<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S 2nd QUARTER 10-Q FOR FISCAL 2000 AND
IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> OCT-31-1999
<CASH> 1,824,876
<SECURITIES> 0
<RECEIVABLES> 18,547,244
<ALLOWANCES> (775,795)
<INVENTORY> 30,572,588
<CURRENT-ASSETS> 54,833,290
<PP&E> 39,293,242
<DEPRECIATION> (22,237,725)
<TOTAL-ASSETS> 97,890,992
<CURRENT-LIABILITIES> 34,968,472
<BONDS> 0
<COMMON> 5,134
0
0
<OTHER-SE> 62,617,410
<TOTAL-LIABILITY-AND-EQUITY> 97,890,992
<SALES> 21,774,385
<TOTAL-REVENUES> 26,402,395
<CGS> 18,682,526
<TOTAL-COSTS> 21,969,977
<OTHER-EXPENSES> 4,308,586
<LOSS-PROVISION> 123,832
<INTEREST-EXPENSE> (584,451)
<INCOME-PRETAX> (406,960)
<INCOME-TAX> 0
<INCOME-CONTINUING> (406,960)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (406,960)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-Q
QUARTERLY REPORT UNDER
TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended October 31, 1999
Commission File No. 0-17174
HAUSER, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE (State or other jurisdiction
ofincorporation or organization)
84-0926801 (I.R.S. Identification Number)
5555 Airport Blvd., Boulder, Colorado 80301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (303) 443-4662
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
___________________________
Common Stock, par value $.001
(Title of Class)
___________________________
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 __ No _X_
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the latest
practicable date.
Common Stock, $.001 par value 5,133,510
Class Outstanding at October 31, 1999
<PAGE>
Part 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Operations (Unaudited) -
Three and six months ended October 31, 1999 and
October 31, 1998 1
Consolidated Balance Sheets -
October 31, 1999 (unaudited) and April 30, 1999 2
Consolidated Statements of Cash Flows (unaudited) -
Six months ended October 31, 1999 and October 31, 1998 3
Notes to Consolidated Financial Statements 4-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-16
Part 2. OTHER INFORMATION
Item 1. Legal Proceedings. 17
Item 2. Changes in Securities. 17
Item 3. Defaults Upon Senior Securities. 17
Item 4. Submission of Matters to a Vote
of Security Holders. 17
Item 5. Other Information. 17
Item 6. Exhibits and Reports on Form 8-K. 17-18
SIGNATURE PAGE 19
<PAGE>
HAUSER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
<TABLE>
Three months ended Six months ended
October 31, October 31,
1999 1998 1999 1998
REVENUES:
<S> <C> <C> <C> <C>
Natural products processing $ 9,344,656 $ 3,849,658 $14,000,029 $ 6,341,893
Technical services 4,628,010 4,344,013 8,436,282 8,312,479
Fine Chemicals and Excipients 8,227,006 13,270,169 -
Paclitaxel 4,202,723 1,405,358 8,383,232 1,996,075
Total revenues 26,402,395 9,599,029 44,089,712 16,650,447
COST OF REVENUES:
Natural products processing 7,794,073 2,808,722 12,329,121 4,661,227
Technical services 3,287,451 3,034,502 6,399,180 5,937,920
Fine Chemicals and Excipients 6,685,730 - 10,968,500 -
Paclitaxel 4,202,723 707,575 8,383,232 1,340,599
Other costs of revenues - - (768,199)
Total cost of revenues 21,969,977 6,550,799 37,311,834 11,939,746
GROSS PROFIT 4,432,418 3,048,230 6,777,878 4,710,701
OPERATING EXPENSES:
Research and development 236,559 496,942 502,076 817,898
Sales and marketing 1,306,913 796,997 2,330,196 1,496,197
General and administrative 2,765,114 1,616,977 4,861,632 3,301,886
Other cost of revenues - - 814,000 -
Total operating expenses 4,308,586 2,910,916 8,507,904 5,615,981
INCOME (LOSS) FROM OPERATIONS 123,832 137,314 (1,730,026) (905,280)
OTHER INCOME (EXPENSE):
Interest income 41,140 22,754 62,186 49,808
Interest expense (584,451) (133,094) (943,869) (179,478)
Other 12,519 42,037 (10,481) 42,037
Other income (expense) - net (530,792) (68,303) (892,164) (87,633)
INCOME (LOSS) BEFORE INCOME TAXES (406,960) 69,011 (2,622,190) (992,913)
INCOME TAX BENEFIT - - - -
NET INCOME (LOSS) $(406,960) $69,011 $(2,622,190) $(992,913)
INCOME (LOSS) PER SHARE:
BASIC $(0.08) $0.03 $(0.57) $(0.38)
DILUTED $(0.08) $0.03 $(0.57) $(0.38)
WEIGHTED AVERAGE SHARES OUTSTANDING :
BASIC 5,133,510 2,616,115 4,573,024 2,616,880
DILUTED 5,133,510 2,616,330 4,573,024 2,616,880
See notes to consolidated financial statements.
</TABLE>
<TABLE>
HAUSER, INC.
CONSOLIDATED BALANCE SHEETS
October 31, April 30,
ASSETS 1999 1999
(unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1,824,876 $ 3,610,825
Restricted cash - 567,032
Accounts receivable, less allowance for doubtful accounts:
October 31, 1999, $775,795; April 30, 1999, $158,421 17,771,449 6,812,444
Income taxes receivable 305,774 -
Inventory, at cost 30,572,588 9,665,832
Inventory, at net realizable value - 6,034,525
Prepaid expenses and other 1,477,028 292,808
Net deferred income tax assets 2,881,575 2,313,594
Total current assets 54,833,290 29,297,060
PROPERTY AND EQUIPMENT
Land and buildings 8,600,713 7,692,252
Lab and processing equipment 26,461,973 23,972,862
Furniture and fixtures 4,230,556 3,970,364
Total property and equipment 39,293,242 35,635,478
Accumulated depreciation and amortization (22,237,725) (19,064,412)
Net property and equipment 17,055,517 16,571,066
OTHER ASSETS:
Goodwill, less accumulated amortization:
October 31, 1999, $1,407,636; April 30, 1999, $847,509 24,766,741 1,373,471
Deposits 489,064 1,953,041
Net deferred income tax asset 642,899 642,899
Other 103,481 66,000
Total other assets 26,002,185 4,035,411
TOTAL $97,890,992 $49,903,537
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,953,140 $ 2,953,559
Current portion of long term debt 27,660,240 6,750,342
Accrued salaries and wages 1,617,488 1,347,040
Deposits 510,658 3,807,798
Accrued exit costs 499,139 3,537,203
Other accrued liabilities 727,807 185,148
Total current liabilities 34,968,472 18,581,090
LONG TERM LIABILITIES 299,976 486,596
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 50,000,000 shares authorized;
shares issued: October 31, 1999, 5,133,510;
April 30, 1999, 2,618,017 5,134 2,618
Additional paid-in capital 93,296,765 58,890,398
(Accumulated deficit) retained earnings (30,679,355) (28,057,165)
Net stockholders' equity 62,622,544 30,835,851
TOTAL $97,890,992 $49,903,537
See notes to consolidated financial statements.
</TABLE>
<TABLE>
HAUSER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS-Unaudited
Six months ended October 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net cash provided by (used in) operating activities 507,647 (2,144,900)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (1,270,580) (1,466,111)
Net change in restricted cash 567,032 (419,550)
Net cash used in investing activities (703,548) (1,885,661)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in bank line of credit (6,000,000) 4,500,000
Proceeds from bank line of credit 4,596,572 -
Repayments of long-term debt (186,620) (64,560)
Proceeds from issuance of common stock and warrants - 15,757
Net cash (used in) provided by financing activities (1,590,048) 4,451,197
Net (decrease) increase in cash and cash equivalents (1,785,949) 420,636
Cash and cash equivalents, beginning of year 3,610,825 2,081,796
Cash and cash equivalents, end of period $ 1,824,876 $ 2,502,432
See notes to consolidated financial statements.
</TABLE>
<PAGE>
HAUSER, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF OCTOBER
31, 1999 AND APRIL 30, 1999 AND FOR THE THREE AND SIX MONTH
PERIODS ENDED OCTOBER 31, 1999 AND 1998 (UNAUDITED)
1. 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
Hauser, Inc.'s ("Hauser" or "the Company") financial position
as of October 31, 1999, and the results of its operations and
its cash flows for the periods ended October 31, 1999 and
1998. 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 1999 amounts have been reclassified to conform to the
fiscal 2000 presentation.
Basis of Consolidation - The accompanying financial statements
include the accounts of Hauser and its wholly owned
subsidiaries: Botanicals International Extracts, Inc. ("BIE"),
formerly known as Zuellig Botanical Extracts, Inc., Shuster
Laboratories, Inc. ("Shuster"), Wilcox Natural Products Inc.,
("Wilcox") formerly knows as Wilcox Drug Company, Inc., and
ZetaPharm, Inc. ("ZetaPharm"). All significant intercompany
accounts and transactions have been eliminated in
consolidation.
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 amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of these
financial statements. Actual results could differ from those
estimates.
2. INVENTORIES
Raw material, work in process, and finished goods inventories,
which include costs of materials, direct labor and
manufacturing overhead, are priced at the lower of average
cost or market. Write-downs for excess and obsolete
inventories are charged to expense in the period when
conditions giving rise to the write-downs are first
recognized. The Company purchases raw material inventory
during harvest seasons, generally in the spring and fall.
These purchases may take place well in advance of scheduled
production of finished product.
Inventories, at cost, are classified as follows:
<TABLE>
October 31, April 30,
1999 1999
<S> <C> <C>
Raw materials and supplies $ 2,971,307 $ 2,694,883
Work in process 6,558,511 3,562,967
Finished goods 21,042,770 3,407,982
Total inventories $ 30,572,588 $ 9,665,832
</TABLE>
Bulk paclitaxel held for sale as of October 31, 1999 and April
30, 1999, at a net realizable value of $0 and $6,034,525,
respectively, is not included in the table above. As of
October 31, 1999 and April 30, 1999, this included bulk
paclitaxel finished goods of $0 and $3,234,121 and bulk
paclitaxel work-in-process of $0, and $2,800,404,
respectively.
3. DEBT
Notes payable and long-term debt consisted of the following:
<TABLE>
October 31, 1999 April 30, 1999
<S> <C> <C>
Line of Credit $ 27,088,364 $ 6,000,000
Capital Leases 871,852 1,236,938
Total 27,960,216 7,236,938
Less current portion 27,660,240 6,750,342
Long Term debt $ 299,976 $ 486,596
</TABLE>
On June 11, 1999 the Company obtained financing from Wells
Fargo Bank, NA for an aggregate amount of $45,000,000, to be
guaranteed by each of its subsidiaries. The borrowings
consist of a revolving line of credit up to $35,000,000 for
general working capital purposes maturing two years after the
loan closing, and a $10,000,000 non-revolving term loan to
finance the acquisition of fixed assets with a draw down
period of two years and a maturity date of five years
following the loan closing (collectively, the "Credit
Facility"). The Company also assumed approximately $22,000,000
of BIE, Wilcox and ZetaPharm (collectively referred to as the
"Contributed Subsidiaries") bank debt. The Credit Facility
includes a $1,000,000 sublimit for the issuance of commercial
letters of credit up to 150 days in term. The advance rates
for the revolving facility are 80% of eligible accounts
receivable and 50% of eligible inventory. Inventory collateral
for loan purposes may not exceed $20,000,000. As of October
31, 1999, the company's borrowing base eligibility totaled
$28,093,000. The Credit Facility is secured by all of the
Company's assets. Additionally, the Credit Facility contains
affirmative and negative covenants, including certain
financial covenants. On October 29, 1999, the Credit Facility
was amended pursuant to which, among other things, (a) certain
financial covenants were amended to be less restrictive, (b)
an over-advance was approved in the amount of $2,500,000
through December 31, 1999, $1,500,000 from January 1, 2000
through April 30, 2000, and $1,000,000 from May 1, 2000
through June 30, 2000, (c) for the revolving loan, the
interest rates were increased for LIBOR based borrowings from
LIBOR plus 1.50% to LIBOR plus 1.95%, and for Prime rate based
borrowings from Prime less .75% to Prime less .25%, and (d)
for the term loan fixed asset facility, the interest rate was
increased for LIBOR based borrowings from LIBOR plus 1.75% to
LIBOR plus 2.20% and for Prime rate based borrowings from
Prime less .50% to the Prime interest rate. A commitment fee
of .25% per annum is charged on the unused portion of the term
loan fixed asset commitment.
4. EARNINGS (LOSS) PER SHARE
The Company calculates basic earnings (loss) per share by
dividing the net earnings or loss by the weighted average
number of shares of common stock outstanding. Diluted earnings
(loss) per share is determined by dividing the net earnings or
loss by the sum of (1) the weighted average number of common
shares outstanding and (2) if not antidilutive, the effect of
outstanding warrants and stock options determined utilizing
the treasury stock method. For the six and three months ended
October 31, 1999, no options were excluded from the
calculation of diluted loss per share. For the six and three
months ended October 31, 1998, 3,251 and zero options were
excluded from the calculation.
The following table sets forth a reconciliation of the
earnings per share calculation.
<TABLE>
Three months ended October 31
1999 1998
Income Shares Per Share Income Shares Per Share
<S> <C> <C> <C> <C> <C> <C>
Basic EPS --- $ (406,960) $5,133,510 $ (0.08) $ 69,011 $ 2,616,115 $ 0.03
Effect of dilutive securities:
Stock options outstanding 215
Diluted EPS --- $ (406,960) $5,133,510 $ (0.08) $ 69,011 $ 2,616,330 $ 0.03
Six months ended October 31
1999 1998
Income Shares Per Share Income Shares Per Share
Basic EPS --- $(2,622,190) $4,573,024 $ (0.57) $992,913 $ 2,616,880 $(0.38)
Effect of dilutive securities:
Stock options outstanding
Diluted EPS --- $(2,622,190) $4,573,024 $ (0.57) $992,913 $ 2,616,880 $ (0.38)
</TABLE>
5. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," ("SFAS 133"). SFAS 133
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded
in other contracts and for hedging activities. It requires
that an entity recognizes all derivatives as either assets or
liabilities in the statement of financial position and
measures those instruments at fair value. In June 1999, the
FASB issued Statement of Financial Accounting Stndards No.
137, "Accounting for Derivative instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement
No. 133 - An amendment of FASB Statement No. 133" ("SFAS No.
137"). SFAS No. 137 delays the effective date of SFAS No. 133
to financial quarters and financial years beginning after June
15, 2000. The Company does not typically enter into
arrangements that would fall under the scope of SFAS No. 133
and thus, management believes that the adoption of SFAS No.
133 will not have a significant impact on the Company's
financial condition and results of operations.
6. MERGER
Pursuant to an Agreement and Plan of Merger dated December 8,
1998 (the "Merger Agreement"), the Company completed a merger
on June 11, 1999, with three subsidiaries of Zuellig Group
N.A, Inc. ("ZGNA") and Zuellig Botanicals, Inc. ("ZBI"). Two
subsidiaries of ZGNA, Wilcox and ZetaPharm and one subsidiary
of ZBI, BIE merged with three wholly owned subsidiaries of the
Company (the "Merger"), which were created for the purpose of
the Merger. The Contributed Subsidiaries were the surviving
corporations and became wholly owned subsidiaries of the
Company as a result of the Merger.
At the closing of the Merger, the Company issued 2,515,349
shares of its common stock to ZGNA and ZBI, which constituted
49% of the outstanding shares. After the closing, the
Company's existing officers and public shareholders own 51.0%
of the combined company, while ZGNA owns 49.0%. The number of
shares that were issued to ZGNA is subject to downward
adjustment under certain circumstances. Simultaneously with
the Merger, the Company effected a one-for-four reverse stock
split. The reverse stock split was implemented in order to
satisfy NASDAQ's listing requirements. All share and per share
information has been adjusted for the reverse stock split.
The Merger was treated as a purchase of the Contributed
Subsidiaries for accounting purposes. Goodwill of $23,953,397
was recognized and will be amortized over a twenty-year
period. Goodwill was computed as follows:
<TABLE>
<S> <C>
Common stock issued 1,913,640 (1)<F1>
Fair value per share 17.98 (2)<F2>
Fair value of common stock issued $34,408,523
Cost associated with the transaction 1,793,387
Total consideration 36,201,910
Fair value of the excess of
identifiable assets acquired over
liabilities assumed by Hauser (12,248,513)
Goodwill 23,953,397
<FN>
<F1>(1) Represents total common stock issued in connection
with the Merger, less 601,709 shares held in escrow in
accordance with The Escrow Agreement, described in Part 2,
Item 2.3 and incorporated by reference.
<F2>(2) Fair value per share computed based on the average
closing price for three days prior and three days after the
announcement of the Merger, after consideration of the effect
of the 1:4 reverse stock split which occurred concurrent with
the closing of the Merger.
</FN>
</TABLE>
The following pro forma unaudited consolidated results of
operations for the three and six months ended October 31,
1999, and 1998 have been prepared assuming the Merger occurred
on May 1, 1998. These pro forma results do not include the
results of paclitaxel related activities and do not purport to
be indicative of the results of operations which actually
would have resulted had the acquisition taken effect on May 1,
1998.
<TABLE>
Three months ended Six months ended
October 31, October 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenue $22,199,672 $25,730,042 $42,739,160 $55,386,815
Cost of Revenue 17,767,254 20,160,337 38,101,046 45,002,155
Gross Profit 4,432,418 5,569,705 4,638,114 10,384,660
Operating Expenses 4,308,586 5,218,593 9,649,647 10,186,634
Loss From Operations $ 123,832 $ 351,112 $(5,011,533) $ 198,026
Net Income (Loss) $ (406,960) $ 228,876 $(6,157,407) $ (567,688)
Diluted Net Loss Per Share $ (0.08) $ 0.05 $ (1.20) $ (0.11)
Weighted Average Shares
Outstanding, Diluted 5,133,510 5,131,681 5,133,510 5,132,231
</TABLE>
7. DISCONTINUED ACTIVITIES
Prior to the Merger, in the third quarter of the fiscal year
ended April 30, 1999, the Company discontinued its paclitaxel
related activities. In the quarter ended January 31, 1999, the
Company incurred a one-time charge to earnings of $25,600,000.
The charge and the results of paclitaxel activities have been
included in the continuing operations because paclitaxel
activities did not constitute a separate business segment of
the Company. In February 1999, the Company signed a contract
for the sale of its paclitaxel inventory as part of the
planned closure of the paclitaxel business. Under the purchase
agreement, the company will receive approximately $9,500,000
in the first six to nine months of the fiscal year ending
March 31, 2000 and is contingent upon the Company delivering
the product in final form within agreed upon specifications.
As of October 31, 1999, shipments of paclitaxel under the
above referenced purchase agreement totaled $8,383,232. The
Company has negotiated settlement of its yew tree cultivation
agreements and termination of a multi year non-exclusive
agreement to supply paclitaxel to a customer. The Company
anticipates completion of its exit of the paclitaxel business
by January 31, 2000.
8. OTHER COSTS OF REVENUE AND OTHER OPERATING CHARGES
During the first quarter of the fiscal year ending March 31,
2000, the Company took a charge to earnings of $3,581,560. The
charge to cost of revenues of $2,767,560 was recorded to
write-off advance payments made for the purchase of raw
material and to reduce the value of Natural Products inventory
to net realizable value. The Company also recorded a charge to
operating expenses in the amount of $814,000 related to the
payment of post-merger severance costs, asset abandonment and
reserves for leases on obsolete equipment.
Offsetting the above charges in cost of revenues was the
reversal of $3,535,759 of the provision established in
connection with the termination of yew tree cultivation
contracts.
9. OPERATING SEGMENTS
The Company's three business segments are; Natural Products,
Technical Services, and Fine Chemicals and Excipients.
Included in corporate and other are the results of the
Company's paclitaxel related activities, which are being
terminated. Selected condensed financial information from the
Company's business segments are as follows:
<TABLE>
Three Months Ended October 31, 1999
Natural Technical Fine Chemicals Corporate Total
Products Services and Excipients and other Hauser
<S> <C> <C> <C> <C> <C>
Revenue $ 9,344,656 $ 4,628,010 $ 8,227,006 $ 4,202,723 $26,402,395
Cost of revenues 7,794,073 3,287,451 6,685,730 4,202,723 21,969,977
Gross profit (loss) 1,550,583 1,340,559 1,541,276 - 4,432,418
Operating expenses 1,405,932 1,200,309 1,015,579 686,766 4,308,586
Operating income (loss) $ 144,651 $ 140,250 $ 525,697 $ (686,766) $ 123,832
Assets $45,673,559 $10,026,877 $11,268,058 $30,922,498 $97,890,992
Three Months Ended October 31, 1998
Natural Technical Fine Chemicals Corporate Total
Products Services and Excipients and other Hauser
Revenue $ 3,849,658 $ 4,344,013 $ - $ 1,405,358 $ 9,599,029
Cost of revenues 2,808,722 3,034,502 - 707,575 6,550,799
Gross profit (loss) 1,040,936 1,309,511 - 697,783 3,048,230
Operating expenses 801,480 587,951 - 1,521,485 2,910,916
Operating income (loss) $ 239,456 $ 721,560 $ - $ (823,702) $ 137,314
Assets $29,296,482 $11,265,321 $ - $31,822,643 $72,384,446
Six Months Ended October 31, 1999
Natural Technical Fine Chemicals Corporate Total
Products Services and Excipients and other Hauser
Revenue $14,000,029 $ 8,436,282 $13,270,169 $ 8,383,232 $44,089,712
Cost of revenues 15,096,681 6,399,180 10,968,500 4,847,473 37,311,834
Gross profit (loss) (1,096,652) 2,037,102 2,301,669 3,535,759 6,777,878
Operating expenses 2,639,271 2,322,622 1,550,936 1,995,075 8,507,904
Operating income (loss) $(3,735,923) $ (285,520) $ 750,733 $ 1,540,684 $(1,730,026)
Six Months Ended October 31, 1998
Natural Technical Fine Chemicals Corporate Total
Products Services and Excipients and other Hauser
Revenue $ 6,341,893 $ 8,312,479 $ - $ 1,996,075 $16,650,447
Cost of revenues 4,661,227 5,937,920 - 1,340,599 11,939,746
Gross profit (loss) 1,680,666 2,374,559 - 655,476 4,710,701
Operating expenses 1,485,648 1,261,964 - 2,868,369 5,615,981
Operating income (loss) $ 195,018 $ 1,112,595 $ - $(2,212,893) $ (905,280)
</TABLE>
Part 1, Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF CONTINUING ACTIVITIES:
The results of continuing activities exclude paclitaxel
related activities, as discussed in Note 7 to the financial
statements. Additionally, the following discussion of results
of operations is based on a comparison of pro forma fiscal
year ending March 31, 2000 operating results to the pro forma
fiscal year ended March 30, 1999 operating data because
management believes the Merger has made comparison of actual
results between quarters meaningless.
Comparison of the three months ended October 31, 1999 to the
three months ended October 31, 1998:
REVENUES. The Company's revenues by product and services are
as follows:
<TABLE>
Three months ended
October 31,
1999 1998
<S> <C> <C>
Natural Products $ 9,344,656 $14,687,759
Technical Services 4,628,010 4,344,013
Fine Chemicals and Excipients 8,227,006 6,698,270
$22,199,672 $25,730,042
</TABLE>
Total revenues decreased by 14% to $22,199,672 in the second
quarter of the fiscal year ending March 31, 2000 from
$25,730,042 in the second quarter of the prior fiscal year.
Natural Products revenues decreased by 36% to $9,344,656 in
the second quarter of the fiscal year ending March 31, 2000
from $14,687,759 in the second quarter of the prior fiscal
year. This decrease is attributable primarily to reduced sales
volume generated by Wilcox due to continued softness in the
dietary supplement market. Additionally, herbal extract sales
have decreased from the prior year as customers continue to
carry high inventories.
Technical Service revenues increased by 7% to $4,628,010 in
the second quarter of the fiscal year ending March 31, 2000
from $4,344,013 in the second quarter of the prior fiscal
year. The increase in Technical Service revenues is attributed
primarily to increased fee rates.
Fine Chemical and Excipient revenues increased by 23% to
$8,227,006 in the second quarter of the fiscal year ending
March 31, 2000 from $6,698,270 in the second quarter of the
prior fiscal year. This increase is due to increased demand
for fine chemicals and excipients.
GROSS PROFIT. Gross profit decreased by 20% to $4,432,418 in
the second quarter of the fiscal year ending March 31, 2000
from $5,569,705 in the second quarter of the prior year. This
decrease can be attributed primarily to reduced production,
related to the reduced sales of herbal extracts, which
resulted in unfavorable manufacturing variances.
Additionally, reduced sales by Wilcox contributed to the
reduced gross profit.
OPERATING EXPENSES. Operating expenses decreased by 17% to
$4,308,586 in the quarter ended October 31, 1999 from
$5,218,593 in the same period in the prior year. This decrease
primarily results from a reduction of general and
administrative expenses.
INTEREST INCOME/EXPENSE. Interest expense increased by 39% to
$584,451 in the quarter ended October 31, 1999 from $419,953
in the same period in the prior year. The increase in interest
expense is due to the increased debt.
Comparison of the six months ended October 31, 1999 to the six
months ended October 31, 1998:
REVENUES. The Company's revenues by product and services are
as follows:
<TABLE>
Six months ended
October 31,
1999 1998
<S> <C> <C>
Natural Products $17,916,777 $29,208,873
Technical Services 8,436,282 8,312,479
Fine Chemicals and Excipients 16,386,101 17,865,463
$42,739,160 $55,386,815
</TABLE>
Total revenues decreased by 23% to $42,739,160 in the first
half of the fiscal year ending March 31, 2000 from $55,386,815
in the first half of the prior fiscal year.
Natural Products revenues decreased by 39% to $17,916,777 in
the first half of the fiscal year ending March 31, 2000 from
$29,208,873 in the first half of the prior fiscal year. This
decrease is attributable primarily to reduced sales volume
generated by Wilcox due to continued softness in the dietary
supplement market. Additionally, herbal extract sales have
been slow during the first half of the fiscal year ending
March 31, 2000 as customers continue to carry high
inventories.
Technical Service revenues increased by 2% to $8,436,282 in
the first half of the fiscal year ending March 31, 2000 from
$8,312,479 in the first half of the prior fiscal year. The
increase in Technical Service revenues is attributed to
increased revenue-generating activities in the second quarter,
partially offset by the utilization of significant Technical
Service resources in the process of exiting the paclitaxel
business.
Fine Chemical and Excipient revenues decreased by 8% to
$16,386,101 in the first half of the fiscal year ending March
31, 2000 from $17,865,463 in the first half of the prior
fiscal year. This decrease is due to a reduction in generic
active ingredient revenues, offset partially by increases in
the sale of other Fine Chemical and Excipient products.
GROSS PROFIT. Gross profit decreased by 21% to $8,173,873 in
the first half of the fiscal year ending March 31, 2000 from
$10,384,660 in the first half of the prior year. During the
first quarter of the fiscal year ending March 31, 2000, the
Company recorded a charge for write-downs of inventories and
other assets totaling $2,767,560. This charge was offset by a
reversal of a reserve of $3,535,759 established in connection
with termination of yew tree cultivation agreements.
Excluding the impact of the above referenced items, the gross
profit percentage of 17% in the six months ended October 31,
1999 has deteriorated from the gross profit percentage of 19%
for the same period in the prior year. This decrease can be
attributed primarily to reduced production because of reduced
sales of herbal extracts, which resulted in unfavorable
manufacturing variances.
OPERATING EXPENSES. Operating expenses decreased by 5% to
$9,649,647 in the six months ended October 31, 1999 from
$10,186,634 in the same period in the prior year. This
decrease is primarily results from a reduction of general and
administrative expenses.
INTEREST INCOME/EXPENSE. Interest expense increased by 54% to
$1,145,874 in the six months ended October 31, 1999 from
$745,714 in the same period in the prior year. The increase in
interest expense is due to the increased debt.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. The Company's primary cash needs are for working
capital and capital expenditures. The Company expects to meet
its liquidity requirements through cash flow from operations
and the Credit Facility.
Total cash and cash equivalents were $1,824,876 at October 31,
1999 compared to $3,610,825 at April 30, 1999.
Cash provided by operating activities for the six months ended
October 31, 1999 was $507,647. This amount is comprised
primarily of a net loss of $2,622,190, a reversal of accrued
exit costs of $3,535,759 and decreases in accounts payable and
customer deposits of $2,111,879 and $3,297,140, respectively.
The use of cash was offset by depreciation and amortization of
$2,308,722, and decreases in deposits, accounts receivable and
inventory of $1,668,364, $3,028,294 and $5,635,646,
respectively.
Cash used in investing activities is comprised of capital
expenditures of $1,270,580, offset by a reduction in
restricted cash of $567,032.
Cash provided by financing activities relates primarily to net
funds provided in connection with the Company's Credit
Facility.
Management believes that current cash reserves, the Credit
Facility and funds generated from earnings are sufficient to
meet the Company's liquidity needs within the next twelve
months and on a long-term basis.
WORKING CAPITAL. Working capital as of October 31, 1999 was
$19,864,818 as compared to $10,715,970 as of April 30, 1999.
The increase is primarily attributable to changes in current
assets and liabilities related to the merger.
INCOME TAXES. The Company has a net deferred tax asset of
approximately $15,800,000 that has been reduced by a valuation
allowance of approximately $12,300,000 as of October 31, 1999.
Included in deferred tax assets at October 31, 1999, are
federal net operating loss carry forwards of approximately
$27,000,000, income tax credits of approximately $544,000 and
alternative minimum tax credits of approximately $1,400,000.
Realization is dependent on generating sufficient taxable
income or realization of future taxable temporary differences
prior to expiration of the carry forwards. Although,
realization is not assured, management believes it is more
likely than not the recorded net deferred tax asset will be
realized.
In assessing the amount of its net deferred tax assets
considered realizable, management has considered the following
factors: (1) taxable income projected within the next
twenty-four months; (2) the expiration dates of its net
operating loss and tax credit carryovers; and (3) tax planning
strategies which would allow Hauser to generate significant
taxable income from existing assets (including possible
sale-leaseback of property and equipment). The amount of the
deferred tax asset considered realizable could be reduced in
the near term if estimates of future taxable income do not
materialize.
BACKLOG. Backlog of unfilled sales orders was $6,000,000 as of
October 31, 1999, compared to $1,600,000 as of April 30, 1998.
Backlog consists of unfilled sales orders for Natural
Products.
Quantitative and Qualitative Disclosures about Market Risk
Market risk represents the risk of loss that may impact the
financial position, results of operations or cash flows of the
Company due to adverse changes in financial and commodity
market prices and rates. The Company is exposed to market risk
in the area of changes in United States interest rates. These
exposures are directly related to the Company's fixed and
variable rate borrowings used to fund its operations.
Historically and as of October 31, 1999, the Company has not
used derivative instruments or engaged in hedging activities.
The interest payable on the Company's revolving line of credit
is variable based on the prime rate or LIBOR, and is
therefore, affected by changes in market interest rates. At
October 31, 1999, $88,364 was outstanding with an interest
rate of 8.00% (prime less 0.25%), and $27,000,000 was
outstanding with an interest rate of 7.46% (LIBOR plus 1.95%).
Should the Company be required to obtain financing for the
existing line elsewhere, or should the Company's liquidity
needs exceed amounts available under this line of credit, the
interest rate to replace the credit facilities could be
significantly higher. For example, if the interest rate on the
Company's line of credit had been 2% higher for its quarter
ended October 31, 1999, the Company would have incurred
additional interest expense of approximately $144,000, with an
associated $.03 increase in the per share loss for the
quarter. Therefore, the Company's exposure to changes in
interest rates will be significant until such time as its
operating results permit it to obtain financing on terms
equivalent or superior to those available under its current
lending agreement.
Year 2000 COMPLIANCE:
Hauser is preparing its systems and applications for the year
2000 ("Y2K"). The issue the Company's Y2K program addresses is
the use of two-digit instead of four-digit year fields in
computer systems. If the computer systems cannot distinguish
between the year 1900 and the year 2000, system failures or
other computer errors could result. The potential for failures
and errors spans all aspects of the Company's business,
including computer systems, voice and data networks, and
building infrastructures. The Company is also faced with
addressing its interdependencies with suppliers and major
customers, which all face the same problem.
The Company recognizes the importance of readiness for Y2K and
has given it high priority. The Company created a
corporate-wide Y2K team to represent all company business and
staff units. The team is headed by the Company's Director of
Information Technology. The team's objective is to ensure an
uninterrupted transition to the year 2000 by assessing,
testing and modifying information technology ("IT") and non-IT
systems so that (a) they would perform as intended, regardless
of the date (before, during and after December 31, 1999), and
(b) dates could be processed (before, during and after
December 31, 1999 and including February 29, 2000) with
expected results ("Year 2000 Compliant").
The scope of the Y2K compliance effort includes (i)
information technology (IT) such as software and hardware;
(ii) non-IT systems or embedded technology such as
micro-controllers contained in various manufacturing and
laboratory equipment; environmental and safety systems,
facilities and utilities, and (iii) the readiness of key third
parties, including suppliers and customers.
The Y2K project team has taken an inventory of IT and non-IT
systems that might malfunction or fail as a result of using
only the last two digits to indicate the year. The project
team categorized the potential date component failures into
three categories: "Vital" (stops the business operation and no
short-term solution is available); "Critical" (inconvenient to
the business operation and a short-term solution is
available); and "Marginal" (inconsequential to the business
operation).
IT Systems - The Company has used both internal and external
resources to remediate and test millions of lines of
application software code. As of October 1, 1999, all "core"
IT systems (e.g., general ledger, payroll, procurement, and
order management) that were deemed "Vital" or "Critical" are
fully Year 2000 Compliant.
Non-IT Systems - The Company has manufacturing and laboratory
locations with varying degrees of non-IT systems (such as
programmable logic controllers, gauging guidance and
adjustment systems, and testing equipment). Assessment and
testing of non-IT systems for Y2K compliance has proven much
more difficult than assessing compliance of IT systems because
testing of non-IT systems often requires shutdown of
operations.
As a result, the Company has approached assessment and testing
of non-IT systems that are common to many of the Company's
facilities by (i) contacting the suppliers of these non-IT
systems and obtaining statements that the systems are Y2K
Compliant, and (ii) testing components of non-IT systems when
they are shut down for normal maintenance. The Company has
also tested manufacturing lines and tested non-IT systems at
the Company's several facilities. These tests demonstrate that
"time interval" instead of "dates" are used primarily in these
non-IT systems and support the Company's belief that potential
disruption of such systems due to the Y2K issue should be
minimal.
Third Parties - In addition to internal Y2K IT and non-IT
remediation activities, the Company is in contact with key
suppliers and with customers to minimize potential disruptions
in the relationships between the Company and these important
third parties related to the Y2K issue. The Company has also
categorized supplies purchased from vendors into three
categories: "Vital" (disruption of supply stops the business
operation and no short-term solution is available); "Critical"
(disruption of supply is inconvenient to the business
operation and a short-term solution is available); and
"Marginal" (disruption of supply is inconsequential to the
business operation). The Company has focused its efforts on
those vendors that supply goods or services deemed "Vital" to
the Company's business. All vendors categorized as "Vital" or
"Critical" have responded confirming that they are fully Y2K
Compliant. While the Company cannot guarantee compliance by
third parties, the Company has developed contingency plans
with its key suppliers that include availability of
appropriate inventories of supplies in the event the supplier
is not Y2K Compliant.
Contingency Planning - The Company has prepared contingency
plans specifying what the Company will do if failures occur in
IT and non-IT systems, or if important third parties are not
Y2K Compliant. The Company has finalized contingency plans
company-wide for its IT and non-IT systems.
Costs - From the project inception through October 31, 1999,
the Company has spent $348,000 out of a total estimate of
approximately $360,000 related to Y2K readiness. These costs
include the costs incurred for external consultants and
professional advisors and the costs for software and hardware.
The Company's process for tracking internal costs does not
capture all of the costs incurred for each of the employees
working on the Y2K project. Such internal costs are
principally the related payroll costs for its information
technology group and other employees who worked on the Y2K
project. The Company is expensing as incurred all costs
related to the assessment and remediation of the Y2K issue.
These costs are being funded through operating cash flows.
Risk Assessment - The Company's current estimates of the time
and costs necessary to remediate and test its computer systems
are based on the facts and circumstances existing at this
time. The estimates were made using assumptions of future
events including the continued availability of certain
resources, such as skilled IT personnel and electrical power,
Y2K modification plans, implementation success by key third
parties, and other factors. New developments could affect the
Company's estimates of the amount of time and costs needed to
modify and test its IT and non-IT systems for Y2K compliance.
These developments include, but are not limited to: (i) the
availability and cost of personnel trained in this area; (ii)
the ability to locate and correct all relevant codes in both
IT and non-IT systems; (iii) unanticipated failures in IT and
non-IT systems; and (iv) the planning and Y2K compliance
success that key customers and suppliers attain.
The Company cannot determine the impact of these potential
developments on the current estimate of probable total cost of
making its IT and non-IT systems Y2K Compliant. Accordingly,
the Company is not able to estimate possible future costs
beyond the current estimates. As new developments occur, these
cost estimates may be revised to reflect the impact of these
developments on the costs to the Company of making its IT and
non-IT systems Y2K Compliant. Such cost revisions could have a
material adverse impact on the Company's net income in the
quarterly period in which they are recorded. Although the
Company considers it unlikely, such revisions could also have
a material effect on the consolidated financial position or
annual results of operations of the Company.
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.
Part 2.
Item 1 Legal Proceedings.
None
Item 2 Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.10 Waiver and Amendment to Credit Agreement
(b) Reports on Form 8-K
(1) Report on Form 8-K dated August 12, 1999.
(2) Report on Form 8-K dated September 9, 1999.
<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: December 13, 1999
/s/ Dean P. Stull
Chairman of the Board and Co-Chief Executive Officer
Date: December 13, 1999
/s/ Volker Wypyszyk
President and Co-Chief Executive Officer
Date: December 13, 1999
/s/ Ralph L. Heimann
Chief Financial Officer and Treasurer
Exhibit 10.10
Waiver and Amendment to Credit Agreement
This waiver and amendment to credit agreement (this "Amendment")
is entered into as of October 29, 1999, by and among Hauser, Inc.
a Colorado corporation (the "Company"), Botanicals International,
Inc., a Delaware corporation, ZetaPharm, Inc., a New York
corporation, and Shuster Laboratories, Inc., a Massachusetts
corporation (collectively, the "Borrowers"), and Wells Fargo Bank
N.A. (the "Lender").
Recitals
Whereas, the Borrowers are currently indebted to the Lender
pursuant to the terms and conditions of that certain Credit
Agreement dated as of June 11, 1999 (the "Agreement"); and
Whereas, the Lender has agreed to waive compliance by the
Borrowers with certain provisions of the Agreement, and the
Lender and the Borrowers have agreed to certain changes in the
terms and conditions set forth in the Agreement and have agreed
to amend the Agreement to reflect the changes.
Now, therefore, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree to the following waivers and that the Agreement shall be
amended as follows:
1.Section 1.01 of the Agreement is amended by deleting entirely
the defined term "Consolidated Funded Indebtedness" and replacing
it with the following new definition:
"'Consolidation Funded Indebtedness' means, as of the date of
determination, (i) all Indebtedness of the Company and its
Subsidiaries, determined on a consolidated basis in accordance
with GAAP, that by its terms matures more that one year after the
date of calculation and (ii) any such Indebtedness maturing
within one year from such date that is renewable or extendable
at the option of the obligor to a date more than one year from
such date."
2.Section 1.01 of the Agreement is further amended by inserting
between the defined terms "Total Expense" and "Transactions" the
following additional defined term:
"'Totals Liabilities' means, at any time, all liabilities of the
Borrowers which would be construed as such in accordance with
GAAP, excluding (i) Indebtedness which is subordinated to the
Obligations to the Lender under a subordination agreement in form
and substance acceptable to the Lender or by subordination
language acceptable to the Lender in the instrument evidencing
such Indebtedness, and (ii) indebtedness for accounts payable and
borrowed money due to Affiliates."
3.Section 2.11(a) of the Agreement is amended as follows:
A. Clause (i) of Section 2.11(a) is amended by deleting entirely
the provisions thereof and replacing them with the following:
"(i) Base Rate Term Loan Borrowing shall bear interest at the
Base Rate;"
B. Clause (ii) of Section 2.11(a) is amended by deleting entirely
the provisions thereof and replacing them with the following:
"(ii) LIBOR Term Loan Borrowing shall bear interest at the LIBOR
Rate for the Interest Period in effect for such Borrowing plus
a margin of two and twenty one-hundredths of one percent
(2.20%)."
C. Clause (iii) of Section 2.11(a) is amended by deleting
entirely the provisions thereof and replacing them with the
following:
"(iii) Base Rate Revolving Loan Borrowings shall bear interest
at the Base Rate minus a margin of one-quarter of on percent
(0.25%); and"
D. Clause (iv) of Section 2.11(a) is amended by deleting entirely
the provisions thereof and replacing them with the following:
"(iv) LIBOR Revolving Loan Borrowing shall bear interest at the
LIBOR Rate for the Interest Period in effect for such Borrowing
plus a margin of one and ninety-five one-hundredths of one
percent (1.95%)."
4. Section 6.07(a) of the Agreement is amended by changing the
date reference form "fiscal year ending April 30, 2000" to
"fiscal year ending March 31, 2000."
5. Section 6.07(b) of the Agreement is amended by deleting
entirely the provisions thereof and replacing them with the
following:
"The Borrowers shall not permit the Consolidation Tangible Net
Worth at the end of any fiscal quarter of the Company until June
30, 2000 to be less than $36,000,000, and thereafter to be not
less than an amount to be mutually agreed upon by the Lender and
the Company, or $40,000,000 if no agreement is reached."
6. Section 6.07(d) of the Agreement is amended by deleting
entirely the provisions thereof and replacing them with the
following:
"The Borrowers shall not permit the ratio of Total Liabilities
to Consolidate Tangible Net Worth at the end of any fiscal
quarter of the Company to be greater than 1.3 to 1.0."
7. Section 6.07(e) is amended by deleting entirely the provisions
thereof and replacing them with the following:
"(e) The Borrowers will not permit the ratio of (i) Consolidated
Liquid Assets to (ii) the sum of (x) Consolidated Current
Liabilities (excluding Accounts Receivable of Affiliates) plus
(y) the Revolving Credit Exposure to be less than 0.35 to 1.0 at
the end of the fiscal quarter of the Company ending July 31,
1999; 0.40 to 1.0 at the end of the fiscal quarter of the Company
ending October 21, 1999; 0.45 to 1.0 at the end of the fiscal
quarter of the Company ending January 31, 2000; 0.50 to 1.0 at
the end of the fiscal quarter of the Company ending March 31,
2000 or at the end of any subsequent fiscal quarter of the
Company."
8. Section 6.07(f) of the Agreement is amended by deleting
entirely the provisions thereof and replacing them with the
following:
"The Borrowers shall not permit the Consolidation Debt Service
Coverage Ratio for the fiscal year of the Company ending March
31, 2000 to be less that 1.25 to 1.0; for the fiscal year of the
Company ending March 31, 2001, to be less than 2.0 to 1.0; and
for all fiscal years of the Company ending thereafter to be less
than 2.25 to 1.0."
9. Borrowing Base Certificate attached to the Agreement as
Exhibit A is amended as follows:
A. The following new sentence shall be added at the end of the
first paragraph appearing immediately after "Subject..." and
immediately before "A. Accounts Receivable ("A/R")":
"For all purposes of this Borrowing Base Certificate, Hauser,
Inc. and Zuellig Botanical Extracts, Inc. shall be deemed to be
a single Co-Borrower (collectively, "Hauser Extracts").
B. Item C.7.(c) is amended by deleting entirely the provisions
thereof and replacing them with the following:
"(c) Note: For Wilcox, there is a special overadvance facility
of $5.5 million from January to July and $7millionfrom August to
December independent of the Consolidated Borrowing Base and the
overall $20 million Inventory cap."
C. Immediately following item C.7.(c), add the following:
"(d) Note: For Hauser Extracts, there is a special overadvance
facility of $2.5 million from September 30, 1999 to December 31,
1999, $1.0 million from January 1, 2000 to March 31, 2000, $0.5
million from April 1, 2000 to June 30, 2000 and zero thereafter
independent of the Consolidated Borrowing Bases and the overall
$20 million Inventory cap."
"(e) Note: For Hauser, Inc. on a consolidated basis, there is a
special overadvance facility of $2.5 million from September 30,
1999 to December 31, 1999, $1.5 million from January 1, 2000 to
March 31, 2000, $1.0 million from April 1, 2000 to June 30, 2000
and zero thereafter independent of the Consolidated Borrowing
Base and the overall $ 20 million Inventory Cap."
The Lender hereby waives, for the Company's fiscal year ending
March 31, 2000 only, compliance by the Borrowers with their
covenant contained in Section 6.07(c) of the Agreement.
Except as specifically provided herein, all terms and conditions
of the Agreement remain in full force and effect, with out waiver
or modification, all terms defined in the Agreement shall have
the same meaning when used in the Amendment. This Amendment and
the Agreement shall be read together as one document.
The Borrowers hereby remake all representations and warranties
contained in the Agreement and reaffirm all covenants set forth
therein. The Borrowers further certify that as of the date of
the Amendment, giving effect to the provisions hereof, there
exists on Event of Default as defined in the Agreement, not any
condition, act or event which with the giving of notice or the
passage of time or both would constitute any such Event of
Default.
In witness whereof, the parties hereto have caused this Amendment
to be executed as of the day and year first written above.
Hauser, Inc.
Name:
/s/Ralph Heimann
Title: CFO
Wells Fargo Bank, N.A.
Name:
/s/Joseph Rice
Title: Vice President
Botanicals International Extracts, Inc.
/s/Ralph Heimann
Title: President
ZetaPharm, Inc.
/s/Ralph Heimann
Secretary/Treasurer
Wilcox Natural Products, Inc.
/s/Ralph Heimann
Secretary/Treasurer
Shuster Laboratories, Inc.
/s/Dean P. Stull
