<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 March 31, 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.
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(Exact name of small business issuer as specified in its character)
CALIFORNIA 33-0502606
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(State or other jurisdiction of incorporation or organization) I.R.S. Employer Identification No.
9985 Businesspark Ave., Suite A, San Diego, California 92131
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(Address of principal executive offices) (Zip Code)
(619) 549-5130
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(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 March 31, 1996
----- -----------------------------
<S> <C>
Common Stock, no par value 5,260,664
</TABLE>
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PLANET POLYMER TECHNOLOGIES, INC.
FORM 10-QSB QUARTERLY REPORT
QUARTER ENDED MARCH 31, 1996
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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PART I - FINANCIAL INFORMATION
Item 1 Balance Sheet (Unaudited)
March 31, 1996 2
Statements of Operations (Unaudited)
Three Months Ended March 31, 1996 and 1995 3
Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 1996 and 1995 4
Statements of Shareholders' Equity (Unaudited)
Three Months Ended March 31, 1996 and 1995 5
Notes to Unaudited Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 10
Item 2 Changes in Securities 10
Item 3 Defaults upon Senior Securities 10
Item 4 Submission of Matters to a vote of Security Holders 10
Item 5 Other Information 10
Item 6 Exhibits and Reports on Form 8K 10
SIGNATURES 11
</TABLE>
1
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PLANET POLYMER TECHNOLOGIES, INC.
BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents $ 352,875
Investments 2,791,604
Accounts receivable 539,696
Inventories 319,002
Prepaid expenses 68,034
------------
Total current assets 4,071,211
Property & equipment, net 933,115
Goodwill, net 610,036
Patents and other, net 410,133
------------
Total assets $ 6,024,495
============
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses:
Trade $ 304,826
Related party 12,976
Current portion of long term debt 136,291
Note payable 10,417
------------
464,510
Long term debt 273,728
------------
Total liabilities 738,238
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 and
outstanding 10,800,458
Accumulated deficit (5,514,201)
------------
Total shareholders' equity 5,286,257
------------
Total liabilities and shareholders' equity $ 6,024,495
============
</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 March 31,
1996 1995
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<S> <C> <C>
Development revenues $ 23,270 $ 86,121
Product sales 671,524 --
----------- -----------
Total revenue 694,794 86,121
----------- -----------
Operating expenses:
Cost of product sales 423,702 --
General & administrative 931,720 99,814
Marketing 328,464 125,058
Research & development 215,836 134,940
----------- -----------
1,899,722 359,812
----------- -----------
Loss from operations (1,204,928) (273,691)
Other income, net 31,840 4,139
----------- -----------
Net loss $(1,173,088) $ (269,552)
=========== ===========
Net loss per share $ (0.22) $ (0.06)
=========== ===========
Shares used in per share computations 5,260,664 4,266,670
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
3
<PAGE> 5
PLANET POLYMER TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,173,088) $(269,552)
Adjustments to reconcile net
loss to net cash used by
operating activities
Depreciation 39,098 8,052
Amortization of intangibles 21,517 10,447
Non-cash charge to compensation 592,370
Change in assets and liabilities:
Accounts receivable (68,162) 20,626
Inventories (32,924) 9,566
Prepaid expenses and other assets 5,518 (1,021)
Accounts payable & accrued expenses (365,300) (31,392)
----------- ---------
Net cash used by operating activities (980,971) (253,274)
----------- ---------
Cash flows from investing activities:
Purchases of property and equipment (30,817) (48,354)
Cost of patents, license and trademarks (12,597) (12,081)
Acquisition of subsidiary, net of cash acquired (803,945)
Sales (purchases) of investments, net (1,054,654) 137,964
----------- ---------
Net cash provided (used) by investing activities (1,902,013) 77,529
----------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of costs -- 44,003
Payments on note payable (10,417) --
Payments on long term debt (11,195) --
----------- ---------
Net cash provided (used) by financing activities (21,612) 44,003
----------- ---------
Net decrease in cash and cash equivalents (2,904,596) (131,742)
Cash and cash equivalents at beginning of period 3,257,471 558,007
----------- ---------
Cash and cash equivalents at end of period $ 352,875 $ 426,265
=========== =========
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
4
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PLANET POLYMER TECHNOLOGIES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Accumulated
------------------------------
Shares Amount Deficit Total
------ ------ ------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1994 3,886,183 3,547,973 $(2,334,733) $1,213,240
Issuance of common stock, net 7,936 44,003 44,003
Net loss for the three months
ended March 31, 1995 (269,552) (269,552)
---------- ----------- ----------- ----------
Balance at March 31, 1995 3,894,119 3,591,976 (2,604,285) 987,691
========== =========== =========== ==========
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 592,370 592,370
Net loss for the three months
ended March 31, 1996 (1,173,088) (1,173,088)
---------- ----------- ----------- ----------
Balance at March 31, 1996 5,260,664 10,800,458 (5,514,201) 5,286,257
========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
5
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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 three month period ended March 31, 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 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.
Supplemental Pro Forma Results of Operations
The following unaudited pro forma information presents the consolidated results
of operations for the three months ended March 31, 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 ...................... $ 879,658
Income from continuing operations .. 14,511
Net income ......................... 16,407
Earnings per share ................. $ 0.004
Shares used in per share computation 4,363,445
</TABLE>
6
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PLANET POLYMER TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS - (CONTINUED)
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 $592,000 based on the Black Scholes option-pricing model. As of
March 31, 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 March 31, 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 March 31, 1996,
none of these options have been exercised.
7
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PLANET POLYMER TECHNOLOGIES, INC.
OVERVIEW
Except for the historical information contained herein, the discussion of this
report contains 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."
Planet Polymer Technologies, Inc. (the "Company" or "Planet") emerged from the
development stage as a result of its acquisition of Deltco of Wisconsin, Inc.
("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.
Planet has incurred operating losses since inception and has an accumulated
deficit as March 31, 1996 of approximately $5.5 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 March 31, 1995 and 1996
The Company's revenues increased from approximately $86,000 during the three
months ended March 31, 1995 to approximately $695,000 during the three months
ended March 31, 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 three months ended March 31, 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.
General and administrative expenses increased by approximately $832,000 for the
three months ended March 31, 1996 compared to the three months ended March 31,
1995. This increase is primarily attributable to a $592,370 one time, non-cash
compensation expense for the fair value of options granted to an outside
consultant during the quarter. In addition, increased expenditures related to
the build-up of administrative infrastructure in anticipation of commercial
scale-up, 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.
8
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
RESULTS OF OPERATIONS, CONTINUED
Marketing expenses increased approximately $203,000 for the three months ended
March 31, 1996 compared to the three months ended March 31, 1995. This increase
is 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 have increased approximately
$81,000 for the three months ended March 31, 1996 compared to the three months
ended March 31, 1995. This increase is due to accelerated efforts spent on
refining the Company's hydrodegradable and compostable products and related
production trials.
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 12 months.
The Company's net loss increased from approximately $270,000 for the three
months ended March 31, 1995 to approximately $1,173,000 for the three months
ended March 31, 1996. This increase was due primarily to a $592,370 one time,
non-cash compensation expense for the fair value of options granted to
an outside consultant during the quarter.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, Planet has financed its operations primarily through the
private 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
secured by Deltco. As of March 31, 1996 the loan balance was approximately
$410,000. The Company has no material commitments for capital expenditures.
The Company has used approximately $981,000 for operations for the three months
ended March 31, 1996. Such funds have been used for research and development
activities, marketing efforts and administrative support.
The Company has used approximately $1.9 million for investing activities for the
three months ended March 31, 1965. 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 the next 12 months.
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.
9
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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. On January 5, 1996, the Company
filed a Current Report on Form 8-K to report the
acquisition of Deltco of Wisconsin, Inc. On March 15,
1996, the Company filed a Current Report on Form 8-K/A
(Amendment No. 1) to file audited financial statements
for Deltco for the fiscal years ended December 31, 1994
and 1995.
10
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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: May 14, 1996 Planet Polymer Technologies, Inc.
/s/ Robert J. Petcavich
-------------------------------------------
Robert J. Petcavich
President, Chief Executive Officer and
Director
(Principal Financial and Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
COMPANY'S UNAUDITED MARCH 31, 1996 BALANCE SHEET AND STATEMENT OF OPERATIONS FOR
THE THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH (B) STATEMENTS AS FILED IN THE COMPANY'S FORM 10-QSB FOR THE
THREE MONTHS ENDED MARCH 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 352,875
<SECURITIES> 2,791,604
<RECEIVABLES> 549,696
<ALLOWANCES> (10,000)
<INVENTORY> 319,002
<CURRENT-ASSETS> 4,071,211
<PP&E> 1,600,820
<DEPRECIATION> (667,705)
<TOTAL-ASSETS> 6,024,495
<CURRENT-LIABILITIES> 464,510
<BONDS> 273,728
0
0
<COMMON> 10,800,458
<OTHER-SE> (5,514,201)
<TOTAL-LIABILITY-AND-EQUITY> 6,024,495
<SALES> 694,794
<TOTAL-REVENUES> 694,794
<CGS> 423,702
<TOTAL-COSTS> 423,702
<OTHER-EXPENSES> 1,476,020
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,173,088)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,204,928)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,173,088)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
