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FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
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Commission file number 0-16257
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Pace Medical, Inc.
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(Exact name of registrant as specified in its charter)
Massachusetts 04-2867416
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
391 Totten Pond Road, Waltham, Massachusetts 02154
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(Address of principal executive offices )
(617) 890-5656
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has 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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of May 15, 1996.
3,391,770 shares of Common Stock, par value $.01 per share
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
a) Consolidated Condensed Balance Sheets
b) Consolidated Condensed Statements of Operations
c) Consolidated Condensed Statements of Cash Flows
d) Notes to Consolidated Condensed Financial Statements
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PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY
<TABLE>
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
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(Unaudited) (See note below)
<S> <C> <C>
ASSETS
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Current assets:
Cash and cash equivalents $ 825,647 $ 772,006
Accounts receivable 514,765 380,781
Inventories:
Raw materials 246,553 297,247
Work-in-process 131,438 96,782
Finished goods 125,851 114,039
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503,842 508,068
Other current assets 52,189 45,489
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Total current assets 1,896,443 1,706,344
Plant and equipment, net 48,189 25,534
Other assets 22,851 47,832
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TOTAL ASSETS $1,967,483 $1,779,710
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Accounts payable $ 189,730 $ 149,450
Due to officer 3,444 --
Accrued expenses 54,790 54,634
Accrued royalties 179,537 165,664
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Total current liabilities 427,501 369,748
Excess of acquired net
assets over purchase price 10,994 14,656
</TABLE>
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PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY
<TABLE>
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
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(Unaudited) (See note below)
<S> <C> <C>
Shareholders' equity:
Common stock 33,909 33,809
Additional paid-in capital 3,142,250 3,137,351
Cumulative translation
adjustment 54,739 57,081
Accumulated deficit (1,701,910) (1,832,935)
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1,528,988 1,395,306
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,967,483 $ 1,779,710
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</TABLE>
Note: The balance sheet at December 31, 1995 has been taken from the audited
financial statements at that date.
See accompanying notes to consolidated condensed financial statements.
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PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31
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1996 1995
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<S> <C> <C>
Net Sales $ 597,081 $ 364,460
Cost of sales 308,598 169,896
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288,483 194,564
Other operating expenses 165,462 159,618
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Income (loss) from
operations 123,021 34,946
Other (income) (8,004) (6,717)
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Net income (loss) $ 131,025 $ 41,663
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Net income (loss) per
common and common
equivalent share $ .04 $ .01
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Average number of
common and common
equivalent shares outstanding 3,467,382 3,387,600
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
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MARCH 31
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1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $131,025 $ 41,662
Adjustments to reconcile
net income to net cash
used in operations:
Depreciation and amortization (3,743) 3,395
Change in assets and
liabilities, net: (56,302) 5,525
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Net cash used in
operating activities 70,980 50,582
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property
and equipment 22,338 13,638
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Net cash used in
investing activities 22,338 13,638
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from exercise of options and warrants 4,999 --
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Net cash provided by financing activities 4,999 --
NET INCREASE (DECREASE) IN CASH $ 53,641 $ 36,944
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD $772,006 $781,110
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $825,647 $818,054
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements and these notes
have been condensed and do not contain all disclosures required by generally
accepted accounting principles. See notes to audited consolidated financial
statements contained in the Company's annual report.
2. In the opinion of the Company, the accompanying unaudited condensed financial
statements contain all adjustments, all of which are normal and recurring,
necessary to present fairly the financial position of the Company and its
wholly-owned subsidiary as of March 31, 1996 and March 31, 1995, and the results
of their operations for the three months ended March 31, 1996 and March 31,
1995, and their cash flows for the three months ended March 31, 1996 and March
31, 1995.
3. The Company prepares its financial information using the same accounting
principles as for its annual financial statements with the following
modifications:
a. No physical inventories were taken during the periods ended March 31, 1996
or 1995. Cost of sales for such periods was calculated primarily using standard
cost methods.
4. The Company has adopted SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", in the current
quarter. This adoption had no impact on the current quarter's financial
statements. The Company has also elected to continue to apply the measurement
provisions of APB 25, "Accounting for Stock Issued to Employees", in lieu of
adopting those described in SFAS 123, "Accounting for Stock-Based Compensation".
5. The results of operations for the three months ended March 31, 1996 and 1995
are not necessarily indicative of the results to be expected for the full year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
As of March 31, 1996, the Company had cash and cash equivalents of
$825,647 and working capital of $1,468,942. This reflects an increase over the
figures seen at December 31, 1995 and reflects the impact of the profit realized
in the first quarter of 1996.
The Company expects to maintain a sound financial base for the balance
of fiscal 1996. Management continues to believe that the current level of
working capital, coupled with the flexibility of the Company's cost structure,
should suffice to ensure that on-going operations are financed adequately.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1996 VERSUS THREE MONTHS
ENDED MARCH 31, 1995
Sales in the first quarter of 1996 increased 64% over the prior
corresponding period of 1995. Management anticipates that the current sales
level will continue due to new products and the ability of the Company's
distributors to continue to obtain a larger share of the temporary pacing
market. Also, management believes that additional new products for the temporary
pacemaker market will be submitted to the FDA for approval during the second
half of 1996. These new products should augment the Company's existing base of
products.
The Company's margins decreased slightly to 48% in the first quarter of
1996 from 53% in the first quarter of 1995. These margin levels are in
accordance with those that management would expect during a period when new
products are introduced to manufacturing. The margin primarily reflects the
current ability of the Company to absorb the overhead structure that has been
established to support its products. It should be noted that pricing is
continuing to remain firm on its products.
Operating expenses were essentially the same between 1996 and 1995.
This
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reflects management's commitment to containing costs. Management also does not
anticipate any significant increases in its operating expenditures during the
balance of 1996. This level will also suffice to maintain the Company's research
and development efforts in developing new products in the temporary pacing
field.
No taxes were provided on income owing to the Company's substantial net
operating loss carryforwards on both the U.S. and the U.K.
The Company earned net income for the quarter of $131,025 or $.04 per
share. This contrasts with net income of $41,663 or $.01 per share in the first
quarter of 1995. Again, these differences are reflective of the increased sales
experienced in the first quarter of 1996.
The adoption of SFAS 121 had no impact on the financial statements for
the three month period ended March 31, 1996.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
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.
PACE MEDICAL, INC.
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(Registrant)
Date: May 20, 1996 /s/ RALPH E. HANSON
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Ralph E. Hanson, President
and Principal Executive Officer
Date: May 20, 1996 /s/ RALPH E. HANSON
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Ralph E. Hanson, Principal
Financial Officer
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