UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 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 0-16894
SUPERMAIL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Utah 87-0423053
(State of Incorporation) (IRS Employer Identification No.)
2201 Park Towne Circle, Suite 200, Sacramento, California 95825
(address of principal executive offices)
Issuer's telephone number, including area code (916) 483-1131
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Check mark the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12
months (or 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 [ ]
The total number of shares outstanding of each of the issuer's
classes of common stock as of May 14, 1996, was 7,646,853 of a single
class of $.06 par value per share common stock.
Documents Incorporated by reference:
1. Portions of the Report on Form 10-KSB(SEC File No. 0-16894) dated
December 31, 1995, are incorporated by reference in Part I.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
Supermail International, Inc.
Table of Contents
Pages
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet at
March 31, 1996 3 - 4
Condensed Consolidated Statements of Income
Three Months Ended March 31, 1996 and 1995 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements 7 - 8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 11
PART II. OTHER INFORMATION 12
SIGNATURES 13
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 1996
ASSETS
Current assets:
Cash and equivalents $3,142,593
Trade accounts receivable, less allowance for
doubtful accounts of $351,804 246,721
Officer receivables 8,963
Notes receivable 154,000
Investment in marketable securities 199,999
Prepaid expenses 192,826
Other current assets 33,486
---------
Total current assets 3,978,588
---------
Property and equipment, net 1,218,280
---------
Intangible assets:
Covenants not to compete, net 81,632
Goodwill, net 308,232
Other intangibles, net 316,804
---------
706,668
---------
Other 107,018
---------
$6,010,554
=========
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET, Continued
March 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of capitalized leases payable $ 12,816
Accounts payable 289,938
Advances from officer 39,709
Accrued liabilities:
Accrued payroll, payroll taxes and benefits 95,010
Accrued money order and money transfer drafts payable 1,518,743
Other 171,388
----------
Total current liabilities 2,127,604
Capitalized leases payable, net of current maturities 17,085
Deferred income 2,020,146
----------
Total liabilities 4,164,835
----------
Commitments
Stockholders' equity:
Preferred stock - no par value; authorized 50,000 shares;
none issued and outstanding
Common stock - par value $.06 per share; authorized
15,000,000, issued and outstanding 7,646,853 458,811
Additional paid-in capital 19,204,375
Accumulated deficit (14,791,905)
----------
4,871,281
Less receivables from officers, directors and others
related to issuance of common stock - 1,107,666 shares
held under notes receivable (3,025,562)
----------
Total stockholders' equity 1,845,719
----------
$ 6,010,554
==========
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three-Month Period Ended March 31, 1996 and 1995
1996 1995
--------- ---------
Sales and commissions $1,120,271 $1,197,805
Operating expenses 1,284,655 1,271,243
--------- ---------
Operating loss (164,384) (73,438)
--------- ---------
Other income (expense):
Interest income 4,094 852
Interest expense (15,275) (1,733)
Other, net 4,600 (2,285)
--------- ---------
(6,581) (3,166)
--------- ---------
Loss before income taxes (170,965) (76,604)
Income taxes (2,400) (2,400)
--------- ---------
Net loss ($173,365) ($79,004)
========= =========
Net loss per common share ($0.02) ($0.01)
========= =========
Weighted average common shares outstanding 7,646,853 9,782,177
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three-Month Period Ended March 31, 1996 and 1995
1996 1995
---------- ----------
Cash flows from operating activities:
Net cash provided by (used in)
investing activities $1,263,451 ($514,801)
Cash flows from investing activities:
Capital expenditures (237,173) (34,404)
Increase in other long-term assets (15,500) (2,550)
--------- --------
Net cash used in investing activities (252,673) (36,954)
--------- --------
Cash flows from financing activities:
Proceeds from advances 869,500 -
Payments on advances (869,500) -
Payments on advances from officer (80,815) -
Principal payments on debt (2,679) (2,861)
--------- --------
Net cash used in financing activities (83,494) (2,861)
--------- --------
Net increase (decrease) in cash and
cash equivalents $ 927,284 ($554,616)
========= ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the three-month period
ended March 31, for:
Interest $15,275 $1,744
Compensation paid through issuance of
restricted common stock $15,000 $ -
See accompanying notes to consolidated financial statements
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-QSB and,
therefore, do not include all information and footnotes necessary for a
fair presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles. In the
opinion of the Company, such financial statements reflect all normal
recurring accruals and entries necessary for a fair presentation of the
results of operations and financial position for the interim periods
presented. Operating results for the three-month period ended March 31,
1996 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's financial statements in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995, which is incorporated herein
by reference.
Loss per share is computed using the weighted average number of shares
outstanding, including common stock equivalents (stock options outstanding
during the period), except where the inclusions of these common stock
equivalents are anti-dilutive. In 1996 common stock equivalents have not
been used in computing the weighted average number of shares because they
are anti-dilutive. Fully diluted (loss)earnings per share does not differ
materially from primary earnings per share.
(2) PROPERTY AND EQUIPMENT
Property and equipment at March 31, 1996, consists of the following:
Equipment $1,052,860
Vehicles 13,427
Construction in progress 163,987
Leasehold improvements 1,030,930
---------
2,261,204
Accumulated depreciation 1,042,924
---------
$1,218,280
=========
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(3) INTANGIBLE ASSETS
Intangible assets at March 31, 1996, consists of the following:
Covenants not to compete $573,063
less accumulated amortization 491,431
-------
$ 81,632
=======
Goodwill $461,076
Less accumulated amortization 152,844
-------
$308,232
=======
Other intangibles $386,308
Less accumulated amortization 69,504
-------
$316,804
=======
(4) DEFERRED INCOME
On December 22, 1995, the Company amended its agreement with American
Express to offer MoneyGram services. This amendment extended the term of
the agreement for seven years beginning in 1996. As consideration for
signing this amendment, the Company received an up-front signing bonus of
$2,000,000 and future incentives for opening new MoneyGram service
locations. The signing bonus will be deferred and amortized over seven
years.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents increased $927,284 to $3,142,593 for the three-month
period ended March 31, 1996. Cash was provided by operating activities of
$1,263,451. Cash was used in investing and financing activities of
$252,673 and $83,494, respectively.
Net working capital increased $1,557,861 to $1,850,984 as of March 31, 1996
compared to $293,123 as of December 31, 1995. This increase was the result
of receiving a $2,000,000 signing bonus from American Express for amending
the Company's agreement to offer MoneyGram services for an additional seven
years. In addition, the amended agreement offers incentives for opening
new MoneyGram service locations.
Cash used in investing activities is primarily the result of costs incurred
for the construction of four new service locations. On February 29, 1996,
the Company opened one kiosk under its license agreement with a retail
department store chain on the east coast and opened the second kiosk in
April 1996. In addition, one Mega store opened in April 1996 and one
is expected to be opened in May 1996.
Cash used in financing activities is primarily the result of repaying
advances from an officer received in 1995. In addition, the Company
received from and repaid advances to outside parties during the three-
month period ended March 31, 1996 of $869,500.
Based on receipt of the $2,000,000 signing bonus and review of existing
operations, the Company believes it has sufficient capital resources to
finance its operating requirements and planned expansion for 1996.
RESULTS OF OPERATIONS
Three-Months Ended March 31, 1996 Compared to Three-Months Ended March 31,
1995
Revenues:
Revenues decreased $77,534 or 6.5% to $1,120,271 for the three-month period
ended March 31, 1995 compared to revenues of $1,197,805 the same period in
1995. This decline was primarily the result of a decrease in check cashing
revenues of $132,503 which was offset by a $39,886 increase in money
transfer revenues.
The decrease in check cashing revenues was primarily the result of
discontinuing the service to one of the Company's corporate
accounts, closure of six locations in 1995 and reduction of check
cashing revenues on the Navajo Nation. Check cashing revenues at
the location servicing the corporate account has decreased
approximately $50,000. The six locations closed in 1995 had
revenues of $61,794 for the three-months ended March 31, 1995 and
there was a $13,469 decrease in revenues on the Navajo Nation.
<PAGE>
Even though there has been a decrease in check cashing revenues for the
period ended March 31, 1996 as compared to 1995, it should be noted that
there has been a significant increase in the monthly check cashing
revenues since the beginning of the year. Check cashing revenues for the
month of March 1996 increased 65% from revenue earned for the month of
January 1996. This increase was due in part to the increase in working
capital.
Over the past year, the Company has redefined its target market niche and
will concentrate on building Mega stores in metropolitan areas catering
to the immigrant population during 1996. These stores are larger, more
visible stores offering a wider range of services. Currently, the Company
operates three Mega stores, opened one in April 1996 and expects to open
one in May 1996. These new stores and the existing ones should have a
significant impact on the check cashing revenues for the remainder of the
year.
The Company's attempt to work with the Navajo Nation to make the Navajo
stores viable has not helped the performance of the stores. Thus, the
Company plans to close these stores in the near future.
The increase in money transfer revenues is the result of an increase in
the amortization of deferred income and increased earnings of all stores
offset by a decrease in the minimum guaranteed revenues from American
Express.
Due to the receipt of the $2,000,000 signing bonus, the amortization of
deferred income increased $71,435 in 1996.
Overall, most stores experienced an increase in money transfers revenues.
Revenues for all stores was up a net $27,619 after accounting for a
$16,591 decrease for stores closed in 1995. This increased performance
by the stores in 1996 had a direct impact on the minimum guaranteed
revenues. As a component of the American Express agreement, American
Express has guaranteed the Company a minimum quarterly revenue. Since the
stores earnings are up, American Express's contribution to the guarantee
has decreased $59,168.
The overall increase in money transfer revenues is in line with the
Company's objectives to increase this service at all store locations.
In addition to the above factors, the Company over accrued the money
transfer commissions for the three-months ended March 31, 1995 by
approximately $22,000. Thus money transfer revenues are actually up
approximately $60,000 when this fact is taken into consideration.
Operating expenses:
Operating expenses consist of costs of providing services (cost of sales)
and general and administrative expenses. Total operating expenses
increased $13,412 or 1.1% for the three-month period ended March 31, 1996,
compared to the same period for 1995.
This increase is primarily the result of increases in advertising and bad
debt expense of $34,872 and $24,539, respectively, offset by decreases in
contract services and telephone expenses of $15,128 and $11,226,
respectively.
<PAGE>
Advertising expense increased due to a receivable collected during the
first quarter of 1995 that was credited against the expense rather than the
receivable. This receivable amounted to $38,774 and if properly accounted
for would have resulted in an actual decrease in expense for 1996 of
$3,902.
Bad debt expense increased due to an overall increase in the percentage of
uncollectible checks cashed from approximately 6% at March 31, 1995 to 11%
at March 31, 1996 of check cashing revenues. It should be noted that the
bad debt percentage for the year ended December 31, 1995 amounted to
approximately 10% which is in line with the percentage experienced during
1996. The increase in bad debt expense is partially the result of opening
the Mega stores which are high volume stores with a lower fee structure
which starts at 1% of the face amount of the check. Thus, the Company is
experiencing the same number of returned checks, but the impact as a
percentage of revenue is greater due to the lower fee.
Contract services declined due to discontinuing the use of temporary
personnel during the year end audit.
Telephone expense decreased as the result of changing the Company's long
distance carrier.
Other income (expenses):
Interest income increased $3,242 as a result of earnings on a portion of
the $2,000,000 signing bonus.
Interest expense increased $13,543 as a result of interest charges on
advances.
Other, net increased $6,885 to income of $4,600 from an expense of $2,285.
This increase is primarily the result of nonoperating legal costs incurred
in 1995 not present in 1996.
Net Loss:
The net loss increased $94,361 to $173,365 for the three-month period
ended March 31, 1996 as compared to $79,004 for the same period in 1995.
However, if the results for 1995 are adjusted for factors noted above
(money transfer over accrual, advertising and bad debt expense), an
adjusted net loss of approximately $170,000 would have been experienced
for the three-month period ended March 31, 1995.
The adjusted net loss for 1995 is comparable to the 1996 net loss which
is encouraging considering the fact that both monthly money transfer and
check cashing revenues have been steadly increasing during 1996 due in
part to the increase in working capital.
<PAGE>
Economy:
Management believes that the current economic conditions have not had a
significant impact on continuing operations nor will they have a
significant effect on future operations.
Inflation:
Management believes that inflation has not had a significant effect on
continuing operations nor will it have a significant effect on future
operations.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
See legal proceeding described in the 1995 Form 10-KSB.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Items 4. Submission of Matters to a Vote of Security Holders.
None
Items 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a)The following are filed as exhibits to the quarterly report.
The numbers refer to the Exhibit Table of Item 601 of Regulation S-K.
2) None
4) None
11) Computation of earnings per share. See Note 1 of Part I,
Item 1, Financial Statements filed with this Form 10-QSB at
page 7.
15) None
16) None
18) None
19) None
20) None
23) None
24) None
25) None
28) None
(b) None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Supermail International, Inc.
(Registrant)
By /s/ K. Lee Date March 14, 1996
----------------------- ----------------------
K.Lee
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARCH 31, 1996 BALANCE SHEET, STATEMENT OF INCOME AND NOTES AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,142,593
<SECURITIES> 199,999
<RECEIVABLES> 598,525
<ALLOWANCES> 351,804
<INVENTORY> 0
<CURRENT-ASSETS> 3,978,588
<PP&E> 2,261,204
<DEPRECIATION> 1,042,924
<TOTAL-ASSETS> 6,010,554
<CURRENT-LIABILITIES> 2,127,604
<BONDS> 0
<COMMON> 458,811
0
0
<OTHER-SE> 1,386,908
<TOTAL-LIABILITY-AND-EQUITY> 6,010,554
<SALES> 1,120,271
<TOTAL-REVENUES> 1,120,271
<CGS> 0
<TOTAL-COSTS> 1,284,655
<OTHER-EXPENSES> (8,694)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,275
<INCOME-PRETAX> (170,965)
<INCOME-TAX> (2,400)
<INCOME-CONTINUING> (173,365)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (173,365)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
