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 May 31, 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 July 12, 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>
MAY NOVEMBER
31, 1996 30, 1995
(Unaudited)
------------ ----------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents 82,325 54,299
Accounts receivable, net of allowance
of $172,295 and $161,000 245,846 335,377
Inventories 36,091 46,438
Prepaid expenses and other current assets 49,616 40,918
------------ ----------
Total current assets 413,878 477,032
------------ ----------
Property and equipment, at cost,
net of accumulated depreciation 51,607 53,542
------------ ----------
Other assets:
Notes receivable, net: 694,714 805,585
Investment in assets held for sale 38,307 33,921
Deposits and other 55,699 54,116
Deferred franchise costs 157,617 141,258
------------ ----------
946,337 1,034,880
------------ ----------
1,411,822 1,565,454
============ ==========
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt 16,002 31,242
Trade accounts payable 287,373 360,990
Accrued commissions 27,522 30,021
Other accrued expenses 174,573 89,791
Due to advertising fund 47,164 32,317
------------ ----------
Total current liabilities 552,634 544,361
------------ ----------
Deferred revenue 677,533 649,351
Long-term debt 10,888 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 and 2,989,482 shares
issued and outstanding 2,990 2,990
Additional paid-in capital 5,026,453 5,026,453
Accumulated deficit -7,075,344 -6,888,131
------------ ----------
Total stockholders' equity 170,767 357,980
------------ ----------
1,411,822 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 SIX MONTHS ENDED
MAY,31 MAY,31
(Unaudited) (Unaudited)
------------------- ---------------------
1996 1995 1996 1995
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
REVENUE
Individual franchise fees 81,800 258,100 203,728 353,100
Area franchise fees 59,498 140,506 67,498 265,782
Royalties from franchisees 397,932 318,915 963,422 789,701
Sales of equipment, supplies
and services 116,253 249,928 237,655 465,332
Interest income 1,377 2,500 6,195 5,807
Other 3,422 12,957 18,607 41,701
--------- --------- --------- ----------
660,282 982,906 1,497,105 1,921,423
--------- --------- --------- ----------
COST AND EXPENSES
Royalties paid to area franchisees 140,756 75,244 298,995 174,827
Commissions on franchise sales 46,040 125,440 120,560 183,412
Cost of sales of equipment,
supplies and services 102,628 214,684 207,732 393,420
Advertising 54,049 56,597 104,148 97,440
Other selling, general
and administrative 427,614 502,736 918,129 1,042,464
Depreciation and amortization 12,684 11,320 23,895 22,922
Interest 693 1,223 1,934 2,480
--------- --------- --------- ----------
787,446 987,244 1,684,320 1,916,965
--------- --------- --------- ----------
Net income (loss) -127,164 -4,338 -187,215 4,458
========= ========= ========= ==========
Net income (loss) per common share -.04 * -.06 *
========= ========= ========= ==========
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>
SIX MONTHS ENDED
MAY 31
(Unaudited)
1996 1995
--------- ----------
<S> <C> <C>
Cash flows from operating activities
Net income(loss) $ -187,215 $ 4,458
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 23,895 22,922
Amortization of discount on note payable 693 693
Deferred revenue 28,182 -52,676
Deferred rent 0 -4,928
Change in operating assets and liabilities-
Accounts receivable 89,531 26,758
Inventories 10,347 1,688
Prepaids and deferred franchise costs -25,057 -61,621
Notes receivable 110,871 -26,807
Deposits and other -1,583 10,150
Trade accounts payable -73,617 38,783
Accrued expenses -17,717 -4,535
Deposits from Franchisees 0 -5,000
Due to Ad Fund 14,847 -17,533
--------- ----------
Net cash used by operating activities -26,823 -69,648
--------- ----------
Cash flows from investing activities
Capital expenditures -21,960 -20,977
Purchase of assets held for sale -4,386 11,464
--------- ----------
Net cash used by investing activities -26,346 -9,513
--------- ----------
Cash flows from financing activities
Payments on Long-term debt -18,807 -3,463
Advances from affiliate 100,000 0
--------- ----------
Net cash provided (used) by financing activities 81,193 -3,463
--------- ----------
Net (decrease) in cash and cash equivalents 28,026 -80,624
Cash and cash equivalents at beginning of year 54,299 157,832
--------- ----------
Cash and cash equivalents at end of period 82,325 $ 77,208
========= ==========
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ 1,934 $ 1,094
========= ==========
<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 July 12, 1996, the Company
awarded 22 individual franchises and as of July 12, 1996, the
Company had 290 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
May 31, 1996, results of operations for the three months and six
months ended May 31, 1995 and 1996 and cash flows for the six
months ended May 31, 1995 and 1996.
The results of operations for the six months ended May 31, 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 a positive cash flow of $28,026 ($81,195
cash provided from financing activities, offset by cash used of
$26,346 from investing activities and $26,823 from operating
activities) during the six months ended May 31, 1996. D. P. Kelly &
Associates LP, an affiliate of the Company's majority shareholder,
made advances in an aggregate amount of $100,000 during the six months
ending May 31, 1996.
Deferred revenue increased $28,182 to $677,533 at May 31, 1996.
The increase is a result of deferring the recognition of revenue from 8
new individual franchises awarded through May 31, 1996 offset by
the recognition of area franchise revenue that was deferred as of
November 30, 1995. The Company has deferred the recognition of
revenue with respect to 11 of the 18 individual franchises awarded
during the six months ended May 31, 1996 and has deferred the
recognition of revenue with respect to 15 individual franchise fees as
of May 31, 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 May 31, 1996, compared to three months
ended May 31, 1995
Total revenues decreased $322,624 (32.8%) to $660,282 for the three
months ended May 31, 1996. The decrease is primarily attributable
to decreases in Area franchise fees (down 57.7% from $140,506 to
$59,498), Individual franchise fees (down 68.3% from $258,100 to
$81,800), Sales of equipment, supplies and services (down 53.5%
from $249,928 to $116,253) partially offset by an increase in
Royalties from franchisees (up 24.8% from $318,915 to $397,932).
The $81,008 decrease in revenue from Area franchise fees is
primarily due to no awards recognized during the three months
ending May 31, 1996 compared to one domestic award and 2
international awards recognized during the three months ended May
31, 1995. During the three months ended May 31, 1996 the
Company recognized a portion of the Area franchise fees that were
deferred as of November 30, 1995.
The $176,300 decrease in Individual franchise fees represents 8 less
awards recognized during the three months ending May 31, 1996
compared to the same period in 1995 and a differing mix of per
franchise revenue recognition. The Company recognized 5 and 13
individual franchise awards respectively during the three months
ended May 31, 1996 and 1995.
The $133,675 decrease in Sales of equipment, supplies and services
is primarily due to the decreased number of new franchisees that
purchased equipment during the three months ending May 31, 1996
compared to the same prior year period.
The $79,017 increase in royalties is due to increases in the average
store volumes and number of stores open.
Total expenses decreased $199,798 (20.2%) to $787,446 for the three
months ended May 31, 1996. The decrease is primarily attributable
to a decreases in Cost of sales of equipment, supplies and services
(down 52.2% from $214,684 to $102,628), Commissions on
franchise sales (down 63.3% from $125,440 to $46,040) and Other
selling, general and administrative (down 14.9% from $502,736 to
$427,614) partially offset by an increase in Royalties paid to area
franchisees (up 87.1% to $140,756 from $75,244).
The $112,056 decrease in Cost of sales of equipment, supplies and
services is primarily due to the decreased number of new franchisees
that purchased equipment during the three months ending May 31,
1996 compared to the prior year period.
The $79,400 decrease in Commissions is due primarily to the
decreased number of individual and area franchise sales made during
the first three months ending May 31, 1996 compared to the same
prior year period and the differing mix of commissions per franchise.
The $75,122 decrease in Other selling, general and administrative
relates primarily to decreases in salaries and payroll taxes, printing
and convention expenses.
The $65,512 increase in Royalties paid to area franchisees relate to
the increase in percentage of stores that operate within area marketer
regions and an increase in the average store volumes of those stores.
Six months ended May 31, 1996, compared to six months ended
May 31, 1995
Total revenues decreased $424,318 (22.1%) to $1,497,105 for the six
months ended May 31, 1996. The decrease is primarily attributable
to decreases in Area franchise fees (down 74.6% from $265,782 to
$67,498), Individual franchise fees (down 42.3% from $353,100 to
$203,722), Sales of equipment, supplies and services (down 48.9%
from $465,332 to $237,655) partially offset by an increase in
Royalties from franchisees (up 22.0% from $789,701 to $963,422).
The $198,284 decrease in revenue from Area franchise fees is
primarily due to no awards recognized during the six months ending
May 31, 1996 compared to 3 domestic awards and 2 international
awards recognized during the six months ended May 31, 1995.
During the six months ended May 31, 1996 the Company recognized
a portion of the Area franchise fees that were deferred as of
November 30, 1995.
The $149,372 decrease in Individual franchise fees represents 7 less
awards recognized during the six months ending May 31, 1996
compared to the same period in 1995 and a differing mix of per
franchise revenue recognition. The Company recognized 11 and 18
individual franchise awards respectively during the six months ended
May 31, 1996 and 1995.
The $227,677 decrease in Sales of equipment, supplies and services
is primarily due to the decreased number of new franchisees that
purchased equipment during the six months ending May 31, 1996
compared to the same prior year period.
The $173,721 increase in royalties is due to increases in the average
store volumes and number of stores open.
Total expenses decreased $232,645 (12.1%) to $1,684,320 for the six
months ended May 31, 1996. The decrease is primarily attributable
to a decreases in Cost of sales of equipment, supplies and services
(down 47.2% from $393,420 to $207,732), Commissions on
franchise sales (down 34.3% from $183,412 to $120,560) and Other
selling, general and administrative (down 11.9% from $1,042,464 to
$918,129) partially offset by an increase in Royalties paid to area
franchisees (up 71.0% from $174,827 to $298,995).
The $185,688 decrease in Cost of sales of equipment, supplies and
services is primarily due to the decreased number of new franchisees
that purchased equipment during the six months ending May 31,
1996 compared to the prior year period.
The $62,852 decrease in Commissions is due primarily to the
decreased number of individual and area franchise sales made during
the first six months ending May 31, 1996 compared to the same prior
year period and the differing mix of commissions per franchise.
The $124,335 decrease in Other selling, general and administrative
relates primarily to an decreases in salaries, payroll taxes and
employee benefits, printing, rent and convention expenses.
The $124,168 increase in Royalties paid to area franchisees relate to
the increase in percentage of stores that operate within area marketer
regions and an increase in the average store volumes of those stores.
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.
The Company's annual meeting of shareholders was held on May 1,
1996, at which directors were elected and the Company's appointment of
Ehrhardt Keefe Steiner & Hottman PC as the Company's independent
certified public accountants for the year ending November 30, 1996 was
ratified (the Auditor Ratification).
The tally for the election of directors was as follows:
DIRECTOR FOR AGAINST ABSTAINING
J. S. Corcoran 1,898,344 0 37,276
John W. Grant 1,898,344 0 37,276
F. Edward Gustafson 1,898,344 0 37,276
John E. Kelly 1,898,194 150 37,276
William F. White 1,898,344 0 37,276
The tally for the Auditor Ratification was 1,891,750 shares voted in
favor, 550 shares voted against and 43,320 shares abstaining.
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
July 12, 1996 Raymond S. Goshorn
Secretary and Treasurer
Date: By: /s/John E. Kelly
July 12, 1996 John E. Kelly
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> May-31-1996
<CASH> 82,325
<SECURITIES> 0
<RECEIVABLES> 418,141
<ALLOWANCES> 172,295
<INVENTORY> 36,091
<CURRENT-ASSETS> 413,878
<PP&E> 387,285
<DEPRECIATION> 335,678
<TOTAL-ASSETS> 1,411,822
<CURRENT-LIABILITIES> 552,634
<BONDS> 0
<COMMON> 2,990
0
2,216,668
<OTHER-SE> 5,026,453
<TOTAL-LIABILITY-AND-EQUITY> 1,411,822
<SALES> 237,655
<TOTAL-REVENUES> 1,497,105
<CGS> 207,732
<TOTAL-COSTS> 627,287
<OTHER-EXPENSES> 1,046,172
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,934
<INCOME-PRETAX> (187,215)
<INCOME-TAX> 0
<INCOME-CONTINUING> (187,215)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (187,215)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
