-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OHFsLKAzsoE+8SHgN1jzQtJbbF0923VcXLRXOvtQH6sJOOZQ8kPluX8nZruATPie NBR7RpDhxZbIZ256V44sag== 0000950135-98-003346.txt : 19980518 0000950135-98-003346.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950135-98-003346 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACE MEDICAL INC CENTRAL INDEX KEY: 0000814057 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 042867416 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-16257 FILM NUMBER: 98622767 BUSINESS ADDRESS: STREET 1: 391 TOTTEN POND RD CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6178905656 MAIL ADDRESS: STREET 1: 391 TOTTEN POND ROAD CITY: WALTHAM STATE: MA ZIP: 02154 10QSB 1 PACE MEDICAL INC. FORM 10-Q (PERIOD END 03/31/98) 1 FORM 10-QSB Securities and Exchange Commission Washington, D. C. 20549 (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 --------------------- OR [ ] 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 0-16257 ------------------------- PACE MEDICAL, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Massachusetts 04-2867416 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 391 Totten Pond Road, Waltham, Massachusetts 02154 -------------------------------------------------- (Address of principal executive offices ) (781) 890-5656 ---------------------------------------------------- (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 --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 12, 1998. 3,390,870 shares of Common Stock, par value $.01 per share 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. a) Consolidated Condensed Balance Sheets b) Consolidated Condensed Statements of Income c) Consolidated Condensed Statements of Cash Flows d) Notes to Consolidated Condensed Financial Statements -2- 3 PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1998 DECEMBER 31, 1997 -------------- ----------------- (Unaudited) (See note below) ASSETS - ------ Current assets: Cash and cash equivalents $ 1,389,879 $ 1,318,652 Accounts receivable 262,511 416,897 Inventories: Raw materials 280,857 235,464 Work-in-process 109,379 77,061 Finished goods 131,683 117,815 ----------- ----------- 521,919 430,340 Other current assets 63,314 43,208 ----------- ----------- Total current assets 2,237,623 2,209,097 Plant and equipment, net 45,386 41,681 Other assets 40,203 41,080 ----------- ----------- TOTAL ASSETS $ 2,323,312 $ 2,291,858 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $ 151,734 $ 129,509 Due to officer 0 7,110 Accrued expenses 40,942 26,619 ----------- ----------- Total current liabilities 192,676 163,238 ----------- ----------- Shareholders' equity: Common stock 34,009 34,009 Additional paid-in capital 3,147,151 3,147,151 Cumulative translation adjustment 110,554 102,899 Accumulated deficit (1,151,491) (1,155,439) ----------- ----------- 2,140,223 2,128,620 ----------- ----------- Less Treasury Stock, at Cost (9,687) 0 ----------- ----------- Total Shareholders' Equity 2,130,536 2,128,620 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,323,212 $ 2,291,858 =========== ===========
Note: The balance sheet at December 31, 1997 has been taken from the audited financial statements at that date. See accompanying notes to consolidated condensed financial statements. -3- 4 PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31 ---------------------------- 1998 1997 -------- -------- Net Sales $279,928 $461,841 Cost of sales 107,816 239,125 -------- -------- 172,112 222,716 Other operating expenses 179,341 155,940 -------- -------- Income from operations (7,229) 66,776 Other income 11,177 9,716 -------- -------- Net income before taxes 3,948 76,492 Provision for income taxes 0 0 -------- -------- Net income $ 3,948 $ 76,492 ======== ======== Net Income per Share: Basic $ .00 $ .02 ======== ======== Diluted $ .00 $ .02 ======== ======== See accompanying notes to consolidated condensed financial statements. -4- 5 PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED ---------------------------- MARCH 31 ---------------------------- 1998 1997 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,948 $ 76,492 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,138 (5,207) Change in assets and liabilities, net: 79,794 21,507 ---------- ---------- Net cash provided by operating activities 89,880 92,792 CASH FLOWS FROM INVESTING ACTIVITIES - Additions to property and equipment (8,966) (32,878) CASH FLOW FROM FINANCING ACTIVITIES - Purchase of treasury stock (9,687) 0 ---------- ---------- NET INCREASE IN CASH $ 71,227 $ 59,914 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $1,318,652 $1,029,666 CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,389,879 $1,089,580 ========== ========== See accompanying notes to consolidated condensed financial statements. -5- 6 PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY MARCH 31, 1998 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. The accompanying unaudited consolidated financial statements and these notes have been condensed and do not contain all disclosures required by generally accepted accounting principles. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company's annual report. 2. In the opinion of the Company, the accompanying unaudited condensed financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company and its wholly-owned subsidiary as of March 31, 1998 and December 31, 1997, and the results of their operations for the three months ended March 31, 1998 and March 31, 1997, and their cash flows for the three months ended March 31, 1998 and March 31, 1997. 3. The Company prepares its financial information using the same accounting principles as those used in its annual financial statements, except that no physical inventories were taken during the periods ended March 31, 1998 or 1997. Cost of sales for such periods was calculated primarily using standard cost methods. 4. The results of operations for the three months ended March 31, 1998 and 1997 are not necessarily indicative of the results to be expected for the full year. 5. The Company has adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" for purposes of presenting basic and diluted net income per share and has restated all periods presented to conform to the new presentation. The denominator used to determine basic net income per share includes the weighted average common shares outstanding during the quarter. The denominator used to determine diluted net income per share includes the shares used in the calculation of basic net income per share plus dilutive weighted average options outstanding during the period using the treasury-stock method. -6- 7
For the three months ended March 31, 1998 Income Shares Per Share (Numerator) (Denominator) Amount Net Income $3,948 Weighted-average shares outstanding - 3,400,183 ------ --------- Basic net income per share $3,948 3,400,183 $0.00 ===== Effect of dilutive securities - 85,621 ------ --------- Diluted net income per share $3,948 3,485,804 $0.00 ====== ========= ===== For the three months ended March 31, 1997 Income Shares Per Share (Numerator) (Denominator) Amount Net Income $76,492 Weighted-average shares outstanding - 3,400,850 ------- --------- Basic net income per share $76,492 3,400,850 $0.02 ===== Effect of dilutive securities - 188,819 ------- --------- Diluted net income per share $76,492 3,589,669 $0.02 ======= ========= =====
6. The Company has adopted the provisions of SFAS No. 130," Reporting Comprehensive Income". Comprehensive Income includes net income and foreign currency translation adjustments, which were $7,655 and ($23,775) for the three months ended March 31, 1998 and 1997, respectively. Accordingly, comprehensive income was $11,603 and $52,717, for the three months ended March 31, 1998 and 1997, respectively. -7- 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. FINANCIAL CONDITION As of March 31, 1998, the Company had cash and cash equivalents of $1,389,879 and working capital of $2,044,947. The essentially flat amount of $2,044,947 in working capital from the position at December 31, 1997 is attributable entirely to the break-even/slight profit from operations of $3,948. The Company's cash flows have historically tracked its operational results. The Company expects to maintain a sound financial base for the balance of 1998. Management continues to believe that the current level of working capital, coupled with the flexibility of the Company's cost structure, should suffice to ensure that on-going operations are financed adequately. FINANCIAL RESULTS - THREE MONTHS ENDED MARCH 31, 1998 VERSUS THE THREE MONTHS ENDED MARCH 31, 1997. Sales in the first quarter of 1998 decreased approximately 39% from sales posted in the first quarter of 1997. The decrease in sales reflects a decrease in sales by the Company to its OEM accounts. In addition, late delivery of components from vendors delayed the Company's ability to produce those devices scheduled for first quarter delivery. The Company expects this situation to improve during the second quarter. The Company's margins in the first quarter were higher than those achieved in the first quarter of 1997 (from 48% in 1997 to 62% in 1998). This occurred due to a change in product mix. It should be noted that pricing continued to remain firm on all products. Operating expenses increased during the first quarter of 1998 due to ISO-9001 approval requirements along with additional marketing costs. Management anticipates some increases in its operating expenditures over 1997 amounts during the balance of 1998. No tax provision was recorded for the three months ended March 31, 1998 owing to the Company's ability to use net operating loss carryforwards in both the U.S. and U.K. Net income for the quarter was $3,948 or $.00 per share in contrast to $76,492 or $.02 per share in the first quarter of 1997. -8- 9 FACTORS THAT MAY AFFECT FUTURE RESULTS From time to time, information provided by the Company or statements made by its employees may contain "forward-looking" information which involves risks and uncertainties. In particular, statements contained in this report which are not historical facts (including, but not limited to, the Company's expectations regarding business strategy, pricing, anticipated operating results, operating expenses and anticipated working capital) may be "forward-looking" statements. The Company's actual results may differ from those stated in any forward-looking statements. Factors that may cause such differences include, but are not limited to, risks associated with the introduction of new products, development of markets for new products offered by the Company, government regulation, competition and general economic conditions. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27. Financial Data Schedule (b) Reports on Form 8-K: None -9- 10 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 thereunto duly authorized. PACE MEDICAL, INC. --------------------------------- (Registrant) Date: May 14, 1998 RALPH E. HANSON ------------ --------------------------------- Ralph E. Hanson, President and Principal Executive Officer Date: May 14, 1998 RALPH E. HANSON ------------ --------------------------------- Ralph E. Hanson, Principal Financial Officer -10- EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 JAN-01-1998 MAR-31-1998 1,389,879 0 262,511 0 521,919 2,237,623 293,397 248,011 2,323,212 192,676 0 0 0 34,009 3,147,151 2,323,212 279,928 279,928 107,816 107,816 179,341 0 0 3,948 0 3,948 0 0 0 3,948 .00 .00
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