United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 31, 2002

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission File Number 0-18583

POLYMER SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)


Nevada, U.S.A.		88-0360526

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

312 Otterson Dr. Suite H
Chico, California 95928
Telephone: (530) 894-3585

(Address of principal executive offices)

(604) 683-3473

(Registrant’s telephone number, including area code)

Indicate by check mark whether the 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 o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of January 13, 2003.


Title of Class		No. of Shares

Common Shares, par value $0.001		9,252,192

POLYMER SOLUTIONS, INC. and SUBSIDIARIES
Quarterly Report on Form 10-Q
For the Three and Nine Months Ended December 31, 2002

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
1. Financial Statements
	Consolidated Balance Sheets
	Consolidated Statements of Operations
	Consolidated Statements of Cash Flows
	Notes to Consolidated Financial Statements
2. Management’s Discussion and Analysis of Financial Condition
PART II — OTHER INFORMATION
1. Legal Proceedings
2. Changes in Securities and Use of Proceeds
3. Defaults Upon Senior Securities
4. Submission of Matters to a Vote of Securities Holders
5. Other Information
6. Exhibits and Reports on Form 8-K

TABLE OF CONTENTS


Item				Page
Number				Number

		PART I — FINANCIAL INFORMATION

	1.	Financial Statements
			Consolidated Balance Sheets at December 31, 2002 and March 31, 2002	3
			Consolidated Statements of Operations for the three and nine months ended December 31, 2002 and 2001	4
			Consolidated Statements of Cash Flows for the nine months ended December 31, 2002 and 2001	5
			Notes to Consolidated Financial Statements	6
	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9

		PART II — OTHER INFORMATION
	1.	Legal Proceedings		16
	2.	Changes in Securities and Use of Proceeds		16
	3.	Defaults Upon Senior Securities		16
	4.	Submission of matters to a vote of securities holders		16
	5.	Other Information		16
	6.	Exhibits Index and Reports on Form 8-K		16

SIGNATURES				16

The accompanying interim consolidated financial statements and notes are unaudited: However, in the opinion of management, they reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods presented. Results of operations for the periods ended December 31, 2002 are not necessarily indicative of results expected for an entire year.

Polymer Solutions, Inc. and Subsidiaries

Consolidated Balance Sheets
(U.S. Dollars)


			December 31,			March 31,
			2002			2002

			(Unaudited)
Assets
Current assets:
	Cash		$	1,174,476		$	1,036,709
	Accounts receivable, net			1,755,588			1,653,506
	Inventories, net			1,582,376			1,358,223
	Prepaid expenses and other assets			125,652			166,750
	Deferred income taxes, current			455,000			421,600

		Total current assets		5,093,092			4,636,788
Fixed assets, net				444,492			498,938
Deferred income taxes				456,857			632,745
Goodwill, net				1,072,863			1,072,863

		Total assets	$	7,067,304		$	6,841,334

Liabilities and Shareholders’ Equity
Current liabilities:
	Accounts payable		$	1,140,955		$	1,069,142
	Payroll related and commissions payable			348,186			239,633
	Current portion of severance liability			69,450			118,261
	Current portion of capital lease obligations			78,277			174,621

		Total current liabilities		1,636,868			1,601,657
Long-term liabilities:
	Capital lease obligations			39,026			74,135
	Severance plan liability			86,150			182,575

		Total liabilities		1,762,044			1,858,367

Shareholders’ equity:
Preferred stock, $0.001 par value;
	Authorized — 4,000,000 shares; issued and outstanding — nil
Common stock, $0.001 par value;
	Authorized — 100,000,000 shares;
	December 31, 2002: issued — 9,620,464 and outstanding — 9,246,164			9,621			9,617
	March 31, 2002: issued — 9,616,964 and outstanding — 9,503,664
	Treasury stock, at cost; 374,300 and 113,300 shares at December 31, 2002 and March 31, 2002, respectively			(106,144	)		(35,153	)
Additional paid-in capital				12,106,070			12,102,497
Accumulated deficit				(6,704,287	)		(7,093,994	)

		Total shareholders’ equity		5,305,260			4,982,967

		Total liabilities and shareholders’ equity	$	7,067,304		$	6,841,334

The accompanying notes are an integral part of these financial statements

Polymer Solutions, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)
(U.S. Dollars)


		Three months ended December 31,						Nine months ended December 31,

		2002			2001			2002			2001

Sales revenue		$	3,814,494		$	3,490,215		$	11,453,212		$	11,029,419
Cost of goods sold			2,775,794			2,538,055			8,153,476			7,822,532

			1,038,700			952,160			3,299,736			3,206,887

Corporate and administrative expenses:
	Marketing and sales		301,582			273,363			872,220			823,676
	General and administrative		492,492			423,370			1,358,627			1,273,176
	Research and development		144,604			128,740			425,312			416,881

			938,678			825,473			2,656,159			2,513,733

Income from operations			100,022			126,687			643,577			693,154
Interest expense			(4,825	)		(14,679	)		(18,932	)		(61,048	)

Income before provision for income taxes			95,197			112,008			624,645			632,106
Income tax expense			41,528			47,695			234,938			249,827

Net income		$	53,669		$	64,313		$	389,707		$	382,279

Basic and diluted earnings per share		$	.01		$	.01		$	.04		$	.04

Weighted average basic number of shares outstanding			9,059,933			9,326,966			9,128,934			9,345,039

Weighted average diluted number of shares outstanding			9,153,214			9,326,966			9,157,750			9,345,039

The accompanying notes are an integral part of these financial statements.

Polymer Solutions, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)
(U.S. Dollars)


				Nine months ended December 31,

				2002			2001

Cash flows from operating activities:
	Net income			$	389,707		$	382,279
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			196,073			262,077
		(Gain) loss on disposals of fixed assets			(300	)		993
		Deferred income tax expense			142,488			205,828
		Stock based compensation			2,679			—
		Changes in operating assets and liabilities:
			Accounts receivable		(102,082	)		254,511
			Inventories		(224,153	)		54,722
			Prepaid expenses and other assets		40,301			(39,636	)
			Accounts payable		71,813			(386,358	)
			Payroll related and commissions payable		108,553			(19,204	)
			Severance plan liability		(145,236	)		(23,805	)

Net cash provided by operating activities					479,843			691,407

Cash flows from investing activities:
	Purchase of fixed assets				(140,830	)		(24,110	)
	Proceeds from disposals of fixed assets				300			3,450

Net cash used in investing activities					(140,530	)		(20,660	)

Cash flows from financing activities:
	Repurchase of stock				(70,991	)		(24,387	)
	Proceeds from issuance of stock				898			—
	Payments on operating line of credit, net				—			(340,991	)
	Payments of capital lease obligations				(131,453	)		(139,234	)

Net cash used in financing activities					(201,546	)		(504,612	)

Increase in cash					137,767			166,135
Cash, beginning of year					1,036,709			112,366

Cash, end of period				$	1,174,476		$	278,501

Supplemental schedule of non-cash investing and financing activities:
Acquisition of equipment under capital leases				$	—		$	24,490

Minority interest redemption or exchange of shares				$	—		$	27,655

The accompanying notes are an integral part of these financial statements.

Polymer Solutions, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1.		Basis of Presentation

		The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The consolidated financial statements include the accounts of the company and its wholly owned subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for this period are not necessarily indicative of the results to be expected for the whole year. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2002, as filed with the Securities and Exchange Commission.

2.		Inventories

		Inventories consist of the following:


	December 31,			March 31,
	2002			2002

Raw materials and supplies	$	1,082,531		$	882,163
Finished goods		748,014			724,811
Less allowance for slow-moving inventory		(248,169	)		(248,751	)

	$	1,582,376		$	1,358,223

3.		Earnings Per Share (“EPS”)

		The Company’s basic net income per share is computed by dividing net income by the weighted average number of outstanding common shares. The diluted EPS amounts are the same as the basic EPS for all periods presented. At December 31, 2002, there were options for 953,219 shares that were dilutive and included in the diluted EPS. At December 31, 2002, there were options for 148,898 shares that could potentially dilute basic EPS in the future.

4.		Commitments and Contingencies

		The Company is subject to environmental related claims in the normal course of business. Management believes these liabilities, if any, will not materially affect the Company’s financial position, results of operations or cash flows.

Polymer Solutions, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

5.		Common Stock

		During the quarter ended December 31, 2002, the Company repurchased and returned to treasury an aggregate of 16,000 shares of its common stock for $4,591. For the nine month period ended December 31, 2002, the Company repurchased and returned to treasury an aggregate of 261,000 shares of its common stock for $70,991.

		During the quarter ended December 31, 2002, the Company issued 3,500 shares of its common stock on the exercise of stock options at an exercise price of $0.26 (Cdn $0.40) per share.

		On August 15, 2002, 2,426,397 outstanding stock options and warrants granted to employees, officers, consultants and directors, with exercise prices between $.78 and $.53 per share, were reissued and repriced into options to purchase 816,719 shares at an exercise price of $0.26 (Cdn$0.40) per share. The repriced options are being accounted for as variable from August 15, 2002 to the date the options are exercised, forfeited, or expire unexercised. As of December 31, 2002, $2,679 of expense has been incurred in connection with these variable options.

		On August 15, 2002, the shareholders of the Company approved an increase in authorized common shares from 20,000,000 to 100,000,000 shares.

6.		Recently Issued Accounting Standards

		In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. They also issued SFAS No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets, and SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, in August and October 2001, respectively.

		SFAS No. 141 requires all business combinations initiated after June 30, 2001 be accounted for under the purchase method. SFAS No. 141 supersedes Accounting Principles Board (APB) Opinion No. 16, Business Combinations, and SFAS No. 38, Accounting for Pre-acquisition Contingencies of Purchased Enterprises.

		SFAS No. 142 addresses the financial accounting and reporting for acquired goodwill and other intangible assets. Under the new rules, amortization of goodwill and other intangible assets with indefinite lives is no longer required but intangible assets will be subject to periodic testing for impairment. SFAS No. 142 supersedes APB Opinion No. 17, Intangible Assets. The Company adopted the provisions of SFAS No. 142 effective April 1, 2002, which will have a positive impact on its consolidated results of operations and financial position, as the Company stopped recording amortization expense in connection with the goodwill related to the USC acquisition.

Polymer Solutions, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

		SFAS No. 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS No. 143 is effective in fiscal years beginning after June 15, 2002, with early adoption permitted. The Company expects that the provisions of SFAS No. 143 will not have a material impact on its consolidated results of operations, financial position and cash flows upon adoption. The Company plans to adopt SFAS No. 143 effective April 1, 2003.

		SFAS No. 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS No. 144 superseded SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and APB Opinion No. 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The Company adopted the provisions of SFAS No. 144 effective April 1, 2002, which did not have a material impact on its consolidated results of operations, financial position and cash flows.

7.		Subsequent Event

		Subsequent to December 31, 2002, the Company issued 203,451 stock options with a three year term at an exercise price of $0.44 (Cdn $0.68) per share. The options were issued to employees, officers, and consultants. In addition, the Company issued an aggregate of 80,000 stock options with a three-year term at an exercise price of $0.28 (Cdn $0.43) per share to outside directors.


Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Nine Months Ended December 31, 2002

OVERVIEW

Polymer Solutions, Inc. (the “Company”), develops, manufactures and distributes paints, coatings and adhesives to various industries, primarily in California. In 1998, PSI constructed a new production facility in Chico, California that allows the Company significant growth opportunities both internally and by way of acquisition. Presently, this facility has excess production capacity and with the addition of a minor amount of capital equipment and some additional labor, capacity can be increased significantly.

RESULTS OF OPERATIONS

Sales revenues increased 9% to $3,814,494 for the three months ended December 31, 2002, compared to the same prior year period. Sales revenues for the nine months ended December 31, 2002 increased 4% to $11,453,212 compared to the same prior year period.

Gross profit for the third quarter increased 9% to $1,038,700 from $952,160 for the comparable period last year. For the nine months ended December 31, 2002 gross profit remained fairly constant at $3,299,736 compared to $3,206,887 in the same prior year period. The gross profit percentage also remained constant at 27% for the three months ended December 31, 2002 and 2001. The gross profit percentage was 29% for the nine months ended December 31, 2002 and 2001.

Marketing and sales expense for the three months ended December 31, 2002 totaled $301,582, an increase of 10% from $273,363 in the comparable prior year period. For the nine months ended December 31, 2002 marketing and sales expense totaled $872,220, an increase of 6% from $823,676 in the comparable prior year period. The third quarter increases are primarily due to increased marketing and sales wages and commissions.

General and administrative expenses for the three months ended December 31, 2002 were $492,492, an increase of 16% from $423,370 for the same prior year period. For the nine months ended December 31, 2002 general and administrative expenses were $1,358,627, versus $1,273,176 for the same prior year period. The third quarter increases are primarily due to increased consulting and legal fees.

Research and development expenses were $144,604 for the three months ended December 31, 2002, versus $128,740 for the same prior year period, reflecting a 12% increase. This increase is primarily due to lab supplies and employee benefits. For the nine months ended December 31, 2002 research and development costs were $425,312, versus $416,881 for the same prior year period, a 2% increase.

Interest expense totaled $4,825 for the three months ended December 31, 2002 compared to $14,679 in the same prior year period reflecting a 67% decrease due to a pay down of the operating line of credit and lower interest rates. For the nine months ended December 31, 2002 interest expense totaled $18,932 compared to $61,048 in the same prior year period reflecting a 69% decrease, also due to the pay down of the operating line of credit and lower interest rates.


Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Nine Months Ended December 31, 2002

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2002 the Company had $1,174,476 in cash compared to $1,036,709 at the end of fiscal 2002. Cash flow provided by operating activities totaled $479,843 for the first nine months of fiscal year 2003, versus cash provided by operations of $691,407 in the comparable prior year period. This decrease is primarily due to payment of severance liability, as well as the timing of payments to vendors. Capital additions were $140,830 in the nine months ended December 31, 2002, compared to $24,110 for the same period a year ago due to the purchase of operating software upgrades. Cash payments for repurchase of stock were $70,991 during the nine months ended December 31, 2002 versus $24,387 in the comparable prior period.

The Company has a positive working capital of $3,456,224 at December 31, 2002, versus $3,035,131 at March 31, 2002. The current ratio at December 31, 2002 was 3.1:1 compared with 2.9:1 for the fiscal 2002 year end ratio.

RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. They also issued SFAS No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets, and SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, in August and October 2001, respectively.

SFAS No. 141 requires all business combinations initiated after June 30, 2001 be accounted for under the purchase method. SFAS No. 141 supersedes Accounting Principles Board (APB) Opinion No. 16, Business Combinations, and SFAS No. 38, Accounting for Pre-acquisition Contingencies of Purchased Enterprises.

SFAS No. 142 addresses the financial accounting and reporting for acquired goodwill and other intangible assets. Under the new rules, amortization of goodwill and other intangible assets with indefinite lives is no longer required but intangible assets will be subject to periodic testing for impairment. SFAS No. 142 supersedes APB Opinion No. 17, Intangible Assets. The Company adopted the provisions of SFAS No. 142 effective April 1, 2002, which will have a positive impact on its consolidated results of operations and financial position, as the Company stopped recording amortization expense in connection with the goodwill related to the USC acquisition.

SFAS No. 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS No. 143 is effective in fiscal years beginning after June 15, 2002, with early adoption permitted. The Company expects that the provisions of SFAS No. 143 will not have a material impact on its consolidated results of operations, financial position and cash flows upon adoption. The Company plans to adopt SFAS No. 143 effective April 1, 2003.

SFAS No. 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS No. 144 superseded SFAS No. 121, Accounting


Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Nine Months Ended December 31, 2002

for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and APB Opinion No. 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The Company adopted the provisions of SFAS No. 144 effective April 1, 2002, which did not have a material impact on its consolidated results of operations, financial position and cash flows.

OUTLOOK

The Company is pursuing additional internal sales growth, and will continue to aggressively seek opportunities to create a meaningful increase in shareholder value for our investors through future acquisitions, joint ventures, and other strategic alliances that will utilize capacity of our state of the art manufacturing plant by adding new customers and improved products.

SIGNIFICANT ACCOUNTING POLICIES

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Our significant accounting policies are described in Note 2 to the financial statements included in Item 7 on Form 10-K filed with the Company’s Annual Report for the year ended March 31, 2002.

DESCRIPTION OF NEVADA LAW

Nevada’s “Combination with Interested Stockholders Statute,” Nevada Revised Statutes §§78.411-78.444, which applies to Nevada corporations having at least 200 stockholders of record and a class of voting shares registered with the Securities and Exchange Commission under Section 12 of the Act (unless the corporation has otherwise effectively opted-out of the provisions of the statutes), prohibits an “interested stockholder” from entering into a “combination” with the corporation, unless certain conditions are met. A “combination” includes (a) any merger with an “interested stockholder,” or any other corporation which is or after the merger would be, an affiliate or associate of the interested stockholder, (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets, in one transaction or a series of transactions, to an “interested stockholder,” having (i) an aggregate market value equal to 5% or more of the aggregate market value of the corporation’s assets; (ii) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation; or (iii) representing 10% or more of the earning power or net income of the corporation, (c) any issuance or transfer of shares of the corporation or its subsidiaries, to the “interested stockholder,” having an aggregate market value equal to 5% or more of the aggregate market value of all the outstanding shares of the corporation, (d) the adoption of any plan or proposal for the liquidation a dissolution of the corporation proposed by the “interested stockholder,” (e) certain transactions which would result in increasing the proportionate share of shares of the corporation owned by the “interested stockholder,” or (f) the receipt of benefits, except proportionately as a stockholder, of any loans, advances or other financial benefits by an “interested stockholder.” An “interested stockholder” is a person who, together with affiliates


Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Nine Months Ended December 31, 2002

and associates, beneficially owns (or within the prior three years, did beneficially own) 10% or more of the corporation’s voting stock.

A corporation to which the statute applies may not engage in a “combination” with an “interested stockholder” within three years after the date on which the interested stockholder acquired its shares, unless the combination or the interested stockholder’s acquisition of shares was approved by the board of directors before the interested stockholder acquired such shares. If this approval was not obtained, after the three-year period expires, the combination may be consummated if all the requirements in the Articles are met, if any, and either (a) (i) the board of directors of the corporation approves, prior to such person becoming an “interested stockholder”, the combination or the purchase of shares by the “interested stockholder” or (ii) the combination is approved by the affirmative vote of holders of a majority of voting power not beneficially owned by the “interested stockholder” at a meeting called no earlier than three years after the date the “interested stockholder” became such or (b) (x) the aggregate amount of cash and the market value of consideration other than cash to be received by holders of common shares and holders of any other class or series of shares meets the minimum requirements set forth in Section 78.441 through 78.443, inclusive, and (y) prior to the consummation of the combination, except in limited circumstances, the “interested stockholder” will not have become the beneficial owner of additional voting shares of the corporation. The Company believes that it currently has over 200 stockholders of record and a class of voting shares registered with the Securities and Exchange Commission under Section 12 of the Act. As a result, since the Company has not opted-out of the provisions of the statutes, the Company believes that it may be subject to the provisions of these statutes.

Nevada’s “Control Share Acquisition Status,” Nevada Revised Statute §§78.378-78.3793, prohibits an acquiror, under certain circumstances, from voting shares of a target corporation’s stock after crossing certain threshold ownership percentages, unless the acquiror obtains the approval of the target corporation’s stockholders. The Control Share Acquisition Statute only applies to Nevada corporations with at least 200 stockholders, including at least 100 record stockholders who are Nevada residents, and which do business directly or indirectly in Nevada. The Company does not intend to “do business” in Nevada within the meaning of the Control Share Acquisition Statute. Therefore, it is unlikely that the Control Share Acquisition Statute will apply to the Company. The statute specifies three thresholds: at least one-fifth but less than one-third, at least one-third but less and a majority, and a majority or more, of the outstanding voting power. Once an acquiror crosses one of the above thresholds, shares which it acquired in the transaction taking it over the threshold or within ninety days become “Control Shares” which are deprived of the right to vote until a majority of the disinterested stockholders restore that right. A special stockholders’ meeting may be called at the request of the acquiror to consider the voting rights of the acquiror’s shares no more than 50 days (unless the acquiror agrees to a later date) after the delivery by the acquiror to the corporation of an information statement which sets forth the range of voting power that the acquiror has acquired or proposes to acquire and certain other information concerning the acquiror and the proposed control share acquisition. If no such request for a stockholders’ meeting is made, consideration of the voting rights of the acquiror’s shares must be taken at the next special or annual stockholders’ meeting. If the stockholders fail to restore voting rights to the acquiror or if the acquiror fails to timely deliver an information


Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Nine Months Ended December 31, 2002

statement to the corporation, then the corporation may, if so provided in its Articles of Incorporation or By-Laws, call certain of the acquiror’s shares for redemption. The Company’s Articles of Incorporation and By-Laws do not currently permit it to call an acquiror’s shares for redemption under these circumstances. The Control Share Acquisition Statute also provides that in the event the stockholders who do not vote in favor of restoring voting rights to the Control Shares may demand payment for the “fair value” of their shares (which is generally equal to the highest price paid in the transaction subjecting the stockholder to the statute).

The provisions described above, together with the ability of the Board of Directors to issue Preferred Stock may have the effect of delaying or deterring a change in the control or management of the Company.

RISK FACTORS

The following risk factors and other information included in this Quarterly Report should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks occur, our business, financial condition, operating results and cash flows could be materially adversely affected.

We are dependent solely on the operations of our wholly owned subsidiary, AMT USA, and its success in a highly competitive business, which has a number of inherent risks. These may be summarized as follows:

• Our success is largely predicated upon our ability to produce superior products to meet the needs of manufacturers, satisfy government environmental guidelines, maintain quality standards and sell our products at competitive prices. Our markets are subject to intense competition from both private and public businesses, many of who have greater financial resources and considerably larger operations than us and may benefit from greater name recognition than us. Such competition as well as any future competition may adversely affect our success in the market place. There can be no assurance that we will continue to be able to successfully compete against our competitors or that the competitive pressures faced by us will not affect our financial performance.

• Our business places heavy reliance on the research and development of our formulated coating and adhesive products. Our products represent significant intellectual property assets. This proprietary position reflects a technology and expertise that enables us to provide products that meet customer and regulatory expectations and therefore we continually offer our customers several additional advantages over our competitors to attain their confidences and sustain our sales. Even though we strictly maintain policies and procedures for strict internal confidentiality, patent protection and binding non-disclosure agreements it is not certain that our intellectual assets will be protected and not made available to our competitors.


Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Nine Months Ended December 31, 2002

• We are required to comply with the Federal Environmental Protection Agency (“EPA”) and, in particular, the 1990 Clean Air Act and the Toxic Substance Control Act and the State of California’s South Coast Air Quality Management District (“SCAQMD”). Government and environmental regulations are driving research and development efforts towards reducing the amount of pollution generated during their manufacturing process. There can be no assurance that existing regulations and licensing will not be amended in a way that negatively impacts our business. There can be no assurance that we will be able to comply with all regulations, which may be in force from time to time and expenditures for necessary corrective actions would be economical. In either event, a material adverse effect on the results of our operations could be expected.

• Our market is based upon a large number of small manufacturers in the California area. Poor market conditions and inflation or other unanticipated events may result in lower revenues than anticipated, making certain planned expenditures on advertising, promotion and research and development projects unachievable.

• We intend to commence an aggressive sales growth strategy to markets in other states, which may not prove profitable due to acceptance of our products or increased costs in providing our products due to raw materials or delivery costs, which in turn could result in decreased margins.

• Should we undertake strategic acquisitions requiring funds in excess of our internally generated cash flow, we might be required to incur additional debt or seek additional financing through private placements. In either case, we may not be able to obtain such funds in sufficient quantities on terms we consider acceptable and there is no assurance that we will operate profitably in the future.

• We are dependent on a relatively small number of key employees, the loss of any would have a significant adverse effect on the Company. We do not carry key-man insurance on any of our employees.

FORWARD-LOOKING STATEMENTS

Some statements and information contained in this Quarterly Report are not historical facts, but are forward-looking statements. They can be identified by the use of forward-looking words such as “believes,” “expects,” “plans,” “may,” “will,” “would,” “could,” “should” or “anticipates” or other comparable words, or by discussions of strategy, plans or goals that involve risks and uncertainties that could cause actual results to differ materially from those currently anticipated. We warn you that these forward-looking statements are only predictions, subject to risks and uncertainties. Actual events or results can differ materially from those expressed or implied as a result of a variety of factors. For a discussion of important factors that could cause results to differ materially from the forward-looking statements contained in this Quarterly Report, see “Risk Factors”.

Please read the above discussion together with the consolidated financial statements and the related notes included elsewhere in this Quarterly Report.


Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Nine Months Ended December 31, 2002

NOTICE OF INTENTION TO MAKE A NORMAL COURSE ISSUER BID

On December 10, 2001, amended June 6, 2002, the Company filed a Notice to purchase an aggregate of 476,143 shares of the Company’s common stock through the facilities of the TSX Venture Exchange, which expired on December 17, 2002. During the quarter ended December 31, 2002, the Company repurchased and returned to treasury an aggregate of 16,000 shares of its common stock for $4,591. Pursuant to the Notice, the Company purchased and returned to Treasury and aggregate of 300,500 shares for a cash consideration of $81,757 during the period December 17, 2001 through December 17, 2002.

PART II — OTHER INFORMATION


Item 1.		Legal Proceedings
		No significant proceedings.
Item 2.		Changes in Securities and Use of Proceeds
		During December 2002, the Company repurchased and returned to treasury an aggregate of 16,000 shares of its common stock for $4,591. During the quarter ended December 31, 2002, the Company issued 3,500 shares on the exercise of stock options at an exercise price of $0.26 (Cdn $0.40) per share.
Item 3.		Defaults Upon Senior Securities
		None
Item 4.		Submission of Matters to a Vote of Securities Holders
		None
Item 5.		Other Information
		None
Item 6.		Exhibits and Reports on Form 8-K
		No reports filed under Form 8-K during the period.

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.


		POLYMER SOLUTIONS, INC. (Registrant)

Date: January 30, 2003		/s/ Flanagan E. Laughlin Flanagan President and CEO

CERTIFICATION

I, E. Laughlin Flanagan, President and CEO, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Polymer Solutions, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report; and

3. Based on my knowledge, the financial statements, and other financial information included in the report, fairly presents, in all material respects, the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in the report.


Date: January 30, 2003		/s/ Flanagan E. Laughlin Flanagan President and CEO

CERTIFICATION

Pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, I, E. Laughlin Flanagan, certify that:

1. I have read this quarterly report on Form 10-Q of Polymer Solutions, Inc.;

2. To my knowledge, this report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

3. To my knowledge, the information in this report fairly presents, in all material respects, the financial condition and results of operations as of December 31, 2002.


Date: January 30, 2003		/s/ Flanagan E. Laughlin Flanagan President and CEO

CERTIFICATION

I, Charlene Bellante, Corporate Controller, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Polymer Solutions, Inc.;


Date: January 30, 2003		/s/ Bellante Charlene Bellante Corporate Controller

CERTIFICATION

Pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, I, Charlene Bellante, certify that:

1. I have read this quarterly report on Form 10-Q of Polymer Solutions, Inc.;

2. To my knowledge, this report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

3. To my knowledge, the information in this report fairly presents, in all material respects, the financial condition and results of operations as of December 31, 2002.


Date: January 30, 2003		/s/ Bellante Charlene Bellante Corporate Controller

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POLYMER SOLUTIONS INC 10-Q