10QSB 1 polymer10qsb3q20028074.txt QUARTERLY REPORT FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2002 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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) APPLICABLE ONLY TO CORPORATE ISSUERS: There were 2,075,784 shares of the registrant's common stock outstanding as of October 31, 2002. Transitional Small Business Disclosure Format (check one) Yes [ ] No [X] POLYMER RESEARCH CORP.OF AMERICA - FORM 10QSB - INDEX - Page(s) ------ Part I - FINANCIAL INFORMATION: Item 1. Financial Statements Balance Sheets at September 30, 2002 (unaudited) and December 31, 2001 1 Statements of Operations for the Three Month Periods Ended September 30, 2002 and 2001 (unaudited) 2 Statements of Operations for the Nine Month Periods Ended September 30, 2002 and 2001 (unaudited) 3 Statements of Cash Flows for the Nine Month Periods Ended September 30, 2002 and 2001 (unaudited) 4 Notes to Financial Statements 5-7 Item 2. Management's Discussion and Analysis or Plan of Operation 8-9 Item 3. Controls and Procedures 9 PART II. OTHER INFORMATION 10 Item 1. Legal Proceedings 10 Item 2. Changes in Securities 10 Item 3. Defaults Upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 PART I - Financial Information Item 1- Financial Statements POLYMER RESEARCH CORP. OF AMERICA BALANCE SHEETS - ASSETS -
September 30, December 31, 2002 2001 ---- ---- (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 545,997 $ 711,952 Accounts receivable, less allowances of $0 465,773 515,343 Inventories 131,387 143,836 Deferred tax charge 57,946 57,946 Prepaid and refundable income taxes 314,343 96,455 Prepaid expenses and other current assets 81,517 6,441 ----------- ----------- TOTAL CURRENT ASSETS 1,596,963 1,531,973 ----------- ----------- Land, Property, and Equipment-net of accumulated depreciation of $ 1,227,802 and $1,194,815 respectively 2,532,663 2,594,197 ----------- ----------- OTHER ASSETS: Cash-restricted 150,000 Mortgage escrow 93,366 Capitalized financing costs - net 112,439 Security deposits 875 2,175 ----------- ----------- TOTAL OTHER ASSETS 206,680 152,175 ----------- ----------- TOTAL $ 4,336,306 $ 4,278,345 =========== =========== - LIABILITIES AND STOCKHOLDERS' EQUITY - CURRENT LIABILITIES: Note payable-bank $ 150,000 Current portion of mortgage payable $ 42,444 Current portion of long-term debt 100,000 Current portion of term loan -- 100,000 Accounts payable and accrued expenses 509,844 387,867 Deferred revenue 234,981 259,250 ----------- ----------- TOTAL CURRENT LIABILITIES 887,269 897,117 ----------- ----------- LONG-TERM LIABILITIES: Mortgage payable, less current maturities 1,347,336 Long-term debt, less current maturities 200,000 Term loan, less current maturities -- 241,667 ----------- ----------- TOTAL LIABILITIES 1,547,336 1,138,784 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock - par value $.01 per share, authorized 4,000,000 shares, issued 2,075,784 and 1,925,784 shares at September 30, 2002 and December 31, 2001, respectively 20,757 19,257 Capital in excess of par value 3,728,478 3,504,978 Accumulated deficit (1,829,773) (366,913) Less: Treasury stock, at cost, 22,140 shares (17,761) (17,761) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 1,901,701 3,139,561 ----------- ----------- TOTAL $ 4,336,306 $ 4,278,345 =========== =========== See accompanying notes to financial statements. -1- POLYMER RESEARCH CORP. OF AMERICA STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001 (Unaudited) 2002 2001 ----------- ----------- Net Revenue Product Sales $ 74,455 $ 134,402 Research 112,255 1,061,683 ----------- ----------- Total 186,710 1,196,085 ----------- ----------- Cost of Revenues Product Sales 84,333 111,336 Research 216,321 254,081 ----------- ----------- Total 300,654 365,417 ----------- ----------- Gross Profit (Loss) on Revenues (113,944) 830,668 ----------- ----------- Selling, General and Administrative Expenses 1,003,697 813,428 ----------- ----------- Income (Loss) from Operations (1,117,641) 17,240 ----------- ----------- Other Revenue (Expenses): Investment income 855 1,871 Interest expense (30,174) (7,957) ----------- ----------- Total Other Revenues (Expenses) (29,319) (6,086) ----------- ----------- Income (Loss) before income taxes (1,146,960) 11,154 (Provision) benefit for income taxes 265,300 1,600 ----------- ----------- Net Income (Loss) $( 881,660) $ 12,754 =========== =========== BASIC AND DILUTED EARNINGS (LOSS) PER SHARE: - Basic $ (.43) $ .01 =========== =========== - Diluted $ (.43) $ .01 =========== =========== WEIGHTED AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING 2,046,436 1,925,784 =========== =========== WEIGHTED AVERAGE NUMBER OF DILUTED COMMON SHARES OUTSTANDING 2,167,088 1,925,784 =========== =========== See accompanying notes to financial statements. -2- POLYMER RESEARCH CORP. OF AMERICA STATEMENTS OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001 (Unaudited) 2002 2001 ---- ---- Net Revenue Product Sales $ 283,027 $ 530,359 Research Revenue 1,535,945 3,592,451 ----------- ----------- Total 1,818,972 4,122,810 ----------- ----------- Cost of Revenues Product Sales 285,866 466,952 Research Revenue 637,141 829,086 ----------- ----------- Total 923,007 1,296,038 ----------- ----------- Gross Profit on Revenues 895,965 2,826,772 ----------- ----------- Selling, General and Administrative Expenses 2,581,161 2,767,960 ----------- ----------- Income (Loss) from Operations (1,685,196) 58,812 ----------- ----------- Other Revenue (Expenses): Investment income 4,706 12,209 Interest expense (47,671) (29,183) ----------- ----------- Total Other Revenues (Expenses) (42,965) (16,974) ----------- ----------- Income (Loss) before income taxes (1,728,161) 41,838 =========== ----------- (Provision) benefit for income taxes 265,300 (28,800) ----------- ----------- Net Income (Loss) $(1,462,861) $ 13,038 =========== =========== BASIC AND DILUTED EARNINGS (LOSS) PER SHARE: - Basic $ (.74) $ .01 =========== =========== - Diluted $ (.74) $ .01 =========== =========== WEIGHTED AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING 1,966,443 1,925,784 =========== =========== WEIGHTED AVERAGE NUMBER OF DILUTED COMMON SHARES OUTSTANDING 2,007,102 1,925,784 =========== =========== See accompanying notes to financial statements. -3- POLYMER RESEARCH CORPORATION OF AMERICA STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001 (Unaudited) 2002 2001 ---- ---- OPERATING ACTIVITIES: Net income (Loss) $(1,462,861) $ 13,038 Adjustments to reconcile net cash provided by operating activities: Depreciation and amortization: 62,406 75,000 ----------- ----------- Changes in Assets and Liabilities: Accounts receivable 49,570 7,309 Inventories 12,449 16,446 Other current assets -- 71,733 Other assets 1,300 -- Prepaid income taxes (217,888) -- Prepaid expenses (75,076) -- Accounts payable and accrued expenses 121,978 (19,712) Deferred revenue (24,269) (145,326) ----------- ----------- Net cash provided by (used for) (1,532,391) 18,488 operating activities ----------- ----------- FINANCING ACTIVITIES: Payments of notes payable and term loan (491,667) (614) Proceeds from issuance of common stock 225,000 -- Payment of financing costs (112,439) -- Mortgage escrow payments (93,366) -- Proceeds of Mortgage 1,400,000 -- Payment of mortgage principal (10,220) -- (Payments of)\proceeds from long term debt 300,000 (75,000) ----------- ----------- Net cash provided by (used for) financing activities 1,217,308 (75,614) ----------- ----------- INVESTING ACTIVITIES: Investment in Land, Property, and Equipment (872) (7,608) ----------- ----------- Net cash provided by (used for) investing activities: (872) (2,608) ----------- ----------- INCREASE (DECREASE) IN CASH (315,955) (64,734) Cash, beginning of period 861,952 845,585 ----------- ----------- Cash, end of period $ 545,997 $ 780,851 =========== ===========
See accompanying notes to financial statements. -4- POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 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 according to revenue recognition policies stated above. -5- POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 AND 2001 (Unaudited) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): 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. 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 are not presented in periods during which there are no outstanding options or warrants or during which the company reflects a net loss from operations. Supplemental Cash Flow Information During the nine months ended September 30, 2002 and 2001, the Company paid interest expense of $47,671 and $29,183, respectively, and income taxes of $-0- and $-0- respectively. -6- POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 AND 2001 (Unaudited) NOTE 3 - Provision for Income Taxes The provision (benefit) for income taxes for the nine months ended September 30, 2002 and 2001 is as follows: 2002 2001 Federal $(272,500) $ 13,300 State and local 7,200 15,500 --------- ---------- Total $(265,300) $ 28,800 ========= ========== NOTE 4 - Contingencies At September 30, 2002, the Company was a defendant in various lawsuits that arose in the ordinary course of business. At September 30, 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 was repayable in monthly principal installments of $8,333 plus interest at 8.5% per annum. The loan required the Company to comply with certain financial covenants and to maintain on deposit with the lender no less than $150,000. Simultaneously, the bank extended a $250,000 line of credit facility to the Company. On May 24, 2002 the outstanding balance of the term loan ($301,122) and the line of credit ($150,000) were paid off with the proceeds from a new mortgage loan (see Note 6). NOTE 6-Mortgage loan On May 24, 2002, the Company entered into a mortgage arrangement with a bank whereby the bank agreed to extend a mortgage loan and the Company received proceeds of $1,400,000 using the Company building in Brooklyn, New York as collateral. The Company utilized the proceeds to pay off an existing term loan debt of $301,122 and a line of credit of $150,000. The balance will be used for working capital purposes. The fifteen-year mortgage loan will be repayable in monthly instalments of $15,044 which includes interest at an initial rate of 10% per annum that is adjustable after 2 years. NOTE 7-Private sale of equity During the third quarter, the Company sold, to a private investor, 150,000 units (the "Units"), each consisting of one share of common stock and one warrant (the "Warrants") to purchase an additional share for $1.50 per share. The Company received $225,000 for the Units and may receive an additional $225,000 if the investor exercises the warrants. The Company is in the process of registering for resale by the investor the shares included in the Units and those underlying the Warrants which are exercisable during the 90-day period following the effective date of the Registration Statement. -7- 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 audited financial statements included in its 2001 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, demand for our research which during economic slowdowns is usually weaker, 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 $315,955 at September 30, 2002 since December 31, 2001. The decrease resulted principally from net losses, offset by the sale of Units from which the Company received net proceeds of $225,000. (See Note 7 to Notes to Financial Statements). The ratio of current assets to current liabilities increased to 1.8 to 1.0 at September 30, 2002 as compared to 1.71 to 1.0 at December 31, 2001 as a result of the repayment of current debt and the replacement of such with long-term debt combined with continuing losses which use cash. On May 24, 2002, the Company entered into a mortgage arrangement with a bank whereby the bank agreed to extend a mortgage loan and the Company received proceeds of $1,400,000 with the Company headquarters building as collateral. The Company utilized the proceeds to pay off existing term loan debt of $301,122 and a line of credit of $150,000. The fifteen-year mortgage loan will be repayable in monthly instalments of $15,044 which includes interest at an initial rate of 10% per annum that is adjustable after 2 years. The Company experienced a dramatic decline in revenues during the third quarter. Management believes that, unless revenues increase significantly, the Company's cash position at September 30, 2002 may be insufficient to meet its financial needs in the short term. At current operating levels, the Company may be out of cash within three to four months from the date of this filing unless revenues increase or expenses are reduced. During October 2002, the Company's chief executive officer loaned the Company $200,000. In addition, the Company expects to receive net proceeds of approximately $200,000 from the exercise of outstanding warrants within 90 days and management is taking steps to reduce expenses. The Company also expects to receive a tax refund of approximately $270,000 in 2003. Over both the long and short term, liquidity will be a direct result of sales and related net earnings. No significant capital expenditures are anticipated or, in the opinion of management, needed. B. RESULTS OF OPERATIONS Three months ended September 30, 2002 v. 2001. Net revenues for the third quarter of 2002 were $ 186,710 a decrease of $1,009,375 (84%) compared with the third quarter of 2001. Research sales decreased $949,428 (89%) in the third quarter of 2002 compared to 2001 due to a dramatic decrease of research demand by customers, which appears to be related to the continued downturn in the economy, and other factors which management has not yet identified. Product sales decreased $ 59,947 (45%) compared to the third quarter of 2001 due to decreased demand from research customers. -8- The cost of revenues in research increased to 192% from 24% in the third quarter of 2002 compared to 2001 as a result of significantly reduced sales with similar staff and expenses. The cost of revenues in production increased to 113% from 82% in the third quarter of 2002 compared to 2001 as a result of similar payroll with decreased sales. Selling, general, and administrative expenses increased as a percentage of sales in the third quarter of 2002 as compared to the same quarter of 2001 from 68% to 537% as a result of significantly decreased sales. Loss from operations during the third quarter increased from a profit of $17,240 (1% of sales) in 2001 to a loss of $1,117,641 ((93%) of sales) in 2002 as a result of significantly decreased sales. Selling, general, and administrative expenses increased in 2002 by $190,269 when compared to the comparable period of 2001 as a result of increased legal settlements. Nine months ended September 30, 2002 v. 2001. Net revenues for the first nine months of 2002 were $1,818,972 a decrease of $2,303,838 (56%) compared with the first nine months of 2001. Research sales decreased $2,056,506 (57%) in the first nine months of 2002 compared to 2001 due to a slower granting of research contracts by customers, which appears to be related to the continued downturn in the economy and other factors that management has been unable to identify. Product sales decreased $247,332 (47%) compared to the first nine months of 2001 due to decreased demand from research customers. The cost of revenues in research increased to 41% from 23% in the first nine months of 2002 compared to 2001 as a result of significantly decreased sales with similar costs. The cost of revenues in production increased to 100% from 88% in the first nine months of 2002 compared to 2001 as a result of decreased sales and similar expenses. Selling, general, and administrative expenses increased as a percentage of sales in the first nine months of 2002 as compared to the same period of 2001 from 67% to 141% as a result of significantly decreased sales. Selling, general, and administrative expenses increased in 2002 by approximately $186,799 when compared to the comparable period of 2001 as a result of increased litigation settlements. Income (loss) from operations during the first nine months decreased from income of $58,812 (.01% of sales) in 2001 to a loss of ($1,685,196) (93% of sales) in 2002 principally as a result of decreased sales. ITEM 3. CONTROLS AND PROCEDURES a) Evaluations of disclosure controls and procedures. Based on evaluation of the effectiveness of the Company's disclosure controls and procedures as of a date within 90 days of the filing date of this quarterly report, the Chief Executive Officer and Chief Financial Officer, who is the same person, concluded that the Company's disclosure controls and procedures are effective in timely alerting him to material information relating to the Company required to be included in the Company's periodic SEC filings. b) Changes in internal control. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation. -9- 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 September 30, 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: (c) On July 18, 2002, the Company sold 150,000 units, each consisting of one share of Common Stock and a Warrant to purchase an one share of Common Stock at an exercise price of $1.50 per share, to a private investor for a purchase price of $225,000. The shares of Common Stock and the shares of Common Stock underlying the Warrants have not been registered under the Securities Act of 1933 and sales of the shares are subject to restrictions and limitations. The issuance of the shares was exempt from registration pursuant to Section 4(2) of the Securities Act as a transaction not involving any public offering. The Company paid a finders fee of $11,500 in connection with the sale of the Units and is obligated to pay an additional $10,000 if the Warrants are exercised. ITEM 3- Defaults Upon Senior Securities: None ITEM 4- Submission of Matters to a Vote of Security Holders: None On October 1, 2002, the U.S. Department of Health and Human Services OIG released its Draft Compliance Program Guidance for Pharmaceutical Manufacturers (the "HHS Draft Guidance") aimed at advising pharmaceutical manufacturers on how to establish a compliance program that will ensure adherence to applicable laws and regulations. Included in the HHS Draft Guidance is a discussion of certain areas of legal risk for pharmaceutical manufacturers that the government encourages manufacturers to consider in structuring their compliance programs. AdvancePCS has reviewed the draft guidance and we believe that our business practices and our arrangements with pharmaceutical manufacturers satisfy the intent of the HHS Draft Guidance. AdvancePCS also maintains a compliance program designed to include the key compliance program elements described in the HHS Draft Guidance. We do not believe that the HHS Draft Guidance, in its current form, would have a material effect on our business operations or financial results. However, because the HHS Draft Guidance has not been finalized, there is the possibility that it could be changed prior to publication of the final version. Any such changes could impact our business operations, possibly materially. ITEM 5- Other Information: None ITEM 6- Exhibits and Reports on Form 8-K: (a) Exhibits: Exhibit 99.1 - Certification pursuant to 18 USC Section 1350 (b) Reports on Form 8-K: None -10- 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 November 9, 2002 by: /s/ Carl Horowitz ------------------------- Carl Horowitz, President and Chief Financial Officer CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER I, Carl Horowitz, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Polymer Research Corporation of America; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. November 9, 2002 by: s/ Carl Horowitz Chief Executive Officer and Chief Financial Officer -11-