SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 11, 1996
PRIME CELLULAR, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-18700 13-3570672
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
100 First Stamford Place, Stamford, Connecticut 06902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 327-3620
---------------------------------------------------------------------
Former name or former address, if changed since last report
<PAGE>
Item 7. Financial Statements and Exhibits
The following financial statements and pro forma financial information
omitted from Form 8-K, dated June 11, 1996, in reliance upon instructions
7(a)(4) and 7(b)(2) of Form 8-K, are filed herewith.
(a). Financial Statements of Business Acquired.
Financial Statements of Bern Communication, Inc. as of May 31, 1996.
(i) Balance Sheets
(ii) Statements of Operations
(iii) Statements of Stockholders' Deficit
(iv) Statements of Cash Flows
(v) Notes to Financial Statements
(b). Pro Forma Financial Information.
Unaudited Pro Forma Condensed Consolidated Financial Statements for Prime
Cellular, Inc.
(i) Introduction
(ii) Balance Sheet as of May 31, 1996
(iii) Statement of Operations for the year ended May
31, 1996
(iv) Notes to Pro Forma Condensed Consolidated
Financial Statements
(c). Exhibits.
Reference is made to the Exhibits previously filed with the Securities
and Exchange Commission as Exhibits to the Company's Report on Form 8-K,
dated June 11, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIME CELLULAR, INC.
By: /s/Joseph K. Pagano
----------------------------
Joseph K. Pagano, President
Date: August 26, 1996
<PAGE>
Prime Cellular, Inc.
Index to Financial Statements
================================================================================
Bern Communications, Inc.
(formerly Bern Associates, Inc.) Financial Statements:
Report of Independent Certified Public Accountants F-2
Balance sheets F-3
Statements of operations F-4
Statements of stockholders' deficit F-5
Statements of cash flows F-6
Notes to financial statements F-7-F-11
Prime Cellular, Inc. Pro Forma Condensed Consolidated
Financial Statements - Unaudited:
Introduction F-12
Balance sheet as of May 31, 1996 F-13
Statement of operations for the year ended May 31, 1996 F-14
Notes to pro forma condensed consolidated F-15
financial statements
F-1
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Bern Communications, Inc.
Teaneck, New Jersey
We have audited the accompanying balance sheets of Bern Communications, Inc.
(formerly Bern Associates, Inc.) as of May 31, 1996 and 1995, and the related
statements of operations, stockholders' deficit, and cash flows for the year
ended May 31, 1996 and the period February 22, 1995 (inception) to May 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bern Communications, Inc.
(formerly Bern Associates, Inc.) at May 31, 1996 and 1995 and the results of its
operations and its cash flows for the year ended May 31, 1996 and the period
February 22, 1995 (inception) to May 31, 1995, in conformity with generally
accepted accounting principles.
The financial statements referred to above have been prepared assuming that the
Company will continue as a going concern. The Company has suffered losses since
inception and has a net working capital deficit and a capital deficit. These
conditions raise substantial doubt as to the Company's ability to continue as a
going concern. Management's plan in regard to these matters is described in Note
1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
BDO Seidman, LLP
August 14, 1996
F-2
<PAGE>
Bern Communications, Inc.
(Formerly Bern Associates, Inc.)
Balance Sheets
<TABLE>
<CAPTION>
=================================================================================================
May 31, 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current:
Cash and cash equivalents $ 184,684 $ 11,324
Accounts receivable, net of allowance for doubtful accounts of
$15,000 294,196 --
Inventory 268,707 --
Prepaid expenses 10,746 --
Stock subscription receivable -- 10,000
Due from officers 390 550
- -------------------------------------------------------------------------------------------------
Total current assets 758,723 21,874
Property and equipment, net of accumulated depreciation 119,153 --
Other 3,432 489
- -------------------------------------------------------------------------------------------------
Total assets $ 881,308 $ 22,363
=================================================================================================
Liabilities and Stockholders' Deficit
Current:
Accounts payable $ 434,464 $ --
Accrued expenses 180,561 28,125
Due to officers 76,561 2,776
Note payable related party 500,000 --
- -------------------------------------------------------------------------------------------------
Total current liabilities 1,191,586 30,901
- -------------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' Deficit
Common stock, $.01 par value, 1,000 shares authorized, 400
shares issued and outstanding 4 4
Additional paid-in capital 32,260 32,260
Accumulated deficit (342,542) (18,542)
Unearned compensation -- (22,260)
- -------------------------------------------------------------------------------------------------
Total stockholders' deficit (310,278) (8,538)
- -------------------------------------------------------------------------------------------------
$ 881,308 $ 22,363
=================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
Bern Communications, Inc.
(Formerly Bern Associates, Inc.)
Statements of Operations
================================================================================
For the Period
February 22, 1995
For the Year Ended (inception) to
May 31, 1996 May 31, 1995
- --------------------------------------------------------------------------------
Revenues:
Equipment $1,767,737 $ --
Service 563,437 12,000
- --------------------------------------------------------------------------------
Total revenues 2,331,174 12,000
- --------------------------------------------------------------------------------
Cost of revenues:
Equipment 1,567,436 --
Service 600,828 21,094
- --------------------------------------------------------------------------------
Total cost of revenues 2,168,264 21,094
- --------------------------------------------------------------------------------
Gross profit (loss) 162,910 (9,094)
- --------------------------------------------------------------------------------
Expenses:
General and administrative 486,910 9,448
- --------------------------------------------------------------------------------
Net loss $ (324,000) $ (18,542)
================================================================================
Loss per share of common stock $ (810.00) $ (46.36)
================================================================================
Weighted average common shares outstanding 400 400
================================================================================
See accompanying notes to financial statements.
F-4
<PAGE>
Bern Communications, Inc.
(Formerly Bern Associates, Inc.)
Statements of Stockholders' Deficit
<TABLE>
<CAPTION>
====================================================================================================================================
Common Stock Additional
------------------- Paid-in Accumulated Unearned
Shares Amount Capital Deficit Compensation Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contribution of capital 400 $ 4 $ 32,260 $ -- $ (22,260) $ 10,004
Net loss for the period
February 22, 1995 (inception)
to May 31, 1995 -- -- -- (18,542) -- (18,542)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1995 400 4 32,260 (18,542) (22,260) (8,538)
Satisfaction of stock subscriptions
receivable -- -- -- -- 22,260 22,260
Net loss for the year ended
May 31, 1996 -- -- -- (324,000) -- (324,000)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1996 400 $ 4 $ 32,260 $(342,542) $ -- $(310,278)
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
Bern Communications, Inc.
(Formerly Bern Associates, Inc.)
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
========================================================================================================================
For the Period
For the Year February 22, 1995
Ended May 31, (inception) to
1996 May 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(324,000) $ (18,542)
- ------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization 12,240 --
Compensation recognized in satisfaction of stock subscription
receivable 22,260 --
Reserve for doubtful accounts 15,000 --
Changes in operating assets and liabilities:
Accounts receivable (309,196) --
Inventory (268,707) --
Prepaid expenses (10,746) --
Due from officers 160 (550)
Other assets (3,000) (489)
Due to officers 73,785 2,776
Accounts payable and accrued expenses 586,900 28,125
- ------------------------------------------------------------------------------------------------------------------------
Total adjustments 118,696 29,862
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (205,304) 11,320
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (131,336) --
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 4
Proceeds from stock subscriptions receivable 10,000 --
Proceeds from note payable related party 500,000 --
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 510,000 4
- ------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 173,360 11,324
Cash and cash equivalents, beginning of period 11,324 --
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 184,684 $ 11,324
========================================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
Bern Communications, Inc.
(Formerly Bern Associates, Inc.)
Notes to Financial Statements
================================================================================
1. Organization and Bern Communications, Inc. (formerly Bern
Business Operations Associates, Inc.) (the "Company") was incorporated
in New Jersey on February 22, 1995 to sell
computer equipment and provide services to
telephone companies providing internet services
throughout the United States.
The accompanying financial statements have been
prepared assuming that the Company will continue
as a going concern. The Company has suffered
losses since inception and has a net working
capital deficit and a capital deficit. As a
result, these matters raise substantial doubt as
to the Company's ability to continue as a going
concern. As discussed in Note 10, the Company
entered into a merger agreement with Prime
Cellular, Inc. which had approximately $5,900,000
of cash and investments at May 31, 1996. In
connection with the merger, Prime Cellular, Inc.
is investigating possible breaches of certain
representations and warranties of the Company's
stockholders in connection with the merger and
otherwise. The ultimate outcome of this
investigation is currently not determinable. The
financial statements do not include any
adjustments that might result should the Company
be unable to continue as a going concern.
2. Significant Accounting (a) Inventories
Policies
Inventories, consisting of computer
equipment, are stated at the lower of cost
or market. Cost is determined using the
first-in, first-out (FIFO) method.
(b) Property, Equipment, Depreciation and
Amortization
Property and equipment are stated at cost.
Depreciation and amortization are computed
over the estimated useful lives of the
assets using the straight-line method for
financial reporting and by statutory methods
for income tax purposes.
(c) Cash and Cash Equivalents
For purposes of the statement of cash flows,
the company considers all highly liquid
investments with an original maturity of
three months or less to be cash equivalents.
(d) Revenue Recognition
Equipment revenue is recognized upon
delivery to and acceptance by the customer.
Service revenue consists of consulting and
help desk revenue. Consulting revenue is
recognized ratably over the applicable
period. Help desk revenue is recognized as
earned on a monthly basis.
F-7
<PAGE>
Bern Communications, Inc.
(Formerly Bern Associates, Inc.)
Notes to Financial Statements
================================================================================
(e) Credit Risk
Financial instruments which potentially
subject the Company to concentrations of
credit risk consist principally of temporary
cash investments and trade accounts
receivable with companies primarily located
in the United States. The Company's cash
investments are placed with high credit
quality financial institutions and may
exceed the amount of federal deposit
insurance. The Company reviews a customer's
credit history before extending credit. The
Company establishes an allowance for
possible losses based on factors surrounding
the credit risk of specific customers,
historical trends and other information.
(f) Income Taxes
Deferred income taxes, when applicable, are
provided on differences between the
financial reporting and income taxes bases
of assets and liabilities based upon
statutory tax rates enacted for future
periods.
(g) Stock-Based Compensation
In October 1995, Financial Accounting
Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock Based
Compensation." SFAS No. 123 establishes a
fair value method for accounting for
stock-based compensation plans either
through recognition or disclosure. The
Company will adopt the employee stock based
compensation provisions of SFAS No. 123 by
disclosing the pro forma net income and pro
forma net income per share amounts assuming
the fair value method as of June 1, 1996.
The adoption of this standard will not
impact the Company's results of operations,
financial position or cash flows. Stock
arrangements with non-employees, if
applicable, will be recorded at fair value.
(h) Use of Estimates
In preparing the financial statements in
conformity with generally accepted
accounting principles, management is
required to make estimates and assumptions
that affect the reported amounts of assets
and liabilities and the disclosure of
contingent assets and liabilities at the
date of the financial statements, and
revenues and expenses during the reporting
period. Actual results could differ from
those estimates.
F-8
<PAGE>
Bern Communications, Inc.
(Formerly Bern Associates, Inc.)
Notes to Financial Statements
================================================================================
(i) Financial Instruments
The carrying amounts of financial
instruments including cash and cash
equivalents, accounts receivable, due from
officers, accounts payable, due to officers
and note payable related party approximated
fair value at May 31, 1996 and 1995, because
of relatively short maturity of these
instruments.
3. Property and Major classes of property and equipment consist of
Equipment the following:
May 31, Lives 1996
---------------------------------------------------
Computer equipment 5 years $130,827
Furniture and fixtures 5 years 509
---------------------------------------------------
131,336
Less accumulated depreciation 12,183
---------------------------------------------------
$119,153
===================================================
4. Note Payable Related On May 15, 1996, the Company entered into a
Party revolving credit note with Prime Cellular, Inc.
(See Note 10) in the amount of $1,000,000 and is
payable on demand. At May 31, 1996, the Company
had outstanding $500,000 under the note with
interest at the prime rate, 8%.
5. Capital Transactions During the period ended May 31, 1995, the Company
issued 400 shares of capital stock at $80.65 per
share in exchange for $10,004 cash and unearned
compensation of $22,260. During the year ended May
31, 1996, the Company received cash of $10,000 and
recognized compensation expense of $22,260 in
satisfaction of the capital contribution.
On June 11, 1996, the Company entered into a
merger agreement with Prime Cellular, Inc. wherein
all the capital stock of the Company was exchanged
for a certain number of shares of common stock of
Prime Cellular, Inc. (See Note 10).
F-9
<PAGE>
Bern Communications, Inc.
(Formerly Bern Associates, Inc.)
Notes to Financial Statements
================================================================================
6. Commitments and (a) The Company rents office space under an
Contingencies operating lease expiring on August 31, 1996.
The lease calls for monthly payments of
$1,000.
Rent expense was $12,000 and none for the
year ended May 31, 1996 and the period
February 22, 1995 to May 31, 1995.
(b) The Company has entered into employment
agreements with six officers of the Company
which expire through August 1998. The
agreements provide for minimum aggregate
annual base salaries of $735,000. In
conjunction with the merger agreement with
Prime Cellular, Inc. (See Note 10), five of
these employees agreed to rescind their
rights to the unpaid salaries under the
employment agreements through May 15, 1996.
Compensation relating to these individuals
under the employment agreements and other
arrangements amounted to $180,500 and
$26,700 for the year ended May 31, 1996 and
the period February 22, 1995 to May 31,
1995, respectively. At May 31, 1996, amounts
due to and due from officers of $76,561 and
$390 represents short-term non-interest
bearing advances.
7. Major Customers One customer accounted for 86% of total revenue
for the year ended May 31, 1996. One customer
accounted for the total revenue for the period
ended May 31, 1995.
8. Taxes on Income As of May 31, 1996 and 1995, the Company had gross
deferred tax assets of approximately $110,000 and
$5,000, respectively. A valuation allowance has
been recognized for the entire deferred tax
assets. Deferred income taxes result primarily
from the net operating loss carryforwards. As of
May 31, 1996, the Company had net operating loss
carryforwards of approximately $320,000 which can
be used to offset future taxable income through
2011.
F-10
<PAGE>
Bern Communications, Inc.
(Formerly Bern Associates, Inc.)
Notes to Financial Statements
================================================================================
9. Supplemental Cash Supplemental non-cash investing and financing
Flow Information activity was as follows:
<TABLE>
<CAPTION>
For the period
February 22,
1995
For the year (inception)
ended to May 31,
May 31, 1996 1995
-----------------------------------------------------------------------------------
Capital stock issued for stock subscription
<S> <C> <C>
receivable and unearned compensation $ -- $32,260
===================================================================================
</TABLE>
10. Subsequent Events On June 11, 1996, Bern Associates, Inc. entered
into a merger agreement with Prime Cellular, Inc.
("Prime"). Under the agreement all of the
outstanding shares of the Company's common stock
were exchanged for 4,100,000 shares of Prime. Bern
Associates, Inc. merged with an inactive
subsidiary of Prime Cellular, Inc., which was
formed to complete the merger and simultaneously
Bern Associates, Inc. changed its name to Bern
Communications, Inc. ("Bern"). In connection with
the merger, Prime is investigating possible
breaches of certain representations and warranties
of Bern stockholders in connection with the merger
and otherwise. In the event Prime concludes that
such breaches have occurred Prime may seek to
reduce the consideration paid in the merger or
pursue other remedies available to it including an
action for damages, rescission or equitable
relief.
In July 1996, a stockholder, who is a former
officer of the Company, has attempted to serve a
summons on the Company seeking the release of the
shares received by the stockholder upon the merger
of the Company with Prime Cellular, Inc. or
alternatively, claiming damages of $2,500,000. The
Company has demanded a complaint which has not yet
been served. The Company's management believes the
claims lack merit and that the Company has
counterclaims against the former officer.
F-11
<PAGE>
Prime Cellular, Inc. Unaudited Pro Forma Condensed
Consolidated Financial Statements
Introduction
The following unaudited pro forma condensed consolidated balance sheet as of May
31, 1996, and the unaudited pro forma condensed consolidated statement of
operations for the year ended May 31, 1996 reflect the pro forma condensed
consolidated financial statements of Prime Cellular, Inc. giving effect to the
pro forma adjustments described herein as though the merger with Bern
Communications, Inc. (formerly Bern Associates, Inc.) dated June 11, 1996, had
been consummated at May 31, 1996 for the condensed consolidated balance sheet
and at June 1, 1995 for the condensed consolidated statement of operations.
The unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the notes thereto and with the historical financial
statements of Prime Cellular, Inc., as filed in its annual report on form 10-K
and Bern Communications, Inc. (formerly Bern Associates, Inc.) included
elsewhere herein. See "Index to Financial Statements". The unaudited pro forma
condensed consolidated statement of operations is not necessarily indicative of
operating results that would have been achieved had the merger actually been
consummated at June 1, 1995 and should not be construed as indicative of future
operations.
Under the terms of the merger agreement, Prime Cellular, Inc. will issue
4,100,000 shares of its common stock in exchange for all of the outstanding
shares of common stock of Bern Communications, Inc. (formerly Bern Associates,
Inc.). The transaction is being accounted for as a reverse acquisition whereby
Bern Communications, Inc. (formerly Bern Associates, Inc.) is the acquirer for
accounting purposes.
F-12
<PAGE>
Prime Cellular, Inc.
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
====================================================================================================================================
Bern
Prime Commmuni-
Cellular, cations,
May 31, 1996 Inc. Inc. Adjustments Pro forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current:
Cash and cash equivalents $ 960,223 $ 184,684 $ -- $ 1,144,907
Investments 4,958,796 -- -- 4,958,796
Accounts receivables -- 294,196 -- 294,196
Inventory -- 268,707 -- 268,707
Notes and other receivables 512,885 11,136 [2] (500,000) 24,021
- ------------------------------------------------------------------------------------------------------------------------------------
6,431,904 758,723 (500,000) 6,690,627
Property and equipment, net -- 119,153 -- 119,153
Other assets -- 3,432 -- 3,432
- ------------------------------------------------------------------------------------------------------------------------------------
$6,431,904 $ 881,308 $(500,000) $6,813,212
====================================================================================================================================
Liabilities and Stockholders'
Equity (Deficit)
Current:
Accounts payable and accrued expenses $ 32,643 $ 615,025 $ -- $ 647,668
Notes payable -- 500,000 [2] (500,000) --
Due to officers -- 76,561 -- 76,561
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 32,643 1,191,586 (500,000) 724,229
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity (deficit):
Common stock 43,000 4 [1] (4) 84,000
[1] 41,000
Additional paid-in capital 6,401,005 32,260 [1] (32,260) 6,347,525
[1] (53,480)
Accumulated deficit (44,744) (342,542) [1] 44,744 (342,542)
- ------------------------------------------------------------------------------------------------------------------------------------
6,399,261 (310,278) -- 6,088,983
- ------------------------------------------------------------------------------------------------------------------------------------
$6,431,904 $ 881,308 $(500,000) $6,813,212
====================================================================================================================================
</TABLE>
See accompanying notes to pro Forma condensed consolidated financial statements.
F-13
<PAGE>
Prime Cellular, Inc.
Pro Forma Condensed Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
====================================================================================================================================
Bern
Prime Communi-
Cellular, cations
Year ended May 31, 1996 Inc. Inc. Adjustments Pro forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ -- $2,331,174 $ -- $2,331,174
Interest income 358,865 -- -- 358,865
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenue 358,865 2,331,174 -- 2,690,039
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Cost of sales -- 2,168,264 -- 2,168,264
Selling, general and administrative 378,645 486,910 -- 865,555
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 378,645 2,655,174 -- 3,033,819
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss $(19,780) $ (324,000) $ -- $ (343,780)
====================================================================================================================================
Net loss per share $ -- $ (.04)
====================================================================================================================================
Weighted average common shares
outstanding 4,108,200 [3] 8,208,200
====================================================================================================================================
</TABLE>
See accompanying notes to pro forma condensed
consolidated financial statements.
F-14
<PAGE>
Prime Cellular, Inc.
Notes Pro Forma Condensed Consolidated
Financial Statements
(Unaudited)
================================================================================
1. To record issuance of 4,100,000 shares of Prime
Cellular, Inc. common stock to acquire Bern
Communications, Inc. (formerly Bern Associates,
Inc.). As discussed in the introduction section,
the acquisition was recorded as a reverse
acquisition.
2. To eliminate intercompany loan.
3. Represents the weighted average number of shares
of Prime Cellular, Inc. plus the 4,100,000 shares
issued to the stockholders of Bern Communications,
Inc. (formerly Bern Associates, Inc.).
F-15
