<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 March 31, 1998 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 7,457
<SECURITIES> 132
<RECEIVABLES> 3,307
<ALLOWANCES> 132
<INVENTORY> 4,826
<CURRENT-ASSETS> 16,134
<PP&E> 6,229
<DEPRECIATION> 831
<TOTAL-ASSETS> 26,728
<CURRENT-LIABILITIES> 3,444
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 20,913
<TOTAL-LIABILITY-AND-EQUITY> 26,728
<SALES> 5,095
<TOTAL-REVENUES> 5,275
<CGS> 2,520
<TOTAL-COSTS> 3,712
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 1,557
<INCOME-TAX> 127
<INCOME-CONTINUING> 1,430
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,430
<EPS-PRIMARY> .19
<EPS-DILUTED> .18
</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: March 31, 1998
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 April 30, 1998, the issuer had 7,517,256 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>
March 31,
1998
---------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,457
Marketable securities 132
Accounts receivable, net of
allowance for uncollectible
accounts and returns and
allowances of $132 3,175
Inventories, net 4,826
Other 544
-------
Total current assets 16,134
-------
Securities available-for-sale 1,333
Investment in unaffiliated
natural products company 1,510
Fixed assets, net 5,398
Notes receivable from affiliates 311
Goodwill, net of accumulated
amortization of $310 1,681
Other assets 361
-------
Total assets $26,728
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,982
Accrued expenses 1,462
-------
Total current liabilities 3,444
Long-term debt 2,296
-------
Total liabilities 5,740
-------
Stockholders' equity:
Common stock, par value $.01;
30,000,000 shares authorized;
7,515,256 shares outstanding 75
Additional paid-in capital 43,304
Accumulated deficit ( 22,784)
Unrealized gains on securities
available-for-sale 393
-------
Total stockholders' equity 20,988
-------
Total liabilities and
stockholders' equity $26,728
=======
</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
March 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Sales $ 5,095 $ 2,423
Net gains on investment securities 76 71
Interest and dividends 101 137
Other income 3 240
------- -------
Total revenues 5,275 2,871
------- -------
Expenses:
Cost of goods sold 2,520 1,257
Personnel 637 497
Professional fees 92 117
Other 469 453
------- -------
Total expenses 3,718 2,324
------- -------
Income before income taxes 1,557 547
Provision for income taxes 127 42
------- -------
Net income $ 1,430 $ 505
======= =======
Basic net income per share $ .19 $ .06
======= =======
Diluted net income per share $ .18 $ .06
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($000 Omitted)
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,430 $ 505
Adjustments:
Depreciation and amortization 137 96
Net marketable securities
transactions 247 ( 13)
Gain on sale of securities
available-for-sale ( 58) ( 71)
Change in inventories ( 1,199) ( 488)
Change in receivables ( 2,036) ( 202)
Change in accounts payable and
other accruals 2,049 156
Other, net ( 87) ( 115)
------- -------
Net cash provided by (used in)
operating activities 483 ( 132)
------- -------
Cash flows from investing activities:
Purchase of fixed assets ( 3,305) ( 75)
Proceeds from sale of securities
available-for-sale 155 90
Purchase of securities
available-for-sale ( 16) ( 415)
Loans to affiliates and others ( 60) -
Repayment of loans to affiliates 246 40
Other, net ( 156) 15
------- -------
Net cash used in financing
activities ( 3,136) ( 345)
------- -------
Cash flows from financing activities:
Repurchase of common stock - ( 183)
Issuance of common stock upon
exercise of stock options 17 -
Change in long-term debt 1,993 -
------- -------
Net cash provided by (used in)
financing activities 2,010 ( 183)
------- -------
Net decrease in cash and cash
equivalents ( 643) ( 660)
Cash and cash equivalents at beginning
of period 8,100 10,865
------- -------
Cash and cash equivalents at end
of period $ 7,457 $10,205
======= =======
Supplemental disclosure for cash
flow information:
Cash paid for:
Interest expense $ 6 $ 4
Taxes $ 12 $ 7
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PURE WORLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
(UNAUDITED)
1. General
-------
The accompanying unaudited consolidated financial statements of Pure World,
Inc. and subsidiaries (the "Company") as of March 31, 1998 and for the
quarters ended March 31, 1998 and 1997 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,
1997 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 quarters ended March 31, 1998 and 1997
are not necessarily indicative of the results to be expected for the entire
year or any other period.
2. Investment Securities
---------------------
At March 31, 1998, investment securities consisted of the following
(in 000's):
<TABLE>
Gross
Amortized Holding Fair
Cost Gains Value
--------- ------- -----
<S> <C> <C> <C>
Marketable securities $ 132 $ - $ 132
Available-for-sale 940 393 1,333
------ ------ ------
Total Investment
Securities $1,072 $ 393 $1,465
====== ====== ======
</TABLE>
All investment securities were investments in common stock. Substantially
all gains recorded in the three months ended March 31, 1998 and 1997 were
realized.
<PAGE>
3. Inventories
-----------
Inventories are comprised of the following (in $000's):
<TABLE>
<S> <C>
Raw materials $2,462
Work-in-progress 257
Finished goods 2,107
------
Total inventories, net $4,826
======
</TABLE>
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. Fixed Assets
------------
At March 31, 1998, fixed assets consisted of the following (in $000's):
<TABLE>
<S> <C>
Furniture, machinery and
equipment $2,822
Construction in progress 3,407
Accumulated depreciation ( 831)
------
Total $5,398
======
</TABLE>
<PAGE>
6. Long-term Debt
--------------
Long-term debt consisted of the following at March 31, 1998 (in $000's):
<TABLE>
<S> <C>
Loans payable to a bank bearing
annual interest at the prime
rate (currently 8.5%) maturing
in 2003. Interest only payments
until December 1998 $ 2,030
Leases payable for equipment 283
All other 154
-------
Total 2,467
=======
Less: Current portion of long-
term debt 171
-------
Long-term debt $ 2,296
=======
</TABLE>
7. Net Income Per Share
--------------------
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128 "Earnings per Share." This standard revises certain methodology for
computing earnings per common share and requires the reporting of two
earnings per share figures: basic earnings per share and diluted earnings
per share. Basic earnings per common share is computed by dividing net
income by the weighted-average number of common shares outstanding. Diluted
earnings per share is computed by dividing net income by the sum of the
weighted-average number of common shares outstanding plus the dilutive
effect of shares issuable through the exercise of stock options.
All prior period earnings per share figures have been restated in
accordance with the adoption of SFAS No. 128.
<PAGE>
The shares used for basic earnings per common share and diluted earnings
per common share are reconciled as follows:
<TABLE>
<CAPTION>
(Shares in Thousands)
Quarter Ended March 31,
-----------------------
1998 1997
------ ------
<S> <C> <C>
Basic earnings per common share:
Average shares outstanding for
basic earnings per share 7,507 7,611
===== =====
Diluted earnings per common share:
Average shares outstanding for
basic earnings per share 7,507 7,611
Dilutive effect of stock options 640 242
----- -----
Average shares outstanding for
diluted earnings per share 8,147 7,853
===== =====
</TABLE>
8. Comprehensive Income
--------------------
Statement of Financial Accounting Standards No. 130 "Reporting
Comprehensive Income" ("SFAS No. 130") is effective for fiscal years
beginning after December 15, 1997. SFAS No. 130 requires reporting
and display of comprehensive income.
Comprehensive income of the company for the quarters ended March 31, 1998
and 1997 are (in $000's):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
------ ------
<S> <C> <C>
Net income $ 1,430 $ 505
Unrealized gains (losses) on
securities available-for-sale ( 239) 434
------- -------
Comprehensive income $ 1,191 $ 939
======= =======
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of
- ------- Financial Condition and Results of Operations
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
At March 31, 1998, the Company had cash and cash equivalents of
approximately $7.5 million. Cash equivalents of $6.8 million consisted of
U.S. Treasury bills with an original maturity of less than three months
and yields ranging between 4.98% and 5.43%. The Company had net working
capital of $12.7 million at March 31, 1998. 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 $483,000 was provided by operations for the three month period
ended March 31, 1998, compared to a net use of cash of $132,000 for the
same period in 1997. The increases in inventory and accounts receivable is
a result of the increase in sales in 1997 and 1998. In 1998, the increase
in accounts payable is a result of the increase in inventory as well as the
additions to fixed assets (described below). Depreciation and amortization
increased in the first quarter of 1998 compared to the first quarter of
1997 due to continued additions and enhancements to the laboratory and
production facilities.
Net cash of $3,136,000 and $345,000 was used in investing activities in the
quarters ended March 31, 1998 and 1997, respectively. The Company, which
has been increasing its investment in laboratory and manufacturing
facilities, began an expansion program in 1997 to upgrade and expand its
productive capacity and to build a new warehouse facility. The total cost
of the warehouse and expansion will be approximately $6 million, including
certain equipment purchases for the laboratories. The Company has obtained
an equipment line of credit of $3 million from a bank of which $2 million
was utilized as of March 31, 1998. The balance will be paid from working
capital. The expansion is scheduled to be completed by the end of the
Second Quarter of 1998.
Cash flows provided by financing activities in the first quarter of 1998
were $2,010,000 compared to a net use of $183,000 in the same period in
1997. The increase in long-term debt in 1998 is a result of the expansion
program and financing described above.
<PAGE>
Results of Operations
- ---------------------
The Company's operations resulted in net income of $1,430,000, or $.19
basic earnings per share, for the three months ended March 31, 1998
compared to net income of $505,000, or $.06 basic earnings per share,
for the comparable period in 1997. Diluted earnings per share were $.18 and
$.06 for the quarters ended March 31, 1998 and 1997 respectively.
The Company, through its wholly-owned subsidiary, Madis Botanicals, Inc.
("Madis") had sales of $5.1 million for the quarter ended March 31, 1998,
compared to sales of $2.4 million for the comparable quarter of 1997, an
increase of $2.7 million, or 110%.
For the three month periods ended March 31, 1998 and 1997, the gross margin
(sales less cost of goods sold) was $2.6 million, or approximately 50% and
$1.2 million, or approximately 48%, respectively.
The improved results are attributed to increases in the sales of Madis'
line of standardized botanical products, particularly St. Johns Wort, kava,
and black cohosh.
For the three month period ended March 31, 1998, the Company recorded net
gains on marketable securities of $76,000 compared to $71,000 for the same
period in 1997. Substantially all of the gains recorded in 1997 and 1998
were realized.
Interest and dividend income was $101,000 for the three month period ended
March 31, 1998, compared to $137,000 for the three month period ended March
31, 1997. Interest income was $100,000 during the three month period ended
March 31, 1998, a decrease of $36,000 from the $136,000 recorded in the
comparable period of 1997. This increase was due primarily to lower
invested balances. Dividend income in the three month periods ended March
31, 1998 and 1997 was $1,000.
Other income was $3,000 for the quarter ended March 31, 1998 compared
to $240,000 for the comparable period in 1997. 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.
<PAGE>
Personnel expenses were $637,000 during the three months ended March 31,
1998 compared to $497,000 in the comparable period in 1997. An increase in
management and laboratory personnel as well as merit salary increases
accounted for the increase.
Professional fees, consisting of legal, accounting and consulting fees were
$92,000 during the three months ended March 31, 1998, compared to $117,000
in the same period in 1997. This decrease was primarily due to a reduction
in legal fees.
Other expenses were $469,000 for the three month period ended March 31,
1998, compared to $453,000 for the same period in 1997. The increased
level of sales and depreciation expense were the primary reasons for the
increase.
<PAGE>
PART II - OTHER INFORMATION
- ------- -----------------
Item 6. - Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
--------
27. Financial Data Schedule for the three months ended
March 31, 1998.
(b) Reports on Form 8-K
-------------------
None.
<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: May 14, 1998 By: /s/ Mark Koscinski
------------------
Mark Koscinski
Senior Vice President and
Principal Accounting Officer
