<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
x Annual report under section 13 or 15(d) of the Securities Exchange Act
- -- of 1934[Fee Required] for the fiscal year ended June 30, 1996
Transition report under section 13 or 15(d) of the Securities Exchange
- -- Act of 1934 [No Fee Required] for the transition period from _________
________ to __________
Commission file number 0-8864
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)
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
xxx 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. x
---
The issuer's revenues for its most recent fiscal year were $22,278,497.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of August 1, 1996 was $11,740,362 (computed by reference to the
average bid and asked prices of such stock on August 1, 1996, as reported in
the over-the-counter market.)
The number of shares outstanding of the registrant's Common Stock, as of
August 1, 1996, was 15,213,475 shares.
Documents incorporated by reference. Pacer Technology's definitive Proxy
Statement dated September 6, 1996 for the 1996 annual meeting of shareholders-
- -Part III.
Transitional Small Business Disclosure Format: Yes No X
--- ---
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 either 1995 or 1996. The Company had net sales to one
customer representing approximately 10.1% of net sales in 1994.
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% of total revenues in 1996, 1995 and 1994. Company products
are sold to the industrial market by Pacer sales personnel and 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 independent representatives and distributed
through mass merchandising retail outlets. Automotive aftermarket products
are sold by Pacer sales personnel and independent representatives 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 $245,000, $365,000
and $307,000 in fiscal years 1996, 1995 and 1994, respectively.
<PAGE>
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 is expected to have a minimal
adverse effect on capital expenditures, earnings and the competitive position
of the Company.
Employees
- ---------
At August 1, 1996, the Company employed 90 people on a full-time basis.
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.
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. This lease expires April, 1999.
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. This lease
expires July, 1997.
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,
1996 1995
-----------------------------------
HIGH LOW HIGH LOW
First Quarter 1 7/32 15/16 1 7/16 1
Second Quarter 1 3/16 29/32 1 5/16 1
Third Quarter 1 25/32 1 3/16 29/32
Fourth Quarter 1 3/8 27/32 1 3/32 11/16
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, 1996 was 2,370.
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
1996 1995 1994
----- ----- -----
Net Sales 100% 100% 100%
Cost of Sales 66% 68% 64%
Gross Profit 34% 32% 36%
Comparison of 1996 to 1995
- --------------------------
Net sales increased $1,694,389, or 8% over the prior year. This growth was
primarily due to increased revenue generated by most product lines.
Cost of sales for the year was $14,771,715, or 66% of sales. This represents
an increase of $809,886, or 6% over the prior year. This rise was primarily
due to increased volume. Cost of sales was, however, favorably impacted by
both a reduction in manufacturing costs and freight charges. These savings
were the result of the Company's reorganization and inventory reduction plans
implemented in the latter part of fiscal year 1995.
Selling, General & Administrative expenses were $5,662,955, or 25% of sales.
These expenses included charges incurred in conjunction with due diligence
activities for a proposed acquisition that did not materialize. This
represents a decrease of $823,480, or 13% below the prior year. This drop in
expenditures was primarily attributed to savings realized through the
Company's reorganization plan coupled with reduced spending in most areas.
Selling, General & Administrative expenses were also favorably impacted by
reduced freight charges resulting from the improved utilization of the
Company's Memphis, Tennessee distribution facility.
Goodwill related to the Super Glue acquisition is being amortized over 14
years. Amortization costs of $133,354 were recorded in fiscal year 1996.
Management believes the Super Glue product line will generate profits that
will significantly exceed the goodwill amortization.
Other expenses for the year were $366,668, or 2% of sales. This represents
a decrease of $146,444, or 29% over the prior year. This decline was
primarily attributed to interest expense associated with reduced utilization
of the Company's credit facility. A substantial improvement in profitability
and cashflow generated from its inventory reduction plan allowed the Company
to reduce its reliance on bank borrowings during fiscal year 1996.
The Company's effective tax rate for fiscal year 1996 after tax credits was
37%.
<PAGE>
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.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by all activities in fiscal year 1996 was $88,762 versus
cash consumed of $104,441 in the prior year.
Cash provided by operating activities during 1996 was $2,927,498 compared to
cash consumed of $762,123 in fiscal year 1995. The rise in net income in
fiscal year 1996 versus 1995 was a major contributor to this change. The
significant decline in inventory levels prompted by the Company's inventory
reduction plan was partially offset by a volume driven increase in accounts
receivable. Notes receivable decreased in fiscal year 1996 as payments were
received from customers for notes negotiated in fiscal year 1995. The
increase in prepaid expenses was caused by advances to suppliers for equipment
purchases and prepayments for premiums related to the Company's business
insurance. The decrease in deferred income taxes was attributed to timing
differences pertaining to tax deductible expenses. Accounts payable levels
increased over the prior year due to a sales related rise in the volume of
purchases in the last quarter of fiscal year 1996. Accrued expenses and other
liabilities were lower in fiscal year 1996 compared to prior year as 1995
included a provision for one time charges related to the elimination of
unprofitable product lines.
Cash consumed by investing activities in 1996 was $243,015 compared to
$426,413 in the prior year. This decrease was the result of lower capital
expenditures in 1996 versus 1995.
Cash consumed by financing activities in 1996 was $2,595,721, compared to cash
generated of $1,084,095 in 1995. This change was primarily due to repayment
on the Company's line of credit, which was made possible through the cashflows
generated from the significant increase in net income and the reduction in
inventory levels.
The Company anticipates continued utilization of its line of credit primarily
to finance working capital requirements throughout fiscal year 1997.
Recently issued Accounting Pronouncements
- -----------------------------------------
During 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets (FASB No. 121), and
Statement No. 123, Accounting for Stock-Based Compensation (FASB No. 123).
<PAGE>
FASB No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill. FASB No. 121 will be
adopted during fiscal year 1997 and is not expected to have a material effect
on the Registrant's financial position or results of operations.
FASB No. 123 establishes a "fair value" method of accounting for the value of
grants under stock-based compensation plans. As permitted under FASB No. 123,
the Registrant will elect to continue to measure compensation expense related
to employee stock option plans utilizing the intrinsic value method as
prescribed by APB Opinion No. 25. However, beginning in fiscal year 1997, the
Registrant will disclose in the footnotes to its financial statements the
proforma effect on net income and earnings per common share as if the fair
value method of measuring compensation expense related to employee stock
option plans was utilized as described in FASB No. 123.
<PAGE>
Item 7. Financial Statements
The following consolidated financial statements are included herein:
Independent Auditors' Report
Consolidated Balance Sheets - June 30, 1996 and 1995.
Consolidated Statements of Operations - Years Ended
June 30, 1996, 1995 and 1994.
Consolidated Statements of Stockholders' Equity - Years
Ended June 30, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows - Years Ended
June 30, 1996, 1995 and 1994.
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
Pacer Technology:
We have audited the accompanying consolidated balance sheets of Pacer
Technology and subsidiaries as of June 30, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 1996, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Orange County, California
August 2, 1996
<PAGE>
PACER TECHNOLOGY AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1996 and 1995
ASSETS 1996 1995
- ------ ---------- ----------
Current assets:
Cash $ 207,995 119,233
Trade receivables, less allowance for doubtful
accounts of $388,525 in 1996 and $399,801 in
1995 (notes 2 and 7) 4,515,127 3,845,991
Other receivables 188,737 125,365
Notes receivable - Current (note 2) 218,165 232,655
Inventories (notes 3 and 7) 3,954,045 5,508,129
Prepaid expenses 340,748 138,016
Deferred income taxes (note 10) 534,369 825,366
---------- ----------
Total current assets 9,959,186 10,794,755
Equipment and leasehold improvements, net
(notes 4, 7 and 8) 1,395,386 1,615,769
Notes receivable - Long-term (note 2) - 100,039
Deferred income taxes (note 10) 36,110 38,634
Cost in excess of net assets of businesses acquired,
net (note 5) 1,859,290 2,027,702
Other assets (note 6) 30,544 51,744
---------- ----------
$13,280,516 14,628,643
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Bank borrowings (note 7) $ 1,675,000 4,157,000
Current installments of long-term debt (note 7) 225,672 225,672
Accounts payable 2,382,718 1,767,102
Accrued payroll and related expenses 298,006 256,239
Other accrued expenses 862,779 1,197,635
---------- ----------
Total current liabilities 5,444,175 7,603,648
Long-term debt, excluding current installments
(note 7) 505,692 735,025
---------- ----------
Total liabilities 5,949,867 8,338,673
Stockholders' equity (notes 5, 11, and 13):
Common stock, no par value. Authorized 50,000,000
shares; issued and outstanding 15,213,475 shares
in 1996 and 14,403,975 shares in 1995 8,105,115 7,844,535
Accumulated deficit (144,998) (1,070,065)
Notes receivable from directors (notes 11 and 13) (629,468) (484,500)
---------- ----------
Total stockholders' equity 7,330,649 6,289,970
Commitments and contingencies (notes 8, 12 and 13)
---------- ----------
$13,280,516 14,628,643
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
PACER TECHNOLOGY AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended June 30, 1996, 1995 and 1994
1996 1995 1994
Net sales (notes 5 and 9) $22,278,497 20,584,108 19,883,753
Cost of sales 14,771,715 13,961,829 12,633,776
---------- ---------- ----------
Gross profit 7,506,782 6,622,279 7,249,977
Selling, general and administrative
expenses 5,662,955 6,486,435 6,444,512
---------- ---------- ----------
Operating income 1,843,827 135,844 805,465
Other expense:
Interest expense, net (267,338) (452,274) (243,733)
Other, net (99,330) (60,838) (50,139)
---------- ---------- ----------
Income (loss) before income taxes 1,477,159 (377,268) 511,593
Income tax expense (benefit) (note 10) 552,092 (177,550) 60,000
---------- ---------- ----------
Net income (loss) $ 925,067 (199,718) 451,593
========== ========== ==========
Income (loss) per common share and common
share equivalent
Primary:
Net income (loss) $ .06 (.01) .03
========== ========== ==========
Weighted average common shares and common
share equivalents outstanding 18,347,280 14,927,373 14,910,609
========== ========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
PACER TECHNOLOGY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended June 30, 1996, 1995 and 1994
Number of Notes
issued and Receivable Total
outstanding Common Accumulated From Stockholders'
shares Stock Deficit Directors Equity
----------- ---------- ---------- ---------- ------------
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 7,844,535 (1,070,065) (484,500) 6,289,970
Net income - - 925,067 - 925,067
Shares issued upon
exercise of options
(Note 11) 175,000 55,845 - - 55,845
Shares issued upon
exercise of warrants
(Note 11) 624,000 198,120 - - 198,120
Shares issued to
Employees (Note 11) 10,500 6,615 - - 6,615
Promissory Note from
Directors (Note 11) - - - (144,968) (144,968)
---------- ---------- ---------- ----------- ---------
Balances at
June 30, 1996 15,213,475 $8,105,115 (144,998) (629,468) 7,330,649
========== ========== =========== =========== =========
See accompanying notes to consolidated financial statements.
<PAGE>
PACER TECHNOLOGY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended June 30, 1996, 1995 and 1994
1996 1995 1994
--------- --------- ---------
Net income (loss) $ 925,067 (199,718) 451,593
Adjustments to reconcile net income (loss) to
net cash (used in) provided by operating
activities:
Depreciation 468,142 476,791 399,506
Amortization of other assets 189,612 189,613 150,659
(Gain) loss on sale of property and
equipment (4,742) 105 (5,963)
Increase (decrease) in provision for
doubtful accounts (11,276) 60,801 (77,000)
(Increase) decrease in trade accounts
receivable (657,860) 1,122,167 (1,063,026)
Increase in other receivables (63,372) (35,161) (21,170)
(Increase) decrease in notes receivables 114,529 (332,694) -
(Increase) decrease in inventory 1,554,084 (1,006,790) (1,486,025)
(Increase) decrease in prepaid expenses
and other assets (202,732) 93,810 241,198
(Increase) decrease in deferred income
taxes 293,521 (444,200) (301,800)
Increase (decrease) in accounts payable 615,616 (932,567) 353,477
Increase (decrease) in accrued payroll
and related expenses 41,767 (7,319) 76,837
Increase (decrease) in accrued expenses
and other liabilities (334,858) 253,039 654,667
---------- --------- ---------
Net cash provided by (used in)
operating activities 2,927,498 (762,123) (627,047)
---------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of property and
equipment 3,450 3,787 8,916
Capital expenditures (246,465) (430,200) (466,345)
Payment for purchase of Super Glue (net
of cash acquired) - - (2,165,420)
---------- --------- ---------
Net cash used in investing
activities (243,015) (426,413) (2,622,849)
---------- --------- ---------
Cash flows from financing activities:
Principal payments on long-term debt (229,333) (184,599) (175,593)
Borrowings of debt - 250,000 1,000,000
Principal payments on obligations
under capital lease - (5,400) (157,399)
Borrowings on line of credit 8,325,000 7,858,000 8,989,014
Payments on line of credit (10,807,000) (7,216,000) (6,429,014)
Notes receivable from directors (144,968) (484,500) -
Issuance of common stock 260,580 866,594 127,628
---------- --------- ---------
Net cash provided by (used in)
financing activities (2,595,721) 1,084,095 3,354,636
---------- --------- ---------
Net increase (decrease) in cash 88,762 (104,441) 104,740
Cash at beginning of year 119,233 223,674 118,934
---------- --------- ---------
Cash at end of year $ 207,995 119,233 223,674
========== ========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
PACER TECHNOLOGY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended June 30, 1996, 1995 and 1994
(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.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 depreciation is calculated using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements 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 (Loss) Per Common Share and Common Share Equivalent
- ----------------------------------------------------------
Income (loss) 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 has approximated primary income per
share.
Income Taxes
- ------------
Pacer reports income taxes in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes," (FASB 109) 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).
<PAGE>
Foreign Currency Translation
- ----------------------------
Assets and liabilities denominated in foreign functional 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 realized transaction
gains and losses, all of which are included in operations.
Fair Value of Financial Instruments
- -----------------------------------
In December 1991, the FASB issued SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments." SFAS No. 107 requires all entities to disclose the
fair value of financial instruments, both assets and liabilities recognized
and not recognized on the balance sheet, for which it is practicable to
estimate fair value. SFAS No. 107 defines fair value of a financial
instrument as the amount at which the instrument could be exchanged in a
current transaction between willing parties. As of June 30, 1996, the fair
value of all financial instruments approximated carrying value.
Research and Development
- ------------------------
Research and development costs are charged to selling, general and
administrative expenses as incurred and amounted to $245,375, $364,646 and
$307,409 in 1996, 1995 and 1994, respectively.
Product Warranties
- ------------------
Pacer provides warranties for some 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
- -----------------------
Cash and cash equivalents include cash on hand and cash at banks. Net cash
provided by operating activities includes interest paid of $381,453 $498,289
and $207,859 for the years ended June 30, 1996, 1995 and 1994, respectively.
Income taxes paid amounted to $385,250, $96,250 and $107,000 for the years
ended June 30, 1996, 1995 and 1994, respectively. Noncash financing activity
consisted of common stock issued in connection with the Super Glue Corporation
acquisition (note 5) of $1,195,505 for the year ended June 30, 1994.
(2) Notes Receivable
During fiscal year 1995, two customers converted trade receivable balances to
term notes. Both notes are payable in monthly installments of principal and
interest and mature on July 26, 1996 and June 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: 1996 1995
--------- ---------
Raw materials $1,724,468 2,610,386
Work-in-process 307,763 417,064
Finished goods 1,921,814 2,480,679
--------- ---------
$3,954,045 5,508,129
========= =========
(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 1996 1995
-------- --------- ---------
Shop equipment 5-10 $3,482,248 3,331,934
Office furniture and equipment 5-7 527,946 519,827
Leasehold improvements 10 825,170 825,170
Transportation equipment 3 102,165 83,068
Construction in progress - 110,846 95,791
--------- ---------
$5,048,375 4,855,790
Less accumulated depreciation
and amortization (3,652,989) (3,240,021)
--------- ---------
$1,395,386 1,615,769
========= =========
<PAGE>
(5) Acquisitions
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
consisted 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, 1996, 1995 and 1994 was $133,354, $133,354 and $94,459, respectively.
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
==========
(6) Other Assets
Other assets (net of amortization) consist of the following:
1996 1995
--------- ---------
Covenant not to compete, net $ 21,666 41,667
Patents and trademarks, net 7,786 8,986
Other 1,092 1,091
--------- ---------
$ 30,544 51,744
========= =========
(7) Line of Credit and Long-Term Debt
The line of credit is cross-collateralized by trade accounts receivable,
inventory, and certain equipment. The current line of credit bears interest
at the bank's prime rate (8.25% at June 30, 1996) plus .5% and is payable on
demand. Total borrowings on the line of credit amounted to $1,675,000 and
$4,157,000 at June 30, 1996 and 1995, respectively.
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 $183,333 at June 30, 1996.
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, 1996.
<PAGE>
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 $548,031 as of June 30, 1996. All
borrowings are secured by certain assets of Pacer.
Long-term debt consists of the following: 1996 1995
Note payable at prime plus 2.0%, secured -------- --------
by certain assets, due in monthly
installments of principal plus interest,
through December 1, 1998. $548,031 727,364
Note payable at prime plus 1.50%, secured
by certain equipment, due in 60 monthly
installments of $4,167 plus interest,
through February 2000. 183,333 233,333
Less current installments (225,672) (225,672)
-------- --------
$505,692 735,025
======== ========
The amount of long-term debt maturing in each of the next four years is as
follows:
Year ending June 30,
1997 $225,672
1998 274,817
1999 197,542
2000 33,333
-------
$731,364
=======
(8) Lease Obligations
Pacer leases two manufacturing buildings under operating leases expiring in
April and June 1999. Pacer also leases two distribution facilities and office
equipment under operating lease agreements. Future minimum lease payments
under noncancelable operating leases as of June 30, 1996 are as follows:
Operating
Year ending June 30, Leases
---------
1997 $ 372,422
1998 332,896
1999 327,906
2000 12,462
Thereafter -
---------
Minimum future lease payments $1,045,686
=========
Rent expense was $404,107, $366,797, and $285,344 in 1996, 1995 and 1994,
respectively.
( 9) Major Customers and Export Sales
Pacer did not have net sales to any individual customer greater than 10% of
net sales in either 1995 or 1996. The Company had net sales to one customer
representing approximately 10.1% of net sales in 1994.
Pacer had export sales representing 16% of net sales in 1996, 1995 and 1994.
(10) Income Taxes
Income tax expense (benefit) consisted of:
1996 1995 1994
Federal: -------- -------- --------
Current $ 208,331 206,250 234,700
Deferred 243,296 (383,800) (240,400)
-------- -------- --------
451,627 (177,550) (5,700)
State:
Current 50,240 60,400 80,700
Deferred 50,225 (60,400) (15,000)
-------- -------- --------
$ 552,092 (177,550) 60,000
======== ======== ========
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at June 30, 1996 and 1995 are presented
below:
Current deferred tax assets (liabilities): 1996 1995
-------- --------
Allowance for doubtful accounts $155,799 160,320
Inventory 144,389 392,285
Prepaid expenses (79,276) 30,964
Vacation accruals 46,739 38,553
Warranty accruals 33,684 22,934
Advertising accruals 49,935 59,964
Other accruals 183,099 120,346
-------- --------
Net current deferred tax assets $534,369 825,366
======== ========
Non-current deferred tax assets:
Depreciation $ 36,110 38,634
======== ========
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 1996, 1995
and 1994 as follows:
1996 1995 1994
-------- -------- --------
Expected income tax provision (benefit) $ 502,234 (163,375) 169,503
Non-deductible expenses 83,447 37,000 18,546
State income tax, net of
Federal income tax benefit 63,462 39,000 43,351
Effect of foreign operations ( 16,470) 80,225 -
Change in balance of valuation allowance - (170,400) (155,500)
Other - - ( 15,900)
Reduction of liabilities previously
accrued ( 80,581) - -
-------- -------- --------
$ 552,092 (177,550) 60,000
======== ======== ========
(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) with 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 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.
<PAGE>
On September 11, 1995, one Director exercised options to purchase 100,000
shares of Pacer Technology common stock. The Director signed a secured
promissory note for the principal sum of $24,000 plus simple interest of
7.015% per annum payable to Pacer Technology. On November 20, 1995, a
Director exercised warrants to purchase 381,000 shares of Pacer Technology
common stock. This director signed a secured promissory note for the
principal sum of $120,967.50, plus simple interest of 6.6939% per annum
payable to Pacer Technology. Principal and all accrued interest will be due
and payable in one lump sum on September 11, 1999 and November 20, 1999,
respectively; subject to the provisions regarding prepayment noted below.
Each Note is secured by 100,000 and 381,000 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 $0.24 and $0.3175 per share sold, respectively; and
(c) third, to the seller or his designee.
If all principal and accrued interest on the Notes are not paid in full on or
before the maturity dates 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 Directors.
Common Stock
- ------------
During the year ended June 30, 1994, Pacer adopted a stock incentive plan
which awards shares of stock to 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. Pacer awarded 10,500 and 12,000 shares to employees for past service
and recorded compensation expense of $6,615 and $9,960 in 1996 and 1995,
respectively.
Stock Option and Incentive Stock Option Plans
- ---------------------------------------------
During the year ended June 30, 1995, Pacer adopted the 1994 Stock Option Plan
to provide key employees and directors 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 2,000,000 shares
of Pacer Technology common stock can be granted. The purchase price shall be
no less than fair market value on the grant date. The exercise period shall
not exceed ten years from grant date and options vest immediately.
In 1996, under this plan, Pacer granted an option to a director to purchase
100,000 shares of Pacer's common stock. The exercise price of $.88 was equal
to the fair market value of the common stock on the date of grant. The option
expires in ten years.
During the year ended June 30, 1995, Pacer adopted the 1994 Incentive Stock
Option Plan that qualifies 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 grant date. 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).
<PAGE>
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.
A summary of transactions under the stock option plans is as follows:
1982 Stock Option Plan & ISOP
Options Outstanding Options
Available Exercise Aggregate
for Grant Shares Price Value
---------- --------- ---------- ---------
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 exercised - (881,700) 0.38-0.58 (528,361)
Options expired - (685,000) 0.38-0.64 (374,987)
Options cancelled - - - -
---------- --------- ---------- ---------
Balances at June 30, 1995 - 1,551,500 $0.19-1.06 637,035
Options exercised - (175,000) 0.24-0.47 (55,845)
Options expired - (100,000) 1.06 (106,300)
---------- --------- ---------- ---------
Balances at June 30, 1996 - 1,276,500 $0.19-0.55 474,890
========== ========= ========== =========
Other Stock Option Plan
Options Outstanding Options
Available Exercise Aggregate
for Grant Shares Price Value
---------- ---------- ---------- ---------
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 cancelled - - - -
---------- ---------- ---------- ---------
Balances at June 30, 1995 - 1,100,000 $1.00-1.08 1,107,800
Options authorized 100,000 - - -
Options granted (100,000) 100,000 .97 96,880
---------- ---------- ---------- ---------
Balances at June 30, 1996 - 1,200,000 $0.97-1.08 1,204,680
========== ========== ========== =========
<PAGE>
1994 SOP & ISOP
Outstanding Options
Options --------------------
Available Exercise Aggregate
for Grant Shares Price Value
---------- ---------- ---------- ---------
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 cancelled - - - -
---------- ---------- ---------- ---------
Balances at June 30, 1995 400,000 3,600,000 $0.72-1.00 3,376,000
Options granted (100,000) 100,000 0.88 87,500
---------- ---------- ---------- ---------
Balances at June 30, 1996 300,000 3,700,000 $0.72-1.00 3,463,500
========== ========== ========== =========
Director Warrants
Pacer has issued warrants to Directors for the purchase of common stock as
follows:
Exercise Aggregate
Warrants Price Value
--------- ---------- -------
Balance at June 30, 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
Warrants exercised (624,000) 0.32 (198,120)
--------- ---------- -------
Balance at June 30, 1996 - $ - -
========= ========== =======
(12) 401(k) Plan
Pacer's 401(k) plan is available to all full-time employees who have completed
a minimum service of one year at January 1 or July 1 of each year.
Employees who elect to participate in the plan 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, 1996, 1995 and 1994 was $28,707,
$21,389 and $28,156, 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, 1996, the outstanding principal amount
on the notes was $629,468 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, 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.
<PAGE>
During fiscal year 1995, Pacer extended an employment contract with a member
of management. Among other things, the contract provides for a three month
continuation of salary payments, approximately $65,000, 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 6, 1996 to be mailed to shareholders in connection with the 1996
Annual Shareholders Meeting and filed with the Securities and Exchange
commission on or about September 6, 1996 (the "Proxy Statement"), found on
pages 4-5 thereof. Information regarding compliance with Section 16(a) of the
Exchange Act is incorporated by reference from the "Section 16(a) Beneficial
Ownership Reporting Compliance" section of the Proxy Statement, found on pages
7-8 thereof.
Item 10. Executive Compensation
Incorporated by reference from the "Election of Directors--Executive
Compensation" section of the Proxy Statement, found on pages 5-7 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 page 7 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 23 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
------------------------
James T. Munn, President
Date: August 30, 1996
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
- --------- ----- ----
_____________ President/ August 30, 1996
James T. Munn Chief Executive
Officer/Director
_______________________ Chief Financial August 30, 1996
Roberto J. Cavazos, Jr. Officer
__________________ Chairman of August 30, 1996
John G. Hockin, II the Board and
Director
______________________ Secretary and August 30, 1996
DeVere W. McGuffin, II Director
____________ Director August 30, 1996
Joe F. Brock
_____________ Director August 30, 1996
Carl Hathaway
______________ Director August 30, 1996
Larry Reynolds
<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 30, 1996
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 30, 1996
__________________________ Chief Executive
James T. Munn Officer/Director
/s/ Roberto J. Cavazos, Jr. Chief Financial August 30, 1996
__________________________ Officer
Robert J. Cavazos,Jr.
/s/ John G. Hockin II Chairman of the August 30, 1996
__________________________ Board and
John G. Hockin II Director
/s/ DeVere W. McGuffin Secretary and August 30, 1996
__________________________ Director
DeVere W. McGuffin
__________________________ Director August 30, 1996
Joe F. Brock
__________________________ Director August 30, 1996
Carl Hathaway
/s/ Larry K. Reynolds Director August 30, 1996
__________________________
Larry K. Reynolds
<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 -
Exhibit 22 Subsidiaries of Registrant (27)
Exhibit 23 Consent of Independent Auditors (28)
- -------------------------------
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 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 23
Consent of Independent Auditors
The Board of Directors and Stockholders
Pacer Technology:
We consent to incorporation by reference in the registration statement (No.
33-48090) on Form S-8 of Pacer Technology of our report dated August 2, 1996,
relating to the consolidated balance sheets of Pacer Technology and
subsidiaries as of June 30, 1996 and 1995, 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, 1996 which report appears in the
June 30, 1996 annual report on Form 10-K of Pacer Technology.
/s/ KPMG Peat Marwick LLP
Orange County, California
September 17, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 208
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0
0
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</TABLE>
