<PAGE>
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 June 30, 1996
-----------------------
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 June 30, 1996
------------------- -------------
Common Stock, $.01 par value 45,676,168
<PAGE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Consolidated Balance Sheets as of June 30, 1996 and December
31, 1995
(b) Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 1996 and 1995
(c) Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995
(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 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
(b) Exhibits
2
<PAGE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,328 $ 1,742
Accounts receivable, net of allowance for bad debts
of $47 in 1996 and $106 in 1995 1,716 1,922
Inventory 246 380
Other current assets 444 425
Assets held for sale 97 1,038
- ---------------------------------------------------------------------------------------------------------
Total current assets 3,831 5,507
- ---------------------------------------------------------------------------------------------------------
Fixed assets, net of accumulated depreciation of $6,703 in
1996 and $6,612 in 1995 2,225 2,345
Patents and other assets, net of accumulated amortization of $405 in 1996
and $354 in 1995 486 503
Non-marketable equity investment 1,946 1,946
Excess of purchase price over net assets acquired, net of
amortization of $475 in 1996 and $380 in 1995 1,425 1,520
- ---------------------------------------------------------------------------------------------------------
Total assets $ 9,913 $ 11,821
=========================================================================================================
=========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 927 $ 1,384
Accrued liabilities 1,057 1,539
Accrued compensation 813 361
Dividend payable 2,329 776
Amount payable to DuPont -- 983
Current portion of note payable 214 204
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 5,340 5,247
- ---------------------------------------------------------------------------------------------------------
Deferred revenue 362 584
Deferred compensation 232 232
Note payable less current portion 5,598 709
- ---------------------------------------------------------------------------------------------------------
Total long-term liabilities 6,192 1,525
- ---------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, par value $.01 per share; authorized 5,000 shares;
$2.25 convertible preferred stock; issued and outstanding - 1,380 share
in 1996 and 1995 (aggregate liquidation preference of $34,500) 14 14
Series A convertible preferred stock par value $.01 per share;
authorized 3 shares; issued - and outstanding no shares in 1996, and
3 shares in 1995 (aggregate liquidation preference of $16,500) -- --
Series B convertible preferred stock, par value $.01 per share;
authorized 1 share; issued and outstanding no shares in 1996 and 1995 -- --
Series C convertible preferred stock, par value $.01 per share;
authorized 1 share; issued and outstanding no shares in 1996 and 1995 -- --
Common stock, par value $.01 per share; authorized 60,000 shares; issued
45,676 shares in 1996 and 42,829 shares in 1995 457 428
Additional paid in capital 158,945 160,405
Accumulated deficit (161,035) (155,798)
- ---------------------------------------------------------------------------------------------------------
Total stockholders' equity (1,619) 5,049
- ---------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 9,913 $ 11,821
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Produce sales $ 3,206 $ 2,992 $ 6,715 $ 6,063
Product development agreements 492 534 987 874
Investment and royalty income 295 32 549 1,510
- ------------------------------------------------------------------------------------
Total revenues 3,993 3,558 8,251 8,447
- ------------------------------------------------------------------------------------
Operating expenses:
Cost of produce sales 3,380 4,981 6,994 8,601
Exit carrot processing - - - 380
Research and product development 1,160 1,455 2,504 3,090
Selling, general and administrative 1,900 1,144 3,821 2,534
- ------------------------------------------------------------------------------------
Total operating expenses 6,440 7,580 13,319 14,605
- ------------------------------------------------------------------------------------
Loss from operations (2,447) (4,022) (5,068) (6,158)
Interest Expense 128 - 218 -
Gain (Loss) on sale of assets (15) 41 49 65
- ------------------------------------------------------------------------------------
Net loss (2,590) (3,981) (5,237) (6,093)
Preferred stock dividend (776) (791) (1,552) (1,567)
- ------------------------------------------------------------------------------------
Net loss applicable to common
stockholders (3,366) (4,772) (6,789) (7,660)
====================================================================================
Net loss per common share $(.08) $(.15) $(.16) $(.25)
Weighted average common shares
outstanding 43,586 31,520 43,264 31,203
====================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(5,237) $(6,093)
Reconciliation of net loss to net
cash used in operating activities:
Depreciation and amortization 283 230
Provision for uncollectible accounts (59) (200)
Compensation and expenses paid in common stock 120 54
Net (gain) loss from disposal of fixed assets (48) (66)
Net changes in:
Accounts receivable 265 752
Inventory 134 436
Other current assets (19) (238)
Other assets (34) (50)
Accounts payable and accrued liabilities (475) 197
Deferred revenue and compensation (222) (18)
- -----------------------------------------------------------------------------------
Net cash used in operating activities (5,292) (4,996)
- -----------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (19) (95)
Sales and maturities of temporary investments -- 3,009
Proceeds from sale of assets 8 66
- -----------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (11) 2,980
- -----------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from sale of common and preferred stock -- 3,494
Proceeds from issuance of note payable 5,000 --
Preferred stock dividends -- (1,567)
Payment of principal on notes payable (111) --
- -----------------------------------------------------------------------------------
Net cash provided by financing activities 4,889 1,927
- -----------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (414) (89)
Cash and cash equivalents, beginning of period 1,742 1,202
- -----------------------------------------------------------------------------------
Cash and cash equivalents, end of period $1,328 $ 1,113
- -----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(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 1995 Annual
Report on Form 10-K, as amended.
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 June 30, 1996 and the results of its operations for the three and
six months ended June 30, 1996 and 1995 and its cash flows for the six months
ended June 30, 1996 and 1995.
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 - AGREEMENT AND PLAN OF MERGER
The Company is party to an Agreement and Plan of Merger, dated as of January
26, 1996, as amended (the "Merger Agreement"), with Empresas La Moderna, S.A. de
C.V., a corporation organized under the laws of the United Mexican States
("ELM"), Bionova, S.A. de C.V., Mexico a corporation organized under the laws of
the United Mexican States ("Bionova Mexico"), Bionova U.S. Inc., a Delaware
corporation ("Bionova U.S."), and Bionova Acquisition, Inc., a Delaware
corporation ("Merger Sub"), pursuant to which, among other things: (i) Merger
Sub will be merged with and into the Company (the "Merger"); (ii) the Company
will become a wholly-owned subsidiary of Bionova U.S.; (iii) shares of common
stock, par value $.01 per share ("Common Stock"), of the Company and shares of
the Company's $2.25 Convertible Exchangeable Preferred Stock, par value $.01 per
share ("Convertible Exchangeable Preferred Stock"), issued and outstanding at
the time of the Merger (the "Effective Time"), will be converted into and
represent the right to receive shares of Bionova U.S.'s common stock in the
ratios described below, except for any shares of the Company's securities held
in the treasury of the Company or held by any subsidiary of the Company, which
will be cancelled and (iv) each option or warrant to purchase shares of Common
Stock outstanding at the Effective Time will be assumed by Bionova U.S. and will
become a corresponding right to acquire shares of Bionova U.S.'s common stock
(adjusted in accordance with the exchange ratio applicable to the Merger). The
holders of the Company's capital stock, as a group, will own approximately 30%
of the outstanding shares of Bionova U.S.'s common stock after the Merger.
6
<PAGE>
On July 30, 1996, the Merger Agreement was amended to provide, among other
things, for the contribution by ELM to Bionova U.S. prior to the Merger of
additional capital in the amount of $8.0 million and a revised Merger exchange
ratio for the Common Stock and Convertible Exchangeable Preferred Stock. With
respect to the Merger exchange ratio, the Merger Agreement had previously
provided that each share of the Company's Common Stock outstanding at the
Effective Time would be converted into the right to receive one share of Bionova
U.S.'s Common Stock and each share of Convertible Exchangeable Preferred Stock
outstanding at the Effective Time would be converted into the right to receive
6.8375 shares of Bionova U.S.'s Common Stock. The amendment did not affect the
proportion of Bionova U.S.'s Common Stock to be owned by the former holders of
the Company's capital stock as a group immediately following the Merger. Under
the Merger Agreement, prior to and after such amendment, the outstanding capital
stock of the Company will be converted in the Merger into the right to receive
Bionova U.S. Common Stock representing in the aggregate 30% of the shares of
Bionova U.S.'s Common Stock outstanding immediately after the Effective Time.
The remaining shares of Bionova U.S.'s Common Stock will be held by an affiliate
of ELM. For additional information regarding the Merger Agreement and the
Merger, see the Company's Annual Report on Form 10-K for the year ended December
31, 1995, as amended.
NOTE 3 - INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
Prepaid grower fees $ - $ 119
Raw materials and seed 197 192
Finished goods 49 69
- ------------------------------------------------------
Total Inventory $ 246 $ 380
======================================================
</TABLE>
NOTE 4 - C.O.O. RESIGNATION
The Chief Operating Officer ("COO") of the Company resigned from the Company
on May 10, 1996. Pursuant to the terms of the COO's employment agreement, the
Company is obligated to pay the COO $312,000 over a twelve month period
commencing May 11, 1996, and ending April 30, 1997. All of this expense is
reflected in the financial statements as of and for the period ended June 30,
1996.
7
<PAGE>
NOTE 5 - LEGAL PROCEEDINGS
By letters dated May 3, 1996 and July 16, 1996, the Company has been advised
by a holder of the Company's Convertible Exchangeable Preferred Stock that such
holder believes that the Merger will result in the occurrence of a "corporate
change" with respect to the Company pursuant to Section 9 of the Certificate of
Designation for the Company's Convertible Exchangeable Preferred Stock, thereby
resulting in special conversion privileges. Under such holder's theory, as a
result of the Merger each share of the Company's Convertible Exchangeable
Preferred Stock will be converted into the right to receive approximately 4.6
shares of Bionova U.S.'s Common Stock instead of the .68375 shares of Bionova
U.S.'s Common Stock as provided in the Merger Agreement. Such holder has further
advised the Company that such holder has reserved any rights which it may have
as a holder of the Company's Convertible Exchangeable Preferred Stock, whether
or not the Merger is consummated.
It is the Company's position that the special conversion privilege specified
in Section 9 of the Certificate of Designation with respect to the Company's
Convertible Exchangeable Preferred Stock will not be triggered as a result of
the Merger. However, if this holder were to institute litigation with respect to
such issue and were to prevail therein and if Bionova U.S. were thereupon
required to issue additional shares of Bionova U.S.'s Common Stock to the former
holders of the Company's Convertible Exchangeable Preferred Stock, such issuance
of additional shares of Bionova U.S.'s Common Stock would substantially dilute
the interest of the other holders of Bionova U.S.'s Common Stock. If such holder
or another holder of the Company's Convertible Exchangeable Preferred Stock were
successful in such litigation, if any, a court could require other remedies,
including a cash judgment, which could materially adversely affect Bionova U.S.
In addition, Section 1.11(e) of the Merger Agreement provides that Bionova
U.S. "shall issue to Bionova Mexico or its designee, on or before the Closing
Date, such number of shares of [Bionova U.S.'s] Common Stock as shall represent
(when added to the shares of [Bionova U.S.'s] Common Stock outstanding as of the
date of . . . [the Merger] Agreement) . . . 70% of the issued and outstanding
shares thereof as of the Effective Time of the Merger." Section 2.3 of the
Merger Agreement provides that "[Bionova U.S.'s] Common Stock into which [the
Company's] Stock shall be converted pursuant to the Merger Agreement and the
Merger shall be deemed to have been issued at the Effective Time . . ."
Accordingly, if Bionova U.S. is required to issue additional shares of Bionova
U.S.'s Common Stock to the former holders of the Company's Convertible
Exchangeable Preferred Stock, as described above, and if such shares are deemed
to have been issued at the Effective Time pursuant to Section 2.3 of the Merger
Agreement, Bionova U.S. may be obligated to issue additional shares of Bionova
U.S.'s Common Stock to Bionova Mexico or its designee (including ELM), for no
additional consideration, pursuant to Section 1.11(e) of the Merger Agreement so
that, after giving effect to the issuances to the former holders of the
Company's Convertible Exchangeable Preferred Stock and to Bionova Mexico or its
designee (including ELM), Bionova Mexico and its affiliates (including ELM) will
own 70% of the outstanding shares of Bionova U.S.'s Common Stock. The foregoing
issuances of additional shares of Bionova U.S.'s Common Stock would
substantially dilute the interest in Bionova U.S. of the holders of the
Company's Common Stock receiving shares of Bionova U.S.'s Common Stock in the
Merger.
By letter dated April 22, 1996, the Company was also notified that a holder of
the Company's Common Stock intended to commence litigation against the Company.
Such holder alleged that the Company had breached its contractual obligations to
register under the Securities Act of 1933 by April 1, 1996 approximately 5.5
million shares of the Company's Common Stock obtained by such holder and certain
other holders in private placement transactions with the Company. As of the date
hereof, no such litigation has been commenced. The Company believes such
allegation is without merit and intends to vigorously defend against any such
claim which may be formally asserted in a future lawsuit.
In addition to the foregoing, from time to time, the Company is involved in
various legal actions that arise in the ordinary course of its business. Such
legal actions are not expected, individually or in the aggregate, to have a
material adverse effect on the Company's financial condition or results of
operations.
NOTE 6 - SUBSEQUENT EVENTS
During the third quarter of 1996, the Company received a $100,000 payment and
a new note receivable in the amount of $200,000 payable to the Company from
Idetek Inc. ("Idetek"), a privately held diagnostic company, on an existing note
receivable. In addition, the Company has been advised by Idetek that a merger
with IDEXX Laboratories, Inc. ("IDEXX") has been approved by the Board of
Directors of both companies and that the 145,000 shares of Idetek stock owned by
the Company will be converted into shares of IDEXX common stock. As of June 30,
1996, the Company's net recorded amount from the receivable and investment in
Idetek was $100,000. The principal amount of the note and interest thereon are
due within seven days after the closing of the merger, or in any event, by
October 10, 1996. The Company will recognize a gain from the note receivable
and investment in Idetek upon the receipt of cash and IDEXX stock.
On July, 1, 1996 in accordance with the proposed Merger (see Note 2 to the
Company's Consolidated Financial Statements), the Company issued a note payable
to Bionova U.S. and received cash in the amount of $5,000,000.
See Note 2 for information concerning amendment No. 2 to the Merger Agreement,
which was executed on July 30, 1996.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1996
General
- -------
The Company is a leading agribusiness biotechnology company focused on
developing and marketing premium branded fresh and processed fruits and
vegetables using advanced breeding, genetic engineering, and other
biotechniques.
Results of Operations
- ---------------------
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
- -----------------------------------------------------------------------------
For the three months ended June 30, 1996, produce sales increased seven
percent to $3.2 million from $3.0 in 1995. This $.2 million increase was a
result of business growth and expanded marketing programs, primarily in cherry
tomatoes and carrots.
Revenues from product development agreements remained unchanged at $.5 million
for each of the three month periods.
Investment and royalty income increased by $.3 million in 1996 primarily as a
result of royalty income from a licensing arrangement with ELM.
Cost of produce sales decreased to $3.4 million due to a shift in sourcing
strategy. In the second quarter of 1995, industry oversupply drove prices down
causing yields to suffer and, ultimately, cost per box to increase. In the
second quarter of 1996, most of the produce sold was sourced through marketing
arrangements whereby FreshWorld capitalized on its unique varieties and brand
strength.
Research and product development expenses decreased twenty percent to $1.2
million in 1996 from $1.5 million in 1995, primarily due to the Company's
efforts to conserve its cash resources by focusing exclusively on fruit and
vegetable programs.
Selling, general and administrative expenses increased to $1.9 million in 1996
from $1.1 million in 1995 as a result of $.2 million in expenses related to the
proposed Merger (see Note 2 to the Company's Consolidated Financial Statements)
and severance expense of $.4 million, including $.3 million of payments related
to the resignation of the Company's Chief Operating Officer (see Note 4 of the
Company's Consolidated Financial Statements).
For the three months ended June 30, 1996, the Company's loss decreased to $2.6
million from $4.0 million in the 1995 period, primarily due to the lower cost of
produce sold for tomatoes.
9
<PAGE>
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1996
- -------------------------------------------------------------------------
For the six months ended June 30, 1996, produce sales increased to $6.7
million from $6.1 million in 1994.
Revenues from product development agreements increased slightly to $1.0
million in 1996 from $.9 million in 1995.
Investment and royalty income decreased to $.5 million in 1996 from $1.5
million in 1995. In 1995 $1.1 million of the net revenue recorded was from the
sale of Frost Technology and the recognition of revenue for cash received on an
option to purchase licensed technology.
Cost of produce sales decreased to $7.0 million in 1996 from $8.6 in 1995.
This $1.6 million decrease was a result of the Company changing its product mix
toward the higher margin tomato product and improving margins in the tomato
business.
Research and product development expenses decreased to $2.5 million in 1996
from $3.1 million in 1995 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 increased to $3.8 million from
$2.5 million. This $1.3 million increase is due to the Company's $.7 million in
expenses related to the pending Merger (see Note 2 to the Company's
Consolidated Financial Statements), severance expense of $.4 million, including
$.3 million of payments related to the resignation of the Company's Chief
Operating Officer (see Note 4 of the Company's Consolidated Financial
Statements).
The Company's loss from continuing operations of $5.3 million for the six months
ended June 30, 1996 decreased from the 1995 loss of $6.2 million primarily due
to lower cost of produce sold and increase in produce sales, offset by an
increase in selling, general and administrative costs.
10
<PAGE>
Liquidity and Capital Resources
- -------------------------------
At June 30, 1996, the Company had $1.3 million in cash and cash equivalents, a
$.4 million net decrease from $1.7 million at December 31, 1995. This decrease
was primarily the net result of proceeds from the issuance of a note payable of
$5.0 million and the sale of assets held for sale for $.7 million, offset by the
funding of operating activities of $5.2 million. The $.7 million in proceeds
from the sale of assets was used to satisfy a payable to E. I. du Pont de
Nemours and Company ("Du Pont"), a principal shareholder, in April 1996 arising
out of the Company's acquisition of Du Pont's interest in FreshWorld.
At December 31, 1995, the Company had $1.7 million in cash and temporary
investments, a $2.8 million net decrease from $4.5 million at December 31, 1994.
This decrease was primarily the net result of $10.8 million in net proceeds
received from the sale of common and preferred stock discussed below, offset by
the funding of operating activities of $12.0 million and the payment of $2.3
million of dividends on the $2.25 Convertible Exchangeable Preferred Stock. At
December 31, 1995, working capital was $.3 million and stockholders' equity was
$5.0 million.
During 1995, the Company received cash proceeds of $1.3 million from the sale
of Frost Technology Corporation, a wholly-owned subsidiary. The assets of this
subsidiary consisted primarily of technology rights.
Historically, the Company has financed its operations primarily through the
public and private offering of common and preferred stock and, to a lesser
extent, from payments related to research and development arrangements, royalty
agreements, and investment earnings. During 1995, the Company privately placed
an aggregate of 8,969,725 shares of Common Stock and warrants to purchase
4,070,182 shares of Common Stock and received net proceeds, after commissions
and expenses, of $9.5 million. In addition, the Company privately placed 750
shares of Convertible Series B and 750 shares of Convertible Series C preferred
stock and received net proceeds, after commission and expenses, of $1.3 million.
These preferred shares were converted into Common Stock during the third
quarter.
Net proceeds from the Company's stock offerings have primarily been used to
purchase temporary investments with maturities that approximate management of
the Company's anticipated cash flow requirements. Investing activities of the
Company consist primarily of the purchases and sales/maturities of these
temporary investments and have generally decreased as available proceeds from
the Company's stock offerings have decreased.
At December 31, 1995, the Company had commitments of $192,000 for grower fees
related to the future harvest of crops.
In October 1995, the Company entered into an agreement to lease to a third
party certain carrot processing equipment with a net book value of $1.7 million
in return for the payment to the Company of $15,935 per month for sixty months.
Concurrent with the leasing of the equipment, the Company terminated its carrot
processing facility lease and agreed to make payments totaling $945,000
consisting of a termination penalty under the terms of the lease agreement,
monthly
11
<PAGE>
lease payments through December 1995 and the cost to restore the facility to its
prelease condition.
Subsequent to December 31, 1995, the Company received $5 million in January
1996 and an additional $5 million in July 1996 from Bionova U.S. in connection
with the Merger Agreement and the Loan Agreement.
Based on its current business plans, including consummation of the Merger, the
Company believes that its current cash resources, including the $5 million
received from Bionova U.S. in January 1996 and the $5 million received on July
1, 1996, its revenues from prospective and existing research, product
development and licensing arrangements, revenues from produce sales, accompanied
by projected improvements in the gross margin on such produce sales and
reduction of fixed overhead and administrative costs will be sufficient to fund
its cash requirements into 1997, although there can be no assurance with respect
thereto.
Not withstanding the foregoing, if the holders of the Common Stock do not
adopt the Merger Agreement by the requisite vote required under applicable
Delaware law, based upon the historical cash needs of the Company it will be
necessary for the Company to raise new capital, to seek a new business
combination transaction with a third party or to consider other available
strategic alternatives in early 1997 if not sooner. Because of the anticipated
financial condition of the Company following its use of the $10 million provided
by Bionova U.S. under the Loan Agreement, there can be no assurance that the
Company would be successful in its pursuit of new capital or a new business
combination transaction with a third party. As a result, it then would be
necessary for the Company to consider other strategic alternatives, which could
have a material adverse effect on the continuing investment of the Company's
stockholders therein.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
By letters dated May 3, 1996 and July 16, 1996, the Company has been advised
by a holder of the Company's Convertible Exchangeable Preferred Stock that such
holder believes that the Merger will result in the occurrence of a "corporate
change" with respect to the Company pursuant to Section 9 of the Certificate of
Designation for the Company's Convertible Exchangeable Preferred Stock, thereby
resulting in special conversion privileges. Under such holder's theory, as a
result of the Merger each share of the Company's Convertible Exchangeable
Preferred Stock will be converted into the right to receive approximately 4.6
shares of Bionova U.S.'s Common Stock instead of the .68375 shares of Bionova
U.S.'s Common Stock as provided in the Merger Agreement. Such holder has further
advised the Company that such holder has reserved any rights which it may have
as a holder of the Company's Convertible Exchangeable Preferred Stock, whether
or not the Merger is consummated.
It is the Company's position that the special conversion privilege specified
in Section 9 of the Certificate of Designation with respect to the Company's
Convertible Exchangeable Preferred Stock will not be triggered as a result of
the Merger. However, if this holder were to institute litigation with respect to
such issue and were to prevail therein and if Bionova U.S. were thereupon
required to issue additional shares of Bionova U.S.'s Common Stock to the former
holders of the Company's Convertible Exchangeable Preferred Stock, such issuance
of additional shares of Bionova U.S.'s Common Stock would substantially dilute
the interest of the other holders of Bionova U.S.'s Common Stock. If such holder
or another holder of the Company's Convertible Exchangeable Preferred Stock were
successful in such litigation, if any, a court could require other remedies,
including a cash judgment, which could materially adversely affect Bionova U.S.
In addition, Section 1.11(e) of the Merger Agreement provides that Bionova
U.S. "shall issue to Bionova Mexico or its designee, on or before the Closing
Date, such number of shares of [Bionova U.S.'s] Common Stock as shall represent
(when added to the shares of [Bionova U.S.'s] Common Stock outstanding as of the
date of . . . [the Merger] Agreement) . . . 70% of the issued and outstanding
shares thereof as of the Effective Time of the Merger." Section 2.3 of the
Merger Agreement provides that "[Bionova U.S.'s] Common Stock into which [the
Company's] Stock shall be converted pursuant to the Merger Agreement and the
Merger shall be deemed to have been issued at the Effective Time . . ."
Accordingly, if Bionova U.S. is required to issue additional shares of Bionova
U.S.'s Common Stock to the former holders of the Company's Convertible
Exchangeable Preferred Stock, as described above, and if such shares are deemed
to have been issued at the Effective Time pursuant to Section 2.3 of the Merger
Agreement, Bionova U.S. may be obligated to issue additional shares of Bionova
U.S.'s Common Stock to Bionova Mexico or its designee (including ELM), for no
additional consideration, pursuant to Section 1.11(e) of the Merger Agreement so
that, after giving effect to the issuances to the former holders of the
Company's Convertible Exchangeable Preferred Stock and to Bionova Mexico or its
designee (including ELM), Bionova Mexico and its affiliates (including ELM) will
own 70% of the outstanding shares of Bionova U.S.'s Common Stock. The foregoing
issuances of additional shares of Bionova U.S.'s Common Stock would
substantially dilute the interest in Bionova U.S. of the holders of the
Company's Common Stock receiving shares of Bionova U.S.'s Common Stock in the
Merger.
By letter dated April 22, 1996, the Company was also notified that a holder of
the Company's Common Stock intended to commence litigation against the Company.
Such holder alleged that the Company had breached its contractual obligations to
register under the Securities Act of 1933 by April 1, 1996 approximately 5.5
million shares of the Company's Common Stock obtained by such holder and certain
other holders in private placement transactions with the Company. As of the date
hereof, no such litigation has been commenced. The Company believes such
allegation is without merit and intends to vigorously defend against any such
claim which may be formally asserted in a future lawsuit.
In addition to the foregoing, from time to time, the Company is involved in
various legal actions that arise in the ordinary course of its business. Such
legal actions are not expected, individually or in the aggregate, to have a
material adverse effect on the Company's financial condition or results of
operations.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) The Company did not file any reports on Form 8-K during the quarter ended
June 30, 1996.
(b) Exhibits
--------
1. Amendment No. 1, dated May 16, 1996, to the Merger Agreement.
2. Amendment No. 2, dated July 30, 1996, to the Merger Agreement.
27. Financial Data Schedule
12
<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: August 14, 1996 By: /s/ Robert Serenbetz
--------------------------------------------
Robert Serenbetz, Chairman and
Chief Executive Officer
(Principal Operating Officer)
Date: August 14, 1996 By: /s/ Willem F.O. Spiegel
--------------------------------------------
Willem F.O. Spiegel, Vice President
& Chief Financial Officer
(Principal Financial Officer)
13
<PAGE>
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1, dated as of May 16, 1996, to the Agreement and Plan of
Merger, dated January 26, 1996, among Empresas La Moderna, S.A. de C.V.,
Bionova, S.A. de C.V., Bionova U.S. Inc., Bionova Acquisition, Inc. and DNA
Plant Technology Corporation (the "Agreement"). Terms defined in the Agreement
shall have their defined meanings herein, unless otherwise defined herein. The
undersigned hereby agree that: (i) Bionova U.S. shall deliver to the Company, as
soon as practicable, the unaudited consolidated financial statements, as of and
for the quarter ended March 31, 1996, of the entities that will constitute the
Bionova Group as of the Closing (the "Quarterly Financial Statements"); (ii) the
date of such delivery of the Quarterly Financial Statements shall be deemed to
be a Schedule Delivery Date for the purposes of the Agreement, including Section
11.1(e) thereof; (iii) notwithstanding the delivery by Bionova U.S. to the
Company on May 3, 1996 of the consolidated financial statements, as of and for
the year ended December 31, 1995, of the entities that will constitute the
Bionova Group as of the Closing (the "Annual Financial Statements" and, together
with the Quarterly Financial Statements, the "Financial Statements"), the
Schedule Delivery Date of the Annual Financial Statements shall be deemed to be
the date of delivery of the Quarterly Financial Statements for the purposes of
the Agreement, including Section 11.1(e) thereof; (iv) the Company shall have
until seven days after the delivery date of the Quarterly Financial Statements,
to determine whether or not to terminate the Agreement pursuant to Section
11.1(e) of the Agreement as a result of the delivery of the Financial
Statements; and (v) notwithstanding Section 11.3(c)(1) of the Agreement, if the
Company terminates the Agreement pursuant to Section 11.1(e) thereof as a result
of the delivery of the Financial Statements, the Company shall not be entitled
to any reimbursement of expenses under Section 11.3(c)(1) of the Agreement.
Except to the extent amended hereby, the Agreement shall remain in full force
and effect and nothing herein shall affect, or be deemed to be a waiver of, the
other terms and provisions of the Agreement, including without limitation the
other termination provisions thereof.
IN WITNESS WHEREOF, the undersigned have caused this Amendment No. 1 to
the Agreement to be executed as of the date set forth above.
EMPRESAS LA MODERNA, S.A. de C.V. DNA PLANT TECHNOLOGY CORPORATION
By /s/ Carlos Herrera By /s/ Willem Spiegel
------------------------------- ------------------------------
Name: Carlos Herrera Name: Willem Spiegel
Title: Director Title: CFO
BIONOVA S.A. de C.V. BIONOVA ACQUISITION, INC. BIONOVA U.S. INC.
By /s/ Carlos Herrera By /s/ Carlos Herrera By /s/ Carlos Herrera
----------------------- ------------------------ ---------------------
Name: Carlos Herrera Name: Carlos Herrera Name: Carlos Herrera
Title: Director General Title: Chairman of the Title: Chairman of the
Board and Chief Board and Chief
Executive Officer Executive
Officer
<PAGE>
AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER
This Amendment No. 2 To Agreement and Plan of Merger (this "Amendment")
is entered into as of the 30th day of July, 1996, among Empresas La Moderna,
S.A. de C.V., a corporation organized under the laws of the United Mexican
States ("Parent"), Bionova, S.A. de C.V., a corporation organized under the laws
of the United Mexican States ("Bionova Mexico"), Bionova U.S. Inc., a Delaware
corporation ("Bionova U.S."), Bionova Acquisition, Inc., a Delaware corporation
("Sub"), and DNA plant Technology Corporation, a Delaware corporation (the
"Company").
W I T N E S E T H:
WHEREAS, Parent, Bionova Mexico, Bionova U.S., Sub and the Company
entered into an Agreement and Plan of Merger on January 26, 1996 (as amended,
the "Agreement"), providing for, among other things, the merger of Sub with and
into the Company; and
WHEREAS, Parent, Bionova Mexico, Bionova U.S., Sub and the Company
desire to amend certain provisions of the Agreement; and
WHEREAS, Section 11.4 of the Agreement requires that all amendments to
the Agreement be made by an instrument in writing signed by or on behalf of all
the parties;
NOW, THEREFORE, Parent, Bionova Mexico, Bionova U.S., Sub and the
Company hereby agree as follows:
1. Defined Terms. All capitalized terms used but not defined in this
-------------
Amendment have the respective meanings ascribed to such terms in the Agreement.
All references in this Amendment to Sections are references to Sections of the
Agreement.
2. Capitalization of Bionova U.S. and Surviving Corporation.
--------------------------------------------------------
(a) The following is inserted as a new Section 1.11(d):
On or before the Closing Date, Parent shall cause $8 million
in cash to be contributed to the capital of Bionova U.S.
(b) Section 1.11(d) is redesignated as Section 1.11(e) and the first
sentence of that section is amended to read as follows:
In consideration of the transactions specified in Sections
1.11(b), 1.11(c) and 1.11(d) (which transactions,
notwithstanding the terms of those sections, may be effected at
any time on or before the Closing Date), Bionova U.S. shall
issue to Bionova Mexico or its designee, on or before the
Closing Date, such number of shares of Bionova U.S. Common Stock
as shall represent (when added to the 25,000 shares of Bionova
U.S.
<PAGE>
Common Stock outstanding as of the date of this Agreement) 70%
(assuming no exercise of appraisal rights under State Law) of
the issued and outstanding shares thereof as of the Effective
Time of the Merger.
3. Conversion of Securities.
------------------------
(a) The first sentence of Section 2.1(a) is amended to read as
follows:
Each then outstanding share of Common Stock, par value $0.01 per
share, of the Company ("Company Common Stock") (other than the
shares of Company Common Stock referred to in Section 2.1(d))
shall be converted into the right to receive 0.10 fully paid and
nonassessable shares of Common Stock, par value $0.01 per share,
of Bionova U.S. ("Bionova U.S. Common Stock"), provided,
however, that no fractional shares of Bionova U.S. Common Stock
shall be issued, and, in lieu thereof, a cash payment shall be
made in accordance with Section 2.3(d).
(b) The first sentence of Section 2.1(b) is amended to read as
follows:
Each then outstanding share of $2.25 Convertible Exchangeable
Preferred Stock, par value $0.01 per share, of the Company
("Company Convertible Exchangeable Preferred Stock") (other than
the shares of such stock referred to in Section 2.1(d)) shall be
converted into the right to receive 0.68375 fully paid and
nonassessable shares of Bionova U.S. Common Stock, provided,
however, that no fractional shares of Bionova U.S. Common Stock
shall be issued, and, in lieu thereof, a cash payment shall be
made in accordance with Section 2.3(d).
4. Termination. Section 11.1(b) is amended by deleting "July 31, 1996"
-----------
and inserting in its place "October 31, 1996".
5. Severance. Schedule 9.10 is amended by (i) deleting the references
---------
to "July 1, 1997" and inserting in their place "the first anniversary of the
Closing Date" and (ii) deleting the name "Clinton Neagley" from the list of
senior management.
6. Indemnification. Schedule 12.2-1 is amended by deleting paragraph 3
---------------
thereof.
7. Effect. Except as amended by this Amendment, the Agreement remains
------
in full force and effect and nothing herein shall affect, or be deemed to be a
waiver of, the other terms and provisions of the Agreement.
- 2 -
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<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
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0
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