FORM 10QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the three months ended June 30, 1996
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 No. 0-18487
CELLULAR TELEPHONE ENTERPRISES, INC.
(Exact name of Registrant as specified in Charter)
Delaware 11-2913717
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification
Number)
240-19 Jamaica Avenue, Bellerose, New York 11426
(Address of principal offices including Zip Code)
Registrant's telephone number, including area code (718) 470-6363
Indicate by check 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
and (2) has been subject to such filing requirement for the past
90 days. Yes x No
The number of shares outstanding of each of the issuer's classes of stock as of
the latest practicable date:
Class Outstanding at August 9, 1996
Common Stock, $.01 par value 9,067,500
Transitional Small Business Disclosure Format (check one)
Yes No X
Page 1 of 13 pages.
<PAGE>
CELLULAR TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
ASSETS
<TABLE>
<CAPTION>
June 30, 1996
(Unaudited)
-------------
<S> <C>
CURRENT ASSETS:
Cash in banks and short term
certificate of deposit $ 4,796
Certificate of deposit 750,000
(Note 3)
Accounts receivable - trade 279,015
Inventories (Note 2) 169,275
Other receivables 111,897
Due from officers (Note 4) 177,973
----------
TOTAL CURRENT ASSETS $ 1,492,956
===========
EQUIPMENT AND LEASEHOLD
IMPROVEMENT less accumulated
depreciation of $381,705
at June 30, 1996 462,907
DEFERRED COST (Note 2) 19,986
INTANGIBLE ASSETS -
License agreement, less
accumulated amortization (Note 2) 937,500
Acquired licenses and
customer list, less
accumulated amortization 1,583,233
-----------
4,496,582
===========
</TABLE>
The accompanying Notes are an integral part of these unaudited
consolidated financial statements.
2
<PAGE>
CELLULAR TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet (Continued)
<TABLE>
<CAPTION>
June 30, 1996
(Unaudited)
-------------
<S> <C>
CURRENT LIABILITIES:
Accounts payable-trade $ 251,258
Accrued expenses and taxes payable 543,404
Deferred income 150,085
Notes Payable Bank 750,000
----------
TOTAL CURRENT LIABILITIES $ 1,694,747
-----------
Certificates of Indebtedness 60,000
-----------
LIABILITIES SUBJECT TO COMPROMISE (Note 5) 2,603,336
-----------
SHAREHOLDERS' EQUITY
Preferred Stock - authorized
1,000,000 shares; $.01 par
value; none issued or
outstanding -0-
Common Stock - authorized
20,000,000 shares; $.01 par
value; issued and outstanding
9,067,500 shares 90,675
Additional paid-in-capital 3,511,066
Unearned portion of Common
Stock issued for services (6,200)
Accumulated deficit (3,457,042)
-----------
TOTAL SHAREHOLDERS' EQUITY
TOTAL EQUITY 138,499
-----------
TOTAL LIABILITIES AND EQUITY $ 4,496,582
===========
</TABLE>
The accompanying Notes are an integral part of these unaudited
consolidated financial statements.
3
<PAGE>
CELLULAR TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
June 30,
------------------
1996 1995
---- ----
<S> <C> <C>
REVENUES:
Sales $ 88,773 $ 161,107
Services 434,014 664,753
--------- --------
TOTAL REVENUES 522,787 825,860
COST OF SALES 211,087 400,953
--------- --------
GROSS PROFIT 311,700 424,907
--------- --------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 295,401 361,271
Advertising 8,288 3,556
Rent 51,218 56,790
Interest Expense 373 528
--------- --------
TOTAL OPERATING EXPENSE 355,280 422,145
--------- --------
OPERATING INCOME (LOSS) (43,580) 2,762
Interest Income -0- -0-
INCOME BEFORE TAXES (43,580) 2,762
Income taxes -- --
--------- --------
NET INCOME (LOSS) $ (43,580) $ 2,762
========= ========
NET LOSS PER SHARE $ NIL $ NIL
WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK 9,067,500 9,067,500
========== =========
</TABLE>
The accompanying Notes are in integral part of these unaudited
consolidated financial statements.
4
<PAGE>
CELLULAR TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1996 June 30, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOW FROM OPERATING
ACTIVITIES:
Net Income $ (43,580) $ 2,762
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 10,000 5,000
Amortization -0- -0-
---------- ---------
(33,580) 7,762
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(Increase) in deferred costs 12,456 43,002
(Increase) in accounts receivable (79,960) 22,784
Decrease (Increase) in inventories 5,767 (2,422)
(Increase) in receivable (48,252) (5,563)
Increase in accounts payable (179,488) (24,935)
Increase (Decrease) in accrued expenses 297,991 (10,826)
Increase (Decrease) in deferred
income (598) (92,865)
---------- ---------
Net Cash Provided from (Used In)
Operations 7,916 20,955
---------- --------
Cash Flows from Investing Activities:
Purchase of (proceeds from sale
of) equipment and leasehold
improvements 19,802 (12,886)
Net Cash Flows from Investing Act.
19,802 (12,886)
-------- ---------
Cash Flow from Financing Activities:
Increase in short-term debt (10,000) -0-
(Decrease) in Long-term debt -- -0-
---------- ---------
Net Cash Flow from Financing (10,000) -0-
Increase (Decrease) in Cash (15,862) (26,079)
Cash at Beginning of Year 20,658 26,597
---------- ---------
Cash at End of Period $ 4,796 $ 518
========== =========
</TABLE>
The accompanying Notes are in integral part of these unaudited
consolidated financial statements.
5
<PAGE>
CELLULAR TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED JUNE 30, 1996
Note 1. Basis of Presentation
In the opinion of management, the accompanying unaudited interim financial
statements presented herein reflect all adjustments which are necessary for a
fair presentation of the financial position of the Registrant and its
wholly-owned subsidiaries as of June 30, 1996 and the results of operations and
cash flows for the three month period ended June 30, 1996. The results of
operations for the three months are not necessarily indicative of the results
that can be expected for the entire fiscal year ending March 31, 1997.
Note 2. SIGNIFICANT ACCOUNTING PRINCIPLES
A. The consolidated financial statements include the accounts of
Cellular Telephone Enterprises, Inc. and its wholly owned subsidiaries (the
"Company"). All significant intercompany balances and transactions have been
eliminated in consolidation.
B. Revenues from paging services, generally billed on a quarterly basis,
are recognized as income in the month of the related service. Sales of paging
devices are recorded at the point of sale.
C. Inventories, which consist primarily of paging devices and related
accessories, are recorded at the lower of cost (first-in, first-out) or market.
D. Equipment, and leasehold improvements are stated at cost less
accumulated depreciation and amortization. Depreciation is provided using the
straight-line method over the assets estimated useful lives, which range from
five to ten years. Maintenance and repairs are charged to operations as
incurred.
E. Costs incurred to acquire licenses to carry radio common carrier
frequencies in the New York City metropolitan and tri-state areas are amortized
over the useful life of the related agreements. Amortization of the cost of the
sublicense has been suspended pending the ultimate resolution of the matters
discussed in Note 7C, Form 10K.
F. Deferred advertising costs represent direct response advertising
placed in local media and are amortized over the average life of the related
customer agreement (considered eighteen months).
6
<PAGE>
G. Deferred income taxes are provided for timing differences between
financial and tax reporting.
H. The Company's earnings (loss) per share are computed by dividing the
net income or loss, by the weighted average outstanding common equivalent
shares; the effect of anti-dilutive common stock equivalents is ignored in the
computations.
I. Common shares issued for services to be rendered, at no or nominal
consideration, are recorded at their fair market value at the date of issuance.
Such amounts are then amortized over the period of service (five years). The
unamortized portion of the deferral shown as a reduction of shareholder's
equity.
Note 3. CERTIFICATE OF DEPOSIT AND NOTE PAYABLE BANK
A certificate of deposit in the amount of $750,000, which matured
during December 1994, to collateralize a demand loan payable to a bank in the
same amount. The loan bears interest at the bank's prime rate plus one-half
percent. The loan and certificate of deposit are subject to Chapter 11
procedures.
Note 4. DUE FROM OFFICERS
Advances to certain officers of the Company which are non-interest
bearing and with no stated maturity date.
Note 5. LIABILITIES SUBJECT TO COMPROMISE
The Registrant filed for Chapter 11 in U.S. Bankruptcy Court, Eastern
District, New York and was approved on November 10, 1994. The Registrant
operates as Debtor in Possession. As a result, the following liabilities are
subject to compromise:
<TABLE>
Cellular Telephone Enterprises
<S> <C>
Carrier Paging $ 737,185
Motorola 701,311
The Weiss Trust (Secured) $ 655,545
Elliot Epstein $ 135,000
Feldman, Radin & Co $ 57,652
MJ&M Advertising $ 36,680
N.Y.S. Sales Tax $ 35,520
Pagenet $ 32,866
Mitchell Weiss (Secured) $ 18,500
Telecommunication Network, Inc. $ 15,766
Skytel $ 14,610
General Accident Insurance Co. $ 13,990
Tristate Communications $ 12,586
Radio Dealers Leasing $ 10,614
Contact Communications $ 10,470
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Various creditors below $10,000 each $ 115,041
---------
Total Liabilities subject to compromise $2,603,336
==========
</TABLE>
Item 2. Management's Discussion and Analysis or Plan of Operations
Results of Operations
Total revenues during the quarter ended June 30, 1996 were $522,787 representing
a decrease of $303,073 (36.7%) from total revenues of $825,860 during the
corresponding quarter in the previous fiscal year. This decrease is principally
attributable to a decline in the selling price of air time, accompanied by a
decline the selling price of paging equipment. The gross profit percentage
during the current quarter was 59.6 % compared to 51.5% during the same period
last year. This increase is attributable to better air time pricing and lower
pricing on the purchases of pagers. Operating expenses decreased $16,879 (4%)
from the corresponding quarter in the previous fiscal year.
Liquidity and Capital Resources
As of June 30, 1996, the Registrant's cash position decreased $15,862. The
Bankruptcy Court approved, on June 21, 1995, the sale of up to $125,000 worth of
Certificates of Indebtedness. The Certificates bear an interest rate of 12
percent per annum for a term of two years. As of the end of June 1996, $60,000
worth of these certificates have been sold. The Registrant anticipates
implementation of the buying and selling policies will yield positive operating
cash flow results in latter part of this current fiscal year. The Registrant
intends to continue to evaluate and consider alternative methods of financing in
order to enhance its liquidity and working capital position.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
On August 5, 1994, petitions were filed in U.S. Bankruptcy Court,
Eastern District of New York, against the Company requesting an order for relief
under Chapter 7 of the U.S. Bankruptcy Code. On November 10, 1994, the Company
filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the
U.S. Bankruptcy Court, Eastern District, New York (the "Bankruptcy Court"). The
Company continues to operate its business as a debtor in possession. The Company
plans to use the bankruptcy process to resolve many of the suits that were
pending against it prior to this filing.
On May 1, 1996, the Company filed with the Bankruptcy Court its Plan of
Reorganization (the "Plan") to emerge from Chapter 11 bankruptcy proceedings.
Under the Plan the existing shareholder's equity interest will be unaffected. On
August 1, 1996, the Company amended its Plan of Reorganization, whereby all
creditors would be fully paid of several years. It is uncertain whether this
Plan will be approved by the Bankruptcy Court in its present form.
8
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: Bellrose, New York
August 13, 1996
CELLULAR TELEPHONE ENTERPRISES, INC.
By: s/s Alexander W. Lanzetta
----------------------------------------
Alexander W. Lanzetta, Treasurer, Chief
Financial Officer and duly authorized
officer to sign on behalf of the
Registrant
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 754,796
<SECURITIES> 0
<RECEIVABLES> 279,015
<ALLOWANCES> 0
<INVENTORY> 169,275
<CURRENT-ASSETS> 1,492,956
<PP&E> 462,907
<DEPRECIATION> 381,705
<TOTAL-ASSETS> 4,496,582
<CURRENT-LIABILITIES> 1,694,747
<BONDS> 0
0
0
<COMMON> 90,675
<OTHER-SE> 47,824
<TOTAL-LIABILITY-AND-EQUITY> 138,499
<SALES> 522,787
<TOTAL-REVENUES> 522,787
<CGS> 211,087
<TOTAL-COSTS> 211,087
<OTHER-EXPENSES> 355,280
<LOSS-PROVISION> (43,580)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (43,580)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (43,580)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
