United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-26624
ALTERNATE POSTAL DELIVERY, INC.
(Exact name of small business issuer as specified in its charter)
Michigan 38-2841197
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Ionia, SW, Suite 300, Grand Rapids, Michigan 49503
(Address of principal executive offices) (Zip Code)
616-235-0698 FAX 616-235-3405
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes_X_ No___
As of August 12, 1996, 4,022,894 shares of the issuer's common stock were
outstanding.
This report contains 13 pages.
ALTERNATE POSTAL DELIVERY, INC.
FORM 10-QSB
INDEX
Page
PART I. Financial Information: No.
Consolidated Balance Sheet - June 30, 1996 . . . .3 & 4
Consolidated Statement of Operations - three
months ended June 30, 1996 and 1995 and the
six months ended June 30, 1996 and 1995 . . . . . . .5
Consolidated Statement of Cash Flows - six
months ended June 30, 1996 and 1995 . . . . . . . . .6
Notes to Financial Statements. . . . . . . . . . . . .7
Management's Discussion and Analysis or Plan
of Operation. . . . . . . . . . . . . . . . . . 8 - 10
PART II. Other Information:
Exhibits and Reports on Form 8-K . . . . . . . . . . 11
Signature. . . . . . . . . . . . . . . . . . . . . . 12
PART I. Financial Information
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1996
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $2,657,955
Accounts receivable, net of allowance of $53,600 2,139,331
Prepaid expenses and other assets 177,540
---------------
Total current assets 4,974,826
Notes receivable, less current portion 73,284
Property and equipment:
Furniture and equipment 890,994
Less accumulated depreciation and amortization 600,177
------------
290,817
Computer software, net of accumulated amortization 51,312
Goodwill, net of accumulated amortization 1,256,048
Other assets 44,741
------------
$6,691,028
============
See accompanying notes.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1996
(unaudited)
LIABILITIES
Current liabilities:
Notes payable, bank 170,714
Notes payable, others 106,875
Current portion of capitalized lease obligations 37,098
Current portion of long-term notes payable 7,098
Accounts payable 1,281,663
Accrued liabilities 351,620
Deferred revenue 89,826
------------
Total current liabilities 2,044,894
Long-term notes payable, less current portion 383,966
Capitalized lease obligations, less current portion 19,343
SHAREHOLDERS' EQUITY
Preferred stock-no par value, authorized 2,000,000 shares,
no shares issued and outstanding
Common stock-no par value, voting, authorized 8,000,000 shares;
4,022,894 shares issued and outstanding 9,677,530
Accumulated losses, as S corporation (Note 4) (1,291,039)
------------
Total Common Stock 8,386,491
Accumulated losses, as C corporation (Note 4) (4,143,666)
------------
Total shareholders' equity 4,242,825
------------
$6,691,028
============
See accompanying notes.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
----------------------------------------------------
1996 1995 1996 1995
----------- ----------- ----------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $5,186,246 $4,064,977 $11,049,734 $9,662,787
Cost of sales 3,837,045 3,137,114 8,268,846 7,368,336
----------- ------------ ------------ -----------
Gross profit 1,349,201 927,863 2,780,888 2,294,451
Selling, general and
administrative expenses 1,496,240 1,077,395 2,924,172 2,112,360
------------ ------------ ------------ ----------
Income (loss) from operations(147,039) (149,532) (143,284) 182,091
Other income (expense) 213,356 (64,883) (41,147) (127,261)
------------ ------------ ------------ ----------
Income (loss) before taxes 66,317 (214,415) (184,431) 54,830
Provision for taxes 3,120 0 6,430 0
------------ ------------ ------------ ----------
Net income (loss) 63,197 (214,415) (190,861) 54,830
============ ============ ============ ==========
Income (loss) per share $0.02 ($0.09) ($0.05) $0.02
============ ============ ============ ===========
Weighted average number of
shares outstanding: 4,022,894 2,463,158 4,015,202 2,463,158
========== ============ ============ ============
</TABLE>
See accompanying notes.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
Six months ended
June 30,
--------------------------
1996 1995
----------- -----------
(unaudited)
Cash flows from operating activities $126,663 $403,120
------------ ------------
Cash flows from investing activities (73,632) (46,667)
------------ ------------
Cash flows from financing activities (786,141) (511,081)
------------ ------------
Net increase (decrease) in cash and cash equivalents (733,110) (154,628)
Cash and cash equivalents, beginning of period 3,391,065 419,045
------------ ------------
Cash and cash equivalents, end of period $2,657,955 $264,417
============ ============
See accompanying notes.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. The interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting only of
normal recurring adjustments necessary for a fair presentation of the results
for the interim periods. The financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading.
2. The organization and business of the Company, accounting policies followed
by the Company and other information are contained in the notes to the Company's
financial statements filed as part of the Company's Form 10-KSB. This quarterly
report should be read in conjunction with the Form 10-KSB.
3. Income (loss) per share calculation has been determined assuming exercise
of all outstanding options and warrants.
Fully diluted loss per share for the three months ended June 30, 1995 and
the six months ended June 30, 1995 further assumes that the Convertible Notes
were converted to common stock according to the terms of the Convertible Notes
at the beginning of the period reported on. This adjustment also includes the
elimination of the related interest expense attributable to the Convertible
Notes.
The results of these transactions and the impact on the net income (loss)
and primary and fully diluted income (loss) per share are provided in Exhibit
11.1.
4. Shareholders' equity represents combined equity after the pooling of
interests on March 29, 1996. Accumulated losses, as S corporation, represent
the losses and capital of the company during the period of time it was a
subchapter S corporation. All other losses of the combined entities are
presented under Accumulated losses, as C corporation.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview and Plan of Operation
During the second quarter of 1996, the Company began its transition period
of integrating the acquisitions of the first quarter. One of the results of the
transition period was the consolidating of the previous five areas of business
into four areas of business as follows:
Address Specific Network (Formerly Magazines and Newspaper Sales) Reaches
approximately 22% of covered households.
Direct Network (Company-owned Affiliates-Formerly called Delivery
Implementation) Reaches approximately 8% of covered households.
Associate Network (Formerly called Distribution Marketing) Reaches
approximately 40% of covered households.
Suburban Network (Newspaper Advertising Space-ROP) Reaches approximately
30% of covered households.
By combining the household coverage from these four areas of business and
adding the full capabilities of the Associate Network, the Company now has a
total household reach of over 50 million households.
Results of Operations
Net sales were up during the quarter ended June 30, 1996 and for the six
months ended June 30, 1996, as compared to the same periods in 1995. Revenues
fluctuate from quarter to quarter based upon the timing of revenues derived from
the Associate Network. In addition, there is some seasonality of revenues. In
general, February, March, April, September, October, and November are better
advertising months in the industry and produce better revenue results for the
Company. Net sales for the three months ended June 30, 1996 increased 27.6%
over the same quarter of the previous year. Net sales for the six months ended
June 30, 1996 increased 14.4% over the same six month period in 1995. The
source of this growth is largely derived from the Direct Network.
The gross margin increased from 22.8% for the three months ended
June 30, 1995 to 26.0% for the three months ended June 30, 1996. The gross
margin increased from 23.7% for the six months ended June 30, 1995 to 25.2% for
the six months ended June 30, 1996. This increase is largely attributable to the
increase in revenues derived from the Direct Network. This source of revenue
generates a higher gross margin, but also adds to the selling, general and
administrative expenses.
Selling, general and administrative expenses increased $418,845 during the
1996 quarter over the previous year's quarter, and $811,812 during the six month
period of 1996 over the same period in the previous year. This was attributable
to business acquisitions in the Company's Direct Network area of business.
Income (loss) from operations remained about the same during the quarter
ending June 30, 1996 as compared to the same period of the previous year due to
the increase in selling, general and administrative expenses offsetting the
increase in revenue and gross profit for the additional Direct Network markets.
Other income (expense) consists of interest income, interest expense, and
one-time non-recurring charges. Interest income earned during the quarter ended
June 30, 1996 was $40,848, which is up from $15,567 for the quarter ending June
30, 1995. Interest income for the six months ending June 30, 1996 and 1995 was
$89,379 and $26,427 respectively. This increase was largely due to the invested
funds from the Company's initial public offering completed in September 1995.
Interest expense for the quarter ending June 30, 1996 and 1995 was $30,213 and
$80,450, respectively. Interest expense for the six months ending June 30,
1996 and 1995 was $72,098 and $153,688 respectively. The decrease is
attributable to the elimination of the interest expense on the Convertible Notes
which were paid off or converted to Common Stock at the Company's initial public
offering. During the quarter ended June 30, 1996 and the six months ending June
30, 1996, the Company incurred costs of $19,027 and $59,248, respectively, as
costs for the pooling of interest transaction which were not attributable to the
ongoing operations of the Company. In addition, the Company incurred one-time
expenses attributable to the Home Mall business investment which the Company
chose to discontinue. For the six months ended June 30, 1996, these costs
amounted to $202,204. During the three months ended June 30, 1996, the Company
implemented a debt reduction strategy whereby it offered to pay sixty cents on
the dollar to existing noteholders and allowed them an immediate cash recovery
instead of the existing payment schedule which was tied to cash flow under the
terms of notes. The Company recorded a gain on the forgiveness of debt in the
amount of $216,376 from the noteholders that accepted the reduced amount.
Liquidity and Capital Resources
The Company continues to have a strong cash position after the two
acquisitions and the debt reduction strategy in the first six months of 1996.
Cash and cash equivalents totaled $2,657,955 at June 30, 1996.
Cash used for the additions to property and equipment for the six months
ended June 30, 1996 and 1995, was $79,632 and $17,070, respectively. Cash used
for payment of notes payable for the six months ended June 30, 1996 and 1995 was
$772,307 and $500,222, respectively. Other changes in cash position were
largely attributable to working capital fluctuations.
The Company believes that cash flows from operations along with its current
cash balance will be sufficient to fund its current growth plans as well as meet
its presently anticipated capital requirements for the next twelve months.
Outlook for Remainder of 1996
The Company intends to focus on the synergism of the two acquisitions and
to follow up on the momuntum created by the Company's Associate Network's
marketing program. In addition, the Company will begin to recognize
efficiencies from the combining of the previous acquisitions into the existing
infrastructure.
The Company intends to continue seeking out strategic alliances for each of
the four areas of business enabling it to leverage its infrastructure and
capacity. The Company will also be seeking potential candidates for
acquisition as part of its ongoing consolidation plan.
Forward-looking statement. Except for historical information contained
herein, the matters set forth in this management discussion are forward-looking
statements based on current expectations. Actual results may differ materially.
These forward-looking statements involve a number of risks and uncertainties
including, but not limited to, the effectiveness of the marketing program.
PART II. Other Information:
Item 6. Exhibits and Reports on form 8-K.
Exhibit 11.1 Computation of income (loss) per share. Page 13.
During the period of this report, there were three Form 8-K filings as follows:
8-K/A filed April 5, 1996 as amendment to provide the related Financial
Statement and Pro Forma Financial Information applicable to the Current Report
event dated January 24, 1996.
8-K filed April 11, 1996 for acquisition of National Home Delivery, Inc. for
Current Report event dated March 29, 1996.
8-K/A filed May 3, 1996 as amendment to provide the related Financial Statement
and Pro Forma Financial Information applicable to the Current Report event dated
March 29, 1996.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ALTERNATE POSTAL DELIVERY, INC.
Date: August 12, 1996 By: Phillip D. Miller
Phillip D. Miller
President and Chief Executive Officer
By: Sandra J. Smith
Sandra J. Smith
Chief Financial Officer
EXHIBIT 11.1
COMPUTATION OF INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three months ending Six months ending
June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- --------
Primary income (loss) per share
Adjustments to net income (loss):
<S> <C> <C> <C> <C> <C>
Net income (loss) $63,197 ($214,415) ($190,861) $54,830
Adjusted net income (loss) $63,197 ($214,415) ($190,861) $54,830
Adjustments to shares outstanding:
Actual weighted average shares
outstanding 4,022,894 2,463,158 4,015,202 2,463,158
Net additional shares
issuable upon conversion of
warrants and options 3,692 0 (94,610) 0
Adjusted shares outstanding 4,026,586 2,463,158 3,920,592 2,463,158
Primary income (loss) per share $0.02 ($0.09) ($0.05) $0.02
Three months ending Six months ending
June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- -------
Fully diluted income (loss)
per Share
Adjustments to net income (loss):
Net income (loss) $63,197 ($214,415) ($190,861) $54,830
Elimination of convertible
notes interest expense $35,881 $70,622
Elimination of deferred financing fees $1,599 ($33,027)
Adjusted net income (loss) $63,197 ($176,935) ($190,861) $92,425
Adjustments to shares outstanding:
Actual weighted average
shares outstanding 4,022,894 2,463,158 4,015,202 2,463,158
Conversion of Convertible 314,062 314,062
Notes into 15% of the
common stock outstanding
Pre-emptive shares 16,530 16,530
Net additional shares issuable
upon conversion of warrants
and options 3,692 0 (143,721) 0
Adjusted shares outstanding 4,026,586 2,793,750 3,871,481 2,793,750
Fully diluted income (loss)
per share $0.02 ($0.06) ($0.05) $0.03
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1996 (unaudited) and the Consolidated
Statement of Operations for the six months ended June 30, 1996 (unaudited) and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000949244
<NAME> ALTERNATE POSTAL DELIVERY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,658
<SECURITIES> 0
<RECEIVABLES> 2,193
<ALLOWANCES> 54
<INVENTORY> 0
<CURRENT-ASSETS> 4,975
<PP&E> 891
<DEPRECIATION> 600
<TOTAL-ASSETS> 6,691
<CURRENT-LIABILITIES> 2,045
<BONDS> 0
0
0
<COMMON> 8,386
<OTHER-SE> (4,144)
<TOTAL-LIABILITY-AND-EQUITY> 6,691
<SALES> 0
<TOTAL-REVENUES> 11,050
<CGS> 0
<TOTAL-COSTS> 8,269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72
<INCOME-PRETAX> (184)
<INCOME-TAX> 6
<INCOME-CONTINUING> (191)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (191)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
