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, 1996
-------------
/ / 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 August 2, 1996
- ----------------------------- -----------------------------
Common stock, $ .01 par value 3,975,975
1
<PAGE>
PANATECH RESEARCH AND DEVELOPMENT CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
---------- ----------
(unaudited) (derived
from audited
statements)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 3,015,000 $ 3,046,000
Accounts receivable, less
allowances of $144,000 at 6/30/96
and 3/31/96 2,010,000 2,240,000
Inventories:
Raw materials and supplies 1,152,000 989,000
Work-in-process 198,000 166,000
Finished goods 332,000 323,000
--------- ---------
1,682,000 1,478,000
--------- ---------
Prepaid expenses 119,000 136,000
Deferred income tax asset 197,000 197,000
--------- ---------
Total current assets 7,023,000 7,097,000
Property, plant and equipment, at cost 1,671,000 1,623,000
Less: Accumulated depreciation
and amortization (755,000) (710,000)
------- -------
Net property, plant and equipment 916,000 913,000
Covenants not to compete, net 54,000 107,000
Cost of purchased business in excess
of net assets acquired, net 933,000 940,000
Other assets 195,000 177,000
--------- ---------
$ 9,121,000 $ 9,234,000
========= =========
</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>
June 30, March 31,
1996 1996
----------- --------
(unaudited) (derived
from audited
statements)
<S> <C> <C>
Current liabilities
Accounts payable $ 157,000 $ 233,000
Accrued payroll and benefits 621,000 662,000
Accrued expenses 319,000 524,000
Income taxes payable 254,000 31,000
--------- ---------
Total current liabilities 1,351,000 1,450,000
--------- ---------
Stockholders' investment
Common stock, par value $.01 per share -
Authorized - 20,000,000 shares
Outstanding - 3,975,975 shares at
at 6/30/96 and 3,987,175 shares
at 3/31/96 40,000 40,000
Premium paid in on common stock 8,913,000 8,951,000
Accumulated deficit ( 1,183,000) ( 1,207,000)
--------- ----------
Total stockholders' investment 7,770,000 7,784,000
--------- ---------
$ 9,121,000 $ 9,234,000
========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
3
<PAGE>
PANATECH RESEARCH AND DEVELOPMENT CORPORATION
Consolidated Statement of Income - (Note 1)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30
------------------
1996 1995
---- ----
<S> <C> <C>
Net sales $ 2,801,000 $ 3,255,000
Costs and expenses -
Cost of sales 1,186,000 1,305,000
Selling, general, and
administrative 850,000 966,000
Amortization 61,000 61,000
--------- ---------
2,097,000 2,332,000
--------- ---------
Operating income 704,000 923,000
Other income (expense):
Interest income 34,000 29,000
Interest expense ( 10,000) ( 30,000)
-------- --------
Income before income taxes 728,000 922,000
Income tax provision (305,000) (391,000)
------- --------
Net income $ 423,000 $ 531,000
======= =======
Net income per common share $ .10 $ .14
=== ===
Average shares outstanding 4,049,000 3,819,000
========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
4
<PAGE>
PANATECH RESEARCH AND DEVELOPMENT CORPORATION
Consolidated Statement of Cash Flows
Three months ended June 30
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Cash from operations:
Net income $ 423,000 $ 531,000
Adjustments to reconcile net income
to net cash from operations
Amortization 61,000 61,000
Depreciation 44,000 36,000
Changes in current assets
and liabilities
(Increase)/decrease in receivables 230,000 ( 429,000)
(Increase)/decrease in inventories ( 204,000) 46,000
Decrease in prepaid expenses 17,000 7,000
(Decrease)/increase in accounts payable
and other accrued expenses ( 321,000) 312,000
Increase (decrease) in
income taxes payable 223,000 (433,000)
Increase in other assets ( 18,000) ( 15,000)
------- -------
Net cash provided by operations 455,000 116,000
Cash flow from investing activities
Capital expenditures ( 48,000) ( 81,000)
Cash flow from financing activities
Payment of notes payable - ( 275,000)
Exercise of stock options and warrants 6,000 -
Purchase and cancellation of stock ( 45,000) -
Cash dividends paid ( 399,000) ( 185,000)
-------- -------
Cash used by financing activities ( 438,000) ( 460,000)
------- -------
Net decrease in cash ( 31,000) ( 425,000)
Beginning balance 3,046,000 2,902,000
--------- ---------
Ending balance $ 3,015,000 $2,477,000
========= =========
Supplemental information
Cash paid during the periods for:
Interest $ - $ 23,000
Taxes $ 87,000 $ 825,000
======= =======
</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
June 30 and March 31, 1996 and the results of operations and cash
flows for the three months ended June 30, 1996 and 1995.
The accounting policies followed by Panatech are set forth in
Note 1 to the financial statements in the 1996 Panatech Annual Report
filed on Form 10-KSB.
The results of operations for the three-month periods ended June
30, 1996 and 1995 are not necessarily indicative of the results to be
expected for the full year.
(2) Cash Dividend
In April, 1995, the Board of Directors voted the Company's first
cash dividend. The Company's dividend history is as follows:
Date Paid Per share amount
--------- ----------------
May 1995 $ .05
Nov 1995 $ .075
May 1996 $ .10
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 $810,000 per year.
Results of Operations
For the three months ended June 30, 1996, the Company had sales
of $2,801,000, a decrease of $454,000, or 14%, from the same quarter
a year ago, partially reflecting heavy product shipments in last
year's first quarter for initial stocking of a new marketing channel
by one of the Company's largest OEM customers. Gross profit was
57.9% of sales compared to 59.9% of sales in last year's first
quarter, largely due to the lower volume. Selling, general, and
administrative expenses were $850,000, or 30.3% of sales, compared to
$966,000, or 29.7% of sales last year, with reductions being made to
compensate for lower sales. Operating income was $704,000 compared
to $923,000 in the year-earlier quarter, mainly due to the lower
gross profit generated by sales.
Interest income was $34,000 compared to $29,000 last year
principally due to higher levels of investment in the money markets.
Interest expense was $10,000 compared to $30,000 in last year's first
quarter mainly due to the payment last year of the outstanding
balance of long-term debt.
Income before income taxes declined from $922,000 to $728,000.
Provision for income taxes was $305,000 compared to $391,000 last
year. Therefore, net income was $423,000, or $.10 per share
compared to $531,000, or $.14 per share, last year. In 1996, average
shares outstanding were 4,049,000 shares compared to 3,819,000 last
year, with the increase mainly due to the exercise of warrants in the
second and third quarters of last year.
See Part II. Other Information, Item 1. Legal Proceedings, on
the following page for a description of an arbitration hearing wich
could have an effect on the Company's future performance.
7
<PAGE>
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 three patents relating to ASM's primary
product, the ZIP-TIP. In September 1995, the parties agreed to
dismiss all claims against each other for financial damages and to
submit all patent issues to final and binding arbitration before a
single arbitrator. The arbitration hearing was held in February and
March 1996, and the arbitrator's decision, which was originally
expected to be rendered by the end of June 1996, is now expected to
be given by the end of August 1996.
The Company believes that an adverse result of this arbitration
could significantly affect its plans to build market share for this
product line over the next three to five years.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report.
11 Calculation of income per share
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 14, 1996 Arthur J. Rosenberg
President and Chief Financial
Officer
8
<PAGE>
PANATECH RESEARCH AND DEVELOPMENT CORPORATION
Exhibit 11
Calculation of Average Shares Outstanding
Three months ended June 30, 1996
Shares issued and outstanding - beginning 3,987,175
Average shares issued during quarter for
exercised options 363
Average shares repurchased ( 13,000)
---------
Total 3,974,538
Average bid price of stock
during quarter $ 4.756
Options outstanding 131,250
Proceeds if all exercised $ 269,188
Shares "purchased" at
average market price (56,602)
Additional shares ------- 74,648
Warrants outstanding 622,375
Proceeds if all exercised
at $5.00 per share n/a
Shares "purchased" at
average market price n/a)
Additional shares ------- n/a
---------
Average common and common equivalent shares 4,049,186
Rounding ( 186)
---------
Average shares for 3 months ended June 30, 1996 4,049,000
Average shares for 3 months ended June 30, 1995 3,819,000
Fully diluted shares outstanding are not materially different than
shares shown in above calculations.
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 3,015
<SECURITIES> 0
<RECEIVABLES> 2,154
<ALLOWANCES> (144)
<INVENTORY> 1,682
<CURRENT-ASSETS> 7,023
<PP&E> 1,671
<DEPRECIATION> (755)
<TOTAL-ASSETS> 9,121
<CURRENT-LIABILITIES> 1,351
<BONDS> 0
0
0
<COMMON> 40
<OTHER-SE> 7,730
<TOTAL-LIABILITY-AND-EQUITY> 9,121
<SALES> 2,801
<TOTAL-REVENUES> 2,801
<CGS> 1,186
<TOTAL-COSTS> 1,186
<OTHER-EXPENSES> 911
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 728
<INCOME-TAX> (305)
<INCOME-CONTINUING> 423
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 423
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
