-----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, Br/vRueSbaGPsw1ZVxxbUCUrkfuy9pAReEXvnzWh0LUU9p+OTd0uAjVyvq3mltP0 ktbXXqkfCqrKZVbvTXNSsQ== 0000933583-96-000013.txt : 19960816 0000933583-96-000013.hdr.sgml : 19960816 ACCESSION NUMBER: 0000933583-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960815 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13558 FILM NUMBER: 96615561 BUSINESS ADDRESS: STREET 1: 100 GREAT MEADOW RD CITY: WETHERSFIELD STATE: CT ZIP: 06109 BUSINESS PHONE: 2032582500 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended June 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-13732 SHARED TECHNOLOGIES CELLULAR, INC. (Exact name of registrant as specified in its charter) Delaware 06-1386411 (State or other jurisdiction of (I.R.S. Employer Identification No.) Incorporation or organization) 100 Great Meadow Road, Suite 102 Wethersfield, Connecticut 06109 (Address of principal executive offices) (860) 258-2500 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has 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 14, 1996, there were 4,598,402 shares outstanding of the Company's Common Stock, $.01 par value. PART 1 FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 3-4 Consolidated Statements of Operations for the six months ending June 30,1996 and 1995 5 Consolidated Statements of Operations for the three months ending June 30, 1996 and 1995 6 Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995 7 Consolidated Statements of Stockholders' Equity for the six months ended June 30, 1996 8 Notes to Consolidated Financial Statements 9-10 Item 2 Management's Discussion and Analysis of Results of Operations and Financial Condition 11-12 PART II OTHER INFORMATION 13 Signature Page 14 Item 1. Financial Statements Shared Technologies Cellular, Inc. Consolidated Balance Sheets June 30, 1996 and December 31, 1995 (unaudited) June 30, 1996 December 31, 1995 ASSETS Current Assets: Cash 120,286 $2,541,827 Accounts receivable, less allowance for doubtful accounts of $679,000 and $685,000 at June 30, 1996 and December 31, 1995, respectively 1,633,925 1,172,671 Carrier commissions receivable, less unearned income 58,715 452,610 Inventories 92,973 49,076 Note receivable 83,417 59,136 Prepaid expenses and other current assets 502,210 471,356 Receivable due from sale of assets - 1,077,856 Total current assets 2,491,526 5,824,532 Telecommunications and office equipment, less accumulated depreciation 3,407,922 2,157,685 Other assets: Intangible assets, less accumulated amortization 9,455,015 6,129,101 Deposits 224,579 142,080 Note receivable, less current portion 100,126 124,407 Total other assets 9,779,720 6,395,588 TOTAL ASSETS $15,679,168 $14,377,805 The accompanying notes are an integral part of these financial statements. Shared Technologies Cellular, Inc. Consolidated Balance Sheets June 30, 1996 and December 31, 1995 (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 1996 December 31, 1995 Current liabilities: Notes payable $1,802,885 $400,000 Accounts payable and other current liabilities 8,096,879 5,838,718 Commissions payable 58,714 452,611 Due to parent 1,011,813 984,592 Total current liabilities 10,970,291 7,675,921 Notes payable, less current portion 1,677,607 1,600,000 Stockholders' equity: Preferred stock, $.01 par value, Series A Convertible, authorized, issued and outstanding 300,000 shares at December 31, 1995. - 3,000 Common stock $.01 par value, authorized 10,000,000 shares, issued and outstanding 4,598,402 shares at June 30,1996 and 3,089,189 shares at December 31, 1995 45,985 30,892 Common stock subscription 5,000 5,000 Capital in excess of par value 10,114,391 9,172,583 Accumulated deficit (7,129,106) (4,104,591) Note receivable arising from stock purchase agreement (5,000) (5,000) Total stockholders' equity 3,031,270 5,101,884 Total liabilities and stockholders' equity $15,679,168 $14,377,805 The accompanying notes are an integral part of these financial statements. Shared Technologies Cellular, Inc. Consolidated Statements of Operations For The Six Months Ended June 30,1996 and 1995 (unaudited) June 30, 1996 June 30,1995 Revenues:Rental operations $7,131,548 $3,252,959 Activation/Debit/Agency operations 2,242,384 2,037,110 Total Revenues 9,373,932 5,290,069 Cost of revenues: Rental Operations 4,574,408 1,665,606 Activation/Debit/Agency operations 1,418,074 1,413,091 Total cost of revenues 5,992,482 3,078,697 Gross margin 3,381,450 2,211,372 Field - operating expenses: Rental operations 3,301,851 1,787,951 Activation/Debit/Agency operations 738,034 424,613 Total field operating expenses 4,039,885 2,212,564 Corporate - operating expenses: 2,236,242 279,214 6,276,127 2,491,778 Operating loss (2,894,677) (280,406) Interest expense (129,838) (30,808) Net loss ($3,024,515) ($311,214) Net loss per common share ($0.85) ($0.13) Weighted average number of common shares outstanding 3,561,455 2,441,920 The accompanying notes are an integral part of these financial statements. Shared Technologies Cellular, Inc. Consolidated Statements of Operations For The Three Months Ended June 30,1996 and 1995 (unaudited) June 30, 1996 June 30,1995 Revenues: Rental operations $3,931,865 $1,792,882 Activation/Debit/Agency operations 1,136,115 1,470,535 Total revenues 5,067,980 3,263,417 Cost of revenues: Rental operations 2,501,160 958,657 Activation/Debit/Agency operations 714,943 1,052,554 Total cost of revenues 3,216,103 2,011,211 Gross margin 1,851,877 1,252,206 Field - operating expenses: Rental operations 1,685,258 1,020,954 Activation/Debit/Agency operations 329,369 319,756 Total field operating expenses 2,014,627 1,340,710 Corporate - operating expenses 1,144,971 134,213 3,159,598 1,474,923 Operating loss (1,307,721) (222,717) Interest expense (69,067) (13,829) Net loss ($1,376,788) ($236,546) Net loss per common share ($0.35) ($.08) Weighted average number of shares outstanding 3,970,959 2,813,271 The accompanying notes are an integral part of these financial statements. Shared Technologies Cellular, Inc. Consolidated Statements of Cash Flows For The Six Months Ended June 30, 1966 and 1995 (unaudited) June 30, 1996 June 30,1995 Cash flows from operating activities: Net loss ($3,024,515) ($311,214) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 742,906 218,677 Provision for doubtful accounts 430,084 40,924 Change in assets and liabilities, net of effect of acquisitions: Accounts receivable (856,010) (819,062) Inventories (43,897) (14,930) Other current assets (30,854) (75,457) Accounts payable and other current liabilities 1,537,436 758,298 Net cash used in operating activities (1,244,850) (202,764) Cash flows from investing activities: Payments for intangible assets (227,407) (183,230) Purchase of equipment (1,557,260) (220,881) Acquisition of businesses (417,316) (347,538) Payments for deposits (82,499) - Net cash used in investing activities (2,284,482) (751,649) Cash flows from financing activities: Payments on capital lease obligations (2,286) (4,673) Collection on note receivable from sale of assets 1,077,856 - Deferred registration costs - (693,316) Issuance of common stock 5,000 4,255,446 Repurchase of common stock - (125,000) Advances from (payments to ) parent 27,221 (916,993) Net cash provided by financing activities 1,107,791 2,515,464 Net increase (decrease) in cash (2,421,541) 1,561,051 Cash, beginning of period 2,541,827 10,233 Cash, end of period $120,286 $1,571,284 Supplemental disclosure of cash flow information: Cash paid during the period for - Interest ($49,394) $30,808 Supplemental schedules of noncash investing and financing activities: Contribution to capital in excess of par value of amount due to parent - $1,184,000 Issuance of common stock for acquisitions $950,000 $250,000 Notes payable incurred for acquisition of assets $1,898,995 - The accompanying notes are an integral part of these financial statements. Shared Technologies Cellular, Inc. Consolidated Statements of Stockholders' Equity For The Six Months Ended June 30, 1996 (unaudited) Series A Common Preferred Stock Common Stock Stock Shares Amount Shares Amount Subscriptions Balances, December 31, 1995 300,000 $3,000 3,089,189 $30,892 $5,000 Issuance of common stock - 62,763 628 - Issuance of common stock for acquisitions - 300,000 3,000 - Conversion of Series A preferred stock to common stock (300,000) (3,000) 1,146,450 11,465 - Net loss - - - - - - Balances, June 30,1996 0 $0 4,598,402 $45,985 $5,000 Capital in Total Excess of Accumulated Note Stockholders' Capital Deficit Receivable Equity Balances, December 31, 1995 $9,172,583 ($4,104,591) ($5,000) $5,101,884 Issuance of common stock 4,372 - - 5,000 Issuance of common stock for acquisitions 947,000 - - 950,000 Conversion of Series A preferred stock to common stock (9,564) - - (1,099) Net loss - (3,024,515) - (3,024,515) Balances, June 30,1996 10,114,391 ($7,129,106) ($5,000) $3,031,270 The accompanying notes are an integral part of these financial statements. Shared Technologies Cellular, Inc. Notes to Consolidated Financial Statements June 30, 1996 (Unaudited) 1. Basis of Presentation: The consolidated financial statements included herein have been prepared by Shared Technologies Cellular, Inc. (STC or the Company) pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary to present a fair statement of the results for interim periods. Certain information and footnote disclosures have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's December 31, 1995 Form 10-K. 2. Litigation: The Company is not involved in any litigation which, in the opinion of management, individually or in the aggregate, if resolved against the Company, would have a materially adverse effect on the Company's financial condition, statement of operation or cash flows. 3. Acquisition: In May and June 1995, the Company commenced management of and subsequently completed its acquisition of the outstanding capital stock of Cellular Hotline, Inc. ("Hotline"), a cellular telephone activation service provider. The purchase price was $617,000, comprised of $367,000 in cash, the assumption of $150,000 of certain indebtedness and the balance through the issuance of 50,000 shares of the Company's common stock ("Shares") valued at $5.00 per share. Pursuant to the purchase agreement in September 1995, the former Hotline stockholders caused the Company to repurchase from them all of the Shares for $5.00 per share, for an aggregate amount of $250,000. The Company subsequently retired those Shares. In connection with the acquisition, the Company issued the former Hotline stockholders a three year option to purchase an aggregate of 50,000 shares of the Company's common stock at a price of $7.50 per share. In addition, the agreement provides for additional payments based upon attaining certain levels of activation revenues over a one year period. In November 1995, the Company completed its acquisition of substantially all of the assets of PTC Cellular, Inc ("PTCC"). The purchase price was $3,800,000, comprised of $300,000 in cash, the assumption of $1,200,000 of accounts payable, a promissory note of $2,000,000 and the issuance of 100,000 shares of the Company's common stock. The agreement provides for a maximum of $2,500,000 of royalty payments, computed at 3% of quarterly revenues generated from certain of the acquired assets. No payments have been made to date. Also, STC committed to use its best reasonable efforts to obtain financing in the amount of $7,000,000 within six months of the acquisition date. On April 27, 1996, 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 ("Marlar"). The purchase price was approximately $3,500,000, comprised of $1,058,000 in cash payable over eight months, $1,492,000 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 at $3.00 per share, 100,000 at $4.00 per share, and 100,000 at $5.00 per share. Unaudited pro forma consolidated statements of operations for the six month periods ended June 30, 1996 and 1995, as though the acquisitions had been made at the beginning of the corresponding periods, are as follows: 1996 1995 Revenues $10,243,482 $12,528,459 Cost of revenues 6,607,651 8,733,695 Gross margin 3,635,831 3,794,764 Operating expenses 6,987,645 4,622,852 Operating loss (3,351,814) (828,087) Interest expense, net (145,906) (643,557 Net loss $(3,497,720) $(1,471,644) Net loss per common share $(0.93) $(.051) Weighted average number of common shares outstanding 3,754,312 2,880,657 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Revenues The Company's revenues of $9,374,000 for the six month period ended June 30, 1996 represented an increase of $4,084,000 (77%) over the six month period ended June 30, 1995 and its revenues of $5,068,000 for the three month period ended June 30, 1996 represented and increase of $1,805,000 (55%) over the three month period ended June 30, 1995. The increase in the six month period ended June 30, 1996 was comprised of an increase of $3,879,000 in the Company's rental operations and a $205,000 increase in the Company's Activation/Debit/Agency operations. The $3,879,000 increase in the rental operations is due to acquisitions and the continued expansion of the portable cellular telephone business through the car rental outlets. $2,510,000 of the increase is due to the in-car cellular telephone revenues generated from the acquisition of certain assets of PTC Cellular, Inc ("PTCC") in November 1995. $552,000 of the increase is due to the portable cellular telephone revenues generated from the acquisition of certain assets of various companies owned by Craig A. Marlar ("Marlar") on April 27, 1996. The balance of the increase in the rental operations is due to the continued expansion of the portable cellular telephone business referred to earlier. The $205,000 increase in the Company's Activation/Debit/Agency operations is due to several factors. The acquisition of Cellular Hotline, Inc. in May 1995 resulted in an increase of $314,000 in activation revenues. The Debit business, which was started early 1996, resulted in revenues of $461,000. These increases were offset by decreases of $570,000 in revenues as a result of the sale of the resale operations in Connecticut in December 1995 and the conversion of its sales force to an agency operation. The revenue increase of $1,805,000 in the three month period ended June 30, 1996 as compared to the three month period ended June 30, 1995 was comprised of an increase of $2,139,000 in the rental operations which was slightly offset by a decrease of $334,000 in the Activation/Debit/Agency operation. The $1,805,000 increase in the rental operations was comprised of $1,125,000 due to the PTCC acquisition, $552,000 due to the Marlar acquisition and the balance of $128,000 is due to continued expansion of the portable cellular telephone business previously discussed. The $334,000 decrease in the Activation/Debit/Agency operations is due to the sale of the resale operations previously discussed. Gross Margin Gross margin increased $1,170,000 for the six month period ended June 30, 1996 and $600,000 for the three month period ended June 30, 1996 compared with the corresponding six and three month periods ended June 30, 1995. Gross margin as a percentage of revenues decreased from 42% for the six month period ended June 30, 1995 to 36% for the six months period ended June 30, 1996 and decreased from 38% in the three month period ended June 30, 1995 to 37% in the three month period ended June 30, 1996. The decrease in the gross margin as a percentage of revenues is due to the material change in the revenues mix as a result of the various acquisitions, the sale of the resale operation and the Company's entry into the debit business. The following chart summarizes the impact of all these changes on the gross margin for the six month period ended June 30, 1996 and 1995: 1996 1995 Revenues Gross Margin Revenues Gross Margin Portable rental 52% 42% 61% 49% In-car rental 24% 25% - - Debit 5% 29% - - Activation 12% 20% 15% 26% Agency 7% 69% 6% 65% Resale - - 18% 22% Total 100% 36% 100% 42% Operating Expenses Operating expenses increased $3,784,000 in the six month period ended June 30, 1996 and increased $1,684,000 in the three month period ended June 30, 1996 over the corresponding period ended June 30, 1995. The majority of the increase is attributable to the previously discussed acquisitions. As a percentage of revenues, the field operating expenses were consistent for the six month period ended June 30, 1996 (43%) versus June 30, 1995 (42%). In addition, for the three month period ended June 30, 1996, the field operating expenses, as a percentage of revenues, decreased to 40%. This decrease is a result of the various cost cutting measures started in the first quarter of 1996. Corporate operating expenses for both the three month and the six month periods ended June 30, 1996 increased dramatically from the same periods in 1995. The increase is primarily due to the various acquisitions, as well as the fact that the Company has made significant investments in infrastructure, both human resources and systems, to better manage, control and consolidate the various operations. In addition, the Company has incurred higher than expected operating expenses in consolidating the in-car administrative functions into its existing operations. The Company has also continued to make investments in the development of the debit phone business and in the programs needed to provide cellular phone rentals to inbound international airline passengers starting in the third quarter of this year. Liquidity and Capital Resources The Company had a working capital deficit of $8,479,000 as of June 30, 1996 compared to a deficit of $1,851,000 as of December 31, 1995. Stockholders' equity at June 30, 1996 was $3,031,000 compared to $5,102,000 at December 31, 1995. Net cash used in operations for the six month period ended June 30, 1996 was $1,245,000. This was mainly due to the operating results for the period, net of noncash items, offset by a $1,537,000 increase in accounts payable and other current liabilities. The Company continued to focus its investing activities on the purchase of equipment and on growth through acquisitions. The Company invested approximately $417,000 to complete the Marlar acquisition previously discussed. In addition, the Company invested approximately $1,558,000 in new cellular telephones for the in-car operations and the anticipated increase in portable cellular telephone rentals at the Olympics in July and August of this year and the subsequent start up of the portable cellular telephone rentals to in-bound international airline passengers. During the six month period ended June 30, 1996, the Company raised $1,108,000 from financing activities. The majority of this amount was due to the collection of a note receivable from the sale of the resale operation in December 1995. The $2,515,000 raised during the six month period ended June 30, 1995 was principally due to the Company's completion of its initial public offering in April 1995 and the subsequent repayment of a portion of advances made by the Company's parent company, Shared Technologies Fairchild Inc. ("STFI"). Cash requirements for the second half of 1996 will include funds needed to sustain operations and for existing obligations arising from completed acquisitions. The Company has recently negotiated an agreement with STFI in which STFI has contributed $1,300,000 in cash to the Company. This cash infusion, together with $1,200,000 of existing debt, is to be converted into $2,500,000 of the Company's newly issued preferred shares. In conjunction with this agreement, the Company has also signed a term sheet with International Capital Partners, Inc. ("ICP") for ICP to invest an additional $2,500,000 through the purchase of shares of the Company's newly issued preferred stock. Management believes that an additional infusion of cash from debt or equity financing will be required. Management does not believe that existing operations can generate sufficient cash to sustain operations. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits None (b) Reports on Form 8-K On August 2, 1996, the Company filed a report on Form 8-KA, Item 2 and Item 7 regarding its acquisition of Marlar. The Company included exhibit 10.1, in accordance with Form 8-K, Item 7. The exhibit was the Asset Purchase Agreement dated April 27, 1996. SIGNATURE 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: August 14, 1995 EX-27 2 ART. 5 FDS FOR QUARTER END 10-Q
5 1000
6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 120 0 2313 679 93 2492 4813 1405 15679 10970 0 0 0 46 0 15679 9374 9374 5992 5992 6276 0 130 (3025) 0 (3025) 0 0 0 (3025) (0.85) (0.85)
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