<PAGE> 1
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarter ended March 31, 1996 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 May 13, 1996, 2,894,765 shares of common stock were outstanding.
<PAGE> 2
AMERISHOP CORP.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Descriptions Page Number
- ------------ -----------
<S> <C>
Cover Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Part I. Financial Information
1. Financial Statements (Unaudited)
Balance Sheets
March 31, 1996 and June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations
Three Months Ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . 4
Statements of Operations
Nine Months Ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . 5
Statement of Cash Flows
Nine Months Ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 7-8
2. Management's Discussion and Analysis of Results
of Operations and Financial Conditions . . . . . . . . . . . . . . . . . . . 9-10
Part II.
1. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2. Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
2
<PAGE> 3
1. FINANCIAL INFORMATION
AMERISHOP CORP.
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
--------- -----------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash $ 43,586 $ 47,210
Prepaid expenses 46,008 7,068
Accounts receivable (Note 3) 621,289 427,700
Prepayments to vendors 160,323 65,204
Inventory 86,949 76,392
----------- -----------
Total current assets 958,155 623,574
EQUIPMENT, net 23,105 25,873
----------- -----------
Total assets $ 981,260 $ 649,447
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 449,828 $ 493,188
Customer deposits 671,992 379,780
Deferred membership revenue 447,340 521,710
Deferred non-compete revenue 0 37,483
Notes payable (Note 3) 1,628,445 1,428,445
Accrued interest 710,847 328,882
Current maturities of long-term debt 371,938 293,131
Other current liabilities 32,043 79,728
----------- -----------
Total current liabilities 4,312,433 3,562,347
LONG-TERM DEBT 1,643,522 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, 2,894,765 and 2,516,327 shares respectively
outstanding at March 31, 1996 and June 30, 1995 29 25
Additional paid-in capital 697,820 484,729
Accumulated deficit (5,672,544) (5,320,079)
----------- -----------
Total shareholders' equity/(deficit) (4,974,695) (4,835,325)
----------- -----------
Total liabilities and shareholders' equity $ 981,260 $ 649,447
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
AMERISHOP CORP.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---------- ----------
<S> <C> <C>
REVENUES:
Membership fees $ 289,703 $ 235,978
Merchandise sales 1,156,276 1,071,688
Travel revenue 194,801 0
Promotional revenue 87,870 97,636
---------- ----------
Total revenues 1,728,650 1,405,302
---------- ----------
EXPENSES:
Sales commissions 116,368 96,035
Cost of merchandise sales 862,717 798,794
Cost of travel revenue 176,279 0
Selling, general and administrative 450,974 461,474
Promotional expenses 97,830 134,663
---------- ----------
Total expenses 1,704,168 1,490,966
---------- ----------
Income (Loss) from operations 24,482 (85,664)
OTHER INCOME (EXPENSE):
Interest income 993 1,595
Other income 1,686 0
Loss on lease renegotiation 0 0
Interest expense (133,077) (111,321)
Other expense (907)
---------- ----------
Total other income (expense) (130,398) (110,633)
---------- ----------
Loss before taxes (105,916) (196,297)
Provision for taxes 12,817 0
---------- ----------
Net Loss $ (118,733) $ (196,297)
========== ==========
Net Loss Per Share (Note 4) $ (.04) $ (.08)
========== ==========
Weighted Average Shares Outstanding 2,894,765 2,516,327
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
AMERISHOP CORP.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1996 1995
---------- ----------
<S> <C> <C>
REVENUES:
Membership fees $ 867,025 $ 703,002
Merchandise sales 3,030,777 2,781,030
Promotional revenue 194,801 158,898
Travel revenue 167,457 230,997
---------- ----------
Total revenues 4,260,060 3,873,927
---------- ----------
EXPENSES:
Sales commissions 323,149 204,762
Cost of merchandise sales 2,284,717 2,161,482
Cost of travel revenue 176,279 143,603
Selling, general and administrative 1,256,414 1,351,931
Promotional expenses 163,175 196,286
---------- ----------
Total expenses 4,203,734 4,058,064
---------- ----------
Income/(Loss) from operations 56,326 (184,137)
OTHER INCOME (EXPENSE):
Interest income 2,824 2,007
Other income 2,932 5,074
Loss on lease renegotiation (17,624)
Interest expense (384,106) (324,585)
---------- ----------
Total other income (expense) (395,974) (317,504)
---------- ----------
Loss before taxes (339,648) (501,641)
Provision for taxes 12,817 0
---------- ----------
Net Loss $ (352,465) $ (501,641)
========== ==========
Net Loss Per Share (Note 4) $ (.13) $ (.20)
========== ==========
Weighted Average Shares Outstanding 2,768,619 2,516,327
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
AMERISHOP CORP.
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine months ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (352,465) $ (501,641)
Adjustments to reconcile net loss
to net cash from operating activities:
Loss on lease renegotiation 17,624
Depreciation and amortization 13,315 44,414
Changes in assets and liabilities:
Prepaid expenses (38,940) 18,917
Accounts receivable (193,589) (152,134)
Prepayments to vendors (95,119) (40,379)
Inventory (10,557) (46,017)
Accounts payable (43,360) (101,571)
Customer deposits 292,212 261,744
Deferred membership revenue (74,370) (147,846)
Deferred non-compete revenue (37,483) (37,503)
Accrued interest 381,965 317,168
Other current liabilities (47,685) (42,090)
---------- ----------
Net cash used in operating activities (188,452) (426,938)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (10,547) (8,284)
---------- ----------
Net cash used in investing activities (10,547) (8,284)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term
debt and capital lease obligations (4,625) (60,058)
Proceeds from issuance of notes payable 200,000 300,000
---------- ----------
Net cash provided by financing activities 195,375 239,942
---------- ----------
NET CHANGE IN CASH (3,624) (195,280)
CASH AT BEGINNING OF PERIOD 47,210 206,958
---------- ----------
CASH AT END OF PERIOD $ 43,586 $ 11,678
========== ==========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON CASH
INVESTING AND FINANCING ACTIVITIES
In October, 1995 the Company was released of $195,471 in accrued rent
obligations when it entered into a new lease, for which it issued $213,095 in
stock.
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
AMERISHOP CORP.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
normally included in the annual financial statements prepared in accordance
with generally accepted accounting principles. In the opinion of management,
all material adjustments (of a normal recurring nature) considered necessary
for a fair presentation have been included. Operating results for the nine
months ended March 31, 1996 are not necessarily indicative of the results that
may be expected for the year ended June 30, 1996. For further information,
refer to the financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the 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
Demand notes payable totaling $1,428,445 at March 31, 1996 and June 30, 1995,
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 March
31, 1996 were 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 March 31, 1996, $364,186 is considered
short-term.
7
<PAGE> 8
The Company is in default of its financial loan covenants on the debentures.
It is also in default of its monthly interest and principle installments on the
debentures and the notes payable. The default concerning covenant violations
and scheduled debt payments related to debentures has been waived through July
1, 1996.
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 and stock options were not included in the
calculation of weighted average shares outstanding since inclusion would be
anti-dilutive.
8
<PAGE> 9
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 $3,354,280 at March 31, 1996.
Included in this deficit is $447,340 of deferred membership 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 $2,906,940 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 March 31, 1996.
The Company also has a total of $1,628,445 of short-term demand note financing
outstanding at March 31, 1996 from the investment fund partnership. The
$1,428,445 of the notes are tied to the Company's accounts receivable and
repayment was 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 nine months ended March 31, 1996, these reductions resulted in a decrease
of SG&A expenses by 7% 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 results of operations
through the elimination of unprofitable programs and through the SG&A expense
reductions. The Company did improve income (loss) from operations by nearly
$240,462 for the nine months ending March 31, 1996 compared to the same period
of the prior year. However, interest expense on the convertible debentures and
short-term demand notes continues to increase and 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 $384,106 in interest expense during the nine months ended
March 31, 1996. 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.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 1996 VS. 1995
The Company experienced a loss of $352,465 during the nine months ended March
31, 1996 compared to a loss of $501,641 for the same period in the prior year
constituting a 30% improvement. The results of Operations improved by 131%
over the prior year from a loss of $184,137 to income of $56,326. 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 nearly 23% from the prior year. Membership fee
revenue is generated primarily through servicing of private label shopping
programs for third party organizations. Therefore, this revenue has been
dependent upon the efforts of other organizations. The Company continues to
contract for private label shopping programs and search for strategic alliances
with greater marketing capabilities, which would help reduce the necessary
outlay of capital.
Merchandise sales increased by 9% from $2,781,030 the prior year to $3,030,777
in the current year. Gross profit remains approximately the same at 14%. This
percentage is a combination of membership programs merchandise gross profit
sold at approximately breakeven and premium incentive merchandise gross profit,
which was approximately 18% for the nine months ended March 31, 1996.
Commissions expense increased from $204,762 in the prior year to $323,149. 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 30% over the prior
year to $1,930,871. 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 7% 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 $384,106. 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.
RESULTS OF OPERATION FOR THE QUARTER ENDED MARCH 31, 1996 VS. 1995
On an operational basis the Company experienced an improvement of approximately
$110,000 over the same period of the prior year. The improved results were due
to $54,000 increase in membership fee revenue, a $27,000 increase in net
promotional gross profit, a $18,500 increase in travel revenue from a program
that occurred in prior quarter the previous year and $10,500 decrease in
selling general and administrative expenses.
Overall, the Company experienced a loss of $118,733 for the quarter ended March
31, 1996 compared to a loss of $196,296 for the same period of the prior year.
Interest expense increased 20% over the prior period to $133,077.
During the Quarter AmeriShop came online with a World-Wide-Web site that it had
been developing. This site http://www.amerishop.com is promoting AmeriShop's
shopping club membership. It includes information about AmeriShop's program
and includes teaser products that show the savings available through AmeriShop.
The prospective member can register online, but then is directed to the toll
free phone number to actively use the membership. It is AmeriShop's intent to
become totally online by the fall of 1996.
10
<PAGE> 11
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 $1,628,445 of
short-term demand notes due to the same debenture holder.
The covenants and rights to remedies for non-payment of interest and fees 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.
/s/ Joseph B. Preston
-------------------------------
Joseph B. Preston, Chairman/CEO
/s/ Steven R. Salasky
-------------------------------
Steven R. Salasky, Controller
11
<PAGE> 12
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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 43,586
<SECURITIES> 0
<RECEIVABLES> 621,289
<ALLOWANCES> 0
<INVENTORY> 86,949
<CURRENT-ASSETS> 958,155
<PP&E> 527,345
<DEPRECIATION> 504,239
<TOTAL-ASSETS> 981,260
<CURRENT-LIABILITIES> 4,312,433
<BONDS> 1,643,522
0
0
<COMMON> 29
<OTHER-SE> 697,820
<TOTAL-LIABILITY-AND-EQUITY> (4,974,695)
<SALES> 3,030,777
<TOTAL-REVENUES> 4,260,060
<CGS> 2,284,717
<TOTAL-COSTS> 4,203,734
<OTHER-EXPENSES> 17,624
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 384,106
<INCOME-PRETAX> (339,648)
<INCOME-TAX> 12,817
<INCOME-CONTINUING> (352,465)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (352,465)
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
