THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, August 24, 1996 TAG: 9608260282
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
DATELINE: CHESAPEAKE LENGTH: 48 lines
Financially troubled Harmony Products Inc., which has been bedeviled from its outset in efforts to find a market for its organic fertilizers, said Friday that it reached an agreement that could lead to its buyout by a larger concern.
Cypress Chemical Co. of Helena, Ark., entered into a nonbinding letter of intent with Harmony that calls for a stock-swap purchase of the Chesapeake-based company. Under the agreement, Harmony said, its shareholders would get a mix of preferred and common stock in Cypress. The stock could be converted, if Cypress approved, into a total of $3.45 million in cash after two years.
Harmony was founded in 1989 by several former executives of the fertilizer company Royster Co. Harmony raised about $4 million in a public offering of 52 percent of its stock in December 1991. But it has lost money in every year of its operation as it struggled to find and hang onto customers.
In June 1995, to stave off collapse, members of its board of directors pumped $2.65 million of their own money into the company - increasing their stake to 88 percent. And Harmony shut down its primary production line, terminating 10 of its 25 employees.
``Companies like Harmony geared up to take advantage of the organic and organic-based fertilizer market,'' Harmony President Gregory Gill said at that time. ``The movement has been less dramatic than expected to a great degree.''
Yet he insisted that he and other board members still believed that the boom would happen. So Harmony continued to market products made for it by other companies.
But even that strategy failed to produce a profit. In the second quarter, during the spring peak for fertilizer sales, Harmony posted a loss of $273,100 on sales of $341,700. And in May Harmony's stock was delisted from NASDAQ's SmallCap Market for failing to meet NASDAQ qualifications. It now trades on the over-the-counter bulletin board.
It closed Friday at $1.50 a share, unchanged, according to Bloomberg Financial Markets.
Gill stressed Friday that the agreement with the closely held Cypress is preliminary and is subject to each company's review of the other's operations and finances. Under the agreement, he said, Harmony's board of directors would be responsible for the company's long-term debt of about $750,000.
Current plans call for Harmony to continue in operation and for its employees to stay on after the acquisition, he added. by CNB