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 July 31, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From to
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Commission File Number 2-33108
ACCESS CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-0673364
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(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification 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
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Indicate the number of shares outstanding of each of the issuer's classes
of common shares, as of July 31, 1997. Common Stock, no par
value: 4,865,559 shares.
<PAGE>
PART I. FINANCIAL INFORMATION
ACCESS CORPORATION
BALANCE SHEETS
ASSETS
July 31, April 30,
1997 1997
CURRENT ASSETS:
Cash $ 1,240,778 $1,404,708
Accounts Receivable, Less Allowances 2,567,389 2,151,829
for Doubtful Accounts of $15,000
in July 1997 and $12,000 in April 1997
Inventories
Raw Materials and Purchase Parts 82,597 96,673
Work - in - Process 49,866 56,401
Finished Goods 12,987 13,551
---------------------------
145,450 166,625
Prepaid Expenses 107,921 135,362
Deferred Income Tax Benefit 73,800 112,000
---------------------------
TOTAL CURRENT ASSETS 4,135,338 3,970,524
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Computer Hardware & Software 1,544,785 1,533,592
Machinery and Equipment 503,337 503,337
Office and Service Equipment 382,755 380,248
Leasehold Improvements 14,130 13,405
Tools, Dies and Fixtures 97,832 97,832
---------------------------
2,542,839 2,528,414
Less Accumulated Depreciation (2,318,352) (2,289,920)
---------------------------
224,487 238,494
GOODWILL 259,691 259,691
DEFERRED INCOME TAX BENEFIT 548,882 548,882
TOTAL ASSETS $ 5,168,398 $5,017,591
<PAGE>
ACCESS CORPORATION
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
July 31, April 30,
CURRENT LIABILITIES 1997 1997
Accounts Payable $ 425,132 $ 291,339
Accrued Salaries, Wages and Commissions 64,262 216,232
Accrued Taxes 9,305 4,198
Accrued Warranty Expense 11,018 11,018
Other Accrued Liabilities 49,691 69,206
Accrued Royalty 667,177 519,916
Advances from Customers 286,525 195,145
-----------------------------------
TOTAL CURRENT LIABILITIES 1,513,110 1,307,054
PREPAID MAINTENANCE CONTRACT REVENUE 552,241 675,245
MANDATORILY REDEEMABLE PREFERRED STOCK 1,500,000 1,500,000
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 (9,527,405) (9,595,160)
16,270 Common Stock Shares In (15,383) (15,383)
Treasury, at Cost
-----------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,603,047 1,535,292
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 5,168,398 $5,017,591
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE>
ACCESS CORPORATION
STATEMENT OF EARNINGS
Three Months Ended
July 31,
1997 1996
----------------------------
REVENUE
System Sales $1,333,744 $ 593,969
Service 1,379,006 1,081,382
---------------------------------
2,712,750 1,675,351
COST OF REVENUE
System Sales 776,319 323,411
Service 1,194,494 670,838
---------------------------------
1,970,813 994,249
GROSS PROFIT BEFORE AMORTIZATION 741,937 681,102
AMORTIZATION OF COMPUTER SOFTWARE COST 168,426
GROSS PROFIT 741,937 512,676
Sales and Administrative 647,864 612,725
Engineering, Research and Development 60,315
--------------------------------
Total Costs and Expenses 647,864 673,040
EARNINGS FROM OPERATIONS 94,073 (160,364)
OTHER INCOME (EXPENSE)
Interest Income 14,525 21,835
Other Income - (31)
Interest Expense (318) (1,032)
Other (2,324) (65)
NET EARNINGS BEFORE INCOME TAXES 105,956 (139,657)
INCOME TAXES 38,200 -
NET EARNINGS 67,756 (139,657)
PREFERRED DIVIDEND - -
INCOME APPLICABLE TO COMMON SHARES $ 67,756 $ (139,657)
=========== ===========
PER COMMON SHARE AND COMMON SHARE
EQUIVALENTS
Net earnings $ 0.01 $ (0.03)
========== ===========
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE>
ACCESS CORPORATION
STATEMENTS OF CASH FLOW
Three Months Ended
July 31,
1997 1996
__________________________
CASH FLOW FROM:
OPERATING ACTIVITIES
Net Earnings (Loss) $ 67,756 $ (139,657)
Adjustments to Reconcile Net Earnings
To Net Cash Used in Operations:
Depreciation 28,432 31,742
Amortization - 168,426
Deferred Income Tax 38,200 -
(Gain) Loss on Sale of Fixed Asset - -
Changes in Assets and Liabilities
Accounts Receivable (415,562) (56,880)
Inventories 21,175 18,205
Prepaid Expenses 27,442 (27,457)
Accounts Payable 133,793 (72,194)
Accrued Liabilities (166,377) (173,977)
Accrued Royalties 147,261 97,528
Advances From Customers 91,380 (108,060)
Prepaid Maintenance
Contract Revenue (123,004) 5,169
-----------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (149,504) (257,155)
INVESTING ACTIVITIES:
Capital Additions (14,426) (33,203)
------------------------------------
NET CASH (USED IN) INVESTING
ACTIVITIES (14,426) (33,203)
FINANCING ACTIVITIES
Payments on Capital Leases (7,699)
---------------------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES - (7,699)
NET CHANGE IN CASH (163,930) (298,057)
CASH, Beginning of the Year 1,404,708 2,071,772
----------------------------------
CASH, July 31, 1997 and 1996 $1,240,778 $ 1,773,715
===================================
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE>
ACCESS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JULY 31, 1997
NOTE A - Condensed Financial Statements
- ----------------------------------------
The condensed balance sheet as of July 31, 1997, the condensed statement of
earnings for the three month periods ended July 31, 1997 and 1996, and the
condensed statements of cash flows for the three month periods ended
July 31, 1997 and 1996, 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
July 31, 1997 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, 1997. The results of operations for the period,
ended July 31, 1997 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, Service and Electronic
Document Management Systems. Originally, the company's service activities
were limited to the support of its proprietary products. The Company is
currently building and growing its business of maintaining equipment
manufactured and sold by third parties. The Company is working with
manufacturers and distributors of high value equipment to develop its
service business. The Company services, on a nationwide basis, end users
on both maintenance contracts and a time and material basis. In April 1997,
through the acquisition of the assets of Graphic Systems Technology,
Incorporated (GST), a company doing third party maintenance in the prepress
industry, Access has expanded into this market. The Company is also a
leader in the Electronic Document Management Systems (EDMS) software
business. In this line of business, the Company is the exclusive North
American reseller of the Cimage software which provides software solutions
for its customers' technical processes.
Fiscal year 1998 first quarter revenue of $2.7 million was up $1,037,300
(62%) compared with the first quarter of fiscal 1997 Service revenue of
$1.4 million increased $297,600 (28%) compared with the first quarter of
fiscal 1997. The increase in revenue for service was attributable to the
new prepress service business the Company acquired from GST in April 1997.
The majority of the 125% increase in EDMS revenue resulted from sales to
one customer which represented $990,500 in software revenue in the month of
July 1997. The prepress revenue was $342,700 for the quarter ended
July 31, 1997.
The Company's current backlog of orders is $2.02 million compared to $2.05
million at the end of the three months ended July 31, 1996. Current EDMS
backlog of $99,400 is 80% lower than that at the same date last year.
This decrease in EDMS backlog is the result of the Company delivering the
remaining portion of a large 24 month software license in the second
quarter of fiscal 1997. Current Service backlog of $1,374,800 is 12% lower
than that at the same date last year. This decrease in service backlog is
the result of delays in and some contract non-renewals for Cimage Software
service and a reduction in the use of the Access proprietary software
requiring service.
Gross Margin for the quarter ended July 31, 1997 of 27% was 4% lower than
the 31% reported in the comparable period in fiscal 1997. Service gross
margin for the first quarter of fiscal 1997 was 13% compared to 38% in the
comparable period in fiscal 1997. With the Company's entry into servicing
the prepress market, it doubled its number of field service
representatives. The addition of these trained personnel greatly expands
the capability of the Company to deliver service on a nationwide basis. In
the first quarter of fiscal 1998, the additional capacity was not utilized,
thus reducing the Company's gross margin for that period. The Company is
forecasting substantial growth in its service business, increased
utilization of this additional personnel and improved service gross
margins. EDMS gross margin before amortization for the first quarter of
fiscal 1998 was 42%, which was an decrease from the first quarter of fiscal
1997 level of 46%. For the quarter ended July 31, 1997, the Company did not
incur amortization expense for EDMS Capitalized Software because the
remaining EDMS computer software development costs were written off in
fiscal 1997. For the first quarter ended July 31, 1996, EDMS had
amortization expense of $168,400 which decreased the gross margin for the
EDMS business unit to 18%. In the first quarter of fiscal 1998 the Company
provided EDMS professional services at a discounted rate to two large
customers which resulted in a lower gross margin for professional services.
Selling and administrative expenses of $647,900 for the first quarter of
fiscal 1998 were $35,100, 6% higher than the first quarter of fiscal 1997.
Selling expenses increased due to the additional sales personnel for the
prepress and third party sales activities.
Engineering, research and development expenses were incurred for
maintaining, upgrading current products and developing new products in the
first quarter of fiscal 1997. Cimage Enterprise Systems Limited performs
all the engineering, research and development for the Cimage software;
therefore, the Company will no longer have a development expense.
Interest income for the first quarter ended July 31, 1997 was $14,525
compared with $21,835 for the first quarter ended July 31, 1996. 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 three months of fiscal 1998, the Company decreased its
cash balance by $163,930 giving the Company an ending cash balance of
$1,240,778 in cash. The Company generated a net income of $67,800 plus
cash flow from non-cash charges for depreciation and deferred income taxes
of $28,400 and $38,200, respectively. This resulted in an increase in cash
of $134,400. Cash was also provided by increases in Accounts Payable,
Advances From Customers and Accrued Royalties of $133,800, $91,400 and
$174,300, respectively. This was offset by a use of funds for increasing
Accounts Receivable, decreasing Accrued Liabilities and decreasing Prepaid
Maintenance Contracts of $415,600, $166,400 and $128,800, respectively.
The Company invested $14,400 for capital equipment.
Working capital on July 31, 1997 was approximately $2,622,200, which is
$41,200 lower than the April 30, 1997 level. This primarily resulted from
increases in accounts receivable and reductions in accrued liabilities and
prepaid maintenance contracts.
The Company believes it is well positioned for the future. The company is a
relatively small participant in the technically dynamic market which is
populated by large players like Microsoft and IBM, as well as many middle
and small size firms. In this fragmented market, a great many companies
are competing for each new customer order. The Company faces a future
filled with opportunities but also filled with a great many risks, many of
which are beyond its control.
The Company is still pursuing the venture to join Avcom in a
Cincinnati-based venture that intends to acquire and operate companies in
the design automation, document management and technical services field
throughout the United States. The Avcom venture is contingent upon
successful due diligence of 11 companies, each of the 11 companies,
including Access, reaching a binding definitive agreement and the successful
completion of an initial public offering by Avcom.
<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: August 22, 1997 /s/ Newton D. Baker
----------------- --------------------------
Newton D. Baker
Executive Vice President
Date: August 22, 1997 /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: August 22, 1996 NEWTON D. BAKER
------------------- ----------------------------
Newton D. Baker
Executive Vice President
Date: August 22, 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 July 31, 1997 and
1996 is attached as Exhibit 11(a).
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JUL-31-1997
<CASH> 1,240,778
<SECURITIES> 0
<RECEIVABLES> 2,567,389
<ALLOWANCES> 15,000
<INVENTORY> 145,450
<CURRENT-ASSETS> 4,135,338
<PP&E> 2,542,839
<DEPRECIATION> 2,318,352
<TOTAL-ASSETS> 5,168,398
<CURRENT-LIABILITIES> 1,513,110
<BONDS> 0
1,500,000
0
<COMMON> 488,183
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,168,398
<SALES> 2,712,750
<TOTAL-REVENUES> 2,712,750
<CGS> 1,970,813
<TOTAL-COSTS> 647,864
<OTHER-EXPENSES> 11,883
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 318
<INCOME-PRETAX> 105,956
<INCOME-TAX> 38,200
<INCOME-CONTINUING> 67,756
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67,756
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
Exhibit 11(a)
ACCESS CORPORATION
CALCULATION OF NET EARNINGS PER COMMON SHARE
AND COMMON SHARE EQUIVALENT
Three Months Ended
July 31,
1997 1996
NET EARNINGS APPLICABLE TO COMMON SHARES AND
COMMON SHARE EQUIVALENTS:
Net Earnings $ 67,756 $ (139,657)
Preferred Dividend - -
Net Earnings Applicable to Common
Shares and Common Share Equivalents $ 67,756 $ (139,657)
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 $ 0.01 $ (0.03)
a) Common Share Equivalents have not been included as their inclusion
would be anti-dilutive or dilution is less than 3%
