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): August 27, 2002
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HAUSER, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-17174 84-0926801
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
20710 S. Alameda Street
Long Beach, CA 90810-1107 90810
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(Address of principal Zip Code
executive offices)
Registrant's telephone number, including area code: (310) 637-9566
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Item 2. Acquisition or Disposition of Assets.
On August 27, 2002, Hauser Technical Services, Inc., a Delaware corporation
("HTS") and a wholly owned subsidiary of Hauser, Inc. (the "Company"), sold the
assets relating to its Shuster Laboratories division to STR Acquisition Sub,
Inc., a Delaware corporation ("STR Acquisition Sub") and a wholly owned
subsidiary of Specialized Technology Resources, Inc. ("STR"), a Delaware
corporation (the "Transaction"). In connection with the Transaction, STR
Acquisition Sub assumed certain liabilities related to the Shuster Laboratories
division.
Under the terms of the Asset Purchase Agreement, dated as of August 27,
2002, among the Company, HTS, STR and STR Acquisition Sub (the "Purchase
Agreement"), the total consideration received for the Transaction was
$7,732,907.08 (the "Purchase Price"), of which (i) $7,000,000 was paid to the
Company in cash, (ii) $250,000 was heldback by STR Acquisition Sub and is
subject to a post-closing working capital adjustment (the "Holdback"), and (iii)
$482,907.08 was to be paid to the Company upon receipt of a certain receivable
by STR Acquisition Sub (the "Receivable"). The Purchase Price was determined by
arms-length negotiations between the Company and STR. The investment banking
firm of Peter J. Solomon Company Limited has provided a fairness opinion to the
board of directors of the Company with respect to the Purchase Price. At the
closing of the Transaction, the Company used $6,022,000 of the Purchase Price to
reduce outstanding indebtedness under its credit facility with Wells Fargo Bank,
N.A. ("Wells Fargo") and $978,000 to pay certain expenses of the Company
incurred in connection with the sale. On September 6, 2002, on behalf of the
Company, STR Acquisition Sub paid the Receivable to Wells Fargo, of which the
entire $482,907.08 was used to further reduce the Company's indebtedness. The
Company has agreed to pay Wells Fargo amounts, if any, received upon release of
the Holdback, which amounts will be used to further reduce its indebtedness. As
a result of the Transaction, the Company expects to record a loss of
approximately $854,000. Upon final determination of the post-closing working
capital, if all or a portion of the Holdback is received by the Company, the
loss will be reduced by the amount received. There is no material relationship
between either STR or STR Acquisition Sub and the Company or any of its
affiliates, any director or officer of the Company, or any associate of any such
director or officer.
The Shuster Laboratories division is engaged in the business of technical
and management consulting, product development, product evaluation and testing,
laboratory testing, laboratory affairs, auditing, consumer testing and sensory
research and claims substantiation to manufacturers and marketers of foods,
pharmaceuticals, dietary supplements, household and personal care products and
specialty industrial products.
The foregoing description of the Purchase Agreement is qualified in its
entirety by reference to such agreement, a copy of which has been filed as
Exhibit 2.1 to this Form 8-K and is incorporated herein by reference.
On August 28, 2002, the Company issued a press release relating to the
Transaction, a copy of which is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Proforma Financial Information.
The following Proforma Consolidated Financial Statements for the three
months ended June 30, 2002 and for the fiscal year ended March 31, 2002
give effect to the sale of certain assets and liabilities relating to the
Shuster Laboratories division of HTS to STR Acquisition Sub and the
subsequent payment of $6,022,000 of the proceeds from the sale to repay a
portion of the outstanding indebtedness under the Company's credit facility
with Wells Fargo Bank, N.A. and $978,000 to pay certain expenses of the
Company incurred in connection with the sale. The proforma adjustments are
based on available information and upon certain assumptions that the
Company believes are reasonable under the circumstances. The proforma
financial information should be read in conjunction with the March 31, 2002
Audited Consolidated Financial Statements of the Company and the June 30,
2002 Unaudited Consolidated Financial Statements of the Company.
The Proforma Consolidated Balance Sheet and Proforma Consolidated
Statements of Operations are necessarily based upon allocations,
assumptions and approximations and, therefore, do not reflect in precise
numerical terms the impact of the transaction on the historical financial
statements. In addition, such proforma statements should not be used as a
basis for forecasting the future operations of the Company.
The proforma adjustments made in the preparation of the Proforma
Consolidated Balance Sheet assume that the sale of certain assets and
liabilities of the Shuster Laboratories division of HTS had been
consummated at June 30, 2002, the end of the Company's most recent
quarterly period. The proforma adjustments related to the Proforma
Consolidated Statements of Operations for the three months ended June 30,
2002 and for the year ended March 31, 2002 assume that the sale of certain
assets and liabilities of the Shuster Laboratories division of HTS had been
consummated as of April 1, 2002 and 2001, respectively, the dates beginning
the Company's fiscal years.
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HAUSER, INC.
PROFORMA CONSOLIDATED BALANCE SHEET
June 30, 2002
(In thousands)
Pro Forma
June 30, June 30,
ASSETS 2002 Pro Forma Adjustments 2002
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(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 25 $7,000(2) $(7,000)(4) $ 25
Accounts receivable, less allowance
for doubtful accounts: $848 8,632 483(3) 9,115
Inventory, at lower of cost or market 7,005 7,005
Prepaid expenses and other 853 (364)(2) 489
Current assets of business held for
sale 2,879 (2,879)(1) -
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Total current assets 19,394 4,240 (7,000) 16,634
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PROPERTY AND EQUIPMENT, net: 7,995 - - 7,995
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OTHER ASSETS:
Deposits and other 494 494
Non-current assets of business held
for sale 4,772 (4,772)(1) -
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$32,655 $ (532) $(7,000) $25,123
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Checks outstanding $ 1,205 $ 1,205
Accounts payable 4,640 4,640
Current portion of long-term debt 15,467 (6,022)(4) 9,445
Note payable to related party 2,852 2,852
Accrued salaries and benefits 1,243 1,243
Customer deposits 297 297
Accrued exit costs 162 162
Amount due to related party 2,660 2,660
Other current liabilities 1,841 978(2) (978)(4) 1,841
Liabilities of business held for sale 948 (948)(1) -
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Total current liabilities 31,315 30 (7,000) 24,345
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STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
20,000,000 shares authorized;
shares issued and outstanding:
5,976,749 6 6
Additional paid-in capital 95,182 95,182
Warrants 1,133 1,133
Accumulated deficit (94,981) (562)(5) (95,543)
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1,340 (562) - 778
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$32,655 $(532) $(7,000) $25,123
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PROFORMA ADJUSTMENTS:
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(1) Adjustment to reflect Shuster held for sale assets and liabilities which would have transferred
to purchaser if sale had occurred June 30, 2002.
(2) Adjustment to reflect $7,000,000 cash proceeds of sale, of which $6,022,000 was used to
immediately repay debt to Wells Fargo, and $978,000 was used to pay accrued expenses resulting
from the sale transaction. Two additional amounts were retained in escrow, $482,907 which was
pending collection of an account receivable, and $250,000 subject to final accounting for
working capital sold. The account receivable for $482,907 was subsequently collected, and the
amount paid to Wells Fargo. Expenses related to the sale of Shuster totaling $364,000 were
previously incurred and recorded as prepaid expenses, and will be reflected as expense in the
period in which Shuster was sold.
(3) Adjustment to reflect account receivable of Shuster retained by the Company.
(4) Proceeds of sale were used to repay debt and expenses related to the sale.
(5) Proforma loss on sale of Shuster if sale had occurred on June 30, 2002.
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HAUSER, INC.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2002
(In thousands, except share amounts)
Actual Proforma
Three months ended Proforma Three months ended
June 30, 2002 Adjustments June 30, 2002
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REVENUES:
Dietary supplements $ 8,905 $ 8,905
Pharmaceutical and
functional food
ingredients 2,458 2,458
Technical services 2,018 2,018
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Total revenues 13,381 - 13,381
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COST OF REVENUES:
Dietary supplements 7,140 7,140
Pharmaceutical and
functional food
ingredients 2,106 2,106
Technical services 1,416 1,416
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Total cost of revenues 10,662 - 10,662
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GROSS PROFIT 2,719 - 2,719
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OPERATING EXPENSES:
New product development 469 469
Sales and marketing 611 611
General and administrative 1,457 1,457
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Total operating expenses 2,537 - 2,537
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INCOME (LOSS) FROM OPERATIONS 182 - 182
INTEREST EXPENSE (568) 108 (1) (460)
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LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAX BENEFIT (386) 108 (278)
INCOME TAX BENEFIT 201 (201) (2) -
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LOSS FROM CONTINUING OPERATIONS (185) (93) (278)
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INCOME (LOSS) PER SHARE FROM
CONTINUING OPERATIONS, BASIC
AND DILUTED $ (0.03) $ (0.05)
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WEIGHTED AVERAGE SHARES
OUTSTANDING 5,957,339 5,957,339
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PROFORMA ADJUSTMENTS:
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(1) Adjustment to reflect interest savings which would have been realized if sale of
Shuster had occurred April 1, 2002 and proceeds had been used to repay debt.
(2) The income tax benefit in continuing operations which is being eliminated by this
proforma adjustment was realized due to the income of the discontinued operation. In
excluding the income of the discontinued operation on a proforma basis, the benefit
also is to be eliminated.
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HAUSER, INC.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2002
(In thousands, except share amounts)
Actual,
Showing
Actual, as Discontinued
Reported Operations Pro Forma
Year Ended Discontinued Year Ended Year Ended
March 31, Operations March 31, Pro Forma March 31,
2002 (1) 2002 Adjustments 2002
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REVENUES:
Dietary Supplements $ 32,059 $ - $ 32,059 $ 32,059
Pharmaceutical and
functional food
ingredients 6,375 - 6,375 6,375
Technical services 19,188 (10,379) 8,809 8,809
Other - - - -
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Total revenues 57,622 (10,379) 47,243 - 47,243
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COST OF REVENUES:
Dietary Supplements 24,707 - 24,707 24,707
Pharmaceutical and
functional food
ingredients 5,320 - 5,320 5,320
Technical services 14,402 (7,852) 6,550 6,550
Write-down of inventory 212 - 212 212
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Total cost of revenues 44,641 (7,852) 36,789 36,789
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GROSS PROFIT (LOSS) 12,981 (2,527) 10,454 - 10,454
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OPERATING EXPENSES:
New product development 2,580 - 2,580 2,580
Sales and marketing 3,374 (728) 2,646 2,646
General and
administrative 8,319 (1,403) 6,916 6,916
Restructuring charge 2,884 - 2,884 2,884
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Total operating expenses 17,157 (2,131) 15,026 - 15,026
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LOSS FROM OPERATIONS (4,176) (396) (4,572) - (4,572)
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OTHER INCOME (EXPENSE):
Interest and other income 12 (12) - -
Interest expense (1,653) 376 (1,277) 448(2) (829)
Gain from sale of assets 309 - 309 - 309
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Total other (expense) (1,332) 364 (968) 448 (520)
income
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LOSS FROM CONTINUING
OPERATIONS BEFORE INCOME
TAX BENEFIT (5,508) (32) (5,540) 448 (5,092)
INCOME TAX BENEFIT (103) - (103) - (103)
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LOSS FROM CONTINUING
OPERATIONS (5,405) (32) (5,437) 448 (4,989)
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INCOME (LOSS) PER SHARE
FROM CONTINUING
OPERATIONS, BASIC AND
DILUTED (0.96) (0.96) (0.88)
================ =============== ===============
WEIGHTED AVERAGE SHARES
OUTSTANDING BASIC AND
DILUTED 5,637,735 5,637,735 5,637,735
================ =============== ===============
PROFORMA ADJUSTMENTS:
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(1) Subsequent to March 31, 2002 the Company adopted SFAS 144, which required the results of Shuster to be shown as
discontinued operations during the three months ended June 30, 2002, as the Company adopted a formal plan of disposal
during that period. Accordingly, the results for the year ended March 31, 2002 have been restated to reflect Shuster as
a discontinued operation.
(2) Adjustment to reflect interest savings which would have been realized if sale of Shuster had occurred April 1, 2001 and
proceeds had been used to repay debt.
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(c) Exhibits.
2.1 Asset Purchase Agreement, dated August 27, 2002, among Hauser,
Inc., Hauser Technical Services, Inc., Specialized Technology
Resources, Inc. and STR Acquisition Sub, Inc.*
The following exhibits and schedules to the Asset Purchase
Agreement have been omitted:
Exhibit A-1 - Katz Employment Agreement
Exhibit A-2 - Damon Employment Agreement
Exhibit B - Form of Assignment and Assumption of
Lease
Exhibit C - Form of Bill of Sale, Assignment and
Assumption Agreement
Exhibit D - Form of Intellectual Property Assignment
Exhibit E - Form of Opinion of Willkie Farr &
Gallagher
Schedule 1.2(b) - Fixed Assets and Equipment
Schedule 1.2(c)(i)(A) - Technology
Schedule 1.2(c)(i)(B) - Trademark Rights
Schedule 1.2(c)(i)(C) - Copyright Rights
Schedule 1.2(c)(i)(D) - Internet Rights
Schedule 1.2(f) - Information Systems
Schedule 1.4 - Accrued Commissions and Other Liabilities
Schedule 3.3 - Governmental Approvals; Consents
Schedule 3.4 - Financial Statements
Schedule 3.5 - Absence of Changes
Schedule 3.6(b) - Leased Real Property
Schedule 3.7 - Contracts
Schedule 3.9 - Intangible Property Rights
Schedule 3.10 - Insurance
Schedule 3.12(b)(i) - Employee Benefit Plans
Schedule 3.12(c) - Employment Contracts
Schedule 3.13 - Licenses and Permits
Schedule 3.15 - Environmental Matters
Schedule 3.16 - Accounts Receivable
Schedule 3.17 - Accounts Payable
Schedule 3.18 - Sufficiency of Assets
Schedule 3.19 - Condition of Facilities
Schedule 4.3 - Government Approvals; Consents
Schedule 5.6(c)(i) - Offers of Employment
Schedule 11.13(a)(iv) - Certain Officers and Employees
Knowledge
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* Pursuant to Rule 601(b)(2) of Regulation S-K, certain exhibits and
schedules have been omitted from this filing. The Company agrees to
furnish supplementally a copy of any omitted exhibit or schedule to the
Securities and Exchange Commission upon request.
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99.1 Press Release, dated August 28, 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HAUSER, INC.
Dated: September 11, 2002 By: /s/ Kenneth C. Cleveland
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Name: Kenneth C. Cleveland
Title: President and Chief
Executive Officer
Exhibit Index
Exhibit No. Description
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2.1 Asset Purchase Agreement, dated August 27, 2002, among Hauser,
Inc., Hauser Technical Services, Inc., Specialized Technology
Resources, Inc. and STR Acquisition Sub, Inc.*
99.1 Press Release, dated August 28, 2002.
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* Pursuant to Rule 601(b)(2) of Regulation S-K, certain exhibits and
schedules have been omitted from this filing. The Company agrees to
furnish supplementally a copy of any omitted exhibit or schedule to the
Securities and Exchange Commission upon request.