SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 4 to Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 25, 1999
ADVANCED WIRELESS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Alabama 0-26533 63-1205304
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) File Number) Identification No.)
927 Sunset Drive
Irving, Texas 75061
(Address of principal executive office)
Issuer's telephone number: 972-254-7604
We have previously reported the purchase of the assets of Dibbs Internet
Services, Inc., on Form 8-K dated August 25, 1999. This amendment to the
August 25, 1999, Form 8-K amends previously provided pro forma financial
information for our Company reflecting this acquisition.
- 1 -
Item 7. Financial Statements and Exhibits
Financial Statements
For a list of financial statements, see Index to Financial Statements which
is part of the Financial Statements which follow page 2 and incorporated
herein by reference.
Exhibits
2.1 Agreement to Purchase Assets between Advanced Wireless Systems, Inc.,
and Dibbs Internet Services, Inc. (incorporated by reference to
Exhibit 2.1 to the Form 8-K dated August 25, 1999).
2.2 Bill of Sale from Dibbs Internet Services, Inc., to Advanced Wireless
Systems, Inc. (incorporated by reference to Exhibit 2.2 to the Form
8-K dated August 25, 1999).
27.1 Financial Data Schedule.
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.
ADVANCED WIRELESS SYSTEMS, INC.
Date: March 14, 2000 /s/ Monte Julius
------------------------------------
Monte Julius, President
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ADVANCED WIRELESS SYSTEMS, INC.
AUDIT OF DIBBS INTERNET SERVICES, INC.
INDEX TO FINANCIAL STATEMENTS
Page
FINANCIAL STATEMENTS OF THE ACQUIRED BUSINESS:
Independent Auditor's Report F-1
Balance Sheets at December 31, 1998 and 1997, and June 30, 1999 F-3
Statements of Operations for the years ended December 31, 1998
and 1997, and for the six months ended June 30, 1999 F-4
Statements of Stockholder's Equity for the years ended December
31, 1998 and 1997, and for the six months ended June 30, 1999 F-5
Statements of Cash Flows for the years ended December 31, 1998
and 1997, and for the six months ended June 30, 1999 F-6
Notes to Financial Statements F-7
PRO FORMA FINANCIAL INFORMATION
Pro Forma Consolidated Balance Sheet of Advanced Wireless
Systems, Inc. as of June 30, 1999 - Unaudited P-1
Pro Forma Consolidated Statements of Operations of Advanced
Wireless Systems, Inc. for the Year Ended December 31, 1998
and for the six months ended June 30, 1999 - Unaudited P-3
Notes to Consolidated Pro Forma Financial Statements P-5
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Advanced Wireless Systems, Inc.
We have audited the accompanying balance sheets of Dibbs Internet Services,
Inc. (the acquired business) as of December 31, 1998 and 1997, and June 30,
1999, and the related statements of operations,stockholder's equity and cash
flows for the years and six months then ended, acquired by Advanced Wireless
Systems, Inc. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the 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 audit provides a
reasonable basis for our opinion.
The accompanying financial statements were prepared as described in Note 1
for the purpose of complying with certain rules and regulations of the
Securities and Exchange Commission (SEC) for inclusion in certain SEC
regulatory reports and filings.
- F-1 -
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the acquired business
described in Note 1 as of December 31, 1998 and 1997, and June 30, 1999 and
the results of its operations and cash flows for the periods then ended, in
conformity with generally accepted accounting principles.
BROWN ARMSTRONG RANDALL
REYES PAULDEN & McCOWN
ACCOUNTANCY CORPORATION
Bakersfield, California
January 25, 2000
- F-2 -
DIBBS INTERNET SERVICES, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
AND JUNE 30, 1999
June 30, December 31, December 31,
1999 1998 1997
---------- ------------ ------------
ASSETS
Current Assets
Cash $ - $ 896 $ 3,648
---------- ------------ ------------
Fixed Assets
Property and Equipment 122,629 122,629 105,201
Accumulated depreciation (52,154) (41,202) (21,152)
----------- ------------ -------------
Total Fixed Assets 70,475 81,427 84,049
----------- ------------ -------------
TOTAL ASSETS $ 70,475 $ 82,323 $ 87,697
----------- ------------ -------------
----------- ------------ -------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Bank Overdraft $ 282 $ - $ -
Operating advance - related
party 2,301 11,964 22,528
----------- ------------- -------------
Total Current Liabilities 2,583 11,964 22,528
---------- ------------ ------------
Stockholder's Equity
Common stock 1,000 1,000 1,000
Retained earnings 66,892 69,359 64,169
----------- ------------- -------------
Total Stockholder's Equity 67,892 70,359 65,169
----------- ------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 70,475 $ 82,323 $ 87,697
----------- ------------- -------------
----------- ------------- -------------
The accompanying notes are an integral part of these financial statements.
- F-3 -
DIBBS INTERNET SERVICES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED JUNE 30, 1999
Six Months
Ended Year Ended Year Ended
June 30, December 31, December 31,
1999 1998 1997
------------- ------------- ------------
Internet Revenues $ 98,580 $ 183,164 $ 139,943
------------- ------------- ------------
Costs and Expenses
Phone lines 35,792 65,486 41,507
Port charges 14,566 29,155 26,273
Technical support and labor 5,902 9,717 2,931
Depreciation 10,952 20,050 15,433
General and administrative 6,498 12,630 6,568
-------- --------- ----------
Total Costs and Expenses 73,710 137,038 92,712
-------- --------- ----------
Net Income from Operations 24,870 46,126 47,231
Other Expense
Interest expense 337 1,436 2,663
------------- ------------- ------------
Net Income $ 24,533 $ 44,690 $44,568
------------- ------------- ------------
------------- ------------- ------------
Basic Earnings per Share $ 24.53 $ 44.70 $ 44.57
------------- ------------- ------------
------------- ------------- ------------
Weighted Average Shares Outstanding 1,000 1,000 1,000
------------- ------------- ------------
------------- ------------- ------------
The accompanying notes are an integral part of these financial statements.
- F-4 -
DIBBS INTERNET SERVICES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED JUNE 30, 1999
Common Stock
------------------------
Retained
Shares Par Value Earnings Total
-------- ----------- --------- --------
Balance at January 1,1997 1,000 $ 1,000 $ 32,201 $ 33,201
Distributions - - (12,600) (12,600)
Net income - - 44,568 44,568
-------- ----------- --------- --------
Balance at December 31,1997 1,000 1,000 64,169 65,169
Distributions - - (39,500) (39,500)
Net income - - 44,690 44,690
-------- ----------- --------- --------
Balance at December 31,1998 1,000 1,000 69,359 70,359
Distributions - - (27,000) (27,000)
Net income - - 24,533 24,533
-------- ----------- --------- --------
Balance at December 31, 1999 1,000 $ 1,000 $ 66,892 $ 67,892
-------- ----------- --------- --------
-------- ----------- --------- --------
The accompanying notes are an integral part of these financial statements.
- F-5 -
DIBBS INTERNET SERVICES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED JUNE 30, 1999
Six Months
Ended Year Ended Year Ended
June 30, December 31, December 31,
1999 1998 1997
------------- ------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 24,533 $ 44,690 $ 44,568
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 10,952 20,050 15,433
------------- ------------- ------------
Net Cash Provided by Operating
Activities 35,485 64,740 60,001
------------- ------------- ------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property and equipment - (17,428) (65,317)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related party loan - - 55,515
Repayments of related party loan (9,663) (10,564) (38,987)
Cash distributions (27,000) (39,500) (12,600)
------------- ------------- ------------
Net Cash Provided (Used) by Financing
Activities (36,663) (50,064) 3,928
------------- ------------- ------------
Net Decrease in Cash (1,178) (2,752) (1,388)
Cash, beginning of period 896 3,648 5,036
------------- ------------- ------------
Cash, end of period $ (282) $ 896 $ 3,648
------------- ------------- ------------
------------- ------------- ------------
The accompanying notes are an integral part of these financial statements.
- F-6 -
DIBBS INTERNET SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
AND JUNE 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Dibbs Internet Services, Inc. (Dibbs), an Alabama S-corporation, is an
Internet service provider in Mobile, Alabama. Dibbs was originally
incorporated on April 19, 1994 under the name Diane Summers' Online
Services, Inc. but subsequently changed its name to its current title on May
23, 1996.
On August 25, 1999, Advanced Wireless Systems, Inc. (the Company) purchased
substantially all of the assets of Dibbs for a purchase price of $225,000.
Dibbs provided Internet services to approximately 730 Internet customers in
the Mobile metropolitan area via dial-in telephone line access. The Company
acquired from Dibbs most of the assets used in the operation of its Internet
service, including its equipment, software, and the right to use the Dibbs
trade name, for $225,000 cash, paid in full on August 25, 1999, to Dibbs'
sole shareholder and president, Diane Summers.
Management 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 as of the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Revenues from Internet services are recognized monthly upon billing.
- F-7 -
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation
Property and equipment are carried at cost and depreciated on a straight-
line basis over their estimated useful lives, ranging from 5 to 7 years.
Maintenance and repair costs are charged to expense as incurred; major
renewals and betterments are capitalized.
Income Taxes
Dibbs' stockholder has elected S corporation status under the Internal
Revenue Code, thereby consenting to include the income in her individual tax
return. Accordingly, there is no provision for income taxes in these
financial statements.
NOTE 2 - OPERATING ADVANCE - RELATED PARTY
The spouse of the sole shareholder of Dibbs advanced funds to the company to
cover operating requirements. The initial advance totaled $55,515 and is
considered due on demand. No written agreement exists between the related
party and Dibbs concerning the timing and extent of repayment. Dibbs has
repaid portions of the advance as funds are available. Interest has been
repaid at the rate of 8% on the outstanding balance, compounded monthly.
- F-8 -
ADVANCED WIRELESS SYSTEMS, INC.
PRO FORMA BALANCE SHEET
(UNAUDITED)
AS OF JUNE 30, 1999
Historical Pro Forma
------------------ ----------------------
Advanced Dibbs
Wireless Internet
Systems, Inc. Services, Inc. Adjustments Consolidated
------------ -------------- ----------- ------------
ASSETS
Current assets
Cash and cash
equivalents $ 374,598 $ - $ (225,000)(a) $ 149,598
Accounts receivable,
net 2,608 - - 2,608
Inventory 45,964 - - 45,964
Employee Advances 375 - - 375
Prepaid expenses 24,600 - - 24,600
------------ -------------- ----------- ------------
Total current assets 448,145 - (225,000) 223,145
------------ -------------- ----------- ------------
Fixed Assets, net
of depreciation 98,098 70,475 (55,980)(d) 112,593
------------ -------------- ----------- ------------
Other assets
Deposits 300 - - 300
License Acquisition
Costs, net 161,703 - - 161,703
Organization costs,
net 5,094 - - 5,094
Goodwill - - 208,005(b) 208,005
Other intangible - - 2,500(b) 2,500
------------ -------------- ----------- ------------
Total Other Assets 167,097 - 210,505 377,602
------------ -------------- ----------- ------------
TOTAL ASSETS $ 713,340 $ 70,475 $ (70,475) $ 713,340
------------ -------------- ----------- ------------
------------ -------------- ----------- ------------
(See Notes to Pro Forma Financial Statements)
- P-1 -
ADVANCED WIRELESS SYSTEMS, INC.
PRO FORMA BALANCE SHEET
(UNAUDITED)
AS OF JUNE 30, 1999
Historical Pro Forma
------------------ ----------------------
Advanced Dibbs
Wireless Internet
Systems, Inc. Services, Inc. Adjustments Consolidated
------------ -------------- ----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bank overdraft $ - $ 282 $ (282)(c) $ -
Operating advance
- related party - 2,301 (2,301)(c) -
Debtor certificates 6,000 - - 6,000
Notes payable, related
parties 250,000 - - 250,000
Accrued payroll taxes 6,629 - - 6,629
Accrued interest payable 50,097 - - 50,097
------------ -------------- ----------- -----------
Total Liabilities 312,726 2,583 (2,583) 312,726
------------ -------------- ----------- -----------
Stockholders' Equity:
Common stock, $.01 par value,
50,000,000 shares authorized;
4,559,263 shares issued and
outstanding 45,593 1,000 (1,000)(b) 45,593
Additional paid in
capital 1,839,173 - - 1,839,173
Accumulated earnings
deficit (1,484,152) 66,892 (66,892)(b)(1,484,152)
------------ -------------- ----------- -----------
Total Stockholders'
equity 400,614 67,892 (67,892) 400,614
------------ -------------- ----------- -----------
Total Liabilities and
Stockholders'
Equity $ 713,340 $ 70,475 $ (70,475) 713,340
------------ -------------- ----------- -----------
------------ -------------- ----------- -----------
(See Notes to Pro Forma Financial Statements)
- P-2 -
ADVANCED WIRELESS SYSTEMS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
Historical Pro Forma
------------------------ ----------------------
For the Six Months
Ended June 30, 1999
-------------------------------
Advanced Dibbs
Wireless Internet
Systems, Inc. Services, Inc. Adjustments Consolidated
------------ -------------- ----------- ------------
Revenues
Service and other $ 42,490 $ 98,580 $ - $ 141,070
------------ ----------- ----------- ------------
Costs and Expenses
Operating 64,353 56,260 - 120,613
General and
administrative 325,424 6,498 9,600(h) 341,522
35,293(e)
Depreciation and
amortization 109,287 10,952 (9,502)(f) 146,030
Provision for impairment
of license acquisition
costs 303,797 - - 303,797
------------ ----------- ----------- ------------
Total Costs and
Expenses 802,861 73,710 35,391 911,962
------------ ----------- ----------- ------------
Income (Loss) from
Operations (760,371) 24,870 (35,391) (770,892)
------------ ----------- ----------- ------------
Other Expense
Interest Expense 11,250 337 (337)(g) 11,250
------------ ----------- ----------- ------------
Net Income (Loss) $ (771,621) $ 24,533 $ (35,054) $ (782,142)
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
Basic Loss per Share$ (.19) $ (.19)
------------ -----------
Weighted Average Number of
Common Shares
Outstanding 4,122,926 4,122,926
------------ -----------
------------ -----------
(See Notes to Pro Forma Financial Statements)
- P-3 -
ADVANCED WIRELESS SYSTEMS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
Historical
------------------------
For the Year
Ended December 31, 1998 Pro Forma
------------------------------- ------------------------
Advanced Dibbs
Wireless Internet
Systems, Inc. Services, Inc. Adjustments Consolidated
------------ -------------- ----------- ------------
Revenues
Service and other $ 106,602 $ 183,164 $ - $ 289,766
------------ -------------- ----------- ------------
Costs and Expenses
Operating 159,840 104,358 - 264,198
General and
administrative 359,921 12,630 9,600 (h) 382,151
70,586 (e)
Depreciation and
amortization 281,155 20,050 (17,150)(f) 354,641
------------ -------------- ----------- ------------
Total Costs and
Expenses 800,916 137,038 63,036 1,000,990
------------ -------------- ----------- ------------
Income (Loss) from
Operations (694,314) 46,126 63,036 (711,224)
------------ -------------- ----------- ------------
Other Income (Expense)
Interest income 2,230 - - 2,230
Interest Expense (20,447) (1,436) 1,436 (g) (20,447)
------------ -------------- ----------- ------------
Total Other Income
(Loss) (18,217) (1,436) 1,436 (18,217)
Net Income (Loss) $ (712,531) $ 44,689 $ (61,600) $(729,441)
------------ -------------- ----------- ------------
------------ -------------- ----------- ------------
Basic Loss Per
Share $ (.21) $ (.22)
------------- ------------
------------- ------------
Weighted Average Number
of Common Shares
Outstanding 3,359,207 3,359,207
------------- ------------
------------- ------------
(See Notes to Pro Forma Financial Statements)
- P-4 -
NOTES TO UNAUDITED PRO FORMA
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
AND FOR THE SIX MONTHS ENDED JUNE 30, 1999
NOTE 1 - BASIS OF PRESENTATION
On August 25 ,1999, Advanced Wireless Systems, Inc. (the Company) purchased
substantially all of the assets of Dibbs Internet Services, Inc. (Dibbs), an
Alabama corporation, an Internet service provider in Mobile, Alabama, for a
purchase price of $225,000. Dibbs provided Internet services to
approximately 730 Internet customers in the Mobile metropolitan area via
dial-in telephone line access. The Company will continue offering Dibbs
customers the telephonic Internet service that they have now, and will also
offer them the opportunity to convert to use of high speed wireless Internet
service.
The Company acquired the Dibbs assets used in the operation of its Internet
service, including its equipment, software, and the right to use the Dibbs
trade name, for $225,000 cash, paid in full on August 25, 1999, to Dibbs,
sole shareholder and president, Diane Summers. The Company did not
assume any liabilities of Dibbs in the transaction.
The assets purchased include the equipment necessary to service the Dibbs
subscribers, including three computers, two network hubs, a Cisco 2500
router, software, a backup power supply and other network accessories. Dibbs
services 730 subscribers, who use 56k, 64k or 128k ISDN telephone services
and e-mail dial-up services. The Dibbs basic service begins at $19.95 per
month. The subscriber base includes 58 domains and 47 commercial websites.
The asset purchase agreement includes a two year non-competition clause in
which Dibbs and Ms. Summers agree not to compete with our Company in
providing Internet services within a 75 mile radius of Mobile for two years.
Ms. Summers also agreed to provide consulting services to the Company, to
help it take over and operate the Dibbs business, for up to 60 days after
the purchase, for $1,200 per week.
The pro forma balance sheet at June 30, 1999, has been prepared assuming that
the business acquisition was consummated on June 30, 1999. The pro forma
statements of operations for the year and six months ended December 31,
1998, and June 30, 1999, respectively, have been prepared assuming that the
Business Acquisition was consummated on January 1, 1998.
The preparation of the pro forma financial statements is based on certain
- P-5 -
adjustments to the historical financial statements of the Company and Dibbs
and are not necessarily indicative of the financial position or results of
operations had the above-described business acquisition occurred on the
assumed date. These pro forma financial statements should be read in
conjunction with the financial statements of the acquired business and of
the Company contained in this registration statement.
NOTE 2 - PRO FORMA ADJUSTMENTS
Pro forma entries necessary to adjust the historical financial statements are
as follows:
(a) Reflects cash paid to sole shareholder of Dibbs Internet Services, Inc.,
for the acquisition purchase price.
(b) Goodwill related to the Dibbs Internet Services, Inc., acquisition has
been determined as follows:
Purchase price $ 225,000
Less stockholder's equity (67,892)
Adjustment to record value of non-compete
agreement with Diane Summers and Dibbs (2,500)
Elimination of liabilities not assumed by the
Company (see Note (c)) (2,583)
Adjustment of fixed assets to fair value
(see Note (d)) 55,980
--------
Total $ 208,005
--------
--------
(c) Reflects the elimination of certain assets and liabilities not acquired
or assumed in connection with the acquisition of Dibbs Internet
Services, Inc.:
Bank overdraft 282
Operating advance - related party 2,301
--------
Total $ (2,583)
--------
--------
(d) The $55,980 adjustment for fixed assets represents the difference
between the carrying amount of the acquired fixed assets and the
estimated fair value of those assets at the date of acquisition.
- P-6 -
NOTE 2 - PRO FORMA ADJUSTMENTS (Continued)
(e) The acquisition of Dibbs Internet Services, Inc., has been accounted for
using the purchase method of accounting. The purchase price has been
allocated to the tangible and intangible assets acquired based upon
their fair values at the time the acquisition was consummated.
The following summarizes the additional amortization expense to be
incurred in connection with the Dibbs acquisition:
Six Months Year Ended
Estimated Ended June 30, December 31,
Useful Life 1999 1998
------------ -------------- -------------
Goodwill $208,005 3 years $ 34,668 $ 69,336
Non-compete
agreement 2,500 2 years 625 1,250
-------- ---------- ------------
$210,505 35,293 70,586
--------
--------
Less historical
recorded predecessor
amounts - -
---------- ------------
Adjustment $ 35,293 $ 70,586
----------- ------------
----------- ------------
(f) Reflects additional depreciation expense in connection with the Dibbs
acquisition:
Six Months Year Ended
Estimated Ended June 30, December 31,
Useful Life 1999 1998
------------ -------------- -------------
Recorded fair value of
property and equipment
acquired $ 14,495 5 years $ 1,450 $ 2,900
----------
----------
Less historical recorded
amounts $ 10,952 20,050
----------- ------------
Adjustment $ (9,502) $ (17,150)
----------- ------------
----------- ------------
(g) Reflects the decrease of Dibbs related party interest expense which
would not have been incurred had the Company purchased Dibbs at the
beginning of the period.
- P-7 -
(h) Reflects the increase of consulting expense attributed to the
agreement with Diane Summers for 60 days consulting at $1,200 per
week, which would have been incurred had the Company purchased Dibbs at
the beginning of the period.
- P-8 -