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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For Quarterly Period Ended September 30, 2001 |
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
Commission File Number: 0-26804
PLANET POLYMER TECHNOLOGIES, INC | |||||
(Exact name of small business issuer as specified in its character) | |||||
CALIFORNIA | 33-0502606 | ||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
9985 Businesspark Avenue, San Diego, California | 92131 | ||||
(Address of principal executive offices) | (Zip Code) | ||||
(858) 549-5130 | |||||
(Issuer’s telephone number, including area code) |
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] YES | [ ] NO |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Class | Outstanding at September 30, 2001 | |||
Common Stock, no par value | 9,237,618 |
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Planet Polymer Technologies, Inc.
Form 10-QSB Quarterly Report
Quarter Ended September 30, 2001
INDEX
Page No. | |||||
PART I — Financial Information | |||||
Item 1 | Balance Sheet (Unaudited) September 30, 2001 | 2 | |||
Statements of Operations (Unaudited) Three Months Ended September 30, 2001 and 2000 | 3 | ||||
Statements of Operations (Unaudited) Nine Months Ended September 30, 2001 and 2000 | 4 | ||||
Statement of Shareholders’ Equity (Unaudited) Nine Months Ended September 30, 2001 | 5 | ||||
Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2001 and 2000 | 6 | ||||
Notes to Unaudited Financial Statements | 7 | ||||
Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 | |||
PART II — Other Information | |||||
Item 1 | Legal Proceedings | 12 | |||
Item 2 | Changes in Securities | 12 | |||
Item 3 | Defaults upon Senior Securities | 12 | |||
Item 4 | Submission of Matters to a Vote of Security Holders | 12 | |||
Item 5 | Other Information | 12 | |||
Item 6 | Exhibits and Reports on Form 8K | 12 | |||
SIGNATURES | 13 |
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PLANET POLYMER TECHNOLOGIES, INC.
BALANCE SHEET (UNAUDITED)
_______________
September 30, | ||||||
2001 | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 295,862 | ||||
Accounts receivable | 34,931 | |||||
Inventories | 104,326 | |||||
Prepaid expenses and other current assets | 96,584 | |||||
Total current assets | 531,703 | |||||
Property and equipment, net of accumulated depreciation of $305,700 | 160,762 | |||||
Patents and trademarks, net of accumulated amortization of $145,137 | 373,443 | |||||
Other assets | 6,605 | |||||
Total assets | $ | 1,072,513 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 114,952 | ||||
Accrued payroll and vacation | 28,344 | |||||
Short-term debt | 42,629 | |||||
Current portion of capital lease obligations | 10,397 | |||||
Total current liabilities | 196,322 | |||||
Capital lease obligations, less current portion | 832 | |||||
Total liabilities | 197,154 | |||||
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 No shares issued or outstanding | — | |||||
Common Stock, no par value 20,000,000 shares authorized 9,237,618 shares issued and outstanding | 14,583,703 | |||||
Accumulated deficit | (13,708,344 | ) | ||||
Total shareholders’ equity | 875,359 | |||||
Total liabilities and shareholders’ equity | $ | 1,072,513 | ||||
The accompanying notes are an integral part of the financial statements.
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PLANET POLYMER TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
_______________
Three months ended September 30, | |||||||||||
2001 | 2000 | ||||||||||
Revenues | $ | 152,955 | $ | 76,702 | |||||||
Operating expenses: | |||||||||||
Cost of revenues | 108,234 | 74,224 | |||||||||
General and administrative | 188,656 | 206,819 | |||||||||
Marketing | 50,702 | 61,506 | |||||||||
Research and development | 54,641 | 67,830 | |||||||||
Total operating expenses | 402,233 | 410,379 | |||||||||
Loss from operations | (249,278 | ) | (333,677 | ) | |||||||
Other income (expense), net | (3,202 | ) | 164,931 | ||||||||
Loss before income taxes | (252,480 | ) | (168,746 | ) | |||||||
Income tax expense | — | — | |||||||||
Net loss | (252,480 | ) | (168,746 | ) | |||||||
Preferred Stock dividends | — | (9,644 | ) | ||||||||
Net loss applicable to common shareholders | $ | (252,480 | ) | $ | (178,390 | ) | |||||
Net loss per share applicable to common shareholders (basic and diluted) | $ | (0.03 | ) | $ | (0.02 | ) | |||||
Shares used in per share computations | 9,237,618 | 7,637,743 | |||||||||
The accompanying notes are an integral part of the financial statements.
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PLANET POLYMER TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
_______________
Nine months ended September 30, | |||||||||||
2001 | 2000 | ||||||||||
Revenues | $ | 312,892 | $ | 616,647 | |||||||
Operating expenses: | |||||||||||
Cost of revenues | 249,026 | 481,654 | |||||||||
General and administrative | 622,106 | 720,842 | |||||||||
Marketing | 189,123 | 169,755 | |||||||||
Research and development | 283,392 | 203,460 | |||||||||
Total operating expenses | 1,343,647 | 1,575,711 | |||||||||
Loss from operations | (1,030,755 | ) | (959,064 | ) | |||||||
Other income (expense), net | 16,230 | 197,378 | |||||||||
Loss before income taxes | (1,014,525 | ) | (761,686 | ) | |||||||
Income tax expense | (800 | ) | (800 | ) | |||||||
Net loss | (1,015,325 | ) | (762,486 | ) | |||||||
Preferred Stock dividends | (10,450 | ) | (31,224 | ) | |||||||
Net loss applicable to common shareholders | $ | (1,025,775 | ) | $ | (793,710 | ) | |||||
Net loss per share applicable to common shareholders (basic and diluted) | $ | (0.11 | ) | $ | (0.11 | ) | |||||
Shares used in per share computations | 9,021,367 | 7,462,708 | |||||||||
The accompanying notes are an integral part of the financial statements.
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PLANET POLYMER TECHNOLOGIES, INC.
STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)
_______________
Series A Preferred Stock | Common Stock | |||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Deficit | Total | |||||||||||||||||||
Balance at December 31, 2000 | 321,500 | $ | 517,251 | 8,680,494 | $ | 14,008,901 | $ | (12,682,569 | ) | $ | 1,843,583 | |||||||||||||
Conversion of Series A Preferred Stock into Common Stock | (321,500 | ) | (517,251 | ) | 378,235 | 517,251 | — | — | ||||||||||||||||
Issuance of Common Stock | — | — | 156,735 | 40,801 | — | 40,801 | ||||||||||||||||||
Issuance of Common Stock for services | — | — | 8,400 | 6,300 | — | 6,300 | ||||||||||||||||||
Issuance of Common Stock as a dividend on Convertible Preferred Stock | — | — | 13,754 | 10,450 | (10,450 | ) | — | |||||||||||||||||
Net loss for the nine months ended September 30, 2001 | — | — | — | — | (1,015,325 | ) | (1,015,325 | ) | ||||||||||||||||
Balance at September 30, 2001 | — | $ | — | 9,237,618 | $ | 14,583,703 | $ | (13,708,344 | ) | $ | 875,359 | |||||||||||||
The accompanying notes are an integral part of the financial statements.
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PLANET POLYMER TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
_______________
Nine months ended September 30, | |||||||||||
2001 | 2000 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | (1,015,325 | ) | $ | (762,486 | ) | |||||
Adjustments to reconcile net loss to net cash used by operating activities: | |||||||||||
Depreciation and amortization | 64,811 | 58,236 | |||||||||
Gain on disposal of assets | (25 | ) | — | ||||||||
Changes in assets and liabilities: | |||||||||||
Accounts receivable | 22,177 | 26,103 | |||||||||
Inventories | 14,419 | 9,241 | |||||||||
Prepaid expenses and other assets | 2,037 | (9,194 | ) | ||||||||
Accounts payable and accrued expenses | 18,601 | (1,524 | ) | ||||||||
Other liabilities | — | (152,886 | ) | ||||||||
Net cash used by operating activities | (893,305 | ) | (832,510 | ) | |||||||
Cash flows from investing activities: | |||||||||||
Purchases of property and equipment | (19,947 | ) | (22,643 | ) | |||||||
Proceeds from the sale of property and equipment | 25 | — | |||||||||
Cost of patents and other | (5,112 | ) | (92,848 | ) | |||||||
Proceeds from the sale of subsidiary | — | 814,639 | |||||||||
Payments from note receivable | 93,783 | 5,053 | |||||||||
Net cash provided by investing activities | 68,749 | 704,201 | |||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from issuance of Common Stock and exercise of warrants and stock options | 40,801 | 502,420 | |||||||||
Proceeds from issuance of warrants | — | 2,500 | |||||||||
Principal payments on borrowings and capital lease obligations | (8,950 | ) | (5,705 | ) | |||||||
Repayments to related party | — | (61,484 | ) | ||||||||
Net cash provided by financing activities | 31,851 | 437,731 | |||||||||
Net (decrease) increase in cash and cash equivalents | (792,705 | ) | 309,422 | ||||||||
Cash and cash equivalents at beginning of period | 1,088,567 | 355,645 | |||||||||
Cash and cash equivalents at end of period | $ | 295,862 | $ | 665,067 | |||||||
Supplemental disclosure of non-cash activity: | |||||||||||
Conversion of Series A Preferred Stock into Common Stock | $ | 517,251 | $ | — | |||||||
Issuance of Common Stock dividends on Preferred Stock | 10,450 | 31,224 | |||||||||
Issuance of Common Stock for Services | 6,300 | — | |||||||||
Insurance purchased under a short-term financing agreement | 44,134 | — | |||||||||
Issuance of note receivable in connection with sale of subsidiary | — | 100,000 | |||||||||
Equipment acquired under capital lease obligations | — | 3,813 | |||||||||
Common Stock issued in obtaining Equity Line of Credit | — | 10,313 | |||||||||
Equity issuance costs incurred | — | 45,495 |
The accompanying notes are an integral part of the financial statements.
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PLANET POLYMER TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
_______________
1. Basis of Presentation
The accompanying unaudited financial statements of Planet Polymer Technologies, Inc. (“Planet” or the “Company”) have been prepared in accordance with the interim reporting requirements of Form 10-QSB, pursuant to the rules and regulations of the Securities and Exchange Commission. However, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
In management’s opinion, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2001 are not necessarily indicative of results that may be expected for the year ending December 31, 2001. For additional information, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2000 contained in the Company’s Form 10-KSB for the fiscal year ended December 31, 2000.
Certain prior period amounts have been reclassified to conform to the current period presentation.
2. Note receivable
In August 2001, the Company received approximately $84,500 in cash for repayment of the outstanding portion of a note receivable. The note related to the Company’s sale of all its common stock shares of Deltco on January 7, 2000. The proceeds were net of a discount for early payment of approximately $4,500, which was recorded as an expense by the Company. .
3. Shareholders’ Equity
The holder of the Series A Convertible Preferred Stock (“Series A Preferred”) was entitled to receive quarterly dividends at an annual rate of 6% payable in shares of the Company’s Common Stock. Each share of Series A Preferred was convertible at the option of the holder into shares of Common Stock of the Company. During March 2001, all 321,500 shares of Preferred Stock were converted into 378,235 shares of Common Stock. Additionally, during March 2001, the Company issued dividends of 13,754 shares of Common Stock valued at approximately $10,450.
4. Liquidity and Capital Resources
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The Company has incurred losses since inception. For the nine months ended September 30, 2001, the Company had net losses of approximately $1,015,000. As of September 30, 2001, the Company had an accumulated deficit of approximately $13,708,000. The Company’s management expects that the financial resources necessary to fund the Company’s planned activities after 2001 exceed its currently available working capital. The Company’s future capital requirements will be dependent upon many factors, including, but not limited to, costs associated with continued research and development of the Company’s proprietary polymer materials, costs associated with the filing and enforcement of the Company’s patents, costs associated with manufacturing scale-up and market acceptance, and the timing thereof, of the Company’s products. The Company will need to secure additional financing through partnership arrangements or through the issuance of additional equity and/or debt securities or through other means. There can be no assurance that the Company will be able to secure the necessary additional financing or to generate positive cash flows or profitability in the future.
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PLANET POLYMER TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS — (Continued)
5. Recent Accounting Pronouncements
In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets”, which is effective for fiscal years beginning after March 15, 2001. SFAS 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of this statement. The Company has not yet determined the impact, if any, the adoption of SFAS No. 142 will have on its results of operations and financial condition.
On October 3, 2001, the FASB issued Statement of Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“FAS 144”). FAS 144 supercedes FAS 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” FAS 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30 (APB 30), Reporting Results of Operations Reporting the Effects of Disposal of a Segment of a Business. FAS 144 develops one accounting model for long-lived assets that are to be disposed of by sale. FAS 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, FAS 144 expands the scope of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. FAS 144 is effective for the Company for all financial statements issued in fiscal 2002. The Company has not yet determined the impact, if any, the adoption of SFAS No. 144 will have on its results of operations and financial condition.
6. Subsequent Event
In October 2001, the Company settled certain litigation resulting in Planet receiving a cash payment of $125,000, Planet’s insurance carrier paying $25,000 to the opposing party, the return of approximately 70,000 shares of Planet stock and the cancellation of certain unexercised stock options.
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PART I — FINANCIAL INFORMATION
Item 2 — Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Planet Polymer Technologies, Inc.
Except for the historical information contained herein, the discussion in this report contains forward- looking statements that involve certain risks and uncertainties. The Company’s actual results could differ materially from those discussed in this report. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and in the Company’s Form 10-KSB for the fiscal year ended December 31, 2000.
OVERVIEW
Since Planet Polymer Technologies, Inc. (“Planet” or the “Company”) was founded in 1991 substantially all of the Company’s resources have been devoted to the development and commercialization of its technologies and products. This has included the expenditure of funds to develop the Company’s corporate infrastructure, support the Company’s marketing efforts and establish a pilot production facility, in addition to research and development.
Planet has incurred operating losses since inception and had an accumulated deficit as of September 30, 2001 of approximately $13.7 million. Pending commercial deployment of and related volume orders for the Company’s products, the Company expects to incur additional losses.
RESULTS OF OPERATIONS
The Company’s revenues increased to approximately $153,000 for the three months ended September 30, 2001 from approximately $77,000 for the same period in 2000. This increase was primarily attributable to higher metal injection molding revenue resulting from customers expanding their commercial use of Planet’s products, partially offset by lower Agway development income as research projects are concluding. Revenues decreased to approximately $313,000 for the nine months ended September 30, 2001 from approximately $617,000 for the same period in 2000. This decrease was primarily attributable to lower EnviroPlastic® Z resin sales to the Toro Company. There was also lower Agway development income. These decreases were partially offset by increased metal injection molding revenue.
Cost of sales increased to approximately $108,000 for the three months ended September 30, 2001 from approximately $74,000 for the same period in 2000. This increase was primarily attributable to increased MIM revenues and associated higher raw material costs for MIM feedstocks. Cost of sales decreased to approximately $249,000 for the nine months ended September 30, 2001 from approximately $482,000 for the same period in 2000. This decrease in raw material costs was primarily attributable to lower overall revenues from EnviroPlastic® Z resin and a significant shift in product mix from polymer resin sales to MIM feedstock sales.
General and administrative expenses decreased to approximately $189,000 for the three months ended September 30, 2001 from approximately $207,000 for the same period in 2000 and to approximately $622,000 for the nine months ended September 30, 2001 from approximately $721,000 for the same period in 2000. These decreases were primarily attributable to reduced use of outside services. These decreases were partially offset by increased salaries resulting from the addition of a new Chief Executive Officer in October 2000 offset by fewer administrative staff and the reallocation of the former Chief Executive Officer’s salary to research and development. During 2000, the former Chief Executive Officer’s salary was allocated equally between general and administrative expenses, marketing
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Item 2 — Management’s Discussion and Analysis of Financial
Condition and Results of Operations — (Continued)
Planet Polymer Technologies, Inc.
expenses and research and development expenses. Beginning in 2001, with the addition of the new Chief Executive Officer, his duties and salary are now entirely allocated to research and development.
Marketing expenses decreased to approximately $51,000 for the three months ended September 30, 2001 from approximately $62,000 for the same period in 2000. This decrease was primarily attributable to reduced use of a metal injection molding consultant. Marketing expense increased to approximately $189,000 for the nine months ended September 30, 2001 from approximately $170,000 for the same period in 2000. This increase was primarily attributable to increased costs associated with the promotion of AQUAMIM®, additional trade shows, salaries resulting from the addition of a new Chief Executive Officer in October 2000, the payment of a bonus offset by the reallocation of the former Chief Executive Officer’s salary to research and development and the reduced use of a metal injection molding consultant.
Research and development expenses decreased to approximately $55,000 for the three months ended September 30, 2001 from approximately $68,000 for the same period in 2000. This decrease was primarily due to savings related to employee terminations and lower research expenditures offset partially by the reallocation of the former Chief Executive Officer’s salary. Research and development expenses increased to approximately $283,000 for the nine months ended September 30, 2001 from approximately $203,000 for the same period in 2000. This increase was primarily due to a decrease in customer funded research and development, severance costs related to employee terminations, and the reallocation of the former Chief Executive Officer’s salary. Beginning in 2001, with the addition of the new Chief Executive Officer, the former Chief Executive Officer’s salary is now entirely allocated to research and development.
In 1996, Planet recorded an obligation of $300,000 for outstanding employment tax issues. During 1997, Planet resolved a portion of the employment tax issues and reversed the original entry by approximately $34,000. The Company subsequently determined that the remainder of such obligation of approximately $266,000 was no longer payable. As a result, the obligation was reversed and other income was recognized in the three months ended September 30, 1999 and 2000, in the amount of $113,000 and $153,000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
On January 7, 2000, the Company sold all of its common stock shares of Deltco. In accordance with the Purchase Agreement, the Company received total proceeds of $1,000,000 in the form of $900,000 in cash and $100,000 in a secured promissory note in consideration of the sale of its Deltco common stock. In August 2001, the Company received approximately $84,500 in cash for repayment of the outstanding portion of the note receivable. The proceeds were net of a discount for early payment of approximately $4,500, which was recorded as an expense by the Company.
The Company used cash of approximately $893,000 for continuing operations for the nine months ended September 30, 2001. Such funds were used primarily for metal injection molding commercialization efforts, ongoing research and development activities, marketing efforts and administrative support.
Net cash provided by investing activities was approximately $69,000 for the nine months ended September 30, 2001 resulted from the prepayment from a note receivable partially offset by payments for the purchase of equipment.
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Item 2 — Management’s Discussion and Analysis of Financial
Condition and Results of Operations — (Continued)
Planet Polymer Technologies, Inc.
Net cash provided by financing activities of approximately $32,000 for the nine months ended September 30, 2001 resulted from proceeds of approximately $41,000 from the issuance of Common Stock partially offset by approximately $9,000 used for payments associated with capital lease obligations.
The Company believes that its existing sources of liquidity and anticipated revenue will satisfy the Company’s projected working capital and other cash requirements through at least December 2001. There can be no assurance, however, that future revenue decreases or changes in the Company’s plans or other events affecting the Company’s operating expenses will not result in the expenditure of the Company’s resources. The Company expects that it will need to raise substantial additional funds to continue its current and planned operations. The Company is seeking additional funding from existing and potential customers. The Company continues to have outstanding a $2 million Private Placement Offering that it is actively evaluating. The Company is also evaluating and soliciting interest in other public or private equity or debt financing, including the potential sale or licensing of other patents and intellectual property which, if successfully consummated, could result in a gain or loss to the Company. On July 18, 2001, the Company’s Common Stock was delisted from the Nasdaq Small Cap Stock Market due to non-compliance with Nasdaq’s net tangible assets and minimum bid pricing requirements. There can be no assurance that the Company’s efforts will result in additional funds or that additional financing will be available on acceptable terms, or at all.
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PART II — OTHER INFORMATION
Planet Polymer Technologies, Inc.
Item 1 — Legal Proceedings:
None
Item 2 — Changes in Securities:
None
Item 3 — Defaults upon Senior Securities:
None
Item 4 — Submission of Matters to a Vote of Security Holders:
None
Item 5 — Other Information:
None
Item 6 — Exhibits and Reports on Form 8-K:
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
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Planet Polymer Technologies, Inc.
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 2, 2001 | Planet Polymer Technologies, Inc. | |
/s/ Richard C. Bernier | ||
Richard C. Bernier Chief Executive Officer (On behalf of Registrant and as Registrant’s Principal Financial and Accounting Officer) |
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