UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 1995
OR
[ ] 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
DNA PLANT TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-2395856
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
6701 San Pablo Avenue, Oakland, California 94608
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 547-2395
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. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding as of
Class September 30, 1995
Common Stock, $.01 par value 40,695,053
<PAGE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Consolidated Balance Sheets as of September 30, 1995 and
December 31, 1994
(b) Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 1995 and 1994
(c) Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1995 and 1994
(d) Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 3. Default Upon Securities
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<CAPTION>
September 30, December 31,
1995 1994
ASSETS _____________ ____________
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $3,684 $1,202
Temporary investments 21 3,287
Accounts receivable, net 860 2,344
Inventory 1,892 1,168
Other current assets 531 600
Assets held for sale 1,066 900
Total current assets 8,054 9,501
Fixed assets, net of accumulated depreciation of $7,597 in
1995 and $7,834 in 1994 2,544 3,339
Note receivable 250 250
Patents and other assets, net of accumulated amortization
of $328 in 1995 and $256 in 1994 444 450
Excess of purchase price over net assets acquired, net of
amortization of $333 in 1995 and $190 in 1994 1,567 1,710
Total assets $12,859 $15,250
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 906 $1,537
Dividend payable -- 776
Accrued compensation 688 462
Accrued restructuring and consolidation costs 804 808
Accrued liabilities 639 1,189
Amount payable to DuPont 983 983
Current portion of long-term debt 167 --
Total current liabilities 4,187 5,755
Deferred revenue 694 518
Deferred compensation 333 285
Long-term debt 778 --
Total other liabilities 1,805 803
Stockholders' equity:
Preferred Stock, par value $.01 per share; authorized
5,000 shares:
$2.25 convertible preferred stock; issued and
outstanding -1,380 shares in 1995 and 1994
(aggregate liquidation preference of $34,500) 14 14
Series A convertible preferred stock, par value $.01
per share; authorized, issued and outstanding
3 shares in 1995 and 1994 (aggregate liquidation
preference of $16,500) -- --
Common Stock, par value $.01 per share; authorized
60,000 shares; issued 40,695 shares in 1995 and
30,713 in 1994 407 307
Common stock to be issued, par value $.01 per share,
none in 1995, 100 shares in 1994 -- 1
Additional paid in capital 158,660 149,918
Accumulated deficit (152,230) (141,752)
Unrealized holding gain 16 204
Total stockholders' equity 6,867 8,692
Total liabilities and stockholders' equity $12,859 $15,250
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
___________________ ___________________
1995 1994 1995 1994
________ _______ ________ ________
<S> <C> <C> <C> <C>
Revenues:
Produce sales $ 1,257 $3,046 $ 7,211 $10,170
Product development agreements 457 613 1,331 1,746
Investment and royalty income 30 1,136 1,550 1,255
Total revenues 1,744 4,795 10,092 13,171
Operating expenses:
Cost of produce sales 2,185 5,179 10,580 18,357
Exit carrot processing 996 2,400 1,375 3,210
Research and product development 1,393 1,676 4,484 5,231
Selling, general and administrative 1,717 1,726 4,288 5,469
Consolidation and relocation costs -- 201 70 1,482
Total operating expenses 6,291 11,182 20,797 33,749
(4,547) (6,387) (10,705) (20,578)
Gain on sale of assets 164 220 230 220
Loss from continuing operations (4,383) (6,167) (10,475) (20,358)
Discontinued operations:
Loss from operations -- -- -- (640)
Gain (Loss) on disposition -- 350 -- (1,273)
Total discontinued operations -- 350 -- (1,913)
Net loss (4,383) (5,817) (10,475) (22,271)
Preferred stock dividend -- (776) (1,567) (2,329)
Net loss applicable to common
stockholders $(4,383) $(6,593) $(12,042) $(24,600)
Net loss per common share:
Continuing operations $ (.13) $ (.23) $ (.37) $ (.80)
Discontinued operations -- .01 -- (.07)
Net loss per common share $ (.13) $ (.22) $ (.37) $ (.87)
Weighted average common shares
outstanding 35,002 29,688 32,635 28,423
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION> Nine Months Ended
September 30,
______________________
1995 1994
__________ __________
<S> <C> <C>
Cash flows from operating activities:
Net loss from continuing operations $(10,475) $(20,358)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 352 1,069
Changes in allowance for doubtful accounts (227) 8
Exit carrot processing 996 2,300
Compensation in common stock 63 64
Gain on sale of assets (230) (220)
Loss from discontinued operations -- (1,332)
Net changes in:
Accounts receivable 1,711 8
Inventory (724) (92)
Other current assets (98) (777)
Accounts payable and accrued liabilities (1,721) (3,576)
Other assets and liabilities 159 383
Net cash used in operating activities (10,194) (22,523)
Cash flows from investing activities:
Capital expenditures (163) (265)
Purchases of temporary investments -- (18,185)
Sales and maturities of temporary investments 3,283 16,559
Proceeds from sale of assets 780 --
Net cash provided by (used in) investing activities 3,900 (1,891)
Cash flows from financing activities:
Proceeds from sale of common stock 10,343 25,527
Proceeds from exercise of options -- 108
Preferred stock dividends (1,567) (2,329)
Net cash provided by financing activities 8,776 23,306
Net increase (decrease) in cash and cash equivalents 2,482 (1,108)
Cash and cash equivalents, beginning of period 1,202 3,254
Cash and cash equivalents, end of period $ 3,684 $ 2,146
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
Note 1 - BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared
by DNA Plant Technology Corporation (the "Company"), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 1994 Annual Report on Form 10-K.
In the opinion of the Company's management, the accompanying unaudited,
consolidated financial statements contain adjustments, all of which are of a
normal recurring nature, necessary to present fairly the Company's financial
position as of September 30, 1995 and the results of its operations for the
three and nine months ended September 30, 1995 and 1994 and its cash flows for
the nine months ended September 30, 1995 and 1994.
Certain reclassifications have been made to prior period amounts to be
consistent with the current period presentation.
Interim results are not necessarily indicative of results for the full
fiscal year.
Note 2 - EXIT CARROT PROCESSING
The Company has entered into an agreement to lease carrot processing
equipment with a net book value of $1,725,000 (original cost of $1,930,000,
net of accumulated depreciation of $205,000) to a third party. The lease is
an operating lease with a term of sixty months beginning November 1, 1995, and
terminating October 31, 2000. Lease payments will be $15,935 per month. The
lessee has an option to purchase the equipment at the end of the lease term at
its then fair market value. The carrot processing equipment not leased was
written down to its net realizable value of $.2 million as of
September 30, 1995 and is recorded in the Consolidated Balance Sheets as
assets held for sale.
Concurrent with the leasing of its carrot processing equipment, the
Company terminated its carrot processing facility lease. In accordance with
the terms of the termination agreement, the Company is to make payments
totaling $945,000 to the lessor of the facility consisting of a termination
penalty under the terms of the original lease agreement, monthly lease
payments through December 1995 and the cost to restore the facility to its
prelease condition. In connection with the payment of these amounts, the
Company executed and delivered a note payable to the lessor in the principal
amount of $945,000 payable over 48 months and bearing interest at a rate of
10% per annum. The note is recorded at its face value in the Consolidated
Balance Sheets as of September 30, 1995.
These transactions resulted in a $1.0 million charge to operations during
the three months ended September 30, 1995.
Note 3 - INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
_____________ _____________
(Unaudited)
<S> <C> <C>
Prepaid grower fees $1,447 $ 581
Raw materials and seed 391 407
Finished goods 54 180
Total Inventory $1,892 $1,168
</TABLE>
Note 4 - SALE OF COMMON STOCK
During the third quarter, the Company privately placed 7,250,000 shares of
common stock of the Company together with warrants entitling the holders to
purchase an additional 3,825,000 shares of common stock at $2.50 per share for
net proceeds, after commissions and expenses, of $6.8 million. The holders of
these shares have agreed not to publicly trade such shares prior to
April 1996. The shares of common stock issuable upon the exercise of the
warrants are subject to shareholder approval; if shareholder approval is not
obtained on or prior to June 30, 1996, the Company will be obligated to redeem
the warrants at $.25 per warrant ($956,250 in the aggregate). As part of the
compensation to the consultant who assisted the Company in placing these
securities, the Company granted the consultant options to purchase 1,087,500
shares of the Company's common stock at $1.75 per share, the issuance of which
is also subject to shareholders approval of an increase in the authorized
number of shares of the Company's common stock.
Note 5 - SALE AND CONVERSION OF PREFERRED STOCK
During the second quarter of 1995 the Company sold 750 shares of
Convertible Series B and 750 shares of Convertible Series C preferred stock
for $1,000 per share. During the third quarter of 1995, these shares were
converted into 1,318,839 shares of the Company's common stock at an average
conversion price of $1.14.
Note 6 - LITIGATION
In May 1995, a lawsuit was brought against the Company by Monsanto Company
("Monsanto") in the United States District Court for the District of Delaware.
Monsanto alleged that the Company had infringed two of Monsanto's United
States patents relating to the use of promoter and gene marker technology in
plants. During the third quarter the Company and Monsanto settled this legal
action for an immaterial amount to be paid in equal annual installments over a
four year period beginning January 1996.
Note 7 - SUBSEQUENT EVENTS
In October 1995, the Company sold to Alida Marine, Inc. ("Alida") under
Alida's right of first refusal, as provided in the Stock Purchase Agreement
dated August 5, 1994, between Alida and the Company, 464,725 shares of the
Company's common stock and warrants to purchase 245,182 shares of the
Company's common stock at $2.50 per share for $464,725. The right of first
refusal provision in such Stock Purchase Agreement in general permits Alida to
purchase a proportionate percentage of securities offered to others at the
same price and terms (See Note 5).
The Company did not declare or pay the regular quarterly dividend ($.5625
per share) on its $2.25 Convertible Exchangeable Preferred Stock payable on
November 1, 1995 and as of the date hereof, the total arrearage with respect
to such class of stock is $776,250.
Subsequent to September 30, 1995, the Company entered into an agreement to
issue 1,557,377 shares of its common stock in exchange for 1,364,118 shares of
common stock of United Agricorp, Inc. ("UAC"), which represents approximately
13% of the outstanding shares of UAC. UAC is an agribusiness biotechnology
company focused on the improvement of strawberries, raspberries and grapes.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1995
General
The Company is a leading agribusiness biotechnology company focused on the
development and marketing of premium, fresh and processed branded fruits and
vegetables developed through advanced biotechnological breeding, genetic
engineering, and other technologies.
Results of Operations
Three Months Ended September 30, 1995 Compared to Three Months Ended
September 30, 1994
For the three months ended September 30, 1995, the Company's loss from
continuing operations decreased to $4.4 million from $6.2 million in the 1994
period. This $1.8 million decrease was attributable to the decrease in costs
to exit the carrot processing business from $2.4 million in 1994 to
$1.0 million in 1995 and to changes in the Company's product mix. In the
third quarter of 1994, the Company's highest revenue product was carrots.
Tomatoes represented the largest product in the third quarter of 1995.
For the three months ended September 30, 1995, produce sales decreased to
$1.3 million from $3.0 million in 1994. This $1.7 million decrease was
primarily attributable to revenues of $1.4 million in 1994 associated with a
marketing joint venture that was dissolved in the fourth quarter of 1994. In
addition the Company exited the cello carrot product line and discontinued the
processing of its own carrots by the end of the third quarter of 1994, which
has resulted in substantially lower carrot sales in 1995 as compared to the
same period in 1994. This decrease in carrot sales, however, was partially
offset by increases in tomato sales as a result of expansion into new and
existing geographic areas.
Revenues from product development agreements decreased slightly to
$.5 million in 1995 from $.6 million in 1994, principally due to fewer
government grants.
Investment and royalty income decreased to less than $.1 million in 1995
from $1.1 million in 1994. This decrease was due to 1994 results which
included the recognition of $1.0 million of revenue from a significant
licensing agreement.
Cost of produce sales decreased to $2.2 million in 1995 from $5.2 million
in 1994. This $3.0 million decrease was a result of 1994 costs of $1.3
million associated with the marketing joint venture terminated in 1994 and the
fact that the Company discontinued the processing of its own carrots and
changed its product mix toward the higher margin tomato product.
Research and product development expenses decreased to $1.4 million in
1995 from $1.7 million in 1994, primarily due to the Company's decision to
sharpen the focus of its research and concentrate its efforts principally in
the area of fruits and vegetables.
Selling, general and administrative expenses remained unchanged at
$1.7 million.
Nine Months Ended September 30, 1995 Compared to Nine Months Ended
September 30, 1994
The Company's loss from continuing operations of $10.5 million for the
nine months ended September 30, 1995 decreased significantly from the 1994
loss of $20.4 million primarily due to changes in the Company's product mix.
During the first nine months of 1994 the Company's primary product was
carrots. In 1995 the primary product was tomatoes, which is a higher margin
product for the Company. In addition, 1994 results included a non-recurring
charge of $1.5 million related to the Company's relocation of its New Jersey
headquarters to existing Company facilities in California, as compared to the
1995 charge of $.1 million and a charge of $3.2 million in 1994 for costs
associated with the Company discontinuing the processing of its own carrots as
compared to the 1995 charge of $1.4 million.
For the nine months ended September 30, 1995, produce sales decreased to
$7.2 million from $10.2 million in 1994. This $3.0 million decrease was
primarily attributable to revenues of $1.4 million in 1994 associated with a
marketing joint venture that was dissolved in the fourth quarter of 1994. In
addition, the Company exited the cello carrot product line and discontinued
the processing of its own carrots by the end of the third quarter of 1994,
which has resulted in substantially lower carrot sales in 1995 as compared to
the same period in 1994. This decrease in carrot sales, however, was
partially offset by increases in tomato sales as a result of expansion into
new and existing geographic areas.
Revenues from product development agreements decreased to $1.3 million in
1995 from $1.7 million in 1994 principally due to fewer government grants.
Investment and royalty income increased to $1.6 million in 1995 from
$1.3 million in 1994 as a result of recording $1.1 million of the net revenue
in the first quarter of 1995 from the sale of Frost Technology and recognizing
revenue for cash received on an option to purchase licensed technology. The
1994 results included $1.0 million as a result of recording revenue from a
significant licensing agreement.
Cost of produce sales decreased to $10.6 million in 1995 from
$18.4 million in 1994. This $7.8 million decrease was a result of 1994 costs
of $1.3 million associated with the marketing joint venture terminated in 1994
and the discontinuation by the Company of the processing of its own carrots
and the change of its product mix toward the higher margin tomato product.
Research and product development expenses decreased to $4.5 million in 1995
from $5.2 million in 1994, primarily due to the Company's decision to sharpen
the focus of its research efforts and concentrate its efforts principally in
the area of fruits and vegetables.
Selling, general and administrative expenses decreased to $4.3 million
from $5.5 million. This $1.2 million decrease was due to the Company's
efforts to consolidate its operations, eliminate duplication of administrative
staff and facilities and focus its marketing efforts on tomatoes.
Liquidity and Capital Resources
At September 30, 1995, the Company had $3.7 million in cash and temporary
investments, a $.8 million net decrease from $4.5 million at
December 31, 1994. This decrease was primarily the net result of the funding
of operating losses of $10.2 million and the payment of $1.6 million of
dividends on the Company's $2.25 Convertible Exchangeable Preferred Stock,
offset by $10.4 million in net proceeds from the sale of common and preferred
stock discussed below (see Notes 4 and 5 to the Company's Consolidated
Financial Statements).
During the nine months ended September 30, 1995, the Company received cash
proceeds of $1.3 million from the sale of Frost Technology Corporation, a
wholly-owned subsidiary.
During the nine months ended September 30, 1995, the Company privately
placed 8,505,000 shares of its common stock and received net proceeds, after
commissions and expenses, of $9.0 million. In addition, the Company privately
placed 750 shares of Series B and 750 shares of Series C preferred stock and
received net proceeds, after commissions and expenses, of $1.4 million. These
preferred shares were converted into common stock in the third quarter (see
Note 5 to the Company's Consolidated Financial Statements).
At September 30, 1995, the Company had commitments of $1,277,000 for
grower fees related to the future harvest of crops.
Subsequent to September 30, 1995, the Company raised approximately
$.5 million from the private placement of the Company's common stock (see
Note 7 to the Company's Consolidated Financial Statements). In addition, the
Company did not declare or pay the regular quarterly dividend ($.5626 per
share or $776,250 in the aggregate) on its $2.25 Convertible Exchangeable
Preferred Stock, payable on November 1, 1995. Based on its current business
plans, the Company believes that its current cash resources, planned working
capital borrowing, revenues from prospective and existing research, product
development and licensing arrangements, revenues from projected increases in
produce sales, accompanied by projected improvements in the gross margin on
such produce sales and reduction of fixed overhead costs as a result of
ceasing carrot processing, will be sufficient to fund its cash requirements
until mid-1996. Although the Company has had various negotiations concerning
prospective research, product development and licensing agreements, and
working capital loan agreements, there can be no assurance that any such
agreements will be entered into or consummated; nor can there be any assurance
that the projected improvements in produce sales and in gross margins will be
achieved. Accordingly, the funds available to the Company may not be
sufficient to meet the Company's cash requirements beyond mid-1996.
Accordingly, in order to generate sufficient funds to meet its cash
requirements beyond the middle of 1996, the Company may be required to
continue to suspend future quarterly dividend payments on its $2.25
Convertible Exchangeable Preferred Stock, issue additional equity securities,
enter into strategic partnerships or other financial arrangements, sell
certain assets, or curtail certain activities. The issuance by the Company of
additional shares of common stock will require the approval of the Company's
shareholders of an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of common stock (see Note 4 to the
Company's Consolidated Financial Statements).
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In May 1995, a lawsuit was brought against the Company by Monsanto Company
("Monsanto") in the United States District Court for the District of Delaware.
Monsanto alleged that the Company had infringed two of Monsanto's United
States patents relating to the use of promoter and gene marker technology in
plants. During the third quarter the Company and Monsanto settled this legal
action for an immaterial amount to be paid in equal annual installments over a
four year period beginning January 1996.
Item 3. Defaults Upon Securities
The Company did not declare or pay the regular quarterly dividend ($.5625
per share) on its $2.25 Convertible Exchangeable Preferred Stock payable on
November 1, 1995 and as of the date hereof, the total arrearage with respect
to such class of stock is $776,250.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K -- No reports on Form 8-K were filed by the Company
during the quarter ended September 30, 1995.
<PAGE>
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.
DNA PLANT TECHNOLOGY CORPORATION
Date: November 13, 1995 By: /s/ Robert Serenbetz
Robert Serenbetz, Chairman
and Chief Executive Officer
(Principal Operating Officer
and Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,684
<SECURITIES> 21
<RECEIVABLES> 979
<ALLOWANCES> (119)
<INVENTORY> 1,892
<CURRENT-ASSETS> 8,054
<PP&E> 10,141
<DEPRECIATION> (7,597)
<TOTAL-ASSETS> 12,859
<CURRENT-LIABILITIES> 4,187
<BONDS> 0
<COMMON> 407
0
14
<OTHER-SE> 6,446
<TOTAL-LIABILITY-AND-EQUITY> 12,859
<SALES> 7,211
<TOTAL-REVENUES> 10,092
<CGS> 10,580
<TOTAL-COSTS> 15,064
<OTHER-EXPENSES> 1,445
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (12,042)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,042)
<DISCONTINUED> 0
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<NET-INCOME> (12,042)
<EPS-PRIMARY> (.37)
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