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 September 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
-------
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 November 2, 1995
- ------------------- -----------------------------
Common stock, $ .01 par value 3,943,625
1
<PAGE>
PANATECH RESEARCH AND DEVELOPMENT CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
Sept. 30, March 31,
1995 1995
---------- ----------
(unaudited) (derived
from audited
statements)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,565,000 $ 2,902,000
Accounts receivable, less
allowances of $133,000 at
9/30/95 and $98,000 at 3/31/95 2,030,000 2,343,000
Inventories:
Raw materials and supplies 796,000 719,000
Work-in-process 24,000 63,000
Finished goods 223,000 105,000
--------- ---------
1,043,000 887,000
--------- ---------
Prepaid expenses 214,000 125,000
Deferred income tax asset 126,000 126,000
--------- ---------
Total current assets 6,978,000 6,383,000
Property, plant and equipment,
at cost 1,188,000 1,077,000
Less: Accumulated depreciation
and amortization (629,000) (552,000)
------- -------
Net property, plant and equipment 559,000 525,000
Covenants not to compete, net 214,000 321,000
Cost of purchased business in excess
of net assets acquired, net 955,000 969,000
Other assets 159,000 144,000
--------- ---------
$ 8,865,000 $ 8,342,000
========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
2
<PAGE>
PANATECH RESEARCH AND DEVELOPMENT CORPORATION
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
Sept. 30, March 31,
1995 1995
----------- --------
(unaudited) (derived
from audited
statements)
<S> <C> <C>
Current liabilities:
Notes payable, current portion $ - $ 750,000
Accounts payable 163,000 113,000
Income taxes payable 86,000 796,000
Accrued payroll and benefits 703,000 621,000
Accrued expenses 432,000 321,000
--------- ---------
Total current liabilities 1,384,000 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 - 3,932,555 shares
at 9/30/95 and 3,692,300
shares at 3/31/95 39,000 37,000
Premium paid in on common stock 8,970,000 7,771,000
Accumulated deficit ( 1,528,000) ( 2,367,000)
--------- ----------
Total stockholders'
investment 7,481,000 5,441,000
--------- ---------
$ 8,865,000 $ 8,342,000
========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
3
<PAGE>
PANATECH RESEARCH AND DEVELOPMENT CORPORATION
Consolidated Statement of Income
(in thousands of dollars except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 3,026 $ 2,299 $ 6,281 $ 4,766
Costs and expenses -
Cost of sales 1,295 878 2,600 2,063
Selling, general,
and administrative 854 966 1,820 1,872
Amortization 60 73 121 145
----- ----- ----- -----
2,209 1,917 4,541 4,080
----- ----- ----- -----
Operating income 817 382 1,740 686
Other income (expense):
Interest income 30 19 59 36
Interest expense ( 16) ( 32) ( 46) ( 66)
Other income - 23 - 61
----- ----- ----- -----
Income before
income taxes 831 392 1,753 717
Income tax provision (337) (176) ( 728) ( 324)
----- ----- ----- -----
Net income $ 494 $ 216 $1,025 $ 393
===== ===== ===== =====
Net income per
common share $ .12 $ .06 $ .26 $ .11
==== ==== ==== ====
Average shares
outstanding 4,190 3,548 4,005 3,547
===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial
statements.
4
<PAGE>
PANATECH RESEARCH AND DEVELOPMENT CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
September 30,
-----------------
1995 1994
------- -------
<S> <C> <C>
Cash from operations:
Net income $1,025,000 $ 393,000
Adjustments to reconcile net income
to net cash from operations
Amortization 121,000 145,000
Depreciation 77,000 65,000
Changes in current assets
and liabilities
(Increase) decrease in receivables 313,000 ( 270,000)
(Increase) in inventories ( 156,000) ( 13,000)
(Increase) decrease in
prepaid expenses ( 89,000) 147,000
Increase in accounts payable
and other accrued expenses 241,000 24,000
Increase (decrease) in
income taxes payable ( 710,000) 114,000
Increase in other assets ( 15,000) ( 18,000)
------- -------
Net cash provided by operations 857,000 587,000
Cash flow from investing activities
Capital expenditures ( 111,000) ( 107,000)
Cash flow from financing activities
Payment of notes payable (1,050,000) ( 475,000)
Cash dividends paid ( 185,000) -
Exercise of warrants 1,202,000 -
Exercise of stock options - 11,000
--------- --------
Total ( 33,000) ( 464,000)
--------- --------
Net increase (decrease) in cash 663,000 16,000
Beginning balance 2,902,000 2,645,000
--------- ---------
Ending balance $ 3,565,000 $2,661,000
========= =========
Supplemental information
Cash paid during the periods for:
Interest $ 59,000 $ 66,000
Taxes $ 1,439,000 173,000
========= =======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
5
<PAGE>
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 September 30 and March 31, 1995 and the results of
operations and cash flows for the three months and six months
ended September 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 and six-month
periods ended September 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. On
October 5, 1995, the Board voted a $.075 per share semi-annual
dividend to be paid on November 15, 1995 to shareholders of
record on October 30, 1995.
6
<PAGE>
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 $553,000 per year.
During the quarter ended September 30, 1995, warrants were
exercised to purchase 240,255 shares of common stock of the
Company at $5.00 per share, for a total of $1,201,275. On August
15, 1995, the Company prepaid the remaining balance of $775,000
of its outstanding long-term debt.
Results of Operations
For the three months ended September 30, 1995, the Company
had sales of $3,026,000, an increase of $727,000, or 32%, from
the same quarter a year ago, reflecting increased demand for ASM
products. Gross profit was 57.2% of sales compared to 61.8% of
sales in last year's first quarter. The decrease in gross profit
percentage was largely due to a change in product mix from year
to year. Selling, general, and administrative expenses were
$854,000, or 28.2% of sales, compared to $966,000, or 42.0% of
sales last year, with the lower percentage due primarily to the
expiration, on September 30, 1994, of amortization and other
expenses relating to the acquisition of ASM. Operating income
was $817,000 compared to $382,000 in the year-earlier quarter,
mainly due to the additional gross profit generated by higher
sales.
Interest income was $30,000 compared to $19,000 last year
principally due to higher balances of invested funds. Interest
expense was $16,000 compared to $32,000 in last year's second
quarter mainly due to full repayment of outstanding long-term
debt on August 15, 1995. Last year, other income represented a
$23,000 royalty payment resulting from a 1991 divestiture. The
royalty payments were completed in March 1995.
Income before income taxes rose from $392,000 to $831,000.
Provision for income taxes was $337,000 compared to $176,000 last
year. Therefore, net income was $494,000, or $.12 per share
compared to $216,000, or $.06 per share, last year; in 1995,
average common and common equivalent shares outstanding were
4,190,000 shares compared to 3,548,000 last year, an increase of
7
<PAGE>
18%. The increase was mainly due to the exercise of stock
options at the end of the last fiscal year as well as 240,255
warrants in August- September 1995, plus the potential dilutive
effect of unexercised options and warrants.
For the six months ended September 30, 1995, the Company had
sales of $6,281,000, an increase of $1,515,000, or 32%, from the
same period a year ago, reflecting increased demand for ASM
products. Gross profit was 58.6% of sales compared to 56.7% of
sales in last year's first half. The increase in gross profit
was largely due to the greater volume enabling overhead costs to
be spread over greater production, offset in part by a different
sale mix in 1995. Selling, general, and administrative expenses
were $1,820,000, or 29.0% of sales, compared to $1,872,000, or
39.3% of sales last year, with the lower percentage primarily due
to the significantly higher sales volume as well as the
expiration, on September 30, 1994, of amortization and other
expenses relating to the acquisition of ASM. Operating income
was $1,740,000 compared to $686,000 in the year-earlier quarter,
mainly due to the additional gross profit generated by higher
sales.
Interest income was $59,000 compared to $36,000 last year
principally due to higher higher balances of invested funds.
Interest expense was $46,000 compared to $66,000 in last year's
first half mainly due to full repayment of outstanding long-term
debt on August 15, 1995. Last year, other income represented a
$61,000 royalty payment resulting from a 1991 divestiture. The
royalty payments were completed in March 1995.
Income before income taxes rose from $717,000 to $1,753,000.
Provision for income taxes was $728,000 compared to $324,000 last
year. Therefore, net income was $1,025,000, or $.26 per share
compared to $393,000, or $.11 per share, last year. In 1995,
average shares outstanding were 4,005,000 shares compared to
3,547,000 last year. The increase was mainly due to the exercise
of stock options at the end of the last fiscal year as well as
240,255 warrants in August- September 1995, plus the potential
dilutive effect of unexercised options and warrants.
The normal seasonal pattern of the Company's sales has
historically been that the June and September fiscal quarters
show greater activity than the December and March fiscal quarters
due to lower purchases by ultimate users of painting equipment
and supplies in the winter months. The exception to this pattern
was last fiscal year when the Company received large initial
stocking orders or "pipeline filling" for new products from
several major customers.
8
<PAGE>
PANATECH RESEARCH AND DEVELOPMENT CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report.
11 Calculation of earnings per share and
average shares outstanding.
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: November 14, 1995 Arthur J. Rosenberg
President and Chief Financial
Officer
9
<PAGE>
PANATECH RESEARCH AND DEVELOPMENT CORPORATION
Exhibit 11
Calculation of Average Shares Outstanding
<TABLE>
<CAPTION>
Three months ended September 30, 1995
<S> <C>
Average shares issued and outstanding 3,692,300
Average shares issued during quarter for
exercised warrants 89,076
---------
Total 3,781,376
<C>
Average bid price of stock
during quarter $ 7.309
Options outstanding 205,000
Proceeds if all exercised $ 324,500
Shares "purchased" at
average market price (44,399)
Additional shares ------- 160,610
Warrants outstanding 784,624
Proceeds if all exercised
at $5.00 per share $3,923,120
Shares "purchased" at
average market price (536,777)
Additional shares ------- 247,847
---------
Average common and common equivalent shares 4,189,823
Rounding 177
---------
Total 4,190,000
Average shares for 3 months ended June 30, 1995 3,819,000
Average shares for 6 months ended Sept. 30, 1995 4,005,000
</TABLE>
Fully diluted shares outstanding are not materially different
than shares shown in above calculations.
[ARTICLE] 5
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] MAR-31-1996
[PERIOD-END] SEP-30-1995
[CASH] 3,565
[SECURITIES] 0
[RECEIVABLES] 2,030
[ALLOWANCES] (133)
[INVENTORY] 1,043
[CURRENT-ASSETS] 6,978
[PP&E] 1,188
[DEPRECIATION] (629)
[TOTAL-ASSETS] 8,865
[CURRENT-LIABILITIES] 1,384
[BONDS] 0
[COMMON] 39
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 7,442
[TOTAL-LIABILITY-AND-EQUITY] 8,865
[SALES] 6,281
[TOTAL-REVENUES] 6,281
[CGS] 2,600
[TOTAL-COSTS] 2,600
[OTHER-EXPENSES] 1,941
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] (46)
[INCOME-PRETAX] 1,753
[INCOME-TAX] (728)
[INCOME-CONTINUING] 1,025
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 1,025
[EPS-PRIMARY] .26
[EPS-DILUTED] .26
</TABLE>
