UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|
ý ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF |
||
|
|
||
|
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 |
||
|
|
||
|
o TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF |
||
|
For the transition period from ____________ to ___________ |
||
|
|
||
|
Commission File Number: 0-12177 |
||
|
|
||
|
BIONOVA HOLDING CORPORATION |
||
|
(Exact Name of Registrant as Specified in its Charter) |
||
|
|
||
|
DELAWARE |
|
75-2632242 |
|
(State of incorporation) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
|
9255 Customhouse Plaza, Suite I |
|
92154 |
|
(Address of principal executive offices) |
|
(Zip Code) |
|
|
|
|
|
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 744-8105 |
||
|
|
||
|
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: |
||
|
|
||
|
COMMON STOCK, PAR VALUE $.01 PER SHARE |
||
|
(Title of class) |
||
|
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE |
||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Yes ý No o
Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended).
Yes o No ý
The aggregate market value of the voting stock and non-voting stock held by non-affiliates of the Registrant computed by reference to the price at which the common equity was last sold on April 8, 2003 was $965,714 (the characterization of officers and directors of the Registrant for purposes of this computation should not be construed as an admission for any other purpose that any such person is in fact an affiliate of the Registrant).
Number of shares of Common Stock outstanding as of April 8, 2003: 22,905,408.
TABLE OF CONTENTS
Transwitch® is a registered trademark of DNAP or its subsidiaries. Master’s Touch® and Showcase® are registered trademarks of an affiliate of Bionova Holding.
2
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report on Form 10-K 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. All statements, including without limitation statements contained in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” other than statements of historical facts included in this Form 10-K, including statements regarding our financial position, business strategy, prospects, plans and objectives of our management for future operations, and industry conditions, are forward–looking statements. Although we believe that the expectations reflected in these forward–looking statements are reasonable, we can give you no assurance that these expectations will prove to be correct. In addition to important factors described elsewhere in this report, the “Risk Factors” beginning on page 23 sometimes have affected, and in the future could affect, our actual results and could cause these results during 2003 and beyond, to differ materially from those expressed in any forward–looking statements made by us or on our behalf. When we use the terms “Bionova,” “we,” “us,” and “our,” these terms refer to the Bionova Holding Corporation and its subsidiaries.
Bionova Holding Corporation, a Delaware corporation (together with its subsidiaries, unless the context requires otherwise, “Bionova Holding” or the “Company”), was formed in January 1996, and acts as a holding company for (i) Agrobionova, S.A. de C.V., a corporation organized under the laws of the United Mexican States, of which the Company owns 98.6% (“ABSA”), (ii) International Produce Holding Company, a Delaware corporation, of which the Company owns 100% (“IPHC”), (iii) DNA Plant Technology Corporation, a Delaware corporation, of which the Company owns 100% (“DNAP”), and (iv) VPP Corporation, a Delaware corporation, of which the Company owns 100% (“VPP”). The Company acquired majority interests in ABSA and IPHC on July 1, 1996, by means of a capital contribution from Bionova, S.A. de C.V. (“Bionova Mexico”), and on October 7, 1997, acquired all of the minority interests in IPHC and increased its ownership interest in ABSA to 80%. On December 28, 2000, Bionova Holding increased its ownership interest in ABSA to 98.6% by completing the capitalization of amounts that had previously been advanced to ABSA. DNAP became a wholly-owned subsidiary of the Company on September 26, 1996, as a result of the merger (the “Merger”) of Bionova Acquisition, Inc., a Delaware corporation that was a wholly-owned subsidiary of the Company, with and into DNAP. VPP was formed as a wholly-owned subsidiary of the Company on August 18, 1997.
ABSA engages in the business of growing fresh fruits and vegetables, primarily tomatoes and peppers, in Mexico and exporting fresh produce to the United States and other markets. In recent years ABSA has been concentrating on the production and marketing of proprietary products, such as its patented vine sweet mini pepper, that offer the potential to generate higher margins as compared with commodity fresh produce items. ABSA owns 98.0% of Siembra Cultivo y Cosecha del Noroeste, S.A. de C.V., a corporation organized under the laws of the United Mexican States (“Siembra”), which provides labor and administrative services to ABSA. ABSA also owns 98.0% of Comercializadora Premier, S.A. de C.V., a corporation organized under the laws of the United Mexican States (“Premier Mexico”), which provides administrative services to the Company. IPHC is a holding company whose subsidiaries are in the business of marketing and distributing fresh produce primarily in the United States and Canada, including fruits and vegetables produced by ABSA. DNAP and VPP are agribusiness biotechnology companies, which until the shut down of their research and development operations in June 2002, concentrated on the development of fruits and vegetables and intellectual properties associated with these development efforts. The Company has been, and is continuing to work on the licensing and sale of the patents and trademarks held by DNAP and VPP.
Approximately 78.9% of the outstanding Common Stock of the Company is indirectly owned by Savia, S.A. de C.V. (“Savia”). In addition, Savia indirectly owns 200 shares of Series A Convertible Preferred Stock, which, if converted, would result in Savia owning 89.5% of the outstanding Common Stock of the Company. The owner of record of all of these shares of common and preferred stock is Ag-Biotech Capital, LLC, a wholly-owned
3
subsidiary of Savia. Savia is a Mexican corporation which acts as a holding company for several companies, including Seminis, Inc., the leading manufacturer of fruit and vegetable seeds in the world.
The corporate headquarters of the Company are located at 9255 Customhouse Plaza, Suite I, San Diego, California 92154, and the telephone number is (609) 744-8105.
2002 Year-End Financial Position
Bionova Holding’s balance sheet at December 31, 2002 reflected that the Company was in a position of technical insolvency, as its current assets of $36.1 million fell far short of its current liabilities of $122.7 million. The Company’s fresh produce subsidiaries owed $9.8 million to banks, all of which is secured by assets of the fresh produce subsidiaries and guaranteed by Bionova Holding and Savia. At December 31, 2002 Bionova Holding and its subsidiaries were indebted to Savia and its subsidiaries (other than Bionova Holding) in a total amount of $96.9 million. Of this total $19.8 million was owed by ABSA and is accruing interest at a rate of approximately 9% per annum. Bionova Holding had debt of $72.2 million to Savia. The Bionova Holding debt currently is accruing interest at a rate of approximately 12.5% per annum. Other subsidiaries of Bionova Holding had related party accounts due to Savia and its subsidiaries that accounted for the remaining balance of $4.9 million. All of the Bionova Holding debt originally was due to be paid by December 31, 2002, but was extended by agreement between Bionova Holding and Savia until December 31, 2003. The other related party accounts due to Savia and its subsidiaries have varying maturities, and most of these are due at various times in 2003. At this time, Bionova Holding does not know how this indebtedness will be handled.
Near-Term Financial and Business Outlook
In December 2002, Bionova Produce, Inc., Bionova Produce of Texas, Inc. and R.B. Packing of California, Inc., the Company’s major distributors of fresh produce in the United States, entered into a new set of credit facilities with Wells Fargo Business Credit, Inc. which run through April 2006. Included in these credit facilities is (i) a “permanent term loan” of $1.75 million, which will be amortized over 10 years, (ii) a “seasonal term loan” of $1.75 million, although only $1.25 million has been extended at this time, and (iii) a $7 million revolving line of credit to support working capital requirements of the fresh produce business. The outstanding principal balance on the seasonal term loan is amortized each year during the months of January through April, and may then be borrowed again in full on May 1 provided no default has occurred. All of the credit facilities are secured by all of the real and intangible assets of the three U.S. distributing companies and are guaranteed by both Bionova Holding and Savia. Various covenants and events of default are specified, including an event of default if Savia fails to complete the restructuring of its debt facilities with its banks by March 31, 2003. As of the date of the filing of this 10-K, the Company believes it is in compliance with all of the covenants of these facilities with the exception of the Savia covenant. While Savia believes it now has reached a verbal understanding with its creditors and expects to move ahead with the corresponding documentation to solidify an agreement, the restructuring is not yet complete. Bionova Holding is in discussions with Wells Fargo Business Credit in an effort to reach an accommodation on this issue.
Due to the lengthy negotiation required to obtain these new credit facilities, the Company’s U.S. distributing companies were forced to scale back their plans to fund certain third party growers for the 2002-2003 winter growing season. As a result of these cutbacks, ABSA and the U.S. distributing companies had been expecting their revenues for the fourth quarter of 2002 and the first quarter of 2003 to be lower than comparable periods in prior years. Further, ABSA concentrated a much higher proportion of its production on its vine sweet mini pepper due to the limited financial resources that were available. ABSA subsequently experienced yield problems due to pest infestation of its mini pepper crop in Todos Santos in late December 2002, causing the harvest to be significantly lower than had been forecast. While commodity prices were much higher than anticipated for tomatoes and some of the other fresh produce ABSA harvested in the months of November 2002 through January 2003 in Todos Santos, these higher prices served to offset only a portion of the loss realized on the mini pepper crop. The Culiacan harvest, which will end in April 2003, is progressing well from a production standpoint, but revenues are running somewhat below forecasted.
These events have put an ever-increasing strain on the Company’s cash resources and its ability going forward to fund the spring and summer harvests for which it is currently planning. Management has been and is continuing to address the Company’s financial condition by selling non-core assets of the fresh produce business and
4
selling and licensing its intellectual property. Company management also has been entertaining discussions with investment bankers and other advisors regarding possible strategic combinations and other options for the Company to undertake a financial re-structuring. Completing one or more such transactions is now deemed essential for the Company to continue as a going concern.
There can be no assurance that these actions will result in sufficient working capital to significantly improve the Company’s current financial position or its results of operations. The Company also must find a solution to the $96.9 million of debt plus the interest which is accruing that is due to Savia and its subsidiaries during 2003. While the Company is actively seeking to develop alternative sources of funding, there can be no assurance the Company will be able to meet its obligations in 2003 nor secure funds to take it beyond the 2003 calendar year. Additional financing may not be available to the Company on favorable terms, if at all. If the Company is unable to obtain financing, or to obtain it on acceptable terms, Bionova Holding may be unable to execute its business plan.
Financial information relating to each of the Company’s industry segments is set forth in Note 21 to the Company’s consolidated financial statements contained in this report. Financial information relating to foreign and domestic operations and export sales also is set forth in Note 21 to the Company’s consolidated financial statements.
For operating and financial reporting purposes, Bionova Holding Corporation (together with its subsidiaries, unless the context requires otherwise, “Bionova Holding” or the “Company”) historically has classified its business into three fundamental areas: (1) Farming, which consists principally of interests in 100% Company-owned fresh produce production facilities and joint ventures or contract growing arrangements with other growers in Mexico; (2) Distribution, consisting principally of interests in sales and distribution companies in the United States, and Canada; and (3) Research and Development (or Technology), which until its shut down in June 2002 consisted of business units focused on the development of fruits and vegetables and intellectual properties associated with these development efforts.
ABSA is a leading grower of fresh produce in Mexico, primarily tomatoes and peppers, and, to a lesser extent, cucumbers, grapes and other fruits and vegetables. Most of ABSA’s farming operations are located in the Mexican states of Sinaloa, Sonora and Baja California. Advanced technology is used to ensure consistent quality and yields, including special hybrid varieties, integrated pest management control, and computerized drip irrigation. ABSA’s produce is distributed in the United States, Mexico and Canada under the “Master’s Touch” and “Showcase” brands as well as other labels, depending on produce grades.
ABSA’s supply derives from (i) produce grown on land owned or leased by ABSA, (ii) produce grown by producers with whom ABSA enters into a financing and distribution contract and (iii) produce grown by producers with whom ABSA enters into both a production association agreement and a distribution contract. When ABSA enters into a financing and distribution contract only, it agrees to provide the grower limited financial assistance for harvesting and/or packing in exchange for exclusive distribution rights. When ABSA enters into a production association agreement, ABSA finances up to 50% of the production cost in a co-production contract with the grower. ABSA provides technical support and agrees to handle the packing and distribution. Net proceeds are shared according to the terms of the association agreement after ABSA recoups its investment. Historically, ABSA had financed up to 100% of the production cost in a joint venture contract with the grower. ABSA discontinued this practice entirely in 2001.
In 2002, approximately 66% of ABSA’s supply came from land owned or leased by ABSA. ABSA owns approximately 4,764 acres in Sinaloa, Sonora, Baja California Sur, Michoacan, and several other states in Mexico. ABSA leases approximately 1,474 acres in Baja California. During 2002, 34% of production supplied by ABSA was sourced through production associations with growers and through distribution contracts.
In 2002, approximately 68% of ABSA’s sales were tomatoes, 17% were peppers, 3% were cucumbers, 6% were grapes, 5% were the vine sweet mini pepper, and the remaining 1% was mixed vegetables. In 2001 and 2000,
5
respectively, ABSA’s sales were allocated approximately as follows: tomatoes – 63% and 60%, peppers – 20% and 19%, cucumbers – 7% and 5%, and grapes, melons and mixed vegetables – 10% and 16%.
In 2002, 2001, and 2000, the Farming segment suffered operating losses of $9.2 million, $13.4 million, and $12.7 million, respectively. Of the $13.4 million operating loss in this segment of the business in 2001, $8.6 million was attributable to the write off of all of the goodwill previously on the balance sheet of ABSA.
The Company’s marketing and distribution activities are carried out by both national and regional distributors. The Company’s national distributors in the United States are Bionova Produce, Inc., R.B. Packing of California, Inc. and Bionova Produce of Texas, Inc., each of which is a wholly-owned subsidiary of IPHC, and are referred to collectively as “Bionova Produce.” Interfruver, S.A. de C.V., which until November of 2001 had been majority owned by ABSA until ABSA’s entire interest was sold to the minority owners of Interfruver, had served as the Company’s distributor in Mexico. As a condition of the contract of sale, Interfruver has agreed to continue distributing produce supplied by ABSA. The Company’s regional distributors are Premier Fruits and Vegetables BBL Inc. in Montreal, Quebec (“Premier”) and Premier Fruits and Vegetables (USA), Inc. in Philadelphia, Pennsylvania.
National Distributors
Bionova Produce, Inc., Bionova Produce of Texas, Inc. and R.B. Packing of California, Inc. collectively had revenues of $65.4 million in 2002. The majority of these sales were made by Bionova Produce, Inc., which is located in Nogales, Arizona, a major point of entry for Mexican produce into the United States, and the majority of the produce distributed by Bionova Produce, Inc. is provided by ABSA (including produce grown by ABSA and produce grown by growers with whom ABSA enters into production association contracts). No single customer accounted for more than 10% of Bionova Produce, Inc.’s sales in 2002. In 2002, Bionova Produce, Inc.’s sales were 63% to supermarkets, 25% to wholesalers and 12% to brokers. Its main selling season is December through May.
R.B. Packing of California, Inc. is located in San Diego, California and the majority of the produce it distributes is grown in California and the Mexican states of Baja California Norte and Baja California Sur. In 2002, its sales were 46% to supermarkets, 35% to wholesalers, and 19% to brokers. Its main selling season is July through November. Bionova Produce of Texas, Inc. is a distributor located in McAllen, Texas that distributes produce grown in Mexico and currently is concentrating on the importation and distribution of papaya, melons and hothouse tomatoes.
Regional Distributors
Premier Fruits & Vegetables, BBL Inc. which is an 80%-owned subsidiary of IPHC, had revenues of U.S. $52.4 million in 2002. Premier distributes produce throughout eastern Canada, and its sales were approximately 70% to supermarkets, and the remaining 30% went to independent retailers, wholesalers, and brokers in 2002.
Premier Fruits and Vegetables (USA), Inc., an 80%-owned subsidiary of IPHC, was formed in February, 2000 to market tomatoes and other vegetables, including the Company’s branded line of cherry tomatoes and peppers, in the eastern United States. Premier Fruits and Vegetables (USA), Inc. sources its products through and operates under the direction of Premier in Canada.
In 2002 the Distribution segment (including national and regional distributors) generated an operating profit of $1.3 million. In 2001 and 2000 the Distribution segment incurred operating losses of $5.9 million and $2.1 million, respectively. Significantly impacting the operating loss in 2001 was a $5.7 million charge for the impairment of all of the goodwill in this segment of the business along with losses recorded on the sales of Tanimura Distributing, Inc. and Interfruver of $0.4 million and $5.0 million, respectively.
The Company’s research and development activities had been carried out by DNAP, a wholly owned subsidiary acquired in September 1996. The mission of DNAP was to develop and commercialize genetic crop
6
protection solutions for specialty crops, including the major vegetables and fruits, such as strawberry, grape, banana, and pineapple.
In 2002 the Company spent approximately $1.4 million and $0.6 million on Company and customer-sponsored research and development activities prior to the shut down of these activities in June 2002. Since June 2002, DNAP has been seeking to sell or license its patents and other intellectual property.
For further information, see “Note 21 of Item 8. Financial Statements and Supplementary Data,” which sets forth certain information with respect to the Company’s segments and operations in different geographic areas.
The Company uses trade secret protection for certain of IPHC’s distribution companies which market produce under the Master’s Touch and Showcase brand names. ABSA and Bionova Produce, Inc. have registered the Master’s Touch name as a trademark in Mexico and the United States, respectively. Bionova Mexico has registered the Master’s Touch name as a trademark in the Benelux countries, the European Community, Canada, Hong Kong, Indonesia, South Korea, Japan, Sweden and the United Kingdom.
DNAP holds a U.S. patent and patents in a number of foreign countries on its vine sweet mini pepper. In 2002 DNAP extended to Seminis a non-exclusive license to produce on a worldwide basis, and an exclusive license to sell the vine sweet mini pepper in Europe and Asia.
Though the fresh produce industry in general, and the tomato industry in particular, are characterized by numerous competitors and low barriers to entry at the production level, Bionova Holding believes that a small group of participants distributes a substantial portion of the tomatoes sold in the United States. In the United States, the Company competes directly with the larger tomato and pepper growers in Florida during the winter, and in California in the summer and fall. Both the Mexican and the U.S. tomato industries are characterized by numerous competitors. Major Florida growers include Six L’s, DiMare, Pacific Tomatoes Growers and NTGargiulo. The major growers in California include DiMare, NTGargiulo, Live Oak, Pacific Tomatoes Growers, Ocean Side, Giumarra Brothers, and Central Tomato.
The Company and its subsidiaries have a total of 211 employees.
ABSA has no employees. Siembra provides labor and administrative services to ABSA pursuant to a contractual agreement, and ABSA pays a fee to Siembra based on Siembra’s costs incurred in connection with providing such services. The number of persons providing such services through Siembra to ABSA ranges from a minimum of 1,179 to a maximum during the Culiacan harvesting season (January-April) of approximately 2,098. The 60 employees of Siembra that are full-time are not unionized. All of the other Siembra employees are temporary workers, and they are represented by a labor union. No other employees in Bionova Holding are represented by a union.
The labor union contracts for the temporary employees are reviewed on an annual basis. Both the union and ABSA may terminate the contract at any time upon 60 days notice to the other party.
Approximately 78.9% of the outstanding shares of common stock of the Company are owned of record by Ag-Biotech Capital, LLC, a wholly-owned subsidiary of Savia. Savia has the power to elect a majority of the Company’s board of directors and to determine the outcome of any action requiring the approval of the holders of the Company’s common stock. This ownership and management structure will inhibit the taking of any action by the Company which is not acceptable to the controlling stockholder.
7
Certain of the Company’s directors and executive officers are also currently serving as board members or executive officers of Savia or companies related to Savia, and it is expected that each will continue to do so. Such management interrelationships and intercorporate relationships may lead to possible conflicts of interest.
The Company and other entities that may be deemed to be controlled by or affiliated with Savia sometimes engage in (i) intercorporate transactions such as guarantees, management and expense sharing arrangements, shared fee arrangements, joint ventures, partnerships, loans, options, advances of funds on open account and sales, leases and exchanges of assets, including securities issued by both related and unrelated parties and (ii) common investment and acquisition strategies, business combinations, reorganizations, recapitalizations, securities repurchases and purchases and sales (and other acquisitions and dispositions) of subsidiaries, divisions or other business units, which transactions have involved both related and unrelated parties. The Company continuously considers, reviews and evaluates, and understands that Savia and related entities consider, review and evaluate transactions of the type described above. Depending upon the business, tax and other objectives then relevant, it is possible that the Company might be a party to one or more of such transactions in the future in addition to those currently in force. In connection with these activities the Company might consider issuing additional equity securities or incurring additional indebtedness. The Company’s acquisition activities may in the future include participation in the acquisition or restructuring activities conducted by other companies that may be deemed to be controlled by Savia.
ABSA owns approximately 4,764 acres in Sinaloa, Sonora, Baja California Sur, Michoacan, and several other states in Mexico. ABSA leases approximately 1,474 acres of land in Baja California. ABSA currently is trying to sell 146 acres of the land it owns in Sinaloa as this land is no longer considered important to the ongoing operations of its business. ABSA also is trying to settle a mortgage obligation with a Mexican bank by exchanging the land in Michoacan for a release from this mortgage obligation. (See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations” below.) Some of ABSA’s land is the subject of a legal dispute. (See “Legal Proceedings” below.)
Bionova Produce, Inc. owns warehouse and office space in Nogales, Arizona. The other subsidiaries of IPHC lease office and warehouse space.
On January 7, 1999, a class action lawsuit styled Gordon K. Aaron et al. v. Empresas la Moderna, S.A. de C.V., et al. was filed in the U.S. federal district court for the Northern District of California. On January 28, 1999, a substantially identical class action lawsuit styled Robert Kaczak v. Empresas la Moderna, S.A. de C.V., et al. was filed in the U.S. federal district court for the Northern District of California, and these two cases were then consolidated. The plaintiffs allege that, prior to the Merger of DNAP with a subsidiary of Bionova Holding on September 26, 1996, they owned shares of DNAP’s Preferred Stock. In connection with the Merger, all of the shares of common stock and Preferred Stock of DNAP were converted into the number of shares of common stock of Bionova Holding specified in the Merger Agreement. The plaintiffs allege that the Proxy Statement/Prospectus distributed to DNAP’s stockholders in connection with the merger contained material misrepresentations and omitted to state material facts. Both DNAP and Bionova Holding, as well as certain former and current directors of DNAP and Bionova Holding, have been named as defendants in this matter. The plaintiffs claim to have been damaged by the alleged actions of the defendants and therefore the plaintiffs seek unspecified actual damages, reimbursement of their litigation costs and expenses, and equitable relief, including rescission of the Merger. The plaintiffs also allege that they were entitled to receive, and seek specific performance of, special conversion privileges under the terms of the Certificate of Designation that established the Preferred Stock. On March 8, 2000, the court dismissed nearly all of the plaintiffs’ claims, and subsequently the plaintiffs filed an amended complaint with respect to some of the dismissed claims. On September 19, 2000, the court ruled in favor of Bionova Holding and DNAP and dismissed all of the plaintiffs’ claims. The plaintiffs appealed this judgment to the U.S. Court of Appeals for the Ninth Circuit, which heard arguments on the matter on February 12, 2002. On September 13, 2002, the Ninth Circuit affirmed the dismissal of some of the claims, including all of the claims against DNAP, and reversed the dismissal of others. The remaining claims have been remanded to the trial court for further proceedings. Bionova Holding and DNAP deny any wrongdoing and liability in this matter and intend to vigorously contest the remaining claims in this lawsuit..
8
DNAP has been named as a defendant in several lawsuits asserting claims against DNAP relating to research DNAP performed from 1983 through 1994 for Brown & Williamson Tobacco Company (“B&W”). In general, the cases allege that DNAP engaged in unfair business practices under California law and/or participated in an alleged conspiracy among cigarette manufacturers to deceive the public regarding the hazards of smoking. All of the pending cases are in California state courts. In December 1999, B&W agreed to indemnify DNAP against all costs (including costs of defense and of costs of any judgment or settlement) incurred by DNAP in connection with these cases and any similar cases in the future. Therefore, management no longer believes that these cases could have a material adverse effect on the Company’s financial condition or results of operations. DNAP denies any wrongdoing or liability in these matters and intends to vigorously contest these lawsuits.
ABSA owns one hundred hectares (approximately 247 acres) of rural land in the State of Sinaloa, Mexico, which is the subject of a judicial proceeding pending in Mexico initiated by a group of campesinos. The petitioners asserted that a previous owner of the subject land, Miguel Angel Suárez, owned rural land in excess of the maximum that was then allowed by law and that therefore the land rightfully belonged to them. On September 25, 1996, the court upheld the petition and ordered the land turned over to the petitioners. The court also ruled that the transfer of the property to Olga Elena Batiz Esquer on June 2, 1990 was null and void, which would mean that the transfer of the land by Ms. Batiz to ABSA in 1993 was ineffective. On October 23, 1996, Ms. Batiz, who was a party to the trial court proceeding, filed a challenge to the judicial determination based on alleged violations of her constitutional rights and procedural and substantive errors in the trial court proceedings. In the Fall of 2002, the Court ruled in favor of Ms. Batiz.
On June 16, 2000, a lawsuit styled Santa Cruz Empacadora, S. de R.L. de C.V., v. R.B. Packing of California, Inc. was filed in the United States District Court for the Southern District of California. R.B. Packing of California, Inc., a subsidiary of Bionova Holding, had been the United States distributor of fresh produce sold by the plaintiff. The plaintiff alleges that R.B. Packing of California, Inc. sold Santa Cruz produce to related companies at below market prices and thereby engaged in unfair conduct, fraud and breach of statutory and fiduciary duties. The plaintiff seeks an unspecified amount of compensatory and punitive damages. R.B. Packing of California, Inc. denies any wrongdoing or liability in this matter and intends to vigorously contest this lawsuit.
In 2000, ABSA filed a lawsuit against Santa Cruz Empacadora, S. de R.L. de C.V., in the Civil Court for the First Judicial District of the State of Nuevo Leon, Mexico. In this proceeding ABSA is seeking to enforce an agreement dated December 31, 1999 in which Santa Cruz Empacadora expressly acknowledged its debt to ABSA and granted a security interest in land and equipment to ABSA to secure the debt. ABSA is seeking to recover $10.1 million in principal and interest and to compel Santa Cruz to comply with the terms of the Agreement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
9
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company’s Common Stock currently is quoted on the American Stock Exchange under the symbol “BVA.”
Public trading of the Company’s Common Stock commenced on September 27, 1996, the date after the Company acquired DNAP and from that date through November 3, 1999 was listed on the Nasdaq National Market. Prior to that date, there was no public market for the Common Stock. On November 4, 1999 Bionova Holding Corporation’s common stock began trading on the American Stock Exchange.
The following table sets forth the high and low trading prices per share for the Common Stock as reported on the American Stock Exchange for the periods indicated.
|
|
|
HIGH |
|
LOW |
|
||
|
2002 |
|
|
|
|
|
||
|
First Quarter |
|
$ |
0.92 |
|
$ |
0.25 |
|
|
Second Quarter |
|
0.84 |
|
0.35 |
|
||
|
Third Quarter |
|
0.58 |
|
0.26 |
|
||
|
Fourth Quarter |
|
0.39 |
|
0.10 |
|
||
|
|
|
|
|
|
|
||
|
2001 |
|
|
|
|
|
||
|
First Quarter |
|
$ |
2.188 |
|
$ |
1.100 |
|
|
Second Quarter |
|
1.600 |
|
1.060 |
|
||
|
Third Quarter |
|
1.400 |
|
0.400 |
|
||
|
Fourth Quarter |
|
0.750 |
|
0.100 |
|
||
On April 8, 2003 the last reported sale price of the Common Stock on the American Stock Exchange was $0.20. As of March 18, 2003 there were 1,534 shareholders of record of the Common Stock.
The Company has never paid cash dividends. Management intends to retain any future earnings for payment of outstanding indebtedness and for the operation and expansion of the Company’s business and does not anticipate paying any cash dividends in the foreseeable future.
10
The following table represents the Company’s equity compensation plans, including both stockholder approved plans and stockholder plans not approved by shareholders.
|
Plan Category |
|
Number of
Securities |
|
Weighted-average |
|
Number of
Securities |
|
|
|
Equity
Compensation Plans Approved |
|
141,000 |
|
$ |
6.68 |
|
1,872,200 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Compensation Plans Not Approved |
|
None |
|
— |
|
None |
|
|
11
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for each of the years in the five year period ended December 31, 2002, are derived from the audited consolidated financial statements of Bionova Holding. The consolidated balance sheets as of December 31, 2002 and 2001, and the consolidated statements of operations for the three years in the period ended December 31, 2002, are derived from the audited consolidated financial statements and are included in “Item 8. Financial Statements and Supplementary Data” in this Form 10-K, and the selected consolidated financial information set forth below should be read in conjunction with such financial statements and related notes and with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Income and expense items in the following consolidated statement of operations data reflect only those from continuing operations for the years ended December 31, 2002, 2001, 2000, 1999, and 1998. The total assets in the consolidated balance sheet data exclude the net assets associated with the discontinued operations of the research and development segment for 2002 and 2001 only.
Thousands of U.S. Dollars
(except per share amounts)
CONSOLIDATED STATEMENT OF OPERATIONS DATA
|
|
|
Year Ending December 31, |
|
|||||||||||||
|
|
|
2002 |
|
2001 |
|
2000 |
|
1999 |
|
1998 |
|
|||||
|
|
|
|
||||||||||||||