-----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, RleHzpns34ii8nbwjSIEetBhAXGrncr0sR48zsPwFAddWA1mxdTzTGVOtdIHWVoO ABbUFNYz8Cct7TC7d+BqAw== 0001089355-03-000314.txt : 20030617 0001089355-03-000314.hdr.sgml : 20030617 20030617165318 ACCESSION NUMBER: 0001089355-03-000314 CONFORMED SUBMISSION TYPE: S-2 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20030617 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: S-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-106202 FILM NUMBER: 03747649 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 S-2 1 polymers2-8292.txt REGISTRATION STATEMENT As Filed with the Securities and Exchange Commission on June 17, 2003 Registration No. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------- Form S-2 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 POLYMER RESEARCH CORP. OF AMERICA --------------------------------------------- (Exact name of registrant as specified in its charter) New York 11-2023495 ----------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 2186 Mill Avenue, Brooklyn, NY 11234 (718) 444-4300 --------------------------------- (Address, including zip code, and telephone number, including area code, of registrant's principal executive office) Robert W. Forman, Esq. Shapiro Mitchell Forman Allen & Miller LLP 380 Madison Avenue, New York, NY 10017 (212) 972-4900 --------------------------------- (Name, address, including zip code, and telephone number, including area code, of agent for service) Approximate date of commencement of proposed sale to public: As soon as practicable after the Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1), check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]____________________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ]___________________ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.[ ]___________________ If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ]___________________ CALCULATION OF REGISTRATION FEE
======================== ====================== ====================== ====================== ====================== Proposed Proposed Title of each maximum maximum class of Amount offering aggregate Amount of securities to to be price offering registration be registered registered per share (1) price fee ======================== ====================== ====================== ====================== ====================== Common Stock, $.01 par value 650,000 $0.55 $357,500 $28.92 ======================== ====================== ====================== ====================== ======================
________________ (1) Pursuant to Rule 457(c) of the Securities Act of 1933, the registration fee is calculated using the last sales price on June 11, 2003 of the Common Stock of Polymer Research Corp. of America as quoted on the over-the counter Electronic Bulletin Board. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 (a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8 (a), MAY DETERMINE. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED June 16, 2003 PROSPECTUS 650,000 SHARES POLYMER RESEARCH CORP. OF AMERICA COMMON STOCK This prospectus relates to the issuance by Polymer Research Corp of America ("PRCA" or the "Company") of up to 650,000 shares of its common stocks, par value $.01 per share ("Shares") of which (i) 500,000 Shares may be issued to certain holders of options to purchase shares of our Common Stock (the "Selling Shareholders") at an exercise price of $0.70 per Share upon the exercise of such options, and (ii) up to 150,000 Shares that may be issued to several unaffiliated companies with whom PRCA is, or may be, in litigation. This prospectus also relates to the sale by the Selling Shareholders of the 500,000 shares acquired by such Selling Shareholder upon exercise of the options. See page 7 for further information with respect to such Selling Shareholder. PRCA will receive no portion of the proceeds of any such sales of shares by the Selling Shareholders. PRCA will receive net proceeds of up to $332,500 upon exercise of the options in full, which it will use for working capital purposes. Upon issuance of the Shares to the claimants, PRCA will not receive any cash, but will be relieved of certain potential claims, some of which have been included in PRCA's financial statements as accrued expenses. The shares of Common Stock to be sold by the Selling Shareholders and covered by this Prospectus may be offered from time to time on the over-the-counter Electronic Bulletin Board or otherwise at prices then obtainable. Our Common Stock trades on the over-the-counter Electronic Bulletin Board under the trading symbol PROA. On June 11, 2003, the closing price of a share of our Common Stock was $.55. It is anticipated that usual and customary brokerage fees will be paid by the Selling Shareholders on the sale of the shares of Common Stock offered hereby. PRCA will pay all the other expenses of the offer of the shares of Common Stock by the Selling Shareholders as described in this Prospectus. 1 Our principal place of business is located at 2186 Mill Avenue, Brooklyn, NY 11234. Our phone number at that address is (718) 444-4300. INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 4. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PRCA OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. The date of this Prospectus is June ____, 2003. 2 TABLE OF CONTENTS Page Uncertainty of Forward-Looking Statements .......................... 3 Risk Factors ....................................................... 4 Available Information on the Company ............................... 6 Our Company ........................................................ 7 Use of Proceeds .................................................... 7 Selling Shareholders and Plan of Distribution ...................... 7 Description of Capital Stock ....................................... 8 Market for Common Equity and Related Shareholder Matters ........... 9 Legal Matters ...................................................... 10 Experts ............................................................ 10 Changes In and Disagreements With Accountants on Accounting and Financial Disclosure ..................................... 10 Indemnification of Directors and Officers - Disclosure of Commission's Position on Indemnification ... 11 UNCERTAINTY OF FORWARD-LOOKING STATEMENTS This prospectus 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. 3 RISK FACTORS INVESTING IN OUR COMMON STOCK INVOLVES RISKS. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE MAKING A DECISION TO PURCHASE ANY OF THE SECURITIES OFFERED HEREBY. OUR CASH POSITION MAY BE INSUFFICIENT TO FUND OPERATIONS IN THE NEAR TERM. The Company experienced a significant decline in revenues during the past 18 months. Management believes that, unless revenues increase significantly, the Company's cash position will continue to decline. At current operating levels, the Company may be out of cash within six to eight months from the date hereof unless revenues increase or expenses are reduced. The Company expects to receive a tax refund of approximately $270,000 in 2003, and received net proceeds of a loan in the amount of $491,500. Over both the long and short term, liquidity will be a direct result of sales and related net earnings. WE HAVE EXPERIENCED SIGNIFICANT DECLINES IN REVENUES AND OPERATING RESULTS DURING THE PAST EIGHTEEN MONTHS. Our results of operations are currently being, and have been in the past, and could in the future be, significantly adversely affected by the downturn in the economy. The Company cannot predict when, or if, the current downturn in the economy and its business will begin to improve. For the year ended December 31, 2002, the Company had a net loss of $2,176,406 on net revenues of $2,127,457. For the three-months ended March 31, 2003, the Company had a net loss of $214,912 on net revenues of $690,412. WE HAVE INCURRED SUBSTANTIAL LOSSES IN TWO OF THE LAST THREE YEARS. For the fiscal years ending December 31, 2002, and 2001, the Company incurred net losses of $2,176,406 and $202,909, respectively. The Company's operating results are affected principally by our ability to attract new research customers. Like many other businesses, during times of economic slowdowns, our revenues are adversely affected. WE HAVE BEEN, AND CONTINUE TO BE, SUBJECT TO LITIGATION CONCERNING THE PERFORMANCE OF CERTAIN RESEARCH CONTRACTS. Over the years, we have entered into numerous contracts to develop formulae requested by our clients which are intended to achieve certain targeted specifications. Our research has not always developed formulations meeting all of the specifications desired by our clients, many of whom have sued us claiming breach of contract. In those lawsuits, such clients have sought the return of amounts paid and alleged consequential damages. We have defended those cases principally on the basis that the contracts called for us to perform research in a commercially reasonable manner, not to guaranty a specific result. At least one court has disagreed with our position, and has found that we breached the contract at issue. If we continue to be subject to lawsuits in cases where we have not satisfied all of our customers' specifications, and other courts agree that such failure constitutes breach of contract, our financial condition and results of operations will likely be affected in a material adverse manner. In addition, these legal proceedings and claims, whether with or without merit, could be time-consuming and expensive to defend, and could divert management's attention and resources. 4 WE DEPEND UPON CERTAIN KEY MEMBERS OF MANAGEMENT WHO ARE 78 YEARS OLD. The success of the Company is largely dependent on the efforts of Carl Horowitz, President of the Company and the Company's co-founder, who is 78 years of age and John Ryan, who is 47 years of age, our principal sales person. The loss of the services of either could have a material adverse effect on the Company's business and prospects. While Dr. Horowitz is in good health and beneficially owns approximately 42.5% of our Common Stock, there can be no assurance that he will continue to actively run the Company. Similarly, John Ryan has worked at the Company for more than 20 years. He has no employment agreement and no post-employment restrictions and could leave the Company's employ at any time. The loss of his services could have a material adverse effect on the Company's sales and profitability. CARL HOROWITZ AND IRENE HOROWITZ BENEFICIALLY OWN A SUBSTANTIAL PORTION OF OUR COMMON STOCK AND ARE LIKELY IN A POSITION TO DETERMINE THE OUTCOME OF CORPORATE ELECTIONS. Carl Horowitz and Irene Horowitz, President and Senior Vice President and members of the Board of Directors, beneficially own 42.5% of the outstanding shares of Common Stock. By virtue of such ownership and their positions with the Company, Carl Horowitz and Irene Horowitz may have the practical ability to determine the election of all directors and control the outcome of substantially all matters submitted to the Company's stockholders. Such concentration of ownership could have the effect of making it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of the Company. THERE IS SIGNIFICANT COMPETITION IN OUR BUSINESSES. In our contract research and development business the Company competes with the in-house research and development staffs of its customers and scientists at educational institutions and foundations who will serve private customers. There can be no assurances that competitors will not develop technology that is superior to ours or costs less than ours. OUR PATENTS MAY NOT BE ENFORCEABLE OR PROVIDE ANY COMPETITIVE ADVANTAGE. The Company has 10 patents which cover our basic grafting process. We can give no assurance that any of the patents which we possess or might possess in the future will be enforceable or, if enforceable, will provide us with an advantage over our competitors or that such patents will not be rendered obsolete by technological change. Moreover, the patent rights for any new application that we develop for a customer is generally assigned to that customer pursuant to our research contract. 5 ABSENCE OF DIVIDENDS. The Company has never paid cash dividends on its capital stock and does not anticipate paying cash dividends in the foreseeable future, but intends instead to retain future earnings, if any, for reinvestment in its business. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon the Company's financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant. TECHNOLOGICAL CHANGES MAY RENDER OUR TECHNOLOGY OBSOLETE OR DECREASE THE ATTRACTIVENESS OF OUR SERVICES TO CUSTOMERS. Our ability to compete, and our future results, may depend in part on our ability to market and continue to develop cost effectively our technology and to introduce enhancements and additions to our technology to meet customer demands and advancements in technology. There can be no assurance that we will successfully market and develop our technology, that technologies or services developed by others will not render our services obsolete or noncompetitive, or that our technology will continue to achieve acceptance in the marketplace. SPORADIC TRADING IN THE MARKET FOR OUR SECURITIES. Our Common Stock is currently quoted on the over-the-counter Electronic Bulletin Board. There is only sporadic trading in our Common Stock. Consequently, holders of our Common Stock may have difficulty selling shares of our Common Stock owned by them. AVAILABLE INFORMATION ON THE COMPANY We filed a registration statement on Form S-2 to register with the Securities and Exchange Commission ("SEC") the shares of our common stock offered hereby. This prospectus is a part of that registration statement. As allowed by SEC rules, this prospectus does not contain all of the information you can find in the registration statement or the exhibits to the registration statement. We file annual, quarterly and current reports and other information with the SEC. You may read and copy any document we file with the SEC at its public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. You may call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to you free of charge at the SEC's web site at http://www.sec.gov. The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this prospectus, and information that we file later with the SEC will automatically update and supersede the information in this prospectus. We incorporate by reference the documents listed below: 1. Annual Report on Form 10-KSB for the year ended December 31, 2002; 2. Amendment No. 1 to Annual Report on Form 10-KSB for the year ended December 31, 2002; and 3. Quarterly Report on Form 10-QSB for the three months ended March 31, 2003. Copies of these filings are being delivered with this prospectus. 6 OUR COMPANY PRCA is principally engaged in research and development in polymer chemistry, on a contract basis, particularly in the application of chemical "grafting", i.e., techniques for modification of organic and inorganic substances. PRCA also manufactures and sells products arising from research activities and textile printing inks. USE OF PROCEEDS Assuming all of the options are exercised, PRCA will receive approximately $332,500 which it will use for working capital purposes. The Company will receive no portion of the proceeds of any sales of the Shares by the Selling Shareholders. The Company will receive no cash proceeds from the issuance of any Shares to claimants, but will be relieved from certain potential liabilities, some of which have been included in the Company's financial statements as accrued expenses. The Company will receive no cash proceeds from the issuance of Shares to the claimants, but will be relieved from certain potential liabilities, some of which have been included in the Company's financial statements as accrued expenses. SELLING SHAREHOLDERS AND PLAN OF DISTRIBUTION The Company may issue 500,000 Shares to the Selling Shareholders upon exercise of the options. Such options are exercisable until August 14, 2003. The Company will receive net proceeds of $332,500 from the sale of such Shares to the Selling Shareholders, and will use those proceeds for working capital. The Company will pay a finders fee to Castle Securities Corp. of 5% of the exercise price of each share acquired upon exercise of the options. In addition, the Company may issue directly to unaffiliated companies with whom the Company is in litigation up to 150,000 Shares. The Company will not receive any cash for such issuance but will be relieved of potential claims, some of which have been contained in the Company's financial statements as accrued expenses. The following table sets forth the name of the Selling Shareholders, the amount of PRCA's Common Stock beneficially owned by each such Selling Shareholder as of June ____, 2003 including the Shares of Common Stock which the Selling Shareholder may acquire upon exercise of the options, the number of shares to be offered by the Selling Shareholder and the number of shares of outstanding Common Stock owned by such Selling Shareholder assuming the sale of all Shares offered hereby: 7 Amount and % of Outstanding Shares to be No. of Shares No. of Shares Beneficially Name Owned Beneficially Offered Owned After Prior to Offering Hereby Offering ----------------- ------ -------- Sam Bergman 25,000 25,000 0 1035 East 26th Street Brooklyn, N.Y. 11210 Eva Carpenter 50,000 50,000 0 2810 Meadowoods Drive East Meadow, N.Y. 11554 Harry Rasp 200,000 200,000 0 2108 Quentin Road Brooklyn, N.Y. 11229 Richard Stapen 225,000 225,000 0 56 Orchard Drive Woodbury, N.Y TOTAL 500,000 The Shares may be sold from time to time by the Selling Shareholders, or by transferees or other successors in interest. Such sales may be made on the over-the-counter Electronic Bulletin Board, or otherwise, at prices and at terms then prevailing or at prices related to the then current market price, or in negotiated transactions. Brokers or dealers engaged by Selling Shareholders will receive commissions or discounts in amounts to be negotiated immediately prior to the sale. Each such Selling Shareholders may be deemed to be an "underwriter" within the meaning of the Securities Act of 1933, as amended (the "Act") in connection with such sales. DESCRIPTION OF CAPITAL STOCK COMMON STOCK The authorized capital stock of PRCA includes 4,000,000 shares of Common Stock, par value $.01 per share. Holders of Common Stock have no preemptive rights. As of May 31, 2003, there were 2,128,644 shares of Common Stock outstanding. The outstanding shares of Common Stock are fully paid and non-assessable. Holders of Common Stock are entitled to dividends when, as and if declared by the Board of Directors of PRCA out of any funds legally available to PRCA for that purpose. Holders of Common Stock are entitled to one vote per share held of record with respect to all matters submitted to a vote of the stockholders. There is no cumulative voting for the election of directors, who are elected annually to one-year terms. Directors are elected by a plurality; all other matters require the affirmative vote of a majority of the votes cast at the meeting. 8 MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Company's Common Stock has traded on the over-the-counter electronic bulletin board since February 25, 2003. Prior to that time it traded on the NASDAQ Small Cap Market. The following table sets forth the high and low bid prices for the periods indicated where the Common Stock is traded under the symbol PROA. The indicated prices are interdealer prices without retail markups, markdowns or commissions and do not necessarily represent actual sales. The limited amount of sales within these ranges should not be interpreted to indicate that an established trading market exists for the shares of Common Stock, nor do these prices necessarily accurately reflect the true value of such shares. BID PRICES LOW HIGH QUARTER 2003 - ------- ---- April-June $ 0.56 $ 1.80 January-March 0.50 1.00 2002 ---- October-December 1.10 5.91 July - September 1.70 3.90 April - June 0.70 1.00 January - March 0.61 1.00 ---- ---- Quarter 2001 - ------- ---- October - December 0.77 1.02 July - September 0.85 1.01 April - June 0.94 1.20 January - March 1.00 2.22 ---- ---- DIVIDEND POLICY The Company has paid no cash dividends to its stockholders since its incorporation and has no present intention to do so. The payment of dividends in the future will be determined by the Board of Directors based on the Company's earnings, financial condition, capital requirements and other factors at the time. On July 20, 1995 the Company adopted a Shareholders Rights Plan. The Rights Plan provides for the issuance of one stock right, entitling the holder to buy one share of Common Stock at a price of $25 (subject to adjustment), for each outstanding share of the Company's Common Stock. The rights will become exercisable only if an "acquiring party" (as defined) acquires or announces a tender offer to acquire 15% or more of the Company's Common Stock. The rights expire July 31, 2005 (See Note 9 of Notes to Financial Statements contained in the Annual Report on Form 10-KSB delivered with this Prospectus and incorporated herein by reference). 9 As of May 1, 2003 there were 2,128,644 shares outstanding, which were held by approximately 811 shareholders, 261 shareholders of record and approximately 550 additional beneficial owners. SALES OF UNREGISTERED SECURITIES On July 18, 2002, the Company sold 150,000 Units, each consisting of one share of Common Stock and a Warrant to purchase one share of Common Stock at an exercise price of $1.50 per share, to Eli Weinstein for a purchase price of $225,000 at the time of sale. The shares of Common Stock and the shares of Common Stock underlying the Warrants had not been registered under the Securities Act of 1933 and sales of the shares were subject to restrictions and limitations. The Warrants expired unexercised. 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 sale of the 150,000 shares acquired in connection with the purchase of the Units was subsequently registered under the Securities Act of 1933. On December 27, 2000, the Company issued a bonus to certain officers, 100,000 restricted shares of the Company's Common Stock. The shares 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. LEGAL MATTERS The validity of the authorization and issuance of the securities offered hereby are being passed upon for Company by Shapiro Mitchell Forman Allen & Miller LLP, 380 Madison Avenue, New York, New York 10017. EXPERTS The financial statements of the Company for December 31, 2002 and December 31, 2001 and the periods then ended appearing in the Annual Report on Form 10-K SB for the year ended December 31, 2002, delivered herewith have been audited by Goldstein & Ganz, CPA's, P.C., independent accountants as set forth in their report with respect thereto appearing elsewhere herein, and are included in reliance on the report of Goldstein & Ganz, CPA's, P.C., independent accountants, given on the authority of said firm as experts in auditing and accounting. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On February 26, 2001, the Company engaged Goldstein & Ganz, P.C. ("GG") as the Company's independent accountants to audit its December 31, 2000 financial statements, replacing Castellano Korenberg & Co. (the "Former Accountants") as the Company's independent auditors. The Former Accountants were dismissed by the Company as of February 26, 2001. The change was approved by the Company's board of directors. The Former Accountants' report on the Company's financial statements for 1999 and 1998 did not contain any adverse opinion or disclaimer of opinion and was not qualified as to uncertainty, audit scope or accounting principles. 10 During the Company's fiscal years ending December 31, 1999 and 1998 and any subsequent interim period through the date of termination: (x) there were no disagreements between the Company and the Former Accountants on any matter of accounting principles or practices, financial statements disclosures or auditing scope or procedures, (y) there were no "Reportable Events" within the meaning of Item 304(a)(1)(iv) of Regulation S-K, and (z) GG was not consulted on any matter specified in Item 304 (a)(2) of Regulation S-K. INDEMNIFICATION OF DIRECTORS AND OFFICERS -- DISCLOSURE OF COMMISSION'S POSITION ON INDEMNIFICATION Under provisions of PRCA's By-laws, any person made a party to any lawsuit by reason of being a director or officer of PRCA, or any parent or subsidiary thereof, shall be indemnified by PRCA to the full extent authorized by the Business Corporation Law of the State of New York. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling PRCA pursuant to the foregoing provisions, PRCA has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable. 11 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. SEC Registration Fee $ 28.92 Legal fees and expenses 7,500.00 Accounting fees and expenses 1,000.00 ======== TOTAL $8,528.92 The foregoing, except for the Securities and Exchange Commission registration fee are estimates. Item 15. Indemnification of Directors and Officers Section 722 of the Business Corporation Law of New York (the "BCL") empowers a corporation to indemnify any person made, or threatened to be made, a party to an action or proceeding, other than one by or in the right of the corporation to procure a judgment in its favor, whether civil or criminal, including an action by or in the right of any other corporation , or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer of the corporation served in any capacity at the request of the corporation, by reason of the fact that he was a director or officer of the corporation, or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorney's fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit or other enterprise, not opposed to, the best interests of the corporation and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his conduct was unlawful. The termination of any such civil or criminal action or proceeding by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not in itself create a presumption that any such director or officer did not act, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit or other enterprise, not opposed to, the best interests of the corporation or that he had reasonable cause to believe that his conduct was unlawful. Section 722(c) of the BCL states that a corporation may indemnify any person made, or threatened to be made, a party to an action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against amounts paid in settlement and reasonable expenses, including attorneys' fees, actually and necessarily incurred by him in connection with the defense or II-1 settlement of such action, or in connection with an appeal therein if such officer or director acted, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit or other enterprise, not opposed to, the best interests of the corporation, except that no indemnification under this provision shall be made in respect of (1) a threatened action, or a pending action which is settled or otherwise disposed of, or (2) any claim issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the court on which the action was brought, or, if no action was brought, any court of competent jurisdiction, determines upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper. Section 721 of the BCL states that the indemnification and advancement of expenses granted pursuant to, or provided by, this article shall not be deemed exclusive of any other rights to which a director or officer seeking indemnification or advancement of expenses may be entitled, whether contained in the certificate of incorporation or the by-laws or, when authorized by such certificate of incorporation or by-laws, (i) a resolution of shareholders, (ii) a resolution of directors, or (iii) an agreement providing for such indemnification, provided that no indemnification may be made to or on behalf of any director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled. PRCA By-laws, as amended, provide: To the extent permitted and in the manner provided by law, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding. The foregoing right of indemnification shall not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled under any agreement, vote of stock-holders or disinterested directors or otherwise, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. II-2 Item 16. Exhibits. Exhibit No. DESCRIPTION 4 Form of Option. 5 Opinion of Shapiro Forman Allen & Miller LLP. 13.1 Annual Report on Form 10-KSB of the Company for the year ended December 31, 2002. 13.2 Amendment No. 1 to Annual Report on Form 10-KSB of the Company for the year ended December 31, 2002. 13.3 Quarterly Report on Form 10-QSB of the Company for the three months ended March 31, 2003. 23.1 Consent of Goldstein & Ganz, CPA's, P.C. 23.2 Consent of Shapiro Forman Allen & Miller LLP.* _______________ * To be contained in Exhibit 5. Item 17. Undertakings. A. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement (i) to include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) to include any additional or changed material information on the plan of distribution. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 C. The undersigned registrant hereby undertakes that: (1) For the purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424 (b) (1) or (4) or 497 (h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-2 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in Brooklyn, New York on June 16, 2003. POLYMER RESEARCH CORP. OF AMERICA By: /s/ Carl Horowitz --------------------- Carl Horowitz Chief Executive Officer II-5 Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /S/ Carl Horowitz President, Chief Executive Officer June 16, 2003 - ------------------------- and Director Carl Horowitz /S/ Irene Horowitz Senior Vice President June 16, 2003 - ------------------------- and Director Irene Horowitz /S/ John Ryan Executive Vice President June 16, 2003 - ------------------------- and Director John Ryan /S/ Alice J. Barton Vice President of West Coast June 16, 2003 - ------------------------- and Director Alice J. Barton /S/ Jascha Gurevitz Director June 16, 2003 - ------------------------- Jascha Gurevitz /S/ Boris Jody Director June 16, 2003 - ------------------------- Boris Jody /S/ Mohan Sanduja, PhD Vice President and Director June 16, 2003 - ------------------------- Mohan Sanduja, PhD /S/ Terry J. Wolfgang Director June 16, 2003 - ------------------------- Terry J. Wolfgang
II-6 EXHIBIT INDEX Exhibit No. Description 4 Form of Option (filed herewith). 5 Opinion of Shapiro Mitchell Forman Allen & Miller LLP.* 13.1 Annual Report on Form 10-KSB of the Company for the year ended December 31, 2002 (filed herewith). 13.2 Amendment No. 1 to Annual Report on Form 10-KSB of the Company for the year ended December 31, 2002 (filed herewith). 13.3 Quarterly Report on Form 10-QSB of the Company for the three months ended March 31, 2003 (filed herewith). 23.1 Consent of Goldstein & Ganz, CPA's, P.C.* 23.2 Consent of Shapiro Mitchell Forman Allen & Miller LLP.* * To be Filed by Amendment. EX-4 3 x4.txt FORM OF OPTION EXHIBIT 4 Date: ____________, 2003 Option No._____ ______Options This certifies that, FOR VALUE RECEIVED, __________________ (the "Holder"), whose address is ____________________________________, is the owner of the number of Options (the "Options") set forth above, each of which entitles the Holder hereof, subject to the terms and conditions contained herein, to purchase one fully paid and nonassessable share of common stock, $.01 par value per share, of Polymer Research Corp. of America, a New York corporation (the "Company"), upon the presentation and surrender of this Option at any time during the Exercise Term (hereinafter defined), and upon payment therefor, by cash or by certified check payable to the Company, of the Exercise Price (hereinafter defined). This Option is not transferrable by the Holder. 1. Exercise Term. The Holder may exercise this Option, in whole or in minimum increments of 25,000 Shares, for a period (the "Exercise Term") beginning on the effectiveness of Registration Statement on Form S-2 registering the Underlying Shares (hereinafter defined) and ending August 14, 2003. 2. Exercise Price. Upon exercise of the Option granted hereby, the Holder may purchase shares of Common Stock per value $.01 per share of the Company (the "Underlying Shares") at a price per share (the "Exercise Price") equal to $.70 per share. 3. Exercise of Options. Upon surrender of this Option with the annexed Form of Exercise duly executed and payment at the Company's principal offices of the appropriate Exercise Price, the Company shall within five business days thereafter issue certificates for the Underlying Shares so purchased to the Holder. The Holder may exercise the purchase rights represented by this Option in whole, or in minimum increments of 25,000 shares. 4. Issuance of Certificates. The Company shall issue certificates for Underlying Shares within 5 business days after such exercise. OPTIONS 1 5. Covenants of Holder. 5.1 Investment Intent. By its acceptance of this Option, the Holder covenants and agrees that the Options are being acquired for its own account as an investment and not with a view to the distribution thereof. 5.2 Restrictions on Sale or Transfer. The Holder acknowledges that the Option is not transferrable, and any attempt to do will be void. 6. Registration Rights. 6.1 Registration Under the Securities Act of 1933. The Options have not been registered for purposes of public distribution under the Act. 6.2 Registrable Securities. As used herein the term "Registrable Security" means the Underlying Shares. 6.3 Registration Statement. The Company has filed a registration statement with the Securities and Exchange Commission (the "SEC") to effect the registration under the Securities Act of 1933, as amended, (the "Act") of the Underlying Shares and will use its reasonable best efforts to cause such registration statement (the "Registration Statement") to become effective as soon as is reasonably practicable and to remain effective during the Exercise Term of the Option. 6.4 Miscellaneous Registration Provisions. The Company and the Holder agree as follows: (a) The Company shall pay all costs, fees and expenses in connection with the Registration Statement filed pursuant to Section 6.3 hereof including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses, except for underwriting commissions and discounts, if any, payable by the Holder. (b) The Company will take all necessary action which may be required in qualifying or registering the Registrable Securities included in a Registration Statement for offering and sale under the securities or blue sky laws of such states as are requested by the Holder, except that the Company shall not, for any such purpose, be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified or to file therein any general consent to service of process. (c) The Holder agrees to use its reasonable best efforts to cooperate with the Company in connection with any registration effected pursuant to this Section 6 and any additional listing on the over-the-counter Electronic Bulletin Board, including furnishing the Company with such information concerning the Holder and executing and delivering such documents as may be required by applicable securities laws. OPTIONS 2 (d) The Holder agrees to deliver the prospectus in the form contained in the effective Registration Statement on Form S-2 in connection with any sale by Holder of the Underlying Shares. 7. Exchange and Replacement of Options. This Option exchangeable without expense, upon the surrender thereof by the Holder at the principal executive office of the Company, for a new Option of like tenor and date representing in the aggregate the right to purchase the same number of Underlying Shares in such denominations as shall be designated by the Holder at the time of such surrender. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Option, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of the Options, if mutilated, the Company will make and deliver a new Option of like tenor, in lieu thereof. The Holder shall pay all transfer taxes payable in connection with any transfer of a Option. 8. Reservation of Securities. The Company shall at all times authorize, allot, reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issuance upon the exercise of the Options, such number of shares of Common Stock as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of this Option and payment of the Exercise Price therefor, all Underlying Shares issuable upon such exercise shall be duly and validly issued as fully paid and non-assessable shares and not subject to the preemptive rights of any shareholder and free and clear of all liens, claims and encumbrances of any nature whatsoever. 9. No Rights Until Exercise. The Holder of any Option shall not have solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Option. 10. Governing Law; Jurisdiction. (a) This Option has been negotiated and consummated in the State of New York and shall be construed in accordance with the laws of the State of New York applicable to contracts made and performed within such State, without regard to principles governing conflicts of law. (b) Each party irrevocably consents to the jurisdiction of the courts of the State of New York and of any federal court located in such State in connection with any action or proceeding arising out of or relating to this Option, any document or instrument delivered pursuant to, in connection with or simultaneously with this Option, or a breach of this Option or any such document or instrument. OPTIONS 3 IN WITNESS WHEREOF, the Company has caused this Option to be duly executed, manually or in facsimile, by its officers thereunto duly authorized and a facsimile of its corporate seal to be imprinted hereon. POLYMER RESEARCH CORP. OF AMERICA Date: , 2003 By: ---------------------------------- President OPTIONS 4 [FORM OF ELECTION TO PURCHASE] The undersigned hereby elects to exercise the right, represented by the attached Option, to purchase ____ Shares and herewith tenders in payment for such number of Shares cash or a certified check payable to the order of The Company in the amount of $______, all in accordance with the terms hereof or other form of payment permitted by the Option. The undersigned requests that a certificate for such Shares be registered in the name(s) of ____________________, and delivered to ______________________. Payment of any required transfer tax accompanies this election. The undersigned has read the Prospectus relating to the shares being purchased hereby and understand that the ownership of such shares involves a high degree of risk including those risk factors identified on pages 4 through 6 of the Prospectus. Dated: Signature:__________________________ OPTIONS 5 EX-13.1 4 x13-1.txt FORM 10KSB FOR 12-31-02 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file No. 0-14119-NY POLYMER RESEARCH CORP. OF AMERICA --------------------------------- (Name of small business issuer in its charter) ---------------------------------------------- NEW YORK 11-2023495 - ------------------------------- ------------------------------- (State or other jurisdiction of (IRS Employer Identification incorporation or organization) Number) 2186 Mill Avenue, Brooklyn, NY 11234 - --------------------------------------- --------- (Address of principal executive offices) (Zip Code) Issuer's telephone number including area code: (718) 444-4300 -------------- Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ------- ------- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. X . State issuers' revenues for its most recent fiscal year - $2,127,457 The aggregate market value of voting stock held by non-affiliates of the Registrant at March 31, 2003 was approximately $1,195,696 based on the last sale price of such stock. As of March 31, 2003, the Registrant had 2,053,644 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE NONE PART I ITEM 1 - Description Of Business Polymer Research Corp. of America ("the Company") was incorporated under the laws of New York State in 1963. It is principally engaged in research and development in polymer chemistry, on a contract basis, particularly in the application of chemical "grafting," i.e., techniques for modification of organic and inorganic substances. The Company also manufactures and sells products arising from research activities and textile printing inks. The Company's principal place of business is located at 2186 Mill Avenue, Brooklyn, New York 11234. The Company's phone number at that address is (718) 444-4300. During 2002, research revenues and products sales accounted for 84 percent and 16 percent of the Company's net revenues, respectively. For a detailed breakdown of segments of the Company's revenues, income, capital expenditures and identifiable assets, see Note 9 of Notes to Financial Statements. Research And Development Contract Work The Company's principal business is that of research and development on a contract basis for other companies in the field of polymer chemistry, i.e., the chemical creation and use of polymers. "Polymers" are essentially compounds of high molecular weight, such as plastics and resins. Polymers result from chemical reactions of compounds with low molecular weights, called "monomers," which react to form a polymer. Generally, a polymerization reaction (i.e., the chemical creation of a polymer) entails the application of heat to a solution containing the appropriate monomers, in the presence of a catalyst; the result of the reaction can include one or more kinds of polymers. The Company owns 4 current patents for its chemical "grafting" technology. Chemical "grafting" refers to processes by which surfaces are bonded together, or a coating is affixed to a surface through various polymerization reactions. By using chemical "grafting" techniques, the Company can form a permanent scratch and corrosion-resistant protective coating on plastics, rubber, metals, and other substances. Based upon the Company's research, management believes that there are many other practical applications of these techniques that have not yet been fully developed or discovered. Research and development contract work for specific application of its chemical "grafting" techniques has been done for pharmaceutical companies and manufacturers of industrial equipment, tires, packaging material, pipes, tubes and plastic films, and other enterprises. -2- A majority of the Company's research and development work in chemical "grafting" is done for customers in the private sector. The Company markets its research and development services by contacting businesses which might have a use for chemical "grafting." Typically the Company and the prospective customer determine the possible application of chemical "grafting" in which the customer has an interest. The Company then submits a research proposal based on specifications provided by the prospective customer. If the proposal is accepted, or if an acceptable proposal is negotiated, the Company enters into a contract with the customer and commences the research that is required. A majority of the Company's research and development contracts are for specified periods of time. Most such contracts extend for a period of three to four months. The remainder of the Company's research and development contract work is done either on a lump sum or month-to-month basis. Research revenue earned from foreign customers outside the United States aggregated approximately $660,000 for 2002, representing approximately 31% of total annual research revenues for 2002. Almost all of the research and development contracts provide that if the Company successfully develops a patentable new process while working on the contract, the Company will assign patent rights to the customer who then will have the exclusive right to use that process. This right generally extends only for uses which the Company was hired to do the research, and in some instances, is dependent upon the customer making specified payments to the Company. The Company believes that these provisions in its contracts are necessary and have not unreasonably inhibited the Company's research and development projects for other customers. As of December 31, 2002, the Company employed seven in-house sales persons to market its research and development contracts, primarily through bulk mailings and presence on the Internet to targeted potential customers. To date, all of the Company's research and development services have been related to contracts for customers. Production The Company manufactures formulations resulting from research work predominantly as an accommodation for the companies for whom the research work was done. The Company also has, since its inception, produced and sold color inks, and components thereof. These products are used by textile businesses for the printing of textiles. Employees And Employee Relations As of December 31, 2002, the Company had 34 full-time employees. The President and the 11 other scientists in the Company's Research Department are engaged in research and development. The Production Department has 2 employees who are engaged in the production of items arising from research and textile inks. There are 5 employees in the sales and marketing departments. In addition, there are 10 clerical employees and 3 maintenance employees. -3- The Company's technical staff sign nondisclosure agreements whereby they agree to keep the technical information and processes of the Company confidential. In those agreements, such technical personnel also agree to unconditionally assign to the Company all techniques and inventions developed by them in furtherance of or related to Company projects. None of the Company's employees are members of a labor union. There have been no strikes or work stoppages and the Company believes its employee relations are satisfactory. Competition The fields in which the Company does business are highly competitive. In its contract research and development business, the Company competes with the in-house research and development staffs of its customers and scientists at educational institutions and foundations who will service private customers. The Company also faces potential competition from research and development companies which are substantially larger than the Company, and various private laboratories, although the Company believes that it is presently the only Company doing contract research and development work in the field of chemical "grafting" for other companies. The Company's "grafting" techniques include the use of innocuous or mild non-alkaline and non-acidic chemicals. In addition, the Company's method of grafting, by use of chemicals, is less expensive than other methods such as gamma ray grafting. In its textile ink business, the Company faces intense competition from a variety of competitors, many of whom are substantially larger and have significantly greater resources, reputations and marketing abilities than does the Company, and the Company is not a significant factor in this business. Environmental Consideration The Company does not believe that its operations are adversely affected by existing environmental regulations. The Company's primary waste products are non-toxic and non-corrosive such as wood, paper and cardboard and are disposed of by a private sanitation company. The small amount of chemicals that the Company disposes of are sealed in non-corrosive containers and are removed from the premises by a company that is licensed to dispose of corrosive waste. Patents The Company's President and other employees of the Company have assigned a total of 20 current United States patents to its clients. The assigned patents, which cover the basic grafting process, were issued between 1986 and 2002. Each patent is effective for 17 years from the date of its issuance. The Company currently owns four patents in the field of chemical grafting, which expire between 2004 and 2019. Management can give no assurance that any of the patents, which the Company possesses or might possess in the future, will be enforceable or, if enforceable, will provide the Company or the holder thereof with an advantage over its competitors. -4- ITEM 2. Description Of Property The Company's offices, research and development and manufacturing facilities are located in a 64,000 square foot three-story building at 2186 Mill Avenue, Brooklyn, New York, which the Company has owned since 1990 (see Note 5 of Notes to Financial Statements). The Company utilizes the space in the following manner: approximately 11,000 square feet is devoted to office space; approximately 10,000 square feet is devoted to production of items resulting from research and textile inks; approximately 35,000 square feet is devoted to research and laboratory facilities and 8,000 square feet is devoted to warehousing inventory. The Company also leases approximately 3,200 square feet of office space in Phoenix, Arizona which serves as its West Coast sales and marketing office and laboratory. The Company believes that its facilities are adequate for its current needs and those of the foreseeable future. ITEM 3. Legal Proceedings The Company is a defendant in certain lawsuits that arose in the normal course of the Company's business. In the opinion of management, the allowance the Company has provided is sufficient to cover the potential damages and expenses that may be incurred in these proceedings. Accordingly, management does not believe these proceedings will have a material adverse affect on the Company's financial condition. ITEM 4. Submission Of Matters To A Vote Of Security Holders During the fourth quarter of 2002, no matters were submitted to a vote of the Company's security holders. PART II ITEM 5. Market For Common Equity And Related Stockholder Matters For the past two fiscal years, the Company's Common Stock trade on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") small capital market. The following table sets forth the high and low bid prices for the periods indicated where the Common Stock is traded under the symbol PROA. The indicated prices are interdealer prices without retail markups, markdowns or commissions and do not necessarily represent actual sales. The limited amount of sales within these ranges should not be interpreted to indicate that an established trading market exists for the shares of Common Stock, nor do these prices necessarily accurately reflect the true value of such shares. -5- Bid Prices ------------------- 2002 LOW HIGH ---- --- ---- October - December 1.10 5.91 July - September 1.70 3.50 April - June 0.56 1.80 January - March 0.50 1.00 2001 ---- October - December 0.77 1.02 July - September 0.85 1.01 April - June 0.94 1.20 January - March 1.00 2.22 Beginning February25, 2003, the Company's common stock was delisted from NASDAQ and currently trades on the over-the-counter electronic bulletin board. Dividend Policy The Company has paid no cash dividends to its stockholders since its incorporation and has no present intention to do so. The payment of dividends in the future will be determined by the Board of Directors based on the Company's earnings, financial condition, capital requirements and other factors at the time. On July 20, 1995 the Company adopted a Shareholders Rights Plan. The Rights Plan provides for the issuance of one stock right, entitling the holder to buy one share of common stock at a price of $25 (subject to adjustment), for each outstanding share of the Company's common stock. The rights will become exercisable only if an "acquiring party" (as defined) acquires or announces a tender offer to acquire 15% or more of the Company's common stock. The rights expire July 31, 2005 (See Note 7 of Notes to Financial Statements). As of March 31, 2003, there were 2,053,644 shares outstanding, which were held by approximately, 400 shareholders of record and approximately 1,000 additional beneficial owners. Sales Of Unregistered Securities On July 18, 2002, the Company issued 150,000 shares of common stock to Eli Weinstein for a purchase price of $225,000. The shares of commons stock were not registered under the Securities Act of 1933. The issuance of the shares was exempt from registration pursuant to Section 4 (2) of the Securities Act as a transaction not involving any public offering. Simultaneously, the Company granted 150,000 warrants to Mr. Weinstein, which expired unexercised. ITEM 6. Management's Discussion And Analysis Of Financial Condition And Results Of Operations The Company is primarily engaged in the business of performing research and development on a contract basis. Additionally, the Company manufactures and sells chemical products arising from its research -6- activities as well as inks used by textile businesses for the printing of textiles. Availability of production of research breakthroughs is an important marketing tool of the Company to its research customers. No material capital expenditures are foreseen nor considered necessary in the next twelve months for the continued production of textile inks and chemical products. Revenue Trend Analysis: Year Ended December 31, --------------------------------------------------- Percentage of ($ In Thousands) Total Revenues ----------------------- ------------------ 2002 2001 2002 2001 ---- ---- ---- ---- Research $1,780 $4,361 87.0% 86.0% Production 348 711 13.0% 14.0 ------ ------ ----- ----- Total Revenues $2,128 $5,072 100.0% 100.0% ====== ====== ===== ===== Total revenues decreased $ 2,943,784 or 58% from $5,071,241 in 2001 to $2,127,457 in 2002. Research revenue decreased 59% or $2,581,544 while production sales decreased 51% or $363,091 from 2001 to 2002. The decrease in annual research and production sales was primarily the result of decreased market demand for research and production related to an inconsistent economy and a decreasing customer base. The rate of inflation has not had a material impact upon the results of operations. Cost of Revenue Trend Analysis: Year Ended December 31, --------------------------------------------------- Percentage of ($ In Thousands) Total Revenues ----------------------- ------------------ Research $ 889 $ 957 41.7% 18.8% Production 473 513 22.2% 10.1% ------ ------ ---- ---- Total Revenues $1,362 $1,470 28.0% 28.9% ====== ====== ==== ==== Costs of revenues as a percentage of sales increased in 2002 as compared to 2001 primarily as a result of decreased sales with a similar labor force. Selling, General and Administrative Expenses Trend Analysis Year Ended December 31, --------------------------------------------------- Percentage of ($ In Thousands) Total Revenues ----------------------- ------------------ Selling, General and Administrative expense $2,561 $3,601 120% 70.1% ====== ====== ===== ===== -7- Selling, general and administrative expenses, as a percentage of sales increased dramatically 142% in 2002, as compared to 72.6% during 2001. The increase is attributed to similar expenses with substantially decreased sales. The key variable to the Company's success is the number of research contracts it can secure and complete in accordance with their respective terms. Over the past 18 months, demand for the Company's research has decreased markedly, which management believes is partially attributable to general economic factors. Management cannot predict if, or when, demand for the Company's services will increase. Income taxes: A total income tax benefit of $235,641 was provided for income taxes for 2002 as compared to a provision of $ 7,955 in 2001. The benefit for income taxes in 2002 and 2001 were calculated based on the statutory federal income tax rates plus state and local taxes. Liquidity And Capital Resources Cash and certificates of deposit have decreased to $ 204,508 at December 31, 2002 from $ 711,952 at December 31, 2001. (See the statement of cash flows for a more detailed analysis of opening versus closing cash). Cash is generated by and used by the Company through its operations. Cash flow of the Company is a direct result of net income and net cash provided from operating activities. Credit extended by the Company in the form of receivables and received in the form of payables has not had and will not have a significant impact on cash flow. During the early portion of 2003, the Company required additional working capital and received a loan from its Senior Vice President of approximately $99,000. However, during the balance of the first quarter of 2003, the Company experienced an increase in new research contracts and greater cash receipts from operations. For the period January 1, 2003 through March 31, 2003, collections of accounts receivable and deposits for new research contracts exceeded $800,000. The Company does not anticipate any material capital expenditures in the next 12 months. The Company's cash position at December 31, 2001 is not deemed sufficient to cover a continued sales downturn. Over both the long and short term, liquidity will be the direct result of sales and the impact of sales on profitability. Although revenues are expected to return to higher levels again in 2003, continued low sales would make it impossible for the Company to continue operations due to insufficient cash flow. Accordingly, the Company is actively seeking to raise additional capital. There can be no assurance that the Company will be successful in raising such funds and that if additional funds are raised, that they will be sufficient to maintain the Company until its operations achieve profitability. For the year ending December 31, 2002, the Company will elect to carryback the current year net operating loss, which will result in an estimated federal refundable tax credit of $ 272,500. Additionally, during the first quarter of 2003, the Company received an approval for an SBA Disaster -8- Loan for $491,500. The loan requires no payments of principle or interest during the first two years. The term of the loan is thirty years and bears interest at 4.5%. The Company expects to receive funding from the loan during the second quarter of 2003. The ratio of current assets to current liabilities at December 31, 2002 was 1.32 to 1.0 as compared to 1.70 to 1.0 at December 31, 2001. Cash flow from investing activities is not expected to have an impact on cash flow in the next twelve months. No significant changes to operating expenses are anticipated within the next twelve months. ITEM 7. Financial Statements The response to this item appears on pages F-1 - F-18, and is hereby incorporated herein. ITEM 8. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure. None. PART III ITEM 9. Directors, Executive Officers, Promoters, And Control Persons; Compliance With Section /16(A) Of The Exchange Act. The directors and executive officers of the Company as of December 31, 2002 are as follows: NAME AGE POSITION - ---- --- -------- Carl Horowitz 79 President and Director Irene Horowitz 79 Senior Vice President and Director John M. Ryan 47 Executive Vice President, Corporate Research and Director Alice J. Horowitz 43 Vice President of Polymer West Coast branch and Director Boris Jody 83 Director Jascha J. Gurevitz 84 Director Anna Dichter 89 Secretary, Treasurer Terry J. Wolfgang 41 Director Dr. Mohan Sanduja 67 Vice President, R & D and Director Clare Chamow 68 Vice President, Office Management -9- Carl Horowitz founded the Company and has devoted his full time and efforts to the affairs of the Company, as its President and as a Director, since 1963. Mr. Horowitz received a B.S. in Chemical Engineering at Columbia University in New York in 1950, and a Master of Science degree in Polymer Chemistry from Polytechnic Institute of Brooklyn in 1961. Mr. Horowitz is the husband of Irene Horowitz and the father of Alice J. Horowitz and Terry J. Wolfgang. Irene Horowitz has been a Director and a Senior Vice President of the Company since 1980. Mrs. Horowitz devotes her full time and efforts to the affairs of the Company, and her primary responsibility as Senior Vice President is to oversee the operations of the Company. Mrs. Horowitz is the wife of Carl Horowitz and the sister of Anna Dichter and the mother of Alice J. Horowitz and Terry J. Wolfgang. John M. Ryan has been a Director since September, 1984. Mr. Ryan has been employed by the Company since 1981 as a technical director of Special Product Development and has been the Executive Vice President of Corporate Research since 1985. Alice J. Horowitz was a Senior Vice President. In 1987, she became a Director. During 1995 Ms. Horowitz relocated outside of New York and now operates a sales office of Polymer Research Corp. of America in Arizona. Ms. Horowitz is the daughter of Carl and Irene Horowitz. Boris Jody was elected a Director of the Company in 1984. Mr. Jody is currently retired. Mr. Jody previously was with Standard Motor Products, Inc., where he had been Vice President of Corporate Affairs. Jascha J. Gurevitz was elected as a Director of the Company in 2000. Currently, Mr. Gurevitz is retired. Previously, Mr. Gurevitz worked for Central News Agency of Johannesburg, South Africa from 1958 through 1990 as manager of their New York office. Anna Dichter joined the Company in 1968 as Controller. She was elected Secretary/Treasurer of the Company in 1977. Mrs. Dichter, who devotes her full time and efforts to the affairs of the Company, is in charge of maintaining the Company's books on a day-to-day basis. She is the sister of Irene Horowitz. Terry J. Wolfgang has been a Director of the Company since 1989. She has been engaged in the private practice of law in New York City. Ms. Wolfgang is the daughter of Carl and Irene Horowitz. Ms. Wolfgang has occasionally performed legal services for the Company. Dr. Mohan Sanduja, PHD joined the Company in 1979 as Assistant Director of Research. In 1982, he became a Director of Research and Development. In 1987, he became a Director of the Company and Vice President of Research and Development. Clare Chamow joined the Company in 1982. She became a Vice President in March of 1996 and is responsible for office management. She is a graduate of Brooklyn College with a B.A. Degree in Education. -10- Section 16(a) of the Securities Exchange Act of 1934 requires directors, executive officers and holders of more than 10% of Polymer's Common Stock to file with the Securities and Exchange Commission reports regarding their ownership and changes in ownership of Polymer's securities. Polymer believes that, during 2002, none its directors, executive officers and 10% shareowners changed any of their ownership of the Company. In making this statement, Polymer has relied upon the written representations of its directors, executive officers and stockholders. -11- ITEM 10. EXECUTIVE COMPENSATION The following table sets forth the compensation paid during the years ended December 31, 2002 and 2001 to the chief executive officer and those three executive officers of the Company who earned in excess of $100,000 for the year ended December 31, 2002.
SUMMARY COMPENSATION TABLE ---------------------------------------------------------------------------------------------------- LONG TERM COMPENSATION ANNUAL COMPENSATION AWARDS PAYOUTS ------------------------------- ------------------------- ------------- (a) (b) (c) (d) (e) (f) (g) (h) NAME OTHER RESTRICTED SECURITIES AND ANNUAL STOCK UNDERLYING LTIP PRINCIPAL COMPEN- AWARDS OPTIONS/ PAYOUTS POSITION YEAR SALARY ($) BONUS($) SATION($) ($) SAR'S(#) ($) CARL HOROWITZ 2002 175,078 - 15,122 (1) - - - CEO, PRESIDENT 2001 171,765 - - - - - 2000 180,440 - - 53,125 - - IRENE HOROWITZ 2002 143,427 - 9,334 (1) - - - SENIOR VICE 2001 134,591 - - - - - PRESIDENT 2000 141,388 - - 53,125 - - JOHN M. RYAN 2002 234,904 30,000 18,798 (2) - - - EXECUTIVE VICE 2001 286,583 - - - - - PRESIDENT 2000 247,178 - - - - - MOHAN SANDUJA 2002 123,989 - - - - - VICE PRESIDENT 2001 124,073 - - - - - RESEARCH AND 2000 128,180 - - - - - DEVELOPMENT (1) Represents automobile lease and insurance payments. (2) Represents automobile lease and insurance payments and premiums on officer's life insurance policy in which Mr. Horowitz has the right to designate the beneficiary.
Stock Options No executive officer owns any stock options or stock appreciation rights . Employment Agreements On May 17, 1998, the Company amended Mr. Horowitz's employment agreement to extend it through May 16, 2003. Additionally, Mr. Horowitz's base salary under the new agreement was $170,000 for 1998 with annual increases of $10,000 thereafter until December 31, 2002. In the final -12- period of the agreement (January 1, 2003 through May 16, 2003), Mr. Horowitz is entitled to receive salary at the annual rate of $240,000. During 2002 and 2001, Mr. Horowitz agreed to accept a lesser salary of $175,078 and $171,765, respectively, to assist in the Company's efforts to reduce expenses. Mr. Horowitz has agreed to continue receiving a reduced salary in 2003. On July 26, 1994 the Company entered into retirement agreements with the Company's President and Senior Vice President. The agreements set a compensation rate of 60% of the average annual compensation for the five preceding year's, payable for the remainder of the individuals' life. In addition the Company is to maintain the individuals' medical benefits. Compensation of Directors Directors who are not employees of the Company receive a fee of $500 for each regular meeting of the Board of Directors that they attend. Effective January 1, 1990, the Company adopted a qualified noncontributory profit sharing plan. 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, if any, are determined at the Board of Directors' discretion. A percentage of the benefits vest after three years of qualifying service. The Company elected to make a $5,000 contribution for 2001. ITEM 11. Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters The following table sets forth certain information, as of March 31, 2003, with respect to each person known to the Company to be the beneficial owner of more than 5% of the Company's Common Stock, each executive officer named on the Summary Compensation table, and by all officers and directors as a group:
Amount Name And Address Of Beneficially Percentage Title Of Class Beneficial Owner Owned Of Class - -------------- ------------------- ----- ---------- Common stock Carl Horowitz 762,668(1) 37.14 (1) $.01 par value 2719 Whitman Drive Brooklyn, NY 11234 Irene Horowitz 475,354(1) 23.15 (1) 2719 Whitman Drive Brooklyn, NY 11234 John M. Ryan 40,210 1.96 3035 Lonni Lane Merrick, N.Y. 11566 -13- Alice J. Horowitz 20,151 0.98 3046 West Tonopah Drive Phoenix, Arizona 85027 Boris Jody 0 0.00 4301 N. Ocean Blvd. Boca Raton, Fl. Jascha J. Gurevitz 0 0.00 155 East 93rd Street, Apt. 3A New York, NY 10028 Anna Dichter 1,800 0.09 1757 E. 54th Street Brooklyn, N.Y. Terry J. Wolfgang 3,700 0.18 2186 Mill Avenue Brooklyn, N.Y. 11234 Dr. Mohan Sanduja 1,000 0.05 144-90 91st Avenue Flushing, N.Y. Clare Chamow 400 0.02 5613 Fillmore Avenue Brooklyn, N.Y. 11234 All executive officers and Directors as a group (10 in number) 1,013,908 49.37
(1) Includes 291,375 shares jointly held by Carl and Irene Horowitz, but excludes shares individually held by the other. ITEM 12. Certain Relationships and Related Transactions During 2002, the Company compensated Terry S. Wolfgang, Esq. approximately $84,000 for legal services rendered to the Company. Ms. Wolfgang is a director of the Company and is the daughter of the Company's President, Dr. Carl Horowitz and Senior Vice President, Irene Horowitz. -14- ITEM 13. Exhibits and Reports on Form 8-k (a) Exhibits Exhibit Description (3.1) Registrant's Certificate of Incorporation, as amended, (incorporated by reference as previously filed with the United States Securities and Exchange Commission on January 7, 1986 on Form 10). Amendment to the Certificate of Incorporation dated July 23, 1988, (incorporated by reference as previously filed with the United States Securities and Exchange Commission in March 1991 with Form 10K) (3.2) By Laws, as amended (incorporated by reference as previously filed with the United States Securities and Exchange Commission on January 7, 1986 on Form 10K) (10.1) Employment Contract of Carl Horowitz, the Company's President, dated March 17, 1998 (filed with 1998 Form 10K). * (10.3) Retirement benefits agreement between the Company and Carl Horowitz, dated July 26, 1994 (incorporated by reference as previously filed with the United States Securities and Exchange Commission in March, 1995 with Form 10K). * (10.4) Retirement benefits agreement between the Company and Irene Horowitz, dated July 26, 1994 (incorporated by reference as previously filed with the United States Securities and Exchange Commission in March, 1995 with Form 10K). * (23.1) Consent of Independent Accountants (99.1) Certificate of Chief Executive Officer pursuant to 18 U.S.C.ss.1350. *Management Contract (b) Reports on Form 8-K. None ITEM 14. Controls and Procedures Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company that is required to be included in the Company's periodic SEC Reports. 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 their evaluation. -15- POLYMER RESEARCH CORP. OF AMERICA INDEX TO FINANCIAL STATEMENTS Page Independent Auditors' Report F-2 Balance Sheets at December 31, 2002 and 2001 F-3 Statements of Operations for the Years Ended December 31, 2002, 2001 and 2000 F-4 Statements of Stockholders' Equity for the Years Ended December 31, 2002, 2001 and 2000 F-5 Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000 F-6 Notes to Financial Statements F-7 - F-18 F-1 GOLDSTEIN & GANZ, P.C. Member of the American CERTIFIED PUBLIC ACCOUNTANTS Institute of Certified 98 CUTTERMILL ROAD Public Accountants, GREAT NECK, NEW YORK 11021 SEC Practice Section ------------------- (516) 487-0110 Member of The New York Facsimile (516) 487-2928 State Society of Certified Public Accountants Independent Auditors' Report To The Stockholders and Board of Directors Polymer Research Corp. of America Brooklyn, New York We have audited the accompanying balance sheets of Polymer Research Corp. of America at December 31, 2002 and 2001, and the related statements of operations, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Polymer Research Corp. of America at December 31, 2002 and 2001 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 7 to the financial statements, the Company has suffered recurring losses from operations, and net capital deficiencies that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 7. The financial statements do not include any adjustments relating to the recoverability or reclassification of any asset or liability that might result from the outcome of this uncertainty. ------------------------------------- GOLDSTEIN & GANZ, CPA's, P.C. Great Neck, New York March 26, 2003 POLYMER RESEARCH CORP. OF AMERICA BALANCE SHEETS DECEMBER 31, 2002 AND 2001 ASSETS
Current assets: 2002 2001 ----------- ----------- Cash and cash equivalents $ 204,508 $ 711,952 Accounts receivable, less allowance for doubtful accounts of $-0- for 2002 and 2001 279,624 515,343 Inventories 126,317 143,836 Prepaid and refundable income taxes 301,437 154,401 Mortgage escrow 120,574 -- Prepaid expenses and other current assets 55,586 6,441 ----------- ----------- Total current assets 1,088,046 1,531,973 ----------- ----------- Property and equipment, net of accumulated depreciation of $1,280,655 and $1,194,815, respectively 2,509,181 2,594,197 ----------- ----------- Other assets: Cash - restricted, non-current -- 150,000 Capitalized mortgage costs, net of amortization of $ 3,748 108,692 -- Security deposits 875 2,175 ----------- ----------- $ 3,706,794 $ 4,278,345 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 523,765 $ 387,867 Deferred revenue 155,500 259,250 Notes payable, current maturities 142,975 250,000 ----------- ----------- Total current liabilities 822,240 897,117 Long-term liabilities: Notes payable, long term 1,494,591 241,667 Due to shareholders 201,808 -- ----------- ----------- Total liabilities 2,518,639 1,138,784 Stockholders' equity: Common stock - $.01 par value; 4,000,000 share authorized, 2,075,784 and 1,925,784 issued, respectively, 2,053,644 and 2,031,504 outstanding 20,757 19,257 Capital in excess of par value 3,728,478 3,504,978 Accumulated deficit (2,543,319) (366,913) ----------- ----------- 1,205,916 3,157,322 Less: Treasury stock, at cost - 22,140 shares 17,761 17,761 ----------- ----------- Total stockholders' equity 1,188,155 3,139,561 ----------- ----------- $ 3,706,794 $ 4,278,345 =========== ===========
See Notes to Financial Statements. F - 3 POLYMER RESEARCH CORP. OF AMERICA STATEMENTS OF OPERATIONS
December 31, ----------------------------------- 2002 2001 ---- ---- Net revenues: Research $ 1,779,600 $ 4,361,144 Production 347,857 710,948 ----------- ----------- 2,127,457 5,072,092 Cost of revenues: Research 889,677 957,277 Production 472,981 513,577 ----------- ----------- 1,362,658 1,470,854 ----------- ----------- Gross profit 764,799 3,601,238 Selling, general and administrative expenses: 2,561,130 3,126,286 Settlement expense 532,983 445,158 ----------- ----------- Income (loss) from operations (2,329,314) 29,794 ----------- ----------- Other income (expense): Interest income 4,903 15,266 Interest expense (87,636) (40,553) ----------- ----------- Total other expense, net (82,733) (25,287) ----------- ----------- Income (loss) before provision for (benefit from) income taxes (2,412,047) 4,507 Provision for (benefit from) income taxes (235,641) (7,955) ----------- ----------- Net income (loss) $(2,176,406) $ 12,462 =========== =========== Basic and diluted earnings (loss) per share ($ 1.09) $ 0.01 =========== =========== Weighted average number of shares outstanding 1,994,003 1,925,784 =========== ===========
See Notes to Financial Statements. F - 4 POLYMER RESEARCH CORP. OF AMERICA STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
Common Stock Capital Retained Treasury Stock ----------------------------------- In Excess Earnings --------------------------- Shares Issued Amounts of Par (Deficit) Shares Amount ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2001 1,925,784 $ 19,257 $ 3,504,978 $ (379,375) 22,140 $ 17,761 Net Income 12,462 ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2001 1,925,784 19,257 3,504,978 (366,913) 22,140 17,761 Private sale of Common Stock 150,000 1,500 223,500 Net Loss (2,176,406) ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2002 2,075,784 $ 20,757 $ 3,728,478 $(2,543,319) 22,140 $ 17,761 =========== =========== =========== =========== =========== ===========
See Notes to Financial Statements. F - 5 POLYMER RESEARCH CORP. OF AMERICA STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001 ----------- ----------- Cash flows from operating activities: Net income (loss) (2,176,406) 12,462 ----------- ----------- Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 89,588 87,187 Bad debt expense 48,110 21,094 Write-off of other receivables 27,100 -- Accrued settlement expenses 258,260 -- Changes in assets and liabilities: Accounts receivable 187,609 (254,776) Inventories 17,519 (19,117) Prepaid and refundable income taxes (174,136) 106,950 Mortgage escrow (120,574) -- Prepaid expenses and other current assets (49,145) (30,787) Security deposits 1,300 (980) Accounts payable and accrued expenses 135,898 133,302 Deferred revenue (103,750) (30,750) ----------- ----------- Net cash provided by (used for) operating activities (1,858,627) 24,585 Cash flows from investing activities: Purchase of property and equipment (824) (7,605) ----------- ----------- Net cash provided by (used for) investing activities (824) (7,605) ----------- ----------- Cash flows from financing activities: Proceeds from long term debt 1,400,000 100,000 Principal payments of current maturities on long term debt (170,694) -- Payments for mortgage financing (112,440) -- Principal payments on long-term borrowings (341,667) (100,613) Loan from shareholders 201,808 -- Proceeds from issuance of stock 225,000 -- ----------- ----------- Net cash (used for) financing activities 1,202,007 (613) ----------- ----------- Net increase (decrease) in cash (657,444) 16,367 Cash, beginning of year 861,952 845,585 ----------- ----------- Cash, end of year 204,508 861,952 =========== =========== Supplemental information: Interest paid $ 88,332 $ 39,301 =========== =========== Taxes paid $ 1,025 $ -- =========== ===========
See Notes to Financial Statements. F - 6 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies Business Activity Polymer Research Corp. of America ("the Company") is predominately engaged in the research and development of the applications of chemical grafting for both domestic and international companies. The Company also produces and sells products arising from research activities and textile printing inks. Revenue from research and production is derived from various customers throughout the United States and worldwide. Concentration of Credit Risk The Company maintains its cash in several bank accounts at high credit quality financial institutions. The balances, at times, may exceed federally insured limits. At December 31, 2002, the Company exceeded FDIC insured limits by $78,674. The Financial instrument, which potentially subjects the Company to significant concentrations of credit risk, is principally trade accounts receivable. 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 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 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 the product is shipped for sale to customers. Inventories Inventories, which consists of raw materials and finished goods 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. F - 7 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 1 - 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 when 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: Land improvements 20 years Building and building improvements 40 years Transportation equipment 3 to 5 years Machinery and equipment 5 years Furniture and fixtures 5 to 10 years Office equipment 5 years Capitalized Mortgage Costs Costs incurred in obtaining the mortgage used to finance the purchase the building were capitalized and amortized over the term of the related obligation utilizing the straight-line method. Deferred Revenue The Company records as deferred revenue payments received for research contracts prior to the culmination of the revenue process. 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." F - 8 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies (continued). Profit Sharing Plan The Company maintains a qualified noncontributory profit sharing plan. The plan provides all eligible employees with a source of retirement income, as well as 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 by an annual resolution of the Board of Directors. A percentage of the benefits vest after three years of qualifying service. Earnings Per Share Basic earnings per share is computed using the weighted average number of common shares. Diluted earnings per share are computed using the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of employee stock options, restricted stock, warrants and convertible securities. The provisions of SFAS No. 128 "earnings per Share," which require the presentation of both net income per common share and net income per common share-assuming dilution preclude the inclusion of any potential common shares in the computation of any diluted per-share amounts when a loss from continuing operations exists. Accordingly, for 2002, net income per common share and net income per common share-assuming dilution are equal. Reclassifications Certain accounts relating to the prior years have been reclassified to conform to the current year's presentation. These reclassifications have no effect on previously reported income. Segment Information The Company operates in two segments. The Company is primarily in the business of performing research and development on a contract basis. Additionally, the Company also manufactures and sells chemical products arising from its research activities as well as inks used by textile businesses for the printing of textiles. F - 9 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 2 - Inventories Inventories at December 31, 2002 and 2001 were comprised of the following: 2002 2001 -------- -------- Raw materials $122,857 $141,549 Finished goods 3,460 2,287 -------- -------- $126,317 $143,836 ======== ======== Note 3 - Property and Equipment Property and equipment at December 31, 2002 and 2001 was comprised of the following: 2002 2001 ---------- ---------- Land $ 450,000 $ 450,000 Land improvements 80,211 80,211 Building 2,550,000 2,550,000 Building improvements 301,880 301,880 Machinery and equipment 262,874 262,050 Furniture and fixtures 100,424 100,424 Office equipment 44,447 44,447 ---------- ---------- 3,789,836 3,789,012 Less: Accumulated depreciation and amortization 1,280,655 1,194,815 ---------- ---------- $2,509,181 $2,594,197 ========== ========== Depreciation and amortization expense related to property and equipment amounted to $85,840, and $87,187 for the years ended December 31, 2002 and 2001, respectively. Note 4 - Accounts Payable and Accrued Expenses Accounts payable and accrued expenses at December 31, 2002 and 2001 were comprised of the following: F - 10 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 4 - Accounts Payable and Accrued Expenses (continued) 2002 2001 -------- -------- Accounts payable $ 41,098 $ 83,915 Accrued settlement expenses 306,150 200,000 Accrued vacation 31,829 30,916 Accrued professional fees 40,000 42,200 Other accruals 104,688 30,836 -------- -------- $523,765 $387,867 ======== ======== Note 5 - Long-term Debt Long-term debt at December 31, 2002 and 2001 was comprised of the following:
2002 2001 ---------- ---------- Mortgage payable through July 2017 in equal monthly installments of $15,044 with interest at 10% per annum through July 2004, thereafter interest at varying rates adjusted every six months with no increase or decrease by more than 2% on any single change date $1,379,306 $ -- Settlement payable over 3 years in equal monthly payments of $8,333 258,260 -- Revolving credit note maturing June 2002, interest payable monthly at prime plus 1% -- 150,000 Term loan payable through May, 2005 in equal monthly installments of $8,333 with interest at 8.5%, collateralized by substantially all assets of the Company -- 341,667 ---------- ---------- 1,637,566 491,667 Less: Current maturities 142,975 250,000 ---------- ---------- Long-term portion $1,494,591 $ 241,667 ========== ==========
F - 11 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 5 - Long-term Debt (continued) Mortgage Payable In July, 2002, the Company entered into a 15 year mortgage for $1,400,000 which is secured by real property and improvements at the Company's corporate headquarters in Brooklyn, NY. Interest on the unpaid balance of the $1,400,000 will accrue at a fixed rate of 10% per annum for the first 24 months of the loan. Beginning August 2004 the interest rate will adjust to the 6-month London Interbank Offer Rate plus 775 basis points (the "Adjusted Interest Rate"). The Adjusted Interest Rate will be adjusted every six months thereafter and will not be increased or decreased by more than 2% on any single change date. At December 31, 2002 the balance due under the term of the mortgage was $1,379,306. The principal payments of the term of the mortgage payable are as follows: Year Ending December 31: ------------------------ 2003 44,611 2004 49,282 2005 54,443 2006 60,144 2007 66,441 thereafter 1,104,385 ---------- $1,379,306 ========== Settlement Payable During the year the Company settled a legal action for thirty-six equal monthly payments of $8,333, which began in February 2003. The present value of this obligation was recorded on the balance sheet based upon an imputed interest rate of 10%. At December 31, 2002, the balance due under the terms of the settlement was $258,260. Revolving Credit Note The Company was provided a $150,000 revolving credit facility, maturing on June 30, 2002, replacing its $250,000 revolving line of credit. Interest was payable monthly at 1% above the bank's prime rate. During 2001 the Company drew upon the entire $150,000 line of credit, which was fully repaid at December 31, 2002. The Company no longer has the line of credit available. F - 12 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 5 - Long-term Debt (continued) Term Loan Payable On March 20, 2000, the Company entered into a borrowing arrangement with the bank that issued the revolving credit facility. At December 31, 2002, the balance due under the term loan was $341,667. During 2002, in connection with the new mortgage financing, the loan was repaid in full (see Mortgage Payable above). In connection with the term loan, the Company was required to place $150,000 into a money market account to collateralize the loan. During 2002, in connection with the new mortgage financing the $150,000 was released upon satisfaction of the note (see Mortgage Payable above). Note 6 - Deferred Revenue At December 31, 2002 and 2001 the Company received research contract payments not yet earned aggregating $155,500 and $259,250, respectively. . Note 7 - Commitments and Contingencies Litigation At December 31, 2002, the Company is a defendant in various lawsuits, which arose, in the ordinary course of business. As of December 31, 2002, the Company recorded a provision which it deemed adequate for legal expenses and potential unfavorable rulings in certain of these cases. As of December, the Company had settled certain of the cases and recorded legal settlement expenses of $532,983 for the year 2002. Retirement Agreements On July 26, 1994 the Company entered into retirement agreements with the Company's President and Senior Vice President. The agreements set a compensation rate of 60% of the average annual compensation for the five preceding years, payable for the remainder of the individuals' life. In addition the Company is to maintain the individuals' medical benefits. F - 13 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 7 - Commitments and Contingencies(continued) Employment Agreements On May 17, 1998, the Company amended Mr. Horowitz's employment agreement to extend it through May 16, 2003. Additionally, Mr. Horowitz's base salary under the new agreement was $170,000 for 1998 with annual increases of $10,000 thereafter until December 31, 2002. In the final period of the agreement (January 1, 2003 through May 16, 2003), Mr. Horowitz is entitled to receive salary at the annual rate of $240,000. During 2002 and 2001, Mr. Horowitz agreed to accept a lesser salary of $175,078 and $171,765, respectively, to assist in the Company's efforts to reduce expenses. Mr. Horowitz has agreed to continue receiving a reduced salary in 2003. Leases The Company has entered into various noncancellable operating leases for office space and equipment requiring future minimum lease payments as follows: Years Ending December 31: ------------------------- 2003 $ 60,368 2004 33,910 2005 34,715 2006 14,600 Rent expense charged to operations for the years ended December 31, 2002 and 2001 amounted to $66,524 and $78,834, respectively. Going Concern The Company has continued to sustain losses and continues to require additional sources of cash to fund its operations. These circumstances create uncertainty about the Company's ability to continue as a going concern. Management of the Company has developed a plan to improve cash flow through increasing revenue and raising additional funds either through the issuance of debt or equity. Throughout 2002 and prospectively, management believes that the impact of the September 11, 2001 tragedy negatively affected to a significant degree the resources available for research of the Company's clients. However, management further believes that such resources have become more available since late 2002 and will continue directing its efforts and resources toward expanding and developing research contracts with new and existing customers. During the early portion of 2003, the Company required additional working capital and received a loan from its Senior Vice President of approximately $99,000. However, during the balance of the first quarter of 2003, the Company F - 14 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 7 - Commitments and Contingencies(continued) began experiencing an increase in new research contracts and greater cash receipts from operations. For the period January 1, 2003 through March 31, 2003, collections of accounts receivable and deposits for new research contracts exceeded $800,000 of which approximately $60,000 was used to partially repay the loan received from the Senior Vice President. The Company may require additional working capital until such time as profitability from increased sales are achieved and the Company reaches break-even levels. The Company is actively seeking to raise additional capital. There can be no assurance that the Company will be successful in raising such funds and that if additional funds are raised, that they will be sufficient to maintain the Company until its operations achieve profitability. The ability of the Company to continue as a going concern is dependent upon its ability to raise additional funds and the Company's success in increasing revenues. The Company anticipates that cash from operations and the additional financing, if successful, will provide the funds it requires for the balance of the year ending December 31, 2003. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Note 8 - Shareholders Rights Plan On July 20, 1995, the Company adopted a Shareholders Rights Plan. The Company adopted the plan to protect shareholders against unsolicited attempts to acquire control of the Company. The rights were issued to shareholders of record on July 31, 1995 and will expire on July 31, 2005. The Rights Plan provides for the issuance of one stock right for each outstanding share of the Company's common stock. The rights will become exercisable only if an "acquiring party" (as defined in the rights plan) acquires 15% or more of the Company's common stock or announces a tender offer that would result in ownership of 15% or more of the Company's common stock. Each right will entitle the holder to buy one share of common stock at an exercise price of $25, subject to adjustment. Upon the occurrence of certain events, holders of the rights will be entitled to purchase either the Company's stock or shares in an "Acquiring Entity" at 50% of those shares market value. The Company will generally be entitled to redeem all rights for $.01 per right at any time prior to the tenth day following the acquisition of 15% or more of the Company's common stock by a person or group. Note 9 - Income Taxes The provision for (benefit from) income taxes is summarized as follows: F - 15 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 9 - Income Taxes (continued). Current: 2002 2001 ------- ---- ---- Federal $(272,500) -- State and local 36,859 $ 16,391 --------- --------- (235,641) 16,391 --------- --------- Deferred: --------- Federal -- (8,341) State and local -0- (16,005) --------- --------- -0- (24,346) --------- --------- $(235,641) $ (7,955) ========= ========= The reconciliation between the tax provision (benefit) utilizing the maximum federal statutory tax rate for the years ended December 31, 2002 and 2001 and the rates reflected in the accompanying financial statements are as follows:
2002 2001 --------- --------- Income tax (benefit) at U.S. statutory rates $(843,863) $ 1,577 Change in allowance for deferred tax assets 569,264 (9,786) Surtax exemption 15,000 -- State and local taxes 23,958 254 --------- --------- Income tax provision (benefit) $(235,641) $ (7,955) ========= =========
For the year ending December 31, 2002, the Company will elect to carryback the current year net operating loss, which will result in an estimated federal refundable tax credit of $ 272,500. As a result of losses incurred through December 31, 2002, after giving effect to the carryback, the Company has a net operating loss carryforward of approximately $1,640,000. This carryforward will expire in 2022. As a result of the current year net operating loss, the Company recorded a deferred tax asset of approximately $ 741,300. Realization of deferred tax assets is dependent on generating sufficient taxable income prior to their expiration. Because realization is not assured, at December 31, 2002 the Company recorded a valuation allowance of $ 741,300. F - 16 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 10 - Industry Segments The Company's operations are classified into the following two industry segments: Research - providing laboratory research services in the area of polymer chemistry, and Production -the manufacturing and sale of products arising from research activities and the sale of textile printing inks and accessories. Selected financial information on industry segments for the years ended December 31, 2002 and 2001 are as follows:
2002 2001 ----------- ----------- Net Revenues: Research $ 1,779,600 $ 4,361,144 Production 347,857 710,948 ----------- ----------- Total Net Revenues $ 2,127,457 $ 5,072,092 =========== =========== Gross Profit: Research $ 889,923 $ 3,403,867 Production (125,124) 197,371 ----------- ----------- Total Gross Profit 764,799 3,601,238 Selling, General and Administrative Expenses 2,561,130 3,126,286 Settlement Expense 532,983 445,158 ----------- ----------- Income (Loss) from Operations $(2,329,314) $ (29,794) =========== =========== Capital Expenditures: Research $ -- $ 1,824 Production -- 879 Corporate 824 4,902 ----------- ----------- Total $ 824 $ 7,605 =========== =========== Depreciation and Amortization: Research $ 33,863 $ 35,155 Production 16,320 16,942 Corporate 35,657 35,090 ----------- ----------- Total $ 85,840 $ 87,187 =========== ===========
F - 17 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 10 - Industry Segments (continued) December 31, ---------------------------------- 2002 2001 ---- ---- Identifiable Assets: Research $1,084,042 $1,502,680 Production 862,424 743,206 Corporate 1,760,328 2,032,459 ---------- ---------- Total $3,706,794 $4,278,345 ========== ========== Net income from operations represents net sales less operating expenses for each segment and corporate expenses, which are not directly attributable to any segment. Segment identifiable assets include accounts receivable, inventories and property and equipment for use in, or directly attributable to, the individual segments. Corporate identifiable assets include cash, property and equipment and other assets, which are not directly attributable to any individual segment. There was no individual customer from which the Company derived 10% or more of its revenues during the periods presented. Note 11 - Profit Sharing Plan Profit sharing expense under the Company's noncontributory profit sharing plan charged to operations amounted to $5,590 for the year ended December 31, 2001. There was no profit sharing expense for the year ended December 31, 2002. Note 12 - Quarterly Results of Operations (Unaudited) Below is a summary of the quarterly results of operations for each quarter of 2002 and 2001:
2002 First Second Third Fourth - ---------------------------- ---------- ---------- ---------- ---------- Revenue $1,017,486 $ 614,776 $ 186,710 $ 308,485 Gross profit (loss) 775,193 234,716 (113,944) (131,166) Net income (loss) $ 2,694 $ (581,201) $ (881,660) $ (713,545) Basic and diluted net income (loss) per common share $ 0.00 $ (0.30) $ (0.43) $ (0.34)
F - 18 POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS Note 12 - Quarterly Results of Operations (Unaudited) (continued)
2001 First Second Third Fourth - ---- ----- ------ ----- ------ Revenue $ 1,399,573 $ 1,300,479 $ 1,196,085 $ 1,175,955 Gross profit 1,127,084 869,020 830,668 774,466 Net income (loss) $ 49,525 $ (49,241) $ 12,754 $ (576) Basic and diluted net income (loss) per common share $ 0.03 $ (0.03) $ 0.01 $ (0.00)
Note 13 - Subsequent Events During the early portion of 2003, the Company required additional working capital and received a loan from its Senior Vice President of approximately $99,000. However, during the balance of the first quarter of 2003, the Company began recognizing a greater increase in new research contracts and greater cash receipts from operations. For the period January 1, 2003 through March 31, 2003, collections of accounts receivable and deposits for new research contracts exceeded $800,000 of which approximately $60,000 was used to partially repay the Senior Vice President. During the first quarter of 2003, the Company received an approval for an SBA Disaster Loan for $491,500. The loan requires no payments of principle or interest during the first two years. The term of the loan is thirty years and bears interest at 4.5%. The Company expects to receive funding from the loan during the second quarter of 2003. F - 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POLYMER RESEARCH CORP. OF AMERICA POLYMER RESEARCH CORP. OF AMERICA --------------------------------- (Registrant) By /s/ Carl Horowitz Date ------------------------- ------------ CARL HOROWITZ, President and Chief Executive Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated /s/ Carl Horowitz Director - --------------------------------- ------------ Carl Horowitz Date /s/ Irene Horowitz Director - -------------------------------- ----------- Irene Horowitz Date /s/John Ryan Director - -------------------------------- ----------- John Ryan Date /s/Alice J. Horowitz Director - -------------------------------- ----------- Alice J. Horowitz Date /s/Jascha J. Gurevitz Director - -------------------------------- ----------- Jascha J. Gurevitz Date /s/Boris Jody Director - -------------------------------- ----------- Boris Jody Date /s/Dr. Mohan Sanduja Director - -------------------------------- ----------- Dr. Mohan Sanduja PhD Date /s/Terry J. Wolfgang Director - -------------------------------- ----------- Terry J. Wolfgang Date I, Carl Horowitz, certify that: 1. I have reviewed this annual report on Form 10-KSB of Polymer Research Corp. of America; 2. Based on my knowledge, this annual 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 annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I 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 annual 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 annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. I have disclosed, based on my 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. I have indicated in this annual 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. April __, 2003 /s/ Carl Horowitz ---------------------- Carl Horowitz Chief Executive Officer and Chief Financial Officer EX-13.2 5 x13-2.txt AMENDMENT NO. 1 TO FORM 10KSB FOR 12-31-02 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 1 TO FORM 10-KSB [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 II-11 For the fiscal year ended December 31, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file No. 0-14119-NY POLYMER RESEARCH CORP. OF AMERICA --------------------------------- (Name of small business issuer in its charter) ---------------------------------------------- NEW YORK 11-2023495 - ------------------------------- ------------------------------- (State or other jurisdiction of (IRS Employer Identification incorporation or organization) Number) 2186 Mill Avenue, Brooklyn, NY 11234 - --------------------------------------- --------- (Address of principal executive offices) (Zip Code) Issuer's telephone number including area code: (718) 444-4300 -------------- Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ------- ------- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. X . State issuers' revenues for its most recent fiscal year - $2,127,457 The aggregate market value of voting stock held by non-affiliates of the Registrant at March 31, 2003 was approximately $1,195,696 based on the last sale price of such stock. As of March 31, 2003, the Registrant had 2,053,644 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE NONE SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POLYMER RESEARCH CORP. OF AMERICA POLYMER RESEARCH CORP. OF AMERICA --------------------------------- (Registrant) By /s/ Carl Horowitz Date April 15, 2003 -------------------- ----------------- CARL HOROWITZ, President and Chief Executive Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated /s/ Carl Horowitz Director April 15, 2003 - --------------------------------- ----------------- Carl Horowitz Date /s/ Irene Horowitz Director April 15, 2003 - -------------------------------- ----------------- Irene Horowitz Date /s/John Ryan Director April 15, 2003 - -------------------------------- ----------------- John Ryan Date /s/Alice J. Horowitz Director April 15, 2003 - -------------------------------- ----------------- Alice J. Horowitz Date /s/Jascha J. Gurevitz Director April 15, 2003 - -------------------------------- ----------------- Jascha J. Gurevitz Date /s/Boris Jody Director April 15, 2003 - -------------------------------- ----------------- Boris Jody Date /s/Dr. Mohan Sanduja Director April 15, 2003 - -------------------------------- ----------------- Dr. Mohan Sanduja PhD Date /s/Terry J. Wolfgang Director April 15, 2003 - -------------------------------- ----------------- Terry J. Wolfgang Date I, Carl Horowitz, certify that: 1. I have reviewed this annual report on Form 10-KSB of Polymer Research Corp. of America; 2. Based on my knowledge, this annual 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 annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I 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 annual 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 annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. I have disclosed, based on my 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. I have indicated in this annual 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. April 15, 2003 /s/ Carl Horowitz ---------------------- Carl Horowitz Chief Executive Officer and Chief Financial Officer II-7 Exhibit 23.1 GOLDSTEIN & GANZ, P.C. CERTIFIED PUBLIC ACCOUNTANTS 98 CUTTERMILL ROAD GREAT NECK, NEW YORK 11021 ------------------------------ (516) 487-0110 Facsimile (516) 487-2928 Member of the American Institute of Certified Public Accountants, SEC Practice Section Member of The New York State Society of Certified Public Accountants Board of Directors Polymer Research Corp. of America 2186 Mill Avenue Brooklyn, New York 11234 We hereby consent to the use of our report dated March 26, 2003, appearing on pages F-2 of Form 10-KSB of Polymer research Corp. of America for the fiscal year ending December 31, 2002. Goldstein & Ganz, CPA's, PC Great Neck, NY March 26, 2003 II-8 Exhibit 23.2 Castellano, Korenberg & Co. - -------------------------------------------------------------------------------- Certified Public Accountants April 1, 2002 Polymer Research Corp. of America 2186 Mill Avenue Brooklyn, New York 11234 Attn: Dr. Carl Horowitz, President Dear Carl, Under the guidance provided by the Statement of Auditing Standards AU 508.74, we hereby consent to the use of our auditor's opinion on the 1999 financial statements for Polymer Research Corp. of America as originally dated February 16, 2000. Very truly yours, /s/ Castellano, Korenberg & Co., CPAs, P.C. II-9 Exhibit 99.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C.ss.1350 Solely for the purposes of complying with 18 U.S.C. 1350, I, the undersigned Chief Executive Officer and Chief Financial Officer of Polymer research Corp. of America (the "Company"), hereby certify, to the best of my knowledge, that the Annual Report on Form 10-KSB of the Company for the year ended December 31, 2002 ( the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. April 15, 2003 /s/ Carl Horowitz ------------------------ Carl Horowitz Chief Executive Officer and Chief Financial Officer EX-13.3 6 x13-3.txt QUARTERLY REPORT ON FORM 10QSB FOR 03-31-03 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) (X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2003 ( ) 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 small business issuer as specified in its charter) New York 11-2023495 (State or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) 2186 Mill Avenue, Brooklyn, New York 11234 (Address of Principal Executive Offices) (718) 444-4300 Issuer's Telephone Number There were 2,128,644 shares of the registrant's common stock outstanding as of April 30, 2003. POLYMER RESEARCH CORP.OF AMERICA - FORM 10QSB - INDEX - Page(s) PART I. FINANCIAL: Item 1. Financial Statements Balance Sheets at March 31, 2003 (unaudited) and December 31, 2002 1 Statements of Operations for the Three Month Periods Ended March 31, 2003 and 2002 (unaudited) 2 Statements of Cash Flows for the Three Month Periods Ended March 31, 2003 and 2002 (unaudited) 3 Notes to Financial Statements 4-6 Item 2. Management's Discussion and Analysis or Plan of Operation 7-8 Item 3. Controls and Procedures 8 PART II. OTHER INFORMATION 9 Item 1. Legal Proceedings 9 Item 2. Changes in Securities 9 Item 3. Defaults Upon Senior Securities 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 9 Signatures 10 Certification 10 PART I - Financial Information Item 1- Financial Statements POLYMER RESEARCH CORP. OF AMERICA BALANCE SHEETS - ASSETS -
March 31, December 31, 2003 2002 ----------- ----------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 83,427 $ 204,508 Accounts receivable, less allowances of $0 254,201 279,624 Inventories 116,548 126,317 Prepaid and refundable income taxes 301,487 301,437 Mortgage escrow 123,574 120,574 Prepaid expenses and other current assets 42,276 55,586 ----------- ----------- TOTAL CURRENT ASSETS 921,513 1,088,046 ----------- ----------- Land, Property, and Equipment-net of accumulated depreciation of $ 1, 302,115 and $1,280,655 respectively 2,487,720 2,509,181 ----------- ----------- OTHER ASSETS: Capitalized mortgage costs, net of amortization 105,692 108,692 Security deposits 875 875 ----------- ----------- TOTAL OTHER ASSETS 106,567 109,567 ----------- ----------- TOTAL $ 3,515,800 $ 3,706,794 =========== =========== - LIABILITIES AND STOCKHOLDERS' EQUITY - CURRENT LIABILITIES: Notes payable, current maturities $ 123,420 $ 142,975 Accounts payable and accrued expenses 444,560 523,765 Deferred revenue 155,000 155,500 ----------- ----------- TOTAL CURRENT LIABILITIES 722,980 822,240 ----------- ----------- LONG-TERM LIABILITIES: Due to shareholder 244,525 201,808 Notes Payable, long term 1,489,708 1,494,591 ----------- ----------- TOTAL LIABILITIES 2,457,213 2,518,639 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock - par value $.01 per share, authorized 4,000,000 shares, issued 2,150,784 shares 21,507 20,757 Capital in excess of par value 3,810,073 3,728,478 Accumulated deficit (2,755,232) (2,543,319) Less: Treasury stock, at cost, 22,140 shares (17,761) (17,761) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 1,058,587 1,188,155 ----------- ----------- TOTAL $ 3,515,800 $ 3,706,794 =========== ===========
See accompanying notes to financial statements. -1- POLYMER RESEARCH CORP. OF AMERICA STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2003 AND 2002 (Unaudited)
2003 2002 ----------- ----------- Net Revenue Research $ 572,602 $ 922,940 Production 117,810 94,546 ----------- ----------- Total 690,412 1,017,486 ----------- ----------- Cost of Revenues Research 230,158 170,096 Production 105,596 72,197 ----------- ----------- Total 335,754 242,293 ----------- ----------- Gross Profit 354,658 775,193 ----------- ----------- Selling, General and Administrative Expenses 532,296 759,254 ----------- ----------- Income (Loss) from operations (177,638) 15,939 ----------- ----------- Other Revenue (Expenses): Interest income 120 2,148 Interest expense (34,394) (7,093) ----------- ----------- Total other Revenues (Expenses) (34,274) (4,945) ----------- ----------- Income (loss) before provision (benefit) for income taxes (211,912) 10,994 Provision (benefit) for income taxes -0- 8,300 ----------- ----------- Net Income (Loss) $ (211,912) $ 2,694 =========== =========== Basic and diluted per share data: Earnings (loss) per share $ (10) $ -0- =========== =========== Weighted average number of shares outstanding 2,197,184 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, 2003 AND 2002 (Unaudited)
2003 2002 --------- --------- Cash Flows from Operating Activities: Net income (loss) $(211,912) $ 2,694 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,461 21,748 Changes in operating assets and liabilities: Accounts receivable 25,423 (87,238) Inventories 9,769 3,593 Mortgage Escrow (3,000) Prepaid and refundable income taxes (50) 41,117 Capitalized mortgage costs - net 3,000 Prepaid expenses and other current assets 13,310 (12,074) Accounts payable, Accrued expenses and other 3,139 (16,329) Deferred revenue (500) (204,375) --------- --------- Net cash provided by operating activities (139,360) (250,864) --------- --------- Cash flows from financing activities: Due to Shareholder 42,717 -- Payments of long term debt (24,438) (25,000) --------- --------- Net cash used for financing activities 18,279 (25,000) --------- --------- Net increase (decrease) in cash and cash equivalents (121,081) (275,864) --------- --------- Cash and cash equivalents, beginning of period 204,508 861,952 --------- --------- Cash and cash equivalents, end of period $ 83,427 $ 586,088 ========= =========
-3- POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS MARCH 31, 2003 AND 2002 (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, 2002 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. Concentration of Credit Risk The Company maintains its cash in several bank accounts at high credit quality financial institutions. The balances, at times, may exceed federally insured limits. At December 31, 2002, the Company exceeded FDIC insured limits by $78,674. The Financial instrument, which potentially subjects the Company to significant concentrations of credit risk, is principally trade accounts receivable. 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- POLYMER RESEARCH CORP. OF AMERICA NOTES TO FINANCIAL STATEMENTS MARCH 31, 2003 AND 2002 (Unaudited) 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: Land improvements 20 years 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 Capitalized Mortgage Costs Costs incurred in obtaining the mortgage used to finance the purchase the building were capitalized and amortized over the term of the related obligation utilizing the straight-line method. Income Taxes The Company accounts for its income taxes utilizing statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes" which requires that the Company follow the liability method of accounting for income taxes. The liability method provides that deferred tax assets and liabilities are recorded based on the difference between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as "temporary differences." Net Earnings per share 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 or during periods during which there is a pretax operating loss. -5- NOTE 3 - Provision for Income Taxes The provision for income taxes for the first three months ended March 31, 2003 and 2002 is as follows: 2003 2002 ----- ---- Federal $ -0- $ 3,750 State and local -0- 4,550 -------- --------- Total $ -0- $ 8,300 ======== ========= NOTE 4 - Contingencies At March 31, 2003 the Company was a defendant in various lawsuits which arose in the ordinary course of business. At March 31, 2003, 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 Long term debt consists of: 1) A mortgage payable through July 2017 in equal monthly installments of $15,044 with interest at 10% per annum through July 2004, thereafter interest at varying rates adjusted every six months with no increase or decrease by more than 2% on any single change date. 2) A settled legal action for thirty-six equal monthly payments of $8,333, which began in February 2003. The present value of this obligation was recorded on the balance sheet based upon an imputed interest rate of 10%. At December 31, 2002, the balance due under the terms of the settlement was $258,260 and at March 31, 2003 the balance due under the terms of the settlement was $ $239,561. -6- POLYMER RESEARCH CORPORATION OF AMERICA OTHER INFORMATION MARCH 31, 2003 AND 2002 (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 $121,081 since December 31, 2002. The decrease resulted principally from operating losses and repayment of long-term debt. The ratio of current assets to current liabilities decreased to 1.14 to 1.0 at March 31, 2003 as compared to 1.32 to 1.0 at December 31, 2002 principally as a result of operating losses which used cash. During the first quarter of 2003 the Company issued approximately $40,000 from additional advances from a shareholder. In April of 2003 the company received a loan from a bank totalling $491,500 bearing interest at 4% per year. After a period of 25 months with no payment, monthly payments of principal and interest of $2,434 will commence in the 26th month and then be paid monthly for 30 years. Based on the above, the Company's cash position at March 31, 2003 may not be sufficient to meet its financial needs including repayment of the bank and to cover any continued sales downturns 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. RESULTS OF OPERATIONS Three months ended March 31, 2003 v. 2002. Net revenues for the first quarter of 2002 were $690,412 a decrease of $ 327,074 (32%) compared with the first quarter of 2002. Research sales decreased $350,338 (38%) in the first quarter of 2003 compared to 2002 due to a slower economy resulting in decreased demand. Product sales increased $23,264 (25%) compared to the first quarter of 2002 due to increased demand from research customers. The cost of revenues in research increased to 40% from 18% in the first quarter of 2003 compared to 2002 as a result of increased staff costs as salaries had been temporarily reduced in early 2002, and significantly lower sales. The cost -7- POLYMER RESEARCH CORPORATION OF AMERICA OTHER INFORMATION MARCH 31, 2003 AND 2002 (Unaudited) of revenues in production increased to 89% from 76% in the first quarter of 2003 compared to 2002 as a result of increased payroll expenses and raw material costs. Selling, general, and administrative expenses increased as a percentage of sales in the first quarter of 2003 as compared to the same quarter of 2002 from 74% to 77% as a result of significantly decreased sales and increased salary costs. Income (loss) from operations during the first quarter decreased from $15,939 (1.5% of sales) in 2002 to a loss of ($177,638) (25% of sales) in 2003 principally as a result of decreased sales. Selling, general, and administrative expenses decreased in 2003 by approximately $226,958 when compared to the comparable period of 2002 as a result of significantly decreased legal settlements. 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. [This section intentionally left blank.] -8- POLYMER RESEARCH CORPORATION OF AMERICA OTHER INFORMATION MARCH 31, 2003 AND 2002 (Unaudited) 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, 2003 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: Registered shares of Common Stock, $0.01 par value, issued in the first quarter of 2003 were as follows: Date: Purchaser: No. of Conditions: shares: 2/28/03 Customer 27,000 A customer accepted 27,000 shares valued at $ 26,640 as a settlement. 1/22/03 Customer 48,000 A customer accepted 48,000 shares valued at $ 55,705 as a settlement. 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 99.1 CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 -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 14, 2003 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-SQB 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-15) 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. May 14`, 2003 by: s/ Carl Horowitz ---------------- Chief Executive and Chief Financial Officer 10 II-10 Polymer Research Corporation of America Certification under Section 906 of the Sarbanes/Oxley Act- Filed as an exhibit to 10-QSB for the Quarter Ended March 31, 2003 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Polymer Research Corp. of America (the"Company") On Form 10-QSB for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof ("Report"), I Carl Horowitz, Chief Executive and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. May 14, 2003 by: s/ Carl Horowitz Chief ---------------------- Chief Executive and Chief Financial Officer EX-23.1 7 x23-1.txt CONSENT OF CPA'S Exhibit 23.1 [LETTERHEAD OF GOLDSTEIN & GANZ, CPA's, P.C.] Board of Directors Polymer Research Corp. of America 2186 Mill Avenue Brooklyn, New York 11234 We hereby consent to the incorporation by the Registration Statement on Form S-2 dated June , 2003, of Polymer Research Corp. of America of our report dated February 25, 2003, appearing in Polymer's Form 10-K filed with the Commission on April ____, 2003 and to the use of our name as it appears under the caption "Experts." Goldstein & Ganz, CPA's, PC Great Neck, NY June , 2003 -----END PRIVACY-ENHANCED MESSAGE-----