UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ___________________
Commission File Number: 33-7106-A
NATURADE, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2442709
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
7110 East Jackson Street, Paramount, California 90723
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(Address of principal executive offices)
(310) 531-8120
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 2,796,855 shares as of
December 31, 1996
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FORM 10-Q
QUARTERLY REPORT
Quarter Ended December 31, 1996
TABLE OF CONTENTS
-----------------
PAGE NO.
--------
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Position at December 31, 1996
(unaudited) and September 30, 1996 (audited) 3
Statements of Operations for the three month periods ended
December 31, 1996 (unaudited) and December 31, 1995
(unaudited) 4
Statements of Cash Flows for the three month periods ended
December 31, 1996 (unaudited) and December 31, 1995
(unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATURADE, INC.
Statements of Financial Position
Assets
------
December 31,1996 September 30, 1996
(Unaudited) (Audited)
Current assets:
Cash $85,088 $120,143
Accounts receivable 1,158,593 921,361
Inventories 2,071,499 1,333,535
Prepaid expenses 78,371 28,289
Deferred income taxes 138,000 138,000
------- -------
Total current assets 3,531,551 2,541,328
Available for sale security 108,500 128,573
Property and equipment 2,181,328 2,201,102
Intangible assets 144,073 147,851
Investment in joint venture 66,246 62,891
Other assets 87,064 78,490
------ ------
Total assets $6,118,762 $5,160,235
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Notes payable $744,475 $720,938
Current installments of
long-term debt 188,272 181,783
Accounts payable 858,813 460,764
Accrued expenses 197,576 265,850
Income tax payable 197,875 32,342
------- ------
Total current liabilities 2,187,011 1,661,677
--------- ---------
Long-term debt, excluding current installments 2,381,846 2,418,334
--------- ---------
Stockholders' equity:
Common stock; .0001 par value;
50,000,000 shares authorized,
2,796,855 issued and outstanding
(2,593,005 at September 30,1996) 280 259
Additional paid-in capital 440,092 236,263
Retained earnings 1,091,233 813,359
Unrealized gain on security available
for sale, net 18,300 30,343
------ ------
Total stockholders' equity 1,549,905 1,080,224
--------- ---------
Total liabilities and
stockholders' equity $6,118,762 $5,160,235
========== ==========
See accompanying notes to financial statements.
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NATURADE, INC.
Statements of Operations
Three Months Three Months
Ended Ended
December 31, 1996 December 31, 1995
(Unaudited) (Unaudited)
Net sales $3,194,943 $1,843,847
Cost of sales 1,596,686 889,310
--------- ---------
Gross profit 1,598,257 954,537
Selling, general and
administrative expenses 1,070,193 896,729
--------- ---------
Operating income 528,064 57,808
Other income (expenses):
Miscellaneous, net 15,795 (5,630)
Interest expense (80,984) (84,602)
--------- ---------
Earnings before income tax
expense (benefit) 462,875 (32,424)
Income tax expense (benefit) 185,000 (13,000)
--------- ---------
Net Income (Loss) $277,875 ($19,424)
========= =========
Net Income (Loss) per common and
common equivalent share $0.10 ($0.01)
========= =========
Shares used in computing net
earnings per common and
common equivalent share 2,862,437 2,854,913
========= =========
See accompanying notes to financial statements.
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NATURADE, INC.
Statements of Cash Flows
Three Months Three Months
Ended Ended
December 31, 1996 December 31, 1995
(Unaudited) (Unaudited)
Net cash used in operating activities ($219,989) ($182,654)
-------- --------
Cash flows used in investing
activities:
Capital expenditures-Property
and equipment (12,454) (70,772)
-------- --------
Cash flows used in financing activities:
Net borrowings under line of
credit agreements 23,537 323,667
Principal payments under long-term debt (29,999) (139,453)
Proceeds from exercise of warrants 203,850 5,792
-------- --------
Net cash provided by financing activities 197,388 190,006
-------- --------
Net (decrease) in cash (35,055) (63,420)
Cash at beginning of period 120,143 116,444
-------- --------
Cash at end of period $85,088 $53,024
======== ========
See accompanying notes to financial statements
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NATURADE, INC.
Notes to Financial Statements
1. The results of operations for the interim periods shown in this report
are not necessarily indicative of results to be expected for the fiscal
year. In the opinion of management, the information contained herein
includes all adjustments necessary for fair presentation of the financial
statements. All such adjustments are of a normal recurring nature.
These financial statements do not include all disclosures associated
with the Company's annual financial statements and accordingly, should
be read in conjunction with such statements.
2. Inventories are stated at the lower of cost (weighted average) or market
(net realizable value); and consist of the following:
December 31, 1996 September 30, 1996
(Unaudited) (Audited)
Finished Goods $ 583,567 $431,471
Components 1,487,932 902,064
--------- ---------
TOTAL $2,071,499 $1,333,535
3. Depreciation of property and equipment is provided over the estimated
useful lives of the respective assets on the straight-line basis.
4. Research and development costs are included in expenses when incurred.
5. Trademarks and copyrights are being amortized using the straight-line
method over a 17 year and 25 year period, respectively.
6. Earnings per common and common equivalent share are computed by dividing
earnings by the weighted average number of common and common equivalent
shares outstanding during the periods presented. Primary and fully
diluted income per share are the same.
7. Income tax expense is recorded at the Company's estimated effective
tax rate after taking into account the available net operating loss
carryforward.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
- -------------------------------
The Company used cash of $219,989 in operating activities in the first quarter
ended December 31, 1996. The amount used was mainly a result of an increase in
inventory of $737,964 and a corresponding increase in accounts payable and
accrued expenses of $329,775. This inventory increase was required to support
the overall increase in the sales of the Company's products during the first
quarter of fiscal 1997 and the anticipation of increased future sales.
The Company's working capital increased from $879,651 at September 30, 1996
to $1,344,540 at December 31, 1996.
Cash used for capital expenditures during the first quarter totaled $12,454.
Management anticipates capital expenditures for the remainder of its
September 30, 1997 fiscal year of less than $100,000.
The Company's cash provided by financing activities of $197,388 for the first
quarter was primarily the result of proceeds received from the exercise of
203,850 Class A warrants.
Management is of the opinion that the Company has sufficient business,
liquidity and capital resources to finance its operations.
Results of Operations
- ---------------------
Total net sales for the first quarter ended December 31, 1996 increased
$1,351,096 or 73.3% compared to the same quarter last year. Of this amount,
domestic sales of the Company's brand products increased $1,027,648 or 72.1%.
Additionally, sales to private label customers increased $121,586 or 40.0% and
international sales increased $201,862 or 176.7%, compared to the same quarter
last year.
The 72.1% increase in domestic brand products was directly related to the
effective reorganization of the Company's sales force, as well as the
positive acceptance of its new product introductions. The Company is
continuing to focus on its sales efforts including promotions, marketing and
key personnel.
The increase in private label sales was primarily due to the expanded
distribution of several key private label customers, The Company was also
successful in obtaining a number of new private label accounts, and is further
continuing its efforts to attract additional customers. However, due to the
nature of the private label business, there is no assurance that this can be
attained.
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The increase in international sales was largely due to a significant customer
in Saudi Arabia completing its reorganization and product registrations and
repackaging which resulted in the resumption of its normal purchasing patterns.
Additionally, several other international customers also increased their
purchases.
Gross profit as a percentage of sales decreased 1.8% to 50.0% of sales for the
quarter ended December 31, 1996 from 51.8% for the same period last year. This
was primarily due to the increase in private label and international sales
which generally carry lower gross margins. Operating expenses decreased 15.1%
to 33.5% of sales for the quarter ended December 31, 1996 from 48.6% for the
same period last year. This was the result of the $1,351,096 increase in
sales with a corresponding increase of only $173,464 in selling, general and
administrative expenses.
Interest expense for the quarter ended December 31, 1996 decreased to $80,984
from $84,602 for the same period last year.
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PART II: OTHER INFORMATION
Item 6. Exhibits & Reports on Form 8-K
- --------------------------------------
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NATURADE, INC.
--------------
(Registrant)
DATE: February 11, 1997 By /s/ Allan Schulman
---------------------
Allan Schulman
Chief Executive Officer
DATE: February 11, 1997 By /s/ Paul D. Shapnick
-----------------------
Paul D. Shapnick
Chief Financial Officer
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EXHIBIT INDEX
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Exhibit Page
No. Description No.
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27 Financial Data Schedule 12
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 85,088
<SECURITIES> 0
<RECEIVABLES> 1,158,593
<ALLOWANCES> 0
<INVENTORY> 2,071,499
<CURRENT-ASSETS> 3,531,551
<PP&E> 2,812,226
<DEPRECIATION> 630,898
<TOTAL-ASSETS> 6,118,762
<CURRENT-LIABILITIES> 2,187,011
<BONDS> 0
0
0
<COMMON> 280
<OTHER-SE> 1,549,625
<TOTAL-LIABILITY-AND-EQUITY> 6,118,762
<SALES> 3,194,943
<TOTAL-REVENUES> 3,194,943
<CGS> 1,596,686
<TOTAL-COSTS> 1,070,193
<OTHER-EXPENSES> (15,795)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,984
<INCOME-PRETAX> 462,875
<INCOME-TAX> 185,000
<INCOME-CONTINUING> 277,875
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 277,875
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
