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 June 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.)
406 Grand Central Avenue, Lavallette, NJ 08735
(Address of Principal Executive Office) (Zip Code)
Issuer's telephone number, including area code (732)830-7895
Address: 100 First Stamford Pl., Stamford, CT 06902
Fiscal Year: May 31
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) 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 ___
As of August 18, 1998 the registrant had 6,101,500 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 June 30, 1998
(unaudited) and December 31, 1997 (audited).................... 3
Consolidated Statements of Operations (unaudited) for the
three months ended June 30, 1998 and June 30, 1997............. 5
Consolidated Statements of Operations (unaudited) for the
six months ended June 30, 1998 and June 30, 1997............... 6
Consolidated Statements of Cash Flows (unaudited) for
the six months ended June 30, 1998 and June 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............................................... 11
Item 2. Changes in Securities and Use of Proceeds............... 11
Item 6. Exhibits and Reports on Form 8-K........................ 12
SIGNATURES................................................................ 13
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
PRIME CELLULAR, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, 1998 December 31, 1997
---------------------------------
<S> <C> <C>
Assets
Current Assets
Cash $ 476,451 $ 743,683
Investments 5,086,512 --
Accounts receivable - less allowance
for doubtful accounts of $10,000 for
each year 331,819 281,332
Unbilled services 134,815 65,188
Inventory 157,441 135,077
Prepaid expenses 34,497 --
---------- ----------
6,221,535 1,225,280
---------- ----------
Property and Equipment 1,465,673 1,117,639
Less: Accumulated depreciation 407,352 321,868
---------- ----------
1,058,321 795,771
---------- ----------
Deferred Financing Costs - net of
accumulated amortization of $270 and
$175 for 1998 and 1997, respectively 7,311 7,406
---------- ----------
$7,287,167 $2,028,457
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
-3-
<PAGE>
PRIME CELLULAR, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, 1998 December 31, 1997
----------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Line of credit $ -- $ 31,295
Current maturities of notes payable 26,257 27,038
Accounts payable and accrued expenses 370,448 263,229
Customer deposits 424,779 614,640
Unearned revenue 15,982 52,648
----------- -----------
837,466 988,850
----------- -----------
Non-Current Liabilities
Notes payable - net of current maturities 334,286 351,111
Stockholder loans - net of current maturities 421,276 397,627
----------- -----------
1,593,028 1,737,588
----------- -----------
Stockholders' Equity
Preferred stock -- 10
Common stock 61,015 8
Additional paid-in capital 5,996,041 392,691
Accumulated deficit (362,917) (101,840)
----------- -----------
5,694,139 290,869
----------- -----------
$ 7,287,167 $ 2,028,457
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
PRIME CELLULAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended
---------------------------------
June 30, 1998 June 30, 1997
---------------------------------
<S> <C> <C>
Revenue
Contract revenue $ 270,828 $ 261,239
Sale of goods 421,486 259,381
----------- -----------
692,314 520,620
----------- -----------
Direct Costs
Contract revenue 201,511 145,721
Sale of goods 232,464 173,567
----------- -----------
433,975 319,288
----------- -----------
Income after Direct Costs
Contract revenue 69,317 115,518
Sale of goods 189,022 85,814
----------- -----------
258,339 201,332
----------- -----------
Other Operating Expenses
Contract revenue 166,996 153,959
Sale of goods 149,121 93,709
----------- -----------
316,117 247,688
----------- -----------
Income (Loss) from Operations
Contract revenue (97,679) (38,441)
Sale of goods 39,901 (7,895)
----------- -----------
(57,778) (46,336)
----------- -----------
Corporate Activities
Selling, general and administrative expenses (157,640) --
Other income -- 11,094
Interest income 81,136 1,200
Interest expense (26,402) (1,300)
----------- -----------
(102,906) 10,994
----------- -----------
(Loss) Before Provision for Income Taxes (160,684) (35,342)
Provision for Income Taxes 13,268 --
----------- -----------
Net (Loss) $ (173,952) $ (35,342)
=========== ===========
Basic and Diluted Earnings Per Share $ (.03) $ (35.34)
=========== ===========
Weighted Average Common Shares 6,101,500 1,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
PRIME CELLULAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended
----------------------------------
June 30, 1998 June 30, 1997
----------------------------------
<S> <C> <C>
Revenue
Contract revenue $ 608,575 $ 763,333
Sale of goods 722,995 433,279
----------- -----------
1,331,570 1,196,612
----------- -----------
Direct Costs
Contract revenue 418,312 479,329
Sale of goods 386,393 289,933
----------- -----------
804,705 769,262
----------- -----------
Income after Direct Costs
Contract revenue 190,263 284,004
Sale of goods 336,602 143,346
----------- -----------
526,865 427,350
----------- -----------
Other Operating Expenses
Contract revenue 321,465 368,583
Sale of goods 256,631 224,343
----------- -----------
578,096 592,926
----------- -----------
Income (Loss) from Operations
Contract revenue (131,202) (84,579)
Sale of goods 79,971 (80,997)
----------- -----------
(51,231) (165,576)
----------- -----------
Corporate Activities
Selling, general and administrative expenses (324,614) --
Other income -- 22,188
Interest income 171,905 2,000
Interest expense (41,410) (2,500)
----------- -----------
(194,119) 21,688
----------- -----------
(Loss) Before Provision for Income Taxes (245,350) (143,888)
Provision for Income Taxes 15,727 --
----------- -----------
Net (Loss) $ (261,077) $ (143,888)
=========== ===========
Basic and Diluted Earnings Per Share $ (.04) $ (143.89)
=========== ===========
Weighted Average Common Shares 6,132,250 1,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
PRIME CELLULAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
---------------------------------
June 30, 1998 June 30, 1997
--------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net (loss) $ (261,077) $ (143,888)
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 85,579 56,126
Allowance for doubtful accounts -- 5,000
Accrued interest on stockholder loans 23,649 --
Changes in assets and liabilities:
Accounts receivable (50,487) 124,020
Unbilled services (69,627) 33,610
Inventory (22,364) (21,447)
Prepaid expenses (34,497) 14,713
Accounts payable and accrued expenses 107,219 630
Customer deposits (189,861) 150,000
Unearned revenue (36,666) (88,700)
----------- -----------
(448,132) 130,064
----------- -----------
Cash Flows from Investing Activities
Acquisitions of property and equipment (348,034) (61,799)
Purchases of investments (5,086,512) --
----------- -----------
(5,434,546) (61,799)
----------- -----------
Cash Flows from Financing Activities
Net borrowings on line of credit (31,295) 13,262
Proceeds of notes payable -- 100,000
Payment of deferred financing costs -- (7,581)
Repayments of notes payable (17,606) (5,981)
Loans from stockholders -- 517,150
Repayments of loans from stockholders -- (71,560)
Stock purchased and retired (37,059) --
Net cash acquired from sale of stock 5,701,406 --
----------- -----------
5,615,446 545,310
----------- -----------
Net Increase (Decrease) in Cash (267,232) 613,575
Cash - beginning 743,683 133,722
----------- -----------
Cash - end $ 476,451 $ 747,297
=========== ===========
Supplemental Disclosures
Cash paid during the year:
Interest $ 17,761 $ 4,783
=========== ===========
Income taxes $ 15,727 $ --
=========== ===========
Non-cash investing and financing activities:
Land and building acquired with mortgage $ -- $ 287,600
=========== ===========
</TABLE>
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. The Company maintains an administrative office at 406
Grand Central Avenue, Lavallette, NJ 08735 as well as manufacturing and
warehouse facilities in each of Lavalette, 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 six months ended June 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 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 six months ended June 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.
Six Months Ended
June 30, 1997
----------------
Net Sales $ 2,026,978
Net Loss ($106,715)
Net loss per share (basic and diluted) (0.01)
-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 Company's recent losses; the Company's need to obtain additional
financing and the ability to obtain such financing; outstanding indebtedness;
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 equipment manufacturers and 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; cost
of and availability of component materials and inventories; effect of
governmental export and import policies; the highly competitive environment in
which the Company operates; potential entry of new, well-capitalized competitors
into the Company's markets; and the uncertainty regarding the Company's
continued ability, through sales growth, to absorb the increasing costs incurred
and expected to be incurred in connection with its business activities. 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 June 30, 1978 to Three Months
Ended June 30, 1997.
Net Sales. Net sales for the three months ended June 30, 1998 were $692,314 as
compared to net sales of $530,620 for the three months ended June 30, 1997. This
increase of $161,694 was as a result of additional sales of goods and an
increase in contract revenue.
Income after Direct Costs. Income after direct costs for the three months ended
June 30, 1998 was $258,000 as compared to income after direct costs of $201,332
for the three months ended June 30, 1997. This increase in income after direct
costs is the result of increased sales.
Corporate Activities. Corporate activities of $102,906 resulted in a net expense
for the three months ended June 30, 1998 as compared to net income of $10,994
for the three months ended June 30, 1997. This decrease of $113,900 resulted
from selling, general and administrative expenses acquired in connection with
the Merger.
Net Loss. The net loss in the second quarter of 1998 was ($173,952) or (.03) per
share based on 6,101,500 weighted average common and common equivalent shares
outstanding as compared to a net loss of ($35,342) or (35.34) per share based on
1,000 weighted average common and common equivalent shares outstanding. The
increase in net loss was the result of the increase in other operating expenses
(attributable to the increased volume of sales) exceeding any increase in income
from sales and contract revenue after accounting for direct costs.
Comparison of Six Months Ended June 30, 1978 to Six Months Ended June 30, 1997.
Net Sales. Net sales for the six months ended June 30, 1998 were $1,331,570 as
compared to net sales of $1,196,612 for the six months ended June 30, 1997. This
increase of $134,958 was from additional sales of goods, offset by a reduction
in contract revenue.
Income After Direct Costs. Income after direct costs for the six months ended
June 30, 1998 was $526,865 as compared to income after direct costs of $427,350
for the six months ended June 30, 1997. This increase in income after direct
costs is the result of additional sales volume and a higher gross profit
percentage.
-9-
<PAGE>
Corporate Activities. Corporate activities of $194,119 resulted in a net expense
for the six months ended June 30, 1998 as compared to net income of $21,688 for
the six months ended June 30, 1997. This decrease of $215,807 resulted from
selling, general and administrative expenses and interest income acquired in
connection with the Merger.
Net Loss. The net loss for the six months ended June 30, 1998 was ($261,077) or
(.04) per share based on 6,132,250 weighted average common and common equivalent
shares outstanding as compared to a net loss of ($143,888) or (143.89) per share
based on 1,000 weighted average common and common equivalent shares outstanding.
The increase in net loss was the result of an increase in operating expenses
attributable to the increased volume of sales, together with the selling,
general and administrative expenses acquired as a result of the Merger. Loss
from operations, however, was reduced by $114,345 to $51,231 for the six months
ended June 30, 1998 as compared to a loss of $165,576 for the six months ended
June 30, 1997. This decrease resulted from a sixty-six percent (66%) increase in
the sale of goods, partially offset by a twenty percent (20%) reduction in
contract revenue.
Liquidity and Capital Resources
During the six months ended June 30, 1998, the Company financed its operations
primarily through working capital.
At June 30, 1998 the company had approximately $5,560,000 in cash and
investments and had working capital of approximately $5,400,000.
Net cash used in operating activities aggregated $448,132 for the six
months ended June 30, 1998 as compared with net cash provided by operating
activities of $130,064 for the six months ended June 30, 1977. The increase in
cash used in operating activities was attributable mainly to a greater loss for
the six months ended June 30, 1998 as compared to the six months ended June 30,
1997 as well as a reduction in customer deposits and an increase in accounts
receivable, offset by an increase in accounts payable.
Net cash used in investing activity aggregated $5,434,546 for the six months
ended June 30, 1998 compared with $61,799 for the six months ended June 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 $5,615,446 for the six
months ended June 30, 1998 as compared to $545,310 for the six months ended June
30, 1997. The increase was due primarily to the Merger which occurred in May
1998.
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 prior to the end of its current 1998 fiscal
year. 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. 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.
-10-
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Under the terms of the Merger, on May 29, 1998 the Company issued options
to purchase 115,200 shares of its Common Stock under its 1990 Stock Option Plan
(the "1990 Plan") to holders of options to purchase shares of CMT's stock, which
options had been granted under the stock option plan of CMT.
Of the 1,611,000 shares issued pursuant to the Merger, an aggregate of
595,500 shares of the Company's Common Stock were issued to affiliates of the
Company, who had been stockholders of CMT, in exchange for the shares of CMT
owned by such affiliates. The closing bid price for the Common Stock on the date
of the Merger was $2.00 per share.
The shares issued in connection with the Merger were issued in a
transaction not involving a public offering and pursuant to an exemption from
registration provided by Section 4(2) of the Securities Act of 1933 (the "Act").
In addition to the options granted in connection with the Merger, on April
20, 1998 the Company issued four (4) year options under its 1997 Stock Option
Plan (the "1997 Plan") to an executive officer of the Company, pursuant to which
such employee received options to purchase up to an aggregate of 25,000 shares
of the Company's Common Stock, at an option price of $2.25 per share. Such
options vest in equal annual installments on each of April 20, 1999 and April
20, 2000 and are subject to certain limitations.
During the six months ended June 30, 1998, the Company issued non-plan
options to purchase an aggregate of 150,000 shares of the Company's Common Stock
to a director of the Company, which options vested January 16, 1998 and shall be
exercisable, at an exercise price of $0.75.
The options granted during the six months ended June 30, 1998 were granted
pursuant to exemptions from registration provided by Sections 2, 3 and/or 4(2)
of the Act.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8
The Company filed a Report on Forms 8-K and 8-K/A with the Commission on
June 15, 1998 and August 12, 1998, respectively, with respect to the Merger.
-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.
August 19, 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 JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 476,451
<SECURITIES> 5,086,512
<RECEIVABLES> 341,819
<ALLOWANCES> 10,000
<INVENTORY> 157,441
<CURRENT-ASSETS> 6,221,535
<PP&E> 1,465,673
<DEPRECIATION> 407,352
<TOTAL-ASSETS> 7,287,167
<CURRENT-LIABILITIES> 837,466
<BONDS> 0
0
0
<COMMON> 61,015
<OTHER-SE> 5,633,124
<TOTAL-LIABILITY-AND-EQUITY> 7,287,167
<SALES> 1,331,570
<TOTAL-REVENUES> 1,331,570
<CGS> 804,705
<TOTAL-COSTS> 804,705
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,410
<INCOME-PRETAX> 245,350
<INCOME-TAX> 15,727
<INCOME-CONTINUING> (245,350)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (261,077)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
