-----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, RSVUsJPTxLjSeKB6WEtkUktc9Q25RH0bLZaxKLzbT3kkTsUAQQx5DcZEtoez16+d JpYXMXyVHbZdIJv26T5hig== 0000356446-96-000008.txt : 19960329 0000356446-96-000008.hdr.sgml : 19960329 ACCESSION NUMBER: 0000356446-96-000008 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PURE WORLD INC CENTRAL INDEX KEY: 0000356446 STANDARD INDUSTRIAL CLASSIFICATION: [9995] IRS NUMBER: 953419191 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-10566 FILM NUMBER: 96540168 BUSINESS ADDRESS: STREET 1: P O BOX 74 STREET 2: 376 MAIN STREET 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: AMERICAN HOLDINGS INC /DE/ DATE OF NAME CHANGE: 19940411 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTER MEMORIES INC /DE/ DATE OF NAME CHANGE: 19940411 EX-27 1 FDS --
5 This Schedule contains summary financial information extracted from the Form 10-KSB of Pure World, Inc. for the year ended December 31, 1995 and is qualified in its entirety by reference to such financial statements. 0000356446 PURE WORLD, INC. 1000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 9,357 1,809 940 100 1,561 13,906 1,579 153 19,187 2,221 0 0 0 77 16,889 19,187 6,173 7,451 3,891 7,381 0 0 18 52 11 41 0 0 0 41 .01 .01
10KSB 2 FOR THE YEAR ENDED DEC-31-95 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB MARK ONE: [X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended December 31, 1995 [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from ________________ to _________________. Commission file number 0-10566 PURE WORLD, INC. (FORMERLY AMERICAN HOLDINGS, INC.) (Name of small business issuer in its charter) Delaware 95-3419191 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 376 Main Street, P.O. Box 74, Bedminster, New Jersey 07921 (Address of principal executive offices with Zip Code) Issuer's telephone number, including area code (908) 234-9220 Securities registered under Section 12(b) of the Exchange Act: NONE Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.01 per share 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 ____ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ X ] Issuer's revenues for the fiscal year ended December 31, 1995 were approximately $7.5 million. At February 29, 1996, there were 7,704,957 shares of common stock outstanding. The aggregate market value of the common stock held by non-affiliates of the registrant, based on the closing price of such stock on such date as reported by NASDAQ, was approximately $14,900,000. Transitional Small Business Disclosure Format Yes ____ No X PART I ITEM 1. - DESCRIPTION OF BUSINESS DISPOSITION OF A SUBSIDIARY On September 21, 1993, the Board of Directors of Pure World, Inc. (the "Company" or "Pure World") approved the distribution of the common stock of NorthCorp Realty Advisors, Inc. ("NorthCorp"), a real estate asset manager and a wholly-owned subsidiary of the Company, to all holders of the Company's outstanding common stock (the "Distribution"). Under the plan of distribution, the Company declared a dividend of one share of NorthCorp common stock outstanding for every two shares of the Company's common stock outstanding on the record date of the Distribution, July 8, 1994. At the date of the Distribution (July 11, 1994), 8,250,000 shares of NorthCorp common stock were outstanding. Approximately 4,000,000 shares, or 48% of NorthCorp's common stock were distributed to the stockholders of the Company. On August 4, 1994, the Company sold substantially all of its remaining interest in NorthCorp to Mr. R. E. Roark and NorthCorp for approximately $1.5 million. Mr. Roark was the sole shareholder of Crown Revenue Services, Inc. ("Crown"), a real estate asset manager. As part of the transaction, Crown was reorganized as a subsidiary of NorthCorp. NorthCorp also assumed the lease of the Company's Washington D.C. office and the employment contract of one of the Company's executive officers. ACQUISITION OF MADIS BOTANICALS, INC. The Company manufactures natural products through its 83% owned subsidiary, Madis Botanicals, Inc. ("Madis"). On January 3, 1995, a wholly-owned subsidiary of the Company merged (the "Merger") with Dr. Madis Laboratories, Inc. (subsequently renamed Madis Botanicals, Inc.), a New Jersey corporation located in South Hackensack, New Jersey. The surviving corporation is owned 83% by the Company and 17% by the former shareholders of Madis. The Merger was effected in connection with a Plan of Reorganization (the "Plan") filed by the predecessor corporation in Chapter 11 proceedings under the Federal Bankruptcy Law. Under the terms of the Merger, the Company financed the Plan which provided for the payment of $3.2 million, of which approximately $2.3 million was advanced by the Company and approximately $900,000 was paid by Madis from funds on hand. The balance of the predecessor corporation's indebtedness was assumed by the surviving corporation and will be paid as due from working capital or by the Company in the event of any deficiency. Madis had sales of $6.2 million, $6.0 million and $5.2 million in 1995, 1994, and 1993, respectively. The natural product industry is very competitive, but is not dominated to any significant degree by any one producer. Madis has been operating continuously in this industry since 1959 and has developed expertise in the manufacturing of hundreds of natural products. Madis products, sold throughout the world, include flavor extracts, aloe, oleoresins and glycolic extracts. Madis also provides custom manufacturing, spray-drying and blending services for customers. Madis obtains raw materials from a variety of sources and is not dependent on any one supplier. Madis is regulated by the Food and Drug Administration ("FDA") and the New Jersey Department of Health in matters of cleanliness, labeling and manufacturing practices. Madis is also regulated by the Occupational Safety and Health Administration in matters of general safety in the operation of its manufacturing facility, and the Bureau of Alcohol, Tobacco and Firearms in its use of alcohol in its production process. The United States Department of Agriculture may also inspect the raw materials used in production. Madis is a member in good standing of the Institute of Food Technologies, the Cosmetic Toiletries and Fragrance Association, the Society of Cosmetic Chemists, the Aloe Council, the Synthetic Organic Chemical Manufacturing Association and the National Nutritional Foods Association. The Madis production facilities are certified by the FDA for food and pharmaceutical production and have kosher-product certification. EMPLOYEES At February 29, 1996, the Company had 50 full-time employees, 42 of whom were employed by Madis. ITEM 2. - DESCRIPTION OF PROPERTY On February 1, 1994, the Company entered into a five-year lease agreement with an affiliate for 1,700 square feet of office space at a monthly rate of approximately $3,600. Prior to that date, the Company leased the same space from the affiliate on a month-to-month basis. Madis leases a 125,000 square-foot facility in South Hackensack, New Jersey, from an affiliated corporation (the "Madis Affiliate") owned by the minority shareholders of Madis for $20,000 per month, net, plus one percent of the gross revenues of Madis up to an additional $200,000 per annum. The lease has a term of five years and expires in December 1999 with renewal options for fifteen additional years. The Company believes this rental rate represents the fair market value of the lease. This facility includes a 20,000 square-foot office area; a 10,000 square-foot laboratory; manufacturing space of 70,000 square feet; and warehousing space of 25,000 square feet. In connection with the Merger, the Madis Affiliate borrowed $200,000 from the Company (the "First Loan") in 1995, and the Madis Affiliate and its shareholders borrowed $205,000 in 1994 from the Company (the "Second Loan"). Both Loans bear interest at the rate of 2% above the Citibank prime rate (but in no event more than 13%) and are collateralized by the Madis facility. The First Loan is repayable at $10,000 per month plus interest commencing February 1, 1995 until it is satisfied, and thereafter the Second Loan will be repaid at the rate of $10,000 per month plus interest until it is satisfied. The First Loan and Second Loan have principal balances of approximately $90,000 and $205,000, respectively, as of December 31, 1995. Madis also leases a warehouse facility in Teterboro, New Jersey for $120,000 per year from an unrelated party. The lease has a two-year term with a renewal option for one three-year period at rates up to $130,000 per year. ITEM 3. - LEGAL PROCEEDINGS ENVIRONMENTAL MATTERS In connection with the Plan, Madis was required to undertake up to $280,000 in costs to perform specified remedial environmental activities at the South Hackensack facility, including the removal of certain underground storage tanks, which was accomplished during 1995. The remaining accrued liability at December 31, 1995 was approximately $179,000. The Company believes this accrued liability will be sufficient to perform all required remaining remediation activity. OTHER The Company is involved from time to time in various lawsuits that arise in the course of its business and the outcome of which, if adverse, would not have a material affect on the financial condition and results of operations of the Company. ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS At February 29, 1996, the Company had approximately 3,000 stockholders of record. The Company's common stock currently trades on the NASDAQ/National Market System under the symbol "PURW." The following table sets forth the high and low closing prices for the common stock for the periods indicated, as reported by NASDAQ on the National Market System. Calendar Quarter Ended:
High Low ------ ----- 1995 March 31 ........................ $ 1 3/4 $ 1 3/8 June 30 ......................... 1 15/16 1 7/16 September 30 .................... 3 1/2 1 7/8 December 31 ..................... 3 1/16 1 7/8 1994 March 31 ........................ $ 1 17/32 $ 1 3/8 June 30 ......................... 1 1/2 1 11/32 September 30 .................... 1 5/16 1 5/16 December 31 ..................... 1 5/8 1 9/32
The Company distributed one share of NorthCorp common stock for every two shares of the Company's common stock outstanding on the record date of the distribution, July 8, 1994. At the date of the Distribution (July 11, 1994), 8,250,000 shares of NorthCorp common stock were outstanding. Approximately 4 million shares, or 48%, of NorthCorp's common stock were distributed to the stockholders of the Company. This distribution was not taxable to the stockholders of the Company, assuming the individual shareholder's cost basis in the shares of the Company exceeded the fair market value of the shares of NorthCorp at the date of distribution. The Company had not declared or paid any other dividends on its common stock and does not foresee doing so in the immediate future. ITEM 6. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DISPOSITION OF A SUBSIDIARY On September 21, 1993, the Board of Directors of the Company approved a plan to distribute the common stock of NorthCorp Realty Advisors, Inc. ("NorthCorp"), a real estate asset manager and a wholly-owned subsidiary of the Company, to all holders of the Company's outstanding common stock (the "Distribution"). Under the plan of distribution, the Company declared a dividend of one share of NorthCorp common stock for every two shares of the Company's common stock outstanding on the record date of the Distribution, July 8, 1994. At the date of distribution (July 11, 1994), 8,250,000 shares of NorthCorp common stock were outstanding. Approximately 4,000,000 shares, or 48%, of NorthCorp's common stock were distributed to the stockholders of the Company. On August 4, 1994, the Company sold substantially all of its remaining interest in NorthCorp ("the Sale") to Mr. R. E. Roark and NorthCorp for approximately $1.5 million. Mr. Roark was the sole shareholder of Crown Revenue Services, Inc. ("Crown"), a real estate asset manager. As part of the transaction, Crown was reorganized as a subsidiary of NorthCorp. NorthCorp also assumed the lease of the Company's Washington, D.C. office and the employment contract of one of the Company's executive officers. The net gain on sale was $378,000. NorthCorp's results of operations have been included in the consolidated financial statements through the date of sale in 1994 as equity in the earnings of disposed-of subsidiary. Since its acquisition in June 1992 and until the date of sale, NorthCorp made dividends and payments under a tax-sharing agreement to the Company aggregating approximately $4.9 million. ACQUISITION OF MADIS BOTANICALS, INC. On January 3, 1995, one of the Company's wholly-owned subsidiaries merged (the "Merger") with Dr. Madis Laboratories, Inc., a New Jersey corporation located in South Hackensack, New Jersey. The surviving corporation in the Merger operates under the name of Madis Botanicals, Inc. ("Madis") and is owned 83% by the Company and 17% by the former shareholders of Madis. In addition, the Company issued to the former Madis shareholders options to acquire 250,000 shares of the Company's Common Stock at its approximate fair value of $2.10 per share. Madis, a manufacturer of natural products, had sales of approximately $6.0 million in 1994 and $6.2 million in 1995. The Merger was effected in connection with a Plan of Reorganization (the "Plan") filed by the predecessor corporation in Chapter 11 proceedings under the Federal Bankruptcy Law. The Plan was confirmed on November 29, 1994 by the United States Bankruptcy Court in Newark, New Jersey. Under the terms of the Merger, the Company financed the Plan which provided for the payment to the creditors of $3.2 million, of which approximately $2.3 million was advanced by the Company and approximately $900,000 was paid by Madis from funds on hand. The balance of the predecessor corporation's indebtedness was assumed by the surviving corporation and will be paid as due from working capital or by the Company in the event of any deficiency. Two principal shareholders of Madis, who were also executive officers, received employment agreements under which one will serve as Chairman Emeritus of the surviving corporation for a period of three years at an annual salary of $100,000 and the other will serve as an executive officer for a period of four years at an annual salary of $150,000. The premises occupied by the surviving corporation will be leased from a corporation owned by the former Madis shareholders at an annual rent of $240,000, net, plus 1% of gross revenues up to an additional $200,000 per annum. The Company believes the rental represents the fair market value. PROFORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION Proforma consolidated condensed financial information is included in Note 4 of Notes to Consolidated Financial Statements. The results of operations have been adjusted to reflect the disposition of NorthCorp and the Washington, D.C. office of the Company (the "Disposition") had the Disposition taken place on January 1, 1994. The results of operations also include the operations of Madis as if the acquisition of Madis had taken place on the same date. The proforma financial information is not intended to reflect results of operations which would have actually resulted had these transactions been effected on the dates indicated. Moreover, this proforma financial information is not intended to be indicative of results of operations which may be attained in the future. This information should be read in conjunction with the audited historical consolidated financial statements contained in this Form 10-KSB. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1995, the Company had cash and cash equivalents of $9.4 million. Cash equivalents consisted of treasury bills with maturities of less than three months and yields of approximately 5.4 percent. Cash and cash equivalents of $3.2 million were used for the acquisition of Madis. The Company also had marketable securities with a current market value of approximately $3.7 million at December 31, 1995. The Company has no funded debt. 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. In connection with the acquisition of NorthCorp by the Company in 1992, two officers of NorthCorp were paid an aggregate of $1,125,000 by NorthCorp, which was used to acquire an aggregate of 750,000 shares of Company stock ("Officer Shares"). In addition, the Company advanced $180,000 to each of the officers to pay federal income taxes resulting from this cash payment. The advances bore interest at the minimum rate allowed under the Internal Revenue Code and were secured by their shares of the Company's common stock. The advances and accrued interest were repaid by the officers from the proceeds of a partial sale of the Officer Shares to the Company in February 1994 in connection with their resignation as officers and directors of NorthCorp. The remaining shares were subsequently repurchased from the Officers in 1994. In February 1994, the Company announced a plan to purchase up to two million shares of the Company's common stock, subject to market conditions and other considerations (the "Repurchase Plan"). As of December 31, 1994, 475,963 shares had been acquired at an aggregate cost of approximately $648,000, and as of December 31, 1995, 497,167 shares had been acquired under the Repurchase Plan for an aggregate cost of approximately $679,000. In total, the Company repurchased 1,225,963 shares in 1994 (475,963 in connection with the Repurchase Plan) for an aggregate cost of approximately $1.9 million, and 21,204 shares (in connection with the Repurchase Plan) were acquired in 1995 for an aggregate cost of approximately $31,000. All shares repurchased in 1994 and 1995 have been canceled and returned to the status of authorized but unissued shares. RESULTS OF OPERATIONS The Company's consolidated operations resulted in net income of $41,000, or $.01 per share, in 1995, compared to net income of $26,000 in 1994. The consolidated results of operations for 1994 reflect the net gain on the sale of the Company's remaining interest in NorthCorp of $378,000 and the equity in its earnings until the date of disposition of $464,000. Madis had sales in 1995 of approximately $6.2 million compared to sales of approximately $6.0 million in 1994 prior to the acquisition. Cost of goods sold was $3.9 million and gross margin was $2.3 million in 1995, compared to cost of goods sold of $4.0 million and gross profit of $2.0 million in 1994 prior to the acquisition. Since the acquisition of Madis was accounted for as a purchase, the results of operations of Madis have been included in the consolidated financial statements since January 3, 1995, the date of acquisition. Financial information of Madis from 1994 has been included herein for comparison purposes only. Interest, dividend and other income was $871,000 in 1995, a decrease of $76,000, or 8% from the $947,000 recorded in 1994. Interest income was $638,000 in 1995, an increase of $6,000, or 1% from the $632,000 recorded in 1994. Dividend income was $178,000 in 1995 compared to $68,000 in 1994, an increase of $110,000. The increase in dividends was due to an increased dividend rate from the securities available-for-sale. All other income decreased from $247,000 in 1994 to $55,000 in 1995. This decrease in all other income was due principally to the revenue from operation of the Washington DC office of the company, which was disposed of on August 4, 1994. In 1995, other income mostly consisted of gains on the disposition of unneeded equipment at Madis. In 1995, the Company recorded net gains on marketable securities of $407,000, compared to net gains of $13,000 in 1994. The Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities", on January 1, 1994. As a result, net gains on marketable securities in 1995 are composed of net realized gains of $143,000 and net unrealized gains of $264,000. Gains on marketable securities in 1994 were composed of realized gains of $50,000 and net unrealized losses of $37,000. Total shareholders' equity was decreased at December 31, 1995 by $101,000, a valuation allowance recorded to reflect the decrease in current market value in securities available-for-sale from its cost basis. The current valuation allowance of $101,000 reflects an increase in the market value of the securities available-for-sale of $641,000 from December 31, 1994. This allowance was related primarily to the Company's investment in a real estate investment trust ("REIT"). The Company has undertaken several proxy contests to protect its investment in the REIT and to obtain control of the REIT's Board of Directors. General and administrative expenses were $3.5 million in 1995, compared to $1.8 million in 1994, an increase of approximately $1.7 million. The increase was mainly due to additional expenses associated with the acquisition and operation of Madis in 1995. Personnel expenses increased due principally to the increased headcount which resulted from the acquisition of Madis. Professional fees increased due to consulting fees incurred for product development and increased audit fees due to the acquisition and operations of Madis. Other expenses represent other operating expenses such as advertising, sales commissions, and marketing expenses incurred in the operations of Madis. ITEM 7. - FINANCIAL STATEMENTS The financial statements filed with this item are listed below: Independent Auditors' Report Consolidated Financial Statements: Consolidated Balance Sheet as of December 31, 1995 Consolidated Statements of Operations for the Years ended December 31, 1995 and 1994 Consolidated Statements of Stockholders' Equity for the Years ended December 31, 1995 and 1994 Consolidated Statements of Cash Flows for the Years ended December 31, 1995 and 1994 Notes to Consolidated Financial Statements INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Pure World, Inc.: We have audited the accompanying consolidated balance sheet of Pure World, Inc. and subsidiaries as of December 31, 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for the two years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Pure World, Inc. and subsidiaries as of December 31, 1995, and the results of their operations and their cash flows for the two years then ended in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for marketable securities effective January 1, 1994 to conform to Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". DELOITTE & TOUCHE LLP Parsippany, New Jersey March 18, 1996 PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 1995 (in $000's)
ASSETS Cash and cash equivalents .............................. $ 9,357 Trading securities ..................................... 1,809 Accounts receivable, net of allowance for uncollectible accounts and returns and allowances of $100 .................................. 840 Inventories, net ....................................... 1,561 Other current assets ................................... 339 ------- Total current assets ............................. 13,906 ------- Securities available-for-sale .......................... 1,909 Furniture and equipment, net ........................... 1,426 Notes receivable from affiliates ....................... 626 Goodwill, net of accumulated amortization of $86........ 1,320 ------- Total assets ..................................... $19,187 ======= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable ....................................... $ 169 Accrued expenses and other liabilities ................. 2,052 ------- Total liabilities ................................ 2,221 ------- Commitments and Contingencies Stockholders' equity: Common stock, par value $.01; 30,000,000 shares authorized; 7,704,957 shares issued and outstanding ............. 77 Additional paid-in capital ............................. 43,769 Accumulated deficit .................................... ( 26,779) Unrealized losses on securities available-for-sale .................................. ( 101) ------- Total stockholders' equity ........................ 16,966 ------- Total liabilities and stockholders' equity ....... $19,187 ======= See accompanying notes to consolidated financial statements.
PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in $000's, except per share data)
Year Ended December 31, ------------------------------ 1995 1994 ------ ------ Revenues: Sales ................................ $ 6,173 $ - Equity in earnings of disposed-of subsidiary ............ - 464 Net gain on sale of majority interest in disposed-of subsidiary - 378 Net gains on marketable securities ... 407 13 Interest, dividend and other income... 871 947 ------- ------- 7,451 1,802 ------- ------- Expenses: Cost of goods sold ................... 3,891 - Personnel ............................ 1,437 855 Professional fees .................... 965 634 Other ................................ 1,106 282 ------ ------- 7,399 1,771 ------- ------- Income before income taxes .............. 52 31 Provision for income taxes .............. 11 5 ------- ------- Net income .............................. $ 41 $ 26 ======= ======= Net income per share .................... $ .01 $ - ======= ======= Weighted average shares outstanding (in 000's) ................ 7,709 8,095 ======= ======= See accompanying notes to consolidated financial statements.
PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in 000's)
Unrealized Gains/(Losses) Total Additional Treasury Stock On Securities Stock- Total Shares Common Paid-In Accumulated ------------------ Available- holders Outstanding Stock Capital Deficit Shares Cost for-Sale Equity ----------- ----- --------- -------- -------- ------ --------------- ------- Balance, December 31, 1993 ......... 10,849 $108 $49,469 ($26,846) 1,897 ($3,330) $ - $19,401 Unrealized gains on securities available for sale at January 1, 1994 ................... -- -- -- -- -- -- 68 68 Change in unrealized losses in securities available- for-sale .......................... -- -- -- -- -- -- ( 810) ( 810) Net income ......................... -- -- -- 26 -- -- -- 26 Distribution of NorthCorp shares ............................ -- -- ( 897) -- -- -- -- ( 897) Purchase of treasury stock ......... -- -- -- -- 759 ( 1,217) -- ( 1,217) Common stock subject to put agreement ..................... -- -- -- -- -- 400 -- 400 Cancellation of treasury stock .............................( 2,656) ( 26) ( 4,121) -- (2,656) 4,147 -- -- Repurchase and cancella- tion of common stock ..............( 467) ( 5) ( 651) -- -- -- -- ( 656) ------- ---- ------- ------- ----- ------ ----- ------- Balance, December 31, 1994 ......... 7,726 $ 77 $43,800 ($26,820) -- $ -- ($ 742) $16,315 ======= ==== ======= ======= ===== ====== ===== ======= See accompanying notes to consolidated financial statements.
PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued) (in 000's)
Unrealized Gains/(Losses) Total Additional On Securities Stock- Total Shares Common Paid-In Accumulated Available- holders Outstanding Stock Capital Deficit for-Sale Equity ------------ ---------- ------- ----------- -------------- ------- Balance, December 31, 1994 .......... 7,726 $ 77 $43,800 ($26,820) ($742) $16,315 Change in net unrealized gains/ losses on securities available- for-sale ........................... -- -- -- -- 641 641 Net income .......................... -- -- -- 41 -- 41 Repurchase and cancellation of common stock .................... ( 21) -- ( 31) -- -- ( 31) ----- ---- ------- ------- ---- ------- Balance, December 31, 1995 .......... 7,705 $ 77 $43,769 ($26,779) ($101) $16,966 ===== ==== ======= ======= ==== ======= See accompanying notes to consolidated financial statements.
PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in $000's)
Year Ended December 31, ----------------------- 1995 1994 ------ ------ Cash flows from operating activities: Net income ......................................... $ 41 $ 26 Adjustments: Net gain on sale of disposed-of subsidiary ..... - ( 378) Depreciation and amortization .................. 211 14 Net trading securities and U.S. Treasury securities transactions ............. ( 584) ( 731) Change in inventories .......................... ( 102) - Change in receivables .......................... ( 147) 76 Change in accounts payable and other accruals ..................................... ( 1,490) ( 162) Other, net ..................................... 95 ( 1,238) ------- ------- Net cash used in operating activities .......... ( 1,976) ( 2,393) ------- ------- Cash flows from investing activities: Purchase of a business less cash acquired .......... ( 1,717) - Proceeds from sale of subsidiary ................... - 1,500 Purchase of furniture and equipment, net ........... ( 177) ( 6) Proceeds from sale of securities available- for-sale ......................................... - 69 Purchase of securities available-for-sale .......... ( 127) ( 1,515) Loans to affiliates ................................ ( 303) ( 463) Repayments of loans to affiliates .................. 160 360 Other, net ......................................... - ( 161) ------- ------- Net cash used in investing activities ................................... ( 2,164) ( 216) ------- ------- Cash flows from financing activities: Repurchase of common stock ......................... ( 31) ( 1,873) Other, net ......................................... 101 - ------- ------- Net cash provided by (used in) financing activities .................................... 70 ( 1,873) ------- ------- Net decrease in cash and cash equivalents ....... ( 4,070) ( 4,482) Cash and cash equivalents at beginning of period .......................................... 13,427 17,909 ------- ------- Cash and cash equivalents at end of period ........... $ 9,357 $13,427 ======= ======= See accompanying notes to consolidated financial statements.
PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1995 and 1994 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF CONSOLIDATION The consolidated financial statements include the accounts of Pure World, Inc. (the "Company" or "Pure World") and its wholly-owned subsidiaries after elimination of all material intercompany accounts and transactions. The results of operations of NorthCorp Realty Advisors, Inc. ("NorthCorp") are included in the Consolidated Statements of Operations as equity in the earnings of disposed-of subsidiary through the date of disposition in 1994. The acquisition of Madis Botanicals, Inc. ("Madis") described in Note 3 of Notes to Consolidated Financial Statements occurred on January 3, 1995 and was accounted for using the purchase method. Therefore, Madis' financial condition, results of operations, and cash flows are included in the consolidated financial statements from that date forward. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount 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. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist primarily of cash on hand, cash in banks and treasury bills purchased with an original maturity of three months or less. MARKETABLE SECURITIES The Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115") as of January 1, 1994. SFAS 115 provides that all investments are to be classified into three categories: debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost; debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1995 and 1994 included in the results of operations; and debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as available-for-sale securities reported at fair value with unrealized gains and losses excluded from the results of operations and reported as a separate component of stockholders' equity. The Company accounts for securities transactions on a trade-date basis. For computing realized gains or losses on sale of marketable securities, cost is determined on a first-in, first-out basis. The effect of all unsettled transactions is accrued in the consolidated financial statements. INVENTORIES Merchandise inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method of accounting. FURNITURE AND EQUIPMENT The Company records all furniture and equipment at cost. Depreciation is computed using the straight-line method over the related estimated useful life of the asset. Gains or losses on dispositions of furniture and equipment are included in operating results. Furniture and equipment as of January 3, 1995 was adjusted to their fair values in connection with the acquisition of Madis. GOODWILL Goodwill has been established in connection with the acquisition of Madis. Goodwill is being amortized using the straight-line method over a fifteen-year period. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts reported in the balance sheet for cash and cash equivalents, investments, accounts receivable and payables approximate their fair value. INCOME TAXES The Company follows the requirements of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). SFAS No. 109 requires an asset and liability approach for the accounting for income taxes. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1995 and 1994 NorthCorp's results of operations are included in the consolidated federal income tax return for the period from January 1, 1994 through the date of Distribution (see Note 2 of Notes to Consolidated Financial Statements). At December 31, 1995, the Company had net operating loss carryforwards for tax purposes that expire in various years through 2010 and are available to offset consolidated taxable income. NET INCOME PER SHARE Net income per share is calculated by dividing net income by the weighted average number of outstanding common stock and common equivalent stock, which consists of the dilutive effect of the assumed exercise of certain outstanding stock options when applicable. RECLASSIFICATIONS Certain reclassifications have been made to the 1994 consolidated financial statements to conform to the current year's presentation. 2. DISPOSITION OF A SUBSIDIARY On September 21, 1993, the Board of Directors of the Company approved the distribution of the common stock of NorthCorp, a real estate asset manager and a wholly-owned subsidiary of the Company, to all holders of the Company's outstanding common stock (the "Distribution"). Under the plan of distribution, the Company declared a dividend of one share of NorthCorp common stock for every two shares of the Company's common stock outstanding on the record date of the Distribution, July 8, 1994. At the date of Distribution (July 11, 1994), 8,250,000 shares of NorthCorp common stock were outstanding. Approximately 4,000,000 shares, or 48%, of NorthCorp's common stock were distributed to the stockholders of the Company. On August 4, 1994, the Company sold substantially all of its remaining interest in NorthCorp to Mr. R. E. Roark and NorthCorp for approxi- mately $1.5 million. Mr. Roark was the sole shareholder of Crown Revenue Services, Inc. ("Crown"), a real estate asset manager. As part of the transaction, Crown was reorganized as a subsidiary of NorthCorp. NorthCorp also assumed the lease of the Company's Washington, D.C. office and the employment contract of one of the Company's executive officers. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1995 and 1994 3. ACQUISITION OF MADIS On January 3, 1995, one of the Company's wholly-owned subsidiaries merged (the "Merger") with Dr. Madis Laboratories, Inc., a New Jersey corporation located in South Hackensack, New Jersey. The surviving corporation in the Merger operates under the Madis Botanicals, Inc. ("Madis") name and is owned 83% by the Company and 17% by the former shareholders of Madis. In addition, the Company issued to the former Madis shareholders options to acquire 250,000 shares of the Company's Common Stock at its approximate fair value at the date of acquisition. The Merger was effected in connection with a Plan of Reorganization (the "Plan") filed by the predecessor corporation in Chapter 11 proceedings under the Federal Bankruptcy law. The Plan was confirmed on November 29, 1994 by the United States Bankruptcy Court in Newark, New Jersey. Under the terms of the Merger, the Company financed the Plan which provided for Madis creditors to be paid approximately $3.2 million, of which approximately $2.3 million was advanced by the Company and approximately $900,000 was paid by Madis from funds on hand. The balance of the predecessor corporation's indebtedness was assumed by the surviving corporation and will be paid as due from working capital or by the Company in the event of any deficiency. Two principal shareholders of Madis, who were also executive officers, received employment agreements under which one will serve as Chairman Emeritus of the surviving corporation for a period of three years at an annual salary of $100,000 and the other will serve as an executive officer for a period of four years at an annual salary of $150,000. The premises occupied by the surviving corporation will be leased from an affiliated corporation owned by the minority shareholders of Madis at an annual rent of $240,000, net, plus 1% of gross revenues up to an additional $200,000 per annum. The Company believes the rental represents the fair value of this lease. The acquisition of Madis has been accounted for as a purchase. The excess of the purchase price over the fair value of the net identifiable assets acquired has been recorded as goodwill and is being amortized using the straight-line method over fifteen years. Minority interest is immaterial. The following is a summary of the allocation of the purchase price of approximately $3.2 million (in 000's): PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1995 and 1994 Current assets ...................... $2,200 Property and equipment .............. 1,300 Other assets ........................ 100 Current liabilities ................. ( 1,200) Other liabilities ................... ( 600) Goodwill ............................ 1,400 ------ $3,200 ======
4. PROFORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION (UNAUDITED) The proforma results of operations for 1994 have been adjusted to reflect the disposition of NorthCorp and the Washington, D.C. office of the Company (the "Disposition") had the Disposition taken place on January 1, 1994. The results of operations also include the operations of Madis as if the acquisition had taken place on the same date. The proforma financial information is not intended to reflect results of operations which would have actually resulted had these transactions been effected on the dates indicated. Moreover, this proforma financial data is not intended to be indicative of results of operations which may be attained in the future. Pure World, Inc. and Subsidiaries Proforma Consolidated Condensed Statement of Operations For the Year Ended December 31, 1994 (in $000's, except per share data) Revenues .......................... $ 6,436 Expenses: Cost of goods sold .............. 4,008 Other ........................... 3,081 ------- 7,089 ------- Loss before income taxes .......... ( 653) Provision for income taxes ........ - ------- Net loss .......................... ($ 653) ======= Loss per common share ............. ($ .08) ======= Weighted average shares outstanding (in 000's) .......... 8,095 =======
PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1995 and 1994 5. MARKETABLE SECURITIES At December 31, 1995, marketable securities consisted of the following (in $000's):
Gross Gross Cost Holding Holding Fair Basis Gains Losses Value --------- ------- ------- ----- Trading securities: Corporate debt securities .............. $ 115 $ 21 $ - $ 136 Equity securities ........ 1,467 206 - 1,673 ------- ------ ------ ------- Total ............. 1,582 227 - 1,809 ------- ------ ------ ------- Available-for-sale: Equity securities ........ 2,010 4 105 1,909 ------- ------ ------ ------- Total marketable securities ...... $ 3,592 $ 231 $ 105 $ 3,718 ======= ====== ====== =======
The corporate debt securities mature in the year 2009. Realized gains and losses of $169,000 and $26,000, respectively, as well as net unrealized gains of $264,000 were included in the results of operations for the year ended December 31, 1995. The unrealized loss on securities available-for-sale included as a separate component of consolidated stockholders' equity was approximately $101,000 at December 31, 1995. The unrealized losses and gains on trading securities included in the results of operations for the year ended December 31, 1994 were $48,000 and $11,000, respectively. 6. INCOME TAXES At December 31, 1995, the Company had net operating loss carryforwards of approximately $21.6 million for Federal income tax reporting purposes, which expire in the years 2001 to 2010. Additionally, the Company has investment and research and development tax credit carryforwards aggregating approximately $200,000 and $870,000, respectively, which expire from 1996 through 2000. The ultimate realization of the tax benefits from the net operating loss and tax credit carryforwards is dependent upon future taxable earnings of the Company. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1995 and 1994 The Company's federal income tax returns for the years ended March 31, 1987 and 1988 and for the nine months ended December 31, 1988 were examined by the Internal Revenue Service ("IRS"). The IRS challenged the deductibility of certain payments aggregating approximately $8.1 million made during those periods in connection with certain litigation settlements and legal fees primarily related to the settlement of a class action lawsuit. The Company disagrees with the IRS. The Company is precluded from challenging the IRS findings until such time as the Company utilizes the disputed loss carryforwards. Even though the Company intends to vigorously defend its position, there can be no assurance that the Company's position will be sustained. The components of income tax expense were as follows (in $000'S):
1995 1994 ------- ------- Federal: Current ........................... $ - $ - Deferred .......................... - - ------ ------ Total federal ................... $ - $ - ====== ====== State: Current ........................... $ 11 $ 5 Deferred .......................... - - ------ ------ Total state ..................... $ 11 $ 5 ====== ====== Total provision for income taxes ...................... $ 11 $ 5 ====== ======
PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1995 and 1994 Deferred income taxes reflect the tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss and tax credit carryforwards. The tax effects of significant items comprising the Company's net deferred tax asset as of December 31, 1995 are as follows (in $000's):
Deferred tax assets: Net operating loss carryforwards ................. $7,431 Alternative minimum tax ("AMT") and other credit carryforwards ................. 1,170 Other, net ....................................... 118 ------ $8,719 ====== Valuation allowance ................................ ($8,719) ====== Net deferred tax asset ............................. $ - ======
A reconciliation of the provision for income tax expense to the expected income tax expense (income before income taxes times the statutory tax rate of 34%) is as follows (in $000's):
1995 1994 ------ ------ Income before income taxes ........... $ 52 $ 31 Statutory federal income tax rate ........................... 34% 34% ------ ------ Expected income tax .................. 18 11 Dividends received deduction .........( 34) ( 16) State tax ............................ 7 3 Net gain on sale of majority interest in disposed-of subsidiary .. - ( 129) Change in valuation allowance ........ 54 114 Other, net ...........................( 34) 22 ------ ------ Provision for income taxes .......... $ 11 $ 5 ====== ======
PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1995 and 1994 The Tax Reform Act of 1986, as amended, provides for a parallel tax system which requires the calculation of AMT and the payment of the higher of the regular income tax or AMT. The Company also has an AMT credit carryforward of approximately $107,000 which will be allowed as a credit carryover against regular tax in the future in the event the regular tax exceeds the AMT tax. 7. COMMON STOCK STOCK REPURCHASES As part of the acquisition and merger of NorthCorp by the Company, two officers of NorthCorp were paid an aggregate of $1,125,000, which was used to acquire 750,000 shares of the Company's stock ("Officer Shares"). The two officers of NorthCorp could each require the Company to repurchase 100,000 of the Officer Shares at $2 per share. The Company repurchased these shares in February 1994 in connection with the officers' resignations as officers and directors of NorthCorp. The Company repurchased an additional 175,000 of the Officer Shares from each of the two officers at $1.50 per share in the first quarter of 1994. The Company repurchased the remaining 200,000 Officer Shares at $1.50 per share during the second quarter of 1994. In February 1994, the Company announced a plan to purchase up to two million shares of the Company's common stock, subject to market condi- tions and other considerations (the "Repurchase Plan"). As of December 31, 1994, 475,963 shares had been acquired under the Repurchase Plan for an aggregate cost of approximately $648,000. As of December 31, 1995, 497,167 shares had been acquired under the Repurchase Plan for an aggregate cost of approximately $679,000. In total, the Company repurchased 1,225,963 shares in 1994 (475,963 in connection with the Repurchase Plan) for an aggregate cost of approxi- mately $1.9 million, and 21,204 shares (in connection with the Repurchase Plan) were acquired in 1995 for an aggregate cost of approximately $31,000. All shares repurchased in 1994 and 1995 have been canceled and returned to the status of authorized but unissued shares. STOCK OPTIONS In August 1991, the Board of Directors of the Company adopted a Non-Qualified Stock Option Plan (the "Option Plan"). Under the Option Plan, non-qualified options to purchase up to an aggregate of 500,000 shares of common stock of the Company may be granted by the Board of Directors to officers, directors and employees of the Company at their fair market value at the date of grant. Options will expire five years from date of grant and will be exercisable as to one-half of the shares on the date of grant of the option and as to the other half, on the first anniversary of the date of grant of the option. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1995 and 1994 The following table summarizes option transactions under the Option Plan for the year ended December 31, 1994 and 1995:
Price Shares Range ------ ------- Options outstanding at December 31, 1993 ................ 245,000 $1.3125 - $1.75 Options granted .................... 10,000 $1.3125 Options canceled ................... - Options exercised .................. - ------- Options outstanding at December 31, 1994 ................ 255,000 $1.3125 - $1.75 Options granted in 1995 ............ 235,000 $1.71875 Options canceled ................... - Options exercised .................. - ------- Options outstanding at December 31, 1995 ................ 490,000 $1.3125 - $1.75 =======
In addition, in connection with the Madis acquisition, the Company issued to the former Madis shareholders options outside of the Option Plan to acquire 250,000 shares of the Company's common stock at its approximate fair value of $2.10 per share. Four employees of Madis were also given a total of 65,000 options outside of the Option Plan with prices ranging from $2.00 - $2.10, the approximate fair market value at the time of grant, in connection with their employment. At December 31, 1995, 492,500 options were exercisable. 8. COMPENSATION ARRANGEMENTS In April 1990, the Company entered into an employment and deferred compensation agreement (the "Agreement") with the Company's Chairman for an initial three-year term commencing on April 1, 1990 (the "Effective Date") at an annual salary of $185,000, which may be increased but not decreased at the discretion of the Board of Directors. In December 1992, the Board of Directors voted unanimously to increase the Chairman's salary to $215,000 per annum effective December 1, 1992. The term is to be automatically extended one day for each day elapsed after the Effective Date. The Chairman may terminate his employment under the Agreement under certain conditions specified in the Agreement, and the Company may terminate the Chairman's employment under the Agreement for cause. In the event of the Chairman's death during the term of the Agreement, his beneficiary shall be paid a PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1995 and 1994 monthly death benefit equal to $215,000 per year for three years payable in equal monthly installments. Should the Chairman become "disabled" (as such term is defined in the Agreement) during the term of the Agreement, he shall be paid an annual disability payment equal to 80 percent of his base salary plus cash bonuses in effect at the time of the disability. Such disability payments shall continue until the Chairman attains the age of 70. The Company accrued approximately $35,000 in each of 1994 and 1995 for the contingent payments provided under the terms of the Agreement. In connection with the Madis acquisition, two employees were given employment agreements commencing January 3, 1995. The Chairman Emeritus of Madis entered into an employment contract with Madis for a three-year period at an annual salary of $100,000. An executive officer of Madis entered into an employment agreement with Madis for a term of four years at an annual salary of $150,000. Both of the employment arrangements may be terminated for cause, as defined in the contract. 9. COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS The Chairman of the Company is the Chairman of a brokerage firm which provided investment services to the Company during the years ended December 31, 1995 and 1994. Brokerage commissions paid by the Company totaled approximately $42,000 in 1995 and $51,000 in 1994. The Chairman of the Company is also the President of Sun Equities Corporation ("Sun"), the Company's principal stockholder. The Company reimburses Sun for the Company's proportionate share of the cost of certain group medical insurance and office supplies. Such reimbursements for the years ended December 31, 1995 and 1994 amounted to approximately $64,000 and $72,000, respectively. Rosenman & Colin ("R&C") performed substantial legal work for the Company and its subsidiaries in 1995. Natalie I. Koether, President of Madis and the wife of the Chairman of the Company, is of counsel to R&C. Aggregate fees and expenses billed to the Company and its subsidiaries were approximately $630,000 in 1995 and $615,000 in 1994. The 1995 professional fees represented work performed primarily in association with proxy contests undertaken in connection with one of the Company's investments and the acquisition and operation of Madis. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1995 and 1994 Madis leases a 125,000 square-foot facility in South Hackensack, New Jersey, from an affiliated corporation ("Madis Affiliate") owned by the minority shareholders of Madis for $20,000, net, per month plus one per cent of the gross revenues of Madis up to an additional $200,000 per year over a term of five years expiring in December 1999 with renewal options for fifteen additional years. The Company believes this rental rate represents the fair market value. This facility includes a 20,000 square-foot office area; a 10,000 square-foot laboratory, manufacturing space of 70,000 square feet; and warehousing space of 25,000 square feet. The Company rents office space on a month-to-month basis from an affiliate. Such rent expense was approximately $43,000 in 1995 and $46,000 in 1994. In connection with the Merger, the Madis Affiliate borrowed $200,000 from the Company (the "First Loan") in 1995, and the Madis Affiliate and its shareholders borrowed $205,000 in 1994 from the Company (the "Second Loan"). Both Loans bear interest at the rate of 2% above the Citibank prime rate (but in no event more than 13%) and are collateralized by the Madis facility. The First Loan is repayable at $10,000 per month plus interest commencing February 1, 1995 until it is satisfied and thereafter the Second Loan will be repaid at the rate of $10,000 per month plus interest until it is satisfied. The current balances of the First Loan and the Second Loan were approximately $90,000 and $205,000, respectively, at December 31, 1995. In connection with the Plan, Madis was required to undertake up to $280,000 in costs to perform specified remedial environmental activi- ties at the South Hackensack facility, including the removal of certain underground storage tanks, which was accomplished during 1995. The remaining accrued liability at December 31, 1995 is approximately $179,000. The Company believes this accrued liability will be suf- ficient to perform all required remaining remediation activity. During 1995, the Company loaned money to an officer of the Company and to an officer of Madis to acquire common stock ("Stock") of the Company in the open market. These loans, amounting to $86,000, are non-recourse loans collateralized by the Stock, bearing interest at the minimum rate required under the Internal Revenue Code to avoid imputation of interest. Also in 1995 in connection with the acquisition of Madis, the Company loaned $210,000 to Voldemar Madis, who serves as Vice-Chairman of the Company and of Madis. In the past, Mr. Madis had made loans for the same amount to Dr. Madis Laboratories, Inc. while it operated under protection of Federal Bankruptcy Law. These loans were not repaid when Dr. Madis Laboratories, Inc. was removed from bankruptcy. The loan made to Mr. Madis by the Company bears interest at a rate of 8.125%, has a five-year term, and is collateralized by Mr. Madis' personal residence. Madis also leases a warehouse facility in Teterboro, New Jersey for $120,000 per year from an unrelated party. The two-year lease has a renewal option for one three-year period at rates up to $130,000 per year. Item 8. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III Item 9. - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The five members of the Board of Directors were elected at the 1995 Annual Meeting of Stockholders and will serve until the next Annual Meeting of Stockholders or until their successors are duly elected and qualified. The Company's officers are elected by and serve at the leave of the Board. None of the executive officers of the Company is related to any other. There is no arrangement or understanding between any executive officer and any other person pursuant to which such officer was elected. The directors and executive officers of the Company at February 29, 1996 were as follows:
Position and Office Presently Held with Director Name of Person Age the Company Since - -------------- ----- ------------------- -------- Paul O. Koether .......... 59 Chairman, President 1988 and Director of the Company; Chairman of Madis Richard M. Bossert ....... Director 1990 Mark W. Jaindl ........... 36 Director 1994 Alfredo Mena ............. 43 Director 1992 William Mahomes, Jr. ..... 49 Director 1993 Deceased
Paul O. Koether is principally engaged in the following businesses: (i) the Company, as Chairman since April 1988, President since April 1989, a director since March 1988, and for more than five years as the Chairman and President of Sun Equities Corporation ("Sun"), a private, closely-held corporation which is the Company's principal stockholder; (ii) as Chairman of Madis Botanicals, Inc., ("Madis") since January 1995 and as a director since December 1994; (iii) as Chairman and director since July 1987 and President since October 1990 of Kent Financial Services, Inc. ("Kent") which engages in various financial services, including the operation of a retail brokerage business through its wholly-owned subsidiary, T. R. Winston & Company, Inc. ("Winston") and the general partner since 1990 of Shamrock Associates, an investment partnership which is the principal stockholder of Kent; (iv) various positions with affiliates of Kent, including Chairman since 1990 and a registered representative since 1989 of Winston; and (v) since July 1992, as Chairman of American Metals Service, Inc., which is currently seeking to acquire an operating business. Prior to August 1994, Mr. Koether also served as a Chairman and director of NorthCorp Realty Advisors, Inc., formerly a subsidiary of the Company. Mark W. Jaindl has served as Senior Vice President of the Company since June 1992 until May 1995 and as a director since October 1994. He was Senior Vice President of Madis from December 1994 until May 1995 and a director of Madis since December 1994. He has served as a director of American Metals Service, Inc. since July 1992. From October 1991 to June 1992, he was self-employed as an investment consultant. From May 1982 to October 1991 and again since May 1995, he has served as Chief Financial Officer of Jaindl Farms which is engaged in diversified businesses, including the operation of a 10,000-acre turkey farm, a mobile home park, a John Deere dealership, and a grain operation. Mr. Jaindl also served as the Chief Financial Officer of Jaindl Land Company, a developer of residential, commercial and industrial properties in eastern Pennsylvania. Mr. Jaindl was a director of NorthCorp from June 1992 until September 1994 and was Interim President of NorthCorp from February 1994 until August 1994. Alfredo Mena has served as a director of the Company since July 1992. He has been the President of CIA. Salvadorena de Inversiones, S.A. de C.V. since 1986 and had served as its Director and General Manager from 1974 to 1986. CIA. Salvadorena de Inversiones, S.A. de C.V. is engaged in coffee growing, pro- cessing and exporting. Mr. Mena is a citizen of El Salvador. Since October 4, 1995, Mr. Mena has served as the Presidential Commissioner for Privatization and Modernization of El Salvador. William Mahomes, Jr. is an attorney. Since 1994 he has been a Senior Shareholder of Locke Purnell Rain Harrell. From 1990 to 1994 he was a partner in the Dallas office of Baker & McKenzie. Prior to that, from 1987 to 1990, he served as Vice President and General Counsel of Pro-Line Corporation, which is engaged in the manufacture and distribution of hair care products. Mr. Mahomes currently serves on the Board of Directors of a variety of organizations, including the Bethlehem Foundation, The Salvation Army, MESBIC Financial Corporation, St. Philip's Academy, Dallas Black Chamber of Commerce, Dallas/ Fort Worth International Airport and the Dallas Opera. Item 10. - EXECUTIVE COMPENSATION The table below sets forth for the years ended December 31, 1995, 1994 and 1993, the compensation of any person who, as of December 31, 1995, was the Chief Executive Officer of the Company or who was among the four most highly compensated executive officers of the Company other than the Chief Executive Officer with annual compensation in excess of $100,000 ("Executive Officers").
Annual Compensation Long-Term Name and ------------------------- Compensation Other Principal Position Year Salary Bonus Options(#) ------- - ------------------ ---- -------- ------- ------------ Paul O. Koether .......... 1995 $215,000 $ - 50,000 $ - Chairman, President ...... 1994 215,000 35,000 - - and Chief Executive ...... 1993 215,000 50,000 - 2,473 Officer of the Company and Chairman of Madis Voldemar Madis ........... 1995 $150,000 $ - 36,115 $ - Vice Chairman of the Company and Madis - ---------------------------------------------------------- The Company currently has no bonus plan. Certain Executive Officers received incidental personal benefits during the fiscal years covered by the table. The value of these incidental benefits did not exceed the lesser of either $50,000 or 10% of the total annual salary and bonus reported for any of the Executive Officers. Such amounts are excluded from the table. Represents the amount of matching contributions made by the Company pursuant to a 401(k) plan. Options granted in conjunction with the acquisition of Madis Botanicals, Inc. on January 3, 1995. Mr. Madis was President of Dr. Madis Laboratories, Inc., the predecessor corporation of Madis, and IVM Corporation ("IVM"). Both IVM and Madis operated under the protection of Federal Bankruptcy Law for the five-year period prior to January 3, 1995, when Madis was acquired by the Company. Mr. Madis is currently President of IVM, the owner of the premises occupied by Madis. The terms of the lease and loans payable to the Company by IVM are described in "Item 2 - Description of Property".
OPTIONS GRANTED Under the Company's 1991 Non-Qualified Stock Option Plan (the "Plan"), non-qualified options to purchase up to an aggregate of 500,000 shares of the Company's Common Stock may be granted by the Board of Directors to officers, directors and employees of the Company, its subsidiaries or parent. The exercise price for the shares may not be less than the fair market value of the Common Stock on the date of grant. Options will expire five years from the date of grant and will be exercisable as to one-half of the shares on the date of grant and as to the other half, after the first anniversary of the date of grant, or at such other time, or in such other installments as may be determined by the Board of Directors or a committee thereof at the time of grant. The options are non-transferable (other than by will or by operation of the laws of descent) and are exercisable generally only while the holder is employed by the Company or by a subsidiary or parent of the Company or, in the event of the holder's death or permanent disability while employed by the Company, within one year after such death or disability. The table below contains information concerning the fiscal year-end value of unexercised options held by the Executive Officers. FISCAL YEAR-END OPTIONS VALUES
Value of Unexercised Number of Unexercised In-the-Money Options at 12/31/95 Options at 12/31/95 Name Exercisable/Unexercisable Exercisable/Unexercisable - --------------- ------------------------- ------------------------- Paul O. Koether 125,000 25,000 $63,281 $13,281 Voldemar Madis 14,446 21,669 $ 2,167 $ 3,250
401(k) PLAN The Company has established a Retirement Savings Plan pursuant to Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan permits employees of the sponsor to defer a portion of their compensation on a pre-tax basis. Employees who meet the 401(k) Plan's eligibility requirements may defer up to 15% of their compensation (base pay plus any bonuses and overtime) for the year. No participant, however, may have deferred more than $9,500 in 1995, which amount is indexed each year for inflation. The Company in previous years had elected to match an employee's contribution to the 401(k) Plan on the basis of 50% of the compensation an employee defers, however, as of June 1, 1993, the Company's matching election was discontinued. Federally mandated discrimination testing limits the amounts which highly paid employees may defer based on the amounts contributed by all other employees. Participant elective deferral accounts are fully vested and participant matching contribution accounts in the 401(k) Plan are vested in accordance with a graduated vesting schedule over a period of six years of service. All participant accounts in the 401(k) Plan are invested at the direction of the participants among several different types of funds offered by a large mutual fund management company selected by the Company. Distributions of account balances are normally made upon death, disability or termination of employment after normal retirement date (age 60) or early retirement date (age 55). However, distribution may be made at any time after an employee terminates employment. Participants may make withdrawals from their deferred accounts in the event of financial hardship but may not borrow from their accounts. Amounts payable to an employee are dependent on the employee's account balance, which is credited and debited with appropriate earnings, gains, expenses and losses of the underlying investment. Benefits are determined by contributions and investment performance over the entire period an employee participates in the 401(k) Plan. Payment is made in a single cash sum no later than sixty days following the close of the year in which the event giving rise to the distribution occurs. The Company does not have any other bonus, profit sharing, or compensation plans in effect. EMPLOYMENT AGREEMENTS In April 1990 the Company entered into an employment agreement (the "Agreement") with Mr. Koether, the Company's Chairman, for an initial three-year term commencing on April 1, 1990 (the "Effective Date") at an annual salary of $185,000 ("Base Salary"), which may be increased but not decreased at the discretion of the Board of Directors. The term is to be automatically extended one day for each day elapsed after the Effective Date. In December 1992, the Board of Directors voted to increase the Chairman's Base Salary to $215,000 effective December 1, 1992. The Chairman may terminate his employment under the Agreement at any time for "good reason" (defined below) within 36 months after the date of a Change in Control (defined below) of the Company. Upon his termination, he shall be paid the greater of (i) the Base Salary and any bonuses payable under the Agreement through the expiration date of the Agreement or (ii) an amount equal to three times the average annual Base Salary and bonuses paid to him during the preceding five years. Change in Control is deemed to have occurred if (i) any individual or entity, other than individuals beneficially owning, directly or indirectly, common stock of the Company representing 30% or more of the Company's stock outstanding as of April 1, 1990, is or becomes the beneficial owner, directly or indirectly, of 30% or more of the Company's outstanding stock or (ii) individuals constituting the Board of Directors on April 1, 1990 ("Incumbent Board"), including any person subsequently elected to the Board whose election or nomination for election was approved by a vote of at least a majority of the Directors comprising the Incumbent Board, cease to constitute at least a majority of the Board. "Good reason" means a determination made solely by Mr. Koether, in good faith, that as a result of a Change in Control he may be adversely affected (i) in carrying out his duties and powers in the fashion he previously enjoyed or (ii) in his future prospects with the Company. Mr. Koether may also terminate his employment if the Company fails to perform its obligations under the Agreement (including any material change in Mr. Koether's duties, responsibilities and powers or the removal of his office to a location more than five miles from its current location) which failure is not cured within specified time periods. In conjunction with the acquisition of Madis in January 3, 1995 by the Company, Madis entered into an employment agreement with Voldemar Madis to serve as an executive officer of Madis. Under the terms of the agreement, Mr. Madis will be employed for four years from the date of the agreement at an annual salary of $150,000. The agreement may be terminated for cause, as defined. Item 11. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth the beneficial ownership of Common Stock of the Company as of February 29, 1996, by each person who was known by the Company to beneficially own more than 5% of the Common Stock, by each director and officers as a group:
Number of Shares Approximate Name and Address of Common Stock Percent of Beneficial Owner Beneficially Owned of Class - ------------------- --------------------- ----------- Paul O. Koether 211 Pennbrook Road Far Hills, N.J. 07931 .................... 3,011,496 36.74% Sun Equities Corporation 376 Main Street Bedminster, N.J. 07921 ................... 2,234,296 27.26% Richard M. Bossert P.O. Box 209 Bedminster, N.J. 07921 ................... 33,500 Mark W. Jaindl 3150 Coffeetown Road Orefield, PA 18069 ........................ 145,720 1.78% William Mahomes, Jr. 2200 Ross Avenue, Suite 2700 Dallas, TX 75201 .......................... 7,500 Alfredo Mena P. O. Box 520656 Miami, Florida 33152 ...................... 9,500 Voldemar Madis 376 Huyler Street So. Hackensack, NJ 07606 .................. 14,446 Dimensional Fund Advisors, Inc. 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 .................... 433,400 5.29% All directors and officers as a group (6 persons) ............................... 3,222,162 39.31% - ------------------------------ The beneficial owner has both sole voting and sole investment powers with respect to these shares except as set forth in this footnote or in other footnotes below. Included in such number of shares beneficially owned are shares subject to options currently exercisable or becoming exercisable within sixty days: Paul O. Koether (125,000 shares); Richard M. Bossert (22,500 shares); Mark W. Jaindl (62,500 shares); William Mahomes, Jr. (7,500 shares); Alfredo Mena (7,500 shares); Voldemar Madis (14,446 shares) and all directors and officers as a group (239,446 shares). Includes (a) 32,400 shares held by a trust for the benefit of Mr. Koether's daughter for which he serves as the sole trustee, 33,900 shares in his discretionary accounts, and (b) 297,500 shares beneficially owned by his wife, including 100,000 shares owned by Emerald Partners of which she is the sole general partner, 2,000 shares owned by Sussex Group, Inc. of which she is the President, a director and controlling stockholder, 75,000 shares which she has the right to acquire upon exercise of stock options and 120,500 shares held in custodial accounts. Mr. Koether may also be deemed to be the beneficial owner of the 2,234,296 shares owned by Sun, of which Mr. Koether is a principal stockholder and Chairman, 35,500 shares held in discretionary accounts of certain of his brokerage customers and 12,900 shares held in Mr. Koether's IRA account. Mr. Koether disclaims beneficial ownership of all of the foregoing shares. Includes 40,000 shares owned by Winston. Mr. Koether is an officer and director of Winston and of Kent, Winston's parent company, and may be deemed the beneficial owners of such shares. Mr. Koether disclaims such beneficial ownership. Includes 11,720 shares held in Mr. Jaindl's IRA account and 4,000 shares held by a trust for the benefit of his son, for which Mr. Jaindl serves as a trustee. Consists of shares that Mr. Madis has the right to acquire upon exercise of stock options. Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed to have beneficial ownership of 433,400 shares of Pure World, Inc. stock as of December 31, 1995, all of which shares are held in portfolios of DFA Investment Dimensions Group, Inc., a registered open-end investment company, or in series of the DFA Investment Trust Company, a Delaware business trust, or the DFA Group Trust and DFA Participation Group Trust, investment vehicles for qualified employee benefit plans, all of which Dimensional Fund Advisors Inc. serves as investment manager. Dimensional disclaims beneficial ownership of all such shares. Represents less than one percent. Deceased.
Item 12. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company reimbursed Sun approximately $64,000 and $72,000 in 1995 and 1994, respectively, for the Company's proportionate share of certain general and administrative expenses. Rosenman & Colin ("R&C") performed substantial legal work for the Company for which they billed the Company an aggregate of approximately $630,000 in 1995 and $615,000 in 1994. The 1995 professional fees represented work performed primarily in association with the proxy contests undertaken in connection with one of the Company's investments, the acquisition and operation of Madis, and litigation. Natalie I. Koether, Esq., President of Madis and wife of the Chairman of the Company, is of Counsel to R&C. See "Security Ownership of Officers, Directors and Certain Stockholders." In connection with the acquisition of NorthCorp in June 1992, the Company issued 80,000 shares of its common stock to Winston as a finder's fee. The transaction was introduced to the Company by an officer of Winston who was otherwise unaffiliated with the Company. Winston's parent company, Kent, may be deemed to be an affiliate of the Company. The Company paid brokerage commissions of approximately $42,000 in 1995 and $51,000 in 1994 to Winston in connection with the Company's purchases and sales of marketable securities. PART IV Item 13. - EXHIBITS AND REPORTS ON FORM 8-K The following exhibits are filed as part of this report:
Exhibit Number Exhibit Method of Filing ------- ------- ---------------- 3.1 Restated Certificate of Incorporated by reference to Incorporation of the Company Computer Memories Incorporated Form 10-K for the year ended March 31, 1987. (b) Certificate of Amendment Incorporated by reference to of Restated Certificate of Exhibit A to Computer Memories Incorporation of the Company Incorporated Proxy Statement dated February 16, 1990. (c) Certificate of Amendment of Incorporated by reference to Restated Certificate of Incor- American Holdings, Inc. poration of the Company Form 10-KSB for the year ended December 31, 1992. (d) Certificate of Amendment of Filed herewith. Restated Certificate of Incor- poration of the Company 3.2 By-laws, as amended Incorporated by reference to American Holdings, Inc. Form 10-K for the year ended December 31, 1992. 10.1 Employment Agreement, dated as Incorporated by reference to of April 6, 1990, by and between Computer Memories Incorporated Computer Memories Incorporated Form 10-Q for the quarter and Paul O. Koether ended June 30, 1990. 10.2 Agreement and Plan of Merger dated Incorporated by reference to June 1, 1992 between CMIN Merger Computer Memories Incorporated Co. and NorthCorp Realty Form 8-K dated June 17, 1992 Advisors, Inc. 10.3 1991 Computer Memories Incorporated Incorporated by reference to Non-Qualified Stock Option Plan Exhibit A to Computer Memories Incorporated Proxy Statement dated July 7, 1992. 10.4 Agreement and Plan of Merger Incorporated by reference to dated as of December, 1994 American Holdings, Inc. Form 8-K dated January 18, 1995. 10.5 Employment Agreement with Incorporated by reference to Dr. V. Madis, Chairman Emeritus American Holdings, Inc. Form of Dr. Madis Laboratories, Inc. 8-K dated January 18, 1995. 10.6 Stock Purchase Agreement, dated Incorporated by reference to as of September 22, 1993, by and American Holdings, Inc. Form between the Company and Nancy 10-KSB for the year ended Nasher December 31, 1993. 10.7 Severance Agreements among the Incorporated by reference to Company, NorthCorp and Messrs. American Holdings, Inc. Form Dorsey and Young, dated February 10-KSB for the year ended 17, 1994 December 31, 1993. 10.8 Employment Agreement with Incorporated by reference to V. Madis American Holdings, Inc. Form 8-K dated January 18, 1995. 10.9 Lease Agreement for premises of Incorporated by reference to Dr. Madis Laboratories, Inc., American Holdings, Inc. Form 375 Huyler Street, South 8-K dated January 18, 1995. Hackensack, New Jersey 10.10 Plan of Reorganization of Incorporated by reference to Dr. Madis Laboratories, Inc. American Holdings, Inc. Form 8-K/A (Amendment No. 1) dated March 17, 1995. 10.11 Disclosure Statement Related Incorporated by reference to to Plan of Reorganization of American Holdings, Inc. Form Dr. Madis Laboratories, Inc. 8-K/A (Amendment No. 1) dated March 17, 1995. 21 Subsidiaries of the Registrant Filed herewith. 27 Financial Data Schedule Filed herewith. (b) Reports on Form 8-K On January 24, 1996, the Company filed a Current Report on Form 8-K disclosing the litigation commenced by American Industrial Properties REIT ("AIP") against the Company. On February 16, 1996, the Company filed an Amendment to the Current Report on Form 8-K disclosing that the Company had filed its response to the litigation as well as commencing suit against the AIP and its executive officer and trust managers as well as instituting a derivative action on behalf of the shareholders of AIP against the officers and trust managers of AIP.
SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PURE WORLD, INC. March 28, 1996 By: /s/ Paul O. Koether -------------------- Paul O. Koether Chairman of the Board and President By: /s/ Mark Koscinski Mark Koscinski ------------------- Senior Vice President (Principal Financial and Accounting Officer) In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Capacity Date /s/ Paul O. Koether Chairman of the Board March 28, 1996 - ------------------------- President, and Director Paul O. Koether (Principal Executive Officer) /s/ William Mahomes, Jr. Director March 28, 1996 - ------------------------- William Mahomes, Jr. /s/ Alfredo Mena Director March 28, 1996 - ------------------------- Alfredo Mena /s/ Mark W. Jaindl Director March 28, 1996 - ------------------------- Mark W. Jaindl EX-99 3 LIST OF COMPANY SUBSIDIARIES PURE WORLD, INC. LIST OF SUBSIDIARIES NAME OF SUBSIDIARY STATE OF INCORPORATION American Holdings, Inc. Delaware Eco-Pure, Inc. Delaware Madis Botanicals, Inc. Delaware Pure World Botanicals, Inc. Delaware Strategic Information Systems, Inc. Delaware -----END PRIVACY-ENHANCED MESSAGE-----