<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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 22, 1999
----------------
AgriBioTech, Inc.
------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Nevada 0-19352 85-0325742
-------------- -------------- ----------------
(State or Other Jurisdiction (Commission File Number) (IRS Employer Ident. No.)
of Incorporation)
</TABLE>
120 Corporate Park Drive, Henderson, Nevada 89014
---------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(702) 566-2440
-------------------------------------------
Registrant's telephone number, including area code
N/A
-------------------------------------------------------
(Former Address, If Changed Since Last Report)
<PAGE>
Item 5. Other Events
------------
A. On January 22, 1999, AgriBioTech, Inc., a Nevada corporation (the
"Registrant"), completed the acquisition of 100% of the issued and outstanding
share capital of HybriGene, LLC, an Indiana limited liability company, from
Thomas K. Hodges, Halina K. Hodges, individuals, and Bill L. Rose, LLC, an
Oregon limited liability company, pursuant to the terms of a Stock Purchase
Agreement dated January 22, 1999. HybriGene, LLC has been engaged in
research and development concerning the use of genetic technology in the farming
industry.
HybriGene, LLC has an extensive patent estate involving site specific
recombination technology originally developed at Purdue University. In
addition, as part of the transaction, ABT acquired exclusive, worldwide rights
to use the technology in all crops, species, applications and geographies. As
part of this agreement, ABT has formed a broad research alliance with Pure Seed
Testing for development of transgenic bentgrass, bluegrass and other turf
species using both parties germplasm.
The aggregate purchase price was $11.5 million, paid as follows: Thomas and
Halina Hodges - $9.5 million in the form of 515,000 shares of Registrant's
common stock; Bill L. Rose, L.L.C. - $100,000 in cash and $1.9 million in the
form of 103,012 shares of Registrant's common stock. The shares of common
stock are being registered for resale under the Company's shelf registration
statement on Form S-4 and may be resold, subject to the terms of Lock-Up
Agreements between Thomas and Halina Hodges and Registrant and Bill L. Rose,
L.L.C. and Registrant. In addition, Bill L. Rose, L.L.C. was granted 35,000
options to purchase common stock of Registrant, which vest at various times over
the next two years, at $12.063 (the closing market price on the date of the
Closing) and may be exercised, after vesting, at any time until January 22,
2004.
B. On Februrary 1, 1999, the Registrant announced that, as a result of the
shift in Company focus to integration and operations, it is making changes in
both the makeup and size of its Board of Directors. Two senior managers have
been appointed to the Board of Directors and the Company has launched a search
to add three additional outside members to the Board, which will create a new,
nine-person Board with a majority being outside Directors. Dr. Tom Rice, Vice
President, Director of Research, and Randy Ingram, Vice President, Chief
Financial Officer (CFO), Director of Business Development joined the Company's
Board as Directors, effective February 1, 1999. Rice and Ingram have replaced
John Francis and Scott Loomis, members of the founder management team and former
Vice Presidents of the Company. Both Francis and Loomis will remain with the
Company in their current positions, Francis as Investor Relations Director and
Loomis as Director of Mexico operations, however, not as officers or Directors.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(a) Financial Statements of Business Acquired - The financial statements of
HybriGene LLC are voluntarily being filed on this Form 8-K, along with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(b) Pro Forma Financial Information - The pro forma financial statements of
HybriGene LLC are voluntarily being filed on this Form 8-K.
(c) Exhibits
23.1 Consent of Huth Thompson LLP
-2-
<PAGE>
SIGNATURE
---------
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.
AGRIBIOTECH, INC.
(Registrant)
Date: February 5, 1999 /s/ Henry A. Ingalls
--------------------------
Henry A. Ingalls,
Vice President
-3-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Partners
HybriGene, LLC
Lafayette, Indiana
We have audited the accompanying balance sheet of HybriGene, LLC as of
December 31, 1998, and the related statement of operations and partners'
capital, and statement of cash flows for the year ended December 31, 1998. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of HybriGene, LLC as of December
31, 1998, and the results of its operations and its cash flows for the period
then ended, in conformity with generally accepted accounting principles.
Huth Thompson LLP
January 27, 1999
- ----------------
Lafayette, Indiana
-1-
<PAGE>
HYBRIGENE, LLC
BALANCE SHEET
As of December 31, 1998
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash $ 2,076
Grant Receivable (Note 2) 25,245
------------
TOTAL CURRENT ASSETS 27,321
INVESTMENTS (Note 3) 321,068
PROPERTY AND EQUIPMENT (Note 4)
Laboratory Equipment 69,935
Office Equipment 9,318
Leasehold Improvements 6,804
------------
86,057
Accumulated Depreciation (5,857)
------------
80,200
OTHER ASSETS
Prepaid Expenses 2,071
Option Agreement (Note 5) 41,814
Organizational Costs (Net of Amortization of $200) 1,514
------------
45,399
------------
$ 473,988
============
LIABILITIES
CURRENT LIABILITIES
Accounts Payable $ 12,007
Deposit (Note 6) 258,760
Accrued Liabilities--
Payroll Taxes 6,552
------------
TOTAL CURRENT LIABILITIES 277,319
PARTNERS' CAPITAL
CAPITAL
Partners' Capital (Note 7) 196,669
------------
$ 473,988
============
</TABLE>
See Notes to Financial Statements.
-2-
<PAGE>
HYBRIGENE, LLC
STATEMENT OF OPERATIONS AND PARTNERS' CAPITAL
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
REVENUE
SBIR Grant $ 55,000
EXPENSES
Wages & Salaries 70,119
Payroll Taxes 6,084
Insurance 6,696
Travel & Meals 3,497
Rent 9,605
Office Supplies 10,606
Utilities 2,435
Accounting Fees 4,762
Legal & Consulting Fees 45,861
Marketing Fees & Supplies 3,936
Shipping, Postage & Printing 1,037
Miscellaneous 160
-----------
164,798
-----------
OPERATING (LOSS) (109,798)
OTHER INCOME
Interest 2,524
OTHER EXPENSES
Depreciation 5,857
Amortization 200
-----------
6,057
-----------
NET (LOSS) (113,331)
BEGINNING CAPITAL--January 1, 1998 5,000
CAPITAL CONTRIBUTION (Note 7) 305,000
-----------
PARTNERS' CAPITAL--December 31, 1998 $ 196,669
===========
</TABLE>
See Notes to Financial Statements.
-3-
<PAGE>
HYBRIGENE, LLC
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Net (Loss) $(113,331)
Adjustments to Reconcile Net (Loss) to Net Cash
Provided by Operating Activities--
Depreciation 5,857
Amortization 200
(Increase) Decrease in Current Assets--
Grant Receivable (25,245)
Prepaid Expenses (2,071)
Option Agreement (41,814)
Increase (Decrease) in Current Liabilities--
Accounts Payable 12,007
Accrued Liabilities 6,552
Deposit 258,760
-----------------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES 100,915
CASH FLOWS FROM INVESTING ACTIVITIES
(Purchases) of Property and Equipment (86,057)
(Increase) in Organizational Costs (1,714)
Net (Increase) in Investment Securities (321,068)
-----------------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (408,839)
CASH FLOWS FROM FINANCING ACTIVITIES
Partners' Contributions 305,000
-----------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,924)
CASH AND CASH EQUIVALENTS--Beginning of Period 5,000
-----------------
CASH AND CASH EQUIVALENTS--End of Period $ 2,076
=================
</TABLE>
See Notes to Financial Statements.
-4-
<PAGE>
HYBRIGENE, LLC
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE 1: ORGANIZATION
Business Activity and Organization--HybriGene, LLC (the Company) was
----------------------------------
organized under the laws of the state of Indiana in March 1997. The
Company's only activity prior to January 1, 1998, consisted of
organizational costs. The Company is a plant genetic engineering
company that develops hybrid and engineered seeds for a worldwide
market.
NOTE 2: GRANT RECEIVABLE
The Company was awarded a SBIR grant of $55,000 from the United States
Department of Agriculture in 1997. Partial payments have been made in
1998. Final payment is in process.
NOTE 3: INVESTMENTS
In accordance with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities,
investments are classified as trading securities and are stated at fair
market value at December 31, 1998.
Money Market $ 62,308
Common Stock 258,760
---------
Fair Market Value $ 321,068
=========
NOTE 4: PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided for
in amounts sufficient to relate the cost of depreciated assets to
operations over their estimated service lives using the straight line
method and accelerated depreciation methods, which are followed for all
assets for both financial reporting and tax purposes. Maintenance,
repairs, and minor renewals are charged to operations as incurred.
Improvement and major renewals are capitalized. Upon sale or
disposition, the asset account is relieved of the cost, and the
accumulated depreciation account is charged with depreciation taken
prior to the sale. Any resultant gain or loss is credited or charged to
operations.
-5-
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE 5: OPTION AGREEMENT
The balance represents payments made by the Company per the option
agreement dated March 31, 1998 with Purdue Foundation (the Foundation),
which grants the Company the option to obtain an exclusive worldwide
royalty bearing license for use of technology owned by the Foundation.
This cost represents approximately 50% of the estimated costs to
complete the agreement with the Foundation.
NOTE 6: DEPOSIT
The balance represents a certain publicly traded stock held by the
Company in their investment account. This stock is being held for a
future transaction which has not been completed at the date of this
financial statement. This liability is equal to the value reported in
the investment account.
NOTE 7: CAPITAL CONTRIBUTION
A new 25% partner was admitted during August, 1998 with an initial
contribution to capital of $300,000. The agreement calls for additional
future contributions by the new partner totaling $5,700,000.
NOTE 8: SUBSEQUENT EVENTS
Subsequent to the balance sheet date, the members have agreed to sell
their interest in the Company. These negotiations are in progress at
the date of this report.
-6-
<PAGE>
AGRIBIOTECH, INC.
Pro Forma Combined Financial Information
(Unaudited)
The following pro forma combined summary of operations combines the results of
operations of AgriBioTech, Inc. ("ABT"), Lofts Seed, Inc. and Budd Seed, Inc.
(collectively "Lofts"), Seed Corporation of America and Green Seed Company
Limited Partnership (collectively "SeedCo"), Oseco Inc. ("Oseco"), Allied Seed
Division of Agway, Inc. ("Allied"), HybriGene LLC ("HybriGene") and other
individually insignificant acquisitions since July 1, 1997 (collectively "Other
Acquisitions") as if all acquisitions occurred at the beginning of the periods
presented. The pro forma combined summary of operations reflects known changes
resulting from the acquisitions but does not reflect impacts of any changes in
operations, anticipated efficiencies and synergies from consolidation.
The pro forma combined summary balance sheet as of September 30, 1998 reflects
ABT's consolidated balance sheet as of September 30, 1998 combined with the
balance sheet of HybriGene, as if such acquisition occurred as of September 30,
1998.
The pro forma combined financial information does not purport to represent what
ABT's financial position or results of operations would actually have been if
such transactions had, in fact, occurred on the above dates and are not
necessarily representative of any future period. The pro forma adjustments are
based on preliminary estimates, available information, and certain assumptions
that management deems appropriate and may be revised as additional information
becomes available. The pro forma combined financial information should be read
in conjunction with the historical financial statements of ABT, Lofts, SeedCo,
Oseco, Allied, and HybriGene included herein or previously filed with the
Securities and Exchange Commission.
-7-
<PAGE>
AGRIBIOTECH, INC. ("ABT");
Pro Forma Combined Summary of Operations
(Unaudited)
Year ended June 30, 1998
<TABLE>
<CAPTION>
ABT (A) Lofts (A) SeedCo (A) Oseco (A)
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $205,117,007 $39,022,000 $16,401,233 $10,898,808
Cost of sales 157,796,888 28,315,773 12,693,089 7,303,517
------------ ----------- ----------- -----------
Gross profit 47,320,119 10,706,227 3,708,144 3,595,291
Operating expenses 47,579,105 10,318,757 4,048,483 2,845,695
------------ ----------- ----------- -----------
Income (loss) from operations (258,986) 387,470 (340,339) 749,596
Other income (expense) (2,261,273) (679,000) 295,005 -
------------ ----------- ----------- -----------
Earnings (loss) before income taxes (2,520,259) (291,530) (45,334) 749,596
Income tax expense (benefit) (2,907,500) - - 407,468
------------ ----------- ----------- -----------
Net earnings (loss) 387,241 (291,530) (45,334) 342,128
Discount and imputed dividends on
preferred stock 84,100 - - -
------------ ----------- ----------- -----------
Net earnings (loss) attributable to
common stock $ 303,141 $ (291,530) $ (45,334) $ 342,128
============ =========== =========== ===========
Shares of common stock used in
computing loss per share:
Basic 30,077,693
Diluted 32,061,546
===========
Net earnings (loss) per common share:
Basic $ 0.01
Diluted 0.01
===========
<CAPTION>
Other
Allied Seed (A) Acquistions (A) Adjustments
--------------- --------------- -------------
<S> <C> <C> <C>
Net sales $22,424,452 $152,243,298 $(16,984,670) (E)
(19,651,448) (L)
Cost of sales 19,244,757 123,343,749 (16,984,670) (E)
27,152 (G)
150,000 (E)
(15,466,463) (L)
----------- ------------ ------------
Gross profit 3,179,695 28,899,549 (4,362,137)
Operating expenses 1,740,747 29,092,493 5,456,723 (B)
(3,867,216) (F)
(709,000) (H)
(4,128,255) (L)
----------- ------------ ------------
Income (loss) from operations 1,438,948 (192,944) (1,114,389)
Other income (expense) (297,360) 296,976 (2,383,571) (C)
(75,454) (L)
----------- ------------ ------------
Earnings (loss) before income taxes 1,141,588 104,032 (3,573,414)
Income tax expense (benefit) 455,330 71,209 (934,007) (I)
----------- ------------ ------------
Net earnings (loss) 686,258 32,823 (2,639,407)
Discount and imputed dividends on
preferred stock - - -
----------- ------------ ------------
Net earnings (loss) attributable to
common stock $ 686,258 $ 32,823 $ (2,639,407)
=========== ============ ============
Shares of common stock used in
computing loss per share:
Basic 7,708,364 (D)
Diluted 7,708,364 (D)
(1,983,853) (D)
============
Net earnings (loss) per common share:
Basic
Diluted
<CAPTION>
Pro Forma Pro Forma
combined Hybrigene (A) Adjustments combined
------------ -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $409,470,680 $29,755 $409,500,435
Cost of sales 316,423,792 - 316,423,792
------------ ------- ---------- ------------
Gross profit 93,046,888 29,755 - 93,076,643
Operating expenses 92,377,532 22,764 474,633 (B) 92,874,929
------------ ------- ---------- ------------
Income (loss) from operations 669,356 6,991 (474,633) 201,714
Other income (expense) (5,104,677) 182 (8,500) (C) (5,112,995)
------------ ------- ---------- ------------
Earnings (loss) before income taxes (4,435,321) 7,173 (483,133) (4,911,281)
Income tax expense (benefit) (2,907,500) (2,907,500)
------------ ------- ---------- ------------
Net earnings (loss) (1,527,821) 7,173 (483,133) (2,003,781)
Discount and imputed dividends on
preferred stock 84,100 - 84,100
------------ ------- ---------- ------------
Net earnings (loss) attributable to
common stock $ (1,611,921) $ 7,173 $(483,133) $ (2,087,881)
============ ======= ========= ============
Shares of common stock used in
computing loss per share:
Basic 37,786,057 618,012 (D) 46,112,433
Diluted 37,786,057 618,012 (D) 46,112,433
============ ========= ============
Net earnings (loss) per common share:
Basic $ (0.04) $ (0.05)
Diluted (0.04) (0.05)
============ ============
</TABLE>
See accompanying notes to pro forma combined financial information.
-8-
<PAGE>
AGRIBIOTECH, INC. ("ABT");
Pro Forma Combined Summary of Operations
(Unaudited)
Three months ended September 30, 1998
<TABLE>
<CAPTION>
Other
ABT (M) Oseco (M) Allied Seed (M) Acquistions (M)
----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $89,601,608 $946,770 $ 727,025 $6,941,068
Cost of sales 65,830,110 591,763 707,795 5,968,985
----------- -------- --------- ----------
Gross profit 23,771,498 355,006 19,231 972,083
Operating expenses 21,225,289 408,125 363,815 1,582,196
----------- -------- --------- ----------
Income (loss) from operations 2,546,209 (53,119) (344,585) (610,113)
Other income (expense): (1,871,349) - (41,437) (239,014)
----------- -------- --------- ----------
Earnings (loss) before income taxes 674,860 (53,119) (386,022) (849,127)
Income tax expense (benefit) 341,634 -
----------- -------- --------- ----------
Net earnings (loss) 333,226 (53,119) (386,022) (849,127)
Discount and imputed dividends on
preferred stock -
----------- -------- --------- ----------
Net
earnings
(loss)
attributable to
common stock $ 333,226 $(53,119) $(386,022) $ (849,127)
=========== ======== ========= ==========
Shares of common stock used in
computing loss per share:
Basic 38,086,413
Diluted 41,328,601
===========
Net earnings (loss) per common share:
Basic $0.01
Diluted 0.01
===========
<CAPTION>
Pro Forma Pro Forma
Adjustments combined Hybrigene (M) Adjustments combined
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ (499,683) (E) 96,707,243 $25,245 $96,732,488
(1,009,545) (L)
Cost of sales (499,683) (E) 71,692,010 - 71,692,010
(906,960) (L)
----------- ----------- ------- --------- -----------
Gross profit (102,585) 25,015,233 25,245 - 25,040,478
Operating expenses 262,657 (B) 23,358,022 33,616 115,731 (B) 23,507,369
(19,000) (F)
(465,060) (M))
----------- ----------- ------- --------- -----------
Income (loss) from operations 118,819 1,657,211 (8,371) (115,731) 1,533,109
Other income (expense): (460,691) (C) (2,546,857) 1,104 (2,898) (C) (2,548,650)
65,635 (L)
------------ ----------- ------- --------- -----------
Earnings (loss) before income taxes (276,238) (889,646) (7,267) (118,628) (1,015,541)
Income tax expense (benefit) (341,634) (I) - -
----------- ----------- ------- --------- -----------
Net earnings (loss) 65,396 (889,646) (7,267) (118,628) (1,015,541)
Discount and imputed dividends on
preferred stock - - - -
----------- ----------- ------- --------- -----------
Net earnings (loss) attributable to
common stock $ 65,396 $ (889,646) $(7,267) $(118,628) $(1,015,541)
=========== =========== ======= ========= ===========
Shares of common stock used in
computing loss per share:
Basic 331,492 (D) 38,417,905 618,012 (D) 39,035,917
Diluted 331,492 (D) 38,417,905 618,012 (D) 39,035,917
(3,242,188) (D)
=========== =========== ========= ===========
Net earnings (loss) per common share:
Basic $ (0.02) $ (0.03)
Diluted (0.02) (0.03)
=========== ===========
</TABLE>
-9-
<PAGE>
AGRIBIOTECH, INC. ("ABT");
Pro Forma Combined Balance Sheet
(Unaudited)
September 30, 1998
<TABLE>
<CAPTION>
Pro Forma
ABT (J) Hybrigene (J) Adjustments Combined
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,122,560 $185,570 $ - $ 1,308,130
Accounts receivable 74,802,573 - 74,802,573
Deferred income taxes 1,445,088 - 1,445,088
Inventories 81,786,992 - 81,786,992
Other 13,429,906 25,245 - 13,455,151
------------ ----------- ----------- ------------
Total current assets 172,587,119 210,815 - 172,797,934
Property, plant and equipment, net 61,278,908 61,619 - 61,340,527
Intangible assets, net of accumulated amortization 149,578,756 11,235,594 (K) 160,814,350
Investment in associated entity, at equity 856,882 856,882
Other 1,336,977 43,413 (100,000) (K) 1,280,390
------------ ----------- ----------- ------------
Total assets $385,638,642 $315,847 $11,135,594 $397,090,083
============ =========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $104,800,647 $104,800,647
Current installments of long-term obligations 3,544,153 - 3,544,153
Accounts payable 48,027,622 5,941 - 48,033,563
Accrued liabilites 11,819,546 45,500 (K) 11,865,046
------------ ----------- ----------- ------------
Total current liabilities 168,191,968 5,941 45,500 168,243,409
Long-term obligations, excluding current installments 16,114,520 - 16,114,520
Deferred income taxes 2,665,050 - 2,665,050
------------ ----------- ----------- ------------
Total liabilites 186,971,538 5,941 45,500 187,022,979
------------ ----------- ----------- ------------
Stockholders' equity:
Preferred stock - - - -
Common stock 39,412 310,000 (309,382) (K) 40,030
Capital in excess of par value 210,332,305 11,399,382 (K) 221,731,687
Accumulated (deficit) (11,704,613) (94) 94 (K) (11,704,613)
------------ ----------- ----------- ------------
Total stockholders' equity 198,667,104 309,906 11,090,094 210,067,104
------------ ----------- ----------- ------------
Total liabilities and
stockholders' equity $385,638,642 $315,847 $11,135,594 $397,090,083
============ =========== =========== ===========
</TABLE>
See accompanying notes to pro forma combined financial information.
-10-
<PAGE>
AGRIBIOTECH, INC.
Notes to Pro Forma Combined Financial Information
(Unaudited)
(A) The year ended June 30, 1998 for ABT includes the operations of Lofts and
SeedCo for the period from January 1, 1998 through June 30, 1998, and the
operations of certain of the Other Acquisitions for the period from their
respective acquisition dates through June 30, 1998. The amounts under the
Lofts and SeedCo columns are for the six-month period ended December 31,
1997. The amount in the Oseco, Allied, and HybriGene columns are for the
twelve-month period ended June 30, 1998. The amounts in the Other
Acquisitions column include such acquisitions for periods not included in
the ABT column. The amounts for Lofts include its affiliates with
intercompany transactions having been eliminated.
(B) To reflect depreciation of property, plant and equipment and amortization
of intangible assets based on market value adjustments in connection with
applying purchase accounting. Intangible assets resulting from the
application of purchase accounting include goodwill (amortized over 10 to
40 years, with a weighted average of 27 years) and covenants not to compete
(amortized over 6 to 10 years).
(C) To adjust interest expense for the cash purchase price of the acquisitions.
The pro forma amounts assume that payments required to be made in the
acquisitions would be obtained through approximately $83.2 million of
proceeds from the sale of the Company's common stock in private placement
transactions from December 1997 through August 1998 and the balance of
$30.3 million from the Company's existing or similar short-term credit
facilities. Interest expense was computed using an average interest rate
of 8.5% for the year ended June 30, 1998 and 11.6% for the three months
ended September 30, 1998.
(D) To reflect the impact on average shares outstanding of shares of ABT common
stock issued in connection with the acquisitions (3,066,973 for the year
ended June 30, 1998 and 670,974 for the three months ended September 30,
1998) and private placements (5,259,403 for the year ended June 30, 1998
and 278,530 for the three months ended September 30, 1998) of the Company's
common stock as if they had been outstanding for the entire period. The
dilutive impacts of options and warrants included in ABT's historical
operations has been eliminated since there is a loss on a pro forma basis.
(E) To eliminate intercompany sales and other revenue.
(F) Prospective reductions in compensation of former owners of acquired
entities, employee benefits, management fees, and property rent resulting
from employment agreements, property purchased directly from former owners
and other contractual arrangements entered into in connection with
acquisitions.
(G) Impact of using the first-in, first-out method of accounting for inventory
accounted for using the last-in, first-out method prior to acquisition.
(H) Acquisition costs expensed by acquired entities that are not applicable to
ongoing operations.
(I) Reflects adjustment to income taxes on pro forma combined loss before
income taxes adjusted for nondeductible goodwill amortization.
(J) The consolidated balance sheet of ABT as of September 30, 1998 includes the
accounts of Lofts, SeedCo, Oseco, Allied, and the Other Acquisitions.
The amounts under the HybriGene columns reflect their accounts as of
September 30, 1998.
-11-
<PAGE>
(K) To reflect the application of purchase accounting to the HybriGene
acquisition. The total purchase price of $11.5 million was to be paid
through the issuance of 618,012 shares of the Company's common stock valued
at approximately $11.4 million and cash of $0.1 million.
(L) To eliminate the operations of the fertilizer division of Willamette Seed
Company that when purchased on August 21, 1998 was intended to be sold and
was sold in December 1998.
(M) The three months ended September 30, 1998 for ABT includes the operations
of Lofts and SeedCo for the entire period, the operations of Allied from
August 28, 1998 through September 30, 1998, the operations of Oseco from
September 1, 1998 through September 30, 1998, and the operations of Other
Acquisitions for the period from their respective acquisition dates through
September 30, 1998. The amounts in the Oseco, Allied and Other Acquisitions
columns include such acquisitions for periods from July 1, 1998 through
their respective acquisition dates. The amounts under the HybriGene column
are for the three month period ended September 30, 1998
-12-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Hybrigene, LLC (the "Company") is a newly formed biotechnology company with an
extensive patent estate involving site specific recombination technology
originally developed at Purdue University. Included in the technology are four
promoters, DNA sequences used to "turn on" genes by providing a gene with
instructions regarding when in development and where in the plant they will be
active. This technology can be used to develop male sterility in plants i.e.
not capable of reproduction because no viable pollen is produced. It can also
be used to develop an alternative way of regulating gene activity. This
technology has the potential for the production of specialty chemicals in plants
such as pharmaceuticals, industrial compounds such as plastics, industrial
enzymes, etc.
In January 1999, the owners of the Company sold all of the equity ownership of
the Company to AgriBioTech, Inc.
See the Company's financial statements for information required to be presented
in Selected Financial Data.
Capital Resources and Liquidity
Since inception the capital resources of the Company have been provided by the
partners. The capital has been used primarily to fund research and development
costs. In August 1998, the Company admitted a 25 percent partner with an
initial contribution to capital of $300,000. Future operations of the Company,
including accounts payable, an office lease and patent royalties, are expected
to be funded by the combined entity.
Results of Operations
For the year ended December 31, 1998 the Company incurred a loss of $109,798.
The loss consists primarily of wages and salaries, legal fees and supplies
associated with research and development of the recombination technology in the
initial stages of the Company's operation. The research and development costs
were partially offset by a $55,000 Small Business Innovations Research (SBIR)
grant from the U. S. Department of Agriculture. The Company anticipates that
its operating expenses will increase significantly in the future commensurate
with increased levels of research and development.
Quantitative and Qualitative Disclosures About Market Risk
As a newly formed entity, the Company has not yet been subject to the variety of
market risks (including, but not limited to, interest rate movements and
collectibility of accounts receivable) that it may be subjected to in the normal
course of business in the future. The Company has no derivative financial
instruments or derivative commodity instruments, nor does the Company have any
financial instruments entered into for trading purposes. The Company's
financial instruments are not subject to significant foreign currency exchange
risk, commodity price risk, or equity price risk. The Company anticipates it
will routinely monitor such risks in the future and take actions to protect
against the adverse effects of these and other potential exposures. Although
the Company does not anticipate any material losses in these areas, no assurance
can be made that material losses will not be incurred in these areas in the
future.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
AgriBioTech, Inc.:
We consent to incorporation by reference in the registration statements
Nos. 333-33367, 333-13953, 333-47637, 333-61127, 333-66145, 333-71477 and 333-
71485 on Form S-3, No. 333-61097 on Form S-4 and Nos. 333-07123, 333-9336 and
333-9330 on Form S-8 of AgriBioTech, Inc. of our report dated January 27, 1999,
with respect to the balance sheet of HybriGene, LLC as of December 31, 1998 and
the related statements of operations and partners' capital and cash flows for
the year then ended, which report appears in the Form 8-K of AgriBioTech, Inc.
dated January 22, 1999.
Huth Thompson LLP
Lafayette, Indiana
February 5, 1999
