United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
-----------
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period ended September 30, 2002
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 0-28920
Access Solutions International, Inc.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 05-0426298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
850 Main Street
East Greenwich, Rhode Island 02818
----------------------------------------
(Address of principal executive offices)
(401) 885-5544
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
The number of shares of the issuer's Common Stock, $.0l par value, outstanding
as of September 30, 2002 was 3,963,940.
Access Solutions International, Inc.
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Condensed balance sheets--September 30, 2002 (unaudited)
and June 30, 2002 3
Condensed (unaudited) statements of operations --Three
months ended September 30, 2002 and 2001 5
Condensed (unaudited) statements of cash flows -- Three
months ended September 30, 2002 and 2001 6
Notes to unaudited condensed financial statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 4. Controls and Procedures 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 21
Access Solutions International, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Access Solutions International, Inc.
Condensed Balance Sheets
September 30, June 30,
2002 2002
---------- ----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $2,199,427 $2,350,692
Trade accounts receivable, net of allowance for
doubtful accounts of $2,000 and $17,375,
respectively 17,204 290,668
Inventories -- 15,003
Prepaid expenses and other current assets 42,537 18,287
---------- ----------
Total current assets 2,259,168 2,674,650
Fixed assets, net 1,023 1,798
---------- ----------
Total assets $2,260,191 $2,676,448
========== ==========
See notes to unaudited condensed financial statements.
3
Access Solutions International, Inc.
Condensed Balance Sheets
September 30, June 30,
2002 2002
------------ ------------
(Unaudited)
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable $ 149,186 $ 147,156
Accrued salaries and wages 21,356 22,069
Accrued expenses 43,479 65,004
Deferred revenue-prepaid service contracts -- 432,918
------------ ------------
Total current liabilities 214,021 667,147
------------ ------------
Total liabilities 214,021 667,147
------------ ------------
Stockholders' equity:
Common Stock, $.01 par value, 13,000,000
shares authorized, 3,965,199 shares issued 39,652 39,652
Additional paid-in capital 17,637,694 17,637,694
Accumulated deficit (15,613,120) (15,649,989)
------------ ------------
Total 2,064,226 2,027,357
Treasury stock, at cost (1,259 shares) (18,056) (18,056)
------------ ------------
Total stockholders' equity 2,046,170 2,009,301
------------ ------------
Total liabilities and stockholders' equity $ 2,260,191 $ 2,676,448
============ ============
Note: The balance sheet at June 30, 2002 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to unaudited condensed financial statements.
4
Access Solutions International, Inc.
Condensed Statements of Operations (Unaudited)
Three months ending
September 30,
2002 2001
----------- -----------
Net sales:
Products $ -- $ 4,915
Services 18,000 164,030
----------- -----------
Total net sales 18,000 168,945
----------- -----------
Cost of sales:
Products -- 115
Services 11,829 36,165
----------- -----------
Total cost of sales 11,829 36,280
----------- -----------
Gross profit 6,171 132,665
----------- -----------
Operating expenses:
General and administrative expense 108,327 145,895
Selling expense 564 33,857
----------- -----------
Total operating expenses 108,891 179,752
----------- -----------
Profit/(Loss) from operations (102,720) (47,087)
----------- -----------
Other revenue and (expenses):
Gain on sale of service contracts, net of related
expenses 97,968 --
Interest income 18,001 28,661
Miscellaneous income 23,620 23,620
Total other revenue (expenses)
139,589 52,281
----------- -----------
Net income $ 36,869 5,194
=========== ===========
Primary net loss per common share $ .01 $ .00
=========== ===========
Weighted average number of
common shares 3,963,940 3,963,940
=========== ===========
See notes to unaudited condensed financial statements.
5
Access Solutions International, Inc.
Condensed Statements of Cash Flows (Unaudited)
For the Three Months Ended
September 30,
Cash flows from operating activities
Net income $ 36,869 $ 5,194
----------- -----------
Adjustments to reconcile net loss to net cash used by
operating activities:
Gain on sale of service contracts (97,968) --
Depreciation and amortization 775 1,367
Provision for doubtful accounts (15,375) (2,344)
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade accounts receivable 288,839 98,086
Inventories -- (485)
Prepaid expenses and other current assets (15,697) (172,520)
Increase (decrease) in:
Accounts payable 2,030 (37,023)
Accrued expenses (22,238) (6,274)
Provision for income taxes -- (95,000)
Deferred revenue - prepaid service contracts -- (67,854)
----------- -----------
Net Cash provided by (used FOR)
OPERATING ACTIVITIES 177,235 (276,853)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for settlement on sale of service contracts (262,656) --
Payment for service expenses incurred in association
with sale of service contracts (65,844) --
----------- -----------
Net Cash used FOR Investing ACTIVITIES (328,500) --
----------- -----------
Net (decrease) in cash and cash
equivalents (151,265) (276,853)
Cash and cash equivalents, BEGINNING 2,350,692 2,426,279
----------- -----------
Cash and cash equivalents, ending $ 2,199,427 $ 2,149,426
=========== ===========
See notes to unaudited condensed financial statements.
6
Access Solutions International, Inc.
Notes to Unaudited Condensed Financial Statements
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10-01 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended September 30, 2002
are not necessarily indicative of the results that may be expected for the year
ended June 30, 2003. For further information, refer to the financial statements
and footnotes thereto included in the Access Solutions International, Inc.
("ASI") annual report on Form 10-KSB for the year ended June 30, 2002.
2. Recent Developments
On September 18, 2002, the Company announced that it had sold its remaining
hardware and software maintenance contracts to Computer Upgrade Corporation
(CUC), a privately owned, full service integrator specializing in proven
turn-key cross platform storage solutions, for consideration of one-half of the
gross margin on the contracts from July 1, 2002 through July 1, 2004. In
consideration of this agreement, Access Solutions paid CUC $262,656 representing
one-half of the accrued but unearned maintenance gross margin on the contracts
in force as of July 1, 2002. The Company had also incurred approximately $66,000
in service related expenses during the period of July 1, 2002 through August
2002 that were not reimbursed by CUC as part of the sale.
Having maximized the value of its maintenance contracts, the Board of Directors
unanimously approved a plan of complete liquidation and dissolution of the
Company (the "Plan"), subject to stockholder approval. The Company plans to sell
its remaining assets, including inventory, property and equipment and
intellectual property, discharge its liabilities and distribute the net proceeds
to stockholders. A proxy statement for a special meeting of stockholders to be
held on November 26, 2006 has been mailed to stockholders of the Company.
If stockholders approve the plan, the Company will file a Certificate of
Dissolution promptly after the stockholder vote, and stockholders will then be
eligible to share in the liquidation proceeds based on their proportionate
interest at the time. Holders of the Company's options will need to exercise
those options prior to the date the Certificate of Dissolution is filed in order
to share in the liquidation proceeds. Under Delaware law the Company will remain
in existence as a non-operating entity for three years from the date the Company
files a Certificate of Dissolution in Delaware, and will maintain a certain
level of reserves to cover any remaining liabilities and pay operating costs
during the dissolution period. During the dissolution period, the Company will
attempt to convert its remaining assets into cash and settle its liabilities as
expeditiously as possible.
Assuming stockholder approval of the Plan, the Board of Directors currently
anticipates that an initial distribution of liquidation proceeds will be made to
stockholders within 75 days after the stockholder's meeting. A portion of the
Company assets will be held in a contingency reserve, and the Board of Directors
anticipates that stockholders could periodically receive additional
distributions subsequent to the initial distribution.
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
-------------------------------------------------------------------------------
Overview
ASI assembled and supported mainframe information storage and retrieval systems,
including both software and hardware, for large companies. ASI's COLD and
optical disk storage systems, which were marketed under the brand names OAS and
GIGAPAGE, and GIGAPAGE DASDI, were sold principally to a limited number of large
organizations that had the need to store and retrieve large quantities of
computer-generated data. ASI had no system sales in the current quarter. ASI
also sold extended service contracts on the majority of the products it has
sold. Such contracts were generally one year in duration with payments received
in advance of the commencement of the contract. ASI recognized revenue from
service contracts on a straight-line basis over the term of the contract. The
unearned portion of the service revenue was then reflected as deferred revenue.
As of September 30, 2002, ASI had no deferred revenue since all the service
contracts had been sold as of July 1, 2002 and the Company's share of that
revenue has been recognized.
ASI's primary operating expenses include maintenance and general and
administrative expenses. General and administrative expenses in the first
quarter consisted primarily of employee compensation, insurance premiums, office
rental and normal contractual services.
On September 18, 2002, the Company announced that it had sold all of its
remaining hardware and software maintenance contracts to Computer Upgrade
Corporation, a full service integrator specializing in proven turn-key cross
platform storage solutions for consideration of one-half of the gross margin on
the contracts from July 1, 2002 through July 1, 2004.
The Company also announced that its Board of Directors had unanimously approved
a plan of complete liquidation and dissolution of the Company, subject to
stockholder approval. A proxy statement for a special meeting of stockholders to
be held on November 26, 2002 has been mailed to the stockholders of the Company.
The Company plans to sell its remaining assets including any inventory, property
and equipment, and intellectual property, discharge its liabilities and
distribute the net proceeds to stockholders over a period of up to three years.
If stockholders approve the plan, the Company will file a Certificate of
Dissolution promptly after the stockholder vote, and stockholders will then be
eligible to share in the liquidation proceeds based on their proportionate
interest at the time. Holders of the Company's options will need to exercise
those options prior to the date the Certificate of Dissolution is filed in order
to share in the liquidation proceeds. Under Delaware law the Company will remain
in existence as a non-operating entity for three years from the date the Company
files a Certificate of Dissolution in Delaware, and will maintain a certain
level of reserves to cover any remaining liabilities and pay operating costs
during the dissolution period. During the dissolution period, the Company will
attempt to convert its remaining assets into cash and settle its liabilities as
expeditiously as possible.
Assuming stockholder approval of the Plan, the Board of Directors currently
anticipates that an in initial distribution of liquidation proceeds will be made
to stockholders within 75 days after the stockholder's meeting. A portion of the
Company's assets will be held in a contingency reserve, and the Board of
Directors anticipates that stockholders could periodically receive additional
distributions subsequent to the final distribution.
8
Results of Operations
The following discussion should be read in conjunction with the unaudited
condensed financial statements and notes thereto of Access Solutions
International, Inc. contained elsewhere herein.
Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001
Net Sales
Net sales for the three months ended September 30, 2002 were $18,000 compared
with $168,945 for the three months ended September 30, 2001, a decrease of
$150,945 or 89%. There were no product sales for the first quarter of Fiscal
2003, compared with $4,915 for the first quarter of Fiscal 2002. Service
revenues were $18,000 for the first quarter of Fiscal 2003 compared with
$164,030 for the first quarter of Fiscal 2002, a decrease of $146,030 or 86%.
This decrease resulted from the sale of all existing prepaid maintenance
contracts as of July 1, 2002. Service revenue for the quarter ended September
30, 2002 was derived from the performance of non-contractual services for one
customer.
Cost of Sales
Cost of sales includes component costs, labor, travel and certain overhead
costs. Costs of sales in the aggregate decreased 67% to $11,829 for the three
months ended September 30, 2002 from $36,280 for the three months ended
September 30, 2001.
The cost of product sales decreased 100% to $0 for the three months ended
September 30, 2002 from $115 for the three months ended September 30, 2001. The
decrease in product-related cost of sales was a result of no product sales in
the first quarter of Fiscal 2003. The cost of services decreased by 67% to
$11,829 for the three months ended September 30, 2002 from $36,165 for the three
months ended September 30, 2001, due to elimination of all costs associated with
the maintenance contracts that were sold as of July 1, 2002. Those costs
incurred during the quarter ended September 30, 2002 were directly related to
the performance of non-contractual service calls.
General and Administrative Expenses
General and administrative expenses this fiscal year consisted primarily of
legal fees, employee compensation, office rental and normal contractual
services. General and administrative expenses decreased 26% or $37,568 to
$108,327 for the three months ended September 30, 2002 from $145,895 for the
three months ended September 30, 2001. This decrease was primarily due to
reduced personnel costs and lower state tax expense.
Selling Expenses
Selling and customer service expenses decreased $33,293 or 98% to $564 for the
three months ended September 30, 2002 from $33,857 for the three months ended
September 30, 2001. This decrease was directly the result of the sale of ASI's
maintenance contracts.
9
Other Income and Expenses
Other income and expenses consisted of the gain on the sale of ASI's maintenance
business, payments on the PaperClip's note, and interest income. For the quarter
ended September 30, 2002, ASI realized a net gain of $97,968 on the sale of its
prepaid hardware and software maintenance contracts. Interest income decreased
$10,660 from $28,661 for the three months ended September 30, 2001 to $18,001
for the three months ended September 30, 2002. This decrease was attributed to
lower interest rates. Miscellaneous income of $23,620 remained unchanged for the
quarter ended September 30, 2002 from the quarter ended September 30, 2001. For
both years, this income represented 3 monthly repayments of principal on the
note receivable from PaperClip Software, Inc., which is fully reserved for as of
September 30, 2002. Consequently, other income and expenses in the aggregate
increased $83,308 or 167% to $139,589 income for the three months ended
September 30, 2002 from income of $52,281 for the three months ended September
30, 2001.
Net Income (Loss)
As a result of the foregoing, ASI realized a net profit of $38,869 ($.01 per
share on 3,963,940 weighted average shares outstanding) for the three months
ended September 30, 2002, an increase of $31,675 from a net profit of $5,194
($.00 per share on 3,963,940 weighted average shares outstanding) during the
three months ended September 30, 2001.
Liquidity and Capital Resources
ASI had a working capital surplus of $2,045,147 as of September 30, 2002
compared to a working capital surplus of $1,902,410 at September 30, 2001.
Total cash provided by operating activities during the three-month period ended
September 30, 2002 was $177,235, compared to the three-month period ended
September 30, 2001 in which operating activities used a total of $276,853. For
the three months ended September 30, 2002, the major use of cash was related to
the sale of ASI's maintenance contracts to Computer Upgrade Corporation, which
includes customer service related costs, and the settlement price. Cash used
during the three-month period ended September 30, 2001 was primarily the result
of the prepayment of income taxes, the repayment of old payables and a reduction
in prepaid service contracts.
Seasonality and Inflation
To date, seasonality and inflation have not had a material effect on ASI's
operations.
10
Forward Looking Statements
Statements contained in this Form 10-QSB that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. In addition, words such as
"believes", "will", "should", "anticipates", "expects" and similar expressions
are intended to identify forward looking statements. These statements are based
on current information that we have assessed but which by its nature is dynamic
and subject to rapid and even abrupt changes. Such statements contain a number
of risks and uncertainties, including, but not limited to the announced sale of
the Company's remaining hardware and software maintenance contracts and the plan
of complete liquidation and dissolution of the Company, subject to stockholder
approval. ASI cautions that its actual results could differ materially from
those stated or implied by our forward-looking statements due to risks and
uncertainties associated with the wind down of our business. Results of
operations in any past period should not be considered indicative of results to
be expected in future periods. Fluctuations in operating results may result in
fluctuations in the price of ASI's securities.
Risk Factors
This Quarterly Report on Form 10-Q contains certain forward looking statements,
including statements concerning the Company's future financial results from the
sale of assets and settlement of liabilities, dissolution proceedings, and
distribution of proceeds to stockholders. Some remaining assets of the Company
may be difficult for us to convert into cash, and we can make no assurance that
we will receive any material amounts in respect of such assets. No assurance can
be given that the amount to be received in liquidation will equal or exceed the
price or prices at which the Common Stock traded prior to our dissolution. In
addition, you should keep in mind that the risks described in the Annual Report
Form10-K are not the only risks that we face. The risks described in the Annual
Report 10-K are the risks that we currently believe are material to the Company.
However, additional risks not presently known to us, or risks that we currently
believe are immaterial, may also impair our ability to distribute proceeds to
our stockholders. You should also refer to the other information set forth in
the Annual Report Form 10-K, including the discussions set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as our financial statements and the related
notes.
There can be no assurance that the liquidation value per share of Common Stock
in the hands of the stockholders will equal or exceed the price or prices at
which the Common Stock has recently traded or may trade at in the future, or
that the liquidation value will exceed zero. However, the Board of Directors
believes that it is in the best interests of the Company and its stockholders to
distribute to the stockholders the Company's net assets, if any, pursuant to the
Plan. If the Plan is not ratified and approved by the stockholders, the Board of
Directors will explore what, if any, alternatives are available for the future
of the Company, particularly in light of the fact that the Company has
consummated the sale of a substantial portion of its assets as of September 18,
2002.
11
CERTIFICATION
Each of the undersigned, being the Chief Executive Officer and the Chief
Financial Officer of Access Solutions, Inc., certify that:
1. I have reviewed this annual report on Form 10-QSB of Access
Solutions, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
/s/ Robert H. Stone
-----------------------------------------
Robert H. Stone
President and Chief Executive Officer
/s/ Thomas E. Gardner
------------------------------------------
Thomas E. Gardner
Chief Financial Officer and Treasurer
12