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 27, 1997 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 (IRS 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 27, 1997, the Registrant had outstanding 4,849,956 shares
of common stock, $.001 par value.
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<PAGE>
PALLET MANAGEMENT SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended
Sept. 27, Jun 30,
ASSETS 1997 1997
(Audited)
CURRENT ASSETS
Cash $163,652 $237,447
Accounts Receivable - trade, net of allowance
for doubtful accounts 1,180,379 1,724,957
Inventories 1,138,943 902,396
Prepaid expenses 158,146 98,079
Total current assets 2,641,121 2,962,879
Property and equipment - net of accumulated
depreciation 2,770,502 2,780,882
Other assets 54,231 39,666
$5,465,854 $5,783,427
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $2,187,680 $2,507,648
Accounts payable - trade 1,524,929 1,215,076
Accrued liabilities 587,170 583,966
Total current liabilities 4,299,779 4,306,690
LONG TERM DEBT
Deferred income tax 70,888 70,888
Long-term debt 1,003,158 1,137,976
1,074,046 1,208,864
STOCKHOLDERS' EQUITY
Preferred stock, authorized 7,500,000 shares at
$.001 par value; no shares issued and outstanding 0 0
Common stock, authorized 10,000,000 shares at
$.001 par value; issued and outstanding 4,849,956
shares at September 27, 1997 and 4,849,956
at June 30, 1997 4,850 4,850
Additional paid in capital 2,821,368 2,821,368
Retained (deficit) earnings (2,734,189) (2,558,345)
92,029 267,873
$5,465,854 $5,783,427
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</TABLE>
<PAGE>
PALLET MANAGEMENT SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C>
13 Weeks Ended
Sept. 27, 1997 Sept. 28, 1996
Net sales $4,564,132 $3,730,690
Cost of goods sold 4,210,993 3,511,114
Gross profit 353,139 219,576
Selling, general and administrative expense 444,494 468,644
Operating profit (91,355) (249,068)
Other income (expense)
Other income 12,266 50,194
Interest expense (96,755) (101,258)
Earnings before income taxes (175,844) (300,132)
Income tax expense 0 0
Net (loss) ($175,844) ($300,132)
Net (loss) per common share $(0.04) $(0.07)
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</TABLE>
<PAGE>
PALLET MANAGEMENT SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
13 Weeks Ended
Sept. 27, 1997 Sept. 28, 1996
Cash flows from operating activities:
Net (loss) ($175,844) ($300,132)
Adjustments to reconcile net (loss) to net
cash provided by (used in) operating activities:
Depreciation 99,084 89,337
(Incr.) Decr. in operating assets:
Accounts receivable 544,578 (312,526)
Inventories (236,548) (25,129)
Prepaid expenses (60,067) 38,656
Income tax refund receivable 0 517,771
Other assets (14,565) 13,507
Incr. (Decr.) in operating assets:
Accounts payable 309,852 266,350
Accrued liabilities and taxes 3,204 61,272
Deferred credits 0 0
Net cash provided by
operating activities 469,694 349,106
Cash flows from investing activities:
Purchase of fixed assets (88,704) (19,560)
Net cash (used in) investing activities (88,704) (19,560)
Cash flows from financing activities:
Repayments to lenders (454,785) (448,763)
Capital contributed 0 102,326
Net cash (used in)
Financing activities (454,785) (346,437)
(DECREASE) IN CASH (73,795) (16,891)
Cash at beginning of period 237,447 16,891
Cash at end of period $163,652 $ 0
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</TABLE>
<PAGE>
Pallet Management Systems, Inc.
Notes to Financial Statements
September 27, 1997
Note 1. Consolidated Financial Statements:
The consolidated balance sheets as of September 27, 1997 and June 30,
1997, the consolidated statement of operations and cash flows for the thirteen
week period ended of September 27, 1997 and September 28, 1996 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, 1997.
Certain prior year amounts within the accompanying financial statements
have been reclassified to conform to the current year presentation.
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
periods presented.
Note 3. Stockholders' Equity:
During the thirteen weeks ended September 27, 1997, stockholders'
equity changed for the following items:
Common stock sold -0-
Additional paid-in capital -0-
Current net loss $175,844
$175,844
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<PAGE>
Pallet Management Systems, Inc.
Management's Discussion and Analysis or Plan of Operation
September 27, 1997
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 27,
1997 and September 28, 1996.
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 and other packaging materials that creates a closed - loop return system
between the manufacturer, their customers and vendors. Integrated pallet
management services consists of sorting, distributing, retrieval and warehousing
of pallets and other transport packaging items.
The Company plans to continue manufacturing new pallets; however, the
main focus of expansion is to develop strategic facilities nationwide and to
implement the pallet remediation program. This program is designed to offer an
integrated network of facilities to its national customers resulting in
significant cost savings.
Customers include large retail and wholesale distributors such as
Allied Signal, Coca-Cola, Disney, DuPont, Food Lion, K-Mart, Wal-Mart and Chep
USA (the country's largest pallet pool rental company).
Thirteen Weeks Ended September 27, 1997 compared to Thirteen Weeks Ended
September 28, 1996
For the thirteen week period ended September 27, 1997 net sales
increased to $4,564,000 from $3,731,000 for the comparable 1996 period.
During the thirteen week period ended September 27, 1997 new pallet
sales increased 34% to $2,972,000 from $2,210,000, pallet recycling (pallet
remediation, depot and repair services and sales of used pallets) increased by
5% to $1,592,000 from the $1,521,000 recorded for the same thirteen week period
ended September 28, 1996. The Company experienced a $24,000 (5%) reduction in
Selling, General and Administrative expenses for the thirteen week period ended
September 27, 1997 when compared to September 28, 1996. Other income decreased
to $12,000 from $50,000. The Company experienced a $4,500 (4%) decrease in
interest expense for the thirteen week period ended September 27, 1997. 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, June 30, 1997 and the current years net operating loss will only
affect the current and future tax filings. The Company recorded a net loss of
$176,000 or $.04 per share during the thirteen week period ended September 27,
1997 compared to a loss of $300,000 or $.07 per share recorded for the same
period last year. The gross margin for the thirteen week period was
approximately 7.8% as compared to 6% achieved for the same thirteen week period
a year prior. This increase in gross margin was due to changing the customer mix
and control of pallet recycling and raw material costs during the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $164,000 cash on hand at the end of the thirteen week
period ending September 27, 1997, versus $237,447 at the beginning of the fiscal
year. This increase in cash is attributable to decreases in accounts receivable
by $544,578, increases in accounts payable by $309,852 and accrued liabilities
by $3,204. In addition the Company experienced increases in inventory by
$236,548, prepaid expenses by $60,067, other assets by $14,565 and fixed assets
purchases of $88,704. Net repayments to lenders for the thirteen week period
were $454,785.
<PAGE>
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) Form 8-K for the period June 17, 1997 covering
Item 4 and Item 7 filed and accepted by the
Securities and Exchange Commission on June 17,
1997. Accession No. 0001012118-97-000090.
<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: November 12, 1997 By: /s/ 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 27, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-27-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,180,379
<ALLOWANCES> 64,000
<INVENTORY> 1,138,943
<CURRENT-ASSETS> 2,641,121
<PP&E> 2,770,502
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,465,854
<CURRENT-LIABILITIES> 4,299,779
<BONDS> 0
0
0
<COMMON> 4,850
<OTHER-SE> 263,023
<TOTAL-LIABILITY-AND-EQUITY> 5,465,854
<SALES> 4,564,132
<TOTAL-REVENUES> 4,564,132
<CGS> 4,210,993
<TOTAL-COSTS> 4,210,993
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96,754
<INCOME-PRETAX> (175,844)
<INCOME-TAX> 0
<INCOME-CONTINUING> (175,844)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (175,844)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
