##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-Q



---



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



For the quarterly period ending September 30, 2004



OR



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



For the transition period from  to



Commission file number 0-23489



---



Access Worldwide Communications, Inc.

(Exact Name of Registrant as Specified in its Charter)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 52-1309227                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



|                                                         |  |           
|-------------------------------------------------------- |  | ----------
|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



---



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, $0.01 par value, as November 15, 2004 was 9,921,219.



---



---

##### Table of Contents

ACCESS WORLDWIDE COMMUNICATIONS, INC.



INDEX



|                                                                                                                          |  |     
|------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                          |  | Page
|Part I
Financial Information                                                                                             |  |     
|                                                                                                                          | 
|Item 1.
Financial Statements                                                                                              |  |     
|                                                                                                                          | 
|Consolidated Balance Sheets  September 30, 2004 (unaudited) and December 31, 2003                                        |  | 1   
|Consolidated Statements of Operations (unaudited)  Three and Nine Months Ended September 30, 2004 and September 30, 2003 |  | 2   
|Consolidated Statement of Changes in Common Stockholders Deficit (unaudited)  Nine Months Ended September 30, 2004      |  | 3   
|Consolidated Statements of Cash Flows (unaudited)  Nine Months Ended September 30, 2004 and September 30, 2003           |  | 4   
|Notes to Consolidated Financial Statements                                                                                |  | 5-8 
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations                             |  | 8-12
|Item 3.
Quantitative and Qualitative Disclosures About Market Risk                                                        |  | 12  
|Item 4.
Controls and Procedures                                                                                           |  | 12  
|                                                                                                                          | 
|Part II
Other Information                                                                                                |  |     
|                                                                                                                          | 
|Item 1.
Legal Proceedings                                                                                                 |  | 12  
|Item 6.
Exhibits                                                                                                          |  | 13  
|Signatures                                                                                                                |  | 14  
|Certifications                                                                                                            |  |     



---

##### Table of Contents

PART IFINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



ACCESS WORLDWIDE COMMUNICATIONS, INC.



CONSOLIDATED BALANCE SHEETS



|                                                                                                                                         |  |                                |             |   |                   |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                                         |  | September 30, 2004 (Unaudited) |             |   | December 31, 2003 |  
|ASSETS                                                                                                                                   |  |                                |             |   |                   |   |             |  
|Current assets:                                                                                                                          |  |                                |             |   |                   |   |             |  
|Cash and cash equivalents                                                                                                                |  | $                              | 957,370     |   |                   | $ | 472,722     |  
|Restricted cash                                                                                                                          |  |                                | 122,000     |   |                   |   | 123,000     |  
|Accounts receivable, net of allowance for doubtful accounts of $734,435 and $707,372, respectively                                       |  |                                | 7,471,699   |   |                   |   | 11,069,284  |  
|Unbilled receivables                                                                                                                     |  |                                | 866,317     |   |                   |   | 1,176,797   |  
|Taxes receivable                                                                                                                         |  |                                | 28,979      |   |                   |   | 658,666     |  
|Other assets, net                                                                                                                        |  |                                | 1,129,597   |   |                   |   | 950,761     |  
|                                                                                                                                         |  |                                |             |   |                   |   |             |  
|Total current assets                                                                                                                     |  |                                | 10,575,962  |   |                   |   | 14,451,230  |  
|Property and equipment, net                                                                                                              |  |                                | 3,754,365   |   |                   |   | 3,881,954   |  
|Restricted cash                                                                                                                          |  |                                | 589,000     |   |                   |   | 711,000     |  
|Other assets, net                                                                                                                        |  |                                | 146,177     |   |                   |   | 434,769     |  
|                                                                                                                                         |  |                                |             |   |                   |   |             |  
|Total assets                                                                                                                             |  | $                              | 15,065,504  |   |                   | $ | 19,478,953  |  
|                                                                                                                                         |  |                                |             |   |                   |   |             |  
|LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND COMMON STOCKHOLDERS DEFICIT                                                     |  |                                |             |   |                   |   |             |  
|Current liabilities:                                                                                                                     |  |                                |             |   |                   |   |             |  
|Current portion of indebtedness                                                                                                          |  | $                              | 2,398,130   |   |                   | $ | 5,098,999   |  
|Current portion of indebtedness  related parties                                                                                        |  |                                | 352,334     |   |                   |   | 383,334     |  
|Accounts payable and accrued expenses                                                                                                    |  |                                | 4,673,498   |   |                   |   | 5,661,514   |  
|Grants payable                                                                                                                           |  |                                | 1,750,000   |   |                   |   | 2,011,250   |  
|Accrued salaries, wages and related benefits                                                                                             |  |                                | 1,332,857   |   |                   |   | 1,347,385   |  
|Deferred revenue                                                                                                                         |  |                                | 2,724,799   |   |                   |   | 2,852,628   |  
|Accrued interest and other related party expenses                                                                                        |  |                                | 12,577      |   |                   |   | 13,304      |  
|                                                                                                                                         |  |                                |             |   |                   |   |             |  
|Total current liabilities                                                                                                                |  |                                | 13,244,195  |   |                   |   | 17,368,414  |  
|Long-term portion of indebtedness                                                                                                        |  |                                | 165,386     |   |                   |   | 97,768      |  
|Other long-term liabilities                                                                                                              |  |                                | 812,959     |   |                   |   | 775,109     |  
|Convertible Notes, net                                                                                                                   |  |                                | 1,271,207   |   |                   |   | 987,336     |  
|Mandatorily redeemable preferred stock, $0.01 par value: 2,000,000 shares authorized, 40,000 shares issued and outstanding (Series
1998) |  |                                | 4,000,000   |   |                   |   | 4,000,000   |  
|                                                                                                                                         |  |                                |             |   |                   |   |             |  
|Total liabilities and mandatorily redeemable preferred stock                                                                             |  |                                | 19,493,747  |   |                   |   | 23,228,627  |  
|                                                                                                                                         |  |                                |             |   |                   |   |             |  
|Commitments and contingencies                                                                                                            |  |                                |             |   |                   |   |             |  
|Common stockholders deficit:                                                                                                            |  |                                |             |   |                   |   |             |  
|Common stock, $0.01 par value: voting: 20,000,000 shares authorized; 9,921,219 and 9,740,501 shares issued and outstanding,
respectively |  |                                | 99,212      |   |                   |   | 97,405      |  
|Additional paid-in capital                                                                                                               |  |                                | 65,050,836  |   |                   |   | 64,950,294  |  
|Accumulated deficit                                                                                                                      |  |                                | (69,556,841 | ) |                   |   | (68,770,973 | )
|Deferred compensation                                                                                                                    |  |                                | (21,450     | ) |                   |   | (26,400     | )
|                                                                                                                                         |  |                                |             |   |                   |   |             |  
|Total common stockholders deficit                                                                                                       |  |                                | (4,428,243  | ) |                   |   | (3,749,674  | )
|                                                                                                                                         |  |                                |             |   |                   |   |             |  
|Total liabilities, mandatorily redeemable preferred stock and common stockholders deficit                                               |  | $                              | 15,065,504  |   |                   | $ | 19,478,953  |  
|                                                                                                                                         |  |                                |             |   |                   |   |             |  



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



---

##### Table of Contents

ACCESS WORLDWIDE COMMUNICATIONS, INC.



CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



|                                                       |  |                                  |           |   |                                 |   |            |      |  |   |            |   |  |   |             |  
|------------------------------------------------------ |  | -------------------------------- | --------- | - | ------------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ----------- | -
|                                                       |  | Three Months Ended September 30, |           |   | Nine Months Ended September 30, |  
|                                                       |  | 2004                             |           |   | 2003                            |   |            | 2004 |  |   | 2003       |  
|Revenues                                               |  | $                                | 9,871,862 |   |                                 | $ | 10,770,036 |      |  | $ | 36,813,074 |   |  | $ | 36,969,317  |  
|Cost of revenues                                       |  |                                  | 5,702,865 |   |                                 |   | 6,781,065  |      |  |   | 21,160,096 |   |  |   | 24,423,376  |  
|                                                       |  |                                  |           |   |                                 |   |            |      |  |   |            |   |  |   |             |  
|Gross profit                                           |  |                                  | 4,168,997 |   |                                 |   | 3,988,971  |      |  |   | 15,652,978 |   |  |   | 12,545,941  |  
|Selling, general and administrative expenses           |  |                                  | 4,778,623 |   |                                 |   | 4,438,705  |      |  |   | 15,432,271 |   |  |   | 14,396,811  |  
|Impairment of intangible assets                        |  |                                  |          |   |                                 |   | 8,951,856  |      |  |   |           |   |  |   | 8,951,856   |  
|Gain on extinguishment of indebtedness  related party |  |                                  |          |   |                                 |   |           |      |  |   |           |   |  |   | (299,555    | )
|Amortization expense                                   |  |                                  |          |   |                                 |   | 37,036     |      |  |   |           |   |  |   | 111,044     |  
|                                                       |  |                                  |           |   |                                 |   |            |      |  |   |            |   |  |   |             |  
|(Loss) income from operations                          |  |                                  | (609,626  | ) |                                 |   | (9,438,626 | )    |  |   | 220,707    |   |  |   | (10,614,215 | )
|Interest income                                        |  |                                  | 5,760     |   |                                 |   | 3,141      |      |  |   | 12,526     |   |  |   | 12,180      |  
|Interest expenserelated parties                       |  |                                  | (12,750   | ) |                                 |   | (31,459    | )    |  |   | (56,666    | ) |  |   | (99,637     | )
|Interest expense                                       |  |                                  | (323,302  | ) |                                 |   | (344,858   | )    |  |   | (962,435   | ) |  |   | (695,147    | )
|                                                       |  |                                  |           |   |                                 |   |            |      |  |   |            |   |  |   |             |  
|Loss before income tax benefit                         |  |                                  | (939,918  | ) |                                 |   | (9,811,802 | )    |  |   | (785,868   | ) |  |   | (11,396,819 | )
|Income tax benefit                                     |  |                                  |          |   |                                 |   | 546,204    |      |  |   |           |   |  |   | 546,204     |  
|                                                       |  |                                  |           |   |                                 |   |            |      |  |   |            |   |  |   |             |  
|Net loss                                               |  | $                                | (939,918  | ) |                                 | $ | (9,265,598 | )    |  | $ | (785,868   | ) |  | $ | (10,850,615 | )
|                                                       |  |                                  |           |   |                                 |   |            |      |  |   |            |   |  |   |             |  
|Basic loss per share of common stock:                  |  |                                  |           |   |                                 |   |            |      |  |   |            |   |  |   |             |  
|Net loss                                               |  | $                                | (0.09     | ) |                                 | $ | (0.95      | )    |  | $ | (0.08      | ) |  | $ | (1.11       | )
|Weighted average common shares outstanding             |  |                                  | 9,906,886 |   |                                 |   | 9,740,501  |      |  |   | 9,828,900  |   |  |   | 9,740,390   |  
|Diluted loss per share of common stock:                |  |                                  |           |   |                                 |   |            |      |  |   |            |   |  |   |             |  
|Net loss                                               |  | $                                | (0.09     | ) |                                 | $ | (0.95      | )    |  | $ | (0.08      | ) |  | $ | (1.11       | )
|Weighted average common shares outstanding             |  |                                  | 9,906,886 |   |                                 |   | 9,740,501  |      |  |   | 9,828,900  |   |  |   | 9,740,390   |  



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



2



---

##### Table of Contents

ACCESS WORLDWIDE COMMUNICATIONS, INC.



CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS DEFICIT

(UNAUDITED)



FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004



|                                                 |  |              |  |                            |        |                     |   |            |                       |   |             |       |  |   |         |   |  |   |            |  
|------------------------------------------------ |  | ------------ |  | -------------------------- | ------ | ------------------- | - | ---------- | --------------------- | - | ----------- | ----- |  | - | ------- | - |  | - | ---------- | -
|                                                 |  | Common Stock |  | Additional Paid-in Capital |        | Accumulated Deficit |   |            | Deferred Compensation |   |             | Total | 
|                                                 |  | Shares       |  | Amount                     |        |                     |   |           
|Balance, December 31, 2003                       |  | 9,740,501    |  | $                          | 97,405 |                     | $ | 64,950,294 |                       | $ | (68,770,973 | )     |  | $ | (26,400 | ) |  | $ | (3,749,674 | )
|Amortization of deferred compensation            |  |             |  |                            |       |                     |   |           |                       |   |            |       |  |   | 4,950   |   |  |   | 4,950      |  
|Common stock issued to pay accrued bonuses       |  | 143,216      |  |                            | 1,432  |                     |   | 85,930     |                       |   |            |       |  |   |        |   |  |   | 87,362     |  
|Common stock options exercised                   |  | 37,502       |  |                            | 375    |                     |   | 14,612     |                       |   |            |       |  |   |        |   |  |   | 14,987     |  
|Net loss for the period ended September 30, 2004 |  |             |  |                            |       |                     |   |           |                       |   | (785,868    | )     |  |   |        |   |  |   | (785,868   | )
|                                                 |  |              |  |                            |        |                     |   |            |                       |   |             |       |  |   |         |   |  |   |            |  
|Balance, September 30, 2004                      |  | 9,921,219    |  | $                          | 99,212 |                     | $ | 65,050,836 |                       | $ | (69,556,841 | )     |  | $ | (21,450 | ) |  | $ | (4,428,243 | )
|                                                 |  |              |  |                            |        |                     |   |            |                       |   |             |       |  |   |         |   |  |   |            |  



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



3



---

##### Table of Contents

ACCESS WORLDWIDE COMMUNICATIONS, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



FOR THE NINE MONTHS ENDED SEPTEMBER 30,



|                                                                                |  |      |            |   |      |   |             |  
|------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ----------- | -
|                                                                                |  | 2004 |            |   | 2003 |  
|Cash flows from operating activities:                                           |  |      |            |   |      |   |             |  
|Net loss                                                                        |  | $    | (785,868   | ) |      | $ | (10,850,615 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |      |            |   |      |   |             |  
|Depreciation and amortization                                                   |  |      | 1,131,103  |   |      |   | 1,245,092   |  
|Impairment of intangible assets                                                 |  |      |           |   |      |   | 8,951,856   |  
|Gain on extinguishment of indebtedness  related party                          |  |      |           |   |      |   | (299,555    | )
|Amortization of financing costs                                                 |  |      | 132,957    |   |      |   | 246,745     |  
|Amortization of unearned stock compensation                                     |  |      | 4,950      |   |      |   | 4,950       |  
|Allowance for doubtful accounts                                                 |  |      | 27,063     |   |      |   | 531,459     |  
|Accretion of discount on Convertible Notes                                      |  |      | 283,871    |   |      |   | 41,140      |  
|Changes in operating assets and liabilities:                                    |  |      |            |   |      |   |             |  
|Accounts receivable                                                             |  |      | 3,570,522  |   |      |   | 217,752     |  
|Unbilled receivables                                                            |  |      | 310,480    |   |      |   | 945,650     |  
|Taxes receivable                                                                |  |      | 629,687    |   |      |   | (738,420    | )
|Other assets                                                                    |  |      | (23,201    | ) |      |   | (793,558    | )
|Accounts payable and accrued expenses                                           |  |      | (950,166   | ) |      |   | (896,755    | )
|Grants payable                                                                  |  |      | (261,250   | ) |      |   | 191,250     |  
|Accrued salaries, wages and related benefits                                    |  |      | 72,834     |   |      |   | (878,410    | )
|Accrued interest and other related party expenses                               |  |      | (727       | ) |      |   | 385,876     |  
|Deferred revenue                                                                |  |      | (127,829   | ) |      |   | 2,574,466   |  
|                                                                                |  |      |            |   |      |   |             |  
|Net cash provided by operating activities                                       |  |      | 4,014,426  |   |      |   | 878,923     |  
|                                                                                |  |      |            |   |      |   |             |  
|Cash flows from investing activities:                                           |  |      |            |   |      |   |             |  
|Additions to property and equipment, net                                        |  |      | (852,348   | ) |      |   | (428,051    | )
|Decrease (increase) in restricted cash                                          |  |      | 123,000    |   |      |   | (834,000    | )
|                                                                                |  |      |            |   |      |   |             |  
|Net cash used in investing activities                                           |  |      | (729,348   | ) |      |   | (1,262,051  | )
|                                                                                |  |      |            |   |      |   |             |  
|Cash flows from financing activities:                                           |  |      |            |   |      |   |             |  
|Payments on capital leases                                                      |  |      | (76,161    | ) |      |   | (12,325     | )
|Issuance of common stock                                                        |  |      | 14,987     |   |      |   | 230         |  
|Net payments under Debt Agreement and Credit Facility                           |  |      | (2,708,256 | ) |      |   | (1,667,398  | )
|Proceeds from issuance of Convertible Notes                                     |  |      |           |   |      |   | 2,100,000   |  
|Payment of loan origination fees                                                |  |      |           |   |      |   | (744,582    | )
|Payments on related party debt                                                  |  |      | (31,000    | ) |      |   | (1,041,402  | )
|                                                                                |  |      |            |   |      |   |             |  
|Net cash used in financing activities                                           |  |      | (2,800,430 | ) |      |   | (1,365,477  | )
|                                                                                |  |      |            |   |      |   |             |  
|Net increase (decrease) in cash and cash equivalents                            |  |      | 484,648    |   |      |   | (1,748,605  | )
|Cash and cash equivalents, beginning of period                                  |  |      | 472,722    |   |      |   | 2,197,209   |  
|                                                                                |  |      |            |   |      |   |             |  
|Cash and cash equivalents, end of period                                        |  | $    | 957,370    |   |      | $ | 448,604     |  
|                                                                                |  |      |            |   |      |   |             |  
|Non-cash investing and financing activities:                                    |  |      |            |   |      |   |             |  
|Equipment acquisitions through capital leases                                   |  |      | 151,166    |   |      |   | 78,003      |  



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



4



---

##### Table of Contents

ACCESS WORLDWIDE COMMUNICATIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. BASIS OF
PRESENTATION



The accompanying unaudited consolidated
financial statements of Access Worldwide Communications, 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, 2003, 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; however the actual results experienced by the Company may differ from managements estimates and assumptions. 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 nine months ended September 30, 2004 are not necessarily indicative of the results to be expected for the
year ending December 31, 2004.



2. RECLASSIFICATIONS



Certain reclassifications have been made to the 2003 consolidated financial
statements to conform to the September 30, 2004 presentation. Such reclassifications did not change our net loss or total common stockholders deficit as previously reported.



3. 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. The Letter of Credit was collateralized by a certificate of deposit in the same amount, which was reduced accordingly on the anniversary date of the lease agreement, as described
below. Therefore, such certificate of deposit is classified as restricted cash in the accompanying balance sheets at September 30, 2004 and December 31, 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 amount shown on each anniversary date as follows:



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



4. STOCK BASED COMPENSATION



Options granted under our stock based compensation plan
to employees are accounted for using the intrinsic value method. We do not recognize compensation expense in connection with granting stock options to employees as the strike price of the option at the time of the grant generally equals the fair
market value of our stock at such time. Options granted under our stock based compensation plan to non-employees are accounted for based on fair value accounting rules.



No compensation cost has been recognized for options granted under our stock based compensation plan except for a grant of
150,000 stock options to an executive of the Company with a strike price of $0.50 per share on January 2, 2003. The Company recorded unearned stock compensation for the intrinsic value of the award ($33,000) in connection with the grant. Such
amount, which is shown as an increase of stockholders deficit, is being amortized as compensation expense over the related vesting period.



5



---

##### Table of Contents

4. STOCK BASED COMPENSATION - Continued



Had the fair value based method been used to account for such compensation, compensation costs would have increased net loss
and loss per share for the three and nine months ended September 30, 2004 and 2003 to the following pro forma amounts:



|                                                                                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |          |   |  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------- | -------- | - | ------------------------------- | - | ---------- | ---- |  | - | -------- | - |  | - | ----------- | -
|                                                                                                                                     |  | Three Months Ended September 30, |          |   | Nine Months Ended September 30, |  
|                                                                                                                                     |  | 2004                             |          |   | 2003                            |   |            | 2004 |  |   | 2003     |  
|Net loss, as reported                                                                                                                |  | $                                | (939,918 | ) |                                 | $ | (9,265,598 | )    |  | $ | (785,868 | ) |  | $ | (10,850,615 | )
|Add: Stock based employee compensation expense included in net loss, net of related tax effect                                       |  |                                  | 1,650    |   |                                 |   | 1,650      |      |  |   | 4,950    |   |  |   | 4,950       |  
|                                                                                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |          |   |  |   |             |  
|Deduct: Total stock based employee compensation expense determined under fair value method for all awards, net of related tax
effect |  |                                  | (22,634  | ) |                                 |   | (53,879    | )    |  |   | (107,729 | ) |  |   | (137,797    | )
|                                                                                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |          |   |  |   |             |  
|Pro forma net loss                                                                                                                   |  |                                  | (960,902 | ) |                                 |   | (9,317,827 | )    |  |   | (888,647 | ) |  |   | (10,983,462 | )
|                                                                                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |          |   |  |   |             |  
|Loss per share:                                                                                                                      |  |                                  |          |   |                                 |   |            |      |  |   |          |   |  |   |             |  
|Basic  as reported                                                                                                                  |  | $                                | (0.09    | ) |                                 | $ | (0.95      | )    |  | $ | (0.08    | ) |  | $ | (1.11       | )
|                                                                                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |          |   |  |   |             |  
|Basic  pro forma                                                                                                                    |  | $                                | (0.10    | ) |                                 | $ | (0.96      | )    |  | $ | (0.09    | ) |  | $ | (1.13       | )
|                                                                                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |          |   |  |   |             |  
|Diluted  as reported                                                                                                                |  | $                                | (0.09    | ) |                                 | $ | (0.95      | )    |  | $ | (0.08    | ) |  | $ | (1.11       | )
|                                                                                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |          |   |  |   |             |  
|Diluted  pro forma                                                                                                                  |  | $                                | (0.10    | ) |                                 | $ | (0.96      | )    |  | $ | (0.09    | ) |  | $ | (1.13       | )
|                                                                                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |          |   |  |   |             |  



5. INCOME TAXES



The effective tax rate used by us to record income tax expense for the three
and nine months ended September 30, 2004 and 2003 differs from the federal statutory rate primarily due to the valuation allowance recorded in connection with the Companys deferred tax assets.



6. LOSS PER COMMON SHARE



Basic loss per share is based on the weighted average number of shares of
common stock outstanding during the period. Diluted loss per share includes the dilutive effect of potential common stock.



The following is a reconciliation of basic net loss per share and diluted net loss per share for the three and nine months ended September 30, 2004:



|                                                                                      |  |                                                 |  |                                             
|------------------------------------------------------------------------------------- |  | ----------------------------------------------- |  | --------------------------------------------
|                                                                                      |  | For the Three Months Ended September 30, Shares |  | For the Six Months EndedSeptember 30, Shares
|2004:                                                                                 |  |                                                 |  |                                             
|Weighted average number of common stock outstanding  basic                           |  | 9,906,886                                       |  | 9,828,900                                   
|                                                                                      |  |                                                 |  |                                             
|Weighted average number of common and common stock equivalent outstanding  dilutive* |  | 9,906,886                                       |  | 9,828,900                                   
|                                                                                      |  |                                                 |  |                                             
|2003:                                                                                 |  |                                                 |  |                                             
|Weighted average number of common stock outstanding  basic                           |  | 9,740,501                                       |  | 9,740,390                                   
|                                                                                      |  |                                                 |  |                                             
|Weighted average number of common and common stock equivalent outstanding  dilutive* |  | 9,740,501                                       |  | 9,740,390                                   
|                                                                                      |  |                                                 |  |                                             

---

|* | Due to the Companys net loss for the third quarter and the first nine months of 2004, common stock equivalents for convertible debt, outstanding options and warrants to
purchase 1,589,000 shares of common stock were excluded from the computation of diluted net loss per common share because they were anti-dilutive.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



6



---

##### Table of Contents

7. COMMITMENTS AND CONTINGENCIES



We are involved in legal actions arising in the ordinary course of our business. With the exception of the following, 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.



On October 5, 2004, Ivelisse Lamboy (the Plaintiff) filed suit against the Company at the Supreme Court of New York, Bronx County. The
Plaintiff is claiming damages of $470,000 for having relied on a letter offering employment from a subsidiary of the Company. Plaintiffs employment was terminated a few weeks after being hired and Plaintiff believes she should be paid damages
for ten years of employment. Management believes there is no merit to the claim and intends to vigorously defend, although no assurances can be given as to the outcome of this matter



8. INDEBTEDNESS



On January 29, 2004, the Revolving Term Loan and Security Agreement (the Debt Agreement) with CapitalSource Finance, LLC
(CapitalSource) was amended to include an Overadvance Agreement (the Overadvance) with CapitalSource for a maximum amount of $0.6 million to fund the expansion of TelAc Teleservices Group (TelAc) into Augusta,
Maine. The Overadvance is for an 18 month period commencing on January 28, 2004 and bears interest at 11% per annum. Monthly payments of interest only were due until August 1, 2004, when additional monthly principal payments of $50,000 commenced.
The Overadvance agreement contains an Overadvance Participation Fee of the greater of $150,000 or 1.5% of the product of 5 times consolidated annualized earnings before interest, taxes, depreciation and amortization (EBITDA) if paid at
maturity or the occurrence of a triggering event as defined, or the greater of $300,000 or 3% of the product of 5 times consolidated annualized EBITDA, if the Overadvance is not paid in full at the maturity date or a trigging event as defined. The
Overadvance is collateralized by the personal assets of Mr. Shawkat Raslan, Chief Executive Officer of the Company. As of September 30, 2004, $0.5 million was outstanding on the Overadvance.



On November 2, 2004, we entered into discussions with Capital Source
regarding non-compliance of our Minimum EBITDA and Fixed Coverage Ratio covenants, as defined in our Debt Agreement, as of September 30, 2004. On November 12, 2004, we entered into the Third Amendment (the Third Amendment) to our Debt
Agreement dated June 10, 2003 that modified among other things, the Minimum EBITDA, the Fixed Coverage Ratio, the Minimum Cash Velocity, as defined, and extended the term of the Debt Agreement to June 10, 2009.



9. 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 nine months ended September 30, 2004 and 2003.



For the three months ended September 30,



|                                 |  |                |            |   |          |   |           |               |  |   |                |   |  |       |          |   |  |   |            |  
|-------------------------------- |  | -------------- | ---------- | - | -------- | - | --------- | ------------- |  | - | -------------- | - |  | ----- | -------- | - |  | - | ---------- | -
|                                 |  | Pharmaceutical |            |   | Business |   |           | Segment Total |  |   | Reconciliation |   |  | Total |         
|2004                             |  |                |            |   |          |   |           |               |  |   |                |   |  |       |          |   |  |   |            |  
|Revenues                         |  | $              | 4,872,551  |   |          | $ | 4,999,311 |               |  | $ | 9,871,862      |   |  | $     |         |   |  | $ | 9,871,862  |  
|Gross profit                     |  |                | 2,502,667  |   |          |   | 1,666,330 |               |  |   | 4,168,997      |   |  |       |         |   |  |   | 4,168,997  |  
|Income (loss) from operations    |  |                | 425,850    |   |          |   | (438,229  | )             |  |   | (12,379        | ) |  |       | (597,247 | ) |  |   | (609,626   | )
|EBITDA(1)                        |  |                | 581,357    |   |          |   | (229,136  | )             |  |   | 352,221        |   |  |       | (565,432 | ) |  |   | (213,211   | )
|Depreciation expense             |  |                | 155,507    |   |          |   | 209,093   |               |  |   | 364,600        |   |  |       | 31,815   |   |  |   | 396,415    |  
|Amortization expense             |  |                |           |   |          |   |          |               |  |   |               |   |  |       |         |   |  |   |           |  
|                                 |  |                |            |   |         
|2003                             |  |                |            |   |          |   |           |               |  |   |                |   |  |       |          |   |  |   |            |  
|Revenues                         |  | $              | 4,136,749  |   |          | $ | 6,633,287 |               |  | $ | 10,770,036     |   |  | $     |         |   |  | $ | 10,770,036 |  
|Gross profit                     |  |                | 1,570,408  |   |          |   | 2,418,563 |               |  |   | 3,988,971      |   |  |       |         |   |  |   | 3,988,971  |  
|(Loss) income from operations(3) |  |                | (9,071,783 | ) |          |   | 423,714   |               |  |   | (8,648,069     | ) |  |       | (790,557 | ) |  |   | (9,438,626 | )
|EBITDA(1)                        |  |                | (8,935,168 | ) |          |   | 665,046   |               |  |   | (8,270,122     | ) |  |       | (760,001 | ) |  |   | (9,030,123 | )
|Depreciation expense             |  |                | 99,579     |   |          |   | 241,332   |               |  |   | 340,911        |   |  |       | 30,556   |   |  |   | 371,467    |  
|Amortization expense             |  |                | 37,036     |   |          |   |          |               |  |   | 37,036         |   |  |       |         |   |  |   | 37,036     |  



7



---

##### Table of Contents

For the nine months ended September 30,



|                                    |  |                |            |   |          |   |               |  |   |                |   |  |       |            |   |  |   |             |  
|----------------------------------- |  | -------------- | ---------- | - | -------- | - | ------------- |  | - | -------------- | - |  | ----- | ---------- | - |  | - | ----------- | -
|                                    |  | Pharmaceutical |            |   | Business |   | Segment Total |  |   | Reconciliation |   |  | Total |           
|2004                                |  |                |            |   |          |   |               |  |   |                |   |  |       |            |   |  |   |             |  
|Revenues                            |  | $              | 18,481,318 |   |          | $ | 18,331,756    |  | $ | 36,813,074     |   |  | $     |           |   |  | $ | 36,813,074  |  
|Gross profit                        |  |                | 8,949,732  |   |          |   | 6,703,246     |  |   | 15,652,978     |   |  |       |           |   |  |   | 15,652,978  |  
|Income (loss) from operations       |  |                | 2,547,577  |   |          |   | 149,691       |  |   | 2,697,268      |   |  |       | (2,476,561 | ) |  |   | 220,707     |  
|EBITDA(1)                           |  |                | 2,930,119  |   |          |   | 803,991       |  |   | 3,734,110      |   |  |       | (2,382,300 | ) |  |   | 1,351,810   |  
|Depreciation expense                |  |                | 382,542    |   |          |   | 654,300       |  |   | 1,036,842      |   |  |       | 94,261     |   |  |   | 1,131,103   |  
|Amortization expense                |  |                |           |   |          |   |              |  |   |               |   |  |       |           |   |  |   |            |  
|                                    |  |                |            |   |         
|2003                                |  |                |            |   |          |   |               |  |   |                |   |  |       |            |   |  |   |             |  
|Revenues                            |  | $              | 16,290,454 |   |          | $ | 20,678,863    |  | $ | 36,969,317     |   |  | $     |           |   |  | $ | 36,969,317  |  
|Gross profit                        |  |                | 5,021,242  |   |          |   | 7,524,699     |  |   | 12,545,941     |   |  |       |           |   |  |   | 12,545,941  |  
|(Loss) income from operations(2)(3) |  |                | (9,735,540 | ) |          |   | 1,529,528     |  |   | (8,206,012     | ) |  |       | (2,408,203 | ) |  |   | (10,614,215 | )
|EBITDA(1)                           |  |                | (9,331,122 | ) |          |   | 2,280,163     |  |   | (7,050,959     | ) |  |       | (2,318,164 | ) |  |   | (9,369,123  | )
|Depreciation expense                |  |                | 293,374    |   |          |   | 750,635       |  |   | 1,044,009      |   |  |       | 90,039     |   |  |   | 1,134,048   |  
|Amortization expense                |  |                | 111,044    |   |          |   |              |  |   | 111,044        |   |  |       |           |   |  |   | 111,044     |  

---

|(1) | EBITDA is calculated by taking income (loss) from operations, which is before interest and taxes, 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(3) | (Loss) income from operations and EBITDA for the Pharmaceutical Segment include an $8,951,856 impairment of intangible assets for the three and nine months ended
September 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, 2003.



Corporate Overview



We are an outsourced marketing services company that
provides a variety of sales, education and communication programs to clients in the medical, pharmaceutical, telecommunications, and consumer products industries. We provide services through the following two business segments:



| |  | Pharmaceutical Services (Pharmaceutical) Segment, which consists of our medical education business, AM Medica Communications Group, and our pharmaceutical
communication center, TMS Professional Markets Group, that provide medical education, medical publishing, product detailing, physician and pharmacist profiling, patient education, disease management, pharmacy stocking, and clinical trial recruitment
to the pharmaceutical and medical industries.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Business Services (Business) Segment(formerly Consumer and Business Services Segment or Consumer Segment), which consists of our multilingual
communication business, TelAc Teleservices Group that provides telemarketing services including inbound and outbound programs to clients in the telecommunications, and consumer products industries.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



8



---

##### Table of Contents

We seek to provide specialized marketing programs, supported by technological systems, in an effort to
differentiate us in the highly fragmented outsourced marketing services industry.



Three Months Ended September 30, 2004 Compared to Three Months Ended September 30, 2003



Our revenues decreased $0.9 million, or 8.3%, to $9.9 million for the three months ended September 30, 2004, compared to $10.8 million for the three
months ended September 30, 2003. Revenues for the Pharmaceutical Segment increased $0.8 million, or 19.5%, to $4.9 million for the three months ended September 30, 2004, compared to $4.1 million for the three months ended September 30, 2003. The
increase was primarily due to an increase in inbound business which includes our Direct to Consumer (DTC) programs which was offset by a decrease in our medical education revenues. Revenues for the Business Segment decreased $1.6
million, or 24.2%, to $5.0 million for the three months ended September 30, 2004, compared to $6.6 million for the three months ended September 30, 2003. The decrease was primarily due to a decrease in programs and hours performed on behalf of a
major client due to a regulatory change and the resulting suspension of several campaigns.



Our gross profit increased $0.2 million, or 5.0%, to $4.2 million for the three months ended September 30, 2004, compared to $4.0 million for the three months ended September 30, 2003. Gross profit as a percentage of
revenues increased to 42.4% for the three months ended September 30, 2004, compared to 37.0% for the three months ended September 30, 2003. Gross profit as a percentage of revenues for the Pharmaceutical Segment increased to 51.0% for the three
months ended September 30, 2004, compared to 39.0% for the three months ended September 30, 2003. The increase was primarily due to the increase in our inbound business, offset by the decrease in medical education revenues, and the reduction in
medical education personnel costs. Gross profit as a percentage of revenues for the Business Segment decreased to 34.0% for the three months ended September 30, 2004, compared to 36.4% for the three months ended September 30, 2003. The decrease as a
percentage of revenues was primarily attributed to the decrease in revenues and payroll costs.



Our selling, general and administrative expenses increased by $0.4 million, or 9.1%, to $4.8 million for the three months ended September 30, 2004, compared to $4.4 million for the three months ended September 30,
2003. Selling, general and administrative expenses as a percentage of revenues for the Company increased to 48.5% for the three months ended September 30, 2004, compared to 40.7% for the three months ended September 30, 2003. Selling, general and
administrative expenses as a percentage of revenues for the Pharmaceutical Segment increased to 42.9% for the three months ended September 30, 2004, compared to 41.5% for the three months ended September 30, 2003. The increase was primarily due to
an increase in management personnel to service the increase in revenues. Selling, general and administrative expenses as a percentage of revenues for the Business Segment increased to 42.0% for the three months ended September 30, 2004, compared to
30.3% for the three months ended September 30, 2003. The increase as a percentage of revenues was primarily attributed to the decrease in revenues.



During the three months ended September 30, 2003, we experienced a significant reduction in revenues from our medical education division. In accordance
with SFAS No. 142, Goodwill and Other Intangibles, we performed a two-step fair value based intangible asset assessment. The first step of the test compared the book value of our reporting unit to its estimated fair value. The estimated
fair value of the reporting unit was computed using the present value of future cash flows as of September 30, 2003. In the second step of the impairment test, we compared the implied fair value of the intangible assets in accordance with the
methodology prescribed by SFAS No. 142 to its book value. As a result of performing the two-step test, we determined that the divisions goodwill and intangible assets were impaired resulting in a charge of $9.0 million during the three months
ended September 30, 2003.



Our net interest expense decreased
by $0.1 million, or 25.0%, to $0.3 million for the three months ended September 30, 2004, compared to $0.4 million for the three months ended September 30, 2003.



Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003



Our revenues decreased $0.2 million, or 0.5%, to $36.8 million for the nine
months ended September 30, 2004, compared to $37.0 million for the nine months ended September 30, 2003. Revenues for the Pharmaceutical Segment increased $2.2 million, or 13.5%, to $18.5 million for the nine months ended September 30, 2004,
compared to $16.3 million for the nine months ended September 30, 2003. This increase was primarily due to an increase in inbound business which includes our DTC programs offset by a decrease in our medical education revenues. Revenues for the
Business Segment decreased by $2.4 million, or 11.6%, to $18.3 million for the nine months ended September 30, 2004, compared to $20.7 million for the nine months ended September 30, 2003. The decrease was primarily due to a continued decrease in
programs and hours performed on behalf of a major client due to a regulatory change and the resulting suspension of several campaigns. Management is working diligently at replacing these programs and hours with new business, and has hired additional
sales staff



Our gross profit increased $3.2 million, or 25.6%,
to $15.7 million for the nine months ended September 30, 2004, compared to $12.5 million for the nine months ended September 30, 2003. Gross profit as a percentage of revenues increased to 42.7% for the nine months ended September 30, 2004, compared
to 33.8% for the nine months ended September 30, 2003. Gross profit as a percentage of revenues for the Pharmaceutical Segment increased to 48.1% for the nine months ended September 30, 2004, compared to 30.7% for the nine months ended September 30,
2003. The increase was primarily due to the increase in our inbound business, offset by the decrease in medical education revenues, and the reduction in medical education personnel costs. Gross profit as a percentage of



9



---

##### Table of Contents

revenues for the Business Segment increased to 36.6% for the nine months ended September 30, 2004, compared to 36.2% for
the nine months ended September 30, 2003. The increase was primarily attributed to a reduction in variable cost personnel as revenues declined.



Our selling, general and administrative expenses increased by $1.0 million, or 6.9%, to $15.4 million for the nine months ended September 30, 2004,
compared to $14.4 million for the nine months ended September 30, 2003. Selling, general and administrative expenses as a percentage of revenues for the Company increased to 41.8% for the nine months ended September 30, 2004, compared to 38.9% for
the nine months ended September 30, 2003. Selling, general and administrative expenses as a percentage of revenues for the Pharmaceutical Segment decreased to 34.6% for the nine months ended September 30, 2004, compared to 37.4% for the nine months
ended September 30, 2003. The decrease was primarily due to a non-recurring bad debt expense recorded in the second quarter of 2003 with no similar charge in 2004 offset by a smaller increase in personnel and related compensation costs, commissions
and travel expenses due to the increase in revenues. Selling, general and administrative expenses as a percentage of revenues for the Business Segment increased to 36.1% for the nine months ended September 30, 2004, compared to 29.0% for the nine
months ended September 30, 2003. The increase was primarily due to the decrease in revenues and the expansion of the customer sales and service facilities in Arlington, Virginia and Augusta, Maine which resulted in higher rent expense and personnel
costs.



During the nine months ended September 30, 2003, we
experienced a significant reduction in revenues from our medical education division. In accordance with SFAS No. 142, Goodwill and Other Intangibles, we performed a two-step fair value based intangible asset assessment. The first step of
the test compared the book value of our reporting unit to its estimated fair value. The estimated fair value of the reporting unit was computed using the present value of future cash flows as of September 30, 2003. In the second step of the
impairment test, we compared the implied fair value of the intangible assets in accordance with the methodology prescribed by SFAS No. 142 to its book value. As a result of performing the two-step test, we determined that the divisions
goodwill and intangible assets were impaired resulting in a charge of $9.0 million during the nine months ended September 30, 2003.



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



Our net interest expense increased $0.2 million, or 25.0%, to $1.0 million for the nine months ended September 30, 2004, compared to $0.8 million for the
nine months ended September 30, 2003. The increase was primarily due to the accretion of the discount on Convertible Notes.



Liquidity and Capital Resources



At September 30, 2004 and December 31, 2003, we had negative working capital of $2.7 million and $2.9 million, respectively. Cash and cash equivalents
were $1.0 million at September 30, 2004, compared to $0.5 million at December 31, 2003.



Net cash provided by operating activities during the first nine months of 2004 was $4.0 million, compared to $0.9 million during the first nine months of 2003. The increase in net cash provided by operating activities
was primarily due to a decrease in accounts receivables, taxes receivable, unbilled receivables and accounts payable and accrued expenses for the nine months ended September 30, 2004, compared to an increase in deferred revenues and other assets and
a decrease in accounts payable and accrued salaries and wages for the nine months ended September 30, 2003.



Net cash used in investing activities was $0.7 million for the first nine months of 2004, compared to $1.3 million for the first nine months of 2003. The
decrease in net cash used in investing activities was primarily due to the increase in fixed asset purchases for the expansion of the customer sales and service facilities in Arlington, Virginia and Augusta, Maine offset by a decrease in restricted
cash in 2004.



Net cash used in financing activities was $2.8
million for the first nine months of 2004, compared to $1.4 million for the first nine months of 2003. The increase in net cash used in financing activities was primarily due to increased payments made on our Debt Agreement during the 2004 period,
and the $2.1 million of proceeds from Convertible Notes received in the 2003 period.



On January 29, 2004, the Debt Agreement with CapitalSource was amended to include an Overadvance Agreement (the Overadvance) with CapitalSource for a maximum amount of $0.6 million to fund the expansion of
TelAc Teleservices Group (TelAc) into Augusta, Maine. The Overadvance is for an 18 month period commencing on January 28, 2004 and bears interest at 11% per annum. Monthly payments of interest only were due until August 1, 2004, when
additional monthly principal payments of $50,000 commenced. The Overadvance agreement contains an Overadvance Participation Fee of the greater of $150,000 or 1.5% of the product of 5 times consolidated annualized earnings before interest, taxes,
depreciation and amortization (EBITDA) if paid at maturity or the occurrence of a triggering event as defined, or the greater of $300,000 or 3% of the product of 5 times consolidated annualized EBITDA, if the Overadvance is not paid in
full at the maturity date or a trigging event as defined. The Overadvance is collateralized by the personal assets of Mr. Shawkat Raslan, Chief Executive Officer of the Company. As of September 30, 2004, $0.5 million was outstanding on the
Overadvance.



10



---

##### Table of Contents

On November 2, 2004, we entered into discussions with Capital Source regarding non-compliance of our
Minimum EBITDA and Fixed Coverage Ratio covenants, as defined in our Debt Agreement as of September 30, 2004. On November 12, 2004, we entered into the Third Amendment (the Third Amendment) to our Debt Agreement dated June 10, 2003 that
modified among other things, the Minimum EBITDA, the Fixed Coverage Ratio, the Minimum Cash Velocity, as defined, and extended the term of the Debt Agreement to June 10, 2009.



We expect to meet our short-term liquidity requirements through net cash provided by operations, and borrowings under the
Debt Agreement as amended and the Overadvance. We believe that these sources of cash will be sufficient to meet the Companys operating needs and planned capital expenditures for at least the next twelve months.



The following is a chart of the Companys approximate contractual cash
payment obligations, which have been aggregated to facilitate a basic understanding of the Companys liquidity as of September 30, 2004:



Contractual Cash Obligations



|                              |  |                        |            |        |   |           |  |         |           |               |   |         |  |   |          
|----------------------------- |  | ---------------------- | ---------- | ------ | - | --------- |  | ------- | --------- | ------------- | - | ------- |  | - | ---------
|                              |  | Payments Due by Period
|                              |  | Total                  |            | 1 year |   | 2-4 years |  | 5 years |           | After 5 years
|Long-term debt                |  | $                      | 2,637,000  |        | $ | 2,637,000 |  | $       |          |               | $ |        |  | $ |         
|Convertible Notes             |  |                        | 2,100,000  |        |   |          |  |         | 2,100,000 |               |   |        |  |   |         
|Capital lease obligations     |  |                        | 279,000    |        |   | 114,000   |  |         | 165,000   |               |   |        |  |   |         
|Operating leases              |  |                        | 9,860,000  |        |   | 2,188,000 |  |         | 5,254,000 |               |   | 868,000 |  |   | 1,550,000
|                              |  |                        |            |        |   |           |  |         |           |               |   |         |  |   |          
|Total contractual obligations |  | $                      | 14,876,000 |        | $ | 4,939,000 |  | $       | 7,519,000 |               | $ | 868,000 |  | $ | 1,550,000
|                              |  |                        |            |        |   |           |  |         |           |               |   |         |  |   |          



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:



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



| |  | Competition from other third-party providers and those clients and prospects who may decide to do the work in-house that we currently do for them;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Consolidation in the pharmaceutical, pedical, telecommunications and consumer products industries which reduces the number of clients and prospective clients that we are able to
serve;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  | The ability to sustain a downturn in any of the industries in which we participate;
| | - | -----------------------------------------------------------------------------------



| |  | The effect of changes in a drugs life cycle;
| | - | ---------------------------------------------



11



---

##### Table of Contents

| |  | Our ability and our clients ability to comply with state, federal and industry regulations;
| | - | --------------------------------------------------------------------------------------------



| |  | Our reliance on a limited number of major clients and the reduction in services performed for or the loss of one or more major clients;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



| |  | Our reliance on technology;
| | - | ---------------------------



| |  | Our reliance on key personnel and labor force, and our ability to recruit additional personnel;
| | - | -----------------------------------------------------------------------------------------------



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



| |  | The effects of an interruption of our business;
| | - | -----------------------------------------------



| |  | Our ability to successfully operate at capacity our new communication center in Maine;
| | - | --------------------------------------------------------------------------------------



| |  | Our ability to develop or fund new products or service offerings;
| | - | -----------------------------------------------------------------



| |  | The unpredictability of the outcome of the litigation in which we are involved;
| | - | -------------------------------------------------------------------------------



| |  | Risks associated with our stock trading on the OTC Bulletin Board;
| | - | ------------------------------------------------------------------



| |  | Our ability to continue as a going concern if we are unable to generate cash flow and income from operations; and,
| | - | ------------------------------------------------------------------------------------------------------------------



| |  | The volatility of our stock price.
| | - | ----------------------------------



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, 2003 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 the greater of 7.0% or prime plus 2.75%. 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 $0.02 million per year.



ITEM 4. CONTROLS AND PROCEDURES



The Companys Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this quarterly report (the Evaluation Date). Based on such evaluation, such officers have concluded that, as of the Evaluation Date,
the Companys disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Companys periodic
filings under the Exchange Act.



Since the Evaluation Date,
there have not been any significant changes in the Companys internal controls or in other factors that could significantly affect such controls.



PART IIOTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



We
are involved in legal actions arising in the ordinary course of our business. With the exception of the following, 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.



On October 5, 2004, Ivelisse Lamboy
(the Plaintiff) filed suit against the Company at the Supreme Court of New York, Bronx County. The Plaintiff is claiming damages of $470,000 for having relied on a letter offering employment from a subsidiary of the Company.
Plaintiffs employment was terminated a few weeks after being hired and Plaintiff believes she should be paid damages for ten years of employment. Management believes there is no merit to the claim and intends to vigorously defend. While we
believe the claim has no legal basis, we cannot provide assurance as to the ultimate outcome.



12



---

##### Table of Contents

ITEM 6. EXHIBITS



|     |  |                                                                  
|---- |  | -----------------------------------------------------------------
|     | 
|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            



13



---

##### Table of Contents

SIGNATURES



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



|                        |  |                                       |  |                                                                                                                   
|----------------------- |  | ------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------
|                        |  | ACCESS WORLDWIDE COMMUNICATIONS, INC.
|                        |  |                                      
|Date: November 15, 2004 |  | By:                                   |  | /s/ SHAWKAT RASLAN                                                                                                
|                        |  |                                       |  | Shawkat Raslan, Chairman of the Board, President and Chief Executive Officer (principal executive
officer)        
|                        |  |                                      
|Date: November 15, 2004 |  | By:                                   |  | /s/ RICHARD A. LYEW                                                                                               
|                        |  |                                       |  | Richard A. Lyew, Executive Vice President and Chief Financial Officer (principal financial and accounting
officer)



14



---

##### Table of Contents

Exhibit Index



|            |  |                                                                  
|----------- |  | -----------------------------------------------------------------
|Exhibit No. |  | Description                                                      
|            | 
|31.1        |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|            | 
|31.2        |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|            | 
|32.1        |  | Section 1350 Certification of Chief Executive Officer            
|            | 
|32.2        |  | Section 1350 Certification of Chief Financial Officer            



15