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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 24, 1998
CELLULARVISION USA, INC.
(Exact name of registrant as specified in charter)
Delaware 000-27582 13-3853788
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
140 58th Street, Loft 7E 11220
Brooklyn, New York (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (718) 489-1200
Not Applicable
(Former name or former address, if changed from last report)
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Item 2. Acquisition or Disposition of Assets.
Consummation of the LMDS Spectrum Assignment
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On November 24, 1998, pursuant to the terms of the LMDS Purchase
Agreement, dated as of July 10, 1998 and as amended, among CellularVision USA,
Inc. (the "CVUSA"), CellularVision of New York, L.P., a wholly-owned subsidiary
of CVUSA ("CVNY") and WinStar Communications, Inc. ("WinStar"), CVNY assigned
850 MHz of the spectrum covered by its LMDS A Block License to WinStar for a
purchase price of $32,500,000 (the "Spectrum Assignment"). The purchase price
was established through arm's length bargaining following consideration and
investigation of several alternatives, engagement of a financial advisor and an
auction process, all as more fully disclosed in the Definitive Solicitation
Statement on Schedule 14A filed by CVUSA with the Securities and Exchange
Commission on October 7, 1998. A copy of the press release announcing the
Spectrum Assignment is attached hereto as Exhibit 99.1 and is incorporated by
reference herein.
Item 5. Other Events.
Redemption of Convertible Preferred Stock and Repayment of Outstanding
Indebtedness
Simultaneously with the closing of the WinStar transaction, CVUSA
repaid in full (i) all of its outstanding Subordinated Exchange Notes, which had
been held by Morgan Guaranty Trust Company of New York and (ii) repaid the $3.5
million loan to CVNY previously made by WinStar, in each case with all accrued
interest and fees. Such payments totaled $10,153,209 in the aggregate.
Redemption of CVUSA's Series A Convertible Preferred Stock
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Simultaneously with the closing of the WinStar transaction, CVUSA also
redeemed all outstanding shares of its Series A Convertible Preferred Stock at
the per share stated cash Redemption Price thereof, equal to 130% of (i) the
stated value ($1,000) plus (ii) accrued and unpaid dividends thereon, or
$4,616,560. Prior to their redemption, under certain circumstances, such shares
could have ultimately been convertible into 36,938,666 shares of CVUSA Common
Stock.
Potential Delisting by Nasdaq
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On November 16, 1998, CVUSA appealed the previously-announced decision
of The Nasdaq Stock Market ("Nasdaq") to delist CVUSA's Common Stock. Nasdaq's
action was based upon a rule requiring that listed securities maintain a minimum
bid price of $1.00 per share. CVUSA's Common Stock will remain listed on the
Nasdaq National Market pending the outcome of the appeal. From December 2, 1998
through the filing date of this Form 8-K, the closing bid price of CVUSA's
Common Stock has exceeded $1.00 per share each day.
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Akcess Pacific Group, LLC Litigation
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On November 20, 1998, Akcess Pacific Group, LLC ("Akcess") commenced
an action in the United States District Court Southern District of New York
against WinStar; WinStar Wireless Fiber Corp.; CVNY; CVUSA; and Shant Hovnanian,
CVUSA's Chairman and Chief Executive Officer (the "Akcess Federal Lawsuit"). The
Akcess Federal Lawsuit alleges, among other things, that CVUSA (i) failed to
convert shares of its Series A Convertible Preferred Stock held by Marshall
Capital Management, Inc. ("MCM") in violation of law, (ii) lacked the requisite
power and authority to execute the LMDS Purchase Agreement, (iii) did not obtain
the necessary shareholder and director approval for the Spectrum Assignment,
(iv) did not obtain adequate consideration for the Spectrum Assignment and (v)
tortiously interfered with the contractual agreement between Akcess and MCM.
On November 24, 1998, Akcess commenced an action in the Supreme Court
of the State of New York, County of New York (the "Court") against MCM, Allan
Weine, Credit Suisse First Boston Corporation, CVUSA and Shant Hovnanian (the
"Defendants") (the "Akcess State Lawsuit"). The Akcess State Lawsuit seeks to
enjoin the redemption of the Series A Convertible Preferred Stock. That
redemption, however, has already been consummated, and no restraining order in
the Akcess State Lawsuit has ever come into effect.
CVUSA and CVNY believe that both the Akcess Federal Lawsuit and the
Akcess State Lawsuit are completely without merit and intend to defend both such
cases vigorously.
Item 7. Financial Statements and Exhibits.
(a) None.
(b) Pro forma financial information.
The following narrative is intended to describe the pro forma effect
that consummation of the LMDS Purchase Agreement would have had on CVUSA's
financial position as of September 30, 1998, as if such transaction had occurred
on that date, and on CVUSA's results of operations for the year ended December
31, 1997 and the nine months ended September 30, 1998, as if such transaction
had occurred on January 1, 1997. CVUSA believes that a narrative description of
these pro forma effects would be more meaningful to stockholders than the
presentation of pro forma financial statements.
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Effects on financial position
At September 30, 1998, CVUSA had outstanding debt in the amount of
approximately $16,394,000, including the current portion of notes payable in the
amount of approximately $10,680,000, including the $3,500,000 loan from WinStar,
and accounts payable, accrued expenses and other liabilities in the amount of
approximately $5,714,000, as well as Series A Convertible Preferred Stock with
an aggregate mandatory redemption price of approximately $4,600,000, which CVUSA
would satisfy out of the net proceeds from consummation of the WinStar
transaction. The remaining funds would be available to CVUSA in the future
course of its business which might include an Internet business, a multi-channel
specialized video business or other transactions with third parties that may
emerge in the future.
At September 30, 1998, CVUSA had property and equipment with a net
carrying value aggregating approximately $2,862,000, represented by
approximately $1,924,000 in set-top converters and approximately $ 938,000 in
head-end equipment which may have little or no value and would be written off,
although CVUSA will consider whether these assets have salvage or other nominal
value. CVUSA believes that its remaining property and equipment may have value
in the future course of its business.
Effects on results of operations
For the year ended December 31, 1997 and the nine months ended
September 30, 1998, CVUSA generated approximately $4,943,000 and $3,956,000,
respectively, in revenues and incurred approximately $2,314,000 and $1,519,000,
respectively, in service costs. These amounts were generated almost entirely as
a result of its subscription television service which CVUSA will discontinue
upon consummation of the WinStar transaction. Revenues to be generated upon
consummation of the WinStar transaction will depend upon CVUSA's future course
of its business and cannot be predicted at this time.
Selling, general and administrative expenses have decreased in the
nine months ended September 30, 1998 primarily attributable to reduced
head-count-related costs as a result of personnel reductions at the end of 1997
and during the first and third quarters of 1998.
For the year ended December 31, 1997 and the nine months ended
September 30, 1998, CVUSA incurred interest expense and financing fees in the
amount of approximately $801,000 and $2,001,000, respectively, which would not
have been incurred if the WinStar transaction had been consummated on January 1,
1998.
(c) Exhibits.
99.1 Press Release dated November 25, 1998 of CellularVision USA, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CELLULARVISION USA, INC.
By: /s/ Shant S. Hovnanian
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Name: Shant S. Hovnanian
Title: Chief Executive Officer
December 9, 1998
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EXHIBIT INDEX
99.1 Press Release dated November 25, 1998 of CellularVision USA, Inc.
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Exhibit 99.1
Contact: Shant S. Hovnanian
718-489-1227
FOR IMMEDIATE RELEASE
CellularVision USA Announces Closing of Spectrum
Assignment to WinStar Communications
November 25, 1998 - New York, New York
CellularVision USA, Inc. (Nasdaq: CVUS) today announced that it had
closed the assignment of spectrum contemplated by the LMDS Purchase Agreement
among the Company, CellularVision of New York and WinStar Communications.
As a condition to the closing, the Company has discontinued its
subscription television service. The Company will explore Internet business
opportunities, initially with the Company's existing network infrastructure
providing high-speed Internet service to metro New York. At the time of closing,
the Company repaid outstanding loans that were due, and redeemed its Convertible
Preferred Stock held by Marshall Capital Management.
The Company also announced that it was appealing Nasdaq's decision to
delist the Company's common stock from the Nasdaq National Market because of
failure to maintain minimum closing bid prices. The Company's common stock will
remain on the National Market through the appeal period, expected to be
mid-January 1999.
