UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended January 31, 1994 Commission file number 0-14361
PARTECH HOLDINGS CORPORATION
(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)
3366 Riverside Drive, Suite 200, Columbus, Ohio 43221
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (614) 538-0660
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 reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
The Company had 5,629,706 shares of $0.05 par value common stock outstanding
as of March 10, 1994.
PARTECH HOLDINGS CORPORATION
FORM 10-Q
For the Fiscal Quarter Ended January 31, 1994
INDEX
Part I: Financial Information
Item 1. Financial Statements Page
(a) Consolidated Balance Sheets as of January 31, 1994 and April 30, 1993 3
(b) Statements of Consolidated Operations for the Three Months Ended January 31,
1994 and 1993, respectively 5
(c) Statements of Consolidated Operations for the Nine Months Ended January 31,
1994 and 1993, respectively 6
(d) Statements of Consolidated Cash Flows for the Nine Months Ended January 31,
1994 and 1993, respectively 7
(e) Notes to Consolidated Financial Statements 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
Part II: Other Information
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 31
Page 2
PART I
Item 1. Financial Statements
--------------------
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
January 31, April 30,
1994 1993
Assets:
Cash and cash equivalents $ 322,138 $ 143,164
Accounts receivable - related parties 159,269 108,318
Accounts and commissions receivable (net of allowance
for doubtful accounts of $3,148 and $0) 113,098 18,388
Notes receivable - related parties 128,714 129,000
Residuals, notes and accrued interest receivable 795,296 918,843
Equipment notes and accrued interest receivable 60,997,940 87,904,468
Leased property under capital lease, at cost (net of
accumulated amortization of $122,486,461
and $141,703,003, respectively) 43,121,931 44,291,407
Net investment in operating leases (net of
accumulated depreciation of $3,756,888 and
$2,271,639, respectively) 1,949,441 5,293,165
Property and equipment, at cost (net of accumulated
depreciation of $326,086 and $263,626, respectively) 628,368 374,962
Cost in excess of net assets acquired (net of
accumulated amortization of $1,053,428
and $957,067, respectively) 2,315,715 2,410,775
Investment in partnerships 45,498 45,498
Net investment in direct financing leases 2,194,564 3,330,791
Deferred organization, stock issuance and
other financing costs 67,099 27,678
Broadcasting rights 411,326 -
Other assets 80,750 171,305
------------- -------------
Total Assets $ 113,331,147 $ 145,167,762
============= =============
See accompanying notes to consolidated financial statements.
Page 3
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(continued)
January 31, April 30,
1994 1993
Liabilities:
Accounts payable and accrued expenses $ 57,909 $ 90,450
Accounts payable - related parties 33,472 49,220
Note payable - related party - 625,000
Notes and accrued interest payable 2,367,137 3,514,047
Broadcasting rights payable 411,326 -
Discounted lease rentals and accrued interest payable 45,071,221 49,584,419
Capital lease obligations and accrued interest payable 61,007,448 87,910,364
Accrued officer compensation and interest payable 99,239 215,113
Unearned income - 10,902
Deferred income taxes 75,000 75,000
------------- -------------
Total Liabilities 109,122,752 142,074,515
------------- -------------
Stockholders' Equity:
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, none issued and outstanding
Common stock, $0.05 par value, 50,000,000 shares
authorized, 5,636,906 and 2,662,425, respectively,
issued 281,845 133,121
Common stock subscribed, $0.05 par value, 400,000
shares subscribed at April 30, 1993 - 20,000
Capital in excess of stated value 7,885,949 5,545,851
Retained deficit (3,947,811) (2,515,725)
------------- -------------
4,219,983 3,183,247
Common stock issued and unpaid - (90,000)
Treasury stock, at cost (11,588) -
------------- -------------
Total Stockholders' Equity 4,208,395 3,093,247
------------- -------------
Total Liabilities and Stockholders' Equity $ 113,331,147 $ 145,167,762
============= =============
See accompanying notes to consolidated financial statements.
Page 4
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
Statements of Consolidated Operations
Three Months Ended January 31,
------------------------------
1994 1993
Revenues:
Rental income $ 6,372,622 $ 8,601,414
Commissions, fees and other income 199,164 164,632
Interest income 1,788,387 3,253,925
----------- -----------
Total Revenues 8,360,173 12,019,971
----------- -----------
Costs and Expenses:
Marketing, administrative and other operating expenses 414,103 266,825
Interest expense 2,902,147 4,997,120
Depreciation and amortization of property, equipment
and leased property under capital lease 5,285,942 6,867,978
Amortization of cost in excess of net assets acquired
and other intangible assets 35,231 30,865
----------- -----------
Total Costs and Expenses 8,637,423 12,162,788
----------- -----------
Net Loss $ (277,250) $ (142,817)
=========== ===========
Primary Net Loss Per Share $ (0.05) $ (0.05)
Fully Diluted Net Loss Per Share $ (0.05) $ (0.05)
Average Number of Common and
Common Equivalent Shares:
Primary 5,634,871 2,650,701
Fully diluted 5,634,871 2,650,701
See accompanying notes to consolidated financial statements.
Page 5
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
Statements of Consolidated Operations
Nine Months Ended January 31,
-------------------------------
1994 1993
Revenues:
Rental income $ 19,243,763 $ 26,607,757
Commissions, fees and other income 288,821 285,876
Interest income 6,194,753 11,831,240
------------ ------------
Total Revenues 25,727,337 38,724,873
------------ ------------
Costs and Expenses:
Marketing, administrative and other operating expenses 1,182,216 616,192
Advisory services 219,665 -
Interest expense - related party 121,011 -
Interest expense 9,105,828 17,406,306
Depreciation and amortization of property, equipment
and leased property under capital lease 16,425,042 21,089,418
Amortization of cost in excess of net assets acquired
and other intangible assets 105,661 92,595
------------ ------------
Total Costs and Expenses 27,159,423 39,204,511
------------ ------------
Loss Before Income Taxes and Cumulative
Effect of Change in Accounting Principal (1,432,086) (479,638)
Income tax benefit - (270,000)
------------ ------------
Loss Before Cumulative Effect of Change
in Accounting Principal (1,432,086) (209,638)
Cumulative Effect to May 1, 1992 of Change
in Accounting Principal for Income Taxes - 180,000
------------ ------------
Net Loss $ (1,432,086) $ (29,638)
============ ============
Primary Income (Loss) Per Share:
Income (loss) before cumulative effect of change in
accounting principal $ (0.29) $ 0.01
Cumulative effect of change in accounting principal 0.00 0.03
------------ ------------
Primary Net Income (Loss) Per Share $ (0.29) $ 0.04
============ ============
Fully Diluted Income (Loss) Per Share:
Income (loss) before cumulative effect of change in
accounting principal $ (0.29) $ 0.01
Cumulative effect of change in accounting principal 0.00 0.03
------------ ------------
Fully Diluted Net Income (Loss) Per Share $ (0.29) $ 0.04
============ ============
Average Number of Common and
Common Equivalent Shares:
Primary 4,924,627 6,888,536
Fully diluted 4,924,627 6,888,668
See accompanying notes to consolidated financial statements.
Page 6
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
Statements of Consolidated Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Nine Months Ended January 31,
-----------------------------
1994 1993
Cash Flows From Operating Activities:
Commissions, fees and other receipts $ 312,457 $ 326,306
Marketing, administrative and other operating
payments (1,215,785) (889,803)
Interest receipts 33,587 29,622
Interest payments (187,840) (25,114)
------------ ----------
Net Cash Used for Operating Activities (1,057,581) (558,989)
------------ ----------
Cash Flows From Investing Activities:
Payment to officer for loan - (10,125)
Investments in non consolidated affiliates (2,844) (1,206)
Purchases of property and equipment (320,910) (3,880)
Proceeds from the sale of property and equipment 55,327 631
Deferred organization costs (75,929) (50,214)
Escrow deposits for radio station acquisitions (90,000) -
------------ ----------
Net Cash Used for Investing Activities (434,356) (64,794)
------------ ----------
Cash Flows From Financing Activities:
Deferred stock, debt issuance and other financing costs (12,646) (43,690)
Proceeds from issuance of stock 2,364,981 857,353
Principal payments under bank borrowings - (88,125)
Principal payments under other borrowings - (74,147)
Principal payments under radio station acquisition
financings (10,889) -
Principal payments under officer loans - (42,000)
Principal payments under related party loans (other
than officer loans) (625,000) -
Principal payments under capital lease obligations
and other financings (45,535) (4,147)
------------ ----------
Net Cash Provided By Financing Activities 1,670,911 605,244
------------ ----------
Net Increase (Decrease) in Cash and Cash Equivalents 178,974 (18,539)
Cash and Cash Equivalents at Beginning
of Period 143,164 45,077
------------ ----------
Cash and Cash Equivalents at End
of Period $ 322,138 $ 26,538
============ ==========
See accompanying notes to consolidated financial statements.
Page 7
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
Statements of Consolidated Cash Flows
Reconciliation of Net Loss
to Net Cash Used for Operating Activities
Nine Months Ended January 31,
-------------------------------
1994 1993
Net loss $ (1,432,086) $ (29,638)
------------ ------------
Adjustments to reconcile net loss to net cash used for
operating activities:
Expenses and revenues not affecting operating activities:
Cumulative effect to May 1, 1992 of change in
accounting principal for income taxes - (180,000)
Depreciation and amortization of equipment,
and intangible assets 16,530,703 21,182,013
Deferred costs expensed and amortized 38,127 2,874
Advisory services paid in stock 189,665 -
Employee stock bonus 42,900 -
Rental income (19,243,763) (26,607,757)
Leasing interest income (6,180,819) (11,815,116)
Leasing interest expense 9,075,970 17,383,831
Changes in assets and liabilities:
Changes in accrued interest income 19,653 13,498
Changes in accrued interest expense (36,971) (2,639)
Changes in notes, accounts and
commissions receivable 56,910 31,891
Changes in other assets (7,925) (15,927)
Changes in accounts payable and
accrued expenses (116,574) (252,440)
Income taxes - (270,000)
Other 6,629 421
------------ ------------
Total Adjustments 374,505 (529,351)
------------ ------------
Net Cash Used for Operating Activities $ (1,057,581) $ (558,989)
============ ============
See accompanying notes to consolidated financial statements.
Page 8
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
Statements of Consolidated Cash Flows
Supplemental Cash Flow Information
Investment in Finance Assets. The Company acquires leased equipment,
equipment leases 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 decreases in assets
and liabilities associated with the acquisition and disposition of such
equipment and equipment leases and the related liabilities for the nine months
ended January 31, 1994 and 1993 were as follows:
Nine Months Ended January 31,
-----------------------------
1994 1993
Assets:
Equipment notes and accrued interest receivable $ - $ (15,048,231)
Leased property under capital lease (net of
accumulated amortization) 12,550,816 (24,281,273)
Net investment in operating leases (715,565) 7,564,804
------------ -------------
Total Assets $ 11,835,251 $ (31,764,700)
============ =============
Liabilities:
Discounted lease rentals and accrued interest payable $ 11,835,251 $ (16,716,469)
Capital lease obligations and accrued interest payable - (15,048,231)
------------ -------------
Total Liabilities $ 11,835,251 $ (31,764,700)
============ =============
During the nine months ended January 31, 1994 the Company (1) incurred
$59,079 of debt and expended $19,449 in cash for the purchase of fixed assets,
(2) entered into a capital lease obligation for $7,670 for new equipment, (3)
issued 110,000 shares for $5,500 in cash and incurred $42,900 of compensation
expense, (4) recorded broadcasting rights of $413,157 and related broadcasting
rights payable of an equivalent amount and (5) reduced common stock issued and
unpaid for $90,000, relieved a liability in the amount of $40,000, charged
capital in excess of stated value for $38,412 and recorded $11,588 of treasury
stock, without receiving or expending cash. During the nine months ended January
31, 1994 the Company purchased assets and liabilities, which included Leased
Property Under Capital Lease of $12,550,816 and Discounted Lease Rentals and
Accrued Interest Payable of $12,550,816. Also, during the nine months ended
January 31, 1994 the Company disposed of Net Investment in Operating Leases of
$715,565 (net of $1,142,909 of accumulated depreciation) and Discounted Lease
Rentals and Accrued Interest Payable of a commensurate amount. Also during the
current nine months leasehold tenancy positions terminated which reduced the
gross value of Leased Property Under Capital Lease by $32,936,834 and
accumulated amortization by an equivalent amount.
During the nine months ended January 31, 1993 the Company sold assets and
liabilities, which at the date of sale included Leased Property Under Capital
Lease of $23,530,628 (net of accumulated amortization of $18,887,171), and
Discounted Lease Rentals and Accrued Interest Payable of $23,530,628 for a
$10,000 reduction of debt. Also, during this same period the Company had
additional dispositions of assets and liabilities which included Leased
Property Under Capital Lease of $750,645 (net of accumulated amortization of
$422,326), Installment Notes and Accrued Interest Receivable of $15,048,231,
Discounted Lease Rentals and Accrued Interest Payable of $750,645, and Capital
Lease Obligations and Accrued Interest Payable of $15,048,231. Acquisitions
during the current period were comprised of Net Investment in Operating Leases
of $7,564,804, and Discounted Lease Rentals and Accrued Interest Payable of
$7,564,804. During the comparative nine months leasehold tenancy positions
terminated which reduced the gross value of Leased Property Under Capital
Lease by $47,958,678 and accumulated amortization by a tantamount.
Also, during the nine months ended January 31, 1993, 100,000 warrants were
exercised for a $100,000 reduction in accrued compensation. Similarly, during
third quarter of fiscal 1993 the Company issued 217,704 shares of $0.05 per
share par value common stock to pay $81,056 of debt. Furthermore, during the
first three months of fiscal 1993, 90,000 warrants were exercised and 90,000
shares were issued for which the Company has recorded a receivable of $90,000.
Additionally, the Company incurred $2,634 of debt pursuant to the purchase of
office equipment during the comparative nine months.
See accompanying notes to consolidated financial statements.
Page 9
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Consolidated Financial Statements
The consolidated balance sheet as of January 31, 1994, the statements of
consolidated operations, for the three and nine months ended January 31, 1994,
and the statements of consolidated cash flows, for the nine months ended
January 31, 1994, have been prepared by the Company, without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows at January 31, 1994, and for all periods presented
herein, have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included with the Company's April 30, 1993 and
1992, Annual Reports to the Securities and Exchange Commission on Form 10-K.
2. Federal Income Tax
The income tax provision is reported 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). A deferred tax asset will result in an income tax benefit
(before valuation allowance), conversely a deferred tax liability will result
in income tax expense. 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. The valuation
allowance at the beginning of the year was $788,200 and increased $330,800.
As of January 31, 1994, the Company and its subsidiaries reported an
aggregate cumulative Federal income tax loss carryforward of approximately
$25,500,000, expiring through 2009. As of January 31, 1993, the Company and
its subsidiaries had aggregate Federal tax net operating loss carryforwards of
approximately $22,768,000.
3. Earnings Per Share
For the three and nine months ended January 31, 1994, primary and fully
diluted earnings per share amounts, are computed based on 5,634,871 shares and
4,924,627 shares, respectively, the weighted average number of common shares
outstanding. The stock purchase rights are not included in primary or fully
diluted earnings per share, the rights are anti-dilutive. Included in the
weighted average number of common shares outstanding are 615,000 shares issued
pursuant to stock sales. During the first quarter of the current fiscal year
the Company issued 2,359,481 shares pursuant to warrant exercises. If these
shares had been issued at the beginning of the period primary and fully
diluted earnings per share would have been ($0.26).
For the three months ended January 31, 1993, primary and fully diluted
earnings per share amounts, are computed based on 2,650,701 shares, the
weighted average number of common shares outstanding. The stock purchase
rights are not included in primary or fully diluted earnings per share for the
three months ended January 31, 1993, due to all rights being anti-dilutive.
Primary earnings per share amounts are computed based on the weighted
average number of common shares outstanding of 2,408,990 shares for the nine
months ended January 31, 1993, and an increased number of shares assuming
exercise of stock purchase rights, and the assumed repurchase of shares at an
average market price. The primary average number of common and common
equivalent shares are 6,888,536 shares for the nine months ended January 31,
1993. For the nine months ended January 31, 1993 fully diluted earnings per
share amounts are based on an increased number of shares computed under the
same 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, and if actually exercised it uses the average market price on
the date of exercise. The fully diluted average number of common and common
equivalent shares for the nine months ended January 31, 1993 are 6,888,668
shares.
Page 10
During the first fiscal quarter of fiscal 1993 the Company issued
1,047,333 shares pursuant to warrant exercises. If these shares had been
issued at the beginning of the fiscal year primary and fully diluted earnings
per share would not have changed. Also, on November 6, 1992 the Company issued
217,704 shares to pay $81,056 of debt. If these shares had been issued at the
beginning of the comparative three months or at the beginning of the
comparative nine months primary and fully diluted earnings per share would not
have changed. Additionally, on October 27, 1992 the Company issued 14,000
shares pursuant to a debt default agreement, which are included in the
weighted average number of common shares outstanding.
4. Warrants
The Company issued an aggregate of 2,360,086 shares pursuant to the
exercise of its Class B Warrants at the Temporary Exercise Price of $1.00
during the Temporary Exercise Period. The Temporary Exercise Period expired
July 23, 1993 and the offering terminated September 12, 1993.
5. Deferred Organization, Stock Issuance and Other Financing Costs
These costs represent costs associated with the acquisition of broadcast
properties and preliminary negotiations of other financings. During the
current period the Company has deferred $60,181 of such costs that relate to
the acquisition of broadcast properties and has expensed $35,000 of previously
deferred costs which relate to abandoned acquisitions. The Company's
accounting policy is to capitalize such costs as the cost of an asset
purchased or as cost in excess of net assets acquired and amortize them to
expense on a straight line basis over the asset's life or 20 years as the case
may be, or expense them totally in the period in which the undertaking to
which they relate is abandoned or sold. Also, the Company has deferred $6,918
of such costs that relate to preliminary negotiations of 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 capital in excess
of stated value if they relate to equity financing. If the financing is
terminated the costs are expensed.
The Company charged to capital in excess of stated value deferred offering
expenses during current period in the amount of $5,728 which represent costs
incurred in connection with its Warrant offering and other stock issuances.
6. Advisory Services
During the nine months ended January 31, 1994 the Company paid $30,000 and
issued 505,000 shares of its common stock, valued at $358,832 for advisory
services rendered during the previous and current year. The Company expensed
$219,665 during the current year, and $169,167 in fiscal 1993 for which
400,000 shares were recorded as common stock subscribed at April 30, 1993.
7. Construction in Progress
Property and equipment includes $208,400 of construction in progress for
the building of a broadcasting tower and transmitting site, which were near
completion at January 31, 1994, and the beginning phases of constructing
another transmitting site. The costs relate to the change in frequency and
power upgrade for the Company's radio station in Shallotte, North Carolina and
a station to be located in the Florida Keys.
8. Related Party Transactions
On March 8, 1993 the Company received $500,000 in net proceeds from a
total borrowing of $625,000 which was incurred to finance the purchase of WDZD-
FM and to provide additional working capital, the difference of $125,000 was
recorded as interest expense - related party in fiscal 1993. The loan was to be
repaid by May 7, 1993, but was extended to June 7, 1993 for an additional
charge of $62,500. The loan thereafter accrued interest at 5% per month. The
extension fee and all interest for the current year are recorded as interest
expense - related party. All principal, accrued interest and charges in the
amount of $746,011 were paid on July 30, 1993. The lender, Funder's Trust 1992-
A, is engaged in the business of providing short-term lending for accounts
receivable and purchase order financing; the Chief Executive Officer of the
Company is a trustee, but not a beneficiary, of this trust.
The Company issued 110,000 shares to officers and directors during the
current period for $5,500 and incurred $42,900 of compensation expense. During
the nine months ended January 31, 1994 the Company earned $45,000 from
partnerships which are partially owned by a nonconsolidated affiliate of which
an officer of the Company is a general
Page 11
partner. The Company has incurred $4,050 for leasing a vehicle from its Chief
Executive Officer and has leased such vehicle to the Chief Operating Officer
of a subsidiary for $2,450.
9. Stock Option Plans
The following table sets forth: (1) the number of shares of the Company's
common stock issuable at January 31, 1994 pursuant to outstanding Options; (2)
the exercise price per share; (3) the aggregate exercise price; (4) the
expiration dates; and (5) the market values of such shares at January 31,
1994, based on $1.7656 per share, which is the average of the high and low ask
and bid prices on the National Association of Securities Dealers Automated
Quotation system on January 31, 1994.
Number of
Shares Market
Covered By Exercise Aggregate Value at
Outstanding Price Per Exercise Expiration January 31,
Plan Options Share Price Dates 1994
- --------------------------- ------------- --------- --------- ---------- -----------
Incentive Stock Option Plan 71,428 $ 0.69 $ 49,285 11/18/02 $ 126,113
Incentive Stock Option Plan 250,000 (1) $ 1.09 $ 272,500 7/15/03 $ 441,400
Stock Option and Stock
Appreciation Rights Plan 100,000 $ 0.69 $ 69,000 11/18/02 $ 176,560
Stock Option and Stock
Appreciation Rights Plan 500,000 (1) $ 1.09 $ 545,000 7/15/03 $ 882,800
(1) On February 23, 1994 160,000 Stock Option and Stock Appreciation Rights
Plan options terminated and three months thereafter 90,000 Incentive Stock
Option Plan options will terminate.
(2) All Options are currently exercisable, except as noted above, and no
Options were exercised during the current period.
10. Other Stock Options
On January 3, 1994 the Company entered into an agreement whereby it may
issue up to 48,000 options (8,000 per month), commencing January 1, 1994 and
ending June 30, 1994. The options would be exercisable at 100.25% of the closing
bid price on the date of issuance. The Company has agreed, if requested between
July 1, 1994 and December 31, 1994, to register the options on Form S-8. On
January 31, 1994 the Company issued 8,000 options which are each exercisable at
$1.6917.
11. Other Capital Transactions
During fiscal 1993 the Company issued 90,000 shares of its common stock
pursuant to the exercise of warrants for which funds were not received. The
Company recorded the receivable as common stock issued and unpaid, and brought
suit to recover the monies owed. The Company had also recorded a liability for
$40,000 for promotional services rendered by the person to whom the shares were
issued. On January 6, 1994 the Company settled its law suit and received 7,200
shares of its common stock and relief from its $40,000 liability. The Company
has recorded treasury stock, at its cost, in the amount of $11,588 and as
charged $38,412 to capital in excess of stated value.
12. Barter Transactions
The Company has recognized $40,409 of barter transaction revenue which is
included in commissions, fees and other income and $39,258 of barter transaction
expense included in marketing, administrative and other operating expenses. The
amount of goods and services which were received or used prior to the
transmission of advertising was not material as of the balance sheet date.
Page 12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Results of Operations
The Company is in the process of acquiring several FM and AM radio stations
located in the Southeastern United States. The Company presently operates one FM
radio station in Shallotte, North Carolina (serving the Wilmington, North
Carolina and Myrtle Beach, South Carolina markets), is in the process of
constructing one FM radio station in the Florida Keys, has requests pending
before the FCC for transfer of three FM radio stations and one AM radio station
all located in Florida, has reached an agreement-in-principle for the purchase
of four FM radio stations and one AM station, and has offers pending acceptance
for the purchase of one FM radio station. The Company expects that its
acquisition activities will extend well into calendar year 1994 and that
significant revenues and income will not be realized until all of the stations
have been acquired and integrated into a consolidated operation. During the
current period the Company has deferred $60,181 of such costs that relate to the
acquisition of broadcast properties and has expensed $35,000 of previously
deferred costs which relate to abandoned acquisitions.
The frequency change and power upgrade to 25,000 watts for the Company's
Shallotte, North Carolina radio station was completed early February, 1994. The
sales staff has been increased in order to cover the entire broadcast market.
The Company has started to penetrate new and larger advertising markets and
expects the station to turn profitable in five to six months.
The Company is continuing to manage its lease portfolios and to acquire
lease properties as and when suitable transactions become available and is also
pursuing the acquisition and management of FM radio station broadcast
properties.
The loss from operations for the nine months ended January 31, 1994 includes
$340,676 of one time charges for interest and advisory services. Without these
charges, the loss from operations would have been ($1,091,410). The loss from
operations includes $230,057 of broadcasting operating expenses in excess of
revenues.
Rental income and interest income is a function of the amount of equipment
in the Company's Portfolios which may change substantially from year to year
based upon the volume of Portfolio acquisitions and dispositions. The Company's
net earnings from its Portfolios is minimal until the Operating Leases are
completed and the related Discounted Lease Rentals and Accrued Interest Payable
are paid. The following tables indicate the comparative results of operations
for the three and nine months ended January 31, 1994 and 1993.
=====================================================================================================
Three Months Ended January 31, 1994 Compared to Three Months Ended January 31, 1993
Three Months Ended January 31, Amount of Change
------------------------------- --------------------------
1994 1993 Dollars Percentage
Rental income $ 6,372,622 $ 8,601,414 $ (2,228,792) (25.9%)
Commissions, fees and other income $ 199,164 $ 164,632 $ 34,532 21.0%
Interest income $ 1,788,387 $ 3,253,925 $ (1,465,538) (45.0%)
Marketing, administrative and other
operating expenses $ 414,103 $ 266,825 $ 147,278 55.2%
Interest expense $ 2,902,147 $ 4,997,120 $ (2,094,973) (41.9%)
Depreciation and amortization of
equipment $ 5,285,942 $ 6,867,978 $ (1,582,036) (23.0%)
Loss before income taxes and
extraordinary item $ (277,250) $ (142,817) $ (134,433) (94.1%)
Net loss $ (277,250) $ (142,817) $ (134,433) (94.1%)
=====================================================================================================
Page 13
=====================================================================================================
Nine Months Ended January 31, 1994 Compared to Nine Months Ended January 31, 1993
Nine Months Ended January 31, Amount of Change
------------------------------- --------------------------
1994 1993 Dollars Percentage
Rental income $ 19,243,763 $ 26,607,757 $ (7,363,994) (27.7%)
Commissions, fees and other income $ 288,821 $ 285,876 $ 2,945 1.0%
Interest income $ 6,194,753 $ 11,831,240 $ (5,636,487) (47.6%)
Marketing, administrative and other
operating expenses $ 1,182,216 $ 616,192 $ 566,024 91.9%
Interest expense $ 9,226,839 $ 17,406,306 $ (8,179,467) (47.0%)
Depreciation and amortization of
equipment $ 16,425,042 $ 21,089,418 $ (4,664,376) (22.1%)
Loss before income taxes and
extraordinary item $ (1,432,086) $ (479,638) $ (952,448) (198.6%)
Net loss $ (1,432,086) $ (29,638) $ (1,402,448) (4,731.9%)
=====================================================================================================
The above costs reflect the activity of the Portfolios acquired by the
Company. As the number of leases vary, so do the related expenses. As of January
31, 1994 Equipment Notes and Accrued Interest Receivable, Leased Property Under
Capital Lease and Net Investment in Operating Leases were $60,997,940,
$43,121,931 and $1,949,441, respectively, compared to $87,904,468, $44,291,407
and $5,293,165, respectively, at April 30, 1993. Discounted Lease Rentals and
Accrued Interest Payable, and Capital Lease Obligations and Accrued Interest
Payable were $45,071,221 and $61,007,448, respectively, compared to $49,584,419
and $87,910,364, respectively, at April 30, 1993. These and the above leasing
revenue and expense decreases are due to payments made as to the Company's
existing lease receivables and related obligations, which is a normal operating
circumstance, and sales of the lease portfolios. Such revenues and expenses, and
assets and liabilities are expected to change in future periods from new
properties being acquired (resulting in increases), and for payments which will
be received and made as to equipment and leases owned or disposed of, as the
case may be (resulting in decreases).
As the Company is, in part, in the business of acquiring, managing and
selling Portfolio properties, the Company anticipates that it will acquire and
will dispose of large amounts of such property in future years. The acquisition
and disposition of these properties will result in substantial periodic
fluctuations of revenues and expenses and will also result in periodic changes
in the Company's assets and liabilities in equivalent proportions.
The Company earns commissions, fees and other income from transactions which
fluctuates substantially from one comparable period to the next. The Company
believes that its relationship with its lease origination customers remains
good, however, none of these companies are presently underwriting business in
volumes sufficient to assure that the Company will have access to future
suitable Portfolio purchases. The Company will continue to pursue Portfolio
acquisitions on suitable terms as and when available, however, there is no
assurance that the current economic environment will be easing in the near term
sufficiently strong enough for the Company's customers to return to their pre-
1991 lease origination volumes.
The Company has recorded in the accompanying income statement as
commissions, fees and other income $121,406 of broadcasting advertising revenue,
which includes recognition of $40,409 of barter transaction revenue and has
recognized $39,258 of barter transaction expense included in marketing,
administrative and other operating expenses.
Effective on February 23, 1994, Mark S. Manafo ceased to be a Director,
Chief Operating Officer and employee of Partech Communications Group, Inc.
("PCG"), a wholly-owned subsidiary of the Company, and all of PCG's
subsidiaries. Mr. Manafo's options to purchase 160,000 shares of Partech's stock
terminated on February 23, 1994 and his options to purchase 90,000 shares will
terminate three (3) months thereafter.
Page 14
During the nine months ended January 31, 1994 the Company earned $45,000
from partnerships which are partially owned by a nonconsolidated affiliate of
which an officer of the Company is a general partner. The Company has incurred
$4,050 for leasing a vehicle from its Chief Executive Officer and has leased
such vehicle to the Chief Operating Officer of a subsidiary for $2,450.
Liquidity and Capital Resources
The Company issued an aggregate of 2,360,086 shares pursuant to the exercise
of its Class B Warrants at the Temporary Exercise Price of $1.00 during the
Temporary Exercise Period. The Temporary Exercise Period expired July 23, 1993
and the offering terminated September 12, 1993. During the current period the
Company charged to capital in excess of stated value deferred offering expenses
in the amount of $5,728 which represent costs incurred in connection with its
Warrant offering and other stock issuances. Also, during the current nine months
the Company has deferred $6,918 of costs associated with the preliminary
negotiations of other financings. The Company issued 110,000 shares to officers
and directors during the current period for $5,500 and incurred $42,900 of
compensation expense.
During fiscal 1993 the Company issued 90,000 shares of its common stock
pursuant to the exercise of warrants for which funds were not received. The
Company recorded the receivable as common stock issued and unpaid, and brought
suit to recover the monies owed. The Company had also recorded a liability for
$40,000 for promotional services rendered by the person to whom the shares were
issued. On January 6, 1994 the Company settled its law suit and received 7,200
shares of its common stock and relief from its $40,000 liability. The Company
has recorded treasury stock, at its cost, in the amount of $11,588 and as
charged $38,412 to capital in excess of stated value.
On March 8, 1993 the Company received $500,000 in net proceeds from a total
borrowing of $625,000 which was incurred to finance the purchase of WDZD-FM and
to provide additional working capital, the difference of $125,000 was recorded
as interest expense - related party in fiscal 1993. The loan was to be repaid by
May 7, 1993, but was extended to June 7, 1993 for an additional charge of
$62,500. The loan thereafter accrued interest at 5% per month. The extension fee
and all interest for the current year are recorded as interest expense - related
party. All principal, accrued interest and charges in the amount of $746,011
were paid on July 30, 1993. The lender, Funder's Trust 1992-A, is engaged in the
business of providing short-term lending for accounts receivable and purchase
order financing; the Chief Executive Officer of the Company is a trustee, but
not a beneficiary, of this trust.
The Company has used a combination of seller financing, sale-leaseback
financing and secured bank loans to finance the acquisition of its Portfolio
properties; and internally generated cash flow, and bank and equity financing to
meet operating needs.
Marketing, administrative and other operating payments were $1,215,785 for
the first nine months of fiscal 1994 compared to $889,803 for the previous nine
months. The increase is due to the radio station operations being supported and
ungraded, and internal costs that cannot be deferred as to radio station
acquisitions.
During the nine months ended January 31, 1994 the Company paid $30,000 and
issued 505,000 shares of its common stock, valued at $358,832 for advisory
services rendered during the previous and current year. The Company expensed
$219,665 during the current year, and $169,167 in fiscal 1993 for which 400,000
shares were recorded as common stock subscribed at April 30, 1993. The Company
registered the 505,000 shares on a Form S-8.
On January 3, 1994 the Company entered into an agreement for promotional
services commencing January 3, 1994 and ending June 30, 1994, whereby it will
pay $3,000 per month and it may issue up to 48,000 options (8,000 per month).
The options would be exercisable at 100.25% of the closing bid price on the date
of issuance. The Company has agreed, if requested between July 1, 1994 and
December 31, 1994, to register the options on Form S-8. On January 31, 1994 the
Company issued 8,000 options which are each exercisable at $1.6917.
Current working capital assets, which are composed of cash and short-term
(one year or less) receivables, increased from $250,282 January 31, 1993, to
$542,411 at January 31, 1994. Short-term (one year or less) debt and accounts
payable increased from $130,308 at January 31, 1993, to $180,689 at January 31,
1994, for a net increase in working capital of $241,748. As of January 31, 1994
there is positive working capital of $361,722. Subsequent to January 31, 1994
the Company has a lease transactions pending which will yield cash commissions
of $60,000. The Company's trade payables at January 31, 1994 were $44,508
compared to $37,390 at January 31, 1993 and $42,554 at April 30, 1993.
Page 15
In connection with the frequency change and power upgrade for the Company's
Shallotte, North Carolina radio station and the beginning phases of constructing
another transmitting site to be located in the Florida Keys the Company has
incurred, as of January 31, 1994, $208,400 of costs for construction in progress
for the building of a broadcasting tower and transmitting sites. Such costs are
included in property and equipment. The Company anticipates $167,711 to be
incurred to finish the transmitting site to be located in the Florida Keys. The
Shallotte, North Carolina construction was completed early February, 1994.
During the current fiscal year the Company received $312,457 in cash from
commissions, fees and other receipts, representing $193,328 from current period
activities (which includes a $115,000 broker fee for a lease transaction) and
$119,129 from receivables; and realized $148,384 from leased equipment
residuals, of which $127,314 are included in commissions, fees and other
receipts, and $21,070 are included in interest income. At January 31, 1994 the
Company had a secured borrowing of $18,306 related to corporate activities and
secured borrowings of $187,563 related to the acquisition of broadcast
properties. During the nine months ended January 31, 1993 the Company realized
$157,159 from leased equipment residuals, of which $130,291 is included in
commissions, fees and other receipts, and $26,868 is included in interest
income.
The Company will continue to collect its receivables, liquidate debt,
convert assets to cash, accumulate cash from asset sales and brokerage fees,
remarket its equipment, and pursue new business opportunities where and whenever
available. The Company believes that its cash on hand will be sufficient to
sustain the Company's operations and its previous radio station purchase
borrowings through the end of its current fiscal year. However, in order to
consummate further radio station acquisitions and construction additional debt
or equity financing will be necessary. The Company is presently negotiating
additional debt and equity financing to complete all of its acquisitions and
sustain operations beyond its current fiscal year.
Page 16
PART II
Page
Item 4. Submission of Matters to a Vote of Security Holders 19
---------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 3.3 Restated Certificate of Incorporation of Partech
Holdings Corporation dated January 25, 1994,
filed herewith as Exhibit 3.3.
Exhibit 11. Computation of Earnings Per Share 20
(b) Reports on Form 8-K 30
Page 17
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Partech Holdings Corporation's Annual Meeting of Stockholders was held on
January 24, 1994. The Company solicited proxies. Thomas E. Reynolds and Jerald
K. Rayl were elected to the Board of Directors. John E. Rayl's term of office as
a director continued after the meeting and is to expire November, 1994.
The matters which were voted upon at the Meeting were as follows:
1) The election of two directors, Thomas E. Reynolds and Jerald K. Rayl.
2) Approval of an amendment of the Company's Articles of Incorporation as
to foreign ownership of common stock, and foreign directors and officers.
This amendment sought to limit ownership of the Company's Common Stock by
a non United States person, government, entity or representative therefor
to not more than twenty-five percent (25%) of the total number of shares
of the Company's capital stock outstanding. Furthermore the amendment
sought to limit the voting or control thereof to twenty-five percent
(25%) of the Company's capital stock outstanding by any of the foregoing.
Finally, the amendment sought to prohibit any of the foregoing to act as
an officer of the Company and require that no more than one-fourth of the
Board of Directors can be comprised of the foregoing.
3) Adopt the Company's 1993 Long-Term Incentive Plan. The Plan has
600,000 shares available thereunder and consists of stock, stock
options, cash and other types of awards.
4) Ratify Hausser + Taylor as independent certified public accountants.
The following table indicates the results of the voting:
Item 1 Item 1
Jerald K. Thomas E.
Rayl Reynolds Item 2 Item 3 Item 4
For 4,451,451 4,484,653 2,278,348 2,070,484 4,474,238
Against/Withheld 55,117 21,955 24,857 199,602 15,289
Abstain - - 13,537 26,437 17,081
Broker non-votes 585,257 585,217 2,775,083 2,795,498 585,217
Due to a clerical error some of the votes were not cast. If such clerical
error had not occurred the results of voting would have been as follows:
Item 1 Item 1
Jerald K. Thomas E.
Rayl Reynolds Item 2 Item 3 Item 4
For 4,689,468 4,722,640 2,528,306 2,319,887 4,703,725
Against/Withheld 55,127 21,955 24,860 200,315 15,289
Abstain - - 22,037 34,937 25,581
Broker non-votes 507,285 507,285 2,676,677 2,696,937 507,285
Page 18
Item 6 (a).
Exhibit 11 (a). Earnings Per Share
-----------------------------------
Primary and fully diluted earnings per share are computed as follows:
Primary:
Three Months Ended January 31,
------------------------------
1994 1993
Weighted average number of common shares outstanding 5,634,871 2,650,701
=========== ===========
Net loss $ (277,250) $ (142,817)
=========== ===========
Net loss per common share $ (0.05) $ (0.05)
Nine Months Ended January 31,
------------------------------
1994 1993
Weighted average number of common shares outstanding 4,924,627 2,408,990
Shares assumed to be issued upon exercising
of stock purchase rights in excess of 20%
repurchase limitation - 4,479,546
----------- -----------
Average number of common and common equivalent shares 4,924,627 6,888,536
=========== ===========
Loss before cumulative effect of change in
accounting principal $(1,432,086) $ (209,638)
Increase in interest income (net of tax) from assumed
investment in certificates of deposit and decrease
in interest expense (net of tax) from assumed
payment of short-term debt with assumed
stock purchase rights' proceeds in excess
of 20% repurchase limitation - 295,665
----------- -----------
Adjusted income (loss) before cumulative effect of change
in accounting principal (1,432,086) 86,027
Cumulative effect of change in accounting principal - 180,000
----------- -----------
Adjusted net income (loss) $(1,432,086) $ 266,027
=========== ===========
Income (loss) before cumulative effect of change in
accounting principal (0.29) 0.01
Cumulative effect of change in accounting principal 0.00 0.03
----------- -----------
Net income (loss) per common share $ (0.29) $ 0.04
=========== ===========
Page 19
Fully Diluted:
Three Months Ended January 31,
------------------------------
1994 1993
Weighted average number of common shares outstanding 5,634,871 2,650,701
=========== ===========
Net loss $ (277,250) $ (142,817)
=========== ===========
Net loss per common share $ (0.05) $ (0.05)
Nine Months Ended January 31,
------------------------------
1994 1993
Weighted average number of common shares outstanding 4,924,627 2,408,990
Shares assumed to be issued upon exercising
of stock purchase rights in excess of 20%
repurchase limitation - 4,479,678
----------- -----------
Average number of common and common equivalent shares 4,924,627 6,888,668
=========== ===========
Loss before cumulative effect of change in
accounting principal $(1,432,086) $ (209,638)
Increase in interest income (net of tax) from assumed
investment in certificates of deposit and decrease
in interest expense (net of tax) from assumed
payment of short-term debt with assumed
stock purchase rights' proceeds in excess
of 20% repurchase limitation - 279,621
----------- -----------
Adjusted income (loss) before cumulative effect of change
in accounting principal (1,432,086) 69,983
Cumulative effect of change in accounting principal - 180,000
----------- -----------
Adjusted net income (loss) $(1,432,086) $ 249,983
=========== ===========
Income (loss) before cumulative effect of change in
accounting principal (0.29) 0.01
Cumulative effect of change in accounting principal 0.00 0.03
----------- -----------
Net income (loss) per common share $ (0.29) $ 0.04
=========== ===========
Page 20
Notes regarding the calculation of primary and fully diluted earnings per share
are:
For the three and nine months ended January 31, 1994 shares issuable under
stock purchase rights, are not included in primary or fully diluted earnings per
share since inclusion of the assumed issuable shares is, in all instances, anti-
dilutive. Included in the weighted average number of common shares outstanding
are 615,000 shares issued pursuant to stock sales. During the current nine
months the Company issued 2,359,481 shares pursuant to warrant exercises. If
these shares had been issued at the beginning of the period primary and fully
diluted earnings per share have been ($0.26).
For the three months ended January 31, 1993 shares issuable under stock
purchase rights, are not included in primary or fully diluted earnings per share
since inclusion of the assumed issuable shares is, in all instances, anti-
dilutive.
Primary earnings per share for the nine months ended January 31, 1993,
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 modified treasury stock method 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, not to exceed 20%
of outstanding shares.
For the nine months ended January 31, 1993 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 previous comparative period the Company issued 1,047,333 shares
pursuant to warrant exercises. If these shares had been issued at the beginning
of the previous fiscal year primary and fully diluted earnings per share would
not have changed. Also, on November 6, 1992 the Company issued 217,704 shares to
pay $81,056 of debt. If these shares had been issued at the beginning of the
previous three months or at the beginning of the previous nine months primary
and fully diluted earnings per share would not have changed. Additionally, on
October 27, 1992 the Company issued 14,000 shares pursuant to a debt default
agreement, which are included in the weighted average number of common shares
outstanding for the current three and nine months.
Page 21
Additional primary and fully diluted earnings per share computations
pursuant to Regulation S-K, CFR (S)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 (computations for the nine months ended
January 31, 1993 do not change from the original computations presented above).
Primary:
Three Months Ended January 31,
------------------------------
1994 1993
Weighted average number of common shares outstanding $ 5,634,871 $ 2,650,701
Shares assumed to be issued upon exercising
of stock purchase rights in excess of 20%
repurchase limitation 387,824 3,791,542
----------- -----------
Average number of common and common
equivalent shares 6,022,695 6,442,243
=========== ===========
Net loss $ (277,250) $ (142,817)
Increase in interest income (net of tax) from assumed
investment in certificates of deposit and decrease
in interest expense (net of tax) from assumed
payment of short-term debt with assumed
stock purchase rights' proceeds in excess
of 20% repurchase limitation - 156,426
----------- -----------
Adjusted net loss $ (277,250) $ 13,609
=========== ===========
Net loss per common share $ (0.05) $ 0.00
Page 22
Primary (continued):
Nine Months Ended January 31,
------------------------------
1994 1993
Weighted average number of common shares outstanding 4,924,627 2,408,990
Shares assumed to be issued upon exercising
of stock purchase rights in excess of 20%
repurchase limitation 1,106,307 4,479,546
----------- -----------
Average number of common and common
equivalent shares 6,030,934 6,888,536
=========== ===========
Loss before cumulative effect of change in
accounting principal $(1,432,086) $ (209,638)
Increase in interest income (net of tax) from assumed
investment in certificates of deposit and decrease
in interest expense (net of tax) from assumed
payment of short-term debt with assumed
stock purchase rights' proceeds in excess
of 20% repurchase limitation 25,715 295,665
----------- -----------
Adjusted income (loss) before cumulative effect of change
in accounting principal (1,406,371) 86,027
Cumulative effect of change in accounting principal - 180,000
----------- -----------
Adjusted net income (loss) $(1,406,371) $ 266,027
=========== ===========
Income (loss) before cumulative effect of change in
accounting principal (0.23) 0.01
Cumulative effect of change in accounting principal 0.00 0.03
----------- -----------
Net income (loss) per common share $ (0.23) $ 0.04
=========== ===========
Page 23
Fully Diluted:
Three Months Ended January 31,
------------------------------
1994 1993
Weighted average number of common shares outstanding $ 5,634,871 $ 2,650,701
Shares assumed to be issued upon exercising
of stock purchase rights in excess of 20%
repurchase limitation 405,139 3,791,542
----------- -----------
Average number of common and common
equivalent shares 6,040,000 6,442,243
=========== ===========
Net loss $ (277,250) $ (142,817)
Increase in interest income (net of tax) from assumed
investment in certificates of deposit and decrease
in interest expense (net of tax) from assumed
payment of short-term debt with assumed
stock purchase rights' proceeds in excess
of 20% repurchase limitation - 156,426
----------- -----------
Adjusted net loss $ (277,250) $ 13,609
=========== ===========
Net loss per common share $ (0.05) $ 0.00
Page 24
Fully Diluted (continued):
Nine Months Ended January 31,
------------------------------
1994 1993
Weighted average number of common shares outstanding 4,924,627 2,408,990
Shares assumed to be issued upon exercising
of stock purchase rights in excess of 20%
repurchase limitation 1,106,307 4,479,678
----------- -----------
Average number of common and common
equivalent shares 6,030,934 6,888,668
=========== ===========
Loss before cumulative effect of change in
accounting principal $(1,432,086) $ (209,638)
Increase in interest income (net of tax) from assumed
investment in certificates of deposit and decrease
in interest expense (net of tax) from assumed
payment of short-term debt with assumed
stock purchase rights' proceeds in excess
of 20% repurchase limitation 25,715 279,621
----------- -----------
Adjusted income (loss) before cumulative effect of change
in accounting principal (1,406,371) 69,983
Cumulative effect of change in accounting principal - 180,000
----------- -----------
Adjusted net income (loss) $(1,406,371) $ 249,983
=========== ===========
Income (loss) before cumulative effect of change in
accounting principal (0.23) 0.01
Cumulative effect of change in accounting principal 0.00 0.03
----------- -----------
Net income (loss) per common share $ (0.23) $ 0.04
=========== ===========
Page 25
Notes regarding the calculation of primary and fully diluted earnings per
share pursuant to Regulation S-K, CFR (S)229.601(b)(11):
Primary earnings per share for the three and nine months ended January 31,
1994, 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 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 the three and nine months ended January 31, 1994 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.
Included in the weighted average number of common shares outstanding are
615,000 shares issued pursuant to stock sales. During the current nine months
the Company issued 2,359,481 shares pursuant to warrant exercises. If these
shares had been issued at the beginning of the period primary and fully diluted
earnings per share have been ($0.23).
Primary earnings per share for the three and nine months ended January 31,
1993, 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 modified treasury stock method 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, not to
exceed 20% of outstanding shares.
For the three and nine months ended January 31, 1993 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 previous period the Company issued 1,047,333 shares pursuant to
warrant exercises. If these shares had been issued at the beginning of the
previous fiscal year primary and fully diluted earnings per share would not have
changed. Also, on November 6, 1992 the Company issued 217,704 shares to pay
$81,056 of debt. If these shares had been issued at the beginning of the
previous three months or at the beginning of the previous nine months primary
and fully diluted earnings per share would not have changed. Additionally, on
October 27, 1992 the Company issued 14,000 shares pursuant to a debt default
agreement, which are included in the weighted average number of common shares
outstanding for the current three and nine months.
Item 6(b). Reports on Form 8-K.
--------------------
None.
Page 26
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARTECH HOLDINGS CORPORATION
--------------------------------
(Registrant)
Date: March 16, 1994 By: /s/ JOHN E. RAYL
----------------------------
John E. Rayl
Chief Executive Officer, Treasurer
and Director
Page 27