-----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, Er0Qd7ffKGk55rmJHUR7YxrodZtHPwDNQWSJb1w6IPSRIKkuhs7sfWppNdEq7hLC EO6q5RQtXu4cK+VT7aBuTA== 0000891554-98-000593.txt : 19980515 0000891554-98-000593.hdr.sgml : 19980515 ACCESSION NUMBER: 0000891554-98-000593 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLYMER RESEARCH CORP OF AMERICA CENTRAL INDEX KEY: 0000079424 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 112023495 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14119 FILM NUMBER: 98619390 BUSINESS ADDRESS: STREET 1: 2186 MILL AVE CITY: BROOKLYN STATE: NY ZIP: 11234 BUSINESS PHONE: 7184444300 MAIL ADDRESS: STREET 1: 2186 MILL AVE CITY: BROOKLYN STATE: NY ZIP: 11234 10QSB 1 QUARTERLY REPORT FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15 (d) Of the Securities and Exchange act of 1934 For Quarter Ended March 31, 1998 Commission file number 0-14119-NY Polymer Research Corp. of America (Exact name of registrant as specified in its charter) New York 11-2023495 (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification No.) 2186 Mill Avenue, Brooklyn, New York 11234 (Address of principal executive offices)(Zip code) (718) 444-4300 (Registrants telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. April 30, 1998 1,593,947 POLYMER RESEARCH CORP. OF AMERICA INDEX Page Number Part I - FINANCIAL INFORMATION: ITEM I - FINANCIAL STATEMENTS Balance Sheets: March 31, 1998 (Unaudited) and December 31, 1997 1 Statements of Operations: Three months ended March 31, 1998 and 1997 (Unaudited) 3 Statements of Cash Flows: Three months ended March 31, 1998 and 1997 (Unaudited) 4 Notes to Financial Statements 5-8 ITEM 2 - MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-10 PART II - OTHER INFORMATION 11 PART I - FINANCIAL INFORMATION POLYMER RESEARCH CORP. OF AMERICA BALANCE SHEETS MARCH 31, 1998 AND DECEMBER 31, 1997 - -------------------------------------------------------------------------------- March 31, December 31, ASSETS 1998 1997 ---------- ---------- (Unaudited) (Note 1) CURRENT ASSETS: Cash $1,924,310 $1,367,008 Investment - certificates of deposit 156,817 155,308 Investment securities available for sale 389,451 482,940 Accounts receivable,less allowances of $0 226,115 137,827 Inventories 107,606 99,654 Prepaid expenses and other 35,929 17,504 ---------- ---------- Total current assets 2,840,228 2,260,241 ---------- ---------- Land, Property, and Equipment-net 2,839,003 2,863,416 ---------- ---------- Deferred financing costs and other 11,218 11,450 ---------- ---------- Total other assets 11,218 11,450 ---------- ---------- TOTAL $5,690,449 $5,135,107 ========== ========== The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------1 PART I - FINANCIAL INFORMATION POLYMER RESEARCH CORP. OF AMERICA BALANCE SHEETS MARCH 31, 1998 AND DECEMBER 31, 1997 - -------------------------------------------------------------------------------- March 31, December 31, 1998 1997 ----------- ----------- (Unaudited) (Note 1) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 30,438 $ 31,244 Accounts payable 53,102 75,548 Accrued expenses and other current liabilities 354,486 349,802 Income taxes payable 288,362 56,100 Deferred revenue 242,450 252,450 ----------- ----------- Total current liabilities 968,838 765,144 ----------- ----------- LONG-TERM DEBT (NOTE 2) 1,445,068 1,451,770 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock, par value $.01 per share, authorized 4,000,000 shares, issued 1,580,548 and 1,580,548 shares respectively 15,805 15,805 Capital in excess of par value 2,850,332 2,850,332 Retained earnings 468,423 111,029 Unrealized holding losses (1,280) (2,236) Less: Treasury stock, at cost 91,837 shares (56,737) (56,737) ----------- ----------- Total Stockholders' Equity 3,276,543 2,918,193 ----------- ----------- TOTAL $ 5,690,449 $ 5,135,107 =========== =========== The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------2 POLYMER RESEARCH CORP. OF AMERICA STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) - -------------------------------------------------------------------------------- 1998 1997 ----------- ----------- Net Revenues Research $ 1,766,516 $ 1,148,300 Production 421,660 232,680 ----------- ----------- Total 2,188,176 1,380,980 ----------- ----------- Cost of Revenues Research 289,303 261,652 Production 369,433 231,131 ----------- ----------- Total 658,736 492,783 ----------- ----------- Gross Profit on Revenues 1,529,440 888,197 ----------- ----------- Selling, General, and Administrative Expenses 827,931 660,357 ----------- ----------- Income from operations 701,509 227,840 ----------- ----------- Other revenues (Expenses): Investment income 16,249 17,116 Interest expense (38,864) (39,499) ----------- ----------- Income before income taxes 678,894 205,457 Provision for income taxes 321,500 98,501 ----------- ----------- Net Income $ 357,394 $ 106,956 =========== =========== Income per share $ .24 $ .07 =========== =========== Weighted average number of shares outstanding during the period 1,488,711 1,488,711 =========== =========== The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------3 POLYMER RESEARCH CORP. OF AMERICA STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) - -------------------------------------------------------------------------------- OPERATIONS: 1998 1997 --------- --------- Net Income $ 357,394 $ 106,956 Charge not affecting funds - Unrealized holding losses 956 Depreciation and amortization 24,999 24,999 --------- --------- Funds Provided by operations 383,349 131,955 --------- --------- Asset and liability management: Accounts receivable (88,288) 28,609 Inventories (7,952) 12,414 Other current assets (18,425) 104,313 Accounts payable (22,446) 9,559 Accrued expenses and other 4,684 (54,606) Income taxes payable 232,262 Deferred revenue (10,000) (373,300) Total other assets 232 --------- --------- Increase (Decrease) in net operating assets 90,067 (273,011) --------- --------- Total 473,416 (141,056) --------- --------- FUNDS USED BY FINANCING Certificates of deposit (1,509) (9,052) Investment securities 93,489 7,986 Payments on long term debt (7,508) (6,829) --------- --------- Total 84,472 (7,895) --------- --------- INVESTMENT IN LAND, PROPERTY, AND EQUIPMENT (586) (803) --------- --------- INCREASE (DECREASE) IN CASH $ 557,302 $(149,754) ========= ========= The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------4 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - Financial statements In the opinion of the management of Polymer Research Corp. of America (the Company), the accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-QSB and do not include all of the information and footnotes required by generally accepted accounting principles. Management believes that the results herein reflect all adjustments which are in the opinion of management necessary to fairly state the results and current financial condition of the Company for the respective periods. These statements should be read in conjunction with the financial statements and notes thereto included in the Company's report filed under cover of Form 10-KSB. The results of operations for the three month period is not necessarily indicative of the results for an entire year. The balance sheet at December 31, 1997 has been taken from the audited financial statements as of that date. NOTE 2 - Summary of Significant Accounting Policies Business Activity The Company is engaged in the research and development of the applications of chemical grafting and sells products resulting from such research. Credit Risk Financial Instruments that potentially subject the company to credit risk include investments in United States Treasury bills notes and other certificates of deposit, government agencies' securities and U.S. Government and New York State mutual bond funds. Future Changes in economic conditions may make the investment less valuable. In addition, financial instruments that potentially subject the Company to credit risk also include accounts receivable. Accounts receivable resulting from research or product sales are not collateralized. The Company maintains deposits with financial institutions in excess of amounts insured by the FDIC. - -------------------------------------------------------------------------------5 Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of 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 Revenue Recognition Revenue from research contracts is recognized upon two criteria: first, client approval of performance of a specific stage of the contract and, second, collection of the resulting revenue is assured. Revenue from production is recognized when products are shipped for sale to customers. Inventories Inventories are valued at the lower of cost or market, with cost determined using the first-in, first-out method and with market defined as the lower of replacement cost or realizable value. Investment Securities The Company determines the appropriate classification of securities at the time of purchase. If the Company has the intent and the ability at the time of purchase to hold securities until maturity or on a long-term basis, they are classified as investments and carried at amortized historical cost. Securities to be held for indefinite periods of time and not intended to be held to maturity or on a long-term basis are classified as available for sale and carried at face value. Securities held for indefinite periods of time include securities that management intends to use as part of its asset and liability management strategy and that may be sold in response to changes in interest rates, resultant prepayment risk and other factors related to interest rate and resultant prepayment risk changes. Realized gains and losses on dispositions are based on the net proceeds and the adjusted book value of the securities sold, using the specific identification method. Unrealized gains and losses on investment securities available for sale are based on the difference between book value and fair value of each security. These gains and losses are credited or charged to shareholders' equity, whereas realized gains and losses flow through the Company's operations. - -------------------------------------------------------------------------------6 Property and Equipment Property and equipment is stated at cost. The costs of additions and betterments are capitalized and expenditures for repairs and maintenance are expensed in the period incurred. When items of property and equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is included in income. The company capitalizes leased equipment where the terms of the lease result in the transfer to the Company of substantially all of the benefits and risks of ownership of the equipment. Depreciation and amortization of property and equipment is provided utilizing the straight-line method over the estimated useful lives of the respective assets as follows: Transportation equipment 3 to 5 years Machinery and equipment 5 years Furniture and fixtures 5 to 10 years Building and improvements 40 years Office equipment under capital leases 5 years Deferred Financing Costs Costs incurred in obtaining the mortgage discussed below have been capitalized and are being amortized over the term of the related obligation utilizing the straight-line method. Income Taxes The Company accounts for its income taxes utilizing Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes" which requires that the Company follow the liability method of accounting for income taxes. The liability method provides that deferred tax assets and liabilities are recorded based on the difference between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as "temporary differences." Net Earnings Per Share Earnings per share are computed based upon the weighted average number of common shares outstanding during each year. - -------------------------------------------------------------------------------7 Profit Sharing Plan The Company maintains a qualified non-contributory profit sharing plan. The plan provides its eligible employees with a source of retirement income, as well as provide assistance in other circumstances such as death or disability. Eligible employees must meet two requirements to become participants; attainment of age 21 and completion of one year of service with the Company. Employer contributions are determined, if any, at the Board of director's discretion. A percentage of the benefits vest after three years of qualifying service. NOTE 3 - Provision for Income Taxes (First three months) 1998 1997 -------- -------- Federal $192,000 $ 58,500 State and local 129,500 40,001 -------- -------- Total $321,500 $ 98,501 ======== ======== NOTE 4 - Mortgage Liability In September of 1996 the Company prepaid $800,000 due under it's mortgage on the Company's building and modified its payment schedule. As modified, the Company is obligated to pay a mortgage note payable in equal monthly instalments of $15,457 including interest at 10.5% per annum through June, 2000, secured by the related building. Such mortgage is being amortized using a 25 year amortization. The entire unpaid principal balance is due in a balloon payment of $1,398,330 on June 1, 2000. NOTE - 5 - Restricted Stock Issuance On April 2, 1998 the Company authorized the issuance of 30,800 restrictive shares of its common stock as incentive to approximately 35 employees as incentive compensation. The Company has valued the shares at $2.77 per share and will recognize compensation expense for $85,316 ratably throughout the year. NOTE - 6 - Subsequent event On March 2, 1998 the Company declared a 5% stock dividend to shareholders, payable on April 2, 1998 to holders of record on March 23, 1998. The transaction was valued based upon the closing market price of the Company's stock on March 2, 1998, which was $2.50 per share. Retained earnings will be charged for $ 186,090 as a result of the issuance of 74,436 shares. - -------------------------------------------------------------------------------8 POLYMER RESEARCH CORP. OF AMERICA ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAPITAL RESOURCES AND LIQUIDITY Cash, Investments, and Investment securities have increased collectively by a $557,302 since December 31, 1997. The increase is principally due to the net income of the first quarter. Cash is generated by and used by the Company through its operations. Neither the issuance of stock nor the acquisition of debt was in 1997, nor expected to be in 1998, sources of cash for use in operations. The rate of current assets to current liabilities decreased to 2.93 to 1.0 at March 31, 1998 as compared to 2.95 to 1.0 at December 31, 1997. The decrease is the result of an increase in taxes payable net of net income for the quarter. Based on the above, the Company's cash, investment, and investment securities position at March 31, 1998 is deemed sufficient to cover any unforeseen sales downturn in the short term as it is equal to approximately nine months selling, general, and administrative expenses. Over both the long and short term, liquidity will be a direct result of sales and related net earnings. B. RESULTS OF OPERATIONS Three months ended March 31, 1998 v. 1997 Net revenues for the first quarter of 1998 were $ 2,188,176, an increase of $807,196 (58%) over the first quarter of 1997. Research sales increased $618,216 (54%) in the first quarter of 1998 over 1997. Product sales increased $188,980 (81%) over the first quarter of 1998 over 1997. The cost of revenues in research decreased from 23% in the first quarter of 1997 to 16% in the same quarter of 1998 due to greatly increased volume using the same staff. Costs of product sales decreased from 99% in the first quarter of 1997 to 88% in the same quarter of 1998 principally as a result of increased sales using the same sized labor force. - -------------------------------------------------------------------------------9 Selling, general, and administrative expenses decreased as a percentage of sales to 38% for the first quarter of 1998 from 48% and for the comparable quarter of 1997 principally due to increased volume without significantly increased expenses. Net income increased from $ 106,956 (7.7% of sales) in 1997 to $357,394 (16% of sales) in 1998, principally as the result of increased revenues and improved gross margins without substantially increased expenses. - ------------------------------------------------------------------------------10 PART II - OTHER INFORMATION ITEM 1 - Legal Proceedings: The Company is party to various lawsuits arising in the ordinary course of business. The Company's financial statements include reserves of $100,000 for legal expenses and any unfavorable outcomes in amounts management believes to be reasonable. In the opinion of management, such lawsuits should not have a material adverse effect on the Company's financial condition. ITEM 2 - Changes in Securities: On April 2, 1998 the Company authorized the issuance of 30,800 restrictive shares of its common stock as incentive to approximately 35 employees as incentive compensation. The Company has valued the shares at $2.77 per share and will recognize compensation expense for $85,316 ratably throughout the year. On March 2, 1998 the Company declared a 5% stock dividend to shareholders, payable on April 2, 1998 to holders of record on March 23, 1998. The transaction was valued based upon the closing market price of the Company's stock on March 2, 1998, which was $2.50 per share. Retained earnings will be charged for $ 186,090 as a result of the issuance of 74,436 shares. ITEM 3 - Defaults Upon Senior Securities: None ITEM 4 - Submission of Matters to a Vote of Security Holders: None ITEM 5 - Other Information: None ITEM 6 - Exhibits and Reports on Form 8-k: None - ------------------------------------------------------------------------------11 FORM 10-Q SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. POLYMER RESEARCH CORP. OF AMERICA, (REGISTRANT) Date May 7, 1998 /s/ Carl Horowitz ----------------------------------- Carl Horowitz, President and Chief Accounting Officer -----------------------------------------------------------------------------12 EX-27 2 FDS
5 3-MOS DEC-31-1998 MAR-31-1998 2,081,127 389,451 226,115 0 107,606 2,840,228 2,839,003 0 5,690,449 968,838 0 0 0 15,805 3,260,738 5,690,449 421,660 2,188,176 369,433 658,736 0 0 38,864 678,894 321,500 357,394 0 0 0 357,394 0.24 0.24
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