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 ACT OF 1934
For the fiscal quarter ended June 30, 1998 Commission file number 0-14361
TROPIC AIR CARGO, INC.
(Exact Name of Company as Specified in Its Charter)
Delaware 31-1166419
(Jurisdiction of incorporation) (I. R. S. Employer I. D. Number)
7500 NW 25th Street, Suite 209, Miami, Florida 33122
(Address of principal executive offices)
Company's telephone number, including area code: (305) 639-2720
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 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 has 5,698,067 shares of $0.90 par value common stock outstanding as
of August 15, 1998.
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TROPIC AIR CARGO, INC.
FORM 10-Q
For the Quarter Ended June 30, 1998
INDEX
Part I: Financial Information
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Item 1.Financial Statements Page
( a )Consolidated Balance Sheet as of June 30, 1998 3
and December 31, 1997
( b )Statement of Consolidated Operations for the Three
and Six Months Ended June 30, 1998 4
( c )Statement of Consolidated Cash Flow for the Six
Months Ended June 30, 1998 5
( d )Notes to Consolidated Financial Statements 7
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II: Other Information
Item 4.Submission of Matters to a Vote of Security Holders 10
Item 6.Exhibit Index and Reports on Form 8-K 10
Signatures 11
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PART I
Item 1. Financial Statements
TROPIC AIR CARGO, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
ASSETS
June 30, December 31,
1998 1997
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Current Assets:
Cash $ 9,712 $ 31,776
Accounts receivable 732,6291 705,335
Other current assets 10,000 15,735
________________________
Total Current Assets 752,3411 752,846
________________________
Property and equipment, at cost (net of
accumulated Depreciation of $ 1,432
and $281, respectively) 11,325 9,210
Other assets 150 150
_______________________
Total Assets $ 763,816 $ 1,762,206
====================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses$ 1,605,936 $ 1,630,296
Notes and accrued interest payable 436,696 460,909
Other current liabilities 3,987 3,987
________________________
Total Current Liabilities 2,046,619 2,095,192
________________________
Commitment and Contingencies
Shareholders' Equity (Deficit):
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, none issued and outstanding--
Common stock, $0.90 par value, 50,000,000 shares
authorized, 5,698,067 and 5,579,361 shares issued
and outstanding, respectively 5,128,260 5,021,425
Common stock subscribed 880,189 880,189
Paid in capital (5,515,432) (5,452,347)
Retained earnings (895,631) 97,936
________________________
(402,614) 547,203
Subscriptions receivable (880,189) (880,189)
________________________
Total Shareholders' Equity (Deficit) (1,282,803) (332,986)
________________________
Total Liabilities and Shareholders'
Equity (Deficit) $ 763,816 $ 1,762,206
====================
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The accompanying notes are an integral part of these financial statements.
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TROPIC AIR CARGO, INC. AND SUBSIDIARIES
Statements of Consolidated Operations
For the Three and Six Months Ended June 30, 1998
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Three Months Six Months
Revenues:
Freight revenues $ 2,148,822 $ 6,769,200
________________________
Cost of freight operations:
Aircraft, crew, maintenance and
insurance charges 1,076,812 3,637,750
Fuel 536,265 1,743,043
Aircraft handling 163,399 555,482
Cargo handling 148,236 509,862
Freight transfers 182,326 277,302
Commissions 48,721 128,185
Aircraft navigation 71,789 202,992
Trucking 6,142 15,188
________________________
Total Cost of Freight Operations 2,233,690 7,069,804
________________________
Gross Profit from Freight Operations (84,868) (300,604)
Cost and Expenses:
Marketing, administration and other
operating expenses 297,707 703,004
Interest expense 15,893 25,608
Depreciation of equipment 588 1,151
________________________
Total Costs and Expenses 314,188 729,763
________________________
Income (Loss) Before Income Taxes (399,056) (1,030,367)
Income tax expense ( benefit) (36,800)
________________________
Net Income (Loss) $(399,056) $ (993,567)
====================
Basic and Diluted Net Income(Loss)Per Share$ (.070) $ (.174)
====================
Number of Common and
Potential Common Shares:
Basic and Diluted 5,698,067 5,698,067
====================
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The accompanying notes are an integral part of these financial statements.
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TROPIC AIR CARGO, INC. AND SUBSIDIARIES
Statement of Consolidated Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the Six Months Ended June 30, 1998
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Cash Flows From Operating Activities:
Freight receipts $ 7,741,906
Freight operations payments (7,051,914)
Marketing, administrative and other
operating payments (752,540)
____________
Net Cash Used For Operating Activities (62,548)
____________
Cash Flows From Investing Activities:
Purchase of property and equipment (3,266)
____________
Net Cash Used For Investing Activities (3,266)
____________
Cash Flows From Financing Activities:
Proceeds from issuance of stock 43,750
Proceeds from other borrowings -
____________
Net Cash Provided By Financing
Activities 43,750
_______________________
Net Increase (Decrease) in Cash and
Cash Equivalents (22,064)
_
Cash and Cash Equivalents at
Beginning of Period 31,776
____________
Cash and Cash Equivalents at
End of Period $ 9,712
===========
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The accompanying notes are an integral part of these financial statements.
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TROPIC AIR CARGO, INC. AND SUBSIDIARIES
Statement of Consolidated Cash Flows
Reconciliation of Net Loss to
Net Cash Used For Operating Activities
For the Six Months Ended June 30, 1998
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Net income (loss) $ (993,567)
____________
Adjustments to reconcile net income (loss)
to net cash used for operating activities:
Depreciation of equipment 1,151
Deferred taxes 4,800
Changes in assets and liabilities:
Accounts receivable 972,706
Other assets 5,735
Notes and accounts payable, and
accrued expenses (11,773)
Income taxes (41,600)
Other -
____________
Total Adjustments 931,019
____________
Net Cash Used for Operating Activities
for Continuing Operations $ (62,548)
===========
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See accompanying notes to consolidated financial statements.
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TROPIC AIR CARGO, INC. AND SUBSIDIARIES
Notes to the Unaudited Consolidated Financial Statements
Note 1.Consolidated Financial Statements
The consolidated balance sheets as of June 30, 1998 and December 31, 1997,
the statements of consolidated operations operations for the three and six
months ended June 30, 1998 and the statement of consolidated cash flows for
the six months ended June 30, 1998 have been prepared by the Company without
audit. Information for the same period last year is not presented as it
relates Company's consulting, leasing and broadcast subsidiaries which were
disposed of effective September 1, 1997. Such information is unrelated to
its on-going freight consolidation operation and, therefore, not comparable
to the current periods. The freight consolidation business was not formed
until July 23, 1997 and did not commence its freight operations until
September 2, 1997. 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 June 30, 1998 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 unaudited
consolidated financial statements be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
December 31, 1997 Form 10-K transitions report and the April 30, 1997, Form
10-K
annual report filed with the Securities and Exchange Commission.
Certain information and footnote disclosure contained in these unaudited
consolidated financial statements that are not historical facts are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, the
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those projections.
Note 2.Employee Stock Option and Stock Appreciation Rights Plan
There were no stock options outstanding at June 30, 1998 and none were
granted during the quarter then ended. The Company has 51,278 options
available for grant under its 1989 and 1993 Incentive Stock Option Plans.
Note 3.Income Taxes
The Company has provided for a tax benefit, to the extent available, from
the carryback of the net operation loss for the period. The tax benefit
included in operations was as follows:
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Federal current $ (41,600)
Federal deferred 4,800
____________
Income tax expense (benefit) $ (36,800)
===========
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Note 4.Earnings Per Share
For the period three and six months ended June 30, 1998 basic and diluted
earnings per share amounts are based on the number of common shares
outstanding of 5,698,067 shares.
Note 5.Repayment of bridge loan debt
During the three month period ending June 30, 1998 the Company retired
certain bridge loan debt which existed from prior to the time the Company
commenced air freight operations. Shares of the Company's $.90 par value
common stock were issued to Messrs. Harvey Glicker, Joseph Polich and Alan
Carter in the amounts of 16,667 shares, 37,039 shares and 65,000 shares
respectively.
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Note 6.Subsequent Events
The Company entered into a settlement agreement with a portion of the
Plaintiffs
in the only pending litigation against the Company, Generation Capital, et. al.
v. Partech Holdings, Tropic Communications, et. al. The Litigation commenced
prior to the company's entrance into the air freight business. The settlement
includes a payment of $165,000.00 to a group of plaintiffs, payable in the
form of stock or cash, in which the accrued debt may be converted into common
stock limited amounts on on a monthly basis over a period of approximately one
year.
Item 2. Management's Discussion and Analysis
This Quarterly Report on Form 10-Q contains certain forward-looking
statements reflecting the Company's current expectations with respect to its
operations, performance, financial condition, and other developments. Such
statements are necessarily estimate reflecting the Company's best judgment
based upon current information and involve a number of risks and uncertainties.
While it is impossible to identify all such factors, factors which could cause
actual results to to differ materially from expectations are: (1) the
Company's
ability to maintain recent profitability; (2) competitive practices in the
industries in which the Company competes; (3) the Company's dependence on
current management; (4) the impact of current and future laws and governmental
regulations affecting the transportation industry in general and the Company's
operations in particular; (5) general economic conditions; and, (6) other
factors which may be identified from time to time in the Company's Securities
and Exchange Commission filings and other public announcements. There can be
no assurance that these and other factors will not affect the accuracy of such
forward-looking statements. Forward-looking statements are preeceded by an
asterisk (*)
Results of Operations
The following discussion relates to the combined results of operations of
the Company for the six months period January 1, 1998 through June 30, 1998.
Results reflect the operations of the Company's two primary wholly-owned
subsidiaries, B. Airways Air Ca
The Six Months Ended June 30, 1998
Operating Revenue. Operating revenue for the six months ended June 30, 1998
consists of $6,769,200 earned by B. Airways Air Cargo, Inc.
Cost of Transportation. Cost of transportation reflects approximately 104.4%
of the Company's operating revenue. Cost of transportation includes
$3,637,750 and $1,743,043 in aircraft and fuel costs, respectively.
Gross Profit (Loss). The Company's operations suffered a loss for the period
of $1,030,367 or 15.2% of total revenue for the period.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses from air cargo services was 10.4% of operating
revenue for the period ended June 30, 1998. It is the plan of the Company to
reduce selling, general and administrat
*The Company attributes its negative operating results for the period
primarily to its inability to raise certain capital required to acquire long
term aircraft contracts which provide guaranteed capacity for the Company's
air freight services. In additio
*Management is actively seeking additional capital resources required to
obtain the optimal aircraft on a long term dedicated basis in order to return
freight operations to a profitable state. In addition management believes
that the market slowdown will
Liquidity and Capital Resources
During the period ended June 30, 1998, net cash used by operating activities
was $62,548. Cash used in investing activities was $3,266, which consisted
of capital expenditures.
Working Capital Requirements.
Cash needs of the Company are currently being met by funds generated from
operations of BAACI and credit extended by BAACI's trade creditors. The
Company has experienced cash flow difficulties which has made it difficult to
negotiate preferential rates fo
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PART II
Item 4.Submission of Matters to Vote of Security Holders
None
Item 6.Exhibits and Reports on Form 8-K
(a)Exhibits:
None
(b)Reports on Form 8-K
There were no reports on Form 8-K were filed during the quarter
ended June 30, 1998.
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Pursuant to the requirements of the Securities and Exchange Act of 1934
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TROPIC AIR CARGO, INC.
(Registrant)
/s/ SCOTT VILLANUEVA
Date:August 19, 1998 By:__________________________________
SCOTT VILLANUEVA
Secretary
