SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File Number: 1-12536
PACIFIC ANIMATED IMAGING CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 11-2964894
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
326 First Street, Suite 100
Annapolis, Maryland 21403
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (410) 263-7761
Not applicable
(Former name, former address and former fiscal year if changed since last
report)
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
--- ---
1,518,900 Common Shares, $.0001 par value were issued and outstanding at
September 30, 1996.
<PAGE>
PACIFIC ANIMATED IMAGING CORPORATION
TABLE OF CONTENTS
Page No.
Part I - Financial Information
Consolidated Balance Sheets, September 30, 1996 (unaudited)
and December 31, 1995 3
Consolidated Statements of Operations for the three and nine
months ended September 30, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II - Other Information
Items 1-6 11
Signature 12
2
<PAGE>
PACIFIC ANIMATED IMAGING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------------ ------------------
(Unaudited)
ASSETS
<S> <C>
Current assets
Cash and cash equivalents $ 1,870,066 $ 4,177,534
Investment in U.S. government securities 474,144 --
Accounts receivable, net 435,270 260,655
Interest receivable 14,018 3,939
Inventory 24,093 --
Prepaid expenses and other current assets 56,721 82,719
------------------ ------------------
Total current assets 2,874,312 4,524,847
------------------ ------------------
Property and equipment, at cost
Computers, furniture and equipment 1,018,808 500,162
Less accumulated depreciation 448,510 218,593
------------------ ------------------
Net property and equipment 570,298 281,569
------------------ ------------------
Goodwill, net of accumulated amortization
of $30,000 as of September 30, 1996 562,317 --
Other assets 84,156 62,708
------------------ ------------------
$ 4,091,083 $ 4,869,124
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 548,330 $ 274,313
Deferred revenue 79,864 76,201
Customer deposit 50,000 50,000
Line of credit 338,333 --
Other current liabilities 102,389 7,781
------------------ ------------------
Total current liabilities 1,118,916 408,295
Note payable to bank 28,192 --
Deferred rent and other 180,506 22,399
------------------ ------------------
Total liabilities 1,327,614 430,694
------------------ ------------------
Commitments and contingencies
Stockholders' equity
Common stock, $.0001 par value. Authorized 5,000,000 shares;
issued and outstanding 1,518,900 shares as of September 30, 1996
and 1,441,024 shares as of December 31, 1995. 152 144
Additional paid-in capital 11,872,324 11,280,624
Accumulated deficit (8,944,187) (6,842,338)
Deferred compensation (164,820) --
------------------ ------------------
Total stockholders' equity 2,763,469 4,438,430
------------------ ------------------
$ 4,091,083 $ 4,869,124
================== ==================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
PACIFIC ANIMATED IMAGING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------------- ---------------------------------
1996 1995 1996 1995
--------------- -------------- --------------- ---------------
<S> <C>
Revenue
Custom software revenue $ 97,053 $ 139,893 $ 449,764 $ 469,226
Service fees 398,092 -- 398,092 --
Product sales 275,410 -- 290,776 --
Royalties 13,487 12,021 47,234 41,926
--------------- -------------- --------------- ---------------
Total revenue 784,042 151,914 1,185,866 511,152
--------------- -------------- --------------- ---------------
Operating expenses
Cost of custom software production 187,085 191,330 667,102 559,517
Cost of service fees 328,693 -- 328,693 --
Cost of product sales 119,346 -- 124,937 --
Research and development 51,820 36,539 175,590 240,006
Selling, general and administrative 844,384 412,498 1,779,182 1,243,015
Write-off of purchased research and development -- -- 289,330 --
--------------- -------------- --------------- ---------------
Total operating expenses 1,531,328 640,367 3,364,834 2,042,538
--------------- -------------- --------------- ---------------
Loss from operations (747,286) (488,453) (2,178,968) (1,531,386)
Other income (expense) (4,927) 13,996 77,119 38,343
--------------- -------------- --------------- ---------------
Net loss $ (752,213) $ (474,457) $ (2,101,849) $ (1,493,043)
=============== ============== =============== ===============
Weighted average number of shares outstanding 1,515,113 521,003 1,472,020 520,865
=============== ============== =============== ===============
Net loss per common share $ (0.50) $ (0.91) $ (1.43) $ (2.87)
=============== ============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
PACIFIC ANIMATED IMAGING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
<S> <C>
Cash flows from operating activities
Net loss $ (2,101,849) $ (1,493,043)
Adjustments to reconcile net loss to net cash
used in operating activities, net of effects
from purchase of Forsight and U.S. Technologies
Depreciation and amortization 166,539 109,590
Amortization of unearned compensation 29,086 --
Loss on disposal of assets 21,916 7,122
Write-off of purchased research and development 289,330 --
Decrease (increase) in assets
Accounts receivable 1,194 (19,286)
Interest receivable (10,079) 30,087
Inventory 7,264 --
Prepaid expenses and other current assets 25,998 97,333
Other assets (3,199) (77,055)
Increase (decrease) in liabilities
Accounts payable and accrued liabilities (85,017) (11,669)
Other liabilities (98,116) (35,774)
----------------- -----------------
Net cash used in operating activities (1,756,933) (1,392,695)
----------------- -----------------
Cash flows from investing activities
Purchase of U.S. government securities (474,144) --
Proceeds from maturity of U.S. government securities -- 1,314,413
Capital expenditures (93,848) (44,376)
Proceeds from sale of property and equipment 2,700 14,038
Payment for purchase of Forsight, net of cash acquired (180,562) --
Cash acquired from purchase of U.S. Technologies, 12,771 --
----------------- -----------------
Net cash provided by (used in) investing activities (733,083) 1,284,075
----------------- -----------------
Cash flows from financing activities
Proceeds from exercise of options 199,997 2,250
Payments on line of credit (9,386) --
Payments on long-term debt (8,063) --
----------------- -----------------
Net cash provided by financing activities 182,548 2,250
----------------- -----------------
Net decrease in cash and cash equivalents (2,307,468) (106,370)
Cash and cash equivalents, beginning of period 4,177,534 505,761
----------------- -----------------
Cash and cash equivalents, end of period $ 1,870,066 $ 399,391
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
PACIFIC ANIMATED IMAGING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
The consolidated financial statements of Pacific Animated Imaging
Corporation (the "Company") as of and for the three and nine month periods ended
September 30, 1996 and 1995 are unaudited; however, in the opinion of
management, include all adjustments, consisting of normal recurring adjustments
necessary for fair presentation of such financial information. These financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the consolidated financial statements for the year
ended December 31, 1995 included in the Company's Annual Report on Form 10-KSB
previously filed with the Securities and Exchange Commission.
2. ACQUISITION OF FORSIGHT
Effective February 2, 1996, the Company acquired substantially all the
assets of Forsight, Inc. ("Forsight"), a closely held corporation engaged in the
business of developing and selling interactive multimedia software to the
business communications and the consumer publishing market for a total purchase
price of approximately $317,000, plus direct expenses of the acquisition which
totaled approximately $23,000. The Company acquired cash, fixtures and
equipment, accounts receivable, intellectual property, and other miscellaneous
assets for the assumption of certain liabilities of Forsight, which totaled
approximately $190,000, and 20,000 unregistered shares of common stock of the
Company. Other terms of the acquisition included the employment by the Company
of certain of Forsight's key employees, who will continue as part of the
Company's senior management team; and the acquisition of all of the shares of
Series A Convertible Preferred Stock of Forsight from Circa Pharmaceuticals,
Inc. in an amount equal to thirty percent of the net income each year for three
years of Forsight's operations up to a maximum value of $600,000, payable in
unregistered shares of common stock of the Company. The Series A Convertible
Preferred Stock of Forsight was canceled after the acquisition. The Company
allocated approximately $109,000 to identifiable tangible assets and wrote-off
approximately $289,000 as in process research and development on the date of
acquisition. The acquisition did not meet materiality thresholds for separate
pro forma disclosure.
3. ACQUISITION OF U.S. TECHNOLOGIES, INC.
Effective July 19, 1996, U.S. Technologies Inc. Acquisition
Corporation, a wholly owned subsidiary of the Company, merged with and into U.S.
Technologies, Inc. ("UST"), in a transaction accounted for as a purchase, with
UST being the surviving corporation. As a result of the merger, the Company owns
100% of UST. Consideration at the time of purchase amounted to $592,317 which
represents the excess of UST's liabilities over its assets as of the date of
the merger. In addition, under the terms of the merger, the former 100% owner
of UST has the ability to earn up to 31,068 shares of common stock in the
Company (the market value of which was $400,000 as of the date of the merger),
provided certain financial milestones are met. In addition, the Company made a
commitment to provide capital to UST of $500,000 over an eight-month period,
beginning in July 1996. The Company also established a Phantom Stock Plan (the
"Plan") for key employees of UST. Pursuant to the Plan, UST's key employees have
the ability to earn up to 46,602 shares of common stock of the Company, the
market value of which was $600,000 as of the date of the merger. The ability to
earn these shares is subject to the same financial milestones as above.
In connection with the acquisition of UST, the former 100% owner of UST
entered into an employment agreement with the Company for a three year period,
automatically renewable for one year periods following the termination date at
the option of either party. This agreement requires annual compensation of
$100,000.
6
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Historically, the Company's principal source of revenue has been from
the development of custom multimedia software for electronic performance support
systems, training, marketing and corporate communications. The Company also
derives revenue in the form of royalties paid by customers who resell copies of
software developed by the Company for such customers. During the last quarter of
1995, in connection with the implementation of a marketing initiative for
consumer off-the-shelf software products, the Company began to derive revenue
from the sale of these products, however, to date, these revenues have been
insignificant.
Effective July 19, 1996, the Company completed a merger with U.S.
Technologies, Inc. ("UST"), resulting in the Company owning 100% of UST. UST is
a full service computer systems integration company whose activities include
sales of computer equipment, integration and support services, and the
development of client specific software products, primarily using Lotus Notes as
a work group computing solution. UST's client base is located primarily
throughout the state of Florida. Consideration at the time of purchase amounted
to $592,317 which represents the excess of UST's liabilities over its assets
as of the date of the merger. In addition, under the terms of the merger, the
former 100% owner of UST has the ability to earn up to 31,068 shares of
common stock in the Company (the market value of which was $400,000 as of the
date of the merger), provided certain financial milestones are met in a 37-month
period pursuant to a Performance Standard Agreement. In addition, the Company
made a commitment to provide capital to the Company of $500,000 over an
eight-month period, beginning in July 1996, of which $75,000 was advanced prior
to the closing date.
Total revenues for the three month period ended September 30, 1996 were
$784,042 as compared to $151,914 for the same period of 1995, an increase of
approximately $632,000. This increase was primarily attributable to the addition
of UST revenues of approximately $673,000, offset by a decrease in sales of the
Company's custom software products of approximately $43,000. The net loss and
net loss per share were $752,213 and $0.50 per share, respectively, for the
three month period ended September 30, 1996 as compared to a net loss and net
loss per share of $474,457 and $0.91 per share, respectively, for the same
period of the prior year.
Total revenues for the nine month period ended September 30, 1996 were
$1,185,866 as compared to $511,152 for the same period of 1995, an increase of
approximately $675,000. This increase was primarily attributable to the addition
of UST revenues of approximately $673,000, as well as increases in sales of
off-the-shelf software products and an increase in royalty revenue of
approximately $15,000 and $5,000, respectively, offset by a decrease in sales of
the Company's custom software products of approximately $20,000. The net loss
and net loss per share were $2,101,849 and $1.43 per share, respectively, for
the nine month period ended September 30, 1996 as compared to a net loss and net
loss per share of $1,493,043 and $2.87 per share, respectively, for the same
period of the prior year.
During the three and nine month periods ended September 30, 1996,
custom software revenue was $97,053 and $449,764, respectively, as compared to
$139,893 and $469,226, respectively, for the same periods of 1995. During 1995,
the Company refocused its sales efforts toward securing larger contracts in
selected industries in which it has had previous success, including automotive
and packaging. These refocused efforts have not yet resulted in the increase in
revenue that the Company has planned. In addition, the Company recognized less
revenue than anticipated during the three and nine month periods ended September
30, 1996 due to ongoing delays in certain contracts with customers. These delays
are expected to last at least through the end of 1996.
7
<PAGE>
During the three and nine month periods ended September 30, 1996,
revenue from services fees was $398,092, as compared to $0 in the prior year.
These revenues represent systems integration and software development services
provided by UST. These revenues are expected to increase as UST increases sales
efforts of their services in conjunction with the IBM Industry Remarketer
program described below which is expected to significantly expand UST's customer
base.
During the three and nine month periods ended September 30, 1996,
revenue from sales of products was $275,410 and $290,776, as compared to $0 in
the prior year. Approximately $275,000 of these revenues for the three and nine
month period ended September 30, 1996, represent sales of computer hardware by
UST. UST routinely sells computer hardware as part of their systems integration
services. These revenues are expected to increase as UST increases sales efforts
for these products. Specifically, UST has been approved as an IBM Industry
Remarketer for both the AS/400 and RS/6000 midrange computer platforms to be
sold as a part of UST's groupware, I-net, data warehousing, and client/server
solutions delivered to their clients. The remaining $15,000 in revenue for the
nine month period ended September 30, 1996 represents sales of consumer
off-the-shelf products which the Company began marketing during the last quarter
of 1995 when it initiated two test market mailing programs for certain products.
Both mailings generated low response rates; accordingly, the Company does not
plan to perform any additional mailings for these products. The Company has not
entered into any additional agreements with developers to market their products;
however, the Company may enter into other agreements and may perform additional
test mailings for other products in the future.
The Company has entered into agreements that allow certain customers to
resell copies of the Company's software products in exchange for royalty
payments. Royalties were $13,487 and $47,234, respectively, during the three and
nine months ended September 30, 1996, as compared to $12,021 and $41,926 for the
same periods in the prior year. Currently, the Company is entitled to receive
royalties from one customer in connection with the sale of education programs
developed by the Company in prior years, as well as, from the resale of software
by another customer. The Company generally expects royalty revenue to decrease
due to the aging shelf life of products for which the Company currently receives
royalties. However, the Company continually explores additional marketing and
development partners to increase revenues generated from royalty arrangements.
During the three and nine months ended September 30, 1996, total
operating expenses were $1,531,328 and $3,364,834, respectively, as compared to
$640,367 and $2,042,538 in the same periods of the prior year, increases of
approximately $891,000 and $1.3 million, respectively. The addition of Forsight
and UST, which were acquired in February 1996 and July 1996, respectively,
accounted for approximately $884,000 and $1.2 million, respectively, of the
increases in total operating expenses. The increase for the nine month period
ended September 30, 1996 also includes a write-off of purchased research and
development, which totaled approximately $289,000, in connection with the
acquisition of Forsight.
During the three and nine months ended September 30, 1996, the gross
margins for custom software products were approximately (93%) and (48%), as
compared to (37%) and (19%) for the same periods in 1995. The negative gross
margins for the 1996 period are primarily due to the lower than anticipated
level of sales of the Company's custom software services. The Company expects
gross margins in custom software to improve as revenues increase. In addition,
as discussed under Strategy to Achieve Profitable Operations below, the Company
is implementing plans, including the consolidation of certain operations, to
reduce and better control production and development costs so that they are more
consistent with the level of sales.
Cost of service fees was approximately $328,693 for the three and nine
month periods ended September 30, 1996, resulting in a gross margin of
approximately 17%, as compared to $0 in the same periods of 1995. These are the
costs associated with systems integration and software development services
provided by UST. In future periods, the margins for services is expected to
increase as the level
8
<PAGE>
of revenue from service fees increases and as the employees who provide these
services become more efficient.
Cost of product sales was $119,346 and $124,937 for the three and nine
month periods ended September 30, 1996, as compared to $0 in the same periods of
1995. Approximately, $119,000 of these costs for the three and nine month
periods ended September 30, 1996 was from the sale of products by UST and
resulted in a gross margin of approximately 57%, an unusually high margin due to
an unusual one-time transaction recognized during this period. In future
periods, typical gross margins are expected to range between 10% and 15%.
Approximately $5,600 of these costs are the costs associated with the consumer
off-the-shelf marketing initiative discussed above.
During the three and nine month periods ended September 30, 1996,
research and development expenses were $51,820 and $175,590, respectively, as
compared to $36,539 and $240,006 for the same periods of 1995. Research and
development expenses for the nine month period ended September 30, 1996 are
lower than the same period of 1995 due to improvements made to the utility and
functionality of the Company's software made during 1995. However, the Company
continues to improve on existing tools as needed and, in addition, is currently
developing modified versions of traditional custom software products to be sold
to a broad range of commercial customers. Accordingly, research and development
expenses increased during the three months ended September 30, 1996 as compared
to the prior year and are expected to be at a consistent level at least for the
remainder of 1996.
During the three and nine month periods ended September 30, 1996,
selling, general and administrative expenses were $844,384 and $1,779,182,
respectively, as compared to $412,498 and $1,243,015 in the same periods of the
prior year, increases of approximately $432,000 and $536,000, respectively.
Approximately $380,000 and $456,000, respectively, of the increases are due to
the additions of Forsight and UST. The remaining increases are due to the
Company's increased sales and marketing efforts.
During the three month period ended September 30, 1996, total other
income (expense) decreased by approximately $19,000 from the same period of the
prior year due to a loss recognized during the period related to the sublease of
excess facilities as well as interest expense on UST's line-of-credit and bank
note. During the nine month period ended September 30, 1996, total other income
(expense) increased by approximately $39,000 from the same period of the prior
year primarily due to an increase in funds available for investment as compared
to the prior year, offset by the loss on the sublease of excess facilities and
the addition of UST's interest expense.
Strategy to Achieve Profitable Operations
During the fourth quarter of 1996, the Company expects to implement a
number of actions intended to address the slow sales growth and the continued
losses. The Company intends to expand current sales efforts of modified versions
of traditional custom software products that it has developed and targeted to a
broad range of commercial customers; expand UST's sales efforts of their
services and products outside of Florida, where a majority of their market has
historically been; and cut costs related to production and development by
consolidating the Redmond, WA office into the Annapolis, MD location. The
consolidation is expected to be completed by December 31, 1996 and the Company
expects to maintain key employees to help minimize disruption to operations as
projects are transferred to the Annapolis office. In addition, the Company has
formed a task force to look at certain aspects of operations, such as ways to
improve sales and reduce costs, including the possibility of further
consolidation of offices.
Management believes that with expanded sales efforts, the Company's
revenues will increase based upon the current volume of outstanding proposals;
the Company's existing technology and marketing base; and the recent entry into
new markets, including corporate communications, web-site development, and
systems integration services. In addition, the Company believes that it can
increase
9
<PAGE>
revenues with sales of its modified versions of custom software products that it
has developed which management believes leverage its proprietary products and
developmental skills to appeal to a wider market. In addition, the Company will
seek to establish ongoing arrangements with larger companies that need to
integrate a multimedia software solution for work group computing, electronic
performance support, training, marketing or corporate communication projects.
Management believes that its strategy for increasing revenues combined
with the impact of cost control measures will enhance the Company's probability
of achieving profitable operations during 1997. Management's estimates are based
upon information currently available to management and may not necessarily prove
accurate.
Cash Flow, Liquidity and Capital Resources
For the nine month period ended September 30, 1996, the Company used
cash of approximately $1,750,000 in operations, primarily due to the net loss of
$2,101,849, net of the write-off of purchased research and development, which
totaled approximately $289,000, in connection with the acquisition of Forsight.
During the nine month period ended September 30, 1996, net cash of approximately
$733,000 was used for investing activities for the purchase Forsight and UST,
U.S. government securities, and equipment. During the nine month period ended
September 30, 1996, net cash of approximately $200,000 was provided by the
exercise of 28,571 common stock options, offset by approximately $17,000 used to
make payments on UST's obligations to a bank.
For the nine month period ended September 30, 1995, the Company used
cash of approximately $1,400,000 in operations, primarily due to the net loss of
$1,493,043. The Company also experienced decreases in accounts payable and
liabilities, offset by decreases in interest receivable, prepaid expenses and
other current assets. During the nine month period ended September 30, 1995, net
cash of approximately $1,284,000 was provided by investing activities primarily
from proceeds received from the maturity of liquid investment securities.
The Company's existing general working capital of approximately $1.8
million at September 30, 1996, together with funds to be generated from
investment income and future sales of custom software, services, and products
are expected to provide sufficient liquidity to meet anticipated cash needs on a
short-term and long-term basis. As discussed above, the Company plans to
implement certain actions to increase sales and reduce expenditures; however,
the Company can make no assurances that operations will generate sufficient cash
flow or that additional financing will be obtained from any sources to meet the
long-term obligations of the Company. Management has not attempted to arrange
any long-term debt financing or seek additional financing through further equity
offerings at this time, in the belief that the Company's liquid resources and
anticipated revenue growth will support operations for the foreseeable future.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: The statements contained in this section and other statements which are
not historical facts are forward looking statements that involve risks and
uncertainties, including, but not limited to, the effect of economic conditions;
the success of newly implemented sales strategies; product and service demand
and market acceptance risks; the ability to obtain a larger number of and larger
size of contracts; the timing of contract awards, customer response, and work
performance; the impact of competitive products and pricing; technological
developments or difficulties in the Company's research and development efforts;
actual purchases under agreements and other risks as detailed in the Company's
Securities and Exchange Commission filings.
10
<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:
Proposal No. 2 for the adoption of Incentive Stock Option Plan No. 3 first
submitted to a vote at the Company's annual meeting of shareholders on June 21,
1996 was adjourned due to a lack of votes to July 15, 1996, then extended to
August 12, 1996 and further extended to September 23, 1996. The Proposal did not
pass. The final results were as follows:
For Against Abstain/Nonvotes
2. Approval of adoption of Incentive
Stock Option Plan No. 3 429,361 66,216 647,936
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits: None
(b) The following report on Form 8-K was filed during the three
months ended September 30, 1996:
July 19, 1996 - Acquisition or Disposition of Assets - U.S.
Technologies, Inc. Merger
11
<PAGE>
PACIFIC ANIMATED IMAGING CORPORATION
SIGNATURE
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.
PACIFIC ANIMATED IMAGING CORPORATION
(Registrant)
Dated: November 14, 1996
BY: /s/ Suzanne C. Brown
--------------------------------------
Suzanne C. Brown
Chief Financial and Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,870,066
<SECURITIES> 474,144
<RECEIVABLES> 435,270
<ALLOWANCES> 0
<INVENTORY> 24,093
<CURRENT-ASSETS> 2,874,312
<PP&E> 1,018,808
<DEPRECIATION> 448,510
<TOTAL-ASSETS> 4,091,083
<CURRENT-LIABILITIES> 1,118,916
<BONDS> 0
0
0
<COMMON> 152
<OTHER-SE> 2,763,317
<TOTAL-LIABILITY-AND-EQUITY> 4,091,083
<SALES> 1,185,866
<TOTAL-REVENUES> 1,185,866
<CGS> 1,120,732
<TOTAL-COSTS> 3,364,834
<OTHER-EXPENSES> (77,119)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,101,849)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,101,849)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,101,849)
<EPS-PRIMARY> (1.43)
<EPS-DILUTED> (1.43)
</TABLE>
