<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 30, 2000
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____TO____
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 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 JUNE 10, 2000
----- -------------------------------
<S> <C>
COMMON 20,936,252
PAR VALUE $.001 PER SHARE
</TABLE>
<PAGE> 2
BIONUTRICS, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
ITEM I. Condensed Consolidated Financial Statements (Unaudited):
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial
Statements 6
ITEM 2. Management's Discussion and Analysis 7
PART II. OTHER INFORMATION
ITEM 2(c) Changes in Securities
12
ITEM 4 Submission of Matters to a Vote of Security Holders 12
ITEM 6 Exhibits and Reports on Form 8-K 13
SIGNATURE 14
2
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BIONUTRICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
2000 1999
------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 276,290 $ 680,190
Trade receivables - net of allowance for bad debts of $50,314
and $48,925, respectively 1,412,060 1,364,823
Inventory 226,062 259,489
Prepaids and other current assets 102,303 99,942
------------------------------------
Total Current Assets 2,016,715 2,404,444
------------------------------------
PROPERTY - net of accumulated depreciation of $314,127
and $264,354, respectively 40,886 90,659
------------------------------------
OTHER ASSETS:
Patent applications and other related costs - net of accumulated
amortization of $156,838 and $149,664, respectively 412,627 419,801
Investment in InCon Processing, LLC 2,258,452 2,271,127
------------------------------------
Total Other Assets 2,671,079 2,690,928
------------------------------------
TOTAL $ 4,728,680 $ 5,186,031
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 524,236 $ 533,013
Accrued liabilities 1,146,189 1,175,275
Current portion of notes payable and capital leases 979,579 331,529
------------------------------------
Total Current Liabilities 2,650,004 2,039,817
------------------------------------
NOTES PAYABLE AND CAPITAL LEASES - Net of
current portion 2,278
------------------------------------
Total Liabilities 2,650,004 2,042,095
------------------------------------
STOCKHOLDERS' EQUITY
Common stock 20,933 20,809
Additional paid-in capital 32,743,240 32,216,750
Warrants 3,143,186 3,254,986
Accumulated deficit (33,827,480) (32,347,406)
Common stock in treasury, at cost (1,203) (1,203)
------------------------------------
Total Stockholders' Equity 2,078,676 3,143,936
------------------------------------
TOTAL $ 4,728,680 $ 5,186,031
====================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
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BIONUTRICS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended April 30 Ended April 30
-----------------------------------------------------------------------------------
2000 1999 2000 1999
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Revenue from services $ 32,242 $ 1,102,914 $ 162,724 $ 1,794,633
Revenue from product sales 43,673 544,996 100,727 988,094
-----------------------------------------------------------------------------------
Total gross revenues 75,915 1,647,910 263,451 2,782,727
DISCOUNTS AND ALLOWANCES 43,649 228,529 79,921 404,339
-----------------------------------------------------------------------------------
Net revenues 32,266 1,419,381 183,530 2,378,388
COST OF REVENUES 20,299 897,052 37,681 1,784,594
-----------------------------------------------------------------------------------
Gross profit 11,967 522,329 145,849 593,794
-----------------------------------------------------------------------------------
OPERATING EXPENSES:
Selling, general and administrative 1,002,073 1,839,659 1,527,915 3,473,559
Research and development 41,827 125,693 82,705 187,618
-----------------------------------------------------------------------------------
Total operating expenses 1,043,900 1,965,352 1,610,620 3,661,177
-----------------------------------------------------------------------------------
Operating loss (1,031,933) (1,443,023) (1,464,771) (3,067,383)
-----------------------------------------------------------------------------------
OTHER INCOME (EXPENSE): 70,919 (52,716) (15,303) (63,344)
-----------------------------------------------------------------------------------
NET LOSS ($961,014) ($1,495,739) ($1,480,074) ($3,130,727)
===================================================================================
Weighted average number of common
shares outstanding 20,868,395 20,805,732 20,843,054 20,622,398
===================================================================================
Basic net loss per common share ($0.05) ($0.07) ($0.07) ($0.15)
===================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
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BIONUTRICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months
Ended April 30
------------------------------------
OPERATING ACTIVITIES: 2000 1999
------------------------------------
<S> <C> <C>
Net Loss ($1,480,074) ($3,130,727)
Adjustments to reconcile net loss to cash used in operations:
Depreciation and amortization 56,947 416,591
Loss on investment in joint venture 12,675
Stock-based compensation expense 28,614
Expenses satisfied with issuance of common stock 414,814 274,103
Changes in operating assets and liabilities:
Trade receivables-net (47,237) (55,840)
Inventory 33,427 398,943
Prepaids and other current assets (2,361) (21,506)
Accounts payable (8,777) (32,849)
Accrued liabilities (29,086) 190,857
------------------------------------
Net cash used in operating activities (1,049,672) (1,931,814)
------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (81,838)
Proceeds from disposal of assets 4,000
------------------------------------
Net cash used in investing activities (77,838)
------------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of stock and warrants 500,000
Proceeds from debt 650,000 200,000
Repayments of debt & capital leases (4,228) (7,229)
------------------------------------
Net cash provided by financing activities 645,772 692,771
------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (403,900) (1,316,881)
CASH AND CASH EQUIVALENTS, BEG OF PERIOD 680,190 1,704,400
------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 276,290 $ 387,519
====================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
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BIONUTRICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 completed 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 six-month period ended April 30, 2000 are not
necessarily indicative of the operating results that may be
expected for the entire year ending October 31, 2000. These
financial statements should be read in conjunction with the
Company's financial statements and accompanying notes thereto as
of and for the year ended October 31, 1999. 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. The Company has incurred operating losses since
inception through April 30, 2000 of $33,827,480, which have been
funded through the issuance of stock and debt. The losses
incurred to date, the uncertainty regarding the ability to raise
additional capital and the Company's inability to generate
positive cash flows from operations may indicate that the Company
will be unable to continue as a going concern for a reasonable
period of time.
NOTE B - Basic 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
basic net loss per share calculation as they are anti-dilutive.
NOTE C - In December 1999, the Company borrowed $500,000 on a short-term
basis from a director. The loan is a demand loan and bears
interest at the rate of 9.5% annually. In April 2000, the
Company borrowed $150,000 from an unrelated third party. The
loan bears no interest but is subject to a $50,000 fee payable at
the time of the loan repayment. Repayment of both the loan and
fee are contingent upon the receipt of future funding by the
Company.
NOTE D - In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133
requires that an enterprise recognize all derivatives as either
assets or liabilities in the statement of financial position and
measure those instruments at fair value. The statement is
effective for the Company's fiscal year ending October
6
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31, 2001. The Company has not yet completed evaluating the impact of
implementing the provisions of SFAS No. 133.
BIONUTRICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE FOLLOWING DISCUSSION OF THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF
OPERATIONS INCLUDES CERTAIN FORWARD LOOKING STATEMENTS. WHEN USED IN THIS
REPORT, THE WORDS "EXPECTS," "INTENDS," "PLANS" AND "ANTICIPATES" AND SIMILAR
TERMS ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS THAT RELATE TO THE
COMPANY'S FUTURE PERFORMANCE. SUCH STATEMENTS INVOLVE RISKS AND UNCERTAINTIES.
THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED
HERE. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED
TO, THOSE DISCUSSED UNDER "BUSINESS-SPECIAL CONSIDERATIONS" IN THE COMPANY'S
FORM 10-K.
RESULTS OF OPERATIONS
Three months ended April 30, 2000 compared with three months ended April 30,
1999.
Consolidated gross revenues for the quarter ended April 30, 2000 were $76,000
versus $1,648,000 for the same quarter in 1999, summarized by subsidiary as
follows:
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
SUBSIDIARY APRIL 30,
------------------------ ---------------------------
2000 1999
------- ----------
<S> <C> <C>
InCon Technologies $ 0 $1,312,000
Bionutrics Health Products 44,000 276,000
Nutrition Technology 0 60,000
LipoGenics 32,000 0
------- ----------
TOTAL CONSOLIDATED GROSS REVENUES $76,000 $1,648,000
======= ==========
</TABLE>
InCon Technologies (InCon) decrease in revenues is attributable to the new 50/50
venture entered into during the third quarter of fiscal 1999 with AC HUMKO
CORP., wherein InCon transferred substantially all of its assets to a newly
formed limited liability
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company, InCon Processing, LLC ("InCon Processing"). InCon Processing took over
substantially all of the business currently engaged in by InCon related to toll
processing, molecular separation, and the design and sale of molecular
separation facilities. As a result of its investment in InCon Processing, InCon
will be entitled to 50% of the future profits or losses. However, it is
anticipated that InCon Processing will retain the cash generated from operations
for at least the next 12 months to expand and develop its business.
Consequently, revenues for the 3 months ended April 30, 2000 are zero as
compared to the same three months in 1999 of $1,312,000.
Bionutrics Health Products continues to experience a significant decline in
sales due to curtailment of advertising and support for the brand evolvE(R) as a
result of financial constraints. The Company recognizes that a substantial
advertising program is necessary to maintain significant sales of the evolvE(R)
product line, and that failure to show positive sales results will have a
negative impact on the maintenance of its accounts. In addition, some accounts
have returned the product due to low volume activity. EvolvE(R) distribution is
maintained by over 20,000 stores including many leading drug and food chains
throughout the United States.
The Company is repositioning itself as a product development company and as such
is engaged in discussions with several potential marketing partners involving
evolvE(R) and future branded products including dietary supplements and
functional food products. New products will be based on new technology extending
beyond a tocotrienol platform.
Nutrition Technology discontinued production in its West Monroe, Louisiana
facility in late 1997. Therefore, no sales are reflected for the quarter ended
April 30, 2000. Sales for the quarter ended April 30, 1999 reflect the sale of
remaining by-products on hand from production and testing. The Company's lease
on the West Monroe, Louisiana facility terminated on February 28, 1999 and no
activity was conducted after that time. After the sale of assets to AC Humko in
fiscal 1998, Nutrition Technology Corporation is substantially inactive.
LipoGenics revenues for the three months ended April 30, 2000 are attributable
to a Phase I Small Business Innovation Research (SBIR) grant from the National
Heart, Blood and Lung Institute. As this is the first such grant received by
LipoGenics, there are no revenues shown for the same period in 1999.
Cost of revenues for the three months ended April 30, 2000 was $20,000 versus
$897,000 for the same quarter in 1999. This reduction is primarily due to the
new 50/50 venture entered into with AC HUMKO, which substantially took over all
of the business engaged in by InCon.
Operating expenses for the three months ended April 30, 2000 of $1,044,000 were
$921,000 less than that recognized for the same quarter in 1998 of $1,965,000.
This reduction is due to significantly reduced salaries, cost curtailment
programs, as well as the 50/50 venture entered into during the third quarter of
1999 with AC HUMKO.
8
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Other income for the three months ended April 30, 2000 was $71,000 versus a net
expense of $53,000 for the same quarter in 1999. This $124,000 increase is
primarily due to the Company's gain on its investment in InCon Processing, which
is accounted for using the equity method. The Company records its share of InCon
Processing's gain for the quarter as an increase in its investment.
Net loss decreased to $961,000 or $.05 per share for the three months ended
April 30, 2000 from $1,496,000, or $0.07 per share for the quarter ended April
30, 1999 due primarily to lower operating expenses.
Six months ended April 30, 1999 compared with six months ended April 30, 1998.
RESULTS OF OPERATIONS
Trends and comments as noted for the second quarter apply also to the six month
year-to-date comparisons.
Consolidated gross revenues for the six months ended April 30, 2000 were
$263,000 versus $2,783,000 for the same period in 1999 and is summarized by
subsidiary as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
SUBSIDIARIES APRIL 30,
--------------------- ------------------------------
2000 1999
---------- ----------
<S> <C> <C>
InCon Technologies $ 0 $2,028,000
Bionutrics Health Products 201,000 650,000
Nutrition Technology 0 105,000
LipoGenics 62,000 0
---------- ----------
TOTAL GROSS REVENUES $ 263,000 $2,783,000
========== ==========
</TABLE>
InCons decrease in revenues is attributable to the new 50/50 venture entered
into with AC HUMKO, InCon Processing. InCon Processing took over substantially
all of the business currently engaged in by InCon related to toll processing,
molecular separation, and the design and sale of molecular separation
facilities. As a result of its investment in InCon Processing, Incon will be
entitled to 50% of the future profits and losses.
9
<PAGE> 10
Bionutrics Health Products Inc. continues to experience a significant decline
in sales due to curtailment of advertising and support for the brand
evolvE(R) as a result of financial constraints.
The Company is repositioning itself as a product development company and has
recognized revenues of $100,000 during the six months ended April 30, 2000 for
services related to its development activities.
Nutrition Technology discontinued production in its West Monroe, Louisiana
facility in late 1997. The sales reflected for the six months ended April 30,
1999 reflect the sale of remaining by-products on hand from production and
testing.
Cost of revenues for the six months ended April 30, 2000 was $38,000 versus
$1,785,000 for the same period in 1999. This reduction is primarily due to the
new 50/50 venture entered into with AC HUMKO, which substantially took over all
of the business engaged in by InCon, as well as lower sales volume.
Operating expenses for the six months ended April 30, 2000 of $1,611,000 were
$2,050,000 less than that recognized for the same period in 1999 of $3,661,000.
This reduction is due to significantly reduced salaries, cost curtailment
programs, as well as the 50/50 venture entered into with AC HUMKO.
Other expense for the six months ended April 30, 2000 was $15,000 versus $63,000
for the same period in 1999. This decrease is primarily due to a reduction in
interest expense incurred on debt proceeds. The gain the Company recognized
during the second quarter 2000 on its investment in InCon Processing, LLC was
essentially off-set by the loss it recognized on its investment during the first
quarter 2000.
Net loss decreased to $1,480,000 or $.07 per share for the six months ended
April 30, 2000 from $3,131,000, or $.15 per share for the same period in 1999
due primarily to lower operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities during the six-month period ended April
30, 2000 was $1,050,000 as compared to $1,932,000 during the same period in
1999. This decrease is due primarily to lower operating expenses.
Net cash used in investing activities during the six months ended April 30, 2000
was $0 as compared to $78,000 during the same period in 1999. These investment
activities during 1999 were largely related to capital expenditures at InCon
Technologies plant in Batavia, Illinois.
Net cash provided by financing activities totaled $646,000 for the six-month
period ended April 30, 2000 versus $693,000 from the same period in 1999. This
cash was provided by loans for both years as well as the sale of common stock
for fiscal 1999.
10
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Since the Company's current cash resources and expected cash flow from
operations will not be sufficient to fund its operational needs for the next 12
months, it continues to seek additional capital through private equity and bank
lines of credit. There can be no assurance that such additional financing will
be attainable, or attainable on terms acceptable to the Company. Access by the
Company to additional capital will depend substantially upon prevailing market
conditions, and the financial condition of and prospects for the Company at the
time. Management is continuing its efforts to obtain additional funds and is
also continuing its efforts to reposition the Company as a product development
company and, as such, is engaged in discussions with several potential marketing
partners involving evolvE(R) and future branded products, including dietary
supplements and functional food ingredients.
11
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BIONUTRICS, INC.
PART II - OTHER INFORMATION
ITEM 2(c) Changes in Securities:
Issued 87,500 shares of common stock valued at $4.00 per share
to Anicet Alexandre for consulting services performed for the
Company.
The above issuance was made pursuant to Section 4(2) of the
Securities Act of 1933.
ITEM 4 Submission of Matters to a Vote of Security Holders
The Company's 2000 Annual Meeting of Stockholders was held on
March 22, 2000. The following nominees were elected to the
Company's Board of Directors to serve as a Class II directors
for a three-year term or until their successors are elected
and qualified:
<TABLE>
<CAPTION>
Nominee Votes in Favor Withheld
------- -------------- --------
<S> <C> <C>
Frederick B. Rentschler 13,678,194 2,475
Milton Okin 13,678,194 2,475
</TABLE>
The following directors' terms of office continued after the 2000 Annual Meeting
of Stockholders:
Ronald H. Lane, Ph.D.
Daniel S. Antonelli
Richard M. Feldheim
Robert B. Goergen
Y. Steve Henig, Ph.D.
William M. McCormick
Winston A. Salser, Ph.D.
Donald Winkler
The following additional item was voted upon by the Company's stockholders:
Proposal to ratify the appointment of Deloitte & Touche LLP as the
independent auditors of the Company for the fiscal year ending October 31,
2000.
<TABLE>
<CAPTION>
Votes in Favor Opposed Abstained Broker Non-Vote
-------------- ------- --------- ---------------
<S> <C> <C> <C>
13,679,854 115 700 0
</TABLE>
12
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ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27
(b) Reports on Form 8-K - None
13
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BIONUTRICS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Bionutrics, Inc.
(Registrant)
Dated: June 13, 2000 By:/s/Ronald H. Lane
Its: Chairman of the Board,
Chief Executive Officer and
President
By:/s/Karen J. Harwell
Its: Controller and Chief
Accounting Officer
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EXHIBIT INDEX
a) Exhibits
1. Exhibit 27
15
