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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ending June 30, 2003



 ̈TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from to



Commission file number 0-23489



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Access Worldwide Communications, Inc.

(Exact Name of Registrant as Specified
in its Charter)



|Delaware                                                       |  | 52-1309227                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|4950 Communication Avenue, Suite 300 Boca Raton, Florida       |  | 33431                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          



Registrants
telephone number, including area code (561) 226-5000



Securities registered pursuant to Section 12(b) of the Act:



|Title of each class. |  | Name of each exchange on which registered.
|-------------------- |  | ------------------------------------------
|None                 |  | None                                      



Securities
registered pursuant to Section 12(g) of the Act:



Common
Stock, $0.01 par value

Title of Class



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Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period as the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.



Yes x     No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).



Yes ̈No x



The number of shares outstanding of the registrants common stock, $.01 par value, as of August 11, 2003 was 9,740,501.



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ACCESS WORLDWIDE COMMUNICATIONS, INC.



INDEX



|                                                                                              |  |                                                                                                                |  | Page
|--------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------- |  | ----
|Part IFinancial Information                                                                  |  |                                                                                                               
|                                                                                              | 
|Item 1. Financial Statements                                                                  |  |                                                                                                               
|                                                                                              |  |                                                                                                               
|                                                                                              |  | Consolidated Balance Sheets  June 30, 2003 (unaudited) and December 31, 2002                                  |  | 1   
|                                                                                              |  | Consolidated Statements of Operations (unaudited)  Three and Six Months Ended June 30, 2003 and June 30, 2002 |  | 2   
|                                                                                              |  | Consolidated Statement of Changes in Stockholders Equity (unaudited)  Six Months Ended June 30, 2003         |  | 3   
|                                                                                              |  | Consolidated Statements of Cash Flows (unaudited)  Six Months Ended June 30, 2003 and June 30, 2002           |  | 4   
|                                                                                              |  | Notes to Consolidated Financial Statements                                                                     |  | 5-11
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 11-15                                                                                                         
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |  | 15                                                                                                            
|Item 4. Controls and Procedures                                                               |  | 15                                                                                                            
|                                                                                              | 
|Part IIOther Information                                                                     |  |                                                                                                               
|Item 1. Legal Proceedings                                                                     |  | 16                                                                                                            
|Item 4. Submission of Matters to a Vote of Security Holders                                   |  | 16                                                                                                            
|Item 6. Exhibits and Reports on Form 8-K                                                      |  | 16                                                                                                            
|                                                                                              |  | Signatures                                                                                                     |  | 17  
|                                                                                              |  | Certifications                                                                                                 |  |     



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##### Table of Contents

PART IFINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



ACCESS WORLDWIDE COMMUNICATIONS, INC.



CONSOLIDATED BALANCE SHEETS



|                                                                                                                                        |  | June 30, 2003 (Unaudited) |             |   | December 31,2002 |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ----------- | - | ---------------- | -
|ASSETS                                                                                                                                  |  |                           |             |   |                  |  
|Current assets:                                                                                                                         |  |                           |             |   |                  |  
|Cash and cash equivalents                                                                                                               |  | $                         | 638,911     |   |                  | $
|Restricted cash                                                                                                                         |  |                           | 123,000     |   |                  |  
|Accounts receivable, net of allowance for doubtful accounts of $666,389 and $129,430, respectively                                      |  |                           | 11,290,837  |   |                  |  
|Unbilled receivables                                                                                                                    |  |                           | 2,241,366   |   |                  |  
|Other assets, net                                                                                                                       |  |                           | 1,789,104   |   |                  |  
|                                                                                                                                        |  |                           |             |   |                  |  
|Total current assets                                                                                                                    |  |                           | 16,083,218  |   |                  |  
|Property and equipment, net                                                                                                             |  |                           | 4,374,615   |   |                  |  
|Intangible assets, net                                                                                                                  |  |                           | 8,988,892   |   |                  |  
|Restricted cash                                                                                                                         |  |                           | 711,000     |   |                  |  
|Other assets, net                                                                                                                       |  |                           | 168,853     |   |                  |  
|                                                                                                                                        |  |                           |             |   |                  |  
|Total assets                                                                                                                            |  | $                         | 30,326,578  |   |                  | $
|                                                                                                                                        |  |                           |             |   |                  |  
|                                                                                                                                        |  |                          
|LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND COMMON STOCKHOLDERS EQUITY                                                     |  |                           |             |   |                  |  
|Current liabilities:                                                                                                                    |  |                           |             |   |                  |  
|Current portion of indebtedness                                                                                                         |  | $                         | 3,546,978   |   |                  | $
|Current portion of indebtedness  related parties                                                                                       |  |                           | 383,334     |   |                  |  
|Accounts payable and accrued expenses                                                                                                   |  |                           | 8,048,622   |   |                  |  
|Deferred revenue                                                                                                                        |  |                           | 5,149,544   |   |                  |  
|Accrued salaries, wages and related benefits                                                                                            |  |                           | 1,993,360   |   |                  |  
|Accrued interest and other related party expenses                                                                                       |  |                           | 3,194       |   |                  |  
|                                                                                                                                        |  |                           |             |   |                  |  
|Total current liabilities                                                                                                               |  |                           | 19,125,032  |   |                  |  
|Long-term portion of indebtedness                                                                                                       |  |                           | 41,943      |   |                  |  
|Other long-term liabilities                                                                                                             |  |                           | 298,054     |   |                  |  
|Convertible notes subscriptions payable                                                                                                 |  |                           | 1,840,000   |   |                  |  
|Mandatorily redeemable preferred stock, $.01 par value: 2,000,000 shares authorized, 40,000 shares issued and
outstanding               |  |                           | 4,000,000   |   |                  |  
|                                                                                                                                        |  |                           |             |   |                  |  
|Total liabilities and mandatorily redeemable preferred stock                                                                            |  |                           | 25,305,029  |   |                  |  
|                                                                                                                                        |  |                           |             |   |                  |  
|                                                                                                                                        |  |                          
|Commitments and contingencies                                                                                                           |  |                           |             |   |                  |  
|                                                                                                                                        |  |                          
|Common stockholders equity:                                                                                                            |  |                           |             |   |                  |  
|Common stock, $.01 par value: voting: 20,000,000 shares authorized; 9,740,501 and 9,740,001 shares issued and outstanding,
respectively |  |                           | 97,405      |   |                  |  
|Additional paid-in capital                                                                                                              |  |                           | 63,669,294  |   |                  |  
|Accumulated deficit                                                                                                                     |  |                           | (58,715,450 | ) |                  |  
|Unearned stock compensation                                                                                                             |  |                           | (29,700     | ) |                  |  
|                                                                                                                                        |  |                           |             |   |                  |  
|Total common stockholders equity                                                                                                       |  |                           | 5,021,549   |   |                  |  
|                                                                                                                                        |  |                           |             |   |                  |  
|Total liabilities, mandatorily redeemable preferred stock and common stockholders equity                                               |  | $                         | 30,326,578  |   |                  | $
|                                                                                                                                        |  |                           |             |   |                  |  



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



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ACCESS WORLDWIDE COMMUNICATIONS, INC.



CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



|                                                                                                                                                                    |  | Three Months Ended June 30, |            |   | Six Months Ended June 30, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | -
|                                                                                                                                                                    |  | 2003                        |            |   | 2002                      |  
|Revenues                                                                                                                                                            |  | $                           | 13,962,773 |   |                           | $
|Cost of revenues                                                                                                                                                    |  |                             | 9,396,139  |   |                           |  
|                                                                                                                                                                    |  |                             |            |   |                           |  
|Gross profit                                                                                                                                                        |  |                             | 4,566,634  |   |                           |  
|                                                                                                                                                                    |  |                             |            |  
|Selling, general and administrative expenses                                                                                                                        |  |                             | (5,459,579 | ) |                           |  
|Gain on extinguishment of indebtedness  related party                                                                                                              |  |                             | 299,555    |   |                           |  
|Amortization expense                                                                                                                                                |  |                             | (36,994    | ) |                           |  
|                                                                                                                                                                    |  |                             |            |   |                           |  
|                                                                                                                                                                    |  |                             |            |  
|(Loss) income from operations                                                                                                                                       |  |                             | (630,384   | ) |                           |  
|Interest income                                                                                                                                                     |  |                             | 3,120      |   |                           |  
|Interest income related parties                                                                                                                                    |  |                             |           |   |                           |  
|Interest expenserelated parties                                                                                                                                    |  |                             | (27,313    | ) |                           |  
|Interest expense                                                                                                                                                    |  |                             | (231,236   | ) |                           |  
|                                                                                                                                                                    |  |                             |            |   |                           |  
|                                                                                                                                                                    |  |                             |            |  
|(Loss) income before income tax expense                                                                                                                             |  |                             | (885,813   | ) |                           |  
|Income tax expense                                                                                                                                                  |  |                             |           |   |                           |  
|                                                                                                                                                                    |  |                             |            |   |                           |  
|                                                                                                                                                                    |  |                             |            |  
|(Loss) income from continuing operations                                                                                                                            |  |                             | (885,813   | ) |                           |  
|                                                                                                                                                                    |  |                             |            |   |                           |  
|                                                                                                                                                                    |  |                             |            |  
|Discontinued operations (Note 10):                                                                                                                                  |  |                             |            |   |                           |  
|Income (loss) from discontinued operations, net of income tax benefit of $32,313 and $107,873 for the three and six month periods
ended June 30, 2002, respectively |  |                             |           |   |                           |  
|                                                                                                                                                                    |  |                             |            |  
|(Loss) gain on disposal of segments, net of income tax expense of $233,070 and $1,549,180 for the three and six month periods
ended June 30, 2002, respectively     |  |                             |           |   |                           |  
|                                                                                                                                                                    |  |                             |            |   |                           |  
|                                                                                                                                                                    |  |                             |           |   |                           |  
|                                                                                                                                                                    |  |                             |            |   |                           |  
|Net (loss) income                                                                                                                                                   |  | $                           | (885,813   | ) |                           | $
|                                                                                                                                                                    |  |                             |            |   |                           |  
|                                                                                                                                                                    |  |                             |            |  
|Basic (loss) earnings per share of common stock:                                                                                                                    |  |                             |            |   |                           |  
|Continuing operations                                                                                                                                               |  | $                           | (0.09      | ) |                           | $
|Discontinued operations                                                                                                                                             |  |                             | 0.00       |   |                           |  
|Net (loss) income                                                                                                                                                   |  | $                           | (0.09      | ) |                           | $
|Weighted average common shares outstanding                                                                                                                          |  |                             | 9,740,501  |   |                           |  
|                                                                                                                                                                    |  |                             |            |  
|Diluted (loss) earnings per share of common stock:                                                                                                                  |  |                             |            |   |                           |  
|Continuing operations                                                                                                                                               |  | $                           | (0.09      | ) |                           | $
|Discontinued operations                                                                                                                                             |  |                             | 0.00       |   |                           |  
|Net (loss) income                                                                                                                                                   |  | $                           | (0.09      | ) |                           | $
|Weighted average common shares outstanding                                                                                                                          |  |                             | 9,740,501  |   |                           |  



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



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ACCESS WORLDWIDE COMMUNICATIONS, INC.



CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS EQUITY

(UNAUDITED)



FOR THE SIX MONTHS ENDED JUNE 30, 2003



|                                            |  | Common Stock |  | AdditionalPaid-inCapital |        | AccumulatedDeficit |   |            | DeferredCompensation |   |             | Total | 
|------------------------------------------- |  | ------------ |  | ------------------------ | ------ | ------------------ | - | ---------- | -------------------- | - | ----------- | ----- | 
|                                            |  |              |  |                          |       
|                                            |  | Shares       |  | Amount                   |        |                    |   |           
|                                            |  |              |  |                          |        |                   
|Balance, December 31, 2002                  |  | 9,740,001    |  | $                        | 97,400 |                    | $ | 63,636,069 |                      | $ | (57,130,433 | )     | 
|                                            |  |              |  |                          |        |                   
|Unearned compensation expense               |  |             |  |                          |       |                    |   | 33,000     |                      |   |            |       | 
|Amortization of unearned stock compensation |  |             |  |                          |       |                    |   |           |                      |   |            |       | 
|Stock options exercised                     |  | 500          |  |                          | 5      |                    |   | 225        |                      |   |            |       | 
|Net loss for the period ended June 30, 2003 |  |             |  |                          |       |                    |   |           |                      |   | (1,585,017  | )     | 
|                                            |  |              |  |                          |        |                    |   |            |                      |   |             |       | 
|                                            |  |              |  |                          |        |                   
|Balance, June 30, 2003                      |  | 9,740,501    |  | $                        | 97,405 |                    | $ | 63,669,294 |                      | $ | (58,715,450 | )     | 
|                                            |  |              |  |                          |        |                    |   |            |                      |   |             |       | 



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ACCESS WORLDWIDE COMMUNICATIONS, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



FOR THE SIX MONTHS ENDED JUNE 30,



|                                                                                                   |  | 2003 |            |   | 2002 |  
|-------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|Cash flows from operating activities:                                                              |  |      |            |   |      |  
|Net (loss) income                                                                                  |  | $    | (1,585,017 | ) |      | $
|Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |  |      |            |   |      |  
|Depreciation and amortization                                                                      |  |      | 836,589    |   |      |  
|Amortization of deferred financing costs                                                           |  |      | 78,564     |   |      |  
|Amortization of unearned stock compensation                                                        |  |      | 3,300      |   |      |  
|Gain on disposition of discontinued operations                                                     |  |      |           |   |      |  
|Changes in discontinued operations                                                                 |  |      |           |   |      |  
|Gain on extinguishment of indebtedness  related party                                             |  |      | (299,555   | ) |      |  
|Allowance for doubtful accounts                                                                    |  |      | 536,959    |   |      |  
|Changes in operating assets and liabilities:                                                       |  |      |            |   |      |  
|Accounts receivables                                                                               |  |      | (2,163,943 | ) |      |  
|Unbilled receivables                                                                               |  |      | 763,969    |   |      |  
|Other assets                                                                                       |  |      | (591,311   | ) |      |  
|Accounts payable and accrued expenses                                                              |  |      | (508,452   | ) |      |  
|Accrued interest and other related party expenses                                                  |  |      | (24,517    | ) |      |  
|Accrued salaries, wages and related benefits                                                       |  |      | (206,503   | ) |      |  
|Deferred revenue                                                                                   |  |      | 4,432,235  |   |      |  
|                                                                                                   |  |      |            |   |      |  
|Net cash provided by (used in) operating activities                                                |  |      | 1,272,318  |   |      |  
|                                                                                                   |  |      |            |   |      |  
|                                                                                                   |  |     
|Cash flows from investing activities:                                                              |  |      |            |   |      |  
|Additions to property and equipment, net                                                           |  |      | (332,660   | ) |      |  
|Increase in restricted cash                                                                        |  |      | (834,000   | ) |      |  
|Additions to property and equipment from discontinued operations, net                              |  |      |           |   |      |  
|Net proceeds from sale of discontinued operations                                                  |  |      |           |   |      |  
|                                                                                                   |  |      |            |   |      |  
|Net cash (used in) provided by investing activities                                                |  |      | (1,166,660 | ) |      |  
|                                                                                                   |  |      |            |   |      |  
|                                                                                                   |  |     
|Cash flows from financing activities:                                                              |  |      |            |   |      |  
|Payments on capital leases                                                                         |  |      | (9,621     | ) |      |  
|Issuance of common stock                                                                           |  |      | 230        |   |      |  
|Net payments under Credit Facility                                                                 |  |      | (1,708,581 | ) |      |  
|Proceeds from sale of subscriptionsconvertible notes payable                                      |  |      | 1,840,000  |   |      |  
|Payment of loan origination fees                                                                   |  |      | (744,582   | ) |      |  
|Payments on related party debt                                                                     |  |      | (1,041,402 | ) |      |  
|                                                                                                   |  |      |            |   |      |  
|Net cash used in financing activities                                                              |  |      | (1,663,956 | ) |      |  
|                                                                                                   |  |      |            |   |      |  
|                                                                                                   |  |     
|Net decrease in cash and cash equivalents                                                          |  |      | (1,558,298 | ) |      |  
|Cash and cash equivalents, beginning of period                                                     |  |      | 2,197,209  |   |      |  
|                                                                                                   |  |      |            |   |      |  
|Cash and cash equivalents, end of period                                                           |  | $    | 638,911    |   |      | $
|                                                                                                   |  |      |            |   |      |  



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



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ACCESS WORLDWIDE COMMUNICATIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. BASIS OF
PRESENTATION



The accompanying unaudited consolidated
financial statements of Access Worldwide Communication, Inc. (Access Worldwide, we, our, us, or the Company) have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, we do not include therein all of the information and footnotes required by accounting
principles generally accepted in the United States of America for a complete set of consolidated financial statements. For further information, refer to our consolidated financial statements and footnotes included in our Annual Report on Form 10-K
for the year ended December 31, 2002, filed with the Securities and Exchange Commission.



The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect reported
amounts included in the consolidated financial statements. In our opinion, all adjustments necessary for a fair presentation of this interim financial information have been included. Such adjustments consisted only of normal recurring items. The
results of operations for the six months ended June 30, 2003 are not necessarily indicative of the results to be expected for the year ending December 31, 2003.



2. LIQUIDITY AND CAPITAL RESOURCES



At December 31, 2002, we were in compliance with all the financial covenants of the Credit Facility. On April 1, 2003, we notified the Bank Group of our
inability to make a mandatory payment required to reduce our outstanding debt under the Credit Facility to the $5.7 million limit, which became effective April 1, 2003 and, therefore, resulted in an event of default pursuant to the Credit Facility.
On April 3, 2003, we received a letter from the Bank Group which allowed us to continue to use cash proceeds generated in the ordinary course of business to fund working capital and operations and changed the interest rate to a default rate of prime
plus 5% on the outstanding balance of the Credit Facility.



On
April 29, 2003, the Company entered into the Seventh Amendment and Waiver Agreement (the Amendment) to the Credit Facility. The Amendment allowed the Company to continue to use cash proceeds generated in the ordinary course of business
to fund working capital and operations. In addition, the Amendment increased the effective rate of interest to Bank of Americas prime rate of interest plus 5% and limited the revolving commitment line to $6.1 million through May 14, 2003 with
periodic reductions thereafter. The outstanding balance on the Credit Facility was due on July 1, 2003.



On June 10, 2003, we entered into a new revolving credit, term loan and security agreement (Debt Agreement) with CapitalSource Finance, LLC
(CapitalSource), a commercial finance firm with expertise in the pharmaceutical industry through their healthcare finance lending unit. The Debt Agreement provides up to $10 million under a revolving line of credit (the
Revolver); up to $0.5 million under a Term Loan (the Term Loan) and requires us to have initial subscriptions of at least $1.5 million of our Convertible Promissory Notes (the Convertible Notes) on June 10, 2003
and at least $2.0 million in Convertible Notes on or before July 15, 2003 (see Note 11 and 12).



In accordance with our Debt Agreement, we offered unregistered Convertible Notes to accredited investors, including Company officers and directors. The
proceeds of the Convertible Notes were used to fund working capital (See Note 12).



In accordance with Emerging Issues Task Force (EITF) No. 95-22, Accounting for Agreements that Include Both a Subjective Acceleration Clauses and a Lock-box Arrangement, which states that
agreements with both subjective acceleration clauses and a lock-box agreement should be classified as a current liability due to the financial institutions ability to accelerate the due date of the debt based on certain events outside of our
control, we have classified the entire amount outstanding on the Debt Agreement as current portion of indebtedness in the accompanying balance sheet at June 30, 2003. Management believes that it has chosen a financial institution that understands
our business and is committed to being a business partner thereby reducing the risk that the acceleration clause combined with a lock-box arrangement would impact or shorten the three year term of the Revolver.



As a result of our lawsuit against MTI Information Technologies, LLC
(MTI), we recorded bad debt expense of approximately $0.6 million during the three months ended June 30, 2003, which placed us in default of the covenants contained in our Debt Agreement. Therefore, we notified CapitalSource about the
potential default of covenants on July 29, 2003, and we entered into the First Amendment (the First Amendment) to the Debt Agreement on August 11, 2003, which modified the financial covenants to allow for such event.



The auditors report on our financial statements included with the
Annual Report on Form 10-K includes an explanatory paragraph indicating that there is substantial doubt regarding our ability to continue as a going concern. As discussed above, in June



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##### Table of Contents

2. LIQUIDITY AND CAPITAL RESOURCES (continued)



2003, we closed on a new Debt Agreement and simultaneously paid off our Credit Facility. We believe that the new debt structure provides us
with the liquidity and capital resources needed to grow the existing business and increase shareholder value. We believe that we will be able to meet the amended financial covenants and that our cash and cash equivalents, as well as cash provided by
operations and the availability from the Debt Agreement and the Convertible Notes will be sufficient to fund our current operations for the next twelve months.



3. RECLASSIFICATIONS



Certain reclassifications have been made to the December 31, 2002 consolidated financial statements to conform to the June 30, 2003 presentation. Such
reclassifications did not change our net loss or total common stockholders equity as previously reported.



4. RESTRICTED CASH



On June 10, 2003, we obtained a new letter of credit (Letter of Credit) in the amount of $834,000 to replace the original letter of credit
issued to the landlord of our Maryland communication center in 2001 by the Bank Group. The Letter of Credit was collateralized by a certificate of deposit in the same amount (see Note 11). Therefore, such certificate of deposit is classified as
restricted cash in the accompanying balance sheet at June 30, 2003.



The amount of the Letter of Credit and restricted cash will be reduced on each anniversary of the lease agreement through May 2011. The balance of the letter of credit will be reduced to the amounts shown on each anniversary date as
follows:



|May 2003              |  | $834,000
|--------------------- |  | --------
|May 2004              |  | 711,000 
|May 2005              |  | 589,000 
|May 2006              |  | 466,000 
|May 2007              |  | 343,000 
|May 2008 through 2010 |  | 221,000 



5. INCOME TAXES



The effective tax rate used by us to record income tax expense for the three
and six months ended June 30, 2003 differs from the federal statutory rate primarily related to the valuation allowance recorded in connection with the Companys deferred tax assets. The effective tax rate for the three and six months ended
June 30, 2002 differs from the federal statutory tax rate primarily due to the utilization of net operating loss carryforwards.



6. (LOSSES) EARNINGS PER COMMON SHARE



The computation of weighted average number of common and common equivalent shares used in the calculation of basic and diluted earnings (losses) per share
is as follows:



|2003:                                                                                  |  | For the Three MonthsEnded June 30, |  | For the Six MonthsEnded June 30,
|-------------------------------------------------------------------------------------- |  | ---------------------------------- |  | --------------------------------
|                                                                                       |  | Shares                             |  | Shares                          
|Weighted average number of common shares outstanding  basic                           |  | 9,740,501                          |  | 9,740,334                       
|                                                                                       |  |                                    |  |                                 
|Weighted average number of common and common equivalent shares outstanding  dilutive* |  | 9,740,501                          |  | 9,740,334                       
|                                                                                       |  |                                    |  |                                 



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##### Table of Contents

ACCESS WORLDWIDE COMMUNICATIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



6. (LOSSES) EARNINGS PER COMMON SHARE ( Continued)



|2002:                                                                                  |  | For the Three MonthsEnded June 30, |  | For the Six MonthsEnded June 30,
|-------------------------------------------------------------------------------------- |  | ---------------------------------- |  | --------------------------------
|                                                                                       |  | Shares                             |  | Shares                          
|Weighted average number of common shares outstanding  basic                           |  | 9,740,001                          |  | 9,740,001                       
|                                                                                       |  |                                    |  |                                 
|Effects of dilutive securities:                                                        |  |                                    |  |                                 
|                                                                                       |  |                                    |  |                                 
|Stock options                                                                          |  | 60,462                             |  |                                
|                                                                                       |  |                                    |  |                                 
|Weighted average number of common and common equivalent shares outstanding  dilutive* |  | 9,800,463                          |  | 9,740,001                       
|                                                                                       |  |                                    |  |                                 



|* |  | Since the effects of the stock options and earn-out contingencies are anti-dilutive for both the three and six months ended June 30, 2003, and the six months ended June 30, 2002,
these effects have not been included in the calculation of dilutive (losses) earnings per common share.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



7. NEW ACCOUNTING PRONOUNCEMENTS



In November 2002, Financial Accounting Standard Board Interpretation (FIN) No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantors, Including Indirect Guarantees of Indebtedness of Others was issued. FIN No. 45 requires recognition of an initial liability for the fair value of the guarantors obligation upon issuance of certain guarantees.
We adopted the disclosure requirements of FIN No. 45 as of December 31, 2002. On January 1, 2003, we adopted the initial recognition and measurement provisions which were effective on a prospective basis for guarantees issued or modified after
December 31, 2002. The implementation of FIN No. 45 had no impact on our results of operations or financial position at adoption or during the six months ended June 30, 2003.



In May 2003, Statement of Financial Accounting Standards (SFAS) No. 150, Accounting For Certain Financial
Instruments with Characteristics of both Liabilities and Equity, was issued. This statement improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. This statement requires
that those instruments be classified as liabilities in statements of financial position. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments
created before the issuance date of the statement and still existing at the beginning of the interim period of adoption. SFAS No. 150 will not impact our results of operations or financial condition.



8. STOCK BASED COMPENSATION



In December 2002, the Financial Accounting Standards Board issued SFAS No.
148, Accounting for Stock-Based Compensation  Transition and Disclosure  an Amendment of SFAS No. 123, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. SFAS No. 148 amends the requirements of SFAS No. 123 requiring prominent disclosure in annual and interim financial statements about methods of accounting for stock-based employee compensation and the effects of
the method used on reported results. We continue to use the intrinsic value method and, as a result, the implementation of SFAS No. 148 had no impact on our results of operations or financial position at adoption or during the six months ended June
30, 2003.



Had the fair value based method been used to account
for such compensation, compensation costs would have reduced net (loss) income and earnings per share for the three and six months ended June 30, 2003 and 2002:



7



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##### Table of Contents

ACCESS WORLDWIDE COMMUNICATIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



8. STOCK BASED COMPENSATION (Continued)



|                                                                                                                                     |  | Three MonthsEnded June 30, 2003 |          |   | Three MonthsEnded June 30, 2002 |   |         | Six MonthsEnded June 30, 2003 |  |   | Six MonthsEnded June 30, 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------- | -------- | - | ------------------------------- | - | ------- | ----------------------------- |  | - | ----------------------------- | -
|Net (loss) income, as reported                                                                                                       |  | $                               | (885,813 | ) |                                 | $ | 417,608 |                               |  | $ | (1,585,017                    | )
|Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax
effect |  |                                 | (50,931  | ) |                                 |   | (41,959 | )                             |  |   | (99,137                       | )
|                                                                                                                                     |  |                                 |          |   |                                 |   |         |                               |  |   |                               |  
|Proforma net (loss) income                                                                                                           |  |                                 | (936,744 | ) |                                 |   | 375,649 |                               |  |   | (1,684,154                    | )
|                                                                                                                                     |  |                                 |          |   |                                 |   |         |                               |  |   |                               |  
|(Loss) earnings per share:                                                                                                           |  |                                 |          |   |                                 |   |         |                               |  |   |                               |  
|                                                                                                                                     |  |                                 |          |   |                                 |   |         |                               |  |   |                               |  
|Basic  as reported                                                                                                                  |  | $                               | (0.09    | ) |                                 | $ | 0.04    |                               |  | $ | (0.16                         | )
|                                                                                                                                     |  |                                 |          |   |                                 |   |         |                               |  |   |                               |  
|Basic  proforma                                                                                                                     |  |                                 | (0.10    | ) |                                 | $ | 0.04    |                               |  |   | (0.17                         | )
|                                                                                                                                     |  |                                 |          |   |                                 |   |         |                               |  |   |                               |  
|Diluted  as reported                                                                                                                |  | $                               | (0.09    | ) |                                 | $ | 0.04    |                               |  | $ | (0.16                         | )
|                                                                                                                                     |  |                                 |          |   |                                 |   |         |                               |  |   |                               |  
|Diluted  proforma                                                                                                                   |  |                                 | (0.10    | ) |                                 | $ | 0.04    |                               |  |   | (0.17                         | )
|                                                                                                                                     |  |                                 |          |   |                                 |   |         |                               |  |   |                               |  



9. COMMITMENTS AND CONTINGENCIES



We are involved in legal actions arising in the ordinary
course of our business. We believe that the ultimate resolution of these matters will not have a material adverse effect on our financial position, results of operation or cash flow except as described below.



On May 29, 2001, Douglas Rebak and Joseph Macaluso filed suit against the
Company in Federal District Court for the district of New Jersey. The lawsuit seeks enforcement of an alleged amendment to an earn-out agreement between the Company and Messrs. Rebak and Macaluso relating to our acquisition of the Phoenix Marketing
Group (Phoenix) in 1997. Messrs. Rebak and Macaluso were two majority shareholders of Phoenix prior to the acquisition and became officers of the Company after Phoenix became a subsidiary of Access Worldwide. The suit alleges that we
agreed to amend the earn-out agreement. The lawsuit seeks actual damages of $0.9 million plus additional unspecified punitive damages. On August 5, 2003, the Court granted the Companys Motion for Summary Judgment and dismissed all claims.



On July 18, 2003, we filed a suit against MTI Information
Technologies, LLC (MTI) in Broward County, Florida. The lawsuit seeks enforcement of our pharmaceutical telemarketing service contract (the Contract) with MTI for services rendered. We performed pharmaceutical telemarketing
services for MTI from November 2001 to April 2003, when services were terminated after payments due from MTI became severely delinquent. The lawsuit alleges that MTI breached its Contract with the Company by not paying for services rendered. The
lawsuit seeks payment for work performed of approximately $0.6 million.



On July 21, 2003, MTI filed a suit against the Company in Bucks County, Pennsylvania, for breach of contract and tortuous interference for the Companys failure to complete telemarketing campaigns. Management asserts that these claims
are not valid and intends to vigorously defend any action related to this claim and take all necessary steps to collect amounts due on account. While we believe MTIs claims have no legal basis, we cannot provide assurances as to the outcome of
the litigation.



10. DISCONTINUED OPERATIONS



In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, we reclassified as discontinued operations, the operations of our a) Cultural Access Group division (CAG), which provided in-language, in-culture market research services and consulting services to
Fortune 500 Companies in a variety of industries and was sold on January 31, 2002 to Lumina Americas, Inc. for $1.2 million in cash, plus the assumption of certain liabilities and b) Phoenix, which provided pharmaceutical sample distribution
services and was sold on February 25, 2002 to Express Scripts, Inc. for $33.0 million in cash, plus the assumption of certain liabilities. We realized a net gain of $8.4 million, net of income taxes and expenses incurred in connection with the
transactions. Revenues and operating (loss) income for the six months ended June 30, 2002 were $358,008 and $(370,998) for CAG and $4,207,194 and $(7,189) for Phoenix, respectively.



8



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##### Table of Contents

ACCESS WORLDWIDE COMMUNICATIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



11. INDEBTEDNESS



At December 31, 2002, we were in compliance with all the financial covenants of the Credit Facility. On April 1, 2003, we
notified the Bank Group of our inability to make a mandatory payment required to reduce our outstanding debt under the Credit Facility to the $5.7 million limit, which became effective April 1, 2003 and, therefore, resulted in an event of default
pursuant to the Credit Facility. On April 3, 2003, we received a letter from the Bank Group which allowed us to continue to use cash proceeds generated in the ordinary course of business to fund working capital and operations and changed the
interest rate to a default rate of prime plus 5% on the outstanding balance of the Credit Facility.



On April 29, 2003, we entered into the Amendment to the Credit Facility. The Amendment allowed the Company to continue to use cash proceeds generated in
the ordinary course of business to fund working capital and operations. In addition, the Amendment increased the effective rate of interest to Bank of Americas prime rate of interest plus 5% and limited the revolving commitment line to $6.1
million through May 14, 2003, with periodic reductions thereafter. The outstanding balance on the Credit Facility was due on July 1, 2003.



On June 10, 2003, we entered into a new Debt Agreement with CapitalSource. The Debt Agreement provides up to $10 million under a revolving line of credit
(the Revolver), up to $0.5 million under a Term Loan and requires us to have initial subscriptions of at least $1.5 million of our Convertible Notes on June 10, 2003, and at least $2.0 million in Convertible Notes on or before July 15,
2003 (see Note 12). The Revolver has a three year term and bears interest at the prime rate plus 2.75%. The availability on the Revolver is based on a percentage of our accounts receivable, unbilled receivable and billings in excess of cost, as
defined. The Term Loan bears interest at the prime rate plus 5.75% with monthly payments of $83,333 commencing on July 1, 2003 through maturity on December 31, 2003. The Term Loan is collateralized by the personal assets of Mr. Shawkat Raslan, Chief
Executive Officer of the Company.



The availability under the
Debt Agreement was used to repay the Credit Facility with the Bank Group, settle our 6.5% subordinated promissory note with a former stockholder of AM Medica Communications Group for $0.7 million, which resulted in a gain of approximately $0.3
million and make a $50,000 payment on our 6% subordinated promissory note (the Subordinated Note) with a former stockholder of TMS Professional Markets Group. The terms of the Subordinated Note were amended to be subordinated to the Debt
Agreement with regularly scheduled monthly payments of principal and interest not to exceed the lesser of 25% of Excess Cash Flow (as defined in the Debt Agreement) for the prior month or $63,000 per month.



The original letter of credit previously issued to the landlord of our
Maryland communication center by the Bank Group was canceled in June 2003. A new Letter of Credit was issued to the landlord in June 2003 and is collateralized by a certificate of deposit in the amount of $834,000 (see Note 4).



As a result of our lawsuit against MTI, we recorded bad debt expense of
approximately $0.6 million during the three months ended June 30, 2003, which placed us in default of the covenants contained in our Debt Agreement. Therefore, we notified CapitalSource about the potential default in our covenants on July 29, 2003
and we entered into the First Amendment (the First Amendment) to the Debt Agreement, on August 11, 2003, which modified the financial covenants to allow for such event.



12. CONVERTIBLE NOTES SUBSCRIPTIONS PAYABLE



In conjunction with our Debt Agreement, we solicited accredited investors to invest in the Convertible Notes. The proceeds of the Convertible
Notes were to be used to fund working capital. The Convertible Notes have a 39 month term, bear interest at a rate of 5% and are convertible after one year to common stock at $1 per share. The Convertible Notes also have detachable warrants in the
amount of 50% of the value of the Convertible Note, with an exercise price of $0.01 per share. Interest is paid quarterly, provided we are in compliance with the covenants of our Debt Agreement. As of June 30, 2003, we had commitments of
approximately $2.0 million and have collected subscriptions of $1.8 million under the Convertible Notes. Such amounts are classified as Convertible Notes Subscriptions Payable in the accompanying balance sheet at June 30, 2003. As of the effective
date of the Convertible Notes, July 15, 2003, we closed on approximately $2.1 million of the Convertible Notes (see Note 14).



In the event that any interest payment is not made within 30 days of its due date, an interest rate of 8% will be retroactively applied to the effective
date of the Convertible Notes.



In the event of a default, as
defined, a default rate of the lesser of 16% per annum or the maximum rate of interest allowable by law will be retroactively applied to the effective date of the Convertible Notes and additional warrants equaling 50% of the remaining outstanding
principal balance of the Convertible Notes plus all accrued and unpaid interest will be required to be issued.



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ACCESS WORLDWIDE COMMUNICATIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



13. UNEARNED STOCK COMPENSATION



During the three months ended March 31, 2003, the Company granted 150,000
stock options to an executive of the Company with a strike price of $0.50 per share. The Company recorded unearned stock compensation in the amount of $33,000 in connection with the grant. Such amount, which is shown as a reduction of
stockholders equity, will be amortized as compensation expense over the related vesting period.



14. RELATED PARTY TRANSACTIONS



The Board of Directors and certain executive management have invested $950,000 in the Companys Convertible Notes (see Note 12). In addition, a greater-than-5% non-board of director shareholder has invested $75,000 in the Convertible
Notes.



15. SEGMENTS



In accordance with SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, our reportable segments are strategic business units that offer different products and services to different industries in the United States and other countries.



The table below presents information about our reportable segments for our
continuing operations used by the chief operating decision-maker of the Company for the three and six months ended June 30, 2003 and 2002. The following information about reportable segments for the three and six months ended June 30, 2002 excludes
the results of Phoenix (previously included in the Pharmaceutical Segment) and CAG (previously included in the Other Segment), as such amounts have been reclassified as discontinued operations (see Note 10):



For the three months ended June 30,



|                              |  | Pharmaceutical(2) |           |   | Consumer |   | Segment Total |  | Reconciliation |            |  | Total |         
|----------------------------- |  | ----------------- | --------- | - | -------- | - | ------------- |  | -------------- | ---------- |  | ----- | --------
|2003                          |  |                   |           |   |          |   |               |  |                |            |  |       |         
|Revenues                      |  | $                 | 6,388,931 |   |          | $ | 7,573,842     |  | $              | 13,962,773 |  | $     |        
|Gross profit                  |  |                   | 1,780,802 |   |          |   | 2,785,832     |  |                | 4,566,634  |  |       |        
|(Loss) income from operations |  |                   | (373,459  | ) |          |   | 683,320       |  |                | 309,861    |  |       | (940,245
|EBITDA(1)                     |  |                   | (242,693  | ) |          |   | 932,304       |  |                | 689,611    |  |       | (910,052
|Depreciation expense          |  |                   | 93,772    |   |          |   | 248,984       |  |                | 342,756    |  |       | 30,193  
|Amortization expense          |  |                   | 36,994    |   |          |   |              |  |                | 36,994     |  |       |        
|                              |  |                   |           |   |         
|2002                          |  |                   |           |   |          |   |               |  |                |            |  |       |         
|Revenues                      |  | $                 | 9,334,631 |   |          | $ | 5,610,791     |  | $              | 14,945,422 |  | $     |        
|Gross profit                  |  |                   | 2,867,413 |   |          |   | 2,277,122     |  |                | 5,144,535  |  |       |        
|Income (loss) from operations |  |                   | 1,281,190 |   |          |   | 425,941       |  |                | 1,707,131  |  |       | (755,984
|EBITDA(1)                     |  |                   | 1,450,919 |   |          |   | 693,772       |  |                | 2,144,691  |  |       | (737,186
|Depreciation expense          |  |                   | 109,197   |   |          |   | 267,831       |  |                | 377,028    |  |       | 18,798  
|Amortization expense          |  |                   | 60,532    |   |          |   |              |  |                | 60,532     |  |       |        



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ACCESS WORLDWIDE COMMUNICATIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



15. SEGMENTS (Continued)



For the six months ended June 30,



|                              |  | Pharmaceutical(2) |            |   | Consumer |   | Segment Total |  | Reconciliation |            |  | Total |           
|----------------------------- |  | ----------------- | ---------- | - | -------- | - | ------------- |  | -------------- | ---------- |  | ----- | ----------
|2003                          |  |                   |            |   |          |   |               |  |                |            |  |       |           
|Revenues                      |  | $                 | 12,153,705 |   |          | $ | 14,045,576    |  | $              | 26,199,281 |  | $     |          
|Gross profit                  |  |                   | 3,408,720  |   |          |   | 5,106,136     |  |                | 8,514,856  |  |       |          
|(Loss) income from operations |  |                   | (663,757   | ) |          |   | 1,105,814     |  |                | 442,057    |  |       | (1,617,646
|EBITDA(1)                     |  |                   | (395,954   | ) |          |   | 1,615,117     |  |                | 1,219,163  |  |       | (1,558,163
|Depreciation expense          |  |                   | 193,795    |   |          |   | 509,303       |  |                | 703,098    |  |       | 59,483    
|Amortization expense          |  |                   | 74,008     |   |          |   |              |  |                | 74,008     |  |       |          
|                              |  |                   |            |   |         
|2002                          |  |                   |            |   |          |   |               |  |                |            |  |       |           
|Revenues                      |  | $                 | 13,931,490 |   |          | $ | 10,332,586    |  | $              | 24,264,076 |  | $     |          
|Gross profit                  |  |                   | 4,222,405  |   |          |   | 4,416,108     |  |                | 8,638,513  |  |       |          
|Income (loss) from operations |  |                   | 872,897    |   |          |   | 666,848       |  |                | 1,539,745  |  |       | (1,589,800
|EBITDA(1)                     |  |                   | 1,211,719  |   |          |   | 1,202,546     |  |                | 2,414,265  |  |       | (1,553,495
|Depreciation expense          |  |                   | 217,754    |   |          |   | 535,698       |  |                | 753,452    |  |       | 36,305    
|Amortization expense          |  |                   | 121,068    |   |          |   |              |  |                | 121,068    |  |       |          



|(1) |  | EBITDA is calculated by taking (loss) income from operations and adding depreciation and amortization expense. EBITDA is a non-GAAP measure of profitability and operating efficiency
widely used by investors to evaluate and compare operating performance among different companies excluding the impact of certain non-cash charges (depreciation and amortization). We believe that EBITDA provides investors with valuable measures to
compare our operating performance with the operating performance of other companies. EBITDA for the three and six months ended June 30, 2003 and 2002 can be reconciled to the most comparable GAAP measure, income (loss) from operations, as shown
above.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | (Loss) income from operations and EBITDA for the Pharmaceutical Segment include a $299,555 gain on extinguishment of indebtedness-related party for the three and six months ended
June 30, 2003.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



The following discussion of the financial condition and results of operations of the Company should be read in conjunction with our Annual Report on Form
10-K for the year ended December 31, 2002.



Three Months Ended June 30, 2003
Compared to Three Months Ended June 30, 2002



Our revenues
decreased $0.9 million, or 6.0%, to $14.0 million for the three months ended June 30, 2003, compared to $14.9 million for the three months ended June 30, 2002. Revenues for the Pharmaceutical Segment decreased $2.9 million, or 31.2%, to $6.4 million
for the three months ended June 30, 2003, compared to $9.3 million for the three months ended June 30, 2002. The decrease was primarily due to the loss of an annually scheduled medical education meeting with one of our major clients and a decrease
in the overall number of medical education meetings awarded and performed. Revenues for the Consumer Segment increased $2.0 million, or 35.7% to $7.6 million for the three months ended June 30, 2003, compared to $5.6 million for the three months
ended June 30, 2002. The increase was primarily due to an increase in new programs and an overall increase in billable hours performed on existing programs.



Our cost of revenues decreased $0.4 million, or 4.1%, to $9.4 million for the three months ended June 30, 2003, compared to $9.8 million for the three
months ended June 30, 2002. Cost of revenues as a percentage of revenues increased to 67.1% for the three months ended June 30, 2003, from 65.8% for the three months ended June 30, 2002. Cost of revenues as a percentage of revenues for the
Pharmaceutical Segment for the three months ended June 30, 2003 increased to 71.9%, compared to 68.8% for the three months ended June 30, 2002. The increase was primarily due to the decrease in revenues and a decrease in medical education meetings,
which included higher direct costs incurred due to client specifications. Cost of revenues as a percentage of revenues for the Consumer Segment increased to 63.2% for the three months ended June 30, 2003, from 58.9% for the three months ended June
30, 2002. The increase was attributed to costs incurred to train new employees for two weeks instead of one week as required by certain clients and an increase in telecommunications costs for new and expanded programs.



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##### Table of Contents

Our selling, general and administrative expenses increased by $1.4 million, or 34.1%, to $5.5 million for
the three months ended June 30, 2003, compared to $4.1 million for the three months ended June 30, 2002. Selling, general and administrative expenses as a percentage of revenues for the Company increased to 39.3% for the three months ended June 30,
2003, compared to 27.5% for the three months ended June 30, 2002. Selling, general and administrative expenses as a percentage of revenues for the Pharmaceutical Segment increased to 37.5% for the three months ended June 30, 2003, from 16.1% for the
three months ended June 30, 2002. The increase was primarily due to bad debt expenses relating to a pharmaceutical client, a decrease in revenues and an increase in payroll expenses due to additional management hires. Selling, general and
administrative expenses as a percentage of revenues for the Consumer Segment decreased to 27.6% for the three months ended June 30, 2003, compared to 33.9% for the three months ended June 30, 2002. The decrease was due to an increase in revenues
while continuing to manage costs.



Our 6.5% subordinated
promissory note with a former stockholder of AM Medica Communications Group was settled for $0.7 million, which resulted in a gain of approximately $0.3 million during the three months ended June 30, 2003.



Our net interest expense increased $0.1 million, or 50.0%, to $0.3 million
for the three months ended June 30, 2003, compared to $0.2 million for the three months ended June 30, 2002. The increase was primarily due to higher deferred financing costs associated with the Debt Agreement which are being amortized over 6 and 36
month periods, offset by a decrease in interest expense, as amortized, on a subordinated promissory note with a former stockholder of AM Medica Communications Group, which was settled for $0.7 million and resulted in a gain of $0.3 million during
the three months ended June 30, 2003.



Six Months Ended June 30, 2003
Compared to Six Months Ended June 30, 2002



Our revenues
increased $1.9 million, or 7.8%, to $26.2 million for the six months ended June 30, 2003, compared to $24.3 million for the six months ended June 30, 2002. Revenues for the Pharmaceutical Segment decreased $1.7 million, or 12.2%, to $12.2 million
for the six months ended June 30, 2003, compared to $13.9 million for the six months ended June 30, 2002. The decrease was primarily due to the loss of an annually scheduled medical education meeting with one of our major clients and a decrease in
the overall number of medical education meetings awarded and performed. Revenues for the Consumer Segment increased by $3.7 million or 35.9% to $14.0 million for the six months ended June 30, 2003, compared to $10.3 million for the six months ended
June 30, 2002. The increase was primarily due to an increase in new programs and an overall increase in billable hours performed on existing programs.



Our cost of revenues increased $2.1 million, or 13.5%, to $17.7 million for the six months ended June 30, 2003, compared to $15.6 million for the six
months ended June 30, 2002. Cost of revenues as a percentage of revenues increased to 67.6% for the six months ended June 30, 2003, from 64.2% for the six months ended June 30, 2002. Cost of revenues as a percentage of revenues for the
Pharmaceutical Segment for the six months ended June 30, 2003 increased to 71.3%, compared to 69.8% for the six months ended June 30, 2002. The increase was primarily due to a decrease in revenues, a decrease in medical education meetings, which
included higher direct cost incurred due to client specifications and an increase in headcount of teleservice representatives to meet clients existing and new programs. Cost of revenues as a percentage of revenues for the Consumer Segment
increased to 63.6% for the six months ended June 30, 2003, from 57.3% for the six months ended June 30, 2002. The increase was attributed to an increase in costs incurred to train new employees for two weeks instead of one week as required by
certain clients and an increase in telecommunication costs for new and expanded programs.



Our selling, general and administrative expenses increased by $1.3 million, or 15.1%, to $9.9 million for the six months ended June 30, 2003, compared to $8.6 million for the six months ended June 30, 2002. Selling,
general and administrative expenses as a percentage of revenues for the Company increased to 37.8% for the six months ended June 30, 2003, compared to 35.4% for the six months ended June 30, 2002. Selling, general and administrative expenses as a
percentage of revenues for the Pharmaceutical Segment increased to 35.2% for the six months ended June 30, 2003, from 23.0% for the six months ended June 30, 2002. The increase was primarily attributed to bad debt expenses relating to a
pharmaceutical client, a decrease in revenues and an increase in payroll costs due to additional management hires. Selling, general and administrative expenses as a percentage of revenues for the Consumer Segment decreased to 28.6% for the six
months ended June 30, 2003, compared to 35.9% for the six months ended June 30, 2002. The decrease was due to an increase in revenues while continuing to manage costs levels.



Our 6.5% subordinated promissory note with a former stockholder of AM Medica Communications Group was settled for $0.7
million, which resulted in a gain of approximately $0.3 million during the six months ended June 30, 2003.



Our net interest expense increased $0.2 million, or 100.0%, to $0.4 million for the six months ended June 30, 2003, compared to $0.2 million for the six
months ended June 30, 2002. The increase was due to interest income from Phoenix Marketing Group (Phoenix) and Cultural Access Group (CAG) intercompany loans for which the corresponding interest expense has been classified as
discontinued operations in 2002, higher deferred financing costs associated with the Debt Agreement which are being amortized over 6 and 36 month periods, offset by a decrease in interest expense, as amortized, on a subordinated promissory note with
a former stockholder of AM Medica Communications Group, which was settled for $0.7 million and resulted in a gain of $0.3 million.



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##### Table of Contents

Liquidity and Capital Resources



At June 30, 2003, we had negative working capital of $3.0 million, as compared to negative working capital of $3.1 million
at December 31, 2002. Cash and cash equivalents were $0.6 million at June 30, 2003, compared to $2.2 million at December 31, 2002.



Net cash provided by operating activities during the first six months of 2003 was $1.3 million, compared to $2.5 million net cash used in operating
activities during the first six months of 2002. The increase in net cash provided by operating activities was primarily due to an increase in deferred revenues and a decrease in accounts receivable and other assets.



Net cash used in investing activities was $1.2 million for the first six
months of 2003, compared to net cash provided by investing activities of $31.0 million for the first six months of 2002. The decrease in net cash provided by investing activities was primarily due to the proceeds received from the sale of our
Phoenix and CAG divisions in 2002, a reduction in capital expenditures and an increase in restricted cash in 2003.



Net cash used in financing activities was $1.7 million for the first six months of 2003, compared to net cash used in financing activities of $30.3
million for the first six months of 2002. The decrease in net cash used in financing activities was primarily due to the net payments under our Credit Facility made in 2002 from proceeds received from the sale of Phoenix and CAG, refinancing of our
Credit Facility, cash received for the future issuance of our 5% Convertible Promissory Notes (the Convertible Notes) and repayments of our related party debt in 2003.



At December 31, 2002, we were in compliance with all the financial covenants of the Credit Facility. On April 1, 2003, we
notified the Bank Group of our inability to make a mandatory payment required to reduce our outstanding debt under the Credit Facility to the $5.7 million limit, which became effective April 1, 2003 and, therefore, resulted in an event of default
pursuant to the Credit Facility. On April 3, 2003, we received a letter from the Bank Group which allowed us to continue to use cash proceeds generated in the ordinary course of business to fund working capital and operations and changed the
interest rate to a default rate of prime plus 5% on the outstanding balance of the Credit Facility.



On April 29, 2003, the Company entered into the Seventh Amendment and Waiver Agreement (the Amendment) to the Credit Facility. The Amendment
allowed the Company to continue to use cash proceeds generated in the ordinary course of business to fund working capital and operations. In addition, the Amendment increased the effective rate of interest to Bank of Americas prime rate of
interest plus 5% and limited the revolving commitment line to $6.1 million through May 14, 2003 with periodic reductions thereafter. The outstanding balance on the Credit Facility was due on July 1, 2003.



On June 10, 2003, we entered into a new revolving credit, term loan and
security agreement (Debt Agreement) with CapitalSource Finance, LLC (CapitalSource), a commercial finance firm with expertise in the pharmaceutical industry through their healthcare finance lending unit. The Debt Agreement
provides up to $10 million under a revolving line of credit (the Revolver); up to $0.5 million under a Term Loan (the Term Loan) and requires us to have initial subscriptions of at least $1.5 million of our Convertible Notes
on June 10, 2003 and at least $2.0 million in Convertible Notes on or before July 15, 2003 (see Note 12). The Revolver has a three year term and bears interest at the prime rate plus 2.75%. The availability on the Revolver is based on a percentage
of our accounts receivable, unbilled receivable and billings in excess of cost, as defined. The Term Loan bears interest at the prime rate plus 5.75% with monthly payments of $83,333 commencing on July 1, 2003 through maturity on December 31, 2003.
The Term Loan is collateralized by the personal assets of Mr. Shawkat Raslan, Chief Executive Officer of the Company.



The availability under the Debt Agreement allowed us to restructure our debt by repaying the Credit Facility with the Bank Group, settling our 6.5%
subordinated promissory note with a former stockholder of AM Medica Communications Group for $0.7 million , which resulted in a gain of approximately $0.3 million and making a $50,000 payment on our 6% subordinated promissory note (the
Subordinated Note) with a former stockholder of TMS Professional Markets Group. The Subordinated Note was amended to be subordinated to the Debt Agreement with regularly scheduled monthly payments of principal and interest not to exceed
the lesser of 25% of Excess Cash Flow (as defined in the Debt Agreement) for the prior month or $63,000 per month.



In accordance with our Debt Agreement, we offered unregistered Convertible Notes to accredited investors, including Company officers and directors. The
proceeds of the Convertible Notes were used to fund working capital. The Convertible Notes have a 39 month term, bear interest at a rate of 5% and are convertible after one year to common stock at $1 per share. The Convertible Notes have detachable
warrants in the amount of 50% of the value of the Convertible Notes with an exercise price of $0.01 per share. Interest is paid quarterly, provided we are in compliance with the covenants of our Debt Agreement. As of June 30, 2003, we have
commitments of approximately $2.0 million and have collected subscriptions of $1.8 million under the Convertible Notes. As of the effective date of the Convertible Notes, July 15, 2003, we closed on $2.1 million, of which $950,000 represents
investments by Board members and executive management (see Notes 12 and 14).



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In addition, a letter of credit previously issued to the landlord of our Maryland communication center by
the Bank Group was canceled in June 2003. A new letter of credit was issued to the landlord in June 2003 and is collateralized by a certificate of deposit in the amount of $834,000 (see Note 4).



In accordance with Emerging Issues Task Force (EITF) No. 95-22,
Accounting for Agreements that Include Both a Subjective Acceleration Clauses and a Lock-box Arrangement, which states that agreements with both subjective acceleration clauses and a lock-box agreement should be classified as a current
liability due to the financial institutions ability to accelerate the due date of the debt based on certain events outside of our control, we have classified the entire amount outstanding on the Debt Agreement as current portion of
indebtedness in the accompanying balance sheet at June 30, 2003. Management believes that it has chosen a financial institution that understands our business and is committed to being a business partner thereby reducing the risk that the
acceleration clause combined with a lock-box arrangement would impact or shorten the three year term of the Revolver.



As a result of our lawsuit against MTI Information Technologies, LLC (MTI), we recorded bad debt expense of approximately $0.6 million during
the three months ended June 30, 2003, which placed us in default of the covenants contained in our Debt Agreement. Therefore, we notified CapitalSource about the potential default of covenants on July 29, 2003, and we entered into the First
Amendment (the First Amendment) to the Debt Agreement, on August 11, 2003, which modified the financial covenants to allow for such event.



The auditors report on our financial statements included with the Annual Report on Form 10-K includes an explanatory paragraph indicating that there
is substantial doubt regarding our ability to continue as a going concern. As discussed above, in June 2003, we closed on a new Debt Agreement and simultaneously paid off our Credit Facility. We believe that the new debt structure provides us with
the liquidity and capital resources needed to grow the existing business and increase shareholder value. We believe that we will be able to meet the amended financial covenants and that our cash and cash equivalents, as well as cash provided by
operations and the availability from the Debt Agreement and the Convertible Notes will be sufficient to fund our current operations for the next twelve months.



Risk Factors That May Affect Future Results



This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities and Exchange Act of 1934, as amended. Those statements represent our current expectations, beliefs, future plans and strategies, anticipated events or trends concerning matters that are not historical facts. Such forward-looking
statements include, among others:



| |  |  | Statements regarding proposed activities pursuant to agreements with clients;
| | - |  | -----------------------------------------------------------------------------



| |  |  | Future plans relating to our business strategy; and,
| | - |  | ----------------------------------------------------



| |  |  | Trends, or proposals, or activities of clients or industries which we serve.
| | - |  | ----------------------------------------------------------------------------



Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from those
expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited, to the following:



| |  |  | The ability to continue as a going concern if the Company is unable to generate additional cash flow and income from continuing operations;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The ability to maintain sufficient liquidity in 2003 to fund operations;
| | - |  | ------------------------------------------------------------------------



| |  |  | The ability to continue to comply with the financial covenants contained under the Debt Agreement;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | Competition from other third-party providers and those clients and prospects who may decide to do the work that Access Worldwide does in-house;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Consolidation in the pharmaceutical, medical, telecommunications and consumer products industries which reduces the number of clients that are able to be served;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Potential consumer saturation reducing the need for our services;
| | - |  | -----------------------------------------------------------------



| |  |  | The Companys ability and clients ability to comply with state, federal and industry regulations;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | Reliance on a limited number of major clients and the possible loss of one or more clients;
| | - |  | -------------------------------------------------------------------------------------------



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| |  |  | The ability to develop or fund the operations of new products or service offerings;
| | - |  | -----------------------------------------------------------------------------------

| |  |  | Reliance on technology;
| | - |  | -----------------------



| |  |  | Reliance on key personnel and labor force;
| | - |  | ------------------------------------------



| |  |  | The possible prolonged impact of the general downturn in the U.S. economy;
| | - |  | --------------------------------------------------------------------------



| |  |  | The volatility of the stock price; and
| | - |  | --------------------------------------



| |  |  | The unpredictability of the outcome of litigation in which the Company is involved.
| | - |  | -----------------------------------------------------------------------------------



The Company assumes no duty to update any forward-looking statements. For a more detailed discussion of these risks and
others that could affect the Companys results, see the Companys filings with the Securities and Exchange Commission, including the risk factors section of Access Worldwides Annual Report on Form 10-K for the year ended December 31,
2002 filed with the Securities and Exchange Commission.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We are exposed to market risks from changes in interest rates and are subject to interest rate risks on our Debt Agreement caused by changes in interest
rates. Our ability to limit our exposure to market risk and interest rate risk is restricted as a result of our current cash management arrangement under the Debt Agreement. Accordingly, we are unable to enter into any derivative or similar
transactions that could limit our exposure to market risk and interest rate risks. Our Debt Agreement currently provides interest rates ranging from prime plus 2.75% to prime plus 5.75%. The prime rate is the prime rate published by the Wall Street
Journal. A one percent increase in the prime interest rate would result in a pre-tax impact on earnings of approximately $0.04 million per year.



ITEM 4. CONTROLS AND PROCEDURES



(a) Disclosure Controls and Procedures



We
carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the
period covered by this Quarterly Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly
Report in accumulating and communicating to our management, including them, material information required to be included in the reports we file or submit under the Securities Exchange Act of 1934 as appropriate to allow timely decisions regarding
required disclosure.



(b) Changes in Internal Control over
Financial Reporting



Based on an evaluation, under the
supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, there has been no change in our internal control over financial reporting during our last fiscal quarter, identified in
connection with that evaluation, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.





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PART IIOTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



We are
involved in legal actions arising in the ordinary course of our business. We believe that the ultimate resolution of these matters will not have a material adverse effect on our financial position, results of operation or cash flow except as
described below.



On May 29, 2001, Douglas Rebak and Joseph
Macaluso filed suit against the Company in Federal District Court for the district of New Jersey. The lawsuit seeks enforcement of an alleged amendment to an earn-out agreement between the Company and Messrs. Rebak and Macaluso relating to our
acquisition of Phoenix in 1997. Messrs. Rebak and Macaluso were two primary shareholders of Phoenix prior to the acquisition and became officers of the Company after Phoenix became a subsidiary of Access Worldwide. The suit alleges that we agreed to
amend the earn-out agreement. The lawsuit seeks actual damages of $0.9 million plus additional unspecified punitive damages. On August 5, 2003, the Court granted the Companys Motion for Summary Judgment and dismissed all claims.



On July 18, 2003, we filed a suit against MTI Information Technologies, LLC
(MTI) in Broward County, Florida. The lawsuit seeks enforcement of our pharmaceutical telemarketing service contract (the Contract) with MTI for services rendered. We performed pharmaceutical telemarketing services for MTI
from November 2001 to April 2003, when services were terminated after payments due from MTI became severely delinquent. The lawsuit alleges that MTI breached its Contract with the Company by not paying for services rendered. The lawsuit seeks
payment for work performed of approximately $0.6 million .



On
July 21, 2003, MTI filed a suit against the Company in Bucks County, Pennsylvania, for breach of contract and tortuous interference for the Companys failure to complete telemarketing campaigns. Management asserts that these claims are not
valid and intends to vigorously defend any action related to this claim and take all necessary steps to collect amounts due on account. While we believe MTIs claims have no legal basis, we cannot provide assurance as to the outcome of the
litigation.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



On July 8, 2003, the Company held its 2003 Annual Meeting of Stockholders. At the Annual Meeting, the following six individuals,
constituting the full Board of Directors of the Company, were nominated and elected to serve as the Directors of the Company:



|                   |  |                    
|------------------ |  | -------------------
|Liam S. Donohue    |  | For:               
|                   |  | Withhold Authority:
|Lee H. Edelstein   |  | For:               
|                   |  | Withhold Authority:
|Shawkat Raslan     |  | For:               
|                   |  | Withhold Authority:
|Orhan Sadik-Khan   |  | For:               
|                   |  | Withhold Authority:
|Carl Tiedemann     |  | For:               
|                   |  | Withhold Authority:
|Charles Henri Weil |  | For:               
|                   |  | Withhold Authority:



No other matters were
submitted to a vote of stockholders.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Exhibits
| | --- |  | --------



|10(aaa) |  | First Amendment to the Revolving Credit, Term Loan and Security Agreement with CapitalSource Finance, LLC dated August 11,
2003.
|------- |  | --------------------------------------------------------------------------------------------------------------------------------
|        | 
|31.1    |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer                                                               
|        | 
|31.2    |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                                                               
|        | 
|32.1    |  | Section 1350 Certification of Chief Executive Officer                                                                           
|        | 
|32.2    |  | Section 1350 Certification of Chief Financial Officer                                                                           



| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------



Current Report on Form 8-K dated June 12, 2003, setting forth the press release containing information relating to the signing of a multi-year debt
agreement with CapitalSource Finance, LLC, a commercial finance firm.



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SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                      | 
|--------------------- | 
|                      | 
|                      | 
|Date: August 14, 2003 | 
|                      | 
|                      | 
|                      | 
|Date: August 14, 2003 | 
|                      | 
|                      | 



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