-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rMD0Ks+pmddefDoJKweL8KkBNAeEXIkkHhrjF9Tu5jnofvIE2Z+uTd46eG11jb+9 6K8W7sEzJzBHVpY0kQbUfg== 0000001988-95-000002.txt : 19950726 0000001988-95-000002.hdr.sgml : 19950726 ACCESSION NUMBER: 0000001988-95-000002 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950725 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACCESS CORP CENTRAL INDEX KEY: 0000001988 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 310673364 STATE OF INCORPORATION: OH FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 002-33108 FILM NUMBER: 95555672 BUSINESS ADDRESS: STREET 1: 4350 GLENDALE MILFORD RD STREET 2: STE 250 CITY: CINCINNATI STATE: OH ZIP: 45215-3700 BUSINESS PHONE: 5137868350 MAIL ADDRESS: STREET 1: 4350 GLENDALE MILFORD RD STREET 2: STE 250 CITY: CINCINNATI STATE: OH ZIP: 45242-3700 10-K405 1 FORM 10-K ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended April 30, 1995. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) 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 of Incorporation I. R. S. Employer Identification Number 4350 Glendale-Milford Road, Suite 250, Cincinnati, Ohio 45242-3700 - ------------------------------------------------------- --------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (l) 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 the filing requirements for at least the past 90 days. Yes X . No ___. Indicate by check mark if disclosure of delinquent fillers pursuant to Item 405 of Regulation S-K ( 229.405 of this chapter) is not contained herein, and will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Inapplicable State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. Because there is no established market for the Common Stock of the Company, it is not possible to determine the aggregate market value of such Common Stock held by non-affialiates Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the close of the period covered by this report. Common Stock, without par value: 3,436,987 shares outstanding and Class A Common Stock, without par value: 1,428,572 shares outstanding. DOCUMENTS INCORPORATED BY REFERENCE The 1995 Annual Report to the shareholders of the Company for the fiscal year ended April 30, 1995, is incorporated herein by reference in Parts I and II to the extent specified in such Parts. PART I ITEM 1. BUSINESS The registrant ("ACCESS" or the "Company") was incorporated under the laws of the State of Ohio on November 18, 1963. Its executive offices are located at 4350 Glendale-Milford Road, Suite 250, Cincinnati, Ohio 45242-3700, and its telephone number is (513) 786-8350. DESCRIPTION OF PRODUCTS AND SERVICES - ------------------------------------- ACCESS enhances the quality of its customers' products by providing software solutions for their technical processes. ACCESS' software allows its customers to manage the process of design changes, release of those changes, and the efficient storage, indexing, and retrieval of both engineering drawings and related technical documentation. ACCESS serves primarily engineering customers in discrete and process manufacturing. Its applications benefit companies in the medical products, pharmaceutical, computer and electronic, petrochemical, defense, and automotive industries. In addition, companies under strict government regulation have found ACCESS' applications beneficial in organizing and controlling compliance procedures. The Cincinnati-based company has two business units: Technical Document Management Systems (TDMS) and Service/Manufacturing. TDMS BUSINESS UNIT - ------------------ ACCESS' application software features three proprietary products: EDICS/DM (Engineering Document Image Control System/Document Management), EDICS/RM (Engineering Document Image Control System/Release Management), and ECC (Electronic Change Control), each of which may be configured to specific organizational needs. A database application for managing documents and engineering-related information, EDICS processes both text and A through E-size drawings that may be scanned or electronically imported from CAD. These documents, from multiple sources, are integrated into a single system which fully automates the revision process and provides flexible tools for viewing, editing, and printing. EDICS also enables a user to comply with requirements of regulatory agencies, such as the Food and Drug Administration, by allowing storage and immediate retrieval of product and process information. ECC may be added to the EDICS system to improve control over the design and processing changes. It provides advanced functionality to automate the entire document change process, including multiple approval processing and notification, rejection handling, in-process review, approval history, and change process performance reporting. ECC automates a company's engineering change control process consistent with its established procedures and operational requirements. ECC correlates change documents with markups and affected drawings for the length of the change cycle. It can be configured to facilitate concurrent reviews (now a Computer Aided Acquisition and Logistics Support, CALS, requirement for many Department of Defense contracts). Both EDICS and ECC support effective concurrent engineering environments, which involve the cooperative interaction of design, manufacturing, support personnel, suppliers, and customers. Concurrent engineering is intended to reduce time-to-market and increase manufacturability, serviceability, and reliability. ACCESS has been approved as an Industry Application Specialist by IBM's Industrial Sector Marketing. In this relationship, ACCESS provides EDICS/400 and ECC/400 for use on the IBM AS/400. ACCESS also supplies EDICS and ECC in the UNIX environment running on IBM's RS/6000 and on both AT&T and Hewlett Packard UNIX platforms. SERVICE/MANUFACTURING BUSINESS UNIT - ------------------------------------ Within the Service/Manufacturing business unit, the Company provides quality field maintenance including hardware and software service on a nationwide basis to the Company's installed customer base. In addition to maintaining ACCESS-installed systems, ACCESS' service group also maintains non-ACCESS electronic and electromechanical equipment such as card embossers, microfiche duplicators, microfilm scanners, large drawing format scanners, and highly sophisticated 5-1/4" and 12" laser. ACCESS continues to pursue additional third-party service opportunities with manufacturers of electronic electromechanical products who require a rapid on-site service response but whose customer base is not large enough to support a nationwide service network. MARKETING - --------- The Company markets its products for the most part directly in the United States. The Company has been approved as an Industry Application Specialist by IBM's Industrial Sector Marketing for the AS/400. Marketing operations are conducted primarily from the Company's headquarters in Cincinnati, Ohio. The Company employs four sales and marketing personnel. Technical Document Management Systems (TDMS), as well as related computer systems, are produced and configured only in response to firm orders. At the end of fiscal years 1995 and 1994, TDMS backlog totaled approximately $1,053,900 and $2,615,900, respectively. The TDMS backlog at the end of 1995 fiscal year is expected to be delivered within the 1996 fiscal year. Effective at the beginning of the third quarter of fiscal 1994, the Company discontinued its operations with respect to its Hardware Engineering Services and Contract Manufacturing line of business. It is limiting its manufacturing to supplying cards for the micrographic equipment sold in prior years and the parts required to support existing equipment. The Company has completed or transferred all contracts and commitments for its Engineering and Contract Manufacturing customers. At present, there are ACCESS systems installed in 48 states and in Puerto Rico, Jamaica, Mexico, Japan, Canada, Europe, China, the Middle East, Australia and the CIS (the former USSR). There is no recurring geographic market concentration with respect to the sale of ACCESS systems in the United States, and in fiscal year 1995, no more than 13% of the Company's revenues were derived from operations in any single state. Aggregate sales to international customers represented 4% of the Company's annual sales in fiscal 1995. In fiscal year 1995, no domestic distributors were employed. ACCESS' primary marketing focus is the sale of the Technical Document Management System products to manufacturers, information processors, utilities and other users of technical documentation. Marketing for the Component Service business unit is provided by ACCESS personnel to sell the Company's services. No single customer accounts for a significant percentage of the Company's revenues on a continuing basis. Net sales to the aerospace industry were 18.8% of fiscal 1995 revenues and 5.4% of fiscal 1994 revenues; net sales to the various agencies of the federal government represented 18.4% of fiscal 1995 revenues and 17% of fiscal 1994 revenues, (these contracts could have been canceled at the election of the government); net sales to the computer industry were 10.5% of fiscal 1995 revenues and 2.1% of fiscal 1994 revenues; and net sales to the medical industry were 7.2% of fiscal 1995 revenues and 20.6% of fiscal 1994 revenues. See Note 7 of Notes to Financial Statements included on page 18 of the 1995 Annual Report to Shareholders of the Company, which information on such page is filed as part of this Annual Report on Form 10-K and incorporated by reference herein. COMPETITION - ----------- Increases in Technical Document Management Systems (TDMS) competition continue to push system prices down to historically unprecedented low levels. The highly published changes within IBM have inhibited the growth of the Company's relationship with that organization. Amidst all this, the Company has significantly reduced fixed costs and increased productivity in anticipation of a TDMS market characterized by low cost, high volume, shrink-wrapped software. PURCHASING AND PRODUCTION - ------------------------- The majority of the TDMS software is developed by the Company. The TDMS hardware and some miscellaneous software and supplies are purchased by the Company from a number of suppliers. In the case of certain materials, the Company employs a single source of supply, although alternative sources are available. The Company integrates and installs the TDMS hardware and software. PATENTS - -------- At the current time, technology utilized in the Company's micrographic storage and retrieval unit and related products are protected by three unexpired United States patents owned by the Company. The Company's issued patents cover most of the major components and supplies utilized in the Company's micrographic storage and retrieval system. PRODUCT DEVELOPMENT - -------------------- Development to enhance the current technical document management and distributions systems is in process. In its development operations, the Company currently employs approximately eight persons with degrees in engineering and related fields. Some of these individuals are involved in the delivery and maintenance of systems or engaged in consulting with respect to these systems. In addition, the Company from time to time engages the services of independent research firms and contractors to assist in development projects. During fiscal year 1995 and fiscal year 1994, the Company spent $1,018,486 and $1,945,403, respectively, on these activities. See Note 5 of Notes to Financial Statements included on page 17 of the 1995 Annual Report to shareholders of the Company, which information on such page is filed as part of this Annual Report on Form 10-K and incorporated by reference herein. EMPLOYEE RELATIONS - ------------------ The Company employs approximately 47 persons, all on a full-time basis and all of whom are non-union. Approximately four employees are connected with marketing activities, while the others are involved in production, installation, service, product development, and financial or administrative operations. Standard hospitalization, prescription drug, dental, life insurance, and disability protection are provided for all full-time employees. The Company has a 401(k) Plan and a Section 125 Plan. The Company considers its employee relations to be good. ITEM 2. PROPERTIES The principal operations of the Company are conducted in approximately 19,678 square feet of leased plant and office space in Cincinnati, Ohio. The Cincinnati property is occupied under a lease which extends through May 1, 2000. The annual rental under this lease is $166,000. The Company owns automatic, custom-made machines used in the production of its proprietary media and owns various standard tools and equipment used in the production of ACCESS products. The capacity of the Company's TDMS facilities and equipment exceeds the current requirements of the Company's operations. The Company owns computer hardware and software used for development, support, and installation for its TDMS product The Cincinnati building occupied by the Company and the fixtures and equipment therein are modern, well maintained, in satisfactory operating condition and adequately insured. The building is air-conditioned. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material pending legal proceeding. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information with respect to the market for the Company's Shares of Common Stock and related security holder matters is set forth on page 12 of the 1995 Annual Report to the shareholders of the Company, which information on such page is filed as part of this Annual Report on Form 10-K and incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Information with respect to selected financial data of the Company is set forth on page 6 of the 1995 Annual Report to the shareholders of the Company, which information on such page is filed as part of this Annual Report on Form 10-K and incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "Management's Discussion and Analysis of Financial Condition and Results of Operations" is set forth on pages 7 through 9 of the 1995 Annual Report to the shareholders of the Company, which pages are filed as part of this Annual Report on Form 10-K and incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is set forth on pages 11 through 18 of the 1995 Annual Report to the shareholders of the Company, which information on such pages is filed as part of this Annual Report on Form 10-K and incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) Directors. Set forth below is certain information regarding the directors of the Company, which information has been obtained in part from the records of the Company and in part from the directors. All directors have been elected by the holders of the Company's Common Stock. All directors are elected annually. NEWTON D. BAKER, age 61. Mr. Baker has been the Executive Vice President of the Company since October 1986. He has been the Treasurer of the Company since July 1970 and Assistant Secretary since June 1974. He has been a director of the Company since 1988. KENT P. FRIEL, age 59. Mr. Friel has been Chairman of the Board of the Company since April 1986. Since June 1989 Mr. Friel has been President of Schonberg Associates, Inc., which performs outplacement services for organizations which may include the Company. He was President and Chief Executive Officer of the Company from February 1986 through May 1989. He has been a director of the Company since 1983. ROBERT J. KALTHOFF, age 69. Dr. Kalthoff has been Chairman and Treasurer of The Kalthoff Group, Inc. since March 1990, and was President from March 1990 to December 1994. The Kalthoff Group, Inc. is an information service and consulting firm for users and vendors in electronic image information management industries. He has been a director of the Company since 1963. DENNIS J. SULLIVAN, JR., age 63. Mr. Sullivan is currently the Executive Counselor for Dan Pinger Public Relations, Inc. Mr. Sullivan served as Executive Vice President and Chief Financial Officer of Cincinnati Bell, Inc. from 1987 to February 1993. He has been a director of the Company since 1990. SCOTT D. WATKINS, age 46. Mr. Watkins has been President of the Company and Chief Operating Officer since April 1989, and Chief Executive Officer since May 1989. He has been a director of the Company since 1989. JOHN W. WEIL, age 67. Dr. Weil has been President of Weil Associates, Inc., which provides consulting services to industrial and non-profit organizations since January 1985. He is a director of Maxwell Laboratories and Weil Associates, Inc. He has been a director of the Company since 1985. Oce, the Company's major holder of Common Stock, has the right (in accordance with the Voting Trust Agreement - see "Certain Relationships and Related Transactions") to direct the Voting Trustees to vote for up to two director nominees designated by Oce. In exercise of this right, Oce has directed the Voting Trustees to vote for Mr. Hardie. Oce retains the right, which it may exercise at any time, to direct the Voting Trustees to vote for up to one additional director nominee. The following information relates to Mr. Hardie. JAMES H. HARDIE, age 65. Mr. Hardie is, and since 1965 has been, a partner in the law firm of Reed Smith Shaw & McClay, Pittsburgh, Pennsylvania. That firm performs and has performed certain legal services from time to time for Oce and certain of its subsidiaries since 1967. Mr. Hardie is also a director of UST&D, Inc., Kiene Diesel Accessories, Inc. and Respironics, Inc.. Mr. Hardie has been a director of the Company since 1987. (b) Executive Officers. Set forth below is certain information regarding the executive officers of the Company. All executive officers are elected annually by the Board of Directors.
Name Age Position & Business Experience Scott D. Watkins 46 President and Chief Operating Officer since April 1989, and Chief Executive Officer since May 1989. Newton D. Baker 61 Executive Vice President of the Company since October 1986; Treasurer and Assistant Secretary of the Company since prior to 1982. Kim Bollinger 37 Vice President of Customer Ser- vices for the Company since May 1993; Director of Systems Man agement from June 1992 to May 1993, and Manager of Consulting Services from January 1990 to June 1992.
ITEM 11. EXECUTIVE COMPENSATION (a) Cash Compensation of Executive Officers. The Board has established an Executive Compensation Committee which considers and makes recommendations to the Board of Directors concerning the compensation of the executives of the Company. During the fiscal year ended April 30, 1995, this committee met six times and consisted of Messrs. Friel, Hardie and Sullivan. Neither Mr. Hardie nor Mr. Sullivan was an officer or employee of the Company or any of its subsidiaries in fiscal 1995 or any prior year. As noted above, Mr. Friel, who is not an employee of the Company, has been Chairman of the Board of the Company since April 1986 and was President and Chief Executive Officer of the Company from February 1986 through May 1989. The following table sets forth for the fiscal years ended April 30, 1993, 1994 and 1995, certain information regarding cash compensation as well as certain other compensation paid to or accrued for the services rendered during such years to each of the Executive Officers of the Company whose total salary and bonus exceeded $100,000 in all capacities in which they served. I. SUMMARY COMPENSATION TABLE Long-Term Compensation ----------------------------------- Annual Compensation Awards Payouts ----------------------------------- (a) (b) (c) (d) (e) (f) (g) (h) (i) Other Securities Annual Restricted Underlying All Compen- Stock Options/ LTIP Other Fiscal Salary (1) Bonus(1) sation Award SARS Payouts Compen. Name and Principal Position Year ($) ($) ($) ($) (#)(3) ($) ($) - ----------------------------------------------------------------------------------------------------------------------------
Scott D. Watkins 1995 155,000.04 32,000.00 - - - - - President and Chief Executive 1994 153,916.56 - - - 100,000.00 - - Officer 1993 140,019.22 - - (2) - - - - Newton D. Baker 1995 115,009.09 18,000.00 - - - - - Exec. Vice President,Treasurer 1994 118,582.90 - - - 75,000.00 - - & Asst. Secretary 1993 110,019.22 - - (2) - - - - (1) These include amounts that would have been payable, but were deferred pursuant to election of an Executive Officer, such as through the Company's 401(k) Savings Plan. (2) No perquisites were provided or other personal benefits paid to a named Executive Officer in fiscal year 1993, 1994 or 1995 which exceeded the lesser of $50,000 or 10% of the total annual salary and bonus reported for such named Executive Officer. (3) These numbers represent options for shares of Common Stock awarded pursuant to the Company's stock option plans. See the next table titled, "Option/SAR Exercises and Year-End Value Table" for more detailed information on such options.
II. OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE The following table sets forth information with respect to the named executive officers concerning the exercise of options and/or SAR's during fiscal year 1995 and unexercised options and SAR's held at April 30, 1995. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR, AND FY END OPTION/SAR VALUE
(a) (b) (c) (d) (e) Value of Number of Unexercised Unexercised In-the-Money Options/SARs Options/SARs Shares Value at FY-End (#) at FY-End ($) Acquired on Realize Exercisable/ Exercisable/ Name Exercise (#) ($) 1/ Unexercisable Unexercisable 1/ - --------------------------------------------------------------------------- Scott D. Watkins 0 0 110,000/70,000 0 Newton D. Baker 0 0 77,500/52,500 0 1/ ACCESS Common Stock is not traded actively; therefore, there is no established market value No stock options or SAR's were granted to either of the named persons in fiscal 1995.
(b) Compensation of Directors. Each non-employee director receives an annual fee of $5,000. Any such person who is the Chairman, any member of the Audit Committee, or a director who resides outside the metropolitan Cincinnati area receives an additional $2,000 annually for each position held. In addition, each such director is reimbursed for expenses incurred in connection with his attendance any Board or Committee meeting. Mr. Hardie is to be compensated on the same basis as the other non-employee directors until the meeting. (c) Existing Stock Option Plans. The Company currently has five Stock Option Plans: The 1979 Stock Option Plan (the "1979 Plan"), the 1983 Stock Option Plan (the "1983 Plan"), the 1985 Incentive Stock Option Plan (the "1985 Plan"), the 1991 Stock Option Plan (the "1991 Plan"), and the 1993 Stock Incentive Plan (the "1993 Plan"). The 1979, 1983, 1991 and 1993 Plans provide for the grant of both qualified and non- qualified stock options for shares of the Common Stock of the Company; the 1985 Plan permits the grant of incentive stock options only. Options under all of the Plans may be granted to officers and other key employees of the Company. The 1979, 1991 and 1993 Plans also permit the grant of non-qualified options to directors of the Company and, in appropriate cases authorized by the Board of Directors, to other persons in business relationships with the Company. Optionees are selected by the Board of Directors; criteria considered in such selection include the potential optionee's position with or services to the Company, his or her tenure in that position, and his or her performance while holding the position or providing those services. The 1979 Plan was terminated in 1991 except for outstanding options, and no further options may be granted under that Plan or the 1983 and 1985 Plans. The 1993 Plan also permits the grant of restricted shares. The option price under the Plans may not be less than the fair market value of the Common Stock at the date of the grant, as determined by the Board of Directors. Other terms and conditions of options granted under the Plans are established by the Board of Directors, which administers the Plans, directly or through the Management Compensation Committee, except that incentive stock options granted under the Plans may not be exercised prior to one year from date of grant and expire ten years from date of grant. All of the plans (except for the 1979 Plan) provide for the acceleration of the exercise date of stock options in certain events relating to a change of control of the Company and for the extension of the period during which stock options may be exercised upon termination of employment following such an event. Such provisions may be considered as having an anti- takeover effect. The 1979 Plan was amended and restated by the Board of Directors on June 24, 1988, effective May l, 1988. All of the existing Plans were also amended at that time to make certain changes relating to incentive stock options necessitated by the provisions of the Tax Reform Act of 1986. No options were granted or exercised in the last fiscal year. Retention Agreements: - ---------------------- On August 24, 1994, the Company entered into Executive Retention Agreements with each of Mr. Watkins and Mr. Baker. These Agreements provide if during the six months preceding or the 24 months following a Change in Control (as defined therein), Mr. Watkins' or Mr. Baker's employment is terminated by the Company (other than for Cause of Disability) or by such executive officer for Good Reason, such executive officer shall be entitled to a severence payment equal to twice his highest annual salary in the last five years, continued insurance coverage and up to $25,000 for outplacement services. Change of Control is defined to include a merger or other business combination after which the existing shareholders of the Company have less than 50% of the voting power, the sale of all or substantially all of the assets of the Company, the acquisition by, or commencement of a tender offer by any person other than Oce or Prudential, of or for 20% of the Company's voting power, or a change in the majority of the Board of Directors without approval of the existing directors. Good Reason includes an adverse change in salary, authority or benefits. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of July 17, 1995, the beneficial ownership of the Company's Common Stock by (l) each person known to the Company to own more than 5% of the outstanding shares of Common Stock, (2) each director individually and (3) all directors and officers as a group. The information in the table has been in part received from the persons listed and in part taken from the records of the Company. Beneficial ownership of Common Stock of the Company has been determined for this purpose in accordance with Rule 13d-3 of the Securities and Exchange Commission ("SEC"), under which a person is deemed to be the beneficial owner of Common Stock if he has or shares voting power or investment power in respect of such Common Stock or has the right to acquire such ownership within 60 days. Accordingly, the amounts shown on the table represent beneficial ownership for the purposes of compliance with SEC reporting requirements, and do not necessarily bear on the economic incidents of ownership of Common Stock.
Amount & Nature Name and, With of Beneficial Respect to 5% Ownership Ownership, ----------- Percent of Address Direct Indirect Common Stock - ----------------- -------- --------- ------------- Oce-van der Grinten N.V. (1) 100 2,180,854 63.46% St. Urbanusweg 43 5900 MA Venlo The Netherlands 2,180,854 -- 63.45% Kent P. Friel, Dennis J. Sullivan, Jr., John W. Weil, and Scott D. Watkins as Voting Trustees (1) 4350 Glendale-Milford Rd. Suite 250 Cincinnati, OH 45242-3700 Newton D. Baker* (2) 148,984 -- 4.33% Kent P. Friel* (4) 10,742 -- .31% James H. Hardie* (3) -- -- -- Robert J. Kalthoff* 112,588 74,180.5 5.43% ACCESS Corporation 4350 Glendale-Milford Rd. Suite 250 Cincinnati, OH 45242-3700 Dennis J.Sullivan,Jr.*(4) 100 -- .003% Scott D. Watkins* (2)(4) 203,924 -- 4.95% John W. Weil* 15,000 -- .44% All directors and 530,838 74,180.5 17.60% officers as a group (10 persons)(2)(4) _________________ *Director
(1) On April 27, 1992, pursuant to the Note Purchase Agreement described above, Oce entered into the Voting Trust Agreement appointing Kent P. Friel, Dennis J. Sullivan, Jr., John W. Weil, and Scott D. Watkins ("the Voting Trustees") as voting trustees for 2,180,854 shares. The Voting Trustees vote on matters relating to the election of directors, including setting the number of directors, in their discretion, except that the Voting Trustees must vote for up to two nominees for director designated by Oce in its discretion. Oce retains the right to obtain the Voting Trustees' proxy as to the voting of such shares with respect to all issues not related to the election of directors. (See "Certain Transactions-Agreements with Oce".) Oce retains the right to dispose of such shares, subject to certain restrictions in the Note Purchase Agreement. As a result of these arrangements, Oce and the Voting Trustees share beneficial ownership of such shares. The Voting Trust created under the Voting Trust Agreement has a term of 10 years, and Oce has agreed to renew it for an additional term of 10 years. The Voting Trust will terminate upon the sale of the shares of Common Stock subject thereto, but only with respect to those so sold and subject to the proviso that Oce may not sell more than 50% of its shares without consent of the Company, the closing of any underwritten public offering of Common Stock as a result of which not less than $10 million in aggregate sales price to the public of Common Stock shall have been sold in such offering plus any previously underwritten public offering or the acquisition by any person of more shares of Common Stock than are held by Oce. Oce can also terminate the Voting Trust by notice given at any time after October 3, 1995, but if Oce does so, it may be required to make a tender offer on terms specified in the note Purchase Agreement for all shares of Common Stock following the fiscal year in which the anniversary of the giving of notice occurs. Mr. Watkins is President and Chief Executive Officer of the Company. Mr. Friel is Chairman of the Board of Directors of the Company but is not an employee of the Company. Messrs. Sullivan and Weil are also non-employee directors of the Company. The Voting Trustees have no current intention to change the composition of the Board of Directors of the Company. Except as set forth above, there are no arrangements or understandings among Oce and the Voting Trustees with respect to the election of directors or other matters. (2) Includes 203,300 shares which officers as a group have the right to acquire upon the exercise of immediately exercisable stock options, including 110,000 exercisable by Mr. Watkins and 77,500 exercisable by Mr. Baker. (3) Does not include shares held by Oce. (4) Does not include shares held by the Voting Trustees in their capacity as such. The Prudential Insurance Company of America ("Prudential"), Three Gateway Center, 100 Mulberry Street, Newark, New Jersey 07102, owns all 1,428,572 outstanding shares of the Company's Class A Common Stock, no par value ("Class A Stock"). The Class A Stock, is convertible share-for-share at any time into shares of the Company's Common Stock and thereafter would constitute 30% of the outstanding Common Stock. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (a) Agreement with Majority Shareholder. On October ------------------------------------ 28, 1991, the Company and Oce entered into a Note Purchase Agreement which provided up to $1,500,000 of financing to the Company for the purpose of paying for expenditures or reimbursing the Company for expenditures incurred by the Company to offer its Engineering Change Control and imaging products on the IBM AS/400 Series, or other IBM computer platform, installing, debugging and supporting initial installations and expenses incurred in marketing and selling the resulting IBM-based products. The IBM project was completed and sales of products began in fiscal 1993. Under the Agreement, the first $1 million of notes purchased by Oce bore interest at 7% per annum, the next $250,000 at 9% per annum, and the remaining $250,000 at a variable rate established at 9%. Under certain circumstances, the Company was entitled to redeem the notes in exchange for shares of mandatorily redeemable preferred stock. On August 26, 1992, the Company exercised its option and issued 10,000 shares of 7% Class One Preferred Stock to Oce in redemption of the $1,000,000 principal amount of notes then outstanding. On April 30, 1993, the Company issued an additional 5,000 shares of Class One Preferred Stock to Oce for $500,000; all such shares carry a 9% dividend. Annual dividends on the Preferred Stock for any fiscal year are cumulative to the extent of 50% of the Company's net after-tax earnings, as defined, for such year. At April 30, 1995, $64,685 Preferred Stock dividends were accrued. Annually, beginning in 1995, the Company is required to redeem the Preferred Stock at a price of $100 per share plus accumulated dividends in an amount equal to a specified portion of after-tax earnings, as defined. Unless dividends on the Preferred Stock are current, the Company may not declare a dividend on, or repurchase any of, the Common Stock. Pursuant to the Note Purchase Agreement, upon the conversion of the Class B Stock into Common Stock on April 27, 1992, Oce, the Company and four directors elected by the holders of Common Stock, entered into the Voting Trust Agreement. 2,180,854 shares of Common Stock held by Oce were transferred to Kent P. Friel, Scott D. Watkins, John W. Weil, and Dennis J. Sullivan, Jr. by Oce-van der Grinten, N.V. as Voting Trustees. This Agreement is irrevocable for a period of ten years, except for certain circumstances. (See Item 12.) (b) Legal Services. James M. Anderson, Secretary of --------------- the Company, is a partner in the law firm of Taft, Stettinius & Hollister, which firm acts as General Counsel to the Company. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) (1) The following financial statements for ACCESS Corporation, included on pages 10 through 18 of the 1995 Annual Report to the Shareholders of the Company, which pages are filed as part of this Annual Report on Form 10K and incorporated herein by reference: (i) Independent Auditors' Report; (ii) Balance sheets as of April 30, 1995 and April 30, 1994; (iii) Statements of Operations for the years ended April 30, 1995, April 30, 1994 and April 30, 1993; (iv) Statements of Capital Stock and Other Stock-holders' Equity for the years ended April 30, 1995, April 30, 1994 and April 30, 1993; (v) Statements of Cash Flows for the years ended April 30, 1995, April 30, 1994 and April 30, 1993; and (vi) Notes to Financial Statements. (2) Exhibits: Refer to EXHIBIT INDEX on page X-l of this Annual Report on Form 10-K. (b) Reports on Form 8-K: None. SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) For the information of the Commission, furnished with this Annual Report on Form 10-K are four copies of the Company's 1995 Proxy Statement and form of proxy relating to its Annual Meeting of Shareholders to be held August 21, 1995. SIGNATURES Pursuant to the requirements of the Section 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized, as of the 24th day of July, 1995. ACCESS CORPORATION By SCOTT D. WATKINS _________________________________ Scott D. Watkins President, Chief Executive Officer, Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of the 24th day of July,1995. SCOTT D. WATKINS ____________________________ President, Chief Executive Scott D. Watkins Officer NEWTON D. BAKER _____________________________Executive Vice President Newton D. Baker and Treasurer (Principal Financial and Accounting Officer), Director /s/ KENT P. FRIEL* Chairman of the Board ____________________ Kent P. Friel /s/ JAMES H. HARDIE* Director ____________________ James H. Hardie /s/ ROBERT J. KALTHOFF* Director ____________________ Robert J. Kalthoff /s/ JOHN W. WEIL* Director ____________________ John W. Weil /s/ DENNIS J. SULLIVAN, JR.* Director ____________________ Dennis J. Sullivan, Jr. * Pursuant to Power of Attorney By NEWTON D. BAKER _____________________ Newton D. Baker Attorney-In-Fact EX-27 2
5 12-MOS APR-30-1995 APR-30-1995 883,487 0 1,033,911 18,100 412,865 2,493,153 2,889,001 2,646,833 5,129,248 758,374 0 488,182 1,500,000 0 0 5,129,248 6,041,782 6,041,782 3,689,032 5,809,996 3,805 0 31,911 196,070 66,700 129,370 0 0 0 129,370 .01 .01
EX-11 3 ACCESS CORPORATION CALCULATION OF NET EARNINGS (LOSS) PER COMMON SHARE AND COMMON SHARE EQUIVALENTS YEAR ENDED APRIL 30 -----------------------------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 Net earnings (loss) applicable to Common Share and Common Share Equivalents: Net earnings (loss) Before Cumulative Effect of change in Accounting Principle $ 153,524 $ 614,008 ($ 182,731) ($ 615,239) $ 129,370 Cumulative Effect as of May 1,1992 of a change in the Accounting for income taxes, net of valuation allowance of $2,220,000 $ 730,000 Preferred Dividend $ 64,685 Net earnings (loss) applicable to Common Shares and Common Share Equivalents After Cumulative Effect and Preferred Dividend $ 153,524 $ 614,008 $ 547,269 ($ 615,239) $ 64,685 ---------- ---------- ----------- ------------ ---------- Calculation of primary net earnings (loss) per Common Share and Common Share Equivalents: Average number of Common Shares and Common Share Equivalents outstanding; 4,809,236 4,865,559 4,865,559 4,865,559 4,865,559 ---------- ---------- ----------- ----------- ---------- Average number of Common Shares and Common Share Equivalents outstanding; 4,809,236 4,865,559 4,865,559 4,865,559 4,865,559 ---------- ---------- ----------- ----------- ---------- Primary net earnings (loss) per Common Share and Common Share Equivalent Before Cumulative Effect of change in Accounting Principle $ 0.03 $ 0.13 ($ 0.04) ($ 0.13) $ 0.01 Cumulative Effect of change in Accounting Principle per Common Shares and Common Share Equivalents $ 0.15 Primary net earnings (loss) per Common Share and Common Share Equivalent After Cumulative Effect of change in Accounting Principle $ 0.03 $ 0.13 $ 0.11 ($ 0.13) $ 0.01
EX-13 4 Contents
Letter to Shareholders 2 Selected Financial Data 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Independent Auditors' Report 10 Statements of Operations 11 Statements of Capital Stock and Other Stockholder's Equity 12 Balance Sheets 13 Statements of Cash Flows 14 Notes to Financial Statements 15 About the Company 19 ACCESS Directors, Officers and Shareholder Information 21
To Our Shareholders: ACCESS' fiscal 1995 produced significant improvements in our financial health as well as the quality of our products and services. Net profits, operating profits, gross margins, and cash balances all showed dramatic increases over fiscal year 1994. At the same time, we eliminated our bank debt entirely and continued our commitment to raising the quality of our products and services. This all occurred during a year of very difficult market conditions that saw a major competitor, with revenues three times that of ACCESS, close its doors. Financially, your company ended the year in better health than it has in many years. Net income after tax for fiscal 1995 was $129,000, a significant improvement over our net after tax loss of $615,239 for the prior year. Similarly, fiscal 1995 produced an operating income of $231,785 versus an operating loss in fiscal 1994, for a $791,000 improvement in the Company's operating income between fiscal 1994 and 1995. The Company's gross margins, calculated before the amortization of the IBM AS/400 software development, continue their upward trend. Gross margins before amortization reached 50% in fiscal 1995, versus 49% in fiscal 1994, and 42% in fiscal 1993. For the second year in a row ACCESS' cash position showed dramatic improvement. I reported to you last year that the Company had reduced its bank borrowing from approximately $960,000 at the beginning of fiscal 1994 to under $100,000 at the end of the year. In this past year, the Company generated another $884,000 cash from operations, completely repaid our bank debt in July, and ended the year with a cash balance in excess of $880,000. That's more than a $1.8 million improvement in the Company's cash position within two years. In response to an overall software market characterized by dropping prices and increased competition, we continue to reduce our fixed costs of operation. As a result, ACCESS' break-even volume, the minimum amount of revenue that the Company needs to cover its operating costs, was 45% lower in fiscal 1995 than it was in fiscal 1994. These reductions in operating costs also reflect a continued improvement in the Company's productivity as measured by revenue per employee. Productivity increased by 5% to $118,000 revenue per employee in fiscal year 1995, up from $112,000 per employee in fiscal 1994, and $100,000 per employee in fiscal 1993. Not everything proceeded as planned for fiscal 1995. Total revenue for the Company dropped by 12% versus a year ago, which was attributable to a reduction in revenue from our TDMS software business and our discontinued manufacturing operation. This drop in TDMS revenue was almost entirely due to deliveries to a large TDMS customer in fiscal year 1994, which did not recur in fiscal year 1995. However, TDMS bookings for fiscal year 1995 increased by 4% over fiscal year 1994. Service revenue continues to show healthy increases in revenue (+5%) and bookings (+6%) versus last year. Fiscal 1995 also saw the elimination of bookings and revenue from the Company's unprofitable contract engineering and manufacturing business that we discontinued during fiscal 1994. Growth in Service Business: ACCESS' service business, exclusive of manufacturing, continues to be a strong and consistently growing part of our company. Revenue, bookings, gross profit and contribution income all improved over fiscal 1994. As noted above, total service revenue increased by 5%, bookings increased by 6%, and service gross profit increased by 8% versus last year. Our focus on Third Party Maintenance over the past several years has resulted in even more dramatic improvements for fiscal 1995, with a revenue increase of 53% over fiscal 1994. Our customer base in Third Party Maintenance increased by over 150%. Both software and hardware maintenance revenue increased from fiscal 1994. We are aggressively pursuing new Third Party Maintenance opportunities, including potential acquisitions. Our service offering is extremely flexible and of very high quality, accommodating the needs of each customer according to its unique situation. This flexibility and quality combined with our nationwide service coverage means we can focus on special-needs customers, and vendors of moderate size, competing effectively with much larger Third Party Maintenance providers. Although we are constantly watching the bottom line, we believe that our success in the service business has come from our constant and relentless focus on total customer satisfaction. TDMS Software Business: As I discussed in last year's report, the market for Technical Document Management Systems continues to evolve at a rapid pace. Competitors continue to enter the TDMS market place with new products as well as with enhanced products from related product categories. This constant competitive pressure, combined with the ever improving price performance of computer hardware, exerts a tremendous downward force on industry pricing. This trend has been clear to us for several years, and we have responded by focusing on reducing the fixed costs associated with delivery of our products. Consistent, year-to-year decreases in pricing can have detrimental impacts on any organization. In fact, we believe prices will continue to fall over the coming year. However, our market research tells us that at a certain, yet to be attained, price level the market for our TDMS products could increase significantly. Many companies in our target industries are starting with simpler systems than in the past, at a substantially lower initial investment. As these first systems prove themselves, our customers are purchasing additional software licenses and functionality as they expand the systems to other parts of the company. We feel this trend bodes well for the future. The lower cost of the initial systems will broaden the number of companies that will find it economically attractive to buy TDMS software. The expansion of installed systems provides a continual source of revenue for ACCESS. This "add-on" revenue has become such a substantial portion of our TDMS revenue, that we recently added sales staff dedicated to handling the needs of our existing customers. During fiscal 1995, ACCESS focused much of our development investment on improving the quality, reliability and performance of our UNIX and AS/400 products. Throughout the year this has continuously increased customer satisfaction with these products. Although work in this area is never done, we believe our software products to be of exceptionally high quality. This will provide a solid foundation on which to build additional functionality, and to continue to pursue that price level at which we can sell our software in high volume, while still maintaining profitability. Fiscal Year 1996: Over the last two fiscal years, the Company has dramatically strengthened its financial position. Our challenge for fiscal 1996 will be to increase our investment in marketing our high quality products and services, while at the same time maintaining our strong financial performance. The long lead time from investment to realization of return makes this doubly difficult. Our strategy is to expand our sales and marketing operation as quickly as our resources will prudently allow. We will continue our focus on building profitable Third Party Maintenance business through sales as well as acquisition. The mission for our TDMS software operation is to take advantage of the high-quality products that we have developed and to identify specific market segments where the Company's product functionality has the optimal fit to the customer's needs. We expect fiscal 1996 to be a year in which the Company establishes a strong basis for growth in our Third Party Maintenance and TDMS software business for the coming years. We will continue to pursue a management philosophy that emphasizes quality over expedience, customer service and value over the quick fix, and profitable revenue over rapid revenue growth. We believe that this approach will allow us to prosper over the long run by building solid, long term, and profitable relationships with our customers. Sincerely, SCOTT D. WATKINS - ---------------- Scott D. Watkins President and Chief Executive Officer ACCESS CORPORATION SELECTED FINANCIAL DATA FOR THE YEARS ENDED April 30 April 30 April 30 April 30 April 30 1995 1994 1993 1992 1991 Summary of Earnings (Loss) from Operations
Net Sales $6,041,782 $6,896,352 $7,020,074 $8,744,752 $8,562,117 Gross Profit 2,352,750 2,573,260 2,871,200 3,836,484 3,577,312 Gross Profit as percentage of net sales 39% 37% 41% 44% 42% Interest Expense 31,911 26,450 53,246 7,543 83,735 Net Earnings (Loss)from Continuing Operations 129,370 (551,376) (23,947) 889,808 156,322 Net Earnings (Loss)before cumulative effect of accounting change 129,370 (615,239) (182,731) 614,008 153,524 Cumulative effect of accounting change 730,000 Net Earnings (Loss) 129,370 (615,239) 547,269 614,008 153,524 Preferred Dividend 64,685 - - - - Income(loss)applicable to common shares $ 64,685 $ (615,239) $ 547,269 $ 614,008 $ 153,524 ---------- ----------- ---------- ---------- ---------- Average common and common share equivalents outstanding 4,865,559 4,865,559 4,865,559 4,865,559 4,809,236 Per Common Share Statistics Net Earnings (Loss) from Continuing Operations $ 0.01 $ (0.11) $ (0.00) $ 0.18 $ 0.03 Net Earnings (Loss)before cumulative effect of accounting change 0.01 (0.13) (0.04) 0.13 0.03 Cumulative effect of accounting change 0.15 ---------- ----------- ----------- ---------- ---------- Net Earnings (Loss) $ 0.01 $ (0.13) $ 0.11 $ 0.13 $ 0.03 ---------- ----------- ----------- ---------- ---------- Balance Sheet Data Working Capital $1,734,779 $ 695,922 $ 342,444 $1,193,459 $1,194,232 Working Capital Ratio 3.3:1 1.7:1 1.1:1 1.5:1 1.9:1 Total Assets 5,129,248 5,132,511 7,242,855 5,027,295 3,260,231 Long-term debt 250,000 Mandatorily redeemable preferred stock 1,500,000 1,500,000 1,500,000 Capital Stock and Other Stockholders' equity $2,483,512 $2,418,826 $3,035,419 $2,488,150 $1,780,178
MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS NET REVENUES (In thousands) 1995 Change 1994 Change 1993 Net Revenues $6,042 (12%) $6,896 (2%) $7,020 ACCESS Corporation 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. The Company continues to have a stable rate base of revenue and profits from its service operations. Service sales are comprised of hardware and software support to the Company's installed base of customers and some third-party maintenance contracts. Service sales were $4,538,900, $4,320,300 and $4,141,200 in fiscal years 1995, 1994 and 1993, respectively. These sales made up 75%, 63% and 59% of total revenues in these fiscal years, respectively. The increase in the percentage of total sales reflects the decrease in sales in the Technical Document Management Systems (TDMS) line of business and the discontinuance of its Hardware Engineering Servies and Contract Manufacturing operations. The fluctuations in the Company's revenues overall are a result of the changes in its TDMS operations. System sales from these operations were $1,275,000, $2,189,200, and $2,490,700 in fiscal years 1995, 1994 and 1993, respectively. These sales represented 21%, 32% and 35% of total revenues, respectively. The reduction between 1994 and 1995 sales was the result of the completion of a major order to deliver a system to eleven sites in fiscal 1994. In fiscal 1995 there was no comparable order. In 1993 revenues included over $360,000 of revenue which represented cost reimbursement for integration of the Company's software with WANG's VS system. Revenues from the Company's TDMS operations in 1994 were up slightly from the 1993 levels, excluding the WANG system integration cost recovery revenue. Effective at the beginning of the third quarter of fiscal 1994, the Company discontinued its operations with respect to its Hardware Engineering Services and Contract Manufacturing line of business. It is limiting its manufacturing to supplying cards for the micrographic equipment sold in prior years and the parts required to support existing equipment. The Company has completed or transferred to third parties all contracts and commitments for its Engineering and Contract Manufacturing customers. Revenues from the continuing manufacturing operations, a support group to the Service line of business, were $227,800, $386,800 and $388,200 in fiscal years 1995, 1994 and 1993, respectively which were 4%, 5% and 6% of the total revenues in these fiscal years, respectively. In fiscal year 1995 sales to the U.S. commercial market continued to exceed those to the federal government and international markets. Sales to the U.S. commercial market represented 78% of the total revenue in fiscal 1995, compared with 73% in fiscal 1994 and 78% in fiscal 1993. The federal government accounted for 18% of total revenue in fiscal 1995, compared with 17% in 1994 and 15% in 1993. This reflects the Company's emphasis on marketing to the commercial market. Sales to international markets accounted for 4% of fiscal 1995 revenues, compared with 10% in 1994 and 7% in 1993. Gross Profits (In Thousands) 1995 Change 1994 Change 1993 Gross Profits $2,352.8 (9%) $2,573.3 (10%) $2,871.2 Percentage of net revenues 39% 37% 41% The above Gross Profits for 1995, 1994 and 1993 were net of $673,700, $839,900 and $112,300 of amortization, respectively. Service gross margins of 55% have been relatively comparable with the fiscal 1994 and 1993 levels of 53% and 52%, respectively. TDMS gross margins before amortization in fiscal 1995 were 43%, which was a decrease from fiscal 1994 level of 59% and an increase from the fiscal 1993 level of 40%. TDMS gross margins after amortization in fiscal 1995 were (10%), which was a decrease from fiscal 1994 and 1993 levels of 20% and 35%, respectively. Manufacturing gross margins of 1% in fiscal year 1995 were more favorable than those reported in fiscal years 1994 and 1993 of (45%) and (35%), respectively. Selling, general and administrative expenses decreased from $2,008,000 in fiscal 1994 to $1,528,000 in fiscal 1995. The primary contributor to this decrease in expenses was the reduction in personnel and related expenses. Engineering, Research and Development (R&D) expenditures were incurred for maintaining and upgrading existing products and developing new products. Engineering and development expenses for the current period decreased from $1,124,800 in fiscal 1994 to $592,500 in fiscal 1995 because the Company completed the development work on the AS/400 in fiscal 1994. Fiscal 1995 operating expenses for R&D were 47% lower than fiscal 1994 and 12% higher than fiscal 1993. The Operating income of $196,400 increased $680,700 in fiscal 1995. The Company's gross margin improved 2% in fiscal 1995. The Company also decreased operating expenses by $1,011,800 in fiscal 1995. Even though revenues declined, these changes in operations and improved gross margins resulted in the above increase in the operating income in fiscal 1995. The Company accrued $66,700 of income taxes in fiscal 1995. This expense resulted in a reduction in deferred income tax benefits accrued in Fiscal 1993 when the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". LIQUIDITY AND CAPITAL RESOURCES In fiscal 1995, the Company provided approximately $1,047,500 of cash from operating activities. The Company eliminated $71,800 of its bank borrowing. The net result was a cash balance of $883,500 and zero bank borrowing at April 30, 1995. Accounts receivable increased approximately $124,200 during fiscal year 1995. This increase is the result of a steady flow of sales throughout fiscal 1995. Inventories at April 30, 1995 decreased approximately $103,200 from the balance at April 30, 1994. This decrease is primarily due to the delivery of finished products in the manufacturing area and completion of projects for the TDMS product line. Accounts Payable at April 30, 1995 decreased approximately $62,500 from April 30, 1994. This decrease reflected primarily a reduction of spending throughout the Company. The Company requires progress payments on its large TDMS System orders based on predetermined events. Reported as current liabilities, these progress payments totaled approximately $339,500 at April 30, 1995, which represents an increase of approximately $30,200 from April 30, 1994. Working capital on April 30, 1995 was $1,734,800, compared with $695,900 on April 30, 1994. The Company has a loan agreement which provides for a line of credit through April 7, 1996 (See Note 2 of the Notes to the Financial Statements). The bank line of credit was $400,000 at April 30, 1995, of which none was outstanding. The Company's plans are structured so that revenues from its AS/400 and UNIX products, in combination with those from its recurring service business, are expected to provide the cash flow required to operate the Company. The Company's assets currently include $1,742,600 of net realizable value for the computer software development of the AS/400 product line. This software is currently being amortized at the greater of 33% of the AS/400 software revenue or $56,100 per month. These computer software development costs will be fully amortized no later than November 1997. At this point in time, there is a good market for the Company's AS/400 software product line. However, there is no assurance that this market will continue through November 1997. If it becomes apparent that net realizable value of this asset on the Company's books will not be supported by sufficient future revenue, the Company will write down the book value of the software and take this write-down as an expense in the period in which it occurs. Independent Auditors' Report Stockholders and Board of Directors: We have audited the accompanying balance sheets of ACCESS Corporation as of April 30, 1995 and 1994, and the related statements of operations, of capital stock and other stockholders' equity and of cash flows for each of the three years in the period ended April 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ACCESS Corporation as of April 30, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended April 30, 1995, in conformity with generally accepted accounting principles. As discussed in Note 6 to the financial statements, in 1993 the Company changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109. DELOITTE & TOUCHE LLP - --------------------- Deloitte & Touche LLP Cincinnati, Ohio May 31, 1995 ACCESS CORPORATION STATEMENT OF OPERATIONS FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
1995 1994 1993 REVENUE: System Sales $1,274,996 $2,189,248 $2,490,713 Service 4,538,938 4,320,323 4,141,187 Manufacturing 227,848 386,781 388,183 ---------- ---------- ---------- Total 6,041,782 6,896,352 7,020,074 ----------- ---------- ---------- COST: System sales, exclusive of amoritization shown separately below 729,965 902,566 1,502,179 Service 2,059,347 2,020,136 2,008,586 Manufacturing 226,016 560,486 525,825 ---------- ---------- ---------- Total 3,015,328 3,483,188 4,036,590 ---------- ---------- ---------- GROSS PROFIT BEFORE AMORTIZATION 3,026,454 3,413,164 2,983,484 AMORTIZATION OF COMPUTER SOFTWARE COST 673,704 839,904 112,284 ---------- ----------- --------- GROSS PROFIT 2,352,750 2,573,260 2,871,200 OPERATING EXPENSES: Selling, general and administrative 1,528,460 2,007,953 2,333,196 Engineering, research and development 592,504 1,124,789 528,268 ---------- -------------------- OPERATING INCOME (LOSS) 231,786 (559,482) 9,736 OTHER INCOME(EXPENSE) (3,805) 24,047 15,363 INTEREST EXPENSE (31,911) (26,450) (53,246) ---------- ---------- ---------- EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 196,070 (561,885) (28,147) INCOME TAXES (BENEFIT) (Note 6) 66,700 (10,509) (4,200) ----------- --------- --------- NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS 129,370 (551,376) (23,947) DISCONTINUED OPERATIONS (Note 9): Net earnings (loss) from operations discontinued E&M Business (less applicable income tax benefit of $81,800) (73,812) (158,784) Income on disposal of discontinued operations 9,949 ------------ --------- --------- EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 129,370 (615,239) (182,731) CUMULATIVE EFFECT AS OF MAY 1, 1992 OF A CHANGE IN THE ACCOUNTING FOR INCOME TAXES, NET OF VALUATION ALLOWANCE OF $2,220,000 (Note 6) 730,000 ---------- ----------- -------- NET EARNINGS (LOSS) 129,370 (615,239) 547,269 PREFERRED DIVIDEND 64,685 - - ---------- -------------------- INCOME (LOSS) APPLICABLE TO COMMON SHARES $ 64,685 $ (615,239)$ 547,269 ---------- ---------- ---------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES 4,865,559 4,865,559 4,865,559 PER COMMON SHARE AND COMMON SHARE EQUIVALENT (Note 4): Net earnings (loss) from continuing operations $ 0.01 $ (0.11) $ (0.00) Net earnings(loss) before cumulative effect of change in accounting principle 0.01 (0.13) (0.04) Cumulative effect of accounting change - - 0.15 ---------- ---------- ---------- Net earnings (loss) $ 0.01 $ (0.13)$ 0.11 ---------- ---------- ---------- See notes to financial statements.
ACCESS CORPORATION STATEMENTS OF CAPITAL STOCK AND OTHER STOCKHOLDERS' EQUITY APRIL 30, 1995, 1994 AND 1993 Treasury Common Class A Common --------------- ----------------- -------------- Shares Amount Shares Amount Shares Amount BALANCE, Apr 30, 1992 16,270 $(15,383) 3,453,257 $345,325 1,428,572 $142,857 Net earnings ------ -------- --------- -------- --------- -------- BALANCE, Apr 30, 1993 16,270 (15,383) 3,453,257 345,325 1,428,572 142,857 Deferred compensation under restricted stock plan Net loss ------ -------- --------- -------- --------- -------- BALANCE, Apr 30, 1994 16,270 (15,383) 3,453,257 345,325 1,428,572 142,857 Class One Preferred Stock Dividends Net earnings ------ --------- --------- -------- --------- -------- BALANCE, Apr 30, 1995 16,270 $(15,383) 3,453,257 $345,325 1,428,572 $142,857 See notes to financial statements.
ACCESS CORPORATION STATEMENT OF CAPITAL STOCK AND OTHER STOCKHOLDERS'EQUITY APRIL 30, 1995, 1994 AND 1993
Additional Paid-in Retained Earnings Capital (Deficit) BALANCE, APR 30, 1992 $10,826,201 $(8,810,849) Net Earnings 547,269 ----------- ------------ BALANCE, APR 30, 1993 10,826,201 (8,263,580) Deferred compensation under restricted stock plan ( 1,354) Net Loss (615,239) ------------ ------------ BALANCE, APR 30, 1994 10,824,847 (8,878,819) Class One Preferred Stock dividends (64,685) Net earnings 129,370 ------------ ------------ BALANCE, APR 30, 1995 $10,760,162 $(8,479,449) ----------- ------------ See notes to financial statements.
ACCESS CORPORATION BALANCE SHEETS APRIL 30, 1995 AND 1994
1995 1994 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 883,487 $ 3,500 Accounts receivable, less allowance for doubtful accounts of $18,100 in 1995 and $17,480 in 1994 (Note 2): 1,015,811 891,600 Inventories (Note 2): Raw materials and purchased parts 79,495 92,718 Work-in-process 318,598 365,470 Finished goods 14,772 57,840 ---------- ---------- Total inventories 412,865 516,028 Prepaid expenses 68,990 106,662 Deferred income tax, net of valuation allowance of $300,000 (Note 6) 112,000 112,000 ---------- ---------- Total current assets 2,493,153 1,629,790 EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Note 2): Computer hardware and software 1,952,220 2,280,658 Machinery and equipment 503,337 503,338 Office and service equipment 313,431 539,717 Leasehold improvements 5,000 5,000 Tools, dies and fixtures 115,013 115,013 ---------- ---------- Total 2,889,001 3,443,726 Less accumulated depreciation 2,646,833 3,075,334 ---------- ---------- Net equipment and leasehold 242,168 368,392 improvements COMPUTER SOFTWARE COSTS, net of accumulated amortization of $1,625,891 in 1995 and $952,188 in 1994 1,742,627 2,416,329 ---------- ---------- DEFERRED INCOME TAX BENEFIT, net of valuation allowance of $2,134,000 in 1995 and 1994 (Note 6) 651,300 718,000 ---------- ---------- TOTAL $5,129,248 $5,132,511 ---------- ---------- See notes to financial statements.
LIABILITIES AND CAPITAL STOCK AND OTHER STOCKHOLDERS' EQUITY 1995 1994 CURRENT LIABILITIES: Note payable - bank (Note 2) $ - $ 71,807 Accounts payable 95,864 158,345 Accrued salaries, wages and commissions 120,054 56,721 Accrued taxes 24,429 74,269 Accrued warranty expense 44,275 44,783 Other accrued liabilities 77,683 144,691 Advances from customers 339,456 309,305 Capital leases 56,613 73,947 ---------- ---------- Total current liabilities 758,374 933,868 PREPAID MAINTENANCE CONTRACTS 299,578 198,971 CAPITAL LEASES (Note 8) 23,099 80,845 MANDATORY REDEEMABLE PREFERRED STOCK (Note 3) 1,500,000 1,500,000 Preferred Dividends 64,685 CAPITAL STOCK AND OTHER STOCKHOLDERS' EQUITY (Notes 2,4): 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 10,760,162 10,824,847 Deficit from April 1, 1985 (8,749,449) (8,878,819) 16,270 Common Stock shares in treasury, at cost (15,383) (15,383) ---------- ---------- Total capital stock and other stockholders' equity 2,483,512 2,418,827 ---------- ---------- TOTAL $5,129,248 $5,132,511 ---------- ----------
ACCESS CORPORATION STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) $ 129,370 $ (615,239) $ 547,269 Adjustments to reconcile net earnings to net cash provided by operating activities: Amortization 673,704 839,904 112,284 Depreciation 139,819 254,943 137,319 Deferred income taxes 66,700 (830,000) Deferred compensation under restricted stock plan (1,354) Loss (gain) on disposal of fixed assets 7,028 (3,608) 3,119 Prepaid maintenance contracts 100,606 66,704 21,228 Change in assets and liabilities: Accounts receivable (124,211) 1,106,941 (598,637) Inventories 103,163 60,411 594,321 Prepaid expenses 37,672 70,470 (52,471) Accounts payable (62,481) (133,824) (621,927) Accrued liabilities (54,023) (283,155) 58,726 Advances from customers 30,151 (449,309) 39,498 ---------- ---------- ---------- Net cash provided by (used in) operating activities 1,047,498 912,884 (589,271) ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Computer software costs (2,120,999) Capital additions (22,779) (84,316) (83,335) Proceeds from disposal of fixed assets 2,156 22,459 100 ---------- ---------- ---------- Net cash (used in) investing activities (20,623) (61,857) (2,204,234) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds (repayments) on bank line of credit (71,807) (848,959) 920,766 Payments on capital leases (75,081) (52,068) Proceeds from note payable 750,000 Proceeds from redeemable preferred stock 500,000 ---------- ---------- ---------- Net cash provided by (used in) financing (146,888) (901,027) 2,170,766 activities ---------- ---------- ---------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 879,987 (50,000) (622,739) CASH AND CASH EQUIVALENTS, Beginning of year 3,500 53,500 676,239 ---------- ---------- ---------- CASH AND CASH EQUIVALENTS, End of year $ 883,487 $ 3,500 $ 53,500 ---------- ---------- ---------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest $ 31,911 $ 26,616 $ 32,531 Cash paid for income taxes 13,500 NON-CASH TRANSACTION - During 1993, notes payable of $1,000,000 were converted into redeemable preferred stock (Note 3). During 1994, the Company entered into capital leases totaling $206,860 (Note 8). See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS ACCESS Corporation for the years ended April 30, 1995, 1994 and 1993 NOTE 1: A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business The Company services hardware and software for its installed base of customers and third parties. It also develops and markets software for the electronic storage, control and processing of technical documentation. Revenue Recognition Revenues from the sale of new systems are recognized upon shipment. If there are services performed, revenue is recognized at the time of customer acceptance. Revenues resulting from research and development arrangements (Note 5) are recognized as the related costs are incurred. Revenue from prepaid maintenance agreements is recognized ratably over the life of the maintenance contracts. Inventories Inventories comprised of material, labor, and related overhead expenses are stated at the lower of cost (first-in, first-out method) or market. Equipment and Leasehold Improvements Equipment and leasehold improvements are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Computer software is depreciated over three years or its useful life, whichever is less. Computer Software Development Costs Computer software development costs are recorded in accordance with Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed. Costs incurred up to the point of establishing technological feasibility are expensed currently. Costs incurred after establishment of technological feasibility were capitalized. Amortization of these capitalized costs began in March 1993 when the products were released to customers and are to be amortized over a period not to exceed five years. Amortization expense was $673,704, $839,904 and $112,284 for fiscal years 1995, 1994 and 1993, respectively. Income Taxes Effective May 1, 1992, the Company adopted Statement of Financial Accounting Standards No. 109, which was issued in February, 1992. The Company previously accounted for income taxes in accordance with Statements of Financial Accounting Standards No. 96. Statement of Cash Flows Cash and cash equivalents consist of cash on hand, cash on deposit, and short-term investments with original maturities less than ninety days. Product Warranties Under its product warranty policy, the Company has agreed to replace certain parts or provide remedial service during the designated warranty period. Costs associated with these programs are determined on the basis of estimated net future costs. NOTE 2: BANK LINE OF CREDIT The Company's current line of credit agreement ($400,000 as of April 8, 1994) extends through April 7, 1996. Borrowings under the agreement bear interest at one percent over the prime rate, 9% at April 30, 1995. Borrowing is based upon the levels (as set forth in the loan agreement) of eligible accounts receivable. To secure any borrowing, the Company has pledged accounts receivable, inventories, fixed assets, and general intangibles. The agreement contains restrictive and other covenants which require the Company to maintain certain levels of indebtedness to net worth, current ratio and cash flow from operations. It also restricts new borrowings, capital expenditures, and dividends on its capital stock. _______________________________________________________________________ 1995 1994 1993 _______________________________________________________________________ Maximum borrowings during the year $127,354 $790,249 $1,159,319 Average outstanding balance during the year $ 27,956 $302,652 $ 706,060 Weighted average interest rate 9.1% 7.5% 7.5% (determined on a monthly basis)
NOTE 3: MANDATORILY REDEEMABLE PREFERRED STOCK AND NOTES PAYABLE On October 28, 1991, the Company entered into a Note Purchase Agreement with Oce-van der Grinten, N.V. ("Oce"), which provided for borrowing by the Company of up to $1.5 million to fund a major software development project. On August 26, 1992, $1,000,000 of then outstanding notes were redeemed in exchange for 10,000 shares of mandatorily redeemable preferred stock. In April 1993, the Company issued to Oce an additional 5,000 shares of mandatorily redeemable preferred stock for $500,000. The preferred stock is divided into three series: 10,000 shares of 7% preferred stock ($1,000,000); 2,500 shares of 9% preferred stock ($250,000), and 2,500 shares of variable rate preferred stock ($250,000). The variable rate preferred stock was issued at the rate of 9%. Dividends on the preferred stock for any fiscal year are cumulative only to the extent of 50% of the Company's net after-tax earnings, as defined, for such year. Annually, beginning in 1995, the Company is required to redeem the preferred stock at $100 per share plus accumulated dividends in an amount equal to a specified portion of after-tax earnings, as defined. Unless dividends on the preferred stock are current, the Company may not declare a dividend on its common shares or redeem or purchase any of its common shares. Under the Note Purchase Agreement, Oce agreed to limitations on the voting and transfer of its stock (including the transfer of such stock to a voting trust, the trustees of which are four of the Company's directors) and Oce was released from its obligation under certain circumstances to make a tender offer for the Company's common stock. As of April 30, 1995, the Company had authorized and issued a total of 15,000 shares of preferred stock. NOTE 4: CAPITAL STOCK In 1992 the Company entered into a Voting Trust Agreement with Oce. The Voting Trust Agreement required Oce to place the certificates for 1,904,763 of its Common Stock, less 100 shares, into a voting trust. The trustees of the trust are four directors of the Company. Pursuant to the Voting Trust Agreement, the shares will be voted for matters related to the election of directors in the discretion of the voting trustees (except that such shares will be voted for up to two director nominees designated by Oce) and on all other matters by Oce pursuant to a proxy to be granted to it by the voting trustees. The Voting Trust Agreement is irrevocable for a period of ten years and may be renewed, at the option of Oce, for additional periods of not more than ten years each. The Voting Trust Agreement will automatically terminate: - with respect to any such shares sold to a party unrelated to Oce - upon the closing of any underwritten public offering of Common Stock which results in not less than $10,000,000 in aggregate sales price of Common Stock having been sold. - upon the acquisition by any person of beneficial ownership of as many or more shares of Common Stock as are owned by Oce. Further, the Voting Trust Agreement may be terminated by notice by Oce to the voting trustees at anytime after October 3, 1995. If the Voting Trust Agreement is terminated by notice or is not renewed on its tenth anniversary, Oce is required to make a tender offer for any and all of the shares of Common Stock (including any such shares issued on conversion of Class A Common Stock) at a price per share not less than that defined in the Note Purchase Agreement (Note 3) and calculated using the Company's audited financial statements. If the calculated price per share is less than zero, Oce is not required to make a tender offer. If the Voting Trust Agreement is terminated by notice to the voting trustees, the tender offer is required not later than six months after the end of the fiscal year in which the first anniversary of the notice affected the termination. If the agreement is not renewed, the tender offer is required not later than six months after the end of that fiscal year end. Common Shares Common Stock shareholders including the voting trustees have equal voting rights. Actions by a majority of voting trustees constitute the act of the voting trust. Class A Common Stock shareholders have class voting privileges on changes to the Articles of Incorporation and some other specified matters but do not vote on the election of directors. Class A Common Stock is convertible into Common Stock, share for share, at any time. Shares of Common Stock reserved for the conversion of the Class A stock were 1,428,572 in 1995 and 1994. Earnings Per Share The earnings (loss) per share computations are based on the weighted average number of common shares outstanding during the year adjusted for the effect of common share equivalents where dilutive. Fully diluted earnings (loss) per share are not presented as the effect of the dilution is less than 3% or is anti-dilutive for the years 1993 - 1995. Stock Option Plans During the year ended April 30, 1994, the Company adopted the 1993 incentive stock option plan covering 500,000 shares of its Common Stock. The Company also amended the 1983, 1985 and 1991 plans to add provisions providing that all outstanding stock options will become exercisable upon the occurrence of a change of control or similar event. Options may be granted under the 1991 and 1993 plans to officers and key employees of the Company. Additionally, directors of the Company and other persons in business relationships with the Company, such as independent contractors and consultants, may be granted nonqualified options under the 1991 plan. No further options may be granted under the 1979, 1983 and 1985 plans. Incentive stock options may be granted only to Company employees. The option price under the plans may not be less than the fair market value of the Common Stock at the date of grant, as determined by the Board of Directors, which administers the plans. All options granted under the 1985 plan and any incentive stock options granted under the 1979, 1983, 1991 and 1993 plans may not be exercised prior to one year from date of grant and expire ten years from the date of grant. Changes in stock options were as follows:
_______________________________________________________________________ Number of Shares Reserved Granted ______________________________________________________________________ Balance, April 30, 1993 383,000 224,600 Reserved 500,000 Granted 325,000 Canceled (4,800) (113,800) _________ ________ Balance,April 30,1994 878,200 435,800 Canceled (500) (73,400) _________ _________ Balance, April 30, 1995 877,700 362,400 ========= =========
[FN] At April 30, 1995, options to purchase 204,900 shares of Common Stock were exercisable at $.50 to $5.25 per share. NOTE 5: ENGINEERING, RESEARCH AND DEVELOPMENT Engineering, research and development costs for the years ended April 30, 1995, 1994 and 1993 are as follows: ___________________________________________________________________________ 1995 1994 1993 ___________________________________________________________________________ Charged to specific customer orders $ 495,887 $ 820,614 $1,158,387 Charged to computer software costs 2,120,999 Charged directly to engineering, research and development 522,599 1,124,789 528,268 __________ __________ __________ Total cost of engineering, research and develop- ment efforts $1,018,486 $1,945,403 $3,807,654 ========== ========== ==========
Revenue recognized under research and development arrangements for the years ended April 30, 1995, 1994, and 1993 was $-0-, $-0- and $383,000 respectively. This revenue was completely offset by costs incurred during the same period. NOTE 6: INCOME TAXES The provision for income taxes (benefit) includes the following:
______________________________________________________________________ 1995 1994 1993 ______________________________________________________________________ Federal: Deferred $66,700 ($214,100) ($14,000) Currently payable (Refundable) 66,700 ( 10,509) 14,000 Tax benefit of net operating loss carryforward (66,700) ( 86,000) Valuation Allowance 214,100 ________ __________ _________ Total $66,700 ($ 10,509) ($86,000) ======== ========== =========
Effective May 1, 1992, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." This statement supersedes SFAS No. 96, "Accounting for Income Taxes." The cumulative effect of adopting SFAS No. 109 on the Company's financial statements was to increase net earnings by $730,000 ($.15 per share) for the year ended April 30, 1993. The effect on earnings was to increase 1993 net income by $100,000. Deferred income taxes reflect the net income tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) net operating loss and tax credit carryforwards. The income tax effects of significant items comprising the Company's net deferred income tax asset as of April 30, 1995 and 1994 are as follows: ________________________________________________________________________ 1995 1994 ________________________________________________________________________ Net operating loss carryforwards Federal $2,995,000 $3,025,000 State 37,000 138,000 Temporary differences: Accrued warranty expense 25,000 21,000 Inventory capitalization 96,000 82,000 Other 44,300 ( 2,000) __________ ___________ Total $3,197,300 $3,264,000 Less Valuation Allowance (2,434,000) (2,434,000) __________ ___________ Net deferred income tax asset $ 763,300 $ 830,000 ========== =========== The amounts and expiration dates for the Company's net operating loss carryforwards for income tax return purposes are summarized as follows: Year Ending April 30 Federal 2002 $1,759,000 2004 2,762,000 2005 3,027,000 2008 459,000 2009 803,000 ---------- Total $8,810,000 ==========
NOTE 7: REVENUES TO MAJOR CUSTOMERS On a continuing basis, no single customer accounts for a significant percentage of the Company's net sales. However, net revenues to customers in selected industries as a percent of total revenues are as follows:
_____________________________________________________________________ 1995 1994 1993 _____________________________________________________________________ Federal Government 18.4% 16.6% 15.0% Aerospace 18.8% 5.4% 3.4% Petroleum 4.9% 4.4% .5% Computer 10.5% 2.1% 9.5% Medical 7.2% 20.6% 13.8% Manufacturing 12.4% 3.0% Accounts receivable from these customers at April 30, 1995 and April 30, 1994 were $778,100 and $657,100, respectively.
NOTE 8: LEASE COMMITMENTS The Company leases office and manufacturing facilities and equipment under operating leases. Rent expense was $223,977 (1995), $342,311 (1994), and $339,504 (1993) of which $60,281 (1995), $131,268 (1994) and $45,426 (1993), were under short-term cancelable leases. As of April 30, 1995, minimum annual payments under all noncancelable long-term operating lease agreements are: $144,398 (1996), $186,780 (1997), $166,780 (1998), $170,950 (1999), and $170,950 (2000). The Company leases office equipment and software under capital leases. As of April 30, 1995, minimum annual payments under all noncancelable capital lease agreements are: $68,497 (1996) and $26,035 (1997) for a total of $94,532. Maintenance on these leases total $3,283, representing net minimum lease payments of $91,250. Interest on these leases represented $11,538 for a present value of net minimum lease payments of $79,712. This is reflected in the balance sheet as current and noncurrent obligations under capital leases of $56,613 and $23,098, respectively. The cost, accumulated depreciation and depreciation expense of assets under capital leases was $206,900, $124,000 and $76,300, respectively at April 30, 1995. NOTE 9: DISCONTINUED OPERATIONS Effective as of the end of the second quarter of fiscal 1994, the Company discontinued its operations with respect to its Hardware Engineering and Contract Manufacturing product lines. It is limiting its manufacturing to the supply of cards for the micrographic equipment sold in prior years and the parts required to support existing equipment. Revenues from discontinued operations were $431,000 and $866,000 for fiscal years 1994 and 1993, respectively. Previously reported results of operations have been reclassified to show the effects of the discontinued operations. ABOUT THE COMPANY CORPORATE PROFILE ACCESS Corporation is dedicated to enhancing the quality of its customers' products by providing world class software solutions for their technical processes. ACCESS' software allows its customers to manage the process of design changes, release of those changes, and the efficient storage, indexing, and retrieval of both engineering drawings and related technical documentation. ACCESS Corporation primarily serves engineering customers in discrete and process manufacturing. Its applications benefit companies in the medical products, pharmaceutical, computer and electronic, petrochemical, defense, and automotive industries. In addition, companies under strict government regulation have found ACCESS' applications beneficial in organizing and controlling compliance procedures. The Cincinnati-based company has two business units: Technical Document Management Systems (TDMS) and Component and Systems Service. ACCESS HISTORY Founded over thirty years ago, ACCESS has designed systems for use by organizations throughout the world. Some have been in continuous use for as long as twenty years. ACCESS' early success in automating the handling of document based information positioned the Company to take a leadership role in the evolution of computer technology in the specialized area of imaging and technical document management. As the industry has evolved into more sophisticated products and processes, numerous document management problems have emerged. ACCESS' TDMS business unit addresses these challenges by designing innovative software solutions. The Service business is comprised of hardware and software support to the Company's installed base of customers and third-party maintenance contracts. It also provides media and parts on a nationwide basis to the Company's installed customer base. ACCESS TDMS BUSINESS UNIT ACCESS' application software features three unique products: EDICS/RM (Engineering Document Image Control System/Release Management), EDICS/DM (Engineering Document Image Control System/ Document Management) and ECC (Electronic Change Control) which may be configured to specific organizational needs. A powerful database application for managing documents and engineering related information, EDICS processes both text and A through E size drawings that may be scanned or electronically imported from CAD (computer aided design). These documents from multiple sources are integrated into a single system which fully automates the revision process and provides flexible tools for viewing, editing, and printing. EDICS also enables a user to comply with regulatory agencies, such as the Food and Drug Administration, by allowing storage and immediate retrieval of product and process information. ECC may be added to the EDICS system to improve control over the design and processing changes. It provides advanced functionality to automate the entire document change process, including multiple approval processing and notification, rejection handling, in-process review, approval history, and change-process performance reporting. ECC automates a company's entire engineering change control process consistent with its established procedures and operational requirements. ECC correlates change documents with markups and affected drawings for the length of the change cycle. It can be easily configured to facilitate concurrent reviews (now a Computer Aided Acquisition and Logistics Support, CALS, requirement for many Department of Defense contracts). Both EDICS and ECC support effective concurrent engineering environments, which involve the cooperative interaction of design, manufacturing, support personnel, suppliers, and customers. Concurrent engineering reduces time-to-market and increases manufacturability, serviceability, and reliability. ACCESS has been approved as an Industry Application Specialist by IBM's Industrial Sector Marketing. In this relationship, ACCESS provides EDICS/400 and ECC/400 for use on the IBM AS/400. ACCESS also supplies EDICS and ECC in the Unix environment running on IBM's RS/6000 and on both AT&T and Hewlett Packard Unix platforms. COMPONENT SERVICE ACCESS also provides quality field maintenance including hardware and software service on a nationwide basis to the Company's installed customer base. In addition to maintaining ACCESS-installed systems, ACCESS' service group also maintains non-ACCESS electronic and electromechanical equipment such as card embossers, microfiche duplicators, microfilm scanners, large drawing format scanners and highly sophisticated 5-1/4" and 12" laser drives. ACCESS continues to pursue additional third-party service opportunities with manufacturers of electronic and electromechanical products who require a rapid on-site service response but whose customer base is not large enough to support a nationwide service network. SALES ACCESS systems have been installed in 48 states, Japan, Europe, Australia, Canada, Mexico, Jamaica, Puerto Rico, the Middle East, China, and the former Soviet Union. Sales in and outside the United States are handled predominantly on a direct basis. There is no recurring geographic market concentration with respect to the sales of ACCESS systems in the United States, and in fiscal year 1995, not more than 13% of the Company's sales were derived from customers in any single state. ACCESS' primary marketing focus is the sale of its TDMS products to manufacturers and other users of technical documentation. No single customer accounts for a significant percentage of the Company's revenues on a continuing basis, although sales of ACCESS' systems to various agencies of the federal government represented 18% of 1995 revenues and 17% of 1994 revenues. These revenues represented numerous federal contracts. COMMON SHARES Currently there is no established market for the Company's Common Shares and the Company is not aware of any reported bid quotations. The Company has not paid, and has no plans to pay, dividends on its Common Shares. The number of holders of record of ACCESS Corporation's Common Shares as of April 30, 1995, was 389. FORM 10-K AVAILABLE An Annual Report on Form 10-K will be filed with the Securities and Exchange Commission detailing the activities, management, and financial results of ACCESS Corporation for the fiscal year ending April 30, 1995. A shareholder may obtain a copy of this report at no charge by writing to ACCESS Corporation, 4350 Glendale-Milford Road, Suite 250, Cincinnati, Ohio 45242, Attention: Treasurer. Board of Directors Kent P. Friel Chairman of the Board President, Schonberg Associates, Inc. Cincinnati, Ohio Scott D. Watkins President and Chief Executive Officer Newton D. Baker Executive Vice President and Treasurer James H. Hardie Partner in law firm of Reed Smith Shaw & McClay Pittsburgh, Pennsylvania Robert J. Kalthoff Chairman of the Kalthoff Group, Inc. Cincinnati, Ohio Dennis J. Sullivan, Jr. Executive Counselor Dan Pinger Relations, Inc. Cincinnati, Ohio John W. Weil President Weil Associates, Inc. Bloomfield Hills, Michigan Officers Scott D. Watkins President and Chief Executive Officer Newton D. Baker Executive Vice President and Treasurer Kim Bollinger Vice President, Customer Services James M. Anderson Secretary, Partner in law firm of Taft, Stettinius & Hollister Cincinnati, Ohio Shareholder Information Transfer Agent/Registrar Fifth Third Bank Fifth Third Center Corporate Trust Cincinnati, OH 45263 Independent Auditors Deloitte & Touche LLP 250 East Fifth Street Cincinnati, Ohio 45201-5340 General Counsel Taft, Stettinius & Hollister 1800 Star Bank Center Cincinnati, Ohio 45202 Patent Counsel Wood, Herron & Evans 2700 Carew Tower Cincinnati, Ohio 45202 EX-23 5 Deloitte & Touche LLP 250 East Fifth Street P. O. Box 5340 Cincinnati, Ohio 45201-5340 Telephone (513)784-7100 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 2-67785, 2-91016, 33-00158, 33-48194 and 33- 48195 of ACCESS Corporation on Forms S-8 of our reports dated May 31, 1995, appearing in and incorporated by reference in the Annual Report on Form 10-K of ACCESS Corporation for the year ended April 30, 1995. DELOITTE & TOUCHE LLP - ------------------------------------ Deloitte & Touche LLP Cincinnati, Ohio July 21, 1995 EX-24 6 Exhibit 24(i) POWER OF ATTORNEY -------------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned, officer and/or director of ACCESS Corporation, an Ohio Corporation, which is about to file with the Securities and Exchange Commission, Washington, DC, under the provisions of the Securities Exchange Act of 1934, as amended, a 1995 Annual Report, hereby constitutes Mr. Newton D. Baker, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign such 1995 Annual Report and any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 5th day of July, 1995. JAMES H. HARDIE ------------------------------ James H. Hardie EX-24 7 Exhibit 24(ii) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned, officer and/or director of ACCESS Corporation, an Ohio Corporation, which is about to file with the Securities and Exchange Commission, Washington, DC, under the provisions of the Securities Exchange Act of 1934, as amended, a 1995 Annual Report, hereby constitutes Mr. Newton D. Baker, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign such 1995 Annual Report and any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 5th day of July, 1995. ROBERT J. KALTHOFF --------------------------------- Robert J. Kalthoff EX-24 8 Exhibit 24(iii) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned, officer and/or director of ACCESS Corporation, an Ohio Corporation, which is about to file with the Securities and Exchange Commission, Washington, DC, under the provisions of the Securities Exchange Act of 1934, as amended, a 1995 Annual Report, hereby constitutes Mr. Newton D. Baker, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign such 1995 Annual Report and any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 5th day of July, 1995. JOHN W. WEIL --------------------------- John W. Weil EX-24 9 Exhibit 24(iv) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, officer and/or director of ACCESS Corporation, an Ohio Corporation, which is about to file with the Securities and Exchange Commission, Washington, DC, under the provisions of the Securities Exchange Act of 1934, as amended, a 1995 Annual Report, hereby constitutes Mr. Newton D. Baker, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign such 1995 Annual Report and any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th day of July, 1995. KENT P. FRIEL ---------------------------- Kent P. Friel EX-24 10 Exhibit 24(v) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned, officer and/or director of ACCESS Corporation, an Ohio Corporation, which is about to file with the Securities and Exchange Commission, Washington, DC, under the provisions of the Securities Exchange Act of 1934, as amended, a 1995 Annual Report, hereby constitutes Mr. Newton D. Baker, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign such 1995 Annual Report and any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 3rd day of July, 1995. DENNIS P. SULLIVAN ----------------------------- Dennis P. Sullivan EX-99 11 Deloitte & Touche LLP 250 East Fifth Street P. O. Box 5340 Cincinnati, Ohio 45201-5340 Telephone (513)784-7100 INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES Stockholders and Board of Directors ACCESS Corporation Cincinnati, Ohio We have audited the financial statements of ACCESS Corporation as of April 30, 1995 and 1994, and for each of the three years in the period ended April 30, 1995, and have issued our report thereon dated May 31, 1995; such financial statements and report are included in your 1995 Annual Report to the Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of ACCESS Corporation, listed in Item 14 of Form 10-K. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP - ------------------------------------ Deloitte & Touche LLP Cincinnati, Ohio May 31, 1995 EX-99 12 ACCESS CORPORATION SCHEDULE II- Valuation and Qualifiying Accounts
Column A Column B Column C Column D Column E Balance Charged to Charged to Balance Beginning Costs and Other End of Description of Period Expenses Accounts Period - ------------------------------------------------------------------------------------------------ Year Ended April 30, 1995 Deferred Income Tax Benefit Valuation Allowance ($2,434,100) $ 0 $ 0 ($2,434,100) Allowance for Doubtful Accounts $ 17,479 $ 4,796 $ 4,175 $ 18,100 - ------------------------------------------------------------------------------------------------ Year Ended April 30, 1994 Deferred Income Tax Benefit Valuation Allowance ($2,220,000) $ 214,100 $ 0 ($2,434,100) Allowance for Doubtful Accounts $ 36,360 (2) $ 13,287 (1) $ 5,594 $ 17,479 - ----------------------------------------------------------------------------------------------- Year Ended April 30, 1993 Deferred Income Tax Benefit Valuation Allowance $ 0 (3) $2,220,000 $ 0 ($2,220,000) Allowance for Doubtful Accounts $ 50,000 (2) $ 4,562 (1) $18,292 $ 36,360 - ----------------------------------------------------------------------------------------------- (1) Accounts written off as uncollectable. (2) Net change in reserve. (3) Recorded as part of cumulative effect of change in accounting for income taxes
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