<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, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Commission File Number: 0-26804
<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)
(858) 549-5130
----------------------------------------------------------------------------------------------------
(Issuer'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 issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at June 30, 1999
----- ----------------------------
Common Stock, no par value 6,365,416
<PAGE> 2
PLANET POLYMER TECHNOLOGIES, INC.
FORM 10-QSB QUARTERLY REPORT
QUARTER ENDED JUNE 30, 1999
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheet (Unaudited)
June 30, 1999 2
Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, 1999 and 1998 3
Consolidated Statements of Operations (Unaudited)
Six Months Ended June 30, 1999 and 1998 4
Consolidated Statement of Shareholders' Equity (Unaudited)
Six Months Ended June 30, 1999 5
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1999 and 1998 6
Notes to Unaudited Consolidated 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 14
Item 2 Changes in Securities 14
Item 3 Defaults upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8K 14
SIGNATURES 15
</TABLE>
<PAGE> 3
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET (UNAUDITED)
---------------
<TABLE>
<CAPTION>
JUNE 30,
1999
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 502,199
Accounts receivable, net of allowance for doubtful accounts of $10,000 429,880
Inventories, net 159,369
Prepaid expenses 31,350
Income tax receivable 30,168
------------
Total current assets 1,152,966
Property and equipment, net of accumulated depreciation of $934,725 732,196
Goodwill, net of accumulated amortization of $112,044 528,018
Patents and trademarks, net of accumulated amortization of $115,753 338,497
Other assets 35,319
------------
Total assets $ 2,786,996
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,351
Advances from related party 166,291
Accrued expenses 57,203
Current portion of capital lease obligations 12,531
------------
Total current liabilities 264,376
Capital lease obligations, less current portion 24,701
Other liabilities 265,842
------------
Total liabilities 554,919
------------
Shareholders' equity:
Preferred Stock, no par value
4,250,000 shares authorized
No shares issued or outstanding --
Series A Convertible Preferred Stock, no par value
750,000 shares authorized
500,000 shares issued and outstanding
Liquidation preference $1,000,000 804,435
Common Stock, no par value
20,000,000 shares authorized
6,365,416 shares issued and outstanding 11,896,143
Accumulated deficit (10,468,501)
------------
Total shareholders' equity 2,232,077
------------
Total liabilities and shareholders' equity $ 2,786,996
============
</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,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Sales $ 457,417 $ 462,378
Cost of sales 389,109 477,951
----------- -----------
Gross profit 68,308 (15,573)
----------- -----------
Operating expenses:
General and administrative 273,373 218,668
Marketing 61,958 69,088
Research and development, net 30,827 162,176
----------- -----------
Total operating expenses 366,158 449,932
----------- -----------
Loss from operations (297,850) (465,505)
Other income, net 7,678 8,269
----------- -----------
Loss before income taxes (290,172) (457,236)
Income tax benefit (expense) (3,110) 1,653
----------- -----------
Net loss $ (293,282) $ (455,583)
=========== ===========
Loss per share (basic and diluted) $ (0.05) $ (0.09)
=========== ===========
Shares used in per share computations 6,357,334 5,311,746
=========== ===========
</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,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Sales $ 998,394 $ 1,052,184
Cost of sales 879,540 993,940
----------- -----------
Gross profit 118,854 58,244
----------- -----------
Operating expenses:
General and administrative 517,461 441,914
Marketing 108,821 127,782
Research and development, net 81,789 274,541
----------- -----------
Total operating expenses 708,071 844,237
----------- -----------
Loss from operations (589,217) (785,993)
Other income, net 3,010 19,167
----------- -----------
Loss before income taxes (586,207) (766,826)
Income tax expense (5,382) (1,915)
----------- -----------
Net loss $ (591,589) $ (768,741)
=========== ===========
Loss per share (basic and diluted) $ (0.09) $ (0.14)
=========== ===========
Shares used in per share computations 6,289,353 5,304,843
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 6
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
---------------
<TABLE>
<CAPTION>
SERIES A PREFERRED STOCK COMMON STOCK
------------------------ ------------------------ ACCUMULATED
SHARES AMOUNT SHARES AMOUNT DEFICIT TOTAL
------- -------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 500,000 $804,435 5,341,062 $11,009,208 $ (9,846,912) $ 1,966,731
Issuance of Common Stock and related Warrants
to Agway, net of issuance costs -- -- 1,000,000 845,060 -- 845,060
Issuance of Warrants to finder for cash -- -- -- 2,500 -- 2,500
Stock Options exercised for cash -- -- 5,000 9,375 -- 9,375
Issuance of Common Stock as a dividend on
Convertible Preferred Stock on March 15, 1999 -- -- 9,677 15,000 (15,000) --
Issuance of Common Stock as a dividend on
Convertible Preferred Stock on June 15, 1999 -- -- 9,677 15,000 (15,000) --
Net loss for the six months ended June 30, 1999 -- -- -- -- (591,589) (591,589)
------- -------- --------- ----------- ------------ -----------
Balance at June 30, 1999 500,000 $804,435 6,365,416 $11,896,143 $(10,468,501) $ 2,232,077
======= ======== ========= =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 7
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
---------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (591,589) $ (768,741)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 103,912 104,731
Compensation expense -- non-cash 2,443 8,241
Loss on disposal of assets 9,994 --
Deferred income taxes 4,582 --
Changes in assets and liabilities:
Accounts receivable, net (136,966) 77,107
Inventories, net 140,867 81,774
Prepaid expenses and other assets 16,363 23,510
Accounts payable and accrued expenses (192,878) (19,967)
Advances from related party 166,291 --
----------- -----------
Net cash used by operating activities (476,981) (493,345)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (87,995) (34,063)
Cost of patents and trademarks (33,998) (9,598)
----------- -----------
Net cash used by investing activities (121,993) (43,661)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of Common Stock 1,000,000 --
Payment of equity issuance costs (73,952) --
Proceeds from issuance of warrants 2,500 --
Proceeds from stock options exercised 9,375 --
Principal payments on borrowings and capital lease obligations (100,747) (45,830)
Proceeds from conversion of restricted cash to cash and cash equivalents 114,880 --
----------- -----------
Net cash provided (used) by financing activities 952,056 (45,830)
----------- -----------
Net increase (decrease) in cash and cash equivalents 353,082 (582,836)
Cash and cash equivalents at beginning of year 149,117 1,516,405
----------- -----------
Cash and cash equivalents at end of year $ 502,199 $ 933,569
=========== ===========
Supplemental disclosure of non-cash activity:
Issuance of Common Stock dividends on Preferred Stock $ 30,000 $ 30,000
Stock options granted to a scientific advisor -- 8,241
</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 consolidated financial statements of Planet
Polymer Technologies, Inc. ("Planet" or the "Company") 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 six month period ended June 30, 1999 are not
necessarily indicative of results that may be expected for the year ending
December 31, 1999. For additional information, refer to the Company's
consolidated financial statements and notes thereto for the year ended December
31, 1998 contained in the Company's Form 10-KSB for the fiscal year ended
December 31, 1998.
Certain items shown in the consolidated financial statements for the six
months ended June 30, 1998 and for the six months ended June 30, 1999 have been
reclassified to conform to the current period presentation.
2. Line of Credit
On March 10, 1999, the Company's wholly-owned subsidiary Deltco obtained a
$100,000 line of credit with a financial institution under which Deltco may make
borrowings for working capital and other general purposes throughout the term of
the line of credit agreement which expires on March 10, 2000. Through June 30,
1999, no borrowings had been made against this line of credit. Borrowings under
the line of credit are collateralized by substantially all of Deltco's assets.
3. Segment Information
The segment information presented below reflects the Company's two
reportable segments - (1) research and development of polymer technologies and
materials in San Diego, California and (2) manufacturing and reprocessing of
thermoplastic scrap resins by Deltco of Wisconsin, Inc. ("Deltco") in Ashland,
Wisconsin. The technologies and products developed in California are currently
in a research and development stage; and therefore, no revenues were reported
under this segment during the three and six months ended June 30, 1999 and 1998.
The Company evaluates the performance of its segments based on income or
loss before depreciation and amortization. The table below presents information
about reported segments for the three and six months ended June 30, 1999 and
1998.
7
<PAGE> 9
PLANET POLYMER TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
Manufacturing
Research and and
Three months ended June 30, 1999 Development Reprocessing Total
- --------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ -- $ 457,417 $ 457,417
----------- ----------- ===========
(Loss) income before depreciation and amortization $ (295,703) $ 54,922 $ (240,781)
----------- -----------
Depreciation and amortization (52,501)
-----------
Net loss $ (293,282)
===========
Total assets at June 30, 1999 $ 1,821,465 $ 965,531 $ 2,786,996
----------- ----------- ===========
Three months ended June 30, 1998
- --------------------------------
Revenues $ -- $ 462,378 $ 462,378
----------- ----------- ===========
(Loss) income before depreciation and amortization $ (368,958) $ (34,072) $ (403,030)
----------- -----------
Depreciation and amortization (52,553)
-----------
Net loss $ (455,583)
===========
Total assets at June 30, 1998 $ 2,105,416 $ 1,367,574 $ 3,472,990
----------- ----------- ===========
</TABLE>
<TABLE>
<CAPTION>
Manufacturing
Research and and
Six months ended June 30, 1999 Development Reprocessing Total
- -------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ -- $ 998,394 $ 998,394
----------- ----------- ===========
(Loss) income before depreciation and amortization $ (577,963) $ 90,286 $ (487,677)
----------- -----------
Depreciation and amortization (103,912)
-----------
Net loss $ (591,589)
===========
Six months ended June 30, 1998
- ------------------------------
Revenues $ -- $ 1,052,184 $ 1,052,184
----------- ----------- ===========
(Loss) income before depreciation and amortization $ (680,264) $ 16,254 $ (664,010)
----------- -----------
Depreciation and amortization (104,731)
-----------
Net loss $ (768,741)
===========
</TABLE>
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 discussion in 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 below and in the
Company's Form 10-KSB for the fiscal year ended December 31, 1998.
OVERVIEW
Since Planet Polymer Technologies, Inc. ("Planet" or the "Company") was
founded in 1991, with exception of resources expended in connection with the
purchase and ongoing operation of Deltco of Wisconsin, Inc. ("Deltco"),
substantially all of the Company's resources have been devoted to the
development and commercialization of its technologies and products. This has
included the expenditure of funds to develop the Company's corporate
infrastructure, support the Company's marketing efforts and establish a pilot
production facility, in addition to research and development.
In January 1996, Planet acquired Deltco, a manufacturer and reprocessor of
plastic resins located in Ashland, Wisconsin. Planet maintains Deltco as a
wholly-owned subsidiary. Prior to the acquisition of Deltco, essentially all
revenue recognized was from customer-funded research and development activities,
which included service and product sales for customer pilot trials. Planet has
incurred operating losses since inception and had an accumulated deficit as of
June 30, 1999 of approximately $10.5 million. Pending commercial deployment of
and related volume orders for the Company's products, the Company expects to
incur additional losses.
In November 1998, the Company entered into a Stock Purchase Agreement with
a subsidiary of Agway Inc. ("Agway") whereby Agway would purchase 1,000,000
shares of Planet's Common Stock for $1,000,000 and receive a warrant to purchase
up to 2,000,000 shares of Common Stock at a price of $1.00 per share. The stock
purchase transaction was completed in January 1999 with the Company's
shareholders' approval. Contemporaneously with the execution of the Stock
Purchase Agreement, Planet and Agway entered into an agreement relating to the
funding by Agway of a feasibility study (the "Feasibility Agreement") of
Planet's polymer technology for use in agricultural products (other than
fertilizers and certain biological products) and food products and an exclusive
worldwide license (the "License Agreement") to all current and future products
that utilize Planet's polymer technology for agricultural and food related
purposes (other than products already covered by existing agreements). Under the
terms of the Feasibility Agreement, Planet will be reimbursed for certain
qualifying research and development costs relating to such applications. Under
the terms of the License Agreement, Agway has the exclusive right to grant
licenses and sublicenses on the technology developed under the License Agreement
to other parties. In return for the rights granted to Agway, Agway is required
to pay royalties to the Company determined in accordance with the terms of the
License Agreement. In addition, in February 1999, the Company received a
commitment from Agway whereby Agway agreed to exercise its warrant to acquire up
to 500,000 shares of the Company's Common Stock after July 1, 1999 at the
Company's request, in the event that the Company's cash flows are less than
currently projected and/or insufficient to fund its operating requirements.
9
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
OVERVIEW, CONTINUED
On June 23, 1999, the Company entered into an Amending Agreement (the
"Amending Agreement") with Agrium, Inc. ("Agrium") to amend that certain
Technology Development and License Agreement dated as of January 30, 1995. The
Amending Agreement provides that if the Company enters into an arrangement or
agreement with Agway with respect to the development of certain technologies,
then the Company will grant Agrium, among other items, an option to acquire a
license and a right to produce, market and distribute such technologies on the
same terms and conditions as those offered to Agway.
RESULTS OF OPERATIONS
Revenue
The Company's revenues, which were all related to Deltco, decreased from
approximately $462,000 for the three months ended June 30, 1998 to approximately
$457,000 for the three months ended June 30, 1999 and from approximately
$1,052,000 for the six months ended June 30, 1998 to approximately $998,000 for
the six months ended June 30, 1999. These decreases were primarily attributable
to the net effect of a decline in the sales price of Deltco's recycled
polypropylene offset in part by an increase in sales volume.
Cost of Sales
Cost of sales decreased from approximately $478,000 for the three months
ended June 30, 1998 to approximately $389,000 for the three months ended June
30, 1999 and from approximately $994,000 for the six months ended June 30, 1998
to approximately $880,000 for the six months ended June 30, 1999. These
decreases were primarily attributable to a reduction in the purchase price of
raw materials due to price fluctuations in the polypropylene market.
General and Administrative Expenses
General and administrative expenses increased from approximately $219,000
for the three months ended June 30, 1998 to approximately $273,000 for the three
months ended June 30, 1999 and from approximately $442,000 for the six months
ended June 30, 1998 to approximately $517,000 for the six months ended June 30,
1999. These increases were primarily attributable to increased costs of outside
services and legal fees.
Marketing Expenses
Marketing expenses decreased from approximately $69,000 for the three months
ended June 30, 1998 to approximately $62,000 for the three months ended June 30,
1999 and from approximately $128,000 for the six months ended June 30, 1998 to
approximately $109,000 for the six months ended June 30, 1999. These decreases
were primarily attributable to the reduction in sales and marketing personnel.
10
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
RESULTS OF OPERATIONS, CONTINUED
Research and Development Expenses, Net
The Company's net research and development expenses decreased from
approximately $162,000 for the three months ended June 30, 1998 to approximately
$31,000 for the three months ended June 30, 1999 and from approximately $275,000
for the six months ended June 30, 1998 to approximately $82,000 for the six
months ended June 30, 1999. These decreases were primarily due to the
Feasibility Agreement entered into with Agway. Planet has allocated research and
development resources to projects that are reimbursable by Agway and other
customers. Offsetting research and development revenue increased from
approximately $7,000 for the three months ended June 30, 1998 to approximately
$147,000 for the three months ended June 30, 1999 and from approximately $43,000
for the six months ended June 30, 1998 to approximately $310,000 for the six
months ended June 30, 1999. Approximately $111,000 of the research and
development revenue for the three months ended June 30, 1999 and approximately
$251,000 of the research and development revenue for the six months ended June
30, 1999 relates to research and development costs reimbursable from Agway.
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
In January 1999, with the Company's shareholders' approval, the Company
issued 1,000,000 shares of Common Stock to Agway and received proceeds of
$845,000, net of issuance costs totaling approximately $155,000 (approximately
$81,000 of which was paid during the three months ended December 31, 1998). In
addition, from January 1999 to June 1999, the Company recorded research and
development revenue of approximately $251,000 from Agway under the Feasibility
Agreement. The Company anticipates that additional research and development
expenditures in the agrotechnology area may be reimbursable by Agway under the
Feasibility Agreement during the remainder of 1999.
In February 1999, the Company received a commitment from Agway whereby Agway
agreed to exercise its warrant to acquire up to 500,000 shares of the Company's
Common Stock after July 1, 1999 at the Company's request, in the event that the
Company's cash flows are less than currently projected and/or insufficient to
fund its operating requirements.
The Company used approximately $477,000 for operations for the six months
ended June 30, 1999. Such funds were used primarily for research and development
activities, marketing efforts and administrative support.
The Company used approximately $122,000 for investing activities for the six
months ended June 30, 1999. Such funds were used for the purchase of equipment
and for the preparation and filing of patents.
Net cash provided by financing activities of approximately $952,000 for the
six months ended June 30, 1999 resulted from the issuance of Common Stock and
warrants for aggregate proceeds of approximately $929,000, net of issuance costs
paid during the six months ended June 30, 1999 of approximately $74,000,
proceeds from the exercise of a stock option of approximately $9,000 and
proceeds from the conversion of restricted cash to cash and cash equivalents of
approximately $115,000, offset by approximately $101,000 used for the repayment
of debt and capital lease obligations.
The Company believes that its existing sources of liquidity and anticipated
revenues, including revenues generated from Deltco, anticipated cost
reimbursements from Agway, Deltco's line of credit and Agway's commitment to
exercise its warrants to acquire up to 500,000 shares of Common Stock after July
1, 1999, will satisfy the Company's projected working capital and other cash
requirements through at least the next twelve months. There can be no assurance,
however, that future revenue decreases or changes in the Company's plans or
other events affecting the Company's operating expenses will not result in the
expenditure of the Company's resources. The Company expects that it will need to
raise substantial additional funds to continue its current and planned
operations. 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.
The Company's ability to raise additional capital may be dependent upon the
stock being quoted on the Nasdaq SmallCap Market. There can be no assurance that
the Company will be able to satisfy the criteria for continued quotation on the
Nasdaq SmallCap Market. For example, one of the criteria for continued quotation
is that the Company will maintain net tangible assets of $2 million. As of June
30, 1999, the Company's net tangible assets were approximately $1.7 million.
Failure to meet the maintenance criteria in the future may result in the
Company's Common Stock not being eligible for quotation. In such event, an
investor may find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of the Company's Common Stock.
12
<PAGE> 14
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
YEAR 2000
The Company recognizes the need to ensure that its operations will not be
impacted by the year 2000 issue that results from computer applications being
written along two digits rather than four to define the application year. As a
result of the year 2000 issue, computer applications may recognize a date using
"00" as the year 1900 rather than the year 2000, resulting in system failures or
miscalculations causing disruption of operations. The Company has reviewed its
material computer applications for year 2000 compliance and is working with
vendors and suppliers to make its computer applications year 2000 compliant.
Thus, the Company has developed a plan to modify its information technology in
recognition of the year 2000 issue. The plan calls for updating existing
software and hardware to newer versions that incorporate corrections to
eliminate the problem. The Company used approximately $36,000 for the six months
ended June 30, 1999 to update the accounting system and network and used
approximately $17,000 for the six months ended June 30, 1999 to update its
computers in order to be year 2000 compliant. The Company believes that these
amounts represent substantially all of its estimated remediation costs and that
future costs will not be significant.
The Company does not expect the year 2000 issue and the plan to resolve it
to have a significant impact on its operations. However, if such plans cannot be
completed on a timely basis, the year 2000 issue could have a material adverse
impact on the Company's business, financial condition and results of operations.
Because of the many uncertainties associated with year 2000 compliance issues,
and because the Company's assessment is necessarily based on information from
third party vendors and suppliers, there can be no assurance as to whether such
assessment is correct or as to the materiality or effect if such assessment is
not correct. For example, to the extent that customers would be unable to order
products or pay invoices or suppliers would be unable to manufacture or deliver
product, the Company's operations would be affected. The Company is currently
evaluating its potential contingency plan options relating to these
uncertainties.
13
<PAGE> 15
PART II - OTHER INFORMATION
PLANET POLYMER TECHNOLOGIES, INC.
Item 1 - Legal Proceedings:
In November 1998, the Company initiated litigation against Brian To, a
former director, officer and consultant of the Company, Tarrenz Inc. and Tarrenz
Management Consultants, Inc., entities owned by Brian To ("Tarrenz"), in the
Superior Court of the State of California for the County of San Diego. The
complaint alleges breach of contract, breach of fiduciary duty and other tort
claims arising from services the defendants performed for or on behalf of the
Company. The Company is seeking recovery of compensation, stock, stock options
and expense reimbursements. In response to the Complaint, the defendants filed a
Motion to Compel Arbitration. The Court issued an order compelling the case to
arbitration on Friday, March 12, 1999. The arbitration will be conducted in San
Diego pursuant to the rules of the American Arbitration Association. On April
26, 1999, the defendants answered and denied the allegations of the complaint
and filed a cross-complaint against the Company alleging breach of contract,
misrepresentation, slander, intentional infliction of emotional distress and
fraud. It is too early to determine the impact, if any, of this proceeding on
the Company, its financial condition or the results of the Company's operations.
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) Exhibits:
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
10.1 Amended Technology Development and License
Agreement, dated June 23, 1999, between
Agrium Inc. (formerly known as Cominco
Fertilizers Ltd.) and Planet Polymer
Technologies, Inc.
11.1 Statement of Computation of Common and
Common Equivalent Shares
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K:
None
14
<PAGE> 16
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, 1999 Planet Polymer Technologies, Inc.
/s/ Robert J. Petcavich
---------------------------------------
Robert J. Petcavich
President, Chief Executive Officer and
Director (On behalf of Registrant and as
Registrant's Principal Financial and
Accounting Officer)
15
<PAGE> 1
EXHIBIT 10.1
AMENDING AGREEMENT
--------------------
THIS AGREEMENT made effective as of the 23rd day of June, 1999,
BETWEEN:
AGRIUM INC., a corporation with an office in the City of Calgary in the
Province of Alberta (formerly known as Cominco Fertilizers Ltd.)
(hereinafter called "Agrium")
-and-
PLANET POLYMER TECHNOLOGIES, INC., a corporation with an office in the
City of San Diego, State of California, United States of America
(hereinafter called "Planet")
WHEREAS a Technology Development and License Agreement was entered into
between Agrium and Planet dated as of January 30, 1995 (the "Agreement");
AND WHEREAS the parties consider it appropriate to amend the Agreement
by changing certain provisions of the Agreement;
NOW THEREFORE in consideration of the foregoing and the mutual
covenants and promises herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the parties hereto, the parties hereto agree as follows:
1. Paragraph 8.1 of the Agreement shall be amended so as to read as
follows:
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, except for Agway Consumer Products, Inc. or Agway
Inc. ("Agway"), on any subject if the intended use falls within,
or could reasonably be expected to fall within, Agrium's Field of
Business formerly Cominco's Field of Business, as defined herein.
If Planet enters into any arrangements or agreements with Agway
for a license under any of the Planet Technology, the New
Technology or with respect to 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 ("Other New Technology") and which could reasonably be
expected to fall within Agrium's Field of Business or any
agreements or arrangements with Agway for the right to
<PAGE> 2
-2-
produce, market or distribute Fertilizer Products, which term,
for purposes of this paragraph 8, shall be as defined in
paragraph 1.1 (but deleting reference to "produced, distributed
or marketed by Cominco from time to time"), or Biological
Products, which term, for purposes of this paragraph 8, shall be
as defined in paragraph 1.2 (but deleting reference to "produced,
distributed or marketed by Cominco from time to time"); under or
with respect to the Planet Technology, the New Technology or the
Other New Technology (the said Fertilizer Products and Biological
Products being collectively called the "New Products") and if
(i) the intended place of use is within the Territory
and
(ii) the intended use falls within, or could reasonably
be expected to fall within Agrium's Field of
Business, or
(iii) if pursuant to such agreements or arrangements,
the intended use falls within, or could reasonably
be expected as falling within Agrium's Field of
Business,
Planet shall provide Agrium with an option, to be exercised by
Agrium within ninety (90) days from receipt of written notice, to
acquire a license and the right to produce, market and distribute
the New Products, on substantially the same terms and conditions
as those contained in this Agreement, including but not limited
to those terms and conditions set out in paragraphs 6.1, 6.2 and
6.3.
Subject to the foregoing exception, during the term of this
Agreement, Planet shall not enter into any arrangement or
agreements with any third party for a license under any of the
Planet Technology, the New Technology or the Other New 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, Agrium's Field of Business, without first offering
such arrangement to Agrium and at terms no less favorable to
Agrium than those offered to a third party.
2. All other provisions of the Agreement not amended by this
Amending Agreement shall be unchanged and remain in full force
and effect.
IN WITNESS WHEREOF the parties hereto have executed this Amending
Agreement as of the date first above written.
Agrium Inc.
Per: /s/ Dennis Kalma
----------------------------
Planet Polymer Technologies, Inc.
Per: /s/ Robert J. Petcavich
----------------------------
<PAGE> 1
PLANET POLYMER TECHNOLOGIES, INC. EXHIBIT 11.1
STATEMENT OF COMPUTATION OF COMMON AND COMMON EQUIVALENT SHARES
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Shares outstanding at beginning of period 5,300,144 5,300,144 5,300,144 5,300,144
10,169 shares issued on March 15, 1998 10,169 10,169 10,169 3,978
8,695 shares issued on June 15, 1998 8,695 1,433 8,695 721
13,483 shares issued on September 15, 1998 13,483 -- 13,483 --
8,571 shares issued on December 15, 1998 8,571 -- 8,571 --
--------- --------- --------- ---------
Weighted average number of shares 5,341,062 5,311,746 5,341,062 5,304,843
========= =========
1,000,000 shares issued on January 11, 1999 1,000,000 939,227
9,677 shares issued on March 15, 1999 9,677 5,721
5,000 shares issued on March 30, 1999 5,000 2,541
9,677 shares issued on June 15, 1999 1,595 802
--------- ---------
Weighted average number of shares 6,357,334 6,289,353
========== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED JUNE 30, 1999 BALANCE SHEET AND STATEMENT OF OPERATIONS FOR
THE SIX MONTHS ENDED JUNE 30, 1999 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, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 502,199
<SECURITIES> 0
<RECEIVABLES> 439,880
<ALLOWANCES> (10,000)
<INVENTORY> 159,369
<CURRENT-ASSETS> 1,152,966
<PP&E> 1,666,921
<DEPRECIATION> (934,725)
<TOTAL-ASSETS> 2,786,996
<CURRENT-LIABILITIES> 264,376
<BONDS> 0
0
0
<COMMON> 11,896,143
<OTHER-SE> (10,468,501)
<TOTAL-LIABILITY-AND-EQUITY> 2,786,996
<SALES> 998,394
<TOTAL-REVENUES> 998,394
<CGS> 879,540
<TOTAL-COSTS> 879,540
<OTHER-EXPENSES> 708,071
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,056
<INCOME-PRETAX> (586,207)
<INCOME-TAX> (5,382)
<INCOME-CONTINUING> (591,589)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (591,589)
<EPS-BASIC> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
