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 December 31, 2001
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
650 Ten Rod Road
North Kingstown, RI 02852
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(Address of principal executive offices)
(401) 295-2691
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(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 December 31, 2001 was 3,963,940.
1
Access Solutions International, Inc.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed balance sheets--December 31, 2001 (unaudited)
and June 30, 2001 3
Condensed (unaudited) statements of operations --Three
months and six months ended December 31, 2001 and 2000 5
Condensed (unaudited) statements of cash flows -- Six
months ended December 31, 2001 and 2000 6
Notes to unaudited condensed financial
statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
Access Solutions International, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Access Solutions International, Inc.
Condensed Balance Sheets
December 31, June 30,
2001 2001
---------- ----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $2,194,663 $2,426,279
Trade accounts receivable, net of allowance for
doubtful accounts of $2,000 and $4,344 126,443 191,145
Inventories 15,003 21,472
Prepaid expenses and other current assets 202,871 32,819
---------- ----------
Total current assets 2,538,980 2,671,715
Fixed assets, net 3,305 6,038
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Total assets $2,542,285 $2,677,753
========== ==========
See notes to unaudited condensed financial statements.
3
Access Solutions International, Inc.
Condensed Balance Sheets
December 31, June 30,
2001 2001
------------ ------------
(Unaudited)
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 151,802 $ 218,103
Accrued salaries and wages 23,310 29,341
Accrued expenses 78,942 65,471
Provision for income taxes -- 95,000
Deferred revenue-prepaid service contracts 367,055 367,951
------------ ------------
Total current liabilities 621,109 775,866
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Total liabilities 621,109 775,866
------------ ------------
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 (15,738,114) (15,757,403)
------------ ------------
1,939,232 1,919,943
Treasury stock, at cost (1,259 shares) (18,056) (18,056)
------------ ------------
Total stockholders' equity 1,921,176 1,901,887
------------ ------------
Total liabilities and stockholders' equity $ 2,542,285 $ 2,677,753
============ ============
Note: The balance sheet at June 30, 2001 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)
For the Three Months For the Six Months
Ended December 31, Ended December 31,
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net sales:
Products $ 7,661 $ 9,000 $ 12,576 $ 18,533
Services 161,059 207,497 325,089 414,592
----------- ----------- ----------- -----------
Total net sales 168,720 216,497 337,665 433,125
----------- ----------- ----------- -----------
Cost of sales:
Products 1,202 -- 1,317 245
Services 41,314 49,505 77,479 102,962
----------- ----------- ----------- -----------
Total cost of sales 42,516 49,505 78,796 103,207
----------- ----------- ----------- -----------
Gross profit 126,204 166,992 258,869 329,918
----------- ----------- ----------- -----------
Operating expenses:
Selling expense 33,123 33,557 66,980 66,089
General and administrative expense 121,998 75,843 267,891 242,301
----------- ----------- ----------- -----------
Total operating expenses 155,121 109,400 334,871 308,390
----------- ----------- ----------- -----------
Profit/(loss) from operations (28,917) 57,592 (76,002) 21,528
----------- ----------- ----------- -----------
Other revenue and (expense):
Interest income 19,392 4,402 48,052 4,482
Interest expense -- (145,597) -- (177,158)
Miscellaneous income 23,620 7,873 47,239 7,873
Other expense -- (41,263) -- (41,050)
----------- ----------- ----------- -----------
Total other revenue/(expense) 43,012 (174,585) 95,291 (205,853)
----------- ----------- ----------- -----------
Net income (loss) $ 14,095 ($ 116,993) $ 19,289 ($ 184,325)
=========== =========== =========== ===========
Primary net income (loss) per common share 0.00 (0.03) 0.00 (0.05)
Weighted average number of
common shares 3,963,940 3,963,940 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 Six Months Ended
December 31,
2001 2000
----------- -----------
Cash flows from operating activities
Net income (loss) $ 19,289 ($ 184,325)
----------- -----------
Adjustments to reconcile net loss to net cash used by
operating activities:
Loss on disposition of fixed assets -- 40,755
Depreciation and amortization 2,733 15,883
Decrease in provision for doubtful accounts - Trade (2,344) (13,167)
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable 67,046 (10,050)
Inventories 6,469 94
Prepaid expenses and other current assets (170,052) 621
Increase (decrease) in:
Accounts payable (66,301) (4,611)
Accrued expenses 7,440 (32,857)
Provision for income taxes (95,000)
Deferred revenue - prepaid service contracts (896) (40,597)
----------- -----------
NET Cash used by operating activities (231,616) (228,254)
----------- -----------
Cash flows from financing activities
Proceeds from notes payable for litigation advances -- 228,101
----------- -----------
Net Cash provided by financing activities -- 228,101
----------- -----------
Net decrease in cash (231,616) (153)
Cash and Cash equivalents, beginning of period 2,426,279 58,042
----------- -----------
Cash and cash equivalents, end of PERIOD $ 2,194,663 $ 57,889
=========== ===========
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 and six months ended
December 31, 2001 are not necessarily indicative of the results that may be
expected for the year ended June 30, 2002. 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, 2001.
2. Paperclip Merger, Management Agreements
On April 15, 1997, the Company and PaperClip entered into an agreement for the
Company to acquire substantially all the assets and liabilities of PaperClip,
which was later amended to change the acquisition to a merger. The Company and
PaperClip also entered into a management agreement (the "Management Agreement")
which allowed the Company to manage the day-to-day operations of PaperClip and
to advance funds on behalf of PaperClip pursuant to an operating budget, in each
case until the closing of the Merger or the termination of the Merger Agreement.
On January 29, 1997, the Company provided a $300,000 bridge loan to PaperClip
for use as operating capital in exchange for a 12% convertible note from
PaperClip secured by substantially all the assets of PaperClip. In addition, the
Company had made unsecured advances to PaperClip of $140,813, $1,252,689, and
$529,052 during the years ended June 30, 1999, 1998 and 1997, respectively, for
funding of working capital requirements.
The Company and PaperClip also entered into a one-year distribution agreement
effective June 1, 1997 pursuant to which the Company acted as a distributor for
PaperClip's products in the United States to dealers and resellers.
Ultimately, the merger agreement was terminated on August 24, 1998. Accordingly,
the Company wrote off approximately $2,443,000 effective June 30, 1998 and
approximately $141,000 effective June 30, 1999 in connection with the terminated
merger.
In November of 2000, PaperClip Software Inc. and ASI entered into an agreement
whereby the indebtedness to ASI in the amount of $300,000, plus all accrued
interest through December 31, 1999 in the amount of $105,300, will be paid for
by the execution and delivery of a new promissory note from PaperClip to ASI in
the aggregate principal amount of $405,300. All amounts due under the new Note
will be paid for over a period of three (3) years in thirty-six (36) equal
installments of $11,265 beginning on January 1, 2001. The outstanding balance on
the note at December 31, 2001 is approximately $270,000. Although payments on
the note are current, ASI has fully reserved for the value of the new promissory
note due to PaperClip's poor financial condition.
7
As a result of advances issued to PaperClip from November 12, 1997 through
August 24, 1998, PaperClip was indebted to ASI in the amount of $2,305,506
including accrued interest through December 31, 1999. In November 2000, ASI
exchanged the above indebtedness for 3,649,543 shares of PaperClip's Series A
Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"). Each
share of Preferred Stock is convertible into one share of PaperClip's common
stock ("common stock") subject to anti-dilution protection in the event of a
stock split, stock dividend, recapitalization or similar change to the capital
structure of PaperClip. The shares are convertible at anytime at ASI's option or
at PaperClip's option, provided that immediately prior to conversion, the common
stock had traded for not less than 60 consecutive days at a closing price of
150% of the implied conversion price. The implied conversion price was derived
by dividing the amount of the additional indebtedness by the number of shares of
common stock issuable upon conversion by ASI of the preferred stock. The
"Converted Shares" would equal 27.5% of the then outstanding Common Stock. The
holders of the converted common stock would have piggy back registration rights
on the Converted Shares underlying the Preferred Stock. Such piggy-back
registration rights on the converted stock would expire with respect to the
holder when such shares were eligible for sale pursuant to Rule 144(k)
promulgated and the rules and regulations of the Securities Act of 1933. The
preferred stock is not entitled to dividends and will have a liquidation
preference equal to $2,305,506. No value has been recorded on the Company's
financial statements for this investment due to PaperClip's deteriorating stock
value and its poor financial condition.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
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Overview
ASI's net sales consist of sales primarily of support and services. Products
sold by ASI consist of COLD systems, software and hardware including replacement
disk drives, subassemblies and miscellaneous peripherals. Support and services
rendered by ASI include post-installation maintenance and support. ASI
recognizes revenue from customers upon installation of COLD systems and, in the
case of COLD systems installed for evaluation, upon acceptance by such customers
of the products. ASI had no system sales in the current year. ASI sells extended
service contracts on the majority of the products it has sold. Such contracts
are one year in duration with payments received either annually in advance of
the commencement of the contract or quarterly in advance. ASI recognizes revenue
from service contracts on a straight-line basis over the term of the contract.
The unearned portion of the service revenue is reflected as deferred revenue. As
of December 31, 2001, ASI had deferred revenue in the amount of $367,055.
ASI's operating results have in the past and may in the future fluctuate
significantly depending upon the renewal of service contracts; the competitive
technological advancements made by the industry; and the control of general and
administrative expenses. The revenue from service contracts is recognized on a
straight-line basis over the term of the contract.
ASI's primary operating expenses include maintenance and general and
administrative expenses. General and administrative expenses this fiscal year
consisted primarily of legal fees, employee compensation, office rental,
miscellaneous taxes and normal contractual services.
In the past, ASI has expended substantial development resources to meet customer
commitments. The majority of these services were provided at no charge to honor
commitments made for added features when the systems were sold. These resource
expenditures have in the past placed a high overhead burden on the GIGAPAGE
product line offerings. After completion of GIGAPAGE 3.0, which occurred at the
end of the second quarter of Fiscal 1998, management concluded that all
significant product commitments had been met. In the future, development of any
new features will not be initiated unless customers make a financial commitment
to cover the minimum engineering costs.
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 and Six Months Ended December 31, 2001 Compared to Three Months and
Six Months Ended December 31, 2000
Net Sales
Net sales for the three months ended December 31, 2001 were $168,720 compared
with $216,497 for the three months ended December 31, 2000, a decrease of
$47,777 or 22%, and $337,665 for the six months ended December 31, 2001,
compared with $433,125 for the six months ended December 31, 2000, a decrease of
$95,460 or 22%. Product sales were $7,661 for the second quarter of Fiscal 2002
compared with $9,000 for the second quarter of Fiscal 2001, a decrease of $1,339
or 15%, and $12,576 for the six months ended December 31, 2001 compared with
$18,533 for the six months ended December 31, 2000, a decrease of $5,957 or 32%.
Service revenues were $161,059 for the second quarter of Fiscal 2002, compared
with $207,497 for the second quarter of Fiscal 2001, a decrease of $46,438 or
22%, and $325,089 for the six months ended December 31, 2001 compared with
$414,592 for the six months ended December 31, 2000, a decrease of $89,503 or
22%. This decrease was primarily due to the consolidation of services to two
customers and the non-renewal of two maintenance contracts.
9
Cost of Sales
Cost of sales includes component costs, firmware license costs, labor, travel
and certain overhead costs. Cost of sales in the aggregate decreased 14% to
$42,516 for the three months ended December 31, 2001 from $49,505 for the three
months ended December 31, 2000 and decreased 24% to $78,796 for the six months
ended December 31, 2001 from $103,207 for the six months ended December 31,
2000. Cost of sales for services decreased 17% to $41,314 for the three months
ended December 31, 2001 from $49,505 for the three months ended December 31,
2000 and decreased 25% to $77,479 for the six months ended December 31, 2001
from $102,962 for the six months ended December 31, 2000, primarily due to lower
sales and favorable renegotiated third-party contracts.
General and Administrative Expenses
General and administrative expenses consist of administrative expenses and
technical support. General and administrative expenses increased 61% or $46,155
to $121,998 for the three months ended December 31, 2001 from $75,843 for the
three months ended December 31, 2000 and increased 11% or $25,590 to $267,891
for the six months ended December 31, 2001 from $242,301 for the six months
ended December 31, 2000. This increase was primarily due to higher fees for
normal contractual services and miscellaneous state sales taxes
Selling Expenses
Selling expenses decreased by $434 or 1% to $33,123 for the three months ended
December 31, 2001 from $33,557 for the three months ended December 31, 2000,
while increasing by $891 or 1% to $66,980 for the six months ended December 31,
2001 from $66,089 for the six months ended December 31, 2000.
Other Income and Expenses
Other income and expenses consisted primarily of interest income and interest
expense. Interest income increased $14,990 from $4,402 for the three months
ended December 31, 2000 to $19,392 for the three months ended December 31, 2001
and increased $43,570 from $4,482 for the six months ended December 31,2000 to
$48,052 for the six months ended December 31, 2001. This increase was due to
interest earned on the cash received as the result of a legal settlement
agreement with Anacomp, Inc. and the Eastman Kodak Company in May, 2001.
Interest expense decreased 100% to $0 for the three months ended December 31,
2001 from $145,597 for the three months ended December 31, 2000 and decreased
100% to $0 for the six months ended December 31, 2001 from $177,158 for the six
months ended December 31, 2000. This elimination of interest expense is the
result of the retirement of an outstanding note in May, 2001. Miscellaneous
income for the second quarter of Fiscal 2002 increased $15,747 to $23,620 from
$7,873 for the second quarter of Fiscal 2001 and increased $39,366 to $47,239
for the six months ended December 31, 2001 from $7,873 for the six months ended
December 31, 2000. This represents principal repayments on the note receivable
from PaperClip Software, Inc., which is fully reserved for as of December 31,
2001. Other expense for the three months and six months ended December 31, 2000
was $41,263 and $41,050, respectively. This expense was related to the disposal
of certain fixed assets. There were no similar charges made in Fiscal 2002.
Consequently, other income and expenses in the aggregate improved $217,597 to
$43,012 income for the three months ended December 31, 2001 from a loss of
$174,585 for the three months ended December 31, 2000 and $301,144 to $95,291
income for the six months ended December 31, 2001 from a loss of $205,853 for
the six months ended December 31, 2000.
Net Income (Loss)
As a result of the foregoing, ASI realized a net profit of $14,095 ($.00 per
share on 3,963,940 weighted average shares outstanding) for the three months
ended December 31, 2001, an increase of $131,088 from a net loss of $116,993
($.03 loss per share on 3,963,940 weighted average shares outstanding) during
the three months ended December 31, 2000 and a net profit of $19,289 ($.00 per
share on 3,963,940 weighted average shares outstanding) for the six months ended
December 31, 2001, an increase of $203,614 from a net loss of $184,325 ($.05
loss per share on 3,963,940 weighted average shares outstanding) during the six
months ended December 31, 2000.
10
Liquidity and Capital Resources
ASI had a working capital surplus of $1,917,871 as of December 31, 2001 compared
to a working capital deficit of $788,556 at December 31, 2000.
Total cash used by operating activities during the six-month period ended
December 31, 2001 was $231,616, compared to $228,254 during the six-month period
ended December 31, 2000. For the six months ended December 31, 2001, the major
use of cash was a pre-payment of income taxes and the repayment of old payables.
The major use of cash for the six months ended December 31, 2000 was primarily a
reduction in pre-paid service contracts.
No cash was provided by financing activities during the six months ended
December 31, 2001. In comparison, $228,101 was provided by financing activities
for the six-month period ended December 31, 2000, the result of an increase in a
long term note payable. This debt was retired in May, 2001.
In previous years, ASI has suffered recurring losses from operations, has had an
accumulated deficit, and has incurred negative cash flows from operating
activities. Without the proceeds from the settlement mentioned above, the
recurring losses and negative cash flow from operating activities would raise
substantial doubt about the Company's ability to continue as a going concern.
However, the cash received from the settlement has provided the Company the
opportunity to reevaluate its market position and opportunities and maintain a
sufficient level of working capital to continue as a going concern for at least
the remainder of the current fiscal year.
Seasonality and Inflation
To date, seasonality and inflation have not had a material effect on ASI's
operations.
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. ASI cautions that a number
of important factors could cause actual results for Fiscal 2002 and beyond to
differ materially from those expressed in any forward-looking statements made by
or on behalf of ASI. Such statements contain a number of risks and
uncertainties, including, but not limited to the outcome of management's
assessment of ASI's long-term strategic alternatives, ongoing capital needs,
variable operating results, dependence on ASI's COLD system product, competing
with rapid technological change and new product development, reliance on single
or limited sources of supply, intense competition, turnover in management,
dependence on significant customers and dependence on key personnel. ASI cannot
assure that it will be able to anticipate or respond timely to changes that
could adversely affect its operating results in one or more fiscal quarters.
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.
Recent Developments
In November of 2000, PaperClip Software, Inc. and ASI entered into an agreement
whereby the indebtedness to ASI in the amount of $300,000, plus all accrued
interest through December 31, 1999 in the amount of $105,300, will be paid for
by the execution and delivery of a new promissory note from PaperClip to ASI in
the aggregate principal amount of $405,300. All amounts due under the new Note
are to be paid for over a period of three (3) years in thirty-six (36) equal
installments of $11,265 beginning on January 1, 2001. Although payments are
current on the note, ASI has fully reserved for the value of the new promissory
note due to PaperClip's poor financial condition.
11
As a result of advances issued to PaperClip from November 12, 1997 through
August 24, 1998, PaperClip is indebted to ASI in the amount of $2,305,506
including interest. ASI will exchange the above indebtedness for shares of a new
class of PaperClip convertible preferred stock (the "Preferred Stock"). Each
share of Preferred Stock will be convertible into one share of PaperClip's
common stock ("common stock") subject to anti-dilution protection in the event
of a stock split, stock dividend, recapitalization or similar change to the
capital structure of PaperClip. The shares are convertible at anytime at ASI's
option or at PaperClip's option, provided that immediately prior to conversion,
the common stock has traded for not less than 60 consecutive days at a closing
price of 150% of the implied conversion price. The implied conversion price is
derived by dividing the amount of the additional indebtedness by the number of
shares of common stock issuable upon conversion by ASI of the preferred stock.
The "Converted Shares" would equal 27.5% of the then outstanding Common Stock.
The holders of the converted common stock will have piggyback registration
rights on the Converted Shares underlying the Preferred Stock. Such piggy back
registration rights on the converted stock will expire with respect to the
holder when such shares are eligible for sale pursuant to Rule 144(k)
promulgated and the rules and regulations of the Securities Act of 1933. The
preferred stock will not be entitled to dividends and will have a liquidation
preference equal to $2,305,506. No value has been recorded on the Company's
financial statements for this investment due to PaperClip's deteriorating stock
value and its poor financial condition.
On April 23, 2001, ASI announced that it had received a monetary settlement
pursuant to a signed settlement agreement with Anacomp, Inc. ("Anacomp") and
Kodak. As a result of this settlement, ASI also announced that management would
be assessing strategic alternatives which will best benefit its shareholders,
customers and employees.
12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the issuer
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Access Solutions International, Inc.
Date: January 31, 2002 By: /s/ Robert H. Stone
-----------------------
Robert H. Stone
President and CEO
14