SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MAY 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-17741
EPOLIN, INC.
(Exact name of Small Business Issuer as Specified in its Charter)
New Jersey 22-2547226
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)
358-364 Adams Street
Newark, New Jersey 07105
(Address of Principal Executive Offices)
(973) 465-9495
(Issuer's Telephone Number, Including Area Code)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes No X
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date:
Common, no par value per share: 11,606,555
outstanding as of July 1, 1998
<PAGE>
PART I - FINANCIAL INFORMATION
EPOLIN, INC. AND SUBSIDIARIES
Index to Financial Information
Period Ended May 31, 1998
Item Page Herein
Item 1 - Financial Statements:
Introductory Comments 3
Consolidated Balance Sheets 4
Consolidated Statements of Income 6
Consolidated Statements of Cash Flows 7
Item 2 - Management's Discussion and
Analysis or Plan of Operation 8
<PAGE>
EPOLIN, INC. AND SUBSIDIARIES
MAY 31, 1998
The financial information herein is unaudited. However, in the opinion of
management, such information reflects all normal and recurring adjustments
necessary for a fair presentation of the financial results for the periods
being reported. Additionally, it should be noted that the accompanying
financial statements do not purport to be complete disclosures in
conformity with generally accepted accounting principles.
The results of operations for the three months ended May 31, 1998 are not
necessarily indicative of the results of operations for the full fiscal
year ending February 28, 1999.
These condensed statements should be read in conjunction with the Company's
audited financial statements for the fiscal year ended February 28, 1998.
<PAGE>
EPOLIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
May 31,
1998 1997
Current assets:
Cash and cash equivalents $417,887 228,010
Accounts receivables 199,697 267,227
Inventories 366,948 365,920
Related party receivables - 4,256
Prepaid expenses:
Income Taxes 32,799 10,145
Other 23,756 14,764
Employee Loans 596 -
Deferred taxes 95,240 100,555
Total current assets 1,136,923 990,877
Property, plant and equipment
- at cost:
Land 77,343 -
Building 352,338 -
Machinery and equipment 200,163 203,043
Furniture and fixtures 11,036 11,036
Leasehold improvements 432,037 429,037
Total 1,072,917 643,116
Less: Accumulated depreciation
and amortization 586,988 510,424
Net depreciated cost 485,929 132,692
Other assets:
Loan receivable - related party - 81,531
Deferred taxes 103,684 199,494
Security deposits 12,635 37,070
Cash value
- - life insurance policy 42,677 23,902
Total other assets 158,996 341,997
Total $1,781,848 1,465,566
<PAGE>
EPOLIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
May 31,
1998 1997
Current liabilities:
Accounts payable $ 12,186 9,057
Accrued expenses 35,181 31,886
Taxes payable - payroll and income 1,311 -
Total current liabilities 48,678 40,943
Other liabilities
- deferred compensation 93,800 23,053
Total liabilities 142,478 63,996
Stockholders' equity:
Preferred stock,
$15.513 par value: 940,000
shares authorized; none issued
Preferred stock, series A
convertible non-cumulative,
$2.50 par value;
redemption price and
liquidation preference:
60,000 shares authorized:
5,478 shares issued
and redeemed
Common stock, no par value;
20,000,000 shares authorized:
11,674,000 shares issued and
11,606,555 shares outstanding 2,216,983 2,206,983
Common stock unissued - 10,000
Paid-in capital 6,486 6,486
Accumulated deficit (574,558) (821,899)
Total 1,648,911 1,401,570
Less: treasury stock (9,541) -
Total stockholders' equity 1,639,370 1,401,570
Total $1,781,848 1,465,566
<PAGE>
EPOLIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED
May 31,
1998 1997
Sales $302,377 343,460
Cost of expenses:
Cost of sales 105,832 127,080
Selling, general and
administrative expenses 156,260 177,517
Total 262,092 304,597
Operating income 40,285 38,863
Other income - Interest 3,871 2,364
Income before taxes 44,156 41,227
Income tax expense 406 -
Net income $ 43,750 41,227
Per share data:
Net income per common share $ - -
Weighted average number of
shares of common outstanding $11,602,388 11,611,555
<PAGE>
EPOLIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
May 31,
1998 1997
Cash flows from
operating activities:
Net income $43,750 41,227
Adjustments to reconcile
net income to net
cash provided (used)
by operating activities:
Depreciation and amortization 17,585 14,829
Changes in assets and liabilities:
Accounts receivable 15,279 (40,703)
Inventories 15,328 (24,232)
Advances and loans 5,270 15,841
Accounts payable (28,199) (9,668)
Accrued Expenses (20,362) (1,328)
Taxes payable (352) (6,347)
Net cash provided (used)
by operating activities 48,299 (10,381)
Cash flows from
investing activities:
Related party loan - (10,027)
Purchase of treasury stock (9,541) -
Payments for equipment - (4,385)
Net cash used by
investing activities (9,541) (14,412)
Cash flows from
financing activities:
Post termination distribution
- Epolin Holding Corp. (10,000) -
Increase (decrease) in cash 28,758 (24,793)
Cash and cash equivalents:
Beginning 389,129 252,803
Ending $417,887 228,010
Supplemental Disclosure
of Cash Flow Information:
Income taxes paid $366 175
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion should be read in conjunction with the Financial
Statements included in this report and is qualified in its entirety by the
foregoing.
Introduction
Epolin, Inc. (the "Company") is a manufacturing and research and
development company which was incorporated in the State of New Jersey in
May 1984. The Company is principally engaged in the development,
production and sale of near infrared dyes to the optical industry for laser
protection and for welding applications and other dyes, specialty chemical
products that serve as intermediates and additives used in the adhesive,
plastic, aerospace, pharmaceutical, flavors and fragrance industries to a
group of customers primarily in the United States, Europe, Australia and
the Far East.
This discussion contains certain forward-looking statements and information
relating to the Company that are based on the beliefs and assumptions by
the Company's management as well as information currently available to the
management. When used herein, the words "anticipate", "believe",
"estimate", and "expect" and similar expressions, are intended to identify
forward-looking statements. Such statements reflect the current views of
the Company with respect to future events and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as
anticipated, believed, estimated or expected. The Company does not intend
to update these forward-looking statements.
Results of Operations
During the quarter ended May 31, 1998, the Company reported sales of
approximately $302,400 as compared to sales of approximately $343,500
during the quarter ended May 31, 1997, a decrease of approximately $41,100
or 11.9%. This decrease in sales was primarily attributable to a decrease
in sales of the Company's near infrared absorbing dyes and decreases in
sales of new dyes and additional applications.
Operating income for the quarter ended May 31, 1998 increased to
approximately $40,300 as compared to operating income of approximately
$38,900 for the quarter ended May 31, 1997, an increase of approximately
$1,400. This change resulted primarily from decreases in selling, general
and administrative expenses and cost of sales, offset by a decrease in
sales. The decrease in cost of sales was primarily attributable to a
reduction in sales for the three months ended May 31, 1998. The cost of
sales in the three months ended May 31, 1998 was approximately $262,100 as
compared to cost of sales during the three months ended May 31, 1997 of
approximately $304,600. During the three months ended May 31, 1998, the
Company's selling, general and administrative expenses were approximately
$156,300 as compared to selling, general and administrative expenses of
approximately $177,500 for the three months ended May 31, 1997.
During the three months ended May 31, 1998, the Company realized
approximately $3,900 in interest income as compared to approximately
$2,400 in interest income for the comparable period of 1997.
During the quarter ended May 31, 1998, the Company reported income before
taxes of approximately $44,200 as compared to income before taxes of
approximately $41,200 for the three months ended May 31, 1997. Net income
after taxes was approximately $43,800 for the three months ended May 31,
1998 as compared to an income after taxes of approximately $41,200 for the
three months ended May 31, 1997.
<PAGE>
Liquidity and Capital Resources
On May 31, 1998, the Company had working capital of approximately
$1,088,000, an equity to debt ratio of approximately 11.5 to 1, and
stockholders' equity of approximately $1,639,000. On May 31, 1998, the
Company had approximately $418,000 in cash and cash equivalents, total
assets of approximately $1,782,000 and total liabilities of approximately
$142,000. At May 31, 1997, the Company had total assets of approximately
$1,466,000. The increase in total assets at May 31, 1998 as compared to
May 31, 1997 is primarily due to the inclusion of property owned by Epolin
Holding Corp. which became a wholly-owned subsidiary of the Company in
January 1998. The Company believes that its available cash, cash flow from
operations and projected revenues will be sufficient to fund the Company's
operations for the next 12 months.
The Company does not anticipate making any significant additional capital
expenditures in the immediate future as it believes its present machinery
and equipment will be sufficient to meet its near term needs.
Inflation has not significantly impacted the Company's operations.
Other Information
In March 1998 (subsequent to the end of fiscal 1998), the Board of
Directors of the Company authorized a stock repurchase program of up to
$150,000 of the Company's outstanding shares of Common Stock. In
connection therewith, the Company announced that purchases may be made in
the open market or in privately negotiated transactions from time to time,
based on market prices and that the repurchase program may be suspended
without further notice. Management believes the Company's shares are
undervalued at current price levels and this program offers the Company a
chance not only to repurchase some of its stock at prices management
perceives to be attractive but it also enables the Company to enhance
shareholder value although no assurance can be given that any such
repurchases will have such effect. During the quarter ended May 31, 1998,
the Company has repurchased 25,000 shares of its Common Stock under this
program at $.38 per share.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
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.
(a) Exhibits.
There are no exhibits applicable to this Form 10-QSB.
(b) Reports on Form 8-K.
Listed below are reports on Form 8-K filed during
the fiscal quarter ended May 31, 1998.
None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned thereunto
duly authorized.
EPOLIN, INC.
(Registrant)
Dated: July 10, 1998 By: /s/Murray S. Cohen
Murray S. Cohen,
Chief Executive Officer
Dated: July 10, 1998 By: /s/Murray S. Cohen
Murray S. Cohen,
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
EPOLIN, INC.'S QUARTERLY REPORT FOR THE QUARTER ENDED MAY 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> MAY-31-1998
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<PP&E> 1,072,917
<DEPRECIATION> 586,988
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<CURRENT-LIABILITIES> 48,678
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<COMMON> 2,216,983
0
0
<OTHER-SE> 0
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<SALES> 302,377
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<CGS> 105,832
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<OTHER-EXPENSES> 156,260
<LOSS-PROVISION> 0
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</TABLE>
