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As filed with the Securities and Exchange Commission on September 5, 1997
Registration No. 333- 19483
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
Amendment No. 4
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WORLDCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13873 Park Center Road, Suite 490 94-3040585
(State or other Herndon, Virginia 20171 (I.R.S. Employer
jurisdiction of (703) 834-9200 Identification No.)
incorporation or (Address, including zip code, and
organization telephone number, including area
code, of registrant's principal
executive offices)
Walter M. Fiederowicz
President & CEO
WorldCorp, Inc.
The Hallmark Building
13873 Park Center Road, Suite 490
Herndon, Virginia 20171
(703) 834-9200
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
David M. Carter
Hunton & Williams
Riverfront Plaza - East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
(804) 788-8200
Approximate date of commencement of the proposed sale of the
securities to the public:
As soon as practicable after the Registration Statement becomes effective.
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 the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement becomes+
+effective. This prospectus shall not constitute an offer to sell or the +
+solicitation of an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 5, 1997
P R O S P E C T U S
- --------------------------------------------------------------------------------
120,000 Warrants
120,000 Shares
WorldCorp, Inc.
Warrants
Common Stock
This Prospectus relates to 120,000 warrants (the "Warrants") of WorldCorp,
Inc., a Delaware corporation (the "Company" or "WorldCorp"), held by seven
holders (the "Selling Securityholders"), and the 120,000 shares (the "Shares")
of the Company's common stock, par value $.001 per share (the "Common Stock"),
issuable upon the exercise of such Warrants. The Warrants held by the Selling
Securityholders together with the Shares are sometimes referred to herein as the
"Selling Securityholder Securities." The Warrants were issued to the Selling
Securityholders in connection with the issuance by WorldCorp of its 10.00%
Senior Subordinated Notes due September 30, 2000 (the "Notes") to the Selling
Securityholders. The Notes and Warrants are completely detached and separately
transferable. The Shares are being registered in connection with the possible
resale of those Shares. Registration of the Warrants and the underlying Shares
enables the Selling Securityholders to sell publicly all or a portion of the
Warrants or the underlying Shares. The Warrants and the underlying Shares
offered by the Selling Securityholders by this Prospectus may be sold from time
to time by the Selling Securityholders or by their transferees. The
distribution of the Warrants and the underlying Shares offered hereby by the
Selling Securityholders may be effected in one or more transactions that may
take place on the over-the-counter market, including ordinary brokers'
transactions, privately negotiated transactions or through sales to one or more
dealers for resale of such securities as principals, at market prices prevailing
at the time of sale or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees, underwriting discounts or commissions
may be paid by the Selling Securityholders. Resales of the Shares may, from
time to time, be made on the New York Stock Exchange (the "NYSE"), or other
stock exchanges, in privately negotiated transactions or otherwise. See
"Selling Securityholders" and "Plan of Distribution." Each Warrant may be
exercised, in whole or in part, for shares of Common Stock at an exercise price
of $6.00 per share, subject to adjustment, at any time, and from time to time,
from the date of issue, September 30, 1996, and ending on September 30, 2000.
WorldCorp, concurrently with the registration of the Warrants pursuant to this
Prospectus is offering to exchange (the "Exchange Offer"), upon the terms and
subject to the conditions set forth in a prospectus, $1,000 principal amount of
its 10.00% Senior Subordinated Notes due September 30, 2000 (the "New Notes"),
which will be registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement on Form S-4, for each
$1,000 principal amount of the outstanding 10.00% Senior Subordinated Notes due
September 30, 2000 (the "Old Notes") of the Company, of which $10,000,000
principal amount is outstanding. The New Notes will be issued pursuant to an
Indenture, dated as of September 30, 1996 (the "10% Indenture"). The New Notes
and the Old Notes are collectively referred to herein as the "Notes."
The Company will not receive any of the proceeds from the sale of the Selling
Securityholder Securities offered hereby by the Selling Securityholders. In the
event all of the Warrants are exercised, the Company will receive gross proceeds
of approximately $720,000. See "Selling Securityholders" and "Plan of
Distribution."
The Common Stock is listed on the NYSE under the trading symbol "WOA." The
reported closing price on the NYSE on September 4, 1997 was $2.00 per
share.
See "Risk Factors" beginning on Page 9 for a discussion of certain risk
factors that should be considered in connection with an investment in the
Warrants and the underlying Shares offered hereby .
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
The date of this Prospectus is September __, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Regional Offices of the Commission at Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661 and Seven World Trade
Center, Suite 1300, New York, New York 10048. In addition, copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web Site on the Internet that contains reports, proxy and
information statements and other information regarding the Company. The
Commission's Web Site address is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the
securities offered hereby (the Shares and the Warrants). For further
information with respect to the Company and the Warrants and the Shares,
reference is hereby made to such Registration Statement. Statements contained
herein concerning the provisions of certain documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference into this
Prospectus: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, (ii) the Company's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1997, and June 30, 1997, (iii) the Company's
Current Reports on Form 8-K filed as of June 23, 1997 and July 14, 1997, each
filed pursuant to Section 13 or 15(d) of the Exchange Act, and (iii) the
description of the Common Stock contained in the Company's Registration
Statement on Form 8-A filed May 19, 1992, with the Commission pursuant to
Section 12 of the Exchange Act. All documents filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Prospectus and prior to the termination of the offering
made hereby shall be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein or in any Prospectus Supplement modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated by reference into this Prospectus, other than certain exhibits to
such documents. Requests for such copies should be directed to Investor
Relations, WorldCorp, Inc., 13873 Park Center Road, Suite 490, Herndon, Virginia
20171 (telephone: (703) 834-9200).
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PROSPECTUS SUMMARY
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995:
WorldCorp desires to take advantage of the new "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. WorldCorp wishes to caution
readers that this Prospectus contains forward looking statements that are
subject to risks and uncertainties, including, but not limited to, the impact of
competitive products, product demand and market acceptance risks, reliance on
key strategic alliances, fluctuations in operating results and other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission, including risk factors disclosed in the Company's Form 10-K
for the fiscal year ended December 31, 1996 and those discussed in "Risk
Factors." See "Risk Factors." These risks could cause the Company's actual
results for 1997 and beyond to differ materially from those expressed in any
forward looking statements made by, or on behalf of, the Company.
The Company
WorldCorp was organized in March 1987 to serve as the holding company for
World Airways, Inc., a Delaware corporation ("World Airways"), which was
organized in March 1948 and is the predecessor to WorldCorp. WorldCorp owns
positions in companies that operate in two distinct business areas: aviation
services (through World Airways) and consumer telecommunications, electronic
commerce, and interactive services (through InteliData Technologies Corporation
("InteliData"), a newly-formed Delaware corporation and successor by merger to
US Order, Inc., a Delaware corporation ("US Order") and Colonial Data
Technologies Corporation, a Delaware corporation ("Colonial Data")). WorldCorp
owns its stock in InteliData through WorldCorp Investments, Inc., a Delaware
corporation and wholly owned subsidiary of WorldCorp ("WorldCorp Investments"
and, together with WorldCorp, "WorldCorp" or the "Company").
In February 1994, pursuant to an October 1993 agreement, WorldCorp sold 24.9%
of its ownership in World Airways to MHS Berhad ("MHS"), a Malaysian aviation
company. Effective December 31, 1994, WorldCorp increased its ownership in World
Airways to 80.1% through the purchase of 5% of World Airways common stock held
by MHS. In October 1995, World Airways completed an initial public offering in
which 2,000,000 shares of its common stock were issued and sold by World Airways
and 900,000 shares were sold by WorldCorp. As of June 30, 1997, WorldCorp and
MHS owned approximately 61.7% and 17.7%, respectively, of the outstanding common
stock of World Airways.
In June 1995, US Order completed an initial public offering whereby 3,062,500
shares of its common stock were issued and sold by US Order, and 1,365,000
shares were sold by WorldCorp. On November 7, 1996, US Order and Colonial Data
were each merged (the "Merger") with and into InteliData. As a result of the
Merger, as of June 30, 1997, WorldCorp owned approximately 28.9% of the
outstanding common stock of InteliData (the "InteliData Common Stock").
The principal executive offices of WorldCorp are located at Washington Dulles
International Airport in The Hallmark Building, 13873 Park Center Road, Herndon,
Virginia 20171. WorldCorp's telephone number is (703) 834-9200.
World Airways
World Airways is a global provider of long-range passenger and cargo air
transportation outsourcing services to major international airlines under fixed
rate, multi-year contracts. World Airways' passenger and freight operations
employ 13 wide-body aircraft which are operated under contracts, primarily with
Pacific Rim airlines. These contracts generally require World Airways to supply
aircraft, crew, maintenance and insurance ("ACMI" or "wet lease"), while World
Airways' customers are responsible for a large portion of the other operating
costs, including fuel. World Airways' airline customers have determined that
outsourcing a portion
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of their wide-body passenger and cargo requirements can be less expensive, and
offers greater operational and financial flexibility, than purchasing new
aircraft and additional spare parts required for such aircraft.
World Airways also leads a contractor teaming arrangement that is one of the
largest suppliers of commercial airlift to the United States Air Forces Air
Mobility Command ("USAF").
World Airways, which was founded in 1948, has been providing ACMI contract
services since 1973. Management believes that, as a result of a July 1996
restructuring of its operations to concentrate on ACMI contract services, and
because it is a U.S. certificated "flag" carrier, World Airways is well-
positioned to benefit from the growth in the global air passenger and air cargo
markets, particularly in the Pacific Rim region and South America, where World
Airways has concentrated a significant amount of its resources.
World Airways restructured its business in July 1996 to focus on ACMI contract
services, taking a one-time charge of $21.0 million as of June 30, 1996. As a
result, World Airways terminated all scheduled services on October 27, 1996.
World Airways' block hours flown from continuing operations increased
approximately 10% in the first six months of 1997 over the first six months of
1996 and increased approximately 23% in the year ended December 31, 1996 over
the year ended December 31, 1995. In addition, World Airways had operating
revenues of approximately $160.7 million and $151.9 million for the first six
months of 1997 and 1996, respectively, and operating revenues of approximately
$309.6 million and $242.4 million for 1996 and 1995, respectively. Due to
accelerated maintenance on two MD-11s in June 1997, World Airways' block hours
flown from continuing operations increased by 1% in the second quarter of 1997
as compared to the same period of the previous year. These aircraft are now
available for operation and are substantially booked for the second half of
1997.
World Airways operates a fleet of nine MD-11 and four DC10-30 wide-body
aircraft. The average age of the MD-11 fleet is 3.4 years. World Airways'
overall fleet age averages 7.7 years. When appropriate, World Airways will add
to this fleet to accommodate the needs of new and existing customers. World
Airways believes that aircraft are available at commercially reasonable rates
for this purpose.
World Airways' operating philosophy is to build on its existing ACMI
relationships to achieve a strong platform for future growth. World Airways
concentrates on ACMI contracts which shift yield, load factor and certain cost
risks to the customer. The customer bears the risk of filling the aircraft with
passengers or cargo and assumes a large portion of the operating expenses,
including fuel. World Airways has elected to emphasize its ACMI business because
it perceives a number of opportunities created by a growing global economy,
particularly growth in second and third world economies where the demand for
airlift exceeds the capacity. World Airways attempts to maximize profitability
by combining its multi-year ACMI contracts with short-term, higher-yielding ACMI
agreements which meet the peak seasonal requirements of its customers. World
Airways responds opportunistically to rapidly changing market conditions by
maintaining a flexible fleet of aircraft that can be deployed in a variety of
configurations.
While its aircraft currently serve predominantly passenger customers, World
Airways substantially increases its potential customer base by being able to
serve both passenger and cargo customers. World Airways flies passenger, cargo
and passenger/cargo convertible aircraft that it believes permit it to react
opportunistically to changing demand. For example, World Airways uses
convertible aircraft in a passenger configuration to meet peak seasonal flying
for Malaysian Airline System Berhad and P.T. Garuda Indonesia during the spring
of each year. World Airways can subsequently use the same convertible aircraft
in a cargo configuration for a customer, such as UPS, later in the same year.
World Airways focuses its marketing efforts on the Pacific Rim, Europe, and
more recently, South America, where rapid economic development drives demand for
its services. World Airways believes that its modern fleet of long-range medium-
density wide-body MD-11 and DC10-30 aircraft are ideally suited to these less
dense international routes and provide superior economics as compared to other
popular
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aircraft, such as the Boeing 747 which has excess capacity. World Airways has
operated in the Pacific Rim almost since its inception in 1948, more recently
has penetrated the South American market, and believes that it has developed the
ability to serve these markets well.
World Airways has been providing safe, reliable services for almost 50 years.
World Airways has flown for the USAF since 1956, for Malaysian Airline System
Berhad since 1981 and for P.T. Garuda Indonesia since 1973. On July 3, 1997,
World Airways entered into a multi-aircraft agreement with Viacao Aereo Sao
Paulo ("VASP").
InteliData
InteliData was incorporated on August 23, 1996 under the Delaware General
Corporation Law in order to effect the merger ("Merger") of US Order and
Colonial Data. The Merger was announced on August 5, 1996, when US Order and
Colonial Data entered into an Agreement and Plan of Merger ("Merger Agreement").
On November 7, 1996, the Merger was consummated with each share of outstanding
US Order and Colonial Data common stock being exchanged for one share of
InteliData common stock. The Merger was treated as a purchase of Colonial Data
by US Order. Following the Merger, WorldCorp reports its proportionate share of
InteliData's financial results using the equity method of accounting. At June
30, 1997, WorldCorp's ownership in InteliData was approximately 28.9%.
Effective September 30, 1996, US Order acquired the business of Braun, Simmons
& Co., an Ohio corporation ("Braun Simmons"), for approximately $7 million
consisting of cash and US Order common stock and including US Order transaction
costs. Braun Simmons was an information engineering firm specializing in the
development of home banking and electronic commerce solutions for financial
institutions. The acquisition expands InteliData's product line for both large
and small financial institutions.
The business of InteliData consists of the businesses previously conducted by
US Order, Colonial Data and Colonial Data's subsidiaries. InteliData develops
and markets products and services for the telecommunications and financial
services industries through its three business divisions: consumer
telecommunications, electronic commerce and interactive services.
The consumer telecommunications division designs, develops and markets
telecommunications products that support intelligent network services being
developed and implemented by the regional Bell operating companies ("RBOCs") and
other telephone companies ("telcos"). InteliData has concentrated its product
development and marketing efforts on products that support Caller ID and other
emerging intelligent network services, including a smart telephone, the
Telesmart 4000/Intelifone(TM), which provides consumers call management features
and the ability to access numerous network services and interactive applications
via telephone. InteliData currently offers a line of Caller ID adjunct units
and telephones with integrated Caller ID, small business telecommunications
systems and high-end consumer telecommunications equipment. InteliData also
repairs and refurbishes telecommunications products for commercial customers and
provides other services that support the development and implementation of
intelligent network services.
The electronic commerce division develops and markets products and services to
assist financial institutions in their home banking and electronic bill payment
initiatives. The products are designed to assist consumers in accessing and
transacting business with their banks and credit unions electronically, and to
assist financial institutions in connecting to and transacting business with
third parties, including data processors and billers. The services focus on a
financial institution's back office, offering outsourcing for data entry,
telemarketing, customer service and technical support. InteliData currently
receives its electronic commerce revenues largely from the sale of products and
services to Visa International Service Association, Inc. ("Visa") member banks.
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The interactive services division was established to provide interactive
applications for use on smart telephones and other small screen devices, such as
alpha-numeric pagers, Personal Communication Systems ("PCS") telephones and
personal digital assistants ("PDAs"). InteliData intends to sell interactive
applications directly to end users and through other companies, including telcos
and wireless communications companies. InteliData's current interactive
applications include electronic national directory assistance lookup, one-way
alpha-numeric paging, one-way internet e-mail, a personal directory data save
and restore function and information services such as news, weather, sports
scores, stock quotes, lottery results and horoscopes.
Recent Events
On August 29, 1996, WorldCorp entered into a bridge loan (the "Bridge Loan")
with a financial institution (the "Bank"), pursuant to which WorldCorp borrowed
$25.0 million at an interest rate equal to the London Interbank Offered Rate
("LIBOR") plus 2.50%. All borrowings under the Bridge Loan initially were
collateralized by $15.0 million in cash, all of the InteliData and World Airways
Common Stock beneficially owned by WorldCorp and a first priority security
interest in the Company's assets. Using the proceeds from the Bridge Loan, on
September 30, 1996, WorldCorp redeemed all of the remaining outstanding
principal amount of approximately $25.0 million of its 13% Subordinated Notes
due August 15, 1997 (the "13% Notes"). In October 1996, the cash
collateralization was reduced to $7.0 million as a result of a $10.0 million
repayment of the monies borrowed under the Bridge Loan. On December 31, 1996,
the Company successfully renegotiated the terms of the Bridge Loan (the
"Renegotiated Bridge Loan"). Pursuant to the Renegotiated Bridge Loan, the
interest rate was lowered to LIBOR plus 1.75%, and all borrowings are now
collateralized by $1.0 million in cash, all of the InteliData and World Airways
Common Stock beneficially owned by WorldCorp and a first priority security
interest in the Company's assets. In addition, certain financial covenants have
been released. On February 26, 1997, the Renegotiated Bridge Loan was further
amended to permit the Margin Loan (as described herein). The Renegotiated
Bridge Loan matures on September 29, 1997.
On September 30, 1996, WorldCorp sold the $10,000,000 in original aggregate
principal amount of its Old Notes pursuant to a purchase agreement, dated as of
September 30, 1996, among WorldCorp and the purchasers named therein (the
"Purchase Agreement"). The initial purchasers of the Notes also received
warrants, dated September 30, 1996 and expiring September 30, 2000, to acquire
120,000 shares of the common stock of WorldCorp, $.001 par value per share (the
"Common Stock"), additional warrants, issuable to such purchasers on October 1,
1997 and expiring on September 30, 2001, to acquire 40,000 shares of Common
Stock and additional warrants, issuable to such purchasers on October 1, 1998
and expiring on September 30, 2002, to acquire 40,000 shares of Common Stock,
which additional warrants will be issued only if certain market conditions are
met (collectively, the "Warrants"). The Warrants have an exercise price of
$6.00 per share, subject to adjustments as set forth therein. Proceeds from the
sale of the Notes were used to repay $10.0 million aggregate principal amount
outstanding under the Renegotiated Bridge Loan. As of June 30, 1997, the
outstanding principal balance under the Renegotiated Bridge Loan was $15.0
million, and there was $10.0 million in aggregate principal amount outstanding
under the Notes.
The Purchase Agreement and the Renegotiated Bridge Loan generally restrict
stock repurchases by WorldCorp and its subsidiaries, except under certain
limited circumstances. These borrowings also contain a number of covenants
that, among other things, restrict the ability of WorldCorp to dispose of
assets, make certain acquisitions of the stock of other entities, incur
additional indebtedness, and make capital expenditures. The Renegotiated Bridge
Loan also contains certain covenants which, among other things, require
WorldCorp to maintain at least a 50.1% ownership of World Airways and in certain
instances to make repayment of the Renegotiated Bridge Loan. Pursuant to the
Renegotiated Bridge Loan, WorldCorp may retire or otherwise acquire up to $10.0
million worth of WorldCorp Common Stock. In addition, WorldCorp was permitted
to exchange with the WorldCorp Employee Savings and Stock Ownership Plan, in a
non-cash transaction, Common Stock held by the trust for common stock of World
Airways, provided, WorldCorp retained a 50.1% ownership of World Airways.
Pursuant to the Purchase Agreement, WorldCorp is permitted to purchase, redeem,
retire or otherwise acquire for value (i) at any time, Common Stock for up to
$25.0 million in cash and up to 650,000 shares of Common Stock
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using shares of common stock of World Airways of which WorldCorp is the
beneficial owner, and (ii) up to $5.0 million worth of additional shares of
Common Stock for every $15.0 million increase in Asset Value (as defined herein)
at such time compared to such Asset Value as of September 12, 1996. As of
September 12, 1996 and June 30, 1997, the Asset Value was $185.7 million and
$109.5 million, respectively. In September 1996, WorldCorp announced its
intention to purchase up to 2.5 million shares of its publicly-traded common
stock (the "WorldCorp Common Stock") pursuant to open market transactions. As of
June 30, 1997, the Company had purchased 1,362,500 shares of WorldCorp Common
Stock for an aggregate cost of $7.8 million. WorldCorp does not intend to
purchase any additional shares at this time. On July 31, 1997, WorldCorp
received a notice of default on the Renegotiated Bridge Loan, whereby the bank
may proceed with the exercise of its rights and remedies under the loan
documents and applicable laws if the default is not corrected within 15 days
following the date of notice. Based on discussions with the bank, WorldCorp
believes that the bank will not exercise its rights at this time. No assurances
can be given that the bank will not exercise its rights in the future.
On January 27, 1997, WorldCorp entered into a $1.0 million margin loan with
Scott & Stringfellow, Inc. ("Scott & Stringfellow"), whereby WorldCorp pledged
approximately 400,000 shares of InteliData common stock which WorldCorp owns as
collateral for such loan (the "Margin Loan"). The purpose of the Margin Loan
was to obtain cash for short-term working capital purposes. As of June 30,
1997, WorldCorp had no outstanding balance on the Margin Loan.
On August 26, 1997, World Airways issued $50 million of convertible senior
subordinated debentures (the "144A Debentures"), in a private offering, due in
2004 (the "144A Offering"). The 144A Debentures are unsecured obligations,
convertible into shares of World Airways' common stock, and subordinated to all
present and future senior indebtedness of World Airways. The 144A Debentures
were offered in reliance on the exemption form the registration requirements
provided by Rule 144A of the Securities Act. Accordingly, the 144A Debentures
and the underlying common stock have not been registered under the Securities
Act and have been offered only to certain accredited investors. World Airways
intends to use net proceeds of the 144A Offering to purchase approximately 4.0
million shares of its common stock, repay certain indebtedness and increase
working capital.
In connection with the 144A Offering, World Airways and WorldCorp have entered
into an agreement (the "Agreement") for the purchase by World Airways of up to
4.0 million shares of the common stock of World Airways owned by WorldCorp at a
purchase price per share of $7.65. World Airways has received an opinion from
Furman Selz LLC that the terms of the Agreement are fair to the stockholders of
World Airways from a financial point of view. Closing under the Agreement is
subject to certain contractual and regulatory contingencies, including the
approval of the Boards of Directors of World Airways and WorldCorp. Discussions
with MHS following the 144A Offering also could have an impact on the number of
shares of common stock of World Airways repurchased from WorldCorp. MHS has
certain rights under a shareholders agreement, dated as of February 3, 1994, as
amended, among WorldCorp, MHS and World Airways (the "Shareholders Agreement").
The Shareholders Agreement includes a provision that provides that if WorldCorp
were to dispose of its holdings in World Airways with the result that
WorldCorp's ownership interest in World Airways falls below 51% of the
outstanding shares of the common stock of World Airways, then MHS may either
sell its shares to a third party or require WorldCorp to sell a pro rata number
of shares held by MHS to the party purchasing WorldCorp's shares.
In August 1997, the Board of Directors of InteliData approved a stock
repurchase program whereby InteliData may repurchase up to 2,000,000 shares of
its common stock from time to time on the open market. There can be no
assurance as to the number of shares ultimately repurchased.
Risk Factors
See "Risk Factors" for a discussion of certain risk factors that should be
considered in connection with an investment in the Common Stock offered hereby.
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RISK FACTORS
The following risk factors should be considered carefully by prospective
investors in evaluating an investment in the Selling Securityholder Securities.
Set forth below are certain risk factors with respect to WorldCorp, World
Airways and InteliData.
Risk Factors with Respect to WorldCorp:
Holding Company Structure and Liquidity
WorldCorp is a highly leveraged holding company. As a holding company, all
of WorldCorp's funds are generated through its positions in World Airways and
InteliData, which have not paid dividends on common stock since 1992. At June
30, 1997, World Airways had a working capital deficit of $31.9 million and had
substantial debt and lease commitments. At June 30, 1997, InteliData had
working capital of $62.9 million, with no long-term debt. World Airways'
ability to pay dividends is currently restricted under a borrowing arrangement.
World Airways and InteliData currently intend to retain their future earnings,
if any, to fund the growth and development of their businesses and, therefore,
do not anticipate paying any cash dividends in the foreseeable future. Of the
$10.6 million in cash and short-term investments WorldCorp held at June 30,
1997, approximately $9.5 million was held by World Airways and, therefore, is
not available to satisfy WorldCorp's obligations. As of June 30, 1997,
WorldCorp had parent company repayment obligations, including principal and
interest, of approximately $18.1 million for the remainder of 1997. In order to
meet these obligations and its general and administrative costs, WorldCorp must
use its existing cash and either sell shares of World Airways or InteliData, or
issue additional debt or equity. Under the terms of certain borrowing
arrangements, however, WorldCorp has pledged all of its shares of World Airways
and InteliData as collateral for the borrowings.
On December 31, 1996, the Company successfully renegotiated the terms of
the Bridge Loan and executed the Renegotiated Bridge Loan. Pursuant to the
Renegotiated Bridge Loan, all borrowings are now collateralized by $1.0 million
in cash, all of the InteliData Common Stock and World Airways beneficially owned
by WorldCorp and a first priority security interest in the Company's assets. In
addition, certain financial covenants have been released. On February 26, 1997,
the Renegotiated Bridge Loan was further amended to permit the Margin Loan. As
of June 30, 1997, WorldCorp had no outstanding balance on the Margin Loan.
WorldCorp also announced its intention to purchase up to 2.5 million shares of
WorldCorp Common Stock pursuant to open market transactions. As of June 30,
1997, the Company had purchased 1,362,500 shares of WorldCorp Common Stock for
an aggregate cost of $7.8 million. WorldCorp does not intend to purchase any
additional shares at this time.
In May 1992, WorldCorp issued $65 million of 7% Convertible Subordinated
Debentures due 2004 (the "7% Debentures") issued pursuant to an Indenture (the
"7% Indenture"). The 7% Debentures are convertible into the common stock of
WorldCorp at $11.06 per share, subject to adjustment in certain events, and bear
an annual interest rate of 7%. The 7% Indenture governing WorldCorp's 7%
Debentures provides that WorldCorp will cause World Airways to not pay dividends
upon the occurrence of any event of default by WorldCorp under such 7%
Indenture. Further, the 10% Indenture defines Subordinated Indebtedness to
include the 7% Debentures and as such, the Notes will rank senior in right of
payment to the 7% Debentures.
Substantial Leverage; Inability to Service Indebtedness
The Company has substantial indebtedness and is highly leveraged. At June
30, 1997, the Company's total long-term indebtedness including current
maturities was $114.7 million, the Company had liabilities (including total
debt) of approximately $200.4 million and total stockholders' deficit of $(39.5)
million. In the ordinary course of business, the Company has incurred and,
subject to certain covenants and financial tests set out in the Renegotiated
Bridge Loan, the 7% Indenture and the Indenture, will continue to incur
additional indebtedness to fund working capital requirements and for other
corporate purposes.
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The degree to which the Company is leveraged could have important
consequences including: (i) the Company's ability to obtain financing in the
future for working capital or other purposes may be impaired; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of principal and interest on its indebtedness; (iii) the indebtedness
outstanding under the Renegotiated Bridge Loan is secured and will mature prior
to the maturity of the New Notes; (iv) certain of the Company's borrowings are
at variable rates of interest, which could result in higher interest expense in
the event of increases in interest rates; and (v) the Company's high degree of
leverage may make it more vulnerable to economic downturns and may limit its
ability to withstand competitive pressures.
The Company believes that, based upon current financing arrangements and
the Company's ability to raise additional capital through issuing equity,
selling shares of its World Airways or InteliData common stock, or through
entering into new loan arrangements, the Company will be able to meet its
principal and interest payment obligations on its outstanding indebtedness.
There can be no assurance, however, that the Company's future financial
condition will be such as to permit the Company to service its indebtedness,
including the New Notes.
Restrictive Debt Covenants; Consequences of Failure to Comply with Debt
Covenants
The Renegotiated Bridge Loan and the 10% Indenture contain a number of
significant covenants that, among other things, restrict the ability of the
Company to dispose of assets, incur additional indebtedness, pay dividends,
enter into sale-leaseback transactions, create liens, make capital expenditures
and make certain investments or acquisitions and otherwise restrict corporate
activities. In addition, the Renegotiated Bridge Loan stipulates that the fair
market value of each share of World Airways and InteliData common stock that
collateralizes the Renegotiated Bridge Loan must equal or exceed $5.00 per share
at all times. The ability of the Company to comply with such provisions may be
affected by events beyond the Company's control. The breach of any of these
covenants could result in a default under the Renegotiated Bridge Loan. In the
event of any such default, depending upon the actions taken by the Bank, the
Company could be prohibited from making any payments of principal or interest on
the New Notes. In addition, the Bank could elect to declare all amounts
borrowed under the Renegotiated Bridge Loan, together with accrued interest, to
be due and payable or could proceed against the collateral securing such
indebtedness. On July 31, 1997, WorldCorp received a notice of default on the
Renegotiated Bridge Loan, whereby the bank may proceed with the exercise of its
rights and remedies under the loan documents and applicable laws if the default
is not corrected within 15 days following the date of notice. Based on
discussions with the bank, WorldCorp believes that the bank will not exercise
its rights at this time. No assurances can be given that the bank will not
exercise its rights in the future.
Mandatory Prepayment
Pursuant to the 10% Indenture, WorldCorp is obligated under certain
conditions to make certain mandatory prepayments of the Notes. If the Asset
Value at the end of any fiscal quarter is less than $70.0 million, then
WorldCorp must prepay 50% of each of the then outstanding Notes within 60 days.
If the Asset Value at the end of any fiscal quarter is less than $50.0 million,
then WorldCorp must prepay all of the then outstanding Notes within 60 days. If
WorldCorp sells any shares of InteliData Common Stock, 20% of the net proceeds
(i.e., gross proceeds less direct costs associated with such sales) received by
WorldCorp upon such sale will be used to prepay the then outstanding Notes
within 30 days. There can be no assurance that WorldCorp will not be required
to make such mandatory prepayments and if so, such prepayments could have an
adverse effect on WorldCorp's financial condition and results of operations. In
the event of a Mandatory Prepayment of the Notes, WorldCorp would seek to raise
additional capital through issuing equity, selling shares of its World Airways
or InteliData common stock, or through entering into new loan arrangements, in
order to meet the principal and interest payment obligations on the Notes.
There can be no assurance, however, that WorldCorp would be able to obtain
sufficient capital through such financings or that the terms of such financings
would be favorable to WorldCorp.
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Risk Factors with Respect to World Airways:
Significant Financial Leverage
World Airways is highly leveraged. World Airways incurred substantial debt and
lease commitments during the past three years in connection with its acquisition
of MD-11 aircraft and related spare parts. In addition, World Airways has
significant future long-term obligations under aircraft lease obligations
relating to its aircraft.
As of June 30, 1997, World Airways had outstanding $29.1 million in long-term
debt and capital leases, with expected debt service and capital lease expense of
$5.9 million for the six months ending December 31, 1997 and $13.3 million for
the year ending December 31, 1998. As of June 30, 1997, after giving effect to
the 144A Offering and use of proceeds therefrom, World Airways' total
indebtedness would have been approximately $86.8 million, $36.8 million of which
would have been senior indebtedness, including $6.7 million attributable to
capital lease obligations, no indebtedness of World Airways would have ranked
pari passu with the 144A Debentures, and no indebtedness would have been
subordinated indebtedness. In the event that World Airways repurchases shares of
its common stock following the 144A Offering, total stockholders' equity would
be reduced by the amount of purchase price for such common stock. The indenture
governing the terms of the 144A Debentures (the "144A Indenture") does not limit
the amount of additional indebtedness, including senior indebtedness, which
World Airways can create, incur, assume or guarantee.
World Airways currently has incurred significant annual cash fixed charge
expenses. After giving effect to the 144A Offering, the as adjusted ratio of
earnings to fixed charges for the fiscal year ended December 31, 1996 would have
been 1.44 to 1 compared to 1.60 to 1 before the 144A Offering.
World Airways' ability to make interest payments on the 144A Debentures will be
dependent on World Airways' future operating performance, which is itself
dependent on a number of factors, many of which are beyond World Airways'
control. World Airways' ability to repay the 144A Debentures at maturity will
depend upon these same factors and the ability of World Airways to raise
additional funds.
Liquidity and Capital Resources
World Airways' cash and cash equivalents at June 30, 1997 and December 31, 1996
were $8.3 million and $7.0 million, respectively. As is common in the airline
industry, World Airways operates with a working capital deficit. At June 30,
1997, World Airways' current assets were $33.5 million and current liabilities
were $65.3 million. World Airways has substantial long-term aircraft lease
obligations with respect to its current aircraft fleet. Although there can be no
assurances, World Airways believes that its existing contracts and additional
business which it expects to obtain in the near term, along with its existing
cash and financing arrangements and the net proceeds from the 144A Offering will
be sufficient to allow World Airways to meet its cash requirements related to
debt service and the operating and capital requirements for its continuing
operations for the next 12 months.
In 1996, World Airways instituted a program to purchase up to one million
shares of its publicly-traded common stock pursuant to open market transactions.
As of June 30, 1997, World Airways had purchased 770,000 shares of Common Stock
at an aggregate cost of approximately $7.8 million pursuant to such program. In
addition, on August 26, 1997, WorldCorp and World Airways entered into the
Agreement for the repurchase by World Airways of up to 4.0 million shares of
World Airways' common stock owned by WorldCorp.
In the event that World Airways enters into leases for additional aircraft,
World Airways will need to make capital expenditures for additional spare
engines and parts. No assurances can be given, however, that World Airways will
obtain all of the financing required for such capital expenditures.
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Dependence Upon Key Customers
World Airways' business relies heavily on its contracts with Malaysian Airlines
System Berhad ("Malaysian Airlines"), Philippine Airlines, Inc. ("Philippine
Airlines"), P.T. Garuda Indonesia ("Garuda") and the USAF. For the first six
months of 1997, these customers provided 27%, 36%, 19% and 15%, respectively, of
World Airways' revenues and 30%, 38%, 20% and 8%, respectively, of total block
hours. In 1996, these customers accounted for 34%, 15%, 13% and 25%,
respectively, of World Airways' revenues and 42%, 17%, 14%, and 17%,
respectively, of total block hours flown from continuing operations. As a result
of teaming arrangements, World Airways has been awarded one of the largest USAF
fixed awards under the Civil Reserve Air Fleet ("CRAF") program for the U.S.
Government's 1997-98 fiscal year. World Airways, however, cannot determine how
the reduction in overall Defense Department spending may affect arrangements
with the USAF in future years. The loss of any of these contracts with these key
customers, a renegotiation of the terms of these contracts or a substantial
reduction in business from any of them, if not replaced, could have a material
adverse effect on the financial condition or results of operations of World
Airways. Although World Airways' customers bear the financial risk of filling
the World Airways' aircraft with passengers or cargo, World Airways can be
affected adversely if its customers are unable to operate its aircraft
profitably, or if one or more of World Airways' customers experience a material
adverse change in their market demand, financial condition or results of
operations. Under these circumstances, World Airways can be adversely affected
by receiving delayed or partial payments or by receiving customer demands for
rate and utilization reductions, flight cancellations, and/or early termination
of their agreements.
As of June 30, 1997, World Airways operated four MD-11 passenger aircraft for
Philippine Airlines under an agreement with high minimum monthly utilization
levels. Philippine Airlines, however, is experiencing financial difficulties,
and since March 1997 had been making monthly lease payments to World Airways on
an installment basis according to a payment plan agreed to by World Airways and
Philippine Airlines at the beginning of each month. On July 11, 1997, World
Airways agreed to shift two MD-11s currently operating for Philippine Airlines
to VASP later in the third quarter. As of the date hereof, Philippine Airlines
is in compliance with its agreements with World Airways and has reconfirmed its
commitment to operate the remaining two MD-11s currently in its fleet until
February 1998. Failure by Philippine Airlines to meet its aircraft lease
obligations, if not offset by other business, would have a material adverse
effect on the financial condition, cash flows and results of operations of World
Airways.
On July 3, 1997, World Airways entered a binding Memorandum of Agreement with
VASP for the lease of two MD-11 passenger aircraft to commence in the third
quarter. World Airways is also leasing a cargo plane to VASP under an ACMI
contract which began in June 1997. The loss of this agreement, a renegotiation
of its terms or a substantial reduction of business for VASP, if not replaced,
could have a material adverse effect on the financial condition or results of
operations of World Airways.
Geographic Concentration
World Airways derives a significant percentage of its revenues and block hours
from its operations in the Pacific Rim region. While World Airways believes the
Pacific Rim region is a growth market for air transportation, any economic
decline or any military or political disturbance in this area may interfere with
World Airways' ability to provide service and could have a material adverse
effect on the financial condition or results of operations of World
Airways.
Operating Losses
While World Airways generated operating income each year from 1987 through 1992
and in 1995, it sustained operating losses in 1993 and 1994 of $7.3 million and
$5.2 million, respectively, and net losses of $9.0 million in each of these two
years. For the year ended December 31, 1996, World Airways incurred a net loss
of $14.0 million, which resulted from operating losses incurred in World
Airways' scheduled service operations,
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which were discontinued in 1996, and the related estimated loss on disposal.
Earnings from continuing operations were $18.4 million for 1996. While World
Airways generated operating income for the six months ended June 30, 1997 of
$12.8 million, there can be no assurance that World Airways will be able to
generate operating income for the remainder of 1997 or future years.
Utilization of Aircraft
Due to the large capital costs of leasing and maintaining World Airways'
aircraft, each of World Airways' aircraft must have high utilization at
attractive rates in order for World Airways to operate profitably. Although
World Airways' strategy is to enter into long-term contracts with its customers,
the terms of World Airways' existing customer contracts are substantially
shorter than the terms of World Airways' lease obligations with respect to the
aircraft. Approximately 70% and 13% of World Airways' contract backlog at June
30, 1997, relates to its multi-year contracts with Malaysian Airlines and
Philippine Airlines, respectively. In addition, a significant portion of World
Airways' current contracts expire near the end of 1997. There can be no
assurance that World Airways will be able to enter into additional contracts
with new or existing customers or that it will be able to obtain enough
additional business to fully utilize each aircraft. World Airways' financial
results could be materially adversely affected even by relatively brief periods
of low aircraft utilization and yields. In order to maximize aircraft
utilization, World Airways does not intend to acquire new aircraft unless such
aircraft would be necessary to service existing needs or World Airways has
obtained additional ACMI contracts for the aircraft to service. World Airways is
seeking to obtain additional ACMI contracts with new and existing customers, to
which such new aircraft would be dedicated when placed in service, but World
Airways can provide no assurance that it will obtain new ACMI contracts or that
existing ACMI contracts will be renewed or extended.
Aircraft Fleet
Each of the aircraft in World Airways' existing fleet is to a large extent
contractually dedicated by World Airways to the service of one or more
customers, with limited aircraft available to provide back-up capability.
Therefore, in the event the use of one or more of World Airways' aircraft was
lost, World Airways might have difficulty fulfilling its obligations under one
or more of these contracts, if it were unable to obtain substitute aircraft.
Also, if World Airways is successful in entering into additional agreements to
use its aircraft fleet on a year-round as opposed to seasonal basis, World
Airways will have fewer aircraft available to meet the peak seasonal demands for
its traditional customers such as Garuda for the Hadj pilgrimage and the USAF
for short-term expansion flying. To continue to meet the peak seasonal demand
requirements of its customers, World Airways will have to acquire additional
aircraft on short-term leases. World Airways has historically been successful in
obtaining MD-11 and DC10-30 aircraft and the financing necessary for the
acquisition of such aircraft. There can be no assurance, however, that World
Airways will be able to lease such aircraft or a satisfactory substitute, that
the terms of such leases will be favorable to World Airways or that World
Airways will be able to obtain satisfactory financing necessary for the
acquisition of such aircraft in the future. Moreover, World Airways may decline
to renew most of its MD-11 leases, which are renewable at World Airways' option
for 10 one-year extensions in years six through 15 of the lease term. However,
the failure to renew such leases would result in penalties.
Aging DC10-30 Aircraft
World Airways' existing fleet includes four DC10-30 aircraft which were
manufactured between 1974 and 1988. Manufacturer Service Bulletins ("Service
Bulletins") and the FAA's Airworthiness Directives ("Directives") issued under
its "Aging Aircraft" program could cause DC10-30 aircraft operators to be
subject to extensive aircraft examinations and require DC10-30 aircraft to
undergo structural inspections and modifications to address problems of
corrosion and structural fatigue at specified times. It is possible that Service
Bulletins or Directives applicable to the types of aircraft or engines included
in World Airways' fleet could be issued in the future. The cost of compliance
with Directives and Service Bulletins cannot currently be estimated, but could
be substantial and could have a material adverse effect on the financial
condition or results of operations of World Airways.
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Reliance on Others
World Airways has entered into agreements with contractors, including other
airlines, to provide certain facilities and services required for its
operations, including all of World Airways' off-wing engine maintenance and most
airframe maintenance. World Airways has also entered into agreements with
contractors to provide security, ground handling and personnel training.
Although World Airways believes that there are many advantages to outsourcing
these activities, the failure of these contractors to provide essential services
that are not otherwise entirely within the control of World Airways could have a
material adverse effect on the financial condition or results of operations of
World Airways.
Maintenance
Engine maintenance accounts for most of World Airways' annual maintenance
expenses. Typically, the hourly cost of engine maintenance increases as the
aircraft ages. World Airways outsources major airframe maintenance and power
plant work to several suppliers. World Airways has a 10-year contract expiring
in August 2003 with United Technologies Corporation's Pratt & Whitney Group for
all off-wing maintenance on the PW 4462 engines that power its MD-11 aircraft.
Under this contract, the manufacturer agreed to provide such maintenance
services at a cost not to exceed specified rates per engine flight hour during
the term of the contract. World Airways' maintenance costs associated with the
MD-11 aircraft and PW 4462 engines have been significantly reduced due in part
to manufacturer guarantees and warranties, which began to expire in 1995 and
which will fully expire by 1998. In addition, the specified rate per engine
flight hour is subject to annual escalation, increasing substantially in 1998.
Accordingly, while World Airways believes the terms of this agreement have
resulted in lower engine maintenance costs than it otherwise would incur, engine
maintenance costs will increase substantially during the last five years of the
agreement. World Airways has begun to accrue these increased expenses in 1997
and such expenses will continue to increase during the remainder of the term of
the contract as World Airways' aircraft fleet ages.
Shareholders Agreement with MHS; Limitation on Voting by Foreign Citizens
MHS currently owns 17.7% of the outstanding Common Stock. Under the
Shareholders Agreement, WorldCorp has agreed to vote its shares of World Airways
common stock to elect the number of directors nominated by MHS that represent
MHS' proportionate interest in World Airways, but in no event less than two
directors. In addition, World Airways is not permitted to consummate the sale of
all or substantially all of its business or make a fundamental change in its
line of business without the approval of the directors designated by MHS.
Accordingly, MHS could block World Airways from entering into a transaction or
taking actions that could be in the best interests of stockholders.
Notwithstanding any other provision of the Shareholders Agreement, if without
the prior written consent of MHS, World Airways sells all or substantially all
of its business or fundamentally changes its line of business, then MHS has the
right to require WorldCorp to purchase all or part of MHS' shares at fair market
value, which could have the effect of discouraging WorldCorp from taking certain
actions that could be in the best interests of other stockholders of World
Airways. See "--World Airways' NOLs." The Shareholders Agreement terminates if
either WorldCorp's or MHS' ownership interest falls below 5% of the outstanding
capital stock of World Airways. The Shareholders Agreement provides that if
WorldCorp were to dispose of its holdings in World Airways with the result that
WorldCorp's ownership interest in World Airways falls below 51% of the
outstanding shares of World Airways' common stock, then MHS may either sell its
shares to a third party or require WorldCorp to sell a pro rata number of shares
held by MHS to the party purchasing WorldCorp's shares of World Airways' common
stock.
Under applicable regulatory restrictions, because World Airways is a U.S.
certificated flag carrier, no more than 25% of the voting stock of World Airways
may be owned or controlled, directly or indirectly, by persons who are not U.S.
citizens ("Foreign Citizens"). World Airways' Certificate of Incorporation and
Bylaws provide that no shares of capital stock may be voted by or at the
direction of Foreign Citizens unless such shares are registered on a separate
stock record (the "Foreign Stock Record"). No shares of Common Stock owned by
Foreign Citizens will be registered on the Foreign Stock Record of World Airways
to the extent that the
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aggregate ownership by Foreign Citizens reflected in the Foreign Stock Record
would exceed 25% of World Airways' outstanding shares of Common Stock.
Employee Relations
World Airways' flight attendants are represented by the International
Brotherhood of Teamsters (the "Teamsters") under a collective bargaining
agreement which expires in August 2000. World Airways' flight attendants
challenged the use of foreign flight attendant crews on World Airways' flights
for Malaysian Airlines and Garuda which has historically been World Airways'
operating procedure. World Airways is contractually obligated to permit its
Southeast Asian customers to deploy their own flight attendants. While the
arbitrator in this matter recently denied the union's request for back pay to
affected flight attendants for flying relating to the 1994 Hadj, the arbitrator
concluded that World Airways' contract with its flight attendants requires World
Airways to first actively seek profitable business opportunities that require
using World Airways' flight attendants, before World Airways may accept wet
lease business opportunities that use the flight attendants of World Airways'
customers. World Airways can provide no assurances as to how the imposition of
this requirement will affect World Airways' financial condition or results of
operations. World Airways' cockpit crew members, who are also represented by the
Teamsters, are subject to a four-year collective bargaining agreement expiring
in June 1998. World Airways is unable to predict whether any of its employees
not currently represented by a labor union, such as World Airways' maintenance
personnel, will elect to be represented by a labor union or collective
bargaining unit. The election of such employees for representation in such an
organization could result in employee compensation and working condition demands
that could have a material adverse effect on the financial condition or results
of operations of World Airways.
World Airways' NOLs
As of December 31, 1996, World Airways had net operating loss carryforwards
("NOLs") for federal income tax purposes of $104.7 million ($38.1 million of
which is subject to a $6.9 million annual limitation as a result of an ownership
change of World Airways for tax purposes in 1991). These NOLs, if not utilized
to offset taxable income in future periods, would expire between 1998 and 2011.
Use of World Airways' NOLs in future years could be further limited if an
ownership change were to occur in the future. World Airways believes that the
sale of common stock in its initial public offering did not cause an ownership
change. However, the application of the Internal Revenue Code (the "Code") in
this area is subject to interpretation by the Internal Revenue Service. The NOLs
are subject to examination by the IRS and, thus, are subject to adjustment or
disallowance resulting from any such IRS examination. In addition, conversion of
the 144A Debentures or future transactions in the common stock of World Airways,
or the common stock of World Airways' stockholders may cause an ownership
change, which could result in a substantial reduction in the annual limitation
in the use of the NOLs and the loss of a substantial portion of the NOLs
available to World Airways.
Seasonality
Historically, World Airways' business has been significantly affected by
seasonal factors. During the first quarter, World Airways typically experiences
lower levels of utilization and yields due to lower demand for passenger and
cargo services relative to other times of the year. World Airways experiences
higher levels of utilization and yields in the second quarter, principally due
to peak demand for commercial passenger services associated with the annual Hadj
pilgrimage. In 1997, World Airways' flight operations associated with the Hadj
pilgrimage occurred from March 15 to May 20. Because the Islamic calendar is a
lunar-based calendar, the Hadj pilgrimage occurs approximately 10 to 12 days
earlier each year relative to the Western (Gregorian) calendar. As a result,
revenues resulting from future Hadj pilgrimage contracts will continue to shift
from the second quarter to the first quarter over the next several years. World
Airways believes that its contracts with Malaysian Airlines and the USAF should
lessen the effect of these seasonal factors.
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Legal and Administrative Proceedings
World Airways has periodically received correspondence from the FAA with
respect to minor noncompliance matters. In November 1996, as the FAA has
increased its scrutiny of U.S. airlines, World Airways was assessed a
preliminary fine of $810,000 in connection with certain security violations by
ground handling crews contracted by World Airways for services at foreign
airport locations. Under 49 U.S.C. 46301, any violation of
pertinent provisions of 49 U.S.C. 40101 or related rules is subject to a civil
penalty for each violation. Upon review of the evidence or facts and
circumstances relating to the violation, the statute allows for the compromise
of proposed civil penalties. The proposed penalties were imposed by the FAA in
connection with recent inspections at foreign airport facilities and relate
primarily to ground handling services provided by World Airways' customers in
connection with their operations; specifically, the inspection procedures of its
aircraft, passengers and associated cargo. In each of these instances, World
Airways was in compliance with international regulations, but not the more
stringent U.S. requirements, despite the fact that the flights in question did
not originate or terminate in the United States. World Airways has taken steps
to comply with the U.S. requirements and is currently working with the FAA to
settle these claims and believes that any fines ultimately imposed by the FAA
will not have a material adverse effect on the financial condition or results of
operations of World Airways. While World Airways believes it is currently in
compliance in all material respects with all appropriate standards and has all
required licenses and authorities, any material non-compliance by World Airways
therewith or the revocation or suspension of licenses or authorities could have
a material adverse effect on the financial condition or results of operations of
World Airways.
In addition, World Airways is party to routine litigation and administrative
proceedings incidental to its business, none of which is believed by World
Airways to be likely to have a material adverse effect on the financial
condition of World Airways.
Possible Volatility of Stock Price
The market price of World Airways' common stock has been subject to significant
fluctuations in response to World Airways' operating results and other factors.
The market price of the shares of World Airways' common stock has varied
significantly and may be volatile depending on news announcements and changes in
general market conditions. In particular, news announcements regarding quarterly
results of operations, competitive developments, litigation or governmental
regulatory actions impacting World Airways may adversely affect the World
Airways' common stock price. In addition, because the number of shares of common
stock of World Airways held by the public is relatively small, the sale of
substantial number of shares of the common stock of World Airways in a short
period of time could adversely affect the market price of the common stock of
World Airways. In addition, the stock market has from time to time experienced
extreme price and volume volatility. These fluctuations may be unrelated to the
operating performance of particular companies whose shares are traded. Market
fluctuations may adversely affect the market price of World Airways' common
stock.
Anti-takeover Provisions; Certain Provisions of Delaware Law, Certificate of
Incorporation and Bylaws
Certain provisions of Delaware law, World Airways' Certificate of Incorporation
and Bylaws and the Shareholders Agreement could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, control of World Airways. Certain of these
provisions allow World Airways to issue preferred stock with rights senior to
those of the common stock of World Airways without any further vote or action by
the holders of common stock of World Airways. The issuance of preferred stock of
World Airways could decrease the amount of earnings and assets available for
distribution to the holders of common stock of World Airways or could adversely
affect the rights and powers, including voting rights, of the holders of
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the common stock of World Airways. In certain circumstances, such issuance could
have the effect of decreasing the market price of the common stock of World
Airways. In addition, the Certificate of Incorporation provides for the Board of
Directors to be divided into three classes of directors serving staggered three-
year terms. Classification of the Board of Directors expands the time required
to change the composition of a majority of directors and may tend to discourage
an acquisition proposal for World Airways.
Control by WorldCorp; Potential Conflicts of Interest
As of June 30, 1997, WorldCorp owned approximately 61.7% of the outstanding
common stock of World Airways. WorldCorp is a holding company that owns
positions in two companies: InteliData and World Airways. WorldCorp is highly
leveraged and therefore requires substantial funds to cover debt service each
year. As a holding company, all of WorldCorp's funds are generated through its
subsidiaries, neither of which is expected to pay dividends in the foreseeable
future. As a result of WorldCorp's cash requirements, it may be required to sell
additional shares of common stock of World Airways during 1997, and such sales,
or the threat of such sales, could have a material adverse effect on the market
price of the common stock of World Airways. Except as limited by contractual
arrangements with MHS, WorldCorp also is in a position to control the outcome of
substantially all issues submitted to World Airways' stockholders, including the
election of all of World Airways' Board of Directors, adoption of amendments to
World Airways' Certificate of Incorporation, and approval of mergers. Under
Delaware law, WorldCorp may approve certain actions by written consent without a
meeting of the stockholders of World Airways.
In connection with the Renegotiated Bridge Loan, WorldCorp has pledged all of
the shares of common stock of World Airways beneficially owned by WorldCorp (the
"WorldCorp Shares"). The Renegotiated Bridge Loan matures on September 29, 1997.
WorldCorp and World Airways have entered into an agreement for the repurchase of
common stock of World Airways owned by WorldCorp. If a closing occurs under
this agreement, WorldCorp expects to use a portion of the proceeds from that
transaction to repay the Renegotiated Bridge Loan. If a closing does not occur
under this agreement and WorldCorp does not refinance the Renegotiated Bridge
Loan, it would be necessary for WorldCorp to sell assets in order to repay the
Renegotiated Bridge Loan. In the event WorldCorp is unable to satisfy its
payment obligations under the Renegotiated Bridge Loan on a timely basis, the
bank may sell or otherwise dispose of all or any part of the WorldCorp Shares.
The inability of WorldCorp to satisfy its payment obligations under the
Renegotiated Bridge Loan on a timely basis and a subsequent disposition by the
bank of the WorldCorp Shares, may adversely affect the market price of the
common stock of World Airways. On July 31, 1997, WorldCorp received a notice of
default on the Renegotiated Bridge Loan, whereby the bank may proceed with the
exercise of its rights and remedies under the loan documents and applicable laws
if the default is not corrected within 15 days following the date of notice.
Based on discussions with the bank, World Airways believes that the bank will
not exercise its rights at this time. No assurances can be given that the bank
will not exercise its rights in the future.
Risks Related to the Air Transportation Industry
Cyclical Nature of Air Carrier Business
World Airways operates in a challenging business environment. The air
transportation industry is highly sensitive to general economic conditions.
Since a substantial portion of passenger airline travel (both business and
personal) is discretionary, the industry tends to experience severe adverse
financial results during general economic downturns and can be adversely
affected by unexpected global political developments. The financial results of
air cargo carriers are also adversely affected by general economic downturns due
to the reduced demand for air cargo transportation. In 1993 and 1994, the
combination of a generally weak global economy and the depressed state of the
air transportation industry adversely affected World Airways' operating
performance. Although World Airways recently has experienced a growth in demand
for its services, such that block hours flown from continuing operations
increased 10% for the first six months of 1997 over the same period in 1996 and
by 23% for 1996 over 1995, there can be no assurance that this level of growth
will continue.
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Competition
The market for outsourcing air passenger and cargo ACMI services is highly
competitive. Certain of the passenger and cargo air carriers against which World
Airways competes possess substantially greater financial resources and more
extensive facilities and equipment than those which are now, or will in the
foreseeable future become, available to World Airways. World Airways believes
that the most important bases for competition in the ACMI outsourcing business
are the age of the aircraft fleet, the passenger, payload and cubic capacities
of the aircraft, and the price, flexibility, quality and reliability of the air
transportation service provided. Competitors in the ACMI outsourcing market
include MartinAir Holland, Tower Air and American TransAir and all-cargo
carriers, such as Atlas Air, Gemini Air Cargo, Polar Air Cargo and Kitty Hawk,
and scheduled and non-scheduled passenger carriers which have substantial belly
capacity. The ability of World Airways to continue to grow depends upon its
success in convincing major international airlines that outsourcing some portion
of their air passenger and cargo business remains more cost-effective than
undertaking passenger or cargo operations with their own incremental capacity
and resources. The allocation of military air transportation contracts by the
USAF is based upon the number and type of aircraft a carrier, alone or through a
teaming arrangement, makes available for use in times of national emergencies.
The formation of competing teaming arrangements comprised of larger partners
than those sponsored by World Airways, an increase by other air carriers in
their commitment of aircraft to the emergency program, or the withdrawal of
World Airways' current partners, could adversely affect the size of the USAF
contracts, if any, which are awarded to World Airways in future years.
Regulation
World Airways is subject to government regulation and control under the
laws of the United States and the various other countries in which it operates.
It is also governed by bilateral air transport services agreements between the
U.S. and the countries to which World Airways provides airline service. World
Airways is subject to Title 49 of the United States Code (the "Transportation
Code"), under which the Department of Transportation (the "DOT") and the Federal
Aviation Administration (the "FAA") exercise regulatory authority. Additionally,
foreign governments assert jurisdiction over air routes and fares to and from
the U.S., airport operation rights and facilities access. Due to its
participation in CRAF, World Airways is subject to inspections approximately
every two years by the USAF as a condition to retaining its eligibility to
provide military charter flights. The USAF may terminate its contract with World
Airways if World Airways fails to pass such inspection or otherwise fails to
maintain satisfactory performance levels. World Airways has periodically
received correspondence from the FAA with respect to minor noncompliance
matters.
Insurance Coverage and Expenses
World Airways is exposed to potential losses that may be incurred in the
event of an aircraft accident. Any such accident could involve not only repair
or replacement of a damaged aircraft and the consequent temporary or permanent
loss from service, but also significant potential claims of injured passengers
and others. World Airways is required by the DOT to carry liability insurance on
each of its aircraft. Although World Airways believes its current insurance
coverage is adequate and consistent with the current industry practice, there
can be no assurance that the amount of such coverage will not be changed or that
World Airways will not bear substantial losses from accidents. Substantial
claims resulting from an accident in excess of related insurance coverage could
have a material adverse effect on the financial condition or results of
operations of World Airways. In addition, World Airways' insurance expenses
could significantly increase if World Airways were to provide service to
destinations where military action is taking place. Any such increases in
expenses could have a material adverse effect on the financial condition or
results of operations of World Airways. As is customary in the airline business,
World Airways has no business interruption insurance. Any extended interruption
of World Airways' operations due to the loss, or unavailability due to
unscheduled servicing or repair, or lack of availability of substitute aircraft
could have a material adverse effect on the financial condition or results of
operations of World Airways.
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Aviation Fuel
The air transportation industry in general is affected by the price and
availability of aviation fuel. Both the cost and availability of aviation fuel
are subject to many economic and political factors and events occurring
throughout the world and remain subject to the various unpredictable economic
and market factors that affect the supply of all petroleum products.
Fluctuations in the price of fuel have not had a significant impact on World
Airways' operations in recent years because, in general, World Airways' ACMI
contracts with its customers limit World Airways' exposure to increases in fuel
prices. However, a substantial increase in the price or the unavailability of
aviation fuel could have a material adverse effect on the air transportation
industry in general and the financial condition and results of operations of
World Airways.
Risk Factors with Respect to InteliData:
Uncertainty as to Future Financial Results
InteliData believes that the Merger will offer opportunities for long-term
efficiencies that should positively affect future operating results of the
combined companies. However, the combined companies will be more complex and
diverse than either US Order or Colonial Data individually, and the combination
and continued operation of their distinct business operations will present
difficult challenges for InteliData's management due to the increased time and
resources required in the management effort. While the management and the Board
of Directors of InteliData believe that the combination can be effected in a
manner that will realize the value of the two companies, neither management
group has experience in combinations of this size or complexity. Accordingly,
there can be no assurance that the process of effecting the business combination
can be effectively managed to realize the operational efficiencies anticipated
to result from the Merger.
Following the Merger, in order to maintain and increase profitability, the
combined Company will need to successfully integrate and streamline overlapping
functions. The two predecessor companies had different systems and procedures in
many operational areas that must be rationalized and integrated. There can be no
assurances that integration will be accomplished smoothly or successfully. The
difficulties of such integration may be increased by the necessity of
coordinating geographically separated organizations. The integration of certain
operations following the Merger will require the dedication of management
resources that may temporarily distract attention from the day-to-day business
of the combined companies. Failure to effectively accomplish the integration of
the two companies' operations could have an adverse effect on InteliData's
results of operation and financial condition.
Developing Marketplace
Home banking and smart telephones are developing markets. Consumer
preferences in interactive technologies are difficult to predict. InteliData's
future growth and profitability will depend, in part, upon consumer acceptance
of electronic home banking and smart telephone technologies and a significant
expansion in the consumer market for telephone-based interactive applications
technologies. Even if these markets experience substantial growth, there can be
no assurance that InteliData's products and services will be commercially
successful or benefit from such growth.
Much of InteliData's success in the smart telephone market depends on
InteliData's ability to meet design specifications and delivery requirements for
its products and services. There can be no assurance of the timing of
introduction of, necessary regulatory approvals for, or market acceptance of
these services and applications. InteliData faces competition in these markets
from other emerging interactive applications delivered through personal
computers, cable television and Integrated Service Digital Network ("ISDN").
Fluctuations in Operating Results
Historically, US Order and Colonial Data have experienced fluctuations in
quarterly operating results, and accordingly, InteliData may experience
fluctuations in quarterly operating results due to a variety of factors, some
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of which are beyond InteliData's control. These include the size and timing of
customer orders or the royalty payments from Visa InterActive, if any, changes
in InteliData's pricing policies or those of its competitors, new product
introductions or enhancements by competitors, delays in the introduction of new
products or product enhancements by InteliData or by its competitors, customer
order deferrals in anticipation of upgrades and new products, market acceptance
of new products, the timing and nature of sales, marketing, and research and
development expenses by InteliData and its competitors, the timing of programs
offering Caller ID or other intelligent network services by a telco, disruptions
in sources of supply, the effects of regulation on Caller ID and other
intelligent network services, the timing and extent of promotional activities by
a telco, changes in service charges by a telco, other changes in operating
expenses, personnel changes and general economic conditions. Additionally,
certain RBOCs have entered into merger agreements. InteliData is unable to
assess the future effect on the company of these mergers, if consummated, and of
other possible consolidations in the telecommunications industry. No assurance
can be given that such quarterly variations will not occur in the future and,
accordingly, the results of any one quarter may not be indicative of the
operating results for future quarters.
Reliance on Caller ID Revenues
A substantial majority of InteliData's revenues are derived from sales and
leases of its Caller ID products. The sale or lease of these products is
directly linked to the implementation and promotion of Caller ID service by
telcos. The timing of such implementation may be affected by government
regulation, by changes in the telecommunications industry resulting from changes
in the regulatory and competitive environment, by switch and software upgrades
and by other factors. There can be no assurance that telcos will continue to
introduce and promote this service successfully or that it will gain widespread
market acceptance. Delays in the introduction of Caller ID service in local
markets or failure of this service to gain widespread market acceptance would
materially and adversely affect InteliData's business, operating results and
financial condition.
Concentration of Distribution of Products and Services
InteliData sells its telecommunications products and services to telcos,
individual telephone subscribers, other equipment manufacturers on a private
label basis ("private label customers") and retail chains. In addition,
InteliData leases its products to individual telco subscribers. Sales and leases
to individual telco subscribers are largely dependent on direct fulfillment
distribution arrangements with certain RBOCs and other telcos. Since InteliData
views the telcos with which it maintains direct fulfillment relationships as its
customers, it considers its customer base to be highly concentrated.
InteliData's current telco fulfillment arrangements are not exclusive and may be
terminated by either party. For the six months ended June 30, 1997,
InteliData's two largest customers, WorldWide Telecom Partners, Inc. and Nynex
Corp. accounted for 23% and 12% of InteliData's revenues, respectively. The
loss of any one or more of InteliData's major customers or the termination of
its distribution arrangements with any telco or the failure to be selected for
significant orders or programs by a telco could materially and adversely affect
InteliData's business, operating results, and financial condition. In addition,
consolidation in the telecommunications industry or changes in the
telecommunications regulatory environment could result in the loss of such
customers or business.
InteliData Common Stock Owned by WorldCorp
As of June 30, 1997, WorldCorp beneficially owned approximately 28.9% of
the outstanding InteliData Common Stock. WorldCorp is highly leveraged, and
therefore requires substantial funds to meet debt service requirements each
year. As a result of WorldCorp's cash requirements, it may be required to sell
shares of InteliData's Common Stock during 1997 and such sales, or the threat of
such sales, could have a material adverse effect on the market price for
InteliData's common stock. In addition, InteliData's Board of Directors has nine
members, four of whom also serve on the Board of Directors of WorldCorp. As a
result of membership on InteliData's Board and stock ownership, WorldCorp may
have a significant influence on the decisions made by InteliData.
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Technological Considerations
InteliData's business activities are concentrated in fields characterized
by rapid and significant technological advances. There can be no assurance that
InteliData will remain competitive technologically or that InteliData's
products, processes or services will continue to be reflective of such advances.
Failure to introduce new products or product enhancements that achieve market
acceptance on a timely basis could materially and adversely affect InteliData's
business, operating results and financial condition. There can be no assurance
that InteliData will not encounter unanticipated technical, marketing or other
problems or delays relating to new products, features or services which
InteliData has recently introduced or which it may introduce in the future.
Moreover, there can be no assurance that InteliData's new products, features or
services will be successful, that the introduction of new products, features or
services by InteliData's competitors will not materially and adversely affect
the sales of InteliData's existing products or that InteliData will be able to
adapt to future changes in the telecommunications industry. Most of InteliData's
competitors and potential competitors have significantly greater financial,
technological and research and development resources than InteliData.
Dependence on Foreign Production
InteliData's Caller ID units and certain other products, including the
smart telephone, the Telesmart 4000/Intelifone(TM), are manufactured by
companies with facilities in Hong Kong, Malaysia, and the People's Republic of
China. These facilities are supplemented, in part, by other manufacturers in
Asia for certain integrated telephone and small business system products and by
limited manufacturing facilities in Connecticut. The availability or cost of
these Caller ID units and smart telephones may be adversely affected by
political, economic or labor conditions in Hong Kong, Malaysia or the People's
Republic of China, including the 1997 return of Hong Kong to China, and by
fluctuations in currency exchange rates. In addition, a change in the tariff
structure or other trade policies of the United States or countries from which
InteliData will import products could adversely affect InteliData's foreign
manufacturing strategies.
Importance of Strategic Alliances
One of InteliData's business strategies is to manufacture or sell its
products and services through strategic alliances. The success of this strategy
will depend to an extent both on the ultimate success of its strategic partners
as well as on the ability of its partners to successfully market InteliData's
products and services. There can be no assurance that any alliance partners will
view their alliance with InteliData as significant for their own businesses or
that they will not reassess their commitment to InteliData at any time in the
future.
Competition
Consumer Telecommunications
---------------------------
The market for InteliData's products is highly competitive and subject to
increased competition resulting from rapid technological change as well as
resulting from changes in the telecommunications regulatory environment, the
telecommunications industry consolidation and the emergence of new market
entrants. At present, InteliData's principal competitors are CIDCO, Lucent and
Northern Telecom. InteliData's Caller ID products also compete with Caller ID
telephones offered by Panasonic, Sony, Thomson and US Electronics.
Marketing of InteliData's smart telephone is subject to competition from
smart telephones marketed or developed by Philips, Northern Telecom and CIDCO as
well as other emerging platforms for interactive applications delivered through
personal computers and cable television. InteliData expects competition in the
markets for its consumer telecommunications products and services to increase in
the future and expects competition from existing and new competitors, possibly
including RBOCs, other telcos or other current customers, as well as from
network switch-based services and from the increased application of cellular
technology. InteliData's primary current and potential competitors in the market
for its consumer telecommunications products and services have substantially
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greater financial, marketing and technical resources than InteliData.
Competition could materially and adversely affect InteliData's results of
operations through price reductions and loss of market share.
InteliData competes with a large number of competitors for its repair
services and other services supporting the development and implementation of
intelligent network services. Several of InteliData's competitors in the market
for such services have substantially greater financial, marketing and
technological resources than InteliData. There can be no assurance that
InteliData will be able to continue to compete successfully against its existing
competitors or that it will be able to compete successfully against new
competitors.
Electronic Commerce
-------------------
The market for interactive products and services is highly competitive and
subject to rapid innovation and technological change, shifting consumer
preferences and frequent new product introductions. InteliData's home banking
products and services compete with services offered by a number of competitors
and competition may intensify as a result of new market entrants. Banks have
developed home banking products for their own customers and, in the future, may
offer these services to other banks. Non-banks also may develop home banking
products to offer to banks. Computer software and data processing companies also
offer home banking services. Visa competes with other organizations, including
MasterCard International, Inc. ("MasterCard"), which offers its Masterbanking
home banking service through CheckFree Corporation. Many competitors exist for
InteliData's various banking products including other manufacturers of touch-
tone response systems, other financial software companies and financial services
software and service companies. InteliData believes that its primary competition
for its customer support services will come from financial institutions and
third parties that choose to offer customer support services either directly
through Visa's customer support messaging standard ("CSMS") product or on their
own. InteliData expects that competition in all of these areas will increase in
the near future.
Relationship with Visa
InteliData sold the Visa Bill-Pay System to Visa on August 1, 1994, for
approximately $15 million in cash, the assumption of certain liabilities and
rights to a 72-month royalty period commencing January 1, 1995 and ending
December 31, 2000 (the "Royalty Period"). Visa subsequently transferred these
assets to Visa InterActive, its wholly owned subsidiary. The royalty obligation
is based on the number of customers who use the Visa Bill-Pay System during the
Royalty Period. The agreement with Visa expressly provides that the royalty will
apply only if the means by which a customer makes an electronic bill payment
involves the use of a "significant portion" of the Visa Bill-Pay System.
In August 1997, Visa announced that it had sold the assets and operations
of Visa Interactive to Integrion Financial Network ("Integrion"). Visa has
retained the Visa Bill-Pay System that was developed around technology acquired
from InteliData by Visa in 1994 and the system will become a licensed product to
Integrion. Visa will continue to be responsible for payment of royalties to
InteliData for bank customers who utilize home banking and bill payment services
based on technology previously acquired from InteliData. However, there can be
no assurance that Visa or Integrion will continue to actively market products
and services that would result in payment of royalties to InteliData.
Royalties to InteliData are calculated and paid by Visa InterActive
quarterly during the Royalty Period. Because the amount of the royalties to
InteliData is dependent upon the number of customers that use the Visa Bill-Pay
System on a monthly basis during the Royalty Period, InteliData cannot provide
any assurances of the amount of royalties, if any, that will be payable by Visa
InterActive to InteliData. The royalty payment will be reduced for each quarter
through December 31, 1997, by an offset amount (the "Visa Offset") which was
initially set at $73,000. If the royalty payment that would otherwise be due in
respect of a quarter is smaller than the offset amount for that quarter, no
royalty payment will be made to InteliData, and the difference between $73,000
and the royalty otherwise due will increase the size of the Visa Offset for the
next quarter. The aggregate amount of the Visa Offset for the Royalty Period is
$880,000. InteliData did not receive any royalty revenue from Visa in 1996 due
to the Visa Offset and does not expect to receive any royalty revenue after
application of the Visa Offset until at least the second half of 1997.
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In addition, under the terms of its agreement with Visa, Visa InterActive
is not obligated to pay royalties to InteliData for active bank customers who
utilize home banking and bill payment technology independently developed by Visa
InterActive. If Visa InterActive independently develops or acquires its own home
banking and bill payment technology which does not use or build upon
InteliData's technology, this could have a material adverse effect on the amount
of royalties payable by Visa InterActive to InteliData. As a condition of Visa's
acquisition of the Visa Bill-Pay System, InteliData has agreed to work
exclusively with Visa in certain areas and to refrain from certain activities
that are in competition with Visa and its affiliates. These covenants may
increase InteliData's reliance upon Visa.
Dependence on Key Employees
InteliData is highly dependent on certain key executive officers and
technical employees to manage the operations and business of InteliData as well
as to implement the business plans of InteliData on an ongoing basis. The loss
of any such key employees could have an adverse impact on the future operations
of InteliData.
Regulation
The Telecommunications Act of 1996 and regulations or orders promulgated
thereunder may result in or accelerate changes in various aspects of the
telecommunications industry, including the competitive environment, the delivery
and pricing of various telecommunications products and services and possible
consolidation. Although InteliData is unable to predict what effect, if any, the
Telecommunications Act of 1996 or other regulatory developments may have upon
the telecommunications industry or InteliData's business, any such effects could
have a material adverse impact on the future operations of InteliData.
In the United States, Caller ID and other intelligent network services are
subject to federal and state regulation. Caller ID and other intelligent network
services may in the future be subject to further regulation by the federal
government, state public utility commissions and other regulatory authorities,
as well as court challenges, including possible challenges due to protests from
special interest groups that object to such services on the basis of privacy
concerns. An order issued by the FCC effective December 1, 1995, requires all
United States telephone service providers with Signaling System 7 switching
architecture to transmit to each other without charge Caller ID number
information on interstate calls within the United States (except for public pay
phones and party lines). The FCC's order also requires that telcos that offer
Caller ID service must provide to their telephone subscribers without charge a
per-call blocking mechanism to block the transmission of their Caller ID
information on interstate calls and must inform subscribers that their telephone
numbers may be identified to a called party and how to use this blocking
capability.
Volatility of Stock Price
The market price of InteliData's Common Stock has experienced significant
volatility. The stock market has experienced volatility that has particularly
affected the market prices of equity securities of many high technology and
developmental stage companies and that has often been unrelated to the operating
performance of such companies. Factors such as announcements of the
introduction of new products or services by InteliData or its competitors,
announcements of joint development efforts or corporate partnerships in the
interactive applications industry, market conditions in the banking,
telecommunications and other emerging growth company sectors and rumors relating
to InteliData or its competitors may have a significant impact on the market
price of InteliData's Common Stock.
Limited Proprietary Protection
InteliData possesses limited patent or registered intellectual property
rights with respect to its technology. InteliData depends in part upon its
proprietary technology and know-how to differentiate its products from those of
its competitors and works independently and from time to time with third parties
with respect to the design and engineering of its own products. InteliData also
relies on a combination of contractual rights and trade secret laws to protect
its proprietary technology. There can be no assurance, however, that InteliData
will be able to protect
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its technology or successfully develop new technology or gain access to such
technology or that third parties will not be able to develop similar technology
independently or that competitors will not obtain unauthorized access to
InteliData's proprietary technology, that third parties will not misuse the
technology to which InteliData has granted access, or that InteliData's
contractual or legal remedies will be sufficient to protect InteliData's
interests in its proprietary technology.
Certain of Lucent's Caller ID patents are licensed by Lucent to InteliData
and others, including InteliData's competitors. If the Lucent license were
terminated and InteliData were unable to negotiate a new patent license
agreement with Lucent, InteliData would no longer be authorized to manufacture
or sell Caller ID products in the United States other than to the RBOCs and to
Lucent. As a result, InteliData's business would be materially and adversely
affected.
Limited Sources of Supply
The key components used in InteliData's products are currently being
purchased from multiple sources, except for its application specific integrated
circuit ("ASIC") chips, which are purchased from a single source, Integrated
Circuit Systems, Inc. Although InteliData believes it could develop other
sources for each of the components for its products, the process could take
several months. The inability or refusal of any such source to continue to
supply components could have a material adverse effect on InteliData pending the
development of an alternative source.
USE OF PROCEEDS
Proceeds from the sale of the Warrants and the underlying Shares will be
received directly by the Selling Securityholders. However, to the extent that
the Warrants are exercised, the Company will receive proceeds equal to the
exercise price thereof multiplied by the number of Warrants exercised. If all
of the Warrants are exercised, the Company will receive gross proceeds of
approximately $720,000 (based on an exercise price of $6.00 per share). The
Company presently intends to use such proceeds, if any, for working capital and
general corporate purposes. See "Selling Securityholders."
PLAN OF DISTRIBUTION
The Warrants and the underlying Shares offered by the Selling
Securityholders by this Prospectus may be sold from time to time by the Selling
Securityholders or by their transferees. The distribution of the Warrants and
the underlying Shares offered hereby by the Selling Securityholders may be
effected in one or more transactions that may take place on the over-the-counter
market, including ordinary brokers' transactions, privately negotiated
transactions or through sales to one or more dealers for resale of such
securities as principals, at market prices prevailing at the time of sale or at
negotiated prices. Usual and customary or specifically negotiated brokerage
fees, underwriting discounts or commissions may be paid by the Selling
Securityholders. Resales of the Shares may, from time to time, be made on the
NYSE, or other stock exchanges, in privately negotiated transactions or
otherwise. For example, the Selling Securityholder Securities may be sold by one
or more of the following without limitation: (a) a block trade in which the
broker or dealer so engaged will attempt to sell the Selling Securityholder
Securities as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; (c) ordinary brokerage transactions in which the broker solicits
purchasers; and (d) face to face transactions between sellers and purchasers
without a broker-dealer. In effecting sales, brokers or dealers engaged by the
Selling Securityholders may arrange for other brokers or dealers to participate
in the resales.
The Selling Securityholders and any broker-dealers that participate in the
distribution may under certain circumstances be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions received by such
broker-dealers and any profits realized on the resale of shares by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
To the extent required under the Securities Act, a supplemental prospectus will
be filed disclosing (a) the name of any such broker-dealers, (b) the number of
Selling
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Securityholder Securities involved, (c) the price at which such Selling
Securityholder Securities are to be sold, (d) the commissions paid or discounts
or concessions allowed to such broker-dealers, where applicable, (e) that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this Prospectus, as supplemented, and (f)
other facts material to the transaction.
The Company and the Selling Securityholders may agree to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act. In addition, the Company has agreed to indemnify the Selling
Securityholders with respect to the Selling Securityholder Securities against
certain liabilities, including, without limitation, certain liabilities under
the Securities Act, or, if such indemnity is unavailable, to contribute toward
amounts required to be paid in respect of such liabilities.
The Company has agreed to pay certain costs and expenses incurred in
connection with the registration of the Selling Securityholder Securities,
except that the Selling Securityholders shall be responsible for all selling
commissions, transfer taxes and related charges in connection with the offer and
sale of such Selling Securityholder Securities.
There is no assurance that any of the Selling Securityholders will sell any
or all of the Selling Securityholder Securities. The Company has agreed to keep
the registration statement relating to the offering and sale by the Selling
Securityholders of the Selling Securityholder Securities continuously effective
for a period of 48 months from the date of this Prospectus; provided, however,
that the Company shall not be required to maintain the registration statement
once the Warrants and the underlying Shares may be sold pursuant to Rule 144(k)
under the Securities Act. In addition, the Selling Securityholders have agreed
not to sell any of the Selling Securityholder Securities for a period of 90 days
after receiving notice that the Company intends to commence a registered public
offering of its Common Stock.
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SELLING SECURITYHOLDERS
The following table sets forth the number of Warrants and underlying Shares
beneficially owned by each of the Selling Securityholders and included herein.
Because the Selling Securityholders may offer all or some of the Selling
Securityholder Securities which they own pursuant to the offering contemplated
by this Prospectus, and because there are currently no agreements, arrangements
or understandings with respect to the sale of any of the Securityholder
Securities, no estimate can be given as to the amount of Selling Securityholder
Securities that will be held by the Selling Securityholders after completion of
this offering. The Selling Securityholder Securities offered by this Prospectus
may be offered from time to time by the Selling Securityholders named below.
All of the Selling Securityholders own less than 1% of the outstanding shares of
Common Stock.
<TABLE>
<CAPTION>
Number of
Shares of
Number of Common Stock
Warrants Beneficially
Beneficially Held Held and Maximum
Names of Selling and Maximum Amount to be
Securityholders Amount to be Sold Sold(1)
- ---------------- ----------------- ----------------
<S> <C> <C>
Hoechst Celanese Employee Master Benefit Trust............... 86,400 86,400
20/20 Short Term High Yield Fund............................. 12,000 12,000
Rectors and Visitors of the University of Virginia........... 6,000 6,000
Riverside Income Fund Ltd. LP................................ 6,000 6,000
Riverside Specialty Income Fund Trust........................ 3,600 3,600
North Broward Radiologists P.A. Profit Sharing Plan FBO
Carl C. Peterson M.D. and Walter F. Ciceric M.D.............. 3,000 3,000
Warwick Fund-Ansbacher Bahamas............................... 3,000 3,000
- --------------
</TABLE>
(1) Represents Shares to be issued upon exercise of the Warrants.
LEGAL MATTERS
The validity of the Warrants and the Common Stock offered hereby will be
passed upon for the Company by Hunton & Williams, Richmond, Virginia.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996 and
1995, and the related consolidated statements of operations, changes in common
stockholders' deficit and cash flows for each of the years in the three year
period ended December 31, 1996, and the related financial statement schedules,
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, incorporated by reference herein, have been incorporated
herein by reference in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the December 31, 1996 consolidated
financial statements states that their opinion, insofar as it relates to the
amounts included for InteliData Technologies Corporation, is based solely on the
report of other auditors. The consolidated financial statements of InteliData
Technologies Corporation as of December 31, 1996, and for the year then ended,
included in WorldCorp's Annual Report on Form 10-K for the year ended December
31, 1996, incorporated by reference herein and in the Registration Statement,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
26
<PAGE>
================================================================================
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied on as
having been authorized by the Company, the Selling Stockholders or any other
person. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information herein is correct
as of any time subsequent to the date hereof or that there has been no change in
the affairs of the Company since such date.
____________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information............... 3
Incorporation of Certain Documents
By Reference...................... 3
Prospectus Summary.................. 4
Risk Factors........................ 9
Use of Proceeds..................... 24
Plan of Distribution................ 24
Selling Securityholders............. 26
Legal Matters....................... 26
Experts............................. 26
</TABLE>
____________
================================================================================
================================================================================
WorldCorp, Inc.
120,000 Warrants
120,000 Shares
Common Stock
_________________________
PROSPECTUS
_________________________
September __, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses* in connection with the Offerings are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.. $ 155
Blue Sky fees........................................ 2,000
Legal fees........................................... 15,000
Accounting fees...................................... 5,000
Printing, engraving and postage expenses............. 3,000
Miscellaneous........................................ 5,845
Total................................................ $31,000
=======
</TABLE>
- -------------------
*The Company will pay these expenses.
Item 15. Indemnification of Officers and Directors
WorldCorp, Inc., a Delaware corporation (the "Company"), is empowered by
Section 145 of the Delaware General Corporation Law, subject to the procedures
and limitations stated therein, to indemnify any person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in the defense of any threatened, pending or
completed action, suit or proceeding in which such person is made a party by
reason of his or her being or having been a director or officer of WorldCorp.
The statute provides that such indemnification is not exclusive of other rights
or indemnification to which a person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Certificate
of Incorporation and Bylaws of WorldCorp provide that WorldCorp shall indemnify
its directors and officers to the full extent permitted by the Delaware General
Corporation Law.
WorldCorp is also empowered by Section 102(b) of the Delaware General
Corporation Law to include a provision in its Certificate of Incorporation that
limits a director's liability to WorldCorp or its stockholders for monetary
damages for breaches of his or her fiduciary duty except for (i) a breach of the
director's duty of loyalty to WorldCorp or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) improper dividend payments, stock repurchases or
redemptions; and (iv) any transaction from which the director derived an
improper personal benefit. Article 10 of WorldCorp's Certificate of
Incorporation includes such a provision.
Policies of insurance are maintained by the Company under which directors
and officers are insured, within the limits and subject to the limitations of
the policies, against certain expenses in connection with the defense of
actions, suits or proceedings, and certain liabilities that might be imposed as
a result of such actions, suits or proceedings, to which they are parties by
reason of being or having been directors or officers of the Company.
The Company has entered into indemnification agreements with its officers
and directors that indemnify such officers and directors to the full extent
permitted by law against all expenses, judgments, fines or settlement amounts
incurred or paid by them in any action or proceeding, including any action by or
in the right of the Company on account of their service as a director or officer
of the Company.
II-1
<PAGE>
Item 16. Exhibits
4.1 Article 10 of the Company's Certificate of Incorporation, incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on Form S-
4, as amended, (Commission File No. 33-012735) filed on March 19, 1987, and
Article VIII of the Company's Bylaws, incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-4, as amended,
(Commission File No. 33-012735) filed on March 19, 1987.
5.1 Opinion of Hunton & Williams.*
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Hunton & Williams (included in Exhibit 5.1).*
24.1 Power of Attorney (included on the signature pages of the Registration
Statement).
- -------
* Previously filed.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(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; 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;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such 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.
(b) The undersigned registrant hereby undertakes 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 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.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has 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
II-2
<PAGE>
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant 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 registrant will, unless in the opinion of its 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.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form
of prospectus 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Herndon, Commonwealth
of Virginia on September 5, 1997.
WORLDCORP, INC.
By: /s/ Andrew M. Paalborg
----------------------
Andrew M. Paalborg
Vice President and General Counsel
II-4
<PAGE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on September 5, 1997. Each of the directors and/or
officers of WorldCorp, Inc. whose signature appears below hereby appoints T.
Coleman Andrews, III, William F. Gorog and Andrew M. Paalborg as his attorney-
in-fact to sign in his name and behalf, in any and all capacities stated below
and to file with the Securities and Exchange Commission, any and all amendments,
including post-effective amendments to this registration statement, making such
changes in the registration statement as appropriate, and generally to do all
such things in their behalf in their capacities as officers and directors to
enable WorldCorp, Inc. to comply with the provisions of the Securities Act of
1933, and all requirements of the Securities and Exchange Commission.
Signature Title
--------- -----
* Chief Executive Officer and President
- ------------------------------- (Principal Executive Officer)
Walter M. Fiederowicz
* Director and Chairman of the Board
- -------------------------------
T. Coleman Andrews, III
* Vice President and Chief Financial Officer
- ------------------------------- (Principal Financial Officer and Principal
Mark S. Lynch Accounting Officer)
* Director
- -------------------------------
Gideon Argov
* Director
- -------------------------------
John C. Backus, Jr.
* Director
- -------------------------------
James E. Colburn
* Director
- -------------------------------
William F. Gray
* Director
- -------------------------------
Patrick F. Graham
* By: /s/ Andrew M. Paalborg
----------------------------
Andrew M. Paalborg
As Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Deloitte & Touche LLP.
24.1 Power of Attorney (included on the signature pages of the
Registration Statement).
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
WorldCorp,Inc.:
We consent to the incorporation by reference in the registration statement on
Form S-3 (No. 333-19483) of WorldCorp, Inc. of our report dated February 14,
1997, relating to the consolidated balance sheets of WorldCorp, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, changes in common stockholders' deficit and cash flows
for each of the years in the three-year period ended December 31, 1996, and the
related financial statement schedule, which report appears in the December 31,
1996 annual report on Form 10-K of WorldCorp, Inc., incorporated by reference
herein, and to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Washington, D.C.
September 4, 1997
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No.4 to the
Registration Statement on Form S-3 (Registration No. 333-19483) filing of
WorldCorp, Inc. of our report dated February 5, 1997, appearing in the Annual
Report on Form 10-K of InteliData Technologies Corporation for the year ended
December 31, 1996, incorporated by reference in WorldCorp, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1996, which is incorporated by
reference in this Amendment No.4 to Form S-3 and to the reference to us under
the heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Hartford, Connecticut
September 2, 1997
