10-Q/A 1 a10-qa.txt 10-Q/A U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------------------- FORM 10-Q/A AMENDMENT NO. 1 (Mark One) /X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2000 / / Transition report pursuant to Section 13 or 15(d) of the Exchange Act. For the transition period from ___________ to ___________ Commission File Number: 0-21975 ECO SOIL SYSTEMS, INC. (Exact Name of Registrant as Specified in its Charter) NEBRASKA 47-0709577 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 10740 THORNMINT ROAD SAN DIEGO, CALIFORNIA 92127 (Address, Including Zip Code, of Principal Executive Offices) (858) 675-1660 (Registrant's Telephone Number, Including Area Code) Check 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 past 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 X NO --- --- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of August 4, 2000, 18,704,535 shares of the Registrant's Common Stock, $.005 par value per share, were outstanding. INDEX ECO SOIL SYSTEMS, INC. FORM 10-Q/A The registrant hereby amends its Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 to (a) correct certain typographical and EDGAR conversion errors in the Unaudited Consolidated Statement of Operations, Unaudited Consolidated Statement of Cash Flows and Unaudited Pro-Forma Consolidated Statement of Operations and (b) correct typographical errors contained in the financial data schedule attached as Exhibit 27.1 thereto. In accordance with the instructions for Form 10-Q, Item 1 is included herein in its entirety and a revised financial data schedule is attached as Exhibit 27.1. No other changes have been made to the Quarterly Report on Form 10-Q for the period ended June 30, 2000.

2 ECO SOIL SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

See accompanying notes. Note: The Balance Sheet at December 31, 1999 is derived from the audited financial statements at that date, but does not include all of the disclosures required by generally accepted accounting principles. 3 ECO SOIL SYSTEMS, INC. UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See accompanying notes. 4 ECO SOIL SYSTEMS, INC. UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS)

See accompanying notes. 5 ECO SOIL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Eco Soil Systems, Inc. (the "Company"), all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the results for the three-month periods ended June 30, 2000 and 1999 have been made. The results of operations for the three-month and six-month periods ended June 30, 2000 are not necessarily indicative of the results to be expected for the full fiscal year. For further information, refer to the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. 2. NET LOSS PER SHARE In accordance with Financial Accounting Standards Board Statement No. 128, "Earnings per share" ("SFAS 128"), basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of the Company such as common stock which may be issuable upon exercise of outstanding stock options and warrants. These shares are excluded when their effects are antidilutive. 3. DISCONTINUED OPERATIONS On July 28, 2000, the Company completed the sale of substantially all of the assets of its Turf Partners subsidiary (the "Asset Sale") to the J.R. Simplot Company ("Simplot"). At the closing of the Asset Sale, Simplot made a cash payment of $23 million and assumed Turf Partners' exiting long-term debt and vendor payables totaling $38.5 million. Simplot also assumed Turf Partners' outstanding contracts and leases. The Asset Sale was consummated pursuant to an Amended and Restated Asset Purchase Agreement dated April 5, 2000, as amended by a First Amendment to Amended and Restated Asset Purchase Agreement dated June 9, 2000. 6 The results of the unaudited discontinued operations (in thousands) were as follows:

For the periods presented, the Company borrowed funds from institutional lenders and accredited investors to provide working capital for the parent company and its subsidiaries. The interest expense associated with this debt was originally recorded by the parent company, but a portion of interest expense associate with this debt has been allocated to the discontinued operations noted above. Interest expense allocated to the discontinued operations totaled $730,000 and $330,000 for the three months ended June 30, 2000 and 1999, respectively, and $1.5 million and $621,000 for the six months ended June 30, 2000 and 1999, respectively. Also, selling, general and administrative expenses that were recorded by the parent company but were specifically an expense of the discontinued operations have been allocated to the discontinued operations as shown above. The amount of selling, general and administrative expenses allocated by the parent company to the discontinued operations totaled $728,000 and $126,000 for the three months ended June 30, 2000 and 1999, respectively, and $1.3 million and $622,000 for the six months ended June 30, 2000 and 1999, respectively. The historical consolidated balance sheets reflect the assets and liabilities of discontinued operations as current or non-current assets based on the original classification of the accounts, except that current liabilities are netted against current assets and non-current liabilities are netted against non-current assets. The following pro forma financial statements reflect the Asset Sale as if the sale to Simplot was completed on June 30, 2000. Also, this information should be read in conjunction with the financial statements and notes thereto included in Item 1 of this report for the quarter ended June 30, 2000. The following pro forma adjustments have been recorded to the historical financial statements: (i) an adjustment of $749,000 to reflect shipments to Turf Partners from the parent company as if they were independent companies as of June 30, 2000, (ii) the recognition of a gain on the sale of the discontinued operations of $17.8 million, (iii) the application of $23 million of proceeds from the Asset Sale as follows: (a) retired $14 million of the $15 million Senior Subordinated Notes, (b) repaid the Simplot Term Loan of $3 million received in July 2000, and (c) paid $1.1 million in closing fees, and (iv) a $3.9 million write-off of debt issuance costs related to the Senior Subordinated Notes. 7 UNAUDITED PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

8 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE AMOUNTS) ASSETS

9 4. RESTRUCTURING CHARGES During the second quarter, the Company incurred a restructuring charge of $1.1 million as a result of the closure of five operating locations of the Agricultural Supply subsidiary located in the United States and Mexico. A total of 25 employees were terminated from these locations, with almost all of them having left the Company as of June 30, 2000. The remaining accrued liabilities associated with these operations are expected to be recognized during the second half of fiscal 2000. Details of the restructuring charge (in thousands) are as follows:

The following is a summary of revenue and net operating losses (in thousands) for the locations that were closed:

10 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. Exhibits: 10.1 (2) Amended and Restated Asset Purchase Agreement dated April 5, 2000 by and among the Company, Turf Partners, Inc. and J.R. Simplot Company. 10.2 (3) Term Loan Agreement dated as of April 12, 2000 among Turf Partners, Inc. and Eco Soil Systems, Inc. and J.R. Simplot Company. 10.3 (1) Amendment No. 3 to Loan and Security Agreement, dated as of April 14, 2000 among Turf Partners, Inc. and Coast Business Credit. 10.4 (3) Amendment No. 4 to Loan and Security Agreement, dated as of May 4, 2000 among Turf Partners, Inc. and Coast Business Credit. 10.5 (4) First Amendment to Amended and Restated Asset Purchase Agreement dated June 9, 2000 by and among the Company, Turf Partners, Inc. and J.R. Simplot Company. 10.6 (1) Amendment No. 6 to Note and Warrant Purchase Agreement, dated as of July 28, 2000 among the Company, Albion Alliance Mezzanine Fund, L.P. and Paribas Capital Funding LLC. 10.7 (1) Amended Senior Subordinated Note due January 28, 2002, dated as of July 28, 2000 among the Company and Paribas Capital Funding LLC. 10.8 (1) Amended and Restated Common Stock Purchase Warrant expiring August 25, 2005 in favor of Paribas Capital Funding LLC. 10.9 (1) Amended Senior Subordinated Note due January 28, 2002, dated as of July 28, 2000 among the Company and Albion Alliance Mezzanine Fund, L.P. 10.10(1) Amended and Restated Common Stock Purchase Warrant expiring August 25, 2005 in favor of Albion Alliance Mezzanine Fund, L.P. 10.11(1) Stock Purchase Warrant, dated as of June 23, 2000, issued to the investors listed in Schedule 1 attached thereto. 10.12(1) Stock Purchase Warrant, dated as of June 23, 2000, issued to the investors listed in Schedule 1 attached thereto. 10.13(1) Distribution and License Agreement dated July 28, 2000 between J.R. Simplot Company and the Company. 27.1(1) Financial Data Schedule -------------------------------------------------------------------------------- (1) Filed herewith. (2) Incorporated by reference to the Company's Annual Report on Form 10-K (File No. 001-21975) filed with the Commission on April 14, 2000. (3) Incorporated by reference to the Company's Periodic Report on Form 10-Q (File No. 001-21975) filed with the Commission on May 15, 2000. (4) Incorporated by reference to the Company's Current Report on Form 8-K (File No. 001-21975) filed with the Commission on June 19, 2000. (b) REPORTS ON FORM 8-K The Company filed a Current Report on Form 8-K (File No. 001-21975) under Item 5 thereof on June 19, 2000, relating to the First Amendment to Amended and Restated Asset Purchase Agreement dated as of April 5, 2000, by and among the Company and the J.R. Simplot Company. 23 SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Eco Soil Systems, Inc. Date: August 16, 2000 By: /s/ WILLIAM B. ADAMS -------------------- William B. Adams Chairman and Chief Executive Officer Date: August 16, 2000 By: /s/ DENNIS N. SENTZ ------------------- Dennis N. Sentz Chief Financial Officer (Principal financial officer and Principal accounting officer)

ECO SOIL SYSTEMS INC 10-Q/A