-----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, MhvANrY0XOSnB4/fa4ogn5Z4ujWO6CmU79yoSAHVEd55AJ9S+p9LCskCuXTYIZwO QktQftuiRk9lpNSweO68+g== 0000950110-99-000778.txt : 19990518 0000950110-99-000778.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950110-99-000778 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: 99628388 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 FORM 10-QSB ================================================================================ 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, 1999 ----------------------------------------------- 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, 1999 1,813,644 ================================================================================ POLYMER RESEARCH CORP. OF AMERICA INDEX Page Number ------ Part I - FINANCIAL INFORMATION: ITEM I - FINANCIAL STATEMENTS Balance Sheets: March 31, 1999 (Unaudited) and December 31, 1998 .......................................... 1 Statements of Operations: Three months ended March 31, 1999 and 1998 (Unaudited) ......................................... 3 Statements of Cash Flows: Three months ended March 31, 1999 and 1998 (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, 1999 AND DECEMBER 31, 1998 - -------------------------------------------------------------------------------- March 31, December 31, ASSETS 1999 1998 - ------ ---------- ---------- (Unaudited) (Note 1) CURRENT ASSETS: Cash ......................................... $ 736,147 $ 823,238 Investment - certificates of deposit ......... 1,147,658 1,137,321 Investment securities available for sale ................................... 358,147 412,341 Accounts receivable, less allowances of $0 ...................................... 204,865 245,669 Inventories .................................. 88,056 103,130 Deferred tax charge .......................... 39,000 39,000 Prepaid expenses and other ................... 29,704 13,178 ---------- ---------- Total current assets ......................... 2,603,577 2,773,877 ---------- ---------- Land, Property, and Equipment-net ............ 2,790,971 2,814,511 ---------- ---------- Security deposits ............................ 1,195 1,195 Deferred financing costs - net ............... 10,855 11,087 ---------- ---------- Total other assets ........................... 12,050 12,282 ---------- ---------- TOTAL ........................................ $5,406,598 $5,600,670 ========== ========== 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, 1999 AND DECEMBER 31, 1998 - -------------------------------------------------------------------------------- March 31, December 31, 1999 1998 ----------- ----------- (Unaudited) (Note 1) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Current portion of long-term debt ........ $ 35,606 $ 34,688 Accounts payable ......................... 53,136 74,288 Accrued expenses and other current liabilities .................... 240,388 235,685 Income taxes payable ..................... 74,045 89,431 Deferred revenue ......................... 220,000 496,650 ----------- ----------- Total current liabilities ................ 623,175 930,742 ----------- ----------- LONG-TERM DEBT (NOTE 2) .................. 1,407,829 1,417,082 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock, par value $.01 per share, authorized 4,000,000 shares, issued 1,765,481 and 1,685,784 shares respectively .................... 16,857 16,857 Capital in excess of par value ........... 3,120,685 3,120,685 Additional paid in capital ............... 140,443 Retained earnings ........................ 100,299 167,259 Accumulated other comprehensive income (loss) .......................... 4,810 4,782 Less: Treasury stock, at cost 12,140 and 91,837 shares respectively ........................... (7,500) (56,737) ----------- ----------- Total Stockholders' Equity ............... 3,375,594 3,252,846 ----------- ----------- TOTAL .................................... $ 5,406,598 $ 5,600,670 =========== =========== 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, 1999 AND 1998 (UNAUDITED) - -------------------------------------------------------------------------------- 1999 1998 ----------- ----------- Net Revenues Research ................................ $ 942,500 $ 1,766,516 Production .............................. 524,677 421,660 ----------- ----------- Total ................................... 1,467,177 2,188,176 ----------- ----------- Cost of Revenues Research ................................ 266,027 289,303 Production .............................. 177,763 369,433 ----------- ----------- Total ................................... 443,790 658,736 ----------- ----------- Gross Profit on Revenues .................. 1,023,387 1,529,440 ----------- ----------- Selling, General, and Administrative Expenses ................ 758,646 827,931 ----------- ----------- Income from operations .................... 264,741 701,509 ----------- ----------- Other revenues (Expenses): Investment income ....................... 19,013 16,249 Interest expense ........................ (38,036) (38,864) ----------- ----------- Income before income taxes ................ 245,718 678,894 Provision for income taxes ................ 123,000 321,500 ----------- ----------- Net Income ................................ $ 122,718 $ 357,394 =========== =========== Basic earnings per share .................. $ .07 $ .21* =========== =========== Weighted average number of shares outstanding during the period ............ 1,673,644 1,673,644* =========== =========== * Restated for 1999 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 THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED) - -------------------------------------------------------------------------------- 1999 1998 OPERATIONS: --------- --------- Net Income ................................... $ 122,718 $ 357,394 Charge not affecting funds - Unrealized holding losses (gains) .......... 28 956 Depreciation and amortization .............. 24,999 24,999 --------- --------- Funds Provided by operations ................. 147,745 383,349 --------- --------- Asset and liability management: Accounts receivable ........................ 40,804 (88,288) Inventories ................................ 15,074 (7,952) Other current assets ....................... (16,526) (18,425) Accounts payable ........................... (21,152) (22,446) Accrued expenses and other ................. 4,703 4,684 Income taxes payable ....................... (15,386) 232,262 Deferred revenue ........................... (276,650) (10,000) Total other assets ......................... 232 232 --------- --------- Increase (Decrease) in net operating assets ........................ (268,901) 90,067 --------- --------- Total ........................................ (121,156) 473,416 --------- --------- FUNDS USED BY FINANCING Certificates of deposit ...................... (10,337) (1,509) Investment securities ........................ 54,194 93,489 Payments on long term debt ................... (8,335) (7,508) --------- --------- Total ........................................ 35,522 84,472 --------- --------- INVESTMENT IN LAND, PROPERTY, AND EQUIPMENT ............................... (1,457) (586) --------- --------- INCREASE (DECREASE) IN CASH .................. $ (87,091) $ 557,302 ========= ========= 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, 1998 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) 1999 1998 -------- -------- Federal $ 73,500 $192,000 State and local 49,500 129,500 -------- -------- Total $123,000 $321,500 ======== ======== 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 - Stock Issuances On February 11, 1999 the Company declared a 5% stock dividend to shareholders of record at March 16, 1999, payable on April 2, 1999. The transaction was valued based upon the closing market price of the Company's stock on February 11, 1999, which was $2.38 per share. Retained earnings was charged for $ 189,680 as a result of the issuance of 79,697 shares from the treasury stock being held by the Company. On April 12, 1999 the Company issued 140,000 shares of its common stock as incentive compensation to four of its officers. The Company valued these shares at $1.00 per share and will recognize compensation expense of $140,000 ratably over four quarters. - -------------------------------------------------------------------------------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 decreased collectively by a $130,948 since December 31, 1998. The decrease is principally due to the net income of the first quarter resulting from the recognition of deferred reveue. Cash is generated by and used by the Company through its operations. Neither the issuance of stock nor the acquisition of debt was in 1998, nor expected to be in 1999, sources of cash for use in operations. The rate of current assets to current liabilities increased to 4.18 to 1.0 at March 31, 1999 as compared to 2.98 to 1.0 at December 31, 1998. The increase is the result of net income for the quarter. Based on the above, the Company's cash, investment, and investment securities position at March 31, 1999 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, 1999 v. 1998 Net revenues for the first quarter of 1999 were $1,467,177, a decrease of $720,999 (33%) compared with the first quarter of 1998. Research sales decreased $824,016 (46%) in the first quarter of 1999 compared to 1998. Research sales for the first quarter of 1998 were the highest for a quarter in Company history. Product sales increased $103,017 (24%) over the first quarter of 1999 compared to 1998. The cost of revenues in research increased from 16% in the first quarter of 1998 to 28% in the same quarter of 1999 due to the substantial decrease in revenue using the same staff. Costs of product sales decreased from 87% in the first quarter of 1998 to 34% in the same quarter of 1999 principally as a result of increased sales without additional employees. - -------------------------------------------------------------------------------9 Selling, general, and administrative expenses increased as a percentage of sales to 52% for the first quarter of 1999 from 38% for the comparable quarter of 1998 principally due to decreased volume without decreased expenses. Net income decreased from $357,394 (16% of sales) in 1998 to $122,718 (8% of sales) in 1999, principally as the result of decreased research revenues. - ------------------------------------------------------------------------------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 February 11, 1999 the Company declared a 5% stock dividend to shareholders of record at March 16, 1999, payable on April 2, 1999. The transaction was valued based upon the closing market price of the Company's stock on February 11, 1999, which was $2.38 per share. Retained earnings was charged for $ 189,680 as a result of the issuance of 79,697 shares from the treasury stock being held by the Company. On April 12, 1999 the Company issued 140,000 shares of its common stock as incentive compensation to four of its officers. The Company valued these shares at $1.00 per share and will recognize compensation expense of $140,000 ratably over four quarters. 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, 1999 /s/ CARL HOROWITZ ----------- ---------------------------------- Carl Horowitz, President and Chief Accounting Officer -----------------------------------------------------------------------------12 EX-27 2 FDS --
5 1 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 1883805 358147 204865 0 88056 2603577 3751147 960176 5406598 623175 1443435 0 0 17654 3357940 5406598 524677 1467177 177763 443790 758646 0 38036 245718 123000 122718 0 0 0 122718 0.07 0.07
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