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 Quarterly Period Ended January 31, 1996 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 2-33108 ACCESS CORPORATION (Exact name of registrant as specified in its charter) 	 Ohio 31-0673364 - ------------------------------------------------------------------------ (State or other jurisdiction (I.R.S. Employer Identification Number) of incorporation)	 4350 Glendale-Milford Road, Suite 250, Cincinnati, Ohio	45242-3700 - ------------------------------------------------------------------- (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 ------ -------- Indicate the number of shares outstanding of each of the issuer's classes of common shares, as of January 31, 1996. Common Stock, no par value: 4,865,559 shares. PART I. FINANCIAL INFORMATION ACCESS CORPORATION BALANCE SHEETS ASSETS January 31, April 30, 1996 1995 CURRENT ASSETS: Cash $ 1,252,837 $ 883,487 Accounts Receivable, Less Allowances for Doubtful Accounts of $81,014 in January 1996 and $18,100 in April 1995 2,334,017 1,015,811 Inventories Raw Materials and Purchase Parts 106,791 79,495 Work - in - Process 92,632 318,598 Finished Goods 15,751 14,772 --------- --------- 215,174 412,865 Prepaid Expenses 241,139 68,990 Deferred Income Tax Benefit 30,200 112,000 --------- --------- TOTAL CURRENT ASSETS 4,073,367 2,493,153 EQUIPMENT AND LEASEHOLD IMPROVEMENTS Computer Hardware & Software 1,427,240 1,952,220 Machinery and Equipment 503,338 503,337 Office and Service Equipment 364,276 313,431 Leasehold Improvements 9,422 5,000 Tools, Dies and Fixtures 115,013 115,013 --------- --------- 2,419,289 2,889,001 Less Accumulated Depreciation (2,153,499) (2,646,833) --------- ---------- 265,790 242,168 COMPUTER SOFTWARE COSTS 1,237,348 1,742,627 DEFERRED INCOME TAX BENEFIT 651,300 651,300 --------- --------- TOTAL ASSETS $ 6,227,805 $5,129,248 =========== ========== <FN> SEE NOTES TO CONDENSED FINANCIAL STATEMENTS ACCESS CORPORATION BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY January 31, April 30, 1996 1995 CURRENT LIABILITIES Accounts Payable $ 149,176 $ 95,864 Accrued Salaries, Wages and Commissions 293,387 120,054 Accrued Taxes 27,245 24,429 Accrued Warranty Expense 21,917 44,275 Capital Leases - Current 27,299 56,613 Other Accrued Liabilities 762,772 77,683 Advances from Customers 228,635 339,456 ------------ ---------- TOTAL CURRENT LIABILITIES 1,510,431 758,374 PREPAID MAINTENANCE CONTRACT REVENUE 574,934 299,578 CAPITAL LEASES - 23,099 MANDATORILY REDEEMABLE PREFERRED STOCK 1,500,000 1,500,000 Accrued Preferred Dividends 79,464 64,685 STOCKHOLDERS' EQUITY Capital Stock Common Stock, No Par Value, Authorized 8,000,000 Shares, Issued and Outstanding 3,453,257 Shares 488,183 345,325 Class A Common Stock, No Par Value, Authorized 2,000,000 Shares, Issued and Outstanding 1,428,572 Shares(1995) - 142,857 Additional Paid-In Capital 10,680,698 10,760,162 Deficit from April 1, 1985 (8,590,522) (8,749,449) 16,270 Common Stock Shares In Treasury, at Cost (15,383) (15,383) ---------- --------- TOTAL STOCKHOLDERS' EQUITY 2,562,976 2,483,512 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,227,805 $5,129,248 ========== ========== <FN> SEE NOTES TO CONDENSED FINANCIAL STATEMENTS ACCESS CORPORATION STATEMENT OF EARNINGS Three Months Ended January 31, 1996 1995 REVENUE System Sales $1,317,097 $ 164,371 Service 1,233,846 1,172,516 Manufacturing 37,113 69,707 ---------- ---------- 2,588,056 1,406,594 COST OF REVENUE System Sales 714,201 78,698 Service 546,176 508,398 Manufacturing 58,481 64,816 ---------- ---------- 1,318,858 651,912 GROSS PROFIT BEFORE AMORTIZATIO 1,269,198 754,682 AMORTIZATION OF COMPUTER SOFTWARE COST 168,426 168,426 ---------- ---------- GROSS PROFIT 1,100,772 586,256 Sales and Administrative 722,263 339,257 Engineering, Research and Development 180,998 158,284 ---------- ---------- Total Costs and Expenses 903,261 497,541 EARNINGS FROM OPERATIONS 197,511 88,715 OTHER INCOME (EXPENSE) Interest Income 12,625 1,021 Other Income 621 359 Interest Expense (2,439) (5,452) Other (295) (2,089) ---------- ---------- EARNINGS BEFORE INCOME TAXES 208,023 82,554 INCOME TAXES 70,700 28,100 ---------- ---------- NET EARNINGS 137,323 54,454 PREFERRED DIVIDEND 68,662 - INCOME APPLICABLE TO COMMON SHARES $ 68,661 $ 54,454 ========== ========== PER COMMON SHARE AND COMMON SHARE EQUIVALENT Net earnings $ 0.01 $ 0.01 =========== ========== <FN> SEE NOTES TO CONDENSED FINANCIAL STATEMENTS ACCESS CORPORATION STATEMENT OF EARNINGS Nine Months Ended January 31, 1996 1995 REVENUE System Sales $ 2,477,502 $ 933,404 Service 3,461,846 3,418,014 Manufacturing 108,995 173,653 ----------- ----------- 6,048,343 4,525,071 COST OF REVENUE System Sales 1,386,432 486,504 Service 1,696,827 1,510,623 Manufacturing 173,024 164,241 ----------- ----------- 3,256,283 2,161,368 GROSS PROFIT BEFORE AMORTIZATION 2,792,060 2,363,703 AMORTIZATION OF COMPUTER SOFTWARE COST 505,278 505,278 ----------- ----------- GROSS PROFIT 2,286,782 1,858,425 Sales and Administrative 1,638,077 1,180,338 Engineering, Research and Development 431,145 437,310 ----------- ----------- Total Costs and Expenses 2,069,222 1,617,648 EARNINGS FROM OPERATIONS 217,560 240,777 OTHER INCOME (EXPENSE) Interest Income 39,677 1,191 Other Income 621 1,550 Interest Expense (9,091) (22,255) Other (8,041) (1,962) ----------- ----------- EARNINGS BEFORE INCOME TAXES 240,726 219,301 INCOME TAXES 81,800 74,600 ----------- ----------- NET EARNINGS 158,926 144,701 PREFERRED DIVIDENDS 79,464 - ----------- ----------- INCOME APPLICABLE TO COMMON SHARES $ 79,462 $ 144,701 =========== =========== PER COMMON SHARE AND COMMON SHARE EQUIVALENT Net Earnings $ 0.02 $ 0.03 =========== =========== <FN> SEE NOTES TO CONDENSED FINANCIAL STATEMENTS ACCESS CORPORATION STATEMENTS OF CASH FLOW Nine Months Ended January 31, 1996 1995 CASH FLOW FROM: OPERATING ACTIVITIES Net Earnings $ 158,926 $ 144,701 Adjustments to Reconcile Net Earnings To Net Cash Used in Operations: Depreciation 108,741 104,845 Amortization 505,278 505,278 Deferred Income Tax 81,800 74,600 (Gain) Loss on Sale of Fixed Asset 7,377 454 Changes in Assets and Liabilities Accounts Receivable (280,376) (609,654) Inventories 197,691 (38,567) Prepaid Expenses (172,149) 5,151 Accounts Payable (50,312) (113,541) Accrued Liabilities 441,795 15,126 Advances From Customers (628,819) 222,799 Prepaid Maintenance Contract Revenue 260,181 253,565 ---------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 630,133 564,757 INVESTING ACTIVITIES: Capital Additions (139,741) (14,781) Investment in Subsidiary (68,629) - Proceeds from Disposal of Fixed Assets - 240 ---------- --------- NET CASH (USED IN) INVESTING ACTIVITIES (208,370) (14,541) FINANCING ACTIVITIES Net Proceeds(Payments)Under Bank Line of Credit - (71,807) Payments on Capital Leases (52,413) (53,692) ---------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (52,413) (125,499) NET CHANGE IN CASH 369,350 424,717 CASH, Beginning of the Year 883,487 3,500 ---------- --------- CASH, January 31, 1996 and 1995 $1,252,837 $ 428,217 ========== ========= <FN> SEE NOTES TO CONDENSED FINANCIAL STATEMENTS ACCESS CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS JANUARY 31, 1996 NOTE A - CONDENSED FINANCIAL STATEMENTS The condensed balance sheet as of January 31, 1996, the condensed statements of earnings for the nine month and three month periods ended January 31, 1996 and 1995, and the condensed statements of cash flows for the nine month periods ended January 31, 1996 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 January 31, 1996 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 January 31, 1996 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 On July 31, 1995, the Company acquired CimSoft Incorporated at a net cost of $350,000. CimSoft had offices in Michigan and California. It was 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 its 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 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 markets both it's proprietary software and resells as a value added re-seller software developed by other companies. The TDMS software that the company markets, enhances the quality of its customers' products and service by providing world class solutions for their technical process. TDMS has the potential for substantial growth in revenue and profits in that it serves a large, worldwide market opportunity. Fiscal year 1996 third quarter revenue of $2.6 million was up $1,181,500 (84%) compared with the third quarter of fiscal 1995. As a result of the Service/Manufacturing revenue of $1.3 million increased $28,700 (2%) compared with the third quarter of fiscal 1995. TDMS revenue of $1.3 million increased $1,152,700 (701%) compared with the third quarter of fiscal 1995. In the first quarter of fiscal 1996 the Company acquired CimSoft Incorporated. This increase resulted from the Company's acquisition described below. This acquisition the Company obtained the sole distribution rights in North America for Cimage software. The Company recorded revenue includes $1,181,500 in Cimage software, hardware and professional services and $397,600 for Cimage Software support in the third quarter of fiscal 1996. The Service revenue for Micrographic equipment continues to decline. This decline in revenue is the result of the declining population of the System M previously manufactured by the Company. The Company anticipates a decrease in System M Service revenue over the next few years. In the current year the sales force has concentrated on the Cimage product line with the result that there has been a dramatic growth in the Cimage product line for bookings and revenue and a decline in the Company's unix and AS/400 product line bookings and revenue. The Company continues to be optimistic about the AS/400 product line and expects a substantial growth in the coming years. Revenue for the first nine months of fiscal 1996 of $6.0 million increased 34% from the nine months ended January 31, 1995. TDMS revenue of $2.5 million was 165% higher than the same period last fiscal year. This increase was due to the recognition of revenue for Cimage products representing $1,799,000 of revenue. Service revenue of $3.6 million was essentially unchanged from the prior year. The Company's current backlog of orders is $3.5 million compared to $3.4 million at January 31, 1995. Current TDMS backlog of $1.3 million is 4% higher than that at the same date last year. The increase is due to $800,100 of Cimage backlog of orders at the end of the third quarter of fiscal 1996. Service backlog of $2.2 million was 3% higher at January 31, 1996, compared with January 31, 1995. The increase occurred in the Cimage Software Maintenance bookings, which totaled $486,500 in backlog at January 31, 1996. This Service backlog is expected to be delivered within the next twelve months. Cost of sales for the third quarter and nine months ended January 31, 1996, of 51% and 54%, respectively were within 5% and 6%, respectively, of those for the comparable periods in fiscal 1995. The Company is required to pay royalties on the Cimage Product line which reduced the gross margin for service and software. Selling and administrative expenses of $722,300 for the third quarter of fiscal 1996 were $383,000 (113%) higher than the third quarter of fiscal 1995. Selling and administrative expenses for the nine months ended January 1996 of $1,638,100 were 39% higher than the same period last fiscal year. Selling and administrative expenses increased due to the acquisition of CimSoft. The increase in sales operations is primarily due to the hiring of additional sales and technical support personnel. The Company will continue to grow the sales operation to take advantage of the sales opportunities of the Cimage product line. Engineering, research and development expenses are incurred for maintaining, upgrading and developing new products. The third quarter expense for engineering, research and development of $181,000 increased $22,700 from the third quarter of last fiscal year. This increase in development expense was primarily due to installation and support personnel applying time to internal projects rather than customer funded work. Interest income for the third quarter and nine months ended January 31, 1996, was $12,600 and $39,700, respectively, compared with $1,000 and $1,200, respectively for fiscal 1995. Interest income for fiscal 1996 was primarily the interest received on cash being invested in short term investments. LIQUIDITY AND CAPITAL RESOURCES During the first nine months of fiscal 1996, the Company increased its cash balance by $369,300 leaving $1,252,800 in cash. The Company provided $709,600 in cash from operations and the Company used $139,700 for capital purchases, $68,600 for the investment of CimSoft and $52,400 for payments on capital leases. Inventory has decreased $197,700 since April 30, 1995. This decrease is due to work in process inventory on TDMS projects being delivered in the third quarter of fiscal 1996. Accounts Receivable, Other Accrued Liabilities, Accounts Payable and Accrued Salaries, Wages and Commissions increased $1,318,200, $685,100, $53,300 and $173,300 respectively between April 30, 1995, and the end of January 1996. The major contributor to this fluctuation is the revenue from CimSoft customers for the Cimage product line, and the royalties due Cimage on these orders. On large customer orders there are provisions for progress payments to be made by customers based on predetermined events. These advances decreased approximately $110,800 since April 30, 1995. Working capital on January 31, 1996, was approximately $2,562,900, which is $828,100 higher than the April 30, 1995 level. This primarily was the result of the increase in cash, accounts receivable and prepaid expenses. 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: February 28, 1996		/s/Newton D. Baker Newton D. Baker Executive Vice President Date: February 28, 1996		/s/ Barbara A. Sommer Barbara A. Sommer Assistant Treasurer & Chief Accounting Officer 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: February 28, 1996 NEWTON D. BAKER 					--------------- 					Newton D. Baker 					Executive Vice President Date: February 28, 1996 BARBARA A. SOMMER 					----------------- 					Barbara A. Sommer Assistant Treasurer & Chief Accounting Officer EXHIBIT INDEX (11)	Statement re-computation of per share earnings 		(a) The calculation of net earnings per common share and common share equivalent for three month periods ended January 31, 1996 and 1995 is attached as Exhibit 11(a). 		(b) The calculation of net earnings per common share and common share equivalent for the nine month periods ended January 31, 1996 and 1995 is attached as Exhibit 11(b). 15