UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from May 1, 1997
to December 31, 1997 Commission file number 0-14361
TROPIC AIR CARGO, INC.
(f.k.a. Tropic Communications, Inc.)
(Exact Name of Company as Specified in Its Charter)
Delaware 31-1166419
(State or Other jurisdiction of incorporation (I.R.S. Employer I.D. Number)
or organization)
7500 NW 25th Street, Suite 210, Miami, Florida 33122
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (305) 639-2720
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, par value $0.90
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
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 report(s), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ___
The approximate aggregate market value of voting stock held by
nonaffiliates of the Company was $571,900 as of March 31, 1998.
The Company had 5,579,361 shares of $0.90 par value common stock
outstanding as of March 31, 1998.
Documents Incorporated by Reference:
1998 Notice of Annual Meeting, Part III
<PAGE>
<TABLE>
<CAPTION>
TROPIC AIR CARGO, INC.
(f.k.a. Tropic Communications, Inc.)
1997 Form 10-K Transition Report For the Transition
Period May 1, 1997 to December 31, 1997
TABLE OF CONTENTS
<S> <C> <C> <C>
Page
Part I
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 6
Part II
Item 5. Market for the Company's Common Equity and
Related Stockholder Matters 6
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 8. Financial Statements and Supplemental Data 10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 36
Part III
Item 10. Directors and Executive Officers of the Company 36
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial
Owners and Management 36
Item 13. Certain Relationships and Related Transactions 36
Part IV
Item 14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 37
Signatures 39
Index to Exhibits 40
</TABLE>
<PAGE>
PART I
Item 1. Business
Tropic Air Cargo, Inc. ("Tropic") was incorporated in Delaware on March
25, 1985, and acts as a holding company, owning 100% of the outstanding
capital stock of several wholly-owned subsidiaries. Tropic and its
subsidiaries are referred to herein as the "Company." During the calendar
year 1997 the Company acquired, in a transaction commonly known as a reverse
merger, 100% of the outstanding capital stock of R.A. Logistics, Inc. and its
wholly-owned subsidiaries, B. Airways, Inc. and B. Airways Air Cargo, Inc.
In addition, the Company disposed of its other business operations. See Note
1, Notes to the Consolidated Financial Statements.
Acquisition of R.A. Logistics, Inc.
On September 18, 1997, the Company issued 4,400,000 shares of its restricted
common stock in exchange for 100% of the issued and outstanding capital stock of
R.A. Logistics, Inc., a Delaware corporation ("RALI" and the "RALI
Acquisition"). In addition, three members of the Company's Board of Directors
have resigned, effective upon the closing of the RALI Acquisition, and have been
replaced by the three shareholders of RALI. As part of the RALI Acquisition, the
Company also entered into Employment Agreements, effective September 2, 1997,
with Angel Munoz, Ronald Vimo and Scott Villanueva (the three shareholders of
RALI) to serve as the Company's President, Vice-President and Secretary,
respectively.
RALI is a holding company owning 100% of the issued and outstanding capital
stock of two subsidiary corporations, B. Airways, Inc. and B. Airways Air Cargo,
Inc. both Florida corporations ("BAI" and "BAACI", respectively). BAACI is a
newly formed corporation organized to operate as an air freight consolidator
operating from a shared warehouse facility located at the Miami International
Airport. BAACI consolidates air cargo for shipment via a widebody aircraft on up
to 4 round trips weekly between Miami International Airport and Latin America.
During 1997 the BAACI aircraft was a Boeing 747-200 provided at a rate of $4,750
per operating hour plus fuel. Operating since September 2, 1997, BAACI had
recorded approximately $8,631,800 in gross revenue through December 31, 1997.
BAI is a non-operating company having an application pending with the U.S.
Department of Transportation and the Federal Aviation Authority for operation as
a Part 135 all cargo air carrier. In addition, BAI has a $10,000 deposit for the
purchase of a DC-3 aircraft which BAI anticipates will be operated within the
Caribbean Basin.
Air Cargo Operations
The primary service offered by the Company to its customers is the
delivery of time sensitive cargo to destinations in Latin America. The Company
also markets northbound cargo transport from Latin American locations to Miami
International Airport ("MIA"). The Company seeks to maintain scheduled service
as well as ad hoc charter services.
The Company's scheduled cargo services provide seamless transportation
through its MIA hub linking North America through direct sales; Europe and Asia,
through marketing agreements with third party companies; and Latin America and
the Caribbean with freight forwarders, integrated carriers, passenger and cargo
airlines and major shippers. The Company offers a range of services including
scheduled cargo service, ad hoc charters, and logistics services such as
warehousing and ground transportation coordination.
The Company is currently utilizing one aircraft on two to three scheduled
flights per week. The standard routing is Miami - Virocopos, Brazil - Asuncion,
Paraguay - Santiago, Chile - Miami. Scheduled service is offered on a
pre-booked, priority or space-available basis, with minimal restrictions for the
size, shape or weight other than those required by the technical specifications
of the particular aircraft being operated.
<PAGE>
In addition to scheduled service, the Company offers ad hoc charters in
which a customer pays a fixed cost for the use of the entire aircraft for a
particular flight and routing. Common charter destinations, at the present time
include, but are not limited to Caracas, Venezuela and Bogota, Columbia.
The Company maintains a routing schedule which can be modified based on
the demands of the market at any given time. Freight rates are based on the
freight commodity, weight or volume, destination, and market conditions. Freight
is priced on a per kilogram basis and is adjusted for low weight, high volume
freight according to industry standards. Shipments for transport are delivered
to the Company's warehouse facility by customers. The Company provides
warehousing, palletization, transportation to and from the aircraft and release
at the final destination, and upon request, the Company can assist customers in
arranging further ground transportation.
Aircraft Availability
The availability of aircraft is a material factor in the operation and
profitability of the Company's air freight operations. Generally there are
sufficient aircraft available to meet the Company's needs. The type of aircraft
used and the rate paid for such aircraft may fluctuate based on seasonal demands
of the industry. It is the Company's plan to secure capacity via the desired
aircraft type on an annual basis. However there is no guarantee that long term
capacity can be secured, due to capital requirements usually demanded by
aircraft providers before entering into long term contracts. Notwithstanding, it
is the Company's belief that there will be sufficient aircraft availability to
continue operating for the foreseeable future, and that should the current
aircraft no longer be available a substitute could be found without unreasonable
difficulty or interruption of operations.
Customers and Marketing
The Company's principal customers are large to mid-sized domestic and
international freight forwarders, freight consolidators and all-cargo carriers.
Domestic and international freight forwarders make up the major part of
the Company's existing customer base. Freight forwarders arrange for the
transportation of cargo for their customers, shippers and manufactures,
utilizing aircraft capacity obtained by the Company. Most major freight
forwarders utilize consolidators or all cargo carriers rather than integrated
carriers (such as FedEx, UPS or DHL) since integrated carriers compete directly
with freight forwarders for the same customer base. The Company does not market
directly to shippers or manufacturers in order not to compete with its loyal
freight forwarder customer base.
The other primary source of business is from other consolidators or all
cargo carriers who do not have sufficient capacity for a particular flight or
market. The Company receives transfer cargo from these sources, accommodates it
on their scheduled departures, and also provides capacity in the form of full
aircraft charters. In addition, through interline agreements with other cargo
and passenger airlines, airline customers are able to enhance their market-share
by offering their customers destinations which may not be served directly.
The Company's sales network is comprised of full-time in-house sales
personnel in its Miami headquarters and General Sales Agents or exclusive sales
and marketing agreements with local participants throughout the United States
and Latin America. Presently, the Company maintains sales agents in the
following cities:
Virocopos, Brazil
Asuncion, Paraguay
Santiago, Chile
Toronto, Canada
Los Angeles, CA
<PAGE>
Houston, TX
Chicago, IL
Atlanta, GA
Competition
The air freight industry is highly competitive. The Company's scheduled
cargo services compete for cargo volume principally with other consolidators,
all-cargo airlines, scheduled and non-scheduled passenger airlines and
integrated carriers. The Company believes that the most important competitive
factors in the air freight transportation industry are quality and reliability
of the cargo transportation service, flexibility and price. Many of the
Company's competitors have substantially greater financial and other resources
and more extensive facilities and equipment than the Company. Such resources are
a major competitive factor due to the capital intensive nature of the industry.
Fuel
Fuel is a major factor and expense for all companies in the air freight
industry, and the cost and availability of aviation fuel are subject to ecomonic
and political factors and events which the Company can neither control nor
accurately predict. Higher fuel prices resulting from fuel shortages or other
factors could adversely affect the Company's profitability if the Company is
unable to pass on the full amount of fuel price increases to its customers
through surcharges or rate increases originally match such price changes. In
addition, a shortage of supply could have a material adverse impact on the air
freight industry in general and the financial condition and results of
operations of the Company.
Employees
As of December 31, 1997, the Company and its subsidiaries had a total of
20 full-time employees, none of which is currently covered by a collective
bargaining agreement.
Regulation
The Company's activities are subject to regulation by the United States
Department of Transportation and Federal Aviation Administration. In addition,
the Company's activities are subject to regulation by the regulatory authorities
of the respective foreign jurisdictions in which the Company does business. The
air freight industry is subject to regulatory and legislative changes which can
affect the economics of the industry by requiring changes in operating practices
or influencing the demand for, and the costs of providing services to customers.
Item 2. Properties
The Company's primary base of operations is located in Miami with its
office and warehouse space located within Miami International Airport's cargo
facilities. Approximately 80,000 square feet of warehouse is available for the
Company's use through a sub-contracted ground handling company. Office space for
accounting, sales, traffic and operations personnel is located within the
confines of the warehouse facility. There is no fixed cost for the use of this
space since it is included in a per pound ground handling fee. The Company also
maintains a small Corporate office, consisting of approximately 1,500 square
feet, located less than 1 mile from the warehouse facility. The Company
maintains no leasehold on any offices or warehouses at the destinations served.
Warehousing and ground handling at the destination stations are handled on a per
pound basis.
Item 3. Legal Proceedings
The Company is a party to one legal proceeding with certain bridge note
lenders including Generation Capital Associates, TGR Ventures, Inc., RSH
Partners, Howard Commander, Norman Colavincenzo, Peter Prescott, Jules and Amos
<PAGE>
Swimmer as joint tenants, and Jules Swimmer (collectively the "GCA Group") all
of whom filed suit on June 13, 1995 in Supreme Court of the State of New York,
County of New York , Generation Capital Associates et al. vs. Partech Holdings
Corporation et al., Index No. 114837/95 (the "GCA Litigation"). In the opinion
of management, the claims asserted, if unfavorably decided, would not have a
materially adverse effect on the financial condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
On September 19, 1997, through an action by a majority of the shareholders
of the Company, the shareholders approved amending the Company's Articles of
Incorporation: (i) to change the par value of the Company's common stock from
fifteen cents ($0.15) per share to ninety cents ($0.90) per share (effectively a
1-for-6 reverse stock split which was effected October 27, 1997); and (ii) to
comport to the non-U.S. citizen ownership and management requirements of the
Federal aviation laws. Also, the Board of Directors approved an amendment to the
Company's By-Laws: (i) to change the beginning of the Company's fiscal year from
May 1 to January 1 of each calendar year; and, (ii) to change the time for the
Company's annual meeting of shareholders from the last Thursday of October to
the last Thursday of June of each calendar year or as otherwise may be
determined by the Board of Directors.
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder
Matters
The Company has historically reinvested its earnings in the business and
therefore has paid no cash dividends on its common stock. The Board of Directors
has no present intention of paying cash dividends in the foreseeable future. The
payment of dividends in the future will be determined by the Board of Directors
considering existing conditions such as financial and business conditions,
financial requirements and beneficial opportunities for reinvestment of earnings
and other conditions.
The Company's common stock is traded on the OTC Electronic Bulletin Board
under the symbol TRPC.
The number of stockholders of record of common stock on December 31, 1997 was
approximately 2,100.
<TABLE>
<CAPTION>
Eight Months Ended December 31, 1997
Fourth Third Second First
Quarter Quarter Quarter Quarter
(2 Months)
<S> <C> <C> <C> <C> <C>
High trade $ N/A $ 1.63 $ 5.06 $ 5.06
Low Trade $ N/A $ 0.41 $ 1.56 $ 1.31
Fiscal Year Ended April 30, 1997
Fourth Third Second First
Quarter Quarter Quarter Quarter
High trade $ 5.46 $ 3.96 $ 4.14 $ 8.28
Low Trade $ 4.86 $ 3.18 $ 3.54 $ 5.46
</TABLE>
All per share information has been adjusted for the effect of the 1 for 6
reverse stock split.
<PAGE>
Item 6. Selected Financial Data
The following table sets forth selected consolidated financial data regarding
the Company for the periods indicated. The Company's consolidated financial
statements as of December 31, 1997 and for all years presented hereunder have
been audited by Hausser + Taylor LLP, CPAs, independent certified public
accountants. The selected financial data set forth in the following table should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's Consolidated Financial
Statements and Notes thereto appearing hereinafter.
<TABLE>
<CAPTION>
July 23, May 1, For the Fiscal Years Ended April 30,
1997 1997 -----------------------------------------------
Through Through
December Sepember
31, 1,
1997(b) 1997(a) 1997 1996 1995 1994
-------- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating
Revenues $8,631,848 $ 482,321 $ 1,195,769 $ 4,832,714 $13,616,622 $ 30,485,138
Income (Loss)
Before Income
Taxes 134,736 69,431 (2,132,200) (1,311,594) (1,842,616) (2,639,593)
Income Tax
Expense
(benefit) 36,800 - - - (75,000) -
Net Income
(Loss) $ 97,936 $ 69,431 $(2,132,200)$(1,311,594)$(1,767,616)$(2,639,593)
Basic Weighted
Average of
Common Shares
Issued and
Outstanding
(c) 3,813,242 618,194 604,540 438,952 312,767 282,593
Basic Net
Income (Loss)
Per Share
(c) $ 0.03 $ 0.11 $ (3.53) $ (2.99)$ (5.65)$ (9.34)
Total
Assets $1,762,206 $ 864 $ 769,743 $ 17,349,095$49,299,089 $ 93,420,160
Total
Debt $2,095,192 $ 745,905 $ 1,584,215 $ 16,434,037$47,865,907 $ 90,443,733
Shareholders'
Equity
(Deficit)$(332,986) $(745,041)$ (814,472) $ 915,056$ 1,433,182 $ 2,976,427
Common Stock
Issued and
Outstanding
(c) 5,579,361 618,194 618,194 542,027 341,174 309,983
Book Value
Per Share
(c) $ (0.06) $ (1.21) $ (1.32) $ 1.69$ 4.20 $ 9.60
</TABLE>
(a) Composed of the income and expense associated with the Company's
consulting, leasing and broadcast subsidiariesup to the date of the merger with
R. A. Logistics, Inc. on September 2, 1997 and includes the activities of
these subsidiaries through the date of disposal.
(b) The financial data presented for the period September 2, 1997 through
December 31, 1997 (post- acquisition period), reflects the activities of the air
freight consolidation business which is unrelated to its pre-acquisition
operations, and as such, the data is not comparable to prior
periods.
(c) All earnings per share and stock related information have been restated for
the 1 for 6 reverse stock split which was effected on October 27, 1997.
(d) This is computed based upon common stock issued and outstanding (see c).
(e) See "Consolidated Financial Statements" and "Notes to the Consolidated
Financial Statements."
(f) There have been no cash dividends declared or paid during the last five
years (see "Market for the Company's Common Equity and Related Stockholder
Matters").
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The following disucssion should be read in conjunction with the Selected
Financial Data and the Financial Statements and Notes contained elsewhere
herein. The Company's results of operations have been and in certain cases are
expected to continue to be, affected by certain general factors.
CAUTIONARY STATEMENT
Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, in other sections of this Annual
Report, and in future filings by the Company with the Securities and Exchange
Commission, in the Company's press release and in oral statements made with the
approval of an authorized executive officer which are not historical or current
facts are "forward-looking statements" made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 and are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical results and those presently anticipated or
projected. Readers are cautioned not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The following
important factors, among others, in some cases have affected and in the future
could affect the Company's actual results and could cause the Company's actual
financial performance to differ materially from that expressed in any
forward-looking statement: (i) the competitive conditions that curently exist in
the Company's industry, which could adversely impact sales and erode gross
margins; (ii) many of the Company's competitors are significantly larger and
better capitalized than the Company; and (iii) the inability to carry out
marketing and sales plans would have a materially adverse impact on the
Company's profitability. The foregoing list should not be construed as
exhaustive and the Company disclaims any obligations subsequently to revise any
forward-looking statements to reflect events of circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
The Company receives revenues solely from the air cargo operations of B.
Airways Air Cargo, Inc. which was acquired on September 2, 1997 and comparisons
to prior periods are not indicative of the Company's existing operations. The
Company has historically reported results of operations on a fiscal year basis
ending April 30 of each calendar year. As part of the RALI Acquisition, the
Company has elected to change its fiscal year end to December 31, in order to
better match the natural annual business cycle associated with the Company's air
freight business acitivities. (See "Description of Business" and Note 1 Notes to
the Consolidated Financial Statements).
Prior to the RALI Acquisition the Company operated one 25 kw FM radio
station located in Shallotte, North Carolina and performed limited financial and
business consulting services. These business activities were disposed of during
1997 concurrant with the RALI Acquisition.
Air Cargo Business Operations During the Period Ended December 31, 1997
The operating results for November and December 1997 were
uncharacteristically low based on historical trends in the air freight industry.
The air freight industry is a seasonal business in which the final months of the
year are traditionally the strongest and most profitable, while the beginning
months of the year are traditionally the slowest. The Company attributes the
poor performances in November and December 1997 to three factors.
First, the Company was contracting the use of one 747-200 aircraft during
its first months of operations. Due to the maintenance problems with the initial
aircraft, for the month of November, the Company was forced to accept the use of
one 747-100 which is a less profitable aircraft based on payload capacity, range
and fuel consumption. This resulted in an increase in cost and a decrease in
revenue. The Company has remedied these problems by changing aircraft providers
and utilizing a newer aircraft. In January of 1998 the Company began using a
<PAGE>
combination of a DC-10 and a MD-11 aircraft. At present the Company is utilizing
one DC-10-30. During the low season this aircraft is attractive since it is
smaller than a 747-200 and therefore requires less to achieve full capacity,
thus enabling the Company to increase frequencies during periods of high demand
and increase the probability of full payloads even during the low season. In May
1998, the Company is scheduled to terminate the use of the DC-10 and commence
use of one MD-11 aircraft which according to management estimates, will be the
optimal aircraft for the market presently being served.
A second factor was certain changes in the regulatory environment in
Brazil, one of the Company's primary destinations. In October 1997, the
Brazilian government implemented a temporary regulation requiring that Brazilian
importers provide proof of pre-payment for all imports with an invoiced value of
greater than US $10,000.00. This made it extremely difficult for importers to
receive merchandise on credit terms, resulting in a drop in southbound traffic.
At present these regulatory changes are no longer in effect and should not
continue to negatively impact revenues or profitability. And, finally,
management believes that the situation in the Asian markets had a moderate
impact on the November and December results. During this period, Brazilian
interest rates increased making the cost of capital needed for imports more
costly. Furthermore, it created a general uncertainty in the market negatively
impacting air cargo traffic. It is the management's belief that this situation
will not materially impact business.
Liquidity and Capital Resources
At the present time, the cash needs of the Company are currently met by
funds generated from operations. The Company believes that its current financial
resources will be sufficient to finance its operations and obligations for the
short term. However, the Company's actual working capital needs for the long and
short terms will depend on numerous factors, none of which can be predicted with
certainty. These include the Company's operating results, costs associated with
increased sales and marketing efforts, costs of obtaining an air carrier
operating certificate, changes in laws of foreign jurisdictions in which the
Company does business; and competition from other transportation providers many
of whom are better capitalized than the Company. Implementation of these
additions and enhancements may require the Company to increase its working
capital and financial resources. To this extent additional financing will be
necessary. Accordingly, the Company may assume additional short or long term
debt and may issue additional debt or equity securities as circumstances permit.
There is no assurance that debt or equity financing will be available to the
Company, or if available, will be available on economically suitable terms and
conditions.
Item 7A. Quantitative and Qualitative Disclosures About Market Risks
None
<PAGE>
Item 8. Financial Statements and Supplemental Data
Report of Independent Certified Public Accountants
To the Shareholders and Board of Directors of
Tropic Air Cargo, Inc.:
We have audited the accompanying consolidated balance sheet of Tropic Air
Cargo, Inc. (f.k.a. Tropic Communications, Inc.) and subsidiaries as of December
31, 1997, and the related statements of consolidated operations, shareholders'
equity, and cash flows for the period July 23, 1997, the date of inception,
through December 31, 1997. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tropic Air
Cargo, Inc. (f.k.a. Tropic Communications, Inc.) and subsidiaries as of December
31, 1997 and the results of their consolidated operations and their consolidated
cash flow for the period July 23, 1997, the date of inception, through December
31, 1997, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company is a newly formed business which
is in need of additional equity and credit resources and has a working capital
deficit of $342,346 at December 31, 1997 which gives rise to uncertainty about
its ability to continue as a going concern. Management's plans in regard to
these matters are described in Note 1. The financial statements do not include
any adjustment that might result from the outcome of this uncertainty.
/s/ HAUSSER + TAYLOR LLP
Columbus, Ohio
April 22, 1998
<PAGE>
<TABLE>
<CAPTION>
TROPIC AIR CARGO, INC. (f.k.a. Tropic Communications, Inc.) AND SUBSIDIARIES
Consolidated Balance Sheet
As of December 31, 1997
ASSETS
<S> <C>
Current Assets:
Cash $ 31,776
Accounts receivable 1,705,335
Other current assets 15,735
-------------
Total Current Assets 1,752,846
-------------
Property and equipment, at cost (net of
accumulated
depreciation of $281) 9,210
Other assets 150
-------------
Total Assets $ 1,762,206
=============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses $ 1,630,296
Notes and accrued interest payable 460,909
Other current liabilities 3,987
-------------
Total Current Liabilities 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, 5,579,361 shares issued and 5,021,425
outstanding
Common stock subscribed 880,189
Paid in capital (5,452,347)
Retained earnings 97,936
-------------
547,203
Subscriptions receivable (880,189)
-------------
Total Shareholders' Equity (Deficit) (332,986)
-------------
Total Liabilities and Shareholders'
Equity (Deficit) $ 1,762,206
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TROPIC AIR CARGO, INC. (f.k.a. Tropic Communications, Inc.) AND SUBSIDIARIES
Statements of Consolidated Operations For the Period July
23, 1997 (date of inception) Through December 31, 1997
<S> <C>
Revenues:
Freight revenues $ 8,631,848
-------------
Cost of freight operations:
Aircraft, crew, maintenance and
insurance charges 3,815,991
Fuel 2,118,083
Aircraft handling 602,362
Cargo handling 538,937
Freight transfers 453,026
Commissions 203,189
Aircraft navigation 128,241
Trucking 23,619
-------------
Total Cost of Freight Operations 7,883,448
-------------
Gross Profit from Freight Operations 748,400
Cost and Expenses:
Marketing, administration and other
operating expenses 599,612
Interest expense - related party 629
Interest expense 13,142
Depreciation of equipment 281
-------------
Total Costs and Expenses 613,664
-------------
Income (Loss) Before Income Taxes 134,736
Income tax expense 36,800
-------------
Net Income (Loss) $ 97,936
=============
Basic and Diluted Net Income (Loss) Per
Share $ 0.03
=============
Weighted Average Number of Common and
Potential Common Shares:
Basic and Diluted 3,813,242
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TROPIC AIR CARGO, INC. (f.k.a. Tropic Communications, Inc.) AND SUBSIDIARIES
Statements of Consolidated Stockholders' Equity (Deficit) For the
Period July 23, 1997 (date of inception) Through December 31, 1997
Sub- Total
Common scrip- Share
Stock Retained tion Treasury holders'
Common Sub- Paid in Earnings Receiv- Stock, Equity
Stock scribed Capital (Deficit) able at Cost (Deficit)
------- -------- ---------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial
capital-
ization
of R. A.
Logistics,
Inc. $ 10 $ - $ 11,037 $ - $ - $ - $ 11,047
Stock
issued
to share-
holders
of R. A.
Logistics,
Inc. in
exchange
for 100%
of their
voting
shares 3,960,000 - (3,971,047) - - - (11,047)
Adjust-
ment for
acqui-
sition
re-cap-
itali-
zation 556,725 880,189 (1,279,131) - (880,189) (11,588) (733,994)
Retire-
ment of
400 shares
of common
stock
held in
treasury (360) (11,228) 11,588 -
Stock
issued in
payment of
secured
note pay-
able to an
officer 135,000 (46,274) 88,726
Stock
issued in
payment of
secured
note
payable 355,650 (143,704) 211,946
Stock
issued to
outside
directors
as compen-
sation for
services 14,400 (12,000) 2,400
Net income 97,936 97,936
--------- -------- ----------- --------- --------- -------- ----------
Balances
as of
December
31, 1997 $5,021,425 $880,189 $(5,452,347)$ 97,936 $(880,189)$ - $(332,986)
========== ======== =========== ========= ========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TROPIC AIR CARGO, INC. (f.k.a. Tropic Communications, Inc.) AND SUBSIDIARIES
Statement of Consolidated Cash Flows
Increase (Decrease) in Cash and Cash Equivalents For the Period
July 23, 1997 (date of inception) Through December 31, 1997
<S> <C>
Cash Flows From Operating Activities:
Freight receipts $ 6,927,377
Freight operations payments (6,437,945)
Marketing, administrative and other
operating payments (597,212)
-------------
Net Cash Used For Operating Activities (107,780)
-------------
Cash Flows From Investing Activities:
Purchase of property and equipment (9,491)
Deposit for aircraft (10,000)
-------------
Net Cash Used For Investing Activities (19,491)
-------------
Cash Flows From Financing Activities:
Proceeds from issuance of stock 11,047
Proceeds from other borrowings 148,000
-------------
Net Cash Provided By Financing
Activities 159,047
-------------
Net Increase (Decrease) in Cash and
Cash Equivalents 31,776
Cash and Cash Equivalents at
Beginning of Period -
-------------
Cash and Cash Equivalents at
End of Period $ 31,776
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TROPIC AIR CARGO, INC. (f.k.a. Tropic Communications, Inc.) AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. GOING CONCERN BASIS OF PRESENTATION AND CERTAIN EVENTS
Certain information and footnote disclosures contained in these financial
statements are not historical facts and 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 projected.
The Company must generate sufficient additional working capital and operate
its air cargo business at a profitable level in order to continue as a going
concern. Management's plans are summarized in Note 2 below. In the event these
plans are not successfully implemented, the Company may not be able to realize
the full value of its assets in the ordinary course of business. The
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classifications of liabilities that might be necessary should the Company be
unable to implement its plan.
Acquisition of R.A. Logistics, Inc.
On September 18, 1997, the Company issued 4,400,000 shares of its restricted
common stock (representing a controlling interest) in exchange for 100% of the
issued and outstanding capital stock of R.A. Logistics, Inc., a Delaware
corporation ("RALI" and the "RALI Acquisition"). In addition, three members of
the Company's Board of Directors resigned, and were replaced by the three
shareholders of RALI. As part of the RALI Acquisition, the Company also entered
into Employment Agreements, effective September 2, 1997, with Angel Munoz,
Ronald Vimo and Scott Villanueva (the three shareholders of RALI) to serve as
the Company's President, Vice-President and Secretary, respectively.
RALI is a holding company owning 100% of the issued and outstanding capital
stock of two subsidiary corporations, B. Airways, Inc. and B. Airways Air Cargo,
Inc. both Florida corporations ("BAI" and "BAACI", respectively). BAACI is a
newly formed corporation organized to operate as an air freight consolidator
operating from a shared warehouse facility located at the Miami International
Airport. During the current period BAACI consolidated air cargo for shipment via
a Boeing 747-200 flying approximately 4 round trips weekly between Miami
International Airport and Latin America. The BAACI aircraft was provided at a
rate of $4,750 per operating hour plus fuel. Operating since September 2, 1997,
BAACI had booked approximately $8,631,800 in gross revenue through December 31,
1997. BAI is a non-operating company having an application pending with the U.S.
Department of Transportation and the Federal Aviation Authority for operation as
a Part 135 all cargo air carrier incurring approximately $43,000 in expenses
during the current period. In addition, BAI has a $10,000 deposit for the
purchase of a DC-3 aircraft which BAI anticipates will be operated within the
Caribbean Basin.
The business combination was closed effective September 2, 1997 with the
shareholders of RALI succeeding to the controlling interest in Tropic in a
transaction commonly known as a "reverse merger". This reverse acquisition was
recorded as a re-capitalization, with RALI considered the acquirer. Due to
re-capitalization, historical stockholders' equity of the acquirer prior to the
merger is retroactively restated for the equivalent number of shares received in
the merger after giving effect to any difference in the par value of the
issuer's stock with an offset to paid in capital. Retained earnings of the
acquirer has been carried forward after the acquisition. As the merger is not
considered a business combination as defined in Accounting Principles Board
Opinion No. 16, "Business Combinations", pro forma information is not presented.
In addition, the operations of Tropic prior to the merger are not on-going
subsequent to the merger and have no relevance to the current operations of the
Company.
Amendment to Articles of Incorporation and By-Laws.
On September 19, 1997, by an action by a majority of the shareholders of the
Company, the shareholders approved amending the Company's Articles of
Incorporation: (i) to change the par value of the Company's common stock from
fifteen cents per share to ninety cents per share (a 1 for 6 reverse stock
split); and (ii) to comport to the non-U.S. citizen ownership and management
<PAGE>
requirements of the Federal aviation laws. This amendment was effected on
October 6, 1997. Also, the Board of Directors approved an amendment to the
Company's By-Laws: (i) to change the beginning of the Company's fiscal year from
May 1 to January 1 of each calendar year; and, (ii) to change the time for the
Company's annual meeting of shareholders from the last Thursday of October to
the last Thursday of June of each calendar year.
2. BUSINESS PLAN (UNAUDITED)
The Company's plans for 1998 involve several goals. The first of which is to
improve and enhance the quality of service being offered to its customers, by
improving the efficiency of internal administrative functions and solidifying
the basic operating infrastructure required to sustain current operations and
facilitate future growth plans. The most significant step toward service
enhancement involves the use of newer, more reliable aircraft which are not
subject to frequent maintenance requirements. In addition, the Company plans to
refine internal operating systems by streamlining and maximizing the efficiency
of administrative functions and upgrading its computer software usage, enhancing
communication methods and increasing employee training.
The second goal of the Company is to complete the certification process
for B. Airways, Inc. In addition to the certification of B. Airways, Inc., it is
estimated that the Company could reduce aircraft expenses from 20% to 40% if it
were authorized to own and operate aircraft. These additions and enhancements
will permit the Company to:
Increase lift capacity - Through the completion of additional ACMI
contracts the Company plans to increase its capacity to meet rising demand for
service to its primary Latin American markets. Since the Company is currently
operating one aircraft, the addition of a second aircraft could immediately
double capacity and revenue potential.
Expand markets - At the present time, the Company is serving several major
Latin American markets including Brazil, Chile, Paraguay, Columbia, Venezuela
and Puerto Rico. It is the Company's plan to increase frequencies to these
existing markets and enter into the remaining regional markets as
capacity allows.
Increase sales personnel - The Company is aggressively working to
establish marketing branches at each destination served by scheduled service in
order to increase northbound revenues. It is estimated by the Company that an
additional 25% revenue potential exists in the form of unsold northbound
capacity. This potential could be realized with only a minimal increase in cost.
Strategic alliances - The Company, through the use of interline agreements
with existing carriers can increase its network route structure and offer
service to and from major domestic and international cities without incurring
significant setup expense.
Concentration on profitable routes - Due to the fact that the Company does
not maintain a costly route structure it is free to concentrate on profitable
routes and markets. In addition, it maintains the flexibility to adapt its
service to frequently changing market conditions.
Implementation of these additions and enhancements may require the Company
to increase its working capital and financial resources. Accordingly, the
Company may assume additional short or long term debt and may issue additional
debt or equity securities as circumstances permit. There is no assurance that
debt or equity financing will be available to the Company, or if available, will
be available on economically suitable terms and conditions.
3. SIGNIFICIANT ACCOUNTING POLICIES
Basis of Consolidation. The consolidated financial statements include the
accounts of Tropic Air Cargo, Inc. (f.k.a. Tropic Communications, Inc.) and
RALI and its wholly-owned subsidiaries (collectively, the "Company"), which
<PAGE>
operate an air freight consolidation business from the effective date of
acquisition on September 2, 1997 (see Note 1 discussion of acquisition
accounting). All material intercompany transactions have been eliminated.
Property and Equipment. Property and equipment are stated at cost.
Depreciation is computed on a straight line method at rates which are adequate
to allocate the costs of such assets over their estimated useful lives.
Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for additions and improvements are added to the cost of property
and equipment. Leasehold improvements are amortized over the term of the lease
and upon termination of the lease any remaining value is expensed.
Cash Flows. For purposes of the Statement of Cash Flows all of the Company's
cash investments are liquid instruments with maturities of three months or less
and are considered to be cash equivalents (see Note 13).
Income Taxes. The Company follows the provisions of Financial Accounting
Statement Number 109, Accounting for Income Taxes ("FAS 109") which requires the
reporting of income taxes 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).
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.
Fair Value. FAS 107, Disclosure about Fair Value of Financial Instruments,
requires disclosure of the fair market value of financial instruments for which
it deems practical to estimate fair value. For certain of the Company's
financial instruments including cash, accounts receivable, accounts and notes
payable, and other accrued liabilities the carrying amounts approximate fair
value due to their short maturities.
Use of Estimates. The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in its
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
Accounting Pronouncements for 1998. The FASB has issued three pronouncements
for fiscal years beginning after December 15, 1997: SFAS No. 130 - "Reporting of
Comprehensive Income"; SFAS No. 131 - "Disclosures about Segments of an
Enterprise and Related Information"; and SFAS No. 132 - "Employers' Disclosures
about Pensions and Other Retirement Benefits". The Company believes that the
effect of the adoption of the above pronouncements will not be material to its
financial position or the results of operations.
4. CONCENTRATION OF CREDIT RISK
The revenue of the Company's air cargo business is earned pursuant to the
terms of a Sales and Marketing Agreements between Cargopar Airlines, Inc. ("CAI
Agreement" and "CAI" respectively), AIA-Latin America, Inc. ("AIALA Agreement"
and AIALA respectively) and BAACI. BAACI is entitled to 100% of the revenue from
each flight operation made under the CAI and AIALA Agreements with all billing
and collection being done by CAI and AIALA. BAACI has concentration of credit
risk to the extent that its revenues are collected by CAI and AIALA, however,
there is a lower concentration of risk in that there are $1,702,617 in trade
receivables due from approximately 120 customers. One customer accounts for
approximately $354,000 or 21% of the total amount receivable. (See Note 8,
Related Party Transactions).
<PAGE>
5. PROPERTY AND EQUIPMENT
The Company's property and equipment and accumulated depreciation, along with
assigned depreciable lives, as of December 31, 1997, are summarized as follows:
<TABLE>
<CAPTION>
Accumulated Net Assigned
Asset Classification Cost Depreciation Book Value Life
--------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
Furniture and office
equipment $ 9,491 $ (281) $ 9,210 5-10 years
--------- ------------- ----------
Total $ 9,491 $ (281) $ 9,210
========== ========== ==========
</TABLE>
6. OFFICE LEASE
The Company is located in Miami with its office and warehouse space located
within the Miami International Airport's cargo facilities. Approximately 80,000
square feet of warehouse is available for the Company's use through a
sub-contracted ground handling company. Office space for accounting, sales,
traffic and operations personnel is located within the confines of the warehouse
facility. There is no fixed cost for the use of this space since it is included
in a per pound ground handling fee. The Company also maintains a small Corporate
office, consisting of approximately 1,500 square feet, located less than 1 mile
from the warehouse facility. The Company maintains no leasehold on any offices
or warehouses at the destinations served and warehousing and ground handling
services are provided at the destination stations on a per pound basis.
7. NOTES AND ACCRUED INTEREST PAYABLE
The Company's notes and accrued interest payable at December 31, 1997 with
their respective interest rates are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997
Secured promissory notes at 6% to
9/6/95, 15% thereafter $ 305,770
Unsecured demand promissory notes and
accrued interest payable, with
interest
at 10% 55,139
Guarantee of installment note 100,000
----------
Total notes and accrued interest
payable $ 460,909
=========
</TABLE>
The Company is a party to one legal proceeding with certain bridge note
lenders commencing on June 13, 1995 in Supreme Court of the State of New York,
County of New York , Generation Capital Associates et al. vs. Partech Holdings
Corporation et al., Index No. 114837/95. In the opinion of management, the
claims asserted, if unfavorably decided, would not have a materially adverse
effect on the financial condition of the Company.
8. RELATED PARTY TRANSACTIONS
Sales and Marketing Agreement.
BAACI markets a portion of its services using the names Cargopar Airlines,
Inc.("CAI") and AIA-Latin America, Inc. ("AIALA"). BAACI acts as the sole
<PAGE>
general sales, marketing and administrative agent for CAI and AIALA through an
Exclusive Sales and Marketing Agreements in which BAACI succeeded CAI and AIALA
when they ceased independent operations on September 1, 1997. BAACI acts
autonomously, using only the CAI and AIALA names, and assumes all costs of
operations and receives all revenues generated.
CAI was formerly the United States presence of Cargopar Lineas Aereas, S.A.,
("CLASA") a Paraguayan certificated all cargo air carrier. When CLASA decided to
close its fixed presence in the United States it entered into an Exclusive Sales
and Marketing Agreement with BAACI through it U.S. presence CAI. Angel Munoz and
Ronald Vimo were formerly officers of CAI.
Employment Agreements.
As part of the RALI Acquisition, the Company also entered into Employment
Agreements effective September 2, 1997 with Angel Munoz, Ronald Vimo and Scott
Villanueva to serve as the Company's President, Vice-President and Secretary
respectively. In addition, these individuals have replaced three of the
Company's resigning members on its Board of Directors. The Employment Agreements
are similar in terms and conditions, providing for, among other things, for a
term of five years, an annual base compensation of $175,000, $175,000 and
$85,000 respectively, for annual incentive compensation in an aggregate amount
(including base compensation) of 1% of consolidated gross revenues and for the
payment of other ordinary employee benefits including medical, disability and
life insurance and business and auto expense reimbursement.
9. EMPLOYEE STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
There were 16,195 stock options, representing all the outstanding stock
options, terminated following the acquisition of R. A. Logistics, Inc. No stock
options were granted during the period September 2, 1997 through December 31,
1997. The Company has 51,278 options available for grant under its 1989 and 1993
Incentive Stock Option Plans.
10. COMMON STOCK AND CAPITAL TRANSACTIONS
The Company's common stock trades on the OTC Bulletin Board under the symbol
TRPC. The Company's common stock issued and outstanding is as follows:
<TABLE>
<CAPTION>
Total Number Common Paid in
of Shares Stock Capital
------------- ------------- ------------
<S> <C> <C> <C>
Initial capitalization of
R. A. Logistics, Inc. 1,047 $ 10 $ 11,037
Shares issued to shareholders
of RALI in exchange for
100% of their voting shares
of RALI 4,400,000 3,960,000 (3,971,047)
Adjustment for acquisition
re-capitalization 618,594 556,725 (1,279,131)
Retirement of 400 shares of
common stock in treasury (400) (360) (11,228)
<PAGE>
Shares issued in payment of
secured note payable to
an officer 150,000 135,000 (46,274)
Shares issued in payment of
secured note payable 395,167 355,650 (143,704)
Shares issued to outside
directors as compensation
for services 16,000 14,400 (12,000)
------------- ------------- -------------
Issued shares as of December 31,
1997 5,579,361 $ 5,021,425 $ (5,542,347)
============= ============= =============
</TABLE>
Subscriptions to Common Stock.
In August, 1997 the Company entered into agreements with three investment
companies for their purchase of up to 800,000 restricted shares of the Company's
$0.90 par value common stock at a price of sixty cents ($0.60) per share for a
total aggregate investment of $480,000 plus an agreement for payment of certain
of the Company's obligations and contingent obligations in the maximum amount of
approximately $880,000 as of the date of these financial statements. At the time
of the agreements the equivalent bid price of the Company's $0.90 par value
common stock, as quoted on the OTC Bulletin Board, was one dollar and eighty-six
cents ($1.86) per share.
11. INCOME TAXES
Deferred income taxes result from temporary differences in the financial
bases and tax bases of assets and liabilities. The difference giving rise to the
deferred income tax assets and the related tax effects are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred Tax Assets:
Vacation pay accrual $ 4,800
-------------
$ 4,800
=============
</TABLE>
The Company's provision for income taxes differs from the amount of income
tax determined by applying the applicable U.S. Federal statutory income tax rate
to pretax accounting income from operations as a result of the following
differences:
<TABLE>
<CAPTION>
<S> <C>
U.S. Federal statutory income tax rate $ 35,800
Other 1,000
-------------
Income tax expense at effective rate $ 36,800
=============
</TABLE>
The provision for income taxes charged to operations was as follows:
<TABLE>
<CAPTION>
<S> <C>
Federal current $ 41,600
Federal deferred (4,800)
-------------
Provision for income tax expense $ 36,800
=============
</TABLE>
<PAGE>
As of December 31, 1997 the Company has pre-acquisition period regular tax
net operating loss carryforwards, expiring in the years 2007 through 2013, which
may be available to offset future taxable income of $6,943,000. These
pre-acquisition period tax loss carryforwards are substantially limited in their
use and no value has been provided for their future benefit, if any, in these
financial statements.
12. NET INCOME (LOSS) PER SHARE
For the period July 23, 1997 (date of inception) through December 31, 1997
basic earnings per share amounts are based on the weighted average number of
common shares outstanding of 3,813,242 shares. No potential common shares are
included herein as none existed. On September 18, 1997, the Company issued
4,400,000 common stock in exchange for 100% of the issued and outstanding
capital stock of R. A. Logistics, Inc. (See Note 1). On September 19, 1997, the
shareholders of the Company approved a 1 for 6 reverse stock split which became
effective October 27, 1997. Share and per share amounts have been adjusted for
the effect of the 1 for 6 reverse split for all periods presented. The
outstanding number of shares of the public company have been assumed to be
outstanding from the date of inception.
13. SUPPLEMENTAL CASH FLOW INFORMATION
Reconciliation of net loss to net cash used for operating activities during
the period July 23, 1997 (date of inception) through December 31, 1997 is as
follows:
<TABLE>
<CAPTION>
<S> <C>
Net income (loss) $ 97,936
-------------
Adjustments to reconcile net income
(loss) to net cash used for
operating activities:
Depreciation of equipment 281
Directors' fees paid in stock 2,400
Deferred taxes (4,800)
Changes in assets and liabilities:
Accounts receivable (1,704,471)
Other assets (1,085)
Notes and accounts payable, and
accrued expenses 1,456,372
Income taxes 41,600
Other 3,987
-------------
Total Adjustments (205,716)
-------------
Net Cash Used for Operating Activities
for Continuing Operations $ (107,780)
=============
</TABLE>
Non Cash Investing and Financing Activities.
During the period September 2, 1997 through December 31, 1997 the Company
issued common stock as follows: (1) 4,400,000 shares on September 18, 1997 for
all the issued and outstanding capital stock of RALI, (2) 150,000 shares on
September 19, 1997 to an officer of the Company in liquidation of its promissory
note and warrant dated September 15, 1994 in the unpaid amount of $88,726, (3)
395,167 shares to Firestar Holdings, Ltd. in liquidation of its promissory note
and warrant dated August 8, 1994 in the unpaid amount of $211,946, (4) 16,000
shares to outside directors for compensation totaling $2,400.
<PAGE>
Report of Independent Certified Public Accountants
To the Shareholders and Board of Directors of
Tropic Communications, Inc.:
We have audited the accompanying consolidated balance sheets of Tropic
Communications, Inc. (n.k.a. Tropic Air Cargo, Inc.) and subsidiaries as of
September 1, 1997 and April 30, 1997, and the related statements of consolidated
operations, shareholders' equity, and cash flows for the period May 1, 1997
through September 1, 1997 and for the years ended April 30, 1997 and 1996 and
the financial statement schedule of this Form 10-K. These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule 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 and related
financial statement schedule are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and the related financial statement
schedule. 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tropic
Communications, Inc. (n.k.a. Tropic Air Cargo, Inc.) and subsidiaries as of
September 1, 1997 and April 30, 1997 and the results of their consolidated
operations and their consolidated cash flow for the period May 1, 1997 through
September 1, 1997 and for the years ended April 30, 1997 and 1996, in conformity
with generally accepted accounting principles. In addition, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly the information required
to be included therein.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has incurred significant losses
from operations and experienced cash flow difficulties that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are described in Note 1. The financial statements do not
include any adjustment that might result from the outcome of this uncertainty.
/s/ HAUSSER + TAYLOR LLP
Columbus, Ohio
April 22, 1998
<PAGE>
<TABLE>
<CAPTION>
TROPIC COMMUNICATIONS, INC. (n.k.a. Tropic Air Cargo, Inc.) AND SUBSIDIARIES
Consolidated Balance Sheets
September 1, April 30,
1997 1997
<S> <C> <C>
Assets:
Cash $ - $ 2,068
Deposits and accounts receivable (net of
allowance for doubtful accounts of
$ - 0 - and $2,500, respectively) 864 25,396
Equipment notes and accrued interest receivable - 198,700
Broadcast rights - 46,449
Other current assets - -
------------- -------------
Total Current Assets 864 272,613
------------- -------------
Leased property under capital lease, at
cost (net of accumulated amortization of
$ - 0 - and $3,567,799, respectively) - 270,915
Property and equipment, at cost (net of
accumulated depreciation of $ - 0 -
and $363,686, respectively) - 65,859
Cost in excess of net assets acquired (net
of accumulated amortization of $ - 0 -
and $50,552, respectively) - 141,955
Other assets - 18,401
--------- -------------
Total Assets $ 864 $ 769,743
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TROPIC COMMUNICATIONS, INC. (n.k.a. Tropic Air Cargo, Inc.) AND SUBSIDIARIES
Consolidated Balance Sheets, continued
September 1, April 30,
1997 1997
<S> <C> <C>
Liabilities:
Accounts payable and accrued expenses $ 146,095 $ 281,821
Note and accrued interest payable -
related party 88,097 315,440
Notes and accrued interest payable 511,713 592,799
Broadcast rights - 46,449
Capital lease obligations and accrued
interest payable - 198,700
Accrued officer compensation and
interest payable - 147,240
Other current liabilities - 1,766
------------- -------------
Total Current Liabilities 745,905 1,584,215
------------- -------------
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, 618,594 shares issued 556,735 556,735
Common stock subscribed 880,189 -
Paid in capital 9,007,109 9,007,109
Retained deficit (10,297,297) (10,366,728)
------------- -------------
146,736 (802,884)
Subscriptions receivable (880,189) -
Treasury stock, at cost, 400 shares (11,588) (11,588)
------------- -------------
Total Shareholders' Equity (Deficit) (745,041) (814,472)
------------- -------------
Total Liabilities and Shareholders'
Equity (Deficit) $ 864 $ 769,743
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TROPIC COMMUNICATIONS, INC. (n.k.a. Tropic Air Cargo, Inc.) AND SUBSIDIARIES
Statements of Consolidated Operations
May 1, 1997 Fiscal Years Ended April 30,
Through ----------------------------
September 1,
1997 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $ - $ - $ 1,323,622
Consulting fees and other income 479,475 369,123 544,793
Interest income 2,846 826,646 2,964,299
------------- ------------- -------------
Total Revenues 482,321 1,195,769 4,832,714
------------- ------------- -------------
Cost and Expenses:
Marketing, administration and other
operating expenses 360,084 566,073 1,346,995
Advisory services - 79,575 -
Interest expense - related parties 23,866 52,749 42,683
Interest expense 1,237,742 910,637 3,106,115
Loss on residual values - 1,967 74,621
Depreciation and amortization of
equipment 24,387 46,750 1,343,383
Amortization of cost in excess of
net assets acquired and other
intangible assets 15,455 230,511 230,511
Impairment valuation write-downs
of cost in excess of net
assets acquired - 1,397,180 -
Write-off investment in real estate
partnerships - 42,527 -
(Gain) on disposal of subsidiaries (1,248,644) - -
------------- ------------- -------------
Total Costs and Expenses 412,890 3,327,969 6,144,308
------------- ------------- -------------
Income (Loss) Before Income Taxes 69,431 (2,132,200) (1,311,594)
Income tax expense - - -
------------- ------------- -------------
Net Income (Loss) $ 69,431 $ (2,132,200) $ (1,311,594)
============= ============= =============
Basic and Diluted Net Income
(Loss) Per Share $ 0.11 $ (3.53) $ (2.99)
============= ============= =============
Weighted Average Number of Common
and Potential Common Shares:
Basic and Diluted 618,194 604,540 438,952
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TROPIC COMMUNICATIONS, INC. (n.k.a. Tropic Air Cargo, Inc.) AND SUBSIDIARIES
Statements of Consolidated Stockholders' Equity (Deficit)
Sub- Total
Common scrip- Share
Stock Retained tion Treasury holders'
Common Sub- Paid in Earnings Receiv- Stock, Equity
Stock scribed Capital (Deficit) able at Cost (Deficit)
-------- -------- ---------- ------------ --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances
as of
April 30,
1995 $307,417 $ - $8,006,287 $ (6,922,934)$ - $(11,588)$ 1,433,182
Stock
issued to
replace
collat-
eral
shares
surrendered
by officer
to secure
promissory
note
holders 68,075 204,661 272,736
Stock
options
exercised
by officers,
directors
and
employ-
ees 34,850 32,337 67,187
Stock
options
exercised
by
others 78,084 375,461 453,545
Fractional
shares
dropped for
1:3 reverse
stock split
effected
July 22,
1994 (241) 241 -
Net income
(loss) (1,311,594) (1,311,594)
-------- -------- ---------- ------------ --------- -------- ------------
Balances
as of
April 30,
1996 488,185 - 8,672,987 (8,234,528) - (11,588) 915,056
Stock
options
exercised
by
others 51,000 289,000 340,000
Stock
issued 17,550 45,122 62,672
Net income
(loss) (2,132,200) (2,132,200)
-------- -------- ---------- ------------ --------- -------- ------------
Balances
as of
April 30,
1997 556,735 - 9,007,109 (10,366,728) - (11,588) (814,472)
Subscrip-
tions for
800,000
shares of
common
stock 880,189 (880,189)
Net
income 69,431 69,431
-------- -------- ---------- ------------ --------- -------- ------------
Balances
as of
September
1, 1997$556,735 $880,189 $9,007,109 $(10,297,297)$(880,189)$(11,588)$ (745,041)
======== ======== ========== ============ ========= ======== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TROPIC COMMUNICATIONS, INC. (n.k.a. Tropic Air Cargo, Inc.) AND SUBSIDIARIES
Statement of Consolidated Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
May 1, 1997 Fiscal Years Ended April 30,
Through ----------------------------
September 1,
1997 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Rental receipts $ - $ - $ 9,207
Commissions, fees and other
receipts 129,925 214,261 241,322
Marketing, administrative and
other operating payments (129,789) (598,835) (646,339)
Interest receipts 7 709 525
Interest payments (2,740) (6,384) (42,768)
------------- ------------- -------------
Net Cash Used For Operating
Activities (2,597) (390,249) (438,053)
------------- ------------- -------------
Cash Flows From Investing Activities:
Purchase of property and
equipment (960) (13,111) (2,524)
Investment in unconsolidated
subsidiaries - (403) (500)
Cash transferred with
subsidiaries (1,842) - -
------------- ------------- -------------
Net Cash Used For Investing
Activities (2,802) (13,514) (3,024)
------------- ------------- -------------
Cash Flows From Financing Activities:
Proceeds from issuance of stock - 340,000 426,720
Proceeds from other borrowings - 50,000 102,500
Principal payment under other
borrowings - (21,500) (81,000)
Principal payments on broadcast
acquisition debt - - (2,725)
Proceeds from officer loans - - 11,500
Principal payments under officer
loans - (11,500) -
Proceeds from related party loans
(non officer loans) 5,076 39,682 -
Principal payments under capital
lease obligations and other
financings (1,745) (4,872) (6,077)
------------- ------------- -------------
Net Cash Provided By Financing
Activities 3,331 391,810 450,918
------------- ------------- -------------
Net Increase (Decrease) in Cash and
Cash Equivalents (2,068) (11,953) 9,841
Cash and Cash Equivalents at
Beginning of Period 2,068 14,021 4,180
------------- ------------- --------------
Cash and Cash Equivalents at
End of Period $ - $ 2,068 $ 14,021
============= ============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TROPIC COMMUNICATIONS, INC. (n.k.a. Tropic Air Cargo, Inc.) AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. GOING CONCERN BASIS OF PRESENTATION AND CERTAIN EVENTS
Certain information and footnote disclosures contained in these financial
statements are not historical facts and 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 projected.
The Company must generate sufficient additional working capital and operate
its newly acquired air cargo business (see below) at a profitable level in order
to continue as a going concern. Management's plans are to expand its newly
acquired air cargo business. In the event these plans are not successfully
implemented the Company may not be able to realize the full value of its assets
in the ordinary course of business. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
should the Company be unable to implement its plans.
During the current period the Company was acquired by R.A. Logistics, Inc. As
part of this acquisition the Company has made provision for the repayment of its
obligations and the disposition of certain of its assets, accordingly, the
financial statements include adjustments to the carrying value of certain assets
as more fully described below. (see Notes 5 and 9).
Reverse Acquisition - R.A. Logistics, Inc. ("RALI").
The business combination was closed effective September 2, 1997 with the
shareholders of RALI succeeding to the controlling interest in Tropic in a
transaction commonly known as a "reverse merger". This reverse acquisition will
be recorded as a re-capitalization, with RALI considered the acquirer. The
accompanying financial statements reflect the accounts and results of operations
for Tropic and its wholly-owned subsidiaries for the date immediately preceding
the date of the RALI acquisition without giving effect to any of the accounts of
RALI and its wholly-owned subsidiaries.
Amendment to Articles of Incorporation and By-Laws.
On September 19, 1997, by an action by a majority of the shareholders of the
Company, the shareholders approved amending the Company's Articles of
Incorporation: (i) to change the par value of the Company's common stock from
fifteen cents per share to ninety cents per share (a 1 for 6 reverse stock
split); and (ii) to comport to the non-U.S. citizen ownership and management
requirements of the Federal aviation laws. This amendment was effected on
October 6, 1997. Also, the Board of Directors approved an amendment to the
Company's By-Laws: (i) to change the beginning of the Company's fiscal year from
May 1 to January 1 of each calendar year; and, (ii) to change the time for the
Company's annual meeting of shareholders from the last Thursday of October to
the last Thursday of June of each calendar year.
2. SIGNIFICIANT ACCOUNTING POLICIES
Basis of Consolidation. The consolidated financial statements include the
accounts of Tropic Communications, Inc., its wholly-owned subsidiaries, and
their related business trusts (collectively, the "Company"), most of which were
engaged in the equipment leasing and radio operating business activities
immediately preceding the date of the RALI acquisition. During the period May 1,
1997 through September 1, 1997, as discussed more thoroughly in Note 9, the
Company disposed of these business activities. All material intercompany
transactions have been eliminated. Certain reclassifications of previous year
amounts presented herein have been made in order to conform with current period
presentations.
<PAGE>
Long-lived Assets. The Company implemented the provisions of Financial
Accounting Standards ("FAS") Number 121, Accounting for the Impairment of
Long-Lived Assets to Be Disposed Of, in fiscal year ended April 30, 1995. Since
the Company's prior accounting policy regarding review of impairment of
long-lived assets approximated FAS 121, there was no financial impact related to
the implementation. Such intangible assets are amortized over periods not
exceeding ten years. The Company evaluates the existence of any impairment
related to intangible assets on the basis of whether the intangible assets are
fully recoverable based upon projected undiscounted cash flows and recognizes
such losses, if any, during the period impairment is incurred. The periods of
amortization and recoverability are evaluated annually to determine whether
circumstances have changed which necessitate revision. Based on management's
estimates, impairments are recognized during the period impairment incurs,
however, actual results could differ from these estimates.
Pursuant to the RALI reverse acquisition, the business of the Company will be
devoted solely to the operation and expansion of the air freight business and
the development of an operational air carrier. Accordingly, the Company has
disposed of its other business activities. Pursuant to the Company's accounting
policy regarding the review of impairment of long-lived assets, the Company
determined during the fourth fiscal quarter of 1997 that it is therefore
appropriate to expense $1,397,180 of the Company's cost in excess of net assets
acquired which is related to these other business activities. The remaining
balance at April 30, 1997 of $141,955, net of accumulated amortization of
$50,552, is related to the cost in excess of the value of the net assets of
WLTT-FM at the date of acquisition and was disposed of in the current period
(See Note 9).
Property and Equipment. Property and equipment are stated at cost.
Depreciation is computed on a straight line method at rates which are adequate
to allocate the costs of such assets over their estimated useful lives.
Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for additions and improvements are added to the cost of property
and equipment. Leasehold improvements are amortized over the term of the lease.
Upon termination of the lease any remaining value is expensed.
Deferred Costs. The Company defers costs that relate to stock, debt and other
financings. The Company's accounting policy is to capitalize such costs and
amortize them over the life of any debt they may relate to or to charge them to
Paid in Capital if they relate to equity financing. If the financing is
terminated the costs are expensed.
Cash Flows. For purposes of the Statement of Cash Flows all of the Company's
cash investments are liquid instruments with maturities of three months or less
and are considered to be cash equivalents (see Note 11).
Income Taxes. The Company follows the provisions of Financial Accounting
Statement Number 109, Accounting for Income Taxes ("FAS 109") which requires the
reporting of income taxes 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).
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.
Fair Value. FAS 107, Disclosure about Fair Value of Financial Instruments,
requires disclosure of the fair market value of financial instruments for which
it deems practical to estimate fair value. For certain of the Company's
financial instruments including cash, accounts receivable, accounts and notes
payable, and other accrued liabilities the carrying amounts approximate fair
value due to their short maturities.
Stock-Based Compensation. The Company has adopted the provisions of APB No.
25, "Accounting for Stock Issued to Employees" which utilizes the intrinsic
value based method. The Financial Accounting Standards Board ("FASB") Statement
No. 123, "Accounting for Stock-Based Compensation", which utilizes a fair value
based method is effective for the Company's year beginning May 1, 1996. The FASB
<PAGE>
requires disclosure for new employee stock options of the impact to the
financial statements of utilizing the intrinsic value versus the fair value
based method. The Company utilizes the intrinsic value method under APB No. 25
to account for employee stock options. If the Company had utilized the fair
value based method under FASB No. 123, the impact would not be significant to
the financial statements as there are no stock options outstanding at December
31, 1997 and all stock options outstanding at April 30, 1997 were terminated
without being exercised.
Use of Estimates. The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in its
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
Accounting Pronouncements for 1998. The FASB has issued three pronouncements
for fiscal years beginning after December 15, 1997: SFAS No. 130 - "Reporting of
Comprehensive Income"; SFAS No. 131 - "Disclosures about Segments of an
Enterprise and Related Information"; and SFAS No. 132 - "Employers' Disclosures
about Pensions and Other Retirement Benefits". The Company believes that the
effect of the adoption of the above pronouncements will not be material to its
financial position or the results of operations.
3. PROPERTY AND EQUIPMENT
The Company's property and equipment were included among the assets of the
subsidiaries disposed of during the period ended September 1, 1997. Property and
equipment and accumulated depreciation, along with assigned depreciable lives,
as of April 30, 1997, are summarized as follows:
<TABLE>
<CAPTION>
April 30, 1997
Accumulated Net Assigned
Asset Classification Cost Depreciation Book Value Life
--------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
Furniture and office
equipment $ 390,303 $ (352,390) $ 37,913 5-10 years
Broadcasting equipment 703 (135) 568 3-20 years
Automobiles 19,079 (9,539) 9,540 3 years
Leasehold improvements 19,460 (1,622) 17,838 3 years
------------------------------------
Total $ 429,545 $ (363,686) $ 65,859
========= ============ ========
</TABLE>
Depreciation expense was $7,489, $46,750 and $1,343,383 for the period May 1,
1997 through September 1, 1997 and for fiscal years ended April 30, 1997 and
1996, respectively.
4. OFFICE LEASE
Through the date of these financial statements the Company leased 2,100
square feet of suburban office space under a one (1) year full service lease,
expiring January 31, 1999 as well as storage space for $83 per month, on a month
to months basis, in Columbus, Ohio. In addition, the Company leased a 1,200
square feet office/studio facility under a thirty-six (36) month lease for
monthly rental of $927 per month with a 3% increase for the final year expiring
December 31, 1999, and leased two parcels of land located in Shallotte, North
Carolina on which its broadcast towers are located from a grantor trust (the
"Trust"), in which an officer of the Company is a co-trustee, on a month to
month basis for $1,500 per month. In addition, the lease for the Shallotte
office/studio facility has been guaranteed by the Trust.
Rental expense reported in the Statement of Operations amounted to $27,230,
$53,709 and $59,220 for the period May 1, 1997 through September 1, 1997 and the
fiscal years ended April 30, 1997 and 1996, respectively.
<PAGE>
5. NOTES AND ACCRUED INTEREST PAYABLE
The Company's notes and accrued interest payable at September 1, 1997 and
April 30, 1997 with their respective interest rates are as follows:
<TABLE>
<CAPTION>
September 1, April 30,
1997 1997
<S> <C> <C>
Secured promissory notes at 6% to
9/6/95, 15% thereafter $ 358,580 $ 344,314
Secured promissory notes to related
party affiliates at 6% to 9/30/95,
15% thereafter (See Note 11) 88,097 254,910
Unsecured demand promissory notes and
accrued interest payable to related
parties, other than officers, with
interest at 12% - 15% (See Note 11) - 60,530
Unsecured demand promissory notes and
accrued interest payable, with
interest at 10% (See Note 11) 53,133 51,168
Installment note payable to vendors,
collateralized with the equipment
purchased, with interest at 8.6% - 6,946
Installment note and accrued interest
payable, with interest at 7% (See Note 11) - 190,371
Guarantee of installment note 100,000 -
------------- -------------
Total notes and accrued interest
payable $ 599,810 $ 908,239
============= =============
</TABLE>
The Company is a party to one legal proceeding with certain bridge note
lenders commencing on June 13, 1995 in Supreme Court of the State of New York,
County of New York , Generation Capital Associates et al. vs. Partech Holdings
Corporation et al., Index No. 114837/95. In the opinion of management, the
claims asserted, if unfavorably decided, would not have a materially adverse
effect on the financial condition of the Company.
<PAGE>
6. EMPLOYEE AND OTHER STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
There were 16,195 stock options, representing all the outstanding stock
options, terminated concurrent with the acquisition of R. A. Logistics, Inc.
During the current period, no options were exercised and no new options were
granted. The Company has 51,278 options available for grant under its 1989
and 1993 Incentive Stock Option Plans.
On May 16, 1996, the Company granted options under an Option Agreement
related to legal services for options on 56,666 shares at $6.00 per share. The
optionee exercised options for all 56,666 shares on July 2, 1996 for a total of
$340,000. There were no other stock options outstanding at September 1, 1997 or
April 30, 1997.
<PAGE>
7. COMMON STOCK AND CAPITAL TRANSACTIONS
The Company's common stock trades on the OTC Bulletin Board under the symbol
TRPC. The Company's common stock issued and outstanding is as follows:
<TABLE>
<CAPTION>
Total Number Common Paid in
of Shares Stock Capital
-------------- ------------- -------------
<S> <C> <C> <C>
Issued shares as of April 30, 1996 542,428 $ 488,185 $ 8,672,987
Stock options exercised by
others (See Note 8) 56,666 51,000 289,000
Shares issued 19,500 14,550 45,122
------------- ------------- -------------
Issued shares as of April 30, 1997 618,594 556,735 9,007,109
------------- -------------- -------------
Issued shares as of September 1,
1997 618,594 $ 556,735 $ 9,007,109
============= ============= =============
</TABLE>
Subscriptions to Common Stock.
In August, 1997 the Company entered into agreements with three investment
companies for their purchase of up to 800,000 restricted shares of the Company's
$0.90 par value common stock at a price of sixty cents ($0.60) per share for a
total aggregate investment of $480,000 plus an agreement for payment of certain
of the Company's obligations and contingent obligations in the maximum amount of
approximately $880,000 as of the date of these financial statements. At the time
of the agreements the equivalent bid price of the Company's $0.90 par value
common stock, as quoted on the OTC Bulletin Board, was one dollar and eighty-six
cents ($1.86) per share.
8. INCOME TAXES
As of September 1, 1997 the Company has regular pre-RALI acquisition tax net
operating loss carryforwards, expiring in the years 2007 through 2012, which may
be available to offset future taxable income of the Company in the amount of
$6,943,000. These pre-RALI acquisition tax loss carryforwards are substantially
limited in their use and no value has been provided for their future benefit, if
any, in these financial statements.
9. DISPOSAL OF SUBSIDIARIES TO RELATED PARTIES
Pursuant to its acquisition of RALI (See Note 1), the Company entered into
agreements for the disposition of its consulting, leasing and broadcasting
businesses in exchange for the full repayment of certain of the Company's
obligations and the assumption by the transferees of certain of the liabilities
associated with these businesses. The dispositions included agreements for
liquidation of the Company's obligations being: (i) a promissory note and
warrants issued August 4, 1994 in the unpaid amount of $63,903 in exchange for
all of the issued and outstanding capital stock of the Company's wholly-owned
consulting subsidiary; and, (ii) a promissory note and warrants issued to the
Trust on September 15, 1994 and other cash advances received through the date of
payment in the total unpaid amount of $194,522 in exchange for all of the issued
and outstanding capital stock of the Company's wholly-owned broadcast
subsidiary.
<PAGE>
The components of net assets of the subsidiaries disposed of included in the
consolidated balance sheet as of April 30, 1997 are summarized in the table
below:
<TABLE>
<CAPTION>
April 30,
1997
<S> <C>
Total current assets $ 272,604
Total long-term assets 496,480
-------------
Total Assets $ 769,084
=============
Total Current Liabilities $ 706,446
=============
Net Assets $ 62,638
=============
</TABLE>
The gain on dispositions of the subsidiaries is summarized in the table
below:
<TABLE>
<CAPTION>
Consulting Leasing Broadcasting Total
<S> <C> <C> <C> <C>
Company's obligations
liquidated in
transfer of
subsidiaries $ 63,903 $ 14,709,335 $ 194,522 $ 14,967,760
Net assets transferred (43,570) 13,501,500 261,186 13,719,116
------------- ------------- ------------- -------------
Gain ( loss) on
disposal 107,473 1,207,835 (66,664) 1,248,644
Income taxes (credit) - - - -
------------- ------------- ------------- -------------
Gain (loss) on
disposal of
business segments $ 107,473 $ 1,207,835 $ (66,664) $ 1,248,644
============= ============= ============= =============
</TABLE>
10. NET INCOME (LOSS) PER SHARE
For the period May 1, 1997 through September 1, 1997 basic earnings per share
amounts are based on the weighted average number of common shares outstanding of
618,194 shares. No potential common stock are included herein as none existed.
On September 18, 1997, the Company issued 4,400,000 common stock in exchange for
100% of the issued and outstanding capital stock of R. A. Logistics, Inc. (See
Note 1). On September 19, 1997, the shareholders of the Company approved a 1 for
6 reverse stock split which become effective October 27, 1997. Share and per
share amounts have been adjusted for the effect of the 1 for 6 reverse split for
all periods presented.
For the fiscal year ended April 30, 1997 basic earnings per share amounts are
based on the weighted average number of common shares outstanding of 604,540
shares. No potential common stock are included herein due to their antidilutive
nature. During the year the Company issued 56,666 shares upon exercise of stock
options granted under consulting agreements, and these are included in the
weighted average number of common shares outstanding. If these shares had been
issued at the beginning of the current fiscal year, primary and fully diluted
loss per share would have been ($3.48).
For the fiscal year ended April 30, 1996 basic earnings per share amounts are
based on the weighted average number of common shares outstanding of 438,952
shares. No potential common stock are included herein due to their antidilutive
nature. During the fiscal year ending April 30, 1996, the Company issued 39,833
shares pursuant to the exercise of employee stock options, 86,760 shares upon
exercise of stock options granted under consulting agreements and 75,639 shares
issued to an officer of the Company pursuant to a collateral pledge agreement
between the Company and the officer, which shares are included in the weighted
average number of common shares outstanding. If these shares had been issued at
the beginning of the beginning of the current fiscal year, primary and fully
diluted loss per share would have been ($2.40).
<PAGE>
11. SUPPLEMENTAL CASH FLOW INFORMATION
Reconciliation of net loss to net cash used for operating activities is as
follows:
<TABLE>
<CAPTION>
May 1, 1997 Fiscal Years Ended April 30,
Through ----------------------------
September 1,
1997 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income (loss) $ 69,431 $ (2,132,200) $ (1,311,594)
------------- ------------- -------------
Adjustments to reconcile net income
(loss)to net cash used for
operating activities:
(Gain) loss from disposal of
subsidiaries (1,248,644) - -
Loss on residual valuation - 1,967 74,621
Depreciation and amortization of
equipment and intangible assets 39,842 277,261 1,573,894
Impairment loss on intangible
assets:
Cost in excess of net asset
acquired - 1,397,180 -
Investment in real estate
partnerships - 42,527 -
Loss on sale of land, office
furniture and equipment 4,101 9,971 1,600
Equipment acquired by barter
transactions - (14,017) (1,874)
Advisory services paid in stock - - 5,000
Interest paid in stock - 60,532
Interest paid in stock - related party - - 24,848
Stock options exercised - - 4,687
Employee stock options exercised - - 62,500
Rental income - - (1,314,914)
Leasing interest income (2,839) (825,937) (2,961,212)
Leasing interest expense 1,211,954 825,937 3,008,267
Changes in assets and liabilities:
Accrued interest income - (3,562) (2,562)
Accrued interest expense 46,915 96,240 12,383
Note, accounts and commissions
receivable 3,553 27,499 22,504
Other assets (942) 29,372 2,187
Note and accounts payable, and
accrued expenses (125,011) (122,887) 300,024
Other (957) 400 1,056
------------- ------------- -------------
Total Adjustments (72,028) 1,741,951 873,541
------------- ------------- -------------
Net Cash Used for Operating
Activities $ (2,597) $ (390,249) $ (438,053)
============= ============= =============
</TABLE>
Non Cash Investing and Financing Activities.
Although the following activities occurred on the dates indicated these
activities have been reflected in the accompanying financial statements
retroactive to September 1, 1997, immediately prior to the acquisition of RALI.
The Company: (1) transferred all of the issued and outstanding capital stock of
its wholly-owned consulting subsidiary in liquidation of loans, advances and a
promissory note and warrants, dated August 4, 1994, totaling $63,903, and (2)
transferred all of the issued and outstanding capital stock of its wholly-owned
<PAGE>
broadcasting subsidiary in liquidation of a promissory note and warrants, dated
September 29, 1994, and other obligations, totaling $194,522.
During the fiscal year ended April 30, 1997 the Company received (1) $14,017
of property and equipment in barter transactions and (2) issued 117,000 shares
for services of $35,250 and interest charges of $27,422.
During the fiscal year ended April 30, 1996 the Company received (1) $1,874
of property and equipment in barter transactions, (2) issued 453,836 shares of
common stock for a reduction of $272,736 in secured promissory notes and accrued
interest, (3) issued 239,000 shares of common stock under employee stock option
plans for a $62,500 reduction in accrued compensation, legal fees of $4,687 and
in exchange for 6,666 shares of common stock which were retired, and (4) issued
10,000 shares in other stock options offset against trade payables of $5,000.
In fiscal years 1997 and 1996, leasehold tenancy positions expired, were paid
off or were otherwise terminated in the ordinary course of the Company's
business which reduced the gross value of Lease Property under Capital Lease by
$95,770,216, and $1,952,718, respectively, and accumulated amortization by an
equivalent amount in each of those periods.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Company
The information required by this Item is incorporated by reference to the
Company's definitive Information Statement pursuant to Regulation 14C or Proxy
Statement pursuant to Regulation 14A, to be filed within 120 days after the
Company's fiscal year end.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to the
Company's definitive Information Statement pursuant to Regulation 14C or Proxy
Statement pursuant to Regulation 14A, to be filed within 120 days after the
Company's fiscal year end.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to the
Company's definitive Information Statement pursuant to Regulation 14C or Proxy
Statement pursuant to Regulation 14A, to be filed within 120 days after the
Company's fiscal year end.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to the
Company's definitive Information Statement pursuant to Regulation 14C or Proxy
Statement pursuant to Regulation 14A, to be filed within 120 days after the
Company's fiscal year end.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and
Reports on Form 8-K
<TABLE>
<CAPTION>
Form 10-K
Page
<S> <C> <C>
Reference
(a)(1) Index to Consolidated Financial Statements:
(i)Report of Independent Certified Public Accountants 10
Consolidated Balance Sheet as of December 31, 1997 11
Statement of Consolidated Operations for the period
July 23, 1997 (date of inception) through December
31, 1997 12
Statement of Consolidated Stockholders' Equity
(Deficit) the period July 23, 1997 (date of inception)
through December 31, 1997 13
Statement of Consolidated Cash Flows for the period
July 23, 1997 (date of inception) through December 31,
1997 14
Notes to Consolidated Financial Statements 15-21
(ii) Report of Independent Certified Public Accountants 22
Consolidated Balance Sheets as of September 1, 1997 23
Statements of Consolidated Operations for the period
May 1, 1997 through September 1, 1997 25
Statements of Consolidated Stockholders' Equity (Deficit)
the period May 1, 1997 through September 1, 1997 26
Statements of Consolidated Cash Flows for the period
May 1, 1997 through September 1, 1997 27
Notes to Consolidated FinancialStatements 28-35
(a)(2) Index to Financial Statement Schedules:
SCHEDULE II Valuation and qualifying accounts 38
</TABLE>
All other schedules have been omitted because the required information is
included in the consolidated financial statements or notes thereto, or is not
required to be filed.
The Company hereby undertakes to furnish to the Commission any instrument
with respect to long-term debt of the Company which does not exceed ten
percent of the total assets of the Company and its subsidiaries.
(a)(3) Exhibits: See index filed as part of Form 10-K on page 40.
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during the two months ended
December 31, 1997: None
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
For The Period May 1, 1997 through September 1, 1997 and The Years Ended
April 30, 1997 and 1996
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------------------------------------------------------------
Additions
------------------
Balance at Balance at
Valuation and Beginning Costs and To Other End of
Qualifying Accounts of Period Expenses Accounts Deductions Period
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the period:
May 1, 1997 through
September 1, 1997
Accounts receivable $ 2,500 $ - $ - $ (B)(2,500) $ -
Equipment residuals - - - - -
Valuation allowance
for deferred tax
assets 2,539,100 (19,100) - (C)2,520,000 -
--------- -------- ------- ------------- -------------
$2,541,600 $(19,100) $ - $ (2,522,500) $ -
========== ======== ======= ============= =============
For the year ended:
April 30, 1997
Accounts receivable $ 5,800 $ 12,226 $ - $ (A)(15,526) $ 2,500
Equipment residuals - 1,967 - (A) (1,967) -
Valuation allowance
for deferred tax
assets 2,353,500 185,600 - - 2,539,100
---------- -------- ------- ------------- -------------
$2,359,300 $199,793 $ - $ (17,493) $ 2,541,600
========== ======== ======= ============= =============
April 30, 1996
Accounts receivable $ 10,789 $ 13,337 $ - $ (A)(18,327) $ 5,800
Equipment residuals - 74,621 - (A)(74,621) -
Valuation allowance
for deferred tax
assets 1,997,900 355,600 - - 2,353,500
---------- -------- ------- ------------- -------------
$2,008,689 $443,558 $ - $ (92,948) $ 2,359,300
========== ======== ===================== =============
</TABLE>
(A) All amounts were written off.
(B) Amount was transferred in exchange of debt.
(C) As a result of its acquisition of R. A. Logistics, Inc. and the
disposition of its consulting, leasing and broadcast subsidiaries, ultimate
future realization of the benefit from the pre-acquisition tax loss
carryforwards, if available at all, are subject to significant limitations,
and therefore, the related deferred tax asset and valuation allowance have
been eliminated.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TROPIC AIR CARGO, INC.
/s/ JOHN E. RAYL
DATE: April 23, 1998 By:____________________________
John E. Rayl
Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
/s/ ANGEL MUNOZ
_________________________ Chairman, Chief Executive Officer, April 23, 1998
Angel Munoz President and Director
/s/ RONALD VIMO
__________________________ Vice President and Director April 23, 1998
Ronald Vimo
/s/ SCOTT VILLANUEVA
__________________________ Secretary and Director April 23, 1998
Scott Vellanueva
/s/ JOHN E. RAYL
__________________________ Treasurer and Director April 23, 1998
John E. Rayl (Principal Financial Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit 2.1 Authorization of Plan of Distribution filed as Exhibit 1 to Form
10, Commission File No. 014361 filed on March 28, 1986 is
incorporated herein by reference.
Exhibit 3.1 Certificate of Incorporation and Bylaws filed as Exhibit 2 to
Form 10, Commission File No. 014361 filed on March 28, 1986 is
incorporated herein by reference.
Exhibit 3.2 Certificate of Amendment of Partech Holdings Corporation dated
March 10, 1992, incorporated herein by reference to Exhibit A, to
Form 8-K, dated March 13, 1992, Commission File No. 014361.
Exhibit 3.3 Proposed Amendment to Partech Holdings Corporation Articles of
Incorporation, Proxy Item Number 2, incorporated herein by reference
to Exhibit 3.3, to Schedule 14A filed November 9, 1993, Commission
file No. 014361.
Exhibit 3.4 Restated Certificate of Incorporation of Partech Holdings
Corporation dated January 25, 1994, incorporated herein by reference
to Exhibit 3.3, to Form 10-Q for the fiscal quarter ended January
31, 1994, filed March 17, 1994, Commission file No. 014361,
Commission file No. 014361.
Exhibit 3.5 Proposed Amendment to Partech Holdings Corporation Certificate
of Incorporation, incorporated herein by reference to Exhibit 3.5,
to Schedule 14A filed May 20, 1994, Commission file No. 014361.
Exhibit 3.6 Restated Certificate of Incorporation of Tropic Communications,
Inc. dated July 10, 1995 incorporated herein by reference to
Exhibit 3.6 to Form 10-K filed on November 3, 1995, Commission file
No. 014361.
Exhibit 3.7 Certificate of Amendment of Partech Holdings Corporation (n.k.a.
Tropic Communications, Inc. dated July 10, 1995 incorporated herein
by reference to Exhibit 3.7 to Form S-8, filed September 8, 1995,
Commission file No. 014361.
Exhibit 3.8 Certificate of Amendment to Articles of Incorporation of the
Tropic Communications, Inc.dated October 6, 1997 incorporated herein
by reference to Exhibit 3.8 to Form 8-K, filed on October 17, 1997,
Commission file No. 014361.
Exhibit 3.9 Certificate of Incorporation for Tropic Air Cargo, Inc. dated
October 6, 1997 incorporated herein by reference to Exhibit 3.9 to
Form 8-K, filed on October 17, 1997, Commission file No. 014361.
Exhibit 3.10 Amended and Restated By-Laws of the Tropic Air Cargo, Inc.
dated October 6, 1997 incorporated herein by reference to Exhibit
3.10 to Form 8-K, filed on October 17, 1997, Commission file No.
014361.
Exhibit 4.1 Instruments Defining the Rights of Security Holders filed as
Exhibit 3 to Form 10, Commission File No. 014361 filed on March 28,
1986 is incorporated herein by reference.
Exhibit 4.2 Form of Common Share Certificate of Partech Holdings
Corporation, incorporated herein by reference to Exhibit B, to Form
8-K, dated March 13, 1992, Commission File No. 014361.
Exhibit 4.3 Form of Notice of Redemption for Redeemable Class A Warrants of
Partech Holdings Corporation incorporated herein by reference to
Exhibit A, to Form 8-K, dated April 14, 1992, Commission File No.
014361.
<PAGE>
Exhibit 4.4 Prospectus Supplement of Partech Holdings Corporation dated
March 13, 1992, incorporated herein by reference to Exhibit A, to
Form 8-K, dated March 13, 1992, Commission File No. 014361.
Exhibit 4.5 Prospectus Supplement of Partech Holdings Corporation dated
February 1, 1993, incorporated herein by reference to Exhibit 4.5,
to Form 8-K, filed February 2, 1993, Commission File No. 014361.
Exhibit 4.6 Prospectus Supplement of Partech Holdings Corporation dated
April 27, 1993, incorporated herein by reference to Exhibit 4.6, to
Form 8-K, filed April 28, 1993, Commission File No. 014361.
Exhibit 4.7 Prospectus Supplement is incorporated herein by reference to
Exhibit 4.7, to Form 8-K, filed June 4, 1993, Commission file No.
014361.
Exhibit 4.8 Prospectus Supplement, filed herewith as Exhibit 4.7 is
incorporated herein by reference to Exhibit 4.8, to Form 8-K, filed
July 2, 1993, Commission file No. 014361.
Exhibit 4.9 Form of Subscription Agreement between Partech Holdings
Corporation and the Investor is incorporated herein by reference to
Exhibit 4.9 to Form 10-K, filed July 19, 1994, Commission file No.
014361.
Exhibit 4.10 Form of 6% Secured Note of Partech Holdings Corporation issued
to the Investor is incorporated herein by reference to Exhibit 4.10
to Form 10-K, filed July 19, 1994, Commission file No.
014361.
Exhibit 4.11 Form of Supplemental Warrant and Additional Warrant between
Partech Holdings Corporation and the Investor, incorporated herein
by reference to Exhibit 4.11 to Form 10-K, filed July 19, 1994,
Commission file No. 014361.
Exhibit 4.12 Form of Unit Warrant between Partech Holdings Corporation and
the Investor is incorporated herein by reference to Exhibit 4.12 to
Form 10-K, filed July 19, 1994, Commission file No. 014361.
Exhibit 4.13 Form of Common Share Certificate of Tropic Communications,
Inc. is incorporated herein by refererence to Exhibit 4.13 to Form
10-K filed November 3, 1995, Commission file No. 014361.
Exhibit 4.14 Subscription Agreement between Tropic Communications, Inc.
and Winchester Investments, Inc. ("Subscriber") dated August 18,
1997 is incorporated by reference to Exhibit 4.14 to Form 10-Q
Amended, filed April __, 1998, Commission file No. 014361.
Exhibit 4.15 Subscription Agreement between Tropic Communications, Inc.
and Mark Foglia dba Pro Sport ("Subscriber") dated August 23, 1997
is incorporated by reference to Exhibit 4.15 to Form 10-Q Amended,
filed April __, 1998, Commission file No. 014361.
Exhibit 4.16 Subscription Agreement between Tropic Communications, Inc.
and AMG Investments ("Subscriber") dated August 10, 1997 is
incorporated by reference to Exhibit 4.16 to Form 10-Q Amended,
filed April __, 1998, Commission file No. 014361.
Exhibit 5.4 Opinion of Counsel Regarding the $600,000 exempt Convertible
Securities offering is incorporated herein by reference to Exhibit
5.4, to Form 10-K, filed July 19, 1994, Commission file No. 014361.
<PAGE>
Exhibit 10.1 Employment Agreement with John E. Rayl filed as Exhibit 5 to
Form 10, Commission File No. 014361 filed on March 28, 1986 is
incorporated herein by reference.
Exhibit 10.4 Form of Agreement of Trust of the Company's Ohio business
trusts. Incorporated herein by reference to Exhibit 10.4 to Annual
Report on Form 10-K for the year ended April 30, 1987, Commission
File No. 014361.
Exhibit 10.5 Form of Purchase Assignment and Assumption Agreement of the
Company's Ohio business trusts. Incorporated herein by reference to
Exhibit 10.5 to Annual Report on Form 10-K for the year ended April
30, 1987, Commission File No. 014361.
Exhibit 10.6 Form of Description of the Property and the Property's Rights,
Obligations, and Equipment of the Company's Ohio business trusts.
Incorporated herein by reference to Exhibit 10.6 to Annual Report on
Form 10-K for the year ended April 30, 1987, Commission File No.
014361.
Exhibit 10.7 Form of Remarketing and Servicing Agreement of the Company's
Ohio business trusts. Incorporated herein by reference to Exhibit
10.7 to Annual Report on Form 10-K for the year ended April 30,
1987, Commission File No. 014361.
Exhibit 10.26 Partech Holdings Corporation 1989 Incentive Stock Options Plan
and 1989 Stock Option and Stock Appreciation Rights Plan
incorporated herein by reference to an Exhibit filed therewith
Information Statement filed on Form 14C for the year ended April 30,
1989, Commission File No. 014361.
Exhibit 10.35 Lease dated as of March 23, 1992 between LCC Asset Management
Corporation and Ohio State Life Insurance Company, filed herewith as
Exhibit 10.35. Incorporated herein by reference to Exhibit 10.35 to
Annual Report on Form 10-K for the Fiscal Year Ended April 30, 1992,
Commission File No. 014361.
Exhibit 10.37 Letter to Continental Stock Transfer and Trust Company, dated
February 1, 1993, authorizing issuance of Redeemable B Warrants at
Temporary Exercise Price during Temporary Exercise Period,
incorporated herein by reference to Exhibit 10.40, to Form 8-K,
dated February 1, 1993, Commission File No. 014361.
Exhibit 10.38 Letter to Continental Stock Transfer and Trust Company, dated
April 27, 1993, authorizing issuance of Redeemable B Warrants at
Temporary Exercise Price during Temporary Exercise Period,
incorporated herein by reference to Exhibit 10.41, to Form 8-K,
filed April 28, 1993, Commission File No. 014361.
Exhibit 10.41 Loan Agreement between Partech Communications Group, Inc. and
Funder's Trust 1992-A, dated March 9, 1993, incorporated herein by
reference to Exhibit 10.41, to Form 8-K, file March 17, 1993,
Commission File No. 014361.
Exhibit 10.42 Purchase Agreement between Jennings Communications Corporation
and PCG of the Golden Strand, Inc., for the purchase of WDZD-FM,
dated September 17, 1992, incorporated herein by reference to
Exhibit 10.42, to Form 8-K, file March 17, 1993, Commission File No.
014361.
Exhibit 10.43 Bill of Sale between Jennings Communications Corporation and
PCG of the Golden Strand, Inc., for the purchase of WDZD-FM, dated
March 10, 1993, incorporated herein by reference to Exhibit 10.43,
to Form 8-K, file March 17, 1993, Commission File No. 014361.
Exhibit 10.44 Letter to Continental Stock Transfer and Trust Company, dated
June 3, 1993, authorizing issuance of Redeemable B Warrants at
Temporary Exercise Price during Temporary Exercise Period
incorporated herein by reference to Exhibit 10.44, to Form 8-K,
filed June 4, 1993, Commission file No. 014361.
<PAGE>
Exhibit 10.45 Purchase Agreement between Webster Broadcasting, Inc. and PCG
of Tallahassee, Inc., for the purchase of WMFL-AM and WJPH-FM,
dated May 12, 1993, incorporated herein by reference to Exhibit
10.45, to Form 8-K, filed June 4, 1993, Commission file No. 014361.
Exhibit 10.46 Guarantee by Partech Holdings Corporation of Purchase
Agreement between Webster Broadcasting, Inc. and PCG of Tallahassee,
Inc., for the purchase of WMFL-AM and WJPH-FM, dated May 12, 1993,
incorporated herein by reference to Exhibit 10.46, to Form 8-K,
filed June 4, 1993, Commission file No. 014361.
Exhibit 10.47 Local Programming and Marketing Agreement between Webster
Broadcasting, Inc. and PCG of Tallahassee, Inc., to broadcast from
WMFL-AM and WJPH-FM, dated May 12, 1993, incorporated herein by
reference to Exhibit 10.47, to Form 8-K, filed June 4, 1993,
Commission file No. 014361.
Exhibit 10.48 1989 Stock Option and Stock Appreciation Rights Plan Agreement
between Partech Holdings Corporation and John E. Rayl, dated July
15, 1993, incorporated herein by reference to Exhibit 10.48, to Form
S-8, filed August 9, 1993, Commission file No.
014361.
Exhibit 10.50 1989 Stock Option and Stock Appreciation Rights Plan Agreement
between Partech Holdings Corporation and Mark S. Manafo, dated July
15, 1993, incorporated herein by reference to Exhibit 10.50, to Form
S-8, filed August 9, 1993, Commission file No.
014361.
Exhibit 10.51 1989 Incentive Stock Option Plan Agreement between Partech
Holdings Corporation and Mark S. Manafo, dated July 15, 1993,
incorporated herein by reference to Exhibit 10.51, to Form S-8,
filed August 9, 1993, Commission file No. 014361.
Exhibit 10.52 1989 Incentive Stock Option Plan Agreement between Partech
Holdings Corporation and Thomas E. Reynolds, dated July 15, 1993,
incorporated herein by reference to Exhibit 10.52, to Form S-8,
filed August 9, 1993, Commission file No. 014361.
Exhibit 10.53 1989 Incentive Stock Option Plan Agreement between Partech
Holdings Corporation and Jerald K. Rayl, dated July 15, 1993,
incorporated herein by reference to Exhibit 10.53, to Form S-8,
filed August 9, 1993, Commission file No. 014361.
Exhibit 10.54 1989 Incentive Stock Option Plan Agreement between Partech
Holdings Corporation and Paul R. Weinberger, dated July 15, 1993,
incorporated herein by reference to Exhibit 10.54, to Form S-8,
filed August 9, 1993, Commission file No. 014361.
Exhibit 10.55 Consulting Agreement between Partech Holdings Corporation and
Birchwood Capital Advisors Group, Inc. dated February 1, 1994,
incorporated herein by reference to Exhibit 10.51, to Form S-8,
filed March 21, 1994, Commission file No. 014361.
Exhibit 10.56 Agreement to Grant Options between Partech Holdings
Corporation and M.S. Farrell & Company, Inc. dated April 6, 1994,
incorporated herein by reference to Exhibit 10.52, to Form S-8,
filed April 8, 1994, Commission file No. 014361.
Exhibit 10.57 Consulting Agreement between Partech Holdings Corporation and
M.S. Farrell & Company, Inc. dated November 13, 1992, incorporated
herein by reference to Exhibit 10.53, to Form S-8, filed April 8,
1994, Commission file No. 014361.
<PAGE>
Exhibit 10.58 Letter to Continental Stock Transfer and Trust Company, dated
June 3, 1993, authorizing issuance of Redeemable B Warrants at
Temporary Exercise Price during Temporary Exercise Period,
incorporated herein by reference to Exhibit 10.49, to Form 8-K,
filed July 2, 1993, Commission file No. 014361.
Exhibit 10.59 1993 Long-Term Incentive Plan, Proxy Item Number 3,
incorporated herein by reference to Exhibit 10.50, to Schedule 14A,
Preliminary Proxy Statement, filed November 9, 1993, Commission
file No. 014361.
Exhibit 10.60 Amendment to Employment Agreement between Partech Holdings
Corporations and John E. Rayl, dated July 15, 1993, incorporated
herein by reference to Exhibit 10.60, to Schedule 14A filed May 20,
1994, Commission file No. 014361.
Exhibit 10.61 Amendment to Employment Agreement between John E. Rayl and
Partech Holdings Corporation, Partech Communications Group, Inc.
and Leeward Capital Corporation, dated May 1, 1994, filed herewith
as Exhibit 10.61.
Exhibit 10.62 Agreement between Dwyer & Associates, Inc. and Partech
Holdings Corporation, dated May 10, 1994, with Exhibit A, Option
Agreement and sub Exhibit A, Certificate for Common Stock Purchase
Options and sub Exhibit B, Form of Election to Purchase,
incorporated herein by reference to Exhibit 10.62, to Form 10-K,
filed July 19, 1994, Commission file No. 014361.
Exhibit 10.63 1989 Incentive Stock Option Plan Agreement between Partech
Holdings Corporation and James B. Dwyer, III, dated May 18, 1994,
incorporated herein by reference to Exhibit 10.63 to Form 10-K,
filed July 19, 1994, Commission file No. 014361.
Exhibit 10.64 Form of Time Brokerage Agreement between Lee Mitchell and
Tropic of St. Simons, Inc., incorporated herein by reference to
Exhibit 10.64 to Form 10-K, filed July 19, 1994, Commission file No.
014361.
Exhibit 10.65 Form of Stock Purchase Agreement between PCG of the Florida
Keys, Inc. and Richard Silva, incorporated herein by reference to
Exhibit 10.65 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.66 Form of Security Pledge and Hypothecation Agreement between
PCG of the Florida Keys, Inc. and Richard Silva, incorporated
herein by reference to Exhibit 10.66 to Form 10-K, filed July 19,
1994, Commission file No. 014361.
Exhibit 10.67 Form of Put Option Agreement between PCG of the Florida Keys,
Inc. and Richard Silva, incorporated herein by reference to
Exhibit 10.67 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.68 Form of Purchase Option Agreement between Richard Silva and
PCG of the Florida Keys, Inc. incorporated herein by reference to
Exhibit 10.68 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.69 Form of Security Agreement between PCG of the Golden Strand,
Inc. and Media Group, Inc., incorporated herein by reference to
Exhibit 10.69 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.70 Form of Escrow Agreement among Ed Winton, Partech
Communications Group, Inc. and Mark T. Jorgenson d/b/a/ Jorgenson
Broadcast Brokerage, incorporated herein by reference to Exhibit
10.70 to Form 10-K, filed July 19, 1994, Commission file No. 014361.
<PAGE>
Exhibit 10.71 Form of Promissory Note by PCG of the Golden Strand, Inc.
payable to Media Group, Inc., incorporated herein by reference to
Exhibit 10.71 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.72 Form of Purchase Agreement between Ed Winton and Tropic of
Tallahassee, Inc., incorporated herein by reference to Exhibit
10.72, to Form 10-K, filed July 19, 1994, Commission file No.
014361.
Exhibit 10.73 Form of Security Agreement between Tropic of Tallahassee, Inc.
and Ed Winton, incorporated herein by reference to Exhibit 10.73 to
Form 10-K, filed July 19, 1994, Commission file No.014361.
Exhibit 10.74 Form of Promissory Note by Tropic of Tallahassee, Inc.
payable to Ed Winton, incorporated herein by reference to Exhibit
10.74 to Form 10-K, filed July 19, 1994, Commission file No. 014361.
Exhibit 10.75 Form of Escrow Agreement among WBA Broadcasting, Inc.,
Partech Communications Group, Inc. and Mark T. Jorgenson d/b/a/
Jorgenson Broadcast Brokerage, incorporated herein by reference to
Exhibit 10.75 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.76 Form of Purchase Agreement among Lee M. Mitchell, AT&T
Commercial Finance Corporation, and Tropic of St. Simons, Inc.,
incorporated herein by reference to Exhibit 10.76, to Form 10-K,
filed July 19, 1994, Commission file No. 014361.
Exhibit 10.77 Purchase Agreement between White Broadcasting Corporation and
Tropic of Key West, Inc., dated June 17, 1994, incorporated herein
by reference to Exhibit 10.77 to Form 10-K, filed July 19, 1994,
Commission file No. 014361.
Exhibit 10.78 Form of Escrow Agreement among White Broadcasting, Inc.,
Partech Communications Group, Inc. and Mark T. Jorgenson d/b/a/
Jorgenson Broadcast Brokerage, incorporated herein by reference to
Exhibit 10.78 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.79 Form of Non-Compete Agreement between White Broadcasting,
Inc. and Tropic of Key West, Inc., incorporated herein by reference
to Exhibit 10.79 to Form 10-K, filed July 19, 1994, Commission file
No. 014361.
Exhibit 10.80 Agreement between John E. Rayl, Partech Holdings Corporation
and Partech Communications Group, Inc., as to the replacement of
pledged shares that may be foreclosed upon in accordance with Unit
Note pursuant to the $600,000 Convertible Securities Offering, dated
May 31, 1994, incorporated herein by reference to Exhibit 10.80 to
Form 10-K, filed July 19, 1994, Commission file No. 014361.
Exhibit 10.81 Partech Communications Group, Inc. Pledge Agreement between
Partech Communications Group, Inc. and the Investor and Kelly Drye
& Warren, the Investor's Representative, dated June 15, 1994,
incorporated herein by reference to Exhibit 10.81 to Form 10-K,
filed July 19, 1994, Commission file No. 014361.
Exhibit 10.82 Pledge Agreement between John E. Rayl and the Investor and
Kelly Drye & Warren, the Investor's Representative, dated June 15,
1994, incorporated herein by reference to Exhibit 10.82 to Form
10-K, filed July 19, 1994, Commission file No. 014361.
Exhibit 10.83 Purchase and Sale Agreement between PCG of the Golden Strand,
Inc. and Funder's Trust 1992-A, dated December 29, 1994,
incorporated herein by reference to Exhibit 10.83 to Form 10-K,
filed November 3, 1995, Commission file No. 014361.
<PAGE>
Exhibit 10.84 Stock Exchange Agreement between Kenneth A. Welt, Trustee of
Florida West Airlines, Inc. and Tradewinds Acquisition Corporation,
dated November 29, 1995, incorporated herein by reference to
Exhibit 10.84 to Form 10-Q, filed December 14, 1995, Commission
file No. 014361.
Exhibit 10.85 Administrative Services Agreement between Partech Holdings
Corporation and Tradewinds Acquisition Corporation, dated March 22,
1995, incorporated herein by reference to Exhibit 10.85 to Form
10-Q, filed December 14, 1995, Commission file No. 014361.
Exhibit 10.86 Administrative Services Agreement Extension between Partech
Holdings Corporation (n.k.a. Tropic Communications, Inc.) and
Tradewinds Acquisition Corporation, dated August 1, 1995,
incorporated herein by reference to Exhibit 10.86 to Form 10-Q,
filed December 14, 1995, Commission file 014361.
Exhibit 10.87 Stock Exchange Agreement between The Flood Group,
incorporated, Shareholders of The Flood Group, incorporated and
Technology Acquisitions Corporation, dated May 21, 1996,
incorporated herein by reference to Exhibit 10.87 to Form 10-K,
filed October 8, 1996, Commission file 014361.
Exhibit 10.88 Stock Registration Agreement between The Flood Group,
incorporated, Technology Acquisitions Corporation, certain
Shareholders of Technology Acquisitions Corporation and Tropic
Communications, Inc., dated May 21, 1996, incorporated herein by
reference to Exhibit 10.88 to Form 10-K, filed October 8, 1996,
Commission file 014361.
Exhibit 10.89 Stock Exchange Agreement between ICCS, Inc., PCK Enterprises,
Inc., Shareholders of ICCS, Inc. and PCK Enterprises, Inc. and
Technology Acquisitions Corporation, dated May 22, 1996,
incorporated herein by reference to Exhibit 10.89 to Form 10-K,
filed October 8, 1996, Commission file 014361.
Exhibit 10.90 Stock Registration Agreement between ICCS, Inc., ICCS
Solutions, Inc., certain Shareholders of ICCS Solutions, Inc. and
Tropic Communications, Inc., dated May 22, 1996, incorporated herein
by reference to Exhibit 10.90 to Form 10-K, filed October 8, 1996,
Commission file 014361.
Exhibit 10.91 Stock Exchange Agreement between R.A. Logistics, Inc., Angel
Munoz, Ronald Vimo and Scott Villanueva and Tropic Communications,
Inc. dated Spetember 2, 1997, incorporated herein by reference to
Exhibit 10.91 to Form 8-K, filed October 3, 1997, Commission file
No. 014361.
Exhibit 10.92 Employment Agreement dated September 2, 1997 by and between
Angel Munoz and Tropic Communications, Inc., incorporated herein by
reference to Exhibit 10.92 to Form 8-K, filed October 3, 1997,
Commission file No. 014361.
Exhibit 10.93 Employment Agreement dated September 2, 1997 by and between
Ronald Vimo and Tropic Communications, Inc., incorporated herein by
reference to Exhibit 10.93 to Form 8-K, filed October 3, 1997,
Commission file No. 014361.
Exhibit 10.94 Employment Agreement dated September 2, 1997 by and between
Scott Villanueva and Tropic Communications, Inc., incorporated
herein by reference to Exhibit 10.94 to Form 8-K, filed October 3,
1997, Commission file No. 014361.
Exhibit 10.95 Stock Purchase Agreement between Dana Credit Corporation
("Seller") and Duluth Master Trust ("Buyer") dated May 1, 1997
incorporated herein by reference to Exhibit 10.95 to Form 10-K,
filed October 3, 1997, Commission file No. 014361.
<PAGE>
Exhibit 10.96 Secured Recourse Note betweenDuluth Master Trust and Duluth
Lease, Inc. ("Co-Borrowers") and Aim Financial Corporation
("Lender") dated May 1, 1997 incorporated herein by reference to
Exhibit 10.96 to Form 10-Q, filed October 3, 1997, Commission file
No. 014361.
Exhibit 10.97 Agreement between Firestar Holdings, Ltd. and Tropic
Communications, Inc. dated August 22, 1997 is incorporated herein
by reference to Exhibit 10.97 to Form 10-Q Amended, filed April __,
1998, Commission file No. 014361.
Exhibit 10.98 Indemnificatioin Agreement between Firestar Holdings, Ltd.,
Birchwood Capital Advisors Group, Inc., Lion Investments, Inc.,
Winchester Investments, Inc. (collectively the "Indemnitors") and
Tropic Communications, Inc. dated September 1, 1997 is incorporated
herein by reference to Exhibit 10.98 to Form 10-Q Amended, filed
April __, 1998, Commission file No. 014361.
Exhibit 10.99 Stock Exchange Agreement between Firestar Holdings, Ltd. and
Tropic Communications, Inc. dated September 1, 1997 is incorporated
herein by reference to Exhibit 10.99 to Form 10-Q Amended, filed
April __, 1998, Commission file No. 014361.
Exhibit 10.100 Stock Exchange Agreement between John E. Rayl and Tropic
Communications, Inc. dated September 26, 1997 is incorporated
herein by reference to Exhibit 10.100 to Form 10-Q Amended, filed
April __, 1998, Commission file No. 014361.
Exhibit 10.101 Stock ExchangeAgreement between CCJ Consultants, Inc. and
Tropic Communications, Inc. dated October 10, 1997 is incorporated
herein by reference to Exhibit 10.101 to Form 10-Q Amended, filed
April __, 1998, Commission file No. 014361.
Exhibit 10.102 Stock Exchange Agreement between Funders Trust 1992-A and
Tropic Communications, Inc. dated October 10, 1997 is incorporated
herein by reference to Exhibit 10.102 to Form 10-Q Amended, filed
April __, 1998, Commission file No. 014361.
Exhibit 11 Statement re: computation of earnings per share.
Exhibit 20 Form of Proxy for 1993 Annual Meeting of Shareholders,
incorporated herein by reference to Exhibit 20 to Schedule 14A,
Preliminary Proxy Statement, filed November 9, 1993, Commission file
No. 014361.
Exhibit 20.1 Letter between Partech Holdings Corporation and M.S. Farrell
& Company, Inc. dated April 6, 1994, incorporated herein by
reference to Exhibit 20 to Form S-8, filed April 8, 1994,
Commission file No. 014361.
Exhibit 20.2 Form of Proxy for Special Meeting to be held July 21, 1994,
incorporated herein by reference to Exhibit 20.2 to Schedule 14A
filed May 20, 1994, Commission file No. 014361.
Exhibit 21 Subsidiaries of the Company.
Exhibit 23.7 Consent of Hausser + Taylor incorporated herein by reference to
Exhibit 23.7 to Form S-8, filed March 24, 1995, Commission file No.
014361.
Exhibit 23.8 Consent of Hausser + Taylor incorporated herein by reference to
Exhibit 23.8 to Form S-8, filed June 12, 1995, Commission file No.
014361.
Exhibit 23.9 Consent of Hausser + Taylor incorporated herein by reference to
Exhibit 23.9 to Form S-8, filed September 8, 1995, Commission file
No. 014361.
<PAGE>
Exhibit 23.10 Consent of Hausser + Taylor incorporated herein by reference
to Exhibit 23.10 to Form S-8, filed January 26, 1996, Commission
file No. 014361.
Exhibit 23.11 Consent of Hausser + Taylor incorporated herein by reference
to Exhibit 23.11 to Form S-8, filed March 20, 1996, Commission file
No. 014361.
Exhibit 23.12 Consent of Hausser + Taylor incorporated herein by reference
to Exhibit 23.12 to Form S-8, filed May 17, 1996, Commission file
No. 014361.
Exhibit 99 Board of Directors resolutions for reverse stock split, dated
April 21, 1994, incorporated herein by reference to Exhibit 99 to
Schedule 14A filed May 20, 1994, Commission file No. 014361.
Exhibit 99.3 Consulting Agreement with Firestar Holdings, Ltd. dated May
2, 1995 incorporated herein by reference to Exhibit 99.3 to Form
S-8, filed June 12, 1995, Commission file No. 014361.
Exhibit 99.4 Option Agreement with Firestar Holdings, Ltd. dated May 2,
1995 incorporated herein by reference to Exhibit 99.4 to Form S-8,
filed June 12, 1995, Commission file No. 014361.
Exhibit 99.5 Consulting Agreement with Toukan, Haring & Co. dated May 2,
1995 incorporated herein by reference to Exhibit 99.5 to Form S-8,
filed June 12, 1995, Commission file No. 014361.
Exhibit 99.6 Option Agreement with Toukan, Haring & Co. dated May 2, 1995
incorporated herein by reference to Exhibit 99.6 to Form S-8, filed
June 12, 1995, Commission file No. 014361.
Exhibit 99.7 Consulting Agreement with Firestar Holdings, Ltd. dated
September 6, 1995 incorporated herein by reference to Exhibit 99.7
to Form S-8, filed September 8, 1995, Commission file No. 014361.
Exhibit 99.8 Option Agreement with Firestar Holdings, Ltd. dated September
6, 1995 incorporated herein by reference to Exhibit 99.8 to Form
S-8, filed September 8, 1995, Commission file No. 014361.
Exhibit 99.9 Consulting Agreement with Wolfe Axelrod Associates dated
January 1, 1994, incorporated herein by reference to Exhibit 99.9 to
Form S-8 filed January 26, 1996, Commission file No. 014361.
Exhibit 99.10 Consulting Agreement with James A. Haring dated January 24,
1996, incorporated herein by reference to Exhibit 99.10 to Form S-8
filed January 24, 1996, Commission file No. 014361.
Exhibit 99.11 Option Agreement with James A. Haring dated January 24, 1996,
incorporated herein by reference to Exhibit 99.11 to Form S-8 filed
January 24, 1996, Commission file No. 014361.
Exhibit 99.12 Radio Marketing Agreement with Corporate Network, Inc. dated
March 13, 1996, incorporated herein by reference to Exhibit 99.12
to Form S-8 filed March 20, 1996, Commission file No. 014361.
Exhibit 99.13 Stock Subscription Agreement with Corporate Network, Inc.
dated March 18, 1996, incorporated herein by reference to Exhibit
99.13 to Form S-8 filed March 20, 1996, Commission file No. 014361.
Exhibit 99.14 Services Agreement with Charles A. Koenig dated May 16, 1996,
incorporated herein by reference to Exhibit 99.14 to Form S-8 filed
May 17, 1996, Commission file No. 014361.
Exhibit 99.15 Option Agreement with Charles A. Koenig dated May 16, 1996,
incorporated herein by reference to Exhibit 99.15 to Form S-8 filed
May 17, 1996, Commission file No. 014361.
<PAGE>
Exhibit 21. Subsidiaries of the Company
R. A. Logistics, Inc. (a wholly-owned subsidiary of the Company)
B. Airways Air Cargo, Inc. (a wholly-owned subsidiary of R. A.
Logistics, Inc.)
B. Airways, Inc. (a wholly-owned subsidiary of R. A. Logistics,
Inc.)
<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>
<CIK> 0000791027
<NAME> Tropic Air Cargo, Inc.
(f.k.a. Tropic Communications, Inc.)
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-23-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 31,776
<SECURITIES> 0
<RECEIVABLES> 1,705,335
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,752,846
<PP&E> 9,491
<DEPRECIATION> (281)
<TOTAL-ASSETS> 1,762,206
<CURRENT-LIABILITIES> 2,095,192
<BONDS> 0
0
0
<COMMON> 5,021,425
<OTHER-SE> (5,354,411)
<TOTAL-LIABILITY-AND-EQUITY> 1,762,206
<SALES> 8,631,848
<TOTAL-REVENUES> 8,631,848
<CGS> 7,883,448
<TOTAL-COSTS> 7,883,448
<OTHER-EXPENSES> 599,612
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,771
<INCOME-PRETAX> 134,736
<INCOME-TAX> 36,800
<INCOME-CONTINUING> 97,936
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,936
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
