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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 4
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 6, 1998
AgriBioTech, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 1-1935 85-0325742
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
120 Corporate Park Drive, Henderson Nevada (89014)
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 566-2440
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<PAGE>
Explanatory Note
This Amendment No. 4 on Form 8-K/A to the Current Report on Form 8-K
("Form 8-K") for January 6, 1998 of AgriBioTech, Inc., a Nevada corporation
("the Company") is submitted in order to provide revised Financial Statements of
Lofts Seed Inc. and Subsidiary under Item 7 of Form 8-K. Therefore, the Company
hereby amends its Form 8-K in accordance with Rule 12b-15 under the Securities
Exchange Act of 1934.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Lofts Seed, Inc.
Winston-Salem, North Carolina
We have audited the accompanying consolidated balance sheets of Lofts Seed, Inc.
and subsidiary as of November 30, 1997, and December 31, 1996 and the related
statements of operations and retained earnings, and cash flows for the eleven
month period and six month period then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the financial statements of
Sunbelt Seeds, Inc., a wholly owned subsidiary, which statements reflect total
assets of $4,830,966 as of November 30, 1997 and total revenues of $14,659,576
for the ten month period then ended. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Sunbelt Seeds, Inc., is based solely on the
report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits and
the report of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Lofts Seed, Inc. and Sunbelt Seeds,
Inc. as of November 30, 1997 and December 31, 1996 and the results of their
operations and their cash flows for the eleven month period and six month period
then ended in conformity with generally accepted accounting principles.
As discussed in Note Q to the financial statements, certain mistakes in the
application of accounting principles relating to consolidation and certain
errors resulting in overstatement of previously reported inventory as of
November 30, 1997 and subsidiary equity as of November 30, 1997 and December 31,
1996 were discovered by management of the Company during the current year.
Accordingly, the 1997 and 1996 financial statements have been restated to
correct these mistakes in application of accounting principles and these errors.
Cannon & Company, L.L.P.
Winston-Salem, North Carolina
January 22, 1998, except for the second
paragraph of Note Q which is as of
December 22, 1998
<PAGE>
LOFTS SEED, INC. AND SUBSIDIARY (Consolidated)
BALANCE SHEETS
November 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,039,782 $ 222,290
Trade accounts receivable, net of allowance for
doubtful accounts of $419,760 for 1997 and
$400,000 for 1996 6,810,137 4,617,372
Employee advances 1,000
Inventory 11,129,392 12,207,635
Prepaid expenses 176,214 34,526
----------- -----------
TOTAL CURRENT ASSETS 19,156,525 17,081,823
----------- -----------
PROPERTY AND EQUIPMENT 303,344 247,961
----------- -----------
OTHER ASSETS
Investment in affiliated company 489,490
Goodwill 387,253
Loan acquisition costs 21,500 27,000
Deferred income taxes 108,000 85,000
----------- -----------
516,753 601,490
----------- -----------
TOTAL ASSETS $19,976,622 $17,931,274
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 5,635,203 $ 6,260,004
Current portion of long-term debt 1,278,634 916,428
Trade accounts payable 3,323,994 2,259,925
Income tax payable 250,000
Royalties payable 119,294 474,000
Accrued expenses 859,229 493,688
Accrued payroll 281,588 345,428
----------- -----------
TOTAL CURRENT LIABILITIES 11,747,942 10,749,473
----------- -----------
SUBORDINATED NOTES PAYABLE - RELATED PARTIES 1,557,547 1,797,492
----------- -----------
LONG-TERM DEBT 4,125,844 4,165,358
----------- -----------
DEFERRED COMPENSATION 146,811 171,937
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, Class A (voting), no par value,
230 shares authorized, issued and outstanding 23,000 23,000
Common stock, Class B (nonvoting), no par value,
770 shares authorized, issued and outstanding 77,000 77,000
Retained earnings 2,298,478 947,014
----------- -----------
2,398,478 1,047,014
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $19,976,622 $17,931,274
=========== ===========
</TABLE>
See accompanying notes.
-1-
<PAGE>
LOFTS SEED, INC. AND SUBSIDIARY (Consolidated)
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
For the Eleven Months Ended November 30, 1997
and the Six Months Ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
NET SALES $ 64,115,227 $ 23,566,501
COST OF SALES 46,663,625 16,112,326
------------ ------------
GROSS PROFIT 17,451,602 7,454,175
GENERAL AND ADMINISTRATIVE EXPENSES 12,920,499 5,917,993
------------ ------------
4,531,103 1,536,182
------------ ------------
OTHER INCOME (EXPENSE)
Equity in earnings of affiliate 167,057 39,650
Interest income 12,854
Miscellaneous income 227,337 79,847
Gain on dispositions of fixed assets 14,500
Management fees expense (1,216,822) (150,621)
Interest expense (1,383,833) (557,642)
------------ ------------
(2,193,407) (574,266)
------------ ------------
INCOME BEFORE INCOME TAXES 2,337,696 961,916
INCOME TAXES 240,873 14,902
------------ ------------
NET INCOME 2,096,823 947,014
BEGINNING RETAINED EARNINGS 947,014
Dividend payments (745,359)
------------ ------------
ENDING RETAINED EARNINGS $ 2,298,478 $ 947,014
============ ============
</TABLE>
See accompanying notes.
-2-
<PAGE>
LOFTS SEED, INC. AND SUBSIDIARY (Consolidated)
STATEMENTS OF CASH FLOWS
For the Eleven Months Ended November 30, 1997
and the Six Months Ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,096,823 $ 947,014
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 78,016 28,919
Equity in earnings of affiliate (167,057) (39,650)
Gain on disposal of fixed assets (14,500)
Bad debt expense 16,000
Deferred taxes (7,000)
Changes in:
Accounts receivable (1,256,112) (202,758)
Inventory 1,821,930 (6,002,661)
Prepaid expenses (155,801) 44,927
Employee advances (1,000)
Other assets 215,875
Trade accounts payable 373,412 269,306
Income tax payable 229,349
Royalties payable (354,706) (337,888)
Accrued expenses 365,541 (805,339)
Accrued payroll (63,840) 345,428
Due to former stockholder (1,512,040)
Deferred compensation (25,126) (10,784)
----------- -----------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES 2,950,429 (7,074,151)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (127,899) (90,258)
Proceeds from sale of assets 14,500
Cash inflows from wholly-owned subsidiary 182,376
----------- -----------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES 54,477 (75,758)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of dividends (745,359)
New borrowings
Short-term 4,308,952 5,847,497
Long-term 1,204,887
Debt reduction
Short-term (5,978,586)
Long-term (977,308) (735,330)
----------- -----------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES (2,187,414) 5,112,167
----------- -----------
NET INCREASE (DECREASE) IN CASH 817,492 (2,037,742)
CASH BEGINNING OF PERIOD 222,290 2,260,032
----------- -----------
CASH AT END OF PERIOD $ 1,039,782 $ 222,290
=========== ===========
</TABLE>
See accompanying notes.
-3-
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
1997 1996
----------- --------
<S> <C> <C>
Purchase of interest in subsidiary $ 900,000
Debt incurred on purchase (900,000)
-----------
Net cash outlay $
===========
Cash paid during the period for:
<CAPTION>
1997 1996
----------- --------
Interest $ 1,404,231 $527,835
=========== ========
Income taxes $ 20,711
===========
</TABLE>
-3-
<PAGE>
LOFTS SEED, INC. AND SUBSIDIARY (CONSOLIDATED)
NOTES TO FINANCIAL STATEMENTS
November 30, 1997 and December 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Company develops and markets seed products with a distribution network of
locations operating throughout the United States.
The subsidiary, Sunbelt Seeds, Inc. markets seed products throughout the
southeastern portion of the United States.
Principles of Consolidation
The consolidated financial statements include the accounts of Lofts Seeds, Inc.
and its wholly owned subsidiary, Sunbelt Seeds, Inc. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Change in Fiscal Year
Effective the year beginning July 1, 1996, the Company elected to change their
fiscal year to a calendar year.
Use of Estimates
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses. Actual results could vary from the estimates that were used.
Inventory
Inventory consists mainly of purchased seed either for resale or blending prior
to resale and is valued at the lower of cost or market, with cost determined
using the first-in, first-out method.
The subsidiary's inventory is valued at the lower of cost or market, with cost
determined using the last-in, first-out method (LIFO).
Property and Equipment
Property and equipment are stated at cost and are depreciated by straight-line
and accelerated methods over estimated useful lives as follows:
Computer equipment five years
Furniture, fixtures and equipment five to seven years
Leasehold improvements thirty-nine years
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all debt
instruments purchased with an original maturity of three months or less to be
cash equivalents.
-4-
<PAGE>
LOFTS SEED, INC. AND SUBSIDIARY (CONSOLIDATED)
NOTES TO FINANCIAL STATEMENTS
November 30, 1997 and December 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income Taxes
Effective July 1, 1996, the parent Company has elected to be treated as an
eligible small business (S Corporation) for tax purposes. Under this election,
income is taxed to the individual stockholders and not to the Company. This
special election recognized in all states the Company operates in, except one.
Accordingly, the only income taxes reflected in the provision will be those due
to this one state. The wholly-owned subsidiary has elected to be treated as an
eligible C Corporation for tax purposes. Therefore, the earnings of the
subsidiary are taxed to the corporation. Deferred taxes are recognized as a
result of the following temporary differences: different methods for treating
allowance for bad debts, noncompete agreements, and accrued vacation.
Reclassifications
Certain amounts for 1996 have been reclassified where appropriate to conform
with 1997 classifications.
NOTE B - BUSINESS COMBINATIONS
On June 28, 1996, all of the previously outstanding shares of Lofts Seed, Inc.
were purchased for approximately $10,280,000, including acquisition costs. The
book value of the net assets and liabilities at that time was approximately
$9,814,000. The fair market value of the net assets and liabilities was
approximately $11,163,000, resulting in an excess fair market value over
purchase price of approximately $883,000. The purchase of the previously
outstanding shares of Lofts Seed, Inc. was financed substantially through
financing sources for approximately $10,000,000, accruals for approximately
$210,000 and capital contributions of $100,000 from the new stockholders.
The adjustments for fair market value and allocation of excess of fair market
value over purchase price were as follows:
Net deferred assets with a book value of approximately $226,000 were
increased approximately $143,500 to a fair market value of
approximately $369,500.
Property and equipment with a book value of approximately $1,880,000
were increased approximately $1,010,000 to a fair market value of
approximately $2,890,000. Prior to the purchase transaction, one of the
new stockholders acquired property and equipment with an adjusted fair
market value of $2,200,000. In exchange, the stockholder assumed
related debt for the property and equipment of $2,200,000. The
remaining fair market value of property and equipment was approximately
$690,000. This amount was subsequently decreased as a result of the
allocation of excess of fair market value over the purchase price for
approximately $465,000, plus an additional amount of approximately
$42,000 for the effect on deferred tax assets.
-5-
<PAGE>
LOFTS SEED, INC. AND SUBSIDIARY (CONSOLIDATED)
NOTES TO FINANCIAL STATEMENTS
November 30, 1997 and December 31, 1996
NOTE B - BUSINESS COMBINATIONS
Investment in an affiliated company required no adjustment to fair
market value due to the fact that book value of $621,474 approximated
fair market value. However, this amount decreased as a result of the
allocation of excess fair market value over the purchase price for
approximately $171,633.
Accrued expenses and other current liabilities with a book value of
approximately $3,738,000 were decreased approximately $274,000 to a
fair market value of approximately $3,464,000.
The acquisition was accounted for by the purchase method of accounting,
whereby the Company allocated the purchase price to the assets based
upon their fair market values. Since the fair market value of the
assets and liabilities exceeded the net purchase price, property and
equipment, investment in affiliated company and deferred taxes relating
to the purchase and subsequent S corporation election were reduced.
The table below presents the reduction:
<TABLE>
<CAPTION>
Fair
Market
Value Adjustments Total
----------- --------- --------
<S> <C> <C> <C>
Property and equipment $ 690,123 $(506,499) $183,624
Investment in affiliate 621,474 (171,633) 449,841
Deferred taxes 369,482 (284,482) 85,000
----------- --------- --------
$ 1,681,079 $(962,614) $718,465
=========== ========= ========
</TABLE>
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Autos $ 59,454 $ 52,232
Equipment 81,467 34,120
Furniture 264,086 170,442
Leasehold improvements 24,088 17,088
-------- --------
429,095 273,882
Less accumulated depreciation 125,751 25,921
-------- --------
$303,344 $247,961
======== ========
</TABLE>
Depreciation expense was $78,016 and $28,919 for the eleven months ended
November 30, 1997 and the six months ended December 31, 1996, respectively.
-6-
<PAGE>
LOFTS SEED, INC. AND SUBSIDIARY (CONSOLIDATED)
NOTES TO FINANCIAL STATEMENTS
November 30, 1997 and December 31, 1996
NOTE D - INVESTMENT IN AFFILIATED COMPANY
Investment in affiliated company reflects ownership by the Company of 50% of the
common stock of Sunbelt Seed, Inc. through June 30, 1997. Summary of information
as of January 31, 1997, is as follows:
<TABLE>
<S> <C>
Current assets $ 1,980,269
Current liabilities 995,202
Net sales 14,705,646
Net income 79,299
</TABLE>
The investment in affiliated company was adjusted in a prior year as a result of
the allocation of excess fair market value over the purchase price of the
Company.
Effective July 1, 1997, Loft Seed, Inc. acquired 100% of Sunbelt Seed, Inc. At
this time the consolidation of the subsidiary was handled using the purchase
method of accounting, at which time common stock, retained earnings, additional
paid in capital and intercompany profits and inventory were eliminated. In
addition, investment in subsidiary was eliminated on Loft Seed's books and the
remaining difference was recorded as goodwill.
NOTE E - SHORT-TERM DEBT PAYABLE
The Company has a short term line of credit with an overall limitation of
$13,140,000, not to exceed 80% of eligible accounts receivable and 50% of
eligible inventory, less the amount of all accounts payable due to growers of
seed inventory. Borrowings under the line of credit bear interest at prime. The
line of credit agreement is collateralized by substantially all assets of the
Company, certain assets of the principal stockholder and a related party company
that is under common ownership. In addition, the line of credit is personally
guaranteed by the principal stockholder. The current line of credit expires
March 31, 1998.
The line of credit and notes payable agreement (Note F) place restrictions on
among other things, dividend payments, capital expenditures, capital lease
obligations, and officer compensation. In addition, the agreement requires
maintaining various financial ratios at predefined levels. All requirements were
either met or waived for the eleven months ended November 30, 1997.
As of November 30, 1997, the fair value of the line of credit was approximately
equivalent to its carrying value, due to the fact that the interest rates
currently available to the Company for debt with similar terms are approximately
equal to the interest rates for its existing debt.
The Company has a short term loan of $804,887 bearing interest at prime (8.5% at
November 30, 1997). It is payable March 31, 1998. At the bank's option, this
loan may be extended to a maximum of sixty months from the original closing date
of August 29, 1997.
-7-
<PAGE>
LOFTS SEED, INC. AND SUBSIDIARY (CONSOLIDATED)
NOTES TO FINANCIAL STATEMENTS
November 30, 1997 and December 31, 1996
NOTE E - SHORT-TERM DEBT PAYABLE
During 1997, the Company borrowed $805,000 from an affiliated company's line of
credit. The amount was repaid in August of 1997.
NOTE F - LONG-TERM DEBT
The Company's long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Note payable in monthly installments of $120,453
through July 2001, with interest at prime + .5%,
collateralized by substantially all of the
Company's assets $4,169,428
Note payable in monthly installments of $76,369
through July 2001, plus interest at prime plus 1%,
collateralized by substantially all of the Company's
assets $5,081,786
Note payable in monthly installments of $21,667
through September 2002, plus interest at prime +.5%,
collateralized by substantially all of the Company's
assets 1,235,050
---------- ----------
5,404,478 5,081,786
Less current maturities 1,278,634 916,428
---------- ----------
$4,125,844 $4,165,358
========== ==========
</TABLE>
Future maturities of long-term debt are summarized as follows:
<TABLE>
<S> <C>
1998 $1,278,634
1999 1,471,011
2000 1,584,613
2001 875,170
2002 195,050
----------
$5,404,478
==========
</TABLE>
Interest expense was $1,383,833 and $568,358 for the eleven months ended
November 30, 1997 and the six months ended December 31, 1996, respectively.
-8-
<PAGE>
LOFTS SEED, INC. AND SUBSIDIARY (CONSOLIDATED)
NOTES TO FINANCIAL STATEMENTS
November 30, 1997 and December 31, 1996
NOTE G - SUBORDINATED NOTES PAYABLE
Subordinated notes payable to related parties represent the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Note payable to an affiliated company under
common control, payable upon demand plus
interest at prime plus 2%. The note is
subordinated to the bank debt $1,557,547 $1,747,492
Note payable to the principal stockholder,
payable in full in June 1998. Interest is
payable quarterly at prime plus 2%. The
note is subordinated to the bank debt 50,000
---------- ----------
$1,557,547 $1,797,492
========== ==========
</TABLE>
NOTE H - LEASES AND RELATED PARTIES
Effective June 1996, the Company entered into two new operating lease agreements
with its majority stockholder to lease certain facilities in Oregon. The leases
require annual lease payments of $266,748 and expire in 2001.
Effective June 1996, the Company entered into a new operating lease agreement
with its majority stockholder to lease certain facilities in Massachusetts. The
lease requires annual lease payments of $61,500 and expires in 2001.
During the year, the Company entered into multiple operating lease agreements
leasing vehicles and equipment over periods ranging from 12 to 48 months, with
lease payments from $227 to $531.
Future minimum lease payments required by leases are summarized as follows:
<TABLE>
<S> <C>
1998 $ 749,990
1999 682,406
2000 506,558
2001 272,743
----------
$2,211,697
</TABLE>
Total lease expense charged to operations was $872,501 and $500,755 for the
eleven months ended November 30, 1997 and the six months ended December 31,
1996, respectively.
-9-
<PAGE>
LOFTS SEED, INC. AND SUBSIDIARY (CONSOLIDATED)
NOTES TO FINANCIAL STATEMENTS
November 30, 1997 and December 31, 1996
NOTE I - DEFERRED COMPENSATION
The Company is obligated to make payments to the surviving spouse of a deceased
officer for a period of twenty years from the date of the death of such officer
(February 1983) or to the death of the surviving spouse, if earlier. The
obligation is payable at $800 per week including interest at 9% through February
2003. The interest paid in connection with the obligation was $15,437 and
$10,014 for the eleven months ended November 30, 1997 and the six months ended
December 31, 1996, respectively.
NOTE J - INCOME TAXES
The income tax provision consists of the following:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Federal and state income taxes $240,873 $14,902
======== =======
</TABLE>
As discussed in Note A, the Parent Company has elected to be treated as an
eligible small business (S Corporation) in all states that it operates in except
one. In this state there is a net operating loss carryforward of $11,336,550
that begins expiring in December 1997 as follows:
<TABLE>
<S> <C>
1997 $ 2,950,162
1998 2,670,452
1999 2,962,828
2000 1,268,260
2001 1,484,848
-----------
$11,336,550
</TABLE>
Deferred taxes result from temporary differences in the recognition of expenses
for income tax and financial statement purposes. The source of these differences
and the tax effect is as follows:
<TABLE>
<S> <C>
Net operating loss carryforward $ 903,550
Valuation allowance (818,550)
Allowance for bad debt 8,000
Noncompete 7,000
Accrued vacation 8,000
---------
$ 108,000
=========
</TABLE>
-10-
<PAGE>
LOFTS SEED, INC. AND SUBSIDIARY (CONSOLIDATED)
NOTES TO FINANCIAL STATEMENTS
November 30, 1997 and December 31, 1996
NOTE J - INCOME TAXES
A reconciliation of the statutory U.S. federal rate and effective rate for the
wholly-owned subsidiary is as follows:
<TABLE>
<CAPTION>
1997
------
<S> <C>
Statutory U.S. Federal rate 34.0%
State income tax rate 7.0%
Other (1.9%)
------
39.1%
======
</TABLE>
NOTE K - CONCENTRATION OF CREDIT RISK
The Company sells its products to a variety of locations throughout the United
States.
Concentrations of credit risk within the region and industry are generally
diversified due to the large number of entities comprising the Company's
customer base. No one customer comprises a significant portion of the Company's
receivables. While these receivables are unsecured, the Company performs ongoing
credit evaluations of its customers' financial condition.
Sales to one customer approximated $10,000,000 (16%) of the Company's sales for
the eleven months ended November 30, 1997.
NOTE L - PURCHASE CONTRACTS
The Company maintains in the ordinary course of business, numerous contracts
with seed growers, primarily in the state of Oregon, to grow specified seed
varieties for a specified period of time (generally three years) and to sell the
harvested seed to the Company at a specified price per pound. These contracts
expire at various dates.
NOTE M - ROYALTY CONTRACTS
The Company has entered into numerous royalty contracts with individuals and
research facilities which developed certain varieties of grass seed sold by the
Company. Royalties are based on pounds of seed sold and computed at the growers'
prices. Royalty percentages range from 2% to 6%. The contracts have minimum
aggregate annual payments of approximately $50,000 per year.
NOTE N - CONTINGENCIES
The Company is subject to legal proceedings and claims arising in the ordinary
course of business. It is management's opinion that legal proceedings and claims
will not have a material effect on the financial statements.
-11-
<PAGE>
LOFTS SEED, INC. AND SUBSIDIARY (CONSOLIDATED)
NOTES TO FINANCIAL STATEMENTS
November 30, 1997 and December 31, 1996
NOTE O - PROFIT SHARING PLAN
The Company has a 401(k) profit sharing plan for qualified employees. The terms
of the plan define qualified employees as all full time non-union employees.
Qualified employees may contribute from 2% to 10% of their gross pay. The
Company has the option to match up to 25% of the employees' contributions up to
4% of eligible employee contributions. The Company's contributions to the
participants investments accounts are fully vested after five years. The Company
did not make any contributions for the eleven months ended November 30, 1997 or
the six months ended December 31, 1996.
NOTE P - SUBSEQUENT EVENTS
Effective January 6, 1998, all of the Company's stock was purchased by another
Company. As a part of the purchase, all security guarantees between the bank and
former stockholders were released.
NOTE Q - RESTATEMENT AND CORRECTION OF AN ERROR
The financial statements as of November 30, 1997 and December 31, 1996 have been
restated to correct mistakes in application of accounting principle and certain
errors that were discovered subsequent to January 22, 1998 as follows:
The Company discovered errors in the reporting of inventory at November 30, 1997
and cost of sales for the eleven months then ended. These errors, aggregating
$494,422, have been corrected in the accompanying financial statements and
resulted in cost of sales being increased and inventory, retained earnings,
total stockholders' equity, gross profit, income before income taxes and net
income being decreased by such amount.
The Company discovered errors in the reporting of equity in subsidiary as of
November 30, 1997 This error resulted in the subsidiary's financial statements
not being consolidated with the parent company. The financial statements as of
November 30, 1997 have been restated to reflect consolidation with the
subsidiary.
The Company discovered errors in the reporting of equity in subsidiary as of
December 31, 1996 This error, aggregating $165,880, has been corrected in the
accompanying financial statements and resulted in income from subsidiary,
retained earnings, total stockholders' equity, income before income taxes and
net income being decreased by such amount.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirement 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.,
Date: March 22, 1999 By: /s/ Randy Ingram
----------------
Randy Ingram,
Vice-President/CFO
Exhibit 23
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, 1998, except
for the second paragraph of Note Q which is as of December 22, 1998, with
respect to the balance sheet of Lofts Seed, Inc. and Subsidiary as of November
30, 1997 and December 31, 1996 and the related statements of operations and
retained earnings, and cash flows for the eleven month period and six month
period then ended, which report appears in the Form 8-K/A of AgriBioTech, Inc.
dated January 6, 1998, Amendment No. 4.
/s/ Cannon & Company, L.L.P.
Winston-Salem, North Carolina
March 22, 1999
