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 June 30, 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 Avenue, 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
The number of shares outstanding of the registrant’s common stock, $.01 par value, as of August 9, 2004 was 9,893,719.
ACCESS WORLDWIDE COMMUNICATIONS, INC.
| Page | ||||
| Part I—Financial Information |
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| Item 1. |
Financial Statements |
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| Consolidated Balance Sheets – June 30, 2004 (unaudited) and December 31, 2003 |
1 | |||
| 2 | ||||
| 3 | ||||
| Consolidated Statements of Cash Flows (unaudited) – Six Months Ended June 30, 2004 and June 30, 2003 |
4 | |||
| 5-7 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
8-10 | ||
| Item 3. |
11 | |||
| Item 4. |
11 | |||
| Part II—Other Information |
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| Item 4. |
12 | |||
| Item 6. |
12 | |||
| 13 | ||||
| Certifications |
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PART I—FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
ACCESS WORLDWIDE COMMUNICATIONS, INC.
| June 30, 2004 (Unaudited) |
December 31, 2003 |
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| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 5,084,464 | $ | 472,722 | ||||
| Restricted cash |
122,000 | 123,000 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $727,015 and $707,372, respectively |
11,368,768 | 11,069,284 | ||||||
| Unbilled receivables |
1,067,472 | 1,176,797 | ||||||
| Taxes receivable |
28,979 | 658,666 | ||||||
| Other assets, net |
1,309,438 | 950,761 | ||||||
| Total current assets |
18,981,121 | 14,451,230 | ||||||
| Property and equipment, net |
3,908,605 | 3,881,954 | ||||||
| Restricted cash |
589,000 | 711,000 | ||||||
| Other assets, net |
146,177 | 434,769 | ||||||
| Total assets |
$ | 23,624,903 | $ | 19,478,953 | ||||
| LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND COMMON STOCKHOLDERS’ DEFICIT |
||||||||
| Current liabilities: |
||||||||
| Current portion of indebtedness |
$ | 7,031,239 | $ | 5,098,999 | ||||
| Current portion of indebtedness – related parties |
352,334 | 383,334 | ||||||
| Accounts payable and accrued expenses |
7,914,989 | 7,672,764 | ||||||
| Accrued salaries, wages and related benefits |
2,023,772 | 1,347,385 | ||||||
| Deferred revenue |
3,721,331 | 2,852,628 | ||||||
| Accrued interest and other related party expenses |
12,480 | 13,304 | ||||||
| Total current liabilities |
21,056,145 | 17,368,414 | ||||||
| Long-term portion of indebtedness |
78,643 | 97,768 | ||||||
| Other long-term liabilities |
812,988 | 775,109 | ||||||
| Convertible Notes, net |
1,175,402 | 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 and mandatorily redeemable preferred stock |
27,123,178 | 23,228,627 | ||||||
| Commitments and contingencies |
||||||||
| Common stockholders’ deficit: |
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| Common stock, $.01 par value: voting: 20,000,000 shares authorized; 9,893,719 and 9,740,501 shares issued and outstanding, respectively |
98,937 | 97,405 | ||||||
| Additional paid-in capital |
65,042,811 | 64,950,294 | ||||||
| Accumulated deficit |
(68,616,923 | ) | (68,770,973 | ) | ||||
| Deferred compensation |
(23,100 | ) | (26,400 | ) | ||||
| Total common stockholders’ deficit |
(3,498,275 | ) | (3,749,674 | ) | ||||
| Total liabilities, mandatorily redeemable preferred stock and common stockholders’ deficit |
$ | 23,624,903 | $ | 19,478,953 | ||||
The accompanying notes are an integral part of these financial statements.
1
ACCESS WORLDWIDE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues |
$ | 13,960,350 | $ | 13,962,773 | $ | 26,941,212 | $ | 26,199,281 | ||||||||
| Cost of revenues |
7,529,082 | 9,396,139 | 15,457,231 | 17,684,425 | ||||||||||||
| Gross profit |
6,431,268 | 4,566,634 | 11,483,981 | 8,514,856 | ||||||||||||
| Selling, general and administrative expenses |
5,667,754 | 5,459,579 | 10,653,648 | 9,915,992 | ||||||||||||
| Gain on extinguishment of indebtedness – related party |
— | (299,555 | ) | — | (299,555 | ) | ||||||||||
| Amortization expense |
— | 36,994 | — | 74,008 | ||||||||||||
| Income (loss) from operations |
763,514 | (630,384 | ) | 830,333 | (1,175,589 | ) | ||||||||||
| Interest income |
4,148 | 3,120 | 6,766 | 9,039 | ||||||||||||
| Interest expense—related parties |
(21,572 | ) | (27,313 | ) | (43,916 | ) | (68,178 | ) | ||||||||
| Interest expense |
(316,833 | ) | (231,236 | ) | (639,133 | ) | (350,289 | ) | ||||||||
| Income (loss) before income tax expense |
429,257 | (885,813 | ) | 154,050 | (1,585,017 | ) | ||||||||||
| Income tax expense |
— | — | — | — | ||||||||||||
| Net income (loss) |
$ | 429,257 | $ | (885,813 | ) | $ | 154,050 | $ | (1,585,017 | ) | ||||||
| Basic earnings (loss) per share of common stock: |
||||||||||||||||
| Net income (loss) |
$ | 0.04 | $ | (0.09 | ) | $ | 0.02 | $ | (0.16 | ) | ||||||
| Weighted average common shares outstanding |
9,839,312 | 9,740,501 | 9,789,907 | 9,740,334 | ||||||||||||
| Diluted earnings (loss) per share of common stock: |
||||||||||||||||
| Net income (loss) |
$ | 0.04 | $ | (0.09 | ) | $ | 0.01 | $ | (0.16 | ) | ||||||
| Weighted average common shares outstanding |
11,392,684 | 9,740,501 | 11,264,974 | 9,740,334 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
2
ACCESS WORLDWIDE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2004
| Common Stock |
Additional Capital |
Accumulated Deficit |
Deferred Compensation |
Total |
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| 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 |
3,300 | 3,300 | ||||||||||||||||||
| Common stock issued to pay accrued bonuses |
143,216 | 1,432 | 85,930 | 87,362 | ||||||||||||||||
| Common stock options exercised |
10,002 | 100 | 6,587 | 6,687 | ||||||||||||||||
| Net income for the period ended June 30, 2004 |
154,050 | 154,050 | ||||||||||||||||||
| Balance, June 30, 2004 |
9,893,719 | $ | 98,937 | $ | 65,042,811 | $ | (68,616,923 | ) | $ | (23,100 | ) | $ | (3,498,275 | ) | ||||||
The accompanying notes are an integral part of these financial statements.
3
ACCESS WORLDWIDE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30,
| 2004 |
2003 |
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| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 154,050 | $ | (1,585,017 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
734,688 | 836,589 | ||||||
| Amortization of deferred financing costs |
88,638 | 78,564 | ||||||
| Accretion of discount on Convertible Notes |
188,066 | — | ||||||
| Amortization of deferred compensation |
3,300 | 3,300 | ||||||
| Gain on extinguishment of indebtedness – related party |
— | (299,555 | ) | |||||
| Allowance for doubtful accounts |
19,643 | 536,959 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(319,127 | ) | (2,163,943 | ) | ||||
| Unbilled receivables |
109,325 | 763,969 | ||||||
| Taxes receivable |
629,687 | — | ||||||
| Other assets |
(158,723 | ) | (591,311 | ) | ||||
| Accounts payable and accrued expenses |
225,520 | (508,452 | ) | |||||
| Accrued salaries, wages and related benefits |
763,749 | (206,503 | ) | |||||
| Accrued interest and other related party expenses |
53,760 | (24,517 | ) | |||||
| Deferred revenue |
868,703 | 4,432,235 | ||||||
| Net cash provided by operating activities |
3,361,279 | 1,272,318 | ||||||
| Cash flows from investing activities: |
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| Additions to property and equipment, net |
(761,339 | ) | (332,660 | ) | ||||
| Decrease (increase) in restricted cash |
123,000 | (834,000 | ) | |||||
| Net cash used in investing activities |
(638,339 | ) | (1,166,660 | ) | ||||
| Cash flows from financing activities: |
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| Payments on capital leases |
(99,658 | ) | (9,621 | ) | ||||
| Issuance of common stock |
6,687 | 230 | ||||||
| Net borrowings (payments) under Debt Agreement and Credit Facility |
2,012,773 | (1,708,581 | ) | |||||
| Proceeds from sale of subscriptions—convertible notes payable |
— | |||||||