FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended
January 31, 1997 Commission File No. 0-17174
HAUSER, INC.
(formerly Hauser Chemical Research, Inc.)
Colorado 84-0926801
(State or other jurisdiction (I.R.S. Identification Number)
of incorporation or
organization)
5555 Airport Boulevard, Boulder, Colorado 80301
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (303) 443-4662
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, as of the latest practicable
date.
Common Stock, $.001 par value 10,615,621
Class Outstanding at January 31, 1997
<PAGE>
HAUSER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
<TABLE>
Three months ended Nine months ended
January 31, January 31,
1997 1996 1997 1996
REVENUES:
<S> <C> <C> <C> <C>
Natural product processing $5,785,729 $1,172,758 $12,040,195 $5,134,364
Technical services 2,171,987 2,385,078 6,722,520 6,285,760
Total revenues 7,957,716 3,557,836 18,762,715 11,420,124
COST OF REVENUES 5,455,532 3,310,523 15,450,697 11,966,596
GROSS MARGIN 2,502,184 247,313 3,312,018 (546,472)
OPERATING EXPENSES:
Research and development 422,984 397,600 1,656,182 1,286,787
Sales and marketing 458,461 229,213 1,212,656 715,471
General and administrative 1,718,685 1,656,784 4,203,566 4,414,828
Total operating expenses 2,600,130 2,283,597 7,072,404 6,417,086
LOSS FROM OPERATIONS (97,946) (2,036,284) (3,760,386) (6,963,558)
OTHER INCOME (EXPENSE):
Interest income 119,014 221,831 419,510 817,827
Interest expense (1,743) (14,281) (16,728) (31,025)
Other income - net 117,271 207,550 402,782 786,802
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 19,325 (1,828,734) (3,357,604) (6,176,756)
INCOME TAX (PROVISION) BENEFIT (5,411) 640,330 939,950 2,162,218
INCOME (LOSS) FROM CONTINUING OPERATIONS 13,914 (1,188,404) (2,417,654) (4,014,538)
DISCONTINUED OPERATIONS:
Loss from operations, net of
applicable income taxes (518,007) (609,287) (1,045,271)
Loss on disposal, net of
applicable income taxes (2,446,760)
LOSS FROM DISCONTINUED OPERATIONS (518,007) (3,056,047) (1,045,271)
NET INCOME (LOSS) $13,914 $(1,706,411) $(5,473,701) $(5,059,809)
INCOME (LOSS) PER SHARE:
Continuing operations $0.00 $(0.11) $(0.23) $(0.39)
Discontinued operations (0.05) (0.30) (0.10)
Net income (loss) per share $0.00 $(0.16) $(0.53) $(0.49)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 10,800,029 10,344,007 10,405,818 10,337,953
See notes to consolidated financial statements.
</TABLE>
<TABLE>
HAUSER, INC.
CONSOLIDATED BALANCE SHEETS
January 31, April 30,
ASSETS 1997 1996
(unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $7,511,207 $7,428,752
Held-to-maturity investments,
at amortized cost 993,396 7,791,875
Accounts receivable, less allowance
for doubtful accounts: January 31,
1997, $351,388; April 30, 1996, $472,215 7,631,626 6,801,376
Income taxes receivable 3,678,085 2,665,464
Inventories, current 9,537,516 8,508,973
Prepaid expenses and other 478,495 772,780
Deferred income tax assets 1,452,031 1,020,895
Total current assets 31,282,356 34,990,115
PROPERTY AND EQUIPMENT
Land and buildings 7,341,588 7,264,294
Lab and processing equipment 27,939,509 27,647,235
Furniture and fixtures 4,437,465 5,632,013
Total property and equipment 39,718,562 40,543,542
Accumulated depreciation and amortization (17,316,313) (15,016,815)
Net property and equipment 22,402,249 25,526,727
OTHER ASSETS:
Goodwill, less accumulated amortization:
January 31, 1997, $580,908;
April 30, 1996, $668,202 2,253,655 3,665,780
Inventories, non-current 12,114,148 9,499,450
Deposits and other 975,631 311,027
Other investments 696,904 862,500
Total other assets 16,040,338 14,338,757
TOTAL $69,724,943 $74,855,599
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,392,488 $754,710
Current portion of long term debt 151,553 623,279
Accrued salaries and wages 637,144 860,747
Other current liabilities 1,118,606 674,870
Total current liabilities 3,299,791 2,913,606
LONG TERM LIABILITIES 141,175 214,922
DEFERRED INCOME TAXES 1,509,775 1,543,452
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 50,000,000 shares
authorized; shares issued:
January 31, 1997, 10,615,621;
April 30, 1996, 10,564,613 10,616 10,565
Additional paid-in capital 59,594,701 59,418,280
Treasury stock, at cost; 201,100 shares (1,054,812) (1,054,812)
Unrealized gain on available-for-sale
investment, net of income taxes 352,926 465,100
Retained earnings 5,870,771 11,344,486
Net stockholders' equity 64,774,202 70,183,619
TOTAL $69,724,943 $74,855,599
See notes to consolidated financial statements.
</TABLE>
<TABLE>
HAUSER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
Nine months ended
January 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(5,473,701) $(5,059,809)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,419,451 2,569,619
Provision for bad debt (126,827) (6,147)
Loss on disposal of discontinued operations 2,446,760
Loss on disposal of assets 344,255 176,004
Amortization of investment premium (discount) (1,875) 72,609
Deferred income tax expense (benefit) (405,391) 184,890
Change in assets and liabilities, net of effects from
the purchase of Shuster and the sale of Ironwood:
Accounts receivable (1,232,235) 115,954
Income taxes receivable (72,049) (456,130)
Inventories (4,611,401) (4,806,405)
Prepaid expenses and other (183,862) (203,190)
Accounts payable 830,326 (436,801)
Other accrued liabilities 356,574 915,019
Net cash used in operating activities (4,709,975) (6,934,387)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (1,326,693) (2,414,576)
Deposits and other (664,604) (77,173)
Purchase of Shuster's common stock, net of cash acquired (3,286,902)
Sale of Ironwood net assets 250,000
Purchase of investments (199,646)
Maturity of investments 7,000,000 11,415,985
Net cash provided by investing activities 5,059,057 5,637,334
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt and capitalized leases (443,099) (22,343)
Proceeds from issuance of common stock 176,472 44,698
Purchase of treasury stock (88,750)
Net cash used in financing activities (266,627) (66,395)
Net increase (decrease) in cash and cash equivalents 82,455 (1,363,448)
Cash and cash equivalents, beginning of period 7,428,752 4,244,874
Cash and cash equivalents, end of period $7,511,207 $2,881,426
See notes to consolidated financial statements.
</TABLE>
<PAGE>
HAUSER, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF JANUARY
31, 1997 AND APRIL 30, 1996 AND FOR THE THREE AND NINE MONTH
PERIODS ENDED JANUARY 31, 1997 AND 1996 (UNAUDITED)
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited
financial statements contain all adjustments (consisting only
of normal recurring adjustments) necessary to present fairly
the Company's financial position as of January 31, 1997 and
results of its operations and cash flows for the periods ended
January 31, 1997 and 1996. The year-end balance sheet data was
derived from audited financial statements, but does not
include all disclosures required by generally accepted
accounting principles. Certain fiscal 1996 amounts have been
reclassified to conform to the fiscal 1997 presentation.
Effective July 21, 1995, the Company acquired all of the stock
of Shuster Laboratories, Inc. (Shuster), formerly Herbert V.
Shuster, Inc., for approximately $4,700,000 in cash and notes
plus a performance based earnout for meeting certain specific
operating results over the next five years. Under the terms of
the purchase agreement, the Company could be required to make
additional payments for Shuster based on the achievement of
these specific operating results. Such payments would be made
to the former shareholders of Shuster. Any such additional
payments would be treated as additional purchase price
consideration. Shuster is a consumer research and development
firm and contract laboratory with headquarters in the Boston
area and another facility in the Atlanta area. The following
pro-forma unaudited consolidated results of operations for the
nine months ended January 31, 1996 have been prepared assuming
the Shuster acquisition occurred as of the beginning of the
earliest period presented. The pro-forma unaudited revenues
for Shuster used for this comparison were $4,167,306 for the
nine months ended January 31, 1996. These pro-forma results
have been prepared for comparative purposes and do not purport
to be indicative of results of operations which actually would
have resulted had the combination been in effect on the dates
indicated, or which may result in the future.
<TABLE>
Nine months ended January 31, 1996
<S> <C>
Revenues $ 18,547,255
Net loss (5,085,942)
Net loss per share $ (0.49)
</TABLE>
ACCOUNTING POLICIES
The accounting policies followed by the Company are set forth
in Note 1 to the Company's financial statements in the
Company's form 10-K filed for the year ended April 30, 1996.
DISCONTINUED OPERATIONS
On October 11, 1996, the Company sold substantially all of the
net assets of its secondary forest products subsidiary, Hauser
Northwest, Inc., d/b/a Ironwood Evergreens (Ironwood). Net
assets of the discontinued operations as of April 30, 1996
included in the balance sheet were $3,118,308 and consisted
primarily of accounts receivable, inventory, fixed assets and
goodwill. The Company has recorded the loss on the disposal of
this segment in accordance with the Accounting Principles
Board Opinion No. 30 (APB No. 30).
The Company reported the sale of Ironwood as discontinued
operations because a) Ironwood's customer base was
significantly different from the other products and services
of the Company, and b) Ironwood was maintained as an
autonomous subsidiary with separate assets and liabilities,
management, results of operations, employee base and
facilities.
INVESTMENTS
The Company accounts for investments in accordance with
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities". The Company records held- to-maturity investments
at amortized cost. The Company has the positive intent and
ability to hold these investments to maturity. Below is a
table of held-to-maturity investments as of January 31, 1997:
<TABLE>
Held-to-Maturity Investments:
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Issues
Maturities less than 1 year:
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 199,646 $ - $ (1,102) $ 198,544
Mortgage Backed Securities 793,750 6,930 800,680
Total Investments $ 993,396 $ 6,930 $ (1,102) 999,224
</TABLE>
Below is a table of held-to-maturity investments as of April 30, 1996:
<TABLE>
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Issues
Maturities less than 1 year:
<S> <C> <C> <C> <C>
U.S. Treasury Securities $3,000,000 $ 6,250 $ (620) $3,005,630
Mortgage Backed Securities 2,793,750 26,560 2,820,310
Municipal Securities 1,998,125 7,190 (3,125) 2,002,190
Total Investments $7,791,875 $ 40,000 $ (3,745) $7,828,130
</TABLE>
Available-For-Sale Investment - The Company records
available-for- sale investments at fair value. At January 31,
1997 and April 30, 1996 respectively, the Company held an
investment in an equity security that had a readily
determinable fair value of $696,904 and $862,500, resulting in
a decrease in unrealized gain, net of taxes, in available-
for-sale investment during the first nine months of fiscal
1997 of $112,174.
INVENTORIES
Inventories are classified as follows:
<TABLE>
January 31, April 30,
1997 1996
<S> <C> <C>
Raw materials and supplies $ 5,530,937 $ 8,497,766
Work in process 10,701,693 3,210,704
Finished goods 5,419,034 6,299,953
Total inventories 21,651,664 18,008,423
Less non-current inventories 12,114,148 9,499,450
Current portion of inventories $ 9,537,516 $ 8,508,973
</TABLE>
LONG TERM DEBT
Long term debt consists of the following:
<TABLE>
January 31, April 30,
1997 1996
<S> <C> <C>
Note payable to former stockholders of Shuster, with interest of 5.5%,
due and payable on July 19, 1996, collateralized by a certificate of
deposit for $582,349. $549,135
Note payable to bank with interest at 10.0% per annum, payable in
monthly installments including interest of $605 and due January 2025,
collateralized by land. 68,430
Capital lease obligations for vehicles and equipment with monthly
payments ranging from $199 to $3,061 and interest rates ranging from
7.9% to 15.4%. $ 79,400 143,380
Obligations to Shuster employees as part of the acquisition
settlement. (see below) 213,328 77,256
292,728 838,201
Less current portion 151,553 623,279
Long term debt $141,175 $214,922
</TABLE>
In July 1996, the Company received cash of $274,833 from a
bank escrow account established for the distribution of funds
related to the acquisition of Shuster. The funds are not
restricted, but the Company is contractually obligated to
disburse these funds to employees of Shuster over a two year
period. If the employees should leave Shuster before the two
year period is up, the Company is obligated to distribute the
remaining funds to the former shareholders of Shuster. The
receipt of this cash by the Company did not alter the purchase
price of Shuster.
MAJOR CUSTOMERS
Below is a table showing revenues and percentage of total
revenues recognized from major customers in three and nine
months ended January 31, 1997 and 1996.
<TABLE>
Three months ended Nine months ended
January 31, January 31,
Revenues: 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Customer A $2,550,000 $2,550,000
Customer B 910,800 1,325,623
Customer C 2,185,999 $2,463,279
Customer D 1,137,500 1,137,500
Percent of Total Revenues:
Customer A 32.00% 13.60%
Customer B 11.40% 7.10%
Customer C 11.70% 21.60%
Customer D 14.30% 6.10%
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental Cash Flow Information - The amounts paid by the Company for
interest are as follows:
<TABLE>
Three months ended Nine months ended
January 31, January 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest $ 1,743 $ 15,423 $ 16,728 $ 41,100
</TABLE>
Effective July 21, 1995, the Company acquired all of the stock
of Shuster for $3,959,515 in cash and $621,953 in notes.
Subsequent adjustments have increased the purchase price by
$146,008.
The net assets purchased were as follows:
<TABLE>
<S> <C>
Current assets $ 1,884,353
Property and equipment 684,840
Long-term assets and goodwill 2,798,238
Current liabilities (541,824)
Long-term liabilities (98,131)
Net assets $ 4,727,476
</TABLE>
Part 1, Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
OVERVIEW
The Company realized a small profit in the third quarter of fiscal 1997, the
first time in nine quarters. As compared to the third quarter in the previous
fiscal year, total revenues increased 124%, gross margin improved to 31% of
total revenues from 7%, operating expenses increased by 14% and results from
continuing operations showed income of $13,914 compared to a loss of $1,188,404
in the prior fiscal year.
These dramatic improvements were primarily the result of third quarter sales of
bulk paclitaxel to two new customers. On November 7, 1996, the Company signed a
contract with a European pharmaceutical firm to supply GMP (Good Manufacturing
Practices) bulk paclitaxel in Europe and Eastern Europe over a three year
period. The value of the contract is estimated to be $11,000,000. Shipments of
bulk paclitaxel to this customer commenced during the quarter ended January 31,
1997. In addition, sales of bulk paclitaxel were made to another new customer
for use in its development efforts. The Company does not have a long term
supply agreement with this customer at the present time and future product
shipments to this customer are not certain.
These additional revenues from the sale of bulk paclitaxel in the third quarter
of fiscal 1997 were realized sooner than the Company originally anticipated. As
a result, the profitable operating results from continuing operations reflected
in the quarter end January 31, 1997 are not expected to be repeated in the
fourth quarter of fiscal 1997. Management believes that the Company can attain
a break-even run rate by the end of the fourth quarter of fiscal 1997; however,
there can be no assurance of when profitability will again be realized.
On November 14, 1996, the Company signed a three year contract to supply
RoseOx[Trademark], a new anti-oxidant nutraceutical product, to a manufacturer
of vitamins and food supplement products. This contract has an estimated value
of $12,700,000. The Company began shipping product under this contract during
the quarter ended January 31, 1997.
On September 13, 1996, the Company adopted plans to sell substantially all of
the net assets of its secondary forest products subsidiary, Hauser Northwest,
Inc., d/b/a Ironwood Evergreens (Ironwood). On October 11, 1996, this sale was
completed. The Company recorded the estimated loss on the disposal of this
segment in the quarter ended July 31, 1996 and adjusted the estimate in the
quarter ended October 31, 1996 to reflect the final sale. There were no
transactions associated with this disposal in the third quarter of fiscal 1997.
Revenues for Ironwood were $2,946,656 in the three months ended January 31,
1996 and were $2,526,351 and $6,137,545 in the nine months ended January 31,
1997 and 1996, respectively.
The following is a discussion of the Company's activities in its continuing
operations.
PHARMACEUTICALS
On May 12, 1994, the Company entered into a multi-year, worldwide and mutually
exclusive Supply Agreement (Supply Agreement) with American Home Products
("AHP"), formerly American Cyanamid Company, whereby the Company will supply
bulk paclitaxel to AHP. On that same day, the Company and AHP also entered into
the R&D Agreement which called for the two companies to cooperate in the
research and development of new products derived from naturally or
synthetically produced taxanes.
The research and development program, which had an initial two year term, was
funded by AHP. This program, and its associated funding, ended in May 1996. The
expiration of the R&D Agreement did not have a material impact on the financial
position or operations of the Company. The R&D Agreement called for the two
companies to cooperate in a mutually exclusive manner in a research and
development program funded by AHP which was designed to develop new products
derived from naturally or synthetically produced taxanes. During the two year
term of the program, several taxanes were evaluated and submitted for in vitro
pre- clinical testing. AHP has the right to review any products derived by the
Company from naturally or synthetically produced taxanes during the one year
period after expiration of the R&D Agreement (May, 1997). No products have been
identified for development by the parties at this time.
The Company has been supplying bulk paclitaxel to AHP on a two- part formula
price basis which includes an initial minimum payment upon shipment of the bulk
paclitaxel and a subsequent final payment, in the form of a royalty, when AHP
sells finished products which contain the bulk paclitaxel. The contract calls
for certain minimum purchase requirements (which are subject to variation based
upon the Company's production costs) which are expected to result in aggregate
minimum payments of approximately $9,000,000 during the first three years
(ending August 1997). The minimum aggregate payments are nonrefundable subject
only to traditional product warranty criteria.
The contract also called for advance purchase payments totaling up to
$3,400,000 contingent upon the following milestones being met: the first filing
of a product registration for a finished product anywhere in the world, first
approval of such product registration, the first filing of such a product
registration in the United Kingdom, Germany or France, upon approval of such
foreign product registration, upon filing of such product registration with the
Food and Drug Administration ("FDA") and upon approval of such FDA
registration. Amounts otherwise payable to the Company by AHP as royalties when
finished products are sold will be reduced by as much as 30% in any calendar
year until such reductions aggregate advance purchase payments previously made.
The unearned advance payments received by the Company are included as deferred
revenue in other liabilities on the balance sheet.
In the third quarter of fiscal 1997, the Company sold bulk paclitaxel to AHP
for its development needs, including final product formulations and clinical
trials. While difficult to predict the exact timing, the Company's management
expects that regulatory approval to sell paclitaxel in at least one country
will be obtained by AHP in calendar year 1997.
During the quarter ended January 31, 1997, the minimum shipments of paclitaxel
provided for in the Supply Agreement were made to AHP and continued minimal
requirements for sales are expected to be fulfilled through approximately
August, 1997. Revenues under the Supply Agreement with AHP totaled $436,390 in
the third quarter of fiscal 1997 and $2,185,999 in the nine months ended
January 31, 1997.
During the first quarter of fiscal 1997, AHP notified the Company of its
decision to maintain exclusivity of the supply of paclitaxel from Hauser in the
United States and Canada. In addition, AHP released its exclusive supply
position in the rest of the world. Currently, the parties are negotiating terms
of an amended contract.
On November 7, 1996, the Company signed a contract with a European
pharmaceutical firm to supply GMP bulk paclitaxel in Europe and Eastern Europe.
The value of this contract is estimated to be $11,000,000 and has an initial
three year term. The agreement is mutually exclusive to both parties, except
for the Company's existing obligation to supply paclitaxel to AHP in Europe and
Eastern Europe, which obligation is pursuant to the Company's existing
contract. The European firm intends to purchase from the Company all supplies
of GMP bulk paclitaxel for its total market needs in Europe.
The Company completed its production of sanguinaria extract for Colgate during
the third quarter of fiscal 1997. Sanguinaria extract, a natural antimicrobial,
is the key ingredient in Colgate's Viadent[Registered Mark] toothpaste and oral
rinse products. Shipments totaling $143,104 were made during the quarter ended
January 31, 1997 to complete product shipment requirements under the contract
with Colgate. The expiration of this contract will not have a material impact
on the operations of the Company.
NATURAL INGREDIENTS
Nutraceuticals - In the quarter ended January 31, 1997, sales of nutraceutical
products were $1,127,944, and were sold to a variety of customers. This
represents a 334% increase over nutraceuticals revenues in the third quarter of
the prior fiscal year. The term nutraceuticals is used to identify the broad
range of natural, healthful products that are used to supplement the diet by
increasing the total dietary intake of important nutrients. The United States
market for herbal and botanical supplements is estimated to be $2.3 billion and
is growing at over 20% per year, according to industry sources. The Company's
current products include liquid and dry herbal extracts of echinacea, valerian,
Siberian ginseng, panax ginseng, rosemary, goldenseal and chamomile. Management
believes that the Company's expertise in the production of special products
from natural sources and its extensive regulatory experience position it well
in this market area. However, management is unable to predict the amount of
future revenues from these nutraceutical products.
On November 14, 1996, the Company signed a three year contract to supply
RoseOx[Trademark], a new anti-oxidant nutraceutical product, to D&F Industries,
a manufacturer of vitamin and food supplement products. The value of this
contract is estimated to be $12,700,000. The Company has granted this customer
certain rights to use the RoseOx[Trademark] and RoseOx 660[Trademark]
trademarks for use in the nutraceutical dietary supplement and cosmetic
markets. The Company began shipping product under this contract during the
quarter ended January 31, 1997.
Natural Flavor Extracts - The Company manufactures, markets and sells natural
flavor extracts. The extracts are marketed under the Company's brand name
NaturEnhance[Trademark] Flavor Extracts. Revenues in the nine months ended
January 31, 1997 increased 40% over the same period last year. Competition for
products in the flavor extract market is based on flavor quality and
concentration, availability, customer service, and price. Many of these factors
are beyond the direct control of the Company.
Natural Food Ingredients - Food ingredients are products which perform a
function in foods, such as preservatives, stabilizers, colorants, antioxidants,
and nutritional additives. The Company's objective is to build a quality line
of products generating revenues and profits as a leader in the development,
manufacture and sales of natural food ingredients.
For the past two years, the Company engaged in process development efforts on
natural beta carotene, a new product for the Company, which is sold into the
healthcare products and food ingredients markets as a colorant, antioxidant and
a nutritional supplement. The beta carotene market represents $100 million in
annual worldwide sales, according to industry sources. In fiscal 1995, the
Company established a joint venture relationship (BetaPharm) with Cyanotech
with the intent to manufacture, market and sell natural beta carotene.
During the first quarter of fiscal 1997, the Company received notification from
Cyanotech that it had decided to end its participation in the BetaPharm joint
venture project. Cyanotech has decided to apply its resources to its own
proprietary products. The Company believes that the results of the research
over the past two years have been encouraging and the demand for natural beta
carotene continues. The Company and Cyanotech are working on an agreement
whereby Cyanotech will be available in a technical advisory role on the growing
and harvesting of microalgae for the BetaPharm project should Hauser elect to
enter this market alone or with another partner.
Pursuant to the terms of the joint venture, Cyanotech will grant an exclusive,
perpetual, royalty-free, worldwide license of the Cyanotech Technology (as
defined in the joint venture agreement) to make, have made, use and sell the
products, in consideration for the payment of aggregate out-of-pocket expenses
incurred by Cyanotech on the joint venture project since August 1, 1994
(estimated to be approximately $400,000). The Company has completed the pilot
project and is evaluating whether or not to acquire the Cyanotech Technology
license and proceed with the final commercialization phase. As construction and
funding of the facilities are required for commercialization, it is expected
that the evaluation will take approximately six more months.
Minimal revenue from natural food ingredients products was recognized in the
third quarter of fiscal 1997, but shipments are expected to increase in the
remainder of fiscal 1997 because of increased interest expressed by potential
customers. However, management is unable to predict the timing and amount of
future revenues from natural food ingredients products.
TECHNICAL SERVICES
Technical Services, which includes Shuster and Chemistry and Engineering
Laboratory Services of Hauser, experienced revenue growth in the first nine
months of fiscal 1997 of almost 7% over the same period in fiscal 1996,
primarily as a result of the acquisition of Shuster. Management believes that
demand for technical services provided by the Company will continue and expects
this service group to continue to grow.
As part of its dedicated effort to find new sources of revenue through business
development activities with new customers or by acquisition, the Company
acquired all of the stock of Shuster effective July 21, 1995 for approximately
$4,700,000 in cash and notes plus a performance based earnout for meeting
certain milestones over the next five years. Shuster, a consumer research and
development firm and contract laboratory with headquarters in the Boston area
and another facility in the Atlanta area, has developed a reputation for
delivering high quality services over the past forty years.
Shuster has a clientele of nationally known companies and operates in areas
that are complementary to the services provided by the Company's own
laboratories. Areas of expertise for Shuster include food product development,
household chemical formulation, nutritional supplement and pharmaceutical assay
and formulation, microbiological assay, FDA labeling and a significant number
of related areas focused around consumer products. The Company believes that
there are significant opportunities to leverage the compatibility and
reputation of Shuster with its own technical services capabilities.
DISCONTINUED OPERATIONS
During the first and second quarters of the current fiscal year, certain events
occurred which had significant negative impacts on the Company's secondary
forest products business. The European greens market, a significant portion of
Ironwood's customer base, became more confused and unpredictable. Shipment of
certain expected tropical greens products was delayed and, therefore, sales
were not consummated during this time period. In addition, the number of
competitors for raw material sourcing in the United States has increased
dramatically over the past three years and, when combined with unpredictable
weather patterns during the last six months, has caused higher raw material
costs to the Company for its greens business. These higher raw material costs
could not be passed on to the European customers as the European greens
business was highly price competitive and unpredictable. Further, the Company
determined that on-hand quantities of yew bark and alternative supplies of
cultivated yew trees were sufficient for the Company's needs to produce bulk
paclitaxel.
Ironwood's operating results during the first and second quarters of fiscal
1997 were unacceptable and well below management's expectations, especially in
light of corrective measures imposed over the past nine months. Ironwood's
operating loss in the six month period ended October 31, 1996 was $846,232.
Because of the foregoing, and in order to retain cash for its core businesses
and improve the Company's operating position going forward, management decided
on September 13, 1996 that this business should be sold. This sale was
completed on October 11, 1996. The results for the nine months ended January
31, 1997 include a non- recurring write-down of the Ironwood Evergreens
business to its fair market value.
The original acquisition of Ironwood enabled the Company to retain its bark
harvesting capabilities in the Pacific Northwest, thereby significantly
reducing the cost of bark collection. Over three collection seasons, Ironwood
reduced the cost of collection by $2.5 million compared to original estimates.
The Company received cash of $250,000, a promissory note of $400,000 and a
basic earnout of no more than $550,000. The earnout is based upon 75% of the
buyer's net cash flow (if any) derived from the business for the four year
period ending December 31, 2000. An additional earnout of 5% of the excess (if
any) of net cash flow over the projected net cash flow in the buyer's five year
plan is available to the Company. The maximum additional earnout is $400,000.
<TABLE>
RESULTS OF OPERATIONS:
Three months ended Nine months ended
January 31, January 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Total revenues $ 7,957,716 $ 3,557,836 $18,762,715 $11,420,124
Gross margin 2,502,184 247,313 3,312,018 (546,472)
Research and development 422,984 397,600 1,656,182 1,286,787
Sales and marketing 458,461 229,213 1,212,656 715,471
General and administrative 1,718,685 1,656,784 4,203,566 4,414,828
Loss from operations (97,946) (2,036,284) (3,760,386) (6,963,558)
Income (loss) from continuing
operations before taxes 19,325 (1,828,734) (3,357,604) (6,176,756)
Income (loss) from continuing
operations 13,914 (1,188,404) (2,417,654) (4,014,538)
Loss from discontinued operations (518,007) (3,056,047) (1,045,271)
Net income (loss) 13,914 (1,706,411) (5,473,701) (5,059,809)
Income (loss) per share -
continuting operations 0.00 (0.11) (0.23) (0.39)
Income (loss) per share -
discontinued operations (0.05) (0.30) (0.10)
Net income (loss) per share $ 0.00 $ (0.16) $ (0.53) $ (0.49)
Number of weighted shares
outstanding 10,800,029 10,344,007 10,405,818 10,337,953
</TABLE>
<TABLE>
Percentage Relationship to Total Revenues
Three months ended Nine months ended
January 31, January 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Total revenues 100.0 % 100.0 % 100.0 % 100.0 %
Gross margin 31.4 % 7.0 % 17.7 % (4.8)%
Research and development 5.3 % 11.2 % 8.8 % 11.3 %
Sales and marketing 5.8 % 6.4 % 6.5 % 6.3 %
General and administrative 21.6 % 46.6 % 22.4 % 38.7 %
Loss from operations (1.2)% (57.2)% (20.0)% (61.0)%
Income (loss) from continuing
operations before taxes 0.2 % (51.4)% (17.9)% (54.1)%
Income (loss) from continuing
operations 0.2 % (33.4)% (12.9)% (35.2)%
Loss from discontinued
operations (14.6)% (16.3)% (9.2)%
Net income (loss) 0.2 % (48.0)% (29.2)% (44.3)%
</TABLE>
<TABLE>
Balance Sheet
January 31, 1997 April 30, 1996
<S> <C> <C>
Working capital $ 27,982,565 $ 32,076,509
Property and equipment, net 22,402,249 25,526,727
Total assets 69,724,943 74,855,599
Net stockholder's equity 64,774,202 70,183,619
</TABLE>
CONTINUING OPERATIONS:
REVENUES. Total revenues increased 123% to $7,957,716 in the
third quarter of fiscal 1997 from $3,557,836 in the third
quarter of fiscal 1996 primarily due to increased revenues of
pharmaceutical and nutraceutical products partially offset by
reduced revenues in technical services. Total revenues in the
first nine months of fiscal 1997 were $18,762,715, an increase
of 64% over the same period last year of $11,420,124. This
increase was primarily due to increased sales of
pharmaceutical and nutraceutical products and the acquisition
of Shuster.
A breakout of the Company's revenues by product and service
groupings for its continuing operations is as follows:
<TABLE>
Three months ended Nine months ended
January 31, January 31,
<S> <C> <C> <C> <C>
Revenues 1997 1996 1997 1996
Pharmaceuticals $4,266,995 $ 584,963 $ 7,038,894 $ 3,590,701
Natural ingredients products
(includes nutraceuticals,
natural flavor extracts and
food ingredients) 1,518,734 587,795 5,001,301 1,543,663
Technical services (includes
chemistry and engineering
services and Shuster) 2,171,987 2,385,078 6,722,520 6,285,760
$7,957,716 $3,557,836 $18,762,715 $11,420,124
</TABLE>
Pharmaceuticals:
Revenues from pharmaceuticals products in the third quarter of
fiscal 1997 increased 629% compared to the third quarter of
fiscal 1996. Revenues for the first nine months of fiscal 1997
increased 96% over the same period in the previous fiscal
year. This was due to increased sales of paclitaxel to two new
customers. The Company signed an agreement with a European
customer in November, 1996 to supply bulk paclitaxel over a
three year period and began shipments to this customer during
the quarter ended January 31, 1997. In addition, the Company
shipped bulk paclitaxel to another customer during the third
quarter of fiscal 1997 for use in its development efforts. The
Company does not have a long term supply agreement with this
customer and future sales of bulk paclitaxel to this customer
are not certain.
The Company recognized revenues of $143,104 for the shipment
of sanguinaria extract to Colgate during the third quarter of
fiscal 1997 as compared to revenues of $233,929 in the same
period last year. For the nine months ended January 31, 1997,
sales of sanguinaria extract totaled $740,011 compared to
$458,809 in the nine months ended January 31, 1996. Shipments
of sanguinaria extract in the third quarter of fiscal 1997
completed the requirements of the Company's contractual
obligations with Colgate, and the Company does not expect
additional orders in the foreseeable future.
Natural ingredients:
Natural ingredients product revenues increased 158% in the
third quarter of fiscal 1997 and 224% in the first nine months
of fiscal 1997 compared to the same periods last year. The
increase is primarily attributable to success in selling
nutraceutical products as revenues were $1,127,944 in the
quarter ended January 31, 1997 compared to revenues of
$259,922 in the quarter ended January 31, 1996. Nutraceutical
product revenues were $3,468,821 in the nine months ended
January 31, 1997 compared to $457,002 in the same period last
year. In addition, revenues from natural flavor extracts were
$300,961 and $1,493,437 in the three and nine months ended
January 31, 1997, respectively, compared to $327,873 and
$1,029,661 in the three and nine months ended January 31,
1996, respectively. The year-to-date increase was the result
of higher sales of natural flavor extracts to the beverage
industry. Revenues from these natural flavor extract sales are
not expected to increase in the fourth quarter of fiscal 1997
due to seasonality.
Technical Services: Technical services revenues were
$2,171,987 in the third quarter of fiscal 1997 compared to
$2,385,078 in the same quarter of fiscal 1996, a decrease of
9%. This decrease is due to the reduction of contract work for
one particular customer at Shuster. Technical Services
revenues increased almost 7% in the nine months ended January
31, 1997 compared to the same period in the last fiscal year
primarily because the acquisition of Shuster occurred in July,
1995 which resulted in consolidating only ten months of
revenues in fiscal year 1996.
GROSS MARGIN. Gross margin in the third quarter of fiscal 1997
was 31% of total revenues as compared to 7% in the same
quarter of fiscal 1996. Gross margin in the nine months ended
January 31, 1997 was approximately 18% of total revenues
compared to approximately negative 5% in the same period last
year. The improvement is mostly due to the sales of paclitaxel
to two new customers in the quarter ended January 31, 1997
which generated significant gross margins. Offsetting this
were gross margins on paclitaxel sales to AHP which are
currently low in anticipation of future royalties. Gross
margins on nutraceutical products vary greatly because of
product mix. The Company recognized only moderate gross
margins from the sale of nutraceutical products during the
third quarter of fiscal 1997. In addition, the Company is
incurring high overhead costs in relation to its current sales
levels in anticipation of growth in other product lines.
Management continues to concentrate on sales and manufacturing
operations with the goal of generating improved gross margins.
OPERATING EXPENSES. Research and development expenses were
$422,984 in the third quarter of fiscal 1997 compared to
$397,600 in the third quarter of fiscal 1996, an increase of
6%. In the first nine months of fiscal 1997, research and
development expenses of $1,656,182 were almost 29% higher than
the same period in fiscal 1996. The increase in research and
development costs is related to various projects including
development of natural beta carotene and research in using
cultivated yew trees as the next source of paclitaxel. The
Company intends to actively continue research and development
efforts.
Sales and marketing expenses in the three and nine months
ended January 31, 1997 were $458,461 and $1,212,656,
respectively, compared to $229,213 and $715,471, respectively,
in the three and nine months ended January 31, 1996. The
increase represents the Company's accelerated efforts to
market new products, particularly in the areas of
pharmaceuticals, nutraceuticals and natural food ingredients.
In addition, fiscal 1997 sales expenses include, for the first
time, payments of commissions to internal salespeople and
external distributors.
General and administrative expenses were $1,718,685 in the
quarter ended January 31, 1997, a 4% increase over the same
quarter last year. Included in this expense is a charge of
$345,000 for the modification of certain production facility
assets. Without this charge, general and administrative
expenses would have decreased from the third quarter of fiscal
1996 by 17%. For the nine months ended January 31, 1997,
general and administrative expenses of $4,203,566 were almost
5% lower compared to the same period last year. These
decreases are the result of management's continued efforts to
reduce general and administrative costs where appropriate.
INTEREST INCOME. Interest income was $119,014 in the third
quarter of fiscal 1997 compared to $221,831 in the same
quarter of fiscal 1996. Interest income was $419,510 and
$817,827 in the nine months ended January 31, 1997 and 1996,
respectively. The decrease is due to less invested capital.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. Total cash and cash equivalents plus short-term
investments were $8,504,603 at January 31, 1997 compared to
$15,220,627 at April 30, 1996. The decrease is due primarily
to expenditures for the harvesting of Pacific yew bark,
capital expenditures, raw material purchases for new product
areas, and other general working capital requirements. The
Company has a line of credit totaling $1,500,000 which expires
on September 30, 1997 and is used primarily for letters of
credit related to raw material purchases. As of January 31,
1997, $1,500,000 was available for use under this line of
credit. In addition, the Company filed for income tax refunds
of approximately $1,300,000 and received those funds
subsequent to January 31, 1997. The Company believes that cash
reserves, funds generated from operations, including the tax
refund, and available borrowings from the line of credit will
be sufficient to fund the Company's operations through at
least the next twelve months.
To further assure that the Company has sufficient available
funds, management has been negotiating with a bank to secure a
working capital line of credit. On March 4, 1997, the Company
received a letter of commitment from the bank to provide a
line of credit totaling $8,000,000. While the final terms of
the credit facility are not yet complete, it is expected that
the borrowing base will consist of eligible accounts
receivable, inventory and fixed assets. Management believes
negotiations with the bank will be complete, and funds under
this line of credit will be available, during the fourth
quarter of fiscal 1997.
Management believes that the combination of cash reserves,
working capital lines of credit, and business opportunities
discussed earlier, including the new contracts secured by the
Company, will be sufficient to meet the liquidity needs of the
Company on a long-term basis.
WORKING CAPITAL. Working capital as of January 31, 1997 was
$27,982,565 compared to $32,076,509 as of April 30, 1996. This
decrease is primarily attributable to the use of cash and cash
equivalents plus short-term investments for the harvest of
Pacific yew tree bark, which has been classified as
non-current inventory. Non- current inventories reflect the
portion of total inventories which are not expected to be sold
in the next twelve months. In addition, working capital
decreased by $1,287,749 as a result of the write-down related
to the discontinued operations of Ironwood.
PROPERTY AND EQUIPMENT. Purchases of property and equipment in
the first nine months of fiscal 1997 totaled $1,326,693. This
was primarily the result of upgrades to manufacturing
equipment for the production of nutraceuticals and food
ingredients products.
SEASONALITY
The Company has experienced seasonality in its natural flavor
extracts product line primarily in advance of the demand for
summer beverages, in which most of its products are used.
FORWARD LOOKING STATEMENTS
Certain oral and written statements of management of the
Company included in the Form 10-Q and elsewhere may contain
forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are intended to be
covered by the safe harbors created thereby. These statements
include the plans and objectives of management for future
operations. The forward-looking statements included herein and
elsewhere are based on current expectations that involve
judgments which are difficult or impossible to predict
accurately and many of which are beyond the control of the
Company. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any
of the assumptions could be inaccurate and, therefore, there
can be no assurance that the forward-looking statements will
prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements, the
inclusion of such information should not be regarded as a
representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
<PAGE>
Part 2
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
Effective December 3, 1996, the Company was
reincorporated in the State of Colorado. As a result of that
action, each share of $.001 par value common stock of Hauser
Chemical Research, Inc., a Delaware corporation, was
immediately converted into one shares of $.001 par value
common stock of Hauser, Inc., a Colorado corporation. The
terms of the Colorado common stock are identical to those of
the Delaware common stock. Under Colorado law, shareholders
are entitled to appraisal rights in connection with the lease,
sale, exchange, transfer or other disposition of all or
substantially all of the assets of a corporation made in the
usual or regular course of its business. In addition,
shareholders of a Colorado corporation being merged into a
surviving corporation or being consolidated into a new
corporation are also entitled to appraisal rights. Delaware
law does not recognize appraisal rights if the shares of the
merged corporation are listed on a national securities
exchange or designated as a national market system securities
on an interdealer quotation system by NASDAQ.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security
Holders.
The Company's annual meeting of shareholders was
held on November 14, 1996.
The shareholders voted upon a proposal to (a)
reincorporate the Company under the laws of the State of
Colorado so that the expense of the Delaware franchise tax is
eliminated; and b) change the name of the Company to Hauser,
Inc.
The shareholders approved the proposal by the
following action:
<TABLE>
<S> <C>
Votes For: 6,896,483
Votes Against 27,988
Shares Withheld 2,651,105
</TABLE>
In addition, the following eight directors were
re-elected to serve as directors of the Company for the
following year: William E. Coleman, Stanley J. Cristol,
Randall J. Daughenbaugh, Ray L. Hauser, Christopher W. Roser,
Robert F. Saydah, Dean P. Stull and Bert M. Tolbert.
The votes cast for and against or withheld as to each
director nominee is as follows:
<TABLE>
Director For Against/Withheld
<S> <C> <C>
Dean P. Stull 9,324,052 251,525
Randall J. Daughenbaugh 9,482,954 92,622
Stanley J. Cristol 9,493,688 81,888
Ray L. Hauser 9,321,732 253,844
Bert L. Tolbert 9,496,184 79,392
William E. Coleman 9,509,936 65,640
Christopher W. Roser 9,325,707 249,869
Robert F. Saydah 9,473,109 102,467
</TABLE>
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) The following Exhibits are filed as part of this
Report:
2.01 Certificate of Merger filed in the State of
Delaware on December 2, 1996.
3.01 Articles of Incorporation of the Company
filed in the State of Colorado on November 21, 1996.
3.02 Colorado Bylaws of the Company dated December
1, 1996.
(b) A Form 8-K was filed by the Company on January
30,1997, reflecting a change in accountants.
<PAGE>
FORM 10 Q
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
HAUSER, INC.
Date: March 14, 1997
/s/ Dean P. Stull
Chairman of the Board, Chief Executive
Officer, and President
Date: March 14, 1997
/s/ David I. Rosenthal
Chief Financial Officer and Treasurer
EXHIBIT 2.01
CERTIFICATE OF MERGER OF
HAUSER CHEMICAL RESEARCH, INC.
(a Delaware corporation)
Into
HAUSER, INC.
(a Colorado corporation)
Under Section 252 of the
General Corporation Law of Delaware
We, the undersigned, being the President and Secretary of
Hauser Inc., a Colorado corporation, do hereby certify as
follows:
1. The constituent corporations of the merger referred to in
this Certificate are Hauser Chemical Research, Inc., a
Delaware corporation (hereinafter referred to as "HCR") and
Hauser, Inc., a Colorado corporation (hereinafter referred to
as "Hauser").
2. An Agreement and Plan of Merger has been approved,
adopted, certified, executed and acknowledged by each of said
constituent corporations in accordance with the provisions of
Section 252 of the General Corporation Law of Delaware.
3. Hauser is the corporation surviving the merger referred
to.
4. The Articles of Incorporation of Hauser, Inc., filed in
the State of Colorado shall be the Certificate of
Incorporation of the surviving corporation.
5. The executed Agreement and Plan of Merger is on file at
the principal place of business of Hauser, Inc., the surviving
corporation, which address is 5555 Airport Boulevard, Boulder,
CO 80301.
6. A copy of the Agreement and Plan of Merger will be
furnished by Hauser, Inc. upon request, and without cost, to
any stockholder of either constituent corporation.
7. The authorized capital stock of Hauser, Inc. is Fifty
Million Eight Hundred (50,800,000) shares, of which Fifty
Million (50,000,000) shall be designated as common stock,
$.001 par value, and of which Eight Hundred Thousand (800,000)
shares shall be designated as preferred stock, $1.00 par
value.
8. Hauser hereby appoints the Secretary of State of the State
of Delaware as an agent for service of process and directs
that any process served upon the Secretary of State may be
mailed to Hauser at 5555 Airport Boulevard, Boulder, CO 80301.
9. This instrument and the merger referred to herein shall
become effective on December 3, 1996.
Dated: November 27, 1996.
HAUSER, INC.
a Colorado corporation
By:
/s/ Dean P. Stull,
President
By:
/s/ Patricia A. Roberts,
Secretary
EXHIBIT 3.01
HAUSER, INC.
ARTICLES OF INCORPORATION
The undersigned, acting as the incorporator of a corporation
to be incorporated under the Colorado Business Corporation Act
(the "Act"), adopts these Articles of Incorporation.
ARTICLE I
NAME
The name of the Corporation is HAUSER, INC.
ARTICLE II
AUTHORIZED CAPITAL
The aggregate number of shares of capital stock which the
corporation shall have authority to issue is Fifty Million
Eight Hundred (50,800,000) shares, of which Fifty Million
(50,000,000) shall be designated as common stock, $.001 par
value, and of which Eight Hundred Thousand (800,000) shares
shall be designated as preferred stock, $1.00 par value. The
Board of Directors shall have the authority to fix the rights,
powers, preferences and privileges, and the qualifications,
limitations or restrictions thereof, of any series of
preferred stock, including but not limited to dividend rights,
dividend rates, conversion rights, voting rights, and
liquidation preferences; and to fix the number of shares
constituting any such series and the designation thereof; and
to increase or decrease the number of shares of any such
series (but not below the number of shares thereof then
outstanding).
ARTICLE III
OFFICES
The street address of the initial registered office of the
Corporation is 5555 Airport Boulevard, Boulder, CO 80301. The
name of the initial registered agent at that address is
Patricia A. Roberts. The address of the Corporation's initial
principal office is 5555 Airport Boulevard, Boulder, CO 80301.
ARTICLE IV
INCORPORATOR
The name and address of the incorporator is Patricia A.
Roberts, 5555 Airport Boulevard, Boulder, CO 80301. The
incorporator is 18 or more years of age.
ARTICLE V
PURPOSES
The purpose for which the Corporation is organized is to
engage in any lawful business.
ARTICLE VI
PREEMPTIVE RIGHTS
No holder of any shares of the Corporation, whether now or
hereafter authorized, shall have any preemptive or
preferential right to acquire any shares or securities of the
corporation, including shares or securities held in the
treasury of the Corporation.
ARTICLE VII
QUORUM FOR SHAREHOLDERS' MEETINGS
Forty percent (40%) of the outstanding shares shall constitute
a quorum at any meeting of shareholders. Except as is
otherwise provided by the Act with respect to action on
amendment to these articles of incorporation, on a plan of
merger or share exchange, on the disposition of substantially
all of the property of the corporation, on the granting of
consent to the disposition of property by an entity controlled
by the Corporation, and on the dissolution of the Corporation,
action on a matter other than the election of directors is
approved if a quorum exists and if the votes cast favoring the
action exceed the votes cast opposing the action.
ARTICLE VIII
BOARD OF DIRECTORS
The corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Corporation
shall be managed under the direction of a board of directors.
The names and addresses of the members of the initial board of
directors are as follows:
<TABLE>
Name Address
<S> <S>
Dean P. Stull 5555 Airport Drive, Boulder, CO 80301
Randall J. Daughenbaugh 5555 Airport Drive, Boulder, CO 80301
Stanley J. Cristol University of Colorado, Dept. of Chemistry,
Campus Box 215, Boulder, CO 80309
Ray Hauser 5555 Airport Drive, Boulder, CO 80301
Bert M. Tolbert 444 Kalmia Avenue, Boulder, CO 80304
William E. Coleman 4820 Pearl East Circle, Boulder, CO 80301
Christopher W. Roser 1105 Spruce Street, Boulder, CO 80302
Robert F. Saydah Four Embarcadero Center, Suite 3570, San Francisco, CA 94111
</TABLE>
The number of directors of the Corporation shall be fixed and
may be altered from time to time in accordance with the
Bylaws. The directors shall be elected at each annual meeting
of the shareholders, provided that vacancies may be filled by
election by the remaining directors, though less than a
quorum. Despite the expiration of his or her term, a director
continues to serve until his or her successor is elected and
qualified.
ARTICLE IX
CUMULATIVE VOTING
Each outstanding share of Common Stock shall be entitled to
one vote and each outstanding fractional share of Common Stock
shall be entitled to a corresponding fractional vote on each
matter submitted to a vote of shareholders. Cumulative voting
shall not be allowed in the election of directors.
ARTICLE X
LIMITATION ON DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable
to the Corporation or to its shareholders for monetary damages
for breach of fiduciary duty as a director; except that this
provision shall not eliminate or limit the liability of a
director to the Corporation or to its shareholders for
monetary damages otherwise existing for
(i) any breach of the director's duty of loyalty to the
Corporation or to its shareholders;
(ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law;
(iii) acts specified in Section 7-108-403 of the Act; or
(iv) any transaction from which the director directly or
indirectly derived any improper personal benefit.
If the Act is hereafter amended or superseded to eliminate or
limit further the liability of a director, then, in addition
to the elimination and limitation of liability provided by the
preceding sentence, the liability of each director shall be
eliminated or limited to the fullest extent permitted by the
Act as so amended or superseded. Any repeal or modification of
this Article X shall not adversely affect any right or
protection of a director of the Corporation under this Article
X, as in effect immediately prior to such repeal or
modification, with respect to any liability that would have
accrued, but for this Article X, prior to such repeal or
modification.
ARTICLE XI
INDEMNIFICATION
The Corporation shall indemnify, to the fullest extent
permitted by applicable law in effect from time to time, any
person, and the estate and personal representative of any such
person, against all liability and expense (including
attorneys' fees) incurred by reason of the fact that the
person is or was a director or officer of the Corporation or,
while serving as a director or officer of the Corporation,
such person is or was serving at the request of the
Corporation as a director, officer, partner, trustee,
employee, fiduciary, or agent of, or in any similar managerial
or fiduciary position of, another domestic or foreign
corporation or other individual or entity or of an employee
benefit plan. The Corporation shall also indemnify any person
who is serving or has served the Corporation as director,
officer, employee, fiduciary, or agent, and that person's
estate and personal representative, to the extent and in the
manner provided in any bylaw, resolution of the shareholders
or directors, contract, or otherwise, so long as such
provision is legally permissible.
ARTICLE XII
TERM OF EXISTENCE
The duration of the Corporation shall be perpetual.
INCORPORATOR
/s/Patricia A. Roberts
The undersigned consents to her appointment as the initial
registered agent of HAUSER, INC.
/s/Patricia A. Roberts,
Corporate Secretary
Hauser Chemical Research, Inc.
EXHIBIT 3.02
BYLAWS
OF
HAUSER, INC.
ARTICLE I
SHAREHOLDERS
1. ANNUAL SHAREHOLDERS' MEETING.
The annual shareholders' meeting of Hauser, Inc.
("Corporation") shall be held in the second fiscal quarter of
each year or on some other date and at the time and place
fixed from time to time by the Board of Directors.
2. SPECIAL SHAREHOLDERS' MEETING.
A special shareholders' meeting for any purpose or purposes,
may be called by the Board of Directors, the chief executive
officer or the chairman of the Board. The Corporation shall
also hold a special shareholders' meeting in the event it
receives, in the manner specified in Section VII.3., one or
more written demands for the meeting, stating the purpose or
purposes for which it is to be held, signed and dated by the
holders of shares representing not less than one-tenth of all
of the votes entitled to be cast on any issue at the meeting.
Special meetings shall be held at the principal office of the
Corporation or at such other place as the Board of Directors
may determine.
3. RECORD DATE FOR DETERMINATION OF SHAREHOLDERS.
(a) In order to make a determination of shareholders (1)
entitled to notice of or to vote at any shareholders' meeting
or at any adjournment of a shareholders' meeting, (2) entitled
to demand a special shareholders' meeting, (3) entitled to
take any other action, (4) entitled to receive payment of a
share dividend or a distribution, or (5) for any other
purpose, the Board of Directors may fix a future date as the
record date for such determination of shareholders. The record
date may be fixed not more than seventy days before the date
of the proposed action.
(b) Unless otherwise specified when the record date is fixed,
the time of day for determination of shareholders shall be
5:00 p.m. local time on the record date.
(c) A determination of shareholders entitled to be given
notice of or to vote at a shareholders' meeting is effective
for any adjournment of the meeting unless the Board of
Directors fixes a new record date, which the Board shall do if
the meeting is adjourned to a date more than one hundred
twenty days after the date fixed for the original meeting.
(d) If no record date is otherwise fixed, the record date for
determining shareholders entitled to be given notice of and to
vote at an annual or special shareholders' meeting is the day
before the first notice is given to shareholders.
(e) The record date for determining shareholders entitled to
take action without a meeting is the date a writing upon which
the action is taken is first received by the Corporation.
4. VOTING LIST.
(a) After a record date is fixed for a shareholders' meeting,
the secretary shall prepare a list of the names of all its
shareholders who are entitled to be given notice of the
meeting. The list shall be arranged by voting groups and
within each voting group by class or series of shares, shall
be alphabetical within each class or series, and shall show
the address of, and the number of shares of each such class
and series that are held by, each shareholder.
(b) The shareholders' list shall be available for inspection
by any shareholder, beginning the earlier of ten days before
the meeting for which the list was prepared or two business
days after notice of the meeting is given and continuing
through the meeting, and any adjournment thereof, at the
Corporation's principal office or at a place identified in the
notice of the meeting in the city where the meeting will be
held.
(c) The secretary shall make the shareholders' list available
at the meeting, and any shareholder or agent or attorney of a
shareholder is entitled to inspect the list at any time during
the meeting or any adjournment.
5. NOTICE TO SHAREHOLDERS.
(a) The secretary shall give notice to shareholders of the
date, time, and place of each annual and special shareholders'
meeting no fewer than ten nor more than sixty days before the
date of the meeting; except that, if the articles of
incorporation are to be amended to increase the number of
authorized shares, at least thirty days' notice shall be
given. Except as otherwise required by the Colorado Business
Corporation Act, the secretary shall be required to give such
notice only to shareholders entitled to vote at the meeting.
(b) Notice of an annual shareholders' meeting need not
include a description of the purpose or purposes for which the
meeting is called unless a purpose of the meeting is to
consider an amendment to the articles of incorporation, a
restatement of the articles of incorporation, a plan of merger
or share exchange, disposition of substantially all of the
property of the Corporation, consent by the Corporation to the
disposition of property by another entity, or dissolution of
the Corporation.
(c) Notice of a special shareholders' meeting shall include a
description of the purpose or purposes for which the meeting
is called.
(d) Notice of a shareholders' meeting shall be in writing and
shall be given:
(1) by deposit in the United States mail, properly
addressed to the shareholder's address shown in the
Corporation's current record of shareholders, first class
postage prepaid, and, if so given, shall be effective when
mailed; or
(2) by telegraph, teletype, electronically transmitted
facsimile, electronic mail, mail, or private carrier or by
personal delivery to the shareholder, and, if so given, shall
be effective when actually received by the shareholder.
(e) If an annual or special shareholders' meeting is
adjourned to a different date, time, or place, notice need not
be given of the new date, time or place if the new date, time,
or place is announced at the meeting before adjournment;
provided, however, that, if a new record date for the
adjourned meeting is fixed pursuant to Section I.3.(c), notice
of the adjourned meeting shall be given to persons who are
shareholders as of the new record date.
(f) If three successive notices are given by the Corporation,
whether with respect to a shareholders' meeting or otherwise,
to a shareholder and are returned as undeliverable, no further
notices to such shareholder shall be necessary until another
address for the shareholder is made known to the Corporation.
6. QUORUM.
Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those
shares exists with respect to that matter. Forty Percent of
the votes entitled to be cast on the matter by the voting
group shall constitute a quorum of that voting group for
action on the matter. If a quorum does not exist with respect
to any voting group, the Board of Directors, chief executive
officer, chairman of the Board, or the holders of a majority
of outstanding shares, whether present in person or by proxy,
whether or not a member of that voting group, may adjourn the
meeting to a different date, time, or place, and (subject to
the next sentence) notice need not be given of the new date,
time, or place if the new date, time, or place is announced at
the meeting before adjournment. If a new record date for the
adjourned meeting is or must be fixed pursuant to Section
I.3.(c), notice of the adjourned meeting shall be given
pursuant to Section I.5. to persons who are shareholders as of
the new record date. At any adjourned meeting at which a
quorum exists, any matter may be acted upon that could have
been acted upon at the meeting originally called; provided,
however, that, if new notice is given of the adjourned
meeting, then such notice shall state the purpose or purposes
of the adjourned meeting sufficiently to permit action on such
matters. Once a share is represented for any purpose at a
meeting, including the purpose of determining that a quorum
exists, it is deemed present for quorum purposes for the
remainder of the meeting and for any adjournment of that
meeting unless a new record date is or shall be set for that
adjourned meeting.
7. VOTING ENTITLEMENT OF SHARES.
Except as stated in the articles of incorporation, each
outstanding share, regardless of class, is entitled to one
vote, and each fractional share is entitled to a corresponding
fractional vote, on each matter voted on at a shareholders'
meeting.
8. PROXIES; ACCEPTANCE OF VOTES AND CONSENTS.
(a) A shareholder may vote either in person or by proxy.
(b) An appointment of a proxy is not effective against the
Corporation until the appointment is received by the
Corporation. An appointment is valid for eleven months unless
a different period is expressly provided in the appointment
form.
(c) The Corporation may accept or reject any appointment of a
proxy, revocation of appointment of a proxy, vote, consent,
waiver, or other writing purportedly signed by or for a
shareholder, if such acceptance or rejection is in accordance
with the provisions of 7-107-203 and 7-107-205 of the Colorado
Business Corporation Act.
9. WAIVER OF NOTICE.
(a) A shareholder may waive any notice required by the
Colorado Business Corporation Act, by the articles of
incorporation or these bylaws, whether before or after the
date or time stated in the notice as the date or time when any
action will occur or has occurred. The waiver shall be in
writing, be signed by the shareholder entitled to the notice,
and be delivered to the Corporation for inclusion in the
minutes or filing with the corporate records, but such
delivery and filing shall not be conditions of the
effectiveness of the waiver.
(b) A shareholder's attendance at a meeting waives objection
to lack of notice or defective notice of the meeting, unless
the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting
because of lack of notice or defective notice, and waives
objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described
in the meeting notice, unless the shareholder objects to
considering the matter when it is presented.
10. ACTION BY SHAREHOLDERS WITHOUT A MEETING.
Any action required or permitted to be taken at a
shareholders' meeting may be taken without a meeting if all of
the shareholders entitled to vote thereon consent to such
action in writing. Action taken pursuant to this section shall
be effective when the Corporation has received writings that
describe and consent to the action, signed by all of the
shareholders entitled to vote thereon. Action taken pursuant
to this section shall be effective as of the date the last
writing, necessary to effect the action, is received by the
Corporation, unless all of the writings necessary to effect
the action specify another date, which may be before or after
the date the writings are received by the Corporation. Such
action shall have the same effect as action taken at a meeting
of shareholders and may be described as such in any document.
Any shareholder who has signed a writing describing and
consenting to action taken pursuant to this section may revoke
such consent by a writing signed by the shareholder describing
the action and stating that the shareholder's prior consent
thereto is revoked, if such writing is received by the
secretary of the Corporation before the effectiveness of the
action.
11. MEETINGS BY TELECOMMUNICATIONS.
Any or all of the shareholders may participate in an annual or
special shareholders' meeting by, or the meeting may be
conducted through the use of, any means of communication by
which all persons participating in the meeting may hear each
other during the meeting. A shareholder participating in a
meeting by this means is deemed to be present in person at the
meeting.
ARTICLE II
DIRECTORS
1. AUTHORITY OF THE BOARD OF DIRECTORS.
The corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Corporation
shall be managed under the direction of, a Board of Directors.
2. NUMBER.
The number of directors shall be at least three and not more
than nine. Within that range, the number of directors shall be
as stated by resolution adopted by the Board of Directors from
time to time, but no decrease in the number of directors shall
have the effect of shortening the term of any incumbent
director.
3. QUALIFICATION.
Directors shall be natural persons at least eighteen years old
but need not be residents of the State of Colorado or
shareholders of the Corporation. At least two of the directors
shall be independent directors as required by NASDAQ. An
independent director shall be a person other than an officer
or employee of the Corporation or its subsidiaries or any
other individual having a relationship which, in the opinion
of the Board of Directors, would interfere with the exercise
of independent judgment in carrying out the responsibilities
of a director. Full or part time employees of the Corporation
or its subsidiaries who serve as members of the Board of
Directors do so as part of their employment and are not
eligible for any supplemental compensation for Board service,
other than reimbursement of expenses.
4. ELECTION.
The Board of Directors shall be elected at the annual meeting
of the shareholders or at a special meeting called for that
purpose.
5. TERM.
Each director shall be elected to hold office until the next
annual meeting of shareholders and until the director's
successor is elected and qualified. The term of a director
elected to fill a vacancy by the Board of Directors, even if
less than a quorum, expires at the next annual meeting at
which directors are elected.
6. RESIGNATION.
A director may resign at any time by giving written notice of
his or her resignation to the chairman or to the secretary.
The resignation shall be effective when it is received by the
chairman or secretary, as the case may be, unless the notice
of resignation specifies a later effective date. Acceptance of
such resignation shall not be necessary to make it effective
unless the notice so provides.
7. REMOVAL.
Any director may be removed by the shareholders, of the voting
group that elected the director with or without cause at a
meeting called for that purpose. The notice of the meeting
shall state that the purpose, or one of the purposes, of the
meeting is removal of the director. A director may be removed
only if the number of votes cast in favor of removal exceeds
the number of votes cast against removal.
8. VACANCIES.
(a) If a vacancy occurs on the Board of Directors, including a
vacancy resulting from an increase in the number of directors:
(1) The Board of Directors may fill the vacancy; or
(2) If the directors remaining in office constitute fewer
than a quorum of the Board, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining
in office.
(b) Notwithstanding Section II.8.(a), if the vacant office
was held by a director elected by a voting group of
shareholders, then, if one or more of the remaining directors
were elected by the same voting group, only such directors are
entitled to vote to fill the vacancy if it is filled by
directors, and they may do so by the affirmative vote of a
majority of such directors remaining in office; and only the
holders of shares of that voting group are entitled to vote to
fill the vacancy if it is filled by the shareholders.
(c) A vacancy that will occur at a specific later date, by
reason of a resignation that will become effective at a later
date under Section II.6. or otherwise, may be filled before
the vacancy occurs, but the new director may not take office
until the vacancy occurs.
9. MEETINGS.
The Board of Directors may hold regular or special meetings
in or out of the State of Colorado. The Board of Directors
may, by resolution, establish dates, times and places for
regular meetings, which may thereafter be held without further
notice. Special meetings may be called by the Chairman of the
Board or by any two directors and shall be held at the
principal office of the Corporation unless another place is
consented to by every director.
10. NOTICE OF SPECIAL MEETING.
Notice of a special meeting shall be given to every director
at least forty eight (48) hours before the time of the
meeting, stating the date, time, and place of the meeting. The
notice need not describe the purpose of the meeting. Notice
may be given orally to the director, personally or by
telephone or other wire or wireless communication. Notice may
also be given in writing by telegraph, teletype,
electronically transmitted facsimile, electronic mail, mail,
or private carrier. Notice shall be effective at the earliest
of the time it is received; five days after it is deposited in
the United States mail, properly addressed to the last address
for the director shown on the records of the Corporation,
first class postage prepaid; or the date shown on the return
receipt if mailed by registered or certified mail, return
receipt requested, postage prepaid, in the United States mail
and if the return receipt is signed by the director to which
the notice is addressed.
11. QUORUM.
Except as provided in Section II.8., a majority of the number
of directors fixed in accordance with these bylaws shall
constitute a quorum for the transaction of business at all
meetings of the Board of Directors. The act of a majority of
the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors, except as
otherwise specifically required by law.
12. WAIVER OF NOTICE.
(a) A director may waive any notice of a meeting before or
after the time and date of the meeting stated in the notice.
Except as provided by Section II. 12.(b), the waiver shall be
in writing and shall be signed by the director. Such waiver
shall be delivered to the secretary for filing with the
corporate records, but such delivery and filing shall not be
conditions of the effectiveness of the waiver.
(b) A director's attendance at or participation in a meeting
waives any required notice to him or her of the meeting
unless, at the beginning of the meeting or promptly upon his
or her later arrival, the director objects to holding the
meeting or transacting business at the meeting because of lack
of notice or defective notice and does not thereafter vote for
or assent to action taken at the meeting.
13. ATTENDANCE BY TELEPHONE.
One or more directors may participate in a regular or special
meeting by, or conduct the meeting through the use of, any
means of communication by which all directors participating
may hear each other during the meeting. A director
participating in a meeting by this means is deemed to be
present in person at the meeting.
14. DEEMED ASSENT TO ACTION.
A director who is present at a meeting of the Board of
Directors when corporate action is taken shall be deemed to
have assented to all action taken at the meeting unless:
(a) The director objects at the beginning of the meeting, or
promptly upon his or her arrival, to holding the meeting or
transacting business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting;
(b) The director contemporaneously requests that his or her
dissent or abstention as to any specific action taken be
entered in the minutes of the meeting; or
(c) The director causes written notice of his or her dissent
or abstention as to any specific action to be received by the
presiding officer of the meeting before adjournment of the
meeting or by the secretary promptly after adjournment of the
meeting.
The right of dissent or abstention pursuant to this Section
II.14. as to a specific action is not available to a director
who votes in favor of the action taken.
15. ACTION BY DIRECTORS WITHOUT A MEETING.
Any action required or permitted by law to be taken at a Board
of Directors' meeting may be taken without a meeting if all
members of the Board consent to such action in writing. Action
shall be deemed to have been so taken by the Board at the time
the last director signs a writing describing the action taken,
unless, before such time, any director has revoked his or her
consent by a writing signed by the director and received by
the secretary or any other person authorized by the bylaws or
the Board of Directors to receive such a revocation. Such
action shall be effective at the time and date it is so taken
unless the directors establish a different effective time or
date. Such action has the same effect as action taken at a
meeting of directors and may be described as such in any
document.
ARTICLE III
COMMITTEES OF THE BOARD OF DIRECTORS
Subject to the provisions of Section 7-109-106 of the Colorado
Business Corporation Act (the "Act"), the Board of Directors
may create one or more committees and appoint one or more
members of the Board of Directors to serve on them. The
creation of a committee and appointment of members to it shall
require the approval of a majority of all the directors in
office when the action is taken.
1. COMPENSATION COMMITTEE.
A Compensation Committee of the Board of Directors shall be
established which shall consist of no more than four Board
members, all of whom shall be outside directors. The function
of the Compensation Committee shall be (a) to set salaries for
corporate officers of the Corporation; (b) to establish,
maintain and administer equity compensation plans for
directors, officers, employee's and consultants; (c) to
recommend to the complete Board of Directors the amount of
fees to be paid to outside Board members for their Board and
Committee service; (c) to set compensation, if any, for inside
Board members for their Board and Committee service; (d) to
review the Corporation's pension plans and their
administration; (e) to review the compensation programs for
all Corporation employees; and (f) to report its activities
and action to the Board at least once each fiscal year.
2. AUDIT COMMITTEE.
An Audit Committee of the Board of Directors shall be
established which shall consist of at least three members, a
majority of which shall be independent directors as required
by NASDAQ. Independent directors shall be as defined in
Article II(3). The Audit Committee is responsible for
overseeing and monitoring the quality of the Corporation's
accounting and auditing practices. The function of the Audit
Committee is to (a) recommend to the Board of Directors a firm
of independent accountants to perform the examination of the
annual financial statements of the Corporation; (b) to review
with the independent accountants and with the Corporation's
Chief Financial Officer, the proposed scope of the annual
audit, past audit experience, the Corporation's internal audit
program, recently completed internal audits and other matters
bearing upon the scope of the audit; (c) to review wit the
independent accountants and with the Chief Financial Officer
significant matters revealed in the course of the audit of the
annual financial statements of the Corporation; (d) to consult
with the independent auditors (periodically, as appropriate,
out of the presence of management) with regard to the adequacy
of internal controls; (e) to oversee the quarterly reporting
process to the Securities and Exchange Commission; (f) to
review on an annual basis whether the Corporation's conflict
of interest policy has been complied with; (g) to review with
the Chief Financial Officer any suggestions and
recommendations of the independent accountants concerning the
internal control standards and accounting procedures of the
Corporation; and (h) to report its activities and action to
the Board at least once each fiscal year.
3. NOMINATING COMMITTEE.
A Nominating Committee of the Board of Directors shall be
established which shall consist of at least three members, a
majority of whom shall be independent directors as described
in Article II(3). The function of the Nominating Committee is
to (a) propose new outside directors to the Board of
Directors; (b) administer the evaluation of the Board as a
whole and individual Board members (inside and outside); (c)
administer management evaluation of the Board and Board
members; (d) establish and administer the management
succession program related to Corporation officers; and (f)
report its activities and actions to the Board at least once
each fiscal year. The provisions of these bylaws governing
meetings, action without meeting, notice, waiver of notice,
and quorum and voting requirements of the Board of Directors
apply to committees and their members as well. To the extent
specified by resolution adopted from time to time by a
majority of all the directors in office when the resolution is
adopted, each committee shall exercise the authority of the
Board of Directors with respect to the corporate powers and
the management of the business and affairs of the Corporation,
except that a committee shall not:
(a) Authorize distributions, other than those related to the
Corporation's 401(k) pension plan;
(b) Approve or propose to shareholders action that the Act
requires to be approved by shareholders;
(c) Fill vacancies on the Board of Directors or on any of its
committees;
(d) Amend the articles of incorporation pursuant to Section
7-110-102 of the Act, as amended or superseded;
(e) Adopt, amend, or repeal bylaws;
(f) Approve a plan of merger not requiring shareholder
approval;
(g) Authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the Board of
Directors; or
(h) Authorize or approve the issuance or sale of shares, or a
contract for the sale of shares, or determine the designation
and relative rights, preferences, and limitations of a class
or series of shares; except that the Board of Directors may
authorize a committee or an officer to do so within limits
specifically prescribed by the Board of Directors. The
creation of, delegation of authority to, or action by, a
committee does not alone constitute compliance by a director
with applicable standards of conduct.
ARTICLE IV
OFFICERS
1. GENERAL.
The officers of the Corporation shall include the Chief
Executive Officer, the President, the Treasurer and the
Secretary. One or more Executive Vice Presidents may be
designated as corporate officers in the discretion of the
Board of Directors. The Board of Directors may elect such
other officers, including a Chairman of the Board, as they may
consider necessary. The Board of Directors and such other
officers as the Board of Directors may authorize from time to
time, acting singly, may appoint as additional officers one or
more vice presidents, assistant secretaries, assistant
treasurers, and such other subordinate officers as the Board
of Directors or such other appointing officers deem necessary
or appropriate. The officers of the Corporation shall hold
their offices for such terms and shall exercise such authority
and perform such duties as shall be determined from time to
time by these bylaws, the Board of Directors, or (with respect
to officers whom are appointed by the appointing officers) the
persons appointing them; provided, however, that the Board of
Directors may change the term of offices and the authority of
any officer appointed by the appointing officers. Any two or
more offices may be held by the same person. The officers of
the Corporation shall be natural persons at least eighteen
years old.
2. TERM.
Each officer shall hold office for the earlier of a term of
one year or until a new Board of Directors has been elected by
the shareholders; until the time of removal or resignation
pursuant to Section IV.3. or until the officer's death.
3. REMOVAL AND RESIGNATION.
Any officer elected by the Board of Directors may be removed
at any time by the Board of Directors. Any officer appointed
by an officer may be removed at any time by the Board of
Directors or by the person appointing the officer. Any officer
may resign at any time by giving written notice of resignation
to any director (or to any director other than the resigning
officer if the officer is also a director), to the chief
executive officer, to the secretary, or to the officer who
appointed the officer. Notwithstanding this Section IV.3, a
resignation may constitute a breach of contract. Acceptance of
such resignation shall not be necessary to make it effective,
unless the notice so provides.
4. CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman shall be appointed by the board of directors and
shall preside, if present, at each meeting of the Board and
stockholders of the Corporation. The Chairman shall be a
non-voting member of all committees of the Board of Directors.
5. THE CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer shall have supervision and
direction over the President and all other officers, agents
and employees of the Corporation. He shall perform all duties
incident to duties as from time to time may be assigned to him
by the Board of Directors.
6. THE PRESIDENT.
The President shall have general and active management of the
day-to- day business of the Corporation and general and active
supervision and direction over the other officers, agents and
employees of the Corporation and shall see that their duties
are properly performed, subject, however, to the control of
the Chief Executive Officer. The President shall perform all
duties incident to the office of President and such other
duties as from time to time may be assigned to him by the
Board or the Chief Executive Officer, or by these Bylaws.
7. VICE PRESIDENTS.
Each Vice President shall have such powers and perform all
such duties as from time to time may be assigned to him by the
Board, the President or the Chief Executive Officer.
8. THE TREASURER.
The Treasurer shall:
(a) have charge and custody of, and be responsible for, all
the funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and have
control of all books of account of the Corporation;
(c) cause all moneys and other valuables to be deposited to
the credit of the Corporation in such depositories as may be
designated by the Board;
(d) receive, and give receipts for, moneys due and payable to
the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board;
(f) render to the Chief Executive Officer and the President
(and the Board whenever the Board may require) an account of
the financial condition of the Corporation; and
(g) in general, perform all of the duties incident to the
office of Treasurer and such other duties as from time to time
may be assigned to him by the Board, the President or the
Chief Executive Officer.
9. THE SECRETARY.
The Secretary shall:
(a) keep or cause to be kept in one or more books provided
for the purpose, the minutes of all meetings of the Board, the
committees of the Board and the stockholders;
(b) see that all notices are duly given in accordance with
the provisions of these Bylaws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock
certificates of the Corporation (unless the seal of the
Corporation on such certificates shall be a facsimile, as
hereinafter provided), and affix and attached the seal to all
other documents to be executed on behalf of the Corporation
under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and
filed are properly kept and filed; and
(e) perform all the duties incident to the office of
Secretary and such other duties as form time to time may be
assigned to her by the Board, the President or the Chief
Executive Officer.
10. OFFICERS' BONDS AND OTHER SECURITY.
If required by the Board, any officer of the Corporation shall
give a bond or other security for the faithful performance of
his duties, in such amount and with such sureties as the Board
may require.
11. COMPENSATION.
The compensation of the Chief Executive Officer, President,
Treasurer, Secretary, any other corporate officers elected by
the Board, and the four most highly compensated employees of
the Corporation or its subsidiaries, other than the Chief
Executive Officer, shall be fixed from time to time by the
Compensation Committee of the Board of directors. The Chief
Executive Officer may fix the compensation of other officers
and agents of the Corporation. An officer of the Corporation
shall not be prevented from receiving compensation by reason
of the fact that the is also a director of the Corporation.
Compensation for the non-employee members of the Board of
Directors shall be determined by recommendation of the
Compensation Committee with final approval by the Board of
Directors or as otherwise determined by government regulation.
ARTICLE V
INDEMNIFICATION
1. DIRECTORS.
The Corporation shall indemnify directors of the Corporation
in their capacities as directors pursuant to the procedures
set forth in, and to the fullest extent authorized by,
Colorado law as the same exists or may hereafter be amended.
The right to indemnification provided herein shall be a
contract right and shall include the right to be paid by the
Corporation in accordance with Colorado law for expenses
incurred in advance of any proceeding's final disposition.
2. OFFICERS, EMPLOYEES, FIDUCIARIES AND AGENTS.
The Corporation may indemnify officers, employees, fiduciaries
and agents of the Corporation to the same extent as is
permitted for directors under Colorado law (and to a greater
extent if consistent with law). No such indemnification shall
be made without the prior approval of the Board of Directors
and the determination by the Board of Directors that such
indemnification is permissible.
3. INSURANCE.
The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee, fiduciary
and agent of the Corporation or another corporation,
partnership, joint venture, trust, or other enterprise against
any expense, liability or loss whether or not the Corporation
would have the power to indemnify such person against such
expense, liability or loss under Colorado law.
4. NOT EXCLUSIVE.
The foregoing rights of indemnification shall not be exclusive
of other rights to which any director, officer, employee or
agent may be entitled as a matter of law.
ARTICLE VI
SHARES
1. CERTIFICATES.
Certificates representing shares of the capital stock of the
Corporation shall be in such form as is approved by the Board
of Directors and shall be signed by the chairman or vice
chairman of the Board of Directors (if any), or the president
or any vice president, and by the secretary or an assistant
secretary or the treasurer or an assistant treasurer. All
certificates shall be consecutively numbered, and the names of
the owners, the number of shares, and the date of issue shall
be entered on the books of the Corporation. Each certificate
representing shares shall state upon its face:
(a) That the Corporation is organized under the laws of the
State of Colorado;
(b) The name of the person to whom issued;
(c) The number and class of the shares and the designation of
the series, if any, that the certificate represents;
(d) The par value, if any, of each share represented by the
certificate;
(e) If the Corporation is authorized to issue different
classes or series of shares, a conspicuous statement, on the
front or back of each certificate, that the Corporation will
furnish to the shareholder, on request in writing and without
charge, information concerning the designations, preferences,
limitations, and relative rights applicable to each class, the
variations in preferences, limitations, and rights determined
for each series, and the authority of the Board of Directors
to determine variations for future classes or series; and
(f) Any restrictions imposed by the Corporation upon the
transfer of the shares represented by the certificate.
2. FACSIMILE SIGNATURES.
Where a certificate is signed:
(a) By a transfer agent other than the Corporation or its
employee, or
(b) By a registrar other than the Corporation or its
employee, any or all of the officers' signatures on the
certificate required by Section VI.1. may be facsimile. If any
officer, transfer agent or registrar who has signed, or whose
facsimile signature or signatures have been placed upon, any
certificate, shall cease to be such officer, transfer agent,
or registrar, whether because of death, resignation, or
otherwise, before the certificate is issued by the
Corporation, it may nevertheless be issued by the Corporation
with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.
3. TRANSFERS OF SHARES.
Transfers of shares shall be made on the books of the
Corporation only upon presentation of the certificate or
certificates representing such shares properly endorsed by the
person or persons appearing upon the face of such certificate
to be the owner, or accompanied by a proper transfer or
assignment separate from the certificate, except as may
otherwise be expressly provided by the statutes of the State
of Colorado or by order of a court of competent jurisdiction.
The officers or transfer agents of the Corporation may, in
their discretion, require a signature guaranty before making
any transfer. The Corporation shall be entitled to treat the
person in whose name any shares are registered on its books as
the owner of those shares for all purposes and shall not be
bound to recognize any equitable or other claim or interest in
the shares on the part of any other person, whether or not the
Corporation shall have notice of such claim or interest.
4. SHARES HELD FOR ACCOUNT OF ANOTHER.
The Board of Directors may adopt by resolution a procedure
whereby a shareholder of the Corporation may certify in
writing to the Corporation that all or a portion of the shares
registered in the name of such shareholder are held for the
account of a specified person or persons. The resolution shall
set forth:
(a) The classification of shareholders who may certify;
(b) The purpose or purposes for which the certification may
be made;
(c) The form of certification and information to be contained
herein;
(d) If the certification is with respect to a record date or
closing of the stock transfer books, the time after the record
date or the closing of the stock transfer books within which
the certification must be received by the Corporation; and
(e) Such other provisions with respect to the procedure as
are deemed necessary or desirable. Upon receipt by the
Corporation of a certification complying with the procedure,
the persons specified in the certification shall be deemed,
for the purpose or purposes set forth in the certification, to
be the holders of record of the number of shares specified in
place of the shareholder making the certification.
ARTICLE VII
MISCELLANEOUS
1. CORPORATE SEAL.
The Board of Directors may adopt a seal, circular in form and
bearing the name of the Corporation and the words "SEAL" and
"COLORADO," which, when adopted, shall constitute the seal of
the Corporation. The seal may be used by causing it or a
facsimile of it to be impressed, affixed, manually reproduced,
or rubber stamped with indelible ink.
2. FISCAL YEAR.
The Board of Directors may, by resolution, adopt a fiscal year
for the Corporation.
3. RECEIPT OF NOTICES BY THE CORPORATION.
Notices, shareholder writings consenting to action, and other
documents or writings shall be deemed to have been received by
the Corporation when they are received:
(a) At the registered office of the Corporation in the State
of Colorado;
(b) At the principal office of the Corporation (as that
office is designated in the most recent document filed by the
Corporation with the Secretary of State for the State of
Colorado designating a principal office) addressed to the
attention of the secretary of the Corporation;
(c) By the secretary of the Corporation wherever the
secretary may be found; or
(d) By any other person authorized from time to time by the
Board of Directors, the president, or the secretary to receive
such writings, wherever such person is found.
4. AMENDMENT OF BYLAWS.
These bylaws may at any time and from time to time be amended,
supplemented, or repealed by the Board of Directors.
CERTIFICATE
I hereby certify that the foregoing Bylaws, consisting of
sixteen pages, including this page, constitute the Bylaws of
HAUSER, INC. adopted by the Board of Directors of the
corporation as of December 1, 1996.
/s/Patricia A. Roberts,
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 3RD QUARTER 10-Q FOR FISCAL 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JAN-31-1997
<CASH> 7,511,207
<SECURITIES> 993,396
<RECEIVABLES> 7,983,014
<ALLOWANCES> 351,388
<INVENTORY> 9,537,516<F1>
<CURRENT-ASSETS> 31,282,356
<PP&E> 39,718,562
<DEPRECIATION> 17,316,313
<TOTAL-ASSETS> 69,724,943
<CURRENT-LIABILITIES> 3,299,784
<BONDS> 0
<COMMON> 10,616
0
0
<OTHER-SE> 64,763,593
<TOTAL-LIABILITY-AND-EQUITY> 69,724,943
<SALES> 12,040,195
<TOTAL-REVENUES> 18,762,715
<CGS> 15,450,697
<TOTAL-COSTS> 15,450,697
<OTHER-EXPENSES> 7,072,404
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,728
<INCOME-PRETAX> (3,357,604)
<INCOME-TAX> 939,950
<INCOME-CONTINUING> (2,417,654)
<DISCONTINUED> (3,056,047)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,473,701)
<EPS-PRIMARY> (.53)
<EPS-DILUTED> (.53)
<FN>
<F1>EXCLUDES 12,114,148 OF LONG-TERM INVENTORY
</FN>
</TABLE>
