<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, 1996.
( ) 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.
- ----------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
Florida 59-0690530
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization
1000 Legion Place, Suite
1515, Orlando, Florida 32801
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(Address of principal executive offices) (Zip Code)
Issuers 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
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(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 registrants 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).
Issuers revenues for its most recent fiscal year $11,051,227
----------
As of March 14, 1997, the aggregate market value of the voting stock held by
non-affiliates of Registrant was $5,058,027.
----------
As of March 14, 1997, 2,319,203 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Part III information is incorporated by reference to Registrants definitive
proxy statement to be filed under Regulation 14A.
Transitional Small Business Disclosure Format (check one): Yes No X
---- ----
<PAGE>
2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Audio Communications Network, Inc. (the "Company" or "Audio") 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 Jacksonville, Florida, which includes Gainesville, Ocala, St. Augustine, and
southern Georgia, including Brunswick. 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.
In November 1996, the Company entered into an Asset Purchase Agreement (the
"Suncom Asset Purchase Agreement") to acquire substantially all of the assets
and assume the liabilities of Suncom Communications, L.L.C. ("Suncom"). Suncom
owns and operates MUZAK(R) franchises in Hillsborough and Charlotte, North
Carolina and Phoenix, Arizona. Management expects the transaction to be
consummated in the second quarter of 1997.
<PAGE>
3
Under the terms of the Suncom Asset Purchase Agreement, the Company will
acquire the business and assume the liabilities of Suncom. In addition to the
assumption of the liabilities of Suncom, the Company will also issue 2.1 million
shares of its common stock as consideration for the acquisition, representing
approximately 48% of the Company's common stock. The transaction was approved by
the Company's Board of Directors, including its independent directors, and the
Board received the opinion of Key Trust Company of Ohio, N.A. that the
transaction contemplated by the asset purchase agreement is fair from a
financial point of view to the shareholders of the Company. Consummation of the
transaction requires the consent of the Company's and Suncoms lenders or the
replacement of the existing banking facilities with a substitute facility or
combined facilities.
Mr. Schell will remain as Chairman of the Company's Board of Directors after
closing of the transaction. In addition, as of the closing, Suncom will
designate four persons who will serve on the Company's eight-person Board of
Directors, with four of the current directors remaining on the Company's Board
and four of the current directors resigning their positions. The Company's
shareholders are expected to vote on a proposal to be submitted at the 1997
annual meeting to increase the size of the Board to nine, with the ninth member
being nominated by Suncom.
Additionally, Suncom has entered into an agreement with A.J. Schell, the
Company's Chairman and Chief Executive Officer, to acquire Mr. Schell's position
in the Company. Upon consummation of both transactions, Suncom is expected to
own approximately 2.7 million shares, or approximately 62% of the Company's
outstanding common stock.
The Suncom Asset Purchase Agreement also provides for the execution of an
Option Agreement between the Company and Suncom. At closing, the Company will
grant Suncom an option to acquire up to 1,000,000 shares of Company common stock
at an exercise price of $6.00 per share. The options become exercisable upon
the consummation of a public or private offering of Company common stock, or
securities convertible into such stock, but only with respect to the number of
shares issued in such offering. In the event that the offering is of securities
convertible into Company common stock, the exercise price of the option
increases to $9.00 per share. The option expires three years from grant or from
the completion of an offering of convertible securities.
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.
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).
<PAGE>
4
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 approximately 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
September 30, 1999. 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 on
the 1st day of September 1995 and continues through the 31st day of 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 this agreement 60
days prior to the expiration date or 60 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 3,300 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>
5
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(A) Price Range of Common Stock
The Companys 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
------------------
1995 HIGH LOW
- ----- ----- -----
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
1996
- -----
First Quarter 2-1/8 2-1/8
Second Quarter 2-3/8 2
Third Quarter 2-1/2 2-3/8
Fourth Quarter 2-7/8 2-1/2
(B) Approximate Number of Equity Security Holders
Approximate Number of Shareholders
Title of Class As of March 14, 1997
- ------------------------------ ----------------------------------
Common Stock, $.25 Par Value 599
(C) Dividends
---------
No dividends have been paid on the Companys 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 Companys banking facility prohibits the Company from paying dividends
without the prior written consent of the lender, and the Suncom Asset Purchase
Agreement prohibits the Company from paying dividends pending the closing of the
Suncom transaction without the prior written consent of Suncom (see "Item 1.
Description of Business - General").
ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Set forth below is a discussion of the Companys financial condition, changes
in financial condition and results of operations for the periods indicated.
<PAGE>
6
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,
1996 1995 1994
Revenues from Operations 100.0% 100.0% 100.0%
Operating Costs and Expenses (69.9)% (69.7)% (72.3)%
----- ----- -----
Income from Operations before
Depreciation and Amortization 30.1% 30.3% 27.7%
Depreciation and Amortization (14.6)% (15.4)% (17.4)%
----- ----- -----
Income before Other Income (Expense)
and Income Taxes 15.5% 14.9% 10.3%
Other Income (Expense), Net (8.3)% (6.2)% (5.2)%
----- ----- ----
Income before Income Taxes 7.2% 8.7% 5.1%
Provision for Income Taxes (0.9)% (0.7)% (0.5)%
---- ---- ----
Net Income 6.3% 8.0% 4.6%
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<PAGE>
7
RESULTS OF OPERATIONS
GENERAL DISCUSSION
Again, the year 1996 exceeded the Company's target both in net income and
earnings per share. The Company is committed to growth through increased
revenues and acquisitions. It was anticipated that Jacksonville would increase
the Company's revenues to approximately $11,000,000, and we can report that
Audios revenues for the year 1996 were $11,051,000.
REVENUES
The Company derives its revenues from recurring MUZAK\R\ franchise billings
and equipment sales. As previously mentioned, the Company's 1996 revenues were
$11,051,000 as compared to 1995's revenues of $7,621,000, an increase of
$3,430,000 or 45%. Jacksonvilles contribution was 46%. The slight reduction in
Audio's continuing revenues was due to consolidation and restructuring of
various national recurring revenue accounts. Revenue in 1995 increased in every
category from equipment sales to recurring billing by $708,000 or 10% from
1994's revenues of $6,913,000.
COSTS AND EXPENSES
Cost of sales increased to $4,718,505 from $3,061,675 or 54% in 1996 over
1995 due to the inclusion of sound equipment sold by the Jacksonville franchise.
Over 50% of the sound equipment revenue is material costs. 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.
There was no additional general and administrative expense incurred in the
Jacksonville acquisition, resulting in a decrease in selling, general, and
administrative expenses as a percentage of sales in 1996 over 1995. In 1995,
there was no additional sales expense due to increasing revenues, resulting in a
slight decrease in selling, general, and administrative expenses as a percentage
of sales in 1995 over 1994.
Depreciation and amortization as a percentage of sales decreased in 1996 over
1995 and 1995 over 1994 as a result of certain assets and intangibles related to
previous acquisitions becoming fully depreciated and amortized. The decrease in
1996 was partially offset by an increase in amortization and depreciation
expense incurred by the Florida Sound Engineering Company acquisition.
OTHER INCOME (EXPENSE)
The increase in interest expense in 1996 over 1995 was due to additional
borrowings for the purchase of the Florida Sound Engineering Company and to
purchase inventory for the Pro Sound Division acquisition. 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 1996 over 1995 of other income is due primarily to the
inclusion of the Jacksonville acquisition. The decrease in 1995 from 1994 was
due to the surrendering in 1994 of a key man insurance policy no longer
required. Other income is primarily composed of cancelation fees, bad debt
recoveries, commissions earned, and discounts earned as allowed.
<PAGE>
8
INCOME TAXES
At December 31, 1996, the Company had net operating loss carryforwards for
federal tax purposes of approximately $2,066,000. Such loss carryforwards
expire in 2004 through 2006.
NET INCOME
Net income for 1996 was $699,000 as compared to $609,000 for the year 1995,
an increase of $90,000 or 15%. Earnings per share for 1996 were $.30 versus
$.27 for the year 1995, an increase of 11% or $.03 per share. Net income for
1995 at $609,000 or $.27 per share as compared to 1994's $312,000 or $.15 per
share. This increase was primarily a result of certain assets and intangibles
related to previous acquisitions becoming fully depreciated and amortized at
December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Operating cash flows (computed as net income plus interest, taxes,
depreciation, and amortization) were $3,448,000 in 1996 as compared to
$2,376,000 for the year 1995, an increase of $1,072,000 or 45%. All loan
payments of interest and principal have been made on a timely basis in both
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 an 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.
On January 2, 1996, 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
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 allows the Company to
expand its sound system contracting business. The Jacksonville company's name
remains the same, and it operates as a wholly owned subsidiary of the Company.
<PAGE>
9
As described in "Item 1. Description of Business - General," in November 1996
the Company entered into an agreement to acquire the business of Suncom. In
connection with this transaction, which is expected to be consummated in the
second quarter of 1997, the Company expects that its existing banking facilities
and the current banking facilities of Suncom will be replaced with a combined
banking facility covering both the Company and Suncom.
<PAGE>
10
ITEM 7. FINANCIAL STATEMENTS
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 11
FINANCIAL STATEMENTS:
Consolidated Balance Sheets, December 31, 1996 and 1995 12
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995, and 1994 14
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1996, 1995, and 1994 15
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995, and 1994 16
Notes to Consolidated Financial Statements for the Years Ended
December 31, 1996, 1995, and 1994 18
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
<PAGE>
11
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, 1996 and 1995, and the related consolidated statements of
operations, stockholder's equity and cash flows for each of the three years in
the period ended December 31, 1996. 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, 1996
and 1995, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
/S/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Orlando, Florida
February 20, 1997
<PAGE>
12
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------
ASSETS 1996 1995
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 995,810 $ 590,107
Accounts receivable - trade (less
allowance for doubtfuL accounts of
$189,000 in 1996 and $147,000 in 1995) 1,044,562 519,754
Inventories (Note 1) 473,771 359,888
Prepaid expenses and other current assets 50,138 33,416
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Total current assets 2,564,281 1,503,165
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PROPERTY - At cost: (Notes 1 and 2)
Leasehold improvements 55,092 49,720
Machinery and equipment 8,445,641 6,117,933
Furniture and fixtures 430,243 333,563
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Total 8,930,976 6,501,216
Less accumulated depreciation (3,969,514) (3,142,999)
----------- -----------
Property - net 4,961,462 3,358,217
----------- -----------
OTHER ASSETS:
Subscriber contract rights and other
intangible assets (net of accumulated
amortization of approximately
$6,383,000 in 1996 and $5,891,000
in 1995) (Note 1) 2,487,096 1,541,922
Goodwill (net of accumulated
amortization of approximately
$797,000 in 1996 and $518,000 in
1995) (Note 1) 4,408,520 1,994,040
Deposits and other 171,761 13,734
----------- -----------
Total other assets 7,067,377 3,549,696
----------- -----------
TOTAL $14,593,120 $ 8,411,078
=========== ===========
(Continued)
<PAGE>
13
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
CURRENT LIABILITIES:
Current portion of long-term debt
(Note 2) $ 1,303,265 $ 923,697
Current portion of obligations under
capital leases - 12,697
Accounts payable 700,276 458,872
Royalties payable 80,757 20,825
Accrued liabilities 85,079 68,781
----------- -----------
Total current liabilities 2,169,377 1,484,872
----------- -----------
LONG-TERM DEBT (Note 2) 8,814,969 4,089,019
----------- -----------
DEFERRED COMPENSATION (Note 1) - 50,000
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (Note 3):
Common stock, $.25 par value,
authorized, 8,000,000
shares; issued and outstanding,
2,309,203 shares in 1996
and 2,243,821 shares in 1995 577,301 560,955
Capital contributed in excess of par
value 5,117,258 5,011,451
Accumulated deficit (2,085,785) (2,785,219)
----------- -----------
Total stockholders' equity 3,608,774 2,787,187
----------- -----------
TOTAL $14,593,120 $ 8,411,078
=========== ===========
See notes to consolidated financial statements.
(Concluded)
<PAGE>
14
<TABLE>
<CAPTION>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
- -----------------------------------------------------------------------------------------------------------------
1996 1995 1994
REVENUES $11,051,227 $ 7,621,495 $ 6,912,519
----------- ------------ ---------------
<S> <C> <C> <C>
COSTS AND EXPENSES:
Cost of sales 4,718,505 3,061,675 2,825,560
Selling, general and administrative expenses 3,011,621 2,252,295 2,173,943
Depreciation and amortization 1,608,870 1,171,670 1,205,191
----------- ------------ --------------
Total 9,338,996 6,485,640 6,204,694
----------- ------------ --------------
INCOME BEFORE OTHER INCOME (EXPENSE)
AND INCOME TAXES 1,712,231 1,135,855 707,825
----------- ------------ --------------
OTHER INCOME (EXPENSE):
Interest income 26,652 22,448 17,463
Interest expense (Note 2) (1,044,063) (538,112) (464,598)
Other 100,014 46,436 89,035
----------- ------------ --------------
Other - net (917,397) (469,228) (358,100)
----------- ------------ --------------
INCOME BEFORE INCOME TAXES 794,834 666,627 349,725
PROVISION FOR INCOME TAXES (Notes 1 and 4) 95,400 57,500 37,700
----------- ------------ --------------
NET INCOME $ 699,434 $ 609,127 $ 312,025
=========== ============ ===============
NET INCOME PER COMMON SHARE (Note 1) $.30 $.27 $.15
=========== ============ ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
15
<TABLE>
<CAPTION>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
- ----------------------------------------------------------------------------------------------------------------
CAPITAL
CONTRIBUTED TOTAL
COMMON IN EXCESS ACCUMULATED STOCKHOLDERS'
STOCK OF PAR VALUE DEFICIT EQUITY
<S> <C> <C> <C> <C>
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 3) 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
Stock issued to directors and
employees in lieu of cash compensation 5,495 46,516 - 52,011
Stock purchased by employees under
employee stock purchase plan (Note 3) 826 9,166 - 9,992
Stock options exercised 10,025 50,125 - 60,150
Net income - - 699,434 699,434
-------- ---------- ------------ -------------
BALANCE, DECEMBER 31, 1996 $577,301 $5,117,258 $(2,085,785) $3,608,774
======== ========== ============ =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
16
<TABLE>
<CAPTION>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
- ----------------------------------------------------------------------------------
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Cash received from customers $10,950,613 $ 7,624,741 $ 6,822,904
Cash paid to suppliers and employees (8,682,360) (6,415,647) (5,479,138)
Interest received 77,974 22,448 17,463
Interest paid (1,044,063) (536,497) (452,349)
Income taxes paid (102,800) (71,101) (12,742)
Other - net (19,525) 537 6,049
----------- ----------- -----------
Net cash provided by operating 1,179,839 624,481 902,187
activities ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (18,631) (25,967) (84,560)
Purchase of Florida Sound Engineering (5,750,000) - -
Purchase of subscriber contract rights
and other intangible assets (135,000) (44,385) (359,063)
----------- ----------- -----------
Net cash used in investing
activities (5,903,631) (70,352) (443,623)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease
obligations (12,697) (58,936) (89,500)
Proceeds from issuance of long-term
debt 11,000,000 5,200,000 494,139
Repayments of long-term debt (5,927,950) (5,619,522) (717,391)
Proceeds from sale of stock to employees 70,142 5,372 -
----------- ----------- -----------
Net cash provided by (used in)
financing activities 5,129,495 (473,086) (312,752)
----------- ----------- -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 405,703 81,043 145,812
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 590,107 509,064 363,252
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 995,810 $ 590,107 $ 509,064
=========== =========== ===========
(Continued)
</TABLE>
<PAGE>
17
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
- --------------------------------------------------------------------------------
1996 1995 1994
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 699,434 $ 609,127 $ 312,025
----------- ----------- ----------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,654,017 1,221,134 1,254,226
Valuation allowances 41,998 17,000 60,500
Deferred commissions (88,533) (59,030) (42,825)
Stock issued to directors and
employees in lieu of cash compensation 52,011 11,702 12,149
(Increase) decrease in operating
assets and increase (decrease) in
operating liabilities - net of
business acquired:
Accounts receivable (191,304) 21,599 (178,650)
Prepaid and other assets (140,497) 36,905 107,071
Inventories (1,142,010) (1,019,492) (817,319)
Accounts payable 191,404 (170,554) 204,171
Accrued liabilities 76,232 (48,253) 69,267
Other - net 27,087 4,343 (78,428)
----------- ----------- ----------
Total adjustments 480,405 15,354 590,162
----------- ----------- ----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 1,179,839 $ 624,481 $ 902,187
=========== =========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the years ended December 31, 1996, 1995, and 1994, approximately
$1,417,000, $887,000, and $864,000, respectively, of inventory was rented 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, 1996 and 1995, service vehicles totaling
approximately $33,000 and $130,000, respectively, were acquired through the
issuance of long-term debt.
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>
18
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
- -------------------------------------------------------------------------------
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 five 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, and long-term debt)
approximates fair value.
INVENTORIES - Inventories, which consist of equipment held for sale or lease
and supplies, 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 had a deferred compensation agreement
with an officer providing for benefits payable to such officer. The
liability was fully accrued at December 31, 1995, was reclassified to
accounts payable as of December 31, 1996, and was paid in January 1997.
GOODWILL AND INTANGIBLE ASSETS - Goodwill, the excess of the purchase price
over the fair value of net assets of businesses acquired, is amortized over
20 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.
<PAGE>
19
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
2,137,611 for 1994, 2,235,108 for 1995, and 2,304,975 for 1996. 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.
RECLASSIFICATIONS - Certain amounts shown in 1995 and 1994 have been
reclassified to conform to the 1996 presentation.
2. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1996 and 1995:
1996 1995
Commercial bank loan, interest
accrues at the banks prime rate
plus 1.25% (9.5% at December 31,
1996); principal and interest paid
monthly, due July 1, 2001 $ 9,988,000 $ 4,810,000
Truck loans, interest accrues at
approximately 10%; principal and
interest payable monthly; due
through May 1998 109,548 136,248
Other long-term debt 20,686 66,468
----------- -----------
Total 10,118,234 5,012,716
Less current portion 1,303,265 923,697
----------- -----------
Long-term portion $ 8,814,969 $ 4,089,019
=========== ===========
<PAGE>
20
Long-term debt matures as follows:
YEAR
1997 $ 1,303,265
1998 1,401,259
1999 1,532,710
2000 1,690,000
2001 4,191,000
-----------
Total $10,118,234
===========
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 monthly billings,
and include restrictions on dividends.
3. STOCKHOLDERS EQUITY
The Company has two stock-based compensation plans, which are described
below. The Company applied APB Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized for the plans. Had
compensation cost for the Company's two stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS No. 123, Accounting for Stock-Based
Compensation, the Company's 1996 and 1995 net income and earnings per common
share would have changed to the pro forma amounts indicated below:
1996 1995
Net income:
As reported $699,400 $609,100
Pro forma $680,200 $594,300
Earnings per common share assuming no
dilution:
As reported $ .30 $ .27
Pro forma $ .30 $ .26
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. The fair value of each option grant is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions: no dividend yield, expected
volatility of 137%, risk-free interest rate of 5.84%, and expected lives of
three years.
<PAGE>
21
Stock option activity for each of the three years in the period ended
December 31, 1996 is as follows:
Weighted
Average
Exercise
Shares Price
Outstanding at January 1, 1994 123,500 $ 1.50
Cancelled/expired (66,000) $ 1.50
-------
Outstanding at December 31, 1994 57,500
Granted 101,000 $1.125
-------
Outstanding at December 31, 1995 158,500
Granted 10,000 $2.625
Exercised (40,100) $ 1.50
Cancelled/expired (17,400) $ 1.50
-------
Outstanding at December 31, 1996
(none exercisable at December 31,
1996) 111,000
=======
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 at fair
value by eligible participants, as defined under the plan (up to 10,000
shares per participant), and for the remainder of the shares to be awarded as
bonuses to key employees. During the years ended December 31, 1996 and 1995,
3,302 shares and 2,452 shares, respectively, were purchased by participants
under this plan.
4. INCOME TAXES
The components of the provision for income taxes are as follows:
1996 1995 1994
Current:
Federal $15,400 $ 2,200 $ -
State 80,000 55,300 37,700
------- ------- -------
$95,400 $57,500 $37,700
======= ======= =======
<PAGE>
22
The Company's effective tax rate differs from the statutory federal income
tax rate for the following reasons:
1996 1995 1994
Computed statutory amount $ 270,000 $ 227,000 $ 119,000
Increases (decreases):
State income taxes, net of benefit
of federal taxes 53,000 36,500 24,900
Nondeductible expenses 124,000 125,000 98,000
Utilization of net operating loss
carryforwards (339,000) (342,700) (217,000)
Other - net (12,600) 11,700 12,800
--------- --------- ---------
$ 95,400 $ 57,500 $ 37,700
========= ========= =========
The components of the Company's net deferred tax asset are as follows:
1996 1995
Noncurrent liabilities - depreciation $ 305,000 $ 225,000
--------- ---------
Noncurrent assets:
Net operating loss carryforwards 703,000 968,000
Deferred compensation 17,000 17,000
Other 93,000 54,000
--------- ---------
Total noncurrent assets 813,000 1,039,000
--------- ---------
Net deferred tax asset - before
valuation allowance 508,000 814,000
Valuation allowance for deferred tax (508,000) (814,000)
asset --------- ---------
Net deferred tax asset $ - $ -
========= =========
It is more likely than not that realization of the net deferred tax asset
through future taxable income within the carryforward periods will not occur.
Accordingly, the net deferred tax asset has been fully reserved with a
valuation allowance at December 31, 1996.
At December 31, 1996, the Company has net operating loss carryforwards for
federal tax purposes approximating $2,066,000. Such loss carryforwards will
expire in 2002 through 2006.
5. 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 amounted to approximately $12,000 for 1996 and
approximately $50,000 for 1995 and 1994.
<PAGE>
23
6. COMMITMENTS AND CONTINGENCIES
Certain equipment and office space are held under noncancelable operating
leases. The Company has also entered into various agreements with
broadcasting companies in order to transmit music service to its customers
through the broadcasting companies' subchannels. Expense under the operating
leases and broadcasting agreements was approximately $408,000, $338,000, and
$268,000 during 1996, 1995, and 1994, respectively.
Future minimum payments under the leases and broadcasting agreements are as
follows:
YEAR
1997 $ 332,000
1998 301,000
1999 283,000
2000 249,000
2001 60,000
Thereafter 88,000
----------
Total minimum lease payments $1,313,000
==========
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.
7. ACQUISITIONS
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 was accounted for as a purchase, and the excess of the amount
paid over the fair value of net assets acquired was approximately $2,700,000,
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 are 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.
In November 1996, the Company entered into an Asset Purchase Agreement to
acquire substantially all of the assets and assume the liabilities of Suncom
Communications, L.L.C. ("Suncom") in exchange for approximately 2,100,000
shares of the Company's common stock. The acquisition will be accounted for
as a purchase. Suncom owns and operates MUZAK/(R) /franchises in
Hillsborough and Charlotte, North Carolina, and Phoenix, Arizona. Management
of the Company expects the transaction to close in April 1997.
<PAGE>
24
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).*
10.3 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).*
<PAGE>
25
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).*
10.14 Asset Purchase Agreement dated as of November 19, 1996 between
Registrant and Suncom Communications L.L.C. (incorporated by reference
to Exhibit on Form 8-K dated November 26, 1996)
21 Subsidiaries of the Registrant.
* Management contract or compensatory plan or arrangement.
(B) Reports on Form 8-K
Form 8-K filed November 26, 1996 reporting the Asset/Purchase Agreement dated
November 19, 1996 between the Company and Suncom Communications L.L.C.
providing for the acquisition of Suncoms business.
<PAGE>
26
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 28, 1997
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 28, 1997
- -------------------------- (Principal Financial Officer and
Doris K. Krummenacker Principal Accounting Officer)
Director
/s/A. J. Schell Chairman of the Board, President, March 28, 1997
- --------------------------- Chief Executive Officer (Principal
A.J. Schell Executive Officer)
/s/Robert Dyer Director March 28, 1997
- ---------------------------
Robert Dyer
/s/Nat M. Turnbull Director March 28, 1997
- ---------------------------
Nat M. Turnbull
/s/Patrick J. Dougherty Director March 28, 1997
- --------------------------
Patrick J. Dougherty
</TABLE>
<PAGE>
27
<TABLE>
<CAPTION>
Signature Title Date
--------- ------ ------
<S> <C> <C>
/s/Ben B. Moss Director March 28, 1997
- --------------------------
Ben B. Moss
/s/Ralph L. Weber Director March 28, 1997
- -------------------------
Ralph L. Weber
/s/C. Lee Maynard Director March 28, 1997
- -------------------------
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
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 995,810
<SECURITIES> 0
<RECEIVABLES> 1,233,562
<ALLOWANCES> 189,000
<INVENTORY> 473,771
<CURRENT-ASSETS> 2,564,281
<PP&E> 8,930,976
<DEPRECIATION> 3,969,514
<TOTAL-ASSETS> 14,593,120
<CURRENT-LIABILITIES> 2,169,377
<BONDS> 8,814,969
0
0
<COMMON> 577,301
<OTHER-SE> 3,031,473
<TOTAL-LIABILITY-AND-EQUITY> 14,593,120
<SALES> 11,051,227
<TOTAL-REVENUES> 11,051,227
<CGS> 4,718,505
<TOTAL-COSTS> 9,338,996
<OTHER-EXPENSES> (126,666)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,044,063
<INCOME-PRETAX> 794,834
<INCOME-TAX> 95,400
<INCOME-CONTINUING> 699,434
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 699,434
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
