U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED March 31, 1997.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO
--------- .
Commission File Number: 333-09935
MULTIMEDIA ACCESS CORPORATION
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 75-2528700
(State or other Jurisdiction of (I.R.S. Employer Incorporation
Incorporation or Organization) Identification No.)
2665 Villa Creek Drive, Suite 200, Dallas, TX 75234
(Address of principal executive offices) (Zip Code)
972/488-7200
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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
As of May 6, 1997, 7,906,291 shares of the Registrant's common stock were
outstanding.
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-QSB
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 1996 and
March 31, 1997
(Unaudited)....................................................................3
Consolidated Statements of Operations for the three Months ended
March 31, 1996 and
1997(Unaudited)................................................................4
Consolidated Statement of Stockholders' Equity (Deficit) for the
three months ended March 31,
1997...........................................................................5
Consolidated Statements of Cash Flows for the three months ended
March 31, 1996 and 1997
(Unaudited)....................................................................6
Notes to Consolidated Financial
Statements.....................................................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of
Operations.....................................................................9
PART II. OTHER INFORMATION
..............................................................................11
SIGNATURES
..............................................................................12
2
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1996 1997
================== =================
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 18,539 $ 3,665,196
Accounts receivable, less allowance for doubtful accounts of $43,000
at December 31, 1996 and $42,000 at March 31, 1997 (unaudited) 185,564 153,568
Inventory 310,133 450,334
Prepaid expenses 46,239 66,607
Deferred charges 504,295 0
------------------ -----------------
Total current assets 1,064,770 4,335,705
Property and equipment, net 460,895 549,529
Software development costs, net 147,321 176,403
Deposits 18,272 23,699
------------------ -----------------
Total assets $ 1,691,258 $ 5,085,336
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 682,689 $ 351,134
Accrued compensation 239,707 186,460
Deferred revenue 15,591 15,591
Other accrued liabilities 857,260 195,160
Short-term debt, officer 533,089 311,243
Short-term debt, other 1,966,202 6,246
Current portion of long-term debt 3,177,550 0
------------------ -----------------
Total current liabilities 7,472,088 1,065,834
Commitments
Stockholders' equity (deficit):
Preferred stock, $.0001 par value:
Authorized shares - 5,000,000
Issued shares - none 0 0
Common stock, $.0001 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 5,315,811at December 31, 1996
and 8,167,788 at March 31, 1997 (unaudited) 532 817
Additional paid-in capital 6,602,572 17,809,152
Accumulated deficit (12,372,028) (13,778,561)
Treasury stock, 261,497 shares at December 31, 1996 and
March 31, 1997 (unaudited) (11,906) (11,906)
------------------ -----------------
Total stockholders' equity (deficit) (5,780,830) 4,019,502
------------------ -----------------
Total liabilities and stockholders' equity (deficit) $ 1,691,258 $ 5,085,336
================== =================
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See accompanying notes.
3
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------------------------------
1996 1997
====================== ======================
<S> <C> <C>
NET SALES $ 410,454 $ 259,533
Cost of goods sold 175,585 116,556
---------------------- ----------------------
GROSS PROFIT 234,869 142,977
Operating expenses:
Selling, general and administrative 579,285 731,971
Research and development 546,399 562,125
Depreciation and amortization 50,265 59,080
---------------------- ----------------------
Total operating expenses 1,175,949 1,353,176
---------------------- ----------------------
OPERATING LOSS (941,080) (1,210,199)
Other income (expense):
Dividend and interest income 49 18,427
Interest expense (117,946) (216,047)
Other 0 1,286
---------------------- ----------------------
Total other income (expense) (117,897) (196,334)
---------------------- ----------------------
NET LOSS $ (1,058,977) $ (1,406,533)
====================== ======================
NET LOSS PER SHARE $ (0.18) $ (0.21)
====================== ======================
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 5,753,573 6,622,790
====================== ======================
</TABLE>
See accompanying notes.
4
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL STOCK
COMMON STOCK PAID-IN SUBSCRIPTIONS
SHARES PAR VALUE CAPITAL RECEIVABLE
================================================================
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 5,315,811 $532 $6,602,572 $0
Sale of Common Stock and Public
Warrants, net of expenses 1,610,000 161 5,427,077 0
Exchange of short-term and
long-term debt for Common Stock
and Public Warrants 1,241,977 124 5,713,003 0
Fair market value of warrants issued
for inducement of debt 0 0 66,500 0
Net Loss 0 0 0 0
==============================================================
BALANCE, MARCH 31, 1997 8,167,788 $817 $17,809,152 0
==============================================================
</TABLE>
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED TREASURY STOCKHOLDERS'
DEFICIT STOCK EQUITY (DEFICIT)
=======================================================
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $(12,372,028) $(11,906) $(5,780,830)
Sale of Common Stock and Public
Warrants, net of expenses 0 0 5,427,238
Exchange of short-term and
long-term debt for Common Stock
and Public Warrants 0 0 5,713,127
Fair market value of warrants issued
for inducement of debt 0 0 66,500
Net Loss (1,406,533) 0 (1,406,533)
===============================================
BALANCE, MARCH 31, 1997 $(13,778,561) $(11,906) $ 4,019,502
===============================================
</TABLE>
See accompanying notes.
5
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
==================================
1996 1997
============= ==============
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(1,058,977) $(1,406,533)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation of fixed assets 37,563 43,729
Amortization of software development costs 12,702 15,351
Non-cash charges to interest expense 0 155,667
Changes in operating assets and liabilities:
Accounts receivable (237,960) 31,996
Inventory (194,597) (140,201)
Prepaid expenses (6,793) (20,368)
Due from debt holder 315,300 0
Deferred charges (55,499) 415,128
Deposits (75) (5,427)
Accounts payable 418,766 (331,555)
Accrued compensation (82,038) (53,247)
Deferred revenue (16,003) 0
Other accrued liabilities 203,083 (281,119)
------------- --------------
Net cash used in operating activities (664,528) (1,576,579)
------------- --------------
INVESTING ACTIVITIES:
Purchase of property and equipment (80,032) (132,363)
Software development costs 0 (44,433)
------------- --------------
Net cash used in investing activities (80,032) (176,796)
------------- --------------
FINANCING ACTIVITIES:
Net proceeds from issuance of short-term
and long-term debt 735,000 210,202
Net repayment of short-term debt-officer 0 (235,000)
Other (2,192) (2,408)
Net proceeds from sale of common stock and warrants 0 5,427,238
------------- --------------
Net cash provided by financing activities 732,808 5,400,032
------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (11,752) 3,646,657
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 16,605 18,539
------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,853 $ 3,665,196
============= ==============
</TABLE>
See accompanying notes.
6
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements include
the accounts of MultiMedia Access Corporation and its wholly-owned subsidiaries,
Viewpoint Systems, Inc., VideoWare, Inc. and Osprey Technologies, Inc.
(collectively, the Company). All material inter-company accounts and
transactions have been eliminated in consolidation.
The interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-KSB filed March 28, 1997.
2. SALE OF COMMON STOCK
In February 1997, the Company completed an underwritten initial public
offering of 1,400,000 shares of its Common Stock and 1,400,000 Redeemable Common
Stock Purchase Warrants (Public Warrants). The shares of Common Stock and the
Public Warrants were sold on the basis of one Public Warrant for each share of
Common Stock at a unit price to the public of $4.60, and were separately
transferable immediately upon issuance. In March 1997 the Company issued an
additional 210,000 shares of Common Stock and Public Warrants upon exercise of
the underwriter's over-allotment option. The Company received net proceeds of
$5,427,000 during February and March 1997 related to this sale. The proceeds,
net of expenses related to the offering, are to be used primarily for marketing
activities in connection with the Company's products, to complete the
development of additional product and software applications, for repayment of
certain loans and to fund its working capital requirements (See Note 3).
3. NOTES PAYABLE
During January and February of 1997, the Company issued $600,000 of 8%
unsecured notes to two principal stockholders of the Company. The notes were due
on demand 10 days subsequent to an initial public offering of the Company's
equity securities or 180 days from date of issue. During February of 1997 these
notes were converted into Common Stock and Public Warrants in the offering as
described below.
During February of 1997, the Company converted $1,915,000 principal amount
of 8% unsecured bridge notes and $1,000,000 principal amount of 8% secured
convertible notes into 633,694 shares Common Stock and Public Warrants of the
offering at $4.60 per share. Additionally, during February of 1997, the Company
paid accrued interest of $76,634 to the converting debt holders.
During February of 1997, the Company converted $2,240,300 principal amount
of 8% convertible debt together with accrued interest of $367,827 into 608,283
shares of Common Stock and Public Warrants of the offering at $4.60 per share.
Additionally, during February 1997, the Company repaid $247,250 principal amount
of 8% convertible debt together with accrued interest of $105,229.
During February of 1997, the Company repaid $257,548 principal amount of 15%
secured notes and $120,000 principal amount of non-interest bearing unsecured
notes together with total accrued interest of $14,110.
7
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. NET LOSS PER SHARE
Net loss per share is computed based on the weighted average number of
common and common equivalent shares outstanding. The Company has computed common
and common equivalent shares in determining the number of shares used in
calculating earnings per share for the three months ended March 31, 1996
pursuant to the Securities and Exchange Commission Staff Accounting Bulletin
(SAB) No. 83. SAB No. 83 requires the Company to include all common shares and
all common share equivalents issued in the 12 month period preceding the filing
date of the initial public offering in its calculation even if anti-dilutive.
Net loss per share for the three months ended March 31, 1997 has been computed
in accordance with AICPA Accounting Principles Board Opinion No. 15 and does not
include common share equivalents since their effect is anti-dilutive.
The FASB has issued Statement of Financial Accounting Standards No. 128,
Earnings per Share, which is effective for financial statements issued after
December 15, 1997. Early adoption of the new standard is not permitted. The new
standard eliminates primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together with disclosure of
how the per share amounts were computed. Because the application of SAB No. 83
in calculation of per share amounts under FAS 128 is presently uncertain, the
Company is unable to determine the effect of this standard on its historical per
share amounts.
8
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
MultiMedia Access Corporation develops and markets advanced video
communications products. The Company delivers high-performance, low-cost
products and integrates video capabilities into existing desktop computers,
applications and networks, delivering standards-based video solutions to the PC
and workstation marketplace.
This Form 10-QSB contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, product demand and market
acceptance risks, the impact of competitive products and pricing, product
development, commercialization and technological difficulties, capacity and
supply constraints or difficulties, general business and economic conditions,
the effect of the Company's accounting policies and other risks detailed in the
Company's Annual Report, Form 10-KSB and other filings with the Securities and
Exchange Commissions.
RESULTS OF OPERATIONS
Quarter Ended March 31, 1997 compared to Quarter Ended March 31, 1996.
Net Sales. Net sales for the quarter ended March 31, 1997 decreased to
$259,533 from $410,454 reported for the same period last year. In the first
quarter of 1996, the Company had product sales to three customers that did not
purchase any significant amount of product after the first quarter of 1996.
Absent these custom and non-recurring sales, which totaled approximately
$261,000, a comparison of period to period sales reflects an increase of
approximately $110,000.
Approximately 82% of sales in the first quarter of 1997 were sales of Osprey
products, principally for the Osprey-1000 and Osprey-1100 and their related
Developer Kits. While sales of Osprey products are expected to increase
dramatically for the balance of 1997 as new products are developed and marketed
and new contracts are finalized, the percentage of Osprey products to total
sales are expected to decline as the Company also expects to see a significant
increase in VBX product revenue over the final three quarters of the year.
Cost of Goods Sold. Cost of goods sold decreased $59,029 to $116,556 for the
quarter ended March 31, 1997 compared to the same period last year, primarily
due to the decline in net sales described above. Gross profit margin for the
quarter ended March 31, 1997 was 55.1%, representing a slight decline from the
57.2% margin reflected in the same period last year. The decrease can be
attributed primarily to consulting and custom programming revenue in the first
quarter of 1996 of $50,000 that was substantially greater than the same period
in 1997 and which has little or no associated cost of goods sold.
Selling, General and Administrative Expense. Selling, general and
administrative expenses increased from $579,285 in the first quarter of 1996 to
$731,971 in the first quarter of 1997 primarily due to a significant expansion
of the Company's sales and marketing efforts. By the end of the first quarter of
1997, the Company had filled six sales positions that did not exist during the
same period in 1996. This increase in the sales staff was anticipated in the Use
of Proceeds discussion in the Company's Form SB-2, effective February 4, 1997,
as filed with the SEC.
Research and Development Expense. Research and development expense of
$562,125 for the quarter ended March 31, 1997 was essentially unchanged from the
same period in 1996.
9
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Other Income (Expense). For the quarter ended March 31, 1997, other expense
increased $78,437 to $196,334 compared to the same period in 1996. This increase
is primarily caused by the write-off of debt issue costs related to debt
converted to equity at the Company's initial public offering in February 1997.
This write-off was recorded as additional interest expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company successfully completed an initial public offering of its Common
Stock and Redeemable Common Stock Purchase Warrants on February 7, 1997 and on
March 13, 1997 sold the over-allotment option, raising a total of $5,427,000 of
net proceeds. It is anticipated that the proceeds from the initial public
offering, together with the cash flow generated from operations in 1997 will be
sufficient to fund the operations of the Company for at least the next twelve
months. During 1997, with the proceeds of the offering, the Company is
endeavoring to build an effective marketing and sales organization, develop a
network of independent resellers and achieve market acceptance of its products
at prices and volumes which will, in the future, result in profitable
operations. However, the Company expects operating losses to continue until such
time as gross margins from the sales of its products exceeds its development,
selling, administrative and financing costs. In the event that the Company's
plans change or its assumptions change or prove to be inaccurate or if the
proceeds of the initial public offering prove to be insufficient to fund
operations (due to unanticipated expenses or difficulties or otherwise), the
Company may be required to seek additional financing sooner than currently
anticipated.
The Company currently has no committments for additional financing. The
Company may seek additional financing to provide additional working capital in
the future. Such financing may include loans or lines of credit and could
include factoring agreements.
At March 31, 1997, the Company had working capital of $3,276,117. Until the
completion of its initial public offering on February 7, 1997, the Company was
dependent upon loans from its principal stockholders, as well as private
placements of its debt and equity securities, to finance its working capital
requirements. At March 31, 1997, the Company did not have any material
commitments for capital expenditures.
10
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
OTHER INFORMATION
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
(Not Applicable)
Item 2. Changes in Securities
(Not Applicable)
Item 3. Defaults Upon Senior Securities
(Not Applicable)
Item 4. Submission of Matters to a Vote of Security Holders
(None)
Item 5. Other Information
(None)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report:
Exhibit 11: Computation of Earnings Per Share
Exhibit 27: Financial Data Schedule
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MultiMedia Access Corporation
-----------------------------
(registrant)
BY:
Date: May 12, 1997 /s/ WILLIAM S. LEFTWICH
------------ -----------------------
William S. Leftwich
Chief Financial Officer
Principal Financial Officer
12
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
STATEMENT RE: CALCULATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
===================================
LOSS PER SHARE DATA: 1996 1997
=============== ==============
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET LOSS AS REPORTED IN THE FINANCIAL STATEMENTS $(1,058,977) $(1,406,533)
=============== ==============
Weighted average number of common shares
outstanding 4,459,771 6,622,790
Common and common equivalent shares issued
in the twelve month period preceding the
filing date of the initial public offering as
required by SAB No. 83:
Common stock 198,181 0
Incentive stock options 276,800 0
Non-qualified stock options 40,208 0
Warrants 778,613 0
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING AS REPORTED IN THE --------------- --------------
FINANCIAL STATEMENTS 5,753,573 6,622,790
=============== ==============
LOSS PER SHARE AS REPORTED IN THE FINANCIAL
STATEMENTS $ (0.18) $ (0.21)
=============== ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES AS
OF MARCH 31, 1997 (UNAUDITED) AND THE RELATED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997(UNAUDITED) AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,665,196
<SECURITIES> 0
<RECEIVABLES> 195,568
<ALLOWANCES> 42,000
<INVENTORY> 450,334
<CURRENT-ASSETS> 4,335,705
<PP&E> 918,785
<DEPRECIATION> 369,256
<TOTAL-ASSETS> 5,085,336
<CURRENT-LIABILITIES> 1,065,834
<BONDS> 0
0
0
<COMMON> 817
<OTHER-SE> 4,018,685
<TOTAL-LIABILITY-AND-EQUITY> 5,085,336
<SALES> 244,802
<TOTAL-REVENUES> 259,533
<CGS> 142,977
<TOTAL-COSTS> 142,977
<OTHER-EXPENSES> 621,205
<LOSS-PROVISION> 5,498
<INTEREST-EXPENSE> 216,047
<INCOME-PRETAX> (1,406,533)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,406,533)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,406,533)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
