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 February 28, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to____________
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 (I.R.S. Employer
of Incorporation or Organization) Identification No.)
3033 S. Parker Road, Suite 1200, Aurora, Colorado 80014
(Address of principal executive offices) (zip code)
Issuer's telephone number: 303-752-3500
Former name, former address and former fiscal year,
if changed since last report: N/A
Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of
the Exchange Act 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 14, 1997, 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, 1997 30, 1996
(Unaudited)
------------ ----------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents 132,774 152,472
Accounts receivable, net of allowance
of $137,937 (1997) and $143,400 (1996) 262,918 264,879
Inventories 39,308 33,769
Prepaid expenses and other current assets 56,895 38,448
------------ ----------
Total current assets 491,895 489,568
------------ ----------
Property and equipment, at cost,
net of accumulated depreciation 53,326 35,692
------------ ----------
Other assets:
Notes receivable, net: 592,861 618,771
Investment in assets held for sale 14,900 20,000
Deposits and other 60,451 52,185
Deferred franchise costs, net of accumulated
amortization of $17,190(1997) and
$13,367(1996) 261,632 146,955
------------ ----------
929,844 837,911
------------ ----------
1,475,065 1,363,171
============ ==========
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt 15,969 15,276
Trade accounts payable 171,034 249,723
Accrued commissions 22,423 22,149
Other accrued expenses 6,080 45,376
Due to advertising fund 111,338 60,343
------------ ----------
Total current liabilities 326,844 392,867
------------ ----------
Deferred revenue 699,317 460,367
Long-term debt 100,000 100,000
Stockholders' equity:
Series A redeemable preferred stock,
$1000 par value; 8% cumulative;
1,500 shares authorized; 1,216.668
shares issued and outstanding
(liquidation preference $1,723,600 - 1996) 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
(liquidation preference $1,200,000 - 1996) 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 -6,897,207 -6,836,174
------------ ----------
Total stockholders' equity 348,904 409,937
------------ ----------
1,475,065 1,363,171
============ ==========
<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
28, 29,
(Unaudited)
---------------------
1997 1996
--------- ----------
<S> <C> <C>
REVENUE
Royalties from franchisees 604,443 565,490
Sales of equipment, supplies
and services 109,964 121,402
Individual franchise fees 65,850 121,928
Area franchise fees 5,000 8,000
Interest income 1,589 4,818
Other 11,025 15,185
--------- ---------
797,871 836,823
--------- ---------
COST AND EXPENSES
Selling, general and administrative 432,103 490,515
Royalties paid to area franchisees 213,768 158,239
Cost of sales of equipment,
supplies and services 104,097 105,104
Advertising 53,899 50,099
Commissions on franchise sales 35,420 74,520
Depreciation and amortization 12,824 11,211
Loss on Investment in assets
held for resale 5,100 5,945
Interest 1,693 1,241
--------- ---------
858,904 896,874
--------- ---------
Net income (loss) -61,033 -60,051
========= =========
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
28, 29,
1997 1996
(Unaudited)
--------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income(loss) $ -61,033 $ -60,051
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 12,824 11,211
Amortization of discount on note payable 693 693
Deferred revenue 238,950 -69,350
Deferred rent 0 0
Change in operating assets and liabilities-
Accounts receivable 1,961 38,710
Inventories -5,539 10,724
Prepaids and deferred franchise costs -133,124 28,667
Notes receivable 25,910 57,527
Deposits and other -8,266 208
Trade accounts payable -78,689 17,519
Accrued expenses -39,022 30,008
Due to ad fund 50,995 -31,586
--------- ---------
Net cash used by operating activities 5,660 34,280
--------- ---------
Cash flows from investing activities
Capital expenditures -30,458 -16,029
Purchase of assets held for sale 5,100 -4,386
--------- ---------
Net cash used by investing activities -25,358 -20,415
--------- ---------
Cash flows from financing activities
Payments on long-term debt 0 -19,499
--------- ---------
Net cash provided (used) by financing activities 0 -19,499
--------- ---------
Net (decrease) in cash and cash equivalents -19,698 -5,634
Cash and cash equivalents at beginning of year 152,472 54,299
--------- ----------
Cash and cash equivalents at end of period 132,774 $ 48,665
========= =========
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ 1,693 $ 1,241
========= =========
<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, 1996 through April
14, 1997, the Company awarded 19 individual
franchises and as of April 14, 1997, the
Company had 304 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 interim financial statements
include all adjustments necessary in order to
make the interim financial statements not
misleading.
The results of operations for the three months
ended February 28, 1997 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.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced cash flow deficiencies
of $19,697 ($25,358 from investing activities
offset by $5,661 provided from operating
activities) during the three months ended
February 28, 1997.
Deferred revenue increased $238,950 to $699,317
and deferred franchise costs increased $114,677
to $261,632 at February 28, 1997. The
increases were primarily a result of deferring
the recognition of revenue and the expensing of
commissions on 12 of the 15 new individual
franchises awarded during the three months
ending February 28, 1997. The Company
anticipates that all of the deferred individual
franchise fees and commissions will be
recognized in fiscal 1997.
RESULTS OF OPERATIONS
Three months ended February 28, 1997, compared
to three months ended
February 29, 1996
Total revenues decreased $38,952 (4.7%) from
$836,823 for the three monthds ended Fevruary
29, 1996, to $797,871 for the three months
ended February 28, 1997. The decrease is
primarily attributable to decreased individual
franchisee fees (down 46% from $121,928 to
$65,850) that were partially offset by an
increase in royalties from franchisees (up 6.9%
from $565,490 to $604,443)
The $56,078 decrease in individual franchise
fees represents the recognition of revenue from
three less franchises during the three months
ended February 28, 1997 compared to the same
prior year period and a differing mix of per
franchise revenue recognition. The Company
recognized revenue on 3 and 6 individual
franchises during the first three months ended
February 28, 1997 and February 29, 1996,
respectively.
The $38,953 increase in royalties during the
three months ended February, 28, 1997 is due to
increases in the average store volumes and
number of stores open.
<PAGE>
Total expenses decreased $37,970 (4.2%) from
$896,894 for the three months ended February
29, 1996, to $858,904 for the three months
ended February 28, 1997. The decrease is
primarily attributable to decreases in selling,
general and administrative (down 11.9% from
$490,515 to $432,103) and commissions on
franchise sales (down 52.5% from $74,520 to
$35,420) that were partially offset by an
increase in royalties paid to area franchisees
(up 35.1% from $158,239 to $213,768).
The $58,412 decrease in selling, general and
administrative relates primarily to decreases
in legal fees and travel and entertainment
expenses.
The $39,100 decrease in commissions on
franchise sales is related to the decrease in
individual franchisee fees referred to above.
The $55,529 increase in royalty rebates relates
to the increase in percentage of stores that
operate within area marketer regions and an
increase in the average store volumes.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Manelle Enterprises, Inc. V. Pak Mail Centers of
America, Inc., Civil Action No. 96013471,
Seventeenth Judicial Circuit Court, Broward County,
Florida. On September 30, 1996, Manelle
Enterprises, Inc. (Manelle), a franchisee, filed
a complaint alleging that South Florida Realprop,
Inc. d/b/a Pak Mail Centers of America Southern
Region (SFRI), Jerald N. Cohn and Jerry G. Nestos
fraudulently induced Manelle to sign a franchise
agreement and a lease relating to a Pak Mail store
located in Hollywood, Florida. Manelle also
alleges that the Company failed to fulfill the
Company's obligations under the franchise
agreement. Manelle also alleges that the Company
violated Florida statutes and breached the implied
covenant of good faith and fair dealing. Manelle
seeks rescission of the franchise agreement and an
unspecified amount of damages, attorney's fees,
costs and interest. The Company's
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. On January 22, 1997, the plaintiff filed
an arbitration realleging his claims and seeking a
total of $50,000 plus costs and expenses. The
plaintiff has also filed a motion with the United
States District Court to lift the stay on those
proceedings. The Company has thus far vigorously
contested both the arbitration and the motion to
lift the stay.
<PAGE>
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
In accordance with the requirements of the Exchange Act, the
registrant 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 14, 1997 Raymond S. Goshorn
Secretary and Treasurer
Date: By: /s/John E. Kelly
April 14, 1997 John E. Kelly
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Nov-30-1997
<PERIOD-END> Feb-28-1997
<CASH> 132,774
<SECURITIES> 0
<RECEIVABLES> 400,855
<ALLOWANCES> 137,937
<INVENTORY> 39,308
<CURRENT-ASSETS> 491,895
<PP&E> 416,705
<DEPRECIATION> 363,379
<TOTAL-ASSETS> 1,475,065
<CURRENT-LIABILITIES> 326,844
<BONDS> 0
<COMMON> 2,990
0
2,216,668
<OTHER-SE> (1,870,754)
<TOTAL-LIABILITY-AND-EQUITY> 1,475,065
<SALES> 109,964
<TOTAL-REVENUES> 797,871
<CGS> 104,097
<TOTAL-COSTS> 353,285
<OTHER-EXPENSES> 505,619
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,693
<INCOME-PRETAX> (61,033)
<INCOME-TAX> 0
<INCOME-CONTINUING> (61,033)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (61,033)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
