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, 1997
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, 1997, 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, 1996, 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, 1997 3 - 4
Condensed Consolidated Statements of Income
Three-Month Period Ended March 31, 1997 and 1996 5
Condensed Consolidated Statements of Cash Flows
Three-Month Period Ended March 31, 1997 and 1996 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, 1997
ASSETS
Current assets:
Cash and equivalents $2,169,054
Trade accounts receivable, less allowance for
doubtful accounts of $300,248 275,437
Officer receivables 12,343
Notes receivable 154,000
Investment in marketable securities 199,999
Prepaid expenses 143,035
Other current assets 36,349
---------
Total current assets 2,990,217
---------
Property and equipment, net 1,205,331
---------
Intangible assets:
Covenants not to compete, net 31,594
Goodwill, net 286,402
Other intangibles, net 255,439
---------
573,435
---------
Other 87,807
---------
$4,856,790
=========
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET, Continued
March 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of capitalized leases payable $ 47,954
Accounts payable 465,123
Advances from officers and employees 100,880
Accrued liabilities:
Accrued payroll, payroll taxes and benefits 92,440
Accrued money order and money transfer drafts payable 1,529,558
Other 66,821
----------
Total current liabilities 2,302,776
Capitalized leases payable, net of current maturities 253,408
Deferred income 1,725,821
----------
Total liabilities 4,282,005
----------
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 (16,062,839)
----------
3,600,347
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 574,785
----------
$ 4,856,790
==========
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three-Month Period Ended March 31, 1997 and 1996
1997 1996
--------- ---------
Sales and commissions $1,153,847 $1,120,271
Operating expenses 1,286,102 1,284,655
--------- ---------
Operating loss (132,255) (164,384)
--------- ---------
Other income (expense):
Interest income 219 4,094
Interest expense (34,563) (15,275)
Other, net 3,389 4,600
--------- ---------
(30,955) (6,581)
--------- ---------
Loss before income taxes (163,210) (170,965)
Income taxes (900) (2,400)
--------- ---------
Net loss ($164,110) ($173,365)
========= =========
Net loss per common share ($0.02) ($0.02)
========= =========
Weighted average common shares outstanding 7,646,853 7,646,853
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three-Month Period Ended March 31, 1997 and 1996
1997 1996
---------- ----------
Cash flows from operating activities:
Net cash provided by (used in)
investing activities $ 284,982 $1,263,451
Cash flows from investing activities:
Capital expenditures (3,592) (237,173)
Increase in other long-term assets 3,500 (15,500)
--------- --------
Net cash used in investing activities (92) (252,673)
--------- --------
Cash flows from financing activities:
Proceeds on short-term borrowings 2,570,000 869,500
Repayments of short-term borrowings (2,570,000) (869,500)
Proceeds from advances from officers
and employees 237,000 -
Payments on advances from officer
and employees (160,500) (80,815)
Principal payments on debt (11,213) (2,679)
--------- --------
Net cash used in financing activities 65,287 (83,494)
--------- --------
Net increase (decrease) in cash and
cash equivalents $ 350,177 $ 927,284
========= ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the three-month period
ended March 31, for:
Interest $34,563 $15,275
Income taxes $10,100 $ 2,400
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,
1997 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1997.
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, 1996, 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 1997 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, 1997, consists of the following:
Equipment $1,219,765
Construction in progress 14,250
Leasehold improvements 1,197,600
---------
2,431,615
Accumulated depreciation 1,226,284
---------
$1,205,331
=========
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(3) INTANGIBLE ASSETS
Intangible assets at March 31, 1997, consists of the following:
Covenants not to compete $573,063
less accumulated amortization 541,469
-------
$ 31,594
=======
Goodwill $461,076
Less accumulated amortization 174,674
-------
$286,402
=======
Other intangibles $363,357
Less accumulated amortization 107,918
-------
$255,439
=======
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents increased $350,177 to $2,169,054 for the three-month
period ended March 31, 1997. Cash was provided by operating and financing
activities of $284,982 and $65,287, respectively, and used in investing
activities of $92.
Net working capital decreased $173,029 to $687,441 as of March 31, 1997
compared to $860,470 as of December 31, 1996. This decrease was the result
of funding the net loss for the three-month period ended March 31, 1997.
Cash provided by financing activities is the result of the Company borrowing
money on a short-term basis to support its higher check cashing volume. The
Company received and repaid $2,570,000 in borrowings from outside parties
during the three-month period ended March 31, 1997. In addition, the
Company received and repaid advances to officers and employees of $237,000
and $160,500, respectively.
During 1997, the Company has taken a stringent look at all aspects of the
business in an effort to reduce its losses and achieve a positive cash flow
position. These efforts have resulted in closing two unprofitable service
locations during the three-month period ended March 31, 1997. In addition,
all expense categories are evaluated on an ongoing basis and cuts made as
deemed feasible.
During the second quarter of 1997, the Company plans to sell its marketable
securities and settle its two outstanding note receivables. The total monies
to be received from these future sources of working capital are uncertain due
to the volatility of a Small-Cap stock and the cash resources available from
the debtors.
Based on its existing working capital and ability to borrow monies on a short-
term basis, the Company believes it will have sufficient resources to finance
its operating requirements. In addition, the Company is evaluating various
financing sources including working lines of credit, loans and equity
investments to finance the Company's planned expansion.
RESULTS OF OPERATIONS
Three-Month Period Ended March 31, 1997 Compared to Three-Month Period Ended
March 31, 1996
Revenues:
Revenues increased $33,577 or 3.0% to $1,153,847 for the three-month period
ended March 31, 1997 compared to revenues of $1,120,271 for the same period
in 1996. This increase was primarily the result of increases in money
transfer and phone card revenues of $26,428 and $27,200, respectively, offset
by a $20,939 decrease in check cashing revenues.
The increase in money transfer revenues is the result of revenues associated
with new service centers opened in 1996 and an increase in the minimum annual
commission from the Company's money transfer supplier.
<PAGE>
The increase in phone card revenue is the result of the Company offering
phone cards to their customers in the latter part of 1996. No revenues
were earned during the three-month period ended March 31, 1996.
Check cashing revenues decreased due to the closure of six service centers
in 1996 and two in 1997. This decrease was offset by revenues earned at
three service centers opened during 1996. In addition, a decrease in
revenues has been experienced at a few service centers due to increased
competition in the area.
Operating expenses:
Operating expenses consist of costs of providing services (cost of sales)
and general and administrative expenses. Total operating expenses
increased $1,447 for the three-month period ended March 31, 1997,
compared to the same period for 1996.
This increase is primarily the result of increases in phone card, payroll and
travel expenses of $19,203, $41,704 and $21,143, respectively, offset by
decreases in rent and telephone expenses of $30,262 and $23,277, respectively.
The majority of the other expense categories have experienced decreases.
Phone card cost is attributable to phone card sales noted above.
Payroll costs increased $66,533 as a result of opening three new service
centers in 1996. This increase was offset by a $45,413 decrease in payroll
associated with the six service centers closed in 1996 and two closed in
1997. In addition, two service centers payroll increased due to higher
volume experienced by the service centers.
Travel expenses increased as a result of hiring an internal auditor who
traveled 80 percent of the time. In addition, several trips were made
to the east coast to oversee the retail program.
Rent decreased $41,030 as a result of closing the six service centers in
1996 and two in 1997. This decrease was offset by a $11,426 increase in
rent associated with new service centers opened in 1996.
Telephone expense decreased as the result of changing the Company's local
and long distance carrier.
Other income (expenses):
Interest expense increased $19,288 as a result of an increase in short-term
borrowings.
Operating Loss:
Operating loss decreased $32,129 to $132,255 for the three-month period ended
March 31, 1997 compared to a $164,384 operating loss for the same period in
1996. Of the 1997 operating loss, approximately $25,000 was attributable to
two stores closed during the three-month period ended March 31, 1997. In
addition, approximately $17,000 of the 1997 operating loss was attributable
to two nonoperating store leases. One of these leases expired in April 1997
and the Company plans to sublease the other facility.
<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 1996 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 May 15, 1997
----------------------- ----------------------
K.Lee
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARCH 31, 1997 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,169,054
<SECURITIES> 199,999
<RECEIVABLES> 575,685
<ALLOWANCES> 300,248
<INVENTORY> 0
<CURRENT-ASSETS> 2,990,217
<PP&E> 2,431,615
<DEPRECIATION> 1,226,284
<TOTAL-ASSETS> 4,856,790
<CURRENT-LIABILITIES> 2,302,776
<BONDS> 0
<COMMON> 458,811
0
0
<OTHER-SE> 115,974
<TOTAL-LIABILITY-AND-EQUITY> 4,856,790
<SALES> 1,153,847
<TOTAL-REVENUES> 1,153,847
<CGS> 0
<TOTAL-COSTS> 1,286,102
<OTHER-EXPENSES> (3,608)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,563
<INCOME-PRETAX> (163,210)
<INCOME-TAX> (900)
<INCOME-CONTINUING> (164,110)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (164,110)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
