U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal year ended May 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number:0-18700
PRIME CELLULAR, INC.
(exact name of Registrant as specified in its charter)
Delaware 13-3570672
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 First Stamford Pl., Stamford, CT 06902
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (203)327-3620
Securities registered pursuant to Section 12(b) of the Act
None.
Securities registered pursuant to Section 12(g) of the Act
Common Stock, $.01 par value
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 reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the shares of voting stock of the Registrant held
by non-affiliates at August 31, 1996 was approximately $8,107,002 based on the
average of the bid and ask prices as reported by the OTC Bulletin Board of
$_______. As of August 31, 1996, 8,400,000 shares of the Registrant's common
stock were outstanding.
Documents incorporated by reference: NONE
<PAGE>
TABLE OF CONTENTS
PAGE
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PART III
Item 10 Directors and Executive Officers of the Registrant................ 3
Item 11 Executive Compensation ........................................... 4
Item 12 Security Ownership of Certain Beneficial Owners and Management.... 6
Item 13 Certain Relationships and Related Transactions.................... 8
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<PAGE>
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons.
The directors, executive officers, promoters and control persons of the
Company are as follows:
Name Age Position
- ---- --- --------
Joseph K. Pagano 50 Director, President & Chief Financial Officer
(principal executive officer & principal financial
officer)
Frederick R. Adler 70 Director
Rafael Collado 42 Director
L. Mark Newman 55 Director
Michael Islek 34 Director
Joseph K. Pagano has served as President of the Company since June 1994 and
as a consultant and director since 1991. For more than the past five years, Mr.
Pagano has also been active as a private investor.
Frederick R. Adler has been a director of the Company since May 8, 1996.
During the last five years, Mr. Adler's principal occupations have included
being the managing director of Adler & Company, a venture capital management
firm organized in 1968, and the general partner of its related investment funds.
Mr. Adler is also a general partner of Adler and Tolkowsky Management
Associates, L.P., which is the managing general partner of Athena Venture
Partners L.P., and a general partner of Euro-America-I L.P., both to which are
venture capital partnerships. Since January 1, 1991, Mr. Adler has been a
retiring senior partner of the law firm of Fulbright & Jaworski L.L.P., at which
firm he was a
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<PAGE>
senior partner from January 1, 1989 until December 31, 1990. Mr. Adler is also
Chairman of the Executive Committee and a director of Data General Corporation
(a computer company) and Life Technologies, Inc. (a supplier of genetic and
other life science research and production materials), and a director of Micro
Linear Corporation (an integrated circuit manufacturer) and various private
companies. Since 1977, Mr. Adler has been a trustee of Teachers' Insurance &
Annuity Association.
Rafael Collado first became associated with the Company on June 11, 1996
when he became a director of the Company and President and Chief Executive
Officer of the Company's wholly-owned subsidiary, Bern Communications Inc. (the
"Subsidiary"). Prior to joining the Company, Mr. Collado served as director,
shareholder, Chairman of the Board and Chief Executive Officer of Bern
Associates, Inc. ("Bern") since its inception in February of 1995. From July
1991 until May 1994, Mr. Collado served in the capacity of Product Vice
President at Fastcomm, a software and communications company. In the interim
between his association with Fastcomm and Bern Associates, Inc., Mr. Collado
founded and served as director of KIPU, a communications consulting entity.
L. Mark Newman became a director of the Company on June 11, 1996 following
the acquisition of Bern by the Subsidiary. During the past five (5) years, Mr.
Newman, either individually or by affiliation, has been involved as a private
investor.
Michael Islek, Vice President of the Subsidiary, became a director of the
Company on June 11, 1996. Mr. Islek has been the chief executive officer of
Forward Technologies, Inc., a company providing turn-key software solutions.
Directors are elected annually by the stockholders. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board.
During the fiscal year ended May 31, 1996, the Board of Directors held 2
meetings.
Item 11. Executive Compensation
The following table sets forth all cash compensation paid or to be paid by
the Company or the Subsidiary as well as certain other compensation paid or
accrued during the fiscal years indicated to the President of the Company which
individual was the only executive officers of the Company for such period:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
Principal Fiscal --------------------- Long-Term and Other
Name Position Year Salary($) Bonus($) Compensation
- ---- -------- ---- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Joseph K. Pagano President 1996 $75,000 $ 0 Incentive Stock
(Company) 1995 $75,000 $ 0 Options(2)
and CFO(1) 1994 $75,000 $ 0
</TABLE>
- ----------
(1) Mr. Pagano, who was elected President of the Company on June 15, 1994, does
not receive a salary for serving as President or CFO of the Company. Mr.
Pagano does, however, receive a consulting fee of $75,000 per annum and
reimbursement of documented expenses incurred on behalf of the Company in
connection with his position as a consultant to the Company. See "Item 13.
Certain Relationships and Related Transactions"
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<PAGE>
(2) The Company granted Mr. Pagano an incentive stock option to purchase
217,000 shares in substitution for an existing option of the Common Stock
of the Company at $1.625 per share, which option became immediately
exercisable the date of grant. See "Item 13. Certain Relationships and
Related Transactions."
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
====================================================================================================================================
Number of Percent Exercise or Expiration Potential Realizable Market
Securities of Total Base Price Date Value at Assumed Price
Underlying Options/ Annual Rates of
Option/ SARs Stock Price
SARs Granted --------------------------------
Name Granted 0%($) 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joseph K. 217,000 100% $1.625/share May 14, 2001 $81,375 $201,376 $346,336 $2.00/share
Pagano
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
AGGREGATED OPTION/SAR GRANTS IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at May 31, 1996 at May 31, 1996 (1)
---------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Joseph K. 217,000 (2) -0- 1,817,375 -0-
Pagano
- ----------
(1) Options are "in-the-money" if the fair market value of a share of Common
Stock exceeds the exercise prices of such options. At May 31, 1996, the
closing bid price per share of the Common Stock as reported by the OTC
Bulletin Board was $10.00. All options were "in-the-money" at May 31, 1996.
(2) Incentive stock options granted by the board of directors as of May 14,
1996, under the Company's 1990 Stock Option Plan, which options became
immediately vested
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and exercisable from the date of grant and expire five (5) years after the
date of grant.
COMPENSATION OF DIRECTORS
Directors receive no cash compensation for serving on the Board or for
attending Board or Committee, if any, meetings. However, non-employee directors
are eligible to be granted non-statutory stock options under the Company's 1990
Stock Option Plan. Nonstatutory stock options may be granted for up to 10 years
from the date of grant at such exercise prices as the Board of Directors may
determine.
EMPLOYMENT CONTRACTS
Messrs. Collado and Islek are employed under employment agreements, dated
August 1, 1995, with Bern, which expire in July 1998. The agreements are
automatically extended for successive one (1) year periods unless sooner
terminated upon sixty (60) days written notice by either party. Under such
agreements, each of Messrs. Collado and Islek receive base compensation at the
annual rate of $140,000. The employment agreements also provide that each
employee is entitled to four weeks paid vacation and provides for non-disclosure
by such employee, during his employment term and, thereafter, of information
deemed by the Company to be confidential and for non-competition with the
Company in the continental United States for two (2) years following the date of
termination of his employment term.
Each of James B. Fleming, Milton A. Gilbert and Samuel A. Rozzi, all former
directors of the Company, agreed to resign as directors of the Company,
effective upon the consummation of the merger of Bern with and into the
Subsidiary.
ADDITIONAL INFORMATION WITH RESPECT TO
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
There is no separate compensation or similar committee. Mr. Pagano and Mr.
Collado, who are the principal executive officer of the Company and the
President of the Subsidiary, respectively, are members of the Board of Directors
which performs equivalent functions.
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<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, as of August 31, 1996 (except
as otherwise noted in the footnotes), regarding the beneficial ownership (as
defined by the Securities and Exchange Commission (the "Commission")) of the
Company's Common Stock of (i) each person or group (as defined by the
Commission) known by the Company to own beneficially more than five percent of o
outstanding the Company's Common Stock; (ii) each director of the Company; (iii)
the executive officer named in the Summary Compensation Table (see "Item 11 -
Executive Compensation"); and (iv) all directors and executive officers of the
Company as a group. Except as otherwise specified, the named beneficial owner
has sole voting and investment power over the shares listed.
<TABLE>
<CAPTION>
=======================================================================================
Name and Address of Amount and Nature of Percentage of Common
Beneficial Owner Beneficial Ownership Stock
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Frederick R. Adler 400,000 6%
1520 S. Ocean Blvd.
Palm Beach, FL 33480
- ---------------------------------------------------------------------------------------
Joseph K. Pagano 1,422,700(1) 17%
P.O. Box 7785
Aspen, CO 81612
- ---------------------------------------------------------------------------------------
Samuel A. Rozzi 450,580(2) 5%
Corporate National Realty
7600 Jericho Turnpike
Woodbury, NY 11797
- ---------------------------------------------------------------------------------------
D.H. Blair Investment 1,116,859(3) 13%
Banking Corp.
44 Wall Street
New York, NY 10005
- ---------------------------------------------------------------------------------------
D.H.Blair Holdings, Inc. 1,116,859(3) 13%
44 Wall Street
New York, NY 10005
- ---------------------------------------------------------------------------------------
J. Morton Davis 1,122,859(3)(4) 13%
44 Wall Street
New York, NY 10005
- ---------------------------------------------------------------------------------------
Ralph Collado 543,250(5)(6) 6%
- ---------------------------------------------------------------------------------------
Michael Islek 635,500(5)(6) 8%
- ---------------------------------------------------------------------------------------
Atalanta Selection Fund #6, 346,000(5)(6)(8) 4%
Limited Partnership
- ---------------------------------------------------------------------------------------
Ellen Kirschenbaum 553,500(5)(6) 7%
- ---------------------------------------------------------------------------------------
William Josuva 635,500(5)(6) 8%
- ---------------------------------------------------------------------------------------
Suhail Nanji 635,500(5)(6) 8%
- ---------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------
Neil Levine 451,000(5)(6) 5%
- ---------------------------------------------------------------------------------------
All directors and officers as 3,457,450(9) 41%
a group (5 persons)
=======================================================================================
</TABLE>
(1) Includes (a) 217,000 shares which may be acquired by Mr. Pagano upon the
exercise of an option, (b) 300,000 shares owned by Mr. Rozzi which Mr.
Pagano has the right to vote pursuant to proxy and (c) 50,000 shares owned
by one individual which Mr. Pagano has the right to vote pursuant to a
proxy.
(2) Mr. Rozzi has granted to Mr. Joseph K. Pagano a proxy to vote 300,000 of
these shares.
(3) The information with respect to D.H. Blair Investment Banking Corp. ("Blair
Investment"), D.H. Blair Holdings, Inc. ("Blair") and J. Morton Davis is
based upon Amendment No. 6, dated August 2, 1995, to the Schedule 13D,
dated January 31, 1992, filed by such persons with the SEC. The Schedule
13D states that Blair Investment and Blair share voting and investment
power over 1,116,859 shares, and Mr. Davis has sole voting and investment
power over such 1,116,859.
(4) Includes 6,000 shares owned by Mr. Davis' wife. Mr. Davis disclaims
beneficial ownership of the 6,000 shares owned by his wife.
(5) Represents shares granted to the named individual or entity as
consideration (the "Merger Consideration") under the Agreement of Merger,
dated May 14, 1996, whereby the Subsidiary acquired, by merger, Bern. All
such shares are held in escrow pursuant to an excrow agreement, dated as of
June 11, 1996.
(6) In connection with the merger, the Company and certain shareholders of Bern
have been negotiating a settlement of claims by the Company for breaches of
representations and warranties, including without limitation a reduction in
the amount of the Merger Consideration received by such shareholders.
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<PAGE>
(7) L. Mark Newman, a director of the Company, has a controlling interest in
the limited partnership.
(8) Includes 100,000 shares granted by the Company in addition to the Merger
Consideration pursuant to the May 14, 1996 board meeting.
(9) Includes an aggregate of 267,500 shares which may be acquired within 60
days upon the exercise of options and 50,000 shares owned by one individual
which Mr. Pagano has the right to vote pursuant to a proxy.
(10) Includes 346,000 shares held by an affiliate of L. Mark Newman, a director
of the Company.
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<PAGE>
Item 13. Certain Relationships and Related Transactions
The law firm of Fulbright & Jaworski L.L.P. performed legal services for
the Company during the Company's past and present fiscal years. Frederick R.
Adler is a retiring senior partner in the firm of Fulbright & Jaworski L.L.P.
In July 1991, the Company entered into a Consulting Agreement with Joseph
K. Pagano, effective through July 2, 1993, which has been renewed annually the
last four years through July 2, 1997, pursuant to which Mr. Pagano has been
retained by the subsidiary to assist the company and the subsidiary in finding a
business to acquire and to advise the Company and the subsidiary in the
investment of their funds pending such acquisition. The consulting Agreement
initially provided for a monthly consulting fee and non-accountable expense
allowance of $6,250 in the aggregate. In May 1992, the consulting Agreement was
amended to provide for a monthly consulting fee of $6,250 and reimbursement of
documented expenses incurred on behalf of the Company and approved by an officer
of the Company. The consulting agreement also provides for Mr. Pagano to
participate in employee benefit plans and receive fringe benefits generally
provided to the Company's senior management and permits the payment to Mr.
Pagano of bonuses within the discretion of the Board. Mr. Pagano was elected
President and a director of the Company on June 15, 1994.
On May 14, 1996, the board of directors of the Company terminated the
Non-Qualified Stock Option Agreement, dated July 2, 1991, granted to Mr. Pagano
in connection with his Consulting Agreement and, in lieu thereof, granted Mr.
Pagano incentive stock options to purchase up to 217,000 shares of the Company's
Common Stock, at a purchase price of $1.625 per shares, which options to
purchase shares of Common Stock were immediately exercisable.
In May 1996, the Company sold for a purchase price at $1.625, 100,000
shares of the Common Stock of the Company to each of Messrs. Adler and Newman.
In June 1996, the Subsidiary acquired, by merger, Bern whereby the former
shareholders of Bern received in exchange for each share held by them in such
company 10,250 shares of the Common Stock of the Company. (See "Item 12 -
Security Ownership of Certain Beneficial Owners and Management"). In connection
with the merger, the Company is investigating possible breaches of certain
representations and warranties of the Bern stockholders in connection with the
merger and otherwise. In the event the Company concludes that such breaches have
occurred the Company may seek to reduce the consideration paid in the merger or
pursue other remedies available to it, including an action for damages,
rescission or other equitable relief. (See "Item 12 - Security Ownership of
Certain Beneficial Owners and Management").
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who beneficially own more than ten percent of the
Company's Common Stock, to file initial reports of ownership and reports of
changes in ownership with the commission and the National Association of
Securities Dealers, Inc. Executive officers, directors and greater than ten
percent beneficial owners are required by Commission
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<PAGE>
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based upon on a review of the copies of such forms furnished to the Company
and written representations from the Company's executive officers and directors,
the Company believes that during fiscal 1995 all Section 16(a) filing
requirements applicable to its executive officers, directors and greater than
ten percent beneficial owners were complied with.
SIGNATURE
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.
PRIME CELLULAR, INC.
September 28, 1996 By: /s/ Joseph K. Pagano
-----------------------
Joseph K. Pagano
President
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