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As filed with the Securities and Exchange Commission on May 21, 1999
Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
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WORLD ACCESS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 58-2398004
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
945 EAST PACES FERRY ROAD
SUITE 2200
ATLANTA, GEORGIA 30326
(404) 231-2025
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
MARK A. GERGEL
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
WORLD ACCESS, INC.
945 EAST PACES FERRY ROAD
SUITE 2200
ATLANTA, GEORGIA 30326
(404) 231-2025
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
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Copies of Communications to:
LEONARD A. SILVERSTEIN, ESQ.
LONG ALDRIDGE & NORMAN LLP
5300 ONE PEACHTREE CENTER
303 PEACHTREE STREET
ATLANTA, GEORGIA 30308-3201
(404) 527-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. [ ] __________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of shares Amount Proposed Proposed Amount of
to be to be maximum maximum registration
registered registered offering price aggregate offering fee (1)
per share (1) price (1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 393,060 $11.469 $4,508,005 $1,253.23
per share
</TABLE>
(1) Pursuant to Rule 457(c), the proposed offering price and registration
fee are based upon the average of the high and low prices of the
Registrant's common stock as reported on the Nasdaq National Market on
May 19, 1999.
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The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus is not complete and may be changed.
This prospectus is part of a registration statement filed with the Securities
and Exchange Commission. The selling security holders may not sell these
securities until the statement filed with the Securities and Exchange Commission
is effective. This prospectus is not an offer to sell these securities.
PROSPECTUS
[LOGO] WORLD ACCESS, INC.
393,060 SHARES OF WORLD ACCESS, INC.
COMMON STOCK
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TERMS OF SALE
This prospectus relates to the resale by their holders of shares of
common stock of World Access, Inc. The holders of these shares may offer and
sell them from time to time pursuant to this prospectus through registered
broker dealers on the Nasdaq National Market or such other national securities
exchange or automated interdealer quotation system on which shares of common
stock are then listed at market prices prevailing at the time of the sale,
through privately negotiated transactions or through other methods described in
this prospectus. The broker dealers may receive compensation in the form of
commissions or otherwise in such amounts as may be negotiated between the
selling stockholders and the broker dealers. As of the date of this prospectus,
no agreements have been reached for the resale of shares of common stock under
this prospectus or the amount of any compensation to be paid to broker dealers
in connection therewith.
World Access will pay the expenses of registering the shares of common
stock offered by this prospectus, including the fees of counsel to World Access,
and the selling stockholders will bear the expenses of selling the shares,
including commissions, concessions or discounts to broker dealers, and fees and
expenses of counsel or other advisors to the selling stockholders. To the extent
any of the shares of common stock offered by this prospectus remain unsold upon
the termination of this offering, it is anticipated that the selling
stockholders will be eligible to resell these shares pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended.
The common stock is listed on the Nasdaq National Market under the
trading symbol "WAXS."
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THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 3.
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS
HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Subject to completion, dated _____________, 1999.
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
PROSPECTUS SUMMARY................................................................................................3
RISK FACTORS......................................................................................................3
Risk Factors Related to Us...............................................................................4
Risk Factors Related to Our Equipment Group..............................................................9
Risk Factors Related to Our Telecommunications Group....................................................11
USE OF PROCEEDS..................................................................................................19
SELLING STOCKHOLDERS.............................................................................................19
PLAN OF DISTRIBUTION.............................................................................................20
LEGAL MATTERS....................................................................................................22
EXPERTS ........................................................................................................22
WHERE YOU CAN FIND MORE INFORMATION..............................................................................22
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................................................23
</TABLE>
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PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS PROSPECTUS
AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. FOR A MORE
COMPLETE UNDERSTANDING OF THIS OFFERING, WE ENCOURAGE YOU TO READ THIS
PROSPECTUS IN ITS ENTIRETY, INCLUDING ANY DOCUMENTS INCORPORATED BY REFERENCE IN
THIS PROSPECTUS. THE WORDS "WE," "OUR," AND "US" REFER TO WORLD ACCESS, INC. AND
OUR WHOLLY-OWNED SUBSIDIARIES.
WORLD ACCESS, INC.
We provide international long distance voice and data services and
proprietary network equipment to the global telecommunications markets. Our
World Access Telecommunications Group provides wholesale international long
distance service to over 200 foreign countries through a combination of our own
international network facilities, various international termination
relationships and resale arrangements with other international long distance
service providers. Our World Access Equipment Group develops, manufactures and
markets digital switches, billing and network telemanagement systems, cellular
base stations, fixed wireless local loop systems, intelligent multiplexers,
digital microwave radio systems and other telecommunications network products.
THE COMMON STOCK
Securities Offered. 393,060 shares of common stock of World Access
offered for resale for the account of the holders of the common stock.
Trading. The common stock trades on the Nasdaq National Market under
the symbol "WAXS."
USE OF PROCEEDS.
We will not receive any proceeds from the sale of the shares. Rather, all
proceeds will be payable to the selling stockholders, less any compensation
payable by the selling stockholders to broker dealers in the form of commissions
or otherwise.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in this
prospectus contain certain information regarding our plans and strategies that
are "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934. When used
in this prospectus or in the documents incorporated by reference, the words
"may," "could," "should," "would," "believe," "anticipate," "estimate,"
"expect," "intend," "plan" and similar terms and/or expressions are intended to
identify forward-looking statements. These statements reflect our assessment of
a number of risks and uncertainties and our actual results could differ
materially from the results anticipated in these forward-looking statements. For
a discussion of the important factors that could cause our actual results to
differ materially from our forward-looking statements, see Risk Factors. Any
forward-looking statement speaks only as of the date of this prospectus or the
documents incorporated by reference, and we undertake no obligation to update
any forward-looking statements to reflect events or circumstances after the date
on which such statement is made or to reflect the occurrence of an unanticipated
event.
RISK FACTORS
You should carefully consider the following factors, in addition to the
other information contained in this prospectus, in evaluating an investment in
the common stock.
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RISK FACTORS RELATED TO US
Our Inability to Identify and Implement Acquisitions Could Adversely Affect
Our Rate of Revenue Growth. An element of our strategy for the future is
expansion through the acquisition of companies that complement or expand our
existing business. We do not currently have any commitments or agreements with
respect to any acquisitions. We may be unable to identify suitable acquisition
candidates at prices acceptable to us, and we may not have adequate resources to
consummate desired acquisitions. If we are unable to make acquisitions, we may
not meet our growth expectations and our business, financial condition and
results of operations could be materially and adversely affected.
Our Inability to Integrate Acquired Companies Profitably Could Adversely
Affect Our Financial and Operational Results. Even though we may acquire
additional companies in the future, we may be unable to successfully integrate
the acquired businesses, personnel and products. If we are unable to
successfully integrate acquired businesses, we may not be able to realize
anticipated economic, operational and other benefits in a timely manner and we
may incur substantial costs and delays or other operational, technical or
financial problems. In addition, the failure to successfully integrate
acquisitions may divert management's attention from our existing business and
may damage our relationships with our key customers and employees.
Future Acquisitions May Decrease Our Stockholders' Percentage Ownership in
World Access and Require Us to Incur Additional Debt and Amortization Expense.
We may issue equity securities in future acquisitions that could be dilutive to
our shareholders. We also may incur additional debt and amortization expense
related to goodwill and other intangible assets in future acquisitions. This
additional debt and amortization expense may reduce significantly our
profitability and materially adversely affect our business, financial condition
and results of operations.
Restrictions under Our Credit Facility May Require Us to Make Business
Decisions That are Adverse to Our Long Term Interests and the Interests of Our
Stockholders. We have, through our wholly owned subsidiaries World Access
Holdings, Inc. and Telco Systems, Inc., entered into a $75.0 million revolving
line of credit facility dated December 30, 1998 with a syndicate of banks. As of
the date of this prospectus, we have no borrowings outstanding under this credit
facility. However, restrictions under our credit facility may require us to make
business decisions that are adverse to our long term interests and to the
interests of the holders of our common stock, including the holders of the
shares purchased pursuant to this prospectus. For example, we generally must
obtain the lender's consent and sometimes prepay a portion of the outstanding
debt under the credit facility before we can issue equity, enter into
acquisitions for cash or securities, dispose of our assets or incur additional
debt. We must also maintain various margins, operating ratios and financial
thresholds.
Upon a default under our credit facility, the lenders may require us to
immediately repay the entire amount outstanding under the credit facility. If we
cannot repay these borrowings, we may need to seek the protection of the federal
bankruptcy laws to continue operating our business. Even if we were able to
repay all amounts owed under the credit facility, our business, financial
condition and results of operations would be materially adversely affected due
to the resulting loss in liquidity. In addition, in the event of a default under
the credit facility that we do not cure, the lenders could foreclose on the
collateral securing our obligations, which would result in the lenders owning
and having effective control over our operations.
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As a Holding Company, Our Liquidity Could be Adversely Affected if Our
Subsidiaries Are Unable to Distribute Money to Us. As a holding company without
significant income from operations, we are dependent upon the income from our
operating subsidiaries to meet our operating expenses. If our operating
subsidiaries are unable to pay dividends or otherwise distribute amounts to us
sufficient to cover our operating expenses, then we may be subject to liquidity
problems, even if, on a consolidated basis, our operating subsidiaries are
profitable.
Our Rapid Growth Has Placed Significant Demands on Our Management and
Financial Resources. Our rapid growth from recent acquisitions and the expansion
of our operations has placed significant demands on our resources. To
successfully manage our growth, we will need to continue to improve our
operational, financial and management information systems and to motivate and
effectively manage our employees. If our management is unable to manage our
growth effectively, the quality of our products and services, our ability to
retain key personnel and our business, financial condition and results of
operations could be materially adversely affected.
We May Not Be Able to Compete Successfully With Other Telecommunications
Firms. The segments of the telecommunications industry in which we operate are
intensely competitive. Many of the long distance providers and
telecommunications equipment manufacturers with whom we compete have
significantly more extensive engineering, manufacturing, marketing, financial
and technical resources than we. We are uncertain whether we can continue to
compete successfully with our competitors.
Significant Variance in Our Quarterly Operating Results Could Adversely
Affect the Price of Our Common Stock . In future quarters, our results of
operations may fail to meet the expectations of market analysts and investors,
which may adversely affect the price of our common stock. Our quarterly
operating results have varied significantly in the past and are expected to do
so in the future.
As we increase the number of telecommunications products we offer, our
future quarterly operating results may vary significantly depending on factors
such as the following:
- - the timing and shipment of significant orders;
- - new product and service introductions by us and our competitors;
- - market acceptance of new and enhanced versions of our products and
services;
- - changes in pricing policies by us and our competitors;
- - the availability of new technologies;
- - the mix of distribution channels through which our products are sold;
- - the inability to obtain sufficient supplies of sole or limited source
components for our products;
- - gains or losses of significant customers;
- - the timing of customers' upgrade and expansion programs;
- - changes in the level of operating expenses;
- - the timing of acquisitions;
- - seasonality; and
- - general economic conditions.
In response to competitive pressures or new product and service
introductions, we may take certain pricing or marketing actions that could
materially adversely affect our quarterly operating results.
We base our expense levels, in part, on our expectations of future sales.
If future sales levels are below expectations, then we may be unable to adjust
spending sufficiently in a timely manner to compensate for the unexpected sales
shortfall.
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Accordingly, we believe that you should not rely upon period-to-period
comparisons of our operating results as an indication of our future performance.
In addition, the operating results of any quarterly period are not indicative of
results that you should expect for a full fiscal year. Historically, we have
generated a disproportionate amount of our operating revenues toward the end of
each quarter, making precise prediction of revenues and earnings particularly
difficult and resulting in risk of variance of actual results from those
forecast at any time.
Delays and Costs Incurred in Achieving Compliance with Government
Regulations and Evolving Industry Standards Could Adversely Affect Our Revenues.
Our products' failure to comply with the various existing and evolving
regulations and industry standards or the delays and costs incurred in achieving
compliance with such regulations and standards could have a material adverse
effect on our business, financial condition and results of operations. Our
products must meet a significant number of voice and data communications
regulations and standards, some of which are evolving as new technologies are
deployed. In the United States, these products and services must comply with
various regulations promulgated by the Federal Communications Commission, as
well as with standards established by Bell Communications Research ("BellCore").
Internationally, our products and services must comply with standards
established by telecommunications authorities in various countries, as well as
with recommendations of the International Telecommunications Union.
In addition, telecommunications service providers require that equipment
connected to their networks comply with their own standards, which may vary from
industry standards. Certain regulations currently require that products which
reside on a customer's premises and interconnect the public switched network
meet certain standards to prevent harm to the network. Other regulations
currently limit the levels of electromagnetic radiation which may emanate from
an electronic device located on a customer's premises. The time and expense
required to comply with these standards and regulations could adversely affect
our revenues.
Government Regulatory Policies May Increase Pricing Pressures in Our
Industry. We expect that government regulatory policies, including the
Telecommunications Act of 1996, are likely to continue to have a major impact on
the pricing of both existing and new public network services and possibly
accelerate the entrance of new competitors and consolidation of the industry.
These trends may affect demand for such services and the telecommunications
products that support such services. Tariff rates, whether determined
autonomously by telecommunications service providers or in response to
regulatory directives, may affect the cost effectiveness of deploying public
network services. Tariff policies are under continuous review and are subject to
change. User uncertainty regarding future policies may also affect demand for
telecommunications products and services, including our products and services.
Our Need to Retain the Services of John D. Phillips and Other Key Officers
and Employees. We are highly dependent on the services of several key executive
officers and technical employees, particularly John D. Phillips, our Chief
Executive Officer. The loss of any of those officers or key employees could have
a material adverse effect on our business, financial condition and results of
operations. In addition, we will need to hire additional skilled personnel to
support the continued growth of our business. The market for skilled personnel,
especially those with the technical abilities we require, is currently very
competitive, and we must compete with much larger companies with significantly
greater resources to attract and retain such personnel.
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Our Significant Reliance on International Sales Could Adversely Affect Our
Financial Condition Because of International Regulatory Changes, Political and
Economic Instability and Collection Efforts. International sales represented
approximately 14.8% of our total sales in the year ended December 31, 1998 and
16.6% of our total sales in the year ended December 31, 1997. We intend to
increase our international sales efforts, which may require significant
management attention and financial resources. There can be no assurance that we
can increase our international sales. International sales are subject to
inherent risks, including:
- - unexpected changes in regulatory requirements, tariffs or other
barriers;
- - difficulties in staffing and managing foreign operations;
- - longer payment cycles;
- - unstable political environments;
- - greater difficulty in accounts receivable collection; and
- - potentially adverse tax consequences.
Moreover, gains and losses on the conversion to U.S. dollars of receivables and
payables arising from international operations may contribute to fluctuations in
our results of operations, and fluctuations in exchange rates could affect
demand for our products and services and could adversely affect U.S. dollar
denominated indebtedness of our foreign operations.
We May Be Unable to Protect and Maintain the Competitive Advantage of Our
Intellectual Property Rights. In the future, we may be required to bring or
defend against litigation to enforce any patents issued or assigned to us, to
protect trademarks, trade secrets and other intellectual property rights we own,
to defend against claimed infringement of the rights of others and to determine
the scope and validity of the proprietary rights of others. Regardless of the
ultimate outcome, any litigation could be costly and could divert management's
attention, which could have a material adverse effect on our business, financial
condition and results of operations. Adverse determinations in litigation could
result in the loss of our proprietary rights, subject us to significant
liabilities, require us to seek licenses from third parties or prevent us from
manufacturing or selling our products, any of which could have a material
adverse effect on our business, financial condition and results of operations.
We rely on contractual rights, trade secrets, trademarks and copyrights to
establish and protect our proprietary rights in our products. Although we
presently hold several patents for certain of our existing products and have
several patent applications pending, not all of our products are covered by
patents. The telecommunications equipment industry is characterized by the
existence of a large number of patents and frequent litigation based on
allegations of patent infringement. We have not conducted a formal patent search
relating generally to the technology used in our products. In addition, since a
patent application in the United States is not publicly disclosed until the
patent is issued and foreign patent applications generally are not publicly
disclosed for at least a portion of the time that they are pending, applications
may have been filed which, if issued as patents, would relate to our products.
In addition, software comprises a substantial portion of the technology in our
products. The scope of protection accorded to patents covering software-related
inventions is evolving and is subject to a degree of uncertainty that may
increase our risk and cost if we discover the existence of third party patents
related to our software products or if such patents are asserted against us in
the future.
The Price of Our Common Stock Has Been Volatile and Could Continue to
Fluctuate Substantially. Our common stock is traded on the Nasdaq National
Market. The market price of our common stock has been volatile and could
fluctuate substantially based on a variety of factors, including the following:
- - announcements of new products or technological innovations by us or
others;
- - variations in our results of operations;
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- - the gain or loss of significant customers;
- - the timing of acquisitions of businesses or technology licenses;
- - legislative or regulatory changes;
- - general trends in the industry;
- - market conditions; and
- - analysts' estimates and other events in our industry.
In addition, the stock market has experienced extreme price and volume
fluctuations that have particularly affected the market price for many
technology companies and that have often been unrelated to the operating
performance of these companies. These broad market fluctuations may adversely
affect the market price of our common stock.
We May Sustain Material Liability as a Result of Stockholder Suits Against
Us. Following our announcement in January 1999 regarding earnings expectations
for the quarter and year ended December 31, 1998 and the subsequent decline in
the price of our common stock, a number of class action complaints were filed
against us. A few of these cases were amended and additional complaints were
filed after a second decline in our stock price shortly after we announced our
earnings in February 1999. Twenty-two such cases were filed by March 7, 1999 and
these cases were consolidated into a single proceeding. An additional class
action complaint was filed against us on March 18, 1999 and we expect that this
case will also be consolidated with the others. We expect that an amended and
restated complaint will be filed in the consolidated action on or before May 28,
1999.
Although the complaints described above differ in some respects, the
plaintiffs, generally, have alleged violations of the federal securities laws
arising from misstatements of material information in and/or omissions of
material information from certain of our securities filings and other public
disclosures, principally related to inventory and sales activities during the
fourth quarter of 1998. The plaintiffs have requested an unspecified amount of
damages in their complaints. Although we do not believe that we have violated
any of the requirements or obligations of the federal securities laws, we may
sustain material liability as a result of or related to these stockholder suits.
Our Certificate of Incorporation and Bylaws and Delaware Law May Inhibit a
Takeover of World Access. Certain provisions of our restated Certificate of
Incorporation, our restated Bylaws and the Delaware General Corporation Law
could, together or separately, discourage potential acquisition proposals or
delay or prevent a change in control. Currently, those provisions include a
classified Board of Directors, a prohibition on written consents in lieu of
meetings of the stockholders and the authorization to issue up to 10,000,000
shares of preferred stock and up to 150,000,000 shares of common stock. Our
Board of Directors has the power to issue any or all of these additional shares
without stockholder approval, subject to the rules of the Nasdaq Stock Market,
and the preferred shares can be issued with such rights, preferences and
limitations as may be determined by the Board. The rights of the holders of
common stock will be subject to, and may be adversely affected by, the
commitments or contracts to issue any additional shares of common stock or any
shares of preferred stock. Authorized and unissued preferred stock and common
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could delay, discourage, hinder or
preclude our unsolicited acquisition, could make it less likely that the
stockholders receive a premium for their shares as a result of any such attempt
and could adversely affect the market price of, and the voting and other rights
of, the holders of outstanding shares of common stock.
We May Lose Revenue or Incur Additional Costs Because of a Failure to
Adequately Address the Year 2000 Issue. Many existing computer programs use only
two digits to
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identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000.
We have undertaken, but have not completed, an assessment of our Year 2000
issues. The assessment is scheduled for completion in mid-1999. Until we have
completed our assessment, we cannot be sure that our efforts to address Year
2000 issues are appropriate, adequate or complete.
As a result, we may suffer various consequences, including:
- - We may experience a significant number of operational inconveniences and
inefficiencies for us, our customers and our suppliers that may divert our
time and attention and financial and human resources from our ordinary
business activities;
- - We and companies on which we rely may suffer serious system failures that
may require significant efforts by us, our customers and our suppliers to
prevent or alleviate material business disruptions; and
- - We may experience a significant loss of revenues or incur a significant
amount of unanticipated expenses.
RISK FACTORS RELATED TO OUR EQUIPMENT GROUP
Our Equipment Group May Be Unable to Compete with Other Telecommunications
Equipment Manufacturers Such as the Regional Bell Operating Companies. Our
Equipment Group may face additional competition from the Regional Bell Operating
Companies ("RBOCs"), which have historically been prohibited from manufacturing
telecommunications equipment by the terms of the Modification of Final Judgment
entered into in connection with the divestiture of the RBOCs by AT&T in 1984.
The Telecommunications Act of 1996 contains provisions that permit the RBOCs,
subject to satisfying certain conditions designed to facilitate local exchange
competition, to manufacture telecommunications equipment. In light of these
provisions, it is possible that one or more of the RBOCs, some of which are
major customers of ours, may decide to manufacture telecommunications equipment
or to form alliances with other manufacturers. Any of these developments could
result in increased competition for us, which may have a material adverse effect
on our business, financial condition and results of operations.
Our Equipment Group Depends on Certain Customers for Significant Revenues.
A small number of customers historically has accounted for a significant
percentage of our Equipment Group's total sales. For the three months ended
March 31, 1999, one customer accounted for 10.9% of our Equipment Group's total
sales and our top 10 customers accounted for 56.9% of total sales. For the year
ended December 31, 1998, no customer individually accounted for more than 10.0%
of our Equipment Group's total sales and our top 10 customers accounted for
30.1% of our Equipment Group's total sales. Our customers typically are not
obligated contractually to purchase any quantity of products or services in any
particular period. The loss of, or a material reduction in orders by, one or
more key customers could have a material adverse effect on our business,
financial condition and results of operations.
Rapid Technological Development and New Products Introduced By Our
Competitors Could Make Our Inventory on Hand Obsolete. Our failure to introduce
new products and services and respond to industry changes on a timely and cost
effective basis could make inventory on hand obsolete and could have a material
adverse affect on our business, financial condition and results of operations.
The market for our products and services is generally characterized
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by rapidly changing technology, evolving industry standards and frequent new
product introductions that can render existing products obsolete or
unmarketable. Our success will depend to a substantial degree upon our ability
to develop and introduce in a timely fashion enhancements to our existing
products and new products and services that meet changing customer requirements
and emerging industry standards.
The development of new, technologically advanced products and services is a
complex and uncertain process requiring high levels of innovation and capital,
as well as the accurate anticipation of technological and market trends. The
introduction and marketing of new or enhanced products and services require us
to manage the transition from existing products in order to minimize disruption
in customer purchasing patterns. There can be no assurance that we will
successfully manage the transition to new or enhanced products or services.
Further, there can be no assurance that products, services or technologies
developed by others will not render our products, services or technologies
obsolete.
Failure to introduce new products or product enhancements effectively and
on a timely basis, customer delays in purchasing products in anticipation of new
product introductions and any inability to respond effectively to technological
changes, emerging industry standards or product announcements by competitors,
could have a material adverse effect on our business, operating results and
financial condition.
From time to time, we or our competitors may announce new products,
services, capabilities or technologies that have the potential to replace or
shorten the life cycle of our existing product and service offerings. There can
be no assurance that announcements of product enhancements or new product or
service offerings will not cause customers to defer purchasing our existing
products or cause resellers to return products. Any such deferrals,
cancellations or returns could have a material adverse effect on our business,
operating results and financial condition.
Our New Products May Contain Undetected Errors Resulting in the Loss or
Delay of Market Acceptance of Our Products. Products as complex as ours may
contain undetected errors or failures when first introduced or as new versions
are released. Such errors have occurred in our products in the past. There can
be no assurance that in our testing and in testing by current and potential
customers, errors will not be found in new products after commencement of
commercial shipments. The occurrence of such errors could result in the loss or
delay in market acceptance of our products, diversion of development resources,
damage to our reputation or increased service or warranty costs, any of which
could have a material adverse effect upon our business, financial condition and
results of operations.
Our Reliance on Third Party Suppliers for Certain Products and Key
Components Could Cause Us to be Unable to Satisfy Customer Demands or Our Growth
Objections. Failure to obtain products and key components on a timely and cost
effective basis could have a material adverse effect on our business, financial
condition and results of operations. We purchase substantially all of our
components and other parts from suppliers on a purchase order basis and do not
maintain long-term supply arrangements. We obtain several components, primarily
custom hybrid integrated circuits, from a single source. Accordingly, there can
be no assurance that we will be able to continue to obtain sufficient quantities
of products or key components as required or that such products or key
components, if obtained, will be available to us on commercially favorable
terms.
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<PAGE> 13
RISK FACTORS RELATED TO OUR TELECOMMUNICATIONS GROUP
On December 14, 1998 we acquired Cherry Communications Incorporated, d/b/a
Resurgens Communications Group ("RCG"), and Cherry Communications U.K. Limited
in a merger transaction effected pursuant to RCG's plan of reorganization under
federal bankruptcy proceedings. RCG is a facilities-based international long
distance carrier, offering wholesale switched voice and data services, primarily
to US-based long distance carriers. Cherry U.K. offers wholesale switched voice
and data services to long distance carriers located in the U.K. RCG and Cherry
U.K. now conduct their operations as our Telecommunications Group.
We May Not Be Able to Fully Use RCG's Tax Benefits. We do not expect that
RCG will be required to recognize any cancellation of indebtedness income by
reason of the bankruptcy plan because, under Section 108 of the Internal Revenue
Code, cancellation of indebtedness income will not be recognized if the
cancellation of indebtedness occurs in a case under the Bankruptcy Code. To the
extent that RCG avoids recognition of cancellation of indebtedness income
because of the bankruptcy case, however, RCG will be required to reduce certain
of its tax attributes (such as its net operating loss carryforward and/or the
tax basis in its assets) by the amount of the cancellation of indebtedness
income avoided. Reduction of these tax attributes could cause a material future
tax cost to us.
RCG reported net operating loss carry-forwards of approximately $200.0
million at December 31, 1998. Section 382 of the Internal Revenue Code
substantially limits our annual use of such net operating loss carryforwards. In
addition, the merger causes RCG's net operating losses through the effective
time of the merger to be subject to the "SRLY" rules of the Internal Revenue
Code, which in general will mean that such losses may be used by us only to
offset RCG income after the merger.
Termination of Our Telecommunication Group's Carrier Service Agreement with
WorldCom Network Services Could Materially Adversely Affect Our Revenues. Our
Telecommunications Group relies upon WorldCom Network Services, Inc., a wholly
owned subsidiary of MCI WorldCom, Inc., for a significant portion of its
revenues. Our Telecommunications Group has entered into a Carrier Service
Agreement with WorldCom Network Services pursuant to which WorldCom Network
Services purchases international long distance services on a wholesale basis.
WorldCom Network Services is obligated to purchase from our Telecommunications
Group at least $25 million a month of such services, provided the services are
of acceptable quality and the rates quoted are at least equal to the rates
WorldCom Network Services is obtaining from other third party providers. The
service agreement is for a one-year term but automatically renews each month,
subject to a one year termination notice. WorldCom Network Services prepays the
services it purchases under the Service Agreement twice a month. Our
Telecommunications Group's revenues attributable to the Service Agreement for
the first quarter of 1999 comprised approximately 69.0% of total revenues for
such period. WorldCom Network Services may decide not to purchase any services
under the Service Agreement. Termination of the Service Agreement, or any
reduction in services provided thereunder, could have a material adverse affect
on our business, financial condition and results of operations.
Our Telecommunications Group's Operating Results Have Fluctuated
Significantly and May Continue to Fluctuate. Our Telecommunications Group's
revenues, costs and expenses have fluctuated significantly in the past and are
likely to continue to fluctuate significantly in the future as a result of such
factors as:
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<PAGE> 14
- - call volume fluctuations, particularly in regions with relatively high
per-minute rates;
- - the addition or loss of major customers, whether through competition,
merger, consolidation or otherwise;
- - the loss of economically beneficial routing options for the termination
of our Telecommunications Group's traffic;
- - financial difficulties of major customers; and
- - pricing pressure resulting from increased competition.
Technical Difficulties May Adversely Affect Our Telecommunications Group's
Ability to Provide Services to its Customers. Technical difficulties with or
failures of portions of our Telecommunications Group's network may impact our
Telecommunications Group's ability to provide service to our customers by
preventing us from delivering call traffic termination initiated by our
customers. Additionally, technical difficulties with the network may cause the
loss of call detail record information, which is the basis for our
Telecommunications Group's ability to process and substantiate customer
billings, thus adversely affecting our ability to bill and collect from
customers. Components of our Telecommunications Group's network have failed in
the past, thus preventing it from delivering call traffic termination initiated
by some customers, and similar network failures may occur in the future. These
failures have had a material adverse effect on our Telecommunications Group's
operating results. Commencing in October 1997, our Telecommunications Group
began to implement a new Network Operations Center and greater systems
redundancy and to install an internal billing system in an effort to minimize
the effects of a network failure. However, future failures may still occur and
have a material adverse effect on our results of operations.
Our Telecommunications Group's Cost of Services and Operating Expenses May
Fluctuate Significantly. Our Telecommunications Group's cost of services and
operating expenses in any given period can vary due to factors such as:
- - fluctuations in rates charged by carriers to terminate our
Telecommunications Group's traffic;
- - increases in bad debt expense and reserves;
- - the timing of capital expenditures and other costs associated with
acquiring or obtaining other rights to switching and other transmission
facilities;
- - changes in our Telecommunications Group's sales incentive plans; and
- - costs associated with changes in staffing levels of sales, marketing,
technical support and administrative personnel.
Additionally, our Telecommunications Group's operating results can vary due to
factors such as:
- - changes in routing due to variations in the quality of vendor
transmission capability;
- - loss of favorable routing options;
- - actions by domestic or foreign regulatory entities;
- - the level, timing and pace of our Telecommunications Group's expansion
in international and commercial markets; and
- - general domestic and international economic and political conditions.
Limited Long-Term Purchase and Resale Agreements and Pricing Pressures for
Transmission Capacity Could Adversely Affect Our Gross Margins. A substantial
portion of transmission capacity used by our Telecommunications Group is
obtained on a variable, per minute and short-term basis, subjecting our
Telecommunications Group to the possibility of unanticipated price increases and
service cancellations. Since our Telecommunications Group does not generally
have long-term arrangements for the purchase or resale of international long
distance services,
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<PAGE> 15
and since rates fluctuate significantly over short periods of time, our
Telecommunications Group's gross margins are subject to significant fluctuations
over short periods of time. Our Telecommunications Group's gross margins also
may be negatively impacted in the longer term by competitive pricing pressures.
Our Telecommunications Group May Not be Able to Continue to Obtain
Sufficient Transmission Facilities on a Cost-Effective Basis. The failure of our
Telecommunications Group to obtain telecommunications facilities that are
sufficient to support its network traffic in a manner that ensures the
reliability and quality of its telecommunications services may have a material
adverse effect on our business, financial condition or results of operations.
Our Telecommunications Group's business depends in part on its ability to obtain
transmission facilities on a cost-effective basis. Because undersea fiber optic
cables typically take several years to plan and construct, carriers generally
make investments well in advance, based on a forecast of anticipated traffic.
Therefore, our Telecommunications Group's operations are subject to the risk
that it will not adequately anticipate the amount of traffic over its network,
and may not procure sufficient cable capacity or network equipment in order to
ensure the cost-effective transmission of customer traffic. Although we
participate in the planning of undersea fiber optic transmission facilities, we
do not control the construction of such facilities and must seek access to such
facilities through partial ownership positions. If ownership positions are not
available, we must seek access to such facilities through lease arrangements on
negotiated terms that may vary with industry and market conditions. Our
Telecommunications Group may not be able to continue to obtain sufficient
transmission facilities or access to undersea fiber optic cable on economically
viable terms.
Our Telecommunications Group's International Telecommunications Business is
Subject to U.S. and Foreign Government Regulation and Various Political and
Economic Risks Which Could Inhibit the Growth of Our International Operations.
Our Telecommunications Group generates substantially all of its revenues by
providing international telecommunications services to its customers on a
wholesale basis. The international nature of our Telecommunications Group's
operations involves risks such as:
- - changes in U.S. and foreign government regulations and
telecommunications standards;
- - dependence on foreign partners;
- - fluctuations in foreign currency values, tariffs, taxes and other trade
barriers;
- - the potential for nationalization and economic downturns; and
- - political instability in foreign countries.
In addition, a reversal in the current trend toward deregulation of
international telecommunications carriers could adversely affect our
Telecommunications Group's business. Our Telecommunications Group will be
increasingly subject to these risks to the extent that we proceed with the
planned expansion of its international operations.
Our Telecommunications Group is Dependent on Foreign Partners. Our
Telecommunications Group increasingly relies on foreign partners to terminate
traffic in foreign countries and to assist in installing transmission facilities
and network switches, complying with local regulations, obtaining required
licenses and assisting with customer and vendor relationships. We may have
limited recourse if our foreign partners do not perform under their contractual
arrangements with our Telecommunications Group. Our Telecommunications Group's
arrangements with foreign partners may expose us to significant legal,
regulatory or economic risks.
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<PAGE> 16
Foreign Governments May Attempt to Prevent Our Telecommunications Group
from Conducting its Business. Governments of many countries exercise substantial
influence over various aspects of the telecommunications market. In some cases,
the government owns or controls companies that are or may become competitors of
our Telecommunications Group or companies, such as national telephone companies,
upon which our Telecommunications Group and its foreign partners may depend for
required interconnections to local telephone networks and other services.
Accordingly, government actions in the future could have a material adverse
effect on our Telecommunications Group's operations. In highly regulated
countries in which our Telecommunications Group is not dealing directly with the
dominant local exchange carrier, the dominant carrier may have the ability to
terminate service to our Telecommunications Group or its foreign partner and, if
this occurs, we may have limited or no recourse. In countries where competition
is not yet fully established and our Telecommunications Group is dealing with an
alternative operator, foreign laws may prohibit or impede new operators from
offering services in these markets.
Our Telecommunications Group's Violations of Government Regulations Could
Subject Us to Monetary Penalties or Termination of Noncompliant Agreements.
Various U.S. and foreign laws, regulations, agency actions and court decisions
affect our Telecommunications Group's business. The FCC regulates our
Telecommunications Group's U.S. international telecommunications service
offerings. The FCC could determine, by its own actions or in response to a third
party's filing, that certain of our Telecommunications Group's services,
termination arrangements, agreements with foreign carriers, transit or refile
arrangements or reports do not or did not comply with FCC policies and rules. If
this occurred, the FCC could order us to terminate noncompliant arrangements,
fine us or revoke our authorizations. Any of these actions could have a material
adverse effect on our business, operating results and financial condition.
The FCC requires international carriers to obtain authorizations under
Section 214 of the Communications Act of 1934, as amended, prior to acquiring
international facilities by purchase or lease, or providing international
service to the public. Prior FCC approval is also required to transfer control
of a certificated carrier. We must file reports and contracts with the FCC and
must pay regulatory fees, which are subject to change.
Certain of Our Telecommunications Group's Arrangements With Foreign
Operators May Be Inconsistent With FCC Policies. The FCC's international private
line resale policy limits the conditions under which a carrier may connect
international private lines to the public switched telephone network at one or
both ends to provide switched services, commonly known as International Simple
Resale. Certain of our Telecommunications Group's termination arrangements with
foreign operators may be inconsistent with the FCC's international private line
resale policy and our Telecommunications Group's existing International Simple
Resale authorization. A carrier generally may only offer International Simple
Resale services to a foreign country if the FCC has found (a) the country is a
member of the World Trade Organization and at least 50% of the U.S. billed and
settled traffic to that country is settled at or below the FCC's benchmark
settlement rate or (b) the country is not a WTO member, but it offers U.S.
carriers equivalent opportunities to engage in International Simple Resale and
at least 50% of the U.S. billed and settled traffic is settled at or below the
applicable benchmark. Our Telecommunications Group's FCC authority currently
permits it to provide International Simple Resale service to Canada, the United
Kingdom, Sweden, Luxembourg, Denmark, Belgium, Netherlands, France, Germany,
Switzerland, Austria, Norway, Japan, Australia and New Zealand. The FCC is
currently
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<PAGE> 17
reviewing U.S. carrier applications to provide International Simple Resale to
additional countries. Upon grant of any such International Simple Resale
application to a given country, the FCC's rules also would permit our
Telecommunications Group to provide International Simple Resale service to that
country.
The FCC's International Settlement Policy limits the arrangements which
U.S. international carriers may enter into with foreign carriers for exchanging
public switched telecommunications traffic, which the FCC terms International
Message Telephone Service. This policy does not apply to International Simple
Resale services. The International Settlement Policy requires that U.S. carriers
receive an equal share of the accounting rate and receive inbound traffic in
proportion to the volume of U.S. outbound traffic which they generate. The
International Settlement Policy and other FCC policies also prohibit a U.S.
carrier and a foreign carrier which possesses sufficient market power on the
foreign end of the route to affect competition adversely in the U.S. market from
entering into exclusive arrangement involving services, facilities or functions
on the foreign end of a U.S. international route which are necessary for
providing basic telecommunications and which are not offered to similarly
situated U.S. carriers. It is possible that the FCC could find that certain of
our Telecommunications Group's arrangements with foreign operators are
inconsistent with the International Settlement Policy.
Our Telecommunications Group uses both transit and refile arrangements to
terminate its international traffic. The FCC routinely approves transit
arrangements by U.S. international carriers. The FCC's rules also permit
carriers in many cases to use International Simple Resale facilities to route
traffic via a third country for refile through the public switched telephone
network. The extent to which U.S. carriers may enter into refile arrangements
consistent with the International Settlement Policy is currently under review by
the FCC. Certain of our Telecommunications Group's transit or refile
arrangements may violate the International Settlement Policy or other FCC
policies.
Recent and Potential FCC Actions May Adversely Affect Our
Telecommunications Group By Increasing Competition, Disrupting Transmission
Arrangements and Increasing Costs. Regulatory action that may be taken in the
future by the FCC may intensify the competition which our Telecommunications
Group faces, impose additional operating costs upon our Telecommunications
Group, disrupt certain of our Telecommunications Group's transmission
arrangements or otherwise require our Telecommunications Group to modify its
operations. Recent FCC rulemaking orders and other actions have lowered the
entry barriers for new facilities-based and resale international carriers by
streamlining the processing of new applications and granting non-dominant
carriers greater flexibility in establishing non-standard settlement
arrangements with non-dominant foreign carriers, including the non-dominant U.S.
affiliates of such carriers. In addition, the FCC's rules implementing the WTO
Basic Telecommunications Agreement presume that competition will be advanced by
the U.S. entry of facilities-based and resale carriers from WTO member
countries, thus further increasing the number of potential competitors in the
U.S. market and the number of carriers which may also offer end-to-end services.
The FCC also recently has sought to reduce the foreign termination costs of
U.S. international carriers by prescribing maximum or benchmark settlement rates
which foreign carriers may charge U.S. carriers for terminating switched
telecommunications traffic. If the FCC's benchmarks order survives judicial
review, the FCC's action may reduce our Telecommunications Group's settlement
costs, although the costs of other U.S. international carriers also may be
reduced in a similar fashion. The FCC has not stated how it will
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<PAGE> 18
enforce the new settlement benchmarks if U.S. carriers are unsuccessful in
negotiating settlement rates at or below the prescribed benchmarks. Any future
FCC intervention could disrupt our Telecommunications Group's transmission
arrangements to certain countries or require our Telecommunications Group to
modify its existing arrangements. Other U.S. international carriers might be
similarly affected.
The 1996 amendment to The Telecommunications Act of 1996 permits the FCC to
forbear enforcement of the tariff provisions in such act, which apply to all
interstate and international carriers, and the U.S. Court of Appeals is
currently reviewing an FCC order directing all domestic interstate carriers to
de-tariff their offerings. Subject to the Court's decision, the FCC may forbear
its current tariff rules for U.S. international carriers, such as our
Telecommunications Group, or order such carriers to de-tariff their services. In
that event, our Telecommunications Group would have greater flexibility in
pricing its service offerings and to compete, although any such FCC action
likely would grant other non-dominant international carriers equivalent freedom.
The FCC routinely reviews the contribution rate for various levels of regulatory
fees, including the rate for fees levied to support universal service, which
fees may be increased in the future for various reasons, including the need to
support the universal service programs mandated by The Telecommunications Act of
1996, the total costs for which are still under review by the FCC. We cannot
predict the net effect of these or other possible future FCC actions on our
business, operating results and financial condition, although the net effect
could be material.
Foreign Governments May Not Provide Our Telecommunications Group With
Practical Opportunities to Compete in their Telecommunications Markets. Our
Telecommunications Group is subject to regulation in foreign countries, such as
the U.K., in connection with certain of its business activities. For example,
laws or regulations in either the transited or terminating foreign jurisdiction
may affect our Telecommunications Group's use of transit, International Simple
Resale or other routing arrangements may be affected by foreign countries,
either independently or jointly as members of the ITU, or other supra-national
organizations such as the European Union or the WTO, may have adopted or may
adopt laws or regulatory requirements regarding such services for which
compliance would be difficult or expensive, that could force our
Telecommunications Group to choose less cost-effective routing alternatives and
that could adversely affect our business, operating results and financial
condition.
To the extent that we seek to provide telecommunications services in other
non-U.S. markets, our Telecommunications Group is subject to the developing laws
and regulations governing the competitive provision of telecommunications
services in those markets. We currently plan to expand our Telecommunications
Group's operations as these markets implement scheduled liberalization to permit
competition in the full range of telecommunications services in the next several
years. The nature, extent and timing of the opportunity for our
Telecommunications Group to compete in these markets will be determined, in
part, by the actions taken by the governments in these countries to implement
competition and the response of incumbent carriers to these efforts. The
regulatory regimes in these countries may not provide our Telecommunications
Group with practical opportunities to compete in the near future, or at all, and
we may not be able to take advantage of any such liberalization in a timely
manner.
Regulation of Customers May Materially Adversely Affect Our Revenues By
Decreasing the Volume of Traffic Our Telecommunications Group Receives From
Major Customers. Our Telecommunications Group's customers are also subject to
actions taken by domestic or foreign regulatory authorities that may affect the
ability
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<PAGE> 19
of customers to deliver traffic to our Telecommunications Group. Regulatory
sanctions have been imposed on certain of our Telecommunications Group's
customers in the past. While such sanctions have not adversely impacted the
volume of traffic received by our Telecommunications Group from such customers
to date, future regulatory actions could materially adversely affect the volume
of traffic received from a major customer, which could have a material adverse
effect on our business, financial condition and results of operations.
Our Telecommunications Group May Lose Revenue or Incur Additional Costs
Because of Network Failure. Any system or network failure that causes
interruptions in our Telecommunications Group's operations could have a material
adverse effect on our business, financial condition or results of operations.
Our Telecommunications Group's operations depend on our ability to successfully
expand its network and integrate new and emerging technologies and equipment
into its network, which are likely to increase the risk of system failure and to
cause strain upon the network. Our Telecommunications Group's operations also
depend on our protection of its hardware and other equipment from damage from
natural disasters such as fires, floods, hurricanes and earthquakes, other
catastrophic events such as civil unrest, terrorism and war and other sources of
power loss and telecommunications failures. Although we have taken a number of
steps to prevent its network from being affected by natural disasters, fire and
the like, such as building redundant systems for power supply to the switching
equipment, such systems may not be able to prevent our Telecommunications
Group's switches from becoming disabled in the event of an earthquake, power
outage or otherwise. The failure of our Telecommunications Group's network, or a
significant decrease in telephone traffic resulting from effects of a natural or
man-made disaster, could have a material adverse effect on our
Telecommunications Group's relationship with its customers and our business,
operating results and financial condition.
Our Telecommunications Group May Not Be Able to Continue to Compete
Successfully with Other Long Distance Carriers. The international
telecommunications industry is intensely competitive and subject to rapid
change. Our Telecommunications Group's competitors in the international
wholesale switched long distance market include large, facilities-based
multinational corporations and smaller facilities-based providers in the U.S.
and overseas that have emerged as a result of deregulation, switch-based
resellers of international long distance services and international joint
ventures and alliances among such companies. Our Telecommunications Group also
competes abroad with a number of dominant telecommunications operators that
previously held various monopolies established by law over the
telecommunications traffic in their countries. International wholesale switched
service providers compete on the basis of price, customer service, transmission
quality, breadth of service offerings and value-added services. Additionally,
the telecommunications industry is in a period of rapid technological evolution,
marked by the introduction of competitive product and service offerings, such as
the utilization of the Internet for international voice and data communications.
We are unable to predict which technological developments will challenge its
competitive position or the amount of expenditures that will be required to
respond to a rapidly changing technological environment. Further, the number of
our Telecommunications Group's competitors is likely to increase as a result of
the competitive opportunities created by a new Basic Telecommunications
Agreement concluded by members of the WTO in April 1997. Under the terms of the
WTO agreement, starting February 5, 1998, the United States and over 65
countries have committed to open their telecommunications markets to
competition, increase foreign ownership and adopt measures to protect against
anti-competitive behavior. As
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<PAGE> 20
a result, we believe that competition will continue to increase, placing
downward pressure on prices. Such pressure could adversely effect our
Telecommunications Group's gross margins if our Telecommunications Group is not
able to reduce its costs commensurate with such price reductions.
We May Face Liability Under the Foreign Corrupt Practices Act. The
international operations of our Telecommunications Group are subject to the
FCPA, which generally prohibits U.S. companies and their intermediaries from
bribing foreign officials for the purpose of obtaining or keeping business. We
may face liability under the FCPA as a result of past or future actions taken
without the knowledge of our Telecommunications Group by agents, strategic
partners and other intermediaries. Such liability could have a material adverse
effect on our business, operating results and financial conditions.
Our Telecommunications Group May Lose Some Existing and Potential Customers
Because of Competition and Consolidation. A majority of the U.S.-based
international telecommunications services revenue is currently generated by AT&T
and Sprint Corporation. Our Telecommunications Group also competes with
WorldCom, Pacific Gateway Exchange, Inc. and other foreign and U.S.-based long
distance providers, including the RBOCs, which presently have FCC authority to
resell and terminate international telecommunication services. Many of these
competitors have considerably greater financial and other resources and more
extensive domestic and international communications networks than our
Telecommunications Group. Our business would be materially adversely affected to
the extent that a significant number of such customers limit or cease doing
business with our Telecommunications Group for competitive or other reasons.
Consolidation in the telecommunications industry could not only create even
larger competitors with greater financial and other resources, but could also
adversely affect us by reducing the number of potential customers for our
Telecommunications Group's services.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common
stock offered by this prospectus. Rather, all proceeds will be payable solely to
the selling stockholders, less any compensation payable by the selling
stockholders to broker dealers in the form of commissions or otherwise.
SELLING STOCKHOLDERS
World Access issued the shares offered by this prospectus in private
placement transactions with the holders named below in transactions exempt from
the registration requirements of the Securities Act. The selling stockholders
may from time to time offer and sell any or all of these shares pursuant to this
prospectus. For purposes of this prospectus, the term "selling stockholder"
includes the holders named below, the beneficial owners of these shares and
their transferees, pledgees, donees or other such successors.
The following table sets forth information with respect to the selling
stockholders and the shares beneficially owned by them as of May 19, 1999, that
they may offer pursuant to this prospectus. We have obtained this information
from the selling stockholders.
<TABLE>
<CAPTION>
Shares of Common Stock Shares of Shares of Common Percentage of Common
Beneficially Common Stock Stock Beneficially Owned Stock Beneficially Owned
Selling Stockholders Owned Prior to Offering(1) Offered Hereby Upon Completion of Offering Upon Completion of Offering
- -------------------- -------------------------- -------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
James E. Bennett (2) 97,389 35,797 61,592 *
Paul G. Blaser (3) 17,941 3,333 14,608 *
Thomas R. Canham (4) 221,822 96,000 125,822 *
Drew H. Davis (5) 6,586 1,671 4,915 *
Eagle Telephonics, Inc. 114,946 114,946 0 *
Largo Holdings Ltd. (6) 161,131 35,797 125,334 *
Moore Family Holdings Ltd. (7) 14,467 6,226 8,241 *
Lewis L. Roberts, Jr. (8) 7,525 1,645 5,880 *
Brian A. Schuchman (9) 221,822 96,000 125,822 *
Robert E. Schwartz (10) 6,751 1,645 5,106 *
--------- -------- ---------
Totals 870,380 393,060 477,320
</TABLE>
- ---------------------
* Less than one percent.
(1) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act. Unless otherwise noted, World Access believes
that all persons named in the table have sole voting and investment
power with respect to the shares beneficially owned by them.
(2) Includes 31,592 shares which were placed in escrow in connection with
World Access' acquisition of Galaxy Engineering Services, Inc. in
August 1997 (the "Galaxy Escrowed Shares"). These shares will be
released to Mr. Bennett, a former principal of Galaxy, upon Galaxy's
realization of certain levels of profitability during 1999 and 2000.
(3) Includes (a) 2,942 Galaxy Escrowed Shares and (b) 5,666 shares pledged
to World Access to secure a promissory note due March 31, 2000 (the
"Galaxy Pledged Shares"). Mr. Blaser is the Vice President of U.S.
Operations for Galaxy.
(4) Includes 85,000 shares which were placed in escrow in connection with
World Access' acquisition of Desert Installation Systems, Inc. in
February 1999 (the "DIS Escrowed Shares"). These shares will be
released to Mr. Canham if World Access realizes certain levels of
profitability from the operations of DIS during 1999 and 2000. Mr.
Canham is an Executive Vice President of Cellular Infrastructure
Supply, Inc. ("CIS"), a wholly-owned subsidiary of World Access.
(5) Includes (a) 1,474 Galaxy Escrowed Shares and (b) 2,857 Galaxy Pledged
Shares. Mr. Davis is the Director of Engineering for Galaxy.
(6) Includes 31,594 Galaxy Escrowed Shares. Joseph W. Forbes, Jr.,
President of Galaxy, is the general partner of Largo Holdings Ltd.
(7) Includes 5,494 Galaxy escrowed Shares. Roy J. Moore, a former principal
of Galaxy, is the general partner of Moore Family Holdings Ltd.
(8) Includes (a) 1,452 Galaxy Escrowed Shares and (b) 2,928 Galaxy Pledged
Shares. Mr. Roberts is the Director of Advanced Technology for Galaxy.
(9) Includes 85,000 DIS Escrowed Shares. Mr. Schuchman is the President of
CIS.
(10) Includes (a) 1,452 Galaxy Escrowed Shares and (b) 2,928 Galaxy Pledged
shares. Mr. Schwartz is the former Controller of Galaxy.
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Except as noted above, none of the selling stockholders has, or within
the past three years has had, any position, office or other material
relationship with World Access or any of our predecessors or affiliates. The
selling stockholders identified above may have sold, transferred or otherwise
disposed of all or a portion of their shares, in transactions exempt from the
registration requirements of the Securities Act, since the date on which they
provided the information regarding their shares. If required, we may identify
and provide additional selling stockholders and information with respect to them
in one or more prospectus supplements.
PLAN OF DISTRIBUTION
The selling stockholders may offer all or part of the shares included
in this prospectus from time to time in transactions on the Nasdaq National
Market, in privately negotiated transactions, through the writing of options on
the shares offered by this prospectus, or a combination of such methods of sale,
at fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. Each selling stockholder will act independently of us in making
decisions with respect to the timing, manner and size of each sale. The methods
by which the selling stockholders may resell their shares include, but are not
limited to, the following:
- a cross or block trade in which the broker or dealer engaged
by a Selling Stockholder will attempt to sell the shares as
agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by
such broker or dealer for its account;
- an exchange distribution in accordance with the rules of such
exchange;
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
- privately negotiated transactions;
- short sales or borrowing, returns and reborrowings of the
shares pursuant to stock loan agreements to settle short
sales;
- delivery in connection with the issuance of securities by
issuers, other than us, that are exchangeable for (whether on
an optional or mandatory basis), or payable in, such shares
(whether such securities are listed on a national securities
exchange or otherwise) or pursuant to which such shares may be
distributed; and
- a combination of any such methods of sale or distribution.
In effecting sales, brokers or dealers engaged by a selling stockholder
may arrange for other brokers or dealers to participate in such sales. Brokers
or dealers may receive commissions or discounts from a selling stockholder or
from the purchasers in amounts to be negotiated immediately prior to the sale. A
selling stockholder may also sell the shares in accordance with Rule 144 or Rule
144A under the Securities Act or pursuant to other exemptions from registration
under the Securities Act.
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If the shares offered by this prospectus are sold in an underwritten
offering, the underwriters may acquire them for their own account and may
further resell these shares from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The names of the underwriters
with respect to any such offering and the terms of the transactions, including
any underwriting discounts, concessions or commissions and other items
constituting compensation of the underwriters and broker-dealers, if any, will
be set forth in a prospectus supplement relating to such offering. Any public
offering price and any discounts, concessions or commissions allowed or
reallowed or paid to broker-dealers may be changed from time to time. Unless
otherwise set forth in a prospectus supplement, the obligations of the
underwriters to purchase the shares will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all the shares
specified in such prospectus supplement if any such shares are purchased.
Brokers who borrow the shares to settle short sales of shares of our common
stock and who wish to offer and sell such shares under circumstances requiring
use of the prospectus or making use of the prospectus desirable may use this
prospectus.
From time to time the selling stockholders may engage in short sales,
short sales against the box, puts, calls and other transactions in our
securities, or derivatives thereof, and may sell and deliver the shares offered
by this prospectus in connection therewith.
We will not receive any of the proceeds from the sales of the shares by
the selling stockholders pursuant to this prospectus. We will, however, bear
certain expenses in connection with the registration of the shares being offered
by the selling stockholders, including all costs incident to the offering and
sale of the shares to the public other than any commissions and discounts of
underwriters, dealers or agents and any transfer taxes.
The Common Stock is listed for trading on the Nasdaq National Market,
and the shares offered by this prospectus have been approved for quotation on
Nasdaq.
In order to comply with the securities laws of certain states, the
selling stockholders may only sell the shares through registered or licensed
brokers or dealers. In addition, in certain states, the selling stockholders may
only sell the shares if they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirements of such state is available and is complied with.
A selling stockholder, and any broker dealer who acts in connection
with the sale of shares hereunder, may be deemed an "underwriter" within the
meaning of Section 2(11) of the Securities Act, and any commissions received by
them and profit on any resale of the shares as principal might be deemed
underwriting discounts and commissions under the Securities Act. We have agreed
to indemnify the selling stockholders, any underwriters and certain other
participants in an underwriting or distribution of the shares and their
directors, officers, employees and agents against certain liabilities including
liabilities arising under the Securities Act. Because the selling stockholders
may be deemed "underwriters" within the meaning of Section 2(11) of the
Securities Act, the selling stockholders will be subject to the prospectus
delivery requirements of the Securities Act.
We will use our best efforts to keep the registration statement of
which this prospectus is a part effective for a period of one year from its
initial effective date. We are permitted to suspend the use of this prospectus
in connection with the sales of shares by selling stockholders upon the
happening of certain events. These include the existence of any fact that makes
any statement of material fact made in this prospectus untrue or that requires
the making of additions to or changes in this prospectus in order to make the
statements herein not misleading. The suspension will continue until such time
as we advise
21
<PAGE> 24
the selling stockholders that use of the prospectus may be resumed, in which
case the period of time during which we are required to maintain the
effectiveness of the registration statement shall be extended. World Access will
bear the expense of preparing and filing the registration statement and all
post-effective amendments.
LEGAL MATTERS
Long Aldridge & Norman LLP, Atlanta, Georgia, has passed upon certain
legal matters regarding the shares offered by this prospectus.
EXPERTS
The consolidated financial statements of World Access, Inc. and
subsidiaries appearing in World Access, Inc.'s Annual Report (Form 10-K) for the
year ended December 31, 1998, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
PricewaterhouseCoopers LLP, independent accountants, audited our
consolidated financial statements for the years ended December 31, 1997 and
1996, which are included in our Annual Report on Form 10-K for the year ended
December 31, 1998, and incorporated by reference in this prospectus. Such
audited consolidated financial statements have been incorporated herein in
reliance on the report dated March 5, 1998, except for the discontinued
operations reclassifications in the Consolidated Statements of Operations and
Note D, which are as of April 9, 1999, of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Federal securities laws require us to file information with the
Securities and Exchange Commission concerning our business and operations.
Accordingly, we file annual, quarterly and special reports, proxy statements and
other information with the Commission. You can inspect and copy this information
at the public reference facility maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You can also
do so at the following regional offices of the Commission:
New York Regional Office
Seven World Trade Center
Suite 1300
New York, New York 10048
Chicago Regional Office
Northwest Atrium Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661
22
<PAGE> 25
You can get additional information about the operation of the
Commission's public reference facilities by calling the Commission at
1-800-SEC-0330. The Commission also maintains a web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding companies that, like us, file information electronically with the
Commission. You can also inspect information about us at the offices of the
Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
This prospectus is part of a registration statement that we filed with
the Commission and omits certain information contained in the registration
statement as permitted by the Commission. Additional information about the
Company and our common stock is contained in the registration statement on Form
S-3 of which this Prospectus forms a part, including certain exhibits and
schedules. You can obtain a copy of the registration statement from the
Commission at the street address or Internet site listed above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" the information
we file with it, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered part of this prospectus, and later information that we file with
the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below, and future filings made
with the Commission will automatically update and supersede this information. We
incorporate by reference documents listed below and any future filings made with
the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
until the selling stockholders sell all their shares offered by this prospectus.
We have filed the following documents with the Commission:
- Our Quarterly Report on Form 10-Q for the quarter ended March
31, 1999 (File Number 0-29782);
- Our Annual Report on Form 10-K for the year ended December 31,
1998 (File Number 0-29782); and
- Our description of the common stock included in the
Registration Statement on Form S-4 (No. 333-65389), as filed
with the Commission on November 10, 1998.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
945 E. Paces Ferry Road
Suite 2240
Atlanta, Georgia 30326
Attention: Mr. Mark A. Gergel
Chief Financial Officer
Telephone: (404) 231-2025
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The selling stockholders can not
offer any of these shares in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any supplement is
accurate as of any date other than the date on the front of the respective
document.
We have not authorized anyone, including brokers and dealers, to give
any information or make any representation not contained in this prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by us or any other person.
This prospectus does not constitute an offer to sell or solicitation of
any offer to buy any of the securities offered hereby in any jurisdiction in
which it is unlawful to make such offer or solicitation.
23
<PAGE> 26
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC Registration Fee................................................................ $ 1,253
Nasdaq Additional Listing Fee....................................................... 7,861
Legal Fees and Expenses............................................................. 25,000
Printing and Mailing Expenses....................................................... 3,000
Miscellaneous Expenses.............................................................. 2,886
Total............................................................................... $40,000
======
</TABLE>
The foregoing items, except for the SEC Registration Fee and the Nasdaq
Additional Listing Fee, are estimated. We will pay all of the above expenses.
The selling stockholders will pay their own expenses, including expenses of
their own counsel, broker or dealer fees, discounts and expenses, and all
transfer and other taxes on the sale of the shares of common stock offered by
this prospectus.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law ("DGCL") allows a
corporation to eliminate or limit the personal liability of directors of a
corporation to the corporation or to any of its stockholders for monetary
damages for a breach of fiduciary duty as a director, except (i) for breach of
the director's duty of loyalty, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
certain unlawful dividends and stock repurchases, or (iv) for any transaction
from which the director derived an improper personal benefit.
Section 145 of the DGCL provides that in the case of any action other
than one by or in the right of the corporation, a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
in such capacity on behalf of another corporation or enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Section 145 of the DGCL provides that in the case of an action by or in
the right of a corporation to procure a judgment in its favor, a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any action or suit by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation in such capacity on behalf of another corporation
or enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
24
<PAGE> 27
such action or suit if he acted under standards similar to those set forth in
the preceding paragraph, except that no indemnification may be made in respect
of any action or claim as to which such person shall have been adjudged to be
liable to the corporation unless a court determines that such person is fairly
and reasonably entitled to indemnification.
Articles X and XI of the World Access, Inc. Restated Certificate of
Incorporation provide for indemnification of directors, officers and employees
to the fullest extent permissible under the DGCL.
Officers and directors of World Access are presently covered by
insurance which (with certain exceptions and with certain limitations)
indemnifies them against any losses or liabilities arising from any alleged
"wrongful act" including any alleged breach of duty, neglect, error,
misstatement, misleading statement, omissions or other act done or wrongfully
attempted. The cost of such insurance is borne by World Access as permitted by
the DGCL.
World Access has entered into separate indemnification agreements with
its directors and non-director officers at the level of Vice President and
above. These indemnification agreements provide as follows:
- there is a rebuttable presumption that the director or officer
has met the applicable standard of conduct required for
indemnification;
- World Access will advance litigation expenses to a director or
officer at his request provided that he undertakes to repay
the amount advanced if it is ultimately determined that he is
not entitled to indemnification for such expenses;
- World Access will indemnify a director of officer for amounts
paid in settlement of a derivative suit;
- in the event of a determination by the disinterested members
of the board of directors or independent counsel that a
director or officer did not meet the standard of conduct
required for indemnification, the director or officer may
contest this determination by petitioning a court or
commencing any arbitration proceeding conducted by a single
arbitrator pursuant to the rules of the American Arbitration
Association to make an independent determination of whether
such director or officer is entitled to indemnification under
his indemnification agreement; and
- World Access will reimburse a director or officer for expenses
incurred enforcing his rights under his indemnification
agreement.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS. The following exhibits are filed as part of this
registration statement.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
5 Opinion of Long Aldridge & Norman LLP.
23.1 Consent of Long Aldridge & Norman LLP (included in Exhibit 5).
23.2 Consent of Ernst & Young LLP.
</TABLE>
25
<PAGE> 28
23.3 Consent of PricewaterhouseCoopers LLP.
24 Power of Attorney (included in the signature pages to this
Registration Statement).
(B) FINANCIAL STATEMENT SCHEDULE. The financial statement schedule
that is required by Regulation S-X is incorporated herein by
reference to our Annual Report on Form 10-K for the year ended
December 31, 1998.
ITEM 17. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in the post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrants pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee
26
<PAGE> 29
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrants of expenses incurred or paid by a director, officer or
controlling person of the registrants in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrants will, unless
in the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
27
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Atlanta, state of Georgia, on May 21, 1999.
WORLD ACCESS, INC.
(formerly known as "WAXS INC.")
By: /s/ JOHN D. PHILLIPS
--------------------------------------
John D. Phillips
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints John D. Phillips and Mark A. Gergel, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement of World Access, Inc. has been signed by the following persons in the
capacities indicated as of May 21, 1999.
SIGNATURE TITLE
--------- -----
/s/ JOHN D. PHILLIPS
- ------------------------------- Director, President and Chief
John D. Phillips Executive Officer (Principal
Executive Officer)
- ------------------------------- Chairman of the Board
Steven A. Odom
[Signatures Continued on Next Page]
28
<PAGE> 31
/s/ Mark A Gergel
- ------------------------------ Director, Executive Vice President
Mark A. Gergel and Chief Financial Officer (Principal
Financial Officer)
/s/ Martin D. Kidder
- ------------------------------ Vice President and Corporate
Martin D. Kidder Controller (Principal Accounting
Officer)
/s/ Stephen J. Clearman
- ------------------------------ Director
Stephen J. Clearman
/s/ John P. Imlay, Jr.
- ------------------------------ Director
John P. Imlay, Jr.
- ------------------------------ Director
Carl E. Sanders
- ----------------------------- Director
Lawrence C. Tucker
29
<PAGE> 32
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
5 Opinion and Consent of Long Aldridge & Norman LLP
23.1 Consent of Long Aldridge & Norman LLP (included in
Exhibit 5).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
24 Power of Attorney (included in the Signature Pages hereto).
</TABLE>
<PAGE> 1
LONG ALDRIDGE & NORMAN LLP EXHIBIT 5
303 Peachtree Street, N.E.
Suite 5300
Atlanta, Georgia 30308
May 21, 1999
World Access, Inc.
945 E. Paces Ferry Road
Suite 2200
Atlanta, GA 30326
Re: World Access, Inc.
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to World Access, Inc., a Delaware corporation
(the "Company"), in connection with the preparation of a Registration Statement
on Form S-3 (the "Registration Statement") and the filing thereof with the
Securities and Exchange Commission for the registration of certain securities of
the Company owned of record by certain stockholders (the "Selling
Stockholders"). Pursuant to the Registration Statement, the Company intends to
register under the Securities Act of 1933, as amended, 393,060 shares (the
"Shares") of common stock, par value $.01 per share, of the Company.
The opinion hereinafter set forth is given to the Company pursuant to
Item 16 of Form S-3 and Item 601(b)(5) of Regulation S-K. The only opinion
rendered by this firm consists of the matter set forth in numbered paragraph (1)
below (our "Opinion"), and no opinion is implied or to be inferred beyond such
matter. Additionally, our Opinion is based upon and subject to the
qualifications, limitations and exceptions set forth in this letter.
Our Opinion is furnished for the benefit of the Company solely with
regard to the Registration Statement, may be relied upon by the Company only in
connection with the Registration Statement and may not otherwise be relied upon,
used, quoted or referred to by or filed with any other person or entity without
our prior written permission.
In rendering our Opinion, we have examined such agreements, documents,
instruments and records as we deemed necessary or appropriate under the
circumstances for us to express our Opinion. In making all of our examinations,
we assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to the original documents of all
documents submitted to us as copies, and the due execution and delivery of all
documents by any persons or entities where due execution and delivery by such
persons or entities is a prerequisite to the effectiveness of such documents.
<PAGE> 2
World Access, Inc.
May 21, 1999
Page 2
As to various factual matters that are material to our Opinion, we have
relied upon the factual statements set forth in a certificate of an officer of
the Company and a certificate of a public official. We have not independently
verified or investigated, nor do we assume any responsibility for, the factual
accuracy or completeness of such factual statements.
Members of this firm are admitted to the Bar of the State of Georgia
and are duly qualified to practice law in that state. Because the Company is
organized under, and the subject of our Opinion therefore is governed by, the
General Corporation Law of the State of Delaware (the "Delaware Code"), we do
not herein express any opinion concerning any matter respecting or affected by
any laws other than the laws set forth in the Delaware Code that are now in
effect and that, in the exercise of reasonable professional judgment, are
normally considered in transactions such as those described in the Registration
Statement. The Opinion hereinafter set forth is based upon pertinent laws and
facts in existence as of the date hereof, and we expressly disclaim any
obligation to advise you of changes to such pertinent laws or facts that
hereafter may come to our attention.
Based upon and subject to the foregoing, we are of the Opinion that:
(1) The Shares are validly issued, fully paid and nonassessable.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement.
Very truly yours,
LONG ALDRIDGE & NORMAN LLP
By: /s/ Leonard A. Silverstein
--------------------------------
Leonard A. Silverstein
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of World Access, Inc.
for the registration of 393,060 shares of its common stock and to the
incorporation by reference therein of our report dated March 26, 1999, with
respect to the consolidated financial statements and schedule of World Access,
Inc. and subsidiaries included in its Annual Report (Form 10-K) for the year
ended December 31, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Atlanta, Georgia
May 20, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 5, 1998, except for the
discontinued operations reclassifications in the Consolidated Statements of
Operations and Note D, which are as of April 9, 1999, relating to the financial
statements and financial statement schedules of World Access, Inc. for the two
years in the period ended December 31, 1997, which appears in World Access
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Atlanta, Georgia
May 20, 1999
