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, 2000
[ ] 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: 11,419,355
outstanding as of September 1, 2000
PART I - FINANCIAL INFORMATION
EPOLIN, INC. AND SUBSIDIARY
Index to Financial Information
Period Ended August 31, 2000
Item
Page Herein
Item 1 - Financial Statements:
Accountant's Review Report 3
Consolidated Financial Statements:
Consolidated Balance Sheets 4-5
Consolidated Statements of Income 6-7
Consolidated Statements of Stockholders' Equity 8
Consolidated Statements of Cash Flows 9-10
Notes to Consolidated Financial Statements 11-18
Item 2 - Management's Discussion and
Analysis or Plan of Operation 19-20
ACCOUNTANT'S REVIEW REPORT
To the Board of Directors
EPOLIN INC. AND SUBSIDIARY
Newark, NJ
We have reviewed the accompanying Consolidated Balance Sheet of Epolin Inc.
and Subsidiary as of August 31, 2000 and the related Consolidated
Statements of Income, Stockholders' Equity and Cash Flows for the six
months then ended in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of Epolin, Inc. and Subsidiary.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially less
in scope than an audit in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the August 31, 2000 financial statements in order for
them to be in conformity with generally accepted accounting principles.
The accompanying financial statements of Epolin, Inc. and Subsidiary for
the six months ended August 31, 1999 were complied by us in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. A compilation is
limited to presenting in the form of financial statements information that
is the representation of management. We have not audited or reviewed the
August 31, 1999 finanical statements and, accordingly, do not express an
opinion or any other form of assurance on them.
POLAKOFF WEISMANN LEEN LLC
September 15, 2000
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
August 31,
2000 1999
Current assets:
Cash and cash equivalents $ 1,192,995 1,170,812
Accounts receivable 415,736 170,633
Inventories 463,007 380,527
Prepaid expenses - other 12,999 34,282
Employee loans 1,675 -
Deferred taxes 8,079 32,000
Total current assets 2,094,491 1,788,254
Property, plant and equipment - at cost:
Land 81,000 81,000
Building 369,000 369,000
Machinery and equipment 228,837 206,727
Furniture and fixtures 11,407 11,408
Leasehold improvements 432,037 432,037
Total 1,122,281 1,100,172
Less: Accumulated depreciation
and amortization 662,204 640,684
Net property, plant and equipment 460,077 459,488
Other assets:
Deferred taxes 151,904 90,107
Cash value - life insurance policy 89,579 72,558
Total other assets 241,483 162,665
Total $ 2,796,051 2,410,407
See accountant's review report
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
August 31,
2000 1999
Current liabilities:
Accounts payable $ 16,340 32,062
Accrued expenses 134,636 19,574
Taxes payable - payroll and income 52,587 163,420
Loans payable officers - 10,319
Total current liabilities 203,563 225,375
Other liabilities:
Deferred compensation 271,986 144,764
Due officers 10,319 -
Total other liabilities 282,305 144,764
Total liabilities 485,868 370,139
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; 11,956,500
and 11,759,000 shares
issued and outstanding
at 2000 and 1999 2,229,658 2,220,384
Paid-in capital 6,486 6,486
Retained earnings (deficit) 203,811 (121,238)
Total 2,439,955 2,105,632
Less: Treasury stock, at cost 129,772 65,364
Total stockholders' equity 2,310,183 2,040,268
Total $ 2,796,051 2,410,407
See accountant's review report
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED AUGUST 31, 2000 AND 1999
2000 1999
Sales $ 657,396 566,347
Cost of sales and expenses:
Cost of sales 199,386 127,826
Selling, general and administrative
expenses 155,306 129,222
Total 354,692 257,048
Operating income 302,704 309,299
Other income - interest 14,630 11,361
Income before taxes 317,334 320,660
Income tax expense 144,713 163,720
Net income $ 172,621 156,940
Per share data:
Net income per common share $ 0.02 0.01
Weighted average number of
shares of common outstanding $ 11,438,268 11,445,414
See accountant's review report
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED AUGUST 31, 2000 AND 1999
2000 1999
Sales $ 1,154,597 1,058,013
Cost of sales and expenses:
Cost of sales 374,933 239,647
Selling, general and
administrative expenses 331,444 240,806
Total 706,377 480,453
Operating income 448,220 577,560
Other income - interest 30,620 19,242
Income before taxes 478,840 596,802
Income tax expense 194,207 257,660
Net income $ 284,633 339,142
Per share data:
Net income per common share $ 0.02 0.03
Weighted average number of
shares of common
outstanding $ 11,438,268 11,445,414
See accountant's review report
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED AUGUST 31, 2000 AND 1999
Common Additional Accumulated
Stock Paid-in-Capital Deficit
Balance - March 1, 1999 $ 2,220,384 6,486 (460,380)
Purchase of treasury stock - - -
Net income - - 339,142
Balance - August 31, 1999 $ 2,220,384 6,486 (121,238)
Balance - March 1, 2000 $ 2,220,384 6,486 (80,822)
Issue of common stock 9,274 - -
Purchase of treasury stock - - -
Net income - - 284,633
Balance - August 31, 2000 $ 2,229,658 6,486 203,811
Treasury Stockholders'
Stock Equity
Balance - March 1, 1999 (34,084) 1,732,406
Purchase of treasury stock (31,280) (31,280)
Net income - 339,142
Balance - August 31, 1999 (65,364) 2,040,268
Balance - March 1, 2000 (118,906) 2,027,142
Issue of common stock - 9,274
Purchase of treasury stock (10,866) (10,866)
Net income - 284,633
Balance - August 31, 2000 (129,772) 2,310,183
See accountant's review report
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED AUGUST 31, 2000 AND 1999
2000 1999
Cash flows from operating activities:
Net income $ 284,633 339,142
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 13,267 9,170
Deferred tax expense (14,031) -
Obligation under deferred
compensation agreement 42,790 -
(Increase) decrease in:
Accounts receivable (126,900) 160,281
Inventories 12,208 (100,903)
Employee loans 3,094 -
Prepaid expenses 19,600 49,531
Increase (decrease) in:
Accounts payable (990) (11,342)
Accrued expenses (27,448) (31,453)
Taxes payable (170,342) 128,875
Net cash provided by
operating activities 35,881 543,301
Cash flows from investing activities:
Increase in cash value -
life insurance policy (9,000) (10,000)
Payments for equipment (15,231) -
Net cash used by
investing activities (24,231) (10,000)
See accountant's review report
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SIX MONTHS ENDED AUGUST 31, 2000 AND 1999
2000 1999
Cash flows from financing activities:
Proceeds from the issuance of
capital stock 9,274 -
Related party loans (31,280)
Purchase of treasury stock (10,866) (6,937)
Net cash used by financing activities (1,592) (38,217)
Increase in cash 10,058 495,084
Cash and cash equivalents:
Beginning 1,182,937 675,728
Ending $ 1,192,995 1,170,812
Supplemental information:
Income taxes paid $ 377,124 5,850
Interest paid $ 472 -
See accountant's review report
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
Note A - Organization and Basis of Presentation:
The Company is engaged in the development, production and sale of near
infrared dyes to the optical industry for laser protection and welding
applications and other dyes and specialty chemical products that serve as
intermediates and additives used in the adhesive, plastic, aerospace,
pharmaceutical and flavors and fragrance industries to customers located in
the United States and throughout the world.
The Company's wholly owned Subsidiary, Epolin Holding, Corp., was
incorporated in New Jersey as a real estate holding company assets
consisting of land and a building. Prior to being acquired on January 29,
1998, it was controlled by two officers/stockholders of the Company.
Note B - Summary of Significant Accounting Policies:
Principles of Consolidation - The accompanying Consolidated Financial
Statements include the accounts of the Company and its Subsidiary.
Intercompany transactions and balances have been eliminated in
consolidation. Condensed consolidating financial statements for the period
ended August 31, 2000 as follows:
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
Note B - Summary of Significant Accounting Policies: (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
Epolin
Epolin Holding Eliminations Consolidated
Current assets $2,299,092 6,832 211,433 2,094,491
Non-current assets 493,156 413,661 205,257 701,560
Total $2,792,248 420,493 416,690 2,796,051
Total liabilities $ 482,065 215,236 211,433 485,868
Stockholders' equity:
Common stock 2,229,658 - - 2,229,658
Additional paid-in
capital 6,486 - - 6,486
Retained earnings 203,811 205,257 205,257 203,811
Treasury stock (129,772) - - (129,772)
Total stockholders'
equity 2,310,183 205,257 205,257 2,310,183
Total $2,792,248 420,493 416,690 2,796,051
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Sales $1,154,597 - - 1,154,597
Other revenue - 48,870 48,870 -
Total 1,154,597 48,870 48,870 1,154,597
Cost of sales 374,933 - - 374,933
Selling, general
and administrative 373,218 7,096 48,870 331,444
Total 748,151 7,096 48,870 706,377
Operating income 406,446 41,774 - 448,220
Other income 68,836 609 38,825 30,620
Income before taxes 475,282 42,383 38,825 478,840
Income taxes 190,649 3,558 - 194,207
Net income $284,633 38,825 38,825 284,633
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
Note B - Summary of Significant Accounting Policies: (Continued)
Cash and Cash Equivalents - Includes cash in bank and money market accounts
for purposes of preparing the Statement of Cash Flows.
Concentrations of Credit Risks - The Company has cash deposits in financial
institutions in excess of the amount insured by agencies of the federal
government of approximately $1,093,000 and $1,071,000 at August 31, 2000
and 1999, respectively. In evaluating this credit risk, the Company
periodically evaluates the stability of these financial institutions.
Inventories - Consists of raw materials, work in process, finished goods
and supplies valued at the lower of cost or market under the first-in,
first-out method.
Fair Value of Financial Instruments - All reported assets and liabilities,
which represent financial instruments, approximate the carrying values of
such amounts.
Property, Plant and Equipment - Stated at cost less accumulated
depreciation and amortization. Provisions for depreciation are computed on
the straight-line and declining balance methods, based upon the estimated
useful lives of the assets.
Depreciation and amortization expense totaled $13,627 and $9,170 for the
period ended August 31, 2000 and 1999, respectively.
Income taxes -The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes",
wherein the asset and liability method is used in accounting for income
taxes. Deferred taxes are recognized for temporary differences between the
basis of assets and liabilities for financial statement and income tax
purposes. The temporary differences relate primarily to different
accounting methods used for depreciation and amortization of property and
equipment, allowance for doubtful accounts and net operating loss carry
forwards.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the amounts of sales and expenses during
the reporting period. Actual results could differ from those estimates.
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
Note C - Economic Dependency:
A material portion of the Company's business is dependent on
certain domestic customers, the loss of which could have a material effect
on operations. During the period ended August 31, 2000, approximately
66.03% of sales were to four customers. Three of these customers, located
in the Eastern United States, amounted for 42.70% of sales at August 31,
2000.
Note D - Inventories:
Raw materials and supplies $ 36,594
Work in process 28,946
Finished goods 397,467
Total $ 463,007
Note E - Income Taxes and Deferred Tax Asset:
Income tax expense and/or benefit consists of the following components:
Current
Federal $ 160,300
State 46,338
Total current 206,638
Deferred:
Federal (9,800)
State (2,631)
Total deferred (12,431)
Total $194,207
Federal and State deferred tax assets include the following:
Temporary differences - principally accelerated amortization
of leasehold improvements for book purposes and deferred
compensation $159,983
Current portion 8,079
Non-current portion $151,904
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
Note F - Accrued Salaries:
On April 25, 1995, the Board of Directors authorized the issuance of
1,000,000 shares of common stock (market value $.04 per share) to an
officer in lieu of $40,000 of his remaining accrued salary of $89,948. The
remaining unpaid balance of $49,948 was paid in the current period.
Note G - Employee Benefits:
Simplified Employee Pension Plan - Effective June 1, 1994, covering all
eligible participating employees as defined. Employer contributions totaled
$5,396 for the period ended August 31, 2000.
Incentive Compensation Plan - In December 1989, the Company approved the
1989 Incentive Compensation Plan for the purpose of attracting and
retaining key personnel. All employees of the Company are eligible to
participate in the plan whereby incentive bonuses are determined by the
Board of Directors and payable in shares of common stock. Shares issued
are determined at fifty percent of the closing bid price and vested and
delivered over a three-year period.
Employee Option Plan - The Company had previously adopted The Stock Option
Plan. As of April 1996, options may no longer be granted. Under the terms
of the Plan, options granted could be designated as portions which qualify
for incentive stock option treatment under Section 422A of the Internal
Revenue Code of 1986, as amended, or options which do not qualify. In
December 1995, options to acquire up to 490,000 shares of the Company's
common stock were granted and will expire on December 1, 2005. In the
current period, 150,000 shares of common stock were issued to two
employees.
Outstanding options remaining under the plan are as follows
Shares allocated as of August 31, 2000 207,500
Option price $ 0.04
All outstanding options are currently exercisable.
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
Note G - Employee Benefits (Continued):
The Company adopted the 1998 Stock Option Plan on December 1, 1998. Under
the terms of the plan, the company reserved 750,000 shares of common stock
for issuance pursuant to the exercise of options to be granted under the
Plan which do not meet the requirements of Section 422 of the Code.
Options expire ten years after the date granted and are subject to a
vesting period as follows: (1) no portion will be exercisable prior to the
first anniversary of the date of grant, and (2) each of the options will
become exercisable as to 50% of the shares underlying the option on each of
the first and second anniversaries of the date granted at $0.15 per share.
Option granted as of August 31, 2000:
No. of Date Expiration
Shares Granted Date
425,000 December 1, 1998 December 30, 2008
25,000 February 10, 1999 February 9, 2009
25,000 February 10, 2000 February 9, 2010
There are 275,000 options attributable to future grants.
Effective March 1, 1999, the company adopted deferred compensation
agreements with two of its employees. Under the terms of the agreements,
each employee will receive one twenty sixth (1/26th) of fifty percent (50%)
of their annual salary (excluding bonuses) as of the date of retirement.
Each has a death vesting schedule.
Note H - Treasury Stock:
Treasury stock at August 31, 2000 totaled 537,145 shares, at a
cumulative cost of $129,772 including 42,445 shares, which were returned to
the Company at no cost in prior years .
Note I - Research and Development:
The cost for the six-month period ended August 31, 2000 is $108,731
included in selling, general and administrative expenses.
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
Note J - Commitments and Contingencies:
Leases:
The company leases its promises from its wholly - owned subsidiary. The
lease was for a term of five (5) years with three (3) five (5) year options
at annual rentals of $97,740 subject to a Cost of Living Index adjustment
effective with the second year. Rent includes reimbursed real estate taxes
and insurance.
The minimum annual rentals under the lease are as follows:
Years Ended Amounts
February 28, 2001 $97,740
February 28, 2002 65,160
The lease is anticipated to be renewed at February 28, 2002,
however, management has not determined the renewal rent.
Rental expense charged to operations and eliminated in consolidation
amounted to $48,870 for the six months ended August 31, 2000.
Deferred Compensation:
On December 29, 1995, the Company entered into a deferred compensation
agreement with two officers. The first officer's additional annual
compensation of $19,645 plus interest is being deferred until such time the
officer reaches age 65 or is terminated. The obligation is being funded
with a life insurance policy. Annual payments of $32,000 for ten
consecutive years shall commence the first day of the month following the
officer's 65th birthday or termination. The second officer was credited
with $25,000 per year until his date of retirement, however, he elected to
continue to work after his retirement age, thereby freezing the balance in
his account. Therefore, no contribution was necessary for the current
period. Upon retirement, he will be paid either in equal consecutive
monthly payments for a period not exceeding sixty (60) months or a single
payment equal to the then present value of the account. This selection
will be at this discretion of the company.
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
Note J - Commitments and Contingencies (continued):
Employment Agreements:
Effective March 1, 1999, the Company entered into ten year employment
Agreements with executive officers/directors:
James Ivchenko, President - To be paid an annual salary of not less than
the greater of his annual base salary in effect immediately prior to the
effective date of the agreement or any subsequently established annual base
salary. In addition, he is to receive 1.5% of gross annual sales of no
more than $3,000,000, effective with the year ended February 29, 2000,
increasing by 0.25% a year during the term of the agreement.
Murray S. Cohen, PhD, Chairman of the Board and Chief Executive Officer -
To be paid an annual salary of not less than the greater of his annual base
salary in effect immediately prior to the effective date of the agreement
or any subsequently established annual base salary. He is to receive 2.00%
of gross annual sales of no more than $3,000,000, effective with the year
ended February 29, 2000, increasing by 0.25% a year during the term of the
agreement. The Company had previously entered into a deferred compensation
agreement with Dr. Cohen providing for the payment of certain funds to him
for a period of ten years beginning two weeks after the date of his
retirement, which agreement was terminated in connection with the execution
of this employment agreement.
Contingencies:
In August 2000, the Company received a letter from a law firm representing
a former officer of the Company (who is also a current director) alleging
age discrimination and other monetary claims pertaining to such former
officer's past employment. In addition, in September 2000, The Company
received a letter from the same law firm on behalf of another director (who
is currently an employee of the Company) alleging similar claims. To date,
no actions have been commenced in either matter and the Company believes
such claims are without merit. In the event actions are commenced, the
Company intends to defend such matters vigorously. Nevertheless, while the
outcome of such matters cannot be predicted with certainty at this time,
management does not expect such will result in an unfavorable outcome to
the Company or have a material adverse effect.
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 located in the United States and throughout the world.
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, 2000, the Company reported
sales of approximately $657,400 as compared to sales of approximately
$566,300 during the quarter ended August 31, 1999, an increase of
approximately $91,000 or 16.1%. During the six months ended August 31,
2000, the Company reported sales of approximately $1,154,600 as compared to
sales of approximately $1,058,000 during the six months ended August 31,
1999, an increase of approximately $96,600 or 9.1%. This increase in sales
was primarily attributed 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 August 31, 2000 decreased to
approximately $302,700 from operating income of approximately $309,300 for
the quarter ended August 31, 1999, a decrease of approximately $6,600.
Operating income for the six months ended August 31, 2000 decreased to
approximately $448,200 from operating income of approximately $577,600 for
the six months ended August 31, 1999, a decrease of approximately $129,300.
This change resulted primarily from increases in cost of sales and selling,
general and administrative expenses for the six months ended August 31,
2000 as compared to the six months ended August 31, 1999, offset by an
increase in sales of approximately $96,600 for the six months ended August
31, 2000, as compared to the comparable period in the prior fiscal year.
Cost of sales for the six months ended August 31, 2000 was approximately
$374,900 as compared to cost of sales during the six months ended August
31, 1999 of approximately $239,600. During the six months ended August 31,
2000, the Company's selling, general and administrative expenses were
approximately $331,400 as compared to selling, general and administrative
expenses of approximately $240,800 for the six months ended August 31,
1999.
During the three and six months ended August 31, 2000, the Company
realized approximately $14,600 and $30,600, respectively, in interest
income as compared to approximately $11,400 and $19,200, respectively, in
interest income for the comparable periods of the prior fiscal year.
During the quarter ended August 31, 2000, the Company reported
income before taxes of approximately $317,300 as compared to income before
taxes of approximately $320,700 for the three months ended August 31, 1999.
For the six months ended August 31, 2000, the Company reported income
before taxes of approximately $478,800 as compared to income before taxes
of approximately $596,800 for the six months ended August 31, 1999. Net
income after taxes was approximately $172,600 for the three months ended
August 31, 2000 as compared to income after taxes of approximately $156,900
for the three months ended August 31, 1999. For the six months ended
August 31, 2000, net income after taxes was approximately $284,600 as
compared to net income after taxes of approximately $339,100 for the
comparable period of the prior fiscal year.
Liquidity and Capital Resources
On August 31, 2000, the Company had working capital of
approximately $1,890,900, an equity to debt ratio of approximately 4.75 to
1, and stockholders' equity of approximately $2,310,200. On August 31,
2000, the Company had approximately $1,193,000 in cash and cash
equivalents, total assets of approximately $2,796,100 and total
liabilities of approximately $485,900. The Company believes that its
available cash, cash flow from operations and projected revenues will be
sufficient to fund the Company's operations for at least 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, 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
494,700 shares have been repurchased under this program through August 31,
2000, at a cumulative cost of $123,097, which includes 24,000 shares
repurchased during the quarter ended August 31, 2000.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In August 2000, the Company received a letter from a law
firm representing a former officer of the Company (who is
also a current director) alleging age discrimination and
other monetary claims pertaining to such former officer's
past employment. In addition, in September 2000, the
Company received a letter from the same law firm on behalf
of another director (who is currently an employee of the
Company) alleging similar claims. To date, no actions have
been commenced in either matter and the Company believes
such claims are without merit. In the event actions are
commenced, the Company intends to defend such matters
vigorously. Nevertheless, while the outcome of such matters
cannot be predicted with certainty at this time, management
does not expect such will result in an unfavorable outcome
to the Company or have a material adverse effect.
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, 2000.
None.
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: September 22, 2000 By: /s/ Murray S. Cohen
Murray S. Cohen,
Chief Executive Officer
Dated: September 22, 2000 By: /s/ Murray S. Cohen
Murray S. Cohen,
Principal Financial Officer
