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 September 30, 1997
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 October 31, 1997, 4,022,894 shares of the issuer's common stock were
outstanding.
This report contains 12 pages.
ALTERNATE POSTAL DELIVERY, INC.
FORM 10-QSB
INDEX
Page
PART I. Financial Information: No.
Condensed Consolidated Balance Sheets - September 30, 1997,
and December 31, 1996. . . . . . . . . . . . . . . . . . . 3 & 4
Condensed Consolidated Statements of Operations - three
and nine months ended September 30, 1997 and 1996 . . . . . . .5
Condensed Consolidated Statements of Cash Flows - nine
months ended September 30, 1997 and 1996 . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements. . . . . . 7
Management's Discussion and Analysis or Plan
of Operation. . . . . . . . . . . . . . . . . . . . . . . .8 - 9
PART II. Other Information:
Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . .10
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . .11
Part I. Financial Information
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1997 1996
(unaudited)
------------ ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 1,242,101 $ 1,857,955
Accounts receivable, trade, less
allowance of $69,600 and $100,000
at September 30 and December 31
respectively 2,609,829 2,511,361
Notes receivable, current portion 37,375 37,375
Prepaid expenses and other assets 246,903 255,863
----------- -----------
Total current assets 4,136,208 4,662,554
Notes receivable, less current portion 40,750 34,595
Property and equipment:
Furniture and equipment 954,519 891,833
Accumulated depreciation and
amortization (742,348) (658,877)
----------- -----------
212,171 232,956
Computer software, net 92,972 43,151
Intangible assets, net 1,159,804 1,220,490
0ther assets 13,491 32,241
----------- -----------
$ 5,655,396 $ 6,225,987
=========== ===========
</TABLE>
Continued
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
LIABILITIES
September 30, December 31,
1997 1996
(unaudited)
------------ -----------
Current liabilities:
<S> <C> <C>
Notes payable, bank $ $ 300,000
Accounts payable 991,344 860,710
Accrued liabilities 321,475 416,947
Deferred revenue 333,901 302,096
Current portion of long-term
obligations 108,403 181,150
----------- -----------
Total current liabilities 1,755,123 2,060,903
Long-term obligations 4,574 334,941
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock-no par value, 2,000,000
authorized shares, no shares issued and
outstanding
Common stock-no par value, voting, 8,000,000
authorized shares; 4,022,894 shares issued and
outstanding 9,677,530 9,677,530
Accumulated losses, through September 30, 1993
(Note 4) (1,291,039) (1,291,039)
----------- -----------
Total common stock 8,386,491 8,386,491
Accumulated losses, since October 1, 1993
(Note 4) (4,490,792) (4,556,348)
----------- -----------
Total shareholders' equity 3,895,699 3,830,143
----------- -----------
$ 5,655,396 $ 6,225,987
=========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- ------------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $4,428,190 $3,880,014 $13,826,222 $14,929,748
Cost of sales 3,283,659 2,947,121 10,248,415 11,215,967
---------- ---------- ----------- -----------
Gross profit 1,144,531 932,893 3,577,807 3,713,781
Selling, general and
administrative expenses 1,139,713 1,391,655 3,599,183 4,315,827
Other operating expenses ( 7,230) 254,222
---------- ---------- ----------- -----------
1,139,713 1,384,425 3,599,183 4,570,049
---------- ---------- ----------- -----------
Income (loss) from operations 4,818 ( 451,532)( 21,376)( 856,268)
Other income (expense), net 12,866 16,612 47,910 20,541
---------- ---------- ----------- -----------
Income (loss) before income
taxes and extraordinary gain 17,684 ( 434,920) 26,534 ( 835,727)
Income tax expense(benefit) 1,283 ( 877) 6,430
---------- ---------- ----------- -----------
Income (loss) before
extraordinary gain 16,401 ( 434,920) 27,411 ( 842,157)
Extraordinary gain from early
retirement of debt 38,145 216,376
---------- ---------- ----------- -----------
Net income (loss) $ 16,401 ($ 434,920) $ 65,556 ($ 625,781)
========== ========== =========== ===========
Income (loss) per share (Exhibit 11.1)
Primary:
Income (loss) before extraordinary
gain $ .00 ($ .12) $ .01 ($ .22)
Extraordinary gain .01 .06
---------- ---------- ----------- -----------
Net income (loss) per share $ .00 ($ .12) $ .02 ($ .16)
========== ========== =========== ===========
Fully diluted:
Income (loss) before extraordinary
gain $ .00 ($ .12) $ .01 ($ .24)
Extraordinary gain .01 .06
---------- ---------- ----------- -----------
Net income (loss) per share $ .00 ($ .12) $ .02 ($ .18)
========== ========== =========== ===========
Weighted average number of shares
outstanding: (Exhibit 11.1)
Primary 4,022,894 3,606,046 4,022,894 3,838,049
========== ========== =========== ===========
Fully diluted 4,022,894 3,516,838 4,022,894 3,511,729
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------------
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
Net cash flows from operating activities $ 225,437 ($ 366,208)
---------- ----------
Net cash flows from investing activities ( 138,177) ( 77,118)
---------- ----------
Net cash flows from financing activities ( 703,114) ( 719,426)
---------- ----------
Net increase (decrease) in cash and
cash equivalents ( 615,854) ( 1,162,752)
Cash and cash equivalents, beginning
of period 1,857,955 3,391,065
---------- ----------
Cash and cash equivalents, end of
period $1,242,101 $2,228,313
========== ==========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED 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
of operations 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. The results of operations for the three months and the nine
months ended September 30, 1997 are not necessarily indicative of the results
of operations expected for the year ended December 31, 1997.
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. This per share information is
provided in Exhibit 11.1.
4. Shareholders' equity represents combined equity after a pooling of
interests on March 29, 1996. Accumulated losses, through September 30, 1993,
represent the losses and capital of the Company during the period of time it
was a subchapter S corporation. All subsequent losses of the combined
entities are presented under Accumulated losses, since October 1, 1993.
5. Certain amounts, as presented in prior periods, have been reclassified to
conform with the amounts presented for the three months and the nine months
ended September 30, 1997. These reclassifications do not have an impact on
the net income and losses previously reported.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview and Plan of Operation
In the third quarter of 1997 the Company significantly repositioned its
Direct Network (Company-owned private delivery) as a part of its
transformation from a private delivery company to a marketing services
company. The Direct Network's repositioning consisted of executing a national
distribution agreement with a major telephone directory company for 1998 and
1999. This network also renewed two of its newspaper distribution agreements
with a third agreement terminating at expiration. The result of these changes
is to continue to improve operating efficiencies and enhance net profit
opportunities moving forward.
The Company also experienced the benefits of its Media Optimizer TM
initiative. The Media Optimizer TM process enables the Company to execute
sample and insert business at a lower operating cost than in the past.
Results of Operations
During the three months ended September 30, 1997, the Company realized an
increase of approximately 14% in revenue over the same period of the previous
year. The product sample revenue area (Associate Network) and the newspaper
advertising revenue area (Suburban Network) recognized increased revenues over
the previous year, while the Address Specific Network and the Direct Network
(Company-owned private delivery) recognized sales lower than the same quarter
of the previous year.
Operating expenses were lower than the same quarter of the previous year
due to the efficiencies implemented by the Company in previous quarters. The
Company has been able to get maximum efficiency out of its operating dollars
in the personnel area, due to the use of the Media Optimizer TM system.
Other income and (expense), net consists of interest income and interest
expense. Interest income for the three months ended September 30, 1997 and
1996 was $15,505 and $36,710 respectively. Interest expense for the three
months ended September 30, 1997 and 1996 was $2,639 and $20,098 respectively.
Liquidity and Capital Resources
The Company continues to have a strong cash position with cash and cash
equivalents totaling $1,242,101 at September 30, 1997 and $1,857,955 at
December 31, 1996.
Cash used for the additions to property, equipment, and software for the
nine months ended September 30, 1997 and 1996, was approximately $135,000 and
$84,000, respectively with most of the expenditures attributable to the Media
Optimizer TM. Cash used for net reduction of long-term notes payable for the
nine months ended September 30, 1997 and 1996 was approximately $379,000 and
$429,000, respectively. Other changes in cash position were largely
attributable to working capital fluctuations.
The Company has a bank line of credit for $500,000 to assist in future
cash flow needs. The Company believes that this line of credit along with its
current cash balance will enable it to fund its current growth plans as well
as meet its presently anticipated capital requirements for the next twelve
months.
Outlook for Remainder of 1997
The third quarter demonstrated the Company's drive to lower operating
expenses while maintaining revenues. The Company noted that increases in
sampling and insert revenue grew but due to variable timing of orders will not
be consistent from quarter to quarter. The fourth quarter of 1997 is expected
to have similar financial results to the Company's second quarter 1997
results.
The Company expects to continue the trend of tight operating expense
control combined with a greater share of its revenue being derived from
marketing services. The Company also expects to announce a new alliance in
the fourth quarter as well as to finalize its name change reflecting the new
marketing services strategy.
Forward-looking Statements
Except for historical information contained herein, the matters set forth
in this management discussion and analysis 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, competition, the timing of receipt of orders,
the effectiveness of the marketing program, and the Company's success in
capitalizing on its strategic alliances.
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K.
Exhibit 11.1 Computation of income (loss) per share. Page 12.
During the period of this report, there were no required filings on Form 8-K.
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: October 31, 1997 By: /s/Phillip D. Miller
Phillip D. Miller
President and Chief Executive
Officer
By: /s/Sandra J. Smith
Sandra J. Smith
Chief Financial Officer
[DESCRIPTION] COMPUTATION OF INCOME (LOSS) PER SHARE
Exhibit 11.1
Computation of Income (Loss) Per Share
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Income (loss) before
<S> <C> <C> <C> <C>
extraordinary gain $ 16,401 ($ 434,920) $ 27,411 ($ 842,157)
Extraordinary gain from early
retirement of debt 38,145 216,376
---------- ---------- ---------- ----------
Net income (loss) $ 16,401 ($ 434,920) $ 65,556 ($ 625,781)
========== ========== ========== ==========
Primary income (loss) per share:
Adjustments to shares outstanding:
Actual weighted average
shares outstanding 4,022,894 4,022,894 4,022,894 4,017,785
Net additional (reduction in)
shares upon conversion of
warrants and options ( 416,848) ( 179,736)
---------- ---------- ---------- ----------
Adjusted shares outstanding 4,022,894 3,606,046 4,022,894 3,838,049
========== ========== ========== ==========
Primary income (loss) per share:
Income (loss) before
extraordinary gain $ .00 ($ .12) $ .01 ($ .22)
Extraordinary gain .01 .06
---------- ---------- ---------- ----------
Net income (loss) per share $ .00 ($ .12) $ .02 ($ .16)
========== ========== ========== ==========
Fully diluted income (loss) per share:
Adjustments to shares outstanding:
Actual weighted average
shares outstanding 4,022,894 4,022,894 4,022,894 4,017,785
Net additional (reduction in)
shares upon conversion of
warrants and options ( 506,056) ( 506,056)
--------- ---------- ---------- ----------
Adjusted shares outstanding 4,022,894 3,516,838 4,022,894 3,511,729
========== ========== ========== ==========
Fully diluted income (loss) per share:
Income (loss) before
extraordinary gain $ .00 ($ .12) $ .01 ($ .24)
Extraordinary gain .01 .06
---------- ---------- ---------- ----------
Net income (loss) per share $ .00 ($ .12) $ .02 ($ .18)
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from the
Consolidated Balance Sheet at September 30, 1997 (unaudited) and the
Consolidated Statement of Operations for the Nine Months Ended
September 30, 1997 (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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,242
<SECURITIES> 0
<RECEIVABLES> 2,679
<ALLOWANCES> 70
<INVENTORY> 0
<CURRENT-ASSETS> 4,136
<PP&E> 955
<DEPRECIATION> 742
<TOTAL-ASSETS> 5,655
<CURRENT-LIABILITIES> 1,755
<BONDS> 0
0
0
<COMMON> 8,386
<OTHER-SE> (4,491)
<TOTAL-LIABILITY-AND-EQUITY> 5,655
<SALES> 0
<TOTAL-REVENUES> 13,826
<CGS> 0
<TOTAL-COSTS> 10,248
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 27
<INCOME-TAX> (1)
<INCOME-CONTINUING> 28
<DISCONTINUED> 0
<EXTRAORDINARY> 38
<CHANGES> 0
<NET-INCOME> 66
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
