UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended April 30, 1997 Commission file number 0-14361
TROPIC COMMUNICATIONS, INC.
(Exact Name of Company as Specified in Its Charter)
Delaware 31-1166419
(State or Other jurisdiction of (I.R.S. Employer I.D. Number)
incorporation or organization)
3021 Bethel Road, Suite 208, Columbus, Ohio 43220
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (614) 538-0660
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, par value $0.15
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such report(s), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No ___
The approximate aggregate market value of voting stock held by
nonaffiliates of the Company was $2,450,800 as of August 29, 1997.
The Company had 3,709,166 shares of $0.15 par value common stock
outstanding as of August 29, 1997.
Documents Incorporated by Reference:
1997 Notice of Annual Meeting, Part III
TROPIC COMMUNICATIONS, INC.
1997 Form 10-K Annual Report
TABLE OF CONTENTS
Page
Part I
Item 1. Business 3
Item 2. Properties 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security
Holders 4
Part II
Item 5. Market for the Company's Common Equity and
Related Stockholder Matters 5
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 37
Part III
Item 10. Directors and Executive Officers of the Company 37
Item 11. Executive Compensation 37
Item 12. Security Ownership of Certain Beneficial
Owners and Management 37
Item 13. Certain Relationships and Related Transactions 37
Part IV
Item 14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 38
Signatures 46
Index to Exhibits 47
PART I
Item 1. Business
Tropic Communications, Inc. ("Tropic") was incorporated in Delaware on
March 25, 1985, and acts as a holding company, owning 100% of the outstanding
capital stock of several wholly-owned subsidiaries. Tropic and its subsidiaries
are referred to herein as the "Company." Historically, the Company's business
has been derived from two segments, equipment leasing and radio broadcasting.
The Company was involved in the equipment leasing business since inception.
Within the past few years the Company's equipment leasing activities have been
limited to managing the payout of its leased equipment portfolio, the net value
of which had been fully realized as of April 30, 1996 (see "Note 4 - Notes to
the Consolidated Financial Statements").
The Company operates WLTT-FM, which is a 25,000 watt FM radio station
located in Shallotte, North Carolina. During the prior fiscal year, the
programming of WLTT was modified from satellite only programming to limited
satellite programming with live drive time programming placing an emphasis on
station involvement in local community activities. The station serves an area
including Myrtle Beach, South Carolina north to Wilmington, North Carolina and
the intervening coastal communities. The Company has no plans to acquire
additional radio stations.
WLTT-FM, licensed to Partech Communications Group, Inc., is subject to
regulation and licensing by the FCC. Radio station licenses are issued for terms
of up to seven years and are renewable for successive terms of up to seven
years. While in the vast majority of cases, radio licenses are routinely renewed
by the FCC, there can be no assurance that the station's license will be
renewed. Failure to obtain the renewal of the station's broadcast licenses would
have a material adverse effect on the station's business and operations. WLTT-FM
was granted renewal of its broadcasting license on November 30, 1995 for a term
expiring on December 1, 2002.
Over the past two fiscal years the Company acted as a consultant to several
unaffiliated businesses from which it earned limited compensation.
Acquisition of R.A. Logistics, Inc.
On September 18, 1997, the Company issued 26,400,000 shares of its $0.15
par value restricted common stock in exchange for 100% of the issued and
outstanding capital stock of R.A. Logistics, Inc., a Delaware corporation
("RALI" and the "RALI Acquisition"). In addition, three members of the Company's
Board of Directors have resigned, effective upon the closing of the RALI
Acquisition, and have been replaced by the three shareholders of RALI. As part
of the RALI Acquisition, the Company also entered into Employment Agreements,
effective September 2, 1997, with Angel Munoz, Ronald Vimo and Scott Villanueva
(the three shareholders of RALI) to serve as the Company's President,
Vice-President and Secretary respectively.
RALI is a newly formed holding company owning 100% of the issued and
outstanding capital stock of two subsidiary corporations, B. Airways, Inc. and
B. Airways Air Cargo, Inc. both Florida corporations ("BAACI" and "BAI",
respectively). The consolidated net assets of RALI as of the date of closing
were approximately $279,500, unaudited. BAACI is a newly formed corporation
organized to operate as an air freight consolidator by Messrs. Angel Munoz and
Ronald Vimo. BAACI provides air cargo consolidation services operating from a
shared warehouse facility located at the Miami International Airport. BAACI
consolidates air cargo for shipment via a Boeing 747-200 via approximately 4
round trips weekly between Miami International Airport and Central and South
America. The BAACI aircraft is provided at a rate of $4,750 per operating hour
plus fuel. Operating since September 2, 1997, BAACI had booked approximately
$1,708,700 in gross revenue through September 30, 1997. BAI is a non-operating
company having an application pending with the U.S. Department of Transportation
and the Federal Aviation
Authority for operation as a Part 135 all cargo air carrier. In addition, BAI
has a $10,000 deposit for purchase of a DC-3 aircraft which BAI anticipates will
be operated within the Caribbean Basin.
The Company anticipates that it will devote its future efforts exclusively
to the development and expansion of the air freight consolidation business of
RALI, that it will manage through to termination its remaining leased equipment
assets and liabilities (approximating $198,700 as of April 30, 1997) and dispose
of its administrative, consulting and radio station businesses. Further see
Footnote 1, Notes to the Consolidated Financial Statements.
Employees
The Company had a total of nine (9) employees as of August 31, 1997, none
of whom were represented by a labor union.
Item 2. Properties
The Company owns no real property and leases 2,100 square feet of suburban
office space located at 3021 Bethel Road, Suite 208, Columbus, Ohio, 43220 under
a one (1) year lease which expires on January 31, 1998 and leases an off
premises storage area on a month to month basis. The Company leases its radio
broadcasting equipment from a trust of which an officer of the Company is a
co-trustee. The Company also leases 1,200 square feet of office and broadcast
studio space located at 4710 Main Street, Shallotte, North Carolina.
Item 3. Legal Proceedings
The Company is a party to three legal proceedings two of which
involve substantive claims and counter-claims. The two substantive claims
involve: (1) certain bridge note lenders including Generation Capital
Associates, TGR Ventures, Inc., RSH Partners, Howard Commander, Norman
Colavincenzo, Peter Prescott, Jules and Amos Swimmer as joint tenants, and Jules
Swimmer (collectively the "GCA Group") all of whom filed suit on June 13, 1995
in Supreme Court of the State of New York, County of New York , Generation
Capital Associates et al. vs. Partech Holdings Corporation et al., Index No.
114837/95 (the "GCA Litigation") and (2) Jennings Communciations, Inc. the
seller and subordinated lender of WLTT-FM (the "Jennings Litigation"). In the
opinion of management, none of these proceedings if unfavorably decided
would have a materially adverse effect on the financial condition of the Company
(see "Note 16 - Notes to the Consolidated Financial Statements").
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1997.
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters
The Company has historically reinvested its earnings in the business and
therefore has paid no cash dividends on its common stock. The Board of Directors
has no present intention of paying cash dividends in the foreseeable future. The
payment of dividends in the future will be determined by the Board of Directors
considering existing conditions such as financial and business conditions,
financial requirements and beneficial opportunities for reinvestment of earnings
and other conditions.
The Company's common stock traded on the The Nasdaq Small-Cap Market under
the symbol TRPC until October 2, 1995 when The Nasdaq Listings Qualification
Committee denied the Company's request for an exception to the requirements for
continued inclusion on The Nasdaq Small-Cap Market. The Company's common stock
was also traded on The Boston Stock Exchange under the symbol TRO until October
2, 1995.
Effective March 4, 1996, the Company's common stock was quoted on the OTC
Bulletin Board under the symbol TRPC.
The number of stockholders of record of common stock on August 31, 1997 was
approximately 2,200.
Fiscal Year Ended April 30, 1997
Fourth Third Second First
Quarter Quarter Quarter Quarter
High trade $ 0.91 $ 0.66 $ 0.69 $ 1.38
Low Trade $ 0.81 $ 0.53 $ 0.59 $ 0.91
Fiscal Year Ended April 30, 1996
Fourth Third Second First
Quarter Quarter Quarter Quarter
High trade $ 1.88 $ 1.13 $ 1.69 $ 1.94
Low Trade $ 0.88 $ 0.56 $ 0.75 $ 0.81
Reverse Stock Split and Change in Fiscal Year End.
On September 19, 1997, through an action by a majority of the shareholder's
of the Company, the shareholders approved amending the Company's Articles of
Incorporation: (i) to change the par value of the Company's common stock from
fifteen cents ($0.15) per share to ninety cents ($0.90) per share (effectively a
1-for-6 reverse stock split); and (ii) to comport to the non-U.S. citizen
ownership and management requirements of the Federal aviation laws. Also, the
Board of Directors approved an amendment to the Company's By-Laws: (i) to change
the beginning of the Company's fiscal year from May 1 to January 1 of each
calendar year; and, (ii) to change the time for the Company's annual meeting of
shareholder's from the last Thursday of October to the last Thursday of June of
each calendar year or as otherwise may be determined by the Board of Directors.
Item 6. Selected Financial Data
The following table sets forth selected consolidated financial data
regarding the Company for the periods indicated. The Company's consolidated
financial statements as of April 30, 1997 and for all years presented hereunder
have been audited by Hausser + Taylor, CPAs, independent certified public
accountants. The selected financial data set forth in the following table should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's Consolidated Financial
Statements and Notes thereto appearing hereinafter.
For the Fiscal Years Ended April 30,
--------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Operating Revenues $1,195,769 $4,832,714 $13,616,622 $30,485,138 $49,660,478
Income (Loss) Before
Income Taxes, Extra
ordinary Items and
Cumulative Effect
of Change in Account-
ing Principal (2,132,200)(1,311,594) (1,842,616) (2,639,593) (1,519,715)
Income Tax Expense
(benefit) - - (75,000) - 180,000
Income (Loss) Before
Extraordinary Items
and Cumulative
Effect of Changes
in Accounting
Principal (2,132,200)(1,311,594) (1,767,616) (2,639,593) (1,699,715)
Cumulative Effect
of Changein
Accounting Prin-
cipal (1) - - - - 180,000
Net Income (Loss) (2,132,200)(1,311,594) (1,767,616) (2,639,593) (1,519,715)
Primary Weighted
Average ofCommon
Shares Issued and
Outstanding (1)(2) 3,627,241 2,633,712 1,876,602 1,695,563 2,316,971
Primary Net Income
(Loss)Per Share
Before Extra-
ordinary Items
and Cumulative
Effect of Change
in Accounting
Principal (1) $ (0.59)$ (0.50)$ (0.94)$ (1.56)$ (0.73)
Primary Cumulative
Effect of Change
in Accounting
Principal Per
Share $ - $ - $ - $ - $ 0.08
Primary Net Income
(Loss) Per
Share (2) $ (0.59)$ (0.50)$ (0.94)$ (1.56)$ (0.65)
Total Assets $ 769,743 $17,349,095 $49,299,089 $93,420,160 $145,167,762
Total Debt $1,584,215 $16,434,037 $47,865,907 $90,443,733 $142,074,515
Shareholders'
Equity
(Deficit) $ (814,472)$ 915,056 $ 1,433,182 $ 2,976,427 $ 3,093,247
Common Stock
Issued and
Outstanding(2)(3) 3,709,166 3,252,166 2,047,045 1,859,902 1,020,808
Book Vaue Per
Share (3) $ (0.22)$ 0.28 $ 0.70 $ 1.60 $ 3.03
Item 6. Selected Financial Data (Continued)
(1) The Financial Accounting Standards Board released Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109") in
February, 1992. The Company adopted SFAS 109, effective May 1, 1992, and
accounted for its adoption as a cumulative effect of change in accounting
principle. Prior periods were not restated. The cumulative effect of the
adoption was $180,000 net of a valuation allowance of $180,000, which was
reported in the fiscal 1993's statements of consolidated operations.
(2) All earnings per share and stock related information have been restated
for the 1 to 3 reverse stock split which were effected and July 22, 1994.
(3) This includes 133,333 shares which are issuable at April 30, 1993, respect-
ively.
(4) This is computed based upon common stock issued and outstanding (see 2).
(5) See "Consolidated Financial Statements" and "Notes to the Consolidated Fin-
ancial Statements."
(6) There have been no cash dividends declared or paid during the last five
years (see "Market for the Company's Common Equity and Related Stockholder
Matters").
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The Company receives revenues from its existing equipment lease portfolio,
the operation of its radio station and, to a limited extent, from its consulting
activities. Leased equipment income and interest income are a function of the
amount of equipment in the Company's equipment lease portfolio which has been
declining from year to year based upon the volume of portfolio acquisitions and
dispositions. (See "Description of Business").
During the current fiscal year, the Company owned and operated WLTT-FM, a
25,000 watt FM radio station located in Shallotte, North Carolina and during
fiscal 1996 the Company also operated WMOG-AM and FM, two small radio stations
located in Brunswick and St. Simons Island, Georgia. The Company terminated its
operation of WMOG-AM and FM in July, 1995, (see "Description of Business").
The Company has recorded in the accompanying income statement as
commissions, fees and other income $334,496 of net broadcasting advertising
revenue (after agency commissions), which includes recognition of $180,920 of
barter transaction revenue and has recognized $166,903 of barter transaction
expense included in marketing, administrative and other operating expenses. Cash
sales from radio station operations for the current fiscal year was
approximately $153,600.
The following tables indicate the comparative results of operations for
the fiscal years ended April 30, 1997, 1996 and 1995 as to each immediately
preceding year.
================================================================================
Fiscal Year Ended April 30, 1997 Compared to Fiscal Year Ended April 30, 1996
Fiscal Year Ended April 30, Amount of Change
1997 1996 Dollars Percentage
Rental income $ - $ 1,323,622 $( 1,323,622) (100.0%)
Commissions, fees
and other income $ 369,123 $ 544,793 $( 175,670) (32.2%)
Interest income $ 826,646 $ 2,964,299 $( 2,137,653) (72.1%)
Marketing, admin-
istrative and
other operating
expenses $ 566,073 $ 1,346,995 $( 780,922) (58.0%)
Advisory Services $ 79,575 $ - $ 79,575 100.0%
Interest expense $ 963,386 $ 3,148,798 $( 2,185,412) (69.4%)
Loss on residual
values $ 1,967 $ 74,621 $ (72,654) (97.4%)
Depreciation and
amortization of
equipment $ 46,750 $ 1,343,383 $( 1,296,633) (96.5%)
Amortization of
cost in excess
of net assets
acquired, other
intangibles
assets $ 230,511 $ 230,511 $( -) (00.0%)
Impairment valu-
ation write-
downs:
Cost in excess
of net assets
acquired $ 1,397,180 $ - $ 1,397,180 100.00%
Investment in
real estate
partnerships $ 42,527 $ - $ 42,527 100.00%
Loss before income
taxes $( 2,132,200) $( 1,311,594) $( 820,606) (62.5%)
Net loss $( 2,132,200) $( 1,311,594) $( 820,606) (62.5%)
================================================================================
As shown in these tables, the reductions in rental income, interest income
and depreciation and amortization are the result of a substantial reduction,
through normally scheduled payout, in the number of leases in the Company's
lease portfolio compared with the number of leases operative in each of the
comparative prior years. The Company has not undertaken any new equipment lease
portfolio acquisitions in fiscal 1997 and 1996 and, therefore, reported no
leasing fee income for those years.
The fluctuations in commissions, fees and other income are attributable to
changes in the radio broadcast segment in the years shown. The decrease in 1996
as compared to 1995 is the result of operating two radio stations in Brunswick
and St. Simon Island, Georgia under a Time Brokerage Agreement for the full term
of fiscal 1995. Effective July 31, 1995, the Time Brokerage Agreement was
terminated which accounts for the decline in fiscal 1997 as compared to 1996.
Marketing, administrative and other operating expenses in 1997 as compared
to 1996 were lower by $537,176 as a result of the reduction of the accrued
liabilty under an employment contract (see Note 12 - Notes to the Consolidated
Financial Statements) and $212,500 related to the terminated Georgia broadcast
operations in the first fiscal quarter of 1996. These expenses were down in 1996
as compared to 1995 by $628,735 due to the termination of the Time Brokerage
Agreement for operation of the Georgia radio stations, the write-off of $236,615
in deposits and deferred costs related to termination of radio station
acquisition agreements and the continued effort to reduce or eliminate
administrative and operating costs.
Officer compensation in 1996 was reinstated after having been suspended in 1995
which resulted in a increase in marketing, administrative and operating expenses
in 1996 of $279,204 over that reported in 1995.
The loss from operations includes a loss from write down of residual
estimates of $74,621 in 1996 related principally to equipment subject to release
or sale which was comprised mostly of IBM and DEC equipment. Realization of the
recorded equipment values has become difficult due to an over supply of used
computer equipment which has reduced such equipment's current and future market
value. Additionally, the decreased demand for new computer equipment has
resulted in increased competition in the used equipment market. The resulting
affect of the oversupply, decreased demand and increased competition has been to
reduce the amount of current and predicted monies to be realized from residual
proceeds (see "Note 3 - Notes to the Consolidated Financial Statements").
================================================================================
Fiscal Year Ended April 30, 1996 Compared to Fiscal Year Ended April 30, 1995
Fiscal Year Ended April 30, Amount of Change
1996 1995 Dollars Percentage
Rental income $ 1,323,622 $ 7,253,573 $( 5,929,951) (81.8%)
Commissions, fees
and other income $ 544,793 $ 1,072,690 $( 527,897) (49.2%)
Interest income $ 2,964,299 $ 5,290,359 $( 2,326,060) (44.0%)
Marketing, admin-
istrative and
other operating
expenses $ 1,346,995 $ 2,002,850 $( 655,855) (32.7%)
Advisory Services $ - $ 182,500 $( 182,500) (100.0%)
Interest expense $ 3,148,798 $ 5,297,212 $( 2,148,415) (40.6%)
Loss on residual
values $ 74,621 $ - $( 74,621) (100.0%)
Write-off costs
related to
abandoned
broadcast
acquisitions $ - $ 236,615 $( 236,615) (100.0%)
Depreciation and
amortization of
equipment $ 1,343,383 $ 7,419,195 $( 6,075,812) (81.9%)
Amortization of
cost in excess
of net assets
acquired, other
intangibles
assets $ 230,511 $ 320,866 $( 90,355) (28.2%)
Loss before income
taxes $( 1,311,594) $( 1,842,616) $( 531,022) (28.8%)
Net loss $( 1,311,594) $( 1,767,616) $( 456,022) (25.8%)
================================================================================
Liquidity and Capital Resources
During the current period, the Company incurred a loss of $2,132,200 which
includes $1,741,951 of current period noncash charges and expenses. The cash
portion of this loss of $390,249 was funded from operations, increases in
accounts payable, short term borrowings and the sale of equity securities.
During the current fiscal year, the Company received $214,261 in cash from
commissions, fees and other receipts, representing $211,228 from current period
activities and realized $3,033 from leased equipment residuals, all of which are
included in commissions, fees and other receipts. Marketing, administrative and
other operating payments were $668,882 for fiscal 1997 compared to $646,339 for
the previous year.
Current working capital assets, which are composed of cash and short-term
(one year or less) receivables, decreased from $102,623 at April 30, 1996 to
$74,066 at April 30, 1997. Short-term (one year or less) debt and accounts
payable decreased from $1,395,189 at April 30, 1996 to $1,378,569 at April 30,
1997 for a net decrease in working capital of $11,937. As of April 30, 1997
there was a working capital deficit of $1,304,503. The Company's trade payables
at April 30, 1997 were $200,587 compared to $232,005 at April 30, 1996. Accrued
officer's compensation and interest payable decreased from $342,943 at April 30,
1996 to $147,240 at April 30, 1997.
Events occurring subsequent to April 30, 1997 include the acquisition of
R.A. Logistics, Inc., (see Note 1 - Notes to the Consolidated Financial
Statements) and the completion of agreements for repayment or provision for the
liquidation of most of the Company's current obligations. Future liquidity is
anticipated to be funded from the operations of the Company's air freight
consolidation business. From September 2, through September 30, 1997 the
operation generated approximately $1,700,000 in gross operating revenue and
netted approximately $130,000 of pre-tax operating income. The Company
anticipates that it will require additional financing and additional capital
resources to fund the growth and expansion of this business which will be pro-
vided from revenues, bank and other forms of short term borrowings which may
include account receivable factoring or other forms of secured debt financing
or the sale of equity and/or debt securities from time to time.
RALI acquired B. Airways, Inc. which it intends to qualify as an all cargo
air carrier pursuant to the applicable federal laws and regulations. Upon
qualification, this company will require additional capital resources in order
to acquire operating aircraft, parts and equipment and to fund the pre-operating
costs of adding operating aircraft including but not limited to the costs and
expenses associated with air crew training and qualification, insurance,
aircraft inspections and other costs. Theses costs are substantial and the
Company anticipates that it will require additional capital resources which may
be provided from secured debt financing and from the sale of equity and/or debt
securities from time to time. The Company has no present commitments for such
financing and there is no assurance that financing will become available or if
available will be available to the Company on reasonably acceptable terms.
Item 8. Financial Statements and Supplemental Data
Report of Independent Certified Public Accountants
To the Shareholders and Board of Directors of
Tropic Communications, Inc.:
We have audited the accompanying consolidated balance sheets of Tropic
Communications, Inc. and subsidiaries as of April 30, 1997 and 1996, and the
related statements of consolidated operations, shareholders' equity, and cash
flows for the years ended April 30, 1997, 1996 and 1995, and the financial
statement schedule of this Form 10-K. These financial statements and schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and related
financial statement schedules are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and the related financial statement
schedule. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tropic
Communications, Inc. and subsidiaries as of April 30, 1997 and 1996 and the
results of their consolidated operations and their consolidated cash flow for
the years ended April 30, 1997, 1996 and 1995, in conformity with generally
accepted accounting principles. In addition, the financial statement schedules
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly the information required to be included
therein.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has incurred significant losses
from operations and experienced cash flow difficulties that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are described in Note 1. The financial statements do not
include any adjustment that might result from the outcome of this uncertainty.
/s/ HAUSSER + TAYLOR
Columbus, Ohio
October 2, 1997
TROPIC COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
April 30,
------------------------
1997 1996
Assets:
Cash 2,068 $ 14,021
Deposits and accounts receivable (net of
allowancefor doubtful accounts of $2,500
and $5,800, respectively) 25,396 46,300
Residual notes receivable - 5,000
Equipment notes and accrued interest receivable 198,700 14,937,756
Leased property under capital lease, at
cost (net of accumulated amortization of
$3,567,799 and $99,288,753, respectively) 270,915 -
Property and equipment, at cost (net of
accumulated depreciation of $363,686 and
$513,934, respectively) 65,859 393,002
Cost in excess of net assets acquired (net of
accumulated amortization of $50,552 and
$1,488,138, respectively) 141,955 1,757,246
respectively)
Investment in unconsolidated affiliates 903 500
Investment in partnerships - 42,527
Broadcast rights 46,449 93,471
Other assets 17,498 59,270
------------ ------------
Total Assets $ 769,743 $ 17,349,093
============ ============
Liabilities:
Accounts payable and accrued expenses $ 281,821 $ 282,025
Note and accrued interest payable -
related party 315,440 263,845
Notes and accrued interest payable 592,799 511,685
Broadcast rights 46,449 93,471
Capital lease obligations and accrued
interest payable 198,700 14,938,702
Accrued officer compensation and
interest payable 147,240 342,943
Unearned income 1,766 1,366
------------ ------------
Total Liabilities 1,584,215 16,434,037
------------ ------------
Shareholders' Equity (Deficit):
Preferred stock, $0.01 par value,
1,000,000 shares authorized, none
issued and outstanding - -
Common stoc0k, $0.15 par value,
50,000,000 shares authorized,
3,711,566 and 3,254,566 shares
issued, respectively) 556,735 488,185
Paid in capital 9,007,109 8,672,987
Retained deficit (10,366,728) (8,234,528)
------------ ------------
(802,884) 926,644
Treasury stock, at cost, 2,400 shares (11,588) (11,588)
------------ ------------
Total Shareholders' Equity (Deficit) (814,472) 915,056
------------ ------------
Total Liabilities and Shareholders'
Equity (Deficit $ 769,743 $ 17,349,093
============ ============
The accompanying notes are an integral part of these financial statements.
TROPIC COMMUNICATIONS, INC. AND SUBSIDIARIES
Statements of Consolidated Operations
Fiscal Years Ended April 30,
------------------------------------
1997 1996 1995
Revenues:
Rental income $ - $ 1,323,622 $ 7,253,753
Commissions, fees, advertising
and other income 369,123 544,793 1,072,690
Interest income 826,646 2,964,299 5,290,359
----------- ----------- -----------
Total Revenues 1,195,769 4,832,714 13,616,622
----------- ----------- -----------
Cost and Expenses:
Marketing, administration and other 566,073 1,346,995 2,002,850
operating expenses
Advisory services 79,575 - 182,500
Interest expense - related party 52,749 42,683 18,145
Interest expense 910,637 3,106,115 5,279,067
Loss on residual values 1,967 74,621 -
Write-off escrow deposits, investment
and deferred expenses for abandoned
broadcas acquisitions - - 236,615
Depreciation and amortization of equipment 46,750 1,343,383 7,419,195
Amortization of cost in excess of net
assets acquired and other intangible
assets 230,511 230,511 228,383
Impairment valuation write-downs of cost
in excess of net assets acquired 1,397,180 - 92,483
Write-off investment in real estate
partnerships 42,527 - -
----------- ----------- -----------
Total Costs and Expenses 3,327,969 6,144,308 15,459,238
----------- ----------- -----------
Income (Loss) Before Income Taxes (2,132,200) (1,311,594) (1,842,616)
Income tax benefit - - (75,000)
----------- ----------- -----------
Net Loss $(2,132,200)$(1,311,594)$(1,767,616)
=========== =========== ===========
Primary Net Loss Per Share $ $(0.59) $ (0.50)$ (0.94)
========== =========== ===========
Fully Diluted Net Loss Per Share $ (0.59) $ (0.50)$ (0.94)
========== =========== ===========
Average Number of Common and
Common Equivalent Shares:
Primary 3,627,241 2,633,712 1,876,602
Fully diluted 3,627,241 2,633,712 1,876,602
The accompanying notes are an integral part of these financial statements.
TROPIC COMMUNICATIONS, INC. AND SUBSIDIARIES
Statements of Consolidated Stockholders' Equity (Deficit)
Retained Treasury Total
Common Paid in Earnings Stock, Shareholders'
Stock Capital (Deficit) at Cost Equity (Deficit)
--------- --------- --------- -------- ----------------
Balances as of
April 30, 1994 $ 279,345 $7,863,988 $(5,155,318) $( 11,588) $ 2,976,427
Stock options exer-
cised by directors,
officers and
employees 3,000 3,250 6,250
Stock options exer-
cised by others 25,072 214,928 240,000
Other capital items (21,879) (21,879)
Net loss (1,767,616) (1,767,616)
--------- ---------- ----------- -------- -------------
Balances as of
April 30, 1995 307,417 8,060,287 (6,922,934) (11,588) 1,433,182
Stock issued to
replace collat-
eral shares
surrendered by
by officer to
secured prom-
issory noteholders 68,075 204,661 272,736
Stock options exer-
cised by directors,
officers and
employees 34,850 32,337 67,187
Stock options exer-
cised by others 78,084 375,461 453,545
Fractional shares
dropped for 1:3
reverse stock
split effected
July 22, 1994 (241) 241 -
Net loss (1,311,594) (1,311,594)
--------- ---------- ----------- -------- -------------
Balances as of
April 30, 1996 488,185 8,672,987 (8,234,528) (11,588) 915,056
Stock options exer-
cised by others 51,000 289,000 340,000
Stock issued 14,550 45,122 59,672
Net loss (2,132,200) (2,132,200)
--------- ---------- ----------- -------- --------------
Balances as of
April 30, 1997 $ 556,735 $9,007,109 $(10,366,718) $(11,$88) $ (814,472)
========== ========== ============ ======== =============
The accompanying notes are an integral part of these financia statements.
TROPIC COMMUNICATIONS, INC. AND SUBSIDIARIES
Statements of Consolidated Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Fiscal Year Ended April 30,
---------------------------------
1997 1996 1995
Cash Flows From Operating Activities:
Rental receipts $ - $ 9,207 $ 3,100
Commissions, fees and other receipts 214,261 241,322 531,242
Marketing, administrative and other
operating payments (598,835) (646,339) (1,193,164)
Interest receipts 709 525 2,225
Interest payments (6,384) (42,768) (19,519)
---------- ---------- ------------
Net Cash Used For Operating
Activities (390,249) (438,053) (676,116)
---------- ---------- ------------
Cash Flows From Investing Activities:
Purchase of property and equipment (13,111) (2,524) (14,600)
Proceeds from sale of land, property
and equipment - - 51,000
Proceeds from sale of net investment
in operating leases - - 56,941
Capitalized organization costs,
including cash payments associated
with the acquisition of radio
stations - - (49,523)
Escrow deposits for radio station
acquisitions - - (76,000)
Investment in unconsolidated subsidiaries (403) (500) -
---------- ---------- ------------
Net Cash Used For Investing Activities (13,514) (3,024) (32,182)
---------- ---------- ------------
Cash Flows From Financing Activities:
Deferred stock, debt issuance and other
financing costs - - (21,879)
Proceeds from issuance of stock 340,000 426,720 88,750
Proceeds from other borrowings 50,000 102,500 460,000
Principal payments under other borrowings (21,500) (81,000) -
Principal payments on broadcast
acquisition debt - (2,725) (14,451)
Proceeds from officer loans - 11,500 31,177
Principal payments under officer loans (11,500) - -
Proceeds from related party loans
(non officer loans) 39,682 - 140,000
Principal payments under capital lease
obligations and other financings (4,872) (6,077) (7,463)
---------- ---------- ------------
Net Cash Provided By Financing
Activities 391,810 450,918 676,134
---------- ---------- ------------
The accompanying notes are an integral part of these financial statements.
TROPIC COMMUNICATIONS, INC. AND SUBSIDIARIES
Statements of Consolidated Cash Flows
Increase (Decrease) in Cash and Cash Equivalents, continued
Fiscal Year Ended April 30,
---------------------------------
1997 1996 1995
Net Increase (Decrease) in Cash and
Cash Equivalents (11,953) 9,841 (32,164)
Cash and Cash Equivalents at
Beginning of Period 14,021 4,180 36,344
---------- ---------- ------------
Cash and Cash Equivalents at
End of Period $ 2,068 $ 14,021 $ 4,180
========== ========== ============
The accompanying notes are an integral part of these financial statements.
TROPIC COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. GOING CONCERN BASIS OF PRESENTATION AND CERTAIN SUBSEQUENT EVENTS
(UNAUDITED AS TO EVENTS SUBSEQUENT TO APRIL 30, 1997)
Certain information and footnote disclosure contained in these financial
statements that are not historical facts are forward-looking statements as that
term is defined in the Private Securities Litigation Reform Act of 1995.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, the forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected.
The Company must generate sufficient additional working capital and operate
its air cargo business (R.A. Logistics, Inc. see below) at a profitable level in
order to continue as a going concern. If the Company is not successful in these
efforts, there is a substantial likelihood that it could not proceed as a going
concern. The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classifications of liabilities that might be necessary should
the Company be unable to continue as a going concern.
On September 18, 1997 the Company closed on the acquisition of R.A.
Logistics, Inc. As part of this acquisition the Company has made provision for
the repayment of its obligations and the disposition of certain of its assets,
accordingly, the financial statements include adjustments to the carrying value
of certain assets as more fully described below. (see Notes 5, 7, 11 and 12).
Acquisition of R.A. Logistics, Inc.
On September 18, 1997, the Company issued 26,400,000 shares of its restricted
$.15 par value common stock in exchange for 100% of the issued and outstanding
capital stock of R.A. Logistics, Inc., a Delaware corporation ("RALI" and the
"RALI Acquisition"). RALI is a newly formed holding company owning 100% of the
issued and outstanding capital stock of two subsidiary corporations, B. Airways,
Inc. and B. Airways Air Cargo, Inc. both Florida corporations ("BAACI" and
"BAI", respectively). The consolidated net assets of RALI as of the date of
closing were approximately $279,500, unaudited. BAACI is a newly formed
corporation organized to operate as an air freight consolidator by Messrs. Angel
Munoz and Ronald Vimo. BAACI provides air cargo consolidation services operating
from a shared warehouse facility located at the Miami International Airport.
BAACI consolidates air cargo for shipment via a Boeing 747-200 via approximately
4 round trips weekly between Miami International Airport and Central and South
America. The BAACI aircraft is provided at a rate of $4,750 per operating hour
plus fuel. Operating since September 2, 1997, BAACI had booked approximately
$1,708,700 in gross revenue through September 30, 1997. BAI is a non-operating
company having an application pending with the U.S. Department of Transportation
and the Federal Aviation Authority for operation as a Part 135 all cargo air
carrier. In addition, BAI has a $10,000 deposit for the purchase of a DC-3 air-
craft which BAI anticipates will be operated within the Caribbean Basin.
The Company anticipates that it will account for the acquisition based upon
the historic costs of the assets and liabilities of both the Company and RALI.
The following unaudited financial forecast summarizes a Forecasted Consolidated
Condensed Balance Sheet, Statement of Operations and Earnings Per Share for the
year ending September 18, 1998 (one year from the stock exchange date). The
forecast is management's estimate of results and do not purport to be indicative
of what will occur in the future, and actual results may differ substantially
from these estimates.
Forecasted Condensed Balance Sheet
(Unaudited)
September 18, 1998
Assets $ 3,375,000
==============
Liabilities $ 2,000,000
Shareholders' Equity 1,375,000
--------------
Total Liabilities and Shareholders'
Equity $ 3,375,000
==============
Forecasted Condensed Statement of Operations
(Unaudited)
September 18, 1998
Net Sales $ 20,400,000
==============
Net Income $ 600,000
==============
Net Income per Common Share:
Primary $ 0.02
==============
Fully Diluted $ 0.02
==============
The forecast assumes that the Company's debt is retired through either the
issuance of shares of the Company's equity securities or disposition of assets.
Therefore, continuing operations will be that of RALI's air cargo consolidation
and cargo air carrier services business. The forecast is limited in scope to a
projection based upon the results of current operations which encompasses
service being limited to the use of the one Boeing 747-200 aircraft. The
forecast does not include an estimate of the revenue or expense which may be
earned or incurred as additional aircraft and routes are added nor does the
forecast include an estimate for the revenue or expense which may be incurred
from the start of business of B. Airways, Inc. as an operating all cargo air
carrier.
Amendment to Articles of Incorporation and By-Laws.
On September 19, 1997, by an action by a majority of the shareholders of the
Company, the shareholders approved amending the Company's Articles of
Incorporation: (i) to change the par value of the Company's common stock from
fifteen cents per share to ninety cents per share; and (ii) to comport to the
non-U.S. citizen ownership and management requirements of the Federal aviation
laws. This amendment has not been effected as of October 2, 1997. Also, the
Board of Directors approved an amendment to the Company's By-Laws: (i) to change
the beginning of the Company's fiscal year from May 1 to January 1 of each
calendar year; and, (ii) to change the time for the Company's annual meeting of
shareholder's from last Thursday of October to the last Thursday of June of each
calendar year.
As a result of the change in the par value of the Company's common stock the
3,711,566 shares $.15 par value common stock issued and outstanding as of April
30, 1997 and the 26,400,000 shares issued pursuant to the RALI Acquisition will
be changed into 618,594 shares and 4,400,000 shares, respectively, of $.90 par
value common stock (a 1-for-6 reverse split). This amendment will not require a
mandatory surrender and exchange of certificates, and certificates evidencing
the post-amendment shares will remain as validly issued and outstanding shares
of the common stock of the Company. The post-amendment shares will have the same
character and bear the same restrictions (if any) as the pre-amendment shares.
New ninety cent ($.90) par value shares will be issuable as a result of the
amendment and when issued in exchange for fifteen cent
($.15) par value shares will be rounded down to the nearest whole share, thus no
fractional common shares will be issuable as a result of the amendment.
2. SIGNIFICIANT ACCOUNTING POLICIES
Basis of Consolidation. The consolidated financial statements include the
accounts of Tropic Communications, Inc., its wholly-owned subsidiaries, and
their related business trusts (collectively, the "Company"), most of which are
engaged in the acquisition, financing, ownership, management and brokerage of
leases of data processing and other equipment. The consolidated financial
statements also include Partech Communications Group, Inc., a wholly-owned
subsidiary and its wholly-owned subsidiaries which are engaged in managing one
FM radio station in the current fiscal year and two FM radio stations and one AM
radio station in 1996 and 1995. The Company uses the equity method of accounting
for its investments in real estate limited partnerships and equipment leasing
limited partnerships. All material intercompany transactions have been
eliminated. Certain reclassifications of previous year amounts presented herein
have been made in order to conform with current year presentations.
Leasing Activities. The Company generally acquires leases of newly leased
equipment solely from other unaffiliated leasing companies and financial
institutions. Generally, the Company will acquire a portfolio of leases
consisting of numerous pieces of equipment already on lease to a user (a
"Portfolio"). Financing for these purchases is accomplished by acquisition of
the property subject to nonrecourse debt obtained by discounting the user lease
(the "Operating Leases" and "Net Investment in Operating Leases" collectively
referred to hereinafter as "Operating Leases") with a financial institution
("Discounted Lease Rentals and Accrued Interest Payable"), and cash. The Company
may invest its own cash ("Net Investment in Operating Leases" and "Residuals
Receivable"), but has principally financed such purchases through sale-leaseback
transactions of the equipment with an investor owner ("Equipment Notes and
Accrued Interest Receivable", "Leased Property Under Capital Lease" and "Capital
Lease Obligations and Accrued Interest Payable").
The Company has acted as both lessor and Lessee in lease equipment
transactions and accounts for its leases in accordance with Financial Accounting
Standards Board Statement No. 13, as further amended by subsequent
pronouncements, which contains guidelines for classifying lease transactions
where the Company is lessor as to (i) sales-type leases, (ii) direct financing
leases, or (iii) operating leases; and, where the Company is lessee as to (i)
capital leases or (ii) operating leases. As lessor, the Company has no
sales-type leases and has accounted for its direct financing and operating
leases as appropriate. The Company's accounting methods and their financial
reporting effects are described hereunder.
Wrap Leases - In a wrap lease transaction, the Company either acquires
equipment subject to an Operating Lease and recourse financing, and then sells
the equipment to a third party and leases the equipment back from the third
party; or assumes an existing wrap lease from another leasing company, together
with the third party note receivable, Operating Lease and nonrecourse debt. For
financial reporting purposes, the Company will record, at the time of the
transaction, the note receivable from the third party, a capital lease equal to
the present value of the wrap lease payments, and the Operating Lease
nonrecourse debt. The Company will recognize interest income as the third party
note receivable is paid, amortization and interest expense as to the capital
lease, rental income as to the Operating Lease and any subsequent Operating
Leases, and interest expense as to the nonrecourse debt.
Barter Transactions. The Company enters into barter transactions wherein
advertising time is exchanged for goods and/or services which are used for
promotional, sales and other business activities. When the advertising time
exchanged in the barter transaction is transmitted the Company recognizes
advertising revenue, when the goods or services are received or used the Company
recognizes expense, unless the goods are to be resold, then the Company records
such goods as inventory. Advertising revenue for barter transactions is
recognized on the basis of the fair market value of the goods or services
received. If the goods or services are received or used prior to the
transmission of the advertising the Company records a liability (unearned
broadcasting revenue). If the advertising is broadcast prior to the receipt of
the goods or services a receivable is recorded (barter transaction receivable).
Broadcasting Rights. Broadcasting rights for music and other programming
consist of agreements to broadcast a specific or unlimited amount of program
material over a defined time period at a specific fee. The Company reports an
asset and a liability for the rights acquired and obligation incurred under such
agreements when the broadcasting rights period begin, the total cost is known or
reasonably estimable, the material to be broadcast is accepted and is available
for broadcasting. Such assets and liability are recorded at the gross amount of
the liability. The asset is amortized over the time period of the agreement or
the expected number of broadcasts if this is a shorter period of time.
Network Affiliation Agreements and Time Brokerage Agreements. The Company may
enter into agreements whereby a third party's programming and advertising
material will be broadcast by the Company, who is the FCC license holder. The
third party solicits advertising and receives fees for such advertising, the
Company receives fees for broadcasting the material. The Company records these
agreements as an intangible asset and amortizes them over the life of the
agreement. The Company also enters into agreements where the Company's
programming and advertising material will be broadcast by a third party who is
the license holder. In such cases the Company will record revenue when earned
and expenses when incurred.
Long-lived Assets. The Company implemented the provisions of Financial
Accounting Standards ("FAS") Number 121, Accounting for the Impairment of
Long-Lived Assets to Be Disposed Of, in fiscal year ended April 30, 1995. Since
the Company's prior accounting policy regarding review of impairment of
long-lived assets approximated FAS 121, there was no financial impact related to
the implementation. These assets include cost in excess of net assets acquired,
a broadcast license and a noncompete agreement. These intangible assets are
amortized over periods not exceeding ten years. The Company evaluates the
existence of any impairment related to intangible assets on the basis of whether
the intangible assets are fully recoverable based upon projected undiscounted
cash flows and recognizes such losses, if any, during the period impairment is
incurred. The periods of amortization and recoverability are evaluated annually
to determine whether circumstances have changed which necessitate revision.
Based on management's estimates, impairments are recognized during the period
impairment incurs, however, actual results could differ from these estimates.
Property and Equipment. Property and equipment are stated at cost.
Depreciation is computed on a straight line method at rates which are adequate
to allocate the costs of such assets over their estimated useful lives.
Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for additions and improvements are added to the cost of property
and equipment. Leasehold improvements are amortized over the term of the lease.
Upon termination of the lease any remaining value is expensed.
Deferred Costs. The Company defers external costs associated with the
acquisition of a radio station or broadcasting asset. Upon finalization of the
acquisition the Company will capitalize these amounts as the cost of an asset
purchased or as cost in excess of net assets acquired. If the acquisition is
terminated the Company will immediately expense the amounts.
The Company also defers costs that relate to stock, debt and other
financings. The Company's accounting policy is to capitalize such costs and
amortize them over the life of any debt they may relate to or to charge them to
Paid in Capital if they relate to equity financing. If the financing is
terminated the costs are expensed.
Investment in and Advances to Unconsolidated Affiliates. The Company may
enter into acquisition transactions in which the Company was a proponent of a
plan of acquisition and financing wherein the Company organized and capitalized
a subsidiary company (an "Unconsolidated Affiliate") for the purpose of
purchasing an operating company. The Company reports the carrying value of its
interest in the common stock retained in an Unconsolidated Affiliate at cost,
representing its initial capitalization of the affiliate, since its retained
interest is nominal and is further diluted by future equity transactions
contemplated at the time of acquisition. The Company would recognize income for
its interest upon payment of a dividend by the affiliate or a gain upon sale of
its interest in the affiliate. (see Note 20).
Fees Received in Common Stock. The Company may enter into transactions in
which the Company provides consulting and administrative services. The Company's
compensation for these services may be paid in cash and in shares of the
common stock of the client company. The Company reports income from the receipt
of such shares at their estimated fair market value and reports the carrying
value of the shares at the lower of cost or market.
Cash Flows. For purposes of the Statement of Cash Flows all of the Company's
cash investments are liquid instruments with maturities of three months or less
and are considered to be cash equivalents (see Note 21).
Income Taxes. The Company follows the provisions of Financial Accounting
Statement Number 109, Accounting for Income Taxes ("FAS 109") which requires the
reporting of income taxes using an asset and liability approach and measuring
the change in the tax asset or liability. A deferred tax asset or liability
generally arises from changes in differences between financial reporting and tax
bases of all assets and liabilities (with exception related to goodwill).
Previously recorded deferred tax assets and liabilities are adjusted upon any
changes in enacted tax rates. Differences between financial reporting and tax
bases usually result from differences in timing of income and expense
recognition. A valuation allowance is applied to a tax asset for any amount that
does not meet certain realizability criteria. A change in the amount of
valuation allowance that is applicable to the beginning of the year balance is
recognized in income from continuing operations, increases in the valuation
allowance are recognized as income tax expense and decreases are recognized as
income tax benefit.
Fair Value. FAS 107, Disclosure about Fair Value of Financial Instruments,
requires disclosure of the fair market value of financial instruments for which
it deems practical to estimate fair value. For certain of the Company's
financial instruments including cash, accounts receivable, accounts and notes
payable, and other accrued liabilities the carrying amounts approximate fair
value due to their short maturities. For long-term, non-current notes payable ,
the Company believes the carrying value will approximate their fair value. The
fair value of long term, non-current notes payable are based on current
borrowing rates available for similar financings.
Stock-Based Compensation. The Company has adopted the provisions of APB No.
25, "Accounting for Stock Issued to Employees" which utilizes the intrinsic
value based method. The Financial Accounting Standards Board ("FASB") Statement
No. 123, "Accounting for Stock-Based Compensation", which utilizes a fair value
based method is effective for the Company's year beginning May 1, 1996. The FASB
requires disclosure for new employee stock options of the impact to the
financial statements of utilizing the intrinsic value versus the fair value
based method. The Company utilizes the intrinsic value method under APB No. 25
to account for employee stock options. If the Company had utilized the fair
value based method under FASB No. 123, the impact would not be significant to
the financial statements.
3. RESIDUAL VALUES RECEIVABLE
As of April 30, 1997, the Company has fully liquidated and/or written down
its equipment residual values. Changes in the present value of the Company's
share of estimated residual values for the periods indicated are as follows:
Year Ended April 30,
------------------------------------
1997 1996 1995
Balance at beginning of year $ 5,000 $ 98,844 $ 291,741
Net additions (reductions) to
residual values (1) - 3,322 11,853
Collections (3,033) (22,545) (204,750)
Provision for decline in net
realizable value (1,967) (74,621) -
---------- ---------- ------------
Balance at end of year $ - $ 5,000 $ 98,844
========== ========== ============
(1) Net of amounts charged to unearned income.
4. EQUIPMENT NOTES AND ACCRUED INTEREST RECEIVABLE
Equipment Notes and Accrued Interest Receivable are due over terms not
exceeding nine years and bear interest at fixed rates ranging from 8.8% to
12.35% per annum. The notes are collateralized by a security interest in the
leased equipment and lease receivables due from users. The notes have been
acquired by the Company as part of its Portfolio acquisitions (see Notes 2 and
5) and represent long-term installment receivables from the purchasers of the
equipment, undertaken at the time the equipment purchase from the manufacturer
was originally financed. Principal and interest payments due the Company for the
fiscal years subsequent to April 30, 1997, amount to $199,461, including future
interest income of $761.
5. LEASE PROPERTY UNDER CAPITAL LEASE
On May 1, 1996 the Company entered into a sale/leaseback with a grantor trust
(the "Trust"), in which an officer of the Company is a co-trustee. The
sale/leaseback was entered into pursuant to a foreclosure action instituted by
the Trust and a subsidiary of the Company against Tropic of North Carolina, Inc.
("TNCI" a subsidiary of the Company) which was the owner and operator of the
Company's FM radio station. The sale/leaseback included all of the tangible
personal property of TNCI. The term of the lease is for a period of nine years
at an annual rental of $1.00 until May 1, 2001 and $4,053 monthly thereafter. At
April 30, 1997, the cost of the leased property under capital lease totals
$304,383 with a net value of $270,915. The Company recognized no gain or loss on
the sale/leaseback transaction and has accounted for the lease as a capital
lease. The accompanying financial statements have recognized $33,262 in
amortization expense related to equipment under capital lease.
On May 1, 1997 the Company acquired 100% of the capital stock of a
corporation owning a 10.47% interest in a leased paper processing plant. The
purchase price of the interest was $13,500,220 which was financed pursuant to
the terms of a secured promissory note due on March 1, 2001 with interest at the
rate of 17.723% per annum. In the first fiscal quarter ending July 31, 1997 the
Company recognized $50,000 of income and $606,037 of interest expense related to
this transaction. The Company expects to dispose of this interest as part of the
cessation of its equipment leasing business pursuant to the RALI Acquisition
undertaking.
6. PROPERTY AND EQUIPMENT
The Company's property and equipment and accumulated depreciation, along with
assigned depreciable lives, as of April 30, 1997 and 1996, are summarized as
follows:
1997
Accumulated Net Assigned
Asset Classification Cost Depreciation Book Value Life
------------------------------------------------
Furniture and office
equipment $ 390,303 $ (352,390) $ 37,913 5-10 years
Broadcasting equipment 703 (135) 568 3-20 years
Automobiles 19,079 (9,539) 9,540 3 years
Leasehold improvements 19,460 (1,622) 17,838 3 years
----------- ---------- ----------
Total $ 429,545 $ (363,686) $ 65,859
=========== ========== ==========
1996
Accumulated Net Assigned
Asset Classification Cost Depreciation Book Value Life
------------------------------------------------
Furniture and office
equipment $ 405,100 $(354,769) $ 50,331 5-10 years
Broadcasting equipment 400,156 (141,946) 258,210 3-20 years
Automobiles 23,079 (10,063) 13,016 3 years
Building and improvements 46,806 (6,516) 40,290 20 years
Land improvements 5,687 (640) 5,047 20 years
Inventory 26,108 N/A 26,108 N/A
------------ --------- --------
Total $ 906,936 $(513,934) $393,002
============ ========= ========
7. COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired and accumulated amortization, as of
April 30, 1997, are summarized as follows:
Accumulated Net Assigned
Asset Classification Cost Amortization Book Value Life
------------------------------------------------
Cost in excess of net
assets acquired $ 192,507 $ (50,552) $141,955 10 years
------------ --------- --------
Total $ 192,507 $ (50,552) $141,955
============ ========== ========
During the year ended April 30, 1995, the Company's review of "cost in excess
of net assets acquired" resulted in the identification of an amount related to a
discontinued business license application in the amount of $92,483 (net of
accumulated amortization of $31,517) which amount was charged to the Statement
of Operations in fiscal 1995. There were no adjustments for impairment to costs
in excess of net assets acquired as a result of the impairment review during
fiscal year ended April 30, 1996.
Pursuant to the RALI Acquisition (see Note 1) the business of the Company
will be devoted solely to the operation and expansion of the air freight
business and the development of an operational air carrier. Accordingly, the
Company will wind down and/or dispose of its other business activities. Pursuant
to the Company's accounting policy regarding review of impairment of long-lived
assets, the Company determined during the fourth fiscal quarter of 1997 that it
is therefore appropriate to expense $1,397,180 of the Company's cost in excess
of net assets acquired which is related to these other business activities. The
remaining balance at April 30, 1997 of $141,955, net of accumulated amortization
of $50,552, is related to the cost in excess of the value of the net assets of
WLTT-FM at the date of acquisition.
8. RENTAL INCOME
Substantially all Operating Leases were receivable in installments and were
assigned to various lending institutions at fixed rates on a recourse basis.
Discounted Lease Rental and Accrued Interest Payable represent the present value
of the Operating Lease payment discounted at the interest rate charged by the
lending institution, generally ranging from 11.00% to 12.00%. Interest expense
over the term of the lease term represents the difference between the rentals
paid to by the user/lessee and the discounted proceeds. Minimum Operating Lease
payments under noncancellable leases and Discounted Lease Rentals and Accrued
Interest Payable were fully amortized in the fiscal year ended April 30, 1996.
The Company's Operating Leases were for initial lease terms of 18 to 72
months and were net leases wherein the lessee pays taxes, licenses, insurance
and provides for general maintenance. The total rental income from Operating
Leases during the fiscal years ended April 30, 1997, 1996 and 1995 was $ - 0 -,
$1,323,622 and $7,253,753, respectively.
9. OFFICE LEASE
The Company leases 2,100 square feet of suburban office space under a one
(1) year full service lease, expiring January 31, 1998 as well as storage space
for $83 per month, on a month to month basis, in Columbus, Ohio. In addition,
the Company entered into a thirty-six (36) month lease for 1,200 square feet
office/studio facility for monthly rental of $900 in the first year with 3%
increase compounded in each of next two years, and two parcels of land on which
its broadcast towers are located from a grantor trust (the "Trust"), in which
the Company's CEO is a co-trustee, on a month to month basis for $1,500 per
month in Shallotte, North Carolina. The rental payments for the Shallotte
office/studio facility has been guaranteed by the Trust.
Rental expense reported in the Statement of Operations amount to $53,709,
$59,220, and $54,443 for fiscal years ended April 30, 1997, 1996 and 1995,
respectively.
The following table reflects minimum future rental payments under the non
cancelable terms of the above referenced facility leases:
Years Ending Minimum Future
April 30, Rental Payments
1998 $ 29,414
1999 11,235
2000 7,638
2001 0
2002 0
Thereafter 0
-----------
Total Minimum Future Rental Payments $ 48,288
===========
10. BARTER TRANSACTIONS
The Company has recognized $180,920, $312,268 and $635,001of barter
transaction revenue which is included in commissions, fees and other income and
$166,903, 310,393 and $631,656 of barter transaction expense included in
marketing, administrative and other operating expenses for the year ended April
30, 1997, 1996 and 1995, respectively. The amount of goods and services which
were received or used prior to the transmission of advertising was insignificant
as of the balance sheet date.
11. NOTES AND ACCRUED INTEREST PAYABLE
The Company's notes and accrued interest payable at April 30, 1997 and 1996
with their respective interest rates are as follows:
Fiscal Year Ended April 30,
---------------------------
1997 1996
Secured promissory notes to third
parties at 6% to 9/6/95, 15% there-
after collateralized by stock of
a subsidiary and 233,435 shares of
the Company's common stock owned by
an officer $ 344,314 $ 303,418
Secured promissory notes to an officer
and/or entities in which the officer
has an interest or is affiliated,
at 6% to 9/30/95, 15% thereafter
collateralized by stock of a subsidiary
and 233,435 shares of the Company's
common stock owned by an officer 254,910 224,733
Unsecured demand promissory notes and
accrued interest payable to related
parties, other than officers, with
interest at 12% - 15% 60,530 26,756
Unsecured demand promissory note and
accrued interest payable to an officer,
with interest at 10% - 12,356
Unsecured demand promissory notes and
accruedinterest payable to third
parties, with interest at 10% 51,168 21,500
Installment note payable to vendors,
collateralized with the equipment
purchased, with interest at 8.6% 6,946 10,872
Installment notes and accrued interest
payable related to radio station
acquisitions, with interest at 7%,
for all years 190,371 175,895
---------- ----------
Total notes and accrued interes payable $ 908,239 $ 775,530
========== ==========
Notes and accrued interest payable for the fiscal years ending subsequent to
April 30, 1997, are as follows:
Type of Debt
----------------------------------
Years Ending April 30, Corporate Broadcasting Total
Accrued Interest $ 127,872 $ 25,398 $ 153,270
1998 567,780 184,520 752,300
1999 2,669 - 2,669
---------- ---------- -----------
Total notes and accrued interest payable $ 698,321 $ 209,918 $ 908,239
========== ========== ===========
Repayment of Notes.
Subsequent to the date of closing on the RALI Acquisition the Company entered
into various agreements for the repayment of various of the Company's
obligations. On September 19, 1997 the Company entered into an agreement with
CCJ Consultants, Inc. ("CCJ"), a related party, for the liquidation of the
Company's obligations to CCJ under its promissory note and warrants to CCJ dated
August 4, 1994 by the transfer to CCJ of all of the issued and outstanding
capital stock of a wholly-owned subsidiary of the Company. Also, on September
19, 1997 the Company entered into an agreement with Mr. John E. Rayl a
shareholder, director and the Treasurer of the Company (and also an officer of
CCJ) for the issuance of 900,000 shares of the Company's fifteen cent par value
common stock in liquidation of the Company's obligations to Mr. Rayl under its
promissory note to him dated September 15, 1994. The Company also entered into
an agreement with Firestar Holdings, Ltd for the partial liquidation of the
Company's obligations to Firestar by issuance of 190,000 shares of the Company's
fifteen cent par value common stock which was valued at $19,000. On September
23, 1997, the Company entered into an agreement with Firestar Holdings, Ltd. to
complete the liquidation of the Company's obligations by the issuance of
2,040,000 shares of the Company's fifteen cent par value common stock.
During the current fiscal year the Trust provided $39,682 in loans to the
Company as working capital support for the operation of WLTT-FM. As of April 30,
1997 the Company is indebted to the Trust in the aggregate amount of $60,530.
The accompanying financial statements include interest expense of $2,848 in
respect of this indebtedness.
12. RELATED PARTY TRANSACTIONS
Employment Agreements.
As part of the RALI Acquisition, the Company also entered into Employment
Agreements effective September 2, 1997 with Angel Munoz, Ronald Vimo and Scott
Villanueva to serve as the Company's President, Vice-President and Secretary
respectively. In addition, these individuals have replaced three of the
Company's resigning members on its Board of Directors. The Employment Agreements
are similar in terms and conditions, providing for, among other things, for a
term of five years, an annual base compensation of $175,000, $175,000 and
$85,000 respectively, for annual incentive compensation in an aggregate amount
(including base compensation) of 1% of consolidated gross revenues and for the
payment of other ordinary employee benefits including medical, disability and
life insurance and business and auto expense reimbursement.
In conjunction with the RALI Acquisition, Mr. John E. Rayl, Chief Executive
Officer of the Company, has agreed to terminate his Employment Agreement and,
accordingly, the Company's accrued liability under the contract was reduced in
the fourth quarter by $537,200 at April 30, 1997 and the related reductions of
expense included under marketing, administrative and other operating expenses in
the accompanying statement of operations.
Additional related party transactions are discussed throughout the Notes to
the Financial Statements.
13. CAPITAL LEASE OBLIGATIONS AND ACCRUED INTEREST PAYABLE
The Company is obligated under long-term capital leases (see Notes 2 and 4)
covering the leases of equipment for the fiscal years ending subsequent to April
30, 1997, total payments of $199,461, including future interest expense of $761.
14. EMPLOYEE STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
The following table sets forth: (1) the number of shares of the Company's
common stock issuable at April 30, 1997 pursuant to outstanding Options; (2) the
exercise price per share; (3) the aggregate exercise price; (4) the expiration
dates; (5) the market values of such shares at April 30, 1997, based on $0.3125
per share, which is the average of the high and low ask and bid prices on the
OTC Bulletin Board at April 30, 1997.
Number
of
Shares Market
Covered By Exercise Aggregate Value at
Outstandin Price Per Exercise Expiration April 30,
Plan Options Share Price Dates 1997
- ------------------ ---------- --------- --------- ---------- ----------
Incentive Stock
Option Plan 30,000 $0.3125 $ 9,375 7/15/03 $ 9,375
Incentive Stock
Option Plan 67,167 $0.3125 $ 20,990 1/06/05 $ 20,990
The Company has 210,499 options available for grant under its 1989 and 1993
Incentive Stock Option Plans. During the current fiscal year, no options were
exercised, 333 options were terminated and no new options were granted. All
Options are currently exerciseable.
15. OTHER STOCK OPTIONS
On May 16, 1996, the Company granted options under an Option Agreement
related to a services agreement with an attorney for options on 340,000 shares
at $1.00 per share. The optionee exercised options for all 340,000 shares on
July 2, 1996 for a total of $340,000 in cash.
There were no stock options outstanding at April 30, 1997. Subsequent to
April 30, 1997, various agreements provided for shares of common stock and
common stock options (see Note 16).
16. COMMON STOCK AND CAPITAL TRANSACTIONS
The Company's common stock trades on the OTC Bulletin Board under the symbol
TRPC. The Company's common stock issued and outstanding is as follows:
Total Number Common Paid in
of Shares Stock Capital
-------------- ----------------------------
Issued as of April 30, 1995 2,049,445 $ 307,417 $ 8,060,287
Stock options exercised by
directors, officers and
employees 239,000 35,850 38,838
Stock options exercised by
others 520,560 70,084 375,461
Stock issued to replace
collateral shares surrendered
by CEO to secured prom-
issory note holders 453,836 68,075 204,660
Retire stock tendered by officer
in exercise of stock options (6,666) (1,000) (6,500)
Fractional shares dropped for
1:3 reverse split effected
July 22, 1994 (1,609) (241) 241
----------- ------------ ------------
Issued shares as of April 30, 1996 3,254,566 488,185 8,672,987
Stock options exercised by
others 340,000 51,000 289,000
Stock issued 117,000 14,550 45,122
----------- ------------ ------------
Issued shares as of April 30, 1997 3,711,566 $ 556,735 $ 9,007,109
=========== ============ ============
As of April 30, 1997 the Company has 46,288,434 shares of common stock
reserved for issuance and unissued, and 2,400 shares in its treasury stock
account. As of April 30, 1997 there were 210,499 shares reserved and issuable
under various stock option plans (see Note 14 and 15).
Under the terms of a marketing agreement with a radio marketing company, the
Company agreed to issue 258,000 free trading shares of the Company's common
stock for broadcast services covering the six month term of the agreement. The
Company suspended the agreement and on September 12, 1996, the Company and the
marketer mutually agreed to terminate the agreement. The Company issued 87,000
shares of common stock in full settlement for services rendered and costs,
valued at $35,250, incurred by the marketer in connection with the agreement.
During January and March 1997, 30,000 shares of common stock was issued to
third party unsecured demand promissory note holders as additional interest.
The stock was valued at $27,422.
On September 19, 1997, two Board of Director members who had resigned were
compensated for their years of service with a total of 96,000 shares of the
Company's $0.15 par value common stock.
Subscriptions to Common Stock.
In order to provide for sufficient working capital to complete the RALI
Acquisition, in August, 1997 the Company entered into agreements with three
investment companies for their purchase of up to 4,800,000 restricted shares of
the Company's $0.15 cent par value common stock at a price of ten cents ($0.10)
per share for a total aggregate investment of $480,000 plus an agreement for
payment of certain of the Company's obligations and contingent obligations in
the maximum aggregate amount of approximately $680,000 as of April 30, 1997. At
the time of the agreements the bid price of the Company's $0.15 par value common
stock, as quoted on the OTC Bulletin Board, was thirty-one ($0.31) cents per
share.
17. INCOME TAXES
Deferred income taxes result from temporary differences in the financial
bases and tax bases of assets and liabilities. The type of differences that give
rise to significant portions of deferred income tax liabilities or (assets) and
the related tax effects are as follows:
Fiscal Year Ended April 30,
------------------------------------
1997 1996 1995
Deferred Tax Liabilities:
Cash versus accrual reporting $ - $ 1,700 $ 33,600
Capital lease versus operating
lease reporting - - 341,100
Excess amortization of lease-
hold costs - 176,500 1,591,100
Temporary differences not
currently utilizable 2,100 31,300 30,000
---------- ----------- ------------
Total deferred tax liabilities 2,100 209,500 1,995,800
---------- ----------- ------------
Deferred Tax Assets:
Cash versus accrual reporting (50,100) (116,600) (25,700)
Net operating loss carryforwards (2,491,100) (2,446,400) (3,968,000)
---------- ----------- ------------
Gross deferred tax assets (2,541,200) (2,563,000) (3,993,700)
Deferred tax asset valuation allowance 2,539,100 2,353,500 1,997,900
---------- ----------- ------------
Total deferred tax assets (2,100) (209,500) (1,995,800)
---------- ----------- ------------
Net deferred tax liabilities $ - $ - $ -
========== =========== ============
As of April 30, 1997 the Company and its subsidiaries have regular tax net
operating loss carryforwards, expiring in the years 2007 through 2012, available
to offset future taxable income of $6,862,000. The Company's income tax expense
attributable to continuing operations is comprised of the following significant
components:
Fiscal Year Ended April 30,
-------------------------------------
1997 1996 1995
Deferred tax expense (benefit) $ (140,900)$(1,877,200)$ (3,312,500)
Utilization of (benefit derived
from use of) operating loss
carryforwards ( 44,700) 1,521,600 2,871,600
Change in the amount of
valuation allowance 185,600 355,600 365,900
----------- ---------- -----------
Provision (benefit) for income taxes $ - $ - $ -
=========== =========== ===========
The Company's provision for income taxes differs from the amount of income
tax determined by applying the applicable U.S. Federal statutory income tax rate
to pretax accounting income from continuing operations as a result of the
following differences:
Fiscal Year Ended April 30,
-------------------------------------
1997 1996 1995
U.S. Federal statutory income tax rate $ (725,000) $ (446,000) $ (626,500)
Key man life insurance premiums 2,100 500 2,700
Amortization of cost in excess of
net assets acquired and valuation
write-down 549,200 74,100 109,100
Losses not currently utilizable (12,300) 15,000 71,500
Other 400 800 2,300
Valuation allowance 185,600 355,600 365,900
---------- ---------- ------------
Income tax (benefit) expense at effective $ - $ - $ (75,000)
========== ========== ============
The provision (benefit) for income taxes charged to continuing operations was
as follows:
Fiscal Year Ended April 30,
-------------------------------------
1997 1996 1995
Federal current $ - $ - $ -
Federal deferred - - (75,000)
---------- ---------- ------------
Provision (benefit) for income taxes $ - $ - $ (75,000)
========== ========== ============
18. INDUSTRY SEGMENT DATA REPORTING INFORMATION
The Company's leasing business consists of the acquisition, financing,
ownership, management and brokerage of leases of data processing and other
equipment. The Company's broadcasting business consists of the acquisition,
ownership, management, development and brokerage of communications related
technology including broadcast properties, telecommunications equipment,
communications software and other products.
Financial information for the Company's industry segments is summarized below
for the fiscal years ended April 30, 1997, 1996 and 1995.
1997 Leasing Broadcasting Other Consolidated
- ------------------------------------------- ------------------------------------
Total revenues from
unaffiliated customers $ 827,116 $ 335,000 $ 33,653 $ 1,195,769
Net operating loss (12,645) (175,341) (1,824,649) (1,944,443)
Identifiable assets 221,759 531,487 16,496 769,742
Depreciation and
amortization 4,790 50,971 221500 277,261
Capital expenditures - 24,485 2,643 27,128
1996 Leasing Broadcasting Other Consolidated
- ------------------------------------------- ------------------------------------
Total revenues from
unaffiliated customers $ 4,279,458 $ 506,505 $ 46,751 $ 4,832,714
Net loss (92,996) (245,162) (832,906) (1,171,064)
Identifiable assets 14,966,395 665,040 1,717,658 17,349,093
Depreciation and
amortization 1,277,765 89,751 206,378 1,573,894
Capital expenditures - 1,874 2,524 4,398
1995 Leasing Broadcasting Other (1) Consolidated
- ------------------------------------------- ------------------------------------
Total revenues from
unaffiliated customers $12,551,294 $ 994,236 $ 71,092 $ 13,616,622
Net loss (186,986) (598,359) (892,790) (1,678,135)
Identifiable assets 45,590,760 1,932,409 1,775,920 49,299,089
Depreciation and
amortization 7,350,100 75,922 314,039 7,740,061
Capital expenditures - 18,686 2,623 21,309
1.) In 1995, Other includes costs associated with the unsuccessful and pending
broadcast property acquisitions.
The following table reconciles consolidated operating loss reported hereof to
operating loss reported in the statement of consolidated operations:
Fiscal Year Ended April 30,
--------------------------------------
1997 1996 1995
------------ ------------ ------------
Consolidated net loss $(1,944,443) $(1,171,064) $(1,678,135)
Interest expense not
included in non leasing
operating loss (187,757) (140,530) (89,481)
----------- ----------- -----------
Net loss reported in the
statement of consolidated
operations $(2,132,200) $(1,311,594) $(1,767,616)
=========== =========== ===========
19. NET INCOME (LOSS) PER SHARE
For the fiscal year ended April 30, 1997 primary earnings per share amounts
are based on the weighted average number of common shares outstanding of
3,627,241shares. No common stock equivalents are included herein due to their
antidilutive nature. During the current year the Company issued 340,000 shares
upon exercise of stock options granted under consulting agreements (see Note
16), which are included in the weighted average number of common shares
outstanding. If these shares had been issued at the beginning of the current
fiscal year, primary and fully diluted loss per share would have been ($0.58).
Share and per share amounts have not been adjusted for the 26,400,000 shares nor
for the 1 for 6 reverse stock split approved by the shareholders on September
19, 1997. (See Note 1).
For the fiscal year ended April 30, 1996 primary earnings per share amounts
are based on the weighted average number of common shares outstanding of
2,633,712 shares. No common stock equivalents are included herein due to their
antidilutive nature. During the current year the Company issued 239,000 shares
pursuant to the exercise of employee stock options, 520,560 shares upon exercise
of stock options granted under consulting agreements and 453,836 shares issued
to replace 2 for 1 collateral shares delivered by the Chief Executive Officer to
satisfy principal and interest on secured promissory notes, which are included
in the weighted average number of common shares outstanding. If these shares had
been issued at the beginning of the beginning of the current fiscal year,
primary and fully diluted loss per share would have been ($0.40).
For fiscal year ended April 30, 1995 primary earnings per share amounts are
computed based on the weighted average number of common shares outstanding of
1,876,602 shares. No common stock equivalents are included herein due to their
antidilutive nature. During the year the Company issued 20,000 shares pursuant
to the exercise of employee stock options and 167,143 shares upon exercise of
stock options granted under consulting agreements, which are included in the
weighted average number of common shares outstanding. If these shares had been
issued at the beginning of the current fiscal year primary and fully diluted
loss per share would have been ($0.86).
20. INVESTMENT IN UNCONSOLIDATED AFFILIATES AND PARTNERSHIPS
During the current fiscal year the Company was a party to two consulting
agreements from which a portion of its compensation was received in shares of
the common stock of the client company. In the first fiscal quarter the Company
recognized $335,000 and $465,000 of income with respect to these two
transactions based on the estimated fair market value of the shares received.
During the fourth fiscal quarter, one of the companies ceased operations and the
business prospects of the other have declined. In addition, as part of the RALI
Acquisition the Company agreed to dispose of all of its obligations to and
investment in these companies. Accordingly, in the fourth quarter of fiscal
1997, the Company wrote off all of the previously recorded income in the fourth
quarter of the current fiscal year.
During the prior fiscal year the Company was a party to one acquisition
transaction with TradeWinds Holdings, Inc. ("THI") in which the company
organized and financed an acquisition subsidiary, TAI, which acquired 100% of
the capital stock of Tradewinds Airlines, Inc. The Company retained warrants and
shares of the common stock of TAI (the "TAI Securities"). The Company recorded
its investment in the TAI Securities as an investment in an uncosolidated
affiliate of approximately $500, representing the initial capitalization costs.
In the prior fiscal year the Company recognized income of $40,000 from cash
received from THI for administrative services.
At April 30, 1997, the Company determined that its investment in real estate
limited partnerships, totaling $42,527, had no future benefit and was expensed
in the fourth quarter.
21. SUPPLEMENTAL CASH FLOW INFORMATION
Reconciliation of net loss to net cash used for operating activities is as
follows:
Fiscal Year Ended April 30,
-------------------------------------
1997 1996 1995
Net loss $(2,132,200) $(1,311,594) $(1,311,594)
------------ ------------------------
Adjustment to reconcile net loss to net
cash used for operating activities:
Expenses and revenues not affecting
operating cash flows:
Loss on residual valuation 1,967 74,621 -
Depreciation and amortization of
equipment and intangible assets 277,261 1,573,894 7,647,576
Impairment loss on intangible assets:
Cost in excess of net asset
acquired 1,397,180 - 92,483
Investment in real estate
partnerships 42,527 - -
Deferred costs expensed and
amortized - - 137,237
Loss on sale of land, office
furniture and equipment 9,971 1,600 20,799
Gain on sale of investment in
operating leases - - (11,853)
Equipment acquired by barter
transactions (14,017) (1,874) (3,423)
Advisory services paid in stock - 5,000 157,500
Interest paid in stock - third party - 60,532 -
Interest paid in stock - related party - 24,848 -
Employee stock options exercise
applied to legal fees - 4,687 -
Employee stock options exercise
applied to accrued officer
compensation - 62,500 -
Rental income - (1,314,914) (7,250,783)
Leasing interest income (825,937) (2,961,212) (5,285,128)
Leasing interest expense 825,937 3,008,267 5,207,731
Changes in assets and liabilities:
Accrued interest income (3,562) (2,562) (3,006)
Accrued interest expense 96,240 12,383 63,712
Note, accounts and commissions
receivable 27,499 22,504 317,124
Other assets 29,372 2,187 26,485
Note and accounts payable, and
accrued expenses (122,887) 300,024 49,736
Income taxes - - (75,000)
Other 400 1,056 310
----------- ----------- ------------
Total Adjustments 1,741,951 873,541 1,091,500
----------- ----------- ------------
Net Cash Used for Operating Activities $ (390,249) $ (438,053)$ (676,116)
=========== =========== ============
Non Cash Investing and Financing Activities. The Company acquires leases of
equipment and lease receivables partially by assuming existing financing. Also,
the Company may sell or dispose of such assets with a commensurate transfer of
any related financing to the transferee. The net increase in assets and
liabilities associated with the acquisition and disposition of such equipment
and equipment leases and the related liabilities for the fiscal years ended
April 30, 1997, 1996 and 1995 are as follows:
Fiscal Year Ended April 30,
-------------------------------------
1997 1996 1995
Assets:
Leased property under capital
lease (net of accumulated
amortization) $(95,770,216) $(1,952,718) $(17,375,522)
Net investment in operating
leases - - (412,132)
Net investment in direct
financing leases - - (14,759,430)
------------ ----------- ------------
Total Assets $ - $(1,952,718) $(32,547,084)
============ =========== ============
Liabilities:
Notes and accrued interest
payable $ - $ - $(14,759,430)
Discounted lease rentals and
accrued interest payable (95,770,216) (1,952,718) (17,787,654)
Capital lease obligation and
accrued interest payable - - -
------------ ----------- ------------
Total Liabilities $ - $(1,952,718)$(32,547,084)
============ =========== ============
During the fiscal year ended April 30, 1997 the Company received (1) $14,017
of fixed assets in barter transactions and (2) issued 117,000 shares for
services of $35,250 and interest charges of $27,422.
During the fiscal year ended April 30, 1996 the Company received (1) $1,874
of fixed assets in barter transactions, (2) issued 453,836 shares for a
reduction of $272,736 in secured promissory notes and accrued interest, (3)
issued 239,000 shares under employee stock option plans for $62,500 reduction in
accrued compensation, legal fees of $4,687 and in exchange for 6,666 shares of
common stock which were retired, (4) issued 10,000 in other stock options offset
against trade payables of $5,000, and (5) adjustment in the carrying value of
Lease Property under Capital Lease by $1,952,718 and Discounted Lease Rentals
and Accrued Interest Payable by an equivalent amount.
During the fiscal year ended April 30, 1995 the Company (1) recorded
broadcasting rights of $1,367,604 and related broadcasting rights payable of an
equivalent amount and (2) received $3,423 of fixed assets in barter
transactions. During the fiscal year the Company disposed of assets and
liabilities, which included Net Investment in Direct Financing Leases of
$14,759,430 and Notes and Accrued Interest Payable of $14,759,430. Also during
this same period the Company disposed of Net Investment in Operating Leases of
$412,132 (net of accumulated depreciation of $5,106,651) and Discounted Lease
Rentals and Accrued Interest Payable of a commensurate amount.
In fiscal years 1997, 1996 and 1995, leasehold tenancy positions terminated
which reduced the gross value of Lease Property under Capital Lease by
$95,770,216, $1,952,718 and $5,293,579, respectively, and accumulated
amortization by an equivalent amount in each of those periods.
22. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized selected quarterly financial data for the fiscal years ended April
30, 1997 and 1996 is set forth below:
Fiscal Year Ended April 30, 1997
-----------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
---------- ----------- ---------- -----------
Revenues $ (608,926) $ 228,370 $ 344,952 $1,231,373
Expenses 1,401,940 484,225 665,722 776,082
----------- ---------- ---------- ----------
Income (Loss) Before Income Taxes (2,010,866) (255,855) (320,770) 455,291
Income Taxes Expense (Benefit) - - - -
----------- ---------- ---------- ----------
Net Income (Loss) $(2,010,866) $(255,855) $(320,770) $ 455,291
=========== ========= ========= ==========
Primary Net Income (Loss)
Per Share $ (0.52) $ (0.07) $ (0.09) $ 0.13
=========== ========= ========= =========
Fully Diluted Net Income
(Loss) Per Share $ (0.52) $ (0.07) $ (0.09) $ 0.13
=========== ========= ========= =========
================================================================================
Fiscal Year Ended April 30, 1996
-----------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
---------- ----------- ---------- -----------
Revenues $ 464,355 $ 922,853 $1,447,203 $ 1,998,303
Expenses 1,106,125 1,124,029 1,692,104 2,222,050
---------- ---------- ---------- -----------
Income (Loss) Before Income Taxes (641,770) (201,176) (244,901) (223,747)
Income Taxes Expense (Benefit) - - - -
---------- ---------- ---------- -----------
Net Income (Loss) $(641,770) $(201,176) $(244,901) $ (223,747)
========= ========= ========= ===========
Primary Net Income (Loss)
Per Share $ (0.20) $ (0.07) $ (0.10) $ (0.10)
========= ========= ========= ===========
Fully Diluted Net Income
(Loss) Per Share $ (0.20) $ (0.07) $ (0.10) $ (0.10)
========= ========= ========= ===========
================================================================================
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Company
The information required by this Item is incorporated by reference to the
Company's definitive Information Statement pursuant to Regulation 14C or Proxy
Statement pursuant to Regulation 14A, to be filed within 120 days after the
Company's fiscal year end.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to the
Company's definitive Information Statement pursuant to Regulation 14C or Proxy
Statement pursuant to Regulation 14A, to be filed within 120 days after the
Company's fiscal year end.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to the
Company's definitive Information Statement pursuant to Regulation 14C or Proxy
Statement pursuant to Regulation 14A, to be filed within 120 days after the
Company's fiscal year end.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to the
Company's definitive Information Statement pursuant to Regulation 14C or Proxy
Statement pursuant to Regulation 14A, to be filed within 120 days after the
Company's fiscal year end.
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
Form 10-K
PageReference
(a)(1) Index to Consolidated Financial Statements:
Report of Independent Certified Public Accountants 12
Consolidated Balance Sheets as of April 30, 1997 and 1996 13
Statements of Consolidated Operations for the years ended
April 30, 1997, 1996 and 1995 14
Statements of Consolidated Stockholders' Equity (Deficit)
for the years ended April 30, 1997, 1996 and 1995 15
Statements of Consolidated Cash Flows for the years ended
April 30, 1997, 1996 and 1995 16
Notes to Consolidated FinancialStatements 18-36
(a)(2) Index to Financial Statement Schedules:
SCHEDULE II Valuation and qualifying accounts 39
All other schedules have been omitted because the required information is
included in the consolidated financial statements or notes thereto, or is not
required to be filed.
The Company hereby undertakes to furnish to the Commission any instrument
with respect to long-term debt of the Company which does not exceed ten
percent of the total assets of the Company and its subsidiaries and business
trusts.
(a)(3) Exhibits: See index filed as part of Form 10-K on page 47.
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during the fiscal quarter
ended April 30, 1997:
(1) None
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
For The Years Ended April 30, 1997, 1996 and 1995
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------------------------------------------------------------
Additions
--------------------
Balance at Balance
Valuation and Beginning Costs and To Other Deductions at End of
Qualifying Accounts of Period Expenses Accounts (A) Period
- --------------------------------------------------------------------------------
For the year ended:
April 30, 1997
Accounts receivable $ 5,800 $ 12,226 $ - $( 15,526) $ 2,500
Equipment residuals - 1,967 - 1,967) -
Valuation allowance
for deferred tax
assets 2,353,500 185,600 - - 2,539,100
---------- ---------- ---------- --------- -----------
$2,359,300 $ 199,793 $ - $ (17,493) $ 2,541,600
========== ========== ========== ========= ===========
April 30, 1996
Accounts receivable $ 10,789 $ 13,337 $ - $ (18,327) $ 5,800
Equipment residuals - 74,621 - (74,621) -
Valuation allowance
for deferred tax
assets 1,997,900 355,600 - - 2,353,500
---------- ---------- ---------- --------- -----------
$2,008,689 $ 443,558 $ - $ (92,948) $ 2,359,300
========== ========== ========== ========== ===========
April 30, 1995
Accounts receivable $ 2,730 $ 22,496 $ - $ (14,437) $ 10,789
Equipment residuals - - - - -
Valuation allowance
for deferred tax
assets 1,632,000 365,900 - - 1,997,900
---------- ---------- ---------- --------- -----------
$1,634,730 $ 388,396 $ - $ (14,437) $ 2,008,689
========== ========== ========== ========= ===========
(A) All amounts were written off.
Exhibit 11(A). Primary Earnings Per Share
The computation of primary earnings per share is as follows:
Fiscal Year Ended April 30,
--------------------------------------
1997 1996 1995
---- ---- ----
Weighted average number of common
shares outstanding
3,627,241 2,633,712 1,876,602
Shares assumed to be issued upon
exercising of stock purchase
rights in excessof 20% repurchase
limitation - - -
--------- --------- ----------
Average number of common and common
equivalent shares 3,627,241 2,633,712 1,876,602
========= ========= =========
Net loss $(2,132,200) $(1,311,594) $(1,767,616)
Increase in interest income
(net of tax)from assumed investment
in certificates of deposit and
decrease in interest expense (net
of tax) from assumed of short-term
debt with assumed stock purchase
rights proceeds in excess of
20% repurchase limitation - - -
------------ ----------- -----------
Adjusted net loss $(2,132,200) $(1,311,594) $(1,767,616)
=========== =========== ===========
Net loss per common share $ (0.59) $ (0.50) $ (0.94)
=========== =========== ===========
Exhibit 11(B). Fully Diluted Earnings Per Share
The computation of fully diluted earnings per share is as follows:
Fiscal Year Ended April 30,
--------------------------------------
1997 1996 1995
---- ---- ----
Weighted average number of common
shares outstanding
3,627,241 2,633,712 1,876,602
Shares assumed to be issued upon
exercising of stock purchase
rights in excessof 20% repurchase
limitation - - -
--------- --------- ----------
Average number of common and common
equivalent shares 3,627,241 2,633,712 1,876,602
========= ========= =========
Net loss $(2,132,200) $(1,311,594) $(1,767,616)
Increase in interest income
(net of tax)from assumed investment
in certificates of deposit and
decrease in interest expense (net
of tax) from assumed of short-term
debt with assumed stock purchase
rights proceeds in excess of
20% repurchase limitation - - -
------------ ----------- -----------
Adjusted net loss $(2,132,200) $(1,311,594) $(1,767,616)
=========== =========== ===========
Net loss per common share $ (0.59) $ (0.50) $ (0.94)
=========== =========== ===========
Notes regarding the calculation of primary and fully diluted earnings per share:
For the fiscal year ended April 30, 1997 no common stock equivalents are
included herein due to their antidilutive nature. During fiscal year ended April
30, 1997 primary earnings per share amounts are based on the weighted average
number of common shares outstanding of 3,627,241 shares. No common stock
equivalents are included herein due to their antidilutive nature. During the
current year the Company issued 340,000 shares upon exercise of stock options
granted under consulting agreements. which are included in the weighted average
number of common shares outstanding. If these shares had been issued at the
beginning of the beginning of the current fiscal year, primary and fully diluted
loss per share would have been ($0.58).
For the fiscal year ended April 30, 1996 no common stock equivalents are
included herein due to their antidilutive nature. During the current year the
Company issued 1,213,396 shares, retired 6,666 shares tendered in the exercise
of stock options by an officer and reduced by 1,609 shares issued and
outstanding shares for fractional shares dropped in connection with the 1 for 3
reverse stock split of July 22, 1994, all of which are included in the weighted
average number of common shares outstanding. The aforementioned shares issued
include 239,000 shares from the exercise of employee stock options and 520,560
shares from exercise of options pursuant to consulting agreements. In addition,
the Company issued 453,836 shares of its common stock, pursuant to a collateral
agreement, to replace common stock on a 2 for 1 basis, owned by its CEO which
had been foreclosed upon by secured promissory note holders. If this share
activity had occurred at the beginning of the current fiscal year primary and
fully diluted earnings per share would have been ($0.40).
For the fiscal year ended April 30, 1995 no common stock equivalents are
included herein due to their antidilutive nature. During fiscal 1995 the Company
issued 187,143 shares pursuant to the exercise of stock options which are
included in the weighted average number of common shares outstanding. The
aforementioned shares issued include 20,000 shares related to the exercise of
employee stock options and 167,143 shares from exercise of options pursuant to
consulting agreements. If these shares had been issued at the beginning of the
current fiscal year primary and fully diluted earnings per share would have been
($0.86).
Additional primary and fully diluted earnings per share computations pursuant
to Regulation S-K, CFR ss.229.601(b)(11): The following computations are
submitted for informational purposes only pursuant to Regulation S-K, although
they are contrary to APB 15.
Exhibit 11(C). Primary Earnings Per Share (Additional)
The computation of primary earnings per share is as follows:
Fiscal Year Ended April 30,
--------------------------------------
1997 1996 1995
---- ---- ----
Weighted average number of common
shares outstanding
3,627,241 2,633,712 1,876,602
Shares assumed to be issued upon
exercising of stock purchase
rights in excessof 20% repurchase
limitation 216,914 201,873 76,539
--------- --------- ----------
Average number of common and common
equivalent shares 3,844,155 2,835,585 1,953,141
========= ========= =========
Net loss $(2,132,200) $(1,311,594) $(1,767,616)
Increase in interest income
(net of tax)from assumed investment
in certificates of deposit and
decrease in interest expense (net
of tax) from assumed of short-term
debt with assumed stock purchase
rights proceeds in excess of
20% repurchase limitation - - -
------------ ----------- -----------
Adjusted net loss $(2,132,200) $(1,311,594) $(1,767,616)
=========== =========== ===========
Net loss per common share $ (0.55) $ (0.46) $ (0.91)
=========== =========== ===========
Exhibit 11(D). Fully Diluted Earnings Per Share (Additional)
The computation of fully diluted earnings per share is as follows:
Fiscal Year Ended April 30,
--------------------------------------
1997 1996 1995
---- ---- ----
Weighted average number of common
shares outstanding
3,627,241 2,633,712 1,876,602
Shares assumed to be issued upon
exercising of stock purchase
rights in excessof 20% repurchase
limitation 288,298 232,651 90,615
--------- --------- ----------
Average number of common and common
equivalent shares 3,915,539 2,866,363 1,967,217
========= ========= =========
Net loss $(2,132,200) $(1,311,594) $(1,767,616)
Increase in interest income
(net of tax)from assumed investment
in certificates of deposit and
decrease in interest expense (net
of tax) from assumed of short-term
debt with assumed stock purchase
rights proceeds in excess of
20% repurchase limitation - - -
------------ ----------- -----------
Adjusted net loss $(2,132,200) $(1,311,594) $(1,767,616)
=========== =========== ===========
Net loss per common share $ (0.54) $ (0.46) $ (0.90)
=========== =========== ===========
Notes regarding the additional calculation of primary and fully diluted earnings
per share pursuant to Regulation S-K, CFR ss.229.601(b)(11):
Primary earnings per share for each of the fiscal years ended April 30, 1997,
1996 and 1995 includes the exercise of stock purchase rights which is assumed at
the beginning of the period or at the date of grant, if granted during the
period. Pursuant to the treasury stock method or modified treasury stock method,
as appropriate, shares assumed to be issued upon exercising of stock purchase
rights represents the number shares issued upon assumed exercise less shares
repurchased at the average market price. For each of the fiscal years ended
April 30, 1997, 1996 and 1995, fully diluted earnings per share amounts are
based on the increased number of shares that would be issued assuming exercise
of stock purchase rights. Fully diluted earnings per share is computed under the
aforementioned method as primary earnings per share, except the repurchase of
shares uses the higher of the average market price during the period or the
ending market price, unless shares were actually issued pursuant to exercises,
then the average market price on the day of exercise is used.
During the current year the Company issued 340,000 shares upon exercise of
stock options granted under consulting agreements. which are included in the
weighted average number of common shares outstanding. If these shares had been
issued at the beginning of the beginning of the current fiscal year, primary and
fully diluted loss per share would have been ($0.58).
During the fiscal year ended April 30, 1996 the Company issued 1,213,396
shares, retired 6,666 shares tendered in the exercise of stock options by an
officer and reduced by 1,609 shares issued and outstanding shares for fractional
shares dropped in connection with the 1 for 3 reverse stock split of July 22,
1994, all of which are included in the weighted average number of common shares
outstanding. The aforementioned shares issued include 239,000 shares related to
the exercise of employee stock options and 520,560 shares from exercise of
options pursuant to consulting agreements. In addition, the Company issued
453,836 of its common shares on a 2 for 1 basis to replace common stock
surrendered by its CEO, pursuant to a collateral agreement, to secured
promissory note holders in satisfaction of principal and accrued interest
totalling $272,736. If these shares had been issued at the beginning of the
current fiscal year primary and fully diluted earnings per share would have been
($0.40).
During the fiscal year ended April 30, 1995 the Company issued 187,143
shares pursuant to the exercise of stock options which are included in the
weighted average number of common shares outstanding. The aforementioned shares
issued include 20,000 shares related to the exercise of employee stock options
and 167,143 shares from exercise of options pursuant to consulting agreements.
If these shares had been issued at the beginning of the current fiscal year
primary and fully diluted earnings per share would have been ($0.86).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TROPIC COMMUNICATIONS, INC.
/s/ JOHN E. RAYL
DATE: October 2, 1997 By:
--------------------------------------
John E. Rayl
Treasurer
(Pincipal financial officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
/s/ ANGEL MUNOZ
____________________________________ Chairman, Chief October 2, 1997
Executive Officer,
Angel Munoz President and Director
/s/ RONALD VIMO
____________________________________ Vice President October 2, 1997
and Director
/s/ SCOTT VELLANUEVA
____________________________________ Secretary and Director October 2, 1997
Scott Vellanueva
/s/ JOHN E. RAYL
____________________________________ Treasurer and Director October 2, 1997
John E. Rayl (principal financial officer)
INDEX TO EXHIBITS
Exhibit 2.1 Authorization of Plan of Distribution filed as Exhibit 1 to Form
10, Commission File No. 014361 filed on March 28, 1986 is
incorporated herein by reference.
Exhibit 3.1 Certificate of Incorporation and Bylaws filed as Exhibit 2 to
Form 10, Commission File No. 014361 filed on March 28, 1986 is
incorporated herein by reference.
Exhibit 3.2 Certificate of Amendment of Partech Holdings Corporation dated
March 10, 1992, incorporated herein by reference to Exhibit A, to
Form 8-K, dated March 13, 1992, Commission File No. 014361.
Exhibit 3.3 Proposed Amendment to Partech Holdings Corporation Articles of
Incorporation, Proxy Item Number 2, incorporated herein by reference
to Exhibit 3.3, to Schedule 14A filed November 9, 1993, Commission
file No. 014361.
Exhibit 3.4 Restated Certificate of Incorporation of Partech Holdings
Corporation dated January 25, 1994, incorporated herein by reference
to Exhibit 3.3, to Form 10-Q for the fiscal quarter ended January
31, 1994, filed March 17, 1994, Commission file No. 014361,
Commission file No. 014361.
Exhibit 3.5 Proposed Amendment to Partech Holdings Corporation Certificate
of Incorporation, incorporated herein by reference to Exhibit 3.5,
to Schedule 14A filed May 20, 1994, Commission file No. 014361.
Exhibit 3.6 Restated Certificate of Incorporation of Tropic Communications,
Inc. dated July 10, 1995 incorporated herein by reference to
Exhibit 3.6 to Form 10-K filed on November 3, 1995, Commission file
No. 014361.
Exhibit 3.7 Certificate of Amendment of Partech Holdings Corporation (n.k.a.
Tropic Communications, Inc. dated July 10, 1995 incorporated herein
by reference to Exhibit 3.7 to Form S-8, filed September 8, 1995,
Commission file No. 014361.
Exhibit 4.1 Instruments Defining the Rights of Security Holders filed as
Exhibit 3 to Form 10, Commission File No. 014361 filed on March 28,
1986 is incorporated herein by reference.
Exhibit 4.2 Form of Common Share Certificate of Partech Holdings
Corporation, incorporated herein by reference to Exhibit B, to Form
8-K, dated March 13, 1992, Commission File No. 014361.
Exhibit 4.3 Form of Notice of Redemption for Redeemable Class A Warrants of
Partech Holdings Corporation incorporated herein by reference to
Exhibit A, to Form 8-K, dated April 14, 1992, Commission File No.
014361.
Exhibit 4.4 Prospectus Supplement of Partech Holdings Corporation dated
March 13, 1992, incorporated herein by reference to Exhibit A, to
Form 8-K, dated March 13, 1992, Commission File No. 014361.
Exhibit 4.5 Prospectus Supplement of Partech Holdings Corporation dated
February 1, 1993, incorporated herein by reference to Exhibit 4.5,
to Form 8-K, filed February 2, 1993, Commission File No. 014361.
Exhibit 4.6 Prospectus Supplement of Partech Holdings Corporation dated
April 27, 1993, incorporated herein by reference to Exhibit 4.6, to
Form 8-K, filed April 28, 1993, Commission File No. 014361.
Exhibit 4.7 Prospectus Supplement is incorporated herein by reference to
Exhibit 4.7, to Form 8-K, filed June 4, 1993, Commission file No.
014361.
Exhibit 4.8 Prospectus Supplement, filed herewith as Exhibit 4.7 is
incorporated herein by reference to Exhibit 4.8, to Form 8-K, filed
July 2, 1993, Commission file No. 014361.
Exhibit 4.9 Form of Subscription Agreement between Partech Holdings
Corporation and the Investor is incorporated herein by reference to
Exhibit 4.9 to Form 10-K, filed July 19, 1994, Commission file No.
014361.
Exhibit 4.10 Form of 6% Secured Note of Partech Holdings Corporation issued
to the Investor is incorporated herein by reference to Exhibit 4.10
to Form 10-K, filed July 19, 1994, Commission file No.
014361.
Exhibit 4.11 Form of Supplemental Warrant and Additional Warrant between
Partech Holdings Corporation and the Investor, incorporated herein
by reference to Exhibit 4.11 to Form 10-K, filed July 19, 1994,
Commission file No. 014361.
Exhibit 4.12 Form of Unit Warrant between Partech Holdings Corporation and
the Investor is incorporated herein by reference to Exhibit 4.12 to
Form 10-K, filed July 19, 1994, Commission file No. 014361.
Exhibit 4.13 Form of Common Share Certificate of Tropic Communications,
Inc. is incorporated herein by refererence to Exhibit 4.13 to Form
10-K filed November 3, 1995, Commission file No. 014361.
Exhibit 5.4 Opinion of Counsel Regarding the $600,000 exempt Convertible
Securities offering is incorporated herein by reference to Exhibit
5.4, to Form 10-K, filed July 19, 1994, Commission file No. 014361.
Exhibit 10.1 Employment Agreement with John E. Rayl filed as Exhibit 5 to
Form 10, Commission File No. 014361 filed on March 28, 1986 is
incorporated herein by reference.
Exhibit 10.4 Form of Agreement of Trust of the Company's Ohio business
trusts. Incorporated herein by reference to Exhibit 10.4 to Annual
Report on Form 10-K for the year ended April 30, 1987, Commission
File No. 014361.
Exhibit 10.5 Form of Purchase Assignment and Assumption Agreement of the
Company's Ohio business trusts. Incorporated herein by reference to
Exhibit 10.5 to Annual Report on Form 10-K for the year ended April
30, 1987, Commission File No. 014361.
Exhibit 10.6 Form of Description of the Property and the Property's Rights,
Obligations, and Equipment of the Company's Ohio business trusts.
Incorporated herein by reference to Exhibit 10.6 to Annual Report on
Form 10-K for the year ended April 30, 1987, Commission File No.
014361.
Exhibit 10.7 Form of Remarketing and Servicing Agreement of the Company's
Ohio business trusts. Incorporated herein by reference to Exhibit
10.7 to Annual Report on Form 10-K for the year ended April 30,
1987, Commission File No. 014361.
Exhibit 10.26 Partech Holdings Corporation 1989 Incentive Stock Options Plan
and 1989 Stock Option and Stock Appreciation Rights Plan
incorporated herein by reference to an Exhibit filed therewith
Information Statement filed on Form 14C for the year ended April 30,
1989, Commission File No. 014361.
Exhibit 10.35 Lease dated as of March 23, 1992 between LCC Asset Management
Corporation and Ohio State Life Insurance Company, filed herewith as
Exhibit 10.35. Incorporated herein by reference to Exhibit 10.35 to
Annual Report on Form 10-K for the Fiscal Year Ended April 30, 1992,
Commission File No. 014361.
Exhibit 10.37 Letter to Continental Stock Transfer and Trust Company, dated
February 1, 1993, authorizing issuance of Redeemable B Warrants at
Temporary Exercise Price during Temporary Exercise Period,
incorporated herein by reference to Exhibit 10.40, to Form 8-K,
dated February 1, 1993, Commission File No. 014361.
Exhibit 10.38 Letter to Continental Stock Transfer and Trust Company, dated
April 27, 1993, authorizing issuance of Redeemable B Warrants at
Temporary Exercise Price during Temporary Exercise Period,
incorporated herein by reference to Exhibit 10.41, to Form 8-K,
filed April 28, 1993, Commission File No. 014361.
Exhibit 10.41 Loan Agreement between Partech Communications Group, Inc. and
Funder's Trust 1992-A, dated March 9, 1993, incorporated herein by
reference to Exhibit 10.41, to Form 8-K, file March 17, 1993,
Commission File No. 014361.
Exhibit 10.42 Purchase Agreement between Jennings Communications Corporation
and PCG of the Golden Strand, Inc., for the purchase of WDZD-FM,
dated September 17, 1992, incorporated herein by reference to
Exhibit 10.42, to Form 8-K, file March 17, 1993, Commission File No.
014361.
Exhibit 10.43 Bill of Sale between Jennings Communications Corporation and
PCG of the Golden Strand, Inc., for the purchase of WDZD-FM, dated
March 10, 1993, incorporated herein by reference to Exhibit 10.43,
to Form 8-K, file March 17, 1993, Commission File No. 014361.
Exhibit 10.44 Letter to Continental Stock Transfer and Trust Company, dated
June 3, 1993, authorizing issuance of Redeemable B Warrants at
Temporary Exercise Price during Temporary Exercise Period
incorporated herein by reference to Exhibit 10.44, to Form 8-K,
filed June 4, 1993, Commission file No. 014361.
Exhibit 10.45 Purchase Agreement between Webster Broadcasting, Inc. and PCG
of Tallahassee, Inc., for the purchase of WMFL-AM and WJPH-FM,
dated May 12, 1993, incorporated herein by reference to Exhibit
10.45, to Form 8-K, filed June 4, 1993, Commission file No. 014361.
Exhibit 10.46 Guarantee by Partech Holdings Corporation of Purchase
Agreement between Webster Broadcasting, Inc. and PCG of Tallahassee,
Inc., for the purchase of WMFL-AM and WJPH-FM, dated May 12, 1993,
incorporated herein by reference to Exhibit 10.46, to Form 8-K,
filed June 4, 1993, Commission file No. 014361.
Exhibit 10.47 Local Programming and Marketing Agreement between Webster
Broadcasting, Inc. and PCG of Tallahassee, Inc., to broadcast from
WMFL-AM and WJPH-FM, dated May 12, 1993, incorporated herein by
reference to Exhibit 10.47, to Form 8-K, filed June 4, 1993,
Commission file No. 014361.
Exhibit 10.48 1989 Stock Option and Stock Appreciation Rights Plan Agreement
between Partech Holdings Corporation and John E. Rayl, dated July
15, 1993, incorporated herein by reference to Exhibit 10.48, to Form
S-8, filed August 9, 1993, Commission file No.
014361.
Exhibit 10.50 1989 Stock Option and Stock Appreciation Rights Plan Agreement
between Partech Holdings Corporation and Mark S. Manafo, dated July
15, 1993, incorporated herein by reference to Exhibit 10.50, to Form
S-8, filed August 9, 1993, Commission file No.
014361.
Exhibit 10.51 1989 Incentive Stock Option Plan Agreement between Partech
Holdings Corporation and Mark S. Manafo, dated July 15, 1993,
incorporated herein by reference to Exhibit 10.51, to Form S-8,
filed August 9, 1993, Commission file No. 014361.
Exhibit 10.52 1989 Incentive Stock Option Plan Agreement between Partech
Holdings Corporation and Thomas E. Reynolds, dated July 15, 1993,
incorporated herein by reference to Exhibit 10.52, to Form S-8,
filed August 9, 1993, Commission file No. 014361.
Exhibit 10.53 1989 Incentive Stock Option Plan Agreement between Partech
Holdings Corporation and Jerald K. Rayl, dated July 15, 1993,
incorporated herein by reference to Exhibit 10.53, to Form S-8,
filed August 9, 1993, Commission file No. 014361.
Exhibit 10.54 1989 Incentive Stock Option Plan Agreement between Partech
Holdings Corporation and Paul R. Weinberger, dated July 15, 1993,
incorporated herein by reference to Exhibit 10.54, to Form S-8,
filed August 9, 1993, Commission file No. 014361.
Exhibit 10.55 Consulting Agreement between Partech Holdings Corporation and
Birchwood Capital Advisors Group, Inc. dated February 1, 1994,
incorporated herein by reference to Exhibit 10.51, to Form S-8,
filed March 21, 1994, Commission file No. 014361.
Exhibit 10.56 Agreement to Grant Options between Partech Holdings
Corporation and M.S. Farrell & Company, Inc. dated April 6, 1994,
incorporated herein by reference to Exhibit 10.52, to Form S-8,
filed April 8, 1994, Commission file No. 014361.
Exhibit 10.57 Consulting Agreement between Partech Holdings Corporation and
M.S. Farrell & Company, Inc. dated November 13, 1992, incorporated
herein by reference to Exhibit 10.53, to Form S-8, filed April 8,
1994, Commission file No. 014361.
Exhibit 10.58 Letter to Continental Stock Transfer and Trust Company, dated
June 3, 1993, authorizing issuance of Redeemable B Warrants at
Temporary Exercise Price during Temporary Exercise Period,
incorporated herein by reference to Exhibit 10.49, to Form 8-K,
filed July 2, 1993, Commission file No. 014361.
Exhibit 10.59 1993 Long-Term Incentive Plan, Proxy Item Number 3,
incorporated herein by reference to Exhibit 10.50, to Schedule 14A,
Preliminary Proxy Statement, filed November 9, 1993, Commission
file No. 014361.
Exhibit 10.60 Amendment to Employment Agreement between Partech Holdings
Corporations and John E. Rayl, dated July 15, 1993, incorporated
herein by reference to Exhibit 10.60, to Schedule 14A filed May 20,
1994, Commission file No. 014361.
Exhibit 10.61 Amendment to Employment Agreement between John E. Rayl and
Partech Holdings Corporation, Partech Communications Group, Inc.
and Leeward Capital Corporation, dated May 1, 1994, filed herewith
as Exhibit 10.61.
Exhibit 10.62 Agreement between Dwyer & Associates, Inc. and Partech
Holdings Corporation, dated May 10, 1994, with Exhibit A, Option
Agreement and sub Exhibit A, Certificate for Common Stock Purchase
Options and sub Exhibit B, Form of Election to Purchase,
incorporated herein by reference to Exhibit 10.62, to Form 10-K,
filed July 19, 1994, Commission file No. 014361.
Exhibit 10.63 1989 Incentive Stock Option Plan Agreement between Partech
Holdings Corporation and James B. Dwyer, III, dated May 18, 1994,
incorporated herein by reference to Exhibit 10.63 to Form 10-K,
filed July 19, 1994, Commission file No. 014361.
Exhibit 10.64 Form of Time Brokerage Agreement between Lee Mitchell and
Tropic of St. Simons, Inc., incorporated herein by reference to
Exhibit 10.64 to Form 10-K, filed July 19, 1994, Commission file No.
014361.
Exhibit 10.65 Form of Stock Purchase Agreement between PCG of the Florida
Keys, Inc. and Richard Silva, incorporated herein by reference to
Exhibit 10.65 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.66 Form of Security Pledge and Hypothecation Agreement between
PCG of the Florida Keys, Inc. and Richard Silva, incorporated
herein by reference to Exhibit 10.66 to Form 10-K, filed July 19,
1994, Commission file No. 014361.
Exhibit 10.67 Form of Put Option Agreement between PCG of the Florida Keys,
Inc. and Richard Silva, incorporated herein by reference to
Exhibit 10.67 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.68 Form of Purchase Option Agreement between Richard Silva and
PCG of the Florida Keys, Inc. incorporated herein by reference to
Exhibit 10.68 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.69 Form of Security Agreement between PCG of the Golden Strand,
Inc. and Media Group, Inc., incorporated herein by reference to
Exhibit 10.69 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.70 Form of Escrow Agreement among Ed Winton, Partech
Communications Group, Inc. and Mark T. Jorgenson d/b/a/ Jorgenson
Broadcast Brokerage, incorporated herein by reference to Exhibit
10.70 to Form 10-K, filed July 19, 1994, Commission file No. 014361.
Exhibit 10.71 Form of Promissory Note by PCG of the Golden Strand, Inc.
payable to Media Group, Inc., incorporated herein by reference to
Exhibit 10.71 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.72 Form of Purchase Agreement between Ed Winton and Tropic of
Tallahassee, Inc., incorporated herein by reference to Exhibit
10.72, to Form 10-K, filed July 19, 1994, Commission file No.
014361.
Exhibit 10.73 Form of Security Agreement between Tropic of Tallahassee, Inc.
and Ed Winton, incorporated herein by reference to Exhibit 10.73 to
Form 10-K, filed July 19, 1994, Commission file No.
014361.
Exhibit 10.74 Form of Promissory Note by Tropic of Tallahassee, Inc.
payable to Ed Winton, incorporated herein by reference to Exhibit
10.74 to Form 10-K, filed July 19, 1994, Commission file No. 014361.
Exhibit 10.75 Form of Escrow Agreement among WBA Broadcasting, Inc.,
Partech Communications Group, Inc. and Mark T. Jorgenson d/b/a/
Jorgenson Broadcast Brokerage, incorporated herein by reference to
Exhibit 10.75 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.76 Form of Purchase Agreement among Lee M. Mitchell, AT&T
Commercial Finance Corporation, and Tropic of St. Simons, Inc.,
incorporated herein by reference to Exhibit 10.76, to Form 10-K,
filed July 19, 1994, Commission file No. 014361.
Exhibit 10.77 Purchase Agreement between White Broadcasting Corporation and
Tropic of Key West, Inc., dated June 17, 1994, incorporated herein
by reference to Exhibit 10.77 to Form 10-K, filed July 19, 1994,
Commission file No. 014361.
Exhibit 10.78 Form of Escrow Agreement among White Broadcasting, Inc.,
Partech Communications Group, Inc. and Mark T. Jorgenson d/b/a/
Jorgenson Broadcast Brokerage, incorporated herein by reference to
Exhibit 10.78 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.79 Form of Non-Compete Agreement between White Broadcasting,
Inc. and Tropic of Key West, Inc., incorporated herein by reference
to Exhibit 10.79 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.80 Agreement between John E. Rayl, Partech Holdings Corporation
and Partech Communications Group, Inc., as to the replacement of
pledged shares that may be foreclosed upon in accordance with Unit
Note pursuant to the $600,000 Convertible Securities Offering, dated
May 31, 1994, incorporated herein by reference to Exhibit 10.80 to
Form 10-K, filed July 19, 1994, Commission file No. 014361.
Exhibit 10.81 Partech Communications Group, Inc. Pledge Agreement between
Partech Communications Group, Inc. and the Investor and Kelly Drye
& Warren, the Investor's Representative, dated June 15, 1994,
incorporated herein by reference to Exhibit 10.81 to Form 10-K,
filed July 19, 1994, Commission file No. 014361.
Exhibit 10.82 Pledge Agreement between John E. Rayl and the Investor and
Kelly Drye & Warren, the Investor's Representative, dated June 15,
1994, incorporated herein by reference to Exhibit 10.82 to Form
10-K, filed July 19, 1994, Commission file No. 014361.
Exhibit 10.83 Purchase and Sale Agreement between PCG of the Golden Strand,
Inc. and Funder's Trust 1992-A, dated December 29, 1994,
incorporated herein by reference to Exhibit 10.83 to Form 10-K,
filed November 3, 1995, Commission file No. 014361.
Exhibit 10.84 Stock Exchange Agreement between Kenneth A. Welt, Trustee of
Florida West Airlines, Inc. and Tradewinds Acquisition Corporation,
dated November 29, 1995, incorporated herein by reference to
Exhibit 10.84 to Form 10-Q, filed December 14, 1995, Commission
file No. 014361.
Exhibit 10.85 Administrative Services Agreement between Partech Holdings
Corporation and Tradewinds Acquisition Corporation, dated March 22,
1995, incorporated herein by reference to Exhibit 10.85 to Form
10-Q, filed December 14, 1995, Commission file No. 014361.
Exhibit 10.86 Administrative Services Agreement Extension between Partech
Holdings Corporation (n.k.a. Tropic Communications, Inc.) and
Tradewinds Acquisition Corporation, dated August 1, 1995,
incorporated herein by reference to Exhibit 10.86 to Form 10-Q,
filed December 14, 1995, Commission file 014361.
Exhibit 10.87 Stock Exchange Agreement between The Flood Group,
incorporated, Shareholders of The Flood Group, incorporated and
Technology Acquisitions Corporation, dated May 21, 1996, filed
herewith as Exhibit 10.87.
Exhibit 10.88 Stock Registration Agreement between The Flood Group,
incorporated, Technology Acquisitions Corporation, certain
Shareholders of Technology Acquisitions Corporation and Tropic
Communications, Inc., dated May 21, 1996, filed herewith as Exhibit
10.88.
Exhibit 10.89 Stock Exchange Agreement between ICCS, Inc., PCK Enterprises,
Inc., Shareholders of ICCS, Inc. and PCK Enterprises, Inc. and
Technology Acquisitions Corporation, dated May 22, 1996, filed
herewith as Exhibit 10.89.
Exhibit 10.90 Stock Registration Agreement between ICCS, Inc., ICCS
Solutions, Inc., certain Shareholders of ICCS Solutions, Inc. and
Tropic Communications, Inc., dated May 22, 1996, filed herewith as
Exhibit 10.90.
Exhibit 10.91 Stock Exchange Agreement between R.A. Logistics, Inc., Angel
Munoz, Ronald Vimo and Scott Villanueva and Tropic Communications,
Inc. dated Spetember 2, 1997, incorporated herein by reference to
Exhibit 10.91 to Form 8-K, filed October 3, 1997, Commission file
No. 014361.
Exhibit 10.92 Employment Agreement dated September 2, 1997 by and between
Angel Munoz and Tropic Communications, Inc., incorporated herein by
reference to Exhibit 10.92 to Form 8-K, filed October 3, 1997,
Commission file No. 014361.
Exhibit 10.93 Employment Agreement dated September 2, 1997 by and between
Ronald Vimo and Tropic Communications, Inc., incorporated herein by
reference to Exhibit 10.93 to Form 8-K, filed October 3, 1997,
Commission file No. 014361.
Exhibit 10.94 Employment Agreement dated September 2, 1997 by and between
Scott Villanueva and Tropic Communications, Inc., incorporated
herein by reference to Exhibit 10.94 to Form 8-K, filed October 3,
1997, Commission file No. 014361.
Exhibit 11 Statement re: computation of earnings per share.
Exhibit 20 Form of Proxy for 1993 Annual Meeting of Shareholders,
incorporated herein by reference to Exhibit 20 to Schedule 14A,
Preliminary Proxy Statement, filed November 9, 1993, Commission file
No. 014361.
Exhibit 20.1 Letter between Partech Holdings Corporation and M.S. Farrell
& Company, Inc. dated April 6, 1994, incorporated herein by
reference to Exhibit 20 to Form S-8, filed April 8, 1994,
Commission file No. 014361.
Exhibit 20.2 Form of Proxy for Special Meeting to be held July 21, 1994,
incorporated herein by reference to Exhibit 20.2 to Schedule 14A
filed May 20, 1994, Commission file No. 014361.
Exhibit 21 Subsidiaries of the Company.
Exhibit 23.7 Consent of Hausser + Taylor incorporated herein by reference to
Exhibit 23.7 to Form S-8, filed March 24, 1995, Commission file No.
014361.
Exhibit 23.8 Consent of Hausser + Taylor incorporated herein by reference to
Exhibit 23.8 to Form S-8, filed June 12, 1995, Commission file No.
014361.
Exhibit 23.9 Consent of Hausser + Taylor incorporated herein by reference to
Exhibit 23.9 to Form S-8, filed September 8, 1995, Commission file
No. 014361.
Exhibit 23.10 Consent of Hausser + Taylor incorporated herein by reference
to Exhibit 23.10 to Form S-8, filed January 26, 1996, Commission
file No. 014361.
Exhibit 23.11 Consent of Hausser + Taylor incorporated herein by reference
to Exhibit 23.11 to Form S-8, filed March 20, 1996, Commission file
No. 014361.
Exhibit 23.12 Consent of Hausser + Taylor incorporated herein by reference
to Exhibit 23.12 to Form S-8, filed May 17, 1996, Commission file
No. 014361.
Exhibit 99 Board of Directors resolutions for reverse stock split, dated
April 21, 1994, incorporated herein by reference to Exhibit 99 to
Schedule 14A filed May 20, 1994, Commission file No. 014361.
Exhibit 99.3 onsulting Agreement with Firestar Holdings, Ltd. dated May
2, 1995 incorporated herein by reference to Exhibit 99.3 to Form
S-8, filed June 12, 1995, Commission file No. 014361.
Exhibit 99.4 Option Agreement with Firestar Holdings, Ltd. dated May 2,
1995 incorporated herein by reference to Exhibit 99.4 to Form S-8,
filed June 12, 1995, Commission file No. 014361.
Exhibit 99.5 Consulting Agreement with Toukan, Haring & Co. dated May 2,
1995 incorporated herein by reference to Exhibit 99.5 to Form S-8,
filed June 12, 1995, Commission file No. 014361.
Exhibit 99.6 Option Agreement with Toukan, Haring & Co. dated May 2, 1995
incorporated herein by reference to Exhibit 99.6 to Form S-8, filed
June 12, 1995, Commission file No. 014361.
Exhibit 99.7 Consulting Agreement with Firestar Holdings, Ltd. dated
September 6, 1995 incorporated herein by reference to Exhibit 99.7
to Form S-8, filed September 8, 1995, Commission file No. 014361.
Exhibit 99.8 Option Agreement with Firestar Holdings, Ltd. dated September
6, 1995 incorporated herein by reference to Exhibit 99.8 to Form
S-8, filed September 8, 1995, Commission file No. 014361.
Exhibit 99.9 Consulting Agreement with Wolfe Axelrod Associates dated
January 1, 1994, incorporated herein by reference to Exhibit 99.9 to
Form S-8 filed January 26, 1996, Commission file No. 014361.
Exhibit 99.10 Consulting Agreement with James A. Haring dated January 24,
1996, incorporated herein by reference to Exhibit 99.10 to Form S-8
filed January 24, 1996, Commission file No. 014361.
Exhibit 99.11 Option Agreement with James A. Haring dated January 24, 1996,
incorporated herein by reference to Exhibit 99.11 to Form S-8 filed
January 24, 1996, Commission file No. 014361.
Exhibit 99.12 Radio Marketing Agreement with Corporate Network, Inc. dated
March 13, 1996, incorporated herein by reference to Exhibit 99.12
to Form S-8 filed March 20, 1996, Commission file No. 014361.
Exhibit 99.13 Stock Subscription Agreement with Corporate Network, Inc.
dated March 18, 1996, incorporated herein by reference to Exhibit
99.13 to Form S-8 filed March 20, 1996, Commission file No. 014361.
Exhibit 99.14 Services Agreement with Charles A. Koenig dated May 16, 1996,
incorporated herein by reference to Exhibit 99.14 to Form S-8 filed
May 17, 1996, Commission file No. 014361.
Exhibit 99.15 Option Agreement with Charles A. Koenig dated May 16, 1996,
incorporated herein by reference to Exhibit 99.15 to Form S-8 filed
May 17, 1996, Commission file No. 014361.
Exhibit 21. Subsidiaries of the Company
Administrative Consultants, Inc. (a wholly-owned subsidiary of the
Company)
LCC Equipment Corporation (a wholly-owned subsidiary of the Company)
LCC Leasing International, Inc. (a wholly-owned subsidiary of
Leeward Capital Corporation)
LCC Investments, Inc. (a wholly-owned subsidiary of Leeward Capital
Corporation)
LCC Asset Management Corporation (a wholly-owned subsidiary of the
Company)
Partech Communications Group, Inc. (a wholly-owned subsidiary of
the Company)
PCG of Florida, Inc. (a wholly-owned subsidiary of Partech
Communications Group, Inc.)
PCG of the Florida Keys, Inc. (a wholly-owned subsidiary of
Partech Communications Group, Inc.)
Tropic of North Carolina, Inc. (f.k.a. PCG of the Golden Strand,
Inc., a wholly-owned subsidiary of Partech Communications Group,
Inc.)
GS Services, Inc. (a wholly-owned subsidiary of Partech
Communications Group, Inc.)
PCG of Tallahassee, Inc. (a wholly-owned subsidiary of Partech
Communications Group, Inc.)
Tropic Broadcasting, Inc. (a wholly-owned subsidiary of Partech
Communications Group, Inc.)
Tropic Broadcasting of Brunswick, Inc. (a wholly-owned subsidiary
of Partech Communications Group, Inc.)
Tropic of Key West, Inc. (a wholly-owned subsidiary of Partech
Communications Group, Inc.)
Tropic Broadcasting of North Florida, Inc. (a wholly-owned
subsidiary of Partech Communications Group, Inc.)
Tropic of St. Simons, Inc. (a wholly-owned subsidiary of Partech
Communications Group, Inc.)
Phoenix Wrecking International, Inc. (a wholly-owned subsidiary of
Partech Communications Group, Inc.)
Tropic Broadcasting of Waycross, Inc. (a wholly-owned subsidiary
of Partech Communications Group, Inc.)
Tropic of Tallahassee, Inc. (a wholly-owned subsidiary of Partech
Communications Group, Inc.)
Par Comm Consultants, Inc. (a wholly-owned subsidiary of Partech
Communications Group, Inc.)
ICCS Solutions, Inc. (a wholly-owned subsidiary of the Company)
Thorndine, Ltd. (an inactive United Kingdom company and
wholly-owned subsidiary of LCC Leasing International, Inc.)