U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT ISSUED UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Thirteen- week period ended Commission file
September 28, 1996 Number 2-99212-A
PALLET MANAGEMENT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2197020
(State or other jurisdiction of Employer Identification
incorporation) Number)
One E. Ocean Boulevard, Suite 305, Boca Raton, Florida 33432
(Address of principal executive offices)
Registrant's telephone number, including area code:
(561) 338-7763
(Former name or address if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all
documents and reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or 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 _______
---------------
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13, or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes _______ No _______
APPLICABLE ONLY TO CORPORATE ISSUERS
On September 28, 1996, the Registrant had outstanding 4,243,216 shares
of common stock, $.001 par value.
<PAGE>
CONSOLIDATED BALANCE SHEETS
Sept. 28, Year Ended
1996 Jun 30, 1996
(Audited)
CURRENT ASSETS
Cash $0 $16,891
Accounts Receivable - trade,
net of allowance for
doubtful accounts 1,493,594 1,181,068
Inventories 1,045,372 1,020,243
Prepaid expenses 105,541 144,197
Income tax refunds receivable 0 517,771
Total current assets 2,644,507 2,880,170
Property and equipment - net
of accumulated depreciation 2,808,032 2,877,809
Other assets 133,870 147,377
$5,586,409 $5,905,356
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $1,185,837 $2,150,634
Accounts payable - trade 1,289,941 1,023,591
Accrued liabilities 676,118 614,846
Total current liabilities 3,151,896 3,789,071
LONG TERM DEBT
Deferred income tax 167,972 167,972
Long-term debt 2,094,085 1,578,051
2,262,057 1,746,023
STOCKHOLDERS' EQUITY
Common stock, authorized 10,000,000
shares at $.001 par value; issued and
outstanding 4,243,216 shares at
September 28, 1996 and 4,243,216
at June 30, 1996 4,243 4,243
Additional paid in capital 2,041,387 2,041,387
Retained (deficit) earnings (1,873,174) (1,675,368)
172,456 370,262
$5,586,409 $5,905,356
<PAGE>
PALLET MANAGEMENT SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
13 Weeks Ended
Sept. 28, 1996 Sept. 30, 1996
Net sales $3,730,690 $3,826,410
Cost of goods sold 3,511,114 3,437,368
Gross Profit 219,576 389,042
Selling, general and
administrative expense 468,644 643,903
Operating profit (249,068) (254,861)
Other income (expense)
Other income 152,520 18,472
Interest expense (101,258) (97,012)
Earnings before income taxes (197,806) (333,401)
Income tax expense (benefit) $0 (88,550)
Net earnings (loss) ($197,806) ($244,851)
Net (loss) earnings per
common share $(0.05) $(0.06)
<PAGE>
Pallet Management Systems, Inc.
Consolidated Statement of Cash Flows
13 Weeks Ended
Sept. 28 Sept. 30
1996 1995
Cash flows from operating activities:
Net (loss) earnings ($197,806) ($244,851)
Adjustments to reconcile net
(loss) earnings to net
cash provided by (used in) operating
activities:
Depreciation 89,337 90,912
(Incr.) Decr. in operating assets:
Accounts receivable (312,526) (17,374)
Inventories (25,129) 128,316
Prepaid expenses 38,656 (46,544)
Income tax refund receivable 517,771 0
Other assets 13,507 15,499
Incr. (Decr.) in operating assets:
Accounts payable 266,350 (692,089)
Accrued liabilities and taxes 61,272 (2,984)
Deferred credits 0 8,233
Net cash provided by (used in)
operating activities 451,432 (760,882)
Cash flows from investing activities:
Purchase of fixed assets (19,560) (304,987)
Net cash (used in) investing activities (19,560) (304,987)
Cash flows from financing activities:
Proceeds from lenders (448,763) 306,837
Capital contributed 0 430,032
Net cash (used in) provided by
financing activities (448,763) 736,869
(DECREASE) IN CASH (16,891) (329,000)
Cash at beginning of period 16,891 448,692
Cash at end of period $0 $119,692
<PAGE>
Pallet Management Systems, Inc.
Notes to Financial Statements
September 28, 1996
Note 1. Consolidated Financial Statements:
The consolidated balance sheets as of September 28, 1996 and June 30,
1996, the consolidated statement of operations and cash flows for the thirteen
week period ended of September 28, 1996 and September 30, 1995 have been
prepared by the company without audit. In the opinion of management, all
adjustments necessary to present fairly the financial position, results of
operations and cash flows for the periods reported have been made. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto as of June 30, 1996.
Certain prior year amounts within the accompanying financial statements
have been reclassified to conform to the current year presentation. In addition,
the weighted average of shares outstanding has been revised to reflect a
two-for-one stock split which occurred on October 3, 1996. Certain shareholders,
consisting primarily of officers and directors, waived their right to this
dividend resulting in an increase of 814,286 shares. All stock data and per
share amounts in the consolidated financial statements have been restated to
give effect to the stock split.
Note 2. Net Loss per Share of Common Stock:
Net loss per share was computed using the weighted average number of
shares outstanding based on the consolidated results of the company for the
period presented.
Note 3. Stockholders' Equity:
During the thirteen weeks ended September 28, 1996 stockholders' equity
changed for the following items:
Common stock sold -0-
Additional paid-in capital -0-
Current net loss $198,000
--------
$198,000
<PAGE>
Pallet Management Systems, Inc.
Management's Discussion and Analysis or Plan of Operation
September 28, 1996
PART I
ITEM 2. Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction
with the financial statements appearing as Item 1 to this Report. These
financial statements reflect the consolidated operations of Pallet Management
Systems, Inc. (the Company) for the thirteen week period ended September 28,
1996 and September 30, 1995.
Results of Operations
General
The Company provides a complete range of pallet services to its
customers. These services include: production and sale of new pallets, pallet
remediation, pallet recovery, repair and sale of used pallets, mobile-on-site
pallet repair and total integrated pallet management services. Pallet
remediation is defined as the systematic collection, repair, return and reuse of
pallets that creates a closed - loop pallet return system between the
manufacturer, their customers and vendors. Integrated pallet management services
consists of sorting, distributing, retrieval and warehousing of pallets and
packaging units.
The Company plans to continue manufacturing new pallets; however, the
main focus of expansion is to develop facilities nationwide and to implement the
pallet remediation program. This program is designed to offer an integrated
pallet network of facilities to its national customers resulting in major cost
savings and permit the customer to effectively utilize their packaging budgets.
Customers include large retail and wholesale distributors such as
Wal-Mart, K-Mart, Pepsi Co., Food Lion, Coca-Cola, Disney, Allied Signal, the US
Government and Chep USA (the country's largest pallet pool rental company).
Thirteen Weeks Ended September 28, 1996 compared to Thirteen Weeks Ended
September 30, 1995
For the thirteen week period ended September 28, 1996 net sales
decreased to $3,731,000 from $3,826,000 for the comparable 1995 period.
During the thirteen week period ended September 28, 1996 new pallet
sales declined 4.7% to $2,286,000 from $2,401,000, pallet recycling (pallet
remediation, depot and repair services and sales of used pallets) increased by
9.5% to $1,444,000 from the $1,319,000 recorded for the same thirteen week
period ended September 30, 1995. The Company experienced a $175,000 (27%)
reduction in Selling, General and Administrative expenses for the thirteen week
period ended September 28, 1996 when compared to September 30, 1995. Other
income increased to $152,000 from $18,500 a result of the sale (to a related
party) of certain non-operating real estate. The Company experienced a $4,000
(4%) increase in interest expense for the thirteen week period ended September
28, 1996. This increase is a result of diminishing cash flow from operations due
to the reduction in sales volume during the first eight weeks of the period. The
Company did not record any tax effect on the net loss as the Company utilized
100% of it's net loss carry back on the June 30, 1996 Federal Income Tax return.
Consequently, the current years net operating loss will only affect the current
and future tax filings. A net loss of $198,000 or $.05 per share during the
thirteen week period ended September 28, 1996 compared to a loss of $245,000 or
$.06 per share recorded for the same period last year was realized by the
Company. The gross margin for the thirteen week period was approximately 6% as
compared to 10% achieved for the same thirteen week period a year prior. The
reduction in gross margin was due to lower production levels during the first
eight weeks of the period. However, sales volumes began to recover during the
last four weeks of the reporting period.
Mr. Eugene Dignoti Sr. resigned from the company as Chief Operating
Officer and member of the Board of
Directors to pursue non-pallet related activities during this thirteen week
period. His duties were assumed by
existing management and the company does not anticipate seeking an immediate
replacement.
The Company also closed its Hartford Connecticut operation and is
currently servicing this customer base through affiliated companies.
<PAGE>
Pallet Management Systems, Inc.
Management's Discussion and Analysis or Plan of Operation
September 28, 1996
LIQUIDITY AND CAPITAL RESOURCES
The Company had zero cash on hand at the end of the thirteen week
period ending September 28, 1996, versus $17,000 at the beginning of the fiscal
year. This decrease in cash is attributable to increases in accounts receivable
by $312,526, inventory by $25,129, accounts payable by $266,350 and accrued
liabilities by $61,272. In addition decreases in prepaid expenses by $38,656,
other assets by $13,517, purchase of fixed assets of $19,560, receipt of the
income tax receivable of $517,771. Net repayments to lenders for the thirteen
week period were $448,763.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulations S-B.
None.
(b) None.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on behalf by the
undersigned thereunto duly authorized.
PALLET MANAGEMENT SYSTEMS, INC.
Dated: April 2, 1997 By: Zachary M. Richardson, President
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for the thirteen week period ended September 28, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-1-1996
<PERIOD-END> SEP-28-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,493,594
<ALLOWANCES> 64,000
<INVENTORY> 1,045,372
<CURRENT-ASSETS> 2,644,507
<PP&E> 2,808,032
<DEPRECIATION> 89,337
<TOTAL-ASSETS> 5,586,409
<CURRENT-LIABILITIES> 3,151,896
<BONDS> 0
0
0
<COMMON> 4,243,216
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,586,409
<SALES> 3,730,690
<TOTAL-REVENUES> 3,730,690
<CGS> 3,511,114
<TOTAL-COSTS> 3,979,758
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,258
<INCOME-PRETAX> (197,806)
<INCOME-TAX> 0
<INCOME-CONTINUING> (197,806)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (197,806)
<EPS-PRIMARY> $(.050)
<EPS-DILUTED> $(.05)
</TABLE>
