-----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, E3Dg6+NJA0XcadrEAwAwhiWkBe16VYQBflMOzTCA2zCDkm8VN31lDPuQsYX72A/I +VL8Phsnv4aUeuV+LbQ2bA== 0000868268-96-000011.txt : 19961118 0000868268-96-000011.hdr.sgml : 19961118 ACCESSION NUMBER: 0000868268-96-000011 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAMET SYSTEMS INC CENTRAL INDEX KEY: 0000868268 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 042985838 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-36989 FILM NUMBER: 96665381 BUSINESS ADDRESS: STREET 1: 1000 MAIN ST CITY: ACTON STATE: MA ZIP: 01720 BUSINESS PHONE: 5082632060 MAIL ADDRESS: STREET 2: 1000 MIN STREET CITY: ACTON STATE: MA ZIP: 01720 10QSB 1 PAMET SYSTEMS 10-QSB FOR Q3 1996 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________ FORM 10-QSB Mark one [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from _________to _________ Commission File No. 1-10623 Pamet Systems, Inc. ____________________________________________________________________ (Exact name of small business issuer as specified in its charter) Massachusetts 04-2985838 ____________________________________________________________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1000 Main Street, Acton, Massachusetts 01720 ____________________________________________________________________ (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (508) 263-2060 Check whether the issurer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 close of the period covered by this report: Title of each class Number of shares outstanding Common stock 2,068,950 ($.01 par value) Transitional Small Business Disclosure Format YES______ NO___X___ PAMET SYSTEMS, INC. INDEX TO FORM 10-QSB PAGE Part I - Financial Information Item 1 - Financial Statements Condensed Balance Sheets 1 September 30, 1996 and December 31, 1995 Condensed Statements of Operations 2 for the quarter ended September 30, 1996 and 1995 and nine months ended September 30, 1996 and 1995 Condensed Statement of Cash Flows 3-4 for the nine months ended September 30, 1996 and 1995 Item 2 - Management's Discussion and Analysis of 6-8 Financial Condition or Plan of Operations Part II - Other Information Item 1 - Legal Proceedings 9 Item 2 - Changes in Securities 9 Item 3 - Defaults Upon Senior Securities 9 Item 4 - Submission of Matters to a Vote of 9 Security Holders Item 5 - Other Information 9 Item 6 - Exhibits and Reports on Form 8-K 9 Signature(s) 10
PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Pamet Systems, Inc. CONDENSED BALANCE SHEETS September 30, December 31, 1996 1995 (unaudited) CURRENT ASSETS Cash $ 187,557 $ 28,264 Accounts receivable, net of allowance for doubtful accounts of $10,000 677,272 246,161 Inventory 50,359 26,921 Prepaid expenses and other current assets 34,741 46,644 ---------- ---------- TOTAL CURRENT ASSETS 949,929 347,990 PROPERTY AND EQUIPMENT, NET 923,517 922,596 OTHER ASSETS 575 1,025 RESTRICTED CASH 26,969 26,450 ---------- ---------- TOTAL OTHER ASSETS 27,544 27,475 $1,900,990 $1,298,061 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 382,068 $ 245,516 Accrued expenses 145,990 140,684 Notes payable-related party 225,099 81,099 Deferred software maintenance revenue 335,442 190,034 Current portion of long-term debt 14,100 13,069 --------- --------- TOTAL CURRENT LIABILITIES 1,102,699 670,402 LONG TERM DEBT, less current portion 498,508 509,426 UNEARNED SUPPORT REVENUE 54,123 79,283 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued Common stock, $.01 par value, 7,500,000 shares authorized; 2,060,200 issued and outstanding 20,690 20,183 Additional paid-in Capital 4,089,636 4,072,629 Accumulated deficit (3,864,666) (4,053,862) --------- --------- TOTAL STOCKHOLDERS' EQUITY 245,660 38,950 $1,900,990 $1,298,061
========== ========== See accompanying notes to financial statements.
Item 1 - Financial Statements Pamet Systems, Inc. STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 Net sales $788,402 $267,427 $1,785,928 $783,334 Cost of product 319,798 106,369 656,371 319,926 -------- -------- ---------- ---------- 468,604 161,058 1,129,557 463,408 Operating expenses: Personnel costs 201,276 172,885 537,864 498,918 Rent, utilities and telephone 15,498 16,841 45,281 53,618 Travel and entertainment 20,246 11,003 42,749 36,329 Professional fees 21,977 20,124 50,931 49,720 Depreciation 12,885 19,213 38,217 57,743 Other operating expenses 76,489 52,248 165,408 102,858 ------- ------- ------- ------- Total operating expenses 348,371 292,314 880,450 799,186 ------- ------- ------- ------- Income (loss) from operation 120,233 (131,256) 249,107 (335,778) Interest income (expense) Net (22,830) (17,067) (59,911) (45,212) ------- ------- ------- ------- Net income (loss) $ 97,403 $(148,323) $ 189,196 $(380,990) ======== ======= ======= ======= Net income (loss) per share $.04 $(.07) $.08 $(.19) ==== ==== === === Shares used in Computing 2,380,796 1,966,250 2,396,745 1,966,250 Earnings per Share
See accompanying "Notes to Financial Statements (unaudited)"
Item 1 - Financial Statements Pamet Systems, Inc. STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 1996 1995 Cash flows provided by (used in) operating activities: Net income (loss) $189,196 $(380,990) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 38,217 95,944 Change in assets and liabilities (Increase) Decrease accounts receivable (431,111) 168,160 (Increase) Decrease in inventory (23,438) 20,597 (Increase) Decrease in prepaids and other current assets 11,903 (10,856) Increase (Decrease) in accounts payable 136,552 (141,133) Increase in deferred software maintenance revenue 120,248 173,364 Increase in accrued payroll 5,306 13,932 (Increase) in restricted cash (519) (512) (Increase) Decrease in deposits and other assets 450 (2) ------- ------- Total adjustments (142,392) 319,494 Net cash provided by (used in) operating activities 46,804 (61,496) Cash flows from investing activities: Sale or disposition of automobile 0 0 Sale of computer equipment 0 1,682 Capital expenditures for property and equipment (39,138) (2,938) Capital expenditures for software 0 (1,157) -------- -------- Net cash used in investing activities (39,138) (2,413) Cash flows from financing activities: Payment of mortgage (9,887) (8,676) Net change in note payable related party 144,000 44,900 Exercise of stock options 17,514 15,844 -------- -------- Net cash from financing activities 151,627 52,068 Net increase (decrease) in cash 159,293 11,841 Cash at beginning of period 28,264 16,103 Cash and cash equivalents at end of period $187,557 $4,262 ======== ====== Supplemental disclosure of cash flow information: Cash paid for interest $60,852 $47,732
See accompanying "Notes to Financial Statements (unaudited)" PAMET SYSTEMS, INC. Notes to Condensed Financial Statements (Unaudited) Note (1) Statement Presentation In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of September 30, 1996 and the results of operations for the three and nine month periods and changes in cash flows for the periods then ended. There were no material unusual charges or credits to operations during the recently completed fiscal quarter. The results reported for the three month and nine month periods ended September 30, 1996 are not necessarily indicative of the results of operations which may be expected for the entire year. Note (2) Mortgage on Corporate Training, Development and Headquarters Facility On April 21, 1992 the Registrant consummated an agreement with the Lexington Savings Bank of Lexington, MA. to mortgage the Registrant's development, training and headquarters facility, located at 1000 Main Street, Acton, Massachusetts. The original principal amount of the mortgage was $560,000. On September 21, 1996 the note was extended for a one year term with monthly payments determined according to a twenty-year amortization period. $5,499, including interest at 10.25%, is payable monthly. The bank has required an interest bearing compensating balance account. On September 30, 1996 this account equaled $26,969. Note (3) Earnings Per Share Earnings per share are computed using the weighted number shares of common stock and common stock equivalents outstanding during the period using the treasury stock method. Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Overview The Registrant's net sales consist primarily of sales of software and turnkey computer systems, and support and update service fees. Sales increased 194.8% for the three month period ended September 30, 1996 (the 1996 period) over the sales for the three month period ended September 30, 1995 (the 1995 period). The increase in sales is primarily due to an increase in system sales and an increase in the sales of the Registrant's digital imaging product (ImageServer). Approximately 30% of the sales in the quarter represent sales from grants associated with the "Violent Crime Control and Law Enforcement Act of 1994" (the Crime Bill). The Registrant expects to recognize more sales from grants under the Crime Bill during the final quarter of the year. In addition to the record sales recorded in the 1996 period, the Registrant had at 9/30/96 a backlog of over $700,000. Three Months Ended September 30, 1996 vs. Three Months Ended September 30, 1995 Net sales increased $520,975 or 194.8% to $788,402 for the 1996 period from $267,427 for the 1995 period. The increase is due to sales increases of all of the Registrant's products. The most significant increases were for the Registrant's ImageServer and PoliceServer products. Sales of turnkey systems for the 1996 period included 2 ImageServer, 7 PoliceServer and 2 FireServer Systems compared to 2 PoliceServer and 3 FireServer systems for the 1995 period. Management believes that the increase in sales is due to the release of a state grant program that has funded a number of imaging systems in Massachusetts, the demand for fire systems associated with the implementation of E-911 in New England and the awards associated with the Crime Bill. Support revenues increased 11.2% or $10,342 to $102,645 for the 1996 period from $92,303 for the 1995 period reflecting the increase in the customer base from the 1995 period. Cost of product increased to $319,798 for the 1996 period from $106,369 for the 1995 period reflecting the increased sales. Gross margin remained effectively flat at 59.4% for the 1996 period compared to 60.2% for the 1995 period. Operating expenses increased $56,057 or 19.2% to $348,371 for the 1996 period from $292,314 for the 1995 period. Personnel costs increased 16.4% to $201,276 for the 1996 period from $172,885 for the 1995 period. The increase reflects the additional part-time staffing for administrative and marketing assistance and increased commissions. Rent, utilities and telephone decreased 8.0% to $15,498 for the 1996 period from $16,841 for the 1995 period due to decreased phone charges. Travel and entertainment expenses increased 84.0% to $20,246 for the 1996 period from $11,003 for the 1995 period due to travel expenses associated with trade shows, sales support, and Crime Bill grant seminars. Professional fees increased 9.2% to $21,977 for the 1996 period from $20,124 for the 1995 period, primarily due to the increased usage of legal services. Depreciation expense decreased 32.9% to $12,885 for the 1996 period from $19,113 for the 1995 period primarily as a result of the reduced depreciation on the older computer equipment and office furnishings. Other operating expenses increased 46.4% to $76,489 for the 1996 period from $52,248 for the 1995 period primarily due to increases in tax penalties and Internet access/usage, and to expenses associated with the Crime Bill grant seminars. Net interest expense for the 1996 period increased to $22,830 for the 1996 period from $17,067 for the 1995 period reflecting the interest associated with increased usage working capital loans from officers and directors. The net income increased to $97,403 or $.04 per share for the 1996 period from a loss of $(148,323) or $(.07) per share for the 1995 period. This increase is associated with the significant increase in revenues for the quarter. Nine Months Ended September 30, 1996 vs. Nine Months Ended September 30, 1995 Net sales for the nine month period ended September 30, 1996 (the 1996 period) increased $1,002,594 or 128.0% to $1,785,928 from $783,334 for the nine month period ended September 30, 1995 (the 1995 period). The increase in sales reflects an overall increase in the demand for the Registrant's products. The most significant increases are associated with the ImageServer, FireServer, and PoliceServer products. Support revenues increased 13.3% to $297,833 for the 1996 period from $262,986 for the 1995 period reflecting the increase in the customer base from the 1995 period. Cost of product increased 105.2% to $656,371 for the 1996 period from $319,926 for the 1995 period reflecting the increased system sales. Gross margin increased to 63.2% for the 1996 period from 59.2% for the 1995 period. The increase is due primarily to the higher number of turnkey system sales and a reduction in the number of sales of lower mark-up hardware upgrades. Operating expenses increased $81,264 or 10.2% to $880,450 for the 1996 period from $799,186 in the 1995 period. Personnel costs increased 7.8% to $537,864 for the 1996 period from $498,918 in the 1995 period. This reflects the part-time staffing increases in the administrative and marketing areas and increased commissions. Rent, utilities and telephone expenses decreased $8,337 or 15.5% to $45,281 for the 1996 period from $53,618 for the 1995 period. This decrease is almost entirely associated with reductions in the phone cost. Travel and entertainment expenses increased 17.7% to $42,749 for the 1996 period from $36,329 for the 1995 period, reflecting the increase in travel associated with sales support and the Crime Bill grant seminars in the Southeast region. Professional fees increased 2.4% to $50,931 for the 1996 period from $49,720 for the 1995 period due to increased use of the Registrant's legal counsel which was partially offset by a decrease in financial consulting services. Depreciation expense decreased 33.8% to $38,217 for the 1996 period from $57,743 for the 1995 period reflecting the reduced depreciation associated with older computer equipment and furnishings. Other operating expenses increased 60.8% to $165,408 for the 1996 period from $102,858 for the 1995 period. These increases reflect increased reserves, an increase in tax penalties, and expenses associated with the Crime Bill grant seminars. Net interest expense was $59,911 for the 1996 period compared to interest expense of $45,212 for the 1995 period reflecting the interest associated with increased usage of working capital loans from directors and officers. The net income for the 1996 period was $189,196 or $.04 per share as compared to a loss of $(380,990) or $(.19) per share for the 1995 period due primarily to the increased revenues for the period. Liquidity and Capital Resources The Registrant's working capital improved to a deficit of $152,770 at September 30, 1996 from a deficit of $322,412 at December 31, 1995 due to the higher level of sales during the first nine months of 1996. Cash increased to $187,557 at September 30, 1996 from $28,264 at December 31, 1995. Accounts receivable increased to $677,272 at September 30, 1996 from $246,161 at December 31, 1995. The increased level of accounts receivable reflects the increased sales of the Registrant's products. The Registrant is experiencing an accounts receivable level that averages 60 days sales outstanding. The Registrant's financial condition was positively impacted during the 1996 period by increased system sales. The increase in sales and associated profitability has helped alleviate (at least temporarily) the Registrant's liquidity and cash flow shortage, although they remain problems. The Registrant has established a short term financing agreement with a director to provide a working capital loan of up to $300,000 to help address these issues. At September 30, 1996, $225,099 was outstanding under this loan. In anticipation of the increased working capital needs associated with the increased sales from the Crime Bill grants, management is exploring other additional financing alternatives, such as a line of credit, sales of securities, factoring, mergers, acquisitions or other business combinations, although, there are no understandings, arrangements or agreements in this regard. The Registrant is also continuing to evaluate sources of funding to finance a project to make the Registrant's products hardware and operating system independent in order to maintain the competitiveness and attractiveness of the Registrant's products. As of September 30, 1996 the Registrant had accumulated approximately $3,700,000 in net operating loss carryforwards for federal income tax purposes. Some of the loss carryforwards expire beginning in the year 2002. Under the Internal Revenue Code of 1986, as amended, the rate at which a corporation may utilize its net operating losses to offset its income for federal tax purposes is subject to specified limitations during periods after the corporation has undergone an "ownership change". It has been determined that an ownership change did take place at the time of the Registrant's initial public offering. However, the limitations on the loss carryforwards exceeded the accumulated loss at the time of the "ownership change". Thus there is no restriction on its use. Inflation Inflation has not had a significant impact on the Registrant's operations to date. Forward Looking Statements This Management's Discussion and Analysis of Financial condition and Results of Operations may include forward-looking statements that may or may not materialize. Additional information on factors that could potentially affect the Company's financial results may be found herein and in the Company's other filings with the Securities and Exchange Commission. PART II - OTHER INFORMATION Item 1 - Legal Proceedings None Item 2 - Changes in Securities Not applicable. Item 3 - Defaults Upon Senior Securities Not applicable. Item 4 - Submission of Matters to a note of Security Holders None Item 5 - Other Information Not applicable. Item 6 - Exhibits and Reports on Form 8-K a. Exhibits none b. Reports on form 8-K - none 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 Pamet Systems, Inc. ------------------- (Registrant) November 14, 1996 Richard C. Becker ------------------------------- ---------------------- Date Richard C. Becker Vice President Principal Financial Officer EX-27 2 PAMET SYSTEMS Q3 1996 10-QSB
5 1 9-MOS DEC-31-1996 SEP-30-1996 187,557 0 677,272 10,000 50,359 949,929 1,464,057 540,540 1,900,990 1,102,699 0 20,690 0 0 245,660 1,900,990 1,785,928 1,785,928 656,371 0 880,450 0 59,911 189,196 0 189,196 0 0 0 189,196 0.09 0.08
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