<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF
1934
For Quarter Ended JULY 31, 1997
Commission File Number 0-22011
BIONUTRICS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 86-0760991
(State or other jurisdiction of I.R.S. Employer
incorporation of organization) Identification Number
2425 E. CAMELBACK RD., SUITE 650 PHOENIX, ARIZONA 85016
(Address of principal executive offices) (Zip code)
602-508-0112
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, at the latest practical date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AS OF AUGUST 29, 1997
- ----- ---------------------------------
<S> <C>
COMMON 16,251,705
PAR VALUE $.001 PER SHARE
</TABLE>
<PAGE> 2
BIONUTRICS, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
ITEM I. Condensed Consolidated Financial Statements:
Consolidated Balance Sheet 3
Consolidated Statement of Operations 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis 8
PART II. OTHER INFORMATION
ITEM 2(C) Changes in Securities 11
ITEM 6 Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
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BIONUTRICS, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JULY 31 OCTOBER 31,
1997 1996
(UNAUDITED)
---------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,020,312 $ 5,676,360
Trade receivables, net $ 1,024,841
Inventory 815,516
Prepaid expenses 105,784
Other receivables 33,723
---------------------------------
Total current assets 6,000,176 5,676,360
---------------------------------
PROPERTY, PLANT and EQUIPMENT 1,497,945 91,900
Less-Accumulated depreciation (113,552) (21,701)
---------------------------------
Net Property, Plant and Equipment 1,384,393 70,199
---------------------------------
OTHER ASSETS:
Notes receivable 16,665
Accrued interest 1,333
Patent applications and other related costs 445,023 452,791
Investment in joint venture 400,000
---------------------------------
Total other assets 845,023 470,789
---------------------------------
TOTAL $ 8,229,592 $ 6,217,348
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,296,517 $ 565,823
Accrued liabilities 1,064,555 370,655
---------------------------------
Total current liabilities 2,361,072 936,478
---------------------------------
STOCKHOLDERS' EQUITY
Common stock 16,249 15,068
Additional paid-in capital 18,377,822 10,406,996
Accumulated deficit (12,524,348) (5,139,991)
Common stock in treasury (1,203) (1,203)
---------------------------------
Total stockholders' equity 5,868,520 5,280,870
---------------------------------
TOTAL $ 8,229,592 $ 6,217,348
=================================
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE> 4
BIONUTRICS
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended July 31 Ended July 31
1997 1996 1997 1996
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
GROSS SALES $ 1,668,285 $ 20,000 $ 1,834,269 $ 20,000
DISCOUNTS AND ALLOWANCES 315,276 0 335,966 0
----------------------------------------------------------------------
NET SALES 1,353,009 20,000 1,498,303 20,000
COST OF SALES 2,102,049 $ 0 2,763,721 0
----------------------------------------------------------------------
GROSS PROFIT (LOSS) (749,040) 20,000 (1,265,418) 20,000
----------------------------------------------------------------------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,996,848 618,372 6,342,882 1,478,503
----------------------------------------------------------------------
OTHER (EXPENSE) INCOME 97,015 (3,108) 223,943 (22,753)
----------------------------------------------------------------------
LOSS BEFORE PROVISION FOR
INCOME TAXES (3,648,873) (601,480) (7,384,357) (1,481,256)
----------------------------------------------------------------------
PROVISION FOR INCOME TAXES 0 0 0 0
----------------------------------------------------------------------
NET LOSS ($3,648,873) ($601,480) ($ 7,384,357) ($1,481,256)
======================================================================
Loss per common share ($0.22) ($0.05) ($0.47) ($0.13)
======================================================================
Weighted average number of common
shares outstanding 16,227,993 11,124,428 15,792,589 11,012,322
======================================================================
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE> 5
BIONUTRICS
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months
Ended July 31
OPERATING ACTIVITIES: 1997 1996
------------------------------------
<S> <C> <C>
Net Loss ($7,384,357) ($1,481,255)
Adjustments to reconcile net loss to cash used in operations
Depreciation and amortization 100,808 13,044
Expenses incurred in exchange for common stock 174,996
Loss on disposal of asset 237
Non-employee stock-based compensation 428,500
Changes in operating assets and liabilities
Receivables (1,040,566) 183,701
Inventory (815,516)
Prepaids (105,784)
Accounts payable and accrued liabilities 1,424,594 417,314
------------------------------------
Net cash used in operating activities (7,217,088) (867,196)
------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (1,413,177) (48,109)
Disposal of fixed asset 5,706
Investment in joint venture (400,000)
------------------------------------
Net cash (used in) provided by investing activities (1,807,471) (48,109)
------------------------------------
FINANCING ACTIVITIES:
Net proceeds from issuance of stock 7,368,511 1,822,332
------------------------------------
Net cash provided by financing activities 7,368,511 1,822,332
------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,656,048) 907,027
CASH AND CASH EQUIVALENTS, BEG OF PERIOD 5,676,360 427,200
------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $4,020,312 $1,334,227
====================================
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE> 6
BIONUTRICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - The accompanying unaudited condensed Consolidated Financial
Statements have been prepared in accordance with generally
accepted accounting principles for interim financial
information and the instructions to Form 10-Q. Accordingly,
they do not include 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- and nine- month
periods ended July 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 presented periods. Options and warrants are
excluded from the net loss per share calculation as they are
anti-dilutive.
NOTE C - The company raised $7,368,511 in capital through issuance of
common stock during the nine months ended July 31, 1997. This
capital stock was issued at $5.00 to $7.00 per share.
NOTE D - The company invested $400,000 in NuRx, a joint venture with
InCon Technologies L.L.C. 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. No revenues were earned or costs incurred
prior to July 31, 1997. The investment is accounted for under
the equity method. The company believes that the investment
will be recovered through the sale of products that the joint
venture will produce.
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NOTE E - The Financial Accounting Standards Board recently issued SFAS
No. 130 on "Reporting Comprehensive Income", SFAS No. 131 on
"Disclosure About Segments of an Enterprise and Related
Information" and SFAS 128 on "Earnings Per Share". The
"Reporting Comprehensive Income" standard is effective for
fiscal years beginning after December 15, 1997. The standard
changes the reporting of certain items currently reported in
the common stock equity section of the balance sheet. The
"Disclosures about Segments of an Enterprise and Related
Information" standard is effective for fiscal years beginning
after December 15, 1997. This standard requires that public
companies report certain information about operating segments
in their financial statements. It also establishes related
disclosures about products and services, geographic areas, and
major customers. The Company is currently evaluating what
impact this standard will have on its disclosures. The
"Earnings Per Share" standard is effective for both interim
and annual periods ending after December 15, 1997. The Company
does not believe the adoption of the standard will have a
significant effect on previously reported earnings per share.
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<PAGE> 8
BIONUTRICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Three months ended July 31, 1997 compared with three months ended July 31, 1996
RESULTS OF OPERATIONS
Results of operations for the third quarter of Fiscal 1997 as compared to 1996
reflect the activities of Bionutrics, Inc. in transition from a research and
development mode to production and sales.
The company continued to rollout nationally its first product evolvE(TM) during
the quarter and also recognized sales from production byproducts. Consolidated
gross sales for the quarter ended July 31, 1997 were $1,668,285 versus $20,000
for the same quarter in 1996. Of the reporting quarter sales, $1,536,150 was
attributable to the sale of evolvE. As of the end of the third quarter evolvE
was distributed by many leading drug and food chains and mass merchandisers
throughout the United States. The $20,000 in revenues for the prior year was
derived from a short-term agreement licensing certain proprietary technology and
does not pertain to the sale of a consumer product.
Cost of sales for the quarter ended July 31, 1997 was $2,102,049 versus $0 for
the same quarter in 1996. Cost of sales for the third quarter ended July 31,
1997 resulted in negative margins as the company has not achieved operating
level efficiency due to low volume activity and start-up cost associated with
initial product introduction.
Selling, general and administrative expenses for the quarter ended July 31, 1997
of $2,996,848 were $2,378,476 higher than that recognized for the same quarter
in 1996 of $618,372. This increase in expenses directly reflects preparation for
product launch and infrastructure development chiefly during 1997. Significant
increases were incurred for salaries, advertising and marketing, legal and
consulting fees.
Other income for the quarter ended July 31, 1997 was $97,015 versus $(3,108) for
the same quarter for the prior year. The increased income is attributable to
increased interest earnings from higher balances of cash.
Net loss increased to $(3,648,873) or $(0.22) per share for the quarter ended
July 31, 1997 from $(601,480) or $(0.05) per share for the quarter ended July
31, 1996 due primarily to the increased levels of expenses as outlined above
offset in part by sales.
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<PAGE> 9
Nine months ended July 31, 1997 compared with nine months ended July 31, 1996
RESULTS OF OPERATIONS
Trends and comments as noted for the third quarter apply also to the nine month
year to date comparisons. Results of operations for the first nine months of
Fiscal 1997 as compared to 1996 reflect the activities of Bionutrics, Inc. in
transition from a research and development mode to production and sales.
The company continued to rollout nationally its first product evolvE(TM) during
the third quarter and also recognized sales from production byproducts.
Consolidated gross sales for the nine months ended July 31, 1997 were,
$1,834,269 versus $20,000 for the same nine months in 1996. Of the $1,834,269 in
gross sales, $1,702,134 was attributable to the sale of evolvE. As of the end of
the third quarter evolvE was distributed by many leading drug and food chains
and mass merchandisers throughout the United States. The $20,000 in revenues for
the prior year was derived from a short-term agreement licensing certain
proprietary technology and does not pertain to the sale of a consumer product.
Cost of sales for the nine months ended July 31, 1997 was $2,763,721 versus $0
for the same nine months in 1996. Cost of sales for the third quarter ended July
31, 1997 resulted in negative margins as the company has not achieved operating
level efficiency due to low volume activity and start-up cost associated with
initial product introduction.
Selling, general and administrative expenses for the nine months ended July 31,
1997 of $6,342,882 were $4,864,379 higher than that recognized for the same nine
months in 1996 of $1,478,503. This increase in expenses directly reflects
preparation for product launch and infrastructure development chiefly during
1997. Significant increases were incurred for salaries, advertising and
marketing, legal and consulting fees.
Other income for the nine months ended July 31, 1997 was $223,943 versus
$(22,753) for the same quarter for the prior year. The increased income is
attributable to increased interest earnings from higher balances of cash.
Net loss increased to $(7,384,357) or $(0.47) per share for the nine months
ended July 31, 1997 from $(1,481,256), or $(0.13) per share for the nine months
ended July 31, 1996 due primarily to the increased levels of expenses as
outlined above offset in part by sales.
-9-
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities during the nine months ended July 31, 1997
was $7,217,088 as compared to $867,196 during the same period in 1996. The
increase in cash used was primarily due to increased expenses incurred in
preparation for the launch of the company's product evolve in the second and
third quarter along with investment in inventory and build-up of accounts
receivable from sales made.
Net cash used in investing activities during the nine months ended July 31, 1997
was $1,807,471 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 the
balance in capital expenditures primarily for manufacturing operations.
The company received net proceeds from issuance of its common stock in the nine
months ended July 31, 1997 of $7,368,511 versus $1,822,332 from the same period
in 1996.
The Company's current cash resources, informal commitments for additional
financing and expected cash flow from operations are projected to be sufficient
to fund its capital needs for the foreseeable future. However, the Company may
seek to raise additional capital through public or private equity financings or
by securing a bank line of credit. There can be no assurance that such
additional financing if necessary will be attainable, or attainable on terms
acceptable to the Company, and, if necessary and not secured, such lack of
capital could have a material adverse affect on the Company's business. Access
by the company to additional capital would depend upon prevailing market
conditions, interest rates and the financial condition of the Company at the
time.
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<PAGE> 11
BIONUTRICS, INC.
PART II - OTHER INFORMATION
ITEM 2(C) Changes in Securities:
Pursuant to private placement under section 4(2) of
the Securities Act of 1933, in June, the Registrant
issued 21,428 shares to an existing shareholder and
director as reimbursement for research expenses.
ITEM 6 Exhibits and Reports on Form 8-K
Exhibits - none
Reports on Form 8-K - none
-11-
<PAGE> 12
BIONUTRICS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Bionutrics, Inc.
(Registrant)
Dated: August 29, 1997 By:/s/George E. Duck, Jr.
----------------------
Its: Vice President, Finance
Secretary and Treasurer
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 4,020
<SECURITIES> 0
<RECEIVABLES> 1,039
<ALLOWANCES> 14
<INVENTORY> 815
<CURRENT-ASSETS> 6,000
<PP&E> 1,497
<DEPRECIATION> 113
<TOTAL-ASSETS> 8,229
<CURRENT-LIABILITIES> 2,361
<BONDS> 0
0
0
<COMMON> 16
<OTHER-SE> 5,852
<TOTAL-LIABILITY-AND-EQUITY> 8,229
<SALES> 1,498
<TOTAL-REVENUES> 1,498
<CGS> 2,763
<TOTAL-COSTS> 2,763
<OTHER-EXPENSES> 6,342
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,384)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,384)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,384)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)
</TABLE>
