BIONOVA HOLDING CORP, 10-Q, 2000-08-14

BIONOVA HOLDING CORP
10-Q, 2000-08-14
AGRICULTURAL SERVICES

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended June 30, 2000

|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ________ to _________

Commission File Number: 0-12177

BIONOVA HOLDING CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 75-2632242
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

6701 San Pablo Avenue
Oakland, California 94608
(Address of principal executive offices) (Zip Code)

(510) 547-2395
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ----

As of August 10, 2000, 23,588,031 shares of common stock, par value $0.01
per share, of Bionova Holding Corporation were outstanding.

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIONOVA HOLDING CORPORATION

CONSOLIDATED BALANCE SHEET
THOUSANDS OF U.S. DOLLARS

<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................................................... $ 7,459 $ 4,510
Accounts receivable .......................................................... 32,754 30,499
Advances to growers, net ..................................................... 3,710 3,151
Inventories .................................................................. 9,322 17,218
Other current assets ......................................................... 702 1,771
--------- ---------
Total current assets .................................................... 53,947 57,149

Property, plant and equipment, net ........................................... 38,006 38,379
Patents and trademarks, net .................................................. 14,549 15,374
Goodwill, net ................................................................ 27,341 28,210
Deferred income taxes ........................................................ 631 611
Other assets ................................................................. 10,306 22,230
--------- ---------
Total assets ........................................................... $ 144,780 $ 161,953
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank loans ....................................................... $ 22,868 $ 22,653
Current portion of long-term debt ........................................... 3,240 3,250
Accounts payable and accrued expenses ....................................... 18,616 20,899
Accounts due to related parties ............................................. 10,817 8,413
Deferred income taxes ....................................................... 1,513 1,513
--------- ---------
Total current liabilities .............................................. 57,054 56,728
Long-term debt with related parties.......................................... 106,509 --
Long-term debt with third parties............................................ 199 100,252
--------- ---------
Total liabilities ...................................................... 163,762 156,980
--------- ---------
Minority interest ........................................................... 1,642 1,589
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized, no shares
issued and outstanding..................................................... -- --
Common stock, $.01 par value, 50,000,000 shares authorized,
23,588,031 shares issued and outstanding .................................. 236 236
Additional paid-in capital .................................................. 107,918 107,918
Accumulated deficit ......................................................... (128,524) (104,494)
Accumulated other comprehensive income (loss) ............................... (254) (276)
--------- ---------
Total stockholders' equity (deficit)......................................... (20,624) 3,384
--------- ---------
Total liabilities, minority interest, and stockholders' equity .............. $ 144,780 $ 161,953
========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

<PAGE>

BIONOVA HOLDING CORPORATION

UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
AND COMPREHENSIVE INCOME AND LOSS
THOUSANDS OF U.S. DOLLARS
(EXCEPT PER SHARE AMOUNTS)

<TABLE>
Caption>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- ---------------------------
2000 1999 2000 1999
------------- --------- --------- ----------
<S> <C> <C> <C> <C>
Total revenues ....................................... $ 70,239 $ 70,362 127,841 $ 128,710
---------- --------- --------- ---------
Cost of sales ........................................ 68,702 65,275 123,166 118,867
Selling and administrative expenses .................. 8,477 7,436 15,368 13,492
Research and development expenses .................... 1,383 1,721 2,921 3,228
Amortization of goodwill, patents and trademarks ..... 854 810 1,709 1,614
---------- --------- --------- ---------
79,416 75,242 143,164 137,201
---------- --------- --------- ---------
Operating income (loss) .............................. (9,177) (4,880) (15,323) (8,491)
---------- --------- --------- ---------
Interest expense ..................................... (4,013) (4,543) (8,574) (6,835)
Interest income ...................................... 507 1,046 1,092 1,748)
Exchange gain (loss), net ............................ (270) (187) (211) (50)
Other non-operating income ........................... (3) (1) (11) (1)
---------- --------- --------- ---------
(3,779) (3,685) (7,704) (5,138)
---------- --------- --------- ---------
Loss before income tax, minority interest, and
extraordinary item.................................. (12,956) (8,565) (23,027) (13,629)

Income tax benefit (expense) ......................... (377) 2 (489) (167)
---------- --------- --------- ---------
Loss before minority interest and extraordinary item.. (13,333) (8,563) (23,516) (13,796)

Minority interest in net loss (income) of subsidiaries 900 267 1,403 583
---------- --------- --------- ---------
Loss before extraordinary item........................ (12,433) (8,296) (22,113) (13,213)

Extraordinary loss on retirement of floating rate
notes............................................... (1,917) -- (1,917) --
---------- --------- --------- ---------
Net loss.............................................. $ (14,350) $ (8,296) $ (24,030) $ (13,213)
Other comprehensive income (expense) net of tax:
Foreign currency translation adjustments ......... 15 3 22 (1)
---------- --------- --------- ---------

Comprehensive income (loss) .......................... $ (14,335) $ (8,293) $ (24,008) $ (13,214)
========== ========= ========= =========

Loss per share before extraordinary item ............. $ (0.53) $ (0.35) $ (0.94) $ (0.56)
Loss per share due to extraordinary item ............. $ (0.08) -- $ (0.08) --
---------- --------- --------- ---------
Net loss per share - basic and diluted ............... $ (0.61) $ (0.35) $ (1.02) $ (0.56)
========== ========= ========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

3
<PAGE>

BIONOVA HOLDING CORPORATION

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
THOUSANDS OF U.S. DOLLARS

<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------
2000 1999
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).............................................................. $ (24,030) $ (13,213)
Items not affecting cash:
Minority interest............................................................. (1,403) (582)
Depreciation.................................................................. 1,173 2,398
Amortization of goodwill, patents and trademarks.............................. 1,709 1,614
Deferred income taxes......................................................... (20) 57
Allowances for uncollectible receivables and slow moving
inventory.................................................................. 2,254 --
Gain from sale of property, plant and equipment............................... -- 6

Net changes (exclusive of subsidiaries acquired or divested) in:
Accounts receivable and advances to growers, net.............................. (2,615) (4,710)
Inventories................................................................... 8,919 5,758
Other assets.................................................................. 1,805 (6,345)
Accounts payable and accrued expenses........................................ (2,283) (3,575)
-------- -------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES...................................................................... (14,491) (18,592)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment.................................... (1,170) (3,660)
Payment for purchase of companies............................................. -- (37)
-------- -------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES...................................................................... (1,170) (3,697)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term debt................................................... 205 (65,745)
Issuance of long-term debt...................................................... -- 100,000
Retirement of long-term debt.................................................... (100,053) (952)
Accounts due to related parties................................................. 108,913 (2,224)
Restricted cash................................................................. 9,545 (12,649)
-------- -------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES...................................................................... 18,610 18,430
-------- -------
Net increase (decrease) in cash and cash equivalents............................ 2,949 (3,859)
Cash at beginning of year ...................................................... 4,510 15,405
-------- -------
Cash at end of period........................................................... $ 7,459 $ 11,546
======== =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

<PAGE>

BIONOVA HOLDING CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000

NOTE 1 - BASIS OF PRESENTATION

Bionova Holding Corporation (together with its subsidiaries,
"Bionova Holding" or the "Company") is a subsidiary of Bionova, S.A. de C.V.,
a Mexican corporation ("Bionova Mexico"), and acts as a holding company for
(i) Agrobionova, S.A. de C.V., of which the Company owns 80% ("ABSA"), (ii)
International Produce Holding Company, of which the Company owns 100%
("IPHC"), (iii) DNA Plant Technology Corporation, of which the Company owns
100% ("DNAP"), and (iv) VPP Corporation, of which the Company owns 100%
("VPP").

NOTE 2 - GENERAL

In management's opinion, the accompanying unaudited consolidated
financial statements for Bionova Holding for the three and six month periods
ended June 30, 2000 and 1999 have been prepared in accordance with generally
accepted accounting principles for interim financial statements and include
all adjustments (consisting only of normal recurring accruals) that the
Company considers necessary for a fair presentation of its financial
position, results of operations, and cash flows for such periods. However,
the accompanying financial statements do not contain all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. All such financial statements are unaudited
except the December 31, 1999 balance sheet. This report and the accompanying
unaudited and audited financial statements should be read in conjunction with
the Company's audited financial statements and notes thereto presented in its
1999 10-K for the fiscal year ended December 31, 1999. Footnotes which would
substantially duplicate disclosures in the Company's audited financial
statements for the fiscal year ended December 31, 1999 contained in the 1999
10-K report have been omitted. The interim financial information contained
herein is not necessarily indicative of the results to be expected for any
other interim period or the full fiscal year ending December 31, 2000.

NOTE 3 - NET LOSS PER COMMON SHARE

The weighted average number of common shares outstanding during the
three and six month periods ended June 30, 2000 and 1999 was 23,588,031.

NOTE 4 - INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- ------------
<S> <C> <C>
Finished produce.................................................. $ 2,342 $ 1,708
Growing crops..................................................... 2,353 8,851
Advances to suppliers............................................. 316 281
Spare parts and materials......................................... 2,984 3,834
Merchandise in transit and other.................................. 1,573 3,813
----------- -------------
9,568 18,487
Allowance for slow moving inventories............................. (246) (1,269)
----------- -------------
$ 9,322 $ 17,218
=========== =============
</TABLE>

NOTE 5 - FINANCING

On March 22, 1999, the Company issued $100 million of Senior Guaranteed
Floating Rate Notes due 2002. The interest rate on this debt during the first
quarter of 2000 was 12.28%. In addition, the Company was charged a service fee
of 1% by Savia, S.A. de C.V. ("Savia"), the ultimate parent company of Bionova
Holding, relating to its guarantee on these notes. On April 13, 2000 the entire
amount of the

5
<PAGE>

$100 million of Senior Guaranteed Floating Rate Notes was retired. Financing
for this early retirement of the notes was provided by Savia. Savia agreed to
provide this $100 million of financing on terms no less favorable than the
terms of the Floating Rate Notes. Savia also agreed that Bionova Holding may
defer all interest payments until the final maturity date of March 23, 2002,
and that Bionova Holding will not be required to maintain any funds in an
interest reserve account. Bionova Holding recorded a charge of $1.9 million in
the second quarter of 2000 to recognize the remaining balance of up front
fees paid for the Floating Rate Note facility that had not previously been
amortized. During the second quarter Savia's interest rate for the financing
provided to Bionova Holding was 12.39%, and no service fee on the debt was
charged.

NOTE 6 - LIQUIDITY

Savia has committed at least through December 31, 2000 to
financially support the Company and its subsidiaries so that they can
continue with their business plans and the fulfillment of their financial
obligations. In addition, Savia has committed to continue to guarantee the
short-term bank loans of the Company. There can be no assurance that any of
the alternatives being considered by management will result in sufficient
working capital to significantly improve the Company's current financial
position or its results of operations.

NOTE 7 - RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the
current year presentation.

NOTE 8 - SEGMENT REPORTING

The Company classifies its business into three fundamental areas:
FARMING, which consists principally of interests in Company-owned fresh
produce production facilities and joint ventures with other growers;
Distribution, consisting principally of interests in sales and distribution
companies in Mexico, the United States, and Canada; and RESEARCH AND
DEVELOPMENT, consisting of business units focused on the development of
fruits and vegetables and intellectual properties associated with these
development efforts.

Information pertaining to the operations of these different business
segments is set forth below. The Company evaluates performance based on
several factors. The most significant financial measure used to evaluate
business performance is business segment operating income. Inter-segment
sales are accounted for at fair value as if the sales were to third parties.
Segment information includes the allocation of corporate overhead to the
various segments, as looked at from the point of view of the segment
presidents. All acquired goodwill has been pushed down to the companies and
segments that have made the acquisitions.

6
<PAGE>

<TABLE>
<CAPTION>
($000'S)
Total of
Research and Reportable
Farming Distribution Development Segments
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
JANUARY 1 - JUNE 30, 2000
Revenues from unaffiliated customers........ $ 1,413 $ 124,308 $ 2,120 $ 127,841
Inter-segment revenues...................... 27,883 -- -- 27,883
------------ -------------- --------------- ---------------
Total revenues.............................. 29,296 124,308 2,120 155,724
============ ============== =============== ===============

Operating income (loss)..................... (7,128) (3,797) (2,819) (13,744)
Depreciation and amortization............... 1,194 524 1,149 2,867
Identifiable assets at June 30 (1)......... 65,523 50,185 42,925 158,633
Acquisition of long-lived assets............ 876 148 147 1,171

JANUARY 1 - JUNE 30, 1999
Revenues from unaffiliated customers........ $ 386 $ 125,430 $ 2,894 $ 128,710
Inter-segment transfers..................... 31,732 -- -- 31,732
------------ -------------- --------------- ---------------
Total revenues.............................. 32,118 125,430 2,894 160,442
============ ============== =============== ===============

Operating income (loss)..................... (6,526) 685 (2,650) (8,491)
Depreciation and amortization............... 2,351 487 1,174 4,012
Identifiable assets at June 30 (1)......... 71,181 63,989 42,322 177,492
Acquisition of long-lived assets............ 2,647 861 152 3,660
</TABLE>
NOTES:
1. IDENTIFIABLE ASSETS for segments are defined as total assets less cash in
banks, deferred income taxes and investment in shares.

Reconciliation of the segments to total consolidated amounts is set
forth below:
<TABLE>
<CAPTION>
($000'S)
JANUARY 1 - JUNE 30
2000 1999
--------------- --------------
<S> <C> <C>
REVENUES
Total segment revenues....................................... $ 155,724 $ 160,442
Eliminations of inter-segment revenues....................... (27,883) (31,732)
------------- --------------
Consolidated revenues........................................ 127,841 128,710
============= ==============
INCOME BEFORE TAXES
Total operating income (loss) from reportable segments....... (13,744) (8,491)
Total operating income (loss) from
Bionova Holding Corp (1)................................ (1,579) --
Interest, net................................................ (7,482) (5,088)
Exchange gain (loss)......................................... (211) (50)
Other non-operating income (loss), net....................... (11) --
------------- --------------
Consolidated income (loss) before taxes.......................... (23,027) (13,629)
============== ==============
ASSETS
Total segment identifiable assets............................ 158,633 177,492
Unallocated and corporate assets (2)........................ 8,090 15,958
Eliminations (3)............................................ (21,943) (10,813)
------------- --------------
Consolidated assets.......................................... 144,780 182,637
============= ==============
</TABLE>
NOTES:
1. Certain expenses, such as shareholder litigation, investor relations, and
Board and professional fees that were allocated in the first half of 1999
to the operating segments were not allocated to these segments in the first
half of 2000. This change was made because management determined that these
types of expenses were not associated with, nor did the results of these
activities benefit the operating

7
<PAGE>

segments. Management further determined that it was impractical to restate
the first half of 1999 to exclude these types of expenses from the
operating segments.

2. Includes Bionova Holding's and segments' cash in banks, deferred income taxes
and other corporate assets.

3. Consists principally of inter-segment intercompany balances. Revenue from
external customers by product / service category is set forth below:

<TABLE>
<CAPTION>
($000'S)
Total of
Research and Reportable
Farming Distribution Development Segments
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
JANUARY 1 - JUNE 30, 2000
Core vegetables (1)........................... $64,890 $ 64,890
Fruits and other fresh produce (2)............ $ 1,413 59,418 60,831
Contracted R&D revenue........................ $ 1,702 1,702
Licensed technology and royalties............. 418 418

JANUARY 1 - JUNE 30, 1999
Core vegetables (1)........................... $59,893 $ 59,893
Fruits and other fresh produce (2)............ $ 386 65,537 65,923
Contracted R&D revenue........................ $ 2,657 2,657
Licensed technology and royalties............. 237 237
</TABLE>

NOTES:
1. Core vegetables include tomatoes, bell peppers and cucumbers.
2. Fruits and other fresh produce include papayas, mangoes, grapes, melons,
watermelons and others.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THE COMPANY

Bionova Holding Corporation, a Delaware corporation (together with
its subsidiaries, unless the context requires otherwise, "Bionova Holding" or
the "Company"), was formed in January 1996, and acts as a holding company for
(i) Agrobionova, S.A. de C.V., a corporation organized under the laws of the
United Mexican States, of which the Company owns 80% ("ABSA"), (ii)
International Produce Holding Company, a Delaware corporation, of which the
Company owns 100% ("IPHC"), (iii) DNA Plant Technology Corporation, a
Delaware corporation, of which the Company owns 100% ("DNAP"), and (iv) VPP
Corporation, a Delaware corporation, of which the Company owns 100% ("VPP").
Since October 6, 1998, approximately 76.6% of the outstanding common stock of
the Company has been indirectly owned by Savia, S.A. de C.V.

The Company classifies its business into three fundamental business
segments. The FARMING segment consists principally of ABSA's interests in
Company-owned fresh produce production facilities and joint ventures with
other growers. The DISTRIBUTION segment consists of Interfruver de Mexico,
S.A. de C.V. ("Interfruver"), which engages in the business of marketing and
distributing fresh produce in Mexico, and IPHC, which owns total or majority
interests in sales and distribution companies in the United States and
Canada. The RESEARCH AND DEVELOPMENT segment consists of DNAP and VPP, two
companies which are focused on the development and application of genetic
engineering and transformation technologies to fruits and vegetables and the
intellectual properties associated with these development efforts.

8
<PAGE>

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1999

Consolidated total revenues decreased by 0.2% from $70.4 million in
the second quarter of 1999 to $70.2 million in the second quarter of 2000.
Consolidated gross profit (revenues less cost of sales) declined from $5.1
million for the second quarter of 1999 to $1.5 million for the second quarter
of 2000. The Company's consolidated operating loss increased from $4.9
million in the second quarter of 1999 to $9.2 million in the second quarter
of 2000.

FARMING segment revenues, the majority of which are eliminated in
consolidation, declined from $11.3 million in the second quarter of 1999 to
$9.9 million in the second quarter of 2000 due to the very heavy production
of tomatoes from Florida and grapes from Chile, which kept prices very low
throughout the second quarter of 2000. Also, as a consequence of the low
prices and generally high quality available in the market, production volumes
had to be curtailed, as the U.S. fresh produce market could not absorb any
more shipments from Mexico during certain weeks in the quarter. In the second
quarter ABSA shut down its growing operations in Culiacan, Sinaloa. ABSA has
contracted with other growers in the region to supply it with produce during
the winter season, which will then be processed through ABSA's packing
facilities and sold through the Company's distribution subsidiaries. A $1.5
million charge was taken in the second quarter for severance payments to
employees and other costs associated with this shut down. These factors led
to an operating loss during the second quarter of 2000 of $4.0 million, as
compared with an operating loss of $3.9 million during the same quarter in
1999. The loss in 1999 was caused by the unusually cold weather conditions in
Mexico during the winter growing season and the impact this had on production
outputs along with losses recorded for closing down two of the joint ventures
in which ABSA was participating.

Revenues of the DISTRIBUTION segment decreased from $69.3 million in
the second quarter of 1999 to $68.7 million in the second quarter of 2000.
Production volumes from the Company's farming operations fell short of
forecast during the second quarter of 2000. Despite this, Bionova Holding's
distributing companies, in the aggregate, turned in a strong performance in
the second quarter due to the companies' continuing efforts to develop new
grower relationships and source product from outside of the Company's farming
operations. As has been the trend for the past year, Premier Fruits and
Vegetables (+9%)and Interfruver in Mexico (+27%) turned in strong
performances in the second quarter of 2000 versus the same quarter a year ago.

Distribution gross margins decreased from $6.1 million in the second
quarter of 1999 to $1.9 million in the second quarter of 2000, and as a
percent of sales from 8.8% to 2.8%, respectively. This decline was due
entirely to the unfavorable performance of Bionova Produce, Inc., in the
second quarter of 2000 as compared with the same quarter in 1999 due to (i) a
$15.8 million sales decrease emanating from a reduction in grape volumes and
prices which impacted commissions earned during the second quarter and (ii) a
$2.0 million write off of growers and accounts receivables in conjunction
with the termination of a contract with a Mexican grower of mangoes, papaya,
and other fruit products on which the Company had lost money over the past
two years. The operating loss of the Distribution segment was $3.3 million in
the second quarter of 2000 as compared to an operating profit of $1.0 million
in the second quarter of 1999.

Revenues of the RESEARCH AND DEVELOPMENT segment declined from $1.1
million in the second quarter of 1999 to $0.6 million in the second quarter
of 2000. This $0.5 million decline in revenues was due to lower third party
contract revenues. The decline in revenues translated directly to lower gross
profit generation in this segment of the business. Research expenses
decreased by $0.3 million due to a reduction in supervisory personnel for the
second quarter of 2000 as compared with the same quarter in 1999.
Amortization of patents and trademarks remained the same at $0.5 million for
the second quarters of 1999 and 2000. This combination of factors caused the
Research and Development segment to experience an operating loss of $1.8
million in the second quarter of 2000, which was virtually unchanged from the
same quarter a year ago.

Selling and administrative expenses increased from $7.4 million
during the second quarter of 1999 to $8.5 million during the same quarter of
2000. This increase was due to higher professional fees and severance
payments associated with the corporate re-structuring, higher legal expenses
associated with shareholder litigation cases, and a special charge incurred
by Interfruver for outside services and consulting advice in connection with
its expansion strategy and operations.

Interest expense declined from $4.5 million in the second quarter of
1999 to $4.0 million in the same quarter of 2000. This $0.5 million decrease
was due to a lower overall rate of interest incurred on the long-term debt
during the second quarter of 2000 as compared with the same quarter in 1999.

9
<PAGE>

Interest income decreased from $1.0 million in the second quarter of
1999 to $0.5 million in the same quarter of 2000. This lower level of
interest earnings was due to a reduction in grower receivables during the
second quarter of 2000 as compared with the same quarter in 1999.

During the second quarter of 2000, the share of losses allocable to
minority interests was $0.9 million as compared to $0.3 million in the same
quarter of 1999. The 2000 and 1999 allocations of losses are consistent with
the minority positions held across the operating subsidiaries of the Company.

An extraordinary charge of $1.9 million was recorded in the second
quarter of 2000 to recognize the remaining balance of up front fees paid for
the Floating Rate Note facility that was retired on April 13, 2000.

SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999

Consolidated total revenues decreased by 1% from $128.7 million in
the first six months of 1999 to $127.8 million in the same period of 2000.
Consolidated gross profit (revenues less cost of sales) was $9.8 million for
the first six months of 1999, as compared with $4.7 million for the same
period in 2000. The Company's consolidated operating loss increased from $8.5
million in the first six months of 1999 to $15.3 million in the same period
in 2000.

FARMING segment revenues, the majority of which are eliminated in
consolidation, declined from $32.1 million in the first six months of 1999 to
$29.3 million in the same period of 2000 due to the very heavy production of
tomatoes from Florida and grapes from Chile, which kept prices very low
throughout the first six months of 2000. Also, as a consequence of the low
prices and generally high quality available in the market, production volumes
had to be curtailed, as the U.S. fresh produce market could not absorb any
more shipments from Mexico during certain weeks in this period. During the
second quarter ABSA shut down its growing operations in Culiacan, Sinaloa.
ABSA has contracted with other growers in the region to supply it with
produce during the winter season, which will then be processed through
ABSA's packing facilities and sold through the Company's distribution
subsidiaries. A $1.5 million charge was taken in the second quarter for
severance payments to employees and other costs associated with this shut
down. These factors led to an operating loss during the first six months of
2000 of $7.1 million, as compared with an operating loss of $6.5 million
during the same period in 1999. The loss in 1999 was caused by the unusually
cold weather conditions in Mexico during the winter growing season and the
impact this had on production outputs along with losses recorded for closing
down two of the joint ventures in which ABSA was participating.

Revenues of the DISTRIBUTION segment decreased from $125.4 million
in the first six months of 1999 to $124.3 million in the same period of 2000.
Production volumes from the Company's farming operations in Culiacan fell
short of forecast during the first half of 2000, although they were 12%
higher than the same period a year ago. Despite this, Bionova Holding's
distributing companies, in the aggregate, turned in a strong performance
during the first six months due to the companies' continuing efforts to
develop new grower relationships and source product from outside of the
Company's farming operations. As has been the trend for the past year,
Premier Fruits and Vegetables (+6%) and Interfruver in Mexico
(+31%) turned in strong performances in the first six months of 2000 versus
the same period a year.

Distribution gross margins decreased from $10.2 million in the first
six months of 1999 to $6.3 million in the same period of 2000, and as a
percent of sales from 8.1% to 5.1%, respectively. This decline was due
entirely to the unfavorable performance of Bionova Produce, Inc. in the first
six months of 2000 as compared with the same period in 1999 due to (i) a
$15.2 million decrease in sales emanating from a reduction in grape volumes
and prices which impacted commissions earned during the period and (ii) a
$2.7 million write off of growers and accounts receivables in conjunction
with the termination of a contract with a Mexican grower of mangoes, papaya,
and other fruit products on which the Company had lost money over the past
two years. The operating loss of the Distribution segment was $3.8 million in
the first six months of 2000 as compared to an operating profit of $0.7
million in the period of 1999.

Revenues of the RESEARCH AND DEVELOPMENT segment declined from $2.9
million in the first months of 1999 to $2.1 million in the same period of
2000. This decline in revenues was due largely to a partial "catchup" payment
made by Savia to DNAP during the first six months of 1999. Under the
long-term founded research agreement between Savia and DNAP, Savia is
obligated to fund DNAP at least $9.0 million in research payments over each
three year period, the first of which ended on September 30, 1999. To meet
this obligation Savia paid DNAP $1.5 million in 1999, and $0.5 million was
earned during the first six months of that year. The decline in revenues
translated directly to lower gross profit generation in this

10
<PAGE>

segment of the business. Research expenses decreased by $0.3 million due to a
reduction in supervisory personnel for the first six months of 2000 as
compared with the same period in 1999. Amortization of patents and trademarks
remained the same at $1.0 million for both the first six months of 1999 and
2000. This combination of factors caused the Research and Development segment
to experience an operating loss of $2.8 million during the first six months of
2000, which was $0.2 million higher than the same period a year ago.

Selling and administrative expenses increased from $13.4 million
during the first six months of 1999 to $15.4 million for the same period of
2000. This increase was due to higher professional fees and severance
payments associated with the corporate re-structuring, higher legal expenses
associated with shareholder litigation cases, and a special charge incurred
by Interfruver for outside services and consulting advice in connection with
its expansion strategy and operations.

Interest expense increased to $8.6 million in the first six months
of 2000 from $6.8 million in the same period of 1999. This $1.8 million
increase was due to a higher overall level of debt outstanding and the higher
interest rates and amortization of the debt issuance costs in the first
quarter of 2000 associated with the Senior Guaranteed Floating Rate Notes
issued on March 22, 1999 as compared with the first quarter of 1999.

Interest income decreased from $1.7 million in the first six months
of 1999 to $1.1 million in the same period of 2000. Interest earned on the
restricted interest reserve account during associated with the Floating Rate
Notes was more than offset by lower interest earnings due to a reduction in
grower receivables.

During the first six months of 2000, the share of losses allocable
to minority interests was $1.4 million as compared to $0.6 million in the
same period of 1999. The 2000 and 1999 allocations of losses are consistent
with the minority positions held across the operating subsidiaries of the
Company.

CAPITAL EXPENDITURES

During the first six months of 2000, the Company made capital
investments of $1.2 million in property, plant and equipment. The majority of
the funds were spent by the Farming segment ($0.9 million) for equipment in
Hermosillo and La Paz, Mexico. Minor investments of $0.2 million and $0.1
million were made in the Company's distribution and technology operations,
respectively.

LIQUIDITY AND CAPITAL RESOURCES

For the six months ended June 30, 2000, the Company used $14.5
million of cash in operating activities. Cash used in the results of
operations amounted to $19.3 million (i.e., net income as adjusted for items
not affecting cash, including minority interest, depreciation, and
amortization). Working capital requirements decreased by $4.8 million during
the first six months of 2000. Accounts receivable and advances to growers
used $2.6 million of cash in the first six months of 2000, as $1.5 million of
financing was provided to growers (net of loss accruals) and customer
receivables increased by $1.1 million. Inventories declined by $7.9 million
and accounts payable and accrued expenses increased by $2.3 million, both of
which were consistent with the end of the Culiacan growing season. The $1.8
million cash generation from other assets reflected a payment of a collateral
receipt for the import of Chilean product into Mexico and a reduction in
prepaid commissions associated with the retirement of the Floating Rate Notes.

On April 13, 2000 the entire amount of the $100 million of Senior
Guaranteed Floating Rate Notes was retired. Financing for this early
retirement of the notes was provided by Savia. Savia agreed to provide this
$100 million of financing on terms no less favorable than the terms of the
Floating Rate Notes. Savia also agreed that Bionova Holding may defer all
interest payments until the final maturity date of March 23, 2002, and that
Bionova Holding will not be required to maintain any funds in an interest
reserve account.

11
<PAGE>

result in sufficient working capital to significantly improve the Company's
current financial position or its results of operations.

As a consequence of the retirement of the floating rate notes and
Savia's commitment to support the Company, cash generated from financing
activities during the first six months of 2000 was $18.6 million. Of this
amount $9.5 million was generated when the Floating Rate Notes were retired,
which freed up the restricted cash being held against the interest reserve
account associated with these notes. The remaining $9.1 million reflects
additional borrowings from Savia to support operations during the first half
of this year.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This report on Form 10-Q includes "forward-looking" statements within
the meaning of Section 27A of the Securities Act of 1933, and Section 21E of
the Securities Exchange Act of 1934. All statements, including without
limitation statements contained in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" other than statements of
historical facts included in this Form 10-Q, including statements regarding
our financial position, business strategy, prospects, plans and objectives of
our management for future operations, and industry conditions, are
forward-looking statements. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, we can give you
no assurance that these expectations will prove to be correct. In addition to
important factors described elsewhere in this report, the following "Risk
Factors," sometimes have affected, and in the future could affect, our actual
results and could cause these results during 2000, and beyond, to differ
materially from those expressed in any forward-looking statements made by us
or on our behalf. When we use the terms "Bionova," "we," "us," and "our,"
these terms refer to the Company and its subsidiaries.

RISKS RELATING TO OUR FINANCIAL CONDITION

WE MAY CONTINUE TO SUSTAIN LOSSES AND ACCUMULATE DEFICITS IN THE FUTURE

We have sustained losses in 1996, 1997, 1998, 1999, and in the first
six months of 2000. As of June 30, 2000 our accumulated deficit was $128.5
million. For the quarter ended June 30, 2000, we had a net loss of $14.4
million. The factors that caused these losses, including factors described in
this section, may continue to limit our ability to make a profit in the
future.

WE MAY NEED ADDITIONAL FINANCING FOR WORKING CAPITAL AND TO EXECUTE OUR
TECHNOLOGY STRATEGY, WHICH COULD HURT OUR GROWTH AND FINANCIAL CONDITION

We may need additional capital to meet our working capital
requirements. Our projected cash flows from operations and existing capital
resources, including our existing credit lines, may not be sufficient to
allow us to pursue proposed business strategies to acquire additional rights
to technologies. Therefore, we may need to obtain additional capital, which
could cause us to incur additional debt or issue additional equity
securities. We cannot assure you that additional capital will be available on
satisfactory terms, if at all, and, as a result, we may be restricted in
executing our technology strategy.

OUR LEVERAGED POSITION COULD CAUSE US TO BE UNABLE TO MEET OUR CAPITAL NEEDS,
WHICH COULD HURT OUR FINANCIAL CONDITION.

At June 30, 2000 we had $132.8 million of indebtedness and a
stockholders' deficit of $20.6 million. This level of indebtedness
may pose substantial risks to our company, including the possibility that we
may not generate sufficient cash flow to pay our outstanding debts. Our level
of indebtedness may also adversely affect our ability to incur additional
indebtedness and finance our future operations and capital needs, and may
limit our ability to pursue other business opportunities.

12
<PAGE>

OUR COMPANY IS CONSIDERING RESTRUCTURING ALTERNATIVES WHICH COULD GREATLY
AFFECT BOTH SHORT- AND LONG-TERM REVENUES AND PROFIT

In May, the Company announced its intent to concentrate on its
technology business and pursue alternatives for the fresh produce business,
including the possible divestiture of parts or all of this business segment.
While Savia recently has expressed an interest in acquiring the Company's
fresh produce business, no commitment has yet been made. Further, if the
fresh produce business is acquired by Savia or another party, the Company's
future will then be focused on its existing technology activities and new
initiatives it is endeavoring to develop. Revenues will be reduced
significantly and losses during the next several years are likely to be
higher than they would have been if the fresh produce business were
continued, though lower than they have been over the past two years.

RISKS RELATING TO OUR FARMING AND DISTRIBUTION BUSINESS

BAD WEATHER AND CROP DISEASE CAN AFFECT THE AMOUNT OF PRODUCE WE CAN GROW AND
SOURCE FROM OTHER GROWERS, WHICH CAN DECREASE OUR REVENUES AND PROFITABILITY

Weather conditions greatly affect the amount of fresh produce we
bring to market, and, accordingly, the prices we receive for our produce.
Storms, frosts, droughts, and particularly floods, can destroy a crop and
less severe weather conditions, such as excess precipitation, cold weather
and heat, can kill or damage significant portions of a crop. Crop disease and
pestilence can be unpredictable and can have a devastating effect on our
crops, rendering them unsalable and resulting in the loss of all or a portion
of the crop for that harvest season. Even when only a portion of our crops
are damaged, the profits we could have made on the crop will be severely
affected because the costs to plant and cultivate the entire crop will have
been incurred although we may experience low yields or may only be able to
sell a portion of our crop. In 1998 and 1999, Agrobionova's significant
losses were in large measure due to very cold weather and diseases that
severely affected outputs in its Culiacan operations and in its joint venture
in Baja California Norte.

ABSA RECENTLY SHUT DOWN ITS GROWING OPERATIONS IN CULIACAN WHICH WILL AFFECT
THE AMOUNT OF PRODUCE WE GROW, WHICH CAN DECREASE REVENUES AND PROFITS

During the second quarter, ABSA, the Company's agricultural
subsidiary in Mexico, shut down its growing operations in Culiacan, Sinaloa.
ABSA has contracted with other growers in the region to supply it with
produce during the winter season, which will then be packaged in ABSA's
packing facilities and sold through the Company's distribution subsidiaries.
While ABSA believes it has replaced virtually all of its lost production in
Culiacan, it cannot predict with certainty that all of the contracts will
deliver an equivalent supply nor can it assure the profit which will result
will be higher or lower than what it would have generated had it continued
its own production in Culiacan.

A RECENT CHANGE IN ABSA'S RELATIONSHIP WITH ITS JOINT VENTURE IN BAJA
CALIFORNIA NORTE WILL AFFECT THE AMOUNT OF PRODUCE WE GROW, WHICH CAN
DECREASE REVENUES AND PROFITS

One grower in Baja California, Santa Cruz Empacadora, S. de R.L. de
C.V., accounted in 1999 for approximately 11% of our consolidated sales. Due
to losses incurred during the 1999 growing season, ABSA recently negotiated
an agreement with this grower whereby the grower has pledged certain assets
as collateral to secure its outstanding receivable. ABSA currently is looking
for alternative sources to supply the needs of the U.S., Canadian, and
Mexican markets during the months of July through November, the season during
which Santa Cruz provided a large proportion of ABSA's supply. While ABSA
expects to secure relationships with other growers, it cannot predict with
any certainty the amount of produce it will be able to source or the relative
cost to grow or purchase this product as compared with Santa Cruz. If ABSA is
not able to source as much product as it expected to grow in its association
with Santa Cruz, this likely will result in lower overall sales of the
Company and lower total operating profit as compared with what previously had
been projected for future years.

LABOR SHORTAGES AND UNION ACTIVITY CAN AFFECT OUR ABILITY TO HIRE WORKERS TO
HARVEST AND DISTRIBUTE OUR CROPS, WHICH CAN HURT OUR FINANCIAL CONDITION

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<PAGE>

The production of fresh produce is heavily dependent upon the
availability of a large labor force to harvest crops. The turnover rate among
the labor force is high due to the strenuous work, long hours, necessary
relocation and relatively low pay. If it becomes necessary to pay more to
attract labor to farm work, our labor costs will increase.

The Mexican farm work force retained by ABSA is unionized. If the
union attempts to disrupt production and is successful on a large scale,
labor costs will likely increase and work stoppages may be encountered, which
would be particularly damaging in our industry where harvesting crops at peak
times and getting them to market on a timely basis is critical. The majority
of fresh produce is shipped by truck. In the United States and in Mexico, the
trucking industry is largely unionized and therefore susceptible to labor
disturbances. As a result, delivery delays caused by labor disturbances in
the trucking industry or any other reason could limit our ability to get
fresh produce to market before it spoils.

ABSA'S RELIANCE ON LEASES AND RELATIONSHIPS WITH OTHER GROWERS COULD RESULT
IN INCREASED COSTS, WHICH COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS

ABSA relies on agricultural land leased from others and
relationships with other growers for a large part of its supply. The average
term of these land leases is two years and we expect to renew many of these
land leases as they expire. If the other parties to these leases and other
arrangements were to choose not to renew their agreements with ABSA, ABSA
would be required to locate alternate sources of supply and/or land or, in
some cases, to pay increased rents for land. In addition to increased rental
rates, increases in land costs could result from increases in water charges,
property taxes and related expenses.

RISKS RELATING TO OUR SCIENTIFIC RESEARCH AND DEVELOPMENT BUSINESS

GOVERNMENT REGULATION CAN CAUSE DELAYS AND INCREASED COSTS, WHICH DECREASE
OUR REVENUES AND PROFITABILITY

Our subsidiaries' activities in the United States are extensively
regulated by the Food and Drug Administration, the United States Department
of Agriculture, the Environmental Protection Agency, and other federal and
state regulatory agencies in the United States. Similarly, our subsidiaries'
activities in Mexico are extensively regulated by the Secretaria de
Agricultura, Ganaderia y Desarrollo Rural, the Secretaria de Salud, and other
federal and state regulatory agencies in Mexico. Also, our products may
require regulatory approval or notification in the United States or in other
countries in which they are tested, used or sold. The regulatory process may
delay research, development, production, or marketing and require more costly
and time-consuming procedures, and there can be no assurance that requisite
regulatory approvals or registration of our current or future genetically
engineered products will be granted on a timely basis.

IF THE PRODUCTS WE DEVELOP AND MARKET ARE NOT COMMERCIAL SUCCESSES, WE WILL
NOT RECOUP OUR DEVELOPMENT AND PRODUCTION COSTS, WHICH WILL HURT OUR
FINANCIAL CONDITION

We are currently in the early stages of marketing several of our new
products, and there can be no assurance that any of these products will be
successful or will produce significant revenues or profits. In addition, a
number of our product development projects are in the early stages, and these
projects may not be successful. The success of these and future products
depends on many variables, including the ability to produce and make
available to the market consistent, premium quality fruits and vegetables on
a year-round basis, consumers' willingness to pay higher prices for premium
quality fruits and vegetables, and retailers' willingness to carry such
fruits and vegetables.

IF THE PUBLIC IS UNWILLING TO ACCEPT GENETICALLY ENGINEERED PRODUCTS, WE WILL
NOT RECOUP OUR DEVELOPMENT AND PRODUCTION COSTS, WHICH WILL HURT OUR
FINANCIAL CONDITION

Our second generation products are being developed through the use
of genetic engineering. The commercial success of these products will depend
in part on public acceptance of the cultivation and consumption of
genetically engineered products. We cannot assure you that these products
will gain sufficient public acceptance to be profitable, even if these
products obtain the required regulatory approvals.

14
<PAGE>

WE MAY NOT BE SUCCESSFUL IN OBTAINING PATENTS, PROTECTING OUR TRADE SECRETS
AND CONDUCTING OUR BUSINESS WITHOUT INFRINGING ON THE RIGHTS OF OTHERS, WHICH
COULD ADVERSELY AFFECT OUR BUSINESS

Our success depends, in part, on our ability to obtain and enforce
patents, maintain trade secret protection, and conduct our business without
infringing the proprietary rights of others. If others develop competing
technologies and market competing products, our sales could be adversely
affected. If we are not able to maintain our trade secrets or to enforce our
patents, our competitive position could be adversely affected. In addition,
we license technology from third parties. If we cannot maintain these
licenses, or if we cannot obtain licenses to other useful technology on
commercially reasonable terms, our research efforts could be adversely
affected.

RISKS RELATING TO OUR INTERNATIONAL OPERATIONS

LEGAL LIMITATIONS COULD AFFECT OUR OWNERSHIP OF RURAL LAND IN MEXICO, WHICH
COULD DECREASE OUR SUPPLY OF PRODUCE CAUSING A DECREASE IN OUR REVENUES AND
PROFITABILITY

ABSA owns a substantial amount of rural land in Mexico, which it
uses to grow fresh fruits and vegetables. Historically, the ownership of
rural land in Mexico has been subject to legal limitations and claims by
residents of rural communities, which in some cases could lead to the owner
being forced to surrender its land. ABSA has been, and continues to be,
involved in land dispute proceedings as part of its ordinary course of
business. If ABSA is required to surrender any of its land, the volume of
fresh fruits and vegetables it produces would decline and adversely affect
our profitability. There are currently pending in Mexico two lawsuits
challenging the ownership rights of ABSA to rural land it owns in Mexico. If
both of these lawsuits were decided against ABSA, ABSA could lose a total of
30% of all the rural land it owns in Mexico.

CURRENCY FLUCTUATIONS AND INFLATION CAN INCREASE THE COST OF OUR PRODUCTS IN
THE UNITED STATES AND ABROAD, WHICH DECREASES OUR REVENUES AND PROFITABILITY

The currency exchange rates in Mexico have historically been
volatile. For example, in December 1994, the Mexican government announced its
intention to float the Mexican peso against the United States dollar and, as
a result, the peso devalued over 40% relative to the dollar during that
month. Since January 1995, the value of the peso has decreased approximately
90%. These exchange rate fluctuations impact our subsidiaries' business. If
the value of the peso decreases relative to the value of the dollar, then:

1. imports of produce into Mexico for distribution by our Mexican
subsidiary become more expensive in peso terms and therefore more
difficult to sell in the Mexican market; and
2. inflation that generally accompanies reductions in the value of
the peso reduces the purchasing power of Mexican consumers, which
reduces the demand for all products including produce and, in
particular, imported, branded or other premium-quality produce.

Conversely, if the value of the peso increases relative to the value
of the dollar, Mexican production costs increase in dollar terms, which
results in lower margins or higher prices with respect to produce grown in
Mexico and sold in the United States and Canada.

VOLATILE INTEREST RATES IN MEXICO CAN INCREASE OUR CAPITAL COSTS

Historically, interest rates in Mexico have been volatile,
particularly in times of economic unrest and uncertainty. High interest rates
restrict the availability and raise the cost of capital for our Mexican
subsidiaries and for growers and other Mexican parties with whom we do
business, both for borrowings denominated in pesos and for borrowings
denominated in dollars. Costs of operations for our Mexican subsidiaries are
higher as a result.

15
<PAGE>

TRADE DISPUTES BETWEEN THE UNITED STATES AND MEXICO CAN RESULT IN TARIFFS,
QUOTAS AND BANS ON IMPORTS, INCLUDING OUR PRODUCTS, WHICH CAN HURT OUR
FINANCIAL CONDITION

Despite the enactment of the North American Free Trade Agreement,
Mexico and the United States from time to time are involved in trade disputes.
The United States has, on occasion, imposed tariffs, quotas, and importation
bans on products produced in Mexico. U.S. tomato growers have brought dumping
claims against Mexican tomato growers and may do so again. Because some of our
subsidiaries produce products in Mexico, which we sell in the United States,
such actions, if taken, could adversely affect our business.

GENERAL BUSINESS RISKS

BIONOVA INTERNATIONAL, INC. HAS SUBSTANTIAL CONTROL OVER OUR COMPANY AND
CAN AFFECT VIRTUALLY ALL DECISIONS MADE BY OUR STOCKHOLDERS

Bionova International beneficially owns 18,076,839 shares of our
common stock accounting for 76.6% of all issued and outstanding shares. As a
result, Bionova International has the requisite voting power to significantly
affect virtually all decisions made by Bionova and our stockholders, including
the power to elect all of our directors and to block corporate actions such as
an amendment to most provisions of our certificate of incorporation. This
ownership and management structure will inhibit the taking of any action by
Bionova which is not acceptable to Bionova International.

WE MAY NOT BE ABLE TO ADAPT OUR MANAGEMENT INFORMATION SYSTEMS AND CONTROLS,
WHICH COULD HURT OUR FINANCIAL CONDITION

Our business has undergone significant changes since the Company's
inception in 1996. As a result, significant strains have been placed on the
management, operations and financial resources of our subsidiaries. The
realization of our business strategy depends on, among other things, our
ability to adapt management information systems and controls and to hire,
train and retain qualified employees to allow these operations to be
effectively managed. The geographic separation of our subsidiaries'
operations exacerbates these issues.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

The table below provides information about the Company's derivative
financial instruments and consisting primarily of debt obligations that are
sensitive to changes in interest rates. For debt obligations, the table
presents principal cash flows and related weighted average interest rates by
expected (contractual) maturity dates. Notional amounts are used to calculate
the contractual payments to be exchanged under the contracts. Weighted
average variable rates are based on implied forward rates in the yield curve
on December 31, 1999. The information is presented in U.S. dollar
equivalents, which is the Company's reporting currency. The instrument's
actual cash flows are denominated in both U.S. dollars and Mexican pesos, and
are indicated accordingly in the tables below.

16
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
EXPECTED MATURITY DATE
-----------------------------------------------------------------------------------------------------------------------------
Fair
2000 2001 2002 2003 2004 Thereafter Total Value
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-term debt:
($US equivalent in millions)
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
U.S. dollar variable rate..... $ 21.6 $ 21.6 $ 21.6
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
Average interest rate....... 9%
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
Peso variable rate (in $US)... 1.1 1.1 1.1
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
Average interest rate....... 26%
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
Long-term debt:
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
U.S. dollar fixed rate........ $ 2.9 $ 2.9 $ 2.9
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
Average interest rate....... 10%
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
U.S. dollar variable rate..... $ 0.3 $ 0.1 $ 100.1 $ 0.1 $ 100.6 $ 100.6
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
Average interest rate....... 12% 12% 13% 12%
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
</TABLE>

The Company tries to use the most cost-effective means to fund its
operating and capital needs. Fixed or variable debt will be borrowed in both
U.S. dollars and Mexican pesos. The Company borrows Mexican pesos to provide
for its working capital needs in its Mexican operations. To minimize exchange
risk associated with the importation of products, the Company will enter into
forward exchange contracts where the functional currency to be used in the
transaction is dollars. At December 31, 1999, approximately 3% of the
Company's long-term debt was fixed rate debt and 97% was variable rate debt.
All of the fixed rate long-term debt is denominated in U.S. dollars. All of
the long-term variable rate debt is denominated in U.S. dollars.

EXCHANGE RATE RISK

The table below provides information about the Company's financial
instruments by functional currency that are subject to exchange risk. This
information is presented in U.S. dollar equivalents. The table summarizes
information on instruments that are sensitive to foreign currency exchange
rates, including peso-denominated debt obligations. For debt obligations, the
table presents principal cash flows and related weighted average interest rates
by expected maturity dates.

----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
Peso short-term debt:
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
Variable rate (in $US)...... $ 1.1 $ 1.1 $ 1.1
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
Average interest rate....... 26%
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
Expected maturity or
transaction date.......... Dec. 31
----------------------------------- --------- ---------- ---------- ---------- --------- ------------- ----------- -----------
</TABLE>

The Company had no firmly committed forward sales contracts in
Mexican pesos as of December 31, 1999.

The Company is exposed to U.S. dollar-to-Mexican peso currency
exchange risk due to revenues and costs denominated in Mexican pesos
associated with its Mexican subsidiaries, ABSA and Interfruver. The Company
expects it will continue to be exposed to currency exchange risks in the near
future.

The Company's subsidiaries, Interfruver and Premier, from time to
time enter into foreign exchange forward contracts to manage their exposure
to fluctuations in foreign currency denominated payables. These contracts
generally mature within three months. As of December 31, 1999, the Company
had foreign exchange forward contracts outstanding in the amount of $1.883
million. Gains and losses arising from foreign currency transactions are
included in the line item entitled "Exchange (loss) gain, net" in the
Consolidated Statement of Operations when realized.

17
<PAGE>

COMMODITY PRICE RISK

The table below provides information about the Company's fresh produce growing
crops inventory and fixed price contracts that are sensitive to changes in
commodity prices. For inventory, the table presents the carrying amount and fair
value at December 31, 1999. For the fixed price contracts, the table presents
the notional amounts in Boxes, the weighted average contract prices, and the
total dollar contract amount by expected maturity dates, the latest of which
occurs within one year from the reporting date. Contract amounts are used to
calculate the contractual payments and quantity of fresh produce to be exchanged
under futures contracts.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1999
---------------------------------------------------------------------------------------------------------
Carrying Fair
Amount Value
-------------------------------------------------------------------------------------- -----------------
<S> <C> <C>
On-balance sheet commodity position:
Fresh produce crops in process inventory ($US in millions).... $8.9 $8.9
-------------------------------------------------------------------------------------- -----------------

-------------------------------------------------------------------------------------- -----------------
Fixed price contracts:
Contract volumes (158,141 boxes)
Weighted average unit price (per 158,141 boxes)................... $ 8.50 $ 8.50
Contract amount ($US in millions)................................. $1.3 $1.3
-------------------------------------------------------------------------------------- -----------------
</TABLE>

18
<PAGE>

In order to manage the exposure to commodity price sensitivity
associated with fresh produce products, the Company enters into fixed price
contracts with certain customers which guarantee specified volumes for the
growing season or the year at a fixed price. The Company believes that its
efforts to assure a high level of product quality along with efforts to
develop and market differentiated, added value products also reduce to some
extent its exposure to commodity price sensitivity.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On June 16, 2000, a lawsuit styled SANTA CRUZ EMPACADORA, S. DE R.L.
DE C.V., V. R.B. PACKING OF CALIFORNIA, INC . was filed in the United States
District Court for the Southern District of California. R.B. Packing of
California, Inc., a subsidiary of the Company, is the United States
distributor of fresh produce sold by the plaintiff. The plaintiff alleges
that R.B. Packing of California, Inc. sold Santa Cruz produce to related
companies at below market prices and thereby engaged in unfair conduct, fraud
and breach of statutory and fiduciary duties. The plaintiff seeks an
unspecified amount of compensatory and punitive damages. R.B. Packing of
California, Inc. denies any wrongdoing or liability in this matter and
intends to vigorously contest this lawsuit.

As described in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999, DNA Plant Technology Corporation was granted
summary judgment in the case brought against it by Grace Brothers, Ltd. in
the United States District Court for the Northern District of California.
This claim arose out of the private placement of stock and warrants made by
DNA Plant Technology Corporation in August of 1995. Grace Brothers, Ltd.
appealed the judgment to the United States Court of Appeals for the Ninth
Circuit. On June 8, 2000, the court of appeals affirmed the trial court's
entry of judgment in favor of DNA Plant Technology Corporation

ITEM 5. OTHER INFORMATION

BUSINESS RESTRUCTURING

In May, the Company announced its intent to concentrate on its
technology business and pursue alternatives for the fresh produce business,
including the possible divestiture of parts or all of this business segment.
Savia, S.A. de C.V., the Company's parent, recently has expressed an interest
to a special committee of the Company's independent directors with respect to
Savia's potential acquisition of the Company's fresh produce business. The
Special Committee has engaged the services of U.S. Bancorp Piper Jaffray,
Inc. as its investment banker and Proskauer Rose, LLP, as its legal advisor
to assist it in reviewing proposals and in any negotiations with Savia and
other prospective buyers.

19
<PAGE>

In the interim, the Company has begun to take steps to limit the
expenses, reduce the agricultural risk, and reduce the working capital
requirements associated with its fresh produce operations. During the second
quarter Agrobionova, S.A. de C.V. ("ABSA"), the Company's agricultural
subsidiary in Mexico, shut down its growing operations in Culiacan, Sinaloa.
ABSA has contracted with other growers in the region to supply it with
produce during the winter season, which will then be packaged in ABSA's
packing facilities and sold through the Company's distribution subsidiaries.
The Company also terminated a contract with a Mexican grower of mangoes,
papaya, and other fruit products on which it had lost money over the past two
years.

RIGHTS OFFERING

On May 4, 2000 Bionova Holding filed with the SEC an amendment to
the registration statement relating to its shareholder rights offering. On
June 27, 2000 the Company received a comment letter from the SEC in which
the SEC requested additional information on the S-3 registration statement
and its most recent 10-Q and 10-K filings. The Company is preparing responses
to the SEC's comments and expects to resubmit its filing by no later than
August 31, 2000.

CONTROLLING STOCKHOLDER; CONFLICTS OF INTEREST

Approximately 76.6% of the outstanding shares of common stock of the
Company are owned of record by Bionova International, Inc., an indirect,
wholly-owned subsidiary of Savia. Therefore, Savia has the power to elect a
majority of the Company's board of directors and to determine the outcome of
any action requiring the approval of the holders of the Company's common
stock. This ownership and management structure will inhibit the taking of any
action by the Company which is not acceptable to the controlling stockholder.

Certain of the Company's directors and executive officers are also
currently serving as board members or executive officers of Savia or
companies related to Savia, and it is expected that each will continue to do
so. Such management interrelationships and intercorporate relationships may
lead to possible conflicts of interest.

The Company and other entities that may be deemed to be controlled
by or affiliated with Savia sometimes engage in (i) intercorporate
transactions such as guarantees, management and expense sharing arrangements,
shared fee arrangements, joint ventures, partnerships, loans, options,
advances of funds on open account and sales, leases and exchanges of assets,
including securities issued by both related and unrelated parties and (ii)
common investment and acquisition strategies, business combinations,
reorganizations, recapitalizations, securities repurchases and purchases and
sales (and other acquisitions and dispositions) of subsidiaries, divisions or
other business units, which transactions have involved both related and
unrelated parties. The Company continuously considers, reviews and evaluates,
and understands that Savia and related entities consider, review and
evaluate, transactions of the type described above. Depending upon the
business, tax and other objectives then relevant, it is possible that the
Company might be a party to one or more of such transactions in the future in
addition to those currently in force, such as the Long Term Funded Research
Agreement dated January 1, 1997 between Seminis Vegetable Seeds, Inc., an
indirect subsidiary of Savia, and DNAP. In connection with these activities
the Company might consider issuing additional equity securities or incurring
additional indebtedness. The Company's acquisition activities may in the
future include participation in the acquisition or restructuring activities
conducted by other companies that may be deemed to be controlled by Savia.

20
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3.1 Certificate of Incorporation of the Company (filed as an exhibit to the
Company's Registration Statement on Form S-4 (No. 333-09975) and
incorporated herein by reference).

3.2 Certificate of Amendment to the Certificate of Incorporation of the
Company effective September 26, 1996 (filed as an exhibit to the
Company's quarterly report on Form 10-Q for the quarterly period ended
June 30, 1996 and incorporated herein by reference).

3.3 Certificate of Amendment to the Certificate of Incorporation of the
Company effective April 28, 1999 (filed as an exhibit to the Company's
Quarterly report on Form 10-Q for the quarterly period ended March 31,
1999 and incorporated herein by reference).

3.4* Bylaws of the Company.

4.1* Note Acquisition Agreement dated as of March 22, 1999 among Savia,
S.A. de C.V., the Company, the Holders referred to therein, Morgan
Guaranty Trust Company of New York, as Administrative Agent and
Documentation Agent, Bankers Trust Company, as Paying Agent and
Registrar, and Citibank,
N.A., as Collateral Agent.

27.1 Financial Data Schedule

----------

* Filed as an exhibit to the Company's annual report on Form 10-K for the
year ended December 31, 1999 and incorporated herein by reference.

(b) Reports on Form 8-K

None.

21
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

BIONOVA HOLDING CORPORATION

Date: August 11, 2000 By: /s/ ARTHUR H. FINNEL
----------------------
Arthur H. Finnel,
Executive Vice President,
Treasurer and Chief Financial Officer

22
<PAGE>

INDEX TO EXHIBITS

(a) Exhibits
<TABLE>
<S> <C>
3.1 Certificate of Incorporation of the Company (filed as an exhibit to the
Company's Registration Statement on Form S-4 (No. 333-09975) and
incorporated herein by reference).

3.4* Bylaws of the Company.

27.1 Financial Data Schedule
</TABLE>
----------

* Filed as an exhibit to the Company's annual report on Form 10-K for the
year ended December 31, 1999 and incorporated herein by reference.