<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-QSB
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
CVF CORP.
(Exact name of small business issuer as specified in its charter)
NEVADA 0-29266 87-0429335
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation or organization) Number) Identification No.)
300 INTERNATIONAL DRIVE, SUITE 100
WILLIAMSVILLE, NEW YORK 14221
(716) 626-3044
(Address, including zip code, and telephone number,
including area code, of issuer's principal executive offices)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 August 11, 1997, there were 5,771,449 shares of common stock, $0.001
par value per share, of the issuer outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
Page 1 of 10 Pages
<PAGE> 2
CVF CORP. AND SUBSIDIARIES
--------------------------
(FORMERLY WESTERN GROWTH CORPORATION)
-------------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
(UNAUDITED)
-----------
June 30, 1997
-------------
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 14,483,703
Accounts receivable 335,735
Inventory 245,635
Prepaid expenses and other 400,787
------------
TOTAL CURRENT ASSETS 15,465,860
PROPERTY AND EQUIPMENT, net of accumulated depreciation 144,427
HOLDINGS 2,666,334
SECURITIES AVAILABLE FOR SALE, at market 1,484,619
GOODWILL, net of accumulated amortization 1,795,689
------------
$ 21,556,929
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,195,137
Bank debt 736,702
Due to related parties 63,135
Accrued income taxes 3,654,456
------------
TOTAL CURRENT LIABILITIES 5,649,430
------------
LONG TERM DEBT 451,569
DEFERRED INCOME TAXES 564,290
MINORITY INTEREST 292,000
REDEEMABLE PREFERRED STOCK 456,250
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value, authorized 50,000,000 shares,
issued 5,992,349 shares, outstanding 5,959,449 shares and 168,900 shares in treasury 5,992
Additional paid in capital 12,930,787
Treasury stock (1,188,591)
Translation adjustment (277,413)
Unrealized gain on available for sale securities 846,441
Retained earnings 1,826,174
------------
TOTAL STOCKHOLDERS' EQUITY 14,143,390
------------
$ 21,556,929
============
</TABLE>
See notes to consolidated financial statements
Page 2 of 10 Pages
<PAGE> 3
CVF CORP. AND SUBSIDIARIES
--------------------------
(FORMERLY WESTERN GROWTH CORPORATION)
-------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES $ 293,386 $ 516,349 $ 555,241 $ 1,004,506
COST OF SALES 52,282 367,567 137,950 664,770
------------ ------------ ------------ ------------
GROSS PROFIT 241,104 148,782 417,291 339,736
------------ ------------ ------------ ------------
EXPENSES:
Selling, general and administrative 751,124 752,181 1,555,670 1,480,656
Research and development 340 17,440 11,919 30,092
------------ ------------ ------------ ------------
TOTAL EXPENSES 751,464 769,621 1,567,589 1,510,748
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS (510,360) (620,839) (1,150,298) (1,171,012)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES):
Interest income (expense), net 91,152 (41,822) 171,763 (27,417)
Other income (expense), net (62,061) 145,989 134,838 157,262
Income (loss) from equity affiliates 205,664 (207,562) 39,884 (350,601)
Gain (loss) on sale of investments 171,798 -- 18,332,223 --
Minority interest -- (77) -- --
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSES) 406,553 (103,472) 18,678,708 (220,756)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION (BENEFIT)
FOR INCOME TAXES (103,807) (724,311) 17,528,410 (1,391,768)
Provision (benefit) for income taxes (605,460) -- 6,689,430 1,168
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 501,653 $ (724,311) $ 10,838,980 $ (1,392,936)
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE $ 0.08 $ (0.12) $ 1.83 $ (0.23)
============ ============ ============ ============
WEIGHTED SHARES USED IN COMPUTATION 5,928,889 5,992,349 5,928,889 5,992,349
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
Page 3 of 10 Pages
<PAGE> 4
CVF CORP. AND SUBSIDIARIES
--------------------------
(FORMERLY WESTERN GROWTH CORPORATION)
-------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ 10,838,980 $ (1,392,936)
------------ ------------
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Depreciation and amortization 140,081 116,373
(Income) loss from equity affiliates (39,884) 350,601
Gain on sale of investments (18,332,223) --
Minority interest in earnings (losses) of subsidiaries -- (77)
Changes in operating assets and liabilities :
(Increase) decrease in accounts receivable 174,554 (8,707)
(Increase) decrease in inventory (20,426) 14,091
(Increase) decrease in prepaid expenses and other (328,677) (122,997)
(Increase) decrease in other assets -- 22,086
Increase (decrease) in accounts payable and accrued expenses (272,663) (77,462)
Increase (decrease) in income taxes payable 2,761,666 --
------------ ------------
(15,917,572) 293,908
------------ ------------
CASH PROVIDED (USED) IN OPERATING ACTIVITIES (5,078,592) (1,099,028)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment -- (89,780)
Investments in and advances to equity affiliates (724,189) (241,089)
Repayment of advances by equity affiliates 321,200 --
Proceeds from sale of investments 19,097,838 --
------------ ------------
CASH PROVIDED (USED) IN INVESTING ACTIVITIES 18,694,849 (330,869)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) of debt 42,615 861,905
Borrowings (payments) of debt to related parties 63,135 273,862
Purchase of treasury stock (1,133,580) --
------------ ------------
CASH PROVIDED (USED) IN FINANCING ACTIVITIES (1,027,830) 1,135,767
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS -- --
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12,588,427 (294,130)
CASH AND CASH EQUIVALENTS - beginning of period 1,895,276 445,515
------------ ------------
CASH AND CASH EQUIVALENTS - end of period $ 14,483,703 $ 151,385
============ ============
</TABLE>
See notes to consolidated financial statements
Page 4 of 10 Pages
<PAGE> 5
CVF CORP. AND SUBSIDIARIES
--------------------------
(FORMERLY WESTERN GROWTH CORPORATION)
-------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SIX MONTHS ENDED JUNE 30, 1997
------------------------------
(UNAUDITED)
-----------
1. BASIS OF PRESENTATION
---------------------
The accompanying financial statements are unaudited, but
reflect all adjustments which, in the opinion of management, are
necessary for a fair presentation of financial position and the results
of operations for the interim periods presented. All such adjustments
are of normal and recurring nature. The results of operations for any
interim period are not necessarily indicative of the results attainable
for a full fiscal year.
2. INCOME (LOSS) PER SHARE
-----------------------
Per share information is computed based on the weighted
average number of shares outstanding during the period with net income
(loss) reduced by cumulative preferred stock dividends.
3. INVESTMENTS
-----------
The following table gives certain summarized financial
information related to the Company's equity basis holdings:
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------
1997 1996
-------------------------
<S> <C> <C>
Net sales $ 876,183 $ 625,525
Gross profit on sales 28,208 178,089
Income (loss) from continuing
operations 1,481,996 (1,056,844)
Net income (loss) 1,481,996 (1,056,844)
</TABLE>
Page 5 of 10 Pages
<PAGE> 6
4. INTERIM FINANCIAL STATEMENT DISCLOSURES
---------------------------------------
Certain information and footnote disclosures normally included
in financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted from the
accompanying unaudited interim financial statements. Reference is to
the Company's audited financial statements for the year ended December
31, 1996 included in the Company's Registration Statement on Form
10-SB/A filed with the Securities and Exchange Commission on May 30,
1997.
5. INCOME TAX EXPENSE (BENEFIT)
----------------------------
The Company recorded an income tax benefit in the second
quarter of 1997 related to the exercise of Non-Qualified Options by
certain officers.
Page 6 of 10 Pages
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
----------------------
Results of Operations.
Six months ended June 30, 1997 compared to June 30, 1996.
In the first six months of 1997 the Company recorded a net
profit of $10,838,980 as compared to a loss of $1,392,936 in the
comparable period of 1996.
The six month results were principally impacted by the sale of
all but 65,605 shares of its position in Certicom, one of its
investments. This sale created a pre-tax gain of $18,332,223. There
were no similar sales of securities in 1996. Additionally, the half
year results were affected by an operating loss of $1,150,298 after a
fall in revenues of $449,265 as compared to the previous year and an
increase of $75,014 in selling, general and administrative expenses.
The fall in revenues is attributable to a reduction in sales at one
subsidiary offset by sales increases at the other subsidiaries. CVF
Corp., on an unconsolidated basis, has no sales from operations.
Sales and gross profit from sales reflect the operations of the
Company's consolidated subsidiaries only. These subsidiaries include
Biorem, Petrozyme, Gemprint, Solaria and Canadian Venture Founders
Leasing. Entities that are not consolidated include Ecoval, Dantec
and Turbotak.
Liquidity and Capital Resources.
At June 30, 1997 the Company recorded stockholder's equity of
$14,143,390 as compared to $17,431,780 at December 31, 1996. This
decrease of $3,288,390 was primarily attributable to several factors:
(1) the Company expended $1,133,580 on the purchase of treasury
stock; (2) there was a loss from operations of $1,150,298 offset by
interest income, other income and income from equity affiliates
totalling $346,485; and (3) the sum of the after tax gain on the
Certicom sale plus the unrealized gain at June 30, 1997 was less than
the unrealized gain on such shares at December 31, 1996 by
$1,350,826. The current ratio of the Company at June 30, 1997 was 2.7
to 1 as compared to .88 to 1 at December 31, 1996. The principal
reason for this improvement was the cash proceeds from the Certicom
sale offset by the resulting accrued tax liability.
Page 7 of 10 Pages
<PAGE> 8
The Company experienced a net increase in cash and cash
equivalents of $12,588,427 at June 30, 1997 compared to a decrease in
cash of $294,130 in the same period of 1996. The principal reason for
the increase was the sale of the Certicom shares resulting in gross
proceeds of $19,097,838 before provision for taxes. There were no
sales of securities in the period ended June 30, 1996.
Page 8 of 10 Pages
<PAGE> 9
PART II - OTHER INFORMATION
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.
(27) Financial Data Schedule.
Page 9 of 10 Pages
<PAGE> 10
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DATED: August 14, 1997
CVF CORP.
By: /s/ Jeffrey Dreben
----------------------------------------
Name: Jeffrey Dreben
Title: Chairman of the Board, President
and Chief Executive Officer
By: /s/ Robert Nally
----------------------------------------
Name: Robert Nally
Title: Secretary and Treasurer
Page 10 of 10 Pages
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 14,483,703
<SECURITIES> 0
<RECEIVABLES> 335,735
<ALLOWANCES> 0
<INVENTORY> 245,635
<CURRENT-ASSETS> 15,465,860
<PP&E> 498,967
<DEPRECIATION> 354,540
<TOTAL-ASSETS> 21,556,929
<CURRENT-LIABILITIES> 5,649,430
<BONDS> 451,569
<COMMON> 5,992
456,250
0
<OTHER-SE> 14,137,398
<TOTAL-LIABILITY-AND-EQUITY> 21,556,929
<SALES> 555,241
<TOTAL-REVENUES> 555,241
<CGS> 137,950
<TOTAL-COSTS> 137,950
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17,528,410
<INCOME-TAX> 6,689,430
<INCOME-CONTINUING> 10,838,980
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,838,980
<EPS-PRIMARY> 1.83
<EPS-DILUTED> 1.83
</TABLE>
