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, 1998
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, 1998: Common Stock, no
par value: 4,865,559 shares.
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
ACCESS CORPORATION
BALANCE SHEETS
ASSETS
<CAPTION> January 31, April 30,
<S> 1998 1997
CURRENT ASSETS: <C> <C>
Cash $1,380,172 $1,404,708
Accounts Receivable, Less Allowances 1,975,019 2,151,829
for Doubtful Accounts of $21,000
in January 1998 and $12,000 in April 1997
Inventories
Raw Materials and Purchase Parts 120,744 96,673
Work - in - Process 4,379 56,401
Finished Goods 5,227 13,551
---------- ----------
130,350 166,625
Prepaid Expenses 116,000 229,862
Deferred Income Tax Benefit 112,000 112,000
---------- ----------
TOTAL CURRENT ASSETS 3,713,541 4,065,024
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Computer Hardware & Software 1,340,144 1,533,592
Machinery and Equipment 250,883 503,337
Office and Service Equipment 360,461 380,248
Leasehold Improvements 15,656 13,405
Tools, Dies and Fixtures 8,946 97,832
--------- ----------
1,976,090 2,528,414
Less Accumulated Depreciation (1,786,411) (2,289,920)
---------- ----------
189,679 238,494
GOODWILL 139,068 165,191
DEFERRED INCOME TAX BENEFIT 548,882 548,882
---------- ----------
TOTAL ASSETS $4,591,170 $5,017,591
========== ==========
<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
ACCESS CORPORATION
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
January 31, April 30,
1998 1997
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 231,635 $ 291,339
Accrued Salaries, Wages and Commissions 193,092 216,232
Accrued Taxes 15,859 4,198
Accrued Warranty Expense 13,009 11,018
Other Accrued Liabilities 28,374 69,206
Accrued Royalty 535,948 519,916
Advances from Customers 343,028 195,145
---------- ----------
TOTAL CURRENT LIABILITIES 1,360,945 1,307,054
PREPAID MAINTENANCE CONTRACT REVENUE 550,202 675,245
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 (9,950,429) (9,595,160)
16,270 Common Stock Shares In (15,383) (15,383)
Treasury, at Cost
----------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,180,023 1,535,292
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,591,170 $5,017,591
========== ==========
<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
ACCESS CORPORATION
STATEMENT OF OPERATIONS
Three Months Ended
January 31,
1998 1997
-------------------
<S> <C> <C>
REVENUE
System Sales $ 569,326 $ 506,570
Service & Service Depot 1,185,943 842,345
---------- ----------
Total 1,755,269 1,348,915
COST OF REVENUE
System Sales, excluding amortization of
software computer costs 296,068 318,451
Service & Service Depot 1,120,462 599,865
---------- ----------
Total 1,416,530 918,316
GROSS PROFIT BEFORE AMORTIZATION OF
COMPUTER SOFTWARE 338,739 430,599
AMORTIZATION OF COMPUTER SOFTWARE COSTS 732,071
GROSS PROFIT (LOSS) 338,739 (301,472)
Sales and Administrative 769,403 615,398
Engineering, Research and Development 89,241
---------- ----------
Total Costs and Expenses 769,403 704,639
EARNINGS (LOSS) FROM OPERATIONS (430,664) (1,006,111)
OTHER INCOME (EXPENSE)
Interest Income 19,652 21,154
Other Income 102 5,169
Interest Expense (511) (1,020)
Other (2,990)
NET LOSS BEFORE INCOME TAXES (414,411) (980,808)
INCOME TAXES (BENEFIT) (21,291)
NET LOSS (393,120) (980,808)
PREFERRED DIVIDEND - -
LOSS APPLICABLE TO BASIC AND DILUTIVE
COMMON SHARES $ (393,120) $ (980,808)
========== ==========
PER BASIC AND DILUTIVE COMMON SHARE
AND COMMON SHARE EQUIVALENTS
Net Loss $ (0.08) $ (0.20)
========== ==========
<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
ACCESS CORPORATION
STATEMENT OF EARNINGS
Nine Months Ended
January 31,
1998 1997
<S> <C> <C>
REVENUE
System Sales $3,372,676 $1,667,988
Service & Service Depot 3,825,372 2,883,886
---------- ----------
7,198,048 4,551,874
COST OF REVENUE
System Sales, excluding amortization of
computer software costs 1,934,309 966,877
Service & Service Depot 3,488,311 1,892,944
---------- ----------
5,422,620 2,859,821
GROSS PROFIT BEFORE AMORTIZATION
OF COMPUTER SOFTWARE 1,775,428 1,692,053
AMORTIZATION OF COMPUTER SOFTWARE COSTS 1,068,923
GROSS PROFIT 1,775,428 623,130
Sales and Administrative 2,164,409 1,717,005
Engineering, Research and Development 233,865
---------- ----------
Total Costs and Expenses 2,164,409 1,950,870
LOSS FROM OPERATIONS (388,981) (1,327,740)
OTHER INCOME (EXPENSE)
Interest Income 47,076 62,695
Other Income 4 11,316
Interest Expense (829) (3,196)
Other (12,539) (362)
LOSS BEFORE INCOME TAXES (355,269) (1,257,287)
INCOME TAXES
NET LOSS (355,269) (1,257,287)
PREFERRED DIVIDENDS
--------- -----------
LOSS APPLICABLE TO BASIC AND
DILUTIVE COMMON SHARES $ (355,269) $(1,257,287)
========== ===========
PER BASIC AND DILUTIVE COMMON SHARE
AND COMMON SHARE EQUIVALENTS
Net Loss $ (0.07) $ (0.26)
=========== ===========
<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
ACCESS CORPORATION
STATEMENTS OF CASH FLOW
Nine Months Ended
January 31,
1998 1997
<S> <C> <C>
CASH FLOW FROM:
OPERATING ACTIVITIES
Net Earnings (Loss) $ (355,269) $(1,257,287)
Adjustments to Reconcile Net Earnings
To Net Cash Provided by (Used in) Operations:
Depreciation 84,723 98,552
Amortization 9,612 1,068,923
Deferred Income Tax - (2,972)
(Gain) Loss on Sale of Fixed Asset 7,630 (2,355)
Changes in Assets and Liabilities
Accounts Receivable 176,808 642,098
Inventories 36,275 69,173
Prepaid Expenses 130,374 (23,688)
Accounts Payable (59,704) (228,686)
Accrued Liabilities (50,319) (222,879)
Accrued Royalties 16,032 (158,100)
Advances From Customers 147,883 (170,453)
Prepaid Maintenance Contract Revenue (125,042) 2,117
--------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 19,003 (185,557)
INVESTING ACTIVITIES:
Capital Additions (43,539) (101,561)
--------- --------
NET CASH USED IN INVESTING ACTIVITIES (43,539) (101,561)
FINANCING ACTIVITIES
Payments of Preferred Dividends - (102,510)
Payments on Capital Leases - (19,598)
--------- --------
- (122,108)
NET CHANGE IN CASH (24,536) (409,226)
CASH, Beginning of the Year 1,404,708 2,071,772
--------- ---------
CASH, January 31, 1998 and 1997 $1,380,172 $1,662,546
========== ==========
<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
ACCESS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JANUARY 31, 1998
NOTE A - Condensed Financial Statements
The condensed balance sheet as of January 31, 1998, the condensed
statements of earnings for the three and nine month periods ended
January 31, 1998 and 1997, and the condensed statements of cash flows
for the nine month periods ended January 31, 1998 and 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,
1998 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 January 31, 1998 are not
necessarily indicative of the operating results for the full year.
NOTE B - Calculation of Net Income (Loss) Per Share
The Financial Accounting Standards Board (FASB) issued Statements of
Financial Accounting Standard (SFAS) no. 128 - "Earnings per Share"
in February 1997. It replaced the presentation of primary and fully
diluted earnings per share (EPS) with basic and diluted EPS. Basic
EPS excludes all dilution. It is based upon the weighted average
number of common shares outstanding during the period. Diluted EPS
reflects the potential dilution that would occur if stock options
were exercised. However, if the effect on EPS assuming exercise of
stock options is anti-dilutive, which it would have been in the
periods presented, such dilution is not considered. The Company
adopted SFAS No. 128 in the third quarter of 1998. All previously
reported EPS amounts have been restated to the new presentation.
<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 (System Sales). 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. 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 Cimage software.
Fiscal year 1998 third quarter revenue of $1.8 million was up
$406,400 (30%) compared with revenue for the third quarter of fiscal
1997. Service revenue of $1.2 million increased $343,600 (41%)
compared with the third quarter of fiscal 1997. $146,600 of this
increase represented servicing of prepress equipment, which the
Company commenced with the purchase of GST's assets in April 1997.
The Company has grown its business of maintaining equipment
manufactured and sold by third parties in the third quarter of fiscal
1998 of $225,700 by $125,500, excluding the prepress equipment. EDMS
revenue of $569,300 increased $62,800 (12%) compared with that in the
third quarter of fiscal 1997. Cimage software increased $79,000 in
the third quarter of fiscal 1998 compared to the third quarter in
fiscal 1997.
Revenue for the first nine months of fiscal 1998 of $7.2 million
increased 58% from that for the nine months ended January 31, 1998.
Service revenue of $3.8 million was $941,500 (33%) higher than the
$2.9 million of service revenue recorded for the nine months ended
January 31, 1997. The increase in revenue for service was
attributable to the new prepress service business the Company
acquired from GST in April 1997 and the increase volume of business
for maintaining equipment manufactured and sold by third parties.
The increase in revenue for prepress and other third party revenue
for the nine months ended January 31, 1998 were $740,600 and
$639,400, respectively. The increase in third party revenue more
than offset the decrease of $372,500 in revenue from servicing the
Company's proprietary equipment. EDMS revenue of $3.4 million was
$1.7 million (102%) greater than EDMS revenue of $1.7 million
recorded in the first nine months of fiscal 1998. This increase
resulted from three customers purchasing software resulting in $1.7
million. EDMS revenue is generated from large orders and tends to
fluctuate substantially from period to period depending upon the
timing of placement and shipping of orders.
The Company's current backlog of orders is $2.1 million compared to
$2.4 million at January 31, 1997. Service backlog of $805,400 was
33% lower at January 31, 1998 than at January 31, 1997. Backlog
relating to maintenance contracts on the Company's proprietary
micrographic hardware decreased $431,800. The Company discontinued
manufacturing this equipment in fiscal 1993. The Service backlog is
expected to be delivered within the next twelve months. Current EDMS
backlog of $820,200 is 45% higher than that at the same date last
year. This increase in backlog is the result of the Company
receiving more orders for EDMS professional services which are
delivered over a length of time and three orders received in January
for software and hardware. The professional services are expected to
be delivered within the next twelve months. The software and
hardware is expected to be delivered in the next three months.
Gross Margin for the third quarter ended January 31, 1998 of 19%
deceased from those in the comparable period in fiscal 1997, which
was 32%. Service gross margin of 6% was lower than the 29% for this
same 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 third quarter of fiscal 1998, the
additional capacity was not fully utilized, thus reducing the
Company's gross margin for that period. The Company anticipates
growth in its service business, increased utilization of this
additional personnel and improved service gross margins within the
next twelve months. EDMS gross margin before amortization for the
third quarter of fiscal 1998 was 48%, which was higher than the 38%
recorded in the third quarter of fiscal 1997. EDMS gross margin after
amortization was 48% , compared to a negative margin of 107% for the
same period last year. The Company did not incur amortization expense
for EDMS Capitalized Software in the third quarter of fiscal 1998
because the remaining EDMS computer software development costs were
written off in the third quarter of fiscal 1997.
<PAGE>
Selling and administrative expenses of $769,400 for the third
quarter of fiscal 1998 were $154,000 (25%) higher than similar
expenses in the third quarter of fiscal 1997. Selling expenses
increased due to increased commissions on orders received in the
third quarter of fiscal 1998.
Engineering, research and development expenses were incurred for
maintaining, upgrading current products and developing new products
in the third 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 third quarter ended January 31, 1998 was
$19,700 compared with $21,200 for the third quarter ended January 31,
1997. Interest income for fiscal 1998 and 1997 was primarily the
interest received on cash being invested in short term investments.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of fiscal 1998, the Company decreased
its cash balance by $24,500 resulting in a $1,380,200 cash balance.
The Company provided $2,400 in cash from operations, invested
$43,500 in fixed assets and provided $16,500 for transactions
relating to the assets acquired from GST.
On large customer orders there are provisions for progress payments
to be made by customers based on predetermined events. These
advances increased approximately $147,900 since April 30, 1997.
Working capital on January 31, 1998 was approximately $2,352,600,
which is $310,900 lower than the April 30, 1997 level. This
primarily was the result of the loss of $355,300 for the nine months
ended January 31, 1998.
The Company believes it is well positioned for the near 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.
On January 29, 1998, Universal Document Management Systems, Inc.
("UDMS") advised Access that UDMS would be unable to complete its
acquisition of Access' assets as previously approved by Access'
shareholders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. Refer to EXHIBIT INDEX on page 14 of this Quarterly
Report on Form 10-Q
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
third quarter of fiscal year 1998.
<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: March 10, 1998 s/Newton D. Baker
-----------------
Newton D. Baker
Executive Vice President
Date: March 10, 1998 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: March 10, 1998 NEWTON D. BAKER
_________________________
Newton D. Baker
Executive Vice President
Date: March 10, 1998 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 January 31,
1998 and 1997 is attached as Exhibit 11(a)
(b) The calculation of net earnings per common share and common
share equivalent for nine month periods ended January 31, 1998 and
1997 is attached as Exhibit 11(b).
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JAN-31-1998
<CASH> 1,380,172
<SECURITIES> 0
<RECEIVABLES> 1,996,019
<ALLOWANCES> 21,000
<INVENTORY> 130,350
<CURRENT-ASSETS> 3,713,541
<PP&E> 1,976,090
<DEPRECIATION> 1,786,411
<TOTAL-ASSETS> 4,591,170
<CURRENT-LIABILITIES> 1,360,945
<BONDS> 0
1,500,000
0
<COMMON> 488,183
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,591,170
<SALES> 1,755,269
<TOTAL-REVENUES> 1,755,269
<CGS> 1,416,530
<TOTAL-COSTS> 2,185,933
<OTHER-EXPENSES> 2,990
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 511
<INCOME-PRETAX> (414,411)
<INCOME-TAX> (21,291)
<INCOME-CONTINUING> (393,120)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (393,120)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
<TABLE>
Exhibit 11(a)
ACCESS CORPORATION
CALCULATION OF NET LOSS PER BASIC AND DILUTIVE COMMON SHARE
AND COMMON SHARE EQUIVALENT
Three Months Ended
January 31,
1998 1997
<S> <C> <C>
NET LOSS APPLICABLE TO BASIC AND DILUTIVE COMMON SHARES AND
COMMON SHARE EQUIVALENTS:
Net Loss $(393,120) $(980,808)
Preferred Dividend - -
Net Loss Applicable to Basic and Dilutive Common
Shares and Common Share Equivalents $(393,120) $(980,808)
CALCULATION OF PRIMARY NET LOSS PER BASIC AND DILUTIVE
COMMON SHARE AND COMMON SHARE EQUIVALENTS:
Average Number of Common Shares and Common
Share Equivalents Outstanding 4,865,559 4,865,559
PRIMARY NET LOSS PER BASIC AND DILUTIVE COMMON SHARE AND
COMMON SHARE EQUIVALENT:
Net Loss per Basic and Dilutive Common Share and
Common Share Equivalents $ (0.08) $ (0.20)
========= =========
<FN>
a) Common Share Equivalents have not been included as their inclusion would be anti-
dilutive
</TABLE>
<TABLE>
Exhibit 11(b)
ACCESS CORPORATION
CALCULATION OF NET LOSS BASIC AND DILUTIVE PER COMMON SHARE
AND COMMON SHARE EQUIVALENT
Nine Months Ended
January 31,
1998 1997
<S> <C> <C>
NET LOSS APPLICABLE TO BASIC AND DILUTIVE COMMON SHARES AND
COMMON SHARE EQUIVALENTS:
Net Loss $ (355,269) $(1,257,287)
Preferred Dividend
Net Loss Applicable to Basic and Dilutive Common Shares
and Common Share Equivalents $ (355,269) $(1,257,287)
CALCULATION OF PRIMARY NET LOSS PER BASIC AND
DILUTIVE COMMON SHARE AND COMMON SHARE EQUIVALENTS:
Average Number of Common Shares and Common
Share Equivalents Outstanding 4,865,559 4,865,559
PRIMARY NET LOSS PER BASIC AND DILUTIVE COMMON SHARE
AND COMMON SHARE EQUIVALENT:
Net Loss per Basic and Dilutive Common Share and Common
Share Equivalents $ (0.07) $ (0.26)
========== =========
<FN>
a) Common Share Equivalents have not been included as their inclusion would
be anti-dilutive
</TABLE>
