<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Form 10-QSB of Pure World, Inc. for the quarter ended June 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000356446
<NAME> PURE WORLD, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,890
<SECURITIES> 0
<RECEIVABLES> 1,485
<ALLOWANCES> 129
<INVENTORY> 2,794
<CURRENT-ASSETS> 14,430
<PP&E> 2,220
<DEPRECIATION> 564
<TOTAL-ASSETS> 20,961
<CURRENT-LIABILITIES> 2,249
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 18,637
<TOTAL-LIABILITY-AND-EQUITY> 20,961
<SALES> 5,079
<TOTAL-REVENUES> 6,066
<CGS> 2,748
<TOTAL-COSTS> 4,810
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 1,249
<INCOME-TAX> 82
<INCOME-CONTINUING> 1,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,167
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</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: June 30, 1997
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)
N/A
(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 July 31, 1997, the issuer had 7,505,297 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>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
($000 Omitted)
<CAPTION>
June 30,
1997
--------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,890
Accounts receivable, net of
allowance for uncollectible
accounts and returns and
allowances of $129 1,356
Inventories, net 2,794
Other 390
-------
Total current assets 14,430
-------
Securities available-for-sale 1,637
Investment in unaffiliated
natural products company 1,510
Furniture and equipment, net 1,656
Notes receivable from affiliates 532
Goodwill, net of accumulated
amortization of $225 1,190
Other assets 6
-------
Total assets $20,961
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 510
Accrued expenses 1,739
-------
Total current liabilities 2,249
-------
Stockholders' equity:
Common stock, par value $.01;
30,000,000 shares authorized;
7,505,297 shares outstanding 75
Additional paid-in capital 43,287
Accumulated deficit ( 25,383)
Unrealized gains on securities
available-for-sale 733
-------
Total stockholders' equity 18,712
-------
Total liabilities and
stockholders' equity $20,961
=======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($000 Omitted, except per share data)
<CAPTION>
Three Months Ended
June 30,
---------------------------
1997 1996
---------- ----------
<S>
<C> <C>
Revenues:
Sales $ 2,656 $ 1,702
Net gains on marketable securities 178 17
Interest and dividends 140 124
Other income 221 2
------- -------
Total revenues 3,195 1,845
------- -------
Expenses:
Cost of goods sold 1,491 1,063
Personnel 488 467
Professional fees 104 280
Other 410 387
------- -------
Total expenses 2,493 2,197
------- -------
Income (loss) before income taxes 702 ( 352)
Provision for income taxes 40 -
------- -------
Net income (loss) $ 662 ($ 352)
======= =======
Net income (loss) per share $ .09 ($ .05)
======= =======
Weighted average shares outstanding
(in 000's) 7,514 7,705
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($000 Omitted, except per share data)
<CAPTION>
Six Months Ended
June 30,
-------------------------
1997 1996
--------- ---------
<S> <C> <C>
Revenues:
Sales $ 5,079 $ 3,315
Net gains on marketable securities 249 309
Interest and dividends 277 266
Other income 461 3
------- -------
Total revenues 6,066 3,893
------- -------
Expenses:
Cost of goods sold 2,748 2,061
Personnel 985 905
Professional fees 221 661
Other 863 787
------- -------
Total expenses 4,817 4,414
------- -------
Income (loss) before income taxes 1,249 ( 521)
Provision for income taxes 82 1
------- -------
Net income (loss) $ 1,167 ($ 522)
======= =======
Net income (loss) per share $ .15 ($ .07)
======= =======
Weighted average shares outstanding
(in 000's) 7,562 7,705
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($000 Omitted)
<CAPTION>
Six Months Ended
June 30,
------------------------
1997 1996
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,167 ($ 522)
Adjustments:
Depreciation and amortization 210 148
Net trading securities
transactions 1 1,776
Gain on sale of securities
available-for-sale ( 244) -
Change in inventories ( 804) ( 458)
Change in receivables ( 277) ( 93)
Change in accounts payable and
other accruals 123 ( 196)
Other, net ( 24) 7
------- -------
Net cash provided by
operating activities 152 662
------- -------
Cash flows from investing activities:
Purchase of furniture and
equipment, net ( 309) ( 226)
Proceeds from sale of securities
available-for-sale 374 -
Purchase of securities
available-for-sale ( 469) -
Repayment of loans to affiliates 71 79
Investment in unaffiliated
natural products company ( 500) ( 1,010)
Other, net 15 ( 8)
------- -------
Net cash used in investing
activities ( 818) ( 1,165)
------- -------
Cash flows from financing activities:
Repurchase of common stock ( 357) -
Other, net 48 -
------- -------
Net cash used in financing
activities ( 309) -
------- -------
Net decrease in cash and cash
equivalents ( 975) ( 503)
Cash and cash equivalents at beginning
of period 10,865 9,357
------- -------
Cash and cash equivalents at end of
period $ 9,890 $ 8,854
======= =======
Supplemental disclosure for cash
flow information:
Cash paid for:
Interest expense $ 7 $ 5
======= =======
Taxes $ 87 $ 15
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PURE WORLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(Unaudited)
1. General
-------
The accompanying unaudited consolidated financial statements of Pure
World, Inc. and subsidiaries (the "Company") as of June 30, 1997 and
for the three and six month periods ended June 30, 1997 and 1996
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, 1996 as filed
with the Securities and Exchange Commission.
The results of operations for the three and six month periods ended
June 30, 1997 and 1996 are not necessarily indicative of the results to
be expected for the entire year or any other period.
2. Inventories
-----------
Inventories are comprised of the following (in $000's):
<TABLE>
<S> <C>
Raw materials $ 876
Work-in-process 259
Finished goods 1,659
-------
Total inventories, net $ 2,794
=======
</TABLE>
3. Securities Available-For-Sale
-----------------------------
At June 30, 1997, securities available-for-sale were as follows (in
000's):
<TABLE>
<S> <C>
Cost $ 904
Gross holding gains 733
-------
Fair value of securities
available-for-sale $ 1,637
=======
</TABLE>
<PAGE>
4. Investment in Unaffiliated Natural Products Company
---------------------------------------------------
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. In June 1997, the Company made an
additional investment of $500,000, increasing its equity ownership to
35% of Gaia's outstanding shares of common stock. The Company also
loaned Gaia $200,000 in July 1997 payable interest only on a quarterly
basis for the first three years and 36 monthly payments of principal
and interest thereafter. The loan bears interest at 6.49% which is the
imputed rate currently required under the Internal Revenue Code.
Gaia manufactures and distributes fluid botanical extracts for the
high-end consumer market. Gaia is a privately held company and does not
publish financial results. The Company is accounting for this
investment by the cost method.
5. Net Income (Loss) Per Common Share
----------------------------------
Net income (loss) per common share is based on the weighted average
number of outstanding shares adjusted for the assumed conversion of
shares issuable upon exercise of stock options where appropriate.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
---------------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
At June 30, 1997, the Company had cash and cash equivalents of
approximately $9.9 million. Cash equivalents of $9.7 million consisted
of U.S. Treasury bills with an original maturity of less than three
months and yields ranging between 5.03% and 5.32%. The Company had net
working capital of $12.2 million at June 30, 1997. 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.
Net cash of $152,000 and $662,000 was provided by operations for the
six months ended June 30, 1997 and 1996, respectively. The increases in
inventory and accounts receivable are a result of the increase in sales
in 1997 as the inventory and accounts receivable turnover in the six
months ended June 30, 1997 remained relatively consistent with the
inventory and accounts receivable turnover in the comparable period in
1996. Depreciation and amortization increased in 1997 compared to 1996
due to the continued additions to and enhancements of laboratory and
production equipment. The net cash flows from operations in 1996 were
generated primarily by the sale of marketable securities and the change
in investment in U.S. Treasury Securities to treasury securities with
maturities of less than three months which are considered cash
equivalents.
In the second quarter of 1997, the Company made an additional
investment of $500,000 in Gaia Herbs, Inc. ("Gaia"), an unaffiliated
manufacturer and distributor of fluid botanical extracts for the
high-end consumer market. Gaia is a privately held company which does
not publish financial results. The Company, which now owns 35% of
Gaia's outstanding shares, accounts for its investment by the cost
method since its shares are non-voting. The Company also loaned Gaia
$200,000 in July 1997 payable interest only on a quarterly basis for
the first three years and 36 monthly payments of principal and interest
thereafter. The loan bears interest at 6.49% which is the imputed
rate currently required under the Internal Revenue Code.
<PAGE>
Results of Operations
- ---------------------
The Company's operations resulted in net income of $662,000, or $.09
per share, for the three months ended June 30, 1997 compared to a net
loss of $352,000, or $.05 per share, for the comparable period in 1996.
Net income was $1,167,000, or $.15 per share for the six month period
ended June 30, 1997, compared to a net loss of $522,000, or $.07 per
share, for the comparable period in the prior year.
The Company, through its majority-owned subsidiary, Madis Botanicals,
Inc. ("Madis") and its wholly-owned subsidiary, Pure World Botanicals,
Inc., had sales of $2.7 million for the quarter ended June 30, 1997,
compared to sales of $1.7 million for the comparable quarter of 1996,
an increase of $1.0 million, or 56%. For the six month period ended
June 30, 1997, sales were $5.1 million compared to $3.3 million for the
comparable period in 1996, an increase of $1.8 million, or 53%. The
growth in sales is a result of the Company's sales and marketing
efforts which increased the demand for many of the Company's products.
Additionally, the introduction of new standardized products such as St.
John's Wort, citrus pectin, olive leaf extract and KavaPure(R) had a
positive impact on sales.
For the three and six month periods ended June 30, 1997, the gross
margin (sales less cost of goods sold) was $1.2 million, or 43.9% of
sales and $2.3 million, or 45.9% of sales, respectively. This compares
to a gross margin of $639,000, or 37.5% of sales and $1.3 million, or
37.8% of sales for the quarter and six month periods ended June 30,
1996, respectively. The increase in gross margin in 1997 compared to
1996 was primarily due to a change in the sales mix.
For the three and six month periods ended June 30, 1997, the Company
recorded net gains on marketable securities of $178,000 and $249,000,
respectively, compared to $17,000 and $309,000 for the same periods in
1996. Substantially all of the gains recorded in 1997 were realized.
The changes in net gains on marketable securities from 1996 to 1997
were due to changes in portfolio composition and general market
conditions.
<PAGE>
Interest and dividend income was $140,000 and $277,000 for the three
and six months ended June 30, 1997, respectively, compared to $124,000
and $266,000 for the three and six months ended June 30, 1996. Interest
income was $277,000 during the six month period ended June 30, 1997, an
increase of $14,000 from the $263,000 recorded in the comparable period
of 1996. This increase was due primarily to higher invested balances.
Dividend income for the six-month period ended June 30, 1997 was zero
compared to $3,000 for the comparable period in 1996.
Other income was $221,000 and $461,000 for the quarter and six months
ended June 30, 1997, respectively, compared to $2,000 and $3,000 for
the comparable periods in 1996. Other income in 1997 was cash received
in connection with the sale of a prior business in 1994. This income is
being recorded on a cash basis. In 1996, other income consisted of
revenue from the sale of unneeded equipment at Madis.
Personnel expenses were $488,000 and $985,000 during the three and six
months ended June 30, 1997 compared to $467,000 and $905,000 in the
comparable periods in 1996. An increase in management and laboratory
personnel as well as merit salary increases accounted for these
increases. Professional fees, consisting of legal, accounting and
consulting fees were $104,000 and $221,000 during the three and six
month periods in 1997, compared to $280,000 and $661,000 in the three
and six month periods in 1996. Legal fees decreased due to settlement
in 1996 of litigations in which the Company was involved. Consulting
fees, incurred principally in product development, also decreased.
Other expenses were $410,000 and $863,000 for the three and six month
periods ended June 30, 1997, compared to $387,000 and $787,000 for the
same periods in 1996. Increased sales expenses, including advertising
and travel and entertainment, depreciation expense and minority
interest in the earnings of Madis were the primary reasons for the
increased expenses in 1997 compared to 1996.
New Accounting Standards
- ------------------------
The Financial Accounting Standards Board ("FASB") has issued Statement
No. 128 "Earnings Per Share ("EPS")" which becomes effective for
periods ending after December 15, 1997. This statement requires
restatement of all prior period EPS data presented and simplifies the
standards for computing earnings per share previously found in APB
Opinion No. 15 and makes them comparable to international EPS
standards. It replaces the presentation of primary EPS with the
presentation of basic EPS and requires dual presentation of diluted
EPS on the face of the income statement for all entities with complex
capital structures.
<PAGE>
Basic EPS excludes dilution and is computed by dividing net income
available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15. The EPS
reported in this Form 10-QSB is equivalent to diluted EPS under FASB
No. 128.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 129 "Disclosure of Information about Capital Structure"
which establishes standards for disclosing information about an
entity's capital structure. The Company does not expect the adoption
of this standard to have a material impact on earnings per share
as compared to primary earnings per share as reported herein.
In June 1997, the Financial Accounting Standards Board issued Statement
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" which will be effective for the Company beginning
January 1, 1998. Statement No. 131 redefines how operating segments
are determined and requires expanded quantitative and qualitative
disclosures relating to a company's operating segments. The Company
has not yet completed its analysis of which operating segments it will
report on.
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 6. - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
27. Financial Data Schedule for the six months ended June 30,
1997.
(b) Reports on Form 8-K
On July 9, 1997, the Company filed a current report on Form 8-K
announcing that it had increased its equity ownership of Gaia Herbs,
Inc. to 35%.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PURE WORLD, INC.
Dated: August 11, 1997 By: /s/ Mark Koscinski
-------------------
Mark Koscinski
Senior Vice President and
Principal Accounting Officer
