-----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, RCXRzWOTZtLEW11Td2oxPNLQX2RhcADQO762QByuGMKPTSx3FrAOpL8Y4jwSvO4p f6M9NbOgujrrQ8GHhs7ZCw== 0000950116-97-000887.txt : 19970512 0000950116-97-000887.hdr.sgml : 19970512 ACCESSION NUMBER: 0000950116-97-000887 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14119 FILM NUMBER: 97598701 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 10-Q 1 FORM 10-Q 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, 1997 --------------- 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, 1997 1,488,711 - -------------------------------------------------------------------------------- POLYMER RESEARCH CORP. OF AMERICA INDEX PART I - FINANCIAL INFORMATION: Page Number ----------- ITEM I - FINANCIAL STATEMENTS Balance Sheets: March 31, 1997 (Unaudited) and December 31, 1996 1 Statements of Operations: Three months ended March 31, 1997 and 1996 (Unaudited) 3 Statements of Cash Flows: Three months ended March 31, 1997 and 1996 (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, 1997 AND DECEMBER 31, 1996 - -------------------------------------------------------------------------------- March 31, December 31, ASSETS 1997 1996 --------- ----------- (Unaudited) (Note 1) CURRENT ASSETS: Cash $ 559,416 $ 709,170 Investment - certificates of deposit 563,390 554,338 Investment securities available for sale 465,297 473,283 Accounts receivable,less allowances of $0 and $4,000 63,241 91,850 Inventories 73,408 85,822 Prepaid expenses and other 90,773 195,086 --------- --------- Total current assets 1,815,525 2,109,549 --------- --------- Land, Property, and Equipment-net 2,915,321 2,939,514 --------- --------- Deferred financing costs and other 11,811 11,814 --------- --------- Total other assets 11,811 11,814 --------- --------- TOTAL $ 4,742,657 $ 5,060,877 ========== ========== 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, 1997 AND DECEMBER 31, 1996 - -------------------------------------------------------------------------------- March 31, December 31, 1997 1996 --------- --------- (Unaudited) (Note 1) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 28,031 $ 28,143 Accounts payable 66,466 56,907 Accrued expenses and other current liabilities 363,108 417,714 Deferred revenue 20,000 393,300 --------- --------- Total current liabilities 477,605 896,064 --------- --------- LONG-TERM DEBT (NOTE 2) 1,476,363 1,483,080 --------- --------- STOCKHOLDERS' EQUITY: Common stock, par value $.01 per share, authorized 4,000,000 shares, issued 1,489,657 and 1,489,657 shares respectively 14,896 14,896 Capital in excess of par value 2,632,037 2,632,037 Retained earnings 210,610 103,654 Unrealized holding losses (12,117) (12,117) Less: Treasury stock, at cost 91,837 shares in 1996 and 91,837 shares in 1995 (56,737) (56,737) --------- --------- Total Stockholders' Equity 2,788,689 2,681,733 --------- --------- TOTAL $ 4,742,657 $ 5,060,877 ========= ========= 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, 1997 AND 1996 (UNAUDITED) - -------------------------------------------------------------------------------- 1997 1996 ---- ---- Net Revenues Research $ 1,148,300 $ 1,087,824 Production 232,680 227,733 --------- --------- Total 1,380,980 1,315,557 --------- --------- Cost of Revenues Research 261,652 295,002 Production 231,131 184,506 --------- --------- Total 492,783 479,508 --------- --------- Gross Profit on Revenues 888,197 836,049 --------- --------- Selling, General, and Administrative Expenses 660,357 634,867 --------- --------- Income from operations 227,840 201,182 --------- --------- Other revenues (Expenses): Investment income 17,116 15,887 Interest expense (39,499) (61,504) --------- --------- Income before income taxes 205,457 155,565 Provision for income taxes 98,501 75,500 --------- --------- Net Income $ 106,956 $ 80,065 ========= ======== Income per share $ .08 $ .06 ========= ======== Weighted average number of shares outstanding during the period 1,397,820 1,397,820 ========= ========= 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, 1997 AND 1996 (UNAUDITED) - -------------------------------------------------------------------------------- OPERATIONS: 1997 1996 - ----------- ---- ---- Net Income $ 106,956 $ 80,065 Charge not affecting funds - Depreciation and amortization 24,999 25,051 ---------- --------- Funds Provided by operations 131,955 105,116 ---------- --------- Asset and liability management: Accounts receivable 28,609 (16,254) Inventories 12,414 (21,918) Other current assets 104,313 (17,176) Accounts payable 9,559 Accrued expenses and other (54,606) 43,160 Income taxes payable (16,602) Deferred revenue (373,300) (170,837) ---------- --------- Other current liabilities Increase (Decrease) in net operating assets (273,011) (199,627) ---------- --------- Total (141,056) (94,511) ---------- --------- FUNDS USED BY FINANCING Certificates of deposit (9,052) (1,865) Investment securities 7,986 57,650 Payments on long term debt (6,829) (9,406) ---------- --------- Total (7,895) 46,379 ---------- --------- INVESTMENT IN LAND, PROPERTY, AND EQUIPMENT (803) (4,559) ---------- --------- INCREASE (DECREASE) IN CASH $ (149,754) $ (52,691) ========== ========= 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 three month period is not necessarily indicative of the results for an entire year. The balance sheet at December 31, 1996 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. 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. NOTE 3 - Provision for Income Taxes (First three months) 1997 1996 ------- ------- Federal $ 58,500 $ 44,500 State and local 40,001 31,000 ------- ------- Total $ 98,501 $ 75,500 ======= ======= 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. 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. NOTE - 6 - SUBSEQUENT EVENT On April 1, 1997 the Company declared a 5% stock dividend to shareholders, paid April 9, 1997. The transaction was valued based upon the closing market price of the Company's stock on April 1, 1997, which was $2.81 per share. Retained earnings was charged for $212,107 as a result of the issuance of 75,483 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 $148,688 since December 31, 1996. The decrease is principally due to the use of cash received in late 1996 to perform services on research contracts. Cash is generated by and used by the Company through its operations. Neither the issuance of stock nor the acquisition of debt was in 1996, nor expected to be in 1997, sources of cash for use in operations. The rate of current assets to current liabilities at March 31, 1997 increased to 3.80 to 1.0 at March 31, 1997 as compared to 2.35 to 1.0 at December 31, 1996. The increase is a result of net earnings in 1997 and the decrease in deferred revenue. Based on the above, the Company's cash, investment, and investment securities position at March 31, 1997 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 March 31, 1997 v. 1996 Net revenues for the first quarter of 1997 were $1,380,980, an increase of $65,423 (5%) over the first quarter of 1996. Research sales increased $60,476 (5.6%) in the first quarter of 1997 over 1996. Product sales were effectively unchanged in the first quarter of 1997 over 1996. The cost of revenues in research decreased from 27% in the first quarter of 1996 to 23% in the same quarter of 1997 due to reductions in staff and repairs and maintenance. Costs of product sales increased from 81% in the first quarter of 1996 to 99% in the same quarter of 1997 principally as a result of increased material prices. - ------------------------------------------------------------------------------9 Selling, general, and administrative expenses remained consistent as a percentage of sales at 48% for the first quarter of 1997 and for the comparable quarter of 1996. Interest expense decreased due to the principal pre-payment of $800,000 on the mortgage in September 1996. (See Note 4.) Net income increased from $80,065 (6% of sales) in 1996 to $106,957 (8% of sales) in 1997, principally as the result of increased revenues, improved gross margins, and the reduced interest expense. - ---------------------------------------------------------------------------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 $150,000 for legal expenses and any unfavorable outcomes in amounts management believes to be reasonable. In the opinion of management, such lawsuits should not have a material adverse effect on the Company's financial condition. ITEM 2 - Changes in Securities: On April 1, 1997 the Company declared a 5% stock dividend to shareholders, paid April 9, 1997. The transaction was valued based upon the closing market price of the Company's stock on April 1, 1997, which was $2.81 per share. Retained earnings was charged for $212,107 as a result of the issuance of 75,483 shares. On April 1, 1997 prior to the declaration of a stock dividend, the Company issued 20,000 shares of stock to an Executive Vice President as a bonus for past and future services. These shares have not been registered under the Securities Act of 1933 and sales of the shares are subject to restrictions and limitations. The Company has valued the shares at $1 per share and will recognize compensation expense for 1997 totaling $20,000 related to this bonus rateably throughout the year. 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-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 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 MAR-31-1997 1,122,806 465,297 63,241 0 73,408 1,815,525 2,915,321 0 4,742,657 477,605 1,476,363 0 0 14,896 0 4,742,657 232,680 1,380,980 231,131 492,783 660,357 0 39,499 205,457 98,501 106,956 0 0 0 106,956 0.08 0.08
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