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Filed Pursuant to Rule 424(b)(1)
Registration No. 333-32638
PROSPECTUS
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330,000 SHARES
BIONUTRICS, INC.
COMMON STOCK
This prospectus relates to the sale of up to 330,000 shares of
Bionutrics, Inc. common stock issuable upon the exercise of warrants and options
held by certain selling stockholders from time to time. We expect that sales
made pursuant to this prospectus will be made
- in broker's transactions,
- in transactions directly with market makers, or
- in negotiated sales or otherwise.
The shares may be sold at current market prices or at negotiated prices
at the time of the sale. We will pay the expenses incurred to register the
shares for resale, but the selling stockholders will pay any underwriting
discounts, concessions, and brokerage commissions associated with the sale of
their shares.
The selling stockholders and the brokers and dealers that they utilize
may be deemed to be "underwriters" within the meaning of the securities laws,
and any commissions received and any profits realized by them on the sale of
shares may be considered to be underwriting compensation.
We will not receive any of the proceeds from sales by the selling
stockholders. Securities laws and SEC regulations may require the delivery of
this prospectus to purchasers when they resell their shares of common stock.
Our common stock is traded on the Nasdaq SmallCap Market under the
symbol "BNRX." On March 21, 2000, the last reported sale price of our common
stock as reported on the Nasdaq SmallCap Market was $3.00 per share.
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PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED
UNDER "RISK FACTORS," BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is March 22, 2000.
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THIS PROSPECTUS INCORPORATES CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus and information we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made by us with the
SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of
1934 until the sale of all of the shares of common stock that are part of this
offering. The documents we are incorporating by reference are as follows:
- our Annual Report on Form 10-K for the year ended October 31,
1999, filed on January 26, 2000;
- our Quarterly Report on Form 10-Q for the quarter ended
January 31, 2000, filed on March 16, 2000;
- the description of our common stock contained in our
registration statement on Form 10 (Registration No. 000-22011)
filed with the SEC on January 21, 1997, including any
amendments or reports filed for the purpose of updating that
description; and
- our Proxy Statement, filed on February 17, 2000.
Any statement contained in a document that is incorporated by reference
will be modified or superseded for all purposes to the extent that a statement
contained in this prospectus (or in any other document that is subsequently
filed with the SEC and incorporated by reference) modifies or is contrary to
that previous statement. Any statement so modified or superseded will not be
deemed a part of this prospectus except as so modified or superseded.
You may request a copy of these filings at no cost by writing or
telephoning our investor relations department at the following address and
number:
Bionutrics, Inc.
2425 East Camelback Road, Suite 650
Phoenix, Arizona 85016
(602) 508-0112
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements and information contained in this prospectus concerning
our future, proposed, and anticipated activities; certain trends with respect to
our revenue, operating results, capital resources, and liquidity or with respect
to the markets in which we compete or our industry in general; and other
statements contained in this prospectus regarding matters that are not
historical facts are forward-looking statements, as that term is defined in the
Securities Act. Forward-looking statements, by their very nature, include risks
and uncertainties, many of which are beyond our control. Accordingly, actual
results may differ, perhaps materially, from those expressed in or implied by
such forward-looking statements. Factors that could cause actual results to
differ materially include those discussed elsewhere under "Risk Factors."
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. You should read this entire prospectus carefully before deciding to
acquire shares of our common stock. All references to "we," "us," "our,"
"Bionutrics," or "the Company" in this prospectus mean Bionutrics, Inc. and all
entities owned or controlled by Bionutrics, Inc., except where it is clear that
the term means only the parent company.
BIONUTRICS, INC.
INTRODUCTION
We are a biopharmaceutical company founded to discover, develop and
apply novel biologically active compounds from natural sources. Our goal is to
be a leader in the newly emerging field of functional nutrition: the marriage of
drugs and food. The objective is to address health by providing food ingredients
that can prevent and even cure diagnosed diseases. Our business model is to
source biologically active compounds from food commodity processing by-product
streams and develop these compounds as proprietary functional nutrition and/or
ethical drug products. The disciplines and efforts comprising a discovery and
development program for functional nutrition and ethical drugs are fundamentally
the same. Products derived from our research program will be directed initially
towards functional nutrition to generate early revenue and reduce the need for
capital while we pursue the development and regulatory approval of drug
candidates.
Our building efforts of the previous decade have positioned us with
proprietary technology, compounds, processing methods, and products having
application to worldwide markets of potential significance. We have sources of
raw material by-products streams available to us in large quantities and we have
developed specific capabilities in engineering and processing technologies for
the separation of these streams into both high-value biologically active
products and bulk food ingredients. This technology provides us the advantage of
access to proprietary active ingredients at relatively low cost. Initial
products are tocotrienol concentrates derived from rice bran.
Our operating strategy is to leverage our core competency of new
product development by partnering the manufacturing and marketing. Our goal is
to discover, define, and protect our products and technology and to partner
manufacturing and marketing. We believe this strategy will allow us to exploit
our strengths while recognizing our resource limitations, and at the same time
access the unfolding global opportunity.
Our three primary subsidiaries are LipoGenics, Inc., Bionutrics Health
Products, Inc., and InCon Technologies Inc. LipoGenics serves as our product
research arm with a focus on the discovery and development of active compounds
for both drugs and functional nutrition. Health Products is our market research
and product positioning company charged to deliver new functional nutrition
products to marketing partners. InCon saw its operation merged into a new
limited liability company, InCon Processing, LLC in which InCon has a 50%
ownership together with AC HUMKO CORP., a subsidiary of ABF North America Corp.
InCon Processing provides engineering and design for our compound recovery
systems and ingredient processing. In addition, we have three inactive
subsidiaries, Nutrition Technology Corporation, InCon International Ltd., and
Cosmedics, Inc.
We were incorporated in Nevada in 1990. All of our subsidiaries are
organized in Delaware except Nutrition Technology Corporation, which is
organized in Nevada, and InCon International Ltd., which is organized in the
British Virgin Islands. We maintain our principal offices at 2425 East Camelback
Road, Suite 650, Phoenix; our telephone number is (602) 508-0112.
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RISK FACTORS
Before you invest in our common stock, you should be aware that there
are risks, including those set forth below. You should carefully consider these
risk factors, together with all the other information included in this
prospectus, before you decide to purchase shares of our common stock.
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU CAN EVALUATE OUR POTENTIAL
FOR FUTURE SUCCESS.
We commenced sales of our first product late in the second quarter of
fiscal 1997. We have only recently acquired or developed additional revenue
sources. Accordingly, we have limited historical financial information upon
which you can base an evaluation of our performance or make a decision regarding
an investment in shares of our common stock. We have generated an accumulated
deficit of approximately $32.3 million through the fiscal year ended October 31,
1999. Our operations to date have progressed from research and development
activities to the marketing and sale of our first product EvolvE(R). We can
provide no assurance that sales of EvolvE(R) or other products we may introduce
will achieve significant levels of market acceptance. As a result, our business
will be subject to all the problems, expenses, delays, and risks inherent in the
establishment of a new business enterprise, including the following:
- limited capital;
- delays in product development;
- possible cost overruns due to price increases in raw product;
- unforeseen difficulties in our manufacturing processes;
- uncertain market acceptance; and
- the absence of an operating history.
Therefore, we can provide no assurance that we will be able to achieve
or maintain profitable operations. We can provide no assurance that we will not
encounter unforeseen difficulties that may deplete our capital resources more
rapidly than anticipated.
WE WILL REQUIRE ADDITIONAL CAPITAL TO SUPPORT OUR GROWTH.
To become and remain competitive, we will be required to make
significant investments in research and development on an ongoing basis. We
will, from time to time, including in the near term, be required to seek
additional equity or debt financing to provide the capital required to maintain
or expand our marketing and production capabilities. This may require us to sell
additional common stock or preferred stock or issue warrants for common stock to
obtain the capital. The timing and amount of any such capital requirements
cannot be predicted at this time except that we will require additional
financing in the second quarter of fiscal 2000. We can provide no assurance that
any financing will be available on acceptable terms. If financing is not
available on satisfactory terms, we may be unable to operate at our present
level or develop and expand our business, develop new products, or develop new
markets at the rate desired and our operating results may be adversely affected.
Debt financing increases expenses and must be repaid regardless of operating
results. Equity financing could result in additional dilution to existing
shareholders. Our losses incurred to date, the uncertainty regarding our ability
to raise additional capital, and our inability to generate gross profits and
positive cash flows from operations may indicate that we will be unable to
continue as a going concern for a reasonable period of time. Our audit opinion
also indicates that due to these factors we may not be able to continue as a
going concern.
WE FACE MARKET RISKS ASSOCIATED WITH OUR BUSINESS PLAN ASSUMPTIONS.
We have formulated our business plans and strategies based on certain
assumptions regarding:
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- opportunities in the ethical drug market based on our
technology;
- the depth and nature of edible oil and derivative products
markets;
- the size of the functional nutrition market including dietary
supplements, functional foods and medical foods;
- our anticipated share of our target markets; and
- the estimated price and acceptance of our projected products.
We can provide no assurance that our assessments regarding these or a variety
of other factors will prove to be correct. Any future success that we might
enjoy will depend upon many factors, including factors that may be beyond our
control or that cannot be predicted at this time. Factors beyond our control may
include:
- changes in the pharmaceutical, edible oil (and processing
derivatives) and functional nutrition industry;
- governmental regulation;
- increased levels of competition, including the entry of
additional competitors and increased success by existing
competitors;
- changes in general economic conditions;
- increases in operating costs, including costs of production,
supplies, personnel, and equipment; and
- reduced margins caused by competitive pressures and other
factors.
WE FACE INTENSE COMPETITION.
Competition in the health food industry is vigorous, with a large
number of businesses present. In addition, many companies are just beginning to
determine how and if they will compete in the functional nutrition market
presently developing. Candidate companies for mass-market retail competition
include virtually all firms currently engaged in retail mass-market consumer
marketing of food and OTC products. While these same companies are potential
customer targets for our company, they also are potential competitors because of
their own product development programs or programs they sponsor. Notably, these
companies include American Home Products, Bayer, Warner-Lambert, Pharmaton
Boehringer Ingleheim, Bristol-Myers&Squibb, Novartis, and Smith Kline Beecham
with OTC and dietary supplements, and Kraft, Nabisco, Nestle, Danone, Kellogg,
General Mills, Proctor&Gamble and Hunt-Wesson/ConAgra with food. Ingredient
manufacturing companies such as BASF, ADM, Hoffmann LaRoche, Heckle, Cargill,
and Eastman Chemical are all involved in both food and
pharmaceutical/pharmaceutical intermediate processing and sales, and have begun
to promote products with functional food applications. These companies represent
some of the largest companies in the world and most formidable competition for
any firm considering entering the functional nutrition business. Other companies
have recently announced tocotrienol supplement products, including Eastman
Chemical Company, whose new product is also derived from rice bran oil and
claims antioxidant properties. Many of our competitors have established
reputations for successfully developing and marketing dietary supplement
products. Many of these companies have greater financial, managerial, and
technical resources than we possess, which may put us at a competitive
disadvantage. Even though we intend to license our functional nutrition
ingredients/products to marketing partners and this would eliminate certain
elements of risk, we can provide no assurance that we will be successful in our
licensing efforts or that our potential marketing partners will be successful in
marketing and selling our products. If
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we are not successful in competing in the dietary supplement market, we may not
be able to recognize our business objectives.
Competition in the pharmaceutical area is intense and competitors have
substantially greater resources than we possess. We will be required to obtain
development and/or marketing partners to effectively enter the drug market.
InCon Processing's current competition is primarily from specialized
local and regional processing facilities. However, many of its toll processing
customers have the capacity to perform toll processing and molecular separation
in-house. No assurance can be given that its customers will continue to
outsource toll processing to InCon Processing, or that they will continue to
utilize InCon Processing's facility over that of a local processor.
WE MAY FAIL TO ESTABLISH OR CULTIVATE STRATEGIC PARTNERSHIPS.
We have stated our intent to develop our business model and build our
business through strategic partnerships. We can provide no assurance that we
will be able to successfully form or manage such partnerships, and if not, our
ability to execute our business plan will be at risk. If these partnerships do
not succeed and therefore no further capital is provided to us from these
sources, we can provide no assurance that we will be able to identify other
sources of capital sufficient for our needs in the time required to execute our
business plan.
We have formed an alliance with Novartis Nutrition to evaluate our
Clearesterol(TM) as a functional food ingredient. We and Novartis Nutrition have
elected not to pursue the initial course as anticipated, but are continuing to
explore product and market opportunities. We can provide no assurance that
Novartis will determine that any of the potential functional nutrition products
we are developing will meet its criteria for a food ingredient or, even if it
does, that Novartis will decide to continue the partnership. Any future funding
of capital by Novartis Nutrition to us will depend upon this ongoing evaluation.
We have formed an alliance with ABF to pursue the exploitation of
certain food processing by-product streams. As part of this alliance AC HUMKO is
considering the exploitation of rice bran derivative products. The rice bran,
rice bran oil, and other derivative products business is highly competitive and
we can provide no assurance that AC HUMKO will succeed or produce profits, of
which we participate at 15% EBIT, or that AC HUMKO will determine to stay in the
business even if profitable.
WE MAY BECOME SUBJECT TO INCREASED GOVERNMENTAL REGULATION.
The processing, formulation, packaging, labeling, and advertising of
our products are primarily subject to regulation by the FDA and the FTC. In
addition, individual state attorneys general have authority to enforce
individual state consumer protection acts within their own states. Although
Congress has recently recognized by enacting the Dietary Supplement and Health
Education Act, or DSHEA, the potential impact of dietary supplements in
promoting the health of U.S. citizens, there are a number of new provisions not
yet subject to judicial interpretation with respect to the FDA's regulation of
dietary supplements and the ultimate effect of DSHEA cannot be predicted.
Further, because of the technical requirements imposed by DSHEA, it may be
difficult for any company manufacturing or marketing dietary supplements to
remain in strict compliance. The FDA has recently promulgated regulations
effective in March 1999 in part to implement DSHEA and proposals have been made
to modify or change the provisions of DSHEA. It is impossible to predict whether
those proposed changes will become law or the full effect that such regulations
will have on our business and operations. We are still reviewing the
regulations. Among other changes, the regulations will require material changes
in the labeling of all dietary supplement products, including products we sell.
In addition, on April 29, 1998 the FDA proposed regulations to limit statements
that may be placed on dietary supplement labels and labeling. If the regulations
are issued by the FDA in their present form, we will be required to
significantly modify cholesterol claims presently being made for our EvolvE(R)
product.
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WE RELY ON A LIMITED NUMBER OF PRODUCTS AND CUSTOMERS.
To date our only product is the EvolvE(R) dietary supplement,
containing a patented tocotrienol vitamin E ingredient, Clearesterol(TM),
derived from rice bran. Our dependence on one product increases risk since a
decline in the market demand for our product or the products of other companies
that may utilize Clearesterol(TM) could have a significant adverse impact on us.
One Fortune 500 company accounted for 44% of InCon Technologies revenue
related to its core business of toll processing and molecular distillation for
the 8 months ended June 30, 1999. Our participation in AC HUMKO's efforts to
market derivative products is just beginning and we can provide no assurance
that AC HUMKO can capture a share of the market for such products. A limited
number of customers could adversely affect our operations.
WE MAY BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS.
As a marketer of dietary supplements that are ingested by consumers, we
may be subject to various product liability claims, including, among others,
that our products contain contaminants or include inadequate instructions as to
use or inadequate warnings concerning side effects and interactions with other
substances. While no such claims have been made to date and we maintain product
liability insurance, we can provide no assurance that product liability claims
and the resulting adverse publicity will not have a material adverse effect on
us.
WE DEPEND ON OUR MARKETING PARTNERS TO MARKET OUR PRODUCTS.
We depend on our ability to market our products through marketing
partners to large mass merchandise and health food retailers and to other
companies for use in their products. We do not anticipate that we will enter
into long-term contractual relationships with any of our customers. We have
stated our intent to rely in the future on strategic partnerships with marketing
companies to market and sell our current and to-be-developed functional
nutrition products. We can provide no assurance that we will be successful in
finalizing such strategic partnerships, nor if finalized that the selected
strategic partner(s) will successfully market and sell our products.
OUR TECHNOLOGY MAY BE QUESTIONED OR REFUTED.
We have invested a decade in research and development to demonstrate
the value of our technology and secure patents and make patent applications. We
have chosen to apply for and secure and acquire by acquisition patent protection
of strategic elements of this technology. We can provide no assurance that the
science upon which the technology is based will not be refuted or otherwise
drawn into question by further research conducted by us or independent
laboratories or our strategic partners.
WE MAY RECEIVE UNFAVORABLE PUBLICITY.
We believe the functional nutrition market is affected by national
media attention regarding the consumption of dietary supplements. We can provide
no assurance that future scientific research or publicity will not be
unfavorable to the functional nutrition market or any particular product, or
inconsistent with earlier favorable research or publicity. Future reports of
research that are perceived as less favorable or that question such earlier
research could have a material adverse effect on us. Because of our dependence
upon consumer perceptions, adverse publicity associated with adverse effects
resulting from the consumption of our products or any similar products
distributed by other companies could have a material adverse impact on us. Such
adverse publicity could arise even if the adverse effects associated with such
products resulted from consumers' failure to consume such products as directed.
In addition, we may not be able to counter the effects of negative publicity
concerning the efficacy of our products. Further, because our products are
derived from natural sources, we must contend with variations in composition
that may impact a product's functionality and which may require us to modify our
processing methodology or product formulations. These changes may impact
consumer perceptions.
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WE DEPEND ON OUR KEY MANAGEMENT PERSONNEL.
We depend on our management, particularly Dr. Ronald Lane, a founder
and our chief executive officer, for all our business activities. We depend on
our ability to attract, retain, and motivate additional qualified personnel. We
have no long-term employment or other agreements with any executive officer
except for Mr. Palmer. The loss of the services of Dr. Lane or other executive
officers and key employees could have a material adverse effect on our business.
WE DEPEND ON OUR SUPPLIERS AND MANUFACTURERS FOR OUR INGREDIENTS.
We have agreed to acquire the Clearesterol(TM) ingredient from AC
HUMKO. If AC HUMKO encounters difficulties in obtaining on commercially
reasonable terms quality rice bran for use in its manufacturing process, we
could experience production delays or the inability to fulfill orders on a
timely basis. Since we have agreed to purchase Clearesterol(TM) from AC HUMKO on
a cost-plus basis, any material increase in projected costs of manufacture could
materially affect our or any strategic marketing partner's ability to compete
with EvolvE(R) or any other dietary supplement or functional food containing
such ingredient. We also rely on outside sources for EvolvE(R) encapsulation. In
the event our contract manufacturers cannot meet our manufacturing and delivery
requirements, we may suffer interruptions of delivery while we arrange for
alternative manufacturing sources. Access to replacement sources could be
delayed if we must first complete a review of the manufacturer's quality control
and capabilities.
WE MAY EXPERIENCE DIFFICULTY ENTERING INTO INTERNATIONAL MARKETS.
We may experience difficulty entering international markets due to
greater regulatory barriers, the necessity of adapting to new regulatory
systems, and problems related to entering new markets with different cultural
bases and political systems. Operating in international markets exposes us to
certain risks, including, among other things:
- changes in or interpretations of foreign regulations that may
limit our ability to sell certain products or repatriate
profits to the United States;
- exposure to currency fluctuations;
- the potential imposition of trade or foreign exchange
restrictions or increased tariffs; and
- political instability.
If we expand into international operations, we are likely to encounter these and
other risks associated with international operations.
WE RELY ON PATENTS, LICENSES, AND INTELLECTUAL PROPERTY RIGHTS TO PROTECT OUR
PROPRIETARY INTERESTS.
Our success depends in part on our ability to obtain patents, licenses,
and other intellectual property rights covering our products. Our patent rights
are held by our subsidiary LipoGenics. We can provide no assurance that our
patents and patent applications are sufficiently comprehensive to protect
EvolvE(R) or our other products intended. The process of seeking further patent
protection can be long and expensive, and we can provide no assurance that all
patents will issue from our ten currently pending or future patent applications
or that any of the patents when issued will be of sufficient scope or strength
to provide meaningful protection or any commercial advantage to us. While we
believe the basis on which we have made further patent applications correspond
to the patents that have been issued for composition and method of production
and use and is reasonable given the issuance of the latter patents, we can
provide no assurance that the patents for which we have applied will be issued.
We may be subject to or may be required to initiate interference proceedings in
the U.S. Patent and Trademark Office. These proceedings could demand significant
financial and management resources. We may receive communications alleging
possible infringement of patents or other intellectual property rights of
others. We believe
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that in most cases we could obtain necessary licenses or other rights on
commercially reasonable terms, but we can provide no assurance on this point or
that litigation would not ensue or that damages for any past infringements would
not be assessed. Litigation, which could result in substantial cost to us and
diversion of our effort, may be necessary to enforce our patents or other
intellectual property rights or to defend us against claimed infringement of the
rights of others. Our failure to obtain necessary licenses or other rights or
litigation arising out of infringement claims could have a material adverse
effect on our business.
OUR STOCK IS THINLY TRADED AND MAY EXPERIENCE PRICE VOLATILITY.
There has been and may continue to be, at least for the immediate
future, a limited public market for our common stock. Despite our listing on
Nasdaq SmallCap in November 1997, we can provide no assurance that an active
public market will be developed or sustained for our common stock. The stock
markets have experienced extreme price and volume fluctuations during certain
periods. These broad market fluctuations and other factors may adversely affect
the market price of our common stock and our ability to raise necessary capital
and finance possible acquisitions including of technology.
RIGHTS TO ACQUIRE SHARES OF OUR COMMON STOCK WILL RESULT IN DILUTION TO OTHER
HOLDERS OF OUR COMMON STOCK.
As of October 31, 1999, options to acquire a total of 1,720,001 shares
were outstanding under our 1996 Stock Option Plan. An additional 1,116,744
shares of common stock are reserved for issuance pursuant to the exercise of
options that may be granted in the future under our 1996 Stock Option Plan. We
also have outstanding options and warrants not issued under the 1996 Plan to
purchase up to 3,640,144 shares of common stock. During the terms of those
options and warrants, the holders will have the opportunity to profit from an
increase in the market price of our common stock with resulting dilution in the
interests of holders of our common stock. The existence of such stock options
and warrants could adversely affect the terms on which we can obtain additional
financing, and the holders of those options and warrants can be expected to
exercise such options and warrants at a time when we, in all likelihood, would
be able to obtain additional capital by offering shares of our common stock on
terms more favorable to us than those provided by the exercise of those options
and warrants. We also have the authority to issue additional shares of common
stock and shares of one or more series of convertible preferred stock. The
issuance of these shares could result in the dilution of the voting power of
outstanding shares of common stock and could have a dilutive effect on earnings
per share.
SALES OF LARGE NUMBERS OF SHARES COULD ADVERSELY AFFECT THE PRICE OF OUR COMMON
STOCK.
Of the 20,812,774 shares outstanding as of October 31, 1999, 19,252,846
are eligible for resale in the public markets. Of these eligible shares,
8,846,805 shares are eligible for resale in the public markets subject to
compliance with the volume and manner of sale rules of Rule 144 under the
Securities Act of 1933, as amended, and 10,406,041 are eligible for resale in
the public markets either as unrestricted shares or pursuant to Rule 144(k). In
general, under Rule 144 as currently in effect, any person (or persons whose
shares are aggregated for purposes of Rule 144) who beneficially owns restricted
securities with respect to which at least one year has elapsed since the later
of the date the shares were acquired from our company, or from an affiliate of
our company, is entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of the then outstanding shares of
our common stock and the average weekly trading volume in our common stock
during the four calendar weeks preceding the sale. Sales under Rule 144 also are
subject to certain manner-of-sale provisions and notice requirements and to the
availability of current public information about our company. A person who is
not an affiliate, who has not been an affiliate within three months prior to
sale, and who beneficially owns restricted securities with respect to which at
least two years have elapsed since the later of the date the shares were
acquired from our company, or from an affiliate of our company, is entitled to
sell such shares under Rule 144(k) without regard to any of the volume
limitations or other requirements described above. Sales of substantial amounts
of our common stock in the public market could adversely affect prevailing
market prices.
We have registered for offer and sale up to 2,850,000 shares of our
common stock that are reserved for issuance pursuant to our 1996 Stock Option
Plan. Shares issued after the effective date of that registration statement
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upon the exercise of stock options generally will be eligible for sale in the
public market, except that affiliates will continue to be subject to volume
limitations and other requirements of Rule 144. The issuance of these shares
could depress the market price of our common stock.
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US, EVEN IF THE ACQUISITION
WOULD BE IN THE BEST INTERESTS OF OUR STOCKHOLDERS.
Our restated articles of incorporation and the Nevada General
Corporation Law contain provisions that may have the effect of making more
difficult or delaying attempts by others to obtain control of our company, even
when those attempts may be in the best interests of our stockholders. The Nevada
GCL also imposes conditions on certain business combination transactions with
"interested stockholders" as defined by the Nevada GCL. Our restated articles
provide for a staggered board and also authorize our Board of Directors, without
stockholder approval, to issue one or more series of preferred stock, which
could have voting and conversion rights that adversely affect the voting power
of the holders of our common stock.
OUR OPERATING RESULTS COULD DIFFER MATERIALLY FROM THE FORWARD-LOOKING
STATEMENTS CONTAINED IN THIS PROSPECTUS.
Certain statements and information contained in this prospectus
regarding matters that are not historical facts are forward-looking statements,
as that term is defined under applicable securities laws. These include
statements concerning our future, proposed, and anticipated activities; certain
trends with respect to our revenue, operating results, capital resources, and
liquidity, and certain trends with respect to the markets in which we compete or
our industry in general. Forward-looking statements, by their very nature,
include risks and uncertainties, many of which are beyond our control.
Accordingly, actual results may differ, perhaps materially, from those expressed
in or implied by such forward-looking statements. Factors that could cause
actual results to differ materially include those discussed under "Risk
Factors."
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SELLING STOCKHOLDERS
The following table sets forth (i) the name of each of the selling
stockholders, (ii) the number of shares of our common stock beneficially owned
by each selling stockholder that may be offered for the account of such selling
stockholder under this prospectus, and (iii) the number of shares of common
stock beneficially owned by each selling stockholder upon completion of this
offering. We have obtained this information from the selling stockholders, but
have not independently verified it. The term "selling stockholders" includes the
persons listed below and their respective transferees, pledgees, donees, or
other successors.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) OFFERING (2)
------------------------ SHARES BEING ----------------------
NAME AND ADDRESS OF REGISTERED
BENEFICIAL OWNER NUMBER PERCENT FOR SALE NUMBER PERCENT
---------------- ------ ------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
IK Biotech(3)................... 30,000 * 30,000 0 0%
Cameron Associates(4)........... 100,000 * 100,000 0 0%
Gary J. Shemano(5)(6)........... 60,000 * 50,000 10,000 *
Michael Jacks(6)................ 25,000 * 25,000 0 0%
Mart Bailey(6).................. 25,000 * 25,000 0 0%
Eric Kuhrts(7).................. 36,732 * 33,000 3,732 *
James D. Warren(7).............. 34,725 * 33,000 1,725 *
Denis Callewaert, Ph.D.(7)...... 13,000 * 13,000 0 0%
L. Jackson Roberts, MD(7)....... 7,000 * 7,000 0 0%
Jason Morrow, MD(7)............. 7,000 * 7,000 0 0%
Vanderbilt University(7)........ 6,000 * 6,000 0 0%
Larry Marnett, MD(7)............ 1,000 * 1,000 0 0%
</TABLE>
- ----------------
* Less than one percent.
(1) Except as otherwise indicated, each person named in the table has sole
voting and investment power with respect to all shares of common stock
beneficially owned by him or her, subject to applicable community
property law. The numbers and percentages shown include the shares of
common stock actually owned as of March 10, 2000 as well as shares of
common stock issuable to the identified person pursuant to stock
options or warrants that may be exercised within 60 days after March
10, 2000.
(2) Each of the selling stockholders is assumed to be selling all of the
shares of common stock registered for sale and will own no shares of
common stock after the offering except as noted. The selling
stockholders may sell all or none of the securities being registered.
(3) 8 Avondale Court, Briarcliff Manor, New York 10510. IK Biotech has
provided financial advisory services to the Company.
(4) 640 Fifth Avenue, 15th Floor, New York, New York 10019-6102. Cameron
Associates has provided financial advisory services to the Company.
(5) Includes 10,000 shares of Common Stock held by The Shemano Group.
(6) c/o The Shemano Group, 601 California Street, #1850, San Francisco,
California 94108. The Shemano Group has provided investment banking
services to the Company.
(7) c/o Lipoprotein Diagnostics, Inc., 1109 Tannery Creek Road, P.O. Box
11, Bodega, California 94922. The Company entered into a license
agreement with Lipoprotein Diagnostics, Inc., dated October 1, 1999.
PLAN OF DISTRIBUTION
This prospectus, as appropriately amended or supplemented, may be used
from time to time principally by persons who were granted shares of common stock
pursuant to the exercise of warrants and options, or their transferees,
pledgees, donees, legatees, heirs, or legal representatives who wish to offer
and sell such shares (such persons are herein referred to as the "Selling
Stockholder" or "Selling Stockholders") in transactions in which they and any
person acting on their behalf through whom such shares are sold may be deemed to
be underwriters within
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<PAGE> 12
the meaning of the Securities Act. We have granted registration rights to
certain of the Selling Stockholders. The registration statement of which this
prospectus forms a part is intended to satisfy these registration rights. We
will receive none of the proceeds from any such sales. We will pay substantially
all of the expenses incident to this offering of the shares by the Selling
Stockholders to the public other than commissions and discounts of underwriters,
brokers, dealers, or agents.
There presently are no arrangements or understandings, formal or
informal, pertaining to the distribution of the shares described in this
prospectus. Upon our company being notified by a Selling Stockholder that any
material arrangements have been entered into for the sale of shares, to the
extent required, we will file, during any period in which offers or sales are
being made, one or more supplements to this prospectus to set forth the names of
Selling Stockholders and any other material information with respect to the plan
of distribution not previously disclosed. In addition, any shares which qualify
for sale pursuant to Section 4 of, or Rules 144 or 144A under, the Securities
Act may be sold under such provisions rather than pursuant to this prospectus.
Selling Stockholders may sell the shares being offered by this
prospectus from time to time in transactions (which may involve crosses and
block transactions) on the Nasdaq SmallCap Market at market prices prevailing at
the time of sale, at prices related to such prevailing market prices, at
negotiated prices, at fixed prices, or in transactions directly to one or more
purchasers, including pledgees in privately negotiated transactions (including
sales pursuant to pledges). Selling Stockholders may sell some or all of the
shares in transactions involving broker-dealers, who may act either as agent or
as principal. Broker-dealers participating in such transactions as agent may
receive commissions from Selling Stockholders (and, if they act as agent for the
purchaser of such shares, from such purchaser), such commissions computed in
appropriate cases in accordance with the applicable rules of the Nasdaq SmallCap
Market, which commissions may be at negotiated rates where permissible under
such rules.
Participating broker-dealers may agree with Selling Stockholders to
sell a specified number of shares at a stipulated price per share and, to the
extent such broker-dealer is unable to do so acting as an agent for Selling
Stockholders, to purchase as principal any unsold shares at the price required
to fulfill the broker-dealer's commitment to Selling Stockholders. In addition
or alternatively, shares may be sold by Selling Stockholders and/or by or
through other broker-dealers in special offerings or secondary distributions
pursuant to and in compliance with the governing rules of the Nasdaq SmallCap
Market, and in connection therewith commissions in excess of the customary
commissions prescribed by the rules of the Nasdaq SmallCap Market may be paid to
participating broker-dealers, or, in the case of certain secondary
distributions, a discount or concession from the offering price may be allowed
to participating broker-dealers in excess of the customary commission.
Broker-dealers who acquire shares as principal may thereafter resell such shares
from time to time in transactions (which may involve crosses and block
transactions and which may involve sales to or through other broker-dealers,
including transactions of the nature described in the preceding two sentences)
on the Nasdaq SmallCap Market, in negotiated transactions or otherwise, at
market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive commissions from the
purchaser of such shares.
Selling Stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including without
limitation Regulation M, which provisions may limit the timing of purchases and
sales of any of the shares by the Selling Stockholders. All of the foregoing may
affect the marketability of the shares.
If the shares are sold in an underwritten offering, the underwriting
and selling group members (if any) may engage in passive market making
transactions in our common stock on the Nasdaq SmallCap Market immediately prior
to the commencement of the offering in accordance with Regulation M. Passive
market making presently consists of displaying bids on Nasdaq limited by the bid
prices of market makers not connected with such offering and purchases limited
by such prices and effected in response to order flow. Net purchases by a
passive market maker on each day are limited in amount to 30% of the passive
market maker's average daily trading volume in the common stock during the
period of the two full consecutive calendar months prior to the determination of
the offering price in connection with a sale pursuant to this prospectus and
must be discontinued when such limit is
12
<PAGE> 13
reached. Passive market making may stabilize the market price of our common
stock at a level above that which might otherwise prevail and, if commenced, may
be discontinued at any time.
We may agree to indemnify each Selling Stockholder as an underwriter
under the Securities Act against certain liabilities, including liabilities
arising under the Securities Act. Each Selling Stockholder may indemnify any
broker-dealer that participates in transactions involving sales of the shares
against certain liabilities, including liabilities arising under the Securities
Act.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus
will be passed on for us by Greenberg Traurig, LLP, Phoenix, Arizona.
EXPERTS
Our consolidated balance sheets as of October 31, 1998, and 1999, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the years ended October 31, 1997, 1998, and 1999, incorporated in this
prospectus by reference from the Company's Annual Report on Form 10-K for the
year ended October 31, 1999 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report (which contains an unqualified
opinion that includes an explanatory paragraph regarding the substantial doubt
about the company's ability to continue as a going concern), which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the Securities
and Exchange Commission relating to the common stock offered by this prospectus.
This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules to the registration
statement. Statements contained in this prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance we refer you to the copy of the contract or other document filed with
the SEC, each such statement being qualified in all respects by such reference.
We file reports, proxy statements, and other information with the SEC.
A copy of any materials that we file with the SEC may be inspected by anyone
without charge at the public reference facilities maintained by the SEC in Room
1024, 450 Fifth Street, N.W., Washington D.C. 20549; the Chicago Regional
Office, Suite 1400, 500 West Madison Street, Citicorp Center, Chicago, Illinois
60661; and the New York Regional Office, Suite 1300, 7 World Trade Center, New
York, New York 10048. Copies of all or any part of the registration statement
may be obtained from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of the prescribed fees. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The registration statement is also available
through the SEC's Web site at the following address: http://www.sec.gov.
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<PAGE> 14
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR
INCORPORATED INTO THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT. THE INFORMATION IN THIS PROSPECTUS MAY ONLY
BE ACCURATE ON THE DATE OF THIS DOCUMENT. THIS DOCUMENT
MAY BE USED ONLY WHERE IT IS LEGAL TO SELL THESE
SECURITIES.
TABLE OF CONTENTS
Prospectus Summary...................................3
Risk Factors.........................................4
Selling Stockholders................................11
Plan of Distribution................................11
Legal Matters.......................................13
Experts.............................................13
Where You Can Find More Information.................13
330,000 SHARES
BIONUTRICS, INC.
COMMON STOCK
PROSPECTUS
March 22, 2000
