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 AUGUST 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 X No
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 October 1, 1998
<PAGE>
PART I - FINANCIAL INFORMATION
EPOLIN, INC. AND SUBSIDIARIES
Index to Financial Information
Period Ended August 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 8
Item 2 - Management's Discussion and
Analysis or Plan of Operation 9
<PAGE>
EPOLIN, INC. AND SUBSIDIARIES
AUGUST 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 six months ended August 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
August 31,
1998 1997
Current assets:
Cash and cash equivalents $ 572,370 $ 356,933
Accounts receivables 186,041 253,766
Inventories 318,477 325,838
Related party receivables - 4,056
Prepaid expenses:
Income Taxes 60,603 10,145
Other 24,148 14,764
Deferred taxes 95,240 100,555
Total current asset 1,256,879 1,066,057
Property, plant and equipment
- at cost:
Land 77,343 -
Building 352,338 -
Machinery and equipment 200,162 203,043
Furniture and fixtures 11,036 11,036
Leasehold improvements 432,037 429,037
Total 1,072,916 643,116
Less: Accumulated depreciation
and amortization 604,575 525,253
Net depreciated cost 468,341 117,863
Other assets:
Loan receivable - related party - 75,864
Deferred taxes 103,684 199,494
Security deposit 12,635 37,070
Cash value - life insurance policy 42,677 23,902
Total other assets 158,996 336,330
Total $1,884,216 1,520,250
<PAGE>
EPOLIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Unaudited)
LIABILITIES AND
STOCKHOLDERS' EQUITY
August 31,
1998 1997
Current liabilities:
Accounts payable $ 9,908 5,637
Accrued expenses 35,181 31,886
Taxes payable
- payroll and income 23,487 -
Total current liabilities 68,576 37,523
Deferred compensation 93,800 73,053
Total liabilities 162,376 110,576
Stockholders' equity:
Preferred stock, $15.513
par value: 940,00 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:
11,606,555 shares and
11,654,000 shares issued
and outstanding at 2,216,983 2,206,983
1998 and 1997 respectively
Common stock unissued - 10,000
Paid-in capital 6,486 6,486
Accumulated deficit (492,088) (813,795)
Total 1,731,381 1,409,674
Less: treasury stock (9,541) -
Total stockholders' equity 1,721,840 1,409,674
Total $1,884,216 1,520,250
<PAGE>
EPOLIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
August 31,
1998 1997
Sales $ 469,770 403,758
Cost of sales and expenses:
Cost of sales 164,419 130,852
Selling, general and
administrative expenses 201,951 217,526
Total 366,370 348,378
Operating income 103,400 55,380
Other income - Interest 4,698 2,725
Income before taxes 108,098 58,105
Income tax expense 25,628 -
Net income $ 82,470 58,105
Per share data:
Net income per common share 0.01 0.01
Weighted average number of
shares of common outstanding 11,606,555 11,611,555
<PAGE>
EPOLIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
SIX MONTHS ENDED
August 31,
1998 1997
Sales $ 772,147 747,218
Cost of sales and expenses:
Cost of sales 270,251 257,932
Selling, general and
administrative expenses 358,211 395,043
Total 628,462 652,975
Operating income 143,685 94,243
Other income - Interest 8,569 5,089
Income before taxes 152,254 99,332
Income tax expense 26,034 -
Net income $ 126,220 99,332
Per share data:
Net income per common share 0.01 0.01
Weighted average number of
shares of common outstanding 11,604,472 11,611,555
<PAGE>
EPOLIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
August 31,
1998 1997
Cash flows from
operating activities:
Net income $ 126,220 99,332
Adjustments to reconcile
net income to net
cash provided by
operating activities:
Depreciation and amortization 35,174 29,658
Changes in assets and liabilities:
Accounts receivable 28,935 (27,242)
Inventories 63,799 15,850
Advances and loans - 16,041
Prepaid expenses:
Income taxes (27,804) -
Other 5,473 -
Accounts payable (30,477) (13,088)
Accrued Expenses (20,362) (1,328)
Taxes payable 21,824 (6,348)
Net cash provided by
operating activities 202,782 112,875
Cash flows from
investing activities:
Related party loans - (4,360)
Purchase of treasury stock (9,541) -
Payments for equipment - (4,385)
Net cash used by
investing activities (9,541) (8,745)
Cash flows from
financing activities:
Post termination distribution
of Epolin Holding
Corp.'s former earnings (10,000) -
Increase in cash 183,241 104,130
Cash and cash equivalents:
Beginning 389,129 252,803
Ending $572,370 356,933
Supplemental Disclosure
of Cash Flow Information:
Income taxes paid $4,034 175
<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 August 31, 1998, the Company reported sales of
approximately $469,800 as compared to sales of approximately $403,800
during the quarter ended August 31, 1997, an increase of approximately
$66,000 or 16.3%. During the six months ended August 31, 1998, the Company
had sales of approximately $772,100 as compared to sales of approximately
$747,200 during the six months ended August 31, 1997, an increase of
approximately $24,900 or 3.3%. This increase in sales was primarily
attributable to an increase in sales of the Company's near infrared
absorbing dyes and increases in sales of new dyes and additional
applications.
Operating income for the quarter ended August 31, 1998 increased to
approximately $103,400 as compared to operating income of approximately
$55,400 for the quarter ended August 31, 1997, an increase of approximately
$48,000. Operating income for the six months ended August 31, 1998
increased to approximately $143,700 as compared to operating income of
approximately $94,200 for the six months ended August 31, 1997, an increase
of approximately $49,500. This change resulted primarily from an increase
in sales and decreases in selling, general and administrative expenses.
Cost of sales for the six months ended August 31, 1998 was approximately
$270,300 as compared to cost of sales during the six months ended August
31, 1997 of approximately $257,900. During the six months ended August 31,
1998, the Company's selling, general and administrative expenses were
approximately $358,200 as compared to selling, general and administrative
expenses of approximately $395,000 for the six months ended August 31,
1997.
During the three and six months ended August 31, 1998, the Company realized
approximately $4,700 and $8,600, respectively, in interest income as
compared to approximately $2,700 and $5,100, respectively, in interest
income for the comparable period of 1997.
During the quarter ended August 31, 1998, the Company reported income
before taxes of approximately $108,100 as compared to income before taxes
of approximately $58,100 for the three months ended August 31, 1997. For
the six months ended August 31, 1998, the Company reported income before
taxes of approximately $152,300 as compared to income before taxes of
approximately $99,300 for the six months ended August 31, 1997. Net income
after taxes was approximately $82,500 for the three months ended August 31,
1998 as compared to income after taxes of approximately $58,100 for the
three months ended August 31, 1997. For the six months ended August 31,
1998, net income after taxes was approximately $126,200 as compared to
income after taxes of approximately $99,300 for the comparable period of
1997.
Liquidity and Capital Resources
On August 31, 1998, the Company had working capital of approximately
$1,188,000, an equity to debt ratio of approximately 10.6 to 1, and
stockholders' equity of approximately $1,722,000. On August 31, 1998, the
Company had approximately $572,000 in cash and cash equivalents, total
assets of approximately $1,884,000 and total liabilities of approximately
$162,000. At August 31, 1997, the Company had total assets of
approximately $1,520,000. The increase in total assets at August 31, 1998
as compared to August 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 repurchased 25,000 shares of its Common Stock under this
program at $.38 per share. No shares were repurchased during the quarter
ended August 31, 1998.
<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 August 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: October 13, 1998 By: /s/Murray S. Cohen
Murray S. Cohen,
Chief Executive Officer
Dated: October 13, 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 AUGUST 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> AUG-31-1998
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<PP&E> 1,072,916
<DEPRECIATION> 604,575
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<COMMON> 2,216,983
0
0
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<SALES> 772,147
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<CGS> 270,251
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<OTHER-EXPENSES> 358,211
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</TABLE>
