SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1995
Commission File No. 0-18686
PAK MAIL CENTERS OF AMERICA, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Colorado 84-0934575
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3033 S. Parker Road, Suite 1200, Aurora, Colorado 80014
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code
(303) 752-3500
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes [X] No [ ]
As of October 13, 1995, there were outstanding 2,989,482 shares of the
issuer's Common Stock, par value $.001 per share.
Transitional Small Business Disclosure Format
Yes [ ] No [X]
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY
Consolidated Balance Sheets
<CAPTION>
AUGUST NOVEMBER
31, 1995 30, 1994
(Unaudited)
------------ ----------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents 13,802 157,832
Accounts receivable, net of allowance
of $154,873 and $153,000 267,250 306,246
Inventories 38,460 26,783
Prepaid expenses and other current assets 43,345 28,848
------------ ----------
Total current assets 362,857 519,709
------------ ----------
Property and equipment, at cost,
net of accumulated depreciation 61,035 70,921
------------ ----------
Other assets:
Notes receivable, net: 663,855 646,922
Investment in assets held for sale 67,186 101,461
Deposits and other 47,780 73,688
Deferred franchise costs 41,176 63,638
------------ ----------
819,997 885,709
------------ ----------
1,243,889 1,476,339
============ ==========
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt 16,015 21,084
Trade accounts payable 268,668 235,267
Accrued commissions 29,628 22,800
Other accrued expenses 84,986 83,443
Deposits from franchisees 2,500 7,500
Due to advertising fund 161 29,256
------------ ----------
Total current liabilities 401,958 399,350
------------ ----------
Deferred revenue 445,645 664,891
Deferred rent 0 4,928
Long-term debt 43,365 51,286
Stockholders' equity:
Series A redeemable preferred stock,
$1000 par value; 8% cumulative;
1,500 shares authorized; 1,216.668
shares issued and outstanding 1,216,668 1,216,668
Series B redeemable preferred stock,
$1000 par value; 8% cumulative;
1,000 shares authorized; 1,000
shares issued and outstanding 1,000,000 1,000,000
Common stock, $.001 par value;
200,000,000 shares authorized;
2,989,482 and 2,989,482 shares
issued and outstanding 2,989 2,989
Additional paid-in capital 5,026,454 5,026,454
Accumulated deficit -6,893,190 -6,890,227
------------ ----------
Total stockholders' equity 352,921 355,884
------------ ----------
1,243,889 1,476,339
============ ==========
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY
Consolidated Statement of Operations
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
AUGUST,31 AUGUST,31
(Unaudited) (Unaudited)
------------------- ---------------------
1995 1994 1995 1994
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
REVENUE
Individual franchise fees 322,240 223,900 675,340 455,450
Area franchise fees 11,578 84,603 277,360 106,076
Royalties from franchisees 348,671 305,460 1,138,372 1,001,059
Sales of equipment, supplies
and services 262,856 260,808 728,188 592,334
Interest income 2,259 359 8,066 1,738
Other 22,193 22,870 63,894 72,779
--------- --------- --------- ----------
969,797 898,000 2,891,220 2,229,436
--------- --------- --------- ----------
COST AND EXPENSES
Royalties paid to area franchisees 78,284 55,795 253,111 213,093
Commissions on franchise sales 162,999 90,199 346,411 197,472
Cost of sales of equipment,
supplies and services 235,547 232,254 628,967 494,195
Advertising 34,034 39,586 131,474 136,340
Other selling, general
and administrative 450,931 585,163 1,493,395 1,652,403
Depreciation and amortization 11,703 11,365 34,625 30,242
Interest 3,720 572 6,200 2,079
--------- --------- --------- ----------
977,218 1,014,934 2,894,183 2,725,824
--------- --------- --------- ----------
Net income (loss) -7,421 -116,934 -2,963 -496,388
========= ========= ========= ==========
Net income (loss) per common share * * * *
========= ========= ========= ==========
Weighted average number of common
shares outstanding 2,989,482 2,989,482 2,989,482 2,989,482
========= ========= ========= ==========
* Amount less than $.01
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
<CAPTION>
NINE MONTHS ENDED
AUGUST 31
(Unaudited)
1995 1994
--------- ----------
<S> <C> <C>
Cash flows from operating activities
Net income(loss) $ -2,963 $ -496,388
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 34,625 30,242
Amortization of discount on note payable 2,079 2,079
Deferred revenue -219,246 361,679
Deferred rent -4,928 -9,000
Change in operating assets and liabilities-
Accounts receivable 38,996 56,106
Inventories -11,677 15,954
Prepaids and deferred franchise costs 7,965 -4,348
Notes receivable -16,933 -308,379
Deposits and other 25,908 -9,400
Trade accounts payable 33,401 3,869
Accrued expenses 8,371 27,288
Deposits from Franchisees -5,000 0
Due to Ad Fund -29,095 -22,103
--------- ----------
Net cash used by operating activities -138,497 -352,401
--------- ----------
Cash flows from investing activities
Capital expenditures -24,739 -58,352
Purchase of assets held for sale -11,413 -179,672
Sales of assets held for sale 45,688 190,761
--------- ----------
Net cash used by investing activities 9,536 -47,263
--------- ----------
Cash flows from financing activities
Payments on Long-term debt -15,069 300,000
--------- ----------
Net cash provided (used) by financing activities -15,069 300,000
--------- ----------
Net (decrease) in cash and cash equivalents -144,030 -99,664
Cash and cash equivalents at beginning of year 157,832 205,432
--------- ----------
Cash and cash equivalents at end of period 13,802 $ 105,768
========= ==========
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ 3,720 $ 2,079
========= ==========
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
PAK MAIL CENTERS OF AMERICA, INC.
Notes to Consolidated Financial Statements
Note 1 ORGANIZATION AND BUSINESS
Pak Mail Centers of America, Inc. was incorporated in Colorado in 1984 and is
engaged in the business of marketing and franchising Pak Mail service centers
and retail stores which specialize in custom packaging and crating of items
to be mailed or shipped. For the period from December 1, 1994 through
October 12, 1995, the Company awarded 42 individual franchises and as of
October 12, 1995, the Company had 274 individual franchise agreements in
existence.
The consolidated financial statements include the accounts of Pak Mail Centers
of America, Inc. and its wholly owned subsidiary, Pak Mail Crating and Freight
Service, Inc. (Company). All significant intercompany transactions and
balances have been eliminated in consolidation.
Note 2 BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by the
Company. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In the opinion of the Company's
management, the disclosures made are adequate to make the information presented
not misleading, and the consolidated financial statements contain all
adjustments necessary to present fairly the financial position as of August 31,
1995, results of operations for the three months and nine months ended
August 31, 1995 and 1994 and cash flows for the nine months ended
August 31, 1995 and 1994.
The results of operations for the nine months ended August 31, 1995 are not
necessarily indicative of the results to be expected for the full year.
Note 3 REVERSE STOCK SPLIT
On February 24, 1995, the shareholders of the Company approved an amendment of
the Company's Articles of Incorporation (the "Amendment") to effect a
one-for-fifty reverse split of the Common Stock (the "Reverse Stock Split").
On March 24, 1995, the Amendment was filed with the Colorado Secretary of
State, and the Reverse Stock Split became effective.
Item 2. Management's Discussion and Analysis or Plan of Operation
The following information should be read in conjunction with the unaudited
consolidated financial statements included herein. See Item 1.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced cash flow deficiencies of $144,030 ($138,497 from
operations and $15,069 from financing activities, offset by cash flow of $9,536
from investing activities) during the nine months ended August 31, 1995.
Deferred revenue decreased $219,246 to $445,668 at August 31, 1995. The
decrease is primarily a result of recognition of area franchise revenue
from 2 areas that were deferred as of November 30, 1994. The Company has
deferred the recognition of revenue with respect to 7 of the 37 individual
franchises awarded during the nine months ended August 31, 1995. The Company
anticipates that the majority of the deferred individual franchise fees will
be recognized as revenue in fiscal 1995.
RESULTS OF OPERATIONS
Three months ended August 31, 1995, compared to three months ended
August 31, 1994
- ------------------------------------------------------------------------------
Total revenues increased $71,797 (8.0%) to $969,797 for the three months ended
August 31, 1995. The increase is primarily attributable to increases in,
Individual franchise fees (up 43.9% from $223,900 to $322,240) and Royalties
from franchisees (up 14.1% from $305,460 to $348,671) offset by a decrease
in Area franchise fees (down 86.3% from $84,603 to $11,578).
The $98,340 increase in Individual franchise fees represents 4 more awards
recognized during the three months ending August 31, 1995 compared to the same
period in 1994 and a differing mix of per franchise revenue recognition. The
Company recognized 17 and 13 individual franchise awards respectively during
the three months ended August 31, 1995 and 1994.
The $43,211 increase in royalties is due to increases in the average store
volumes and number of stores open.
The $73,025 decrease in revenue from Area franchise fees is primarily the
result of fewer area franchise awards during the three months ended
August 31, 1995. No area awards were recognized during the three months
ending August 31, 1995. The $11,578 revenue recognized during the three
months ending August 31, 1995 represents the amortization of deferred area
revenue recorded in previous years.
Total expenses decreased $37,716 (3.7%) to $977,218 for the three months ended
August 31, 1995. The decrease is primarily attributable to a decrease in Other
selling, general and administrative (down 22.9% from $585,163 to $450,931)
offset by increases in Commissions on franchise sales (up 80.7% from $90,199
to $162,999) and Royalties paid to area franchisees (up 40.3% from $55,795
to $78,284).
<PAGE>
The $134,232 decrease in Other selling, general and administrative relates
primarily to decreases in salaries and payroll taxes, and decreases in
convention, consulting and miscellaneous expenses. The $18,383 decrease in
salaries and payroll taxes is primarily due to the elimination of a regional
sales and support office that was in operation during the three months ending
August 31, 1994. The $27,258 decrease in convention expense relates to the
timing difference of the 1995 annual convention compared to the five regional
training seminars held in 1994. The expense connected to the 1994 regional
training seminars was incurred over the second and third quarters of 1994,
whereas the expense connected to the 1995 convention was incurred in the
first and second quarters of 1995. The $17,571 decrease in consulting expenses
relates primarily to the elimination of software modifications that were
incurred during the three months ending August 31, 1994. The $49,854 decrease
in miscellaneous expense relates primarily to the losses recorded on two stores
the Company owned and sold at an amount less that their carrying value during
the three months ending August 31, 1994. No such losses were recorded during
the comparable period in 1995.
The $72,800 increase in Commissions on franchise sales is due primarily to the
increased number of individual and area franchise sales recognized during the
three months ending August 31, 1995 compared to the same prior year period and
the differing mix of per franchise commission paid. The Company paid
commissions on 17 and 13 individual franchise awards respectively during
the three months ended August 31, 1995 and 1994.
The $22,489 increase in royalties paid to area franchisees is due to the
increase in Royalties from franchisees and the percentage of stores operating
within area franchisees regions.
Nine months ended August 31, 1995, compared to nine months ended
August 31, 1994
- ------------------------------------------------------------------------------
Total revenues increased $661,784 (29.7%) to $2,891,220 for the nine months
ended August 31, 1995. The increase is primarily attributable to increases in
Individual franchise fees (up 48.3% from $455,450 to $675,340), Area franchise
fees (up 161.5% from $106,076 to $277,360), Royalties from franchisees (up
13.7% from $1,001,059 to $1,138,372) and Sales of equipment, supplies and
services (up 22.9% from $592,334 to $728,188).
The $219,890 increase in Individual franchise fees represents 6 more awards
recognized during the nine months ending August 31, 1995 compared to the same
period in 1994 and a differing mix of per franchise revenue recognition. The
Company recognized 35 and 29 individual franchise awards respectively during
the nine months ended August 31, 1995 and 1994.
The $171,284 increase in revenue from Area franchise fees represents 3 domestic
awards and 2 international awards recognized during the nine months ended
August 31, 1995 compared to 2 domestic award during the same prior year period.
The $137,313 increase in royalties is due to increases in the average store
volumes and number of stores open.
<PAGE>
The $135,854 increase in Sales of equipment, supplies and services is primarily
due to the increased number of new franchisees that purchased equipment during
the nine months ending August 31, 1995 compared to the same prior year period.
Total expenses increased $168,359 (6.2%) to $2,894,183 for the nine months
ended August 31, 1995. The increase is primarily attributable to increases in
Commissions on franchise sales (up 75.4% from $197,472 to $346,411), Cost of
sales of equipment, supplies and services (up 27.3% from $494,195 to $628,967)
and Royalties paid to area franchisees (up 18.8% from $213,093 to $253,111)
offset by a decrease in Other selling, general and administrative (down 9.6%
from $1,652,403 to $1,493,395).
The $148,939 increase in Commissions is due primarily to the increased number
of individual and area franchise sales made during the first nine months ending
August 31, 1995 compared to the same prior year period and the differing mix of
per franchise commission paid. The Company paid commissions on 35 and 29
individual franchise awards respectively during the nine months ended
August 31, 1995 and 1994.
The $134,772 increase in Cost of sales of equipment, supplies and services is
primarily due to the increased number of new franchisees that purchased
equipment during the nine months ending August 31, 1995 compared to the same
prior year period.
The $40,018 increase in Royalties paid to area franchisees is due to the
increase in Royalties from franchisees and the percentage of stores operating
within area franchisees' regions.
The $159,008 decrease in Other selling, general and administrative relates
primarily to decreases in salaries and payroll taxes, and decreases in
convention, consulting, legal and miscellaneous expenses offset by an increase
in printing expense. The $42,827 decrease in salaries and payroll taxes is
primarily due to the elimination of a regional sales and support offices that
were in operation during the nine months ending August 31, 1994. The $14,289
decrease in convention expense relates to the savings related to holding one
annual convention in 1995 compared to the five regional training seminars held
in 1994. The $43,436 decrease in consulting expenses relates primarily to the
elimination of software modifications and regional office expenses that were
incurred during the nine months ending August 31, 1994. The $30,385 decrease
in legal expense is primarily due to elimination of litigation costs that the
Company incurred during the nine months ending August 31, 1994. The $48,263
decrease in miscellaneous expense relates primarily to the losses recorded on
two stores the Company owned and sold at an amount less that their carrying
value during the nine months ending August 31, 1994. No such losses were
recorded during the comparable period in 1995. The $22,558 increase in
Printing costs relates primarily to the shareholder mailings and mailing
of operation manual updates to the existing franchise network.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On or about June 23, 1995, a former employee of the Company filed complaints
with the Equal Employment Opportunity Commission and the United States
District Court for the District of Colorado captioned Kristine Gilbert v. John
Kelly, David Watson, Pak Mail Centers of America, Inc. and D & G Holdings,
Inc., Civil Action No. 95-WY-1592CB, alleging sexual harassment and
constructive discharge under Title VII of the Civil Rights Act of 1964.
Plaintiff seeks declaratory and injunctive relief and compensatory and
punitive damages in unspecified amounts. The Company intends to vigorously
defend this action and believes that the resolution of this action will not
have a material adverse effect on the Company's financial condition.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K.
None.
<PAGE>
PAK MAIL CENTERS OF AMERICA, INC.
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.
PAK MAIL CENTERS OF AMERICA, INC.
(Registrant)
Date: By: /s/Raymond S. Goshorn
October 13, 1995 Raymond S. Goshorn
Secretary and Treasurer
Date: By: /s/John E. Kelly
October 13, 1995 John E. Kelly
President
