<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarter ended September 30, 1995 Commission File Number 33-8333-D
AMERISHOP CORP.
(Exact Name of registrant as specified in its charter)
DELAWARE 38-2684858
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Centennial Office Park
Suite 308
3033 Orchard Vista Drive SE
Grand Rapids, MI 49546-7080
(Address of principal executive offices) (Zip Code)
(616) 949-0775
(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 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 September 30, 1995, 2,516,327 shares of common stock were outstanding.
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AMERISHOP CORP.
FORM 10-Q
INDEX
Descriptions Page Number
- ------------ -----------
Cover Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Part I. Financial Information
1. Financial Statements (Unaudited)
Balance Sheets
September 30, 1995 and June 30, 1995 . . . . . . . . . . 3
Statements of Operations
Three Months Ended September 30, 1995 and 1994 . . . . . . 4
Statement of Cash Flows
Three Months Ended September 30, 1995 and 1994 . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . 6-7
2. Management's Discussion and Analysis of Results
of Operations and Financial Conditions . . . . . . . . . 8-9
Part II.
1. Other Information . . . . . . . . . . . . . . . . . . . 10
2. Signatures . . . . . . . . . . . . . . . . . . . . . . . 10
2
<PAGE> 3
1. FINANCIAL INFORMATION
AMERISHOP CORP.
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- -------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash $ 61,755 $ 47,210
Prepaid expenses 109,972 7,068
Accounts receivable (Note 3) 457,641 427,700
Prepayments to vendors 236,502 65,204
Inventory 79,498 76,392
------------- -------------
Total current assets 945,368 623,574
EQUIPMENT, net 21,300 25,873
------------- --------------
Total assets $ 966,668 $ 649,447
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 574,413 $ 493,188
Customer deposits 499,809 379,780
Deferred membership revenue 533,330 521,710
Deferred non-compete revenue 24,982 37,483
Notes payable (Note 3) 1,628,445 1,428,445
Accrued interest 429,708 328,882
Current maturities of long-term debt (Note 3) 352,672 293,131
Other current liabilities 56,387 79,728
------------- -------------
Total current liabilities 4,099,746 3,562,347
LONG-TERM DEBT 1,852,428 1,922,425
SHAREHOLDERS' EQUITY:
Preferred stock, $.001 par value per share,
1,000,000 shares authorized and no shares issued.
Common stock, $.00001 par value per share, 20,000,000
shares authorized, 2,516,327 shares outstanding at
September 30, 1995 and June 30, 1995 25 25
Additional paid-in capital 484,729 484,729
Accumulated deficit (5,470,260) (5,320,079)
---------- ----------
Total shareholders' equity/(deficit) (4,985,506) (4,835,325)
---------- ----------
Total liabilities and shareholders' equity $ 966,668 $ 649,447
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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AMERISHOP CORP.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1995 1994
------------- -------------
<S> <C> <C>
REVENUES:
Membership fees $ 288,736 $ 217,494
Merchandise sales 727,429 681,281
Travel revenue 0 0
Promotional revenue 13,114 34,986
------------- -------------
Total revenues 1,029,279 933,761
------------- -------------
EXPENSES:
Sales commissions 85,069 43,705
Cost of merchandise sales 556,634 557,884
Cost of travel revenue 0 0
Selling, general and administrative 416,078 441,362
Promotional expenses 2,556 17,074
------------- -------------
Total expenses 1,060,337 1,060,025
------------- -------------
Loss from operations (31,058) (126,264)
OTHER INCOME (EXPENSE):
Interest income 940 1,615
Other expense 775 765
Interest expense (120,838) (102,568)
------------- -------------
Total other income (expense) (119,123) (100,188)
------------- -------------
Net loss $ (150,181) $ (226,452)
============= =============
Net Loss Per Share (Note 4) $ (.06) $ (.09)
============= =============
Weighted Average Shares Outstanding 2,516,327 2,516,327
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
AMERISHOP CORP.
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three months ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (150,181) $ (226,452)
Adjustments to reconcile net loss
to net cash from operating activities:
Depreciation and amortization 4,572 17,603
Changes in assets and liabilities:
Prepaid expenses (102,904) (4,579)
Accounts receivable (29,941) 48,946
Prepayments to vendors (171,298) (22,176)
Inventory (3,105) (3,735)
Accounts payable 81,225 (240,650)
Customer deposits 120,029 231,457
Deferred membership revenue 11,620 (152,550)
Deferred non-compete revenue (12,501) (12,501)
Accrued interest 100,826 99,905
Other current liabilities (23,342) (58,191)
------------ ------------
Net cash used in operating activities (175,000) (322,923)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments received on long-term note 0 0
Capital expenditures 0 0
------------ ------------
Net cash used in investing activities 0 0
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term
debt and capital lease obligations (10,455) (30,508)
Principal payments under short-term
debt
Proceeds from issuance of notes payable 200,000 300,000
Proceeds from issuance of long-term debt
------------ ------------
Net cash provided by financing activities 189,545 269,492
------------ ------------
NET CHANGE IN CASH 14,545 (53,431)
CASH AT BEGINNING OF PERIOD 47,210 206,958
------------ ------------
CASH AT END OF PERIOD $ 61,755 $ 153,527
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
AMERISHOP CORP.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1995
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements (the "Financial
Statements") of AmeriShop Corp. (the "Company") have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, the Financial Statements do not include all the information and
footnotes normally included in the annual financial statements prepared in
accordance with generally accepted accounting principles.
In the opinion of management, the Financial Statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
such information in accordance with generally accepted accounting principles.
These Financial Statements should be read in conjunction with the financial
statements and footnotes thereto included in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1995.
The balance sheet at June 30, 1995 has been derived from the audited financial
statements at that date.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - AmeriShop Corp., formerly AmeriMark Corporation, was
incorporated under the laws of the State of Delaware on August 1, 1986.
Revenue Recognition: Membership fees and annual renewal fees allow members to
use services provided by the Company. Annual renewal fees are recorded as
deferred revenue when received and recognized as income on the straight-line
basis over the renewal period.
Merchandise sales are recorded when the customer is shipped the merchandise.
Travel revenue is recognized when the client has completed its trip.
Equipment and Depreciation - Equipment is stated at cost less accumulated
depreciation. Improvements and betterments are capitalized; maintenance and
repairs are charged to expense as incurred. Depreciation is provided by the
use of straight-line and accelerated methods for both financial reporting and
income tax purposes over the estimated useful lives of 3 to 7 years.
Industry Segment - The Company operates as a provider of consumer merchandise
and other services. It services customers through consumer benefit programs as
well as premium incentive programs.
NOTE 3 - NOTES PAYABLE AND LONG-TERM DEBT
Demand notes payable totaling $1,428,445 at September 30, 1995 and June 30,
1995, respectively, were due no later than July 1, 1995. The notes are
collateralized by the Company's accounts receivable. Demand notes payable
totaling $200,000 at September 30, 1995 are due March 31, 1996. Interest is
payable at 12.5% per annum.
The Company has $2,000,000 of convertible debentures payable to an investment
fund partnership payable in quarterly installments of interest only at 12.5%
per annum. Commencing on August 1, 1995, monthly principal installments of $10
per $1,000 borrowed are required. As of September 30, 1995, $262,508 is
considered short-term.
The Company is in default of its financial loan covenants on the debentures. It
is also in default of its monthly interest installments since May 1, 1994 on
the debentures and the notes payable. These covenants and default from
nonpayment of interest have been waived through July 1, 1996.
6
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NOTE 4 - LOSS PER SHARE
Loss per share is based on the weighted average number of common shares
outstanding during the periods presented. Common stock equivalents in the form
of convertible debentures were not included in the calculation of weighted
average shares outstanding since inclusion would be anti-dilutive.
7
<PAGE> 8
AMERISHOP CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company has a working capital deficit of approximately $3,154,378 at
September 30, 1995. Included in this deficit is approximately $558,312 of
deferred membership revenue and non-compete revenue. The deferred revenue will
be liquidated through amortization into income over the next two years.
Management is in the process of seeking additional equity financing to offset
the remaining $2,596,066 deficit and to provide sufficient working capital to
increase the Company's sales effort.
The Company has a deficiency in shareholders' equity and its continuation is
dependent upon meeting its liabilities as they become due and attaining
profitable operations.
At the present time, the Company's office space, telephone system and computer
system capabilities are underutilized. Management believes that a substantial
number of new members and merchandise incentive programs can be added without
significant capital expenditures. By adding new membership and merchandise
incentive programs, Management anticipates there will be an improvement in
operating results by more fully utilizing the Company's facilities.
The Company entered into an arrangement with an investment fund partnership
that has provided $2.0 million in long-term convertible debenture financing.
The investment fund partnership has the right at any time to convert any issued
debenture into the common stock of the Company at $.56309 per share. The
debenture is currently redeemable, at varying premium rates above par, of which
none have been redeemed as of September 30, 1995.
The Company also has a total of $1,628,445 of short-term demand note financing
outstanding at September 30, 1995 from the investment fund partnership. The
$1,428,445 of the notes are tied to the Company's accounts receivable and
repayment is current as of July 1, 1995. The remaining $200,000 must be repaid
by no later than March 31, 1996.
The Company is in default of its loan covenants on the convertible debentures
regarding current ratio and positive cash flow from operations. It is also in
default of its monthly interest installments since May 1, 1994 on the
debentures and the demand notes. The covenants and rights to remedies for
nonpayment have been waived through July 1, 1996. If at that date, a default
is declared, the Company would not be able to continue to operate unless
adequate equity capital was received.
Management implemented budgetary reduction measures in June, 1995 with the
intent of reducing selling, general and administrative (SG&A) expenses. For
the three months ended September 30, 1995, these reductions resulted in a
decrease of SG&A expenses by 6% from the same period of the prior year.
Management anticipates similar savings throughout the remainder of the fiscal
year.
The Company has made significant strides toward improving its results of
operations through the elimination of unprofitable programs and through the
SG&A expense reductions. The Company did improve loss from operations by
nearly $95,206 for the quarter ending September 30, 1995. However, interest
expense on the convertible debentures and short-term demand notes continues to
increase and more than offsets the operational gains. In response to this,
Management has been seeking ways to obtain new equity financing to allow for
the repayment of the short-term demand notes and for the redemption or
conversion of the convertible debentures.
The Company incurred approximately $121,000 in interest expense during the
three months ended September 30, 1995. This interest results primarily from
the $2 million in convertible debentures and $1,628,445 in notes payable which
are held by an investment fund partnership. It is Management's intent to
eliminate a significant portion of this debt and related interest in 1996.
This would be possible through conversion of the debentures into common stock
or by repayment of the debt at the debenture holder's option. In order to
repay the debt, the Company would first have to raise the funds through an
equity offering, either publicly or privately.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1995 vs. 1994
The Company experienced a loss of $150,000 during the quarter ended September
30, 1995 compared to a loss of $226,000 for same period in the prior year
constituting a 34% improvement. The loss from operations improved by 75% over
the prior year from $126,000 to $31,000. The Company is making significant
progress in improving its results from operations, however, its costs of
financing continue to increase substantially.
Membership fees increased by 33% from the prior year. Membership fee revenue
was generated primarily through servicing of private label shopping programs
for third party organizations, therefore, has been dependent upon the efforts
of other organizations. The Company is searching for strategic alliances with
greater marketing capabilities which would help reduce the necessary outlay of
capital.
Merchandise sales increased by 7% from $681,281 the prior year to $727,429 the
current year. Gross profit remains approximately the same at 11.7%. This
percentage is a combination of membership programs merchandise gross profit
sold at approximately breakeven and premium incentive merchandise gross profit,
which was approximately 17% for the quarter ended September 30, 1995.
Commissions expense increased from $43,700 in the prior year to nearly $85,000.
The increase resulted from greater sales derived from independent sales agents.
Commission rates to independent agents range from 5% to 25% of sales.
Merchandise sales to premium incentive customers increased 48% over the prior
year to $409,396. The Company's sales efforts have been focused toward the
premium incentive sales, and Management anticipates continued improvement in
this area.
Selling, general and administrative expenses decreased by 6% as a result of
budget reductions implemented in the fourth quarter of the prior year.
Interest expense increased by 18% over the prior period to $120,838. The
increase resulted from the addition of approximately $1,436,000 in short-term
loans, which were received in various amounts beginning in October 1993.
9
<PAGE> 10
PART II.
AMERISHOP CORP.
OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None.
ITEM 2 CHANGES IN SECURITIES
None.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
The Company is in default of certain covenants and interest payments on its $2
million of convertible debentures. The covenants dictate that the Company
maintain a current ratio of 1 to 1 and maintain positive cash flow from
operations over a three month moving average. The Company has not met these
requirements.
Since May 1, 1994, the Company is also in default regarding the payment of
interest and fees relating to the debentures and to the $1,428,445 of
short-term demand notes due to the same debenture holder.
The covenants and rights to remedies for nonpayment have been waived through
July 1, 1996.
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
None.
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.
AMERISHOP CORP.
-------------------------------------
Joseph B. Preston, Chairman/CEO
-------------------------------------
Steven R. Salasky - Controller
10
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- ------- ----------------------- ----
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1995
<PERIOD-END> SEP-30-1995
<CASH> 61,755
<SECURITIES> 0
<RECEIVABLES> 457,641
<ALLOWANCES> 0
<INVENTORY> 79,498
<CURRENT-ASSETS> 945,368
<PP&E> 516,797
<DEPRECIATION> 495,497
<TOTAL-ASSETS> 966,668
<CURRENT-LIABILITIES> 4,099,746
<BONDS> 1,852,428
<COMMON> 25
0
0
<OTHER-SE> (4,985,531)
<TOTAL-LIABILITY-AND-EQUITY> 966,668
<SALES> 727,429
<TOTAL-REVENUES> 1,029,279
<CGS> 641,703
<TOTAL-COSTS> 1,060,337
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120,838
<INCOME-PRETAX> (150,181)
<INCOME-TAX> 0
<INCOME-CONTINUING> (150,181)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (150,181)
<EPS-PRIMARY> 0
<EPS-DILUTED> (.06)
</TABLE>
