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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ending March 31, 2004

For the transition period from              to             

Commission file number 0-23489

Access Worldwide Communications, Inc.

(Exact Name of Registrant as Specified in its Charter)

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

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

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

The number of share outstanding of the registrant’s common stock, $.01 par value, as of May 5, 2004 was 9,740,501.

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

INDEX

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PART I—FINANCIAL INFORMATION

ACCESS WORLDWIDE COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEETS

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

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31,

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

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS’ DEFICIT

(UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2004

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

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31,

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

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(UNAUDITED)

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 as of and 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. 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 three months ended March 31, 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 March 31, 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. Therefore, such certificate of deposit is classified as restricted cash in the accompanying balance sheets at March 31, 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:

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 grant 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 a reduction of stockholders’ equity, is being amortized as compensation expense over the related vesting period.

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 months ended March 31 to the following pro forma amounts:

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5. INCOME TAXES

The effective tax rate used by us for the three month periods ended March 31, 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

Loss per common share are calculated using the following weighted average common shares:

7. INDEBTEDNESS

On January 29, 2004, 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%. Monthly payments of interest only are due until August 1, 2004, when additional monthly principal payments of $50,000 will commence. 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 Overadvance is not paid in full at the maturity date or a triggering event as defined. The Overadvance is collateralized by the personal assets of Mr. Shawkat Raslan, Chief Executive Officer of the Company. As of March 31, 2004, $0.6 million was outstanding under the Overadvance.

8. 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 months ended March 31, 2004 and 2003.

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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.

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

Our revenues increased $0.8 million, or 6.6%, to $13.0 million for the three months ended March 31, 2004, compared to $12.2 million for the three months ended March 31, 2003. Revenues for the Pharmaceutical Services (“Pharmaceutical”) Segment increased $0.4 million, or 6.9%, to $6.2 million for the three months ended March 31, 2004, compared to $5.8 million for the three months ended March 31, 2003. The increase was primarily attributed to an increase in new inbound programs which was offset by a reduction of $0.6 million in medical education revenue. Management is working diligently to hire additional medical education sales personnel. Revenues for the Business Services (“Business”) Segment increased $0.3 million or, 4.6%, to $6.8 million for the three months ended March 31, 2004, compared to $6.5 million for the three months ended March 31, 2003. The increase was primarily attributed to larger telecommunications programs and more production hours performed for an existing client.

Our gross profit increased $1.1 million, or 27.5%, to $5.1 million for the three months ended March 31, 2004, compared to $4.0 million for the three months ended March 31, 2003. Gross profit as a percentage of revenues increased to 39.2% for the three months ended March 31, 2004, from 32.8% for the three months ended March 31, 2003. Gross profit as a percentage of revenues for the Pharmaceutical Segment for the three months ended March 31, 2004 increased to 41.9%, compared to 27.6% for the three months ended March 31, 2003. The increase was primarily attributed to an increase in productivity on our pharmacy and physician programs offset by a decrease in our medical education revenue. Gross profit as a percentage of revenues for the Business Segment decreased slightly to 35.3% for the three months ended March 31, 2004, from 35.4% for the three months ended March 31, 2003.

Our selling, general and administrative expenses increased by $0.5 million, or 11.1%, to $5.0 million for the three months ended March 31, 2004, compared to $4.5 million for the three months ended March 31, 2003. Selling, general and administrative expenses as a percentage of revenues increased to 38.5% for the three months ended March 31, 2004, compared to 36.9% for the three months ended March 31, 2003. Selling, general and administrative expenses as a percentage of revenues for the Pharmaceutical Segment decreased to 30.7% for the three months ended March 31, 2004, from 32.8% for the three months ended March 31, 2003. The decrease was primarily attributed to the increase in revenues combined with management’s efforts to control costs. Selling, general and administrative expenses as a percentage of revenues for the Business Segment increased to 33.8% for the three months ended March 31, 2004, compared to 29.2% for the three months ended March 31, 2003. The increase was primarily attributed to the expansion of the customer sales and service facility in Arlington, Virginia which resulted in an increase in salaries and rent expense.

Our net interest expense increased slightly to $0.3 million for the three months ended March 31, 2004, compared to $0.2 million for the three months ended March 31, 2003 due primarily to the accretion of the discount on Convertible Notes.

Liquidity and Capital Resources

At March 31, 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 March 31, 2004, compared to $0.5 million at December 31, 2003.

Net cash provided by operating activities during the first quarter of 2004 was $2.1 million, compared to net cash used in operating activities during the first quarter of 2003 of $1.0 million. The increase in net cash provided by operating activities was primarily due to an increase in the change of accounts receivable of $3.0 million offset by a decrease in the change of deferred revenue of $1.2 million.

Net cash used in investing activities was $0.1 million for the first quarter of 2004, compared to $0.1 million for the first quarter of 2003.

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Net cash used in financing activities was $1.4 million for the first quarter of 2004, compared to $0.5 million for the first quarter of 2003. The increase was primarily due to the pay down of our Debt Agreement during the first quarter of 2004.

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 into Augusta, Maine. The Overadvance is for an 18 month period commencing on January 28, 2004 and bears interest at 11%. Monthly payments of interest only are due until August 1, 2004, when additional monthly principal payments of $50,000 will commence. 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 Overadvance is not paid in full at the maturity date or a triggering event as defined. The Overadvance is collateralized by the personal assets of Mr. Shawkat Raslan, Chief Executive Officer of the Company.

As of March 31, 2004, we were in compliance with all of our debt covenants under the Debt Agreement. We expect to meet our short-term liquidity requirements through net cash provided by operations, an income tax refund, the release of restricted cash as collateral under lease arrangement (Note 3), and borrowings under the Debt Agreement 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 commitments as of March 31, 2004:

Contractual Cash Obligations

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from changes in interest rates and are subject to interest rate risk 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 arrangements 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 for an interest rate of 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 change in the prime interest rate would result in a pre-tax impact to us on earnings of approximately $0.04 million.

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.

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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. These 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:

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 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 2003 Annual Report on Form 10-K as of and for the year ended December 31, 2003 filed with the Securities and Exchange Commission.

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PART II–OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

(b) Reports on Form 8-K

On February 4, 2004, a report on Form 8-K was filed, reporting under “Item 4. Changes in Registrant’s Certifying Accountant” that the Company hired BDO Seidman, LLP as its independent accountants for the 2003 fiscal year. BDO Seidman, LLP succeeded PricewaterhouseCoopers LLP who resigned its position on December 5, 2003, as described on the Company’s report on form 8-K filed on December 12, 2003.

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.

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Exhibit Index