SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual report under section 13 or 15(d) of the Securities Exchange Act of
1934[Fee Required] for the fiscal year ended June 30, 1995
PACER TECHNOLOGY
(Name of small business issuer in Its charter)
California 77-0080305
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9420 Santa Anita Avenue
Rancho Cucamonga, California 91730
(Address of principal executive offices) (Zip Code)
Issuer's telephone number(909) 987-0550
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, no par value
(Title of Class)
<PAGE>
Check whether the issuer(1) 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 [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
The issuer's revenues for its most recent fiscal year were $20,584,108.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of August 1, 1995 was $8,966,997 (computed by reference to the
average bid and asked prices of such stock on August 1, 1995, as reported in the
over-the-counter market.)
The number of shares outstanding of the registrant's Common Stock, as of August
1, 1995, was 14,458,975 shares.
Documents incorporated by reference. Pacer Technology's definitive Proxy
Statement dated September 11, 1995 for the 1995 annual meeting of shareholders-
- -Part III.
This document contains 29 pages;
the index to exhibits is on page 26 .
<PAGE>
PART I
Item 1. Description of Business
Background
Pacer Technology (the "Company") is engaged in the business of manufacturing and
marketing high performance adhesives, sealants, threadlockers and a line of
clips. The Company sells these products worldwide under both private label and
proprietary trademarks to industrial, consumer, automotive aftermarket and
hobby markets. The Company was formed in 1975 as a Wyoming corporation and was
reincorporated in California in 1984.
On August 1, 1992, the Company acquired Novest, Inc., a privately-held
corporation. This product line includes adhesives, sealants and lubricants for
engine and body parts, trim applications and accessories.
On October 15, 1993, Pacer acquired the assets of MEXLONIC (formerly Super Glue
Corporation), a manufacturer and packager of adhesive products and plastic
molded clips for use in automotive, stationery, hardware, home, office and
school applications.
Major Customers And Export Sales
Pacer did not have net sales to any one individual customer greater than 10% of
net sales in 1995. The Company had net sales to one customer representing
approximately 10.1% of net sales in 1994, and net sales to two customers
representing approximately 14.5% and 13.1% of net sales in 1993.
Principal Markets for Adhesive Products
Industrial
The Company's products are sold in the industrial market for use in automotive,
aerospace, electronic, O.E.M. and maintenance repair applications.
Consumer
The major thrust of Pacer's consumer division consists of products from Super
Glue Corporation. These products include a nationally known brand of adhesives,
sealants, epoxies, and plastic molded clips for use in automotive, stationery,
hardware, home, office and school applications. The remaining lines in the
division consist primarily of products demanded by customers who have existing
product lines other than adhesives and wish to expand their product base to
include adhesive products. In these cases, the Company packages the product
requested in containers labeled with the customer's private label trademark.
Hobby
The Company markets several types of adhesives and related products which may be
used for various project and model assembly requirements.
Automotive Aftermarket
Pacer's automotive aftermarket product line, PRO SEAL, includes adhesives,
sealants and lubricants for engine and body parts, trim applications and
accessories.
Marketing
Pacer's products are marketed domestically and internationally. Foreign sales
accounted for 16%, 16%, and 19% of total revenues in 1995, 1994 and 1993,
respectively. Company products are sold to the industrial market through
independent distributors. The Company provides technical service and sales
support using factory trained personnel and sales representatives. Pacer
products are sold to dealers and model shops in the hobby market through a
network of master distributors. In the consumer market sector, products are
sold by Pacer sales personnel and distributed through mass merchandising
retail outlets. Automotive aftermarket products are sold by Pacer sales
personnel and distributed through retail automotive, professional repair and
installation, agri-business and heavy duty truck outlets.
Research and Development
Research and Development expenditures were approximately $365,000, $307,000 and
$272,000 in fiscal years 1995, 1994 and 1993, respectively.
Source and Availability of Raw Materials
The Company's primary source of raw material is subject to tariff and quota
controls, fluctuations in the value of the U.S. dollar on foreign currency
exchanges and related constraints associated with international trade. This
material is readily available from several suppliers. Other raw materials are
also purchased from suppliers for manufacture of the Company's plastic
packaging. Supply of these materials is subject to availability of petroleum
by-products.
Competitive Conditions Affecting the Company
The principal competitive factors affecting the Company's products are
technology, market coverage, price and service. Some of Pacer's competitors are
larger and have substantially greater financial resources. The Company believes
it is on the leading edge of technology and is price competitive.
Subsidiaries
The Company has two wholly owned subsidiaries. Pacer Tech Ltd., based in the
United Kingdom, distributes products in the industrial, hobby, consumer,
automotive aftermarket and private label markets in the United Kingdom and
Europe. RECAP LTD. was formed in 1992 and is currently inactive.
In October 1993 the Company formed a subsidiary, Super Glue Corporation of
California, and signed an agreement to acquire the assets of Super Glue
Corporation of Hollis, New York for stock and cash. Super Glue's manufacturing
operations were relocated in February 1994 from Hollis, N.Y. to Pacer's
worldwide headquarters in Rancho Cucamonga, California. Super Glue Corporation
of California and Pacer Technology merged on March 1, 1994 and Pacer Technology
became the surviving corporation.
Government Regulations
Compliance with federal, state and local provisions regarding the production and
discharge of materials into the environment has had, and is expected to have, a
moderate adverse effect on capital expenditures, earnings and the competitive
position of the Company.
Employees
At August 1, 1995, the Company employed 91 people on a full-time basis and also
employed 2 part-time employees.
Item 2. Description of Property
The Company's executive office, manufacturing facility and research and
development facility are housed in a 50,000 square foot site in Rancho
Cucamonga, California. This facility is leased under an operating lease
expiring in June 1999, with an option to purchase in the fifty-fourth month of
the lease term (January 1994). This option to purchase was not exercised.
The Company's subsidiary, Pacer Tech Ltd., maintains its sales and distribution
office at a leased facility in Essex, England. This lease expires December,
1999.
On April 28, 1994, the Company signed a five year lease for a 10,000 square foot
facility in Ontario, California to manufacture certain flammable products.
On July 11, 1994, the Company signed a three year lease for a 14,000 square foot
facility in Memphis, Tennessee to warehouse and distribute products to customers
located in the Midwest and Eastern part of the U.S.
All of the Company's facilities are in good operating condition and are adequate
for the Company's present and anticipated future needs.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Pacer Technology common stock is traded in the over-the-counter market and is
listed on the National Association of Securities Dealers Automated Quotation
System (NASDAQ) under the symbol "PTCH". High and low bid quotations are listed
below:
For the year ended June 30,
1995 1994
HIGH LOW HIGH LOW
First Quarter 1 7/16 1 1 3/16 3/4
Second Quarter 1 5/16 1 1 3/8 1
Third Quarter 1 3/16 29/32 1 13/16 1 3/16
Fourth Quarter 1 3/32 11/16 1 1/4 1
The foregoing quotations reflect inter-dealer prices without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
The approximate number of shareholders of record of the Company's common stock
as of August 1, 1995 was 2,544.
Since its incorporation, the Company has not paid any dividends on its common
stock and does not anticipate dividend payments in the foreseeable future.
Item 6. Management's Discussion and Analysis or Plan of Operation
Results of Operations
Table 1 - Cost of Sales and Gross Margin as a
Percentage of Sales
1995 1994 1993
Net Sales 100% 100% 100%
Cost of Sales 68% 64% 64%
Gross Margin 32% 36% 36%
Comparison of 1995 to 1994
Net sales increased $700,355, or 4% over the prior year. This growth was
primarily due to revenue generated by the acquisition of Super Glue Corporation
during the second quarter of fiscal year 1994 and to improvements in PRO SEAL
and Cosmetic international sales. These increases were partially offset by
weaker performance by the other product lines in response to a continued soft
economy.
Cost of sales for the year were $13,961,829, or 68% of sales. This represents
an increase of $1,328,053, or 11% over the prior year. This rise was primarily
due to increased volume and substantial raw material cost increases from
suppliers, compounded by one time charges of approximately $450,000 incurred
during the fourth quarter of fiscal year 1995 for the phaseout of unprofitable
product lines. This rise in costs was partially offset by lower manufacturing
expenses resulting from the relocation of the Super Glue Hollis, New York
facility to Rancho Cucamonga, California during the third quarter of fiscal year
1994.
Selling, General & Administrative expenses were $6,486,435, or 32% of sales.
This represents an increase of $41,923, or 1% over the prior year. This rise in
expenditures was attributed primarily to higher Super Glue selling expenses, the
redesign of packaging and brochures for the Super Glue and PRO SEAL product
lines, and charges pertaining to due diligence activities for a proposed
acquisition that management subsequently elected to forego. Selling, General
and Administrative expenses were favorably impacted during fiscal year 1995, as
1994 operating expenses included relocation costs to consolidate Super Glue
operations in California during the third quarter of fiscal year 1994.
Goodwill related to the Super Glue acquisition is being amortized over 14 years.
Amortization costs of $133,354 were recorded in fiscal year 1995. Management
believes the economies of scale to be realized from the consolidation of Super
Glue's Hollis, New York facility into the Company's corporate headquarters in
California will enable the Super Glue product line to generate profits that will
significantly exceed the goodwill amortization.
Other expenses for the year were $513,112, or 2% of sales. This represents an
increase of $219,240, or 75% over the prior year. This rise was primarily
attributed to interest expense associated with the further utilization of the
Company's credit facility to support higher working capital requirements,
compounded by raised interest rates.
Comparison of 1994 to 1993
Net sales increased $5,760,484, or 41% over the prior year. This increase was
primarily due to revenues from PRO SEAL product sales and from sales resulting
from the acquisition of the assets of MEXLONIC Corporation (formerly Super Glue
Corporation based in Hollis, New York and referred to hereafter as Super Glue)
during the second quarter of fiscal year 1994.
Cost of sales increased $3,560,352, or 39% over the prior year. This increase
was attributed primarily to higher volume, low absorption of fixed overhead
costs at the Hollis, New York facility during December 1993 through February
1994, and operating inefficiencies associated with the phase out of the Super
Glue plant. Additionally, the Company has experienced a moderate erosion in
gross margins due to compliance with certain government regulations pertaining
to the disposition of hazardous material waste and the substitution of more
costly raw materials in place of ozone depleting chemicals.
Selling, General and Administrative expenses increased $2,409,571, or 60% over
the prior year. As a percent of sales, selling, general and administrative
expenses were 32% in fiscal year 1994 compared to 29% in fiscal year 1993.
This rise in expenditures was due primarily to operating costs associated with
the Super Glue acquisition. The Super Glue facility in Hollis, New York was
closed in February 1994, and the operation was relocated to Pacer's primary
manufacturing facility in Southern California. This move resulted in charges of
approximately $231,000 during the third quarter of fiscal year 1994. This
consolidation resulted in a savings of approximately $125,000 in ongoing
operating fixed costs during the fourth quarter of fiscal year 1994.
Goodwill related to the Super Glue acquisition is being amortized over 14 years.
Amortization costs of approximately $95,000 were recorded in fiscal year 1994.
Management believes that the economies of scale to be realized from the
consolidation of Super Glue's Hollis, New York facility into the Company's
corporate headquarters in California will enable the Super Glue product line to
generate profits that will significantly exceed the goodwill amortization.
Other expenses for the year ended June 30, 1994 decreased $69,255, or 19% from
the prior year. As a percent of sales, other expenses were 1% in fiscal year
1994 compared to 3% in fiscal year 1993. A one-time charge of approximately
$307,000 was recorded in fiscal year 1993, to reflect the costs associated with
the discontinuance of the Company's interest in a joint venture for the
production and distribution of BAR-B-BRIC. Interest expense increased
approximately $179,000, or 278% from the prior year due to a rise in bank
borrowings utilized for working capital required to support higher volumes and
to finance the acquisition of Super Glue.
The Company adopted Statement 109, "Accounting For Income Taxes", as of July 1,
1993. This change did not have a material effect on the financial statements of
the Company.
Liquidity and Capital Resources
Net cash consumed from all activities in fiscal year 1995 was $104,441 versus
cash provided of $104,740 in the prior year.
Cash used by operating activities during 1995 was $762,123 compared to $627,047
in fiscal year 1994. The net loss in fiscal year 1995 was a major contributor
to the use of cash.
A decrease in accounts receivable levels prompted by lower volumes during the
fourth quarter of fiscal year 1995 versus the comparable period in the prior
year was offset by increased inventory levels to satisfy customer shipping
requirements. Notes receivable
increased as the Company permitted two customers to convert trade receivables to
term notes during fiscal year 1995. Accounts payable decreased significantly
due to lower volumes during the fourth quarter of fiscal year 1995 versus the
comparable quarter in the prior year. The increase in accrued expenses and
other liabilities during fiscal year 1995 was lower than in the prior year,
since fiscal year 1994 included accrued expenses for the acquisition and
relocation of Super Glue Corporation from Hollis, N.Y. to Pacer's primary
facility in California.
Cash consumed by investing activities in 1995 was $426,413 compared to
$2,622,849 in the prior year. This decrease was primarily the result of the
Company's acquisition of the assets of Super Glue during the second quarter of
fiscal year 1994.
Cash generated by financing activities in 1995 was $1,084,095, compared to
$3,354,636 in the prior year. This change was primarily due to borrowings
utilized to finance the acquisition of Super Glue Corporation during the second
quarter of fiscal year 1994. In fiscal year 1995, the Company used its credit
facilities primarily to finance additional working capital requirements and
capital equipment purchases. Proceeds received from employees and directors to
exercise options and warrants to purchase shares of the Company's common stock
during fiscal year 1995 were higher than the prior year. Additionally, three
Directors exercised options to purchase shares of Pacer Technology common stock
and issued interest bearing promissory notes payable to the Company for the
exercise price of the stock.
Although the integration of the Super Glue acquisition has been completed, the
Company still anticipates continued utilization of its line of credit primarily
to finance working capital requirements throughout fiscal year 1996.
Item 7. Financial Statements
The following consolidated financial statements are included herein:
Independent Auditors' Report
Consolidated Balance Sheets - June 30, 1995 and 1994.
Consolidated Statements of Operations - Years Ended
June 30, 1995, 1994 and 1993.
Consolidated Statements of Stockholders' Equity - Years
Ended June 30, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows - Years Ended
June 30, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders
Pacer Technology:
We have audited the accompanying consolidated balance sheets of Pacer Technology
and subsidiaries as of June 30, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended June 30, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pacer Technology and
subsidiaries as of June 30, 1995 and 1994, and the results of their operations
and their cash flows for each of the years in the three-year period ended June
30, 1995, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Ontario, California
July 28, 1995
<PAGE>
<TABLE>
PACER TECHNOLOGY AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1995 and 1994
<CAPTION>
<S> <C> <C>
ASSETS 1995 1994
Current assets:
Cash $ 119,233 223,674
Trade receivables, less allowance for doubtful
accounts of $399,801 in 1995 and $339,000 in
1994 (notes 2 and 7) 3,845,991 5,028,959
Other receivables 125,365 90,204
Notes receivable - Current (note 2) 232,655 -
Inventories (notes 3 and 7) 5,508,129 4,501,339
Prepaid expenses 138,016 231,826
Deferred income taxes (note 10) 825,366 390,065
Total current assets 10,794,755 10,466,067
Equipment and leasehold improvements, net
(notes 4, 7 and 8) 1,615,769 1,666,252
Notes receivable - Long-term (note 2) 100,039 -
Deferred income taxes (note 10) 38,634 29,735
Cost in excess of net assets of businesses acquired,
net (note 5) 2,027,702 2,196,115
Other assets (note 6) 51,744 72,945
$14,628,643 14,431,114
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Bank borrowings (note 7) $ 4,157,000 3,515,000
Current installments of long-term debt (note 7) 225,672 175,276
Current installments of obligations under
capital lease - 5,400
Accounts payable 1,767,102 2,699,668
Accrued payroll and related expenses 256,239 263,559
Other accrued expenses 1,197,635 944,598
Total current liabilities 7,603,648 7,603,501
Long-term debt, excluding current installments (note 7) 735,025 720,019
Total liabilities 8,338,673 8,323,520
Stockholders' equity (notes 5, 11, and 13):
Common stock, no par value. Authorized 50,000,000
shares; issued and outstanding 14,403,975 shares
in 1995 and 12,749,375 shares in 1994 7,844,535 6,977,941
Accumulated deficit (1,070,065)( 870,347)
Notes receivable from directors (notes 11 and 13) (484,500) -
Total stockholders' equity 6,289,970 6,107,594
Commitments and contingencies (notes 8, 12 and 13)
$14,628,643 14,431,114
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> PACER TECHNOLOGY AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Statements of Operations
Years ended June 30, 1995, 1994 and 1993
<S> <C> <C> <C>
1995 1994 1993
Net sales (notes 5 and 9) $20,584,108 19,883,753 14,123,269
Cost of sales 13,961,829 12,633,776 9,073,424
Gross profit 6,622,279 7,249,977 5,049,845
Selling, general and administrative
expenses 6,486,435 6,444,512 4,034,941
Operating income 135,844 805,465 1,014,904
Other income (expense):
Losses from joint venture (note 6) - - (307,127)
Interest expense (452,274) (243,733) (64,519)
Other, net (60,838) (50,139) 8,519
Income (loss) before income taxes and
extraordinary item (377,268) 511,593 651,777
Income taxes (benefit) (note 10) (177,550) 60,000 286,000
Income (loss) before extraordinary
item (199,718) 451,593 365,777
Extraordinary item--reduction of Federal
income tax resulting from utilization
of net operating loss carryforward - - 220,000
Net income (loss) $ (199,718) 451,593 585,777
Income (loss) per common share and common
share equivalent (rounded to $0.01):
Primary:
Income (loss) before extraordinary item $ (.01) .03 .03
Extraordinary item - - .01
Net income (loss) $ (.01) .03 .04
Weighted average common shares and common
share equivalents outstanding 14,927,373 14,910,609 14,319,194
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PACER TECHNOLOGY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended June 30, 1995, 1994 and 1993
<S> <C> <C> <C> <C>
Number of
issued and Total
outstanding Common Accumulated Stockholders'
shares Stock Deficit Equity
Balances at June 30, 1992 10,976,603 $5,307,397 (1,907,717) 3,399,680
Net income - - 585,777 585,777
Shares issued upon exercise
of options (Note 11) 133,500 53,132 - 53,132
Shares issued in
connection with
Novest acquisition (Note 5) 254,511 294,279 - 294,279
Balances at June 30, 1993 11,364,614 5,654,808 (1,321,940) 4,332,868
Net income - - 451,593 451,593
Shares issued upon exercise
of options (Note 11) 168,750 99,896 - 99,896
Shares issued upon exercise
of warrants (Note 11) 40,100 12,732 - 12,732
Shares issued to employees
(Note 11) 15,000 15,000 - 15,000
Shares issued in
connection with Super
Glue acquisition (Note 5) 1,160,911 1,195,505 - 1,195,505
Balances at June 30, 1994 12,749,375 6,977,941 (870,347) 6,107,594
Net loss - - (199,718) (199,718)
Shares issued upon exercise
of options (Note 11) 881,700 528,361 528,361
Shares issued upon exercise
of warrants (Note 11) 760,900 328,273 328,273
Shares issued to Employees
(Note 11) 12,000 9,960 9,960
Promissory Note from Directors
(Note 11) - (484,500) (484,500)
Balances at June 30, 1995 14,403,975 $7,360,035 ( 1,070,065) 6,289,970
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PACER TECHNOLOGY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended June 30, 1995, 1994 and 1993
<S> <C> <C> <C>
1995 1994 1993
Net income (loss) $ (199,718) 451,593 585,777
Adjustments to reconcile net income (loss) to
net cash (used) provided by operating
activities:
Depreciation 476,791 399,506 316,232
Amortization of other assets 189,613 150,659 51,203
(Gain) loss on sale of property and
equipment 105 (5,963) 57
Increase (decrease) in provision for
doubtful accounts 60,801 (77,000) (26,600)
Share of net loss of joint venture - - 198,358
(Increase) decrease in trade accounts
receivable 1,122,167 (1,063,026) (509,957)
Increase in other receivables (35,161) (21,170) (31,376)
Increase in notes receivables (332,694) - -
Increase in inventory (1,006,790) (1,486,025) (130,302)
(Increase) decrease in prepaid expenses
and other assets 93,810 241,198 (324,510)
Increase in deferred income taxes (444,200) (301,800) (118,000)
Increase (decrease) in accounts payable (932,567) 353,477 342,857
Increase (decrease) in accrued payroll
and related expenses (7,319) 76,837 41,624
Increase (decrease) in accrued expenses
and other liabilities 253,039 654,667 (102,781)
Net cash (used) provided by
operating activities (762,123) (627,047) 292,582
Cash flows from investing activities:
Proceeds from sale of property and
equipment 3,787 8,916 -
Capital expenditures (430,200) (466,345) (247,568)
Investment in joint ventures - - (154,258)
Payment for purchase of Novest (net of
cash acquired) - - (715,027)
Payment for purchase of Super Glue (net
of cash acquired) - (2,165,420) -
Net cash used in investing
activities (426,413) (2,622,849) (1,116,853)
Cash flows from financing activities:
Principal payments on long-term debt (184,599) (175,593) (58,045)
Borrowings of debt 250,000 1,000,000 -
Principal payments on obligations
under capital lease (5,400) (157,399) (160,233)
Borrowings on line of credit 7,858,000 8,989,014 4,937,000
Payments on line of credit (7,216,000) (6,429,014) (3,982,000)
Notes receivable from directors (484,500) - -
Issuance of common stock 866,594 127,628 53,132
Net cash provided by
financing activities 1,084,095 3,354,636 789,854
Net increase (decrease) in cash (104,441) 104,740 (34,417)
Cash at beginning of year 223,674 118,934 153,351
Cash at end of year $ 119,233 223,674 118,934
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PACER TECHNOLOGY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended June 30, 1995, 1994 and 1993
(1) The Company and Summary of Significant Accounting Policies
The Company
Pacer Technology ("Pacer") is a vertically integrated manufacturer, formulator
and packager of adhesives, sealants and other related products used in hobby,
cosmetic, industrial, automotive aftermarket, consumer and private label
applications. Pacer produces nearly all of the plastic containers used to
package their adhesives and also produces plastic containers for other
customers.
Principles of Consolidation
The consolidated financial statements include the accounts of Pacer and its
subsidiaries, Pacer Tech Limited ("Pacer Tech") and Recap Limited ("Recap").
Pacer Tech was formed in 1986 to conduct business operations as a distributor of
adhesives in the United Kingdom. Recap was formed in 1992 to record Pacer's
one-third interest in Future Fuel Limited ("Future Fuel"), a general partnership
which marketed and distributed fuel oil technology products in the United
States, Canada and Mexico (see note 6).
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market (net
realizable value).
Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost less accumulated
depreciation or amortization. Equipment and leasehold improvements acquired
under capital leases are stated at the lower of the present value of minimum
lease payments at the beginning of the lease term or the fair value at the
inception of the lease.
Equipment depreciation is calculated using the straight-line method over the
estimated useful lives of the assets. Equipment and leasehold improvements
acquired under capital leases are amortized using the straight-line method over
the shorter of the lease term or estimated useful life of the asset.
Cost in Excess of Net Assets of Businesses Acquired
Cost in excess of net assets of businesses acquired are amortized on the
straight-line method over a 14-year life. Pacer assesses the recoverability of
this intangible asset by determining whether the amortization of the asset
balance over its remaining useful life can be recovered through undiscounted
future operating cash flows of the acquired operation.
Other Assets
Included in other assets are certain costs that are being amortized over the
estimated useful lives of the respective assets (from 3 to 20 years) using the
straight-line method.
Income Per Common Share and Common Share Equivalent
Income per common share and common share equivalent is computed based on the
weighted average number of common shares outstanding and common equivalent
shares from the dilutive effect of outstanding stock options and warrants.
Fully diluted income per share approximates primary income per share.
Income Taxes
Effective July 1, 1993, Pacer prospectively adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes," which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse (see note 10). The adoption
of the provisions of Statement 109 did not have a material impact on the
financial statements of Pacer.
Prior to July 1, 1993, the provision for income taxes was based on income and
expenses included in the accompanying consolidated statements of income.
Differences between taxes so computed and taxes payable under applicable
statutes and regulations were classified as deferred taxes arising from timing
differences.
Foreign Currency Translation
Assets and liabilities denominated in foreign currency are translated into U.S.
dollars at the current rate of exchange existing at year-end and revenues and
expenses are translated at the average monthly exchange rates. Translation
adjustments are immaterial, as are gains and losses included in income.
Research and Development
Research and development costs are charged to selling, general and
administrative expenses as incurred and amounted to $364,646, $307,409 and
$272,053 in 1995, 1994 and 1993, respectively.
Product Warranties
Pacer provides warranties for certain of its products for periods generally
ranging from 6 to 12 months. Estimated warranty costs are recognized at the
time of the sale.
Statement of Cash Flows
For purposes of reporting cash flows, cash includes cash at banks and petty cash
on hand. Net cash provided by operating activities includes interest paid of
$498,289, $207,859 and $59,413 for the years ended June 30, 1995, 1994 and 1993,
respectively.
Income taxes paid amounted to $96,250, $107,000 and $159,943 for the years ended
June 30, 1995, 1994 and 1993, respectively. Noncash financing activities
consisted of common stock issued in connection with the Super Glue Corporation
and Novest, Inc. acquisitions (note 5) of $1,195,505 and $294,279 for the years
ended June 30, 1994 and 1993, respectively.
(2) Notes Receivable
During fiscal year 1995, the Company permitted two customers to convert trade
receivable balances to term notes. Both notes are payable in monthly
installments of principal and interest and mature on July 26, 1996 and August
15, 1997, respectively. The notes bear interest at a rate higher than the rate
of interest charged to Pacer for its borrowing of funds from its predominant
bank.
(3) Inventories
Inventories are summarized as follows: 1995 1994
Raw materials $2,610,386 2,503,552
Work-in-process 417,064 551,030
Finished goods 2,480,679 1,446,757
$5,508,129 $4,501,339
(4) Equipment and Leasehold Improvements
Equipment and leasehold improvements and the useful lives used for computing
depreciation and amortization are summarized as follows:
Lives
in years 1995 1994
Shop equipment 5-10 $3,331,934 3,280,209
Office furniture and equipment 5-7 519,827 454,466
Leasehold improvements 10 825,170 761,971
Transportation equipment 3 83,068 67,192
Construction in progress 95,791 8,056
$4,855,790 4,571,894
Less accumulated depreciation
and amortization (3,240,021) (2,905,642)
$1,615,769 1,666,252
<PAGE>
(5) Acquisitions
On August 1, 1992, Pacer acquired Novest, Inc. ("Novest"), a privately-held
corporation, by means of a purchase of all of Novest's outstanding stock.
Novest manufactured adhesive and sealant products for use in the automotive
aftermarket. The total purchase price was $1,056,416 (including acquisition
costs of $59,637). Pacer financed the acquisition through cash of $602,500 and
254,511 shares of Pacer common stock valued at $294,279, and a $100,000 cash
payment for a covenant not to compete.
The acquisition of Novest has been accounted for as a purchase and, accordingly,
the results of Novest's operations for the 11 months ended June 30, 1993 are
included in Pacer's consolidated statements of operations for the year then
ended. The excess of cost over the fair value of net assets acquired was
$490,807, and is being amortized on a straight-line basis over 14 years.
Amortization expense charged to operations during the years ended June 30, 1995,
1994 and 1993 was $35,058, $35,057 and $32,136 respectively.
Supplementary information related to the acquisition of Novest for the June 30,
1993 consolidated statement of cash flows is as follows:
1993
Assets acquired $ 1,168,771
Liabilities assumed (171,992)
Common stock issued (294,279)
Cash paid to sellers 702,500
Fees and expenses 59,637
Less cash acquired (47,110)
Net cash paid $ 715,027
Pacer purchased the assets of Mexlonic (formerly Super Glue Corporation ("Super
Glue")), a manufacturer and packager of adhesive products. The bankruptcy court
allowed Pacer to assume full managerial, operational and financial control over
Super Glue's operations until the bankruptcy court approved the agreement. The
agreement was confirmed and the transaction was completed on October 15, 1993.
Pursuant to the agreement, Pacer acquired certain assets and assumed certain
liabilities of Super Glue. The purchase price totaled $3,582,350 and consists
of the following amounts incurred by Pacer:
Cash $2,073,859
Pacer common stock 1,195,505
Transaction costs 312,986
$3,582,350
The acquisition has been accounted for as a purchase and accordingly, the
results of Super Glue's operations for the 8 1/2 months ended June 30, 1994 are
included in Pacer's consolidated statements of operations for the year then
ended. The excess of cost over the fair market value of net assets acquired was
$1,866,960 and is being amortized on a straight-line basis over 14 years.
Amortization expense charged to operations during the years ended June 30, 1995
and 1994 was $133,354 and $94,459.
Supplementary information related to the acquisition of Super Glue for the June
30, 1994 consolidated statement of cash flows is as follows:
Assets acquired $ 4,254,032
Liabilities assumed (984,668)
Common stock issued (1,195,505)
Cash paid to sellers 2,073,859
Fees and expenses 207,207
Less cash acquired (115,646)
Net cash paid $ 2,165,420
<PAGE>
The following represents the unaudited pro forma results of operations as if the
acquisition of Super Glue had occurred at July 1, 1992, after consideration for
certain adjustments including the amortization of cost in excess of net assets
acquired and interest expense:
1994 1993
Net sales $22,112,174 21,239,670
Income (loss) before extraordinary item $ 46,735 (630,479)
Net income (loss) $ 46,735 (630,479)
Earnings (loss) per share $ 0.00 (0.04)
All pro forma information presented above is in response to applicable
accounting rules relating to business acquisitions. This pro forma information
does not purport to be indicative of the results that actually would have been
obtained if the combined operations had been conducted during the periods
presented and is not intended to be a projection of future results due to
extensive changes being made in the organization, facilities, personnel and
other costs of the acquired company.
(6) Other Assets
Other assets (net of amortization) consists of the following:
1995 1994
Covenant not to compete, net (note 5) $ 41,667 61,667
Patents and trademarks, net 8,986 10,186
Other 1,091 1,092
$ 51,744 72,945
On March 16, 1992, Pacer acquired a one-third interest in Future Fuel, as
described in Note 1. Summarized financial information of Future Fuel as of and
for the years ended June 30, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Assets $ 122,324 115,834 115,834
Liabilities 120,276 113,786 113,786
Partners' equity $ 2,048 2,048 2,048
Revenues $ - - (208,212)
Costs and expenses - - (386,862)
Net loss - - (595,074)
Pacer's one-third share of net loss $ - - (198,358)
</TABLE>
Future Fuel has not met management's expectations and is currently winding down
to dissolution. All unsold inventory was returned to the manufacturer during
1993. The expected total losses have been summarized and the partners have been
advised of additional capital requirements. Pacer does not anticipate and has
not recognized losses in connection with the dissolution since the year ended
June 30, 1993, when an additional loss of $108,769 was recognized.
(7) Line of Credit and Long-Term Debt
At June 30, 1994, Pacer had a line of credit agreement providing for maximum
borrowings of $4,000,000. The line of credit was cross-collateralized by trade
accounts receivable, inventory, and certain equipment. On August 1, 1994, Pacer
revised its line of credit agreement to increase the maximum borrowings to
$5,250,000. The revised line of credit bears interest at the bank's prime (9%
at June 30, 1995) plus 1% and is payable on demand. In connection with this
revision, Pacer also entered into a promissory note agreement whereby Pacer can
borrow up to an aggregate of $250,000. The promissory note bears interest at
prime plus 1.5% and is payable in monthly installments of principal and
interest. The principal outstanding on this note was $233,333 at June 30, 1995.
Total borrowings on the line of credit amounted to $4,157,000 and $3,515,000 at
June 30, 1995 and 1994 respectively.
The line of credit agreement requires maintenance of certain financial ratios
and contains other restrictive covenants, including a restriction on all
dividends. Pacer was in compliance with all debt covenants at June 30, 1995.
Pacer also has a term loan agreement providing for maximum borrowings of
$1,000,000 bearing interest at a rate of prime plus 2%. Total principal
outstanding on this credit facility was $727,364 as of June 30, 1995. All
borrowings are secured by certain assets of Pacer.
Long-term debt consists of the following: 1995 1994
Note payable at prime plus 2.0%, secured
by certain assets, due in monthly
installments of principal plus interest. $727,364 895,295
Note payable at prime plus 1.50%, secured
by certain equipment, due in 60 monthly
installments of $4,167 plus interest,
through February 2000. 233,333 -
Less current installments (225,672) (175,276)
$735,025 720,019
The amount of long-term debt maturing in each of the next five years is as
follows:
Year ending June 30,
1996 $225,672
1997 244,865
1998 262,866
1999 193,961
2000 33,333
$960,697
(8) Lease Obligations
Pacer leases a building for its office and manufacturing operations under an
operating lease expiring in June 1999. Pacer also leases certain manufacturing
and office equipment under operating lease agreements. Future minimum lease
payments under noncancelable operating leases as of June 30, 1995 are as
follows:
Operating
Year ending June 30, Leases
1996 $ 368,790
1997 377,479
1998 332,896
1999 327,906
2000 12,462
Thereafter -
Minimum future lease payments $1,419,533
Rent expense was $244,266, $241,563, and $297,007 in 1995, 1994 and 1993,
respectively.
( 9) Major Customers and Export Sales
Pacer did not have net sales to any individual customer greater than 10% of net
sales in 1995. The Company had net sales to one customer representing
approximately 10.1% of net sales in 1994 and had net sales to two customers
representing approximately 14.5% and 13.1% of net sales in 1993.
Pacer had export sales representing 16%, 16% and 19% of net sales in 1995, 1994
and 1993, respectively.
(10) Income Taxes
As discussed in Note 1, Pacer prospectively adopted Statement 109 as of July 1,
1993. The cumulative effect of this change did not have a material effect on the
1994
consolidated financial statements.
Income tax expense consists of:
1995 1994 1993
Federal:
Current $ 206,250 234,700 118,000
Deferred (383,800) (240,400) (118,000)
Charges in lieu of taxes - - 220,000
(177,550) (5,700) 220,000
State:
Current 60,400 80,700 67,000
Deferred ( 60,400) (15,000) (1,000)
$(177,550) 60,000 286,000
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets at June 30, 1995 and 1994 are presented below:
Current deferred tax assets: 1995 1994
Allowance for doubtful accounts $160,320 143,390
Inventory 392,285 227,934
Prepaid expenses 30,964 (45,979)
Vacation 38,553 38,980
Warranty 22,934 21,291
Advertising 59,964 74,021
Other accruals 120,346 100,828
825,366 560,465
Less valuation allowance - (170,400)
Net current deferred tax assets $825,366 390,065
Non-current deferred tax assets:
Depreciation $ 38,634 29,735
The valuation allowance at June 30, 1994 represents potential tax credit
carryforwards of which the ultimate utilization was uncertain in 1994.
The total income tax expense differs from the "expected" tax expense (computed
by applying the U.S. Federal corporate income tax rate of 34%) for 1995, 1994
and 1993 as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1995 1994 1993
Expected income tax provision (benefit) $(163,375) 169,503 221,604
Non-deductible expenses 37,000 18,546 22,350
State income tax, net of
Federal income tax benefit 39,000 43,351 42,046
Effect of foreign operations 80,225 - -
Change in balance of valuation allowance (170,400) (155,500) -
Other - ( 15,900)
$(177,550) 60,000 286,000
</TABLE>
(11) Stockholders' Equity
Notes Receivable from Directors
On September 27, 1994, three Directors exercised options to purchase 100,000
shares each (300,000 total) of Pacer Technology common stock. Each Director
signed a secured promissory note for the principal sum of $58,437.50
($175,312.50 total) plus simple interest of 7.8% per annum payable to Pacer
Technology. On October 19, 1994, a Director exercised options to purchase
485,000 shares of Pacer Technology common stock. This director signed a secured
promissory note for the principal sum of $309,187.50, plus simple interest of
7.89% per annum payable to Pacer Technology. Principal and all accrued interest
will be due and payable in one lump sum on September 27, 1998 and October 19,
1998, respectively; subject to the provisions regarding prepayment noted
below.
Each Note is secured by 100,000 and 485,000 shares, respectively, of the
Company's common stock as provided in a Security Agreement between the Company
and each Director.
Each Director may sell the shares securing the Note in whole or in part, without
penalty, provided that the proceeds of sale are applied to pre-pay the Note.
The amount of each prepayment shall be applied as follows:
(a) first, to interest accrued on the Note with respect to the shares
sold, to the date of sale;
(b) second, to the outstanding principal on the Note in the amount of
$0.584375 and $0.6375 per share sold, respectively; and
(c) third, to the seller or his designee.
If all principal and accrued interest on the Note is not paid in full on or
before September 27, 1998 and October 19, 1998, respectively, the Company shall
be entitled to exercise any and all remedies available to it under the
California Commercial Code, with full recourse to the personal assets of the
Director.
Common Stock
During the year ended June 30, 1994, Pacer adopted a stock incentive plan which
awards employees for years of service. Under this plan, 500 shares of Pacer
stock are granted to each employee for every five years of service. The shares
are restricted for two years after the grant date. During 1995, Pacer awarded
12,000 shares to employees for past service and recorded compensation expense of
$9,960.
Stock Option and Incentive Stock Option Plans
During the year ended June 30, 1995, Pacer adopted the 1994 Stock Option Plan to
provide a means whereby key employees and directors of the Company may be given
an opportunity to purchase the common stock of the Company pursuant to
"non-qualified stock options" at the discretion of the Board of Directors.
Under the 1994 Stock Option Plan, options to purchase up to an aggregate of
2,000,000 shares of Pacer Technology common stock can be granted. The purchase
price shall be no less than the fair market value of the common stock on the
date such option is granted. The exercise period for the options shall not
exceed ten years from date of grant and options granted will vest immediately.
During the year ended June 30, 1995, Pacer adopted the 1994 Incentive Stock
Option Plan to provide a means whereby key employees of the Company may be given
an opportunity to purchase the common stock of the Company at the discretion of
the Board of Directors pursuant to options that will qualify as "incentive stock
options" under Section 422 of the Internal Revenue Service Code.
Under the 1994 Incentive Stock Option Plan, options to purchase up to an
aggregate of 2,000,000 shares of Pacer Technology common stock can be granted.
The purchase price shall be no less than the fair market value of the common
stock on the date such option is granted. In the event such option is granted
to an employee who, at the time the option is granted, owns common stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, the exercise price of the option shall be no less than
110% of the fair market value. The exercise period for the options shall not
exceed ten years. The option agreement may provide (a) that the right to
exercise the option in whole or in part shall not accrue until a certain date or
the occurrence of an event; (b) that the right to exercise the option shall
accrue over time in accordance with a vesting schedule; or (c) that such accrual
shall be accelerated upon the occurrence of certain specified event(s).
Pacer had 4,800,000 shares of common stock reserved for non-qualified and
qualified incentive stock options under the Company's 1982 Stock Option Plan and
the 1982 Incentive Stock Option Plan. These Plans expired in 1992, and no
options were granted under these plans thereafter.
Under the 1982 Stock Option Plan, options to purchase up to an aggregate of
1,800,000 shares of common stock could be granted to both directors and key
employees. The purchase price was not normally less than the fair market value
of the shares on the date the option was granted, and in no event was the
purchase price less than 85% of the fair market value of the shares on the date
the option was granted. The exercise period for an option could not exceed ten
years, and options granted vested immediately.
Under the 1982 Incentive Stock Option Plan, options to purchase an aggregate of
3,000,000 shares of common stock could be granted to key employees of Pacer.
The purchase price was not less than the fair market value of the shares on the
date the option was granted. These options generally expired in ten years and
vested immediately.
Other Options Granted
In 1995, Pacer granted an option to a key employee to purchase 100,000 shares of
Pacer's common stock. The exercise price of $1.07 was equal to the fair market
value of the common stock on the date of grant. The options expire in ten years
and require a two year holding period.
A summary of transactions under the stock option plans is as follows:
<TABLE>
<CAPTION>
1982 Stock Option Plan & ISOP
Options Outstanding Options
Available Exercise Aggregate
for Grant Shares Price Value
<S> <C> <C> <C> <C>
Balances at June 30, 1992 288,750 3,330,450 $0.19-1.00 1,597,411
Options granted (100,000) 100,000 1.06 106,000
Options exercised - (133,500) 0.38-0.47 (53,132)
Options expired (188,750) - - -
Balances at June 30, 1993 - 3,296,950 $0.19-1.06 1,650,279
Options exercised - (168,750) 0.38-0.68 (99,896)
Options cancelled - (10,000) 1.00 (10,000)
Balances at June 30, 1994 - 3,118,200 $0.19-1.06 1,540,383
Options authorized - - - -
Options granted - - - -
Options exercised - (881,700) 0.38-0.58 (528,361)
Options expired - (685,000) 0.38-0.64 (374,987)
Options cancelled - - - -
Balance at June 30, 1995 - 1,551,500 $0.19-1.06 637,035
</TABLE>
<TABLE>
<CAPTION>
Other Stock Option Plan
Options Outstanding Options
Available Exercise Aggregate
for Grant Shares Price Value
<S> <C> <C> <C> <C>
Balances at June 30, 1993 - - - -
Options authorized 1,000,000 - - -
Options granted (1,000,000) 1,000,000 $ 1.00 1,000,000
Balances at June 30, 1994 - 1,000,000 $ 1.00 1,000,000
Options authorized 100,000 - - -
Options granted (100,000) 100,000 1.08 107,800
Options exercised - - - -
Options expired - - - -
Options cancelled - - - -
Balance at June 30, 1995 - 1,100,000 $ 1.08 1,107,800
</TABLE>
<TABLE>
<CAPTION>
1994 SOP & ISOP
Options Outstanding Options
Available Exercise Aggregate
for Grant Shares Price Value
<S> <C> <C> <C> <C>
Balances at June 30, 1994 - - $ - -
Options authorized 4,000,000 - - -
Options granted (3,600,000) 3,600,000 0.72-1.00 3,376,000
Options exercised - - - -
Options expired - - - -
Options cancelled - - - -
Balance at June 30, 1995 400,000 3,600,000 $0.72-1.00 3,376,000
</TABLE>
Director Warrants
Pacer has issued warrants to Directors for the purchase of common stock as
follows:
<TABLE>
<CAPTION>
Exercise Aggregate
Warrants Price Value
<S> <C> <C> <C>
Balance at June 30, 1992 and 1993 1,900,000 $0.32-0.50 777,000
Warrants exercised (40,100) 0.32 (12,732)
Balance at June 30, 1994 1,859,900 $0.32-0.50 764,268
Warrants exercised (760,900) 0.32-0.50 (328,273)
Warrants expired (475,000) $0.32-0.50 (237,875)
Balance at June 30, 1995 624,000 $ 0.32 198,120
</TABLE>
The warrants are exercisable at issuance and all expire in fiscal year 1996.
(12) 401(k) Plan
Pacer adopted a 401(k) plan effective February 1, 1991 covering all employees of
Pacer who were full-time employees as of February 1, 1991 and who elected to
participate in the plan.
Participants may make contributions to the plan on a pre-tax basis from 2% to
16% of their annual compensation. Pacer contributions, when made, will match
25% of employee contributions up to 4% of salaries paid. Pacer contributions
are accrued as participant contributions are withheld, and participants become
fully vested in Pacer contributions after six years of service.
Plan expense for the years ended June 30, 1995, 1994 and 1993 was $21,389,
$28,156 and $16,140, respectively.
(13) Related Party Transactions
The Company has made loans to certain directors which are evidenced by
promissory notes and secured by shares of common stock. The loans have
maturities of 4 years. As of June 30, 1995, the outstanding principal amount on
the notes was $484,500 and is included in stockholders' equity. (Note 11)
(14) Commitments and Contingencies Pacer has entered into sales agreements in
the ordinary course of business which include pricing terms, renewability
clauses, guaranteed minimum purchase quantities and provisions which convey
trademark rights. Each of these agreements is unique and may include one or
more of these features as part of its terms.
Pacer is involved in certain legal actions and claims arising in the ordinary
course of business. It is the opinion of management (based on advice of legal
counsel) that such litigation will be resolved without material effect on
Pacer's financial position or results of operations.
During fiscal year 1995, Pacer extended an employment contract with a member of
management. Among other things, the contract provides for a specified
continuation of salary payments for termination without cause and includes
certain agreements not to compete.
(15) Fourth Quarter Adjustment
Pacer took a one time charge against cost of sales of approximately $450,000
during the fourth quarter of fiscal year 1995 for the phaseout of unprofitable
product lines.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Identification of the directors and executive officers of the Company is
incorporated by reference from the "Election of Directors--Nominees and
executive officers" sections of the Company's definitive Proxy Statement dated
September 11, 1995 to be mailed to shareholders in connection with the 1995
Annual Shareholders Meeting and filed with the Securities and Exchange
commission on or about September 11, 1995 (the "Proxy Statement"), found on
pages 4-5 thereof.
Item 10. Executive Compensation
Incorporated by reference from the "Election of Directors--Executive
Compensation" section of the Proxy Statement, found on pages 6-7 thereof.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Incorporated by reference from the "General Information--Share Ownership of
Management" section of the Proxy Statement, found on pages 2-3 thereof.
Item 12. Certain Relationships and Related Transactions
Incorporated by reference from the "Certain Transactions" section of the Proxy
Statement, found on pages 7-8 thereof.
Item 13. Exhibits and Reports on Form 8-K
(a) Following is a list of the exhibits filed with this Form 10-KSB.
Exhibit 3.1 Articles of Incorporation (4)
Exhibit 3.2 By-laws (4)
Exhibit 10.3 Employment agreement dated November 21,
1989 between the Company and James Munn. (1)
Exhibit 10.4 Warrants issued to directors in fiscal year
ended June 30, 1987. (3)
Exhibit 10.5 Lease Agreement on new facilities in Rancho Cucamonga,
California, dated March 1, 1988. (2)
Exhibit 10.6 Agreement To Extend Term of Executive Employment
Agreement
Exhibit 22 Subsidiaries of Registrant
Exhibit 24 Consent of Independent Auditors
(b) Non-Applicable
<PAGE>
- ---------------------------------
1) Incorporated by reference to exhibits to Form 10-K for fiscal year
ended June 30, 1990.
2) Incorporated by reference to exhibits to Form 10-K for fiscal year
ended June 30, 1988.
3) Incorporated by reference to exhibits to Form 10-K for fiscal year
ended June 30, 1987.
4) Incorporated by reference to exhibits to Form 10-K for fiscal year
ended June 30, 1986.
<PAGE>
Signatures
Pursuant to the requirements of section 13 or 15(d) 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.
PACER TECHNOLOGY
/s/James T. Munn
James T. Munn, President
Date: August 28, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/James T. Munn President/ August 28, 1995
James T. Munn Chief Executive
Officer/Director
/s/Roberto J. Cavazos Jr. Chief Financial August 28, 1995
Roberto J. Cavazos, Jr. Officer
/s/John G. Hockin, II Chairman of August 28, 1995
John G. Hockin, II the Board and
Director
/s/Devere W. McGuffin, II Secretary and August 28, 1995
DeVere W. McGuffin, II Director
/s/Joe F. Brock Director August 28, 1995
Joe F. Brock
/s/Carl Hathaway Director August 28, 1995
Carl Hathaway
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
PACER TECHNOLOGY
/s/ James T. Munn
James T. Munn, President
Date: August 28, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ James T. Munn President/ August 28, 1995
James T. Munn Chief Executive
Officer/Director
/s/ Roberto J. Cavazos, Jr. Chief Financial August 28, 1995
Robert J. Cavazos,Jr. Officer
/s/ John G. Hockin II Chairman of the August 28, 1995
John G. Hockin II Board and
Director
/s/Devere W. McGuffin Secretary and August 28, 1995
DeVere W. McGuffin Director
/s/ Joe F. Brock Director August 28, 1995
Joe F. Brock
/s/ Carl Hathaway Director August 28, 1995
Carl Hathaway
<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Number Name Page
Exhibit 3.1 Articles of Incorporation (4) -
Exhibit 3.2 By-laws (4) -
Exhibit 10.3 Employment agreement dated November 21, 1989
between the Company and James Munn. (1) -
Exhibit 10.4 Warrants issued to directors in fiscal
year ended June 30, 1987. (3) -
Exhibit 10.5 Lease Agreement on new facilities in
Rancho Cucamonga, California, dated
March 1, 1988. (2) -
Exhibit 10.6 Agreement To Extend Term of Executive
Employment Agreement (27)
Exhibit 22 Subsidiaries of Registrant (28)
Exhibit 24 Consent of Independent Auditors (29)
- -------------------------------
1) Incorporated by reference to exhibits to Form 10-K for fiscal
year ended June 30, 1990.
2) Incorporated by reference to exhibits to Form 10-K for fiscal
year ended June 30, 1988.
3) Incorporated by reference to exhibits to Form 10-K for fiscal
year ended June 30, 1987.
4) Incorporated by reference to exhibits to Form 10-K for fiscal
year ended June 30, 1986.
<PAGE>
EXHIBIT 10.6
AGREEMENT TO EXTEND TERM
of
EXECUTIVE EMPLOYMENT AGREEMENT
IT IS HEREBY AGREED by and between PACER TECHNOLOGY, a California
Corporation
("Employer") and JAMES T. MUNN ("Employee") that the Executive Employment
Agreement ("Employment Agreement") between Employer and Employee effective by
its terms October 29, 1989 (a copy of which is attached hereto as Exhibit "A")
shall be amended and modified as follows:
1. EXTENSION OF TERM OF EMPLOYMENT: The term of employment under the
Employment Agreement shall be extended uninterruptedly for a period of two (2)
years commencing November 1, 1994 and terminating October 31, 1996 ("Extension
Term").
2. COMPENSATION DURING EXTENSION TERM: During the Extension Term,
Employee shall receive a salary of $21,750.00 per month on a schedule mutually
agreed upon between Employer and Employee.
3. OPTION TO PURCHASE STOCK: In conformance with the "Pacer
Technology 1994 Incentive Stock Option Plan", Employee will receive stock
options to purchase Employer's stock under terms and conditions set forth in a
single separate agreement entitled "Incentive Stock Option Agreement", a true,
correct and complete copy of which is attached hereto as Exhibit "B".
4. EFFECTIVE DATE: Regardless of the dates set forth at the
signatures hereto, this Agreement shall be effective from and after November 1,
1994.
5. NO OTHER CHANGES: Except for the modification and amendments set
forth herein, all terms and conditions of the Employment Agreement shall remain
unchanged and in full force and effect throughout the Extension Term.
Execution by Employer
Date: April 12, 1995 PACER TECHNOLOGY
By: /s/ John G. Hockin II
JOHN G. HOCKIN, II,
Chairman of the Board
Execution by Employee
Date: April 12, 1995 /s/ James T. Munn
JAMES T. MUNN
<PAGE>
EXHIBIT 22
SUBSIDIARIES OF PACER TECHNOLOGY
1. Pacer Tech Ltd.
A United Kingdom Corporation - 100% owned
2. RECAP, LTD.
A California Corporation - 100% owned
<PAGE>
EXHIBIT 24
Consent of Independent Auditors
The Board of Directors and Stockholders
Pacer Technology:
We consent to the use of our reports (incorporated herein by reference) and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Ontario, California
July 28, 1995
29
August 28, 1995
NASDAQ
National Association of
Securities Dealers Inc.
1735 "K" Street, N.W.
Washington DC 20006
Ref: Form 10-KSB for the period ended June 30, 1995;
Commission File No. 0-8864
Herewith for filing are three (3) conformed copies of Form 10-KSB for Pacer
Technology for the period ended June 30, 1995.
Please date stamp the enclosed copy of this letter "Received" and return same to
the undersigned in the envelope provided.
Sincerely,
PACER TECHNOLOGY
R.J. Cavazos, Jr.
Chief Financial Officer
RJC/hk
encls.
