-----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, UH95GpSUtEpU9LVnjmK+yPTTsLYg2ps3gHORjaIw4SYfy4t0XQ3zSzGfYeR2nKLX +g2hq48OM/mqLCgSp8KXWw== 0001089355-02-000351.txt : 20020517 0001089355-02-000351.hdr.sgml : 20020517 20020517165014 ACCESSION NUMBER: 0001089355-02-000351 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020517 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: 02656513 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 polymer10qsb1q20027822.txt QUARTERLY REPORT FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15 (d) Of the Securities and Exchange act of 1934 For Quarter Ended March 31, 2002 --------------------- 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: There were 1,925,784 shares of the registrant's common stock outstanding as of April 30, 2002. POLYMER RESEARCH CORP.OF AMERICA - FORM 10QSB - INDEX - Page Number ------ Part I - FINANCIAL INFORMATION: ITEM I - FINANCIAL STATEMENTS Balance Sheets: March 31, 2002 (Unaudited) and December 31, 2001 1 Statements of Operations: Three months Periods Ended March 31, 2002 and 2001 (Unaudited) 2 Statements of Cash Flows: Three months Periods Ended March 31, 2002 and 2001 (Unaudited) 3 Notes to Financial Statements 4-6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS 7-8 PART II - OTHER INFORMATION 9 Item 1. Legal Proceedings 9 Item 2. Changes in Securities 9 Defaults Upon Senior Securities 9 Submission of Matters to a Vote of Security Holders 9 Other Information 9 Item 6. Exhibits and Reports on Form 8-K 9 Signatures 10 PART I - Financial Information Item 1- Financial Statements POLYMER RESEARCH CORP. OF AMERICA BALANCE SHEETS - ASSETS -
March 31, December 31, 2002 2001 ---- ---- (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 436,088 $ 711,952 Accounts receivable, less allowances of $0 602,581 515,343 Inventories 140,243 143,836 Deferred tax charge 57,946 57,946 Prepaid and refundable income taxes 55,338 96,455 Prepaid expenses and other current assets 18,515 6,441 ----------- ----------- TOTAL CURRENT ASSETS 1,310,711 1,531,973 ----------- ----------- Land, Property, and Equipment-net of accumulated depreciation of $ 1,216,612 and $1,194,815 respectively 2,572,449 2,594,197 ----------- ----------- OTHER ASSETS: Cash-restricted 150,000 150,000 Security deposits 2,175 2,195 ----------- ----------- TOTAL OTHER ASSETS 152,175 152,195 ----------- ----------- TOTAL $ 4,035,335 $ 4,278,345 =========== =========== - LIABILITIES AND STOCKHOLDERS' EQUITY - CURRENT LIABILITIES: Note payable-bank $ 150,000 $ 150,000 Current portion of term loan 316,667 100,000 Accounts payable and accrued expenses 371,539 387,867 Deferred revenue 54,875 259,250 ----------- ----------- TOTAL CURRENT LIABILITIES 893,081 897,117 ----------- ----------- LONG-TERM LIABILITIES: Term loan, less current maturities -- 241,667 ----------- ----------- TOTAL LIABILITIES 893,081 1,138,784 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock - par value $.01 per share, authorized 4,000,000 shares, issued 1,925,784 shares 19,257 19,257 Capital in excess of par value 3,504,978 3,504,978 Accumulated deficit (364,220) (366,913) Less: Treasury stock, at cost, 22,140 shares (17,761) (17,761) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 3,142,254 3,139,561 ----------- ----------- TOTAL $ 4,035,335 $ 4,278,345 ============ =========== See accompanying notes to financial statements. - 1 - POLYMER RESEARCH CORP. OF AMERICA STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2002 AND 2001 (Unaudited) 2002 2001 Net Revenue Research $ 922,940 $ 1,399,573 Production 94,546 226,673 ----------- ----------- Total 1,017,486 1,626,246 ----------- ----------- Cost of Revenues Research 170,096 298,443 Production 72,197 200,719 ----------- ----------- Total 242,293 499,162 ----------- ----------- Gross Profit 775,193 1,127,084 ----------- ----------- Selling, General and Administrative Expenses 759,254 1,016,933 -------------- -------------- Income from Operations 15,939 110,151 -------------- ----------- Other Revenue (Expenses): Interest income 2,148 4,780 Interest expense (7,093) (10,906) ------------ ------------ Total other Revenues (Expenses) (4,945) (6,126) ------------ ------------ Income (loss) before provision (benefit) for income taxes 10,994 143,545 Provision (benefit) for income taxes 8,300 54,500 -------------- ----------- Net Income $ 2,694 $ 49,525 =========== =========== Basic and diluted per share data: Earnings per share $ -0- $ .03 =========== =========== Weighted average number of shares outstanding 1,925,784 1,925,784 =========== =========== See accompanying notes to financial statements. - 2- POLYMER RESEARCH CORP. OF AMERICA STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2002 AND 2001 (Unaudited) 2002 2001 Cash Flows from Operating Activities: Net income (loss) $ 2,694 $ 49,525 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,748 24,999 ----------- ----------- Changes in operating assets and liabilities: 24,442 74,524 ----------- ----------- Accounts receivable (87,238) 171,131 Inventories 3,593 (1,942) Prepaid and refundable income taxes 41,117 145,059 Prepaid expenses and other current assets (12,074) (36,974) Accounts payable 10,956 (15,895) Accrued expenses and other (27,285) 34,500 Deferred revenue (204,375) (31,450) ----------- ----------- Net cash provided by operating activities (250,864) 338,953 ----------- ----------- Cash flows from investing activities: Purchase of equipment - 0- (25,615) ----------- ----------- Net cash used for investing activities - 0- (25,615) ----------- ----------- Cash flows from financing activities: Payments of long term debt (25,000) (25,615) ----------- ----------- Net cash used for financing activities (25,000) (25,615) ----------- ----------- Net increase (decrease) in cash and cash equivalents (275,864) 307,828 ----------- ----------- Cash and cash equivalents, beginning of period 861,952 845,585 ----------- ----------- Cash and cash equivalents, end of period $ (586,088) $ 1,153,413 =========== =========== See accompanying notes to financial statements.
- 3 - POLYMER RESEARCH CORP. OF AMERICA - ------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS MARCH 31, 2002 AND 2001 (Unaudited) NOTE 1 - BASIS OF PRESENTATION: The Interim financial statements included herein have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures, normally included in the financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to SEC rules and regulations; nevertheless, management of the Company believes that the disclosures herein are adequate to make the information presented not misleading. The financial statements and notes should be read in conjunction with the audited financial statements and notes thereto as of December 31, 2001 included in the Company's Form 10-KSB filed with SEC. In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary to present fairly the financial position of the Company with respect to the interim financial statements have been made. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. 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. Use 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 the satisfaction of the following two criteria: first, client approval of performance of a specific stage of the contract and, second, when collection of the resulting revenue is assured. Revenue from production is recognized when products are shipped for sale to customers. Deferred Revenue Deferred revenue represents cash received from customers prior to and in anticipation of research services performed by the Company. As these services are performed, such deferred amount is recognized as revenue. 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 net realizable value. -4- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): 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 & Equipment 5 years Furniture & Fixtures 5 to 10 years Building and improvements 40 years Office equipment under Capital leases 5 years 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 The financial statements are presented in accordance with Statement of Financial Accounting Standards No. 128 "Earnings Per Share". Basic earnings per share are computed based upon the weighted average number of common shares outstanding during each year. Diluted earnings per share incorporate the incremental shares issuable upon the assumed exercise of stock options and warrants. In accordance with SFAS 128, diluted earnings per share is not presented in years during which the are no outstanding options or warrants. -5- NOTE 3 - Provision for Income Taxes The provision for income taxes for the first three months ended march 31, 2002 and 2001 is as follows: 2002 2001 ----- ---- Federal 3,750 $32,500 State and local 4,550 22,000 ------- ------- Total $ 8,300 $54,500 ------- ------- NOTE 4 - Contingencies At March 31, 2002, the Company was a defendant in various lawsuits which arose in the ordinary course of business. At March 31, 2002, the Company has included a reserve in current liabilities in an amount that management believes is reasonable for legal expenses and potential unfavorable rulings or settlements of these cases. It is management's opinion that the ultimate liability, if any, which might result from the remainder of such actions would not have a material effect on the Company's financial condition. NOTE 5-Long Term Debt On March 15, 2000, the Company entered into a borrowing arrangement with a bank whereby the bank agreed to extend a $500,000 term loan facility to the Company. The Company utilized the facility in full in connection with the balloon mortgage payment on June 1, 2000. The five year term loan is repayable in monthly principal installments of $8,333 plus interest at 8.5% per annum. The loan requires the Company to comply with certain financial covenants and to maintain on deposit with the lender no less than $150,000. So long as the company is in compliance with certain financial covenants such balance is decreased proportionately as the term loan is reduced. Simultaneously, the bank extended a $250,000 line of credit facility to the Company. At March 31, 2002 $150,000 is outstanding under the line and is due to be repaid or renewed by the bank June 30, 2002. To secure the term loan and line of credit, the Company granted the lender a security interest in all of the Company's personal property. As of March 31, 2002 the Company was not in compliance with the financial covenants of the loan agreements. The company is currently attempting to refinance the line of credit and the term loan. -6- POLYMER RESEARCH CORPORATION OF AMERICA OTHER INFORMATION MARCH 31, 2002 AND 2001 (Unaudited) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Company's financial statements and the accompanying notes thereto included herein, and the financial statements included in its 2000 annual report on Form 10-KSB. This Quarterly Report on Form 10-QSB includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause the actual results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements not to occur or be realized. Such forward-looking statements generally are based upon the Company's best estimates of future results, performance or achievement, based upon current conditions, and based upon the most recent results of operations. There can be no assurance that actual results will not differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements may be identified by the use of forward-looking terminology such as "may," "will," "expect," believe," "estimate," anticipate," "continue" or similar terms, variation of those terms or the negative of those terms. Potential risks and uncertainties include, among other things, such factors as the ability to attract and retain qualified personnel, the effect on our financial condition of delays in payments received from third parties, economic conditions, and other factors which may be set forth in our other filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. CAPITAL RESOURCES AND LIQUIDITY Cash and cash equivalents have decreased collectively by $275,864 since December 31, 2001. The decrease resulted principally from slower customer payments, and the repayment of long-term debt of $25,000 and accrued expenses of $ 27,285. The ratio of current assets to current liabilities decreased to 1.46 to 1.0 at March 31, 2002 as compared to 1.71 to 1.0 at December 31, 2001 principally as a result of the reclassification to current of long term debt. On March 20, 2000, the Company entered into a borrowing arrangement with a bank whereby the bank agreed to extend a $500,000 term loan facility to the Company. The Company utilized the facility in connection with the balloon mortgage payment on June 1, 2000 and at March 31, 2002 the balance was $316,667. The five-year term loan is repayable in monthly principal instalments of $8,333 plus interest at 8.5% per annum. The loan requires the Company to comply with certain financial covenants and to maintain on deposit with the lender $150,000. Simultaneously, the bank extended a $250,000 line of credit facility to the Company, $150,000 of which was drawn upon and was outstanding at March 31, 2002 for use as working capital. As of March 31, 2002 the Company was not in compliance with the financial covenants of the loan agreements. The company is currently attempting to refinance such debt. Based on the above, the Company's cash position at March 31, 2002 may not be sufficient to meet its financial needs including repayment of the bank and to cover any unforeseen sales downturn in the short term. Over both the long and short term, liquidity will be a direct result of sales and related net earnings as well as bank financing. No significant capital expenditures are anticipated. -7- B. RESULTS OF OPERATIONS Three months ended March 31, 2002 v. 2001. Net revenues for the first quarter of 2002 were $1,017,486 a decrease of $ 608,760 (37%) compared with the first quarter of 2001. Research sales decreased $476,633 (34%) in the first quarter of 2002 compared to 2001 due to a slower economy resulting in decreased demand. Product sales decreased $132,127 (58%) compared to the first quarter of 2001 due to decreased demand from research customers. The cost of revenues in research decreased to 18% from 21% in the first quarter of 2002 compared to 2001 as a result of decreased staff costs. The cost of revenues in production decreased to 76% from 88% in the first quarter of 2002 compared to 2001 as a result of decreased payroll expenses due to attrition of employees who were not replaced. Selling, general, and administrative expenses increased as a percentage of sales in the first quarter of 2002 as compared to the same quarter of 2001 from 62% to 74% as a result of significantly decreased sales. Income (loss) from operations the first quarter decreased from $110,151 (7% of sales) in 2001 to $15,939 (1.5% of sales) in 2002 principally as a result of decreased sales. Selling, general, and administrative expenses decreased in 2002 by approximately $258,000 when compared to the comparable period of 2001 as a result of significantly decreased payroll. [This section intentionally left blank.] -8- PART II - OTHER INFORMATION ITEM 1 - Legal proceedings: The Company is a defendant in various lawsuits, which arose, in the ordinary course of business. As of March 31, 2002, the Company has recorded a reserve which it deems adequate for legal expenses and any potential unfavorable rulings in certain of these cases. It is management's opinion that the outcome from such lawsuits will not have a material effect on the Company's financial position. 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 -9- SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. POLYMER RESEARCH CORPORATION OF AMERICA May 20, 2002 by: /s/ Carl Horowitz ------------------------- Carl Horowitz, President and Chief Financial Officer -10- -----END PRIVACY-ENHANCED MESSAGE-----