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, 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: 11,379,355
outstanding as of November 30, 2000
<PAGE>
PART I - FINANCIAL INFORMATION
EPOLIN, INC. AND SUBSIDIARY
Index to Financial Information
Period Ended November 30, 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
<PAGE>
ACCOUNTANT'S REVIEW REPORT
To the Board of Directors
EPOLIN, INC. AND SUBSIDIARY
Newark, NJ
We have reviewed the accompanying Consolidated Balance Sheets of Epolin,
Inc. and Subsidiary as of November 30, 2000 and the related Consolidated
Statements of Income, Stockholders' Equity and Cash Flows for the nine
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 November 30, 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 nine months ended November 30, 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
November 30, 1999 financial statements and, accordingly, do not express an
opinion or any other form of assurance on them.
POLAKOFF WEISMANN LEEN LLC
December 28, 2000
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
NOVEMBER 30,
------------------------
2000 1999
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $1,495,452 1,193,448
Accounts receivable 388,621 233,915
Inventories 457,649 414,293
Prepaid expenses - other 18,660 32,885
Employee loans - -
Deferred taxes 10,021 32,000
---------- ----------
Total current assets 2,370,403 1,906,541
---------- ----------
PROPERTY, PLANT AND EQUIPMENT - AT COST:
Land 81,000 81,000
Building 369,000 369,000
Machinery and equipment 228,837 212,206
Furniture and fixtures 11,407 11,407
Leasehold improvements 432,037 432,037
---------- ----------
Total 1,122,281 1,105,650
Less: Accumulated depreciation and amortization 667,657 646,354
---------- ----------
Net property, plant and equipment 454,624 459,296
---------- ----------
OTHER ASSETS:
Deferred taxes 155,811 92,000
Cash value - life insurance policy 94,081 71,565
---------- ----------
Total other assets 249,892 163,565
---------- ----------
Total $3,074,919 2,529,402
========== ==========
See accountant's review report.
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 20,555 5,338
Accrued expenses 76,544 26,077
Taxes payable - payroll and income 112,937 208,210
---------- ----------
Total current liabilities 210,036 239,625
---------- ----------
OTHER LIABILITIES:
Deferred compensation 293,381 144,764
Due officers 10,319 10,319
---------- ----------
Total other liabilities 303,700 155,083
---------- ----------
Total liabilities 513,736 394,708
---------- ----------
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 467,892 7,193
---------- ----------
Total 2,704,036 2,234,063
Less: Treasury stock, at cost 142,853 99,369
---------- ----------
Total stockholders' equity 2,561,183 2,134,694
---------- ----------
Total $3,074,919 2,529,402
========== ==========
</TABLE>
See accountant's review report.
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED NOVEMBER 30, 2000 AND 1999
2000 1999
----------- -----------
SALES $ 1,826,111 1,496,080
----------- -----------
COST OF SALES AND EXPENSES:
Cost of sales 551,537 385,407
Selling, general and administrative expenses 499,395 345,291
----------- -----------
Total 1,050,932 730,698
----------- -----------
OPERATING INCOME 775,179 766,102
OTHER INCOME - interest 49,174 32,382
----------- -----------
INCOME BEFORE TAXES 824,353 798,484
INCOME TAX EXPENSE 275,639 330,910
----------- -----------
NET INCOME $ 548,714 467,574
=========== ===========
PER SHARE DATA:
Net income per common share $ 0.05 0.04
=========== ===========
Weighted average number of shares of common
outstanding $11,416,388 11,342,844
=========== ===========
See accountant's review report.
<PAGE>
EPOLIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED NOVEMBER 30, 2000 AND 1999
2000 1999
----------- -----------
SALES $ 671,514 438,787
----------- -----------
COST OF SALES AND EXPENSES:
Cost of sales 176,604 145,760
Selling, general and administrative
expenses 167,951 104,485
----------- -----------
Total 344,555 250,245
----------- -----------
OPERATING INCOME 326,959 188,542
OTHER INCOME - interest 18,554 13,140
----------- -----------
INCOME BEFORE TAXES 345,513 201,682
INCOME TAX EXPENSE 81,432 73,250
----------- -----------
NET INCOME $ 264,081 128,432
=========== ===========
PER SHARE DATA:
Net income per common share $ 0.02 0.01
=========== ===========
Weighted average number of
shares of common outstanding $11,416,388 11,342,844
=========== ===========
See accountant's compilation report.
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED NOVEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
COMMON ADDITIONAL ACCUMULATED TREASURY STOCKHOLDERS'
STOCK PAID-IN-CAPITAL DEFICIT STOCK EQUITY
---------- --------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance - March 1, 1999 $2,220,384 6,486 (460,381) (34,084) 1,732,405
Purchase of treasury stock - - - (65,285) (65,285)
Net income - - 467,574 - 467,574
---------- ---------- ---------- ---------- ----------
Balance - November 30, 1999 $2,220,384 6,486 7,193 (99,369) 2,134,694
========== ========== ========== ========== ==========
Balance - March 1, 2000 $2,220,384 6,486 (80,822) (118,906) 2,027,142
Issue of common stock 9,274 - - - 9,274
Purchase of treasury stock - - - (23,947) (23,947)
Net income - - 548,714 - 548,714
---------- ---------- ---------- ---------- ----------
Balance - November 30, 2000 $2,229,658 6,486 467,892 (142,853) 2,561,183
========== ========== ========== ========== ==========
</TABLE>
See accountant's review report.
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED NOVEMBER 30, 2000 AND 1999
2000 1999
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 548,714 467,574
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 18,720 14,840
Deferred tax expense (18,280) 33,100
Obligation under deferred compensation agreement 64,185 -
(Increase) decrease in:
Accounts receivable (99,785) 96,999
Inventories 17,566 (134,669)
Employee loans 4,769 10,360
Prepaid expenses 12,339 6,567
Increase (decrease) in:
Accounts payable 3,225 (38,066)
Accrued expenses (85,540) (24,950)
Taxes payable (109,992) 173,665
--------- ---------
Net cash provided by operating activities 355,921 605,420
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in cash value - life insurance policy (13,502) (10,000)
Payments for equipment (15,231) (12,415)
--------- ---------
Net cash used by investing activities (28,733) (22,415)
--------- ---------
See accountant's review report.
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
NINE MONTHS ENDED NOVEMBER 30, 2000 AND 1999
2000 1999
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of capital stock 9,274 -
Related party loans -
Purchase of treasury stock (23,947) (65,285)
----------- -----------
Net cash used by financing activities (14,673) (65,285)
----------- -----------
INCREASE IN CASH 312,515 517,720
CASH AND CASH EQUIVALENTS:
Beginning 1,182,937 675,728
Ending $ 1,495,452 1,193,448
=========== ===========
SUPPLEMENTAL INFORMATION:
Income taxes paid $ 399,180 102,427
=========== ===========
Interest paid $ 472 -
=========== ===========
See accountant's review report.
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 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, flavors and fragrance industries to customers located in
the United States and throughout the world.
The Company's wholly owned Subsidiary, Epolin Holding, Corp., incorporated
in New Jersey as a real estate holding company with 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 November 30, 2000 as follows:
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2000
Note B - Summary of Significant Accounting Policies: (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
Epolin
Epolin Holding Eliminations Consolidated
Current assets $2,369,548 20,799 19,944 2,370,403
Non-current assets 883,433 570,413 729,386 724,460
Total $3,252,981 591,212 749,330 3,074,919
Total liabilities $ 671,854 366,369 524,487 513,736
Stockholders' equity:
Common stock 2,229,658 - - 2,229,658
Additional paid-in
capital 6,486 - - 6,486
Retained earnings 467,892 224,843 224,843 467,892
Treasury stock (142,853) - - (142,853)
Total stockholders'
equity 2,561,183 224,843 224,843 2,561,183
Total $3,233,037 591,212 749,330 3,074,919
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Sales $1,826,111 - - 1,826,111
Other revenue - 73,305 73,305 -
Total 1,826,111 73,305 73,305 1,826,111
Cost of sales 551,537 - - 551,537
Selling, general
and administrative 563,238 9,462 73,305 499,395
Total 1,114,775 9,462 73,305 1,050,932
Operating income 711,336 63,843 - 775,179
Other income 107,459 126 58,411 49,174
Income before taxes 818,795 63,969 58,411 824,353
Income taxes 270,081 5,558 - 275,639
Net income $ 548,714 58,411 58,411 548,714
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 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 $1,495,000 and $1,193,000 at November 30, 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 $18,720 and $13,627 for the
period ended November 30, 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.
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 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 November 30, 2000, approximately
66.03% of sales were to four customers. Three of these customers, located
in the Eastern United States, amounted for 43% of sales at November 30,
2000.
Note D - Inventories:
Raw materials and supplies $ 39,525
Work in process 47,681
Finished goods 370,443
Total $ 457,649
Note E - Income Taxes and Deferred Tax Asset:
Income tax expense and/or benefit consists of the following components:
Current
Federal $ 231,389
State 62,530
Total current 293,919
Deferred:
Federal (15,780)
State (2,500)
Total deferred (18,280)
Total $275,639
Federal and State deferred tax assets include the following:
Temporary differences - principally accelerated amortization
of leasehold improvements for book purposes and deferred
compensation $165,832
Current portion 10,021
Non-current portion $155,811
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 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
$16,202 for the period ended November 30, 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 November 30, 2000 207,500
Option price $ 0.04
All outstanding options are currently exercisable.
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 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 November 30, 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 former 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 November 30, 2000 totaled 577,145 shares, at a
cumulative cost of $142,853 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 nine-month period ended November 30, 2000 is $235,131
included in selling, general and administrative expenses.
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2000
Note J - Commitments and Contingencies:
Leases:
The company leases its premises 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 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 $73,305 for the nine months ended November 30, 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.
<PAGE>
EPOLIN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 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
was then an employee of the Company) alleging similar claims. In December
2000, these individuals instituted suit in the Superior Court of New
Jersey, Bergen County - Law Division, against the Company and the other
directors of the Company alleging claims pursuant to their past employment
as well as a derivative claim, as minority stockholders. The Company
believes such claims are without merit and intends to defend such matter
vigorously. Nevertheless, while the outcome of this action cannot be
predicted at this time, taking into account the uncertainty and risks
inherent in any litigation, management does not anticipate that the
ultimate disposition will have a material adverse effect on the Company.
<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 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 November 30, 2000, the Company reported
sales of approximately $671,500 as compared to sales of approximately
$438,800 during the quarter ended November 30, 1999, an increase of
approximately $232,700 or 53.0%. During the nine months ended November 30,
2000, the Company reported sales of approximately $1,826,100 as compared to
sales of approximately $1,496,100 during the nine months ended November 30,
1999, an increase of approximately $330,000 or 22.1%. 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 November 30, 2000 increased to
approximately $327,000 from operating income of approximately $188,500 for
the quarter ended November 30, 1999, an increase of approximately $138,500.
Operating income for the nine months ended November 30, 2000 increased to
approximately $775,200 from operating income of approximately $766,100 for
the nine months ended November 30, 1999, an increase of approximately
$9,100. This change resulted primarily from an increase in sales of
approximately $330,000 for the nine months ended November 30, 2000 as
compared to the nine months ended November 30, 1999, offset by increases in
cost of sales and selling, general and administrative expenses for the nine
months ended November 30, 2000 as compared to the nine months ended
November 30, 1999. Cost of sales for the nine months ended November 30,
2000 was approximately $551,500 as compared to cost of sales during the
nine months ended November 30, 1999 of approximately $385,400. During the
nine months ended November 30, 2000, the Company's selling, general and
administrative expenses were approximately $499,400 as compared to selling,
general and administrative expenses of approximately $345,300 for the nine
months ended November 30, 1999.
<PAGE>
During the three and nine months ended November 30, 2000, the
Company realized approximately $18,600 and $49,200, respectively, in
interest income as compared to approximately $13,100 and $32,400,
respectively, in interest income for the comparable periods of the prior
fiscal year.
During the quarter ended November 30, 2000, the Company reported
income before taxes of approximately $345,500 as compared to income before
taxes of approximately $201,700 for the three months ended November 30,
1999. For the nine months ended November 30, 2000, the Company reported
income before taxes of approximately $824,400 as compared to income before
taxes of approximately $798,500 for the nine months ended November 30,
1999. Net income after taxes was approximately $264,100 for the three
months ended November 30, 2000 as compared to income after taxes of
approximately $128,400 for the three months ended November 30, 1999. For
the nine months ended November 30, 2000, net income after taxes was
approximately $548,700 as compared to net income after taxes of
approximately $467,600 for the comparable period of the prior fiscal year.
Liquidity and Capital Resources
On November 30, 2000, the Company had working capital of
approximately $2,160,400, an equity to debt ratio of approximately 4.98 to
1, and stockholders' equity of approximately $2,561,200. On November 30,
2000, the Company had approximately $1,495,500 in cash and cash
equivalents, total assets of approximately $3,074,900 and total
liabilities of approximately $513,700. The Company believes that its
available cash, cash flow from operations and projected revenues will be
sufficient to fund the Company's operations for 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
534,700 shares have been repurchased under this program through November
30, 2000, at a cumulative cost of $136,178, which includes 40,000 shares
repurchased during the quarter ended November 30, 2000.
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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 was then an employee of the
Company) alleging similar claims. In December 2000, these
individuals instituted suit in the Superior Court of New Jersey,
Bergen County - Law Division, against the Company and the other
directors of the Company alleging claims pursuant to their past
employment as well as a derivative claim, as minority stockholders.
The Company believes such claims are without merit and intends to
defend such matter vigorously. Nevertheless, while the outcome of
this action cannot be predicted at this time, taking into account
the uncertainty and risks inherent in any litigation, management
does not anticipate that the ultimate disposition will have a
material adverse effect on the Company.
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, 2000.
None.
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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 12, 2001 By: /s/ Murray S. Cohen
Murray S. Cohen,
Chief Executive Officer
Dated: January 12, 2001 By: /s/ Murray S. Cohen
Murray S. Cohen,
Principal Financial Officer
