-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UGzXdNXteJiCE0m4nrsdLK4CJ+5uQCu8KgQ6hKrOdLLBBjc0nrgi/mdCy0fthtcX e1tb8FblTaGMDT86Rb8dpg== 0000933583-97-000007.txt : 19970317 0000933583-97-000007.hdr.sgml : 19970317 ACCESSION NUMBER: 0000933583-97-000007 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970331 ITEM INFORMATION: Other events FILED AS OF DATE: 19970314 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHARED TECHNOLOGIES CELLULAR INC CENTRAL INDEX KEY: 0000933583 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TELEPHONE INTERCONNECT SYSTEMS [7385] IRS NUMBER: 061386411 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13558 FILM NUMBER: 97556845 BUSINESS ADDRESS: STREET 1: 100 GREAT MEADOW RD STREET 2: SUITE 102 CITY: WETHERSFIELD STATE: CT ZIP: 06109 BUSINESS PHONE: 8602582474 MAIL ADDRESS: STREET 1: C/O SHARED TECHNOLOGIES CELLULAR INC STREET 2: 100 GREAT MEADOW ROAD SUITE 102 CITY: WETHERSFIELD STATE: CT ZIP: 06109 8-K/A 1 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 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 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 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
December 31 1995 1994 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 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
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31 1995 1994 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
COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
December 31 1995 1994 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 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
COMBINED STATEMENTS OF CASH FLOWS
Years ended 1995 1994 December 31, 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 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 acquisition of net assets and goodwill of affiliates previously combined $564,032 $-
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 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 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:
Arizona West 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
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 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:
1995 1994 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
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:
1995 1994 Goodwill $457,366 $- Franchise licenses 507,033 507,033 964,399 507,033 Accumulated amortization 78,721 30,500 $885,678 $476,533
Amortization expense for the years ended December 31, 1995 and 1994 was $48,221 and $15,250, respectively. 11 NOTES TO COMBINED FINANCIAL STATEMENTS 6. Notes payable Notes payable consist of the following at December 31, 1995 and 1994:
1995 1994 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 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
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 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 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)
Shared Summit Pro Forma Total Technologie Assurance, Adjustmen s Cellular, Inc and ts Inc Affiliates 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 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
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)
Shared Summit Pro Forma Total Technologie Assurance, Adjustment s Cellular, Inc and s Inc Affiliates (A) 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 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
A To record goodwill amortization from the acquisition Shared Technologies Cellular, Inc Pro Forma Balance Sheet As of March 31, 1996
Shared Summit Pro Forma Total Technologi Assurance Adjustment es Cellular, s Cellular, Inc. Inc. 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 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 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
(a) - To adjust Summit's assets and liabilities based on thier fair market values and any excess has been treated as goodwill. 19 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 -----END PRIVACY-ENHANCED MESSAGE-----