SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------------------
AMENDMENT NO. 1 ON FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported):
January 17, 1997
________________________________________
THERMO ECOTEK CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 1-13572 04-3072335
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification Number)
incorporation or
organization)
245 Winter Street, Suite 300
Waltham, Massachusetts 02154
(Address of principal executive offices) (Zip Code)
(617) 622-1000
(Registrant's telephone number
including area code)
PAGE
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FORM 8-K/A
Item 2. Acquisition or Disposition of Assets
On January 17, 1997, Thermo Ecotek Corporation (the Company)
through its wholly owned subsidiary, Thermo Trilogy Corp., acquired
substantially all of the assets (the Assets) of biosys, inc. (biosys),
including the stock of a wholly-owned subsidiary, AgriSense-BCS, Ltd., a
U.K. company, for approximately $11,200,000 in cash (the Purchase Price).
The Assets consist of the business of biosys, a producer of pheromone,
neem/azadiractin, nematodes, and virus-based biopesticide products, as
well as disease resistant sugar cane, based in Columbia, Maryland (the
biosys Business).
In September 1996, biosys filed for reorganization under Chapter
11 of the U.S. Bankruptcy Code. The Company, through Thermo Trilogy
Corp., acquired the Assets from biosys as part of an auction conducted by
biosys. The Purchase Price represents the Company's bid in the auction
for the Assets. The Company based its bid in part on the Company's
estimate of projected sales and profits to be generated by the biosys
Business. The sale of the Assets was subject to, and received, approval
by the bankruptcy court on January 7, 1997.
The acquisition was made pursuant to an Asset Purchase Agreement
dated as of December 24, 1996, among Thermo Trilogy Corp., biosys, inc.,
Crop Genetics International Corporation and AgriDyne Technologies, Inc.,
both of which are wholly owned subsidiaries of biosys. The Purchase Price
was funded entirely from cash on hand.
The Company has no present intention to use the Assets for
purposes materially different from the purposes for which such assets
were used prior to the acquisition. However, simultaneously upon closing,
the Company abandoned certain equipment which was immaterial and
unnecessary to the operation of the biosys Business. Further, the Company
will review the biosys Business and its assets, corporate structure,
capitalization, operations, properties, and policies, and, upon
completion of this review, may develop alternative plans or proposals,
including mergers, transfers of a material amount of assets, or other
transactions or changes relating to such business.
2PAGE
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FORM 8-K/A
Item 7. Financial Statements, Pro Forma Combined Condensed Financial
Information, and Exhibits
(a) Financial Statements of Business Acquired
Attached hereto.
3PAGE
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of biosys, inc.:
In our opinion, based upon our audits and the report of other auditors,
the accompanying consolidated balance sheets and the related consolidated
statements of operations, of cash flows and of shareholders' equity present
fairly, in all material respects, the financial position of biosys, inc.
and its subsidiaries at December 31, 1994 and 1995, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles. 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 did not audit the
financial statements of Crop Genetics International Corporation, a
wholly-owned subsidiary, which statements reflect total assets of
$10,306,000 at December 31, 1994, and total revenues of $3,851,000 and
$2,184,000 for the two years in the period ended December 31, 1994,
respectively. Those statements were audited by other auditors whose report
thereon has been furnished to us, and our opinion expressed herein, insofar
as it relates to the amounts included for Crop Genetics International
Corporation, is based solely on the report of the other auditors. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits and the report of the
other auditors provide a reasonable basis for the opinion expressed above.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 13 to the consolidated financial statements, the Company has incurred
recurring operating losses and negative operating cash flows since its
inception, including an operating loss of $17,244,000 and negative
operating cash flows of $13,567,000 in 1995. At December 31, 1995, the
Company had negative working capital of $5,689,000, an accumulated deficit
of $128,592,000, and total shareholders' deficit of $2,324,000. Management
has developed a 1996 operating plan designed to reduce operating losses and
improve cash flows. Subsequent to December 31, 1995, the Company completed
a merger with AgriDyne Technologies, Inc. (Note 3) and raised $7,250,000
through a private placement of equity (Note 6). The Company is in the
process of renegotiating certain bank debt covenants and will be seeking a
renewal of its existing bank line of credit, which expires on June 5, 1996
(Note 5). There can be no assurance that the 1996 operating plan will be
achieved, that the Company will be able to negotiate debt covenants
acceptable to the Company or that a renewal of the line of credit will be
granted. These and related factors, discussed in Note 13, raise substantial
doubt about the Company's ability to continue as a going concern.
Management's plan in regard to these matters are also described in Note 13.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
1PAGE
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REPORT OF INDEPENDENT ACCOUNTANTS -(continued)
As discussed in Note 14, on September 27, 1996, the Company and one of
its subsidiaries, Crop Genetics International Corporation, filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code
("Chapter 11"). On November 15, 1996, another of the Company's
subsidiaries, AgriDyne Technologies, Inc., also filed a voluntary petition
for relief under Chapter 11. On January 17, 1997, substantially all of the
assets of the Company, including the stock of the Company's U.K.
subsidiary, AgriSense-BCS, Limited, were sold to Thermo Trilogy
Corporation, a wholly-owned subsidiary of Thermo Ecotek Corporation, for
$11,000,000 in cash. In accordance with the terms of the Asset Purchase
Agreement, Thermo Trilogy Corporation also assumed certain liabilities
related to the Company's manufacturing and operating agreements and
purchase contracts. The Company retained its cash and trade accounts
receivable. Management presently anticipates that the liquidation of the
Company's remaining assets will be completed and the Company will cease
operations during 1997. The proceeds from the January 17, 1997 sale and
from the anticipated liquidation of the trade accounts receivable will be
distributed to the Company's creditors in accordance with the provisions of
the United States Bankruptcy Code and the United States Bankruptcy Court
for the District of Maryland. The accompanying consolidated financial
statements do not include any adjustments relating to the recoverability of
the recorded asset amounts or the amounts and classification of liabilities
which will be necessary as a consequence of the bankruptcy proceedings and
the ultimate sale of substantially all of the assets of the Company.
PRICE WATERHOUSE LLP
Falls Church, Virginia
March 29, 1996, except for the third
paragraph of our report and Note 14,
as to which the date is March 24, 1997
2PAGE
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REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Crop Genetics International Corporation:
We have audited the balance sheets of Crop Genetics International
Corporation as of December 31, 1993 and 1994, and the related statements of
operations, cash flows, and stockholders' equity for each of the three
years in the period ended December 31, 1994 (not included herein). 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 (not
included herein) present fairly, in all material respects, the financial
position of Crop Genetics International Corporation at December 31, 1993
and 1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles.
As discussed in Note 4 to the financial statements (not included
herein), in 1993 the Company changed its method of accounting for income
taxes.
Ernst & Young LLP
Washington, DC
January 27, 1995
3PAGE
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biosys, inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
December 31, September 30,
--------------------
1994 1995 1996
--------- --------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 8,377 $ 1,755 $ 755
Short-term investments 76 - -
Accounts receivable (Note 4) 1,882 3,009 3,419
Inventories (Note 4) 3,524 4,086 4,531
Prepaid expenses and other current assets 604 500 912
--------- --------- ---------
Total current assets 14,463 9,350 9,617
--------- --------- ---------
Property and equipment, net (Note 4) 7,542 6,421 6,378
--------- --------- ---------
Other assets, net 1,038 586 824
--------- --------- ---------
Goodwill - - 3,875
--------- --------- ---------
$ 23,043 $ 16,357 $ 20,694
========= ========= =========
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biosys, inc.
CONSOLIDATED BALANCE SHEETS - (continued)
(in thousands, except share and per share data)
December 31, September 30,
--------------------
1994 1995 1996
--------- --------- -------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 3,072 $ 4,767 $ 1,947
Short-term debt (Note 5) - 5,250 3,642
Accrued expenses (Note 4) 801 3,309 401
Current portion of long-term obligations
(Note 5) 427 782 -
Deferred credits (Note 9) 532 931 219
--------- --------- ---------
Total current liabilities 4,832 15,039 6,209
--------- --------- ---------
Long-term obligations, less current portion
(Note 5) 5,121 3,642 -
--------- --------- ---------
Liabilities subject to compromise (Note 15) - - 10,852
--------- --------- ---------
Total liabilities 9,953 18,681 17,061
--------- --------- ---------
Commitments and contingencies (Notes 9 and 12)
Shareholders' equity (deficit) (Note 6):
Convertible preferred stock, $.10 par
value; 5,000,000 shares authorized,
2,133,605 shares issued and outstanding
in 1994 213 - -
Convertible preferred stock, $.001 par
value; 5,000,000 shares authorized,
535 shares issued and outstanding
in 1996 - - 312
Common stock, $.001 par value; 30,000,000
shares authorized, 4,106,838,
5,598,828 and 9,176,375 issued and
outstanding 4 6 9
Additional paid-in capital 122,983 126,315 146,340
Accumulated deficit (110,052) (128,592) (142,987)
Cumulative translation adjustment (58) (53) (41)
--------- --------- ---------
Total shareholders' equity (deficit) 13,090 (2,324) 3,633
--------- --------- ---------
$ 23,043 $ 16,357 $ 20,694
========= ========= =========
See accompanying notes to consolidated financial statements.
5PAGE
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biosys, inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Nine Months Ended
-------------------
Years ended December 31, Sept. 30, Sept. 30,
----------------------------
1993 1994 1995 1995 1996
-------- -------- -------- --------- ---------
(Unaudited)
Revenues:
Product sales $ 7,685 $ 16,520 $ 22,679 $ 19,668 $ 18,514
Contract research and
development 5,216 620 320 76 724
-------- -------- -------- -------- --------
Total revenues 12,901 17,140 22,999 19,744 19,238
-------- -------- -------- -------- --------
Operating costs and expenses:
Cost of product sales 9,183 15,929 21,241 16,988 16,732
Research and development
(Note 3) 13,610 10,788 7,006 5,658 4,339
Marketing and selling 2,827 4,663 4,301 3,529 2,570
General and administra-
tive 6,094 6,141 3,520 2,669 2,739
Purchased research and
development (Note 3) 3,692 - - - 6,000
Costs of mergers (Note 3) - 743 4,175 3,961 58
-------- -------- -------- -------- --------
Total operating
costs and expenses 35,406 38,264 40,243 32,805 32,438
-------- -------- -------- -------- --------
Loss from operations (22,505) (21,124) (17,244) (13,061) (13,200)
Interest and other expense (54) (65) (1,415) (874) (1,252)
Interest and other income 1,174 337 119 114 57
-------- -------- -------- -------- --------
Net loss (21,385) (20,852) (18,540) (13,821) (14,395)
Preferred stock dividends
and accretions (2,561) (2,027) - - -
-------- -------- -------- -------- --------
Net loss applicable to
common shares $(23,946) $(22,879) $(18,540) $(13,821) $(14,395)
======== ======== ======== ======== ========
Net loss per share (Note 2) $ (6.40) $ (5.67) $ (4.04) $ (3.07) $ (2.03)
Weighted average common
shares and equivalents
(Note 2) 3,740 4,036 4,587 4,507 7,106
See accompanying notes to consolidated financial statements.
6PAGE
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biosys, inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
--------------------
Years ended December 31, Sept. 30, Sept. 30,
----------------------------
1993 1994 1995 1995 1996
-------- -------- -------- --------- ---------
(Unaudited)
Cash flows from operating
activities:
Net loss $(21,385) $(20,852) $(18,540) $(13,821) $(14,395)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Purchased research and
development 3,692 - - - 6,000
Depreciation and
amortization 2,223 2,485 1,589 1,179 1,037
Write-off of production
facility and equipment 1,242 - - - -
Common stock and warrants
issued for loan origina-
tion and modification - 51 85 - 153
(Gain) loss on disposal
of assets 30 - 49 49 -
Changes in assets and
liabilities:
Accounts receivable 1,250 (788) (1,130) (2,204) (115)
Inventories (663) (926) (543) (202) 254
Prepaid expenses and
other current
assets 107 (63) 103 (12) 39
Other assets 146 (115) 233 323 (426)
Accounts payable and
accrued expenses 1,214 887 4,188 3,245 203
Deferred credits 157 293 399 - (106)
-------- -------- -------- -------- --------
Net cash used in operating
activities $(11,987) $(19,028) $(13,567) $(11,443) $ (7,356)
-------- -------- -------- -------- --------
7PAGE
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biosys, inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
(in thousands)
Nine Months Ended
--------------------
Years ended December 31, Sept. 30, Sept. 30,
----------------------------
1993 1994 1995 1995 1996
-------- -------- -------- --------- ---------
(Unaudited)
Cash flows from investing
activities:
Acquisition of property
and equipment $ (6,207) $ (2,314) $ (845) $ (396) $ (740)
Proceeds from sale of
property and equipment 55 22 547 - -
Purchase of short-term
investments (2,138) - - - -
Proceeds from sale of
short-term investments 18,182 8,856 76 622 -
Cash acquired in AgriDyne
acquisition - - - - 2,041
Acquisition of AgriSense,
net of cash acquired (3,540) - - - -
-------- -------- -------- -------- --------
Net cash provided by (used
in) investing activities 6,352 6,564 (222) 226 1,301
-------- -------- -------- -------- --------
Cash flows from financing
activities:
Issuance of common stock,
net of issuance costs - - 3,012 24 8
Issuance of preferred stock,
net of issuance costs - - - - 7,254
Exercise of stock options
and warrants 65 22 24 - -
Payments on debt - - (761) (646) (2,042)
Proceeds from issuance
of debt - 5,548 5,325 5,374 182
Restricted cash - (365) - - -
Principal payments on
capitalized lease
obligations (296) (79) (425) (349) (328)
Dividends paid (1,281) - - - -
-------- -------- -------- -------- --------
Net cash provided by (used
in) financing activities $ (1,512) $ 5,126 $ 7,175 $ 4,403 $ 5,074
-------- -------- -------- -------- --------
8PAGE
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biosys, inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
(in thousands)
Nine Months Ended
--------------------
Years ended December 31, Sept. 30, Sept. 30,
----------------------------
1993 1994 1995 1995 1996
-------- -------- -------- --------- ---------
(Unaudited)
Effect of exchange rate
changes on cash $ 2 $ (39) $ (8) $ (20) $ (19)
-------- -------- -------- -------- --------
Net decrease in cash and
cash and cash equivalents (7,145) (7,377) (6,622) (6,834) (1,000)
Cash and cash equivalents at
beginning of period 22,899 15,754 8,377 8,377 1,755
-------- -------- -------- -------- --------
Cash and cash equivalents at
end of period $ 15,754 $ 8,377 $ 1,755 $ 1,543 $ 755
======== ======== ======== ======== ========
Supplemental disclosure of cash
flow information:
Cash paid during the
period for interest $ 54 $ 86 $ - $ 580 $ 1,080
Supplemental disclosure of
non-cash investing and
financing activities:
Common stock issued for
acquisition of
AgriSense $ 3,500 $ - $ - $ - $ -
Common stock warrant
issued in obtaining
long-term debt $ - $ 110 $ - $ - $ -
Preferred stock dividends
paid in common stock $ - $ 2,027 $ - $ - $ -
Common stock issued to
retire preferred stock $ - $ - $ 213 $ - $ -
Accretion of preferred
stock dividends $ - $ - $ - $ - $ 311
Common stock issued for
acquisition of
AgriDyne $ - $ - $ - $ - $ 12,925
Conversion of preferred
stock to common stock $ - $ - $ - $ - $ 2
See accompanying notes to consolidated financial statements.
9PAGE
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<TABLE>
biosys, inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data)
<CAPTION>
Preferred Stock Common Stock Additional Cumulative
------------------- ------------------- Paid-in Accumulated Translation
Shares Amount Shares Amount Capital Deficit Adjustment Total
---------- ------ ---------- ------ ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1992 - $ - 9,004,341 $ 9 $ 93,771 $ (67,815) $ - $ 25,965
Reverse stock
split (Note 2) - - (5,402,605) (5) 5 - - -
---------- ----- ---------- --- -------- --------- ---- --------
-
Balance at
December 31,
1992, as
restated - - 3,601,736 4 93,776 (67,815) - 25,965
Preferred stock
dividends - - - - (1,281) - - (1,281)
Accretion of
dividends on
preferred stock - - - - (1,280) - - (1,280)
Issuance of
common stock in
connection with
AgriSense
acquisition
(Note 3) - - 198,874 - 3,500 - - 3,500
Issuance of common
stock upon
exercise of
stock options - - 48,169 - 65 - - 65
Net loss - - - - - (21,385) - (21,385)
Translation
adjustment - - - - - - (83) (83)
---------- ----- ---------- --- -------- --------- ---- --------
Balance at
December 31,
1993 - - 3,848,779 4 94,780 (89,200) (83) 5,501
Exchange of
preferred stock - - 106,473 - 5,617 - - 5,617
Accretion of
dividends on
preferred stock - - - - (747) - - (747)
10PAGE
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biosys, inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) - (continued)
(in thousands, except share data)
Preferred Stock Common Stock Additional Cumulative
------------------- ------------------- Paid-in Accumulated Translation
Shares Amount Shares Amount Capital Deficit Adjustment Total
---------- ------ ---------- ------ ---------- ----------- ----------- -------
Preferred stock
dividends paid
in common stock - $ - 89,419 $ - $ 2,027 $ - $ - $ 2,027
Elimination of
redemption
provision of
preferred stock 2,133,605 213 - - 21,123 - - 21,336
Reduction in
amount recorded
in 1993 for
issuance of
common stock in
connection with
AgriSense
acquisition - - - - (184) - - (184)
Issuance of
additional
common stock in
connection with
AgriSense
acquisition
(Note 3) - - 10,907 - 184 - - 184
Issuance of common
stock upon
exercise of
stock options
and warrants - - 45,545 - 22 - - 22
Issuance of common
stock warrant in
connection with
the issuance of
long-term debt - - - - 110 - - 110
11PAGE
<PAGE>
biosys, inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data)
Preferred Stock Common Stock Additional Cumulative
------------------- ------------------- Paid-in Accumulated Translation
Shares Amount Shares Amount Capital Deficit Adjustment Total
---------- ------ ---------- ------ ---------- ----------- ----------- -------
Issuance of common
stock - $ - 5,715 $ - $ 51 $ - $ - $ 51
Net loss - - - - - (20,852) - (20,852)
Translation
adjustment - - - - - - 25 25
----------- ----- ---------- --- -------- --------- ---- -------
Balance at
December 31,
1994 2,133,605 213 4,106,838 4 122,983 (110,052) (58) 13,090
Issuance of common
stock to retire
preferred stock (2,133,605) (213) 573,878 1 212 - - -
Issuance of common
stock upon
exercise of
options and
issuance of
warrants - - 51,398 - 109 - - 109
Issuance of common
stock 866,714 1 3,011 - - 3,012
Net loss - - - - - (18,540) - (18,540)
Translation
adjustment - - - - - - 5 5
----------- ----- ---------- --- ------- --------- ---- -------
Balance at
December 31,
1995 - $ - 5,598,828 $ 6 $126,315 $(128,592) $(53) $ (2,324)
=========== ===== ========== === ======== ========= ==== ========
12PAGE
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biosys, inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) - (unaudited)
(in thousands, except share data)
Preferred Stock Common Stock Additional Cumulative
------------------- ------------------- Paid-in Accumulated Translation
Shares Amount Shares Amount Capital Deficit Adjustment Total
---------- ------ ---------- ------ ---------- ----------- ----------- -------
Balance at
December 31, 1995 - $ - 5,598,828 $ 6 $126,315 $(128,592) $(53) $ (2,324)
Issuance of common
stock in
connection with
acquisition of
AgriDyne
(Note 4) - - 1,888,121 1 12,924 - - 12,925
Issuance of
preferred stock 780 1 - - 7,253 - - 7,254
Accretion of
preferred stock
dividend - 311 - - (311) - - -
Issuance of common
stock upon
exercise of
options and
issuance of
common stock
warrants - - 8,718 - 161 - - 161
Issuance of common
stock upon
conversion of
preferred stock (245) - 1,680,708 2 (2) - - -
Net loss - - - - - (14,395) - (14,395)
Translation
adjustment - - - - - - 12 12
----------- ----- ---------- --- -------- --------- ---- --------
Balance at
September 30,
1996 535 $ 312 9,176,375 $ 9 $146,340 $(142,987) $(41) $ 3,633
=========== ===== ========== === ======== ========= ==== ========
See accompanying notes to consolidated financial statements.
13PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
biosys, inc. ("biosys" or the "Company") is an agricultural
biotechnology company incorporated in California in December 1987,
reincorporated in Delaware in 1994, and is the successor in interest to a
partnership formed in 1984 and a corporation formed in 1983. The Company
engages primarily in the development, production and sale of
bioinsecticides used to detect, monitor, and control harmful insects. The
Company's Kleentek division produces high yielding seed for the sugarcane
industry.
On April 30, 1993, the Company acquired AgriSense in a transaction
accounted for using the purchase method of accounting. On March 31, 1995,
the Company completed a merger with Crop Genetics International
Corporation ("CGI") in a transaction accounted for using the pooling of
interests method of accounting. Accordingly, all consolidated financial
information for prior periods has been adjusted to include CGI financial
data. On March 15, 1996, the Company acquired AgriDyne Technologies Inc.
("AgriDyne") in a transaction accounted for using the purchase method of
accounting (see Note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of biosys
and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
Revenue Recognition
Revenue from the sale of the Company's products, as well as from
products manufactured for others, is recognized upon shipment. Provision
is made for expected sales returns and allowances when revenue is
recognized. Contract research and development revenues are recognized as
related expenses are incurred (Note 7).
Cash Equivalents and Short-term Investments
Cash equivalents consist of highly liquid investments with original
maturities of three months or less. Short-term investments consist of
highly liquid investments and time deposits which mature in less than one
year and are recorded at cost which approximates fair market value.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of cash equivalents and short-term
investments. The Company invests its available funds into U.S. Government
securities as well as investments with high credit quality financial
institutions and, by policy, limits the amount of credit exposure to any
14PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
one financial institution. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally,
requires no collateral from its customers. The Company maintains reserves
for potential credit losses; to date, such losses have been insignificant
and within management's expectations.
Inventories
Inventories are stated at the lower of cost, determined on the
first-in, first out basis, or market. Deferred growing costs represent
the accumulated average cost of growing seedcane and are charged to cost
of product sales and revenue is recognized as the product is delivered to
customers. Growing costs which are estimated to be in excess of
anticipated realizable value are charged to cost of product sales
currently.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and
amortization are computed using the straight line method over the
estimated useful lives of the assets, which range from three to ten
years. Depreciation of leasehold improvements is computed using the
shorter of the remaining lease term or the estimated useful life of the
improvements. The cost of improvements to bring the Company's land into a
suitable condition for farming are capitalized and amortized using the
straight-line method over estimated useful lives of three to six years.
Foreign Currency Translation
Assets and liabilities of the Company's foreign subsidiary are
translated to U.S. dollars at year-end exchange rates. Revenue and
expense items are translated at average exchange rates prevailing during
the year. Translation adjustments are accumulated as a separate component
of shareholders' equity. Transaction gains and losses are included in
results of operations and have not been significant.
Income Taxes
Income taxes are reported using the liability method whereby current
income tax expense or benefit represents the amount of income taxes
expected to be payable or refundable for the current year. Deferred
income tax liabilities or assets, net of valuation allowances, are
established for the expected future consequences resulting from the
differences between the financial reporting and income tax bases of
assets and liabilities and from net operating loss carryforwards and tax
credit carryforwards. Deferred income tax expense or benefit represents
the net change during the year in the deferred income tax liability or
asset.
15PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net Loss Per Share
Net loss per share has been computed using the weighted average
number of common shares outstanding during each period presented. Common
equivalent shares for options and warrants granted but not exercised are
not included in the calculation as their effect would be antidilutive.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Reverse Stock Split
Effective March 15, 1996, the Company effected a one for two and
one-half reverse stock split of its common stock (the "Reverse Stock
Split"). All common stock share information in the accompanying
consolidated financial statements and related footnotes has been adjusted
to reflect the Reverse Stock Split.
Reclassifications
Certain prior year information has been reclassified to conform with
current year presentation.
New Accounting Standards
In March 1995, the Financial Accounting Standards Board (the "Board")
issued Statement of Financial Accounting Standards No. 121 "Accounting
for Impairment of Long Lived Assets and for Long Lived Assets to be
Disposed of," which the Company expects to adopt in 1996. Additionally,
in October 1995, the Board issued Statement of Financial Accounting
Standards No. 123 "Accounting for Stock-Based Compensation," which the
Company expects to adopt in 1996. Adoption of these new statements are
not expected to have a material impact on the Company's financial
position or results of operations.
16PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. BUSINESS COMBINATIONS
AgriDyne Technologies Inc.
On March 15, 1996, the Company acquired AgriDyne Technologies Inc.
("AgriDyne"), in a merger whereby AgriDyne became a wholly-owned
subsidiary of the Company. To effect the merger, the Company issued
approximately 1.9 million shares of its common stock in exchange for all
of the outstanding shares of AgriDyne common stock based on a conversion
ratio of 0.28664 of a share of biosys common stock for each share of
AgriDyne common stock, after giving effect to a one for two and one-half
reverse stock split of biosys common stock effected immediately prior to
the merger. From the initial announcement of the merger, in April 1995,
through September 30, 1995, the Company anticipated accounting for the
merger as a pooling of interests. During that period the Company charged
to expense $452,000 for printing, professional services and other costs
related to the merger. Subsequent to September 30, 1995, due to changes
in facts and circumstances, the Company determined purchase accounting
was the appropriate method of accounting for the merger. Thus, all costs
related to the merger incurred subsequent to September 30, 1995 will be
treated as additional purchase consideration.
Crop Genetics International Corporation
On March 31, 1995, the Company completed a merger with CGI. In
exchange for all of CGI's outstanding equity securities, the Company
issued approximately 1.4 million shares of common stock. The acquisition
has been accounted for using the pooling-of-interests method and the
separate balance sheets, statements of operations, cash flows and
shareholders' equity of the Company and CGI have been restated on a
combined basis for all periods presented. At the time of the merger
announcement in December 1994, the Company anticipated that an aggregate
of approximately $4,100,000 in merger, severance and relocation costs
would be incurred by biosys and CGI related to their combination. During
the fourth quarter of 1994 and 1995, such costs amounted to $743,000 and
$3,723,000, respectively, for a total of $4,466,000. As of December 31,
1995, all significant merger, severance and relocation costs related to
the CGI merger have been incurred.
17PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenues and net loss of the separate companies included in the
combined statement of operations through the merger date of March 31,
1995 are as follows (in thousands):
Period
Years ended ended
December 31, March 31,
--------------------
1993 1994 1995
-------- -------- ---------
Revenues:
biosys $ 9,589 $ 15,057 $ 5,921
CGI 3,312 2,083 99
-------- -------- --------
$ 12,901 $ 17,140 $ 6,020
======== ======== ========
Net loss:
biosys $(12,911) $(12,591) $ (2,682)
CGI (8,474) (8,261) (3,423)
-------- -------- --------
$(21,385) $(20,852) $ (6,105)
======== ======== ========
AgriSense
On April 30, 1993 the Company completed the acquisition of AgriSense
(a Delaware General Partnership). In exchange for substantially all of
AgriSense's assets and certain liabilities, the Company paid $3,500,000
in cash and issued approximately 210,000 shares of common stock, of which
approximately 11,000 shares were issued in 1994 pursuant to an
acquisition share purchase price adjustment arrangement, valued in the
aggregate as $3,500,000. The direct costs of the acquisition were
approximately $400,000. The acquisition was accounted for using the
purchase method and AgriSense's assets, liabilities and results of
operations are included in the consolidated financial statements
subsequent to the acquisition date. Acquisition costs aggregating
$3,692,000 were allocated to purchased research and development with no
alternative future use and, accordingly, were charged to expense on the
acquisition date.
Other
During 1993, the Company expended approximately $1,242,000 to modify
its leased facility in Maryland to its production requirements and to
acquire custom-designed production equipment. As the production facility
and equipment had not demonstrated future utility at the time of
acquisition and had no alternative future uses in the research and
development, the Company charged the cost of these assets to research and
development in current operations.
18PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. DETAILS OF BALANCE SHEET COMPONENTS
December 31,
--------------------------
1994 1995
----------- -----------
Accounts receivable:
Trade receivables $ 2,055,000 $ 2,993,000
Other receivables - 304,000
Less allowance for doubtful accounts (173,000) (288,000)
----------- -----------
$ 1,882,000 $ 3,009,000
=========== ===========
Inventories:
Raw materials $ 2,065,000 $ 2,576,000
Work-in-process 343,000 225,000
Finished goods 612,000 814,000
Deferred growing costs 504,000 471,000
----------- -----------
$ 3,524,000 $ 4,086,000
=========== ===========
Property and equipment:
Land and improvements $ 1,233,000 $ 220,000
Machinery and equipment 9,262,000 9,721,000
Furniture and fixtures 670,000 567,000
Leasehold improvements 4,303,000 4,045,000
----------- -----------
15,468,000 14,553,000
Less accumulated depreciation (7,926,000) (8,132,000)
----------- -----------
$ 7,542,000 $ 6,421,000
=========== ===========
Accrued expenses:
Merger costs (Note 3) $ 336,000 $ 1,633,000
Accrued compensation and benefits 465,000 169,000
Other - 1,507,000
----------- -----------
$ 801,000 $ 3,309,000
=========== ===========
19PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INDEBTEDNESS
During 1995, the Company entered into a working capital line of
credit with a bank that allows for borrowings of up to $5,250,000. At
December 31, 1995, $5,250,000 was outstanding under the line of credit.
Of the allowable borrowings, a portion of borrowings may not exceed the
lesser of $4,000,000 or the eligible borrowing base, calculated as the
sum of percentage of eligible accounts receivable and domestic inventory,
net of reserves. An overline portion of the line of credit in the amount
of $1,250,000 was repaid on March 25, 1996, and the remaining $4,000,000
line of credit expires on June 5, 1996. Borrowings under the line of
credit agreement are secured by substantially all of the Company's
assets. Interest on borrowings is charged at the bank's prime rate plus
3% (11.5% as of December 31, 1995).
The line of credit agreement contains certain financial covenants,
including minimum levels of tangible net worth, maximum levels of
periodic operating losses, maximum allowable ratios of total liabilities
to tangible net worth and a covenant the Company maintain a minimum quick
ratio. At December 31, 1995, the Company had breached certain of these
covenants. Such default and any future potential defaults through March
31, 1996, have been waived by the bank. It is the intent of the Company
and the bank to renegotiate such covenants to reflect 1996 projected
operations. Although not a binding commitment, the bank has also agreed
to renegotiate the terms and repayment of the line of credit. If the
covenants are not renegotiated there can be no assurance that the
covenants of the line of credit agreement will be met in the future by
the Company. If the Company is in default, and such default is not
waived, then the bank may accelerate the Company's payment obligations
and may exercise other rights and remedies as a secured creditor as
granted under the line of credit agreement and by law, including, but not
limited to, foreclosure on substantially all of the Company's assets
which were pledged as security for the line of credit. The consequences
of exercise by the bank of such remedies could include prevention or
delay of the continued development and marketing of the products of the
Company and require curtailment of the operations of the Company. In
addition, the inability of the Company to comply with the requirements of
the line of credit agreement could lead to the insolvency or bankruptcy
of the Company.
In connection with the line of credit agreement and amendments to the
agreement, the Company has paid fees of $100,000 and issued to the lender
warrants to purchase 45,992 shares of common stock at exercise prices
ranging from $5.00 to $7.00 per share. The warrants are exercisable at
various dates through January 31, 2001. The warrant shares are subject to
adjustment for certain changes in capital structure and have registration
rights. The warrants were valued at $58,000 and recorded as interest
expense in 1995.
20PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CGI had a credit facility with a bank pursuant to which it borrowed
$3,400,000. Pursuant to a modification of the agreement, biosys agreed to
guarantee the credit facility. At December 31, 1995, approximately
$2,701,000 was outstanding under this credit facility. The borrowing
bears interest at the bank's prime rate plus 0.5% (9.0% at December 31,
1995). Payments are required under the amended agreement as follows: (i)
commencing on February 1, 1996 and continuing on the first day of each
month thereafter up to and including December 1, 1996, biosys must prepay
loan principal by approximately $25,000, plus all accrued and unpaid
interest, (ii) commencing on January 2, 1997 and continuing on the first
day of each month thereafter up to and including August 1, 1998, biosys
must prepay loan principal by approximately $119,700, plus all accrued
and unpaid interest and, (iii) on or before September 1, 1998, biosys
must pay all principal and interest that remains outstanding. The amended
agreement also contains a covenant that CGI maintain a positive
shareholders' equity. As of December 31, 1995 the Company was in
compliance with this covenant. The amended agreement also calls for the
Company and the bank to negotiate new financial covenants to reflect
projected 1996 operations. There can be no assurance that all of the
foregoing events will have occurred by the dates required. If all such
events do not occur in the time required, default would occur under the
credit facility which may entitle the bank to accelerate payment of the
credit facility and to exercise other rights and remedies under the
credit facility and by law. The consequences of exercise by the bank of
such remedies could include prevention or delay of the continued
development and marketing of the products of the Company and require
curtailment of the operations of the Company. In addition, the inability
of the Company to comply with the requirements of the credit facility
agreement could lead to the insolvency or bankruptcy of the Company.
In December 1994, the Company entered into a borrowing arrangement
under which the Company borrowed $2,180,000, secured by certain property
and equipment. At December 31, 1995, approximately $1,720,000 was
outstanding under this arrangement. The borrowings are being repaid in 42
monthly installments of $64,000 with a final payment of $327,000 in July,
1998. The Company is required to meet specific financial statement ratios
and covenants including minimum levels of tangible net worth and maximum
levels of periodic operating losses. At December 31, 1995, the Company
was in default of these financial covenants; such default has been waived
through March 31, 1996. It is the intent of the Company and the lender to
renegotiate these covenants to reflect projected 1996 operations. If the
covenants are not renegotiated there can be no assurance that the
covenants of the borrowing agreement will be met in the future by the
Company. If the Company is in default, and such default is not waived,
then the lender would have remedies available comparable to those
available to the bank under the line of credit agreement described above.
The consequences of the exercise by the lender of its rights upon default
would be comparable to those resulting from the exercise by the bank
under the line of credit agreement described above of its rights upon
21PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
default. A default and subsequent acceleration of any of the debt
agreements described above would result in cross defaults under the
agreements governing the other arrangements. The exercise of rights and
remedies under any of the agreements could prevent or delay the continued
development and marketing of the Company's products, require curtailment
of the operations of the Company and could result in the insolvency or
bankruptcy of the Company.
In connection with this borrowing and subsequent amendments, the
Company has issued to the lender warrants to purchase 55,179 shares of
common stock at prices ranging from $7.525 to $8.125 per share. These
warrants are exercisable at various dates through November 1, 2000. The
warrant shares are subject to adjustment for certain changes in capital
structure and have certain registration rights. The warrants were valued
at $138,000 and included in other long-term assets as a debt issuance
cost. The warrants are being amortized over the term of the debt and
$52,000 was recognized as interest expense during 1995. The effective
rate of interest on this borrowing, including the value of the warrants,
is approximately 21%.
Future scheduled principal payments on these borrowings are as
follows:
Year ending
December 31,
------------
1996 $6,032,000
1997 2,041,000
1998 1,601,000
----------
$9,674,000
==========
The estimated fair value of these debt facilities approximates the
carrying amounts as of December 31, 1995 and 1994.
6. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDERS' EQUITY
Mandatorily Redeemable Convertible Preferred Stock of CGI
At a special meeting of shareholders held on June 13, 1994, a
majority of each of the preferred and common shareholders of CGI approved
an amendment to CGI's restated Certificate of Incorporation amending the
terms of CGI's convertible exchangeable preferred stock ("Preferred
Stock"). The amendment (i) allowed CGI to pay dividends with respect to
the Preferred Stock in cash or, at the option of CGI, with shares of
CGI's common stock, (ii) allowed CGI to redeem the Preferred Stock with
cash or, at the option of CGI, with shares of CGI's common stock, and
(iii) eliminated the right of the holders of the Preferred Stock to
demand redemption of such stock upon the occurrence of certain business
combinations or changes in control.
22PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Prior to approval of the amendment discussed in the preceding
paragraph, CGI accounted for the carrying value of the Preferred Stock at
the demand redemption price of $10.00 per share plus unpaid dividends on
the Preferred Stock. As a result of the elimination of the right of the
shareholders of the Preferred Stock to demand redemption of such stock,
effective June 13, 1994, CGI accounted for the Preferred Stock as
permanent capital, with the transfer of the carrying value in excess of
par value to additional paid in capital.
Commencing with the third quarter of 1993, payment of dividends on
the Preferred Stock had been suspended by CGI's board of directors. On
June 14, 1994, the board of directors of CGI declared a $0.95 per share
dividend, payable in common stock, to all holders of its Preferred Stock
as of the close of business on June 20, 1994. Dividends on the Preferred
Stock for the third and fourth quarters of 1994, in aggregate totaling
$1,013,500, or $0.475 per share were undeclared.
On January 6, 1994, the Board of Directors authorized CGI to exchange
1,000,000 shares of Preferred Stock of CGI for shares of CGI's common
stock. The Board of Directors authorized CGI to conduct such exchange
transactions from time to time pursuant to negotiated transactions with
holders of the Preferred Stock. From January 9, 1994 through March 10,
1994, CGI acquired 561,695 shares of Preferred Stock in exchange for
common stock.
In connection with the merger of CGI into the Company on March 31,
1995, all outstanding shares of Preferred Stock were exchanged for common
stock of the Company (Note 3).
Warrants
In connection with obtaining certain equipment leases in 1991, the
Company has outstanding warrants to purchase 445 shares of common stock
at an exercise price of $95.625 per share and 15,671 shares of common
stock at an exercise price of $8.25 per share. The warrants are
exercisable at any time prior to their expiration in 1996. In connection
with obtaining the borrowings as described in Note 5, the Company issued
warrants to purchase 101,170 shares of common stock at exercise prices
ranging from $5.00 to $8.125 per share, exercisable at various times
through January 31, 2001.
Options
The Company has an incentive stock option plan (the "Option Plan")
which is administered, and terms of option grants are established, by the
Company's Board of Directors (the "Board"). Under the terms of the Option
Plan, options covering the purchase of common stock may be granted to
directors, employees and consultants of the Company at prices not less
than the fair market value of such common stock at the date of grant.
Options granted are exercisable over time and generally vest 20% on a
date specified by the Board and vest thereafter in equal monthly
increments over four years. To date, all options granted under the Option
Plan have been for a term of ten years after grant. The shares subject to
expired options become available for future grants. Generally, in the
23PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
event of a transfer of control of the Company, the stock option
agreements used in conjunction with the Option Plan provide that the
Board shall either cause all outstanding options to become vested and
immediately exercisable or arrange for the successor or surviving entity
to assume such options. As of December 31, 1995, a total of 1,019,608
shares of common stock were reserved under the Option Plan.
During 1994, the Company adopted an outside directors' stock option
plan (the "Directors' Option Plan") which is administered by the Board.
Under the terms of the Directors' Option Plan, options to purchase common
stock are granted to outside directors upon appointment and after each
annual meeting of the stockholders of the Company at prices equal to the
fair market value of such common stock at the date of grant. Options
granted are exercisable over time and vest 50% six months after the date
of grant and 50% one year after the date of grant. Options granted under
the Directors' Option Plan are for a term of ten years and any expired or
canceled options become available for future grants. Generally, in the
event of a transfer of control of the Company, the stock option
agreements used in conjunction with the Directors' Option Plan provide
that the Board shall either cause all outstanding options to become
vested and immediately exercisable or arrange for the successor or
surviving entity to assume such options. As of December 31, 1995, a total
of 40,000 shares of common stock were reserved under the Directors'
Option Plan.
The following table summarizes activity under these Option Plans:
Shares Under
Option Exercise Price
------------ ----------------
Balance at December 31, 1992 443,295 $ 0.45 - 98.425
Options canceled (18,539) $ 0.45 - 91.875
Options granted 209,803 $13.125 - 54.20
Options exercised (48,169) $ 0.45 - 59.05
--------
Balance at December 31, 1993 586,390 $ 0.45 - 98.425
Options canceled (233,820) $ 0.45 - 59.05
Options granted 282,169 $11.875 - 14.375
Options exercised (45,305) $ 0.45 - 5.625
--------
Balance at December 31, 1994 589,434 $ 0.45 - 98.425
Options canceled (179,140) $ 0.45 - 98.425
Options granted 220,960 $ 4.375 - 5.12
Options exercised (51,398) $ 0.45 - 15.625
--------
Balance at December 31, 1995 579,856 $0.45 - 29.05
========
Options exercisable at December 31, 1995 207,636 $0.45 - 29.05
========
During the first quarter of 1994, options to purchase 209,569 shares
of common stock were canceled and new options for the same number of
shares were granted to the same option holders at an exercise price equal
to the then-current quoted market price of the Common Stock.
24PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Reincorporation
On March 30, 1995, in connection with the CGI merger, the Company's
Certificate of Incorporation was amended to increase the authorized
number of shares of common stock from 8,000,000 to 12,000,000 and to
increase the authorized number of shares of Preferred Stock from
1,000,000 to 5,000,000.
Series A Preferred Stock
On March 26, 1996, biosys completed the sale of an aggregate of 780
shares of biosys Series A Preferred Stock (the "Preferred Shares") at
$10,000 per share or an aggregate purchase price of $7.8 million, net of
placement fees of approximately $550,000, to a group of institutional
accredited investors in a private placement (the "Preferred Share
Financing"). The Preferred Shares were offered and sold in reliance on
the exemption from registration under the Securities Act set forth in
Regulation D under the Securities Act. In connection with the issuance of
the Preferred Shares, warrants to purchase up to 80,889 shares of biosys
common stock were issued to the placement agent and related parties (the
"Warrants"). The Warrants are exercisable over a five-year term and have
an exercise price of $6.75.
The Preferred Shares may be converted into biosys common stock at a
conversion price which is the lower of (i) $6.75, or (ii) 85% of the
average closing bid price for the five trading days prior to the date the
investor gives notice of conversion. The Preferred Shares shall
automatically be converted into biosys common stock, if not previously
converted, on March 22, 1999. The Preferred Shares principal amount
accretes at an annual rate of 8%, payable in stock upon conversion to
biosys common stock. The Preferred Shares may be redeemed at the option
of the Company at the time of conversion at a price that would give the
investor the same return as he would have received had he converted on
the day the redemption occurs and sold the common stock upon conversion.
biosys also may, at its option, redeem the Preferred Shares commencing at
any time after March 26, 1997 at a price per share equal to a specified
percentage, commencing at 130% and declining to 115% in 1999, of the
original purchase price plus all accrued and unpaid accretion.
7. RESEARCH AND DEVELOPMENT ARRANGEMENTS
In April 1992, the Company entered into a research and development
agreement with CIBA-GEIGY, Ltd. ("CIBA"). Under the terms of the
agreement the Company received $5,000,000 from CIBA through fiscal 1993
for continued research and development of certain products and in
consideration for granting CIBA exclusive marketing and distribution
rights to certain products in specified markets. For the year ended
December 31, 1993, the Company recognized $2,500,000 under this
agreement.
25PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In October 1992, the Company entered into a research and development
agreement with Sandoz Agro, Inc. ("Sandoz"). Under the terms of the
agreement, Sandoz reimbursed the Company for approximately one-half of
certain research and development costs incurred by the Company up to
specified amounts. This agreement ended during 1995. During the years
ended December 31, 1994 and 1993, the Company recognized $620,000 and
$500,000 under this agreement.
In March 1993, the Company entered into a research and distribution
agreement with SDS Biotech KK ("SDS"). Under the terms of the agreement,
the Company received $220,000 from SDS during fiscal 1993 for continued
research and development of certain products and in consideration for
granting SDS exclusive marketing and distribution rights for specified
markets. For the year ended December 31, 1993, the Company recognized
$220,000 under this agreement.
Costs associated with these contracts were not tracked separately and
were included in research and development expenses as substantially all
such amounts represent research and development costs that the Company
would have incurred regardless of the third party contract reimbursement.
26PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES
Loss before income taxes comprises:
Year ended December 31,
-------------------------------------------
1993 1994 1995
------------- ------------- -------------
United States $(20,676,000) $(20,306,000) $(18,733,000)
United Kingdom (709,000) (546,000) 193,000
------------ ------------ ------------
$(21,385,000) $(20,852,000) $(18,540,000)
============ ============ ============
Deferred income taxes
comprise:
December 31,
---------------------------
1994 1995
------------- ------------
Deferred tax assets:
Tax attribute carry-
forwards $ 33,665,000 $ 38,636,000
Purchased/capitalized
research and
development 4,894,000 1,329,000
Reserves not deductible
for tax purposes 538,000 663,000
Depreciation 790,000 -
Other 101,000 64,000
------------ ------------
Gross deferred tax
assets 39,988,000 40,692,000
Deferred tax liabilities:
Depreciation - 17,000
------------ ------------
Net deferred tax
assets 39,988,000 40,675,000
Less valuation allowance (39,988,000) (40,675,000)
------------ ------------
Total net deferred tax
assets $ - $ -
============ ============
At December 31, 1995, the Company had net operating loss
carryforwards of approximately $95 million and $16 million for Federal
and Louisiana tax purposes, respectively, which expire between 1998 and
2010. The Company also had net operating loss carryforwards of
approximately $18 million for California tax purposes, which expire
through 2000. In addition, the Company had net operating loss
carryforwards of approximately $4 million for United Kingdom tax
purposes, which have no expiration date.
27PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Due to changes in the Company's ownership, certain of the federal and
state net operating loss carryforwards are restricted in their
utilization to a maximum aggregate annual amount of approximately
$500,000. If certain substantial changes in the Company's ownership
should occur in the future, there would be additional annual limitations
on the amount of unrestricted carryforwards which can be utilized for
federal and California tax purposes.
9. COMMITMENTS
The Company leases its headquarters facility under a non-cancelable
lease agreement which expires in 2004. The Company is accounting for the
total minimum lease commitment on a straight-line basis. In the early
portion of the lease, the rent expense for accounting purposes will be
greater than the actual rent payments, thereby creating a deferred rent
liability which is classified in the financial statements with deferred
credits. At December 31, 1995, the deferred rent liability was $564,000.
Under various operating lease agreements the Company rents land in
Louisiana to grow seedcane. The Louisiana land leases provide for one
year renewal options allowing the Company to rent the properties for
various periods through 1998. The Company also leases its United Kingdom
facility under a non-cancelable lease agreement which expires in 2003 and
contains a renewal option.
Commencing in December 1992, the Company entered into a ten year
lease with Archer-Daniels-Midland Company ("ADM") for a facility which
ADM constructed for the Company to use in its formulation, packaging and
distribution operations. Effective January 1994, the existing lease
arrangement was terminated and a new twelve year, non-cancelable
operating lease (which can be extended indefinitely if agreed by both
parties) was entered into for this facility.
Commencing in December 1991, the Company entered into a ten year
manufacturing agreement with ADM whereby ADM would provide the facilities
to manufacture the bulk active ingredient of the Company's nematode-based
products and provide the fermentation facilities for the Company's third
party contract manufacturing business at an existing ADM facility.
Effective January 1994, the existing manufacturing arrangement was
terminated and an a new twelve year, non-cancelable agreement (which can
be extended indefinitely if agreed by both parties) was entered into with
ADM for this facility. Under the terms of the new agreement, ADM is now
the Company's worldwide, exclusive producer of nematode-based products
for the North and South American markets.
28PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future minimum payments under the above lease agreements are as
follows:
Year ending
December 31,
------------
1996 $ 5,111,000
1997 5,486,000
1998 6,397,000
1999 7,327,000
2000 7,524,000
Thereafter (through the end of 2005) 38,888,000
-----------
$70,733,000
===========
Total rent expense under these leases, including lease arrangements
with month-to-month terms, aggregated $4,799,000, $3,713,000 and
$1,998,000 during 1995, 1994 and 1993, respectively.
In connection with the aforementioned formulation facility lease, the
Company is also required to pay annual minimum contract manufacturing,
administration and other fees of approximately $234,000 through 2005.
During 1994, the Company entered into a five year, non-cancelable
manufacturing agreement (which can be extended indefinitely if agreed by
both parties) for the supply of the active ingredient of one of the
Company's pheromone products. Also during 1994, the Company entered into
a two year, non-cancelable manufacturing agreement for the supply of the
water dispersible granular formulation of its nematode-based products.
During 1995, the Company entered into a three year, non-cancelable
agreement for the supply of various active ingredients of the Company's
pheromone products. Also during 1995, the Company entered into a five
year, non-cancelable agreement for the supply of certain raw materials.
Future minimum purchase commitments under these agreements are as
follows:
Year ending
December 31,
------------
1996 $1,880,000
1997 1,720,000
1998 1,654,000
1999 525,000
2000 375,000
----------
$6,154,000
==========
The Company has also entered into contract manufacturing agreements
with other companies which require the Company to manufacture products at
specified minimum levels of production volume over the lives of the
agreements.
29PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SEGMENT INFORMATION
The Company is engaged in one industry segment. One customer
accounted for 22%, and 14% of total revenues for the years ended December
31, 1995 and 1994, respectively. One other customer accounted for 12% of
total revenues for the year ended December 31, 1994. One different
customer accounted for 30 % of total revenues for the year ended December
31, 1993. Three customers accounted for 22%, 14% and 12% of accounts
receivable at December 31, 1995, and one customer accounted for 38% of
accounts receivable at December 31, 1994. Substantially all of the
Company's customers are in bioagricultural and consumer insecticide
economic sector.
Information about the Company's operations in different geographical
locations for the years ended December 31, 1995, 1994 and 1993 is shown
below. The Company's areas of operation outside the United States are
primarily in Europe. Revenues from unaffiliated customers represent total
net revenues from the respective geographical areas after elimination of
intercompany transactions. Intraenterprise revenues represent
intercompany sales in 1995, 1994 and 1993. Operating loss is net revenues
less operating costs and expenses pertaining to specific geographic
areas. Identifiable assets are those assets used in the geographic areas
and are reflected after elimination of intercompany balances.
Years ended December 31,
-------------------------------------------
1993 1994 1995
------------ ------------ ------------
Revenues from unaffiliated
customers:
United States $ 11,482,000 $ 11,875,000 $ 13,251,000
Europe 1,419,000 5,265,000 9,748,000
------------ ------------ ------------
$ 12,901,000 $ 17,140,000 $ 22,999,000
============ ============ ============
Intraenterprise revenues:
United States $ 114,000 $ 622,000 $ 3,036,000
Europe 24,000 49,000 63,000
------------ ------------ ------------
$ 138,000 $ 671,000 $ 3,099,000
============ ============ ============
Operating (loss) income:
United States $(21,799,000) $(20,554,000) $(17,661,000)
Europe (706,000) (570,000) 417,000
------------ ------------ ------------
$(22,505,000) $(21,124,000) $(17,244,000)
============ ============ ============
December 31,
-------------------------------------------
1993 1994 1995
------------ ------------ ------------
Identifiable assets:
United States $ 35,086,000 $ 19,782,000 $ 12,337,000
Europe 1,906,000 3,261,000 4,020,000
------------ ------------ ------------
$ 36,992,000 $ 23,043,000 $ 16,357,000
============ ============ ============
30PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. RELATED PARTY TRANSACTIONS
During 1995, 1994 and 1993 the Company paid approximately $76,000.
$107,000 and $115,000, respectively, to a company for marketing services.
A former member of the Company's Board is an officer of this company.
12. CONTINGENCIES
The Company is involved in certain legal actions arising in the
ordinary course of business. Management believes, based on the advice of
legal counsel, that such litigation and claims will be resolved without
material effect on the Company's consolidated financial position, results
of operations or cash flows.
13. LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred recurring operating losses and negative
operating cash flows since its inception, including an operating loss of
$17,244,000 and negative operating cash flows of $13,567,000 in 1995. At
December 31, 1995, the Company had negative working capital of
$5,689,000, an accumulated deficit of $128,592,000 and total
shareholders' deficit of $2,324,000. Included within the 1995 operating
losses were merger costs of $4,175,000 and pre-merger operating losses
related to CGI.
The Company anticipates that negative operating cash flows will
continue through the end of the second quarter of 1996 and potentially
thereafter. Management has developed a 1996 operating plan designed to
increase revenues, reduce operating losses and improve cash flow, in
comparison to prior year levels. During March 1996, the Company raised
net proceeds of approximately $7,250,000 through a private placement.
Management believes that such monies, together with cash flows from
operations, will provide the Company with sufficient working capital to
enable the Company to continue operations in the present form at least
through 1996. However, given (a) that the 1996 operating plan is
dependent upon the renewal of the bank line of credit and the successful
renegotiation of certain bank covenants, both of which are discussed
below, and (b) that there is inherent uncertainty in the Company's
ability to achieve the Company's 1996 operating plan to increase
revenues, reduce operating losses and improve cash flows, there can be no
assurance that management's plans and efforts will be successful.
During 1995, the Company received notice from Nasdaq indicating
that, as a result of biosys' failure to maintain $4 million of net
tangible assets, as required by the NASD bylaws governing continuance on
the Nasdaq National Market, biosys' common stock would be delisted if the
required net tangible assets condition were not satisfied. As a
consequence of the AgriDyne merger and the infusion of net equity of
approximately $7,250,000, both of which occurred in March 1996, the
Company satisfied the Nasdaq net tangible assets requirement as of March
29, 1996. It is possible that the 1996 losses, if incurred, could cause
biosys to again fall below the Nasdaq net tangible assets requirement.
Were such condition to occur and if (a) no extension of time was received
31PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
from Nasdaq, and (b) further equity financing was not secured, biosys'
common stock would be delisted from the Nasdaq National Market. Such a
delisting of biosys from Nasdaq could adversely effect the value and
liquidity of the shares of biosys common stock and restrict the Company's
future ability to raise equity capital.
As explained in Note 5, biosys was in violation of certain bank
covenants at December 31, 1995, and received waivers of such violations
from the lending institutions through March 31, 1996. It will be
necessary for the Company to renegotiate the covenants within its various
loan agreements. The lending institutions and biosys have agreed to
renegotiate the covenants and management believes that the revised
covenants, once renegotiated, will permit compliance therewith. There can
be no assurance that the Company will be able to successfully renegotiate
covenants with which it will be able to comply throughout the coming
year.
Also as explained in Note 5, the Company has a bank line of credit
for $4 million which is scheduled to expire on June 5, 1996. Management
believes that a renewal of the line can be renegotiated. While the bank
involved has expressed an initial willingness and intent to renew such
line, formal negotiations have not commenced and there can be no
assurance that such negotiations will ultimately result in a renewal of
the line of credit or that, if required, biosys could secure alternative
working capital financing from other sources.
The accompanying December 31, 1995 consolidated financial statements
have been prepared assuming the Company will continue as a going concern
and do not include any adjustments that might result from the outcome of
this uncertainty.
14. SUBSEQUENT EVENT
On September 27, 1996, the Company and one of its subsidiaries, Crop
Genetics International Corporation, filed voluntary petitions for relief
under Chapter 11 of the United States Bankruptcy Code ("Chapter 11"). On
November 15, 1996, another of the Company's subsidiaries, AgriDyne
Technologies, Inc., also filed a voluntary petition for relief under
Chapter 11. The Company, its Crop Genetics International Corporation
subsidiary and its AgriDyne Technologies, Inc. subsidiary are herein
collectively referred to as "the Debtors". The Company's U.K. subsidiary,
AgriSense-BCS, Limited, did not file for bankruptcy protection and has
continued normal operations. On January 17, 1997, substantially all of
the assets of the Company, including the stock of AgriSense-BCS, Limited,
were sold to Thermo Trilogy Corporation, a wholly-owned subsidiary of
Thermo Ecotek Corporation, for $11,000,000 in cash. In accordance with
the terms of the Asset Purchase Agreement, Thermo Trilogy Corporation
also assumed certain liabilities related to the Company's manufacturing
and operating agreements and purchase contracts. The Company retained its
cash and trade accounts receivable. Management presently anticipates that
the liquidation of the Company's remaining assets will be completed and
the Company will cease operations during 1997. The proceeds from the
January 17, 1997 sale and from the anticipated liquidation of the trade
accounts receivable will be distributed to the Company's creditors in
32PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
accordance with the provisions of the United States Bankruptcy Code and
orders of the United States Bankruptcy Court for the District of
Maryland. The accompanying consolidated financial statements do not
include any adjustments relating to the recoverability of the recorded
asset amounts or the amount and classification of liabilities that will
be necessary as a consequence of the bankruptcy proceedings and the
ultimate sale of substantially all of the assets of the Company.
15. INTERIM FINANCIAL STATEMENTS (Unaudited)
Presentation
The financial statements as of September 30, 1996 and for the
nine-month periods ended September 30, 1996 and September 30, 1995 are
unaudited but, in the opinion of management, reflect all adjustments of a
normal recurring nature necessary for a fair presentation of results for
these interim periods. The results of operations for the nine-month
period ended September 30, 1996 are not necessarily indicative of the
results to be expected for the entire year.
Business Combination
In connection with the Company's purchase of Agridyne in March 1996,
for $13,592,000 (Note 3), $3,717,000 has been allocated to net tangible
assets acquired, $3,875,000 to goodwill and $6,000,000 to in-process
research and development, which was recorded as an expense in the nine
months ended September 30, 1996.
Liabilities Subject to Compromise
Liabilities subject to compromise under reorganization proceedings
include substantially all current and long-term unsecured or undersecured
debt as of the date of the Chapter 11 filings. Pursuant to the provisions
of the Bankruptcy Code, payment of those liabilities may not be made
except pursuant to a plan of reorganization or Bankruptcy Court order
while the Debtors continue to operate as a debtor-in-possession. The
Company has notified all known or potential claimants for the purpose of
identifying all pre-petition claims against the Debtors. While the
Company believes that the amounts recorded reflect known claims at this
time, the amounts actually claimed by creditors or allowed by the
Bankruptcy Court may be different. Additionally, other claims may be
asserted by parties not identified by the Company as creditors, which may
result in additional liabilities subject to compromise. The following
liabilities are classified as liabilities subject to compromise at
September 30, 1996:
Accounts payable $ 5,193,000
Accrued expenses 1,209,000
Deferred credits 606,000
Long-term obligations 3,844,000
-----------
$10,852,000
===========
33PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
After the filing of Chapter 11, some of the preferred stockholders
filed proofs of claim in the Company's bankruptcy estate asserting
unsecured creditor claims in connection with the Company's alleged
breach of the subscription agreement relating to the convertibility of
the preferred stock to common stock. The Company disagrees with these
claims and intends to defend against them.
Common Stock
In August 1996, due to biosys' failure to maintain $4 million of net
tangible assets as required by the NASD bylaws governing continued
listing on the Nasdaq National Market, biosys received notice from Nasdaq
that biosys' Common Stock was being delisted from the Nasdaq National
Market.
Subsidiary Not Subject to Bankruptcy Proceedings
As described in Note 14, on September 27, 1996, the Debtors filed
voluntary petitions for relief under Chapter 11 of the United States
Bankruptcy Code. Biosys' wholly-owned U.K. subsidiary, AgriSense-BCS,
Limited, did not file for bankruptcy protection. Condensed combined
financial statements for the Debtors as of and for the nine months ended
September 30, 1996, are presented below.
Condensed combined balance sheet
--------------------------------
Cash and cash equivalents $ 158,000
Accounts receivable 2,241,000
Inventories 3,694,000
Intercompany receivables, net 763,000
Other current assets 864,000
------------
Total current assets 7,720,000
------------
Noncurrent assets 11,742,000
------------
$ 19,462,000
============
Short-term debt $ 3,642,000
Accrued expenses 401,000
Deferred credits 219,000
------------
Total current liabilities 4,262,000
Liabilities subject to compromise 10,852,000
------------
Total liabilities 15,114,000
Shareholders' equity 4,348,000
------------
$ 19,462,000
============
34PAGE
<PAGE>
biosys, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed combined statement of operations
------------------------------------------
Total revenues $ 12,280,000
Operating costs and expenses:
Cost of product sales 12,473,000
Operating costs 7,595,000
Purchased research and
development 6,000,000
Costs of mergers 58,000
------------
26,126,000
Loss from operations (13,846,000)
Interest and other expense, net (936,000)
------------
Net loss $(14,782,000)
============
35PAGE
<PAGE>
FORM 8-K/A
Item 7. Financial Statements, Pro Forma Combined Condensed Financial
Information, and Exhibits
(b) Pro Forma Combined Condensed Financial Information
The following unaudited pro forma combined condensed financial
statements set forth the results of operations for the fiscal year ended
September 28, 1996, as if the acquisition of biosys by the Company had
occurred at the beginning of fiscal 1996, and the financial position as
of September 28, 1996, as if the acquisition had occurred as of that
date. Biosys has a financial year which differs from the Company's fiscal
year end, therefore, the pro forma combined condensed statement of
operations for the year ended September 30, 1996, includes the historical
results of income for biosys, derived by adding the results of operations
for the three months ended December 31, 1995, to its results of
operations for the nine months ended September 28, 1996. The pro forma
combined condensed balance sheet includes the historical financial
position for biosys as of September 28, 1996.
The acquisition has been accounted for using the purchase method of
accounting. The pro forma results of operations are not necessarily
indicative of future operations or the actual results that would have
occurred had the acquisition of biosys been consummated at the beginning
of fiscal 1996. The financial statements filed under part (a) of this
item should be read in conjunction with these pro forma combined
condensed financial statements.
4PAGE
<PAGE>
FORM 8-K/A
THERMO ECOTEK CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Fiscal Year Ended September 28, 1996
(Unaudited)
Historical Pro Forma
------------------------- -----------------------
Thermo Ecotek biosys Adjustments Combined
------------- -------- ----------- --------
(In thousands except per share amounts)
Revenues $150,076 $ 22,493 $ - $172,569
-------- -------- -------- --------
Costs and Operating
Expenses:
Cost of revenues 101,883 20,985 (410) 122,458
General and administra-
tive expenses 12,218 3,590 627 16,435
Research and development
expenses - 5,687 - 5,687
Marketing and selling
expenses - 3,342 - 3,342
Purchased research and
development costs - 6,000 - 6,000
Costs of mergers - 272 - 272
-------- -------- -------- --------
114,101 39,876 217 154,194
-------- -------- -------- --------
Operating Income (Loss) 35,975 (17,383) (217) 18,375
Interest Income 5,104 62 (661) 4,505
Interest Expense (14,727) (1,793) 1,533 (14,987)
Other Expense (26) - - (26)
-------- -------- -------- --------
Income Before Provision for
Income Taxes and Minority
Interest 26,326 (19,114) 655 7,867
Provision for Income Taxes 7,271 - (4,361) 2,910
Minority Interest Expense 1,275 - - 1,275
-------- -------- -------- --------
Net Income (Loss) $ 17,780 $(19,114) $ 5,016 $ 3,682
======== ======== ======== ========
Earnings per Share:
Primary $ .70 $ .14
======== ========
Fully diluted $ .53 $ .14
======== ========
Weighted Average Shares:
Primary 25,476 25,476
======== ========
Fully diluted 36,315 36,315
======== ========
See notes to pro forma combined condensed financial statements.
5PAGE
<PAGE>
FORM 8-K/A
THERMO ECOTEK CORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
September 28, 1996
(Unaudited)
Historical Pro Forma
------------------------ ----------------------
Thermo Ecotek biosys Adjustments Combined
------------- -------- ----------- --------
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 63,238 $ 755 $(11,381) $ 52,612
Restricted funds 18,936 - - 18,936
Accounts receivable and
unbilled revenues 28,061 3,419 (2,241) 29,239
Inventories 11,299 4,531 - 15,830
Prepaid income taxes and
other current assets 4,953 912 (912) 4,953
-------- -------- -------- --------
126,487 9,617 (14,534) 121,570
-------- -------- -------- --------
Property, Plant, and
Equipment, Net 262,766 6,378 (4,101) 265,043
-------- -------- -------- --------
Due from Parent Company 12,116 - - 12,116
-------- -------- -------- --------
Long-term Available-for-
sale Investments 20,254 - - 20,254
-------- -------- -------- --------
Restricted Funds 14,112 - - 14,112
-------- -------- -------- --------
Other Assets 13,410 4,699 1,111 19,220
-------- -------- -------- --------
$449,145 $ 20,694 $(17,524) $452,315
======== ======== ======== ========
See notes to pro forma combined condensed financial statements.
6PAGE
<PAGE>
FORM 8-K/A
THERMO ECOTEK CORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
September 28, 1996
(Unaudited)
Historical Pro Forma
------------------------- ----------------------
Thermo Ecotek biosys Adjustments Combined
-------------- --------- ----------- --------
(In thousands)
LIABILITIES AND SHAREHOLDERS'
INVESTMENT
Current Liabilities:
Short-term debt and current
maturities of long-term
obligations $ 24,806 $ 3,642 $ (3,642) $ 24,806
Accounts payable 1,517 1,947 - 3,464
Lease obligations payable 1,812 - - 1,812
Accrued interest 3,159 - - 3,159
Accrued income taxes 1,858 - - 1,858
Other current liabilities
and accrued expenses 15,532 620 603 16,755
Due to parent company 1,586 - - 1,586
-------- -------- -------- --------
50,270 6,209 (3,039) 53,440
-------- -------- -------- --------
Liabilities Subject to
Compromise - 10,852 (10,852
-------- -------- -------- --------
Deferred Income Taxes and
Other Deferred Items 56,591 - - 56,591
-------- -------- -------- --------
Long-term Obligations 209,281 - - 209,281
-------- -------- -------- --------
Minority Interest 3,316 - - 3,316
-------- -------- -------- --------
Shareholders' Investment:
Convertible preferred
stock - 312 (312) -
Common stock 1,617 9 (9) 1,617
Capital in excess of par
value 74,740 146,340 (146,340) 74,740
Retained earnings
(deficit) 45,048 (142,987) 142,987 45,048
Treasury stock at cost (481) - - (481)
Cumulative translation
adjustment - (41) 41 -
Net unrealized gain on
available-for-sale
investments 8,763 - - 8,763
-------- -------- -------- --------
129,687 3,633 (3,633) 129,687
-------- -------- -------- --------
$449,145 $ 20,694 $(17,524) $452,315
======== ======== ======== ========
See notes to pro forma combined condensed financial statements.
7PAGE
<PAGE>
FORM 8-K/A
THERMO ECOTEK CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The allocation of the purchase price is based on an estimate of the
fair market value of the net assets acquired and is subject to adjustment.
To date, no information has been gathered that would cause the Company to
believe that the final allocation of the purchase price will be materially
different than the preliminary estimate.
Note 2 - Pro Forma Adjustments to Pro Forma Combined Condensed
Statement of Income (In thousands, except in text)
Fiscal
Year Ended
September 28,
1996
--------------
Debit (Credit)
Cost of Revenues
Decrease in the depreciation expense for
leasehold improvements and fixed assets
of biosys due to planned abandonment
of certain facilities $ (410)
General and Administrative Expenses
Service fee of 1.20% and 1.0% of the
revenues of biosys for services
provided under a services agreement
between the Company and Thermo
Electron Corporation for the three
months ended December 30, 1995 and
for the nine months ended September 28,
1996, respectively 231
Amortization over 14 years of patents,
trademarks, intellectual property, and
product technology acquired through the
acquisition of biosys 448
Elimination of biosys' amortization of goodwill (52)
-------
627
-------
8PAGE
<PAGE>
FORM 8-K/A
THERMO ECOTEK CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note 2 - Pro Forma Adjustments to Pro Forma Combined Condensed
Statement of Income (In thousands, except in text)
(continued)
Fiscal
Year Ended
September 28,
1996
--------------
Debit (Credit)
Interest Income
Decrease in interest income earned
attributable to the lower cash
position as a result of the total cash
payments of $11,381,000 to acquire biosys,
calculated using the average 90-day Commercial
Paper Composite Rate plus 25 basis point, or 5.81% $ 661
Interest Expense
Decrease in interest expense as a result of the
elimination of biosys' short-term debt and long-term
obligations (included in liabilities subject to
compromise) not included as part of the purchase of
biosys (1,533)
Provision for Income Taxes
Income tax provision associated with the
adjustments above (excluding amortization of biosys'
goodwill), calculated at the Company's statutory income
tax rate of 35% 211
Income tax benefit related to biosys'
pro forma pre-tax loss (excluding the $6,000,000
purchased research and development costs associated
with the acquisition of AgriDyne and $52,000 of
amortization related to biosys' goodwill), calculated
at the Company's statutory income tax rate of 35% (4,572)
-------
(4,361)
-------
9PAGE
<PAGE>
FORM 8-K/A
THERMO ECOTEK CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note 3 - Pro Forma Adjustments to Pro Forma Combined Condensed
Balance Sheet (In thousands, except in text)
September 28, 1996
------------------
Debit (Credit)
Cash and Cash Equivalents
Cash payment to acquire biosys, including
closing costs, net of cash acquired $(11,381)
Accounts Receivable
Elimination of all receivables (with the exception
of AgriSense receivables) not included as
part of the purchase of biosys (2,241)
Prepaid Expenses
Elimination of the prepaid expenses of biosys
not included as part of the purchase of biosys (912)
Property, Plant, and Equipment
Elimination of leasehold improvements and other
fixed assets of biosys due to planned
abandonment of certain facilities (4,101)
Other Assets
Adjust balance of biosys' patents, trademarks,
intellectual property, and product technology
acquired through the acquisition of biosys 4,986
Elimination of biosys' goodwill (3,875)
--------
1,111
--------
Short-term Debt
Elimination of short-term debt not included
as part of the purchase of biosys 3,642
Other Accrued Expenses
Estimated severance, relocation, and other
acquisition reserves arising from the acquisition
of biosys (1,223)
Liabilities not assumed as part of the purchase
of biosys 620
--------
(603)
--------
Liabilities Subject to Compromise
Elimination of liabilities not assumed
as part of the purchase of biosys 10,852
Shareholders' Investment
Elimination of biosys' equity accounts 3,633
10PAGE
<PAGE>
FORM 8-K/A
Item 7. Financial Statements, Pro Forma Combined Condensed Financial
Information and Exhibits
(c) Exhibits
2 Asset Purchase Agreement among Thermo Trilogy
Corporation, biosys, inc., Crop Genetics International
Corporation, and AgriDyne Technologies, Inc. dated
December 24, 1996 (filed as Exhibit 2 to the
Registrant's Current Report on Form 8-K filed January
31, 1997 [File No 1-3572] and incorporated herein by
reference).
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Ernst & Young LLP, independent auditors
11PAGE
<PAGE>
FORM 8-K/A
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, on this 28th day of March
1997.
THERMO ECOTEK CORPORATION
Paul F. Kelleher
---------------------
Paul F. Kelleher
Chief Accounting Officer
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (No. 33-91538), Registration Statement
on Form S-8 (No. 33-91542), Registration Statement on Form S-8 (No.
33-91546), Registration Statement on Form S-8 (No. 33-91544),
Registration Statement on Form S-8 (No. 33-91548), and Registration
Statement on Form S-8 (No. 33-80753) of Thermo Ecotek Corporation of our
report dated March 29, 1996, except for the third paragraph as to which
the date is March 24, 1997, appearing on page 2 of this Current Report on
Amendment No. 1 on Form 8-K/A.
PRICE WATERHOUSE LLP
Falls Church, Virginia
March 24, 1997
Exhibit 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-91538), Registration Statement on Form S-8
(No. 33-91542), Registration Statement on Form S-8 (No. 33-91546),
Registration Statement on Form S-8 (No. 33-91544), Registration Statement
on Form S-8 (No. 33-91548), and Registration Statement on Form S-8 (No.
33-80753) of Thermo Ecotek Corporation of our report of Crop Genetics
International Corporation dated January 27, 1995, with respect to the
financial statements of Crop Genetics International Corporation for the
three years ended December 31, 1994, included in Thermo Ecotek
Corporation's Amendment No. 1 on Form 8-K/A - Current Report filed with
the Securities and Exchange Commission on March 28, 1997.
Ernst & Young LLP
Washington, D.C.
March 24, 1997
