U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-QSB/A-1
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
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition period from _________to _________
Commission File No. 1-10623
Pamet Systems, Inc.
____________________________________________________________________
(exact name of small business issuer as specified in its charter)
Massachusetts 04-2985838
____________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Main Street, Acton, Massachusetts 01720
____________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (508) 263-2060
Check whether the issurer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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_____
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the close of the period covered by this report:
Title of each class Number of shares outstanding
Common stock 2,043,250
($.01 par value)
Transitional Small Business Disclosure Format
YES______ NO___X___
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
Condensed Balance Sheets March 31, December 31,
1996 1995
CURRENT ASSETS (unaudited)
<S> <C> <C>
Cash $ 12,286 $ 28,264
Accounts receivable, net of allowance for
doubtful accounts of $20,000 134,277 246,161
Inventory 28,461 26,921
Prepaid expenses and other current assets 47,433 46,644
---------- ----------
TOTAL CURRENT ASSETS 222,457 347,990
PROPERTY AND EQUIPMENT, net 910,149 922,596
OTHER ASSETS 1,025 1,025
RESTRICTED CASH 26,621 26,450
---------- ----------
TOTAL OTHER ASSETS 27,646 27,475
$1,160,252 $1,298,061
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $202,336 $ 245,516
Accrued expenses 167,741 140,684
Notes payable-related party 124,099 81,099
Deferred software maintenance revenue 112,507 190,034
Current portion of long-term debt 14,987 13,069
---------- ----------
TOTAL CURRENT LIABILITIES 621,670 670,402
LONG TERM DEBT, less current portion 504,629 509,426
UNEARNED SUPPORT REVENUE 79,283 79,283
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000
shares authorized, none issued
Common Stock, $.01 par value, 7,500,000 shares
authorized; 1,966,250 issued and outstanding 20,433 20,183
Additional paid-in Capital 4,089,379 4,072,629
Accumulated deficit (4,155,142) (4,053,862)
---------- ----------
(45,330) 38,950
$1,160,252 $1,298,061
========== ==========
</TABLE>
See accompanying "Notes to Financial Statements"
<PAGE>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
Statements of Operations
(Unaudited)
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Net sales $ 238,204 $ 180,127
Cost of product 73,791 97,921
--------- ---------
164,413 82,206
Operating expenses:
Personnel costs 170,840 171,793
Rent, utilities and telephone 15,234 17,746
Travel and entertainment 10,069 11,791
Professional fees 9,990 12,846
Depreciation 12,447 19,412
Other operating expenses 31,966 25,611
--------- ---------
Total operating expenses 250,546 259,199
--------- ---------
Income (loss) from operation (86,133) (176,993)
Interest income (expense) Net (15,147) (12,466)
Net income (loss) (101,280) (189,459)
========= =========
Net income (loss) per share $(.05) $(.10)
====== ======
Shares Outstanding 2,043,250 1,966,250
========= =========
</TABLE>
See accompanying "Notes to Financial Statements (unaudited)"
<PAGE>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31, 1996 March 31, 1995
<S> <C> <C>
Cash flows provided by (used in)
operating activities:
Net loss $(101,280) $(189,459)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 12,447 32,146
Change in assets and liabilities:
Decrease accounts receivable 111,884 209,459
(Increase) Decrease in inventory (1,540) 20,763
(Increase) Decrease in prepaids and other
current assets (789) (9,654)
(Increase) Decrease in other assets (171) (172)
(Decrease) Increase in accounts payable (43,180) (49,585)
(Decrease) in deferred software
maintenance revenue (77,527) (71,882)
Increase (Decrease) in accrued payroll 27,057 9,681
-------- -------
Total adjustments 28,181 140,756
Net cash provided by (used
in) operating activities (73,099) (48,703)
Cash flows from investing
activities:
Sale of computer Equipment 0 927
-------- -------
Net cash used in investing activities 0 927
</TABLE>
(continued on following page)
<PAGE>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31, 1996 March 31, 1995
<S> <C> <C>
Cash flows from financing activities:
Payment of mortgage (2,879) (2,887)
Net Change Note payable
related party 43,000 36,900
Issuance of Capital Stock 17,000 0
-------- -------
Net cash provided by
financing activities 57,121 34,013
Net increase (decrease) in cash (15,978) (13,763)
Cash and cash equivalents at
beginning of period 28,264 16,103
Cash and cash equivalents at
end of period $12,286 $ 2,340
======= =======
Supplemental disclosure of cash
flow information:
Cash paid for interest: $15,740 $13,439
</TABLE>
See accompanying "Notes to Financial Statements"
<PAGE>
PAMET SYSTEMS, INC.
Notes to Condensed Financial Statements
(Unaudited)
Note (1) Statement Presentation
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of
March 31, 1996 and the results of operations for the three month periods
and changes in cash flows for the period then ended. There were no
material unusual charges or credits to operations during the recently
completed fiscal quarter.
The results reported for the three month periods ended March 31, 1996
are not necessarily indicative of the results of operations which may be
expected for the entire year.
Note (2) Mortgage on Corporate Training, Development and Headquarters
Facility
On April 21, 1992 the Registrant consummated an agreement with the
Lexington Savings Bank of Lexington, MA. to mortgage the Registrant's
development, training and headquarters facility, located at 1000 Main
Street, Acton, Massachusetts. The original principal amount of the
mortgage was $560,000. On June 21, 1995 the note was extended for a one
year term with monthly payments determined according to a twenty-year
amortization period. $5,741, including interest at 11%, is payable
monthly. The bank has required an interest bearing compensating balance
account. On March 31, 1996 this account equaled $26,621.
<PAGE>
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Overview
The Registrant's net sales consist primarily of sales of software and
turnkey computer systems, and support and update service fees. Sales
increased 32.2% for the three month period ended March 31, 1996 (the 1996
period) over the sales for the three month period ended March 31, 1995 (the
1995 period). Management believes that although sales have increased over
the 1995 period the lack of profitability for the 1996 period was due to
communities' continuing to delay purchases of systems to take advantage of
the grants that they believed would be released pursuant to the "Violent
Crime Control and Law Enforcement Act of 1994" (the 1994 Crime Bill).
However, in recent weeks the Registrant has learned of many grants finally
being awarded. There can be no assurance as to when, if at all, these
awards will result in sales to the Registrant. The Registrant is
experiencing cash flow shortages due to the delay of orders into the second
and third quarters of the year. Management has taken initiatives, however,
to insure that adequate working capital is available during the first 6
months of 1996. In addition, in anticipation of the increased working
capital needs associated with the increased sales from the crime bill
grants, management is exploring other additional financing alternatives.
Three Months Ended March 31, 1996 vs.
Three Months Ended March 31, 1995
Net sales increased $58,077 or 32.2% to $238,204 for the 1996 period
from $180,127 for the 1995 period. The increase in total revenues is due to
an increase in sales of the Registrant's new imaging product. Municipalities
are continuing to delay the procurement of the Registrant's full records and
dispatch products to take advantage of the Federal grants associated with
the 1994 Crime Bill. Sales during the 1996 period consisted of hardware and
software enhancements and imaging systems. There were no new system sales
during the 1996 or 1995 periods. Software support revenues increased 3.7% to
$88,640 for the 1996 period from $85,482 for the 1995 period reflecting the
increase in the customer base from the 1995 period. Cost of product
decreased $24,131 to $73,791 for the 1996 period from $97,921 for the 1995
period reflecting the higher margins associated with the imaging systems.
Gross margin increased to 69.0% for the 1996 period compared to 45.6% for
the 1995 period reflecting the increased imaging margins. The 1995 period
also included some pass through services which carried no markup.
Operating expenses decreased $8,653 or 3.3% to $250,546 for the 1996
period compared to $259,199 for the 1995 period. Personnel costs decreased
slightly to $170,840 for the 1996 period compared to $171,793 for the 1995
period. The slight decrease is due to changes in vacation pay. Rent,
utilities and telephone decreased 14.2% to $15,234 for the 1996 period from
$17,746 for the 1995 period due primarily to the reduced phone expense due
to discounts and reduced support usage. Travel and entertainment expenses
decreased 14.6% to $10,069 for the 1996 period from $11,791 for the 1995
period. This decrease reflects the reduction in travel associated with a
major project in the southeast that has been completed. Professional fees
decreased 22.2% to $9,990 for the 1996 period from $12,846 for the 1995
period, primarily due to the reduced use of a public relations firm in the
1996 period. Depreciation expense decreased 35.9% to $12,447 for the 1996
<PAGE>
period from $19,412 for the 1995 period primarily as a result of the reduced
depreciation on the older computer equipment and office furnishings and the
write off of previous development expense during 1995. Other operating
expenses increased 24.8% to $31,966 for the 1996 period from $25,611 for the
1995 period due the payment of director fees and the increased expenses
associated with snow removal for the last winter season.
Net interest expense for the 1996 period was $15,147 compared to
$12,466 for the 1995 period. This reflects the increased interest associated
with the working capital loan and the increased interest rate on the
mortgage.
The net loss for the 1996 period decreased by $88,179 to $(101,280)
for the 1996 period from $(189,459) for the 1995 period. This loss is the
result of the delayed sales.
Liquidity and Capital Resources
The Registrant's working capital decreased to a deficit of $399,213
at March 31, 1996 from a deficit of $322,412 at December 31, 1995 due to
the loss during the quarter. Cash decreased to $12,286 at March 31, 1996
from $28,264 at December 31, 1995. Accounts receivable decreased
significantly to $134,277 at March 31, 1996 from $246,161 at December 31,
1995. The lower level of accounts receivable reflects the decreased sales
and the results of the collection activities during the 1996 period. The
Registrant is experiencing an accounts receivable level that averages 60
days sales outstanding.
The Registrant's backlog was approximately $250,000 at March 31,
1996. The Registrant also is continuing its cost improvement program and
continues an aggressive sales effort. Specifically, sales of the
Registrant's imaging product are expected to increase during 1996. The
continuing delays in system sales as a result of the delays in awards of
grants under the 1994 Crime Bill continue to have an adverse effect on
sales and the Registrant's resulting cash position. During the 1996 period,
however, the Registrant began to be notified by potential customers who had
participated in the Registrant's grant writing seminars that they had
received awards. Many of these prospective customers will still have to
proceed with a competitive bidding process as required by their respective
state laws, consequently there can be no assurance as to when, if at all,
these awards will result in sales to the Registrant. In addition, the
Registrant is continuing to consider projects to increase its cash position
such as mergers, acquisitions or other business combinations, as well as
capital raising alternatives. To date there have been no agreements or
arrangements. The Registrant has also received short term financing
commitments from Directors and Officers to support operations, if needed.
The Registrant believes its existing backlog, combined with working capital
loans from directors and shareholders and sales resulting from the grants
associated with the 1994 Crime Bill will be sufficient to ensure the
continued operations through the year.
As of March 31,1996, the Registrant had accumulated approximately
$4,000,000 and $3,200,000 in net operating loss carryforwards for federal
and state income tax purposes respectively. The loss carryforwards expire
in the year 2009. Under the Internal Revenue Code of 1986, as amended, the
rate at which a corporation may utilize its net operating losses to offset
its income for federal tax purposes is subject to specified limitations
during periods after the corporation has undergone an "ownership change".
It has been determined that an ownership change did take place at the time
of the Registrant's initial public offering. However, the limitations on
the loss carryforward exceed the accumulated loss at the time of the
"ownership change". Thus there is no restriction on its use.
<PAGE>
Inflation
Inflation has not had a significant impact on the Registrant's
operations to date.
Forward Looking Statements
This Management's Discussion and Analysis of Financial condition and
Results of Operations may include forward-looking statements that may or
may not materialize. Additional information of factors that could
potentially affect the Company's financial results may be found in the
Company's filings with the Securities and Exchange Commission.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
Not applicable.
Item 3 - Defaults Upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a note of Security Holders
None
Item 5 - Other Information
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibits - none
b. Reports on form 8-K - none
<PAGE>
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
Pamet Systems, Inc.
(Registrant)
May 14, 1996 Richard C. Becker
_______________________________ ______________________
Date Richard C. Becker
Vice President
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 12,286
<SECURITIES> 0
<RECEIVABLES> 134,277
<ALLOWANCES> 0
<INVENTORY> 28,461
<CURRENT-ASSETS> 222,457
<PP&E> 1,424,920
<DEPRECIATION> 514,771
<TOTAL-ASSETS> 1,160,252
<CURRENT-LIABILITIES> 621,670
<BONDS> 0
<COMMON> 20,133
0
0
<OTHER-SE> (65,763)
<TOTAL-LIABILITY-AND-EQUITY> 1,160,252
<SALES> 282,204
<TOTAL-REVENUES> 282,204
<CGS> 73,791
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 250,546
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,147
<INCOME-PRETAX> (101,280)
<INCOME-TAX> 0
<INCOME-CONTINUING> (101,280)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101,280)
<EPS-PRIMARY> (0.050)
<EPS-DILUTED> 0.000
</TABLE>
