U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-QSB
Mark one
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition period from _________to _________
Commission File No. 1-10623
Pamet Systems, Inc.
____________________________________________________________________
(exact name of small business issuer as specified in its charter)
Massachusetts 04-2985838
____________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Main Street, Acton, Massachusetts 01720
____________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (978) 263-2060
--------------
Check whether the issurer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12
months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the close of the period covered by this report:
Title of each class Number of share outstanding
------------------- ---------------------------
Common stock 3,475,238
($.01 par value)
Transitional Small Business Disclosure Format
YES NO X
------ ------
<PAGE>
PAMET SYSTEMS, INC.
FORM 10-QSB TABLE OF CONTENTS
Part I - Financial Information
Item 1 - Financial Statements
Condensed Balance Sheets
March 31, 2000 and December 31, 1999
Condensed Statements of Operations
for the quarter ended March 31, 2000
and 1999
Condensed Statement of Cash Flows
for the three months ended March 31,
2000 and 1999
Item 2 - Management's Discussion and Analysis of
Financial Condition or Plan of Operations
Part II - Other Information
Item 1 - Legal Proceedings
Item 2 - Changes in Securities
Item 3 - Defaults Upon Senior Securities
Item 4 - Submission of Matters to a Vote of
Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
Signature(s)
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
Condensed Balance Sheets March 31, December 31,
2000 1999
--------- ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $132,888 $40,207
Accounts receivable, net of allowance for
doubtful accounts of $110,000 and factored 214,292 619,066
receivables
Accounts Receivable, factored 57,073 53,931
Inventory, net of reserve of $15,000 14,415 11,745
Prepaid expenses and other current assets 53,131 94,243
------ ------
TOTAL CURRENT ASSETS 471,799 819,192
PROPERTY AND EQUIPMENT, net 104,949 110,590
OTHER ASSETS 4,190 4,190
RESTRICTED CASH -- --
BLDG LEASE DEPOSIT 80,000 80,000
CAPITALIZED SOFTWARE DEVELOPMENT COSTS 114,137 130,442
------- -------
TOTAL ASSETS $775,075 $1,144,414
======= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $550,000 $450,000
Notes payable to related party 175,000 175,000
Due to Factor -- 57,496
Accounts payable, trade 904,118 688,292
Accounts payable, related party 28,363 32,241
Current portion of accrued interest payable
on long-term debt 77,279 54,894
Current portion of deferred gain on sale of
land and building 42,614 42,614
Accrued expenses 586,260 436,625
Deferred software maintenance revenue and
unearned support revenue 259,290 383,930
------- -------
TOTAL CURRENT LIABILITIES 2,622,924 2,321,092
ACCRUED INTEREST PAYABLE on long-term debt,
net of current portion 74,309 86,511
DEFERRED GAIN on sale of land and building,
net of current portion 227,848 238,502
LONG TERM DEBT, net current portion 835,000 1,185,000
------- ---------
TOTAL LIABILITIES 3,760,081 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; 3,475,238 issued and outstanding 34,752 32,852
Additional paid-in Capital 7,176,604 6,688,504
Accumulated deficit (10,196,362) (9,408,047)
---------- ---------
TOTAL STOCKHOLDERS DEFICIT (2,985,006) (2,686,691)
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS DEFICIT $775,075 $1,144,414
======= =========
</TABLE>
See accompanying "Notes to Financial Statements (Unaudited)"
<PAGE>
<TABLE>
<CAPTION>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
Statements of Operations
(Unaudited)
Three Months Ended
March 31
------------------
<S> <C> <C>
2000 1999
Net sales $395,861 $395,790
Cost of product 131,762 149,779
-------- --------
264,099 246,011
Operating expenses:
Personnel costs 551,342 395,794
Rent, utilities and telephone 58,220 21,972
Travel and entertainment 31,371 25,272
Professional fees 41,082 68,280
Depreciation and Amortization 28,963 20,335
Research and Development 223,372 208,799
Other operating expenses 79,911 62,636
-------- --------
Total operating expenses 1,014,261 803,088
-------- --------
Income (loss) from operations (750,162) (557,077)
Interest Income (expense), Net (38,154) (74,060)
Net Income (loss) (788,316) (631,137)
======= =======
Earnings (loss) per common share $(.23) $(.25)
===== =====
Shares used in Computing 3,475,238 2,535,250
Earnings per Share
</TABLE>
See accompanying "Notes to Financial Statements (unaudited)"
<PAGE>
<TABLE>
<CAPTION>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Net (loss) $(788,316) $(631,137)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Deferred gain on sale of land and building (10,654) --
Depreciation and amortization 45,269 20,335
Interest payable (12,202) --
Capitalized software development costs -- (58,242)
Change in assets and liabilities:
Accounts receivable, trade 404,774 189,060
Accounts receivable, factored (3,142) 56,996
Inventory (2,670) (9,321)
Prepaid expenses and other current assets 41,112 13,514
Restricted cash -- (141)
Due to factor (57,496) (65,980)
Accounts payable 215,826 2,439
Accounts payable,related parties (3,878) 1,427
Accrued expenses 149,635 44,219
Accrued interest payable on long-term debt 22,385 --
Deferred software maintenance revenue and
unearned support revenue (124,640) (103,209)
------- -------
Net cash used for operating activities (123,997) (540,040)
------- -------
Investing Activities
Expenditures for property and equipment (23,322) (5,806)
------ -----
Net cash provided by/(used for)
investing activities (23,322) (5,806)
------ -----
</TABLE>
(continued on following page)
<PAGE>
<TABLE>
<CAPTION>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Financing activities:
Proceeds from long-term debt-convertible
promissory notes -- 350,000
Proceeds from related party notes -- 110,000
Payment of mortgage -- (4,270)
Issuance of capital stock 240,000 64
Net change line of credit-vendor -- 128,286
--------- -------
Net cash provided by financing
activities 240,000 584,080
------- -------
Net increase (decrease) in cash 92,681 38,234
Cash at beginning of period 40,207 54,817
------ ------
Cash at end of period 132,888 93,051
======= ======
Supplemental disclosure of cash
flow information:
Cash paid for interest: $34,590 $31,307
Summary of non-cash financing activites
Conversion of convertible promissory notes
to capital stock 250,000 --
</TABLE>
See accompanying "Notes to Financial Statements (Unaudited)"
<PAGE>
PAMET SYSTEMS, INC.
Notes to Condensed Financial Statements
(Unaudited)
Note (1) Statement Presentation
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of March
31, 2000, the results of operations for the three month period and
changes in cash flows for the period then ended. There were no material
unusual charges or credits to operations during the recently completed
fiscal quarter.
The results reported for the three months ended March 31, 2000 are not
necessarily indicative of the results of operations which may be expected
for the entire year.
Note (2) Mortgage and Subsequent Sale and Lease Back of Corporate Training,
Development and Headquarters Facility
On April 21, 1992 the Company consummated an agreement with the
Lexington Savings Bank of Lexington, MA. to mortgage the Company's
development, training and headquarters facility, located at 1000 Main Street,
Acton, Massachusetts. The original principal amount of the mortgage was
$560,000. In October 1997 the note was extended for a one year term through
October 21, 1998 with monthly payments of $5,423.00, determined according to a
twenty-year amortization period including interest at 10.0%. Lexington
Savings Bank's parent company, Affiliated Community Bankcorp, Inc. was
purchased by UST Corp., the parent company of USTrust in August 1998. The
mortgage was not renewed in October 1998.
The Company entered into a second mortgage agreement on June 16, 1999
with Area Realty, LLC, the eventual buyer of the building, for $100,000 at 11%
per annum. The principal and accrued interest were to be repaid in one
payment on the earlier of December 31, 1999 or the date upon which the
building was sold by the Company to Area Realty, LLC.
On August 6, 1999 the Company sold the facility to Area Realty, LLC for
$1,150,000 and signed a lease back agreement with the buyer for 7 years. As
part of the lease back agreement with the buyer of the facility, the Company
was required to place $80,000 on deposit with the buyer. The balance on the
first and second mortgages and all accrued interest were paid in full at the
time of the sale. The sale of the building resulted in a gain of
approximately $298,000 that the Company deferred and is recognizing as a
reduction to rent expense over the term of the lease. The monthly 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 the percentage increase in the Consumer Price Index
for Urban Wage Earners and Clerical Workers for the preceding year up to a
maximum of three percent per annum.
<PAGE>
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
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. In October 1999, the Company announced
a three year joint venture agreement with Hanahan Computer Designs of Milford,
Connecticut to develop the next generation of laptop based crime scene
investigation toolkits for the public safety market, "The Investigator's
Toolkit". The Company's revenues consist primarily of sales of these software
applications, the associated hardware and systems integration, and support and
update service fees.
Although the Company's revenues for the 3 month period ended March 31,
2000 (the 2000 period) remained flat at $395,000 compared to the 3 month
period ending March 31, 1999 (the 1999 period), the Company is experiencing
strong bookings for its new NT-based products. Late in the 2000 period, the
Company received an order from SM&A Corporation, the prime contractor for the
Utica, NY Police Department. The SM&A Corporation has asked the Company to
install the new PoliceServer NT records management system, the CADServer NT
dispatch system and the Mobile system in Utica, NY. The Utica installation is
part of the Central New York Law Enforcement Network Demonstration Project
that is funded by the Department of Justice and this project will serve as a
model of current law enforcement technology for mid-sized departments in the
Central New York Area. The project is being managed by the National Law
Enforcement Corrections Technology Center (NLECTC) in Rome, NY and it is
expected that the New York project will serve as a model for installations
within NLECTC's thirteen state jurisdiction. The Company's core products have
been completely rebuilt using modern design tools and databases and the entire
suite utilizes the Windows NT operating system. The Company believes that its
fully integrated native NT suite of products is one of only a few on the
market today and positions the Company for future revenue growth. The
bookings for the second quarter of 2000 and beyond are primarily for the NT
core products. However,the shift of sales back to the core NT products that
was experienced late in 1999 was not reflected in the 2000 period revenues, as
the first quarter 2000 sales were composed almost entirely of support revenues
and the Mobile product.
The Company has continued development on the NT product suite during
the 2000 period. This development has focused on system refinements and added
functionality resulting from knowledge gained from the installations and
production utilization of the NT product in seven communities in three
states. The company spent approximately $223,000 on external resources and
$171,000 of dedicated internal personnel on the development effort in the 2000
period.
The primary focus of management during the 2000 period has been in
three areas: current revenue and development of a sales pipeline for the NT
product; completion of the development, integration of new functionality, and
system refinements; and the acquisition of adequate funding to enable growth.
During the 2000 period, a Vice President of Marketing joined the Company and
will focus on the development of an innovative communication, marketing and
product packaging strategy. Together with the Company's Vice President of
Sales, this team will direct the Company's sales and marketing efforts.
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
funding 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 continues to see 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 all of these
opportunities for sales growth, 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.
Three Months Ended March 31, 2000 vs. Three Months Ended March 31, 1999
Net sales in the 1999 period remained flat at $395,861 compared to
$395,790 for the 1999 period. The revenues for the 2000 period were comprised
of one FireServer NT system, one Imaging system, and fourteen add-on Mobile
units compared with two hardware upgrades, two Imaging systems, and three
Mobile systems in the 1999 period. Mobile sales in both the 2000 and 1999
periods represented 36.8% of revenues. Support revenues increased 14.7% to
$181,269 for the 2000 period from $158,071 for the 1999 period reflecting the
increase in the customer base from the 1999 period. Cost of product decreased
12.0% or $18,017 to $131,762 for the 2000 period from $149,779 for the 1999
period despite comparable revenues in the two periods. The resulting increase
in gross margin from from 62.2% in the 1999 period to 66.7% in the 2000 period
can be attributed to the increase in the support revenues, improvement in
system margins, and additional revenue from services. Mobile and Imaging
margins were consistent for the two periods.
Operating expenses increased $211,173 or 26.3% to $1,014,261 for the
2000 period compared to $803,088 for the 1999 period primarily due to the
addition of sales and marketing resources, continued spending on product
development, and the sale and leaseback of the Company headquarters building.
Gross expenditures, including capitalized spending on the NT suite of products
during the first quarter of 1999 of $58,242, only reflect an increase $152,931
or 17.8%.
Personnel costs increased 39.3% to $551,342 for the 2000 period
compared to $395,794 for the 1999 period. The major reasons the for the
increase in personnel spending were the hiring of a Vice President of Sales, a
Vice President of Marketing, a Senior Database Engineer, a Product Development
Engineer for the new "Investigator's Toolkit" and three contract employees
focusing on forms and documentation for the NT product line. These salaries
and the associated costs including FICA, Medicare, unemployment, and health
insurance of these new employees constitute a significant portion of the
increase. These resources support a shift in the Company's focus from
development to sales and marketing. The engineering resources are necessary
to support the NT product line on an ongoing basis. The Company will continue
to add strategic personnel as necessary to support expected revenue growth
with an expanded market. The Company also instituted an employee incentive
plan late in 1997 that provides for awards based on achievement of Company
goals set by the Board of Directors. The amount of this incentive has
increased significantly from the 1999 period to the 2000 period.
Rent, utilities and telephone increased 165.0% to $58,220 for the 2000
period from $21,972 for the 1999 period due primarily to the sale and lease
back of the headquarters facility located in Acton, MA. The Company has
agreed to lease the building for seven years on a triple net lease. (See Note
2) Travel and entertainment expenses increased $6,099 or 24.1% to $31,371 for
the 2000 period from $25,272 for the 1999 period. This increase primarily
reflects the additional travel related to sales, trade shows, and system
installations outside Massachusetts. The Company has not replaced the
salesperson in the Southeast region resulting in headquarters personnel
covering that territory. Professional fees decreased 39.8% to $41,082 for the
2000 period from $68,280 for the 1999 period due to decreased legal fees and
consulting expenses. The decrease in legal fees resulted from a reduction in
services associated with the ongoing private placement of debt and equity
financing and joint ventures. Consulting fees decreased as inhouse resources
are now being used for product documentation projects. Depreciation and
amortization expense increased 42.4% to $28,963 for the 2000 period from
$20,335 for the 1999 period reflecting the amortization of 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.
Research and development costs during the 2000 period increased
$14,573 or 7.0% to $223,372 from $208,799 in the 1999 period. However, gross
expenditures on research and development spending including the costs of
outside resources, the deployment of current staff to product development and
testing, and the capitalized 1999 spending of $58,242, was $394,335 in the
2000 period, an increase of 9.8% over gross 1999 spending of $359,268. During
the final stages of the development cycle of the NT products, the Company
continues to utilize outside resources and employees hired on short-term
contracts to accomplish product development goals while minimizing the long
term financial commitments of the Company. This stage includes refinement of
the core products, interfaces to companion products, and utilities to migrate
current customers from the VMS-based system to the NT-based system.
Other operating expenses increased 27.6% to $79,911 for the 2000
period from $62,636 for the 1999 period primarily due to increases in
marketing expenses, automobile repairs, and tax penalties.
Net interest expense for the 2000 period decreased to $38,154 from
$74,060 in the 1999 period reflecting the reversal of accrued interest expense
on the $250,000 of convertible promissory notes converted to equity during the
2000 period. As specified in the convertible promissory notes, the accrued
interest was not payable since the note was converted.
The net loss for the 2000 period was $(788,316) or $(.23) per share
compared to net loss of $631,137 or $(.25) per share for the 1999 period.
The loss is due primarily to increased operating expenses resulting from
continued product development and refinement and the increased personnel costs
which will position the Company for expected future revenue growth.
Liquidity and Capital Resources
The Company's working capital was a deficit of $(2,151,125) at March
31, 2000 compared to a deficit of $(1,501,900) at December 31, 1999 due to the
reduced sales, the impact of convertible promissory notes reclassified to
current liabilities, and the additional personnel expenses associated with the
increased corporate infrastructure.
During the first quarter of 2000, the Company secured $150,000 of
additional equity financing and received $90,000 from an investor who
exercised the warrants issued with his convertible note. In addition, during
the 2000 period three investors converted $250,000 of convertible promissory
notes to equity. Subsequent to the end of the period, an additional $200,000
in equity financing was received and two investors converted $550,000 of
convertible promissory notes to equity. During the quarter, loan commitments
from directors were increased to $450,000 from $300,000. In general, the
outstanding convertible debt funding 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 the purchase of
additional shares of common stock at the conversion price of $2.50.
Cash increased to $132,888 at March 31, 2000 from $40,207 at December
31, 1999. Accounts receivable decreased to $214,292 at March 31, 2000 from
$619,066 at December 31, 1999 due to the reduced sales for the 1999 period and
the continued use of the receivables financing agreement with Silicon Bank.
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
suite of NT-based 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. Backlog at
May ll, 2000 was approximately $1,020,000. 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 March 31, 2000, the Company had accumulated approximately
$9,875,000 of federal net operating loss carryforwards that expire
beginning in the year 2005. In addition, the Company has state net
operating losses to carryforwards of $6,675,000 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
offset income for federal tax purposes is subject to specified limitations
during periods after the corporation has undergone an "ownership change".
It has been determined that an ownership change did take place at the time
of the Registrant's initial public offering. However, the limitations on
the loss carryforward exceed the accumulated loss at the time of
the"ownership change". Thus there is no restriction on its use.
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 Registrant'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
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 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.
Forward Looking Statements
This Form 10-QSB 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;
Utica, NY project being the model for NLECTC; building a sales and marketing
initiative; growth potential in the year 2000; adequacy of funding and
corporate infrastructure to complete the NT development and support operations
and anticipated growth;and economic and competitive factors affecting market
growth. 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 and forward-looking statements for
any reason even if new information becomes available or other events occur in
the future.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
c. Sales of Securities
The Company issued the following securities in transactions that
were exempt from the registration requirements of the Securities
Act of 1933, as amended, pursuant to the exemptions afforded by
Sections 4(2) or 3(a)(9) thereof or Regulation S therunder, because
they did not constitute sales under the Securities Act:
On February 7, 2000, 40,000 shares of Pamet Systems Common Stock
were issued to an investor for the aggregate price of $90,000 or
$2.25 per share upon the exercise of warrants associated with his
convertible promissory note. On March 20, 2000, 40,000 shares of
Pamet Systems Common Stock were issued to the investor in exchange
for the surrender of a $100,000 convertible promissory note.
On March 15, 2000, 40,000 shares of Pamet Systems Common Stock
were issued to an investor in exchange for the surrender of a
$100,000 convertible promissory note.
On March 29, 2000, 20,000 shares of Pamet Systems Common Stock
were issued to an investor in exchange for the surrender of a
$50,000 convertible promissory note.
On March 29, 2000, the Company sold 50,000 shares of Pamet Systems
Common Stock for an aggregate price of $150,000 or $3.00 per share.
In connection with this agreement, the investor was granted a five
year warrant to purchase 50,000 shares of common stock at a price of
$3.00 per share.
Item 3 - Defaults Upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a vote of Security Holders
None
Item 5 - Other Information
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibits
4.26 Warrant issued to West Country Partners dated March 29, 2000
27 Financial Date Schedule
b. Reports on form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized
Pamet Systems, Inc.
-------------------------
(Registrant)
May 15, 2000 (s) Richard C. Becker
_______________________________ ______________________
Date Richard C. Becker
Vice President
Principal Financial Officer
<PAGE>
Exhibit 4.26: Warrant issued to West Country Partners Dated March 29, 2000
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 March 29, 2005.
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 March 30, 2000, and prior to 5:00 P.M., Eastern
Standard Time, on March 29, 2005, 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 Seventy Five Thousand Dollars ($175,000) (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 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 March 30, 2000, and prior to 5:00 P.M., Eastern
Standard Time, on March 29, 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 incompliance 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
<PAGE>
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____________________________
____________________________
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0
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