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 September 25, 1999
------------------
PALLET MANAGEMENT SYSTEMS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2197020 2-99212-A
------------------------------- ---------------------- ---------------
(State or other jurisdiction of (IRS Employer Commission file
incorporation) Identification Number) 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 25, 1999, the Registrant had outstanding 3,917,612 shares of common
stock, $.001 par value.
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<TABLE>
<CAPTION>
PALLET MANAGEMENT SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
Sept. 25, June 26,
ASSETS 1999 1999
------------ ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 483,646 $ 262,117
Accounts receivable - trade, net of allowance
For doubtful accounts 3,587,919 2,652,599
Inventories 2,366,071 1,866,494
Other Current Assets 228,750 156,422
------------ ------------
Total current assets 6,666,386 4,937,632
Property and equipment - net of accumulated
Depreciation 4,914,418 4,259,038
Other assets 1,137,491 1,008,336
------------ ------------
Total Assets $ 12,718,295 $ 10,205,006
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 5,245,570 $ 304,341
Accounts payable 3,304,926 1,123,515
Accrued liabilities 456,896 513,656
------------ ------------
Total current liabilities 9,007,391 1,941,512
------------ ------------
LONG TERM DEBT
Long-term debt 263,954 3,119,578
------------ ------------
Total long term liabilities 263,954 3,119,578
------------ ------------
Total liabilities 9,271,345 5,061,090
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 7,500,000 shares at $.001 par
Value; no shares issued and outstanding -- --
Common stock, authorized 10,000,000 shares at
$.001 par value; issued and outstanding 3,917,612
Shares at September 25, 1999 and
June 26, 1999 3,918 3,918
Additional paid in capital 6,958,704 6,958,704
Accumulated deficit (3,526,156) (1,829,190)
Accumulated other comprehensive income 10,484 10,484
------------ ------------
Total stockholder's equity 3,446,950 5,143,916
------------ ------------
Total liabilities and stockholder's equity $ 12,718,295 $ 10,205,006
============ ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
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PALLET MANAGEMENT SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
13 Weeks Ended
------------------------------
Sept. 25, 1999 Sept. 26, 1998
-------------- --------------
Net sales $ 12,278,269 $ 7,919,647
Cost of goods sold 12,493,289 6,712,534
------------ -----------
Gross profit (loss) (215,020) 1,207,113
Selling, general and administrative expense 1,382,513 478,624
------------ -----------
Operating profit (loss) (1,597,533) 728,489
Other income (expense)
Other income (expense) (1,466) (89,093)
Interest expense (97,968) (83,709)
------------ -----------
Earnings (loss) before income tax expense (1,696,967) 555,687
Income tax expense (benefit) 0 0
------------ -----------
Net earnings (loss) ($ 1,696,967) $ 555,687
============ ===========
Net earnings (loss) per common share $ (0.43) $ .22
============ ===========
Diluted earnings (loss) per common share $ (0.43) $ .15
============ ===========
* exercise of warrants and options would be anti-dilutive
The accompanying notes are an integral part of these financial statements.
3
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<TABLE>
<CAPTION>
PALLET MANAGEMENT SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
13 Weeks Ended
-------------------------------
Sept. 25, 1999 Sept. 26, 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(1,696,967) $ 555,687
Adjustments to reconcile net earnings (loss) to net
cash used in operating activities:
Depreciation 149,943 108,770
(Incr.) Decr. in operating assets:
Accounts receivable (935,320) (422,023)
Inventories (499,576) (632,974)
Prepaid expenses (72,329) (197,615)
Other assets (129,154) (3,131)
Incr. (Decr.) in operating liabilities:
Accounts payable 2,181,411 3,087
Accrued liabilities and taxes (56,760) 270,975
----------- -----------
Net cash used in operating activities (1,058,752) (317,224)
----------- -----------
Cash flows from investing activities:
Purchase of fixed assets (805,324) (578,873)
----------- -----------
Net cash used in investing activities (805,324) (578,873)
----------- -----------
Cash flows from financing activities:
Net borrowings from lenders 2,085,605 73,238
Capital contributed from exercise of
warrants and options 0 2,303,940
----------- -----------
Net cash provided by
Financing activities 2,085,605 2,377,178
----------- -----------
Increase in cash 221,529 1,481,081
Cash at beginning of period 262,117 401,166
----------- -----------
Cash at end of period $ 483,646 $ 1,882,247
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Pallet Management Systems, Inc.
Notes to Financial Statements
September 25, 1999
NOTE 1. CONSOLIDATED FINANCIAL STATEMENTS:
The consolidated balance sheet as of September 25, 1999, the
consolidated statements of operations and cash flows for the thirteen-week
periods ended as of September 25, 1999 and September 26, 1998 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. These consolidated financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Company's
annual report to shareholders filed on Form 10-KSB as of June 26, 1999.
Certain prior year amounts within the accompanying financial statements
have been reclassified to conform to the current period presentation.
NOTE 2. DEBT AGREEMENT
The Company's credit facility with the National Bank of Canada has
various covenants that require the Company to maintain certain financial ratios.
As of September 25, 1999 the Company was not in compliance with several of these
covenants and without amendments to these covenants, also will be out of
compliance in future periods. Therefore, in accordance with generally accepted
accounting principles, all amounts outstanding under the credit facility have
been classified as current liabilities. On November 2, 1999, the Company
requested waivers and amendments to covenants so as not to be out of compliance
for the first quarter and quarters going forward. While the National Bank of
Canada has preliminarily indicated that such request will be approved, there are
no assurances that such a request will be approved.
NOTE 3. INVENTORIES
Inventories consisted of the following at June 26, 1999:
Raw material $ 1,513,657
Work in process $ 244,136
Finished goods $ 608,278
-----------
TOTAL $ 2,366,071
===========
NOTE 4. NET INCOME (LOSS) PER SHARE OF COMMON STOCK:
Net income (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 5. LITIGATION
In June 1999, Pallet Management Systems was named as a co-defendant in
a lawsuit whereby the plaintiff is alleging damages of up to $300,000 related to
lost income from a facility formerly leased to it in Jessup, Maryland.
Management believes the claim is without merit, that Pallet has valid defenses
and intends to vigorously contest the claim. The outcome of the action as well
as the extent of Pallet's liability, if any, cannot be determined at this time.
5
<PAGE>
NOTE 6. SIGNIFICANT EVENTS
In mid-September, 1999 the Company discovered a theft at its
Bolingbrook facility, estimated to be $640,000, consisting of raw material, work
in process and finished goods. The Company has changed the management at this
facility, a private investigator has been retained, and this theft is being
pursued with the local authorities. This loss has been included in cost of goods
sold.
6
<PAGE>
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 periods ended September 25,
1999 and September 26, 1998.
The following discussion regarding Pallet Management and its business
and operations contains "forward-looking statements" within the meaning of
Private Securities Litigation Reform Act 1995. These statements consist of any
statement other than a recitation of historical fact and can be identified by
the use of forward-looking terminology such as "may," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereon or
comparable terminology. The reader is cautioned that all forward-looking
statements are necessarily speculative and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward looking statements, including the limited
history of profitable operations, dependence on CHEP, competition, risks related
to acquisitions, difficulties in managing growth, dependence on key personnel
and other factors discussed under "Factors That May Affect Future Results" in
the Annual Report on Form 10-KSB for the year ended June 26, 1999. Pallet
Management does not have a policy of updating or revising forward-looking
statements and thus it should not be assumed that silence by management of the
Pallet Management over time means that actual events are bearing out as
estimated in such forward looking statements.
RESULTS OF OPERATIONS
GENERAL
Our company has grown to be one of the largest pallet companies in the
more than $6 billion pallet industry, by providing value-added products and
services to our customers. Our customer base has grown to over 200 Fortune 1000
companies including AlliedSignal, Bethlehem Steel, CHEP America, DuPont, IAMS,
Monsanto, Mitsubishi, Siemens, and various governmental agencies. Our sales for
the first quarter of fiscal year 2000 were over $12.2 million with 6 facilities
in 5 states, including one which commenced operations in this period.
The majority of our company's revenues have traditionally been
generated from providing high quality, specially engineered pallets to
manufacturers, wholesalers and distributors. As supply chain logistics has
become more complex, our existing customers as well as prospective customers are
seeking new ways to streamline distribution and reduce costs, which is opening a
huge service oriented market for our company. With this shift in focus toward
services and cost efficiency, our company has started providing "state of the
art" logistical services known as Reverse Distribution. Reverse Distribution is
simply defined as maximizing the use of transport packaging, the base of which
is the pallet, by reusing assets to reduce the overall cost per trip. This shift
in focus toward supply chain cost efficiency by our customer base is by far the
most dramatic shift in focus and provides the most opportunity for our company.
Our company has two lines of revenue, manufacturing and services:
MANUFACTURING: We have two primary categories of manufacturing: CHEP
grocery pallets and specially engineered niche market pallets. We have
multi-year contracts to manufacture high quality pallets for CHEP, the world's
largest pallet rental pool.
Pallets that are uniquely engineered to transport a specific product
are classified as niche market pallets. Besides CHEP, our company's customer
base is primarily composed of customers who require niche pallets. These types
of pallets are lower volume and higher margin than CHEP pallets.
7
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SERVICES: We have three categories of services; first is retrieval,
sortation, repair, warehousing and return; second is Reverse Distribution; and
third is other products.
First - Retrieval, sortation, repair, warehouse and return services
enable our customers to better utilize their packaging assets. Besides being
environmentally friendly, a properly repaired used pallet will provide the
customer significant savings over having to buy a new pallet. Pallet users
currently discard a large portion of new pallets after one use. The condition
and size of these pallets vary greatly. The pallets are sorted and repaired as
needed, placed in storage and made available for return to service ("depot
services"). Pallets that can be repaired have their damaged boards replaced with
salvaged boards or boards from new stock inventoried at the facility. Pallets
that cannot be repaired are dismantled and the salvageable boards are recovered
for use in repairing and building other pallets. Pallet Management sells the
remaining damaged boards to be ground into wood fiber, which is used as
landscaping mulch, fuel, animal bedding, gardening material and other items.
Despite recent increases in levels of automation, pallet return operations
remains a labor-intensive process.
Second - Reverse Distribution Services can carry the retrieval, sort,
repair, warehouse and return services one step further by contracting with a
customer to manage their pallet flow.
Third - Pallet Management functions as a wholesale distributor of other
various returnable transport packaging such as plastic and metal pallets;
collapsible plastic bulk boxes; wood, plastic, and metal slave pallets; wooden
boxes and crates; and various other products. Due to lack of demand, sales of
pallets made from materials other than wood are minimal.
Without the pallet, the supply chain would be severely hampered, though
it is also the weak link in the supply chain. If a manufacturer or wholesaler
can manage their pallet assets, distribution logistics become dramatically
simplified and more cost effective. Unlike most companies that are entering the
logistical distribution arena through the transportation industry, we are
responding to customer demands for Reverse Distribution Logistics through the
pallet industry. This approach will provide us a more cost-effective "seamless
system" which provides increased benefits to the customer base and will give
Pallet Management Systems an advantage over competition from current logistic
companies.
As the market for Reverse Distribution is just starting to be created,
the economic advantages to companies that are implementing it are significant.
We are working diligently as an industry leader in this area, as the growth
potential continues to unfold.
Reverse logistics, a sub-industry of the logistics industry, is growing
rapidly and is estimated to be $7.7 billion by the year 2000. We are positioning
Pallet Management to become a third party sub-specialist in reverse logistics of
pallets and other packaging material. The third party logistics industry is
estimated to be in excess of $35 billion and growing rapidly as companies are
discovering the benefits of out-sourcing their logistical demands.
THIRTEEN WEEKS ENDED SEPTEMBER 25, 1999 COMPARED TO THIRTEEN WEEKS ENDED
SEPTEMBER 26, 1998
For the thirteen-week period ended September 25, 1999, net sales
increased 59% to $12,278,269 from $7,919,647 for the comparable 1998 period.
During the thirteen-week period ended September 25, 1999, manufacturing
sales increased 61.3% to $9,157,000 from $5,678,000, and services increased by
39.2% to $3,121,000 from the $2,241,000 recorded for the same thirteen-week
period ended September 26, 1998. This increase in sales was due to three new
manufacturing facilities that commenced operations subsequent to September 26,
1998. The results of operations for this thirteen-week period was a loss of
$215,020 as compared to income of $1,207,000 achieved for the same thirteen-week
period a year prior. Substantial expenses relating to the opening of the three
new facilities operational inefficiencies,
8
<PAGE>
and an estimated $640,000 theft at our Bolingbrook facility significantly
impacted earnings. We have hired a private investigator to work with the
authorities on the Bolingbrook situation. Internal controls have been altered to
prevent reoccurrence.
During the second half of fiscal 1999, the company moved much of its
manufacturing from Lawrenceville to its newer facilities but continued to incur
substantial costs at this facility. Subsequent to the end of this quarter,
additional orders have been received at this facility.
We experienced a 148% increase in Selling, General and Administrative
expenses from $478,000 to $1,382,000 for the thirteen week period ended
September 25, 1999 when compared to the period ended September 26, 1998. This
increase was a result of additional management costs related to the sales volume
increase and expenses related to expanding our Reverse Distribution business.
During this period, we took a one-time write-off of $254,000 as discussed below.
A $14,251 (17%) increase in interest expense was recorded for this thirteen-week
period ended September 25, 1999 due to the increased sales volume. This increase
was very modest in relation to the large increase in sales due to the new and
more advantageous credit facility entered into with the National Bank of Canada
in April 1999.
A loss of $1,697,000 or ($0.43) per share was realized during this
thirteen week period ended September 25, 1999 compared to a net profit of
$556,000 or $0.22 per share recorded for the same period last year. We did not
record any tax benefit on the loss due to net operating losses previously
experienced.
We expect to return to profitability in the second quarter of fiscal
2000.
LIQUIDITY AND CAPITAL RESOURCES
We had $483,646 cash on hand at the end of the thirteen-week period
ending September 25, 1999, versus $262,000 at the beginning of the fiscal year.
This $221,529 increase in cash is primarily attributable to an increase in
accounts payable and an increase in net borrowings of $2,085,605. These
increases were offset by $1,058,752 of cash used in operating activities and
$805,324 used in purchases of fixed assets.
At the end of this period, we were in violation of several loan
covenants with the National Bank of Canada. The Company has applied for waivers
for our current violations and are negotiating amendments for the covenants
going forward. As of November 10, 1999 we have not received a written response
to our waiver and amendment application and, accordingly, we have reclassified
all of the National Bank of Canada notes as short-term.
During the period the Company expensed costs incurred for a potential
acquisition for which the Company is no longer pursuing. In addition, the
Company expensed certain costs which had been incurred to develop some custom
software. The Company has now decided to pursue another vendor which can provide
ready-to-use software. Finally, during this period we restructured management in
which middle levels of management were eliminated so that senior management
became directly responsible for operations. Related to all of these actions the
Company expensed an aggregate of $154,000 during the quarter in selling, general
and administrative expenses.
Our Lakeland facility will be closing at the end of our second quarter.
This is a facility where CHEP pallets are sorted, repaired and stored. Sales at
this facility are approximately $3.5 million per year. We expect to incur costs
of $100,000 to $150,000 when this facility closes.
The completion of the acquisition of The Nelson Company has been
postponed until the second quarter as the transaction is being restructured due
to our recent losses and loan covenant violations. With the anticipation of this
acquisition being completed shortly, we have already integrated our sales and
operations processes.
9
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We are in the process of achieving ISO 9000 registration. Profile
Consulting Group, Ltd. of Troy, MI has been engaged to assist in this endeavor.
Once completed by the end of this fiscal year, this process will streamline and
enhance internal operations to better meet customer needs. Many large
corporations are now requiring their vendors to be ISO certified. The Company
views this program as a vehicle to strengthen its ongoing quality program.
Year 2000 Issues
Pallet Management uses software and related technologies throughout its
businesses that may be affected by the "Year 2000 Problem", which is common to
most businesses and relates to the inability of information systems and computer
software programs to properly recognize and process date-sensitive information
as the year 2000 approaches.
ASSESSMENT. Pallet Management has undertaken various initiatives
intended to ensure that its computer equipment and software will function
properly with respect to dates in the Year 2000 and thereafter. For this
purpose, the term "computer equipment and software" includes systems that are
commonly thought of as IT (Information Technologies) systems, including
accounting, data processing, telephone/PBX systems and other miscellaneous
systems, as well as systems that are not commonly thought of as IT systems, such
as alarm systems, fax machines, or other miscellaneous systems. Both IT and
non-IT systems may contain embedded technology and complicate the Company's Year
2000 identification, assessment, recycling, and testing efforts.
INTERNAL SYSTEMS. Based upon its identification and assessment efforts
to date, the Company believes that substantially all of its computer equipment
and software are Year 2000 compliant. Pallet Management has recently upgraded
its computer systems and believes that it has minimized the detrimental effects
of any Year 2000 problem. Utilizing both internal and external resources to
identify and assess needed Year 2000 remediation, the Company anticipates that
its Year 2000 identification, assessment, remediation and testing efforts, which
began in the fourth quarter 1998, are expected to be completed prior to January
1, 2000, and that these efforts will be completed prior to any currently
anticipated impact on its computer equipment and software.
Pallet Management believes that substantially all of its manufacturing
equipment is not affected by Year 2000 issues.
SUPPLIERS. Pallet Management has mailed letters to its significant
vendors and service providers to determine the extent to which interfaces with
such entities are vulnerable to Year 2000 issues and whether the products and
services purchased from or by such significant entities is Year 2000 compliant.
As of October 1999 the Company had received responses from approximately 70% of
these third parties, and all of them that have responded have provided written
assurance that they expect to address all their significant Year 2000 issues on
a timely basis. A follow-up phone call to significant vendors and service
providers that did not initially respond, or whose responses were deemed
unsatisfactory by the Company, will be conducted in November 1999.
10
<PAGE>
COSTS. Pallet Management believes that the cost of its Year 2000
identification, assessment, remediation and testing efforts, as well as
currently anticipated costs to be incurred by the Company with respect to Year
2000 issues of third parties, will not exceed $100,000 and will be funded from
current existing financial resources. As of October 31, 1999, the Company had
incurred costs of approximately $35,000 related to its Year 2000 identification,
assessment, remediation and testing efforts. These costs were for planning,
analysis, repair or replacement of existing software, upgrades of existing
software, or evaluation of information received from significant vendors,
service providers, or customers.
If all Year 2000 issues are not properly identified, or assessment,
remediation and testing of those Year 2000 problems that are identified is not
effected in a timely manner, there can be no assurance that the Year 2000 issue
will not materially adversely impact the Company's results of operations or
adversely affect the Company's relationships with customers, vendors, or others.
Additionally, there can be no assurance that the Year 2000 issues of other
entities will not have a material adverse impact on the Company's systems or
results of operations.
CONTINGENCY PLAN. Pallet Management has not yet completed a
comprehensive analysis of the operational problems and costs (including loss of
revenues) that would be reasonably likely to result from the failure by the
Company and certain third parties to complete efforts necessary to achieve Year
2000 compliance on a timely basis. Pallet Management has no contingency plan for
dealing with the most reasonably likely worst case scenario, and such scenario
has not yet been clearly identified. Pallet Management currently plans to
complete such analysis and contingency planning by November 15, 1999. Virginia
Power, which supplies two of the Company's facilities, has told the Company that
they cannot assure compliance and that potential power disruptions are possible.
Pallet Management believes that there is no viable alternative for the expected
temporary power disruption. Pallet Management has also switched nail suppliers
to those that are Year 2000 compliant to minimize the disruption of supplies.
The costs of the Company's Year 2000 identification, assessment,
remediation and testing efforts and the dates on which the Company believes it
will complete such efforts are based upon management's best estimates, which
were derived using numerous assumptions regarding future events, including the
continued availability of certain resources, third-party remediation plans, and
other factors. Pallet Management cannot assure that these estimates will prove
to be accurate and actual results could differ materially from those currently
anticipated. Specific factors that could cause material differences include, but
are not limited to, the availability and cost of personnel trained in Year 2000
issues, the ability to identify, assess, remediate and test all relevant
computer codes and embedded technology and other similar uncertainties. In
addition, variability of definitions of "compliance with Year 2000" and the
variety of different products and services and combinations thereof sold by the
Company may lead to claims relating to Year 2000 compliance whose impact on the
Company is not currently estimable.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In June 1999, Pallet Management Systems was named as a co-defendant in
a lawsuit whereby the plaintiff is alleging damages of up to $300,000 related to
lost income from a facility formerly leased to it in Jessup, Maryland.
Management believes the claim is without merit, that Pallet has valid defenses
and intends to vigorously contest the claim. The outcome of the action as well
as the extent of the company's liability, if any, cannot be determined at this
time.
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
The Company and The Nelson Company are continuing to negotiate a restructuring
of their previously announced transaction. The Company expects that the new
completion and effective date will be around the end of the second quarter of
fiscal 2000, subsequent to the satisfactory completion of negotiations with the
National Bank of Canada, which must consent to the transaction. Accordingly, the
Company has not yet filed the financial statements for The Nelson Company and
will make such filing on a timely basis after completion of the restructured
transaction.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulations S-B.
None.
(b) During the quarter ended September 25, 1999, Pallet Management
filed the following Reports on Form 8-K:
1. On August 17, 1999 reporting a change in accountants to
PricewaterhouseCoopers LLP.
2. On August 30, 1999 reporting The Nelson Company transaction.
12
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SIGNATURES
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 15, 1999 By: /s/ ZACHARY M. RICHARDSON
------------------------------------
Zachary M. Richardson, President
13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000773724
<NAME> PALLET MANAGEMENT SYSTEMS, INC.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-26-1999
<PERIOD-START> JUN-27-1999
<PERIOD-END> SEP-25-1999
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,587,919
<ALLOWANCES> 0
<INVENTORY> 2,366,071
<CURRENT-ASSETS> 6,666,386
<PP&E> 8,402,330
<DEPRECIATION> 149,943
<TOTAL-ASSETS> 12,718,295
<CURRENT-LIABILITIES> 9,007,391
<BONDS> 0
0
0
<COMMON> 3,918
<OTHER-SE> 3,443,032
<TOTAL-LIABILITY-AND-EQUITY> 12,718,295
<SALES> 12,278,000
<TOTAL-REVENUES> 12,278,000
<CGS> 12,493,000
<TOTAL-COSTS> 12,493,000
<OTHER-EXPENSES> 1,383,978
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 97,968
<INCOME-PRETAX> (1,697,000)
<INCOME-TAX> 0
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<DISCONTINUED> 0
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<NET-INCOME> (1,697,000)
<EPS-BASIC> (0.43)
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