<PAGE>
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 January 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 _________________
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) (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 ________
Indicate the number of shares outstanding of each of the issuer's classes of
common shares, as of January 31, 1997. Common Stock, no par value: 4,865,559
shares.
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
<CAPTION>
ACCESS CORPORATION
BALANCE SHEETS
ASSETS
January 31, April 30,
1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash $1,662,546 $2,071,772
Accounts Receivable, Less Allowances 1,248,575 1,890,673
for Doubtful Accounts of $17,098
in January 1997 and $189,685 in April 1996
Inventories
Raw Materials and Purchase Parts 43,634 64,553
Work - in - Process 57,100 102,900
Finished Goods 18,603 21,057
---------- ----------
119,337 188,510
Prepaid Expenses 144,365 106,283
Deferred Income Tax Benefit 112,000 112,000
---------- ----------
TOTAL CURRENT ASSETS 3,286,823 4,369,238
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Computer Hardware & Software 1,513,813 1,449,310
Machinery and Equipment 503,337 503,337
Office and Service Equipment 377,880 364,492
Leasehold Improvements 13,405 13,405
Tools, Dies and Fixtures 115,013 115,013
--------- ---------
2,523,448 2,445,557
Less Accumulated Depreciation (2,274,706) (2,187,785)
--------- ---------
248,742 257,772
COMPUTER SOFTWARE COSTS - 1,068,923
DEFERRED INCOME TAX BENEFIT 548,672 545,700
--------- ---------
TOTAL ASSETS $4,084,237 $6,241,633
========== ==========
<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
</FN>
<PAGE>
</TABLE>
<TABLE>
ACCESS CORPORATION
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
January 31, April 30,
CURRENT LIABILITIES 1997 1996
<S> <C> <C>
Accounts Payable $ 57,017 $ 285,703
Accrued Salaries, Wages and Commissions 68,926 367,282
Accrued Taxes 21,024 22,400
Accrued Warranty Expense 12,915 -
Capital Leases - Current - 19,599
Other Accrued Liabilities 113,324 49,385
Accrued Royalty 133,092 291,192
Advances from Customers 238,007 408,460
--------- ---------
TOTAL CURRENT LIABILITIES 644,305 1,444,021
PREPAID MAINTENANCE CONTRACT REVENUE 611,196 609,078
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 (9,801,716) (8,544,428)
16,270 Common Stock Shares In (15,383) (15,383)
Treasury, at Cost
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,328,736 2,586,024
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,084,237 $ 6,241,633
========= =========
<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
</FN>
<PAGE>
ACCESS CORPORATION
STATEMENT OF OPERATIONS
Three Months Ended
January 31,
1997 1996
<S>
REVENUE <C> <C>
System Sales $ 506,570 $ 1,317,097
Service & Service Depot 842,345 1,270,959
--------- ---------
Total 1,348,915 2,588,056
COST OF REVENUE
System Sales 318,451 714,201
Service & Service Depot 599,865 604,657
--------- ---------
Total 918,316 1,318,858
GROSS PROFIT BEFORE AMORTIZATION OF COMPUTER SOFTWARE 430,599 1,269,198
AMORTIZATION OF COMPUTER SOFTWARE COSTS 732,071 168,426
GROSS PROFIT (LOSS) (301,472) 1,100,772
Sales and Administrative 615,398 722,263
Engineering, Research and Development 89,241 180,998
--------- ---------
Total Costs and Expenses 704,639 903,261
EARNINGS (LOSS) FROM OPERATIONS (1,006,111) 197,511
OTHER INCOME (EXPENSE)
Interest Income 21,154 12,625
Other Income 5,169 621
Interest Expense (1,020) (2,439)
Other (295)
NET EARNINGS (LOSS) BEFORE INCOME TAXES (980,808) 208,023
INCOME TAXES - 70,700
NET EARNINGS (LOSS) (980,808) 137,323
PREFERRED DIVIDEND - 68,662
EARNINGS (LOSS) APPLICABLE TO COMMON SHARES $ (980,808) $ 68,661
========= =========
PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
Net Earnings (Loss) $ (0.20) $ 0.01
========= =========
<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
</FN>
</TABLE>
<PAGE>
<TABLE>
ACCESS CORPORATION
STATEMENT OF EARNINGS
Nine Months Ended
January 31,
1997 1996
REVENUE
<S> <C> <C>
System Sales $ 1,667,988 $ 2,477,502
Service & Service Depot 2,883,886 3,570,841
--------- ---------
4,551,874 6,048,343
COST OF REVENUE
System Sales 966,877 1,386,432
Service & Service Depot 1,892,944 1,869,851
--------- ---------
2,859,821 3,256,283
GROSS PROFIT BEFORE AMORTIZATION OF COMPUTER SOFTWARE 1,692,053 2,792,060
AMORTIZATION OF COMPUTER SOFTWARE COSTS 1,068,923 505,278
GROSS PROFIT 623,130 2,286,782
Sales and Administrative 1,845,169 1,638,077
Engineering, Research and Development 233,865 431,145
--------- ---------
Total Costs and Expenses 2,079,034 2,069,222
EARNINGS (LOSS) FROM OPERATIONS (1,455,904) 217,560
OTHER INCOME (EXPENSE)
Interest Income 62,695 39,677
Other Income 139,480 621
Interest Expense (3,196) (9,091)
Other (362) (8,041)
EARNINGS (LOSS ) BEFORE INCOME TAXES (1,257,287) 240,726
INCOME TAXES 81,800
NET EARNINGS (LOSS) (1,257,287) 158,926
PREFERRED DIVIDENDS 79,464
--------- ---------
EARNINGS (LOSS) APPLICABLE TO COMMON SHARES $ (1,257,287) $ 79,462
========== ==========
PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
Net Earnings (Loss) $ (0.26) $ 0.02
========== ==========
<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
</FN>
</TABLE>
<PAGE>
<TABLE>
ACCESS CORPORATION
STATEMENTS OF CASH FLOW
Nine Months Ended
January 31,
1997 1996
<S> <C> <C>
CASH FLOW FROM:
OPERATING ACTIVITIES
Net Earnings (Loss) $(1,257,287) $ 158,926
Adjustments to Reconcile Net Earnings
To Net Cash Provided by (Used in) Operations:
Depreciation 98,552 108,741
Amortization 1,068,923 505,278
Deferred Income Tax (2,972) 81,800
(Gain) Loss on Sale of Fixed Asset (2,355) 7,377
Changes in Assets and Liabilities
Accounts Receivable 642,098 (280,376)
Inventories 69,173 197,691
Prepaid Expenses (23,688) (172,149)
Accounts Payable (228,686) (50,312)
Accrued Liabilities (222,879) 517,667
Accrued Royalties (158,100) 4,128
Advances From Customers (170,453) (628,819)
Prepaid Maintenance Contract Revenue 2,117 260,181
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (185,557) 710,133
INVESTING ACTIVITIES:
Capital Additions (101,561) (139,741)
Acquisition of business, net of cash received - (148,629)
--------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (101,561) (288,370)
FINANCING ACTIVITIES
Payments of Preferred Dividends (102,510)
Payments on Capital Leases (19,598) (52,413)
--------- ---------
(122,108) (52,413)
NET CHANGE IN CASH (409,226) 369,350
CASH, Beginning of the Year 2,071,772 883,487
--------- ---------
CASH, January 31, 1997 and 1996 $ 1,662,546 $ 1,252,837
========== ==========
<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
</FN>
</TABLE>
<PAGE>
ACCESS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE A - Condensed Financial Statements
The condensed balance sheet as of January 31, 1997, the condensed statements
of earnings for the nine month and three month periods ended January 31, 1997
and 1996, and the condensed statements of cash flows for the nine month
periods ended January 31, 1997 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
January 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, 1996. The results of operations for the period, ended January
31, 1997 are not necessarily indicative of the operating results for the full
year.
NOTE B - Amortization of Computer Software Costs
While the Company continues to maintain and support its AS/400 EDMS software
product, it does not believe that future revenues of this product reduced by
the estimated future costs, including maintenance and support, are sufficient
to absorb the amortization of the software costs previously capitalized.
Therefore, the Company accelerated the amortization of the remaining
unamortized cost of $732,000 in the third quarter of fiscal 1997.
<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 continuing field maintenance 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 significant factor in the Electronic Document Management
Systems (EDMS) software business. In this line of business, the Company
develops and markets software solutions for its customers' technical
processes. Both the field maintenance and EDMS business have the potential
for substantial growth in revenue and profits in that they each serve a
potentially large market opportunities.
Fiscal year 1997 third quarter revenue of $1.3 million was down $1.2 million
(48%) compared with the third quarter of fiscal 1996. Service revenue of
$842,300 decreased $428,600 (34%) compared with the third quarter of fiscal
1996. EDMS revenue of $506,600 decreased $810,500 (62%)compared with the
third quarter of fiscal 1996. The third quarter ended January 31, 1996 was
unusual in that one customer represented $524,500 of software revenue and a
number of companies issued retroactive software maintenance contracts.
Neither of these events re-occurred in the third quarter ended January 31,
1997. Seven Cimage software service agreements were scheduled to be renewed in
the third quarter of fiscal 1997 but are currently expected to be renewed in
the fourth quarter of fiscal 1997.
Revenue for the first nine months of fiscal 1997 of $4.6 million decreased 25%
from the nine months ended January 31, 1996. EDMS revenue of $1.7 million
was 33% lower than the same period last year. In the nine months ended
January 31, 1996, the Company recognized revenue of $899,200 from one customer
for a right to use license of a Cimage system that extends into fiscal 1998,
this did not occur for the same period of fiscal 1997. Service revenue of
$2.9 million was 19% lower than the $3.6 million reported for the nine months
ended January 31, 1996. The major contributor to this decrease in revenue was
the loss of micrographic maintenance service agreements being replaced with
current technology. This represented $1,006,000 in lost business which was
partially offset by the increase in third party hardware service of $206,200
and the increase in Cimage software service of $249,400. The Company
continues actively to pursue third party hardware service business to replace
the loss of the micrographic maintenance service agreements.
The Company's current backlog of orders is $2.4 million compared to $3.5
million at January 31, 1996. Current EDMS backlog of $567,200 is 56% lower
than that at the same date last year. This decrease in backlog is the result
of the Company delivering a major order that was in backlog last fiscal year.
Service backlog of $1.8 million was 17% lower at January 31, 1997 compared
with January 31, 1996. This reduction in backlog was partially due to the
<PAGE>
reduction in some of the maintenance coverage on the Company's micrographic
based systems as well as the reduction in software maintenance for the
Company's old computer based systems. Seven Cimage software service
agreements were scheduled to be renewed in the third quarter of fiscal 1997
but are currently expected to be renewed in the fourth quarter of fiscal 1997.
Cost of sales for the third quarter of 68% and for the nine months ended
January 31, 1997 of 63% were 16% and 8% higher, respectively, of those for the
comparable periods in fiscal 1996. The increase in cost of sales was due to
the lower revenue outlined in the previous paragraphs and the fixed costs were
not reduced pro rata to reflect the decline in revenue.
Selling and administrative expenses of $615,400 for the third quarter of
fiscal 1997 were $106,900 (15%) lower than the third quarter of fiscal 1996.
Selling and administrative expenses for the nine months ended January 1996 of
$1,845,200 were 13% higher than the same period last fiscal year. Selling
and administrative expenses increased due to the addition of CimSoft sales
resources in August 1995. The Company had these resources and expenses for
six months in fiscal 1996 and nine months in fiscal 1997.
Engineering, research and development expenses are incurred for maintaining
and upgrading products. The third quarter expense for engineering, research
and development of $89,200 decreased $58,600 from the third quarter of last
fiscal year. This decrease in development expense is the result of Cimage
Enterprise Systems providing the development on the Cimage product line as
well as more time being applied to inventory projects and lower spending.
Interest income for the third quarter and nine months ended January 31, 1997
was $21,200 and $62,700, respectively, compared with $12,600 and $39,700,
respectively for the third quarter and nine months ended January 31, 1996.
Interest income for fiscal 1997 and fiscal 1996 was primarily the interest
received on cash being invested in short term investments.
Other income for the nine months ended January 31, 1997 was $139,500 compared
with $600 for the same period last fiscal year. In September 1996, the
Company collected a Cimage receivable acquired when the Company acquired
CimSoft Incorporated. The Company did not accrue this receivable because the
Company felt it was unlikely to be able to collect the receivable at the time
of the purchase of CimSoft.
Accelerated Amortization of Computer Software Costs
The Company accelerated the depreciation of the remaining balance of the
Intangible Asset - Computer Software Costs in the quarter ended January 31,
1997. This write-off of $1,068,923 for the nine months ended January 31, 1997
and $732,100 for the three months ended January 31, 1997, represents the
balance of a total of $3,368,500. In fiscal year 1991 through fiscal year 1993
Access capitalized the development of its AS/400 EDMS software product.
Although the Company has continued to invest in maintaining and supporting the
AS/400 software product, it ceased the capitalization of the expenditures in
<PAGE>
November 1993. The Company has, and plans to continue to pursue the sale of
AS/400 EDMS systems, and will continue to maintain those systems currently
installed. The Company does not believe that future revenues of this product
reduced by the estimated future costs, including maintenance and support, are
sufficient to absorb the amortization of the software costs previously
capitalized. Therefore, the Company accelerated the amortization of the
remaining unamortized cost of $732,000 in the third quarter of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of fiscal 1997, the Company decreased its cash
balance by $409,200 leaving $1,662,500 in cash. The Company used $185,600 in
cash from operations, invested $101,600 in fixed assets , paid $102,500 in
dividends and $19,600 for capital leases.
Accounts receivable decreased $642,100 for the nine months ended January 31,
1997 from $1,890,700 to $1,248,600. Accounts Payable, Accrued Royalties and
Advances from Customers decreased $222,900, $158,100 and $140,500,
respectively.
Working capital on January 31, 1997 was approximately $2,642,500, which is
$282,700 lower than the April 30, 1996 level. This primarily was the result
of the reduction in cash.
The Company wrote off the Intangible Asset for Computer Software Costs on the
AS/400 product in the third quarter ended January 31, 1997. The capitalized
value of this asset was not justified by the potential and actual profits
generated from the AS/400 product. The amortization for the nine months ended
January 31, 1997 was $1,068,900.
<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: February 26, 1997 NEWTON D. BAKER
---------------
Newton D. Baker
Executive Vice President
Date: February 26, 1997 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: February 26, 1997 ________________________
Newton D. Baker
Executive Vice President
Date: February 26, 1997 ________________________
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 January 31, 1997 and 1996 is
attached as Exhibit 11(a).
(b) The calculation of net earnings per common share and common
share equivalent for the nine month periods ended January 31, 1997 and 1996 is
attached as Exhibit 11(b).
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JAN-31-1997
<CASH> 1662546
<SECURITIES> 0
<RECEIVABLES> 1265673
<ALLOWANCES> 17098
<INVENTORY> 119337
<CURRENT-ASSETS> 3286823
<PP&E> 2523449
<DEPRECIATION> 2274707
<TOTAL-ASSETS> 4084237
<CURRENT-LIABILITIES> 644305
<BONDS> 0
1500000
0
<COMMON> 488183
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4084237
<SALES> 1348915
<TOTAL-REVENUES> 1348915
<CGS> 918317
<TOTAL-COSTS> 1650388
<OTHER-EXPENSES> 704638
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1020
<INCOME-PRETAX> (980808)
<INCOME-TAX> (980808)
<INCOME-CONTINUING> (980808)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (980808)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
<PAGE>
<TABLE>
Exhibit
11(a)
ACCESS CORPORATION
CALCULATION OF NET EARNINGS (LOSS) PER COMMON SHARE
AND COMMON SHARE EQUIVALENT
<CAPTION>
Three Months Ended
January 31,
1997 1996
<S> <C> <C>
NET EARNINGS (LOSS) APPLICABLE TO COMMON SHARES AND
COMMON SHARE EQUIVALENTS:
Net Earnings (Loss) $ (980,808) $ 137,323
Preferred Dividend - 68,662
Net Earnings (Loss) Applicable to Common Shares and
Common Share Equivalents $ (980,808) $ 68,661
CALCULATION OF PRIMARY NET EARNINGS (LOSS) 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 (LOSS) PER COMMON SHARE AND
COMMON SHARE EQUIVALENT:
Net Earnings (Loss) per Common Share and Common Share
Equivalents $ (0.20) $ 0.01
========== =========
<FN>
a) Common Share Equivalents have not been included as their inclusion would be anti-
dilutive or dilution is less than 3%
</FN>
</TABLE>
<PAGE>
<TABLE>
Exhibit
11(b)
ACCESS CORPORATION
CALCULATION OF NET EARNINGS (LOSS) PER COMMON SHARE
AND COMMON SHARE EQUIVALENT
<CAPTION>
Nine Months Ended
January 31,
1997 1996
<S> <C> <C>
NET EARNINGS (LOSS) APPLICABLE TO COMMON SHARES AND
COMMON SHARE EQUIVALENTS:
Net Earnings(Loss) $(1,257,287) $ 158,926
Preferred Dividend 79,464
Net Earnings (Loss) Applicable to Common Shares and
Common Share Equivalents $(1,257,287) $ 79,462
CALCULATION OF PRIMARY NET EARNINGS (LOSS) 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 (LOSS) PER COMMON SHARE AND
COMMON SHARE EQUIVALENT:
Net Earnings (Loss) per Common Share and Common Share
Equivalents $ (0.26) $ 0.02
========== =========
<FN>
a) Common Share Equivalents have not been included as their inclusion would be anti-
dilutive or dilution is less than 3%
</FN>
</TABLE>
