<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the fiscal year ended: Commission File Number:
September 30, 1996 0-13615
-------------------------- -----------------------
CELLCOM CORP.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer as specified in Its charter)
Delaware 06-1106964
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
520 South Fourth Street, Las Vegas, Nevada 89101
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(702) 896-8898
------------------------------------------------------------
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------
(Title of class)
Check whether the Issuer (1) filed all reports required to be filed by the
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
such shorter period that the registrant was required to file such reports), and
(2) has been subject to the filing requirements for the past 90 days.
X Yes No
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
X
---
Issuer's revenues for the most recent fiscal year are $0.
The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant as of November 25, 1996 was $288,965. On such
date, the closing price of the Company's Common Stock was $0.025.
Yes X No
--- ---
ISSUER'S INVOLVED IN BANKRUPTCY PROCEEDINGS FOR THE LAST FIVE YEARS
Check whether the Issuer has filed all documentation and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act of 1934 after the
distribution of securities under a plan confirmed by a court.
X Yes No
--- ---
Transitional small business disclosure format.
The registrant had 11,558,605 shares of Common Stock outstanding as of November
14, 1996.
<PAGE> 2
PART I.
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
Cellcom Corp., which was incorporated in the State of Delaware on
October 26, 1983 (hereinafter the "Registrant" or the "Company"), was engaged in
the purchase and resale of cellular telephone service through July 28, 1992 at
which time the Company sold substantially all of its assets as described below.
Cellular telephone service is access to a cellular telephone system through the
assignment of an individual mobile telephone number, which enables the
subscriber to make local and long distance telephone calls. The Company obtained
such service from local cellular telephone system operators ("Cellular
Carriers") who have received licenses from the Federal Communications Commission
to construct and operate cellular telephone systems in specific geographical
areas. The Company purchased the service in accordance, where applicable, with
the Cellular Carriers' wholesale tariffs filed with the local regulatory
agencies and resold the service to its subscribers according to the Company's
retail rates, or retail tariffs, if required by state regulatory agencies. As a
reseller of cellular telephone service, the Company did not have a license to
construct, operate or own a cellular telephone system.
Prior to 1992, the Company experienced declining working capital, net
operating losses, negative cash flow and an increased rate of customer
deactivations in certain markets. Consequently, Management and the Board of
Directors concluded that it was in the best interest of the Company to enter
into the sale described below and contemporaneously seek protection from its
creditors under the United States Bankruptcy Code.
On April 16, 1992, the Company and its subsidiaries filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code. On
July 28, 1992, the Company sold substantially all of its assets to Nationwide
Cellular Service, Inc. ("Nationwide"). The sale was consummated after receiving
the requisite approvals from the Bankruptcy Court and governmental regulatory
agencies. In connection with the sale, Nationwide assumed the secured
indebtedness to the Company's senior secured creditor, Cellular Carriers and
customer security deposits on July 28, 1992. Prior to the closing of the sale
and pursuant to an Option Agreement between Nationwide and the Company's senior
subordinated noteholders dated April 15, 1992, Nationwide issued 702,007 shares
of its common stock to Cellcom's senior subordinated noteholders in exchange for
the senior subordinated notes and warrants issued by Cellcom and in connection
with the sale, such notes and warrants were canceled. At July 28, 1992, the
closing price of Nationwide's common stock on Nasdaq was $6.75. The Company
received $2,300,000 from the sale in cash plus $800,000 in reimbursement of
postpetition bankruptcy costs to be paid by the Company.
On August 20, 1993, the Company filed a Modified Consolidated Plan of
Reorganization (the "Plan") with the Bankruptcy Court. The "Post Confirmation
Order" was dated and notice was given on October 7, 1993. The Plan called for a
consolidation of the Company and its subsidiaries for tax and accounting
purposes and for the Company to continue to pursue collection of contingent
assets. Pursuant to the terms of the Plan, the Company has settled all
administrative, secured and priority claims. All funds remaining after these
distributions have been distributed among the unsecured creditors and the
Company.
As of September 30, 1995, all administrative, secured and priority
claims were settled in the amount of $479,000. In addition, the Company
distributed $418,133 to the unsecured creditors and $415,000 to the reorganized
Company. All distributions to the unsecured creditors have been made with the
exception of the recovery of the net operating loss benefit. Under the terms of
the settlement, the unsecured creditors are entitled to one quarter of the tax
savings from the net operating loss utilization for five years following the
Bankruptcy Petition which ends after 1997. (See Part II, Item 6.)
2
<PAGE> 3
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
During the last three fiscal years, the Company was engaged in only one
industry segment, the resale of cellular telephone service and the sale of
cellular telephone equipment and accessories.
(c) NARRATIVE DESCRIPTION OF BUSINESS
OPERATIONS
As described above, on April 16, 1992, the Company and each of its
subsidiaries filed voluntary petitions for relief under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the Southern
District of New York.
The Company currently has no operations. It is principally engaged in
managing its assets (principally cash) and administering its liabilities and
bankruptcy claims. The Company has been, and is, in the process of evaluating
potential business opportunities which could be attained by merger or
acquisition. If the Company embarks on a new business venture, no assurance can
be given regarding the future success of such a business due to all the
attendant costs and risks associated with starting or acquiring a new business.
EMPLOYEES
The Company currently has one employee.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
The Company does not have any foreign operations or sales.
ITEM 2. PROPERTIES
On December 1, 1996, the Company entered a lease for 1,500 square feet
at 6273 South Industrial Road, Las Vegas, Nevada. This facility is leased under
a month to month contract at a monthly rental rate of $1,028.
ITEM 3. LEGAL PROCEEDINGS
Other than the aforementioned bankruptcy proceedings, the Company is
not a party to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal year 1996.
3
<PAGE> 4
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
(a) The Company's common stock is traded in the over-the-counter
market. The following table sets forth the high and low closing prices for the
Company's common stock for the periods indicated, as reported by brokers and
dealers making a market in the common stock:
<TABLE>
<CAPTION>
Fiscal 1996 Fiscal 1995
------------------------ ---------------------
Quarter High Low High Low
------- ------- ------- -------- ------
<S> <C> <C> <C> <C>
First $ 0.02 $ 0.01 $ 0.07 $ 0.02
Second $ 0.07 $ 0.015 $ 0.04 $ 0.01
Third $ 0.07 $ 0.045 $ 0.035 $ 0.01
Fourth $ 0.045 $ 0.04 $ 0.03 $ 0.01
</TABLE>
The aforesaid quotations do not represent actual transactions and do
not include retail mark-ups, mark-downs or commissions.
(b) As of November 14, 1996, there were 750 holders of record of the
Company's common stock.
(c) The Company has not paid any dividends on its common stock since
its inception.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF CONTINUING OPERATIONS
LIQUIDITY , CAPITAL RESOURCES AND RESULTS FROM CONTINUING OPERATIONS
The Company has sufficient cash to pay its current and anticipated
operating expenses for the current fiscal year. During the fiscal year ended
September 30, 1996, the company incurred administrative expenses of $96,000. The
Company has a net operating loss carryforward ("NOL") of approximately $9.3
million for both financial reporting and income tax purposes. The Company
expects to use this NOL to offset earnings in potential business opportunities
subject to limitations on use as described below in Item 6. If the Company
embarks on a new business venture no assurance can be given regarding the future
success of such a business due to all the attendant costs and risks associated
with starting or acquiring a new business.
See Item 1(a) above, General Development of Business, regarding the
Company's bankruptcy filing and the sale of substantially all of its assets and
the assumption and cancellation of substantially all its liabilities.
The tax loss carryforward expires during the years 2001 through 2006.
The Internal Revenue Code of 1986 as amended (the "Code"), imposes substantial
limitations under certain circumstances on the use of tax loss carryforwards
upon the occurrence of an "ownership change" (as defined in Section 382 of the
Code). An "ownership change" can result from issuance of equity securities by
the Company, purchases of the Company's securities in the secondary market or a
combination of the forgoing.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information required by Item 8 is included elsewhere in this
report (see Part IV, Item 14).
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND ACCOUNTING
AND FINANCIAL DISCLOSURE
None
4
<PAGE> 5
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names of the directors and executive officers
of the Company along with certain information relating to business experience of
each of the listed directors and officers.
<TABLE>
<CAPTION>
Name Age Position With Company
---- --- ---------------------
<S> <C> <C>
Jay H. Brown 55 Chairman, Chief Executive Officer
and President
William S. Taylor 35 Executive Vice President,
Secretary and Director
David A. Obal 32 Chief Financial Officer
and Director
</TABLE>
Directors are elected until the next annual meeting of stockholders or
until their successors are duly elected and qualified. Officers serve at the
discretion of the Board of Directors. The Board of Directors does not have
Audit, Compensation or Nomination committees.
Jay H. Brown has been Chairman, Chief Executive Officer and President
since the Company's formation in October 1983, and devoted substantially all of
his time to the Company's business affairs from February 1, 1989 through July
31, 1992. Since August 1992, he has worked as a management consultant for
Nationwide Cellular Service, Inc. and has practiced law in Las Vegas, Nevada.
William S. Taylor has been a Director of the Company since June 1989.
He also serves as Executive Vice President and Secretary. Mr Taylor was employed
by the Company from 1984 through May 31, 1992 in various sales and marketing
capacities. Since June 1992, Mr. Taylor has operated as a cellular and office
product wholesaler in New Jersey. Mr. Taylor currently holds the position of
officer and director of Electronics Communication Corp. He is a member of the
Radio Club of America.
David A. Obal has been a Director and Chief Financial Officer of the
Company since February 8, 1994. From October 1993 through February 1994, he was
employed by the Company as Finance Manager. From October 1992 through September
1993, he was retained by the Company as a consultant. Between July 1988 and
October 1992, he held various finance positions with the Company.
Except with respect to the Company's bankruptcy filing, during the past
five years, no Director or Executive Officer of the Registrant has been involved
in any legal proceedings which is material to an evaluation of the ability or
integrity of such Director or Executive Officer.
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's Officers, Directors and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, Directors and ten percent shareholders are required by regulation to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on the Company's copies of such forms received or written representations
from certain reporting persons that no Form 5's were required for those persons,
the requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the aggregate compensation paid by the
Company to the Chief Executive Officer. No executive officer of the Company
received total compensation in excess of $100,000 during the last three years:
5
<PAGE> 6
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------- ------------------------------------------
Awards Payouts
Other Restricted Long-Term
Name and Annual Stock Option Incentive All Other
Principal Position Year Salary$ Bonus$ Compensation Awards SARs Payouts Compensation
- ------------------ ---- ------- ------ ------------ ------ ---- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jay H. Brown 1996 0 0 0 0 0 0 0
Chairman, Chief 1995 0 0 0 0 0 0 0
Executive Officer 1994 0 0 0 0 0 0 0
and President
</TABLE>
The Company does not have any long-term incentive compensation plans.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the date of
this report, with respect to the beneficial ownership (as defined in Rule 13d-3
under the Securities and Exchange Act of 1934) of shares of common stock, the
Company's sole voting securities, by each person known to the Company to be the
beneficial owner of 5% or more of the Company's Common Stock, by each director
and by all officers and directors as a group.
<TABLE>
<CAPTION>
Title of Name and Address Nature of % of
Class of Beneficial Owner Ownership # of Shares Class(1)
- ----- ------------------- --------- ----------- --------
<S> <C> <C> <C> <C>
Common Jay H. Brown Record and 2,998,441 25.9%
Stock 520 South Fourth St. Beneficial
Las Vegas, NV 89101
Common William S. Taylor Record and 99,999 .. (2)
Stock c/o Free Trade Beneficial
4 Madison Avenue
Fairfield, NJ 07004
Common David Obal Record and 50,000 (3) .. (2)
Stock 2675 Windmill Pkwy. Beneficial
Henderson, NV 89014
Common Joseph W. Namath Record and 1,333,332 (4) 11.5%
Stock and James Walsh Beneficial
300 East 51st Street
New York, NY 10022
Common All Officers and Record and 3,148,440 27.3%
Stock Directors as a Beneficial
Group (consisting
of 3 persons)
</TABLE>
- -----------------------
(1) All percentages are based on a total of 11,558,605 shares outstanding
as of November 14, 1996.
(2) Represents less than 1%.
(3) Represents 50,000 shares issuable upon exercise of incentive stock
options. Excludes 50,000 shares subject to incentive stock options
which are not currently exercisable.
(4) Includes 666,666 shares of Common Stock owned of record by Joseph W.
Namath and 666,666 shares of Common Stock owned of record by James
Walsh. The Company has been advised by Messrs. Namath and Walsh that
for the purposes of Section 16(a) of the Securities Exchange Act of
1934, each beneficially owns the shares owned of record by the other.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended, September 30, 1994, the Company granted
100,000 incentive stock options to David Obal, a Director and officer of the
Company. During the fiscal year ended, September 30, 1996, the Company paid
$34,000 in salary to David Obal, the Chief Financial Officer and a Director.
6
<PAGE> 7
PART IV.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. The financial statements and schedules listed in the
accompanying index to financial statements are filed as a part
of this Form 10-K report.
2. Exhibits.
2.1 Certificate of Incorporation of the Company (incorporated
herein by reference to the Company's Registration Statement on
Form S-18, File No. 2-88633-NY, effective March 16, 1984).
2.2 Amendments to the Certificate of Incorporation of the
Company (incorporated by reference to the Company's annual
report on Form 10-K for the fiscal year ended September 30,
1990).
2.3 By-Laws of the Company (incorporated herein by reference to
the Company's Registration Statement on Form S-18, File No.
2-88633-NY, effective March 16, 1984).
10.1 The Company's 1985 Incentive Stock Option Plan, as amended
(incorporated by reference to the Company's Registration
Statement on Form S-8, File No. 33-30985, which became effective
on September 29, 1989).
10.2 Asset Purchase Agreement dated April 15, 1992 by and among
Cellcom Acquisition Corp., Cellcom Corp., Cellcom Telephone
Company, Inc. and certain affiliated companies (incorporated by
reference to the Company's current Report on Form 8-K dated
April 29, 1992).
10.3 Bankruptcy Court Order dated May 29, 1992 approving the
sale of substantially all of the assets of the Company under an
Asset Purchase Agreement pursuant to 11 U.S.C.P. 363 (b) and
(f). (incorporated by reference to the Company's annual report
on Form 10-K for the fiscal year ending September 30, 1992).
10.4 Transition Assistance Agreement dated July 28, 1992 between
Nationwide Cellular Service, Inc. and Cellcom Corp.
(incorporated by reference to the Company's annual report on
Form 10-K for the fiscal year ending September 30, 1992).
10.5 Assumption Agreement dated July 28, 1992 by Nationwide
Cellular Service, Inc. (incorporated by reference to the
Company's annual report on Form 10-K for the fiscal year ending
September 30, 1992).
10.6 Letter Agreement dated July 28, 1992 between Nationwide
Cellular Service, Inc. and Cellcom Corp. related to certain
Subscriber Taxes (incorporated by reference to the Company's
annual report on Form 10-K for the fiscal year ending September
30, 1992).
10.7 Release Agreement dated July 28, 1992 between Congress
Financial Corporation and Cellcom Corp., et al. (incorporated by
reference to the Company's annual report on Form 10-K for the
fiscal year ending September 30, 1992).
10.8 Assumption and Assignment Agreements of Executory Contract
between Nationwide Cellular Service, Inc. and Los Angeles SMSA
Ltd. Partnership dated July 27, 1992 (incorporated by reference
to the Company's annual report on Form 10-K for the fiscal year
ending September 30, 1992).
10.9 Assumption and Assignment of Executory Contract Agreements
between Nationwide Cellular Service, Inc. and Los Angeles
Telephone Company dated July 24, 1992 and July 27, 1992
(incorporated by reference to the Company's annual report on
Form 10-K for the fiscal year ending September 30, 1992).
10.10 Assumption and Assignment of Executory Contract Agreements
between
7
<PAGE> 8
Nationwide Cellular Service, Inc. and Bay Area Cellular
Telephone Company dated July 24, 1992 and July 27, 1992
(incorporated by reference to the Company's annual report on
Form 10-K for the fiscal year ending September 30, 1992).
10.11 Assumption and Assignment of Executory Contracts Agreement
between Nationwide Cellular Service, Inc. and Cellular Telephone
Company dated July 24, 1992 and July 27, 1992 (incorporated by
reference to the Company's annual report on Form 10-K for the
fiscal year ending September 30, 1992).
10.12 Assumption and Assignment of Executory Contract Agreements
among Nationwide Cellular Service, Inc., New York SMSA Limited
Partnership and Boston CGSA dated July 24, 1992 and July 27,
1992 (incorporated by reference to the Company's annual report
on Form 10-K for the fiscal year ending September 30, 1992).
10.13 Debtor's Modified Consolidated Plan of Reorganization
dated August 20, 1993 (incorporated by reference to the
Company's annual report on Form 10-K for the fiscal year ending
September 30, 1993).
10.14 Notice of (i) Order Confirming Debtor's Modified
Consolidated Plan of Reorganization, and (ii) Discharge of Debts
dated October 7, 1993 (incorporated by reference to the
Company's annual report on Form 10-K for the fiscal year ending
September 30, 1993).
21 Subsidiaries of the Registrant.
23.1 Consent of Independent Public Accountants.
(b) Reports on Form 8-K
None
8
<PAGE> 9
CELLCOM CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants............................................... 10
Consolidated Financial Statements:
Consolidated Balance Sheet as of September 30, 1996 .............................. 11
Consolidated Statements of Operations for the Years Ended September
30, 1996 and September 30, 1995 ................................................. 12
Consolidated Statements of Changes in Stockholders' Deficit for the
Years Ended September 30, 1996 and September 30, 1995 ........................... 13
Consolidated Statements of Cash Flows for the Years Ended September
30, 1996 and September 30, 1995 ................................................. 14
Notes to the Consolidated Financial Statements.................................... 15
</TABLE>
9
<PAGE> 10
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Cellcom Corp.
We have audited the accompanying consolidated balance sheet of Cellcom Corp. (a
Delaware corporation) and subsidiaries as of September 30, 1996 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the two years in the period ended September 30, 1996. 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 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 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cellcom Corp. and subsidiaries
as of September 30, 1996 and the results of their operations and their cash
flows for each of the two years in the period ended September 30, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
November 20, 1996
10
<PAGE> 11
CELLCOM CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
(Dollar amounts in thousands except for per share amounts)
<TABLE>
<CAPTION>
ASSETS 1996
- ------------------------------------ --------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 128
Accounts receivable 1
Prepaid expenses 3
--------
TOTAL CURRENT ASSETS $ 132
========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable 18
Taxes payable 53
--------
TOTAL CURRENT LIABILITIES 71
--------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; 100,000,000
shares authorized and 11,558,605 shares
issued and outstanding 12
Additional paid-in capital 10,989
Accumulated deficit (10,940)
--------
TOTAL STOCKHOLDERS' EQUITY 61
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 132
========
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11
<PAGE> 12
CELLCOM CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
(Dollar amounts in thousands except for per share amounts)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ 102 $ 115
Reorganization item - professional fees 4 11
Interest income (6) (39)
Miscellaneous income (4) (18)
------------ ------------
NET (LOSS) $ (96) $ (69)
============ ============
NET (LOSS) PER SHARE $ (.01) $ (.01)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES 11,558,605 11,558,605
------------ ------------
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12
<PAGE> 13
CELLCOM CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
(Dollar amounts and number of shares in thousands)
<TABLE>
<CAPTION>
ADDI-
TIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES PAR VALUE CAPITAL DEFICIT TOTAL
------ --------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1994 11,559 12 10,989 (10,775) 226
Net (Loss) -- -- -- (69) (69)
------ -- ------ ------- --
BALANCE, SEPTEMBER 30, 1995 11,559 12 10,989 (10,844) 157
Net (Loss) -- -- -- (96) (96)
------ -- ------ ------- --
BALANCE, SEPTEMBER 30, 1996 11,559 12 10,989 (10,940) 61
====== == ====== ======= ==
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13
<PAGE> 14
CELLCOM CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (96) $ (69)
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Changes in operating assets and liabilities:
Decrease in accounts receivable -- 356
Decrease in accounts payable (1) (191)
----- -----
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (97) 96
----- -----
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (97) 96
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 225 129
----- -----
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 128 $ 225
----- -----
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
INTEREST RECEIVED $ 6 $ 39
===== =====
REORGANIZATION EXPENSES PAID $ 5 $ 11
===== =====
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14
<PAGE> 15
CELLCOM CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Cellcom Corp. and its subsidiaries which comprise
the "Company." All significant intercompany accounts and transactions
have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS - All highly liquid instruments with original
maturities of three months or less are considered cash equivalents.
(LOSS) PER SHARE CALCULATIONS - Per share amounts have been calculated
based on 11.6 million weighted average number of common shares
outstanding for the years ended September 30, 1996 and 1995. The effects
of common stock equivalents are not considered because they are
anti-dilutive.
INCOME TAXES - The Company's policy is to provide for deferred income
taxes resulting from differences in the timing of amounts reported for
financial accounting and income tax purposes. Since the Company has a net
operating loss carryforward, no deferred income taxes have been recorded.
2. PETITION FOR RELIEF UNDER CHAPTER 11
On April 16, 1992, the Company filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code (the "Petitions") in the
United States Bankruptcy Court for the Southern District of New York (the
"Court"). The Company's existing Directors and officers remained
responsible for the Company's business and assets, subject to supervision
by the Court. Under Chapter 11, certain claims against the Company in
existence prior to the filing of the Petitions under the federal
bankruptcy laws were stayed while the Company continued business
operations as a debtor-in-possession. These claims were reflected in the
accompanying consolidated balance sheets as "liabilities subject to
compromise." Additional claims (liabilities subject to compromise) arose
subsequent to April 16, 1992 resulting from rejection of executory
contracts, including leases, and from the determination by the Court (or
as agreed to by parties in interest) of allowed claims for contingencies
and other disputed amounts. Claims secured against the Company's assets
("Secured Claims") were also stayed, although the holders of such claims
were those secured by substantially all of the Company's assets and by
the outstanding capital stock of the subsidiaries of Cellcom Corp.
The Company received approval from the Court to pay or otherwise honor
certain of its prepetition obligations, including employee wages,
customer claims and agent commissions. The Court approved a
Debtor-in-Possession loan agreement, which provided that an existing
creditor was permitted to continue lending funds to the Company during
the postpetition period through July 28, 1992 under terms substantially
the same as those contained in the original loan agreement. In exchange,
this creditor was granted senior security interests and liens upon
substantially all of the Company's assets. Pursuant to a debt covenant,
all cash receipts from subscribers were forwarded to the Company's senior
secured creditor. The Court established several dates by which creditors
were allowed to file claims against the Company with the Court.
Prepetition and postpetition liabilities reflect those amounts previously
reported to the Court pending the final disposition by the Court of all
claims.
On August 20, 1993, the Company filed a Modified Consolidated Plan of
Reorganization (the "Plan") with the Bankruptcy Court. The "Post
Confirmation Order" was dated and notice was given on October 7, 1993.
The Plan called for a consolidation of the Company and its subsidiaries
for tax and accounting purposes and the Company will continued to pursue
collection of contingent assets. Pursuant to the terms of the Plan, the
Company has settled all administrative, secured and priority claims. All
funds remaining after these distributions have been distributed among the
unsecured creditors and the Company. The Company has no operations. It is
principally engaged in
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<PAGE> 16
controlling its assets (principally cash) and administering its
liabilities and bankruptcy claims. The Company is in the process of
evaluating potential business opportunities which could be attained by
merger or acquisition. In Management's opinion, if the Company embarks on
a new business venture, no assurance can be given regarding the future
success of such a business due to all the attendant costs and risks
associated with starting or acquiring a new business.
3. INCOME TAXES
The Company follows the provisions of SFAS No. 109 "Accounting for Income
Taxes." SFAS No. 109 requires the recognition of deferred tax assets, net
of applicable reserves, related to net operating loss carryforwards and
certain temporary differences. The standard requires recognition of a
deferred tax asset to the extent that realization of such asset is more
likely than not; otherwise, a valuation allowance is applied. As of
September 30, 1996, the Company determined that its deferred tax asset,
primarily its net operating loss carryforward of $9.3 million, did not
satisfy the recognition criteria set forth in the standard and
accordingly, a valuation allowance was recorded to fully reserve the
deferred tax asset.
The tax loss carryforward expires during the years 2001 through 2006. The
Internal Revenue Code of 1986 as amended (the "Code"), imposes
substantial limitations under certain circumstances on the use of
carryforwards upon the occurrence of an "ownership change" (as defined in
Section 382 of the Code). An "ownership change" can result from issuances
of equity securities by the Company, purchases of the Company's
securities in the secondary market or a combination of the foregoing.
4. SALE OF ASSETS
During the year ended September 30, 1995, the Company sold its minority
interest in Pascagoula Cellular Services for $13,585. The Company
continues to hold a minority interest in Alexandria Cellular License
Corporation.
5. COMMITMENTS AND CONTINGENCIES
The Company entered into a month to month lease on December 1, 1996 for
the office located at 6273 South Industrial Road, Las Vegas, Nevada. The
monthly rental is $1,028. Rent expense for each of the fiscal years ended
September 30, 1996 and 1995 was $12,000.
As of September 30, 1996, the Company had accrued reserves and interest
for certain unpaid, disputed and other tax matters related to various
taxing authorities. These amounts are included in current liabilities in
the financial statements.
6. STOCKHOLDERS' EQUITY
The Company had an incentive stock option plan, which expired in 1995.
The plan called for up to 1,217,186 shares of its common stock to be
issued at an exercise price equal to or greater than fair market value at
the date of grant to key employees of the Company.
A summary of stock option transactions is as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Options outstanding-beginning of year 100,000 100,000
Granted -- --
Exercised -- --
Canceled or Lapsed -- --
------- -------
Options outstanding-end of year 100,000 100,000
======= =======
</TABLE>
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<PAGE> 17
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation". The statement provides that companies which maintain stock
option plans either account for stock options using the determined fair
market value as compensation cost or to continue under the provisions of
APB No. 25. If a company continues to follow APB No. 25, then the company
must provide pro forma disclosure showing the impact of the cost using
the fair market value approach. The statement is effective for fiscal
years beginning after December 15, 1995. Management anticipates based on
current circumstances that this statement will not have a material impact
on the Company's financial position or results of operations.
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<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: December 27, 1996 CELLCOM CORP.
By: /s/ Jay H. Brown
---------------------------
Jay H. Brown, President
In accordance with the Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant in the capacities and
the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Jay H. Brown
- ---------------------
Jay H. Brown President, Chief December 27, 1996
Executive Officer
and Director
/s/ William S. Taylor
- ---------------------
William S. Taylor Executive Vice December 27, 1996
President, Secretary
and Director
/s/ David A. Obal
- ---------------------
David A. Obal Chief Financial and December 27, 1996
Accounting Officer
and Director
</TABLE>
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<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
State of Incorporation
----------------------
Name Incorporation
- ----------------------------------------------- ----------------------
<S> <C>
Cellcom Telephone Company, Inc. Delaware
Car-Tel Systems Corp. New Jersey
Cellcom Cellular Corp. Delaware
Cellular Dynamics Telephone Company of Connecticut Connecticut
Cellular Dynamics Telephone Company of Boston, Inc. Delaware
Cellular Dynamics Telephone Company of Los Angeles, Inc. California
Cellular Dynamics Telephone Company of San Francisco, Inc. California
Cellular Dynamics Telephone Company of Maryland, Inc. Maryland
Cellular Dynamics Telephone Company, Inc. Nevada
Racehorse Cell-Fone Corp. Delaware
Cellular Dynamics Telephone Company of San Diego, Inc. California
Cellcom Management Company, Inc. Delaware
</TABLE>
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<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report in this 10-KSB, into the Company's previously filed
Registration Statements on Form S-8, File No. 33-30985.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
November 20, 1996
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