<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Form 10-QSB of Pure World, Inc., for the period ended March 31, 2000 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,547
<SECURITIES> 157
<RECEIVABLES> 3,397
<ALLOWANCES> 155
<INVENTORY> 11,823
<CURRENT-ASSETS> 20,241
<PP&E> 13,770
<DEPRECIATION> 3,147
<TOTAL-ASSETS> 34,699
<CURRENT-LIABILITIES> 7,237
<BONDS> 0
0
0
<COMMON> 83
<OTHER-SE> 23,067
<TOTAL-LIABILITY-AND-EQUITY> 34,699
<SALES> 5,730
<TOTAL-REVENUES> 5,892
<CGS> 4,060
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,214
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170
<INCOME-PRETAX> 448
<INCOME-TAX> 35
<INCOME-CONTINUING> 413
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 413
<EPS-BASIC> .05
<EPS-DILUTED> .05
</TABLE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31, 2000
--------------
OR
[ ] TRANSITION REPORT UNDER 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 equity: As of April 30, 2000, the issuer had 8,268,883 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
- ------ --------------------
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31,2000
(UNAUDITED)
(in $000's)
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 4,547
Marketable securities 157
Accounts receivable, net of allowance for
uncollectible accounts and returns and
allowances of $155 3,242
Inventories 11,823
Other 472
-------
Total current assets 20,241
Plant and equipment, net 10,623
Investment in unaffiliated natural products company 1,510
Notes receivable from affiliates 280
Goodwill, net of accumulated amortization of $596 1,395
Other assets 650
-------
Total assets $34,699
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 2,214
Short-term borrowings 3,975
Accrued expenses and other 1,048
-------
Total current liabilities 7,237
Long-term debt 4,312
-------
Total liabilities 11,549
-------
Stockholders' equity:
Common stock, par value $.01;
30,000,000 shares authorized;
8,268,883 shares issued and outstanding 83
Additional paid-in capital 43,321
Accumulated deficit ( 20,254)
-------
Total stockholders' equity 23,150
-------
Total liabilities and stockholders' equity $34,699
=======
See accompanying notes to consolidated financial statements.
2
<PAGE>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
($000 Omitted, except per share data)
Three Months Ended
March 31,
--------------------
2000 1999
------ ------
Revenues:
Sales $ 5,730 $ 3,747
Net gains on marketable securities 93 8
Interest income 69 66
------- -------
Total revenues 5,892 3,821
------- -------
Expenses:
Cost of goods sold 4,060 2,430
Selling, general and administrative 1,384 1,239
------- -------
Total expenses 5,444 3,669
------- -------
Income before income taxes 448 152
Provision for income taxes 35 8
------- -------
Net income 413 144
Other comprehensive income:
Unrealized holding losses on
securities available-for-sale - ( 261)
------- -------
Comprehensive income (loss) $ 413 ($ 117)
======= =======
Basic and diluted net income per share $ .05 $ .02
======= =======
See accompanying notes to consolidated financial statements.
3
<PAGE>
PURE WORLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($000 Omitted)
Three Months Ended
March 31,
-----------------------
2000 1999
-------- --------
Cash flows from operating activities:
Net income $ 413 $ 144
Adjustments:
Depreciation and amortization 468 336
Net marketable securities
transactions ( 4) 11
Gain on sale of securities
available-for-sale - ( 13)
Change in inventories ( 1,043) ( 2,296)
Change in receivables ( 790) 193
Change in accounts payable and
other accruals 808 856
Other, net 96 ( 82)
-------- --------
Net cash used in operating activities ( 52) ( 851)
-------- --------
Cash flows from investing activities:
Purchase of plant and equipment ( 712) ( 1,018)
Proceeds from sale of securities
available-for-sale - 59
Loans to affiliates and others ( 20) -
Repayment of loans to affiliates
and others 21 4
Other, net 2 -
-------- --------
Net cash used in investing
activities ( 709) ( 955)
-------- --------
Cash flows from financing activities:
Term loan borrowings 255 350
Term loan repayments ( 358) ( 184)
Net revolving line of credit borrowings
(repayments) ( 187) 1,393
-------- --------
Net cash provided by (used in) financing
activities ( 290) 1,559
-------- --------
Net decrease in cash and cash equivalents ( 1,051) ( 247)
Cash and cash equivalents at beginning of period 5,598 6,122
-------- --------
Cash and cash equivalents at end of period $ 4,547 $ 5,875
======== ========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 170 $ 124
======== ========
Taxes $ - $ 13
======== ========
See accompanying notes to consolidated financial statements.
4
<PAGE>
PURE WORLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(UNAUDITED)
1. General
-------
The accompanying unaudited consolidated financial statements of Pure World,
Inc. and subsidiaries ("Pure World" or the "Company") as of March 31, 2000 and
for the quarters ended March 31, 2000 and 1999 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 consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999 as filed with the Securities and Exchange Commission. Prior
year's financial statements have been reclassified to conform to the current
years' presentation.
The results of operations for the quarters ended March 31, 2000 and 1999
are not necessarily indicative of the results to be expected for the entire year
or any other period.
2. Marketable Securities
---------------------
At March 31, 2000, marketable securities consisted of the following (in
$000's):
Gross
Holding Fair
Cost Losses Value
------ -------- --------
Trading securities $ 569 $ 412 $ 157
===== ===== =====
All marketable securities were investments in common stock.
3. Inventories
-----------
Inventories are comprised of the following (in $000's):
Raw materials $ 2,875
Work-in-progress 324
Finished goods 8,624
-------
Total inventories $11,823
=======
5
<PAGE>
4. Investment in Unaffiliated Natural Products Company
---------------------------------------------------
In May 1996, the Company purchased 500 shares of common stock representing
a 25% interest in Gaia Herbs, Inc. ("Gaia") for approximately $1 million. In
June 1997, the Company purchased an additional 200 shares of common stock for
$500,000, increasing its equity ownership to 35% of Gaia's outstanding shares of
common stock ("Pure World's Gaia Stock"). Pure World's Gaia Stock is 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 "Pure World Loan"). The Pure World 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. The
parties also agreed that if any other party acquired voting shares, Pure World's
Gaia Stock would become voting stock.
Additionally, the parties agreed that Gaia and the principal stockholder of
Gaia (the "Principal Stockholder") would have a right of first refusal to
acquire any Gaia stock sold by Pure World and that Pure World would have a right
of first refusal to acquire any Gaia stock sold by Gaia or the Principal
Stockholder.
In June 1998, Gaia requested that Pure World guarantee an unsecured bank
line of $500,000 (the "Gaia Bank Loan"). Because of expansion plans for Pure
World's wholly-owned subsidiary, Pure World Botanicals Inc., Pure World declined
to issue the guarantee. An individual unaffiliated with Gaia or Pure World
agreed to guarantee the Gaia Bank Loan in consideration of a cash fee and the
issuance to the individual of 100 shares of Gaia's common stock, representing 5
percent of Gaia's common stock outstanding (the "Guarantee"). The Guarantee is
also secured by Gaia stock held by Gaia's Principal Stockholder. Pure World
notified Gaia that it wished to exercise its right of first refusal in
connection with the Guarantee. Pure World and Gaia reached an understanding that
Pure World would decline the right of first refusal if by November 30, 1998
thirty percent of Pure World's interest was purchased for $1,500,000 (leaving
five percent of the current Gaia common stock outstanding) and the Pure World
Loan was repaid, including any accrued interest (the "Repurchase"). If the
Repurchase was not closed by November 30, 1998 ("the Closing Date"), Pure World
then would have the right to assume the Guarantee pursuant to the same terms
granted the original guarantor, except for the cash fee. If the Repurchase did
not close prior to the Closing date, and either before or after the Closing
Date, the Guarantee is called by the bank, Pure World would then own, or have
the right to own a majority of Gaia's voting stock. The repurchase did not close
as of November 30, 1998. The Company continues to monitor its investment.
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.
6
<PAGE>
5. Borrowings
----------
Borrowings consisted of the following at March 31, 2000 (in $000's):
Loans payable to a bank,
collateralized by certain
property and equipment, bearing
annual interest at 6.878% in
March 2000 maturing in December 2003 $ 2,464
Loans payable to a bank, pursuant
to a $3 million unsecured line of
credit bearing annual interest at
the prime rate, currently 9%,
maturing in June 2000 2,726
Loan payable to a bank, collateralized
by certain equipment bearing annual
interest at 7.94%, maturing in October 2004 1,833
Loan payable to a bank, collateralized
by certain equipment bearing
annual interest at 8.75%
maturing in April 2003 200
Loan payable to a bank, collateralized
by certain equipment bearing
annual interest at 8.75% maturing in
August 2003 47
Loan payable to a bank, collateralized
by certain equipment, bearing annual
interest at 8.25% maturing in June 2004 187
Loan payable to a bank, pursuant to a credit
agreement, collateralized by certain
equipment, bearing annual interest
at LIBOR plus 2.5% payable
interest only until June 2000
maturing in June 2004 352
Lease payable to IBM Credit Corporation
for gross assets of $150,000 with
inputed interest of 6.5% maturing
in January 2002. 127
7
<PAGE>
Leases payable for equipment 314
All other 37
-------
Total borrowings 8,287
Less: Current portion of long-term debt 3,975
-------
Long-term debt $ 4,312
=======
Interest expense was $170,000 and $124,000 for the three months ended March
31, 2000 and 1999, respectively.
6. Net Income Per Share
--------------------
Basic earnings per common share are computed by dividing net income by the
weighted-average number of common shares outstanding. Diluted earnings per share
are 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.
The shares used for basic earnings per common share and diluted earnings
per common share are reconciled below. All share and per share information
reflects a 10% stock dividend declared on November 17, 1998, to stockholders of
record on January 7, 1999, distributed on January 15, 1999.
(Shares in Thousands)
2000 1999
---- ----
Basic earnings per common share:
Average shares outstanding for
basic earnings per share 8,269 8,269
===== =====
Diluted earnings per common share:
Average shares outstanding for
basic earnings per share 8,269 8,269
Dilutive effect of stock options 452 742
----- -----
Average shares outstanding for
diluted earnings per share 8,721 9,011
===== =====
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
This Form 10-QSB contains forward-looking statements which may involve
known and unknown risks, uncertainties and other factors that may cause the
Company's actual results and performance in future periods to be materially
different from any future periods or performance suggested by these statements.
Liquidity and Capital Resources
- -------------------------------
At March 31, 2000, the Company had cash and cash equivalents of
approximately $4.5 million. Cash equivalents of $3.9 million consisted of U.S.
Treasury bills with an original maturity of less than three months and yields
ranging between 5.30% and 5.91%. The Company had working capital of $13 million
at March 31, 2000. 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 $52,000 was used in operations for the three months ended March
31, 2000, compared to net cash used in operations of $851,000 for the same
period in 1999. In 2000 and 1999, the net use of cash was primarily attributable
to an increase in inventories, partially offset by an increase in accounts
payable and other accruals and depreciation and amortization.
Net cash of $709,000 and $955,000 was used in investing activities in the
three months ended March 31, 2000 and 1999, respectively. In 2000, $712,000 was
used in connection with the construction of an additional production facility.
In 1999, $1,018,000 was used in connection with plant and equipment purchases as
follows: $376,000 was used for the replacement of underground storage tanks with
greater capacity tanks, $350,000 was used in connection with production
expansion and $292,000 for purchases of machinery and equipment.
Cash flows used in financing activities in the first quarter of 2000 were
$290,000 compared to net cash of $1,559,000 provided in the same period in 1999.
Changes in notes payable were the primary reason for these cash flows. For more
information on borrowings, see Note 5 of Notes to Consolidated Financial
Statements.
Results of Operations
- ---------------------
The Company's operations resulted in net income of $413,000, or $.05 basic
earnings per share, for the three months ended March 31, 2000 compared to net
income of $144,000, or $.02 basic earnings per share, for the comparable period
in 1999. Diluted earnings per share was $.05 and $.02 for the three months ended
March 31, 2000 and 1999, respectively.
The Company, through its wholly-owned subsidiary, Pure World Botanicals,
Inc. had sales of $5.7 million for the quarter ended March 31, 2000, compared to
sales of $3.7 million for the comparable quarter of 1999, an increase of $2.0
million, or 53%. The Company believes that the increase in sales was due to the
gradual but continued improvement in the herbal products industry.
9
<PAGE>
For the three month periods ended March 31, 2000 and 1999, the gross margin
(sales less cost of goods sold) was $1.7 million, or 29.1% of sales and $1.3
million, or 35.2% of sales, respectively. The decrease in gross margin was due
to the change in the product sales mix and pricing pressures.
For the three month period ended March 31, 2000, the Company recorded net
gains on marketable securities of $93,000 compared to $8,000 for the same period
in 1999. In 2000, $478,000 were unrealized gains and $385,000 were realized
losses. In 1999, substantially all of the gains recorded were realized.
Interest income was $69,000 for the three month period ended March 31,
2000, compared to $66,000 for the three month period ended March 31, 1999.
Selling, general and administrative expenses were $1,384,000 for the three
months ended March 31, 2000 compared to $1,239,000 for the comparable period in
1999, an increase of $145,000 or 11.7%. Higher selling and interest expenses
were the primary reasons for the increase.
10
<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, 2000.
(b) Reports on Form 8-K
-------------------
None
11
<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 15, 2000 By: /s/ Sue Ann Itzel
----------------------------
Sue Ann Itzel
Assistant Secretary
(Principal Accounting Officer)
12
