-----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, BASVNXme8prf20Sz52WcqatBh9nikvBGD5q7BwtyM2Lqc6LlepOsk/E3WlZSup+g 2c1EwjByT5QRAERB9CC/JA== 0000891554-98-000936.txt : 19980806 0000891554-98-000936.hdr.sgml : 19980806 ACCESSION NUMBER: 0000891554-98-000936 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980805 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: 98677241 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 June 30, 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. July 31, 1998 1,593,947 POLYMER RESEARCH CORP. OF AMERICA INDEX Page Number Part I - FINANCIAL INFORMATION: ------ ITEM I - FINANCIAL STATEMENTS Balance Sheets: June 30, 1998 (Unaudited) and December 31, 1997 1 Statements of Operations: Three months and six months ended June 30, 1998 and 1997 (Unaudited) 3 Statements of Cash Flows: Three months and six months ended June 30, 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 JUNE 30, 1998 AND DECEMBER 31, 1997 - -------------------------------------------------------------------------------- June 30, December 31, ASSETS 1998 1997 - ------ ---------- ------------ (Unaudited) (Note 1) CURRENT ASSETS: Cash $1,963,905 $1,367,008 Investment - certificates of deposit 158,356 155,308 Investment securities available for sale 384,389 482,940 Accounts receivable,less allowances of $0 and $4,000 120,112 137,827 Inventories 74,912 99,654 Prepaid expenses and other 73,643 17,504 ---------- ---------- Total current assets 2,775,317 2,260,241 ---------- ---------- Land, Property, and Equipment-net 2,821,363 2,863,416 ---------- ---------- Deferred financing costs and other 10,984 11,450 ---------- ---------- Total other assets 10,984 11,450 ---------- ---------- TOTAL $5,607,664 $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 JUNE 30, 1998 AND DECEMBER 31, 1997 - -------------------------------------------------------------------------------- June 30, December 31, 1998 1997 ----------- ----------- (Unaudited) (Note 1) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 33,438 $ 31,244 Accounts payable 30,238 75,548 Accrued expenses and other current liabilities 249,350 349,802 Income taxes payable 238,849 56,100 Deferred revenue 202,450 252,450 ----------- ----------- Total current liabilities 754,325 765,144 ----------- ----------- LONG-TERM DEBT (NOTE 2) 1,434,365 1,451,770 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock, par value $.01 per share, authorized 4,000,000 shares, issued 1,685,784 and 1,685,784 shares respectively 16,857 15,805 Capital in excess of par value 3,120,117 2,850,332 Retained earnings 339,765 111,029 Unrealized holding losses (1,028) (2,236) Less: Treasury stock, at cost 91,837 shares in 1998 and 91,837 shares in 1997 (56,737) (56,737) ----------- ----------- Total Stockholders' Equity 3,418,974 2,918,193 ----------- ----------- TOTAL $ 5,607,664 $ 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 JUNE 30, 1998 AND 1997 (UNAUDITED) AND THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) - --------------------------------------------------------------------------------
Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 1998 1997 1998 1997 Net revenues: Product sales $ 127,759 $ 320,399 $ 549,419 $ 553,079 Research 1,234,326 1,129,601 3,000,842 2,277,901 ----------- ----------- ----------- ----------- Total 1,362,085 1,450,000 3,550,261 2,830,980 ----------- ----------- ----------- ----------- Cost of Revenues Product sales 183,718 258,758 553,151 489,889 Research 253,405 233,608 542,708 495,260 ----------- ----------- ----------- ----------- Total 437,123 492,366 1,095,859 985,149 ----------- ----------- ----------- ----------- Gross Profit on Revenues 924,962 957,634 2,454,402 1,845,831 Selling, General, and Administrative Expenses 813,865 746,822 1,641,796 1,407,179 ----------- ----------- ----------- ----------- Income from Operations 111,097 210,812 812,606 438,652 ----------- ----------- ----------- ----------- Other Revenues (Expenses): Interest income 28,501 16,952 44,750 34,068 Interest expense (See note 2) (38,665) (39,518) (77,529) (79,017) ----------- ----------- ----------- ----------- Total (10,164) (22,566) (32,779) (44,949) ----------- ----------- ----------- ----------- Income before income taxes 100,933 188,246 779,827 393,703 Provision for income taxes (43,500) (89,499) (365,000) (188,000) ----------- ----------- ----------- ----------- Net Income $ 57,433 $ 98,747 $ 414,827 $ 205,703 =========== =========== =========== =========== Basic earnings per Share $ 0.04 $ 0.06* $ 0.26 $ 0.13 =========== =========== =========== =========== Weighted average number of shares outstanding during the period 1,593,947 1,593,947* 1,593,947 1,593,947 =========== =========== =========== ===========
* Restated for 1998 5% stock dividend The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------- 3 POLYMER RESEARCH CORP. OF AMERICA - --------------------------------- STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) - -------------------------------------------------------------------------------- OPERATIONS: 1998 1997 ---- ---- Net Income $ 414,827 $ 205,703 Charge not affecting funds - Issuance of incentive stock 28,439 Unrealized holding losses 1,208 5,428 Depreciation and amortization 49,998 48,978 --------- --------- Funds Provided by operations 494,472 260,109 --------- --------- Asset and liability management: Accounts receivable 17,715 (6,637) Inventories 24,742 3,258 Other current assets (56,139) 75,225 Other assets 466 214 Accounts payable (45,310) (8,794) Accrued expenses and other (100,452) (114,401) Income taxes payable 182,749 Deferred revenue (50,000) (368,300) --------- --------- Other current liabilities Increase (Decrease) in net operating assets (26,229) (419,435) --------- --------- Total 468,243 (159,326) --------- --------- FUNDS USED BY FINANCING Certificates of deposit (3,048) (15,953) Investment securities 98,551 1,168 Issuance of stock 56,309 20,000 Payments on long term debt (15,211) (13,770) --------- --------- Total 136,601 (8,555) --------- --------- INVESTMENT IN LAND, PROPERTY, AND EQUIPMENT (7,376) --------- INCREASE (DECREASE) IN CASH $ 597,468 $(167,881) ========= ========= 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 six 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." The adoption of the new statement did not have a material impact on the Company's financial position or results of operations. 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 Effective January 1, 1990, the Company adopted 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. Since inception the company has contributed $100,000 each year. NOTE 3 - Provision for Income Taxes (First six months) 1998 1997 ---- ---- Federal $218,000 $112,000 State and local 147,000 76,000 -------- -------- Total $365,000 $188,000 ======== ======== NOTE 4 - Mortgage Liability In September of 1996 the Company prepaid $800,000 due under a mortgage on the Company's building and modified its payment schedule. As modified, the Company is obligated to pay the mortgage note 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. In connection with the modification, the company paid the Mortgagee $45,000. 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. The Company has valued the shares at $2.77 per share and will recognize compensation expense for $85,316 rateably throughout the year. NOTE - 6 - Stock Dividend On March 2, 1998 the Company declared a 5% stock dividend to shareholders, paid April 2, 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 has been charged for $ 186,090 as a result of the issuance of 74,436 shares which was credited to common stock and Capital in excess of par value. - ------------------------------------------------------------------------------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 $501,394 since December 31, 1997. The increase is principally due to net income of the fist six months. 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, significant sources of cash for use in operations. The rate of current assets to current liabilities at June 30, 1998 increased to 3.68 to 1.0 as compared to 2.95 to 1.0 at December 31, 1997. The increase is a result of net earnings in 1998 and the decrease in deferred revenue. Based on the above, the Company's cash, investment, and investment securities position at June 30, 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. The company expects to use its available cash to satisfy the mortgage on its building when it becomes due in June 2000. B. RESULTS OF OPERATIONS Three months ended June 30, 1998 v. 1997 Net revenues for the second quarter of 1998 were $ 1,362,085, a decrease of $87,915 (7%) from the second quarter of 1997. Research sales increased $104,725 (1%) in the second quarter of 1998 over 1997. Product sales decreased $192,640 (60%) in the second quarter of 1998 from 1997. Product sales decreased as many large customers bought large quantities in the first quarter of 1998 and are still using their inventory. The cost of revenues in research decreased from 24% in the second quarter of 1997 to 21% in the same quarter of 1998 due to reductions in staff and in repairs and maintenance expenses. Costs of product sales increased from 81% in the second quarter of 1997 to 144% in the same quarter of 1998 - ------------------------------------------------------------------------------9 principally as a result of decreased volume while utilizing the same staff. Product sales, while not always profitable are very useful in helping to obtain research contracts as clients are aware that the company is able to produce the results of research findings. Selling, general, and administrative expenses increased as a percentage of sales to 60% for the second quarter of 1998 from 52% for the comparable quarter of 1997 as a result of increased salaries, legal, insurance, and travel expenses. Net income decreased from $ 98,747 (7% of sales) in 1997 to $ 57,433 (4% of sales) in 1998, principally as the result of decreased revenues coupled with increased Selling, General, and Administrative expenses. Six months ended June 30, 1998 v. 1997 Net revenues for the first six months of 1998 were $ 3,550,261 an increase of $719,281 (25%) over the first six months of 1997. Research sales increased $722,941 (32%) in the first six months of 1998 over 1997 primarily as a result of the increasing reputation of the company research results triggering further demand for research work. Product sales decreased $ 3,660 (1%) in the first six months of 1998 over 1997. The cost of revenues in research decreased from 22% in the first six months of 1997 to 18% in the same period of 1998 due to increased volume without increases in staff size. Costs of product sales increased from 89% in the first six months of 1997 to 101% in the same period of 1998 principally as a result of decreased sales as well as the same staff level with decreased sales. Selling, general, and administrative expenses decreased as a percentage of sales to 46% from 50% for the first six months of 1998 as compared to the first six months of 1997 as a result of increased salaries, legal, insurance, and travel expenses. Net income increased from $ 205,703 (7% of sales) in 1997 to $414,827 (12% of sales) in 1997, principally as the result of increased revenues and improved gross margins. - ------------------------------------------------------------------------------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 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 to act as incentive compensation. The Company has valued the shares at $2.77 per share and will recognize compensation expense for $85,316 rateably throughout the year. On March 2, 1998 the Company declared a 5% stock dividend to shareholders, paid April 2, 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 has been 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: The Company held its annual meeting on May 19, 1998. At such meeting the following persons were elected directors: Director and votes for: Carl Horowitz 1,181,724 Irene Horowitz 1,181,724 John Ryan 1,181,724 Alice Ryan 1,181,724 Boris Jody 1,181,724 Mohan Sanduja 1,181,724 Terry J. Wolfgang 1,181,724 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 July 29, 98 /s/ CARL HOROWITZ ---------------------------------- Carl Horowitz, President and Chief Accounting Officer - ------------------------------------------------------------------------------12 EX-27 2 FDS --
5 3-MOS DEC-31-1998 JUN-30-1998 2,122,261 384,389 120,112 0 74,912 2,775,317 3,761,628 940,265 5,607,664 754,324 1,434,365 0 0 16,857 3,402,117 5,607,664 549,419 3,550,261 0 1,095,859 1,641,796 0 77,529 779,827 365,000 414,827 0 0 0 414,827 0.26 0.26
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