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 March 31, 1998 Commission file number 0-14361
TROPIC AIR CARGO, INC.
(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)
7500 NW 25th Street, Suite 209, Miami, Florida 33122
(Address of principal executive offices) (Zip Code)
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 5,579,361 shares of $0.90 par value common stock outstanding as
of May 15, 1998.
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TROPIC AIR CARGO, INC.
FORM 10-Q
For the Quarter Ended March 31, 1998
INDEX
Part I: Financial Information
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Page
Item 1. Financial Statements
( a ) Consolidated Balance Sheet as of March 31, 1998
and December 31, 1997 3
( b ) Statement of Consolidated Operations for the Three
Months Ended March 31, 1998 4
( c ) Statement of Consolidated Cash Flow for the Three
Months Ended March 31, 1998 6
( 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
March 31, December31,
1998 1997
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Current Assets:
Cash $ 14,815 $ 31,776
Accounts receivable 1,704,016 1,705,335
Other current assets 10,000 15,735
------------- -------------
Total Current Assets 1,728,831 1,752,846
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Property and equipment, at cost (net of
accumulated
depreciation of $ 844 and $281, respectively) 11,912 9,210
Other assets 150 150
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Total Assets $ 1,740,893 $ 1,762,206
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses $ 2,193,779 $ 1,630,296
Notes and accrued interest payable 470,624 460,909
Other current liabilities 3,987 3,987
------------- -------------
Total Current Liabilities 2,668,390 2,095,192
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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, 5,579,361 shares issued and 5,021,425 5,021,425
outstanding
Common stock subscribed 880,189 880,189
Paid in capital (5,452,347) (5,452,347)
Retained earnings (496,575) 97,936
------------- -------------
(47,308) 547,203
Subscriptions receivable (880,189) (880,189)
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Total Shareholders' Equity (Deficit) (927,497) (332,986)
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Total Liabilities and Shareholders'
Equity (Deficit) $ 1,740,893 $ 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 Months Ended March 31, 1998
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Revenues:
Freight revenues $ 4,620,378
-------------
Cost of freight operations:
Aircraft, crew, maintenance and insurance charges 2,560,938
Fuel 1,206,778
Aircraft handling 392,083
Cargo handling 361,626
Freight transfers 94,976
Commissions 79,464
Aircraft navigation 131,203
Trucking 9,046
-------------
Total Cost of Freight Operations 4,836,114
-------------
Gross Profit from Freight Operations (215,736)
Cost and Expenses:
Marketing, administration and other 405,297
operating expenses
Interest expense 9,715
Depreciation of equipment 563
-------------
Total Costs and Expenses 415,575
-------------
Income (Loss) Before Income Taxes (631,311)
Income tax expense ( benefit) (36,800)
-------------
Net Income (Loss) $ (594,511)
=============
Basic and Diluted Net Income (Loss) Per Share $ (0.11)
=============
Weighted Average Number of Common and
Potential Common Shares:
Basic and Diluted 5,579,361
=============
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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 Three Months Ended March 31, 1998
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Cash Flows From Operating Activities:
Freight receipts $ 4,621,696
Freight operations payments (4,230,095)
Marketing, administrative and other
operating payments (405,297)
-------------
Net Cash Used For Operating Activities (13,696)
-------------
Cash Flows From Investing Activities:
Purchase of property and equipment (3,265)
-------------
Net Cash Used For Investing Activities (3,265)
-------------
Cash Flows From Financing Activities:
Proceeds from issuance of stock -
Proceeds from other borrowings -
-------------
Net Cash Provided By Financing
Activities -
-------------
Net Increase (Decrease) in Cash and
Cash Equivalents (16,961)
Cash and Cash Equivalents at
Beginning of Period 31,776
-------------
Cash and Cash Equivalents at
End of Period $ 14,815
=============
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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 Three Months Ended March 31, 1997
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Net income (loss) $ (594,511)
-------------
Adjustments to reconcile net income (loss)to
net cash used for operating activities:
Depreciation of equipment 563
Deferred taxes 4,800
Changes in assets and liabilities:
Accounts receivable 1,319
Other assets 935
Notes and accounts payable, and
accrued expenses 614,798
Income taxes (41,600)
Other -
-------------
Total Adjustments 580,815
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Net Cash Used for Operating Activities
for Continuing Operations $ (13,696)
=============
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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 March 31, 1998 and December 31, 1997,
the statement of consolidated operations and the statement of consolidated cash
flows for the three months ended March 31, 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 period. 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 March 31, 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 March 31, 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 months ended March 31, 1998 basic and diluted earnings
per share amounts are based on the weighted average number of common shares
outstanding of 5,579,361 shares. No potential common shares are included herein
as none existed.
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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 estimates 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 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 preceded by an
asterisk (*).
Results of Operations
The following discussion relates to the combined results of operations of the
Company for the three month period January 1, 1998 through March 31, 1998.
Results reflect the operations of the Company's two primary wholly-owned
subsidiaries, B. Airways Air Cargo, Inc. ("BAACI") and B. Airways, Inc. ("BAI").
There is no comparison to prior periods since the Company's air freight
operations did not exist during the same period in 1997. The accompanying
unaudited financial statements exclusively reflect the activities of the
Company's air freight operations (BAACI) and air carrier operating certificate
application efforts (BAI).
The Three Months Ended March 31, 1998
Operating Revenue. Operating revenue for the three months ended March 31,
1998 consists of $4,620,378 earned by B. Airways Air Cargo, Inc.
Cost of Transportation. Cost of transportation reflects approximately 104.7% of
the Company's operating revenue. Cost of transportation includes $2,560,938 and
$1,206,778 in aircraft and fuel costs, respectively.
Gross Profit (Loss). The Company's operations suffered a loss for the period
of $631,311 or 13.7% of total revenue for the period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses from air cargo services was 8.8% of operating revenue
for the period ended March 31, 1998. It is the plan of the Company to reduce
selling, general and administrative expenses through work force reductions to
take place in the second quarter of 1998.
The Company attributes its negative operating results for the period to two
primary factors:
For the majority of the current reporting period the Company provided air
freight services via DC-10-30 aircraft. The 747 aircraft previously being
utilized was discontinued due to unreliability and repeated maintenance
problems. Based on preliminary projections, the DC-10-30's overall range and
lift capacity appeared to be profitable, however, following analysis of first
quarter activities the Company has decided to discontinue regular use of the
DC-10-30. The primary reason is that while the aircraft's weight payload is
sufficient, its volume payload is less desirable than other aircraft in the
market. Since a large amount of business is received through voluminous cargo
which is more profitable, the Company is seeking alternate aircraft which will
be more suitable for the present operations.
The Company is currently in discussions with two aircraft operators who are
interested in providing capacity on a long or short term basis. In addition to
this the current aircraft provider will have an MD-11 aircraft available on May
31, 1998. Until such time as a long term substitute aircraft can be found the
Company's operations are continuing through short term agreements and ad hoc
charter contracts with aircraft operators on a flight by flight basis.
In addition to the aircraft reevaluation, the period from January through
March is traditionally the low season for cargo. Post holiday drop in shipments,
as well as holidays in Brazil, the Company's largest destination, make the
current period traditionally the lowest time of the year. Since the Company
offers scheduled service it must undertake certain operations in order to
service its larger customers who require service at all times of the year, even
though the flights may operate at a loss. Thus results which are significantly
different from the prior reporting period are not unusual based on seasonality
of the industry.
Liquidity and Capital Resources
During the quarter ended March 31, 1998, net cash used by operating
activities was $13,696. Cash used in investing activities was $3,265, 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 for major expenses such as aircraft and fuel. The Company's
working capital needs for the long term and short term will depend on numerous
factors, including the Company's operating results. To the extent that long term
working capital needs are not met from existing sources, additional financing
will be necessary. To meet additional capital needs the Company may incur
additional debt and/or issue debt or equity securities. There is no assurance
that, in the event additional capital is required, the Company may be able to
acquire such capital through the issuance of its debt or equity securities or if
such capital becomes available that it will be available on acceptable terms or
conditions.
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PART II
Page
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 March 31, 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: May 15, 1998 By:________________________
SCOTT VILLANUEVA
Secretary
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<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>
<CIK> 0000791027
<NAME> Tropic Air Cargo, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 14,815
<SECURITIES> 0
<RECEIVABLES> 1,704,016
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,728,831
<PP&E> 12,756
<DEPRECIATION> (844)
<TOTAL-ASSETS> 1,740,893
<CURRENT-LIABILITIES> 2,668,390
<BONDS> 0
0
0
<COMMON> 5,021,425
<OTHER-SE> (5,948,922)
<TOTAL-LIABILITY-AND-EQUITY> 1,740,893
<SALES> 4,620,378
<TOTAL-REVENUES> 4,620,378
<CGS> 4,836,114
<TOTAL-COSTS> 4,836,114
<OTHER-EXPENSES> 405,297
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,715
<INCOME-PRETAX> (613,311)
<INCOME-TAX> (36,800)
<INCOME-CONTINUING> (594,511)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (594,511)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
