<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended SEPTEMBER 30, 1999
Commission file number 1-9431
ESCAGENETICS CORPORATION
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(Name of Small Business Issuer in Its Charter)
Delaware 94-3012230
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
Suite 605, 1075 Bellevue Way NE, Bellevue, WA 98004
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(Address of Principal Executive Offices) (Zip Code)
(206) 901-3595
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.0001 par value per share.
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 past 90 days.
Yes X No____
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. / /
Issuer's revenues for its most recent fiscal year were $-0-.
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. $2,202,075 as of November 11, 1999.
<PAGE>
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes X No________
The number of shares outstanding of the issuer's common stock as of November 11,
1999 was 73,402,516 shares.
Transitional Small Business Disclosure Format (check one):
Yes ____ No X
PART I
ITEM 1 - Business Description
Formed in 1986, ESCAgenetics Corporation ("the Company") was organized to
develop and commercialize high-value, plant derived products for the
agricultural and pharmaceutical markets. The Company actively conducted its
business between 1987 and the early part of 1995. In January 1995, the Company
scaled back its business activities and became largely a dormant business. In
January 1996, the Company filed a bankruptcy petition for protection under
Chapter 11 of the U.S. Bankruptcy Code. At the time of the bankruptcy filing,
the Company retained rights to certain plant extracts and related patents, its
date palm inventory and related technology and patents and its hybrid true
potato seed inventory and related technology and patents. The Company sold the
plant extracts and related patents and its date palm inventory as part of the
bankruptcy reorganization.
The Company's amended plan of reorganization (the "Amended Plan of
Reorganization") became effective on August 22, 1996. Under the Amended Plan of
Reorganization, GFL Ultra Fund, Ltd. ("Ultra"), the Company's largest debt
holder, received 25% of the cash available to unsecured creditors and 90% of the
Company's common stock. The remaining cash was distributed proportionately to
the remaining unsecured creditors and the remaining 10% of the Company's common
stock remained owned by its previous shareholders. The bankruptcy proceeding was
officially closed effective March 31, 1997. In July, 1998 Genesee Holdings, Inc.
("Holdings") acquired by merger all the assets of Ultra.
On December 27, 1996, the Company sold 100% of the common stock outstanding of
its wholly owned subsidiary, Potato Products International, Ltd. (formerly known
as TPS Products Company) to an affiliate of Ultra for $175,000. Prior to the
sale, the Company transferred to Potato Products International, Ltd. title to
all of its tangible and intangible assets other than cash on hand and the stock
of PHYTOpharmaceuticals, Inc. (an inactive majority owned subsidiary), SRE
ESCAgenetics Corporation (an inactive wholly owned subsidiary) and Potato
Products International, Ltd. The Company used the proceeds from the sale to
repay amounts owed to Ultra for cash advances and to pay for the costs
associated with preparing the Company for a business combination or other
strategic transaction.
The Company has been dormant during the fiscal year ended September 30, 1999.
The Company has had no employees since November 1996. The Company does not plan
to continue the business activities that it conducted prior to its
reorganization. It plans to pursue a business combination or other strategic
transaction. No candidate for such a transaction has been identified. The
Company believes its status as a public company may be attractive to a private
company wishing to avoid an initial public offering but there is no guarantee
that a business combination or other strategic transaction will be consummated.
ITEM 2 - Description of Property
None.
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ITEM 3 - Legal Proceedings
None.
ITEM 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the shareholders during the fourth
quarter of fiscal 1999.
PART II
ITEM 5 - Market for Common Equity and Related Shareholder Matters
The Company's Common Stock trades under the symbol "ESNG" on the OTC Bulletin
Board. The market for the Company's Common Stock is limited, sporadic and highly
volatile. The following table sets forth the high and low bid prices per share
of the Company's Common Stock during its last two fiscal years as reported by
the OTC Bulletin Board. These prices reflect inter-dealer prices, without retail
mark-ups, mark-downs or commissions, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
High Low
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<S> <C> <C>
Fiscal 1998
First Quarter 0.1000 0.0001
Second Quarter 0.0001 0.0001
Third Quarter 0.0050 0.0050
Fourth Quarter 0.0050 0.0010
Fiscal 1999
First Quarter 0.0010 0.0010
Second Quarter 0.0010 0.0010
Third Quarter 1.1250 0.0200
Fourth Quarter 0.0469 0.0100
</TABLE>
The number of shareholders of record as of November 3, 1999 was 493.
It is the present policy of the Company not to pay cash dividends. Any payment
of cash dividends in the future will depend upon the amount of funds legally
available for that purpose, the Company's earnings, financial condition, capital
requirements and other factors that the Board of Directors may deem relevant.
ITEM 6 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company has had no revenues from operations since the reorganization date.
The Company does not plan to continue the business activities that it previously
conducted. It plans to pursue a business combination or other strategic
transaction. No candidate for such a transaction has been identified. The
Company believes its status as a public company may be attractive to a private
company wishing to avoid an initial public offering but there is no guarantee
that a business combination or other strategic transaction will be consummated.
The Company expects to fund its expenses during fiscal 2000 with advances from
its majority shareholder, Holdings. These advances are expected to total
approximately $50,000 during fiscal 2000. The Company expects Holdings to
continue to fund its expenses until a business combination or other strategic
transaction is consummated. There is no guarantee that the Company is a viable
party for a business combination or
<PAGE>
other strategic transaction. If a business combination or other strategic
transaction is not consummated in a timeframe suitable to Holdings or cannot
be consummated due to excessive cost or for any other reason, Holdings may
cease to advance funds to the Company.
The Company has no employees and no fixed assets. The Company does not
anticipate hiring any employees or purchasing any assets until such time as a
business combination or other strategic transaction is consummated or is
imminent.
ITEM 7 - Financial Statements
The financial statements of the Company are included in this report commencing
on page F-1.
ITEM 8 - Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
ITEM 9 - Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Executive Officers and Directors
The following table sets forth the name, age and position of each person who was
serving as an executive officer or director of the Company at November 11, 1999:
<TABLE>
<CAPTION>
Name Age Office
------------------------- -------- --------------------------------------------
<S> <C> <C>
Michelle Kline 42 President, Treasurer, Secretary, Director
Greg L. Key 34 Director
</TABLE>
Ms. Kline was appointed as an officer and director as of August 23, 1996. Mr.
Key was appointed as a director on October 9, 1998. Ms. Kline and Mr. Key have
been employees of Genesee Services Corp., an affiliate of Holdings, since 1990.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes of ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all such
reports they file.
Based solely on its review of the copies of such reports received by the
Company, the Company believes that, during the fiscal year ended September 30,
1999, all filing requirements applicable to its officers and directors, and all
of the persons known to the Company to own more than ten percent of its Common
Stock, were complied with by such persons.
ITEM 10 - Executive Compensation
The Company has had no employees since November 1996 and did not compensate its
officer or directors during the fiscal year ended September 30, 1999. Their
employer compensates Ms. Kline and Mr. Key for services rendered to their
employer. No portion of their compensation is specifically attributable to their
service as officer or director of the Company.
ITEM 11 - Security Ownership of Beneficial Owners and Management
The table below sets forth information as to the beneficial owner of record that
was known by the Company to own beneficially more than 5% of the 73,402,516
shares of issued and outstanding Common Stock of the Company as of November 11,
1999.
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
------------------- ------------------------------------- ------------------------ -----------
<S> <C> <C> <C>
Common Stock Genesee Holdings, Inc. 81,270,000 shares* 91.7%
c/o ESCAgenetics Corporation
Suite 605, 1075 Bellevue Way NE
Bellevue, WA 98004
</TABLE>
*15,210,000 shares of this balance may be issued to Holdings at the option of
Holdings under convertible loans.
Neither Ms. Kline nor Mr. Key beneficially owns any shares of the Company or an
interest in Holdings.
ITEM 12 - Certain Relationships and Related Transactions
At September 30, 1999 the Company owed $117,000 to Holdings for loans provided
to finance the Company's business activities. The loans are convertible into
equity at the rate of 130 shares per dollar at Holding's option. Holdings has
waived its right to receive interest on the loans through September 30, 1999.
ITEM 13 - Exhibits, Lists and Reports on Form 8-K
(a) The following exhibits are filed as part of this report
<TABLE>
<CAPTION>
Exhibit # Exhibit Title
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<S> <C>
3.1 * Certificate of incorporation
3.2 ** By-laws
21 Subsidiaries of registrant
27.1 Financial Data Schedule
</TABLE>
* Incorporated by reference to the Company's Form 10-QSB for the
quarter ended December 31, 1998.
** Incorporated by reference to the Company's Form 10-QSB for the
quarter ended December 31, 1996.
(b) No reports on Form 8-K were filed during the fourth quarter of fiscal 1999.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ESCAGENETICS CORPORATION
By /s/ Michelle Kline
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Michelle Kline, President
Dated: 11/15/99
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In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Michelle Kline
--------------------------
Michelle Kline, Principal Executive, Financial
and Accounting Officer and Director
Date 11/15/99
------------------------
By /s/ Greg L. Key
--------------------------
Greg L. Key, Director
Date 11/15/99
------------------------
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
ESCAgenetics Corporation and Subsidiaries
Bellevue, Washington
We have audited the accompanying consolidated balance sheet of ESCAgenetics
Corporation and Subsidiaries (the Company) as of September 30, 1999, and the
related consolidated statements of operations and cash flows for the years ended
September 30, 1999 and 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ESCAgenetics Corporation and
Subsidiaries as of September 30, 1999, and the results of their operations and
their cash flows for the years ended September 30, 1999 and 1998, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the continuation of the Company as a going concern is
dependent upon the establishment of profitable operations. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
BADER MARTIN ROSS & SMITH, P.S.
Seattle, Washington
November 9, 1999
F1
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ESCAGENETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
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<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets - cash $ 3,000
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Total assets $ 3,000
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LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY
Liabilities:
Accounts payable $ 3,000
Due to Genesee Holdings, Inc. 117,000
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Total liabilities, all current 120,000
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Shareholders' equity deficiency:
Common stock 7,000
Additional paid-in capital 134,000
Accumulated deficit (258,000)
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Total shareholders' equity deficiency (117,000)
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Total liabilities and shareholders' equity deficiency $ 3,000
==============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F2
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ESCAGENETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
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<TABLE>
<CAPTION>
Years ended September 30,
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1999 1998
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<S> <C> <C>
Revenues $ 0 $ 0
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Operating expenses:
Accounting and legal 37,000 5,000
General and administrative 26,000 7,000
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Total expenses 63,000 12,000
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Net loss (63,000) (12,000)
Accumulated deficit, beginning of year (195,000) (183,000)
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Accumulated deficit, end of year $ (258,000) $ (195,000)
================ ================
Net loss per share $ (0.00) $ (0.00)
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Weighted average common shares outstanding 73,402,516 73,402,516
================ ================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F3
<PAGE>
ESCAGENETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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<TABLE>
<CAPTION>
Years ended September 30,
-------------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (63,000) $ (12,000)
Change in accounts payable 2,000 (2,000)
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Net cash used in operating activities (61,000) (14,000)
---------------- ----------------
Net cash provided by financing activities, advances
from Genesee Holdings, Inc. 63,000 15,000
---------------- ----------------
Net increase in cash 2,000 1,000
Cash at beginning of year 1,000 0
---------------- ----------------
Cash at end of year $ 3,000 $ 1,000
================ ================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F4
<PAGE>
ESCAGENETICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1. Summary of significant accounting policies
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of ESCAgenetics
Corporation (the "Company") and its majority and wholly owned subsidiaries,
PHYTOpharmaceuticals, Inc. and SRE ESCAgenetics Corporation, after
elimination of all significant intercompany accounts and transactions. The
Company's subsidiaries did not have any significant operating activities
during the periods presented.
OPERATIONS
Formed in 1986, the Company was organized to develop and commercialize
high-value, plant-derived products for the agricultural and pharmaceutical
markets. In January 1995, the Company scaled back its business activities
and became largely a dormant business. In January 1996, the Company filed a
bankruptcy petition for protection under Chapter 11 of the U.S. Bankruptcy
Code, and the Company's plan of reorganization became effective on August
22, 1996. The bankruptcy proceeding was officially closed effective March
31, 1997.
Genesee Holdings, Inc. ("Holdings") owns ninety percent of the outstanding
common stock of the Company. Currently, all operating expenses are being
funded by Holdings through a line of credit (Note 3). During the years
ended September 30, 1999 and 1998, the Company paid $0 and $1,000,
respectively, to an affiliate for general and administrative expenses
consisting primarily of accounting services.
The Company does not plan to continue the business activities that it
conducted prior to its reorganization. It plans to pursue a business
combination or other strategic transaction. No candidate for such a
transaction has been identified. Ultimately, the continuation of the
Company as a going concern is dependent upon the establishment of
profitable operations. Management believes Holdings will continue to fund
expenditures until such time as a business combination or other strategic
transaction is consummated.
Because the achievement of these plans is dependent upon future events,
there can be no assurance that future profitable operations will occur as
planned.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
F5
<PAGE>
1. Summary of significant accounting policies (continued)
NET LOSS PER SHARE
Net loss per share is calculated on the basis of weighted average number of
common shares outstanding. Common stock equivalents are excluded from the
computation, as their effect is antidilutive.
2. Shareholders' equity
The Company has authorized 101,000,000 shares of Common Stock with a par
value of $.0001 per share and 1,000,000 shares of Preferred Stock with a
par value of $.01 per share. There were 73,402,516 shares of Common Stock
issued and outstanding at September 30, 1999 and 1998. No shares of
Preferred Stock are outstanding.
3. Due to Holdings
At September 30, 1999, the Company owed $117,000 to Holdings for loans
provided to finance the Company's expenses. The loans are convertible into
equity at the rate of 130 shares per dollar at Holdings' option. Holdings
has waived its right to receive interest on the loans through September 30,
1999.
4. Income taxes
The Company has accumulated net operating loss carryforwards of
approximately $123,000 that are available to offset future taxable income,
if any, through 2019. Realization of the net operating loss carryforwards
is dependent upon future profitable operations. Accordingly, management has
recorded a valuation allowance to reduce deferred tax assets associated
with net operating loss carryforwards to zero at September 30, 1999.
F6
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ESCAGENETICS CORPORATION
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Exhibit 21
Subsidiaries of Registrant
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation Doing Business As
- ------------------------------------- --------------------------------- -------------------------------------
<S> <C> <C>
PHYTOpharmaceuticals, Inc. California PHYTOpharmaceuticals, Inc. *
SRE ESCAgenetics Corporation California SRE ESCAgenetics Corporation *
</TABLE>
* This company is currently dormant
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONSOLIDATED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S SEPTEMBER 30, 1999
ANNUAL REPORT ON FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,000
<CURRENT-LIABILITIES> 120,000
<BONDS> 0
0
0
<COMMON> 7,000
<OTHER-SE> (124,000)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 63,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (63,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (63,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (63,000)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
