-----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, C1txenfRqIwa/nvXlbj5ijr2mKQFhzyvjAmlAmbO1ApWyNrMdl99W5zISEalCGqU 9zj+oNh5UmGOYeWnbkyBrw== 0001047469-99-031793.txt : 19990816 0001047469-99-031793.hdr.sgml : 19990816 ACCESSION NUMBER: 0001047469-99-031793 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: 99687914 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 10QSB 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 JUNE 30, 1999 --------------------------- 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 small business issuer 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 02451 -------------------------------------------------- (Address of principal executive offices ) (781) 890-5656 ------------------------ (Issuer's telephone number, including area code) Indicate by check mark whether the issuer (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 August 13, 1999. 3,375,870 shares of Common Stock, par value $.01 per share PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. a) Condensed Consolidated Balance Sheets b) Condensed Consolidated Statements of Income c) Condensed Consolidated Statements of Cash Flows d) Notes to Condensed Consolidated Financial Statements - 2 - PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 DECEMBER 31, 1998 ------------- ----------------- (Unaudited) (See note below) ASSETS Current assets: Cash and cash equivalents $1,397,447 $1,257,700 Accounts receivable 374,168 350,916 Inventories: Raw materials 230,305 255,821 Work-in-process 189,392 176,999 Finished goods 127,257 160,125 ------------ ------------ 546,954 592,945 Other current assets 38,881 43,749 ------------ ------------ Total current assets 2,357,450 2,245,310 Plant and equipment, net 107,736 46,130 Other assets 516 35,183 ------------ ------------ TOTAL ASSETS $2,465,702 $2,326,623 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $101,923 $114,823 Accrued expenses 16,768 40,490 ------------ ------------ Total current liabilities 118,691 155,313 ------------ ------------ Shareholders' equity: Common stock 34,009 34,009 Additional paid-in capital 3,147,151 3,147,151 Cumulative translation adjustment 76,765 104,836 Accumulated deficit (892,227) (1,095,999) 2,365,698 2,189,997 ------------ ------------ Less Treasury Stock, at Cost (18,687) (18,687) ------------ ------------ Total Shareholders' Equity 2,347,011 2,171,310 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,465,702 $2,326,623 ------------ ------------ ------------ ------------
Note: The balance sheet at December 31, 1998 has been taken from the audited financial statements at that date. See accompanying notes to condensed consolidated financial statements. - 3 - PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the three months For the six months Ended June 30 ended June 30 ---------------------- ----------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Net Sales $ 431,229 $ 477,971 $ 951,144 $ 757,899 Cost of sales 126,287 185,869 338,391 293,685 --------- --------- --------- --------- 304,942 292,102 612,753 464,214 Other operating expenses 216,067 272,489 430,113 451,830 --------- --------- --------- --------- Income from operations 88,875 19,613 182,640 12,384 Other income (10,551) (12,264) (21,132) (23,441) --------- --------- --------- --------- Net income $ 99,426 $ 31,877 $ 203,772 $ 35,825 --------- --------- --------- --------- --------- --------- --------- --------- Net income per share: Basic $ .03 $ .01 $ .06 $ .01 --------- --------- --------- --------- --------- --------- --------- --------- Diluted $ .03 $ .00 $ .06 $ .01 --------- --------- --------- --------- --------- --------- --------- ---------
See accompanying notes to condensed consolidated financial statements. - 4 - PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30 -------------------------- 1999 1998 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 203,772 $ 35,825 Adjustments to reconcile net income to net cash (Used in) provided by operating activities: Depreciation and amortization 9,717 7,743 Change in assets and liabilities, net: (2,678) (169,743) --------- --------- Net cash (used in) provided by operating activities 210,811 (126,175) CASH FLOWS FROM INVESTING ACTIVITIES - Purchases of property and equipment (71,064) (11,993) CASH FLOW FROM FINANCING ACTIVITIES - Purchase of treasury stock - (9,687) --------- --------- NET INCREASE IN CASH AND 139,747 (147,855) CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $1,257,700 $1,318,652 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,397,447 $1,770,797 --------- --------- --------- ---------
See accompanying notes to condensed consolidated financial statements. - 5 - PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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. See notes to 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, all of which are normal and recurring, necessary to present fairly the financial position of the Company and its wholly-owned subsidiary as of June 30, 1999 and the results of their operations for the three and six months ended June 30, 1999 and June 30, 1998 and their cash flows for the six months ended June 30, 1999 and June 30, 1998. 3. The Company prepares its financial information using the same accounting principles as for its annual financial statements except that no physical inventories were taken during either of the periods ended June 30, 1999 or 1998. Cost of sales for such periods was calculated primarily using standard cost methods. 4. The results of operations for the three and six months ended June 30, 1999 are not necessarily indicative of the results to be expected for the full year. 5. 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 the weighted average options outstanding during the period using the treasury-stock method.
For the three months ended June 30, 1999 Income Shares Per Share (Numerator) (Denominator) Amount Net Income $99,426 Weighted-average shares outstanding - 3,375,870 ------- --------- Basic net income per share $99,426 3,375,870 $0.03 ----- ----- Effect of dilutive securities - 62,232 ------- --------- Diluted net income per share $99,426 3,438,102 $0.03 ------- --------- ----- ------- --------- -----
- 6 -
For the three months ended June 30, 1998 Income Shares Per Share (Numerator) (Denominator) Amount Net Income $31,877 Weighted-average shares outstanding - 3,390,850 ------- --------- Basic net income per share $31,877 $0.01 ----- ----- Effect of dilutive securities - 96,505 ------- --------- Diluted net income per share $31,877 3,487,355 $0.00 ------- --------- ----- ------- --------- -----
For the six months ended June 30, 1999 Income Shares Per Share (Numerator) (Denominator) Amount Net Income $ 203,772 Weighted-average shares outstanding - 3,375,870 -------- --------- Basic net income per share $ 203,772 3,375,870 $0.06 ----- Effect of dilutive securities - 48,405 -------- --------- Diluted net income per share $ 203,772 3,424,275 $0.06 -------- --------- ----- -------- --------- -----
For the six months ended June 30, 1998 Income Shares Per Share (Numerator) (Denominator) Amount Net Income $ 35,825 Weighted-average shares outstanding - 3,395,517 -------- --------- Basic net income per share $ 35,825 3,395,517 $0.01 ----- ----- Effect of dilutive securities - 90,883 -------- --------- Diluted net income per share $ 35,825 3,486,400 $0.01 -------- --------- ----- -------- --------- -----
6. The Company has adopted the provisions of SFAS No. 130," Reporting Comprehensive Income". Comprehensive income includes net income and foreign currency translation adjustments. Comprehensive income for the three and six months ended June 30, 1999 and 1998 is as follows: - 7 -
Three Months Ended Six Months Ended June 30, June 30, -------- -------- 1999 1998 1999 1998 ---- ---- ---- ---- Net Income $99,426 $ 31,877 $203,772 $ 35,825 Currency Translation Adjustment (12,638) 9,689 (28,072) (2,034) -------- --------- --------- ------- Total $86,788 $41,566 $175,700 $33,791 -------- --------- --------- ------- -------- --------- --------- -------
- 8 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION As of June 30, 1999, the Company had cash and cash equivalents of $1,397,447 and working capital of $2,238,759. Working capital increased $148,762 since December 31, 1998 owing to the profitable operations of the Company over the first half of the year. The Company's cash flows have historically tracked its operational results. The Company expects to maintain a sound financial base for the balance of fiscal 1999. 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 JUNE 30, 1999 VERSUS THREE MONTHS ENDED JUNE 30, 1998 Sales in the second quarter of 1999 decreased 10% from the sales posted in the second quarter of 1998. The decrease in sales was caused by our inability to ship outstanding orders due to parts shortages. The Company's margins in the second quarter increased over those seen in 1998 (from 61% in 1998 to 71% in 1999). This occurred due to a change in the product mix. It should be noted that pricing is continuing to remain firm on all products. Operating expenses were lower in the three months ended June 30, 1999 versus the three months ended June 30, 1998. Management anticipates some increase in its operating expenditures during the balance of 1999. No tax provision was recorded for the three months ended June 30, 1999 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 $99,426 or $.03 per share, representing an increase of 212% from the comparable quarter in 1998. - 9 - FINANCIAL RESULTS - SIX MONTHS ENDED JUNE 30, 1999 VERSUS SIX MONTHS ENDED JUNE 30, 1998 Sales in the six months ended June 30, 1999 increased from the amount posted in the six months ended in June 30, 1998. The increase in sales is primarily attributed to higher volumes of products shipped to its OEM accounts and a distributor. The Company expects this situation to continue during the second half of fiscal 1999. The Company's margins for the year-to-date period were slightly higher than those achieved in the first half of 1998 (from 61% in 1998 to 64% in 1999). This occurred due to a change in the product mix. It should be noted that pricing continued to remain firm on all products. Operating expenses were lower for the six months ended June 30, 1999 versus the six months ended June 30, 1998. Management anticipates some increase in its operating expenditures during the balance of 1999. No tax provision was recorded for the six months ended June 30, 1999 owing to the Company's ability to use net operating loss carryforwards in both the U.S. and U.K. Net income for the six months was $203,772 or $.06 per share, representing an increase of 469% from the comparable period in 1998. - 10 - 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, the Company's relationships with distributors and OEM's, the economic health of such OEM's, government regulation, competition and general economic conditions. YEAR 2000 The Year 2000 presents potential concerns for businesses. The consequences of this issue may include systems failures and business process interruption due to calculation problems with the use of 2-digit date formats as the year changes from 1999 to 2000. The Company's products do not use date fields, therefore, the Year 2000 issue should not affect the Company's products. All organizations dealing with the Year 2000 must address the effect this issue will have on their third-party supply chain. The Company has undertaken steps to identify its vendors and to formulate a system of working with key third parties to understand their ability to continue providing services and products through the change to 2000. The Company will work directly with its key vendors and distributors to avoid any business interruptions in 2000. The Year 2000 issue also affects the Company's internal systems, including information technology (IT) and non-IT systems. The Company has assessed the readiness of its systems for handling the Year 2000. Management currently believes that all material systems are Year 2000 compliant; the costs to address Year 2000 compliance were not material. Currently, the Company does not plan to develop a contingency plan for Year 2000 compliant internal systems or for continuing to do business with key third parties since the Company believes its internal systems and those of its key vendors will not be adversely affected by the change to the Year 2000. The impact of the Year 2000 on future revenue is difficult to discern but is a risk to be considered. - 11 - 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 - 12 - 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: AUGUST 13, 1999 /S/ RALPH E. HANSON ------------------ ------------------------------ Ralph E. Hanson, President and Chief Executive Officer (principal executive officer) Date: AUGUST 13, 1999 /S/ RALPH E. HANSON ------------------ ------------------------------ Ralph E. Hanson, Chief Financial Officer (principal financial officer) - 13 - EX-27 2 EX-27
5 3-MOS 6-MOS DEC-31-1999 DEC-31-1999 APR-01-1999 JAN-01-1999 JUN-30-1999 JUN-30-1999 1,397,447 1,397,447 0 0 374,168 374,168 0 0 546,954 546,954 2,357,450 2,357,450 107,736 107,736 0 0 2,465,702 2,465,702 118,691 118,691 0 0 0 0 0 0 34,009 34,009 2,313,002 2,313,002 2,465,702 2,465,702 431,229 951,144 431,229 951,144 126,287 338,391 342,354 768,504 0 0 0 0 0 0 99,426 203,772 0 0 99,426 203,772 0 0 0 0 0 0 99,426 203,772 0.03 0.06 0.03 0.06
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