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 March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-26624
ALTERNATE MARKETING NETWORKS, INC.
formerly 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 May 5, 1998, 4,020,127 shares of the issuer's common stock were
outstanding.
This report contains 13 pages.
ALTERNATE MARKETING NETWORKS, INC.
FORM 10-QSB
INDEX
Page
PART I. Financial Information: No.
Condensed Consolidated Balance Sheets - March 31, 1998,
and December 31, 1997. . . . . . . . . . . . . . . . . . . 3 & 4
Condensed Consolidated Statements of Operations - three
months ended March 31, 1998 and 1997. . . . . . . . . . . . . .5
Condensed Consolidated Statements of Cash Flows - three
months ended March 31, 1998 and 1997 . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements. . . . . 7-8
Management's Discussion and Analysis or Plan
of Operation. . . . . . . . . . . . . . . . . . . . . . . . 9-10
PART II. Other Information:
Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . .11
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . .12
Part I. Financial Information
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1998 1997
(unaudited)
------------ ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 738,079 $ 1,057,898
Accounts receivable, trade, less
allowance of $106,450 and $103,800
at March 31 and December 31 respectively 3,191,732 2,392,855
Notes receivable, current portion 32,466
Prepaid expenses and other assets 203,916 164,902
------------ ------------
Total current assets 4,166,193 3,615,655
Notes receivable, less current portion 36,005
Property and equipment:
Computer equipment 568,777 562,741
Furniture and fixtures 418,716 411,087
------------ ------------
987,493 973,828
Accumulated depreciation and
amortization (802,410) (780,450)
------------ ------------
185,083 193,378
Computer software, net 133,933 126,486
Intangible assets, net 1,117,947 1,138,876
0ther assets 5,158 7,241
------------ ------------
$ 5,608,314 $ 5,117,641
============ ============
</TABLE>
Continued
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
LIABILITIES
March 31, December 31,
1998 1997
(unaudited)
------------ ------------
Current liabilities:
<S> <C> <C>
Accounts payable $ 931,450 $ 630,792
Accounts payable, related parties 45,062 76,993
Accrued liabilities 299,019 315,644
Deferred revenue 371,841 68,369
Current portion of capitalized lease
obligations 6,085 7,116
Current portion of long-term debt 95,938 97,500
------------ ------------
Total current liabilities 1,749,395 1,196,414
Capitalized lease obligations, less current
portion 1,917 3,278
Commitments and contingencies (Note A)
SHAREHOLDERS' EQUITY
Preferred stock-no par value, 2,000,000
authorized, no shares issued and outstanding
Common stock-no par value, voting, 8,000,000
authorized shares; 4,030,127 shares issued and
outstanding at March 31, 1998 and 4,022,894
at December 31, 1997 9,709,229 9,677,530
Accumulated losses, through September 30, 1993
(Note 4) (1,291,039) (1,291,039)
------------ ------------
Total common stock 8,418,190 8,386,491
Accumulated losses, since October 1, 1993
(Note 4) (4,561,188) (4,468,542)
------------ ------------
Total shareholders' equity 3,857,002 3,917,949
------------ ------------
$ 5,608,314 $ 5,117,641
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------
1998 1997
------------- -------------
(unaudited)
<S> <C> <C>
Net sales $4,238,896 $4,045,909
Cost of sales 3,205,939 2,893,137
------------ ------------
Gross profit 1,032,957 1,152,772
Selling, general and administrative expenses 1,135,734 1,196,546
------------ ------------
Loss from operations ( 102,777) ( 43,774)
Other income and (expense), net 11,881 12,430
------------ ------------
Loss before income taxes and
extraordinary gain ( 90,896) ( 31,344)
Income tax expense (benefit) 1,750 ( 3,460)
------------ ------------
Loss before extraordinary gain ( 92,646) ( 27,884)
Extraordinary gain from early
retirement of debt 38,145
------------ ------------
Net income (loss) ($ 92,646) $ 10,261
============ ============
Net income (loss) per share: (Note 3)
Basic:
Loss before extraordinary gain ($ .02) ($ .01)
Extraordinary gain .01
------------ ------------
Net income (loss) ($ .02) $ .00
============ ============
Diluted:
Loss before extraordinary gain ($ .02) ($ .01)
Extraordinary gain .01
------------ ------------
Net income (loss) ($ .02) $ .00
============ ============
Weighted average number of shares
outstanding: (Note 3)
Basic 4,029,806 4,022,894
============ ============
Diluted 4,029,806 4,022,894
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
Net cash flows from operating activities ($ 289,292) $ 630,844
------------ ------------
Net cash flows from investing activities ( 26,573) ( 24,657)
------------ ------------
Net cash flows from financing activities ( 3,954) ( 463,236)
------------ ------------
Net increase (decrease) in cash and
cash equivalents ( 319,819) 142,951
Cash and cash equivalents, beginning
of period 1,057,898 1,857,955
------------ ------------
Cash and cash equivalents, end of
period $ 738,079 $2,000,906
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting only of
normal recurring adjustments necessary for a fair presentation of the results
of operations for the interim periods. The financial statements included
herein have been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures included herein are adequate to make the information presented not
misleading. The results of operations for the three months ended March 31,
1998 are not necessarily indicative of the results of operations expected for
the year ended December 31, 1998.
2. The organization and business of the Company, accounting policies
followed by the Company and other information are contained in the notes to
the Company's financial statements filed as part of the Company's Form 10-KSB.
This quarterly report should be read in conjunction with the Form 10-KSB.
3. Net Income (Loss) Per Share Calculation:
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------------
1998 1997
------------ ------------
Income (Numerator):
<S> <C> <C>
Loss before extraordinary gain ($ 92,646) ($ 27,884)
Extraordinary gain from early retirement
of debt 38,145
------------ ------------
Net income (loss) ($ 92,646) $ 10,261
============ ============
Shares (Denominator):
Basic income (loss) per share:
Actual weighted average shares outstanding 4,029,806 4,022,894
============ ============
Basic income (loss) per share:
Loss before extraordinary gain ($ .02) ($ .01)
Extraordinary gain .01
------------ ------------
Net income (loss) per share ($ .02) $ .00
============ ============
</TABLE>
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(unaudited)
3. Net Income (Loss) Per Share Calculation, continued:
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------------
1998 1997
------------ ------------
Diluted income (loss) per share:
<S> <C> <C>
Actual weighted average shares outstanding 4,029,806 4,022,894
Shares upon conversion of warrants and
options * *
------------ ------------
Adjusted shares outstanding 4,029,806 4,022,894
============ ============
Diluted income (loss) per share:
Loss before extraordinary gain ($ .02) ($ .01)
Extraordinary gain .01
------------ ------------
Net income (loss) per share ($ .02) $ .00
============ ============
</TABLE>
* The incremental shares are not included in the computation due to the loss
before extraordinary gain and the exercise prices of the warrants and
options exceeding the average market price of the common stock.
4. 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.
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview and Plan of Operation
During the quarter ended March 31, 1998, the Company announced its
decision to change its corporate name from Alternate Postal Delivery, Inc. to
Alternate Marketing Networks, Inc. to reflect the Company's emergence as a
marketing services company, and consistent with its new strategic direction,
also announced its plan to suspend its traditional magazine business effective
July 1, 1998. In addition, the Company promoted Ruth Ann Carroll to Executive
Vice President. Ms. Carroll's more than 12 years experience with Donnelley
Marketing, a marketing services company, where she assisted consumer goods
companies with coupon and product sampling programs, offers the Company the
high-powered industry experience to achieve the Company's financial goals.
The Company also implemented its proprietary software and database
system, the Media Optimizer TM, in the first quarter. This new system will
enable the Company to improve targeting, tracking and efficiencies for its
clients.
The Company has introduced a new public web site (http://www.altposd.com)
and marketing material to promote its new name and brands. The Company will
be offering its products to national advertisers under the following brand
names:
- APD In-home Sampling Network
- USSPI Newspaper Network
- Alternate Postal Direct Network
The Company's clients include national advertisers who place Run of Press
(ROP) or insert advertisements into newspapers, package goods clients who
desire a sample to be delivered to a targeted household audience, and
telephone directory publishers who wish to have their directories delivered to
the households of communities across the nation. The Company believes it
offers these clients unrestricted reach, unequaled access and unduplicated
delivery to approximately 100 million households nationally.
Results of Operation
The first quarter of 1998 showed an overall approximate 5% increase in
revenues over the same period in 1997. During that period, revenues from
magazine deliveries were down approximately 38%. While the Company performed
several sample "test" programs in the first quarter of 1998, it had only one
full sample program. It currently has three full sample programs scheduled
for the second quarter of 1998.
During this quarter, the Company incurred increased selling expenses over
the same period last year, including an approximate increase of $35,000 in
travel expenses. The Company expects to continue this investment into sales
in the second quarter, but anticipates improved efficiencies in its selling
expenses in the second half of 1998. Overall, the Company decreased operating
expenses by approximately $60,000 over the same quarter in the previous year
due to planned overhead reductions.
Other income and (expense), net consists of interest income and interest
expense. Interest income for the three months ended March 31, 1998 and 1997
was $12,580 and $23,541 respectively. Interest expense for the three months
ended March 31, 1998 and 1997 was $699 and $11,111 respectively. The decrease
in interest income and expense is attributable to the use of cash for debt
reduction in 1997.
Due to the timing of sample programs, the Company's revenues may
fluctuate from quarter to quarter and in comparison to the previous year.
Liquidity and Capital Resources
During the first quarter of 1998, the Company realized a decrease in cash
of $319,819 largely attributable to working capital fluctuations and the net
loss. Accounts receivable increased approximately $799,000 during the first
quarter, and deferred revenue increased by approximately $303,000, largely due
to the timing of sample and phone directory deliveries. These two revenue
sources fluctuate from quarter to quarter. For the same quarter of the
previous year, the Company recognized a net increase in cash of $142,951.
During this 1997 quarter, accounts receivable increased approximately $413,000
and deferred revenue increased $1,363,000.
Cash used for additions to property, equipment, and software for the
three months ended March 31, 1998 and 1997 was approximately $30,000 and
$13,000, respectively. In addition, the Company used cash for the net
reduction of notes payable for the three months ended March 31, 1998 and 1997
of approximately $2,000 and $454,000, respectively.
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 1998
The Company expects a modest increase in net sales for fiscal 1998 even
though it intends to discontinue its traditional magazine business effective
July 1, 1998. In fiscal 1997 the Company showed a slight decrease of 7% in
net sales while significantly reducing total selling, general and
administrative expenses.
The Company also expects a positive operating profit of approximately one
percent of revenues compared to essentially a break even in 1997. This
assumes no business acquisitions 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 implementation of the Company's re-orientation as a marketing services
Company, 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 3.3 Certificate of Amendment to the Articles Of
Incorporation. Page 13.
During the period of this report, there were no 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 MARKETING NETWORKS, INC.
Date: May 11, 1998 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] CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
Exhibit 3.3
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Profit and Nonprofit Corporations
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
1. The present name of the corporation is: Alternate Postal Delivery, Inc.
2. The identification number assigned by the Bureau is: 452-574
3. The location of the registered office is:
One Ionia S.W., Suite 300 Grand Rapids, Michigan 49503
4. Article I of the Articles of Incorporation is hereby amended to read as
follows:
The name of the corporation is Alternate Marketing Networks, Inc.
5. (For amendments adopted by unanimous consent of incorporators before the
first meeting of the board of directors or trustees.) N/A
6. (For profit corporations, and for nonprofit corporations whose articles
state the corporation is organized on a stock or on a membership basis.)
The foregoing amendment to the Articles of Incorporation was duly
adopted on the 30th day of April, 1998 by the shareholders if a profit
corporation, or by the shareholders or members if a nonprofit corporation
(check one of the following)
[X] at a meeting. The necessary votes were cast in favor of the
amendment.
Profit Corporations
Signed this 30th day of April, 1998.
By: /s/ Sandra J. Smith
Sandra J. Smith
Chief Financial Officer
Filed of Record with the Secretary of State of Michigan on May 6, 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1998 (unaudited) and the Consolidated
Statement of Operations for the three months ended March 31, 1998 (unaudited)
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000949244
<NAME> ALTERNATE MARKETING NETWORKS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 738
<SECURITIES> 0
<RECEIVABLES> 3,298
<ALLOWANCES> 106
<INVENTORY> 0
<CURRENT-ASSETS> 4,166
<PP&E> 987
<DEPRECIATION> 802
<TOTAL-ASSETS> 5,608
<CURRENT-LIABILITIES> 1,749
<BONDS> 0
0
0
<COMMON> 8,418
<OTHER-SE> (4,561)
<TOTAL-LIABILITY-AND-EQUITY> 5,608
<SALES> 0
<TOTAL-REVENUES> 4,239
<CGS> 0
<TOTAL-COSTS> 3,206
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> (91)
<INCOME-TAX> 2
<INCOME-CONTINUING> (93)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
