10-Q 1 a10-q.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED: JUNE 30,2000 COMMISSION FILE NO: 0-2172 THE FLAMEMASTER CORPORATION --------------------------- (Exact name of Registrant as specified in its Charter) NEVADA 95-2018730 ---------------------------------- ----------------------------- (State or other jurisdiction of (IRS Employer identification incorporation or organization) Number) 11120 SHERMAN WAY, SUN VALLEY, CALIFORNIA 91352 -------------------------------------------------------------------------------- (Address of Principal Executive Office) Registrant's telephone number including area code: (818) 982-1650 Registrant's facsimile number including area code: (818) 765-5603 Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 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 ------------------ ---------------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: JUNE 30, 2000 1,606,058 ------------------------------------ Item 1 Financial Information Item 1 Financial Statements

Note: Balance sheet as of September 30, 1999 has been derived from the audited balance sheet at that date. See notes to condensed financial statements. Item 1 Financial Statements (continued) THE FLAMEMASTER CORPORATION CONDENSED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED JUNE 30, 2000 ------------------------------------

**** Diluted earnings per share is not presented, as effect of the assumed conversion of preferred stock is anti-dilutive. See notes to condensed financial statements. Item 1 Financial Statements (continued) THE FLAMEMASTER CORPORATION CONDENSED STATEMENTS OF INCOME (UNAUDITED) NINE MONTHS ENDED JUNE 30, --------------------------------

***Diluted earnings per share is not presented, as the effect of the assumed conversion of preferred stock is anti-dilutive. See notes to condensed financial statements Item 1 Financial Statements (continued) THE FLAMEMASTER CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED JUNE 30, --------------------------------

See notes to Condensed Financial Statements. Item 1 Financial Statements (continued) THE FLAMEMASTER CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2000 Note 1: FORWARD-LOOKING AND CAUTIONARY STATEMENTS The Company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in the Company's filings with Securities and Exchange Commission and its reports to stockholders. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company is hereby identifying information that its forward-looking, including, without limitations, statements regarding the Company's future financial performance, the effect of government regulations, national and local economic conditions, the competitive environment in which the Company operates, results or success of discussions with other entitities on mergers, acquisitions, or alliance possibilities and expansion of product offerings. Actual results may differ materially from those described in the forward-looking statement. The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company. Note 2: BASIS OF PRESENTATION: The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation have been included. Operating results for the nine months and three months ended June 30, 2000 are not indicative of the results that may be expected for the year ending September 30, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended September 30, 1999. Item 1 Financial Statements ( continued) THE FLAMEMASTER CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2000 Note 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: INVESTMENT IN DEBT AND EQUITY SECURITIES: The Company adopted Statement of Financial Accounting Standards No: 115 ("SFAS No: 115"), Accounting for Certain Investments in Debt and Equity Securities, effective January 1,1995. Management determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determination at each balance sheet date. Debt securities for which the Company does not have the intent or ability to hold to maturity are classified as available for sale, along with the Company's investment in equity securities. Securities available for sale are carried at fair value, with the unrealized gains and losses reported in a separate component of shareholders' equity net of income taxes, until realized. At June 30, 2000 the Company had no investments that qualified as trading or held to maturity. The amortized cost of zero-coupon debt securities classified as available for sale is adjusted for accretion of discounts to maturity. Such amortization and interest are included in interest income. Realized gains and losses are included in other income or expense. The cost of securities sold is based on specific identification method. RECLASSIFICATION OF FINANCIAL STATEMENTS: Beginning in the first quarter of fiscal 2000, various items of portfolio income, which were previously classified as "other (income), expenses, net" are classified as "interest and other income" in the condensed Statements of Income. Amounts reported for the prior quarters have been reclassified to conform to the quarter 2000 presentation. Item 1 Financial Statements (continued) THE FLAMEMASTER CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30,2000 Note 4: Inventories are summarized as follows:

Note 5: During the nine months ended June 30, 2000, the Company purchased 3,807 shares of its outstanding common stock at a cost of $28,672. Note 6: MARKETABLE SECURITIES: Marketable securities classified as current assets at June 30, 2000 include the following:

The contractual maturities of debt securities available for sale at June 30, 2000 are as follows:

Gross unrealized holding gains and losses at June 30,2000 were $2,440,445 and $267,721, respectively. Realized gains from the sale of securities for the nine months ended June 30, 2000 were $238,543. THE FLAMEMASTER CORPORATION Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: JUNE 30, 2000 COMPARED TO SEPTEMBER 30, 1999 AND JUNE 30, 2000 COMPARED TO JUNE 30, 1999. FINANCIAL CONDITION AND LIQUIDITY: The Company's financial condition is strong with current assets of $8,907,675 compared to current liabilities of $412,905 at June 30, 2000 for a current ratio of better than 21.5 to 1. Working capital stood at $8,494,770 on June 30, 2000 compared to $5,716,492 at September 30, 1999 and $5,793,033 on June 30, 1999, a robust increase. The Company's strong financial performance and appreciation in marketable securities accounted for the increase. Accounts receivable increased moderately to $554,251 on June 30, 2000 from $496,776 on September 30, 1999. Inventories expanded to $1,098,329 from $873,504 at year end. Revenues for the June 30, 2000 period were $1,618,219 compared to $1,504,919 in the prior year. Investment gains accounted for the increase in revenues. Management believes that future working capital requirements will be provided primarily from operations and that the Company's liquidity and working capital requirements are adequate for the next 12 months of operation. Management believes that the Company's creditworthiness is substantial relative to its size. The Company paid a $.032 dividend on its common stock in May 2000 and it's Board of Directors declared a $.032 dividend to be paid in August 2000. RESULTS OF OPERATIONS: For the three month ended June 30, 2000 net income was $440,673 compared to $364,619 or $.27 per share vs. $.22 per share basic and fully diluted in the year earlier period. The increase in earnings were due to a higher level of investment gains. For the nine months ended June 30, 2000 the Company's net income was $988,576 compared to $692,457 or $.61 vs. $.42 per share. Laboratory costs including research and development for the quarter decreased modestly to $69,110 from $75,591 in the prior year's quarter. General and administrative expenses increased modestly to $154,598 for the quarter compared to $147,264 in the prior year's quarter. For the nine month period general and administrative expenses were $474,817 up modestly from the $448,342 in the year earlier period. Signatures: Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE FLAMEMASTER CORPORATION (Registrant) DATE: AUGUST 4, 2000 /s/ JOSEPH MAZIN --------------------- ------------------------------ (Signature) Joseph Mazin, President and Chairman and Chief Executive Officer DATE: AUGUST 4, 2000 /s/ BARBARA E. WAITE -------------------- ------------------------------ (Signature) Barbara E. Waite, Treasurer and Secretary DATE: AUGUST 4, 2000 /s/ DONNA MAZIN -------------------- ------------------------------- (Signature) Donna Mazin, Director

FLAMEMASTER CORP 10-Q