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 |
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| For Quarterly Period Ended June 30, 2002 | ||
| [ ] |
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 June 30, 2002 | |
|
|
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| Common Stock, no par value | 9,207,884 |
INDEX
| Page No. | |||||
| PART I — Financial Information | |||||
| Item 1 |
Condensed Balance Sheet (Unaudited) June 30, 2002 |
2 | |||
|
Condensed Statements of Operations (Unaudited) Three and Six Months Ended June 30, 2002 and 2001 |
3 | ||||
|
Condensed Statement of Shareholders’ Equity (Unaudited) Six Months Ended June 30, 2002 |
4 | ||||
|
Condensed Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2002 and 2001 |
5 | ||||
| Notes to Unaudited Financial Statements | 6 | ||||
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 8 | |||
| PART II — Other Information | |||||
| Item 1 | Legal Proceedings | 11 | |||
| Item 2 | Changes in Securities | 11 | |||
| Item 3 | Defaults upon Senior Securities | 11 | |||
| Item 4 | Submission of Matters to a Vote of Security Holders | 11 | |||
| Item 5 | Other Information | 11 | |||
| Item 6 | Exhibits and Reports on Form 8K | 11 | |||
| SIGNATURES | 12 | ||||
PLANET POLYMER TECHNOLOGIES, INC.
CONDENSED BALANCE SHEET (UNAUDITED)
| June 30, | ||||||
| 2002 | ||||||
ASSETS |
||||||
Current assets: |
||||||
Cash |
$ | 150,233 | ||||
Accounts receivable |
22,519 | |||||
Note receivable |
158,793 | |||||
Prepaid expenses and other current assets |
18,891 | |||||
Total current assets |
350,436 | |||||
Property and equipment, net of accumulated depreciation of $71,373 |
13,520 | |||||
Patents and trademarks, net of accumulated amortization of $55,858 |
175,478 | |||||
Other assets |
6,012 | |||||
Total assets |
$ | 545,446 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||
Current liabilities: |
||||||
Accounts payable |
$ | 11,566 | ||||
Accrued payroll and vacation |
29,195 | |||||
Accrued expenses |
4,592 | |||||
Capital lease obligations |
2,994 | |||||
Total liabilities |
48,347 | |||||
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 9,207,884 shares issued and outstanding |
14,582,123 | |||||
Accumulated deficit |
(14,085,024 | ) | ||||
Total shareholders’ equity |
497,099 | |||||
Total liabilities and shareholders’ equity |
$ | 545,446 | ||||
The accompanying notes are an integral part of the financial statements.
2
PLANET POLYMER TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||||
Revenues |
$ | 43,238 | $ | 70,816 | $ | 77,769 | $ | 159,937 | ||||||||||
Operating expenses: |
||||||||||||||||||
Cost of revenues |
32,313 | 68,494 | 55,460 | 140,792 | ||||||||||||||
General and administrative |
86,688 | 210,068 | 187,009 | 434,250 | ||||||||||||||
Marketing |
30,342 | 57,961 | 49,552 | 138,421 | ||||||||||||||
Research and development |
37,390 | 65,416 | 84,955 | 228,751 | ||||||||||||||
Loss from impairment of assets |
62,159 | — | 62,159 | — | ||||||||||||||
Total operating expenses |
248,892 | 401,939 | 439,135 | 942,214 | ||||||||||||||
Loss from operations |
(205,654 | ) | (331,123 | ) | (361,366 | ) | (782,277 | ) | ||||||||||
Other income, net |
19,945 | 6,383 | 20,616 | 19,433 | ||||||||||||||
Net loss |
(185,709 | ) | (324,740 | ) | (340,750 | ) | (762,844 | ) | ||||||||||
Preferred Stock dividends |
— | — | — | (10,450 | ) | |||||||||||||
Net loss applicable to common shareholders |
$ | (185,709 | ) | $ | (324,740 | ) | $ | (340,750 | ) | $ | (773,294 | ) | ||||||
Net loss per share applicable to common shareholders (basic and diluted) |
$ | (0.02 | ) | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.09 | ) | ||||||
Shares used in per share computations |
9,207,884 | 9,098,170 | 9,178,004 | 8,911,449 | ||||||||||||||
The accompanying notes are an integral part of the financial statements.
3
PLANET POLYMER TECHNOLOGIES, INC.
CONDENSED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)
| Common Stock | ||||||||||||||||
| Accumulated | ||||||||||||||||
| Shares | Amount | Deficit | TOTAL | |||||||||||||
Balance at January 1, 2002 |
9,165,618 | $ | 14,575,783 | $ | (13,744,274 | ) | $ | 831,509 | ||||||||
Issuance of Common Stock for services |
42,266 | 6,340 | — | 6,340 | ||||||||||||
Net loss |
— | — | (340,750 | ) | (340,750 | ) | ||||||||||
Balance at June 30, 2002 |
9,207,884 | $ | 14,582,123 | $ | (14,085,024 | ) | $ | 497,099 | ||||||||
The accompanying notes are an integral part of the financial statements.
4
PLANET POLYMER TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Six months ended June 30, | |||||||||||
| 2002 | 2001 | ||||||||||
Cash flows from operating activities: |
|||||||||||
Net loss |
$ | (340,750 | ) | $ | (762,844 | ) | |||||
Adjustments to reconcile net loss to net cash used
by operating activities: |
|||||||||||
Depreciation and amortization |
15,543 | 42,919 | |||||||||
Loss from impairment of assets |
62,159 | — | |||||||||
Gain on disposal of assets |
(13,500 | ) | (25 | ) | |||||||
Issuance of Common Stock for services |
6,340 | 6,300 | |||||||||
Changes in operating assets and liabilities: |
|||||||||||
Accounts receivable |
103,417 | 11,164 | |||||||||
Inventories |
— | 27,461 | |||||||||
Prepaid expenses and other assets |
39,530 | 5,461 | |||||||||
Accounts payable and accrued expenses |
(87,831 | ) | (68,779 | ) | |||||||
Net cash used by operating activities |
(215,092 | ) | (738,343 | ) | |||||||
Cash flows from investing activities: |
|||||||||||
Purchases of property and equipment |
— | (19,947 | ) | ||||||||
Proceeds from the sale of property and equipment |
13,500 | 25 | |||||||||
Cost of patents and other |
— | (1,243 | ) | ||||||||
Payments from note receivable |
97,577 | 4,200 | |||||||||
Net cash provided (used) by investing activities |
111,077 | (16,965 | ) | ||||||||
Cash flows from financing activities: |
|||||||||||
Proceeds from issuance of Common Stock and exercise of warrants
and stock options |
— | 40,801 | |||||||||
Principal payments on capital lease obligations |
(37,231 | ) | (4,833 | ) | |||||||
Net cash provided (used) by financing activities |
(37,231 | ) | 35,968 | ||||||||
Net increase (decrease) in cash |
(141,246 | ) | (719,340 | ) | |||||||
Cash at beginning of period |
291,479 | 1,088,567 | |||||||||
Cash at end of period |
$ | 150,233 | $ | 369,227 | |||||||
Supplemental disclosure of non-cash activity: |
|||||||||||
Issuance of Common Stock dividends on Preferred Stock |
$ | — | $ | 10,450 | |||||||
Conversion of Series A Preferred Stock into Common Stock |
— | 517,251 | |||||||||
The accompanying notes are an integral part of the financial statements.
5
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 six months ended June 30, 2002 are not necessarily indicative of results that may be expected for the year ending December 31, 2002. For additional information, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2001 contained in the Company’s Form 10-KSB for the fiscal year ended December 31, 2001.
Certain reclassifications have been made to the interim financial statements of the prior year to conform to the presentation of the current interim periods. These reclassifications had no effect on previously reported results of operations or retained earnings.
2. 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, and not on a liquidation basis. The Company has incurred losses since inception. For the six months ended June 30, 2002 and 2001, the Company had net losses of approximately $341,000 and $763,000, respectively. As of June 30, 2002, the Company had an accumulated deficit of approximately $14,085,000. These matters raise substantial doubt about the ability of the Company to continue as a going concern. The Company has reduced staff and operating expenses, reduced or sold non-Agway or agricultural assets, while continuing to provide technical research and development for Agway’s FreshSeal commercial program and Optigen development activities, as well as support of MIM asset utilization at Ryer Industries. However, management cannot provide any assurance that the Company will be successful in satisfying future working capital and other cash requirements past December 31, 2002. As a result, the Company may have to cease its operations and liquidate its assets and liabilities and prepare its financial statements on a liquidation basis. The accompanying financial statements do not include any adjustments that might result for this uncertainty. The Company’s future capital requirements will be dependent upon many factors, including, but not limited to, costs associated with the 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.
3. Long-Lived Assets
The Company 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. For similar assets held for sale, an impairment loss is recognized when the carrying amount exceeds its net realizable value or fair value less cost to sell. In June 2002, the Company recorded approximately $62,000 relating to the write-off of certain intangible assets when it was determined that net realizable value or fair value
6
Planet Polymer Technologies, Inc.
NOTES TO UNAUDITED FINANCIAL STATEMENTS — (Continued)
less cost to sell these assets were insufficient to recover their carrying value. The impaired assets principally represent the Company’s EnviroPlastic® Z technology.
4. 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.
The Company has excluded all convertible preferred stock and outstanding stock options and warrants from the calculation of diluted loss per share for the three and six months ended June 30, 2001 and 2002 because all such securities are anti-dilutive for those periods. Accordingly, diluted earnings per share equals basic earnings per share. The total number of potential common shares excluded from the calculation of diluted loss per share for the three and six months ended June 30, 2002 was 1,748,729 and 1,748,729, respectively.
7
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, 2001.
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 June 30, 2002 of approximately $14.1 million. Pending commercial deployment of and related volume orders for the Company’s products, the Company expects to incur additional losses.
RESULTS OF OPERATIONS
On December 28, 2001, the Company sold certain assets of the Company relating to its Metal Injection Molding (“MIM”) business, including intellectual property, technology, manufacturing equipment and raw material and finished goods to Ryer Industries LLC (“Ryer”).
The Company’s revenues decreased to approximately $43,000 for the three months ended June 30, 2002 from approximately $71,000 for the same period in 2001 and to approximately $78,000 for the six months ended June 30, 2002 from approximately $160,000 for the same period in 2001. These decreases were primarily attributable to no AQUAMIM® sales, resulting from selling all AQUAMIM® assets in December 2001 and no EnviroPlastic® Z sales partially offset by higher Agway development income, revenue from research and development technical consulting and approximately $2,000 in royalties paid by Ryer in the second quarter of 2002.
Cost of revenues decreased to approximately $32,000 for the three months ended June 30, 2002 from approximately $68,000 for the same period in 2001 and to approximately $55,000 for the six months ended June 30, 2002 from approximately $141,000 for the same period in 2001. These decreases were primarily due to decreased revenues and a change in product mix away from AQUAMIM® and EnviroPlastic® Z.
General and administrative expenses decreased to approximately $87,000 for the three months ended June 30, 2002 from approximately $210,000 for the same period in 2001 and to approximately $187,000 for the six months ended June 30, 2002 from approximately $434,000 for the same period in 2001. These decreases were primarily attributable to a reduction in staff, reduced use of outside services, and lower depreciation and amortization expense resulting from selling all AQUAMIM® assets in December 2001.
8
Item 2 — Management’s Discussion and Analysis of Financial
Condition and Results of Operations — (Continued)
Planet Polymer Technologies, Inc.
Marketing expenses decreased to approximately $30,000 for the three months ended June 30, 2002 from approximately $58,000 for the same period in 2001 and to approximately $50,000 for the six months ended June 30, 2002 from approximately $138,000 for the same period in 2001. These decreases were primarily due to a reduction in staff and reduced promotional expenses.
Research and development expenses decreased to approximately $37,000 for the three months ended June 30, 2002 from approximately $65,000 for the same period in 2001 and to approximately $85,000 for the six months ended June 30, 2002 from approximately $229,000 for the same period in 2001. These decreases were primarily due to a reduction in staff, severance costs related to employee terminations in 2001, greater research and development expense reimbursement from Agway and lower depreciation and amortization expense resulting from selling all AQUAMIM® assets in December 2001.
In June 2002, the Company recorded a charge of approximately $62,000 relating to the write-off of certain EnviroPlastic Z intangible assets held for sale when it was determined that future undiscounted cash flows associated with these assets were insufficient to recover their carrying value. The assets principally represent the Company’s historical ownership interest in product rights and license agreements relating to the Company’s EnviroPlastic Z patent.
Other income, net increased to approximately $20,000 for the three months ended June 30, 2002 from approximately $6,000 for the same period in 2001 and to approximately $21,000 for the six months ended June 30, 2002 from approximately $19,000 for the same period in 2001. These increases were primarily attributable to a gain on the sale of fixed assets and securities partially offset by lower cash balances and lower interest rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company used cash of approximately $215,000 for continuing operations for the six months ended June 30, 2002. Such funds were used primarily for research and development activities, marketing efforts and administrative support.
Net cash provided by investing activities of approximately $111,000 for the six months ended June 30, 2002 resulted from the receipt of payments on a note receivable associated with the sale of MIM assets to Ryer and the sale of other equipment to unrelated parties.
Net cash used by financing activities was approximately $37,000 for the six months ended June 30, 2002. Such funds were used for payments associated with capital lease obligations.
The Company does not believe that its existing sources of liquidity and anticipated revenue will satisfy the Company’s projected working capital and other cash requirements through June 30, 2003. The Company expects that it will need to raise or generate substantial additional capital to accomplish its business plan over the next year. The Company has reduced staff and operating expenses, reduced or sold non-Agway or agricultural assets, while continuing to provide technical research and development for Away’s FreshSeal commercial program and Optigen development activities, as well as support of MIM asset utilization at Ryer Industries. However, management cannot provide any assurance that the Company will be successful in satisfying future working capital and other cash requirements past
9
Item 2 — Management’s Discussion and Analysis of Financial
Condition and Results of Operations — (Continued)
Planet Polymer Technologies, Inc.
December 31, 2002. If it cannot, the Company may have to cease operations and liquidate its assets and liabilities and prepare its financial statements on a liquidation basis instead of a going concern basis. The Company’s future capital requirements will be dependent upon many factors, including, but not limited to, costs associated with the 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. There can be no assurance that the Company will be able to generate positive cash flows or profitability in the future.
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.
10
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:
| Exhibit Number | Description | |||||
| 99.1 | CEO and CFO certification | |||||
(b) Reports on Form 8-K:
| None |
11
Planet Polymer Technologies, Inc.
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 13, 2002 |
Planet Polymer Technologies, Inc. |
|
/s/ Richard C. Bernier |
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|
Richard C. Bernier Chief Executive Officer (On behalf of Registrant and as Registrant’s Principal Financial and Accounting Officer) |
12