FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
Of the Securities and Exchange act of 1934
For Quarter Ended March 31, 2001
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Commission file number 0-14119-NY
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Polymer Research Corp. of America
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(Exact name of registrant as specified in its charter)
New York 11-2023495
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(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
2186 Mill Avenue, Brooklyn, New York 11234
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(Address of principal executive offices)
(Zip code)
(718) 444-4300
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(Registrants telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
April 30, 2001 1,925,784
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POLYMER RESEARCH CORP. OF AMERICA
INDEX
Page
Number
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Number
Part I - FINANCIAL INFORMATION:
ITEM I - FINANCIAL STATEMENTS
Balance Sheets:
March 31, 2001 (Unaudited) and
December 31, 2000 1
Statements of Operations:
Three months ended March 31, 2001
and 2000 (Unaudited) 3
Statements of Cash Flows:
Three months ended March 31, 2001
and 2000 (Unaudited) 4
Notes to Financial Statements 5-8
ITEM 2 - MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9-10
PART II - OTHER INFORMATION 11
PART I - FINANCIAL INFORMATION POLYMER RESEARCH CORP. OF AMERICA
BALANCE SHEETS
MARCH 31, 2001 AND DECEMBER 31, 2000
March 31, December 31,
ASSETS 2001 2000
(Unaudited) (Note 1)
CURRENT ASSETS:
Cash and cash equivalents $ 1,003,413 $ 695,585
Cash - Restricted cash 30,000 30,000
Accounts receivable,less allowances
of $0 110,530 281,661
Inventories 126,661 124,719
Prepaid expenses 36,974
Deferred tax charge 33,600 33,600
Prepaid and refundable income taxes 58,346 203,405
Total current assets 1,399,524 1,368,970
Land, Property, and Equipment-net 2,654,290 2,673,779
OTHER ASSETS:
Cash - restricted, non-curent 120,000 120,000
Security deposits 1,195 1,195
Total other assets 121,195 121,195
TOTAL $ 4,175,009 $ 4,163,944
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The accompanying notes are an integral part of these financial statements.
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PART I - FINANCIAL INFORMATION POLYMER RESEARCH CORP. OF AMERICA
BALANCE SHEETS
MARCH 31, 2001 AND DECEMBER 31, 2000
March 31, December 31,
2001 2000
(Unaudited) (Note 1)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable-bank 50,000 50,613
Current portion of term loan $ 100,000 $ 100,000
Accounts payable 4,096 19,991
Accrued expenses and other
current liabilities 269,074 234,574
Deferred revenue 258,550 290,000
Total current liabilities 681,720 695,178
LONG-TERM LIABILITIES:
Term loan, less current maturities 316,667 341,667
Total long-term liabilities 316,667 341,667
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per
share, authorized 4,000,000 shares,
issued 1,925,784 shares 19,257 19,257
Capital in excess of par value 3,504,978 3,504,978
Accumulated deficit (329,852) (379,375)
Less: Treasury stock, at cost
22,140 respectively (17,761) (17,761)
Total Stockholders' Equity 3,176,622 3,127,099
TOTAL $ 4,175,009 $ 4,163,944
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The accompanying notes are an integral part of these financial statements.
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POLYMER RESEARCH CORP. OF AMERICA
STATEMENTS OF OPERATIONS FOR THE
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
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2000 1999
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Net Revenues Research $ 1,399,573 $ 1,291,765
Production 226,673 185,216
Total 1,626,246 1,476,981
Cost of Revenues
Research 298,443 254,243
Production 200,719 157,608
Total 499,162 411,851
Gross Profit on Revenues 1,127,084 1,065,130
Selling, General, and
Administrative Expenses 1,016,933 807,572
Income from operations 110,151 257,558
Other revenues (expenses):
Investment income 4,780 14,764
Interest expense (10,906) (37,118)
Total (6,126) (22,354)
Income before income taxes 104,025 235,204
Provision for income taxes (54,500) (100,000)
Net Income $ 49,525 $ 135,204
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Basic earnings per share $ .03 $ .07
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Weighted average
number of shares
outstanding during the period 1,925,784 1,825,784
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
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3
POLYMER RESEARCH CORP. OF AMERICA
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
OPERATIONS: 2001 2000
Net Income $ 49,525 $ 135,204
Charge not affecting funds -
Unrealized holding losses (gains)
Depreciation and amortization 24,999 24,999
Funds Provided by operations 74,524 160,203
Asset and liability management:
Accounts receivable 171,131 160,828
Inventories (1,942) (857)
Prepaid taxes 145,059
Other current assets (36,974) (13,431)
Accounts payable (15,895) (36,507)
Accrued expenses and other 34,500 (20,784)
Income taxes payable 100,219
Deferred revenue (31,450) (1,332)
Total other assets 363
Increase (Decrease) in
net operating assets 264,429 188,499
Total 338,953 348,702
FUNDS USED BY
FINANCING
Certificates of deposit 66,187
Investment securities 6,416
Proceeds of note payable 50,000
Payments on long term debt (25,615) (11,706)
Total (25,615) 110,897
INVESTMENT IN LAND, PROPERTY,
AND EQUIPMENT (5,510)
INCREASE (DECREASE) IN CASH $ 307,828 $ 459,599
========= =========
The accompanying notes are an integral part of these financial statements.
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POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - Financial statements
Management believes that the results herein reflect all adjustments which are in
the opinion of management necessary to fairly state the results and current
financial condition of the Company for the respective periods. These statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's report filed under cover of Form 10-KSB. The results
of operations for the three month period are not necessarily indicative of the
results for an entire year. The balance sheet at December 31, 2000 has been
taken from the audited financial statements as of that date.
NOTE 2 - Summary of Significant Accounting Policies
Business Activity
The Company is engaged in the research and development of the applications of
chemical grafting and sells products resulting from such research.
Credit Risk
Financial Instruments that potentially subject the company to credit risk
include investments in United States Treasury bills, notes and other
certificates of deposit, government agencies' securities and U.S. Government and
New York State mutual bond funds. Future changes in economic conditions may make
the investment less valuable.
In addition, financial instruments that potentially subject the Company to
credit risk also include accounts receivable. Accounts receivable resulting from
research or product sales are not collateralized.
The Company maintains deposits with financial institutions in excess of amounts
insured by the FDIC.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities at the date of the financial
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statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue from research contracts is recognized upon two criteria: first, client
approval of performance of a specific stage of the contract and, second, when
collection of the resulting revenue is assured. Revenue from production is
recognized when products are shipped for sale to customers.
Inventories
Inventories are valued at the lower of cost or market, with cost determined
using the first-in, first-out method and with market defined as the lower of
replacement cost or realizable value.
Property and Equipment
Property and equipment is stated at cost. The costs of additions and betterments
are capitalized and expenditures for repairs and maintenance are expensed in the
period incurred. When items of property and equipment are sold or retired, the
related costs and accumulated depreciation are removed from the accounts and any
gain or loss is included in income.
The Company capitalizes leased equipment where the terms of the lease result in
the transfer to the Company of substantially all of the benefits and risks of
ownership of the equipment.
Depreciation and amortization of property and equipment is provided utilizing
the straight-line method over the estimated useful lives of the respective
assets as follows:
Transportation equipment 3 to 5 years
Machinery and equipment 5 years
Furniture and fixtures 5 to 10 years
Building and improvements 40 years
Office equipment under capital
leases 5 years
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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
Earnings per share are computed based upon the weighted average number of common
shares outstanding during each year.
Profit Sharing Plan
The Company maintains a qualified non-contributory profit sharing plan. The plan
provides its eligible employees with a source of retirement income, as well as
provide assistance in other circumstances such as death or disability. Eligible
employees must meet two requirements to become participants; attainment of age
21 and completion of one year of service with the Company. Employer
contributions are determined, if any, at the Board of director's discretion. A
percentage of the benefits vest after three years of qualifying service.
NOTE 3 - Provision for Income Taxes (First three months)
2001 2000
Federal $ 32,500 $ 60,000
State and local 22,000 40,000
Total $ 54,500 $100,000
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NOTE 4 - Contingencies
At March 31, 2001 the Company is a defendant in various lawsuits which arose in
the ordinary course of business. At March 31, 2001, the Company has included a
reserve in current liabilities in an amount that management believes is
reasonable for legal expenses and potential unfavorable rulings in certain of
these cases. It is managements'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 position.
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NOTE 5 - Long Term Debt
On March 15, 2000, the Company entered into a borrowing arrangement with a bank
whereby the bank agreed to extend a $500,000 term loan facility to the Company.
The Company utilized the facility in full in connection with the balloon
mortgage payment on June 1, 2000. The five year term loan is repayable in
monthly principal installments of $8,333 plus interest at 8.5% per annum. The
loan requires the Company to comply with certain financial covenants and to
maintain on deposit with the lender no less than $150,000. Simultaneously, the
bank extended a $250,000 line of credit facility to the Company, $50,000 of
which was drawn upon and is outstanding at March 31, 2001. To secure the term
loan and line of credit, the Company granted the lender a security interest in
all of the Company's personal property.
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POLYMER RESEARCH CORP. OF AMERICA
ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
Cash and cash equivalents have increased collectively by $ 307,828 since
December 31, 2000. The increase resulted principally from the net income of the
first quarter, receipt of a $90,000 tax refund, and reduction of accounts
receivable.
The ratio of current assets to current liabilities increased to 2.13 to 1.0 at
March 31, 2001 as compared to 1.91 to 1.0 at December 31, 2000. The increase is
the result of net income for the quarter.
On March 20, 2000, the Company entered into a borrowing arrangement with a bank
whereby the bank agreed to extend a $500,000 term loan facility to the Company.
The Company utilized the facility in connection with the balloon mortgage
payment on June 1, 2000. The five year term loan is repayable in monthly
principal installments of $8,333 plus interest at 8.5% per annum. The loan
requires the Company to comply with certain financial covenants and to maintain
on deposit with the lender $150,000. Simultaneously, the bank extended a
$250,000 line of credit facility to the Company, $50,000 of which was drawn upon
and was outstanding at March 31, 2001.
Based on the above, management believes the Company's cash position at March 31,
2001 is sufficient to cover any unforeseen sales downturn in the short term.
Over both the long and short term, liquidity will be a direct result of sales
and related net earnings.
B. RESULTS OF OPERATIONS
Three months ended March 31, 2001 v. 2000
Net revenues for the first quarter of 2001 were $ 1,626,246, an increase of $
149,265 (10%) compared with the first quarter of 2000. Research sales increased
$ 107,809 (8.3%) in the first quarter of 2001 compared to 2000. The increase
resulted in part from the recognition of revenue from research contracts signed
in the fourth quarter of 2000 that were performed in the first quarter of 2001.
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Product sales increased $41,457 (22%) compared to the first quarter of 2000 due
to increased demand from research customers.
The cost of revenues in research remained similar (20% in the first quarter of
2000 compared to 21% in the same quarter of 2001) due to the a small increase in
sales revenue using the same staff with similar small increases in expenses.
Selling, general, and administrative expenses increased as a percentage of sales
from 55% in the first quarter of 2000 to 62% in the same quarter of 2001
principally as a result of increased western office salaries, sales salaries,
legal settlement expenses, travel expenses, and utilities. Net income decreased
from $ 135,204 (9% of sales) in 2000 to $ 49,525 (3% of sales) in 2001,
principally as the result of increased selling, general, and administrative
expenses described in the preceding paragraph.
Net income decreased from $135,204 (9% of sales) in 2000 to $49,525 (3% of
sales) in 2001, principally as the result of increased selling, general, and
administrative expenses described in the preceding paragraph.
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PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings:
The Company is party to various lawsuits arising in the ordinary course of
business. In the opinion of management, such lawsuits should not have a material
adverse effect on the Company's financial condition.
ITEM 2 - Changes in Securities: None
ITEM 3 - Defaults Upon Senior Securities: None
ITEM 4 - Submission of Matters to a Vote of Security Holders:
None
ITEM 5 - Other Information: None
ITEM 6 - Exhibits and Reports on Form 8-k:
(b) The Company filed a Report on Form 8-K on February 26, 2001 reporting
under Item 4, Changes in Registrant's Certifying Accountants.
The Company filed a Report on Form 8-K/A-1 dated April 2, 2001 reporting
under Item 4, Changes in Registrant's Certifying Accountants.
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FORM 10-QSB
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POLYMER RESEARCH CORP. OF AMERICA,
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(REGISTRANT)
Date: May 14, 2001 /s/Carl Horowitz
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Carl Horowitz, President and Chief
Accounting Officer
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