<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10/A
(AMENDMENT NO. 4)
GENERAL FORM FOR REGISTRATION OF SECURITIES PURSUANT TO
SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
BIONUTRICS, INC.
(Exact Name of Registrant Specified in Charter)
Nevada 86-0760991
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2425 E. Camelback Road, Suite 650, Phoenix, Arizona 85016
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (602) 508-0112
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
(Title or Class)
<PAGE> 2
ITEM 2. FINANCIAL INFORMATION.
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's consolidated financial statements and the related notes and with
the Company's management's discussion and analysis of financial condition and
results of operations, provided elsewhere herein. The selected financial data
for the three months ended January 31, 1997 and 1996 are derived from financial
statements prepared by the Company that have not been audited. The results of
operations for the three months ended January 31, 1997 and 1996 are not
necessarily indicative of the results of operations for a full fiscal year. See
Item 15. "Financial Statements and Exhibits" for the historical financial
statements of, and other financial information regarding, the Company.
2
<PAGE> 3
<TABLE>
<CAPTION>
TEN MONTH
THREE MONTHS ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
JANUARY 31, OCTOBER 31, OCTOBER 31, DECEMBER 31,
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Revenue $ 0 $ 0 $ 20,000 $ 50,000 $ 0
Operating Expense 1,307,238 583,834 2,996,880 341,900 249,351
Other Income (Expense) 55,755 (15,106) (30,667) (39,585) (44,843)
Net Loss (1,251,483) (598,940) (3,007,547) (331,485) (294,194)
Loss Per Share(1) (.08) (.06) (.26) (.03) (.13)
Weighted Average
Shares Outstanding 15,222,451 10,956,269 11,564,327 9,853,970 2,214,743
BALANCE SHEET DATA:
Working capital 4,074,413 (295,889) $ 4,739,882 $ 184,546 $ (460,069)
Total assets 6,018,058 563,102 6,217,348 1,099,521 630,280
Total liabilities 579,367 607,176 936,478 544,654 1,452,160
Stockholders equity 5,438,691 (44,074) 5,280,870 554,867 (821,880)
<CAPTION>
FEBRUARY 22,
SIX MONTH 1990 (DATE OF
PERIOD ENDED YEAR ENDED YEAR ENDED INCEPTION
DECEMBER 31, JUNE 30, JUNE 30, TO OCTOBER 31,
1993 1993 1992 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Revenue $ 0 $ 0 $ 0 $ 72,448
Operating Expense 43,813 423,602 621,876 4,965,674
Other Income (Expense) (7,520) (35,265) (61,816) (246,765)
Net Loss (51,333) (458,867) (683,692) (5,139,991)
Loss Per Share(1) (.17) (2.29) (10.62)
Weighted Average
Shares Outstanding 307,124 200,000 64,400
BALANCE SHEET DATA:
Working capital $ (374,271) $(300,700) $ (255,690)
Total assets 475,011 426,871 342,117
Total liabilities 1,034,177 934,705 1,138,182
Stockholders equity (559,166) (507,834) (796,065)
</TABLE>
(1) These shares do not include an aggregate of 2,128,144 of additional shares
of Common Stock as of October 31, 1996, 566,955 of additional shares as of
October 31, 1995, and 220,288 for the year ended December 31, 1994, the
six month period ended December 31, 1993, the year ended June 30, 1993 and
the year ended June 30, 1992 that may be issued upon exercise of
outstanding stock options, warrants and conversion of debt.
3
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
To date, management's efforts have been primarily directed toward
conducting research and development, applying for patent approvals, recruiting
employees, developing manufacturing and distribution arrangements for its
dietary supplement product and obtaining initial capital and financing, to fund
these activities. Management plans to transition the Company from the
development stage to the operating stage in the second and third quarters of
calendar 1997. The Company does not anticipate a significant change in the
number of employees.
The research and development relating to the product and production
technology began in 1990 in a predecessor to LipoGenics, Inc., a Delaware
corporation ("LipoGenics") which was formed in July 1992. LipoGenics formed
NutraGenics, Inc., a Delaware corporation ("NutraGenics (Delaware)") in April
1994 pursuant to a rights offering to all LipoGenics shareholders. The purpose
of NutraGenics (Delaware) was to provide a vehicle to engage in manufacturing
and marketing of the technology developed by LipoGenics pursuant to a licensing
arrangement. NutraGenics (Delaware) merged in December 1994 into Nutrition
Technology Corporation, a Nevada corporation and wholly owned subsidiary of ERBA
Corporation ("ERBA"), a publicly traded Nevada corporation incorporated in 1983.
Although Nutrition Technology Corporation survived the merger, the merger was
accounted for as a reverse acquisition and the financials of NutraGenics
(Delaware) became the financials for the surviving corporation. ERBA had minimal
historical operations and as such the merger of its subsidiary with NutraGenics
(Delaware) had no impact on operations and operating results. ERBA changed its
name to NutraGenics, Inc. at the time of the merger. NutraGenics, Inc.
subsequently changed its name to Bionutrics on December 26, 1996.
Bionutrics completed a merger with LipoGenics on October 31, 1996 and
LipoGenics became a wholly owned subsidiary of the Company. The merger with
LipoGenics was accounted for as a pooling and as such Bionutrics accounts
reflect the historic operations of LipoGenics. Pursuant to the merger,
Bionutrics obtained ownership of the proprietary rights previously licensed to
it by LipoGenics.
RESULTS OF OPERATIONS
Three months ended January 31, 1997 and January 31, 1996
There were no revenues recorded in the first quarter as the Company is
presently transitioning from research and development to sales and distribution.
The sale of its first product is targeted for April 1997.
Consulting services were $288,441 for the quarter ended January 31, 1997
compared to $33,782 for the same period in 1996. This increase is primarily
attributable to expenditures relating to preparation for product introduction.
Research and development expenses were $62,474 for the quarter ended
January 31, 1997 compared to $92,295 for the same period in 1996. This decrease
is due to lower levels of research and development as the Company is moving from
a research to a production mode.
Other operating expenses were $956,323 for the quarter ended January 31,
1997 compared to $457,757 for the same period in 1996. This increase in other
operating expenses of $498,566 is due
4
<PAGE> 5
primarily to higher levels of salaries and travel expenses of $92,522, increased
advertising of $143,250 and legal expenses of $198,003. These additional costs
pertain to preparation for product introduction in the second quarter of 1997.
Interest income was $55,992 for the quarter ended January 31, 1997
compared to $819 for the same period in 1996 due to increased levels of cash.
Net loss increased to $(1,251,483) or $(.08) per share for the quarter
ended January 31, 1997 from $(598,940), or $(.06) per share, for the quarter
ended January 31, 1996 due to increased levels of expenses as outlined above.
Year ended December 31, 1994, 10 months ended October 31, 1995 and year ended
October 31, 1996
Net losses for the Company were $294,194 for the 12 months ended December
31, 1994, $331,485 for the 10 months ended October 31, 1995 and $3,007,547 for
the 12 months ended October 31, 1996. Since inception the Company recorded net
losses of $5,139,991. Although minor revenues unrelated to product sales were
recorded during these periods, operating expenses increased in preparation for
the launch of the Company's product resulting in increasing losses being
recognized.
Historic revenues represent amounts derived from a short-term agreement
licensing certain proprietary technology to an independent party and do not
pertain to the sale of any type of consumer product. There were no revenues
recorded for the 12 months ended December 31, 1994, $50,000 for the 10 months
ended October 31, 1995 and $20,000 for the 12 months ended October 31, 1996.
Since inception revenues were $72,448.
As the timing for the product launch for evolvE approaches, management's
efforts, as outlined above, have accelerated resulting in additional
expenditures and investment in infrastructure. Expenses were $249,351 for the 12
months ended December 31, 1994, $341,900 for the 10 months ended October 31,
1995 and $2,996,880 for the 12 months ended October 31, 1996. Total expenses
since inception were $4,965,674. The largest components included in these
expenditures are research and development, salaries, consulting fees and
advertising. As a start up company, management recognizes the critical
importance of controlling and managing expenses and to that end has implemented
budget guidelines, integrated general ledger system and has employed a corporate
controller.
LIQUIDITY AND CAPITAL RESOURCES
Three months ended January 31, 1997 and January 31, 1996
Net cash used in operating activities during the quarter ended January 31,
1997 was $1,672,381 as compared to $317,804 during the same period in 1996. The
increase in cash used is primarily due to increased expenses incurred in
preparation for the launch of the Company's product in the second quarter.
Net cash used in investing activities during the quarter ended January 31,
1997 was $849,271 as compared to $48,109 during the same period in 1996. This
increase is attributable to a $400,000 investment in a joint venture and capital
expenditures for manufacturing operations.
The Company received proceeds from issuance of its Common Stock in the
quarter ended
5
<PAGE> 6
January 31, 1997 of $1,366,304 versus $0 for the same period in 1996.
Year ended December 31, 1994, 10 months ended October 31, 1995 and year ended
October 31, 1996
Net cash used in operating activities was $166,861 for the 12 months ended
December 31, 1994, $244,861 for the 10 months ended October 31, 1995 and
$2,185,267 for the 12 months ended October 31, 1996. Total net cash used in
operating activities since inception was $3,571,589. Cash used in operating
activities primarily related to the need to pay fees to professionals in the
course of research and development of the proprietary product, to develop
manufacturing capability, and to build the organization for the purpose of
selling the proprietary product.
With regard to investing activities, the Company has had minimal
investments in property, a total of $91,900 since inception, and has incurred
notes receivable, most of which have been collected. Net cash used in investing
activities was $151,900 for the 12 months ended December 31, 1994, $61,800 for
the 10 months ended October 31, 1995 and cash provided for the 12 months ended
October 31, 1995 was $103,802. Total net cash used in investing activities since
inception was $109,898.
Net cash provided by financing activities was $333,159 for the 12 months
ended December 31, 1994, $719,000 for the 10 months ended October 31, 1995 and
$7,330,625 for the 12 months ended October 31, 1996. Total net cash provided by
financing activities was $9,357,847 since inception. The Company has funded its
development stage costs primarily through the proceeds of private placements of
debt which was subsequently converted to Common Stock and the issuance of Common
Stock. The Company has liquidity to meet its business needs for the next year
based upon projections in its Business Plan. The primary business need is the
investment in infrastructure, manufacturing equipment and personnel.
On October 31, 1996, the Company completed a Regulation S offering of
Common Stock in the amount of $5,000,000 to one overseas investor. The Company
has commitments for $6,000,000 of Common Stock from various overseas investors
pursuant to a second Regulation S offering. Of that amount, $4,200,000 has been
received.
In addition to the projected recurring operating expenses in fiscal 1997
capital expenditures for production are estimated at $750,000. This capital
expenditure is a one-time cost of investment to prepare for production
requirements.
Subsequent to October 31, 1996, the Company invested $400,000 in a joint
venture with InCon Technologies. On July 31, 1996, the Company entered into an
agreement with In Con Technologies, L.L.C. to form a limited liability company
("Joint Venture") to undertake the further research and development of certain
non-proprietary dietary supplements and other non-proprietary nutritional and
health promoting products and to manufacture, market and sell existing, as well
as newly developed supplements and products. The two companies will share
equally in the capital contribution, profits and losses derived, and management
of the Joint Venture. The investment is accounted for under the equity method.
The Company believes that the investment will be recovered through the sale of
products which the venture will produce.
The Company had no long-term debt as of October 31, 1996.
As discussed in Note 1, the Company's continuation as a going concern is
dependent upon its ability to evolve from a development stage to an operating
stage company. To achieve the operating stage, management has developed a plan
which, if successful, will allow for the Company to generate sufficient cash
flow to meet its obligations on a timely basis, secure agreements regarding the
manufacturing and distribution of the dietary supplement product, obtain
additional equity financing as may be required, and ultimately, attain
profitable operations. The Company's marketing activities through an independent
broker network of five organizations has resulted in 34 orders for delivery in
April and May. The Company expects to invest $750,000 in the Louisiana
processing facility to reduce its reliance on outside processors and to contain
costs. The Company expects to hire 15 persons to operating the processing
facility. Management's projections for the next 12
6
<PAGE> 7
months indicate that the cash generated from investors and sales of product are
more than sufficient to meet the requirements of operating expenses and capital
expenditures.
7
<PAGE> 8
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Independent Auditors' Report dated December 6, 1996.
Consolidated balance sheets as of October 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity
and cash flows for the year ended December 31, 1994, the 10 month
period ended October 31, 1995, the year ended October 31, 1996 and
for the period from February 22, 1990 (date of inception) to October
31, 1996.
Consolidated balance sheets as of January 31, 1997 (unaudited) and
October 31, 1996, and the related unaudited consolidated statements
of operations, stockholders' equity and cash flows for the three
months ended January 31, 1997 and 1996.
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this amended registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
BIONUTRICS, INC.
Date: May 20, 1997 By: /s/ Ronald H. Lane
_____________________________________
Ronald H. Lane
President and Chief Executive
Officer
9
<PAGE> 10
BIONUTRICS, INC.
(FORMERLY NUTRAGENICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
Consolidated Financial Statements
Year Ended December 31, 1994,
Ten Month Period Ended October 31, 1995,
Year Ended October 31, 1996 and
Period from February 22, 1990 (Date of Inception) to
October 31, 1996, and
Independent Auditors' Report
<PAGE> 11
INDEPENDENT AUDITORS' REPORT
Board of Directors
Bionutrics, Inc.
Phoenix, Arizona
We have audited the consolidated balance sheets of Bionutrics, Inc. (formerly
NutraGenics, Inc.) and subsidiaries (a development stage company) (collectively
referred to as the "Company") as of October 31, 1995 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year ended December 31, 1994, the ten month period ended October 31, 1995,
the year ended October 31, 1996 and for the period from February 22, 1990 (date
of inception) to October 31, 1996. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. The
consolidated financial statements give retroactive effect to the merger of
Bionutrics, Inc. and LipoGenics, Inc., which has been accounted for in a manner
similar to a pooling of interests as described in Note 1 to the consolidated
financial statements. We did not audit the balance sheet of NutraGenics, Inc.
("NutraGenics") as of October 31, 1995, or the related statements of operations,
stockholders' equity and cash flows of NutraGenics for the ten month period
ended October 31, 1995 and the period from April 5, 1994 (date of NutraGenics'
inception) to October 31, 1995, which statements reflect total assets of
$1,093,000 as of October 31, 1995, and no revenues. Those statements were
audited by other auditors whose report, dated December 22, 1995, expressed an
unqualified opinion on those statements and included an explanatory paragraph
that described the substantial doubt surrounding NutraGenics' ability to
continue as a going concern. The other auditors' report has been furnished to
us, and our opinion, insofar as it relates to the amounts included for
NutraGenics for such prior period, is based solely on the report of such other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company at October 31, 1995 and
1996, and the results of their operations and their cash flows for the year
ended December 31, 1994, the ten month period ended October 31, 1995, the year
ended October 31, 1996 and the period from February 22, 1990 (date of inception)
to October 31, 1996, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company is a development
stage enterprise engaged in developing and marketing dietary supplements using
proprietary technology. As discussed in Note 1 to the consolidated financial
statements, the Company's operating losses since inception raise substantial
doubt about its ability to continue as a going concern. Management's plans
concerning these matters are also described in Note 1. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Deloitte & Touche LLP
Phoenix, Arizona
December 6, 1996
- 2 -
<PAGE> 12
BIONUTRICS, INC.
(Formerly NutraGenics, Inc.)
(A Development Stage Company)
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1995 AND 1996
- --------------------------------------------------------------------------------------------------
ASSETS 1995 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 427,200 $ 5,676,360
Note receivable (Note 3) 50,000
Accrued interest (Note 3) 2,000
------------ ------------
Total current assets 479,200 5,676,360
------------ ------------
PROPERTY - Net of accumulated depreciation
of $21,701 in 1996 (Note 2) 70,199
------------ ------------
OTHER ASSETS:
Notes receivable (Note 3) 147,000 16,665
Accrued interest (Note 3) 14,700 1,333
Organizational costs - net 5,830
Patent applications and other related costs (Note 2) 452,791 452,791
------------ ------------
Total other assets 620,321 470,789
------------ ------------
TOTAL $ 1,099,521 $ 6,217,348
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 286,686 $ 565,823
Accrued payroll and compensation 306,481
Accrued other 7,968 64,174
------------ ------------
Total current liabilities 294,654 936,478
------------ ------------
LONG-TERM LIABILITY - Note payable (Note 4) 250,000
------------ ------------
Total liabilities 544,654 936,478
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 1, 5, 7 and 9)
STOCKHOLDERS' EQUITY (Note 5):
Common stock, $.001 par value - authorized, 45,000,000 shares;
issued and outstanding, 10,956,269 and 15,067,979 shares 10,956 15,068
Preferred stock, $.001 par value - authorized, 5,000,000 shares;
no issued and outstanding shares
Additional paid-in capital 2,677,558 10,406,996
Deficit accumulated during the development stage (2,132,444) (5,139,991)
Common stock in treasury (1,203) (1,203)
------------ ------------
Total stockholders' equity 554,867 5,280,870
------------ ------------
TOTAL $ 1,099,521 $ 6,217,348
============ ============
</TABLE>
See notes to consolidated financial statements.
- 3 -
<PAGE> 13
BIONUTRICS, INC.
(Formerly NutraGenics, Inc.)
(A Development Stage Company)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------
February 22,
Ten 1990
Month (Date of
Year Period Year Inception)
Ended Ended Ended to
December 31, October 31, October 31, October 31,
1994 1995 1996 1996
<S> <C> <C> <C> <C>
REVENUES - Licensing fees (Note 1) $ $ 50,000 $ 20,000 $ 72,448
----------- ----------- ----------- -----------
EXPENSES - Including related party
amounts of $55,178, $68,972, $469,103
and $976,995, respectively:
Consulting services (Notes 5 and 8) 101,832 153,650 385,916 1,317,915
Research and development
(Notes 2 and 8) 25,300 626,735 922,203
Other operating expenses (Note 8) 147,519 162,950 1,984,229 2,725,556
----------- ----------- ----------- -----------
Total expenses 249,351 341,900 2,996,880 4,965,674
----------- ----------- ----------- -----------
OTHER (EXPENSE) INCOME:
Interest expense - including related
party amounts of $45,809, $33,756,
$35,457 and $213,119, respectively
(Note 8) (54,833) (52,391) (45,019) (283,913)
Interest income 9,990 12,806 14,352 37,148
----------- ----------- ----------- -----------
Total other expense (44,843) (39,585) (30,667) (246,765)
----------- ----------- ----------- -----------
LOSS BEFORE PROVISION FOR
INCOME TAXES (294,194) (331,485) (3,007,547) (5,139,991)
PROVISION FOR INCOME
TAXES (Note 6)
----------- ----------- ----------- -----------
NET LOSS $ (294,194) $ (331,485) $(3,007,547) $(5,139,991)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE AND
COMMON SHARE EQUIVALENT $ (.13) $ (.03) $ (.26)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON SHARE EQUIVALENTS
OUTSTANDING 2,214,743 9,853,970 11,564,327
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE> 14
BIONUTRICS, INC.
(Formerly NutraGenics, Inc.)
(A Development Stage Company)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PERIOD FROM FEBRUARY 22, 1990 (Date of Inception) TO DECEMBER 31, 1993, YEAR
ENDED DECEMBER 31, 1994, TEN MONTH PERIOD ENDED OCTOBER 31, 1995 AND YEAR ENDED
OCTOBER 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock
----------------------
Shares Amount
<S> <C> <C>
BALANCE, FEBRUARY 22, 1990 (Date of Inception) - $ -
Issuance of common shares in merger with Pentad, July 13, 1992 (Note 5) 64,400 64
Notes and other liabilities converted to stock at $.62 per share (converted rate), July 1992 129,600 130
Issuance of common shares for cash at $2.39 per share (converted rate), July 1992 1,900 2
Issuance of common shares for cash at $2.52 per share (converted rate), July 1992 2,000 2
Issuance of common shares for services at $2.52 per share (converted rate), July 1992 2,000 2
Issuance of common shares for cash at $5.04 per share (converted rate), July 1992 100
Issuance of common shares for cash at $.004 per share, December 1993 642,741 643
Net loss - February 22, 1990 through December 31, 1993
---------- -------
BALANCE, DECEMBER 31, 1993 842,741 843
Issuance of common shares for cash at $.015 per share, February - December 1994 1,555,000 1,555
Issuance of common shares in reverse acquisition with Erba, December 1, 1994 (Note 5) 7,134,066 7,134
Reclassification of intercompany shares to treasury shares
Net loss - year ended December 31, 1994
---------- ------
BALANCE, DECEMBER 31, 1994 9,531,807 9,532
Issuance of common shares for cash at $1 per share, January 1995 - October 1995 663,000 663
Issuance of common shares for services at $1 per share, January 1995 - October 1995 60,561 60
Issuance of common shares for services at $1.40 per share, October 1995 380,494 381
Notes payable and other liabilities converted to stock at $1.40 per share, October 1995 320,407 320
Net loss - ten month period ended October 31, 1995
---------- ------
BALANCE, OCTOBER 31, 1995 10,956,269 10,956
</TABLE>
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Paid-In Development
Capital Stage
<S> <C> <C>
BALANCE, FEBRUARY 22, 1990 (Date of Inception)
Issuance of common shares in merger with Pentad, July 13, 1992 (Note 5) $ - $ -
Notes and other liabilities converted to stock at $.62 per share (converted rate), July 1992
Issuance of common shares for cash at $2.39 per share (converted rate), July 1992 797,406
Issuance of common shares for cash at $2.52 per share (converted rate), July 1992 44,998
Issuance of common shares for services at $2.52 per share (converted rate), July 1992 49,998
Issuance of common shares for cash at $5.04 per share (converted rate), July 1992 49,998
Issuance of common shares for cash at $.004 per share, December 1993 5,000
Net loss - February 22, 1990 through December 31, 1993 1,857
(1,506,765)
--------- ----------
BALANCE, DECEMBER 31, 1993 949,257 (1,506,765)
Issuance of common shares for cash at $.015 per share, February - December 1994
Issuance of common shares in reverse acquisition with Erba, December 1, 1994 (Note 5) 21,495
Reclassification of intercompany shares to treasury shares
Net loss - year ended December 31, 1994
(294,194)
--------- ----------
BALANCE, DECEMBER 31, 1994 970,752 (1,800,959)
Issuance of common shares for cash at $1 per share, January 1995 - October 1995
Issuance of common shares for services at $1 per share, January 1995 - October 1995 662,337
Issuance of common shares for services at $1.40 per share, October 1995 60,501
Notes payable and other liabilities converted to stock at $1.40 per share, October 1995 534,160
Net loss - ten month period ended October 31, 1995 449,808
(331,485)
--------- ----------
BALANCE, OCTOBER 31, 1995 2,677,558 (2,132,444)
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock
---------------------
Shares Amount
<S> <C> <C>
BALANCE, FEBRUARY 22, 1990 (Date of Inception) $ - $ -
Issuance of common shares in merger with Pentad, July 13, 1992 (Note 5)
Notes and other liabilities converted to stock at $.62 per share (converted rate), July 1992
Issuance of common shares for cash at $2.39 per share (converted rate), July 1992
Issuance of common shares for cash at $2.52 per share (converted rate), July 1992
Issuance of common shares for services at $2.52 per share (converted rate), July 1992
Issuance of common shares for cash at $5.04 per share (converted rate), July 1992
Issuance of common shares for cash at $.004 per share, December 1993
Net loss - February 22, 1990 through December 31, 1993
---------- ------
BALANCE, DECEMBER 31, 1993
Issuance of common shares for cash at $.015 per share, February - December 1994
Issuance of common shares in reverse acquisition with Erba, December 1, 1994 (Note 5)
Reclassification of intercompany shares to treasury shares
Net loss - year ended December 31, 1994 (1,202,886) (1,203)
---------- ------
BALANCE, DECEMBER 31, 1994 (1,202,886) (1,203)
Issuance of common shares for cash at $1 per share, January 1995 - October 1995
Issuance of common shares for services at $1 per share, January 1995 - October 1995
Issuance of common shares for services at $1.40 per share, October 1995
Notes payable and other liabilities converted to stock at $1.40 per share, October 1995
Net loss - ten month period ended October 31, 1995
---------- ------
BALANCE, OCTOBER 31, 1995 (1,202,886) (1,203)
</TABLE>
<TABLE>
<CAPTION>
Total
Stockholders'
Equity
<S> <C>
BALANCE, FEBRUARY 22, 1990 (Date of Inception) $ -
Issuance of common shares in merger with Pentad, July 13, 1992 (Note 5) 64
Notes and other liabilities converted to stock at $.62 per share (converted rate), July 1992 797,536
Issuance of common shares for cash at $2.39 per share (converted rate), July 1992 45,000
Issuance of common shares for cash at $2.52 per share (converted rate), July 1992 50,000
Issuance of common shares for services at $2.52 per share (converted rate), July 1992 50,000
Issuance of common shares for cash at $5.04 per share (converted rate), July 1992 5,000
Issuance of common shares for cash at $.004 per share, December 1993 2,500
Net loss - February 22, 1990 through December 31, 1993 (1,506,765)
----------
BALANCE, DECEMBER 31, 1993 (556,665)
Issuance of common shares for cash at $.015 per share, February - December 1994 23,050
Issuance of common shares in reverse acquisition with Erba, December 1, 1994 (Note 5) 7,134
Reclassification of intercompany shares to treasury shares (1,203)
Net loss - year ended December 31, 1994 (294,194)
----------
BALANCE, DECEMBER 31, 1994 (821,878)
Issuance of common shares for cash at $1 per share, January 1995 - October 1995 663,000
Issuance of common shares for services at $1 per share, January 1995 - October 1995 60,561
Issuance of common shares for services at $1.40 per share, October 1995 534,541
Notes payable and other liabilities converted to stock at $1.40 per share, October 1995 450,128
Net loss - ten month period ended October 31, 1995 (331,485)
----------
BALANCE, OCTOBER 31, 1995 554,867
</TABLE>
(Continued)
- 5 -
<PAGE> 15
BIONUTRICS, INC.
(Formerly NutraGenics, Inc.)
(A Development Stage Company)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PERIOD FROM FEBRUARY 22, 1990 (Date of Inception) TO DECEMBER 31, 1993, YEAR
ENDED DECEMBER 31, 1994, TEN MONTH PERIOD ENDED OCTOBER 31, 1995 AND YEAR ENDED
OCTOBER 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional
---------------------- Paid-In
Shares Amount Capital
<S> <C> <C> <C>
BALANCE, OCTOBER 31, 1995 10,956,269 10,956 2,677,558
Warrants granted for services, May 1996 (Note 5) 87,500
Issuance of common shares for services at $1 per share, May 1996 - August 1996 65,425 65 65,360
Issuance of common shares for cash at $1.50 per share, June 25, 1996 66,667 67 99,933
Issuance of common shares for cash at $1.75 per share, June 25, 1996 60,000 60 104,940
Issuance of common shares for cash at $2 per share, June 1996 - October 1996 255,000 255 509,745
Notes payable converted to stock at $1.50 per share, October 31, 1996 (Note 4) 400,000 400 599,600
Issuance of common shares for cash at $3 per share, October 31, 1996 371,875 372 1,115,253
Issuance of common shares for cash at $5 per share, October 31, 1996 1,000,000 1,000 4,999,000
Issuance of common shares for cash at $1.36 per share (converted rate) under
option agreement, October 31, 1996 (Note 1) 11,111 11 149,989
Issuance of common shares in merger, October 31, 1996 (Note 1) 1,881,632 1,882 (1,882)
Net loss - year ended October 31, 1996
---------- ------- -----------
BALANCE, OCTOBER 31, 1996 15,067,979 $15,068 $10,406,996
========== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
Deficit
Accumulated
During the Treasury Stock Total
Development ------------------ Stockholders'
Stage Shares Amount Equity
<S> <C> <C> <C> <C>
BALANCE, OCTOBER 31, 1995 (2,132,444) (1,202,886) (1,203) 554,867
Warrants granted for services, May 1996 (Note 5) 87,500
Issuance of common shares for services at $1 per share, May 1996 - August 1996 65,425
Issuance of common shares for cash at $1.50 per share, June 25, 1996 100,000
Issuance of common shares for cash at $1.75 per share, June 25, 1996 105,000
Issuance of common shares for cash at $2 per share, June 1996 - October 1996 510,000
Notes payable converted to stock at $1.50 per share, October 31, 1996 (Note 4) 600,000
Issuance of common shares for cash at $3 per share, October 31, 1996 1,115,625
Issuance of common shares for cash at $5 per share, October 31, 1996 5,000,000
Issuance of common shares for cash at $1.36 per share (converted rate) under
option agreement, October 31, 1996 (Note 1) 150,000
Issuance of common shares in merger, October 31, 1996 (Note 1)
Net loss - year ended October 31, 1996 (3,007,547) (3,007,547)
----------- ---------- ------- ----------
BALANCE, OCTOBER 31, 1996 $(5,139,991) (1,202,886) $(1,203) $5,280,870
=========== ========== ======= ==========
</TABLE>
See notes to consolidated financial statements. (Concluded)
-6-
<PAGE> 16
BIONUTRICS, INC.
(Formerly NutraGenics, Inc.)
(A Development Stage Company)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------------------------------------
February 22,
Ten 1990
Month (Date of
Year Period Year Inception)
Ended Ended Ended to
December 31, October 31, October 31, October 31,
1994 1995 1996 1996
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (294,194) $ (331,485) $(3,007,547) $(5,139,991)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 32,765 29,898 27,531 152,499
Stock based compensation expense 87,500 87,500
Expenses incurred in exchange for
common stock 70,613 65,425 626,114
Changes in operating assets and liabilities:
Prepaid expenses 19,327
Other assets (100,000) (25,000) (583,589)
Accounts payable 26,527 123,130 279,137 565,823
Accrued expenses and other liabilities 148,714 (112,017) 362,687 720,055
----------- ----------- ----------- -----------
Net cash used in operating activities (166,861) (244,861) (2,185,267) (3,571,589)
----------- ----------- ----------- -----------
INVESTING ACTIVITIES:
Capital expenditures (91,900) (91,900)
Net (increase) decrease in notes receivable (151,900) (61,800) 195,702 (17,998)
----------- ----------- ----------- -----------
Net cash (used in) provided by
investing activities (151,900) (61,800) 103,802 (109,898)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from long-term debt 311,664 250,000 350,000 986,627
Proceeds from issuance of stock 23,050 663,000 6,980,625 8,566,775
Repayments of long-term debt (1,555) (194,000) (195,555)
----------- ----------- ----------- -----------
Net cash provided by
financing activities 333,159 719,000 7,330,625 9,357,847
----------- ----------- ----------- -----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 14,398 412,339 5,249,160 5,676,360
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 463 14,861 427,200
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 14,861 $ 427,200 $ 5,676,360 $ 5,676,360
=========== =========== =========== ===========
</TABLE>
(Continued)
- 7 -
<PAGE> 17
BIONUTRICS, INC.
(Formerly NutraGenics, Inc.)
(A Development Stage Company)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------------
February 22,
Ten 1990
Month (Date of
Year Period Year Inception)
Ended Ended Ended to
December 31, October 31, October 31, October 31,
1994 1995 1996 1996
<S> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION - Cash
paid during the period for interest $ 575 $ 962 $ 39,813 $ 122,794
======= ======= ========== ===========
SUPPLEMENTAL DISCLOSURES OF
NONCASH INVESTING AND
FINANCING ACTIVITIES:
The Company incurred loans
payable to various stockholders
in exchange for services from
inception to October 31, 1995 totaling
$450,128. In October 1995, the Company
repaid these and other stockholder loans
and current liabilities totaling
$984,669 by issuing 700,901 common shares
of the Company
In October 1995, the Company repaid
loans payable to a stockholder of
$600,000 by issuing 400,000 common
shares of the Company
</TABLE>
See notes to consolidated financial statements. (Concluded)
- 8 -
<PAGE> 18
BIONUTRICS, INC.
(FORMERLY NUTRAGENICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1994, TEN MONTH PERIOD ENDED
OCTOBER 31, 1995, YEAR ENDED OCTOBER 31, 1996 AND
PERIOD FROM FEBRUARY 22, 1990 (DATE OF INCEPTION) TO OCTOBER 31, 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
BIONUTRICS, INC. ("BIONUTRICS") - Subsequent to October 31, 1996,
NutraGenics, Inc. ("NutraGenics") changed its name to Bionutrics.
Bionutrics and its wholly-owned subsidiaries, LipoGenics, Inc.
("LipoGenics"), Bionutrics Health Products, Inc. (formed in November 1996
to market the Company's product), and Nutrition Technologies Corporation
("Nutrition Technologies") (collectively referred to as the "Company") is
considered a development stage company under Statement of Financial
Accounting Standards ("SFAS") No. 7 since no revenues have been earned
from the Company's planned principle operations.
Revenues to date represent amounts derived from a short-term agreement
licensing certain proprietary technology, which expired in 1996. The
planned principal operations are the development, manufacturing, marketing
and selling of dietary supplements using proprietary technology (the
"Technology"). The dietary supplement that the Company will be producing
and marketing is known as Clearesterol. The product is expected to be
marketed beginning in the second or third quarters of fiscal 1997.
Effective with the December 31, 1994 year-end, the Company changed to a
fiscal year-end of October 31.
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in
the consolidated financial statements, during the year ended December 31,
1994, the ten month period ended October 31, 1995, the year ended October
31, 1996 and the period from February 22, 1990 (date of inception) to
October 31, 1996, the Company incurred net losses of approximately
$294,000, $331,000, $3,008,000 and $5,140,000, respectively, however, as
of October 31, 1995 and 1996, the Company's current assets exceeded its
current liabilities by approximately $185,000 and $4,740,000,
respectively, and its total assets exceeded its total liabilities by
approximately $555,000 and $5,281,000, respectively. Losses incurred to
date, the Company's development stage status and the uncertainty regarding
the potential market for the Company's product may indicate that the
Company will be unable to continue as a going concern for a reasonable
period of time.
The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis,
maintaining adequate financing, and ultimately to attain successful
operations.
-9-
<PAGE> 19
Management is continuing its efforts to obtain additional funds so that
the Company can meet its obligations and sustain operations through the
issuance of common stock in private nonregistered transactions. Subsequent
to October 31, 1996, the Company obtained $4,200,000 through an overseas
common stock offering and is in process of obtaining an additional
$1,800,000. In addition, management intends to further the Company through
execution of various distribution and manufacturing agreements and through
the development of nonsupplemental technology products.
To date, management's efforts have been primarily directed towards
obtaining initial capital and financing, developing manufacturing and
distribution arrangements for its dietary supplement product, conducting
research and development, applying for patent approvals and recruiting
employees.
On July 13, 1992, LipoGenics, Inc. ("LipoGenics"), a Delaware corporation
incorporated on July 13, 1992, acquired all of the outstanding shares of
the common stock of Pentad Foods International, Ltd. ("Pentad"), an
Arizona corporation incorporated on February 22, 1990, in exchange for
64,400 shares of LipoGenics' common stock.
On October 31, 1996, NutraGenics acquired LipoGenics, a company controlled
by the controlling stockholders of NutraGenics, through the exchange of
2,092,743 shares of its common stock for all 211,111 shares of outstanding
common stock of LipoGenics. LipoGenics had previously developed the
technology and was the owner of patent applications underlying the
technology. The business combination has been accounted for in a manner
similar to a pooling-of-interests, and, accordingly, the consolidated
financial statements for periods prior to the combination have been
restated to include the results of LipoGenics. In October 1994,
NutraGenics issued 1,202,886 shares of its common stock to LipoGenics in
consideration for a license agreement under which NutraGenics was given
the right to produce and market products. As a result of the pooling, the
common stock of NutraGenics owned by LipoGenics, now a wholly-owned
subsidiary, has been classified as treasury stock.
LipoGenics and its predecessors effectively commenced operations in 1990
and NutraGenics effectively commenced operations in 1994. Accordingly, the
financial statements reflect the accumulated losses of both NutraGenics
and LipoGenics.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the amounts of Bionutrics and its wholly-owned subsidiaries,
LipoGenics, and Nutrition Technologies. All significant intercompany
balances and transactions have been eliminated.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to
be cash and cash equivalents.
PROPERTY AND DEPRECIATION - Property is stated at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of
the individual assets, which range from three to five years. Expenditures
for additions are capitalized. Expenditures of a repair and maintenance
nature are expensed when incurred.
-10-
<PAGE> 20
LICENSING FEES - The Company recognizes licensing fees as revenue over
the license term.
PATENTS - Legal and other costs related to patent applications are
capitalized as incurred and amortized using a straight-line basis over 17
years commencing at the date patent approval is obtained. Patents
currently capitalized and unamortized relate to both the processes and
products associated with the Company's business.
INCOME TAXES are accounted for under the asset and liability approach,
which can result in recording tax provisions or benefits in periods
different from the periods in which such taxes are paid or benefits
realized. Deferred federal income taxes result principally from certain
tax carryforwards that are recognized for financial reporting purposes in
different years than for income tax reporting purposes.
RESEARCH AND DEVELOPMENT - The cost of research and development is charged
to expense as incurred.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The fair values of notes receivable,
accounts payable, accrued compensation and other accrued liabilities
approximate the carrying value due to the short-term nature of these
instruments.
STOCK OPTIONS have been accounted for in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.
Options granted to consultants or independent contractors are recorded as
expense, based on the fair market value of the stock, at the date of
grant.
NEWLY ISSUED ACCOUNTING PRONOUNCEMENT - In October 1995, SFAS No. 123,
Accounting for Stock Based Compensation, was issued. SFAS No. 123
establishes a fair value based method of accounting for stock-based
compensation plans and the related disclosures. The Company is required to
adopt the disclosure requirements of SFAS No. 123 for the year ending
October 31, 1997, as they relate to employee stock based compensation
plans. The Company has not completed the process of evaluating the impact
that will result from SFAS No. 123, but no material impact on the results
of operations or the financial condition of the Company is expected. SFAS
No. 123 is effective for non-employee stock based compensation plans for
all transactions entered into after December 15, 1995.
3. NOTES RECEIVABLE
At October 31, 1996, a stockholder and employee owes the Company $16,665
on a note receivable. Principal plus interest calculated at 8% per annum
are due on or before April 30, 1998.
Notes receivable of $147,000 and the related accrued interest at October
31, 1995, were converted to compensation during the fiscal year ended
October 31, 1996 and recorded as compensation expense. Remaining notes
receivable of $50,000 at October 31, 1995, from a stockholder, were repaid
during 1996.
4. NOTE PAYABLE
At October 31, 1995, the Company had a note payable of $250,000 to a
stockholder of the Company and during 1996, the same stockholder advanced
an additional $350,000 to the Company. Prior to October 31, 1996, the
stockholder exercised the right and option under the note agreements to
accept as repayment 400,000 shares of unregistered common stock of the
Company at a price of $1.50 per share.
-11-
<PAGE> 21
5. STOCKHOLDERS' EQUITY
On December 29, 1994, Erba Corporation ("Erba"), a Nevada corporation with
no operations, acquired all 143,204 shares of the common stock of
NutraGenics, Inc., a Delaware corporation incorporated on April 5, 1994
("NutraGenics - Delaware"), in exchange for 7,134,066 shares of Erba's
common stock. Erba then changed its name to NutraGenics, Inc. For
accounting purposes, the acquisition has been treated as a
reverse-acquisition of Erba by NutraGenics - Delaware with NutraGenics -
Delaware being treated as the acquiror ("reverse-acquisition"). The
historical financial statements prior to December 29, 1994, are those of
NutraGenics - Delaware. The pro forma effects of the acquisition for the
period prior to the acquisition are not significant.
EMPLOYEE STOCK-BASED COMPENSATION - At October 31, 1995, the Company
granted 180,000 options to a stockholder and board member to purchase
shares of the Company's unregistered common stock at an exercise price of
$1.50 per share for a period of three years commencing October 31, 1995.
No options under this agreement have been exercised at October 31, 1996.
At October 31, 1996, the Company authorized 1,900,000 shares of common
stock for issuance under its 1996 Stock Option Plan (the "1996 Plan") to
key personnel, consultants and independent contractors. The incentive
stock options are granted to purchase common stock at 100% (110% for an
optionee who is a 10% stockholder) of the fair market value of the
stock on the date of grant. Non-qualified stock options are granted to
purchase common stock at a price determined by the plan administrator.
Options granted under this plan can be exercisable for a period of up to
ten years from the date of grant (five years for an option granted to a
10% stockholder). All participants are eligible to receive stock
awards and stock appreciation rights, as to be determined by the Company's
board of directors. At October 31, 1996, 1,223,000 options with a five
year exercise period and an option price of $5 were granted under the
plan. These options vest equally over a three year period from the date of
grant. No stock awards or stock appreciation rights have been granted
under the plan. No options under the 1996 Plan have been exercised at
October 31, 1996.
NONEMPLOYEE STOCK-BASED COMPENSATION - At July 21, 1992, the Company
granted 110,144 options to a stockholder to purchase shares of the
Company's unregistered common stock at a total exercise price of $150,000
expiring on the earlier of July 21, 2002, or a public offering of the
Company's shares of common stock, none of which have been exercised at
October 31, 1996. Options to another stockholder under a similar agreement
were fully exercised at October 31, 1996.
In May 1996, the Company granted 600,000 warrants to a stockholder and
board member to purchase shares of common stock at an exercise price of
$2.50 per share for the first 300,000 shares and $4 per share for the
remaining 300,000 shares in exchange for consulting services rendered, or
to be rendered, to the Company. Of the 600,000 warrants granted, 200,000
became exercisable at the date of grant and the remaining warrants become
exercisable at a rate of 50,000 per quarter commencing August 1996 through
May 1998. All warrants have ten year exercise periods. The fair value of
each warrant is estimated on the date of grant using the Black-Scholes
pricing model with the following weighted average assumptions used for
grants in 1996: risk free interest rate of 6%; expected dividend yield of
0%; expected life of five years; and, expected volatility of 60%.
Compensation related to warrants granted at fair market value totaling
$87,500 was expensed during 1996. None of the warrants granted under this
agreement have been exercised at October 31, 1996.
-12-
<PAGE> 22
6. INCOME TAXES
The Company had no income tax liability at December 31, 1994, October 31,
1995 or 1996, as it has generated operating losses to date. At October 31,
1996, the Company had available for federal income tax purposes the
following tax carryforwards:
<TABLE>
<CAPTION>
Year of Expiration Amount
<S> <C>
2009 $1,801,000
2010 331,000
2011 3,008,000
----------
Total net operating losses $5,140,000
==========
</TABLE>
At October 31, 1995 and 1996, a deferred tax asset of approximately
$725,000 and $1,748,000, respectively, relating to such potential tax
benefits was fully offset by a valuation allowance.
7. OPERATING LEASE
The Company leases office space under a three year operating lease
beginning December 1, 1995, which contains option renewal provisions and
escalation of future rents. Total rental expense was approximately $96,000
for fiscal year 1996. Future minimum lease payments under noncancellable
operating leases at October 31 are as follows:
<TABLE>
<S> <C>
1997 $ 94,800
1998 97,700
1999 8,100
--------
Total $200,600
========
</TABLE>
8. RELATED PARTY
Various stockholders have provided consulting and other administrative
services to the Company. Expense for the year ended December 31, 1994, the
ten month period ended October 31, 1995, the year ended October 31, 1996
and the period from inception to October 31, 1996 was approximately
$55,000, $69,000, $469,000 and $977,000, respectively, and is included in
consulting, research and development, and other operating expenses in the
accompanying consolidated statements of operations.
Interest paid to stockholders in connection with outstanding notes was
approximately $46,000, $34,000, $35,000 and $213,000 for the year ended
December 31, 1994, the ten month period ended October 31, 1995, the year
ended October 31, 1996 and the period from inception to October 31, 1996,
respectively.
-13-
<PAGE> 23
JOINT VENTURE
On July 31, 1996, the Company entered into an agreement with InCon Technologies,
L.L.C. to form a limited liability company ("joint venture") to undertake the
further research and development of certain non-proprietary dietary supplements
and other non-proprietary nutritional and health promoting products and to
manufacture, market and sell existing, as well as newly developed supplements
and products. The two companies will share equally in the capital contributions,
profits and losses derived, and management of the joint venture. No costs were
incurred prior to October 31, 1996, however, approximately $400,000 was incurred
subsequent to year-end. The investment is accounted for under the equity method.
The Company believes that the investment will be recovered through the sale of
products which the joint venture will produce.
******
-14-
<PAGE> 24
BIONUTRICS, INC.
QUARTERLY REPORT
FOR THE QUARTER ENDED JANUARY 31, 1997
TABLE OF CONTENTS
<TABLE>
<S> <C>
Consolidated Balance Sheets-
January 31, 1997 (unaudited) and October 31, 1996 .............. 1
Consolidated Unaudited Statements of Operations -
Three Months Ended January 31, 1997 and 1996 ................... 2
Consolidated Unaudited Statements of Cash Flows-
Three Months Ended January 31, 1997 and 1996 .................. 3
Notes To Consolidated Financial Statements ............................ 4
Managements Discussion and Analysis of Financial Condition and
Results of Operations............................................ 5
</TABLE>
<PAGE> 25
[BIONUTRICS LOGO]
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
1997 1996
(UNAUDITED)
------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,521,012 $ 5,676,360
Inventory 33,962
Prepaid expenses 84,168
Other receivable 14,638
------------------------------
Total Current Assets 4,653,780 5,676,360
------------------------------
PROPERTY, PLANT and EQUIPMENT 539,982 91,900
Less-Accumulated depreciation (27,386) (21,701)
------------------------------
Net Property, Plant and Equipment 512,596 70,199
------------------------------
OTHER ASSETS:
Notes Receivable 16,665
Accrued interest 1,333
Patent applications and other related costs 451,682 452,791
Other 400,000
------------------------------
Total Other Assets 851,682 470,789
------------------------------
TOTAL $ 6,018,058 $ 6,217,348
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 235,367 $ 565,823
Accrued Liabilities 344,000 370,655
------------------------------
Total Current Liabilities 579,367 936,478
------------------------------
STOCKHOLDERS' EQUITY
Common Stock 15,307 15,068
Additional Paid in Capital 11,816,061 10,406,996
Deficit accumulated during the development stage (6,391,474) (5,139,991)
Common stock in treasury (1,203) (1,203)
------------------------------
Total stockholders' equity 5,438,691 5,280,870
------------------------------
TOTAL $ 6,018,058 $ 6,217,348
==============================
</TABLE>
The accompanying notes are an integral part of these consolidated balance sheets
<PAGE> 26
[BIONUTRICS LOGO]
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended January 31,
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
REVENUES: $ 0 $ 0
------------ ------------
EXPENSES:
Consulting Services 288,441 33,782
Research and development 62,474 92,295
Other operating expenses 956,323 457,757
------------ ------------
Total expenses 1,307,238 583,834
------------ ------------
OTHER (EXPENSE) INCOME:
Interest Income 55,992 819
Interest Expense (15,925)
Loss on disposal of asset (237)
------------ ------------
Total other expense 55,755 (15,106)
------------ ------------
LOSS BEFORE PROVISION FOR
INCOME TAXES (1,251,483) (598,940)
------------ ------------
PROVISION FOR INCOME TAXES 0 0
------------ ------------
NET LOSS $ (1,251,483) $ (598,940)
============ ============
Net loss per common share and
common share equivalent $ (0.08) $ (0.06)
============ ============
Weighted average number of common
shares and common share equivalents
outstanding 15,222,451 10,956,269
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements
of operation
<PAGE> 27
[BIONUTRICS LOGO]
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months
Ended January 31,
--------------------------
OPERATING ACTIVITIES: 1997 1996
--------------------------
<S> <C> <C>
Net Loss $(1,251,483) $(598,940)
Adjustments to reconcile net loss to cash used in operations:
Depreciation and amortization 7,984 4,915
Expenses incurred in exchange for common stock 25,000
Non-employee stock based compensation 18,000
Changes in operating assets and liabilities:
Receivables 3,361 197,000
Inventory (33,962)
Prepaids (84,168)
Accounts payable and accrued liabilities (357,113) 79,221
--------------------------
Net cash used in operating activities (1,672,381) (317,804)
--------------------------
INVESTING ACTIVITIES:
Capital expenditures (449,271) (48,109)
Investment in NuRx (400,000)
--------------------------
Net cash (used in) provided by investing activities (849,271) (48,109)
--------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of stock 1,366,304
--------------------------
Net cash provided by financing activities 1,366,304 0
--------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,155,348) (365,913)
--------------------------
CASH AND CASH EQUIVALENTS, BEG OF PERIOD 5,676,360 427,200
--------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,521,012 $ 61,287
==========================
</TABLE>
The accompanying notes are an integral part of these consolidated statements of
cash flow
<PAGE> 28
BIONUTRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A- The accompanying unaudited Consolidated Financial Statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do
not included all the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash
flows for all periods presented have been made. The results of
operations for the three month period ended January 31, 1997 are
not necessarily indicative of the operating results that may be
expected for the entire year ending October 31, 1997. These
financial statements should be read in conjunction with the
Company's October 31, 1996 financial statements and accompanying
notes thereto.
NOTE B- Net Loss per share is computed by dividing net loss by the weighted
average number of common shares assumed outstanding during the
three-month periods. Options and warrants are excluded from the net
loss per share calculation as they are anti-dilutive.
NOTE C- The company raised $1,366,304 in capital through issuance of common
stock during the quarter ended January 31, 1997. This capital stock
was issued at $5.00 to $7.00 per share.
NOTE D- The company invested $400,000 in a joint venture with InCon
Technologies during the quarter ended January 31, 1997. On July 31,
1996, the Company entered into an agreement with InCon Technologies,
L.L.C. to form a limited liability company ("joint venture") to
undertake the further research and development of certain
non-proprietary dietary supplements and other non-proprietary
nutritional and health promoting products and to manufacture, market
and sell existing, as well as newly developed supplements and
products. The two companies will share equally in the capital
contribution, profits and losses derived, and management of the
joint venture.
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Three months ended January 31, 1997 and January 31, 1996
There were no revenues recorded in the first quarter as the Company is
presently transitioning from research and development to sales and distribution.
The sale of its first product is targeted for April 1997.
Consulting services were $288,441 for the quarter ended January 31,
1997 compared to $33,782 for the same period in 1996. This increase is primarily
attributable to expenditures relating to preparation for product introduction.
Research and development expenses were $62,474 for the quarter ended
January 31, 1997 compared to $92,295 for the same period in 1996. This decrease
is due to lower levels of research and development as the Company is moving from
a research to a production mode.
Other operating expenses were $956,323 for the quarter ended January
31, 1997 compared to $457,757 for the same period in 1996. This increase in
operating expenses is due primarily to higher levels of salaries and related
costs for anticipated product sales and distribution in the second quarter of
1997.
Interest income was $55,992 for the quarter ended January 31, 1997
compared to $819 for the same period in 1996 due to increased levels of cash.
Net loss increased to $(1,251,483) or $(.08) per share for the quarter
ended January 31, 1997 from $(598,940), or $(.06) per share, for the quarter
ended January 31, 1996 due to increased levels of expenses as outlined above.
LIQUIDITY AND CAPITAL RESOURCES
Three months ended January 31, 1997 and January 31, 1996
Net cash used in operating activities during the quarter ended January
31, 1997 was $1,672,381 as compared to $317,804 during the same period in 1996.
The increase in cash used is primarily due to increased expenses incurred in
preparation for the launch of the Company's product in the second quarter.
Net cash used in investing activities during the quarter ended January
31, 1997 was $849,271 as compared to $48,109 during the same period in 1996.
This increase is attributable to a $400,000 investment in a joint venture and
capital expenditures for manufacturing operations.
The Company received proceeds from issuance of its Common Stock in the
quarter ended January 31, 1997 of $1,366,304 versus $0 for the same period in
1996.
