SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-KA
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) :
April 27, 1996
SHARED TECHNOLOGIES CELLULAR, INC.
DELAWARE 1-13732 06-386411
(State or other Commission (I.R.S.
jurisdiction of File Number) Employer
incorporation) Identification
No.)
100 Great Meadow Road, Suite 102
Wethersfield, CT 06109
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code
(860-258-2500)
Total number of sequentially numbered paged in this filing,
including exhibits hereto:
1
<PAGE>
Item 2. Acquisition or Disposition of Assets
On April 27, 1996, Shared Technologies Cellular, Inc ("STC"
or the "Company") completed its acquisition of certain
assets of Cellular Global Investments of Northern
California, Inc., Access Cellular Corp., Summit Assurance
Cellular, Inc., Road and Show Cellular Arizona Corp., Road
and Show Cellular West, Northstar Cellular Corp. and Craig
A. Marlar (`
`Summit'
'). The purchase price was calculated as
follows:
Cash $1,058,276
Common Stock (a) 937,500
Warrants-
100,000 @ $3.00 (b) 12,500
100,000 @ $4.00 (b) -
100,000 @ $5.00 (b) -
Subtotal 2,008,276
Liabilities Assumed 1,554,387
Total Purchase Price $3,562,663
(a) 300,000 shares of the Company's common stock, $.01 par
value were issued. The close bid price of the common stock
on April 27, 1996 was $3.125 per share.
(b) The purchase price included three-year warrants to
purchase an aggregate of 300,000 additional shares on the
Company's common stock $.01 par value. The warrants are
excersizable as follows:
100,000 shares at $3.00 per share; 100,000 shares at $4.00
per share; and 100,000 shares at $5.00 per share. Based on
the April 27, 1996 close bid price of $3.125 per share,
$12,500 of the purchase price was allocated to the three-
year warrants. This amount represents the excess of the
close bid price over the warrant price at April 27, 1996
The purchase price was allocated as follows:
Accounts Receivable $20,000
Equipment 169,600
Goodwill 3,373,063
Total 3,562,663
Goodwill is being amortized over a 20 year period. The
purchase of Summit gave the Company the right to sell its
services to specific geographical territories controlled by
Summit. Management believes that its right to sell its
services in those markets has an unlimited life, but has
used 20 years to be conservative.
Item 7. Financial Statements and Exhibits
(a)Financial statements of business acquired
2
<PAGE>
Audited balance sheets of Summit Assurance Cellular, Inc and
Subsidiaries and Affiliates as of December 31, 1995 and
1994, and the related audited statements of operations and
stockholder's earnings (deficit), and cash flows for the
years ended December 31, 1995
and 1994, including the noted thereto.
(b) Pro Forma financial information
(i) Pro forma consolidated statements of operations for the
year ended December 31, 1995.
(ii) Pro forma consolidated statements of operations for the
three months ended March 31, 1996.
2
(c) Exhibits
Exhibit No. Description Page No.
10.1 Asset Purchase Agreement
dated April 27, 1996
Incorporated by reference
from Exhibit 10.1 of the
Company's Form 8-K filed
May 9, 1996.
SUMMIT ASSURANCE CELLULAR INC.
AND SUBSIDIARIES AND AFFILIATES
COMBINED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 1995 AND 1994
CONTENTS
Independent Auditors' Report 1
Combined Financial Statements
Combined Balance Sheets 2
Combined Statements of Operations and
Retained Earnings (Deficit) 3
Combined Statements of Cash Flows 4
Notes to Combined Financial Statements 5-12
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Summit Assurance Cellular Inc. and
Subsidiaries and Affiliates
We have audited the accompanying combined balance sheets of
Summit Assurance Cellular Inc. and Subsidiaries and
3
<PAGE>
Affiliates as of December 31, 1995 and 1994 and the related
combined statements of operations and retained earnings
(deficit) and cash flows for the years then ended. These
combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these combined 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 audit to obtain reasonable assurance
about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the combined 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 provides a reasonable basis for
our opinion.
In our opinion, the combined financial statements referred
to above present fairly, in all material respects, the
combined financial position of Summit Assurance Cellular
Inc. and Subsidiaries and Affiliates as of December 31, 1995
and 1994 and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
As discussed in Note 8 to the combined financial statements,
substantially all of the assets of the Company were sold in
April 1996 for approximately $3,250,000.
ROTHSTEIN, KASS & COMPANY, P.C.
Roseland, New Jersey
July 3, 1996
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 1995 1994
<S> <C> <C>
ASSETS
Current assets
Cash $2,617 $63,213
Due from affiliates 587,966 206,351
Prepaid expenses
and other current
assets 27,454 28,622
Total current
assets 618,037 298,186
4
<PAGE>
Telecommunications
and office
equipment, less
accumulated
depreciation and
amortization 227,104 309,144
Intangible assets,
less accumulated
amortization 885,678 476,533
$1,730,819 $1,083,863
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31 1995 1994
<S> <C> <C>
Current liabilities
Notes payable $174,270 $84,190
Accounts payable 852,137 493,413
Accrued expenses
and other current
liabilities 275,116 8,073
Total current
liabilities 1,301,523 585,676
Notes payable, less
current portion 598,434 169,487
Commitments and
contingencies
Stockholders'
equity
Common stock 1,100 285,198
Retained earnings
(deficit) (170,238) 43,502
Total stockholders'
equity (169,138) 328,700
$1,730,819 $1,083,863
</TABLE>
COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(DEFICIT)
<TABLE>
<CAPTION>
December 31 1995 1994
<S> <C> <C>
Revenues $3,499,380 $3,277,532
Cost of revenues 1,997,157 1,806,305
Gross margin 1,502,223 1,471,227
Selling, general
5
<PAGE>
and administrative
expenses 1,815,553 1,427,898
Income (loss) from (313,330)
operations 43,329
Interest expense 47,842 4,025
Income (loss)
before income taxes
(credit) (361,172) 39,304
Income taxes
(credit) (150,000) 16,000
Net income (loss) (211,172) 23,304
Retained earnings,
beginning of year 43,502 20,198
Retained earnings
of affiliates
acquired which were
previously combined (2,568)
Retained earnings
(deficit), end of
year $(170,238) $43,502
</TABLE>
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended 1995 1994
December 31,
<S> <C> <C>
Cash flows from
operating
activities
Net income (loss)
Adjustments to
reconcile net
income (loss) to
net cash provided
by operating
activities: $(211,172) $23,304
Tax allocation from
parent (150,000) 16,000
Accretion of
discount on notes
payable 25,310
Depreciation and
amortization 177,430 113,791
Change in assets
and liabilities:
Prepaid expenses
and other current
assets 1,168 (23,838)
Accounts payable 358,724 382,292
Accrued expenses
6
<PAGE>
and other current
liabilities 267,043 (1,979)
Net cash provided
by operating
activities 468,503 509,570
Cash flows from
investing
activities
Purchases of
equipment (12,339) (142,237)
Payments to former
shareholders (180,000)
Net cash used in
investing
activities (192,339) (142,237)
Cash flows from
financing
activities
Advances to
affiliates (231,615) (286,099)
Payments on notes
payable (105,145) (41,114)
Issuance of common
stock 1,000
Net cash used in
financing
activities (336,760) (326,213)
Net increase
(decrease) in cash (60,596) 41,120
Cash, beginning of
year 63,213 22,093
Cash, end of year $2,617 $63,213
Supplemental
disclosures of cash
flow information,
cash paid during
the year for
interest $- $4,025
Supplemental
disclosures of non-
cash investing and
financing
activities
Note payable and
capital lease
obligation incurred
for acquisition of
equipment $34,830 $92,758
Note payable
incurred for
acquisition of
franchise license $- $202,033
Notes payable
incurred for the
7
<PAGE>
acquisition
of net assets and
goodwill of
affiliates
previously combined $564,032 $-
</TABLE>
NOTES TO COMBINED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
Business and Organization
Summit Assurance Cellular Inc. ("SAC") together with its
subsidiaries and affiliates is a provider of short-term
cellular telephone services in certain regions in the United
States. SAC and certain of its affiliates are subsidiaries
of Summit Assurance,
Inc.
Principles of Combination
The combined financial statements include the accounts of
SAC and its affiliates Access Cellular Corporation
("Access"), Cellular Global Investments of Northern
California, Inc. ("Global"), Northstar Cellular Corporation
("Northstar"), Road and Show Cellular Arizona Corporation
("Arizona") and Road and Show Cellular West Corporation
("West") (collectively the "Company"). These corporations
are under common control and while their statements have
been combined, the financial position, results of operations
and cash flows presented herein, do not represent those of a
single legal entity. All material intercompany accounts and
transactions have been eliminated in combination.
Fair Value of Financial Instruments
The fair value of the Company's assets and liabilities which
qualify as financial instruments under Statement of
Financial Accounting Standards No. 107 approximate the
carrying amounts presented in the balance sheets.
Telecommunications and Office Equipment
Telecommunications and office equipment is stated at cost.
The Company records depreciation and amortization on the
straight-line method over the estimated useful lives of the
assets as follows:
Telecommunications equipment 3 years
Office equipment 5-7 years
Intangible Assets
8
<PAGE>
Goodwill represents the excess of cost over the net assets
of acquired businesses which is amortized over 20 years from
the acquisition date. The Company monitors the profitability
of the acquired operations to assess whether any impairment
of recorded goodwill has occurred.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. Summary of significant accounting policies -
continued
Franchise licensing fees relate to the costs of acquiring a
license for short-term cellular telephone rental operations
within certain regions of the United States. These costs
are amortized over 20 years.
Income Taxes
The Company files its federal income tax return on a
consolidated basis with its parent. The parent allocates
income taxes to its subsidiaries on a pro rata basis. During
the years ended December 31, 1995 and 1994, the parent had
no income tax liability.
The Company complies with Statement of Financial Accounting
Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes", which requires an asset and liability approach to
financial reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between
the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible
amounts in the future, based on enacted tax laws and rates
applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce the deferred tax
assets to the amount expected to be realized. The adoption
of SFAS No. 109 had no material impact on the Company's
financial statements since the Company, and its parent,
fully reserved the tax benefits flowing from its operating
losses.
Impairment on Long-lived Assets
In March 1995, Statement of Financial Accounting Standards
No. 121 (SFAS No. 121), "Accounting for the Impairment of
Long- lived Assets and for Long-lived Assets to be Disposed
of" was issued. The Company will adopt SFAS No. 121 in the
first quarter of 1996. The impact on the Company's
financial position and results of operations is not expected
to be material.
NOTES TO COMBINED FINANCIAL STATEMENTS
9
<PAGE>
1. Summary of significant accounting policies -
continued
Use of 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 date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
2. Acquisitions
In January 1995, SAC commenced management of, and
subsequently acquired, all of the outstanding capital stock
of Arizona and West. The purchase price was $248,598 and
$495,434, respectively, comprised of $180,000 of cash and
promissory notes aggregating $564,032 (Note 6). These
acquisitions were accounted for as purchases and the
purchase prices were allocated on the basis of relative fair
market values of the net assets acquired and net liabilities
assumed, as follows:
<TABLE>
<CAPTION>
Arizona West
<S> <C> <C>
Cash $- $67,463
Prepaid expenses
and other current
assets 1,032 12,701
Equipment 9,300 36,373
Intangibles 250,370 409,496
Accounts payable
and other current
liabilities (12,104) (30,599)
$248,598 $495,434
</TABLE>
In connection with the acquisition of the aforementioned
affiliates, common stock and retained earnings were reduced
by $284,098 and $2,568, respectively, in 1995.
Assets and liabilities and statements of operations for
Arizona and West for the year ended December 31, 1994 are
included within the combined financial statements. A pro
forma financial statement for the year ended December 31,
1994 would not be materially different from the combined
presentation and, therefore, not included.
10
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS
3. Due from affiliates
Amounts due from affiliates are non-interest bearing
advances payable on demand.
4. Telecommunications and office equipment
Telecommunications and office equipment consist of the
following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Telecommunications
equipment $357,776 $335,546
Office equipment 129,699 104,760
487,475 440,306
Accumulated
depreciation and
amortization 260,371 131,162
$227,104 $309,144
</TABLE>
Depreciation and amortization expense for the
years ended December 31, 1995 and 1994 amounted to $129,209
and $98,541, respectively.
5. Intangible assets
Intangible assets consist of the following at December 31,
1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Goodwill $457,366 $-
Franchise licenses 507,033 507,033
964,399 507,033
Accumulated
amortization 78,721 30,500
$885,678 $476,533
</TABLE>
Amortization expense for the years ended December 31, 1995
and 1994 was $48,221 and $15,250, respectively.
11
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS
6. Notes payable
Notes payable consist of the following at December 31, 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Note payable (face
amount of $250,000)
for the acquisition
of a license, is
due in monthly
installments of
$5,000 through
April 1999. In
discounting the
note to $202,033,
interest has been
imputed at 10% per
annum $183,543 $202,033
Notes payable (face
amounts aggregating
$118,000) for the
acquisition of
Arizona and West
common stock, is
due in monthly
installments
aggregating $3,278
through March 1998.
In discounting the
notes to $101,532,
interest has been
imputed at 10% per
annum. 84,558
Notes payable (face
amount aggregating
$518,750) for the
acquisition of
Arizona and West
common stock, is
due in 60 monthly
installments of
$8,479 commencing
April 1997.
In discounting the
note to $327,057,
12
<PAGE>
interest has been
imputed at 10% per
annum 352,467
Note payable (face
amount of $150,000)
for the acquisition
of West common
stock, is due in
monthly
installments of
$6,250 through
March 1997. In
discounting the
note to $135,443,
interest has been
imputed at 10% per
annum 119,951
Note payable for
the acquisition of
telecommunication
equipment is due in
monthly
installments of
$8,860 including
interest at 10% per
annum through June
1995 51,644
Capital lease
oligations,
collateralized by
related
telecommunications
and office
equipment 32,185
772,704 253,677
Less current
portion 174,270 84,190
$598,434 $169,487
</TABLE>
Scheduled aggregate payments on notes payable and capital
lease obligations are as follows:
Capital
Notes Lease
Payable Obligations
Year Ending December 31
1996 $157,444 $19,287
1997 177,641 16,072
1998 141,301
1999 96,676
2000 85,158
$658,220 35,359
13
<PAGE>
Less amount representing
interest 3,174
Present value of future
payments, including current
portion of $16,826 $32,185
Telecommunication and office equipment include
assets acquired under capital leases with a net book value
of approximately $29,000 as of December 31, 1995.
NOTES TO COMBINED FINANCIAL STATEMENTS
7 Commitments and contingencies
In connection with the acquisitions of Arizona and
West, the Company entered into a two year employment
agreement with the former majority shareholder. The
agreement expires in March 1997 and provides for annual
compensation of $88,800. In addition, the former
shareholder may not compete with the Company in certain
businesses, as defined, in certain regions of the United
States through March 1999.
The Company leases office facilities and office
equipment, which expire in various years through 1998.
Future minimum aggregate annual rental payments as of
December 31, 1995 are as follows:
Year Ending December 31
1996 $91,900
1997 57,300
1998 14,000
Rent expense for the years ended December 31, 1995 and 1994
was approximately $190,000 and $161,000, respectively.
In March 1996, the Company settled a lawsuit with a cellular
carrier. The settlement requires the Company to pay $175,000
on or before May 1, 1996, which amount has been recorded as
of December 31, 1994.
The Company is a defendant in litigation for rent owed on
certain premises previously leased by the Company. A
settlement offer by the Plaintiff of $15,000 is currently
outstanding, which has been recorded as of December 31,
1995.
The Company is a party to litigation in which it is claimed
that the Company received certain priority payments from an
affiliated entity. This litigation is in the discovery
14
<PAGE>
process. While any litigation contains an element of
uncertainty, management is of the opinion that the ultimate
resolution of the matter should not have a material
adverse effect upon results of operations, cash flows or
financial position of the Company.
In addition to the above matters, the Company is a party to
various legal actions, the outcome of which, in the opinion
of management, will not have a material adverse effect on
results of operations, cash flows or financial position of
the Company.
NOTES TO COMBINED FINANCIAL STATEMENTS
8. Subsequent event
In April 1996, the Company sold substantially all of its
assets less liabilities assumed of approximately $1,450,000,
for approximately $1,800,000.
Shared Technologies Cellular, Inc.
Pro Forma Statement of Operations
For The Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Shared Summit Pro Forma Total
Technologie Assurance, Adjustmen
s Cellular, Inc and ts
Inc Affiliates
<S> <C> <C> <C> <C>
Revenues $13,613,161 $3,499,380 $17,112,541
Cost of
revenues 8,587,272 1,997,157 10,584,429
Gross
Margin 5,025,889 1,502,223 6,528,112
Selling,
general
and
administra
tive
expenses 8,015,184 1,815,553 179,775A 10,010,512
Loss from
operations (2,989,295) (313,330) (179,775) (3,482,400)
Interest
expense 136,395 47,842 6,000B 190,237
Net loss
15
<PAGE>
before
income tax (3,125,690) (361,172) (185,775) (3,672,637)
Income
taxes 47,924 (150,000) 150,000 47,924
Net loss (3,173,614) (211,172) (335,775) (3,720,561)
Net loss
per common
share $(1.15) $(1.22)
Weighted
average
number of
shares
outstandin
g 2,748,288 300,000 3,048,288
</TABLE>
A To record goodwill amortization for the acquisition
B To record interest for the entire year on the liabilities
assumed from Summit
Shared Technologies Cellular, Inc.
Pro Forma Statement of Operations
For The Three Months Ended March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Shared Summit Pro Forma Total
Technologie Assurance, Adjustment
s Cellular, Inc and s
Inc Affiliates (A)
<S> <C> <C> <C> <C>
Revenues $4,305,952
$874,845 $5,180,797
Cost of
revenues 2,776,379
499,289 3,275,668
Gross 1,529,573
Margin 375,556 1,905,129
Selling,
general
and
administra
tive
expenses 3,116,529 453,888 44,944A 3,615,361
Loss from (1,586,956) (78,333) (44,944) (1,710,232
operations )
Interest
expense 60,771 13,375 74,146
16
<PAGE>
Net loss
before
income tax (1,647,727) (91,708) (44,944) (1,784,378
)
Income
taxes (40,000) 40,000
Net loss (1,647,727) $(51,708) $(84,944) (1,784,378
)
Net loss
per common
share $(0.52) $(0.52)
Weighted
average
number of
shares
outstandin
g 3,151,952 300,000 3,451,952
</TABLE>
A To record goodwill amortization from the acquisition
Shared Technologies Cellular, Inc
Pro Forma Balance Sheet
As of March 31, 1996
<TABLE>
<CAPTION>
Shared Summit Pro Forma Total
Technologi Assurance Adjustment
es Cellular, s
Cellular, Inc.
Inc.
<S> <C> <C> <C> <C>
ASSETS
Cash 341,467 2,617 (2,617) 341,467
Accounts
Receivable
, net 1,571,583 587,966 (587,966) 1,591,583
20,000
Inventorie
s 89,304 89,304
Note
receivable 71,126 71,126
Prepaid
expenses
and other
current
assets 725,120 27,454 (27,454) 725,120
17
<PAGE>
Total
current
assets 2,798,600 618,037 (598,037) 2,818,600
Equipment,
net of
accumulate
d
depreciati 2,290,455 227,104 (227,104) 2,460,055
on 169,600
Other
assets:
Intangible
assets, 6,466,824 885,678 (885,678) 9,839,887
net 3,373,063
Deposits 208,130 208,130
Note
receivable
, net of
current
portion
112,417 112,417
Total
other
assets 6,787,371 885,678 2,487,385 10,160,434
Total
assets 11,876,426 1,730,819 1,831,844 15,439,089
LIABILITIE
S
Notes
payable 400,000 174,270 1,209,041 1,783,311
Accounts
payable
and other
current
liabilitie 5,406,969 1,127,253 (366,112) 6,168,110
s
Due to
parent 1,010,300 1,010,300
Total
current
liabilitie 6,817,269 1,301,523 842,929 8,961,721
s
Note
payable,
less
current
portion 1,600,000 598,434 (130,223) 2,068,211
STOCKHOLDE
RS' EQUITY
Series B
preferred
stock 3,000 3,000
Common 31,520 1,100 (1,100) 34,520
stock 3,000
18
<PAGE>
Common
stock
subscripti
ons 5,000 5,000
Additional
paid in
capital 9,176,955 947,000 10,123,955
Accumulate
d deficit (5,752,318 (170,238) 170,238 (5,752,318
) )
Note
receivable
arising
from stock
purchase
agreement (5,000) (5,000)
Total
stockholde
rs' equity 3,459,157 (169,138) 1,119,138 4,409,157
Total
liabilitie
s and
stockholde
rs' equity 11,876,426 1,730,819 1,831,844 15,439,089
</TABLE>
(a) - To adjust Summit's assets and liabilities based on
thier fair market values and any excess has been treated as
goodwill.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
Shared Technologies Cellular, Inc.
By: /s/ Vincent DiVincenzo
Vincent DiVincenzo
Chief Financial Officer
Date: March 14, 1997
