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, 1998
[ ] 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, 1998, there were outstanding 2,989,483 shares of the issuer's
Common Stock, par value $.001 per share.
Transitional Small Business Disclosure Format
Yes [ ] No [X]
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY
Consolidated Balance Sheets
FEBRUARY NOVEMBER
28, 1998 30, 1997
(Unaudited)
------------ -----------
Assets
<S> <C> <C>
Current assets
Cash and cash equivalents $ 107,602 $ 87,405
Restricted cash 23,780
Accounts receivable, net of allowance
of $90,507 (1998) and $101,039 (1997) 296,976 262,791
Inventories 29,984 34,514
Prepaid expenses and other current assets 65,061 31,805
Deferred income tax benefit - current 136,100 136,100
----------- -----------
Total current assets 635,723 576,395
----------- -----------
Property and equipment, at cost, net of
accumulated depreciation 84,905 61,892
----------- -----------
Other assets:
Notes receivable, net: 691,960 722,478
Deposits and other 94,168 90,130
Deferred franchise costs, net of
accumulated amortization of
$40,947 (1998) and $36,360 (1997) 324,536 175,943
Capitalized software costs, net 172,099 124,202
----------- -----------
Total other assets 1,282,763 1,112,753
----------- -----------
$ 2,003,391 $ 1,751,040
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt $ 0 $ 100,000
Trade accounts payable 103,909 284,355
Accrued commissions 26,686 52,950
Other accrued expenses 1,502 18,580
Due to advertising fund 11,834 23,780
----------- -----------
Total current liabilities 143,931 479,665
----------- -----------
Deferred revenue 1,042,417 533,518
Stockholders' equity:
Series C redeemable preferred stock,
$1,000 par value; 2,500 shares
authorized; 2,216.668 shares issued and outstanding
(liquidation preference $2,216,668) 2,216,668 2,216,668
Common stock, $.001 par value; 200,000,000 shares
authorized; 2,989,483 shares issued and outstanding 2,990 2,990
Additional paid-in capital 5,026,453 5,026,453
Accumulated deficit (6,429,068) (6,508,254)
----------- -----------
Total stockholders' equity 817,043 737,857
----------- -----------
$ 2,003,391 $ 1,751,040
=========== ===========
See notes to consolidated financial statements.
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<PAGE>
PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY
Consolidated Statement of Operations
THREE MONTHS ENDED
February 28, February 28,
(Unaudited)
---------------------------
1998 1997
----------- -----------
Revenue
Royalties from franchisees $ 691,834 $ 604,443
Sales of equipment, supplies,
and services 132,844 109,964
Individual franchise fees 87,210 65,850
Area franchise fees, net 14,000 5,000
Interest Income 6,412 1,589
Other 22,027 11,025
----------- -----------
954,327 797,871
----------- -----------
Costs and expenses
Selling, general, and administrative 449,247 432,103
Cost of sales of equipment, supplies
and services 113,179 104,097
Commissions on franchise sales 32,750 35,420
Royalties paid to area franchises 229,454 213,768
Advertising 34,852 53,899
Loss on investment in assets held
for resale 0 5,100
Depreciation and amortization 15,659 12,824
Interest 0 1,693
----------- -----------
875,141 858,904
----------- -----------
Net income (loss) $ 79,186 $ (61,033)
=========== ===========
Basic income (loss) per common share $ 0.03 $ (0.02)
=========== ===========
Weighted average number of
common shares outstanding 2,989,483 2,989,483
=========== ===========
See notes to consolidated financial statements.
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<CAPTION>
PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
THREE MONTHS ENDED
February 28, February 28,
(Unaudited)
-------------------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income(loss) $ 79,186 $ (61,033)
Adjustments to reconcile net
income (loss) to net cash
from operating activities:
Depreciation and amortization 15,659 12,824
Amortization of discount on note payable 0 693
Deferred revenue, net 508,899 238,950
Deferred rent 0 0
Change in operating assets and liabilities-
Accounts receivable (34,185) 1,961
Inventories 4,530 (5,539)
Prepaids and deferred franchise costs (186,430) (133,124)
Notes receivable 30,518 25,910
Deposits and other (4,038) (8,266)
Trade accounts payable (180,446) (78,689)
Accrued expenses (43,342) (39,022)
Due to Ad Fund (11,946) 50,995
--------- ---------
Net cash provided by operating activities 178,405 5,660
--------- ---------
Cash flows from investing activities
Capital expenditures (34,091) (30,458)
Capitalized software costs (47,897) 0
Purchase/additions of assets held for sale 0 5,100
--------- ---------
Net cash used by investing activities (81,988) (25,358)
--------- ---------
Cash flows from financing activities
Payment of short-term debt (100,000) 0
--------- ---------
Net cash used by financing activities (100,000) 0
--------- ---------
Net decrease in cash and cash equivalents (3,583) (19,698)
Cash and cash equivalents, beginning of year 111,185 152,472
--------- ---------
Cash and cash equivalents, end of period $ 107,602 $ 132,774
========= =========
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ 0 $ 1,693
========= =========
See notes to consolidated 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, 1997 through April 14, 1998, the Company awarded 15
individual franchises and 1 new area franchise and as of April 14,
1998, the Company had 339 domestic and international individual
franchise agreements in existence and 26 area franchises 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. (together, the "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, 1998
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 used cash of $3,583 ($178,405 provided from operating
activities offset by $81,988 used by investing activities and by
$100,000 used in financing activities) during the three months ended
February 28, 1998. The $100,000 cash used by financing activities was
used to pay off the note payable to D. P. Kelly & Associates L.P., a
shareholder and an affiliate of the Company's majority shareholder.
Deferred revenue increased $508,899 to $1,042,417 and deferred
franchise costs increased $148,593 to $324,536 at February 28, 1998.
The increases were primarily a result of deferring the recognition of
revenue and the expensing of commissions on 4 of the 7 new individual
franchises and 1 new area franchise awarded during the three months
ending February 28, 1998. The Company anticipates that all of the
deferred individual franchise fees and commissions will be recognized
in fiscal 1998.
<PAGE>
RESULTS OF OPERATIONS
---------------------
Three months ended February 28, 1998, compared to three months ended
February 28, 1997
----------------------------------------------------------------------
Total revenues increased $156,456 (19.6%) from $797,871 for the three
months ended February 28, 1997, to $954,327 for the three months ended
February 28, 1998. The increase is primarily attributable to increases
in royalties from franchisees (up 14.5% from $604,443 to $691,834),
sales of equipment, supplies and services (up 20.8% from $109,964 to
$132,844) and individual franchisee fees (up 32.4% from $65,850 to
$87,210).
The $87,391 increase in royalties for the three months ended February
28, 1998 as compared to the three months ended February 28, 1997, is
due to increases in the average store volumes and number of stores
open.
The $22,880 increase in sales of equipment, supplies and services is
primarily due to the increased number of new franchisees that
purchased equipment during the three months ending February 28, 1998
as compared to the same prior year period.
The $21,360 increase in individual franchise fees represents the
recognition of revenue from two more franchises during the three
months ended February 28, 1998 as compared to the same prior year
period and a differing mix of per franchise revenue recognition. The
Company recognized revenue on 5 and 3 individual franchises during the
first three months ended February 28, 1998 and February 28, 1997,
respectively.
Total expenses increased $16,237 (1.9%) from $858,904 for the three
months ended February 28, 1997, to $875,141 for the three months ended
February 28, 1998. The increase is primarily attributable to increases
in selling, general and administrative (up 4.0% from $432,103 to
$449,247) and royalties paid to area franchisees (up 7.3% from
$213,768 to $229,454) partially offset by a $19,047 (35.3%) decrease
in advertising.
The $17,144 increase in selling, general and administrative for the
three months ended February 28, n1998 as compared to the same prior
year period relates primarily to increases in personnel expenses. The
$15,686 increase in royalties paid to area franchisees over the same
periods 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.
None
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>
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: April 14, 1998
By: /s/ John E. Kelly
---------------------------------
John E. Kelly
President
By: /s/ Raymond S. Goshorn
---------------------------------
Raymond S. Goshorn
Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> FEB-28-1998
<CASH> 107,602
<SECURITIES> 0
<RECEIVABLES> 387,483
<ALLOWANCES> 90,507
<INVENTORY> 29,984
<CURRENT-ASSETS> 635,723
<PP&E> 481,538
<DEPRECIATION> 396,633
<TOTAL-ASSETS> 2,003,391
<CURRENT-LIABILITIES> 143,931
<BONDS> 0
0
2,216,668
<COMMON> 2,990
<OTHER-SE> (1,402,615)
<TOTAL-LIABILITY-AND-EQUITY> 2,003,391
<SALES> 132,844
<TOTAL-REVENUES> 954,327
<CGS> 113,179
<TOTAL-COSTS> 375,383
<OTHER-EXPENSES> 499,758
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 79,186
<INCOME-TAX> 0
<INCOME-CONTINUING> 79,186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,186
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0
</TABLE>
