UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K/A
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13 OR 15 (D) OF
THE SECURITIES ACT OF 1934
ACCESS WORLDWIDE COMMUNICATIONS, INC.
-------------------------------------
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K, dated
October 24, 1998, as set forth in the pages attached hereto:
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
DELAWARE 000-23489 52-1309227
-------- --------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) (Commission File Number) Identification No.)
2200 CLARENDON BLVD., 11TH FL
ARLINGTON, VIRGINIA 22201
------------------- -----
(Address of principal executive (Zip code)
offices)
Registrant's telephone number, including area code: 1 (800) 522-3447
CULTURALACCESSWORLDWIDE, INC.
-----------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION.
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, thereunto duly authorized
Date: January 7, 1999 ACCESS WORLDWIDE COMMUNICATIONS, INC.
By: /s/ John Fitzgerald
-------------------
John Fitzgerald, President and Chief
Executive Officer
(principal executive officer)
Dated: January 7, 1999 By: /s/ Michael Dinkins
-------------------
Michael Dinkins, Senior Vice President
of Finance and Administration
and Chief financial Officer
(principal financial officer)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION.
<TABLE>
<CAPTION>
<S> <C>
Balance Sheets - September 30, 1998, December 31, 1997 and December 31, 1996 1
Statements of Operations - Nine Months Ended September 30, 1998, Years Ended
December 31, 1997 and December 31, 1996 2
Statements of Stockholder's Equity - September 30, 1998, December 31, 1997
and December 31, 1996 3
Statements of Cash Flows - Nine Months Ended September 30, 1998,
Years Ended December 31, 1997 and December 31, 1996 4
Notes to Financial Statements 5-10
Unaudited Proforma Financial Information 11-16
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Access Worldwide Communications, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, of changes in stockholder's equity and of cash flows present fairly,
in all material respects, the financial position of A.M. Medica Communications,
Ltd. (the "Company") at September 30, 1998 and December 31, 1997 and 1996 and
the results of its operations and its cash flows for the nine months ended
September 30, 1998 and the two years ended December 31, 1997 in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 10, 1998
<PAGE>
AM MEDICA COMMUNICATIONS, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
ASSETS
<S> <C> <C> <C>
Current assets
Cash $ 2,226,380 $ -- $ 212,003
Contract receivables (Note 2) 7,052,664 2,234,152 2,374,489
Costs in excess of billings (Note 3) 1,232,956 786,372 211,477
Prepaid assets 26,867 46,338 97,726
----------- ----------- -----------
TOTAL CURRENT ASSETS 10,538,867 3,066,862 2,895,695
Property and equipment, net (Note 4) 7,531 9,131 11,227
Other assets 22,677 22,677 22,677
----------- ----------- -----------
TOTAL ASSETS $10,569,075 $ 3,098,670 $ 2,929,599
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable $ 1,554,610 $ 1,021,161 $ 608,476
Accrued expenses 364,634 136,961 764,778
Deferred income taxes 24,927 36,071 97,973
Deferred revenues 6,294,157 1,292,931 549,227
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 8,238,328 2,487,124 2,020,454
----------- ----------- -----------
Stockholder's equity
Common stock, no par value; 200 shares 1,000 1,000 1,000
authorized; 10 shares issued and outstanding
at September 30, 1998, December 31,
1997 and 1996
Retained earnings 2,329,747 610,546 908,145
----------- ----------- -----------
TOTAL STOCKHOLDER'S EQUITY 2,330,747 611,546 909,145
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY $10,569,075 $ 3,098,670 $ 2,929,599
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
1
<PAGE>
AM MEDICA COMMUNICATIONS, LTD.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
Contract revenues $ 17,570,559 $ 12,544,642 $ 14,816,032
Cost of contracts completed 12,536,965 7,522,965 8,494,075
------------ ------------ ------------
Gross profit 5,033,594 5,021,677 6,321,957
Selling, general and administrative
expenses (net of approximately $49,000,
$106,000, and $125,000 received
from related parties, respectively) 3,105,608 5,292,670 6,302,284
------------ ------------ ------------
Income (loss) from operations 1,927,986 (270,993) 19,673
Other income and expense
Interest expense -- (3,084) --
Interest income 25,077 28,788 44,417
------------ ------------ ------------
Income (loss) before income taxes 1,953,063 (245,289) 64,090
Provision for income taxes (Note 6) 223,694 52,310 242,410
------------ ------------ ------------
Net income (loss) $ 1,729,369 $ (297,599) $ (178,320)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
AM MEDICA COMMUNICATIONS, LTD.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
NUMBER
OF RETAINED
SHARES AMOUNT EARNINGS TOTAL
<S> <C> <C> <C> <C>
Balance, December 31, 1995 10 $ 1,000 $ 1,836,465 $ 1,837,465
Distributions (750,000) (750,000)
Net
loss (178,320) (178,320)
----- ---------- ---------- ----------
Balance, December 31, 1996 10 1,000 908,145 909,145
Net (297,599) (297,599)
loss
----- ---------- ---------- ----------
Balance, December 31, 1997 10 1,000 610,546 611,546
Distributions (10,168) (10,168)
Net
income 1,729,369 1,729,369
----- --------- ---------- ----------
Balance, September 30, 1998 10 $ 1,000 $ 2,329,747 $ 2,330,747
==== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AM MEDICA COMMUNICATIONS, LTD.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
1998 1997 1996
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $ 1,729,369 $ (297,599) $ (178,320)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation 1,600 2,096 3,500
Deferred income taxes (11,144) (61,902) 97,973
Changes in operating assets and liabilities:
Contract receivables (4,818,512) 140,337 719,900
Costs in excess of billings (446,584) (574,895) 186,423
Prepaid assets 19,471 51,388 (9,320)
Other assets -- -- (6,375)
Accounts payable 533,449 412,685 (207,423)
Accrued expenses 227,673 (627,817) 634,615
Deferred revenues 5,001,226 743,704 (309,001)
----------- ----------- -----------
Net cash provided by (used in)
operating activities 2,236,548 (212,003) 931,972
----------- ----------- -----------
Cash flows from financing activities
Distributions (10,168) -- (750,000)
----------- ----------- -----------
Net cash used in financing
activities (10,168) -- (750,000)
----------- ----------- -----------
Net increase (decrease) in cash 2,226,380 (212,003) 181,972
Cash at beginning of period -- 212,003 30,031
----------- ----------- -----------
Cash at end of period $ 2,226,380 $ -- $ 212,003
=========== =========== ===========
Supplement cash flow information:
Cash paid during the period for:
Interest $ 3,084
Income taxes $ 58,163 $ 161,514 $ 136,849
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
1. BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
GENERAL
A.M. Medica Communications, Ltd. (the "Company") provides a range of services to
companies in the pharmaceutical industry, including medical education programs,
medical meetings management, medical publishing, medical audio-visual production
and interactive medical education programs. These services are typically
performed under fixed-price contacts.
REVENUE RECOGNITION
Revenues are recognized on the completed contract method based on when the
services have been rendered.
Contract costs include all direct reimbursable and labor costs. General and
administrative costs are charged to expense as incurred.
DEFERRED REVENUE
Deferred revenue represents customer deposits for services that have been
contracted for but have not been fully performed.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is computed using accelerated methods over the estimated useful
lives of the assets ranging from five to seven years. When assets are retired or
otherwise disposed of, the cost and related accumulated depreciation are removed
from the accounts and any resulting gain or loss is recognized in income for the
period. Expenditures for maintenance and repairs are expensed as incurred, while
expenditures for major renewals that extend useful lives are capitalized.
INCOME TAXES
The Company, with the consent of its stockholder, elected under the Internal
Revenue Code to be an S Corporation, since its inception in 1986. In lieu of
corporate income taxes, the stockholder is taxed on her proportionate share of
the Company's taxable income. Therefore, no provision or liability for federal
income taxes has been included in the financial statements.
A provision for state and local income taxes is included in the financial
statements since S Corporation elections are not recognized for state and local
income tax purposes.
5
<PAGE>
1. BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, accounts payable, accrued
expenses and deferred revenue approximate fair value given the terms and
short-term nature of these instruments.
2. CONTRACT RECEIVABLES
Contract receivables consist of the following:
<TABLE>
<CAPTION>
September 30, December 31, December 31,
1998 1997 1996
<S> <C> <C> <C>
Completed contracts $3,293,001 $1,665,243 $2,073,929
Contracts in progress 3,759,663 568,909 300,560
---------- ---------- ----------
$7,052,664 $2,234,152 $2,374,489
========== ========== ==========
</TABLE>
6
<PAGE>
3. COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS
Costs and billings on uncompleted contracts consist of the following:
<TABLE>
<CAPTION>
September 30, December 31, December 31,
1998 1997 1996
Included in accompanying balance sheet:
<S> <C> <C> <C>
Costs in excess of billings $ 1,232,956 $ 786,372 $ 211,477
Deferred revenues - billings on
uncompleted contracts 6,294,157 1,292,931 549,227
----------- ----------- -----------
$(5,061,201) $ (506,559) $ (337,750)
=========== =========== ===========
Uncompleted contracts with costs in excess
of billings $ 296,276 $ 514,324 $ 126,370
Less: Uncompleted contracts with billings in
excess of costs (5,357,477) (1,020,883) (464,120)
----------- ----------- -----------
$(5,061,201) $ (506,559) $ (337,750)
=========== =========== ===========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, less accumulated depreciation and
consist of the following:
<TABLE>
<CAPTION>
Useful September 30, December 31, December 31,
Lives 1998 1997 1996
<S> <C> <C> <C>
Funiture and fixtures 7 $ 28,407 $ 28,407 $ 28,407
Office equipment 7 70,430 70,430 70,430
Vehicles 5 42,466 42,466 42,466
Less - Accumulated
depreciation (133,772) (132,172) (130,076)
----------- ----------- -----------
Property and equipment, net $ 7,531 $ 9,131 $ 11,227
=========== =========== ===========
</TABLE>
7
<PAGE>
4. PROPERTY AND EQUIPMENT (CONT'D)
Depreciation expense was $1,600, $2,096, and $3,500 for the nine months ended
September 30, 1998 and for the years ended December 31, 1997 and 1996,
respectively.
5. CONTRACT REVENUES FROM SIGNIFICANT CUSTOMERS
The Company had revenues of approximately 75% and 68% from four customers for
the nine months ended September 30, 1998 and the year ended December 31, 1997,
respectively, and 59% from three customers for the year ended December 31, 1996.
Total receivables from these customers approximated 55%, 42% and 35% of the
receivable balances as of September 30, 1998 and December 31, 1997 and 1996,
respectively.
6. INCOME TAXES
The provision for state and local income taxes consists of the following:
<TABLE>
<CAPTION>
Period Ended Years Ended
September 30, December 31,
1998 1997 1996
<S> <C> <C> <C>
Current tax provision $ 234,837 $ 114,212 $ 144,437
Deferred tax expense (benefit) (11,143) (61,902) 97,973
--------- --------- ---------
Total $ 223,694 $ 52,310 $ 242,410
========= ========= =========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
8
<PAGE>
6. INCOME TAXES (CONT'D)
Net deferred tax liabilities are comprised of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997 1996
<S> <C> <C> <C>
Cash basis of accounting for
tax purposes $21,750 $32,894 $97,973
Depreciation 3,177 3,177 --
------- ------- -------
Total $24,927 $26,071 $97,973
======= ======= =======
</TABLE>
7. LEASING ARRANGEMENTS
The Company leases office space under noncancelable operating leases with terms
ranging from five to ten years and expiring on December 31, 2002. Total rental
expense, net of sublease rentals under operating leases was $141,449, $152,018
and $137,154 for the nine months ended September 30, 1998 and the years ended
December 31, 1997 and 1996, respectively.
Aggregate minimum annual rentals under the operating leases as of December 31,
1997 are as follows:
Years ending December 31,
<TABLE>
<CAPTION>
<S> <C>
1998 $ 185,000
1999 185,000
2000 185,000
2001 185,000
2002 185,000
----------
Total minimum rental payments $ 925,000
==========
</TABLE>
9
<PAGE>
8. RELATED PARTY TRANSACTIONS
The Company subleases a portion of its leased office space to a
stockholder-controlled corporation on a month-to-month basis for $31,000,
$40,000 and $97,000 for the nine months ended September 30, 1998 and the years
ended December 31, 1997 and 1996, respectively. There were no amounts due from
the stockholder-controlled corporation at these dates.
The Company leased some employees to a stockholder-controlled corporation for
approximately $18,000, $66,000 and $28,000 for the nine months ended September
30, 1998 and the years ended December 31, 1997 and 1996, respectively. There
were no amounts due from the stockholder-controlled corporation at these dates.
9. RETIREMENT PLAN
The Company sponsors a 401(k) Retirement Plan (the "Plan") covering
substantially all employees subject to certain eligibility requirements as
specified in the Plan. The Plan allows for employee contributions, up to a
maximum of 15% of compensation subject to federal tax limits. The Plan does not
provide for the Company to make matching contribution payments.
10. SUBSEQUENT EVENT
On October 24, 1998 Access Worldwide Communications, Inc. ("Access") acquired
all the outstanding capital stock of the Company. The consideration paid for the
stock of the Company was $22 million in cash, $0.5 million of Access common
stock, $.01 par value, valued at the average closing price for the 10 trading
days ending three business days prior to the closing date and a three year 6.5%
subordinated promissory note in the principal amount of $5.5 million. The
purchase price also includes certain future contingent payments of cash and
shares of Access' common stock dependent on the achievement of certain financial
goals by the Company. The ultimate amount of cash to be paid and the ultimate
number of shares of common stock to be issued cannot be determined until the
earn-out periods terminate and achievement of criteria is established.
10
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following Unaudited Pro Forma Statements of Operations for the year ended
December 31, 1997 and the nine months ended September 30, 1998 are based on the
historical financial statements of Access Worldwide Communications, Inc.
("Access"), adjusted to give effect, using the purchase method of accounting, to
the acquisition of A.M. Medica Communications, Inc. ("AMM") as of January 1,
1997. AMM was acquired in 1998. The Unaudited Pro Forma Balance Sheet has been
prepared assuming that the acquisition took place as of September 30, 1998.
The Unaudited Pro Forma Financial Information does not purport to represent what
Access' results of operations or financial position would have been had the
acquisition occurred as of the above mentioned dates or to project Access'
results of operations or financial position for a future period or date, nor
does it give effect to any matters other than those described in the notes
thereto.
The Unaudited Pro Forma Financial Information should be read in conjunction with
Access' Consolidated Financial Statements and the financial statements of AMM
appearing elsewhere in this filing.
11
<PAGE>
<TABLE>
<CAPTION>
Balance Sheets
Access(8) AMM(9)
September 30, Pro Forma Pro Forma
1998 1998 Adjustments
Historical
--------------------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 1,604,041 $ 2,226,380 $ -- $ 3,830,421
Accounts receivable, net of allowance 13,636,502 7,052,664 482,000 (3) 21,171,166
Cost in excess of billings -- 1,232,956 (1,024,000) (3) 208,956
Other assets 1,837,130 26,867 -- 1,863,997
------------ ------------ ------------ ------------
Total current assets 17,077,673 10,538,867 (542,000) 27,074,540
Property and equipment, net 7,465,633 7,531 -- 7,473,164
Intangibles and other assets, net 36,422,954 22,677 25,682,000 (10) 62,127,631
------------ ------------ ------------ ------------
Total assets $ 60,966,260 $ 10,569,075 $ 25,140,000 $ 96,675,335
============ ============ ============ ============
Liabilities, Mandatorily Redeemable Preferred
Stock and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $ 6,718,002 $ 1,944,171 $ 953,000 (3) $ 9,615,173
Deferred revenue 705,834 6,294,157 (2,599,000) (3) 4,400,991
Current portion of indebtedness 672,877 -- -- 672,877
------------ ------------ ------------ ------------
Total current liabilities 8,096,713 8,238,328 (1,646,000) 14,689,041
Line of credit facility and long-term
portion of indebtedness 2,407,829 -- 27,513,000 (10) 29,920,829
Mandatorily redeemable preferred stock 6,554,444 -- -- 6,554,444
------------ ------------ ------------ ------------
Total liabilities and mandatorily
redeemable preferred stock $ 17,058,986 $ 8,238,328 $ 25,867,000 $ 51,164,314
============ ============ ============ ============
Stockholders' equity
Common stock $ 90,432 $ 1,000 $ (1,000) (10) $ 91,432
1,000 (11)
Additional paid-in-capital 58,540,888 -- 499,000 (11) 59,039,888
(Accumulated deficit) retained earnings (14,355,382) 2,329,747 (2,330,000) (10) (13,251,635)
1,104,000 (3)
Less: cost of treasury stock and deferred compensation (368,664) -- -- (368,664)
------------ ------------ ------------ ------------
Total stockholders' equity 43,907,274 2,330,747 (727,000) 45,511,021
------------ ------------ ------------ ------------
Total liabilities, mandatorily redeemable
preferred stock and stockholders' equity $ 60,966,260 $ 10,569,075 $ 25,140,000 $ 96,675,335
============ ============ ============ ============
</TABLE>
See notes to unaudited pro forma financial information
12
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations
September 30, 1998
Access(1) AMM(2)
Nine Months Ended
September 30, Pro Forma Pro Forma
1998 1998 Adjustments
Historical
------------------------
<S> <C> <C> <C> <C>
Revenues $ 47,397,255 $ 17,570,559 $ 1,434,000(3) $ 66,401,814
Cost of revenues (exclusive of
depreciation) 26,252,491 12,536,965 1,032,000(3) 39,821,456
------------ ------------ ------------ ------------
Gross profit 21,144,764 5,033,594 402,000 26,580,358
Selling, general and administrative expenses 15,033,706 3,105,608 (1,383,000)(4) 16,756,314
Amortization expense 1,077,161 -- 832,500 (5) 1,909,661
------------ ------------ ------------ ------------
Income from operations 5,033,897 1,927,986 952,500 7,914,383
Interest income 62,570 25,077 -- 87,647
Interest expense - related parties (528,229) -- (268,500)(6) (796,729)
Interest expense -- -- (1,047,000)(6) (1,047,000)
------------ ------------ ------------ ------------
Income (loss) before income taxes 4,568,238 1,953,063 (363,000) 6,158,301
Income tax expense (2,010,025) (223,694) (476,000)(7) (2,709,719)
------------ ------------ ------------ ------------
Net income (loss) $ 2,558,213 $ 1,729,369 $ (839,000) $ 3,448,582
============ ============ ============ ============
Earnings per share of common stock (basic and diluted) $ 0.30 $ 0.30
============ ============
Shares - basic 8,517,525 122,045(11) 8,639,570
============ =========== ============
Shares - diluted 8,654,687 122,045(11) 8,776,732
============ =========== ============
</TABLE>
See notes to unaudited pro forma financial information
13
<PAGE>
<TABLE>
<CAPTION>
ACCESS (1) AMM (2)
TWELVE MONTHS ENDED
DECEMBER 31, PRO FORMA PRO FORMA
1997 1997 ADJUSTMENTS
Historical
-----------------------------
<S> <C> <C> <C> <C> <C>
Revenues $36,652,889 $12,544,642 $1,193,000 (3) $50,390,531
Cost of revenues (exclusive of depreciation) 21,812,960 7,522,965 742,000 (3) 30,077,925
---------- ---------- --------- ----------
GROSS PROFIT 14,839,929 5,021,677 451,000 20,312,606
Selling, general and administrative expenses 8,909,475 5,292,670 (3,610,000)(4) 10,592,145
Amortization expense 900,696 - 1,110,000 (5) 2,010,696
---------- ---------- --------- ----------
INCOME FROM OPERATIONS 5,029,758 (270,993) 2,951,000 7,709,765
Interest income 113,204 28,788 141,992
Interest expense-related parties (1,999,009) - (358,000)(6) (2,357,009)
Interest expense (440,453) (3,084) (1,396,000)(6) (1,839,537)
Other expense-related party (301,841) - - (301,841)
Other income 4,757 - - 4,757
---------- ---------- --------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 2,406,416 (245,289) 1,197,000 3,358,127
Income tax expense (1,181,484) (52,310) (277,000)(7) (1,510,794)
---------- ---------- --------- ----------
NET INCOME (LOSS) $ 1,224,932 $ (297,599) $ 920,000 $ 1,847,333
=========== ========== ========= ===========
Earnings per share of common stock (basic and diluted) $ 0.26 $ 0.26
=========== ===========
Shares - basic 4,762,333 122,045 (11) 4,884,378
=========== ========= ===========
Shares - diluted 4,872,834 122,045 (11) 4,994,879
=========== ========= ===========
</TABLE>
See notes to unaudited pro forma financial information
14
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
(1)Reflects the historical consolidated statements of operations of Access
Worldwide Communications, Inc. ("Access") for the nine months ended
September 30, 1998 and the year ended December 31, 1997.
(2)Reflects the historical statements of operations of A.M. Medica
Communications, Ltd. ("AMM") for the nine months ended September 30, 1998
and the year ended December 31, 1997 prior to the date of its acquisition
by Access.
(3)Reflects the adjustment to convert revenue recognition from the
completed-contract method used by AMM to the percentage-of-completion
method in accordance with Access' accounting policy, as if such acquisition
occurred on January 1, 1997.
(4)Reflects the adjustment to selling, general and administrative expenses to
reduce AMM's historical amount of compensation for services provided by the
former owner for the difference between such historical amount and the
amount specified in the employment contract with the former owner for a
comparable position in Access.
(5)Reflects the additional amortization over four to 35 years of the excess of
cost over fair value of net assets acquired and other intangible assets of
AMM, as if such acquisition occurred on January 1, 1997.
(6)Reflects the additional interest expense-related parties of approximately
$268,500 and $358,000 for the nine months ended September 30, 1998 and the
year ended December 31, 1997, respectively, on the 6.5% subordinated
promissory note, maturing on October 24, 2001, used in conjunction with the
acquisition as if such acquisition occurred on January 1, 1997. The
adjustment also reflects additional interest expense of approximately
$1,047,000 and $1,396,000 for the nine months ended September 30, 1998 and
the year ended December 31, 1997, respectively, on Access' line of credit
at 6.34% (the current actual rate on the borrowing) to fund the cash
portion of the purchase price, as if such acquisition occurred on January
1, 1997. Annual interest expense on the line of credit would change by
approximately $27,500 for each 1/8% change in the interest rate.
(7)Reflects the estimated income tax provision of $508,000 and $395,000 as if
AMM were a C Corporation and the tax effect of pro forma adjustments at an
effective tax rate of 46% and 47% for the nine months ended September 30,
1998 and the year ended December 31, 1997, respectively. The adjustment
also reflects the estimated income tax benefit of $32,000 and $118,000 to
record the consolidated income tax expense at Access' consolidated
estimated effective tax rate of 44% and 45% for the nine months ended
September 30, 1998 and the year ended December 31, 1997, respectively.
(8)Reflects the historical balance sheet data for Access as of September 30,
1998.
(9)Reflects the historical balance sheet data for AMM as of September 30,
1998.
(10)Reflects the adjustment to (i) record the consideration for the purchase of
AMM; (ii) record the excess of purchase price over the net assets acquired;
and (iii) eliminate the stockholder's equity of AMM. Information with
respect to the business acquired is as follows:
15
<PAGE>
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ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Useful Life
in Years AMM
<S> <C> <C>
Goodwill 35 $23,627,440
Customer lists 5 1,027,280
Assembled workforce 4 770,460
Noncompete 7 256,820
----------
$25,682,000
===========
</TABLE>
A summary of the preliminary allocation of the purchase price to the
intangible assets acquired is as follows:
<TABLE>
<CAPTION>
AMM
<S> <C>
Cash paid $22,013,000
Stock issued 500,000
Note issued 5,500,000
Liabilities assumed 8,238,000
----------
36,251,000
Less: Fair value of assets acquired (10,569,000)
-----------
Cost in excess of fair value of tangible assets acquired $25,682,000
===========
</TABLE>
The book value of AMM's assets approximates fair market value as of the
date of acquisition. Access is obligated to pay additional consideration
to the former owner of AMM based upon the business' achievement of certain
EBITA goals after the acquisition. The ultimate amount of cash to be paid
and the ultimate number of shares of common stock to be issued cannot be
determined until the earn-out periods terminate and achievement of
criteria is established. Any amount paid pursuant to this agreement will
be recorded as additional purchase price for the business acquired and
will be amortized over 35 years.
(11)Reflects the impact of the additional shares issued pursuant to the
transaction and the resultant impact on weighted average shares
outstanding.
16
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC. 3
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
