<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended July 31, 1994 Commission file number 0-14361
PARTECH HOLDINGS CORPORATION
(Exact Name of Company as Specified in Its Charter)
Delaware 31-1166419
(State or Other jurisdiction of (I.R.S. Employer I.D. Number)
incorporation or organization)
3366 Riverside Drive, Suite 200, Columbus, Ohio 43221
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (614) 538-0660
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The Company had 1,859,902 shares of $0.15 par value common stock
outstanding as of August 31, 1994.
<PAGE> 2
<TABLE>
PARTECH HOLDINGS CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JULY 31, 1994
INDEX
PART I: FINANCIAL INFORMATION
<CAPTION>
PAGE
<S> <C>
Item 1. Financial Statements
(a) Consolidated Balance Sheets as of July 31, 1994 and April 30, 1994 3
(b) Statements of Consolidated Operations for the Three Months Ended July 31,
1994 and 1993, respectively 4
(c) Statements of Consolidated Cash Flows for the Three Months Ended July 31,
1994 and 1993, respectively 5
(d) Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibit Index and reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE> 3
<TABLE>
PART I
Item 1. Financial Statements
--------------------
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
JULY 31, APRIL 30,
1994 1994
<S> <C> <C>
ASSETS:
Cash $ 23,230 $ 36,344
Deposits and accounts receivable (net of allowance for
doubtful accounts of $7,077 and $2,730, respectively) 262,900 137,328
Residuals notes receivable 259,893 291,741
Equipment notes and accrued interest receivable 52,697,302 56,789,950
Leased property under capital lease, at cost (net of accumulated
amortization of $121,052,566 and $123,972,731, respectively) 24,835,131 29,084,845
Net investment in operating leases (net of accumulated
depreciation of $4,600,196 and $4,159,137, respectively) 844,120 1,359,646
Property and equipment, at cost (net of accumulated depreciation of
$374,721 and $350,259, respectively) 595,694 613,906
Cost in excess of net assets acquired (net of accumulated amortization
of $1,117,699 and $1,085,562, respectively) 2,251,885 2,283,781
Investment in partnerships 45,498 45,498
Net investment in direct financing leases 2,300,126 2,230,641
Deferred organization, stock issuance and other financing costs 98,401 86,708
Broadcasting rights 343,818 381,818
Other assets 75,474 77,954
-------------- --------------
Total Assets $ 84,633,472 $ 93,420,160
============== ==============
LIABILITIES:
Accounts payable and accrued expenses $ 228,545 $ 198,899
Accounts payable - related parties 31,348 31,348
Note and accrued interest payable - related party 30,796 30,033
Notes and accrued interest payable 2,908,776 2,431,855
Broadcasting rights 343,818 381,818
Discounted lease rentals and accrued interest payable 25,679,251 30,444,340
Capital lease obligations and accrued interest payable 52,703,440 56,797,791
Accrued officer compensation and interest payable 95,121 52,649
Deferred income taxes - 75,000
-------------- --------------
Total Liabilities 82,021,095 90,443,733
-------------- --------------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 1,000,000 shares authorized,
none issued and outstanding
Common stock, $0.15 par value, 50,000,000 shares authorized,
1,862,302 issued 279,345 279,345
Paid in capital 7,863,790 7,863,988
Retained deficit (5,519,170) (5,155,318)
-------------- --------------
2,623,965 2,988,015
Treasury stock, at cost (11,588) (11,588)
-------------- --------------
Total Stockholders' Equity 2,612,377 2,976,427
-------------- --------------
Total Liabilities and Stockholders' Equity $ 84,633,472 $ 93,420,160
============== ==============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE> 4
<TABLE>
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
<CAPTION>
THREE MONTHS ENDED JULY 31,
-----------------------------------------------
1994 1993
<S> <C> <C>
REVENUES:
Rental income $ 2,692,543 $ 6,947,460
Commissions, fees, advertising and other income 211,051 41,767
Interest income 1,559,676 2,354,204
-------------- --------------
Total Revenues 4,463,270 9,343,431
-------------- --------------
COSTS AND EXPENSES:
Marketing, administrative and other operating expenses 579,769 369,219
Advisory services - 84,583
Interest expense - related party - 121,011
Interest expense 1,372,732 3,406,525
Depreciation and amortization of equipment 2,914,384 5,929,276
Amortization of cost in excess of net assets acquired
and other intangible assets 35,237 35,215
-------------- --------------
Total Costs and Expenses 4,902,122 9,945,829
-------------- --------------
LOSS BEFORE INCOME TAXES (438,852) (602,398)
Income tax benefit (75,000) -
-------------- --------------
NET LOSS $ (363,852) $ (602,398)
============== ==============
PRIMARY NET LOSS PER SHARE $ (0.20) $ (0.51)
============== ==============
FULLY DILUTED NET LOSS PER SHARE $ (0.20) $ (0.51)
============== ==============
AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES:
Primary 1,859,902 1,170,756
Fully diluted 1,859,902 1,170,756
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE> 5
<TABLE>
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
INCREASE IN CASH AND CASH EQUIVALENTS
<CAPTION>
THREE MONTHS ENDED JULY 31,
------------------------------
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Commissions, fees, advertising and other receipts $ 87,524 $ 69,187
Marketing, administrative and other operating
payments (385,133) (292,482)
Interest receipts 371 4,358
Interest payments (5,847) (125,659)
----------- -----------
Net Cash Used For Operating Activities (303,085) (344,596)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments to non consolidated affiliates (620) (2,260)
Purchases of property and equipment (1,806) (50,681)
Proceeds from sale of property and equipment 1,050 -
Capitalized organization costs (2,109) (25,473)
Escrow deposits for radio station acquisitions (67,000) -
Other - (70)
----------- -----------
Net Cash Used For Investing Activities (70,485) (78,484)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred stock, debt issuance and other financing costs (43,207) (4,093)
Proceeds from issuance of stock - 2,339,981
Proceeds from other borrowings 410,000 -
Principal payments under other borrowings - (625,000)
Principal payments under radio station acquisition financings (3,828) (3,565)
Principal payments under capital lease obligation
and other financings (2,509) (1,682)
----------- -----------
Net Cash Provided By Financing Activities 360,456 1,705,641
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,114) 1,282,561
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 36,344 143,164
----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 23,230 $ 1,425,725
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE> 6
<TABLE>
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
RECONCILIATION OF NET LOSS TO
NET CASH USED FOR OPERATING ACTIVITIES
<CAPTION>
THREE MONTHS ENDED JULY 31,
--------------------------------------
1994 1993
<S> <C> <C>
Net loss $ (363,852) $ (602,398)
------------- --------------
Adjustments to reconcile net loss to net cash used for
operating activities:
Expenses and revenues not affecting operating activities:
Depreciation and amortization of equipment, and
cost in excess and other intangible assets 2,949,621 5,964,491
Deferred costs expensed 33,917 -
Advisory services paid in stock - 84,583
Employee stock bonus - 42,900
Rental income (2,692,543) (6,947,460)
Leasing interest income (1,558,641) (2,351,301)
Leasing interest expense 1,362,396 3,396,197
Changes in assets and liabilities:
Changes in accrued interest income (664) 1,455
Changes in accrued interest expense 4,489 5,680
Changes in residual notes and accounts
receivable (29,502) 24,176
Changes in other assets 66,517 (1,873)
Changes in notes and accounts payable,
and accrued expenses (2,294) 36,733
Income taxes (75,000) -
Other 2,471 2,221
------------- --------------
Total Adjustments 60,767 257,802
------------- --------------
NET CASH USED FOR OPERATING ACTIVITIES $ (303,085) $ (344,596)
============= ==============
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION
INVESTMENT IN FINANCE ASSETS. The Company acquires leases of equipment
and lease receivables partially by assuming existing financing. Also, the
Company may sell or dispose of such assets with a commensurate transfer of
any related financing to the transferee.
During the current period the Company disposed of Net Investment in
Operating Leases which reduced its gross value by $74,467 and accumulated
depreciation by the same amount. During the three months ended July 31, 1994
leasehold tenancy positions terminated which reduced the gross value of
Leased Property Under Capital Lease by $5,293,579 and accumulated
amortization by an equivalent amount. Also, during the same period the
Company's obligation to pay $1,876,300 of Discounted Lease Rentals and
Accrued Interest Payable terminated; therefore, the carrying value of
Equipment Under Capital Lease was reduced tantamount.
During the three months ended July 31, 1993 the Company (1) incurred
$40,000 of debt and expended $19,449 in cash for the purchase of fixed
assets, (2) issued 110,000 shares for $5,500 in cash and incurred $42,900 of
compensation expense, and (3) recorded other assets of $1,775 and related
liabilities of an equivalent amount. During the three months ended July 31,
1993 leasehold tenancy positions terminated which reduced the gross value of
Leased Property Under Capital Lease by $16,551,812 and accumulated
amortization by an equivalent amount.
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
PARTECH HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of July 31, 1994, the statement of
consolidated operations for the three months ended July 31, 1994, and the
statement of consolidated cash flows for the three months ended July 31, 1994,
have been prepared by the Company, without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows at July 31, 1994, and for all periods presented, have been made.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's April 30, 1994 and 1993, Annual Report
to the Securities and Exchange Commission on Form 10-K.
2. FEDERAL INCOME TAX
The income tax provision is reported using an asset and liability approach
and measuring the change in the tax asset or liability. A deferred tax asset
or liability generally arises from changes in differences between financial
reporting and tax bases of all assets and liabilities (with exception related
to goodwill). A deferred tax asset will result in an income tax benefit
(before valuation allowance), conversely a deferred tax liability will result
in income tax expense. Previously recorded deferred tax assets and liabilities
are adjusted upon any changes in enacted tax rates. Differences between
financial reporting and tax bases usually result from differences in timing of
income and expense recognition. A valuation allowance is applied to a tax
asset for any amount that does not meet certain realizability criteria. A
change in the amount of valuation allowance that is applicable to the beginning
of the year balance is recognized in income from continuing operations,
increases in the valuation allowance are recognized as income tax expense and
decreases are recognized as income tax benefit. The valuation allowance at the
beginning of the year was $1,632,000 and increased $111,400.
As of July 31, 1994, the Company and its subsidiaries reported an aggregate
cumulative Federal income tax loss carryforward of approximately $17,559,000,
expiring through 2010. As of July 31, 1993, the Company and its subsidiaries
had aggregate Federal tax net operating loss carryforwards of approximately
$22,872,000.
3. EARNINGS PER SHARE
For the fiscal quarters ended July 31, 1994 and 1993, primary and fully
diluted earnings per share amounts, are computed based on 1,859,902 shares and
1,170,756 shares, the weighted average number of common shares outstanding.
Stock purchase rights are not included in primary or fully diluted earnings per
share for either period presented herein due to the rights being anti-dilutive.
Included in the weighted average number of common shares outstanding, for the
first fiscal quarter of 1993, are 36,667 shares issued pursuant to stock sales
and 133,333 shares which were issuable as of July 31, 1993. During the fiscal
quarter ended July 31, 1993 the Company issued 778,160 shares pursuant to
warrant exercises. If these shares had been issued at the beginning of the
period primary and fully diluted loss per share would have been ($0.33).
5. DEFERRED COSTS
At July 31, 1994, the Company has deferred $47,601 of costs associated with
the acquisition of broadcast properties and $50,800 of costs in connection with
financings. During the current period the Company expensed $33,917 of deferred
financing costs.
6. ADVERTISING REVENUE AND BARTER TRANSACTIONS
During the fiscal quarter ended July 31, 1994 the Company recognized
$196,915 of advertising revenue which is included in commissions, fees,
advertising and other income. Such advertising revenue includes $88,245 of
barter transaction revenue. Also during the current period, the Company
recognized $70,534 of barter transaction expense,
7
<PAGE> 8
which is included in marketing, administrative and other operating expenses.
Prior years amounts were not significant. The amount of goods and services
which were received or used prior to the transmission of advertising was
insignificant as of the balance sheet date.
7. REVERSE STOCK SPLIT
The Company held a Special Meeting of Stockholders on July 21, 1994 to vote
upon a one (1) for three (3) reverse stock split (the "Reverse Split"). The
Company's Certificate of Amendment for the Reverse Split was filed with the
Secretary of State of Delaware on July 26, 1994, thereby causing this date to
be the effective date of the Reverse Split. All amounts herein have been
restated for the Reverse Split.
8. PRIVATE DEBT PLACEMENT
During the fiscal quarter ended July 31, 1994 the Company received $410,000
and subsequent to July 31, 1994 the Company received an additional $100,000
(which includes $50,000 from a Company of which John E. Rayl, C.E.O. and
President is a principal) pursuant to an exempt offering of the Company's
securities. The securities are convertible after September 30, 1994 into the
Company's common stock at a price equal to 50% of the closing bid price on
conversion date. The securities are collateralized by all of the issued and
outstanding stock of the Company's communications subsidiary and 700,305 shares
of the Company's common stock which is owned by John E. Rayl, C.E.O. and
President. Mr. Rayl and the Company have agreed that if Mr. Rayl's shares are
foreclosed upon the Company will satisfy its contribution obligation to Mr.
Rayl by distributing two shares of the same class of stock for every one share
foreclosed upon.
The Company is presently negotiating with the existing Note holders for
their approval to extend the due date of the Notes from September 30, 1994 to
March 31, 1995 and, capitalize late interest in the amount of $4,578 on
$410,000 of Notes and current or future interest to Note principal.
8
<PAGE> 9
8. STOCK OPTION PLANS
The following table sets forth: (1) the number of shares of the Company's
common stock issuable at July 31, 1994 pursuant to outstanding Options; (2) the
exercise price per share; (3) the aggregate exercise price; (4) the expiration
dates; and, (5) the market values of such shares at July 31, 1994, based on
$2.25 per share, which is the average of the high and low ask and bid prices on
the National Association of Securities Dealers Automated Quotation system on
July 31, 1994.
<TABLE>
<CAPTION>
Number of
Shares Market
Covered By Exercise Aggregate Value at
Outstanding Price Per Exercise Expiration July 31,
Plan Options Share Price Dates 1994
- - ----------------------- --------- ------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
Incentive Stock Option Plan 23,808 $ 2.07 $ 49,283 11/18/02 $ 53,568
Incentive Stock Option Plan 53,332 $ 3.27 $ 174,396 7/15/03 $ 119,997
Incentive Stock Option Plan 499 $ 2.8125 $ 1,403 4/29/04 $ 1,123
Incentive Stock Option Plan 10,000 $ 2.34375 $ 23,438 4/29/04 $ 22,500
Stock Option and Stock
Appreciation Rights Plan 33,333 $ 2.07 $ 68,999 11/18/02 $ 74,999
Stock Option and Stock
Appreciation Rights Plan 113,333 $ 3.27 $ 370,599 7/15/03 $ 254,999
<FN>
No Options were exercised during the current period.
</TABLE>
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
RESULTS OF OPERATIONS
The Company presently owns and operates WLTT-FM in Shallotte, North
Carolina (serving the Wilmington, North Carolina and Myrtle Beach, South
Carolina markets), operates WMOG-FM and WMOG-AM, St. Simons Island and
Brunswick, Georgia, respectively, through a Time Brokerage Agreement, and is in
the process of constructing WKKB-FM in the Florida Keys, of which the Company
owns a 49% interest and many pursue the acquisition of the other 51%. The
Company's applications for license transfer have been approved by the FCC for
two FM and one AM station, all of which are located in Florida. The
applications for license transfer for an FM station located in Florida and
WMOG-FM and WMOG-AM are pending FCC approval.
The Company expects that its acquisition activities will extend well into
fiscal year 1995 and that significant revenues and income will not be realized
until all of the stations have been acquired and integrated into a consolidated
operation. As of July 31, 1994 the Company has $47,601 of costs deferred which
relate to these acquisition activities.
The Company is continuing to manage its lease portfolios and to acquire
lease properties as and when suitable transactions become available. The
Company is actively pursuing leasing opportunities within the broadcast
industry. If the Company has idle broadcast equipment, it aggressively markets
such equipment for lease.
Rental income and interest income is a function of the amount of equipment
in the Company's Portfolios which may change substantially from year to year
based upon the volume of Portfolio acquisitions and dispositions. The
Company's net earnings from its Portfolios is minimal until the Operating
Leases are completed and the related Discounted Lease Rentals and Accrued
Interest Payable are paid. The following tables indicate the comparative
results of operations for the fiscal quarters ended July 31, 1994 and 1993.
<TABLE>
===================================================================================================================
FISCAL QUARTER ENDED JULY 31, 1992 COMPARED TO QUARTER ENDED JULY 31, 1991
<CAPTION>
Fiscal Quarter Ended July 31, Amount of Change
-------------------------------- ----------------------------
1994 1993 Dollars Percentage
<S> <C> <C> <C> <C>
Rental income $ 2,692,543 $ 6,947,460 $ (4,254,917) (61.2%)
Commissions, fees, advertising and
other income $ 211,051 $ 41,767 $ 169,284 405.3%
Interest income $ 1,559,676 $ 2,354,204 $ (794,528) (33.7%)
Marketing, administrative and other
operating expenses $ 579,769 $ 369,219 $ 210,550 57.0%
Interest expense $ 1,372,732 $ 3,527,536 $ (2,154,804) (61.1%)
Depreciation and amortization of
equipment $ 2,914,384 $ 5,929,276 $ (3,014,892) (50.8%)
Loss from operations $ (438,852) $ (602,398) $ 163,546 27.1%
Net loss $ (363,852) $ (602,398) $ 238,546 39.6%
===================================================================================================================
</TABLE>
The above costs reflect the activity of the Portfolios acquired by the
Company. As the number of leases vary, so do the related expenses. As of July
31, 1994 Equipment Notes and Accrued Interest Receivable, Leased Property Under
Capital Lease and Net Investment in Operating Leases were $52,697,302,
$24,835,131 and $844,120 respectively, compared to $56,789,950, $29,084,845 and
$1,359,646, respectively, at April 30, 1994. Discounted Lease Rentals and
Accrued Interest Payable, and Capital Lease Obligations and Accrued Interest
Payable were $25,679,251 and $52,703,440, respectively, at July 31, 1994
compared to $30,444,340 and $56,797,791, respectively, at April 30, 1994.
These and the above leasing revenue and expense decreases are due to payments
made as to the Company's existing lease receivables and related obligations,
which is a normal operating circumstance, and
10
<PAGE> 11
sales of the lease portfolios. Such revenues and expenses, and assets and
liabilities are expected to change in future periods from new properties being
acquired (resulting in increases) and for payments which will be received and
made as to equipment and leases owned or disposed of, as the case may be
(resulting in decreases).
As the Company is, in part, in the business of acquiring, managing and
selling Portfolio properties, the Company anticipates that it will acquire and
will dispose of large amounts of such property in future years. The
acquisition and disposition of these properties will result in substantial
periodic fluctuations of revenues and expenses and will also result in periodic
changes in the Company's assets and liabilities in equivalent proportions.
At July 31, 1994, the Company has deferred $50,800 of costs in connection
with financings. During the current period the Company expensed $33,917 of
deferred financing costs.
During the fiscal quarter ended July 31, 1994 the Company recognized
$196,915 of advertising revenue which is included in commissions, fees,
advertising and other income. Such advertising revenue includes $88,245 of
barter transaction revenue. Also during the current period, the Company
recognized $70,534 of barter transaction expense included in marketing,
administrative and other operating expenses.
The Company earns commissions, fees and other income from transactions
which fluctuates substantially from one comparable period to the next. The
Company believes that its relationship with its lease origination customers
remains good, however, none of these companies are presently underwriting
business in volumes sufficient to assure that the Company will have access to
future suitable Portfolio purchases. The Company will continue to pursue
Portfolio acquisitions on suitable terms as and when available. During the
current period the Company has not consummated any leasing transactions which
have generated fee income.
The Company held a Special Meeting of Stockholders on July 21, 1994 to vote
upon a one (1) for three (3) reverse stock split (the "Reverse Split"). The
Company's Certificate of Amendment for the Reverse Split was filed with the
Secretary of State of Delaware on July 26, 1994, thereby causing this date to
be the effective date of the Reverse Split.
LIQUIDITY AND CAPITAL RESOURCES
Marketing, administrative and other operating payments were $385,133 for
the first quarter of fiscal 1995 compared to $292,482 for the previous fiscal
quarter. In order to conserve cash resources the Company has deferred payments
to vendors, its CEO and others. At July 31, 1994 the Company owed its CEO
$95,121 of accrued compensation and interest compared to $52,649 at April 30,
1994. The Company's trade payables at July 31, 1994 were $106,521 compared to
$72,776 at April 30, 1994.
Current working capital assets, which are composed of cash and short-term
(one year or less) receivables, decreased from $1,679,977 at July 31, 1993, to
$267,417 at July 31, 1994. Short-term (one year or less) debt and accounts
payable increased from $459,081 at July 31, 1993, to $692,019 at July 31, 1994,
for a net decrease in working capital of $1,645,498. As of July 31, 1994 there
is negative working capital of $424,602.
During the current fiscal year the Company received $87,524 in cash from
commissions, fees and other receipts, representing $45,898 from current period
activities and $41,626 from receivables; and realized $31,964 from leased
equipment residuals, which are all included in commissions, fees and other
receipts. At July 31, 1994 the Company had aggregate borrowings not related to
leasing activities of $735,298 of which $178,587 relate to the acquisition of
broadcast properties. During the fiscal quarter ended July 31, 1993 the
Company received $38,425 from leased equipment residuals, of which $3,086 are
included in commissions, fees and other receipts, and $35,339 are included in
interest income.
At the request of the of the Company's previous underwriters, the Company's
Chief Executive Officer agreed to reduce his salary effective May 1, 1994 to
$110,000 per year from $249,700, such amendment to his salary included an
increase of 5% of income before income taxes (excluding the CEO's compensation
and costs associated with the underwriting and any short-term loans undertaken
until the underwriting is completed) over $1,000,000 of the previous year.
This amendment became null and void, due to the underwriting with the previous
underwriters to which it related not being undertaken, and the salary was
retroactively adjusted to the previous amount.
The Company expended $67,000 for broadcast property escrow deposits during
the current period and has a total of $161,000 of such deposits outstanding as
of July 31, 1994. The aggregate purchase price and construction costs
11
<PAGE> 12
for the Company's broadcast properties are estimated to be approximately
$3,416,000 which is comprised of (1) approximately $1,439,000 to be paid in
cash at closing, (2) $1,350,000 of debt will be incurred which will require
monthly payments with interest at rates ranging from 7% to 10% per annum based
on a 10 year term with all unpaid principal due in 60 months from the date of
closing, (3) $145,000 of existing bank debt will be assumed, (4) $397,000 of
new equipment purchases and (5) the assumption of approximately $85,000 of
existing leases on broadcast equipment.
In May, 1994 the Company entered into a letter of intent with a wall street
brokerage firm which provided for such firm to undertake a $7.5 million firm
commitment underwriting of the Company's equity securities by no later than
September 30, 1994. As part of this undertaking the Company also entered into
a private placement undertaking agreement involving the brokerage firm and
other parties for the placement of $600,000 of Company secured debt securities
(the "Notes"). As part of these various agreements the Company pledged 100% of
the stock of Partech Communications Group, Inc. and the Company's Chief
Executive Officer pledged all (700,305 shares) of his Company common stock,
which if foreclosed upon will be repaid by the Company with two shares for
every one share. In respect of this offering the Company received only
$460,000 of proceeds from the outside parties and received $50,000 of proceeds
from a company owned by its Chief Executive Officer.
In August, 1994 the Company was advised by the brokerage firm that it would
not undertake the $7.5 million public underwriting, but would consider an
expansion of the Note private placement. The Company is presently negotiating
with: (a) the existing Note holders for their approval to increase the amount
of the Note offering from $600,000 to $2,200,000, extend the due date of the
Notes from September 30, 1994 to March 31, 1995 and, capitalize late interest
in the amount of $4,578 on $410,000 of Notes and current or future interest to
Note principal; and, (b) with the brokerage firm and others for the placement
of Notes aggregating an additional $1,590,000. In the event this undertaking
is not successful the Company may be required to substantially reduce its
operations and abandon its radio station acquisition program along with a
possible loss of its escrow deposits.
The Company anticipates that it will continue to collect its receivables,
liquidate debt, convert assets to cash, accumulate cash from asset sales and
brokerage fees, remarket its equipment, and pursue new business opportunities
where and whenever available.
Future cash prospects will be determined by the outcome of the Company's
exempt offering, availability of leasing transactions, the time frame within
which the pending radio broadcast station acquisitions are completed and the
operations of the stations assumed by the Company. Such revenue prospects may
be adversely affected in the event transactions or such acquisitions are
delayed or not consummated. Timely completion of acquisitions is subject to
approval of the transfer of the broadcast licenses by the Federal
Communications Commission, satisfactory completion of certain obligations by
the various sellers and timely and successful performance by financing sources.
In the event one or many events transpire to delay or terminate any or all
planned acquisitions, the Company's operations may be less than anticipated,
but will continue through the management of its lease portfolio and broadcast
station(s), and the acquisition of additional broadcast and lease properties as
favorable transactions become available.
12
<PAGE> 13
PART II
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company's Special Meeting of Stockholders was held on July 21, 1994.
The Company solicited proxies. The only matter voted upon was a one (1) for
three (3) reverse stock split (the "Reverse Split"). The result of voting was
as follows: 4,599,331 votes for, 99,957 votes against/withheld, 21,099 votes
abstained and 439,450 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 11 Computation re: earnings per share, filed herewith as
Exhibit 11.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
The following report on Form 8-K was filed during the fiscal
quarter ended July 31, 1994:
(1) Form 8-K dated July 28, 1994 to announce the result of the
Company's Special Meeting of Stockholders held on July 21,
1994.
13
<PAGE> 14
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARTECH HOLDINGS CORPORATION
----------------------------------
(Registrant)
Date: September 14, 1994 By: /s/ JOHN E. RAYL
------------------------------
JOHN E. RAYL
President, Treasurer and
Principal Financial Officer
14
<PAGE> 1
Exhibit 11. Earnings Per Share
- - ---------------------------------
Additional primary and fully diluted earnings per share computations
pursuant to Regulation S-K, CFR Section 229.601(b)(11): The following
computations are submitted for informational purposes only pursuant to
Regulation S-K, although they are contrary to APB 15.
<TABLE>
PRIMARY EARNINGS PER SHARE (ADDITIONAL):
<CAPTION>
THREE MONTHS ENDED JULY 31,
----------------------------------
1994 1992
<S> <C> <C>
Weighted average number of common shares outstanding 1,859,902 1,170,756
Shares assumed to be issued upon exercising
of stock purchase rights (29,075) 966,349
---------- ----------
Average number of common and common equivalent
shares 1,830,827 2,137,105
========== ==========
Net loss $ (363,852) $ (602,398)
Increase in interest income (net of tax) from assumed
investment in certificates of deposit and decrease
in interest expense (net of tax) from assumed
payment of short-term debt with assumed
stock purchase rights proceeds in excess
of 20% repurchase limitation - 22,179
---------- ----------
Adjusted net loss $ (363,852) $ (580,219)
========== ==========
Net income (loss) per common share $ (0.20) $ (0.27)
========== ==========
</TABLE>
1
<PAGE> 2
<TABLE>
FULLY DILUTED EARNINGS PER SHARE (ADDITIONAL):
<CAPTION>
THREE MONTHS ENDED JULY 31,
----------------------------------
1992 1991
<S> <C> <C>
Weighted average number of common shares outstanding 1,859,902 1,170,756
Shares assumed to be issued upon exercising
of stock purchase rights (29,075) 976,936
----------- ----------
Average number of common and common equivalent
shares 1,830,827 2,147,692
=========== ==========
Net loss $ (363,852) $ (602,398)
Increase in interest income (net of tax) from assumed
investment in certificates of deposit and decrease
in interest expense (net of tax) from assumed
payment of short-term debt with assumed
stock purchase rights proceeds in excess
of 20% repurchase limitation - 20,753
----------- ----------
Adjusted net loss $ (363,852) $ (581,645)
=========== ==========
Net income (loss) per common share $ (0.20) $ (0.27)
=========== ==========
</TABLE>
Notes regarding the calculation of primary and fully diluted earnings per share
pursuant to Regulation S-K, CFR Section 229.601(b)(11):
For the fiscal quarters ended July 31, 1994 and 1993, exercise of stock
purchase rights is assumed at the beginning of the period or at the date of
grant, if granted during the period. Pursuant to the treasury stock method
shares assumed to be issued upon exercising of stock purchase rights represents
the number shares issued upon assumed exercise less shares repurchased at the
average market price.
For the fiscal quarter ended July 31, 1994 and 1993 fully diluted earnings
per share amounts are based on the increased number of shares that would be
issued assuming exercise of stock purchase rights. Fully diluted earnings per
share is computed under the aforementioned method as primary earnings per
share, except the repurchase of shares uses the higher of the average market
price during the period or the ending market price, unless shares were actually
issued pursuant to exercises, then the average market price on the day of
exercise is used.
Included in the weighted average number of common shares outstanding at
July 31, 1993 are 36,667 shares issued pursuant to stock sales and 133,333
shares which were issuable at July 31, 1993. During the previous fiscal
quarter the Company issued 778,160 shares pursuant to warrant exercises. If
these shares had been issued at the beginning of the period primary and fully
diluted earnings per share have been ($0.29).
All amounts hereof have been restated for the Company's one (1) to three
(3) reverse stock split which was effected July 26, 1994.
2
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS FINANCIAL SUMMARY INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE STATEMENT OF CONSOLIDATED OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> 04/30/95
<PERIOD-START> 05/01/94
<PERIOD-END> 07/31/94
<PERIOD-TYPE> QTR-1
<EXCHANGE-RATE> 1
<CASH> 23,230
<SECURITIES> 0
<RECEIVABLES> 53,220,095 <F1>
<ALLOWANCES> 7,077
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 26,274,945
<DEPRECIATION> 126,027,483
<TOTAL-ASSETS> 84,633,472
<CURRENT-LIABILITIES> 0
<BONDS> 81,386,588
0
0
<COMMON> 279,345
<OTHER-SE> 2,333,032
<TOTAL-LIABILITY-AND-EQUITY> 84,633,472
<SALES> 0
<TOTAL-REVENUES> 4,463,270
<CGS> 0
<TOTAL-COSTS> 2,914,384
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,372,732
<INCOME-PRETAX> (438,852)
<INCOME-TAX> (75,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (363,852)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
<FN>
<F1> This amount does not include $2,300,126 of Net Investment in Direct
Financing Leases.
</TABLE>
