<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 June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
Commission File Number: 0-26804
PLANET POLYMER TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its character)
CALIFORNIA 33-0502606
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.
9985 Businesspark Ave., Suite A, San Diego, California 92131
(Address of principal executive offices) (Zip Code)
(619) 549-5130
(Issuer's telephone number, including area code)
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 issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at August 1, 1997
----- -----------------------------
Common Stock, no par value 5,271,270
<PAGE> 2
PLANET POLYMER TECHNOLOGIES, INC.
FORM 10-QSB QUARTERLY REPORT
QUARTER ENDED JUNE 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheet (Unaudited)
June 30, 1997 2
Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, 1997 and 1996 3
Consolidated Statements of Operations (Unaudited)
Six Months Ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1997 and 1996 5
Consolidated Statement of Shareholders' Equity (Unaudited)
Six Months Ended June 30, 1997 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 11
Item 2 Changes in Securities 11
Item 3 Defaults upon Senior Securities 11
Item 4 Submission of Matters to a Vote of Security Holders 11
Item 5 Other Information 11
Item 6 Exhibits and Reports on Form 8K 12
SIGNATURES 13
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 1,276,236
Accounts receivable 568,050
Inventories 285,654
Prepaid expenses and other receivables 35,332
Deferred income taxes 13,913
------------
Total current assets 2,179,185
Property and equipment, net 858,959
Goodwill, net 592,020
Patents and other, net 338,911
------------
Total assets $ 3,969,075
============
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 261,801
Notes payable 285,059
------------
Total current liabilities 546,860
Other liabilities 300,555
Deferred income taxes 14,334
------------
Total liabilities 861,749
------------
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, 5,271,270 shares issued & outstanding 10,711,412
Accumulated deficit (7,604,086)
------------
Total shareholders' equity 3,107,326
------------
Total liabilities and shareholders' equity $ 3,969,075
============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
2
<PAGE> 4
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Development revenue $ 64,199 $ 102,680
Product sales 868,402 851,398
----------- -----------
Total revenue 932,601 954,078
Cost of sales 612,954 547,432
----------- -----------
319,647 406,646
----------- -----------
Operating expenses:
General and administrative 290,950 227,908
Marketing 7,765 307,728
Research and development 135,066 222,425
----------- -----------
Total operating expenses 433,781 758,061
----------- -----------
Loss from operations (114,134) (351,415)
Other income, net 8,973 17,809
----------- -----------
Loss before income taxes (105,161) (333,606)
Income taxes 14,027 --
----------- -----------
Net loss $ (119,188) $ (333,606)
=========== ===========
Net loss per share $ (0.02) $ (0.06)
=========== ===========
Shares used in per share computations 5,271,270 5,260,664
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE> 5
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Development revenue $ 83,206 $ 125,950
Product sales 1,740,257 1,522,922
----------- -----------
Total revenue 1,823,463 1,648,872
Cost of sales 1,235,992 971,134
----------- -----------
587,471 677,738
----------- -----------
Operating expenses:
General and administrative 568,870 1,159,628
Marketing 194,117 636,192
Research and development 260,425 438,261
----------- -----------
Total operating expenses 1,023,412 2,234,081
----------- -----------
Loss from operations (435,941) (1,556,343)
Other income, net 30,649 49,649
----------- -----------
Loss before income taxes (405,292) (1,506,694)
Income taxes 29,094 --
----------- -----------
Net loss $ (434,386) $(1,506,694)
=========== ===========
Net loss per share $ (0.08) $ (0.29)
=========== ===========
Shares used in per share computations 5,271,270 5,260,664
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE> 6
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (434,386) $(1,506,694)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 85,959 125,620
Compensation expense - non cash (62,667) 478,491
Gain on disposal of assets (375) --
Change in assets and liabilities, net of effects of acquisition:
Accounts receivable 103,716 (212,902)
Inventories 83,921 (5,512)
Prepaid expenses and other assets 20,927 41,140
Accounts payable and accrued expenses (105,159) (395,268)
----------- -----------
Net cash used by operating activities (308,064) (1,475,125)
----------- -----------
Cash flow from investing activities:
Purchases of property and equipment (621) (32,821)
Proceeds from the sale of property and equipment 3,000 --
Cost of patents, licenses and trademarks (9,536) (12,597)
Acquisition of subsidiary, net of cash acquired -- (803,945)
Purchases of investments, net -- (173,328)
----------- -----------
Net cash used by investing activities (7,157) (1,022,691)
----------- -----------
Cash flow from financing activities:
Payments on note payable -- (20,834)
Payments on short-term borrowings (48,935) (40,918)
----------- -----------
Net cash used by financing activities (48,935) (61,752)
----------- -----------
Net decrease in cash and cash equivalents (364,156) (2,559,568)
Cash and cash equivalents at beginning of period 1,640,392 3,257,471
----------- -----------
Cash and cash equivalents at end of period $ 1,276,236 $ 697,903
=========== ===========
Supplemental disclosure of non-cash activity:
Stock options granted to a consultant $ 704 $ 478,491
Restricted Common Stock issued in connection with acquisition -- 508,069
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE> 7
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
----------------------------- Accumulated
Shares Amount Deficit Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 5,271,270 $ 10,774,783 $ (7,169,700) $ 3,605,083
Revision of Common Stock issuance
estimate -- (63,371) -- (63,371)
Net loss for the six months ended
June 30, 1997 -- -- (434,386) (434,386)
------------ ------------ ------------ ------------
Balance at June 30, 1997 5,271,270 $ 10,711,412 $ (7,604,086) $ 3,107,326
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
6
<PAGE> 8
PLANET POLYMER TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED 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 and six month periods ended June 30,
1997 are not necessarily indicative of results that may be expected for the year
ending December 31, 1997. For additional information, refer to the Company's
financial statements and notes thereto for the year ended December 31, 1996
contained in the Company's Form 10-KSB for the fiscal year ended December 31,
1996.
2. Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement Accounting Standards No. 128 "Earnings per Share" ("SFAS No. 128").
SFAS No. 128 requires dual presentation of newly defined basic and diluted
earnings per share on the face of the income statement for all entities with
complex capital structures. The accounting standard is effective for fiscal
years ending after December 15, 1997, including interim periods. The Company
does not believe that the adoption of SFAS No. 128 will have a material impact
on the computation of its earnings per share in future periods.
3. Shareholders' Equity
On February 5, 1997, a previously granted incentive stock option to purchase
5,000 shares of Common Stock was terminated in accordance with its terms.
On February 6, 1997, a previously granted incentive stock option to purchase
5,000 shares of Common Stock was terminated in accordance with its terms.
On May 1, 1997, a previously granted incentive stock option to purchase 25,000
shares of Common Stock was terminated in accordance with its terms.
On April 11, 1997, the Company's Board of Directors granted incentive stock
options to purchase 10,000 shares of Common Stock at an exercise price of $2.50
per share to employees under the 1995 Stock Option Plan. These options were
fully vested as of the date of grant and expire on April 11, 2007. As of June
30, 1997, none of these options have been exercised.
On May 22, 1997, the Company's Board of Directors granted non-statutory stock
options to purchase 10,000 shares of Common Stock at an exercise price of $3.00
per share to an outside consultant of the Company. These options vest ratably
over the one-year term of the agreement and expire on May 22, 2007. In
connection with this transaction, the Company recorded a charge to income, for
the six months ended June 30, 1997, of approximately $704, based on the Black
Scholes option-pricing model. As of June 30, 1997, 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.
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, the development of new products,
market acceptance of new products, general economic conditions and the
availability of additional financing, as well as those discussed in the
Company's Form 10-KSB for the fiscal year ended December 31, 1996 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 maintains Deltco as a wholly owned
subsidiary, and uses its plant, equipment and other physical property in the
manner in which it was used prior to the acquisition. The Company plans to
leverage its Enviroplastic technologies and sales and marketing expertise with
Deltco's manufacturing experience.
The Company is actively seeking to reduce costs such that general and
administrative and marketing expenses are not expected to increase in the next
three months. Notwithstanding the decrease in research and development expenses
experienced during the first six months of 1997, the Company expects that
research and development expenses may increase significantly in the future as
the Company's products are commercialized and continued efforts are focused on
Deltco's resins.
Planet has incurred operating losses since inception and had an accumulated
deficit at June 30, 1997 of approximately $7.6 million. The Company expects to
incur additional losses for the foreseeable future.
Results of Operations
The Company's revenues decreased from approximately $954,000 for the three
months ended June 30, 1996 to approximately $933,000 for the three months ended
June 30, 1997 and increased from approximately $1,649,000 for the six months
ended June 30, 1996 to approximately $1,823,000 for the six months ended June
30, 1997. These were primarily attributable to increased sales volume at Deltco
offset by decreased research and development revenue at Planet. In addition,
Planet continued to focus on internally-funded, rather than customer-funded
product development. 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.
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
Cost of sales increased from approximately $547,000 for the three months ended
June 30, 1996 to approximately $613,000 for the three months ended June 30, 1997
and from approximately $971,000 for the six months ended June 30, 1996 to
approximately $1,236,000 for the six months ended June 30, 1997. The increase
was primarily attributable to higher sales at Deltco at lower margins resulting
from increases in the cost of raw materials and increases in personnel costs.
General and administrative expenses increased from approximately $228,000 for
the three months ended June 30, 1996 to approximately $291,000 for the three
months ended June 30, 1997 and decreased from approximately $1,160,000 for the
six months ended June 30, 1996 to approximately $569,000 for the six months
ended June 30, 1997. This was primarily attributable to a $592,000 one time,
non-cash compensation expense for the fair value of options granted to an
outside consultant during the three months ended March 31, 1996 which was
revised downward by approximately $114,000 during the three months ended June
30, 1996. The Company also incurred certain costs associated with the
acquisition of Deltco during 1996. In addition, the Company reduced the costs of
outside services and general and administrative staff as a result of various
cost reduction programs initiated by the Company during 1997.
Marketing expenses decreased from approximately $308,000 for the three months
ended June 30, 1996 to approximately $8,000 for the three months ended June 30,
1997 and from approximately $636,000 for the six months ended June 30, 1996 to
approximately $194,000 for the six months ended June 30, 1997. These decreases
were primarily due to reductions in sales and marketing personnel, the reduction
of outside services and the reduction in international travel expenditures while
increasing marketing efforts in North America. In addition, during the three
months ended June 30, 1997 there was a downward revision of approximately
$63,000 to the December 31, 1996 estimated non-cash incentive compensation
expense for the fair value of stock granted to the president of Deltco.
Research and development expenses decreased from approximately $222,000 for the
three months ended June 30, 1996 to approximately $135,000 for the three months
ended June 30, 1997 and from approximately $438,000 for the six months ended
June 30, 1996 to approximately $260,000 for the six months ended June 30, 1997.
These decreases were due primarily to lower research and development revenue at
Planet, the decreased use of outside resin processors and a reduction in pilot
plant operations staff offset by the addition of a scientist during the three
months ended June 30, 1996.
Deltco recently received a request for bid from its preferred supplier of scrap
plastic. Although the Company doesn't expect any change in Deltco's supply of
scrap plastic, such a change, if it occurs, could result in substantial
short-term increases in costs resulting from the selection of a replacement
supplier. Additional information can be found in the Company's Form 10-KSB for
the fiscal year ended December 31, 1996, including sections therein entitled
"Item 1 - Description of Business - Manufacturing and Suppliers" and " - Risk
Factors - Availability of Raw Materials."
9
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
Liquidity and Capital Resources
Since its 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. In September 1995, the Company completed its
initial public offering in which it sold an aggregate of 1,150,000 shares of
Common Stock 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 June 30, 1997 the loan balance was approximately
$224,000. The Company has no material commitments for capital expenditures.
The Company used approximately $308,000 for operations for the six months ended
June 30, 1997. Such funds were used for research and development activities,
marketing efforts and administrative support.
The Company used approximately $7,000 for investing activities for the six
months ended June 30, 1997. Such funds were used for the preparation and filing
of patents offset by proceeds from the sale of property and equipment.
The Company used approximately $49,000 for the repayment of debt for the six
months ended June 30, 1997.
The Company believes that its 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 December,
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.
10
<PAGE> 12
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.
The Annual Meeting of Shareholders of Planet Polymer Technologies, Inc.
(the "Annual Meeting") was held on May 22, 1997 in San Diego,
California.
Proposal 1 - Election of Directors
Each of the candidates listed below were duly elected to the Board of
Directors at the Annual Meeting by the tally indicated.
<TABLE>
<CAPTION>
Candidate Votes in Favor Votes Witheld
--------- -------------- -------------
<S> <C> <C>
Robert J. Petcavich, Ph.D. 4,192,051 102,078
Michael V. Pundeff 4,190,951 103,178
Michael M. Coleman, Ph.D. 4,191,651 102,478
</TABLE>
Proposal 2 - Ratification of Selection of Independent Auditors
<TABLE>
<CAPTION>
Votes in Favor Votes Against Votes Abstained
-------------- ------------- ---------------
<S> <C> <C>
4,277,767 8,850 7,325
</TABLE>
Item 5 - Other Information:
None
11
<PAGE> 13
Item 6 - Exhibits and Reports on Form 8-K:
(a) Exhibits.
Exhibit Number Description
-------------- -----------
10.11(1) Technology Development and License
Agreement, dated January 30, 1995 between
the Company and Cominco Fertilizers, Ltd.
10.12 Fourth Amendment to Lease, dated August 1,
1997, between the Company and Trustees
Under the Will and of the Estate of James
Campbell
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None
- ---------------------
(1) Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions will be filed separately with the
Securities and Exchange Commission.
12
<PAGE> 14
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: August 11, 1997 Planet Polymer Technologies, Inc.
/S/ ROBERT J. PETCAVICH
-----------------------------------
President, Chief Executive Officer and
Director
(On behalf of Registrant and as
Registrant's Principal Financial and
Accounting Officer)
13
<PAGE> 1
EXHIBIT 10.11
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (the "Mark"). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 24b-2 under the
Securities Exchange Act.
TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
This Agreement is made this 30th Day of January, 1995 between Cominco
Fertilizers Ltd, a Canadian corporation, with offices at 426, 10333 Southport
Road S.W., Calgary, Alberta, Canada T2W 3X6, hereinafter referred to as
"Cominco"; and Planet Polymer Technologies, Inc. with offices at 9985
Businesspark Avenue, Suite A, San Diego, California, U.S. 92131 hereinafter
referred to as "Planet".
RECITALS:
WHEREAS, Planet has developed technology, specifically coatings to
achieve time release of fertilizers, and
WHEREAS , Cominco wishes to have Planet conduct further development work
including, but not limited to the use of coatings to control release of
fertilizers and to protect products containing biological inoculants.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS:
1.1 "Fertilizer Products" shall mean fertilizers products produced,
distributed or marketed by Cominco from time to time, including, but not
limited to: urea, monoammonium phosphate, ammonium sulphate and potash.
1.2 "Biological Products" shall mean biological products, including
inoculants, produced, distributed or marketed by Cominco from time to
time.
1.3 "Cominco's Field of Business" shall mean production, distribution and
marketing of Fertilizer Products, Biological Products, and any substitute
products mutually agreed upon (collectively the "Products").
1.4 "Marketplace" shall mean the respective geographic areas that Cominco may
from time to time decide constitutes a distinct market for the Products.
1.5 "Affiliate shall mean any company which directly or indirectly (1) is
controlled by a party to this Agreement, (2) controls a party to this
Agreement, or (3) is controlled by the same entity which controls a party
to this Agreement. Ownership of 50% or more of the voting stock of a
company shall be regarded as control.
1.6 "Planet Technology" shall mean technology in the possession or control of
Planet now (as more specifically identified in Appendix "A" hereto) or in
the future during the term of this Agreement relating to water
dispersible coating materials that are suitable for coating Products or
components of products in Cominco's Field of Business including
technology developed on behalf of Cominco under the previous research and
development agreement dated May 12, 1993 between the parties.
<PAGE> 2
1.7 "New Technology" shall mean new compositions of matter, new chemical
complexes, improved chemical complexes, association compounds, blends,
mixtures or compositions of coating materials, polymer materials, or new
products or new processes relating thereto developed by Planet alone,
including its employees, officers, consultants or representatives, or by
Planet and Cominco jointly as a result of the Work to be conducted by
Planet under Article 2 of this Agreement or Cominco alone as result of
the disclosure made by Planet to Cominco prior to or during the course of
the Work. "New Technology" shall not include the addition to Planet
Technology of conventional additives, such as color, aromas, flow
enhancers or processability enhancers.
1.8 "Water dispersible" shall mean degradable in, soluble in, or responsive
to ordinary water.
1.9 "Territory" shall mean the world.
ARTICLE 2
THE WORK:
2.1 Cominco hereby requests that Planet conduct the following development
work as set out in Appendix "B" (hereinafter referred to as "Work"), and
Planet agrees to conduct the Work in accordance with the time schedule
set out in Appendix C. The Work is to make water dispersible coatings for
fertilizers and biological organisms using, but not limited to, Planet
Technology. The Work contemplated shall include regular meetings between
representatives of Planet and representatives of Cominco. During such
meetings, it is contemplated that Cominco will offer comments on samples
made from blends of materials supplied by Planet. It is contemplated by
the parties that there will be several rounds of Work during which Planet
will provide blends of materials to Cominco and that Cominco will provide
comments and suggestions relating to components made from such blends.
The Work by Planet shall be directed toward achieving performance
characteristics approved by Cominco to Planet, as set forth in Appendix
B.
2.2 In the event the performance characteristics described in Appendix B are
not met or that reasonable progress is not made towards achieving the
performance characteristics or that the work is not performed to
Cominco's satisfaction, Cominco, in it's sole judgment, shall have the
right to terminate the Work and fees for the Work outlined in appendix C.
ARTICLE 3
WORK SCHEDULE:
3.1 The Work to be performed by Planet shall be conducted in accordance with
the Time Schedule set forth in Appendix C. Planet shall use reasonable
business-like efforts to conduct the work as described in Article 2 and
Appendix B, and to complete the Work in accordance with the Time Schedule
set forth in Appendix C.
<PAGE> 3
ARTICLE 4
PAYMENTS:
4.1 Cominco agrees to pay Planet the fees set out in Appendix C for
performance of the Work on the further terms as set forth in Appendix C
and reimburse Planet for reasonable costs associated with travel.
4.2 Cominco shall also reimburse Planet for the reasonable costs for coating
materials and coated Products supplied by Planet to Cominco, including
the costs of shipping and processing, plus independent laboratory tests
mutually agreed upon.
4.3 Cominco shall also pay to Planet a royalty equal to the sums determined
in accordance with the principles set forth in Article 9 hereof.
ARTICLE 5
OWNERSHIP:
5.1 The New Technology and all inventions, whether patentable or not, arising
from the Work shall be owned by Cominco, or such of it's affiliates as it
may designate from time to time.
5.2 Planet agrees to execute and deliver, or cause to be executed and
delivered, from time to time such documents as may be necessary to
evidence the ownership rights of Cominco hereunder.
5.3 All patents and/or publications arising from the work shall show the name
of inventors or Planet, as the case may be, as inventor(s). Cominco shall
take all reasonable steps to acknowledge Planet as the inventors. In the
event an employee of Cominco contributes to the invention they too shall
be ackowledged as inventor(s).
5.4 Cominco shall pay all the costs of applying for and prosecuting any
patents it considers appropriate to protect the New Technology. All
patents shall be in the name of Cominco. Planet shall provide assistance
as is reasonably necessary to obtain these patents.
5.5 If the parties mutually elect to protect some or all of the New
Technology as a trade secret, the parties shall cooperate with one
another to protect such trade secret or secrets.
ARTICLE 6
LICENSES:
6.1 Cominco hereby grants to Planet a field-limited, sole, worldwide, license
to make, use the New Technology, and practice such new processes for the
full term of any U.S. or foreign patent or patent applications issuing
from applications assigned by Planet to Cominco. In the event that
Cominco elects to protect such New Technology as a trade secret, Cominco
hereby grants to Planet a field-limited, sole, worldwide, license to use
such trade secret, provided that Planet cooperates in the protection of
the trade secrets. Licenses shall be limited to fields of business
outside Cominco's Field of Business. No license is granted hereby by
Cominco to Planet within Cominco's Field of Business, as defined herein.
<PAGE> 4
6.2 Planet hereby grants to Cominco a field-limited, irrevocable, exclusive,
worldwide, royalty bearing license to make, use and practice the Planet
Technology, and practice such processes for the full term of any U.S. or
foreign patent or patent applications therefor. For any of the Planet
Technology that is not patented, Planet hereby grants to Cominco a
field-limited, irrevocable, exclusive, worldwide, royalty-bearing,
license to use such trade secrets, provided that Cominco cooperates in
the protection of the trade secret. Licenses shall be limited to fields
of business within Cominco's Field of Business.
6.3 Cominco shall have the right to grant licenses on the New Technology in
Cominco's Field of Business. Cominco shall also have the right to grant
sublicenses on Planet Technology to the extent necessary to practice New
Technology in Cominco's Field of Business; provided that if Cominco
grants a license including sublicense under Planet Technology, Cominco
shall pay Planet *** of any consideration it receives on account of such
license.
6.4 Nothing herein shall be deemed or interpreted as granting to Planet any
rights in or to technology developed during the term of or prior to this
Agreement by employees of Cominco independent of Planet and without use
or access to confidential information Planet disclosed to Cominco under a
Non-Disclosure Agreement.
6.5 If Cominco elects not to exploit either the New Technology or the Planet
Technology in Southeast Asia and the Asian countries on or before 5 years
from commencement of commercial production, Planet shall have the right
to license and sublicense the New or the Planet Technology within this
region in Cominco's Field of Business provided that Planet shall pay
Cominco *** of any consideration it receives on account of such license
or sublicense.
ARTICLE 7
CONFIDENTIALITY:
7.1 The terms of a Confidential Disclosure Agreement between Cominco and
Planet, signed on October 31, 1992 apply to the disclosure of information
between the parties during the time period from October 31, 1992 to the
effective date of this Agreement. On the effective date of this
Agreement, the attached Non Disclosure Agreement between Cominco and
Planet shall apply to disclosure of information during the term of this
Agreement and beyond.
ARTICLE 8
EXCLUSIVITY:
8.1 During the term of this Agreement, Planet shall not conduct any
development work of the same nature or type as the Work, for any third
party on any subject if the intended use falls within, or could
reasonably be expected to fall within, Cominco's Field of Business, as
defined herein. Also during the term of this Agreement, Planet shall not
enter into any arrangements or agreements with any third party for a
license under any of the Planet Technology if the intended place of use
is within the Territory and the intended use falls within, or could
reasonably be expected to fall within, Cominco's Field of Business,
without first offering such arrangement to Cominco and at terms no less
favorable to Cominco than those offered to a third party.
*** - confidential treatment requested
<PAGE> 5
ARTICLE 9
ROYALTY:
9.1 Cominco shall pay to Planet each quarter during the term of this
Agreement royalties determined in accordance with the principles and
formulas set forth in the following paragraph 9.2.
9.2 A royalty determination shall be made based on *** , of the Products
produced, distributed or sold by Cominco and/or its Affiliates with
Planet Technology and/or New Technology during each calendar year, and
shall be determined as follows:
(a) *** , until the *** in any calendar year *** ;
(b) *** for *** ; and
(c) *** for *** in any calendar year *** provided however that until
*** or until *** whichever first occurs the sums payable by
Cominco to Planet shall be *** .
For purposes of this Agreement, *** means:
***:
***
*** ;
***.
9.3 In the event the *** a royalty determination shall be made on *** as
defined above, or the Products produced, distributed or sold by Cominco
and/or its Affiliates with Planet Technology and/or New Technology
during each calendar year, and shall be determined as follows:
(a) ***, as defined above, until *** in any calendar year *** ;
(b) *** for ***; and
(c) *** for *** in any calendar year *** provided however that
*** or until *** whichever first occurs the sums payable by
Cominco to Planet shall be *** .
*** - confidential treatment requested
<PAGE> 6
ARTICLE 10
ROYALTY REPORTS AND PAYMENTS:
10.1 A Royalty Report shall be sent by Cominco to Planet within sixty (60)
days after the end of the calendar period during the term of this
Agreement. The Royalty Report shall contain the following information
listed separately for Cominco and each of its affiliates:
(a) the royalty determination made in accordance with Paragraph 9.2
for each Marketplace;
(b) the Royalty due.
10.2 Each Royalty Report shall be accompanied by payment of the royalty due.
10.3 Unless otherwise directed in writing by Planet, Cominco shall pay said
royalties to Planet in the United States in United States Dollars free of
any taxes payable in any country other than the United States, except
such taxes as result in and to the extent that the same result in a
foreign tax credit applicable to the United States taxes payable by
Planet.
ARTICLE 11
RECORDS:
11.1 Cominco and its Affiliates shall keep accurate books and records of all
data and information needed for determination of royalties in accordance
with Paragraph 9.2. Such books and records shall be maintained for a
period of at least six years from the date of the royalty report.
11.2 Not more than once per calendar year, Cominco and its Affiliates shall
permit an independent accountant or auditor mutually agreed upon to
inspect the books and records of Cominco and its Affiliates to verity the
correctness of any Royalty Report furnished under this Agreement. Such
independent accountant or auditor shall be obligated to secrecy and shall
report to Planet and Cominco only the accuracy of and/or any deficiencies
in any such Royalty Report. The fee for the accountant or auditor shall
be paid by Planet unless such examination results in an upward adjustment
of royalties due Planet by more than 5% in which event Cominco shall
reimburse Planet for the fee paid to the accountant or auditor.
ARTICLE 12
TERM:
12.1 Except as otherwise provided herein, this agreement shall remain in force
from the date of its execution until the expiration of ten full calendar
years following such date or until the expiration of the last to expire
of the patents covering the Planet Technology and/or the New Technology,
whichever occurs later.
12.2 This agreement may also be extended by the mutual agreement of both
parties.
<PAGE> 7
ARTICLE 13
TERMINATION:
13.1 This Agreement may be terminated:
a) Upon the mutual written agreement of the parties; or
b) By either party for material breach of any of the terms hereof by
the other party if the breach is not corrected within sixty (60)
days after giving the written notice of breach to the defaulting
party; or
c) By Cominco on six month written notice to Planet, if in Cominco's
sole opinion, the continued marketing and sale of Products under
this Agreement is unprofitable or otherwise not viable for
Cominco; provided however that Cominco shall not have the right to
terminate the Agreement under this subparagraph until the
expiration of three years from the effective date first written
above.
d) By Cominco forthwith, upon written notice to Planet if Planet
shall become insolvent or shall make an assignment for the
benefits of creditors, or shall be placed in receivership,
reorganisation, liquidation or bankruptcy (voluntary or
involuntary); or
e) By Planet forthwith, upon written notice to Cominco if Cominco
shall become insolvent or shall make an assignment for the benefit
of creditors, or shall be placed in receivership, reorganization,
liquidation or bankruptcy (voluntary or involuntary); or
f) If the business of Cominco subject to the terms of this Agreement
by law, decree, ordinance or other governmental action, is vested
in, or is made subject to, the control or direction of any
governmental agent, officer or appointee, or any other person or
firm not a party to this agreement.
g) If the business of Planet subject to the terms of this Agreement
by law, decree, ordinance or other governmental action, is vested
in, or is made subject to, the control or direction of any
governmental agent, officer or appointee, or any other person or
firm not a party to this agreement.
h) Any termination pursuant to this paragraph 13.1 shall not relieve
either party of any obligation or liability accrued hereunder
prior to such termination, or rescind or give rise to any right to
rescind anything done or recover any payments made or other
consideration given hereunder prior to the time such termination
become effective and such termination shall not affect in any
manner any rights arising under this Agreement prior to such
termination.
13.2 The attached Non-Disclosure Agreement shall remain in effect following
the termination of this Agreement, in accordance with its terms.
<PAGE> 8
13.3 In the event of termination of this Agreement for any reason, Cominco
shall have a reasonable period of grace within which to dispose of
inventory incorporating the Planet Technology and/or to fulfil orders
received prior to the termination data, but Cominco shall be liable for
royalties as provided in Article 9 above.
13.4 The provisions of articles 5, 7 and 9 and paragraph 6.3 shall survive
termination of this agreement.
ARTICLE 14
PATENT MARKING:
14.1 Cominco and its Affiliates will affix and/or will require its or their
distributors to affix to the packaging, or in the case of bulk
distribution the accompanying documents, for the Products a notice
complying with all applicable patent marking laws in the country or
countries in which the Products are made and the country or countries in
which the Products are distributed and sold. Planet shall form time to
time inform Cominco of the appropriate patent marking in respect of
Planet Technology.
ARTICLE 15
REPRESENTATIONS AND WARRANTIES:
15.1 Planet represents and warrants that:
a) It has authority to enter into this Agreement, and doing so will
not violate any agreements to which it is a party.
b) It has all necessary government licenses and approvals required to
conduct its business.
c) It has no knowledge of any impediment to its performance of this
Agreement.
15.2 Cominco represents and warrants that:
a) It has authority to enter into this Agreement, and doing so will
not violate any agreements to which it is a party.
b) It has all necessary government licenses and approvals required to
conduct its business.
c) It has no knowledge of any impediment to its performance of this
Agreement.
<PAGE> 9
ARTICLE 16
NOTICES:
16.1 All notices or other communications required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been
sufficiently given when delivered in person, or when deposited with the
United States Postal Service or Canada Post, first-class, registered or
certified mail, postage prepaid, or by Fax addressed as follows:
COMINCO:
Cominco Fertilizers Ltd.
426, 10333 Southport Road S.W.
Calgary, Alberta Canada T2W 3X6
FAX: (403) 258-5770
Attention: Dale M. Marantz
PLANET:
Planet Polymer Technologies, Inc.
9985 Businesspark Avenue, Suite A
San Diego, California U.S. 92131
FAX: (619) 549-5133
Attention: Robert J. Petcavich
or to such other address or individual as either party may specify from
time to time in writing.
ARTICLE 17
ASSIGNMENT:
17.1 This Agreement shall inure to the benefit of an be binding upon the
parties and the respective party's successors and assigns of
substantially the entire business and goodwill of that party or that part
or portion of that party's business relating to the subject matter of
this Agreement. Neither party may otherwise assign this Agreement or
assign or delegate its rights and obligations hereunder to a third party,
without the prior written approval of the other party, except that
Cominco may assign to a subsidiary corporation without the prior written
approval of the other party.
ARTICLE 18
NO REFUND OR PAYMENTS:
18.1 Royalties and all other sums paid by Cominco to Planet under this
Agreement shall not be refundable to for any purpose, except for excess
payment made due to computational errors.
<PAGE> 10
ARTICLE 19
LITIGATION:
19.1 Planet shall have no obligation to enforce rights under its patents
and/or trade secrets for the benefit of Cominco or otherwise; nor shall
Planet have any obligation to defend or indemnify Cominco or its
Affiliates in respect of any activities of Cominco and/or its Affiliates
under this Agreement.
19.2 Cominco shall have no obligation to enforce rights under its patents
and/or trade secrets for the benefit of Planet or otherwise; nor shall
Cominco have any obligation to defend or indemnify Planet or its
Affiliates in respect of any activities of Planet and/or its Affiliates
under this Agreement.
ARTICLE 20
PRODUCT LIABILITY:
20.1 Cominco shall hold Planet harmless and shall indemnify Planet against any
product liability claim made against Planet arising out of the activities
of Cominco and/or its Affiliates.
20.2 Planet shall hold Cominco harmless and shall indemnify Cominco against
any product liability claim made against Cominco arising out of the
activities of Planet and/or its Affiliates.
ARTICLE 21
NON-WAIVER:
21.1 The failure by any party to this Agreement, at any time, to enforce or to
require strict compliance of performance by any other party of any of the
provisions of this Agreement shall not constitute a waiver of such
provisions and shall not affect or impair in any way its rights at any
time to enforce such provisions or to avail itself of such remedies as it
may have for any breach thereof.
ARTICLE 22
SEVERABILITY:
22.1 If any provision hereof is held invalid or unenforceable by a tribunal of
competent jurisdiction, it shall be considered severed from this
Agreement and shall not serve to invalidate or render unenforceable the
remaining provisions hereof.
<PAGE> 11
ARTICLE 23
ENTIRE AGREEMENT:
23.1 This Agreement constitutes the entire understanding between the parties.
No waiver, modification or amendment of any terms of this Agreement shall
be valid unless made in writing specifying such waiver, modification, or
amendment and signed by the parties hereto.
ARTICLE 24
DISPUTE RESOLUTION AND CHOICE OF LAW:
24.1 This Agreement will be governed by and interpreted in accordance with he
laws of the State of California, U.S.A., and shall be construed as if
written jointly by the parties hereto.
24.2 Disputes arising under this Agreement shall be settled before a single
arbitrator in accordance with the Arbitration Act of California.
ARTICLE 25
NO AGENCY:
25.1 Nothing contained in this Agreement will be deemed to constitute either
party the agent or representative of the other party for any purpose.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered by their duly authorized officers as of the day and year first set
forth above.
COMINCO FERTILIZERS LTD.
By: /s/ Robert J. Rennie
---------------------------
Robert J. Rennie
Title: Director, New Products Research
and Development
PLANET TECHNOLOGIES, INC.
By: /s/ Robert J. Petcavich
---------------------------
Robert J. Petcavich
Title: Chairman and Chief Operating
Officer
<PAGE> 12
APPENDIX A
Planet Polymer Technologies Includes:
1. Biodegradradable esters, urethane, ethers and aliphatic plant
oils, as well as their polymers, blends and association complexes.
2. Methods and processes of Creating Polymers from the chemical
compounds as in 1 by free radical, addition, and condensation
poymerization processes.
3. Water Dispersible and soluble polymer technology including
polyethers, polyvinyl alchohol, hydrooxypropylcelulose, methyl
cellulose, natural gums such as guar, arabic and seaweed
derivatives, polyamides, silicones and poyurethane copolymers, as
well as blends, alloys, ixtures and association complexes of the
aforementioned polymers.
<PAGE> 13
APPENDIX B
A. Planet will undertake the development of fertilizer coatings designed to meet
Cominco's specifications. Palnet shall deliver products on a monthly basis.
Cominco requires working and laboratory tested prototypes with the following
specifications:
1. ***
2. ***
3. ***
4. ***
5. ***
6. ***
7. ***
B. *** :
1. ***
2. ***
3. ***
4. ***
5. ***
6. ***
7. ***
8. ***
*** - confidential treatment requested
<PAGE> 14
APPENDIX C
[Chart] ***
*** Confidential Treatment Requested
<PAGE> 15
APPENDIX C
[Chart] ***
*** Confidential Treatment Requested
<PAGE> 16
APPENDIX C
***
1. ***
2. ***
3. ***
4. ***
5. ***
6. ***
7. ***
8. ***
9. ***
10. ***
11. ***
12. ***
13. ***
14. ***
15. ***
*** - confidential treatment requested
<PAGE> 17
APPENDIX C
[Chart] ***
*** Confidential Treatment Requested
<PAGE> 18
APPENDIX C
[Chart] ***
*** Confidential Treatment Requested
<PAGE> 19
Appendix C
***
1. ***
2. ***
3. ***
4. ***
5. ***
6. ***
7. ***
8. ***
9. ***
10. ***
11. ***
12. ***
13. ***
*** - confidential treatment requested
<PAGE> 1
EXHIBIT 10.12
FOURTH AMENDMENT TO LEASE
This FOURTH AMENDMENT TO LEASE ("Amendment") is made this 1st day of July
1, 1997, by and between the Trustees Under the Will and of the Estate of James
Campbell, deceased, acting in their fiduciary and not their individual
capacities ("Landlord"), and Planet Polymer Technologies, Inc., a California
corporation ("Tenant").
WHEREAS, Landlord and Tenant entered into a lease dated July 11, 1992, as
amended by First Amendment to Lease dated August 13, 1992, by Second Amendment
to Lease dated May 3, 1994, and by Third Amendment to Lease dated April 17,
1996, covering certain premises located at 9985 Business Park Avenue, Suite A,
(the "Premises") City of San Diego, County of San Diego, State of California
(the "Lease").
WHEREAS, it is the mutual desire of the parties hereto to amend the Lease
and to enter into certain other agreements as hereinafter specified:
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties, Landlord and Tenant agree as follows:
1. Lease Term. The term of the Lease commenced July 20, 1992 and is hereby
extended until July 31, 1999.
2. Base Monthly Rent. On the Effective Date, Base Monthly Rent as defined in
Paragraph 3 of the above referenced lease shall be adjusted as follows:
Effective Date through 7/31/98 $4,316.80/month
8/1/98 through 7/31/99 $4,489.47/month
3. Effective Date. The above referenced extension of the Lease term shall
commence on August 1, 1997 (the "Effective Date").
Except as amended herein, all other terms and conditions of the Lease remain the
same and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on July 17,
1997:
Landlord: Tenant:
THE TRUSTEES UNDER THE WILL PLANET POLYMER TECHNOLOGIES,
AND OF THE ESTATE OF JAMES INC., a California corporation
CAMPBELL, deceased, in their
fiduciary and not in their individual
capacities
By: /s/ Roy S. Robins By: /s/ Robert J. Petcavich
------------------------------- --------------------------------
Its: Director Mainland Properties Its: CEO
----------------------------- ------------------------------
By: /s/ Sydni L. Robertson, CPM By:
------------------------------- --------------------------------
Its: Senior Asset Manager Its:
----------------------------- ------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED JUNE 30, 1997 BALANCE SHEET AND STATEMENT OF OPERATIONS FOR
THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS AS FILED IN THE COMPANY'S FORM 10-QSB FOR THE SIX
MONTHS ENDED JUNE 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,276,236
<SECURITIES> 0
<RECEIVABLES> 578,050
<ALLOWANCES> (10,000)
<INVENTORY> 285,654
<CURRENT-ASSETS> 2,179,185
<PP&E> 1,642,746
<DEPRECIATION> (783,787)
<TOTAL-ASSETS> 3,969,075
<CURRENT-LIABILITIES> 546,860
<BONDS> 0
<COMMON> 0
0
10,711,412
<OTHER-SE> (7,604,086)
<TOTAL-LIABILITY-AND-EQUITY> 3,969,075
<SALES> 1,823,463
<TOTAL-REVENUES> 1,823,463
<CGS> 1,235,992
<TOTAL-COSTS> 1,235,992
<OTHER-EXPENSES> 1,023,412
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,192
<INCOME-PRETAX> (405,292)
<INCOME-TAX> 29,094
<INCOME-CONTINUING> (434,386)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (434,386)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
