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 September 30, 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.)
580 Marshall Street, Phillipsburg, NJ 08865
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (908)387-1673
406 Grand Central Avenue, Lavallette, NJ 08735
(Former Address If Changed Since Last Report)
Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 [_]
As of November 18, 1998 the registrant had 6,108,700 shares outstanding of
its Common Stock, $.01 par value.
<PAGE>
PRIME CELLULAR, INC.
AND SUBSIDIARY
INDEX
PART I: FINANCIAL INFORMATION ...............................................3
Item 1. Consolidated Financial Information ..................................3
Consolidated Balance Sheets at September 30, 1998
(unaudited) and December 31, 1997 (audited) ........................3
Consolidated Statements of Operations (unaudited) for
the three months ended September 30, 1998 and
September 30, 1997 .................................................5
Consolidated Statements of Operations (unaudited) for
the nine months ended September 30, 1998 and
September 30, 1997 .................................................6
Consolidated Statements of Cash Flows (unaudited) for
the nine months ended September 30, 1998 and
September 30, 1997 .................................................7
Notes to Consolidated Financial Statements ..........................8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................................9
PART II: OTHER INFORMATION ..................................................12
Item 2. Changes in Securities and Use of Proceeds ..........................12
Item 6. Exhibits and Reports on Form 8-K ...................................12
SIGNATURES ...................................................................13
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<PAGE>
PRIME CELLULAR, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
(Unaudited)
September 30, December 31,
1998 1997
---------------------------
Assets
Current Assets
Cash $ 542,307 $ 743,683
Investments 5,018,097 --
Accounts receivable - less allowance
for doubtful accounts of $10,000 for
each year 255,954 281,332
Unbilled services 35,062 65,188
Inventory 137,420 135,077
Prepaid expenses 29,175 --
---------- ----------
6,018,015 1,225,280
---------- ----------
Property and Equipment 1,528,830 1,117,639
Less: Accumulated depreciation 452,064 321,868
---------- ----------
1,076,766 795,771
---------- ----------
Deferred Financing Costs - net of
accumulated amortization of $317 and
$175 for 1998 and 1997, respectively 7,264 7,406
---------- ----------
$7,102,045 $2,028,457
========== ==========
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
PRIME CELLULAR, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
(Unaudited)
September 30, December 31,
1998 1997
-----------------------------
Liabilities and Stockholders' Equity
Current Liabilities
Line of credit $ -- $ 31,295
Current maturities of notes payable 25,888 27,038
Accounts payable and accrued expenses 572,751 263,229
Customer deposits 328,409 614,640
Unearned revenue 32,419 52,648
----------- -----------
959,467 988,850
----------- -----------
Non-Current Liabilities
Notes payable - net of current maturities 327,826 351,111
Stockholder loans - net of current maturities 440,927 397,627
----------- -----------
1,728,220 1,737,588
----------- -----------
Stockholders' Equity
Preferred stock -- 10
Common stock 61,087 8
Additional paid-in capital 5,997,969 392,691
Accumulated deficit (685,231) (101,840)
----------- -----------
5,373,825 290,869
----------- -----------
$ 7,102,045 $ 2,028,457
=========== ===========
See accompanying notes to consolidated financial statements.
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<PAGE>
PRIME CELLULAR, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
- --------------------------------------------------------------------------------
For the Nine Months Ended
September 30,
--------------------------
1998 1997
--------------------------
Revenue
Contract revenue $ 753,598 $ 895,981
Sale of goods 975,931 774,988
----------- -----------
1,729,529 1,670,969
----------- -----------
Direct Costs
Contract revenue 669,724 561,086
Sale of goods 537,894 518,591
----------- -----------
1,207,618 1,079,677
----------- -----------
Income after Direct Costs
Contract revenue 83,874 334,895
Sale of goods 438,037 256,397
----------- -----------
521,911 591,292
----------- -----------
Other Operating Expenses
Contract revenue 476,627 496,629
Sale of goods 355,435 302,279
----------- -----------
832,062 798,908
----------- -----------
Income (Loss) from Operations
Contract revenue (392,753) (161,734)
Sale of goods 82,602 (45,882)
----------- -----------
(310,151) (207,616)
----------- -----------
Corporate Activities
Selling, general and administrative expenses (442,462) --
Other income -- 33,281
Interest income 255,313 6,000
Interest expense (69,496) (25,000)
----------- -----------
(256,645) 14,281
----------- -----------
Loss Before Provision for Income Taxes (566,796) (193,335)
Provision for Income Taxes 16,595 --
----------- -----------
Net Loss $ (583,391) $ (193,335)
=========== ===========
Basic and Diluted Earnings Per Share $ (.10) $ (193.34)
=========== ===========
Weighted Average Common Shares 6,126,363 1,000
=========== ===========
See accompanying notes to consolidated financial statements.
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<PAGE>
PRIME CELLULAR, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
- --------------------------------------------------------------------------------
For the Three Months Ended
September 30,
--------------------------
1998 1997
--------------------------
Revenue
Contract revenue $ 145,023 $ 132,648
Sale of goods 252,936 341,709
----------- -----------
397,959 474,357
----------- -----------
Direct Costs
Contract revenue 251,412 81,757
Sale of goods 151,501 228,658
----------- -----------
402,913 310,415
----------- -----------
Income after Direct Costs
Contract revenue (106,389) 50,891
Sale of goods 101,435 113,051
----------- -----------
(4,954) 163,942
----------- -----------
Other Operating Expenses
Contract revenue 155,162 128,046
Sale of goods 98,804 77,936
----------- -----------
253,966 205,982
----------- -----------
Income (Loss) from Operations
Contract revenue (261,551) (77,155)
Sale of goods 2,631 35,115
----------- -----------
(258,920) (42,040)
----------- -----------
Corporate Activities
Selling, general and administrative expenses (117,848) --
Other income -- 11,093
Interest income 83,408 4,000
Interest expense (28,086) (22,500)
----------- -----------
(62,526) (7,407)
----------- -----------
Loss Before Provision for Income Taxes (321,446) (49,447)
Provision for Income Taxes 868 --
----------- -----------
Net Loss $ (322,314) $ (49,445)
=========== ===========
Basic and Diluted Earnings Per Share $ (.05) $ (49.44)
=========== ===========
Weighted Average Common Shares 6,108,700 1,000
=========== ===========
See accompanying notes to consolidated financial statements.
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<PAGE>
PRIME CELLULAR, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
- --------------------------------------------------------------------------------
For the Nine Months Ended
September 30,
--------------------------
1998 1997
--------------------------
Cash Flows from Operating Activities
Net (loss) $ (583,391) $ (193,335)
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 130,338 84,189
Allowance for doubtful accounts -- 7,500
Accrued interest on stockholder loans 43,300 7,949
Stock-based compensation -- 22,500
Changes in assets and liabilities:
Accounts receivable 25,378 11,477
Unbilled services 30,126 33,610
Inventory (2,343) (15,302)
Prepaid expenses (29,176) 14,713
Accounts payable and accrued expenses 309,522 (42,916)
Customer deposits (286,231) 150,000
Unearned revenue (20,229) (68,664)
----------- -----------
(382,706) 11,721
----------- -----------
Cash Flows from Investing Activities
Acquisitions of property and equipment (411,190) (202,406)
Purchases of investments (5,018,097) --
----------- -----------
(5,429,287) (202,406)
----------- -----------
Cash Flows from Financing Activities
Net borrowings on line of credit (31,295) 11,262
Proceeds of notes payable -- 100,000
Payment of deferred financing costs -- (7,581)
Repayments of notes payable (24,435) (12,152)
Loans from stockholders -- 517,150
Repayments of loans from stockholders -- (150,207)
Proceeds from issuance of preferred stock -- 250,000
Stock purchased and retired (37,059) --
Net cash acquired from sale of stock 5,703,406 --
----------- -----------
5,610,617 708,472
----------- -----------
Net Increase (Decrease) in Cash (201,376) 517,787
Cash - beginning 743,683 133,722
----------- -----------
Cash - end $ 542,307 $ 651,509
=========== ===========
Supplemental Disclosures
Cash paid during the year:
Interest $ 26,196 $ 7,174
=========== ===========
Income taxes $ 16,595 $ --
=========== ===========
Non-cash investing and financing activities:
Land and building acquired with mortgage $ -- $ 287,600
=========== ===========
See accompanying notes to consolidated financial statements.
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<PAGE>
PRIME CELLULAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS OPERATIONS AND ORGANIZATION
On May 29, 1998, Prime Cellular, Inc. ("Prime"), a Delaware corporation,
consummated a merger (the "Merger") with Cell & Molecular Technologies, Inc.,
another Delaware corporation ("CMT"), pursuant to which a wholly-owned
subsidiary of Prime was merged with and into CMT (collectively, Prime and CMT
are referred to hereinafter as the "Company"). Under the terms of the Merger,
all of the outstanding shares of capital stock of CMT were converted into an
aggregate of 1,611,000 shares of Common Stock, par value $.01 per share, of
Prime, representing approximately 26.4% (after consummation of the Merger) of
Prime's issued and outstanding Common Stock.
The Company is engaged in the provision of contract research and development
services to the biotechnology and pharmaceutical industries as well as the
manufacture and sale of research products for the biotechnology and
pharmaceutical industries. In addition to its executive offices located at 580
Marshall Street, Phillipsburg, NJ 08865, the Company maintains manufacturing and
office/warehouse facilities in Lavallette, New Jersey and Phillipsburg, New
Jersey (the "Facilities"), which Facilities are either owned or leased by the
Company.
NOTE 2: UNAUDITED 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 September 30, 1998, are not necessarily indicative of
the results to be expected for the year ending December 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 reports on Forms 8K and
8-K/A filed for the event dated May 29, 1998.
NOTE 3: MERGER WITH CELL & MOLECULAR TECHNOLOGIES, INC.
On May 29, 1998, Prime consummated the Merger with CMT pursuant to which CMT
became a wholly-owned subsidiary of Prime. The unaudited pro forma information
for the nine months ended September 30, 1997, set forth below gives effect to
the Merger as if it had occurred on January 1, 1997. The pro forma information
is presented for informational purposes only and is not necessarily indicative
of the results of operations that actually would have been achieved had the
Merger been consummated on January 1, 1997, nor are they indicative of future
results of operations.
Nine Months Ended
September 30, 1997
Net Sales $ 2,663,794
------------
Net Loss (128,680)
------------
Net loss per share (basic and diluted) (0.02)
------------
-8-
<PAGE>
Item 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, the
following: the ability to hire and retain key personnel; successful completion
and integration of prior and any future acquisitions; relationships with and
dependence on third-party suppliers; uncertainties relating to business and
economic conditions in markets in which the Company operates; uncertainties
relating to government and regulatory policies and other political risks;
uncertainties relating to customer plans and commitments; the highly competitive
environment in which the Company operates; and potential entry of new,
well-capitalized competitors into the Company's 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
Comparison of three months ended September 30, 1998 to three months ended
September 30, 1997.
Net Sales. Net Sales for the three months ended September 30, 1998 were $397,959
as compared to Net Sales of $474,357 for the three months ended September 30,
1997. This decrease of $76,398 or 16% was a result of a decrease in the sale of
goods partially offset by an increase in contract revenue.
Income After Direct Costs. Income after Direct Costs for the three months ended
September 30, 1998 was a loss of $(4,954) as compared to Income after Direct
Costs of $163,942 for the three months ended September 30, 1997. This decrease
in Income after Direct Costs (103%) resulted principally from the Company hiring
additional personnel to accommodate an anticipated large increase in contract
revenue, which increase in business did not materialize during the three months
ended September 30, 1998.
Corporate Activities. Corporate Activities of $62,526 resulted in a net expense
for the three months ended September 30, 1998 as compared to a net expense of
$7,407 for the three months ended September 30, 1997. This increase in expense
resulted from increased selling, general and administrative expenses, partially
offset by interest income, realized in connection with the Merger.
Net Loss. Net Loss for the three months ended September 30, 1998 was $(322,314)
as compared to a net loss of $(49,447) during the three months ended September
30, 1997. The increase in net loss was the result of an increase in direct costs
- - contract revenue which was not absorbed by a proportionate increase in
contract revenue and an increase in corporate activity expenses and other
operating expenses.
-9-
<PAGE>
Comparison of Nine Months Ended September 30, 1998 to Nine Months ended
September 30, 1997.
Net Sales. Net Sales for the nine months ended September 30, 1998 were
$1,729,527 as compared to net sales of $1,670,969 for the nine months ended
September 30, 1997. This increase of $58,560 or 3% resulted from additional
sales of goods, offset by a reduction in contract revenue.
Income After Direct Costs. Income After Direct Costs for the nine months ended
September 30, 1998 was $521,910 as compared to Income after Direct Costs of
$591,292 for the nine months ended September 30, 1997. This decrease in Income
after Direct Costs (12%) was the result of a lower gross profit percentage on
the increased sales volume.
Corporate Activities. Corporate Activities was a net expense of $256,645 for the
nine months ended September 30, 1998, as compared to net income of $14,281 for
the nine months ended September 30, 1997. This increase in expenses resulted
from increased selling, general and administrative expenses, partially offset by
interest income, realized in connection with the Merger.
Net Loss. Net Loss for the nine months ended September 30, 1998 was $(583,391)
as compared to a net loss of $(193,335) for the nine months ended September 30,
1997. This increase in net loss was the result of an increase in operating
expenses attributable to the increased volume of shares, together with the
selling, general and administrative expenses realized in connection with the
Merger. Loss from operations increased by $102,535 to $310,151 for the nine
months ended September 30, 1998 as compared to a loss of $207,616 for the nine
months ended September 30, 1997. This increase resulted from a 5% decrease in
gross profit partially offset by a 3% increase in revenue for the nine months
ended September 30, 1998 as compared to September 30, 1997.
Liquidity and Capital Resources
During the nine months ended September 30, 1998, the Company financed its
operations primarily through working capital.
At September 30, 1998 the company had approximately $5,560,000 in cash and
investments and had working capital of approximately $5,100,000.
Net cash used in operating activities aggregated $382,706 for the nine
months ended September 30, 1998 as compared with net cash provided by operating
activities of $11,721 for the nine months ended September 30, 1997. The increase
in cash used in operating activities was principally attributable to increased
losses for the nine months ended September 30, 1998 as compared to the nine
months ended September 30, 1997 as well as due to a reduction in customer
deposits and an increase in accounts payable.
Net cash used in investing activity aggregated $5,429,287 for the nine
months ended September 30, 1998 as compared with $202,406 for the nine months
ended September 30, 1997. The increase in cash used was attributable to the
purchase of approximately $5,000,000 in investments and an increase in the
purchase of fixed assets.
Cash flow from financing activities aggregated $5,610,617 for the nine
months ended September 30, 1998 as compared to $708,472 for the nine months
ended September 30, 1997. The increase was due primarily to the Merger which
occurred in May 1998.
-10-
<PAGE>
Impact of the Year 2000.
The Company is currently exploring new operations and financial software
packages compatible with the computer related problems with the new millennium,
and intends to install such software within the next few months. The Company is
also currently assessing the readiness of third party suppliers and customers
with any proposed software package to minimize or eliminate any adverse effect
on the Company's business in the event customers or suppliers systems have a
Year 2000 problem. Although the Company does not expect significant costs or
disruptions to its operations as a result of the inability of any of its
suppliers and customers to achieve Year 2000 compliance, the Company cannot
predict what effect such noncompliance may have upon the operations of the
Company. The Company believes the cost of its investment in any new computer and
software packages in response to a potential Year 2000 problem will be
immaterial.
-11-
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On July 9, 1998, the Company issued options to a director of the Company
for purchase of up to an aggregate of 18,000 shares of the Company's Common
Stock, which options immediately vested and are exercisable, at an exercise
price of $2.00 per share, until July 9, 2002.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8
The Company filed Reports on Forms 8-K and 8-K/A with the Commission with
respect to the event dated May 29, 1998.
-12-
<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.
November 18, 1998 PRIME CELLULAR, INC.
By:/s/ Robert A. Reinhart
-----------------------------------------------
Robert A. Reinhart, Chief Financial Officer
(duly authorized officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q AT SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 542,307
<SECURITIES> 5,018,097
<RECEIVABLES> 265,954
<ALLOWANCES> 10,000
<INVENTORY> 137,420
<CURRENT-ASSETS> 6,018,015
<PP&E> 1,528,830
<DEPRECIATION> 452,064
<TOTAL-ASSETS> 7,102,045
<CURRENT-LIABILITIES> 959,467
<BONDS> 0
0
0
<COMMON> 61,087
<OTHER-SE> 5,312,738
<TOTAL-LIABILITY-AND-EQUITY> 7,102,045
<SALES> 1,729,529
<TOTAL-REVENUES> 1,729,529
<CGS> 1,207,618
<TOTAL-COSTS> 1,207,618
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,496
<INCOME-PRETAX> (566,796)
<INCOME-TAX> 16,595
<INCOME-CONTINUING> (566,796)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (583,391)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
