-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CHSq83INIQLJxgrvd5nH49Nfp9K2IEdbymYY7sTA2aZDocqNOFckMJ8CFv6CbbrX IsTVkz64HwW+7enzjPLosQ== 0000356446-02-000011.txt : 20020814 0000356446-02-000011.hdr.sgml : 20020814 20020814125302 ACCESSION NUMBER: 0000356446-02-000011 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PURE WORLD INC CENTRAL INDEX KEY: 0000356446 STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799] IRS NUMBER: 953419191 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-10566 FILM NUMBER: 02733453 BUSINESS ADDRESS: STREET 1: P O BOX 74 STREET 2: 376 MAIN ST CITY: BEDMINSTER STATE: NJ ZIP: 07921 BUSINESS PHONE: 9082349220 MAIL ADDRESS: STREET 1: P O BOX 74 STREET 2: 376 MAIN STREET CITY: BEDMINSTER STATE: NJ ZIP: 07921 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTER MEMORIES INC DATE OF NAME CHANGE: 19920908 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTER MEMORIES INC /DE/ DATE OF NAME CHANGE: 19940411 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN HOLDINGS INC /DE/ DATE OF NAME CHANGE: 19940411 10QSB 1 purw10q.txt 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: June 30, 2002 ------------- 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 July 31, 2002, the issuer had 7,556,834 shares of its common stock, par value $.01 per share, outstanding. Transitional Small Business Disclosure Format (check one): Yes No X --- --- PART I - FINANCIAL INFORMATION - ------ --------------------- ITEM 1. - Financial Statements - ------ -------------------- PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET JUNE 30,2002 (UNAUDITED) (in $000's) ASSETS - ------ Current assets: Cash and cash equivalents $ 2,231 Accounts receivable, net of allowance for uncollectible accounts and returns and allowances of $344 2,374 Inventories 8,386 Other 507 -------- Total current assets 13,498 Plant and equipment, net 8,407 Investment in unaffiliated natural products company 1,510 Notes receivable from affiliates 288 Goodwill, net of accumulated amortization of $847 1,144 Other assets 481 -------- Total assets $ 25,328 ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $ 740 Short-term borrowings 3,587 Accrued expenses and other 1,696 -------- Total current liabilities 6,023 Long-term debt 2,596 -------- Total liabilities 8,619 -------- Stockholders' equity: Common stock, par value $.01; 30,000,000 shares authorized; 7,563,634 shares issued and outstanding 76 Additional paid-in capital 42,852 Accumulated deficit ( 26,219) -------- Total stockholders' equity 16,709 -------- Total liabilities and stockholders' equity $ 25,328 ======== See accompanying notes to consolidated financial statements. 2 PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ($000 Omitted, except per share data) Three months ended June 30, ---------------------- 2002 2001 -------- -------- Revenues: Sales $ 4,285 $ 6,170 Net losses on marketable securities - ( 21) Interest income 14 35 -------- -------- Total revenues 4,299 6,184 -------- -------- Expenses: Cost of goods sold 3,755 4,905 Selling, general and administrative 1,029 1,229 -------- -------- Total expenses 4,784 6,134 -------- -------- Income (loss) before income taxes ( 485) 50 Provision for income taxes - 7 -------- -------- Net income (loss) ($ 485) $ 43 ======== ======== Basic and diluted net income (loss) per share ($ .06) $ .01 ======== ======== See accompanying notes to consolidated financial statements. 3 PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ($000 Omitted, except per share data) Six months ended June 30, --------------------- 2002 2001 --------- -------- Revenues: Sales $ 7,875 $ 10,354 Net gains on marketable securities 28 58 Interest income 28 80 -------- -------- Total revenues 7,931 10,492 -------- -------- Expenses: Cost of goods sold 6,876 8,609 Selling, general and administrative 2,134 2,515 -------- -------- Total expenses 9,010 11,124 -------- -------- Loss before income taxes ( 1,079) ( 632) Provision for income taxes - 12 -------- -------- Net loss ($ 1,079) ($ 644) ======== ======== Basic and diluted net loss per share ($ .13) ($ .08) ======== ======== See accompanying notes to consolidated financial statements. 4 PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ($000 Omitted) Six months ended June 30, -------------------- 2002 2001 -------- -------- Cash flows from operating activities: Net loss ($ 1,079) ($ 644) Adjustments: Depreciation and amortization 839 898 Net marketable securities transactions 27 ( 23) Change in inventories 1,231 860 Change in receivables ( 329) ( 1,254) Change in accounts payable and other accruals ( 149) 731 Other, net 6 171 -------- -------- Net cash provided by operating activities 546 739 -------- -------- Cash flows from investing activities: Purchase of plant and equipment ( 165) ( 591) Loans to affiliates and others - ( 30) Repayment of loans to affiliates and others 31 46 -------- -------- Net cash used in investing activities ( 134) ( 575) -------- -------- Cash flows from financing activities: Term loan borrowings 59 485 Term loan repayments ( 703) ( 728) Net revolving line of credit borrowings (repayments) 233 ( 360) Repurchase of common stock ( 453) ( 30) -------- -------- Net cash used in financing activities ( 864) ( 633) -------- -------- Net decrease in cash and cash equivalents ( 452) ( 469) Cash and cash equivalents at beginning of period 2,683 3,116 -------- -------- Cash and cash equivalents at end of period $ 2,231 $ 2,647 ======== ======== Supplemental disclosure of cash flow information: Cash paid for: Interest $ 223 $ 321 ======== ======== Taxes $ 19 $ 1 ======== ======== See accompanying notes to consolidated financial statements. 5 PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2002 AND 2001 (UNAUDITED) 1. General ------- The accompanying unaudited consolidated financial statements of Pure World, Inc. and subsidiaries ("Pure World" or the "Company") as of June 30, 2002 and for the periods ended June 30, 2002 and 2001 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 accounting principles generally accepted in the United States of America 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, 2001 as filed with the Securities and Exchange Commission. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the periods ended June 30, 2002 and 2001 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): Raw materials $ 680 Work-in-progress 621 Finished goods 7,085 ------- Total inventories $ 8,386 ======= 6 3. 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 6.33% which is the imputed rate required under the Internal Revenue Code and is classified as an other asset in the consolidated balance sheet. The Pure World loan balance was approximately $148,000 at June 30, 2002. 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 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 and discusses its position with Gaia from time to time. 7 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. 4. Borrowings ---------- Borrowings consisted of the following at June 30, 2002 (in $000's): Loan payable to a bank, pursuant to a $2.75 million secured line of credit bearing annual interest at the prime rate plus 2% (6.75% at June 30, 2002) maturing in December 2002 $ 2,290 Loan payable to a bank, collateralized by certain property and equipment, bearing annual interest at 6.878% maturing in December 2003 1,500 Loan payable to a bank, collateralized by certain equipment bearing annual interest at LIBOR plus 2.5% (4.34% at June 30, 2002) maturing in October 2004 933 Lease payable for equipment for gross assets of $800,000 with imputed interest of approximately 8% maturing in June 2007 571 Lease payable for equipment for gross assets of approximately $392,800 with imputed interest of approximately 6.95% maturing in March 2006 295 Loan payable to a bank, bearing annual interest at LIBOR plus 2.5% (4.34% at June 30, 2002) maturing in May 2005 240 Leases payable for equipment 182 All other 172 ------- Total borrowings 6,183 Less: Current portion of long-term debt 3,587 ------- Long-term debt $ 2,596 ======= 8 Interest expense was $111,000 and $223,000 for the three and six months ended June 30, 2002, respectively and $159,000 and $321,000 for the same periods in 2001. 5. Common Stock ------------ In connection with the Company's Common Stock Repurchase Plans, 681,000 shares of Common Stock were repurchased in the six months ended June 30, 2002. All shares repurchased were returned to the status of authorized but unissued shares. In accordance with the Company's common stock repurchase plans, 975,900 shares are still available for repurchase. 6. Net Income (Loss) Per Share --------------------------- Basic income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted income (loss) per share is computed by dividing net income (loss) 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 (loss) per common share and diluted earnings (loss) per common share are reconciled below. Three Months Ended Six Months Ended June 30, June 30, ---------------------- -------------------- (Shares in Thousands) (Shares in Thousands) 2002 2001 2002 2001 ------ ------ ------ ------ Average shares outstanding for basic earnings (loss) per share 7,858 8,265 8,050 8,274 Dilutive effect of stock options - - - - ----- ----- ----- ----- Average shares outstanding for diluted earnings (loss) per share 7,858 8,265 8,050 8,274 ===== ===== ===== =====
Excluded from the calculation of earnings (loss) per share for the three and six months ended June 30, 2002 are 823,000 common stock options which, if included, would have an antidilutive effect. 7. Goodwill and Other Intangible Assets - Adoption of Statement of Financial --------------------------------------------------------------------------- Accounting Standards No. 142 ---------------------------- The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, "Accounting for Goodwill and Other Intangible Assets" (SFAS No. 142), in June 2001. This statement provides guidance on 9 how to account for existing goodwill and intangible assets from completed acquisitions. In accordance with this statement, the Company adopted SFAS No. 142 in the first quarter of 2002. The Company discontinued the amortization of goodwill and has determined that there is no impairment to goodwill at this time. The following table presents the income (loss) and income (loss) per share on a proforma basis as though goodwill amortization had not been recorded in 2001. Three Months Ended Six Months Ended June 30, June 30, ---------------------- -------------------- 2002 2001 2002 2001 ------ ------ ------ ------ Net income (loss): Reported net income (loss) ($ 485) $ 43 ($1,079) ($ 644) Add back goodwill amortization - 36 - 72 ------ ------ ------ ------ Adjusted net income (loss) ($ 485) $ 79 ($1,079) ($ 572) ====== ====== ====== ====== Basic and diluted income (loss) per share: Reported net income (loss) per share ($ .06) $ .01 ($ .13) ($ .08) Goodwill amortization - - - .01 ------ ------ ------ ------ Adjusted net income (loss) per share ($ .06) $ .01 ($ .13) ($ .07) ====== ====== ====== ======
8. New Accouting Standards ----------------------- In July 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146"). SFAS 146 will be effective for the Company for disposal activites initiated after December 31, 2002. The Company is in the process of evaluating the effect that adopting SFAS 146 will have on its financial statements. 10 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 June 30, 2002, the Company had cash and cash equivalents of approximately $2.2 million. Cash equivalents of $1.8 million consisted of U.S. Treasury bills with an original maturity of less than three months and yields ranging between 1.67% and 1.73%. The Company had working capital of $7.5 million at June 30, 2002. At June 30, 2002 the Company did not comply with a certain covenant of a loan agreement. The Company received a waiver of such non-compliance from the lender. Additionally, the loan agreement was extended from June 30, 2002 to December 31, 2002. The Company has commenced discussions with existing and other lenders to explore the opportunity to refinance some or all of its debt. Although there are no assurances, management believes that the Company will successfully refinance its debt. The management of the Company believes that its financial resources and anticipated cash flows will be sufficient for future operations. Net cash of $546,000 was provided by operations for the six months ended June 30, 2002, compared to net cash provided by operations of $739,000 for the same period in 2001. In the six months ended June 30, 2002, cash flows from the net loss of $1,079,000 were offset by depreciation and amortization and a decrease in inventory. In 2001, the net cash provided by operations was primarily attributable to the change in inventories, change in accounts payable and accrued liabilities and depreciation and amortization, offset by the change in receivables and the net loss. Net cash of $134,000 and $575,000 was used in investing activities in the six months ended June 30, 2002 and 2001, respectively due primarily to the purchase of machinery and equipment. Net cash of $864,000 was used in financing activities for the six months ended June 30, 2002 compared to net cash used in financing activities of $633,000 for the six months ended June 30, 2001. Changes in notes payable and the repurchase of common stock were the reasons for the cash used. For more information on borrowings, see Note 4 of Notes to Consolidated Financial Statements. 11 Results of Operations - --------------------- The Company's operations resulted in a net loss of $485,000, or $.06 basic and diluted net loss per share, for the three months ended June 30, 2002 compared to net income of $43,000, or $.01 basic and diluted net income per share, for the comparable period in 2001. The net loss was $1,079,000 or $.13 basic and diluted loss per share for the six months ended June 30, 2002 compared to a net loss of $644,000 or $.08 basic and diluted loss per share for the comparable period in 2001. The Company, through its wholly-owned subsidiary, Pure World Botanicals, Inc., had sales of $4.3 million for the quarter ended June 30, 2002, compared to sales of $6.2 million for the comparable quarter in 2001, a decrease of $1.9 million, or 31%. For the six months ended June 30, 2002, sales were $7.9 million compared to sales of $10.3 million for the comparable period in 2001, a decrease of $2.5 million or 24%. For the quarters ended June 30, 2002 and 2001, the gross margin (sales less cost of goods sold) was $530,000, or 12% of sales and $1,265,000, or 21% of sales, respectively. For the six months ended June 30, 2002 and 2001, the gross margin was $999,000 or 13% of sales and $1,745,000 or 17% of sales, respectively. The decrease in gross margin was due to the change in the product sales mix and competitive pricing pressures. Interest income was $14,000 and $35,000 for the three months ended June 30, 2002 and 2001, respectively. Interest income was $28,000 and $80,000 for the six month periods ended June 30, 2002 and 2001, respectively. Lower invested balances and lower yields on investments were the reasons for the decrease. Selling, general and administrative expenses were $1,029,000 for the three months ended June 30, 2002, a decrease of $200,000 or 16% from $1,229,000 for the comparable period in 2001. Selling, general and administrative expenses were $2,134,000 for the six months ended June 30, 2002 compared to $2,515,000 for the comparable period in 2001, a decrease of $381,000 or 15%. This decrease was due principally to lower interest expense, lower personnel expenses and the elimination of goodwill amortization. 12 PART II - OTHER INFORMATION - ------- ----------------- Item 6. - Exhibits and Reports on Form 8-K - ------- -------------------------------- (a) Exhibits -------- 99.1 - Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K ------------------- None 13 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 14, 2002 By:/s/ Sue Ann Itzel ----------------------- Sue Ann Itzel Vice President (Principal Accounting Officer) 14 EX-99 3 exhib99.txt Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. 1350, as adopted), Paul O. Koether, the Chairman of Pure World, Inc., (the "Company"), and Sue Ann Itzel, the Vice President, Treasurer and Assistant Secretary of the Company each hereby certifies that, to the best of their knowledge: 1. The Company's Quarterly Report on Form 10-QSB for the period ended June 30, 2002, to which this Certification is attached as Exhibit 99.1 (the "Periodic Report"), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Periodic Report and results of operations of the Company for the period covered by the Periodic Report. Dated: August 14, 2002 /s/ Paul O. Koether - ------------------------------------ Paul O. Koether Chairman /s/ Sue Ann Itzel - ------------------------------------ Sue Ann Itzel Vice President, Treasurer and Assistant Secretary -----END PRIVACY-ENHANCED MESSAGE-----