Agritope, Inc. today reported that improved operating results, increased research funding and the completion of a private placement highlighted the fiscal year ended September 30, 1999. Revenues increased 27% to $3.6 million, compared to $2.8 million for fiscal 1998. The net loss for the year narrowed to $4.7 million, or $1.15 per diluted share, compared to a loss of $5.2 million, or $1.42 per diluted share, for the year ended September 30, 1998.

In the fourth fiscal quarter, Agritope's bottom line improved to a loss of $841,000, or $.21 per diluted share, on revenues of $1.4 million, compared to a loss of $1.5 million, or $.37 per diluted share, on revenues of $1.9 million in the fourth quarter of fiscal 1998.

"We have had a remarkably successful year,'' Ferro continued. "Transactions we completed during the year are expected to provide $26.8 million to support current and future research activities. We not only continued to develop our programs to create superior varieties of fruits and vegetables, but we also initiated a new gene discovery program with our newest strategic partner, Rhone-Poulenc. In our ongoing efforts to broaden our technology base, we completed six licensing agreements. Our aggressive program of filing patents to protect our technology resulted in the issuance of two new U.S. patents and notices of allowance for three additional patent applications. And, in the area of product development, field trials were conducted with respect to melons, tomatoes and raspberries.''

"Grants and research contracts added $1.0 million in revenues during the year,'' said Adolph J. Ferro, president and chief executive officer. "This 365% improvement over last year reflects our commitment to working with strategic partners to develop better plant varieties. Specific projects were sponsored by the National Institute of Standards and Technology, Vilmorin Clause & Cie, and Agrinomics, LLC, our joint venture that was formed with Rhone-Poulenc, S.A. in July 1999. Reflecting the increased activity, research and development expenses in the fourth quarter were $839,000 compared to $651,000 in the like quarter a year ago. Research and development expenses were $3.1 million for 1999 compared to $2.5 million last year.''

Agritope's majority-owned subsidiary, Vinifera, Inc., a grapevine nursery, expanded its customer base by 57% during fiscal 1999. "The increased customer base is significant in that no single customer accounted for more than 5% of Vinifera's sales in 1999, whereas, one customer accounted for 32% of last year's sales,'' Ferro added. "In addition, sales in 1998 were concentrated in the fourth quarter due to planting delays caused by inclement weather earlier in the year in California.'' In fiscal year 1999, Vinifera recorded sales of $2.5 million compared to sales of $2.6 million for 1998. Sales in the fourth quarter were $944,000 compared to $1.7 million in the fourth quarter of 1998. The poor weather conditions in 1998 also caused Vinifera to experience a negative gross margin on sales last year. Gross margins improved to 6.8% in 1999.

In March 1998, Agritope moved into larger research and office facilities. Operating costs also
increased in 1999 over 1998 due to increased sales activity at Vinifera, non-cash compensation
expense related to stock option awards and legal costs associated with the company's proposed gene discovery program. As a result, selling, general and administrative expenses were $957,000 for the fourth quarter, compared to $644,000 in the corresponding quarter a year ago. For the year, selling, general and administrative expenses were $3.7 million compared to $3.1 million in 1998.

In September 1999, Agritope completed a $2.5 million private placement of 500,000 shares of Series A Preferred Stock at a price of $5 per share. The shares were purchased by Vilmorin Clause & Cie, a leading worldwide vegetable seed company based in France, and a strategic partner of Agritope since 1997. Vilmorin owned 214,285 shares of Series A Preferred Stock prior to this purchase. For every four shares of Series A Stock purchased in the 1999 private placement, Vilmorin also received a warrant to purchase one additional share of Series A Stock at a price of $7 per share at any time over the next five years. Each share of Series A Stock is convertible into one share of Agritope Common Stock. The Series A Preferred Stock has the same voting privileges and rights as the Common Stock, with the exception of a right to fill a board seat. Vilmorin intends to sell 150,000 shares of Series A Stock together with the related warrants for $750,000 to Hazera Quality Seeds Ltd. Hazera, an Israeli seed company, has had a strategic alliance with Vilmorin since 1998. After completion of the sale, Vilmorin will own 564,285 shares of Series A Stock, or 11.8% of the outstanding capital stock of Agritope. Hazera's holdings will amount to 3.1% of Agritope's outstanding capital stock.

Also in July 1999, Agritope entered into stock purchase agreements with certain minority shareholders of Vinifera. These transactions will reduce Agritope's ownership from 64% to approximately 50% over a three-year period. The July payments of $874,000 from the minority shareholders reduced Agritope's ownership interest in Vinifera from 64% to 57%. In a related transaction, Vinifera repaid Agritope the $1 million balance on its working capital line of credit and replaced the line with a $1.5 million revolving bank line of credit guaranteed by a minority shareholder.

In July 1999, Agritope finalized an agreement with Rhone-Poulenc, S.A. to establish Agrinomics LLC, a joint venture that will conduct a research, development and commercialization program in the field of functional genomics. Rhone-Poulenc expects to make capital contributions, in cash, to Agrinomics totaling $20 million over five years. The initial capital contribution of $5 million to support first-year operating requirements was made in July. Agritope and Rhone-Poulenc each own a 50% equity interest in Agrinomics. Through its fully integrated functional genomics program, Agrinomics is developing a network of research and commercial alliances with a broad range of interests. Discussions with several prospective sponsors are underway.

Agritope is an Oregon-based agricultural biotechnology company that develops improved plant
products and provides technology to the agricultural industry. Its fruit and vegetable division specializes in the development of novel fruit, vegetable and flower varieties. Agrinomics LLC, its 50%-owned joint venture with Rhone-Poulenc, conducts a research, development and commercialization program in the field of plant functional genomics. Vinifera, Inc., its majority owned subsidiary, offers superior grapevine plants to the premium wine industry together with disease testing and elimination services.

Company news release
N2297