AWWC Access Worldwide Communications Inc (GM)

ACCESS WORLDWIDE COMMUNICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(UNAUDITED)

1. BASIS OF PRESENTATION

We prepared the condensed consolidated balance sheets as of September 30, 2007 and December 31, 2006, the condensed consolidated statements of operations for the three and nine months ended September 30, 2007 and 2006, the condensed consolidated statements of stockholders’ equity (deficit) for the nine months ended September 30, 2007 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2007 and 2006, without an audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to fairly present our financial position, results of operations and cash flows as of September 30, 2007 and for all periods presented have been made.

We prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted. We recommend that you read these unaudited condensed consolidated financial statements together with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006. The results of operations for the period ended September 30, 2007 are not necessarily indicative of the results of operations for the full 2007 fiscal year.

The condensed consolidated financial statements present our financial position and results of operations, including all subsidiaries. All intercompany balances and transactions have been eliminated.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

2. CONCENTRATION OF RISK

We potentially are subjected to concentration of credit risks through our cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited or managed by major financial institutions and at times are in excess of FDIC insurance limits.

We extend credit to our customers in the normal course of business and our accounts receivable are concentrated in a relatively few number of customers, a significant change in the liquidity or financial position of any of these customers could have a material adverse impact on the collectability of our accounts receivable and our future operating results. We continuously monitor accounts receivable balances and payments from our customers and maintain an allowance for doubtful accounts based upon historical experience and any specific customer collection issues that we have identified. For the period ended September 30, 2007 and December 31, 2006, we maintain allowance for doubtful accounts of $24,715 and $99,130, respectively. While such bad debt expenses have historically been within our expectations and the allowances established, we cannot guarantee that we will continue to experience the same collectability rates that we have in the past. Management’s assessment and judgment are vital requirements in assessing the ultimate realization of accounts receivable, including the credit-worthiness, financial stability and effects of market conditions on each client.

Our revenues are dependent on clients in the telecommunications, financial services, retail/catalog and media industries, and a material decrease in demand for outsourced services in these industries could result in decreased revenues. Additionally, we have significant operations in the Philippines and are subject to risk associated with operating in the Philippines including political, social and economic instability and increased security concern, fluctuation in currency exchange rates and exposure to different legal standards.

We maintain operational and technical facilities for our global operations, including maintaining a relationship with three significant vendors that provide maintenance of our main technology equipment and data. Any significant events leading to systems and operations unavailability before our contingency plans can be deployed could potentially lead to a disruption of services and associated financial impact.

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3. RECLASSIFICATIONS

Certain amounts have been reclassified in our prior year consolidated financial statements to conform them to the presentation used in the current year. Such reclassifications did not change our net (loss) income or total common stockholders’ equity (deficit) as previously reported.

4. RESTRICTED CASH

We have restricted cash of $0.3 million in the form of a certificate of deposit which secured a letter of credit issued to the landlord of our Maryland communication center. The restriction decreases each anniversary year of the lease agreement by $0.1 million through 2008 and then remains at $0.2 million through 2010.

5. (LOSS) INCOME PER COMMON SHARE

Basic (loss) earnings per share is based on the weighted average number of common shares outstanding and diluted (loss) earnings per share is based on the weighted average number of common shares outstanding and all potentially dilutive common shares outstanding.

The following is a summary of the number of shares or securities outstanding during the respective periods that have been excluded from the calculation because their effects on net (loss) income would have been anti-dilutive:

The information required to compute net (loss) income per basic and diluted share is as follows:

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On May 24, 2006, we entered into a $2.0 million subordinated unsecured promissory note agreement (the “Note”) with Charles Henri-Weil, a member of our board of directors and one of our stockholders. The Note had a constant maturity of four months which required us to issue a warrant to purchase 200,000 shares of our common stock for each of the four month periods the Note remained unpaid. The warrants were fully vested upon issuance and had an exercise price of $0.01 per share and a term of ten years. As of September 30, 2007, we issued four warrants totaling 725,000 shares of our common stock. We estimated these warrants to have a fair value of $335,000 using a Black-Scholes pricing model, which was recorded as loan origination fees, and was amortized to interest expense over each four month period. On August 8, 2007, in conjunction with the execution of our revolving line of credit, the Note was repaid in full and all loan origination fees associated with the note were recognized as interest expense.

On August 8, 2007, we entered into a Loan and Security Agreement (the “Agreement”) with Manufacturers and Traders Trust Company for an $8.0 million revolving line of credit (the “Revolver”). The Revolver bears an interest rate of the prime rate plus a margin of 1.25%. The margin is adjustable based on our total liabilities to net worth as defined in the Agreement. Loans made under the Revolver are secured by a pledge of (i) all of our domestic assets and (ii) 65% of our common stock of our international subsidiary. All principal and unpaid interest on the Revolver is due and payable in full on August 7, 2010. We were required to pay loan origination fees, commitment fees, an unused facility fee, collateral management fees and adhere to certain financial covenants.

During the third quarter of 2007, we notified M&T of the loss of one of our most profitable programs due to our client’s budgetary cuts and that we would not be able to make our fixed charge coverage covenant for the third and fourth quarters of 2007.

On November 15, 2007, M&T agreed to waive the default of the fixed charge coverage covenant for the three months ended September 30, 2007 and eliminate the remaining fixed charge coverage covenants for 2007. These covenants were replaced by a monthly cash flow covenant from October 31, 2007 to March 31, 2007 and an amended and reset fixed charge coverage covenant for 2008 and 2009.

We expect to meet our short-term liquidity requirements through net cash provided by operations, cash and cash equivalents and our Revolver. We believe that these sources of cash will be sufficient to meet the Company’s operating needs and planned capital expenditures for at least the next twelve months.

Aggregate annual principal maturities for indebtedness as of September 30, 2007 are as follows:

7. CONVERTIBLE NOTES

On July 15, 2003 (the “Effective Date”), we completed a private placement of $2.1 million of Convertible Notes and warrants (“Convertible Notes I) to purchase up to 1.05 million shares of our common stock that were sold to accredited investors. The proceeds of the Convertible Notes I were used to fund working capital and operations. The Convertible Notes I had a 39 month term, bore interest at a rate of 5% and were convertible after one year from the Effective Date of the Convertible Notes I into our common stock at $1.00 per share. The warrants had an exercise price of $0.01 per share, a term of ten years, and were exercisable commencing July 15, 2004. Interest on the Convertible Notes I was paid quarterly. Principal was payable on October 15, 2006.

We have recorded a debt discount of approximately $1,281,000 consisting of the intrinsic value of the beneficial conversion option of $441,000 and the portion of the proceeds allocated to the warrants of $840,000, using the Black-Scholes option pricing model, based on the relative fair values of the warrants and the Convertible Notes I. The debt discount was amortized over the contractual life of the Convertible Notes I as additional interest expense using the effective interest method.

During the third quarter of 2006, we contacted the Holders of Convertible Note I (the “Holders”) and offered each, the following options: (a) to convert their Convertible Note I to shares of our common stock, (b) to receive a payout of principal and any accrued interest, or (c) to reinvest their Convertible Note I with us for another 36 months in return for an increased conversion rate from one

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(1) share of our common stock per dollar invested, to two (2) shares of common stock per dollar invested. On October 13, 2006, approximately $1.985 million of the Holders agreed to reinvest in Convertible Notes I (henceforth referred to as “Amended Convertible I”) and Convertible Notes I was amended. Amended Convertible I was scheduled to mature on October 1, 2009, and all or any part of the principal amount may be converted at any time at a conversion rate of $0.50 per share.

We recorded a debt discount of approximately $600,385 using the Black-Scholes option pricing model. The debt discount will be amortized over the contractual life of Convertible I as additional interest expense using the effective interest method.

On December 15, 2004, we completed a private placement of $1.15 million of Convertible Notes and warrants (“Convertible Notes II”) to purchase up to 1.15 million shares of our common stock that were sold to accredited investors. The proceeds of the Convertible Notes II were used to fund working capital and operations. The Convertible Notes II had a 39 month term, bore interest at a rate of 5% and were convertible beginning after one year from the Effective Date, as defined, of the Convertible Notes II into common stock at $1.00 per share. The warrants had an exercise price of $0.01 per share, a term of ten years, and were immediately exercisable. Interest on the Convertible Notes II was paid quarterly. Principal was payable on March 15, 2008.

We have recorded a debt discount of approximately $1,104,000 consisting of the intrinsic value of the beneficial conversion option of $494,500 and the portion of the proceeds allocated to the warrants of $609,500, using the Black-Scholes option pricing model, based on the relative fair values of the warrants and the Convertible Notes II. The debt discount is being amortized over the contractual life of the Convertible Notes II as additional interest expense using the effective interest method.

On March 17, 2006, we completed a private placement of $2.5 million of Convertible Notes (“Convertible Notes IV”) to purchase up to 5.0 million shares of our common stock that were sold to accredited investors. The proceeds of the Convertible Notes IV were used to fund working capital and operations. The Convertible Notes IV had a 36 month term, bore interest at a rate of 5% and were immediately convertible into common stock at a rate of 2 shares per dollar invested, as defined. Interest on the Convertible Notes IV was paid quarterly. Principal was payable on March 17, 2009.

Under the terms of registration rights granted to the holders of Amended Convertible I, and Convertible Notes II, III and IV for the shares into which the notes are convertible, and common shares into which the related warrants are exercisable, we have committed to take all reasonable efforts to file a registration statement to register and maintain registration of such shares for a period of two years from the effective date of the registration statement.

On June 29, 2007, all holders of Amended Convertible I, and Convertible Notes II and IV (collectively, the “Convertible Notes”) agreed to convert their Convertible Notes to common stock, par value $0.01, at the conversion rates presented below:

8. INCOME TAXES

The effective tax rate used by us for the three and nine month periods ended September 30, 2007 and 2006 differs from the federal statutory rate primarily due to the valuation allowance recorded in connection with the our deferred tax assets.

9. DISCONTINUED OPERATIONS

In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long Lived Assets, we have reclassified as discontinued operations, the operations of our TMS Professional Markets Group (“TMS”), a provider of professional pharmaceutical marketing services in a variety of therapeutic categories and our AM Medica Communications Group (“AMG”), a provider of professional pharmaceutical educations and meeting management services.

TMS was sold on August 3, 2006 for $10.5 million less $0.4 million for the settlement of a subordinated note with the former stockholder of TeleManagement Services, accrued interest and a $0.8 million holdback for the working capital settlement in 90 days,

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as defined in the Asset Purchase Agreement. We realized a net gain, including operations through July 31, 2006, of $7.8 million on the disposal of the segment, net of income tax expense and expenses incurred in connection with the transaction as of December 31, 2006. On March 27, 2007, we settled the working capital settlement with TMS for $0.3 million.

In addition, the Board of Directors approved a plan to terminate our medical education and meeting management services as of December 31, 2006 and focus its attention to the rapidly growing business process outsourcing industry. This action resulted in AMG being reclassified to discontinued operations.

Revenues and operating profit for TMS and AMG for the three and nine month period ended September 30, 2007 and 2006 were as follows:

10. SEGMENTS

Our reportable segments are strategic business units that offer our products and services out of different geographical regions. Our reportable segments consist of U.S. Segment which provides customer management services within the U.S. and Philippines Segment which provides customer management services within the Philippines.

We evaluate the performance of our segments and allocate resources based on revenues and operating (loss) income. The tables below present information about our reportable segments for our continuing operations used by our chief operating decision-maker:

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