<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
Commission file number 0-26362
ADVANCED NUTRACEUTICALS, INC.
-----------------------------
(Exact name of Registrant as specified in its charter)
TEXAS 76-0642336
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9101 JAMEEL ROAD, SUITE 180
HOUSTON, TEXAS 77040
(Address of Principal Executive Offices)
(713) 460-1976
(Registrant's telephone number, including area code)
ADVANCED NUTRACEUTICALS, INC. IS THE SUCCESSOR ISSUER TO
NUTRITION FOR LIFE INTERNATIONAL, INC.
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 [ ]
As of May 5, 2000 there were 5,808,595 shares of common stock,
$0.01 par value per share, outstanding.
<PAGE>
ADVANCED NUTRACEUTICALS, INC.
Index
PART 1 - Financial Information
<TABLE>
<CAPTION>
PAGE
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Advanced Nutraceuticals, Inc..
Consolidated Balance Sheets 3
March 31, 2000 and September 30, 1999
Consolidated Statements of Operations and Comprehensive Income (Loss) 4
For the Three and Six Months Ended March 31, 2000 and 1999
Condensed Consolidated Statements of Cash Flows 5
For the Six Months Ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II - Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
</TABLE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1
ADVANCED NUTRACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
2000 September 30,
(Unaudited) 1999
----------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 174,873 $ 1,395,310
Restricted cash 101,266 585,866
Marketable securities -- 996,942
Receivables, net 4,041,322 362,315
Inventories 11,278,222 8,434,220
Deferred tax asset net 1,664,000 1,647,000
Prepaid expenses and other assets 1,921,008 1,062,513
------------ -------------
Total current assets 19,180,691 14,484, 166
Property and equipment, net 15,250,718 6,038,186
Audio production rights 738,889 972,222
Goodwill 10,186,971 --
Other assets 637,650 746,246
------------ -------------
$ 45,994,919 $ 22,240,820
============ =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 5,093,975 $ 2,517,020
Accrued bonuses and commissions 1,293,437 1,384,950
Deferred income 656,935 826,464
Accrued expenses and other liabilities 2,556,117 1,344,001
Note payable - other 600,000 --
Current portion of capital lease obligation 177,160 177,160
Current portion of long-term debt 4,009,681 385,304
------------ -------------
Total current liabilities 14,387,305 6,634,899
Deferred tax liability 3,788,000 778,000
Long-term portion of capital lease obligation 84,406 170,994
Long-term debt 8,016,708 308,725
------------ -------------
Total liabilities 26,276,419 7,892,618
------------ -------------
Stockholders' equity:
Series A convertible preferred stock, $.001 par value;
1,000,000 authorized; 221,127 issued; stated at liquidation
preference at $28.40 per share 6,280,000 --
Common stock; $.01 par value; 20,000,000 shares authorized 58,875 58,875
Additional paid-in capital 11,837,156 11,837,156
Retained earnings 2,193,822 3,110,405
Accumulated other comprehensive income (loss) (118,868) (125,749)
----------- ------------
20,250,985 14,880,687
Less: Treasury stock 79,000 shares, at cost (532,485) (532,485)
----------- ------------
Total Stockholders' Equity 19,718,500 14,348,202
----------- ------------
$ 45,994,919 $ 22,240,820
============ =============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
ADVANCED NUTRACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
--------------------------- ---------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 18,409,746 $ 16,535,613 $ 34,996,742 $ 33,527,514
Cost of sales 12,346,644 10,961,435 23,823,209 21,982,037
------------ ------------ ------------ ------------
Gross profit 6,063,102 5,574,178 11,173,533 11,545,477
Marketing, distribution and
Administrative expenses 6,040,764 5,466,967 11,659,535 11,080,516
------------ ------------ ------------ ------------
Income (loss) from operations 22,338 107,211 (486,002) 464,961
------------ ------------ ------------ ------------
Other income (expense):
Interest income (expense), net (281,713) (23,244) (385,913) (13,244)
Foreign exchange income (loss) (51,275) (32,274) (84,110) 114,632
Other, net (7,773) 171,858 93,442 352,596
------------ ------------ ------------ ------------
(340,761) 116,340 (376,581) 453,984
------------ ------------ ------------ ------------
Income (loss) before income tax expense (318,423) 223,551 (862,583) 918,945
Income tax (expense ) benefit (100,000) (209,000) (54,000) (500,000)
------------ ------------ ------------ ------------
Net income (loss) (418,423) 14,551 (916,583) 418,945
------------ ------------ ------------ ------------
Other comprehensive income (loss):
Unrealized gain (loss) on investments -- 1,778 45,500 (6,873)
Foreign currency translation gain (loss) (122,266) 6,171 (38,619) (60,372)
------------ ------------ ------------ ------------
(122,266) 7,949 6,881 (67,245)
------------ ------------ ------------ ------------
Total comprehensive income (loss) $ (540,689) $ 22,500 $ (909,702) $ 351,700
============ ============ ============ ============
Basic income (loss) per common share $ (.05) $ .00 $ (.12) $ .07
============ ============ ============ ============
Diluted income (loss) per common share $ (.05) $ .00 $ (.12) $ .07
============ ============ ============ ============
Weighted average common share
Basic 8,024,480 5,887,595 7,415,261 5,887,595
============ ============ ============ ============
Diluted 8,024,480 5,948,949 7,415,261 5,949,875
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
ADVANCED NUTRACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months
Ended March 31,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Net cash used in operating activities $ (2,347,616) $ (192,137)
Net cash used in investing activities (3,678,040) (203,265)
Net cash provided by (used in) financing activities 4,843,838 (238,459)
Effects of exchange rates on cash and cash equivalents (38,619) (60,372)
------------- -------------
Net decrease in cash and cash equivalents (1,220,437) (694,233)
Cash and cash equivalents at beginning of period 1,395,310 4,404,388
------------- -------------
Cash and cash equivalents at end of period $ 174,873 $ 3,710,155
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
ADVANCED NUTRACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERIM FINANCIAL STATEMENTS
The accompanying financial statements of Advanced Nutraceuticals, Inc. ("ANI" or
the "Company") have been prepared in accordance with the instructions to
quarterly reports on Form 10-Q. In the opinion of Management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and changes in financial position
at March 31, 2000, and for all periods presented have been made. Certain
information and footnote data necessary for fair presentation of financial
position and results of operations in conformity with generally accepted
accounting principles have been condensed or omitted. It is therefore suggested
that these financial statements be read in conjunction with the summary of
significant accounting policies and notes to financial statements included in
the Company's Annual Report on Form 10-K. The results of operations for the
period ended March 31, 2000 are not necessarily an indication of operating
results for the full year.
NOTE 1 - REORGANIZATION INTO A HOLDING COMPANY
On March 15, 2000, Nutrition For Life International, Inc. a Texas corporation
("NFLI") reorganized into a holding company structure (the "Reorganization") in
which Advanced Nutraceuticals, Inc., a Texas corporation became the holding
company. As a result of the Reorganization, ANI became the publicily traded
entity.
The Reorganization was effected through the formation by NFLI of ANI as a
wholly-owned subsidiary and the formation by ANI of a wholly-owned subsidiary,
NFLI Merger Sub, Inc., a Texas corporation ("Merger Sub"). An agreement and Plan
of Merger dated March 13, 2000 was entered into by and among NFLI, ANI and
Merger Sub (the "Merger Agreement"), and pursuant to the Merger Agreement,
Merger Sub merged with and into NFLI (the "Merger"), with NFLI as the surviving
corporation. NFLI became a wholly-owned subsidiary of ANI as a result of the
Merger. The Reorganization was effected in accordance with the provisions of
Article 5.03(H) of the Texas Business Corporation Act.
Pursuant to the Merger Agreement, each outstanding share of common stock of NFLI
issued and outstanding immediately prior to the Merger was converted into one
share of ANI's common stock. As a result, the NFLI shareholders now hold common
stock in ANI (instead of NFLI) which is deemed to have been registered under
Section 12(g) of the Securities Exchange Act of 1934 because the Reorganization
constitutes a "succession" and the Registrant constitutes a "successor issuer"
of NFLI for securities law purposes.
In addition, pursuant to the terms of the Merger Agreement, each outstanding
share of Series A Preferred Stock of NFLI issued and outstanding immediately
prior to the Merger was converted into one share of Series A Preferred Stock of
ANI. Also, each outstanding option, and each outstanding warrant, to purchase
shares of NFLI's common stock has been converted into an option or warrant, as
the case may be, to purchase, on the same terms and conditions, an identical
number of shares of ANI's common stock.
ANI's common stock trades on the Nasdaq National Stock Market (NMS) under the
trading symbol, ANII, and the warrants trade under the symbol, ANIIW.
NOTE 2 - RECENT ACQUISITIONS
On November 17, 1999 the Company finalized the acquisitions of Advanced
Nutraceuticals, Inc., a Delaware corporation ("Old ANI") and Bactolac
Pharmaceutical Inc. ("Bactolac"). The acquisition of Old ANI was completed
through a merger with the Company's wholly owned subsidiary, NL Acquisition
Company. The acquisition of Bactolac was completed through a merger with the
Company's wholly owned subsidiary, BPI Acquisition Company. In connection with
the merger of Bactolac into BPI Acquisition Company, the name of the surviving
corporation was changed to Bactolac Pharmaceutical Inc.
Old ANI was formed to pursue a consolidation and integration program in the
nutrition industry. The former Old ANI stockholders received an aggregate of
75,000 shares of a newly created Series A Preferred Stock of the Company. Each
one share of Series A Preferred Stock will be automatically converted into ten
shares of the Company's common stock upon approval of the Company's
shareholders. A vote on the approval of the conversion of the Series A Preferred
Stock into common stock is scheduled for the Company's Annual Meeting to be held
June 6, 2000. The Series A Preferred Stock has no voting rights (except as
required by law) and no dividend rights. Upon liquidation, dissolution or
winding up of the Company, the Series A Preferred Stock has a preference of
$28.40 per share, payable prior and in preference to any distribution of any
assets or surplus funds of the Company to the holders of the Company's common
stock.
Bactolac headquartered in Westbury, New York, manufactures nutritional
supplements for private labeled customers. The purchase price of the Bactolac
acquisition consisted of $2,500,000 in cash, a subordinated promissory note in
the principal amount of
6
<PAGE>
$2,500,000 and 96,831 shares of Series A Preferred Stock. Additionally, up to
17,606 shares of Series A Preferred Stock may be issued pursuant to an earnout
agreement. Bactolac entered into an employment agreement and covenant not to
compete agreement with its former owner at the closing on November 17,1999. The
Company intends to continue the operations of Bactolac and to use its inventory,
machinery and equipment in connection with the manufacture of nutritional
supplements.
On December 1, 1999, the Company finalized the acquisition of Ash Corp. ("Ash").
The acquisition of Ash was completed through a merger with the Company's wholly
owned subsidiary Bactolac. The purchase price of Ash consisted of $750,000 in
cash, a note payable in the amount of $500,000 and 49,296 shares of Series A
Preferred Stock. Additionally, up to 105,634 shares of Series A Preferred Stock
may be issued pursuant to an earnout agreement. The Company intends to continue
the operations of Ash and to use its inventory, machinery and equipment in
connection with the manufacture of liquid pharmaceutical and nutraceutical
products.
Financing for the above acquisitions was provided primarily through a financing
arrangement entered into on November 17,1999 with General Electric Capital
Corporation ("GECC"). The Company borrowed $2,360,000 from GECC pursuant to a
term loan payable in three years, and is subject to limitations based upon
eligible accounts. The loan facility is secured by substantially all of the
assets of the Company and its subsidiaries. The interest rate on borrowing is
0.5% above the prime rate. There is a fee of 0.25% on the unused portion of the
facility and an annual monitoring fee of $10,000. It is required, among other
provisions, that the Company maintain as of the end of the fiscal year ending
September 30, 1999, a minimum net worth (on a consolidated basis including ASH
and BPI) of $18 million and a minimum net worth of $25.5 million at
September 30, 2000, and a minimum net worth of $27 million for each fiscal year
after September 30, 2000. In addition, the Company is required to maintain a
fixed charge coverage ratio of 2.0 to 1.0 through July 1, 2000, and 1.5 to 1.0
at July 2, 2000, and at all times thereafter. The Company is also subject to
additional covenants, including filing of reports and significant restrictions
on dividend payments, issuance of debt and equity, mergers, changes in business
operations and sales of assets.
The acquisitions have been accounted for using the purchase method of
accounting, and, accordingly, the purchase price has been allocated to the
assets purchased and the liabilities assumed based upon their fair values at the
acquisition dates. The excess of the purchase price over the fair values of the
net assets acquired was approximately $10,200,000 and has been recorded as
goodwill, which is being amortized on a straight-line basis over 20 years.
The operating results of these acquired businesses have been included in the
consolidated statement of operations and comprehensive income (loss) from their
dates of acquisition. On the basis of a proforma consolidation of the results of
operations as if the acquisition had taken place on October 1, 1998 consolidated
results of operations would have been as follows:
Six Months Ended March 31,
--------------------------
2000 1999
----------- -----------
Net revenue $38,127,000 $42,909,000
Net income (loss) (1,734,000) 1,556,000
Net income (loss) per share (.23) .19
These proforma results have been prepared for comparative purposes only and
include certain adjustments such as additional depreciation expense as a result
of a step-up in the basis of fixed assets, additional amortization expense as a
result of goodwill and increased interest expense on acquisition debt. They do
not purport to be indicative of the results of operations which actually would
have resulted had the acquisitions been in effect on October 1, 1998 and 1999 or
of future results of operations of the consolidated entities.
7
<PAGE>
ADVANCED NUTRACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SEGMENT INFORMATION
Information regarding the Company's business segments as required by Statements
of Financial Accounting Standards No. 131, "Disclosure About Segments of a
Business Enterprise", follows below:
Six Months ended
March 31,
(In Thousands)
-------------------------
2000 1999
---- ----
Sales to unaffiliated customers:
Distribution:
North America (1) $ 24,478 $ 31,042
United Kingdom (2) 2,399 2,089
Philippines 402 396
Japan 937 --
Manufacturing (3) 6,782 --
Sales or transfers between geographic areas:
Distribution:
North America -- --
United Kingdom 531 426
Philippines 102 (9)
Japan -- --
Manufacturing (3) -- --
Operating profit (loss):
Distribution:
North America (528) 992
United Kingdom (584) (307)
Philippines (177) (220)
Japan 46 --
Manufacturing (3) 757 --
Identifiable assets:
Distribution:
North America 37,090 27,075
United Kingdom 2,162 1,535
Philippines 325 835
Japan 674 --
Manufacturing (3) 27,189 --
(1) Includes the United States, Canada, and Puerto Rico
(2) Includes the United Kingdom, Ireland, and the Netherlands
(3) Substantially all in North America
8
<PAGE>
ITEM 2.
ADVANCED NUTRACEUTICALS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
DISTRIBUTION OPERATIONS:
Net sales of the distribution operations for the six months ended March 31, 2000
decreased by $5,312,486 or 15.9% to $28,215,028 as compared to net sales of
$33,527,514 for the six months ended March 31, 1999. At March 31, 2000, the
Company had approximately 64,200 distributors compared to approximately 72,800
at March 31, 1999 and 67,000 at September 30, 1999. During the six months ended
March 31, 2000 the number of active international distributors increased by
approximately 1,400, while active distributors in North America decreased by
approximately 4,200. The Company's results of operations depend to a significant
degree on the motivation of its existing distributors and the attraction of new
distributors to the Company. The decrease in distribution operations net sales
is recapped below:
Decrease in sales due to decreased number of distributors $ 4,626,000
Decrease in distributor average sales 686,000
-----------
$ 5,312,000
===========
The Company's net sales per average number of distributors per month decreased
from $73 during the six months ended March 31, 1999 to $72 for the six months
ended March 31, 2000.
Cost of sales decreased by $2,793,573 or 12.7% to $19,188,484 for the six months
ended March 31, 2000 from $21,982,037 for the six months ended March 31, 1999.
Cost of sales as a percentage of net sales increased from 65.6% in the six
months ended March 31, 1999 to 68.0% in the six months ended March 31, 2000.
Cost of sales, which includes product costs, commissions and bonuses paid to
distributors, and shipping costs, is recapped below:
Six months ended
March 31,
----------------
2000 1999
---- ----
Product costs 24.9% 25.9%
Commissions and bonuses paid to distributors 34.2 32.9
Shipping costs 8.9 6.8
---- ----
68.0% 65.6%
==== ====
Product cost decreased by 1% primarily as a result of the mix of product sales.
Commissions and bonuses paid to distributors increased 1.3% as a result of
changes in the mix of higher versus lower bonus value products purchased by
distributors. Shipping costs increased 2.1% during the six months ended
March 31, 2000 primarily from a combination of increased shipping to continental
Europe from the United Kingdom and the contract shipping of success kits. In May
2000 the Company instituted revised shipping and handling charges which will
more closely reflect the actual cost of shipping product.
Gross profit as percentage of net sales decreased from 34.4% for the six months
ended March 31, 1999 to 32.0% for the six months ended March 31, 2000. Gross
profit dollars decreased 21.8% or $2,518,933 from $11,545,477 for the six months
ended March 31, 1999 to $9,026,544 for the six months ended March 31, 2000.
Marketing, distribution and administrative expenses decreased $810,850 or 7.3%
from $11,080,516 for the six months ended March 31, 1999 to $10,269,666 for the
six months ended March 31, 2000. This decrease results primarily from reduced
professional fees credit card fees promotion expenses and bad debt expense. As a
percentage of net sales, marketing, distribution, and administrative expenses
increased to 36.4% for the six months ended March 31, 2000 from 33.1% for the
six months ended March 31, 1999.
9
<PAGE>
MANUFACTURING OPERATIONS
Net sales for the manufacturing operations from the dates of acquisition to
March 31, 2000 were $6,781,714. Cost of sales for the six months ended
March 31, 2000 were $4,634,726 or 68.3%. Gross profit for the same period was
$2,146,988 or 31.7%.
COMBINED OPERATIONS
Income (loss) from operations for the six months ended March 31, 2000 decreased
$950,963 to a loss of $486,002 from income of $464,961 for the six months ended
March 31, 1999, principally as a result of items explained above.
Other income (expense) decreased to an expense of $376,581 for the six months
ended March 31, 2000 from income of $453,984 for the six months ended March 31,
1999. The decrease was primarily the result of increased interest expense
associated with the revolving credit debt and acquisitions related debt incurred
in November and December 1999. Additionally the Company experienced foreign
exchange losses of approximately $84,000 for the six months ended March 31,2000
compared to foreign exchange gains of approximately $115,000 for the similar
period of 1999.
Net loss was $916,503 for the six months ended March 31, 2000, a decrease of
$1,335,448 compared to net income of $418,945 for the six months ended
March 31, 1999. The decrease was the result of the items discussed above.
To reduce the monthly operating expenditures of its foreign operations, the
Company has begun a program of closing its small office/warehouse facilities in
Norway, Finland and the Netherlands. Orders from those countries will now be
fulfilled from the Company's U.K. warehouse. Additionally the Company has
reduced the head count in its U.K. operations from 35 at September 30, 1999 to
26 as of May 1, 2000. The Company expects further reductions in head count
subject to local employment regulations over the next several months. Monthly
operating expenditures in the U.S. have been reduced through head count
reductions and salary reductions for certain corporate personnel. The Company
intends to continue its efforts to reduce operating costs and increase revenue
to return to profitability as soon as possible.
CHANGES IN FINANCIAL CONDITION
The Company had cash and cash equivalents of $174,873 at March 31, 2000 compared
to $1,395,310 at September 30, 1999. The cash used in operating activities of
$2,347,616 for the six months ended March 31, 2000 was $2,155,479 more than the
cash used in operating activities of $192,137 for the six months ended
March 31, 1999. The Company used approximately $460,000 and $169,000,
respectively, to purchase property and equipment during the six month periods
ended March 31, 2000 and 1999. The Company had working capital of $4,793,386 at
March 31, 2000 compared to $7,849,267 at September 30, 1999.
The decrease in working capital resulted principally from increases in trade
accounts payable, accrued liabilities, current maturities of long-term debt and
revolving credit debt which more than offset increases in accounts receivable
and inventories. These increases resulted from the Company's recent acquisition
of two manufacturing companies.
The Company's revolving line of credit is formula-based and provides a borrowing
arrangement based on a percentage of accounts receivable and inventory up to a
maximum borrowing limit. As of March 31, 2000, Company advances under the line
of credit totaled approximately $4.4 million and the Company had available to it
approximately $820,000 of additional borrowing capacity. Pursuant to the
agreement with GECC all cash received by the Company is deposited into a
controlled lockbox and is swept on a daily basis to reduce the outstanding
revolving line of credit balance thereby reducing the Company's interest
expense.
Management believes that the Company's internally generated funds together with
the existing revolving line of credit should be sufficient to meet working
capital requirements in fiscal 2000. To improve its working capital position
the Company is currently considering various alternatives, which could include
mortgaging real property used by the Company in its manufacturing operations in
Mississippi and equity or debt offerings. The Company has no firm commitments
for additional financing and there can be no assurance that any financing, if
obtained, would be on terms favorable to the Company.
The revolving credit agreement with GECC requires among other things that the
Company maintain a consolidated net worth of $18 million as of September 30,
1999 and $25.5 million at September 30, 2000 and $27 million for each fiscal
year after September 30, 2000. The Company has recently begun negotiations with
GECC to revise the September 30, 2000 and beyond requirements to more closely
reflect the Company's expected net worth at those dates.
FORWARD-LOOKING STATEMENTS
The Company is including the following cautionary statement in this report to
make applicable and take advantage of the safe harbor provision of the Private
Securities Litigation Reform Act of 1995 for any forward-looking statements made
by, or on behalf of the
10
<PAGE>
Company. This report includes statements, other than historical fact, that may
be deemed forward-looking. These statements may be accompanied by words such as
"believe", "estimate", "project", "expect", "anticipate", or "predict", that
convey the uncertainty of future events or outcomes. These statements are based
on assumptions that the Company believes are reasonable; however, many factors
could cause the Company's actual results in the future to differ materially from
the forward-looking statements made herein and in any other documents or oral
presentations made by, or on behalf of, the Company. Important factors, which
could cause actual results to differ materially from those in forward-looking
statements, include, among others, product acceptance and competition,
competition in the recruitment and retention of distributors, governmental
regulation including interpretations of the FDA and foreign regulatory agencies,
legislation affecting the marketing of nutritional supplements, risks related to
current operations in, and expansion into, foreign markets, including currency
fluctuations, local economic conditions, and local tax and accounting policies,
the Company's ability to complete and successfully integrate acquisitions into
the Company's business as well as factors discussed in the Company's filings
with the Securities and Exchange Commission. The Company assumes no obligation
to publicly update or revise any forward-looking statements made herein or any
other forward-looking statements made by the Company.
11
<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) REPORTS ON FORM 8-K
On March 21, 2000, the Company filed a Report on Form 8-K reporting the
reorganization of the Company into a holding company structure.
12
<PAGE>
ADVANCED NUTRACEUTICALS, INC.
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 thereunto duly authorized.
ADVANCED NUTRACEUTICALS, INC.
(Registrant)
Dated: May 15, 2000 By: /s/ John R. Brown, Jr.
-----------------------------------------
John R. Brown, Jr.
Vice President - Finance
and Chief Accounting Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-2000 SEP-30-1999
<PERIOD-START> OCT-01-1999 OCT-01-1998
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 174,873 1,395,310
<SECURITIES> 0 996,942
<RECEIVABLES> 4,041,322 362,315
<ALLOWANCES> 0 0
<INVENTORY> 11,278,222 8,434,220
<CURRENT-ASSETS> 19,180,691 14,484,166
<PP&E> 19,859,477 6,038,186
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 45,994,919 22,240,820
<CURRENT-LIABILITIES> 14,387,305 6,634,899
<BONDS> 8,016,708 308,725
0 0
6,280,000 0
<COMMON> 58,875 58,875
<OTHER-SE> 13,379,625 14,289,327
<TOTAL-LIABILITY-AND-EQUITY> 45,994,919 22,240,820
<SALES> 0 0
<TOTAL-REVENUES> 34,996,742 33,527,514
<CGS> 0 0
<TOTAL-COSTS> 23,823,209 21,982,037
<OTHER-EXPENSES> 11,659,535 11,080,516
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 385,913 13,244
<INCOME-PRETAX> (862,583) 918,945
<INCOME-TAX> 54,000 500,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (916,583) 418,945
<EPS-BASIC> (.12) .07
<EPS-DILUTED> (.12) .07
</TABLE>
