<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[Fee Required]
For the Fiscal Year Ended December 31, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[No Fee Required]
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: (916) 483-1131
Securities Registered Pursuant to Section 12(b) of the Act:None
Securities Registered Pursuant to Section 12(g) of the Act:Common Stock
Check whether the registrant (1) filed all reports required to be
filed by Section 13 or 15(d) of the 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 [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X]
Issuer's revenue for the year ended December 31, 1995: $4,418,598
Aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 22, 1996: $4,030,225
The total number of shares outstanding of each of the Issuers's
classes of common stock as of March 22, 1996, was 7,607,177 of a single
class of $.06 par value per share common stock.
Documents Incorporated by Reference:
None
Transitional Small Business Disclosure Format: Yes ; No X
<PAGE>
Supermail International, Inc.
Table of Contents
PART I
ITEM 1 Description of Business 3
ITEM 2 Description of Properties 6
ITEM 3 Legal Proceedings 8
ITEM 4 Submission of Matters to a Vote of Security Holders 8
PART II
ITEM 5 Market for Common Equity and
Related Stockholder Matters 9
ITEM 6 Management's Discussion and Analysis 10
ITEM 7 Consolidated Financial Statements and
Independent Auditors' Report 13
ITEM 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 29
PART III
ITEM 9 Directors and Executive Officers of the Registrant 30
ITEM 10 Executive Compensation 31
ITEM 11 Security Ownership of Certain Beneficial Owners
and Management 33
ITEM 12 Certain Relationships and Related Transactions 34
ITEM 13 Exhibits and Reports on Form 8-K 35
SIGNATURES 38
<PAGE>
PART I
ITEM 1 Description of Business
General Description of Business
Supermail International, Inc. (the "Company") was incorporated in Utah
on October 12, 1979. The operations of the Company are carried out
through its wholly-owned subsidiary, Supermail International of Utah,
Inc. (the "Utah subsidiary").
The Company offers a wide range of non-banking financial and
communication services through its 25 retail service centers. These
services include check cashing, money transfer and money orders through
American Express, food stamp distribution, utility payments, tax return
preparation, and electronic tax filings. Other services and products
offered through the Company's retail outlets include telegrams,
Mailgrams, telex, facsimile transmissions, overnight courier and
delivery services, California lottery and lotto sales, postal services,
packaging and shipping services, peso exchange, and transit tickets
sales. While some services and products are not offered at every retail
center, all stores provide check cashing, money transfer, money orders,
utility payment collection, and electronic mail services including
telegrams, Mailgrams, facsimile and tax services. Check cashing and
money transfer revenues accounted for 57% and 30%, respectively of the
Company's total revenues during 1995.
The Company commenced operations with the opening of its first retail
outlet in San Francisco, California, during October 1985. By the end of
1986 the Company operated 11 retail centers throughout California
and in Reno, Nevada. These centers were acquired by purchasing them
from existing operators and taking over Western Union turnkey locations.
The Company's business during 1986 consisted primarily of electronic
mail and Western Union money transfer services.
During 1987, the Company determined that the best way to increase
revenues was a combination of acquisitions and additional services
offered at existing retail outlets. Electronic mail and money
transfer accounted for approximately 90% of total revenues during
1987, thus, the Company decided it would be prudent to expand its
revenues with other products and services. The Company determined
that check cashing was a good complement to the existing revenue
base because check cashing was similar in nature; and the Company
would be servicing the same customer base and utilizing existing
plant and equipment. The Company started check cashing in December
1987 at its Sacramento, California, retail outlet. As of January
1992, the Company began offering money transfer service through
American Express. Tax return preparation, electronic tax filing and
refund anticipation loan services were added during 1992. In July
1993, the Company entered into a 25-year contract with the Navajo
Nation to open five to seven retail service centers offering check
cashing and other non-bank financial services on the reservation.
As of December 31, 1995, the Company has five centers on the Navajo
Nation.
<PAGE>
On September 12, 1995, the Company entered into a license agreement
with a retail department store chain on the east coast to install
kiosks in some of their stores (a kiosk is a secured portable booth).
The Company opened one kiosk on February 29, 1996 and expects to
open an additional four pilot kiosks in 1996. If this pilot program
is successful, it could result in installing kiosks in many of this
retail chains 300+ locations. These kiosks will provide services
similar to those currently offered by the Company.
The Company continues to look for opportunities to increase its existing
revenue base. The Company intends to continue its expansion in 1996
through opening or acquiring additional check cashing locations. The
actual number and estimated cost of these centers depends upon the cash
flow generated from operations and available financing. Locations for
future centers are expected to be in high traffic suburban areas such as
malls, regional shopping centers, and commercial business districts.
Description of Store Operations
As of December 31, 1995, the Company operated 25 retail service centers,
20 in California, 3 in Arizona and 2 in New Mexico.
The typical service center requires about 1,200 square feet and
employs an average of three people. The stores' hours are
coordinated with those of other stores and shops in the vicinity.
Generally, the hours are from 8 a.m. to 9 p.m., six days a week with
many outlets open on Sundays from noon to 6 p.m. During 1994, the
Company opened two Mega-stores which are larger than the existing
store locations. The Mega-stores occupy approximately 2500 square
feet and have 10 to 12 teller windows. All of the centers consist
of a public lobby separated from the work area by a counter and a
bulletproof barrier. The Company offers a variety of payment
methods depending on the type of service selected by the customer.
Check cashing revenues are collected by deducting the amount due
from the customer's check. The Company requires money transfers,
money orders, transit tickets, lottery and lotto sales, and postal
services to be paid for in cash. Other products and services may be
paid for using cash or credit cards. Selected customers, who have
established accounts, may charge certain products and services on
account. Accounts receivable are due ten days from the date of the
invoice.
Each of the Company's retail centers is equipped with Company owned
computer hardware and software, American Express MoneyGram (money
transfer) leased computers and software, American Express automatic
money order dispensers, facsimile, photocopier and telex equipment.
Management and Business Conditions
The majority of the Company's senior management have all been employed
by the Company since its inception and have extensive background and
experience in financial and business management. The Company's district
supervisors and store managers have an average of five years management
experience. The Company has an extensive training program for both
managers and retail store personnel. The Company makes every effort to
retain and promote employees from within the organization. No special
professional licenses or franchises are necessary to carry on the
Company's current business operations. The Company is in compliance
with all state and federal laws which regulate its business. The
Company is not aware of any pending legislation which would materially
affect the Company's business or operations.
<PAGE>
The Company's customers consist primarily of individuals and businesses
who do not regularly use banks, savings and loans, or credit unions.
This market is estimated to be in excess of 20% of the United States
adult population, according to the American Bankers Association. The
Company does not compete with traditional financial institutions but
instead competes with other check cashing companies. The Company cashes
primarily payroll checks, social security checks and other government
entitlement checks. The Company charges between 1.00% and 3.5% to cash
a check. The average fee is less than 2%, which is lower than most of
the Company's competition. The Company's policy is to offer its
services through convenient retail locations, with fast friendly service
and competitive pricing. The Company believes this positions it to
effectively meet competition whenever it occurs.
The Company offers Western Union telegrams, international messages,
telex and Mailgram messages on a non-contractual basis. These services
are offered in accordance with tariffs filed with the Federal
Communications Commission by Western Union and other Western Union
policies and procedures in existence from time to time. Western Union
furnishes the Company, at Western Union's expense, equipment, signage
and forms necessary in providing their services.
On December 22, 1995, the Company amended its contracts with
American Express to offer Moneygram (money transfer) service for an
additional seven-years. This agreement provides for receipt of an
up-front signing bonus of $2,000,000, future incentives for opening
new MoneyGram Service locations and certain other payments to the
Company over the seven-year period. American Express currently
makes monthly payments to the Company for earned commissions on
services provided to customers based upon the type of transaction
performed, on a per transaction or percentage of customer fee basis
as specified in the agency agreement. The agreement also provides
for guaranteed minimum payments, which are paid quarterly when
earned commissions do not meet the guaranteed amounts. American
Express furnishes the Company, at American Express's expense,
equipment, signage, and forms necessary for providing their
services.
The Company believes that termination of this agency agreement with
American Express could have a material adverse effect on the
Company's operations. American Express money transfer service
currently accounts for 30% of the Company's total revenues.
American Express may terminate its contract with the Company for the
following reasons: if the Company fails to remit monies due
American Express under the trust agreement; if there is a material
adverse change in the financial condition of the Company; if the
Company does not obtain American Express's prior consent to any
sale, merger, or transfer of ownership of the Company; or if the
Company fails to comply with state or federal laws regulating the
Company's business.
The Company markets its services by means of advertisements in local
newspapers, Yellow Pages, bus benches, flyers, direct mail, radio,
television, personal contact with large organizations which may use the
Company's services, and through high-visibility signage strategically
located in each center's servicing area. The Company has received
trademark protection for the words "Supermail International."
<PAGE>
Employees
At December 31, 1995, the Company had 78 employees. Of these, 28 were
full-time salaried, 33 were full-time hourly, and 17 were part-time
hourly employees. Corporate headquarters employs 9 full-time salaried
employees who devote all of their time to the management of the Company.
The remaining 69 employees provide financial and other related services
in the Company's retail service centers. The Company plans to hire
additional personnel as needed to accommodate planned growth. The
employees of the Company are not subject to collective bargaining and
the Company does not have a pension or other retirement plan. The
Company considers its relations with its employees to be excellent.
ITEM 2 Description of Properties
The Company occupies a 4,600-square foot office at 2201 Park Towne
Circle in Sacramento, California, which serves as corporate
headquarters. The Company occupies these premises on a month to
month basis with a monthly rental amount of $5,750. Since the rate
of office building vacancies in Sacramento, California remains high,
the Company wants to review all of its options before entering into
a long-term lease at the current location.
The Company also holds leases for twenty-nine service centers. The
Company cannot guarantee that the lessors or sublessors will renew these
leases. However, it has no reason to believe that the leases will not
be renewed. The Company also believes that it can find alternative
locations at comparable rents.
Set forth below is information concerning Company locations as of
December 31, 1995:
Location Type Sq. Ft. Expiration
719 J Street
Sacramento, CA 95814 Leased 2,800 04/01/97
5803 N. Figueroa Street
Los Angeles, CA 90042 Leased 900 01/15/97
2430 Broadway
Oakland, CA 94612 Leased 2,018 10/31/97
161 W. San Fernando Street
San Jose, CA 95113 Leased 1,500 04/30/98
110 S. El Camino Real
San Mateo, CA 94401 Leased 1,000 03/31/96
2400 E. Florence Ave.
Huntington Park, CA 90255 Leased 1,850 01/31/99
11009 Burbank Blvd. #123
North Hollywood, CA 91601 Leased 808 01/17/97
6371 Selma Avenue
Hollywood, Ca 90028 Leased 1,203 08/01/98
<PAGE>
6219 Van Nuys Blvd.
Van Nuys, CA 91401 Leased 1,200 Monthly
3970 University Ave.
Riverside, CA 92501 Leased 1,210 08/15/97
11849 Braddock Drive
Culver City, CA 90230 Leased 736 03/31/96
6740 Reseda Blvd.
Reseda, CA 91335 Leased(1) 2,365 09/10/00
7020 Reseda Blvd.
Reseda, CA 91335 Leased 1,500 10/31/96
6320 S. Compton Avenue
Los Angeles, CA 90001 Leased 600 10/31/96
461 Blossom Hill Road #H2
San Jose, CA 95123 Leased(2) 1,015 10/30/96
1777 S. Winchester Blvd.
Campbell, CA 95008 Leased(2) 1,400 11/30/96
2688 E. Florence Avenue
Huntington Park, CA 90255 Leased 1,750 09/15/98
450 Sansome Street
San Francisco, CA 94111 Leased 1,835 01/21/97
231 East 17th Street
Santa Ana, CA 92706 Leased 1,246 02/01/00
1706 Long Beach Blvd.
Long Beach, CA 90813 Leased(2) 1,306 12/14/98
260 S. Normandie Ave.
Los Angeles, CA 90004 Leased 982 04/30/97
10167 Folsom Blvd.
Rancho Cordova, CA 95670 Leased 1,200 10/31/96
2800 Broadway #3
Sacramento, CA 95817 Leased 1,520 09/30/96
111 W. Pacific Coast Hwy. #D
Wilmington, CA 90744 Leased 1,154 11/18/98
Hwy. 191 TSEYI' Shopping Center
Chinle, AZ 86503 Leased 1,524 10/12/96
Junction Hwy 57 & Route 9, General Delivery
Crownpoint, NM 87313 Leased 1,000 03/01/05
Hwy 666 Box 0778
Shiprock, NM 87420 Leased 1,000 03/01/05
Junction Hwy 264 & Route 12, P. O. Box 4349
Window Rock, AZ 86515 Leased 1,000 03/01/05
<PAGE>
Hwy 160 & Hwy 163, General Delivery
Kayenta, AZ 86033 Leased 1,800 03/01/05
- --------------
(1) New Mega-store to be opened in 1996.
(2) Closed stores still under lease.
ITEM 3 Legal Proceedings
The Company is party to a dispute that alleges breach of a lease by
tenant Franklin-Lord, Inc., and subsequent suit against Franklin-Lord
and several signatories to a purported guaranty of the tenant's lease
obligations. These signatories include several principals of the
tenant, and the Company. Depending on whether the leased premises are
or have been re-leased, and when, the damages for the alleged breach
of lease and guaranty could range from approximately $40,000 to
$300,000.
The Company is defending the action on the ground that its execution of
the guaranty was conditioned on the closing of a transaction with
Franklin-Lord that was never consumated. The Company is also cross-
complaining against Franklin-Lord for indemnity as primary obligor, and
against the other signatories for contribution as co-obligors.
Other than the forgoing and routine litigation incidental to its
business, as of the date of this filing, the Company is not a party to
any pending legal proceedings nor is any of its property subject to
pending legal proceeding.
ITEM 4 Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
ITEM 5 Market for Common Equity and Related Stockholder Matters
Market Information
The Company's common stock trades on The Nasdaq OTC Bulletin Board
under the symbol SPML. The following table sets forth by quarter
the high and the low prices reported by the "real-time" sales and
price information system of the Nasdaq Small-Cap Market and Nasdaq
Trading and Market Services of the Company's common stock for 1994
and 1995.
MARKET INFORMATION
1995 Price Per Share
High Low
------ -----
First Quarter $1.44 $0.78
Second Quarter 0.94 0.38
Third Quarter 0.75 0.07
Fourth Quarter 0.38 0.13
1994 High Low
------ -----
First Quarter $5.25 $3.00
Second Quarter 3.75 3.00
Third Quarter 3.38 2.38
Fourth Quarter 2.63 1.19
Holders
As of December 31, 1995, there were 3,022 stockholders of record.
However, based upon information supplied by the Company's transfer
records, brokers and nominees with respect to shares held in street
name, the Company calculates it has approximately 5,000 total
shareholders.
Dividends
The Company's preferred stock, which was converted to common stock in
1994, provided for cumulative dividends of 1% of net profits.
Cumulative preferred dividends totaling $14,963 were paid in 1995.
The Company has not declared or paid any dividends on its common stock.
The Company plans to reinvest any earnings toward continued expansion
efforts at this time.
<PAGE>
ITEM 6 Management's Discussion and Analysis
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents decreased $175,400 to $2,215,309 as of December 31,
1995 compared to $2,390,709 for the same period in 1994. Cash was used
in operating and investing activities of $141,976 and $143,228,
respectively. Cash was provided by financing activities of $109,804.
Net working capital decreased $1,057,698 to $293,123 as of December 31,
1995 compared to $1,350,821 for the same period in 1994. The decline in
working capital had a significant impact on the Company's liquidity
position during 1995. This decline was due to expenses, including
unusual nonoperating expenses, exceeding revenues. To help mitigate the
decline in working capital, the Company was able to obtain short-term
advances to meet its check cashing needs on the first and fifteenth of
the month. The Company received and repaid $1,221,000 in advances to
outside parties during the year ended December 31, 1995. In addition,
the Company received from and repaid advances to officers and an
employee of $304,600 and $184,076, respectively during 1995.
The Company currently has $32,580 in debt of which $19,764 is long term.
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.
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. It
is management's philosophy to explore new products or opportunities that
will enhance the Company's operations. These new products or
opportunities may require additional capital which, if available, would
be raised through debt or equity transactions.
RESULTS OF OPERATIONS (1995 AS COMPARED TO 1994)
Revenues
Revenues decreased $155,161 or 3.4% to $4,418,598 for the year ended
December 31, 1995, compared to revenues of $4,573,759 for the year ended
December 31, 1994. This decline was the result of decreases in check
cashing, electronic mail and other revenues of $151,576, $76,912 and
$97,425, respectively, offset by increases in money transfer and lobby
phone revenues of $137,443 and $97,140, respectively.
The decrease in check cashing revenues is primarily the result of
closing six stores in 1995 and the decrease in working capital (cash
available to cash checks) during the third and fourth quarters. The
decrease in working capital reversed the growth experienced during
the first and second quarters and resulted in an overall decline at
some locations for the year. These declines were offset by a
significant increase in revenues at one of the Mega stores opened in
1994. Decline in electronic mail and other revenues is the result
of a customer discontinuing the use of our electronic mail services
and a $60,000 lotto bonus received in 1994.
<PAGE>
Money transfer revenues increased approximately $200,000 at the two Mega
stores opened in 1994. However, this increase was offset by decreases
for the six stores closed in 1995. Activity at the remaining stores was
relatively flat with about an equal number of stores experiencing
increases or decreases.
Lobby phone revenues increased significantly due to installation of this
service in two stores during 1995 versus one store in 1994. In
addition, the one store in 1994 was in operation for only part of the
year.
Operating Expenses
Operating expenses consist of costs of providing services (cost of
sales) and general and administrative expenses. Total operating
expenses decreased $5,811 to $5,307,302 for the year ended
December 31, 1995, compared to 1994.
Cost of sales increased $83,294 or 61.4%, to $219,037 for the year ended
December 31, 1995, compared to 1994. This increase results primarily
from the cost of providing lobby phone services which rose $93,934
during 1995.
General and administrative expenses decreased $77,483 or 1.5% to
$5,088,265 for the year ended December 31, 1995, compared to 1994.
This decrease resulted primarily from a $224,895 and $55,975 decline
in shareholder relations and bad debt expense, respectively, offset
by increases of $62,507, $48,160, $47,205 and $37,073 in
advertising, insurance, rent and telephone expenses, respectively.
Decrease in shareholder relations and travel expenses were the result of
Regulation S offering costs incurred in 1994 that were expensed rather
than netted against the offering proceeds. The decrease in bad debt
expense resulted from losses of approximately $50,000 in 1994 related to
an ATM theft not present in 1995.
Advertising expense increased as a result of accruing an advertising
reimbursement receivable in the amount of $28,000 that was uncollectible
and written-off to advertising expense in 1995.
Insurance increased as a result of a full years premium in 1995 for
stores opened in 1994.
Rent increased due to a full year of operations in 1995 of stores opened
in 1994 and the lease of a new location to be opened in 1996.
Telephone expense was relatively flat in 1995 as compared to 1994
except, in 1994, some telephone expenses were reclassified to
Regulation S offering costs. This reclassification resulted in net
telephone expense being lower in 1994, thus causing an increase for
1995.
Other Income (Expenses)
Interest income decreased $40,161 as a result of interest received on
Regulation S notes receivable paid in 1994. No collections were made in
1995.
In 1994, a provision of $76,000 was provided on a $200,000 note
receivable. The carrying value of this note did not change in 1995.
<PAGE>
Consulting and other costs related to proposed new business ventures
decreased $67,261 as such costs were fully amortized in 1994.
Other net increased $147,152 in 1995 due primarily to $155,603 in
nonoperating legal expense relating to a case between the State of
Arizona and a business that the Company had dealings within a prior
year. While the Company is not named in this action, it has incurred
legal expenses associated with obtaining legal counsel to represent
officers, directors and employees in the investigation of this case.
<PAGE>
ITEM 7 Consolidated Financial Statements and Independent Auditors'
Report
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Supermail International, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of
Supermail International, Inc. and subsidiary as of December 31,
1995, and the related consolidated statement of operations,
stockholders' equity, and cash flows for each of the two years
in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Supermail International, Inc. and Subsidiary as of
December 31, 1995, and the consolidated results of their operations
and their consolidated cash flows for each of the two years in the
period ended December 31, 1995, in conformity with generally
accepted accounting principles.
SINGER, LEWAK, GREENBAUM & GOLDSTEIN
Los Angeles, California
March 12, 1996
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1995
ASSETS
Current assets:
Cash and equivalents $2,215,309
Trade accounts receivable, less allowance for
doubtful accounts of $289,944 306,046
Officer receivables 279
Notes receivable 154,000
Investment in marketable securities 199,999
Prepaid expenses 97,921
Other current assets 25,245
---------
Total current assets 2,998,799
---------
Property and equipment, net 1,051,912
---------
Intangible assets:
Covenants not to compete, net 97,353
Goodwill, net 313,689
Other intangibles, net 298,353
---------
709,395
---------
Other 91,518
---------
$4,851,624
=========
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET, Continued
December 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of capitalized leases payable $ 12,816
Accounts payable 212,264
Advances from officer 120,524
Accrued liabilities:
Accrued payroll, payroll taxes and benefits 91,201
Accrued money order and
money transfer drafts payable 2,089,832
Other 179,039
---------
Total current liabilities 2,705,676
Capitalized leases payable, net of current maturities 19,764
Deferred income 122,100
---------
Total liabilities 2,847,540
---------
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 7,607,177 456,430
Additional paid-in capital 19,191,756
Accumulated deficit (14,618,540)
----------
5,029,646
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 2,004,084
---------
$ 4,851,624
=========
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1995 and 1994
1995 1994
------ ------
Sales and commissions $4,418,598 $4,573,759
Operating expenses 5,307,302 5,301,491
--------- ---------
Operating loss (888,704) (727,732)
--------- ---------
Other income (expense):
Interest income 3,462 43,623
Interest expense (35,572) (23,703)
Provision for doubtful note receivable - (76,000)
Loss on disposal of assets (20,216) -
Consulting and other costs related to
proposed new business ventures - (67,261)
Other, net (192,273) (45,121)
--------- ---------
(244,599) (168,462)
--------- ---------
Loss before income taxes (1,133,303) (896,194)
Income taxes (2,700) (3,415)
--------- ---------
Net loss $(1,136,003) $ (899,609)
========== =========
Net loss per common share $ (0.12) $ (0.10)
========== =========
Weighted average common
shares outstanding 9,537,862 8,831,793
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1994 and 1995
<CAPTION>
-Preferred Stock- ---Common Stock---
Number of Par Number of Par Additional Accumulated Notes
Shares Value Shares Value Paid-in-Capital Deficit Receivable Total
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 15,000 $15,000 5,802,032 $348,122 $16,653,140 $(12,567,965) $(1,368,484) $3,079,813
Rounding - - 7 - - - - -
Net loss - - - - - (899,609) - (899,609)
Common stock issued:
Conversion of preferred stock
to common stock (15,000) (15,000) 300,000 18,000 (3,000) - - -
Sale of common stock 1,594,250 95,655 2,623,688 - (1,775,456) 943,887
Exercise of stock options by
officers and directors 1,080,555 64,833 1,023,166 - (1,087,999) -
Compensation for services
rendered 5,333 320 1,630 - - 1,950
Exchange of common stock for
investment in privately held
corporation 1,000,000 60,000 940,000 - (1,000,000) -
Preferred stock dividend - - - (14,963) - (14,963)
Other - - 121,096 - (92,087) 29,009
----------------------------------------------------------------------------------------------
Balance at December 31, 1994 - - 9,782,177 586,930 21,359,720 (13,482,537) (5,324,026) 3,140,087
Net loss - - - - - (1,136,003) - (1,136,003)
Cancellation of stock purchased
with notes receivable - - (2,175,000) (130,500) (2,167,964) - 2,298,464 -
----------------------------------------------------------------------------------------------
Balance at December 31, 1995 - - 7,607,177 $456,430 $19,191,756 $(14,618,540) $(3,025,562) $2,004,084
==============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995 and 1994
1995 1994
------------ ----------
Cash flows from operating activities:
Net loss $(1,136,003) $(899,609)
---------- --------
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 313,330 375,296
Provision for doubtful note receivable - 76,000
Loss on disposal of assets 20,216 -
Deferred income recognized (122,100) (121,200)
Issuance of common stock for
services rendered - 13,106
Change in assets and liabilities:
Decrease in interest receivable - 29,009
Decrease in trade accounts receivable 68,554 81,888
Decrease (increase) in prepaid expenses 101,407 (57,759)
Decrease (increase) in other current assets 39,393 (37,599)
Increase (decrease) in accounts payable 157,092 (24,824)
Increase in accrued payroll, payroll taxes
and benefits 4,807 2,401
Increase in accrued drafts payable 617,935 440,444
(Decrease) increase in other
accrued liabilities (169,762) 82,599
Decrease in income taxes payable (36,845) (11,155)
---------- ---------
Net cash used in operating activities (141,976) (51,403)
---------- ---------
Cash flows from investing activities:
Proceeds on sale of assets 17,000 -
Collection on notes receivable - 1,000,000
Loan under a note receivable (30,000) (200,000)
Capital expenditures (145,357) (702,632)
Advances collected from (made to) officers
and directors, net 7,096 (7,375)
Other long-term assets 8,033 15,672
---------- ---------
Net cash (used in) provided by
investing activities (143,228) 105,665
---------- ---------
Cash flows from financing activities:
Proceeds from advances 1,221,000 -
Payments on advances (1,221,000) -
Proceeds from advances from officers and
employee 304,600 -
Payments on advances from officers and
employee (184,076) -
Proceeds from sale of common stock, net - 943,888
Principal payments on debt (10,720) (7,287)
Net cash provided ---------- ---------
by financing activities 109,804 936,601
---------- ----------
Net (decrease) increase in cash and equivalents (175,400) 990,863
Cash and equivalents at beginning of year 2,390,709 1,399,846
---------- ----------
Cash and equivalents at end of year $ 2,215,309 $2,390,709
========== =========
See accompanying notes to consolidated financial statements
<PAGE>
SUPERMAIL INTERNATIONAL, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Line of Business
The consolidated financial statements include the accounts of Supermail
International, Inc. (the Company), and its wholly-owned subsidiary,
Supermail International of Utah, Inc. The Company offers a wide range of
non-banking financial and communication services through its retail
service centers. These services include check cashing, money transfer
and money orders through American Express and food stamp distribution.
The Company's concentration of customers is in the state of California
and on the Navajo Nation Reservation in Arizona and New Mexico.
(b) Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(c) Marketable Equity Securities
The Company accounts for marketable equity securities in accordance
with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities"
(FAS 115).
Management determines the appropriate classification of its investments
in equity securities at the time of purchase and reevaluates such
determination at each balance date. Securities available for sale are
carried at fair value, with the unrealized gains and losses, net of
tax, reported in a separate component of stockholders'equity. At
December 31, 1995, the Company had no investments that qualified as
trading or held to maturity.
Marketable equity securities are valued based quoted market prices.
(d) Property and Equipment
Property and equipment are carried at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets. When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is recognized as income for the period. The cost
of maintenance and repairs is charged to expense as incurred;
significant renewals and betterments are capitalized.
Leasehold improvements are amortized over the lesser of the lease term
or the estimated useful life of the asset.
<PAGE>
(e) Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes."
(f) Loss Per Share
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 inclusion of these
common stock equivalents would produce an anti-dilutive effect. In 1995
and 1994, common stock equivalents have not been used in computing the
weighted average number of shares because of the anti-dilutive effects.
The calculation of fully diluted loss per share does not differ
materially from primary loss per share for 1995 and 1994.
(g) Reclassifications
Certain reclassifications have been made to the 1994 financial
statements in order to conform with the 1995 presentation.
(h) Statements of Cash Flows
Cash and equivalents include cash on hand and cash in banks. Cash
equivalents are considered to be all highly liquid debt instruments
purchased with a maturity of three months or less at the date of
purchase.
(2) RELATED PARTY TRANSACTIONS
During 1995, advances from and repayments to officers and an employee
amounted to $304,600 and $184,076, respectively. These advances have
no specific repayment terms and carry interest rates from 10% to 19%
per annum. Of the $120,524 balance owed at December 31, 1995, an
officer has the option of converting up to $50,000 into restricted
common stock at $.03 per share. Interest paid on these advances in
1995 totaled $7,720. In addition, advances to officers decreased
$7,096 in 1995.
(3) SIGNIFICANT SUPPLIER
The Company's money transfer services have been provided through one
supplier during 1995 and 1994. Services provided through this supplier
resulted in commissions of approximately $1,311,000 and $1,173,000 for
1995 and 1994, respectively and a corresponding receivable of
approximately $158,000 at December 31, 1995.
Money transfer revenues constituted 30% and 26% of total revenues during
1995 and 1994, respectively. Under the terms of the agreement, the
Company's money transfer supplier may terminate the agency agreement for
the following reasons: if the Company fails to remit monies due under
the trust agreement; if there is a material adverse change in the
financial condition of the Company; if the Company does not obtain the
supplier's prior consent to any sale, merger, or transfer of ownership
of the Company; or if the Company fails to comply with state or federal
laws which regulate the Company's business. As permitted by the
agreement, the Company commingles trust funds held for the money
transfer supplier with its own funds. As a result a substantial portion
of the cash balance is held in trust for payment of amounts due the
money transfer supplier at December 31, 1995. In the ordinary course of
business this amount is settled within a few business days.
<PAGE>
(4) NOTES RECEIVABLE
The Company has a $200,000 note receivable reduced by a valuation
allowance of $76,000 from a privately held corporation that bears
interest at 8.5% per annum and is due December 31, 1995. This note
is in default. Thus, the Company is determining its course of
action. The note is collateralized by common stock of a publicly
traded company. This collateral has a market value in excess of the
amount owed to the Company.
In addition, the Company has a $30,000 note receivable from a publicly
held corporation that bears interest at 8.5% per annum and was due May
23, 1995. The note is in default and the Company is working with this
corporation to collect the amount due. This note is collateralized by
common stock which has a market value in excess of the amount owed to
the Company.
(5) MARKETABLE SECURITIES
During 1994, the Company sold an investment in marketable equity
securities with a carrying value of $199,999 in exchange for a note
receivable. During 1995, this note became in default, thus, the Company
received the securities back from the transfer agent. These securities
have been classified as available-for-sale, at December 31, 1995. The
investment in equity securities has a cost and fair value of $199,999.
(6) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995, consists of the following:
Estimated
Useful Life
------------
Equipment $1,042,124 3 - 10 years
Vehicles 13,427 5 years
Leasehold improvements 973,553 5 - 12 years
Construction in progress 19,600
---------
2,048,704
Less accumulated depreciation
and amortization 996,792
---------
$1,051,912
=========
Depreciation expense in 1995 and 1994 was $193,114 and $173,727,
respectively.
<PAGE>
(7) INTANGIBLE ASSETS
Intangible assets at December 31, 1995, consists of the following
Amortization
Period
------------
Covenants not to compete $573,063 5 - 10 years
Less accumulated amortization 475,710
-------
$ 97,353
=======
Goodwill $461,076 5 - 20 years
Less accumulated amortization 147,387
-------
$313,689
=======
Food stamp contract $50,000 14 years
Organization/start-up costs 274,111 5 years
Beneficial leases 37,525 9 - 13 years
-------
Subtotal 361,636
Less accumulated amortization 63,283
-------
$298,353
=======
Amortization charged to expense in 1995 and 1994 was $120,216 and
$201,569, respectively.
Covenants not to compete, food stamp contract, and beneficial leases are
being amortized over the term of the contracts using the straight-line
method. Organization costs and goodwill are being amortized over their
estimated useful lives using the straight-line method.
During 1995, the Company incurred start-up costs associated with the
development of new markets for existing products. Total cost
capitalized of $88,322 will be amortized over five-years upon
commencement of these operations.
<PAGE>
(8) INCOME TAXES
No provision for federal income taxes has been provided due to the net
losses. As of December 31, 1995, the Company had federal net operating
loss carryforwards of approximately $6,402,000 which expire at various
amounts through 2010.
The income tax effect of temporary timing differences between financial
and income tax reporting that give rise to a significant portion of the
deferred income tax assets and liabilities at December 31, 1995, under
the provisions of SFAS 109, are as follows:
Deferred Income Taxes
---------------------------
Assets (Liabilities)
------------ ------------
Net operating loss carryforwards $2,389,000
Officer and Director option
compensation expense 2,216,000
Signing bonus agreement 49,000
Difference between book and tax
basis of fixed assets 107,000
Difference between book and tax
basis of intangible assets $(38,000)
Allowance for doubtful accounts 146,000
------------ ------------
4,907,000 (38,000)
Less valuation allowance 4,869,000
------------ ------------
Net long-term deferred $ 38,000 $(38,000)
============ ============
The net change in the valuation allowance for the year ended December
31, 1995 was an increase of $557,000.
Income tax benefits (expense) consists of:
1995 1994
---------- ----------
Federal $ - $ -
State (2,700) (3,415)
-------- --------
$ (2,700) $ (3,415)
======== ========
The Company's tax expense for 1995 and 1994 consists of minimum
California and Utah tax.
(9) LEASES
The Company is obligated under capital leases that expire at various
dates during the next four years. Equipment under capital leases was
$50,587 and related amortization was $19,716 as of December 31, 1995.
The Company also leases certain real estate for its corporate office and
service center operations, as well as certain equipment under long-term
lease agreements ranging from one to nine years.
<PAGE>
Future minimum lease payments under noncancelable operating leases and
the present value of future minimum capital lease payments as of
December 31, 1995, are:
Capital Operating
Leases Leases
------- ---------
1996 $17,658 $600,574
1997 9,768 366,915
1998 9,051 277,145
1999 6,034 136,301
2000 90,865
Thereafter - 216,750
------ ---------
Total minimum lease payments 42,511 $1,688,550
=========
Less: Amount representing interest
(at 18%) 9,931
------
Present value of net minimum
capital lease payments 32,580
Less current maturities 12,816
------
$19,764
======
Rent expense under operating leases in 1995 and 1994 amounted to
$775,228 and $728,023.
(10) STOCKHOLDERS' EQUITY
(a) Preferred Stock
During July 1994, the Company entered into an agreement with its
preferred stockholders to exchange their preferred stock for common
stock on a basis of 20 shares of common stock for each share of
preferred stock. Under the terms of the agreement, the Company issued
300,000 shares of common stock in exchange for the entire 15,000 shares
of preferred stock.
(b) Common Stock Transactions
On March 17, 1994, the Company entered into an agreement to issue
1,000,000 shares of the Company's common stock in exchange for 2,500,000
shares of a privately held, start-up corporation. The privately held
corporation sold the Company's stock pursuant to Regulation S in
exchange for notes receivable and expects to collect $1,000,000 on these
notes which has been used as the basis for valuing this transaction in
the Company's financial statements. The Company's investment in the
privately held corporation has been netted against stockholders' equity
until the notes receivable are collected in full.
In September 1994, the Company sold 1,000,000 shares of the privately
held corporation discussed above for $2.00 per share. Consideration for
this sale was a $2,000,000 note receivable, bearing interest at 8% per
annum; due in August 31, 1995. These notes are in default and the
Company is determining its course of action due to the uncertainty of
collection. This transaction has not been accounted for in the
financial statements due to the uncertainty of collection.
<PAGE>
During 1994, the Company received $2,623,688 in cash and notes
receivable, net of selling costs of $208,408 from the issuance of
1,594,250 shares of common stock valued at $1.75 to $2.00 per share in
connection with restricted stock private placements and a Regulation S
offering. Notes receivable from the Regulation S offering of $1,775,456
bearing interest at 8% per annum; due in June 1995, are outstanding at
December 31, 1995 and are shown as a reduction of Stockholders' Equity.
These notes are in default and the Company is the process of canceling
the shares not paid for and held by the transfer agent or legal counsel.
During 1994, the Company issued 1,075,000 shares of restricted common
stock from certain officers, directors and employees of the Company were
exercised at a price of $1.00 per share in exchange for notes
receivable. These notes receivable provide for interest at 5% per annum
and are due in January 1996. On February 16, 1996, the Board of
Directors authorized the cancellation of these notes receivable along
with all accumulated interest and the related shares are to be
surrendered and returned to the Company. This transaction is being
reported as of November 20, 1995, the date the new options were granted
and the cancellation was contemplated.
During 1993, the Company issued 1,100,000 shares of restricted
common stock to the Chief Executive Officer of the Company at a
price of $1.00 per share in exchange for a note receivable. The
price was based upon shares sold pursuant to the 1993 Regulation S
sale. The note receivable provides for interest at 5% per annum and
matures in October 1995. On February 16, 1996, the Board of
Directors authorized the cancellation of this note receivable
along with all accumulated interest and the related shares are to be
surrendered and returned to the Company. This transaction is being
reported as of November 20, 1995, the date the new options were
granted and the cancellation was contemplated.
(c) Incentive Compensation Plan
The 1987 Incentive Compensation Plan provides for granting up to 416,667
shares of common stock to key employees at an exercise price of at least
the fair market value at the time of grant.
Non-recourse
Notes
Plan Receivable
-------- ------------
Shares under option, December 31, 1993 5,555 $229,838
Exercise at $2.34 (5,555) 12,999
Interest on notes receivable 7,269
-------- ------------
Shares under option, December 31, 1994
and 1995 - $250,106
======== ============
Options granted expire five years from date of grant. The Plan has
11,667 shares under option which are reserved and ungranted as of
December 31, 1995.
<PAGE>
(d) Other Options
On November 20, 1995, the Company's Board of Directors approved the
grant of a two-year option to purchase 2,820,000 shares of common stock
to certain officers, directors and employees at $0.13 per share, the
bid price on the date of grant. Said options, when exercised, will be
subject to non-recourse promissory notes and the related shares will be
registered under a S-3 registration statement or other registratio as
recommended by legal counsel. As of December 31, 1995, no options
were exercised.
On April 22, 1994, The Company's Board of Directors approved the grant
of an option to purchase 100,000 shares of restricted common stock to
each of the three new board members at $3.00 per share, the market price
on the date of grant. These options are exercisable for a five year
period commencing November 24, 1994. As of December 31, 1995, no
options were exercised.
(11) DEFERRED INCOME
On December 31, 1991, the Company entered into an agreement with
American Express to offer MoneyGram through the Company's service
centers. The agreement provided for an up front signing bonus of
$919,621 and certain guaranteed and other payments over the five-year
term of the contract. This signing bonus was recorded as deferred
income and is being amortized over the life of the agreement on a
straight line basis.
(12) COMMITMENTS
(a) Employment Contracts
The Board of Directors approved employment agreements for certain key
officers and employees ranging from one to five years. These proposed
agreements provide for minimum annual compensation of $340,000 and
bonuses to be determined by the compensation committee. The Company is
in the process of finalizing the agreements.
On December 1, 1988, the Company entered into a deferred compensation
agreement with the Company's Chief Executive Officer (CEO). Under terms
of the agreement, upon retirement from active and daily employment
following her sixty-fifth birthday, the Company will pay as deferred
compensation for past services rendered to the Company the amount of
$134,508 payable in ten equal installments. The liability will be
funded by a split-dollar life insurance policy on her life. The yearly
premium is withheld from her established salary and paid by the Company
directly. She will be obligated to repay the Company the guaranteed
cash surrender value ("CS") and the Company will retain collateral
assignment of the CS. CS of the policy based upon industry annuity
tables will equal the deferred compensation due to the Company's CEO at
age 65. Accruals are made currently under the terms of the agreement.
<PAGE>
(13) SUPPLEMENTAL CASH FLOW DISCLOSURE
Supplemental disclosures of cash flow information:
Cash paid during the year for:
1995 1994
---------- ----------
Interest $35,572 $23,703
State income taxes 2,700 3,415
Supplemental schedule of noncash investing and financing activities:
The Company acquired equipment under capital leases during 1994 totaling
$50,587.
During 1995, the Company reclassed a note receivable to an investment
as stock originally sold was received back due to default on the note.
(14) OTHER EXPENSES, NET
Other expenses, net, for the years ended December 31, 1995 and 1994
consisted of the following:
1995 1994
---------- ----------
Preopening costs $ (55,172)
Nonoperating legal costs $(155,603) -
Consulting costs (18,180) -
Other (18,490) 10,051
-------- -------
$(192,273) $(45,121)
======== =======
(15) CONCENTRATION OF CREDIT RISK
The Company has a large number of customers in each category of
revenues. Returned checks pose the largest credit risk for the Company.
In 1995 the Company cashed approximately 41,000 checks totaling
approximately $15,146,000 each month. The Company maintains surplus
cash balances in two separate banks. At December 31, 1995, the Company
has balances of approximately $153,000 in excess of the $100,000
insurance amount provided by the Federal Deposit Insurance Corporation
(FDIC). In order to mitigate credit risk, the majority of the Company's
surplus cash balances are carried in one of California's largest banks.
(16) SUBSEQUENT EVENTS
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. The other
terms and condition in the original agreement, as described in note
3, remain the same.
<PAGE>
ITEM 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
<PAGE>
PART III
ITEM 9 Directors and Executive Officers of the Registrant
The following is a list of Company directors who have served during the
periods indicated as provided below:
Director
Name Age Position with the Company Since
- -------------- --- ------------------------- --------
Bradley D. Cox 33 Director 1991
John J. Feliz 37 Director 1995
Kurt Lee 35 Chief Financial Officer 1995
Umberto Umbertino 37 Director, President
and Chief Operating Officer 1993
Christine A. Umbertino 40 Director, Chairperson of
the Board and Chief Executive
Officer 1985
Mercedes Veiga 43 Director, Senior Vice President
and Secretary 1995
Information About Individual Directors
BRADLEY D. COX, age 33, has been a Director of the Company since
February 1991. He is currently active as President of Paradise Valley
Spas, Inc., a retail spa and sauna company in San Mateo, California.
Mr. Cox is also active as owner of Paradise Valley Group, an export and
trading company conducting business in the United States and Japan.
JOHN J. FELIZ, age 37, has been a Director of the Company since
November 1995. He has been a Space Planner with the State of
California Office of Real Estate and Design in Sacramento, Ca since
1990 and also the proprietor of Feliz Interior since 1989. He is a
graduate of Interior Architecture from the University of Oregon in
1983. He taught at the University of Oregon and is presently a
professor at American River College in Sacramento, California.
Kurt Lee, age 35, has been the Chief Financial Officer of the
Company since December 1, 1995. Prior to joining the Company, he
was a senior manager with a public accounting firm. Mr. Lee has been
a licensed CPA in the state of California since 1986 and is a graduate
of the University of Southern California in 1983.
UMBERTO UMBERTINO, age 37, was appointed to the Board of Directors
effective September 29, 1993. Mr. Umbertino was appointed President
effective December 15, 1993. Mr. Umbertino has been employed by the
Company since 1985 and has been Vice President in charge of Operations
since 1987. Mr Umbertino is the brother of Christine A. Umbertino.
CHRISTINE A. UMBERTINO, age 40, has been an Officer and Director of the
Company since 1985. She became President and Chief Operating Officer of
the Company in 1987, was elected Chief Executive Officer effective April
1, 1988 and was elected Chairperson of the Board effective September 29,
1993.
MERCEDES VEIGA, age 43, was appointed to the Board in 1995. She has
been Secretary of the Company since 1987. Ms. Veiga was promoted to
Senior Vice President effective December 15, 1993.
<PAGE>
ITEM 10 Executive Compensation
Summary Compensation Table
Annual Compensation
Name and Stock(Option) All Other
Principal Position Year Salary($) Number Compensation($)(1)
- ------------------ ---- --------- ------------ ------------------
Christine Umbertino 1995 $162,000 - $5,000
Chairperson and Chief 1994 $151,958 - $5,000
Executive Officer 1993 $125,000 1,100,000 $5,000
(1) On December 1, 1988, the Company entered into a deferred
compensation agreement with the Company's CEO. Under the terms of
the agreement, upon retirement from active and daily employment
following her sixty-fifth (65th) birthday, the Company will pay a
deferred compensation for past services rendered to the company in the
amount of $134,508, payable in ten (10) equal installments. The
liability will be funded by a split dollar life insurance policy on her
life. The yearly premium is withheld from her established salary and
paid by the Company directly. She will be obligated to repay the
Company the guaranteed cash surrender value ("CSV") and the Company will
retain collateral assignment of the CSV. CSV of the policy based upon
industry annuity tables will equal the deferred compensation due the
president at age 65.
Employment Contracts
The Company has entered into a five-year employment agreement with
Christine A. Umbertino as Chairperson of the Board and Chief Executive
Officer of the Company. The agreement calls for a five-year term
commencing as of January 1, 1994, and ending December 31, 1999. The
term is, however, extended by one year for each year completed unless
either party terminated upon twenty (20) days notice before the end of a
calendar year. Pursuant to the agreement, Ms. Umbertino's salary is
$150,000, subject to increases as the Board may determine. In addition,
Ms. Umbertino is to receive a bonus in an amount determined by the Board
of Directors. The bonus shall not be less than five (5%) percent of the
increase in consolidated operating income (as such term is defined in
the Agreement) from the prior year but not to exceed 200% of her prior
year compensation.
Options
On November 20, 1995, the Company's Board of Directors approved the
grant of a two-year option to purchase 2,820,000 shares of common stock
to certain officers, directors and employees at $0.13 per share, the
bid price on the date of grant. Said options, when exercised, will be
subject to non-recourse promissory notes and the related shares will be
registered under a S-3 registration statement or other registration as
recommended by legal counsel. As of December 31, 1995, no options were
exercised.
During September 1993, the Board of Directors granted options to
Christine A. Umbertino to purchase 1,100,000 shares of restricted common
stock for $1.00. The quoted stock price on the date of the grant was
$3.63. These options were exercised during 1993 with a note receivable
carrying interest at 5%.
<PAGE>
During December 31, 1993, the Board of Directors granted options to
certain officers, directors and employees to purchase 1,075,000 shares
of restricted common stock for $1.00. The quoted stock price on the
date of the grant was $2.94. These options were exercised during 1994
with notes receivable carrying interest at 5%.
On February 16, 1996, the Board of Directors authorized the
cancellation of these notes receivable along with all accumulated
interest and the related shares are to be surrendered and returned
to the Company. This transaction is being reported as of November
20, 1995, the date the new options were granted and the cancellation
was contemplated.
Directors' Compensation
The Company's directors currently serve without cash compensation. They
are reimbursed for certain travel related and other out-of-pocket
expenses incurred to attend Board of Directors and stockholder meetings.
Certain directors have been granted options to purchase shares of
the Company's common stock. During 1994, two directors exercised
their options and purchased 200,000 shares of stock with notes
receivable carrying interest at 5% and maturing January 1, 1996. On
February 16, 1996, the Board of Directors authorized the
cancellation of these notes receivable along with all accumulated
interest and the related shares are to be surrendered and returned
to the Company. This transaction is being reported as of November
20, 1995, the date the new options were granted and the cancellation
was contemplated.
ITEM 11 Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 15, 1996,
regarding the share ownership of each officer and director or each
person who is known to the Company to have been a beneficial owner of
more than 5% of any class of stock of the Company:
Amount and
Nature of
Name and Address of Beneficial Percent
Title of Class Beneficial Ownership Ownership of Class
- -------------- ---------------------- ---------- --------
Common Christine A. Umbertino 1,516,667 (1)(2) 14.98%
2201 Park Towne Circle (3)
Sacramento, CA 95825
Common Umberto Umbertino 509,267 (1)(2) 5.03%
Director, President and (3)
Chief Operating Officer
2201 Park Towne Circle
Sacramento, CA 92825
Common Bradley D. Cox 206,904 (1)(2) 2.04%
Director (3)
#12 Dockside Circle
Redwood Shores, CA 94065
Common John J. Feliz 20,000 (3) .20%
Director
400 R Street, #500
Sacramento, CA 95816
<PAGE>
Common Kurt Lee 100,000 (3) .99%
Chief Financial Officer
2201 Park Towne Circle
Sacramento, CA 95825
Common Mercedes Veiga 510,959 (1)(2) 5.05%
Secretary and Senior (3)
Vice President
2201 Park Towne Circle
Sacramento, CA 95825
--------- --------
2,863,797 28.29%
========= ========
Footnotes to Tables
(1) Beneficial owner has sole voting power and sole investment power, to
the Company's knowledge.
(2) The Company holds the following number of shares listed in the table
for payment of non-recourse promissory notes used to exercise
options for the following named persons:
Christine A. Umbertino 116,667
Umberto Umbertino 8,333
Mercedes Veiga 8,333
(3) Includes shares which may be acquired by officers and directors by
exercise o options. Total shares exercisable under options for the
named persons is as follows:
Christine A. Umbertino 1,400,000
Umberto Umbertino 500,000
Mercedes Veiga 500,000
Brad D. Cox 200,000
Kurt Lee 100,000
John J. Feliz 20,000
The ownership percentage figures for each person listed in this note
are computed by increasing the shares outstanding by the total
number of such options.
ITEM 12 Certain Relationships and Related Transactions
The Company accepted notes receivable totaling $2,175,000 from officers,
directors and employees during 1993 and 1994 in connection with the
exercise of options. These notes provide for interest at 5% and mature
in October 1995 and January 1996. Christine A. Umbertino is the maker
of $1,100,000 of the notes receivable. The highest amount of
indebtedness owed by Ms. Umbertino during 1995 was $1,370,640 in
connection with such note and another note issued in connection with the
exercise of options granted under the 1987 Plan. The notes bear
interest ranging from 3% to 5%.
On February 16, 1996, the Board of Directors authorized the
cancellation of the $2,175,000 notes receivable discussed above
along with all accumulated interest and the related shares are to be
surrendered and returned to the Company. This transaction is being
reported as of November 20, 1995, the date the new options were
granted and the cancellation was contemplated.
<PAGE>
All other transactions with affiliates of the Company are on terms no
less favorable than could be obtained with unaffiliated third parties.
ITEM 13 Exhibits and Reports on Form 8-K
a. List separately all documents filed as part of the report
(a)(1) Financial Statements Pages
-----
Independent Auditors' Report. 14
Consolidated Balance Sheets, December 31, 1995. 15-16
Consolidated Statements of operations, Years Ended
December 31, 1995 and 1994. 17
Consolidated Statements of Stockholders' Equity, Years
Ended December 31, 1995 and 1994. 18
Consolidated Statements of Cash Flows, Years Ended
December 31, 1995 and 1994. 19
Notes to Consolidated Financial Statements. 20
(a)(3) Exhibits Required by Item 601 of Regulation S-K
The following are filed as Exhibits to this registration form. The
numbers refer to the Exhibit Table of Item 601 of Regulation S-K. The
Exhibits are contained in a separate bound volume of this Form 10-K.
2. Not applicable
3.1-a Revised Articles of Incorporation of Omicron Industries, Inc.
3.2-a Amendment to Articles of Incorporation (changing name
to Supermail International, Inc.)
3.3-a Registrant's Bylaws, as amended
3.4-b Amendment to Articles of Incorporation (effecting 6-for-1
reverse stock split and changing par value to $0.06 per share)
4.1 Not applicable
9. Not applicable
10.2-a Registrant's 1987 Incentive Compensation Plan
10.8-a Lease for 4 Embarcadero Center, Lobby Level, San Francisco,
California 94111
10.19-a Lease for 2201 Park Towne Circle,Sacramento, California 95825
10.28-c Incentive Compensation Agreement (including detail schedule)
10.30-d Lease for 719 J Street, Sacramento, California 95814
10.31-d Lease for 161 W. San Fernando St., San Jose, California 95113
10.32-d Lease for 110 S. El Camino Real, San Mateo, California 95501
10.34-d Lease for 4035 Market Street, Riverside, California 92501
10.35-d Lease for 7020 Reseda Blvd., Reseda, California 91335
10.36-d Lease for 6318 S. Compton Ave., Los Angeles, California 90001
10.37-d Lease for 2688 E. Florence Ave., Huntington Park, California
90255
10.38-d Lease for 303 San Fernando Road, Los Angeles, California 90031
10.41-e SSGR, Inc. Purchase Agreement
10.42-e General Check Cashing Co. Limited Partnership Agreement
10.43-c Lease for 6219 Van Nuys Blvd., Van Nuys, California 91401
10.44-c Lease for 5803 N. Figueroa St., Los Angeles, California 90042
10.45-c Lease for 1883 Daly St. #104, Los Angeles, California 90031
10.46-c Lease for 461 Blossom Hill Rd. #H2, San Jose, California 95123
10.47-c Lease extension and amendment for 1777 S. Winchester Blvd.,
Campbell, California 95008
10.48-c Exercise of option to extend lease for 303
San Fernando Road, Los Angeles, California 90031
10.49-c Lease for 450 Sansome Street, San Francisco, California 94111
<PAGE>
10.50-c Lease for 231 East 17th Street, Santa Ana, California 92706
10.51-c Lease for 10167 Folsom Blvd., Rancho Cordova, California 95670
10.52-c Lease for 2800 Broadway #3, Sacramento, California 95817
10.53-c Lease for 5702 Watt Ave., North Highlands, California 95660
10.54-c Lease for 10330 Arlington Ave. #2, Riverside, California 92505
10.55-c MoneyGram Agency and Trust Agreement between Registrant and
American Express Travel Related Services Company, Inc.
10.56-c Money Order Trust Agreement between Registrant and American
Express Travel Related Services Company, Inc.
10.57-c Lease for 719 J Street, Sacramento, California 95814
10.58-c Lease for 110 S. El Camino Real, San Mateo, California 94401
10.59-b Amendment to lease for 11849 Braddock Drive, Culver City,
California 90230
10.60-b Letter of agreement with J. R. Bothe & Co. regarding financial
public relations services
10.61-b Amendment to lease for 10167 Folsom Blvd., Rancho Cordova,
California 95670
10.62-f Lease for Hwy. 191 TSEYI' Shopping Center (next to Basha's),
Chinle Arizona 86503
10.63-f Lease for 111 W. Pacific Coast Hwy. # D, Wilmington, California
90744
10.64-f Hamclo Financial Services Inc., Purchase Agreement
10.65-f Lease for 1706 Long Beach Blvd., Long Beach, California 90813
10.66-f Lease extension for 2800 Broadway # 3, Sacramento,
California 95817
10.67-f Money Order Trust Agreement between Registrant and American
Express Travel Related Services Company, Inc. for Navajo
Check Cashing
10.68-f MoneyGram Agency and Trust Agreement between Registrant
and American Express Travel Related Services Company, Inc.
for Navajo Check Cashing
10.69-f Contract with the Navajo Nation governing Company operations
on the reservation
10.70-g Exchange of stock between Ultra-Male Center, Inc. and the
Company 10.71-i Lease for 260 S. Normandie Ave.,
Los Angeles, California 90004
10.72-i Lease for 2400 E. Florence Ave., Huntington Park,
California 90255
10.73-i Lease for 3970 University Ave., Riverside, California 92501
10.74-i Lease for 2688 E. Florence Ave., Huntington Park,
California 90255
10.75-i Lease for Junction Hwy 57 & Route 9, Crownpoint,
New Mexico 87313
10.76-i Lease for Hwy 666, Shiprock, New Mexico 87420
10.77-i Lease for Junction Hwy 264 & Route 12, Window Rock,
Arizona 86515
10.78-i Lease for Hwy 160 & Hwy 163, Kayenta, Arizona 86033
10.79 Lease for 6740 Reseda Blvd #A&B, Reseda, California 91335
10.80 Lease for 229 & 231 E. 17th Street, Santa Ana,
California 92706
10.81 Lease extension for 10167 Folsom Blvd, Rancho Cordova,
California 95670
11.-c Statement re computation of per share earnings for the
years ended 1991, 1990 and 1989. See page 24.
12-18. Not applicable.
21.-h Subsidiaries of the registrant.
23-27 Not applicable.
28.-h Form 8, dated September 12, 1988 - Item 6. Compensation,
pages 30-31.
<PAGE>
(b) Reports on FORM 8-K.
1) Engagement of new accountant to audit the registrant's
financial statements for the year ended December 31, 1994.
Date of report: December 16, 1994
2) Death of Director of the Company. Date of report:
September 14, 1994
___________________________
a Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10 filed May 4, 1988, File No. 0-16894.
h Exhibit is incorporated by reference to the exhibit number 22 in
Registrant's Form 8 dated September 12, 1988, File No. 0-16894.
d Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-K dated March 27, 1990, File
No. 0-16894.
e Exhibit is incorporated by reference to Exhibit 30 and Exhibit
31 in Registrant's Form 10-K dated March 27, 1990, File
No. 0-16894.
c Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-K dated March 29, 1991,
File No. 0-16894.
b Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-K dated March 30, 1993, File No.
0-16894
f Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-K dated April 14, 1994, File
No. 0-16894
g Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-Q dated May 13, 1994
i Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-KSB dated June 5, 1995, File No.0-16894
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Supermail International, Inc.
(Registrant)
By /s/ Christine A. Umbertino Date March 30,1996
Christine A. Umbertino
Chief Executive Officer
Pursuant to the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By /s/ Christine A. Umbertino Date March 30,1996
Christine A. Umbertino
Chief Executive Officer and Director
By /s/ Umberto Umbertino Date March 30, 1996
Umberto J. Umbertino
President & Director
By /s/ Kurt Lee Date March 30, 1996
Kurt Lee
Chief Financial Officer
By /s/ Mercedes Veiga Date March 30, 1996
Merecedes Veiga
Director
By /s/ John J. Feliz Date March 30, 1996
John J. Feliz
Director
By /s/ Bradley D. Cox Date March 30, 1996
Bradley D. Cox
Director
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-END> DEC-31-1995
<CASH> 2,215,309
<SECURITIES> 199,999
<RECEIVABLES> 595,990
<ALLOWANCES> 289,944
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<CURRENT-ASSETS> 2,998,799
<PP&E> 2,048,704
<DEPRECIATION> 996,792
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<INCOME-TAX> 2,700
<INCOME-CONTINUING> (1,136,003)
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