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, 1998
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 10, 1998 the registrant had 4,490,500 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, 1998
(unaudited) and May 31, 1997 (audited).......................... 3
Consolidated Statements of Operations (unaudited) for the
three months ended February 28, 1998 and February 29, 1997....... 4
Consolidated Statements of Operations (unaudited) for the
nine months ended February 28, 1998 and February 29, 1997....... 5
Consolidated Statements of Cash Flows (unaudited) for
the nine months ended February 28, 1998 and February 29, 1997... 6
Notes to Consolidated Financial Statements........................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 9
PART II. OTHER INFORMATION................................................ 11
Item 6. Exhibits........................................................ 11
SIGNATURES................................................................. 12
-2-
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
PRIME CELLULAR, INC.
CONSOLIDATED BALANCE SHEETS
February 28,
1998 May 31, 1997
----------- ------------
(unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 505,596 $ 779,216
Investments 4,982,557 4,969,512
Accounts Receivables, net of allowance of $0
and $3,500, respectively 0 44,744
Notes and Other Receivables 199,309 120,102
----------- -----------
Total Current Assets 5,687,462 5,913,574
Property and Equipment, net of accumulated
depreciation of $9,965 and $46,074 as of
February 28, 1998 and May 31, 1997,
respectively 46,833 176,777
Other Assets 1,600 3,600
----------- -----------
TOTAL $ 5,735,895 $ 6,093,951
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses $ 104,421 $ 366,450
Deferred Revenue 0 37,638
----------- -----------
Total Current Liabilities 104,421 404,088
----------- -----------
Stockholders' Equity:
Common Stock 44,906 59,362
Additional Paid-In Capital 5,925,841 6,447,163
Accumulated Deficit (339,273) (816,662)
----------- -----------
Total Stockholders' Equity 5,631,474 5,689,863
----------- -----------
TOTAL $ 5,735,895 $ 6,093,951
=========== ===========
See accompanying notes to consolidated financial statements
-3-
<PAGE>
PRIME CELLULAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended
-----------------------------
February 28, February 28,
1998 1997
----------- -----------
Revenues:
Equipment $ 0 $ 406,277
Service 0 164,262
----------- -----------
Total Revenues 0 570,539
----------- -----------
Cost of Revenues:
Equipment 0 258,228
Service 0 60,523
----------- -----------
Total Cost of Revenues 0 318,751
----------- -----------
Gross Profit 0 251,788
Selling, General and Administrative 188,255 417,662
----------- -----------
Income (Loss) From Operations (188,255) (165,874)
----------- -----------
Other Income (Expenses)
Dividend and Interest Income 83,578 74,632
Interest Expense (867) --
----------- -----------
Total Other Income (Expenses) 82,711 74,632
----------- -----------
Net Income (Loss) $ (105,544) $ (91,242)
=========== ===========
Loss Per Share of Common Stock $ (.02) $ (.02)
=========== ===========
Weighted Average Common Shares 4,536,625 5,936,187
=========== ===========
Outstanding
See accompanying notes to consolidated financial statements
-4-
<PAGE>
PRIME CELLULAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months ended
-----------------------------
February 28, February 28,
1998 1997
----------- -----------
Revenues:
Equipment $ 0 $ 1,028,399
Service 282,277 387,231
----------- -----------
Total Revenues 282,277 1,415,630
----------- -----------
Cost of Revenues:
Equipment 0 571,750
Service 34,420 194,470
----------- -----------
Total Cost of Revenues 34,420 766,220
----------- -----------
Gross Profit 247,857 649,410
Selling, General and Administrative 652,675 1,440,160
----------- -----------
Income (Loss) From Operations (404,818) (790,750)
----------- -----------
Other Income (Expenses)
Dividend and Interest Income 253,104 223,359
Contract Settlement 629,970 0
Interest Expense (867) (2,355)
----------- -----------
Total Other Income (Expenses) 882,207 221,004
----------- -----------
Net Income (Loss) $ 477,389 $ (569,746)
=========== ===========
Loss Per Share of Common Stock $. 09 $ (.10)
=========== ===========
Weighted Average Common Shares
Outstanding 5,216,628 5,878,085
=========== ===========
See accompanying notes to consolidated financial statements
-5-
<PAGE>
PRIME CELLULAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the nine months ended
--------------------------
February 28, February 28,
1998 1997
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 477,389 $ (569,746)
----------- -----------
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
Depreciation and amortization 22,880 25,189
Changes in operating assets and liabilities:
Accounts receivable 44,744 44,787
Inventory -- 268,707
Prepaid expenses and other receivables (79,207) (71,143)
Other assets 2,000 (168)
Deferred revenue (37,638) 100,137
Accounts payable and accrued expenses (262,029) (19,685)
----------- -----------
Total adjustments (309,250) 347,824
----------- -----------
Net Cash provided by (used in) Operating Activities 168,139 (221,922)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposal of fixed assets, net 110,293 0
Increase in investments (13,045) 0
Repurchase of common stock (535,778) 0
Purchase of property and equipment (3,229) (87,546)
----------- -----------
Net Cash provided by (used in) Investing Activities (441,759) (87,546)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 75,000
Net cash acquired from sale of stock (Note 1) 0 5,899,261
Repayment of amounts due to officers 0 (76,561)
----------- -----------
Net Cash provided by Financing Activities 0 5,897,700
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (273,620) 5,588,232
Cash and Cash Equivalents - Beginning of Period 779,216 184,684
----------- -----------
Cash and Cash Equivalents - End of Period $ 505,596 $ 5,772,916
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
-6-
<PAGE>
PRIME CELLULAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Company. On June 11, 1996, Prime Cellular Inc. ("Prime") consummated a merger
with Bern Associates, Inc. (the "Merger"). Bern Associates, Inc. merged with
Prime Cellular Acquisition Corp. ("Acquisition Corp."), and simultaneously
Acquisition Corp. changed its name to Bern Communications, Inc. ("Bern"). Under
the terms of the merger agreement, as amended, all of the outstanding shares of
common stock of Bern Associates, Inc. were exchanged for 1,586,187 shares (the
"Merger Consideration") of Prime. The transaction was accounted for as a reverse
acquisition whereby Bern was the acquirer for accounting purposes.
Bern, was the sole operating entity of Prime and its subsidiaries
(collectively, the "Company"), and engaged in the design, installation,
maintenance, service and support of computer systems enabling companies to
provide Internet access to their subscribers. Bern also developed Internet
software.
The operations of Bern were discontinued in the quarter ended November 30,
1997. During such period, Bern ceased soliciting further opportunities, did not
engage in any further consulting services in connection with its integrated
Internet access service business, discontinued all sales of computer hardware
and/or software and ceased all "help desk" service operations, which service
contracts either expired by their own terms or were mutually terminated by the
parties. In addition, the Company reacquired substantially all of the Merger
Consideration from the former stockholders of Bern Associates, Inc. and settled
certain disputes having arisen out of the Merger, as follows:
(a) On August 28, 1997, pursuant to a settlement between Prime, Bern and
certain former stockholders of Bern Associates, Inc. (the "Settling
Shareholders"), Prime purchased all of the common stock from the Settling
Shareholders (which in the aggregate amounted to 676,937 shares) at $.50 per
share for an aggregate of $338,469 (the "Settlement"). In addition, Prime and
Bern transferred their respective rights, title and interest in certain computer
software programs and computer equipment to certain of the Settling
Shareholders, who had been officers and employees of Bern. In exchange, all of
the Settling Shareholders signed a general release in favor of the Company and
certain of the Settling Shareholders, as applicable, confirmed their prior
resignations as officers and/or directors of Prime and/or Bern, as well as
terminated their respective options to purchase securities of Prime.
(b) On October 15, 1997, the Company entered into an agreement to purchase
20,500 shares of Prime common stock for $10,250 from a former stockholder of
Bern Associates, Inc.
(c) On November 21, 1997, the Company settled outstanding disputes with a
former employee/shareholder of Bern Associates, Inc. and a related party,
whereby an action commenced by the Company against such persons in the New York
Supreme Court was dismissed with prejudice. The settlement provided for the
purchase by Prime of 656,000 shares of Prime common stock from the settling
parties for $150,000. The former employee/settling party also confirmed and
ratified her prior termination as director, officer and employee of Prime and/or
Bern and both of the settling parties signed general releases.
(d) On January 14, 1998, the Company settled with two additional former
shareholders of Bern Associates, Inc. whereby the Company purchased 92,250
shares of Prime common stock, for $37,060.
-7-
<PAGE>
PRIME CELLULAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Income Taxes. There was no provision for federal income taxes for the nine
month period ended February 28, 1998 as a result of net operating loss
carryforwards. The amount of the net operating loss carryforwards which may be
utilized in any future period may be subject to certain limitations, based upon
changes in the ownership of the Company's common stock.
3. Interim Statements. The accompanying unaudited consolidated financial
statements of 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, 1998 are not
necessarily indicative of the results that will be obtained for the fiscal year
ending May 31, 1998. 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 10-K for the year ended May 31, 1997 and the
Company's report on Form 8-K and 8-K/A filed on June 11, 1996 and August 26,
1996, respectively.
4. Proposed Merger. The Company has entered into a non-binding Letter of
Intent to acquire Cell & Molecular Technologies, Inc., ("Cell & Molecular"),
which is engaged in the manufacture and sale of research products for the
biotechnology and pharmaceutical industries and the provision of contract
research and development services to the biotechnology and pharmaceutical
industries. In the transaction, holders of all of the outstanding capital stock
of Cell & Molecular would receive 28% of the stock of the Company. An additional
3% of the stock of the Company would be reserved for a stock option plan for
employees of Cell & Molecular. The transaction is subject to the negotiation and
execution of a definitive merger agreement as well as customary closing
conditions, including satisfaction by the parties with the results of their due
diligence investigations. The Company currently anticipates that if all closing
conditions have been fulfilled, absent unforeseen circumstances, the transaction
will be consummated during the fourth fiscal quarter of 1998.
-8-
<PAGE>
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Report contains statements that are forward-looking, such as statements relating
to plans for future activities. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, those
relating to the Company's growth strategy, successful completion and integration
of any future acquisitions; changes in federal or state laws and the general
condition of the economy and its effect on the securities markets. The words
"believe", "expect", "anticipate", "intend" and "plan" and similar expressions
identify forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
the statement was made.
Results of Operations
Bern discontinued its operations during the quarter ended November 30, 1997
and the Company has had no active business operations since that date.
The Company continues to retain an outside consultant, engaged since 1991
who is also a shareholder and officer of Prime, to assist the Company in finding
new business opportunities for the Company.
Three and Nine Months Ended February 28, 1998 vs. 1997
Revenue decreased to $0 and $282,277 for the three and nine months ended
February 28, 1998, respectively, as compared to $570,539 and $1,415,630 for the
three and nine months ended February 28, 1997, respectively. Gross profit
decreased to $0 and $247,857 for the three and nine months ended February 28,
1998, respectively, as compared to $251,788 and $649,410 for the three and nine
months ended February 28, 1997, respectively. This decrease in revenue and gross
profit in the 1998 period was due to the Company's decision to discontinue its
operations during the quarter ended November 30, 1997.
Dividend and interest income increased to $83,578 and $253,104 for the
three and nine months ended February 28, 1998, respectively, as compared to
$74,632 and $223,359 for the three and nine months ended February 28, 1997,
respectively. This increase resulted from the Company investing in higher
interest bearing instruments for the three and nine months ended February 28,
1998.
For the three months ended February 28, 1998, the Company recorded a net
loss of $(105,544) as compared to a net loss of $(91,242) for the three months
ended February 28, 1997. For the nine months ended February 28, 1998 the Company
recorded a net income of $477,389 as compared to a net loss of $(569,746) for
the nine months ended February 28, 1997. The increase in the loss for the three
months ended February 28, 1998 as compared to 1997 was due to the Company having
no operations during the 1998 period. For the nine months ended February 28,
1998, as compared to 1997, the net income resulted from decreases in cost of
revenue and selling, general and administrative expenses, coupled with an
increase in interest income and a one time (non-recurring) negotiated cash
payment to Bern by a principal customer with respect to the early termination of
its "help desk" service contract with Bern.
Selling, general and administration expenses decreased to $188,255 and
$652,675 for the three and nine months ended February 28, 1998, respectively, as
compared to $417,662 and $1,440,160 for the three and nine months ended February
28, 1997, respectively. These expenses dropped as a result of the Company's
cessation of business operations during the quarter ended November 30, 1997. For
the nine months ended February 28, 1998 as compared to the nine months ended
February 28, 1997, this decrease resulted from both the cessation of business
operations in November 1997 as well as management's decision to downsize the
Company to support only its then existing customer base.
-9-
<PAGE>
Liquidity and Capital Resources
At February 28, 1998 the Company had approximately $5,490,000 in cash and
cash equivalent and had working capital of approximately $5,580,000.
Net cash provided by operating activity aggregated $168,139 for the nine
months ended February 28, 1998 compared with net cash used by operating activity
of $221,922 for the nine months ended February 28, 1997. The increase in cash
provided by operating activities was attributable to an increase of net income
of $477,389 from a net loss of $569,746 for the nine months ended February 28,
1997 respectively, offset by a decrease in accounts payable, deferred revenue
and notes and other receivables.
Net cash used in investing activity aggregated $397,170 for the six months
ended November 30, 1997 compared with $80,952 for the six months ended November
30, 1996. The increase in cash usage was attributable to the repurchase of the
Company's common stock. As a result of the cessation of operations in November
1997 and the management's decision to downsize the Company, there was no cash
flow from financing activities for the nine months ended February 28, 1998. The
cash flow from financing activity of $5,894,023 for the six months ended
November 30, 1996 was a result of the Merger between Bern Associates, Inc. and
Prime's wholly-owned subsidiary in June 1996.
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.
-10-
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8
None
-11-
<PAGE>
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.
April 13, 1998 PRIME CELLULAR, INC.
By: /s/ Robert A. Reinhart
--------------------------
Robert A. Reinhart,
Chief Financial Officer
(duly authorized officer)
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION EXTRACTED
FROM FORM 10-Q AT FEBRUARY 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> FEB-28-1998
<CASH> 505,596
<SECURITIES> 4,982,557
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,687,462
<PP&E> 56,798
<DEPRECIATION> 9,965
<TOTAL-ASSETS> 5,735,895
<CURRENT-LIABILITIES> 104,421
<BONDS> 0
0
0
<COMMON> 44,906
<OTHER-SE> 5,586,568
<TOTAL-LIABILITY-AND-EQUITY> 5,735,895
<SALES> 282,277
<TOTAL-REVENUES> 282,277
<CGS> 34,420
<TOTAL-COSTS> 34,420
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 867
<INCOME-PRETAX> 477,389
<INCOME-TAX> 0
<INCOME-CONTINUING> 477,389
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 477,389
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
