UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- ----
EXCHANGE ACT OF 1934, FOR THE QUARTERLY PERIOD ENDED APRIL 2, 2000
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ to __________.
Commission File Number
0-19746
-------
ECOSCIENCE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2912632
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10 Alvin Court, East Brunswick, New Jersey 08816
------------------------------------------------
(Address of principal executive offices)
(732) 432-8200
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
-----------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No__.
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of May 15, 2000, the issuer
had outstanding 12,887,882 shares of common stock, par value $.01 per share.
<PAGE>
PART I. FINANCIAL INFORMATION
EcoScience Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
April 2, 2000 January 2, 2000
------------- ---------------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,457 $ 1,246
Accounts receivable, less reserves of $650
at April 2, 2000 and $806 at January 2, 2000 5,406 7,672
Inventories 6,687 7,317
Other current assets 553 487
--------- ---------
Total current assets 14,103 16,722
--------- ---------
Property and equipment, net 55,811 56,941
Intangible assets, net 5,241 5,314
Other noncurrent assets 2,147 2,420
--------- ---------
Total assets 77,302 81,397
========= =========
Liabilities and Stockholders' Deficit
Current liabilities:
Short-term borrowings $ 12,038 $ 16,094
Current maturities of long-term debt 59,273 59,005
Current obligations under capital leases 53 49
Accounts payable 5,631 8,433
Accrued expenses and other current liabilities 10,851 9,087
--------- ---------
Total current liabilities 87,846 92,668
--------- ---------
Noncurrent liabilities:
Long-term debt, less current maturities 16,085 16,191
Obligations under capital leases 305 322
Other long-term liabilities 787 787
--------- ---------
Total liabilities 105,023 109,968
--------- ---------
Minority interest 3,017 --
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.01 par value, 10,000,000 shares authorized;
333,333 issued and outstanding at April 2, 2000 and January 2, 2000 3 3
Common stock, $0.01 par value, 100,000,000 shares authorized; 12,887,882
issued and outstanding at April 2, 2000 and January 2, 2000 129 129
Additional paid-in-capital 55,662 55,662
Accumulated deficit (86,532) (84,372)
Accumulated other comprehensive income 0 7
--------- ---------
Total stockholders' deficit (30,738) (28,571)
--------- ---------
Total liabilities and stockholders' deficit 77,302 81,397
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE>
EcoScience Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Thirteen Weeks Ended
April 2, 2000 April 4, 1999
------------- -------------
Net revenues $ 15,649 $ 18,264
Cost of revenues 12,976 12,839
-------- --------
Gross profit 2,673 5,425
-------- --------
Operating expenses:
Selling, general and administrative 2,421 3,630
-------- --------
Total operating expenses 2,421 3,630
-------- --------
Operating income 252 1,795
-------- --------
Other (expense) income:
Interest, net (2,576) (2,671)
Other, net 109 87
-------- --------
Total other expense, net (2,467) (2,584)
-------- --------
Loss before taxes and minority interest (2,215) (789)
Provision for income taxes 15 3
-------- --------
Loss before minority interest (2,230) (792)
Minority interest 70 62
-------- --------
Net loss ($ 2,160) ($ 730)
======== ========
Loss per share:
Basic and Diluted:
Loss per share ($ 0.17) ($ 0.06)
======== ========
Weighted average basic shares outstanding 12,888 12,619
======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
EcoScience Corporation and Subsidiaries
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-----------------------------------
April 2, 2000 April 4, 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($2,160) ($ 730)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,331 1,598
Minority interest in limited partnerships (70) (62)
Foreign exchange gain (12) (2)
Loss on sales of assets -- (16)
Changes in current assets and liabilities:
Accounts receivable, net 2,266 1,704
Inventories 630 105
Other current assets (66) 261
Other noncurrent assets 273 (96)
Accounts payable and accrued expenses 2,061 (2,085)
------- -------
Net cash provided by operating activities: 4,253 677
------- -------
Cash flows from investment activities:
Purchases of property and equipment (128) (95)
Proceeds from sale of assets -- 32
Release of restricted cash -- 127
------- -------
Net cash provided by (used in) investing activities (128) 64
------- -------
Cash flows from financing activities:
Net payments under line of credit (3,872) (331)
Payments on long-term debt and capital leases (35) (880)
------- -------
Net cash used in by financing activities (3,907) (1,211)
------- -------
Effects of exchange rates on cash balances (7) 35
Increase (decrease) in cash and cash equivalents 211 (435)
Cash and cash equivalents at beginning of period 1,246 1,095
------- -------
Cash and cash equivalents at end of period $ 1,457 $ 660
======= =======
Supplemental cash flow information
Cash paid for:
Interest $ 66 $ 2,439
Income taxes 15 3
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
ECOSCIENCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 2, 2000 and April 4, 1999
(in thousands, except share data)
(UNAUDITED)
1. Operations
EcoScience Corporation ("EcoScience") and its wholly owned subsidiaries
(collectively, the "Company"), Agro Power Development, Inc. and its consolidated
limited partnership (collectively "APD"), Agro Dynamics, Inc. and its 51% owned
subsidiary Agro-Dan, Inc. (collectively, "AGRO") and EcoScience Produce Systems
Corp. ("EPSC") are primarily engaged in the production, marketing and sale of
premium grade tomatoes grown in intensive greenhouse facilities. In addition,
the Company markets, sells, develops and commercializes products for the
agricultural and biological industries.
The Company has suffered losses resulting in an accumulated deficit of $86,532
as of April 2, 2000. As of March 31, 2000, the Company is in default under its
Consolidated, Amended and Restated Loan Agreement (the "Loan Agreement") dated
as of January 2, 2000, which has resulted in approximately $58,886 of debt being
classified as current in the accompanying April 2, 2000 balance sheet which
otherwise would have been classified as long-term. This has resulted in
significant negative working capital. Management's plan is focused on raising
additional capital and improving the gross profit of all greenhouse operations
as a result of greater production, sales volumes and efficiency at each
greenhouse facility.
The Company believes that its $1,457 of cash and cash equivalents as of April 2,
2000, along with borrowings and revenues from product sales, will be sufficient
to fund the Company's working capital needs, planned capital expenditures and to
service its indebtedness through April 2, 2001, provided that the Company's
senior lender extends the maturity dates of certain payments under the Company's
credit facility and the Company can raise additional capital and resolve its
near term cash flow problems. The Company has engaged a financial advisor to
assist it in raising additional funds. No assurances can be given that the
Company will be able to raise additional capital or that the Company's creditors
will not attempt to exercise their legal remedies against the Company.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal course of
business. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
2. Basis of presentation
The accompanying unaudited consolidated financial statements have been prepared
by the Company and reflect all adjustments, consisting of only normal recurring
adjustments, which are, in the opinion of management, necessary for a fair
presentation of financial results for the thirteen weeks ended April 2, 2000 and
April 4, 1999, in accordance with generally accepted accounting principles for
interim financial reporting and pursuant to Article 10 of Regulation S-X.
Certain information and footnote disclosures normally included in the Company's
annual audited consolidated financial statements have been condensed or omitted
pursuant to such rules and regulations.
The results of operations for the thirteen weeks ended April 2, 2000 and April
4, 1999 are not necessarily indicative of the results of operations to be
expected for a full fiscal year. These interim consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
for the year ended January 2, 2000, which are included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and disclosures of contingent assets and
liabilities as of the dates of the financial statements, and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
3. Debt
5
<PAGE>
Effective January 2, 2000, the Company restructured an existing $58,900 term
facility with CoBank, ACB ("CoBank") and closed on a new $13,400 working capital
line of credit which was funded in 1999. The maturity date of the term facility
is July 31, 2001, with a two-year extension under certain conditions. The line
of credit will mature July 31, 2000 with an option to request a one-year
extension. The interest rate is the CoBank National Variable Rate plus 2%.
Principal under the term facility is payable quarterly in the amount of $5,000
per year with all principal due July 31, 2001. An additional $5,000 payment on
the working capital line of credit was due on March 31, 2000. Interest payments
on both the term facility and the working capital line were deferred until March
31, 2000. On March 31, 2000, the Company made a $2,500 payment and on April 25,
2000 made a $500 payment on the working capital line of credit, which did not
satisfy the required principal and interest payments due CoBank on March 31,
2000 and accordingly is in violation of the Loan Agreement.
4. Joint Venture
In January 2000, the Company, through Agro Dynamics, Inc. ("ADI"), entered into
a joint venture agreement ( the "Joint Venture") with Grodan A/S ("Grodan"), a
wholly owned subsidiary of Rockwool International A/S, pursuant to which it
formed Agro-Dan, Inc., a Delaware corporation, in which ADI owns a 51% interest
and Grodan owns a 49% interest. In March 2000, ADI contributed substantially all
of its assets and liabilities to the Joint Venture and Grodan assigned to ADI
its right to collect approximately $3 million under the distribution agreement
with ADI and contributed approximately $83 in cash to the Joint Venture. Grodan
and the Joint Venture have entered into a new distribution agreement which has a
five year term expiring on December 31, 2004, subject to automatic five year
extensions unless either party elects to terminate the agreement upon six months
prior written notice. ADI and Grodan have entered into a stockholders agreement
which provides that each stockholder has the right to designate 50% of the Joint
Venture's Board of Directors, subject to adjustment if their respective
ownership interests in the Joint Venture change. Actions by stockholders require
the approval of 52% of the outstanding shares of the Joint Venture. If either
stockholder wishes to sell its shares in the Joint Venture, these shares must
first be offered to the other stockholder.
5. Net loss per share
The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share," which requires presentation of both basic and diluted
earnings per share in the Consolidated Statements of Operations. Basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share gives effect to all potentially dilutive
common shares that were outstanding during the period.
The following table sets forth a reconciliation of weighted average common
shares outstanding to the weighted average common shares assuming dilution:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 2, 2000 April 4, 1999
------------- -------------
<S> <C> <C>
Weighted average common shares outstanding 12,888 12,619
Dilutive effect of common shares issuable(1) -- --
------ ------
Weighted average common shares outstanding
assuming dilution 12,888 11,618
====== ======
</TABLE>
Common stock purchase warrants and stock options at April 2, 2000 and April 4,
1999 to purchase 1,177,801 and 275,511 shares, respectively, were not included
in the computation of earnings per share assuming dilution as their effect would
be anti-dilutive.
6. Comprehensive income
Effective January 3, 1999, the Company adopted the provisions of Statement No.
130, "Reporting Comprehensive Income", which modifies the financial statement
presentation of comprehensive income and its components.
Comprehensive income, representing all changes in stockholders' equity during
the period other than changes resulting from the Company's stock and dividends.
Comprehensive income is as follows:
6
<PAGE>
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 2, 2000 April 4, 1999
------------- -------------
<S> <C> <C>
Net loss ($2,160) ($730)
Other comprehensive gain, net of taxes
Foreign currency translation adjustments 12 35
Net unrealized loss on securities available for (6) (2)
-------- -----
Other comprehensive gain 6 33
-------- -----
Comprehensive loss ($2,154) ($697)
======== =====
</TABLE>
7. Segment and geographic information
The Company has two reportable segments: greenhouse tomatoes and biological and
agricultural products. The greenhouse tomatoes segment operates six greenhouse
facilities in the United States, representing approximately 176 acres of growing
capacity. Through these facilities, the Company produces, harvests, packages and
distributes premium hydroponic vine-ripened tomatoes. The tomatoes are marketed
under the Village Farms(R) and Home Choice(TM) brandnames and sold to retail
supermarket chains, dedicated wholesalers, distributors and food service clients
throughout the United States.
The biological and agricultural products segment distributes various products
under written distribution agreements and relations with specific vendors. The
Company's biological and agricultural products include (1) growing medium
products and computerized environmental and irrigational control systems; (2)
postharvest coating products and (3) biological pest control products. The
Company sold its postharvest coating products business in November, 1999.
The Company's reportable segments are strategic business units that offer
different products. The Company is not dependent on any single customer for its
net revenues.
Thirteen Weeks Ended
Company data by operating segment April 2, 2000 April 4, 1999
- --------------------------------- ------------- -------------
Net revenues
Greenhouse tomatoes $ 13,172 $ 15,159
Biological and agricultural products 2,477 3,105
-------- --------
Total $ 15,649 $ 18,264
======== ========
Operating income (loss)
Greenhouse tomatoes $ 551 $ 1,937
Biological and agricultural products (299) (142)
-------- --------
Total $ 252 $ 1,795
======== ========
Company data by geographic segments
- -----------------------------------
Net revenues
United States $ 14,441 $ 17,280
Canada 1,208 984
-------- --------
Total $ 15,649 $ 18,264
======== ========
7
<PAGE>
ECOSCIENCE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(in thousands, except share data)
EcoScience Corporation ("EcoScience") and its wholly owned subsidiaries
(collectively, the "Company"), Agro Power Development, Inc. and its consolidated
limited partnership (collectively "APD"), Agro Dynamics, Inc. and its 51% owned
subsidiary Agro-Dan, Inc. (collectively, "AGRO") and EcoScience Produce Systems
Corp. ("EPSC") are primarily engaged in the production, marketing and sale of
premium grade tomatoes grown in intensive greenhouse facilities. In addition,
the Company markets, sells, develops and commercializes products for the
agricultural and biological industries.
Results of Operations for the thirteen weeks ended April 2, 2000 and April 4,
1999.
The Company's two reportable segments are comprised of (1) greenhouse tomatoes
and (2) biological and agricultural products.
The Company's net revenues decreased by $2,615 or 14% to $15,649 for the
thirteen weeks ended April 2, 2000 from $18,264 for the thirteen weeks ended
April 4, 1999. This decrease was due to decreases in product sales in the
greenhouse tomato market of $1,987 and decreases in the biological and
agricultural products market of $628.
The following table sets forth the Company's net revenues by segment for the
thirteen weeks ended April 2, 2000 and April 4, 1999:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 2, 2000 April 4, 1999 Change
------------- ------------- --------
<S> <C> <C> <C>
Greenhouse tomatoes $13,172 $15,159 ($1,987)
Biological and agricultural products 2,477 3,105 (628)
-------- ------- -------
Total $15,649 $18,264 ($2,615)
======== ======= =======
</TABLE>
Net revenue decreases for the greenhouse tomato segment were primarily due to
the reduction of product sales from contract growers.
Net revenue decreases for the biological and agricultural products market were
primarily due to the sale of its postharvest equipment division on February 2,
1999. Sales of the postharvest equipment division decreased $344 to $0 for the
thirteen weeks ended April 2, 2000 from $344 for the thirteen weeks ended April
4, 1999. The Company's sales of coating products decreased $444 or 84% to $82
for the thirteen weeks ended April 2, 2000 from $526 for the thirteen weeks
ended April 4, 1999. The coating products division sold all its assets except
its BioSave(R) biofungicide products and technology to Pace International LLC in
November 1999.
Cost of revenues increased $137 or 1% to $12,976 for the thirteen weeks ended
April 2, 2000 from $12,839 for the thirteen weeks ended April 4, 1999, primarily
due to higher utility costs.
Gross profit on net revenues decreased $2,752 or 51% to $2,673 for the thirteen
weeks ended April 2, 2000 from a gross profit of $5,425 for the thirteen weeks
ended April 4, 1999. Gross profit percentage on net revenues decreased 13% to
17% for the thirteen weeks ended April 2, 2000 from 30% for the thirteen weeks
ended April 4, 1999. Both gross profit on net revenues and gross profit
percentage on net revenues decreased primarily as a result of less than
anticipated production yields in the tomato segment resulting in fixed
production costs being allocated over fewer units and lower than expected market
prices.
Selling, general and administrative expenses decreased $1,209 or 33% to $2,421
for the thirteen weeks ended April 2, 2000 from $3,630 for the thirteen weeks
ended April 4, 1999, primarily due to the cost containment of administrative
expenses.
Operating income decreased $1,543 or 86% to $252 for the thirteen weeks ended
April 2, 2000 compared to $1,795 for the thirteen weeks ended April 4, 1999. The
decrease in operating income resulted primarily from a decrease of $2,752 in
gross profit for the thirteen weeks ended April 2, 2000, partially offset by a
$1,209 decrease in operating expenses.
8
<PAGE>
Other expenses decreased by $117 to $2,467 for the thirteen weeks ended April 2,
2000, compared to $2,584 the thirteen weeks ended April 4, 1999, primarily due
to decreased interest expenses.
The Company's net loss increased $1,430 or $0.11 per basic and diluted share to
a net loss of $2,160 or $0.17 per diluted share for the thirteen weeks ended
April 2, 2000 compared to net loss of $730 or $0.06 per diluted share for the
thirteen weeks ended April 4, 1999.
The Company's EBITDA decreased $1,846 to $1,693 for the thirteen weeks ended
April 2, 2000 from $3,539 for the thirteen weeks ended April 4, 1999. EBITDA is
net income (loss) excluding interest income, interest expense, income taxes,
depreciation and amortization expense. While EBITDA should not be construed as a
substitute for income (loss) from operations, net income (loss) or cash flows
from operating activities in analyzing the Company's operating performance,
financial condition or cash flows, the Company is reporting EBITDA because it is
commonly used by certain users of the Company's financial statements to analyze
and compare companies on the basis of operating performance, leverage and
liquidity and to determine a company's ability to service debt.
Liquidity and Capital Resources
The Company's operations have been funded through revenues from product sales,
public and private placements of its equity securities, bank loans and lease
financings, licensing, collaborative research and development arrangements,
investment income and the sale of certain assets.
The Company continues to experience a significant liquidity shortfall primarily
due to weak market pricing. The Company has also delayed payments to vendors;
however, the Company has structured extended terms with certain vendors and has
substantially paid most other vendors whose payments were delayed. In addition,
the Company is in default under the Consolidated, Amended and Restated Loan
Agreement dated as of January 2, 2000 with its lender CoBank, ACB ("CoBank").
The Company's management has been in close contact with major suppliers and its
lenders, and the parties are working cooperatively together to manage this cash
flow shortfall. Although the Company's liquidity position is currently
manageable, the cash shortfall will remain until additional capital is raised.
No assurance can be given that the Company will be able to raise additional
capital or that the Company's creditors will not attempt to enforce legal
remedies available to them.
Cash and cash equivalents were $1,457 at April 2, 2000 compared to $1,246 at
January 2, 2000. Cash provided by operating activities totaled $4,253 for the
thirteen weeks ended April 2, 2000 and principally consisted of a decrease in
accounts receivable of $2,266 and inventory of $630 and an increase in accounts
payable and accrued expenses of $2,061 and depreciation and amortization of
$1,331, partially offset by a net loss of $2,160. Cash used in financing
activities totaled $3,907 for the thirteen weeks ended April 2, 2000, which
consisted of net payments under lines of credit of $3,872 and payments of
long-term debt of $35. Cash used in investment activities for the thirteen weeks
ended April 2, 2000 totaled $128, which consisted principally of the purchase of
property and equipment of $128. The Company's current liabilities exceeded its
current assets by $73,743 (which includes $58,886 of senior debt classified as
current, which otherwise would have been classified as long-term had the Company
not had certain defaults under its credit facility with CoBank) and its current
ratio was 0.16 to 1, at April 2, 2000 compared to 0.18 to 1, respectively, at
January 2, 2000.
Debt and capital leases decreased by $3,907 to $87,754 at April 2, 2000 compared
to $91,661 at January 2, 2000. The decrease was attributable to payments of
$2,500 to the working capital line of credit with CoBank, $1,310 to line of
credit with Century Business Credit and $97 on capital leases.
The Company believes that its $1,457 of cash and cash equivalents as of April 2,
2000, along with borrowings and revenues from product sales, will be sufficient
to fund the Company's working capital needs, planned capital expenditures, and
to service its indebtedness through April 2, 2001, provided that CoBank extends
the maturity dates of certain payments under the Loan Agreement and the Company
can resolve its short term cash flow shortfall by raising additional capital.
The Company has engaged a financial advisor to assist it in raising additional
funds to finance its ongoing operations in 2000, current debt obligations and
expected growth after April 2, 2001. The Company is currently attempting to
raise debt and/or equity financing. No assurance can be given that the Company
will be able to complete the refinancing or that the Company's creditors will
not attempt to enforce legal remedies available to them. This raises substantial
doubt about the ability of the Company to continue as a going concern.
9
<PAGE>
Year 2000 Compliance
Since entering the Year 2000 ("Y2K"), the Company has not experienced any
significant disruptions to its business either directly or by reason of Y2K
related problems affecting the Company's customers or suppliers. The Company
will continue to monitor its critical IT and non-IT systems over the next
several months, but does not anticipate any significant Y2K impact on its
business.
Quantitative and Qualitative Disclosure about Market Risk
There has been no material change in market risk since January 2, 2000.
Forward-looking Statements
This report contains "forward-looking statements" which are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that known and unknown risks, uncertainties and other
factors may cause actual results, performance or achievements of EcoScience to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Factors that might
cause such differences include EcoScience's risks and uncertainties related to
EcoScience's future profitability, ability to meet its capital needs, government
regulation, continued cooperation of the Company's creditors, competition,
market acceptance, Year 2000 compliance and other factors described in Item 7A
and elsewhere in EcoScience's annual report on Form 10-K filed with the
Securities and Exchange Commission.
10
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceeding
Smalley v. EcoScience Corporation, et al. In April 2000, a class action lawsuit
was filed in the United States District Court for the District of Massachusetts
against the Company, APD, the individuals who served on the Company's Board of
Directors at the time of the merger transaction pursuant to which the Company
acquired ADP (the "Merger") and the shareholders of APD prior to the Merger by
William F. Smalley, Jr. on his own behalf and on behalf of persons and entities
who were shareholders of the Company on July 31, 1998 and/or at the time of the
Merger. The plaintiff alleges, among other things, that the Proxy Statement
distributed by the Company in connection with the Merger omitted material
information regarding the financial performance of APD, and asserts the
defendants violated Sections 10(b) of the Securities Exchange Act of 1934 (the
"Exchange Act") and Rules 10b-5 and 14a-9 promulgated thereunder. The plaintiff,
who is seeking damages in an unspecified amount, also alleges that the Company's
Board of Directors breached its fiduciary duty to shareholders and seeks to
impose liability on the individual defendants under Section 20(a) of the
Exchange Act and, in the case of the APD shareholders, Section 20A(a) of the
Exchange Act. The Company believes that the plaintiff's allegations are without
merit and intends to vigorously contest the matter.
Joannidi v. EcoScience Corporation, et al. In April 2000, Harold A. Joannidi,
the former Vice President, Secretary and Corporate Controller of the Company,
filed an action in the Superior Court of New Jersey, Law Division, Middlesex
County against the Company and its Board of Directors in which he alleges that
the Company's President directed him to fraudulently and illegally change the
Company's Securities and Exchange Commission filings and that his employment was
terminated in violation of the New Jersey Conscientious Employee Protection Act.
Mr. Joannidi, who is seeking equitable, compensatory, punitive and liquidated
damages in unspecified amounts, as well as injunctive relief, also asserts
claims for violations of common law public policy, age discrimination, fraud,
beach of good faith and fair dealing, intentional interference with contractual
relations and/or prospective economic advantage and intentional infliction of
emotional distress. The Company believes that Mr. Joannidi's claims are without
merit and intends to vigorously defend this action.
Item 3. Defaults Upon Senior Securities
The Company's wholly owned subsidiary, Village Farms, L.P. is in default under
the Consolidated, Amended and Restated Loan Agreement. As a result of this
default, the lender has the right to accelerate the payment of all amounts
outstanding under the facility.
Item 6. Exhibits and Reports on Form 8-K
(i) Exhibits
27 Financial Data Schedule as of and for the Thirteen Weeks Ended April 2, 2000
(ii) Reports on Form 8-K.
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ECOSCIENCE CORPORATION
Registrant
May 15, 2000 /s/ Kenneth S. Hollander
-------------------------
Kenneth S. Hollander
Senior Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
12
<PAGE>
ECOSCIENCE CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Exhibit Description
- ------- -------------------
27 Financial Data Schedule as of and for the Thirteen Weeks
Ended April 2, 2000
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Quarterly Report on Form 10-Q for the quarter ended April 2, 2000 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> APR-02-2000
<CASH> 1,457
<SECURITIES> 0
<RECEIVABLES> 5,406
<ALLOWANCES> 650
<INVENTORY> 6,687
<CURRENT-ASSETS> 553
<PP&E> 55,811
<DEPRECIATION> 1,258
<TOTAL-ASSETS> 77,302
<CURRENT-LIABILITIES> 87,846
<BONDS> 87,754
0
3
<COMMON> 129
<OTHER-SE> (30,869)
<TOTAL-LIABILITY-AND-EQUITY> 77,302
<SALES> 15,649
<TOTAL-REVENUES> 15,649
<CGS> 12,976
<TOTAL-COSTS> 12,976
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,576)
<INCOME-PRETAX> (2,215)
<INCOME-TAX> 15
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,160)
<EPS-BASIC> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
