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 February 28, 1997
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 April 7, 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 February 28, 1997
(unaudited) and May 31, 1996 (audited) ......................... 3
Consolidated Statements of Operations (unaudited) for the
three months ended February 28, 1997 and February 29, 1996 ..... 4
Consolidated Statements of Operations (unaudited) for the
nine months ended February 28, 1997 and February 29, 1996 ...... 5
Consolidated Statements of Cash Flows (unaudited) for
the nine months ended February 28, 1997 and February 29, 1996 .. 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 ............................................... 10
SIGNATURES ................................................................
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
PRIME CELLULAR, INC.
CONSOLIDATED BALANCE SHEETS
February 28, 1997 May 31, 1996
----------------- ------------
(unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 5,772,916 184,684
Accounts Receivables 249,409 294,196
Inventory -- 268,707
Notes and Other Receivables 82,279 11,136
----------- -----------
Total Current Assets 6,104,604 758,723
Property and Equipment 181,510 119,153
Other Assets 3,600 3,432
----------- -----------
TOTAL $ 6,289,714 $ 881,308
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current Liabilities:
Accounts Payable and Accrued Expenses $ 595,340 $ 615,025
Deferred Revenue 100,137 --
Note Payable -- 500,000
Due to Officers -- 76,561
----------- -----------
Total Current Liabilities 695,477 1,191,586
=========== ===========
Stockholders' Equity (Deficit):
Common Stock 59,362 43,000
Additional Paid-In Capital 6,447,163 (10,736)
Accumulated Deficit (912,288) (342,542)
----------- -----------
Total Stockholders' Equity (Deficit) 5,594,237 (310,278)
----------- -----------
TOTAL $ 6,289,714 $ 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
--------------------------------------
February 28, 1997 February 29, 1996
----------------- -----------------
Revenues:
Equipment $ 406,277 $ 332,431
Service 164,262 163,397
----------- -----------
Total Revenues 570,539 495,828
----------- -----------
Cost of Revenues:
Equipment 258,228 309,356
Service 60,523 153,076
----------- -----------
Total Cost of Revenues 318,751 462,432
----------- -----------
Gross Profit 251,788 33,396
Selling, General and Administrative 417,662 125,828
Reclassified to Cost of Revenues -- (126,250)
----------- -----------
417,662 (422)
Income (Loss) From Operations (165,874) 33,818
----------- -----------
Other Income (Expenses)
Dividend and Interest Income 74,632 102
Interest Expense -- (34)
----------- -----------
Total Other Income (Expenses) 74,632 68
----------- -----------
Net Income (Loss) $ (91,242) $ 33,886
=========== ===========
Income (Loss) Per Share of Common Stock $ (.02) .01
=========== ===========
Weighted Average Common Shares
Outstanding 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 nine months ended
--------------------------------------
February 28, 1997 February 29, 1996
----------------- -----------------
Revenues:
Equipment $ 1,028,399 $ 1,410,242
Service 387,231 360,600
----------- -----------
Total Revenues 1,415,630 1,770,842
----------- -----------
Cost of Revenues:
Equipment 571,750 1,245,102
Service 194,470 336,251
----------- -----------
Total Cost of Revenues 766,220 1,581,353
----------- -----------
Gross Profit 649,410 189,489
Selling, General and Administrative 1,440,160 363,467
Reclassified to Cost of Revenue -- (126,250)
----------- -----------
1,440,160 237,217
Loss From Operations (790,750) (47,728)
----------- -----------
Other Income (Expenses)
Dividend and Interest Income 223,359 2,175
Interest Expense (2,355) (79)
----------- -----------
Total Other Income (Expenses) 221,004 2,096
----------- -----------
Net Loss $ (569,746) $ (45,632)
=========== ===========
Loss Per Share of Common Stock $ (.10) $ (.01)
=========== ===========
Weighted Average Common Shares
Outstanding 5,878,085 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 nine months ended
--------------------------
February 28, February 29,
1997 1996
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (569,746) $ (45,632)
----------- -----------
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities: 25,189 4,849
Depreciation and amortization
Changes in operating assets and liabilities:
Accounts receivable 44,787 (171,664)
Inventory 268,707 (355,750)
Prepaid expenses and other receivables (71,143) (46,800)
Due from officers -- 84,125
Other assets (168) (2,943)
Deferred revenue 100,137 --
Accounts payable and accrued expenses (19,685) 680,245
----------- -----------
Total adjustments 347,824 192,062
----------- -----------
Net Cash provided by (used in) Operating Activities (221,922) 146,430
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (87,546) (111,522)
----------- -----------
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 (76,561) --
----------- -----------
Net Cash provided by Financing Activities 5,897,700 22,260
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 5,588,232 57,168
Cash and Cash Equivalents - Beginning of Period 184,684 11,324
----------- -----------
Cash and Cash Equivalents - End of Period $ 5,772,916 $ 68,492
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
PRIME CELLULAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
envisioned. The amendment resulted from allegations of possible breaches of
certain representations and warranties of certain form stockholders of
Associates in connection with the merger. 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.
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 nine months ended February 28, 1997
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.
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.
Nine Months ended February 29, 1996
- --------------------------------------------------------------------------------
Revenues $1,770,842
Net Income $ 530
- --------------------------------------------------------------------------------
Income 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.
-7-
<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
envisioned. The amendment resulted from allegations of possible breaches of
certain representations and warranties of certain former stockholders of
Associates in connection with the merger. 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 NINE MONTHS ENDED FEBRUARY 28, 1997 VS. FEBRUARY 29, 1996
Revenue increased to $406,277 for the quarter ended February 28, 1997 as
compared to $332,431 for the quarter ended February 29, 1996. This increase was
due to larger equipment sales to a major customer. In light of this, revenue for
the nine months ended February 28, 1997 as compared to February 29, 1996 was
$1,028,399 and $1,410,242, 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 $91,242 and $569,746 for the three and nine
months ended February 28, 1997, respectively as compared to net income of
$33,886 and net loss of $45,632 for the three and nine months ended February 29,
1996, respectively, resulted from increased selling, general and administrative
expenses for the three months ended February 28, 1997. Selling, general and
administrative expenses increased 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.
For the three months ended February 29, 1996, a reclassification of
$126,250 in selling, general and administrative expenses was made to cost of
revenues to make the 1997 and 1996 statements comparative.
Liquidity and Capital Resources
At February 28, 1997 the Company had approximately $5,780,000 in cash and
cash equivalent and had working capital of approximately $5,400,000.
Net cash used by operating activity aggregated $221,922 for the nine months
ended February 28, 1997 compared with net cash provided of $146,430 for the
prior year's comparable period. The decrease in cash provided by operating
activities was attributable to a large decrease in accounts payable offset by a
large decrease in accounts receivable.
Net cash used in investing activity aggregated $87,546 for the nine months
ended February 28, 1997 compared with $111,522 for the prior year's comparable
period. The decrease in cash usage was attributable to major purchases of
property and equipment for the prior years' quarter ended February 28, 1997.
Cash flow from financing activities aggregated $5,897,700 for the nine
months ended February 28, 1997 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.
April __, 1997 ------------------------------------
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 FEBRUARY 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> FEB-28-1997
<CASH> 5,772,916
<SECURITIES> 0
<RECEIVABLES> 260,696
<ALLOWANCES> 11,287
<INVENTORY> 0
<CURRENT-ASSETS> 6,104,604
<PP&E> 218,882
<DEPRECIATION> 37,372
<TOTAL-ASSETS> 6,289,714
<CURRENT-LIABILITIES> 695,477
<BONDS> 0
<COMMON> 59,362
0
0
<OTHER-SE> 5,534,875
<TOTAL-LIABILITY-AND-EQUITY> 6,289,714
<SALES> 1,415,630
<TOTAL-REVENUES> 1,415,630
<CGS> 766,220
<TOTAL-COSTS> 2,206,380
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,355
<INCOME-PRETAX> (569,746)
<INCOME-TAX> 0
<INCOME-CONTINUING> (569,746)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (569,746)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
