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FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION STATEMENT NO. 333-61127
SUPPLEMENT TO AGRIBIOTECH, INC.
PROSPECTUS DATED AUGUST 14, 1998
AS PREVIOUSLY SUPPLEMENTED ON
SEPTEMBER 2, 1998, SEPTEMBER 4, 1998
OCTOBER 15, 1998 AND NOVEMBER 13, 1998
850,000 Shares
_________________________
On December 4 and 7, 1998, AgriBioTech, Inc. (the "Company") entered into
Securities Purchase Agreements to sell a total of 850,000 shares (the "Shares")
of Common Stock. We sold 250,000 Shares at $12.50 per share to The State of
Wisconsin Investment Board. We also sold 300,000 shares and 300,000 common stock
purchase warrants ("Warrants") to LBI Group Inc., 40,000 Shares and 40,000
Warrants to Brown Simpson Strategic Growth Fund, L.P., and 260,000 Shares and
260,000 Warrants to Brown Simpson Strategic Growth Fund, Ltd. at a price of
$13.50 for one Share and one Warrant. The Shares were registered as original
equity issuances as part of this Registration Statement. The shares issuable
upon exercise of the Warrants will be registered in a separate registration
statement. See "Plan of Distribution."
Our Common Stock is listed and traded on the Nasdaq National Market under
the symbol "ABTX." The last reported sale price on December 7, 1998, was
$12.5625 per share.
_________________________
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 12.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_________________________
December 8, 1998
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ABOUT THIS PROSPECTUS SUPPLEMENT
This Prospectus Supplement is part of a registration statement we filed with
the SEC using a "shelf" registration process. Under this process, we filed a
Registration Statement and Prospectus on August 14, 1998, for which we filed
supplements on September 2, 1998, September 4, 1998, October 15, 1998 and
November 13, 1998. The Prospectus that we filed included a general description
of the securities that we may offer at any time for two years from the original
filing date. Whenever we sell any securities using this process, we must provide
a supplement, like this one, that contains specific information about the
securities we are selling and the terms of that sale.
This Prospectus Supplement relates to shares of common stock that we are
selling to certain investors who have entered into stock purchase agreements.
To fully understand this offering, you should read this Prospectus
Supplement, the Prospectus (and any other supplements) and the additional
information described under the heading "WHERE YOU CAN FIND MORE INFORMATION."
TABLE OF CONTENTS
<TABLE>
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WHERE YOU CAN FIND MORE INFORMATION............................. -3-
RECENT DEVELOPMENTS AND WEB SITE DISCLOSURES.................... -5-
RISK FACTORS.................................................... -12-
USE OF PROCEEDS................................................. -19-
PRICE RANGE OF COMMON STOCK..................................... -20-
DIVIDEND POLICY................................................. -20-
DESCRIPTION OF CAPITAL STOCK.................................... -21-
PLAN OF DISTRIBUTION............................................ -23-
COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES............................. -24-
LEGAL MATTERS................................................... -24-
</TABLE>
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Unless the context indicates otherwise, the terms the "Company" and
"ABT," or references to "we," "us," and "our" in this Prospectus refer to
AgriBioTech, Inc. and its subsidiaries.
WHERE YOU CAN FIND MORE INFORMATION
ABT is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"). In accordance with the Exchange Act,
we file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
inspect and copy any document we file at the SEC's public reference rooms in
Washington, D.C. at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's Northeast Regional Office at Seven World Trade Center, New York, New York
10048, and at the Midwest Regional Office at 500 West Madison Street, Chicago,
Illinois 60611-2511. You may also purchase copies of our SEC filings, by writing
to the SEC, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549 or on the SEC's Worldwide Web site at http://www.sec.gov. You may find
additional information about ABT at our Web site at http://www.agribiotech.com.
This Prospectus Supplement and the Prospectus for which it provides
additional information, are part of a registration statement on Form S-3 that we
have filed with the SEC. The SEC allows us to "incorporate by reference"
information that we file with them. This means that we can disclose important
information to you by referring you to other documents that we have filed with
the SEC. The information that is incorporated by reference is considered part of
this Prospectus Supplement, and information that we file later will
automatically update and may supersede this information. For further information
about ABT and the securities being offered, you should refer to the registration
statement and the following documents that are incorporated by reference.
(i) Our Annual Report on Form 10-K for the fiscal year ended June 30,
1998 ("Form 10-K");
(ii) Our Quarterly Report on Form 10-QSB for the fiscal quarter ended
March 31, 1996 (as amended on July 12, 1996) and Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1998;
(iii) The following Current Reports on Form 8-K (collectively, Forms "8-
K") that we filed during the quarter ended September 30, 1998 and
through November 30, 1998:
- Dated October 30, 1996 and amended on January 13, 1997, February
17, 1998 and August 11, 1998
- Dated May 22, 1998 and filed August 11, 1998
- Dated June 23, 1998 and filed on July 8, 1998 and amended on
August 28, 1998
- Dated August 28, 1998 and filed September 11, 1998 and amended
November 12, 1998
- Dated June 30, 1998 and filed October 26, 1998
- Amendment filed August 11, 1998 to report dated May 15, 1997
- Amendments filed August 11, 1998 and August 27, 1998 to report
dated August 22, 1997
- Amendment filed August 11, 1998 to report dated January 6, 1998
- Amendment filed August 11, 1998 to report dated January 9, 1998
- Amendments filed August 11, 1998 and September 4, 1998 to report
dated January 26, 1998
- Amendments filed August 28, 1998 to report dated October 22,
1997;
(iv) The description of our Common Stock, $.001 par value, in our
registration statement on Form 8-A (File No. 0-19352), filed July 11,
1995, pursuant to Section 12(g) of the Exchange Act including any
amendment or report filed for the purpose of updating such
information;
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(v) Our Proxy Statement dated January 20, 1998 for our Annual Meeting held
on February 23, 1998; and
(vi) All documents we file pursuant to Sections 13(a), 13(c), 14 and 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
filing of a post-effective amendment that indicates that all the
securities offered hereby have been sold or that deregisters all the
securities remaining unsold.
You may request a copy of all documents that are incorporated by reference
in this Prospectus by writing or telephoning us at the following address:
AgriBioTech, Inc., Attention: Secretary, 120 Corporate Park Drive, Henderson, NV
89014; telephone number (702) 566-2440. We will provide copies of all documents
requested (not including the exhibits to those documents, unless the exhibits
are specifically incorporated by reference into those documents or this
Prospectus) without charge.
We have not authorized any person to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus Supplement and the Prospectus. You should not rely on any
information or representations in connection with this offering other than the
information or representations in this Prospectus Supplement and the Prospectus.
The information in this Prospectus Supplement is correct as of the date of this
Prospectus Supplement. You should not assume that there has been no change in
the affairs of ABT since the date of this Prospectus Supplement or that the
information contained in this Prospectus Supplement is correct as of any time
after its date. This Prospectus Supplement is not an offer to sell or a
solicitation of an offer to buy shares in any circumstances in which such an
offer or solicitation is unlawful.
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RECENT DEVELOPMENTS AND WEB SITE DISCLOSURES
RECENT DEVELOPMENTS
Acquistions & Disposition
The Company signed letters of intent in connection with the following three
acquisitions (the "Pending Acquisitions") described below, all of which the
Company expects to close before March 31, 1999. Since each Pending Acquisition
is subject to conditions and events which may not necessarily occur, no
assurance can be given that any of the following acquisitions will be completed.
The Company, in conjunction with Garst Seed Company, a member of Advanta
Seeds Group, has agreed to purchase AgriPro Seeds, Inc. ("ABI"). ABT is
purchasing the alfalfa business unit and the international sorghum business
unit, while Garst is purchasing the business units relating to the sales of
corn, soybeans, wheat, cotton, sunflowers and domestic sorghum. Closing of the
acquisition is subject to negotiation of definitive agreements and regulatory
approvals.
The Company also agreed to acquire two additional businesses: Moore Seed
Processors and Production Plus+. Moore, located in Grand Prairie, Alberta,
Canada, is a leading handler of creeping red fescue. Production Plus+ is located
in Plainview, Texas. They are a leading producer and distributor of forage and
grain sorghum in the U. S. and Mexico.
The Company has signed a Letter of Intent to sell the assets relating to
the chemical and fertilizer division of Willamette Seed Company to Wilbur-Ellis
Company. The division has approximately $20 million in sales and the purchase
price will be approximately $10 million in cash for fixed assets, inventory and
accounts receivable. The chemical and fertilizer division of Willamette Seed
Company specializes in the distribution of chemicals and the manufacturing and
distribution of fertilizer to farmers in the Willamette Valley of Oregon, many
of whom are contract growers for turfgrass seed production.
Biotechnology
On November 30, 1998, the Company announced it is opening a molecular
biology and transformation laboratory at and in association with the University
of Rhode Island ("URI"). Transformation refers to the tools to introduce
functional foreign genes into plant species. The decision to begin research at
the URI campus was made to take advantage of synergies that are expected to
benefit both parties, including the university's new Environmental Biotechnology
Initiative that is designed to build capacity for environmental and agricultural
biotechnology in the university and the state through enhanced research
investment, academic programs and links to the business community. Work at the
ABT laboratory at URI will focus on forage and turfgrass seed species.
The Company also announced the hiring of Dr. Albert Kausch, a leading
molecular biologist and plant transformation expert. Dr. Kausch, formerly
at a leading competitive biotechnology program, and most recently at the
University of Connecticut, earned his advanced degrees in molecular, cellular
and developmental biology at the Iowa State University, Ames, IA. He is the
author of important published work in the areas of molecular biology and plant
transformation. He is also the author or co-author of twelve patents in these
areas.
On December 1, 1998, the Company announced it had acquired a license to use
whiskers transformation technology from Garst Seed Company (a member of the
Advanta Group, with whom it has agreed to purchase ABI, as described above).
With this license, the Company has acquired access to a technology which will
give it "freedom to operate" for transformation of all turfgrass and forage
species, the Company's strategic crop species. Whiskers is a unique
transformation system developed in-house by Garst and for which Garst holds
patent rights. The agreement is initially a research license for this technology
with the right, at ABT's option, to enter into a commercial license.
Management
Randy Ingram was elected Chief Financial Officer of the Company on November
2, 1998. Prior thereto, from September 1998, he served as a Vice President of
the Company. From January 1996, until September 1998, Mr. Ingram was Head,
Business Planning and Development at global headquarters of Novartis Seeds AG
(Basel, Switzerland). Prior thereto, from March 1993, he served as Vice
President of Finance and Chief Financial Officer at Northrup King Co., at the
time an operating unit of Sandoz Seeds, Ltd. He is a Certified Public
Accountant, with extensive postgraduate work in executive education at leading
U.S. institutions.
On August 5, 1998, Randy Ingram entered into an employment agreement with
the Company terminable for cause (as defined) or without cause upon 10 working
days' notice. If the agreement is terminated without cause, Mr. Ingram will
receive 12 months salary as severance pay and be vested in the options which
would otherwise have vested on the next anniversary of employment following such
termination. The agreement contains a covenant by Mr. Ingram not to compete
against the Company during the term and for a one-year period thereafter. If
Mr. Ingram voluntarily terminates the agreement, Mr. Ingram would not be
entitled to any compensation and not have any rights to exercise stock options
exercisable upon termination. In the event there is a change in the Chief
Executive Officer of the Company and at any time thereafter Mr. Ingram is either
terminated or, in his sole determination, there is a significant change in his
duties, responsibilities, or compensation, Mr. Ingram shall be vested in full in
all stock options granted pursuant to his employment agreement and shall be
entitled to receive his full compensation, less $1.00, and other employee
benefits for two years from the date of termination or his determining that such
a change has occurred. In addition, for a one-year period following the change
of Chief Executive Officer, Mr. Ingram has the option to terminate the agreement
without justification and be vested in his stock options, which would otherwise
become vested on the next anniversary date of employment and receive his full
compensation for one year following such termination.
Mr. Ingram is currently receiving a salary of $150,000 per annum. He was
granted stock options to purchase 250,000 shares of Common Stock exercisable at
$15.5625 per share and vesting 50,000 shares upon signing of the employment
agreement and 50,000 on each of the four subsequent anniversary dates.
Strategic Alternatives to Maximize Shareholder Value
On October 8, 1998, the Company announced it had retained Merrill Lynch &
Co. as its investment banker primarily to explore alternatives to maximize
shareholder value and subsequently added Deutsche Bank Securities as an advisor
for such transactions. The Company has said it is exploring all alternatives,
including the option of a strategic equity partner or fund willing to acquire at
least a 20% interest in the Company, up to a complete acquisition of the
Company. The offering being made by this Prospectus Supplement is independent of
the Company's efforts to issue stock to a strategic partner and is not
contingent upon such transaction occurring.
WEB-SITE DISCLOSURES
In the following paragraphs, the Company is disclosing information
discussed in the Company's Web Site, including forward-looking information, that
is not set forth in this Prospectus Supplement or incorporated by reference
herein. Forward-looking and other statements in this section, as well as
elsewhere in this Prospectus Supplement, reflect the good faith judgment of the
Company's management, and were solely based on facts and factors known by the
Company at the time such statements were made. Except where otherwise indicated,
the following statements in this section have not been updated since they were
made. Forward-looking statements are inherently subject to risks and
uncertainties, and actual results and outcomes may
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differ materially from the results and outcomes discussed in the forward-looking
statements. The risks and uncertainties that could cause or contribute to such
differences in results and outcome include without limitation, the Company's
historical lack of profitability, need to manage its growth, intense competition
in the seed industry, seasonality of quarterly results, weather conditions,
volatility of common stock prices, as well as those factors discussed under
"Risk Factors" and elsewhere in this Prospectus Supplement and in any documents
that are incorporated into this Prospectus Supplement by reference.
The Company has made certain other forward-looking and other statements
(the "Prior Statements") in prior versions of its Web Site which were included
in registration statements filed previously with the Commission. The Prior
Statements include: (a) Chairman's Update dated March 4, 1998; (b) Chairman's
Update dated April 1, 1998; (c) Chairman's Update dated June 22, 1998; (d)
Chairman's Update dated September 1, 1998; (e) Chairman's Update dated
October 9, 1998; and (f) Chairman's Letter to Shareholders dated November 10,
1998.
The Company has deleted each of the Prior Statements in its entirety from
its Web Site. As a result, the Prior Statements are deemed not incorporated by
reference into this document and shall be deemed to be superseded for purposes
of this registration statement, in accordance with the terms of Rule 412
promulgated under the Securities Act. The Company may make other Statements that
are "forward-looking statements" as defined in Section 27A of the Securities Act
and Section 21E of the Exchange Act.
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1997 ANNUAL REPORT TO SHAREHOLDERS
The following section consists of statements from the Company's 1997 Annual
Report to Shareholders, which is not a document incorporated by reference in
this Registration Statement.
(a) Agribiotech Mission Statement. "To become the premier forage and
-----------------------------
turfgrass seed company in the world, while also providing a full service seed
product line. AgriBioTech, Inc. is committed to providing superior, value added
seed varieties and superior service. The ultimate goal is to achieve a 45%
market share in forage and turf seed by the year 2000 with annual revenues
exceeding $500 million.
(b) Chief Executive Officer's Letter.
--------------------------------
Dear Fellow Shareholders:
"In 1995, we set out to consolidate two important seed sectors and gain 45
percent market share by the year 2000; we are 12 to 18 months ahead of our
target schedule for achieving this goal. The annualized revenues from our
completed acquisitions mean that today we are approximately double the size in
market share of the second leading company. When pending acquisitions are
closed, the Company's market share position will be roughly 3.5 times that of
the largest competitive forage and cool season turfgrass seed company."
"To date, the Company has maintained historical revenues while increasing
same store sales by roughly 7 percent as a result of our consolidation
strategy."
"In Fiscal 1998, we expect to achieve full-year profitability because our
Company now has a strong platform of research and development through
traditional genetic breeding programs, seed processing plants, and national and
international distribution and sales networks for most forage and cool-season
turfgrass species."
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"We have strong management. We are number one in market share, and we have
an industry-leading germplasm position. We expect continued growth in sales,
assets and equity in 1998."
"Respected and knowledgeable analysts predict that the agricultural
biotechnology market will grow to $12 to $14 billion a year within seven to
eight years."
(c) Industry and Strategy Review.
----------------------------
Industry Overview. "Recently, however, margins in the industry have begun
-----------------
to expand as increasingly larger and more sophisticated farmers and other users
have moved away from public varieties toward higher yielding proprietary
varieties. Proprietary varieties have desirable attributes such as improved
nutritional quality and disease and insect resistance. Additionally, protection
of intellectual property in the seed industry (variety rights) has recently been
firmly established by federal legislation (1994) and an important and favorable
U.S. Supreme Court ruling for seed companies (1995).
Prior to the launch of ABT's acquisition plan in 1995, no seed company
achieved the necessary size and scope of operations in the forage and turfgrass
seed sectors to develop higher yielding and better performing proprietary
varieties for national markets. The leading U.S. and global seed companies and
industry players--Pioneer Hi-Bred International, Inc., DEKALB Genetics
Corporation, Novartis AG, Delta and Pine Land Company, Monsanto Co., and The Dow
Chemical Company--have focused on and invested in other important seed sectors
like corn, cotton and vegetables. The leaders in these sectors have used
investment in traditional seed breeding R&D and vertical integration to generate
annual returns on equity in the 20 percent range, and because of their
leadership positions, are now realizing sizable additional returns and profits
due to the commercialization of higher-value biotechnology-based seed products."
Biotechnology and Biotechnology Access. "The impact of biotechnology on the
--------------------------------------
value of agricultural crops can be great. The soybean crop in the U.S. is a
present day example of what can happen when value-added, biotechnology produced
seeds are developed and marketed. Prior to the introduction of Roundup Ready(R)
soybean seed in the U.S. (seed genetically engineered to be tolerant to a
specific, efficacious and cost-effective herb icide) farmers spent between $800
and $900 million on soybean seed in the U.S. In 1998, 20-25 percent, of all U.S.
soybean acres are expected to be planted with these seeds generating increased
value for seed companies and the technology's owner of $200 to 250 million."
(d) Business Strategy and Operations.
--------------------------------
Management and Leadership. The Company announced that on January 1, 1998
-------------------------
two key positions were filled, that of President and Chief Operating Officer and
Vice President, Director of Research. The respective biographies of Kent
Schulze, President, and Dr. Thomas B. Rice,
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Vice President, appear in the Company's Proxy Statement dated January 20, 1998.
See "Information Incorporated by Reference." This section includes the following
biographies of various other employees which also appear in the Company's 1997
Annual Report to Shareholders, none of whom, except Dr. Rice, are executive
officers of the Company.
"Dr. Thomas B. Rice, Vice President, Director of Research, who will join
the Company January 1, 1998 was formerly with DEKALB Genetics Corporation, where
he served 10 years as Director of Research and subsequently as President and
Chief Operating Officer of DEKALB Plant Genetics, a subsidiary. Tom was the
architect of DEKALB'S highly successful biotechnology effort, starting at Pfizer
in 1976 where he initiated, managed and directed the plant biotechnology effort.
This program later became DEKALB's highly productive effort as a result of a
joint venture with Pfizer. Tom's program developed the first genetically
engineered corn and received the first product patents for corn, covering insect
resistance (Bt), herbicide tolerance and improved nutritional quality. During
his seed industry career, Tom has had direct management experience in the areas
of international subsidiaries, strategic alliances, breeding and biotechnology
R&D, intellectual property rights, strategic planning and technology transfer.
He will lead ABT's R&D and biotechnology efforts to optimize the Company's
planning and investments in this critical area and in exploring the
possibilities associated with licensing in and/or collaborating in the
development of biotechnology traits, products and processes. Tom received a
Ph.D. in genetics from Yale University in 1973, and was a Post-Doctoral fellow
of Brookhaven National Laboratory and a Research Associate at Michigan State
University before joining Pfizer.
Keith Sandberg, National Sales Director, was formerly Area Manager for the
Central and Southern Regions of Cargill Hybrid Seeds, a division of Cargill,
Inc., the largest privately owned company in the U.S. Keith was responsible for
the sales and commercial development activities to support Cargill's corn,
alfalfa and sorghum product lines. From 1987 to 1993, Keith was responsible for
Sales, Sales Administration and Technical Services, Central and Southern
Regions, for Cargill, based in Aurora, Illinois. Keith managed all sales and
agronomy activities for Cargill's seed products in the Central and Southern
regions, and had primary responsibilities for managing the integration of the
seed brands PAG, Paymaster and Cargill. From 1981 to 1987, Keith managed North
American Sales for the Paymaster Brand and had product line responsibility for
Cargill's corn business in Canada.
Bruce J. Ceranske, General Manager of W-L Research, was formally a District
Sales Manager for all or parts of Wisconsin, Minnesota, Michigan and Iowa, for
Cargill Hybrid Seeds based in Waupaca, Wisconsin since 1989. In addition, Bruce
was selected to Cargill Hybrid Seeds Corn Business Management Team and Forage
Management Team, which selected corn and alfalfa germplasm for production, and
commercialization. Currently, Bruce is managing W- L Research, based in
Evansville, Wisconsin. W-L Research is a world leading alfalfa research company
with varieties marketed globally.
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Keith Flynn, Forage Business Unit Director, holds a BS degree in Plant
Breeding & Genetics from the University of Reading, England. Keith was formerly
Vice President of Alfalfa, Wheat and International (1994 to 1997) for Agripro
Seeds, a wholly owned subsidiary of Helena Chemical Co. Keith directed three
profitable business units with research, production, sales and marketing as
direct reporting functions. From 1972 to 1994, Agripro Seeds and its
predecessors were owned by Shell Oil and The Royal Dutch Shell Group. Keith held
increasingly important positions in sales, marketing, product management and
general management. He has extensive knowledge of both national and
international seed business and brings 25 years of broad seed experience to ABT.
Doug Elkins, Western Regional Sales Manager joined Germain's Seeds in 1978
as a Washington State Sales Representative. He was promoted to Sales Manager in
1980, to Division Manager in 1987 and to Chief Executive Officer in 1992. Prior
to joining Germain's, Doug was employed at Ferry Morse Seed Company and Helena
Chemical. He has 24 year of experience in the seed business and served as
President of the Pacific Seed Association and currently serves as President of
the California Seed Association and holds a position on the California Seed
Advisory Board. As the Western Regional Sales Manager he has the primary
responsibility and oversight of sales and marketing for the western region of
ABT which includes Germain's Seeds and Hobart Seed Co.
Greg S. Fennell started in the seed business as a shipping coordinator in
1979, became active in seed sales in 1980 and in 1986 co-founded Olsen Fennell
Seeds, Inc. with James E. Olsen. They developed Olsen Fennell into an industry
leading turf and forage seed company with revenues in excess of $35 million.
Greg's primary responsibility at Olsen Fennell is income production where he
dedicates most of his time to distributor sales and the creation and
implementation of marketing plans for proprietary turf and forage grasses. He is
responsible for international sales, and concentrates much of his domestic
marketing efforts in the Midwestern and Southern states. Greg graduated from the
University of Oregon with a major in Business Management.
Greg McCarthy's career in the seed business began in 1976 as an agronomist
and field representative for E.F. Burlingham & Sons. Greg is experienced in
various aspects of seed management procurement and international sales. Greg and
Doug Pope purchased Burlingham in 1994 and have guided the company into becoming
an industry leading turf and grass seed research, production and distribution
company with net sales in excess of $36 million. Greg is responsible for
directing Burlingham's research and development department. He also is
responsible for the procurement and purchasing of seed, including the program
for production of proprietary seed varieties and maintaining relationships with
seed growers. Greg graduated from Oregon State University with a major in
Agronomic Crop Science.
James E. Olsen started in the seed business in 1983 as a sales trainee at
DM Combs, Co., and in 1986, co-founded Olsen Fennell Seeds, Inc. with Greg
Fennell. They developed Olsen Fennell into an industry leading turfgrass and
forage seed company with revenues in excess of
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$35 million. James is responsible for oversight of all production contracts,
grower relations and breeding work for Olsen Fennell Seeds. He also has
responsibilities for domestic sales on proprietary products for both turfgrass
and forage seeds. He graduated from Willamette University with a major in
Philosophy.
Michael Peterson, Ph.D., Director of Research, W-L Research, Inc., joined
W-L Research, Inc. in 1982. His responsibilities include the coordination of
all alfalfa breeding and product development activities at the four W-L alfalfa
research stations. He is also responsible for technical product support for the
W-L Research franchise and private label sales as well as coordination of all W-
L contract and joint venture projects. He attended the University of California
at Davis where he received a Bachelor of Science degree in Agronomy in 1978.
Mike also attended the University of Minnesota where he received his Masters of
Science and a Doctoral degree in Plant Breeding in 1982.
Doug Pope started in the seed business in 1983 when he joined E. F.
Burlingham & Sons. Prior to that he was an Account Executive for the Bell
Telephone System. Doug and Greg McCarthy purchased Burlingham in 1994 and led
it into becoming an industry leading turf and grass seed research, production
and distribution company with revenues in excess of $36 million. Doug is the
Chief Operating Officer of Burlingham and is responsible for domestic sales
which includes program and product development for Burlingham's customer base.
Doug oversee's the daily functioning of Burlingham including shipping and
warehousing. Doug graduated from Penn State University with a major in finance.
Functional Planning, Vertical Integration and Efficiencies. "Market share
----------------------------------------------------------
at the acquired companies has been maintained. In fact, sales and revenues
growth have been realized at certain, key combined operations. Improved
customer service and a superior product offering, among other things, accounts
for this and is indicative of what the Company intends to achieve and improve
upon with other acquired businesses.
Management believes that these planning, integration and optimization
efforts are typical of others to come as the Company grows and builds upon its
acquisition program success. Operationally, Management's plans are to increase
the profitability of both the Company and its customers by implementing the
[following strategies]."
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RISK FACTORS
Before you invest in our Common Stock, you should be aware that there are
various risks, including those described below, that may affect our business,
financial condition and results of operations. We caution you, however, that
this list of risk factors may not be exhaustive, particularly with respect to
future filings.
You should also be aware that this Prospectus Supplement contains forward-
looking statements. Forward looking statements discuss future expectations,
contain projections of results of operations or financial condition, and general
business prospects. Words such as "expects," "may," "will," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates," and similar expressions
identify forward-looking statements. The forward-looking statements in this
Prospectus Supplement reflect the good faith judgment of the Company's
management. However, forward-looking statements can only be based on facts and
factors currently known. Consequently, actual results and outcomes may differ
materially from the results and outcomes discussed in the forward-looking
statements. You should carefully consider the risk factors described below
together with all of the other information included or incorporated by reference
in this Prospectus Supplement before you decide to purchase shares of our Common
Stock.
Recent Rapid Growth; Ability to Manage Growth. We have acquired all or
---------------------------------------------
part of 33 businesses in the forage and turfgrass seed sector since January 1,
1995 and currently intend to further expand current levels of operations. As a
result of these acquisitions, we have experienced significant revenue growth and
expanded the number of our employees and the geographic scope of our operations.
These factors have resulted in increased responsibilities for management
personnel. This rapid growth has placed and may continue to place significant
demands on our management, technical, financial and other resources. In
addition, successful expansion of our operations will depend on, among other
things, our ability to attract, hire and retain skilled management and other
personnel, secure adequate sources of seed on commercially reasonable terms and
successfully manage growth. To manage growth effectively, we will need to
improve operational, financial and management information systems, procedures
and controls. We may not be able to manage future growth effectively, and
failure to do so could have a material adverse effect on our business, financial
condition and/or operating results. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in the Form 10-K ("MD&A"), and
"Description of Business - Acquisition Program" in the Form 10-K.
Integration of Acquisitions. Our future success depends upon our ability
---------------------------
to combine the operations of the businesses we have acquired and businesses we
may acquire in the future into a vertically integrated company. This process is
made more difficult by the fact that our subsidiaries are geographically
disparate and represent the full spectrum of the forage and turfgrass seed
production, processing, sales and distribution process, rather than just one
component of this process. You should therefore evaluate our prospects in light
of the problems, expenses, delays and complications associated with operating,
managing and integrating a large
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group of diverse businesses. We may not be able to effectively integrate all of
the businesses we have acquired or that we acquire in the future. If we cannot
successfully integrate these businesses, our business, financial condition
and/or operating results may be materially adversely affected. See "MD&A" and
"Description of Business - Acquisition Program" in the Form 10-K.
No Assurance of Future Acquisitions. We have experienced significant
-----------------------------------
growth in net sales, from approximately $26 million in the fiscal year ended
June 30, 1996 ("Fiscal 1996") to $66 million in the fiscal year ended June 30,
1997 ("Fiscal 1997"), $205 million in the fiscal year ended June 30, 1998
("Fiscal 1998") and pro forma net sales of approximately $409 million for Fiscal
1998, reflecting the disposition of the fertilizer division of Willamette Seed
Company, but not including Pending Acquisitions. This growth was primarily a
result of the businesses that we have acquired. Our future growth depends upon
our ability to continue to make acquisitions, and to increase sales from
existing operations. We may not be successful in doing either.
While we have been able to acquire 33 businesses since January 1995, we may
not make as many acquisitions in the future. We are unable to predict whether
and when any prospective business will become available or the likelihood that
any acquisition will be completed. We also may, in certain circumstances,
compete for businesses with entities that have substantially greater resources
than we do.
Potential Liabilities Associated with Acquisitions. The businesses that we
--------------------------------------------------
have acquired may have existing liabilities that we did not discover or may have
been unable to discover during our pre-acquisition investigation. These
liabilities may arise from environmental contamination or non-compliance by
prior owners with environmental laws or regulatory requirements. In addition,
environmental laws or regulatory requirements may change in the future with
retroactive effect. If that were to happen, we could have liabilities that
result from the conduct of prior owners of the property. Any indemnities or
warranties that we receive from prior owners may not fully cover such
liabilities due to their limited scope, amount or duration, the financial
limitations of the indemnitor or warrantor, or for other reasons. If we are
held responsible for liabilities from acquired businesses, our operations may be
materially adversely affected.
Development of New Products. We are developing new, genetically superior
---------------------------
forage and turfgrass varieties. We believe that the development and marketing
of these elite varieties will play a key role in our success. There can be no
assurance that we will successfully develop genetically superior strains either
through our own efforts or with industry partners. If we are not able to
develop and successfully market new product lines, our business, financial
condition and results of operations may be materially adversely affected. See
"Description of Business--Research and Development" in the Form 10-K.
Market Acceptance. Even if we are successful in developing genetically
-----------------
superior forage and turfgrass varieties, there can be no assurance that there
will be a market for such products. Even if a market for these products
develops, there can be no assurance that we will recoup the
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<PAGE>
costs associated with developing and marketing them. If we cannot effectively
market new products we develop at prices sufficient to cover costs and generate
adequate return on capital, our business, financial condition and results of
operations may be materially adversely affected.
Reliance on Patents and Proprietary Rights. We own the proprietary rights
------------------------------------------
to a number of forage and turfgrass species that are protected under the Plant
Variety Protection Act ("PVPA") and are seeking to acquire and/or develop other
PVPA protected varieties. The PVPA prohibits others from selling seed of
proprietary varieties for 20 years. However, these proprietary rights may be
challenged, invalidated or circumvented. In addition, others could claim that
products that we develop violate their proprietary rights. We may incur
substantial costs in asserting our proprietary rights against others, and/or
defending any infringement suits brought against us by others. The proprietary
rights we own may not provide us with a competitive advantage. It is also
possible that our competitors possess protected varieties that perform better
than ours. See "Description of Business--Proprietary Rights" in the Form 10-K.
Access to Biotechnology. Breakthroughs in biotechnology have led to the
-----------------------
introduction of new, improved and specialized seeds in the corn, soybean and
cotton seed sectors. By introducing specialized seeds developed through
biotechnology, companies in these seed sectors have improved margins and
increased profitability. We believe that similar biotechnology breakthroughs
will also lead to the introduction of enhanced seeds in the forage and turfgrass
seed sector. This in turn will allow improved margins and greater profitability
for forage and turfgrass seed companies. Our objective is to become the
licensee or partner of choice in our seed sector for owners of value-added
genetic traits developed through biotechnology. If we cannot license value-
added genetic traits, or if we cannot develop and market commercially viable
products from such licenses at prices sufficient to cover costs and generate
adequate return on capital, our business, financial condition and results of
operations may be materially adversely affected. See "Description of Business--
Proprietary Rights" in the Form 10-K.
Competition. The seed industry and the field of agricultural technology
-----------
are both highly competitive. The major agricultural seed companies in the
United States focus their sales around hybrid seed corn (Pioneer Hi-Bred
International, DEKALB Genetics Corporation, Novartis AG and Mycogen
Corporation), cotton seed (Delta and Pine Land Company) and other grain crops.
Each of these competitors has national brand name acceptance. In the past,
these companies have treated forage and turfgrass seeds as ancillary crops.
This is the opposite of our business strategy, which is to treat forage and
turfgrass seed as our primary product. Therefore, our major competitors in the
forage and turfgrass seed sector currently are large regional companies and
numerous small family seed businesses. However, any of the major agricultural
seed companies may decide to intensify their efforts in the forage and turfgrass
seed sector.
Our largest United States competitors in the alfalfa seed industry are
Cenex/Land O'Lakes/Research Seed, Helena/AgriPro, Pioneer and Cal/West Seeds,
each of which we estimate has annual alfalfa seed sales of between $20 and $60
million. Our largest competitors for forages other than alfalfa are FFR
Research and its farm cooperative members. We also
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compete with small family owned businesses that are strong competitors in small
geographic areas. In the cool-season turfgrass seed industry we compete with a
number of companies that have annual sales of between $20 and $80 million. Most
of these companies are regional companies with only Pennington Seed and O.M.
Scott having national brand name acceptance.
Although many of our competitors are small family owned businesses and
regional companies, any of the major agricultural seed companies may decide to
intensify their efforts in the forage and turfgrass seed sector. Accordingly we
compete with, and expect to continue to compete with, companies with
substantially greater financial, marketing, personnel and research and
development resources. We may not be able to compete successfully against such
companies. These competitive factors could have a material adverse effect on
the Company's business, results of operation and/or financial condition. See
"Description of Business--Competition" in the Form 10-K.
Lack of Historical Profitability; Accumulated Deficit. Over the life of
------------------------------------------------------
the Company, we have not shown consistent profitability. We have reported only
four profitable quarters since becoming a publicly owned company in September
1993 and Fiscal 1998 was our first profitable year. We had an accumulated
deficit of $11,704,613 through September 30, 1998.
Substantial Indebtedness; Effects of Financial Leverage. We have
-------------------------------------------------------
indebtedness that is substantial in relation to our stockholders' equity, and
interest and debt service requirements that are significant compared to our cash
flow from operations. As of September 30, 1998, we had an aggregate of
approximately $124 million of short-term debt and long-term obligations
outstanding. We have a revolving credit facility (the "Revolving Credit
Facility") under which we may incur up to $100 million of indebtedness (subject
to a borrowing base computation and compliance with certain financial
covenants). As of November 27, 1998, we have borrowed approximately $89.9
million under the Revolving Credit Facility and $4.0 million was available to be
borrowed.
The degree to which we are leveraged could have important consequences to
you. For example: (i) our level of indebtedness could make it more difficult to
satisfy our debt repayment obligations; (ii) our level of indebtedness could
increase our vulnerability to general adverse economic and industry conditions;
(iii) a substantial portion of our cash flow from operations must be dedicated
to debt service and is, therefore, not available for operations and other
purposes; (iv) our ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, research and development,
or general corporate purposes may be impaired; (v) our leverage position and
covenants contained in the Revolving Credit Facility could limit our ability to
expand, compete and make capital improvements; and (vi) our borrowings under
the Revolving Credit Facility are and will continue to be at variable rates of
interest, which exposes us to the risk of increased interest rates.
Our ability to pay interest on the Revolving Credit Facility and to satisfy
our other obligations depends upon our future financial and operating
performance. Our financial and operating performance may be affected by
prevailing economic conditions and financial,
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<PAGE>
business, competitive, regulatory and other factors that are beyond our control.
Our cash flow from operations has not been sufficient to meet our debt service
obligations without additional equity and debt financings. We may not have
sufficient funds in the future to meet our obligations under the Revolving
Credit Facility and any other indebtedness that we may incur. This is
particularly true as we continue to expand operations. If we are unable to
service our indebtedness, we will be forced to adopt an alternative strategy
that may include reducing or delaying capital expenditures, scaling back
expansion efforts, selling assets, restructuring or refinancing indebtedness or
seeking additional equity capital, including this offering. We may not be able
to implement any of these strategies on terms acceptable to us. See "MD&A."
Restrictions Imposed by Terms of Certain Indebtedness. The Revolving
-----------------------------------------------------
Credit Facility contains certain restrictive covenants that limit us in many
ways. These restrictive covenants may significantly limit or prohibit us from
incurring indebtedness, making prepayments of certain indebtedness, paying
dividends, making investments, engaging in certain transactions with affiliates,
creating liens, selling assets and engaging in mergers and corporate
consolidations. The Revolving Credit Facility also requires us to maintain
specified financial ratios and to satisfy certain financial condition tests.
Our ability to comply with these restrictions and to meet those financial
ratios and financial condition tests can be affected by events and factors
beyond our control (e.g., the general economy and the weather). A breach of any
of these covenants could constitute an event of default under the Revolving
Credit Facility.
Our obligations under the Revolving Credit Facility are secured by
substantially all of our assets, except fixed assets and real estate. If there
were an event of default under the Revolving Credit Facility, the lenders could
declare the total amount outstanding, together with accrued interest,
immediately due and payable. If this were to happen we might not be able to
repay the amount owed plus our other debt obligations. If we were unable to
repay those amounts, the lenders under the Revolving Credit Facility could
proceed to foreclose their security interest in the collateral securing the
indebtedness. See "MD&A."
Need for Additional Capital. Our capital requirements have been and are
---------------------------
expected to remain significant. Our capital requirements depend on many factors.
These factors include the timing and cost of future acquisitions, the time and
cost involved in integrating completed acquisitions, and our success at
expanding existing operations. We need the proceeds of this offering and other
capital to fund acquisitions and to repay $30 million principal amount of
interim bridge financings due at the end of 1998. We have reached an agreement
in principle, however, to extend repayment of $15 million of the bridge
financings to March 31, 1999. After the bridge financings are repaid we believe
that we will have funds available under the Revolving Credit Facility to fund
operations through June 30, 1999 for acquisitions completed through September
30, 1998. However, we may need to seek an increase in or an alternative to the
Revolving Credit facility to finance increased operating needs resulting from
unexpected changes in seasonality or weather patterns, or if acquisitions are
completed more rapidly than anticipated. If we are unable to obtain additional
capital, we will be unable to fund additional acquisitions and expand our
operations. In that case, we may have to delay or abandon certain development
and expansion plans. See "MD&A."
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<PAGE>
Dependence on Key Personnel. Our success depends in large part on the
---------------------------
efforts, abilities and expertise of Dr. Johnny R. Thomas, Chief Executive
Officer, and the four other executive officers. The loss of any of these key
personnel could have a material adverse effect on the Company's business,
financial condition and results of operations. We have obtained a key-man life
insurance policy in the amount of $3 million on the life of Dr. Thomas. Our
prospects also depend upon our ability to attract and retain qualified
marketing, financial, management information system, and other technical
personnel. Competition for qualified personnel is intense and there can be no
assurance that we will be successful in attracting or retaining such personnel.
See "Management" in the Form 10-K.
Cyclical Nature of Agricultural Products. Most agricultural products,
----------------------------------------
including forage and turfgrass seed, are commodities that are subject to wide
fluctuations in price based on supply and demand. Demand for seed by farmers is
determined by the general farm economy. In addition, a variety of nature's
adversities affect the production of seed. For example, drought, wind, hail,
disease, insects, early frost and numerous other forces could adversely affect
the growing of seed in any growing season. This, in turn, could result in large
fluctuations in our results of operations between quarters. See "MD&A--
Seasonality of Business and Quarterly Comparisons" in the Form 10-K.
Seasonality of Quarterly Results. Our sales are subject to wide seasonal
--------------------------------
fluctuations that reflect the typical purchasing and growing patterns for forage
and turfgrass crops. Also, because the purchasing and growing patterns are
different for forage and turfgrass seeds, our sales are affected by the
breakdown of our product mix. In addition, weather affects commodity prices,
seed yields and planting decisions by farmers. Results of operations from
quarter to quarter do not necessarily reflect the results that may be expected
for any other interim period. Quarterly results also do not indicate the
results that may be expected for the entire year. See "MD&A--Seasonality of
Business and Quarterly Comparisons" in the Form 10-K.
Government Regulation. Our operations are directly and indirectly subject
----------------------
to various Federal and state environmental controls and regulations. We believe
that we are in substantial compliance with existing environmental regulations.
However, these regulations may be changed with retroactive effect and new laws
or regulations may be promulgated at any time. If existing environmental
regulations are changed, or additional laws or regulations are promulgated, the
cost of complying with those laws may be substantial.
The United States Department of Agriculture, the Food and Drug
Administration, the Environmental Protection Agency (the "EPA"), and various
state agencies regulate the development of seed of genetically altered plants.
The regulatory agencies that administer existing or future regulations or
legislation may not allow us to produce and market genetically engineered seed.
Even if we are legally permitted to produce and market genetically engineered
seed, existing or future regulations and legislation may prevent us from doing
so in a timely manner or under technically or commercially feasible conditions.
See "Description of Business-Government Regulation" in the Form 10-K.
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Adverse Effect of Potential Future Sales of Common Stock. As of November
--------------------------------------------------------
30, 1998, we had 40,111,978 shares of Common Stock issued and outstanding. Of
these shares, approximately 6,640,000 shares are "restricted securities" as that
term is defined in Rule 144 under the Securities Act. All but approximately
1,000,000 of these restricted shares have been registered for resale under the
Securities Act. We also have approximately 8.9 million shares of Common Stock
available for issuance without restriction upon exercise of outstanding options.
We cannot predict what effect sales of these shares may have on the existing
market price of our Common Stock. It is possible that the sale of these shares,
or even the potential for such sales, may have a depressive effect on the price
of our Common Stock in the public trading market. Any such depressive effect
could impair the Company's ability to raise additional equity capital.
Public Market Risks; Possible Volatility of Securities Prices. The market
-------------------------------------------------------------
price for our securities has been and may continue to be volatile. Factors such
as our financial results, financing efforts, changes in earnings estimates by
analysts, conditions in our business and various factors affecting the
agriculture industry generally may have a significant impact on the market price
of our securities. Additionally, in the last several years, the stock market
has experienced a high level of price and volume volatility. During this period
the market prices for many companies, particularly small and emerging growth
companies like ours, have experienced wide price fluctuations and volatility
that have not necessarily been related to the operating performance of those
companies. Our operating results are also tracked by professional analysts. If,
in some future quarter, our operating results are below the expectations of
these analysts, the price of our securities may be materially adversely
affected. These factors and general economic and market trends may adversely
affect the price of our securities. See "Market for Common Equity and Related
Stockholder Matters" in the Form 10-K.
Immediate Substantial Dilution. Net tangible book value per share is equal
------------------------------
to the total tangible assets of a company less total liabilities divided by the
number of shares of common stock outstanding. Because our present stockholders
acquired their shares of Common Stock at costs substantially less than the price
that you will pay in this offering, if you purchase Common Stock in this
offering, you will incur an immediate and substantial dilution in pro forma net
tangible book value per share. This means that the net tangible book value per
share of our Common Stock is less than the price you paid.
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Management Information Systems and the Year 2000 Risks. Because of the
------------------------------------------------------
large number of businesses we have acquired, we have several different data
processing systems in use. These systems are substantially the same systems
that were in use by the acquired companies prior to their acquisition by ABT.
Our preliminary assessment of these systems is that they generally are not Year
2000 compliant. Local area networks (LANs), desktop hardware, and desktop
operating systems in some cases also are not compliant. Although we have
determined that some of the non-compliant systems can be updated to be
compliant, a number of them can not be updated because of software and hardware
limitations.
To address this issue and integrate all our information systems into one
company-wide system, we have contracted for software, hardware and consulting
services to implement an enterprise resource planning ("ERP") system. The ERP
system and related network and hardware systems are Year 2000 compliant. All
non-compliant desktop and LAN systems will be converted either through normal
attrition or through the ERP system implementation. We expect the cost of this
implementation to be approximately $6 million, including internal costs for
personnel, training, supplies, travel and equipment. We believe that we have
allocated adequate resources to ensure that all our information systems are Year
2000 compliant. We expect to complete the ERP system implementation prior to
January 1, 2000.
The ability of third parties with whom we do business to adequately address
their Year 2000 issues is outside of our control. We are taking steps to
confirm that the systems of our suppliers and customers are Year 2000 compliant
and to determine whether any noncompliance would have a material adverse effect
on us. If we cannot complete the ERP system implementation before January 1,
2000, or if a significant portion of our suppliers or customers fail to
adequately address their Year 2000 issues, our business, financial condition,
cash flows and operations may be materially adversely affected. See "MD&A."
USE OF PROCEEDS
The Company will use the net proceeds from this offering for working
capital and to reduce the balance due under the Company's short-term
indebtedness, including the $15 million bridge loan due December 31, 1998 under
its Revolving Credit Facility. As of November 27, 1998 the Company had borrowed
approximately $89.9 million, including the bridge loan, under its Revolving
Credit Facility. Such debt has interest at an average rate of 9.97%.
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PRICE RANGE OF COMMON STOCK
The Company's Common Stock has traded on the Nasdaq National Market since
February 14, 1997, under the symbol "ABTX."
The following table sets forth the high and low closing prices for the
Common Stock for each quarter in Fiscal 1997 and Fiscal 1998, on the Nasdaq
SmallCap Market until February 13, 1997 and on the Nasdaq National Market
thereafter.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
FISCAL 1997
July 1, 1996-September 30, 1996........ $ 4 1/16 $ 2 5/32
October 1, 1996-December 31, 1996...... $ 2 3/16 $ 2 1/32
January 1, 1997-March 31, 1997......... $ 3 3/8 $ 2 1/16
April 1, 1997-June 30, 1997............ $ 6 15/16 $ 2 15/32
FISCAL 1998
July 1, 1997-September 30, 1997........ $10 1/2 $ 6 1/32
October 1, 1997-December 31, 1997...... $17 1/16 $ 9
January 1, 1998-March 31, 1998......... $19 3/32 $13 7/16
April 1, 1998-June 30, 1998............ $29 $13 3/4
FISCAL 1999
July 1, 1998-September 30, 1998........ $25 3/4 $ 8 1/8
October 1, 1997-November 30, 1998...... $17 3/16 $ 8 15/16
</TABLE>
As of November 30, 1998, the Company had 479 record holders of its Common
Stock and reasonably believes, based on information from shareholder mailing
services, that there are in excess of 20,000 beneficial holders of its Common
Stock.
DIVIDEND POLICY
The Company has never declared or paid any dividends on its Common Stock.
The Company and its Board of Directors currently intend to retain any earnings
for use in the operation and expansion of the Company's business and do not
anticipate paying any dividends on the Common stock for the foreseeable future.
The Company's Revolving Credit Facility prohibits the payment of cash dividends
without the lenders' approval.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED
The authorized capital stock of the Company consists of 75,000,000
shares of Common Stock, $.001 par value, and 10,000,000 shares of preferred
stock, $.001 par value ("Preferred Stock").
COMMON STOCK
The Company is authorized to issue 75,000,000 shares of Common Stock,
$.001 par value per share, of which 40,111,978 shares were issued and
outstanding as of November 30, 1998. All of the outstanding shares of Common
Stock and those issuable upon completion of this offering, are and will be, duly
authorized, validly issued, fully paid and non-assessable. Holders of shares of
Common Stock are entitled to one vote for each share held of record on all
matters to be voted on by shareholders. There are no preemptive, subscription,
conversion or redemption rights pertaining to the Common Stock. Holders of
shares of Common Stock are entitled to receive such dividends as may be declared
on Common Stock by the Board of Directors out of funds legally available
therefor and to share ratably in the assets of the Company available upon
liquidation subject to rights of creditors and any shares of Preferred Stock.
The holders of shares of Common Stock do not have the right to cumulate their
votes in the election of directors and, accordingly the holders of more than 50%
of all the Common Stock outstanding are able to elect all directors. The current
officers and directors beneficially held 5,107,975 (12.7%) of the shares
outstanding and 7,762,975 shares or (16.2%), after giving full effect to the
exercise of their respective options exercisable within 60 days of November 30,
1998.
PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of Preferred
Stock, $.001 par value per share. As of the date hereof, the Company had no
shares of Preferred Stock issued and outstanding.
The Preferred Stock may be divided by the Company's Board of Directors
from time to time into one or more series. The Board of Directors is authorized
to determine the rights, preferences, privileges and restrictions, including the
dividend rights, conversion rights, voting rights, terms of redemption
(including sinking fund provisions, if any) and liquidation preferences, of any
series of Preferred Stock and to fix the number of shares of any such series
without any further vote or action by stockholders. The Company has no present
plans,
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proposals, commitments or arrangements to issue any additional shares of
Preferred Stock. The Company's Certificate of Incorporation authorizes the
issuance of Preferred Stock with such designations, rights, and preferences as
may be determined from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue
Preferred Stock with dividend, liquidation, conversion, voting or other rights
that could adversely affect the voting power or other rights of the holders of
the Common Stock. Although the Preferred Stock may be used for any lawful
purpose, the Company has agreed not to use it as an anti-takeover device that
could be utilized as a method of discouraging, delaying or preventing a change
in control of the Company without the approval of the Company's stockholders.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Company's Common Stock is
Corporate Stock Transfer, Inc., Denver, Colorado.
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PLAN OF DISTRIBUTION
All of the Shares being offered by this Prospectus Supplement are being
sold by the Company to the investors who purchased the Shares from the Company
on December 4 and 7, 1998, pursuant to Securities Purchase Agreements to sell an
aggregate of 850,000 shares of Common Stock. We sold 250,000 Shares to the State
of Wisconsin Investment Board. We also sold 300,000 Shares and 300,000 Warrants
to LBI Group Inc., 40,000 Shares and 40,000 Warrants to Brown Simpson Strategic
Growth Fund, L.P. and 260,000 Shares and 260,000 Warrants to Brown Simpson
Strategic Growth Fund, Ltd. The Shares have been registered pursuant to the
Company's Registration Statement on Form S-3 (No. 333-61127) of which the
Prospectus Supplement forms a part. Accordingly, the Shares that will be issued
hereunder are freely tradeable and may be resold by the investors without
restriction. The shares issuable upon exercise of the Warrants will be
registered in a separate registration statement.
The investors and/or their assignees, transferees, intermediaries,
donees, pledgees or other successors in interest through whom the investors
Shares are sold may be deemed "underwriters" within the meaning of Section 2(11)
of the Securities Act, with respect to the Shares offered and any profits
realized or commissions received may be deemed to be underwriting compensation.
Any broker-dealers that participate in the distribution of the Shares also may
be deemed to be "underwriters," as defined in the Securities Act, and any
commissions, discounts, concessions or other payments made to them, or any
profits realized by them upon the resale of the Shares purchased by them as
principals, may be deemed to be underwriting commissions or discounts under the
Securities Act.
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COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
issuer pursuant to the foregoing provisions or otherwise, the Company has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon by Snow Becker Krauss P.C., 605 Third Avenue, New York, New York
10158. Snow Becker Krauss P.C. owns 43,823 shares of the Company's Common Stock
and individual members of the firm own additional shares of Common Stock.
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