<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Form 10QSB of Pure World, Inc. for the period ended September 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 10,270
<SECURITIES> 0
<RECEIVABLES> 1,426
<ALLOWANCES> 133
<INVENTORY> 2,833
<CURRENT-ASSETS> 14,868
<PP&E> 2,461
<DEPRECIATION> 647
<TOTAL-ASSETS> 21,581
<CURRENT-LIABILITIES> 2,177
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 19,329
<TOTAL-LIABILITY-AND-EQUITY> 21,581
<SALES> 8,051
<TOTAL-REVENUES> 9,679
<CGS> 4,365
<TOTAL-COSTS> 7,395
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> 2,272
<INCOME-TAX> 193
<INCOME-CONTINUING> 2,079
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,079
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</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, 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 October 31, 1997, the issuer had 7,505,287 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>
September 30,
1997
-------------
<S>
ASSETS <C>
Current assets:
Cash and cash equivalents $10,270
Accounts receivable, net of
allowance for uncollectible
accounts and returns and
allowances of $133 1,293
Inventories, net 2,833
Other 472
-------
Total current assets 14,868
-------
Securities available-for-sale 1,488
Investment in unaffiliated
natural products company 1,510
Furniture and equipment, net 1,814
Notes receivable from affiliates 529
Goodwill, net of accumulated
amortization of $249 1,166
Other assets 206
-------
Total assets $21,581
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 320
Accrued expenses and other 1,857
-------
Total current liabilities 2,177
-------
Stockholders' equity:
Common stock, par value $.01;
30,000,000 shares authorized;
7,505,287 shares outstanding 75
Additional paid-in capital 43,287
Accumulated deficit ( 24,472)
Unrealized gains on securities
available-for-sale 514
-------
Total stockholders' equity 19,404
-------
Total liabilities and
stockholders' equity $21,581
=======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($000 Omitted, except per share data)
<CAPTION>
Three Months Ended
September 30,
-------------------------
1997 1996
------- --------
<S>
Revenues: <C> <C>
Sales $ 2,972 $ 1,469
Net gains on marketable securities 265 6
Interest and dividends 134 125
Other income 242 -
------- -------
Total revenues 3,613 1,600
------- -------
Expenses:
Cost of goods sold 1,617 904
Personnel 467 475
Professional fees 90 199
Other 416 332
------- -------
Total expenses 2,590 1,910
------- -------
Income (loss) before income taxes 1,023 ( 310)
Provision for income taxes 111 -
------- -------
Net income (loss) $ 912 ($ 310)
======= =======
Net income (loss) per share $ .12 ($ .04)
======= =======
Weighted average shares outstanding
(in 000's) 7,505 7,680
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($000 Omitted, except per share data)
<CAPTION>
Nine Months Ended
September 30,
------------------------
1997 1996
-------- --------
<S>
Revenues: <C> <C>
Sales $ 8,051 $ 4,784
Net gains on marketable securities 514 315
Interest and dividends 411 391
Other income 703 3
------- -------
Total revenues 9,679 5,493
------- -------
Expenses:
Cost of goods sold 4,365 2,965
Personnel 1,452 1,380
Professional fees 311 860
Other 1,279 1,119
------- -------
Total expenses 7,407 6,324
------- -------
Income (loss) before income taxes 2,272 ( 831)
Provision for income taxes 193 1
------- -------
Net income (loss) $ 2,079 ($ 832)
======= =======
Net income (loss) per share $ .26 ($ .11)
======= =======
Weighted average shares outstanding
(in 000's) 7,543 7,697
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($000 Omitted)
<CAPTION>
Nine Months Ended
September 30,
------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,079 ($ 832)
Adjustments:
Depreciation and amortization 318 218
Net marketable securities
transactions ( 443) 1,900
Change in inventories ( 842) ( 616)
Change in receivables ( 219) 33
Change in accounts payable and
other accruals 62 ( 187)
Other, net ( 147) 33
------- -------
Net cash provided by
operating activities 808 549
------- -------
Cash flows from investing activities:
Purchase of furniture and
equipment, net ( 550) ( 277)
Proceeds from sale of securities
available-for-sale 706 -
Purchase of securities
available-for-sale ( 610) ( 37)
Loans to affiliates ( 30) -
Repayment of loans to affiliates 104 92
Loan to unaffiliated natural
products company ( 200) -
Investment in unaffiliated
natural products company ( 500) ( 1,010)
Other, net 15 ( 30)
------- -------
Net cash used in investing
activities ( 1,065) ( 1,262)
------- -------
Cash flows from financing activities:
Repurchase of common stock ( 357) ( 107)
Other, net 19 -
------- -------
Net cash used in financing
activities ( 338) ( 107)
------- -------
Net decrease in cash and cash
equivalents ( 595) ( 820)
Cash and cash equivalents at beginning
of period 10,865 9,357
------- -------
Cash and cash equivalents at end of
period $10,270 $ 8,537
======= =======
Supplemental disclosure for cash flow information:
Cash paid for:
Interest expense $ 12 $ 8
Taxes 150 15
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PURE WORLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
1. General
-------
The accompanying unaudited consolidated financial statements of Pure
World, Inc. and subsidiaries (the "Company") as of September 30, 1997
and for the three and nine month periods ended September 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. Prior years financial
statements have been reclassified to conform to the current year's
presentation.
The results of operations for the three and nine month periods ended
September 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 $ 765
Work-in-progress 231
Finished goods 1,837
------
Total inventories, net $2,833
======
</TABLE>
3. Securities Available-For-Sale
-----------------------------
At September 30, 1997, securities available-for-sale were as follows
(in 000's):
<TABLE>
<S> <C>
Cost $ 974
Gross holding gains 514
------
Fair value of securities
available-for-sale $1,488
======
</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 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 was the
imputed rate required under the Internal Revenue Code and is classified
as an other asset in the consolidated balance sheet.
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.
6. Subsequent Event - Acquisition of Minority Interest
in Madis Botanicals, Inc.("Madis")
---------------------------------------------------
In October, 1997 the Company acquired the remaining 17% minority
interest ownership in Madis for approximately $940,000. Madis is now a
wholly-owned subsidiary of the Company. As a result of this
transaction, goodwill will be increased by approximately $575,000 and
minority interest in Madis, included in other liabilities on the
consolidated balance sheet will be decreased by approximately $365,000.
The remaining goodwill will be amortized over 13 years.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
At September 30, 1997, the Company had cash and cash equivalents of
approximately $10.3 million. Cash equivalents of $9.6 million consisted
of U.S. Treasury bills with an original maturity of less than three
months and yields ranging between 5.01% and 5.312%. The Company had net
working capital of $12.7 million at September 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 $808,000 and $549,000 was provided by operations for the
nine months ended September 30, 1997 and 1996, respectively. The
increases in inventory and accounts receivable is a result of the
increase in sales in 1997 as the inventory and accounts receivable
turnover in the nine months ended September 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 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 was the imputed
rate required under the Internal Revenue Code and is classified as an
other asset in the consolidated balance sheet.
<PAGE>
Results of Operations
- ---------------------
The Company's operations resulted in net income of $912,000, or $.12
per share, for the three months ended September 30, 1997 compared to a
net loss of $310,000, or $.04 per share, for the comparable period in
1996. Net income was $2,079,000, or $.26 per share for the nine month
period ended September 30, 1997, compared to a net loss of $832,000, or
$.11 per share, for the comparable period in 1996.
The Company, through its wholly-owned subsidiaries, Madis Botanicals,
Inc. ("Madis") and Pure World Botanicals, Inc., had sales of $3.0
million for the quarter ended September 30, 1997, compared to sales of
$1.5 million for the comparable quarter of 1996, an increase of $1.5
million, or 102%. For the nine month period ended September 30, 1997,
sales were $8.1 million compared to $4.8 million for the comparable
period in 1996, an increase of $3.3 million, or 68%. The growth in
sales principally is related to marketing new standardized products
such as St. John's Wort, citrus pectin, CimiPure(TM) black cohosh,
olive leaf extract and KavaPure(R).
For the three and nine month periods ended September 30, 1997, the
gross margin (sales less cost of goods sold) was $1.4 million, or 46%
of sales and $3.7 million, or 46% of sales, respectively. This compares
to a gross margin of $565,000, or 39% of sales and $1.8 million, or 38%
of sales for the three and nine month periods ended September 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 nine month periods ended September 30, 1997, the
Company recorded net gains on marketable securities of $265,000 and
$514,000, respectively, compared to $6,000 and $315,000 for the same
periods in 1996. Substantially all of the gains recorded in 1997 were
realized. The increase 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 $134,000 and $411,000 for the three
and nine months ended September 30, 1997, respectively, compared to
$125,000 and $391,000 for the three and nine month periods ended
September 30, 1996. Interest income was $408,000 during the nine month
period ended September 30, 1997, an increase of $20,000 from the
$388,000 recorded in the comparable period of 1996. This increase was
due primarily to higher invested balances. Dividend income in both nine
month periods ended September 30, 1997 and 1996 was $3,000.
Other income was $242,000 and $703,000 for the quarter and nine months
ended September 30, 1997, respectively, compared to zero 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. The Company
does not anticipate additional revenue from this source. In 1996, other
income consisted of revenue from the sale of unneeded equipment at
Madis.
Personnel expenses were $467,000 and $1,452,000 during the three and
nine months ended September 30, 1997 compared to $475,000 and
$1,380,000 in the comparable periods in 1996. An increase in management
and laboratory personnel as well as merit salary increases accounted
for the overall nine month increase. Professional fees, consisting of
legal, accounting and consulting fees were $90,000 and $311,000 during
the three and nine month periods in 1997, compared to $199,000 and
$860,000 in the same three and nine month periods in 1996. Legal fees
decreased due to the settlement in 1996 of litigations in which the
Company was involved. Consulting fees, incurred principally in product
development, also decreased.
Other expenses were $416,000 and $1,279,000 for the three and nine
month periods ended September 30, 1997, compared to $332,000 and
$1,119,000 for the same periods in 1996. Increased sales expenses,
depreciation expense and minority interest in the earnings of Madis
were the primary reasons for the increased expenses in 1997 compared to
1996.
Subsequent Event - Acquisition of Minority
Interest in Madis
------------------------------------------
In October, 1997 the Company acquired the remaining 17% minority
interest ownership in Madis for approximately $940,000. Madis is now a
wholly-owned subsidiary of the Company. As a result of this
transaction, goodwill will be increased by approximately $575,000 and
minority interest in Madis, included in other liabilities on the
consolidated balance sheet will be decreased by approximately $365,000.
The remaining goodwill will be amortized over 13 years.
<PAGE>
New Accounting Standards
- ------------------------
The Financial Accounting Standard 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.
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
Financial Accounting Standards 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 Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which will be effective for the
Company beginning January 1, 1998. This standard 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 nine months ended September 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: November 10, 1997 By: /s/ Mark Koscinski
-------------------
Mark Koscinski
Senior Vice President and
Principal Accounting Officer
