Filed Pursuant to Rule 424(b)(3)
Reg. No. 333-95531
PROSPECTUS
2,562,503 SHARES
LANDEC CORPORATION
COMMON STOCK
---------------------
This prospectus is part of a registration statement that covers 2,562,503
shares of our common stock. These shares of common stock may be offered and sold
from time to time by our stockholders. The selling stockholders may sell the
common stock from time to time on the Nasdaq National Market in regular
brokerage transactions, in transactions directly with market makers or in
privately negotiated transactions. The selling stockholders and any
underwriters, dealers or agents who participate in the distribution of the
common stock may be deemed to be "underwriters" under the Securities Act of
1933. See "Plan of Distribution."
We will not receive any proceeds from the sale of the common stock by the
selling stockholders. We will bear the costs and expenses of registering the
common stock offered by the selling stockholders. Selling commissions, brokerage
fees and any applicable stock transfer taxes are payable by the selling
stockholders.
Our common stock is traded on the Nasdaq National Market under the symbol
"LNDC." On May 10, 2000, the last sale price of Landec's common stock on the
Nasdaq National Market was $5.625 per share.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
You should rely only on the information contained or incorporated by
reference in this prospectus and in any accompanying prospectus supplement. No
one has been authorized to provide you with different information.
The date of this Prospectus is May 17, 2000
THE COMPANY
Landec and its subsidiaries design, develop, manufacture and sell
temperature-activated and other specialty polymer products for a variety of food
products, agricultural products, specialty industrial and medical applications.
This proprietary polymer technology is the foundation, and a key differentiating
advantage, upon which Landec has built its business.
Landec's Food Products Technology business, operated through its wholly
owned subsidiary Apio, Inc., combines Landec's proprietary food packaging
technology with the capabilities of a large national food supplier and
value-added produce processor. This combination was consummated in
December 1999 when we acquired Apio, Inc. and its related entities (collectively
"Apio").
Landec's Agricultural Seed Technology business, operated through its wholly
owned subsidiary Intellicoat Corporation combines Landec's proprietary seed
coating technology with a unique Fielder's Choice Direct system of selling
called eDC--e-commerce, direct marketing and consultative sales. In September
1997, Intellicoat acquired Fielder's Choice, a direct marketer of hybrid corn
seed.
In addition to its two core businesses, Landec also operates a Technology
Licensing/Research and Development Business which licenses products outside of
Landec's core businesses to industry leaders such as Alcon Laboratories, Inc.
and Hitachi Chemicals. It also engages in research and development activities
with companies such as ConvaTec, a division of Bristol Myers Squibb.
To support the polymer manufacturing needs of the core businesses, Landec
has developed and acquired lab scale and pilot plant capabilities in Menlo Park,
California and scale-up and commercial manufacturing capabilities at its Dock
Resins Corporation subsidiary in Linden, New Jersey. In April 1997, Landec
acquired Dock Resins, a manufacturer and marketer of specialty acrylic and other
polymers. In addition to providing manufacturing capabilities, Dock Resins sells
industrial specialty products under the Doresco-TM- trademark which are used by
more than 300 customers throughout the United States in the coatings, printing
inks, laminating and adhesives markets.
Landec's core polymer products are based on its patented proprietary
Intelimer-Registered Trademark- polymers, which differ from other polymers in
that they can be customized to abruptly change their physical characteristics
when heated or cooled through a pre-set temperature switch. For instance,
Intelimer polymers can change within the space of one or two degrees Celsius
from a slick, non-adhesive state to a highly tacky, adhesive state; from an
impermeable state to a highly permeable state; or from a solid state to a
viscous state. These abrupt changes are repeatedly reversible and can be
tailored by Landec to occur at specific temperatures, offering substantial
competitive advantages in Landec's target markets.
Landec was incorporated in California on October 31, 1986. Landec completed
its initial public offering in 1996 and is listed on the Nasdaq National Market
under the symbol "LNDC." Our principal executive offices are located at
3603 Haven Avenue, Menlo Park, California 94025 and our telephone number is
(650) 306-1650.
2
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Landec's business and financial condition have been, and in the future may be,
affected by the factors we describe below or those incorporated by reference in
this prospectus.
WE HAVE A HISTORY OF LOSSES WHICH MAY CONTINUE
Landec has incurred net losses in each fiscal year since its inception,
including a net loss of $2.8 million for fiscal year 1999 and a net loss of
$2.7 million for the three months ended January 30, 2000. Landec's accumulated
deficit as of January 30, 2000 totaled $48.3 million. Landec may incur
additional losses in the future. The amount of future net profits, if any, is
highly uncertain and there can be no assurance that Landec will be able to reach
or sustain profitability for an entire fiscal year.
OUR SUBSTANTIAL INDEBTEDNESS COULD LIMIT OUR FINANCIAL AND OPERATING FLEXIBILITY
At January 30, 2000, Landec's total debt, including current maturities and
capital lease obligations, was approximately $26.7 million and the total debt to
equity ratio was approximately 53%. This level of indebtedness could have
significant consequences because:
- a substantial portion of Landec's net cash flow from operations must be
dedicated to debt service and will not be available for other purposes;
- Landec's ability to obtain additional debt financing in the future for
working capital, capital expenditures or acquisitions may be limited; and
- Landec's level of indebtedness may limit its flexibility in reacting to
changes in the industry and economic conditions generally.
In connection with the Apio acquisition, Landec may be obligated to make
future payments to the former stockholders of Apio of up to $16.75 million. See
"Selling Stockholders."
Landec's ability to service its indebtedness will depend on its future
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, some of which are beyond Landec's
control. If Landec were unable to service its debt, it would be forced to pursue
one or more alternative strategies such as selling assets, restructuring or
refinancing its indebtedness or seeking additional equity capital, which might
not be successful and which could substantially dilute the ownership interest of
existing shareholders.
In addition, Apio is subject to various financial and operating covenants
under its term debt and line of credit facilities, including minimum levels of
EBITDA, minimum fixed charge coverage ratio, minimum current ratio, minimum
adjusted net worth and maximum leverage ratios. These requirements and ratios
generally become more restrictive over time. The loan agreement limits the
ability of Apio to make cash payments to Landec until the outstanding balance is
reduced to an amount specified in the loan agreement. Landec has pledged
substantially all of Apio's assets to secure its bank debt. Landec's failure to
comply with the obligations under the loan agreement, including maintenance of
financial ratios, could result in an event of default, which, if not cured or
waived, would permit acceleration of the indebtedness due under the loan
agreement.
OUR FUTURE OPERATING RESULTS ARE LIKELY TO FLUCTUATE WHICH MAY CAUSE OUR STOCK
PRICE TO DECLINE
In the past, Landec's results of operations have fluctuated significantly
from quarter to quarter and are expected to continue in the future.
Historically, Landec's direct marketer of hybrid corn seed, Fielder's Choice,
has been the primary source of these fluctuations, as its revenues and profits
are concentrated over a few months during the spring planting season (generally
during Landec's second
3
quarter). In addition, Apio can be heavily affected by seasonal and weather
factors which could impact quarterly results. Landec's earnings in its Food
Products Technology business will be sensitive to price fluctuations in the
fresh vegetables and fruits markets. Excess supplies can cause intense price
competition. Other factors affecting Landec's food and/or agricultural
operations include the seasonality of its supplies, the ability to process
produce during critical harvest periods, the timing and effects of ripening, the
degree of perishability, the effectiveness of worldwide distribution systems,
the terms of various federal and state marketing orders, total worldwide
industry volumes, the seasonality of consumer demand, foreign currency
fluctuations, foreign importation restrictions and foreign political risks. As a
result of these and other factors, Landec expects to continue to experience
fluctuations in quarterly operating results, and there can be no assurance that
Landec will be able to reach or sustain profitability for an entire fiscal year.
WE MAY EXPERIENCE DIFFICULTIES IN INTEGRATING APIO AND OTHER NEW BUSINESS
ACQUISITIONS INTO OUR EXISTING OPERATIONS
Landec's acquisition of Apio involves the integration of Apio's operations
into Landec. The integration will require the dedication of management resources
in order to achieve the anticipated operating efficiencies of the acquisition.
No assurance can be given that difficulties encountered in integrating the
operations of Apio into Landec will be overcome or that the benefits expected
from integration will be realized. The difficulties in combining Apio and
Landec's operations are exacerbated by the necessity of coordinating
geographically separate organizations, integrating personnel with disparate
business backgrounds and combining different corporate cultures. The process of
integrating operations could cause an interruption of, or loss of momentum in,
the activities of the combined company's business.
The successful integration of other new business acquisitions may require
substantial effort from Landec's management. The diversion of the attention of
management and any difficulties encountered in the transition process could have
a material adverse effect on Landec's ability to realize the anticipated
benefits of the acquisitions. The successful combination of new businesses also
requires coordination of research and development activities, manufacturing, and
sales and marketing efforts. In addition, the process of combining organizations
could cause the interruption of, or a loss of momentum in, Landec's activities.
There can be no assurance that Landec will be able to retain key management,
technical, sales and customer support personnel, or that Landec will realize the
anticipated benefits of the acquisitions.
WE MAY NOT BE ABLE TO ACHIEVE ACCEPTANCE OF OUR NEW PRODUCTS IN THE MARKETPLACE
The success of Landec in generating significant sales of its products will
depend in part on the ability of Landec and its partners and licensees to
achieve market acceptance of Landec's new products and technology. The extent to
which, and rate at which, market acceptance and penetration are achieved by
Landec's current and future products are a function of many variables including,
but not limited to, price, safety, efficacy, reliability, conversion costs and
marketing and sales efforts, as well as general economic conditions affecting
purchasing patterns. There can be no assurance that markets for Landec's new
products will develop or that Landec's new products and technology will be
accepted and adopted. The failure of Landec's new products to achieve market
acceptance would have a material adverse effect on Landec's business, results of
operations and financial condition.
There can be no assurance that Landec will be able to successfully develop,
commercialize, achieve market acceptance of or reduce the costs of producing
Landec's new products, or that Landec's competitors will not develop competing
technologies that are less expensive or otherwise superior to those of Landec.
There can be no assurance that Landec will be able to develop and introduce new
products and technologies in a timely manner or that new products and
technologies will gain market acceptance. Landec is in the early stage of
product commercialization of Intellipac breathable
4
membrane, Intellicoat-TM- seed coating and Intelimer polymer systems products
and many of its potential products are in development. In addition, commercial
applications of Landec's temperature switch polymer technology are relatively
new and evolving. Landec believes that its future growth will depend in large
part on its ability to develop and market new products in its target markets and
in new markets. In particular, Landec expects that its ability to compete
effectively with existing food products, agricultural, industrial and medical
companies will depend substantially on successfully developing, commercializing,
achieving market acceptance of and reducing the cost of producing Landec's
products.
WE FACE STRONG COMPETITION IN THE MARKETPLACE
Competitors may succeed in developing alternative technologies and products
that are more effective, easier to use or less expensive than those which have
been or are being developed by Landec or that would render Landec's technology
and products obsolete and non-competitive. Landec operates in highly competitive
and rapidly evolving fields, and new developments are expected to continue at a
rapid pace. Competition from large food products, agricultural, industrial and
medical companies is expected to be intense. In addition, the nature of Landec's
collaborative arrangements may result in its corporate partners and licensees
becoming competitors of Landec. Many of these competitors have substantially
greater financial and technical resources and production and marketing
capabilities than Landec, and may have substantially greater experience in
conducting clinical and field trials, obtaining regulatory approvals and
manufacturing and marketing commercial products.
WE HAVE LIMITED MANUFACTURING EXPERIENCE AND MAY HAVE TO DEPEND ON THIRD PARTIES
TO MANUFACTURE OUR PRODUCTS
Landec may need to consider seeking collaborative arrangements with other
companies to manufacture some of its products. If Landec becomes dependent upon
third parties for the manufacture of its products, then Landec's profit margins
and its ability to develop and deliver those products on a timely basis may be
affected. Failures by third parties may impair Landec's ability to deliver
products on a timely basis, impair Landec's competitive position, or may delay
the submission of products for regulatory approval. In late fiscal 1999, in an
effort to reduce reliance on third party manufacturers, Landec began the set up
of a manufacturing operation at its facility in Menlo Park, California, for the
production of Intellipac breathable membrane products. There can be no assurance
that Landec can successfully operate a manufacturing operation at acceptable
costs, with acceptable yields, and retain adequately trained personnel.
Although Landec believes Dock Resins will provide Landec with practical
knowledge in the scale-up of Intelimer polymer products, production in
commercial-scale quantities may involve technical challenges for Landec. Landec
anticipates that a portion of its products will be manufactured in the Linden,
New Jersey facility acquired in the purchase of Dock Resins. Landec's reliance
on this facility involves a number of potential risks, including the
unavailability of, or interruption in access to, some process technologies and
reduced control over delivery schedules, and low manufacturing yields and high
manufacturing costs.
OUR DEPENDENCE ON SINGLE SUPPLIERS MAY CAUSE DISRUPTION IN OUR OPERATIONS SHOULD
ANY SUPPLIER FAIL TO DELIVER MATERIALS
No assurance can be given that Landec will not experience difficulty in
acquiring materials for the manufacture of its products or that Landec will be
able to obtain substitute vendors, or that Landec will be able to procure
comparable materials or hybrid corn varieties at similar prices and terms within
a reasonable time. Many of the raw materials used in manufacturing Landec's
products are currently purchased from a single source, including some monomers
used to synthesize Intelimer polymers and substrate materials for Landec's
breathable membrane products. In addition, virtually all of the hybrid
5
corn varieties sold by Fielder's Choice are purchased from a single source. Any
interruption of supply could delay product shipments and materially harm our
business.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS
Landec has received, and may in the future receive, from third parties,
including some of its competitors, notices claiming that it is infringing third
party patents or other proprietary rights. If Landec were determined to be
infringing any third-party patent, Landec could be required to pay damages,
alter its products or processes, obtain licenses or cease the infringing
activities. If Landec is required to obtain any licenses, there can be no
assurance that Landec will be able to do so on commercially favorable terms, if
at all. Litigation, which could result in substantial costs to and diversion of
effort by Landec, may also be necessary to enforce any patents issued or
licensed to Landec or to determine the scope and validity of third-party
proprietary rights. Any litigation or interference proceeding, regardless of
outcome, could be expensive and time consuming and could subject Landec to
significant liabilities to third parties, require disputed rights to be licensed
from third parties or require Landec to cease using that technology. Landec's
success depends in large part on its ability to obtain patents, maintain trade
secret protection and operate without infringing on the proprietary rights of
third parties. There can be no assurance that any pending patent applications
will be approved, that Landec will develop additional proprietary products that
are patentable, that any patents issued to Landec will provide Landec with
competitive advantages or will not be challenged by any third parties or that
the patents of others will not prevent the commercialization of products
incorporating Landec's technology. Furthermore, there can be no assurance that
others will not independently develop similar products, duplicate any of
Landec's products or design around Landec's patents.
OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL REGULATIONS THAT DIRECTLY IMPACT OUR
BUSINESS
Federal, state and local regulations impose various environmental controls
on the use, storage, discharge or disposal of toxic, volatile or otherwise
hazardous chemicals and gases used in some of the manufacturing processes,
including those utilized by Dock Resins. As a result of historic off-site
disposal practices, Dock Resins was recently involved in two actions seeking to
compel the generators of hazardous waste to remediate hazardous waste sites.
Dock Resins has been informed by its counsel that it was a DE MINIMIS generator
to these sites, and these actions have been settled without the payment of any
material amount by Landec. In addition, the New Jersey Industrial Site Recovery
Act ("ISRA") requires an investigation and remediation of any industrial
establishment, like Dock Resins, which changes ownership. This statute was
activated by Landec's acquisition of Dock Resins. Dock Resins has completed its
investigation of the site, delineated the limited areas of concern on the site,
and completed the bulk of the active remediation required under the statute. The
costs associated with this effort are being borne by the former owner of Dock
Resins, and counsel has advised Dock Resins and Landec that funds of the former
owner required by ISRA to be set aside for this effort are sufficient to pay for
the successful completion of remedial activities at the site. In most cases,
Landec believes its liability will be limited to sharing clean-up or other
remedial costs with other potentially responsible parties. Any failure by Landec
to control the use of, or to restrict adequately the discharge of, hazardous
substances under present or future regulations could subject it to substantial
liability or could cause its manufacturing operations to be suspended and
changes in environmental regulations may impose the need for additional capital
equipment or other requirements.
Landec's agricultural operations are subject to a variety of environmental
laws including the Food Quality Protection Act of 1966, the Clean Air Act, the
Clean Water Act, the Resource Conservation and Recovery Act, the Federal
Insecticide, Fungicide and Rodenticide Act and the Comprehensive Environmental
Response, Compensation and Liability Act. Compliance with these laws and related
regulations is an ongoing process. Environmental concerns are, however, inherent
in most agricultural
6
operations, including those conducted by Landec, and there can be no assurance
that the cost of compliance with environmental laws and regulations will not be
material. Moreover, it is possible that future developments, such as
increasingly strict environmental laws and enforcement policies and further
restrictions on the use of manufacturing chemicals could result in increased
compliance costs.
ADVERSE WEATHER CONDITIONS MAY CAUSE SUBSTANTIAL DECREASES IN OUR SALES
Landec's Food Products and Agricultural Seed Technology businesses are
subject to weather conditions that affect commodity prices, crop yields, and
decisions by growers regarding crops to be planted. Crop diseases and severe
conditions, particularly weather conditions such as floods, droughts, frosts,
windstorms and hurricanes may adversely affect the supply of vegetables and
fruits used in Landec's business, reduce the sales volumes and increase the unit
production costs. Because a significant portion of the costs are fixed and
contracted in advance of each operating year, volume declines due to production
interruptions or other factors could result in increases in unit production
costs which could result in substantial losses and weaken Landec's financial
condition.
WE HAVE LIMITED SALES AND MARKETING EXPERIENCE WITH OUR INTELIMER POLYMER
PRODUCTS
Landec has only limited experience marketing and selling its Intelimer
polymer products. While Dock Resins will provide consultation and in some cases
direct marketing support for Landec's Intelimer polymer products, establishing
sufficient marketing and sales capability will require significant resources.
Landec intends to distribute some of its products through its corporate partners
and other distributors and to sell other products through a direct sales force.
There can be no assurance that Landec will be able to recruit and retain skilled
sales management, direct salespersons or distributors, or that Landec's sales
and marketing efforts will be successful. To the extent that Landec has entered
into or will enter into distribution or other collaborative arrangements for the
sale of its products, Landec will be dependent on the efforts of third parties.
WE DEPEND ON STRATEGIC PARTNERS AND LICENSES FOR FUTURE DEVELOPMENT
For some of its current and future products, Landec's strategy for
development, clinical and field testing, manufacture, commercialization and
marketing includes entering into various collaborations with corporate partners,
licensees and others. Landec is dependent on its corporate partners to develop,
test, manufacture and/or market some of its products. Although Landec believes
that its partners in these collaborations have an economic motivation to succeed
in performing their contractual responsibilities, the amount and timing of
resources to be devoted to these activities are not within the control of
Landec. There can be no assurance that those partners will perform their
obligations as expected or that Landec will derive any additional revenue from
the arrangements. There can be no assurance that Landec's partners will pay any
additional option or license fees to Landec or that they will develop, market or
pay any royalty fees related to products under the agreements. Moreover, some of
the collaborative agreements provide that they may be terminated at the
discretion of the corporate partner, and some of the collaborative agreements
provide for termination under other circumstances. In addition, there can be no
assurance as to the amount of royalties, if any, on future sales of QuickCast
and PORT products as Landec no longer has control over the sales of those
products since the sale of QuickCast-TM- and the license of the PORT-TM- product
lines. There can be no assurance that Landec's partners will not pursue existing
or alternative technologies in preference to Landec's technology. Furthermore,
there can be no assurance that Landec will be able to negotiate additional
collaborative arrangements in the future on acceptable terms, if at all, or that
the collaborative arrangements will be successful.
7
BOTH DOMESTIC AND FOREIGN GOVERNMENT REGULATIONS MAY HAVE AN ADVERSE EFFECT ON
OUR BUSINESS OPERATIONS
Landec's products and operations are subject to governmental regulation in
the United States and foreign countries. The manufacture of Landec's products is
subject to periodic inspection by regulatory authorities. There can be no
assurance that Landec will be able to obtain necessary regulatory approvals on a
timely basis or at all. Delays in receipt of or failure to receive approvals or
loss of previously received approvals would have a material adverse effect on
Landec's business, financial condition and results of operations. Although
Landec has no reason to believe that it will not be able to comply with all
applicable regulations regarding the manufacture and sale of its products and
polymer materials, regulations are always subject to change and depend heavily
on administrative interpretations and the country in which the products are
sold. There can be no assurance that future changes in regulations or
interpretations relating to matters such as safe working conditions, laboratory
and manufacturing practices, environmental controls, and disposal of hazardous
or potentially hazardous substances will not adversely affect Landec's business.
There can be no assurance that Landec will not be required to incur significant
costs to comply with the laws and regulations in the future, or that the laws or
regulations will not have a material adverse effect on Landec's business,
operating results and financial condition. As a result of the Apio acquisition,
Landec is subject to USDA rules and regulations concerning the safety of the
food products handled and sold by Apio, and the facilities in which they are
packed and processed. Failure to comply with the applicable regulatory
requirements can, among other things, result in fines, injunctions, civil
penalties, suspensions or withdrawal of regulatory approvals, product recalls,
product seizures, including cessation of manufacturing and sales, operating
restrictions and criminal prosecution.
OUR INTERNATIONAL OPERATIONS AND SALES MAY EXPOSE OUR BUSINESS TO ADDITIONAL
RISKS
During the first quarter of fiscal year 2000, approximately 8% of Landec's
total revenues were derived from product sales to and collaborative agreements
with international customers. Landec expects that with the acquisition of Apio
and its export business, international revenues will become an important
component of its total revenues. A number of risks are inherent in international
transactions. International sales and operations may be limited or disrupted by
the regulatory approval process, government controls, export license
requirements, political instability, price controls, trade restrictions, changes
in tariffs or difficulties in staffing and managing international operations.
Foreign regulatory agencies have or may establish product standards different
from those in the United States, and any inability to obtain foreign regulatory
approvals on a timely basis could have a material adverse effect on Landec's
international business and its financial condition and results of operations.
While Landec's foreign sales are currently priced in dollars, fluctuations in
currency exchange rates, such as those recently experienced in many Asian
countries, may reduce the demand for Landec's products by increasing the price
of Landec's products in the currency of the countries to which the products are
sold. There can be no assurance that regulatory, geopolitical and other factors
will not adversely impact Landec's operations in the future or require Landec to
modify its current business practices.
CANCELLATIONS OR DELAYS OF ORDERS BY OUR CUSTOMERS MAY ADVERSELY EFFECT OUR
BUSINESS
During the first quarter of fiscal year 2000, sales to Landec's top five
customers accounted for approximately 42% of Landec's product sales with the top
customer accounting for 16% of Landec's product sales. Landec expects that for
the foreseeable future a limited number of customers may continue to account for
a substantial portion of its net revenues. Landec may experience changes in the
composition of its customer base, as Apio, Dock Resins and Fielder's Choice have
experienced in the past. Landec does not have long-term purchase agreements with
any of its customers. The reduction, delay or cancellation of orders from one or
more major customers for any reason or the loss of one or more of the major
customers could materially and adversely affect Landec's business, operating
results
8
and financial condition. In addition, since some of the products manufactured in
the Linden, New Jersey facility or processed by Apio at its Guadalupe,
California facility are often sole sourced to its customers, Landec's operating
results could be adversely affected if one or more of its major customers were
to develop other sources of supply. There can be no assurance that Landec's
current customers will continue to place orders, that orders by existing
customers will not be canceled or will continue at the levels of previous
periods or that Landec will be able to obtain orders from new customers.
SALES OF OUR PRODUCTS MAY EXPOSE US TO PRODUCT LIABILITY CLAIMS
The testing, manufacturing, marketing, and sale of the products being
developed by Landec involve an inherent risk of allegations of product
liability. While no product liability claims have been made against Landec to
date, if any product liability claims were made and adverse judgments obtained,
they could have a material adverse effect on Landec's business. Although Landec
has taken and intends to continue to take what it believes are appropriate
precautions to minimize exposure to product liability claims, there can be no
assurance that it will avoid significant liability. Landec currently maintains
medical and non-medical product liability insurance with limits in the amount of
$4.0 million per occurrence and $5.0 million in the annual aggregate. In
addition, Apio has product liability insurance with limits in the amount of
$41.0 million per occurrence and $42.0 million in the annual aggregate. There
can be no assurance that the coverage is adequate or will continue to be
available at an acceptable cost, if at all. A product liability claim, product
recall or other claim with respect to uninsured liabilities or in excess of
insured liabilities could have a material adverse effect on Landec's financial
condition.
WE EXPECT OUR STOCK PRICE TO FLUCTUATE IN ACCORDANCE WITH MARKET CONDITIONS
Factors such as announcements of technological innovations, the attainment
of (or failure to attain) milestones in the commercialization of Landec's
technology, new products, new patents or changes in existing patents, the
acquisition of new businesses or the sale or disposal of a part of Landec's
businesses, or development of new collaborative arrangements by Landec, its
competitors or other parties, as well as government regulations, investor
perception of Landec, fluctuations in Landec's operating results and general
market conditions in the industry may cause the market price of Landec's common
stock to fluctuate significantly. In addition, the stock market in general has
recently experienced extreme price and volume fluctuations, which have
particularly affected the market prices of technology companies and which have
been unrelated to the operating performance of technology companies. These broad
fluctuations may adversely affect the market price of Landec's common stock.
THE IMPLEMENTATION OF FINANCIAL AND ACCOUNTING CHANGES MAY CAUSE AN INCREASE IN
COSTS AND DELAYS
In order to address deficiencies in Apio's management information systems
and accounting systems, Apio has restructured its financial and accounting
department, including hiring a chief financial officer and a new controller, and
retained consultants who have worked with Apio to improve accounting processes
and procedures. Apio management believes that those changes will improve its
managing of operations, including delivering complete and accurate financial
statements to Landec's corporate offices in a more timely manner. However,
Landec can give no assurances that it will be able to effect those changes in
the management information systems and accounting systems in a timely manner.
THE EURO CURRENCY MAY CAUSE DISRUPTIONS IN OUR BUSINESS
On January 1, 1999, some member states of the European Economic Community
fixed their respective currencies to a new currency, commonly known as the
"Euro". During the three years beginning on January 1, 1999, business in these
countries will be conducted both in the existing national currency, as well as
the Euro. Companies operating in or conducting business in these
9
countries will need to ensure that their financial and other software systems
are capable of processing transactions and properly handling the existing
currencies and the Euro. Based on the current level of direct European business
conducted by Landec, and also because Landec expects that any transactions in
Europe in the near future will be priced in U.S. dollars, Landec does not expect
that introduction and use of the Euro will materially affect Landec's business.
Landec will continue to evaluate the impact over time of the introduction of the
Euro. However, if Landec encounters unexpected opportunities or difficulties in
Europe, Landec's business could be adversely affected, including the inability
to bill customers and to pay suppliers for transactions denominated in the Euro
and the inability to properly record transactions denominated in the Euro in
Landec's financial statements.
IF OUR OPERATIONS AND PRODUCTS DO NOT FUNCTION PROPERLY IN THE YEAR 2000, OUR
BUSINESS COULD BE DISRUPTED
The Year 2000 issue concerns the potential inability of computer
applications, other information technology systems, and software-based
"embedded" control systems to recognize and process properly, date-sensitive
information in the Year 2000 and beyond. Landec could suffer material adverse
impacts on its operations and financial results if the applications and systems
used by Landec, or by third parties with whom Landec does business, do not
accurately or adequately process or manage dates or other information as a
result of the Year 2000 issue.
Landec has key relationships with some of its customers, vendors and outside
service providers. Landec is primarily relying upon the voluntary disclosures
from third parties for this review of their Year 2000 readiness. Failure by
Landec's key customers, vendors and outside service providers to adequately
address the Year 2000 issue could have a material adverse impact on Landec's
operations and financial results.
10
FORWARD LOOKING STATEMENTS
This prospectus contains so-called forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Landec intends that the
forward-looking statements be subject to the safe harbor provisions of
Section 27A of the Securities Act of 1933. These include statements about our
expectations, beliefs, intentions or strategies for the future, which we
indicate by words or phrases such as "anticipate," "expect," "intend," "plan,"
"will," "we believe," "management believes" and similar language. All
forward-looking statements are based on our current expectations and are subject
to risks, uncertainties and assumptions. Our actual results may differ
materially from results anticipated in these forward-looking statements. We base
our forward-looking statements on information currently available to us, and we
assume no obligation to update them.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock by the
selling stockholders in the offering; all net proceeds will go to the selling
stockholders.
SELLING STOCKHOLDERS
The following table contains information as of May 10, 2000 with respect to
the selling stockholders. The following table assumes that the selling
stockholders sell all of the shares offered by this prospectus. We are unable to
determine the exact number of shares that actually will be sold.
The number and percentage of shares of common stock beneficially owned is
based on 16,002,394 shares outstanding at May 10, 2000 determined in accordance
with Rule 13d-3 of the Exchange Act, plus in the case of Frederick Frank, the
shares issuable upon conversion of the Series A Preferred Stock. The information
is not necessarily indicative of beneficial ownership for any other purpose.
Under Rule 13d-3, beneficial ownership includes any shares as to which an
individual has sole or shared voting power or investment power, and also
includes shares which an individual has the right to acquire within 60 days of
May 10, 2000 through the exercise of any stock option or other right currently
outstanding. Unless otherwise indicated in the footnotes, each person has sole
voting and investment power (or shares the voting and investment powers with his
or her spouse) with respect to the shares shown as beneficially owned.
COMMON SHARES COMMON SHARES
BENEFICIALLY OWNED PRIOR BENEFICIALLY OWNED
TO OFFERING NUMBER OF AFTER OFFERING
------------------------ COMMON SHARES ---------------------
BENEFICIAL OWNERS NUMBER PERCENTAGE BEING OFFERED NUMBER PERCENTAGE
- ----------------- ----------- ---------- ------------- -------- ----------
Frederick Frank (1).................... 1,686,670 9.54% 1,666,670 20,000 *
Nicholas Tompkins (2).................. 416,666 2.60 138,889 277,777 1.74
Kathleen Tompkins...................... 416,667 2.60 138,889 277,778 1.74
Timothy Murphy......................... 833,333 5.21 277,777 555,556 3.47
John Maulhardt......................... 208,333 1.30 69,444 138,889 *
Roy Killgore........................... 208,334 1.30 69,445 138,889 *
The Edward W. Silva Jr. Revocable Trust
dated August 6, 1989................. 208,333 1.30 69,444 138,889 *
The Larry J. Silva Revocable Trust
Dated July 31, 1990.................. 208,334 1.30 69,445 138,889 *
Lehman Brothers Inc.................... 62,500 * 62,500 0 0%
- ------------------------
* Less than one percent
(1) Frederick Frank is a Director of Landec. His shares consist of 166,667
shares of Series A Preferred Stock that are convertible into 1,666,670
shares of Common Stock and 20,000 shares of common stock subject to
outstanding stock options.
(2) Nicholas Tompkins is the Chief Executive Officer of Apio and Senior Vice
President of Landec.
11
On November 19, 1999, Landec sold 166,667 shares of Series A Preferred Stock
(representing 1,666,670 shares of common stock on an as-converted basis) to
Mr. Frederick Frank at a price of $60.00 per share for $10,000,000 and paid
Mr. Frank $800,000 as a finder's fee pursuant to a Series A Preferred Stock
Purchase Agreement between Mr. Frank and Landec. Frederick Frank was elected as
a director of Landec in December 1999. In accordance with the Purchase
Agreement, the 1,666,670 shares of common stock issuable upon conversion of the
Preferred Stock owned by Frederick Frank are being registered in this
Registration Statement.
On December 2, 1999, Landec acquired Apio by the merger of Apio with and
into a wholly owned subsidiary of Landec. Upon the closing, Landec paid $8.9
million in cash and issued 2,500,000 shares of Landec's common stock to the
former stockholders of Apio. In accordance with the merger agreement, 833,333
shares of the common stock are being registered for the former stockholders of
Apio. In addition, the merger agreement provides for future payments to the
stockholders of up to $16.75 million. These payments consist of (a) up to $10
million which will be paid out over two years to Nicholas Tompkins if Apio
exceeds certain earnings targets in 2000 and 2001 that should generate enough
cash flow to enable Landec to make such payments, (b) $5.3 million which will be
paid in equal annual installments to the stockholders over the next five years
and which is expected to be paid out of Landec's operating cash flow, (c) up to
$1.25 million which will be paid to the stockholders if the average closing sale
price of the common stock is trading below $6.00 per share during the last
twenty trading days of the nine month period after the closing, which is
expected to be paid out of Landec's operating cash flow, and (d) up to $200,000
to be paid to the stockholders conditioned upon the collection of certain notes
receivable. Only the condition giving rise to the potential payment of $100,000
to the Apio stockholders upon the collection of certain note receivables has
matured, and that condition was not satisfied. The conditions giving rise to the
Company's obligation to make all of the other payments to the Apio stockholders
have not yet matured.
As compensation for services provided by Lehman Brothers Inc. in connection
with the closing of the merger, Landec issued 62,500 shares of common stock to
Lehman Brothers Inc. and agreed to register the shares. From time to time,
Lehman Brothers Inc. or its affiliates have provided, and may continue to
provide, investment banking services to Landec, for which they received or will
receive customary fees.
12
PLAN OF DISTRIBUTION
Resales of the common stock by the selling stockholders may be made on the
Nasdaq National Market, in the over-the-counter market or in private
transactions. The shares will be offered for sale on terms to be determined when
the agreement to sell is made or at the time of sale, as the case may be. The
selling stockholders may sell some or all of the common stock in transactions
involving broker-dealers who may act solely as agent and or may acquire shares
as principal. Broker-dealers participating in transactions as agents may receive
commissions from the selling stockholders (and, if they act as agent for the
purchaser of the shares, from the purchaser), the commissions computed in
appropriate cases in accordance with the applicable rules of NASDAQ, which
commissions may be at negotiated rates where permissible under the applicable
rules. Participating broker-dealers may agree with the selling stockholders to
sell a specific number of shares at a stipulated price per share and, to the
extent the broker-dealer is unable to do so acting as agent, for the selling
stockholders to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer's commitment to the selling stockholders. Any of these
sales may be by block trade.
The selling stockholders and any underwriters, dealers or agents who
participate in the distribution of the common stock may be seen as
"underwriters" under the Securities Act of 1933. Any discount, commission or
concession received by those selling stockholders might be deemed to be an
underwriting discount or commission under the Securities Act. We have agreed to
indemnify the selling stockholders against liabilities arising under the
Securities Act.
The selling stockholders will pay selling commissions or brokerage fees for
the sale of the common stock offered by this prospectus in amounts customary for
this type of transaction. Each selling stockholder will also pay all applicable
transfer taxes and fees for its legal counsel incurred in connection with the
sale of the common stock, except that Landec has agreed to pay the reasonable
legal fees of legal counsel to Frederick Frank.
The anti-manipulation rules under the Securities Exchange Act of 1934 may
apply to sales of the shares offered by this prospectus in the market.
We have agreed to maintain the effectiveness of this registration statement
until the sale of all the common stock offered by this prospectus, but in no
event after first anniversary of the effective date of the Registration
Statement. No sales may be made based on this prospectus after the expiration
date unless we amend or supplement this prospectus to indicate that we have
agreed to extend the period of effectiveness. The selling stockholders may sell
all, some or none of the shares offered by this prospectus.
From time to time, Lehman Brothers Inc. or its affiliates have provided, and
may continue to provide, investment banking services to Landec, for which they
received or will receive customary fees.
LEGAL MATTERS
The validity of the issuance of the common stock offered by this
Registration Statement will be passed upon by Orrick, Herrington & Sutcliffe
LLP, Menlo Park, California.
EXPERTS
Ernst & Young LLP, the independent auditors, have audited our consolidated
financial statements and schedules included in our Annual Report on Form 10-K
for the year ended October 31, 1999, in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements and schedule are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
13
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with the
U.S. Securities and Exchange Commission (the "SEC"). You may read and copy any
document that we have filed at the SEC's public reference rooms located at
450 Fifth Street N.W., Room 1024, Washington, D.C. 20549, and at the SEC's
regional offices located at World Trade Center, 13th Floor, New York, New York
10048 and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Please call the SEC at 1-800-732-0330 for more
information about the Public Reference Room facilities. Our SEC filings are also
available to you free of charge at the SEC's website at http:// www.sec.gov.
Our common stock is quoted on the Nasdaq National Market under the symbol
"LNDC." Copies of publicly available documents that have been filed with the SEC
can be inspected and copied at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
We have filed a registration statement on Form S-3 with the SEC that covers
the securities offered by this Registration Statement. This prospectus is part
of the registration statement, however, the prospectus does not include all of
the information included in the registration statement and its exhibits. As a
result, you should refer to the registration statement for additional
information about us and the common stock offered under this prospectus.
Statements that we make in this prospectus relating to any documents filed as an
exhibit to the registration statement or any document incorporated by reference
into the registration statement are not necessarily complete and you should
review the referenced document itself for a complete understanding of its terms.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information that we file later with the SEC
will automatically update and supersede previously filed information, including
information contained in this document.
We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until this offering has been completed.
(a) Our Annual Report on Form 10-K, for the year ended October 31, 1999;
(b) Our Quarterly Report on Form 10-Q for the quarter ended January 30,
2000;
(c) Our Current Report on Form 8-K filed with the SEC on December 17, 1999,
as amended by our Current Report on Form 8-K/A filed with the SEC on
February 15, 2000; and
(d) The description of our common stock contained in our Registration
Statement on Form 8-A filed with the SEC on December 21, 1995.
All documents subsequently filed by Landec under Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act, prior to the termination of the offering, shall
be deemed to be incorporated by reference in this Registration Statement from
the date of filing the documents.
You may request free copies of these filings by writing or telephoning us at
the following address: Gregory Skinner, Chief Financial Officer, Landec
Corporation, 3603 Haven Avenue, Menlo Park, California 94025-1010
(650) 306-1650.
14
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE PROSPECTUS IN CONNECTION WITH
THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, THE INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY LANDEC OR
BY ANY SELLING STOCKHOLDER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE BASED ON THIS PROSPECTUS SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF LANDEC AS OF THIS
DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN
ANY STATE IN WHICH AN OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE AN OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PAGE
--------
The Company........................... 2
Risk Factors.......................... 3
Forward Looking Statements............ 11
Use Of Proceeds....................... 11
Selling Stockholders.................. 11
Plan of Distribution.................. 13
Legal Matters......................... 13
Experts............................... 13
Where You Can Find More Information... 14
2,562,503 SHARES
LANDEC CORPORATION
COMMON STOCK
---------------------
PROSPECTUS
---------------------
MAY 17, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
