Investors file lawsuit against LV's AgriBioTech

As AgriBioTech Inc. executives attempted to explain their financial strategy in the face of plunging stock prices Monday, news broke that investors had filed another lawsuit against the Henderson company.

The turf and forage seed company was sued in U.S. District Court for the Southern District of New York on behalf of all purchasers of the stock between Oct. 8 and Jan. 22.

The suit says AgriBioTech artificially inflated its stock, violating federal securities laws, by making false and misleading statements about the time by which it expected to sell all or part of itself and the price it expected to receive.

It was the third suit filed against AgriBioTech this month. Shareholders recently filed suit in New Mexico claiming the company overstated revenue and profit; and Helena Chemical Co. sued in Tennessee, claiming AgriBioTech lied about the reason it pulled out of an agreement to acquire a Helena subsidiary.

Johnny Thomas, the company's chief executive, said on a conference call with analysts and journalists that the company was "dealing with approximately 10 potential strategic equity partners in this process" as of two weeks ago.

Thomas also said misinformation abounds about the financial status of the company, but "our balance sheet is in good shape."

AgriBioTech, which had sales of $205 million in the year ended June 30, had predicted since November -- both in regulatory filings and press releases -- that a biotechnology company such as Dow Chemical Co. or Monsanto Co. would pay as high as $70 a share for a stake. Last week, the company announced it was abandoning the effort to sell out.

Thomas insisted the effort was not a failure and that the process of seeking funding started by Merrill Lynch & Co. in October would continue. AgriBioTech had been counting on an equity infusion to help pay off debt, complete pending acquisitions and fund future growth.

In the meantime, the company sold $40 million of stock, convertible debt and warrants to institutional investors. Two weeks ago the company said it was issuing stock to pay legal and other bills.

Thomas said the focus for AgriBioTech now will be on integrating operations at several of the companies it has purchased. AgriBioTech's strategy has been to acquire small seed companies, absorb their best resources and dispose of what's left. In the process, the company has also taken on additional debt.

The company had projected taking a restructuring charge of between $5 million and $15 million this year. On Monday, Thomas acknowledged it may be even higher than $15 million.

Thomas said the company also wants to focus on its core business -- biotechnology.

"Biotechnology is the very heart and soul of what this company is becoming," Thomas said. "There has been an explosion of progress in this area over the past six months and we've developed relationships with universities and some world-class people who believe in what we're doing."

AgriBioTech announced the acquisition of another company on Monday. HybriGene LLC, a biotechnology company with patents developed by research at Purdue University, has developed methods of creating plant hybrids at the genetic level. By switching genes on and off, scientists can develop seeds that yield plants that are disease and herbicide resistant.

The promise of biotechnology is the ability to develop better crops by altering genes that can change the traits of plants. While AgriBioTech focuses on turfgrass and forage seeds, the HybriGene research has applications in other crops.

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