SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
[_] TRANSITION REPORT PURSUANT TO 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 issued 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)
Issuers 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:
4,000,000 shares of $.01 par value Common Stock
Check whether the issuers: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 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
---- ----
Registrant's revenues for its most recent fiscal year - $5,448,272
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 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. Yes X No
---- ----
The aggregate market value of voting stock held by non-affiliates of the
Registrant at February 18, 1998 was approximately $2,415,285 based on the last
sale price of such stock.
As of February 18, 1998, the Registrant had 1,488,711 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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ITEM 1 - 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.
During 1997, research revenues and products sales accounted for 77 percent and
23 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 14 of Notes to the 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 several patented processes for chemical "grafting" technology.
Chemical "grafting" refers to processes by which surfaces are bonded together,
or a coating is affixed to a surface, or in depth, through various
polymerization reactions.
Chemical "grafting" is done by treating a surface with one or more solutions
containing monomers, polymers and/or other chemicals. By using heat, catalysts
and/or other appropriate techniques, small "whiskers" grow on the surface being
treated. These "whiskers" are generally polymers which include in their chemical
makeup molecules that remain part of the surface being treated. The "whiskers"
can themselves form a protective coating on a surface or join the "whiskers"
from another surface thus bonding the two surfaces together. Alternately, by
suitable methods, grafting can take place in depth throughout the body of the
substrate, i.e. the product to be grafted.
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<PAGE>
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. The Company continues to seek and
obtain such research and development contract work.
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
and are renewable. 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 $840,000 for 1997, representing approximately 20% of total annual
research revenues.
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
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.
The Company employs 7 in-house sales persons plus 2 persons in training to
market its research and development contracts, primarily through bulk mailings
to targeted potential customers.
To date, all of the Company's research and development services have been
related to contracts for customers.
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<PAGE>
PRODUCTION
The Company manufactures formulations resulting from research work 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.
The manufacture of textile inks is essentially a process of mechanically mixing
solvents, resins, emulsions, gums, oils and pigments to produce a colored ink
which can be printed onto cloth. The Company owns and operates the mixing
machinery for this manufacturing process and acquires the required ingredients
from a variety of sources. The Company is not dependent upon a particular
supplier for the ingredients. The Company's textile inks are solvent-free and
non-polluting.
During 1997, 1996 and 1995, no one customer of the Company accounted for more
than 5% of its sales of formulation products or textile inks. The Company has no
long-term contracts with its customers for textile inks and maintains
approximately a one-month supply of the ingredients for the textile inks in
inventory. The Company fills 95% of all textile ink orders within two business
days after their receipt.
The Company's sales of textile inks are dependent upon the decision of textile
companies as to whether they will dye or print their fabrics. Such a decision is
primarily based on fashion trends, with one-color fabrics requiring dyeing and
multi-colored fabrics requiring printing. However, these trends have not had a
material adverse effect on the Company's revenues because the Company has
maintained a reliable customer base in the United States. The sales of printing
inks has not been a significant source of revenues or profits for the Company.
The Company employs 1 in-house salesperson to sell its textile inks. The Company
markets its textile inks to the United States and foreign customers. Foreign
customers account for less than 5% of the Company's textile ink sales.
EMPLOYEES AND EMPLOYEE RELATIONS
As of December 31, 1997, the Company had 52 full-time employees. The President
and the 18 other scientists in the Company's Research Department are engaged in
research and development. The Production Department has 4 employees who are
engaged in the production of items arising from research and textile inks. There
are 10 employees in the sales and marketing departments. In addition, there are
15 clerical employees and 4 maintenance employees.
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.
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<PAGE>
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 do private grant research on
processes to produce materials with characteristics of the types desired by the
Company's 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 disposes of corrosive waste.
PATENTS
The Company's President and other employees of the Company have assigned a total
of 16 United States patents to the Company, 9 of which have expired. The
assigned patents, which cover the basic grafting process, were issued between
1968 and 1996. Each patent is effective for 17 years from the date of its
issuance.
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.
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<PAGE>
ITEM 2. 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. On June 4, 1990, the Company purchased the building and
adjoining property. The Company had previously leased this facility under the
terms of a long-term operating lease. The purchase price of the property was
$3,000,000 of which the Company paid $500,000 and granted a $2,500,000
seller-financed mortgage, which was renegotiated during 1996. Under the terms of
the renegotiated mortgage the Company made an $800,000 principal installment and
paid a $45,000 renegotiation fee. (See Note 6 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 believes that its facility is adequate for its current needs and
those of the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in certain lawsuits which 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, and they will not have a material
adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1997, no matters were submitted to a vote of the
Company's security holders.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The Company's Common Stock has traded 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. The prices indicated have not
been adjusted for stock dividends and stock splits referred to below.
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<PAGE>
Bid Prices
---------------------
Quarter LOW HIGH
------- --- ----
1997
October - December 2-1/8 3
July - September 2 2-5/16
April - June 2 2-1/2
January - March 2-1/2 3-7/8
1996
October - December 2 2-5/8
July - September 2-5/16 3-1/4
April - June 3-5/8 5-1/4
January - March 3-5/8 4-3/4
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 March 20, 1997 the Company declared a 5% stock dividend to shareholders at
April 1, 1997, paid April 8, 1997. The transaction was valued based upon the
closing market price of the Company's stock on the day prior to the declaration.
(See Note 9 of Notes to Financial Statements).
On March 1, 1996 the Company declared a 10% stock dividend to shareholders at
March 15, 1996, paid March 29, 1996. The transaction was valued based upon the
closing market price of the Company's stock on the day prior to declaration (See
Note 9 of Notes to Financial Statements).
On February 21, 1995 the Company declared a 10% stock dividend to shareholders
at March 6, 1995, paid March 20, 1995. The transaction was valued based upon the
closing market price of the Company's stock on the day prior to the declaration.
(See Note 9 of Notes to Financial Statements).
On June 6, 1995 the Company declared a 5 for 4 stock split effected in the form
of a 25% stock dividend, to its shareholders at June 19, 1995 and distributed
June 27, 1995. (See Note 10 of Notes to Financial Statements).
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 $25 (subject to adjustment), for each
outstanding share of the Company's common stock. The rights will become
excersizable only if an "acquiring party" (as defined) acquires or announces a
tender offer to acquire 15% or more of the Company's common stock. The rights
expire July 31, 2005 (See Note 11 of Notes to Financial Statements).
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<PAGE>
On March 2, 1998, the Company declared a 5% stock dividend to shareholders at
March 23, 1998, payable April 2, 1998 (see Note 17 of Notes to Financial
Statements).
As of February 18, 1998 there were 1,488,711 shares outstanding, which were held
by 1,012 shareholders, 276 shareholders of record and an additional 736
unregistered shareholders.
ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue Analysis
Year Ended December 31,
-----------------------
Percentage of
($) In Thousands Total Revenues
------------------------ -----------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ------ ------ ------
Research $4,214 $4,326 $4,608 77.3% 85.2% 89.0%
Production 1,234 752 571 22.7 14.8 11.0
------ ------ ------ ----- ----- -----
Total Revenues $5,448 $5,078 $5,179 100.0% 100.0% 100.0%
====== ====== ====== ===== ===== =====
1997 v. 1996
Total revenues increased $370,000 or 7% from $5,078,000 in 1996 to $5,448,000 in
1997. Research revenues decreased $112,000 or 3% while production revenue
increased $482,000 or 64% from 1996 to 1997.
The decrease in research was primarily attributable to continuing turnover of
personnel in the marketing department.
The increase in production sales was primarily the result of increased demand
resulting from research findings for customers in prior years and increased
demand from the industry for polymer coatings.
The rate of inflation has not had a material impact upon the results of
operations.
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<PAGE>
1996 v. 1995
Total revenues decreased $100,000 or 2% from $5,179,000 in 1995 to $5,079,000 in
1996. Research revenues decreased $281,000 or 6% while production revenue
increased $181,000 or 32.0% from 1995 to 1996.
The decrease in research revenue was primarily attributable to turnover of
personnel. During the latter part of 1995 and early 1996 several important sales
department people left the Company. Their replacements were unable to offset the
decrease in revenue generated by these former employees.
The increase in production sales was primarily the result of increased demand
resulting from research findings for customers in prior years and increased
demand from the building industry for polymer coatings.
The rate of inflation has not had a material impact upon the results of
operations.
Cost of Revenues Analysis
Year Ended December 31,
-----------------------
Cost as a
Percentage of
($) In Thousands Total Revenues
------------------------ -----------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ------ ------ ------
Research $1,002 $1,017 $1,311 18.4% 20.0% 25.3%
Production 1,018 623 505 18.7 12.3 12.8
------ ------ ------ ---- ---- ----
Total cost of
revenues $2,020 $1,640 $1,816 37.1% 32.3% 35.1%
====== ====== ====== ==== ==== ====
The cost of research revenues for 1995, set forth above, have been adjusted to
exclude sales salaries, which have been reclassified to selling, general and
administrative expenses.
1997 v.1996
The cost of revenues as a percentage of sales increased from 32.3% in 1996 to
37.1% in 1997. The increase in cost of revenues is primarily caused by an
increase in the percentage of product sales, which have a higher cost of sales
than research revenue. Production sales as a percentage of total sales increased
to 22.7% in 1997 compared to 14.8% in 1996.
1996 v. 1995
The cost of revenues as a percentage of sales decreased from 35.1% in 1995 to
32.3% in 1996. The primary cause is decreased labor costs.
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<PAGE>
Selling, General and Administrative Expenses Analysis
Year Ended December 31,
-----------------------
Expenses as a
Percentage of
($) In Thousands Total Revenues
------------------------ -----------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ------ ------ ------
Selling, General &
Administrative Expenses $2,902 $2,898 $2,491 53.2% 57.1% 48.1%
====== ====== ====== ==== ==== ====
Selling, general and administrative expenses for 1995, set forth above, have
been adjusted to include sales salaries, which were previously charged to costs
of research revenues.
1997 v. 1996
Selling, general and administrative expenses increased $4,000 during 1997, but
decreased as a percentage of sales, from 57.1% in 1996 to 53.2% in 1997. The
Company's 7% sales increase in 1997 was supported by slightly increased support
staff. In addition, legal proceeding expenses dropped from 1996 to 1997.
1996 v. 1995
Selling, general and administrative expenses, as a percentage of sales,
increased to 57.1% in 1996, as compared to 48.1% during 1995. The increase is
attributed to increased support salaries and related expenses, increased
insurance costs, and increased travel expenses. In addition, legal proceeding
expenses increased in 1996 as compared to1995.
CAPITAL RESOURCES AND LIQUIDITY
Cash has increased from $709,170 at December 31, 1996 to $1,367,008 at December
31, 1997. During 1997 many of the Company's Certificates of Deposits matured and
were transferred to interest bearing savings accounts to avoid locking into
longer term cash investments at low interest rates. (See the statement of cash
flows for a more detailed analysis of opening versus closing cash).
Cash is generated and used by the Company through its operations. Neither the
issuance of stock nor the acquisition of debt was in 1997, nor expected to be in
1998, significant sources of cash.
In an attempt to secure a better, yet safe, return on excess cash, management
has elected to invest certain cash amounts in marketable securities. These
securities include U.S. Government and New York State Mutual Bond Funds. The
Company closely monitors these investments which are subject to price
fluctuation (See Note 2 to Financial Statements).
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<PAGE>
There are no known demands for cash related to capital expenditures seen as
imminent in the upcoming three years based on stable sales. Capital expenditures
anticipated in the next year are anticipated to approximate those in the past
three years (see above).
The Company's cash position at December 31, 1997 is deemed sufficient to cover
any unforeseen sales downturn as it is equal to approximately 6 months of
selling, general and administrative expenses. Over both the long and short term,
liquidity will be the direct result of sales.
The ratio of current assets to current liabilities at December 31, 1997 was 2.95
to 1.0 as compared to 2.35 to 1.0 at December 31, 1996.
GENERAL DISCUSSION
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.
Cash flow from financing and investing activities is not expected to have an
impact on cash flow in the next 1 to 2 years. However, the Company is preparing
for the building mortgage balloon payment of $1,400,000 due on June 1, 2000 (see
Note 6 of Notes to the Financial Statements). The Company intends to provide for
this payment by accumulating cash prior to the payment due date.
No significant changes to operating expenses are anticipated within the next 1
to 3 years.
SEGMENT DISCUSSION
The Company is primarily in the business of research sales. The sale of textile
inks and chemical products is an accommodation to research customers and is not
seen as a segment that could stand on its own as an independent business.
Availability of production of research breakthroughs is an important marketing
tool of the Company to its research customers.
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<PAGE>
ANALYTIC REVIEW OF QUARTERLY RESULTS
Gross profit for the fourth quarter decreased substantially from the average of
the prior three quarters. Production sales, which yield a lower gross profit
than research, increased in the fourth quarter.
Selling, general and administrative expenses increased significantly in the
fourth quarter resulting from increased legal proceedings expenses and normal
year-end expenses including bonuses and holiday expenses as well as travel and
entertainment expenses in connection with increased year-end selling efforts.
3/31/97 6/30/97 9/30/97 12/31/97
------- ------- ------- --------
Total revenue $ 1,380,980 $ 1,450,000 $ 1,272,483 $ 1,344,809
Cost of revenue 492,783 492,366 405,998 629,176
Gross profit 888,197 957,634 866,485 715,633
SG&A expenses 660,357 746,822 657,340 837,955
Income (loss) from
operations 227,840 210,812 209,145 (122,322)
Other expenses (22,383) (22,556) (23,020) (21,861)
Pre-tax income (loss) 205,457 188,246 186,125 (144,183)
Income tax expense
(benefit) 98,501 89,499 86,000 (44,934)
Net income (loss) 106,956 98,747 100,125 (99,249)
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<PAGE>
POLYMER RESEARCH CORP.
OF AMERICA
FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
CONTENTS
Page
----
Independent Auditors' Report F-1
Financial Statements
Balance Sheets at December 31, 1997 and 1996 F-2 - F-3
Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995 F-4
Statement of Changes in Stockholders' Equity
for the Years Ended December 31, 1997, 1996 and 1995 F-5
Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 F-6 - F-7
Notes to Financial Statements F-8 - F-20
Financial Statement Schedules
For the Years Ended December 31, 1997, 1996 and 1995:
Report of Independent Certified Public
Accountants on Financial Statement Schedules F-21
VIII Valuation and Qualifying Accounts and Reserves F-22
X Supplementary Income Statement Information F-23
XI Property, Equipment and Accumulated Depreciation F-24
All other schedules have been omitted because the required information
is included in the financial statements or the notes thereto or
because they are not required.
<PAGE>
[LOGO]CK CASTELLANO, KORENBERG & CO.
- --------------------------------------------------------------------------------
CERTIFIED PUBLIC ACCOUNTANTS 1048 Old Country Road
Westbury, New York 11590
516-338-6600
FAX: 516-338-6632
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, 1997 and 1996, and the related statements of income,
stockholders' equity and cash flows for the years ended December 31, 1997, 1996
and 1995. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide 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, 1997 and 1996 and the results of its operations and its
cash flows for the years ended December 31, 1997, 1996 and 1995, in conformity
with generally accepted accounting principles.
/s/Castellano, Korenberg & Co. CPAs, P.C.
-----------------------------------------
CASTELLANO, KORENBERG & CO. CPAs, P.C.
Westbury, New York
February 18, 1998
F-1
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
1997 1996
---- ----
CURRENT ASSETS:
Cash and cash equivalents $ 1,367,008 $ 709,170
Certificates of deposit 155,308 554,338
Investment securities available
for sale 482,940 473,283
Accounts receivable, less allowance for
doubtful accounts of $-0- for 1997 and 1996 137,827 91,850
Inventories 99,654 85,822
Prepaid income taxes -0- 167,000
Prepaid expenses and other current assets 17,504 28,086
----------- -----------
Total Current Assets 2,260,241 2,109,549
----------- -----------
PROPERTY AND EQUIPMENT 2,863,416 2,939,514
----------- -----------
OTHER ASSETS:
Deferred financing costs, less accumulated
amortization of $3,093 for 1997 and
$2,728 for 1996 11,450 11,814
----------- -----------
$ 5,135,107 $ 5,060,877
=========== ===========
See independent auditors' report and notes to financial statements.
F-2
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
---- ----
CURRENT LIABILITIES:
Current maturities of long-term debt $ 31,244 $ 28,143
Accounts payable 75,548 56,907
Deferred revenue 252,450 393,300
Income taxes payable 56,100 -0-
Accrued expenses and other current
liabilities 349,802 417,714
----------- -----------
Total Current Liabilities 765,144 896,064
----------- -----------
LONG-TERM LIABILITY:
Long-term debt, less current maturities 1,451,770 1,483,080
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; 4,000,000
shares authorized; 1,580,548 and 1,489,657
shares issued at December 31, 1997 and
1996, respectively 15,805 14,896
Capital in excess of par value 2,850,332 2,632,037
Retained earnings 111,029 103,654
Unrealized holding losses (2,236) (12,117)
----------- -----------
2,974,930 2,738,470
Less: Treasury stock, at cost -
91,837 shares in 1997 and 1996 56,737 56,737
----------- -----------
Total Stockholders' Equity 2,918,193 2,681,733
----------- -----------
$ 5,135,107 $ 5,060,877
=========== ===========
See independent auditors' report and notes to financial statements.
F-3
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
NET REVENUES:
Research $ 4,214,293 $ 4,326,424 $ 4,607,889
Production 1,233,979 752,145 571,256
----------- ----------- -----------
5,448,272 5,078,569 5,179,145
----------- ----------- -----------
COST OF REVENUES:
Research 1,001,818 1,017,460 1,310,643
Production 1,018,505 623,320 504,621
----------- ----------- -----------
2,020,323 1,640,780 1,815,264
----------- ----------- -----------
GROSS PROFIT 3,427,949 3,437,789 3,363,881
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,902,474 2,897,775 2,491,150
----------- ----------- -----------
INCOME FROM OPERATIONS 525,475 540,014 872,731
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 65,886 58,965 55,358
Interest expense (157,320) (227,683) (227,195)
Net rental income (expense) -0- 2,850 5,000
Realized gain (loss) on
investment in marketable
securities 1,604 (1,621) 9,890
Mortgage modification expense -0- (45,000) -0-
----------- ----------- -----------
Total Other Expense (89,830) (212,489) (156,947)
----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME
TAXES 435,645 327,525 715,784
PROVISION FOR INCOME TAXES 229,066 157,697 358,841
----------- ----------- -----------
NET INCOME $ 206,579 $ 169,828 $ 356,943
=========== =========== ===========
EARNINGS PER SHARE $ .14 $ .12* $ .24**
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 1,487,371 1,472,303* 1,471,634**
=========== =========== ===========
</TABLE>
* Restated for 1997 5% stock dividend
** Restated for 1997 5% stock dividend and 1996 10% stock dividend
See independent auditors' report and notes to financial statements.
F-4
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Common Stock, $.01 Par
Value Authorized;
4,000,000 Shares Capital Unrealized Treasury Stock - At Cost
----------------------- in Excess Retained Holding ------------------------
Shares Amount of Par Earnings Losses Shares Amount
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 984,897 $ 9,849 $1,797,214 $ 416,753 $ (27,198) 60,719 $ (56,737)
Stock Dividend 98,490 985 294,485 (295,470) -0- 6,072 -0-
Stock Split 270,847 2,708 -0- (2,708) -0- 16,697 -0-
Unrealized Gain on Investment
Securities Available for Sale -0- -0- -0- -0- 25,228 -0- -0-
Net Income -0- -0- -0- 356,943 -0- -0- -0-
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1995 1,354,234 13,542 2,091,699 475,518 (1,970) 83,488 (56,737)
Stock Dividend 135,423 1,354 540,338 (541,692) -0- 8,349 -0-
Unrealized Loss on Investment
Securities Available for Sale -0- -0- -0- -0- (10,147) -0- -0-
Net Income -0- -0- -0- 169,828 -0- -0- -0-
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1996 1,489,657 14,896 2,632,037 103,654 (12,117) 91,837 (56,737)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Stock Bonus Issued 20,000 200 19,800 -0- -0- -0- -0-
Stock Dividend 70,891 709 198,495 (199,204) -0- -0- -0-
Unrealized Gain on Investment
Securities Available for Sale -0- -0- -0- -0- 9,881 -0- -0-
Net Income -0- -0- -0- 206,579 -0- -0- -0-
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1997 1,580,548 $ 15,805 $2,850,332 $ 111,029 $ (2,236) 91,837 $ (56,737)
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See independent auditors' report and notes to financial statements.
F-5
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 5,255,070 $ 5,266,656 $ 5,260,240
Interest received 65,886 58,965 55,358
Rent received -0- 2,850 5,000
----------- ----------- -----------
Cash Provided By Operating Activities 5,320,956 5,328,471 5,320,598
----------- ----------- -----------
Cash paid for merchandise (1,961,416) (1,572,608) (1,752,829)
Cash paid to suppliers and employees (2,899,200) (2,732,151) (2,384,450)
Interest paid (157,320) (227,683) (227,195)
Income taxes paid (5,966) (358,097) (348,553)
Mortgage modification fee paid -0- (45,000) -0-
----------- ----------- -----------
Cash Disbursed For Operating Activities (5,023,902) (4,935,539) (4,713,027)
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 297,054 392,932 607,571
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of certificates of deposit 399,030 142,611 136,086
Proceeds from sale of marketable securities 551,452 378,619 807,290
----------- ----------- -----------
Cash Provided By Investing Activities 950,482 521,230 943,376
----------- ----------- -----------
Purchase of certificates of deposits -0- (554,338) (142,611)
Purchase of marketable securities (549,624) (275,189) (773,517)
Purchase of property and equipment (11,865) (18,221) (41,445)
----------- ----------- -----------
Cash Disbursed For Investing Activities (561,489) (847,748) (957,573)
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 388,993 (326,518) (14,197)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings (28,209) (831,278) (32,460)
----------- ----------- -----------
NET CASH USED IN FINANCING
ACTIVITIES (28,209) (831,278) (32,460)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 657,838 (764,864) 560,914
CASH, BEGINNING OF YEAR 709,170 1,474,034 913,120
----------- ----------- -----------
CASH, END OF YEAR $ 1,367,008 $ 709,170 $ 1,474,034
=========== =========== ===========
</TABLE>
See independent auditors' report and notes to financial statements.
F-6
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
NET INCOME $ 206,579 $ 169,828 $ 356,943
----------- ----------- -----------
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Bonus paid through issuance of stock 20,000 -0- -0-
Depreciation and amortization 88,327 93,658 103,824
Bad debt expense 6,375 2,342 6,255
Realized (gain) loss on investment
in marketable securities (1,604) 1,621 (9,890)
Changes in assets (increase) decrease:
Accounts receivable (52,352) (34,376) (6,026)
Inventories (13,832) (13,109) (1,043)
Prepaid income taxes 167,000 (167,000) -0-
Prepaid expenses and other current assets 10,582 (15,491) 41,699
Other assets -0- -0- 8,199
Changes in liabilities increase (decrease):
Accounts payable 18,641 43,765 (8,111)
Deferred revenue (140,850) 222,463 85,837
Income taxes payable 56,100 (33,400) 10,275
Accrued expenses and other current liabilities (67,912) 122,631 19,609
----------- ----------- -----------
Total Adjustments 90,475 223,104 250,628
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 297,054 $ 392,932 $ 607,571
=========== =========== ===========
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock dividend paid $ 199,204 $ 541,692 $ 295,470
=========== =========== ===========
Stock split paid $ -0- $ -0- $ 2,708
=========== =========== ===========
Unrealized gain (loss) on investment securities $ 9,881 $ (10,147) $ 25,228
=========== =========== ===========
Stock bonus paid $ 20,000 $ -0- $ -0-
=========== =========== ===========
</TABLE>
See independent auditors' report and notes to financial statements.
F-7
<PAGE>
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 for research and production is derived from
various manufacturers throughout the United States and
worldwide.
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
investments less valuable.
In addition, financial instruments that potentially subject the
Company to credit risk also include accounts receivable.
Accounts receivable resulting from 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 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 specific stage of the contract and second,
collection of the resulting revenue is assured. Revenue from
production is recognized when the product is shipped for sale to
customers.
F-8
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies (cont'd)
Cash Equivalents
The Company considers securities with maturities of three months
or less, when purchased, to be cash equivalents.
Investment Securities
The Company determines the appropriate classification of
securities at the time of purchase. If the Company has the
intent and the ability at the time of purchase to hold
securities until maturity or on a long-term basis, they are
classified as investment securities and carried at amortized
historical cost. Securities to be held for indefinite periods of
time and not intended to be held to maturity or on a long-term
basis are classified as available for sale and carried at fair
value. Securities held for indefinite periods of time include
securities that management intends to use as part of its asset
and liability management strategy and that may be sold in
response to changes in interest rates, resultant prepayment risk
and other factors related to interest rate and resultant
prepayment risk changes.
Realized gains and losses on dispositions are based on the net
proceeds and the adjusted book value of the securities sold,
using the specific identification method. Unrealized gains and
losses on investment securities available for sale are based on
the difference between book value and fair value of each
security. These gains and losses are credited or charged to
stockholders' equity, whereas realized gains and losses flow
through the Company's yearly operations.
Inventories
Inventories, which consists of raw materials and finished goods
is 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.
F-9
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies (cont'd)
Property and Equipment (cont'd).
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 both the straight-line and accelerated
methods over the estimated useful lives of the respective assets
as follows:
Building and building improvements 40 years
Land improvements 20 years
Transportation equipment 3 to 5 years
Machinery and equipment 5 years
Furniture and fixtures 5 to 10 years
Office equipment 5 years
Deferred Financing Costs
Costs incurred in obtaining the mortgage used to finance the
purchase of its building have been capitalized and are being
amortized over the term of the related obligation utilizing the
straight-line method.
Deferred Revenue
The Company records as deferred revenue payments received from
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-10
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies (cont'd).
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
Earnings per share is computed based upon the weighted average
number of common shares outstanding during each year.
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.
Note 2 - Investment Securities
At December 31, 1997 and 1996, the investment securities
portfolio is comprised of securities classified as available for
sale, in conjunction with FASB 115, resulting in investment
securities available for sale being carried at market value.
The amortized cost and fair values of investment securities
available for sale at December 31, 1997 are:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 90,181 $ 2,053 $ -0- $ 92,234
Obligations of other U.S.
government agencies 254,177 12,601 (20,948) 245,830
Other securities 149,999 -0- (5,123) 144,876
--------- ---------- ---------- ---------
$ 494,357 $ 14,654 $ (26,071) $ 482,940
========= ========== ========== =========
</TABLE>
F-11
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 2 - Investment Securities (cont'd).
The amortized cost and fair values of investment securities
available for sale at December 31, 1996 are:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 148,367 $ -0- $ (2,332) $ 146,035
Obligations of other U.S.
government agencies 194,572 -0- (9,407) 185,165
Other securities 149,999 -0- (7,916) 142,083
--------- ---------- ---------- ---------
$ 492,938 $ -0- $ (19,655) $ 473,283
========= ========== ========== =========
</TABLE>
The amortized cost and fair values of investment securities
available for sale December 31, 1997 by expected maturity are
shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities Available
For Sale
--------------------------------------
Amortized Fair
Cost Value
--------- --------
<S> <C> <C>
Due in one year or less $-0- $-0-
Due after one year but less
than five years 43,037 43,142
Due after five years but
less than ten years 47,144 49,092
Due after ten years -0- -0-
90,181 92,234
Mortgage-backed securities 254,177 245,830
Other securities 149,999 144,876
-------- --------
$494,357 $482,940
======== ========
</TABLE>
Proceeds from sales and maturities of investment securities
available for sale during 1997 and 1996 were $551,452 and
$378,619, respectively. Included in shareholders' equity at
December 31, 1997 and 1996 is $2,236 and $12,117 respectively,
of net unrealized losses on investment securities available for
sale.
F-12
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 3 - Inventories
Inventories at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Raw materials $ 85,556 $ 73,515
Finished goods 14,098 12,307
-------- --------
$ 99,654 $ 85,822
======== ========
</TABLE>
Note 4 - Property and Equipment
Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land $ 450,000 $ 450,000
Land improvements 80,211 80,211
Building 2,550,000 2,550,000
Building improvements 289,505 289,505
Transportation equipment 12,967 12,967
Machinery and equipment 206,917 200,259
Furniture and fixtures 99,018 98,213
Office equipment 65,066 60,664
-------- --------
3,753,684 3,741,819
Less: Accumulated depreciation
and amortization 890,268 802,305
---------- ----------
$2,863,416 $2,939,514
========== ==========
</TABLE>
Depreciation and amortization expense related to property and
equipment amounted to $87,963, $93,295 and $103,460 for the
years ended December 31, 1997, 1996 and 1995 respectively.
Note 5 - Deferred Revenue
At December 31, 1997 and 1996 the Company had received research
contract payments not yet earned aggregating $252,450 and
$393,300, respectively.
F-13
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 6 - Mortgage Payable
On August 20, 1996 the Company renegotiated the existing
mortgage on its building. The terms of the agreement required
the Company to make an $800,000 principal installment and pay a
re-negotiation fee of $45,000. The remaining balance of the
mortgage is being paid pursuant to a 25-year amortization in
monthly installments of $15,457 including principal and interest
at the rate of 10.50% per annum. The entire unpaid principal
balance at the end of the mortgage term, anticipated to be
$1,398,330, is due in a balloon payment on June 1, 2000.
The mortgage is secured by a lien on the building. The principal
balances payable on the mortgage amounted to $1,483,014 and
$1,511,223 of which $31,244 and $28,143 represent current
maturities of the mortgage at December 31, 1997 and 1996
respectively.
Aggregate maturities of the mortgage note payable are as
follows:
Years Ending December 31:
1998 $ 31,244
1999 34,688
2000 1,417,082
-----------
$ 1,483,014
===========
Note 7 - Contingencies
At December 31, 1997, the Company is a defendant in various
lawsuits which arose in the ordinary course of business. At
December 31, 1997, the Company has provided a reserve of
$100,000, included in current liabilities, as a provision for
legal expenses and potential unfavorable rulings in certain 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 position.
F-14
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 8 - Commitments
On July 26, 1994 the Company entered into retirement agreements
with 2 key executives. The agreements set a compensation rate of
60% of the average 5 preceding years' annual compensation,
payable for the remainder of the executive's life. The Company
is also responsible to maintain the executives medical
insurance.
On March 1, 1993 the Company extended its employment contract
with its President which expires on May 16, 1998. The contract
provides for a current minimum annual salary of $170,000 for
1997 and annual increases of $10,000 throughout its duration.
In addition, the Company leases vehicles under various
noncancellable operating leases requiring future minimum rentals
as follows:
Years Ending December 31:
1998 $ 29,748
1999 21,921
2000 6,205
--------
$ 57,874
========
Vehicle lease expense charged to operations for the years ended
December 31, 1997 and 1996 amounted to $11,191 and $26,903,
respectively.
Note 9 - Stock Dividends
On March 20, 1997 the Company declared a 5% stock dividend to
stockholders of record at April 1, 1997, paid April 8, 1997. The
transaction was valued based upon the closing market price of
the Company's stock on April 7, 1997 which was $2.81 per share.
Retained earnings was charged for $199,204 as a result of the
issuance of 70,891 shares.
On March 1, 1996 the Company declared a 10% stock dividend to
stockholders of record at March 15, 1996, paid March 29, 1996.
The transaction was valued based upon the closing market price
of the Company's stock on March 15, 1996 which was $4.00 per
share. Retained earnings was charged for $541,692 as a result of
the issuance of 135,423 shares.
F-15
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 9 - Stock Dividends (cont'd).
On February 21, 1995 the Company declared a 10% stock dividend
to stockholders of record at March 6, 1995, paid March 20, 1995.
The transaction was valued based upon the closing market price
of the Company's stock on March 19, 1995, which was $3.00 per
share. Retained earnings was charged for $295,470 as a result of
the issuance of 98,490 shares.
Per share data were retroactively restated for the effects of
the 1997, 1996 and 1995 stock dividends.
Note 10- Stock Split
On June 6, 1995 the Company declared a 5 for 4 stock split
effected in the form of a 25% stock dividend, to stockholders of
record at June 19, 1995, distributed June 27, 1995. As a result
of this transaction, an additional 270,847 shares were issued.
The Company did not distribute fractional shares from the stock
split. The Company's par value of $.01 per share remained
unchanged. Per share data was retroactively restated for the
effects of the stock split.
Note 11- 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.
F-16
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 12 - Stock Bonus
On April 1, 1997, prior to the 1997 5% stock dividend record
date, the Company paid an Executive Vice President a bonus by
issuing to him 20,000 restricted shares of the Company's 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 Company valued the shares at $20,000.
Note 13 - Provision For Income Taxes
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Federal $ 135,754 $ 92,054 $ 207,140
State and local 93,312 65,643 151,701
--------- --------- ---------
Provision for income taxes $ 229,066 $ 157,697 $ 358,841
========= ========= =========
</TABLE>
The reconciliation between the maximum effective income tax
rates with federal statutory tax rates for the year ended
December 31, 1997 and the rates reflected in the accompanying
financial statements is as follows:
Income taxes at U.S. statutory rates $ 148,119
(Decrease) increase in federal income
tax expense resulting from:
Federal tax arising from non-deductible
financial statement expenses 15,727
Benefit from utilization of lower federal
tax brackets (982)
Benefit from deduction for state
and local taxes (27,110)
State and local taxes 93,312
---------
Provision for Income Taxes $ 229,066
=========
F-17
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 14 - 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.
Production - Manufacture and sale of products arising from
research activities and the sale of textile
printing inks and accessories.
Information on industry segments for the years ended December
31, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
NET REVENUES:
Research $4,214,293 $4,326,424 $4,607,889
Production 1,233,979 752,145 571,256
---------- ---------- ----------
Total Net Revenues $5,448,272 $5,078,569 $5,179,145
========== ========== ==========
GROSS PROFIT:
Research $3,212,475 $3,308,964 $3,297,246
Production 215,474 128,825 66,635
---------- ---------- ----------
Total Gross Profit 3,427,949 3,437,789 3,363,881
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,756,224 2,680,505 2,450,509
---------- ---------- ----------
INCOME FROM OPERATIONS $ 671,725 $ 757,284 $ 913,372
========== ========== ==========
CAPITAL EXPENDITURES:
Research $ -0- $ 3,603 $ 12,189
Production -0- 2,881 9,747
Corporate 11,864 5,766 19,509
---------- ---------- ----------
Total $ 11,864 $ 12,250 $ 41,445
========== ========== ==========
DEPRECIATION AND AMORTIZATION:
Research $ 36,505 $ 27,545 $ 30,309
Production 17,593 22,028 24,239
Corporate 33,865 44,085 49,276
---------- ---------- ----------
Total $ 87,963 $ 93,658 $ 103,824
========== ========== ==========
</TABLE>
F-18
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 14 - Industry Segments (cont'd).
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS:
Research $1,262,411 $ 886,238 $ 885,752
Production 718,512 831,529 818,175
Corporate 3,154,184 3,343,110 3,673,088
---------- ---------- ----------
Total $5,135,107 $5,060,877 $5,377,015
========== ========== ==========
</TABLE>
Net income from operations represents net sales less operating
expenses for each segment and corporate expenses which are not
directly attributable to any segment. A ratable portion of
corporate expenses have been charged to rental operations.
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 15 - Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Accrued profit sharing $100,000 $100,000
Accrued provision for legal
proceedings 100,000 150,000
Accrued vacation 26,042 25,584
Accrued professional fees 30,000 30,000
Accrued officers' bonuses 37,899 -0-
Other items (none in excess
of 5% of total current
liabilities) 55,861 112,130
-------- --------
$349,802 $417,714
======== ========
</TABLE>
Note 16 - Profit Sharing Plan
Profit sharing expense under the Company's noncontributory
profit sharing plan charged to operations amounted to $100,000
for the years ended December 31, 1997, 1996 and 1995.
F-19
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 17 - Subsequent Event
On March 2, 1998, the Company declared a 5% stock dividend to
shareholders at March 23, 1998, payable April 2, 1998.
F-20
<PAGE>
[LOGO]CK CASTELLANO, KORENBERG & CO.
- --------------------------------------------------------------------------------
CERTIFIED PUBLIC ACCOUNTANTS 1048 Old Country Road
Westbury, New York 11590
516-338-6600
FAX: 516-338-6632
To The Stockholders
Polymer Research Corp. of America
Brooklyn, New York
Our report on our audits of the basic financial statements of Polymer Research
Corp. of America for 1997, 1996 and 1995, appears on page F-1. Those audits were
made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The accompanying supplementary information is presented for
the purpose of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/Castellano, Korenberg & Co., CPAs, P.C.
------------------------------------------
CASTELLANO, KORENBERG & CO., CPAs, P.C.
Westbury, New York
February 18, 1998
F-21
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- ---------- --------------------------- ---------- ----------
Additions
---------------------------
Balance at Charged to Charged
Beginning Costs and to Other Balance at
Of Year Expenses Accounts Deductions End of Year
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
- --------------------------------
Year ended December 31, 1997 $ -0- $ 6,375 $ -0- $ 6,375 $ -0-
---------- ---------- ---------- ---------- ----------
Year ended December 31, 1996 $ 4,000 $ 2,342 $ -0- $ 6,342 $ -0-
---------- ---------- ---------- ---------- ----------
Year ended December 31, 1995 $ -0- $ 6,375 $ -0- $ 2,255 $ 4,000
---------- ---------- ---------- ---------- ----------
Reserve for Sales Credits:
- --------------------------
Year ended December 31, 1997 $ -0- $ -0- $ -0- $ -0- $ -0-
---------- ---------- ---------- ---------- ----------
Year ended December 31, 1996 $ -0- $ -0- $ -0- $ -0- $ -0-
---------- ---------- ---------- ---------- ----------
Year ended December 31, 1995 $ -0- $ -0- $ -0- $ -0- $ -0-
---------- ---------- ---------- ---------- ----------
</TABLE>
F-22
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
SCHEDULE X - SUPPLEMENTARY INCOME
STATEMENT INFORMATION
Charged To Costs and Expenses
-----------------------------
December 31,
------------
1997 1996 1995
--------- --------- --------
1. MAINTENANCE AND REPAIR $ * $ 56,208 $ *
--------- --------- --------
2. DEPRECIATION $ 87,963 $ 93,295 $103,460
--------- --------- --------
3. TAXES, OTHER THAN PAYROLL
AND INCOME TAXES * * *
4. ROYALTIES * * *
5. ADVERTISING COSTS * * *
Note: * Less than 1% of revenue.
F-23
<PAGE>
POLYMER RESEARCH CORP. OF AMERICA
SCHEDULE XI - PROPERTY, EQUIPMENT AND ACCUMULATED DEPRECIATION
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Initial Cost to Company Gross Amount At Which
----------------------- Carried At Close of Period
------------------------------- Life On Which
Depreciation
In Latest
Land Land Income
Date Building and Building and Accumulated Date Statement
Description Encumbrances Improvements Equipment Improvements Equipment Total Depreciation Acquired is Computed
- ----------- ------------ ------------ --------- ------------ --------- ---------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Land, Building
and Improvements $1,483,014 $3,369,716 $ -0- $3,369,716 $ -0- $3,369,716 $ 534,851 June 4, 1990 20-40Years
Equipment -0- -0- 383,968 -0- 383,968 383,968 355,416 Various 3-10 Years
---------- ---------- ---------- ---------- ---------- ---------- ------------
$1,483,014 $3,369,716 $ 383,968 $3,369,716 $ 383,968 $3,753,684 $ 890,267
========== ========== ========== ========== ========== ========== ============
</TABLE>
F-24
<PAGE>
ITEM 9. DISAGREEMENTS ON FINANCIAL AND ACCOUNTING DISCLOSURES
None
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company as of December 31, 1997 are
as follows:
NAME AGE POSITION
Carl Horowitz 74 President and Director
Irene Horowitz 74 Senior Vice President and Director
John M. Ryan 42 Director, Executive Vice
President, Corporate Research
Alice J. Horowitz 38 Director
Boris Jody 78 Director
Anna Dichter 84 Secretary, Treasurer
George V. Sawey 69 Vice President, Chemicals
Terry J. Wolfgang 36 Director
Dr. Mohan Sanduja, 62 Vice President, R & D
Director
Clare Chamow 63 Vice President, Office Management
Betty Friedman 66 Vice President, Personnel
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.
-13-
<PAGE>
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. 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.
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.
George V. Sawey has been employed full time by the Company since 1972 and is
Vice President in charge of chemical products. He is responsible for the
manufacture of textile inks and chemical products resulting from research.
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 and law firms with whom she
has been associated occasionally have 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.
Betty Friedman joined the Company in 1976. She became a Vice President in March
of 1996 and is in charge of personnel and purchasing for production.
-14-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid during the years ended
December 31, 1997, 1996 and 1995 to the chief executive officer and those three
executive officers of the Company who earned in excess of $100,000 for the year
ended December 31, 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
NAME OTHER RESTRICTED
AND ANNUAL STOCK LTIP ALL OTHER
PRINCIPAL COMPEN- AWARDS OPTIONAL PAYOUTS COMPEN-
POSITION YEAR SALARY ($) BONUS($) SATION($) ($) SAR'S(#) ($) SATION($)
(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CARL HOROWITZ 1997 $160,000 $25,000 $13,236 $-0- $-0- $-0- $12,985
CEO, PRESIDENT 1996 150,000 25,000 10,836 -0- -0- -0- 7,460
1995 135,915 25,000 27,616 -0- -0- -0- 8,084
IRENE HOROWITZ 1997 158,349 10,000 -0- -0- -0- -0- 12,985
SENIOR VICE 1996 153,923 10,000 -0- -0- -0- -0- 7,650
PRESIDENT 1995 152,525 10,000 -0- -0- -0- -0- 7,940
JOHN M. RYAN 1997 248,014 -0- -0- 20,000 -0- -0- 3,359
EXECUTIVE VICE 1996 241,167 20,000 -0- -0- -0- -0- 3,524
PRESIDENT 1995 218,227 7,738 -0- -0- -0- -0- 3,374
MOHAN SANDUJA 1997 117,780 1,624 -0- -0- -0- -0- 9,905
VICE PRESIDENT 1996 114,080 1,500 -0- -0- -0- -0- 10,592
RESEARCH AND 1995 102,930 2,000 -0- -0- -0- -0- 9,493
DEVELOPMENT
</TABLE>
(1) Represents premiums on officer's life insurance policy in which Mr.
Horowitz has the right to designate the beneficiary.
During the years ended 1997, 1996 and 1995, the financial statements reflected a
charge for profit sharing contributions of $100,000.
-15-
<PAGE>
STOCK OPTIONS
No executive officer owns any stock options.
EMPLOYMENT AGREEMENTS
On March 1, 1993, the Company and Carl Horowitz agreed to extend Mr. Horowitz's
employment agreement through May 16, 1998. Mr. Horowitz's maximum base salary
under the new agreement is $160,000 for 1997 with annual increases of $10,000
thereafter.
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 5 preceding year's annual compensation, payable for
the remainder of the individuals' life. In addition the Company is to maintain
the individuals' medical benefits.
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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information, as of February 18, 1998,
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 361,206 24.2%
$.01 par value 2719 Whitman Drive
Brooklyn, NY 11234
-16-
<PAGE>
AMOUNT
NAME AND ADDRESS OF BENEFICIALLY PERCENTAGE
TITLE OF CLASS BENEFICIAL OWNER OWNED OF CLASS
- -------------- ---------------- ------------ ----------
Irene Horowitz 32,507 2.2%
2719 Whitman Drive
Brooklyn, NY 11234
John M. Ryan 36,637 1.1%
3035 Lonni Lane
Merrick, N.Y. 11566
Alice J. Horowitz 46,585 3.1%
3046 West Tonopah Drive
Phoenix, Arizona 85027
Boris Jody -0- 0.0%
4301 N. Ocean Blvd.
Boca Raton, Fl.
Anna Dichter 770 0.0%
1757 E. 54th Street
Brooklyn, N.Y.
George Sawey 74 0.0%
59 Squaw Brook Road
N. Haldon, N.J.
Terry J. Wolfgang 13,970 0.9%
440 West End Avenue
New York, N.Y. 10750
Dr. Mohan Sanduja -0- 0.0%
144-90 91st Avenue
Flushing, N.Y.
Clare Chamow -0- 0.0%
5613 Fillmore Avenue
Brooklyn, N.Y. 11234
Betty Friedman -0- 0.0%
7219 Avenue N
Brooklyn, N.Y. 11234
All executive officers and
Directors as a group (11
in number) 471,749 31.7%
-17-
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NONE
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS
ON FORM 8-K
1. Financial Statements. See Item 8 above for a list of financial
statements included as part of this Annual
Report on Form 10-K.
3. Exhibits
(3) Registrant's Certificate of Incorporation, as
amended, and By-Laws, 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 Security and Exchange Commission
in March 1991 with Form 10K)
(10) Material Contracts
(.1) Employment Contract of Carl Horowitz, the Company's
President, dated March 1, 1993 (incorporated by
reference as previously filed with United States
Security and Exchange Commission in March, 1994
Form 10K).
(.2) Mortgage agreement between the Company and Tama
Realty Co., dated June 4, 1990 (incorporated by
reference as previously filed with the United
States Security and Exchange Commission in March
1991 with Form 10K).
(.2A) Mortgage modification agreement between the Company
and Tama Realty Co., dated August 26, 1996.
(Incorporated by reference as previously filed with
the United States Security and Exchange Commission
in March, 1997 with Form 10k).
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
/s/CARL HOROWITZ
----------------------------------
CARL HOROWITZ, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, 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 March 30, 1998
- -------------------------- Director ----------------
Carl Horowitz Date
/s/IRENE HOROWITZ March 30, 1998
- -------------------------- Director ----------------
Irene Horowitz Date
/s/JOHN M. RYAN March 30, 1998
- -------------------------- Director ----------------
John M. Ryan Date
/s/ALICE J. HOROWITZ March 30, 1998
- -------------------------- Director ----------------
Alice J. Horowitz Date
/s/BORIS JODY March 30, 1998
- -------------------------- Director ----------------
Boris Jody Date
/s/DR. MOHAN SANDUJA, PhD March 30, 1998
- -------------------------- Director ----------------
Dr. Mohan Sanduja, PhD Date
/s/TERRY WOLFGANG March 30, 1998
- -------------------------- Director ----------------
Terry Wolfgang Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
DECEMBER 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED AS ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,522,316
<SECURITIES> 482,942
<RECEIVABLES> 137,827
<ALLOWANCES> 0
<INVENTORY> 99,654
<CURRENT-ASSETS> 2,260,241
<PP&E> 2,863,416
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,135,107
<CURRENT-LIABILITIES> 765,144
<BONDS> 1,451,770
0
0
<COMMON> 15,805
<OTHER-SE> 2,959,125
<TOTAL-LIABILITY-AND-EQUITY> 5,135,101
<SALES> 1,233,979
<TOTAL-REVENUES> 5,448,272
<CGS> 1,018,505
<TOTAL-COSTS> 2,020,323
<OTHER-EXPENSES> 2,902,474
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 185,529
<INCOME-PRETAX> 435,645
<INCOME-TAX> 229,066
<INCOME-CONTINUING> 206,579
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 206,579
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
