U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2000
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________________
Commission file number 0-14978
------------------------------
PRE-CELL SOLUTIONS, INC.
------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-0751916
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
255 East Drive, Suite C, Melbourne, Florida 32904
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
(321) 308-2900
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ ] No [X]
Indicate number or shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
As of February 29, 2000, 33,852,730 shares of the Registrant's Common Stock were
issued and outstanding.
Page 1
<PAGE>
PRE-CELL SOLUTIONS, INC.
Form 10-Q
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL STATEMENTS
Item 1. Consolidated Financial Statements
Balance Sheet - January 31, 2000 and April 30, 1999...............3
Statements of Operations Three and nine months ended
January 31, 2000 and 1999.......................................4
Statements of Stockholders Equity- Nine months ended
January 31, 2000................................................5
Statements of Cash Flows - Three and nine months ended
January 31, 2000 and 1999.......................................6
Notes to Consolidated Financial Statements........................8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................8-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................9
Item 2. Changes in Securities.............................................9
Item 3. Defaults Upon Senior Securities...................................9
Item 4. Submission of Matters to a Vote of Securities Holders.............9
Item 5. Other Information.................................................9
Item 6. Exhibits and Reports on Form 8-K.................................10
SIGNATURES..................................................................11
Page 2
<PAGE>
PART I
Item 1. Financial Statements.
<TABLE>
<CAPTION>
Pre-Cell Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
January 31, 2000 April 30, 1999
---------------- --------------
(Unaudited)
Assets
<S> <C> <C>
Cash ................................................................ $ -- $ 507
Certificate of deposit, 4.26% matures June 28, 2000..................... 3,000 3,000
Accounts receivable...................................................... 15,560 --
Stock subscription receivable........................................... 3,000 3,000
Prepaid service fees.................................................... 7,000 5,000
-------------- ------------
Total current assets................................................. 28,560 11,507
Property and equipment, net.............................................. 7,173 1,713
Intangible assets, net..................................................... 1,420,802 1,480,302
-------------- ------------
$ 1,456,535 $ 1,493,522
============== ============
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable......................................................... $ 38,965 $ 5,003
Accrued liabilities ................................................ 35 82
Due to stockholders/officers............................................. 435,000 330,000
Due to related party ..................................................... 106,812 18,563
-------------- ------------
Total current liabilities............................................. 580,812 353,648
-------------- ------------
Commitments............................................................... -- --
Stockholders' equity:
Preferred stock ..................................................... -- --
Common stock.............................................................. 338,527 338,484
Additional paid in capital ................................................ 2,318,303 2,318,346
Accumulated deficit ....................................................... (1,781,107) (1,516,956)
-------------- ------------
Total stockholders' equity .................................................... 875,723 1,139,874
-------------- ------------
................................................................................ $ 1,456,535 $ 1,493,522
============== ============
</TABLE>
See accompanying notes to consolidated financial statements
Page 3
<PAGE>
<TABLE>
<CAPTION>
Pre-Cell Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended January 31, Nine Months Ended January 31,
------------------------------ -----------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues...................................... $ 62,252 $ 463 $ 133,251 $ 463
Costs of revenues............................. 31,587 1,882 103,284 1,882
------------- ------------ ------------ ------------
Gross profit .................................. 30,665 (1,419) 29,967 (1,419)
Selling, general and administrative expenses .. 123,334 83,448 294,118 83,448
------------- ------------ ------------ ------------
Net income (loss)............................... $ (92,669) $ (84,867) $ (264,151) $ (84,867)
============= ============ ============ ============
Net income (loss) per common share:
Basic and Diluted....................... $ -- $ -- $ (0.01) $ (0.01)
============= ============ ============ ============
Weighted average number of common shares and share equivalents outstanding:
Basic........................................ 33,852,730 23,134,063 33,852,730 8,842,508
============= ============ ============ ============
Diluted........................................ 39,871,099 27,601,081 39,173,346 10,331,514
============= ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
Page 4
<PAGE>
<TABLE>
<CAPTION>
Pre-Cell Solutions, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Common Stock
------------
Number Additional
of Par Paid-In Accumulated
Shares Value Capital Deficit Total
------ ----- ------- ------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, April 30, 1999 33,852,730 $ 338,484 $ 2,318,346 $(1,516,956) $ 1,139,874
Unaudited:
Adjustment for fractional shares as a
result of 1 for 7 stock split -- 43 (43) -- --
Net loss -- -- -- (264,151) (264,151)
---------- --------- ----------- ------------ ------------
BALANCE, Januay 31, 2000 (unaudited) 33,852,730 $ 338,527 $ 2,318,303 $ (1,781,107) $ 875,723
========== ========= =========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
Page 5
<PAGE>
<TABLE>
<CAPTION>
Pre-Cell Solutions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended January 31,
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income/ (loss).......................................................... $ (264,151) $ (84,867)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation........................................................... 175 --
Amortization............................................................. 59,500 17,000
Cash provided by (used for):
Accounts receivable................................................... (15,560) --
Stock subscription receivable.................................... -- (3,000)
Prepaid services fees................................................ (2,000) --
Accounts payable....................................................... 33,961 5,865
Accrued expenses and other liabilities............................... (47) (6,062)
Due to stockholders/officers.......................................... 105,000 30,000
Due to related party................................................... 88,248 4,177
------------ -----------
Net cash provided by operating activities..................................... 5,126 (36,887)
------------ -----------
Cash flows from investing activities:
Purchase of property and equipment........................................ (5,633) --
------------ -----------
Net cash used in investing activities........................................ (5,633) --
------------ -----------
Cash flows from financing activities:
Isuance of common stock of subsidiary................................. -- 37,000
------------ -----------
Net cash used in investing activities.................................... -- 37,000
------------ -----------
Net decrease in cash and cash equivalents......................................... (507) 113
Cash at beginning of period................................................... 507 --
------------ -----------
Cash at end of period....................................................... $ -- $ 113
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
Page 6
<PAGE>
Pre-Cell Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements of Pre-Cell
Solutions, Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for a complete financial statement presentation.
In the opinion of management, such unaudited interim information reflect all
adjustments, consisting only of normal recurring adjustments, necessary to
present the Company's financial position and results of operations for the
periods presented. The results of operations for interim periods are not
necessarily indicative of the results to be expected for a full fiscal year. The
consolidated balance sheet as of April 30, 1999 was derived from the audited
consolidated financial statements as of that date but does not include all the
information and notes required by generally accepted accounting principles.
These consolidated financial statements should be read in conjunction with the
company's audited consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended April 30, 1999.
Note 2 - Acquisition
On December 1, 1998, the Company exchanged 31,328,910 shares of its common stock
for the outstanding common stock of Pre-Cell Solutions, Inc., a Florida
corporation in a transaction accounted for as a purchase. The total purchase
price approximated $1,253,000. The excess of the purchase price over the net
liabilities assumed was accounted for as goodwill, which is being amortized over
fifteen years utilizing the straight-line method.
Note 3 - Related party transactions
The Company has entered into employment agreements with two
stockholders/executives. Total fees under these agreements for the quarter ended
January 31, 2000 totaled $45,000 and are included in current liabilities.
Additionally, the agreements provide for the executive to receive a total of
4,000,000 and 3,000,000 options to purchase common stock at $.04 per share.
These options vested on December 1, 1999 and are exercisable for a term of five
years.
The Company leases its offices from a related party under a sublease. The
agreement calls for monthly rental payments totaling approximately $500 with
annual renewal options through June 2001. Total rent for the quarter ended
January 31, 2000 is included in current liabilities at January 31, 2000.
The Company has entered into an administrative services agreement with a related
party totaling $1,000 per month through June 30, 2001. Total fees under this
agreement for the quarter ended January 31, is included in current liabilities
at January 31, 2000.
Note 4 - Basic and diluted earnings per share
Net income (loss) per common share is based on the weighted average number of
common shares and potential common shares outstanding during each period.
Options to purchase shares of common stock outstanding during the third quarter
of 1999 and for the three and nine months ended January 31, 2000 were not
included in the computation of diluted earnings
Page 7
<PAGE>
per share because the company reported losses during these periods and
therefore, the effect would be anti-dilutive. The following represents a
reconciliation from basic earnings per share to diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Jan. 31, Nine months Ended Jan. 31,
--------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) available to common stockholders $ (92,669) $ (84,867) $ (264,151) $ (84,867)
============ =========== =========== ===========
Weighted-average common shares 33,852,730 23,134,063 33,852,730 8,842,508
Plus: Incremental shares from assumed conversion
Options 6,018,369 4,467,018 5,320,616 1,489,006
------------ ----------- ----------- -----------
Dilutive potential common stock 6,018,369 4,467,018 5,320,616 1,489,006
------------ ----------- ----------- -----------
Adjusted weighted-average shares 39,871,099 27,601,081 39,173,346 10,331,514
============ =========== =========== ===========
Net income (loss) per common share:
Basic and Diluted $ -- $ -- $ (0.01) $ (0.01)
============ =========== =========== ===========
</TABLE>
Item No. 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis of the Company's consolidated financial
position and consolidated results of operations should be read in conjunction
with the Company's condensed consolidated financial statements and related notes
thereto included in Item 1.
Forward-Looking Statements
This report contains forward-looking statements. Additional written or oral
forward looking statements may be made by the Company from time to time in
filings with the Securities and Exchange Commission or otherwise. Such forward
looking statements are within the meaning of the term in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Such statements may include, but not be limited to,
projections of revenues, income, or loss, estimates of capital expenditures,
plans for future operations, products or services, and financing needs or plans,
as well as assumptions relating to the foregoing. The words "believe," "expect,"
"anticipate," "estimate," "project," and similar expressions identify forward
looking statements, which speak only as of the date the statement was made.
Forward-looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified. Future events and actual
results could differ materially from that set forth in, contemplated by, or
underlying the forward-looking statements. The Company undertakes no obligation
to publicly update or revise any forward looking statements, whether as a result
of new information, future events, or otherwise. The following disclosures, as
well as other statements in this Report on Form 10-Q, and in the notes to the
Company's condensed consolidated financial statements, describe factors, among
others, that could contribute to or cause such differences, or that could affect
the Company's stock price.
Overview
Since 1995, the Company was inactive but structured to take advantage of
business opportunities which management believed would be in the best interest
of the Company's shareholders. In December 1998, the Company acquired Pre-Cell
Florida through the issuance of 32,156,000 shares of its common stock and
changed its name to Pre-Cell Solutions, Inc. The Company currently offers
pre-paid residential local and long distance telecommunications services to
customers who reside in the state of Florida.
Results Of Operations
The operating results as reported in the Company's unaudited financial
statements for the three and nine months ended January 31, 2000 are the results
of Pre-Cell Solutions, Inc. the Florida corporation aquired on December 1, 1998.
Since the Company had been inactive until December 1, 1998 there is virtually no
comparative analysis for the three and nine months ended January 31, 2000 as
compared to the same periods ended January 31, 1999.
Liquidity and Capital Resources
For the quarter ended January 31, 2000, net cash provided by operating
activities was $5,126. As of January 31, 2000, the Company had cash and cash
equivalents of approximately $3,000 and a net working capital deficit of
approximately
Page 8
<PAGE>
$552,000. The Company's ability to meet its future obligations in relation to
the orderly payment of its recurring, general and administrative expenses on a
current basis is totally dependent on its ability to expand its current customer
base and secure and develop new business opportunities through acquisitions or
other venture opportunities. Since the Company has no current source of
liquidity, the Company is unable to predict how long it may be able to survive
without a significant infusion of capital from outside sources and it is further
unable to predict whether such capital infusion, if available, will be on terms
and conditions favorable to the Company.
In order to generate future operating activities, the Company intends to
implement its plan to expand its business and search for, investigate and
attempt to secure and develop business opportunities through acquisitions,
mergers or other business combinations and strategic alliances.
On February 2, 2000 the Company entered into a letter of intent to acquire Pre
Paid Solutions ("PPS"), a provider of prepaid cellular phone service and
technology throughout the United State and Canada, in an all-stock transaction.
As a result of the proposed acquisition the PPS shareholders could own 38.46% of
the issued and outstanding shares of Pre-Cell's common stock, assuming
consummation of the merger of US/Intellicom, Inc. (see below) simultaneous with
or before this acquisition. PPS is controlled by Thomas Biddix, the Company's
Chairman of the Board, Chief Executive Officer and President, who ownes 22% of
PPS.. Additionally, on February 24, 2000 the Company entered into a letter of
intent to acquire US/Intellicom, Inc. ("USI"), a leading provider of prepaid
cellular handset technology. Pursuant to the terms of the letter of intent, USI
will merge with and into a wholly owned subsidiary of Pre-Cell and USI will be
the surviving corporation. After the consummation of the proposed merger,
Pre-Cell will own all of the issued and outstanding capital stock of USI. As a
result of the proposed merger, (i) the USI shareholders could own as much as
38.46% of the issued and outstanding shares of Pre-Cell's common stock, assuming
consummation of the previously announced acquisition of Pre-Paid Solutions, Inc.
("PPS") simultaneous with or before the merger; and (ii) Ronald Kindland, USI's
Chairman of the Board and Chief Executive Officer is expected to become a member
of Pre-Cell's Board of Directors and Thomas Fricks, USI's President, is expected
to become Pre-Cell's President and Chief Operating Officer.
These letters of intent, by their nature, are non-binding and the consummation
of the acquisition of Pre Paid Solutions, Inc. and merger of US/Intellicom, Inc.
each remain subject to, among other things, due diligence, execution of a
definitive agreement and the approval by the parties' boards of directors. There
can be no assurance that the Company will infact complete these transactions or
will be successful in its plan to expand its customer base or locate businesses
in the same or similar industry for acquisition.
Year 2000
The Company is aware of the issues associated with the programming code in
existing computer systems as a result of the calendar year 2000. The Year 2000
issue relates to whether computer systems will properly recognize and process
information relating to dates in and after the year 2000. These systems could
fail or produce erroneous results if they cannot adequately process dates beyond
the year 1999 and are not corrected. Prior to the beginning of the year 2000,
the Company analyzed software and hardware used internally by the Company in all
support systems to determine whether they were Year 2000 compliant. Since the
Company has past the critical date of January 1, 2000 and has been unaffected in
all its computer systems and operations after that date it now believes that all
of its software is Year 2000 compliant. The Company does not believe that any
additional cost for the Year 2000 issue will be necessary. The Company also
believes the effect of the Year 2000 issue on entities with which the Company
transacts business will not have a material adverse effect on the Company's
business, financial condition or results of operations.
The Company is dependent on BellSouth to provide local exchange services and
Sprint for long distance services. These service providers do not appear to have
experienced any Year 2000 issues, which interfered with their ability to fulfill
their obligations to the Company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None
Page 9
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Filed Herewith Or
No. Exhibit Description Incorporated By Reference To:
--- ------------------- -----------------------------
10.1 Share Exchange Agreement Exhibit 10.1 to Form 10K for
entered into between the the year ended April 30, 1999
Company and Pre-Cell filed on February 2, 2000.
Solutions, Inc., a Florida
corporation.
10.2 Employment Agreement between Exhibit 10.1 to Form 10K for
the Company and Thomas E. the year ended April 30, 1999
Biddix filed on February 2, 2000.
10.3 Stock Option Agreement between Exhibit 10.1 to Form 10K for
the Company and Thomas E. the year ended April 30, 1999
Biddix filed on February 2, 2000.
10.4 Employment Agreement between Exhibit 10.1 to Form 10K for
the Company and Timothy F. the year ended April 30, 1999
McWilliams filed on February 2, 2000.
10.5 Stock Option Agreement between Exhibit 10.1 to Form 10K for
the Company and Timothy F. the year ended April 30, 1999
McWilliams filed on February 2, 2000.
10.6 Administrative Services Exhibit 10.1 to Form 10K for
Agreement between the Company the year ended April 30, 1999
and Pre-Paid Solutions, Inc. filed on February 2, 2000.
10.7 Sublease between the Company Exhibit 10.1 to Form 10K for
and Pre-Paid Solutions, Inc. the year ended April 30, 1999
for the property located at filed on February 2, 2000.
255 East Drive, Suite C,
Melbourne, Florida
11.1 Statement re Computation of *
Earnings Per Share.
27.1 Financial Data Schedule. Filed herewith.
* Information regarding the computation of earnings per share is set forth in
the Notes to Consolidated Financial Statements.
(b) Report on Form 8-K
None
Page 10
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on March 16, 2000.
PRE-CELL SOLUTIONS, INC.
By: /s/ Thomas E. Biddix
--------------------
Thomas E. Biddix
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signatures Title Date
/s/ Thomas E. Biddix President and Chief March 16, 2000
- -------------------- Executive Officer
Thomas E. Biddix
/s/ Timothy F. McWilliams Chief Accounting Officer March 16, 2000
- -------------------------
Timothy F. McWilliams
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 0
<SECURITIES> 3,000
<RECEIVABLES> 15,560
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,560
<PP&E> 7,498
<DEPRECIATION> 325
<TOTAL-ASSETS> 1,456,535
<CURRENT-LIABILITIES> 580,812
<BONDS> 0
0
0
<COMMON> 338,527
<OTHER-SE> 537,196
<TOTAL-LIABILITY-AND-EQUITY> 1,456,535
<SALES> 133,251
<TOTAL-REVENUES> 133,251
<CGS> 103,284
<TOTAL-COSTS> 397,402
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (264,151)
<INCOME-TAX> 0
<INCOME-CONTINUING> (264,151)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (264,151)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
