-----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, ThdTT6OJRPPp0AsFoClmB9kNwNLFknK9hFZ43sc3iryEp59ecz0lgNxoMGkArX2a 7MyarKWjYWJQUc1/PW/0EQ== 0000356446-99-000007.txt : 19990513 0000356446-99-000007.hdr.sgml : 19990513 ACCESSION NUMBER: 0000356446-99-000007 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PURE WORLD INC CENTRAL INDEX KEY: 0000356446 STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799] IRS NUMBER: 953419191 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-10566 FILM NUMBER: 99618389 BUSINESS ADDRESS: STREET 1: P O BOX 74 STREET 2: 376 MAIN ST CITY: BEDMINSTER STATE: NJ ZIP: 07921 BUSINESS PHONE: 9082349220 MAIL ADDRESS: STREET 1: P O BOX 74 STREET 2: 376 MAIN STREET CITY: BEDMINSTER STATE: NJ ZIP: 07921 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN HOLDINGS INC /DE/ DATE OF NAME CHANGE: 19940411 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTER MEMORIES INC /DE/ DATE OF NAME CHANGE: 19940411 EX-27 1 FDS --
5 This schedule contains summary financial information extracted from the Form 10-QSB of Pure World, Inc. for the quarter ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000356446 PURE WORLD, INC. 1000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 5,875 64 3,803 140 9,168 19,252 11,730 1,750 34,087 6,252 0 0 0 83 24,434 34,087 3,747 3,821 2,430 3,545 0 0 124 152 8 144 0 0 0 144 0.02 0.02
10QSB 2 FOR THE QUARTER ENDED MARCH 31, 1999 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 1999 -------------- OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No.: 0-10566 ------- Pure World, Inc. --------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 95-3419191 - -------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 376 Main Street, Bedminster, New Jersey 07921 ---------------------------------------------- (Address of principal executive offices) (908) 234-9220 --------------------------- (Issuer's telephone number) N/A -------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ State the number of shares outstanding of each of the issuer's classes of common equity: As of April 30, 1999, the issuer had 8,268,883 shares of its common stock, par value $.01 per share, outstanding. Transitional Small Business Disclosure Format (check one): Yes No X PART I - FINANCIAL INFORMATION - ------ --------------------- ITEM 1. - Financial Statements - ------ --------------------- PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31,1999 (UNAUDITED) (in $000's) ASSETS - ------ Current assets: Cash and cash equivalents $ 5,875 Marketable securities 64 Accounts receivable, net of allowance for uncollectible accounts and returns and allowances of $140 3,663 Inventories 9,168 Other 482 ------- Total current assets 19,252 Securities available-for-sale 896 Investment in unaffiliated natural products company 1,510 Plant and equipment, net 9,980 Notes receivable from affiliates 269 Goodwill, net of accumulated amortization of $453 1,538 Other assets 642 ------- Total assets $34,087 ======= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $ 1,768 Short-term borrowings 3,550 Accrued expenses and other 934 ------- Total current liabilities 6,252 Long-term debt 3,318 ------- Total liabilities 9,570 ------- Stockholders' equity: Common stock, par value $.01; 30,000,000 shares authorized; 8,268,909 shares issued and outstanding 83 Additional paid-in capital 43,321 Accumulated deficit ( 18,382) Accumulated other comprehensive loss ( 505) ------- Total stockholders' equity 24,517 ------- Total liabilities and stockholders' equity $34,087 ======= See accompanying notes to consolidated financial statements. PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED) ($000 Omitted, except per share data) Three Months Ended March 31, ------------------ 1999 1998 ------ ------ Revenues: Sales $ 3,747 $ 5,095 Net gains on marketable securities 8 76 Interest, dividends and other income 66 104 ------- ------- Total revenues 3,821 5,275 ------- ------- Expenses: Cost of goods sold 2,430 2,520 Selling, general and administrative 1,239 1,198 ------- ------- Total expenses 3,669 3,718 ------- ------- Income before income taxes 152 1,557 Provision for income taxes 8 127 ------- ------- Net income 144 1,430 Other comprehensive income: Unrealized holding losses on securities available-for-sale ( 261) ( 239) ------- ------- Comprehensive income (loss) ($ 117) $ 1,191 ======= ======= Basic net income per share $ .02 $ .17 ======= ======= Diluted net income per share $ .02 $ .16 ======= ======= See accompanying notes to consolidated financial statements. PURE WORLD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ($000 Omitted) Three Months Ended March 31, --------------------- 1999 1998 ------ ------ Cash flows from operating activities: Net income $ 144 $ 1,430 Adjustments: Depreciation and amortization 336 137 Net marketable securities transactions 11 247 Gain on sale of securities available-for-sale ( 13) ( 58) Change in inventories ( 2,296) ( 1,199) Change in receivables 193 ( 2,036) Change in accounts payable and other accruals 856 2,049 Other, net ( 82) ( 87) -------- -------- Net cash provided by (used in) operating activities ( 851) 483 -------- -------- Cash flows from investing activities: Plant and equipment ( 1,018) ( 3,305) Proceeds from sale of securities available-for-sale 59 155 Purchase of securities available-for-sale - ( 16) Loans to affiliates and others - ( 60) Repayment of loans to affiliates and others 4 246 Other, net - ( 156) -------- -------- Net cash used in investing activities ( 955) ( 3,136) -------- -------- Cash flows from financing activities: Issuance of common stock - 17 Term loan borrowings 350 2,051 Term loan repayments ( 184) ( 58) Net revolving line of credit borrowings 1,393 - -------- -------- Net cash provided by financing activities 1,559 2,010 -------- -------- Net decrease in cash and cash equivalents ( 247) ( 643) Cash and cash equivalents at beginning of period 6,122 8,100 -------- -------- Cash and cash equivalents at end of period $ 5,875 $ 7,457 ======== ======== Supplemental disclosure of cash flow information: Cash paid for: Interest $ 124 $ 6 ======== ======== Taxes $ 13 $ 12 ======== ======== See accompanying notes to consolidated financial statements. PURE WORLD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1999 AND 1998 (UNAUDITED) 1. General ------- The accompanying unaudited consolidated financial statements of Pure World, Inc. and subsidiaries ("Pure World" or the "Company") as of March 31, 1999 and for the quarters ended March 31, 1999 and 1998 reflect all material adjustments consisting of only normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. Certain information and footnote disclosures required under generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1998 as filed with the Securities and Exchange Commission. Prior years' financial statements have been reclassified to conform to the current year's presentation. The results of operations for the quarters ended March 31, 1999 and 1998 are not necessarily indicative of the results to be expected for the entire year or any other period. 2. Marketable Securities --------------------- At March 31, 1999, marketable securities consisted of the following (in $000's): Gross Amortized Holding Fair Cost Losses Value --------- ------- ----- Trading securities $ 115 $ 51 $ 64 Available-for-sale 1,401 505 896 ------ ----- ----- Total marketable securities $1,516 $ 556 $ 960 ====== ===== ===== All marketable securities were investments in common stock. 3. Inventories ----------- Inventories are comprised of the following (in $000's): Raw materials $ 3,818 Work-in-progress 604 Finished goods 4,746 ------- Total inventories, net $ 9,168 ======= 4. Investment in Unaffiliated Natural Products Company --------------------------------------------------- In May 1996, the Company purchased 500 shares of common stock representing a 25% interest in Gaia Herbs, Inc. ("Gaia") for approximately $1 million. In June 1997, the Company purchased an additional 200 shares of common stock for $500,000, increasing its equity ownership to 35% of Gaia's outstanding shares of common stock ("Pure World's Gaia Stock"). Pure World's Gaia Stock is non-voting. The Company loaned Gaia $200,000 in July 1997 payable interest only on a quarterly basis for the first three years and 36 monthly payments of principal and interest thereafter (the "Pure World Loan"). The Pure World Loan bears interest at 6.49% which was the imputed rate required under the Internal Revenue Code and is classified as an other asset in the consolidated balance sheet. The parties also agreed that if any other party acquired voting shares, Pure World's Gaia Stock would become voting stock. Additionally, the parties agreed that Gaia and the principal stockholder of Gaia (the "Principal Stockholder") would have a right of first refusal to acquire any Gaia stock sold by Pure World and that Pure World would have a right of first refusal to acquire any Gaia stock sold by Gaia or the Principal Stockholder. In June 1998, Gaia requested that Pure World guarantee an unsecured bank line of $500,000 (the "Gaia Bank Loan"). Because of expansion plans for Pure World's wholly-owned subsidiary, Pure World Botanicals Inc., Pure World declined to issue the guarantee. An individual unaffiliated with Gaia or Pure World agreed to guarantee the Gaia Bank Loan in consideration of a cash fee and the issuance to the individual of 100 shares of Gaia's common stock, representing 5 percent of Gaia's common stock outstanding (the "Guarantee"). The Guarantee is also secured by Gaia stock held by Gaia's Principal Stockholder. Pure World notified Gaia that it wished to exercise its right of first refusal in connection with the Guarantee. Pure World and Gaia reached an understanding that Pure World would decline the right of first refusal if by November 30, 1998 thirty percent of Pure World's interest was purchased for $1,500,000 (leaving five percent of the current Gaia common stock outstanding) and the Pure World Loan was repaid, including any accrued interest (the "Repurchase"). If the Repurchase was not closed by November 30, 1998 ("the Closing Date"), Pure World then would have the right to assume the Guarantee pursuant to the same terms granted the original guarantor, except for the cash fee. If the Repurchase did not close prior to the Closing date, and either before or after the Closing Date, the Guarantee is called by the bank, Pure World would then own, or have the right to own a majority of Gaia's voting stock. The repurchase did not close as of November 30, 1998 and the Company is in discussions with Gaia about its investment. Gaia manufactures and distributes fluid botanical extracts for the high-end consumer market. Gaia is a privately held company and does not publish financial results. The Company is accounting for this investment by the cost method. 5. Borrowings --------- Borrowings consisted of the following at March 31, 1999 (in $000's): Loans payable to a bank, collateralized by certain property and equipment, bearing annual interest at 7.75% in March 1999 maturing in December 2003 $2,893 Loans payable to a bank, pursuant to a $3 million unsecured line of credit bearing annual interest at the prime rate, currently 7.75% maturing in June 1999 2,798 Loan payable to a bank, pursuant to a $2 million convertible line of credit collateralized by certain equipment bearing interest the LIBOR rate plus 2.5% (the "Initial Rate") until October 6, 1999 when it is convertible to either the Initial Rate or variable rate equal to the yield on five-year U.S. Treasury Obligations plus 2.5%, maturing in October 2004, interest only payments until October 1999 350 Loan payable to a bank, collateralized by certain equipment bearing annual interest at 8.75% maturing in April 2003 254 Loan payable to a bank, collateralized by certain equipment bearing annual interest at 8.75% maturing in August 2003 59 Leases payable for equipment 406 All other 108 ------ Total borrowings 6,868 Less: Short-term borrowings 3,550 ------ Long-term debt $3,318 ====== Interest expense was $124,000 and $6,000 for the three months ended March 31, 1999 and 1998, respectively. 6. Net Income Per Share -------------------- Basic earnings per common share are computed by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per share are computed by dividing net income by the sum of the weighted-average number of common shares outstanding plus the dilutive effect of shares issuable through the exercise of stock options. The shares used for basic earnings per common share and diluted earnings per common share are reconciled below. All share and per share information has been restated to reflect a 10% stock dividend declared on November 17, 1998, to stockholders of record on January 7, 1999, distributed on January 15, 1999. (Shares in Thousands) 1999 1998 ---- ---- Basic earnings per common share: Average shares outstanding for basic earnings per share 8,269 8,258 ===== ===== Diluted earnings per common share: Average shares outstanding for basic earnings per share 8,269 8,258 Dilutive effect of stock options 742 704 ----- ----- Average shares outstanding for diluted earnings per share 9,011 8,962 ===== ===== ITEM 2. Management's Discussion and Analysis of - ------ Financial Condition and Results of Operations ---------------------------------------------- This Form 10-QSB contains forward-looking statements which may involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results and performance in future periods to be materially different from any future periods or performance suggested by these statements. Liquidity and Capital Resources - ------------------------------- At March 31, 1999, the Company had cash and cash equivalents of approximately $5.9 million. Cash equivalents of $5.5 million consisted of U.S. Treasury bills with an original maturity of less than three months and yields ranging between 4.45% and 4.64%. The Company had net working capital of $13 million at March 31, 1999. The management of the Company believes that the Company's financial resources and anticipated cash flows will be sufficient for future operations and possible acquisitions of other operating businesses. Net cash of $851,000 was used by operations for the three months ended March 31, 1999, compared to net cash provided by operations of $483,000 for the same period in 1998. In 1999, the net use of cash was primarily attributable to an increase in inventories, partially offset by an increase in accounts payable and other accruals and depreciation and amortization. In 1998, net income and the increase in accounts payable and other accruals partially offset by the increase in inventories and receivables accounted for the cash provided by operations. Net cash of $955,000 and $3,136,000 was used in investing activities in the three months ended March 31, 1999 and 1998, respectively. In 1999, $1,018,000 was used in connection with plant and equipment purchases as follows: $376,000 was used for the replacement of underground storage tanks with greater capacity tanks, $350,000 was used in connection with production expansion, and $292,000 in connection with various purchases of machinery and equipment. In 1998, $3.3 million was used in connection with an expansion program that began in 1997 to upgrade and expand productive capacity and to build a new warehouse facility. Cash flows provided by financing activities in the first quarter of 1999 were $1,559,000 compared to net cash of $2,010,000 provided in the same period in 1998. Increases in notes payable were the primary reason for the cash provided in both periods. For more information, see Note 5 of Notes to Consolidated Financial Statements. Results of Operations - --------------------- The Company's operations resulted in net income of $144,000, or $.02 basic earnings per share, for the three months ended March 31, 1999 compared to net income of $1,430,000, or $.17 basic earnings per share, for the comparable period in 1998. Diluted earnings per share was $.02 and $.16 for the three months ended March 31, 1999 and 1998, respectively. The Company, through its wholly-owned subsidiary, Pure World Botanicals, Inc. had sales of $3.7 million for the quarter ended March 31, 1999, compared to sales of $5.1 million for the comparable quarter of 1998, a decrease of $1.4 million, or 27%. The Company believes that the decrease in sales was due primarily to inventory buildups by manufacturers and distributors of dietary supplements. Although sales increased toward the end of the first quarter, the Company believes it is too early to tell whether the improvement was a trend. For the three month periods ended March 31, 1999 and 1998, the gross margin (sales less cost of goods sold) was $1.3 million, or 35.2% of sales and $2.6 million, or 50.5% of sales, respectively. The decrease in gross margin was due to the change in the product sales mix and pricing pressures. For the three month period ended March 31, 1999, the Company recorded net gains on marketable securities of $8,000 compared to $76,000 for the same period in 1998. In 1999, $28,000 were unrealized gains and $20,000 were realized losses. In 1998, substantially all of the gains recorded were realized. Interest, dividend and other income was $66,000 for the three month period ended March 31, 1999, compared to $104,000 for the three month period ended March 31, 1998. Interest income was $66,000 during the three month period ended March 31, 1999, a decrease of $34,000 from the $100,000 recorded in the comparable period of 1998. This decrease was due primarily to lower invested balances and lower yields on investments. Selling, general and administrative expenses were $1,239,000 for the three months ended March 31, 1999 compared to $1,198,000 for the comparable period in 1998, an increase of $41,000 or 3.4%. Increased selling and interest expense were the primary reasons for the increase. Year 2000 Issue - --------------- The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions or engage in similar normal business activities. Management has determined that the Year 2000 Issue will not pose significant operational problems for its computer systems. There can be no guarantee that the systems of other companies on which the Company's systems rely will be timely converted and would not have an adverse effect on the Company's systems. The Company will utilize external resources to reprogram, or replace, and test the software for Year 2000 modifications. The Company anticipates completing the Year 2000 project not later than October 31, 1999, which is prior to any anticipated impact on its operating systems. The Company anticipates incurring costs of $250,000 to upgrade its management information systems ("MIS") in 1999 which is required due to the increase in sales volume and the need for enhanced systems to more effectively manage ongoing business. The costs of the project and the date on which the Company believes it will complete the Year 2000 modifications are based on management's best estimate, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources, third party modifications plans and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, and similar uncertainties. PART II - OTHER INFORMATION - ------- ----------------- Item 6. - Exhibits and Reports on Form 8-K - ------ --------------------------------- (a) Exhibits -------- 27. Financial Data Schedule for the three months ended March 31, 1999. (b) Reports on Form 8-K ------------------- None SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PURE WORLD, INC. Dated: May 12, 1999 By: /s/ Mark Koscinski ------------------------------ Mark Koscinski Senior Vice President and Principal Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----