UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
(Mark One)
[X] Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the fiscal year ended................................DECEMBER 31, 2002
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from.......................to...................
Commission File Number 0-19437
CELLULAR TECHNICAL SERVICES COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 11-2962080
- -------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2815 SECOND AVENUE, SUITE 100, SEATTLE, WASHINGTON 98121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 443-6400
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section
12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of Class)
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 the filing
requirements for the past 90 days. Yes _ X _ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes ____ No _ X _
As of April 29, 2003, there were 2,291,770 shares of Common Stock, $.001 par
value outstanding. As of June 30, 2002 the aggregate market value of the
Registrant's Common Stock, $.001 par value, held by non-affiliates was
approximately $2.5 million. The aggregate market value of the Company's stock
was calculated using $1.11, the closing price for its Common Stock on June 30,
2002 as reported on The Nasdaq Stock Market (SmallCap System).
Documents incorporated by reference in Part III: None.
1
INTRODUCTION
This Form 10-K/A amends the registrant's Form 10-K for the fiscal year ended
December 31, 2002 by deleting the information contained in Items 10, 11, 12 and
13 of Part III of such form and substituting the following for such Items.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The name, age, position with the Company, and biographical information with
respect to each of the Company's current directors and executive officers are
provided below.
NAME Age POSITION WITH COMPANY
- ---- --- ---------------------
Stephen Katz 59 Chairman of the Board of Directors, Chief
Executive Officer and Acting President
Lawrence J. Schoenberg 70 Director
Joshua J. Angel 67 Director
Barry J. Beil 56 Director
Bruce R. York 48 Vice President, Chief Financial Officer and
Secretary
Stephen Katz, Chairman of the Board of Directors, was Acting Chief Executive
Officer and Acting President from November 1992 until February 1994, at which
time he became Chief Executive Officer. Mr. Katz was re-appointed as Acting
President in September 1998. Mr. Katz has been Chairman of the Board and a
director of the Company since its inception and a member of the Management
Committee of the predecessor partnership during the entire period of its
existence. From September 1984 until September 1995, Mr. Katz was Chairman of
the Board, Chief Executive Officer and until September 1993, President of
Nationwide Cellular Service, Inc., which was the Company's majority stockholder
until May 1992 and its largest stockholder, owning 34% of its outstanding
shares, until September 1995. At that time such shares were distributed to
Nationwide's stockholders, immediately prior to Nationwide's merger with MCI
Communications Corp. Mr. Katz served as Chief Executive Officer of Global
Payment Technologies, Inc. (formerly Coin Bill Validator, Inc.) from May 1996
through March 2003 and as its Chairman of the Board from September 1996 to April
2003. Global Payment Technologies is engaged in the business of currency
validation.
Lawrence J. Schoenberg joined the Company as a director in September 1996. Mr.
Schoenberg also serves as Director of Government Technology Services, Inc.,
Merisel, Inc., and Sunguard Data Services, Inc. Former directorships include
Systems Center, Inc. (which was sold to Sterling Software, Inc.), SoftSwitch,
Inc. (which was sold to Lotus/IBM Corp.), Forecross Corporation, Image Business
Systems, Inc., and Penn America Group, Inc. Mr. Schoenberg founded AGS
Computers, Inc. in 1967 and served as its Chief Executive Officer until 1991.
The company was sold to NYNEX in 1988. The micro-computer segment subsequently
became a part of Merisel, Inc.
Barry J. Beil has been a director of the Company since April 2003. From 1980 to
1998 he was President and Chief Executive Officer of Sheldon Electric Co., Inc.,
a New York City based electrical contractor. Since 1985 he has been President of
Hampton Hills Operating Corp. and Managing Partner of Hampton Hills Associates
which collectively own and operate the Hampton Hills Golf & Country Club. Since
1996 he has been the Managing Member of Rugby Recreational Group LLC which owns
and operates the Fox Hill Golf & Country Club. Since 1988 he has been Vice
President and Secretary of M&M Beach Properties, Inc., a developer and builder
of residential properties.
2
Joshua J. Angel has been a director of the Company since June 6, 2001. Mr. Angel
is Founder and Senior Managing Shareholder of Angel & Frankel, P.C., a New York
based law firm specializing in commercial insolvency and creditors' rights. Mr.
Angel serves as a director of Dynacore Holdings Corporation. Mr. Angel has a
B.S. from N.Y.U. and an L.L.B. from Columbia University.
Bruce R. York joined the Company in April 1999 as Vice President and Chief
Financial Officer. Prior to joining the Company, Mr. York was the Director of
Finance of Cell Therapeutics, Inc., a biopharmaceutical company, from February
1998 to February 1999. From May 1987 to January 1998, Mr. York held various
positions with Physio Control International Corporation, a manufacturer of
external defibrillators, in Seattle and London, including Director of Business
Planning, Director of Finance - Europe, Director of Finance and Corporate
Controller, and Finance Manager. From September 1978 to April 1987, Mr. York
held several positions with Price Waterhouse in Seattle and New York, including
Senior Tax Manager. Mr. York is a C.P.A. and has an A.B. and an M.B.A. from
Dartmouth College.
The Company's officers are elected annually and serve at the discretion of the
Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), officers, directors and holders of more than 10% of the
outstanding shares of the Company's Common Stock are required to file periodic
reports of their ownership of, and transactions involving, the Company's Common
Stock with the United States Securities and Exchange Commission ("SEC") . The
Company believes that its reporting persons complied with all Section 16(a)
filing requirements applicable to them with respect to the Company's fiscal year
ended December 31, 2002.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning annual and long-term
compensation, paid or accrued, for the Named Executive Officers for services in
all capacities to the Company during fiscal years 2002, 2001 and 2000.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(1)
------------------- ---------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
---- ------ ----- ------------ ------- ------------
Stephen Katz............ 2002 $50,000 $0 $322 10,000 $ 0
Chairman of the Board of 2001 99,355 0 645 15,000 0
Directors and Chief 2000 108,458 60,000 543 70,000 0
Executive Officer (2)
Bruce R. York.......... 2002 $120,000 $0 $16,666 10,000 0
Vice President, Chief 2001 116,651 18,750 14,690 15,000 0
Financial Officer and 2000 106,858 70,000 5,308 7,500 0
Corporate Secretary (3)
______________________________________
3
1. None of the Named Executive Officers received any Restricted Stock
Awards or LTIP Payouts in 2002, 2001 or 2000.
2. Other annual compensation represents taxable income originating from
term life insurance premiums paid on behalf of the Named Executive
Officer under the Company's standard employee group benefits plan.
3. Other annual compensation for 2002 includes 401(k) matching
contributions by the Company of $5,641, an automobile allowance of
$10,800 and taxable income originating from term life insurance
premiums paid on behalf of the Named Executive Officer under the
Company's standard employee group benefits plan. Other annual
compensation for 2001 includes 401(k) matching contributions of $6,817
an automobile allowance of $7,650 and taxable income originating from
term life insurance premiums paid on behalf of the Named Executive
Officer under the Company's standard employee group benefits plan.
Other annual compensation for 2000 includes 401(k) matching
contributions of $5,083 and taxable income originating from term life
insurance premiums paid on behalf of the Named Executive Officer under
the Company's standard employee group benefits plan.
GRANTS OF STOCK OPTIONS IN 2002
The following table sets forth information as to all grants of stock options to
the Named Executive Officers during 2002.
INDIVIDUAL GRANTS (1)
------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM (3)
OPTIONS EMPLOYEES EXERCISE EXPIRATION ----------------------------
NAME GRANTED (2) IN 2002 PRICE DATE AT 5% AT 10%
- ------------------------ ----------- ------- ----- ---- ----- ------
Stephen Katz............. 10,000 13.3% $0.99 9/22/12 $6,226 $15,778
Bruce R. York............ 10,000 13.3% 0.99 9/22/12 6,226 15,778
______________________________________
1. No stock appreciation rights ("SARs") were granted to any of the Named
Executive Officers during 2002.
2. The options become exercisable in cumulative annual installments of
25% per year on each of the first four anniversaries of the grant
date. The options are exercisable over a ten-year period.
3. The dollar amounts set forth under these columns are the result of
calculations at the 5% and 10% rates established by the SEC and are
not intended to forecast future appreciation of the Company's stock
price. The Company did not use an alternative formula for a grant date
valuation as it is unaware of any formula that would determine with
reasonable accuracy a present value based upon future unknown factors.
AGGREGATED OPTION EXERCISES IN 2002 AND YEAR-END OPTION VALUES
The following table sets forth information with respect to the exercise of stock
options during 2002 by the Named Executive Officers and unexercised options held
by them on December 31, 2002.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE DECEMBER 31, 2002 DECEMBER 31, 2002
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE (1) EXERCISABLE/
- -------------------------- ----------- -------- ----------------------------- ------------
UNEXERCISABLE (2)
-----------------
Stephen Katz.............. 0 $0 43,290/55,110 $0/$0
Bruce R. York............. 0 0 11,820/27,880 $0/$0
______________________________________
4
1. There were no SAR exercises during 2002 and no SARs were outstanding
at December 31, 2002.
2. The closing price for the Company's Common Stock as reported on the
NASDAQ SmallCap Market on December 31, 2002 was $0.69 per share. Value
is calculated by multiplying: (i) the difference between $0.69 and the
option exercise price, by (ii) the number of shares of Common Stock
underlying the option.
DIRECTOR COMPENSATION
Each director serving in 2002 who was not an officer or employee of the Company
received an award of restricted shares of the Company's common stock, contingent
upon stockholder approval of the 2002 Stock Incentive Plan and is reimbursed for
his out-of-pocket expenses incurred in connection with attendance at Board and
Committee meetings or other Company business. No cash payments other than
reimbursement of expenses were made to non-employee directors during 2002.
In December 1993, the Company adopted the 1993 Non-Employee Director Stock
Option Plan ("1993 Plan") pursuant to which each person who is not a salaried
employee of the Company who first becomes a director after December 29, 1993
shall be granted on the date he first becomes a director an option to purchase
2,000 shares of Common Stock and on January 2 of each year beginning with
January 2, 1994, each person who is not a salaried employee of the Company and
is then a director shall be granted an option to purchase an additional 1,200
shares of Common Stock. In addition, the 1993 Plan authorizes the Board of
Directors to approve additional stock option grants to such non-employee
directors. The per share exercise price of each option granted under the 1993
Plan shall be equal to the fair market value of a share of Common Stock on the
date the option is granted.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee of the Board of Directors consists
of Messrs. Angel (Chairman), Schoenberg and Beil. None of such committee members
is or has been an officer or employee of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and footnotes thereto set forth, as of April 17, 2003,
information with respect to the beneficial ownership of the Company's Common
Stock by: (i) each person known by the Company to beneficially own more than 5%
of the outstanding shares of Common Stock; (ii) each director of the Company;
(iii) the Chief Executive Officer and each of the other executive officers of
the Company who received salary and bonus in excess of $100,000 during 2002
(collectively, the "Named Executive Officers"); and (iv) all current directors
and executive officers of the Company as a group.
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OUTSTANDING
NAME OF BENEFICIAL OWNER OWNERSHIP (1) SHARES
- ------------------------ ------------- ------
Stephen Katz
20 E. Sunrise Highway, Suite 200
Valley Stream, NY 11581......................... 186,194 (2) 8.0%
Lawrence J. Schoenberg........................... 20,950 (3) *
Joshua J. Angel.................................. 3,200 (4) *
Barry J. Beil.................................... ---- *
Bruce R. York.................................... 12,820 (5) *
All directors and executive officers as a group
(5 persons)...................................... 223,164 (6) 9.4%
___________________________
5
* Less than 1%
1. Unless otherwise indicated, each person or group has sole voting and
investment power with respect to such shares. For purposes of this
table, a person or group of persons is deemed to have "beneficial
ownership" of any shares which such person or group has the right to
acquire within 60 days. For purposes of computing the percent of
outstanding shares held by each person or group named above as of a
given date, any shares which such person or group has the right to so
acquire are deemed to be outstanding, but are not deemed to be
outstanding for the purpose of computing the percentage owned by any
other person or group.
2. Includes 41,273 shares held by a partnership controlled by Mr. Katz
and 3,090 shares held by a trust for the benefit of his wife. Also
includes 43,290 shares subject to currently exercisable options, none
of which are at prices lower than the market price of the Company's
Common Stock.
3. Consists of 20,950 shares subject to currently exercisable options,
none of which are at prices lower than the market price of the
Company's Common Stock.
4. Consists of 3,200 shares subject to currently exercisable options,
none of which are at prices lower than the market price of the
Company's Common Stock.
5. Includes 12,820 shares subject to currently exercisable options, none
of which are at prices lower than the market price of the Company's
Common Stock.
6. Includes an aggregate of 83,460 shares subject to currently
exercisable options, none of which are at prices lower than the market
price of the Company's Common Stock.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the Company's equity compensation
plans as of December 31, 2002.
Plan Category A B C
Number of securities Weighted average exercise Number of securities remaining
to be issued upon price of outstanding available for future issuance under
exercise of options, warrants and equity compensation plans
outstanding options, rights securities (excluding securities reflected in
warrants and rights reflected in column (A) column (A))
Equity compensation plans 240,009 $8.17 148,951
approved by security
holders
Equity compensation plans 35,000 -- 75,000
not approved by security
holders
-----------------------------------------------------------------------------------------------
Total 275,009 -- 223,951
On June 6, 2002, the Board adopted the 2002 Stock Incentive Plan and issued
restricted shares to its non-management directors subject to stockholder
approval. This Plan will be submitted for stockholder approval at the 2003
annual meeting.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
6
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amended Annual Report
on Form 10-K/A to be signed on its behalf by the undersigned thereunto duly
authorized.
Dated: April 29, 2003
CELLULAR TECHNICAL SERVICES COMPANY, INC.
By: /s/ Bruce R. York
--------------------------------------
Name: Bruce R. York
Title: Vice President and Chief
Financial Officer
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Annual Report on Form 10-K/A for the Year
Ended December 31, 2002 (the "Report") by Cellular Technical Services Company,
Inc. ("Registrant"), I, Bruce R. York, certify that:
1. I have reviewed this annual report on Form 10-K/A of Cellular
Technical Services Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a - 15 and 15d - 15) for the
registrant and we have: a) designed such disclosure controls and
procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared; b) evaluated the effectiveness of
the registrant's disclosure controls and procedures as of a date
within 90 days prior to the filing date of this report (the
"Evaluation Date"); and c) presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function): a) all significant deficiencies
in the design or operation of internal controls which could adversely
affect the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and b) any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
By: /s/ Bruce R. York
-----------------
Bruce R. York
Vice President and Chief Financial Officer
April 29, 2003
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Annual Report on Form 10-K/A for the Year
Ended December 31, 2002 (the "Report") by Cellular Technical Services Company,
Inc. ("Registrant"), I, Stephen Katz, certify that:
1. I have reviewed this annual report on Form 10-K/A of Cellular
Technical Services Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a - 15 and 15d - 15) for the
registrant and we have: a) designed such disclosure controls and
procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared; b) evaluated the effectiveness of
the registrant's disclosure controls and procedures as of a date
within 90 days prior to the filing date of this report (the
"Evaluation Date"); and c) presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function): a) all significant deficiencies
in the design or operation of internal controls which could adversely
affect the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and b) any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
By: /s/ Stephen Katz
----------------
Stephen Katz
Chief Executive Officer
April 29, 2003
