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, 1999
-----------------
[ ] 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 19, 1999, 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]
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY
Consolidated Balance Sheets
FEBRUARY NOVEMBER
28, 1999 30, 1998
(Unaudited)
--------------------------
Assets
Current assets
Cash and cash equivalents $ 34,650 $ 230,964
Restricted cash 4,682 3,880
Accounts receivable, net of allowance
of $76,542 (1999) and $69,681 (1998) 433,981 365,277
Inventories 61,691 56,237
Prepaid expenses and other current assets 30,432 37,500
Deferred income tax benefit - current 275,000 275,000
----------- -----------
Total current assets 840,436 968,858
----------- -----------
Property and equipment, at cost, net of
accumulated depreciation 139,943 110,169
----------- -----------
Other assets:
Notes receivable, net: 613,824 666,408
Deposits and other 110,863 95,253
Deferred franchise costs, net of
accumulated amortization of
$59,299 (1999) and $54,711 (1998) 226,937 197,732
Capitalized software costs, net 416,916 351,207
----------- -----------
Total other assets 1,368,540 1,310,600
----------- -----------
$ 2,348,919 $ 2,389,627
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Trade accounts payable $ 236,523 $ 189,754
Preferred dividends payable 133,000 133,000
Accrued commissions 31,085 31,085
Other accrued expenses 24,363 153,330
Due to advertising fund 4,682 3,880
----------- -----------
Total current liabilities 429,653 511,049
----------- -----------
Deferred revenue 640,284 704,135
Stockholders' equity:
Series C redeemable preferredstock,
$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 (5,967,129) (6,071,668)
----------- -----------
Total stockholders' equity 1,278,982 1,174,443
----------- -----------
$ 2,348,919 $ 2,389,627
=========== ===========
See notes to consolidated financial statements.
<PAGE>
PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY
Consolidated Statement of Operations
THREE MONTHS ENDED
FEBRUARY 28,
(Unaudited)
------------------------
1999 1998
---------- ----------
Revenue
Royalties from franchisees $ 741,900 $ 691,834
Sales of equipment, supplies, and services 150,514 132,844
Individual franchise fees 70,850 87,210
Area franchise fees, net 131,000 14,000
Interest Income -- 6,412
Other 14,125 22,027
---------- ----------
1,108,389 954,327
---------- ----------
Costs and expenses
Selling, general, and administrative 484,608 449,247
Cost of sales of equipment, supplies
and services 135,463 113,179
Commissions on franchise sales 38,950 32,750
Royalties paid to area franchises 279,225 229,454
Advertising 40,016 34,852
Loss on investment in assets held for resale -- --
---------- ----------
Depreciation and amortization 25,588 15,659
Interest -- --
---------- ----------
1,003,850 875,141
---------- ----------
Net income $ 104,539 $ 79,186
========== ==========
Basic income per common share $ 0.03 $ 0.03
========== ==========
Weighted average number of common
shares outstanding 2,989,483 2,989,483
========== ==========
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
THREE MONTHS ENDED
FEBRUARY 28,
(Unaudited)
--------------------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income $ 104,539 $ 79,186
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 25,588 15,659
Amortization of discount on note payable -- --
Deferred revenue, net (63,851) 508,899
Change in operating assets and liabilities-
Accounts receivable (68,704) (34,185)
Inventories (5,454) 4,530
Prepaids and deferred franchise costs (26,725) (186,430)
Notes receivable 52,584 30,518
Deposits and other (15,610) (4,038)
Trade accounts payable 46,769 (180,446)
Accrued expenses (128,967) (43,342)
Due to Ad Fund (11,946) 802
--------- ---------
Net cash (used in) provided
by operating activities (79,029) 178,405
--------- ---------
Cash flows from investing activities
Capital expenditures (50,774) (34,091)
Capitalized software costs (65,709) (47,897)
--------- ---------
Net cash used by investing activities (116,483) (81,988)
--------- ---------
Cash flows from financing activities
Payment of short-term debt -- (100,000)
--------- ---------
Net cash used by financing activities -- (100,000)
--------- ---------
Net decrease in cash and cash equivalents (195,512)
(3,583)
Cash and cash equivalents, beginning of year 234,844 111,185
--------- ---------
Cash and cash equivalents, end of period $ 39,332 $ 107,602
========= =========
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ -- $ --
========= =========
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, 1998 through April 14, 1999, the Company awarded 15
individual franchises and 1 new area franchise and as of April 14,
1999, the Company had 372 domestic and international individual
franchise agreements in existence and 33 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, 1999
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 $195,512 ($79,029 used by operating
activities and $116,483 used by investing activities) during the three
months ended February 28, 1999.
Deferred revenue decreased $63,851 to $640,284 at February 28, 1999.
The decrease was primarily a result of recognizing the revenue on 2
area franchises and 3 individual franchises that were deferred as of
November 30, 1998 offset by deferring the recognition of revenue or
deposits on ten new individual franchises awarded during the three
months ending February 28, 1999. The Company anticipates that all of
the deferred individual franchise fees and related commissions will be
recognized in fiscal 1999.
<PAGE>
The decrease in accrued expenses is primarily due to the payment of
bonuses which were accrued at November 30, 1998 during the quarter
ended February 28, 1999.
RESULTS OF OPERATIONS
---------------------
Three months ended February 28, 1999, compared to three months ended
February 28, 1998
----------------------------------------------------------------------
Total revenues increased $154,062 (16.1%) from $954,327 for the three
months ended February 28, 1998, to $1,108,389 for the three months
ended February 28, 1999. The increase is primarily attributable to
increases in royalties from franchisees (up 7.2% from $691,834 to
$741,900), area franchise fees (up $117,000 from $14,000 to $131,000),
and sales of equipment, supplies and services (up 13.3% from $132,844
to $150,514).
The $50,066 increase in royalties for the three months ended February
28, 1999 as compared to the three months ended February 28, 1998 is
due to increases in the average store volumes and number of stores
open.
The $117,000 increase in area franchise fees is primarily due to two
domestic area franchises awarded during the three months ended
February 28, 1999.
The $17,670 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 ended February 28, 1999 as
compared to the same prior year period.
Total expenses increased $128,709 (14.7%) from $875,141 for the three
months ended February 28, 1998 to $1,003,850 for the three months
ended February 28, 1999. The increase is primarily attributable to
increases in selling, general and administrative (up 8.9% from
$449,247 to $489,196), royalties paid to area franchises (up 21.7%
from $229,454 to $279,225) and cost of sales of equipment, supplies
and services (up 19.7% from $113,179 to $135,463).
The $39,949 increase in selling, general and administrative for the
three months ended February 28, 1999 as compared to the same prior
year period relates primarily to increases in personnel expenses.
The $49,771 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.
The $22,284 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 three months ended February 28,
1999 compared to the same prior year period.
<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 19, 1999
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-30-1998
<PERIOD-END> FEB-28-1999
<CASH> 34,650
<SECURITIES> 0
<RECEIVABLES> 510,523
<ALLOWANCES> 76,542
<INVENTORY> 61,691
<CURRENT-ASSETS> 840,436
<PP&E> 589,525
<DEPRECIATION> 449,582
<TOTAL-ASSETS> 2,348,919
<CURRENT-LIABILITIES> 429,653
<BONDS> 0
0
2,216,668
<COMMON> 2,990
<OTHER-SE> (940,676)
<TOTAL-LIABILITY-AND-EQUITY> 2,348,919
<SALES> 150,514
<TOTAL-REVENUES> 1,108,389
<CGS> 135,463
<TOTAL-COSTS> 453,638
<OTHER-EXPENSES> 550,212
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 104,539
<INCOME-TAX> 0
<INCOME-CONTINUING> 104,539
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104,539
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.02
</TABLE>
