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 the quarterly period ending March 31, 2004
| ¨ | 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 0-23489
Access Worldwide Communications, Inc.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 52-1309227 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| 4950 Communication Ave., Suite 300 Boca Raton, Florida |
33431 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code (561) 226-5000
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class. |
Name of each exchange on which registered. | |
| None | None |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
Title of Class
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 as 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
The number of share outstanding of the registrant’s common stock, $.01 par value, as of May 5, 2004 was 9,740,501.
ACCESS WORLDWIDE COMMUNICATIONS, INC.
| Page | ||||
| Item 1. |
1 | |||
| Consolidated Balance Sheets-March 31, 2004 (unaudited) and December 31, 2003 |
1 | |||
| 2 | ||||
| 3 | ||||
| 4 | ||||
| 5-6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
7-8 | ||
| Item 3. |
8 | |||
| Item 4. |
8-9 | |||
| Item 6. |
10 | |||
| 10 | ||||
| Certifications |
||||
| ITEM 1. | FINANCIAL STATEMENTS |
ACCESS WORLDWIDE COMMUNICATIONS, INC.
| March 31, 2004 (Unaudited) |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 1,027,309 | $ | 472,722 | ||||
| Restricted cash |
123,000 | 123,000 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $712,876 and $707,372, respectively |
8,577,670 | 11,069,284 | ||||||
| Unbilled receivables |
1,474,629 | 1,176,797 | ||||||
| Taxes receivable |
658,666 | 658,666 | ||||||
| Other assets, net |
931,943 | 950,761 | ||||||
| Total current assets |
12,793,217 | 14,451,230 | ||||||
| Property and equipment, net |
3,665,778 | 3,881,954 | ||||||
| Restricted cash |
711,000 | 711,000 | ||||||
| Other assets, net |
490,958 | 434,769 | ||||||
| Total assets |
$ | 17,660,953 | $ | 19,478,953 | ||||
| LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND COMMON STOCKHOLDERS’ DEFICIT |
||||||||
| Current liabilities: |
||||||||
| Current portion of indebtedness |
$ | 3,464,095 | $ | 5,098,999 | ||||
| Current portion of indebtedness - related parties |
352,334 | 383,334 | ||||||
| Accounts payable and accrued expenses |
5,887,537 | 7,672,764 | ||||||
| Accrued salaries, wages and related benefits |
1,428,885 | 1,347,385 | ||||||
| Deferred revenue |
4,305,481 | 2,852,628 | ||||||
| Accrued interest and related party expenses |
33,113 | 13,304 | ||||||
| Total current liabilities |
15,471,445 | 17,368,414 | ||||||
| Long-term portion of indebtedness |
354,338 | 97,768 | ||||||
| Other long-term liabilities |
777,619 | 775,109 | ||||||
| Convertible Notes, net |
1,080,782 | 987,336 | ||||||
| Mandatorily redeemable preferred stock, $.01 par value: 2,000,000 shares authorized, 40,000 shares issued and outstanding |
4,000,000 | 4,000,000 | ||||||
| Total liabilities |
21,684,184 | 23,228,627 | ||||||
| Commitments and contingencies |
||||||||
| Common stockholders’ deficit: |
||||||||
| Common stock, $.01 par value: voting: 20,000,000 shares authorized; 9,740,501 shares issued and outstanding |
97,405 | 97,405 | ||||||
| Additional paid-in capital |
64,950,294 | 64,950,294 | ||||||
| Accumulated deficit |
(69,046,180 | ) | (68,770,973 | ) | ||||
| Deferred compensation |
(24,750 | ) | (26,400 | ) | ||||
| Total common stockholders’ deficit |
(4,023,231 | ) | (3,749,674 | ) | ||||
| Total liabilities and common stockholders’ deficit |
$ | 17,660,953 | $ | 19,478,953 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
1
ACCESS WORLDWIDE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
| 2004 |
2003 |
|||||||
| Revenues |
$ | 12,980,862 | $ | 12,236,508 | ||||
| Cost of revenues |
7,928,149 | 8,284,239 | ||||||
| Gross profit |
5,052,713 | 3,952,269 | ||||||
| Selling, general and administrative expenses |
4,985,894 | 4,460,460 | ||||||
| Amortization expense |
— | 37,014 | ||||||
| Income (loss) from operations |
66,819 | (545,205 | ) | |||||
| Interest income |
2,618 | 5,919 | ||||||
| Interest expense – related parties |
(22,344 | ) | (40,865 | ) | ||||
| Interest expense |
(322,300 | ) | (119,053 | ) | ||||
| — | — | |||||||
| Net loss |
$ | (275,207 | ) | $ | (699,204 | ) | ||
| Basic loss per share of common stock: |
||||||||
| Net loss |
$ | (0.03 | ) | $ | (0.07 | ) | ||
| Weighted average common shares outstanding |
9,740,501 | 9,740,168 | ||||||
| Diluted loss per share of common stock: |
||||||||
| Net loss |
$ | (0.03 | ) | $ | (0.07 | ) | ||
| Weighted average common shares outstanding |
9,740,501 | 9,740,168 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
ACCESS WORLDWIDE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2004
| Common Stock |
Additional Paid- in-Capital |
Accumulated Deficit |
Deferred Compensation |
Total |
||||||||||||||||
| Shares |
Amount |
|||||||||||||||||||
| Balance, December 31, 2003 |
9,740,501 | $ | 97,405 | $ | 64,950,294 | $ | (68,770,973 | ) | $ | (26,400 | ) | $ | (3,749,674 | ) | ||||||
| Amortization of deferred compensation |
— | — | — | — | 1,650 | 1,650 | ||||||||||||||
| Net loss |
— | — | — | (275,207 | ) | — | (275,207 | ) | ||||||||||||
| Balance, March 31, 2004 |
9,740,501 | $ | 97,405 | $ | 64,950,294 | $ | (69,046,180 | ) | $ | (24,750 | ) | $ | (4,023,231 | ) | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
ACCESS WORLDWIDE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (275,207 | ) | $ | (699,204 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) in operating activities: |
||||||||
| Depreciation and amortization |
357,988 | 426,646 | ||||||
| Amortization of deferred financing costs |
69,318 | 11,597 | ||||||
| Amortization of deferred compensation |
1,650 | 1,650 | ||||||
| Accretion of discount on Convertible Notes |
93,446 | — | ||||||
| Allowance for doubtful accounts |
5,504 | 39,111 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
2,486,110 | (478,996 | ) | |||||
| Unbilled receivables |
(297,832 | ) | 32,595 | |||||
| Other assets |
(106,689 | ) | (556,223 | ) | ||||
| Accounts payable and accrued expenses |
(1,782,717 | ) | (1,776,116 | ) | ||||
| Accrued salaries, wages and related benefits |
81,500 | (735,632 | ) | |||||
| Accrued interest and related party expenses |
19,809 | (4,235 | ) | |||||
| Deferred revenue |
1,452,853 | 2,740,895 | ||||||
| Net cash provided by (used in) operating activities |
2,105,733 | (997,912 | ) | |||||
| Cash flows from investing activities: |
||||||||
| Additions to property and equipment |
(141,812 | ) | (114,139 | ) | ||||
| Net cash used in investing activities |
(141,812 | ) | (114,139 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Payments on capital leases |
(16,332 | ) | (9,621 | ) | ||||
| Issuance of common stock |
— | 230 | ||||||
| Net (payments) borrowings under Debt Agreement and Credit Facility |
(1,362,002 | ) | 89,037 | |||||
| Payments of deferred financing costs |
— | (120,000 | ) | |||||
| Payment of related party debt |
(31,000 | ) | (415,729 | ) | ||||
| Net cash used in financing activities |
(1,409,334 | ) | (456,083 | ) | ||||
| Net increase (decrease) in cash and cash equivalents |
554,587 | (1,568,134 | ) | |||||
| Cash and cash equivalents, beginning of period |
472,722 | 2,197,209 | ||||||
| Cash and cash equivalents, end of period |
$ | 1,027,309 | $ | 629,075 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
4
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Access Worldwide Communications, Inc. (“Access Worldwide,” “we,” “our,” “us,” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, we do not include therein all of the information and footnotes required by accounting principles generally accepted in the United States of America for a complete set of consolidated financial statements. For further information, refer to our consolidated financial statements and footnotes included in our Annual Report on Form 10-K as of and for the year ended December 31, 2003, filed with the Securities and Exchange Commission.
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect reported amounts included in the consolidated financial statements. In our opinion, all adjustments necessary for a fair presentation of this interim financial information have been included. Such adjustments consisted only of normal recurring items. The results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results to be expected for the year ending December 31, 2004.
2. RECLASSIFICATIONS
Certain reclassifications have been made to the 2003 consolidated financial statements to conform to the March 31, 2004 presentation. Such reclassifications did not change our net loss or total common stockholders’ deficit as previously reported.
3. RESTRICTED CASH
On June 10, 2003, we obtained a new letter of credit (“Letter of Credit”) in the amount of $834,000 to replace the original letter of credit issued to the landlord of our Maryland communication center in 2001. The Letter of Credit was collateralized by a certificate of deposit in the same amount. Therefore, such certificate of deposit is classified as restricted cash in the accompanying balance sheets at March 31, 2004 and December 31, 2003.
The amount of the Letter of Credit and restricted cash will be reduced on each anniversary of the lease agreement through May 2011. The balance of the Letter of Credit will be reduced to the amount shown on each anniversary date as follows:
| May 2004 |
$ | 711,000 | |
| May 2005 |
589,000 | ||
| May 2006 |
466,000 | ||
| May 2007 |
343,000 | ||
| May 2008 through 2010 |
221,000 |
4. STOCK-BASED COMPENSATION
Options granted under our stock-based compensation plan to employees are accounted for using the intrinsic value method. We do not recognize compensation expense in connection with granting stock options to employees as the strike price of the option at the time of grant equals the fair market value of our stock at such time. Options granted under our stock-based compensation plan to non-employees are accounted for based on fair value accounting rules.
No compensation cost has been recognized for options granted under our stock-based compensation plan except for a grant of 150,000 stock options to an executive of the Company with a strike price of $0.50 per share on January 2, 2003. The Company recorded unearned stock compensation for the intrinsic value of the award ($33,000) in connection with the grant. Such amount, which