-----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, A/8tJLk5U3cx2CS5zADY4ff5yRoACYKHdFs1+qKyg8klG8wGkObk/OSWSoY0Zty9 oAiguMlJg5HXJAdsnXznIw== 0000868268-96-000007.txt : 19960904 0000868268-96-000007.hdr.sgml : 19960904 ACCESSION NUMBER: 0000868268-96-000007 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAMET SYSTEMS INC CENTRAL INDEX KEY: 0000868268 STANDARD INDUSTRIAL CLASSIFICATION: 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: 96610723 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 Q2 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 June 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 2,060,200 ($.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 June 30, 1996 and December 31, 1995 Condensed Statements of Operations 2 for the quarter ended June 30, 1996 and 1995 and six months ended June 30, 1996 and 1995 Condensed Statement of Cash Flows 3-4 for the six months ended June 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 June 30, December 31, 1996 1995 (unaudited) CURRENT ASSETS Cash $ 8,941 $ 28,264 Accounts receivable, net of allowance for doubtful accounts of $36,951 645,549 246,161 Inventory 51,198 26,921 Prepaid expenses and other current assets 32,705 46,644 TOTAL CURRENT ASSETS 738,393 347,990 PROPERTY AND EQUIPMENT, NET 904,030 922,596 OTHER ASSETS 827 1,025 RESTRICTED CASH 26,794 26,450 TOTAL OTHER ASSETS 27,621 27,475 ---------- ---------- $1,670,044 $1,298,061 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $345,414 $ 245,516 Accrued expenses 208,290 140,684 Notes payable-related party 304,539 81,099 Deferred software maintenance revenue 92,940 190,034 Current portion of long-term debt 13,805 13,069 --------- --------- TOTAL CURRENT LIABILITIES 964,988 670,402 LONG TERM DEBT, less current portion 502,851 509,426 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 20,602 20,183 Additional paid-in Capital 4,089,549 4,072,629 Accumulated deficit (3,962,069) (4,053,862) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 148,082 38,950 $1,670,045 $1,298,061 ========== ==========
See accompanying "Notes to Financial Statements (Unaudited)" Item 1 - Financial Statements Pamet Systems, Inc.
STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Net sales $759,321 $335,780 $997,525 $515,907 Cost of product 262,781 115,635 336,572 213,556 -------- -------- -------- -------- 496,540 220,145 660,953 302,351 Operating expenses: Personnel costs 165,748 154,240 336,588 326,033 Rent, utilities and telephone 14,549 19,030 29,783 36,777 Travel and entertainment 12,434 13,536 22,503 25,327 Professional fees 18,964 16,750 28,954 29,596 Depreciation 12,885 19,117 25,332 38,529 Other operating expenses 56,954 25,000 88,819 50,610 -------- -------- -------- -------- Total operating expenses 281,534 247,673 532,079 506,872 -------- -------- -------- -------- Income (loss) from operations 215,006 (27,528) 128,874 (204,521) Interest Income (expense), Net (21,933) (15,680) (37,081) (28,146) Net Income (loss) $193,073 $(43,208) $91,793 $(232,667) ======== ========= ========= ========== Net Income (loss) per share $.08 $ (.02) $.04 $ (.12) ======= ======== ======= ======== Shares used in Computing Earnings per Share 2,401,742 1,966,250 2,372,742 1,966,250
See accompanying "Notes to Financial Statements (Unaudited)" Item 1 - Financial Statements Pamet Systems, Inc.
STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 1996 June 30, 1995 Cash flows provided by (used in) Operating activities: Net (loss)/income $91,793 (232,667) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25,332 63,996 (Increase) decrease in accounts receivable (399,388) 184,065 (Increase) decrease in inventory (24,277) 21,556 (Increase) decrease in prepaids and other current assets 13,939 (2,057) Increase (Decrease) in accounts payable 99,898 (118,685) (Decrease) in deferred software maintenance revenue (122,254) (53,237) Increase (Decrease) in accrued expenses and other current liabilities 67,606 24 (Increase) Decrease in deposits and other assets (146) (342) ---------- ---------- Total adjustments (339,290) 95,320 Net cash provided by (used in) operating activities (247,497) (137,347)
(continued on following page) See accompanying "Notes to Financial Statements (Unaudited)" Item 1 - Financial Statements Pamet Systems, Inc.
STATEMENTS OF CASH FLOWS (cont.) (Unaudited) Cash flows from investing activities: Sale of computer equipment 1,682 Capital expenditures for property and equipment (6,766) (1,589) Net Cash from Investing Activities (6,766) 93 Cash Flow from Financing Activities: Payment of Mortgage (5,839) (6,850) Proceeds from sale of Capital Stock 17,339 Net Change in Note Payable Related Party 223,440 138,900 Net Cash from Financing Activities 234,940 132,050 Net increase (decrease) in cash (19,323) (5,204) Cash at beginning of period 28,264 16,103 Cash at end of period $8,941 $10,899 ========= ======== Supplemental disclosure of cash flow information: Cash paid for interest $ 35,775 $ 28,491
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 June 30, 1996 and the results of operations for the three and six 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 six month periods ended June 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 June 21, 1995 the note was extended for a one year term with monthly payments determined according to a twenty-year amortization period. $5,741, including interest at 11%, is payable monthly. The bank has required an interest bearing compensating balance account. On June 30, 1996 this account equaled $26,794. 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 126.1% for the three month period ended June 30, 1996 (the 1996 period) over the sales for the three month period ended June 30, 1995 (the 1995 period). The increase in sales is primarily due to the sales of the Registrants' digital imaging product (ImageServer) and to an increase in FireServer sales. Less than 10% of the increase is represented by 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 second half of the year. In addition to the record sales recorded in the 1996 period, the Registrant has a significant backlog of over $700,000, the majority of which, it believes, will be delivered and invoiced during the second half of the year. Three Months Ended June 30, 1996 vs. Three Months Ended June 30, 1995 Net sales increased $423,542 or 126.1% to $759,321 for the 1996 period from $335,780 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 imaging and FireServer product. Sales of turnkey systems for the 1996 period included 5 ImageServer, 5 PoliceServer and 5 FireServer Systems compared to 1 ImageServer, 3 PoliceServer and 1 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 and the demand for fire systems associated with the implementation of E-911 in New England. Support revenues increased 20.8% or $17,719 to $102,746 for the 1996 period from $85,207 for the 1995 period reflecting the increase in the customer base from the 1995 period. Cost of product increased to $262,781 for the 1996 period from $115,635 for the 1995 period reflecting the increased sales. Gross margin remained effectively flat at 65.4% for the 1996 period compared to 65.6% for the 1995 period. Operating expenses increased $33,851 or 13.7% to $281,534 for the 1996 period from $247,683 for the 1995 period. Personnel costs increased 7.5% to $165,748 for the 1996 period from $154,240 for the 1995 period. The increase reflects the additional part-time staffing for administrative and marketing assistance. Rent, utilities and telephone decreased 23.6% to $14,549 for the 1996 period from $19,031 for the 1995 period due to decreased utility costs associated with a cooler spring season and decreased phone charges. Travel and entertainment expenses decreased 8.1% to $12,434 for the 1996 period from $13,536 for the 1995 period due to the reduced usage of rental cars. Professional fees increased 13.2% to $18,964 for the 1996 period from $16,750 for the 1995 period, primarily due to the increased usage of legal services. Depreciation expense decreased 32.6% to $12,885 for the 1996 period from $19,117 for the 1995 period primarily as a result of the reduced depreciation on the older computer equipment and office furnishings. Other operating expenses increased 127.7% to $56,954 for the 1996 period from $25,000 for the 1995 period primarily due to the write off of questionable accounts and an increase in tax penalties. Net interest expense for the 1996 period increased to 21,933 for the 1996 period from $15,680 for the 1995 period reflecting the interest associated with working capital loans from officers and directors. The net income increased to $193,073 or $.08 per share for the 1996 period from a loss of $(43,208) or $(.02) per share for the 1995 period. This increase is associated with the significant increase in revenues for the quarter. Six Months Ended June 30, 1996 vs. Six Months Ended June 30, 1995 Net sales for the six month period ended June 30, 1996 (the 1996 period) increased $481,618 or 93.4% to $997,525 from $515,907 for the six month period ended June 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 product and the FireServer product. Support revenues increased 14.4% to $195,188 for the 1996 period from $170,684 for the 1995 period reflecting the increase in the customer base from the 1995 period. Cost of product increased 57.6% to $336,572 for the 1996 period from $213,556 for the 1995 period reflecting the increased system sales. Gross margin increased to 66.3% for the 1996 period from 58.6% 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 $25,207 or 5.0% to $532,079 for the 1996 period from $506,872 in the 1995 period. Personnel costs increased 3.2% to $336,588 for the 1996 period from $326,033 in the 1995 period. This reflects the part-time staffing increases in the administrative and marketing areas. Rent, utilities and telephone expenses decreased $6,994 or 19.0% to $29,783 for the 1996 period from $36,777 for the 1995 period. This decrease is almost entirely associated with reductions in the phone cost and the significant decreases in utility cost during the 1996 period. Travel and entertainment expenses decreased 11.1% to $22,503 for the 1996 period from $25,327 for the 1995 period, reflecting the decrease in travel associated with training and installations in the Southeast region. Professional fees decreased 2.2% to $28,954 for the 1996 period from $29,596 for the 1995 period due to the decrease in financial consulting services which were partially offset by the increased use of the Registrant's legal counsel. Depreciation expense decreased 34.3% to $25,332 for the 1996 period from $38,529 for the 1995 period reflecting the reduced depreciation associated with older computer equipment and furnishings. Other operating expenses increased 75.7% to $88,819 for the 1996 period from $50,610 for the 1995 period. These increases reflect increased reserves and the increase in tax penalties. Net interest expense was $37,081 for the 1996 period compared to interest expense of $28,146 for the 1995 period reflecting the interest associated with working capital loans from directors and officers. The net income for the 1996 period was $91,793 or $.04 per share as compared to a loss of $(232,667) or $(.12) 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 $226,595 at June 30, 1996 from a deficit of $322,412 at December 31, 1995 due to the higher level of business during the first half of 1996. Cash decreased to $8,941 at June 30, 1996 from $28,264 at December 31, 1995. Accounts receivable increased to $645,549 at June 30, 1996 from $246,161 at December 31, 1995. The increased level of accounts receivable reflects the increased sales. 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. Nevertheless the Registrant continues to experience liquidity problems and cash flow shortages. The Registrant established a short term financing agreement with a director to provide a working capital loan of up to $300,000. At June 30, 1996, $300,000 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 June 30, 1995 the Registrant had accumulated approximately $3,900,000 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 in the Company's 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) August 9, 1996 Richard C. Becker _______________________________ ______________________ Date Richard C. Becker Vice President Principal Financial Officer EX-27 2 PAMET SYSTEMS Q2 1996 10-QSB
5 1 6-MOS DEC-31-1996 JUN-30-1996 8,941 0 645,549 0 51,198 738,393 1,431,686 527,655 1,670,044 964,988 0 20,602 0 0 148,082 1,670,045 997,525 997,525 336,572 0 532,079 0 37,081 91,793 0 91,793 0 0 0 91,793 0.04 0.04
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