UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
March 23, 2004
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Advanced Nutraceuticals, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Texas
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(State or Other Jurisdiction of Incorporation)
0-26362 76-0642336
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(Commission File Number) (I.R.S. Employer Identification No.)
106 South University Blvd. #14, Denver, Colorado 80209
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code - (303) 722-4008
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. Acquisition or Disposition of Assets
On March 23, 2004, Advanced Nutraceuticals, Inc. ("ANI" or the "Company")
completed the sale of all of the assets used in the operations of its
pharmaceutical products subsidiary, ANI Pharmaceuticals, Inc. ("ANIP"), to ANIP
Acquisition Company (the "Buyer"). The assets included the land and building in
Gulfport, Mississippi used in ANIP's operations, which were owned by the
Company's Bactolac Pharmaceutical Inc., subsidiary, as well as all equipment,
machinery, inventory and accounts receivable. Prior to the closing, there was no
material relationship between the Buyer and the Company, except that the Buyer's
Chief Executive Officer had provided consulting services to ANIP for three
months in 2003. At closing, the Company received approximately $3.1 million in
cash, which was used to repay outstanding indebtedness to the Company's lenders.
An additional $250,000 was placed into a short-term escrow account to be applied
against possible indemnity claims that may arise during the six-month period
after closing. At Closing the Buyer also assumed the outstanding trade accounts
payable and specified accrued expenses of ANIP. The consideration for the ANIP
assets was determined principally by calculating ANIP's working capital and a
negotiated value of the land and building.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Not applicable
(b) Pro Forma Financial Information
(1) Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
December 31, 2003.
(2) Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the three months ended December 31, 2003.
(3) Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended September 30, 2003.
(c) Exhibits.
10.54 Asset Purchase Agreement, dated March 23, 2004 among ANIP Acquisition
Company, Advanced Nutraceuticals, Inc., Bactolac Pharmaceutical, Inc.
and ANI Pharmaceuticals, 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 hereunto duly authorized.
ADVANCED NUTRACEUTICALS, INC.
Dated: April 2, 2004 By: /s/ Jeffrey G. McGonegal
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Jeffrey G. McGonegal
Senior Vice President of Finance
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ADVANCED NUTRACEUTICALS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
HEADNOTE
The following unaudited pro forma condensed consolidated balance sheet as of
December 31, 2003 and the unaudited pro forma condensed consolidated statements
of operations for the three months ended December 31, 2003 and the year ended
September 30, 2003, give effect to the disposition of the net assets and
operations of ANIP by ANI, which transaction closed on March 23, 2004. The
unaudited pro forma condensed consolidated balance sheet as of December 31, 2003
assumes that the disposition took place as of December 31, 2003. The unaudited
pro forma condensed consolidated statements of operations gives effect to the
disposition as if it had occurred at the beginning of the earliest period
presented. The unaudited pro forma consolidated financial statements give effect
to the terms of the disposition, including the cash portion of the purchase
price as well as the trade liabilities assumed as part of the consideration. For
subsequently issued financial statements of ANI, the operations of ANIP to be
included in such financial statements will be treated as discontinued operations
for all prior periods.
The unaudited pro forma condensed consolidated balance sheet and statements of
operations are presented for information purposes only and are not necessarily
indicative of the financial position or the results of operations that would
have been obtained had the disposition actually occurred as of the dates assumed
nor is it necessarily indicative of the financial position or future results of
operations. The pro forma adjustments are based upon estimates, information and
assumptions available at the time of the filing of this document. The pro forma
condensed consolidated financial statements are based on the historical
consolidated financial statements of ANI, and should be read in conjunction with
the audited consolidated financial statements and related notes thereto of ANI
contained in its Annual Report on Form 10-K for the year ended September 30,
2003 and the condensed consolidated financial statements in its Quarterly Report
on Form 10-QSB for the quarter ended December 31, 2003, as well as the estimates
and assumptions set forth below and in the notes to the unaudited pro forma
financial statements.
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Advanced Nutraceuticals, Inc.
Unaudited Pro Forma Condensed
Consolidated Balance Sheet
December 31, 2003
-----------------
Pro Forma
Adjustments
DR (CR)
-------------------- Pro Forma
Historical Ref. Amount Adjusted
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Assets
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Current assets:
Cash and cash equivalents $ 920,764 $ -- $ 920,764
Receivables, net 4,854,553 2 (1,452,471) 3,402,082
Inventories 2,626,929 2 (1,358,748) 1,268,181
Prepaid expenses and other assets 128,488 2,3 (1,439) 127,049
------------ ----------------------------
Total current assets 8,530,734 (2,812,658) 5,718,076
Property and equipment, net 4,507,298 2 (3,355,303) 1,151,995
Goodwill 7,563,913 -- 7,563,913
Other assets 416,099 4 697,000 1,113,099
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Total assets $ 21,018,044 $ (5,470,961) $ 15,547,083
============ ============================
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 3,021,775 2 $ 1,603,328 $ 1,418,447
Credit facility 248,600 3 8,600 240,000
Current portion of long-term debt 76,635 3 34,945 41,690
------------ ----------------------------
Total current liabilities 3,347,010 1,646,873 1,700,137
Long-term debt:
Credit facility 3,075,752 3 529,844 2,545,908
Other long-term debt 2,314,193 3 2,299,066 15,127
------------ ----------------------------
Total liabilities 8,736,955 4,475,783 4,261,172
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Stockholders' equity:
Common stock 49,928 -- 49,928
Additional paid-in capital 20,322,048 -- 20,322,048
Accumulated deficit (8,090,887) 2,3,4 995,178 (9,086,065)
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Total stockholders equity 12,281,089 995,178 11,285,911
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Total liabilities and stockholders' equity $ 21,018,044 $ 5,470,961 $ 15,547,083
============ ============================
See accompanying Headnote and
Notes to Pro Forma Condensed
Consolidated Financial Statements
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Advanced Nutraceuticals, Inc.
Unaudited Pro Forma Condensed
Consolidated Statement of Operations
Three Months Ended December 31, 2003
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Pro Forma
Adjustments
DR (CR)
------------------- Pro Forma
Historical Ref. Amount Adjusted
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Net sales $ 6,756,551 5 $ 2,681,478 $ 4,075,073
Cost of sales 4,867,780 5 (2,121,627) 2,746,153
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Gross margin 1,888,771 559,851 1,328,920
General and administrative expenses 1,544,526 5 (843,471) 701,055
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Operating income (loss) 344,245 (283,620) 627,865
Other income (expense):
Interest expense (180,656) 5 (124,640) (56,016)
Other, net 35,707 5 3,199 32,508
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Income (loss) from operations
before income taxes 199,296 (405,061) 604,357
Income tax expense -- -- --
----------- --------------------------
Net income (loss) $ 199,296 $ (405,061) $ 604,357
=========== ==========================
Net income (loss) per share:
Basic $ 0.04 $ 0.12
=========== ===========
Diluted $ 0.04 $ 0.12
=========== ===========
Weighted average common shares outstanding:
Basic 4,992,789 4,992,789
=========== ==========================
Diluted 5,001,834 6 9,045 5,010,879
=========== ==========================
See accompanying Headnote and
Notes to Pro Forma Condensed
Consolidated Financial Statements
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Advanced Nutraceuticals, Inc.
Unaudited Pro Forma Condensed
Consolidated Statement of Operations
Year Ended September 30, 2003
-----------------------------
Pro Forma
Adjustments
DR (CR)
------------------- Pro Forma
Historical Ref. Amount Adjusted
---------------------------------------------------
Net sales $ 24,699,501 5 $ 11,905,233 $ 12,794,268
Cost of sales 17,325,853 5 (9,458,854) 7,866,999
------------ ----------------------------
Gross margin 7,373,648 2,446,379 4,927,269
General and administrative expenses
6,467,336 5 (3,675,700) 2,791,636
Impairment loss on long-lived assets 3,900,000 5 (3,900,000) --
------------ ----------------------------
Operating income (loss) (2,993,688) (5,129,321) 2,135,633
Other income (expense):
Interest expense (680,645) 5 (478,804) (201,841)
Loss on sale of equipment (180,128) 5 (180,128) --
Other, net 10,657 5 8,860 1,797
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Income (loss) from operations
before income taxes (3,843,804) (5,779,393) 1,935,589
Income tax expense -- -- --
------------ ----------------------------
Net income (loss) $ (3,843,804) $ (5,779,393) $ 1,935,589
============ ============================
Net income (loss) per share:
Basic $ (0.77) $ 0.39
============ ============
Diluted $ (0.77) $ 0.38
============ ============
Weighted average common shares outstanding:
Basic 4,992,789 4,992,789
============ ============================
Diluted 4,992,789 6 112,957 5,105,746
============ ============================
See accompanying Headnote and
Notes to Pro Forma Condensed
Consolidated Financial Statements
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ADVANCED NUTRACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - General
The accompanying unaudited pro forma condensed consolidated balance sheet as of
December 31, 2003 and the unaudited pro forma condensed consolidated statements
of operations for the three months ended December 31, 2003 and the year ended
September 30, 2003, give effect to the disposition of the net assets and
operations ANIP by ANI, which transaction closed on March 23, 2004. The
unaudited pro forma condensed consolidated balance sheet as of December 31, 2003
assumes that the disposition took place as of December 31, 2003. The unaudited
pro forma condensed consolidated statements of operations gives effect to the
disposition as if it had occurred at the beginning of the earliest period
presented. The pro forma adjustments only give effect to amounts that are
directly attributable to the disposition transaction. For subsequently issued
financial statements of ANI, the operations of ANIP to be included in such
financial statements will be treated as discontinued operations for all prior
periods.
Note 2 - Net Assets of ANIP Sold
Adjustments were made to remove from the balance sheet the individual amounts of
assets and liabilities associated with the ANIP operation that were sold. All of
the assets associated with the pharmaceutical products manufacturing operation
were sold and the buyer assumed as of closing, specified liabilities consisting
of trade accounts payable and accrued liabilities.
Note 3 - Proceeds From Sale of ANIP
As of March 23, 2004, ANI sold to ANIP Acquisition Company, a newly formed
privately held entity, all of the assets and operations associated with the
pharmaceutical products manufacturing of ANIP. The agreement provided for
approximately $3.1 million in cash at closing, which was used by ANI to repay
outstanding indebtedness to ANI's lenders. Out of the proceeds, approximately
$2.5 million, including a prepayment penalty of approximately $116,000, was used
to repay the mortgage obligation and the balance, net of closing expenses paid
by ANI, was used to reduce ANI's obligations under its Senior Credit Facility.
Note 4 - ANIP Deferred Tax Adjustment
Adjustments were made to remove the net deferred income tax liability amounts
that are directly associated with the ANIP net assets sold.
Note 5 - ANIP Operations
Adjustments were made to remove the amounts representing the items of revenue
and expense associated with ANIP.
Note 6 - Net Income (Loss) Per Share
The average shares outstanding for the three months ended December 31, 2003 and
the year ended September 30, 2003 have been adjusted for the dilutive effect of
the common equivalent shares outstanding for each period.
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