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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
File No. 333-46474
PLANET POLYMER TECHNOLOGIES, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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CALIFORNIA 33-0502606
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OF ORGANIZATION)
9985 BUSINESSPARK AVENUE, SAN DIEGO, CA 92131
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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ISSUER'S TELEPHONE NUMBER (858) 549-5130
Copies to:
Robert W. Blanchard, Esq.
BLANCHARD KRASNER & FRENCH
800 Silverado Street, Second Floor
La Jolla, California 92037
(858) 551-2440
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434 under
the Securities Act, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act,
please check the following box. [x]
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CALCULATION OF REGISTRATION FEE
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Title of each
class of Amount Amount of
securities to to be Offering Price Aggregate registration
be registered registered per unit Offering Price fee
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Common stock 2,032,212 $ 2.25(1) $4,572,477.00(2) $1,207.13
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Common stock 175,000 $ 2.5781 $ 434,762.50(3) $ 114.78
underlying warrants
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Common stock
underlying options 5,000 $ 2.50 $ 12,500.00 $ 3.30
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(1) Based upon the closing price of the common stock on the day preceding the
date
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of filing this registration statement, the actual price per common share will
vary based on the market price of the shares at the time shares are sold.
(2) This represents the maximum amount of this offering which Planet expects to
offer and sell during the two-year period following the effective date of this
registration statement.
(3) Based upon a warrant to purchase 125,000 shares at $2.5781 per share and a
warrant to purchase 50,000 shares at $2.25 per share.
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CROSS REFERENCE TABLE
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Item Number in Form SB-2 Caption or Location in Prospectus
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1. Front of Registration Statement and Outside Front Cover Page of
Outside Front Cover of Prospectus Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back Cover
Cover Pages of Prospectus Pages of the Prospectus
3. Summary Information and Risk Factors Disclosure Regarding Forward-
Looking Statements; Prospectus
Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Dilution
7. Selling Security Holders Selling Security Holders
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Directors, Executive Officers,
Promoters and Control Persons Promoters and Control Persons
11. Security Ownership of Certain Security Ownership of Certain
Beneficial Owners and Management Beneficial Owners and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Interest of Named Experts and Counsel
14. Disclosure of Commission Position Disclosure of Commission Position
on Indemnification for Securities on Indemnification for Securities
Act Liabilities Act Liabilities
15. Organization within Last Five Years Certain Relationships and Related
Transactions
16. Description of Business Description of Business
17. Management's Discussion and Management's Discussion and
Analysis of Financial Condition and Analysis of Financial Condition and
Results of Operations Results of Operations
18. Description of Property Description of Property
19. Certain Relationships and Related Certain Relationships and Related
Transactions Transactions
20. Market for Common Equity and Market for Common Equity and
Related Stockholder Matters Related Stockholder Matters
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Changes in and Disagreements with
Accountants on Accounting and Accountants on Accounting and
Financial Disclosure Financial Disclosure
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PROSPECTUS
PLANET POLYMER TECHNOLOGIES, INC.
Up to 2,032,212 shares of common stock
175,000 shares of common stock underlying warrants
5,000 shares of common stock underlying option
This Prospectus relates to the sale of up to 2,000,000 shares of common
stock by Triton West Group, Inc. Triton may acquire these shares under an equity
line of credit agreement. Triton is an "underwriter" within the meaning of the
Securities Act of 1933 with respect to this offering.
In addition, the selling shareholders, including Triton, named on page
11, are selling 212,212 shares of common stock, including 175,000 issuable under
warrants and 5,000 issuable under a stock option. However, Planet will receive
the selling price of common stock sold to Triton under the line of credit and
upon the exercise of warrants and a stock option held by selling shareholders.
The common stock of Planet is traded on the Nasdaq SmallCap Market
System under the symbol "POLY." On November 9, 2000, the last reported sales
price of Planet's common stock was $1.75.
-----------------------
The securities offered under this prospectus involves a high degree of
risk. See "Risk Factors" beginning at Page 3.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of the prospectus. Any
representation to the contrary is a
criminal offense.
The date of this prospectus is November 13, 2000.
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PLANET POLYMER TECHNOLOGIES, INC.
TABLE OF CONTENTS
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PAGE
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Disclosure Regarding Forward-Looking Statements................................ 1
Prospectus Summary......................... ................................... 1
Risk Factors................................................................... 3
Use of Proceeds................................................................ 9
Dilution....................................................................... 9
Selling Security Holders....................................................... 10
Legal Proceedings.............................................................. 11
Directors, Executive Officers, Promoters and Control Persons................... 12
Security Ownership of Certain Beneficial Owners and Management................. 13
Description of Securities...................................................... 16
Shares Eligible for Future Sale................................................ 18
Interest of Named Experts and Counsel.......................................... 18
Plan of Distribution........................................................... 19
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities............................................ 19
Description of Business........................................................ 20
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 27
Description of Property........................................................ 30
Certain Relationships and Related Transactions................................. 30
Market for Common Equity and Related Stockholder Matters....................... 31
Executive Compensation......................................................... 32
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................. 34
Financial Statements................................... ....................... F-1
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. When Planet uses words such as "intend," "anticipate,"
"believe," "estimate," "plan," "expect," or similar phrases in this prospectus,
Planet is making forward-looking statements. Planet believes that the
assumptions and expectations reflected in such forward-looking statements are
reasonable, based on information available to it on the date of this prospectus,
but Planet cannot assure you that these assumptions and expectations will prove
to have been correct or that Planet will take any action that it may presently
be planning. Planet has disclosed important factors that could cause its actual
results to differ materially from its current expectations under "Risk Factors"
and elsewhere in this prospectus. You should understand that forward-looking
statements made in connection with this offering are necessarily qualified by
these factors.
PROSPECTUS SUMMARY
Since this is a summary, it does not contain all the information that
may be important to you in evaluating your investment. You should read the
following summary, and the "Risk Factors" section, along with the more detailed
information and financial statements and the notes to the financial statements
appearing elsewhere in this prospectus or incorporated by reference in this
prospectus, prior to purchasing securities of Planet.
PLANET POLYMER TECHNOLOGIES, INC.
Planet Polymer Technologies, Inc. is an advanced materials company that
develops and licenses unique materials that are water soluble and biodegradable.
Planet's materials can be used to produce films, coatings and injection molded
parts that serve as environmentally compatible alternatives to conventional
plastics. Planet produces and markets its products to the current and emerging
needs of the industrial and agricultural markets. For example, Planet currently
licenses its technology for agricultural and food related purposes including use
as coatings in animal feed products and on fruits, vegetables, floral and
nursery items.
Planet was incorporated under the laws of California in August 1991.
Planet's principal executive offices are located at 9985 Businesspark Avenue,
San Diego, CA 92131, and its telephone number is 858-549-5130. Planet has a
research and development facility in San Diego, California, but recently sold
its wholly owned subsidiary, Deltco of Wisconsin, Inc. on January 7, 2000.
Planet is focusing on specific market opportunities where Planet
believes that its polymer chemistry expertise and technologies may address
current or emerging market requirements. To facilitate the development and
commercialization of Planet's products, Planet has pursued strategic
collaborations with a number of companies in the areas of product development
and marketing. See also "Strategic Alliances" beginning on Page 22. Planet
intends to continue developing strategic relationships that may help it promote
its products or that might extend the range of product solutions provided by
Planet's technologies. Since inception, Planet has financed its operations
primarily through the sale of equity securities and revenue from customer
development agreements. Of these agreements, only the agreement with Agway, Inc.
is still in force.
Most of Planet's technologies are designed to be specially engineered to
enhance, and become incorporated into, customers' products. Due to this high
degree
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of product specialization, Planet expects the average sales cycle for its
products to be approximately 24 to 48 months. This average sales cycle includes
initial customer contacts, specification writing, engineering design, prototype
construction, pilot testing, regulatory approval, if any, sales and marketing
and commercial manufacture. Planet's staff must expend a significant amount of
time and energy to educate the customer, understand the customer's unique
application requirements and recommend and develop the appropriate solution.
THE OFFERING
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Securities Offered 2,125,000 shares of common stock,
upon exercise of rights by Planet
from time to time under the Triton
Private Equity Line of Credit
Agreement, and exercise by Triton
from time to time its warrant, not
to exceed $7,322,262.50 in the
aggregate; and 27,212 shares and
5,000 shares of common stock held by
Special Situations Private Equity
Fund, L.P. and Triton, respectively,
and 50,000 shares issuable to LBC
Capital Resources under a warrant
and 5,000 shares issuable to Tom
Connelly under a non-statutory stock
option.
Percentage of Planet's outstanding
securities that the securities
offered represent Approximately 21%.
Common stock to be outstanding
after the offering 9,654,095 shares, assuming all
shares purchased under the Private
Equity Line of Credit Agreement are
sold.
Use of Proceeds General working capital to continue
development of Planet's business.
Planet may also use funds from time
to time to acquire technology or
business opportunities.
Risk Factors The common stock offered in this
prospectus involves a high degree of
risk. See "Risk Factors."
Nasdaq SmallCap System
trading symbol "POLY"
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This prospectus covers up to 2,125,000 shares of Planet's common stock
to be issued to Triton under the Private Equity Line of Credit Agreement and
Stock Purchase Warrant, both dated August 15, 2000. Under the Private Equity
Line of Credit Agreement, Triton committed up to $7,000,000 to purchase Planet's
common stock over a period of 36 months. The Private Equity Line of Credit
Agreement establishes what is sometimes termed an equity line of credit or an
equity drawdown facility. From time to time, we may request a drawdown from the
line of credit from Triton, not less than 15 trading days apart, unless
otherwise accepted by Triton.
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In connection with the Private Equity Line of Credit Agreement, Planet
issued to Triton 5,000 shares of Planet common stock and a warrant to purchase
125,000 shares of Planet common stock at an exercise price of $2.5781; agreed to
pay the fees of Triton's counsel in the amount of $15,000; and agreed to pay a
commitment fee of $23,333 for each of the first six drawdowns requested by
Planet.
Under current levels of the stock price and average daily trading
volume, Planet would be able to draw down $35,000 per request under the line of
credit. However, it would not be cost effective to request a drawdown from
Triton, in its first six drawdowns, if the stock price fell below $1.01 and the
average daily trading volume were less than 15,001 shares since the proceeds
from the drawdown would be less than the fees that Planet would have to pay.
RISK FACTORS
Before purchasing the shares offered by this prospectus, you should
carefully consider the risks described below, in addition to the other
information presented in this prospectus or incorporated by reference into this
prospectus. If any of the following risks actually occur, they could adversely
affect Planet's business, financial condition or results of operations. In such
case, the trading price of Planet's common stock could decline and you may lose
all or part of your investment.
WE HAVE EXPERIENCED LOSSES SINCE INCEPTION, WE EXPECT FUTURE LOSSES AND WE MAY
NOT BECOME PROFITABLE.
We have incurred losses since inception. Our revenues to date have
consisted primarily of revenues generated by Deltco and contract research and
development revenues. Since we sold Deltco on January 7, 2000, we will no longer
receive revenues from Deltco in the future. For the years ended December 31,
1999 and 1998, we had net losses of approximately $1,561,000 and $1,629,000,
respectively. The net loss for the six months ended June 30, 2000 was $593,740.
As of June 30, 2000, we had an accumulated deficit of approximately $12.1
million.
Since we have historically incurred net losses, we expect this trend to
continue until some indefinite date in the future. We may not become profitable.
If we do achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis.
WE MAY REQUIRE ADDITIONAL CAPITAL IN THE FUTURE WHICH MAY NOT BE AVAILABLE.
Our future capital requirements will depend on many factors, including:
- the cost of manufacturing scale-up;
- the timing of market acceptance of our products;
- competing technological and market developments; and
- the costs involved in filing, prosecuting and enforcing patent
claims.
We anticipate that our existing resources combined with revenues and
without utilization of proceeds from sales under the line of credit will enable
us to maintain our current and planned operations through February 2001.
However, changes in our plans or other events affecting our
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operating expenses, such as increases in production costs, may cause us to
expend our existing resources sooner than expected. The line of credit provides
Planet with an additional source of capital. However, if our stock price and
trading volume stay at current levels, we will not be able to draw down all
$7,000,000 from the line of credit since it could result in Triton's ownership
of more than 9.9% of Planet's outstanding shares of common stock, which is
prohibited under the terms of the Private Equity Line of Credit Agreement.
We intend to seek additional funding through partnership arrangements or
the extension of existing arrangements. But the uncertainty as to our future
profitability may make it difficult for us to secure additional financing on
acceptable terms, if we are able to secure additional financing at all.
Insufficient funds may require us to delay, scale back or eliminate some or all
of our activities or to obtain funds through arrangements with third parties
that may require us to relinquish rights to some or all of our technologies,
product candidates or products that we would otherwise seek to develop or
commercialize ourselves.
DUE TO THE LISTING REQUIREMENTS OF THE NASDAQ, WE MAY BE DELISTED FROM THE
NASDAQ SMALLCAP MARKET FOR FAILING TO SATISFY THESE REQUIREMENTS, WHICH COULD
MAKE IT MORE DIFFICULT TO DISPOSE OF OUR COMMON STOCK.
Our common stock is quoted on the Nasdaq SmallCap Market. Our ability to
raise capital may depend on the stock's continued quotation on the Nasdaq
SmallCap Market. One of the criteria for continued quotation is that we will
maintain net tangible assets of $2 million, defined for purposes of this test as
Total Assets, excluding goodwill, minus Total Liabilities. As of June 30, 2000,
our net tangible assets as so defined were approximately $1,700,000. In our
discussion with a representative from the Nasdaq, we were given until November
15, 2000 to comply with the $2,000,000 net tangible asset requirement. Failure
to meet the maintenance criteria by November 15, 2000 or failure to meet the
criteria in the future after meeting it by November 15, 2000, may disqualify our
common stock from quotation on the Nasdaq stock market. In such event, an
investor may find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, our common stock.
If the Nasdaq delists our common stock from the Nasdaq SmallCap Market,
trading, if any, in our common stock would thereafter have to be conducted in
the over-the-counter market in the so-called "pink sheets" or, if available,
Nasdaq OTC Bulletin Board. As a result, an investor would find it more difficult
to dispose of, and to obtain accurate quotations as to the value of, our common
stock. In addition, our ability to raise additional funding may be impeded
should we not maintain the continued listing requirements of the Nasdaq SmallCap
Market.
IF WE ARE DELISTED FROM THE NASDAQ SMALLCAP MARKET, WE MAY BE SUBJECT TO PENNY
STOCK REGULATIONS.
If the Nasdaq delists our common stock from the Nasdaq SmallCap Market
and the trading price of our common stock is less than $5.00 per share, trading
in our common stock would also be subject to the requirements of Rule 15g-9
promulgated under the Securities Exchange Act of 1934, as amended. Under such
rule, broker/dealers who recommend such low-priced securities to persons other
than established customers and accredited investors must satisfy special sales
practice requirements, including a requirement that they make an individualized
written suitability determination for the purchaser and receive the purchaser's
written consent prior to the transaction.
The Securities Enforcement Remedies and Penny Stock Reform Act of 1990
also requires additional disclosure in connection with any trades involving a
stock defined as a penny stock,
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including delivery, prior to any penny stock transaction, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
Subject to a few exceptions, a penny stock is generally, according to recent
regulations adopted by the Commission, any equity security not traded on an
exchange or quoted on the Nasdaq that has a market price of less than $5.00 per
share. The additional disclosure requirements could severely limit the market
liquidity of our common stock and the ability of purchasers of our common stock
to sell their shares in the secondary market. Currently, our stock is trading
under $5.00 and may be treated as a penny stock if we do not satisfy the
Nasdaq's listing requirement by November 15, 2000.
WE MAY FACE PROBLEMS IN UTILIZING OUR LINE OF CREDIT IF THE NASDAQ OBJECTS TO
THE LISTING OF THE ADDITIONAL SHARES ISSUED UNDER THE LINE OF CREDIT, OR IF WE
CANNOT OBTAIN PRIOR SHAREHOLDER APPROVAL WHEN THE LINE OF CREDIT REACHES 20% OF
OUR OUTSTANDING COMMON STOCK.
The shares to be registered by this registration statement must be
listed with the Nasdaq Stock Market. We sent a notification form regarding the
listing of the additional shares, including shares issuable under the line of
credit, to the Nasdaq on October 25, 2000. However, we are uncertain as to
whether the Nasdaq will approve or object to the listing of the additional
shares. If the Nasdaq objects, then we will not be able to utilize the line of
credit, which denies us access to funds that could be used to develop our
business.
In addition, if our line of credit reaches 20% of our outstanding
equity, the NASD rules require prior shareholder approval before we may continue
to utilize the line of credit. Under NASD rules, Triton may not be entitled to
vote its equity line shares in a subsequent shareholder vote to authorize use of
the line of credit. With or without Triton's vote we may not be able to obtain
shareholder approval to allow utilization of the line of credit once it reaches
20% of our outstanding common stock. If we need to obtain a shareholder vote,
unless the vote is at an annual meeting, there would be a considerable expense
in calling and holding a special meeting of the shareholders.
WE ARE UNCERTAIN AS TO WHETHER OUR PRODUCTS AND TECHNOLOGIES WILL BE
COMMERCIALLY ACCEPTED, SINCE COMPETING TECHNOLOGIES ARE ALREADY WELL-ESTABLISHED
AND COMMERCIALLY ACCEPTED.
Our success depends upon the commercial acceptance of our technologies
by the various industries targeted by us. The primary source of competition for
our biodegradable products currently comes from suppliers of conventional
non-degradable plastic products. The use of non-degradable products is
well-established and accepted by both consumers and the industry, many of which
may be indifferent to the benefits offered by our products. Changes in political
and consumer emphasis on environmental factors in waste disposal could
significantly harm our competitive position relative to these established
solutions since the principal advantage of our products is degradability. Such
changes may be imminent in light of the current political climate, the
unlikelihood of increased environmental regulation and the possibility of a
reduction in environmental regulation. Considering these factors, we may never
be able to achieve full-scale commercialization, and the commercialization
process of any new product could take several years. Broad market acceptance of
our products may largely depend upon our ability to demonstrate to potential
customers that our products can compete favorably with alternative
non-degradable solutions.
WE MAY EXPERIENCE PROBLEMS WITH OUR TECHNOLOGY IN THE FUTURE IF WE ARE UNABLE TO
SUCCESSFULLY ADAPT TO ADVERSE MARKET CONDITIONS THAT COULD ADVERSELY AFFECT THE
SUPPLY OF COMPONENTS THAT MAKE UP OUR PRODUCTS.
We are developing an innovative approach to address problems and
concerns of many industries. We manufacture polymer materials in pellet form
from base raw materials purchased from third party vendors. We have manufactured
only limited production quantities of our products at our facility in San Diego,
California, and we continue to use contract manufacturers to produce larger
quantities of materials when required. The components for our polymer blends,
alloys and coating products are available from several suppliers, with whom we
do not have any long-term supply agreements. Although in the past we have
obtained adequate quantities of raw materials on acceptable terms to meet our
requirements in addition to some quantity discounts, we may have difficulty in
locating or using alternative resources should supply problems arise. An
interruption or reduction in the source of supply of any
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of the component materials, or an unanticipated increase in vendor prices, could
materially and adversely affect our operating results and damage customer
relationships as well as our business.
WE INCREASINGLY RELY ON OUR STRATEGIC RELATIONSHIPS TO PROMOTE OUR PRODUCTS,
THUS MAKING THE FUTURE SUCCESS OF OUR BUSINESS PARTICULARLY CONTINGENT ON THE
EFFORTS OF OTHER PARTIES.
Our technologies are designed to serve multiple industries. An important
part of our strategy is to promote acceptance of our products through technology
and product alliances with certain customers who we feel could assist us with
our promotion strategies. Currently, we only have a strategic relationship with
Agway. Our dependence on Agway, however, raises potential risks with respect to
the future success of our business. We have focused a significant amount of our
product development efforts into working in close collaboration with Agway.
Agway is concurrently engaged in similar development and testing programs with
other companies involving competing products and technologies. Our success is
dependent on the successful completion and commercial deployment of our products
and on the future commitment of our customers to our products and technology.
Thus, our collaboration with customers may not necessarily result in products
that are accepted by our customers or widely accepted in the marketplace. In
addition, our reliance on collaborations with third parties may require us to
relinquish rights to some of our technologies, product candidates or products
that we would otherwise seek to develop or commercialize ourselves. For example,
under our license agreement with Agway, Agway has the exclusive right to
commercialize our animal feed and fruit coating technologies, and we must rely
upon them to commercially produce, market and distribute these technologies. In
addition, under the Agway license, Planet is restricted from developing similar
technologies for other entities. We may enter into other collaborations with our
customers in the future.
MANY OF OUR COMPETITORS HAVE SIGNIFICANTLY GREATER FINANCIAL, TECHNICAL AND
HUMAN RESOURCES AND MARKET PRODUCTS THAT ARE WELL-ESTABLISHED AND ACCEPTED,
WHICH MAY CAUSE OUR COMPANY TO LOSE ITS ABILITY TO COMPETE IN THE MARKETPLACE.
We consider our competition for our AQUAMIM(R) product to be from
competing technologies rather than from direct competitors. The competing
technologies include: those which use hazardous organic materials to dissolve
organic polymer materials, offered by Advanced Forming Technology; those which
use acid catalysts to dissolve organic polymer material, offered by BASF
Corporation; and those which use air to evaporate water from materials, offered
by Rohm & Haas Company. In the manufacture and
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marketing of controlled-release fertilizer, Planet competes indirectly with
Pursell Inc. and The Scotts Company in the United States and Haifa Chemical
Company in Israel. Many of our competitors have significantly greater financial,
technical and human resources than we do, which may diminish any competitive
advantage that we may currently have over them.
The primary source of competition for our EnviroPlastic(R) and Aquadro(R)
products currently comes from suppliers of conventional non-degradable plastic
products. The use of non-degradable products is well-established and accepted by
both consumers and the industry, many of which may be indifferent to the
benefits offered by our products. Many of our competitors who provide these
non-degradable products have significantly greater financial, technical and
human resources than we do. Changes in political and consumer emphasis on
environmental factors in waste disposal could significantly harm our competitive
position relative to these established solutions with respect to some of our
products whose principal advantage is degradability. Such changes may be
imminent in light of the current political climate, the unlikelihood of
increased environmental regulation and the possibility of a reduction in
environmental regulation. In addition, we are subject to competition from other
specialty chemical companies offering alternative solutions. Thus, our
competitors may succeed in obtaining market acceptance for products more rapidly
than we do in addition to having volume manufacturing efficiency and marketing
capabilities, areas in which we have limited or no experience.
WE ARE LARGELY DEPENDENT ON KEY PERSONNEL AND MAY NOT BE ABLE TO CONTINUE TO
ATTRACT, RETAIN AND MOTIVATE HIGHLY SKILLED PERSONNEL.
Our success depends to a significant extent upon the continued service
of Robert J. Petcavich, Ph.D., our Chairman, Chief Financial Officer and Chief
Technical Officer, and Richard C. Bernier, our Chief Executive Officer and
President, and the loss of key executives could have a material adverse effect
on our business or results of operations. Currently, Robert Petcavich and
Richard Bernier are under contract with us, through 2003 and 2002, respectively.
No other key personnel are currently under contract. We are also dependent on
other key personnel, and on our ability to continue to attract, retain and
motivate highly skilled personnel. The competition for such employees is
intense, and we may not be able to continue attracting, retaining or motivating
key personnel. We currently maintain "key-person" life insurance policies with
respect to Petcavich and Dr. Xiaoming Yang, our chief scientist, and will be
obtaining a policy on Bernier, to compensate us in the event of their deaths.
WE FACE RISKS THAT OUR PATENTS AND PROPRIETARY RIGHTS, WHICH ARE IMPORTANT IN
OUR BUSINESS, ARE NOT ADEQUATELY PROTECTED OR ARE SUPERIOR TO THOSE OF OUR
COMPETITORS.
Planet relies on a combination of patent and trade secret protection,
non-disclosure agreements and licensing arrangements to establish and protect
our proprietary rights. More than 90% of our current business relies upon
technology contained in issued patents and about 10% of our current business
relies upon technology contained in pending patent applications. We have filed
and intend to file applications as appropriate for patents covering our
products. Due to the increasing number of patent applications filed with the
United States Patent and Trademark Office, we are uncertain as to if or when
patents will issue from any of our pending applications or, if patents do issue,
that claims allowed will be sufficiently broad to protect our technology. In
addition, there is a possibility that any of our issued patents could be
challenged, invalidated or circumvented, or that the rights granted to us as
owners of the patents will not provide proprietary protection to us. Since U.S.
patent applications are maintained in secrecy until patents issue, and since
publication of inventions in the technical or patent literature tend to lag
behind such inventions by several months, there is a possibility that we were
not the first creator of inventions covered by our issued patents or pending
patent applications or that we were not the first to file patent
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applications for such inventions. Despite our efforts to safeguard and maintain
our proprietary rights, we are uncertain as to whether we will be successful in
doing so or that our competitors will not independently develop or patent
technologies that are substantially equivalent or superior to our technologies.
FUTURE SALES OF OUR COMMON STOCK AND THE ISSUANCE OF ADDITIONAL SHARES UNDER THE
LINE OF CREDIT MAY DEPRESS OUR STOCK PRICE, WHICH MAY CAUSE YOU TO LOSE SOME OR
ALL OF YOUR INVESTMENT.
Sales of substantial amounts of our common stock in the public market or
the prospect of such sales by existing shareholders and warrant holders could
materially adversely affect the market price of our common stock. As of October
27, 2000, we had outstanding 8,032,330 shares of common stock, assuming all of
the outstanding shares of preferred stock have been converted into shares of
common stock. A large majority of our outstanding shares of common stock are
either registered and therefore freely tradable or may be transferred under Rule
144(k) under the Securities Act, unless held by our "affiliates" as that term is
defined in Rule 144 under the Securities Act.
Currently, we must issue additional shares of common stock upon:
o paying dividends to holders of our Series A Convertible Preferred
Stock; see also "Dilution";
o the exercise of stock options granted under our 1995 Stock Option
Plan and 2000 Stock Incentive Plan; see also "Shares Eligible for
Future Sale";
o the exercise of warrants previously granted, including those held
by the selling security holders and Agway Holdings; see also
"Selling Security Holders";
o our drawdowns of the line of credit; see also "Description of
Securities"; and
o the exercise of Agway Holdings' right of first refusal under our
stock purchase agreement with them; see also "Dilution."
If Triton purchases all of the shares issuable under the line of credit
that are being registered by this registration statement, which does not allow
Triton to beneficially own more than 9.9% of our outstanding common stock, the
total outstanding shares of our common stock could increase by more than 750,000
shares. Such an increase in the number of shares outstanding could cause
dilution, which could pose a potential risk on the market price of our common
stock.
8
<PAGE> 14
OUR PRODUCTS ARE SUBJECT TO GOVERNMENT REGULATIONS, WHICH ARE SUBJECT TO CHANGE
AND WHICH MAY ADVERSELY AFFECT DEMAND FOR OUR PRODUCTS AND OUR OPERATIONS.
Some end products into which our products are expected to be
incorporated are subject to extensive government regulation in the United States
by federal, state and local agencies including the EPA and FDA. Similar
regulatory agencies exist worldwide. Our customers who incorporate our products
into consumer products will bear primary responsibility for obtaining any
required regulatory approvals. The process of obtaining and maintaining FDA and
any other required regulatory approvals for products is lengthy, expensive and
uncertain, and regulatory authorities may delay or prevent product introductions
or require additional tests prior to introduction. Currently, we have two
products, Optigen(TM) 1200, an animal feed coating and FreshSeal(TM), a fruit
coating for fresh produce, that we licensed to Agway and which are still
awaiting FDA approval. We are uncertain as to if or when FDA will approve these
products. In addition, changes in existing regulations or the adoption of new
regulations could occur, which could prevent approval of our two products or
prevent our customers from obtaining approval or delay the approval of various
products or could adversely affect market demand for all of our products.
WE MAY BE SUBJECT TO PRODUCT LIABILITY, WHICH MAY NOT BE COVERED BY LIABILITY
INSURANCE.
Product liability claims may be asserted against us in the event that
the use of our products or products which incorporate our products are alleged
to have caused injury or other adverse effects, and such claims may involve
large amounts of alleged damages and significant defense costs. We do not
maintain product liability insurance. If we obtain product liability insurance
in the future, there is a possibility that the liability limits or the scope of
our insurance policy may not be adequate to protect against such potential
claims. Additionally, we may not even be able to obtain product liability
insurance. Whether or not we obtain such insurance, a successful claim against
us could have a material adverse effect on us. In addition, these product
liability claims, regardless of their merit or eventual outcome, could adversely
affect our business reputation.
WE HAVE NOT PAID ANY CASH DIVIDENDS ON OUR COMMON STOCK SINCE OUR INCEPTION AND
DO NOT ANTICIPATE PAYING CASH DIVIDENDS IN THE FORESEEABLE FUTURE.
Since we have never paid any cash dividends on our common stock and do
not anticipate doing so in the future, you may only realize a profit from your
investment if our stock price appreciates.
USE OF PROCEEDS
We intend to use the proceeds from drawdowns under the line of credit
for general working capital purposes, including the development or acquisition
of new products or businesses. We have a maximum of $7,000,000 available under
such credit facility, excluding the exercise of Triton's warrant. The use of any
proceeds from the exercise of this warrant, and the timing of such use, will
depend on the availability to us of cash from other sources. We will invest any
proceeds not immediately required for the purposes described above principally
in United States government obligations, short term certificates of deposit,
money market funds or other short term, interest-bearing investments.
DILUTION
The issuance of further shares to shareholders who have anti-dilution
rights, the issuance of further shares to Triton under the line of credit, and
the eligibility of issued shares and shares issued upon the exercise of
warrants, for resale, will dilute our common stock and may lower the price of
our common stock. If you invest in our common stock, your interest will be
diluted by the issuance of additional shares to Triton and the shareholders
holding anti-dilution rights.
On November 12, 1998, Planet entered into a Stock Purchase Agreement
with Agway Holdings, Inc., a subsidiary of Agway, whereby Agway Holdings
9
<PAGE> 15
received a right of first refusal to purchase its pro-rata share of any common
stock or other security of Planet that Planet proposed to sell or issue after
the date of the Agway Holdings Stock Purchase Agreement. Under Section 5(b) of
the Agway Holdings Stock Purchase Agreement, Planet is required to give Agway
Holdings written notice of its intention, describing the securities to be
issued, the price and the terms and conditions upon which Planet proposes to
issue the securities and gives Agway Holdings twenty days from that date to
purchase its pro-rata share. Agway Holdings may also waive its right of first
refusal in writing. Thus, upon each exercise by Planet of the right to sell
shares to Triton under the Private Equity Line of Credit Agreement and exercise
of Triton's warrant, Agway Holdings will have the right to purchase additional
shares of the common stock.
On September 19, 1997, Planet filed with the California Secretary of
State a Certificate of Determination of Preferences of Series A Convertible
Preferred Stock which entitles the holders of such shares to convert shares of
their preferred stock to shares of common stock. Section 5(d) of the Certificate
of Determination provides that the conversion price will be adjusted if Planet
issues or sells any shares of common stock for less than the greater of the
conversion price and 85% of the market price on the date of such issue or sale.
Similarly, Planet issued warrants to LBC Capital Resources on May 4,
1998, March 29, 1999 and March 9, 2000; a warrant to AM-RE Services, Inc. on
June 8, 1995; and a warrant to Special Situations Private Equity Fund, L.P. on
September 24, 1997. Under LBC's warrants and AM-RE's warrant, the exercise
prices may be adjusted if Planet issues or sells any shares of the common stock
for less than the respective exercise prices stated in LBC's warrants and
AM-RE's warrant. Likewise, under Special Situations' warrant, the exercise price
will be adjusted if Planet issues or sells any shares of common stock for less
than the greater of the exercise price and 85% of the market price on the date
of such issue or sale. Thus, the exercise prices stated in the warrants held by
LBC, AM-RE and Special Situations may be reduced with each exercise of a
drawdown by Planet under the line of credit.
As of October 27, 2000, there are outstanding options and warrants to
purchase in the aggregate of about 2.6 million shares of Planet common stock and
up to 321,500 shares of preferred stock that pay dividends of Planet common
stock every quarter. Furthermore, we may issue additional shares, stock options
and warrants and we may grant additional stock options to our employees,
officers, directors and consultants under our 1995 Stock Option Plan and 2000
Stock Incentive Plan, any of which may further dilute our stock price.
SELLING SECURITY HOLDERS
Triton West Group, Inc.
Triton is engaged in the business of investing in publicly traded
investment securities for its own account. Triton is located in Georgetown,
Grand Cayman. Triton received 5,000 shares of Planet common stock and a warrant
to purchase 125,000 shares of Planet common stock in connection with the closing
of the Private Equity Line of Credit Agreement entered into by and between
Triton and Planet on August 15, 2000. Under the Private Equity Line of Credit
Agreement, Triton has committed up to $7,000,000 to purchase Planet's common
stock over a period of 36 months. Based upon the closing stock price as of
October 27, 2000 of $2.03, Planet would be able to issue approximately 3,400,000
shares to Triton. However, Planet will not be able to draw down the entire
$7,000,000 since only 2,000,000 shares of common stock issuable under the line
of credit are being registered in this registration statement. Thus, if the
average stock price is less than $3.50 then Planet will not be able to drawdown
the entire amount committed by Triton. In addition to the limitation of the
number of shares registered, Planet must also consider limitations stated in the
Private Equity Line of Credit Agreement. See also "Description of Securities."
If Planet intends to issue additional shares under the line of credit in excess
of 2,000,000 shares, it will file an additional registration statement for the
additional shares.
10
<PAGE> 16
Other than its obligation to purchase Planet common stock under the
Private Equity Line of Credit Agreement and its warrant, Triton has no other
commitments or arrangements to purchase or sell any of Planet's securities. In
addition, Triton may vote all of the shares it acquires under the line of credit
or its warrant in subsequent votes concerning the line of credit. However, if
the line of credit reaches 20% of our outstanding common stock, NASD rules
require prior shareholder approval for continued utilization of the line of
credit. In order for us to continue to utilize the line of credit after it has
reached 20% of our outstanding common stock, the shareholders, which under NASD
rules may exclude Triton's equity line shares, would have to vote on and approve
by a majority vote, the further issuance of shares under the line of credit. A
copy of the Private Equity Line of Credit Agreement and exhibits are attached as
exhibits to this registration statement.
The Selling Security Holders
The selling security holders of this offering are included in the
following table:
<TABLE>
<CAPTION>
PRIOR TO OFFERING NO. OF SHARES AFTER OFFERING
------------------------------- ------------- -------------------------
NAME NO. OF SHARES PERCENT TO BE SOLD NO. OF SHARES PERCENT
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMON STOCK
DIVIDEND SHARES
Special Situations
Private Equity Fund,
L.P.(1) 27,212** * 27,212 - -
---------------------------------------------------------------------------------------------------------------
WARRANT SHARES
LBC Capital
Resources(2) 50,000*** * 50,000 - -
Triton West Group(3)
125,000 1.24 125,000 - -
---------------------------------------------------------------------------------------------------------------
OPTION SHARES
Thomas M. Connelly 5,000**** * 5,000 - -
---------------------------------------------------------------------------------------------------------------
COMMON STOCK SHARES
Triton West Group(3)
5,000 1.24 5,000 - -
---------------------------------------------------------------------------------------------------------------
</TABLE>
----------------
* Less than 1%
** These shares constitute dividend payments from Planet's Series A
Convertible Preferred Stock.
*** These shares are issuable upon exercise of a warrant dated March 9, 2000
received as compensation for past services rendered to Planet consisting of
locating investors for Planet.
**** These shares are issuable upon exercise of a stock option dated May 1, 2000
received as compensation for past services rendered to Planet consisting of
acting as an advisor and director of Planet.
(1) Austin W. Marxe and David M. Greenhouse may exercise voting and investment
control over these shares.
(2) Andrew D. Tepper and James F. Mongiardo may exercise voting and investment
control over these shares.
(3) Sophia Harris may exercise voting and investment control over these shares.
LEGAL PROCEEDINGS
In November 1998, Planet initiated litigation against Brian To, a former
director, officer and consultant of Planet, Tarrenz Inc. and Tarrenz Management
Consultants, Inc., entities owned by Brian To, 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 Planet. Planet 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. On April 26, 1999, the defendants answered and denied the
allegations of the complaint and filed a cross-complaint against Planet alleging
breach of contract, misrepresentation, slander, intentional infliction of
emotional distress and fraud. In response to a motion filed by Planet, the
arbitrator issued a ruling on May 1, 2000 disqualifying defendants' counsel
based on a finding that said
11
<PAGE> 17
counsel had previously represented Planet in a related matter. As a result, the
arbitration previously set for February 28, 2000 was rescheduled for September
11, 2000. However, the defendants filed a motion in San Diego Superior Court to
vacate the arbitrator's order granting Planet's motion to disqualify defendants'
counsel.
On September 22, 2000, the Superior Court issued a telephonic ruling
denying the defendants' motion to vacate. In response, the defendants requested
oral arguments. The court held a hearing on October 27, 2000, but has not yet
issued a ruling.
In light of the limited discovery allowed in arbitration, it is
difficult to evaluate defendants' claims. However, in the opinion of management,
the ultimate resolution of this litigation is not expected to have a material
adverse effect on Planet's financial position or results of operations.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
ROBERT J. PETCAVICH is the founder of Planet and has been Chairman since
August 1991. He currently is Chairman of the Board, Chief Financial Officer and
Chief Technical Officer of Planet. Mr. Petcavich is also Chairman of the Board
of A-Life Medical, Inc., a San Diego-based company. In 1988, Dr. Petcavich
founded AlphaScribe Express Inc., an electronic medical records company, where
he served as Chief Executive Officer until September 1995. Dr. Petcavich is the
inventor of seventeen issued United States patents. Dr. Petcavich has a Ph.D. in
Polymer Science, a Master of Science degree in Solid State Science, and a
Bachelor of Science degree in Chemistry from Pennsylvania State University, and
has completed an executive management program (PMD) at the Harvard University
Graduate School of Business.
RICHARD C. BERNIER was recently named Planet's new President and Chief
Executive Officer on October 17, 2000. By unanimous written consent on October
18,2000, Planet's Board of Directors increased the number of directors to 8 and,
as permitted by Planet's bylaws, appointed Mr. Bernier as a director onto the
Board to fill the vacancy created by the increase. Until joining Planet, Mr.
Bernier worked as a consultant to industrial corporations for two years for his
privately-held company, Directional Consulting, based in Newport Beach,
California. From 1991 to 1998, he was president of Techcon Systems Inc., a
California-based manufacturer of fluid-dispensing products and valves and a
subsidiary of OK Industries.
H. M. "MAC" BUSBY has been a director of Planet since August 1997 when
he was elected by the members of the Board of Directors to fill a vacancy on the
Board. From 1995 until August 1997, he was Chairman of Sun-Gard USA, Inc. He is
currently a director of A-Life Medical, Inc., a San Diego-based company and
still the Chairman of the Board of Sun-Gard USA and Mac's Ventures, Inc., both
privately held companies. Mr. Busby began his career in 1966 at Wisconsin
Centrifugal, Inc. which included the position of Manager of Industrial and
Public Relations. Mr. Busby has also served as Vice President of Human Relations
and Administration for MCA Financial, Inc. a subsidiary of MCA, Inc. Mr. Busby
earned his B.S. in Business Administration from Indiana University.
MICHAEL M. COLEMAN has been a director of Planet since April 1996. He
has been a Professor of Polymer Science at Pennsylvania State University since
1982. From 1983 to 1991, Dr. Coleman was the head of the Department of Materials
Science and Engineering at Pennsylvania State University. Dr. Coleman received a
Ph.D. and a Master of Science degree in Macromolecular Science from Case Western
Reserve University, Cleveland, Ohio, in 1973 and 1971, respectively. He also
holds a B.S. degree in Polymer Science from Borough Polytechnic, London.
DENNIS J. LAHOOD has been a director of Planet since April 1999 when he
was nominated to serve as a director pursuant to an understanding between Planet
and Agway, Inc., which has been a major shareholder since January 1999. He has
been the President of Agway Inc.'s Country Products Group since February 1995.
Mr. LaHood joined Agway in 1969 and has held various management positions. From
1987 to November 1992, he was President of Agway Data Services following his
position as
12
<PAGE> 18
Agway's Chief Information Officer. From November 1992 to February 1995, Mr.
LaHood was Agway's Director of Country Foods and President of Country Foods,
Inc.
THOMAS A. LANDSHOF has been a director of Planet since March 1998 when
he was nominated to serve as a director pursuant to a Securities Purchase
Agreement, dated September 19, 1997, between Planet and purchasers of Planet's
preferred stock, Special Situations Private Equity Fund, L.P. Pursuant to that
agreement, Special Situations may appoint one reasonably acceptable person as a
director on the Board of Directors of Planet. Such right will continue so long
as Special Situations holds at least 200,000 shares of preferred stock or at
least 10% of the outstanding common stock. Mr. Landshof was the President, Chief
Executive Officer and a director of Hitox Corporation of America, a publicly
held manufacturer of prime pigments and extenders for the plastics, coatings and
other markets from August 1994 until November 1997. Mr. Landshof served as
President of Consultants Group from April 1992 to August 1994 and Corporate Vice
President of Lilly Industries, Inc. prior to April 1992. Mr. Landshof earned his
B.S. in Chemistry from Tufts University.
PETER J. O'NEILL has been the Senior Vice President and Chief Financial
Officer for Agway Inc. since October 1992. Mr. O'Neill was recently voted as a
director of Planet at Planet's last annual meeting in May 2000.
RONALD B. SUNDERLAND is currently Sr. Vice President Business / Legal
Affairs of AsSeenIn.com where he has been since 1999. From 1997 to 1999, Mr.
Sunderland was the Senior Vice President of Aaron Spelling Television, Inc.
During the years 1978 to 1996 he was with the American Broadcasting Company,
Inc. where he eventually became Executive Vice-President, Business Affairs and
Contracts. Mr. Sunderland received a Bachelor's degree in Political Science from
the University of California at Los Angeles and a Juris Doctor from Loyola
University School of Law. Mr. Sunderland was recently voted as a director of
Planet at Planet's last annual meeting. Mr. Sunderland was recently voted as a
director of Planet at Planet's last annual meeting in May 2000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the ownership of
Planet's Stock as of October 27, 2000 by: (i) each director; (ii) each of the
Executive Officers named in the Summary Compensation Table; (iii) all executive
officers and directors of Planet as a group; and (iv) all those known by Planet
to be beneficial owners of more than five percent (5%) of any class of Planet's
Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-------------------------------
NUMBER OF PERCENTAGE OF
TITLE OF CLASS BENEFICIAL OWNER SHARES(1) CLASS OWNED(2)
-------------- ---------------- ---------- --------------
<S> <C> <C> <C>
Common Agway Holdings Inc. (3) 3,000,000 34.67%
P.O. Box 4933
Syracuse, NY 13221
Common Special Situations Private Equity Fund, 882,767 10.39%
L.P. (4)
153 East 53rd Street, 55th Floor
New York, NY 10022
Common Robert J. Petcavich, Ph.D. (5) 810,932 10.33%
9985 Businesspark Avenue
San Diego, CA 92131
Common Benchmark Capital, Inc. (6) 742,900 9.71%
750 Lexington Avenue, 24th Floor
New York, NY 10022
Common Lorraine DiPaolo (7) 839,000** 10.96%**
750 Lexington Avenue, 24th Floor
New York, NY 10022
Common Richard Zorn (8) 742,900** 9.71%**
750 Lexington Avenue, 24th Floor
New York, NY 10022
Common H. M. Busby (9) 281,292 3.65%
Common Michael M. Coleman, Ph.D. (10) 52,200 *
Common Dennis J. LaHood (11) 37,083 *
</TABLE>
13
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Common Thomas A. Landshof (12) 51,000 *
Common Peter J. O'Neill (13) 18,000 *
Common Ronald B. Sunderland (14) 73,000 *
Common Richard C. Bernier (15) 10,000 *
Common All executive officers and directors as 1,333,507 16.53%
a group (16)
Series A Special Situations Private Equity Fund, 321,500 100.00%
Preferred L.P.153 East 53rd Street, 55th Floor
New York, NY 10022
</TABLE>
----------------
* Less than one percent.
** Includes shares also reported by other persons on this Table. See
Footnotes.
(1) This table is based upon information supplied by officers, directors and
principal shareholders and Schedules 13D and 13G filed with the
Securities and Exchange Commission. Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, Planet believes that each of the shareholders named in this
table has sole voting and investment power with respect to the shares
indicated as beneficially owned.
(2) Percentage ownership is based upon 7,654,095 shares outstanding on
October 27, 2000, and any shares issuable pursuant to securities
convertible into or exercisable for shares of common stock by the person
or group in question on October 27, 2000 or within 60 days thereafter.
Percentage of Series A Convertible Preferred Stock is based upon 321,500
shares of Series A Convertible Preferred Stock outstanding as of October
27, 2000.
(3) Includes 1,000,000 shares of common stock issuable upon exercise of a
warrant within 60 days of October 27, 2000. Agway Holdings Inc. is an
indirect wholly owned subsidiary of Agway, Inc.
(4) Includes 42,088 shares of common stock, 378,235 shares of common stock
issuable upon conversion of 321,500 shares of Series A Convertible
Preferred Stock and 462,444 shares of common stock issuable upon
exercise of a warrant within 60 days of October 27, 2000. Special
Situations Private Equity Fund, L.P. is managed by its general partner
MG Advisers, L.L.C., a New York limited liability company. The members
of MG Advisers, L.L.C. are Austin W. Marxe and David M. Greenhouse, who
are each deemed to beneficially own 882,767 shares of common stock by
virtue of their ownership and control of MG Advisers, L.L.C.
(5) Includes 7,800 shares held by Dr. Petcavich's wife and includes 192,533
shares issuable upon exercise of options that are exercisable within 60
days of October 27, 2000.
(6) Benchmark, by virtue of its investment discretion over accounts of its
customers and acting through its executive officers, has the sole power
to vote 742,900 shares.
(7) Ms. DiPaolo is the beneficial owner of 839,000 shares of common stock
through the following: (i) her direct, personal ownership of 76,100
shares of common stock; (ii) the ownership of 20,000 shares of common
stock by her husband; and (iii) her ownership of the Benchmark Company,
Inc., a broker-dealer registered under Section 15 of the Securities
Exchange Act of 1934 and an investment advisor registered under the
Investment Advisors Act of 1940, in accordance with Section 240.13d-1
14
<PAGE> 20
(b)(1)(ii)(E), by virtue of Benchmark's investment discretion over
accounts of its customers that hold 742,900 shares of common stock as of
December 31, 1999.
(8) Mr. Zorn is the beneficial owner of 742,900 shares of common stock
through the following: (i) his direct, personal ownership of 56,600
shares of common stock; (ii) his IRA account which holds 70,000 shares
of common stock; (iii) his power of attorney for the management of the
account of his daughter which holds 13,200 shares of common stock; (iv)
his position as president of The Zorn Foundation, Inc., which owns
21,000 shares of common stock; (v) his position as Trustee of the
Lillian R. Zorn Charitable Remainder Annuity Trust which owns 10,000
shares of common stock; (vi) his position as Trustee of the Lillian R.
Zorn Trust for his grandchildren which owns 13,000 shares of common
stock; (vii) his position as General Partner of LRZ Family Limited
Partnership, which owns 30,000 shares of common stock; and (viii) his
position as Executive Vice President of The Benchmark Company, Inc. a
broker-dealer registered under Section 15 of the Securities Exchange Act
of 1934 and an investment advisor registered under the Investment
Advisors Act of 1940, in accordance with Section 240.13d-1
(b)(1)(ii)(E), by virtue of Benchmark's investment discretion over
accounts of its customers that hold 529,100 shares of common stock as of
December 31, 1999.
(9) Includes 48,200 shares of common stock issuable upon exercise of options
that are exercisable within 60 days of October 27, 2000.
(10) Includes 48,200 shares of common stock issuable upon exercise of options
that are exercisable within 60 days of October 27, 2000.
(11) Includes 37,083 shares of common stock issuable upon exercise of options
that are exercisable within 60 days of October 27, 2000. Mr. LaHood is
the President of the Country Products Group of Agway, Inc., the indirect
parent company of Agway Holdings, Inc. Agway Holdings Inc., is the
beneficial owner of 3,000,000 shares of common stock, which includes
1,000,000 shares of common stock issuable upon exercise of a warrant
within 60 days of October 27, 2000. Mr. LaHood is also an officer of
Agway Holdings, Inc. As a result of his positions within Agway and Agway
Holdings, Mr. LaHood has indirect shared voting power and indirect
shared investment power of Agway's shares of common stock.
(12) Includes 51,000 shares of common stock issuable upon exercise of options
that are exercisable within 60 days of October 27, 2000.
(13) Includes 18,000 shares of common stock issuable upon exercise of options
that are exercisable within 60 days of October 27. Mr. O'Neill is the
Senior Vice-President and Chief Financial Officer of Agway, Inc., the
indirect parent company of Agway Holdings, Inc. Agway Holdings Inc., is
the beneficial owner of 3,000,000 shares of common stock, which includes
1,000,000 shares of common stock issuable upon exercise of a warrant
within 60 days of October 27, 2000. Mr. O'Neill is also a director and
an officer of Agway Holdings, Inc. As a result of his positions within
Agway and Agway Holdings, Mr. O'Neill has indirect shared voting power
and indirect shared investment power of Agway's shares of common stock.
(14) Includes 18,000 shares of common stock issuable upon exercise of options
that are exercisable within 60 days of October 27, 2000.
(15) Does not include 160,000 shares of common stock issuable upon exercise
of options granted which are subject to a vesting schedule beginning on
January 1, 2001.
(16) Includes 413,016 shares of common stock issuable upon exercise of
options that are exercisable within 60 days of October 27, 2000.
15
<PAGE> 21
DESCRIPTION OF SECURITIES
The authorized capital stock of Planet consists of 20,000,000 shares of
common stock and 5,000,000 shares of preferred stock.
COMMON STOCK
Each holder of record of common stock is entitled to one vote for each
share held, and each holder of record of preferred stock is entitled to one vote
for each share of common stock issuable upon conversion of such preferred stock.
With respect to the election of directors, shareholders may exercise cumulative
voting rights, i.e., each shareholder entitled to vote for the election of
directors may cast a total number of votes equal to the number of directors to
be elected multiplied by the number of such shareholder shares, on an as
converted basis, and may cast such total of votes for one or more candidates in
such proportions as such shareholder chooses.
Subject to preferences that may be applicable to any prior rights of
holders of outstanding stock having prior rights as to dividends, the holders of
outstanding shares of our common stock are entitled to receive dividends out of
assets legally available therefore at such times and in such amounts as the
Board from time to time may determine. Upon our liquidation, dissolution or
winding-up, the assets legally available for distribution to stockholders are
distributable ratably among the holders of the common stock after payment of
liquidation preferences, if any, on any outstanding stock having prior rights on
such distributions and payment of other claims of creditors. Each outstanding
share of common stock is, and all shares of common stock to be outstanding upon
completion of this offering, will be, upon payment for each share, duly and
validly issued, fully paid and nonassessable.
LINE OF CREDIT
On August 15, 2000, we entered into a Private Equity Line of Credit
Agreement with Triton. Under this agreement, we have the right, until August 15,
2003, or earlier, to request a drawdown and require that Triton purchase between
$100,000 and $1,250,000 of our common stock. Each request may not be less than
15 trading days apart, unless otherwise accepted by Triton. The maximum amount
that we can require Triton to purchase at any given time is subject to a
floating number based on our closing bid price and our average trading volume in
a thirty-day period.
For example, if our common stock trades between $3.01 and $4.50 per
share and the average 30-day trading volume is between 15,001 and 50,000 shares,
we may request up to a $250,000 drawdown from Triton under the Private Equity
Line of Credit Agreement. If our common stock traded between $1.01 and $3.00 per
share and the average 30-day trading volume does not exceed 15,000 shares, the
maximum we could draw down would be only $35,000 for our request. However, if
our common stock trades over $9.01 per share and the average 30-day trading
volume exceeds 150,001 shares, we could draw down the maximum amount of
$1,250,000 for our request. If our stock price and trading volume remain at the
same levels as of the day of this prospectus for the remainder of the term of
the Private Equity Line of Credit Agreement, the maximum amount that we would be
able to draw down would be $35,000 per request.
In addition to the limitation regarding the maximum that we may draw
down and the trading days that must separate each request under the Private
Equity Line of Credit Agreement, Planet may not request a drawdown which would
result in:
- the issuance of an aggregate number of shares to Triton available
under the line of credit and issued from Planet's drawdown of the
line of credit exceeding 19.9% of the number of Planet's outstanding
shares without prior shareholder approval; and
- Triton and its affiliates beneficially owning more than 9.9% of the
then outstanding shares of Planet's common stock, including shares
exercisable under the warrant held by Triton on any given date.
16
<PAGE> 22
Within 10 days after the commencement of each calendar quarter Planet
must notify Triton, in writing, as to Planet's reasonable expectations as to the
dollar amount it intends to raise during that quarter through drawdown notices.
These quarterly notices, however, will not obligate Planet to raise the stated
amount or any amount. Planet's failure to give the quarterly notices may be
cured by notifying Triton, in writing, at any time as to Planet's reasonable
expectations for that quarter.
Planet may request a drawdown by delivering written notice to Triton
setting forth the investment amount that Planet intends to sell to Triton. The
amount requested in the drawdown notice may not be less than $100,000 nor more
than the maximum drawdown amount of $1,250,000. However, if the maximum amount
is less than $100,000 because the average 30 day trading volume is less than a
stated amount and the stock price is less than a stated amount, then the minimum
request amount must be equal to the maximum drawdown amount. The price per share
to be paid by Triton for each share will be 85% of the market price of the
fourth trading day following Planet's delivery of a drawdown notice to Triton.
However, if the applicable market price is equal to or greater than $10, then
the purchase price will consist of 87% of the market price of the fourth trading
day after Planet's drawdown notice. Unless other arrangements are made between
Triton and Planet, upon receipt of the drawdown notice, Triton will deliver the
specified investment amount by wire transfer to a designated escrow agent. Upon
the escrow agent's receipt of the purchased shares from Planet, the escrow agent
will deliver the investment amount to Planet and the purchased shares to Triton.
Triton is not obligated to purchase Planet common stock if any of the
following occurs:
- The shares purchased by Triton are not or no longer registered
pursuant to a then-effective registration statement;
- There is a material adverse effect on the business operations,
properties, prospects or financial condition of Planet after the
date of Planet's most recent SEC filing pursuant to the
Securities Exchange Act of 1934;
- The SEC suspends the trading of Planet's common stock or the
common stock is delisted from the principal exchange on which the
common stock was listed.
Lastly, the Private Equity Line of Credit Agreement sets forth
restrictions on Planet that does not allow Planet to:
- merge or consolidate with, or transfer all or substantially all
of its assets to, another entity unless the resulting entity or
acquiring entity agrees or is obligated to deliver the shares
that Triton purchases under the line of credit; and
- enter into any sale of securities for cash at a price lower than
the then-current closing bid price, not including sales:
- made under existing stock incentive plans;
- made under any compensatory plan for full-time employees,
directors, or key consultants;
- made under any underwritten public offering with an
established investment bank;
- made in connection with a strategic partnership or other
business transaction, the principal purpose of which is
not to simply raise money;
- made under any option, warrant or other agreement
outstanding as of August 15, 2000; or
- made with prior approval from Triton.
COMPENSATION TO TRITON WEST GROUP, INC.
As compensation for establishing the Equity Line of Credit under the
Private Equity Line of Credit Agreement, Planet issued 5,000 shares of common
stock, a warrant to Triton and agreed to pay a commitment fee of $23,333 per
drawdown for the first 6 drawdowns.
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WARRANTS
In connection with the Private Equity Line of Credit Agreement with
Triton, Planet issued a warrant to Triton to purchase up to 125,000 shares of
common stock at $2.5781 which was equal to 125% of the lowest closing bid price
during the six trading days immediately preceding the initial closing date.
Triton's warrant expires on the close of business on February 23, 2004.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is Transfer
Online, located at 227 SW Pine St., Suite 300, Portland, Oregon 97204.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market or
the prospect of such sales by existing shareholders and warrant holders could
materially adversely affect the market price of our common stock. As of October
27, 2000, we had outstanding 8,032,330 shares of common stock, assuming all
outstanding shares of preferred stock are converted into shares of common stock.
A large majority of our outstanding shares of common stock are either registered
and therefore freely tradable or may be transferred pursuant to Rule 144(k)
under the Securities Act, unless held by our "affiliates" as that term is
defined in Rule 144 under the Securities Act. Holders of the 750,000 authorized
shares of preferred stock are entitled to dividend payments of shares of the
common stock every March 15, June 15, September 15, and December 15 of each
year. In May 1995, we filed a Registration Statement on Form S-8 under the
Securities Act covering 500,000 shares of common stock issuable under our 1995
Stock Option Plan. As of October 27, 2000, there were 109,278 remaining shares
available for grant under the 1995 Plan. In June 2000, we also filed a
Registration Statement on Form S-8 under the Securities Act covering 500,000
shares of common stock reserved for issuance under our 2000 Stock Incentive
Plan. As of October 27, 2000, 165,500 shares are available for grant under the
2000 Plan, in addition to the remaining shares available for grant under the
1995 Plan, which may also be granted under the 2000 Plan. Upon issuance, shares
registered under such Registration Statement will be, subject to Rule 144 volume
limitations applicable to our affiliates, available for sale in the open market.
See also "Dilution."
Since Triton is an underwriter, Rule 144 of the Securities Act of 1933
is not available to Triton to sell its shares.
INTEREST OF NAMED EXPERTS AND COUNSEL
The validity of the securities offered under this prospectus will be
passed upon for us by the law firm of Blanchard, Krasner & French, La Jolla,
California.
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The consolidated financial statements of Planet for the years ended
December 31, 1998 and 1999, and for the six months ended June 30, 2000, have
been examined by PricewaterhouseCoopers LLP, independent certified public
accountants.
PLAN OF DISTRIBUTION
A majority of the shares of common stock to be registered by this
registration statement are being offered to Triton under a line of credit. The
total dollar amount of this offering to Triton, excluding Triton's warrant, will
not exceed $7,000,000. Planet will receive funds upon drawdowns of the line of
credit by Planet and Triton's exercise of its warrant. In accordance with the
Private Equity Line of Credit Agreement, Planet issued to Triton a warrant to
purchase 125,000 shares of common stock and 5,000 shares of common stock in
addition to agreeing to pay Triton a commitment fee of $23,333 per drawdown for
the first 6 drawdowns, Triton's legal fees incurred in connection with the
transaction in the amount of $15,000; and the expenses incurred in connection
with each drawdown in the amount of $1,500.
In this offering, Triton is a statutory underwriter within the meaning
of the Securities Act of 1933. As a statutory underwriter, Triton will be
subject to Regulation M of the Securities Act. However, Triton entered into the
Private Equity Line of Credit Agreement for its own account and not with a view
to or for sale in connection with any distribution of the common stock and
Triton has no present arrangement, whether or not legally binding, at any time
to sell its shares to or through any person or entity. In addition, Triton may
not engage in any short sales of Planet's common stock during the term of the
Private Equity Line of Credit Agreement. Triton has not, however, agreed to hold
its shares for any minimum or other specific term and has reserved the right to
dispose of its shares at any time in accordance with federal and state
securities laws applicable to such disposition. Furthermore, Triton has neither
agreed, prior to any sales, to effect any offers or sales of the Triton Shares
in any manner other than as specified in the prospectus nor to purchase or
induce others to purchase the Triton Shares in violation of any applicable
federal and state securities laws, rules and regulations and the rules and
regulations of the Nasdaq National and Small Cap Markets.
Planet will not receive funds from the sale of shares of Planet common
stock or shares of Planet common stock issuable upon exercise of warrants held
by selling shareholders.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Planet's Restated Articles of Incorporation include provisions to
eliminate the personal liability of its directors to the fullest extent
permitted by Section 204(a)(10) under the General Corporation Law of California.
Planet's Articles also include provisions that authorize Planet to indemnify its
directors and officers to the fullest extent permitted by Sections 204 and 317
of the California Corporations Code. Planet's Bylaws also provide Planet with
the authority to indemnify its other officers, employees and other agents as set
forth in the Corporations Code. Such indemnification may be provided against
expenses incurred or in connection with any suit to which an indemnified party
is, or is threatened to be made, a party by reason of such party's acting for or
on behalf of Planet so long as the party acted in good faith and in a manner the
party reasonably believed to be in the best interests of Planet, and with
respect to a manner the party reasonably believed to be in the best interests of
Planet, and with respect to any criminal action, the party had no reasonable
cause to believe the party's conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, employees or agents of
Planet pursuant to the foregoing paragraphs, or otherwise, Planet has been
advised that in the opinion of the Securities and Exchange Commission that such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
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DESCRIPTION OF BUSINESS
PLANET POLYMER TECHNOLOGIES, INC.
Planet Polymer Technologies, Inc. is an advanced materials company that
develops and licenses unique hydro-soluble polymer and biodegradable materials.
Planet's proprietary polymer materials are marketed under the trademarks
EnviroPlastic(R), Aquadro(R) and AQUAMIM(R). EnviroPlastic(R) and Aquadro(R) can
be used to produce films, coatings and injection molded parts that serve as
environmentally compatible alternatives to conventional plastics. AQUAMIM(R) can
be used to manufacture complex metal parts using conventional plastics molding
equipment. Planet has also developed polymer technologies for Agway, Inc. in
1999 that are being marketed under the trademarks Optigen(TM) 1200 and Fresh
Seal(TM).
Planet's primary focus is on the technologies listed below:
- EnviroPlastic(R) controlled-release technology - Polymer coating
technologies for use in agriculture and food products
- AQUAMIM(R) Metal Injection Molding - Moldable metal filled
polymers
- EnviroPlastic(R) Z - Biodegradable and compostable polymers
- Aquadro(R) - Hydrodegradable (water dispersible) polyvinyl
alcohol resin
To date, Planet has commercialized EnviroPlastic(R) controlled-release
technologies with Agway, EnviroPlastic(R) Z with The Toro Company's Irrigation
Division and has sold pilot production quantities of AQUAMIM(R) and Aquadro(R)
products.
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Planet's research and development facility is located in San Diego,
California. Planet sold its wholly owned subsidiary, Deltco of Wisconsin, Inc.
on January 7, 2000.
Planet was incorporated under the laws of California in August 1991.
Planet's principal executive offices are located at 9985 Businesspark Avenue,
San Diego, CA 92131, and its telephone number is 858-549-5130.
PLANET'S PRODUCTS AND TECHNOLOGIES
Planet is using its polymer chemistry expertise to provide water soluble
and degradable technology-based solutions to the current and emerging needs of
the industrial and agricultural markets.
ENVIROPLASTIC(R) CONTROLLED-RELEASE TECHNOLOGY. Planet's EnviroPlastic(R)
controlled-release technology is a proprietary polymer coating product line.
This technology allows fertilizer to be controlled for release over 120 days.
The patent for EnviroPlastic(R) controlled-release technology is No.
5,803,946.
The controlled-released products for animal feed and fruit coating are
currently in production for Agway. The product line for the animal feed is time
released polymer coated nitrogen. The fruit coating technology allows controlled
ripening which extends the shelf life of the coated fruit. In March 2000, Planet
and Agway entered into a sub-agreement with respect to animal feed products
incorporating Planet's patented/patent pending coatings and/or polymer systems.
Also in March 2000, Planet and Agway entered into another sub-agreement with
respect to Planet's patented/patent pending coatings and/or polymer systems sold
for use on fruits, vegetables, floral and nursery items.
AQUAMIM(R) METAL INJECTION MOLDING. AQUAMIM(R) is designed for the
production of precision metal components utilizing a water debinding process,
which eliminates the need for hazardous solvents or acids. AQUAMIM(R) feedstock
is a mixture of metal powders and Planet's proprietary water soluble polymer
binder. Various industrial and consumer products can be manufactured by the
AQUAMIM(R) technology. Planet currently offers stainless steel compounds, 316L,
17-4PH, and 420; iron-nickel; tool steels M2, and M4; and heavy metal alloys,
tungsten copper and tungsten carbide cobalt. In May 1998, Planet retained Dr.
Randall German, an authority on metal injection molding as a scientific advisor
to Planet. To date, Planet has not received significant revenue from the sale of
products based on its AQUAMIM(R) technology. The patents for AQUAMIM(R) are No.
5,977,230 and No. 6,008,281.
ENVIROPLASTIC(R) Z. Planet's patented EnviroPlastic(R) Z materials are
biodegradable and compostable polymers based on the polymer cellulose acetate
derived from trees, a natural renewable resource. EnviroPlastic(R) Z materials
are subjected to a high energy physical process that enhances their
biodegradability and compostability. Product features include transparency, fast
molding cycles, outstanding processability and degradation rates from 1 to 3
years. EnviroPlastic(R) Z materials have been successfully injection molded and
extruded into sheet film. EnviroPlastic(R) Z materials are targeted for use in
products in the packaging and the industrial markets and is currently in
commercial production for The Toro Company's Irrigation Division. The patent for
EnviroPlastic(R) Z is No. 5,505,830.
AQUADRO(R). Aquadro(R) is a polyvinyl alcohol based compound developed
by Planet to provide cost effective product solutions for the medical
disposable, industrial manufacturing and personal hygiene markets. Aquadro(R)
can be manufactured into blown film, extrusion cast film, and injection molded
products.
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Aquadro(R) resins are highly versatile and can be engineered for elastomeric or
rigid applications. Aquadro(R) can be disposed of through the municipal sewage
system by dissolving the material in hot or cold water. The development of
Aquadro(R) is an advancement of Planet's EnviroPlastic(R) H technology, patent
No. 5,367,003. The patent for Aquadro(R) is No. 5,658,977.
MARKETS AND APPLICATIONS
Planet is focusing on specific market opportunities where Planet
believes that its polymer chemistry expertise, EnviroPlastic(R)
controlled-release technology, AQUAMIM(R), EnviroPlastic(R) Z and Aquadro(R)
technologies, may address current or emerging market requirements.
Planet is currently targeting the following markets:
AGROTECHNOLOGY. Planet believes that EnviroPlastic(R) controlled-release
technology materials provide a potential solution to the problem of soil and
water contamination in the fertilizer industry. The use of controlled-release
technology decreases the water contamination caused by unacceptably high levels
of nitrates being dissolved in the water table and provides a cost-effective
method of dissemination of the fertilizer product. Additionally, rain does not
wash away controlled-release fertilizers using EnviroPlastic(R)
controlled-release technology materials.
Planet's controlled-release technology is currently being utilized in a
product sold by Agway as a concentrated source of controlled release nitrogen
for dairy cows and is currently being developed for controlled ripening of
produce. Planet believes that Agway will continue to expand the market areas for
both of these technologies.
INDUSTRIAL MANUFACTURING. Planet believes that potential users of
AQUAMIM(R) include commercial custom metal injection molding parts producers,
internal metal injection molding parts producers and new entrants including
diversifying plastic injection molders. Some of the metal injection molding
products being produced today include aerospace parts, medical devices, firearm
components, business machine and camera parts, jewelry, cutting tools,
microelectronics, wear components, surgical tools, computer disk drives, locks,
hand tools, sporting goods, thermocouples, connectors, and various industrial
components and automotive parts. Planet believes that its AQUAMIM(R) technology
provides a simple, safe and cost effective solution for producing metal
injection molded parts. Planet's EnviroPlastic(R) Z is currently in use by The
Toro Company's Irrigation Division as a degradable component of their sprinkler
systems.
PERSONAL HYGIENE AND MEDICAL DISPOSABLES. Planet's Aquadro(R) technology
offers both product enhancements and environmental benefits in both film and
injection molded applications in the personal hygiene market. Prototype samples
of these products, manufactured with Planet's EnviroPlastic(R) H polymer blends,
have demonstrated that they can be disposed of in the toilet and jettisoned into
the sewage system. Planet believes that consumers will consider this method of
disposal to be more convenient and environmentally sound. Planet believes that
its injection molded Aquadro(R) product is well positioned to capitalize on the
increasing concern for safe, efficient and environmentally compatible disposable
medical supplies.
STRATEGIC ALLIANCES
To facilitate the development and commercialization of Planet's products,
Planet has pursued a strategy of aligning itself with a number of companies in
the areas of product development and marketing.
AGWAY PRODUCT FEASIBILITY AGREEMENT, LICENSE AGREEMENT AND STOCK
PURCHASE AGREEMENT. In November 1998, Planet entered into a Stock Purchase
Agreement with Agway Holdings, Inc., a subsidiary of Agway, whereby Agway
Holdings purchased 1,000,000 shares of Planet's common stock for $1,000,000 and
received a warrant to purchase up to 2,000,000 additional shares of common stock
at a price of $1.00 per share. The stock purchase transaction was completed in
January 1999 with Planet's
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shareholders' approval. Additionally, in February 1999, Planet received a
commitment from Agway whereby Agway agreed to exercise its warrant to acquire up
to 500,000 shares of Planet's common stock after July 1, 1999 at Planet's
request, in the event that Planet's cash flows were less than currently
projected or were insufficient to fund its operating requirements. On November
5, 1999 and March 3, 2000, at Planet's request, Agway exercised warrants with
respect to a total of 1,000,000 shares of Planet's common stock on the terms,
and subject to conditions, set forth in the warrants and Planet received a total
of $1,000,000 in connection with such exercises.
Contemporaneously with the execution of the Agway Holdings Stock
Purchase Agreement, Planet and Agway entered into an agreement relating to the
funding by Agway of a feasibility study of Planet's polymer technology for use
in agricultural products, other than fertilizers and other biological products,
and food products. Under the terms of the feasibility study agreement, Planet is
reimbursed for qualifying research and development costs related to staffing,
materials, equipment, equipment time, outside testing and travel from Agway.
Also in November 1998, Planet granted Agway an exclusive worldwide
license 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 license, Agway
has the exclusive right to grant licenses and sublicenses to other parties on
the technology developed under the license. During the term of the license,
however, Planet may not conduct any development work of the same nature or type
as that performed under the license for any third party on any subject if the
intended use falls within, or could reasonably be expected to fall within,
Agway's field of business. Moreover, Planet may not enter into any arrangements
or agreements with any third party for a license under any of Planet's
technology used during performance of this agreement if the intended place of
use falls within, or could reasonably be expected to fall within, Agway's field
of business without first offering such arrangement to Agway and at the terms no
less favorable to Agway than those offered to a third party. Agway's field of
business is broadly related to agricultural products and food products, but does
not include fertilizers for purposes of the license. As a result, Planet's
ability to develop or license its technology to third parties for agricultural
and food applications is significantly restricted by the license with Agway.
Planet and Agway agreed to execute further sub-agreements to specify the
royalties to be paid to Planet for Agway's use of Planet's technology on
specific products. In March 2000, Planet and Agway entered into a sub-agreement
with respect to animal feed products incorporating Planet's patented/patent
pending coatings and/or polymer systems. Also in March 2000, Planet and Agway
entered into another sub-agreement with respect to Planet's patented/patent
pending coatings and/or polymer systems sold for use on fruits, vegetables,
floral and nursery items.
AGRIUM TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT. In January 1995,
Planet entered into a ten year technology and license agreement with Cominco
Fertilizers Ltd., now named Agrium Inc., pursuant to which Agrium desired 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. Planet's EnviroPlastic(R) controlled-release
technology polymer was developed for Agrium under this agreement. Under the
terms of the agreement, Agrium owns all technology developed under the
agreement, including, among other things, compositions of matter, new chemical
complexes, association compounds, blends, mixtures or compositions of coating
materials, or new products, or new processes relating thereto developed by
Planet or by Agrium. In addition, Agrium has the exclusive right to grant
licenses and sublicenses on the technology developed under the agreement to
other parties. In return for the rights granted to Agrium, Agrium is required to
pay royalties to Planet determined in accordance with the terms of the
agreement. On June 23, 1999, Planet entered into an Amending Agreement with
Agrium, Inc. to amend the Technology Development and License Agreement dated as
of January 30, 1995. The Amending Agreement allows Planet to enter into an
arrangement or agreement with Agway with respect to the development of
technologies involving controlled-released
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coatings of fertilizers. If Planet enters into such arrangements or agreements
with Agway, then Planet 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.
Planet intends to continue developing other strategic relationships that
may help it promote its products or that might extend the range of product
solutions provided by Planet's technologies. Planet has entered into
non-disclosure agreements providing for the confidential exchange of information
and discussion with potential strategic partners and customers. There can be no
assurance that any such agreements will result in any development and license
agreements or commercial relationships. There can be no assurance that Planet
will be able to negotiate acceptable customer relationships in the future, or
that its existing joint development and licensing agreements will be successful.
There can also be no assurance that Planet and its potential strategic partners
will be able to develop any products or that the new products, if developed, and
their pricing will be acceptable to customers.
SALES AND MARKETING
Planet primarily relies on direct sales efforts and strategic marketing
alliances to market Planet's products and technologies. Many of these direct
sales efforts are based on the initiatives of Planet's senior management. Planet
believes that these efforts have provided Planet with significant market
exposure and have continued the educational process required to commercialize
its technologies. In order to leverage its sales and marketing efforts, Planet
has also developed strategic alliances with Agway and Agrium. See "Strategic
Alliances."
Most of Planet's technologies are designed to be specially engineered to
enhance, and become incorporated into, customers' products. Due to this high
degree of product specialization, Planet expects the average sales cycle for its
products to be approximately 24 to 48 months. This average sales cycle includes
initial customer contacts, specification writing, engineering design, prototype
construction, pilot testing, regulatory approval, if any, sales and marketing
and commercial manufacture. A significant amount of time and energy is required
by Planet's staff to educate the customer, understand the customer's unique
application requirements and recommend and develop the appropriate solution.
COMPETITION
Planet considers its competition for its AQUAMIM(R) product to be from
competing technologies rather than from direct competitors. The competing
technologies include: solvent debinding technologies based on a wax binder by
Advanced Forming Technology, catalytic debinding based on a polyacetal binder by
BASF Corporation, air dry debinding based on a water-based binder by Honeywell,
Inc. and thermal debinding based on an acrylic binder by Rohm & Haas Company.
In the manufacture and marketing of controlled-release fertilizer,
Planet competes indirectly with Pursell Inc. and The Scotts Company in the
United States and Haifa Chemical Company in Israel. Planet believes that its
EnviroPlastic(R) controlled-release technology is a lower cost alternative that
can be targeted towards the broader agricultural market rather than the turf
nursery and ornamental market segment being served today.
The primary source of competition for Planet's EnviroPlastic(R) and
Aquadro(R) products currently comes from suppliers of conventional
non-degradable plastic products. The use of non-degradable products and current
methods of solid waste disposal are well established and accepted by both
consumers and the industry, many of whom may be indifferent to the benefits
offered by Planet's technologies. Many of Planet's competitors, who provide
these non-degradable products, have significantly greater financial, technical
and human resources than Planet. Direct competition with respect to degradable
polymer materials is limited. Technologies which Planet believes to be
potentially competitive include polyvinyl alcohol, starch-based polymers and
polylactic acid. A lessening of political or consumer concern for environmental
aspects of waste disposal could significantly harm Planet's competitive
position.
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There can be no assurance that any one of these potentially competitive
technologies will not obtain a significant market share prior to the
commercialization of Planet's products. The development of a competing or
superior technology or the commercialization of such technology by any one of
Planet's potential competitors could have a material adverse effect on Planet's
sales or operating profits.
MANUFACTURING AND SUPPLIERS
Planet manufactures polymer materials in pellet form from base raw
materials purchased from third party vendors. Planet has manufactured only
limited production quantities of its products at its facility in San Diego,
California, and continues to use M.A. Hanna Engineered Materials as a contract
manufacturer to produce larger quantities of materials when required. The
components for Planet's polymer blends, alloys and coating products are
available from several suppliers such as Union Carbide Corporation, The Dow
Chemical Company, Dupont, Eastman Chemical Company and Air Products and
Chemicals, Inc. as well as other sources. Planet has not executed long-term
supply agreements with any of its vendors.
To date, Planet has obtained adequate quantities of raw materials on
acceptable terms to meet its requirements and with volume purchase orders on
some items in order to obtain quantity discounts. Planet does not anticipate
significant difficulties in obtaining raw materials in sufficient quantities to
meet its anticipated needs. Should supply problems arise, however, Planet's
inability to develop alternative cost-effective sources could materially impair
Planet's ability to manufacture and deliver products. Additionally, an
interruption or reduction in the source of supply of any of the component
materials, or an unanticipated increase in vendor prices, could materially and
adversely affect Planet's operating results and damage customer relationships.
RESEARCH AND DEVELOPMENT
Research and development expenditures during the years ended December
31, 1998 and 1999, and the six months ended June 30, 1999 and 2000, were
approximately $634,000, $727,000, $392,000 and $269,000, respectively, of which
approximately $122,000, $497,000, $310,000 and $139,000, respectively, were
customer funded. Planet believes that its long-term success depends on the
continued development and commercialization of cost-effective solutions
consisting of engineered environmentally compatible polymer materials. Planet
currently has three Ph.D. polymer scientists, one MS research scientist and one
process technician engaged in product development programs, which include
polymer synthesis, polymer blending, process development, pilot and full scale
manufacturing and testing. Planet aims to design and develop new products
internally and, where appropriate, acquire existing technologies for
commercialization, although Planet currently has no plans for any such
acquisitions. Planet anticipates that some of the 2000 research and development
expenditures in the agrotechnology area will be reimbursed by Agway under its
Feasibility Agreement. For the years ended December 31, 1998 and 1999, and the
six months ended June 30, 1999 and 2000, Planet recorded reimbursable research
and development costs of approximately $62,000, $355,000, $251,000 and $94,000,
respectively, from Agway.
INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGIES
Planet believes that, although the ownership of patents is a significant
competitive advantage in its business, its success also depends on the
innovative skills, technical competence, and marketing ability of its
scientific, engineering, and sales and marketing personnel. Planet intends to
continue to design and develop proprietary engineered environmentally compatible
polymer blends and alloys, as well as enhancements and improvements on existing
products, and will seek patent and trademark protection for such inventions,
improvements and enhancements as appropriate.
In 1999, Planet expanded its existing patent portfolio with the issuance
of US name registration and patents for Planet's AQUAMIM(R) technology, and US
patent allowed on fresh produce coating technology. All other technologies of
Planet are considered trade secrets and patent protection will be pursued as
appropriate.
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While Planet believes that a competitor with substantial financial
resources and technical expertise could develop polymer materials equivalent to
Planet's, Planet believes that its lead times, continued research and
development efforts and relationship driven strategic alliances with customers
provide it with a competitive advantage. Planet relies on trade secrets,
proprietary know-how and process technology, which it seeks to protect, in part,
by confidentiality agreements with its employees, consultants and customers.
There can be no assurance that these agreements will not be breached, that
Planet would have adequate remedies for any breach or that Planet's trade
secrets and proprietary know-how will not otherwise become known or be
independently discovered by others.
In addition, there can be no assurance that Planet's pending patent
applications will be approved, that Planet will develop additional proprietary
materials or processes that are patentable, that any patents issued to Planet or
any of its licenses will provide Planet with competitive advantages or will not
be successfully challenged by third parties or that the patents of others will
not have an adverse effect on the ability of Planet to conduct its business.
Furthermore, there can be no assurance that others will not independently
develop similar or superior technologies, duplicate any of Planet's processes or
design around the patented materials developed by Planet. Planet believes that
its products, patents, trademarks and other proprietary rights do not infringe
the property rights of third parties. There can be no assurance, however, that
third parties will not assert infringement claims in the future. It is possible
that Planet may need to acquire licenses to, or to contest the validity of,
issued or pending patents of third parties relating to Planet's technology.
There can be no assurance that licenses under such patents would be made
available to Planet on acceptable terms, if at all, or that Planet would prevail
in any such contest. In addition, Planet could incur substantial costs defending
itself in suits brought against the Company with respect to patents or in
bringing suits against other parties.
GOVERNMENT REGULATION
Some end products into which Planet's products are incorporated may be
subject to significant regulation and approval by federal, state and local
entities such as the Food and Drug Administration and the Environmental
Protection Agency. Similar regulatory agencies exist worldwide. Planet may be
required to provide its customers with technical information on its products to
be used by the customer in the regulatory process. Planet's customers will have
primary responsibility for obtaining any required governmental approvals. The
approval process could be costly and lengthy and potential sales of Planet's
products could be significantly delayed and/or eliminated as to end products
subject to such regulatory approval.
EMPLOYEES
Planet currently has ten full-time employees at its corporate
headquarters in San Diego, California, three of whom hold doctoral degrees. Five
employees are engaged in research and development activities, one is involved in
sales and marketing, and four are in administrative, business development,
operations and research support positions. Planet believes that its future
success will depend in part on its ability to recruit, retain and motivate
qualified management, marketing, technical and administrative employees. Planet
has an employment agreement with two key employees, Robert Petcavich and Richard
Bernier. None of Planet's employees are covered by collective bargaining
agreements, and management considers relations with employees to be good.
26
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Except for the historical information, the following discussion contains
forward-looking statements that involve some risks and uncertainties. Planet's
actual results could differ materially from those discussed below.
Since Planet was founded in 1991, with the exception of resources
expended in connection with the purchase and ongoing operation of Deltco,
substantially all of Planet's resources have been devoted to the development and
commercialization of its technologies and products. This has included the
expenditure of funds to develop Planet's corporate infrastructure, support
Planet's marketing efforts and establish a pilot production facility, in
addition to research and development. In January 2000, Planet sold its wholly
owned subsidiary, Deltco, a manufacturer and reprocessor of plastic resins
located in Ashland, Wisconsin. Planet has incurred operating losses since
inception and had an accumulated deficit as of June 30, 2000 of approximately
$12.1 million. Pending commercial deployment of and related volume orders for
Planet's products, Planet expects to incur additional losses.
RESULTS OF OPERATIONS
On January 7, 2000, Planet sold all of its common stock shares of Deltco
to Daniel B. Mettler and Randy J. Larson, members of Deltco's management team,
based upon Planet's Board of Directors' determination that Deltco's business in
recycled plastics was not strategic to Planet's core technologies. In accordance
with the Stock Purchase Agreement with Deltco, Planet received total proceeds of
$1,000,000 in the form of $900,000 in cash and $100,000 in a secured promissory
note in consideration of the sale of its Deltco common stock. This note is
collateralized by all of the equipment, accounts, inventory, supplies and
personal property now held or hereafter acquired by Deltco. The accompanying
financial statements present the results of operations of Planet and Deltco as a
discontinued operation. Accordingly, Planet's continuing operations are now
comprised of one segment, the "Research and Development" business segment. The
following discussion of results of operations relates solely to Planet's
continuing operations.
Planet's revenues increased from $0 for the year ended December 31, 1998
to approximately $76,000 for the year ended December 31, 1999. This increase was
primarily attributable to the successful commercial deployment of
EnviroPlastic(R) Z for The Toro Company's Irrigation Division. Planet's revenues
increased from $0 for the six months ended June 30, 1999 to approximately
$401,000 for the same period in 2000. This increase was also attributable to the
commercial deployment of EnviroPlastic(R) Z.
Cost of sales increased from $0 for the year ended December 31, 1998 to
approximately $54,000 for the year ended December 31, 1999. This increase was
primarily due to the costs associated with the commercialization of
EnviroPlastic(R) Z. Cost of sales increased from $0 for the six months ended
June 30, 1999 to approximately $274,000 for the same period in 2000. This
increase was also due to the costs associated with the commercialization of
EnviroPlastic(R) Z.
General and administrative expenses increased $156,000 from
approximately $732,000 for the year ended December 31, 1998 to approximately
$888,000 for the year ended December 31, 1999. This increase was primarily
attributable to increased legal fees and an increase in outside services
relating to costs associated with becoming Year 2000 compliant. The
aforementioned expenses increased $38,000 from approximately $477,000 for the
six months ended June 30, 1999 to approximately $515,000 for the same period in
2000. This increase was primarily attributable to professional fees paid to an
independent consultant for providing investor relation services.
Marketing expenses increased $5,000 from approximately $178,000 for the
year ended December 31, 1998 to approximately $183,000 for the year ended
December 31, 1999. Marketing expenses increased $24,000 from approximately
$84,000 for the six months ended June 30, 1999 to approximately $108,000 for the
same period in 2000. These increases were primarily attributable to increased
costs associated with the
27
<PAGE> 33
promotion of AQUAMIM(R) which included professional fees paid to an independent
consultant.
Planet's net research and development expenses decreased from
approximately $512,000 for the year ended December 31, 1998 to approximately
$230,000 for the year ended December 31, 1999. This decrease was primarily due
to a feasibility study agreement entered into with Agway and a reduction in
research and development travel expenditures. Planet has allocated research and
development resources to projects that are reimbursable by Agway and other
customers. Offsetting research and development revenue from customers other than
Agway increased from approximately $60,000 for the year ended December 31, 1998
to approximately $142,000 for the same period in 1999. This increase was
primarily due to the advancement of AQUAMIM(R) and Aquadro(R). Offsetting
reimbursable research and development costs from Agway increased from
approximately $62,000 for the year ended December 31, 1998 to approximately
$355,000 for the same period in 1999. This increase was due primarily to the
commercial scale up of animal feed and an increase in costs associated with
developing fruit coating. A net advance of funds of approximately $61,000
existed as of December 31, 1999. In addition, Planet's net research and
development expenses increased from approximately $82,000 for the six months
ended June 30, 1999 to approximately $130,000 for the same period in 2000. This
increase was primarily due to a reduction in allocated research and development
resources to projects that are reimbursable by Agway under the feasibility study
agreement. Offsetting reimbursable research and development revenue from
customers other than Agway decreased from approximately $59,000 for the six
months ended June 30, 1999 to approximately $44,000 for the same period in 2000.
Offsetting reimbursable research and development costs from Agway decreased from
approximately $251,000 for the six months ended June 30, 1999 to approximately
$94,000 for the same period in 2000. These decreases were due to a reduction in
the research and development labor rates charged to Agway.
In 1996, Planet recorded an obligation of $265,000 for outstanding
employment tax issues. During the three months ended September 30, 1999, Planet
resolved a portion of the employment tax issue and recorded other income of
$113,000.
In 1998 and 1999, Planet recorded an income tax provision of $800, which
represented a current tax liability for California minimum taxes.
Planet's net loss decreased from approximately $1,629,000 during the
year ended December 31, 1998 to approximately $1,561,000 during the year ended
December 31, 1999 as a result of the aforementioned contributing factors, offset
by the loss on the sale of Deltco of approximately $561,000. Planet's net loss
increased from approximately $592,000 for the six months ended June 30, 1999 to
approximately $594,000 for the same period in 2000.
As of December 31, 1999, Planet had net operating loss carry forwards
for federal income tax purposes of approximately $9,815,000, and for California
and Wisconsin state tax purposes of approximately $3,372,000 and $141,000,
respectively. Planet's annual utilization of net operating loss and tax credit
carry forwards may be limited if Planet's ownership were to change in the
future, as defined by Sections 382 and 383 of the Internal Revenue Code. Due to
the possible limitations under Sections 382 and 383 of the Internal Revenue Code
and Planet's lack of historical earnings, the Company has recorded a full
valuation allowance for deferred tax assets as it is more likely than not that
such assets will not be realized.
Planet's quarterly results of operations have and continue to fluctuate
materially depending on, among other things, the mix of products sold,
availability of inventory, costs, price discounts, market acceptance and the
timing and availability of new products by Planet or its customers,
customization of products, and general economic and political conditions.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, Planet has financed its operations primarily through
the sale of equity securities and revenue from customer development agreements.
During 1991 to 1994, Planet raised approximately $4 million (net of issuance
costs) from the private sale of common stock and exercise of warrants to
purchase common stock.
28
<PAGE> 34
In September 1995, Planet 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 1999, a Small Business Administration loan obtained in
connection with a purchase business combination was repaid in full in the amount
of approximately $96,000 with cash obtained from the redemption of a certificate
of deposit.
In September 1997, Planet issued 500,000 shares of Series A Convertible
Preferred Stock and warrants to purchase common stock for an aggregate purchase
price of approximately $882,000, net of issuance costs.
In January 1999, with Planet's shareholders' approval, Planet issued
1,000,000 shares of common stock to Agway and received proceeds of $1,000,000
before any issuance costs. In addition, from January 1999 to December 1999,
Planet recorded reimbursable research and development costs of approximately
$355,000 from Agway under the feasibility study agreement. Planet anticipates
that some of the 2000 research and development expenditures in the
agrotechnology area will be reimbursed by Agway under the feasibility agreement.
Additionally, in February 1999, Planet received a commitment from Agway
whereby Agway agreed to exercise its warrant to acquire up to 500,000 shares of
Planet's common stock as early as July 1, 1999, at Planet's request, in the
event Planet's cash flows were less than projections and/or insufficient to fund
its operating requirements. On November 5, 1999, at Planet's request, Agway
exercised the warrant with respect to 500,000 shares of Planet's common stock on
the terms, and subject to conditions, set forth in the warrant and Planet
received $500,000 in connection with such exercise. On March 3, 2000, Agway
exercised a warrant to purchase an additional 500,000 shares of common stock. To
date, Agway has exercised warrants to purchase 1,000,000 shares of common stock
and holds a warrant to purchase an additional 1,000,000 shares.
Planet used approximately $1,208,000 for continuing operations for the
year ended December 31, 1999. Such funds were used for research and development
activities, marketing efforts and administrative support. Net cash provided by
discontinued operations of approximately $55,000 for the year ended December 31,
1999 resulted from Deltco's manufacturing and reprocessing activities. Planet
used approximately $536,000 for continuing operations for the six months ended
June 30, 2000. Such funds were used primarily for research and development
activities, marketing efforts and administrative support.
Planet used approximately $148,000 for investing activities for the year
ended December 31, 1999. Such funds were used for the purchase of equipment and
for the preparation and filing of patents, offset by proceeds from the sale of
equipment. Net cash provided by investing activities of approximately $753,000
for the six months ended June 30, 2000 resulted from proceeds from the sale of
Deltco of approximately $818,000, net of Deltco's cash, offset by approximately
$65,000 used for the purchase of equipment and for the preparation and filing of
patents.
Net cash provided by financing activities of approximately $1,507,000
for the year ended December 31, 1999 resulted from net proceeds of approximately
$1,438,000 from the issuance of common stock and warrants, net advance of funds
of approximately $61,000 from Agway and $115,000 from the conversion of
restricted cash to cash and cash equivalents, offset by approximately $107,000
used for the repayment of debt and capital lease obligations. Net cash provided
by financing activities of approximately $480,000 for the six months ended June
30, 2000 resulted from net proceeds of approximately $440,000 from the exercise
of warrants, $102,000 from the exercise of stock options, and $3,000 from the
issuance of warrants, offset by a net reduction in the advance of funds of
approximately $61,000 from Agway and $4,000 used for capital lease obligations.
At December 31, 1999, Planet's cash and cash equivalents were
approximately $356,000. On January 7, 2000, Planet received $900,000 in cash
from the sale of Deltco. Planet believes that its existing sources of liquidity
and anticipated revenue, cash proceeds from the sale of Deltco and proceeds from
Agway's warrant exercise for 500,000 shares of common stock on March 3, 2000,
will satisfy Planet's
29
<PAGE> 35
projected working capital and other cash requirements through February 2001.
There can be no assurance, however, that future revenue decreases or changes in
Planet's plans or other events affecting Planet's operating expenses will not
result in the expenditure of additional Company resources. On August 15, 2000
Planet entered into the Private Equity Line of Credit Agreement which gives
Planet the right, until August 15, 2003, or earlier, to exercise a drawdown and
require that Triton purchase between $100,000 and $7,000,000 of our common
stock. The maximum amount that Planet can require Triton to purchase at any
given time is subject to a floating number based on our closing bid price and
our average trading volume in a thirty-day period. Planet expects that it will
need to raise substantial additional funds to continue its current and planned
operations. Planet 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 under the line of credit or other sources. Planet'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 Planet will be able to satisfy
the criteria for continued quotations on the Nasdaq SmallCap Market. See also
"Risk Factors."
DESCRIPTION OF PROPERTY
Planet's executive offices, as well as research laboratories and a
limited production facility, are located in approximately 6,080 square feet of
leased office space in San Diego, California. On August 1, 1999, Planet entered
into a new three-year standard industrial lease. The lease will expire on July
31, 2002 and the monthly rental payment is $5,168 for the first twelve months,
$5,349 for the second twelve months and $5,536 until expiration. Planet believes
its current facility is suitable for its present and future needs.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1998, Planet and Agway entered into an agreement relating to
the funding by Agway of a feasibility study of Planet's polymer technology for
use in agricultural products, other than fertilizers and some biological
products, and food products. Under the terms of this feasibility study
agreement, Planet is reimbursed for qualifying research and development costs
relating to such applications. During 1999 and the six months ended June 30,
2000, Planet recorded reimbursable research and development costs of $355,000
and $94,000, respectively, from Agway under the feasibility study agreement.
Also in November 1998, Planet granted Agway an exclusive worldwide
license in connection with Planet's technology for time-release coatings for a
variety of agricultural and food products. This license outlines the general
terms and conditions for the rights granted to Agway. Planet and Agway agreed to
execute further sub-agreements specifying the royalties to be paid to Planet for
Agway's use of Planet's technology with some of Agway's products.
Agway Holdings Inc., an indirect wholly owned subsidiary of Agway, is a
beneficial owner of more than 10% of Planet's common stock.
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<PAGE> 36
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Planet's common stock has been traded on the Nasdaq SmallCap tier of the
Nasdaq Stock Market under the symbol "POLY" since Planet's initial public
offering on September 21, 1995. The following table sets forth the high and low
sales prices of Planet's common stock for the period from January 1, 1998
through December 31, 1999, and the first two quarters ended June 30, 2000, as
furnished by Nasdaq. These prices reflect prices between dealers without retail
markups, markdowns or commissions, and may not necessarily represent actual
transactions:
<TABLE>
<CAPTION>
Trade Prices
-------------------
High Low
------ -------
<S> <C> <C>
Fiscal year ended December 31, 1998
First Quarter 2 1/4 1 5/16
Second Quarter 2 5/8 1 3/16
Third Quarter 1 5/8 7/8
Fourth Quarter 2 1/8 5/8
Fiscal year ended December 31, 1999
First Quarter 2 1/4 1 1/8
Second Quarter 2 3/8 1 3/8
Third Quarter 3 1/2 1 1/12
Fourth Quarter 3 1/8 2
Fiscal year ending December 31, 2000
First Quarter 5 2 17/32
Second Quarter 3 1/4 2 3/50
Third Quarter 1 1/2 2 31/50
</TABLE>
On November 9, 2000, the last reported sale price of Planet's common
stock on the Nasdaq SmallCap market was $1.75. As of October 27, 2000, there
were approximately 144 holders of record of Planet's common stock with 7,654,095
shares outstanding. The market price of shares of common stock, like that of the
common stock of many other emerging growth companies, has been and is likely to
continue to be highly volatile.
Under the terms of the Securities Purchase Agreement dated as of
September 19, 1997, between Planet and Special Situations, holder of Planet's
Series A Preferred Shares and related Amended and Restated Certificate of
Determination of Planet filed with the California Secretary of State on
September 19, 1997, Special Situations is entitled to receive, quarterly as a
dividend, such number of shares of common stock, or if Planet is unable to
distribute shares of common stock, cash equal to (a) 1.5% multiplied by the
liquidation preference of the Series A Preferred Shares, divided by (b) the
average 4:00 p.m. closing bid price of Planet's common stock on the Nasdaq
SmallCap Market over a period of 5 consecutive trading days prior to the
dividend distribution date. Accordingly, in 1998, Planet issued to Special
Situations dividends of 40,918 shares of common stock, valued at approximately
$60,000, in 1999, issued 29,914 shares of common stock valued at approximately
$60,000, and for the nine months ended September 30, 2000, issued 11,123 shares
of common stock valued at approximately $31,000.
Except to Special Situations as set forth above, Planet has never
declared or paid a cash dividend. Planet has not paid and does not intend to pay
any common stock dividends to common stock shareholders in the foreseeable
future and intends to retain any future earnings for capital expenditures and
otherwise to fund Planet's operations. Any payment of dividends in the future
will depend upon Planet's earnings, capital requirements, financial condition
and such other factors as the Board of Directors may deem relevant.
In February 1999, Planet received a commitment from Agway whereby Agway
agreed to exercise its warrant to acquire up to 500,000 shares of Planet's
common stock after July 1, 1999 at Planet's request, in the event that Planet's
cash flows were less than currently projected or were insufficient to fund its
operating requirements. On November 5, 1999, at Planet's request, Agway
exercised the warrant with respect to 500,000 shares of Planet's common stock on
the terms, and subject to conditions, set forth in the warrant and Planet
received $500,000 in connection with
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<PAGE> 37
such exercise. On March 3, 2000, Agway exercised a warrant to purchase an
additional 500,000 shares of common stock.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
During 1999, options to purchase an aggregate of 66,083 shares of
Planet's common stock were granted to Planet's directors pursuant to Planet's
1995 Stock Option Plan as follows: (i) in May 1999, the Board of Directors of
Planet approved and granted non-statutory stock option grants to each
non-employee director to purchase 13,000 shares of Planet's common stock at an
exercise price of $1.8125 per share, vesting fully at the date of grant; and
(ii) Mr. LaHood received non-statutory stock option grants to purchase an
additional 1,083 shares for services to the Board of Directors rendered April
12, 1999 to May 21, 1999. On May 1, 2000, each director, excluding Robert
Petcavich, Peter O'Neill and Ronald Sunderland, was granted a non-statutory
stock option to purchase 5,000 shares of Planet's common stock at $2.50 per
share pursuant to Planet's 2000 Stock Incentive Plan as compensation for
services rendered in 1999, and may in the future be granted additional options
pursuant to the 2000 Plan. Also on May 1, 2000, each director, excluding Robert
Petcavich, was granted a non-statutory stock option to purchase 18,000 shares of
Planet's common stock at $2.50 per share under the 2000 Plan as compensation for
services to be rendered from May 1, 2000 through May 1, 2001.
Directors are reimbursed for reasonable travel expenses incurred in
connection with attendance at Board meetings, or any committee meetings, or
otherwise in connection with their service as a director.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the fiscal years ended December 31,
1999, 1998, and 1997, compensation awarded or paid to, or earned by Planet's
Chief Executive Officer. No other executive officer's total annual salary and
bonus for services to Planet exceeded $100,000 in the fiscal year ended December
31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Shares All Other
Compen- Underlying Compen-
Name and Principal Position Year Salary($) Bonus($)(1) sation($)(2) Options(#) sation($)(3)
--------------------------- ---- --------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Petcavich 1999 $210,000 $ 25,000 $ - - $ 1,136
Chairman of the Board, 1998 $201,000 $ - $ - 125,000(4) 955
President and Chief 1997 $176,114 $ - $ 9,000 57,851(5) 1,357
Executive Officer
</TABLE>
(1) Includes $25,000 accrued as a bonus pursuant to a five-year employment
agreement effective January 1, 1999, but paid in March 2000.
(2) Includes $9,000 paid as director fees during 1997.
(3) Represents insurance premiums paid by Planet under a term life insurance
policy insuring Dr. Petcavich.
(4) Represents an incentive stock option granted on November 18, 1998 with an
exercise price of $1.65 (which is equal to 110% of the fair market value on
the date of grant). Of the 125,000 shares, 25,000 vest immediately, 35,000
shall vest on the first anniversary, 35,000 on the second anniversary, and
30,000 on the third anniversary.
(5) Represents a non-statutory stock option granted on October 30, 1997 vesting
50% annually for two years with an exercise price of $3.025.
STOCK OPTION GRANTS AND EXERCISES
Planet's executive officers have been granted options to purchase the
common stock pursuant to the 1995 Plan and are eligible for grants of options
under the 2000 Plan. As of October 27, 2000, there were 109,278 remaining shares
available for grant under the 1995 Plan, which may be granted under the 2000
Plan, in addition to the 165,500 shares that are available for grant under the
2000 Plan.
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<PAGE> 38
There were no stock options granted to executive officers in 1999.
Upon signing his employment agreement with Planet to serve as Planet's
new President and Chief Executive Officer, Richard Bernier received stock
options to purchase 160,000 shares of common stock under Planet's 2000 Stock
Incentive Plan. The stock options are subject to a vesting schedule which begins
on January 1, 2001.
The following table sets forth information with respect to the number of
securities underlying unexercised options held by the Chief Executive Officer as
of December 31, 1999 and the value of unexercised in-the-money options (i.e.,
options for which the current fair market value of the common stock underlying
such options exceeds the exercise price):
AGGREGATED OPTION EXERCISES LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR END FISCAL YEAR END ($) (1)
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J -0- -0- 157,533 65,000 $69,750 $75,563
Petcavich
</TABLE>
(1) Calculated based on the estimated fair market value of Planet's common
stock as of December 31, 1999, less the exercise price payable upon the
exercise of such options. Such estimated fair market value as of December
31, 1999 was $2.8125, the last price posted at the close of trading on
December 31, 1999.
DESCRIPTION OF EMPLOYEE BENEFIT PLANS
2000 STOCK INCENTIVE PLAN
Planet's 2000 Stock Incentive Plan was approved by Planet's shareholders
at its annual meeting of shareholders on May 1, 2000. The Board of Directors
reserved 500,000 shares of common stock for issuance under the 2000 Plan,
together with any remaining shares of common stock eligible for issuance under
the 1995 Stock Option Plan expire unexercised. A committee consisting of
Planet's Board of Directors or appointed Board members has the sole discretion
to determine under which plan stock options and bonuses may be granted.
The purpose of the 2000 Plan is similar to that of the 1995 Plan, which
was to attract and retain qualified personnel, to provide additional incentives
to employees, officers, directors and consultants of Planet and to promote the
success of Planet's business. As was the case under the 1995 Plan, under the
2000 Plan, Planet may grant or issue incentive stock options and non-statutory
stock options to eligible participants, provided that incentive stock options
may only be granted to employees of Planet. Option grants under both plans are
discretionary. Options granted under both plans are subject to vesting as
determined by the Board, provided that the option vests as to at least 20% of
the shares subject to the option per year. The maximum term of a stock option
under both plans is ten years, but if the optionee at the time of grant has
voting power over more than 10% of Planet's outstanding capital stock, the
maximum term is five years under both plans. Under both plans if an optionee
terminates his or her service to Planet, such optionee may exercise only those
option shares vested as of the date of termination, and must affect such
exercise within the period of time after termination set forth in the optionee's
option. The exercise price of incentive stock options granted under both plans
must be at least equal to the fair market value of the common stock of Planet on
the date of grant. Under both plans the exercise price of options granted to an
optionee who owns stock possessing more than 10% of the voting power of Planet's
outstanding capital stock must equal at least 110% of the fair market value of
the common stock on the date of grant. Payment of the exercise price may be made
in cash, by delivery of other shares of Planet's
33
<PAGE> 39
common stock or by any other form of legal consideration that may be acceptable
to the Board.
401(k) PLAN
Planet provides a defined contribution 401(k) savings plan in which all
full-time employees of Planet are eligible to participate. Eligible employees
may contribute up to 15% of their pre-tax salary to the 401(k) Plan subject to
IRS limitations. Company contributions to the 401(k) Plan are at the discretion
of the Board of Directors. There were no Company contributions charged to
operations that related to the 401(k) Plan in the years ended December 31, 1998
and 1999, and the six months ended June 30, 1999 and 2000.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
On November 18, 1998, Planet entered into a five-year employment
agreement, effective January 1, 1999, with Dr. Petcavich. This agreement
increases Dr. Petcavich's salary to $210,000 and provides that if Dr. Petcavich
is terminated for any reason other than for cause during the term of employment,
then he shall be engaged to perform services to Planet pursuant to a consulting
agreement. On November 18, 1998, in connection with this employment agreement,
Planet's Board of Directors also granted Dr. Petcavich an incentive stock option
to purchase 125,000 shares of common stock at an exercise price of $1.65 per
share under the 1995 Stock Option Plan.
On October 17, 2000, Planet entered into a two-year employment agreement
with Richard Bernier, who now serves as Planet's new President and Chief
Executive Officer. Planet may extend the employment term beyond the two-year for
additional one-year terms. Planet must give at least 183 days notice before
Bernier's employment may be terminated. Bernier's compensation consists of
$205,000 as an annual salary, a signing bonus of 10,000 shares of Planet's
common stock, a grant of a stock option to purchase 160,000 shares of common
stock at an exercise price of $1.50 per share under the 2000 Stock Incentive
Plan, and a year-end bonus of 2.5% of each dollar of improvement in Planet's net
losses in fiscal year ending December 31, 2001 compared to fiscal year ending
December 31, 2000, in the first year of the employment and a year-end bonus of
2.5% of Planet's earnings before tax for any following years. Bernier's
agreement also provides that if Bernier is terminated for any reason other than
for cause during the term of employment, then he shall be engaged to perform
services to Planet pursuant to a consulting agreement.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
34
<PAGE> 40
FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants F-2
Consolidated Financial Statements and Notes:
Balance Sheet as of December 31, 1999 and
June 30, 2000 (Unaudited) F-3
Statements of Operations for the Years Ended December 31,
1998 and 1999 F-4
Statements of Operations (Unaudited) for the Six Months
Ended June 30, 1999 and June 30, 2000 F-5
Statements of Shareholders' Equity for the Years Ended
December 31, 1998 and 1999, and the Six Months Ended
June 30, 2000 (Unaudited) F-6
Statements of Cash Flows for the Years Ended December 31,
1998 and 1999 F-7
Statements of Cash Flows (Unaudited) for the Six Months
Ended June 30, 1999 and June 30, 2000 F-8
Notes to Consolidated Financial Statements F-9
</TABLE>
F-1
<PAGE> 41
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Planet Polymer Technologies, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Planet
Polymer Technologies, Inc. and its subsidiary at December 31, 1999, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Diego, California
March 27, 2000
F-2
<PAGE> 42
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
---------------
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 2000
------------ ------------
<S> <C> <C>
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $ 355,645 $ 1,051,454
Accounts receivable 134,917 125,360
Note receivable -- 7,082
Inventories, net 153,435 146,157
Prepaid expenses 48,740 27,882
Net assets of discontinued operations held for sale 914,639 --
------------ ------------
Total current assets 1,607,376 1,357,935
Property and equipment, net of accumulated depreciation of $214,302
and $239,647, respectively 205,757 188,185
Patents and trademarks, net of accumulated amortization of $127,912
and $140,958, respectively 325,897 374,123
Note receivable, less current portion -- 89,583
Other assets 7,630 6,715
------------ ------------
Total assets $ 2,146,660 $ 2,016,541
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 73,269 $ 65,755
Accrued payroll and vacation 32,056 60,929
Other accrued expenses 41,053 --
Advances from related party 61,484 --
Current portion of capital lease obligations 7,006 9,200
------------ ------------
Total current liabilities 214,868 135,884
Capital lease obligations, less current portion 15,798 13,840
Other liabilities 152,886 152,886
------------ ------------
Total liabilities 383,552 302,610
------------ ------------
Commitments (Notes 8, 12) -- --
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 and 321,500 shares issued and outstanding
Liquidation preference $1,000,000 and $643,000 804,435 517,251
Common stock, no par value
20,000,000 shares authorized
6,875,976 and 7,634,947 shares issued and outstanding 12,426,143 13,279,470
Accumulated deficit (11,467,470) (12,082,790)
------------ ------------
Total shareholders' equity 1,763,108 1,713,931
------------ ------------
Total liabilities and shareholders' equity $ 2,146,660 $ 2,016,541
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 43
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
---------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1998 1999
----------- -----------
<S> <C> <C>
Sales $ -- $ 75,600
Cost of sales -- 53,862
----------- -----------
Gross profit -- 21,738
----------- -----------
Operating expenses:
General and administrative 731,846 888,256
Marketing 178,484 183,001
Research and development, net 511,804 230,129
----------- -----------
Total operating expenses 1,422,134 1,301,386
----------- -----------
Loss from operations (1,422,134) (1,279,648)
Other income, net 23,834 116,777
----------- -----------
Loss from continuing operations before income taxes (1,398,300) (1,162,871)
Income tax expense (800) (800)
----------- -----------
Loss from continuing operations (1,399,100) (1,163,671)
Discontinued operations:
Income (loss) from discontinued operations, net of tax (benefit) expense
of $(23,838) and $13,286, respectively (229,443) 164,390
Loss on disposal of discontinued operations, net of tax expense of $0 -- (561,277)
----------- -----------
Loss from discontinued operations (229,443) (396,887)
=========== ===========
Net loss $(1,628,543) $(1,560,558)
=========== ===========
Loss per share from continuing operations (basic and diluted) $ (0.26) $ (0.18)
=========== ===========
Loss per share from discontinued operations (basic and diluted) $ (0.05) $ (0.06)
=========== ===========
Net loss per share (basic and diluted) $ (0.31) $ (0.24)
=========== ===========
Shares used in per share computations 5,317,297 6,406,145
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 44
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
---------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 2000
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Sales $ -- $ 401,272
Cost of sales -- 273,629
----------- -----------
Gross profit -- 127,643
----------- -----------
Operating expenses:
General and administrative 476,688 514,784
Marketing 84,284 107,869
Research and development, net 81,789 130,377
----------- -----------
Total operating expenses 642,761 753,030
----------- -----------
Loss from operations (642,761) (625,387)
Other (expense) income, net (1,446) 32,447
----------- -----------
Loss from continuing operations before income taxes (644,207) (592,940)
Income tax expense (800) (800)
----------- -----------
Loss from continuing operations (645,007) (593,740)
Discontinued operations:
Income from discontinued operations, net of tax expense of $4,582 53,418 --
----------- -----------
Income from discontinued operations 53,418 --
----------- -----------
Net loss $ (591,589) $ (593,740)
=========== ===========
Loss per share from continuing operations (basic and diluted) $ (0.10) $ (0.08)
=========== ===========
Income per share from discontinued operations (basic and diluted) $ .01 $ --
=========== ===========
Net loss per share (basic and diluted) $ (0.09) $ (0.08)
=========== ===========
Shares used in per share computations 6,289,353 7,374,234
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 45
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
---------------
<TABLE>
<CAPTION>
SERIES A PREFERRED STOCK COMMON STOCK
---------------------------- --------------------------- ACCUMULATED
SHARES AMOUNT SHARES AMOUNT DEFICIT
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 500,000 $ 804,435 5,300,144 $ 10,940,967 $ (8,158,369)
Issuance of common stock as a dividend on
Convertible Preferred Stock on March 15, 1998 -- -- 10,169 15,000 (15,000)
Issuance of common stock as a dividend on
Convertible Preferred Stock on June 15, 1998 -- -- 8,695 15,000 (15,000)
Issuance of common stock as a dividend on
Convertible Preferred Stock on September 15, 1998 -- -- 13,483 15,000 (15,000)
Fair market value of stock options granted to
non-employees -- -- -- 8,241 --
Issuance of common stock as a dividend on
Convertible Preferred Stock on December 15, 1998 -- -- 8,571 15,000 (15,000)
Net loss for year -- -- -- -- (1,628,543)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 500,000 $ 804,435 5,341,062 $ 11,009,208 $ (9,846,912)
Issuance of common stock and related Warrants -- -- 1,000,000 1,000,000 --
Common stock issuance costs -- -- -- (154,940) --
Issuance of Warrants to the finder -- -- -- 2,500 --
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)
Issuance of common stock as a dividend on
Convertible Preferred Stock on September 15, 1999 -- -- 5,106 15,000 (15,000)
Issuance of common stock as a dividend on
Convertible Preferred Stock on December 15, 1999 -- -- 5,454 15,000 (15,000)
Warrant exercised -- -- 500,000 500,000 --
Stock option exercised -- -- 5,000 9,375 --
Net loss for year -- -- -- -- (1,560,558)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1999 500,000 $ 804,435 6,875,976 $ 12,426,143 $(11,467,470)
January 1, 2000 - June 30, 2000 (UNAUDITED)
Conversion of Series A Preferred Stock into Common
Stock on January 20, 2000 (102,000) (164,105) 119,997 164,105 --
Stock Options exercised for cash on February 15, 2000 -- -- 10,000 30,250 --
Stock Options exercised for cash on March 2, 2000 -- -- 10,000 30,250 --
Warrants exercised on March 3, 2000 -- -- 500,000 500,000 --
Transaction fee to the finder -- -- -- (60,000) --
Issuance of Warrants to the finder on March 9, 2000 -- -- -- 2,500 --
Issuance of common stock as a dividend on
Convertible Preferred Stock on March 15, 2000 -- -- 2,736 11,936 (11,936)
Conversion of Series A Preferred Stock into Common
Stock on March 28, 2000 (76,500) (123,079) 89,999 123,079 --
Stock Options exercised for cash on June 7, 2000 -- -- 2,000 3,625 --
Stock Options exercised for cash on June 9, 2000 -- -- 2,400 4,350 --
Stock Options exercised for cash on June 12, 2000 -- -- 3,000 5,438 --
Stock Options exercised for cash on June 13, 2000 -- -- 4,000 7,250 --
Stock Options exercised for cash on June 14, 2000 -- -- 5,100 9,900 --
Issuance of common stock as a dividend on
Convertible Preferred Stock on June 15, 2000 -- -- 4,239 9,644 (9,644)
Stock Options exercised for cash on June 16, 2000 -- -- 3,500 7,000 --
Stock Options exercised for cash on June 21, 2000 -- -- 2,000 4,000 --
Net loss for the six months ended June 30, 2000 -- -- -- -- (593,740)
------------ ------------ ------------ ------------ ------------
Balance at June 30, 2000 (UNAUDITED) 321,500 $ 517,251 7,634,947 $ 13,279,470 $(12,082,790)
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
TOTAL
------------
<S> <C>
Balance at December 31, 1997 $ 3,587,033
Issuance of common stock as a dividend on
Convertible Preferred Stock on March 15, 1998 --
Issuance of common stock as a dividend on
Convertible Preferred Stock on June 15, 1998 --
Issuance of common stock as a dividend on
Convertible Preferred Stock on September 15, 1998 --
Fair market value of stock options granted to
non-employees 8,241
Issuance of common stock as a dividend on
Convertible Preferred Stock on December 15, 1998 --
Net loss for year (1,628,543)
------------
Balance at December 31, 1998 $ 1,966,731
Issuance of common stock and related Warrants 1,000,000
Common stock issuance costs (154,940)
Issuance of Warrants to the finder 2,500
Issuance of common stock as a dividend on
Convertible Preferred Stock on March 15, 1999 --
Issuance of common stock as a dividend on
Convertible Preferred Stock on June 15, 1999 --
Issuance of common stock as a dividend on
Convertible Preferred Stock on September 15, 1999 --
Issuance of common stock as a dividend on
Convertible Preferred Stock on December 15, 1999 --
Warrant exercised 500,000
Stock option exercised 9,375
Net loss for year (1,560,558)
------------
Balance at December 31, 1999 $ 1,763,108
January 1, 2000 - June 30, 2000 (UNAUDITED)
Conversion of Series A Preferred Stock into Common
Stock on January 20, 2000 --
Stock Options exercised for cash on February 15, 2000 30,250
Stock Options exercised for cash on March 2, 2000 30,250
Warrants exercised on March 3, 2000 500,000
Transaction fee to the finder (60,000)
Issuance of Warrants to the finder on March 9, 2000 2,500
Issuance of common stock as a dividend on
Convertible Preferred Stock on March 15, 2000 --
Conversion of Series A Preferred Stock into Common
Stock on March 28, 2000 --
Stock Options exercised for cash on June 7, 2000 3,625
Stock Options exercised for cash on June 9, 2000 4,350
Stock Options exercised for cash on June 12, 2000 5,438
Stock Options exercised for cash on June 13, 2000 7,250
Stock Options exercised for cash on June 14, 2000 9,900
Issuance of common stock as a dividend on
Convertible Preferred Stock on June 15, 2000 --
Stock Options exercised for cash on June 16, 2000 7,000
Stock Options exercised for cash on June 21, 2000 4,000
Net loss for the six months ended June 30, 2000 (593,740)
------------
Balance at June 30, 2000 (UNAUDITED) $ 1,713,931
============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 46
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1998 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,628,543) $(1,560,558)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 141,463 136,299
Loss on disposal of assets -- 9,994
Deferred income taxes (22,649) --
Non-cash compensation expense 8,241 --
Loss (income) from discontinued operations 254,385 (164,390)
Loss on sale of discontinued operations -- 561,277
Changes in assets and liabilities:
Accounts receivable (4,437) (70,801)
Inventories, net 19,107 (116,635)
Prepaid expenses and other assets 18,318 (10,473)
Accounts payable and accrued expenses 112,732 (29,638)
Other liabilities -- 37,044
----------- -----------
Net cash used by continuing operations (1,101,383) (1,207,881)
Net cash (used) provided by discontinued operations (9,018) 54,955
----------- -----------
Net cash used by operating activities (1,110,401) (1,152,926)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (45,219) (130,343)
Proceeds from the sale of property and equipment -- 14,000
Cost of patents and other (28,425) (31,639)
----------- -----------
Net cash used by investing activities (73,644) (147,982)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 1,509,375
Proceeds from issuance of warrants -- 2,500
Payment of equity issuance costs (80,988) (73,952)
Principal payments on borrowings and capital lease obligations (95,652) (106,851)
Advances from related party -- 61,484
Restricted cash in connection with borrowings (6,603) 114,880
----------- -----------
Net cash (used) provided by financing activities (183,243) 1,507,436
----------- -----------
Net (decrease) increase in cash and cash equivalents (1,367,288) 206,528
Cash and cash equivalents at beginning of year 1,516,405 149,117
----------- -----------
Cash and cash equivalents at end of year $ 149,117 $ 355,645
=========== ===========
Supplemental disclosure of non-cash activity:
Cash paid during the year for:
Interest paid $ 18,768 $ 5,236
Income taxes paid 30,968 13,092
Non-cash activities:
Equipment purchased under capital lease obligations $ 18,035 $ --
Fair market value of stock options granted to non-employees 8,241 --
Issuance of common stock dividends on Preferred Stock 60,000 60,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE> 47
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 2000
----------- -----------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net loss $ (591,589) $ (593,740)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 69,487 38,390
Loss on disposal of assets 9,994 --
Income from discontinued operations (53,418) --
Changes in assets and liabilities:
Accounts receivable (61,464) 9,557
Inventories, net 2,011 7,278
Prepaid expenses and other assets 13,315 21,773
Accounts payable and accrued expenses (148,313) (19,694)
----------- -----------
Net cash used by continuing operations (759,977) (536,436)
Net cash provided by discontinued operations 116,705 --
----------- -----------
Net cash used by operating activities (643,272) (536,436)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (87,995) (3,960)
Cost of patents and other (33,998) (61,272)
Proceeds from the sale of subsidiary -- 814,639
Payments from note receivable -- 3,335
----------- -----------
Net cash (used) provided by investing activities (121,993) 752,742
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,000,000 --
Proceeds from issuance of warrants 2,500 2,500
Proceeds from warrants exercised -- 500,000
Payment of equity issuance costs (73,952) (60,000)
Proceeds from stock options exercised 9,375 102,063
Principal payments on borrowings and capital lease obligations (100,747) (3,576)
Advances from related party 166,291 (61,484)
Restricted cash in connection with borrowings 114,880 --
----------- -----------
Net cash provided by financing activities 1,118,347 479,503
----------- -----------
Net increase in cash and cash equivalents 353,082 695,809
Cash and cash equivalents at beginning of period 149,117 355,645
----------- -----------
Cash and cash equivalents at end of period $ 502,199 $ 1,051,454
=========== ===========
Supplemental disclosure of non-cash activity:
Issuance of common stock dividends on Preferred Stock $ 30,000 $ 21,580
Issuance of note receivable in connection with sale of subsidiary -- 100,000
Equipment acquired under capital leases -- 3,813
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<PAGE> 48
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PLANET
Planet Polymer Technologies, Inc. ("Planet") was incorporated on August
22, 1991 in the State of California for the purpose of engaging in the design,
development, manufacture and marketing of degradable and recycled polymer
materials. Planet's proprietary polymer materials are marketed under the
trademarks EnviroPlastic(R), Aquadro(R) and AQUAMIM(R). EnviroPlastic(R) and
Aquadro(R) can be used to produce films, coatings and injection molded parts
that serve as environmentally-compatible alternatives to conventional plastics.
AQUAMIM(R) can be used to manufacture complex metal parts using conventional
plastics molding equipment. Planet has also developed polymer technologies for
Agway, Inc. ("Agway") in 1999 that are being marketed under the trademarks
Optigen(TM) 1200 and Fresh Seal(TM).
Planet sold its wholly owned subsidiary, Deltco of Wisconsin, Inc. on
January 7, 2000. The accompanying financial statements present the results of
operations of Deltco as a discontinued operation. Accordingly, Planet's
continuing operations are now comprised of one segment, the "Research and
Development" business segment.
2. LIQUIDITY AND CAPITAL RESOURCES
Planet has incurred losses since inception. For the years ended December
31, 1998 and 1999, and the six months ended June 30, 2000 (unaudited), Planet
had net losses of approximately $1,629,000, $1,561,000 and $594,000,
respectively. As of June 30, 2000, Planet had an accumulated deficit of
approximately $12,083,000. Planet believes that its existing sources of
liquidity and anticipated revenue will satisfy its projected working capital and
other cash requirements through February 2001. Thereafter, Planet's future
capital requirements will be dependent upon many factors, including, but not
limited to, costs associated with the continued research and development of
Planet's proprietary polymer materials, costs associated with the filing and
enforcement of Planet's patents, costs associated with manufacturing scale-up
and market acceptance, and the timing thereof, of Planet's products. Planet will
need to secure additional financing through partnership arrangements or through
the issuance of additional equity and/or debt securities or through other means.
Planet executed a Stock Purchase Agreement with Triton West Group, Inc.
("Triton") in August 2000, but its ability to require Triton to purchase its
shares is dependent upon its ability to register Triton's shares for sale in a
public market, among other things (Note 13). There can be no assurance that the
Triton or any additional financing will be available to Planet on acceptable
terms, or at all. Further, there can be no assurance that Planet will be able to
generate positive cash flows or profitability in the future.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include accounts of
Planet and its wholly owned subsidiary, Deltco. All intercompany balances and
transactions have been eliminated in consolidation. Certain prior year amounts
have been reclassified to conform with the current year presentation.
Unaudited Financial Statements
The interim financial statements as of June 30, 2000 and for the six
months ended June 30, 1999 and 2000 are unaudited and have been prepared on the
same basis as the audited financial statements. In the opinion of management,
these unaudited financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
information set forth therein in accordance with accounting principles generally
accepted in the United States. Operating results for the interim periods are not
necessarily indicative of operating results for an entire year. All financial
statement disclosures related to the six months ended June 30, 1999 and 2000 are
unaudited.
F-9
<PAGE> 49
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
New Accounting Pronouncements
In December, 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 entitled "Revenue Recognition in Financial
Statements." The objective of this bulletin is to provide further guidance on
revenue recognition issues in the absence of authoritative literature addressing
a specific arrangement or a specific industry. Companies must follow the
guidance in the bulletin no later than the fourth fiscal quarter of the fiscal
year beginning after December 15, 1999. Planet believes that its current revenue
recognition policy complies with the guidelines in the bulletin. Therefore, the
adoption of SAB 101 will have no impact on Planet's recognition of revenue and
reimbursable research and development costs.
Revenue Recognition
Revenue is recognized when all of the following conditions are met: the
product has been shipped, Planet has the right to invoice the customer at a
fixed price, the collection of the receivable is probable and there are no
significant obligations remaining.
Research and Development
Company-sponsored research and development costs related to future
products and re-design of present products are expensed as incurred. Research
and development revenues from customers other than Agway and reimbursable
research and development costs from Agway partially offset those incurred costs.
Research and development revenues from customers other than Agway and
reimburseable research and development costs from Agway are not refundable if
the research is unsuccessful. The research and development revenues from
customers other than Agway are recognized when services have been rendered
and/or products have been shipped, at which time the customer is obligated to
pay for those services and/or products. The reimbursable research and
development costs from Agway are recognized when costs related to services
performed and/or products shipped have been paid in full by Planet, at which
time Agway is obligated to reimburse these costs. The components of research and
development, net are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
1998 1999 JUNE 30, 2000
--------- --------- -------------
(unaudited)
<S> <C> <C> <C>
Research and development expenses $ 633,520 $ 727,151 $ 269,050
Research and development revenues (60,082) (141,566) (44,260)
Reimbursable research and development costs (61,634) (355,456) (94,413)
--------- --------- ---------
Research and development, net $ 511,804 $ 230,129 $ 130,377
========= ========= =========
</TABLE>
Cash and Cash Equivalents
Cash and cash equivalents include U.S. Treasury bills with original
maturities of three months or less.
F-10
<PAGE> 50
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
The carrying amounts shown for Planet's financial instruments
approximate their fair values at December 31, 1999 and June 30, 2000
(unaudited).
Inventories
Inventories, which consist primarily of raw materials and finished
goods, are stated at the lower of cost or market. Cost is determined using the
weighted average cost method.
Property and Equipment
Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful lives ranging from three to ten
years. When assets are sold or retired, the cost and associated accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
operations.
Patents and Trademarks
Costs incurred to obtain patents and trademarks, principally legal fees,
are capitalized. Planet amortizes these costs on a straight-line basis over
fifteen years.
Long-Lived Assets
Planet assesses potential impairments to its long-lived assets when
there is evidence that events or changes in circumstances have made recovery of
the asset's carrying value unlikely. An impairment loss would be recognized when
the sum of the expected future net cash flows is less than the carrying amount
of the asset. Planet has identified no such impairment losses during the years
ended December 31, 1998 and 1999, and the six months ended June 30, 2000
(unaudited).
Income Taxes
Planet accounts for income taxes using the liability method. Current
income tax expense is the amount of income taxes expected to be payable for the
current year. Deferred income taxes are recognized for the tax consequences in
future years for differences between the tax basis of assets and liabilities and
their financial reporting amounts at each year-end ("temporary differences")
based on enacted tax laws and statutory rates applicable to the periods in which
the temporary differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Stock-Based Compensation
Planet measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method and provides pro forma
disclosures of net loss as if the fair value method had been applied in
measuring compensation expense. Compensation charges for non-employee
stock-based compensation is measured using fair value-based methods.
Earnings (Loss) Per Share
Earnings (loss) per share is computed using the weighted average number
of shares of common stock outstanding and is presented for basic and diluted
earnings (loss) per share. Basic earnings (loss) per share is computed by
dividing income
F-11
<PAGE> 51
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings (Loss) Per Share (Continued)
(loss) available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted earnings (loss) per share is computed
by dividing income (loss) available to common shareholders by the weighted
average number of common shares outstanding during the period increased to
include, if dilutive, the number of additional common shares that would have
been outstanding if the potential common shares had been issued. Dilutive
potential common shares consist of the incremental common shares issuable upon
conversion of convertible preferred stock (using the "if converted" method) and
exercise of stock options and warrants (using the treasury stock method) for all
periods.
Planet has excluded all convertible preferred stock and outstanding
stock options and warrants from the calculation of diluted loss per share for
the years ended December 31, 1998 and 1999, and the six months ended June 30,
1999 and 2000 (unaudited) because all such securities are anti-dilutive for
these periods. The total number of potential common shares excluded from the
calculation of diluted loss per share for the years ended December 31, 1998 and
1999, and the six months ended June 30, 1999 and 2000 (unaudited) was 1,733,386,
3,472,900, 3,960,521 and 2,809,684, respectively.
401(k) Plan
Planet provides a defined contribution 401(k) savings plan (the "401(k)
Plan") in which all full-time employees of Planet are eligible to participate.
Eligible employees may contribute up to fifteen percent (15%) of their pre-tax
salary to the 401(k) Plan subject to IRS limitations. Company contributions to
the 401(k) Plan are at the discretion of the Board of Directors. There were no
Company contributions charged to operations that related to the 401(k) Plan in
the years ended December 31, 1998 and 1999, and the six months ended June 30,
2000 (unaudited).
4. DISCONTINUED OPERATIONS
On December 30, 1999, Planet and its wholly owned subsidiary Deltco
entered into a Stock Purchase Agreement (the "Purchase Agreement") with Daniel
B. Mettler and Randy J. Larson (together, the "Buyers") whereby Planet agreed to
sell and the Buyers agreed to purchase all of the outstanding shares of stock of
Deltco for an aggregate purchase price of $1,000,000. The Buyers are management
employees of Deltco and the purchase price was determined during arms-length
negotiations between the parties.
Deltco, which was previously reported as part of the "Manufacturing and
Reprocessing" business segment, is being reported as a discontinued operation as
of December 31, 1999. Deltco's net revenues for the year ended December 31, 1999
were approximately $2,032,000 and Planet recognized a net loss from discontinued
operations of approximately $397,000. The net assets held for sale that are
included in the accompanying financial statements consist primarily of Deltco's
accounts receivable of $405,000, inventories of $187,000, property and equipment
of $478,000 and accounts payable and other liabilities of $147,000.
The sale of Deltco was finalized on January 7, 2000. Planet received
$900,000 in cash and a secured promissory note in the amount of $100,000. This
note is collateralized by all of the equipment, accounts, inventory, supplies
and personal property now held or hereafter acquired by Deltco.
F-12
<PAGE> 52
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
5. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject Planet to concentrations
of credit risk consist principally of cash and cash equivalents and trade
accounts receivable. Planet invests its excess cash in United States government
securities and money market funds. Planet limits the amount of credit exposure
to any one entity. Planet performs ongoing credit evaluations of its customers
and maintains allowances for doubtful accounts based on factors surrounding the
credit risk of specific customers, historical trends and other information.
Credit losses were not significant to Planet during the years ended December 31,
1998 and 1999, and the six months ended June 30, 2000 (unaudited).
During the year ended December 31, 1999 and the six months ended June
30, 2000 (unaudited), 100% of Planet's revenues were derived from one customer.
At December 31, 1999 and June 30, 2000 (unaudited), approximately 85% and 79%,
respectively, of Planet's accounts receivable balance was due from this
customer.
6. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 JUNE 30, 2000
----------------- -------------
(unaudited)
<S> <C> <C>
Raw materials $ 63,070 $ 82,721
Finished goods 90,365 63,436
-------- --------
$153,435 $146,157
======== ========
</TABLE>
7. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 JUNE 30, 2000
----------------- -------------
(unaudited)
<S> <C> <C>
Machinery and equipment $ 384,477 $ 392,250
Furniture and fixtures 26,274 26,274
Vehicles and trailers 9,308 9,308
--------- ---------
420,059 427,832
Less: Accumulated depreciation (214,302) (239,647)
--------- ---------
$ 205,757 $ 188,185
========= =========
</TABLE>
Depreciation expense charged to continuing operations in the years ended
December 31, 1998 and 1999, and the six months ended June 30, 1999 and 2000
(unaudited) was $80,126, $80,258, $39,163 and $25,344, respectively.
Depreciation expense charged to discontinued operations in 1998 and 1999, and
the six months ended June 30, 1999 and 2000 (unaudited) was $71,842, $71,433,
$35,336 and $0, respectively.
8. COMMITMENTS
Planet leases its facility and certain office equipment under
non-cancelable operating leases which expire on various dates through October 9,
2004. Planet also leases certain equipment under capital leases that mature on
various dates through October 1, 2002 and have interest rates ranging from 15.8%
to 42.7%. Machinery and equipment under capital lease obligations totaled
$34,950 and $38,763 and related accumulated amortization totaled $14,563 and
$18,216 as of December 31, 1999 and June 30, 2000 (unaudited)
F-13
<PAGE> 53
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
8. COMMITMENTS (CONTINUED)
Future minimum payments under non-cancelable leases as of December 31,
1999 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
-------- --------
<S> <C> <C> <C>
2000 $ 10,116 $ 69,176
2001 10,116 70,590
2002 8,149 41,029
2003 -- 2,277
2004 -- 1,708
-------- --------
Total minimum lease payments 28,381 $184,780
========
Less: Interest portion (5,577)
--------
Present value of net minimum
lease payments 22,804
Less: Current portion of capital
lease obligations (7,006)
--------
Long-term capital lease obligations $ 15,798
========
</TABLE>
Rent expense charged to continuing operations in the years ended
December 31, 1998 and 1999, and the six months ended June 30, 1999 and 2000
(unaudited) was $61,563, $63,655, $30,170 and $34,558, respectively. Rent
expense charged to discontinued operations in the years ended December 31, 1998
and 1999, and the six months ended June 30, 1999 and 2000 (unaudited) was
$114,427, $114,263, $57,213 and $0, respectively.
In November 1998, Planet entered into a five-year employment agreement,
effective January 1, 1999, with Planet's Chief Executive Officer. The employment
agreement stipulates an annual salary of $210,000 and provides that, if the
officer were to be terminated for any reason other than for cause during the
term of employment (as defined), Planet would engage the officer to perform
services to Planet pursuant to a separate consulting agreement.
9. INCOME TAXES
The components of income tax benefit (expense) are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1999
-------- --------
<S> <C> <C>
Federal
Current $ -- $ --
Deferred -- --
State
Current (800) (800)
Deferred 23,838 (13,286)
-------- --------
Total $ 23,038 $(14,086)
======== ========
</TABLE>
F-14
<PAGE> 54
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
9. INCOME TAXES (CONTINUED)
The differences between income tax (expense) benefit provided at the
Company's effective rate and the federal statutory rate (34%) are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1999
--------- ---------
<S> <C> <C>
Federal benefit at statutory rate $ 561,810 $ 525,492
State taxes, net of federal benefit 15,206 (9,297)
Disallowed losses -- (190,525)
Nondeductible expenses (13,966) (14,976)
Valuation allowance (540,012) (324,780)
--------- ---------
Total $ 23,038 $ (14,086)
========= =========
</TABLE>
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of Planet's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31,1999
-----------
<S> <C>
Net operating loss carryforwards $ 3,646,352
Tax credit carryforwards 99,641
Reserves, accrued expenses and other 310,367
Property and equipment and intangible assets (172,421)
-----------
3,883,939
Less: Valuation allowance (3,864,801)
-----------
Net deferred tax asset $ 19,138
===========
</TABLE>
Planet has determined that a full valuation allowance for Federal and
California tax purposes is necessary due to Planet's lack of historical
earnings. The aforementioned net deferred tax asset balance relates to deferred
taxes associated with the state of Wisconsin where Deltco has historically
generated income despite its loss in 1998.
At December 31, 1999, Planet had net operating loss carryforwards for
Federal income tax purposes of approximately $9,815,000 and for California and
Wisconsin state tax purposes of approximately $3,372,000 and $141,000,
respectively. Planet's California loss carryforwards expire in 2000 through 2004
and Federal loss carryforwards begin to expire in 2006. Loss carryforwards
related to Wisconsin expire in 2014. Planet also has available tax credit
carryforwards for Federal, California and Wisconsin tax purposes of
approximately $50,000, $42,000 and $8,000, respectively. Some of these tax
credit carryforwards will begin to expire in 2007.
Planet's annual utilization of net operating loss and tax credit
carryforwards may be limited if Planet's ownership were to change in the future,
as defined by Sections 382 and 383 of the Internal Revenue Code.
F-15
<PAGE> 55
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
10. SHAREHOLDERS' EQUITY
Preferred Stock
On September 19, 1997, Planet issued to one investor (the "Preferred
Issuee") 500,000 shares of its Series A Convertible Preferred Stock ("Series A
Preferred") at $1.85 per share. The holder of the Series A Preferred is entitled
to receive quarterly dividends at an annual rate of 6% payable in shares of
Planet's common stock. Each share of Series A Preferred is convertible at the
option of the holder into shares of common stock of Planet. Due to certain
anti-dilution adjustments as a result of the private equity transaction
consummated on January 11, 1999, the conversion rate of the Series A Preferred
into shares of common stock was adjusted from one-to-one to approximately 1 to
1.17647. The Series A Preferred will automatically convert if the average market
price of Planet's common stock for a certain number of consecutive days is $6.00
or above. On January 20, 2000, the Preferred Issuee converted 102,000 shares of
preferred stock into 119,997 shares of common stock. At the option of Planet,
the Series A Preferred can be redeemed at any time if the average market price
of Planet's common stock for a certain number of consecutive days is $5.00 or
above. The holder of the Series A Preferred is entitled to one vote for each
share of common stock issuable upon conversion. Upon liquidation or dissolution
of Planet, the Series A Preferred has a liquidation preference of $2.00 per
share. All per share rights and benefits are subject to adjustment upon the
occurrence of certain events.
Common Stock
In November 1998, Planet entered into a Stock Purchase Agreement with
Agway Holdings, Inc., a subsidiary of Agway whereby Agway Holdings purchased
1,000,000 shares of Planet's common stock for $1,000,000 and received a warrant
to purchase up to 2,000,000 additional shares of common stock at a price of
$1.00 per share. The stock purchase transaction was completed in January 1999
with Planet's shareholders' approval. Additionally, in February 1999, Planet
received a commitment from Agway whereby Agway agreed to exercise its warrant to
acquire up to 500,000 shares of Planet's common stock after July 1, 1999 at
Planet's request, in the event that Planet's cash flows are less than currently
projected and are insufficient to fund its operating requirements. On November
5, 1999 and March 3, 2000, at Planet's request, Agway exercised warrants with
respect to a total of 1,000,000 shares of Planet's common stock on the terms,
and subject to conditions, set forth in the warrants and Planet received a total
of $1,000,000 in connection with such exercises.
Warrants
On September 24, 1997, Planet issued to the Preferred Issuee of the
Series A Preferred, for $75,000, a warrant to purchase up to 375,000 shares of
Planet's common stock at an exercise price of $2.75 per share (the "Preferred's
Warrant"). In addition, as partial consideration for services rendered in
connection with the issuance of the Series A Preferred and Preferred's Warrant
to the Preferred Issuee, Planet issued to the finder, for $2,500, a five-year
warrant to purchase up to 50,000 shares of Planet's common stock at an exercise
price of $4.16 per share. Upon receiving the $1,000,000 proceeds from the common
stock issuance to Agway on January 11, 1999, Planet was required to make certain
anti-dilution adjustments to Preferred's Warrant issued to the finder. The
number of shares issuable under Preferred's Warrant and the exercise price per
warrant were adjusted to 64,635 shares and an exercise price of $3.22 per
warrant, respectively.
F-16
<PAGE> 56
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
10. SHAREHOLDERS' EQUITY (CONTINUED)
After receiving the $1,000,000 proceeds from Agway pursuant to its
purchase of common stock on January 11, 1999, Planet was required to (i) pay a
$60,000 cash transaction fee to the finder, LBC Capital Resources, Inc., and
(ii) issue LBC five-year warrants to purchase 50,000 shares of common stock with
an exercise price of $4.125 per warrant, in exchange for $2,500. These warrants
were issued March 29, 1999, pursuant to an exemption from registration for
transactions not involving a public offering. In connection with Agway's stock
purchase transaction in January 1999 and pursuant to the terms of the warrants
issued to LBC, Planet was required to increase the number of shares of common
stock per the warrants to 59,243 and reduce the exercise price to $3.5131 per
warrant.
After receiving cumulative proceeds of $1,000,000 from Agway's warrant
exercises on November 5, 1999 and March 3, 2000, Planet was required to (i) pay
a $60,000 cash transaction fee to LBC, and (ii) issue LBC five-year warrants to
purchase 50,000 shares of common stock with an exercise price of $4.1625 per
warrant, in exchange for $2,500. These warrants were issued March 9, 2000
pursuant to an exemption from registration for transactions not involving a
public offering. In connection with Agway's stock purchase transaction in
January 1999 and pursuant to the terms of the warrants issued to LBC, Planet may
be required to make certain anti-dilution adjustments to the warrants issued to
LBC. Accordingly, Planet may issue additional shares of common stock and reduce
the exercise price of the outstanding warrants. It is too early to determine the
anti-dilution amount, if any.
At December 31, 1999, the following exercisable warrants to purchase
Planet's common stock were outstanding:
<TABLE>
<CAPTION>
Underlying
Shares Exercise Price Expiration Date
---------- -------------- ---------------
<S> <C> <C> <C>
Advisor warrants 59,723 $2.23 - $3.88 2000 - 2003
Underwriter warrants 115,000 $7.20 2000
Investor warrants 1,962,444 $1.00 - $2.23 2000 - 2002
Other warrants 123,757 $3.22 - $3.51 2002 - 2004
---------
2,260,924
=========
</TABLE>
All per share rights and benefits are subject to adjustment upon the
occurrence of certain events. All the numbers in the above table reflect the
anti-dilution adjustments due to the private equity transaction consummated on
January 11, 1999.
Options
Planet has a 1995 Stock Option Plan and a 2000 Stock Incentive Plan
under which incentive stock options and non-statutory stock options to acquire
an aggregate of 1,000,000 shares of common stock may be granted to employees,
non-employee directors and consultants to Planet. Incentive stock options may be
granted only to employees of Planet whereas non-statutory options may be granted
to employees, directors and consultants. The terms of stock options granted
under both the 1995 and 2000 Plans are determined by the Board of Directors.
Under both Plans, stock options may be granted for periods of up to ten years at
a price per share not less than the fair market value of Planet's common stock
at the date of grant for incentive stock options and not less than 85% of the
fair market value of Planet's common stock at the date of grant for
non-statutory stock options. In the case of stock options granted to employees,
directors or consultants, who at the time of
F-17
<PAGE> 57
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
10. SHAREHOLDERS' EQUITY (CONTINUED)
grant of such options, own stock possessing more than 10% of the voting power of
all classes of stock of Planet, the exercise price shall be no less than 110% of
the fair market value of Planet's common stock at the date of grant.
Additionally, the term of stock option grants is limited to five years if the
grantee owns in excess of 10% of the voting power of all classes of stock of
Planet at the time of grant. The vesting provisions of individual options may
vary but in each case will provide for vesting of at least 20% per year of the
total number of shares subject to the option.
Planet measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method and provides pro forma
disclosures of net loss as if the fair value method had been applied in
measuring compensation expense. Had compensation cost for Planet's stock-based
compensation plans been determined based on the fair value method at the grant
dates for awards under this plan, Planet's net loss and loss per share for 1998
and 1999 would have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1999
------------------------------- -------------------------------
Net Loss Loss per Share Net Loss Loss per Share
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
As reported $(1,628,543) $(0.31) $(1,560,558) $(0.24)
Pro forma $(1,720,645) $(0.32) $(1,683,226) $(0.26)
</TABLE>
The fair value of each stock option is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions for 1998 and 1999: an expected life of 3.7 and 4 years, expected
volatility of 82.49% and 93.10%, no dividend yield and a risk-free interest rate
of 4.96% and 5.62%, respectively, represented by the interest rate on U.S.
Treasury securities with a term of maturity equal to the option's expected time
to exercise on the dates of grant. The weighted average fair value of options
granted during 1998 and 1999 was approximately $.96 and $1.20 per option,
respectively.
On May 1, 2000, each director, excluding Robert Petcavich, Peter O'Neill
and Ronald Sunderland, was granted a non-statutory stock option to purchase
5,000 shares of Planet's common stock at $2.50 per share pursuant to Planet's
2000 Plan as compensation for services rendered in 1999. These options were
fully vested at the date of grant and expire on May 1, 2010. As of June 30, 2000
(unaudited), none of these options have been exercised.
On May 1, 2000, each non-employee director was granted a non-statutory
stock option to purchase 18,000 shares of Planet's common stock at $2.50 per
share under the 2000 Plan as compensation for services to be rendered from May
1, 2000 through May 1, 2001. These options were fully vested at the date of
grant and expire on May 1, 2010. As of June 30, 2000 (unaudited), none of these
options have been exercised.
On May 1, 2000, Planet's Board of Directors granted non-statutory stock
options to purchase 5,000 shares of common stock at an exercise price of $2.50
per share to a former director as compensation for services rendered in 1999.
These options were fully vested at the date of grant and expire on May 1, 2010.
As of June 30, 2000 (unaudited), none of these options have been exercised.
F-18
<PAGE> 58
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
10. SHAREHOLDERS' EQUITY (CONTINUED)
On May 1, 2000, Planet'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 an employee under the 2000 Plan. These options vest 25% per year
and expire on May 1, 2010. As of June 30, 2000 (unaudited), none of these
options have been exercised.
On July 1, 1999, Planet's Board of Directors granted incentive stock
options to purchase 12,500 shares of common stock at an exercise price of $1.50
per share to an employee under the 1995 Plan. Of such options, 4,166 shall vest
on June 30, 2000, 4,167 shall vest on June 30, 2001 and 4,167 shall vest on June
30, 2002. All of such options expire on June 30, 2009. As of December 31, 1999,
none of these options have been exercised.
On May 21, 1999, Planet's Board of Directors granted non-statutory stock
options to purchase 66,083 shares of common stock at an exercise price of $1.813
per share to non-employee directors under the 1995 Plan. These options were
fully vested at the date of grant and expire on May 20, 2009. As of December 31,
1999, none of these options have been exercised.
On February 24, 1999, Planet's Board of Directors granted non-statutory
stock options to purchase 6,000 shares of common stock at an exercise price of
$1.563 per share to a non-employee director under the 1995 Plan. These options
were fully vested at the date of grant and expire on February 23, 2009. As of
December 31, 1999, none of these options have been exercised.
On November 18, 1998, Planet's Board of Directors granted incentive
stock options to purchase 125,000 shares of common stock at an exercise price of
$1.65 per share to Planet's Chief Executive Officer who is also a significant
shareholder of Planet under the 1995 Plan. These options were granted in
connection with a certain employment agreement between the officer and Planet
(Note 8). Of such options, 25,000 were immediately vested at the grant date,
35,000 shall vest on the first anniversary, 35,000 on the second anniversary and
30,000 on the third anniversary. All of such options expire on November 17,
2003. As of December 31, 1999, none of these options have been exercised.
On July 1, 1998, Planet's Board of Directors granted incentive stock
options to purchase 12,500 shares of common stock at an exercise price of $1.625
per share to an employee under the 1995 Plan. These options became fully vested
on December 31, 1998 and expire on June 30, 2008. As of December 31, 1999, none
of these options have been exercised.
On May 21, 1998, Planet's Board of Directors granted non-statutory stock
options to purchase 36,000 shares of common stock at an exercise price of $2.00
per share to non-employee directors under the 1995 Plan. These options were
fully vested at the date of grant and expire on May 20, 2008. As of December 31,
1999, none of these options have been exercised.
On April 29, 1998, Planet's Board of Directors granted non-statutory
stock options to purchase 10,000 shares of common stock at an exercise price of
$1.75 per share to a scientific advisor of Planet under the 1995 Plan. These
options vest ratably over one year and expire on April 28, 2008. In connection
with this transaction, Planet recorded a charge to income of $8,241 based upon
application of the Black-Scholes option pricing model. As of December 31, 1999,
none of these options have been exercised.
F-19
<PAGE> 59
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
10. SHAREHOLDERS' EQUITY (CONTINUED)
On February 13, 1998, Planet's Board of Directors granted incentive
stock options to purchase 5,000 shares of common stock at an exercise price of
$1.875 per share to an employee under the 1995 Plan. These options were fully
vested as of the date of grant and expire on February 12, 2008. On March 30,
1999, these options were exercised.
A summary of stock option activity during 1998 and 1999 follows:
<TABLE>
<CAPTION>
1995 Stock Option Plan Other Options
---------------------------- ----------------------------
Weighted Weighted
Underlying Avg. Exercise Underlying Avg. Exercise
Shares Price Shares Price
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1997 256,459 $4.631 226,274 $4.591
Granted / reissued 188,500 1.726 -- --
Exercised -- -- -- --
Forfeited / expired (25,000) 3.875 -- --
---------- ----------
Outstanding at December 31, 1998 419,959 3.373 226,274 4.591
Granted 84,583 1.749 -- --
Exercised (5,000) 1.875 -- --
Forfeited / expired (75,620) 7.753 (26,455) 3.780
---------- ----------
Outstanding at December 31, 1999 423,922 2.285 199,819 4.699
========== ==========
</TABLE>
Other Options listed above include non-statutory stock options issued to
key personnel prior to the adoption of the 1995 Stock Option Plan.
The following table summarizes information about stock options
outstanding and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Weighted-
Average
Range of Remaining
Exercise Number Contractual Number
Prices Outstanding Life (years) Exercisable
-------- ----------- ------------ -----------
<S> <C> <C> <C>
$1.500 to $2.500 273,083 8.91 195,583
$2.750 to $4.125 256,658 2.61 256,658
$5.100 to $6.000 94,000 4.08 94,000
----------- -----------
623,741 5.13 546,241
=========== ===========
</TABLE>
11. RELATED PARTY TRANSACTIONS
In November 1998, 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. Under the terms
of the Feasibility Agreement, Planet will be reimbursed for certain qualifying
research and development costs relating to such applications. During the years
ended December 31, 1998 and 1999, and the six months ended June 30, 1999 and
2000 (unaudited), Planet recorded reimbursable research and development costs of
$61,634, $355,456, $250,645 and $94,413, respectively, from Agway under the
Feasibility Agreement.
F-20
<PAGE> 60
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
11. RELATED PARTY TRANSACTIONS (CONTINUED)
Also in November 1998, Planet granted Agway 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 License Agreement, Agway has the exclusive right to grant licenses and
sublicenses to other parties on the technology developed under the License
Agreement. Planet and Agway agreed to execute further sub-agreements
("Sub-Agreement") to specify the royalties to be paid to Planet for Agway's use
of Planet's technology on certain specific products. In March 2000, Planet and
Agway entered into a Sub-Agreement with respect to animal feed products
incorporating Planet's patented/patent pending coatings and/or polymer systems.
Also in March 2000, Planet and Agway entered into another Sub-Agreement with
respect to Planet's patented/patent pending coatings and/or polymer systems sold
for use on fruits, vegetables, floral and nursery items. During the years ended
December 31, 1998 and 1999, and the six months ended June 30, 2000 (unaudited),
Planet received no royalty payments. Agway Holdings Inc., an indirect wholly
owned subsidiary of Agway, is a beneficial owner of more than 10% of Planet's
common stock since January 11, 1999.
Planet leased primarily all of Deltco's operating facilities from the
brother of Deltco's former president and from a partnership owned 50% by
Deltco's former president. Rents of $56,886 were paid in 1998, prior to the
former President's resignation in June 1998.
12. LEGAL PROCEEDINGS
In November 1998, Planet initiated litigation against Brian To, a former
director, officer and consultant of Planet, Tarrenz Inc. and Tarrenz Management
Consultants, Inc., entities owned by Brian To, 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 Planet. Planet 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. On April 26, 1999, the defendants answered and denied the
allegations of the complaint and filed a cross-complaint against Planet alleging
breach of contract, misrepresentation, slander, intentional infliction of
emotional distress and fraud. In response to a motion filed by Planet, the
arbitrator issued a ruling on May 1, 2000 disqualifying defendants' counsel
based on a finding that said counsel had previously represented Planet in a
related matter. As a result, the arbitration previously set for February 28,
2000 was rescheduled for September 11, 2000. However, the defendants filed a
motion in San Diego Superior Court to vacate the arbitrator's order granting
Planet's motion to disqualify defendants' counsel.
On September 22, 2000, the Superior Court issued a telephonic ruling
denying the defendants' motion to vacate. In response, the defendants
requested oral arguments. The Court held a hearing on October 27, 2000, but has
not yet issued a ruling.
In light of the limited discovery allowed in arbitration, it is
difficult to evaluate defendants' claims. However, in the opinion of management,
the ultimate resolution of this litigation is not expected to have a material
adverse effect on Planet's financial position or results of operations.
F-21
<PAGE> 61
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
13. SUBSEQUENT EVENTS (UNAUDITED)
On August 15, 2000, Planet entered into a Stock Purchase Agreement with
Triton West Group. Under this agreement, Planet has the right, until August 15,
2003, or earlier, to request a drawdown and require that Triton purchase between
$100,000 and $1,250,000 of Planet's common stock. The maximum amount that Planet
can require Triton to purchase at any given time is subject to a floating number
based on the closing bid price and the average trading volume in a thirty-day
period. Planet may not make requests less than fifteen (15) trading days apart
unless accepted by Triton.
F-22
<PAGE> 62
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Planet's Restated Articles of Incorporation ("Articles") include
provisions to eliminate the personal liability of its directors to the fullest
extent permitted by Section 204(a)(10) under the General Corporation Law of
California (the "California Law"). Planet's Articles also include provisions
that authorize Planet to indemnify its directors and officers to the fullest
extent permitted by Sections 204 and 317 of the California Law. Planet's Bylaws
also provide Planet with the authority to indemnify its other officers,
employees and other agents as set forth in the California Law.
Pursuant to Sections 204 and 317 of the California Law, a corporation
generally has the power to indemnify its present and former directors, officers,
employees and agents against expenses incurred by them in connection with any
suit to which they are, or are threatened to be made, a party by reason of their
serving in such positions so long as they acted in good faith and in a manner
they reasonably believed to be in the best interests of the corporation, and
with respect to a manner they reasonably believed to be in the best interests of
the corporation, and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. A corporation may not eliminate
liability: (i) for acts or omissions involving intentional misconduct or knowing
and culpable violations of law; (ii) for acts or omissions that the individual
believes to be contrary to the best interests of the corporation or its
shareholders or that involve the absence of good faith on the part of the
individual; (iii) for any transaction from which the individual derived an
improper personal benefit; (iv) for acts or omissions involving a reckless
disregard for the individual's duty to the corporation or its shareholders when
the individual was aware or should have been aware of a risk of serious injury
to the corporation or its shareholders; (v) for acts or omissions that
constitute an unexcused pattern of inattention that amounts to any abdication of
the individual's duty to the corporation or its shareholders; or (vii) for
improper distribution to shareholders and loans to directors and officers. Also,
a corporation may not eliminate liability for any act or omission occurring
prior to the date on which the corporation authorizes indemnification of its
directors, officers, employees and agents.
Planet has entered into agreements with its directors and executive
officers that require Planet to indemnify such persons against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
(including expenses of a derivative action) in connection with any proceeding,
whether actual or threatened, to which any such person may be made a party by
reason of the fact that such person is or was a director or officer of Planet or
any of its affiliated enterprises, provides such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the best
interests of Planet and, with respect to any criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The indemnification
agreements also set forth certain procedures that will apply in the event of a
claim for indemnification thereunder.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The table below sets forth the estimated expenses (except the SEC
registration fee, which is an actual expense) in connection with the offer and
sale of the shares of common stock of the registrant covered by this
Registration Statement.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration fee ................... $ 1,400
Printing and EDGARization .............. $ 8,000
Accountants' fees and expenses ......... $15,000
Attorneys' fees and expenses ........... $25,000
Total .................................. $49,400
</TABLE>
<PAGE> 63
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In 1999, Planet paid common stock dividends to holders of its Series A
Convertible Preferred Stock. The June 15, 1999, September 15, 1999 and December
15, 1999 dividend payments of 9,677 shares, 5,106 shares and 5,454 shares,
respectively, were issued pursuant to an exemption from registration for
transactions not involving a public offering. The March 15, 1999 dividend
payment of 9,677 shares was registered under the Form S-3 Registration Statement
filed with the Securities and Exchange Commission on March 30, 1999. On March
15, 2000 and June 15, 2000, Planet paid common stock dividends of 2,736 shares
and 4,239 shares, respectively. The 2000 common stock dividends were also issued
pursuant to an exemption from registration for transactions not involving a
public offering.
After receiving the $1,000,000 proceeds from Agway Holdings, Inc.
("AHI") pursuant to its purchase of Planet common stock on January 11, 1999,
Planet was required to (i) pay a $60,000 cash transaction fee to the finder, LBC
Capital Resources, Inc. ("LBC"), and (ii) issue LBC five-year warrants to
purchase 50,000 shares of Planet common stock with an exercise price of $4.125
per warrant, in exchange for $2,500. These warrants were issued March 29, 1999,
pursuant to an exemption from registration for transactions not involving a
public offering. In connection with AHI's stock purchase transaction in January
1999 and pursuant to the terms of the warrants issued to LBC, Planet was
required to increase the number of shares of common stock issuable under the
warrants to 59,243 and reduce the exercise price to $3.5131 per warrant. LBC was
also issued a warrant to purchase 50,000 shares of Planet common stock on March
9, 2000 with an exercise price of $4.1625. The March 9, 2000 warrant to LBC was
also issued pursuant to an exemption from registration for transactions not
involving a public offering.
AHI exercised warrants to purchase and was issued 500,000 shares of
common stock on November 5, 1999 and March 3, 2000 pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933. After receiving
cumulative proceeds of $1,000,000 from AHI, Planet was required to (i) pay a
$60,000 cash transaction fee to LBC, and (ii) issue LBC five-year warrants to
purchase 50,000 shares of common stock with an exercise price of $4.1625 per
warrant, in exchange for $2,500. These warrants were issued March 9, 2000
pursuant to an exemption from registration for transactions not involving a
public offering. In connection with AHI's stock purchase transaction in January
1999 and pursuant to the terms of the warrants issued to LBC, Planet may be
required to make certain anti-dilution adjustments to the warrants issued to
LBC. Accordingly, Planet may issue additional shares of common stock and reduce
the exercise price of the outstanding warrants.
As part of compensation for establishing and entering into the Private
Equity Line of Credit Agreement on August 15, 2000, Triton West Group, Inc. was
issued 5,000 shares of Planet common stock and a warrant to purchase up to
125,000 shares of Planet common stock. Both the 5,000 shares of Planet common
stock and warrant issued to Triton were issued pursuant to an exemption from
registration for transactions not involving a public offering.
On September 22, 2000, Special Situations received a dividend payment of
4,148 shares of common stock as a holder of Planet's Series A Convertible
Preferred Stock. The dividends were issued pursuant to an exemption from
registration for transactions not involving a public offering. On October 17,
2000, Richard Bernier received 10,000 shares of common stock as a signing bonus
upon signing his employment agreement with Planet. Bernier's shares were issued
pursuant to an exemption from registration for transactions not involving a
public offering.
ITEM 27. EXHIBITS
-------- --------
3.1(1) Restated Articles of Incorporation of the Registrant.
3.2(1) Restated Bylaws of the Registrant.
3.3(6) Amended and Restated Certificate of Determination of Preferences
of Series A Convertible Preferred Stock.
<PAGE> 64
4.1 Reference is made to Exhibits 3.1, 3.2 and 3.3.
4.2(1) Form of warrant issued to Underwriters.
4.3(1) Form of Class B Warrant, with related schedule of warrantholders.
4.4(1) Warrant issued to Reynolds Kendrick Stratton.
4.5(1) Form of warrant issued to advisors, with related schedule of
warrantholders.
4.6(1) Specimen Stock Certificate.
4.7(2) Non-statutory Stock Options granted in September 1994 to Dr.
Petcavich and Messrs. Wright and To.
4.8(1) Warrant issued to Am-Re Services, Inc.
5.1 Opinion of Blanchard Krasner & French, APC.
10.1(1) Form of Indemnity Agreement entered into between the Registrant
and each of its executive officers and directors.
10.2(1) Registrant's 1995 Stock Option Plan (the "1995 Option Plan").
10.3(1) Form of Incentive Stock Option Grant under the 1995 Option Plan.
10.4(1) Form of Non-statutory Stock Option Grant under the 1995 Option
Plan.
10.5(1) Standard Industrial Gross Lease, dated June 1, 1992, between the
Registrant and The Trustees Under the Will and of the Estate of
James Campbell, Deceased, as amended August 13, 1992 and May 3,
1994.
10.6(1) Agreement to Assign Proprietary Rights between the Registrant and
Dr. Robert J. Petcavich.
10.7(1) Form of Confidential Information Agreement entered into between
the Registrant and its employees.
10.8(3) Purchase and Sale Agreement dated as of January 1, 1996, by and
among the Registrant, Deltco of Wisconsin, Inc., and Jack G.
Martinsen.
10.9(4) Executive Employment Agreement dated January 1, 1996, between the
Registrant and Dr. Robert J. Petcavich.
10.10(10) Executive Employment Agreement dated November 18, 1998 and
effective January 1, 1999, between the Registrant and Dr. Robert
J. Petcavich.
10.11(5)(9) Technology Development and License Agreement, dated January 30,
1995, between the Registrant and Cominco Fertilizers, Ltd.
10.12(5) Fourth Amendment to Lease, dated August 1, 1997 between the
Registrant and The Trustees Under the Will and of the Estate of
James Campbell.
10.13(6) Securities Purchase Agreement, dated September 19, 1997, between
the Registrant and Special Situations Private Equity Fund, L.P.
10.14(6) Warrant to Purchase common stock, dated September 24, 1997,
issued by the Registrant to Special Situations Private Equity
Fund, L.P.
10.15(8) Stock Purchase Agreement, dated November 12, 1998 between the
Registrant and Agway Holdings, Inc.
10.16(8) Warrant to Purchase common stock, dated January 11, 1999, issued
by the Registrant to Agway Holdings, Inc.
10.17(10) Registration Rights Agreement, dated January 11, 1999, between
the Registrant and Agway Holdings, Inc.
<PAGE> 65
10.18(10) Product Feasibility Agreement dated as of November 12, 1998
between the Registrant and Agway Consumer Products, Inc.
10.19(10) License Agreement dated as of November 12, 1998 between the
Registrant and Agway Consumer Products, Inc.
10.20(11) Amendment No.1 dated as of February 25, 1999 to the Form of the
Warrant dated January 11, 1999 issued by the Registrant to Agway
Holdings, Inc.
10.21(13) Warrant to Purchase common stock, dated March 29, 1999, issued by
the Registrant to LBC Capital Resources, Inc.
10.22(12) Amended Technology Development and License Agreement, dated June
23, 1999, between the Registrant and Agrium Inc. (formerly known
as Cominco Fertilizers Ltd.).
10.23(13) Sub-Agreement to License Agreement (Animal Feed) effective as of
March 1, 2000 between the Registrant and Agway, Inc.
10.24(13) Sub-Agreement to License Agreement (Fruits, Vegetables, Etc.)
effective as of March 1, 2000 between the Registrant and Agway,
Inc.
10.25(13) Warrant to Purchase common stock, dated March 9, 2000, issued by
the Registrant to LBC Capital Resources, Inc.
10.26(14) Registrant's 2000 Stock Incentive Plan (the "2000 Plan").
10.27(14) Form of Incentive Stock Option Grant under the 2000 Plan.
10.28(14) Form of Non-statutory Stock Option Grant under the 2000 Plan.
10.29(16) Private Equity Line of Credit Agreement dated August 15, 2000 and
Exhibits.
10.30(16) Letter dated September 11, 2000 amending the Private Equity Line
of Credit Agreement.
10.31(17) Employment Agreement with Richard C. Bernier.
11.1(13)(15) Statement of Computation of Common and Common Equivalent Shares.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Blanchard Krasner & French, APC. (included in Exhibit
5.1).
24.1(16) Power of Attorney (included on signature page to this
Registration Statement).
27.1 Financial Data Schedule.
(1) Previously filed as an exhibit to the Registrant's Registration Statement
on Form SB-2, as amended (No. 33-91984 LA) and incorporated herein by
reference.
(2) Previously filed as an exhibit to the Registrant's Registration Statement
on Form S-8 (No. 333-1042) filed on February 5, 1996 and incorporated
herein by reference.
(3) Previously filed as an exhibit to the Registrant's Current Report on Form
8-K filed on January 11, 1996, as amended by the Registrant's Current
Report on Form 8-K/A (Amendment No. 1) filed on March 15, 1996 and
incorporated herein by reference.
(4) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-KSB filed for the fiscal year ended December 31, 1995 and incorporated
herein by reference.
(5) Previously filed as an exhibit to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended June 30, 1997 and incorporated herein by
reference.
<PAGE> 66
(6) Previously filed as an exhibit to the Registrant's Registration Statement
on Form S-3 (No. 333-39845) filed on November 7, 1997, amended on December
31, 1997 and incorporated herein by reference.
(7) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-KSB filed for the fiscal year ended December 31, 1997 and incorporated
herein by reference.
(8) Previously filed with the Registrant's Definitive Proxy Statement filed on
December 14, 1998 and incorporated herein by reference.
(9) 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.
(10) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-KSB filed for the fiscal year ended December 31, 1998 and incorporated
herein by reference.
(11) Previously filed as an exhibit to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1999 and incorporated herein by
reference.
(12) Previously filed as an exhibit to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended June 30, 1999 and incorporated herein by
reference.
(13) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1999 and incorporated herein
by reference.
(14) Previously filed as an exhibit to the Registrant's Registration Statement
on Form S-8 (No. 333-38500) filed on June 2, 2000 and incorporated herein
by reference.
(15) Previously filed as an exhibit to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended June 30, 2000.
(16) Previously filed as an exhibit to the Registrant's Registration Statement
on Form SB-2 (No. 333-46474) originally filed on September 22, 2000 and
incorporated herein by reference.
(17) Previously filed as an exhibit to the Registrant's Amendment No. 1 to the
Registration Statement on Form SB-2 (No. 333-46474) originally filed on
October 31, 2000 and incorporated herein by reference.
ITEM 28. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that Paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
<PAGE> 67
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section (d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
of expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant has duly authorized this amendment to its registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Diego, State of California, on November 13, 2000.
Planet Polymer Technologies, Inc.
Dated November 13, 2000 By: /s/ Robert J. Petcavich
-------------------------------------
Robert J. Petcavich
Chairman and Chief Technical Officer
<PAGE> 68
In accordance with the requirements of the Securities Act of 1934, this
amendment to the Registrant's registration statement has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE DATE
--------- ----
<S> <C>
/s/ Robert J. Petcavich November 13, 2000
-----------------------------------
ROBERT J. PETCAVICH, PH.D,
Chairman of the Board, Chief
Technical Officer, and Principal
Accounting Officer of Planet
/s/ Richard C. Bernier November 13, 2000
-----------------------------------
RICHARD C.BERNIER, Director
/s/ Robert J. Petcavich* November 13, 2000
-----------------------------------
H. M. BUSBY, Director
/s/ Robert J. Petcavich* November 13, 2000
-----------------------------------
MICHAEL M. COLEMAN, PH.D.,
Director
/s/ Robert J. Petcavich* November 13, 2000
-----------------------------------
DENNIS J. LAHOOD, Director
/s/ Robert J. Petcavich* November 13, 2000
-----------------------------------
THOMAS A. LANDSHOF, Director
/s/ Robert J. Petcavich* November 13, 2000
-----------------------------------
PETER J. O'NEILL, Director
/s/ Robert J. Petcavich* November 13, 2000
-----------------------------------
RONALD B. SUNDERLAND, Director
</TABLE>
*By Robert J. Petcavich, attorney-in-fact
