<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 0-26054
<TABLE>
<S> <C>
PLANET POLYMER TECHNOLOGIES, INC.
---------------------------------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its character)
CALIFORNIA 33-0502606
---------------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) I.R.S. Employer Identification No.
9985 Businesspark Ave., Suite A, San Diego, California 92131
---------------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(619) 549-5130
---------------------------------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
</TABLE>
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.
/ X / YES / / NO
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
Class Outstanding at September 30, 1996
----- ---------------------------------
<S> <C>
Common Stock, no par value 5,260,664
</TABLE>
<PAGE> 2
PLANET POLYMER TECHNOLOGIES, INC.
FORM 10-QSB QUARTERLY REPORT
QUARTER ENDED SEPTEMBER 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 Balance Sheet (Unaudited)
September 30, 1996 2
Statements of Operations (Unaudited)
Three Months Ended September 30, 1996 and 1995 3
Statements of Operations (Unaudited)
Nine Months Ended September 30, 1996 and 1995 4
Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 1996 and 1995 5
Statements of Shareholders' Equity (Unaudited)
Nine Months Ended September 30, 1996 6
Notes to Unaudited Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Defaults upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8K 13
SIGNATURES 14
</TABLE>
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
PLANET POLYMER TECHNOLOGIES, INC.
BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 758,113
Investments 1,432,806
Accounts Receivable 619,031
Inventories 342,081
Prepaid expenses 41,745
-----------
Total current assets 3,193,776
Property and equipment, net 916,846
Goodwill, net 594,592
Patents and other, net 422,344
-----------
Total assets $ 5,127,558
===========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable and accrued expenses $ 228,636
Current portion of long term debt 136,291
-----------
Total current liabilities 364,927
Long term debt 219,649
-----------
Total liabilities 584,576
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares
authorized, no shares outstanding --
Common stock, no par value, 20,000,000 shares
authorized, 5,260,664 shares issued & outstanding 10,686,579
Accumulated Deficit (6,143,597)
-----------
Total shareholders' equity 4,542,982
-----------
Total liabilities and shareholders' equity $ 5,127,558
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 4
PLANET POLYMER TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1996 1995
---------- -----------
<S> <C> <C>
Development revenue $ 32,286 $ 38,888
Product Sales 844,637 --
---------- ----------
Total revenue 876,923 38,888
---------- ----------
Operating expenses:
Cost of product sales 513,302 --
General and administrative 230,266 176,512
Marketing 274,610 73,457
Research and development 167,911 111,387
--------- ----------
Total operating expenses 1,186,089 361,356
--------- ----------
Loss from operations (309,166) (322,468)
Other income, net 13,375 10,685
---------- ----------
Net loss $ (295,791) $ (311,783)
========== ==========
Net loss per share $ (0.06) $ (0.08)
========== ==========
Shares used in per share
computations 5,260,664 4,080,266
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 5
PLANET POLYMER TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
----------- -----------
<S> <C> <C>
Development revenue $ 158,236 $ 211,147
Product Sales 2,367,559 --
----------- -----------
Total revenues 2,525,795 211,147
----------- -----------
Operating expenses:
Cost of product sales 1,484,437 --
General and administrative 1,389,893 503,985
Marketing 910,802 612,024
Research and development 606,172 355,978
----------- -----------
Total operating expenses 4,391,304 1,471,987
----------- -----------
Loss from operations (1,865,509) (1,260,840)
Other income, net 63,025 20,071
----------- -----------
Net loss $(1,802,484) $(1,240,769)
=========== ===========
Net loss per share $ (0.34) $ (0.30)
=========== ===========
Shares used in per share
computations 5,260,664 4,080,266
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 6
PLANET POLYMER
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,802,484) $(1,240,769)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 120,444 26,786
Amortization of intangibles 53,245 12,135
Compensation expense - non cash 478,491 --
Change in assets and liabilities:
Accounts receivable (147,497) 45,597
Inventories (56,003) 2,374
Prepaid expenses and other assets 38,077 (6,664)
Accounts payable and accrued expenses (454,464) 97,537
----------- -----------
Net cash used by operating activities (1,770,191) (1,063,004)
----------- -----------
Cash flow from investing activities:
Purchases of property and equipment (95,891) (60,117)
Cost of patents, licenses and trademarks (47,367) (25,015)
Acquisition of subsidiary, net of cash acquired (803,945) --
Sales of investments 304,144 334,553
----------- -----------
Net cash provided (used) by investing activities (643,059) 249,421
----------- -----------
Cash flow from financing activities:
Proceeds from issuance of common stock, -- 5,333,129
Proceeds from exercise of warrants -- 21,301
Payments on note payable (20,834) --
Payments on long term debt (65,274) --
----------- -----------
Net cash provided (used) by financing activities (86,108) 5,354,430
----------- -----------
Net increase (decrease) in cash and cash equivalents (2,499,358) 4,540,847
Cash and cash equivalents at beginning of period 3,257,471 558,007
----------- -----------
Cash and cash equivalents at end of period $ 758,113 $ 5,098,854
=========== ===========
Supplemental disclosure of non-cash activity:
Stock issued in connection with acquisition of subsidiary $ 508,069
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 7
PLANET POLYMER TECHNOLOGIES
STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
------------------------------- Accumulated
Shares Amount Deficit Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 5,163,889 $ 9,700,019 $ (4,341,113) $ 5,358,906
Issuance of common stock, net 96,775 508,069 508,069
Fair value of stock options
granted to an outside consultant 478,491 478,491
Net loss for the nine months ended
September 30, 1996 (1,802,484) (1,802,484)
------------ ------------ ------------ ------------
Balance at September 30, 1996 5,260,664 $ 10,686,579 $ (6,143,597) $ 4,542,982
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 8
PLANET POLYMER TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited financial statements of Planet Polymer Technologies,
Inc. (the "Company" or "Planet") have been prepared in accordance with the
interim reporting requirements of Form 10-QSB, pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended September 30, 1996
are not necessarily indicative of results that may be expected for the year
ended December 31, 1996. For additional information, refer to the Company's
financial statements and notes thereto for the year ended December 31, 1995
contained in the Company's Form 10-KSB for the fiscal year ended December 31,
1995 and the financial statements of Deltco of Wisconsin, Inc. ("Deltco") for
the year ended December 31, 1995, contained in the Company's Current Report on
Form 8K and Current Report on Form 8-K/A filed with the Commission on January 5,
1996 and March 15, 1996, respectively.
2. Acquisition
Effective January 1, 1996, the Company acquired all the outstanding capital
stock of Deltco, a Wisconsin corporation, from the sole stockholder of Deltco
pursuant to the terms of a Purchase and Sale Agreement dated as of January 1,
1996 (the "Agreement"). This transaction was accounted for as a purchase.
Pursuant to the Agreement, the Company paid the sole stockholder of Deltco
$1,125,000 and issued 96,775 shares of restricted Common Stock of the Company
valued at approximately $508,000 based on a discounted stock price at January 4,
1996, the date of announcement of the transaction. The purchase agreement also
specified target net worth and cash balances at the date of transaction. The
excess net worth of approximately $36,000, reduced by $24,000 due from the
seller, brought the total purchase price to approximately $1,646,000. The
Company paid the cash portion of the purchase price out of its available cash
reserves. The stock portion of the purchase price was paid with newly issued
shares of the Company's Common Stock, which were issued pursuant to an exemption
from the registration requirements of the Securities Act of 1933, as amended.
The purchase price was first allocated to the tangible assets (which included
approximately $334,000 of cash) and liabilities based on fair market value at
the purchase date. The remaining amount, approximately $617,000, was recorded as
goodwill which will be amortized over 20 years.
In addition, the Agreement provides for contingent payments to the President of
Deltco based on performance criteria for each of the years ended December 31,
1996 and 1997.
As a result of this acquisition, the Company is no longer considered a
development stage enterprise as of January 1, 1996.
7
<PAGE> 9
PLANET POLYMER TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS - (CONTINUED)
Supplemental Pro Forma Results of Operations
The following unaudited pro forma information presents the consolidated results
of operations for the nine months ended September 30, 1995, as if the
acquisition had occurred at the beginning of the period and does not purport to
be indicative of what would have occurred had the acquisition actually been made
as of such date or of results which may occur in the future.
<TABLE>
<S> <C>
Total revenue .......................................... $ 2,856,631
Loss from continuing operations ........................ ($1,052,190)
Net loss ............................................... ($1,006,803)
Earnings per share ..................................... ($ 0.241)
Shares used in per share computation ................... 4,177,041
</TABLE>
3. Shareholders' Equity
Options
On January 31, 1996, the Company's Board of Directors granted non-statutory
stock options to purchase 66,137 shares of Common Stock at an exercise price of
$6.00 per share and 27,863 shares of Common Stock at an exercise price of $5.10
per share to an outside consultant of the Company. These options were
fully-vested as of the date of the grant and expire on January 30, 2004. In
connection with this transaction, the Company recorded a charge to income of
approximately $479,000 based on the Black-Scholes option-pricing model. As of
September 30, 1996, none of these options have been exercised.
On January 31, 1996, the Company's Board of Directors granted non-statutory
stock options to acquire an aggregate of 312,620 shares of Common Stock at an
exercise price of $8.125 per share to directors and employees under the 1995
Stock Option Plan. These options were fully vested as of the date of the grant
and expire on January 30, 2004. As of September 30, 1996, none of these options
have been exercised.
On January 31, 1996, a previously granted incentive stock option to purchase
50,000 shares of Common Stock was terminated in accordance with its terms, prior
to the vesting of any shares subject to such option.
On February 1, 1996, the Company's Board of Directors granted incentive stock
options to acquire 5,000 shares of Common Stock at an exercise price of $8.125
per share to employees under the 1995 Stock Option Plan. These options vest one
year from the grant date and expire on January 31, 2004. As of September 30,
1996, none of these options have been exercised.
8
<PAGE> 10
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PLANET POLYMER TECHNOLOGIES, INC.
Except for the historical information contained herein, the discussions in this
report contain forward looking statements that involve certain risks and
uncertainties. The Company's actual results could differ materially from those
discussed in this report. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in the Company's
Form 10-KSB for the fiscal year ended December 31, 1995 in "Item 1 - Description
of Business," including the section therein entitled "Risk Factors," and "Item 6
- - Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Overview
Planet Polymer Technologies, Inc. (the "Company" or "Planet") emerged from the
development stage as a result of its acquisition of Deltco of Wisconsin, Inc., a
Wisconsin corporation ("Deltco"), effective January 1, 1996. Prior to this
acquisition, substantially all of the Company's resources had been devoted to
the development and commercialization of its seven Enviroplastic technologies
and products.
Deltco is a manufacturer and reprocessor of thermoplastic scrap resins located
in Ashland, Wisconsin. The Company intends to continue to use Deltco's plant,
equipment and other physical property in the manner in which it was used prior
to the acquisition. In addition, the Company plans to leverage its Enviroplastic
technologies and sales and marketing expertise with Deltco's manufacturing
experience.
Research and development and marketing expenses are expected to increase
significantly in the future as the Company's Enviroplastic products are
commercialized and continued efforts are focused on Deltco's resins. General and
administrative expenses are not expected to increase significantly in the next
three months.
Planet has incurred operating losses since inception and has an accumulated
deficit at September 30, 1996 of approximately $6.1 million. Pending commercial
deployment of and related volume orders for the Company's Enviroplastic
products, the Company expects to incur additional losses.
Results of Operations
Three months ended September 30, 1996 and 1995
The Company's revenues increased from approximately $39,000 during the three
months ended September 30, 1995 to approximately $877,000 during the three
months ended September 30, 1996. This increase primarily reflects the
acquisition by Planet of Deltco. The Company continued to focus on
internally-funded, rather than customer-funded, product development of the
Company's Enviroplastic products during the three months ended September 30,
1996. The Company will continue to participate in customer-funded development
when appropriate, but believes internally-funded development is advantageous as
to certain technologies and applications.
9
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
Results of Operations, Continued
General and administrative expenses increased to approximately $230,000 for the
three months ended September 30, 1996 from approximately $177,000 during the
three months ended September 30, 1995. This increase was primarily attributable
to increased expenditures related the build-up of administrative infrastructure
in anticipation of commercial scale-up, additional professional fees, activities
associated with the Company's status as a public company and the related
reporting requirements, and the acquisition of Deltco.
Marketing expenses increased to approximately $275,000 for the three months
ended September 30, 1996 from approximately $73,000 during the three months
ended September 30, 1995. This increase primarily reflects the addition of sales
and marketing personnel and efforts focused on establishing international joint
ventures in anticipation of the commercialization of the Company's products.
The Company's research and development expenses increased to approximately
$168,000 for the three months ended September 30, 1996 from approximately
$111,000 during the three months ended September 30, 1995. This increase was due
primarily to increased efforts spent on refining the Company's hydrodegradable
and compostable products and related production trials, and the addition of
research personnel.
Research and development and marketing expenses are expected to increase
significantly in the future as the Company's Enviroplastic products are
commercialized and continued efforts are focused on Deltco's resins. General and
administrative expenses are not expected to increase significantly in the next
three months.
Nine Months Ended September 30, 1996 and 1995
The Company's revenue increased from approximately $211,000 during the nine
months ended September 30, 1995 to approximately $2,526,000 during the nine
months ended September 30, 1996. This increase primarily reflects the
acquisition by Planet of Deltco, offset by the Company's continued focus on
internally-funded, rather than customer-funded, product development of the
Company's Enviroplastic products during the nine months ended September 30,
1996. The Company will continue to participate in customer-funded development
when appropriate, but believes internally-funded development is advantageous as
to certain technologies and applications.
10
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
General and administrative expenses increased to approximately $1,390,000 for
the nine months ended September 30, 1996 from approximately $503,985 during the
nine months ended September 30, 1995. This increase was primarily due to a
$479,000 one time, non-cash compensation expense for the fair value of options
granted to an outside consultant during the 1st Quarter. In addition, increased
expenditures related to the build-up of administrative infrastructure in
anticipation of commercial scale-up, additional professional fees, activities
associated with the Company's status as a public company and the related
reporting requirements, and the acquisition of Deltco contributed to the
increase.
Marketing expenses increased to approximately $911,000 for the nine months ended
September 30, 1996 from approximately $612,000 during the nine months ended
September 30, 1995. This increase was primarily attributable to the addition of
sales and marketing personnel, efforts focused on increasing Deltco's customer
base, and efforts focused on establishing international joint ventures in
anticipation of the commercialization of the Company's products.
The Company's research and development expenses increased to approximately
$606,000 for the nine months ended September 30, 1996 from approximately
$356,000 during the nine months ended September 30, 1995. This increase was due
to accelerated efforts spent on refining the Company's hydrodegradable and
compostable products and related production trials, and the addition of research
personnel.
11
<PAGE> 13
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
Liquidity and Capital Resources
Since inception, Planet has financed its operations primarily through the sale
of equity securities and revenue from customer development agreements. The
Company has raised approximately $4 million (net of issuance costs) from the
private sale of Common Stock and exercise of warrants to purchase Common Stock.
In September 1995 the Company completed its initial public offering in which it
sold an aggregate of 1,150,000 shares of Common Stock to the public and received
net proceeds of approximately $5.6 million. In January 1996, the Company used
$1,125,000 in cash and issued 96,775 shares of restricted Common Stock valued at
approximately $508,000 to acquire Deltco in a purchase transaction. In
connection with the purchase, the Company now has one outstanding debt agreement
related to a Small Business Administration loan collateralized by Deltco. As of
September 30, 1996 the loan balance was approximately $356,000. The Company has
no material commitments for capital expenditures.
The Company has used approximately $1,770,000 for operations for the nine months
ended September 30, 1996. Such funds have been used for research and development
activities, marketing efforts and administrative support.
The Company has used approximately $643,000 for investing activities for the
nine months ended September 30, 1996. Such funds were used primarily to purchase
Deltco as well as to purchase short term investments for cash reserves.
The Company believes that the proceeds generated from its initial public
offering together with existing sources of liquidity and anticipated revenue,
including revenues generated from Deltco, will satisfy the Company's projected
working capital and other cash requirements through at least September, 1997.
There can be no assurance, however, that changes in the Company's plans or other
events affecting the Company's operating expenses will not result in the
expenditure of such resources before such time. The Company expects that it will
need to raise substantial additional funds to establish large-scale
manufacturing capabilities. The Company intends to seek additional funding from
existing and potential customers or through public or private equity or debt
financing. There can be no assurance that additional financing will be available
on acceptable terms, or at all.
12
<PAGE> 14
PART II - OTHER INFORMATION
PLANET POLYMER TECHNOLOGIES, INC.
Item 1 - Legal Proceedings:
None
Item 2 - Changes in Securities:
None
Item 3 - Defaults upon Senior Securities:
None
Item 4 - Submission of Matters to a Vote of Security Holders.
None
Item 5 - Other Information:
None
Item 6 - Exhibits and Reports on Form 8-K:
(a) 1. Financial Statements. Financial statements are included as
Part I, Item 1 of this report.
2. Financial Statement Schedules. All schedules are omitted since
the required information is not present or is not present in
amounts sufficient to require a submission of the schedules,
or because the information required is included in the
financial statements and notes thereto.
3. Exhibits.
Exhibit Number Description
-------------- -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None
13
<PAGE> 15
PLANET POLYMER TECHNOLOGIES, INC.
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 13, 1996 Planet Polymer Technologies, Inc.
------------------
/s/ ROBERT J. PETCAVICH
---------------------------------------
President, Chief Executive Officer and Director
(Principal Financial and Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's unaudited September 30, 1996 Balance Sheet and Statement of Operations
for the nine months ended September 30, 1996 and is qualified in its entirety by
reference to such statements as filed in the Company's Form 10-QSB for the nine
months ended September 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 758,113
<SECURITIES> 1,432,806
<RECEIVABLES> 629,031
<ALLOWANCES> (10,000)
<INVENTORY> 342,081
<CURRENT-ASSETS> 3,193,776
<PP&E> 1,665,892
<DEPRECIATION> (749,046)
<TOTAL-ASSETS> 5,127,558
<CURRENT-LIABILITIES> 364,927
<BONDS> 219,649
0
0
<COMMON> 10,686,579
<OTHER-SE> (6,143,597)
<TOTAL-LIABILITY-AND-EQUITY> 5,127,558
<SALES> 2,525,795
<TOTAL-REVENUES> 2,525,795
<CGS> 1,484,437
<TOTAL-COSTS> 1,484,437
<OTHER-EXPENSES> 2,906,867
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,959
<INCOME-PRETAX> (1,802,485)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,865,509)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,802,485)
<EPS-PRIMARY> (0.34)
<EPS-DILUTED> (0.34)
</TABLE>
