SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 2
(Amending Items 7(a) and 7(b))
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 29, 1998
World Access, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State 0-19998 65-0044209
or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
945 E. Paces Ferry Road,
Suite 2240, Atlanta, Georgia 30326
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 231-2025
<PAGE>
Explanatory Note: This Amendment No. 2 on Form 8-K/A is being filed to set forth
the audited financial statements of Advanced TechCom, Inc. ("ATI") for the year
ended December 31, 1997 in lieu of ATI's audited financial statements for the
year ended December 31, 1996 and the unaudited financial statements for the nine
months ended September 30, 1997 previously filed.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired. Included in this Report
are the consolidated financial statements of Advanced TechCom, Inc. ("ATI")
for the year ended December 31, 1997. Such financial statements have been
audited by the independent accounting firm of Tedder Grimsley & Company, P.A.,
whose opinion thereon is also included herein.
<PAGE>
ADVANCED TECHCOM, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
For the Year Ended December 31, 1997
<PAGE>
TABLE OF CONTENTS
Page No.
INDEPENDENT AUDITOR'S REPORT..................................................1
FINANCIAL STATEMENTS
Consolidated Balance Sheet..................................................2
Consolidated Statement of Operations .......................................3
Consolidated Statement of Stockholder's Equity..............................4
Consolidated Statement of Cash Flows........................................5
Notes to Consolidated Financial Statements..................................6
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Advanced TechCom, Inc.
Wilmington, Massachusetts
We have audited the accompanying consolidated balance sheet of Advanced TechCom,
Inc. and Subsidiaries (the "Company") as of December 31, 1997, and the related
consolidated statements of operations, stockholder's equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Advanced TechCom,
Inc. and Subsidiaries as of December 31, 1997 and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Tedder, Grimsley & Company, P.A.
March 27, 1998
Lakeland, Florida
<PAGE>
<TABLE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1997
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 473,433
Accounts receivable 1,349,833
Inventory 4,553,766
Prepaid expenses and other 73,683
------------
TOTAL CURRENT ASSETS 6,450,715
PROPERTY AND EQUIPMENT - net 1,081,714
------------
TOTAL ASSETS $ 7,532,429
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 5,675,021
Accounts payable 1,700,536
Accrued liabilities 1,899,597
Warranty reserve 586,339
Customer deposits 305,173
------------
TOTAL CURRENT LIABILITIES 10,166,666
LONG-TERM DEBT - net of current portion 73,413
------------
TOTAL LIABILITIES 10 240,079
------------
STOCKHOLDERS' EQUITY
Preferred stock 1,121,051
Common stock 38,747
Additional paid-in capital 13,246,315
Accumulated deficit (17,113,763)
------------
TOTAL STOCKHOLDER'S EQUITY (2,707,650)
------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 7,532,429
============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
<CAPTION>
<S> <C>
NET SALES $ 13,686,728
Cost of goods sold 10,404,156
Write-off of obsolete inventory 2,188,000
Capitalization of material overhead 431,700
Accrual of liability under firm purchase
commitments 561,500
------------
TOTAL COST OF GOODS SOLD 13,585,356
------------
GROSS PROFIT 101,372
OPERATING EXPENSES
Research and development 4,282,513
Sales and marketing 3,524,061
General and administrative 2,228,273
Customer service 513,778
------------
TOTAL OPERATING EXPENSES 10,548,625
------------
LOSS FROM OPERATIONS (10,447,253)
OTHER INCOME 64,004
------------
NET LOSS BEFORE INCOME TAXES (10,383,249)
PROVISION FOR INCOME TAXES ---
------------
NET LOSS $(10,383,249)
============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
For the Year Ended December 31, 1997
<CAPTION>
Common Stock Preferred Stock
$.10 Par $.10 Par
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Balance, beginning of year 343,989 $ 34,399 10,097,103 $ 1,009,710
Issuance of stock 750 75 913,413 91,341
Exercise of stock options 42,730 4,273 - -
Stock issued for services - - 200,000 20,000
Forgiveness of debt - - - -
Net loss
-------- -------- ---------- -----------
Balance, end of year 387,469 $ 38,747 11,210,516 $ 1,121,051
======== ======== ========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Stock
Additional Accumulated Subscription Deferred
PIC Deficit Receivable Compensation
<CAPTION>
<S> <C> <C> <C>
$ 10,107,727 $ (6,730,514) $ (273,000) $ (24,000)
2,951,766 - - -
6,822 - - -
180,000 - - 24,000
- - 273,000 -
- (10,383,249) - -
------------ ------------- ------------ ------------
$ 13,246,315 $ (17,113,763) $ - $ -
============ ============= ============ ============
</TABLE>
<PAGE>
<TABLE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1997
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (10,383,249)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 699,382
Forgiveness of stock subscription
receivable 273,000
Deferred compensation 24,000
Issuance of stock for services 200,000
Other 115,401
(Increase) decrease in:
Accounts receivable 2,238,264
Inventory 1,289,950
Prepaid expenses and other 73,922
Increase (decrease) in:
Accounts payable (930,234)
Accrued liabilities 1,023,095
Warranty reserve 183,488
Customer deposits 84,266
--------------
NET CASH USED BY
OPERATING ACTIVITIES (5,108,715)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (774,972)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under line of credit 975,000
Proceeds from issuance of debt 2,364,948
Principal payments on debt (343,548)
Proceeds from sale of stock 3,043,182
Proceeds from exercise of stock options 11,095
--------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 6,050,677
--------------
NET INCREASE IN CASH 166,990
CASH, BEGINNING OF YEAR 306,443
--------------
CASH, END OF YEAR $ 473,433
==============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Advanced TechCom, Inc. and Subsidiaries (the "Company") designs, develops and
manufactures a series of high-performance digital microwave/millimeter wave
radio equipment, operating in frequencies of 1.5 GHZ to 38 GHZ utilized in the
telecommunications industry.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned foreign sales corporation, Advanced TechCom
(Barbados), Inc. They also include the accounts of Advanced TechCom de Mexico,
S.A. de C.V. which is owned equally by Advanced TechCom, Inc. and Advanced
TechCom (Barbados), Inc.
Revenue Recognition
The Company recognizes revenue from the sales of products when the products are
shipped. Sales to overseas customers generally require letters of credit before
the products are shipped.
Allowance for Doubtful Accounts
An allowance for doubtful accounts is provided when accounts are considered
uncollectible.
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or market.
Property and Equipment
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Estimated useful lives of assets are as follows:
Machinery, equipment and other 3-7 years
Furniture and fixtures 3-7 years
Leasehold improvements Shorter of lease term
or useful life
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1997
Financial Instruments
The carrying values of cash, accounts receivable, accounts payable and
borrowings under the Company's various debt instruments approximate fair value
due to the short-term nature of these instruments.
Income Taxes
The Company is taxed as a C Corporation. Deferred tax assets and liabilities are
recognized for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred income taxes are
determined based on the difference between the financial statement and tax basis
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.
Research and Development
Research and development costs are expensed when incurred.
Warranty Reserve
The Company sells the majority of its products with a two-year repair or
replacement warranty. The accompanying consolidated financial statements include
an accrual of $586,339 for estimated warranty claims based on the Company's
actual claims and anticipated future claims.
Employee Stock-Based Compensation
The Company used the intrinsic value-based method of Accounting Principles Board
Opinion ("APB") No. 25 as allowed under Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," to
account for all of its employee stock-based compensation plans.
Customers and Concentration of Credit Risk
The Company's products are sold both directly to customers and through
distributors. The Company's customers consist of domestic and international
wireless and cellular companies, telephone companies, utilities and government
and educational institutions.
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1997
Approximately 93% of the Company's net sales are derived from international
customers. A major international systems integrator, who resells worldwide,
accounted for approximately 18% of the Company's 1997 net sales and
approximately 12% of the accounts receivable balance at December 31, 1997. A
second customer accounted for approximately 16% of the Company's 1997 net sales
and approximately 10% of the accounts receivable balance at December 31, 1997.
Use of Estimates
The preparation of the Company's consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures of
certain assets and liabilities at the balance sheet date. Actual results may
differ from such estimates.
NOTE B - FUNDING OF OPERATIONS
As shown in the consolidated financial statements for the year ended December
31, 1997, the Company incurred a net loss of $10,383,249 and had negative cash
flow from operations of $5,108,715. The Company's 1997 loss and working capital
needs were principally funded by proceeds from a private placement equity
offering, issuance of short-term debt and borrowings under a line of credit.
On December 24, 1997, the Company entered into an agreement and plan of merger
with World Access, Inc. and its wholly owned Subsidiary, Cellular Infrastructure
Supply, Inc. (which is a more fully described below). This merger was completed
in January, 1998. Subsequent to the merger, management made significant
revisions to its plan of operations including personnel cut backs and
expenditure reductions.
NOTE C - ACCOUNTS RECEIVABLE
At December 31, 1997, the Company evaluated its accounts receivable and
determined that $413,092 of accounts receivable may be uncollectible. Such
amount has been established as an allowance for doubtful accounts at December
31, 1997.
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1997
Accounts receivable is comprised of the following at December 31, 1997:
Accounts receivable $ 1,762,925
Less allowance for
doubtful accounts 413,092
------------
$ 1,349,833
============
NOTE D - INVENTORY
Inventory consisted of the following at December 31, 1997:
Raw materials $ 3,065,469
Work in process 1,220,720
Finished goods 267,577
------------
Total $ 4,553,766
============
NOTE E - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1997:
Leasehold improvements $ 60,459
Machinery, equipment
and other 1,990,896
Office furniture and
equipment 881,801
------------
2,933,156
Less accumulated depreciation 1,851,442
------------
Property and equipment - net $ 1,081,714
============
At December 31, 1997, the capitalized cost of property and equipment under
capital leases was approximately $451,979 and related accumulated depreciation
was approximately $78,807.
NOTE F - LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997:
Revolving line of credit - World Access, Inc. $ 4,450,613
Note payable to stockholder, due on
demand, interest rate 12%. 195,000
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1997
Note payable to stockholder, due on
demand, interest rate 12%. 200,000
Note payable to a community development
finance corporation, interest payable
monthly at a rate of 10%, collateralized by
a second lien on substantially all of the
Company's assets and personally guaranteed
by the principal stockholder of the Company. 124,999
Note payable to a community development
organization, interest payable monthly
at a rate of 10%, collateralized by a second
lien on substantially all of the Company's
assets and personally guaranteed by the
principal stockholder of the Company. 124,999
Note payable to a business development
corporation, payable in installments
through August 2000 with interest computed
at prime plus 2.5% (approximately 9%
at December 31, 1997), collateralized by a
second lien on substantially all of the
Company's assets and personally guaranteed
by the principal stockholder of the Company. 274,982
Premium finance agreement payable in
monthly installments of $1,353 including
interest at 10.75%. 10,217
Capital lease obligations:
Non-cancelable lease obligations, payable
in monthly installments, collateralized
by certain equipment
Monthly Interest Maturity
Payment Rate Date
$ 3,172 12.24% March, 1999 57,142
2,428 12.24% May, 1999 47,630
13,416 12.38% April, 1999 262,852
------------
5,748,434
Less current portion 5,675,021
------------
$ 73,413
============
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1997
Maturities on long-term debt as of December 31, 1997 are as follows:
Year Ending
December 31,
------------
1998 $ 5,675,021
1999 73,413
------------
$ 5,748,434
============
The Company had a revolving bank line of credit up to a maximum of $2,500,000
which was due on demand and had interest at the bank's prime rate plus 1/2%. The
line was collateralized by substantially all of the Company's assets. This line
of credit required, among other things, minimum levels of consolidated tangible
net worth, maintenance of certain financial ratios and a minimum base of
inventory and accounts receivable. The Company was out of compliance with such
covenants.
In December 1997, World Access, Inc., assumed the bank's position under such
agreement via assignment by the bank.
World Access, Inc. subsequently increased the line of credit to $5,000,000 and
waived compliance with certain covenants.
World Access, Inc. also repaid certain notes payable by the Company to the bank
in the amount of $117,344 which was applied against the line of credit extended
to the Company.
Subsequent to December 31, 1997, all of the notes payable except the line of
credit, the premium finance agreement and the capital lease obligations were
refinanced by the Company by requesting funds from World Access, Inc. for such
purpose. World Access, Inc. formally merged the Company into its wholly owned
subsidiary in 1998. As such debts were in substance, refinanced in 1998, they
are included in current liabilities.
NOTE G - INCOME TAXES
Deferred income taxes are provided for temporary differences in the recognition
of certain income and expense items for financial reporting and income tax
purposes. Such temporary differences relate primarily to depreciation methods,
inventory allowances, the recognition of certain liabilities for financial
statement purposes that can not be recognized for tax purposes until later
periods and the difference in the recognition of the tax effects of operating
losses for financial reporting and income tax purposes.
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1997
As of December 31, 1997, the Company had a net deferred tax asset of
approximately $7,437,000 which consisted of the following:
State research and development credits $ 654,223
Federal research and development credits 361,202
State investment tax credits 21,837
Inventory 34,114
Warranty 222,220
Accruals 450,824
Depreciation 189,500
Operating loss carry forwards 5,503,080
--------------
7,437,000
Valuation allowance (7,437,000)
--------------
Net deferred taxes $ -
==============
A valuation allowance for the full amount has been recognized to fully offset
this asset as the Company will not be able to utilize the future benefit.
As of December 31, 1997, the Company had net operating losses of approximately
$14,520,000.
NOTE H - STOCKHOLDER'S EQUITY
Stock -
The Company has authorized the issuance of the following stock as of December
31, 1997:
Common stock $.10 par value 25,000,000 shares
Preferred stock-designated* $.10 par value 15,000,000 shares
Preferred stock-undesignated $.10 par value 5,000,000 shares
* Series A preferred stock
The preferred stock has voting rights similar to common stock and equal to the
number of whole shares of common into which the preferred is convertible. The
preferred stock also has preference on liquidation over common stock and on the
payment of dividends. The Series A preferred stock shall be convertible, without
the payment of any additional consideration by the holder, at any time at the
option of the holder, at a conversion rate, subject to adjustment, of one share
of common for each share of preferred.
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1997
Each share of Series A preferred stock shall automatically be converted into
common stock at the then effective applicable conversion rate upon the closing
of a public offering with gross proceeds of not less than $15 million or upon
the affirmative vote of the majority of the preferred stockholders.
NOTE I - OPTIONS
During 1995, the Company adopted the 1995 Stock Option Plan (the "1995 Plan").
The 1995 Plan initially permitted the grant of options to purchase up to
1,200,000 shares of the Company's common stock at a price at least equal to the
fair market value of the stock, determined by the Board, on the date of grant
for incentive stock options and at prices determined by the Board in its sole
discretion for nonqualified options. On September 6, 1996, the Board and
stockholders approved an increase in the shares available for grants to
1,650,000.
During the fourth quarter of 1996, the Company repriced all options to reflect
the then fair market value of the Company's common stock. The repricing provided
each option holder the right to exchange their existing stock options for new
incentive stock options (the "new options" to purchase an identical number of
shares of common stock at an exercise price of $.26 per share. The new options
vest according to the original vesting schedule but with a six-month delay, or
in 16 equal quarterly installments beginning three months before the original
vesting date. The options are exercisable for 10 years from the original date of
grant.
At December 31, 1997, there were 824,250 options available for grant under the
1995 Plan.
Stock Exchanged for Services - During 1997, the Company issued 200,000 shares of
preferred stock in exchange for services by a Director of the Company. The value
of the services provided amounting to $200,000 for 1997 has been charged to
operations.
A summary of all stock option activity for the year ended December 31, 1997 is
as follows:
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1997
Exercise
Price
Shares Per Share
Outstanding at December 31, 1996 821,861 $.26
Options granted 215,200
Options terminated (42,730) $.26
Options exercised (168,581) $.26
-------
Outstanding at December 31, 1997 825,750 $.26
======= ====
Options exercisable at
December 31, 1997 463,430 $.26
======= ====
The weighted average grant date
fair value for options granted
in 1997 was approximately $.31.
The following table sets forth information regarding stock options outstanding
at December 31, 1997 under the Stock Option Plans as described above:
Weighted
Average
Range Weighted Weighted Exercise
Number of of Average Average Number Price for
Options Exercise Exercise Remaining Currently Currently
Outstanding Price Price Life Exercisable Exercisable
----------- -------- -------- --------- ----------- -----------
825,750 $0.26 $0.26 7.6 years 463,430 $0.26
Pro Forma Disclosures
As described in Note 1, the Company applies the intrinsic value method of APB
No. 25 and related Interpretations in accounting for its stock option plan.
Accordingly, no compensation cost has been recognized for its stock option plan.
Had compensation cost been determined based on the fair value at the grant dates
for awards under the plan consistent with the method of SFAS No. 123, the
Company's net loss for the year ended December 31, 1997 would have been
approximately $10,449,961.
For purposes of pro forma disclosures, the fair value of the options granted
under the Company's stock options plans during 1997 was estimated on the date of
grant using the Black-Scholes option pricing mode. Key assumptions used to apply
this pricing model are as follows:
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1997
Risk-free interest rate 6.50%
Expected life of option grants 5 years
The pro-forma disclosures, as required by SFAS No. 123, only include the effects
of options granted in 1997.
NOTE J - EMPLOYEE BENEFIT PLAN
In 1994, the Company established a 401(k) retirement plan for substantially all
employees. Employees eligible to participate in the plan must be age 21. The
Company does not contribute to the plan.
NOTE K - LEASES
The Company leases its present facilities in Wilmington, Massachusetts, under a
five-year lease expiring in November 2000. Future minimum lease payments under
noncancelable operating leases with initial or remaining terms of one year or
more consist of the following at December 31, 1997.
Year Ending Amount
1998 $ 351,996
1999 368,000
2000 384,000
------------
Total $ 1,103,996
============
The Company is also responsible for real estate taxes and other operating
expenses associated with the property lease. Rent expense under all operating
leases for the year ended December 31, 1997 was approximately $631,000.
NOTE L - CONTINGENCIES
The Company has been named as a defendant in a suit filed by a successor to a
former vendor. The vendor claims it is owed $1,000,000 from the Company and has
asserted breach of contract and other claims. The Company has counter claimed
for breach of contract and other causes of action. The Company's recorded
liability at December 31, 1997 was approximately $480,564. The ultimate outcome
of this claim cannot be predicted, however, management estimates that the
Company's possible loss that may be incurred will not exceed the amounts
recorded.
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1997
NOTE M - SUPPLEMENTAL CASH FLOW STATEMENT DISCLOSURES
Cash flow information -
Cash paid for interest $ 292,679
Cash paid for taxes -
Non-cash investing and financing
activities -
Debt refinanced by:
World Access, Inc.
line of credit $ 2,315,516
Capital lease obligations 283,933
Other -
Interest expensed $ 394,653
NOTE N - LETTER OF CREDIT
The Company is contingently liable under a letter of credit arrangement with a
bank for $140,000 which is being used as security for the operating lease on its
facilities. The letter of credit is secured by a $140,000 certificate of deposit
(included in cash in the accompanying consolidated balance sheet).
NOTE 0 - CONCENTRATION OF CREDIT RISK
The Company maintains certain of its main operating accounts in a single
financial institution. At times throughout the year, the Company may maintain
balances in such accounts in excess of the FDIC insured limits. The excess at
December 31, 1997 was $270,855.
NOTE P - FORGIVENESS OF STOCK SUBSCRIPTION RECEIVABLE
The Company's Board of Directors authorized the forgiveness of the stock
subscription receivable from the Company's principal stockholder in 1997.
NOTE Q - PURCHASE COMMITMENTS
The Company has entered into numerous agreements for the purchase of inventory.
In connection with such agreements, the Company has recorded estimated losses of
$561,500 in the accompanying consolidated financial statements for the future
purchase of inventory that they no longer expect to use and other reasons.
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1997
NOTE R - SUBSEQUENT EVENTS
In December 1997 the Company entered into an Agreement and Plan of Merger (the
"Plan") with World Access, Inc. and its wholly owned Subsidiary, Cellular
Infrastructure Supply, Inc. Under the Plan, the Company's stockholders would
receive shares of World Access, Inc. stock in return for their shares of the
Company's stock. Outstanding stock options were also to be acquired by World
Access, Inc. The final Plan was executed in January 1998.
<PAGE>
(b) Pro Forma Financial Information. The acquisition of ATI has been
accounted for using the purchase method of accounting. Immediately subsequent to
such acquisition, World Access recorded a charge of approximately $5.4 million,
representing the portion of the purchase price for ATI allocated to in-process
research and development. World Access has not yet determined the final
allocation of the purchase price, and accordingly, the amount shown below may
differ from the amounts ultimately determined. The following unaudited pro forma
consolidated balance sheet as of December 31, 1997 reflects the acquisition of
ATI as if it had been completed on December 31, 1997. The following unaudited
pro forma consolidated statement of operations for the year ended December 31,
1997 reflect the acquisition of ATI as if it had been completed as of January 1,
1997.
The pro forma data does not purport to be indicative of the results
which would actually have been reported if the acquisition had occurred on such
dates or which may be reported in the future. The pro forma data should be read
in conjunction with the historical consolidated financial statements of the
Company, the historical consolidated financial statements of ATI and the
related notes thereto.
<PAGE>
<TABLE>
World Access, Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
December 31, 1997
<CAPTION>
World Pro Forma Pro Forma
Access ATI Adjustments Combined
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents $ 118,065 $ 473 $ (299)(A) $ 118,239
Accounts receivable 20,264 1,350 (75)(A) 21,539
Inventories 22,427 4,554 (250)(A) 26,731
Other current assets 10,924 74 --- 10,998
--------- --------- --------- ---------
Total Current Assets 171,680 6,451 (624) 177,507
Property and equipment 5,705 1,081 --- 6,786
Investment in affiliate 5,002 --- --- 5,002
Goodwill 31,660 --- 850 (A) 32,510
Other assets 11,236 --- 5,000 (A) 11,751
(4,485)(D)
--------- --------- --------- ---------
Total Assets $ 225,283 $ 7,532 $ 741 $ 233,556
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 82 $ 5,675 $ (4,485)(D) $ 1,272
Accounts payable 9,340 1,701 --- 11,041
Accrued payroll and benefits 2,589 --- --- 2,589
Purchase price payable 3,700 --- --- 3,700
Other accrued liabilities 2,219 2,791 200 (A) 5,210
--------- --------- --------- ---------
Total Current Liabilities 17,930 10,167 (4,285) 23,812
Other liabilities 334 --- 334
Long-term debt 115,264 73 115,337
--------- --------- --------- ---------
Total Liabilities 133,528 10,240 (4,285) 139,483
--------- --------- --------- ---------
Stockholders' Equity
Common and preferred stock 193 1,160 (1,160)(B) 197
4 (A)
Capital in excess of par value 84,163 13,246 (13,246)(B) 91,877
7,714 (A)
Retained earnings (deficit) 7,399 (17,114) 17,114 (B) 1,999
(5,400)(C)
--------- --------- --------- ---------
Total Stockholders' Equity 91,755 (2,708) 5,026 94,073
--------- --------- --------- ---------
Total Liabilities and
Stockholders' Equity $ 225,283 $ 7,532 $ 741 $ 233,556
========= ========= ========= =========
<FN>
Notes to Unaudited Pro Forma Consolidated Balance Sheet
(A) The acquisition of ATI will be accounted for under the purchase method of
accounting. In addition, in accordance with generally accepted accounting
principles, the portion of the purchase price allocable to in-process research
and development projects of ATI will be expensed at the consummation of the
acquisition. The amount of the one-time, non-recurring charge is expected to be
approximately $5.4 million. Since this charge is directly related to the
acquisition and will not recurr, the pro forma statements of operations have
been prepared excluding this charge. World Access has not yet determined the
final allocation of the purchase price, and accordingly, the amount shown below
may differ from the amounts ultimately determined.
<PAGE>
The unallocated excess of purchase price over net assets acquired is determined
as follows (amounts in thousands):
Purchase price:
Cash purchase of ATI shares 34
Cash paid for options 265
-------
Total cash 299
Restricted stock issued in exchange for ATI shares 7,593
Restricted stock issued in exchange for options 125
-------
Total restricted stock 7,718
Fees and expenses related to the Merger 200
-------
Total purchase price 8,217
-------
Less:
Historical stockholders' equity 2,708
Adjust assets and liabilities:
Inventories 250
Accounts receivable 75
In process R&D costs (5,400)
Deferred income taxes (5,000)
-------
(7,367)
-------
Unallocated excess of purchase price over net assets acquired 850
=======
(B) Eliminate ATI's existing stockholders' equity.
(C) Represents retained earnings adjustment for nonrecurring charge related to
write-off of in-process R&D expenses acquired in the Merger.
(D) Eliminate advances received from the World Access in 1997 for repayment of
ATI bank debt and working capital.
</FN>
</TABLE>
<PAGE>
<TABLE>
World Access, Inc. and Subsidiaries
Pro Forma Consolidated Statements of Operations
For the Year Ended December 31, 1997
(Unaudited)
<CAPTION>
World Pro Forma Pro Forma
Access ATI Adjustments Combined
-------- -------- -------- --------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Sales of products $ 71,392 $ 13,687 $ (150)(A) $ 84,929
Service revenues 21,592 --- --- 21,592
-------- -------- -------- --------
Total Sales 92,984 13,687 (150) 106,521
Cost of products sold 43,827 13,586 (70)(A) 57,343
Cost of services 17,017 --- --- 17,017
-------- -------- -------- --------
Total Cost of Sales 60,844 13,586 (70) 74,360
-------- -------- -------- --------
Gross Profit 32,140 101 (80) 32,161
Engineering and development 1,862 4,283 --- 6,145
Selling, general and administrative 9,000 6,265 --- 15,265
Amortization of goodwill 1,756 60 (B) 1,816
-------- -------- -------- --------
Operating Income 19,522 (10,447) (140) 8,935
Interest and other income 2,503 64 --- 2,567
Interest expense (1,355) (1,355)
-------- -------- -------- --------
Income Before Income Taxes 20,670 (10,383) (140) 10,147
Income taxes 7,536 --- (3,800)(C) 3,736
-------- -------- -------- --------
Net Income $ 13,134 $(10,383) $ 3,660 $ 6,411
======== ======== ======== ========
Net Income Per Common Share: $ .70 $ .34 (D)
======== ========
Weighted Average Shares Outstanding: 18,707 19,132 (D)
======== ========
<FN>
Notes to Pro forma Consolidated Statement of Operations for the Year Ended December 31, 1997
(A) Eliminate intercompany sales and related cost of sales.
(B) Amortization of unallocated excess purchase price over net assets acquired
over 15 years.
(C) Adjust tax provision for the benefit of the loss incurred by ATI and pro
forma adjustments.
(D) Represents diluted earnings per share, including shares of World Access
common stock issued to the shareholders of ATI, calculated in accordance
with Statement of Financial Accounting Standards No. 128 ("SFAS 128").
</FN>
</TABLE>
<PAGE>
(c) Exhibits. The following exhibits are filed herewith by direct
transmission via "edgar."
2.1 Agreement and Plan of Merger by and among World Access, Inc.,
Cellular Infrastructure Supply, Inc., Advanced TechCom, Inc.
and Ernest H. Lin dated as of December 24, 1997.(*)
10.1 Employment Agreement dated as of January 29, 1998 by and
among World Access, Inc., Cellular Infrastructure Supply, Inc.
and Ernest H. Lin.(*)
10.2 Escrow Agreement dated as of January 29, 1998 by and among
World Access, Inc., Cellular Infrastructure Supply, Inc.,
Ernest H. Lin, individually and as attorney-in-fact for the
former ATI stockholders, and Cauthen & Feldman, P.A.(*)
10.3 Registration Rights Agreement dated as of January 29, 1998 by
and among World Access, Inc. and Ernest H. Lin, individually
and as attorney-in-fact for the former ATI stockholders.(*)
10.4 Non-Competition and Non-Disclosure Agreement dated as of
January 29, 1998 by and among World Access, Inc., Cellular
Infrastructure Supply, Inc. and Ernest H. Lin.(*)
23.1 Consent of Tedder Grimsley & Company, P.A.
99.1 Press Release issued on January 30, 1998.(*)
______________________________
(*) Incorporated by reference to the Current Report on Form 8-K filed by World
Access, Inc. on February 13, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WORLD ACCESS, INC.
By: /S/ Martin D. Kidder
---------------------------------
Martin D. Kidder
Its Vice President, Controller and Secretary
Dated as of September 3, 1998
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion of our report dated March 27, 1998 with respect to
the consolidated financial statements of Advanced TechCom, Inc. and
Subsidiaries, which report appears in the Form 8-K/A, Amendment No. 2, of World
Access, Inc. dated September 3, 1998. We also consent to incorporation by
reference in the registration statements on Form S-8 (Nos. 33-77918, 33-47752,
333-17741 and 333-59347) and Form S-3 (Nos. 333-43497 and 333-51199) of World
Access, Inc. to the above referenced report which appears in the aforementioned
Form 8-K/A.
/S/ Tedder Grimsley & Company, P.A.
September 3, 1998
Lakeland, Florida
