<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
-------------
/ / TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-12530
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PANATECH RESEARCH AND DEVELOPMENT CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 95-3615472
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P. O. Box 23160 Albuquerque, NM 87192-1160
(Address of principal executive offices and zip code)
(505) 271-2200
(Registrant's telephone number, including area code)
Check whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding at August 2, 1995
------------------- -----------------------------
Common stock, $ .01 par value 3,692,300
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PANATECH RESEARCH AND DEVELOPMENT CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995
---------- ----------
(unaudited) (derived
from audited
statements)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 2,477,000 $ 2,902,000
Accounts receivable, less
allowances of $124,000 at
6/30/95 and $98,000 at 3/31/95 2,772,000 2,343,000
Inventories:
Raw materials and supplies 673,000 719,000
Work-in-process 66,000 63,000
Finished goods 102,000 105,000
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841,000 887,000
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Prepaid expenses 118,000 125,000
Deferred income tax asset 126,000 126,000
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Total current assets 6,334,000 6,383,000
Property, plant and equipment,
at cost 1,158,000 1,077,000
Less: Accumulated depreciation
and amortization (588,000) (552,000)
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Net property, plant and equipment 570,000 525,000
Covenants not to compete, net 268,000 321,000
Cost of purchased business in excess
of net assets acquired, net 961,000 969,000
Other assets 159,000 144,000
--------- ---------
$ 8,292,000 $ 8,342,000
========= =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
2
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PANATECH RESEARCH AND DEVELOPMENT CORPORATION
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995
----------- --------
(unaudited) (derived
from audited
statements)
<S> <C> <C>
Current liabilities
Notes payable, current portion $ 775,000 $ 750,000
Accounts payable 180,000 113,000
Accrued payroll and benefits 634,000 621,000
Accrued expenses 554,000 321,000
Income taxes payable 363,000 796,000
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Total current liabilities 2,506,000 2,601,000
--------- ---------
Notes payable, net of current portion - 300,000
--------- ---------
Stockholders' investment
Common stock, par value $.01 per share -
Authorized - 20,000,000 shares
Outstanding - 3,692,300 shares
at 6/30/95 and 3/31/95 37,000 37,000
Premium paid in on common stock 7,771,000 7,771,000
Accumulated deficit ( 2,022,000) ( 2,367,000)
--------- ----------
Total stockholders'
investment 5,786,000 5,441,000
--------- ---------
$ 8,292,000 $ 8,342,000
========= =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
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PANATECH RESEARCH AND DEVELOPMENT CORPORATION
Consolidated Statement of Income - (Note 1)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30
------------------
1995 1994
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<S> <C> <C>
Net sales $ 3,255,000 $ 2,467,000
Costs and expenses -
Cost of sales 1,305,000 1,185,000
Selling, general, and
administrative 966,000 906,000
Amortization 61,000 72,000
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2,332,000 2,163,000
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Operating income 923,000 304,000
Other income (expense):
Interest income 29,000 17,000
Interest expense ( 30,000) ( 34,000)
Other income - 38,000
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Income before income taxes 922,000 325,000
Income tax provision (391,000) (148,000)
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Net income $ 531,000 $ 177,000
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Net income per common share $ .14 $ .05
=== ===
Average shares outstanding 3,819,000 3,545,000
========= =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
4
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PANATECH RESEARCH AND DEVELOPMENT CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
June 30,
-----------------
1995 1994
<S> <C> <C>
Cash from operations:
Net income $ 531,000 $ 177,000
Adjustments to reconcile net income
to net cash from operations
Amortization 61,000 73,000
Depreciation 36,000 32,000
Changes in current assets
and liabilities
(Increase) in receivables ( 429,000) ( 557,000)
Decrease in inventories 46,000 198,000
Decrease in prepaid expenses 7,000 77,000
Increase in accounts payable
and other accrued expenses 312,000 85,000
Increase (decrease) in
income taxes payable ( 433,000) 13,000
Increase in other assets ( 15,000) ( 18,000)
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Net cash provided by operations 116,000 80,000
Cash flow from investing activities
Capital expenditures ( 81,000) ( 46,000)
Cash flow from financing activities
Payment of notes payable ( 275,000) ( 475,000)
Cash dividends paid ( 185,000) -
-------- -------
Cash used by financing
activities ( 460,000) ( 475,000)
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Net decrease in cash ( 425,000) ( 441,000)
Beginning balance 2,902,000 2,645,000
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Ending balance $ 2,477,000 $2,204,000
========= =========
Supplemental information
Cash paid during the periods for:
Interest $ 23,000 $ 33,000
Taxes $ 825,000 -
======= ======
</TABLE>
The accompanying notes are an integral part of these
financial statements.
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PANATECH RESEARCH AND DEVELOPMENT CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
In the opinion of management, the accompanying
unaudited condensed consolidated financial statements
contain all adjustments necessary to present fairly the
financial position of Panatech as of June 30 and March 31,
1995 and the results of operations and cash flows for the
three months ended June 30, 1995 and 1994.
The accounting policies followed by Panatech are set
forth in Note 1 to the financial statements in the 1995
Panatech Annual Report filed on Form 10-KSB.
The results of operations for the three-month periods
ended June 30, 1995 and 1994 are not necessarily indicative
of the results to be expected for the full year.
(2) Cash Dividend
On April 11, 1995, the Board of Directors voted the
Company's first cash dividend of $.05 per share which was
paid on May 15, 1995 to shareholders of record on April 28,
1995.
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PANATECH RESEARCH AND DEVELOPMENT CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
Panatech's resources, in the opinion of management, are
adequate for projected operations and capital spending
programs, and the continuation of semi-annual cash dividends
which are presently at a rate of approximately $369,000 per
year.
Results of Operations
For the three months ended June 30, 1995, the Company
had sales of $3,255,000, an increase of $788,000, or 32%,
from the same quarter a year ago, reflecting increased
demand for ASM products. Gross profit was 59.9% of sales
compared to 51.9% of sales in last year's first quarter.
The increase in gross profit was largely due to the greater
volume enabling overhead costs to be spread over greater
production. Selling, general, and administrative expenses
were $966,000, or 29.7% of sales, compared to $906,000, or
36.7% of sales last year, with the lower percentage
primarily due to the significantly higher sales volume.
Operating income was $923,000 compared to $304,000 in the
year-earlier quarter, mainly due to the additional gross
profit generated by higher sales.
Interest income was $29,000 compared to $17,000 last
year principally due to higher interest rates available in
the money markets. Interest expense was $30,000 compared to
$34,000 in last year's first quarter mainly due to a
reduction in long-term debt. Last year, other income
represented a $38,000 royalty payment resulting from a 1991
divestiture. The royalty payments were completed in March
1995.
Income before income taxes rose from $325,000 to
$922,000. Provision for income taxes was $391,000 compared
to $148,000 last year. Therefore, net income was $531,000,
or $.14 per share compared to $177,000, or $.05 per share,
last year. In 1995, average shares outstanding were
3,819,000 shares compared to 3,545,000 last year, with the
increase due to the exercise of stock options and the
potential dilutive effect of outstanding options.
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PANATECH RESEARCH AND DEVELOPMENT CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On April 10, 1995, the Company's wholly owned operating
subsidiary, ASM Company, Inc. ("ASM") filed a complaint
against Titan Tool, Inc. ("Titan"), in the United States
District Court for the Central District of California,
alleging that a new product recently introduced by Titan
infringes certain patents which are owned by ASM, and which
are used in a major ASM product line. On June 2, 1995,
Titan filed an answer to said complaint in which Titan
denied ASM's allegations of patent infringement and asserted
defensive claims including the invalidity of the patents.
Titan also alleged counterclaims against ASM, and demanded
unspecified damages. ASM has liability insurance coverage
with respect to such claims, and believes that any liability
and a majority of the defense costs incurred by it as a
result of Titan's counterclaims will be covered and paid by
its insurance carrier.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report.
27 Financial Data Schedule (EDGAR filing only)
(b) Reports on Form 8-K
There were no reports on Form 8-K during the
quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
PANATECH RESEARCH AND DEVELOPMENT CORPORATION
by: /s/ Arthur J. Rosenberg
---------------------------
Date: August 10, 1995 Arthur J. Rosenberg
President and Chief Financial
Officer
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