UNITED STATES SECURITIES AND EXCHANGE COMMISISION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
(Amending Items 7(a) and 7(b))
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 27, 1997
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World Access, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 0-19998 65-0044209
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification Number)
incorporation)
945 East Paces Ferry Road
Suite 2240, Atlanta, GA 30326
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 231-2025
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<PAGE>
Item 7 Financial Statements, Pro Forma Financial Information and Exhibits
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Item 7 (a). Financial Statements
Included in this Report are the financial statements of Cellular Infrastructure
Supply, Inc. ("CIS") as of December 31, 1996 and for the twelve months then
ended. Such financial statements have been audited by the independent accounting
firm of Tedder, Grimsley & Company, P.A., whose opinion thereon is also included
herein. Prior to January 1, 1996, the operations of CIS were conducted as a sole
proprietorship.
The results of operations of CIS have been included in the consolidated
financial statements of World Access, Inc. (the "Company") from January 1, 1997,
the effective date of the acquisition of CIS.
<PAGE>
CELLULAR INFRASTRUCTURE SUPPLY, INC.
AND SUBSIDIARY
FINANCIAL STATEMENTS
Year Ended December 31, 1996
<PAGE>
TABLE OF CONTENTS
Page No.
INDEPENDENT AUDITOR'S REPORT...............................................1
FINANCIAL STATEMENTS
Balance Sheet............................................................2
Statement of Income......................................................3
Statement of Stockholders' Equity........................................4
Statement of Cash Flows..................................................5
Notes to Financial Statements............................................6
<PAGE>
Independent Auditor's Report
To the Board of Directors
Cellular Infrastructure Supply, Inc.
Burr Ridge, Illinois
We have audited the accompanying consolidated balance sheet of Cellular
Infrastructure Supply, Inc. (a Nevada corporation) and subsidiary as of December
31, 1996, and the related consolidated statements of income, stockholders'
equity and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's 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 consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated 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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cellular
Infrastructure Supply, Inc. and subsidiary as of December 31, 1996, and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ Tedder, Grimsley & Company, P.A.
Tedder, Grimsley & Company, P.A.
May 16, 1997
<PAGE>
CELLULAR INFRASTRUCTURE SUPPLY, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1996
ASSETS
CURRENT ASSETS
Accounts receivable (net of allowance
for doubtful accounts of $10,000) $ 850,679
Inventory 395,000
------------
TOTAL CURRENT ASSETS 1,245,679
------------
EQUIPMENT 310,885
OTHER ASSETS 3,183
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$ 1,559,747
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 17,352
Notes payable to stockholders 176,000
Accounts payable 589,622
Accrued liabilities 186,065
State income taxes payable 61,527
Note payable 300,000
------------
TOTAL CURRENT LIABILITIES 1,330,566
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STOCKHOLDERS' EQUITY
Common stock 300
Retained earnings 228,881
------------
229,181
------------
$ 1,559,747
============
See accompanying notes to financial statements.
<PAGE>
CELLULAR INFRASTRUCTURE SUPPLY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 1996
SALES $ 12,839,513
COST OF SALES 8,221,239
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GROSS PROFIT 4,618,274
OPERATING EXPENSES 853,064
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INCOME FROM OPERATIONS 3,765,210
OTHER INCOME 2,935
INTEREST EXPENSE (22,105)
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INCOME BEFORE TAXES 3,746,040
PROVISION FOR STATE INCOME TAXES 61,527
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NET INCOME $ 3,684,513
=============
See accompanying notes to financial statements.
<PAGE>
CELLULAR INFRASTRUCTURE SUPPLY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Year Ended December 31, 1996
Common Stock Retained
Number Amount Earnings
---------- ---------- ------------
Balance, December 31, 1995 100 $ 100 $ 148,405
Issuance of shares 200 200 -
Dividends - - (3,604,037)
Net income - - 3,684,513
---------- ---------- ------------
Balance, December 31, 1996 300 $ 300 $ 228,881
========== ========== ============
See accompanying notes to financial statements.
<PAGE>
CELLULAR INFRASTRUCTURE SUPPLY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,684,513
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for inventory write
down 70,000
Provision for warranties 35,000
Provision for bad debts 10,000
(Increase) Decrease in:
Accounts receivable (486,983)
Inventory (328,300)
Other assets (3,183)
Increase (Decrease) in:
Accounts payable 370,396
Accrued liabilities 128,565
Income taxes 61,527
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 3,541,535
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CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment (310,885)
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NET CASH USED BY
INVESTING ACTIVITIES (310,885)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stockholder notes 1,456,600
Repayment of stockholder notes (1,280,600)
Proceeds from other notes 407,300
Repayment of other note (132,300)
Proceeds from sale of stock 200
Payment of accrued dividends (3,690,037)
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NET CASH USED BY
FINANCING ACTIVITIES (3,238,837)
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NET DECREASE IN CASH (8,187)
BANK OVERDRAFT, beginning of year (9,165)
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BANK OVERDRAFT, end of year $ (17,352)
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SUPPLEMENTAL DISCLOSURES:
Interest paid $ -
============
Income taxes paid $ -
============
See accompanying notes to financial statements.
<PAGE>
CELLULAR INFRASTRUCTURE SUPPLY, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cellular Infrastructure Supply, Inc. (the "Company") was incorporated in
the State of Nevada on December 30, 1994. In January of 1996, the Company formed
another Nevada Corporation called Wireless Installation Services, Inc. ("WIS").
WIS is wholly owned subsidiary.
The Company purchases and sells equipment and related design, installation and
technical support services to cellular mobile service providers. The wholly
owned subsidiary provides installation and de-installation services.
The Company conducts its' operations from its' facilities in Burr Ridge,
Illinois; Flanders, New Jersey; and Yuma, Arizona.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. All material intercompany transactions between the
Company and WIS have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The significant estimates and
assumptions are explained below.
Basis of Accounting
The Company prepares its financial statements using the accrual basis of
accounting.
Inventory
Inventories consisting of cellular telephone equipment held for sale are stated
at the lower of average cost or market.
<PAGE>
CELLULAR INFRASTRUCTURE SUPPLY, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
Equipment
Equipment is stated at cost. Expenditures for maintenance and repairs are
expensed as incurred.
All equipment was purchased during the current year as part of bulk purchases or
similar acquisitions. Cost of equipment retained for use as testing equipment by
the Company was estimated based on the relative value of such equipment to the
value of the total equipment purchased.
The cost estimate was made as of year end, therefore, no depreciation was taken.
Depreciation over the estimated useful lives will commence in 1997.
Income Taxes
The Company, with the consent of its stockholders, has elected under the
Internal Revenue Code to be an S Corporation. In lieu of corporation income
taxes, the stockholders of an S Corporation are taxed on their proportionate
share of the Company's taxable income. Therefore, no provision or liability for
federal income taxes has been included in the accompanying financial statements.
Illinois and New Jersey assess a corporate tax on S Corporations. Provisions for
such taxes has been included in the accompanying financial statements.
NOTE B - INVENTORY
Inventory consists of new and used cellular telephone equipment which is held by
the Company for sale.
Used equipment is often acquired in a bulk sale transaction. Management
allocates the total cost to the items acquired based on relative market values.
The inventory is stated at the lower of average cost or market. Provision is
made for the write-off or write down of inventory due to obsolescence or
marketability in the period that such obsolescence occurs or when management
assesses that marketability is impaired. Provision is also made to write down
excess inventory which generally occurs when the Company acquires inventory as
part of a bulk purchase.
<PAGE>
CELLULAR INFRASTRUCTURE SUPPLY, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE C - EQUIPMENT
Equipment at December 31, 1996 consists of the following:
Test and demonstration equipment $ 281,010
Office furniture and equipment 21,375
Vehicles 8,500
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$ 310,885
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NOTE D - NOTES FROM STOCKHOLDERS
The Company finances its purchases with short term notes from its' stockholders.
The notes outstanding at December 31, 1996 carry interest at 6% and are due on
demand. Even though the notes have a stated interest rate, the Company, with the
consent of its stockholders, has not paid interest on any stockholder notes.
NOTE E - OTHER NOTE PAYABLE
The note, payable to an individual, carries interest at 8% and is due February
28, 1997.
NOTE F - STOCKHOLDERS' EQUITY
The Company has authorized 2,500 shares of no par common stock, of which 300
shares were issued and outstanding as of December 31, 1996.
NOTE G - CONCENTRATION OF CREDIT RISK
Cash Balances
The Company maintains its cash balances at four financial institutions of which
two are located in Chicago, Illinois and two are located in Flanders, New
Jersey. Accounts at each institution are insured by Federal Deposit Insurance
Corporation up to $100,000. At December 31, 1996, the Company's uninsured cash
balances totaled $2,269,877.
Sales
During the current year, the company made 53% of its total sales to four
customers.
<PAGE>
CELLULAR INFRASTRUCTURE SUPPLY, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE H - RETIREMENT PLAN
The Company maintains a Simplified Employee Pension Plan for the benefit of
eligible employees. Employees must have attained the age of twenty-one and
performed services for the Company during at least one out of five immediately
preceding years. The Company contributes up to 15% of the employees annual
compensation. The Company contributed $67,500 during the year ended December 31,
1996.
NOTE I - SUBSEQUENT EVENTS
On March 11, 1997, the stockholders entered into a letter of intent to sell all
of their stock in the Company to CIS Acquisition Corp., a subsidiary of World
Access, Inc. On March 27, 1997, a definitive agreement, plan of merger and
irrevocable proxies were executed by the stockholders.
<PAGE>
Item 7 (b). Pro Forma Financial Information
The acquisition of CIS has been accounted for using the purchase method of
accounting. The following unaudited pro forma consolidated statement of
operations for the year ended December 31, 1996 reflects the acquisition of
CIS as if it had been completed as of January 1, 1996. No pro forma condensed
balance sheet has been presented herein because the Company's Report on
Form 10-Q for the three months ended March 31, 1997 includes the acquired
company.
The pro forma data does not purport to be indicative of the results which would
actually have been reported if the acquisition had occurred on such dates or
which may be reported in the future. The pro forma data should be read in
conjunction with the historical consolidated financial statements of the
Company, the financial statements of CIS, and the related notes thereto.
<PAGE>
<TABLE>
World Access, Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1996
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL CIS (A) ADJUSTMENTS COMBINED
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Sales of products $ 34,411,079 $ 12,839,513 $ (25,000)(B) $ 47,225,592
Service revenues 16,589,123 16,589,123
------------ ------------ ------------- ------------
Total Sales 51,000,202 12,839,513 (25,000) 63,814,715
Cost of products sold 21,485,696 8,221,239 22,400 (B) 29,729,335
Cost of services 14,519,917 14,519,917
------------ ------------ ------------- ------------
Total Cost of Sales 36,005,613 8,221,239 22,400 44,249,252
Gross Profit 14,994,589 4,618,274 (47,400) 19,565,463
Engineering and development 891,959 891,959
Selling, general
and administrative 6,210,324 853,064 7,063,388
Amortization of goodwill 533,919 397,600 (C) 931,519
------------ ------------ ------------- ------------
Total Operating Expenses 7,636,202 853,064 397,600 8,886,866
------------ ------------ ------------- ------------
Operating Income 7,358,387 3,765,210 (445,000) 10,678,597
Interest and other income 484,211 2,935 487,146
Interest expense (318,987) (22,105) (315,000)(D) (656,092)
------------ ------------ ------------- ------------
Income Before
Income Taxes 7,523,611 3,746,040 (760,000) 10,509,651
Income taxes 745,069 61,527 1,180,000 (E) 1,986,596
------------ ------------ ------------- ------------
Net Income $ 6,778,542 $ 3,684,513 $ (1,940,000) $ 8,523,055
============ ============ ============= ============
Net Income Per
Common Share $ .46 $ .57 (F)
============ ============
Weighted Average
Shares Outstanding 14,423,840 14,864,714 (F)
============ ============
<FN>
Notes to Unaudited Pro Forma Consolidated Statement of Operations
(A) Represents results of CIS for the year ended December 31, 1996.
(B) Represents elimination of intercompany shipments and adjustment
to depreciation expense based on estimated fair values of assets
acquired and useful lives assigned.
(C) Represents adjustment to amortize the excess of cost over the net
assets acquired.
(D) Adjustment for estimated interest expense the Company would have
incurred had it borrowed the cash paid to the stockholders of CIS.
(E) Adjust CIS provision for income taxes.
(F) Includes shares of Company common stock issued to the stockholders of CIS.
</FN>
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of 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.
WORLD ACCESS, INC.
By: /s/ Mark A. Gergel
-----------------------------
Mark A. Gergel
Its Executive Vice President
and Chief Financial Officer
Dated as of June 6, 1997
<PAGE>
EXHIBIT INDEX
NO. DESCRIPTION
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Exhibit No. 23.1 Consent of Tedder, Grimsley & Company, P.A
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference of our report dated May 16,
1997 relating to the financial statements of Cellular Infrastructure Supply,
Inc. in the Prospectus constituting part of World Access, Inc.'s Registration
Statements on Forms S-3 and S-8. We also consent to the reference to us under
the heading "Experts" in each such Prospectus.
/s/ Tedder, Grimsley & Company, P.A.
Tedder, Grimsley & Company, P.A.
June 6, 1997
