SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report: August 12, 1999
HAUSER, INC.
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation) Colorado
(Commission File Number) 0-17174
(I.R.S. Employer Number) 84-0926801
5555 Airport Boulevard
Boulder, Colorado 80301
(Address of principal executive office)
(720) 406-4600
(Registrant's telephone number,including area code
<PAGE>
Item 7. Financial Statements and Exhibits
The following amendments to Item 7 of the form 8-K are hereby made.
(c) Exhibits
Exhibit Index:
Exhibit 2.1 - Agreement and Plan of Merger
Incorporated by reference as Exhibit 2.1 to Form 10-Q dated October 31,
1998, and amended as Appendix B to Definitive Proxy Statement dated May
11, 1999
Exhibit 2.2 - Form of Agreement Regarding Employees
Incorporated by reference as Exhibit 2.2 to Form 10-Q dated October 31,
1998
Exhibit 2.3 - Form of Escrow Agreement
Incorporated by reference as Exhibit 10.2 to Form 10Q-A dated January
31, 1999
Exhibit 2.4 - Form of Governance Agreement
Incorporated by reference as Exhibit 2.4 to Form 10-Q dated October 31,
1998, and amended as Appendix C to the Definitive Proxy Statement dated
May 11, 1999
Exhibit 2.5 - Inventory Purchase Agreement
Incorporated by reference as Exhibit 2.5 to Form 10Q dated October 31,
1998
Exhibit 2.6 - Agreement for Option to Acquire Powders Business
Incorporated by reference as Exhibit 2.6 to Form 10-Q dated October 31,
1998
Exhibit 2.7 - Registration Rights Agreement
Incorporated by reference as Exhibit 2.7 to Form 10-Q dated October 31,
1998
Exhibit 2.8 - Sourcing Agreement dated June 11, 1998
Incorporated by reference as Exhibit 2.8 to Form 10-Q dated October 31,
1998
Exhibit 2.9 - Press Release announcing the closing of the Merger dated June
11, 1999
Incorporated by reference as Exhibit 2.9 to Form 8-K dated June 25, 1999
Exhibit 3.0 - Zuellig Botanical Extracts, Inc. and Affiliated Companies
Combined Financial Statements of the Contributed Subsidiaries
as of March 31, 1999 and 1998 and for Each of the Three Years in the Period
Ended March 31, 1999 and Independent Auditors' Report
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
HAUSER, INC.
By: _____________________________
/s/Ralph L. Heimann
Chief Financial Officer
Exhibit 3.0
Zuellig Botanical Extracts, Inc. and Affiliated Companies Combined
Financial Statements as of March 31, 1999 and 1998 and for Each of the
Three Years in the Period Ended March 31, 1999 and Independent Auditors'
Report
<PAGE>
ZUELLIG BOTANICAL EXTRACTS, INC. AND AFFILIATED COMPANIES
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
COMBINED FINANCIAL STATEMENTS AS OF MARCH 31, 1999 AND 1998 AND
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED MARCH 31, 1999:
Combined Balance Sheets 2
Combined Statements of Income 3
Combined Statements of Stockholders' Equity 4
Combined Statements of Cash Flows 5
Notes to the Combined Financial Statements 6-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To Zuellig Botanical Extracts, Inc. and Affiliates:
We have audited the accompanying combined balance sheets of Zuellig
Botanical Extracts, Inc., ZetaPharm, Inc., and Wilcox Drug Company, Inc.
(collectively, the "Companies"), all of which are under common ownership
and common management, as of March 31, 1999 and 1998, and the related
combined statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended March 31, 1999. These
financial statements are the responsibility of the Companies' management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of the Companies as of March 31,
1999 and 1998, and the combined results of their operations and their
combined cash flows for each of the three years in the period ended March
31, 1999 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
June 4, 1999
<PAGE>
ZUELLIG BOTANICAL EXTRACTS, INC. AND AFFILIATED COMPANIES
COMBINED BALANCE SHEETS MARCH 31, 1999 AND 1998
<TABLE>
ASSETS 1999 1998
CURRENT ASSETS:
<S> <C> <C>
Cash $ 48,331 $ 1,866,735
Receivables:
Customers, less allowance for doubtful accounts
of $479,948 in 1999 and $215,410 in 1998 15,306,919 14,668,147
Other receivables 83,897 113,755
Inventories 23,299,519 13,071,303
Prepaid expenses and other current assets 1,113,374 1,325,241
Deferred income taxes 567,981 440,543
Due from affiliates 1,528,868
Total current assets 40,420,021 33,014,592
PROPERTY:
Land 442,268 312,101
Machinery and equipment 1,084,704 950,610
Furniture and fixtures 352,474 337,526
Vehicles 292,093 289,583
Leasehold improvements 132,529 132,529
Construction in progress 75,741 39,136
2,379,809 2,061,485
Accumulated depreciation and amortization (1,543,253) (1,434,545)
Total property, net 836,556 626,940
OTHER ASSETS 1,121,065 275,468
TOTAL $42,377,642 $33,917,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank borrowings $19,615,145 $10,305,683
Bank overdraft 48,901
Accounts payable 7,702,623 8,244,654
Accrued liabilities 1,451,505 3,228,115
Due to affiliates 1,375,169 1,492,480
Total current liabilities 30,193,343 23,270,932
COMMITMENTS AND CONTINGENCIES (Notes 3, 5 and 10)
STOCKHOLDERS' EQUITY:
Cumulative preferred stock 2,000,000 2,000,000
Common stock 1,061 1,060
Additional paid-in capital 1,003,499 1,003,400
Retained earnings 9,579,739 6,079,223
Divisional equity 1,962,385
Treasury stock (400,000) (400,000)
Total stockholders' equity 12,184,299 10,646,068
TOTAL $42,377,642 $33,917,000
See accompanying notes to the combined financial statements.
</TABLE>
<PAGE>
ZUELLIG BOTANICAL EXTRACTS, INC. AND AFFILIATED COMPANIES
COMBINED STATEMENTS OF INCOME
YEARS ENDED MARCH 31, 1999, 1998, AND 1997
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
NET SALES TO THIRD PARTIES $78,268,276 $94,333,310 $68,111,118
NET SALES TO AFFILIATES 11,905,166 6,793,310 5,029,129
NET SALES 90,173,442 101,126,620 73,140,247
COST OF SALES 77,131,816 84,318,709 62,285,139
GROSS PROFIT 13,041,626 16,807,911 10,855,108
COMMISSION AND OTHER INCOME 403,971 282,939 1,389,012
13,445,597 17,090,850 12,244,120
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 8,025,690 8,570,143 6,855,444
MANAGEMENT FEE EXPENSE 1,119,772 1,601,163 429,007
INTEREST EXPENSE 1,456,310 1,190,689 1,127,371
INCOME BEFORE PROVISION FOR INCOME TAXES 2,843,825 5,728,855 3,832,298
PROVISION FOR INCOME TAXES 1,305,694 2,389,195 1,214,928
NET INCOME $ 1,538,131 $ 3,339,660 $ 2,617,370
See accompanying notes to the combined financial statements.
</TABLE>
<PAGE>
ZUELLIG BOTANICAL EXTRACTS, INC. AND AFFILIATED COMPANIES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS
ENDED MARCH 31, 1999, 1998, AND 1997
<TABLE>
Cumulative Additional
Preferred Stock Common Stock Paid-in Retained Divisional Treasury
Shares Amount Shares Amount Capital Earnings Equity Stock Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 1, 1996 10 $2,000,000 1,060 $1,060 $1,003,400 $2,062,333 $ 22,245 $(400,000) $ 4,689,038
Net income (loss) 2,698,288 (80,918) 2,617,370
BALANCE, MARCH 31, 1997 10 2,000,000 1,060 1,060 1,003,400 4,760,621 (58,673) (400,000) 7,306,408
Net income 1,318,602 2,021,058 3,339,660
BALANCE, MARCH 31, 1998 10 2,000,000 1,060 1,060 1,003,400 6,079,223 1,962,385 (400,000) 10,646,068
Issuance of stock 100 1 99 100
Reclassification of
divisional equity 1,962,385 (1,962,385)
Net income 1,538,131 1,538,131
BALANCE, MARCH 31, 1999 10 $2,000,000 1,160 $1,061 $1,003,499 $9,579,739 $ - $(400,000) $12,184,299
See accompanying notes to the combined financial statements.
</TABLE>
<PAGE>
ZUELLIG BOTANICAL EXTRACTS, INC. AND AFFILIATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1999, 1998, AND 1997
<TABLE>
1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 1,538,131 $ 3,339,660 $ 2,617,370
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 196,586 240,329 228,379
Gain on sale of property (1,355) (5,914) (4,000)
Deferred income taxes (127,438) (193,546) 67,610
Reversal of accrued environmental cleanup costs (38,990) (805,282)
Changes in operating assets and liabilities:
Receivables (608,914) (2,504,231) (2,886,954)
Inventories (10,228,216) (1,148,731) (3,026,220)
Prepaid expenses and other current assets 323,174 (586,883) (500,844)
Deposits on cultivation projects (859,122) (63,948) (67,467)
Accounts payable (542,031) 4,911,713 (31,710)
Accrued liabilities (1,737,620) 1,332,820 138,377
Due to/from affiliates 1,411,557 4,910,682 (3,630,314)
Net cash (used in) provided by operating activities (10,674,238) 10,231,951 (7,901,055)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in other assets 13,525
Purchase of property (522,033) (192,836) (171,909)
Proceeds from sale of property 5,879 8,000 16,252
Net cash used in investing activities (502,629) (184,836) (155,657)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under bank loan facilities (10,305,683) (8,800,746) 2,310,117
Net borrowings under bank loan facilities 19,615,145 6,200,000
Principal payments on long-term debt (55,000) (55,000)
Increase (decrease) in bank overdraft 48,901 (163,388) 79,821
Proceeds from issuance of common stock 100
Net cash provided by (used in) financing activities 9,358,463 (9,019,134) 8,534,938
NET (DECREASE) INCREASE IN CASH (1,818,404) 1,027,981 478,226
CASH, BEGINNING OF YEAR 1,866,735 838,754 360,528
CASH, END OF YEAR $ 48,331 $ 1,866,735 $ 838,754
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid for:
Interest $ 1,340,472 $ 1,172,781 $ 1,113,066
Income taxes $ 1,492,480 $ 1,430,130 $ 732,763
See accompanying notes to the combined financial statements.
</TABLE>
<PAGE>
ZUELLIG BOTANICAL EXTRACTS, INC. AND AFFILIATED COMPANIES
NOTES TO THE COMBINED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1999, 1998, AND 1997
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination - The combined financial statements include the
accounts of Zuellig Botanical Extracts, Inc. ("ZBE"), ZetaPharm, Inc.
("ZetaPharm"), and Wilcox Drug Company, Inc. ("Wilcox," together with ZBE
and ZetaPharm, the "Companies"), which are affiliated through common
ownership and common management. ZBE is a wholly owned subsidiary of
Zuellig Botanicals, Inc. ("ZBI"). ZBI, ZetaPharm, and Wilcox are wholly
owned subsidiaries of Zuellig Group N.A., Inc. ("ZGNA"). All significant
intercompany balances and transactions have been eliminated in combination.
General - ZBE is a distributor of bulk standardized and non-standardized
nutraceutical extracts to manufacturers of dietary supplements. ZetaPharm
is a distributor of bulk fine chemicals, excipients, and active ingredients
used in the manufacture of generic pharmaceuticals. Wilcox is a supplier
of wild gathered and cultivated botanical raw materials. The botanical raw
materials sold by Wilcox are used in the manufacture of nutraceutical
extracts or the production of botanical powders, both of which are sold to
manufacturers of dietary supplements.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Concentration of Credit Risk - Financial instruments that subject the
Companies to credit risk consist primarily of accounts receivable.
Concentration of credit risk with respect to accounts receivable is
generally diversified due to the large number of entities composing the
Companies' customer base and their geographic dispersion. The Companies
perform ongoing credit evaluations of their customers and maintain
allowances for potential credit losses.
In 1997, sales to one customer accounted for 11% of net sales.
Inventories - Inventories consist of botanical and herbal products held for
resale and are stated at the lower of cost or market, with cost determined
primarily by specific identification.
Property - Property is stated at cost less accumulated depreciation and
amortization. Depreciation is provided for primarily using the
straight-line method over estimated useful lives ranging from 2 to 15
years. Leasehold improvements are amortized over the shorter of the terms
of the leases or the assets' estimated useful lives.
Impairment of Long-Lived Assets - The Companies review long-lived and
intangible assets to determine whether there has been any impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. This assessment is performed
based on the estimated future cash flows compared with the asset's carrying
value. If the future cash flows (undiscounted and without interest
charges) are less than the carrying value, a write-down would be recorded
to reduce the related asset to its estimated fair value.
Income Taxes - The Companies are included in ZGNA's consolidated federal
income tax return and combined California franchise tax return. California
franchise taxes are allocated to the Companies based on factors used to
apportion taxable income to ZGNA's subsidiaries. Other state income taxes
are recorded based on the Companies' separate income tax returns. The
benefits of state tax credits are utilized to the extent available to the
combined group. Federal income taxes are computed as if the Companies
filed separate income tax returns.
Deferred income tax assets and liabilities are computed for differences
between the financial statement and income tax bases of assets and
liabilities. Such deferred income tax asset and liability computations are
based on enacted tax laws and rates applicable to years in which the
differences are expected to reverse. A valuation allowance is established,
when necessary, to reduce deferred income tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for
the year plus or minus the change during the year in deferred income tax
assets and liabilities.
Allocation of Expenses - ZBE was incorporated on August 27, 1998. Prior to
that time, the accounts of ZBE were not maintained on a stand-alone basis.
Revenues and, when practicable, expenses have been allocated between ZBI
and ZBE on a specific identification basis. Certain selling, general, and
administrative expenses have been incurred by ZBI during the ordinary
course of business and are not specifically allocable to ZBI or ZBE. In
these instances, management has allocated expenses based on sales mix or a
percentage of time spent on extract-related administrative duties. The
Companies' management believes that these methods of allocation are
reasonable.
New Accounting Standards - In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999. The
Companies have not yet determined the impact of adopting this new standard.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
1999 1998
<S> <C> <C>
Raw materials $ 5,836,419 $ 3,819,730
Finished goods 17,463,100 9,251,573
Total $23,299,519 $13,071,303
</TABLE>
3. BANK BORROWINGS
During 1998, the Companies, ZGNA, and certain affiliates entered into
various credit agreements with a bank whereby they could borrow up to
$35,000,000 under a revolving credit agreement, with an additional
$3,000,000 available upon approval by the bank, and up to $750,000 under a
non-revolving line of credit with a term repayment option through December
1, 1998 (the "1998 Credit Agreements"). Under the terms of the 1998 Credit
Agreements, $3,000,000 was available for the issuance of letters of credit
with a maximum term of 150 days. Advances bore interest at either the
bank's reference rate at the time of each borrowing or LIBOR plus 1.75%.
Outstanding borrowings by the Companies under the 1998 Credit Agreements
were $10,305,683 at March 31, 1998. The 1998 Credit Agreements were
superceded and replaced by the 1999 Credit Agreements, as discussed below.
During December 1998, the 1998 Credit Agreements were extended for eight
days. On December 8, 1998 the Companies, ZGNA, and its affiliates entered
into various new credit agreements (the "1999 Credit Agreements") with a
bank whereby they may borrow up to $38,000,000 under a revolving credit
agreement, with an additional $6,500,000 available under a non-revolving
loan commitment. The 1999 Credit Agreements expire on June 30, 1999 and
have a term repayment option through April 30, 1999. Under the terms of
the 1999 Credit Agreements, $1,500,000 is available for the issuance of
letters of credit with a maximum term of 150 days. Advances under the
revolving line of credit bear interest at either the prime rate minus .75%
or LIBOR plus 1.5%, and advances under the non-revolving loan commitment
bear interest at either the prime rate minus .5% or LIBOR plus 1.75% (rates
at March 31, 1999 range from 6.44% to 7%). Outstanding borrowings by the
Companies under the 1999 Credit Agreements were $19,615,145 at March
31,1999. The aggregate amount outstanding under the 1999 Credit Agreements
for ZGNA and its subsidiaries was $39,729,982 at March 31, 1999. All
borrowings are collateralized by receivables and inventories, and all
borrowings are cross-guaranteed by the Companies, ZGNA, and affiliates
participating in the 1999 Credit Agreements. The 1999 Credit Agreements
require ZGNA and its subsidiaries to maintain certain specified operating
ratios, minimum tangible net worth, and certain other requirements. The
agreements also require the bank's approval to incur additional
indebtedness. At March 31, 1999, ZGNA and its subsidiaries were in
violation of a financial covenant for which a waiver has been obtained.
During 1997, the Companies, ZGNA, and certain affiliates entered into
various credit agreements (the "1997 Credit Agreements"). Advances bore
interest at either the bank's reference rate at the time of borrowing or
LIBOR plus 1.85%. These 1997 Credit Agreements were superceded and
replaced by the 1998 Credit Agreements discussed above.
4. LONG-TERM DEBT
Long-term debt at March 31, 1997 consisted of a note payable to a former
Wilcox stockholder of $55,000. The entire balance was repaid in 1998.
5. COMMITMENTS AND CONTINGENCIES
Lease Commitments - The Companies lease their facilities and certain
equipment. At March 31, 1999, future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease
terms in excess of one year are as follows:
<TABLE>
Year Ending
March 31,
<C> <C>
2000 $340,990
2001 213,895
2002 102,240
2003 74,400
Total $731,525
</TABLE>
The facility leases generally include provisions for rent escalation to
reflect increased operating and require the Companies to pay property
taxes, maintenance, and utility costs. One lease includes a renewal option
for an additional five-year term.
Rent expense for the years ended March 31, 1999, 1998, and 1997 was
$287,109, $261,802, and $256,654, respectively.
Claims and Legal Actions - The Companies are involved in various claims and
legal actions arising in the normal course of their business. In the
opinion of management, the ultimate resolution of these matters will not
have a material adverse effect on the Companies' combined financial
statements.
6. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
1999 1998 1997
Current:
<S> <C> <C> <C>
Federal $ 1,029,422 $ 2,022,113 $ 967,684
State 403,710 560,628 179,634
1,433,132 2,582,741 1,147,318
Deferred:
Federal (161,569) (255,720) 362,146
State (42,239) (24,285) 24,177
Adjustment to valuation allowance:
Federal 66,790 75,647 (290,907)
State 9,580 10,812 (27,806)
(127,438) (193,546) 67,610
Total $ 1,305,694 $ 2,389,195 $ 1,214,928
</TABLE>
The actual income tax provisions on earnings from operations subject to
income taxes differ from the statutory federal income tax rate due to the
following:
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Federal income taxes at the statutory rate $ 966,899 $1,947,811 $1,302,982
State income taxes, net of federal benefit 266,864 323,069 221,233
Adjustment to valuation allowance 76,370 86,459 (318,713)
Other (4,439) 31,856 9,426
Total $1,305,694 $2,389,195 $1,214,928
</TABLE>
Deferred income tax assets and liabilities at March 31, 1999 and 1998
are as follows:
<TABLE>
1999 1998
Deferred income tax assets:
<S> <C> <C>
Accrued environmental cleanup costs $ 15,070
Allowance for doubtful accounts $ 193,658 123,400
Reserve for inventory obsolescence 366,977 206,270
Inventory capitalization 421,866 287,706
State income taxes 20,839 88,976
Other 11,955 7,351
Total deferred income tax assets 1,015,295 728,773
Deferred income tax liabilities:
Prepaid expenses 132,282 33,111
Other 16,457
Total deferred income tax liabilities 132,282 49,568
Valuation allowance (315,032) (238,662)
Total $ 567,981 $ 440,543
</TABLE>
7. RELATED PARTY TRANSACTIONS
Amounts due to/from affiliates consist primarily of management fees,
intercompany tax allocations and balances arising from product sales to
ZBI.
Wilcox sold products to ZBI totaling $11,446,441, $6,793,310, and
$5,029,129 during 1999, 1998, and 1997, respectively. Selling prices of
products to affiliates have historically been similar to selling prices to
unrelated customers. During 1999, it was contemplated that Wilcox would be
merged into ZBI, and accordingly, all sales to ZBI during 1999 were made at
cost.
The Companies incurred management fee expense with affiliates of
approximately $1,119,772, $1,601,163, and $429,007 during 1999, 1998, and
1997, respectively.
8. EMPLOYEE BENEFITS
ZetaPharm has an employment contract with its president that provides for
incentive compensation based on defined earnings. Compensation expense
recorded under this plan in 1999, 1998, and 1997 was approximately
$137,393, $306,000, and $252,300, respectively. The employment contract
may be terminated by either party upon six months' notice.
Wilcox has an executive bonus plan and incentive compensation arrangements
for key employees based on an earnings formula. Compensation expense of
$68,000 and $32,207 was recorded under these plans in 1999 and 1997,
respectively. There was no compensation expense recorded in 1998.
During 1998, the Companies established a 401(k) plan under which the
Companies make matching contributions, as defined. Additionally, the
Companies make a two-percent contribution based on the qualified employee's
compensation to the individual's 401(k) account. During 1999 and 1998, the
Companies recorded contribution expense of $155,713 and $140,879,
respectively.
During 1997, the Companies provided a simplified employee pension plan
under which the Companies made contributions based on a percentage of the
qualified employee's compensation to the individual's retirement account
under Internal Revenue Code Section 408(k). Such percentage was four
percent during 1997 and amounted to $121,246. This plan was terminated in
1998.
9. CAPITAL STRUCTURE
The capital structures of the Companies are as follows:
<TABLE>
1999 1998
ZetaPharm:
Cumulative preferred stock, $200,000 par value; authorized,
<S> <C> <C>
issued and outstanding, 10 shares $ 2,000,000 $ 2,000,000
Common stock, $1 par value; authorized, 1,000 shares;
issued and outstanding, 960 shares 960 960
Additional paid-in capital 1,000,000 1,000,000
Retained earnings 4,593,248 3,744,815
Wilcox:
Common stock, $1 par value; authorized, 1,000 shares; issued,
100 shares; outstanding, 80 shares 100 100
Additional paid-in capital 3,400 3,400
Treasury stock (400,000) (400,000)
Retained earnings 1,832,734 2,334,408
ZBE:
Common stock, $0.01 par value; authorized, issued, and
outstanding, 100 shares 1
Additional paid-in capital 99
Retained earnings/divisional equity 3,153,757 1,962,385
</TABLE>
10. PLAN OF MERGER
On December 9, 1998, ZGNA and ZBI announced that ZBE, Zetapharm, Inc., and
Wilcox will merge with Hauser, Inc. ("Hauser"), a non-affiliated
manufacturer of natural products headquartered in Boulder, Colorado. Upon
closing, ZGNA and ZBI will own collectively up to 10.05 million shares,
representing approximately 49 percent of Hauser's outstanding common stock.
The agreement is subject to approval of Hauser's shareholders and customary
closing conditions. Hauser issued a proxy statement on May 11, 1999, for a
vote to occur on June 11, 1999.
******
