SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
Form 10-Q
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended November 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period of _________________to ______________
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
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
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Sections 12, 13 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan conformed by a court.
Yes No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date: As of January 21, 1997 the registrant had 5,936,187 shares
outstanding of its Common Stock, $.01 par value.
<PAGE>
PRIME CELLULAR, INC.
AND SUBSIDIARY
INDEX
Page
----
PART I. FINANCIAL INFORMATION ............................................. 3
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at November 30, 1996
(unaudited) and May 31, 1996 (audited) ......................... 3
Consolidated Statements of Operations (unaudited) for the
three months ended November 30, 1996 and November 30, 1995 ..... 4
Consolidated Statements of Operations (unaudited) for the
six months ended November 30, 1996 and November 30, 1995 ....... 5
Consolidated Statements of Cash Flows (unaudited) for
the six months ended November 30, 1996 and November 30, 1995 ... 6
Notes to Consolidated Financial Statements ....................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................... 8
PART II. OTHER INFORMATION ............................................... 9
SIGNATURES ................................................................ 9
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
PRIME CELLULAR, INC.
CONSOLIDATED BALANCE SHEETS
November 30, 1996 May 31, 1996
----------------- ------------
(unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 6,078,707 $ 184,684
Accounts Receivables 145,325 294,196
Inventory 151,560 268,707
Notes and Other Receivables 39,072 11,136
----------- -----------
Total Current Assets 6,414,664 758,723
Property and Equipment 183,643 119,153
Other Assets 3,000 3,432
----------- -----------
TOTAL $ 6,601,307 $ 881,308
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current Liabilities:
Accounts Payable and Accrued Expenses $ 739,102 $ 615,025
Deferred Revenue 162,636 --
Note Payable -- 500,000
Due to Officers 14,090 76,561
----------- -----------
Total Current Liabilities 915,828 1,191,586
----------- -----------
Stockholders' Equity (Deficit):
Common Stock 59,362 43,000
Additional Paid-In Capital 6,447,163 (10,736)
Accumulated Deficit (821,046) (342,542)
----------- -----------
Total Stockholders' Equity (Deficit) 5,685,479 (310,278)
----------- -----------
TOTAL $ 6,601,307 $ 881,308
=========== ===========
See accompanying notes to consolidated financial statements
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<PAGE>
PRIME CELLULAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended
--------------------------
November 30, 1996 November 30, 1995
---------------- -----------------
Revenues:
Equipment $ 445,644 $ 968,507
Service 138,078 197,203
--------- ---------
Total Revenues 583,722 1,165,710
--------- ---------
Cost of Revenues:
Equipment 265,797 866,019
Service 57,502 183,175
--------- ---------
Total Cost of Revenues 323,299 1,049,194
--------- ---------
Gross Profit 260,423 116,516
Selling, General and Administrative 591,287 174,671
--------- ---------
Loss From Operations (330,864) (58,155)
--------- ---------
Other Income (Expenses)
Dividend and Interest Income 74,611 1,844
Interest Expense (1,810) (45)
--------- ---------
Total Other Income 72,801 1,799
--------- ---------
Net Loss ($258,063) $(56,356)
========= =========
Loss Per Share of Common Stock $ (.04) $ (.01)
========= =========
Weighted Average Common Shares 5,936,187 4,100,000
========= =========
See accompanying notes to consolidated financial statements
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<PAGE>
PRIME CELLULAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months ended
-----------------------
November 30, 1996 November 30, 1995
----------------- -----------------
Revenues:
Equipment $ 622,122 $ 1,077,811
Service 222,969 197,203
----------- -----------
Total Revenues 845,091 1,275,014
----------- -----------
Cost of Revenues:
Equipment 313,522 935,746
Service 133,947 183,175
----------- -----------
Total Cost of Revenues 447,469 1,118,921
----------- -----------
Gross Profit 397,622 156,093
Selling, General and Administrative 1,022,498 237,639
----------- -----------
Loss From Operations (624,879) (81,546)
----------- -----------
Other Income (Expenses)
Dividend and Interest Income 148,727 2,073
Interest Expense (2,355) (45)
----------- -----------
Total Other Income 146,372 2,028
----------- -----------
Net Loss ($ 478,504) $ (79,518)
=========== ===========
Loss Per Share of Common Stock $ (.08) $ (.02)
=========== ===========
Weighted Average Common Shares
Outstanding 5,849,510 4,100,000
=========== ===========
See accompanying notes to consolidated financial statements
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<PAGE>
PRIME CELLULAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended
------------------------
November 30, November 30,
1996 1995
----------------------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $ (478,504) $ (79,518)
----------- -----------
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 16,462 --
Changes in operating assets and liabilities:
Accounts receivable 148,871 (22,460)
Inventory 117,147 (209,144)
Prepaid expenses and other receivables (27,936) 10,550
Due from officers -- 74,390
Other assets 432 --
Deferred revenue 162,636 (3,390)
Accounts payable and accrued expenses 124,077 228,350
----------- -----------
Total adjustments 541,689 78,296
----------- -----------
Net Cash provided by (used in) Operating Activities 63,185 (1,222)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (80,952) (24,017)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 75,000 22,260
Net cash acquired from sale of stock (Note 1) 5,899,261 --
Repayment of amounts due to officers (62,471) --
----------- -----------
Net Cash provided by Financing Activities 5,911,790 22,260
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 5,894,023 (2,979)
Cash and Cash Equivalents - Beginning of Period 184,684 11,324
----------- -----------
Cash and Cash Equivalents - End of Period $ 6,078,707 8,345
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
PRIME CELLULAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. On June 11, 1996, Bern Associates, Inc. ("Associates") merged with Prime
Cellular, Inc. ("Prime") pursuant to that merger agreement dated May 14, 1996.
By amendment dated as of June 11, 1996, Prime and a majority of the stockholders
of Associates agreed to reduce the consideration paid in the merger as a result
of which all of the outstanding shares of Associate's common stock were
exchanged for 1,025,000 shares of Prime in lieu of 4,100,000 shares as initially
provided. The amendment was entered into to settle claims relating to possible
breaches of certain representations and warranties contained in the merger
agreement. Following the merger of Associates into a subsidiary of Prime, which
was formed to complete the merger, the subsidiary changed its name to Bern
Communications, Inc. ("Bern"). The merger was accounted for as a reverse
acquisition whereby Bern is the acquirer for accounting purposes.
Following Prime's investigation of possible breaches of certain
representations and warranties of former stockholders of Associates in
connection with the merger and otherwise, Prime has brought an action against
certain such former stockholders.
The accompanying unaudited consolidated financial statements of Prime and
its subsidiaries (the "Company") have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management all adjustments (which
consist only of normal recurring adjustments) necessary for a fair presentation
have been included. All significant intercompany transactions and balances have
been eliminated. Operating results for the six months ended November 30, 1996
are not necessarily indicative of the results that will be obtained for the
fiscal year ending May 31, 1997. These financial statements and notes should be
read in conjunction with the financial statements and notes thereto included in
the Company's annual report on Form 10K for the year ended May 31, 1996 and the
Company's report on Form 8K and 8-K/A filed in June 11, 1996 and August 26,
1996, respectively.
For purposes of determining the loss per share of Common Stock, the Company
calculated the weighted average of common shares outstanding, based upon the
reductions in shares of Common Stock pursuant to the amendment dated as of June
11, 1996 to the merger agreement.
The Company sells computer equipment and provides services to telephone
companies providing internet services throughout the United States.
The unaudited pro forma results of operations which follow assume that the
acquisition occurred at June 1, 1995.
Six Months ended November 30, 1995
- --------------------------------------------------------------------------------
Revenues $ 1,275,014
Net Loss $ (43,319)
- --------------------------------------------------------------------------------
Loss per share of
common stock $ -
================================================================================
The pro forma information presented is for information purposes only and does
not purport to be indicative of the results which would actually have been
obtained if the combination had been in effect for the period indicated.
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<PAGE>
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
On June 11, 1996, Bern Associates, Inc. ("Associates") merged with Prime
Cellular, Inc. ("Prime") pursuant to that merger agreement dated May 14, 1996.
By amendment dated as of June 11, 1996, Prime and a majority of the stockholders
of Associates agreed to reduce the consideration paid in the merger as a result
of which all of the outstanding shares of Associate's common stock were
exchanged for 1,025,000 shares of Prime in lieu of 4,100,000 shares as initially
provided. The amendment was entered into to settle claims relating to possible
breaches of certain representations and warranties contained in the merger
agreement. Following the merger of Associates into a subsidiary of Prime, which
was formed to complete the merger, the subsidiary changed its name to Bern
Communications, Inc. ("Bern"). The merger was accounted for as a reverse
acquisition whereby Bern is the acquirer for accounting purposes.
Bern provides software, equipment and services necessary to enable local
telephone companies to become Internet "providers" and provides support and
assistance to such companies and their Internet-user customers.
THREE AND SIX MONTHS ENDED NOVEMBER 30, 1996 VS. 1995
Revenue decreased to $583,722 and $845,091 for the three and six months
ended November 30, 1996, respectively, as compared to $1,165,710 and $1,275,014
for the three and six months ended November 30, 1995, respectively. This
decrease was due to a large equipment sale which occurred during the three
months ended November 30, 1995 which was not duplicated for the quarter ended
November 30, 1996.
The increase in the net loss of $258,063 and $478,504 for the three and six
months ended November 30, 1996, respectively, as compared to the loss of $56,356
and $79,518 for the three and six months ended November 30, 1995, respectively,
resulted from the reduced revenue and increased selling, general and
administrative expense for the three months ended November 30, 1996. Selling,
general and administrative expenses increased due primarily due to expenses
incurred to increase equipment sales and revenue from services. Interest income
increased as a result of acquiring significant cash from the merged company,
which occurred in June 1996.
Liquidity and Capital Resources
At November 30, 1996 the Company had approximately $6,078,000 in cash and
cash equivalent and had working capital of approximately $5,500,000.
Net cash provided by operating activity aggregated $63,185 for the six
months ended November 30, 1996 compared with net cash used of $1,222 for the
prior year's comparable period. The increase in cash provided by operating
activities was attributable to better management of accounts receivable and
increases in deferred revenue and accounts payable offset by the increased loss
from operations.
Net cash used in investing activity aggregated $80,952 for the six months
ended November 30, 1996 compared with $24,017 for the prior year's comparable
period. The increase in cash usage was attributable to increases in purchase of
property and equipment.
Cash flow from financing activities aggregated $5,911,790 for the six
months ended November 30, 1996 compared with $22,260 for the prior year's
comparable period. The increase was due mainly as a result of the merger between
Bern and Prime which occurred in June 1996.
-8-
<PAGE>
Inflation
Inflation has not historically had a material impact on the Company's
operations.
Seasonality
The operations of the Company are not considered to be seasonal.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27. Financial Data Schedule.
(a) Reports on Form 8-K
None
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.
PRIME CELLULAR, INC.
January __, 1997 /s/ Robert A. Reinhart
----------------------
Robert A. Reinhart, Chief Financial
Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q AT NOVEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> NOV-30-1996
<CASH> 6,078,707
<SECURITIES> 0
<RECEIVABLES> 156,612
<ALLOWANCES> 11,287
<INVENTORY> 151,560
<CURRENT-ASSETS> 6,414,664
<PP&E> 212,288
<DEPRECIATION> 28,645
<TOTAL-ASSETS> 6,601,307
<CURRENT-LIABILITIES> 915,828
<BONDS> 0
0
0
<COMMON> 59,362
<OTHER-SE> 5,626,117
<TOTAL-LIABILITY-AND-EQUITY> 6,601,307
<SALES> 583,722
<TOTAL-REVENUES> 583,722
<CGS> 323,299
<TOTAL-COSTS> 839,975
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (330,864)
<INTEREST-EXPENSE> (1,810)
<INCOME-PRETAX> (258,063)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (258,063)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
