UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
Commission File Number: 0-19437
CELLULAR TECHNICAL SERVICES COMPANY, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 11-2962080
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
20 East Sunrise Highway, Valley Stream, New York 11581
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(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (516) 568-0100
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share
Check whether the Issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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-KSB or any amendment to
this Form 10-KSB. [X]
The Issuer had no revenue for the fiscal year ended December 31, 2004.
As of March 30, 2005, there were 2,486,758 shares of Common Stock,
$.001 par value outstanding.
As of December 31, 2004 the aggregate market value of the Registrant's
Common Stock, $.001 par value, held by non-affiliates was approximately $1.8
million. The aggregate market value of the Registrant's Common Stock was
calculated using $0.75, the closing price for its Common Stock on December 30,
2004 as reported on the over-the-counter bulletin board.
Documents Incorporated by Reference: None
Transitional Small Business Disclosure Format Yes ____ No X
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INTRODUCTION
Cellular Technical Services Company, Inc. is filing this Amendment No.
1 on Form 10-KSB/A to amend its Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2004, as filed with the Securities and Exchange Commission
(the "SEC") on March 31, 2005 (the "Original Filing"). The purpose of this
Amendment No. 1 is to amend in their entirety Items 9, 10, 11, 12 and 14. This
Amendment No. 1 does not otherwise update information in the Original Filing to
reflect facts or events occurring subsequent to the date of the Original Filing.
PART III
Item 9. 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. The table below also indicates the term of office of each
director.
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Name Age Term Expires at Position with Company
- ----------------------------------------------------------------------------------------------------------------------
Stephen Katz 61 2006 Annual Meeting Chairman of the Board of
Directors, Chief Executive Officer
and Acting President
Phillip Frost 68 2007 Annual Meeting Director
Richard C. Pfenniger, Jr. 49 2006 Annual Meeting Director
Jane H. Hsaio 58 2005 Annual Meeting Director
Lawrence J. Schoenberg 72 2005 Annual Meeting Director
Joshua J. Angel 69 2007 Annual Meeting Director
Kenneth Block 58 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 2004 and as its Chairman of the Board from September 1996 to April
2004. Global Payment Technologies is engaged in the business of currency
validation.
Phillip Frost, MD has been a director of the Company since April 2005. Dr. Frost
is the Chairman of the Board of Directors, Chief Executive Officer and founder
of IVAX Corporation. He was Chairman of the Department of Dermatology at Mt.
Sinai Medical Center of Greater Miami, Miami Beach, Florida from
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1972 to 1990. Dr. Frost was Chairman of the Board of Directors and a founder of
Key Pharmaceuticals, Inc. He is also Chairman of the Board of Directors of IVAX
Diagnostics, Inc. (diagnostic reagent kits), a subsidiary of IVAX. He is a
director of Northrop Grumman Corporation (aerospasce), Continucare Corporation
(healthcare) and Ladenburg Thalmann Financial Services, Inc. (securities
brokerage). He is a member of the Board of Trustees of the University of Miami
and a member of the Board of Governors of the American Stock Exchange. He is a
trustee for Scripps Research Institute.
Richard C. Pfenniger Jr. has been a director of the Company since April 2005.
Mr. Pfenniger has been Chief Executive Officer and President of Continucare
Corporation (healthcare) since October 2003, and a director of Continucare since
March 2002, serving as a Chairman since September 2002. He served as CEO and
Vice Chairman of Whitman Education Group, Inc. (proprietary education) from 1997
until July 2003. Mr. Pfenniger is a director of GP Strategies, Inc. (corporate
training). Mr. Pfenniger was IVAX' Chief Operating Officer from 1994 to 1997. He
also served as IVAX' Senior Vice President - Legal Affairs and General Counsel
from 1989 to 1994.
Jane H. Hsiao, Ph. D. has been a director of the Company since April 2005. Dr.
Hsiao has been the Vice Chairman of Technical Affairs and a director of IVAX
Corporation since February 1995. Dr. Hsiao has served as the Chief Technical
Officer of IVAX since 1996 and as Chairman, Chief Executive Officer and
President of DVM Pharmaceuticals, Inc. since 1998.
Lawrence J. Schoenberg has been a director of the Company since 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 of AGS
Computers, Inc. subsequently became part of Merisel, Inc.
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 has a B.S. from N.Y.U. and an L.L.B. from Columbia University.
Kenneth Block joined the Company in September 2004 as Secretary and Chief
Financial Officer. Since 1991 Mr. Block has been the controller of Shadybrook
Charter Corp. and Sunrise Charter Management Corp., each of which is a real
estate management company. Mr. Block graduated from Bernard Baruch College with
a Bachelors of Business Administration degree. He is a Certified Public
Accountant in the State of New York.
The Company's officers are elected annually and serve at the discretion of the
Board of Directors.
The Board of Directors of the Company has determined that Lawrence J. Schoenberg
is the audit committee financial expert serving on its Audit Committee. Mr.
Schoenberg is an independent director, as that term is used in Item 7(d)(3)(iv)
of Schedule 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
Audit Committee
The Audit Committee is established in accordance with Section 3(a)(58)(A) of the
Exchange Act, and each member of the Audit Committee meets the independence
requirements for Audit Committee members under the listing standards of the
NASDAQ SmallCap Market, on which the Company's Common Stock was formerly listed.
This committee currently consists of Messrs. Schoenberg (Chairman) and Angel.
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Nominee Policies
The Board of Directors does not have a formalized process for identifying and
evaluating nominees for director. Nor does it have a formal policy relating to
the consideration of any director candidates recommended by the Company's
stockholders. However, the Board of Directors believes its process for
evaluation of nominees proposed by stockholders would be no different from the
process of evaluating any other candidate. Stockholders should send nominations
and a short biography of the nominee to Cellular Technical Services Company,
Inc., 20 East Sunrise Highway, Valley Stream, NY 11581, addressed to the Board
of Directors or any member or members of the Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of 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 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,
2004.
Code of Ethics
The Company has adopted a code of ethics that applies to its Chief Executive
Officer, Chief Financial Officer and Chief Accounting Officer. The Company has
filed a copy of its code of ethics as Exhibit 14 to its Annual Report on Form
10-K for the fiscal year ended December 31, 2004.
Item 10. 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 (as said term is
defined in Item 402 of Regulation S-B) for services in all capacities to the
Company during fiscal years 2004, 2003 and 2002.
Annual Compensation Long Term Compensation Awards
----------------------------------------------------------- ------------------------------------------
Year Salary Bonus Other Annual Restricted Securities All Other
Compensation Stock Awards Underlying Compensation
(1) Options
----------------------------------------------------------- -------------------------------------------
Stephen Katz 2004 $ 0 $ 0 $ 0 $ 6,753 15,000 $ 0
Chairman of the 2003 $ 0 $ 0 $ 0 $59,400 0 $ 0
Board of 2002 $50,000 $ 0 $ 322 $ 0 10,000 $ 0
Directors and
Chief Executive
Officer
Kenneth Block 2004 $10,000 $ 0 $ 0 $ 0 0 $ 0
Chief Financial 2003 $ 0 $ 0 $ 0 $ 0 0 $ 0
Officer 2002 $ 0 $ 0 $ 0 $ 0 0 $ 0
1. None of the Named Executive Officers received any LTIP Payouts in
2004, 2003 or 2002.
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Grants of Stock Options in 2004
The following table sets forth information with respect to the individual grant
of stock options made during 2004 to the Named Executive Officers. No SARs were
granted during 2004.
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Name Number of Securities Percent of Total Exercise or Base Expiration Date
Underlying Options/SARs Granted Price
Options//SARs Granted to Employees in
Fiscal Year
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Stephen Katz 15,000 100% $0.73 06/10/2014
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Kenneth Block 0 - - -
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Aggregated Option Exercises in 2004 and Year-End Option Values
The following table sets forth information with respect to the exercise of stock
options during 2004 by the Named Executive Officers and unexercised options held
by them on December 31, 2004
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Name Shares Value Number of Securities Value of Unexercised
Acquired on Realized Underlying Unexercised Options In-the-Money Options at
Exercise at December 31, 2004 December 31, 2004
Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------------------------------------------------------------------------------------------------------------
Stephen Katz 0 $ 0 75,650 / 22,750 $ 0 /$ 0
Kenneth Block 0 $ 0 - -
- ----------------------------------------------------------------------------------------------------------------------
1. There were no SAR exercises during 2004 and no SARs were outstanding at
December 31, 2004.
2. The closing price for the Company's Common Stock as reported on the Over the
Counter Bulletin Board on December 31, 2004 was $0.75 per share. Value is
calculated by multiplying; (i) the difference between $0.75 and the option
exercise price, by (ii) the number of shares of Common Stock underlying the
option.
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Long-Term Incentive Plan Awards Table
The following table sets forth information with respect to each award made to a
Named Executive Officer during 2004 under any Long-Term Incentive Plan.
- ----------------------------------------------------------------------------------------------------------------------
Name Number of Performance or Other Estimated Future Payouts Under Non-Stock
Shares, Units or Period until Price-Based Plans
Other Rights Maturation or Payout -----------------------------------------------------
Threshold Target Maximum
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Stephen Katz 15,000 June 10, 2005 - - -
Kenneth Block 0 - - - -
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Director Compensation
Each director serving in 2004 who was not an officer or employee of the Company
received an award of restricted shares (which included a one-year vesting
period) of the Company's common stock from 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
2004.
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. On December 22, 2004 the Board of Directors amended
the Plan to permit the grant of options under the Plan until December 26, 2008.
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Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table and footnotes thereto set forth, as of April 26, 2005,
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 executives officers of
the Company who received salary and bonus in excess of $100,000 during 2004
(collectively, the "Named Executive Officers"); and (iv) all current directors
and executive officers of the Company as a group.
- ---------------------------------------- --------------------------------------- -------------------------------------
Name of Beneficial Owners Amount And Nature of Percent of Outstanding Shares
Beneficial Ownership (1)
Phillip Frost 1,400,000 (2) 30.5%
- ---------------------------------------- ---------------------------- ---------- -------------------------------------
Stephen Katz 301,243 (3) 6.6%
- ---------------------------------------- ---------------------------- ---------- -------------------------------------
Jane Hsiao 200,000 4.4%
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Richard Pfenniger 100,000 2.2%
- ---------------------------------------- ---------------------------- ---------- -------------------------------------
Lawrence J. Schoenberg 57,028 (4) 1.2%
- ---------------------------------------- ---------------------------- ---------- -------------------------------------
Joshua J. Angel 37,153 (5) *
- ---------------------------------------- ---------------------------- ---------- -------------------------------------
All directors and executive officers 2,100,424 (6)
as a group (7 persons) 45.8%
- ---------------------------------------- ---------------------------- ---------- -------------------------------------
*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. These shares are held by Frost Gamma Investments Trust ("Frost
Trust"), of which Dr. Frost is the trustee and Frost Gamma,
Limited Partnership is the sole and exclusive beneficiary. Dr.
Frost is the sole limited partner of Frost Gamma, Limited
Partnership. The general partner of Frost Gamma, Limited
Partnership is Frost Gamma, Inc. and the sole shareholder of
Frost Gamma, Inc. is Frost-Nevada Corporation. Dr. Frost is
also the sole shareholder of Frost Nevada Corporation. As
such, Dr. Frost may be deemed the beneficial owner of all
shares owned by the Frost Trust by virtue of his power to vote
or direct the vote of such shares or to dispose or direct the
disposition of such shares owned by the Frost Trust.
3. Includes 41,273 shares held by a partnership controlled by Mr.
Katz. Also includes 76,650 shares subject to currently
exercisable options, none of which are at prices lower than
the market price of the Company's Common Stock.
4. Includes 23,275 shares subject to currently exercisable
options, 1,200 of which are at prices lower than the market
price of the Company's Common Stock.
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5. Includes 4,400 shares subject to currently exercisable
options, 1,200 of which are at prices lower than the market
price of the Company's Common Stock.
6. Includes an aggregate of 104,325 shares subject to currently
exercisable options, 2,400 of which are at prices lower than
the market price of the Company's Common Stock and 41,723
shares held by a partnership controlled by Mr. Katz.
Equity Compensation Plan Information
The following table provides information about the Company's equity compensation
plans as of December 31, 2004.
- ---------------------------------------------------------------------------------------------------------------------------
A B C
- ---------------------------------------------------------------------------------------------------------------------------
Plan Category Number of securities to be Weighted average exercise Number of securities
issued upon exercise of price of outstanding remaining available for
outstanding options, options, warrants and future issuance under equity
warrants and rights rights securities compensation plans (excluding
reflected in column (A) securities reflected in
column (A))
- ---------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders 120,450 11.39 192,800
Equity compensation plans not
approved by security holders - - -
- ---------------------------------------------------------------------------------------------------------------------------
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On April 12, 2005 the Company entered into a Securities Purchase Agreement (the
"Agreement") with the Frost Trust, Dr. Jane Hsiao and Richard C. Pfenniger, Jr.,
among others. Pursuant to the Agreement, the Company sold an aggregate of
2,100,000 shares of the Common Stock of the Company. The purchase price for the
sale of the Common Stock was $0.75 per share in cash for an aggregate price of
$1,575,000. Pursuant to the Agreement, Frost Trust purchased 1,400,000 shares of
Common Stock for a cash purchase price of $1,050,000. Dr. Phillip Frost, a
member of the Company's board of directors, controls Frost Trust. Dr. Hsiao and
Mr. Pfenniger, also members of the board of directors of the Company, each have
a direct material interest in 200,000 shares and 100,000 shares, respectively,
of Common Stock which were purchased by them under the Agreement.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The firm of Ernst & Young, LLP, independent public accountants, served as the
Company's independent public accountants for the years ended December 31, 2001
and 2002 and reviewed the financial statements included in the Company's
quarterly SEC filings for the first and second quarters of 2003. The firm of
Stonefield Josephson, Inc., served as the Company's independent accountants for
the years ended December 31, 2003 and 2004 and reviewed the financial statements
included in the Company's quarterly SEC filings for the third quarter of 2003.
Audit Fees: Audit fees billed to the Company by Ernst & Young, LLP for its
consent included in the Company's consolidated annual financial statements for
the year ended December 31, 2003 and for its review of the financial statements
included in the Company's March 2003 and June 2004 Quarterly Reports on Form
10-Q filed with the SEC totaled $25,223. Audit fees billed to the Company by
Stonefield Josephson, Inc. for its audit of the Company's consolidated annual
financial statements for the years ended December 31, 2003 and 2004, and for its
review of the financial statements included in the
Company's Quarterly Reports on Form 10-Q filed with the SEC for those years
totaled $28,158.
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Audit Related Fees: The Company did not engage Ernst & Young, LLP or Stonefield
Josephson, Inc. to provide any audit related fees to the Company during the
years ended December 31, 2003 and 2004.
Tax Fees: Tax consulting fees of $2,500 were billed to the Company during the
year ended December 31, 2003 by Ernst & Young, LLP. No tax fees were billed to
the Company for the years ended December 31, 2003 or 2004 by Stonefield
Josephson, Inc.
All Other Fees: The Company did not engage Ernst & Young, LLP or Stonefield
Josephson, Inc. to provide any non-audit services to the
Company during 2003 or 2004.
In connection with the revised standards for independence of the Company's
independent public accountants promulgated by the SEC, the Audit Committee
considered whether the provision of such services was compatible with
maintaining the independence of Ernst & Young, LLP and considered whether the
provision of such services was compatible with maintaining the independence of
Stonefield Josephson, Inc. There were no such services provided in 2003 or 2004.
The Audit Committee pre-approved all fees for 2003 and 2004.
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Signatures
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: May 4, 2005
CELLULAR TECHNICAL SERVICES COMPANY, INC.
By: /s/ Kenneth Block
-------------------------------------
Name: Kenneth Block
Title: Chief Financial Officer
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