-----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, GEeFW5gPPddNdAXJFYR9PKesC0526m49hi+mAZzHV34Lp4TJxX38IZaVJGB2FxBy fWlJ81j93hUMrHweFhg22g== 0000950116-96-001225.txt : 19961107 0000950116-96-001225.hdr.sgml : 19961107 ACCESSION NUMBER: 0000950116-96-001225 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961106 SROS: NONE 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: 1934 Act SEC FILE NUMBER: 000-14119 FILM NUMBER: 96655059 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 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 30,1996 ----------------------------- 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, 1996 1,406,169 - ---------------- --------- POLYMER RESEARCH CORP. OF AMERICA INDEX Page Number ------ Part I - FINANCIAL INFORMATION: ITEM I - FINANCIAL STATEMENTS Balance Sheets: September 30, 1996 (Unaudited) and December 31, 1995 1-2 Statements of Operations: Three months and nine months ended September 30, 1996 and 1995 (Unaudited) 3 Statements of Cash Flows: Nine months ended September 30, 1996 and 1995 (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 PARTI-FINANCIAL INFORMATION - --------------------------- POLYMER RESEARCH CORP. OF AMERICA BALANCE SHEETS SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 - -------------------------------------------------------------------------------- September 30, December 31, ASSETS 1996 1995 - ------ ----------- ------------ (Unaudited) (Note 1) CURRENT ASSETS: Cash $ 508,344 $1,474,034 Investment - certificates of deposit 548,093 142,611 Investment securities available for sale 526,055 588,481 Accounts receivable,less allowances of $ 0 55,490 59,816 Inventories 76,137 72,713 Prepaid expenses and other 27,404 12,595 ---------- ---------- Total current assets 1,741,523 2,350,250 ---------- ---------- Land, Property, and Equipment-net 2,944,760 3,014,588 ---------- ---------- Deferred financing costs and other 11,786 12,177 ---------- ---------- Total other assets 11,786 12,177 ---------- ---------- TOTAL $4,698,069 $5,377,015 ========== ========== 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, 1996 AND DECEMBER 31, 1995 - -------------------------------------------------------------------------------- September 30, December 31, 1996 1995 ------------- ------------ (Unaudited) (Note 1) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Current portion of long-term debt $ 27,473 $ 39,146 Accounts payable 12,483 13,142 Accrued expenses and other current liabilities 248,144 295,083 Income taxes payable 44,605 33,400 Deferred revenue 50,000 170,837 ----------- ----------- Total current liabilities 382,705 551,608 ----------- ----------- LONG-TERM DEBT (NOTE 4) 1,488,117 2,303,355 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock, par value $.01 per share, authorized 4,000,000 shares, issued 1,489,657 and 1,354,234 shares respectively 14,896 13,542 Capital in excess of par value 2,632,037 2,091,699 Retained earnings 246,905 475,518 Unrealized holding losses (9,854) (1,970) Less: Treasury stock at cost 83,488 shares in 1996 and 83,488 shares in 1995 (56,737) (56,737) ----------- ----------- Total Stockholders' Equity 2,827,247 2,522,052 ----------- ----------- TOTAL $ 4,698,069 $ 5,377,015 =========== =========== 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, 1996 AND 1995 (UNAUDITED) AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED) - --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------ ------------------------------ 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Net revenues: Product sales $ 166,655 $ 141,886 $ 617,741 $ 513,249 Research 1,275,500 1,099,641 3,499,224 3,345,613 ----------- ----------- ----------- ----------- Total 1,442,155 1,241,527 4,116,965 3,858,862 ----------- ----------- ----------- ----------- Cost of Revenues Product sales 134,478 117,880 514,945 396,225 Research 237,954 475,727 808,328 1,484,546 ----------- ----------- ----------- ----------- Total 372,432 593,607 1,323,273 1,880,771 ----------- ----------- ----------- ----------- Gross Profit on Revenues 1,069,723 647,920 2,793,692 1,978,091 Selling, General, and Administrative Expenses 689,668 427,216 2,006,762 1,261,708 ----------- ----------- ----------- ----------- Income from Operations 380,055 220,704 786,930 716,383 ----------- ----------- ----------- ----------- Other Revenues (Expenses): Interest income 11,781 11,305 40,468 36,018 Mortgage modification fee (45,000) (45,000) Interest expense (see note 2) (62,966) (61,888) (185,630) (165,543) Rental income 4,311 3,650 4,311 3,650 ----------- ----------- ----------- ----------- Total (91,874) (46,933) (185,851) (125,875) ----------- ----------- ----------- ----------- Income before income taxes 288,181 173,771 601,079 590,508 Provision for income taxes (134,500) (83,000) (288,000) (288,000) ----------- ----------- ----------- ----------- Net income $ 153,681 $ 90,771 $ 313,079 $ 302,508 =========== =========== =========== =========== Income per Share $ 0.11 $ 0.O6 * $ 0.22 $ 0.22 * =========== =========== =========== =========== Weighted average number of shares outstanding during the period 1,406,069 1,406,069 * 1,406,069 1,406,069 * =========== =========== =========== ===========
* Restated for 1996 10% 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, 1996 AND 1995 (UNAUDITED) - -------------------------------------------------------------------------------- OPERATIONS: 1996 1995 ----------- ----------- Net Income $ 313,079 $ 302,508 Charge not affecting funds - Depreciation and amortization 75,440 74,658 ----------- ----------- Funds Provided by operations 388,519 377,166 ----------- ----------- Asset and liability management: Accounts receivable 4,326 (20,890) Inventories (3,424) (7,465) Other current assets (14,809) 5,981 Other assets 391 8,499 Accounts payable (659) Accrued expenses and other (46,939) (42,152) Income taxes payable 11,205 18,532 Deferred revenue (120,837) ----------- ----------- Increase (Decrease) in net operating assets (170,746) (37,655) ----------- ----------- Total 217,773 339,511 ----------- ----------- FUNDS PROVIDED BY FINANCING Certificates of deposit (405,482) (4,665) Investment securities 54,542 37,381 Payments on long term debt (826,911) (23,297) ----------- ----------- Total (1,177,851) 9,419 ----------- ----------- INVESTMENT IN LAND, PROPERTY, AND EQUIPMENT (5,612) (23,532) ----------- ----------- INCREASE (DECREASE) IN CASH $ (965,690) $ 325,398 =========== =========== 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-Q 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-K. The results of operations for the nine month period is not necessarily indicative of the results for an entire year. The balance sheet at December 31, 1995 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. Additionally, the Company produces and sells textile printing inks. 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. - -------------------------------------------------------------------------------5 The Company maintains deposits with financial institutions in excess of amounts insured by the FDIC. 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 and disclosure of contingent 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 on performance of a specific stage of the contract and collection. In addition, revenue on products sold are recognized when products are shipped for sale to customers. 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 fair 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, - -------------------------------------------------------------------------------6 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 yearly operations. 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 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 it's 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." - -------------------------------------------------------------------------------7 Net Earnings Per Share Earnings per share are computed based upon the weighted average number of common shares outstanding during each year. 1995 computations have been restated to reflect the stock dividend in February of 1996 for comparison purposes. 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. NOTE 3 - ProvisionforIncomeTaxes (First nine months) 1996 1995 ---- ---- Federal $ 172,000 $ 169,000 State and local 116,000 119,000 ------- ------- Total $ 288,000 $ 288,000 ======= ======= NOTE 4 - Mortgage Liability In September of 1996, the company prepaid $ 800,000 due under its mortgage on the Company's building and modified its payment schedule. As modified the Company is obligated to pay the balance of the mortgage in equal monthly instalments of $15,435 including interest at 10.5% per annum through June, 2000. Such mortgage is being amortized using a 25 year amortization. The entire unpaid principal balance is due in a balloon payment of $1,399,534 on June 1, 2000. In connection with the modification, the Company paid the Mortgagee $45,000. NOTE - 5 - Stock Dividend On March 15, 1996 the Company declared a 10% stock dividend to shareholders, paid March 29, 1996. The transaction was valued based upon the closing market price of the Company's stock on March 15, 1996, which was $4.00 per share. Retained earnings was charged for $ 541,692 as a result of the issuance of 135,423 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 decreased collectively by a $622,634 since December 31, 1995 as a result of income tax payments, a decrease in accrued expenses, and an $ 800,000 prepayment on the building mortgage made in September 1996 which were partially offset by cash generated from operations. Cash is generated by and used by the Company through its operations. Neither the issuance of stock nor the acquisition of debt was in 1995, nor expected to be in 1996, sources of cash for use in operations. The rate of current assets to current liabilities at September 30, 1996 increased to 4.55 to 1.0 as compared to 4.26 to 1.0 at December 31, 1995. The increase is a result of net earnings in 1996 and the decrease in deferred revenue. Based on the above, the Company's cash, investment, and investment securities position at September 30, 1996 is deemed sufficient to cover any unforeseen sales downturn in the short term as it is equal to approximately seven 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 September 30, 1996 v. 1995 Net revenues for the third quarter of 1996 were $ 1,442,155 an increase of $ 200,628 (16%) compared to the third quarter of 1995 as a result of more contracts and increased contract fees. Product sales increased 17% in the third quarter of 1996 over 1995, principally due to increased demand resulting from increased research contracts yielding increased production demand. The cost of revenues in research decreased from 43% in the third quarter of 1995 to 19% in same quarter of 1996 due to a reallocation of salaries which were previously classified as Research Cost of Sales being re-allocated to Selling, General, and Administrative expenses. - -------------------------------------------------------------------------------9 Costs of product sales decreased from 83% in the third quarter of 1995 to 81% in the same quarter of 1996 principally as a result of increased sales without the need for additional employees and higher wages. Selling, general, and administrative expenses increased as a percentage of sales from 34% for the third quarter of 1995 to 48% for the comparable quarter of 1996. Such increase is primarily the result of reallocation of salaries which were previously classified as Research Cost of Sales being re-allocated to Selling, General, and Administrative expenses. costs. Net income increased from $ 90,771 (7.3% of sales) in 1995 to $ 153,681 (11% of sales) in 1996 due to increased sales. Nine months ended September 30, 1996 v. 1995 Net revenues for the first nine months of 1996 were $ 4,116,965 an increase of $ 258,103 (6.7%) compared to first nine months of 1995. Research sales increased 4.6% in the first nine months of 1996 as compared to 1995 as a result of more contracts and increased contract fees. The increase in research sales is attributable to increased foreign sales and increased economic demand. Product sales increased 20% in the first nine months of 1996 over 1995. Production revenue increased principally due to increased demand resulting from increased research contracts yielding increased production demand. The cost of revenues in research decreased from 44% in the first nine months of 1995 to 23% in the first nine months of 1996 due to a re-allocation of salaries which were previously classified as Research Cost of Sales being re-allocated to Selling, General, and Administrative expenses. Costs of product sales increased from 77% in the first nine months of 1995 to 83% in the first nine months of 1996 principally as a result of increased labor related to additional employees and higher wages. Selling, general, and administrative expenses increased as a percentage of sales from 33% for the first nine months of 1995 to 49% for the first nine months of 1996. Such increase is primarily the result of reallocation of salaries which were previously classified as Research Cost of Sales being re-allocated to Selling, General, and Administrative expenses. - ------------------------------------------------------------------------------10 PART II - OTHER INFORMATION ITEM 1 - Legal Proceedings: Periodically the company becomes subject to litigation concerning research results. Management believes that the ultimate outcome of pending litigation will not have a material adverse effect on the company. 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: Exhibit 27 - Financial Data Schedule - ------------------------------------------------------------------------------11 FORM 10-QSB 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 October 31, 1996 /s/ Carl Horowitz ----------------------- ---------------------------------- Carl Horowitz, President and Chief Accounting Officer - ------------------------------------------------------------------------------12 EX-27 2
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION, EXTRACTED FROM THE COMPANY'S THIRD QUARTER FINANCIAL STATEMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1996 SEP-30-1996 1,056,437 526,055 554,490 0 76,137 1,741,534 2,944,760 0 4,698,069 382,705 1,488,117 0 0 14,896 2,182,351 4,498,069 617,741 4,116,965 514,945 1,323,273 2,051,762 0 185,630 601,079 288,000 313,079 0 0 0 313,079 0.22 0.22
-----END PRIVACY-ENHANCED MESSAGE-----