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 February 29, 1996
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 April 15, 1996, 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>
FEBRUARY NOVEMBER
29, 1996 30, 1995
(Unaudited)
------------ ----------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents 48,665 54,299
Accounts receivable, net of allowance
of $166,299 (1996) and $161,000 (1995) 296,667 335,377
Inventories 35,714 46,438
Prepaid expenses and other current assets 62,136 40,918
------------ ----------
Total current assets 443,182 477,032
------------ ----------
Property and equipment, at cost,
net of accumulated depreciation 58,360 53,542
------------ ----------
Other assets:
Notes receivable, net: 748,058 805,585
Investment in assets held for sale 38,307 33,921
Deposits and other 53,908 54,116
Deferred franchise costs, net 91,373 141,258
------------ ----------
931,646 1,034,880
------------ ----------
1,433,188 1,565,454
============ ==========
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt 16,002 31,242
Trade accounts payable 378,509 360,990
Accrued commissions 30,021 30,021
Other accrued expenses 119,799 89,791
Due to advertising fund 731 32,317
------------ ----------
Total current liabilities 545,062 544,361
------------ ----------
Deferred revenue 580,001 649,351
Long-term debt 10,196 13,762
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 shares
issued and outstanding 2,990 2,990
Additional paid-in capital 5,026,453 5,026,453
Accumulated deficit -6,948,182 -6,888,131
------------ ----------
Total stockholders' equity 297,929 357,980
------------ ----------
1,433,188 1,565,454
============ ==========
<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
FEBRUARY
29, 28,
(Unaudited)
---------------------
1996 1995
--------- ----------
<S> <C> <C>
REVENUE
Individual franchise fees 121,928 95,000
Area franchise fees 8,000 125,276
Royalties from franchisees 565,490 470,786
Sales of equipment, supplies
and services 121,402 215,404
Interest income 4,818 3,307
Other 15,185 28,744
--------- ---------
836,823 938,517
--------- ---------
COST AND EXPENSES
Royalties paid to area franchisees 158,239 99,583
Commissions on franchise sales 74,520 57,972
Cost of sales of equipment,
supplies and services 105,104 178,736
Advertising 50,099 40,843
Other selling, general
and administrative 490,515 539,728
Depreciation and amortization 11,211 11,602
Loss on Investment in assets
held for resale 5,945 0
Interest 1,241 1,257
--------- ---------
896,874 929,721
--------- ---------
Net income (loss) -60,051 8,796
========= =========
Net income (loss) per common share * *
========= =========
Weighted average number of common
shares outstanding 2,989,483 2,989,483
========= =========
* 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>
THREE MONTHS ENDED
FEBRUARY FEBRUARY
29, 28,
1996 1995
(Unaudited)
--------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income(loss) $ -60,051 $ 8,796
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 11,211 11,602
Amortization of discount on note payable 693 693
Deferred revenue -69,350 -28,158
Deferred rent 0 -3,000
Change in operating assets and liabilities-
Accounts receivable 38,710 1,891
Inventories 10,724 0
Prepaids and deferred franchise costs 28,667 -63,202
Notes receivable 57,527 17,024
Deposits and other 208 2,989
Trade accounts payable 17,519 15,241
Accrued expenses 30,008 -19,675
Due to ad fund -31,586 -17,533
--------- -----------
Net cash used by operating activities 34,280 -73,332
--------- -----------
Cash flows from investing activities
Capital expenditures -16,029 -5,876
Purchase of assets held for sale -4,386 -5,568
--------- -----------
Net cash used by investing activities -20,415 -11,444
--------- -----------
Cash flows from financing activities
Payments on long-term debt -19,499 -3,336
--------- ----------
Net cash provided (used) by financing activities -19,499 -3,336
--------- ----------
Net (decrease) in cash and cash equivalents -5,634 -88,112
Cash and cash equivalents at beginning of year 54,299 157,832
--------- ----------
Cash and cash equivalents at end of period 48,665 $ 69,720
========= ==========
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ 1,241 $ 1,257
========= ==========
<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, 1995 through April 15, 1996, the
Company awarded 13 individual franchises and as of April 15, 1996,
the Company had 280 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 February 29, 1996, results of operations for the three months
ended February 29, 1996 and February 28, 1995 and cash flows for
the three months ended February 29, 1996 and February 28, 1995.
The results of operations for the three months ended February 29,
1996 are not necessarily indicative of the results to be expected
for the full year.
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced cash flow deficiencies of $5,635 ($20,415
from investing activities and $19,499 from financing activities
offset by $34,280 provided from operating activities) during the
three months ended February 29, 1996.
Deferred revenue decreased $69,350 to $580,001 at February 29,
1996. The decrease is primarily a result of recognizing revenue on
4 of the 8 individual franchise fees that were deferred as of
November 30, 1995. The Company has deferred the recognition of
revenue with respect to 2 of the 5 individual franchises awarded
during the three months ended February 29, 1996. The Company
anticipates that all of the deferred individual franchise fees will
be recognized as revenue in fiscal 1996.
RESULTS OF OPERATIONS
Three months ended February 29, 1996, compared to three months
ended February 28, 1995
Total revenues decreased $101,694 (10.8%) to $836,823 for the three
months ended February 29, 1996. The decrease is primarily
attributable to decreases in Area franchise fees (down 93.6% from
$125,276 to $8,000) and Sales of equipment, supplies and services
(down 43.6% from $215,404 to $121,402) partially offset by
increases in Royalties from franchisees (up 20.1% from $470,786 to
$565,490) and Individual franchisee fees (up 28.3% from $95,000 to
$121,928).
The $117,276 decrease in revenue from Area franchise fees is
primarily due to no awards recognized during the three months ended
February 29, 1996 compared to two awards recognized during the same
period in 1995.
The $94,002 decrease in Sales of equipment, supplies and services
is primarily due to the decrease in the number of new franchisees
that purchased equipment during the three months ending February
29, 1996 compared to the same prior year period. The Company
opened 8 stores during the three months ended February 29, 1996
compared to 15 for the same prior year period.
The $94,704 increase in royalties is due to increases in the
average store volumes and number of stores open.
The $26,928 increase in Individual franchise fees represents the
recognition of revenue from two additional franchises during the
three months ending February 29, 1996 compared to the same prior
year period and a differing mix of per franchise revenue
recognition.
Total expenses decreased $32,847 (3.5%) to $896,874 for the three
months ended February 29, 1996. The decrease is primarily
attributable to a decreases in Cost of sales of equipment, supplies
and services (down 41.2% from $178,736 to $105,104) and Selling,
general and administrative (down 9.1% from $539,728 to $490,515)
partially offset by an increase in Royalties paid to area
franchisees (up 58.9% from $99,583 to $158,239).
The $73,632 decrease in Cost of sales of equipment, supplies and
services is primarily due to the decrease in the number of new
franchisees that purchased equipment during the three months ending
February 29, 1996 compared to the prior year period.
The $49,213 decrease in Selling, general and administrative relates
primarily to an decreases in employee benefits, convention expense
and the elimination of the regional office the Company maintained
during fiscal 1995. The $19,420 decrease in employee benefits
relates to an unusually high occurrence of employee health claims
during the first quarter of 1995. Through the first quarter of
fiscal 1995, the Company participated in a self funded health
insurance program where the Company is responsible for the first
$5,000 of each employee claim incurred. In October 1995, the
Company switched health insurance coverage to a fixed premium
coverage program. The $14,161 decrease in convention expense
relates to the 1995 annual convention. The Company does not plan
to hold a convention in fiscal 1996.
The $58,656 increase in Royalty rebates relate to the increase in
percentage of stores that operate within area marketer regions and
an increase in the average store volumes.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Irwin Jacobs v. Pak Mail Centers of America, Inc. and South Florida
Realprop, Inc. d/b/a/ Pak Mail Centers of America Southern Region,
Civil Action, File No. 95A4565-4, Cobb County, Georgia. The complaint
alleges wrongdoing on the part of the Company regarding the termination
of plaintiff's franchise agreement by the Company. Additionally,
plaintiff alleges that South Florida Realprop, Inc. ( SFRP ) provided
plaintiff with certain equipment that SFRP did not have title to, that
SFRP and PMCA somehow inappropriately diverted potential buyers of
plaintiff's franchise, that SFRP and the Company somehow deceived
plaintiff into surrendering possession of his franchise and then
inappropriately operated the franchise under his business license, that
SFRP and PMCA wrongfully sold plaintiff's terminated franchise and did
not account to plaintiff or turn over proceeds, and that
misrepresentations were made to the purchaser of the franchise
respecting plaintiff's operation of the franchise. Plaintiff seeks
$60,000 of compensatory damages and $150,000 of punitive damages, as
well as costs, interest and attorney's fees. The case was removed by
the Company to the United States District Court for the Northern
District of Georgia on August 29, 1995 and now bears a Civil Action No.
of 1 95-CV-2190-RLV. Contemporaneously with removal of the action, the
Company filed a Motion to Stay the Proceedings Pending Arbitration,
which was granted on January 29, 1996. The Company intends to contest
vigorously any arbitration filed by Jacobs.
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
April 15, 1996 Raymond S. Goshorn
Secretary and Treasurer
Date: By: /s/John E. Kelly
April 15, 1996 John E. Kelly
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> Feb-29-1996
<CASH> 48,665
<SECURITIES> 0
<RECEIVABLES> 462,966
<ALLOWANCES> 166,299
<INVENTORY> 35,714
<CURRENT-ASSETS> 443,182
<PP&E> 383,540
<DEPRECIATION> 325,180
<TOTAL-ASSETS> 1,433,188
<CURRENT-LIABILITIES> 545,062
<BONDS> 0
<COMMON> 2,990
0
2,216,668
<OTHER-SE> (1,921,729)
<TOTAL-LIABILITY-AND-EQUITY> 1,433,188
<SALES> 121,402
<TOTAL-REVENUES> 836,823
<CGS> 105,104
<TOTAL-COSTS> 337,863
<OTHER-EXPENSES> 557,770
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,241
<INCOME-PRETAX> (60,051)
<INCOME-TAX> 0
<INCOME-CONTINUING> (60,051)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (60,051)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
