-----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, Ec8hILP9spRjnQ05UH4sEEywavnwid5+wxPfnYK77JMp+6a5Twu/Q9h52nj5xuWv sAgtXLjVyEaVc/ylqZG+fw== 0000356446-97-000008.txt : 19970328 0000356446-97-000008.hdr.sgml : 19970328 ACCESSION NUMBER: 0000356446-97-000008 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970327 SROS: NASD 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: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-10566 FILM NUMBER: 97565684 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 10KSB of Pure World, Inc. for the year ended December 31, 1996 and is qualified in its entirety by reference to such financial statements. 0000356446 PURE WORLD, INC. 1000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 10,865 62 1,194 120 1,991 14,318 1,912 402 19,547 2,096 0 0 0 76 17,375 19,547 6,643 8,499 4,292 8,252 0 0 13 234 5 229 0 0 0 229 0.03 0.03
10KSB 2 FOR YEAR ENDED 12/31/96 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, 1996 [ ] 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. --------------------------------------------- (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, 1996 were approximately $8.5 million. At February 28, 1997, there were 7,620,378 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 $14,450,000. Transitional Small Business Disclosure Format Yes No X --- --- PART I Item 1. - DESCRIPTION OF BUSINESS ----------------------- Background - ---------- On August 4, 1994, Pure World, Inc. (the "Company" or "Pure World") completed the disposition of its prior business, real estate asset management. On January 3, 1995, the Company acquired 80% (later increased to 83%) of the outstanding common stock of Dr. Madis Laboratories, Inc. ("DML"), a New Jersey corporation engaged for almost forty years in the manufacture and sale of botanical extracts used in the cosmetics, food and flavor, and nutraceutical industries. The name of DML was later changed to Madis Botanicals, Inc. ("Madis"). Pure World subsequently formed a separate wholly-owned subsidiary, Pure World Botanicals, Inc. ("PWBI"). General - ------- Through its subsidiaries, Madis and PWBI, the Company develops, manufactures and sells natural ingredients which principally are derived from plant materials (referred to herein also as botanicals or herbs) using the Company's proprietary extraction technology. Extraction is the process by which the commercial ingredients of plants are drawn out by applying a solution ("menstruum") consisting of water or a combination of water and alcohol to the raw materials. The resultant extract can be converted into fluid extract, solid extract (paste) or powdered extract which can be tableted or encapsulated. The Company has produced more than one thousand botanical extracts which are used by the cosmetic, food and flavor, nutraceutical and pharmaceutical industries to manufacture finished products for the consumer market. The term nutraceuticals incorporates a wide range of natural products, such as vitamins, minerals, anti-oxidants and herbs which enhance health by supplementing diets. (See "Dietary Supplement Health and Education Act of 1994" and "New Nutraceutical Products"). Manufacturing Facility (the "Madis Facility") - --------------------------------------------- The Company believes it has the largest botanical extraction facility in North America. Situated on 4.5 acres, the 125,000 square foot Madis Facility contains custom designed stainless steel equipment including milling equipment; percolators; vacuum stills; filters; automatic extractors; ribbon blenders; homogenizers; and high capacity spray, fluid bed and vacuum dryers. Extraction capacity exceeds 15,000 pounds of crude botanical material per day. The Company's large-capacity spray dryers produce free-flowing powders for tableting, encapsulation or dissolution in liquids. With an annual spray-drying capacity of more than 8,000,000 pounds, the Company estimates that its current utilization is only approximately one-third of capacity of which approximately 10% is for its own account and the balance for the account of toll customers. Quality Control in Manufacturing - -------------------------------- In its registered Food and Drug Administration ("FDA") facility, Madis is authorized to manufacture The United States Pharmacopeia ("U.S.P.") and pharmaceutical grade products such as casanthranol (a further processed product of the bark of the Cascara tree used in natural laxatives), coal tar (used by the cosmetic industry for dandruff control shampoos) and benzoin (used as an aromatic and local antiseptic and skin protectant). The Madis Facility is kosher certified and operates under current Good Manufacturing Practices ("GMP") to assure consistently high quality in the manufacture of its products. The Madis Facility is routinely inspected by the FDA. The facility and manufacturing process also routinely undergoes audits by customers, which include pharmaceutical and large consumer product firms. To the best of its information, the Madis Facility has never failed an audit. Laboratory - ---------- The Madis Facility contains six laboratories: quality control; research and development; instrumental analytical; flavor; cosmetic; and microbiology, which are all currently in use and fully equipped. The microbiology laboratory, believed to be the first on-site microbiology laboratory in the industry, evaluates finished products for microbiological purity. Madis' microbiological standards of less than five thousand organisms per gram are believed to be the most rigorous among its competitors. Quality control and research and development are conducted in the two main laboratories which are divided between the "wet" laboratory and the instrumental analytical laboratory. The wet laboratory is devoted to physical/chemical analysis of products against Madis' customer and compendial specifications. The instrumental analytical laboratory is equipped with state-of-the-art equipment including a Multi-state Mass Spectrometer (LC/Ms/Ms) on line with two High Performance Liquid Chromatographs (HPLC) and two Gas Chromatographs (GC). Thin Layer Chromatography (TLC), Infrared Spectroscopy (IR) and Ultra-violet Spectrophotometry (UV) are also routinely used in research and development. The Laboratory and the Manufacturing Process - -------------------------------------------- The manufacturing process begins and ends in the laboratory. Incoming plant materials are evaluated to verify species, variety and quality. Generally, at least three and sometimes more than a dozen samples of a plant are evaluated by the laboratory's proprietary methods prior to purchase. The scientists determine the right menstruum for each plant extract and the optimal method of extraction and drying to maintain product integrity and ensure manufacturing efficiency. Only after a raw material obtains laboratory approval is price a determinative factor in the purchasing process. When an approved material arrives it is tested again against the preshipment sample and if it matches, it is forwarded to production along with the menstruum to be used. The Company estimates that only forty percent of samples are accepted for production. Throughout Madis' proprietary manufacturing processes, called the Unitized(TM) process, the plant raw material is subjected to a series of laboratory control tests which examine physical and chemical properties such as active constituents, color, flavor and purity. The material is then either stored in a finished state called a native extract which is available for further processing when an order is received or further processed into a liquid, solid or powdered extract ready for delivery to the customer who will then use it for their finished product. Prior to delivery, each item undergoes final micro-biological and analytical testing. The Company calls its quality control program Truth in Testing(TM). Raw Materials - ------------- The Company buys its raw materials from a variety of growers, collectors and brokers. To date the Company has not experienced any shortage of raw materials that has effected its business other than an occasional increase in price. Nonetheless the demand for botanical products has experienced exponential growth in recent years and the demand pressure for some products may outstrip the capacity of the suppliers. Moreover the Company has developed a new line of standardized products (see "New Nutraceutical Products") which have guaranteed potency, meaning that the products contain a stipulated amount of active ingredients. The Company believes that it has sufficient inventory for its standardized line for the next six months and that its inventory can be replaced without significant cost increase, however botanicals are subject to substantial variations due to weather, ground conditions and political problems in the source country and therefore supply will always be somewhat unpredictable. The Company has in place, in most instances, multiple geographic sources of raw material to minimize this potential problem. Also, the quality of botanicals varies from season to season and year to year, which can impose a limitation on the ability to produce standardized products and which can result in substantial price changes which may or may not be passed on to the consumer depending on demand for the affected product. Government Regulation and Intellectual Property - ----------------------------------------------- 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 and conforms to the FDA's proposed "Good Manufacturing Procedures" for the Dietary Supplement industry. 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 as well as state and federal environment agencies on a variety of environmental issues affecting air and ground water. The United States Department of Agriculture may also inspect the raw materials and plant facilities used in production. To date, the Company has no material problems in any of these regulatory areas. The Company has considerable proprietary technology used in its manufacturing processes, quality control and reseach and development. Although it has no patents, the loss or misappropriation of its technology would injure the Company. The Company has numerous trademarks which it uses to differentiate its technology and products and it protects its proprietary technology by confidentiality agreements with employees and prospective customers and other contractees. 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 American Herbal Products Association, the Synthetic Organic Chemical Manufacturing Association, the National Nutritional Foods Association, the American Society of Pharmacognosy, and the American Society for Microbiology. The Madis production facilities are certified by the FDA for food, pharmaceutical and cosmetic ingredient production and have kosher-product certification. Dietary Supplement Health and Education Act of 1994 ("DSHEA") - ------------------------------------------------------------- In 1994, DSHEA was enacted to establish the framework for the regulation of nutraceuticals which were being manufactured and marketed not as drugs but as dietary supplements. Except for certain pharmaceuticals manufactured to the standards of the U.S.P. published by the FDA, the Company's nutraceutical products are categorized as dietary supplements under DSHEA and not drugs which require FDA approval. The legislation recognized the importance of nutrition and benefits of dietary supplements in promoting health and preventive health measures. DSHEA defines dietary supplements as vitamins, minerals, herbs or other botanicals, amino acids, or other dietary substances which enhance or increase the total dietary intake. It provides that where an ingredient is first marketed as a dietary supplement and is subsequently approved as a new drug, it can continue to be sold as a supplement unless the Secretary of Health and Human Services rules that it would not be safe to do so. Conversely, if an ingredient is undergoing review as a drug, it cannot be marketed as a supplement unless the Secretary determines it would be safe to do so. The FDA has publicly stated its concern that any claims about the efficacy of supplements receive prior approval by that agency. It is anticipated that the FDA will publish regulations about making claims and will adopt current GMPs for the manufacture of nutraceuticals. The Company believes that its GMPs are at least as stringent as any that the FDA is considering. New Nutraceutical Products - -------------------------- Historically, most of the nutraceutical products sold by the Company were based on the amount of raw material used in the manufacturing process, i.e., the amount of kilograms of crude material required to produce each kilogram of the plant extract. These extracts, generally called "drug ratios", were the principal nutraceutical products sold by the Company until 1996. Increasingly, the dietary supplement market is turning to nutraceuticals that contain a specified amount of a plant ingredient, called the "active ingredient" or "marker". Many of these products were first developed in Europe and are supported by clinical studies which document the efficacy of the active ingredients and that the product is made with a specific level of the active ingredient. Generally these products are called "standardized" or "guaranteed potency" extracts. Many of the Company's competitors, particularly those in Europe, refine products to increase the level of the active ingredient above the level found naturally in the plant. The Company believes that the active ingredient in some botanicals is only a "marker", meaning that it denotes at least one of a plant's active ingredients but it may be only one, among many important ingredients to be found in the plant. Therefore the Company's extracts contain the whole profile of the plant with the active ingredients and/or markers guaranteed to a certain level being only one part of the profile. The Company believes the synergistic effect from different chemical components of a plant mixture are an important part of the efficacy of the extract. The Company utilizes HPLC and Mass Spectrometry to match the profile of the raw plant material with the resultant botanical extract. To date, the Company has developed seventeen (17) standardized products and expects to add at least another twenty (20) during 1997. Competition - ----------- The Company has numerous competitors, in each of the industry segments it serves both domestically and abroad, principally European. Many of the European competitors are larger than the Company and have more history in making standardized products. Only one domestic producer of standardized nutraceuticals has resources equivalent to the Company. In the flavors and cosmetics segments, the Company believes it is the largest manufacturer of botanical extracts. The Company does not manufacture finished flavors therefore it does not compete with companies such as International Flavors and Fragrances Inc., Givaudan-Roure Corporation or Tastemaker, Inc. Employees - --------- At February 28, 1997, the Company had 53 full-time employees, 45 of whom were employed by Madis. Products Liability Insurance - ---------------------------- The Company has experienced no product liability claims to date, however the development and marketing of botanical extracts entails an inherent risk that product liability claims may be asserted against it in the future. The Company currently has obtained product liability coverage, which it deems adequate, but there can be no assurance that the Company can maintain adequate insurance on acceptable terms in the future. Any claim against the Company would negatively affect the reputation of the Company and a judgment above the policy limits would have an adverse financial effect on the Company. 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. Madis leases a 125,000 square-foot facility in South Hackensack, New Jersey, from an affiliated corporation 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 renewable options for fifteen additional years. This facility includes a 20,000 square-foot office area; 10,000 square-feet for laboratories; manufacturing space of 70,000 square feet; and warehousing space of 25,000 square feet. Madis also leases a warehouse facility in Teterboro, New Jersey for $120,000 per year from an unrelated party. The lease has a three year term at rates up to $130,000 per year. In connection with a Plan of Reorganization discussed in Item 6 - "Management's Discussion and Analysis of Financial Condition and Results of Operations", 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 in 1995. The remaining accrued liability at December 31, 1996 was approximately $127,000. The Company believes this accrued liability will be sufficient to perform any required remaining remediation activity. Item 3. - LEGAL PROCEEDINGS ----------------- 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 --------------------------------------------------- The Company held its Annual Meeting of Stockholders on October 28, 1996. All nominees to the Company's Board of Directors were elected. The following is a vote tabulation for all nominees:
For Withheld Paul O. Koether 6,376,019 45,858 Mark W. Jaindl 6,376,178 45,699 William Mahomes, Jr. 6,376,163 45,714 Alfredo Mena 6,376,163 45,714
PART II Item 5. - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS -------------------------------------------------------- At February 28, 1997, the Company had approximately 2,800 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 ------ ------ 1996 March 31 $ 4 1/16 $ 2 1/8 June 30 3 9/16 2 3/16 September 30 2 1/4 1 11/16 December 31 2 1/2 1 11/16 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
The Company had not declared or paid any dividends on its common stock in 1996 and 1995 and does not foresee doing so in the immediate future. Item 6. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ----------------------------------------------------------------- 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. ("DML"), 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 DML. In addition, the Company issued to the former DML shareholders options to acquire 250,000 shares of the Company's Common Stock at its then approximate fair value of $2.10 per share. Madis, a manufacturer of natural products, had sales of approximately $6.6 million in 1996 and $6.2 million in 1995. The Merger was effected in connection with a Plan of Reorganization (the "Plan") filed by DML 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 DML's indebtedness was assumed by the Madis and was paid as due from working capital. Two principal shareholders of DML, who were also executive officers, received employment agreements under which one served as Chairman Emeritus of Madis until his death on March 13, 1997 at an annual salary of $100,000 and the other serves as an executive officer for a period of four years commencing January 3, 1995 at an annual salary of $150,000. The premises occupied by Madis are leased from a corporation owned by the former DML shareholders at an annual rent of $240,000, net, plus 1% of gross revenues up to an additional $200,000 per annum. For additional information about the premises, see Note 9 of Notes to Consolidated Financial Statements. Liquidity and Capital Resources - ------------------------------- At December 31, 1996, the Company had cash and cash equivalents of $10.9 million. Cash equivalents consisted of treasury bills with maturities of less than three months and yields ranging from 4.96% to 5.16%. The Company also had marketable securities with a market value of approximately $909,000 at December 31, 1996. Marketable securities consisted of trading securities ($62,000) and securities available-for-sale ($847,000). See Notes 1 and 3 of Notes to Consolidated Financial Statements for additional information. The Company has no funded debt. The management of the Company believes that its financial resources and anticipated cash flows will be sufficient for future operations and possible acquisitions of other operating businesses. Net cash of $735,000 was provided by operations in 1996 compared to a net use of cash of approximately $2.0 million in 1995. Net income of $229,000 and net trading security transactions of approximately $1.8 million were the primary causes of the increase in cash flow in 1996 compared to 1995. Net trading and U.S. Treasury securities transactions used cash of $584,000 in 1995. The increase in cash flows from operations in 1996 were partially offset by a net growth in inventory of $430,000, which was due almost entirely to the introduction of KavaPure(TM) in 1996. KavaPure(TM) is available in fluid and softgel capsules in the retail market and in powdered, fluid and softgel forms in other markets. Investing activities provided cash of $900,000 in 1996, compared to a use of cash of approximately $2.2 million in 1995. In November 1996, the Company and American Industrial Properties REIT ("IND") entered a settlement agreement resolving all disputes and litigation that arose between them as a result of the Company's efforts to influence the management of and protect its investment in IND. The settlement agreement provided that IND pay $825,000 to the Company as reimbursement for costs incurred in connection with the disputes and as consideration for releases and a standstill agreement. The Company also sold its investment in IND to an unrelated third party for an aggregate price of approximately $2.5 million. IND agreed to make numerous changes to its Bylaws designed to remedy the corporate governance problems which the Company pointed to in the disputes. The sale of the investment in IND resulted in a net gain of approximately $619,000. The reimbursement of expenses incurred in prior years of $394,000 to protect the Company's investment in IND was recorded as other income, while the remaining reimbursement of $431,000 offset expenses incurred in 1996. In May 1996, the Company made an investment in non-voting common stock representing 25% ownership of Gaia Herbs, Inc. ("Gaia") for approximately $1.0 million. Gaia manufactures and distributes natural products. Gaia is a privately-held company and does not publish financial results. The Company is accounting for this investment under the cost method. The net purchase of furniture and equipment of $332,000 in 1996, principally reflects the acquisition of a new management information system and the continuous enhancement of and addition to laboratory and production equipment at Madis. In 1995, the net acquisition of furniture and equipment was $177,000. Cash flows used in investing activities in 1995 of approximately $2.2 million consisted principally of the purchase of Madis of $1.7 million and the loans to minority shareholders of Madis, net of repayment. 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 determined by the Board of Directors. As of December 31, 1996, 567,746 shares had been acquired under the Repurchase Plan for an aggregate cost of approximately $806,000. The Company repurchased 21,204 shares in 1995 for an aggregate cost of approximately $31,000. In 1996, 70,579 shares were repurchased for an aggregate cost of approximately $127,000. All shares repurchased in 1995 and 1996 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 $229,000, or $.03 per share in 1996, compared to net income of $41,000, or $.01 per share in 1995. The consolidated results of operations for 1996 reflect the net gain on the sale of the Company's investment in IND of $619,000 and the reimbursement of expenses of $825,000 as described above. Madis and Pure World Botanicals, Inc., a 100% owned subsidiary of the Company ("PWBI"), had consolidated combined sales in 1996 of approximately $6,643,000 compared to sales of approximately $6,173,000 in 1995, an increase of approximately $470,000 or 7.6%. Cost of goods sold was $4.3 million and gross margin was $2.3 million in 1996, compared to cost of goods sold of $3.9 million and gross margin of $2.3 million in 1995. Gross margin as a percentage of sales was 35.4% and 37% in 1996 and 1995 respectively. The decrease in gross margin as a percentage of sales was due principally to increased production costs in 1996. In 1996, the Company recorded net gains on marketable securities of $918,000, compared to net gains of $407,000 in 1995. Net gains on marketable securities in 1996 were composed of net realized gains of $1,159,000 and net unrealized losses of $241,000. Gains on marketable securities in 1995 were composed of realized gains of $143,000 and net unrealized gains of $264,000. Total stockholders' equity was increased at December 31, 1996 by $282,000 to reflect the increase in current market value in securities available-for-sale from their cost basis. See Note 1 of Notes to Consolidated Financial Statements for additional information on the accounting for securities available-for-sale. Interest, dividend and other income was $938,000 in 1996, an increase of $67,000, or 7.7% from the $871,000 recorded in 1995. Interest income was $502,000 in 1996, a decrease of $136,000 or 21.3% from the $638,000 recorded in 1995. This decrease was due to lower investable balances and prevailing interest rates in 1996 compared to 1995. Dividend income was $39,000 in 1996 compared to $178,000 in 1995, a decrease of $139,000. The decrease in dividends was due to the marketable securities mix. All other income increased from $55,000 in 1995 to $397,000 in 1996. The increase in all other income was due principally to the reimbursement of expenses in connection with the IND settlement agreement as described above. In 1995 all other income of $55,000 consisted principally of the sale of fully depreciated and unneeded equipment at Madis. General and administrative expenses (consisting of personnel, professional and all other expenses) were $4.0 million in 1996, compared to $3.5 million in 1995, an increase of approximately $500,000. Personnel expenses were $1,813,000 in 1996, an increase of $376,000, or 26.2%, from $1,437,000 in 1995. The principal reason for the increase was added management and laboratory personnel at Madis as well as cost of living and merit increases given to the employees of the Company and Madis. Professional fees were $698,000 in 1996, a decrease of $267,000, or 27.7%, from the 1995 amount of $965,000. The reimbursement of expenses from the IND dispute as described above was the major reason for the decrease in expenses. The reduction in all other legal expenses related to the acquisition and management of Madis was offset by other professional fees incurred in new product development. Other general and administrative expenses were $1,462,000 in 1996, an increase of $356,000 or 32.2% from $1,106,000 in 1995. Travel and entertainment expense increased by $129,000; advertising expense increased by $114,000; general office expense increased by $94,000, and all other expense had a net increase of $19,000. These expenses were principally due to an increased sales effort in 1996 and the introduction of new products, especially KavaPure(TM). 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, 1996 Consolidated Statements of Operations for the Years ended December 31, 1996 and 1995 Consolidated Statements of Stockholders' Equity for the Years ended December 31, 1996 and 1995 Consolidated Statements of Cash Flows for the Years ended December 31, 1996 and 1995 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, 1996, 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, 1996, and the results of their operations and their cash flows for the two years then ended in conformity with generally accepted accounting principles. /S/ DELOITTE & TOUCHE LLP Parsippany, New Jersey March 14, 1997 PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 1996 (in $000's)
ASSETS Current Assets: Cash and cash equivalents $10,865 Trading securities 62 Accounts receivable, net of allowance for uncollectible accounts and returns and allowances of $120 1,074 Inventories 1,991 Other current assets 326 ------- Total current assets 14,318 ------- Securities available-for-sale 847 Investment in Gaia Herbs, Inc. 1,010 Furniture and equipment, net 1,510 Notes receivable from affiliates 603 Goodwill, net of accumulated amortization of $177 1,238 Other assets 21 ------- Total assets $19,547 ======= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 312 Accrued expenses and other liabilities 1,784 ------- Total liabilities 2,096 ------- Commitments and Contingencies - Stockholders' equity: Common stock, par value $.01; 30,000,000 shares authorized; 7,634,378 shares issued and outstanding 76 Additional paid-in capital 43,643 Accumulated deficit ( 26,550) Unrealized gains on securities available-for-sale 282 ------- Total stockholders' equity 17,451 ------- Total liabilities and stockholders' equity $19,547 ======= 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, ----------------------- 1996 1995 ------ ------ Revenues: Sales $ 6,643 $ 6,173 Net gains on marketable securities 918 407 Interest, dividend and other income 938 871 ------- ------- 8,499 7,451 ------- ------- Expenses: Cost of goods sold 4,292 3,891 Personnel 1,813 1,437 Professional fees 698 965 Other 1,462 1,106 ------ ------- 8,265 7,399 ------ ------- Income before income taxes 234 52 Provision for income taxes 5 11 ------- ------- Net income $ 229 $ 41 ======= ======= Net income per share $ .03 $ .01 ======= ======= Weighted average shares outstanding (in 000's) 7,683 7,709 ======= ======= 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 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 Change in net unrealized gains/ losses on securities available-for-sale -- -- -- -- 383 383 Net income -- -- -- 229 -- 229 Repurchase and cancellation of common stock ( 71) ( 1) ( 126) -- -- ( 127) ----- ---- ------- ------- ---- -------- Balance, December 31, 1996 7,634 $ 76 $43,643 ($26,550) $282 $17,451 ===== ==== ======= ======= ==== ======= See accompanying notes to consolidated financial statements.
PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in $000's)
Year Ended December 31, ----------------------- 1996 1995 ------ ------ Cash flows from operating activities: Net income $ 229 $ 41 Adjustments: Depreciation and amortization 330 211 Net trading and U.S. Treasury securities transactions 1,775 ( 584) Gain on sale of securities available-for-sale ( 641) - Change in inventories ( 430) ( 102) Change in receivables ( 164) ( 147) Change in accounts payable and other accruals ( 288) ( 1,490) Other, net ( 76) 95 ------- ------- Net cash provided by (used in) operating activities 735 ( 1,976) ------- ------- Cash flows from investing activities: Purchase of a business less cash acquired - ( 1,717) Purchase of furniture and equipment, net ( 332) ( 177) Proceeds from sale of securities available-for-sale 2,530 - Purchase of securities available-for-sale ( 444) ( 127) Loans to affiliates ( 100) ( 303) Repayments of loans to affiliates 123 160 Investment in Gaia Herbs, Inc. ( 1,010) - Other, net 133 - ------- ------- Net cash provided by (used in) investing activities 900 ( 2,164) ------- ------- Cash flows from financing activities: Repurchase of common stock ( 127) ( 31) Other, net - 101 ------- ------- Net cash provided by (used in) financing activities ( 127) 70 ------- ------- Net increase (decrease) in cash and cash equivalents 1,508 ( 4,070) Cash and cash equivalents at beginning of year 9,357 13,427 ------- ------- Cash and cash equivalents at end of year $10,865 $ 9,357 ======= ======= See accompanying notes to consolidated financial statements.
PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1996 and 1995 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") its 83% owned subsidiary Madis Botanicals, Inc. ("Madis") and its 100% owned subsidiary Pure World Botanicals, Inc. ("PWBI") after elimination of all material intercompany accounts and transactions. The Company, through its subsidiaries, manufactures natural products for the nutraceutical, flavor and cosmetic industries. The acquisition of Madis described in Note 2 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 --------------------- Marketable securities are 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 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 and 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. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1996 and 1995 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. Investment in Gaia Herbs, Inc. ------------------------------ In May 1996, the Company made an investment in non-voting common stock representing 25% ownership of Gaia Herbs, Inc. ("Gaia") for approximately $1.0 million. Gaia manufactures and distributes natural products. Gaia is a privately-held company and does not publish financial results. The Company is accounting for this investment under the cost method. 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 of Madis as of January 3, 1995 was adjusted to their fair values in connection with the acquisition of Madis. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("FAS 121") which the Company adopted in 1996. The Company evaluates the carrying value of its long-lived assets whenever there is a significant change in the use of an asset and adjusts the carrying value, if necessary, to reflect the amount recoverable through future operations. The adoption of FAS 121 had no effect on the Company's results of operations or financial condition. 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. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1996 and 1995 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. 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. 2. 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 ("DML"). The surviving corporation in the Merger operates under the name Madis Botanicals, Inc. and is owned 83% by the Company and 17% by the former shareholders of DML. In addition, the Company issued to the former DML 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 DML 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 DML's indebtedness was assumed by Madis and was paid as due from working capital. Two principal shareholders of DML, who were also executive officers, received employment agreements under which one served as Chairman Emeritus of Madis until his death on March 13, 1997 at an annual salary of $100,000 and the other serves as an executive officer for a period of four years commencing January 3, 1995 at an annual salary of $150,000. The premises occupied by Madis are 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. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1996 and 1995 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): Current assets $ 2,200 Property and equipment 1,300 Other assets 100 Current liabilities ( 1,200) Other liabilities ( 600) Goodwill 1,400 ------ $ 3,200 =======
3. Marketable Securities --------------------- At December 31, 1996, marketable securities consisted of the following (in $000's):
Gross Gross Cost Holding Holding Fair Basis Gains Losses Value ----- ------- ------- ----- Trading securities $ 75 $ - $ 13 $ 62 Securities available-for-sale 565 282 - 847 ------ ------ ----- ------ Total marketable securities $ 640 $ 282 $ 13 $ 909 ====== ====== ===== ======
All marketable securities are investments in common stock. Realized gains and losses of $1,161,00 and $2,000, respectively, as well as net unrealized losses of $241,000 were included in the results of operations for the year ended December 31, 1996. The net unrealized gains on securities available-for-sale included as a separate component of consolidated stockholders' equity was approximately $282,000 at December 31, 1996. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1996 and 1995 4. Inventories ----------- Inventories are comprised of the following (in 000's): Raw materials $ 451 Work-in-process 17 Finished goods 1,523 ------ Total inventories $1,991 ======
5. Common Stock ------------ Stock Repurchase ---------------- 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 determined by the Board of Directors. As of December 31, 1996, 567,746 shares had been acquired under the Repurchase Plan for an aggregate cost of approximately $806,000. The Company repurchased 21,204 shares in 1995 for an aggregate cost of approximately $31,000. In 1996, 70,579 shares were repurchased for an aggregate cost of approximately $127,000. All shares repurchased in 1995 and 1996 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, or under such other terms as determined by the Board of Directors. The following table summarizes option transactions under the Option Plan for the year ended December 31, 1995 and 1996:
Price Shares Range ------ ------ 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 and 1996 490,000 $1.3125 - $1.75 =======
PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1996 and 1995 In addition, in 1995 in connection with the Madis acquisition, the Company issued to the former DML shareholders options outside of the Option Plan to acquire 250,000 shares of the Company's common stock at its then approximate fair value of $2.10 per share. Three employees of Madis were also given a total of 60,000 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. In 1996, 57,000 options were granted outside of the Option Plan to various employees of the Company and Madis with prices ranging between $1.8125 and $2.25, the approximate fair market value at the time of the grant. The Company applies Accounting Principles Board (APB) Opinion 25 and related interpretations in accounting for its options. Accordingly, no compensation cost has been recognized for stock options issued. Had compensation cost for the issued stock options been determined based upon the fair values at the rates of awards under those plans consistent with the method of FASB Statement 123, the Company's net income and net income per share would have been reduced to the pro forma amounts indicated below:
Net income: 1996 ---- As reported (in 000's) $229 Pro forma (in 000's) $ 76 Net income per common share: As reported $.03 Pro forma $.01
All options granted to date have an exercise price equal to the market price of the Company's stock on the grant date. For purposes of calculating the compensation cost consistent with FAS No. 123, the fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions used: no dividend yield; expected volatility of 48 percent; risk free interest rates between 5.25 percent and 7.63 percent; and weighted average expected lives of 5 years. 6. Settlement of Dispute and Litigation with American Industrial Properties REIT ------------------------------------------------------------- In November 1996, the Company and American Industrial Properties REIT ("IND") entered a settlement agreement resolving all disputes and litigation that arose between them as a result of the Company's efforts to influence the management of and protect its investment in IND. The settlement agreement provided that IND pay $825,000 to the Company as reimbursement for costs incurred in connection with the disputes and as consideration for releases and a standstill agreement. The Company also sold its investment in IND to an unrelated third party for an aggregate price of approximately $2.5 million. IND agreed to make numerous changes to its Bylaws designed to remedy the corporate governance problems which the Company pointed to in the disputes. The sale of the investment in IND resulted in a net gain of approximately $619,000. The reimbursement of expenses incurred in prior years of $394,000 to protect the Company's investment in IND was recorded as other income, while the remaining reimbursement of $431,000 offset expenses incurred in 1996. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1996 and 1995 7. 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 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 1995 and 1996 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 (who passed away on March 13, 1997) 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. 8. Income Taxes ------------ At December 31, 1996, the Company had net operating loss carryforwards of approximately $21 million for Federal income tax reporting purposes, which expire in the years 2002 to 2011. Additionally, the Company has investment and research and development tax credit carryforwards aggregating approximately $200,000 and $870,000, respectively, which expire from 1997 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. 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. Even though the Company intends to vigorously defend its position when it utilizes the NOL, there can be no assurance that the Company's position will be sustained. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1996 and 1995 The components of income tax expense (benefit) were as follows (in $000's):
1996 1995 ------ ------ Federal-current $ 7 $ - State-current ( 2) 11 Deferred - - ------ ------ Total $ 5 $ 11 ====== ======
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, 1996 are as follows (in 000's):
Deferred tax assets: Net operating loss carryforwards $7,244 Alternative minimum tax ("AMT") and other credit carryforwards 1,177 Other, net 352 ------ $8,773 ====== Valuation allowance ($8,773) ====== 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):
1996 1995 -------- ------- Income before income taxes $ 234 $ 52 Statutory federal income tax rate 34% 34% ------ ------ Expected income tax 80 18 Dividends received deduction ( 9) ( 34) Alternative minimum tax 7 - State tax ( 1) 7 Change in valuation allowance ( 108) 54 Other, net 36 ( 34) ------ ------ Provision for income taxes $ 5 $ 11 ====== ======
PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1996 and 1995 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 $112,000 which will be allowed as a credit carryover against regular tax in the future in the event the regular tax exceeds the AMT tax. 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, 1996 and 1995. Brokerage commissions paid by the Company totaled approximately $33,000 in 1996 and $42,000 in 1995. 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, 1996 and 1995 amounted to approximately $76,000 and $64,000, respectively. Rosenman & Colin, LLP ("R&C") performed substantial legal work for the Company and its subsidiaries in 1996 and 1995. Natalie I. Koether, President of the Company and 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 $118,000 in 1996 and $630,000 in 1995. The professional fees represented work performed primarily for proxy contests undertaken in connection with IND and the acquisition and management of Madis. 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. This facility includes a 20,000 square-foot office area; 10,000 square-feet for laboratories, manufacturing space of 70,000 square feet; and warehousing space of 25,000 square feet. Madis also leases a warehouse facility in Teterboro, New Jersey for $120,000 per year from an unrelated party for a term of three years beginning January 1, 1997 at rates up to $130,000 per year. The Company rents office space on a month-to-month basis from an affiliate. Such rent expense was approximately $43,000 in 1996 and in 1995. 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 bore 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 was repayable at $10,000 per month plus interest commencing February 1, 1995 until it was 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 has been paid off in 1996 and the current balance of the Second Loan was approximately $185,000 at December 31, 1996. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1996 and 1995 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 in 1995. The remaining accrued liability at December 31, 1996 was approximately $127,000. The Company believes this accrued liability will be sufficient 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 DML while it operated under the protection of Federal Bankruptcy Law. These loans were not repaid when DML 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. The loan to Mr. Madis has a principal balance of $204,000. 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 four members of the Board of Directors were elected at the 1996 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. There is no arrangement or understanding between any executive officer and any other person pursuant to which such officer was elected. Paul O. Koether, the Chairman of the Company, and Natalie I. Koether, the President of the Company, are spouses. The directors and executive officers of the Company at February 28, 1997 were as follows:
Position and Office Presently Held with Director Name of Person Age the Company Since - -------------- --- ------------------- ------------- Paul O. Koether 60 Chairman 1988 and Director of the Company; Chairman of Madis Mark W. Jaindl 37 Director 1994 Alfredo Mena 44 Director 1992 William Mahomes, Jr. 50 Director 1993 Natalie I. Koether 57 President of the - Company and Madis Voldemar Madis 56 Vice Chairman of the - Company and Madis Mark Koscinski 39 Senior Vice President - of the Company; Vice President, Treasurer and Secretary of Madis John W. Galuchie, Jr. 44 Executive Vice President, - Treasurer and Secretary of the Company - --------------------
Paul O. Koether is principally engaged in the following businesses: (i) the Company, as Chairman since April 1988, President from April 1989 to February 1997, 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") a majority-owned subsidiary of the Company, 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 Chairman and director of NorthCorp Realty Advisors, Inc. ("NorthCorp"), formerly a subsidiary of the Company. Mark W. Jaindl. From May 1982 to October 1991, and again since May 1995, Mr. Jaindl has served as Chief Financial Officer of Jaindl Farms, which is engaged in diversified businesses, including the operation of a 12,000-acre turkey farm, a John Deere dealership and a grain operation. Mr. Jaindl is Vice Chairman of American Bank of the Lehigh Valley, a commercial bank located in Allentown, Pennsylvania. He also serves as the Chief Financial Officer of Jaindl Land Company, a developer of residential, commercial and industrial properties in eastern Pennsylvania. From June 1992 until May 1995 he was Senior Vice President of the Company. He was Senior Vice President of Madis from December 1994 until May 1995 and a director of Madis since December 1994 and he has served as a director of American Metals Service, Inc. since July 1992. 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. Since October 4, 1995, Mr. Mena has served as the Presidential Commissioner for Privatization and Modernization of El Salvador. 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, processing and exporting. Mr. Mena is a citizen of El Salvador. William Mahomes, Jr. Since March 1997 Mr. Mahomes has been with the law firm of Winstead Sechrest & Minich, P.C. From 1994 to March 1997, Mr. Mahomes was a Senior Shareholder of the law firm of Locke Purnell Rain Harrell. From 1990 to 1994 he was an international 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, the Dallas Opera and the Texas Real Estate Council. Natalie I. Koether is engaged principally in the following activities: (i) President of the Company since February 1, 1997 and President and Director of Madis since November 1995; (ii) Counsel with the law firm of Rosenman & Colin, LLP, from September 1993. From February 1989 to September 1993, Mrs. Koether was the partner-in-charge of the New York and New Jersey offices of Keck Mahin Cate & Koether, a national law firm. Voldemar Madis is principally engaged in the following businesses: (i) Vice Chairman of the Company and of Madis since November 1, 1995 and (ii) President of IVM Corporation ("IVM"). IVM is a real estate holding company. From 1973 through 1994, Mr. Madis was the President of Dr. Madis Laboratories, Inc. ("DML"). Both IVM and DML operated under the protection of Federal Bankruptcy Law for the five-year period prior to January 3, 1995 when DML was acquired by the Company. IVM is the owner of the premises occupied by Madis. The terms of the lease are described in "Item 2 - Description of Property". For more information on DML see "Item 6 - Management's Discussion and Analysis of Financial Condition and Results of Operations". Mark Koscinski, a certified public accountant is engaged in the following activities: (i) the Company as Senior Vice President and principal accounting and financial officer since August 1993; (ii) Vice President of Sun since August 1993; (iii) Vice President, Treasurer and Secretary and a Director of Madis since December 1994; and (iv) Vice President of Kent and Winston since August 1993. Mr. Koscinski was Vice President of Accounting Operations of Chemical Bank, New York from October 1992 to August 1993. Prior to that, Mr. Koscinski was the Controller of the Howard Savings Bank (the "Howard") in New Jersey for more than five years. The Howard was placed into receivership by the Federal Deposit Insurance Corporation on October 2, 1992. John W. Galuchie, Jr., a certified public accountant, is engaged in the following businesses: (i) the Company, as Executive Vice President, Treasurer and Secretary since April 1988 and director from January 1990 until October 1994; (ii) Kent, as Vice President and Treasurer since September 1986 and a director from June 1989 to August 1993; (iii) Winston, as President and Treasurer since September 1989. Mr. Galuchie was a director of NorthCorp from June 1992 until August 1996 and Secretary from November 1992 to August 1994. Item 10. - EXECUTIVE COMPENSATION ---------------------- The table below sets forth for the years ended December 31, 1996, 1995 and 1994, the compensation of any person who, as of December 31, 1996, 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").
Long-Term Name and Annual Compensation Compensation Principal Position Year Salary Bonus Options(#) - ------------------ ---- ------------------------- ------------ Paul O. Koether 1996 $215,000 $ - - Chairman 1995 215,000 - 50,000 1994 215,000 35,000 - Natalie I. Koether 1996 $244,760 $ - - President 1995 55,807 - 100,000 1994 60,000 - - Mark Koscinski 1996 $108,000 $15,101 10,000 Senior Vice President 1995 88,250 3,500 15,000 1994 57,750 15,000 10,000 Voldemar Madis 1996 $152,885 $ 6,101 - Vice Chairman 1995 150,000 - 36,115 1994 - - - - ---------------------------------------------------------- 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. In 1995, the Company loaned Mr. Koscinski $43,425 to acquire 25,000 shares of Company stock in the open market (the "Shares"). The Shares are held as security for the loan which shall accrue interest at the interest rate necessary to avoid the imputation of interest under the Internal Revenue Code of 1986. The loan or loan interest shall be paid solely from the proceeds of any sale by Mr. Koscinski of the Shares. In no event will Mr. Koscinski be otherwise liable for the loan or loan interest. 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 ("DML"), and is President of IVM Corporation ("IVM"). Both IVM and DML operated under the protection of Federal Bankruptcy Law for the five-year period prior to January 3, 1995, when DML was acquired by the Company. IVM is the owner of the premises occupied by Madis. The terms of the lease 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 12/31/96 Options at 12/31/96 Name Exercisable/Unexercisable Exercisable/Unexercisable ------ ------------------------- ------------------------- Paul O. Koether 150,000 - $ 85,938 $ - Natalie I. Koether 125,000 - $ 73,438 $ - Mark Koscinski 27,000 8,000 $ 19,031 $ 500 Voldemar Madis 21,669 14,446 $ 4,605 $ 3,070
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 1996, which amount is indexed each year for inflation. The Company did not match employee contributions 1996 or 1995. 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 on 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 28, 1997, by each person who was known by the Company to beneficially own more than 5% of the Common Stock, by each director and officer and directors 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 3,103,996 38.35% Natalie I. Koether 211 Pennbrook Road Far Hills, N.J. 07931 3,103,996 38.35% Sun Equities Corporation 376 Main Street Bedminster, N.J. 07921 2,234,296 27.60% Mark W. Jaindl 3150 Coffeetown Road Orefield, PA 18069 153,220 1.89% William Mahomes, Jr. 5400 Renaissance Tower 1201 Elm Street Dallas, TX 75201 15,000 Alfredo Mena P. O. Box 520656 Miami, Florida 33152 17,000 Voldemar Madis 375 Huyler Street So. Hackensack, NJ 07606 21,669 Mark Koscinski 376 Main Street Bedminster, NJ 07921 62,000 Dimensional Fund Advisors, Inc. 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 440,500 5.44% All directors and officers as a group (8 persons) 3,424,085 42.30% - ------------------------------ 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 (150,000 shares); Natalie I. Koether (125,000 shares); Mark W. Jaindl (70,000 shares); William Mahomes, Jr. (15,000 shares); Alfredo Mena (15,000 shares); Voldemar Madis (21,669 shares); Mark Koscinski (27,000 shares) and all directors and officers as a group (473,669 shares). Includes (1) 32,400 shares held by a trust for the benefit of Mr. Koether's daughter for which he serves as the sole trustee; (2) 347,500 shares beneficially owned by his wife, including 100,000 shares owned by Emerald Partners of which she is the sole general partner and 2,000 shares owned by Sussex Group, Inc. of which she is the President, a director and controlling stockholder, 125,000 shares which she has the right to acquire upon exercise of stock options and 120,500 shares held in custodial accounts; and (3) 33,900 shares owned by Mr. Koether's daughter. 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, 153,000 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 (1) 100,000 shares owned by Emerald Partners of which Mrs. Koether is the sole general partner and 2,000 shares owned by Sussex Group, Inc. of which she is the President, director and controlling stockholder; (2) 125,000 shares which she has the right to acquire upon exercise of stock options; (3) 120,500 shares held in custodial accounts; and (4) 272,200 shares beneficially owned by her husband, described above in footnotes (2) and (3). Mrs. Koether may also be deemed to be the beneficial owner of the 2,234,296 shares owned by Sun, of which she is a principal stockholder and her husband is a principal stockholder and Chairman. Mrs. Koether disclaims beneficial ownership of all of the foregoing shares. 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. Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed to have beneficial ownership of 440,500 shares of Pure World, Inc. stock as of December 31, 1996, 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.
Item 12. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ---------------------------------------------- The Company reimbursed Sun approximately $76,000 and $64,000 in 1996 and 1995, respectively, for the Company's proportionate share of certain general and administrative expenses. Rosenman & Colin LLP ("R&C") performed substantial legal work for the Company for which it billed the Company an aggregate of approximately $118,000 in 1996 and $630,000 in 1995. The professional fees represented work performed primarily in association with the proxy contests undertaken in connection with one of the Company's investments and the acquisition and management of Madis. Natalie I. Koether, Esq., President of the Company and Madis and wife of the Chairman of the Company, is of Counsel to R&C. 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 $33,000 in 1996 and $42,000 in 1995 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 (a) 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-KSB 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 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. Exhibit Number Exhibit Method of Filing - ------ ------- ---------------- 10.3 Agreement and Plan of Merger Incorporated by reference to dated as of December, 1994 American Holdings, Inc. Form 8-K dated January 18, 1995. 10.4 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. 10.5 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. 10.6 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. 10.7 Employment Agreement with Incorporated by reference to V. Madis American Holdings, Inc. Form 8-K dated January 18, 1995. 10.8 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 10.9 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. 10.10 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 November 14, 1996, the Company filed a current report on Form 8-K that it was engaged in ongoing reporting discussions to resolve its dispute with American Industrial Properties REIT (the "Trust") including the settlement of all litigation pending at that time. On November 26, 1996, the Company filed a Current Report on Form 8-K announcing that it and the Trust had entered into a settlement agreement resolving all disputes, including litigation that had arisen between them. For additional information, see Note 6 of Notes to Consolidated Financial Statements.
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 27, 1997 By: /s/ Paul O. Koether -------------------- Paul O. Koether Chairman of the Board 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 27, 1997 - ------------------------- and Director Paul O. Koether (Principal Executive Officer) /s/ William Mahomes, Jr. Director March 27, 1997 - ------------------------- William Mahomes, Jr. /s/ Alfredo Mena Director March 27, 1997 - ------------------------- Alfredo Mena /s/ Mark W. Jaindl Director March 27, 1997 - ------------------------- Mark W. Jaindl EX-3.1(D) 3 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION AMERICAN HOLDINGS, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That a meeting of the Board of Directors of American Holdings, Inc., resolutions were duly adopted setting forth a proposed amendment of the Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and directing that the proposed amendment be considered at the next annual meeting of the stockholders of said corporation. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the Restated Certificate of Incorporation of this Corporation be amended by deleting ARTICLE FIRST as currently in effect and substituting the following: "FIRST. The name of the Corporation is Pure World, Inc." SECOND: That thereafter, pursuant to a resolution of its Board of Directors, the annual meeting of the stockholders of said corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, American Holdings, Inc. has caused this certificate to be signed by John W. Galuchie, Jr., its Secretary, this 27th day of September 1995. BY: /s/ John W. Galuchie, Jr. ------------------------- John W. Galuchie, Jr. Secretary EX-21 4 LIST OF 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
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