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 Ended July 31, 1995.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From
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to
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Commission File Number 2-33108
ACCESS CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-0673364
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(State of incorporation) (I.R.S Employer Identification Number)
4350 Glendale-Milford Road, Suite 250, Cincinnati, Ohio 45242-3700
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 786-8350
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
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Indicate the number of shares outstanding of each of the issuer's classes
of common shares, as of July 31, 1995. Common Stock, no par value: 3,453,257
shares; Class A Common Stock, no par value: 1,428,572 shares.
PART I. FINANCIAL INFORMATION
ACCESS CORPORATION
BALANCE SHEET
ASSETS
July 31 April 30, 1995
1995 ---------------
-------
CURRENT ASSETS
Cash $ 1,216,621 $ 883,487
Accounts Receivable, Less
Allowances for Doubtful
Accounts of $203,268 in
July 1995 and $18,100 in
April 1995 1,838,328 1,015,811
Inventories
Raw Material and Purchased
Parts 73,817 79,495
Work-in-Process 356,263 318,598
Finished Goods 16,631 14,772
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446,711 412,865
Prepaid Expenses 152,200 68,990
Deferred income tax benefit 112,000 112,000
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TOTAL CURRENT ASSETS 3,765,860 2,493,153
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Computer Hardware & Software 1,347,966 1,952,220
Machinery and Equipment 503,338 503,337
Office and Service Equipment 320,025 313,431
Leasehold Improvements 5,251 5,000
Tools, Dies and Fixtures 115,013 115,013
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2,291,593 2,889,001
Less Accumulated Depreciation 2,078,518 2,646,833
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213,075 242,168
COMPUTER SOFTWARE COSTS 1,574,200 1,742,627
DEFERRED INCOME TAX BENEFIT 651,300 651,300
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TOTAL ASSETS $ 6,204,435 $ 5,129,248
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<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
ACCESS CORPORATION
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
July 31, April 30,
1995 1995
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CURRENT LIABILITIES
Accounts Payable $ 252,383 $ 95,864
Accrued Salaries, Wages
and Commissions 375,321 120,054
Accrued Taxes 25,128 24,429
Accrued Warranty Expense 28,553 44,275
Capital Leases- Current 48,238 77,683
Other Accrued Liabilities 243,014 339,456
Advances from Customers 865,677 56,613
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TOTAL CURRENT LIABILITIES 1,838,314 758,374
PREPAID MAINTENANCE CONTRACT 378,469 299,578
CAPITAL LEASES 17,965 23,099
MANDATORILY REDEEMABLE
PREFERRED STOCK 1,500,000 1,500,000
Preferred Dividends 0 64,685
STOCKHOLDERS' EQUITY
Capital Stock
Common Stock, No Par Value,
Authorized 8,000,000 Shares;
Issued and Outstanding
3,453,257 Shares 345,325 345,325
Class A Common Stock, No Par
Value, Authorized 2,000,000
Shares; Issued and Outstanding
1,428,572 Shares 142,857 142,857
Additional Paid-In Capital 10,761,408 10,760,162
Deficit from April 1, 1985 (8,764,520) (8,749,449)
16,270 Common Stock Shares In
Treasury, at Cost (15,383) (15,383)
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TOTAL CAPITAL STOCK AND OTHER 2,469,687 2,483,512
STOCKHOLDERS' EQUITY
TOTAL LIABILITIES AND $ 6,204,435 $ 5,129,248
STOCKHOLDERS' EQUITY =========== ==========
<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
ACCESS CORPORATION
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
JULY 31,
1995 1994
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REVENUE
System Sales $ 216,061 $ 423,340
Service 1,090,209 1,046,211
Manufacturing 51,001 46,633
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1,357,271 1,516,184
COST
System Sales 151,598 228,111
Service 568,597 405,315
Manufacturing 39,256 127,411
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759,451 760,837
GROSS PROFIT BEFORE
AMORTIZATION 597,820 755,347
AMORTIZATION OF COMPUTER
SOFTWARE COST 168,426 168,426
GROSS PROFIT 429,394 586,921
Selling and Administrative 337,758 411,928
Engineering, Research
and Development 109,289 157,319
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Total Costs and Expenses 447,047 569,247
EARNINGS (LOSS)FROM
OPERATIONS (17,653) 17,674
OTHER INCOME (EXPENSE)
Interest Income 12,414 950
Other Income 66 728
Interest Expense (2,176) (10,031)
Other (7,723) (250)
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EARNINGS (LOSS) (15,072) 9,071
BEFORE INCOME TAXES
INCOME TAXES 3,100
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NET EARNINGS (LOSS) (15,072) 5,971
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PER COMMON SHARE AND COMMON
SHARE EQUIVALENTS
Net Earnings Per Common
Share and Common Share
Equivalent $ (0.00) $ 0.00
<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
ACCESS CORPORATION
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
JULY 31,
1995 1994
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CASH FLOWS FROM:
OPERATING ACTIVITIES
Net Earnings $ (15,072) $ 5,971
Adjustments to Reconcile
Net Earnings To Net Cash
Used in Operations:
Depreciation 33,760 33,740
Amortization 168,426 168,425
(Gain) Loss on Disposal of
Fixed Assets 7,377
Deferred Income Taxes 3,100
Changes In Assets and Liabilities:
Accounts Receivable 291,313 (242,725)
Inventories (33,846) 95,408
Prepaid Expenses (83,210) (91,132)
Accounts Payable 52,895 (28,207)
Accrued Liabilities (66,265) 148,818
Advances From Customers 8,223 615
Prepaid Maintenace Contract 63,715 59,664
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NET CASH PROVIDED BY
OPERATING ACTIVITIES: 427,316 153,677
INVESTING ACTIVITIES
Capital Additions (12,045) (10,908)
Investment in Subsidiary-Net
of Cash Acquired of $281,371 (68,629)
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NET CASH (USED IN) INVESTING
ACTIVITIES: (80,674) (10,908)
FINANCING ACTIVITIES
Proceeds(repayments) under
bank line of credit 0 (54,252)
Payments on Capital Leases (13,508) (88,767)
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES: (13,508) (143,019)
NET CHANGE IN CASH $ 333,134 $ (250)
CASH, Beginning of Year 883,487 3,500
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CASH, July 31, 1995 and 1994 $ 1,216,621 $ 3,250
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<FN>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
ACCESS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JULY 31, 1995
NOTE A - Condensed Financial Statements
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The condensed balance sheets as of July 31, 1995, the condensed statements
of earnings for the three month periods ended July 31, 1995 and 1994, and
the condensed statements of cash flows for the three month periods then
ended have been prepared by the Company without audit. These financial
statements reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim periods
presented. All adjustments made during the quarter ended July 31, 1995 are
of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's annual report on Form 10-K for the year
ended April 30, 1995. The results of operations for the period ended
July 31, 1995 are not necessarily indicative of the operating results for
the full year.
NOTE B - Reclassification
--------------------------
Certain amounts previously reported have been reclassified to be consistent
with the classifications being used in the current period.
NOTE C - Acquisition of Subsidiary
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On July 31, 1995, the Company acquired a new company at a net cost of
$350,000, CimSoft Incorporated. CimSoft has offices in Michigan and
California. It is the exclusive distributor for all of Cimage Enterprises
Systems, Limited (CESL) products in North America. These products are sold
under the trade name "Cimage" in markets similar to those the Company has
served for many years.
The Company expects to expand their ability to serve its existing markets
through new product offerings, broader sales and distribution coverage,
and continued growth in its customer service programs.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company has two primary lines of business. Over the
years the Company has built a substantial, continuing field
maintenance business. This business services, on a
nationwide basis, hardware and, on a national and
international basis, software for the Company's installed
base of customers and third parties. The Company is also a
leader in the Technical Document Management Systems (TDMS)
software business. In this line of business, the Company
develops and markets software solutions for its customers'
technical processes. TDMS has the potential for substantial
growth in revenue and profits in that it serves a
potentially large, worldwide market opportunity.
First quarter 1995 revenue of $1.4 million was down $158,900
(10%) compared with the first quarter of fiscal 1995, due to
a decrease in TDMS revenue. System Sales declined $207,300
while Service and Manufacturing revenue increased $48,400.
TDMS revenue of $216,100 was 49% lower than the first
quarter of fiscal 1995. TDMS represented 16% of the total
revenue in the first quarter of fiscal 1996 compared with
28% in the same period of fiscal 1995. In the first
quarter of Fiscal 1995, the Company delivered one (1) system
as compared to 15 small enhancements in fiscal 1996.
Service/Manufacturing revenue in the first quarter of 1996
of $1.1 million increased 4% over the first quarter of
fiscal 1995.
The Company's backlog of orders at July 31, 1995 was $2.1
million compared to $3.4 at July 31, 1994. Current TDMS
backlog is 21% lower than the same date last year.
Service/Manufacturing backlog was 50% lower than the same
period last year. The Service backlog decreased due to a
loss of a contract for a customer with multiple sites as well
as a steady decrease occuring in the micrographic based
maintenace. The Company expects a continual decrease in the
service on the micrographic based systems as systems age and
are taken out of service. However, the Company is actively
seeking additional third party service. The Company expects
that additional third party service in combination with service
revenue from its new customers will maintain or even grow its
service revenue over the long run.
Gross margins before amortization for the first quarter of
fiscal 1996 of 44% were within 6% of that for the comparable
period in fiscal 1995. Gross margins for the first quarter
of fiscal 1995 were higher due to the sale of one TDMS
system in 1994 versus the 15 small enhancements delivered in
this same period in fiscal 1996. Total cost stayed
relatively the same for the first quarter in fiscal 1996.
The 15 small enhancements have higher costs than a system
which would be mostly software with lower cost.
Service/Manufacturing business unit costs increased 14%
primarily due to the increased revenue for third party
maintenance contracts.
Selling and administrative expenses of $337,800 for the
first quarter of fiscal 1996 were 18% lower than the first
quarter of fiscal 1995. The primary cause of this reduction
was a decrease in labor and travel expenses.
Engineering, research and development expenses are incurred
for maintaining, upgrading and developing new products. The
first quarter expenses for engineering, research and
development of $109,300 decreased $48,000 from the first
quarter 1995. This decrease is due to the Company spending
less on labor and outside contractors and applying more time
to inventory projects rather than development projects.
Interest expense for the first quarter was $2,200 compared
with $10,000 in the same period of fiscal 1995. Interest
income of $12,400 in the first quarter of fiscal 1996 is
$11,500 higher than the $950 reported in the same period in
fiscal 1995. This fluctuation in interest expense and
income is the result of the Company not using its bank
line of credit in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The first quarter of fiscal 1996 ended with $1,216,600 in
cash and zero borrowing under tha bank line of credit. The
Company provided $427,300 in cash from operations and
invested $12,100 in fixed assets. The Company invested
$350,000 in the acquisition of a subsidiary which was offset
by an additional $281,400 in cash provided by this
subsidiary.
Inventories have increased $33,800 since April 30, 1995.
This is primarily due to more time being applied toward a
large TDMS system order currently in backlog.
Accounts Receivable increased $291,300 during the first
three months of fiscal 1996. This was the result of 15
enhancements completed in the first quarter of fiscal 1996
and not yet paid.
On large customer orders in backlog there are provisions for
progress payments to be made by customers based on
predetermined events. These orders are expected to be filled
within this fiscal year.
Working capital on July 31, 1995 was approximately
$2,007,500 which is $272,700 higher than the April 30, 1995
level. This primarily was the result of the increase in
accounts receivable.
The Company's plans are structured so that revenues from its
AS/400, UNIX and new Cimage products, in combination with
those from its recurring service business, are expected to
provide the cash flow required to operate the Company.
On July 31, 1995, the Company acquired a new company at a net
cost of $350,000, CimSoft Incorporated. CimSoft has offices in
Michigan and California. It is the exclusive distributor for all
of Cimage Enterprises Systems, Limited (CESL) products in North
America. These products are sold under the trade name "Cimage"
in markets similar to those the Company has served for many years.
The Company expects to expand their ability to serve its existing
markets through new product offerings, broader sales and distribution
coverage, and continued growth in its customer service programs.
PART II OTHER INFORMATION
--------------------------
Item 4. Submission of Matters to a Vote of Security Holders
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The Registrant's Annual Meeting of Shareholders was held on
August 21, 1995.
At the Annual Meeting, the holders of Common Stock of the
Registrant approved a resolution setting the number of
directors to be elected at seven. The vote of the
shareholders was:
FOR: 3,062,387
AGAINST: 2,170
ABSTAIN: 2,081
BROKER NON-VOTES: 370,349
The holders of Common Stock of the Registrant approved the
appointment of the following directors. The vote of the
shareholders was:
FOR WITHHELD
Newton D. Baker 3,063,473 3,165
Kent P. Friel 3,063,473 3,165
James H. Hardie 3,065,378 1,260
Robert J. Kalthoff 3,063,473 3,165
Dennis J. Sullivan,Jr. 3,065,378 1,260
Scott D. Watkins 3,065,378 1,260
John W. Weil 3,065,378 1,260
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits. Refer to EXHIBIT INDEX on page 12 of this
Quarterly Report on Form 10-Q.
(b) Reports on Form 8-K. No reports on Form 8-K were filed
during the first quarter of fiscal year 1996.
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 CORPORATION
Date: August 31, 1995 NEWTON D. BAKER
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Newton D. Baker
Executive Vice President
Date: August 31, 1995 BARBARA A. SOMMER
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Barbara A. Sommer
Assistant Treasurer & Chief
Accounting Officer
EXHIBIT INDEX
(11) Statement recomputation of per share earnings.
(a) The calculation of net earnings per common share
and common share equivalent for the three month period ended
July 31, 1995 and 1994 is attached as Exhibit 11(a), page
13.
(19) Material Contracts:
(i) Stock Purchase agreement between the Company and
William Manning is attached hereto as Exhibit 19(i).
(ii) Consulting Agreement between the Company and
Joseph Ben-Gal is attached hereto as Exhibit 19(ii).
ACCESS CORPORATION
CALCULATION OF NET EARNINGS PER COMMON SHARE
AND COMMON SHARE EQUIVALENT
THREE MONTHS ENDED
JULY 31,
1995 1994
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NET EARNINGS (LOSS) $ (15,072) $ 5,971
NET EARNINGS APPLICABLE TO COMMON
SHARES AND COMMON SHARE
EQUIVALENTS:
Net Earnings Applicable to Common
Shares and Common Share
Equivalents (0.00) 0.00
============== =============
CALCULATION OF PRIMARY NET EARNINGS
PER COMMON SHARE AND COMMON SHARE
EQUIVALENTS:
Average Number of Common Shares
and Common Share Equivalents
Outsatanding 4,865,559 4,865,559
<FN>
a) Common Share Equivalents have not been included as their inclusion
would be anti-dilutive or dilusion is less than 3%