<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Form 10-QSB of Pure World, Inc. for the nine months ended September 30, 1996 and
is qualified to its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000356446
<NAME> PURE WORLD, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,537
<SECURITIES> 15
<RECEIVABLES> 887
<ALLOWANCES> 86
<INVENTORY> 2,177
<CURRENT-ASSETS> 11,855
<PP&E> 1,855
<DEPRECIATION> 313
<TOTAL-ASSETS> 18,413
<CURRENT-LIABILITIES> 2,158
<BONDS> 0
0
0
<COMMON> 76
<OTHER-SE> 16,179
<TOTAL-LIABILITY-AND-EQUITY> 18,413
<SALES> 4,784
<TOTAL-REVENUES> 5,493
<CGS> 2,965
<TOTAL-COSTS> 6,316
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> (831)
<INCOME-TAX> 1
<INCOME-CONTINUING> (832)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (832)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No.: 0-10566
Pure World, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 95-3419191
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
376 Main Street, Bedminster, New Jersey 07921
(Address of principal executive offices)
(908) 234-9220
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
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 issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No _____
State the number of shares outstanding of each of the issuer's classes of
common stock: As of October 31, 1996, the issuer had 7,644,387 shares of its
common stock, par value $.01 per share, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
<TABLE>
<CAPTION>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(000 Omitted)
September 30,
1996
-------------
<S> <C>
ASSETS
Cash and cash equivalents $ 8,537
Trading securities 15
Accounts receivable, net of allowance
for uncollectible accounts and
returns and allowances of $86 801
Inventories, net 2,177
Other current assets 325
-------
Total current assets 11,855
-------
Securities available-for-sale 2,175
Furniture and equipment, net 1,542
Notes receivable from affiliates 535
Goodwill, net of accumulated
amortization of $154 1,261
Other assets 1,045
-------
Total assets $18,413
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 266
Accrued expenses and other liabilities 1,892
-------
Total current liabilities 2,158
-------
Stockholders' equity:
Common stock, par value $.01;
30,000,000 shares authorized;
7,644,691 shares issued and outstanding 76
Additional paid-in capital 43,663
Accumulated deficit ( 27,611)
Unrealized gains on securities
available-for-sale 127
-------
Total stockholders' equity 16,255
-------
Total liabilities and stockholders'
equity $18,413
=======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000 Omitted, except per share data)
Three Months Ended
September 30,
1996 1995
-----------------------
<S> <C> <C>
Revenues:
Sales $ 1,469 $ 1,360
Net gains on marketable securities 6 108
Interest, dividend and other income 125 186
------- -------
Total revenues 1,600 1,654
------- -------
Expenses:
Cost of goods sold 904 844
Personnel 475 326
Professional fees 199 234
Other 332 240
------- -------
Total expenses 1,910 1,644
------- -------
Income (loss) before income taxes ( 310) 10
Provision for income taxes - 2
------- -------
Net income (loss) ($ 310) $ 8
======= =======
Net income (loss) per share ($ .04) $ -
======= =======
Weighted average shares outstanding
(in 000's) 7,680 7,957
======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000 Omitted, except per share data)
Nine Months Ended
September 30,
1996 1995
-----------------------
<S> <C> <C>
Revenues:
Sales $ 4,784 $ 4,638
Net gains on marketable securities 315 250
Interest, dividend and other income 394 602
------- -------
Total revenues 5,493 5,490
------- -------
Expenses:
Cost of goods sold 2,965 2,811
Personnel 1,380 1,090
Professional fees 860 556
Other 1,119 820
------- -------
Total expenses 6,324 5,277
------- -------
Income (loss) before income taxes ( 831) 213
Provision for income taxes 1 47
------- -------
Net income (loss) ($ 832) $ 166
======= =======
Net income (loss) per share ($ .11) $ .02
======= =======
Weighted average shares outstanding
(in 000's) 7,697 7,752
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000 Omitted)
Nine Months Ended
September 30,
1996 1995
-----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($ 832) $ 166
Adjustments:
Depreciation and amortization 218 200
Net trading securities and
U.S. Treasury securities
transactions 1,900 ( 389)
Change in inventories ( 616) ( 262)
Change in receivables 33 ( 52)
Change in accounts payable
and other accruals ( 187) ( 898)
Other, net 33 60
------- -------
Net cash provided by (used
in) operating activities 549 ( 1,175)
------- -------
Cash flows from investing activities:
Purchase of a business less
cash acquired - ( 2,128)
Purchase of furniture and
equipment, net ( 277) ( 176)
Purchase of securities
available-for-sale ( 37) ( 227)
Repayment of loans to affiliates 92 50
Investment in Gaia Herbs, Inc. ( 1,010) -
Other, net ( 30) ( 86)
------- -------
Net cash used in investing
activities ( 1,262) ( 2,567)
------- -------
Cash flows from financing activities:
Repurchase of common stock ( 107) ( 31)
Other, net - ( 5)
------- -------
Net cash used in financing
activities ( 107) ( 36)
------- -------
Net decrease in cash and
cash equivalents ( 820) ( 3,778)
Cash and cash equivalents at
beginning of period 9,357 13,427
------- -------
Cash and cash equivalents at
end of period $ 8,537 $ 9,649
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PURE WORLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(Unaudited)
1. General
-------
The accompanying unaudited consolidated financial statements of Pure World,
Inc. and subsidiaries (the "Company") as of September 30, 1996 and for the three
and nine month periods ended September 30, 1996 and 1995 reflect all material
adjustments consisting of only normal recurring adjustments which, in the
opinion of management, are necessary for a fair presentation of results for the
interim periods. Certain information and footnote disclosures required under
generally accepted accounting principles have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. These consolidated financial statements should be read
in conjunction with the year-end consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995 as filed with the Securities and Exchange Commission.
The results of operations for the three and nine month periods ended
September 30, 1996 and 1995 are not necessarily indicative of the results to be
expected for the entire year or any other period.
2. Marketable Securities
---------------------
At September 30, 1996, marketable securities consisted of the following (in
000's):
<TABLE>
<CAPTION>
Gross Gross
Holding Holding Fair
Cost Gains Losses Value
--------- --------- --------- -------
<S> <C> <C> <C> <C>
Trading securities $ 15 $ - $ - $ 15
Securities available-
for-sale 2,048 302 175 2,175
------ ------ ------ ------
Total marketable
securities $2,063 $ 302 $ 175 $2,190
====== ====== ====== ======
</TABLE>
All marketable securities were investments in common stock. Substantially
all gains recorded in the three and nine month periods ended September 30, 1996
were realized.
<PAGE>
3. Inventories, Net
----------------
Inventories are comprised of the following (in 000's):
<TABLE>
<S> <C>
Raw materials $ 524
Work-in-process 103
Finished goods 1,550
------
Total inventories $2,177
======
</TABLE>
4. Other Assets
------------
In May 1996, the Company made an investment in non-voting common stock
representing 25% ownership of Gaia Herbs, Inc. ("Gaia") for approximately $1.0
million. Gaia manufactures and distributes natural products. Gaia is a
privately-held company and does not publish financial results.
The Company is accounting for this investment by the cost method. The cost
method is a method of accounting for an investment under which an investor
records an investment in the stock of an investee at cost, and recognizes as
income dividends received that are distributed from net accumulated earnings of
the investee since the date of acquisition by the investor. The net accumulated
earnings of an investee subsequent to the date of investment are recognized by
the investor only to the extent distributed by the investee as dividends.
Dividends received in excess of earnings subsequent to the date of investment
are considered a return of investment and are recorded as reductions of the cost
of the investment.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
At September 30, 1996, the Company had cash and cash equivalents of $8.5
million. Cash equivalents of $8.4 million consisted of U.S. Treasury bills with
an original maturity of less than three months and yields ranging between 5.02%
and 5.37%. The Company had net working capital of $9.7 million. The Management
of the Company believes that the Company's financial resources and anticipated
cash flows will be sufficient for future operations and possible acquisitions of
other operating businesses.
The Company repurchased 60,266 shares of its common stock during the
three-month period ended September 30, 1996 for an aggregate purchase of
approximately $107,000. No other shares were repurchased during the nine months
ended September 30, 1996. In 1995, the Company repurchased 21,192 shares at an
aggregate cost of $31,000 during the nine months ended September 30, 1995 with
none repurchased in the third quarter 1995. All shares repurchased have been
returned to the status of authorized but unissued.
Net cash of approximately $549,000 was provided by operations for the nine
months ended September 30, 1996, compared with the use of $1.2 million during
the same period in 1995. The principal reasons for the increase in net cash
flows from operations were the sale of trading securities and the change in
investment in U.S. Treasury securities with original maturities longer than
three months to securities with original maturities of less than three months.
This increase in net cash flows in the first nine months of 1996 was partially
offset by the growth in inventories of $616,000. The growth in inventories is
primarily attributable to the introduction of Kava Pure(TM) by the Company. Kava
Pure(TM) is available in powder and fluid extracts and "softgel" formula to the
wholesale market and in softgel capsules and fluid extract to the retail market.
Net cash of approximately $1.2 million was used in operations in the first
nine months of 1995. The payment of $.9 million to creditors of Madis
Botanicals, Inc. ("Madis")in connection with the Company's acquisition of an 83%
ownership interest in Madis and the increase in inventories of $.3 million were
the principal uses of cash in operating activities during this period.
<PAGE>
Results of Operations
- ---------------------
The Company's operations resulted in a net loss of $310,000, or $.04 per
share, for the three months ended September 30, 1996 compared to net income of
$8,000 for the comparable period in 1995. The net loss was $832,000 or $.11 per
share for the nine month period ended September 30, 1996 compared to net income
of $166,000 or $.02 per share for the comparable period in the prior year.
Madis had sales of $1.5 million and $4.8 million for the three and nine
months ended September 30, 1996, respectively, compared to $1.4 million and $4.6
million for the same periods in 1995. For the three and nine months ended
September 30, 1996, the cost of goods sold was $.9 million and $3.0 million,
respectively, compared to $.8 million and $2.8 million for the comparable
periods in 1995. Gross margin was $.6 million and $1.8 million for the three and
nine months ended September 30, 1996 which was comparable to the same periods in
1995.
For the three and nine months ended September 30, 1996, the Company
recorded net gains on marketable securities of $6,000 and $315,000,
respectively, compared to net gains of $108,000 and $250,000 for the same
periods in 1995. Substantially all of the gains recorded in 1996 were realized.
The changes in net gains on marketable securities from 1996 to 1995 were due to
changes in portfolio composition and general market conditions.
Interest, dividend and other income was $125,000 and $394,000 for the three
and nine months ended September 30, 1996, respectively, compared to $186,000 and
$602,000 for the three and nine months ended September 30, 1995. Interest income
was $388,000 during the nine month periods ended September 30, 1996, a decrease
of $100,000 from the $488,000 recorded in the comparable period of 1995. This
decrease was due to lower average interest rates on the Company's cash
equivalents and U.S. Treasury securities and lower invested balances. Dividend
income for the nine month periods ended September 30, 1996 and 1995 was $3,000
and $108,000, respectively. The decrease in dividends was due to a change in
portfolio composition. All other income decreased from $6,000 in the nine months
ended September 30, 1995 to $3,000 for the same period in 1996.
Personnel expenses were $475,000 and $1,380,000 during the three and nine
months ended September 30, 1996, respectively, compared to $326,000 and
$1,090,000 in the comparable periods in 1995. This increase was predominantly
due to an increase in sales and laboratory personnel at Madis. Professional fees
were $199,000 and $860,000 during the three and nine month periods in 1996,
compared to $234,000 and $556,000 in the three and nine month periods in 1995.
The professional fees in 1996 were incurred primarily to conduct litigation to
protect the Company's investment in a real estate investment trust and
consulting fees associated with new product introduction ("KavaPure(TM")).
<PAGE>
Other expenses were $332,000 and $1,119,000 for the three and nine month
periods ended September 30, 1996 compared to $240,000 and $820,000 for the same
periods in 1995. General office expenses increased by $116,000, travel related
expenses increased by $114,000 and advertising expenses increased by $92,000 in
the nine month period ended September 30, 1996 compared to the same period in
1995. These increases were primarily due to the introduction of a new product,
KavaPure(TM), and other sales efforts including advertising and the above
mentioned litigation. All other expenses had a net decrease of $23,000 in the
first nine months of 1996 compared to the first nine months of 1995.
New Accounting Standards
- ------------------------
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") was issued in October 1995 and was
effective January 1, 1996. SFAS No. 123 requires entities that have employee
stock option plans to estimate the value of grants awarded to employees and
disclose in a pro forma footnote the impact on the entities' earnings per shares
as if the estimated option value were expensed over the vesting period of the
same.
The Company has granted to key employees and directors options to buy
shares of the Company's common stock at the current market value of the stock at
the date of grant. Since SFAS No. 123 only requires additional disclosure of the
cost of stock options, implementation will not have a material impact on the
Company's results of operations.
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 4. - Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The Company held its Annual Meeting of Stockholders on October 28,
1996. All nominees to the Company's Board of Directors were elected.
The following is a vote tabulation for all nominees:
<TABLE>
For Withheld
--------- --------
<S> <C> <C>
Paul O. Koether 6,376,019 45,858
Mark W. Jaindl 6,376,178 45,699
William Mahomes, Jr. 6,376,163 45,714
Alfredo Mena 6,376,163 45,714
</TABLE>
Item 6. - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
27. Financial Data Schedule for the nine months ended September 30, 1996.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter for which this
report is being filed.
<PAGE>
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.
PURE WORLD, INC.
Dated: November 14, 1996 By: /s/ Mark Koscinski
----------------------------------
Mark Koscinski
Senior Vice President and
Principal Accounting Officer
