Access Worldwide Communications (AWWC) 10-Q 2007 Q1 Quarterly report

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 the quarterly period ending March 31, 2007

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: 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.)

1820 North Fort Myer Drive Arlington, Virginia	22209
(Address of principal executive offices)	(Zip Code)

(703) 292-5210

(Registrant’s telephone number, including area code)

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

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 by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨    Accelerated filer  ¨    Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at May 10, 2007
Common Stock, $0.01 par value per share	17,679,065 shares

ACCESS WORLDWIDE COMMUNICATIONS, INC.

INDEX

		Page
Part I-Financial Information		1
Item 1.	Condensed Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets-March 31, 2007 and December 31, 2006	1
	Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2007 and March 31, 2006	2
	Condensed Consolidated Statement of Changes in Common Stockholders’ Deficit – Three Months Ended March 31, 2007	3
	Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2007 and March 31, 2006	4
	Notes to Condensed Consolidated Financial Statements	5-7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8-11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12
Item 4.	Controls and Procedures	12
Part II-Other Information		13
Item 1A.	Risk Factors	13
Item 6.	Exhibits	13
	Signatures	14

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACCESS WORLDWIDE COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	March 31, 2007			December 31, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	3,767,082		$	2,836,980
Restricted cash		123,000			123,000
Accounts receivable, net of allowance for doubtful accounts of $97,275 and $99,130, respectively		6,030,866			6,956,218
Unbilled receivables		—			7,750
Other assets, net		661,052			831,958
Total current assets		10,582,000			10,755,906
Property and equipment, net		4,122,426			3,374,575
Restricted cash		343,000			343,000
Other assets, net		66,054			386,127
Total assets	$	15,113,480		$	14,859,608
LIABILITIES AND COMMON STOCKHOLDER’S DEFICIT
Current liabilities:
Current portion of indebtedness	$	509,145		$	438,866
Current portion of indebtedness—related parties		1,750,000			1,750,000
Accounts payable		1,662,773			1,315,785
Accrued expenses		474,146			654,140
Accrued salaries, wages and related benefits		997,063			586,107
Customer deposits		1,105,753			1,210,146
Deferred revenue		133,770			669,290
Total current liabilities		6,632,650			6,624,334
Long-term portion of indebtedness		327,422			259,256
Other long-term liabilities		504,244			530,992
Convertible Notes, net		4,749,963			4,625,490
Mandatorily redeemable preferred stock, $0.01 par value: 1,000,000 shares authorized, 40,000 shares issued and outstanding		4,000,000			4,000,000
Total liabilities		16,214,279			16,040,072
Commitments and contingencies
Common stockholders’ deficit:
Common stock, $0.01 par value: voting: 40,000,000 shares authorized; 17,679,065 and 17,340,065 shares issued and outstanding, respectively		176,791			173,401
Additional paid-in capital		71,475,293			71,362,793
Accumulated deficit		(72,752,883	)		(72,716,658	)
Total common stockholders’ deficit		(1,100,799	)		(1,180,464	)
Total liabilities and common stockholders’ deficit	$	15,113,480		$	14,859,608

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31,

	2007			2006
Revenues	$	8,747,688		$	5,503,228
Cost and expenses:
Cost of revenues		6,523,738			4,308,940
Selling, general and administrative expenses		1,659,293			1,353,133
Depreciation expense		287,484			271,577
Total costs and expenses		8,470,515			5,933,650
Income (loss) from operations		277,173			(430,422	)
Interest income		28,820			16,211
Interest expense – related parties		(34,500	)		(22,937	)
Interest expense		(258,209	)		(454,113	)
Income (loss) from continuing operations		13,284			(891,261	)
Discontinued operations
Loss from discontinued operations		(49,509	)		(279,986	)
Loss before income tax		(36,225	)		(1,171,247	)
Income tax expense		—			—
Net loss	$	(36,225	)	$	(1,171,247	)
Basic and diluted loss per share of common stock:
Continuing operations	$	(0.00	)	$	(0.05	)
Discontinued operations	$	(0.00	)	$	(0.02	)
Net loss	$	(0.00	)	$	(0.07	)
Weighted average common shares outstanding		17,679,065			16,889,039

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS’ DEFICIT

(UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2007

	Common Stock			Additional Paid-in		Accumulated
	Shares	Amount		Capital		Deficit			Total
Balance, December 31, 2006	17,340,065	$	173,401	$	71,362,793	$	(72,716,658	)	$	(1,180,464	)
Common stock warrants exercised	334,000		3,340		—		—			3,340
Common stock issued for stock options	5,000		50		1,200		—			1,250
Value of warrants issued in connection with note payable to related party	—		—		89,250		—			89,250
Share based compensation expense	—		—		22,050		—			22,050
Net loss	—		—		—		(36,225	)		(36,225	)
Balance, March 31, 2007	17,679,065	$	176,791	$	71,475,293	$	(72,752,883	)	$	(1,100,799	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31,

	2007			2006
Cash flows from operating activities:
Net income (loss)	$	13,284		$	(891,262	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		287,484			271,577
Amortization of deferred financing costs		33,469			24,606
Amortization of deferred compensation		2,625			2,625
Accretion of discount on Convertible Notes		124,473			186,166
Allowance for doubtful accounts		97,093			1,786
Share based compensation expense		22,050			20,327
Changes in assets and liabilities from discontinued operations		(99,710	)		(336,291	)
Changes in operating assets and liabilities:
Accounts receivable		765,259			(892,830	)
Other assets		520,209			(189,106	)
Accounts payable and accrued expenses		280,362			5,383
Accrued salaries, wages and related benefits		415,454			212,269
Accrued interest and related party expenses		—			6,082
Deferred revenue and customer deposits		(636,112	)		36,073
Net cash provided by (used in) operating activities		1,825,940			(1,542,595	)
Cash flows from investing activities:
Additions to property and equipment, net		(771,696	)		21,205
Additions to property and equipment from discontinued operations, net		—			(187,549	)
Increase in restricted cash		—			(1,208,000	)
Net cash used in investing activities		(771,696	)		(1,374,344	)
Cash flows from financing activities:
Payments on capital leases		(115,210	)		(67,570	)
Proceeds from issuance of common stock		4,590			4,410
Proceeds from exercise of common stock options and warrants		—			101,250
Net borrowings under Credit Facility and Debt Agreement		—			390,411
Loan origination fees		—			(35,000	)
Proceeds from issuance of Convertible Notes		—			1,500,000
Proceeds from insurance financing, net		(13,522	)		103,012
Payment on capital leases from discontinued operations		—			(4,106	)
Net cash (used in) provided by financing activities		(124,142	)		1,992,407
Net increase (decrease) in cash and cash equivalents		930,102			(924,532	)
Cash and cash equivalents, beginning of period		2,836,980			1,755,926
Cash and cash equivalents, end of period	$	3,767,082		$	831,394
Non-cash investing and financing activities:
Equipment acquisitions through capital lease	$	267,177			—
Issuance of warrant on Note		89,250			—

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(UNAUDITED)

1. BASIS OF PRESENTATION

Access Worldwide Communications, Inc. (“Access Worldwide,” “Access,” “we,” “our,” “us” or the “Company”) is a Business Process and Sales Outsourcing (“BPO”) provider with reportable geographic segments.

In our opinion, these financial statements reflect all normal, recurring adjustments necessary to provide a fair presentation of our financial position, results of operations and cash flow for the periods presented. These interim financial statements are condensed, and thus, do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for the presentation of a complete set of financial statements. The balance sheet as of December 31, 2006 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

These interim results are not necessarily indicative of the results that should be expected for the fully year. For a better understanding of our business and our financial statements, the condensed interim financial statement should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2006, which are included in our 2006 Annual Report on Form 10K, filed with the Securities and Exchange Commission (the “SEC”) on April 16, 2007.

2. CONCENTRATION OF RISK

We are potentially subjected to concentration of credit risks through our cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited or managed by major financial institutions and at times are in excess of FDIC insurance limits.

We extend credit to our customers in the normal course of business and our accounts receivable are concentrated in a relatively few number of customers, a significant change in the liquidity or financial position of any of these customers could have a material adverse impact on the collectability of our accounts receivable and our future operating results. We continuously monitor accounts receivable balances and payments from our customers and maintain an allowance for doubtful accounts based upon historical experience and any specific customer collection issues that we have identified. As of March 31, 2007 and December 31, 2006, we maintain allowance for doubtful accounts of $97,275 and $99,130, respectively. While such bad debt expenses have historically been within our expectations and the allowances established, we cannot guarantee that we will continue to experience the same collectability rates that we have in the past. Management’s assessment and judgment are vital requirements in assessing the ultimate realization of accounts receivable, including the credit-worthiness, financial stability and effects of market conditions on each client.

Our revenues are dependent on clients in the telecommunications, financial services, retail/catalog and media industries, and a material decrease in demand for outsourced services in these industries could result in decreased revenues. Additionally, we have significant operations in the Philippines and are subject to risk associated with operating in the Philippines including political, social and economic instability and increase security concern, fluctuation in currency exchange rates and exposure to different legal standards.

We maintain operational and technical facilities for our global operations, including maintaining a relationship with three significant vendors that provide maintenance of our main technology equipment and data. Any significant events leading to systems and operations unavailability before our contingency plans can be deployed could potentially lead to a disruption of services and associated financial impact.

3. RECLASSIFICATIONS

Certain amounts have been reclassified in our prior period condensed consolidated financial statements to conform them to the presentation used in the current year. Such reclassifications did not change our net income (loss) or total common stockholders’ deficit as previously reported.

4. RESTRICTED CASH

As of March 31, 2007, we have restricted cash of $0.5 million in the form of a certificate of deposit which secured a letter of credit issued to the landlord of our Maryland communication center. The restriction decreases each anniversary year of the lease agreement by $0.1 million through 2008 and then remains at $0.2 million through 2010.

5. INCOME (LOSS) PER COMMON SHARE

Basic earnings per share is based on the weighted average number of common shares outstanding and diluted earnings per share is based on the weighted average number of common shares outstanding and all potentially dilutive common shares outstanding.

The following is a summary of the number of shares or securities outstanding during the respective periods that have been excluded from the calculation because their effects on net loss from operations would have been anti-dilutive:

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	For The Three Months Ended March 31, 2007
Convertible debt	10,120,000
Warrants	6,812,500
Stock options	1,277,390
Total	18,209,890

The information required to compute basic and diluted net income (loss) per share is as follows:

	For The Three Months Ended March 31,
	Loss (Numerator)			Shares (Denominator)	Per Share Amount
2007
Basic	$	(36,225	)	17,679,065	$	(0.00	)
Diluted	$	(36,225	)	17,679,065	$	(0.00	)
2006
Basic	$	(1,171,247	)	16,889,039	$	(0.07	)
Diluted	$	(1,171,247	)	16,889,039	$	(0.07	)

6. INDEBTEDNESS

	For the Three Months Ended
	March 31, 2007			December 31, 2006
Our borrowings consist of the following:
Subordinated unsecured promissory note payable to related party, constant maturity of four months and 200,000 warrants for each four month period	$	1,750,000		$	1,750,000
Deferred Financing		—			13,521
Capital leases payable in monthly installments through May 2010		836,567			684,601
		2,586,567			2,448,122
Less: current portion		(2,259,145	)		(2,188,866	)
	$	327,422		$	259,256

On May 24, 2006, we entered into a $2.0 million subordinated unsecured promissory note agreement (the “Note”) with Charles Henri-Weil, a member of our board of directors and one of our stockholders. The Note has a constant maturity of four months which requires us to issue a warrant to purchase 200,000 shares of our common stock for each of the four month period the Note remains unpaid. The warrants are fully vested upon issuance and have an exercise price of $0.01 per share and a term of ten years. As of March 31, 2007, we have issued three warrants totaling 600,000 shares of our common stock. We estimated these warrants to have a fair value $253,000 using a Black-Scholes pricing model, which has been recorded as loan origination fees, and is being amortized to interest expense over each four month period.

We expect to meet our short-term liquidity requirements through remaining proceeds from the sale of TMS, net cash provided by operations and cash and cash equivalents. We believe that these sources of cash will be sufficient to meet the Company’s operating needs and planned capital expenditures for at least the next twelve months.

Aggregate annual principal maturities for indebtedness as of March 31, 2007 are as follows:

2007	$	2,259,145
2008		216,889
2009		107,156
2010		3,377
	$	2,586,567

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7. INCOME TAXES

The effective tax rate used by us for the three month periods ended March 31, 2007 and 2006 differs from the federal statutory rate primarily due to the valuation allowance recorded in connection with the our deferred tax assets.

8. DISCONTINUED OPERATIONS

In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long Lived Assets, we have reclassified as discontinued operations, the operations of our TMS Professional Markets Group (“TMS”), a provider of highly professional pharmaceutical marketing services in a variety of therapeutic categories and our AM Medica Communications Group (“AMG”), a provider of highly professional pharmaceutical educations and meeting management services.

TMS was sold on August 3, 2006 for $10.5 million less $0.4 million for the settlement of a subordinated note with the former stockholder of TeleManagement Services, accrued interest and a $0.8 million holdback for the working capital settlement in 90 days, as defined in the Asset Purchase Agreement. We realized a net gain, including operations through July 31, 2006, of $7.8 million on the disposal of the segment, net of income tax expense and expenses incurred in connection with the transaction as of December 31, 2006. On March 27, 2007, we settled the Working Capital Settlement with TMS for $0.3 million.

In addition, the Board of Directors approved a plan to terminate our medical education and meeting management services as of December 31, 2006 and focus its attention to the rapidly growing business process outsourcing industry. This action resulted in AMG being reclassified as discontinued operations.

Revenues and operating loss for TMS and AMG for the period ended March 31:

	2007			2006
TMS:
Revenues		—		$	3,972,653
Operating loss		—			(222,872	)
Net loss per share		—		$	(0.01	)
AMG:
Revenues	$	—		$	513,514
Operating loss income		(49,508	)		(50,294	)
Net loss per share	$	(0.00	)	$	(0.00	)

9. SEGMENTS

Our reportable segments are strategic business units that offer our products and services out of different geographical regions. Our reportable segments consist of U.S. Segment which provides customer management services within the U.S. and Philippines Segment which provides customer management services within the Philippines.

We evaluate the performance of our segments and allocate resources based on revenues and operating (loss) income. The tables below present information about our reportable segments for our continuing operations used by our chief operating decision-maker as of and for the three months ended March 31,

	2007			2006
Revenues
United States	6,560,810			4,710,817
Philippines	2,186,878			792,411
Total	8,747,688			5,503,228
Operating loss			��
United States	(60,740	)		(399,138	)
Philippines	337,913			(31,285	)
Total	277,173			(430,423	)
Depreciation expense
United States	128,706			172,662
Philippines	158,778			98,915
Total	287,484			271,577

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Disclosure Concerning Forward-Looking Statements

In December 1995, the Private Securities Litigation Reform Act of 1995 (the “Reform Act”) was enacted by the United States Congress. The Reform Act, as amended, contains certain amendments to the Securities Act of 1933 and the Securities Exchange Act of 1934. These amendments provide protection from liability in private lawsuits for “forward-looking” statements made by public companies. We choose to take advantage of the “safe harbor” provisions of the Reform Act.

This Quarterly Report on Form 10-Q contains both historical information and other information. While we have specifically identified certain information as being forward-looking in the context of its presentation, we caution the reader that, with the exception of information that is clearly historical, all the information contained in this Quarterly Report on Form 10-Q should be considered to be “forward-looking statements” as referred to in the Reform Act. Without limitation, when we use the words “believe,” “estimate,” “plan,” “expect,” “intend,” “anticipate,” “continue,” “project,” “probably,” “should,” “will” and similar expressions, we intend to clearly express that the information deals with possible future events and is forward-looking in nature.

Forward-looking information involves risks and uncertainties. This information is based on various factors and assumptions about future events that may or may not actually come true. As a result, our operations and financial results in the future could differ substantially from those we have discussed in the forward-looking statements in this Quarterly Report and other documents that have been filed or furnished with the Securities and Exchange Commission. In particular, various economic and competitive factors, including those outside our control, such as the following, could cause our actual results during the remainder of fiscal 2007 and in future years to differ materially from those expressed in any forward-looking statement made in this Quarterly Report on Form 10-Q:

• The availability and adequacy of our cash flow to meet Company requirements, including payment of loans;

• Our ability to continue as a going concern;

• Competition from other third-party providers and those of our clients and prospects who may decide to do the work that we do in-house;

• Industry consolidation which reduces the number of clients that we are able to serve;

• Our dependence on the continuation of the trend toward outsourcing;

• Dependence on the industries we serve;

• Our ability and our clients’ ability to comply with state, federal and industry regulations;

• Reliance on a limited number of major clients;

• The effects of possible contract cancellations;

• Reliance on technology;

• Reliance on key personnel and recent changes in management;

• Reliance on our labor force;

• The possible impact of terrorist activity or attacks, war and other international conflicts, and a downturn in the US economy;

• The effects of an interruption of our business;

• The volatility of our stock price;

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• Risks associated with our stock trading on the OTC Bulletin Board;

• Our inability to successfully operate our communication center in the Philippines; and

• Our inability to successfully operate the Company after the sale of all or substantially all the assets of the Company’s TMS Professional Markets Group division.

In addition, under the heading “Critical Accounting Policies” in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K, we describe various estimates and assumptions we make that affect the reported amounts of assets, liabilities, sales and expenses as well as the disclosure of contingent assets and liabilities. Future revisions to these estimates and assumptions may cause these amounts, when reported, to differ materially from those expressed in any forward-looking statement made in this Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements attributable to Access Worldwide Communications, Inc. and our subsidiaries are expressly qualified in their entirety by the foregoing factors.

Results of Operations

The following table sets forth, for the periods indicated, certain statements of operations data by segment obtained from our consolidated statements of operations.

	United States								International
	2007			2006			Change		2007		2006			Change
	(in thousands)
Statements of Operations Data:
Revenues	$	6,561		$	4,711		1,850		$	2,187	$	792		1,395
Cost of services		5,264			3,849		1,415			1,260		460		800
Selling, general and administrative expenses		1,228			1,089		139			431		264		167
Depreciation expense		129			173		(44	)		158		99		59
Operating (loss) income	$	(60	)	$	(400	)	340		$	338	$	(31	)	369

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Revenues

Our revenues for the quarter ended March 31, 2007 increased $3.2 million, or 58.2%, to $8.7 million, compared to $5.5 million for the quarter ended March 31, 2006. Revenues for the U.S. Segment increased $1.9 million, or 40.4%, to $6.6 million for the quarter ended March 31, 2007, compared to $4.7 million for the quarter ended March 31, 2006. The increase was attributed to a one time performance incentive program ran by one of our clients and a 7% increase in production hours produced. Revenues for the International Segment increased $1.4 million, or 175.0%, to $2.2 million for the quarter ended March 31, 2007, compared to $0.8 million for the quarter ended March 31, 2006. The increase in revenues is primarily attributed to organic growth resulting in a 175% increase in production hours produced. These revenues included revenues from one of our clients’ that have decided to take their outsourced programs in house effective the end of April 2007. As a result of this decision we have entered into a Work Station Terms and Use Agreement with the client which includes, among other things, the clients continued utilization of our communication seats on a fee basis. Management is working diligently to replace this book of business through its active pipeline.

Cost of Services

Our cost of services increased $2.2 million, or 51.2%, to $6.5 million for the quarter ended March 31, 2007, compared to $4.3 million for the quarter ended March 31, 2006. Cost of services as a percentage of revenues decreased to 74.7% for the quarter ended March 31, 2007, compared to 78.2% for the quarter ended March 31, 2006. Cost of revenues as a percentage of revenues for the U.S. Segment decreased to 80.3% for the quarter ended March 31, 2007, compared to 80.9% for the quarter ended March 31, 2006. The decrease is primarily attributed to the increase in revenues and a decrease in our reliance on recruiting agencies to provide staffing needs. Cost of services as a percentage of revenues for the International Segment decreased to 59.1% for the quarter ended March 31, 2007, compared to 62.5% for the quarter ended March 31, 2006. The decrease is primarily attributed to the increase in revenues as our first communication center operated at operating capacity for the quarter ended March 31, 2007 offset by an increase in operating costs from our second communication center which came on line at the end of February 2007.

Selling, General and Administrative

Our selling, general and administrative expenses increased $0.3 million, or 21.4%, to $1.7 million for the quarter ended March 31, 2007, compared to $1.4 million for the quarter ended March 31, 2006. Selling, general and administrative expenses as a percentage of revenues decreased to 19.5% for the quarter ended March 31, 2007, compared to 25.5% for the quarter ended March 31, 2006. Selling, general and administrative expenses as a percentage of revenues for the U.S. Segment decreased to 18.2% for the quarter ended March 31, 2007, compared to 23.4% for the quarter ended March 31, 2006. The decrease is primarily attributed to the increase in revenues and a decrease in facilities rent as we did not renew our lease for the 8th floor at our Virginia Facility. Selling, general and administrative expenses as a percentage of revenues for the International Segment decreased to 18.2% for the quarter ended March 31, 2007, compared to 37.5% for the quarter ended March 31, 2006. The decrease is primarily attributed to the increase in revenues as our first center operated at operating capacity for the quarter ended March 31, 2007 offset by an increase in fixed operating costs from our second communication center which came on line at the end of February 2007.

Depreciation Expense:

Our depreciation expense remained approximately the same for quarter ended March 31, 2007, compared to the quarter ended March 31, 2006. Depreciation expense for the United States Segment decreased $0.1 million, or 50%, to $0.1 million for three months ended March 31, 2007, compared to $0.2 million for the three months ended March 31, 2006. The decrease was primarily attributed to assets becoming fully depreciated in 2006. Depreciation expense for the International Segment increased $0.1 million or 100%, to $0.2 million for the quarter ended March 31, 2007, compared to $0.1 million for the quarter ended March 31, 2006. The increase was primarily attributed to $1.0 million in fixed assets to support our revenue growth.

LIQUIDITYAND CAPITAL RESOURCES

The following table summarizes our cash flow by category for the three months ended March 31, (in thousands):

	2007			2006			Change			% Change
Net cash provided by (used in) operating activities	$	1,647		$	(1,543	)	$	3,190		206.7	%
Net cash (used) in investing activities	$	(772	)	$	(1,374	)	$	602		43.8	%
Net cash (used in) provided by financing activities	$	(124	)	$	1,992		$	(2,116	)	(106.2	)%

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Our primary cash requirements include the funding of the following:

• operating expenses

• capital expenditures for new and ongoing communication centers

• interest payments and the repayment of principal on our debt

• tax payments

Our primary source of liquidity has been cash and cash equivalents, restricted cash and cash flow from operations. At March 31, 2007 and December 31, 2006, we had cash and cash equivalents of $3.8 million and $2.8 million, respectively and working capital of $4.0 million and $4.2 million, respectively, excluding of $0.5 million restricted cash.

Net cash provided by operating activities during the first quarter of 2007 was $1.6 million, compared to net cash used in operating activities during the first quarter of 2006 of $1.5 million. The net increase was primarily due decreases in account receivables outstanding, other assets and increases in accounts payables and accrued salaries, wages and related benefits and deferred revenues and customer deposits. The decrease in other assets is attributed to the collection of the remaining proceeds from the sale of TMS as a result of the finalization of the agreed upon working capital.

Net cash used in investing activities during the first quarter of 2007 was approximately $0.7 million, compared to $1.4 million during the first quarter of 2006. The increase is attributed to cost incurred in opening our second communication center in the Manila, Philippines and the establishment of a co-location site for our IT equipment in Auburn, MD.

Net cash used in financing activities was $0.1 million for the first quarter of 2007, compared to net cash provided by financing activities of $2.0 million for the first quarter of 2006. The decrease was primarily due to our Debt Agreement being paid off in August 2006 and therefore no additional borrowing and no additional convertible notes issued for the period ended March 31, 2007.

Contractual Obligations and Off Balance Sheet Arrangements

The following is a chart of our approximate contractual cash payment obligations, which have been aggregated to facilitate a basic understanding of our liquidity as of March 31, 2007:

Contractual Cash Obligations

	Payments Due by Period
	Total		1 year		2-4 years		5 years
Long-term debt	$	1,750,000	$	1,750,000	$	—	$	—
Convertible debt		5,635,000		1,150,000		4,485,000		—
Capital lease obligations		836,000		509,000		327,000		—
Operating leases		6,088,000		2,239,000		3,777,000		72,000
Total contractual obligations	$	14,309,000	$	5,648,000	$	8,589,000	$	72,000

We have no off-balance sheet arrangements. The debt and lease obligations in the table above do not include accrued interest.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our results of operation and cash flows are subject to fluctuations due to changes in foreign currency exchange rate, in particularly, the Philippines peso. For the three months ended March 31, 2007 and 2006, approximately 13% and 6%, respectively, of our expenses were generated in the Philippines. We measure all of our revenues in U.S. dollars. A 10% increase in the value of the U.S. dollar relative to the Philippines peso would reduce the expenses associated with the operations of our overseas operation by approximately $0.1 million where as a 10% decrease in the relative value of the dollar would increase the cost associated with these operations by approximately $0.1 million. Expenses related to our operations outside of the United States increased for the three months ended March 31, 2007 when compared to the three months ended March 31, 2006 due to increased cost associated with higher revenue generation and a decrease in the value of the U.S. dollar relative to the Philippine peso.

We have cash and cash equivalents and restricted cash equivalents totaling $4.2 million at March 31, 2007. These amounts were primarily invested in money market funds, certificate of deposits and variable rated preferred instruments. The cash and cash equivalents are held for working capital requirements, expansion and general corporate purposes. We do not enter into investments for trading or speculative purposes. We believe that we have no material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates.

ITEM 4. CONTROLS AND PROCEDURES

We carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer of the effectiveness of our disclosure controls and procedures as of the end

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of the period covered by this Quarterly Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective for recording, processing and summarizing the information we are required to disclose in the reports we file under the Securities Exchange Act of 1934, within the time periods specified in the SEC’s rules and forms. Our management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature can provide only reasonable assurance regarding management’s control objectives. There has been no change in our internal control over financial reporting during our last quarter, identified in connection with the evaluation referred to above, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II–OTHER INFORMATION

ITEM 1A. Risk Factors

During the period covered by this Report, there have been no material changes from the Company’s risk factors as previously disclosed in the Company’s Form 10-K for the year ended December 31, 2006.

ITEM 6. Exhibits

Exhibits No.	Description
10(ttttt)	Press Release of Company announcing first quarter 2007 earnings, dated May 15, 2007 (incorporated by reference to Exhibit 99.1 to the Company’s 8-K filed on May 15, 2007).
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer

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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 WORLDWIDE COMMUNICATIONS, INC.
Date: May 15, 2007	By:	/s/ SHAWKAT RASLAN
		Shawkat Raslan, Chairman of the Board,
		President and Chief Executive Officer (principal executive officer)
Date: May 15, 2007	By:	/s/ RICHARD A. LYEW
		Richard A. Lyew, Executive Vice President and
		Chief Financial Officer (principal financial and accounting officer)

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Exhibit Index

Exhibit Number	Description
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer

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