<PAGE> 1
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 quarterly period ended March 31. 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ___________
Commission File Number: 0-29020
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)
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 8, 1998, 8,735,958 shares of the Registrant's common stock were
outstanding.
<PAGE> 2
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-QSB
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 1997 and
March 31, 1998 (Unaudited) ........................................................ 3
Consolidated Statements of Operations for the three months ended
March 31, 1997 and 1998 (Unaudited) ............................................... 4
Consolidated Statement of Stockholders' Equity (Deficit) for the
three months ended March 31, 1998 (Unaudited) ..................................... 5
Consolidated Statements of Cash Flows for the three months ended
March 31, 1997 and 1998 (Unaudited) ............................................... 6
Notes to Consolidated Financial Statements ........................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................................ 8
PART II. OTHER INFORMATION ............................................................. 11
SIGNATURES ............................................................................... 12
</TABLE>
2
<PAGE> 3
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1997 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,117,202 $ 1,181,426
Accounts receivable, less allowance for doubtful accounts of $65,000
at December 31, 1997 and $102,000 at March 31, 1998 (unaudited) 1,195,230 1,639,437
Inventory 1,762,186 1,627,067
Prepaid expenses 75,096 224,474
Deferred charges 191,287 196,565
------------ ------------
Total current assets 6,341,001 4,868,969
Property and equipment, net 877,440 1,032,961
Software development costs, net 203,858 270,399
Deferred charges 752,125 720,738
Deposits 36,991 70,803
------------ ------------
Total assets $ 8,211,415 $ 6,963,870
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 759,319 $ 774,221
Accrued compensation 313,634 369,020
Deferred revenue 52,784 136,517
Other accrued liabilities 343,051 756,909
Short-term debt, officer 311,243 186,243
Short-term debt, other 13,120 24,613
------------ ------------
Total current liabilities 1,793,151 2,247,523
Long-term debt 5,000,000 5,000,000
Commitments
Stockholders' equity (deficit):
Preferred stock, $.0001 par value:
Authorized shares - 5,000,000
Issued shares - none -- --
Common stock, $.0001 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 8,995,455 at December 31, 1997
and 8,997,455 at March 31, 1998 (unaudited) 900 900
Additional paid-in capital 19,628,703 19,718,054
Accumulated deficit (18,199,433) (19,990,701)
Treasury stock, 261,497 shares at December 31, 1997 and
March 31, 1998 (unaudited) (11,906) (11,906)
------------ ------------
Total stockholders' equity (deficit) 1,418,264 (283,653)
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 8,211,415 $ 6,963,870
============ ============
</TABLE>
Note: The balance sheet at December 31, 1997 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> 4
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
---------------------------------
1997 1998
----------- -----------
<S> <C> <C>
NET SALES $ 259,533 $ 1,834,968
Cost of goods sold 116,556 900,802
----------- -----------
GROSS PROFIT 142,977 934,166
Operating expenses:
Selling, general and administrative 731,971 1,715,125
Research and development 562,125 771,763
Depreciation and amortization 59,080 103,275
----------- -----------
Total operating expenses 1,353,176 2,590,163
----------- -----------
OPERATING LOSS (1,210,199) (1,655,997)
Other income (expense):
Dividend and interest income 18,427 26,123
Interest expense (216,047) (161,394)
Other 1,286 --
----------- -----------
Total other income (expense) (196,334) (135,271)
----------- -----------
NET LOSS $(1,406,533) $(1,791,268)
=========== ===========
NET LOSS PER SHARE: BASIC AND DILUTED $ (0.21) $ (0.21)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 6,622,790 8,735,002
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON STOCK PAID-IN ACCUMULATED TREASURY STOCKHOLDERS'
SHARES PAR VALUE CAPITAL DEFICIT STOCK EQUITY (DEFICIT)
------------- ------------- -------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 8,995,455 $ 900 $ 19,628,703 $(18,199,433) $ (11,906) $ 1,418,264
Exercise of options 2,000 -- 6,000 -- -- 6,000
Fair market value of options and
warrants issued for consulting
services -- -- 83,351 -- -- 83,351
Net Loss -- -- -- (1,791,268) -- (1,791,268)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, MARCH 31, 1998 8,997,455 $ 900 $ 19,718,054 $(19,990,701) $ (11,906) $ (283,653)
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 6
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
---------------------------------
1997 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(1,406,533) $(1,791,268)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation of fixed assets 43,729 81,026
Amortization of software development costs 15,351 22,249
Non-cash charges to interest expense 155,667 46,123
Non-cash consulting fees exchanged for options and warrants -- 83,351
Changes in operating assets and liabilities:
Accounts receivable 31,996 (444,207)
Inventory (140,201) 135,119
Prepaid expenses (20,368) (149,378)
Deferred charges 415,128 (20,014)
Deposits (5,427) (33,812)
Accounts payable (331,555) 14,902
Accrued compensation (53,247) 55,386
Deferred revenue -- 83,733
Other accrued liabilities (281,119) 413,858
----------- -----------
Net cash used in operating activities (1,576,579) (1,502,932)
----------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment (132,363) (236,547)
Software development costs (44,433) (88,790)
----------- -----------
Net cash used in investing activities (176,796) (325,337)
----------- -----------
FINANCING ACTIVITIES:
Net proceeds from issuance of short-term debt 210,202 --
Repayment of short-term debt-officer (235,000) (125,000)
Other (2,408) 11,493
Net proceeds from sale of common stock and warrants 5,427,238 --
Proceeds from the exercise of options -- 6,000
----------- -----------
Net cash provided (used) by financing activities 5,400,032 (107,507)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,646,657 (1,935,776)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 18,539 3,117,202
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,665,196 $ 1,181,426
=========== ===========
</TABLE>
See accompanying notes.
6
<PAGE> 7
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, 1998 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 1998. 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 31, 1998.
2. INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------
1997 1998
---------- ----------
<S> <C> <C>
Purchased materials $1,035,006 $ 925,485
Finished goods 727,180 701,582
---------- ----------
$1,762,186 $1,627,067
========== ==========
</TABLE>
3. NET LOSS PER SHARE
The Company has adopted Statement of Financial Accounting Standards No.
128 (SFAS 128), "Earnings per Share," which has changed the method for
calculating earnings per share on the face of the income statement. 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. Basic earnings per share is calculated
by dividing net income/loss by the number of weighted average common shares
outstanding for the period. Since the Company has reported net losses for the
periods presented, the computation of diluted loss per share excludes the
effects of options, warrants and convertible debt since their effect is
anti-dilutive. Loss per share amounts for prior periods have been restated to
conform to SFAS 128 requirements.
7
<PAGE> 8
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 Commission.
RESULTS OF OPERATIONS
Quarter Ended March 31, 1998 compared to Quarter Ended March 31, 1997.
Net Sales. Net sales for the quarter ended March 31, 1998 increased
607% to $1,834,968 from $259,533 reported for the same period last year. The
increase can be attributed to significant growth of both video systems and video
peripheral products during the first quarter of 1998 as compared to the same
period in 1997. The Company has experienced a growing acceptance of its products
and technologies in the market place and expects its sales volumes to continue
to increase as the overall market for video communications products expands.
During the first quarter of 1998, sales of VBX(TM) video distribution
systems increased 4,175% over the same period in 1997 and represented 57% of
1998 revenues compared to 9.4% of 1997 revenues. Sales of Osprey(R) codecs and
peripherals increased 237% in the first quarter of 1998 over the same period in
1997 and represented 39% of 1998 revenues, compared to 82% of 1997 revenues.
There were no significant revenues from the sale of ViewCast(R) web video
servers during the first quarter of 1998. Sales are expected to increase for the
balance of 1998 as new products are developed and marketed and new contracts are
finalized. The percentage of Osprey(R) products to total sales are expected to
continue to decline as the Company expects to see increases in VBX(TM) and
ViewCast(R) systems revenue over the final three quarters of the year.
Cost of Goods Sold. Cost of goods sold increased $784,246 to $900,802
for the quarter ended March 31, 1998 compared to the same period last year,
primarily due to the increase in net sales described above. Gross profit margin
for the quarter ended March 31, 1998 was 50.1%, representing a decline from the
55.1% margin reflected in the same period last year. The decrease in gross
margin can be attributed primarily to increases in sales to distribution
partners with contractual sales discounts during 1998.
8
<PAGE> 9
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
Selling, General and Administrative Expense. Selling, general and
administrative expenses increased from $731,971 in the first quarter of 1997 to
$1,715,125 in the first quarter of 1998 primarily due to a significant expansion
of the Company's sales, marketing and customer support efforts. By the end of
the first quarter of 1998, the Company had added 12 sales and 2 customer support
positions that did not exist during the same period in 1997 and had opened three
sales offices, two in the continental U.S. and one in Europe. This growth
resulted in significant increases in labor, benefits, hiring, office rental, and
travel expenses. Also contributing to the increase were growth in legal and
professional, filing fees and investor relations expenses associated with being
a public company.
Research and Development Expense. Research and development expense
increased from $562,125 in the first quarter of 1997 to $771,763 in the first
quarter of 1998. This increase of $209,638 can be attributed to additions to the
Company's development staff, contract consultants and manufacturing staff during
1998. The new staff and consultants were principally involved in the
development, testing, and quality control of new circuit board designs and
related software releases for both the VBX(TM) and Osprey(R) products.
Other Income (Expense). For the quarter ended March 31, 1998, other
expense decreased $61,063 compared to the same period in 1997. This decrease was
primarily caused by the write-off of debt issue costs related to debt converted
to equity at the Company's initial public offering in the first quarter of 1997.
The write-off was recorded as additional interest expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds for conducting its business
activities come from the sale of its debt and equity securities and from
operations. The Company requires liquidity and working capital primarily to fund
increases in inventories and accounts receivable associated with sales growth,
development of its products, debt service and for capital expenditures.
Net cash used in operating activities for the three months ended March
31, 1998 was $1,502,932 due primarily to the $1,791,268 net loss for the period
offset by $232,749 of non-cash operating expenses and changes in operating
assets and liabilities of $55,587.
Investing activities utilized cash of $325,337 during the three months
ended March 31, 1998 for capital expenditures for computer equipment, test
equipment, purchased software, leasehold improvements and capitalized
development costs associated with the Company's growth and product development.
Financing activities utilized cash in the amount of $107,507 primarily
due to repayment of $125,000 of short-term secured debt to the Company's Chief
Executive Officer.
The Company had working capital of $2,621,446 at March 31, 1998
compared to $4,547,850 at December 31, 1997 and cash and cash equivalents of
$1,181,426 at March 31, 1998 compared to $3,117,202 at December 31, 1997. The
Company experienced significant sales growth during the first quarter of 1998.
However, it is anticipated that losses will continue during 1998 and until such
time as gross margins from the sales of its products exceed its development,
selling, administrative and financing costs. The Company anticipates that
additional financing will be needed during the second quarter of 1998 in order
to meet its working capital requirements and has had preliminary discussions
with several potential sources of financing, and may seek additional financing
to provide additional working capital in the future. Such financing may include
loans, lines of credit and/or secured capital financing through the issuance of
convertible preferred stock or other equity securities and could include
factoring agreements.
9
<PAGE> 10
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
Although the Company has no current firm arrangements with respect to
any additional financing, it is currently considering various proposals by
several potential investors relating to the issuance of convertible preferred
stock or other equity in exchange for a cash investment in the Company. The
Company is also considering obtaining a revolving line of credit, which would
rank pari passu with its convertible notes, except to the extent of the
collateral securing such debt. There can be no assurance that any such
additional financing will be available to the Company on acceptable terms, or at
all. Additional equity financing, including the issuance of convertible
preferred stock, may involve substantial dilution to the Company's then existing
stockholders and holders of the its convertible debt (assuming conversion
thereof). In the event the Company is unable to raise additional capital it may
be required to curtail its activities. However, the Company believes that it
will be able to raise sufficient capital to fund its growth at least through the
end of 1998.
10
<PAGE> 11
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: Calculation of Net Loss Per Share
Exhibit 27: Financial Data Schedule
11
<PAGE> 12
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 8, 1998 /s/ WILLIAM S. LEFTWICH
----------- -----------------------
William S. Leftwich
Chief Financial Officer
Principal Financial Officer
12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
11 Statement Re: Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
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: 1997 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET LOSS AS REPORTED IN THE FINANCIAL STATEMENTS $(1,406,533) $(1,791,268)
----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 6,622,790 8,735,002
LOSS PER SHARE AS REPORTED IN THE FINANCIAL
STATEMENTS: BASIC AND DILUTED $ (0.21) $ (0.21)
=========== ===========
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET OF MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES AS OF MARCH 31,
1998 (UNAUDITED) AND THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,181,426
<SECURITIES> 0
<RECEIVABLES> 1,741,437
<ALLOWANCES> 102,000
<INVENTORY> 1,627,067
<CURRENT-ASSETS> 4,868,969
<PP&E> 1,664,907
<DEPRECIATION> 631,946
<TOTAL-ASSETS> 6,963,870
<CURRENT-LIABILITIES> 2,247,523
<BONDS> 5,000,000
0
0
<COMMON> 900
<OTHER-SE> (284,553)
<TOTAL-LIABILITY-AND-EQUITY> 6,963,870
<SALES> 1,767,968
<TOTAL-REVENUES> 1,834,968
<CGS> 900,802
<TOTAL-COSTS> 900,802
<OTHER-EXPENSES> 875,038
<LOSS-PROVISION> 36,699
<INTEREST-EXPENSE> 161,394
<INCOME-PRETAX> (1,791,268)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,791,268)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,791,268)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
