<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
(X) Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 (Fee required)
For the fiscal year ended December 31, 1995.
( ) Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required)
For the transition period from to .
------------------ --------------------
Commission file Number 0-7762.
AUDIO COMMUNICATIONS NETWORK, INC.
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(Name of Small Business Issuer in Its Charter)
Florida 59-0690530
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1000 Legion Place, Suite 1515, Orlando, Florida 32801
- ----------------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number, Including Area Code (407) 649-8877
--------------
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange on
Title of each Class which registered
------------------- ------------------------
None None
---- ----
Securities registered under Section 12(g) of the Exchange Act:
Common Stock - $.25 par value
- ------------------------------------------------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB (X).
Issuer's revenues for its most recent fiscal year $7,621,495.
----------
As of March 15, 1996, the aggregate market value of the voting stock
held by non-affiliates of Registrant was $3,152,166.
----------
As of March 15, 1996, 2,243,821 shares of Common Stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Part III information is incorporated by reference to Registrant's definitive
proxy statement to be filed under Regulation 14A.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
- -------
The Company owns and operates MUZAK/(R)/ franchises. The Company currently
owns franchises located in Baltimore, Maryland and the Delmarva peninsula area
encompassing the Maryland Eastern Shore, and Kansas City and St. Louis,
Missouri, and Fresno, California, and the recently acquired franchise in
Jacksonville, Florida. The Company distributes functional programs of
MUZAK/(R)/ and ancillary products and services.
The Company was incorporated in Florida in 1953, and originally operated as a
manufacturer of various types of electronic equipment used for the transmission
and reception of specialized communications systems used principally by the
background music industry. In 1989, the Company ceased its manufacturing
efforts.
In 1985, the Company acquired its first MUZAK/(R)/ franchise when it
purchased the assets of the Maryland Music Corporation, the MUZAK/(R)/ franchise
for Baltimore, Maryland. In 1986, the Company purchased the assets of Delmarva
Music, the MUZAK/(R)/ franchise for the Delmarva peninsula area, and acquired
the stock of Music Services, Inc., the MUZAK/(R)/ franchise for Kansas City,
Missouri. In 1988, the Company continued its expansion with the purchase of the
assets of Wired Music, Inc., the MUZAK/(R)/ franchise for St. Louis, Missouri.
In May 1992, the Company acquired certain assets of Business Music of America in
St. Louis, Missouri. This acquisition was incorporated into the Company's
MUZAK/(R) /franchise in St. Louis and further strengthened the Company's
position in the St. Louis market.
In January 1994, the Company purchased additional subscriber accounts in the
Delmarva peninsula area from an independent music supplier for the Baltimore
franchise. Additionally in March 1994, the Company acquired all the outstanding
stock of American Music Network, Inc. (AMN) in exchange for newly issued shares
of the Company's common stock in a related party transaction. AMN is based in
Fresno, California, and serves central California, including Fresno, Modesto,
Salinas, and the Monterey peninsula.
On January 2, 1996, the Company acquired the assets of Florida Sound
Engineering Company (Florida Sound) holder of the Jacksonville, Florida
MUZAK/(R)/ franchise. In addition to the MUZAK/(R)/ franchise, the Company also
acquired the assets of Florida Sound's Pro Sound Division enabling it to install
complex and extensive communication systems, such as the newly completed
Jacksonville Municipal Stadium. The area of operations extends beyond
Jacksonville to Gainesville, Ocala, St. Augustine, and into southern Georgia,
including Brunswick.
MUZAK/(R)/ PRODUCTS
- -------------------
Through its network of MUZAK/(R)/ franchises, the Company distributes
functional programs of MUZAK/(R) /to a wide range of businesses. MUZAK/(R)/ is
used primarily as a management tool to increase productivity and efficiency and
to enhance sales environments. The programs are distributed by means of
telephone lines, FM SCA (Subsidiary Communication Authorization) radio
transmissions which are special communication systems on the portion of the FM
broadcast signal not normally available to the general public, and direct
broadcast satellite (DBS). Distribution by radio transmissions permits up to two
programs while DBS distribution enables the dissemination of up to 16 music
programs, from environmental to classical, as well as data and video.
<PAGE>
The Company also provides certain ancillary products such as audio/video
systems and equipment, data services whereby a business distributes data to
multiple locations through the Company's communications systems, and messaging
on hold whereby advertisements are delivered while a telephone caller is on
hold. The Company also uses its communications systems to provide in-store
advertising services and advertising services produced by MUZAK/(R)/
The audio, video and other equipment needed to receive MUZAK/(R)/ and
ancillary products may be provided to the customer by the Company or other
suppliers. The Company also provides equipment installation services.
MARKETING
- ---------
The customer base is in excess of 9,600 accounts. The Company bills its
customers monthly under long term service agreements which provide the recurring
revenue base for the Company. The Company is not dependent on one or a few
major customers.
All MUZAK/(R)/ affiliates operate under an exclusive 10-year agreement with
MUZAK/(R)/ for distribution of products. The Company pays to MUZAK/(R)/ a set
market fee and a royalty based on its gross billings.
COMPETITION
- -----------
The Company competes with independent distributors of other music products
in each of its current markets. The Company is the leading distributor of music
products in these markets. The Company believes its leading position is
attributable to the superior service and equipment provided to the customer and
the availability of additional audio products. Also MUZAK/(R)/ has the only
national distribution network through the Company and its other MUZAK/(R)/
affiliates and this network provides continuity of product for MUZAK/(R)/
subscribers with multiple locations.
EMPLOYEES
- ---------
The Company employs approximately 82 persons all of whom are full-time
employees. The service and installation employees of the MUZAK/(R)/ franchise
in Kansas City, Missouri, are members of Communications Workers of America
AFL/CIO. These employees are currently working under a negotiated agreement
which expires in April 1996. Negotiations are currently underway with the union
to reach a new agreement. Additionally, the employees of the St. Louis,
Missouri franchise are working under a negotiated agreement with the
International Brotherhood of Electrical Workers (IBEW). This agreement became
effective in September 1995 and continues in full force and effect through
August 1998 and automatically renews itself from year to year thereafter, unless
either the Company or IBEW serves written notice upon the other party to the
agreement sixty days prior to the expiration date or sixty days prior to any
subsequent anniversary date.
ITEM 2. DESCRIPTION OF PROPERTY
The offices of the Company are located in Orlando, Florida and occupy
approximately 2,000 square feet of leased space. MUZAK/(R)/ franchises are
operated from leased facilities within their respective cities.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not Applicable.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(A) Price Range of Common Stock
---------------------------
The Company's Common Stock is traded in the over-the-counter market under the
symbol "AUCM". All over-the-counter prices are quotes supplied by the National
Association of Securities Dealers through the NASD OTC Bulletin Board, its
automated system for reporting non-NASDAQ quotes. Quotations reflect inter-
dealer prices, without retail markup, markdown or commission, and may not
represent actual transactions.
BID PRICES
-------------
1994 HIGH LOW
- ----
First Quarter 2-1/8 1-1/8
Second Quarter 1-3/4 1
Third Quarter 1-3/8 1
Fourth Quarter 1-3/8 1
1995
- ----
First Quarter 1-3/8 3/4
Second Quarter 1-3/8 7/8
Third Quarter 2-1/4 1-1/4
Fourth Quarter 2-1/8 1
(B) Approximate Number of Equity Security Holders
---------------------------------------------
Approximate Number of Shareholders
Title of Class As of February 29, 1996
-------------- ----------------------------------
Common Stock, $.25 Par Value 618
(C) Dividends
---------
No dividends have been paid on the Company's Common Stock since 1973.
Payment of dividends are within the discretion of the Company's Board of
Directors and will depend on, among other factors, earnings, capital
requirements and the operating and financial condition of the Company. Also,
the Company's banking facility prohibits the Company from paying dividends
without the prior written consent of the lender.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Set forth below is a discussion of the Company's financial condition, changes
in financial condition and results of operations for the periods indicated.
<PAGE>
SUMMARY
- -------
The following table sets forth for the periods indicated, certain items
from the Company's Consolidated Statements of Operations expressed as a
percentage of operating revenues.
PERCENTAGE OF REVENUES
----------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993
Revenues from Operations 100.0 % 100.0 % 100.0 %
Operating Costs and Expenses (69.7)% (72.3)% (72.1)%
----- ----- -----
Income from Operations before
Depreciation and Amortization 30.3 % 27.7 % 27.9 %
Depreciation and Amortization (15.4)% (17.4)% (20.0)%
----- ----- -----
Income before Other Income (Expense)
and Income Taxes 14.9 % 10.3 % 7.9 %
Other Income Expense), Net (6.2)% (5.2)% (5.1)%
----- ----- -----
Income before Income Taxes 8.7 % 5.1 % 2.8 %
Provision for Income Taxes (0.7)% (0.5)% (0.2)%
----- ----- -----
Net Income 8.0 % 4.6 % 2.6 %
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<PAGE>
RESULTS OF OPERATIONS
---------------------
GENERAL DISCUSSION
- ------------------
The year 1995 exceeded the Company's target; net income and earnings per
share approximately doubled from the previous year. The year 1994 was the most
profitable in a decade and 1995 continued that favorable trend. Revenues
increased in every category from equipment sales to recurring billing, the
"major" factor in the success of a MUZAK/(R)/ franchise.
The Company is committed to growth through increased revenues and
acquisitions. It met that commitment in increased revenues in 1995 and
subsequently on January 2, 1996, the Company acquired the assets of Florida
Sound, the MUZAK/(R)/ franchise holder for northern Florida and southern
Georgia. Included in the acquisition was Florida Sound's Pro Sound Division
capable of high-tech communication and sound systems as complex as the recently
completed Jacksonville Municipal Stadium. The acquisition is expected to
increase the Company's revenue to an estimated $11,000,000 in 1996.
In addition to its operations in Baltimore, Maryland, the Delmarva peninsula
area encompassing the Maryland Eastern Shore, Fresno, California, Kansas City
and St. Louis, Missouri, the Company has extended its operations to
Jacksonville, Gainesville, Ocala, and St. Augustine, Florida, and into southern
Georgia, including Brunswick.
REVENUES
- --------
As previously mentioned, the Company continues its growth with consolidated
revenues increasing in 1995 to $7,621,000 from $6,913,000 in 1994, an increase
of 10% or $708,000. Revenues in 1994 increased by 27% to $6,913,000 from
$5,455,000 in 1993. Twenty-two percent (or approximately $1,190,000) of the
1994 increase was attributable to the purchase of the subscriber accounts from
an independent music supplier in the Delmarva peninsula area and the acquisition
of the MUZAK/(R)/ franchise in central California.
COSTS AND EXPENSES
- ------------------
There was a slight decrease in cost of sales as a percentage of sales in
1995 over the previous year due to various installations not requiring
additional materials. The year 1994 increased over 1993 as a percentage of
sales as a result of increased installation and equipment sales that required
labor, material, and expenses.
There was no additional sales expense due to the increased 1995 revenues
resulting in a slight decrease in selling, general, and administrative expenses
as percentage of sales in 1995 over 1994. The year 1994's decrease over 1993
was attributable to additional allowance for doubtful accounts recorded in 1993
for increased reserves for bad debts due to the 1993 flood disaster in the
Midwest.
Depreciation and amortization as a percentage of sales decreased in 1995 over
1994 and 1994 over 1993 as a result of certain assets and intangibles related to
previous acquisitions becoming fully depreciated and amortized. The decrease in
1994 was partially offset by an increase in amortization and depreciation
expense incurred by the Baltimore purchase and California acquisition.
<PAGE>
OTHER INCOME (EXPENSE)
- ---------------------
The increase in interest expense in 1995 over 1994 was due to the increase in
the prime rate and the reduction of the Company's principal payment when the
loan was restructured in June 1995, thereby increasing interest expense. The
increase in interest expense in 1994 over the previous year was due to the
increase in the prime rate and additional borrowings for the Baltimore purchase
and the assumptions of the California franchise debt.
Other "net" remained relatively the same in all years with the exception in
1994 when proceeds were received in connection with the surrendering of a key
man policy no longer required. Other "net" is primarily comprised of
cancelation fees, bad debt recoveries, commissions earned, and discounts earned
or allowed.
INCOME TAXES
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Effective January 1, 1993, the Company prospectively adopted Statement of
Financial Accounting Standards No. 109 (FAS 109), Accounting for Income Taxes.
---------------------------
The adoption of FAS 109 had no impact on the consolidated financial position or
results of operations of the Company.
At December 31, 1995, the Company had net operating loss carryforwards for
federal tax purposes of approximately $3.1 million. Such loss carryforwards
expire in 2002 through 2006.
NET INCOME
- ----------
Net income for 1995 was $609,000 as compared to 1994 net income of
$312,000, an increase of 95% or $297,000. Earnings per share for 1995 were $.27
per share as compared to 1994's $.15 per share, an increase of 80% or $.12 per
share. Net income for 1994 doubled when compared to 1993's $142,000 or $.08 per
share.
Income increased both years due to continued growth and certain assets and
intangibles related to previous acquisitions being fully depreciated and
amortized.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Operating cash flows (computed as net income plus interest, taxes,
depreciation, and amortization) have increased from a low of $1,601,000 in 1993
to a high of $2,376,000 in 1995. All payments of interest and principal on
loans outstanding and payments on lease obligations have been made on a timely
basis in all years.
In July 1993, the bank loans were renewed with SunTrust Bank, Central
Florida, N.A. (SunTrust), with a maturity date of July 1, 1999 and bear interest
at 1-1/4% above prime. Additionally on January 28, 1994, the Company increased
its bank loans from SunTrust for the purchase of subscriber contracts for the
Baltimore franchise and for DBS equipment to be installed in the locations
purchased.
On March 4, 1994, the Company assumed upon its purchase of the California
franchise its debt of $1,186,000 with an interest rate of 1% above prime and
lease obligations of approximately $71,000.
On June 7, 1995, the Company and SunTrust entered into a 7th Amendment to its
existing loan agreement. The new amendment was for $5,200,000 and was called a
"consolidated loan." It paid off the Company's and AMN's indebtedness of
$4,899,000. The following covenants supersede all other covenants: 1) Debt
Service Coverage Ratio, 2) Debt to Net Worth Ratio, and 3) a Minimum Monthly
Recurring Billing Required.
<PAGE>
Subsequent to December 31, 1995, the Company and SunTrust entered into a
Second Amended and Restated Loan Agreement to its existing loan agreement. The
new amendment is for $11,000,000 and is called a "consolidated loan." The new
loan paid off the Company's indebtedness of $4,810,000 at year-end and gave the
Company the ability to purchase for cash the assets of the MUZAK/(R)/ franchise
in Jacksonville, Florida, and to purchase additional inventory for the Pro Sound
Division acquired in the acquisition.
ACQUISITIONS
- ------------
In January 1994, the Company purchased for cash various subscriber accounts
from an independent music supplier in the Baltimore/Delmarva peninsula area. The
additional recurring revenue, although not material, had an immediate positive
effect on the Company's net income.
In March 1994, the Company acquired AMN, the exclusive MUZAK/(R)/ franchise
for central California, including Fresno, Modesto, Salinas, and the Monterey
peninsula. Positive growth had been experienced within the state of California
and this trend was expected to continue.
AMN was acquired from A.J. Schell, Chairman, President, and CEO of the
Company. The new acquisition complimented the Company's plans to operate in
major metropolitan areas.
AMN operates as a wholly owned subsidiary of Audio Communications Network,
Inc.
On January 2, 1996, the Company acquired the assets of Florida Sound, the
Jacksonville, Florida MUZAK/(R)/ franchise holder for $5,750,000. Included in
the sale, the Company acquired Florida Sound's Pro Sound Division with its
accounts receivable, inventory, and other equipment. This division will allow
the Company to expand its sound system contracting business. The Jacksonville
company's name will remain the same, and it will operate as a wholly owned
subsidiary of Audio Communications Network, Inc.
Traditionally, MUZAK/(R)/ franchises generate substantial and sufficient cash
flows, and the Company has no reason to believe that the Florida franchise will
not meet the Company's expectations.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
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AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
-----------------
PAGE
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 10
FINANCIAL STATEMENTS:
Consolidated Balance Sheets, December 31, 1995 and 1994 11
Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1994, and 1993 13
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1995, 1994, and 1993 14
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994, and 1993 15
Notes to Consolidated Financial Statements for the Years Ended
December 31, 1995, 1994, and 1993 17
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
----------------------------------------------------
Not Applicable
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Audio Communications Network, Inc.:
We have audited the accompanying consolidated balance sheets of Audio
Communications Network, Inc. and its subsidiaries (the "Company") as of December
31, 1995 and 1994, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements 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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1995
and 1994, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Orlando, Florida
February 16, 1996
<PAGE>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
- ----------------------------------------------------
ASSETS 1995 1994
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 590,107.00 $ 509,064.00
Accounts receivable - trade
(less allowance for doubtful
accounts of $147,000 in 1995
and $130,000 in 1994) 519,754.00 558,353.00
Inventories (Note 1) 359,888.00 228,242.00
Prepaid expenses 33,416.00 34,933.00
Other current assets - 43,207.00
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Total current assets 1,503,165.00 1,373,799.00
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PROPERTY - At cost: (Notes 1 and 3)
Leasehold improvements 49,720.00 46,724.00
Machinery and equipment 6,117,933.00 5,113,309.00
Furniture and fixtures 333,563.00 328,688.00
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Total 6,501,216.00 5,488,721.00
Less accumulated depreciation (3,142,999.00) (2,592,209.00)
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Property - net 3,358,217.00 2,896,512.00
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OTHER ASSETS:
Subscriber contract rights and
other intangible assets
(net of accumulated amortization
of approximately $5,891,000 in
1995 and $5,448,000 in 1994)
(Note 1) 1,541,922.00 1,826,977.00
Goodwill (net of accumulated
amortization of approximately
$518,000 in 1995 and
$374,000 in 1994) (Note 1) 1,994,040.00 2,138,407.00
Deposits and other 13,734.00 5,915.00
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Total other assets 3,549,696.00 3,971,299.00
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TOTAL $8,411,078.00 $8,241,610.00
============= =============
(Continued)
<PAGE>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt (Note 2) $ 923,697.00 $ 824,902.00
Current portion of obligations under capital leases (Note 3) 12,697.00 58,936.00
Accounts payable 458,872.00 629,426.00
Royalties payable 20,825.00 55,352.00
Accrued liabilities 68,781.00 82,507.00
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Total current liabilities 1,484,872.00 1,651,123.00
-------------- --------------
LONG-TERM DEBT (Note 2) 4,089,019.00 4,366,763.00
-------------- --------------
OBLIGATIONS UNDER CAPITAL LEASES (Note 3) 12,738.00
--------------
DEFERRED COMPENSATION (Note 1) 50,000.00 50,000.00
-------------- --------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY: (Note 4)
Common stock, $.25 par value, authorized, 8,000,000
shares; issued and outstanding, 2,243,821 shares in 1995
and 2,233,360 shares in 1994 560,955.00 558,340.00
Capital contributed in excess of par value 5,011,451.00 4,996,992.00
Accumulated deficit (2,785,219.00) (3,394,346.00)
-------------- --------------
Total stockholders' equity 2,787,187.00 2,160,986.00
-------------- --------------
TOTAL $ 8,411,078.00 $ 8,241,610.00
============== ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
- -------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
REVENUES (Note 1) $7,621,495 $ 6,912,519 $ 5,455,418
----------- ----------- -----------
COSTS AND EXPENSES:
(Notes 1 and 6)
Cost of sales 3,061,675 2,825,560 2,159,640
Selling, general and
administrative expenses 2,252,295 2,173,943 1,773,750
Depreciation and amortization 1,171,670 1,205,191 1,089,486
----------- ----------- -----------
Total 6,485,640 6,204,694 5,022,876
----------- ----------- -----------
INCOME BEFORE OTHER INCOME
(EXPENSE) AND INCOME TAXES 1,135,855 707,825 432,542
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 22,448 17,463 5,151
Interest expense (Note 2) (538,112) (464,598) (357,210)
Other 46,436 89,035 73,995
----------- ----------- -----------
Other - net (469,228) (358,100) (278,064)
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 666,627 349,725 154,478
PROVISION FOR INCOME TAXES
(Notes 1 and 5) 57,500 37,700 12,700
----------- ----------- -----------
NET INCOME $ 609,127 $ 312,025 $ 141,778
=========== =========== ===========
NET INCOME PER COMMON SHARE
(Note 1) $ .27 $ .15 $ .08
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION> CAPITAL
CONTRIBUTED TOTAL
COMMON IN EXCESS ACCUMULATED STOCKHOLDERS'
STOCK OF PAR VALUE DEFICIT EQUITY
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $411,856 $4,152,429 $(3,848,149) $ 716,136
Stock issued to directors in lieu
of cash compensation 11,809 37,787 49,596
Net income 141,778 141,778
-------- ---------- ----------- ----------
BALANCE, DECEMBER 31, 1993 423,665 4,190,216 (3,706,371) 907,510
Stock issued to directors and employees
in lieu of cash compensation 2,557 9,592 12,149
Stock issued for acquisition 132,118 797,184 929,302
Net income 312,025 312,025
-------- ---------- ----------- ----------
BALANCE, DECEMBER 31, 1994 558,340 4,996,992 (3,394,346) 2,160,986
Stock issued to directors in lieu of
cash compensation 2,002 9,700 11,702
Stock purchased by employees under
employee stock purchase plan (Note 4) 613 4,759 5,372
Net income 609,127 609,127
-------- ---------- ----------- ----------
BALANCE, DECEMBER 31, 1995 $560,955 $5,011,451 $(2,785,219) $2,787,187
======== ========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 7,624,741 $ 6,822,904 $ 5,444,182
Cash paid to suppliers and employees (6,415,647) (5,479,138) (4,238,404)
Interest received 22,448 17,463 5,151
Interest paid (536,497) (452,349) (357,853)
Income taxes paid (71,101) (12,742) (16,352)
Other - net 537 6,049 34,880
----------- ----------- -----------
Net cash provided by operating activities 624,481 902,187 871,604
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (25,967) (84,560) (324,248)
Proceeds from the sale of equipment 6,525
Purchase of subscriber contract rights
and other intangible assets (44,385) (359,063)
----------- ----------- -----------
Net cash used in investing activities (70,352) (443,623) (317,723)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations (58,936) (89,500) (78,548)
Proceeds from issuance of long-term debt 5,200,000 494,139 28,221
Repayments of long-term debt (5,619,522) (717,391) (695,194)
Proceeds from sale of stock to employees 5,372
----------- ----------- -----------
Net cash used in financing activities (473,086) (312,752) (745,521)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 81,043 145,812 (191,640)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 509,064 363,252 554,892
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 590,107 $ 509,064 $ 363,252
----------- ----------- -----------
</TABLE>
(Continued)
<PAGE>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 609,127 $ 312,025 $ 141,778
--------- ---------- ---------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,221,134 1,254,226 1,137,318
Valuation allowances 17,000 60,500 (27,000)
Deferred compensation 0 0 (12,041)
Deferred commissions (59,030) (42,825) (33,219)
Stock issued to directors and
employees in lieu of cash
compensation 11,702 12,149 49,596
Gain on sale of equipment 0 0 (5,534)
(Increase) decrease in operating
assets and increase
(decrease) in operating
liabilities - net of business
acquired:
Accounts receivable 21,599 (178,650) 9,331
Prepaid and other assets 36,905 107,071 (135,977)
Inventories (1,019,492) (817,319) (316,360)
Accounts payable (170,554) 204,171 60,650
Accrued liabilities (48,253) 69,267 (18,385)
Other - net 4,343 (78,428) 21,447
--------- ---------- ---------
Total adjustments 15,354 590,162 729,826
--------- ---------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 624,481 $ 902,187 $ 871,604
========== ========== ==========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the years ended December 31, 1995, 1994, and 1993, approximately
$887,000, $864,000, and $216,000, respectively, of inventory was leased to
customers and reclassified to property.
During the year ended December 31, 1995, subscriber contract rights totaling
approximately $111,000 were acquired through the issuance of other long-term
debt.
During the year ended December 31, 1995, service vehicles totaling approximately
$130,000 were acquired through the issuance of long-term debt.
Capital lease obligations of approximately $65,000, and $7,000 were incurred in
1994 and 1993, respectively, when the Company entered into leases for new
equipment.
During the year ended December 31, 1994, the Company acquired assets with a fair
value of approximately $1,544,000, recorded goodwill of approximately $800,000,
and assumed liabilities totaling approximately $1,415,000 for common stock
totaling approximately $929,000 in connection with its acquisition of American
Music Network, Inc.
See notes to consolidated financial statements.
(Concluded)
<PAGE>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
- ------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company owns and operates MUZAK/(R)/ franchises, which provide background
music programming and ancillary services to customers, in four major
metropolitan areas, as its single line of business.
PRINCIPLES OF CONSOLIDATION AND USE OF ESTIMATION
The consolidated financial statements include the accounts of Audio
Communications Network, Inc. and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
FINANCIAL INSTRUMENTS
Management believes the book value of financial instruments (cash and cash
equivalents, accounts receivable, accounts payable, royalties payable, accrued
liabilities, long-term debt, and obligations under capital leases) approximates
fair value.
INVENTORIES
Inventories, which consist of equipment held for sale or lease, are stated at
the lower of cost or market. Cost is determined by the first-in, first-out
method.
PROPERTY
Property is recorded at cost. Depreciation is provided on the straight-line
method over estimated useful lives of 3 to 10 years.
DEFERRED COMPENSATION
The Company has a deferred compensation agreement with an officer providing for
benefits payable to the officer at retirement or, in the event of the officer's
death, to the officer's beneficiaries. The liability is fully accrued at
December 31, 1995 and 1994.
<PAGE>
GOODWILL AND INTANGIBLE ASSETS
Goodwill, the excess of the purchase price over the fair value of net assets of
businesses acquired, was previously amortized over 40 years using the straight-
line method. Other intangible assets acquired, principally subscriber contract
rights, are amortized using the straight-line method over various periods from
three to ten years. Management evaluates the recoverability of goodwill and
other intangible assets quarterly and annually based on current operating trends
in relation to the recorded intangible values. In 1994, the Company refined its
estimate of the useful life of goodwill to 20 years. The effect of the
refinement was to decrease 1994 net income by approximately $39,600 ($.02 per
share).
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 ("FAS 109"), Accounting for Income Taxes. A
---------------------------
significant provision of FAS 109 is the use of the liability method of computing
deferred income taxes. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under FAS
109, the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
Additionally, under FAS 109, the Company recognizes, subject to a valuation
allowance regarding asset realization, the future tax benefits of expenses which
have been recognized in the consolidated financial statements.
NET INCOME PER COMMON SHARE
Net income per common share is computed by dividing net income by the weighted
average number of shares of common stock and common stock equivalents
outstanding during the year. Common stock equivalents include shares issuable
on the exercise of employee stock options under the incentive stock option plan
adopted in May 1984 and amended in February 1991. The weighted average number
of common shares outstanding were 1,659,233 for 1993, 2,137,611 for 1994, and
2,235,108 for 1995. Certain options have been excluded from the computation
since their effect would be antidilutive.
CASH EQUIVALENTS
Cash equivalents include demand and interest-bearing deposits due from banks
with original maturities of 90 days or less.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("FAS 121"), Accounting for the
------------------
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
- ---------------------------------------------------------------------------
effective for fiscal years beginning after December 15, 1995. FAS 121 requires
that long-lived assets and certain identifiable intangibles to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Management believes that the adoption of FAS 121 will not have a
material impact on the Company.
In October 1995, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 123 ("FAS 123"), Accounting for Stock-Based
Compensation, effective for fiscal years beginning after December 15, 1995. FAS
123 encourages, but does not require, companies to recognize compensation
expense for employee stock-based arrangements based on their fair market value
on the date of grant. For nonemployee stock-based arrangements, the Company is
required to adopt the fair value method. If the Company chooses not to adopt
FAS 123 for employee stock-based arrangements, it will be
<PAGE>
required to make proforma disclosures of net income and earnings per share, as
if the fair value method had been applied, in the footnotes of the financial
statements beginning in the fiscal year ending December 31, 1996.
RECLASSIFICATIONS
Certain amounts shown in 1994 and 1993 have been reclassified to conform to the
1995 presentation.
2. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1995 and 1994:
1995 1994
Commercial bank loan, interest accrues at the
bank's prime rate plus 1.25% (9.75% at
December 31, 1995); principal and interest paid $4,810,000
monthly, due July 1, 2000
Commercial bank loan, interest accrues at the
bank's prime rate plus 1.25%; principal and
interest payable monthly; refinanced in 1995 $1,975,596
Commercial bank loan, interest accrues at the
bank's prime rate plus 1.25%; principal and
interest payable monthly; refinanced in 1995. 2,108,000
Commercial bank loan, interest accrues at the
bank's prime rate plus 1%; principal and
interest payable monthly; refinanced in 1995 1,044,548
Truck loans, interest accrues at approximately
10%; principal and interest payable monthly;
due through May 1998 136,248 63,521
Other long-term debt 66,468
---------- ----------
Total 5,012,716 5,191,665
Less current portion 923,697 824,902
---------- ----------
Long-term portion $4,089,019 $4,366,763
========== ==========
Long-term debt matures as follows:
YEAR
1996 $ 923,697
1997 988,021
1998 1,050,236
1999 1,140,762
2000 910,000
----------
Total $5,012,716
==========
<PAGE>
The Company's commercial bank loan is collateralized by substantially all assets
of the Company and assignment of key man life insurance on the Company's
President. These loans also contain certain covenants which, among other
things, require maintenance of minimum earnings and current ratios, and monthly
billings.
3. OBLIGATIONS UNDER CAPITAL LEASES
The Company is obligated under various capital leases for certain field
equipment. The leases bear interest from 12% to 16% and generally provide that
the Company pay the taxes, insurance and maintenance expenses relating to the
leased assets. The net amount included in machinery and equipment is as
follows:
December 31,
-----------------------
1995 1994
Equipment $254,993 $250,085
Less accumulated amortization 116,593 89,533
-------- --------
Total $138,400 $160,552
======== ========
As of December 31, 1995, minimum annual rental commitments under capital leases
are as follows:
1996 $12,985
Less amounts repesenting interest 288
-------
Total 12,697
Less current portion 12,697
-------
Long-term portion $ --
=======
4. STOCKHOLDERS' EQUITY
On May 10, 1984, the Company's stockholders adopted an incentive stock option
plan (the "Plan") with 100,000 shares of common stock authorized to be granted
thereunder. The Plan provides for the options to be granted to key employees,
requires expiration within ten years of date of grant, allows the options to be
exercised two years from the date of the grant, and requires the option price to
be at least the fair market value, as determined by the Board of Directors, of
the common stock on the date of grant. All options granted under the plan have
been for five-year terms. The Plan was amended in February 1991 increasing the
number of shares which may be issued from 100,000 to 200,000 shares.
Stock options outstanding under the Plan totaled 123,500 shares with an exercise
price of $1.50 per share at December 31, 1993. During the year ended December
31, 1994, 66,000 shares under option were canceled. During the year ended
December 31, 1995, options to purchase 101,000 shares with an exercise price of
$1.125 per share were granted, for a total of options to purchase 158,500 shares
outstanding at December 31, 1995. Options to purchase 57,500 shares are
exercisable at December 31, 1995.
The Company also has an employee stock purchase and bonus plan with up to
500,000 shares of common stock authorized to be issued thereunder. This plan
provides for the purchase of up to 200,000 shares of common stock by eligible
participants, as defined under the plan (up to 10,000 shares per participant),
<PAGE>
and for the remainder of the shares to be awarded as bonuses to key employees.
During the year ended December 31, 1995, 2,452 shares were purchased by
participants under this plan.
5. INCOME TAXES
The components of the provision for income taxes are as follows:
1995 1994 1993
Current
Federal $ 2,200
State 55,300 $37,700 $12,700
------- ------- -------
$57,500 $37,700 $12,700
======= ======= =======
The Company's effective tax rate differs from the statutory federal income tax
rate for the following reasons:
1995 1994 1993
Computed statutory amount $ 227,000 $119,000 $ 53,000
Increases (decreases):
State income taxes 55,300 37,700 12,700
Nondeductible expenses 125,000 98,000 70,000
Utilization of net operating
loss carryforwards (342,700) (217,000) (114,000)
Other - net (7,100) (9,000)
--------- -------- --------
$ 57,500 $ 37,700 $ 12,700
========= ======== ========
The components of the Company's net deferred tax asset are as follows:
1995 1994
Noncurrent liabilities - depreciation $ 225,000 $ 162,000
--------- ----------
Noncurrent assets:
Net operating loss carryforwards 968,000 1,320,000
Deferred compensation 17,000 17,000
Other 54,000 49,000
--------- ----------
Total noncurrent assets 1,039,000 1,386,000
--------- ----------
Net deferred tax asset- efore valuation
allowance 814,000 1,224,000
Valuation allowance for deferred tax asset (814,000) (1,224,000)
--------- -----------
Net deferred tax asset $ -- $ --
========== ===========
Realization of the net deferred tax asset through future taxable income within
the carryforward periods is not deemed likely. Accordingly, the net deferred
tax asset has been fully reserved with a valuation allowance at December 31,
1995.
<PAGE>
At December 31, 1995, the Company has net operating loss carryforwards for
federal tax purposes approximating $3,060,000. Such loss carryforwards will
expire in 2002 through 2006.
6. DEFINED CONTRIBUTION PENSION PLAN
The Company has a noncontributory defined contribution pension plan covering
substantially all employees who have met certain age and length of service
qualifications. The Company's policy is to fund pension cost with annuity
contracts. Pension expense for 1995, 1994, and 1993 amounted to approximately
$50,000 each year.
7. COMMITMENTS AND CONTINGENCIES
Certain equipment, office space and broadcast licenses are held under operating
leases. Rent expense was approximately $338,000, $268,000, and $255,000 during
1995, 1994, and 1993, respectively.
Future minimum lease payments are as follows:
Year
1996 $248,724
1997 219,531
1998 185,346
1999 110,974
--------
Total minimum lease payments $764,575
========
The Company has entered into an employment agreement with its President. The
agreement provides for the President to receive a stated minimum annual salary.
The term of the agreement is through May 1998.
8. ACQUISITIONS
On March 4, 1994, the Company acquired all of the outstanding common stock of
American Music Network, Inc. ("American") in exchange for 528,474 shares of
common stock of the Company. American was a MUZAK/(R)/ franchisee in California
and was wholly owned by the Company's Chairman, President and Chief Executive
Officer.
The acquisition was accounted for as a purchase, and the excess of the amount
paid over the fair value of net assets acquired was approximately $800,000,
which is being amortized over 20 years on a straight-line basis. The other
intangible assets acquired, principally subscriber contracts, are being
amortized over 8 years.
The results of operations of American are included with the results of the
Company from March 1, 1994. Assuming the acquisition had occurred on January 1,
1993, the Company's (unaudited) net sales, net income, and earnings per share
would have been approximately $6,770,000, $141,000, and $.06, respectively, for
the year ended December 31, 1993.
<PAGE>
9. SUBSEQUENT EVENT
On January 2, 1996, the Company acquired the assets of Florida Sound Engineering
Company ("Florida Sound"), including its Pro Sound division, for $5,750,000.
The acquisition was funded through a commercial bank loan. Florida Sound is a
MUZAK/(R)/ franchisee in north Florida and south Georgia.
The acquisition will be accounted for as a purchase, and the excess of the
amount paid over the fair value of net assets acquired was approximately
$2,800,000, which is being amortized over 20 years on a straight-line basis.
The other intangible assets acquired, principally subscriber contracts, are
being amortized over 8 years.
The results of operations of Florida Sound will be included with the results of
the Company from January 2, 1996. Assuming the acquisition had occurred on
January 1, 1995, the Company's (unaudited) net sales, net income, and earnings
per share would have been approximately $11,500,000, $612,000, and $.27,
respectively, for the year ended December 31, 1995.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The information required by this Item is incorporated by reference to the
Company's definitive proxy statement to be filed under Regulation 14A.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's definitive proxy statement to be filed under Regulation 14A.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's definitive proxy statement to be filed under Regulation 14A.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's definitive proxy statement to be filed under Regulation 14A.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
--------
2.2 Agreement and Plan of Share Exchange dated March 1, 1994 among
Registrant, American Music Network, Inc. and A.J. Schell
(incorporated by reference to Exhibit 2 of Form 8-K/A filed March
17, 1994).
2.3 Agreement of Sale dated October 19, 1995 among Registrant and
Florida Sound Engineering Company (incorporated by reference to
Exhibit I of Form 8-K dated March 15, 1996).
3.1 Articles of Incorporation, as amended through September 17, 1982
(incorporated herein by reference to Exhibit 3.1 to Amendment No. 1
on Form 8 dated May 9, 1990, amending the Annual Report on Form 10-
K for the year ended December 31, 1989).
3.1 (a) Amendment to Articles of Incorporation, effective June 11, 1991
(incorporated herein by reference to Exhibit 3.1(a) of the Annual
Report on Form 10-K for the year ended December 31, 1991).
3.2 Bylaws, as amended (incorporated herein by reference to Exhibit 3.2
of the Annual Report on Form 10-KSB for the year ended December 31,
1993).
10.1 Employment Agreement dated July 18, 1989, with A. J. Schell
(incorporated herein by reference to Exhibit 10.3 to Amendment No.
1 on Form 8 dated May 9, 1990, amending the Annual Report on Form
10-K for the year ended December 31, 1989).*
10.2 Agreement dated March 20, 1990, with Ralph L. Weber (incorporated
herein by reference to Exhibit 10.4 to Amendment No. 1 on Form 8
dated May 9, 1990, amending the Annual Report on Form 10-K for the
year ended December 31, 1989).*
<PAGE>
10.3 Deferred Compensation Agreement Dated January 5, 1983 with Doris K.
Krummenacker (incorporated herein by reference to Exhibit 10.5 to
Amendment No. 1 on Form 8 dated May 9, 1990, amending the Annual
Report on Form 10-K for the year ended December 31, 1989).*
10.4 Second Amended and Restated Loan Agreement by and between
Registrant and SunTrust Bank, Central Florida, N.A. dated December
21, 1995, effective January 2, 1996 (incorporated by reference to
Exhibit II of Form 8-K dated March 15, 1996).
10.6 Incentive Stock Option Plan (incorporated herein by reference to
Exhibit 10.8 of the Annual Report on Form 10-K for the year ended
December 31, 1991).*
10.7 1993 Employee Stock Purchase and Stock Bonus Plan (incorporated by
reference to Exhibit 10.7 of Form 10-KSB for the year ended
December 31, 1992).*
10.8 MUZAK/(R)/ License Agreement by and between MUZAK Limited
Partnership and Registrant dated January 1, 1992 (incorporated by
reference to Exhibit 10.8 of Form 10-KSB for the year ended
December 31, 1992).
10.9 MUZAK/(R)/ License Agreement by and between MUZAK Limited
Partnership and Registrant dated January 1, 1991 (incorporated by
reference to Exhibit 10.9 of Form 10-KSB for the year ended
December 31, 1992).
10.10 MUZAK/(R)/ License Agreement by and between MUZAK Limited
Partnership and Registrant dated January 1, 1991 (incorporated by
reference to Exhibit 10.10 of Form 10-KSB for the year ended
December 31, 1992).
10.11 MUZAK/(R)/ License Agreement by and between MUZAK Limited
Partnership and American Music Network, Inc. dated March 1, 1991
(incorporated by reference to Exhibit 10.11 of the Annual Report on
Form 10-KSB for the year ended December 31, 1993).
10.12 MUZAK/(R)/ License Agreement by and between MUZAK Limited
Partnership and Florida Sound Engineering Company dated January 1,
1991 (incorporated by reference to Exhibit III of Form 8-K dated
March 15, 1996).
10.13 Amendment and Supplement to Employment Agreement, dated September
1, 1993, between the Registrant and A.J. Schell (incorporated by
reference to Exhibit 1 of Form 10-QSB for the period ended
September 30, 1993).*
21 Subsidiaries of the Registrant.
* Management contract or compensatory plan or arrangement.
(B) Reports on Form 8-K
-------------------
Press release related to acquisition of Florida Sound Engineering Company in
October 1995.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AUDIO COMMUNICATIONS NETWORK, INC.
(Registrant)
By: /s/ A. J. Schell
----------------------------------
A. J. Schell
Chairman of the Board of Directors
Date: March 18, 1996
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Doris K. Krummenacker Vice President, Secretary/Treasurer March 18, 1996
- ------------------------- (Principal Financial Officer and
Doris K. Krummenacker Principal Accounting Officer)
Director
/s/ A. J. Schell Chairman of the Board, President, March 18, 1996
- ------------------------- Chief Executive Officer (Principal
A. J. Schell Executive Officer
/s/ Robert Dyer Director March 18, 1996
- -------------------------
Robert Dyer
/s/ Nat M. Turnbull Director March 18, 1996
- -------------------------
Nat M. Turnbull
/s/ Patrick J. Dougherty Director March 18, 1996
- --------------------------
Patrick J. Dougherty
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Ben B. Moss Director March 18, 1996
- -------------------------
Ben B. Moss
/s/ Ralph L. Weber Director March 18, 1996
- -------------------------
Ralph L. Weber
/s/ C. Lee Maynard Director March 18, 1996
- -------------------------
C. Lee Maynard
</TABLE>
<PAGE>
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
American Music Network, Inc. d/b/a Audio Communications Network
Florida Sound Engineering Company
Audio Communications Network, Inc. (Missouri corporation)
Audio Communications Network, Inc. (Maryland corporation)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1995
FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 590,107
<SECURITIES> 0
<RECEIVABLES> 519,754
<ALLOWANCES> 0
<INVENTORY> 359,888
<CURRENT-ASSETS> 1,503,165
<PP&E> 6,501,216
<DEPRECIATION> 3,142,999
<TOTAL-ASSETS> 8,411,078
<CURRENT-LIABILITIES> 1,484,872
<BONDS> 4,089,019
0
0
<COMMON> 560,955
<OTHER-SE> 2,226,232
<TOTAL-LIABILITY-AND-EQUITY> 8,411,078
<SALES> 0
<TOTAL-REVENUES> 7,621,495
<CGS> 3,061,675
<TOTAL-COSTS> 6,485,640
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 538,112
<INCOME-PRETAX> 666,627
<INCOME-TAX> 57,500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 609,127
<EPS-PRIMARY> .27
<EPS-DILUTED> 0
</TABLE>
