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 NOVEMBER 30, 1999
[ ] 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: 11,293,355
outstanding as of November 30, 1999
<PAGE>
PART I - FINANCIAL INFORMATION
EPOLIN, INC. AND SUBSIDIARY
Index to Financial Information
Period Ended November 30, 1999
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 SUBSIDIARY
NOVEMBER 30, 1999
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 nine months ended November 30, 1999 are
not necessarily indicative of the results of operations for the full fiscal
year ending February 29, 2000.
These condensed statements should be read in conjunction with the
Company's audited financial statements for the fiscal year ended February
28, 1999.
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
November 30,
1999 1998
Current assets:
Cash and cash equivalents $ 1,193,448 761,519
Accounts receivable 233,915 92,909
Inventories 414,293 294,900
Prepaid expenses:
Income taxes - 82,804
Other 32,885 26,703
Deferred taxes 32,000 -
Total current assets 1,906,541 1,258,835
Property, plant
and equipment - at cost:
Land 81,000 77,343
Building 369,000 352,338
Machinery and equipment 212,206 200,162
Furniture and fixtures 11,407 11,036
Leasehold improvements 432,037 432,037
Total 1,105,650 1,072,916
Less: Accumulated
depreciation and
amortization 646,354 622,165
Net property and equipment 459,296 450,751
Other assets:
Deferred taxes 92,000 198,924
Security deposits - 12,635
Cash value - life
insurance policy 72,558 42,680
Total other assets 164,558 254,239
Total $ 2,530,395 1,963,825
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
November 30,
1999 1998
Current liabilities:
Accounts payable $ 5,338 4,393
Accrued expenses 26,077 46,239
Taxes payable:
Payroll 1,310 1,902
Income 206,900 -
Loans payable officers 10,319 -
Total current liabilities 249,944 52,534
Other liabilities -
deferred compensation 144,764 93,800
Total liabilities 394,708 146,334
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;
11,759,000 shares issued
and 11,759,000 and
11,724,000 shares issued
and outstanding at
1999 and 1998
respectively. 2,220,384 2,216,983
Paid-in capital 6,486 6,486
Accumulated deficit 7,193 (384,673)
Total 2,234,063 1,838,796
Less: Treasury stock (99,369) (21,305)
Total stockholders'
equity 2,134,694 1,817,491
Total $ 2,529,402 1,963,825
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
November 30,
1999 1998
Sales $ 438,787 351,627
Cost of sales and expenses:
Cost of sales 145,760 103,516
Selling, general and
administrative
expenses 104,485 173,469
Total 250,245 276,985
Operating income 188,542 74,642
Other income - interest 13,140 8,972
Income before taxes 201,682 83,614
Provision for taxes:
Current:
Federal 53,800 23,801
State 20,350 -
Total current 74,150 23,801
Deferred:
Federal (900) -
State - -
Total deferred (900) -
Total 73,250 23,801
Net income $ 128,432 107,415
Per share data:
Net income
per common share $ 0.01 0.01
Weighted average
number of
shares of common
outstanding $ 11,342,844 11,606,555
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED
November 30,
1999 1998
Sales $ 1,496,800 1,123,774
Cost of sales and expenses:
Cost of sales 385,407 373,767
Selling, general
and administrative
expenses 345,291 531,680
Total 730,698 905,447
Operating income 766,102 218,327
Other income -
interest 32,382 17,541
Income before taxes 798,484 235,868
Provision for taxes:
Current:
Federal 251,000 2,233
State 46,810 -
Total current 297,810 2,233
Deferred:
Federal - -
State 33,100 -
Total deferred 33,100 -
Total 330,910 2,233
Net income $ 467,574 233,635
Per share data:
Net income
per common share $ 0.04 0.02
Weighted average
number of
shares of common
outstanding $ 11,342,844 11,604,472
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
November 30,
1999 1998
Cash flows
from operating activities:
Net income $ 467,574 233,635
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization 14,840 52,764
(Increase) decrease in:
Accounts receivable 96,999 122,067
Inventories (134,669) 87,376
Cash surrender value
- - officers' life insurance (10,000) -
Employee loans 10,360
Prepaid expenses:
Income taxes 22,505 (50,005)
Other (15,938) 2,916
Deferred taxes 33,100
Increase (decrease) in:
Accounts payable (38,066) (35,992)
Accrued expenses (24,950) (9,304)
Taxes payable:
Payroll - 238
Income 173,665 -
Net cash provided
by operating activities 595,420 403,695
Cash flows
from investing activities:
Related party loans - -
Purchase of
property and equipment (12,415)
Purchase of
treasury stock (65,285) (21,305)
Net cash
used by
investing activities (77,700) (21,305)
Cash flows
used by financing activities:
Post termination
distribution of Epolin Holding
Corp.'s former earnings - (10,000)
Increase in cash 517,720 372,390
Cash and cash equivalents:
Beginning 675,728 389,129
Ending $ 1,193,448 761,519
Supplemental disclosure of
cash flow information:
Income taxes paid $ 102,427 4,034
<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 November 30, 1999, the Company reported sales
of approximately $438,800 as compared to sales of approximately $351,600
during the quarter ended November 30, 1998, an increase of approximately
$87,200 or 24.8%. During the nine months ended November 30,
1999, the Company reported sales of approximately $1,497,000 as compared
to sales of approximately $1,124,000 during the nine months
ended November 30, 1998, an increase of
approximately $373,000 or 33.2%. 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 for new applications.
Operating income for the quarter ended November 30, 1999
increased to approximately $188,500 as compared to operating
income of approximately $74,600 for
the quarter ended November 30, 1998, an increase of approximately $113,900.
Operating income for the nine months ended
November 30, 1999 increased to approximately $766,100 as compared to
operating income of approximately $218,300 for the nine months ended
November 30, 1998, an increase of approximately $547,800.
This change resulted primarily from an increase in sales
during the nine months ended November 30, 1999
as compared to the comparable 1998 period, along
with a decrease in selling, general and
administrative expenses for the nine months ended
November 30, 1999 compared to the comparable 1998 period.
Cost of sales for the nine months
ended November 30, 1999 was approximately $385,400 as compared
to cost of sales during the nine
months ended November 30, 1998 of approximately $373,800.
During the nine months ended November 30, 1999, the Company's selling,
general and administrative expenses were
approximately $345,300 as compared to selling, general and
administrative expenses of approximately $531,700
for the nine months ended November 30, 1998.
During the three months and nine months ended November 30, 1999,
the Company realized approximately $13,100 and
$32,400, respectively, in interest income as compared to
approximately $9,000 and $17,600, respectively,
in interest income for the comparable periods of
1998.
<PAGE>
During the quarter ended November 30, 1999, the Company reported income
before taxes of approximately $201,700 as compared to income before
taxes of approximately $83,600 for the three
months ended November 30, 1998. For the nine months ended
November 30, 1999, the Company reported income
before taxes of approximately $798,500 as
compared to income before taxes of
approximately $235,900 for the nine months
ended November 30, 1998. Net income after taxes was
approximately $128,400 for the three months ended
November 30, 1999 as compared to income after
taxes of approximately $107,400 for the
three months ended November 30, 1998. For the nine
months ended November 30, 1999, net income
after taxes was approximately $467,600 as compared to
net income after taxes of approximately $233,600 for
the comparable period of 1998.
Liquidity and Capital Resources
On November 30, 1999, the Company had working capital of
approximately $1,656,600, an equity to debt ratio of approximately
5.41 to 1, and stockholders' equity of
approximately $2,135,000. On November 30, 1999,
the Company had approximately $1,193,400 in cash and
cash equivalents, total assets of approximately $2,530,400 and total
liabilities of approximately $394,700. 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.
Year 2000 Issue
The Year 2000 issue is the result of computer programs having been
written using two digits, rather then four, to define the applicable
year. Software programs and hardware that have
date-sensitive software or embedded chips may recognize a date using
"00" as the year 1900 rather than the year 2000.
This could result in a major system failure or miscalculations causing
disruptions of operations, including a temporary inability to engage in
normal business activities.
Prior to the year 2000, the Company determined that its critical
software (primarily widely-used software packages)
and all of its critical business systems, including manufacturing
instrumentation, were already year 2000 compliant, and as of the date
of this report, no significant problems had been encountered.
However, there can be no assurance that this will
continue to be the case, and there are also continuing risks
to the Company's operations from
year 2000 failures by third parties, such as suppliers. In this regard,
the Company continues to monitor the situation.
The Company previously initiated communications with third
parties with whom the Company has material direct and indirect
business relationships in order to determine the extent to which the
Company's business is vulnerable to the third
parties' failure to make their systems year 2000 compliant. Based upon
the information gathered from such other third parties, the Company
is not aware of any material third party year 2000
risks which have not been resolved. As of the date of this report, the
Company has not experienced any significant year 2000 issues arising
from third parties. The Company continues to maintain
close contact with critical suppliers with respect to such third
parties' year 2000 compliance and any year 2000 issues that might arise
at a later date.
<PAGE>
The Company currently does not have a contingency
plan in the event year 2000 issues arise at a future date.
Such a plan will be developed if it becomes necessary.
Although no assurance can be given that there
will be no interruption of operations due to year 2000 issues, the
Company has not to date suffered any significant problems and believes
that it has reasonably assessed all of its systems
in order to ensure that the Company will not suffer any material
adverse effect in the future.
The Company has used and will continue to use, if necessary,
internal resources to resolve its year 2000 issue. Costs incurred to
date by the Company have not been material
and the Company estimates that the total cost
of these programs to date was less
than $60,000. No further substantial expenditures are currently planned.
Other Information
In March 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. A total of 423,200 shares have been repurchased under
this program through November 30, 1999, which includes
128,200 shares repurchased during the quarter ended November 30, 1999.
<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 November 30, 1999.
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: January 17, 2000 By:/s/Murray S. Cohen
Murray S. Cohen,
Chief Executive Officer
Dated: January 17, 2000 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 NOVEMBER 30, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-END> NOV-30-1999
<CASH> 1,193,448
<SECURITIES> 0
<RECEIVABLES> 233,915
<ALLOWANCES> 0
<INVENTORY> 414,293
<CURRENT-ASSETS> 1,906,541
<PP&E> 1,105,650
<DEPRECIATION> 646,354
<TOTAL-ASSETS> 2,530,395
<CURRENT-LIABILITIES> 249,944
<BONDS> 0
<COMMON> 2,220,384
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,529,402
<SALES> 1,496,800
<TOTAL-REVENUES> 1,496,800
<CGS> 385,407
<TOTAL-COSTS> 385,407
<OTHER-EXPENSES> 345,291
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 798,484
<INCOME-TAX> 330,910
<INCOME-CONTINUING> 467,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 467,574
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
