UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For Quarterly Period Ended October 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 For the Transition Period
From to
------------------------- -----------------------------------
Commission File Number 2-33108
ACCESS CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-0673364
- --------------------------------------- ----------------------------
(State or other jurisdiction of incorporation) (IRS Employer ID Number)
4350 Glendale-Milford Road, Suite 250, Cincinnati, Ohio 45242-3700
- ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (513)786-8350
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
--------- -------
Indicate the number of shares outstanding of each of the
issuer's classes of common shares, as of
October 31, 1996. Common Stock, no par value: 4,865,559
shares.
<PAGE>
PART I. FINANCIAL INFORMATION
ACCESS CORPORATION
BALANCE SHEETS
ASSETS
October 31, April 30,
1996 1996
CURRENT ASSETS:
Cash $ 1,673,614 $2,071,772
Accounts Receivable, Less Allowances 1,919,971 1,890,673
for Doubtful Accounts of $14,000
in October 1996 and $189,685 in
April 1996
Inventories
Raw Materials and Purchase Parts 49,279 64,553
Work - in - Process 7,773 102,900
Finished Goods 18,981 21,057
-------------------------
76,033 188,510
Prepaid Expenses 134,063 106,283
Deferred Income Tax Benefit 112,000 112,000
--------------------------
TOTAL CURRENT ASSETS 3,915,681 4,369,238
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Computer Hardware & Software 1,483,044 1,449,310
Machinery and Equipment 503,337 503,337
Office and Service Equipment 369,208 364,492
Leasehold Improvements 13,405 13,405
Tools, Dies and Fixtures 115,013 115,013
---------------------------
2,484,007 2,445,557
Less Accumulated Depreciation (2,246,728) (2,187,785)
---------------------------
237,279 257,772
COMPUTER SOFTWARE COSTS 732,070 1,068,923
DEFERRED INCOME TAX BENEFIT 545,700 545,700
---------------------------
TOTAL ASSETS $ 5,430,730 $ 6,241,633
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE>
ACCESS CORPORATION
BALANCE SHEETS
LIABILITIES AND
STOCKHOLDERS' EQUITY
October 31, April 30,
CURRENT LIABILITIES 1996 1996
------------------------------
Accounts Payable $ 94,229 $ 285,703
Accrued Salaries, Wages and Commissions 171,761 367,282
Accrued Taxes 10,753 22,400
Accrued Warranty Expense 16,950 -
Capital Leases - Current 4,201 19,599
Other Accrued Liabilities 117,633 49,385
Accrued Royalty 496,849 291,192
Advances from Customers 232,846 408,460
-----------------------------
TOTAL CURRENT LIABILITIES 1,145,222 1,444,021
PREPAID MAINTENANCE CONTRACT REVENUE 475,964 609,078
MANDATORILY REDEEMABLE PREFERRED STOCK 1,500,000 1,500,000
Accrued Preferred Dividends - 102,510
STOCKHOLDERS' EQUITY
Capital Stock
Common Stock, No Par Value,Authorized 488,183 488,183
8,000,000 Shares, Issued and Outstanding
4,881,829 Shares
Additional Paid-In Capital 10,657,652 10,657,652
Deficit from April 1, 1985 (8,820,908) (8,544,428)
16,270 Common Stock Shares In (15,383) (15,383)
Treasury, at Cost -----------------------------
TOTAL STOCKHOLDERS' EQUITY 2,309,544 2,586,024
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 5,430,730 $ 6,241,633
=============================
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE>
ACCESS CORPORATION
STATEMENT OF OPERATIONS
Three Months Ended
October 31,
1996 1995
---------------------------
REVENUE
System Sales,exclusive of
amortization shown below $ 567,449 $ 944,345
Service 949,950 1,137,791
Manufacturing 10,209 20,880
----------------------------
1,527,608 2,103,016
COST OF REVENUE
System Sales 325,015 520,633
Service 595,171 606,901
Manufacturing 27,069 50,441
------------------------------
947,255 1,177,975
GROSS PROFIT BEFORE AMORTIZATION 580,353 925,041
AMORTIZATION OF COMPUTER SOFTWARE COST 168,426 168,426
GROSS PROFIT 411,927 756,615
Sales and Administrative 617,046 578,056
Engineering, Research and Development 84,310 140,858
-------------------------------
Total Costs and Expenses 701,356 718,914
EARNINGS(LOSS) FROM OPERATIONS (289,429) 37,701
OTHER INCOME (EXPENSE)
Interest Income 19,705 14,611
Other Income 131,926 10
Interest Expense (1,144) (4,515)
Other 2,120 (33)
NET EARNINGS(LOSS) BEFORE INCOME TAXES (136,822) 47,774
INCOME TAXES - 11,100
NET EARNINGS (136,822) 36,674
PREFERRED DIVIDEND - 10,802
INCOME(LOSS) APPLICABLE TO COMMON SHARES$(136,822) $ 25,872
===============================
PER COMMON SHARE AND COMMON SHARE
EQUIVALENTS
Net earnings(loss) $ (0.03) $ 0.01
===============================
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE>
ACCESS CORPORATION
STATEMENT OF OPERATIONS
Six Months Ended
October 31,
1996 1995
----------------------------
REVENUE
System Sales $ 1,161,418 $ 1,160,406
Service 1,988,065 2,228,000
Manufacturing 53,476 71,881
----------------------------
3,202,959 3,460,287
COST OF REVENUE
System Sales,exclusive of
amortization shown below 648,426 672,231
Service 1,219,248 1,150,651
Manufacturing 73,831 114,543
----------------------------
1,941,505 1,937,425
GROSS PROFIT BEFORE AMORTIZATION 1,261,454 1,522,862
AMORTIZATION OF COMPUTER SOFTWARE COST 336,852 336,852
GROSS PROFIT 924,602 1,186,010
Sales and Administrative 1,229,771 915,814
Engineering, Research and Development 144,624 250,147
----------------------------
Total Costs and Expenses 1,374,395 1,165,961
EARNINGS(LOSS) FROM OPERATIONS (449,793) 20,049
OTHER INCOME (EXPENSE)
Interest Income 41,540 27,052
Other Income 131,895
Interest Expense (2,176) (6,652)
Other 2,054 (7,746)
EARNINGS(LOSS) FROM CONTINUING OPERATIONS (276,480) 32,703
BEFORE INCOME TAXES
INCOME TAXES - 11,100
NET (LOSS) EARNINGS (276,480) 21,603
PREFERRED DIVIDENDS - 10,802
---------------------------
INCOME APPLICABLE TO COMMON SHARES $ (276,480) $ 10,801
=============================
PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
Net Earnings (Loss) $ (0.06) $ 0.00
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE>
ACCESS CORPORATION
STATEMENTS OF CASH FLOW
Six Months Ended
October 31,
1996 1995
------------------------------
CASH FLOW FROM:
OPERATING ACTIVITIES
Net Earnings (Loss) $ (276,480) $ 21,603
Adjustments to Reconcile Net Earnings
(loss)To Net Cash Used in Operations:
Depreciation 62,788 70,367
Amortization 336,852 336,852
Deferred Income Tax - 11,100
(Gain) Loss on Sale of Fixed Asset (2,355) 7,377
Changes in Assets and Liabilities
Accounts Receivable (29,298) (313,960)
Inventories 112,477 171,487
Prepaid Expenses (13,386) (105,259)
Accounts Payable (191,474) 131,734
Accrued Liabilities (121,971) 98,316
Accrued Royalties 205,657 (38,177)
Advances From Customers (175,614) (95,720)
Prepaid Maintenance Contract Revenue(133,114) 17,486
-------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (225,918) 291,603
INVESTING ACTIVITIES:
Capital Additions (54,333) (109,331)
Investment in Subsidiary - (68,629)
-------------------------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (54,333) (177,960)
FINANCING ACTIVITIES
Preferred Dividends (102,509) (64,685)
Payments on Capital Leases (15,398) (36,846)
-------------------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (117,907) (101,531)
NET CHANGE IN CASH (398,158) 33,715
CASH, Beginning of the Year 2,071,772 883,487
---------------------------------
CASH, October 31, 1996 and 1995 $1,673,614 $917,202
================================
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE>
ACCESS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
OCTOBER 31, 1996
NOTE A - Condensed Financial Statements
- ------------------------------------------
The condensed balance sheet as of October 31, 1996, the
condensed statement of earnings for the six month and three month
periods ended October 31, 1996 and 1995, and the condensed
statements of cash flows for the six month periods ended
October 31, 1996 and 1995, have been prepared by the Company
without audit. These financial statements reflect all
adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim
periods presented. All adjustments made during the quarter
ended October 31, 1996 are of a normal recurring nature.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted.
It is suggested that these condensed financial statements be
read in conjunction with the financial statements and notes
thereto included in the Company's annual report on Form 10-K
for the year ended April 30, 1996. The results of
operations for the period, ended October 31, 1996 are not
necessarily indicative of the operating results for the full
year.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
------------------------------------------------------------------
RESULTS OF OPERATIONS:
The Company has two primary lines of business. Over the
years the Company has built a substantial, continuing field
maintenance service business. This business services, on a
nationwide basis, hardware and, on a national and
international basis, software for the Company's installed
base of customers and third parties. The Company is also a
leader in the sale of Electronic Document Management Systems
(EDMS) software systems. In this line of business, the
Company develops and markets software solutions for its
customers' technical processes. EDMS has the potential for
substantial growth in revenue and profits in that it serves
a potentially large, worldwide market opportunity.
Fiscal year 1997 second quarter revenue of $1.5 million was
down $575,400 (27%) compared with the second quarter of
fiscal 1996. Service revenue of $950,000 decreased $187,800
(17%) compared with the second quarter of fiscal 1996. This
decrease in revenue occurred in Hardware Service as the
result of the loss of micrographic equipment being
replaced with new technology. EDMS revenue of $567,000
decreased $376,900 (40%) compared with the second quarter of
fiscal 1996. The Company revenued two large orders for U.S. West
and Allied Signal in the quarter ended October 31,1995 and did not
have similar large system sales in the second quarter of fiscal 1997.
Revenue for the first six months of fiscal 1997 of $3.2
million decreased 7% from the six months ended October 31,
1996. EDMS revenue of $1.2 million was essentially unchanged
from the prior year. Service revenue of $2.0 million decreased
11% from the six months ended October 31,1996. This decrease in
service revenue is due to the continuing decline of hardware
service revenue from micrographic products. The Company continues
to look for third party hardware to maintain which is expected to
increase the service revenue.
The Company's current backlog of orders is $2.20 million
compared to $2.19 million at the end of the six months ended
October 31, 1995. Current EDMS backlog of $570,000 is 8%
lower than that at the same date last year. This decrease
in backlog is the result of the Company delivering a
majority of its UNIX orders over the past year. Service backlog
of $1.6 million was 5% higher at October 31, 1996 compared
with October 31, 1995. This increase in backlog was due to
the increase in orders for Cimage software support, which
the Company began selling with the acquisition of CimSoft
Inc. on July 31, 1995. This Service backlog is expected to
be delivered within the next twelve months.
Gross Margins for the second quarter ended October 31, 1996
of 27% deceased 9% of that for the comparable period in
fiscal 1996, which was 36% EDMS gross margin before
amortization for the second quarter of fiscal 1997 was 43%,
which was identical to the second quarter of fiscal 1996
level. EDMS gross margin after amortization was 13% ,
compared to 25% for the same period last year. The decrease
in gross margin is a result of the lower revenue discussed
above. Service gross margin of 35% for the quarter ended
October 31, 1996 decreased from 43% for the period ended
October 31, 1995. This decrease in gross margin is the
result of decreased micrographic service revenue while related
costs did not decease for the period.
Selling and administrative expenses of $617,000 for the
second quarter of fiscal 1997 were $39,000 (7%) higher than
the second quarter of fiscal 1996. Selling expenses
increased due to increased travel expenses. Administrative
expenses of $286,900 have increased $13,900 due to the
spending for acquisition development. This expense funds
outside activity in the search for attractive acquisition
candidates. This expense shall continue throughout fiscal
1997.
Engineering, research and development expenses are incurred
for maintaining, upgrading and developing new Access products.
The research and development for the Cimage products are
performed by Cimage Enterprise Systems in the U.K.
The second quarter expense for engineering, research and
development of $84,300 decreased $56,500 (40%) from the
second quarter of last fiscal year. This decrease is
primarily due to the fact that more time is being spent on
inventory projects versus development projects, as well as
decreases in expenses for depreciation and occupancy
charges. In fiscal 1996, the Company reported the under
absorption for Installations Management/ Professional
Services as a cost to Research and Development.The expense of this
department in fiscal 1997 is accounted for entirely in the cost
of goods sold.
Other income for the second quarter ended October 31, 1996 was
$131,900. In September 1996, the Company collected a Cimage receivable
acquired when the Company acquired CimSoft Inc.. The Company did not
accrue this receivable because the Company felt it was uncollectable
at the time of purchase.
Interest income for the second quarter ended October 31,
1996 was $19,700 compared with $14,600 for the second
quarter ended October 31, 1995. Interest income for fiscal
1997 and 1996 was primarily the interest received on cash
being invested in short term investments.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of fiscal 1997, the Company
decreased its cash balance by $398,200 leaving $1,673,600 in
cash. The Company used $225,900 in cash from operations,
invested $54,300 in fixed assets and spent $15,400 for
payments on capital leases.
Accrued Royalties increased $205,700 since April 30, 1996.
The major contributor for this increase was the accrual of
royalties to Cimage Enterprise Systems for software sold in
Fiscal 1997.
On large customer orders there are provisions for progress
payments to be made by customers based on predetermined
events. These advances decreased approximately $175,600
since April 30, 1996.
Working capital on October 31, 1996 was approximately
$2,770,500, which is $154,700 lower than the April 30, 1996
level. This primarily was the result of reduction in the
cash balance.
The Company's operations are structured so that revenues
from its ongoing and new third party service business, in
combination with the sale of new Cimage , AS/400 and UNIX
products are expected to provide the cash flow required to
operate the Company.
<PAGE>
SIGNATURES
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.
ACCESS CORPORATION
Date: November 30, 1996 /s/Newton D. Baker
-----------------------------
Newton D. Baker
Executive Vice President
Date: November 30, 1996 /s/ Barbara A. Sommer
-----------------------------
Barbara A. Sommer
Assistant Treasurer & Chief
Accounting Officer
<PAGE>
SIGNATURES
---------------
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.
ACCESS CORPORATION
Date: November 30, 1996 NEWTON D. BAKER
_________________ ------------------------------
Newton D. Baker
Executive Vice President
Date: November 30, 1996 BARBARA A. SOMMER
----------------- ------------------------------
Barbara A. Sommer
Assistant Treasurer & Chief
Accounting Officer
<PAGE>
EXHIBIT INDEX
-------------
(11) Statement re-computation of per share earnings
(a) The calculation of net earnings per common
share and common share equivalent for three month periods
ended October 31, 1996 and 1995 is attached as Exhibit 11(a).
(b) The calculation of net earnings per common
share and common share equivalent for six month periods
ended October 31, 1996 and 1995 is attached as Exhibit 11(b).
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> OCT-31-1996
<CASH> 1,673,614
<SECURITIES> 0
<RECEIVABLES> 1,919,971
<ALLOWANCES> 14,000
<INVENTORY> 76,033
<CURRENT-ASSETS> 3,915,681
<PP&E> 2,484,007
<DEPRECIATION> (2,246,728)
<TOTAL-ASSETS> 5,430,730
<CURRENT-LIABILITIES> 1,145,222
<BONDS> 0
1,500,000
0
<COMMON> 488,183
<OTHER-SE> (15,383)
<TOTAL-LIABILITY-AND-EQUITY> 5,430,730
<SALES> 1,527,608
<TOTAL-REVENUES> 1,527,608
<CGS> 947,255
<TOTAL-COSTS> 701,356
<OTHER-EXPENSES> (150,655)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,144)
<INCOME-PRETAX> (136,822)
<INCOME-TAX> 0
<INCOME-CONTINUING> (136,822)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (136,822)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
Exhibit 11(a)
ACCESS CORPORATION
CALCULATION OF NET EARNINGS PER COMMON SHARE
AND COMMON SHARE EQUIVALENT
Three Months Ended
October 31,
1996 1995
--------------------------
NET EARNINGS APPLICABLE TO COMMON SHARES
AND COMMON SHARE EQUIVALENTS:
Net Earnings $ (136,822) $ 36,674
Preferred Dividend - 10,802
Net Earnings Applicable to Common
Shares and Common Share Equivalents $ (136,822) $ 25,872
CALCULATION OF PRIMARY NET EARNINGS PER
COMMON SHARE AND COMMON SHARE EQUIVALENTS:
Average Number of Common Shares
and Common Share Equivalents Outstanding 4,865,559 4,865,559
PRIMARY NET EARNINGS PER COMMON SHARE AND
COMMON SHARE EQUIVALENT:
Net Earnings per Common Share and
Common Share Equivalents $ (0.03) $ 0.01
a) Common Share Equivalents have not been included as their inclusion
would be anti-dilutive or dilution is less than 3%
Exhibit 11(b)
ACCESS CORPORATION
CALCULATION OF NET EARNINGS PER COMMON SHARE
AND COMMON SHARE EQUIVALENT
Six Months Ended
October 31,
1996 1995
----------------------------
NET EARNINGS APPLICABLE TO COMMON SHARES AND
COMMON SHARE EQUIVALENTS:
Net Earnings $ (276,480) $ 21,603
Preferred Dividend - 10,802
Net Earnings Applicable to Common
Shares and Common Share Equivalents $ (276,480) $ 10,801
CALCULATION OF PRIMARY NET EARNINGS PER
COMMON SHARE AND COMMON SHARE EQUIVALENTS:
Average Number of Common Shares and
Common Share Equivalents Outstanding 4,865,559 4,865,559
PRIMARY NET EARNINGS PER COMMON SHARE AND
COMMON SHARE EQUIVALENT:
Net Earnings per Common Share and Common
Share Equivalents $ (0.06) $ 0.00
a) Common Share Equivalents have not been included as their inclusion
would be anti-dilutive or dilution is less than 3%
