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 March 31, 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.)
650 Ten Rod Road
North Kingstown, RI 02852
----------------------------------------
(Address of principal executive offices)
(401) 295-2691
--------------------------
(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 March 31, 2002 was 3,963,940.
Access Solutions International, Inc.
INDEX
-----
PART I. FINANCIAL INFORMATION PAGE
--------------------- ----
Item 1. Financial Statements
Condensed balance sheets--
March 31, 2002 (unaudited)and June 30, 2001 3
Condensed (unaudited) statements of operations--
Three months and nine months
ended March 31, 2002 and 2001 5
Condensed (unaudited) statements of cash flows--
Nine months ended March 31, 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 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
March 31, June 30,
2002 2001
----------- ----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $2,338,851 $2,426,279
Trade accounts receivable, net of allowance for
doubtful accounts of $17,375 and $4,344 71,002 191,145
Inventories 15,003 21,472
Prepaid expenses and other current assets 14,988 32,819
------------ ----------
Total current assets 2,439,844 2,671,715
Fixed assets, net 2,104 6,038
------------ ----------
Total assets $2,441,948 $2,677,753
============ ==========
See notes to unaudited condensed financial statements.
3
Access Solutions International, Inc.
Condensed Balance Sheets
March 31, June 30,
2002 2001
----------- -----------
(Unaudited)
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 137,312 $ 218,103
Accrued salaries and wages 21,626 29,341
Accrued expenses 57,481 65,471
Provision for income taxes -- 95,000
Deferred revenue-prepaid service contracts 275,418 367,951
Total current liabilities 491,837 775,866
------------ -----------
Total liabilities 491,837 775,866
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 (15,709,179) 15,757,403
------------ -----------
1,968,167 1,919,943
Treasury stock, at cost (1,259 shares) (18,056) (18,056)
------------ -----------
Total stockholders' equity 1,950,111 1,901,887
------------ -----------
Total liabilities and stockholders' equity $ 2,441,948 $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 Nine Months
Ended March 31, Ended March 31,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net sales:
Products $ 3,750 $ 3,750 $ 16,326 $ 25,143
Services 175,343 194,913 500,433 606,644
----------- ----------- ----------- -----------
Total net sales 179,093 198,663 516,759 631,787
----------- ----------- ----------- -----------
Cost of sales:
Products -- -- 1,317 245
----------- ----------- ----------- -----------
Services 42,544 38,470 120,024 141,432
----------- ----------- ----------- -----------
Total cost of sales 42,544 38,470 121,341 141,677
----------- ----------- ----------- -----------
Gross profit 136,549 160,193 395,418 490,110
----------- ----------- ----------- -----------
perating expenses:
Selling expense 30,037 30,405 97,016 96,495
General and administrative expense 118,490 99,371 386,382 283,548
----------- ----------- ----------- -----------
Total operating expenses 148,527 129,776 483,398 380,043
----------- ----------- ----------- -----------
(Loss) profit from operations (11,978) 30,417 (87,980) 110,067
----------- ----------- ----------- -----------
Other (revenue) and expense:
Interest income (17,293) (7,445) (65,345) (11,926)
Interest expense -- 45,580 -- 222,738
Miscellaneous income (23,620) (15,746) (70,859) (23,620)
Other expense -- 26,041 -- 125,212
----------- ----------- ----------- -----------
Total other (revenue)/expense (40,913) 48,430 (136,204) 312,404
----------- ----------- ----------- -----------
Net income (loss) $ 28,935 ($ 18,013) $ 48,224 ($ 202,337)
----------- ----------- ----------- -----------
Primary net income (loss) per common share 0.01 (0.00) 0.01 (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 Nine Months Ended
March 31,
2002 2001
----------- -----------
Cash flows from operating activities
Net income (loss) $ 48,224 ($ 202,337)
----------- -----------
Adjustments to reconcile net loss to net cash used by
operating activities:
Loss on disposition of fixed assets -- 40,755
Depreciation and amortization 3,934 17,624
Increase (decrease) in provision for doubtful accounts-Trade 13,031 (8,167)
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable 107,112 244,312
Inventories 6,469 (1,142)
Prepaid expenses and other current assets 17,831 7,012
Increase (decrease) in:
Accounts payable (80,791) (153,821)
Accrued expenses (15,705) (51,268)
Provision for income taxes (95,000)
Deferred revenue - prepaid service contracts (92,533) (105,291)
----------- -----------
NET Cash used by operating activities (87,428) (212,323)
----------- -----------
Cash flows from financing activities
Proceeds from notes payable for litigation advances -- 294,428
Net Cash provided by financing activities -- 294,428
Net (decrease) INCREASE in cash (87,428) 82,105
Cash and Cash equivalents, beginning of period 2,426,279 58,042
----------- -----------
Cash and cash equivalents, end of period $ 2,338,851 $ 140,147
=========== ===========
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 nine months ended
March 31, 2002 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 March 31, 2002 is approximately $222,000. 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 March 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
-----------------------------------------------------------
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 March 31, 2002, ASI had deferred revenue in the amount of $275,418.
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 Nine Months Ended March 31, 2002 Compared
to Three Months and Nine Months Ended March 31, 2001
Net Sales
---------
Net sales for the three months ended March 31, 2002 were $179,093 compared with
$198,663 for the three months ended March 31, 2001, a decrease of $19,570 or
10%, and $516,759 for the nine months ended March 31, 2002, compared with
$631,787 for the nine months ended March 31, 2001, a decrease of $115,028 or
18%. Product sales were $3,750 for the third quarters of both Fiscal 2002 and
2001 and $16,326 for the nine months ended March 31, 2002 compared with $25,143
for the nine months ended March 31, 2001, a decrease of $8,817 or 35%. Service
revenues were $175,343 for the third quarter of Fiscal 2002, compared with
$194,913 for the third quarter of Fiscal 2001, a decrease of $19,570 or 10%, and
$500,433 for the nine months ended March 31, 2002 compared with $606,644 for the
nine months ended March 31, 2001, a decrease of $106,211 or 18%. This decrease
was primarily due to the site consolidation by one customer and the decision by
three other customers not to continue their maintenance agreements.
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 increased 11% to
$42,544 for the three months ended March 31, 2002 from $38,470 for the three
months ended March 31, 2001 and decreased 14% to $121,341 for the nine months
ended March 31, 2002 from $141,677 for the nine months ended March 31, 2001.
Cost of sales for services increased 11% to $42,544 for the three months ended
March 31, 2002 from $38,470 for the three months ended March 31, 2001 and
decreased 15% to $120,024 for the nine months ended March 31, 2002 from $141,432
for the nine months ended March 31, 2001, primarily due to lower sales and
renegotiated third-party contracts.
General and Administrative Expenses
-----------------------------------
General and administrative expenses consist of administrative expenses and
technical support. General and administrative expenses increased 19% or $19,119
to $118,490 for the three months ended March 31, 2002 from $99,371 for the three
months ended March 31, 2001 and increased 36% or $102,834 to $386,382 for the
nine months ended March 31, 2002 from $283,548 for the nine months ended March
31, 2001. This increase was primarily due to higher insurance premiums,
additional accounting fees, miscellaneous state franchise taxes which were
unusually high due to the revenue received from the settlement of the
Anacomp/Kodak lawsuit, and bad debt expense associated with a contested
equipment lease.
Selling Expenses
----------------
Selling expenses decreased by $368 or 1% to $30,037 for the three months ended
March 31, 2002 from $30,405 for the three months ended March 31, 2001, while
increasing by $521 or 1% to $97,016 for the nine months ended March 31, 2002
from $96,495 for the nine months ended March 31, 2001.
Other Income and Expenses
-------------------------
Other income and expenses consisted primarily of interest income and interest
expense. Interest income increased $9,848 from $7,445 for the three months ended
March 31, 2001 to $17,293 for the three months ended March 31, 2002 and
increased $53,419 from $11,926 for the nine months ended March 31, 2001 to
$65,345 for the nine months ended March 31, 2002. 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 March 31, 2002
from $45,580 for the three months ended March 31, 2001 and decreased 100% to $0
for the nine months ended March 31, 2002 from $222,738 for the nine months ended
March 31, 2001. This elimination of interest expense is the result of the
retirement of an outstanding note in May, 2001. Miscellaneous income for the
third quarter of Fiscal 2002 increased $7,874 to $23,620 from $15,746 for the
third quarter of Fiscal 2001 and increased $47,239 to $70,859 for the nine
months ended March 31, 2002 from $23,620 for the nine months ended March 31,
2001. This primarily represents principal repayments on the note receivable from
PaperClip Software, Inc., which is fully reserved for as of March 31, 2002.
Other expense for the three months and nine months ended March 31, 2001 was
$26,041 and $125,212, respectively. This expense was related to legal expenses
associated with the patent litigation and 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 $89,343 to $40,913 of income for
the three months ended March 31, 2002 from a loss of $48,430 for the three
months ended March 31, 2001 and $448,608 to $136,204 of income for the nine
months ended March 31, 2002 from a loss of $312,404 for the nine months ended
March 31, 2001.
10
Income (Loss)
-------------
As a result of the foregoing, ASI realized a net profit of $28,935 ($.01 per
share on 3,963,940 weighted average shares outstanding) for the three months
ended March 31, 2002, an improvement of $46,948 from a net loss of $18,013 ($.00
loss per share on 3,963,940 weighted average shares outstanding) during the
three months ended March 31, 2001 and a net profit of $48,224 ($.01 per share on
3,963,940 weighted average shares outstanding) for the nine months ended March
31, 2002, an improvement of $250,561 from a net loss of $202,337 ($.05 loss per
share on 3,963,940 weighted average shares outstanding) during the nine months
ended March 31, 2001.
Liquidity and Capital Resources
-------------------------------
ASI had a working capital surplus of $1,948,007 as of March 31, 2002 compared to
a working capital deficit of $738,500 at March 31, 2001.
Total cash used by operating activities during the nine-month period ended March
31, 2002 was $87,428, compared to $212,323 during the nine-month period ended
March 31, 2001. For the nine months ended March 31, 2002, the major uses of cash
were a payment for income taxes, the repayment of old payables and a decrease in
deferred revenue from prepaid service contracts. The major uses of cash for the
nine months ended March 31, 2001 were primarily the repayment of old payables.
No cash was provided by financing activities during the nine months ended March
31, 2002. In comparison, $294,428 was provided by financing activities for the
nine-month period ended March 31, 2001, 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.
11
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-nine (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.
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.
/s/ Robert H. Stone
------------------------------------
Robert H. Stone
President and CEO
Date: April 12, 2002
14