FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to _______________________
Commission file number 0-15355
J.A.M., INC.
(Exact name of registrant as specified in its charter)
NEW YORK 16-1092174
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
530 WILLOWBROOK OFFICE PARK, FAIRPORT, NEW YORK 14450
(Address of principal executive offices)
(716) 385-6740
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13
or 15 (d) of the Securities and 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 __________
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the
latest practicable date.
JUNE 30, 1996: 15,274,447 SHARES.
-1-
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
J.A.M., INC.
Balance Sheets
As of June 30, 1996 with Comparative Amounts for December 31, 1995
________________________________________________________________________
<TABLE>
<CAPTION>
6/30/96 12/31/95
<S> <C> <C>
UNAUDITED Audited
Current Assets:
Cash and cash equivalents $ 2,717 $ 4,705
Trade accounts receivable, less allowance
for
doubtful accounts of $1,797 in 1996 and 395,083 288,126
1995
Inventories
3,206 2,988
Prepaid expenses
8,126 6,380
Employee receivables
2,288 -
Total current assets 411,420 302,199
Property, plant and equipment 904,661 729,440
Less: accumulated depreciation and 581,327 560,631
amortization
Net property, plant and equipment 323,334 168,809
Other assets:
Deposits 11,219
6,032
$ 740,786 $ 482,227
</TABLE>
See accompanying notes to financial statements
-2-
J.A.M., INC.
Balance Sheets
As of June 30, 1996 with Comparative Amounts for December 31, 1995
_________________________________________________________________
<TABLE>
<CAPTION>
6/30/96 12/31/95
<S> <C> <C>
Current Liabilities: (UNAUDITED) (Audited)
Demand note - bank $ $ 100,000
-
Demand note - others 150,000 190,000
Current portion of long-term debt 50,000 0
Current portion of capital lease obligation 64,181 0
Loan - officer 107,910 146,175
Accounts payable - trade 129,383 87,535
Accrued income tax 0 349
Accrued expenses 109,447 138,975
Total current liabilities 610,921 663,034
Long-Term Liabilities:
Long-term portion of bank debt 79,165 0
Long-term portion of capital lease 61,285 0
obligation
Total Long-Term Liabilities 140,450 0
Stockholders' Deficit:
Common stock, $.01 par value.
Authorized 16,000,000 shares; issued
and outstanding 15,274,447 shares in
1996 and 1995 152,745 152,745
Additional paid-in capital 3,147,227 3,147,227
Accumulated deficit (3,310,557) (3,480,779)
Total stockholders' deficit (180,807)
(10,585)
$ 740,786 $ 482,227
</TABLE>
See accompanying notes to financial statements
-3-
J.A.M., INC.
Statements of Operations
For the Six-Month Interim Period Ended
June 30, 1996 with Comparative Amounts to June 30, 1995
____________________________________________________________________
<TABLE>
<CAPTION>
Quarter Quarter Six Six
<S> <C> <C> <C> <C>
Ended Ended Months Months
6/30/96 6/30/95 6/30/96 6/30/95
(UNAUDITED) (Unaudited) (Unaudited) (Unaudited)
Net sales $ 698,796 $ 537,424 $ 1,261,350 $ 670,916
Cost of sales 391,910 215,080 663,355 359,677
Gross profit $ 306,886 $ 322,344 $ 597,995 $ 311,239
Selling, general and
administrative
expenses 207,988 137,622 398,172 269,049
Operating profit $ 98,898 $ 184,722 $ 199,823 $ 42,190
Other income (expense):
Gain on disposal of asset 0 5,000 0 5,000
Interest expense (18,817) (18,424) (33,308)
(29,600)
(18,817) (13,424) (28,308)
(29,600)
Net earnings
before income taxes $ 80,081 $ 171,298 $ 170,223 $ 13,882
Income taxes 0 0 0 0
Net earnings $ 80,081 $ 171,298 $ 170,223 $ 13,882
Net earnings per common share,
based upon the weighted
average
common shares outstanding
during
each period $0.00 $0.01 $0.01 $0.00
Weighted average number of 15,274,447 12,274,447 15,274,447 12,274,447
shares
</TABLE>
See accompanying notes to financial statements
-4-
J. A.M., INC.
Statements of Cash Flows
For the Six-Month Interim Period Ended
June 30, 1996 with Comparative Amounts to June 30, 1995
_____________________________________________________________________
<TABLE>
<CAPTION>
Six Six
<S> <C> <C>
Months Months
Ended Ended
6/30/96 6/30/95
(UNAUDITED) (Unaudited)
Cash flow from operating activities:
Net earnings $ 170,223 $ 13,882
Adjustment to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 20,696 19,758
Gain on sale of fixed asset 0 (5,000)
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable (106,957) (49,510)
Employee loan receivable (2,288) 0
Inventories (219) (471)
Prepaid expenses 4,380 0
of billings on uncompleted
contracts
Deposits (939) (4,840)
Increase (decrease) in:
Accounts payable, trade 41,848 (77,438)
Accrued expenses (29,878) (42,274)
Net cash provided by (used in) operating $96,866 ($145,893)
activities
Cash flows provided by (used in) investing
activities:
Capital expenditures (175,220) 11,437
Net cash provided by (used in) investing ($175,220) $11,437
activities
(continued)
</TABLE>
See accompanying notes to financial statements
-5-
J.A.M., INC.
Statements of Cash Flows
For the Six-Month Interim Period Ended
June 30, 1996 with Comparative Amounts to June 30, 1995
______________________________________________________________________
<TABLE>
<CAPTION>
Six Six
<S> <C> <C>
Months Months
Ended Ended
6/30/96 6/30/95
(UNAUDITED) (Unaudited)
Cash flow from financing activities:
Principal payments under long-term debt $ (20,835) $0
Net borrowing on demand note 50,000 100,000
Net (repayments)/borrowings on other (40,000) 23,000
demand note
Principal payments of obligations under
capital leases (3,711) 0
Net borrrowings on capital lease 129,177 0
obligations
Prior period adjustment 0 (29,448)
Net (repayments)/borrowings on officer (38,265) 46,607
loan
Net cash provided by financing activities $76,366 $140,159
Net increase (decrease) in cash $ (1,988) $5,703
Cash and cash equivalents at beginning of 4,705 0
period
Cash and cash equivalents at end of period $2,717 $5,703
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 18,817 $ 18,424
</TABLE>
See accompanying notes to financial statements
-6-
J.A.M., INC.
Notes to Financial Statements
June 30, 1996 and 1995
(1) Management's Representation
The information furnished herein reflects all adjustments of a normal recurring
nature which are, in the opinion of management, necessary to a fair statement
of the results of operations for the interim periods presented.
(2) Earnings Per Share Information
The computation of earnings or (loss) per share in each period is based upon
the weighted average number of common shares outstanding at the end of each
period. Per APB 15, J.A.M., Inc. is considered to have a simple capital
structure since the conversion of the corporation's convertible securities to
common stock would dilute earnings per share by less than 3%.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OPERATIONS
Net sales for the second quarter 1996 increased 23% from the same period in
1995 to $698,796.
This $161,372 increase from $537,424 for the comparable 1995 quarter was due to
increased revenue from existing customers and consulting services.
At the end of the second quarter of 1996, the Company had a backlog of $525,000
compared to $295,000 in 1995.
Net earnings for the second quarter of 1996 totaled $80,081 compared to net
profit of $171,298 for the
respective 1995 quarter. This $91,217 decrease was largely due to opening
another development facility to prepare the Company for planned growth in the
development of its product offerings.
On April 18, 1996, the Company signed a new lease agreement for the next five
years for approximately 20,000 square feet in order to expand and consolidate
all operations into one facility. The Company also refinanced the video
equipment lease which provided a net savings of approximately $12,000 over the
next three years. In June, 1996, the Company negiotiated a new lease for
software and hardware equipment. The Company President personally guaranteed
all new lease agreements.
The Company has also purchased new accounting software that will expand the
efficiency of operations and future product development.
LIQUIDITY
Earnings of $80,081 for the second quarter of 1996 increased the Company's
equity to $(10,585), compared to $(391,557) as of June 30, 1995. At June 30,
1996, the Company did not have any working capital. Cash on hand totaled
$2,617. Net trade receivables, less allowance for doubtful accounts of $1,747,
totaled $395,083 at the end of the second quarter.
At the present time the Company does not have an operating Line of Credit and
is generating cash flow from on-going operations. Management believes that
existing cash flow may not be sufficient to sustain third quarter growth.
Therefore, the Company may need an additional means of financing for necessary
expansion and product development.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended June 30,
1996.
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.
J.A.M., INC.
(Registrant)
Dated: August 14, 1996 By: /s/John A. Marszalek
Chairman of the Board and
Chief Executive Officer
<PAGE>
-10-
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
<S> <C> <C>
Number Description Location
10-1 Lease dated April 18, 1996 Filed herewith
between Company as Tenant
and Willowbrook Office Park
as Landlord leasing and additional
14,022 square feet at 530
Willowbrook Office Park
11 Statement re: calculation of per See Note 2 of the Notes to the
share earnings Financial Statements filed
herewith
27 Financial Data Schedule Filed only with EDGAR filing,
per Reg. S-K, Rule 601(c)(1)(v)
</TABLE>
250 WILLOWBROOK OFFICE PARK/FAIRPORT,NEW YORK 14450
WILLOWBROOK
March 28, 1996
J.A.M., Inc.
530 Willowbrook Office Park
Fairport, New York 14450
Attention: John A. Marszalek, President
Re: 530 WillowBrook Office Park
Dear John:
The purpose of this letter is to amend the Lease Agreement dated June 16,
1992, as amended by letters dated June 24, 1992, and December 12, 1995, (the
"Lease") between WillowBrook and you for space you now occupy at 530
WillowBrook Office Park, Fairport, New York. I have attached a copy of the
facing page of the Lease to this letter.
It is my understanding that we have agreed to amend the Lease as follows:
1. As of the "Effective Date" (as below defined):
a. The Demised Premises shall be changed to include the "Additional Demised
Premises" as shown on Exhibit A attached hereto and made a part hereof;
b. The annual rental will be changed from $114,452.04 ($9,537.67 per
month) to $217,341 ($18,111.75 per month);
c. The demised term for the space presently occupied by Tenant in 460
WillowBrook Office Park shall expire on the Effective Date as if the
said date were the original expiration date of the demised term for the
said space;
d. That as of the Effective Date, "building operating costs" as referred
to in Article 17 of the Lease, in addition to all other costs included
therein, shall be deemed to also include roof repairs, maintenance and
service (including but not limited to service contacts) of
security/safety equipment and automatic/electronic and/or magnetic
exterior door devices and interior cleaning (if supplied to the Demised
Premises). Tenant's "pro rate" portion of the increase in costs for
janitorial services for the Demised Premises ("interior cleaning") ONLY
shall be 100 percent. Notwithstanding anything herein contained, said
increases in any said costs only shall be calculated,
Page 2
for the period commencing with the Effective Date through July 31, 1997,
AS IF the Demised Premises were 9,279 renewable square feet.
Thereafter, the said calculations shall be based upon the total
rentable square footage of the Demised Premises (14,022) rentable
square feet).
The "Operating Year" for roof repairs, and, maintenance and service
(including but not limited to service contracts) of security/safety
equipment and automatic/electronic and/or magnetic exterior entrance
door devices only shall be January 1, 1995 through December 31, 1995,
with appropriate changes made in said Article 17 to other dates in said
Article for said costs only. "Refuse removal", shall be defined to
include "recycling expense".
2. The expiration of the demised term shall be changed from July 31,
1997, to five (5) years from the last day of the first full month
following the "Effective Date".
3. The Additional Demised Premises shall be completed by Landlord, at its
sole cost and expense ("Landlord's Work"), as follows:
a. Remove a portion of the demising wall and interior partitions as shown
on Exhibit A, pages 1 and 2, attached.
b. Remove glass wall in Conference room and construct a new hard wall
leaving one glass panel on each side of existing double door entrance
to Conference room.
c. Construct lunch room adjacent to Men's room. Said lunch room to be
furnished to 5' base cabinet with sink and hot and cold running water.
d. Remove all wallcovering and paint using flat wall paint, one color
throughout.
e. All floors will be carpeted standard 26 ounce carpet. Color to be
chosen by Tenant from Landlord's available colors matching 4" vinyl
base. If Tenant elects to upgrade carpet, Landlord will provide a
material allowance equal to the cost of landlord supplied carpet.
f. Existing light fixtures will be relocated in areas where walls are
removed to accommodate Tenant's furniture layout. Further, ALL troffer
light fixtures shall be "deep-cell" 3-tube electronically-ballasted
light fixtures.
g. Landlord will supply and install a 1"-6" drywall soffit around the
perimeter of the ceiling in the reception area and front conference
room. Recessed "can" lights will be installed in soffit in conference
room.
In addition, Landlord, at its sole cost and expense, will complete the
following work in the Original Demised Premises:
Page 3
a. Relocate door into Computer Program/Tech area in Original Demised
Premises.
b. Repaint/coat to match existing color.
c. If Tenant so elects, construct an office with drywall and metal studs
in Tenant's existing reception are after Tenant has relocated its
reception desk.
4. a. The "Effective Date" shall be the earlier of:
1. Tenant taking possession of the Additional Demised Premises for
the purpose of operating its
business therein, or;
2. September 1, 1996.
b. Notwithstanding the forgoing, the Effective Date shall not occur until
the substantial completion of Landlord's Work. Substantial completion
shall be defined to mean that Landlord's Work shall have been completed
in accordance with Paragraph 3 of this Amendment subject only to minor
"punchlist" items which do not separately or in aggregate, materially
effect Tenant's use and occupancy of the Additional Demised Premises,
that the Additional Demised Premises have received a valid Certificate
of Occupancy, have been professionally cleaned and are free of trash an
debris.
5. As to the Additionally Demised Premises ONLY, Article 33 shall be
deemed eliminated and in its place and stead shall be substituted the
following:
Rentable area shall be calculated by measuring from the outside face of
all perimeter exterior walls to the center line of Tenant separating
walls, and to the Common Area side of walls between the Demised
Premises and the Building Common Area and shall include the area of the
"vestibule" entrance area to the Demised Premises, if any, and include
a proportionate share of the common halls, lobbies, public bathrooms,
stairwells and elevator core (if any) of the building; but said
proportionate share shall not increase the rentable square footage
calculated as aforesaid by an amount greater than 12%.
6. Unless performed by employees of Tenant, Tenant agrees that cleaning
services for the cleaning of the Demised Premises shall be supplied, at
Landlord's option, only by Landlord. Landlord agrees that the charges
therefore shall be reasonable and be competitive with charges for similar
"first class" interior cleaning services in the Rochester, New York
suburban Class A office buildings.
7. Tenant shall be permitted to have a 2' x 4' sign panel in the exterior
sign pedestal serving the Building. Tenant shall, at its sole cost and
expense, provide Landlord with camera-ready copy for said sign. Said sign
shall conform to Landlord established sign regulations for the WillowBrook
Office Park.
Page 4
Except as modified above, all other terms, provisions, and conditions of
the Lease shall remain unchanged and are hereby ratified and confirmed.
If the above reflects your understanding, please sign the enclosed copy of
this letter in the appropriate place and return it to us.
Cordially your,
WILLOWBROOK
BY:/s/ Charles N. Mills
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FOLLOWING SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S JUNE 30, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000765449
<NAME> J.A.M., INC.
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,717
<SECURITIES> 0
<RECEIVABLES> 396,880
<ALLOWANCES> 1,797
<INVENTORY> 3,206
<CURRENT-ASSETS> 411,420
<PP&E> 904,661
<DEPRECIATION> 581,327
<TOTAL-ASSETS> 740,786
<CURRENT-LIABILITIES> 610,921
<BONDS> 140,450<F1>
0
0
<COMMON> (10,585)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 740,786
<SALES> 1,261,350
<TOTAL-REVENUES> 1,261,350
<CGS> 663,355
<TOTAL-COSTS> 1,061,527
<OTHER-EXPENSES> 29,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,600
<INCOME-PRETAX> 170,223
<INCOME-TAX> 0
<INCOME-CONTINUING> 170,223
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 170,223
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
<FN>
<F1>Long-term liabilities.
</FN>
</TABLE>
