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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PLANET POLYMER TECHNOLOGIES, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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)
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]
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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<S> <C> <C> <C> <C>
Common stock 2,032,212 $2.25(1) $4,572,477.00(2) $1,207.13
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Common stock
underlying warrants 175,000 $2.5781 $434,762.50(3) $114.78
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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 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 Not Applicable
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 Not Applicable
Accountants on Accounting and
Financial Disclosure
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
SUBJECT TO COMPLETION, DATED August 31, 2000
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 up to 2,000,000 shares of common stock of
Planet Polymer Technologies, Inc. issuable to Triton West Group, Inc. by Planet
upon Planet's exercise from time to time of the right to sell shares to Triton
pursuant to the Private Equity Line of Credit Agreement between Planet and
Triton dated August 15, 2000, and 125,000 shares of Planet common stock issuable
by Planet upon the exercise of a warrant held by Triton at $2.5781 per share.
Triton is an "underwriter" within the meaning of the Securities Act of 1933 with
respect to this offering. This prospectus also relates to 87,212 shares offered
by certain selling shareholders and shares issuable under a warrant and stock
option held by certain shareholders. Planet will not receive any of the proceeds
from the sale of shares of Planet common stock by selling shareholders. However,
Planet will receive the selling price of common stock sold to Triton under the
Triton Stock Purchase Agreement or upon Triton's exercise of the Triton Warrant
or upon the exercise of a certain warrant and a certain stock option held by
selling shareholders. The total dollar amount of this offering will not exceed
$7,530,016.
The common stock of Planet is traded on the Nasdaq SmallCap Market
System under the symbol "POLY." On August 31, 2000, the last reported sales
price of Planet's Common stock was $2.56.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING AT PAGE 3.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this prospectus is August 31, 2000.
The Information in this prospectus is not complete and may be changed. Planet
may not sell these Securities until the registration statement filed with the
SEC is effective. This prospectus is not an offer to sell these Securities and
it is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
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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............................................................ 7
Dilution................................................................... 8
Selling Security Holders................................................... 8
Legal Proceedings.......................................................... 9
Directors, Executive Officers, Promoters and Control Persons............... 10
Security Ownership of Certain Beneficial Owners and Management............. 11
Description of Securities.................................................. 13
Shares Eligible for Future Sale............................................ 15
Plan of Distribution....................................................... 15
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities......................................... 16
Description of Business.................................................... 16
Management's Discussion and Analysis of Financial Condition and
Results of Operations. ............................................ 23
Description of Property.................................................... 26
Certain Relationships and Related Transactions............................. 27
Market for Common Equity and Related Stockholder Matters................... 27
Executive Compensation..................................................... 28
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 words such as "intend," "anticipate," "believe,"
"estimate," "plan," "expect," or similar phrases are used, 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 certain 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. Planet is not undertaking to publicly update or revise any
forward-looking statement if it obtains new information or upon the occurrence
of future events or otherwise.
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 hydro-soluble polymer and biodegradable materials.
Planet's proprietary polymer 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. However, there can be no assurance that
Planet's products or that new products, if developed, will be able to capture
market share or be profitable. 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. 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. 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.
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
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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.
THE OFFERING
Securities Offered 2,125,000 shares of common stock,
upon exercise of rights by Planet
from time to time under the Triton
Stock Purchase Agreement, and
exercise by Triton from time to time
of the Triton 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 West Group, Inc.,
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.
Common stock to be outstanding
after the offering 9,639,947 shares, assuming all
shares purchased under the Triton
Stock Purchase Agreement are sold.
Use of Proceeds General working capital to continue
development of Planet's business.
Funds may also be used from time to
time to acquire technology or
business opportunities.
Risk Factors The common stock offered hereby
involves a high degree of risk. See
"Risk Factors."
Nasdaq SmallCap System
trading symbol "POLY"
This prospectus covers up to 2,125,000 shares of Planet's common stock
to be issued to Triton West Group, Inc. under the Private Equity Line of Credit
Agreement and Stock Purchase Warrant, both dated August 15, 2000. Under the
Triton Stock Purchase Agreement, Triton committed up to $7,000,000 to purchase
Planet's common stock over a period of thirty-six (36) months. The Triton Stock
Purchase Agreement establishes what is sometimes termed an equity line of credit
or an equity drawdown facility.
In general, the equity line of credit operates like this: Triton has
committed to provide us up to $7,000,000 as we request it over a 36 month period
in return for common stock we issue to Triton. From time to time, we may request
a drawdown, also called a put, of up to $1,250,000. The maximum amount we can
actually draw down upon each request is subject to a floating number based on
our common stock's 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
Triton Stock Purchase Agreement. However, we are under no obligation to request
a draw for any period.
In connection with the Triton Stock Purchase 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. The common stock already issued and the common stock issuable to Triton
upon exercise of the Triton Warrant is included in this prospectus.
This prospectus also covers 32,212 shares of Planet common stock, 50,000
shares of Planet common stock issuable under a warrant and 5,000 shares issuable
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under a stock option, to be sold by certain selling shareholders identified in
this prospectus.
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. 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 Triton Stock Purchase
Agreement will enable us to maintain our current and planned operations through
February 2001. The Triton Stock Purchase Agreement 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
Equity 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 Triton Stock Purchase Agreement. We cannot guarantee that
changes in our plans or other events affecting our operating expenses will not
result in the expenditure of our existing resources sooner than expected.
We intend to seek additional funding through partnership arrangements or
the extension of existing arrangements. We cannot guarantee that additional
financing will be available on acceptable terms, or 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 certain of our technologies, product candidates or
products that we would otherwise seek to develop or commercialize ourselves.
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DUE TO CERTAIN 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 be dependent upon the stock being quoted on the Nasdaq
SmallCap Market. We cannot guarantee that we will be able to satisfy the
criteria for continued quotation on the Nasdaq SmallCap Market. For example, one
of the criteria for continued quotation is that 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 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 result in our common stock not
being eligible for quotation. In such event, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, our common stock.
If our common stock is delisted 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 CERTAIN
PENNY STOCK REGULATIONS.
If our common stock is delisted 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 (generally, according to recent regulations
adopted by the Commission, any equity security not traded on an exchange or
quoted on Nasdaq that has a market price of less than $5.00 per share, subject
to certain exceptions), including delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith. Such requirements could severely limit the market
liquidity of our common stock and the ability of purchasers of our common stock
to sell such shares in the secondary market. We cannot guarantee that our common
stock will remain listed on the Nasdaq SmallCap Market or that it will not be
treated as a penny stock.
WE ARE UNCERTAIN AS TO WHETHER OUR PRODUCTS AND TECHNOLOGIES WILL BE
COMMERCIALLY ACCEPTED.
Our success is dependent upon the commercial acceptance of our
technologies by the various industries targeted by us. There can be no certainty
as to the amount of time required to achieve full-scale commercialization, and
the commercialization process of any new product could take several years. We
cannot guarantee that our products will receive broad market acceptance as an
economically acceptable alternative. Broad market acceptance of our products
will depend upon our ability to demonstrate to potential customers that our
products can compete favorably with alternative solutions. In addition, we will
need to achieve further product cost reductions to compete successfully in the
future. Although we intend to achieve such reductions through a combination of
engineering and process improvements and economies of scale, we cannot guarantee
that we will achieve our cost objectives.
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WE MAY EXPERIENCE PROBLEMS WITH OUR TECHNOLOGY IN THE FUTURE.
We are developing an innovative approach to address problems and
concerns of many industries. We cannot guarantee that unforeseen problems will
not develop with respect to our technology or products or that we will be
successful in completing the development.
WE INCREASINGLY RELY ON STRATEGIC RELATIONSHIPS TO PROMOTE OUR PRODUCTS.
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. Our dependence on these customers
raises certain risks with respect to the future success of our business. We have
focused our product development efforts by working in close collaboration with
our customers. Certain of our customers are 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. We cannot guarantee that our
collaboration with our customers will 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
certain of our technologies, product candidates or products that we would
otherwise seek to develop or commercialize ourselves. For example, pursuant to
our License Agreement with Agway, Inc., a Delaware corporation ("Agway"), Agway
has certain rights to our technologies and we must rely upon them to produce,
market and distribute the technologies licensed to them. In addition, the Agway
agreement places certain limitations on us with respect to the use of our
technologies in certain areas of business. We may enter into similar
collaborations in the future.
WE MAY HAVE DIFFICULTY MANAGING ANY FUTURE GROWTH.
Future company growth may challenge our management, operational and
financial resources. Our ability to manage growth effectively will require us to
continue to implement and improve our management, operational and financial
systems and to expand, train and manage our employees.
Management of growth is especially challenging for a company with a short
operating history and limited financial resources, and the failure to
effectively manage growth could have a material adverse effect on our results of
operations. Failure to upgrade operating and financial control systems or
difficulties encountered during such upgrades could adversely affect our
business and results of operations. Although we believe that our systems and
controls are adequate to address our current needs, we cannot guarantee that
such systems and controls will be adequate to address future changes in our
business.
MANY OF OUR COMPETITORS HAVE SIGNIFICANTLY GREATER FINANCIAL, TECHNICAL AND
HUMAN RESOURCES AND MARKET PRODUCTS THAT ARE WELL-ESTABLISHED AND ACCEPTED.
We consider our competition for our 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. Many of our competitors have significantly
greater financial, technical and human resources than we do.
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 whom
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
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disposal could significantly harm our competitive position relative to these
established solutions with respect to certain 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.
We cannot guarantee that our competitors will not succeed in developing
products or technologies that are more effective than any which have been or are
being developed by us or which would render our technology and products obsolete
and noncompetitive. Accordingly, our competitors may succeed in obtaining market
acceptance for products more rapidly than we do. Furthermore, if we obtain
market acceptance of our products, we will also be competing with respect to
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 Executive Officer and
President, and the loss of such a key executive could have a material adverse
effect on our business or results of operations. 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
cannot guarantee that we will be successful in attracting, retaining or
motivating key personnel. We maintain "key-person" life insurance policies with
respect to such persons 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. We have filed and intend to file applications as
appropriate for patents covering our products. We cannot guarantee that patents
will issue from any of the pending applications or, if patents do issue, that
claims allowed will be sufficiently broad to protect our technology. In
addition, we cannot guarantee that any issued patents will not be challenged,
invalidated or circumvented, or that the rights granted to us as owners of the
patents will 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, we cannot be certain that we were the
first creator of inventions covered by our issued patents or pending patent
applications or that we were the first to file patent applications for such
inventions. Despite our efforts to safeguard and maintain our proprietary
rights, we cannot guarantee that 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 MAY DEPRESS OUR STOCK PRICE.
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 August
31, 2000, we had outstanding 8,018,182 shares of common stock (assuming the
conversion of all outstanding shares of preferred stock 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.
In September 1997, we filed with the California Secretary of State a
Certificate of Determination of Preferences of Series A Convertible Preferred
Stock which entitles the holders of the 750,000 authorized shares of preferred
stock to dividend payments of a certain number 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
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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 August
31, 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 August 31, 2000, 325,500 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.
On November 12, 1998, Planet entered into a Stock Purchase Agreement
with Agway Holdings, Inc., a subsidiary of Agway, Inc., whereby Agway Holdings
was given 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 AHI Stock Purchase Agreement. Under Section 5(b) of the
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 Triton Stock
Purchase Agreement and exercise of the Triton Warrant, Agway Holdings will have
the right to purchase additional shares of the common stock.
OUR PRODUCTS ARE SUBJECT TO GOVERNMENT REGULATION, WHICH ARE SUBJECT TO CHANGE
AND WHICH MAY ADVERSELY AFFECT DEMAND FOR OUR PRODUCTS AND OUR OPERATIONS.
Certain 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. We cannot guarantee that
changes in existing regulations or the adoption of new regulations will not
occur, which could prevent us or our customers from obtaining approval or delay
the approval of various products or could adversely affect market demand for 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, we cannot guarantee that the liability limits or the scope of our
insurance policy would be adequate to protect against such potential claims.
Additionally, we may not 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, our business reputation could be
adversely affected by product liability claims, regardless of their merit or
eventual outcome.
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.
USE OF PROCEEDS
We intend to use the proceeds from drawdowns under the Triton Stock
Purchase Agreement 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 the
Triton 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. Proceeds not
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<PAGE> 12
immediately required for the purposes described above will be invested by us
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 certain shareholders under certain
anti-dilution rights, the issuance of further shares to Triton under the Triton
Stock Purchase Agreement, 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
certain shareholders holding anti-dilution rights.
On November 12, 1998, Planet entered into a Stock Purchase Agreement
with Agway Holdings, Inc., a subsidiary of Agway, Inc., whereby Agway Holdings
was given 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 Triton Stock Purchase Agreement and exercise of the
Triton 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 eighty-five percent (85%) of the market price on the date
of such issue or sale.
Similarly, LBC Capital Resources was issued warrants on May 4, 1998,
March 29, 1999 and March 9, 2000; AM-RE Services, Inc. was issued a warrant on
June 8, 1995; and Special Situations Private Equity Fund, L.P. was issued a
warrant on September 24, 1997. Under the LBC Warrants and the AM-RE 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 the LBC
Warrants and the AM-RE Warrant. Likewise, under the 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 eighty-five
percent (85%) of the market price on the date of such issue or sale. Thus, the
exercise prices stated in the LBC Warrants, the AM-RE Warrant and the Special
Situations Warrant may be reduced with each exercise of a drawdown by Planet
under the Triton Stock Purchase Agreement.
As of August 31, 2000, there are outstanding options and warrants to
purchase in the aggregate of about 2.5 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 West Group, Inc. is engaged in the business of investing in
publicly traded investment securities for its own account. Triton is located in
Georgetown, Grand Cayman. Triton was given 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
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<PAGE> 13
Private Equity Line of Credit Agreement entered into by and between Triton and
Planet on August 15, 2000. Under the Triton Stock Purchase Agreement, Triton has
committed up to $7,000,000 to purchase Planet's common stock over a period of
thirty-six (36) months. Other than its obligation to purchase Planet common
stock under the Triton Stock Purchase Agreement, Triton has no other commitments
or arrangements to purchase or sell any of Planet's securities. A copy of the
Triton Stock Purchase Agreement and exhibits are attached as exhibits to this
registration statement.
Other Selling Security Holders
The remaining 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. 27,212** * 27,212 - -
----------------------------------------------------------------------------------------------
WARRANT SHARES
LBC Capital
Resources 50,000*** * 50,000 - -
----------------------------------------------------------------------------------------------
OPTION SHARES
Tom Connelly 5,000**** * 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.
**** These shares are issuable upon exercise of a stock option dated May 1, 2000
received as compensation for past services rendered to Planet.
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. The Court has scheduled a
hearing on this issue for September 22, 2000. The arbitration will be
rescheduled after the Superior Court rules on defendants' motion to vacate.
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.
9
<PAGE> 14
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, President and Chief
Executive 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.
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. He is currently a director of A-Life Medical, Inc., a San Diego-based
company. He is Chairman of the Board of Sun-Gard USA, Inc. 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 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
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<PAGE> 15
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 certain information regarding the
ownership of Planet's Stock as of August 31, 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 34.72%
P.O. Box 4933
Syracuse, NY 13221
Common Special Situations Private Equity Fund, 878,619 10.36%
L.P. (4)
153 East 53rd Street, 55th Floor
New York, NY 10022
Common Robert J. Petcavich, Ph.D. (5) 775,932 9.95%
9985 Businesspark Avenue
San Diego, CA 92131
Common Benchmark Capital, Inc. (6) 742,900 9.72%
750 Lexington Avenue, 24th Floor
New York, NY 10022
Common Lorraine DiPaolo (7) 839,000** 10.98%**
750 Lexington Avenue, 24th Floor
New York, NY 10022
Common Richard Zorn (8) 742,900** 9.72%**
750 Lexington Avenue, 24th Floor
New York, NY 10022
Common H. M. Busby (9) 278,592 3.62%
Common Michael M. Coleman, Ph.D. (10) 52,200 *
Common Dennis J. LaHood (11) 37,083 *
Common Thomas A. Landshof (12) 51,000 *
Common Peter J. O'Neill (13) 18,000 *
Common Ronald B. Sunderland (14) 73,000 *
Common All executive officers and directors as 1,285,807 16.04%
a group (15)
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 7,639,947 shares outstanding on
August 31, 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 August 31, 2000 or within 60 days thereafter.
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<PAGE> 16
Percentage of Series A Convertible Preferred Stock is based upon 321,500
shares of Series A Convertible Preferred Stock outstanding as of August
31, 2000.
(3) Includes 1,000,000 shares of common stock issuable upon exercise of a
warrant within 60 days of August 31, 2000. Agway Holdings Inc. is an
indirect wholly owned subsidiary of Agway, Inc.
(4) Includes 37,940 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 August 31, 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 878,619 shares of common stock by
virtue of their ownership and control of MG Advisers, L.L.C.
(5) Includes 157,533 shares issuable upon exercise of options that are
exercisable within 60 days of August 31, 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
(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 August 31, 2000.
(10) Includes 48,200 shares of common stock issuable upon exercise of options
that are exercisable within 60 days of August 31, 2000.
(11) Includes 37,083 shares of common stock issuable upon exercise of options
that are exercisable within 60 days of August 31, 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
12
<PAGE> 17
within 60 days of August 31, 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 August 31, 2000.
(13) Includes 18,000 shares of common stock issuable upon exercise of options
that are exercisable within 60 days of August 31, 2000. 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 August 31, 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 August 31, 2000.
(15) Includes 378,016 shares of common stock issuable upon exercise of
options that are exercisable within 60 days of August 31, 2000.
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 therefore, duly and validly
issued, fully paid and nonassessable.
TRITON STOCK PURCHASE AGREEMENT
On August 15, 2000, we entered into a Stock Purchase Agreement with
Triton West Group, Inc. 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 fifteen (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.
13
<PAGE> 18
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 Triton Stock
Purchase 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 Triton Stock
Purchase 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 Triton Stock
Purchase Agreement, Planet may not request a drawdown which would result in:
- the issuance of an aggregate number of Triton Shares issued from
Planet's drawdown of the Equity 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 Triton Warrant on any given date.
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
certain amount and the stock price is less than certain 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 eighty-five percent (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 eighty-seven percent (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 trading of Planet's common stock is suspended by the SEC or the
common stock is delisted from the principal exchange on which the
common stock was listed.
COMPENSATION TO TRITON WEST GROUP, INC.
As compensation for establishing the Equity Line of Credit under the
Triton Stock Purchase 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.
WARRANTS
In connection with the Triton Stock Purchase Agreement with Triton,
Planet issued a warrant to Triton to purchase up to 125,000 shares of common
stock at
14
<PAGE> 19
$2.5781 which was equal to 125% of the lowest closing bid price during the six
trading days immediately preceding the initial closing date. The Triton 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 August
31, 2000, we had outstanding 8,018,182 shares of common stock (assuming the
conversion of all outstanding shares of preferred stock 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. In September 1997, we filed with
the California Secretary of State a Certificate of Determination of Preferences
of Series A Convertible Preferred Stock which entitles the holders of the
750,000 authorized shares of preferred stock to dividend payments of a certain
number 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 August 31, 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 August 31, 2000, 325,500 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.
On November 12, 1998, Planet entered into a Stock Purchase Agreement
with Agway Holdings, Inc., a subsidiary of Agway, Inc., whereby Agway Holdings
was given 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 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 pursuant to the Equity
Line of Credit and exercise of the Triton Warrant, Agway Holdings will have the
right to purchase additional shares of the common stock.
PLAN OF DISTRIBUTION
A majority of the shares of common stock to be registered by this
registration statement, including those issuable under the Triton Warrant, are
being offered to Triton West Group, Inc. under an Equity Line of Credit. The
total dollar amount of this offering to Triton, excluding the Triton Warrant,
will not exceed $7,000,000. Planet will receive funds upon drawdowns of the
Equity Line of Credit by Planet and Triton's exercise of the Triton Warrant.
Pursuant to the Triton Stock Purchase Agreement, Triton will receive the Triton
Warrant (under which 125,000 shares of the common stock may be exercised by
Triton), 5,000 shares of common stock, and a commitment fee of $23,333 per
drawdown for the first 6 drawdowns.
In this offering, Triton has agreed to be named as a statutory
underwriter within the meaning of the Securities Act of 1933. However, Triton
entered into the
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Triton Stock Purchase 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. Triton has not, however, agreed to
hold the Triton Shares for any minimum or other specific term and has reserved
the right to dispose of the Triton 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 a warrant held
by certain 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 (the "Act") 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.
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) CRT (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
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- Aquadro(R) - Hydrodegradable (water dispersible) polyvinyl
alcohol ("PVOH") resin
To date, Planet has commercialized EnviroPlastic(R) CRT 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.
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. 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.
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 (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 is reimbursed for certain qualifying research and development
costs from Agway.
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 (each a
"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.
In addition to the Agway alliance, Planet has sought to develop
strategic alliances with other potential customers. Since 1995, Planet has had a
relationship with Agrium Inc. to conduct development work in the use of coatings
of fertilizer products. On June 23, 1999, Planet entered into an Amending
Agreement (the "Amending Agreement") with Agrium to amend that certain
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 certain technologies involving
controlled-released 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'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) CRT. Planet's EnviroPlastic(R) CRT (controlled-release
technology) is a proprietary polymer coating product line. This technology
allows fertilizer to be controlled for release over 120 days (see "Strategic
Alliances:
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Agrium Technology Development and License Agreement"). The patent for
EnviroPlastic(R) CRT 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, commonly referred to as
MIM, 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. 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) CRT, AQUAMIM(R),
EnviroPlastic(R) Z and Aquadro(R) technologies, may address current or emerging
market requirements. However, there can be no assurance that Planet's products
or that new products, if developed, will be able to capture market share or be
profitable.
Planet is currently targeting the following markets:
AGROTECHNOLOGY. Planet believes that EnviroPlastic(R) CRT 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) CRT materials.
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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 MIM parts producers, internal MIM parts
producers and new entrants including diversifying plastic injection molders.
Some of the MIM 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 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 (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 is reimbursed for certain qualifying
research and development costs from Agway.
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. During the term of the License Agreement, however, Planet may not
conduct any development work of the same nature or type as that performed under
the License Agreement for any third party on any subject if the intended use
falls within, or could reasonably be expected to
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fall within, Agway's Field of Business (as defined in the License Agreement).
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 (as
defined in the License Agreement) 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
Agreement. 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 Agreement. Planet and Agway agreed to execute further
sub-agreements (each a "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.
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) CRT 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 (the "Amending Agreement") with Agrium, Inc. to amend
that certain 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 certain technologies
involving controlled-released 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."
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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) CRT 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.
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 contract manufacturers 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
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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.
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
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substantial costs defending itself in suits brought against the Company with
respect to patents or in bringing suits against other parties.
GOVERNMENT REGULATION
Certain 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 (the "FDA") and the
Environmental Protection Agency (the "EPA"). 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 one key employee. None of Planet's employees
are covered by collective bargaining agreements, and management considers
relations with employees to be good.
FINANCIAL INFORMATION
On January 7, 2000, Planet sold all of its common stock shares of
Deltco. In accordance with the Stock Purchase Agreement, dated December 30,
1999, Planet received on January 7, 2000 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 Deltco as a
discontinued operation. Accordingly, Planet's continuing operations are now
comprised of one segment, the "Research and Development" business segment.
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 certain 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.
In accordance with the Stock Purchase Agreement, Planet received total proceeds
of $1,000,000 in the form of $900,000 in cash and $100,000 in a secured
promissory note
23
<PAGE> 28
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 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 the Feasibility 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
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.
24
<PAGE> 29
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. 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 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
25
<PAGE> 30
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 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 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 Equity 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.
26
<PAGE> 31
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 (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 is reimbursed for certain 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 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 (the "License Agreement"). The License
Agreement outlines the general terms and conditions for the rights granted Agway
thereunder. 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
certain products.
Agway Holdings Inc., an indirect wholly owned subsidiary of Agway, is a
beneficial owner of more than 10% of Planet's common stock.
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
</TABLE>
On August 31, 2000, the last reported sale price of Planet's common
stock on the Nasdaq SmallCap market was $2.56. As of August 31, 2000, there were
approximately 143 holders of record of Planet's common stock with 7,639,947
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 Private Equity Fund,
L.P., 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) one
and one-half percent (1.5%) multiplied by the liquidation preference of the
Series A Preferred Shares, divided by (b) the average
27
<PAGE> 32
4:00 p.m. closing bid price of Planet's common stock on the Nasdaq SmallCap
Market over a period of five (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 six months ended June 30, 2000, issued 6,975 shares of common stock
valued at approximately $21,580.
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 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.
28
<PAGE> 33
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the fiscal years ended December 31,
1999, 1998, and 1997, certain 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 $3.025.
STOCK OPTION GRANTS AND EXERCISES
Planet's executive officers have been granted options to purchase the
common stock pursuant to the 1995 Plan and are eligible for grants of options
under the 2000 Plan. As of August 31, 2000, there were 109,278 remaining shares
available for grant under the 1995 Plan, which may be granted under the 2000
Plan, in addition to the 325,500 shares that are available for grant under the
2000 Plan.
There were no stock options granted to executive officers in 1999.
The following table sets forth information with respect to the number of
securities underlying unexercised options held by the Chief Executive Officer as
of December 31, 1999 and the value of unexercised in-the-money options (i.e.,
options for which the current fair market value of the common stock underlying
such options exceeds the exercise price):
AGGREGATED OPTION EXERCISES LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END($)(1)
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Petcavich -0- -0- 157,533 65,000 $69,750 $75,563
</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.
29
<PAGE> 34
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 twenty
percent (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 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 (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,
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.
30
<PAGE> 35
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> 36
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> 37
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
---------------
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 2000
------------ ------------
ASSETS (UNAUDITED)
<S> <C> <C>
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> 38
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> 39
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
---------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 2000
----------- -----------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
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> 40
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 (15,0000
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>
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> 41
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> 42
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 2000
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
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> 43
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
OptigenTM 1200 and Fresh SealTM.
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> 44
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.
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 redesign 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.
The research and development revenues are recognized when services have been
rendered or products have been shipped. The reimbursable research and
development costs are recognized when services and/or products have been paid in
full. 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.
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.
F-10
<PAGE> 45
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
Costs incurred to obtain patents, 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 (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.
F-11
<PAGE> 46
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings (Loss) Per Share (Continued)
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.
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).
F-12
<PAGE> 47
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
5. CONCENTRATIONS OF CREDIT RISK (CONTINUED)
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> 48
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> 49
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> 50
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> 51
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> 52
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> 53
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> 54
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> 55
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. The Court has scheduled a
hearing on this issue for September 22, 2000. The arbitration will be
rescheduled after the Superior Court rules on defendants' motion to vacate.
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> 56
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> 57
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
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> 58
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.
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ITEM 27. EXHIBITS
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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.
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.
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<TABLE>
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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.
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.
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<PAGE> 60
<TABLE>
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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 Private Equity Line of Credit Agreement dated August 15, 2000 and
Exhibits.
10.30 Letter dated September 11, 2000 amending the Private Equity Line
of Credit Agreement.
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 Power of Attorney (included on signature page to this
Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
(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.
(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.
<PAGE> 61
(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.
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
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
<PAGE> 62
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 certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly authorized this
Registration Statement or amendment thereto to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on September 18, 2000.
Planet Polymer Technologies, Inc.
Dated September 18, 2000 By: /s/ Robert J. Petcavich
-------------------------------------
Robert J. Petcavich
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert J. Petcavich, his attorney-in-fact, each
with the power of substitution, for him, in any and all capacities, to sign any
amendments to this report, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and conforming all that each the attorney in-fact, or his
substitute may do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE DATE
--------- ----
/s/ Robert J. Petcavich September 18, 2000
------------------------------
ROBERT J. PETCAVICH, PH.D,
Chairman of the Board, Chief
Executive Officer, and Principal
Accounting Officer of Planet
<PAGE> 63
/s/ H.M. Busby September 18, 2000
------------------------------
H.M. BUSBY, Director
/s/ Michael M. Coleman September 18, 2000
------------------------------
MICHAEL M. COLEMAN, PH.D.,
Director
/s/ Dennis LaHood September 18, 2000
------------------------------
DENNIS J. LAHOOD, Director
/S/ Thomas A. Landshof September 18, 2000
------------------------------
THOMAS A. LANDSHOF, Director
/s/ Peter J. O'Neill September 18, 2000
------------------------------
PETER J. O'NEILL, Director
/S/ Ronald B. Sunderland September 18, 2000
------------------------------
RONALD B. SUNDERLAND, Director
