<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, 1999 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) 474-9920
(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 December 7, 1999 was $78,126. On such
date, the closing price of the Company's Common Stock was $.005.
_________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 15,625,272 shares of Common Stock outstanding as of December
7, 1999.
<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
Since July 28, 1992, the Company has not been engaged in any industry
segments. The Company currently has no operations.
(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 no employees.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
The Company does not have any foreign operations or sales.
ITEM 2. PROPERTIES
None.
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 1999.
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 bid 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 1999 Fiscal 1998
------------------------ ------------------------
Quarter High Low High Low
------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
First $ .015 $ .01 $ 0.02 $ 0.02
Second $ .015 $ .01 $ 0.05 $ 0.015
Third $ .12 $ .008 $ 0.03 $ 0.02
Fourth $ .055 $ .015 $ 0.03 $ 0.015
</TABLE>
3
<PAGE> 4
The aforesaid quotations do not represent actual transactions and do
not include retail mark-ups, mark-downs or commissions.
(b) As of December 7, 1999, there were 765 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 does not have sufficient cash to pay its current and
anticipated operating expenses for the following fiscal year. During the fiscal
year ended September 30, 1999, the company incurred administrative expenses of
$45,000. In January 1998 a stock sale was transacted which provided cash
resources and additional funding will be obtained as needed from the same
source. In connection with the stock acquisition on January 12, 1998, the
Company's additional paid in capital and related operating account increased by
the related amount. Total funds transferred amounted to $61,000, net of
commission charges and acquisition legal fees.
The Company has a net operating loss carryforward ("NOL") of
approximately $9.6 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. 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 foregoing.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information required by Item 8 is included elsewhere in this
report (see Part IV, Item 13).
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND ACCOUNTING AND
FINANCIAL DISCLOSURE
As indicated in the Representation of Public Accountants, Cellcom Corp,
the Company, has contracted with Bradshaw Smith and Co., a Las Vegas based CPA
Firm, to audit the enclosed financial statements. A Current Report on Form 8-K
was filed with the U. S. Securities and Exchange Commission on December 7, 1998
incorporating the above changes.
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 58 Chairman, Chief Executive Officer
and President
William S. Taylor 38 Executive Vice President,
Secretary and Director
David A. Obal 35 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 President of a publicly traded telecommunications company. 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.
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 1999 0 0 0 0 0 0 0
Chairman, Chief 1998 0 0 0 0 0 0 0
Executive Officer 1997 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>
<S> <C> <C> <C> <C>
Title of Name and Address Nature of % of
Class of Beneficial Owner Ownership # of Shares Class(1)
- -------- ------------------- --------- ----------- --------
Common Jay H. Brown Record and 3,931,774 25.2%
Stock 520 South Fourth St. Beneficial
Las Vegas, NV 89101
Common William S. Taylor Record and 933,331 6.0%
Stock 50 Springbrook Rd. Beneficial
Livingston, NJ 07039
Common Joseph W. Namath Record and 1,333,332 (3) 8.5%
Stock and James Walsh Beneficial
300 East 51st Street
New York, NY 10022
Common SBK Investment Partners Record and 866,667 5.5%
Stock 605 Third Avenue Beneficial
New York, NY 10158
Common Tassinari Family Trust Record and 1,000,000 6.4%
Stock Post Office Box 81890 Beneficial
Las Vegas, NV 89180
Common All Officers and Record and 4,865,105 31.1%
Stock Directors as a Beneficial
Group (consisting
of 2 persons)
</TABLE>
- -------------
(1) All percentages are based on a total of 15,625,272 shares outstanding
as of December 7, 1999.
(2) Represents less than 1%.
(3) 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
None.
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).
7
<PAGE> 8
10.10 Assumption and Assignment of Executory Contract Agreements
between 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
Page
Report of Independent Public Accountants......................................10
Consolidated Financial Statements:
Consolidated Balance Sheet as of September 30, 1999 .....................11
Consolidated Statements of Operations for the Years Ended September
30, 1999 and September 30, 1998 ..........................................12
Consolidated Statements of Changes in Stockholders' Deficit for the
Years Ended September 30, 1999 and September 30, 1998 ....................13
Consolidated Statements of Cash Flows for the Years Ended September
30, 1999 and September 30, 1998 ..........................................14
Notes to the Consolidated Financial Statements...........................15
9
<PAGE> 10
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Cellcom Corp. and subsidiaries
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheet of Cellcom Corp. (a
Delaware corporation) and subsidiaries as of September 30, 1999 and the related
consolidated statements of operations, changes in stockholders' deficit and cash
flows for the two years then ended. 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 have 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 audit provides 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, 1999 and the results of their operations and their cash
flows for the years ended September 30, 1999 and 1998, 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 6 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 6. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ BRADSHAW SMITH & CO., LLP
Las Vegas, Nevada
January 19, 2000
10
<PAGE> 11
CELLCOM CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
(Dollar amounts in thousands except for per share amounts)
<TABLE>
<CAPTION>
ASSETS 1999
--------
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $ --
Accounts receivable 5
--------
TOTAL ASSETS 5
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 49
Taxes payable --
--------
TOTAL CURRENT LIABILITIES 49
--------
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' DEFICIT
Common stock, $.001 par value; 100,000,000
shares authorized and 15,625,272 shares
issued and outstanding 16
Additional paid-in capital 11,046
Accumulated deficit (11,106)
--------
TOTAL STOCKHOLDERS' DEFICIT (44)
--------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 5
========
</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, 1999 AND 1998
- --------------------------------------------------------------------------------
(Dollar amounts in thousands except for per share amounts)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ 45 $ 51
Interest income -- --
----------- -----------
NET OPERATING LOSS $ (45) $ (51)
OTHER INCOME
Reversal of tax accrual 53 --
----------- -----------
NET INCOME (LOSS) $ 8 $ (51)
=========== ===========
INCOME (LOSS) PER SHARE $ 0.001 $ (0.004)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES 15,625,272 14,224,906
=========== ===========
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12
<PAGE> 13
CELLCOM CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998
- --------------------------------------------------------------------------------
(Dollar amounts and number of shares in thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDI-
--------------------------- TIONAL
OUTSTANDING PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------- ---------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1997 11,559 $ 12 $ 10,989 $(11,063) $ 62
Issuance of Stock 4,066 4 57 -- 61
Net (Loss) -- -- -- (51) (51)
------- -------- --------- -------- --------
BALANCE, SEPTEMBER 30, 1998 15,625 16 11,046 (11,114) (52)
Net Income (Loss) -- -- -- 8 8
------- -------- --------- -------- --------
BALANCE, SEPTEMBER 30, 1999 15,625 $ 16 $ 11,046 $(11,106) $ (44)
======= ======== ========= ======== ========
</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, 1999 AND 1998
- --------------------------------------------------------------------------------
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 8 $ (51)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Changes in operating assets and liabilities
Increase in accounts receivable (1) (1)
(Increase) decrease in other assets 1 (1)
(Decrease) increase in accounts payable 34 (8)
(Decrease) increase in taxes payable (53) --
---- ------
NET CASH USED IN OPERATING ACTIVITIES (11) (61)
CASH PROVIDED BY FINANCING ACTIVITIES
Issuance of Common Stock -- 61
---- ------
NET DECREASE IN CASH AND CASH EQUIVALENTS 11 --
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 11 11
---- ------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ -- $ 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.
EARNINGS <LOSS> PER SHARE CALCULATIONS: - Per share amounts have been
calculated based on 15.6 and 14.2 million weighted average number of
common shares outstanding for the years ended September 30, 1999 and
1998, respectively. 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 and operating loss and tax
credit carryforwards. Valuation reserves are recorded if uncertainty
exists as to the realization of deferred tax assets.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS: - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS: - Cash, accounts receivable, and
accounts payable are reported as carrying amounts that approximate their
fair value because of the short maturities of these instruments.
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 previously
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
15
<PAGE> 16
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 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. The Company has no operations. It is
principally engaged in 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, 1999 and 1998, the Company determined that its deferred tax
asset of $3.4 million and $3.4 million, consists primarily of its net
operating loss carryforward of $9.6 million and $9.6 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. REVERSAL OF TAX ACCRUAL:
As of September 30, 1999, the Company, based upon advise of legal
counsel, reversed the accrual for estimated excise taxes. These amounts
were included in current liabilities in the financial statements as of
September 30, 1998.
5. RELATED PARTY TRANSACTIONS:
David Obal, Cellcom Corp.'s Chief Financial Officer, furnished the
Company with rent free facilities for the corporate office for fiscal
1997. Cellcom Corp. having no operations in 1999 or 1998, paid David Obal
for the preparation and filing of the required SEC documents and
bookkeeping services, which Mr. Obal conducted out of his personal
offices.
6. GOING CONCERN:
The Company does not have sufficient cash to pay its current and
anticipated operating expenses for the following fiscal year. During the
fiscal year ended September 30, 1999 and 1998, the company incurred
administrative expenses of $45,000 and $51,000. The Company does not have
firm commitments for stock purchases or financing from outside sources or
its present officers and directors.
16
<PAGE> 17
7. SUBSEQUENT EVENTS:
On December 10, 1999, the Company sold its minority interest in a
cellular phone company for $79,300. The minority interest had been deemed
worthless and written off in a prior year.
The Company loaned its President $50,000 on December 16, 1999. Interest
is receivable monthly at 10% per annum, principal is due in full on or
before June 15, 2000.
17
<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: March 15, 2000 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:
Signature Title Date
/s/ Jay H. Brown
Jay H. Brown President, Chief March 15, 2000
Executive Officer
and Director
/s/ William S. Taylor
William S. Taylor Executive Vice March 15, 2000
President, Secretary
and Director
/s/ David A. Obal
David A. Obal Chief Financial and March 15, 2000
Accounting Officer
and Director
18
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
State of Incorporation
<TABLE>
<CAPTION>
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>
19
<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.
/s/ BRADSHAW SMITH & CO.
Las Vegas, Nevada
January 19, 2000
20
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 5
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5
<CURRENT-LIABILITIES> 49
<BONDS> 0
0
0
<COMMON> 16
<OTHER-SE> (60)
<TOTAL-LIABILITY-AND-EQUITY> 5
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 45
<OTHER-EXPENSES> (53)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8
<INCOME-TAX> 0
<INCOME-CONTINUING> 8
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
