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): May 29, 1997
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
Not Applicable
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 the Company's Report on Form 8-K for that event dated May 29, 1998
filed with the Commission on June 15, 1998, 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 Cell & Molecular Technologies, Inc. and Subsidiary
(i) Independent Auditors Report
(ii) Balance Sheets at December 31, 1997, 1996 and 1995
(iii) Statements of Operations for the years ended December 31, 1997,
1996 and 1995
(iv) Statements of Stockholders' Deficit for the years ended December
31, 1997, 1996 and 1995
(v) Statements of Cash Flows for the years ended December 31, 1997,
1996 and 1995
(vi) Notes to Consolidated 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 December 31, 1997
(iii) Statement of Operations for the year ended December 31, 1997
(iv) Balance Sheet as of March 31, 1998
(v) Statement of Operations For the Three Months Ended March 31, 1998
(vi) 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, filed with
the Commission on June 15, 1998.
<PAGE>
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.
Dated: August 11, 1998
PRIME CELLULAR, INC.
By /s/ JOSEPH K. PAGANO
----------------------------------
Name: Joseph K. Pagano
Title: President
CELL & MOLECULAR TECHNOLOGIES, INC.
AND SUBSIDIARY
Consolidated Financial Statements
December 31, 1997, 1996 and 1995
<PAGE>
CELL & MOLECULAR TECHNOLOGIES, INC.
AND SUBSIDIARY
Table of Contents
================================================================================
Page
Independent Auditors' Report 1
Consolidated Financial Statements
Balance Sheets at December 31, 1997 and 1996 2-3
Statements of Operations
For the Years Ended December 31, 1997, 1996 and 1995 4
Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 1997, 1996 and 1995 5
Statements of Cash Flows
For the Years Ended December 31, 1997, 1996 and 1995 6-7
Notes to Consolidated Financial Statements 8-18
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders
Cell & Mollecular Technologies, Inc. and Subsidiary
We have audited the accompanying balance sheets of Cell & Mollecular
Technologies, Inc. and Subsidiary as of December 31, 1997 and 1996, and the
related statements of operations, changes in stockholders' equity and cash flows
for the years ended December 31, 1997, 1996 and 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 Cell & Mollecular Technologies,
Inc. and Subsidiary as of December 31, 1997 and 1996 and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
RAICH ENDE MALTER LERNER & CO.
East Meadow, New York
March 6, 1998
-1-
<PAGE>
CELL & MOLECULAR TECHNOLOGIES, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
================================================================================
<TABLE>
<CAPTION>
December 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Assets
Current Assets
Cash $ 743,683 $ 133,722
Accounts receivable - net of allowance for doubtful
accounts of $10,000 and $-0- for 1997 and 1996,
respectively 281,332 274,904
Unbilled services 65,188 33,610
Inventory 135,077 77,702
Prepaid expenses -- 14,713
---------- ----------
1,225,280 534,651
---------- ----------
Property, Plant and Equipment 1,117,639 382,103
Less: Accumulated depreciation and amortization 321,868 209,790
---------- ----------
795,771 172,313
---------- ----------
Deferred Financing Costs - net of accumulated amortization
of $175 7,406 --
---------- ----------
$2,028,457 $ 706,964
========== ==========
</TABLE>
-2-
<PAGE>
================================================================================
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Line of credit $ 31,295 $ 25,690
Current maturities of long-term debt 27,038 3,431
Current maturities of stockholder loans -- 133,057
Accounts payable 222,994 133,386
Accrued salaries and payroll taxes 40,235 174,217
Taxes payable -- 800
Customer deposits 614,640 --
Unearned revenue 52,648 124,720
----------- -----------
988,850 595,301
Long-Term Debt - net of current maturities 351,111 3,872
Stockholder Loans - net of unamortized discount
of $116,748 397,627 --
----------- -----------
1,737,588 599,173
----------- -----------
Stockholders' Equity
Convertible Preferred Stock - $.01 par value - 1,000
shares authorized, issued and outstanding in 1997 10 --
Class A Common Stock - $.01 par value - 2,000 shares
authorized; 1,000 shares issued and 790 shares
outstanding in 1997 and 1,000 shares issued and
outstanding in 1996 8 10
Class B Common Stock - $.01 par value - 150 shares
authorized, none issued and outstanding in 1997 and
1996 -- --
Additional paid-in capital 392,691 --
Retained earnings (deficit) (101,840) 107,781
----------- -----------
290,869 107,791
----------- -----------
$ 2,028,457 $ 706,964
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
CELL & MOLECULAR TECHNOLOGIES, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
================================================================================
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Income
Contract revenue $ 1,125,855 $ 602,836 $ 729,268
Sales of goods 1,054,335 868,385 797,123
Other income 44,375 4,704 --
Interest income 12,949 1,182 1,205
----------- ----------- -----------
2,237,514 1,477,107 1,527,596
----------- ----------- -----------
Expenses
Cost of contract revenue 696,195 378,071 488,493
Cost of goods sold 705,519 555,167 503,666
Selling, general and administrative expenses 997,994 555,513 456,649
Interest expense 47,427 7,077 8,136
Loss on sale of fixed assets -- 41,258 --
----------- ----------- -----------
2,447,135 1,537,086 1,456,944
----------- ----------- -----------
Income (Loss) Before Provision (Benefit) for
Income Taxes (209,621) (59,979) 70,652
Provision (Benefit) for Income Taxes -- 2,638 13,943
----------- ----------- -----------
Net Income (Loss) $ (209,621) $ (62,617) $ 56,709
=========== =========== ===========
Basic and Diluted Net Income (Loss) Per Share $ (229.85) $ (62.62) $ 56.71
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
CELL & MOLECULAR TECHNOLOGIES, INC.
AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
================================================================================
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Convertible Class A Class B
Preferred Stock Common Stock Common Stock Additional Retained
-------------------- --------------------- ---------------- Paid-In Earnings
Shares Amount Shares Amount Shares Amount Capital (Deficit) Total
==============================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1995 -- $ -- 1,000 $10 -- $ -- $ -- $113,689 $113,699
Net income -- -- -- -- -- -- -- 56,709 56,709
--------- --------- --------- --------- ----- ----- --------- --------- ---------
Balance - December 31, 1995 -- -- 1,000 10 -- -- -- 170,398 170,408
Net (loss) -- -- -- -- -- -- -- (62,617) (62,617)
--------- --------- --------- --------- ----- ----- --------- --------- ---------
Balance - December 31, 1996 -- -- 1,000 10 -- -- -- 107,781 107,791
Issuance of preferred stock 1,000 10 -- -- -- -- 249,990 -- 250,000
Discount on stockholder loan -- -- -- -- -- -- 120,199 -- 120,199
Contribution of shares back to
the Company -- -- (300) (3) -- -- 3 -- --
Stock grants -- -- 90 1 -- -- 22,499 -- 22,500
Net (loss) -- -- -- -- -- -- -- (209,621) (209,621)
--------- --------- --------- --------- ----- ----- --------- --------- ---------
Balance - December 31, 1997 1,000 $10 790 $8 -- $ -- $392,691 $(101,840) $290,869
========= ========= ========= ========= ===== ===== ========= ========= =========
</TABLE>
See notes to financial statements.
-5-
<PAGE>
CELL & MOLECULAR TECHNOLOGIES, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows Page 1 of 2
================================================================================
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------
1997 1996 1995
---------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $(209,621) $(62,617) $56,709
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 112,253 68,302 41,387
Loss on sale of fixed assets -- 41,258 --
Increase in allowance for doubtful accounts 10,000 -- --
Accrued interest on stockholder loans 17,826 -- --
Stock-based compensation 22,500 -- --
(Increase) decrease in:
Accounts receivable (16,428) (99,581) (49,317)
Unbilled services (31,578) (33,610) --
Inventory (57,375) (20,542) 13,681
Prepaid expenses 14,713 (9,967) (1,452)
Increase (decrease) in:
Accounts payable 89,608 70,975 27,245
Accrued salaries and payroll taxes (133,982) 174,217 (11,362)
Customer deposits 614,640 -- (125,765)
Taxes payable (800) (13,394) 4,257
Unearned revenue (72,072) 124,720 --
--------- --------- ---------
359,684 239,761 (44,617)
--------- --------- ---------
Cash Flows from Investing Activities
Acquisitions of property and equipment (447,936) (100,774) (102,076)
Proceeds from sale of fixed assets -- 21,675 --
--------- --------- ---------
(447,936) (79,099) (102,076)
--------- --------- ---------
Cash Flows from Financing Activities
Net borrowings on line of credit 5,605 2,591 23,099
Proceeds of notes payable 100,000 -- --
Payment of deferred financing costs (7,581) -- --
Repayments of notes payable (16,754) (42,799) (11,876)
Loans from stockholders 517,150 -- 53,623
Repayments of loans from stockholders (150,207) (30,806) --
Issuance of preferred stock 250,000 -- --
--------- --------- ---------
698,213 (71,014) 64,846
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
-6-
<PAGE>
CELL & MOLECULAR TECHNOLOGIES, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows Page 2 of 2
================================================================================
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-----------------------------------
1997 1996 1995
-----------------------------------
<S> <C> <C> <C>
Increase (Decrease) in Cash $ 609,961 $ 89,648 $ (81,847)
Cash - beginning 133,722 44,074 125,921
--------- --------- ---------
Cash - end $ 743,683 $ 133,722 $ 44,074
========= ========= =========
Supplemental Disclosures Cash paid during the year:
Interest $ 9,565 $ 7,077 $ 8,136
========= ========= =========
Income taxes $ -- $ 2,638 $ 13,943
========= ========= =========
Non-cash investing and financing activities:
Land and building acquired with mortgage $ 287,600 $ -- $ --
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
-7-
<PAGE>
CELL & MOLECULAR TECHNOLOGIES, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements December 31, 1997, 1996 and 1995
================================================================================
1- Nature of Entity, Operations and Summary of Significant Accounting
Policies
Nature of Entity and Operations - Cell & Molecular Technologies, Inc. (the
"Company"), was incorporated on May 6, 1997. The Company is comprised of
two separate divisions that provide goods and services in the domestic
biotechnology industry. The Specialty Media Division ("SM") is a
manufacturer and wholesaler of cell culture media and reagents. The
Molecular Cell Science Division ("MCS") provides research services to
pharmaceutical companies and other molecular biology and cell biology
research and development entities.
Effective May 9, 1997, the Company acquired 100% of the issued and
outstanding shares of two companies owned by Company stockholders,
Specialty Media, Inc. and Molecular Cell Science, Inc. (an S corporation
for federal income tax purposes), in exchange for 1,000 shares of its Class
A Common Stock. This transaction was treated as a transfer of shares
between companies under common control in a manner similar to a pooling of
interests. Accordingly, all assets and liabilities of the merged companies
were recognized at historical costs and the historical financial statements
of Specialty Media, Inc. and Molecular Cell Science, Inc. became a
component of the historical financial statements of the Company.
Accordingly, the accompanying consolidated financial statements present the
merger as of first day of the earliest fiscal year presented.
A summary of significant accounting policies is as follows:
a. Principle of Consolidation - In August, 1997, the Company acquired
sole ownership of 580 Marshall Street, L.L.C. from two Company
stockholders. The accompanying consolidated financial statements
include the assets and liabilities of 580 Marshall Street, L.L.C. and
results of its operations since its inception in 1997. All
intercompany transactions and balances have been eliminated upon
consolidation.
b. Cash and Cash Equivalents - Cash and cash equivalents include liquid
investments with maturities of three months or less at the time of
purchase.
c. Inventory - Inventory is stated at the lower of cost (first-in,
first-out method) or market.
d. Financial Instruments - The Company does not hold any financial
instruments for trading purposes. The carrying value of cash and debt
approximated fair value at December 31, 1997 and 1996.
Continued
-8-
<PAGE>
e. Property, Plant and Equipment - Property, plant and equipment are
stated at cost. Depreciation is provided on the straight-line method
over the estimated useful lives of the assets, which range from three
to forty years. Amortization of leasehold improvements is provided on
the straight-line basis over the lesser of the estimated useful life
of the asset or the remaining lease term. Repairs and maintenance
which do not extend the useful lives of the related assets are
expensed as incurred.
f. Deferred Financing Costs - Financing costs, principally incurred in
connection with the mortgage on Company premises, is amortized on a
straight-line basis over the duration of the related loan.
g. Revenue Recognition - The Company records revenues from fixed-price
contracts extending over more than one accounting period on a
percentage-of-completion basis. If it is determined that a loss will
result from the performance of a contract, the entire amount of
estimated loss is charged against income in the period in which the
determination is made. In general, prerequisites for billings are
established by contractual provisions including predetermined payment
schedules, the achievement of contract milestones or submission of
appropriate billing detail. Unbilled services arise when services have
been rendered but clients have not been billed. Similarly, unearned
revenue represents amounts billed in excess of revenue recognized.
h. Research and Development Costs - Expenditures for Company-sponsored
research and development are expensed as incurred. Such costs were
approximately $20,000, $10,000 and $5,000 in 1997, 1996 and 1995,
respectively.
i. Income Taxes - The Company accounts for certain income and expense
items differently for financial reporting and income tax purposes.
Deferred tax assets and liabilities are determined based on the
difference between the financial statement and income tax basis of
assets and liabilities applying the enacted statutory tax rates in
effect for the year in which the differences are expected to reverse.
j. Advertising Costs - All costs relating to advertising and marketing
have been expensed in the period incurred. Advertising costs during
1997, 1996 and 1995 were $12,726, $56,342 and $10,726, respectively.
k. Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
l. Recent Accounting Pronouncements
> Earnings Per Share - The Company has chosen to adopt Financial
Accounting Standards No. 128 Earnings Per Share which replaced
the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Earnings per share is
calculated by dividing net income (loss) by the sum of the
weighted average number
Continued
-9-
<PAGE>
of shares of common stock and common stock equivalents
outstanding for the years ended December 31, 1997, 1996 and 1995.
Common stock equivalents were excluded from the computation for
the years ended December 31, 1997 and 1996 because of their
anti-dilutive effect.
> Stock-Based Compensation - Statement of Financial Accounting
Standards No. 123 Accounting for Stock-Based Compensation,
encourages, but does not require companies to record compensation
cost for stock-based employee compensation plans at fair value.
The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees. APB No. 25 requires no recognition of
compensation expense for the stock-based compensation
arrangements provided by the Company where the exercise price is
equal to the market price at the date of the grants.
> Segments - The Company has chosen early adoption of Financial
Accounting Standards No. 131 Disclosures about Segments of an
Enterprise and Related Information, which expands and modifies
disclosures and has no impact on consolidated financial position,
results of operations or cash flows.
2- Issuance of Preferred Stock and Stockholder Loans
In May, 1997, the Company issued 1,000 shares of Convertible Preferred
Stock to three individuals for $250,000. The Preferred Stock carry 50% of
the voting rights of the Company. Such shares are non-interest-bearing and
are convertible to an equal number of Class A Common Stock, at the option
of the holder.
In July, 1997, the Company borrowed $500,000, in aggregate, from the
Preferred Stock stockholders of the Company. The promissory notes bear 5%
simple interest over five years. Principal and accrued interest are payable
in full on July 14, 2002. As the promissory notes bear a below market rate
of interest, additional interest has been imputed on the notes to
approximate the Company's current available financing rate of 10%. At
December 31, 1997, the balance of stockholder loans, net of unamortized
discount of $116,748, is $397,627.
3- Inventory
Inventory consists of the following:
December 31,
----------------------
1997 1996
-------- --------
Finished Goods $74,469 $38,335
Packaging Materials 32,458 27,915
Raw Materials 28,150 11,452
-------- --------
$135,077 $77,702
======== ========
Continued
-10-
<PAGE>
4 - Property, Plant and Equipment
Property, plant and equipment consist of the following:
December 31,
---------------------- Estimated
1997 1996 Useful Lives
---------- ---------- ------------
Land $ 90,000 $ -- --
Building and Improvements 255,970 -- 10-40 years
Machinery and Equipment 580,621 264,582 5-10 years
Leasehold Improvements 104,761 80,336 Lease life
Furniture and Fixtures 86,287 37,185 5-7 years
---------- ----------
1,117,639 382,103
Less: Accumulated depreciation
and amortization 321,868 209,790
---------- ----------
$ 795,771 $ 172,313
========== ==========
Depreciation and amortization expense charged to operations is $112,253,
$68,302 and $41,387 for the years ended December 31, 1997, 1996 and 1995,
respectively.
5- Line of Credit
At December 31, 1997 and 1996, the Company had outstanding balances of
$31,295 and $25,690, respectively on a $75,000 line of credit issued by a
bank. The line of credit had expired in September, 1997 and was paid in
full in January, 1998.
6- Related Party Transactions and Lease Commitment
a. The Company has, from time to time, received various other loans from
its stockholders to fund operations. At December 31, 1996, amounts due
to stockholders was $133,057.
b. During 1996, the Company sold certain automobiles to stockholders and
incurred a loss of approximately $41,000 on the sale.
c. The Company subleases its administrative office and executive research
laboratory from a stockholder of the Company. The underlying lease
expires in November, 1999. Rent payments are made directly to the
landlord on behalf of the officer of the Company. Rental expense of
$17,444, $14,000 and $38,000 was incurred under sublease for the years
ended December 31, 1997, 1996 and 1995, respectively.
The future minimum lease payments to be made for these premises are
$14,400 and $13,200 for the years ended December 31, 1998 and 1999,
respectively.
Continued
-11-
<PAGE>
7 - Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
Mortgage Payable - payable in 240 monthly installments of
$2,610 to February, 2017, including interest at
9%- secured by the Company's building in Phillipsburg, New Jersey $284,972 $ --
Notes Payable - bank - payable in 60 monthly installments of $2,132 to
March, 2002, including interest at 10% - guaranteed
by two stockholders and secured by a stockholder's personal residence 89,303 --
Other 3,874 7,303
-------- --------
378,149 7,303
Less: Current maturities 27,038 3,431
-------- --------
$351,111 $ 3,872
======== ========
</TABLE>
Principal maturities of long-term debt over the next five years are as
follows;
December 31, 1998 $ 27,038
1999 25,533
2000 28,147
2001 31,028
2002 16,038
Thereafter 250,365
-----------
$ 378,149
===========
8- Employee Agreement
In May, 1997, the Company entered into an employment agreement with its
President/CEO. The agreement is for an initial term of three years and
contains a provision for an automatic one-year extension, unless written
notice is received by either party.
Continued
-12-
<PAGE>
9- Income Taxes
The components of the provision for income taxes for the years ended are as
follows:
December 31,
------------------------------------
1997 1996 1995
-------- ------- -------
Current $ -- $ 2,638 $13,943
Deferred -- -- --
-------- ------- -------
$ -- $ 2,638 $13,943
======== ======= =======
Deferred taxes reflect the tax effects of temporary differences between the
amount of assets and liabilities for financial reporting and the amounts
recognized for income tax purposes. The significant components of deferred
tax assets are as follows:
December 31,
---------------------------
1997 1996 1995
------- ------ -----
Net Operating Loss Carryforward $64,000 $ -- $ --
Depreciation 11,000 -- --
------- ----- -----
75,000 -- --
Less: Valuation allowance 75,000 -- --
------- ----- -----
$ -- $ -- $ --
======= ===== =====
The provision for income taxes differs from the amount using the statutory
federal income tax rate (34%) as follows:
December 31,
------------------------------
1997 1996 1995
-------- -------- --------
At Statutory Rates $(64,000) $(20,000) $ 24,000
Valuation Allowance Change 75,000 -- --
Loss of Net Operating Loss Carryforward
Benefit Related to S Corporation -- 16,900 --
Lower Effective Rate on C Corp. -- -- (11,200)
No Federal Income Tax on S Corp. (17,000) -- --
Other - primarily state taxes 6,000 5,738 1,143
-------- -------- --------
$ -- $ 2,638 $ 13,943
======== ======== ========
The Company has available to offset future income taxes a net operating
loss of approximately $186,000.
Continued
-13-
<PAGE>
10- Percentage-of-Completion
The following is a summary of assets and liabilities related to long-term
contracts which are recognized on the percentage-of-completion basis:
December 31,
---------------------
1997 1996
--------- ---------
Contract Receivables
Billed:
Completed contracts $ -- $ 5,890
Contracts in progress 66,187 36,537
Unbilled 65,188 33,610
--------- ---------
131,375 76,037
Less: Allowance for doubtful collections -- --
--------- ---------
$ 131,375 $ 76,037
========= =========
Unearned Revenue
Costs incurred on uncompleted contracts $ 197,207 $ 30,000
Estimated earnings 223,847 48,418
--------- ---------
421,054 78,418
Less: Billings to date 408,514 169,528
--------- ---------
$ 12,540 $ (91,110)
========= =========
Included in the accompanying balance sheets under the following
captions:
Unbilled services $ 65,188 $ 33,610
Unearned revenue (52,648) (124,720)
--------- ---------
$ 12,540 $ (91,110)
========= =========
There were no contracts where the expected costs exceeded the contract
price.
All contract receivables are due within one year.
Continued
-14-
<PAGE>
11 - Significant Customers and Concentrations of Credit Risk
For the years ended December 31, 1997, 1996 and 1995, the Company had
significant sales and receivable balances from major customers in the
pharmaceutical and biotechnology industries as follows:
<TABLE>
<CAPTION>
Approximate Year-to-Date
December 31, 1997 December 31, 1996 December 31, 1995
-------------------- ------------------- -------------------
Percentage Percentage Percentage
Sales of Total Sales of Total Sales of Total
===============================================================
<S> <C> <C> <C> <C> <C> <C>
Significant Customer
A $528,000 24% $345,000 23% $200,000 13%
B 229,000 11 189,000 13 219,000 14
C -- -- -- -- -- --
D -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
$757,000 35% $534,000 36% $419,000 27%
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Approximate Value at Year End
December 31, 1997 December 31, 1996
----------------------- -----------------------
Accounts Accounts
Receivable Percentage Receivable Percentage
(Net)* of Total (Net)* of Total
=================================================
<S> <C> <C> <C> <C>
Significant Customer
A $ -- --% $ 89,000 48%
B 48,000 16 44,000 24
C 37,000 13 -- --
D 36,000 12 -- --
-------- -------- -------- --------
$121,000 41% $133,000 72%
======== ======== ======== ========
</TABLE>
*Accounts receivable (net) includes billed accounts receivable and unbilled
services less unearned revenue.
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and trade accounts receivable. The
Company placed its cash with high credit quality institutions. At times,
balances may be in excess of the FDIC insurance limit. The Company
routinely assesses the financial strength of its customers and, as a
consequence, believes that its trade accounts receivable credit risk
exposure is limited.
Continued
-15-
<PAGE>
12- Stock Option Plan
In July, 1997, the Company adopted the 1997 Stock Option Plan (the "Plan")
under which options to purchase 210 shares of Class A Common Stock at not
less than 100% of the fair market value on the date the option is granted
will be issued to employees. The options issued under the Plan vest 20% per
year for five years and expire in 2002.
The pro forma information required by SFAS 123 regarding net income and
earnings per share has been presented as if the Company had accounted for
its stock option plans under the fair value method. The fair value of each
option grant is estimated on the date of the grant using the minimum value
method prescribed for non-public entities with the following weighted
average assumptions:
Assumptions
Expected life of options 5 years
Risk free interest rate 5.5%
Expected dividend yield --
The weighted average fair value of the options granted during 1997 was
$5,500. Had the fair value of the options been amortized to expense over
the options' vesting period, the pro forma impact on earnings of the
stock-based compensation for the options under the provision would have
been as follows:
Net (Loss)
As reported $ (209,621)
Pro forma $ (210,721)
Earnings Per Share
As reported $ (229.85)
Pro forma $ (231.05)
In accordance with SFAS 123, the weighted average fair value of stock
options granted is required to be based on a theoretical statistical model
using the preceding assumptions. In actuality, the Company's stock options
do not trade on a secondary exchange and, therefore, the employees and
directors cannot derive any benefit from holding the stock options under
these plans without an increase in the market price of Company stock. Such
an increase in stock price would benefit all shareholders commensurately.
13- Segment Information
The Company has two reportable segments which are organized along its
divisional lines. The MCS segment provides research services to
pharmaceutical and other companies. The SM segment manufactures and
wholesales cell culture media and reagents.
Continued
-16-
<PAGE>
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on profit or loss before income taxes. The Company
accounts for inter-segment sales and transfers, if any, as if the
transactions were to third parties, that is at current market prices.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technologies and marketing strategies.
There are no significant adjustments to reconcile segment totals to
consolidated totals presented in the accompanying consolidated financial
statements.
December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
Sales to External Customers
MCS $ 1,125,855 $ 602,836 $ 729,268
SM 1,054,335 868,385 797,123
----------- ----------- -----------
$ 2,180,190 $ 1,471,221 $ 1,526,391
=========== =========== ===========
Gross Margin
MCS $ 429,660 $ 224,765 $ 240,775
SM 348,816 313,218 293,457
----------- ----------- -----------
$ 778,476 $ 537,983 $ 534,232
=========== =========== ===========
Income (Loss) Before Taxes
MCS $ (201,479) $ (49,686) $ (3,298)
SM (8,142) (10,293) 73,950
----------- ----------- -----------
$ (209,621) $ (59,979) $ 70,652
=========== =========== ===========
Interest Income
MCS $ 1,324 $ 1,182 $ 1,205
SM 11,625 -- --
----------- ----------- -----------
$ 12,949 $ 1,182 $ 1,205
=========== =========== ===========
Continued
-17-
<PAGE>
December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
Interest (Expense)
MCS $ (8,460) $ -- $ --
SM (38,967) (7,077) (8,136)
----------- ----------- -----------
$ (47,427) $ (7,077) $ (8,136)
=========== =========== ===========
Depreciation and Amortization
MCS $ 82,502 $ 41,265 $ 16,175
SM 29,751 27,037 25,212
----------- ----------- -----------
$ 112,253 $ 68,302 $ 41,387
=========== =========== ===========
Segment Assets
MCS $ 1,520,920 $ 433,047 $ 156,617
SM 507,537 273,917 327,460
----------- ----------- -----------
$ 2,028,457 $ 706,964 $ 484,077
=========== =========== ===========
Expenditures for Segment Assets
MCS $ 368,778 $ 99,154 $ 58,868
SM 366,758 1,620 43,208
----------- ----------- -----------
$ 735,536 $ 100,774 $ 102,076
=========== =========== ===========
Essentially all revenue earned for the years ended December 31, 1997, 1996
and 1995 by the Company are attributable to the United States, the
Company's country of domicile. All long-lived assets of the Company are
located in the United States.
-18-
PRIME CELLULAR, INC.
Pro Forma Condensed Consolidated Financial Statements
December 31, 1997 and March 31, 1998
(Unaudited)
================================================================================
Introduction
The following unaudited pro forma condensed consolidated balance sheets as of
December 31, 1997 and March 31, 1998 and the unaudited pro forma condensed
consolidated statements of operations for the year ended December 31, 1997 and
the three months ended March 31, 1998 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 Cell &
Molecular Technologies, Inc. dated May 29, 1998 had been consummated at December
31, 1997 for the condensed consolidated balance sheet and at January 1, 1997 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 Cell & Molecular Technologies, 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 January 1, 1997 and
should not be considered as indicative of future operations.
Under the terms of the merger agreement, Prime Cellular, Inc. will issue
1,611,000 shares of its common stock in exchange for all of the outstanding
shares of common stock of Cell & Mollecular Technologies, Inc. The transaction
is being accounted for as a reverse acquisition whereby Cell & Molecular
Technologies, Inc. is the acquirer for accounting purposes.
<PAGE>
PRIME CELLULAR, INC.
Pro Forma Condensed Consolidated Balance Sheet
December 31, 1997
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Prime Cellular, Inc. Cell & Molecular
and Subsidiary Technologies, Inc. Adjustments Pro Forma
==============================================================================
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash $ 576,948 $ 743,683 $ -- $1,320,631
Investments 5,079,022 -- -- 5,079,022
Accounts receivable - net 146,847 281,332 -- 428,179
Unbilled services -- 65,188 -- 65,188
Inventory -- 135,077 -- 135,077
Other current assets 2,360 -- -- 2,360
---------- ---------- ---------- ----------
5,805,177 1,225,280 -- 7,030,457
Property and Equipment 45,009 795,771 -- 840,780
Other Assets 3,600 7,406 -- 11,006
---------- ---------- ---------- ----------
$5,853,786 $2,028,457 $ -- $7,882,243
========== ========== ========== ==========
</TABLE>
<PAGE>
PRIME CELLULAR, INC.
Pro Forma Condensed Consolidated Balance Sheet
December 31, 1997
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Prime Cellular, Inc. Cell & Molecular
and Subsidiary Technologies, Inc. Adjustments Pro Forma
===============================================================================
<S> <C> <C> <C> <C>
Liabilities
Stockholders' Equity
Current Liabilities
Line of credit $ -- $ 31,295 $ -- $ 31,295
Current maturities of notes payable -- 27,038 -- 27,038
Accounts payable and accrued
expenses 152,380 263,229 -- 415,609
Customer deposits -- 614,640 -- 614,640
Current maturities of stockholder
loans -- -- -- --
Unearned revenue -- 52,648 -- 52,648
----------- ----------- ----------- -----------
152,380 988,850 -- 1,141,230
Long-Term Debt
Notes payable - net of current
maturities -- 351,111 -- 351,111
Stockholder loans - net of current
maturities -- 397,627 -- 397,627
----------- ----------- ----------- -----------
152,380 1,737,588 -- 1,889,968
----------- ----------- ----------- -----------
Stockholders' Equity
Common stock 45,828 8 (a) 16,110 61,938
(a) (8)
Additional paid-in capital 5,961,978 392,691 (a) (16,110) 6,032,177
(a) 8
(a) 10
(a)(306,400)
Preferred stock -- 10 (a) (10) --
Accumulated (deficit) (306,400) (101,840) (a) 306,400 (101,840)
----------- ----------- ----------- -----------
5,701,406 290,869 -- 5,992,275
----------- ----------- ----------- -----------
$ 5,853,786 $ 2,028,457 $ -- $ 7,882,243
=========== =========== =========== ===========
</TABLE>
<PAGE>
PRIME CELLULAR, INC.
Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1997
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Prime Cellular, Inc. Cell & Molecular
and Subsidiary Technologies, Inc. Adjustments Pro Forma
===============================================================================
<S> <C> <C> <C> <C>
Income
Revenues $ 1,676,131 $ 2,224,565 $ -- $ 3,900,696
Interest income 334,040 12,949 -- 346,989
----------- ----------- ----------- -----------
2,010,171 2,237,514 -- 4,247,685
----------- ----------- ----------- -----------
Expenses
Cost of revenues 328,364 1,401,714 -- 1,730,078
Selling, general and administrative
expenses 1,093,641 997,994 -- 2,091,635
Interest -- 47,427 -- 47,427
----------- ----------- ----------- -----------
1,422,005 2,447,135 -- 3,869,140
----------- ----------- ----------- -----------
Income (Loss) Before Provision
for Income Taxes 588,166 (209,621) -- 378,545
Provision for Income Taxes 24,133 -- -- 24,133
----------- ----------- ----------- -----------
Net Income (Loss) $ 564,033 $ (209,621) $ -- $ 354,412
=========== =========== =========== ===========
Net Income Per Share $ .05
===========
Weighted Average Common
Shares Outstanding (b) 7,141,112
===========
</TABLE>
<PAGE>
PRIME CELLULAR, INC.
Pro Forma Condensed Consolidated Balance Sheet
March 31, 1998
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Prime Cellular, Inc. Cell & Molecular
and Subsidiary Technologies, Inc. Adjustments Pro Forma
===============================================================================
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash $ 627,382 $ 248,530 $ -- $ 875,912
Investments 5,008,902 -- -- 5,008,902
Accounts receivable - net -- 276,517 -- 276,517
Unbilled services -- 193,221 -- 193,221
Inventory -- 136,037 -- 136,037
Other current assets 26,440 -- -- 26,440
----------- ----------- ----------- -----------
5,662,724 854,305 -- 6,517,029
----------- ----------- ----------- -----------
Property and Equipment 45,883 953,858 -- 999,691
Other Assets -- 7,359 -- 7,359
----------- ----------- ----------- -----------
$ 5,708,557 $ 1,815,522 $ -- $ 7,524,079
=========== =========== =========== ===========
</TABLE>
<PAGE>
PRIME CELLULAR, INC.
Pro Forma Condensed Consolidated Balance Sheet
March 31, 1998
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Prime Cellular, Inc. Cell & Molecular
and Subsidiary Technologies, Inc. Adjustments Pro Forma
===============================================================================
<S> <C> <C> <C> <C>
Current Liabilities
Notes Payable - current portion $ -- $ 26,640 $ -- $ 26,640
Accounts payable and accrued expenses 123,970 140,578 -- 264,548
Customer deposits -- 611,750 -- 611,750
Unearned revenue -- 2,270 -- 2,270
----------- ----------- ----------- -----------
123,970 781,238 -- 905,208
----------- ----------- ----------- -----------
Notes payable - net of current portion -- 342,854 -- 342,854
Stockholder loans - net of current portion -- 407,926 -- 407,926
----------- ----------- ----------- -----------
123,970 1,532,018 -- 1,655,988
----------- ----------- ----------- -----------
Stockholders' Equity
Common stock 44,905 8 (a) 16,110 61,015
(a) (8)
Additional paid-in capital 5,925,842 392,691 (a) (16,110) 5,996,041
(a) 8
(a) 10
(a)(306,400)
Preferred stock -- 10 (a) (10) --
Accumulated (deficit) (386,160) (109,205) (a) 306,400 (188,965)
----------- ----------- ----------- -----------
5,584,587 283,504 -- 5,868,091
----------- ----------- ----------- -----------
$ 5,708,557 $ 1,815,522 $ -- $ 7,524,079
=========== =========== =========== ===========
</TABLE>
<PAGE>
PRIME CELLULAR, INC.
Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 1998
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Prime Cellular, Inc. Cell & Molecular
and Subsidiary Technologies, Inc. Adjustments Pro Forma
===============================================================================
<S> <C> <C> <C> <C>
Income
Revenues $ -- $ 639,256 $ -- $ 639,256
Interest income 86,147 4,822 -- 90,769
----------- ----------- ----------- -----------
86,147 643,878 -- 730,025
----------- ----------- ----------- -----------
Expenses
Cost of revenues -- 370,730 -- 370,730
Selling, general and administrative
expenses 156,974 261,979 -- 428,953
Interest expense (3,526) 18,535 -- 15,009
----------- ----------- ----------- -----------
163,448 651,243 -- 814,691
----------- ----------- ----------- -----------
Income (loss) Before income taxes (77,301) (7,365) -- (84,666)
Income Taxes 2,459 -- -- 2,459
----------- ----------- ----------- -----------
Net Income (loss) $ (79,760) $ (7,365) $ -- $ (87,125)
=========== =========== =========== ===========
Net Income (loss)per share $ (0.01)
===========
Weighted average common
shares outstanding (b) 6,147,625
===========
</TABLE>
<PAGE>
PRIME CELLULAR, INC.
Notes to Pro Forma Condensed Consolidated Financial Statements
December 31, 1997 and March 31, 1998
(Unaudited)
================================================================================
(a) To record issuance of 1,611,000 shares of Prime Cellular, Inc. common stock
to acquire Cell & Molecular Technologies, Inc. As discussed in the
introduction section, the acquisition was recorded as a reverse
acquisition.
(b) Represents the weighted average number of shares of Prime Cellular, Inc.
plus the 1,611,000 shares issued to the stockholders of Cell & Molecular
Technologies, Inc.
