UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES ACT OF 1934
For the fiscal quarter ended September 30, 1998 Commission file
number 0-14361
TROPIC AIR CARGO, INC.
(Exact Name of Company as Specified in Its Charter)
Delaware 31-1166419
(State or other jurisdiction of (I. R. S. Employer I. D. Number)
incorporation or organization)
7500 NW 25th Street, Suite 209, Miami, Florida 33122
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (305) 639-2720
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [ X ] No [ ]
The Company has 5,698,067 shares of $0.90 par value common stock
outstanding as of September 30, 1998.
<PAGE>
PART I
Item 1. Financial Statements
<TABLE>
TROPIC AIR CARGO, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
<CAPTION>
September 30, December 31,
19981 1997
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 1,386 $ 31,776
Accounts receivable 336,921 1,705,335
Other current assets 10,000 15,735
__________ __________
Total Current Assets 348,307 1,752,846
__________ __________
Property and equipment, at cost
(net of Accumulated Depreciation of
$ 2,019 and $281, respectively) 10,737 9,210
Other assets - 150
__________ __________
Total Assets $ 359,044 $ 1,762,206
========== ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 1,242,995 $ 1,630,296
Notes and accrued interest payable 436,696 460,909
Other current liabilities 3,987 3,987
__________ __________
Total Current Liabilities 1,683,678 2,095,192
__________ __________
Commitment and Contingencies
Shareholders' Equity (Deficit):
Preferred stock, $0.01 par value,
1,000,000 shares Authorized, none
issued and outstanding - -
Common stock, $0.90 par value,
50,000,000 shares authorized,
5,698,067 and 5,579,361 shares
issued and outstanding, respectively 5,128,260 5,021,425
Common stock subscribed 880,189 880,189
Paid in capital (5,515,432) (5,452,347)
Retained earnings (937,462) 97,936
__________ __________
(444,445) 547,203
Subscriptions receivable (880,189) (880,189)
__________ __________
Total Shareholders' Equity (Deficit) (1,324,634) (332,986)
__________ __________
Total Liabilities and Shareholders'
Equity (Deficit) $ 359,044 $ 1,762,206
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
TROPIC AIR CARGO, INC. AND SUBSIDIARIES
Statements of Consolidated Operations
For the Three and Nine Months Ended September 30, 1998
<CAPTION>
Three Months Nine Months
<S> <C> <C>
Revenues:
Freight revenues $ 323,658 $ 7,092,858
__________ __________
Cost of freight operations:
Aircraft, crew, maintenance
and insurance charges 123,167 3,760,917
Fuel 45,785 1,788,828
Aircraft handling 24,347 579,829
Cargo handling 17,489 527,351
Freight transfers 2,849 280,151
Commissions 13,913 142,098
Aircraft navigation - 202,992
Trucking 24 15,212
__________ __________
Total Cost of Freight Operations 227,574 7,297,378
__________ __________
Gross Profit from Freight Operations 96,084 (204,520)
Cost and Expenses:
Marketing, administration and
other operating expenses 137,328 840,332
Interest expense - 25,608
Depreciation of equipment 587 1,738
__________ __________
Total Costs and Expenses 137,915 867,678
__________ __________
Income (Loss) Before Income Taxes (41,831) (1,072,198)
Income tax expense ( benefit) - (36,800)
__________ __________
Net Income (Loss) $ (41,831) $(1,035,398)
========== ==========
Basic and Diluted Net Income
(Loss) Per Share $ (.007) $ (.182)
========== ==========
Number of Common and
Potential Common Shares:
Basic and Diluted 5,698,067 5,698,067
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
TROPIC AIR CARGO, INC. AND SUBSIDIARIES
Statement of Consolidated Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the Nine Months Ended September 30, 1998
<S> <C>
Cash Flows From Operating Activities:
Freight receipts $ 8,461,272
Freight operations payments (7,637,889)
Marketing, administrative and other
Operating payments (894,408)
____________
Net Cash Used For Operating Activities (71,025)
____________
Cash Flows From Investing Activities:
Purchase of property and equipment (3,265)
Sale of Other assets 150
____________
Net Cash Used For Investing Activities (3,115)
____________
Cash Flows From Financing Activities:
Proceeds from issuance of stock 43,750
Proceeds from other borrowings -
____________
Net Cash Provided By Financing
Activities 43,750
____________
Net Increase (Decrease) in Cash and
Cash Equivalents (30,390)
Cash and Cash Equivalents at
Beginning of Period 31,776
____________
Cash and Cash Equivalents at
End of Period $ 1,386
===========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
TROPIC AIR CARGO, INC. AND SUBSIDIARIES
Statement of Consolidated Cash Flows
Reconciliation of Net Loss to
Net Cash Used For Operating Activities
For the Nine Months Ended September 30, 1998
<S> <C>
Net income (loss) $(1,035,398)
____________
Adjustments to reconcile net income (loss)
to net cash used for operating activities:
Depreciation of equipment 1,738
Deferred taxes 4,800
Changes in assets and liabilities:
Accounts receivable 1,368,414
Other assets 5,735
Notes and accounts payable, and
Accrued expenses (374,714)
Income taxes (41,600)
____________
Total Adjustments 964,373
____________
Net Cash Used for Operating Activities
for Continuing Operations $ (71,025)
===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
TROPIC AIR CARGO, INC. AND SUBSIDIARIES
Notes to the Unaudited Consolidated Financial Statements
Note 1. Consolidated Financial Statements
The consolidated balance sheets as of September 30, 1998 and
December 31, 1997, the statements of consolidated operations for
the three and Nine months ended September 30, 1998 and the
statement of consolidated cash flows for the Nine months ended
September 30, 1998 have been prepared by the Company without
audit. Information for the same period last year is not
presented as it relates Company's consulting, leasing and
broadcast subsidiaries which were disposed of effective September
1, 1997. Such information is unrelated to its on-going freight
consolidation operation and, therefore, not comparable to the
current periods. The freight consolidation business was not
formed until July 23, 1997 and did not commence its freight
operations until September 2, 1997. In the opinion of management,
all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of
operations and cash flows at September 30, 1998 have been made.
Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these unaudited consolidated financial
statements be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's
December 31, 1997 Form 10-K transitions report and the April 30,
1997, Form 10-K annual report filed with the Securities and
Exchange Commission.
Certain information and footnote disclosure contained in these
unaudited consolidated financial statements that are not
historical facts are forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995.
Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, the forward-
looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those
projections.
Note 2. Employee Stock Option and Stock Appreciation Rights Plan
There were no stock options outstanding at September 30, 1998
and none were granted during the quarter then ended. The Company
has 51,278 options available for grant under its 1989 and 1993
Incentive Stock Option Plans.
<PAGE>
Note 3. Income Taxes
The Company has provided for a tax benefit, to the extent
available, from the carryback of the net operation loss for the
period. The tax benefit included in operations was as follows:
Federal current $ (41,600)
Federal deferred 4,800
________
Income tax expense (benefit) $ (36,800)
===========
Note 4. Earnings Per Share
For the period three and Nine months ended September 30, 1998
basic and diluted earnings per share amounts are based on the
number of common shares outstanding of 5,698,067 shares.
Note 5. Subsequent events
The Company entered into an agreement with Martin Shugrue &
Associates, AvMan and Cardinal Capital Management to act as the
exclusive financial advisors for the company with the purpose of
raising working capital and implementing the Company's business
plan.
In addition the Company discontinued the Federal Aviation
Administration FAR Part 135 Operating Certificate application.
<PAGE>
Item 2. Management's Discussion and Analysis
This Quarterly Report on Form 10-Q contains certain forward-
looking statements reflecting the Company's current expectations
with respect to its operations, performance, financial condition,
and other developments. Such statements are necessarily
estimates reflecting the Company's best judgment based upon
current information and involve a number of risks and
uncertainties. While it is impossible to identify all such
factors, factors which could cause actual results to differ
materially from expectations are: (1) the Company's ability to
maintain recent profitability; (2) competitive practices in the
industries in which the Company competes; (3) the Company's
dependence on current management; (4) the impact of current and
future laws and governmental regulations affecting the
transportation industry in general and the Company's operations
in particular; (5) general economic conditions; and, (6) other
factors which may be identified from time to time in the
Company's Securities and Exchange Commission filings and other
public announcements. There can be no assurance that these and
other factors will not affect the accuracy of such forward-
looking statements. Forward-looking statements are preceded by
an asterisk (*).
Results of Operations
The following discussion relates to the combined results of
operations of the Company for the Nine months period January 1,
1998 through September 30, 1998. Results reflect the operations
of the Company's two primary wholly-owned subsidiaries, B.
Airways Air Cargo, Inc. ("BAACI") and B. Airways, Inc. ("BAI").
There is no comparison to prior periods since the Company's air
freight operations did not exist during the same period in 1997.
The accompanying unaudited financial statements exclusively
reflect the activities of the Company's air freight operations
(BAACI) and air carrier operating certificate application efforts
(BAI).
The Nine Months Ended September 30, 1998
Operating Revenue. Operating revenue for the Nine months ended
September 30, 1998 consists of $7,092,858 earned by B. Airways
Air Cargo, Inc.
Cost of Transportation. Cost of transportation reflects
approximately 102.9% of the Company's operating revenue. Cost of
transportation includes $3,760,917 and $1,788,828 in aircraft and
fuel costs, respectively.
Gross Profit (Loss). The Company's operations suffered a loss for
the period of $1,072,198 or 15.1% of total revenue for the
period.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses from air cargo services was 11.8% of
operating revenue for the period ended September 30, 1998. It is
the plan of the Company to reduce selling, general and
administrative expenses through work force reductions.
<PAGE>
* The Company attributes its negative operating results for the
period primarily to its inability to raise certain capital
required to acquire long term aircraft contracts which provide
guaranteed capacity for the Company's air freight services. In
addition, the markets being served by the Company, primarily the
Southern Cone countries of South America, have experienced a
slowdown in freight traffic for all market participants.
* Management is actively seeking additional capital resources
required to obtain the optimal aircraft on a long term dedicated
basis in order to return freight operations to a profitable
state. In addition management believes that the market slowdown
will be temporary in nature only.
Liquidity and Capital Resources
During the period ended September 30, 1998, net cash used by
operating activities was $71,025. Cash used in investing
activities was $3,115, which consisted of capital expenditures.
Working Capital Requirements.
Cash needs of the Company are currently being met by funds
generated from operations of BAACI and credit extended by BAACI's
trade creditors. The Company has experienced cash flow
difficulties which has made it difficult to negotiate
preferential rates for major expenses such as aircraft and fuel.
The Company's working capital needs for the long term and short
term will depend on numerous factors, including the Company's
operating results. To the extent that long term working capital
needs are not met from existing sources, additional financing
will be necessary. To meet additional capital needs the Company
may incur additional debt and/or issue debt or equity securities.
There is no assurance that, in the event additional capital is
required, the Company may be able to acquire such capital through
the issuance of its debt or equity securities or if such capital
becomes available that it will be available on acceptable terms
or conditions.
<PAGE>
PART II
Item 4. Submission of Matters to Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K
There were no reports on Form 8-K were filed during
the quarter ended September 30, 1998.
<PAGE>
TROPIC AIR CARGO, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934 the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
TROPIC AIR CARGO, INC.
(Registrant)
/s/ SCOTT VILLANUEVA
Date: November 17, 1998 By:______________________
SCOTT VILLANUEVA
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000791027
<NAME> TROPIC AIR CARGO, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,386
<SECURITIES> 0
<RECEIVABLES> 336,921
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 348,307
<PP&E> 12,756
<DEPRECIATION> (2,019)
<TOTAL-ASSETS> 359,044
<CURRENT-LIABILITIES> 1,683,678
<BONDS> 0
0
0
<COMMON> 5,021,425
<OTHER-SE> 6,452,894
<TOTAL-LIABILITY-AND-EQUITY> 359,044
<SALES> 7,092,858
<TOTAL-REVENUES> 7,092,858
<CGS> 7,297,378
<TOTAL-COSTS> 7,297,378
<OTHER-EXPENSES> 840,332
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,608
<INCOME-PRETAX> (1,072,198)
<INCOME-TAX> (36,800)
<INCOME-CONTINUING> (1,035,398)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,035,398)
<EPS-PRIMARY> (.182)
<EPS-DILUTED> (.182)
</TABLE>
