SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] 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.
____________________________________________
(Name of small business issuer 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)
Issuer's telephone number (978) 263-2060
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Securities registered pursuant to Section 12(b) of the Exchange Act:
Name of each exchange
Title of each class on which registered
none none
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(Title of Class)
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock $.01 par value
____________________________
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the 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
______ ______
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $2,413,225
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The aggregate market value of the registrant's common stock held by
non-affiliates of the Company, based upon the average of the closing bid and
asked prices on April 11, 2000 was $8,186,042.
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The number of shares outstanding of the registrant's common stock, as of April
11, 2000 was 3,834,282 shares.
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<PAGE>
Documents included by reference: If the Registrant's definitive proxy
statement is filed within 120 days of the close of the Registrant's fiscal
year ended December 31, 1999, the information called for by Items 9, 10, 11,
and 12 shall be deemed incorporated herein by reference to the Registrant's
definitive proxy statement relating to the Annual Meeting of Stockholders.
<PAGE>
PART I
Item 1. Business
This Form 10-KSB contains statements that are not historical facts.
These statements may constitute "forward-looking statements" within the meaning
of the Securities Act of 1933 and the Securities and Exchange Act of 1934 as
amended. Certain, but not necessarily all, of such forward-looking statements
can be identified by the use of such words as "believes," "expects," "may,"
"will," "should," or "anticipates" or the negative thereof or other variations
thereon of similar terminology, and/or which include, without limitation,
statements regarding the following: market expectation for the NT operating
environment; customer acceptance of the Company's NT products; building a
sales and marketing initiative; growth potential in the year 2000; the
acceptance of the Investigator's Toolkit; ability to integrate Imaging into the
Mobile product; law enforcement trends regarding E911; adequacy of NT security
to prevent tampering; current and ongoing compatibility with federal
standards; adequacy of funding and corporate infrastructure to complete the NT
development and support operations and anticipated growth; economic and
competitive factors affecting market growth; and discussions of strategies
involving risk and uncertainties that reflect management's current views.
These statements are based on many assumptions and factors and may involve
risks and uncertainties. The actual results of the Company or industry
results may be materially different from any future results expressed or
implied by such forward-looking statements because of factors such as problems
in the development of the NT products; insufficient capital resources to
complete development and operate the Company; inability to successfully market
and sell the NT product; changes in the marketplace including variations in
the demand for public safety software; and changes in the economic and
competitive environment. These factors and other information contained in
this Form 10-KSB could cause such views, assumptions and factors and the
Company's results of operations to be materially different. We undertake no
obligation to update publicly forward-looking statements for any reason even
if new information becomes available or other events occur in the future.
Pamet Systems, Inc. (the "Company" or "Pamet Systems") develops,
markets and supports computer software for organizations in the public safety
and criminal justice sectors. The Company's products automate the acquisition,
storage, processing, retrieval and communication of information for these
organizations. The Company's customers include law enforcement agencies, fire
fighting agencies, and corrections facilities.
The Company's principal product for the law enforcement market is
PoliceServer, a fully integrated information management system, which was
totally redesigned and upgraded to the Windows NT platform in 1999. This
redesign changes the Company's entire NT suite of products, which includes
PoliceServer NT, FireServerNT and CADServer NT products, to a new Windows
user interface and completely redesigned backend database.
PoliceServer NT provides law enforcement agencies with the full
spectrum of information-related functionality needed for agency operations and
management. Designed primarily to serve agencies with fewer than 500 officers
(99.4% of US police agencies), current users include both municipal agencies
such as the Worcester, Massachusetts Police Department and other agency types
such as the University of Massachusetts Police Department, the Metropolitan
Atlanta Rapid Transit Authority (MARTA) Police Department, and the McMinn
County Tennessee Sheriff's Office. Capabilities of PoliceServer NT and its
associated modules include criminal records management, department
management, and advanced reporting. Designed to accommodate a wide diversity
of agency types, PoliceServer NT is both easy to learn and to use.
PoliceServer NT automates many of the complex and time consuming department
functions such as arrest booking, crime analysis and reporting, and case
management. A number of interfaces are provided to other data sources such as
the E911 network, various state Criminal Justice Information Systems, and the
National Crime Information Center. The Company also provides interfaces with
systems for digital imaging, mobile/remote access, and the scanning and
identification of fingerprints. These systems went into production
environments in the last quarter of 1999.
FireServer NT provides equivalent functionality for fire fighting
agencies. An upgraded, Windows NT version was completed during 1999, with the
first implementation beginning in the first quarter of 2000. The fire records
capability provides fire departments with data on structures, fire suppression
plans, inspections data, and hazardous materials.
CADServer NT (Computer Aided Dispatch), designed with a "look and
feel" similar to that of the PoliceServer NT and FireServer NT, was also
developed in 1999 in order to support integrated E911 dispatch centers. The
new CADServer NT went into live operation during the fourth quarter of 1999
and will be marketed as a separate product, rather than offered as a component
of the police or fire records management system, as it was in earlier
versions.
The installation of the core products in the reference sites that use
Microsoft NT Server and a Windows graphical user interface completes a two
year development process and leaves the Company poised for the year 2000.
The Company also offers several companion products.
* The Mobile module is a mobile terminal that allows fully integrated
communications with a department's internal system as well as other local,
state and federal databases. Mobile improves officer efficiency, allowing
the departments to realize cost savings, increase officer safety, and enhance
community policing efforts. Sales of the Mobile product accounted for nearly
40% of total revenue in 1999, as agencies used "COPSMore 98" funding to
procure these systems.
* Imaging is a digital image capture, storage and printing system.
* Mapping module displays maps for dispatchers and creates pin maps for crime
analysis.
* The Advanced Reporting module facilitates the creation of both standard and
ad-hoc reports from data in the PoliceServer NT database.
* JailServer provides corrections facility staff with the ability to capture,
track, and report a wide variety of data related to inmates.
* Investigator's Tool Kit extends the Company's expertise into a laptop based
crime scene tool kit, which may be used in a stand-alone configuration or in
a dockable mode. The product is the result of a three-year joint venture
between the Company and Hanahan Computer Designs that was announced in
October, 1999. Investigator's Tool Kit is currently sold in the state of
Connecticut and will be offered in other markets beginning in early 2000.
The Company believes that the level and quality of its customer
support is vital to continuing customer satisfaction and the long-term success
of the Company. The Company has established a strong history of
responsiveness to customer requirements and a high level of support, which
have resulted in a loyal customer base. The Company provides product
enhancements and customer support services under an annual maintenance
program. Annual fees are based on a percentage of the price paid for the
licensed software products. Historical renewal rates for annual maintenance
for the Company's products have been in excess of 99%.
The Company's primary customer support center is located at the
Company's headquarters in Acton, Massachusetts. The Company also maintains a
customer support center in Maitland, Florida, currently serving principally
JailServer customers. The standard customer support service provides access
during business hours Monday through Friday, with a 24-hour, 7-day customer
service option.
As of December 31, 1999, the Company had installed PoliceServer in 105
police departments, FireServer in 29 fire departments, JailServer in 5
institutions, Imaging in 46 departments, Mobile in 45 departments, Advanced
Reporting in 29 departments, and the Mapping module in 5 departments. These
installations are located in 10 states in the Eastern and Southeastern U.S.
In the 12 month period ended December 31, 1999 a significant portion
of sales to police departments was funded by federal grants associated with
the "Violent Crime Control and Law Enforcement Act of 1994" (the 1994 Crime
Bill) designed to provide automation grants to law enforcement agencies. This
grant program is expected to continue through 2000. In general, however, the
long lead-time and uncertainties of selling to the governmental sector
continue and will continue to result in volatility in sales and cash flow. The
Company continues to evaluate mergers, acquisitions and other business
combinations, as well as capital raising alternatives to enhance its working
capital.
The Company was incorporated in Massachusetts on November 24, 1987 by
Dr. Joel B. Searcy.
PoliceServer, PoliceServer NT, FireServer, FireServer NT, JailServer,
and CADServer NT are trademarks of the Company.
The Company's principal executive offices are located at 1000 Main
Street, Acton, Massachussets 01720.
Business of the Company
Public safety agencies are paper-intensive organizations, which manage
large amounts of information in their day-to-day activities. These agencies
must collect, process, file and retrieve such information quickly,
conveniently and cost effectively. Traditionally, police and fire departments
have performed these tasks manually, resulting in significant resources and
man-hours being spent processing and locating documents in large, sometimes
haphazardly maintained, filing systems. Critical information can be
inadvertently lost or misfiled and can only be accessed by one person at a
time. In an attempt to more efficiently manage information and to improve
personnel productivity and response time, many public safety agencies have
computerized certain aspects of their business practices.
Corrections facilities face a similar requirement to maintain
information on the inmates under their custody. In addition to background
information and information on current status and assignments, there is a need
to maintain readily accessible data on inmate health and to account for and
control inmate funds. Corrections officials must have ready access to data on
all aspects of inmate life.
The Company continues to believe that the market for the computer
systems it provides continues to be positioned for growth due to a number of
major factors. The first factor was the passage of the 1994 Crime Bill which
has allocated more than $33.0 billion of funding for police and prison agencies
over the first five years of the grant program, of which over $1.0 billion has
been targeted for the automation of police agencies. Approximately $1.0B has
been allocated for automation thus far under the 1994 Crime Bill. In 1999 an
additional $330M was allocated to automation as part of a follow-on Community
Policing bill. Although the majority of the funding from the 1994 and the
follow-on Crime Bills has been earmarked for additional police presence on the
street, automation and computerization of police agencies is encouraged if it
can be demonstrated that this investment will allow additional police
resources to be "put back on the street". The Company has designed and
implemented a series of seminars to provide departments with the information
necessary to demonstrate the cost effectiveness of the Company's products to
enable them to obtain grant monies. The second factor is E911 systems
currently being established around the country that require 24 hour dispatch
centers for police, fire and EMS departments. Many smaller communities have
not been able to afford to staff a dispatch center 24 hours a day. This has
led to the establishment of regional dispatch centers serving a number of
communities. This regionalization requires computer systems to enable the
regional dispatchers to have timely access to the information needed to
respond to varied situations in a diverse geography. The Company's products
are designed and marketed with the option to be used in this type of regional
application. Currently six regional dispatch centers in Massachusetts,
Georgia and Tennessee use the Company's product for this application. The
third factor is the growing trend toward the use of mobile technologies. The
last factor is the focus of many departments and municipalities to modernize
their computer resources to standard Windows based applications. Given its
existing product base and the completed redevelopment of the PoliceServer NT
and FireServer NT on the NT platform, the Company believes that it is well
positioned to meet these needs with its suite of new NT based products.
Additional factors affecting the business include the following: the
improving economy, which may provide greater availability of funding for
public safety computerization; the emphasis municipalities are currently
placing on crime prevention; the trend among public safety officials towards
increasing effectiveness of operations through computers; the pressures to
control personnel costs, which account for a major portion of municipal
budgets; the need to achieve higher personnel productivity due to local
budgetary constraints; and the availability of computer hardware that does not
require special environmental systems and can, in fact, be used in a remote
location such as a police cruiser.
The corrections market also continues to grow in response to the need
for prison space as well as continued pressure for economies in prison
operations. There is also an active trend in the corrections sector to move
from older, main frame systems to more cost-effective computing platforms.
Products
General: In an effort to meet the demands of its market, which
consists of approximately 15,000 police departments and 5,000 fire departments
nationwide, the Company has not only developed proprietary software but also
offers its customers complete systems. The Company provides the customer with
software, training, support, installation and initial maintenance for its
products for an all-inclusive price. The Company also sells hardware upgrades
and supplies.
The Company has developed and actively markets a series of integrated
software products: PoliceServer NT, a management information system for police
departments; FireServer NT, a management information system for fire
departments; CADServer NT, a real time automation product for Communication
and Dispatch Centers; Imaging, an image capture, storage, and printing system;
Mobile, a mobile computer allowing fully integrated communications with the
department's internal system as well as other local, state and federal
databases; a Mapping system for dispatchers and crime analysis; the Advanced
Reporting module for creating reports with data in the PoliceServer NT and
FireServer NT database; and JailServer, an information management tool for
corrections facilities with the capability to capture, track and report data
on inmates. The Company owns the full and exclusive rights to the
PoliceServer, FireServer, Imaging, Mapping and JailServer products. The
Mobile product incorporates technology licensed from Cerulean Technologies.
Before 1998 the Company's software was developed to run on the Digital
Equipment Corporation's Open VMS(R) operating system together with
character-based terminals or personal computers emulating character-based
terminals. Due to customer demand for software utilizing Graphical User
Interface (GUI) displays and low cost servers, the Company began in 1997
re-developing its software for Windows NT(R)-based servers and Windows(R)
95, Windows(R) 98, and Windows NT(R) client Personal computers. The first
NT-based system was shipped in 1998, and the Company believes that the bulk of
its new customer sales will be for the NT-based product line. The Company
completed the Windows NT versions of PoliceServer and FireServer in 1999. The
Imaging, Mobile, Mapping system, Advanced Reporting and JailServer products
have always been Windows PC-based products. The Company has committed to fully
support the existing VMS customers for 3 years to give them an adequate window
of time to budget and plan for the migration to the Company's suite of NT
products. Some of the Company's computer systems are considered turnkey and
can include networked personal computers, networking equipment, printers and
bundled proprietary software, all of which the Company purchases from other
companies and sells to the Company's users.
PoliceServer NT: PoliceServer NT is part of a comprehensive suite of
law enforcement applications software that performs the clerical and record
keeping functions necessary for police department operation. PoliceServer NT
includes an incident reporting function, which assists dispatchers in
allocating and controlling resources and logging and reporting incidents, and
performs automatic checks for outstanding arrest warrants and gun permits.
The system's functions include an arrest booking system which collects, stores
and reports data on arrests from the time of arrest through court appearances.
The system also automatically produces and prints all reports, forms and other
documents needed in connection with a booking. In addition, the system
provides access to the Federal Government's CAMEO(R) (Computer Aided
Management of Emergency Operations) Hazardous Materials or database. Other
functions create and maintain records with respect to arrest warrants, alarm
systems, citations, licenses, permits, property, equipment, and vehicle
maintenance.
PoliceServer NT automatically cross-references and updates all
appropriate files in the data base. This feature eliminates the need for
repetitive input, saves people-hours, and ensures the timely and consistent
updating of police records. The system provides multiple levels of security
controls, which the Company believes limit the likelihood of tampering with
police records.
An important feature of PoliceServer NT is ease of use. Current
customers find the system easy to learn and operate. PoliceServer NT is
designed to be used by any member of the department to expedite the handling
of departmental paperwork. PoliceServer NT eliminates much of the manual
process, replacing it with a series of simple interactive entry screens.
Computerizing these processes reduces paperwork, ensures more accurate data
entry, and makes information available more rapidly to other members of the
police department.
FireServer NT: FireServer NT relies on the design approach taken with
the PoliceServer NT and performs a number of similar functions. Like
PoliceServer NT, the FireServer NT system assists in the logging and
reporting incidents, as well as providing access to the CAMEO Hazardous
Materials database. In addition, FireServer NT permits a dispatcher using
CADServer NT to immediately print a fire suppression plan for use by
firefighters at the scene, including incident location information; orders for
first arriving units; emergency contact information; structure type, size and
usage data; identification of any permits, inspection violations or hazardous
material at the site; and identification of individuals with special needs
known to reside at the incident address. FireServer NT's other functions
create and maintain records with respect to hydrant location and history;
permits; inspections; violations; street box and building alarm systems;
personnel; payroll; property; equipment; and vehicle maintenance.
CADServer NT: CADServer NT, designed with a "look and feel" similar
to that of the PoliceServer NT and FireServer NT, was also developed in 1999
in order to support integrated E911 dispatch centers. CADServer NT enables a
dispatcher to have immediate access to all pertinent information that is
necessary to safely and efficiently administer a call or incident. The
dispatcher has an overview of all the incidents that are current as well as
all the units in his or her control. In addition, the system will display the
required units that should be dispatched to an incident and will continue to
update the status as changes occur.
JailServer: JailServer is an integrated technology solution utilizing
barcode and video imaging technologies to ensure effective collection,
processing, and output of information for correctional institutions.
JailServer modules include tracking of inmate booking, arrest, housing, trusts
accounting, medical, commissary, property, and visitation.
Imaging: Imaging is an image capture, storage and printing system
that handles color or monochrome photo images (mug shots, crime scene etc.)
and document imaging. The product is fully integrated with the PoliceServer
NT, FireServer NT and will be integrated with the Mobile system during 2000.
It supports unlimited numbers of images connected to Master Name File entries.
Images can be captured using digital cameras, video cameras and scanners.
Incident or accident related images can be stored as part of the PoliceServer
NT or FireServer NT databases and are related to incident reports, arrests or
other investigations. Images can include photo images or document images.
Images can also be associated with property and evidence and with department
personnel files. The system has been designed for compatibility with new
Federal standards (NCIC 2000), and will be evolved to maintain such
compatibility as NCIC 2000 specifications evolve.
Mobile: Mobile data terminals (MDT's) are fully integrated companion
products to the Company's other products. Based on the private branding
agreement with Cerulean Technologies, the Company is able to offer a mobile
data product that has many of the "Best in Class" mobile data capabilities.
The MDT is a laptop PC mounted in a patrol car or carried as a briefcase,
together with wireless communications equipment. The product allows
communications from car to dispatch, car to car, as well as access into the
files in the PoliceServer NT or FireServer NT databases and many government
information systems. In addition all messages are fully encrypted and many
officer safety and alarm features are standard in the product. This system
increases officer efficiencies and minimizes the need for the officer to
return to the station. This system has also served to increase the police
presence on the street, due to the fact that an officer, in the cruiser, has a
link to the state CJIS information system and full access to all of the
information in the entire PoliceServer system.
Mapping System: The Mapping module allows the dispatcher to view maps
of street addresses, incident locations and building floor plans. It also can
be used to create pin maps showing the location and concentration of crimes
and other events, such as traffic accidents. The Mapping system can also
assist in the early identification of crime patterns.
Advanced Reporting: The Advanced Reporting module allows analysts to
run a fully integrated report writer, Crystal Reports from Seagate Software,
against the PoliceServer NT or FireServer NT databases. This can be used to
create standard reports or run ad hoc queries using the tremendous volume of
operational data captured during the day-to-day operations of a department.
Product Pricing: Complete systems including software, training, one
year's hardware maintenance (provided by the hardware vendor when hardware is
provided), and six months of software support and update service, including a
warranty against defects in the software, have sold for between $28,000 and
$300,000, with most sales falling within the $50,000 - $100,000 range.
Pricing of the FireServer NT base product is priced at about one half that of
the PoliceServer NT package for an entry level system. The majority of
FireServer NT or the VMS FireServer systems in operation utilize the same
computer as the PoliceServer NT or VMS PoliceServer systems in that
municipality.
In addition to revenues generated by sales of the PoliceServer NT,
FireServer NT, CADServer NT, JailServer, Imaging, Mapping, Advanced Reporting,
Mobile and software support fees, the Company generates operating revenues
from the sale of services such as system performance evaluation and tuning, as
well as consulting on system design. Additional revenues come from sales of
miscellaneous supplies, accessories and training.
Marketing
The Company's marketing strategy is designed to attract potential
customers from the existing base of law enforcement agencies, fire agencies,
and correctional facilities. The Company utilizes live demonstrations of its
products, conducted in a way that emphasizes the operational features of the
products rather than the underlying technology. Seminars are held at various
facilities selected to allow potential customer representatives to see the
products in a relaxed, neutral environment. The 1994 Crime Bill also provided
another marketing avenue as the Company conducted seminars to assist public
safety agencies obtain grants as described below.
The Company generally concentrates its marketing efforts on the police
departments using the integrated PoliceServer NT, CADServer NT, Imaging,
Mapping, Advanced Reporting and Mobile systems, with approach to the fire
department following success with the municipality's police department. In
locations where the police and fire departments are incorporated in a single
Department of Public Safety, the Company's strategy is to sell the entire
suite of products. The expanded use of E911 will add greater focus to the
latter strategy. In county sheriff departments, JailServer is offered to
round out a comprehensive information system.
The Company customizes its software by state, so that each state's
prescribed reporting forms can be printed in accordance with such state's
requirements. In addition, the Company's software allows users to customize
their reporting forms to their particular specifications.
With the encouragement of the Company, active, independent user
groups, consisting of the police departments using PoliceServer and
PoliceServer NT and fire departments using FireServer and FireServer NT, have
developed. Any department participating in the Company's annual support and
update service may attend its group's monthly meetings. Currently there are
three police groups, one in each region, and one fire group, which is in the
Northeast. Since each department uses identical software, the users are able
to effectively discuss the application and development of the system, to
support each other in identifying training techniques and new applications,
and to discuss concerns encountered in using the system. The groups have also
served as a source of referrals of potential customers and as a source of
satisfied customers willing to recommend the Company's products to prospective
customers. The Company relies on the groups to determine the direction and
development of updates or enhancements to be made to the software.
The Company's strategy is to continue to expand its current
distribution approach by focusing in those states where the Company has
established reference sites within the region. The strategy is structured so
as to permit the techniques and strategies developed in the New England area
to be extended to those states covered by dedicated sales teams. The Company
has recently added a Vice President of Marketing and a Vice President of Sales
who together will lead these efforts.
The Company believes that the initial sale of its products in a state
is critical to its marketing efforts and that subsequent sales within the same
state will be easier due to the already-achieved acceptance of its products
and the ability to use the first installation as a reference and for
demonstrations. As of March 2000, the Company has customers in Massachusetts,
Connecticut, Rhode Island, Ohio, Florida, Georgia, Indiana, New Hampshire,
Tennessee, and Kentucky.
The Company markets its products in the New England area as well as in
two additional regions of the country. The Company established an office in
Maitland, Florida to support sales activities in the Southeastern states.
Marketing for the Midwest part of the country is now being coordinated through
the Company's headquarters in Massachusetts.
Competition
The public safety software business is highly competitive. There are a
large number of small local and regional vendors across the country who offer
competing products on personal computers to agencies in the Company's target
markets. There are also some medium sized companies that have a national
marketing presence. The Company's management believes, that although it will
not be the only supplier, it will be one of a small group of vendors providing
an internally developed integrated NT based suite of public safety products.
The Company expects to encounter future competition from established
companies that are developing new products and from new companies that may
develop comparable products.
The principal competitive factors that exist in the public safety
software business are price, ease of use, reputation relative to support and
design sophistication. Management believes the competitive advantages of the
Company's products include sophisticated capabilities and relative ease of use
within a fully integrated software suite, a complete native NT designed set of
products, and its consistent high level of customer satisfaction.
Principal Suppliers
The Company also purchases Personal computers, networking equipment
and peripherals and operating system software and databases from a number of
manufacturers and suppliers. The Company acquires it mobile data software from
Cerulean Technologies, Inc. Cerulean Technologies sells the products to the
Company at a discount and the Company resells them at the Cerulean list price.
Products similar to the Cerulean product are available from a number of other
suppliers.
Customers
The Company's target market consists of police and fire departments
serving populations under 250,000, campus police departments and other
non-municipal public safety agencies such as transit authority police, state
police and county sheriff departments. The Company estimates that this target
market nationally is comprised of approximately 15,000 police departments and
5,000 fire departments. Currently, however, the Company is marketing its
products to police and fire departments only in New England, the Midwest and
the Southeast, and the largest portion of its sales to date have been in New
England, particularly Massachusetts. The Company has installed six systems in
the lower Midwest Region, which is composed of the states of Ohio, Indiana,
and Kentucky and has installed nineteen systems in the Southeast Region,
which is composed of Georgia, Tennessee, and Florida.
In any given fiscal period, sales to any one purchaser of the
Company's products may account for 10% or more of the Company's revenues for
that fiscal period. Because such sales usually involve a one-time purchase
for the customer, the existence of such purchase is not indicative of future
sales or the Company's dependence on any one customer. During 1999 the sales
to one customer, the Stratford Police Department accounted for 12.3 % of
annual sales.
Licensing and Support
The purchase price for the software system includes a perpetual
license to use the software. The Company typically enters into a software
license agreement with its customers.
Support and update service for the original VMS products is priced at
14% of the cost of the software package per year after the initial six-month
warranty period. The support and update service for the NT products is priced
at 19% of list price at time of purchase after a six-month warranty period.
Current VMS customers who convert to the NT product will receive the NT
software at no charge but will be charged 19% of the current list price of the
NT product for support commencing on the date of conversion. The migration of
customers from the existing product to the NT product is being done at no
software cost to the customer to protect the customer's investment in Pamet
Systems. Pamet Systems will offer them an optional migration service which
includes data conversion and training that will range from $7,500 to as high
as $50,000. The payment of the annual support and update service fee
automatically extends the Company's warranty against software defects for an
additional year and entitles the licensee to receive all software upgrades and
enhancements and to participate in the appropriate user group. In addition to
providing licensees with updates and enhancements, the Company's annual fee
also includes telephone support for all applications. Currently all customers
subscribe to this service, primarily to receive software updates and
enhancements which average a minimum of one update per year. Maintenance
charges on the hardware are not included in the Company's annual fee and are
currently billed and collected directly by hardware maintenance suppliers.
The Company generally relies upon contract, trade secret and copyright
laws to protect its products. The license agreement under which a customer
uses the Company's products restricts the customer's use to its own operations
and prohibits disclosure to third persons. Notwithstanding these restrictions,
it may be possible for other persons to obtain copies of the Company's
products. The Company believes that such copying would have limited utility
without access to the product's source code, which the Company keeps highly
confidential. The Company's products are encoded to run only on designated
types and sizes of computers. The Company incorporates certain technological
defenses into its products. The Company believes that because of the rapid
pace of technological change in the computer industry, copyright and patent
protection is of less significance than factors such as the knowledge and
experience of the Company's personnel and their ability to develop, enhance,
market and acquire new products.
The Company also requires all of its employees to execute agreements
requiring them to maintain the confidentiality of the Company's proprietary
information.
Research and Development
The Company made significant research and development expenditures in
1999 in several areas including personnel costs totaling over $1,800,000. The
majority of the 1999 expenditure, as well as a significant portion of 1997 and
1998 research and development spending of over $1,251,000, was on the NT
product development of PoliceServer NT, CADServer NT and FireServer NT. Other
expenditures included the purchase of Mapping software and development of the
Investigator's Toolkit and some further enhancements of the Cerulean interface.
The Company used a combination of outside resources and internal staff to
design, develop and test these projects minimizing the long-term financial
commitments of the Company. NT product development will continue into the
first half of 2000 until all functionality of the PoliceServer and FireServer
have been completed on the NT platform.
Employees
As of December 31, 1999, the Company had 18 full-time employees and 4
part-time employees, of whom 5 were engaged in computer programming, 9 were
engaged in documentation, training and software support and 8 were engaged in
sales, marketing and administration. The Company has been using consultants
to complete a portion of its NT development to minimize the long-term impact
on the Company's operations. The Company considers its employee relations to
be satisfactory.
Item 2. Properties
The Company's operations are located in Acton, Massachusetts, where
the Company owned a 12,000 square foot office building. This facility
contains office, training, conference, development, and shipping space. The
acquisition and renovation of the building had been financed from the
Company's working capital. In April 1992 the Company mortgaged the facility
through a local lending institution with a $560,000 mortgage on the improved
facility. The Company believes that the building is adequate to house the
training, development and other headquarters needs for the foreseeable future.
In August of 1999 the company sold the building and entered into a seven year
lease with the buyer. The final sales price was $1,150,000.
Item 3. Legal Proceedings
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
PART II
Item 5. Market for the Company's Common Equity and Related
Stockholder Matters.
Shares of the Company's Common Stock are available for trading on the
Nasdaq Stock Market over-the-counter exchange. The Common Stock is quoted
under the symbol PAMT.
The following table sets forth the high and low bid prices of the Common Stock
as quoted on the OTC Bulletin Board.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31 COMMON STOCK
High Low
<S> <C> <C>
1998
First Quarter $4.75 $3.62
Second Quarter 4.20 2.75
Third Quarter 3.62 2.25
Fourth Quarter 2.50 1.37
1999
First Quarter $2.56 $1.50
Second Quarter 2.16 1.37
Third Quarter 4.25 2.06
Fourth Quarter 3.88 2.12
</TABLE>
The Company had 83 registered shareholders of Common Stock on April
6, 2000. The Company has not paid any dividends to date. For the foreseeable
future, it is anticipated that earnings, if any, will be used to finance the
growth of the Company and that cash dividends will not be paid to stockholders.
Sales of Securities
On November 19, 1999, the Company sold 50,000 shares of Pamet Systems Common
Stock at a price of $2.00 per share and warrants to purchase 50,000 shares of
Common Stock at the exercise price of $2.50 for a total of $100,000 to one
entity, which is an accredited investor as defined in Rule 501(a) under the
Securities Act of 1933, as amended (the "Act"). The issuance was exempt from
registration requirements of the Act pursuant to Section 4(2) thereof.
On November 30, 1999, the Company sold 175,000 shares of Pamet Systems Common
Stock at a price of $2.00 per share and warrants to purchase 175,000 shares of
Common Stock at the exercise price of $2.50 for a total of $350,000 to one
entity, which is an accredited investor as defined in Rule 501(a) under the
Securities Act of 1933, as amended (the "Act"). The issuance was exempt from
registration requirements of the Act pursuant to Section 4(2) thereof.
On December 14, 1999, the Company sold 100,000 shares of Pamet Systems Common
Stock at a price of $2.00 per share and warrants to purchase 100,000 shares of
Common Stock at the exercise price of $2.50 for a total of $200,000 to one
entity, which is an accredited investor as defined in Rule 501(a) under the
Securities Act of 1933, as amended (the "Act"). The issuance was exempt from
registration requirements of the Act pursuant to Section 4(2) thereof.
On December 23, 1999, 40,000 shares of Pamet Systems Common Stock were issued
to an investor who exercised his warrants in connection with a warrant
solicitation program whereby the Company offered the warrant holder a 20%
discount to exercise the warrants associated with an earlier securities
purchase agreement. The issuance was exempt from registration requirements of
the Act pursuant to Section 4(2) thereof.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Pamet Systems, Inc. (the "Company" or "Pamet Systems"), founded in 1987,
designs and implements broad-based information technology solutions for public
safety agencies enabling them to realize cost efficiencies and provide better
service. The Company's suite of products is composed of three major
components: PoliceServer NT, FireServer NT, and CADServer NT. The Company
also offers several companion products including Imaging, Mobile, Advanced
Reporting, JailServer NT and Mapping. An additional product, the
"Investigator's Tool Kit" is being brought to market in early 2000. The
Company's revenues consist primarily of sales of these software applications,
the associated hardware and systems integration, and support and update service
fees.
The Company's revenues for the 12 month period ended December 31, 1999 (the
1999 period) decreased 11.8% to $2,413,534 from $2,736,986 for the 12 month
period ending December 31, 1998 (the 1998 period). With the release of the
Company's redesigned NT product line in the second half of the 1999 period, the
revenues began to shift back to sales of the core products: PoliceServer NT,
CADServer NT, and FireServer NT. These core products have been completely
rebuilt using modern design tools and databases and the entire suite utilizes
the Windows NT operating system. During the previous two years, revenue from
sales to new customers of the core VMS-based PoliceServer and FireServer
products had been decreasing as potential customers waited for or selected
systems that operated on the NT operating system. The decreased system
revenue levels during this period were partially replaced by increased sales
to existing customers of companion products such as Mobile and Imaging. The
shift back to the core products operating in the NT environment that occurred
during the latter half of the 1999 period supports the decisions that were
made in 1997 to redesign and rebuild the product.
The Company began rebuilding its products on the NT platform late in 1997 at
considerable expense. The Company spent over $1.8M during the 1999 period and
over $3.5M during the past three years on research and development. This
spending in the 1999 period includes $1.2M on outside resources and $.6M of
dedicated internal personnel. Although 89.9% of this spending in the 1999
period was on the development of the NT-based suite of products, the Company
also purchased the software product rights for the Mapping product during the
last quarter of the 1999 period. The acquisition of this product enhances the
suite of products now available from the Company. The Mapping product had
previously been integrated with PoliceServer and FireServer and had been
successfully installed in a number of customer sites.
The Company continues to believe that significant market opportunities exist
for its suite of NT-based products based on the following factors. Major
federal grant programs continue to be announced that will infuse up to $1.0B
over the next four years into the public safety market. In addition, the
continuing growth in the number of E911 centers, heightened emphasis on crime
in most communities and the awareness by municipalities that computer systems
can improve the efficiency and effectiveness of their public safety resources
support the belief that the market for the Company's products will continue to
grow. The Company has also seen increased emphasis on the coordination of
public safety systems between neighboring town, county, and state police
organizations. The Company's products are designed and marketed with the
option to be used in this type of regional application. Despite what the
Company believes are these growth opportunities, the Company remains hampered
by the fact that its primary market is the government sector, which is
characterized by long lead times and political influence in the decision
making process. As a consequence, the Company is pursuing an analysis of
complementary markets and adaptations for its products.
The primary challenge that the Company is focusing on during the year 2000
fiscal period is to capitalize on the design efforts that have resulted in a
complete suite of NT-based products. To accomplish this, the Company is
focusing its efforts on the sales and marketing of its new products. To
support these efforts, the Company added a Vice President of Sales during the
second quarter of 1999 and a Vice President of Marketing at the start of 2000.
Results of Operations
Year Ended December 31, 1999 vs. Year Ended December 31, 1998.
The Company's net sales decreased 11.8% or $323,452 to $2,413,534 for the 1999
period from $2,736,986 in the 1998 period. Although total revenues decreased
during the 1999 period, the contribution to total Company revenues from the
sale of the core products increased for the first time in the past two years.
The production release of the NT based product early in the second half of the
1999 period resulted in significant revenues for the Company during the third
and fourth quarters of the 1999. The new products have been installed during
the 1999 period in five communities representing eight different agencies in
three states, compared to two installations of the Beta version of the product
in the 1998 period. These new installations in Tennessee, Connecticut and
Massachusetts with PoliceServer NT and CADServer NT as the core system in
conjunction with additional revenues from the Beta installations resulted in
revenues of $751,897 for the 1999 period that were associated with the
Company's NT products compared to $92,275 for the 1998 period.
Revenues for the Mobile product decreased $310,335 or 25.3% to $917,833 for
the 1999 period from $1,228,168 for the 1998 period. Revenues from the
Imaging product decreased 53.9% or $116,313 to $99,483 for the 1999 period
from $215,796 for the 1998 period. The decrease in the Mobile and Imaging
product sales can be attributed to existing customers refocusing their
budgeted capital spending on upgrading their core systems to the Company's new
suite of NT applications.
The Company has continued to see increased revenues from support and update
service fees resulting from increases in the installed base and renewal rates
of almost 100%. Support revenues increased $149,227 or 26.4% to $713,496 for
the 1999 period from $564,269 for the 1998 period. These service revenues
represented 29.6 % of the Company's total revenues in the 1999 period versus
20.6% in the 1998 period. The contribution of support will increase in the
future periods as new customers, as well as those existing customers that
migrate to the NT product, will be charged higher support fees. Migrating
customers, who had previously paid 14% of the original software purchase
price, will begin paying 19% of the current list price for the new products at
the time of conversion.
Cost of sales decreased $377,314 or 32.6% to $779,309 for the 1999 period from
$1,156,623 for the 1998 period reflecting reduced sales and the improved
margins on many of the Company's products. The Company experienced an
improvement in gross margin from 57.7% in the 1998 period to 67.7% in the 1999
period. Substantial increases in margin were attained in several product
categories including new systems and Mobile. The gains in the new systems
margin can be attributed to the trend of customers to provide their own system
hardware, which is less profitable than the software component of sales. The
Mobile margins increased as a result of implementing more favorable pricing
strategies and increased teaming with state bid list contractors who provided
the hardware to the customer.
Software support and update service revenues delivered traditionally high
margins although they decreased from 91.8% in the 1998 period to 86.2% in the
1999 period. This decrease can be attributed to the increase in Mobile
installations where support is purchased from Cerulean Technology, Inc. rather
than being performed by Pamet employees.
The Company's operating expenses increased $979,587 or 30.4% to $4,202,877 for
the 1999 period from $3,223,290 for the 1998 period. The Company's commitment
to bringing the NT product successfully to market in 1999 generated
significant increases in personnel costs and research and development
spending. Of the increases, $601,799 or 61.4% of the increase is associated
with research and development spending which can be attributed almost
exclusively to NT product development. In addition, over $659,000 of
personnel costs are directly related to internal resources devoted to the NT
product development and contractors hired exclusively for the development
effort. Also, $195,665 of development cost on the NT-based PoliceServer
product was capitalized during the 1998 period as this part of the NT project
reached technical feasibility. No development costs were capitalized during
the 1999 period. The Company continued to use outside resources and employees
hired on short-term contracts in the design, development, and testing of these
projects creating minimal impact on the long-term financial commitments of the
Company for research and development. NT product development will continue
throughout 2000 until all modules and functionality of PoliceServer and
FireServer including Computer-Aided Dispatch (CAD) have been ported to the NT
platform, consistent with market demands. During the 1998 and 1999 periods,
virtually all requests for proposals (RFP's) received by Pamet Systems
required either a functioning NT system or a transition plan to the NT
platform.
Personnel costs increased 29.4% or $457,908 to $2,018,065 for the 1999 period
from $1,560,157 for the 1998 period. The major reasons for the increase in
personnel spending were the hiring of a Vice President of Sales, Senior
Database Engineer, and a Product Development Engineer for the new
"Investigator's Toolkit"; full year salaries in 1999 for the Customer Support
Manager and Northeast salesperson; and the addition of resources on a
short-term basis to support the NT development. Related personnel costs
including employer FICA and Medicare costs, health insurance, employment
agency fees, and commissions also increased significantly as a result of the
new hires. The increased headcount supported the product development effort
in 1999 and positions the company to move to a sales and marketing focus in
2000. These strategic additions in head count will also expand the Company's
infrastructure to handle the anticipated increase in the level of business in
the future. The Company also instituted an employee incentive program late in
1997 that is awarded based on the achievement of Company goals set by the
Board of Directors. The amount of these incentive awards has increased
significantly over the past two years.
Rent, utilities and telephone increased 3.5% or $4,930 to $144,971 for the
1999 period from $140,041 for the 1998 period. Increased rent expense
resulting from the sale and leaseback of the Company headquarters building in
August 1999 was offset by reducing the size of the Southeast regional office
in Maitland, FL as resources in the Southeast region were reduced through
attrition. In addition, telephone costs decreased significantly based on the
reduction in lines in the Southeast regional office and reduced long distance
telephone rates.
Travel and entertainment expenses decreased $8,811 or 5.6% to $148,992 for the
1999 period from $157,803 for the 1998 period due to more favorable airline
fares on frequently traveled routes to the Southeast, reduced attendance at
trade shows prior to the production release of the NT products, and a lack of
grant seminars in the 1999 period. Partially offsetting these decreases in
travel expenses were increased rental car and employee mileage costs resulting
from expanding Northeast sales initiatives outside Massachusetts and the
installation of two NT based systems in Connecticut.
Spending on professional fees decreased $135,693 or 45.4% to $162,986 for the
1999 period from $298,679 for the 1998 period. Consulting fees contributed
$123,368 or 90.9% of the decrease being reduced from $135,970 in the 1998
period to $12,602 in the 1999 period. The most significant decreases in
consulting expenditures can be attributed to completion of several projects
including the update of VMS product documentation, the use of a consultant
hired to advise the Company on its capital raising initiatives, and the
installation of an upgraded financial package. The 1998 documentation effort
supported ongoing product quality and customer satisfaction projects relating
to the VMS product. These projects were undertaken to ensure that the VMS
product was at a steady state as the focus of the Company's resources moved to
the NT product and to ease the transition from the VMS product to the NT
product for current customers. Currently the Company has an extensive list of
users desiring to migrate to the NT-based product as soon as possible. Legal
fees decreased 20.0% or $24,494 to $97,812 for the 1999 period from $122,306
for the 1998 as a result of a decrease in legal services required in support
of the Company's debt and equity fundraising activities. Accounting fees
increased $12,169 or 30.0% due to increased audit and accounting fees.
Depreciation expense increased 60.4% or $54,597 to $144,969 for the 1999
period from $90,372 for the 1998 period reflecting the first full year of
amortization on the capitalized PoliceServer NT development expenditures.
This increase was partially offset by the decrease in depreciation resulting
from the sale of the headquarters building in August 1999.
Other operating expenses increased 1.3% or $4,857 to $372,127 for the 1999
period from $367,270 for the 1998 period. Significant decreases in spending
on trade shows, COPSMore grant seminars and office supplies and equipment were
offset by increases in internet access costs, an increased reserve for
uncollectible accounts, officer and directors insurance, and tax penalties.
Net interest expense increased to $267,818 for the 1999 period compared to the
net interest expense of $164,155 for the 1998 period. This increase reflects
accrued interest costs on the convertible promissory notes issued to outside
investors as part of the Company's capital raising program. It should be
noted that this interest would not be payable if the investors decide to
convert their notes to equity. Subsequent to year-end 1999, the Company had
commitments from investors to convert $800,000 of the outstanding notes. This
$800,000 represents nearly 50% of the outstanding debt.
The loss for the 1999 period was $(2,836,470) or $(1.00) per share compared to
a loss of $(1,807,082) or $(.71) per share for the 1998 period.
Liquidity and Capital Resources
The Company's working capital was a deficit of $(1,501,900) at December 31,
1999 compared to $(1,360,973) at December 31, 1998 due to the current level of
research and development spending. During the 1999 period the corporate
headquarters building in Acton Massachusetts was sold and a seven-year triple
net lease agreement was signed by the Company for the continued use of the
facility.
The capital raising program initiated during the 1998 period continued during
the 1999 period. During the 1998 period, the Company secured $450,000 of
financing in the form of long-term convertible debt, converted $600,000 in
lines of credit from Directors to long-term convertible debt, and negotiated a
$250,000 vendor line of credit that has supported the CADServer NT development
program. During the 1999 period, the Company secured an additional $835,000
of new long-term convertible debt and converted $600,000 of long-term
convertible debt secured in 1998 to equity. In addition, the Company
renegotiated the $250,000 vendor line of credit rolling it into a $350,000
long-term convertible note. In general, the outstanding convertible debt
secured in the 1998 and 1999 periods accrues interest at 11%, has a two-year
term, carries the option of conversion of the principal to common stock by the
debt holder or repayment of principal and accrued interest by the Company, and
has 100% warrant coverage attached that allows for purchase of additional
shares of common stock at the conversion price which ranges from $1.45 to
$2.50. For detailed information on these convertible promissory notes refer
to Note H of the financial statements. In addition to the debt financing
received in the 1999 period, the Company secured an additional $650,000 in
equity financing in the 1999 period and an investor purchased the warrants
related to his long-term convertible note generating an additional $80,000.
The company also has a line of credit with four Directors for up to $300,000
in additional short-term financing. At the end of the 1999 period, the
outstanding balance on the line of credit with Directors was $175,000.
Subsequent to year end, the Company received commitments from five noteholders
to convert $800,000 of long-term convertible notes to equity, another investor
purchased the warrants associated with his note generating another $90,000,
and two investors purchased a total of $350,000 of common stock
Cash decreased to $40,207 at December 31, 1999 from $54,817 at December 31,
1998. Accounts receivable increased to $672,997 at December 31, 1999 from
$537,405 at December 31, 1998 due to the increase in sales during the fourth
quarter of 1999 over the same period in 1998. While resources necessary to
fund the completion of the NT development program and provide working capital
for operations continue to be a focus of concern for the Company, the Company
believes that the additional funding which has been secured or committed
combined with sales of the Company's NT suite of products should ensure
continued operations through the end of the year. If additional funds are
required, the Board of Directors is willing to increase its investment or seek
additional financing. Failure to acquire the necessary financing could have a
material adverse effect on the Company. Backlog at March 24, 2000 was
approximately $710,000. The Company is continuing to consider projects to
increase its cash position such as activities to raise capital, mergers,
acquisitions or other business combinations.
As of December 31, 1999, the Company had accumulated approximately $9,086,000
of federal net operating loss carryforwards that expire beginning in the year
2005. In addition, the Company has state net operating losses to carryforward
of $5,887,000 which expire between the years 2000 and 2004. Under the
Internal Revenue Code of 1986, as amended, the rate at which a corporation may
utilize its net operating losses to offsets 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 Company'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.
Seasonality
The majority of the Company's installed base has a fiscal year that commences
on July 1 and, therefore, the Company bills its customers for their annual
software support and update service on July 1 of each year. Consequently,
cash flow representing software support revenues has tended to be higher in
the second half of the Company's fiscal year, although software support
revenues are recognized ratably throughout the fiscal year.
Revenue Recognition
Revenues from software license fees are recognized when a contract has been
executed, the product has been delivered, all significant contractual
obligations have been satisfied and collection of the related receivable is
probable. Maintenance revenues, including those bundled with the initial
license fee, are deferred and recognized ratably over the service period.
Consulting and training service revenues are recognized as the services are
performed.
Year 2000 Recap
The Company had no major problems reported from any of its customers at the
beginning of year 2000. Other than some minor list orientation issues, the
application functioned to specification and handled the transition from 1999
to the year 2000. Internally no problems were experienced with any of the
administrative systems that the Company depends on for its operations.
Inflation
Inflation has not had a significant impact on the Company's operations to
date.
<PAGE>
Item 7. Financial Statements and Supplementary Data.
PAMET SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Auditors ...................................... F-2
Financial Statements:
Balance Sheet - December 31, 1999 ........................... F-3
Statements of Operations -
Years Ended December 31, 1999 and 1998 .............. F-4
Statements of Stockholders' Equity (Deficit) -
Years Ended December 31, 1999 and 1998 ............. F-5
Statements of Cash Flows -
Years Ended December 31, 1999 and 1998 .............. F-6
Notes to Financial Statements ...................................... F-8
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have
been omitted.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Pamet Systems, Inc.
We have audited the accompanying balance sheet of Pamet Systems, Inc. as of
December 31, 1999, and the related statements of operations, stockholders'
equity (deficit) and cash flows for each of the two years in the period ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pamet Systems, Inc. as of
December 31, 1999, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1999, in conformity
with generally accepted accounting principles.
The Company has incurred significant losses from operations in each of the
last two years (See Note A).
CARLIN, CHARRON & ROSEN LLP
March 24, 2000
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET
PAMET SYSTEMS, INC.
December 31
1999
-----------
<S> <C>
ASSETS
CURRENT ASSETS
Cash $40,207
Accounts receivable, trade, net of allowance for
doubtful accounts of $110,000 and factored
receivables of $268,351 619,066
Accounts receivable, factored 53,931
Inventory, net of reserve of $15,000 11,745
Prepaid expenses and other current assets 94,243
------
TOTAL CURRENT ASSETS 819,192
PROPERTY AND EQUIPMENT, NET 110,590
DEPOSITS 84,190
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, NET 130,442
-------
TOTAL ASSETS $1,144,414
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current portion of long-term debt 450,000
Notes payable to related parties 175,000
Due to factor 57,496
Accounts payable, trade 688,292
Accounts payable, related parties 32,241
Current portion of accrued interest payable
on long-term debt 54,894
Current portion of deferred gain on sale of land
and building 42,614
Accrued expenses 436,625
Deferred software maintenance revenue and unearned
support revenue 383,930
-------
TOTAL CURRENT LIABILITIES 2,321,092
ACCRUED INTEREST PAYABLE on long-term debt, net of current
portion 86,511
DEFERRED GAIN on sale of land and building, net of current
portion 238,502
LONG-TERM DEBT, net of current portion 1,185,000
---------
TOTAL LIABILITIES 3,831,105
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued --
Common stock, $.01 par value, 7,500,000 shares
authorized, 3,285,238 shares issued and outstanding 32,852
Additional paid-in capital 6,688,504
Accumulated deficit (9,408,047)
---------
TOTAL STOCKHOLDERS' DEFICIT (2,686,691)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $1,144,414
=========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
PAMET SYSTEMS, INC.
Year Ended December 31,
1999 1998
--------- ---------
<S> <C> <C>
Net hardware and software sales $1,700,039 $2,172,716
Support revenues 713,495 564,270
--------- ---------
TOTAL REVENUES 2,413,534 2,736,986
Cost of sales 779,309 1,156,623
--------- ---------
GROSS PROFIT 1,634,225 1,580,363
--------- ---------
Operating expenses
Personnel costs 2,018,065 1,560,157
Rent, utilities and telephone 144,971 140,041
Travel and entertainment 148,992 157,803
Professional fees 162,986 298,679
Depreciation and amortization 144,969 90,372
Research and development 1,210,767 608,968
Other operating expenses 372,127 367,270
--------- ---------
TOTAL OPERATING EXPENSES 4,202,877 3,223,290
--------- ---------
Loss from operations (2,568,652) (1,642,927)
Interest expense, net (267,818) (164,155)
--------- ---------
NET LOSS $(2,836,470) $(1,807,082)
========= =========
Loss per common share $(1.00) $(.71)
==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
PAMET SYSTEMS, INC.
Common Stock Additional Total
------------ Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Equity(Deficit)
--------- ------ ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1998 2,410,250 $24,103 $4,776,821 $(4,764,495) $36,429
NET LOSS -- -- -- (1,807,082) (1,807,082)
CONVERSION OF
STOCK OPTIONS 10,250 102 103 -- 205
PRIVATE PLACE-
MENT OF STOCK 125,000 1,250 530,000 -- 531,250
------- ----- ------- ------- -------
BALANCE AT
DECEMBER 31,
1998 2,545,500 25,455 5,306,924 (6,571,577) (1,239,198)
NET LOSS (2,836,470) (2,836,470)
CONVERSION OF
STOCK OPTIONS 11,750 117 8,860 -- 8,977
CONVERSION OF
PROMISSORY
NOTES TO STOCK 315,988 3,160 596,840 -- 600,000
CONVERSION OF
WARRANTS TO STOCK 87,000 870 129,130 -- 130,000
PRIVATE PLACE-
MENT OF STOCK 325,000 3,250 646,750 -- 650,000
------- ----- ------- ------- -------
BALANCE AT
DECEMBER 31,
1999 3,285,238 $32,852 $6,688,504 $(9,408,047) $(2,686,691)
========= ====== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
PAMET SYSTEMS, INC.
Year Ended December 31,
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(2,836,470) $(1,807,082)
Adjustments to reconcile net loss to net
cash used for operating activities:
Deferred gain on sale of land and building (17,184) --
Depreciation and amortization 144,969 90,372
Interest payable -- 4,635
Provision for losses on accounts receivable,
trade 49,566 --
Long-term debt incurred for research and
development 75,000 --
Line of credit and accounts payable, trade-
vendor incurred for research and development
subsequently converted to long-term debt 180,066 169,934
Capitalized software development costs -- (195,665)
Changes in operating assets and liabilities:
Accounts receivable, trade (250,403) 243,031
Accounts receivable, factored 65,245 (119,176)
Inventory 38,509 39,557
Prepaid expenses and other current assets (12,822) (41,827)
Restricted cash 28,534 (674)
Deposits (80,000) (4,190)
Due to factor (8,484) 65,980
Accounts payable, trade (99,472) 160,537
Accounts payable, related parties 11,728 20,513
Accrued expenses 186,472 105,975
Accrued interest payable on long-term debt 126,291 15,114
Deferred software maintenance revenue and
unearned support revenue 84,459 (9,314)
------ -----
Net cash used for operating activities $(2,313,996) $(1,262,280)
--------- ---------
INVESTING ACTIVITIES
Expenditures for property
and equipment (33,914) (91,590)
Proceeds from sale of land and building 1,089,066 --
--------- ------
Net cash provided by/(used for) investing
activities 1,055,152 (91,590)
========= ======
</TABLE>
(continued)
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS - CONTINUED
PAMET SYSTEMS, INC.
Year Ended December 3l,
1999 1998
--------- --------
<S> <C> <C>
FINANCING ACTIVITIES
Proceeds from long-term debt-convertible
promissory notes 760,000 450,000
Proceeds from related party notes 250,000 707,561
Payment of related party notes (25,000) --
Payments on mortgage note (479,743) (16,216)
Issuance of capital stock 738,977 226,820
------- -------
Net cash provided by financing activities 1,244,234 1,368,165
--------- ---------
NET INCREASE (DECREASE) IN CASH (14,610) 14,295
Cash at beginning of period 54,817 40,522
------ ------
CASH AT END OF PERIOD $40,207 $54,817
====== ======
SUPPLEMENTAL DISCLOSURES OF CASH
FLOWS INFORMATION
Cash paid for interest $123,000 $127,000
======= =======
SUMMARY OF NON-CASH FINANCING ACTIVITIES
Note payable-related party converted to long-term
debt-convertible promissory note -- 600,000
====== =======
Research and development costs financed through line
of credit and accounts payable, trade-vendor 180,066 169,934
======= =======
Note payable-related party and accrued interest
repaid by issuance of capital stock 50,000 304,635
====== =======
Conversion of related party long-term debt-convertible
promissory notes to capital stock 600,000 --
======= =======
Line of credit and accounts payable, trade-vendor con-
verted to long-term debt-convertible promissory note 350,000 --
======= =======
Deferred gain as a result of the sale and leaseback
transaction 298,299 --
======= =======
Research and development costs financed by long-
term debt-convertible promissory note 75,000 --
====== =====
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
PAMET SYSTEMS, INC.
NOTE A--NATURE OF OPERATIONS
Pamet Systems, Inc. (the Company), a Massachusetts corporation, was formed in
November 1987 to engage in the business of designing, developing, installing
and servicing computer software systems for the municipal market throughout
the United States, principally in the area of public safety. Credit is granted
to certain customers, most of which are municipalities. The Company generally
does not require collateral.
The Company's backlog at March 24, 2000 was approximately $710,000
(unaudited). Management believes that this level of backlog and its
anticipated sales, as well as the funding described below, are adequate to
sustain operations through the end of fiscal year 2000.
However, the ultimate success of the Company is still dependent upon its
ability to secure financing adequate to meet its working capital and ongoing
product development needs. In addition, in order for the Company's operations
to be maintained and/or expanded, the Company will need to successfully finish
the development of its Microsoft Windows NT computing platform and effectively
market these newly developed software applications. Subsequent to year end,
the Company had a private placement in which one investor purchased 116,667
shares of the Company's common stock at a price of $3.00 per share. In
addition, a convertible promissory noteholder exercised 40,000 warrants at
$2.25 per share. Also, five convertible promissory noteholders have agreed to
convert $800,000 worth of promissory notes to an equity position. If
additional funds are required beyond the related party credit facility that is
available as discussed in Note C, the current Board members are willing to
increase their investment or seek additional equity financing, as needed.
Management believes the Company's current sources of liquidity and funding are
adequate to sustain operations. Management is also seeking to enhance the
Company's financial position by obtaining permanent additional financing.
There can be no assurance, however, that the Company's operations will be
sustained or be profitable in the future, that adequate sources of financing
will be available at all, when needed or on commercially acceptable terms, or
that the Company's product development and marketing efforts will be
successful.
NOTE B--SIGNIFICANT ACCOUNTING POLICIES
Property and equipment: Property and equipment are stated at cost and are
depreciated on the straight line or accelerated methods over their estimated
useful lives.
Inventory: Inventory consists primarily of computer-related supplies and is
stated at the lower of cost (first-in, first-out) or market value.
Reclassifications: Certain reclassifications have been made to the 1998
financial statements to conform with the 1999 financial statement
presentation. These reclassifications had no effect on net loss for 1998 as
previously reported.
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
PAMET SYSTEMS, INC.
NOTE B--SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounts receivable, factored: The Company factors part of its accounts
receivable with recourse, which means that the Company bears the risk of
uncollectible accounts over 120 days old. Accounts receivable, factored in the
accompanying balance sheet represents the portion of each account held back by
the factor. The balance will be remitted to the Company when the respective
accounts have been collected.
Due to factor: The balance represents the Company's estimated liability for
its factored accounts that will become greater than 120 days old or
uncollectible, based on historical collections.
Deferred software maintenance revenue and unearned support revenue: Deferred
software maintenance revenue and unearned support revenue represent revenue
relating to software support, updates and warranties which the Company has not
yet earned. Software maintenance fees are recognized ratably over the period
of the service contract. The portion of the maintenance fee associated with
the sale of a first time system or software that relates to the initial
maintenance period is also recognized ratably over the period of the extended
service.
Deferred gain on sale of land and building: The balance represents a deferred
gain on the sale of real estate, accounted for as a sale-leaseback
transaction. The gain is being amortized and shows as a reduction to rent
expense over the term of the lease on a straight-line basis.
Revenue recognition: The Company generally recognizes product revenue upon
shipment. Revenues for products with extensive installation requirements under
contractual agreements are recognized upon customer acceptance.
Loss per common share: In 1999 and 1998, loss per common share is computed
using the weighted average number of shares of common stock outstanding during
the period. Diluted per share computations are not presented since the effect
would be antidilutive.
Stock-based compensation: The Company measures compensation expense relative
to employee stock-based compensation plans using the intrinsic value-based
method of accounting as prescribed by Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees". However, the Company will
disclose the pro forma amounts of net income and earnings per share as though
the fair value-based method of accounting prescribed by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation", had
been applied. See the Stockholders' Equity Note for these disclosures.
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
PAMET SYSTEMS, INC.
NOTE B-SIGNIFICANT ACCOUNTING POLICIES (continued)
Capitalized software development costs: Pursuant to Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed," the Company capitalizes certain
software development costs once technological feasibility of the related
products, as defined in the statement, has been achieved. The establishment of
technological feasibility and the ongoing assessment of recoverability of
capitalized software development costs require considerable judgment by
management with respect to certain external factors, including but not limited
to, anticipated future gross revenues, estimated economic life and changes in
software and hardware technology. Software development costs incurred prior to
achieving technological feasibility as well as certain licensing and other
research and development costs are charged to research and development expense
as incurred.
Capitalized software development costs are reported at the lower of
unamortized cost or net realizable value. Net realizable value is determined
by periodically reviewing net capitalized software development costs for
impairment based upon current and anticipated product revenue and other
changes in circumstances that indicate the carrying amount of the capitalized
software development costs may not be fully recoverable. Commencing with the
initial product release, these costs are amortized on the straight-line method
over the estimated life of the product, generally three to five years. The
Company began amortizing software costs on product that was available for sale
in the first quarter of 1999. Accumulated amortization of capitalized software
costs at December 31, 1999 was $65,223.
Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income taxes: The Company accounts for income taxes according to the
liability method. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and income tax
bases of assets and liabilities and are measured using enacted tax rates and
tax laws that will be in effect when the differences are expected to reverse.
The primary component of the Company's deferred tax asset as of December 31,
1999, which is fully reserved, is net operating loss carryforwards.
NOTE C--RELATED-PARTY TRANSACTIONS
Compensation: The Company expensed approximately $24,000 in 1999 and $22,000
in 1998 relating to a stockholder and director for financial accounting
consulting services. In addition, the Company expensed approximately $360,000
in 1999 and $396,00 in 1998 relating to a Company, in which an employee is a
principal, for research and development expenses.
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
PAMET SYSTEMS, INC.
NOTE C-RELATED-PARTY TRANSACTIONS (continued)
Notes payable to related parties represent promissory notes payable to two
directors. The promissory notes provide a credit facility up to $425,000 to
the Company from two officers and two directors. Interest is applied at 11%
per annum. Warrants are awarded to the lenders if the notes are utilized for
the balance of the note outstanding, for each six month period, at a rate of
1,000 warrants per $10,000 utilized, at the fair market value of the Company's
shares on that date. The promissory notes maturity date is June 1, 200l.
Accounts payable, related parties represent non-interest bearing amounts owed
to employees and directors for services performed or expense reimbursements.
In addition, during 1999 two stockholders and directors of the Company
converted $600,000 of promissory notes to common stock.
NOTE D--PROPERTY AND EQUIPMENT AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Property and equipment at December 31, 1999 is as follows:
Balance at Balance at
Beginning Additions End of
Classification of Period at Cost Retirements Period
- -------------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Land $231,283 $ -- $(231,283) $ --
Building 758,728 -- (758,728) --
Furniture and Fixtures 133,327 -- -- 133,327
Computer Equipment 451,625 33,914 (3,012) 482,527
Automobiles 24,894 -- -- 24,894
------- ------ ------- -------
TOTALS $1,599,857 $33,914 $(993,023) $640,748
========= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Accumulated depreciation at December 31, 1999 is as follows:
Balance at Additions Balance at
Beginning Charged End of
Classification of Period to Expense Retirements Period
- -------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Building $184,194 $15,051 $(199,245) $ --
Furniture and Fixtures 123,162 4,228 -- 127,390
Computer Equipment 328,493 57,736 (3,012) 383,217
Automobiles 16,820 2,731 -- 19,551
------- ------ ------- -------
TOTALS $652,669 $79,746 $(202,257) $530,158
======= ====== ======= =======
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
PAMET SYSTEMS, INC.
NOTE E--ACCRUED EXPENSES
</TABLE>
<TABLE>
<CAPTION>
Accrued expenses consist of the following at December 31, 1999:
<S> <C>
Accrued payroll and vacation $300,174
Accrued and withheld payroll taxes 68,685
Other 67,766
-------
$436,625
=======
</TABLE>
<TABLE>
<CAPTION>
NOTE F--LONG-TERM DEBT
Long-term debt represents convertible promissory notes with
five year detachable warrants. The promissory notes may be
converted to common stock no more frequently than four
times per year at an amount of not less than $25,000. No
interest shall be deemed to have accrued or be payable on
any portion of a note converted prior to maturity. The
conversion price, maturity dates and the warrants available
on each note are as follows:
<S> <C>
Convertible promissory note with five year detachable
warrants, which allow the noteholder to purchase up to
20,000 shares of common stock at $2.50 per share. No
warrants have been exercised at December 31, 1999. The
principal amount of the note may be converted to common
stock at $2.50 per share, at the noteholder's option as
described above. No principal has been converted to common
stock at December 31, 1999. The interest rate on the note is
11% per year and interest expense in fiscal year 1999 was
$5,500. Total interest accrued on the note at December 31,
1999 was $5,771. Both the principal balance of the note and
unpaid accrued interest are due on December 13, 2000. See
the subsequent event footnote. 50,000
Convertible promissory note with five year detachable
warrants, which allow the noteholder to purchase up to
172,413 shares of common stock at $1.45 per share. No
warrants have been exercised at December 31, 1999. The
principal amount of the note may be converted to common
stock at $1.45 per share, at the noteholder's option as
described above. No principal has been converted to common
stock at December 31, 1999. The interest rate on the note is
11% per year and interest expense in fiscal year 1999 was
$27,500. Total interest accrued on the note at December 31,
1999 was $31,192. Both the principal balance of the note
and unpaid accrued interest are due on November 12, 2000.
See the subsequent event footnote. 250,000
</TABLE>
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
NOTE F-LONG-TERM DEBT (continued)
<S> <C>
Convertible promissory note with five year detachable
warrants, which allow the noteholder to purchase up to
40,000 shares of common stock at $2.50 per share. During
1999 the noteholder exercised all 40,000 warrants at a
discounted price of $2.00 per share. The principal amount of
the note may be converted to common stock at $2.50 per
share, at the noteholder's option as described above. No
principal has been converted to common stock at December 31,
1999. The interest rate on the note is 11% per year and
interest expense in fiscal year 1999 was $11,000, Total
interest accrued on the note at December 31, 1999 was
$11,663. Both the principal balance of the note and unpaid
accrued interest are due on December 9, 2000. See the
subsequent event footnote. 100,000
Convertible promissory note with five year detachable
warrants, which allow the noteholder to purchase up to
20,000 shares of common stock at $2.50 per share. No
warrants have been exercised at December 31, 1999. The
principal amount of the note may be converted to common
stock at $2.50 per share, at the noteholder's option as
described above. No principal has been converted to common
stock at December 31, 1999. The interest rate on the note is
11% per year and interest expense in fiscal year 1999 was
$5,500. Total interest accrued on the note at December 31,
1999 was $5,862. Both the principal balance of the note and
unpaid accrued interest are due on December 7, 2000. See the
subsequent event footnote. 50,000
Convertible promissory note with five year detachable
warrants, which allow the noteholder to purchase up to
40,000 shares of common stock at $2.50 per share. No
warrants have been exercised at December 31, 1999. The
principal amount of the note may be converted to common
stock at $2.50 per share, at the noteholder's option as
described above. No principal has been converted to common
stock at December 31, 1999. The interest rate on the note is
11% per year and interest expense in fiscal year 1999 was
$10,367. Total interest accrued on the note at December 31,
1999 was $10,367. Both the principal balance of the note and
unpaid accrued interest are due on January 21, 2001. See the
subsequent event footnote. 100,000
Convertible promissory note with five year detachable
warrants, which allow the noteholder to purchase up to
100,000 shares of common stock at $2.50 per share. No
warrants have been exercised at December 31, 1999. The
principal amount of the note may be converted to common
stock at $2.50 per share, at the noteholder's option as
described above. No principal has been converted to common
stock at December 31, 1999. The interest rate on the note is
11% per year and interest expense in fiscal year 1999 was
$24,863. Total interest accrued on the note at December 31,
1999 was $24,863. Both the principal balance of the note and
unpaid accrued interest are due on February 7, 2001. See the
subsequent event footnote. 250,000
</TABLE>
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
NOTE F-LONG-TERM DEBT (continued)
<S> <C>
Convertible promissory note with five year detachable
warrants, which allow the noteholder to purchase up to
14,000 shares of common stock at $2.50 per share. No
warrants have been exercised at December 31, 1999. The
principal amount of the note may be converted to common
stock at $2.50 per share, at the noteholder's option as
described above. No principal has been converted to common
stock at December 31, 1999. The interest rate on the note is
11% per year and interest expense in fiscal year 1999 was
$2,489. Total interest accrued on the note at December 31,
1999 was $2,489. Both the principal balance of the note and
unpaid accrued interest are due on May 9, 2001. 35,000
Convertible promissory note with five year detachable
warrants, which allow the noteholder to purchase up to
175,000 shares of common stock at $2.50 per share. No
warrants have been exercised at December 31, 1999. The
principal amount of the note may be converted to common
stock at $2.50 per share, at the noteholder's option as
described above. No principal has been converted to common
stock at December 31, 1999. The interest rate on the note is
11% per year and interest expense in fiscal year 1999 was
$26,219. Total interest accrued on the note at December 31,
1999 was $26,219. Both the principal balance of the note and
unpaid accrued interest are due on May 13, 2001. 375,000
Convertible promissory note to a vendor with five year
detachable warrants, which allow the noteholder to purchase
up to 140,000 shares of common stock at $2.50 per share. No
warrants have been exercised at December 31, 1999. The
principal amount of the note may be converted to common
stock at $2.50 per share, at the noteholder's option as
described above. No principal has been converted to common
stock at December 31, 1999. The interest rate on the note is
11% per year and interest expense in fiscal year 1999 was
$22,573. Total interest accrued on the note at December 31,
1999 was $22,573. Both the principal balance of the note and
unpaid accrued interest are due on May 31, 2001. 350,000
Convertible promissory note to a vendor with five year
detachable warrants, which allow the noteholder to purchase
up to 7,500 shares of common stock at $2.19 per share. No
warrants have been exercised at December 31, 1999. The
principal amount of the note may be converted to common
stock at $2.19 per share, at the noteholder's option as
described above. No principal has been converted to common
stock at December 31, 1999. The interest rate on the note is
11% per year and interest expense in fiscal year 1999 was
$407. Total interest accrued on the note at December 31,
1999 was $407 and unlike the notes above is to be paid
quarterly. Both the principal balance of the note and unpaid
accrued interest are due on December 13, 2001 75,000
------
1,635,000
Less current portion of long-term debt 450,000
-------
1,185,000
=========
</TABLE>
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
PAMET SYSTEMS, INC.
NOTE F-LONG-TERM DEBT (continued)
The notes are shown at face value because the value attributed to the
detachable warrants was considered not material. Subsequent to year end
noteholders have committed to convert $800,000 of the above principal to the
Company's common stock.
<TABLE>
<CAPTION>
Annual principal maturities of long-term debt are as follows:
<S> <C> <C>
Year ending December 31, 2000 450,000
December 31, 2001 1,185,000
---------
1,635,000
=========
</TABLE>
<TABLE>
<CAPTION>
NOTE G--STOCKHOLDERS' EQUITY
Stock-based compensation expense under the fair value-based method of
accounting would have resulted in pro forma net loss and loss per common share
approximating the following amounts:
1999 1998
------------------------- ------------------------
As Reported Pro Forma As Reported Pro Forma
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net loss $(2,836,470) $(3,199,775) $(1,807,082) $(2,077,835)
========= ========= ========= =========
Loss per common share $(1.00) $(1.13) $(.71) $(.82)
==== ==== === ===
</TABLE>
<TABLE>
<CAPTION>
The fair value of each option granted during 1999 and 1998, reflecting the
basis for the above pro forma disclosures, was determined on the date of grant
using the Black-Scholes option-pricing model. The following assumptions were
used in determining fair value through the model:
1999 1998
------------ ------------
<S> <C> <C>
Expected Life 5-8 years* 5-8 years*
Risk-free interest rate 4.51%-6.00%* 4.10%-5.93%*
Expected Volatility 116% 119%
</TABLE>
*Amounts vary due to graded vesting for options granted to employees and
differences between options granted to employees and options granted to
directors.
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
PAMET SYSTEMS, INC.
NOTE G--STOCKHOLDERS' EQUITY (continued)
The Company recognizes forfeitures as they occur.
The application of fair value-based accounting in arriving at the pro forma
disclosures above is not an indication of future income statement effects.
The pro forma disclosures do not reflect the effect of fair-value accounting
on stock-based compensation awards granted prior to 1995, if any.
Stock Option Plans: In 1990, the Company adopted a Stock Option Plan under
which the Board of Directors may grant incentive or non-qualified stock
options to employees, directors and consultants of the Company. The maximum
number of shares of stock subject to issuance under the 1990 Stock Option Plan
is 400,000 shares. These options, of which a total of 126,750 had been
exercised at December 31, 1999, are exercisable within a ten-year period from
the date of the grant, and are generally fully exercisable when issued to
directors and exercisable 20% per year and continuing over five years for
employees (based on continual employment) and consultants. The options are not
transferrable except by will or domestic relations order. The option price per
share under the Plan is not less than the fair market value of the shares on
the date of grant.
<TABLE>
<CAPTION>
Stock option activity for the 1990 Stock Option Plan for the two year period
ended December 31, 1999 is as follows:
Weighted Average
------------------------------
Number Exercise Price Exercise Fair Value Remain-
Of Options Per Share Price at Grant ing Life
---------- -------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Outstanding
January 1, 1998 291,000 $.02-$5.50 $1.21 3.49 years
Cancelled (13,000) $1.44-$3.50
Exercised (10,250) $.02 $.02
------ ----------
Outstanding
December 31, 1998 267,750 $.02-$5.50 $1.20 2.55 years
Granted 13,800 $2.50 $2.50 2.07
Cancelled (800) $ .02
Exercised (7,500) $ .02 $ .02
----- ---------
Outstanding
December 31, 1999 273,250 $.02-$5.50 $1.30 1.78 years
======= =========
Exercisable at
December 31, 1999 243,250 $.02-$5.50 $1.15
======= =========
Exercisable at
December 31, 1998 203,950 $.02-$5.50 $.95
======= =========
</TABLE>
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
NOTE G--STOCKHOLDERS' EQUITY (Continued)
<S> <C>
Available for Grant At
December 31, 1999 --
======
Available for Grant At
December 31, 1998 13,000
======
</TABLE>
In 1998, the Company adopted a Stock Option Plan under which the Board of
Directors may grant incentive or non-qualified stock options to employees,
directors and consultants of the Company. The maximum number of shares of
stock subject to issuance under the 1998 Stock Option Plan is 250,000 shares.
These options, of which at total of 3,250 had been exercised at December 31,
1999, are exercisable within a ten-year period from the date of the grant, and
are generally fully exercisable when issued to directors and exercisable 25%
per year and continuing over four years for employees (based on continual
employment) and consultants. The options are not transferable except by will
or domestic relations order. The option price per share under the Plan is not
less than the fair market value of the shares on the date of grant.
<TABLE>
<CAPTION>
Stock option activity for the 1998 Stock Option Plan for the two year period
ended December 31, 1999 is as follows:
Weighted Average
------------------------------
Number Exercise Price Exercise Fair Value Remain-
Of Options Per Share Price at Grant ing Life
---------- -------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Outstanding
January 1, 1998 -- -- --
Granted to Directors 15,000 $1.37 $1.37 $1.14
Granted to Officer 50,000 $1.37 $1.37 $1.14
Granted to Employees 27,500 $1.87 $1.87 $1.56
------ ----
Outstanding
December 31, 1998 92,500 $1.37-$1.87 $1.52 5.54
years
Granted to Officers 27,250 $1.50-$2.50 $2.32 $1.24-2.07
Granted to Employees 145,250 $1.50-$3.19 $1.95 $1.24-2.65
Exercised (3,250) $1.87 $1.87
Cancelled (15,000) $1.37 $1.37
------ ----
Outstanding 5.12
December 31, 1999 246,750 $1.37-$3.19 $1.87 years
======= ==========
</TABLE>
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
NOTE G--STOCKHOLDERS' EQUITY (Continued)
<S> <C> <C> <C>
Exercisable at
December 31, 1999 84,375 $1.37-$3.19 $2.02
====== ========== =====
Exercisable at
December 31, 1998 --
======
Available for Grant at
December 31, 1999 --
======
Available for Grant at
December 31, 1998 157,500
=======
</TABLE>
During 1999 the Company issued stock options to directors outside of any
formalized plan. During 2000, it is expected the Company will adopt a
Non-Employee Director Stock Option Plan (the NED Plan) for outside directors.
These options, of which none had been exercised at December 31, 1999, are
exercisable within a ten-year period from the date of the grant, and are
generally exercisable at 33% per year. The options are not transferable except
by will or domestic relations order. The option price per share is not less
than the fair market value of the shares on the date of the grant.
<TABLE>
<CAPTION>
Stock option activity for the directors for the one year period ended December
31, 1999 is as follows:
Weighted Average
-----------------------------
Number Exercise Price Exercise Fair Value Remain-
Of Options per Share Price at Grant ing Life
---------- -------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Outstanding
January 1, 1999 -- -- --
Granted to Directors 53,000 $1.37-$2.50 $1.46 $1.13-$2.07
------ ----------
Outstanding
December 31, 1999 53,000 $1.37-$2.50 $1.43 5 years
====== ==========
Exercisable at
December 31, 1999 37,700 $1.37-$2.50 $1.46
====== ==========
Available For Grant at
December 31, 1999 197,000
========
</TABLE>
Subsequent to December 31, 1999, options representing 6,000 share were granted
to Directors at an exercise price of $3.88.
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
PAMET SYSTEMS, INC.
NOTE G--STOCKHOLDERS' EQUITY (Continued)
In addition, the Company also issued additional stock options and warrants
outside of any formalized plan. The stock options are exercisable within a
ten-year period from the date of grant and are generally fully exercisable
when issued to directors and exercisable 25% per year and continuing over four
years for employees (for options based on continual employment) and
consultants. The warrants are exercisable within a five year period from the
date of grant and are generally fully exercisable when issued. The options and
warrants are not transferable except by will or domestic relations order. The
option or warrant price per share is not less than the fair market value of
the shares on the date of grant.
<TABLE>
<CAPTION>
Stock option and warrant activity for stock options and warrants issued
outside a formalized plan for the two year period ended December 31, 1999 is
as follows:
Weighted Average
-----------------------------
Number of Exercise Price Exercise Fair Value Remain-
Options/Warrants Per Share Price at Grant ing Life
---------------- -------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Outstanding 5.94
January 1, 1998 373,000 $.68-$4.25 $2.10 years
Options granted
to Directors 10,000 $4.00 $4.00 $3.36
Options granted
to Employees 40,000 $3.25-$4.75 $4.38 $2.73-$3.56
Warrants granted
to Directors 181,250 $2.50-$4.25 $2.84 $2.09-$3.57
Warrants granted to
Convertible Debt
Holders 252,413 $1.45-$2.50 $1.78 $2.09-$1.21
Options cancelled (7,500) $2.75
------- ----------
Outstanding 4.80
December 3l, 1998 849,163 $.68-$4.75 $2.45 years
</TABLE>
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
NOTE G-STOCKHOLDERS' EQUITY (continued)
Weighted Average
------------------------------
Number of Exercise Price Exercise Fair Value Remain-
Options/Warrants Per Share Price at Grant ing Life
---------------- -------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Options Granted
to Officer 56,200 $2.50 $2.50 $2.07
Warrants Granted
to Officers 2,500 $2.50 $2.50 $2.07
Warrants Granted
to Directors 162,546 $2.50-$3.19 $2.57 $2.07-$2.65
Warrants Granted
to Convertible
Debt Holders 444,000 $2.50 $2.50 $2.07
Warrants Granted
to new Stockholders 325,000 $2.50 $2.50 $2.08
Warrants Granted to
Consultant/Debt
Holders for goods
and services
provided 37,500 $2.19-$2.50 $2.44 $1.82-$2.07
Options Exercised (1,000) $2.75 $2.75
Warrants Exercised (87,000) $0.80-$2.00 $1.70
Warrants Cancelled (8,000) $0.80
------- ----------
Outstanding 4.34
December 31,1999 1,780,909 $0.68-$4.75 $2.52 years
========= ==========
Exercisable at
December 31, 1999 1,644,459 $0.68-$4.75 $2.48
========= ==========
Exercisable at
December 31, 1998 306,625 $0.68-$4.75 $2.60
======= ==========
</TABLE>
Subsequent to December 31, 1999, options representing 25,000 shares were
granted to a new marketing director at an exercise price of $3.88.
<TABLE>
<CAPTION>
NOTE H-EARNINGS PER SHARE DISCLOSURE
Earnings per share disclosures for the two year period ended December 31, 1999
are as follows:
For the Year Ended December 31, 1999
--------------------------------------
Weighted- Per Share
Income Average Shares Amount
------ -------------- ---------
<S> <C> <C> <C>
Basic loss per common share
Income available to common
stockholders $(2,836,470) 2,838,728 $(1.00)
========= ========= ====
</TABLE>
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
NOTE H-EARNINGS PER SHARE DISCLOSURE (continued)
For the Year Ended December 31, 1998
---------------------------------------
Weighted- Per Share
Income Average Shares Amount
------ -------------- ---------
<S> <C> <C> <C>
Basic loss per common share
Income available to common
stockholders $(1,807,082) 2,529,408 $(.71)
========= ========= ===
</TABLE>
NOTE I--INCOME TAXES
During 1999, the Company recorded deferred tax assets for the benefit of net
operating losses in the amount of $606,000. The cumulative amount of these
assets, which is $1,838,000 at December 31, 1999 is fully reserved. Due to the
Company's history of operating losses, management has concluded that
realization of the benefit is not likely.
<TABLE>
<CAPTION>
At December 31, 1999, the Company has federal net operating loss carryforwards
of $9,086,000 that expire beginning in the year 2005. Additionally, the
Company has Massachusetts state net operating losses to carryforward which
expire as follows:
Year Ending
December 31, Amount
------------ ------
<S> <C>
2000 $ 514,000
2001 --
2002 980,000
2003 1,752,000
2004 2,641,000
---------
$5,887,000
=========
</TABLE>
NOTE J-COMMITMENTS AND CONTINGENCIES
Lease: During 1999, the Company entered into a real estate transaction in
which it sold its main operating facility and land to an unaffiliated third
party and leased the property back. The lease is being accounted for as an
operating lease. The transaction resulted in a gain of approximately $298,000,
that the Company has deferred and will recognize as a reduction to rent
expense over the term of the lease (see Note B). The proceeds from the sale of
the building were used to fully repay the outstanding mortgage note payable on
the building. The lease agreement is for 7 years through August 2006 with a 5
year renewal option available. The monthly base rent for the first three years
is $12,997. For years four through seven the monthly base rent increases to
$14,564. For the second through seventh year, rent may be further increased by
multiplying the base rent for the preceding year by the percentage increase in
the Consumer Price Index for Urban Wage Earners and Clerical Workers, up to a
maximum of a three percent increase per annum.
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
NOTE J-COMMITMENTS AND CONTINGENCIES (continued)
Future minimum lease payments are as follows:
Year ending
December 31, Amount
------------ ------
<S> <C>
2000 $ 155,961
2001 155,961
2002 162,229
2003 174,765
2004 174,765
Thereafter 279,056
-------
TOTAL $1,102,752
=========
</TABLE>
Employment Contracts
On May 3, 1999 the Company entered into a joint venture and service agreement
with Hanahan Computer Designs. As part of the agreement Pamet has obtained the
right to a product and has an employment agreement with the owner of Hanahan
Computer Designs.
Under the joint venture agreement, Hanahan Computer Designs will receive
royalties of fifty percent of gross sales of the product until June 30, 2002,
subject to a maximum aggregate royalty payment of $170,000. Thereafter, the
owner of Hanahan Computer Designs will receive a thirty percent commission on
all his sales of this product.
Under the Hanahan employment agreement which runs through June 30, 2002, a
minimum salary of $90,000 per annum is payable. The employee also is eligible
of an annual bonus for up to 15% of his annual salary.
In addition, the Company has employment agreements with three key management
employees through December 2000 that total $319,500 per year.
NOTE K-SIGNIFICANT ACCOUNTS RECEIVABLE, TRADE/CUSTOMERS
Amounts due from three customers represented approximately 48% of total
accounts receivable-trade, outstanding at December 31, 1999.
Sales to one customer represented approximately 12% of total revenues for the
year ended December 31, 1999. There were no sales to individual customers that
were greater than 10% of total revenues for the year ended December 31, 1998.
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
PAMET SYSTEMS, INC.
NOTE L-MAJOR SUPPLIER
The Company obtained approximately 46% of its merchandise from one supplier in
1999. Management believes that if this supplier ceased providing software, the
Company could find alternative suppliers, although there would be a short
interruption of this line of business as the new software was integrated with
the Company's products.
NOTE M--PROFIT SHARING PLAN
The Company has a qualified contributory profit sharing plan [401(k) Plan].
The Plan covers all employees meeting certain age and service requirements.
Employee contributions are voluntary, based on specific percentages of
compensation. The Plan also provides for contributions by the Company in any
amount approved by the Board of Directors. During 1999 and 1998, the Board
elected to make contributions equal to 15% of employee contributions. The
employees' and employer's contributions may not exceed maximum amounts
established by the Internal Revenue Code. Total Company contributions to the
plan were $11,183 during 1999 and $8,635 during 1998.
NOTE N-RESEARCH AND DEVELOPMENT
Research and development costs in the current year represent costs associated
with developing a Microsoft Windows NT computing platform for the Company's
current computer applications as well as developing accompanying software
support applications for the NT system.
Included in personnel costs are approximately $660,000 relating to personnel
who have worked exclusively on the development of the Company's NT computing
platform and supporting applications during fiscal year 1999.
NOTE O-SUBSEQUENT EVENTS
In January 2000, a convertible promissory noteholder exercised 40,000 warrants
at a discounted price of $2.25 per share.
During March 2000, the Company had a private placement in which an investor
purchased 116,667 shares of the Company's common stock at a price of $3.00 per
share.
Five convertible promissory noteholders have agreed to convert $800,000 worth
of promissory notes to the Company's common stock. The Company had recorded
approximately $90,000 of accrued interest relating to these notes as of
December 31, 1999.
(continued)
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
NOTE P--QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1999 and 1998 is as follows:
Quarter Ended
------------------------------------------------------------
March 31, June 30, September 30, December 31,
1999 1999 1999 1999
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues $395,790 $576,594 $530,907 $910,243
Gross Profit 246,011 342,536 346,279 699,399
Operating Loss (557,077) (394,737) (301,988) (1,314,850)
Net Loss (631,137) (443,908) (377,611) (1,383,814)
Loss per share $(.25) $(.15) $(.13) $(.46)
Quarter Ended
------------------------------------------------------------
March 31, June 30, September 30, December 31,
1998 1998 1998 1998
--------- -------- ------------- ------------
Revenues $604,163 $897,304 $597,429 $638,090
Gross Profit 310,032 474,035 376,954 419,342
Operating Loss (417,412) (424,087) (234,688) (566,740)
Net Loss (441,061) (460,300) (283,146) (622,575)
Loss per share $(.17) $(.18) $(.11) $(.25)
</TABLE>
Loss per share is computed independently for each of the quarters presented.
Therefore, the sum of the quarterly loss per share information may not equal
annual loss per common share as reported on the statement of operations
<PAGE>
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
During the Registrant's fiscal years ended December 31, 1999 and 1998
there were no disagreements with its auditing firm, Carlin, Charron & Rosen,
LLP on any matters.
PART III
Item 9. Directors and Executive Officers of the Registrant.
If the Registrant's definitive proxy statement is filed within 120 days of the
close of the Registrant's fiscal year ended December 31, 1999, the information
called for by Items 9, 10, 11, and 12 shall be deemed incorporated herein by
reference to the Registrant's definitive proxy statement relating to the
Annual Meeting of Stockholders.
Item 10. Executive Compensation.
If the Registrant's definitive proxy statement is filed within 120 days of the
close of the Registrant's fiscal year ended December 31, 1999, the information
called for by Items 9, 10, 11, and 12 shall be deemed incorporated herein by
reference to the Registrant's definitive proxy statement relating to the
Annual Meeting of Stockholders.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
If the Registrant's definitive proxy statement is filed within 120 days of the
close of the Registrant's fiscal year ended December 31, 1999, the information
called for by Items 9, 10, 11, and 12 shall be deemed incorporated herein by
reference to the Registrant's definitive proxy statement relating to the
Annual Meeting of Stockholders.
Item 12. Certain Relationships and Related Transactions.
If the Registrant's definitive proxy statement is filed within 120 days of the
close of the Registrant's fiscal year ended December 31, 1999, the information
called for by Items 9, 10, 11, and 12 shall be deemed incorporated herein by
reference to the Registrant's definitive proxy statement relating to the
Annual Meeting of Stockholders.
<PAGE>
Item 13. Exhibits. Financial Statement Schedules, and Reports on Form 8-K
(a) Exhibits
3.1 Restated and Amended Articles of Organization (filed by reference to
Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990).
3.2 By-Laws, as amended (filed by reference to Exhibit 3.2 to Registration
Statement No. 33-36989).
4.1 Specimen Common Stock Certificate (filed by reference to Exhibit 4.2 to
Registration Statement No. 33-36989).
4.2 Warrant issued to Rogow Opportunity Capital dated March 2, 1998 (filed by
reference to Exhibit 4.3 to the Company's Quarterly Report of Form 10-QSB
for the Quarter Ended March 31, 1998).
4.3 Convertible Note issued to Rogow Opportunity Capital LLC dated November
6, 1998.
4.4 Warrant issued to Rogow Opportunity Capital LLC dated November 6, 1998.
4.5 Convertible Note issued to Robboy Associates LLC dated November 6, 1998.
4.6 Warrant issued to Robboy Associates LLC dated November 6, 1998.
4.7 Convertible Note issued to William James Bell 1993 Trust dated November
13, 1998.
4.8 Warrant issued to William James Bell 1993 Trust dated November 13, 1998.
4.9 Convertible Note issued to Gene Raphalean dated December 8, 1998.
4.10 Warrant issued to Gene Raphalean dated December 8, 1998.
4.11 Convertible Note issued to Donald M. Liddell, Jr. dated December 10,
1998.
4.12 Warrant issued to Donald M. Liddell, Jr. dated December 10, 1998.
4.13 Convertible Note issued to Joseph Terrence Waters dated December 14,
1998.
4.14 Warrant issued to Joseph Terrence Waters dated December 14, 1998.
4.15 Convertible Note issued to William James Bell 1993 Trust dated February
8, 1999.
4.16 Warrant issued to William James Bell 1993 Trust dated February 8, 1999.
4.17 Convertible Note issued to Stephen Wilder dated January 22, 1999.
4.18 Warrant issued to Stephen Wilder dated January 22, 1999.
4.19 Convertible Note issued to West Country Partners dated May 10, 1999.
4.20 Warrant issued to West Country Partners dated May 10, 1999.
4.21 Convertible Note issued to BSI SA dated May 14, 1999.
4.22 Warrant issued to BSI SA dated May 14, 1999.
4.23 Warrant issued to West Country Partners dated November 19, 1999.
4.24 Warrant issued to BSI SA dated November 29, 1999.
4.25 Warrant issued to Leonardo Capital fund dated December 14, 1999.
10.1 Stock Option Plan (filed by reference to Exhibit 10.3 to Registration
Statement No. 33-36989).
10.2 Form of License Agreement (filed by reference to Exhibit 10.5 to
Registration Statement No. 33-42819).
10.3 Commercial real estate promissory note to Lexington Savings Bank dated
April 21, 1992 (filed by reference to Exhibit 28.1 to the Company's
Quarterly Report of Form 10-Q for the Quarter Ended June 30, 1992).
10.4 Mortgage security agreement, and assignment granted to Lexington
Savings Bank, dated April 21, 1992 (filed by reference to Exhibit 28.2
to the Company's Quarterly Report of Form 10-Q for the Quarter Ended
June 30, 1992).
10.5 Mortgage guaranty by six Pamet Systems, Inc. Directors and Officers,
dated April 21, 1992 (filed by reference to Exhibit 28.3 to the
Company's Quarterly Report of Form 10-Q for the Quarter Ended June 30,
1992).
10.6 Mortgage security extension (one year) Agreement granted to Lexington
Savings Bank, dated 21 June 1996 (Filed by reference to Exhibit 10.12
to the Company's Quarterly Report of Form 10-Q for the Quarter Ended
June 30, 1996).
10.7 Mortgage guaranty for five Pamet Systems, Inc. Directors and Officers,
Dated June 21, 1996 (Filed by reference to Exhibit 10.12 to the
Company's Quarterly Report of Form 10-Q for the Quarter Ended
June 30, 1996).
10.8 Form of Employment agreement between the Registrant and Dr. Joel B.
Searcy (Filed by reference to Exhibit 10.13 to the Company's Annual
Report of Form 10-KSB for the Fiscal Year Ended December 31, 1997).
10.9 Form of Employment agreement between the Registrant and David T. McKay
(Filed by reference to Exhibit 10.14 to the Company's Annual Report of
Form 10-KSB for the Fiscal Year Ended December 31, 1997).
10.10 Form of Employment agreement between the Registrant and Richard C.
Becker (Filed by reference to Exhibit 10.15 to the Company's Annual
Report of Form 10-KSB for the Fiscal Year Ended December 31, 1997).
10.11 1998 Stock Option Plan (Filed by reference in the 1998 Proxy Statement
dated May 14, 1998).
10.12 Silicon Valley Financial Services Accounts Receivable Purchase
Agreement dated April 14, 1998 (Filed by reference to Exhibit 10 to the
Company's Quarterly Report of Form 10-QSB for the Quarter Ended June 30,
1998).
10.13 Promissory Note ($200,000) with Rogow Opportunity Capital dated June 11,
1998 (Filed by reference to Exhibit 4 to the Company's Quarterly Report
of Form 10-QSB for the Quarter Ended June 30, 1998).
10.14 Promissory Note ($100,000) with Rogow Opportunity Capital dated July 31,
1998 (Filed by reference to Exhibit 4 of the Company's Quarterly Report
of Form 10-QSB for the Quarter Ended September 30, 1998.
23 Consent of Carlin, Charron & Rosen LLP.
27 Financial Data Schedule.
______________________
(b) Reports on Form 8-K
none
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PAMET SYSTEMS, INC.
(Registrant)
-----------------------
By BRUCE J. ROGOW
Name: Bruce J. Rogow
Title: Chairman
Date April 12, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name Title Date
BRUCE J. ROGOW ________________________
Bruce J. Rogow Chairman of the Board April 12, 2000
DAVID T. MCKAY ________________________
David T. McKay President and Chief Executive April 12, 2000
Officer
RICHARD C. BECKER ________________________
Richard C. Becker Vice President, Finance April 12, 2000
And Administration,
Treasurer, and Director
(Principal Financial and
Accounting Officer)
ARTHUR V. JOSEPHSON, JR. ________________________
Arthur V. Josephson, Jr. Director and Clerk April 12, 2000
JOEL B. SEARCY ________________________
Dr. Joel B. Searcy Director April 12, 2000
STANLEY J. ROBBOY, M.D. ________________________
Stanley J. Robboy, M.D. Director April 12, 2000
DAVINDER SETHI ________________________
Davinder Sethi Director April 12, 2000
<PAGE>
INDEX OF EXHIBITS
4.23 Warrant issued to West Country Partners dated November 19, 1999.
4.24 Warrant issued to BSI SA dated November 29, 1999.
4.25 Warrant issued to Leonardo Capital fund dated December 14, 1999.
23 Consent of Carlin, Charron & Rosen LLP
27 Financial Data Sheet
<PAGE>
Exhibit 4.23: Warrant issued to West Country Partners dated November 19, 1999
LW - 014 WARRANT
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY (WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY
WITHHELD) THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on November 18, 2004.
WARRANT TO PURCHASE COMMON STOCK
OF
PAMET SYSTEMS, INC.
FOR VALUE RECEIVED, PAMET SYSTEMS, INC. (the "Company"), a Massachusetts
corporation, hereby certifies that West Country Partners, a California Limited
Partnership of which James S. Schmitt is the General Partner, with its address
at 1917 Brittany Park, Camarillo, CA 93012, or its permitted assigns, is
entitled to purchase from the Company, at any time or from time to time
commencing November 19, 1999, and prior to 5:00 P.M., Eastern Standard Time,
on November 18, 2004, a total of Fifty Thousand (50,000) fully paid and
nonassessable shares of common stock, par value $.01 per share ("Common
Stock"), of the Company for an aggregate purchase price of One Hundred Twenty
Five Thousand Dollars ($125,000) (computed on the basis of $2.50 per share).
(Hereinafter, (i) said Common Stock, together with any other equity securities
which may be issued by the Company with respect thereto or in substitution
therefor, is referred to as the "Common Stock," (ii) the shares of the Common
Stock purchasable hereunder are referred to as the "Warrant Shares," (iii) the
aggregate purchase price payable hereunder for the Warrant Shares is referred
to as the "Aggregate Warrant Price," (iv) the price payable hereunder for each
of the Warrant Shares is referred to as the "Per Share Warrant Price," (v)
this Warrant, and all warrants hereafter issued in exchange or substitution
for this Warrant are referred to as the "Warrant" and (vi) the holder of this
Warrant is referred to as the "Holder.") The number of Warrant Shares for
which this Warrant is exercisable is subject to adjustment as hereinafter
provided.
This Warrant is issued by the Company pursuant to the Securities Purchase
Agreement, dated as of the date hereof, among the Company and West Country
Partners (the "Securities Purchase Agreement"). Capitalized terms used but not
defined shall have the respective meanings ascribed to them in the Securities
Purchase Agreement.
1. Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in part from time
to time, commencing November 19, 1999, and prior to 5:00 P.M., Eastern
Standard Time, on November 18, 2004, by the Holder of this Warrant by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Subsection 9(a) hereof, together with
proper payment of the Aggregate Warrant Price, or the proportionate part
thereof if this Warrant is exercised in part.
(b) The Aggregate Warrant Price or Per Share Warrant Price shall be paid in
cash by certified or official bank check payable to the order of the Company.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which the Warrant
shall have been surrendered to the Company as provided in subsection 1(a)
above (an "Exercise Date"). At such time, the person or persons in whose name
or names any certificates for Warrant Shares shall be issuable upon such
exercise as provided in subsection 1(d) below shall be deemed to have become
the holder or holders of record of the Warrant Shares represented by such
certificates.
(d) If this Warrant is exercised in part, the Holder shall be entitled to
receive a new Warrant covering the number of Warrant Shares in respect of
which this Warrant has not been exercised and setting forth the proportionate
part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon
such surrender of this Warrant, the Company will (a) issue a certificate or
certificates in the name of the Holder for the shares of the Common Stock to
which the Holder shall be entitled, and (b) deliver the proportionate part
thereof if this Warrant is exercised in part, pursuant to the provisions of
the Warrant.
(e) No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the fair value of a
share.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and
in reserve, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, the shares of the Common Stock as from time to time
shall be receivable upon the exercise of this Warrant.
3. Adjustments.
(a) In case the Company shall hereafter (i) pay a dividend or
make a distribution on its capital stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its Common Stock any
shares of capital stock of the Company, the number of Warrant Shares for which
this Warrant may be exercised shall be adjusted so that if the Holder
surrendered this Warrant for exercise after such action the Holder would be
entitled to receive the number of shares of Common Stock or other capital
stock of the Company which he would have been entitled to receive had such
Warrant been exercised immediately prior to such action. An adjustment made
pursuant to this subsection (a) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made
pursuant to this subsection (a), the Holder of this Warrant shall become
entitled to receive shares of two or more classes of capital stock or shares
of Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of this Warrant promptly after such adjustment) shall
determine the allocation of the adjusted Per Share Warrant Price between or
among shares of such classes of capital stock or shares of Common Stock and
other capital stock.
(b) In case of any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the holder shall have the right thereafter to
exercise this Warrant for the kind and amount of securities, cash or other
property which he would have owned or have been entitled to receive
immediately after such consolidation, merger, statutory exchange, sale or
conveyance had such Warrant been exercised immediately prior to the effective
date of such consolidation, merger, statutory exchange, sale or conveyance and
in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder to the end that the provisions
set forth in this Section 3 shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of stock
or other securities or property thereafter deliverable on the conversion of
this Warrant. The above provisions of this subsection (b) shall similarly
apply to successive consolidations, mergers, statutory exchanges, sales or
conveyances. Notice of any such consolidation, merger, statutory exchange,
sale or conveyance and of said provisions so proposed to be made, shall be
mailed to the Holder not less than 30 days prior to such event. A sale of all
or substantially all of the assets of the Company for a consideration
consisting primarily of securities shall be deemed a consolidation or merger
for the foregoing purposes.
(c) In the event of any adjustment to the number of Warrant Shares issuable
upon exercise of this Warrant, the Per Share Warrant Price shall be adjusted
by multiplying the Per Share Warrant Price in effect immediately prior to such
adjustment by a fraction the numerator of which is the aggregate number of
Warrant Shares for which this Warrant may be exercised immediately prior to
such adjustment and the denominator of which is the aggregate number of
Warrant Shares for which this Warrant may be exercised immediately after such
adjustment.
(d) Whenever the Per Share Warrant Price is adjusted as provided in this
Warrant and upon any modification of the rights of the Holder of this Warrant
in accordance with this Section 3, the Company shall promptly prepare a
certificate of an officer of the Company, setting forth the Per Share Warrant
Price and the number of Warrant Shares after such adjustment or modification,
a brief statement of the facts requiring such adjustment or modification and
the manner of computing the same and cause a copy of such certificate to be
mailed to the Holder.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the Common
Stock represented by each and every certificate for Warrant Shares delivered
on the proper exercise of this Warrant shall, at the time of such delivery, be
validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights, and the Company will take all such actions as may be
necessary to assure that the par value or stated value, if any, per share of
the Common Stock is at all times equal to or less than the then Per Share
Warrant Price. Subject to Section 6(e) hereof, the Company further covenants
and agrees that it will pay, when due and payable, any and all Federal and
state stamp, original issue or similar taxes that may be payable in respect of
the issuance of any Warrant Shares or certificates therefor. The Holder
covenants and agrees that it shall pay, when due and payable, any and all
federal, state and local income or similar taxes that may be payable in
respect of the issuance of any Warrant Shares or certificates therefor.
5. Transfer
(a) Securities Laws. Neither this Warrant nor the Warrant Shares issuable upon
the exercise hereof have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or under any state securities laws and unless
so registered may not be transferred, sold, pledged, hypothecated or otherwise
disposed of unless an exemption from such registration is available. In the
event the Holder desires to transfer this Warrant or any of the Warrant Shares
issued, the Holder must give the Company prior written notice of such proposed
transfer including the name and address of the proposed transferee. Such
transfer may be made only either (i) upon publication by the Securities and
Exchange Commission (the "Commission") of a ruling, interpretation, opinion or
"no action letter" based upon facts presented to said Commission, or (ii) upon
receipt by the Company of an opinion of counsel acceptable to the Company to
the effect that the proposed transfer will not violate the provisions of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the rules and regulations promulgated under either such act, or to
the effect that the Warrant or Warrant Shares to be sold or transferred have
been registered under the Securities Act of 1933, as amended, and that there
is in effect a current prospectus meeting the requirements of Subsection 11(a)
of the Securities Act, which is being or will be delivered to the purchaser or
transferee at or prior to the time of delivery of the certificates evidencing
the Warrant or Warrant Shares to be sold or transferred.
(b) Conditions to Transfer. Prior to any such proposed transfer (including,
without limitation, a transfer by will or pursuant to the laws of descent and
distribution), and as a condition thereto, if such transfer is not made
pursuant to an effective registration statement under the Securities Act, the
Holder will, if requested by the Company, deliver to the Company (i) an
investment covenant, in form and substance equivalent to that signed by the
original Holder of this Warrant, signed by the proposed transferee, (ii) an
agreement by such transferee to the restrictive investment legend set forth
herein on the certificate or certificates representing the securities acquired
by such transferee, (iii) an agreement by such transferee that the Company may
place a "stop transfer order" with its transfer agent or registrar, and (iv)
an agreement by the transferee to indemnify the Company to the same extent as
set forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder understands the meaning
and legal consequences of this Section 6, and the Holder hereby agrees to
indemnify and hold harmless the Company, its representatives and each officer
and director thereof from and against any and all loss, damage or liability
(including all attorneys' fees and costs incurred in enforcing this indemnity
provision) due to or arising out of (a) the inaccuracy of any representation
or the breach of any warranty of the Holder contained in, or any other breach
by the Holder of, this Warrant, (b) any transfer of the Warrant or (c) any
untrue statement or omission to state any material fact in connection with the
investment representations or with respect to the facts and representations
supplied by the Holder to counsel to the Company upon which its opinion as to
a proposed transfer shall have been based.
(d) Transfer. Upon surrender of this Warrant to the Company or at the office
of its stock transfer agent, if any, with assignment documentation duly
executed and funds sufficient to pay any transfer tax, and upon compliance
with the foregoing provisions, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment, and this Warrant shall promptly be canceled. Any assignment,
transfer, pledge, hypothecation or other disposition of this Warrant attempted
contrary to the provisions of this Warrant, or any levy of execution,
attachment or other process attempted upon the Warrant, shall be null and void
and without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares have been
registered under the Securities Act, upon exercise of any part of the Warrant
and the issuance of any of the Warrant Shares, the Company shall instruct its
transfer agent to enter stop transfer orders with respect to such shares, and
all certificates representing Warrant Shares shall bear on the face thereof
substantially the following legend, insofar as is consistent with
Massachusetts law:
"The shares of common stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be sold,
offered for sale, assigned, transferred or otherwise disposed of unless
registered pursuant to the provisions of that Act or an opinion of counsel to
the Company is obtained stating that such disposition is in compliance with an
available exemption from such registration."
6. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like
date, tenor and denomination.
7. Warrant Holder Not Shareholder. Except as otherwise provided herein, this
Warrant does not confer upon the Holder any right to vote or to consent to or
receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
8. Communication. No notice or other communication under this Warrant shall be
effective unless the same is in writing and is mailed by first-class mail,
postage prepaid, addressed to:
(a) the Company at 1000 Main Street, Acton, Massachusetts 01720, or such other
address as the Company has designated in writing to the Holder, or
(b) the Holder at the address contained in the first paragraph of this
Warrant, or such other address as the Holder has designated in writing to the
Company.
9. Headings. The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
10. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the Commonwealth of Massachusetts without giving
effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, PAMET SYSTEMS, INC., has caused this Warrant to be signed
by a duly authorized officer as of this 10th day of April, 2000.
ATTEST: PAMET SYSTEMS, INC.
_______________________
By: ___________________________________
Name: David T. McKay
Title: President & CEO
SUBSCRIPTION
The undersigned, __________________________________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for the
purchase of _________________________ shares of the Common Stock of PAMET
SYSTEMS, INC. covered by said Warrant, and makes payment therefor in full at
the price per share provided by said Warrant.
Dated __________________ Signature__________________________
Address ____________________________
____________________________
ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _________________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer said Warrant on the books of
PAMET SYSTEMS, INC.
Dated __________________ Signature _________________________
Address ___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby assigns and transfers unto
_________________________ the right to purchase _________________________
shares of the Common Stock of PAMET SYSTEMS, INC. by the foregoing Warrant,
and a proportionate part of said Warrant and the rights evidenced hereby, and
does irrevocably constitute and appoint _________________________, attorney,
to transfer that part of said Warrant on the books of PAMET SYSTEMS, INC.
Dated ___________________ Signature _________________________
Address ___________________________
____________________________
<PAGE>
Exhibit 4.24: Warrant issued to BSI SA dated November 29, 1999.
LW - 018 WARRANT
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY (WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY
WITHHELD) THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on April 10, 2005.
WARRANT TO PURCHASE COMMON STOCK
OF
PAMET SYSTEMS, INC.
FOR VALUE RECEIVED, PAMET SYSTEMS, INC. (the "Company"), a Massachusetts
corporation, hereby certifies that BSI SA, a financial institution with its
address at Via Magatti 2, 6900 Lugano, Switzerland, or its permitted assigns,
is entitled to purchase from the Company, at any time or from time to time
commencing April 11, 2000, and prior to 5:00 P.M., Eastern Standard Time, on
April 10, 2005, a total of Sixty Six Thousand Six Hundred Sixty Seven
(66,667) fully paid and nonassessable shares of common stock, par value $.01
per share ("Common Stock"), of the Company for an aggregate purchase price of
Two Hundred Thirty Three Thousand Three Hundred Thirty Five Dollars
($233,335) (computed on the basis of $3.50 per share). (Hereinafter, (i) said
Common Stock, together with any other equity securities which may be issued
by the Company with respect thereto or in substitution therefor, is referred
to as the "Common Stock," (ii) the shares of the Common Stock purchasable
hereunder are referred to as the "Warrant Shares," (iii) the aggregate
purchase price payable hereunder for the Warrant Shares is referred to as the
"Aggregate Warrant Price," (iv) the price payable hereunder for each of the
Warrant Shares is referred to as the "Per Share Warrant Price," (v) this
Warrant, and all warrants hereafter issued in exchange or substitution for
this Warrant are referred to as the "Warrant" and (vi) the holder of this
Warrant is referred to as the "Holder.") The number of Warrant Shares for
which this Warrant is exercisable is subject to adjustment as hereinafter
provided.
This Warrant is issued by the Company pursuant to the Securities Purchase
Agreement, dated as of the date hereof, among the Company and BSI SA (the
"Securities Purchase Agreement"). Capitalized terms used but not defined
shall have the respective meanings ascribed to them in the Securities
Purchase Agreement.
1. Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in part from time
to time, commencing April 11, 2000, and prior to 5:00 P.M., Eastern Standard
Time, on April 10, 2005, by the Holder of this Warrant by the surrender of
this Warrant (with the subscription form at the end hereof duly executed) at
the address set forth in Subsection 9(a) hereof, together with proper payment
of the Aggregate Warrant Price, or the proportionate part thereof if this
Warrant is exercised in part.
(b) The Aggregate Warrant Price or Per Share Warrant Price shall be paid in
cash by certified or official bank check payable to the order of the Company.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which the Warrant
shall have been surrendered to the Company as provided in subsection 1(a)
above (an "Exercise Date"). At such time, the person or persons in whose name
or names any certificates for Warrant Shares shall be issuable upon such
exercise as provided in subsection 1(d) below shall be deemed to have become
the holder or holders of record of the Warrant Shares represented by such
certificates. (d) If this Warrant is exercised in part, the Holder shall be
entitled to receive a new Warrant covering the number of Warrant Shares in
respect of which this Warrant has not been exercised and setting forth the
proportionate part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such surrender of this Warrant, the Company will (a) issue a
certificate or certificates in the name of the Holder for the shares of the
Common Stock to which the Holder shall be entitled, and (b) deliver the
proportionate part thereof if this Warrant is exercised in part, pursuant to
the provisions of the Warrant.
(e) No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the
Holder an amount in cash equal to such fraction multiplied by the fair value
of a share.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and
in reserve, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, the shares of the Common Stock as from time to time
shall be receivable upon the exercise of this Warrant.
3. Adjustments.
(a) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of
shares or (iv) issue by reclassification of its Common Stock any shares of
capital stock of the Company, the number of Warrant Shares for which this
Warrant may be exercised shall be adjusted so that if the Holder surrendered
this Warrant for exercise after such action the Holder would be entitled to
receive the number of shares of Common Stock or other capital stock of the
Company which he would have been entitled to receive had such Warrant been
exercised immediately prior to such action. An adjustment made pursuant to
this subsection (a) shall become effective immediately after the record date
in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made
pursuant to this subsection (a), the Holder of this Warrant shall become
entitled to receive shares of two or more classes of capital stock or shares
of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in
a written notice to the Holder of this Warrant promptly after such
adjustment) shall determine the allocation of the adjusted Per Share Warrant
Price between or among shares of such classes of capital stock or shares of
Common Stock and other capital stock.
(b) In case of any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the holder shall have the right thereafter to
exercise this Warrant for the kind and amount of securities, cash or other
property which he would have owned or have been entitled to receive
immediately after such consolidation, merger, statutory exchange, sale or
conveyance had such Warrant been exercised immediately prior to the effective
date of such consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in
the application of the provisions set forth in this Section 3 with respect to
the rights and interests thereafter of the Holder to the end that the
provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the
conversion of this Warrant. The above provisions of this subsection (b) shall
similarly apply to successive consolidations, mergers, statutory exchanges,
sales or conveyances. Notice of any such consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so proposed to be made,
shall be mailed to the Holder not less than 30 days prior to such event. A
sale of all or substantially all of the assets of the Company for a
consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.
(c) In the event of any adjustment to the number of Warrant Shares issuable
upon exercise of this Warrant, the Per Share Warrant Price shall be adjusted
by multiplying the Per Share Warrant Price in effect immediately prior to
such adjustment by a fraction the numerator of which is the aggregate number
of Warrant Shares for which this Warrant may be exercised immediately prior
to such adjustment and the denominator of which is the aggregate number of
Warrant Shares for which this Warrant may be exercised immediately after such
adjustment.
(d) Whenever the Per Share Warrant Price is adjusted as provided in this
Warrant and upon any modification of the rights of the Holder of this Warrant
in accordance with this Section 3, the Company shall promptly prepare a
certificate of an officer of the Company, setting forth the Per Share Warrant
Price and the number of Warrant Shares after such adjustment or modification,
a brief statement of the facts requiring such adjustment or modification and
the manner of computing the same and cause a copy of such certificate to be
mailed to the Holder.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the Common
Stock represented by each and every certificate for Warrant Shares delivered
on the proper exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not
subject to preemptive rights, and the Company will take all such actions as
may be necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. Subject to Section 6(e) hereof, the Company further
covenants and agrees that it will pay, when due and payable, any and all
Federal and state stamp, original issue or similar taxes that may be payable
in respect of the issuance of any Warrant Shares or certificates therefor.
The Holder covenants and agrees that it shall pay, when due and payable, any
and all federal, state and local income or similar taxes that may be payable
in respect of the issuance of any Warrant Shares or certificates therefor.
5. Transfer
(a) Securities Laws. Neither this Warrant nor the Warrant Shares issuable
upon the exercise hereof have been registered under the Securities Act of
1933, as amended (the "Securities Act"), or under any state securities laws
and unless so registered may not be transferred, sold, pledged, hypothecated
or otherwise disposed of unless an exemption from such registration is
available. In the event the Holder desires to transfer this Warrant or any of
the Warrant Shares issued, the Holder must give the Company prior written
notice of such proposed transfer including the name and address of the
proposed transferee. Such transfer may be made only either (i) upon
publication by the Securities and Exchange Commission (the "Commission") of a
ruling, interpretation, opinion or "no action letter" based upon facts
presented to said Commission, or (ii) upon receipt by the Company of an
opinion of counsel acceptable to the Company to the effect that the proposed
transfer will not violate the provisions of the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the
rules and regulations promulgated under either such act, or to the effect
that the Warrant or Warrant Shares to be sold or transferred have been
registered under the Securities Act of 1933, as amended, and that there is in
effect a current prospectus meeting the requirements of Subsection 11(a) of
the Securities Act, which is being or will be delivered to the purchaser or
transferee at or prior to the time of delivery of the certificates evidencing
the Warrant or Warrant Shares to be sold or transferred.
(b) Conditions to Transfer. Prior to any such proposed transfer (including,
without limitation, a transfer by will or pursuant to the laws of descent and
distribution), and as a condition thereto, if such transfer is not made
pursuant to an effective registration statement under the Securities Act, the
Holder will, if requested by the Company, deliver to the Company (i) an
investment covenant, in form and substance equivalent to that signed by the
original Holder of this Warrant, signed by the proposed transferee, (ii) an
agreement by such transferee to the restrictive investment legend set forth
herein on the certificate or certificates representing the securities
acquired by such transferee, (iii) an agreement by such transferee that the
Company may place a "stop transfer order" with its transfer agent or
registrar, and (iv) an agreement by the transferee to indemnify the Company
to the same extent as set forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder understands the
meaning and legal consequences of this Section 6, and the Holder hereby
agrees to indemnify and hold harmless the Company, its representatives and
each officer and director thereof from and against any and all loss, damage
or liability (including all attorneys' fees and costs incurred in enforcing
this indemnity provision) due to or arising out of (a) the inaccuracy of any
representation or the breach of any warranty of the Holder contained in, or
any other breach by the Holder of, this Warrant, (b) any transfer of the
Warrant or (c) any untrue statement or omission to state any material fact in
connection with the investment representations or with respect to the facts
and representations supplied by the Holder to counsel to the Company upon
which its opinion as to a proposed transfer shall have been based.
(d) Transfer. Upon surrender of this Warrant to the Company or at the office
of its stock transfer agent, if any, with assignment documentation duly
executed and funds sufficient to pay any transfer tax, and upon compliance
with the foregoing provisions, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment, and this Warrant shall promptly be canceled. Any assignment,
transfer, pledge, hypothecation or other disposition of this Warrant
attempted contrary to the provisions of this Warrant, or any levy of
execution, attachment or other process attempted upon the Warrant, shall be
null and void and without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares have been
registered under the Securities Act, upon exercise of any part of the Warrant
and the issuance of any of the Warrant Shares, the Company shall instruct its
transfer agent to enter stop transfer orders with respect to such shares, and
all certificates representing Warrant Shares shall bear on the face thereof
substantially the following legend, insofar as is consistent with
Massachusetts law:
"The shares of common stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be sold,
offered for sale, assigned, transferred or otherwise disposed of unless
registered pursuant to the provisions of that Act or an opinion of counsel to
the Company is obtained stating that such disposition is in compliance with
an available exemption from such registration."
6. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like
date, tenor and denomination.
7. Warrant Holder Not Shareholder. Except as otherwise provided herein, this
Warrant does not confer upon the Holder any right to vote or to consent to or
receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder,
prior to the exercise hereof.
8. Communication. No notice or other communication under this Warrant shall
be effective unless the same is in writing and is mailed by first-class mail,
postage prepaid, addressed to:
(a) the Company at 1000 Main Street, Acton, Massachusetts 01720, or such
other address as the Company has designated in writing to the Holder, or
(b) the Holder at the address contained in the first paragraph of this
Warrant, or such other address as the Holder has designated in writing to the
Company.
9. Headings. The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
10. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the Commonwealth of Massachusetts without giving
effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, PAMET SYSTEMS, INC., has caused this Warrant to be signed
by a duly authorized officer as of this 10th day of April, 2000.
ATTEST: PAMET SYSTEMS, INC.
_______________________
By: ___________________________________
Name: David T. McKay
Title: President & CEO
SUBSCRIPTION
The undersigned, __________________________________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for the
purchase of _________________________ shares of the Common Stock of PAMET
SYSTEMS, INC. covered by said Warrant, and makes payment therefor in full at
the price per share provided by said Warrant.
Dated __________________ Signature__________________________
Address ____________________________
____________________________
ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _________________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer said Warrant on the books of
PAMET SYSTEMS, INC.
Dated __________________ Signature_________________________
Address ___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby assigns and transfers
unto _________________________ the right to purchase
_________________________ shares of the Common Stock of PAMET SYSTEMS, INC.
by the foregoing Warrant, and a proportionate part of said Warrant and the
rights evidenced hereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer that part of said Warrant on
the books of PAMET SYSTEMS, INC.
Dated ___________________ Signature__________________________
Address ____________________________
____________________________
<PAGE>
Exhibit 4.25: Warrant issued to Leonardo Capital fund dated December 14, 1999.
LW - 016
WARRANT
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY (WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY
WITHHELD) THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on December 13, 2004.
WARRANT TO PURCHASE COMMON STOCK
OF
PAMET SYSTEMS, INC.
FOR VALUE RECEIVED, PAMET SYSTEMS, INC. (the "Company"), a Massachusetts
corporation, hereby certifies that Leonardo Capital Fund, with an address at
Hemisphere Management (Ireland) Limited, 4th Floor, Frederick House, South
Frederick Street, Dublin 2, Ireland, or its permitted assigns, is entitled to
purchase from the Company, at any time or from time to time commencing
December 14, 1999, and prior to 5:00 P.M., Eastern Standard Time, on December
13, 2004, a total of One Hundred Thousand (100,000) fully paid and
nonassessable shares of common stock, par value $.01 per share ("Common
Stock"), of the Company for an aggregate purchase price of Two Hundred Fifty
Thousand Dollars ($250,000) (computed on the basis of $2.50 per share).
(Hereinafter, (i) said Common Stock, together with any other equity
securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock," (ii) the shares
of the Common Stock purchasable hereunder are referred to as the "Warrant
Shares," (iii) the aggregate purchase price payable hereunder for the Warrant
Shares is referred to as the "Aggregate Warrant Price," (iv) the price
payable hereunder for each of the Warrant Shares is referred to as the "Per
Share Warrant Price," (v) this Warrant, and all warrants hereafter issued in
exchange or substitution for this Warrant are referred to as the "Warrant"
and (vi) the holder of this Warrant is referred to as the "Holder.") The
number of Warrant Shares for which this Warrant is exercisable is subject to
adjustment as hereinafter provided.
This Warrant is issued by the Company pursuant to the Securities Purchase
Agreement, dated as of the date hereof, among the Company and Leonardo
Capital Fund (the "Securities Purchase Agreement"). Capitalized terms used
but not defined shall have the respective meanings ascribed to them in the
Securities Purchase Agreement.
1. Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in part from time
to time, commencing December 14, 1999, and prior to 5:00 P.M., Eastern
Standard Time, on December 13, 2004, by the Holder of this Warrant by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Subsection 9(a) hereof, together with
proper payment of the Aggregate Warrant Price, or the proportionate part
thereof if this Warrant is exercised in part.
(b) The Aggregate Warrant Price or Per Share Warrant Price shall be paid in
cash by certified or official bank check payable to the order of the Company.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which the Warrant
shall have been surrendered to the Company as provided in subsection 1(a)
above (an "Exercise Date"). At such time, the person or persons in whose name
or names any certificates for Warrant Shares shall be issuable upon such
exercise as provided in subsection 1(d) below shall be deemed to have become
the holder or holders of record of the Warrant Shares represented by such
certificates. (d) If this Warrant is exercised in part, the Holder shall be
entitled to receive a new Warrant covering the number of Warrant Shares in
respect of which this Warrant has not been exercised and setting forth the
proportionate part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such surrender of this Warrant, the Company will (a) issue a
certificate or certificates in the name of the Holder for the shares of the
Common Stock to which the Holder shall be entitled, and (b) deliver the
proportionate part thereof if this Warrant is exercised in part, pursuant to
the provisions of the Warrant.
(e) No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the
Holder an amount in cash equal to such fraction multiplied by the fair value
of a share.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and
in reserve, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, the shares of the Common Stock as from time to time
shall be receivable upon the exercise of this Warrant.
3. Adjustments.
(a) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of
shares or (iv) issue by reclassification of its Common Stock any shares of
capital stock of the Company, the number of Warrant Shares for which this
Warrant may be exercised shall be adjusted so that if the Holder surrendered
this Warrant for exercise after such action the Holder would be entitled to
receive the number of shares of Common Stock or other capital stock of the
Company which he would have been entitled to receive had such Warrant been
exercised immediately prior to such action. An adjustment made pursuant to
this subsection (a) shall become effective immediately after the record date
in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made
pursuant to this subsection (a), the Holder of this Warrant shall become
entitled to receive shares of two or more classes of capital stock or shares
of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in
a written notice to the Holder of this Warrant promptly after such
adjustment) shall determine the allocation of the adjusted Per Share Warrant
Price between or among shares of such classes of capital stock or shares of
Common Stock and other capital stock.
(b) In case of any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the holder shall have the right thereafter to
exercise this Warrant for the kind and amount of securities, cash or other
property which he would have owned or have been entitled to receive
immediately after such consolidation, merger, statutory exchange, sale or
conveyance had such Warrant been exercised immediately prior to the effective
date of such consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in
the application of the provisions set forth in this Section 3 with respect to
the rights and interests thereafter of the Holder to the end that the
provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the
conversion of this Warrant. The above provisions of this subsection (b) shall
similarly apply to successive consolidations, mergers, statutory exchanges,
sales or conveyances. Notice of any such consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so proposed to be made,
shall be mailed to the Holder not less than 30 days prior to such event. A
sale of all or substantially all of the assets of the Company for a
consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.
(c) In the event of any adjustment to the number of Warrant Shares issuable
upon exercise of this Warrant, the Per Share Warrant Price shall be adjusted
by multiplying the Per Share Warrant Price in effect immediately prior to
such adjustment by a fraction the numerator of which is the aggregate number
of Warrant Shares for which this Warrant may be exercised immediately prior
to such adjustment and the denominator of which is the aggregate number of
Warrant Shares for which this Warrant may be exercised immediately after such
adjustment.
(d) Whenever the Per Share Warrant Price is adjusted as provided in this
Warrant and upon any modification of the rights of the Holder of this Warrant
in accordance with this Section 3, the Company shall promptly prepare a
certificate of an officer of the Company, setting forth the Per Share Warrant
Price and the number of Warrant Shares after such adjustment or modification,
a brief statement of the facts requiring such adjustment or modification and
the manner of computing the same and cause a copy of such certificate to be
mailed to the Holder.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the Common
Stock represented by each and every certificate for Warrant Shares delivered
on the proper exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not
subject to preemptive rights, and the Company will take all such actions as
may be necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. Subject to Section 6(e) hereof, the Company further
covenants and agrees that it will pay, when due and payable, any and all
Federal and state stamp, original issue or similar taxes that may be payable
in respect of the issuance of any Warrant Shares or certificates therefor.
The Holder covenants and agrees that it shall pay, when due and payable, any
and all federal, state and local income or similar taxes that may be payable
in respect of the issuance of any Warrant Shares or certificates therefor.
5. Transfer
(a) Securities Laws. Neither this Warrant nor the Warrant Shares issuable
upon the exercise hereof have been registered under the Securities Act of
1933, as amended (the "Securities Act"), or under any state securities laws
and unless so registered may not be transferred, sold, pledged, hypothecated
or otherwise disposed of unless an exemption from such registration is
available. In the event the Holder desires to transfer this Warrant or any of
the Warrant Shares issued, the Holder must give the Company prior written
notice of such proposed transfer including the name and address of the
proposed transferee. Such transfer may be made only either (i) upon
publication by the Securities and Exchange Commission (the "Commission") of a
ruling, interpretation, opinion or "no action letter" based upon facts
presented to said Commission, or (ii) upon receipt by the Company of an
opinion of counsel acceptable to the Company to the effect that the proposed
transfer will not violate the provisions of the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the
rules and regulations promulgated under either such act, or to the effect
that the Warrant or Warrant Shares to be sold or transferred have been
registered under the Securities Act of 1933, as amended, and that there is in
effect a current prospectus meeting the requirements of Subsection 11(a) of
the Securities Act, which is being or will be delivered to the purchaser or
transferee at or prior to the time of delivery of the certificates evidencing
the Warrant or Warrant Shares to be sold or transferred.
(b) Conditions to Transfer. Prior to any such proposed transfer (including,
without limitation, a transfer by will or pursuant to the laws of descent and
distribution), and as a condition thereto, if such transfer is not made
pursuant to an effective registration statement under the Securities Act, the
Holder will, if requested by the Company, deliver to the Company (i) an
investment covenant, in form and substance equivalent to that signed by the
original Holder of this Warrant, signed by the proposed transferee, (ii) an
agreement by such transferee to the restrictive investment legend set forth
herein on the certificate or certificates representing the securities
acquired by such transferee, (iii) an agreement by such transferee that the
Company may place a "stop transfer order" with its transfer agent or
registrar, and (iv) an agreement by the transferee to indemnify the Company
to the same extent as set forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder understands the
meaning and legal consequences of this Section 6, and the Holder hereby
agrees to indemnify and hold harmless the Company, its representatives and
each officer and director thereof from and against any and all loss, damage
or liability (including all attorneys' fees and costs incurred in enforcing
this indemnity provision) due to or arising out of (a) the inaccuracy of any
representation or the breach of any warranty of the Holder contained in, or
any other breach by the Holder of, this Warrant, (b) any transfer of the
Warrant or (c) any untrue statement or omission to state any material fact in
connection with the investment representations or with respect to the facts
and representations supplied by the Holder to counsel to the Company upon
which its opinion as to a proposed transfer shall have been based.
(d) Transfer. Upon surrender of this Warrant to the Company or at the office
of its stock transfer agent, if any, with assignment documentation duly
executed and funds sufficient to pay any transfer tax, and upon compliance
with the foregoing provisions, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment, and this Warrant shall promptly be canceled. Any assignment,
transfer, pledge, hypothecation or other disposition of this Warrant
attempted contrary to the provisions of this Warrant, or any levy of
execution, attachment or other process attempted upon the Warrant, shall be
null and void and without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares have been
registered under the Securities Act, upon exercise of any part of the Warrant
and the issuance of any of the Warrant Shares, the Company shall instruct its
transfer agent to enter stop transfer orders with respect to such shares, and
all certificates representing Warrant Shares shall bear on the face thereof
substantially the following legend, insofar as is consistent with
Massachusetts law:
"The shares of common stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be sold,
offered for sale, assigned, transferred or otherwise disposed of unless
registered pursuant to the provisions of that Act or an opinion of counsel to
the Company is obtained stating that such disposition is in compliance with
an available exemption from such registration."
6. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like
date, tenor and denomination.
7. Warrant Holder Not Shareholder. Except as otherwise provided herein, this
Warrant does not confer upon the Holder any right to vote or to consent to or
receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder,
prior to the exercise hereof.
8. Communication. No notice or other communication under this Warrant shall
be effective unless the same is in writing and is mailed by first-class mail,
postage prepaid, addressed to:
(a) the Company at 1000 Main Street, Acton, Massachusetts 01720, or such
other address as the Company has designated in writing to the Holder, or
(b) the Holder at the address contained in the first paragraph of this
Warrant, or such other address as the Holder has designated in writing to the
Company.
9. Headings. The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
10. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the Commonwealth of Massachusetts without giving
effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, PAMET SYSTEMS, INC., has caused this Warrant to be signed
by a duly authorized officer as of this 10th day of April, 2000.
ATTEST: PAMET SYSTEMS, INC.
_______________________
By:___________________________________
Name: David T. McKay
Title: President & CEO
SUBSCRIPTION
The undersigned, __________________________________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for the
purchase of _________________________ shares of the Common Stock of PAMET
SYSTEMS, INC. covered by said Warrant, and makes payment therefor in full at
the price per share provided by said Warrant.
Dated __________________ Signature__________________________
Address ____________________________
____________________________
ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _________________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer said Warrant on the books of
PAMET SYSTEMS, INC.
Dated __________________ Signature_________________________
Address ___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby assigns and transfers
unto _________________________ the right to purchase
_________________________ shares of the Common Stock of PAMET SYSTEMS, INC.
by the foregoing Warrant, and a proportionate part of said Warrant and the
rights evidenced hereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer that part of said Warrant on
the books of PAMET SYSTEMS, INC.
Dated ___________________ Signature__________________________
Address ____________________________
____________________________
<PAGE>
Exhibit 23: Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-41029) pertaining to the Pamet Systems, Inc. 1990 Stock
Option Plan of our report dated March 24, 2000, with respect to the financial
statements of Pamet Systems, Inc. included in its Annual Report (Form 10-KSB)
for the year ended December 31, 1999, filed with Securities and Exchange
Commission.
Carlin, Charron & Rosen LLP
Worcester, Massachusetts
March 24, 2000
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