<PAGE>
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 OCTOBER 1, 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.)
17 Christopher Way, Eatontown, New Jersey 07724
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(Address of principal executive offices)
(732) 676-3000
--------------
(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 November 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>
October 1, 2000 January 2, 2000
--------------- ---------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $72 $997
Accounts receivable, less reserves of $300
at October 1, 2000 and $636 at January 2, 2000, respectively 984 5,162
Inventories 3,978 6,471
Other current assets 757 393
--------- --------
Total current assets 5,791 13,023
--------- --------
Property and equipment, net 54,004 57,342
Intangible assets, net 4,781 4,982
Other noncurrent assets 1,338 2,402
--------- --------
Total assets $65,914 $77,749
========= ========
Liabilities and Stockholders' Deficit
Current liabilities:
Short-term borrowings $10,800 $13,646
Current maturities of long-term debt 58,860 59,005
Current obligations under capital leases 59 49
Accounts payable 4,667 5,104
Accrued expenses and other current liabilities 14,636 8,444
Net liabilities of discontinued operations 3,255 2,772
--------- --------
Total current liabilities 92,277 89,020
--------- --------
Noncurrent liabilities:
Long-term debt, less current maturities 15,934 16,191
Obligations under capital leases 274 322
Other long-term liabilities 785 787
--------- --------
Total liabilities 109,270 106,320
--------- --------
Minority interest - -
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.01 par value, 10,000,000 shares authorized;
333,333 issued and outstanding at October 1, 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 October 1, 2000 and January 2, 2000 129 129
Additional paid-in-capital 55,662 55,662
Accumulated deficit (99,083) (84,372)
Accumulated other comprehensive (loss) income (67) 7
--------- --------
Total stockholders' deficit (43,356) (28,571)
--------- --------
Total liabilities and stockholders' deficit $65,914 $77,749
========= ========
</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)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999
--------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net revenues $4,467 $4,509 $28,064 $32,505
Cost of revenues 5,100 7,552 30,530 35,616
------- ------- ------- -------
Gross (loss) profit (633) (3,043) (2,466) (3,111)
------- ------- ------- -------
Operating expenses:
Selling, general and administrative 1,419 3,038 4,732 8,708
Impairment charge 0 0 0 654
------- ------- ------- -------
Total operating expenses 1,419 3,038 4,732 9,362
------- ------- ------- -------
Operating loss (2,052) (6,081) (7,198) (12,473)
------- ------- ------- -------
Other (expense) income:
Interest, net (2,626) (2,333) (7,701) (7,427)
Other, net 246 531 336 785
------- ------- ------- -------
Total other expense, net (2,380) (1,802) (7,365) (6,642)
------- ------- ------- -------
Loss before taxes and minority interest (4,432) (7,883) (14,563) (19,115)
Provision for income taxes 2 (4) 21 0
------- ------- ------- -------
Loss before minority interest (4,434) (7,879) (14,584) (19,115)
Minority interest 0 207 0 359
------- ------- ------- -------
Loss for continuing operations (4,434) (7,672) (14,584) (18,756)
Income (loss) from discontinued operations 88 (85) (127) 313
------- ------- ------- -------
Net loss ($4,346) ($7,757) ($14,711) ($18,443)
======= ======= ======= =======
Loss per share:
Basic and Diluted:
Loss from continuing operations ($0.35) ($0.60) ($1.13) ($1.48)
Income (loss) from discontinued operations $0.01 ($0.01) ($0.01) $0.02
------- ------- ------- -------
Loss per share ($0.34) ($0.61) ($1.14) ($1.46)
======= ======= ======= =======
Weighted average basic shares outstanding 12,888 12,619 12,888 12,619
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
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EcoScience Corporation and Subsidiaries
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
October 1, 2000 October 3, 1999
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($14,711) ($18,443)
Net loss (gain) from discontinued operations 127 (313)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,922 4,704
Minority interest in limited partnerships - (359)
Loss on sales of assets - (54)
Impairment charge - 654
Changes in current assets and liabilities:
Accounts receivable, net 4,178 4,137
Inventories 2,493 979
Other current assets (364) 439
Other noncurrent assets (39) 166
Accounts payable and accrued expenses 5,756 (1,471)
Other noncurrent liabilities (2) (47)
Net cash provided by (used in) operating activities of
contininuing operations 2,360 (9,608)
-------- --------
Cash flows from investment activities:
Purchases of property and equipment (279) (731)
Proceeds from sale of assets - 2,576
Proceeds from sale of short-term investments - 127
-------- --------
Net cash (used in) provided by investing activities (279) 1,972
-------- --------
Cash flows from financing activities:
Net (payment) borrowings under line of credit (3,000) 7,747
Payments on long-term debt and capital leases (286) (1,686)
-------- --------
Net cash used in financing activities (3,286) 6,061
-------- --------
Effects of exchange rates on cash balances (74) 57
Net cash provided by discontinued operations 354 1,430
Decrease in cash and cash equivalents (925) (88)
Cash and cash equivalents at beginning of period 997 842
-------- --------
Cash and cash equivalents at end of period $72 $754
======== ========
Supplemental cash flow information
----------------------------------
Cash paid for:
Interest 155 6,472
Income taxes 27 1
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
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ECOSCIENCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 1, 2000 and October 3, 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. ("ADI") 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 certain biological products. Until the sale of ADI's 51% interest
in Agro-Dan, Inc. on October 2, 2000, the Company marketed and sold products for
the agricultural industries.
The Company has suffered losses resulting in an accumulated deficit of $99,083
as of October 1, 2000. As of October 1, 2000, the Company is in default under
its Consolidated, Amended and Restated Loan Agreement (the "Loan Agreement")
dated as of January 2, 2000. 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 $72 of cash and cash equivalents as of October 1,
2000, along with borrowings and revenues from product sales and $2,200 of cash
proceeds derived from the sale of the Company's 51% interest in Agro-Dan, Inc.
in October 2000, will be sufficient to fund the Company's working capital needs,
planned capital expenditures and to service its indebtedness through October 1,
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.
As of June 23, 2000 the operating agreement between Village Farms, L.P.
("Village Farms") and Greenhost, Inc. ("Greenhost") pursuant to which the
company leased and operated its Virginia greenhouse facility terminated.
Effective July 1, 2000 Village Farms and Greenhost entered into a management
services agreement where Village Farms will manage the Virginia greenhouse and
will market the tomatoes produced under the Village Farms(R) brand name for a
term of approximately one year. Village Farms will not record any revenues or
expenses related to the sale of this product and will be paid a monthly
management fee for its services.
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 thirty-nine weeks ended October 1,
2000 and October 3, 1999, in accordance with accounting principles generally
accepted in the United States 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 following discussion included in the Results of Operations are based on both
continuing operations of the Company as well as the discontinued operations of
5
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the Agro-Dan, Inc. division. The financial statements present the Company's
Agro-Dan, Inc. division as discontinued operations in accordance with APB
Opinion No. 30, "Reporting the Effects of Disposal of a Segment of a Business."
The results of operations for the thirty-nine weeks ended October 1, 2000 and
October 3, 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
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 matured July 31, 2000. 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. A $5,000
principal payment on the working capital line of credit was due on March 31,
2000. Principal payments on the term loan of $1,500 and $1,000 were due March
31, 2000 and June 30, 2000 respectively. 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. No other interest or principal payments have been made to
CoBank. CoBank has not elected to exercise remedies against the Company. The
Company is in the process of seeking replacement financing with a new lender. No
assurance can be given that the replacement financing will be found.
4. Sale of assets and Discontinued Operations
In January 2000, the Company, through ADI, entered into a joint venture
agreement (the "Joint Venture") with Grodania 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 owned a 51% interest and Grodan owned
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.
Agro-Dan, Inc. represented primarily all of the Company's biological and
agricultural products segment. As a result of the Company's sale of its
remaining interest in Agro-Dan, Inc., as discussed below, the Company will cease
to operate in that segment.
As of October 2, 2000, the Company sold its 51% interest in the Joint Venture to
Grodan for $2.2 million. The Company expects a gain of approximately $5,400 as a
result of the transaction. The Company recorded net revenues of $10,671 and a
net loss of $42 as a result of the activities of Agro-Dan, Inc. during the
fifty-two weeks ended January 2, 2000 and net revenues of $8,422 and a net loss
of $127 as a result of the activities of Agro-Dan, Inc. during the thirty-nine
weeks ended October 1, 2000. The Company has reported the Agro-Dan, Inc., as
discontinued operations in the current and prior period financial statements.
Upon completion of the sale, the Company is primarily a producer, marketer, and
distributor of high quality greenhouse grown tomatoes.
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.
6
<PAGE>
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 Thirty-nine Weeks Ended
October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999
----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 12,888 12,619 12,888 12,619
Dilutive effect of common shares issuable (1) - - - -
----------------- ---------------- ---------------- ----------------
Weighted average common shares outstanding
assuming dilution 12,888 12,619 12,888 12,619
================= ================ ================ ================
</TABLE>
(1) Common stock purchase warrants and stock options at October 1, 2000 and
October 3, 1999 to purchase 1,121,951 and 1,154,221 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,
is as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999
<S> <C> <C> <C> <C>
Net loss ($4,356) ($7,757) ($14,711) ($18,443)
Other comprehensive (loss) gain, net of taxes
Foreign currency translation adjustments (32) (19) (74) 57
--------------- ---------------- ---------------- -----------------
Other comprehensive (loss) gain (32) (19) (74) 57
--------------- ---------------- ---------------- -----------------
Comprehensive loss ($4,388) ($7,776) ($14,785) ($18,386)
=============== ================ ================ =================
</TABLE>
7
<PAGE>
7. 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 subsidiaries
and consolidated limited partnerships (collectively "APD"), Agro Dynamics, Inc.
("ADI") and Agro Dynamics Canada 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
certain biological products. Until the sale of ADI's 51% interest in Agro-Dan,
Inc. on October 2, 2000, the Company marketed and sold products for the
agricultural industries.
Results of Operations for the thirteen weeks ended October 1, 2000
------------------------------------------------------------------
and October 3, 1999
-------------------
Discontinued Operations
As of October 2, 2000, the Company sold its 51% interest in the Joint Venture to
Grodan for $2.2 million. The Company expects a gain of approximately $5,400 in
the forth quarter, as a result of the transaction. Agro-Dan, Inc. was primarily
all of the biological and agricultural products segment and the Company is
ceasing operations in that segment.
As a result of this transaction, the net assets, operating results and cashflows
of the Company's Agro-Dan, Inc. division, have been classified as discontinued
operation within the accompanying consolidated financial statements.
The Company's income from discontinued operations increased $173 or $.02 per
basic and diluted share to a income of $88 or $0.01 per basic and diluted share
for the thirteen weeks ended October 1, 2000 compared to loss of $85 or $0.01
per basic and diluted share for the thirteen weeks ended October 3, 1999.
Continuing Operations
Upon completion of the sale, the Company is primarily a producer, marketer, and
distributor of high quality greenhouse grown tomatoes.
The Company's net revenues decreased by $42 or 1% to $4,467 for the thirteen
weeks ended October 1, 2000 from $4,509 for the thirteen weeks ended October 3,
1999. This decrease in sales of coating products was $215 or 49% to $116 for the
thirteen weeks ended October 1, 2000 from $437 for the thirteen weeks ended
October 3, 1999. The coating products division sold all its assets except its
BioSave(R) biofungicide products and technology to Pace International LLC in
November 1999, partially offset by revenue increase for the greenhouse tomatoes.
Cost of revenues decreased $2,452 or 32% to $5,100 for the thirteen weeks ended
October 1, 2000 from $7,552 for the thirteen weeks ended October 3, 1999,
primarily due the successful implementation of various cost containment
initiatives throughout the greenhouse production area.
Gross loss on net revenues decreased $2,410 or 79% to $633 for the thirteen
weeks ended October 1, 2000 from a gross loss of $3,043 for the thirteen weeks
ended October 3, 1999. Gross profit percentage on net revenues increased to
(14%) for the thirteen weeks ended October 1, 2000 from (67%) for the thirteen
weeks ended October 3, 1999. Both gross profit on net revenues and gross profit
percentage on net revenues increased primarily as a result of decreases in cost
of revenue.
Selling, general and administrative expenses decreased $1,619 or 53% to $1,419
for the thirteen weeks ended October 1, 2000 from $3,038 for the thirteen weeks
ended October 3, 1999, primarily due to the successful implementation of various
cost containment initiatives.
Operating loss from continuing operations decreased $4,029 or 66% to $2,052 for
the thirteen weeks ended October 1, 2000 compared to $6,081 for the thirteen
weeks ended October 3, 1999. The decrease in operating loss resulted primarily
8
<PAGE>
from an increase of $2,410 in gross profit for the thirteen weeks ended October
1, 2000 and a $1,619 decrease in operating expenses.
Other expenses increased by $578 to $2,380 for the thirteen weeks ended October
1, 2000, compared to $1,802 the thirteen weeks ended October 3, 1999, primarily
due to increased interest expense of $293 and a decrease in other income of
$285.
The Company's loss from continuing operations decreased $3,238 or $.25 per basic
and diluted share to a loss of $4,434 or $0.35 per basic and diluted share for
the thirteen weeks ended October 1, 2000 compared to loss of $7,672 or $0.60 per
basic and diluted share for the thirteen weeks ended October 3, 1999.
The Company's net loss decreased $3,411 or $.26 per basic and diluted share to a
net loss of $4,346 or $0.34 per basic and diluted share for the thirteen weeks
ended October 1, 2000 compared to net loss of $7,757 or $0.61 per basic and
diluted share for the thirteen weeks ended October 3, 1999.
The Company's EBITDA increased $3,431 to ($493) for the thirteen weeks ended
October 1, 2000 from ($3,924) for the thirteen weeks ended October 3, 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.
Results of Operations for the thirty-nine weeks ended October 1, 2000
---------------------------------------------------------------------
and October 3, 1999
-------------------
The Company's net revenues decreased by $4,441 or 14% to $28,064 for the
thirty-nine weeks ended October 1, 2000 from $32,505 for the thirty-nine weeks
ended October 3, 1999. This decrease was primarily due to revenue decreases for
the greenhouse tomato segment, that were primarily attributable to the reduction
of product sales from the closing of the Wheatfield greenhouse, a decrease in
product from contract growers and decreases in the Company's sales of coating
products of $998 or 75% to $338 for the thirty-nine weeks ended October 1, 2000
from $1,336 for the thirty-nine weeks ended October 3, 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 decreased $5,086 or 14% to $30,530 for the thirty-nine weeks
ended October 1, 2000 from $35,616 for the thirty-nine weeks ended October 3,
1999, primarily due to net revenue decreases.
Gross loss on net revenues decreased $645 to $2,466 for the thirty-nine weeks
ended October 1, 2000 from a gross loss of $3,111 for the thirty-nine weeks
ended October 3, 1999, primarily as a result of a decrease in cost of revenue.
Gross profit percentage on net revenues increased 1% to (9%) for the thirty-nine
weeks ended October 1, 2000 from a gross profit percentage of (10%) the
thirty-nine weeks ended October 3, 1999 for the reasons stated above.
Selling, general and administrative expenses decreased $3,976 or 46% to $4,732
for the thirty-nine weeks ended October 1, 2000 from $8,708 for the thirty-nine
weeks ended October 3, 1999, primarily due to the successful implementation of
various cost containment initiatives.
An impairment charge of $654 was recorded in the thirty-nine weeks ended October
3, 1999, related to the Company's sale of substantially all of the assets of
EPSC. The Company's long term assets, principally property and equipment and
goodwill, were written down to the proposed sales price.
Operating loss from continuing operations decreased $5,275 or 42% to $7,198 for
the thirty-nine weeks ended October 1, 2000 compared to $12,473 for the
thirty-nine weeks ended October 3, 1999. The decrease in operating loss resulted
primarily from an decrease of $4,630 in operating expenses for the thirty-nine
weeks ended October 1, 2000, and by a $645 increase in gross profit.
Other expenses increased by $723 to $7,365 for the thirty-nine weeks ended
October 1, 2000, compared to $6,642 for the thirty-nine weeks ended October 3,
1999, primarily due to a decrease in other income of $449 and an increase of
$274 in interest expense.
9
<PAGE>
The Company's net loss from continuing operations decreased $4,172 or $0.35 per
basic and diluted share to a net loss of $14,584 or $1.13 per basic and diluted
share for the thirty-nine weeks ended October 1, 2000 compared to net loss of
$18,756 or $1.48 per basic and diluted share for the thirty-nine weeks ended
October 3, 1999.
The Company's net income from discontinued operations decreased $440 or $0.03
per basic and diluted share to a net loss of $127 or $.01 per basic and diluted
share for the thirty-nine weeks ended October 1, 2000 compared to net income of
$313 or $.02 per basic and diluted share for the thirty-nine weeks ended October
3, 1999.
The Company's net loss decreased $3,732 or $0.32 per basic and diluted share to
a net loss of $14,711 or $1.14 per basic and diluted share for the thirty-nine
weeks ended October 1, 2000 compared to net loss of $18,443 or $1.46 per basic
and diluted share for the thirty-nine weeks ended October 3, 1999.
The Company's EBITDA increased $3,235 to ($3,106) for the thirty-nine weeks
ended October 1, 2000 from ($6,341) for the thirty-nine weeks ended October 3,
1999. EBITDA is net income (loss) excluding interest income, interest expense,
depreciation and amortization expense.
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 certain
vendors; however, the Company has structured extended terms with these 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 $72 at October 1, 2000 compared to $1,246 at
January 2, 2000. Cash provided by operating activities of continuing operations
totaled $2,360 for the thirty-nine weeks ended October 1, 2000 and principally
consisted of a decrease in accounts receivable of $4,178 and inventory of $2,493
and an increase in accounts payable and accrued expenses of $5,756 and
depreciation and amortization of $4,922, partially offset by a net loss of
$14,711. Cash used in financing activities of continuing operations totaled
$3,286 for the thirty-nine weeks ended October 1, 2000, which consisted of net
payments under lines of credit of $3,000 and payments of long-term debt and
capital leases of $286. Cash used in investment activities of continuing
operations for the thirty-nine weeks ended October 1, 2000 totaled $279, which
consisted of the purchase of property and equipment. The Company's net working
capital deficit is $83,529 and its current ratio was 0.11 to 1, at October 1,
2000 compared to 0.18 to 1, at January 2, 2000.
Debt and capital leases decreased by $4,419 to $87,242 at October 1, 2000
compared to $91,661 at January 2, 2000. The decrease was attributable to
payments of $3,000 to the working capital line of credit with CoBank, $1,131 to
line of credit with Century Business Credit Corporation, $249 to notes payable
and $39 on capital leases.
The Company believes that its $72 of cash and cash equivalents as of October 1,
2000, along with borrowings and revenues from product sales, and $2,200 of cash
proceeds derived from the sale of the Company's 51% interest in Agro-Dan, Inc.
in October 2000, will be sufficient to fund the Company's working capital needs,
planned capital expenditures, and to service its indebtedness through October 1,
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 October
1, 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.
10
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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.
11
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PART II. OTHER INFORMATION
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 its failure
to make payments of approximately $14,818 in principal and interest under the
terms of the agreement. As a result of this default, the lender has the right to
accelerate the payment of all amounts outstanding under the facility. As of
October 1, 2000 principal of $69,286 was outstanding under the facility.
Item 6. Exhibits and Reports on Form 8-K
(i) Exhibits
10.134 Stock Purchase Agreement between EcoScience Corporation and Grodania A/S
dated as of October 2, 2000. (Incorporated by reference to Exhibit 2 to the
Company's report on Form 8-K filed with the Securities and Exchange Commission
on October 23, 2000)
10.135 Management Service Agreement entered into on July 1, 2000, by and between
Greenhost, Inc and Village Farms, L.P.
27 Financial Data Schedule as of and for the Nine Months Ended October 1, 2000
(ii) Reports on Form 8-K.
(a) October 2, 2000 - regarding the sale of the 51% of Agro-Dan, Inc. to
Grodania A/S.
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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
November 15, 2000 /s/ Kenneth S. Hollander
--------------------------------------
Kenneth S. Hollander
Senior Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
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ECOSCIENCE CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Exhibit Description
------ -------------------
10.134 Stock Purchase Agreement between EcoScience Corporation and
Grodania A/S dated as of October 2, 2000. (Incorporated by
reference to Exhibit 2 to the Company's report on Form 8-K filed
with the Securities and Exchange Commission on October 23, 2000)
10.135 Management Service Agreement entered into on July 1, 2000, by and
between Greenhost, Inc and Village Farms, L.P.
27 Financial Data Schedule as of and for the Nine Months Ended
October 1, 2000
14
