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, 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 August 1, 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 - June 30, 1997,
and December 31, 1996. . . . . . . . . . . . . . . . . . . 3 & 4
Condensed Consolidated Statements of Operations - three
and six months ended June 30, 1997 and 1996 . . . . . . . . . .5
Condensed Consolidated Statements of Cash Flows - six
months ended June 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
June 30, December 31,
1997 1996
(unaudited)
------------ ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 1,343,601 $ 1,857,955
Accounts receivable, trade, less
allowance of $63,749 and $100,000
at June 30 and December 31 respectively 2,672,322 2,511,361
Notes receivable, current portion 37,375 37,375
Prepaid expenses and other assets 159,235 255,863
----------- -----------
Total current assets 4,212,533 4,662,554
Notes receivable, less current portion 40,750 34,595
Property and equipment:
Furniture and equipment 935,723 891,833
Accumulated depreciation and
amortization (713,476) (658,877)
----------- -----------
222,247 232,956
Computer software, net 67,633 43,151
Intangible assets, net 1,180,733 1,220,490
0ther assets 19,741 32,241
----------- -----------
$ 5,743,637 $ 6,225,987
=========== ===========
</TABLE>
Continued
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
LIABILITIES
June 30, December 31,
1997 1996
(unaudited)
----------- -----------
Current liabilities:
<S> <C> <C>
Notes payable, bank $ 450,000 $ 300,000
Accounts payable 662,016 860,710
Accrued liabilities 341,897 416,947
Deferred revenue 290,461 302,096
Current portion of long-term
obligations 19,786 181,150
--------- ---------
Total current liabilities 1,764,160 2,060,903
Long-term obligations 100,179 334,941
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) (4,507,193) (4,556,348)
--------- ---------
Total shareholders' equity 3,879,298 3,830,143
--------- ---------
$ 5,743,637 $ 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 Six months ended
June 30, June 30,
---------------------- ------------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $5,352,123 $5,186,246 $9,398,032 $11,049,734
Cost of sales 4,071,619 3,837,045 6,964,756 8,268,846
--------- ---------- ----------- -----------
Gross profit 1,280,504 1,349,201 2,433,276 2,780,888
Selling, general and
administrative expenses 1,262,924 1,496,240 2,459,470 2,924,172
Other operating expenses 303 261,452
---------- ---------- ----------- -----------
1,262,924 1,496,543 2,459,470 3,185,624
---------- ---------- ----------- -----------
Income (loss) from operations 17,580 ( 147,342) ( 26,194) ( 404,736)
Other income (expense), net 22,614 ( 2,717) 35,044 3,929
---------- ---------- ----------- -----------
Income (loss) before income
taxes and extraordinary gain 40,194 ( 150,059) 8,850 ( 400,807)
Income tax expense(benefit) 1,300 3,120 ( 2,160) 6,430
---------- ---------- ----------- -----------
Income (loss) before
extraordinary gain 38,894 ( 153,179) 11,010 ( 407,237)
Extraordinary gain from early
retirement of debt 216,376 38,145 216,376
---------- ---------- ----------- -----------
Net income (loss) $ 38,894 $ 63,197 $ 49,155 ($ 190,861)
========== ========== ========== ===========
Income (loss) per share (Exhibit 11.1)
Primary:
Income (loss) before extraordinary
gain $ .01 ($ .04) $ .00 ($ .10)
Extraordinary gain .00 .05 .01 .06
---------- ---------- ----------- -----------
Net income (loss) per share $ .01 $ .01 $ .01 ($ .04)
========== ========== =========== ===========
Fully diluted:
Income (loss) before extraordinary
gain $ .01 ($ .04) $ .00 ($ .11)
Extraordinary gain .00 .05 .01 .06
---------- ---------- ----------- -----------
Net income (loss) per share $ .01 $ .01 $ .01 ($ .05)
========== ========== =========== ===========
Weighted average number of shares
outstanding: (Exhibit 11.1)
Primary 4,022,894 4,026,586 4,022,894 3,920,592
========== ========== =========== ===========
Fully diluted 4,022,894 4,026,586 4,022,894 3,871,481
========== ========== =========== ===========
</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>
Six months ended
June 30,
--------------------------
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
Net cash flows from operating activities ($ 180,931) $ 126,663
---------- ----------
Net cash flows from investing activities ( 87,297) ( 73,632)
---------- ----------
Net cash flows from financing activities ( 246,126) ( 786,141)
---------- ----------
Net increase (decrease) in cash and
cash equivalents ( 514,354) ( 733,110)
Cash and cash equivalents, beginning
of period 1,857,955 3,391,065
---------- ----------
Cash and cash equivalents, end of
period $1,343,601 $2,657,955
========== ==========
</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 ended June 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 six months
ended June 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 second quarter of 1997, the Company implemented its agreement with
Media Passage (formerly American Newspaper Network) for the electronic
placement of newspaper advertising (ROP) to enhance the service of the
Company's Suburban Network. This agreement provides for the outsourcing of
the operations of ROP order processing and replaced fixed overhead associated
with personnel costs with a variable fee related to the number of orders
processed.
The Company completed the first phase of centralizing its delivery
capabilities into the proprietary Media Optimizer database as it continues to
refine its targeted marketing services for samples and inserts. During this
quarter, the Company successfully completed three large sample delivery
projects and as the alliance with News America FSI, a division of News Corp.
(NYSE ADRS: NWS), continues to gain momentum, the Company anticipates that
this area of business will see increased growth.
Results of Operations
Total revenues for the three months ended June 30, 1997 showed a modest
increase over the same period of the previous year as increased revenue of one
area of business was offset by decreases in revenue in the other areas of
business. During the three months ended and the six months ended June 30,
1997, the Company continued to realize a decrease in revenue in the Address
Specific Network as compared to the same periods of the previous year, due to
the effects of the United States Postal Service reclassification rate case.
The product sample revenues area (Associate Network) recognized an increase in
revenue for the three months ended June 30, 1997 as compared to the same
period last year.
Operating expenses decreased during the 1997 quarter compared to the
previous year's quarter largely due to reductions in personnel. Also included
in the 1997 quarter are one-time severance payments to certain employees as a
result of the Media Passage agreement.
Other income (expense), net consists primarily of interest income and
interest expense. Interest expense decreased from $30,213 for the three
months ended June 30, 1996 to $4,410 for the three months ended June 30, 1997
due to the reduction in the Company's long-term debt obligations. Interest
income decreased from $40,848 for the three months ended June 30, 1996 to
$27,024 for the three months ended June 30, 1997.
Liquidity and Capital Resources
The Company continues to have a strong cash position with cash and cash
equivalents totaling $1,343,601 at June 30, 1997 and $1,857,955 at December
31, 1996.
Cash used for the additions to property, equipment, and software for the
six months ended June 30, 1997 and 1996, was approximately $81,000 and
$79,000, respectively of which a large portion of the 1997 expenditures were
attributable to the Media Optimizer database. Cash used for net reduction of
notes payable for the six months ended June 30, 1997 and 1996 was
approximately $377,000 and $772,000, 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 second quarter demonstrated strong sales for sampling, but the ROP
newspaper sales remained soft due to lower than expected revenue from the
automotive industry. The Company noted that sampling sales do not typically
track quarter to quarter due to variable timing of orders. The Company
implemented a plan to seek revenues in new categories to replace the decreased
revenue from the automotive industry.
While the Company continued to strive for greater efficiencies with its
operating expenses, it did incur additional expense in the second quarter
associated with evaluating potential acquisitions and the transition to Media
Passage for certain operational functions. The Company expects tight controls
to continue to hold down operating expenses for the second half.
The Company is exploring a name change during the second half of 1997.
The name change will demonstrate the successful transformation away from the
United States Postal Service rate cycles to the fast growing marketing
services industry. The Company will continue to use the various brand names
which its private delivery and newspaper networks currently are marketing
under. It is anticipated that the name change will be unveiled in the fourth
quarter and followed up by a strong marketing campaign in 1998.
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: August 1, 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 Six months ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(unaudited) (unaudited)
Net income (loss):
<S> <C> <C> <C> <C>
Loss before extraordinary gain $ 38,894 ($ 153,179) $ 11,010 ($ 407,237)
Extraordinary gain from early
retirement of debt 216,376 38,145 216,376
---------- ---------- ---------- ----------
Net income (loss) $ 38,894 $ 63,197 $ 49,155 ($ 190,861)
========== ========== ========== ==========
Primary income (loss) per share:
Adjustments to shares outstanding:
Actual weighted average
shares outstanding 4,022,894 4,022,894 4,022,894 4,015,202
Net additional shares
issuable upon conversion
of warrants and options 3,692 ( 94,610)
---------- ---------- ---------- ----------
Adjusted shares outstanding 4,022,894 4,026,586 4,022,894 3,920,592
Primary income (loss) per share:
Loss before extraordinary gain $ .01 ($ .04) $ .00 ($ .10)
Extraordinary gain .00 .05 .01 .06
---------- ---------- ---------- ----------
Net income (loss) per share$ .01 $ .01 $ .01 ($ .04)
========== ========== ========== ==========
Fully diluted income (loss) per share:
Adjustments to shares outstanding:
Actual weighted average
shares outstanding 4,022,894 4,022,894 4,022,894 4,015,202
Net additional shares
issuable upon conversion
of warrants and options 3,692 ( 143,721)
--------- ---------- ---------- ----------
Adjusted shares outstanding 4,022,894 4,026,586 4,022,894 3,871,481
Fully diluted income (loss) per share:
Loss before extraordinary gain $ .01 ($ .04) $ .00 ($ .11)
Extraordinary gain .00 .05 .01 .06
---------- ---------- ---------- ----------
Net income (loss) per share$ .01 $ .01 $ .01 ($ .05)
========== ========== =========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1997 (unaudited) and the
Consolidated Statement of Operations for Six Months Ended June 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,344
<SECURITIES> 0
<RECEIVABLES> 2,736
<ALLOWANCES> 64
<INVENTORY> 0
<CURRENT-ASSETS> 4,213
<PP&E> 936
<DEPRECIATION> 713
<TOTAL-ASSETS> 5,744
<CURRENT-LIABILITIES> 1,764
<BONDS> 0
0
0
<COMMON> 8,386
<OTHER-SE> (4,507)
<TOTAL-LIABILITY-AND-EQUITY> 5,744
<SALES> 0
<TOTAL-REVENUES> 9,398
<CGS> 0
<TOTAL-COSTS> 6,965
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> 9
<INCOME-TAX> (2)
<INCOME-CONTINUING> 11
<DISCONTINUED> 0
<EXTRAORDINARY> 38
<CHANGES> 0
<NET-INCOME> 49
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
