-----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, ANRsI1wE+jTK4DkJScLoYjli9OFV8oWlPs3UXGdCOR6OiaoB4T9fVe20CpFNB6J3 T/0/YqP/4HjYLtVRuwTIOA== 0000950110-99-001355.txt : 19991103 0000950110-99-001355.hdr.sgml : 19991103 ACCESSION NUMBER: 0000950110-99-001355 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991102 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: 99739551 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 September 30, 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. October 31, 1999 1,813,644 POLYMER RESEARCH CORP. OF AMERICA INDEX Page Number ------ Part I - FINANCIAL INFORMATION: ITEM I - FINANCIAL STATEMENTS Balance Sheets: September 30, 1999 (Unaudited) and December 31, 1998 1 Statements of Operations: Three months and nine months ended September 30, 1999 and 1998 (Unaudited) 3 Statements of Cash Flows: Nine months ended September 30, 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 SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 September 30, December 31, ASSETS 1999 1998 ---------- ---------- (Unaudited) (Note 1) CURRENT ASSETS: Cash $ 754,977 $ 823,238 Investment - certificates of deposit 663,322 1,137,321 Investment securities available for sale 314,350 412,341 Accounts receivable, less allowances of $0 611,460 245,669 Inventories 109,827 103,130 Deferred tax charge 39,000 39,000 Prepaid expenses and other 99,822 13,178 ---------- ---------- Total current assets 2,592,758 2,773,877 ---------- ---------- Land, Property, and Equipment-net 2,753,746 2,814,511 ---------- ---------- Security deposits 1,195 1,195 Deferred financing costs - net 9,632 11,087 ---------- ---------- Total other assets 10,827 12,282 ---------- ---------- TOTAL $5,357,331 $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 SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 September 30, December 31, 1999 1998 ----------- ----------- (Unaudited) (Note 1) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 1,426,097 $ 34,688 Accounts payable 57,869 74,288 Accrued expenses and other current liabilities 193,912 235,685 Income taxes payable 89,431 Deferred revenue 200,000 496,650 ----------- ----------- Total current liabilities 1,877,878 930,742 ----------- ----------- LONG-TERM DEBT (NOTE 2) 1,417,082 ----------- STOCKHOLDERS' EQUITY: Common stock, par value $.01 per share, authorized 4,000,000 shares, issued 1,825,784 and 1,685,784 shares respectively 18,257 16,857 Capital in excess of par value 3,399,728 3,120,685 Retained earnings 76,768 167,259 Accumulated other comprehensive income (loss) (7,800) 4,782 Less: Treasury stock, at cost 12,140 and 91,837 shares respectively (7,500) (56,737) ----------- ----------- Total Stockholders' Equity 3,479,453 3,252,846 ----------- ----------- TOTAL $ 5,357,331 $ 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 SEPTEMBER 30,1999 AND 1998 (UNAUDITED) AND THE NINE MONTHS ENDED SEPTEMBER 30,1999 AND 1998 (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, ----------- ----------- ----------- ----------- 1999 1998 1999 1998 Net revenues: Product sales $ 152,502 $ 239,005 $ 841,037 $ 788,424 Research 1,076,231 891,826 3,102,951 3,892,668 ----------- ----------- ----------- ----------- Total 1,228,733 1,130,831 3,943,988 4,681,092 ----------- ----------- ----------- ----------- Cost of Revenues Product sales 221,522 128,405 529,049 681,556 Research 280,842 190,907 803,372 733,615 ----------- ----------- ----------- ----------- Total 502,364 319,312 1,332,421 1,415,171 ----------- ----------- ----------- ----------- Gross Profit on Revenues 726,369 811,519 2,611,567 3,265,921 Selling, General, and Administrative Expenses 780,793 764,981 2,316,430 2,406,777 ----------- ----------- ----------- ----------- Income from Operations (54,424) 46,538 295,137 859,144 ----------- ----------- ----------- ----------- Other Revenues (Expenses): Interest income 12,468 35,391 48,516 80,141 Interest expense (see note 4) (37,589) (38,461) (113,466) (115,990) ----------- ----------- ----------- ----------- Total (25,121) (3,070) (64,950) (35,849) ----------- ----------- ----------- ----------- Income (loss) before income taxes (79,545) 43,468 230,187 823,295 (Provision for) benefit from income taxes 30,000 (30,050) (131,000) (395,050) ----------- ----------- ----------- ----------- Net income (loss) $ (49,545) $ 13,418 $ 99,187 $ 428,245 =========== =========== =========== =========== Income (loss) per Share $ (0.03) $ 0.01* $ 0.06 $ 0.26* =========== =========== =========== =========== Weighted average number of shares outstanding during the period 1,813,644 1,673,644* 1,761,844 1,673,644* =========== =========== =========== ===========
* Restated for 1999 5% stock dividend The accompanying notes are an integral part of the financial statements - -------------------------------------------------------------------------------3 POLYMER RESEARCH CORP. OF AMERICA STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) OPERATIONS: 1999 1998 --------- --------- Net Income $ 99,187 $ 428,245 Charges not affecting funds - Issuance of Incentive stock 81,667 42,658 Unrealized holding losses (12,582) 2,564 Depreciation and amortization 66,451 75,000 --------- --------- Funds Provided by operations 234,723 548,467 --------- --------- Asset and liability management: Accounts receivable (365,791) (35,844) Inventories (6,697) 11,829 Other current assets (28,311) (70,035) Other assets 1,455 699 Accounts payable (16,419) (57,701) Accrued expenses and other (41,773) (62,491) Income taxes payable (89,431) 209,789 Deferred revenue (296,650) (112,450) Increase (Decrease) in net operating assets (843,617) (116,204) --------- --------- Total (608,894) 432,263 --------- --------- FUNDS PROVIDED (USED) BY FINANCING Certificates of deposit 473,999 (979,841) Investment securities 97,991 85,191 Issuance of stock 42,090 Payments on long term debt (25,671) (23,125) --------- --------- Total 546,319 (875,685) --------- --------- INVESTMENT IN LAND, PROPERTY, AND EQUIPMENT (5,686) (21,446) --------- --------- INCREASE (DECREASE) IN CASH $ (68,261) $ 464,868 ========= ========= 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 l0-KSB. The results of operations for the nine month period are 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 client approval of performance of a specific stage of the contract and the assurance of collection of the resulting revenue. 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 nine months) 1999 1998 -------- -------- Federal $ 80,000 $236,000 State and local 51,000 159,050 -------- -------- Total $131,000 $395,050 ======== ======== NOTE 4 - Mortgage Liability In September of 1996 the Company prepaid $800,000 due under the mortgage on the Company's building and modified the payment schedule on such mortgage. 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 were 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 restricted 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 $640,251 since December 31, 1998. The decrease is principally due to the expense associated with the cost of performance of work for revenue that was deferred as of December 31, 1998. 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 decreased to 1.38 to 1.0 at September 30, 1999 as compared to 2.98 to 1.0 at December 31, 1998. The decrease results from the reclassification to current of the entire remaining mortgage balance in as the balloon payment is due within one year. The Company's cash, investment, and investment securities position which totals $ 1,732,649 at September 30, 1999 is deemed sufficient to satisfy the mortgage balloon payment of $1,398,330 due in June 2000. After such payment, liquidity will be a direct result of sales and net earnings. B. RESULTS OF OPERATIONS Three months ended September 1999 v. 1998 Net revenues for the third quarter of 1999 were $ 1,228,733, an increase of $97,902 (9%) compared with the third quarter of 1998. Research sales increased $184,405 (6%) in the third quarter of 1999 compared to 1998. Product sales decreased $86,503 (36%) for the third quarter of 1999 compared to 1998 due to decreased demand. The cost of revenues in research increased from 21% in the third quarter of 1998 compared to 26% the same quarter of 1999 as a result of increased direct and indirect costs. Costs of product sales increased from 54% in the third quarter of 1998 to 145% in the same quarter of 1999 principally as a result of decreased sales with similar employees and costs in production. - -------------------------------------------------------------------------------9 Selling, general, and administrative expenses decreased as a percentage of sales to 64% for the third quarter of 1999 from 68% for the comparable quarter of 1998 principally due to increased volume without a comparable increase in expenses. This years selling, general, and administrative expenses included $ 35,000 in compensation related to the issuance of 140,000 shares of common stock as incentive to certain members of management (see note 5) Net income decreased from $ 13,418 (1% of sales) in 1998 to a loss of ($20,014) in 1999, principally as the result of decreased gross profit with an increase in overhead expenses and decreased interest income. Nine months ended September 30, 1999 v. 1998 Net revenues for the first nine months of 1999 were $3,943,988, a decrease of $737,104 (16%) compared with the first nine months of 1998. Research sales decreased $ 789,717 (20%) in the first nine months of 1999 compared to 1998. Product sales for 1999 increased $52,613 (7%) over the first nine months of 1999 compared to 1998. The cost of revenues in research increased from 19% in the nine months of 1998 to 26% in the first nine months of 1999 due to the substantial decrease in revenue with increase direct and indirect expenses. Costs of product sales decreased from 86% in the first nine months of 1998 to 63% in the same period of 1999 principally as a result of increased sales without additional employees. Selling, general, and administrative expenses increased as a percentage of sales to 59% for the first nine months of 1999 from 51% for the comparable period of 1998 principally due to decreased volume without a proportionate decrease in expenses. Net income decreased from $ 428,245 (9% of sales) in 1998 to $ 99,187 (3% 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: None 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 l0-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 --------------------------- ------------------------------------------ Carl Horowitz, President and Chief Accounting Officer - ------------------------------------------------------------------------------12 EX-27 2 FDS --
5 9-MOS DEC-31-1999 SEP-30-1999 1,418,299 314,350 611,460 0 109,827 2,592,758 3,753,917 1,000,171 5,357,331 1,877,878 1,426,097 0 0 18,257 3,461,196 5,357,331 841,037 3,943,988 529,049 0 1,332,421 2,316,430 0 0 131,000 99,187 0 0 0 99,187 0.06 0.06
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