-----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, RzczddeTYYlkXUIqAa4T+MLnquqliAJBMu4JBodCbAZkojR8ryhxIBsayAVIk2ms NOkFRznwKdGVDIAd/70p1w== 0000933583-96-000010.txt : 19960801 0000933583-96-000010.hdr.sgml : 19960801 ACCESSION NUMBER: 0000933583-96-000010 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960727 ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 19960731 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHARED TECHNOLOGIES CELLULAR INC CENTRAL INDEX KEY: 0000933583 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] 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: 96601520 BUSINESS ADDRESS: STREET 1: 100 GREAT MEADOW RD CITY: WETHERSFIELD STATE: CT ZIP: 06109 BUSINESS PHONE: 2032582500 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 8-KA 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. The purchase price was approximately $3,500,000, comprised of $1,058,276 in cash payable over eight months, $1,697,724 in assumed liabilities, and the issuance of 300,000 shares of the Company's common stock, $.01 par value. Additionally, at closing, the Company issued three-year warrants to purchase an aggregate of 300,000 additional shares of 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 at $5.00 per share. Item 7. Financial Statements and Exhibits (a)Financial statements of business acquired 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 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 an 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 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 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) Years Ended 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 and administrative expenses 1,815,553 1,427,898 Income (loss) from operations (313,330) 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 December 31, 1995 1994 Cash flows from operating activities Net income (loss) $(211,172) $23,304 Adjustments to reconcile net income (loss) to net cash provided by operating activities: 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 and other current liabilities 267,043 (1,979) Net cash provided by operating activities 468,503 509,510 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) (268,099) 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 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 affiliate 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 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 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 1. Summary of significant accounting policies 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. 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. 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, 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 NOTES TO COMBINED FINANCIAL STATEMENTS 6. Notes payable (continued) 1995 1994 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 obligations, 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 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 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. SUMMIT ASSURANCE CELLULAR INC. AND SUBSIDIARIES AND AFFILIATES SUMMIT ASSURANCE CELLULAR INC. AND SUBSIDIARIES AND AFFILIATES SUMMIT ASSURANCE CELLULAR INC. AND SUBSIDIARIES AND AFFILIATES See accompanying notes to combined financial statements. 5 SUMMIT ASSURANCE CELLULAR INC. AND SUBSIDIARIES AND AFFILIATES Shared Technologies Cellular, Inc. Pro Forma Statement of Operations For The Year Ended December 31, 1995 (Unaudited) Shared Summit Technologies Assurance Cellular, Inc. Inc. and Affiliates Revenues $13,613,161 $3,499,380 Cost of Revenues 8,587,272 1,997,157 Gross Margin 5,025,889 1,502,223 Selling, General and Administrative Expenses 8,015,184 1,815,553 Loss From Operations (2,989,295) (313,330) Interest Expense 136,395 47,842 Net Loss Before Income Tax (3,125,690) (361,172) Income Taxes 47,924 150,000 Net Loss $(3,173,614) $(211,172) Net Loss Per Common Share $(1.15) Weighted Average Number of Shares Outstanding 2,748,288 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 Year Ended December 31, 1995 Continued (Unaudited) Pro Forma Adjustment Total Revenues $17,112,541 Cost of Revenues 10,584,429 Gross Margin 6,582,112 Selling, General and Administrative Expenses 179,775 A 10,010,512 Loss From Operations (179,775) (3,482,400) Interest Expense 6,000 B 190,237 Net Loss Before Income Tax (185,775) (3,672,637) Income Taxes 150,000 47,924 Net Loss $(335,775) $(3,720,561) Net Loss Per Common Share $(1.22) Weighted Average Number of Shares Outstanding 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 Technologies Assurance Cellular, Inc. Inc. and Affiliates Revenues $4,305,952 $874,845 Cost of Revenues 2,776,379 499,289 Gross Margin 1,529,573 375,556 Selling, General and Administrative Expenses 3,116,529 453,888 Loss From Operations (1,586,956) (78,333) Interest Expense 60,771 13,375 Net Loss Before Income Tax Income Taxes (1,647,727) (91,708) Net Loss $(1,647,727) $(51,708) Net Loss Per Common Share $(.52) Weighted Average Number of Shares Outstanding 3,151,952 A To record goodwill amortization for the acquisition Shared Technologies Cellular, Inc. Pro Forma Statement of Operations For The Three Months Ended March 31, 1996 Continued (Unaudited) Pro Forma Total Revenues $5,180,797 Cost of Revenues 3,275,668 Gross Margin 1,905,129 Selling, General and Administrative Expenses 44,944 A 3,615,361 Loss From Operations (44,944) (1,710,232) Interest Expense 74,146 Net Loss Before Income Tax Income Taxes (44,944) (1,784,378) Net Loss $(84,944) $(1,784,378) Net Loss Per Common Share $(.52) Weighted Average Number of Shares Outstanding 300,000 3,451,952 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: May 9, 1996 3 -----END PRIVACY-ENHANCED MESSAGE-----