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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ending June 30, 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

The number of shares outstanding of the registrant’s common stock, $.01 par value, as of August 9, 2004 was 9,893,719.

ACCESS WORLDWIDE COMMUNICATIONS, INC.

INDEX

PART I—FINANCIAL INFORMATION

ACCESS WORLDWIDE COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEETS

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

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

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

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS’ DEFICIT

(UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2004

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

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30,

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

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

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

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.

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Had the fair value based method been used to account for such compensation, compensation costs would have reduced net income (loss) and earnings (loss) per share for the three and six months ended June 30, 2004 and 2003 to the following pro forma amounts:

5. INCOME TAXES

The effective tax rate used by us to record income tax expense for the three and six months ended June 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. EARNINGS (LOSS) PER COMMON SHARE

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

The following is a reconciliation of basic net income per share and diluted net income per share for the three and six months ended June 30, 2004:

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ACCESS WORLDWIDE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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 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 June 30, 2004, $0.6 million was outstanding on 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 and six months ended June 30, 2004 and 2003.

For the three months ended June 30,

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

Our revenues remained unchanged at $14.0 million for the three months ended June 30, 2004, compared to $14.0 million for the three months ended June 30, 2003. Revenues for the Pharmaceutical Segment increased $1.0 million, or 15.6%, to $7.4 million for the three months ended June 30, 2004, compared to $6.4 million for the three months ended June 30, 2003. The increase was primarily due to the Company being awarded a Direct to Consumer (“DTC”) program by one of our existing clients. This was offset by a decrease in our medical education revenues. Revenues for the Business Segment decreased $1.0 million, or 15.2%, to $6.6 million for the three months ended June 30, 2004, compared to $7.6 million for the three months ended June 30, 2003. The decrease was primarily due to a decrease in programs and hours performed on behalf of one of our major clients.

Our gross profit increased $1.8 million, or 39.1%, to $6.4 million for the three months ended June 30, 2004, compared to $4.6 million for the three months ended June 30, 2003. Gross profit as a percentage of revenues increased to 45.7% for the three months ended June 30, 2004, from 32.9% for the three months ended June 30, 2003. Gross profit as a percentage of revenues for the Pharmaceutical Segment for the three months ended June 30, 2004 increased to 51.4%, compared to 28.1% for the three months ended June 30, 2003. The increase was primarily due to the increased revenues from the DTC program, 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 increased to 39.4% for the three months ended June 30, 2004, from 36.8% for the three months ended June 30, 2003. The increase as a percentage of revenues was primarily attributed to a reduction in variable cost personnel as revenues declined.

Our selling, general and administrative expenses increased by $0.2 million, or 3.6%, to $5.7 million for the three months ended June 30, 2004, compared to $5.5 million for the three months ended June 30, 2003. Selling, general and administrative expenses as a percentage of revenues for the Company increased to 40.7% for the three months ended June 30, 2004, compared to 39.3% for the three months ended June 30, 2003. Selling, general and administrative expenses as a percentage of revenues for the Pharmaceutical Segment decreased to 32.4% for the three months ended June 30, 2004, from 34.4% for the three months ended June 30, 2003. The decrease was primarily due to the increase in revenues, a non-recurring bad debt expense recorded in the second quarter of 2003 with no similar charge in 2004 and a slight increase in personnel costs. Selling, general and administrative expenses as a percentage of revenues for the Business Segment increased to 33.3% for the three months ended June 30, 2004, compared to 27.6% for the three months ended June 30, 2003. The increase as a percentage of revenues was primarily attributed to the decrease in revenues and an increase in rent expense and payroll costs as a result of the expansion of the customer sales and service facility to Augusta, Maine.

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

Our net interest expense remained unchanged at $0.3 million for the three months ended June 30, 2004, compared to $0.3 million for the three months ended June 30, 2003.

Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003

Our revenues increased $0.7 million, or 2.7%, to $26.9 million for the six months ended June 30, 2004, compared to $26.2 million for the six months ended June 30, 2003. Revenues for the Pharmaceutical Segment increased $1.4 million, or 11.5%, to $13.6 million for the six months ended June 30, 2004, compared to $12.2 million for the six months ended June 30, 2003. The increase was primarily due to the Company being awarding a Direct to Consumer (“DTC”) program by one of our existing clients. This was offset by a decrease in our medical education revenues. Revenues for the Business Segment decreased by $0.7 million, or 5.0%, to $13.3 million for the six months ended June 30, 2004, compared to $14.0 million for the six months ended June 30, 2003. The decrease was primarily due to a decrease in programs and hours performed on behalf of one of our major clients, which if the decline continues could have a significant impact on our Business Services Segment.

Our gross profit increased $3.0 million, or 35.3%, to $11.5 million for the six months ended June 30, 2004, compared to $8.5 million for the six months ended June 30, 2003. Gross Profit as a percentage of revenues increased to 42.8% for the six months ended June 30, 2004, from 32.4% for the six months ended June 30, 2003. Gross profit as a percentage of revenues for the Pharmaceutical Segment for the six months ended June 30, 2004 increased to 47.1%, compared to 27.9% for the six months ended June 30, 2003. The increase was primarily due to the increased revenues from the DTC program, offset by the decrease in medical education revenues, and a reduction in variable personnel costs. Gross profit as a percentage of revenues for the Business Segment increased to 37.6% for the

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six months ended June 30, 2004, from 36.4% for the six months ended June 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 $0.7 million, or 7.0%, to $10.7 million for the six months ended June 30, 2004, compared to $10.0 million for the six months ended June 30, 2003. Selling, general and administrative expenses as a percentage of revenues for the Company increased to 39.8% for the six months ended June 30, 2004, compared to 38.2% for the six months ended June 30, 2003. Selling, general and administrative expenses as a percentage of revenues for the Pharmaceutical Segment decreased to 31.6% for the six months ended June 30, 2004, from 33.6% for the six months ended June 30, 2003. The decrease was primarily due a non-recurring bad debt expense recorded in the second quarter of 2003 with no similar charge in 2004 offset by an increase in personnel and related compensation costs due to the increase in revenues. Selling, general and administrative expenses as a percentage of revenues for the Business Segment increased to 33.1% for the six months ended June 30, 2004, compared to 28.6% for the six months ended June 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.

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

Our net interest expense increased $0.3 million, or 75.0%, to $0.7 million for the six months ended June 30, 2004, compared to $0.4 million for the six months ended June 30, 2003. The increase was primarily due to the accretion of the discount on Convertible Notes and a higher average loan balance due to a receivable payment of $3.1 million being received on the last day of June.

Liquidity and Capital Resources

At June 30, 2004 and December 31, 2003, we had negative working capital of $2.1 million and $2.9 million, respectively. Cash and cash equivalents were $5.1 million at June 30, 2004, compared to $0.5 million at December 31, 2003. The significant increase in cash and cash equivalents is due to collection of a receivable of $3.1 million on the last day of June.

Net cash provided by operating activities during the first six months of 2004 was $3.4 million, compared to $1.3 million during the first six months of 2003. The increase in net cash provided by operating activities was primarily due to an increase in deferred revenues and a decrease in other assets for the six months ended June 30, 2004 compared to an increase in deferred revenues and a decrease in accounts receivable and other assets for the six months ended June 30, 2003.

Net cash used in investing activities was $0.6 million for the first six months of 2004, compared to $1.2 million for the first six 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 provided by financing activities was $1.9 million for the first six months of 2004, compared to net cash used in financing activities of $1.7 million for the first six months of 2003. The increase in net cash provided by financing activities was primarily due to increased borrowings under our Debt Agreement due to a receivable payment of $3.1 million being received on the last day of June without enough time to be swept to pay down the Debt Agreement.

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 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 June 30, 2004 $0.6 million was outstanding on the Overadvance.

As of June 30, 2004, we are 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, 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.

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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 June 30, 2004:

Contractual Cash Obligations

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:

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

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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 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 increase in the prime interest rate would result in a pre-tax impact on earnings of approximately $0.07 million per year.

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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PART II–OTHER INFORMATION

On May 28, 2004, the Company held its 2004 Annual Meeting of Stockholders. At the Annual Meeting, the following six individuals, constituting the full Board of Directors of the Company, were nominated and elected to serve as the Directors of the Company:

In addition, the selection of BDO Seidman, LLP to serve as the Company’s independent auditors for 2004 was ratified:

No other matters were submitted to a vote of stockholders.

Current report on Form 8-K dated May 5, 2004 was furnished under Item 12 of Form 8-K, setting forth the press release containing information to the Company’s financial results for the three months ended March 31, 2004. The current report on Form 8-K is not deemed to be incorporated by reference by any filings made by the Company with the Securities and Exchange Commission.

Current report on Form 8-K dated June 23, 2004 was filed under Item 5 of Form 8-K, setting forth the announcement of the addition of a new director.

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SIGNATURES

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

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Exhibit Index

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