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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, 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
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Title of Each Class
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Common Stock, par value $0.05
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 $3,594,434 as of June 30, 1994.
The Company had 5,579,706 shares of $0.05 par value common stock
outstanding as of June 30, 1994.
DOCUMENTS INCORPORATED BY REFERENCE:
1994 Notice of Annual Meeting, Part III
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PARTECH HOLDINGS CORPORATION
1994 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
- - ------
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
- - -------
Item 5. Market for the Company's Common Equity and
Related Stockholder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 8. Financial Statements and Supplementary Data 18
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 43
PART III
- - --------
Item 10. Directors and Executive Officers of the Company 43
Item 11. Executive Compensation 43
Item 12. Security Ownership of Certain Beneficial
Owners and Management 43
Item 13. Certain Relationships and Related Transactions 43
PART IV
- - -------
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K 44
Signatures 56
Index to Exhibits 57
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PART I
Item 1. BUSINESS
Partech Holdings Corporation ("Partech") was incorporated in Delaware on
March 25, 1985, and acts primarily as a holding company, owning 100% of the
outstanding capital stock of four wholly-owned subsidiaries: Leeward Capital
Corporation ("Leeward Capital"), an Ohio corporation formed in 1980, and its
two subsidiaries; LCC Equipment Corporation ("LCC Equipment"), a Delaware
corporation formed in 1985; LCC Asset Management Corporation ("LCC Asset
Management"), a Nevada corporation, formed in 1990; and Partech Communications
Group, Inc. ("PCG"), a Nevada corporation, formed in 1992, and its fifteen
subsidiaries. Partech and its subsidiaries are referred to herein as the
"Company."
Through most of the 1980s and into 1990 the Company was actively involved
in the equipment leasing business, which provided substantially all of the
Company's revenue during that period. In the late 1980s, the equipment leasing
industry experienced a significant change due to a number of factors, including
the overall decline in the economy that caused equipment users to delay or
cancel acquisition of new equipment, technological improvements in computer and
peripheral equipment which altered leasing decisions of equipment users, and
changes in tax laws. As a result of this change many of the major leasing
companies have scaled back their operations, sold their portfolios, ceased
originating new business or have gone out of business entirely. IBM Credit
Corporation quickly filled the financing void left by the departure of these
companies by aggressive pricing and having binding release clauses built into
the original lease contracts, which further reduced the availability and
profitability of computer lease transactions.
The net effect of this industry-wide change was to significantly slow down
the Company's equipment leasing operations. Therefore, since late 1990, the
Company has actively pursued various business opportunities which were
compatible with the Company's past experiences in the equipment leasing
industry and which could take advantage of the unique talents and experience of
existing management. The Company pursued a number of prospective opportunities
over the years which it rejected because, among other reasons, of their failure
to fit in with the Company's equipment leasing business. Contemporaneously
with its search, the Company has continued to engage in equipment leasing
activities, albeit on a considerably smaller scale than in the past.
In mid-1992 the Company began to investigate the broadcast and
communications industry. This industry appeared particularly attractive to the
Company because of the Company's knowledge of electronic data processing
equipment and its access to warehoused off lease computers and related
equipment which were required in certain aspects of the broadcast industry.
The Company's investigation into this field led it to determine that there was
a significant investment opportunity in the broadcast and communications
business that had recently appeared and was likely to not last long. The
unprecedented overinflated purchase prices that had been paid for broadcast
properties in the 1980s caused many operators to find themselves in financial
distress and broadcast properties were, accordingly, being offered for sale at
deep discounts from the historic highs of only a few years earlier.
Additionally, in August 1992, the Federal Communications Commission ("FCC")
increased the number of radio stations a company may control and increased
limits to the ownership of multiple stations in single markets.
The combination of these factors resulted in the formation of PCG, which
was formed for the purpose of acquiring, owning, managing, developing and
brokering communications related technology including broadcast properties,
telecommunications equipment, communications software and other products.
From May, 1992 through July, 1993 the Company received approximately
$3,560,000 in proceeds from the exercise of its A and B Warrants. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." In addition, in March, 1993 the Company received $500,000 in
proceeds from a private borrowing which was repaid from the proceeds received
upon the aforesaid exercise of B Warrants (see "Note - 13 Notes to the
Consolidated Financial Statements"). These funds were used by the Company to
repay all of its unsecured debts, fund its working capital requirements,
finance the Company's search for broadcast properties and to acquire and
upgrade the radio broadcast properties (described below).
The Company is continuing to manage its lease portfolios and to acquire
lease properties as and when suitable transactions become available. The
Company is also pursuing the acquisition and management of FM radio station
broadcast properties and leasing opportunities within the broadcasting
industry. The Company expects that its broadcast acquisition policies will
enable it expand its equipment leasing activities into this rather related
industry in a manner that is wholly homogeneous with the Company's current
leasing operations. The Company's business is
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derived from two segments, leasing and broadcasting. Financial and other
information regarding these business segments appears on page 37 of this Annual
Report on Form 10-K. The Company operated in predominately one segment for all
years prior to 1994; therefore, no financial segment information is reported
herein prior to fiscal 1994. Each of the business segments is more fully
described below.
ACQUISITION, MANAGEMENT AND SALE OF EQUIPMENT LEASE PORTFOLIOS
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 lease brokerage and management activities are
principally conducted through LCC Equipment, LCC Asset Management and LCC
Leasing International, Inc., which is a leasing broker and owner of equipment
leases, and a wholly-owned subsidiary of Leeward Capital. Following is a
general description of the Company's equipment lease acquisition and management
activities. Defined terms have been applied consistently with the terms used
in the Company's Consolidated Financial Statements.
The Company acquires new equipment leases 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"), seller financing ("Notes and Accrued Interest
Payable") and cash. The Company may invest its own cash ("Net Investment In
Direct Financing 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").
Upon acquisition, the Company enters into a contract with the selling
company to remarket the equipment and administer the Company's obligations
under the Operating Leases. Payment for these services is accomplished through
sharing of residual proceeds. The Company's revenues from these transactions
include rental income from the Operating Leases, interest income from Equipment
Notes and Accrued Interest Receivable from sale-leaseback transactions, lease
brokerage fees and commissions (in cash and other property), and Residuals
Receivable from the release and/or sale of equipment after the expiration of
the various leases and early termination of leases.
The equipment in the Company's Portfolios consists principally of data
processing and communications equipment and is principally equipment
manufactured by International Business Machines Corporation, Digital Equipment
Corporation and Xerox Corporation. Users of the equipment, from whom Operating
Lease payments are received, are principally major U. S. industrial, financial
and service companies. All of the debt owed to financial institutions from
discounting the Operating Leases is nonrecourse to the Company.
The Company generally formed a special purpose grantor trust (the "Trusts")
to acquire each designated Portfolio. The Trusts are formed pursuant to
Section 1746 of the Ohio Revised Code. The grantor and sole beneficiary of
each Trust is generally either LCC Equipment or LCC Asset Management. The
trustee of each Trust is the Chief Executive Officer of the Company. As of
April 30, 1994 Company's twelve (12) active Business Trusts have approximately
$89,465,000 in aggregate assets. There is no cross-collateralization of assets
between Portfolios, each Portfolio and Trust constitutes a single investment
transaction undertaken with a single unaffiliated leasing company and there is
no commingling of assets or liabilities between Trusts.
As the Company has been in the business of acquiring, managing and selling
properties on a portfolio basis, it is anticipated that there may be
acquisitions or dispositions of large amounts of such property in future years.
The acquisition and disposition of these properties will result in substantial
equal periodic fluctuations of revenues and expenses and will also result in
substantial periodic changes in the Company's assets and liabilities in
equivalent proportions (see "Note 3 - Notes to the Consolidated Financial
Statements").
The Portfolio properties are highly leveraged transactions. However, once
the Discounted Lease Rentals and Accrued Interest Payable are paid, and the
Operating Lease has ended (which are coterminus events), the equipment will be
released to the same or another user, or will be sold, generally for
substantially less than the original purchase price of the equipment. Gross
proceeds from such release or sale are generally shared among several parties,
but paid first to cover the remarketing agent's expenses, and as fees to the
remarketing agent, then paid to the Company, and to the sale-leaseback owner
(if participating in the sharing of the proceeds). Proceeds received by the
Company will be applied to recover the Company's remaining investment in the
equipment.
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The Company's leasing fee income for the current year totaled $115,000 and
was earned solely from Aim Financial Corporation. For the fiscal year ended
April 30, 1993 the Company's leasing fee income totaled $349,064 which was
earned from Aim Financial Corporation and Aftra Leasing Corporation, accounting
for 82% and 18%, respectively, of the Company's leasing fee income. The
Company believes that it's relationship with these 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.
RADIO BROADCASTING
Once the Company decided upon expanding into the broadcast and
communications industry, the Company quickly turned its attention to
negotiating purchase contracts for radio broadcast properties in small to
mid-sized markets, concentrating on vacation/resort destination locations due
to their increased immunity to recessionary problems. By December, 1992 the
Company had entered into its first contract to purchase a radio station, which
was approved for transfer by the FCC and consummated in March, 1993. Since
that time, the Company has acquired a 49% interest in a station in Marathon
Key, Florida, and has entered into purchase contracts for an additional seven
(7) stations, the applications for transfer of which are or will be filed with
the FCC for approval (see table below). All subject stations are located in
the southeastern United States.
The Company has striven, in its acquisition strategy, to identify station
candidates which are in need of significant retooling in order to became
profitable. The Company's business plan calls for upgrading the stations'
broadcast power wherever feasible, changing the stations' call letters, if
appropriate, changing (often drastically) the stations' format in order to
target a market's under-served listening audience and substantially modifying
the stations' production operations, which includes reducing production and
administrative personnel. Stations will be uplinked to national satellite
broadcast sources, and interfaced with state-of-the-art computer-driven
broadcast equipment to produce seamless broadcasts of music and programming to
new audiences. The Company's experience with high-tech data processing
equipment gives it this added ability to perform a complete face-over on
stations being acquired to take advantage of situations where these acquisition
candidates are presently falling behind their competitors.
As a result of this make-over, the Company anticipates that it will capture
a completely new and different listening audience than the acquisition
candidates had. Improving the stations' broadcast power and targeting a
"better" listening audience will each serve to increase the stations' broadcast
market thereby substantially increasing their potential revenue base. The
change in the stations' listening audiences and broadcasting markets will
naturally lead to different advertisers utilizing the stations. The stations'
sales personnel will engage in a program during the make-over which will
identify and target markets to this new group of advertisers. Moreover, the
regional aspect of the Company's broadcast chain will allow the Company to
market to national and regional advertisers in substantially larger proportions
than could the acquisitions candidates.
Additionally, the Company's acquisition strategy calls for it to contract
for more than one station in each market, in order to allow the Company to
employ efficiencies of scale in significantly curtailing overhead,
administrative and production costs, and, to a lesser extent, controlling
selling costs of the stations. Additionally, multiple station ownership in a
single market will permit the Company to simultaneously broadcast different
formats, thereby allowing the Company to appeal to a larger and more diverse
audience.
The Company's first broadcast property acquisition was WDZD-FM, licensed to
Shallotte, North Carolina. The Company immediately undertook to upgrade the
station's 3,000 watt signal and expand its broadcast range and, therefore, its
marketing reach pursuant to FCC approval which had been held but not developed
by prior ownership. Accordingly, in February, 1994, the station's signal
strength was upgraded to 25,000 watts, its call letters were changed to WLTT,
and the station now serves both Myrtle Beach, South Carolina and Wilmington,
North Carolina. The Company employs eight (8) full time employees at the
station, four (4) of whom are salespeople.
As previously mentioned, the Company acquired a 49% interest in WKKB, Inc.,
Marathon, Florida, and is in the process of constructing a 50,000 watt FM radio
station in the Florida Keys, which will be leased to WKKB, Inc. In addition,
the Company has entered into a Time Brokerage Agreement ("TBA") with WMOG-FM
and WMOG-AM, for their daily operations which are licensed to St. Simons Island
and Brunswick, Georgia, respectively. The Company has contracted to purchase
these stations and its applications for license transfers are pending before
the FCC. The TBA requires the Company to pay a monthly fee to broadcast its
programming on the stations. The Company
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employs eleven (11) full time employees at these stations, four (4) of whom are
salespeople.
The Company has also entered into contracts for the purchase of stations
WJPH-FM and WMFL-AM, Montecello, Florida, and WMLO-FM, Havanna, Florida, all of
which will serve the greater Tallahassee, Florida market. The Company has also
entered into a purchase contract for WIIS-FM, Key West, Florida. Applications
for transfer of these broadcast licenses are currently pending before the FCC.
The following table sets forth the frequency and power of each of the
Stations and the date on which each of their FCC licenses expires (see "Note 24
- - - Notes to the Consolidated Financial Statements"):
Expiration Date of
Station Market Frequency Power FCC Authorization
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WLTT-FM (1) Myrtle Beach, SC 103.7 25.0 kw December 1, 1995
Wilmington, NC
WKKB-FM (2) Florida Keys 105.3 3.0 kw February 1, 1996
WMOG-AM (3) Brunswick, GA 1490 0.6 kw April 1, 1996
St. Simons Island
WMOG-FM (4) Brunswick, GA 92.7 6.0 kw April 1, 1996
St. Simons Island
WJPH-FM (5) Tallahassee, FL 101.9 6.0 kw February 1, 1996
WMFL-AM (5) Tallahassee, FL 1090 1.0 kw February 1, 1996
WMLO-FM (6) Tallahassee, FL 104.9 47 kw February 1, 1996
WIIS-FM (7) Key West, FL 107.1 2.5 kw February 1, 1996
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<FN>
(1) WLTT-FM - Licensed to Shallotte, North Carolina. The station's market
includes Wilmington, NC and Myrtle Beach, SC.
(2) WKKB-FM - Licensed to Marathon, Florida, which is in the middle of the
Florida Keys island chain and its broadcast market is the Florida Keys.
The Company owns 49% of WKKB, Inc. and intends to finance the development
of the station and thereafter may pursue the acquisition of the remaining
51%. This station has a construction permit to increase power to 50kw.
(3) WMOG-AM - Licensed to Brunswick, Georgia. The Company has entered into
time brokerage agreement and has an application for license transfer
pending FCC approval.
(4) WMOG-FM - Licensed to St. Simons Island, Georgia. The Company has entered
into time brokerage agreement and has an application for license transfer
pending FCC approval.
(5) WJPH-FM and WMFL-AM - Both are licensed to Monticello, Florida and their
broadcast market is Tallahassee, Florida. WJPH-FM has been granted a
construction permit to increase power to 25kw and the Company has an
application for license transfer for both stations pending FCC approval.
(6) WMLO-FM - Licensed to Havanna, Florida and has a construction permit to
increase power to 47kw. The stations broadcast market is Tallahassee,
Florida. The Company's application for license transfer is pending FCC
approval.
(7) WIIS-FM - Licensed to Key West, Florida. The Company's application for
license transfer is pending FCC approval. The stations broadcast market is
Key West, Florida.
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REGULATION
The radio broadcasting industry is subject to extensive federal regulation
by the FCC. In particular, the Company's radio broadcast business is dependent
upon its continuing to hold broadcasting station operating licenses issued 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 Company's licenses will be renewed. Failure to obtain
the renewal of any of the Company's broadcast licenses would have a material
adverse effect on the Company's business and operations. Also, the activities
of persons who would be deemed by the FCC to control the Company could
adversely affect the Company's ability to obtain license renewals and to
acquire additional radio stations. There can be no assurance that there will
not be changes in the current regulatory scheme, the imposition of additional
regulations or the creation of new regulatory agencies, which would restrict or
curtail the ability of the Company to acquire, operate and dispose of its
stations or, in general, to compete profitably with other operators of radio or
other media properties. Nor can there be any assurance that there will not be
other regulatory changes, including aspects of deregulation, that will result
in a decline in the value of broadcasting licenses owned by the Company or
adversely affect the Company's competitive position.
ADVERTISING
The Company believes radio is one of the most efficient, cost-effective
means for advertisers to reach specific demographic groups. The Company also
believes that radio in general is more resistant to economic downturns than
other advertising-supported media due to its relatively lower-priced
advertising rates and lower commercial production costs.
Advertising rates charged by radio stations are based primarily on a
station's ability to attract audiences in the demographic groups targeted by
advertisers. The number of listeners of a station is often reported by rating
service surveys such as Arbitron, although most small radio markets and many
medium-sized markets are not serviced by Arbitron. Advertising rates are also
dependent upon the number of stations in the market competing for the same
demographic group and on the supply of and demand for radio advertising time.
Rates are generally highest during the morning and afternoon drive-time hours.
Radio station revenues are derived substantially from local, regional and
national advertising. Local and regional sales generally are made by a
station's sales staff. National sales are made by "national rep" firms, which
specialize in radio advertising sales on the national level. These firms are
compensated on a commission-only basis. Most contracts with advertisers are
short-term, generally running for only a few weeks.
Tourism is one of the major industries in the Company's targeted markets
which are popular vacation destinations. In addition, the average stay for
visitors is in excess of five days which, in management's view, provides an
unusual opportunity for advertisers to reach tourists through repeated
exposures to radio advertisements. Myrtle Beach (WLTT-FM) has enjoyed
substantial population growth over the last few years. Broadcast Investment
Analysts's INVESTING IN RADIO projects that the area's population will grow at
an annual rate of 4.8% from 1989 through 1994, which is substantially faster
than the projected national growth rate of 0.9% over such period.
COMPETITION
Radio broadcasting is a highly competitive business. The Company's radio
stations directly compete for listeners and advertising revenues with other
radio stations within their markets. Radio stations compete for listeners
primarily on the basis of program content and, to a lesser extent, by hiring
on-air talent which appeals to a particular demographic group. By building a
strong audience base comprised of a specific demographic group in each of its
markets (which will include several markets in the same region), the Company
seeks to attract advertisers that target these listeners. The Company's major
competitors may be owned by larger companies with greater resources.
Other media, including broadcast television, cable television, newspapers,
magazines, direct mail, coupons and billboard advertising, also compete with
the Company's stations for advertising revenues.
The FCC has indicated that the present FCC Rules will allow a greater
degree of consolidation, additional diversity and increased competition. The
Company believes that the present FCC Rules will enhance its ability to compete
in the marketplace. No assurance can be given, however, that the present FCC
Rules will improve the Company's competitive position.
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SEASONALITY
Radio industry revenues, like retailers, are seasonal and cyclical. The
Company's strongest advertising season is in the months of September through
January due to the holiday season, back-to-school advertising and retailers'
inventory reduction measures. The second largest advertising season for the
Company is in the months of May through September, due to the tourism industry
and summer sporting events. As is the case throughout the radio broadcast
industry, the months of February through April produce the lowest advertising
revenue.
OTHER INVESTMENTS
The Company is also a general partner in nine real estate limited
partnerships and receives from 0.01% to 1.00% of such partnerships' net income
and loss, which has been minimal. In addition, the Company is a limited
partner in two (2) leased equipment limited partnerships (which have active
Portfolios) and receives 99% of each partnership's net income and loss. The
Company's share of such net income or loss from leased equipment limited
partnerships has not been significant for financial statement purposes. The
Company's share, for financial accounting purposes, of net income or loss from
these limited partnerships is not expected to be significant in future periods.
The Company had a total of thirty-three (33) employees as of July 8, 1994,
none of whom were represented by a labor union.
Item 2. PROPERTIES
The Company leases 4,218 square feet of suburban office space at 3366
Riverside Drive, Suite 200, Columbus, Ohio, 43221, under a three year operating
lease which commenced April 6, 1992. The lease expires April 5, 1995. Such
leased property is utilized for general corporate purposes, leasing and
broadcasting activities. The Company owns five (5) acres in Shallotte, North
Carolina which has a Company owned broadcasting tower and building located
thereon. The land, tower and building hereof are currently not being utilized
for broadcasting purposes, but the Company has entered into a lease, as lessor,
for the tower and use of the building which is effective August 1, 1994 for
five (5) years. Furthermore, the Company leases 1,440 square feet of ocean
front office space in North Carolina for $900 per month, on a month to month
basis, which is used for broadcasting purposes. The Company owns approximately
sixteen (16) acres near Shallotte, North Carolina which has a broadcasting
tower, building, and other broadcasting equipment located thereon. The
property hereof is currently being utilized for broadcasting purposes. The
five (5) acres in Shallotte, North Carolina and the property located thereon,
along with other broadcasting equipment acquired or subsequently added which
relates to the Company's Shallotte, North Carolina radio station is encumbered
by the debt that was incurred for its acquisition.
Item 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings incidental to its
business. In the opinion of management, none of the proceedings, if adversely
decided, would have a material effect on the business of the Company. The
Company intends to vigorously prosecute or defend, as the case may be, all such
matters.
The Company has been involved in a dispute with the Estate of Joseph
Bitonte and Star Bank Central Ohio, regarding a loan from the bank to Mr.
Bitonte and a guarantee and pledge of collateral by the Company and Mr. John E.
Rayl, C.E.O. (among others). In a settlement recently reached between the
parties and to be entered into on or before August 6, 1994, the Company has
agreed to pay $115,000 to the Bitonte Estate in full and final settlement of
all matters in dispute against the Company and Mr. Rayl.
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 1994.
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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 trades on The Nasdaq Small-Cap Market under the
symbol APHC and on the Boston Stock Exchange under the symbol PTH.B. The
number of stockholders of record of common stock on June 30, 1994 was
approximately 2,000. The following table depicts the high and low sales price
as reported on NASDAQ for the current fiscal year.
FISCAL YEAR ENDED APRIL 30, 1994
--------------------------------
FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
HIGH ASK $ 1.81 $ 2 .06 $ 2.13 $ 1.97
LOW ASK $ 0.94 $ 1 .44 $ 1.00 $ 0.97
FISCAL YEAR ENDED APRIL 30, 1993
--------------------------------
FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
HIGH ASK (1) $ 1.16 $ 1 .20 $ 1.08 $ 1.28
LOW ASK (1) $ 0.52 $ 0 .40 $ 0.34 $ 1.00
<FN>
(1) After June 30, 1992 the Company is required to report high and low trade
amounts, heretofore the Company reported high and low ask amounts. The
National Association of Securities Dealers Automatic Quotation System did
not maintain records of high and low trade amounts prior to June, 1992;
therefore, the first quarter of fiscal 1993 only includes amounts hereof
for the months of June and July. The high and low ask prices for the first
quarter of fiscal 1993 were $1.44 and $1.06, respectively.
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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, 1994 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 YEAR ENDED APRIL 30,
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1994 1993 1992 1991 1990
Operating Revenues $ 30,485,138 $ 49,660,478 $ 89,515,391 $ 109,504,773 $132,880,872
Income (Loss) Before Income
Taxes, Extraordinary
Item and Cumulative
Effect of Change in
Accounting Principle $ (2,639,593) $ (1,519,715) $ (2,319,433) $ (1,670,236) $ 536,379
Income Tax Expense
(Benefit) $ - $ 180,000 $ - $ (647,616) $ -
Income (Loss) Before
Extraordinary Item and
Cumulative Effect of
Change in Accounting
Principle $ (2,639,593) $ (1,699,715) $ (2,319,433) $ (1,022,620) $ 536,379
Extraordinary Item (1) $ - $ - $ - $ 872,984 $ -
Cumulative Effect of
Change in Accounting
Principle (2) $ - $ 180,000 $ - $ - $ -
Net Income (Loss) $ (2,639,593) $ (1,519,715) $ (2,319,433) $ (149,636) $ 536,379
Average Number of Common
and Common Equivalent
Shares - Primary (3) 5,086,690 6,950,914 1,268,857 1,413,090 1,190,645
Net Income (Loss) Per Share
Before Extraordinary Item
and Cumulative Effect
of Change in Accounting
Principle - Primary (3)$ (0.52) $ (0.20) $ (1.83) $ (0.70) $0.48
Extraordinary Item Per
Share - Primary (3) $ 0.00 $ 0.00 $ 0.00 $ 0.62 $ 0.00
Cumulative Effect of
Change in Accounting
Principle - Primary (3)$ 0.00 $ 0.03 $ 0.00 $ 0.00 $0.00
Net Income (Loss) Per
Share - Primary (3) $ (0.52) $ (0.17) $ (1.83) $ (0.08) $ 0.48
Total Assets $ 93,420,160 $ 145,167,762 $ 269,931,484 $407,662,591 $545,050,232
Total Debt $ 90,443,733 $ 142,074,515 $ 266,589,256 $402,222,327 $539,545,332
Stockholders' Equity $ 2,976,427 $ 3,093,247 $ 3,342,228 $ 5,440,264 $ 5,504,900
Common Stock
Outstanding (4) 5,579,706 3,062,425 1,395,503 1,186,348 1,186,348
Book Value Per Share (5) $ 0.53 $ 1.01 $ 2.39 $ 4.59 $ 4.64
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Item 6. SELECTED FINANCIAL DATA (CONTINUED)
(1) An officer forgave $343,491 of the prior years' accrued compensation and
interest, which was recognized as extraordinary income in fiscal 1991. In
addition, two officers reduced their compensation for fiscal 1991 by $427,835
and $80,000, respectively. Had such salary reductions and debt extinguishment
not occurred marketing, administrative and other operating expenses would have
been $2,552,121. Loss before income taxes and extraordinary item would have
been $2,178,071 and $1.52 per share, respectively, loss before extraordinary
item would have been $1,530,455 and $1.06 per share, respectively,
extraordinary item would have been $529,493 and $0.40 per share, respectively,
and net loss would have been $1,000,962 and $0.68 per share, respectively.
Earnings per share amounts are based upon primary earnings per share.
(2) 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 $360,600 (net of a valuation allowance of $180,600), which was
reported in the fiscal 1993's statements of consolidated operations.
(3) All earnings per share and stock related information have been restated for
the 1 to 5 reverse stock split, which was effected March 9, 1992.
(4) This includes 400,000 shares and 12,000 shares which are issuable at April
30, 1993 and 1992, respectively.
(5) This is computed based upon common stock issued and outstanding (see 4).
(6) See "Consolidated Financial Statements" and "Notes to the Consolidated
Financial Statements"
(7) 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").
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
As discussed in the Company's 1993 Form 10-K many of the major leasing
companies have scaled back their operations, sold their portfolios, ceased
originating new business or have gone out of business entirely. IBM Credit
Corporation quickly filled the financing void left by the departure of these
companies by aggressive pricing and having binding release contracts built
into the original lease contracts, which further reduced the availability and
profitability of computer lease transactions. Market forces driven by economic
uncertainties and technological advances have changed the markets for computer
and other types of leasing. Economic uncertainties have caused many users to
maintain with existing equipment and seek alternatives which provide low cost
access to advanced technology. Due to technological advances equipment end
users have more options available without creating a need for new equipment.
All of these factors have contributed to the slowdown of the Company's leasing
business.
As a result of the downturn in the Company's leasing business the Company
focused on cost containment for fiscal 1993 and 1992 and operated virtually on
a cash basis while it sought out other business opportunities without the
pressure and undue influence of creditors. The Company found that economic and
other factors which were having a negative effect on the leasing industry were
having a positive affect on the broadcasting industry. The Company sought out
broadcasting leasing opportunities and uses for its warehoused computers and
related equipment, and found that there were opportunities to acquire broadcast
properties which would help diversify the Company's business, and create
leasing and other opportunities within the broadcasting industry. In order to
enter into its broadcast leasing opportunities and acquire broadcast
properties, the Company undertook a public offering which provided capital to
repay past borrowings (which included a $625,000 short-term financing), finance
operations and provide financing for radio broadcast property acquisitions.
The Company received approximately $3,560,000 in proceeds from this public
offering (see "Notes 13 and 20 - Notes to the Consolidated Financial
Statements").
In the latter part of fiscal 1993 the Company acquired its first broadcast
property and has since then entered into agreements to acquire other
broadcasting properties. The Company currently owns and operates WLTT-FM,
located in Shallotte, North Carolina (serving the Wilmington, North Carolina
and Myrtle Beach, South Carolina markets) and owns a 49% interest in WKKB-FM
which is not operating, but has a construction permit to build a 50 kw station
in the Florida Keys. On April 1, 1994 the Company entered into a Time
Brokerage Agreement (the "Agreement") for the daily operations of WMOG-AM and
WMOG-FM, located in St. Simons Island and Brunswick, Georgia, until the sale of
the stations and transfer of the license is consummated (the results of
operations are included in the accompanying income statements). The Agreement
requires the Company to pay a monthly fee to broadcast it programming on the
stations. The Company has requests pending FCC approval for the transfer of
four FM and two AM stations (which include the WMOG stations). All of the
Company's stations, current and future, are to be located in the southeastern
United States (see "Note 24 - Notes to the Consolidated Financial Statements").
The Company's financial results from its broadcasting operations are
dependent on several factors, many of which are not in the Company's control.
Such factors include, but are not limited to, the general strength of the local
and national economies, the growth of the population in the Company's markets,
the ability to attract a loyal following by providing popular programming,
competition in each market, the comparative efficiency and cost of radio
broadcasting compared to other advertising media, signal strength and
penetration, and government regulation and policies. The Company's
broadcasting revenues are primarily affected by the advertising rates the
Company's radio stations are able to charge, which are based on the Company's
competition in each market and its ability to attract audiences. The Company
strives to increase its audiences by choosing a popular format for which there
is vulnerable competition and to make the station publicly visible. The amount
of advertisements that a station can broadcast without hindering audience
levels and the resultant ratings is subject, in part, to the format of a
station. Broadcasting revenues are increased by planning the number of
commercials that can be sold within a particular format and making appropriate
price adjustments for the supply and demand of commercials, taking into
consideration local and regional market conditions.
The Company expects that its broadcasting revenues will continue to grow,
but will not become significant until all of the Company's acquisition
activities (which are expected to continue into fiscal 1995 ) have been
completed.
As to the Company's leasing activities, the Company is continuing to manage
its lease portfolios and to acquire lease properties as and when suitable
transactions become available. The Company is also actively pursuing leasing
opportunities within the broadcast industry. If the Company has idle
broadcasting equipment it aggressively markets such equipment for lease.
Rental income and interest income are a function of the amount of equipment in
the
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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 (see "Business") is minimal until the Operating
Lease 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 fiscal years ended April 30, 1994, 1993 and 1992 as to each immediately
preceding year.
=================================================================================================================
FISCAL YEAR ENDED APRIL 30, 1994 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1993
Fiscal Year Ended April 30, Amount of Change
--------------------------------- -----------------------------
1994 1993 Dollars Percentage
Rental income $ 21,845,430 $ 34,761,344 $ (12,915,914) (37.2%)
Commissions, fees and other income $ 449,743 $ 494,192 $ (44,449) (9.0)%
Interest income $ 8,189,965 $ 14,404,942 $ (6,214,977) (43.1%)
Marketing, administrative and other
operating expenses $ 2,025,408 $ 863,774 $ 1,161,634 134.5%
Interest expense $ 11,753,578 $ 13,364,059 $ (1,610,481) (12.1%)
Depreciation and amortization of
equipment $ 18,526,940 $ 36,013,645 $ (17,486,705) (48.6%)
Loss before income taxes and
cumulative effect of change
in accounting principle $ (2,639,593) $ (1,519,715) $ (1,119,878) (73.7%)
Net loss $ (2,639,593) $ (1,519,715) $ (1,119,878) (73.7%)
=================================================================================================================
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
April 30, 1994 Equipment Notes and Accrued Interest Receivable, Leased Property
Under Capital Lease and Net Investment in Operating Leases were $56,789,950,
$29,084,845 and $1,359,646, 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 $30,444,340 and $56,797,791, 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, sales of the lease portfolios and the low volume of new lease
Portfolios acquired. 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). During fiscal 1994 the Company acquired $14,759,430 of Net
Investment in Direct Financing Leases and disposed of $715,565 of leased
equipment (see "Notes 2 and 27 - Notes to the Consolidated Financial
Statements").
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
substantial periodic changes in the Company's assets and liabilities in
equivalent proportions.
The Company has recorded in the accompanying income statement as
commissions, fees and other income $205,223 of net broadcasting advertising
revenue (after agency commissions), which includes recognition of $90,137 of
barter transaction revenue and has recognized $81,814 of barter transaction
expense included in marketing, administrative and other operating expenses. As
the stations continue to mature the Company anticipates the percentage of
barter transaction revenue compared to cash business will decline.
The cash revenue for the first full year of operations for WLTT-FM was
approximately $100,900. The station incurred an operating loss for the year
which included the results of operations for ten (10) months at 3 kw. In
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February, 1994 the Company completed the frequency, format, call letter, and
power upgrade (to 25,000 watts) change for WLTT-FM. The loss is primarily due
to operating a weak signal, in a small depressed local market for approximately
ten (10) months. As a result of the stations upgrade the signal now reaches
298% more people located in a broadcast market which includes Wilmington, North
Carolina and Myrtle Beach, South Carolina. Operating revenues for the months
of March through May, 1994 have increased each month. The revenue increase is
also due to the Company increasing the sales staff which now penetrates new and
larger advertising markets and the initiation of an extensive promotion
campaign which is expected to last until the summer tourist season begins in
March, 1995. The Company expects WLTT-FM revenues to continue to increase and
that it will turn profitable at the end of it initial promotional campaign.
Cash revenue for WMOG-AM and WMOG-FM for April, 1994 was approximately
$14,233, and for the months of April and May, 1994 this combination has been
operating above break-even (exclusive of corporate expense allocation). On the
date the Company assumed operations these stations were in receivership. The
Company has changed the broadcast format and added employees. Operating
revenues for the months of April and May, 1994 have increased each month and
this trend is expected to continue. The Company anticipates that it will
upgrade the FM station to 6,000 watts from 3,000 watts and will add six hours
to its broadcast day.
During fiscal 1994 the loss on residual values relates 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.
At the beginning of the current fiscal year the Company's investments in
residual interests of leased equipment totaled $973,040. The value of this
investment declined during the fiscal year to $291,741. This reduction is due
to $227,096 of receipts, $4,042 of additions and a charge to operations of
$458,245 for market declines in the value of used equipment. Realization of
this remaining investment is dependent upon a number of factors outside the
control of the Company, including general economic conditions at the time of
anticipated residual realization, technological changes, changes in
manufacturers' business and maintenance policies, and the remarketing skills of
the Company or its remarketing agents (see "Note 2 - Notes to the Consolidated
Financial Statements").
The loss from operations for the fiscal year ended April 30, 1994 includes
$340,676 of one time charges for interest and advisory services. Without these
charges, the loss from operations would have been ($2,298,917). Furthermore,
the loss from operations includes nonrecurring write offs of $256,268. Without
the one time charges, nonrecurring write offs and residual write downs the loss
from operations would have been ($1,584,404). The loss from operations also
includes $671,612 of broadcasting operating expenses in excess of revenues.
Marketing, administrative and other operating expenses increased from $863,774
in 1993 to $1,765,005 in 1994 due mainly to the additional broadcasting
personnel, broadcasting operating costs, and costs which were incurred, but not
deferred which relate to broadcast property acquisitions.
During the fiscal year ended April 30, 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. The Company issued 60,000 shares
to officers and directors during the current period for $3,000 and incurred
$23,400 of compensation expense.
During the current period the Company incurred $86,700 of costs related to
the investigations, negotiations and acquisitions of broadcast properties. The
Company has deferred $46,251 of such costs and has expensed $65,000 of
previously deferred costs which relate to abandoned acquisitions.
The Company earns commissions, fees and other income from transactions
which fluctuates substantially from one comparable period to the next. During
fiscal 1994 and 1993 the Company earned $115,000 and $349,064, respectively, of
leasing commissions. 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
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return to their pre-1991 lease origination volumes. During fiscal 1994 and
1993 the Company earned $96,615 and $67,617, respectively, 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 $4,950 for leasing
a vehicle from its Chief Executive Officer and leased such vehicle to the Chief
Operating Officer of a subsidiary for $2,900. Also, during the current fiscal
year the Company recognized $256,268 of nonrecurring write-offs which relates
to the above mentioned partnerships and other nonconsolidated affiliates of the
Company of which an officer of the Company is a general partner or officer.
On May 25, 1994 the Company appointed Mr. James B. Dwyer III to the Board
of Directors. The Company entered into a financial advisory contract with
Dwyer & Associates, Inc. to assist in analyzing and negotiating broadcast
property acquisitions and other related acquisition and financing activities.
On May 9, 1994 a Special Meeting of Shareholders was called to approve a
one (1) for three (3) reverse stock split (the "Reverse Split"). The Meeting
is scheduled for July 21, 1994 and the Company expects the effective date to be
July 22, 1994. If the Reverse Split is approved, each three (3) shares owned
by holders of record of the Company's Common Stock at the close of business on
the Effective Date will be converted into one (1) share.
As a result of the Reverse Split, the number of options granted under the
Company's 1989 Stock Option and Stock Appreciation Rights Plan and 1989
Incentive Stock Option Plan, and the exercise price thereof, and certain other
stock purchase agreements to which the Company is a party will also require
corresponding adjustments in accordance with the terms thereof to reflect the
effects of the Reverse Split. Also, the shares authorized for issuance under
the Company's 1989 Stock Option and Stock Appreciation Rights Plan, 1989
Incentive Stock Option Plan, and 1993 Long-term Incentive Plan will require
corresponding adjustments in accordance with the terms thereof to reflect the
effects of the Reverse Split. There will be no change in the number of common
or preferred shares authorized for issuance.
Although it cannot be predicted what effect the Reverse Split will have on
stockholders or what the potential impact will be on the trading market, the
Board of Directors believes that by effecting the proposed Reverse Split the
result will be to increase the Corporation's common stock market value, and
thereby increase the marketability and investment potential of the
Corporation's common stock by causing the market price of the common stock to
be in a range more attractive to investors, assist in increasing the
stockholder base of the Corporation, and enhance the Corporation's ability to
obtain future financing. However, there is no assurance whatsoever that any or
all of such events will occur. Shareholders who hold a odd lot number of
shares may be required to pay additional brokerage fees depending upon the
brokers they utilize.
==================================================================================================================
FISCAL YEAR ENDED APRIL 30, 1993 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1992
Fiscal Year Ended April 30, Amount of Change
---------------------------------- -----------------------------
1993 1992 Dollars Percentage
Rental income $ 34,761,344 $ 65,755,543 $ (30,994,199) (47.1%)
Commissions, fees and other income $ 494,192 $ 159,850 $ 334,342 209.2%
Interest income $ 14,404,942 $ 23,599,998 $ (9,195,056) (39.0%)
Marketing, administrative and other
operating expenses $ 863,774 $ 1,045,665 $ (181,891) (17.4%)
Interest expense $ 13,364,059 $ 37,135,938 $ (23,771,879) (64.0%)
Depreciation and amortization of
equipment $ 36,013,645 $ 52,349,015 $ (16,335,370) (31.2%)
Loss before income taxes and
cumulative effect of change
in accounting principle $ (1,519,715) $ (2,319,433) $ 799,718 (34.5%)
Net loss $ (1,519,715) $ (2,319,433) $ 799,718 (34.5%)
==================================================================================================================
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Operating expenses were $863,744 for fiscal 1993, down from $1,045,665 and
$2,044,286 in the preceding two years which were a result of the Company's cost
reduction measures instituted in the latter part of fiscal 1990. During fiscal
1993 the Company incurred $104,551 of incremental costs associated with the
organization of its broadcasting subsidiary, of which $24,551 were deferred,
$50,000 were allocated to the acquisition of the Company's Shallotte, North
Carolina station and $30,000 were expensed in fiscal 1993. At the end of
fiscal 1993 the Company acquired WLTT-FM, Shallotte, North Carolina.
As of April 30, 1993 Equipment Notes and Accrued Interest Receivable, and
Leased Property Under Capital Lease were $87,904,468 and $44,291,407,
respectively, compared to $159,000,800 and $102,242,667 respectively, at April
30, 1992. Also, the Company acquired Net Investment in Operating Leases which
were $5,293,165 as of the end of the current fiscal year. Discounted Lease
Rentals and Accrued Interest Payable, and Capital Lease Obligations and Accrued
Interest Payable were $49,584,419 and $87,910,364, respectively, compared to
$102,229,885 and $159,023,162, respectively, at April 30, 1992. During fiscal
1993 the Company earned $67,617 from partnerships which are partially owned by
a nonconsolidated affiliate of which an officer of the Company is a general
partner.
At the beginning of the current fiscal year the Company's investments in
residual interests of leased equipment totaled $1,606,620. The value of this
investment declined during the fiscal year to $973,040. This reduction is due
to $232,246 of receipts, $232,017 of additions and a charge to operations of
$633,351 for market declines in the value of used equipment.
=================================================================================================================
FISCAL YEAR ENDED APRIL 30, 1992 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1991
Fiscal Year Ended April 30, Amount of Change
--------------------------------- -----------------------------
1992 1991 Dollars Percentage
Rental income $ 65,755,543 $ 73,407,326 $ (7,651,783) (10.4%)
Commissions, fees and other income $ 159,850 $ 1,861,399 $ (1,701,549) (91.4%)
Interest income $ 23,599,998 $ 34,236,048 $ (10,636,050) (31.1%)
Marketing, administrative and other
operating expenses $ 1,045,665 $ 2,044,286 $ (998,621) (48.8%)
Interest expense $ 37,135,938 $ 50,644,548 $ (13,508,610) (26.7%)
Depreciation and amortization of
equipment $ 52,349,015 $ 57,170,705 $ (4,821,690) (8.4%)
Loss before income taxes and
extraordinary item $ (2,319,433) $ (1,670,236) $ (649,197) (38.9%)
Net loss $ (2,319,433) $ (149,636) $ (2,169,797) (1,450.1%)
=================================================================================================================
As of April 30, 1992 Equipment Notes and Accrued Interest Receivable, and
Leased Property Under Capital Lease were $159,000,800 and $102,242,667,
respectively, compared to $240,558,085 and $155,020,468, respectively, for the
previous fiscal year. Discounted Lease Rentals and Accrued Interest Payable,
and Capital Lease Obligations and Accrued Interest Payable were $102,229,885
and $159,023,162, respectively, compared to $154,982,871 and $240,595,529,
respectively, for the previous fiscal year. In addition, the Company recorded
$45,000 in management fees from a nonconsolidated affiliate in which an officer
is a general partner.
LIQUIDITY AND CAPITAL RESOURCES
During the current period the Company incurred a loss of $2,639,593 and has
incurred capital expenditures of $406,390. The Company has financed its
activities from the proceeds received through the exercise of the Company's
Warrants and from non cash charges of approximately $957,578. Capital
expenditures for the purchase of WLTT-FM were provided by the proceeds of a
short-term loan which was repaid from Warrant proceeds (see "Notes 2, 13, 18,
22 and 27 - Notes to the Consolidated Financial Statements").
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During the current fiscal year the Company received $406,114 in cash from
commissions, fees and other receipts, representing $208,422 from current period
activities (which includes a $115,000 broker fee for a lease transaction) and
$197,692 from receivables; and realized $227,377 from leased equipment
residuals, of which $206,145 are included in commissions, fees and other
receipts, and $21,232 are included in interest income.
Marketing, administrative and other operating payments were $1,607,204 for
fiscal 1994 compared to $1,014,732 for the previous year. The increase is due
to radio station operations and non deferred costs related to radio station
acquisitions.
Current working capital assets, which are composed of cash and short-term
(one year or less) receivables, decreased from $374,011 April 30, 1993, to
$136,544 at April 30, 1994. Short-term (one year or less) debt and accounts
payable decreased from $830,080 at April 30, 1993, to $252,443 at April 30,
1994, for a net increase in working capital of $340,170. As of April 30, 1994
there is a working capital deficit of $115,899, which includes a $115,000
settlement obligation (see "Note 23 - Notes to the Consolidated Financial
Statements"). Subsequent to April 30, 1994 the Company has a lease transaction
pending which is anticipated to yield cash commissions of $60,000. The
Company's trade payables at April 30, 1994 were $72,776 compared to $42,554 at
April 30, 1993. Accrued officer compensation and interest payable decreased
from $215,113 at April 30, 1993 to $52,649 at April 30, 1994. In addition the
Company's pending contracts for the acquisition and development of its
broadcast properties are $3,487,000 (see "Note 24 - Notes to the Consolidated
Financial Statements").
As of the date of this report the Company has issued $410,000 of secured
promissory notes, has commitments for the issuance of an additional $150,000 of
such notes and may seek to issue an additional $40,000 (see "Note 13 - Notes to
the Consolidated Financial Statements"). The monies received are to be used
for working capital purposes, and for broadcast property escrow deposits.
The Company anticipates that it 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. In addition the Company has entered into a
letter of intent which provides for the sale of up to $7,500,000 of additional
equity securities in a registered underwriting. The underwriting is subject to
change based upon future market conditions. The Company anticipates that it
will file a registration statement with the Securities and Exchange Commission
as to these securities as soon as practicable after the filing of its April 30,
1994 annual report. In addition, the Company is pursuing additional secondary
sources of mezzanine financing and other debt and/or equity transactions as
they may become available (see "Note 24 - Notes to the Consolidated Financial
Statements").
The Company believes that funds provided from operations, together with the
funds from the above described private and public financings will be sufficient
to sustain the Company's operations, meet its obligations and acquire and
construct its broadcast properties. Future revenue prospects will be
determined by the availability of leasing transactions, the time frame within
which the pending radio broadcast station acquisitions are completed and the
operations of the stations assumed by the Company. Such revenue prospects may
be adversely affected in the event transactions or such acquisitions are
delayed or not consummated. Timely completion of acquisitions is subject to
approval of the transfer of the broadcast licenses by the Federal
Communications Commission, satisfactory completion of certain obligations by
the various sellers and timely and successful performance by financing sources,
including the Company's underwriter. In the event one or many events transpire
to delay or terminate any or all planned acquisitions, the Company's operations
may be less than anticipated but will continue through the management of its
lease portfolio and broadcast station(s), and the acquisition of additional
broadcast and lease properties as favorable transactions become available.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Partech Holdings Corporation:
We have audited the accompanying consolidated balance sheets of Partech
Holdings Corporation and subsidiaries as of April 30, 1994 and 1993, and the
related statements of consolidated operations, stockholders' equity, and cash
flows for the years ended April 30, 1994, 1993 and 1992, and the financial
statement schedules 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 related financial statement
schedules. 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 Partech
Holdings Corporation and subsidiaries as of April 30, 1994 and 1993, and the
results of their consolidated operations and their consolidated cash flows for
the years ended April 30, 1994, 1993 and 1992, 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.
/s/ HAUSSER + TAYLOR
Columbus, Ohio
July 15, 1994
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PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FISCAL YEAR ENDED APRIL 30,
----------------------------------
1994 1993
ASSETS:
Cash and cash equivalents $ 36,344 $ 143,164
Accounts receivable - related parties - 108,318
Deposits, accounts and commissions receivable
(net of allowance for doubtful accounts of $2,730
and $0, respectively) 137,328 18,388
Notes receivable - related parties - 129,000
Residuals, notes and accrued interest receivable 291,741 918,843
Equipment notes and accrued interest receivable 56,789,950 87,904,468
Leased property under capital lease, at cost (net of
accumulated amortization of $123,972,731
and $141,703,003, respectively) 29,084,845 44,291,407
Net investment in operating leases (net of
accumulated depreciation of $4,159,137
and $2,271,639) 1,359,646 5,293,165
Property and equipment, at cost (net of
accumulated depreciation of $350,259
and $263,626, respectively) 613,906 374,962
Cost in excess of net assets acquired (net of
accumulated amortization of $1,085,562
and $957,067, respectively) 2,283,781 2,410,775
Investment in partnerships 45,498 45,498
Net investment in direct financing leases 2,230,641 3,330,791
Deferred organization, stock issuance and other
financing costs 86,708 27,678
Broadcasting rights 381,818 -
Other assets 77,954 171,305
------------ ------------
Total Assets $ 93,420,160 $ 145,167,762
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
19
20
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
FISCAL YEAR ENDED APRIL 30,
----------------------------------
1994 1993
LIABILITIES:
Accounts payable and accrued expenses $ 198,899 $ 90,450
Accounts payable - related parties 31,348 49,220
Note and accrued interest payable - related party 30,033 625,000
Notes and accrued interest payable 2,431,855 3,514,047
Broadcasting rights payable 381,818 -
Discounted lease rentals and accrued interest payable 30,444,340 49,584,419
Capital lease obligations and accrued interest payable 56,797,791 87,910,364
Accrued officer compensation and interest payable 52,649 215,113
Unearned income - 10,902
Deferred income taxes 75,000 75,000
------------ ------------
Total Liabilities 90,443,733 142,074,515
------------ ------------
COMMITMENTS AND CONTINGENCIES
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, 5,586,906 and 2,662,425, respectively,
issued 279,345 133,121
Common stock subscribed, $0.05 par value, 400,000
shares subscribed at April 30, 1993 - 20,000
Paid in capital 7,863,988 5,545,851
Retained deficit (5,155,318) (2,515,725)
------------ ------------
2,988,015 3,183,247
Common stock issued and unpaid - (90,000)
Treasury stock, at cost (11,588) -
------------ ------------
Total Stockholders' Equity 2,976,427 3,093,247
------------ ------------
Total Liabilities and Stockholders' Equity $ 93,420,160 $ 145,167,762
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
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PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
FISCAL YEAR ENDED APRIL 30,
----------------------------------------------
1994 1993 1992
REVENUES:
Rental income $ 21,845,430 $ 34,761,344 $ 65,755,543
Commissions, fees and other income 449,743 494,192 159,850
Interest income 8,189,965 14,404,942 23,599,998
----------- ----------- -----------
Total Revenues 30,485,138 49,660,478 89,515,391
----------- ----------- -----------
COSTS AND EXPENSES:
Marketing, administrative and other operating expenses 1,765,005 863,774 1,045,665
Nonrecurring write-offs - related party 256,268 - -
Advisory services 219,665 176,417 -
Interest expense - related party 121,011 125,000 -
Interest expense 11,632,567 13,239,059 37,135,938
Loss on disposal and sale of fixed assets 4,135 - 78,147
Loss on residual values 458,245 633,351 1,102,602
Depreciation and amortization property, equipment
and leased property under capital lease 18,526,940 36,013,645 52,349,015
Amortization of cost in excess of net assets acquired
and other intangible assets 140,895 128,947 123,457
----------- ----------- -----------
Total Costs and Expenses 33,124,731 51,180,193 91,834,824
----------- ----------- -----------
LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (2,639,593) (1,519,715) (2,319,433)
Income tax expense - 180,000 -
----------- ----------- -----------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (2,639,593) (1,699,715) (2,319,433)
Cumulative Effect to May 1, 1992 of Change in
Accounting Principle for Income Taxes - 180,000 -
----------- ----------- -----------
NET LOSS $ (2,639,593) $ (1,519,715) $ (2,319,433)
=========== =========== ==========
PRIMARY INCOME (LOSS) PER SHARE:
Loss before cumulative effect of change in
accounting principle $ (0.52) $ (0.20) $ (1.83)
Cumulative effect of change in accounting principle 0.00 0.03 0.00
----------- ----------- ----------
PRIMARY NET LOSS PER SHARE $ (0.52) $ (0.17) $ (1.83)
=========== =========== ==========
FULLY DILUTED INCOME (LOSS) PER SHARE:
Loss before cumulative effect of change in
accounting principle $ (0.52) $ (0.20) $ (1.83)
Cumulative effect of change in accounting principle 0.00 0.03 0.00
----------- ----------- ----------
FULLY DILUTED NET LOSS PER SHARE $ (0.52) $ (0.17) $ (1.83)
=========== =========== ==========
AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES:
Primary 5,086,690 6,950,914 1,268,857
Fully diluted 5,086,690 6,951,709 1,268,857
<FN>
The accompanying notes are an integral part of these financial statements.
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PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
COMMON RETAINED COMMON STOCK TREASURY TOTAL
COMMON STOCK PAID IN EARNINGS ISSUED AND STOCK, STOCKHOLDERS'
STOCK SUBSCRIBED CAPITAL (DEFICIT) UNPAID AT COST EQUITY
------- ------------ ---------- ----------- -------------- ---------- --------------
BALANCES AS OF
APRIL 30, 1991 $59,317 $0 $4,057,524 $1,323,423 $0 $0 $5,440,264
Stock sales (excluding
warrants) 4,110 125,890 130,000
Warrant exercise stock sales
(net of offering expenses) 5,748 85,649 91,397
Net loss (2,319,433) (2,319,433)
------- ------------ ---------- ----------- -------------- ---------- --------------
BALANCES AS OF
APRIL 30, 1992 69,175 0 4,269,063 (996,010) 0 0 3,342,228
Stock sales (excluding
warrants) 11,585 76,471 88,056
Common stock subscribed 20,000 233,750 253,750
Reverse split shares dropped
(720 shares) (36) 36 0
Warrant exercise stock sales
(net of stock issuance and
warrant redemption costs) 52,397 966,531 (90,000) 928,928
Net loss (1,519,715) (1,519,715)
------- ------------ ---------- ----------- -------------- ---------- --------------
BALANCES AS OF
APRIL 30, 1993 133,121 20,000 5,545,851 (2,515,725) (90,000) 0 3,093,247
Warrant exercise stock sales
(net of stock issuance costs)117,974 2,237,288 2,355,262
Stock sales (excluding
warrants) 8,250 119,262 127,512
Common stock subscribed 20,000 (20,000) 0
Other capital items (38,413) 90,000 (11,588) 39,999
Net loss (2,639,593) (2,639,593)
------- ------------ ---------- ----------- -------------- ---------- --------------
BALANCES AS OF
APRIL 30, 1994 $279,345 $0 $7,863,988 ($5,155,318) $0 ($11,588) $2,976,427
======= ============ ========== =========== ============== ========== ==============
<FN>
The accompanying notes are an integral part of these financial statements.
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PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FISCAL YEAR ENDED APRIL 30,
------------------------------------------
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Commissions, fees and other receipts $ 406,114 $ 389,785 $ 302,362
Marketing, administrative and other operating
payments (1,607,204) (1,014,732) (648,122)
Interest receipts 34,440 33,145 120,012
Interest payments (195,150) (27,654) (11,932)
----------- ----------- -----------
Net Cash Used For Operating Activities (1,361,800) (619,456) (237,680)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments to officers for loans - (10,125) -
Proceeds from distributions from (investments in)
non consolidated affiliates 43,950 (1,756) 2,399
Purchases of property and equipment (336,432) (6,836) (8,233)
Proceeds from the sale of property and equipment 58,027 671 1,616
Capitalized organization costs, including cash payments
associated with the acquisition of radio stations (106,482) (66,798) -
Escrow deposits for radio station acquisitions (90,000) - -
Payments for acquisition of radio stations - (280,742) -
----------- ----------- -----------
Net Cash Used For Investing Activities (430,937) (365,586) (4,218)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred stock, debt issuance and other financing costs (21,315) (61,209) (41,254)
Proceeds from issuance of stock 2,364,981 857,958 226,175
Principal payments under bank borrowings - (88,125) (43,542)
Proceeds of other borrowings - - 100,000
Principal payments under other borrowings - (74,147) -
Principal payments under radio station acquisition
financings (14,756) (3,549) -
Proceeds from officer loans 30,000 - 17,000
Principal payments under officer loans - (42,000) -
Proceeds from related party loans (other than officer loans) - 500,000 -
Principal payments under related party loans (other than
officer loans) (625,000) - -
Principal payments under capital lease obligations and
other financings (47,993) (5,799) (2,088)
----------- ----------- -----------
Net Cash Provided By Financing Activities 1,685,917 1,083,129 256,291
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (106,820) 98,087 14,393
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 143,164 45,077 30,684
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 36,344 $ 143,164 $ 45,077
=========== =========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
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PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION. The consolidated financial statements include the
accounts of Partech Holdings Corporation, 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 acquiring,
owning, managing, developing and brokering in communications related technology
including broadcast properties, telecommunications equipment, communications
software and other products. The Company uses the equity method of accounting
for its investments in real estate limited partnerships and equipment leasing
limited partnerships (see Note 7). 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"), seller financing
("Notes and Accrued Interest Payable") and cash. The Company may invest its
own cash ("Net Investment In Direct Financing 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 leased 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.
DIRECT FINANCING LEASES - The cost of equipment is recorded as Net
Investment in Direct Financing Leases. Leasing revenue, which is recognized
over the term of the lease, consists of the excess of lease payments plus the
estimated residual value over the equipment's cost. The fair market value of
the equipment at lease termination is recorded at lease inception (Residuals
Receivable) and is reevaluated each accounting period thereafter. When
Residuals Receivable are collected, as to Direct Financing Leases, such
receipts are recorded as interest receipts. Initial direct costs are
capitalized and amortized over the lease term. Income is recognized monthly to
provide a constant yield and is recorded as interest income in the accompanying
statements of operations (see Notes 2, 6 and 13).
OPERATING LEASES - Rental income consists principally of monthly rentals
from Operating Leases. Equipment subject to Operating Leases has been recorded
at cost and is either depreciated over the lease term, if acquired by purchase
(Net Investment in Operating Leases), or amortized over the lease term, if
subject to a capital lease, (with the Company as lessee) to an amount equal to
the estimated fair market value at the lease termination date. The fair market
value of the equipment at lease termination is recorded at lease inception
(Residuals Receivable) and is reevaluated each accounting period thereafter.
Initial direct costs are capitalized and amortized over the lease term.
Depreciation and amortization expense are recorded as such in the accompanying
statements of operations (see Notes 4 and 9).
DISCOUNTED LEASE RENTALS - The Company's Operating Leases have been
assigned to financial institutions at fixed interest rates on a nonrecourse
basis. In the event of default by a lessee, the financial institution has a
first lien on the underlying leased equipment, with no further recourse against
the Company. Rental income and interest expense is recorded as lessees make
payments to financial institutions (see Note 9).
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25
WRAP LEASES - In a wrap lease transaction, the Company either acquires
equipment subject to an Operating Lease and nonrecourse 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 existing 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
(see Notes 3, 9 and 14).
EQUIPMENT SALES. Revenues from the sale of equipment and related costs are
reflected in the accompanying statements of consolidated operations for all
sales, and are reported as earnings when title to such equipment has
transferred to the purchaser.
COMMISSIONS, FEES AND OTHER INCOME. Income is earned from brokering and
financing transactions in which the Company has earned and received cash and
rights to future rental and sale proceeds sharing (Residuals Receivable) for
services rendered in negotiating the sale, financing, or refinancing of leased
equipment. The Company records commissions, fees and other income as income in
the period earned. Where Residuals Receivable are earned, such values are
initially recorded at the discounted present value of the Company's share of
the future appraised value of the equipment. Thereafter, the Company
reevaluates residual estimates each accounting period for any impairment of
value (see Note 2). The Company also earns management fees for accounting and
other management services provided which are not related to leases (see Note
15). These fees are recognized as earned.
The Company recognizes revenue for advertising time sold when the
advertising is transmitted. If payment for advertising time is recorded prior
to the advertising being transmitted the Company will record a liability for
the advertising time due to be transmitted. The Company recognizes revenue net
of discounts earned and commissions to be withheld by advertising agencies.
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 (see Note 11). 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 transactions
receivable).
BROADCASTING RIGHTS. Broadcasting rights for music and other programming
consist of agreements to broadcast a specified or unlimited amount of program
material over a defined time period at a specified fee. The Company reports an
asset and a liability for the rights acquired and obligations 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 asset 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.
INTANGIBLE ASSETS. Intangible assets include cost in excess of net assets
acquired, a broadcasting license and a noncompete agreement. These intangible
assets are amortized over periods not exceeding twenty 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
undiscounted cash flows; historic, current and expected future results; and
market capitalization. The periods of amortization are evaluated annually to
determine whether circumstances have changed which necessitate revision. In
the opinion of management no revision is necessary nor have any of the
25
26
intangible assets diminished in value.
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 see
(Note 5). Expenditures for maintenance and repairs are charged to expense as
incurred. Expenditures for additions and improvements are added to the cost of
the property and equipment. Leasehold improvements are amortized over the life
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. Such amounts will be
amortized on a straight line basis over the asset's life or 20 years, as the
case may be. 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.
CASH FLOWS. For the purpose 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 27).
2. RESIDUAL VALUES RECEIVABLE
As of April 30, 1994 the Company has recorded the present value of its
estimated equipment residual values, of which the gross values are receivable
in the fiscal years ending subsequent to April 30, 1994 as follows (see Notes 1
and 6):
Years Ending
April 30,
1995 $ 116,611
1996 130,020
1997 85,857
------------
Total gross residual value receivable $ 332,488
============
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,
_____________________________________________________
1994 1993 1992
Balance at beginning year 973,040 1,606,620 3,794,794
Net additions (reductions) to residual values (1) 4,042 232,017 (728,217)
Collections (227,096) (232,246) (357,355)
Provision for losses (458,245) (633,351) (1,102,602)
------------ ------------ ------------
Balance at end of year $ 291,741 $ 973,040 $ 1,606,620
============ ============ ============
<FN>
(1) Net of amounts charged to unearned income.
The Company evaluated the net realizable value of its equipment pools at
April 30, 1994. The total net estimated realizable value of this equipment is
$291,741 at April 30, 1994. The Company has charged $458,245 to operations in
the current period for a decline in value.
The Company evaluated the net realizable value of its equipment pools at
April 30, 1993. The total net estimated realizable value of this equipment was
$973,040 at April 30, 1993. The Company charged $633,351 to operations in
fiscal 1993 for a decline in value. The Company also had a receivable recorded
in Residuals, Notes and
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27
Accrued Interest Receivable of $10,582, and a corresponding amount recorded in
Unearned Income. These amounts have been eliminated against each other.
During the fiscal year ended April 30, 1993 the Company recognized Residuals
Receivable with a present value of $190,064, which was included in commissions,
fees and other income.
The Company charged to operations $832,102 during fiscal 1992 as to the
AmeriGroup properties as a result of settlement of various claims against
AmeriGroup, Inc. Also, in fiscal 1993 the Company sold approximately
$14,305,000 of leased assets relating to AmeriGroup, transferring $14,305,000
of liabilities and receiving $65,000 in cash which was included in commissions,
fees and other income, and a note for $78,000, which will be recognized into
income when collected. Also, the Company received an additional $40,975 as to
these properties in fiscal 1993 which was included in commissions, fees and
other income. The Company also had a receivable related to AmeriGroup recorded
in Residuals, Notes and Accrued Interest Receivable of $794,280, and a
corresponding amount recorded in Unearned Income, which were eliminated upon
settlement.
The Company evaluated the net realizable value of its other equipment pools
at April 30, 1992. The total net estimated realizable value of this equipment
was $1,541,620 compared to a total net book value of $1,812,120 (after
applicable collections) at April 30, 1992. Consequently the Company has
charged $270,500 to operations in fiscal 1992 for this decline in value.
3. 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 1 and
14) and represent long-term installment receivables from the purchasers of the
equipment, undertaken at the time the equipments' purchase from the
manufacturer was originally financed. Principal and interest payments due the
Company for the fiscal years ending subsequent to April 30, 1994, are as
follows:
Years Ending Equipment Note
April 30, Payments
1995 $ 24,882,895
1996 24,882,895
1997 11,698,143
1998 2,445,760
1999 2,035,662
------------
Total 65,945,355
Less portion pertaining to
future interest income (9,155,405)
------------
Net notes and accrued interest receivable $ 56,789,950
============
4. NET INVESTMENT IN OPERATING LEASES
The Company is lessor of data processing equipment recorded in Net
Investment in Operating Leases which consists of mainly IBM and DEC equipment.
The Company's Operating Leases recorded herein are for initial lease terms of 4
to 52 months, are recorded at cost and are net leases wherein the lessee pays
taxes, licenses, insurance and provides for general maintenance. Such
equipment is comprised of mainframes and peripheral equipment (see Notes 1 and
9). The Company's Net Investment in Operating Leases is comprised of the
following components:
Cost of investment in operating leases $ 5,518,783
Accumulated depreciation (4,159,137)
-------------
Net investment in operating leases $ 1,359,646
=============
During the fiscal years ended April 30, 1994 and 1993 the Company incurred
$3,217,953 and $2,271,639, respectively, in depreciation expense as to its
investment in these operating leases.
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5. PROPERTY AND EQUIPMENT
Accumulated Net Assigned
Asset Classification Cost Depreciation Book Value Life
-----------------------------------------------------------------
Furniture and office equipment $ 394,405 $ (298,991) $ 95,414 5-10 years
Broadcasting equipment 400,385 (46,749) 353,636 3-20 years
Automobile 23,079 (2,613) 20,466 3 years
Building and improvements 46,806 (1,835) 44,971 20 years
Land 68,761 N/A 68,761 N/A
Land improvements 5,687 (71) 5,616 20 years
Construction in progress 3,539 N/A 3,539 N/A
Inventory 21,503 N/A 21,503 N/A
------------ ------------ ------------
Total $ 964,165 $ (350,259) $ 613,906
============ ============ ============
During the fiscal year ended April 30, 1994 the Company incurred $299,461
for the construction of its Shallotte, North Carolina radio station. Such
construction was completed in early February, 1994.
6. NET INVESTMENT IN DIRECT FINANCING LEASES
The Company is a lessor of data processing and communications equipment
leased to various users. The components of the Net Investment in Direct
Financing Leases as of April 30, 1994 and 1993 are as follows (see Notes 1, 2
and 13):
Fiscal Year Ended April 30,
---------------------------------
1994 1993
Minimum lease payments receivable $ 2,563,386 $ 3,968,850
Estimated residual values - 54,197
Less unearned revenue on lease payments
and residual values (332,745) (692,256)
------------ ------------
Net investment in direct financing leases $ 2,230,641 $ 3,330,791
============ ============
The minimum lease payments receivable are receivable in the fiscal years
ending subsequent to April 30, 1994 are as follows:
Years Ending Minimum Lease
April 30, Payments to be Received
1995 $ 1,281,693
1996 1,281,693
------------
Total minimum lease payments to be received $ 2,563,386
============
7. INVESTMENT IN PARTNERSHIPS
The Company is a general partner in nine (9) real estate limited
partnerships and receives from 0.01% to 1.00% of the partnerships' net income
and loss, which has been minimal. In addition, the Company is a limited
partner in two (2) leased equipment limited partnerships (which have active
Portfolios) and receives 99% of the partnerships' net income and loss. The
Company's share of such net income or loss from leased equipment limited
partnerships has not been significant for financial statement purposes.
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8. DEFERRED ORGANIZATION, STOCK AND DEBT ISSUANCE COSTS
During the current period the Company deferred $46,251 of costs that relate
to the acquisition of broadcast properties and expensed $65,000 of previously
deferred costs which relate to abandoned acquisitions. Also, during the fiscal
year ended April 30, 1994 the Company deferred $40,457 of costs that relate to
preliminary negotiations of other financings (see Note 1).
The Company charged to paid in capital deferred offering expenses during
fiscal 1994 in the amount of $8,189 which represent costs incurred in
connection with its Warrant offering and other stock issuances.
During fiscal 1993 the Company incurred $104,551 of costs associated with
the organization of it broadcasting subsidiaries, of which $24,551 were
deferred, $50,000 were allocated to the acquisition of WDZD-FM and $30,000 were
expensed in 1993 (see Note 22).
The Company capitalized deferred offering expenses during the fiscal years
ended April 30, 1993 and 1992 in the amount of $29,264 (which includes $98 of
warrant redemption costs) and $56,767, respectively. These costs, were charged
to paid in capital. Also during the year ended April 30, 1992 the Company
capitalized $22,990 of expenses in relation to the issuance of debt. Such
costs were amortized over the life of the debt (one year).
9. DISCOUNTED LEASE RENTALS AND ACCRUED INTEREST PAYABLE
Substantially all Operating Leases (see Note 1) are receivable in
installments and have been assigned to various lending institutions at fixed
rates on a nonrecourse basis. Discounted Lease Rentals and Accrued Interest
Payable represent the present value of the Operating Lease payments discounted
at the interest rate charged by the lending institution, generally ranging from
6.5% to 13.68%. Interest expense over the lease term represents the difference
between the rentals to be paid by the user/lessee and the discounted proceeds.
Minimum Operating Lease payments under noncancellable leases, and Discounted
Lease Rentals and Accrued Interest Payable for the fiscal years ending
subsequent to April 30, 1994, are as follows:
Years Ending Minimum Noncancellable Lease Discounted Lease
April 30, Payments to be Earned Rental Payments
1995 $ 12,971,976 $ 12,418,370
1996 10,084,186 10,024,036
1997 6,317,420 6,316,687
1998 1,685,247 1,685,247
------------ ------------
Total lease payments to be earned and discounted lease
rentals and accrued interest payable, respectively $ 31,058,829 $ 30,444,340
============ ============
The Company's Operating Leases are for initial lease terms of 18 to 72
months and are net leases wherein the lessee pays taxes, licenses,
insurance and provides for general maintenance. The total rental income from
Operating Leases earned during the fiscal year ended April 30, 1994, and the
two previous fiscal years is $21,845,430 $34,761,344 and $65,755,543,
respectively.
10. OFFICE LEASE
The Company leases 4,218 square feet of suburban office space under a three
year operating lease which commenced April 6, 1992. The Company's lease
obligation plus operating charges for the year ending April 30, 1995 is
$35,378. The lease expires April 5, 1995. The Company also leases office
space in Shallotte, North Carolina for $900 per month on a month-to-month
basis.
11. BARTER TRANSACTIONS
During fiscal 1994 the Company has recognized $90,137 of barter transaction
revenue which is included in commissions, fees and other income and $81,814 of
barter transaction expense included in marketing, administrative and other
operating expenses. Prior years amounts were not significant. 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.
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30
12. CONCENTRATION OF CREDIT RISK
The Company sells advertising time to local and regional customers in North
Carolina, South Carolina and Georgia. The Company grants credit to these
customers and performs ongoing credit evaluations. There is no concentration
of credit risks within an industry and no material concentration of credit
risks for any single customer.
13. NOTES AND ACCRUED INTEREST PAYABLE
The Company's notes and accrued interest payable at April 30, 1994 and 1993 with their respective interest rates
are as follows:
Fiscal Year Ended April 30,
---------------------------------
1994 1993
Unsecured demand promissory notes payable to trade creditors, with
interest at 18% $ - $ 38,168
Unsecured demand promissory note and accrued interest payable to an
officer, with interest at 10% (Note 15) 30,033 -
Note payable to related party, other than officers, with
interest and loan fee - 625,000
Installment note payable to vendors, collateralized with the
equipment purchased, with interest at 8.6% and 5.09%,
respectively 17,517 671
Installment notes and accrued interest payable related to radio
station acquisition, collateralized with property purchased,
with interest at 7%, for all years (see Note 22) 183,697 198,451
Installment notes and accrued interest payable to sellers, related
to direct financing leases, collateralized with equipment leases
and equipment notes receivable (Notes 1 and 6), with interest at
fixed rates from 10.5% to 16%, for all years 2,230,641 3,276,757
------------ ------------
Total notes and accrued interest payable $ 2,461,888 $ 4,139,047
============ ============
Notes and accrued interest payable for the fiscal years ending subsequent
to April 30, 1994, are as follows:
Type of Debt
Years Ending ________________________________________________________________
April 30, Corporate Lease Radio Total
Accrued Interest $ 33 $ 92,648 $ - $ 92,681
1995 33,042 1,003,752 14,449 1,051,245
1996 3,603 1,134,241 16,842 1,154,684
1997 3,926 - 18,088 22,014
1998 4,277 - 134,318 138,595
1999 2,669 - - 2,669
------------ ------------ ------------ ------------
Total notes and accrued interest
payable $ 47,550 $ 2,230,641 $ 183,697 $ 2,461,888
============ ============ ============ ============
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
(see Note 22) and to provide additional working capital, the difference of
$125,000 is recorded as interest expense - related party. 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 balance of the loan, fees and applicable interest (5%
per month) was $746,011, and was paid on July 30, 1993. The loan was
collateralized by a pledge of the
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31
common stock of Partech Communications Group, Inc. The Chief Executive Officer
of the Company is a trustee, but not a beneficiary, of the lender.
As of the date of this report and subsequent to April 30, 1994 the
Company has received $410,000, has commitments pending receipt for $150,000 and
may seek an additional $40,000 pursuant to an exempt offering of the Company's
securities. The securities sold consists of a Unit (the "Unit") which includes
a 6% per annum note (the "Note") and a warrant (the "Warrant"), which entitles
its holder to purchase securities of the Company which are of the same class of
securities that are contemplated to be offered in a planned public offering
(see Note 24). The Company will be required to register the Warrant and
underlying securities in the registration statement for the public offering.
The Unit is convertible after September 30, 1994 into the Company's common
stock at a price equal to 50% of the closing bid price on conversion date. If
the Note has been paid in full the Warrant is exercisable for $1 into the
Company's common stock for an amount of shares which equates to the dollar
amount of the original Unit. Upon conversion of the Unit or exercise of the
Warrant, another warrant is to be issued, which is exercisable into the number
of shares issued upon the aforementioned exercise or conversion at the closing
bid price on the date of exercise or conversion hereof. The Unit Note is
collateralized by all of the issued and outstanding stock of the Company's
communications subsidiary and 700,305 shares of the Company's common stock
which is owned by John E. Rayl, C.E.O. and President. Mr. Rayl and the Company
have agreed that if Mr. Rayl's shares are foreclosed upon the Company will
satisfy its contribution obligation to Mr. Rayl by distributing two shares of
the same class of stock for every one share foreclosed upon.
14. CAPITAL LEASE OBLIGATIONS AND ACCRUED INTEREST PAYABLE
The Company is obligated under long-term capital leases (see Notes 1 and 3)
covering the lease of equipment for the fiscal years ending subsequent to April
30, 1994, as follows:
Years Ending Capital Lease
April 30, Obligation Payments
1995 $ 24,887,661
1996 24,885,779
1997 11,699,104
1998 2,445,760
1999 2,035,662
------------
Total minimum obligations 65,953,966
Less interest (9,156,175)
------------
Present value of net minimum
obligations and accrued interest $ 56,797,791
============
15. RELATED PARTY TRANSACTIONS
For the fiscal year ended April 30, 1994 the Company 1) issued 60,000
shares to officers and directors for $3,000 and incurred $23,400 of
compensation expense therefor, 2) earned $96,615 from partnerships which are
partially owned by a nonconsolidated affiliate of which an officer of the
Company is a general partner, 3) incurred $4,950 for leasing a vehicle from its
Chief Executive Officer which was leased to the Chief Operating Officer of a
subsidiary for $2,900, 4) recognized $256,268 of non recurring write-offs which
relate to the above mentioned partnerships and other nonconsolidated affiliates
of the Company of which an officer of the Company is a general partner or
officer, 5) borrowed $30,000 from its Chief Executive Officer, and 6) applied a
loan of $11,370 and accrued interest against compensation owed to its Chief
Executive Officer. At the request of the underwriter's (see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 24") the Company's Chief Executive Officer has agreed to reduce his salary
effective May 1, 1994 to $110,000 per year from $249,700, such amendment to
his salary includes an increase of 5% of income before income taxes (excluding
the C.E.O.'s compensation and costs associated with the underwriting and any
short-term loans undertaken until the underwriting is completed) over
$1,000,000 of the previous year. This amendment will be null and void if the
underwriting to which it relates is not undertaken and in such case the salary
will be retroactively adjusted to the previous amount. For additional related
party information see Notes 13 and 23.
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For the fiscal year ended April 30, 1993 the accompanying financial
statements include $67,617 of income recognized from partnerships in which the
Company and its Chief Executive Officer are general partners. In addition, the
Company entered into several transactions with its Chief Executive Officer
including the exchange of a note payable in the amount of $81,056 for 217,704
shares of restricted common stock, issuance of 100,000 shares upon the exercise
of 100,000 Class A Warrants, repayment of loans in the amount of $43,225, an
advance of $10,125, and leased a van at the rate of $450 per month.
During the fiscal year ended April 30, 1992 the Company recognized $45,000
in management fees from a nonconsolidated affiliate in which an officer of the
Company is a general partner; and at the end of fiscal 1992 the Company's
president had personally guaranteed repayment of $88,125 of the Company's
obligations.
16. EMPLOYEE STOCK OPTION AND STOCK APPRECIATION RIGHTS PLANS
The following table sets forth: (1) the number of shares of the Company's
common stock issuable at April 30, 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 April 30, 1994,
based on $1.00 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 at April 30, 1994 (see Note 19).
Number of
Shares Market
Covered By Exercise Aggregate Value at
Outstanding Price Per Exercise Expiration April 30,
Plan Options Share Price Dates 1994
- - ----------------------- --------- ------- ----------- -------- -----------
Incentive Stock Option Plan 71,428 $ 0.69 $ 49,285 11/18/02 $ 71,428
Incentive Stock Option Plan 250,000 (1) $ 1.09 $ 272,500 7/15/03 $ 250,000
Incentive Stock Option Plan 1,500 $ 0.9375 $ 1,406 4/29/04 $ 1,500
Stock Option and Stock
Appreciation Rights Plan 100,000 $ 0.69 $ 69,000 11/18/02 $ 100,000
Stock Option and Stock
Appreciation Rights Plan 340,000 (1) $ 1.09 $ 370,600 7/15/03 $ 340,000
<FN>
(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 terminated.
(2) All Options are currently exercisable, except as noted above, and no
Options were exercised during the current period.
17. 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. As of April 30, 1994 the Company had issued 8,000 options which
are each exercisable at $1.6917.
18. 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.
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33
19. PROPOSED REVERSE STOCK SPLIT
On May 9, 1994 a Special Meeting of Shareholders was called to approve a
one (1) for three (3) reverse common stock split (the "Reverse Split"). The
Meeting is scheduled for July 21, 1994 and the Company expects the effective
date to be July 22, 1994. If the Reverse Split is approved, each three (3)
shares owned by holders of record of the Company's Common Stock at the close of
business on the effective date will be converted into one (1) share. As a
result of the Reverse Split there will be corresponding adjustments for all
previous stock purchase rights granted and the number of shares authorized
thereunder in accordance will all plan terms therefor.
20. COMMON STOCK AND CAPITAL TRANSACTIONS
The Company's Common stock trades on The Nasdaq Small-Cap Market under the
symbol APHC and on the Boston Stock Exchange under the symbol PTH.B. The
Company's common stock issued and outstanding is as follows (see Note 19):
Total Number Common Paid in
of Shares Stock Capital
Issued and outstanding shares as of April 30, 1992 1,383,503 $ 69,175 $4,269,063
Stock sales (excluding warrants) 231,704 11,585 76,471
Common stock subscribed 400,000 20,000 233,750
Warrant exercise stock sales (net of offering
expenses) 1,047,938 52,397 966,531
Reverse stock split fractional shares dropped (720) (36) 36
---------- ---------- ----------
Issued and outstanding shares as of April 30, 1993 3,062,425 153,121 5,545,851
Warrant exercise stock sales (net of offering
expenses) 2,359,481 117,974 2,237,288
Stock sales (excluding warrants and net of offering
expenses) 565,000 28,250 119,262
Common stock subscribed (400,000) (20,000) -
Other charges - - (38,413)
---------- ---------- ----------
Issued shares as of April 30, 1994 5,586,906 $ 279,345 $ 7,863,988
========== ========== ==========
During the fiscal year ended April 30, 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.
As of April 30, 1994 the Company has 44,413,094 shares of its $0.05 per
share par value common stock authorized for issuance and unissued, and 7,200
shares in its treasury stock account. As of April 30, 1994 there were 762,928
shares reserved and issuable under various stock option plans (see Note 16).
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 and
recorded a liability for $40,000 for promotional services rendered by the
person to whom the shares were issued. The Company recorded the receivable as
common stock issued and unpaid. In fiscal 1994 the Company received from this
person 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 has charged $38,413 to paid in capital.
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34
21. INCOME TAXES
The Financial Accounting Standards Board released Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109") in
February, 1992, which changed the accounting principles used in reporting
income tax expense pursuant to Accounting Principals Board Opinion No. 11 ("APB
11"). All amounts computed for fiscal 1993 and thereafter are pursuant to SFAS
109 and all amounts computed for fiscal 1992 are pursuant to APB 11.
For financial accounting purposes income taxes were reported pursuant to
APB 11 using the deferred method. SFAS No. 109 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 arise
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 Company has 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 $360,600
(net of a valuation allowance of $180,600), which was reported in the fiscal
1993's statements of consolidated operations. The valuation allowance at the
beginning fiscal 1994 was $788,200 and increased $843,800.
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) are as follows:
Fiscal Year Ended April 30,
-----------------------------------------
1994 1993 1992
Deferred Liabilities:
Cash versus accrual reporting $ 99,200 $ 312,400 $ 638,300
Capital lease versus operating lease reporting 594,400 923,500 336,700
Excess amortization of leasehold costs 4,513,500 5,356,700 -
Temporary differences not currently utilizable 93,400 75,000 1,410,900
---------- ---------- ----------
Total deferred tax liabilities 5,300,500 6,667,600 2,385,900
---------- ---------- ----------
Deferred Assets:
Cash versus accrual reporting $ (17,900) $ (73,100) $ -
Excess amortization of leasehold costs - - (2,310,900)
Temporary differences with no tax benefit - - -
Net operating loss carryforwards (6,839,600) (7,307,700) -
---------- ---------- ----------
Gross deferred tax assets (6,857,500) (7,380,800) (2,310,900)
Deferred tax asset valuation allowance 1,632,000 788,200 -
---------- ---------- ----------
Total deferred tax assets (5,225,500) (6,592,600) (2,310,900)
---------- ---------- ----------
Net deferred tax liabilities (asset) $ 75,000 $ 75,000 $ 75,000
---------- ---------- ----------
As of April 30, 1994 the Company and its subsidiaries have regular tax net
operating loss carryforwards, expiring in the years 2004 through 2009 available
to offset future taxable income of $19,771,300.
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35
The Company's income tax expense attributable to continuing operations is
comprised of the following significant components for the fiscal year ended
April 30, 1994:
1994 1993
----------- -----------
Deferred tax expense $(1,311,900) $ 587,500
Utilization of (Benefit) derived from use of operating
loss carryforwards 468,100 (1,015,100)
Change in the amount of valuation allowance that is
applicable to the beginning of the year balance 843,800 607,600
---------- ----------
Provision for income taxes $ 0 $ 180,000
========== ==========
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,
-----------------------------------------
1994 1993 1992
U.S. Federal statutory income tax rate $ (897,500) $ (516,700) $ (788,600)
Key man life insurance premiums 1,300 $ - $ 300
Amortization of cost in excess of
net assets acquired 47,900 43,800 42,000
Utilization of net operating losses - - -
Losses not currently utilizable 2,500 - 746,000
Other 2,000 45,300 300
Valuation allowance 843,800 607,600 -
---------- ---------- ----------
Income tax expense (benefit) at effective rate $ 0 $ 180,000 $ 0
========== ========== ==========
For the years ended April 30, 1994, 1993 and 1992 the provision for income
taxes charged to continuing operations was as follows:
Fiscal Year Ended April 30,
-----------------------------------------
1994 1993 1992
Federal current $ - $ - $ -
Federal deferred - 180,000 -
---------- ---------- ----------
Provision for income taxes $ - $ 180,000 $ -
========== ========== ==========
22. ACQUISITION
On March 10, 1993 the Company acquired the assets of WDZD-FM, Shallotte,
North Carolina. The total purchase price was $462,000, which was paid with
$260,000 in cash and two promissory notes to the seller in the amounts of
$95,000 and $107,000, which are payable over 60 months (see Note 13). The
station's upgrade to 25 kw was completed and call letters were changed to
WLTT-FM in February, 1994.
The acquisition was accounted for under the purchase method of accounting
and the results of operations for WDZD are included in the Company's results of
operations for the period beginning March 10, 1993 and thereafter. Goodwill
associated with the acquisition will be amortized over twenty years.
Additionally, the Company has allocated $50,000 of its deferred organization
costs to this goodwill.
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36
If the acquisition had occurred at the beginning of fiscal 1993 or at the
beginning of fiscal 1992 period the unaudited proforma results of operations
would of been as follows:
Fiscal Year Ended April 30,
------------------------------------
1993 1992
Total revenue $ 49,823,554 $ 89,678,467
Loss before cumulative effect of change
in accounting principle $ (1,844,810) $ (2,464,528)
Net loss $ (1,664,810) $ (2,464,528)
Primary Earnings Per Share:
Loss before cumulative effect of change in
accounting principle $ (0.22) $ (1.94)
Cumulative effect of change in accounting principle $ 0.03 $ 0.00
Primary net loss per share $ (0.19) $ (1.94)
Fully Diluted Earnings Per Share:
Loss before cumulative effect of change in
accounting principle $ (0.22) $ (1.94)
Cumulative effect of change in accounting principle $ 0.03 $ 0.00
Fully net loss per share $ (0.19) $ (1.94)
The above proforma financial information is presented for informational
purposes only and is not necessarily indicative of the operating results which
would have occurred had the acquisition of WDZD been consummated at the above
dates, nor are they necessarily indicative of future operating results.
23. LITIGATION
The Company has been involved in a dispute with the Estate of Joseph
Bitonte and Star Bank Central Ohio, regarding a loan from the bank to Mr.
Bitonte and a guarantee and pledge of collateral by the Company and Mr. Rayl
(among others) since 1987. In a settlement recently reached between the
parties and to be entered into on or before August 6, 1994, the Company has
agreed to pay $115,000 to the Bitonte Estate in full and final settlement of
all matters in dispute against the Company and Mr. Rayl, and, in turn, the
litigation will be terminated and all parties' claims against one another will
be released in such a manner so as to reserve the Star Bank's claims against
other guarantors who are not affiliated with the Company.
24. COMMITMENTS AND CONTINGENCIES
The Company has entered into contracts for the purchase and construction of
five (5) FM and two (2) AM radio stations. Escrow deposits in the aggregate
amount of $90,000 have been tendered and requests for permission to transfer
the various licenses have been filed with the Federal Communications
Commission. As of the date of this report the FCC has not acted favorably or
unfavorably as to any of the requests for transfer and the Company has no
reason to believe that the requests will not be granted. The aggregate
purchase price and construction costs are estimated to be approximately
$3,487,000 of which approximately $1,510,000 is to be paid in cash at closing,
$1,350,000 is to be paid monthly with interest at rates ranging from 7% to 10%
per annum based on a 10 year term with all unpaid principal due in 60 months
from the date of closing, approximately $145,000 through the assumption of
existing bank debt, $397,000 of new equipment purchases and the assumption of
approximately $85,000 of existing leases on broadcast equipment.
Financing for these transactions is being provided principally from
external sources, including the Companies placement of approximately $600,000
of promissory notes (see Note 13) and an anticipated sale of equity securities.
The Company has entered into a letter of intent which provides for the sale of
up to $7,500,000 of equity securities in a registered underwriting. Such
underwriting is subject to change based upon future market conditions. The
Company anticipates that it will file a registration statement with the
Securities and Exchange Commission as to these securities as soon as
practicable after the filing of its April 30, 1994 annual report. In addition,
the Company is
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pursuing secondary sources of mezzanine financing and other debt and/or equity
transactions as they may become available. Also see Note 15.
25. 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. The Company operated in
predominately one segment for all years prior to 1994; therefore, no financial
segment information is reported herein prior to fiscal 1994. Financial
information for the Company's industry segments is summarized below for the
fiscal year ended April 30, 1994.
1994 Leasing Broadcasting Other (1) Consolidated
------------------- -------------- -------------- -------------- --------------
Total revenue from
unaffiliated customers $ 30,152,140 $ 211,702 $ 121,296 $ 30,485,138
Operating loss (873,552) (671,612) (953,198) (2,498,362)
Identifiable assets 89,887,858 1,199,924 2,332,378 93,420,160
Depreciation and
amortization 18,459,756 68,296 139,783 18,667,835
Capital expenditures 1,389 392,505 12,496 406,390
<FN>
(1) Other includes costs associated with 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 for the
fiscal year ended April 30, 1994:
Consolidated operating loss $ (2,498,362)
Interest expense not included in
non leasing operating loss (141,231)
--------------
Operating loss reported in the
statement of consolidated
operations (2,639,593)
==============
26. NET INCOME (LOSS) PER SHARE
For the fiscal year ended April 30, 1994 primary earnings per share amounts
are computed based on the weighted average number of common shares outstanding
of 5,086,690 shares. No common stock equivalents are included herein due to
their antidilutive nature. During the current year the Company issued
2,917,281 shares pursuant to stock sales, net of 7,200 shares acquired for
treasury stock (see Note 18 and 20) which are included in the weighted average
number of common shares outstanding. The aforementioned shares issued include
2,359,481 shares issued pursuant to warrant exercises. If these shares had
been issued at the beginning of the current fiscal year primary and fully
diluted earnings per share would have been ($0.47).
For the fiscal year ended April 30, 1993 primary earnings per share amounts
are computed based on the weighted average number of common shares outstanding
of 2,541,977 shares. The primary average number of common and common
equivalent shares were 6,950,914 shares for the fiscal year ended April 30,
1993. Fully diluted average number of common and common equivalent shares for
the fiscal year ended April 30, 1993 were 6,951,709. Interest expense for
fully diluted earnings per share has been adjusted under the modified treasury
stock method. At the end of fiscal 1993 the Company had issuable 400,000
shares which were not issued, these were included in the average number of
common and common equivalent shares.
The Company issued, during the fiscal year ended April 30, 1993, 1,279,642
shares pursuant to stock sales (see Note 20) which are included in the weighted
average number of common shares outstanding. The aforementioned shares issued
include 1,047,938 shares issued pursuant to warrant exercises, also 2,334,423
shares were issued
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38
subsequent to April 30, 1993 pursuant to warrant exercises. If these shares
had been issued at the beginning of fiscal 1993 primary and fully diluted
earnings per share would have been as follows: Loss per share before
cumulative effect of change in principle ($0.23), cumulative effect of a change
in principle $0.03, and net loss per share ($0.20). On October 27, 1992 the
Company issued 14,000 shares of stock (which are included in the above
mentioned number) for the payment of accrued interest on debt. There would
have been no change in earnings per share if these shares were issued at the
beginning of the period. On November 6, 1992, the Company issued 217,704
shares of stock (which are included in the aforesaid number) for the payment of
debt (see Note 15). If these shares had been issued at the beginning of the
current fiscal year primary and fully diluted loss per share would have been as
follows: Loss per share before cumulative effect of a change in principle
($0.20), cumulative effect of a change in principle $0.03, and net loss per
share ($0.17).
For the fiscal year ended April 30, 1992, primary and fully diluted
earnings per share amounts, were computed based on 1,268,857 shares, the
weighted average number of common shares outstanding. The Company issued,
during fiscal 1992, 197,155 shares pursuant to stock sales which were included
in the weighted average number of common shares outstanding . Shares under the
Company's stock option plans are antidilutive for fiscal 1992, therefore, these
are not included herein. All of the above amounts and all amounts hereof were
restated (unless specified otherwise) for the 1 to 5 reverse stock split,
effected March 9, 1992. During the fiscal year ended April 30, 1992 the
Company issued 114,955 shares pursuant to warrant exercises and 1,047,333
shares subsequent to April 30, 1992 pursuant to warrant exercises. If these
shares had been issued immediately upon the issuance of the warrants primary
and fully diluted loss per share would have been ($1.01). On February 25, 1992
the Company issued 50,000 shares (before restatement) of stock pursuant for the
exercise of 50,000 A Warrants. The proceeds therefrom were used to retire debt
issued June 14, 1991. If the stock was issued and debt retired upon the
issuance of the warrants, primary and fully diluted loss per share would have
been ($1.82). At the end of fiscal 1992 the Company has issuable 12,000 shares
pursuant to the above debt, which were included in the weighted average number
of common shares outstanding for the current fiscal year.
38
39
27. SUPPLEMENTAL CASH FLOW INFORMATION
Reconciliation of net loss to net cash used for operating activities is as follows:
Fiscal Year Ended April 30,
---------------------------------------------
1994 1993 1992
Net loss $ (2,639,593) $(1,519,715) $(2,319,433)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash
used for operating activities:
Expenses and revenues not affecting operating cash flows:
Cumulative effect to May 1, 1992 of change in
accounting principle for income taxes - (180,000) -
Loss on residual valuation 458,245 633,351 1,102,602
Depreciation, and amortization of equipment and
intangible assets 18,667,835 36,142,592 52,472,472
Deferred costs expensed and amortized 68,127 2,874 20,116
Loss from other valuation - - 24,147
Loss (net of $8,211 gain, for fiscal 1992) on
sale of office furniture and equipment 4,135 - 69,936
Advisory services paid in stock 189,665 169,166 -
Nonrecurring write-offs - related party 256,268 - -
Employee stock bonus 23,400 - -
Rental income (21,845,430) (34,761,344) (65,755,543)
Leasing interest income (8,175,098) (14,387,839) (23,597,940)
Leasing interest expense 11,595,851 13,209,859 37,087,101
Changes in assets and liabilities:
Changes in accrued interest income 19,573 16,042 117,954
Changes in accrued interest expense (37,423) 126,546 36,905
Changes in notes, accounts and commissions
receivable 38,702 (105,138) 209,177
Changes in other assets 28,883 10,293 48,739
Changes in note and accounts payable, and
accrued expenses (9,486) (156,354) 245,877
Income taxes - 180,000 -
Other (5,454) 211 210
----------- ----------- -----------
Total Adjustments 1,277,793 900,259 2,081,753
----------- ----------- -----------
NET CASH USED FOR OPERATING ACTIVITIES $(1,361,800) $ (619,456) $ (237,680)
=========== =========== ===========
39
40
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 increases 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, 1994, 1993 and 1992 are as follows:
Fiscal Year Ended April 30,
---------------------------------------------------
1994 1993 1992
ASSETS:
Equipment notes and accrued interest receivable $ - $ (15,049,872) $ (9,840,731)
Leased property under capital lease (net of
accumulated amortization) - (24,281,049) (511,559)
Net investment in operating leases (715,565) 7,564,804 -
Net investment in direct financing leases 14,759,430 - -
------------ ------------ ------------
Total Assets $ 14,043,865 $ (31,766,117) $ (10,352,290)
------------ ------------ ------------
LIABILITIES:
Notes and accrued interest payable $ 14,759,430 $ - $ -
Discounted lease rentals and accrued interest payable (715,565) (16,716,245) (511,559)
Capital lease obligations and accrued interest payable - (15,049,872) (9,840,731)
------------ ------------ ------------
Total Liabilities $ 14,043,865 $ (31,766,117) $ (10,352,290)
============ ============ ============
During the fiscal year ended April 30, 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 60,000 shares for $3,000 in cash and incurred $23,400 of compensation
expense, (4) recorded broadcasting rights of $417,039 and related broadcasting
rights payable of an equivalent amount (5) reduced common stock issued and
unpaid by $90,000, relieved a liability in the amount of $40,000, charged paid
in capital for $38,413 and recorded $11,588 of treasury stock, without
receiving or expending cash (see Note 20), (6) received $1,450 of fixed assets
in barter transactions and (7) reduced accrued officer compensation and
interest payable by offsetting a short-term loan and accrued interest
receivable in the amount of $11,370 (see Note 15). During the current fiscal
year the Company purchased 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 the fiscal year ended April 30,
1994 the Company disposed of Net Investment in Operating Leases of $715,565
(net of $1,330,455 of accumulated depreciation) and Discounted Lease Rentals
and Accrued Interest Payable of a commensurate amount. Also during fiscal 1994
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 fiscal year ended April 30, 1993 the Company sold assets and
liabilities, which at the date of sale included Leased Property Under Capital
Lease of $23,530,404, and Discounted Lease Rentals and Accrued Interest Payable
of $23,530,404 for a $10,000 reduction of debt. Also, during this same period
there were additional dispositions of assets and liabilities which included
Leased Property Under Capital Lease of $750,645, Installment Notes and Accrued
Interest Receivable of $15,049,872, Discounted Lease Rentals and Accrued
Interest Payable of $750,645, and Capital Lease Obligations and Accrued
Interest Payable of $15,049,872. Acquisitions during fiscal 1993 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 fiscal 1993
leasehold tenancy positions terminated which reduced the gross value of Leased
Property Under Capital Lease by $52,863,547 and accumulated amortization by a
tantamount.
Also, during fiscal 1993 100,000 warrants were exercised for a $100,000
reduction in accrued compensation (see Note 15). 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 (see Note 15). Furthermore, during
fiscal 1993, 90,000 warrants were exercised and 90,000 shares were issued for
which the Company has recorded a receivable of $90,000 (see Note 20).
Additionally, the Company incurred $2,634 of debt pursuant to the purchase of
office equipment during the fiscal year ended April 30, 1993. During the
fiscal 1993 the Company reduced Residuals, Notes and Accrued Interest
Receivable by $10,582 by eliminating Unearned Income. Also, during the same
period the Company received 2,000 shares of
40
41
another Company's stock in payment of a $7,822 note receivable. Additionally,
during fiscal 1993 the Company incurred $625,000 of debt, incurring $125,000
related to a transaction fee, receiving a net of $500,000 (see Note 13).
During the fiscal year ended April 30, 1992, the Company acquired assets
and liabilities associated with equipment and equipment leases represented by
Leased Property Under Capital Lease of $7,059,442, and Discounted Lease Rentals
and Accrued Interest Payable of $7,059,442. Also during the fiscal year April
30, 1992, the Company disposed of assets and liabilities which were comprised
of Equipment Notes and Accrued Interest Receivable of $9,840,731, Leased
Property Under Capital Lease of $7,571,001, Discounted Lease Rentals and
Accrued Interest Payable of $7,571,001 and Capital Lease Obligations and
Accrued Interest Payable of $9,840,731. Leasehold tenancy positions terminated
which reduced the gross value of Leased Property Under Capital Lease by
$42,847,270 and accumulated amortization by a tantamount.
During fiscal 1992 the Company issued stock and debt for $101,000, for
which an additional $9,000 of paid in capital has been assigned to the value of
the stock, which was capitalized as debt issuance costs. Also, a capital lease
obligation of $11,825 was incurred when the Company entered into a lease for
new equipment. Additionally, the Company reduced notes and accrued interest
payable by $41,836 without expending any cash or property. During fiscal 1992,
the Company has written off the value of a securities broker license in the
amount of $22,400. Further, the fiscal year ended April 30, 1992, the Company
paid compensation with furniture and office equipment in the amount of $13,767
and accounts payable for $8,625. The Company issued stock for the payment of
debt in the net amount of $25,853. The Company reduced Residuals, Notes and
Accrued Interest Receivable by $794,280 by eliminating Unearned Income.
Refer to other notes to the financial statements for further discussion of
noncash investing and financing activities.
41
42
28. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized selected quarterly financial data for the fiscal years ended April 30, 1994 and 1993 is set forth below:
FISCAL YEAR ENDED APRIL 30, 1994
----------------------------------------------------------------------
FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------ -------------
Revenues $ 5,708,797 $ 7,409,177 $ 8,023,733 $ 9,343,431
Expenses 6,916,303 7,686,428 8,576,171 9,945,829
------------ ------------ ------------ -------------
NET LOSS $ (1,207,506) $ (277,251) $ (552,438) $ (602,398)
============ ============ ============ =============
PRIMARY NET LOSS PER SHARE $ (0.22) $ (0.05) $ (0.10) $ (0.17)
============ ============ ============ =============
FULLY DILUTED NET LOSS PER SHARE $ (0.22) $ (0.05) $ (0.10) $ (0.17)
============ ============ ============ =============
================================================================================================================================
FISCAL YEAR ENDED APRIL 30, 1993
----------------------------------------------------------------------
FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------ -------------
Revenues $ 10,935,605 $ 12,019,971 $ 11,992,846 $ 14,712,056
Expenses 11,975,682 12,162,788 12,174,355 14,867,368
------------ ------------ ------------ -------------
LOSS BEFORE INCOME TAXES (1,040,077) (142,817) (181,509) (155,312)
Income tax expense (benefit) 450,000 0 (251,200) (18,800)
------------ ------------ ------------ -------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (1,490,077) (142,817) 69,691 (136,512)
Cumulative Effect to May 1,1992 of Change in
Accounting Principle for Income Taxes
0 0 0 180,000
------------ ------------ ------------ -------------
NET INCOME (LOSS) $ (1,490,077) $ (142,817) $ 69,691 $ 43,488
============ ============ ============ =============
PRIMARY NET INCOME (LOSS) PER SHARE:
Income (loss) before cumulative effect of
change in accounting principle $ (0.50) $ (0.05) $ 0.01 $ 0.01
Cumulative effect of change in accounting
principle 0.00 0.00 0.00 0.02
------------ ------------ ------------ -------------
Primary Net Income (Loss) Per Share $ (0.50) $ (0.05) $ 0.01 $ 0.03
============ ============ ============ =============
FULLY DILUTED NET INCOME (LOSS) PER SHARE:
Income (loss) before cumulative effect of
change in accounting principle $ (0.50) $ (0.05) $ 0.01 $ 0.01
Cumulative effect of change in accounting
principle 0.00 0.00 0.00 0.02
------------ ------------ ------------ -------------
FULLY DILUTED NET INCOME (LOSS) PER SHARE $ (0.50) $ (0.05) $ 0.01 $ 0.03
============ ============ ============ =============
42
43
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
Cocmpany'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.
43
44
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
Form 10-K
Page Reference
--------------
(a)(1) Index to Consolidated Financial Statements:
Report of Independent Certified Public Accountants 18
Consolidated Balance Sheets as of April 30, 1994 and 1993 19
Statements of Consolidated Operations for the years ended
April 30, 1994, 1993 and 1992 21
Statements of Consolidated Stockholders' Equity for the years ended
April 30, 1994, 1993 and 1992 22
Statements of Consolidated Cash Flows for the years ended
April 30, 1994, 1993 and 1992 23
Notes to Consolidated Financial Statements 24-42
(a)(2) Index to Financial Statement Schedules:
II Amounts due from related parties and underwriters, promoters and
employees other than related parties 45
V Property, plant and equipment 46
VI Accumulated depreciation, depletion and amortization of property,
plant and equipment 47
VIII Valuation and qualifying accounts 48
IX Short-term borrowings 49
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 57.
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during the fiscal quarter
ended April 30, 1994:
(1) Form 8-K dated March 10, 1994 to announce Mark S. Manafo ceased being a
Director, Chief Operating Officer and Employee of the Company's Subsidiary,
Partech Communications Group, Inc. and all of its subsidiaries.
44
45
PARTECH HOLDINGS CORPORATION
SCHEDULE II AMOUNTS RECEIVABLE FROM RELATED PARTIES
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE FISCAL YEARS ENDED APRIL 30, 1994, 1993 AND 1992
Column A Column B Column C Column D Column E
---------------- ------------ ------------ ---------------------------- --------------------------
Deductions Balance at End of Period
---------------------------- --------------------------
Balance at
Fiscal Beginning Amounts Amounts
Year Ended Name of Debtor of Period Additions Collected Written Off Current Non Current
------------ ---------------- ------------ ------------ -------------- ------------ --------- --------------
1994 John E. Rayl $232,158 $35,765 (A) ($11,655) (B) ($256,268) $0 (C) $0 (C)
1993 John E. Rayl $211,966 $24,271 (A) ($4,079) (B) $0 $101,478 $130,680
1992 John E. Rayl $171,473 $58,033 (A) ($17,540) (B) $0 $77,407 $134,559
<FN>
(A) Represents advances to nonconsolidated affiliates, and partnerships which are partially owned by a
nonconsolidated affiliate. Mr. Rayl is a partner in the above mentioned nonconsolidated affiliates.
Fiscal 1992 additions include a $10,125 short-term loan to Mr. Rayl, at 10% interest per annum.
(B) Fiscal 1994 collections include the above mentioned loan to Mr. Rayl and accrued interest in the amount of
$11,370, which were applied against accrued compensation due to Mr. Rayl. Collections for fiscal 1993
and 1992 were entirely cash.
(C) There are no amounts hereof due to the Company at the end of fiscal 1994.
45
46
SCHEDULE V PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED APRIL 30, 1994, 1993 AND 1992
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- -------- -------- -------- -------- --------
Balance at Other Balance at
Beginning Additions Changes End of
Description of Period at Cost Retirements Add (Deduct) Period
----------- ------------- -------------- ------------- ------------- ---------------
FOR THE YEAR ENDED
APRIL 30, 1994:
Furniture and office
equipment $ 383,073 $ 24,669 $ (13,337) $ - $ 394,405
Broadcasting equipment 211,515 198,170 (9,300) - 400,385
Automobile 4,000 77,255 (58,176) - 23,079
Leased property under
capital lease (B) 185,994,410 - (32,936,834) - 153,057,576
Net investment in
operating leases (A) 7,564,804 - (2,046,021) - 5,518,783
Building and
improvements 25,000 21,806 - - 46,806
Land 15,000 53,761 - - 68,761
Land improvements - 5,687 - - 5,687
Construction in progress - 3,539 - - 3,539
Inventory - 21,503 - - 21,503
------------- ------------- ------------- ------------- -------------
$ 194,197,802 $ 406,390 $ (35,063,668) $ - $ 159,540,524
============= ============= ============= ============== =============
FOR THE YEAR ENDED
APRIL 30, 1993:
Furniture and office
equipment $ 369,960 $ 13,113 $ 0 $ - $ 383,073
Broadcasting equipment 0 211,515 0 - 211,515
Automobile 0 4,000 0 - 4,000
Leased property under
capital lease (A)(B) 300,095,873 0 (114,101,463) - 185,994,410
Net investment in
operating leases (A) 0 7,564,804 0 - 7,564,804
Building and
improvements 0 25,000 0 - 25,000
Land 0 15,000 0 - 15,000
------------- ------------- ------------- ------------- -------------
$ 300,465,833 $ 7,833,432 $ (114,101,463) $ - $ 194,197,802
============= ============== =============== ============== =============
FOR THE YEAR ENDED
APRIL 30, 1992:
Furniture and office
equipment $ 564,413 $ 19,003 $ (213,456) $ - $ 369,960
Leased property under
capital lease (A)(B) 348,408,807 7,059,442 (55,372,376) - 300,095,873
------------- ------------- ------------- ------------- -------------
$ 348,973,220 $ 7,078,445 $ (55,585,832) $ - $ 300,465,833
============= ============== =============== ============== =============
<FN>
(A) Cost of additions for all years represent the assumption of discounted lease rental debt.
(B) Retirements of $32,936,834, $52,863,547 and $42,847,270 and are due to leasehold tenancies expiring in
the fiscal years ended April 30, 1994, 1993 and 1992, respectively.
46
47
SCHEDULE VI ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED APRIL 30, 1994, 1993 AND 1992
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- -------- -------- -------- -------- --------
Additions
Balance at Charged to Other Balance at
Beginning Costs and Changes End of
Description of Period Expenses Retirements Add (Deduct) Period
----------- ------------- ------------- ------------- ------------- ---------------
FOR THE YEAR ENDED
APRIL 30, 1994:
Furniture and office
equipment $ 254,779 $ 54,188 $ (9,976) $ - $ 298,991
Broadcasting equipment 8,284 40,126 (1,661) - 46,749
Automobile 250 6,518 (4,155) - 2,613
Leased property under
capital lease (A) 141,703,003 15,206,562 (32,936,834) - 123,972,731
Net investment in
operating leases 2,271,639 3,217,953 (1,330,455) - 4,159,137
Building and
improvements 313 1,522 - - 1,835
Land improvements - 71 - - 71
------------- ------------- ------------- ------------- -------------
$ 144,238,268 $ 18,526,940 $ (34,283,081) $ - $ 128,482,127
------------- ------------- ------------- ------------- -------------
FOR THE YEAR ENDED
APRIL 30, 1993:
Furniture and office
equipment $ 191,831 $ 62,948 $ 0 $ - $ 254,779
Broadcasting equipment 0 8,284 0 - 8,284
Automobile 0 250 0 - 250
Leased property under
capital lease (A) 197,853,206 33,670,211 (89,820,414) - 141,703,003
Net investment in
operating leases 0 2,271,639 0 - 2,271,639
Building and
improvements 0 313 0 - 313
------------- ------------- ------------- ------------- -------------
$ 198,045,037 $ 36,013,645 $ (89,820,414) $ - $ 144,238,268
============= ============= ============= ============== =============
FOR THE YEAR ENDED
APRIL 30, 1992:
Leased property under
capital lease (A) $ 193,388,339 $ 52,266,242 $ (47,801,375) $ - $ 197,853,206
Furniture and office
equipment 228,213 82,773 (119,155) - 191,831
------------ ------------ ------------- ------------- ------------
$ 193,616,552 $ 52,349,015 $ (47,920,530) $ - $ 198,045,037
============= ============= ============= ============== =============
<FN>
(A) Retirements of $32,936,834 , $52,863,547 and $42,847,270 and are due to leasehold tenancies expiring in
the fiscal years ended April 30, 1994, 1993 and 1992, respectively.
47
48
SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 1994, 1993 AND 1992
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
Additions
---------------------------
Balance at Charged Charged Balance at
Allowance for Beginning to Costs to Other End of
Uncollectable Accounts of Period and Expenses Accounts Deductions (A) Period
- - ------------------------- ------------- ------------ -------- -------------- ---------------
FOR THE YEAR ENDED:
April 30, 1994
Accounts receivable -
related party $ - $ 129,234 $ - $ (129,234) $ -
Accounts receivable - 10,415 - (7,685) 2,730
Notes receivable -
related party - 128,714 - (128,714) -
Equipments residuals - 425,000 - (425,000) -
Net investment in
direct financing
leases - 33,245 - (33,245) -
Valuation allowance for
deferred tax assets 788,200 843,800 - - 1,632,000
----------- ----------- ----------- ------------ -----------
Total $ 788,200 $ 1,570,408 $ - $ (723,878) $ 1,634,730
=========== =========== =========== ============ ===========
April 30, 1993
Accounts receivable $ - $ 9,498 $ - $ (9,498) $ -
Equipments residuals - 578,553 10,583 (B) (589,136) -
Net investment in
direct financing
leases - 54,798 - (54,798) -
Valuation allowance for
deferred tax assets (C) 180,600 607,600 - - 788,200
----------- ----------- ----------- ------------ -----------
Total $ 180,600 $ 1,250,449 $ 10,583 $ (653,432) $ 788,200
=========== =========== =========== ============ ===========
For the year ended:
April 30, 1992
Accounts receivable $ - $ 17,443 $ - $ (17,443) $ -
Equipments residuals - 474,699 - (474,699) -
Net investment in
direct financing
leases - 610,460 - (610,460) -
----------- ----------- ------------ -------------- ------------
Total $ - $ 1,570,408 $ - $ (1,102,602) $ 1,634,730
============= =========== ============ ============== ============
<FN>
(A) All amounts were written off.
(B) Charged to unearned income.
(C) The Company implemented SFAS 109, Accounting for Income Taxes, as a Cumulative Effect of Change
in Accounting Principle effective May 1, 1992 and recorded a valuation allowance of $180,600 thereof (see
"Note 21 - Notes to the Consolidated Financial Statements").
48
49
SCHEDULE IX SHORT-TERM BORROWINGS
FOR THE YEARS ENDED APRIL 30, 1994, 1993 AND 1992
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- - -------- -------- -------- -------- -------- --------
Maximum Average Weighted
Category of Weighted Amount Amount Average
Aggregate Balance at Average Outstanding Outstanding Interest Rate
Short-Term End of Interest During the During the During the
Borrowing Period Rate Period Period (A) Period (B)
- - ---------- ------------ ----------- ----------- ----------- ----------
For the year ended
April 30, 1994:
Short-term
borrowings
from banks
and officers (C) $ 30,000 81.72% $ 625,000 $ 106,667 127.15%
=========== ========== =========== =========== ==========
For the year ended
April 30, 1993:
Short-term
borrowings
from banks
and officers (C) $ 625,000 22.20% $ 625,000 $ 137,177 84.24%
=========== ========== =========== =========== ==========
For the year ended
April 30, 1992:
Short-term
borrowings
from banks
and officers $ 204,272 11.93% $ 283,732 $ 238,180 12.35%
=========== ========== =========== =========== ==========
<FN>
(A) The average amount outstanding during the period was computed by dividing the total of month-end
outstanding principal balances by twelve.
(B) The weighted average interest rate during the period was computed by dividing the actual interest expense by
the average short-term debt outstanding.
(C) During the fiscal year ended April 30, 1993 the Company borrowed $625,000 and incurred a transaction fee
of $125,000 which was charged to interest expense. During fiscal 1994 the loan was extended and the
Company incurred an extension fee of $62,500 which was charged to interest expense, and incurred interest
thereafter at the rate of 5% per month.
49
50
EXHIBIT 11(A). PRIMARY EARNINGS PER SHARE
The computation of primary earnings per share is as follows:
Fiscal Year Ended April 30,
-----------------------------------------------
1994 1993 1992
Weighted average number of common shares outstanding 5,086,690 2,541,977 1,268,857
Shares assumed to be issued upon exercising
of stock purchase rights in excess of 20%
repurchase limitation
- 4,408,937 -
----------- ---------- ----------
Average number of common and common
equivalent shares 5,086,690 6,950,914 1,268,857
=========== ========== ==========
Loss before cumulative effect of change
in accounting principle $ (2,639,593) $ (1,699,715) $ (2,319,433)
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 - 338,074 -
----------- ----------- -----------
Adjusted loss before cumulative effect of change in
accounting principle (2,639,593) (1,361,641) (2,319,433)
Cumulative effect of change in accounting principle - 180,000 -
----------- ----------- -----------
Adjusted net loss $ (2,639,593) $ (1,181,641) $ (2,319,433)
=========== =========== ===========
Loss before cumulative effect of change in accounting
principle per common share $ (0.52) $ (0.20) $ (1.83)
Cumulative effect of change in accounting
principle per common share 0.00 0.03 0.00
------------ ----------- ----------
Net loss per common share $ (0.52) $ (0.17) $ (1.83)
============ =========== ==========
50
51
EXHIBIT 11(B). FULLY DILUTED EARNINGS PER SHARE
The computation of fully diluted earnings per share is as follows:
Fiscal Year Ended April 30,
-----------------------------------------------
1994 1993 1992
Weighted average number of common shares outstanding 5,086,690 2,541,977 1,268,857
Shares assumed to be issued upon exercising
of stock purchase rights in excess of 20%
repurchase limitation - 4,409,732 -
----------- ---------- ----------
Average number of common and common equivalent
shares 5,086,690 6,951,709 1,268,857
=========== ========== ==========
Loss before cumulative effect of change
in accounting principle $ (2,639,593) $ (1,699,715) $ (2,319,433)
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 - 338,078 -
----------- ---------- ----------
Adjusted loss before cumulative effect of change in
accounting principle (2,639,593) (1,361,637) (2,319,433)
Cumulative effect of change in accounting principle - 180,000 -
----------- ----------- -----------
Adjusted net loss $ (2,639,593) $ (1,181,637) $ (2,319,433)
----------- ----------- -----------
Loss before cumulative effect of change in accounting
principle per common share $ (0.52) $ (0.20) $ (1.83)
Cumulative effect of change in accounting
principle per common share 0.00 0.03 0.00
----------- ----------- ----------
Net loss per common share $ (0.52) $ (0.17) $ (1.83)
=========== =========== ==========
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52
Notes regarding the calculation of primary and fully diluted earnings per
share:
For the fiscal year ended April 30, 1994 no common stock equivalents are
included herein due to their antidilutive nature. During the current year the
Company issued 2,917,281 shares pursuant to stock sales, net of 7,200 shares
acquired for treasury stock which are included in the weighted average number
of common shares outstanding. The aforementioned shares issued include
2,359,481 shares issued pursuant to warrant exercises. If these shares had
been issued at the beginning of the current fiscal year primary and fully
diluted earnings per share would have been ($0.47).
The fiscal year ended April 30, 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 fiscal year ended April 30, 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.
At the end of fiscal 1993 the Company had issuable 400,000 shares which
were not issued, these were included in the average number of common and common
equivalent shares. The Company issued, during fiscal 1993, 1,279,642 shares
pursuant to stock sales which are included in the weighted average number of
common shares outstanding. The aforementioned shares issued include 1,047,938
shares issued pursuant to warrant exercises also 2,334,423 shares were issued
subsequent to April 30, 1993 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 have been as follows: Loss per share before
cumulative effect of change in principle ($0.23), cumulative effect of a change
in principle $0.03, and net loss per share ($0.20). On October 27, 1992 the
Company issued 14,000 shares of stock (which are included in the above
mentioned number) for the payment of accrued interest on debt. There would of
been no change in earnings per share if these shares were issued at the
beginning of the period. On November 6, 1992, the Company issued 217,704
shares of stock (which are included in the aforesaid number) for the payment of
debt. If these shares had been issued at the beginning of the fiscal year
primary and fully diluted loss per share would have been as follows: Loss per
share before cumulative effect of a change in principle ($0.20), cumulative
effect of a change in principle $0.03, and net loss per share ($0.17).
The Company issued, during fiscal 1992, 197,155 shares pursuant to stock
sales which are included in the weighted average number of common shares
outstanding. All of the above amounts and all amounts hereof have been
restated for the 1 to 5 reverse stock split, effected March 9, 1992.
During fiscal 1992 the Company issued 114,955 shares pursuant to warrant
exercises and 1,047,333 shares subsequent to April 30, 1992 pursuant to warrant
exercises. If these shares would have been issued immediately upon the
issuance of the warrants primary and fully diluted loss per share would have
been $1.01 On February 25, 1992 the Company issued 50,000 shares (before
restatement) of stock pursuant for the exercise of 50,000 A Warrants. The
proceeds therefrom were used to retire debt issued June 14, 1991. If the stock
was issued and debt retired upon the issuance of the Warrants primary and fully
diluted loss per share would be $1.82. At the end of fiscal 1992 the Company
had to issue 12,000 shares pursuant to the above debt, these are included in
the weighted average number of common shares outstanding for the current fiscal
year. Shares under the Company's stock option plans are antidilutive for
fiscal 1992, therefore, these are not included herein.
52
53
Additional primary and fully diluted earnings per share computations
pursuant to Regulation S-K, CFR Section 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
fiscal year ended April 30, 1993 does not change from the original computations
presented above).
EXHIBIT 11(C). PRIMARY EARNINGS PER SHARE (ADDITIONAL)
The computation of primary earnings per share is as follows:
Fiscal Year Ended April 30,
---------------------------------------------
1994 1993 1992
Weighted average number of common shares outstanding 5,086,690 2,541,977 1,268,857
Shares assumed to be issued upon exercising
of stock purchase rights 910,433 4,408,937 5,253,433
----------- ---------- ----------
Average number of common and common
equivalent shares 5,997,123 6,950,914 6,522,290
=========== ========== ==========
Loss before cumulative effect of change
in accounting principle $ (2,639,593) $ (1,699,715) $ (2,319,433)
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 26,158 338,074 610,967
----------- ----------- -----------
Adjusted loss before cumulative effect of change in
accounting principle (2,613,435) (1,361,641) (1,708,466)
Cumulative effect of change in accounting principle - 180,000 -
----------- ----------- -----------
Adjusted net loss $ (2,613,435) $ (1,181,641) $ (1,708,466)
============ ========== ==========
Loss before cumulative effect of change in accounting
principle per common share $ (0.44) $ (0.20) $ (0.26)
Cumulative effect of change in accounting
principle per common share 0.00 0.03 0.00
------------ ---------- ----------
Net loss per common share $ (0.44) $ (0.17) $ (0.26)
============ ========== ==========
53
54
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,
------------------------------------------------
1994 1993 1992
Weighted average number of common shares outstanding 5,086,690 2,541,977 1,268,857
Shares assumed to be issued upon exercising
of stock purchase rights 992,169 4,409,732 5,250,154
----------- ---------- ----------
Average number of common and common equivalent
shares 6,078,859 6,951,709 6,519,011
----------- ---------- ----------
Loss before cumulative effect of change
in accounting principle $ (2,639,593) $ (1,699,715) $ (2,319,433)
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 24,712 338,078 608,408
----------- ---------- ----------
Adjusted loss before cumulative effect of change in
accounting principle (2,614,881) (1,361,637) (1,711,025)
Cumulative effect of change in accounting principle - 180,000 -
----------- ----------- -----------
Adjusted net loss $ (2,614,881) $ (1,181,637) $ (1,711,025)
=========== =========== ===========
Loss before cumulative effect of change in accounting
principle per common share $ (0.43) $ (0.20) $ (0.26)
Cumulative effect of change in accounting
principle per common share 0.00 0.03 0.00
---------- ---------- ----------
Net loss per common share $ (0.43) $ (0.17) $ (0.26)
========== ========== ==========
54
55
Notes regarding the additional calculation of primary and fully diluted
earnings per share pursuant to Regulation S-K, CFR Section 229.601(b)(11):
Primary earnings per share for the fiscal year ended April 30, 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 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 the fiscal year ended April 30,
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. During the current year the
Company issued 2,917,281 shares pursuant to stock sales, net of 7,200 shares
acquired for treasury stock which are included in the weighted average number
of common shares outstanding. The aforementioned shares issued include
2,359,481 shares issued pursuant to warrant exercises. If these shares had
been issued at the beginning of the current fiscal year primary and fully
diluted earnings per share would have been ($0.44).
The fiscal year ended April 30, 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 fiscal year ended April 30, 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.
At the end of fiscal 1993 the Company had issuable 400,000 shares which
were not issued, these were included in the average number of common and common
equivalent shares. The Company issued, during fiscal 1993, 1,279,642 shares
pursuant to stock sales which are included in the weighted average number of
common shares outstanding. The aforementioned shares issued include 1,047,938
shares issued pursuant to warrant exercises also 2,334,423 shares were issued
subsequent to April 30, 1993 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 have been as follows: Loss per share before
cumulative effect of change in principle ($0.23), cumulative effect of a change
in principle $0.03, and net loss per share ($0.20). On October 27, 1992 the
Company issued 14,000 shares of stock (which are included in the above
mentioned number) for the payment of accrued interest on debt. There would of
been no change in earnings per share if these shares were issued at the
beginning of the period. On November 6, 1992, the Company issued 217,704
shares of stock (which are included in the aforesaid number) for the payment of
debt. If these shares had been issued at the beginning of the fiscal year
primary and fully diluted loss per share would have been as follows: Loss per
share before cumulative effect of a change in principle ($0.20), cumulative
effect of a change in principle $0.03, and net loss per share ($0.17).
Primary earnings per share for the fiscal year ended April 30, 1992
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. For the
fiscal year ended April 30, 1992 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. The Company
issued, during fiscal 1992, 197,155 shares pursuant to stock sales which are
included in the weighted average number of common shares outstanding. All of
the amounts hereof have been restated for the 1 to 5 reverse stock split,
effected March 9, 1992. During fiscal 1992 the Company issued 114,955 shares
pursuant to warrant exercises and 1,047,333 shares subsequent to April 30, 1992
pursuant to warrant exercises. If these shares would have been issued
immediately upon the issuance of the warrants primary and fully diluted loss
per share would have been $0.97. On February 25, 1992 the Company issued
50,000 shares (before restatement) of stock pursuant for the exercise of 50,000
A Warrants. The proceeds therefrom were used to retire debt issued June 14,
1991. If the stock was issued and debt retired upon the issuance of the
Warrants primary and fully diluted loss per share would not change. The
Company had to issue 7,000 shares pursuant to the above debt, these are
included in the weighted average number of common shares outstanding for the
current fiscal year.
55
56
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.
PARTECH HOLDINGS CORPORATION
/s/ JOHN E. RAYL
DATE: July 15, 1994 By: _______________________________
John E. Rayl
Chairman and Chief Executive 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/ JOHN E. RAYL
___________________________ Chairman, Chief Executive Officer, July 15, 1994
John E. Rayl President, Treasurer and Director
(principal financial officer)
/s/ THOMAS E. REYNOLDS
___________________________ Vice President, Secretary, Assistant July 15, 1994
Thomas E. Reynold Treasurer and Director
/s/ JERALD K. RAYL
___________________________ Director July 15, 1994
Jerald K. Rayl
/s/ JAMES B. DWYER III
___________________________ Director July 15, 1994
James B. Dwyer III
56
57
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 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, 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,
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, filed herewith as Exhibit 4.9.
Exhibit 4.10 Form of 6% Secured Note of Partech Holdings Corporation issued
to the Investor, filed herewith as Exhibit 4.10.
Exhibit 4.11 Form of Supplemental Warrant and Additional Warrant between
Partech Holdings Corporation and the Investor, filed herewith
as Exhibit 4.11.
Exhibit 4.12 Form of Unit Warrant between Partech Holdings Corporation and
the Investor, filed herewith as Exhibit 4.12.
57
58
Exhibit 5.4 Opinion of Counsel Regarding the $600,000 exempt Convertible
Securities offering, filed herewith as Exhibit 5.4.
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 Jenning's 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 Jenning's 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.
58
59
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.
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60
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 top
Purchase, filed herewith as Exhibit 10.62.
Exhibit 10.63 1989 Incentive Stock Option Plan Agreement between Partech
Holdings Corporation and James B. Dwyer, III, dated May 18,
1994, filed herewith as Exhibit 10.63.
Exhibit 10.64 Form of Time Brokerage Agreement between Lee Mitchell and
Tropic of St. Simons Inc., filed herewith as Exhibit 10.64.
Exhibit 10.65 Form of Stock Purchase Agreement between PCG of the Florida
Keys, Inc. and Richard Silva, filed herewith as Exhibit 10.65.
Exhibit 10.66 Form of Security Pledge and Hypothecation Agreement between
PCG of the Florida Keys, Inc. and Richard Silva, filed
herewith as Exhibit 10.66.
Exhibit 10.67 Form of Put Option Agreement between PCG of the Florida Keys,
Inc. and Richard Silva, filed herewith as Exhibit 10.67.
Exhibit 10.68 Form of Purchase Option Agreement between Richard Silva and
PCG of the Florida Keys, Inc. filed herewith as Exhibit 10.68.
Exhibit 10.69 Form of Security Agreement between PCG of the Golden Strand,
Inc. and Media Group, Inc., filed herewith as Exhibit 10.69.
Exhibit 10.70 Form of Escrow Agreement among Ed Winton, Partech
Communications Group, Inc. and Mark T. Jorgenson d/b/a/
Jorgenson Broadcast Brokerage, filed herewith as Exhibit
10.70.
Exhibit 10.71 Form of Promissory Note by PCG of the Golden Strand, Inc.
payable to Media Group, Inc., filed herewith as Exhibit 10.71.
Exhibit 10.72 Form of Purchase Agreement between Ed Winton and Tropic of
Tallahassee, Inc., filed herewith as Exhibit 10.72.
Exhibit 10.73 Form of Security Agreement between Tropic of Tallahassee, Inc.
and Ed Winton, filed herewith as Exhibit 10.73.
Exhibit 10.74 Form of Promissory Note by Tropic of Tallahassee, Inc. payable
to Ed Winton, filed herewith as Exhibit 10.74.
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, filed herewith as Exhibit
10.75.
Exhibit 10.76 Form of Purchase Agreement among Lee M. Mitchell, AT&T
Commercial Finance Corporation, and Tropic of St. Simons,
Inc., filed herewith as Exhibit 10.76.
Exhibit 10.77 Purchase Agreement between White Broadcasting Corporation and
Tropic of Key West, Inc., dated June 17, 1994, filed herewith
as Exhibit 10.77.
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, filed herewith as
Exhibit 10.78.
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61
Exhibit 10.79 Form of Non-Compete Agreement between White Broadcasting, Inc.
and Tropic of Key West, Inc., filed herewith as Exhibit 10.79
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, filed herewith as Exhibit 10.80.
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, filed herewith as Exhibit 10.81.
Exhibit 10.82 Pledge Agreement between John E. Rayl and the Investor and
Kelly Drye & Warren, the Investor's Representative, dated June
15, 1994, filed herewith as Exhibit 10.82.
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 22 Subsidiaries of the Company.
Exhibit 23.2 Consent of Hausser + Taylor incorporated herein by reference
to Exhibit 23.6, to Form S-8, filed April 8, 1994, Commission
file No. 014361.
Exhibit 23.3 Consent of Hausser + Taylor incorporated herein by reference
to Exhibit 24.4, to Form S-8, filed August 9, 1993, Commission
file No. 014361.
Exhibit 23.5 Consent of Hausser + Taylor incorporated herein by reference
to Exhibit 23.5, to Form S-8, filed March 21, 1994, 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.
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EXHIBIT 22. SUBSIDIARIES OF THE COMPANY
Leeward Capital Corporation (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.)
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.)
PCG of Florida, 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.)
Tropic of South Carolina, 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.)
Thorndine, Ltd. (an inactive United Kingdom company and wholly-owned subsidiary
of LCC Leasing International, Inc.)
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