SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
Access Solutions International, Inc.
------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
---
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, $0.01 par value, of Access Solutions International, Inc.
("ASI Common Stock")
(2) Aggregate number of securities to which transaction applies:
4,538,940 shares of ASI Common Stock
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
The filing fee of $318.00 was calculated pursuant to Rule 0-11(c)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), by multiplying 1/50th of 1% by the aggregate of the cash and
value of the securities and other property estimated to be distributed
to security holders.
(4) Proposed maximum aggregate value of transaction: $1,588,629
(5) Total fee paid: $318.00
[ ] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$250.00
(2) Form, Schedule or Registration Statement No.:
Preliminary Proxy Statement on Schedule 14A
(3) Filing Party:
Access Solutions International, Inc.
(4) Date Filed:
October 8, 2002
Access Solutions International, Inc.
650 Ten Rod Road
North Kingstown, RI 02852
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 26, 2002
To the Stockholders of
Access Solutions International, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Access
Solutions International, Inc., a Delaware corporation (the "Company" or "ASI"),
will be held on Tuesday, November 26, 2002, at 10:00 a.m. local time, at the
offices of Edwards & Angell, LLP, 2800 Financial Plaza, Providence, Rhode
Island, to consider and vote upon the following proposals:
1. To ratify and approve the Plan of Complete Liquidation and Dissolution
of the Company, substantially in the form of Exhibit A attached to the
accompanying Proxy Statement.
2. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Only stockholders of record at the close of business on October 11, 2002, the
record date fixed by the Board of Directors, are entitled to notice of and to
vote at the meeting and any adjournment thereof.
By Order of the Board of Directors,
/s/Thomas E. Gardner
-----------------------------------
Thomas E. Gardner
Chairman of the Board of Directors
North Kingstown, Rhode Island
October 21, 2002
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE.
QUESTIONS AND ANSWERS ABOUT THE PROPOSAL
Q: WHAT WILL BE VOTED ON AT THE SPECIAL MEETING?
A: The proposal to be voted on at the Special Meeting is whether to
ratify and approve the Plan of Complete Liquidation and Dissolution
attached as Exhibit A (the "Plan").
Q: WHAT WILL HAPPEN IF THE PLAN IS APPROVED?
A: If the Plan is approved, we will complete the liquidation of our
remaining assets, satisfy our remaining obligations and make
distributions to our stockholders of available liquidation proceeds.
Q: WHEN WILL THE STOCKHOLDERS RECEIVE ANY PAYMENT FROM THE LIQUIDATION OF THE
COMPANY?
A: We anticipate that an initial distribution of liquidation proceeds
will be made to the stockholders sometime in December 2002 or January
2003. Thereafter, as we liquidate our remaining assets and properties
we will distribute available liquidation proceeds, if any, to
stockholders as the Board of Directors deems appropriate. We
anticipate that the majority of the remaining liquidation proceeds
will be distributed over a period of no more than three years.
Q: WHAT IS THE AMOUNT OF THE PAYMENT THAT STOCKHOLDERS WILL RECEIVE FROM THE
LIQUIDATION OF THE COMPANY?
A: Because of the uncertainties as to the precise net realizable value of
our assets that we have not yet sold and the ultimate settlement
amount of our liabilities, it is impossible to predict with certainty
the aggregate net value which will ultimately be distributed to our
stockholders. We believe that the proceeds stockholders could receive
over time is between $.25 and $.35 per share; however we are unable at
this time to predict the precise nature, amount and timing of any
distributions, due in part to our inability to predict the net value
of our non-cash assets, the ultimate value of the hardware and
software maintenance contracts, the financial ability of PaperClip to
complete its payments on its term loan and the ultimate amount of our
liabilities and the cost of Directors and Officers insurance. If we
are unable to settle these liabilities or achieve a sufficient value
for our remaining non-cash assets, our stockholders may not receive
any proceeds after the initial payment. See the factors described by
us beginning on page 10 of this Proxy Statement which could result in
no proceeds to stockholders.
Q: WHAT DO THE COMPANY STOCKHOLDERS NEED TO DO NOW?
A: After carefully reading and considering the information contained in
this Proxy Statement, each ASI stockholder should complete and sign
his or her proxy and return it in the enclosed return envelope as soon
as possible so that his or her shares may be represented at the
meeting. A majority of shares entitled to vote must be represented at
the meeting to enable us to conduct business at the meeting.
Q: CAN THE COMPANY STOCKHOLDERS CHANGE THEIR VOTE AFTER THEY HAVE MAILED THEIR
SIGNED PROXIES?
A: Yes. A stockholder can change his or her vote any time before proxies
are voted at the meeting. Each stockholder can change his or her vote
in one of three ways. First, a stockholder can send a written notice
via registered mail to Access Solutions International, Inc., c/o Point
Gammon Corporation, One Providence Washington Plaza, 4th Floor,
Providence, RI 02903, stating that he or she would like to revoke his
or her proxy. Second, a stockholder can complete and submit a new
proxy. If a stockholder chooses either of these two methods, he or she
must submit the notice of revocation or the new proxy to the Company.
Third, a stockholder can attend the meeting and vote in person.
Q: IF THE COMPANY SHARES ARE HELD IN "STREET NAME" BY A STOCKHOLDER'S BROKER,
WILL THE BROKER VOTE THESE SHARES ON BEHALF OF THE STOCKHOLDER?
A: A broker will vote Company shares only if the holder of these shares
provides the broker with instructions on how to vote. Stockholders
should follow the directions provided by their brokers regarding how
to instruct brokers to vote the shares.
Q: CAN I STILL SELL MY SHARES OF COMPANY COMMON STOCK?
A: We were delisted from the Nasdaq Stock Market on August 2, 1998 due to
the low trading price per share of our stock. Trading, if any, of our
Common Stock is conducted on the over-the-counter market in the
so-called "pink sheets" or on the "Electronic Bulletin Board" of the
National Association of Securities Dealers, Inc. Consequently,
stockholders may find it more difficult to dispose of, or to obtain
accurate quotations as to the price of the Common Stock. In addition,
we intend to close our stock transfer books and restrict transfers of
our Common Stock after filing the Certificate of Dissolution with the
State of Delaware.
Q: WHO CAN HELP ANSWER QUESTIONS?
A: If you have any additional questions about the proposed Plan or if you
need additional copies of this Proxy Statement or any public filings
referred to in this Proxy Statement, you should contact: Thomas E.
Gardner, Chairman, at (401) 854-0520. Our public filings can also be
accessed at the SEC's web site at www.sec.gov.
Access Solutions International, Inc.
650 Ten Rod Road
North Kingstown, RI 02852
PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 26, 2002
Proxies in the form enclosed with this Proxy Statement are solicited by the
Board of Directors of Access Solutions International, Inc. (the "Company" or
"ASI") for use at the Special Meeting of Stockholders of the Company to be held
on Tuesday, November 26, 2002 at 10:00 a.m. local time, at the offices of
Edwards and Angell, LLP, 2800 Financial Plaza, Providence, Rhode Island 02903
and any adjournments thereof (the "Special Meeting"). This proxy statement and
the enclosed proxy are first being sent to stockholders on or about October 21,
2002.
Only stockholders of record as of October 11, 2002 (the "Record Date") will be
entitled to vote at the Special Meeting. As of that date, there were 3,963,940
shares of Common Stock, par value $0.01 per share, of the Company ("Common
Stock") issued and outstanding. Each share of Common Stock outstanding as of the
Record Date will be entitled to one vote and stockholders may vote in person or
by proxy. Execution of a proxy will not in any way affect a stockholder's right
to attend the Special Meeting and vote in person. Any stockholder giving a proxy
has the right to revoke it by written notice to Access Solutions International,
Inc., c/o Point Gammon Corporation, One Providence Washington Plaza, 4th Floor,
Providence, Rhode Island, 02903 at any time before it is exercised, or by voting
in person at the Special Meeting. If a stockholder is not attending the Special
Meeting, any proxy or notice should be returned in time for receipt no later
than the close of business on the day preceding the Special Meeting.
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Special Meeting is
necessary to establish a quorum for the transaction of business. The matters
being submitted to stockholders require the affirmative vote of a majority of
the issued and outstanding shares entitled to vote at the Special Meeting. Votes
cast by proxy or in person at the Special Meeting will be tabulated by the
Inspector of Elections (the "Inspector") with the assistance of the Company's
transfer agent. The Inspector will also determine whether or not a quorum is
present. Abstentions are included in the number of shares present or represented
and voting on the proposal, and, therefore, will have the effect of a negative
vote.
At the Special Meeting, a proposal to ratify and approve a plan of complete
liquidation and dissolution of the Company will be subject to the vote of
holders of the Company's Common Stock. The Board of Directors of the Company
knows of no other matters to be presented at the Special Meeting. If any other
matter should be presented at the Special Meeting upon which a vote may be
properly taken, shares represented by all proxies received by the Board of
Directors will be voted with respect thereto in accordance with the judgment of
the persons named as attorneys in the proxies.
Shares which abstain from voting as to a particular matter, and shares held in
"street name" by brokers or nominees who indicate on their proxies that they do
not have discretionary authority to vote such shares as to a particular matter,
will not be voted in favor of such matter, and will also not be counted as votes
cast or shares voting on such matter. Accordingly, abstentions and "broker
non-votes" will have the effect of a vote against the proposal to approve the
plan of complete liquidation and dissolution and any other matter requiring the
affirmative vote of a certain percentage of shares outstanding.
SECURITIES OWNERSHIP OF
MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to us with respect to
beneficial ownership of the ASI Common Stock as of June 30, 2002 by (i) each
stockholder who is known by us to own beneficially more than 5% of the
outstanding ASI Common Stock, (ii) each of our current directors, (iii) each of
our named executive officers (as defined in the Securities Act of 1933, as
amended) as of the end of our fiscal year, and (iv) all directors and executive
officers as a group. Unless otherwise indicated, each has sole voting and
investment power with respect to the shares beneficially owned.
Name and Address of Shares of Common Stock Percentage of
Beneficial Owner Beneficially Owned Common Stock
Robert H. Stone 100,000 (1) 2.46%
c/o Access Solutions International, Inc.
650 Ten Rod Road
North Kingstown, RI 02852
Thomas E. Gardner and Leslie A. Gardner 113,891 (2) 2.80%
93 Power Street
Providence, RI 02906
Adrian Hancock 100,000 (3) 2.46%
c/o
Point Gammon Corporation
One Providence Washington Plaza
4th Floor
Providence, RI 02903
David J. Capraro, Trustee of 390,000 9.84%
the David J. Capraro
Living Trust U/A/D 3/31/00
1682 Graefield
Birmingham, Michigan 48009
J. Michael Costello c/o Baldwin Brothers 757,212 19.10%
One Providence Washington Plaza
Providence, RI 02903
Directors and Executive Officers as a group 313,891 7.36%
(3 person group)
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(1) Consists of 100,000 shares of ASI Common Stock issuable upon exercise of
stock options.
(2) Consists of 100,000 shares of ASI Common Stock issuable upon exercise of
stock options and 13,891 shares individually owned.
(3) Consists of 100,000 shares of ASI Common Stock Stock issuable upon
exercise of stock options.
PROPOSAL NO. 1
RATIFICATION AND APPROVAL OF PLAN OF
COMPLETE LIQUIDATION AND DISSOLUTION
GENERAL
The Board of Directors is proposing the Plan of Complete Liquidation and
Dissolution (the "Plan") for ratification and approval by our stockholders at
the Special Meeting. The Plan was approved by the Board of Directors, subject to
stockholder approval, on September 17, 2002 and went into effect on September
17, 2002. A copy of the Plan is attached as Exhibit A to this Proxy Statement.
Certain material features of the Plan are summarized below. Stockholders should
read the Plan in its entirety.
The Board of Directors unanimously adopted resolutions on September 17, 2002
(the "Effective Date") which authorized the orderly liquidation of the Company's
assets pursuant to the Plan. The Plan authorized the Company's officers to
commence the sale of the Company's individual assets on September 18, 2002. As
of September 18, 2002, the Company's officers subsequently commenced the sale of
our assets and the general winding down of the Company's business, including
such things as laying off personnel, terminating commercial agreements and
exiting related obligations. As of the date of this Proxy Statement, the Company
has completed the sale of a substantial portion of its assets and paid or
settled a substantial portion of its liabilities. After the Effective Date, the
Company has not engaged in any business activities except for the purpose of
preserving the value of its assets, prosecuting and defending lawsuits by or
against it, adjusting and winding up its business and affairs, selling and
liquidating its properties and assets, including its intellectual property and
other intangible assets, paying its creditors, terminating commercial agreements
and relationships and preparing to make distributions to stockholders, in
accordance with the Plan. In addition, if the Plan is approved by the
stockholders, the Company will file a Certificate of Dissolution with the
Secretary of State of the State of Delaware.
The Board of Directors may, at any time, turn management of the Company over to
a third party to complete the liquidation of our remaining assets and distribute
proceeds from the sale of assets to the stockholders pursuant to the Plan. This
third-party management may be in the form of a liquidating trust, which, if
adopted, would succeed to all of the assets, liabilities and obligations of the
Company. The Board of Directors may appoint one or more of its members, an
officer of the Company or a third party to act as trustee or trustees of such
liquidating trust. If, however, all of the assets are not distributed within
three years after the date the Certificate of Dissolution is filed with the
State of Delaware, the Board will transfer the remaining assets to a liquidating
trust if it has not already done so. Your ratification and approval of the Plan
will also constitute your approval of any appointment and compensation of such
trustees.
During the liquidation of the Company's assets, the Company may pay to its
officers, directors, employees, and agents, or any of them, compensation for
services rendered in connection with the implementation of the Plan. Your
ratification and approval of the Plan will constitute your approval of the
payment of any such compensation.
The following resolution will be offered at the Special Meeting:
"Resolved, that the Plan of Complete Liquidation and Dissolution recommended by
the Board of Directors be ratified and approved."
BACKGROUND AND REASONS FOR THE PLAN
Company Background
ASI, a Delaware corporation formed in 1986, 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.
On April 15, 1997, the Company and PaperClip Software, Inc. ("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 for funding of working capital requirements.
Despite extensive discussions and adjustments in the terms of the original
agreement, PaperClip and ASI were unable to reach an acceptable agreement. At
the termination of talks, PaperClip owed ASI over $1,922,554 in advances plus
the $300,000 bridge loan and had no immediate ability to repay these advances.
In November of 2000, PaperClip 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, would 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 would 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.
As a result of the advances made by ASI from November 12, 1997 through August
24, 1998, PaperClip was indebted to ASI in the amount of $2,305,506 including
interest. In November 2000, ASI exchanged the above indebtedness for shares of a
new class of PaperClip convertible preferred stock (the "Preferred Stock"). Each
share of Preferred Stock is convertible into one share of PaperClip's common
stock ("PaperClip 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 anytime at ASI's
option or at PaperClip's option, provided that immediately prior to conversion,
the PaperClip 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 PaperClip Common Stock issuable upon conversion by ASI of
the preferred stock. As of June 30, 2002, the "Converted Shares" would equal
27.5% of Paperclip'sthe outstanding PaperClip Common Stock. The holders of the
converted PaperClip Common Stock have piggyback registration rights on the
shares underlying the Preferred Stock. Such piggy back registration rights on
the converted stock 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 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.
On August 29, 1997, ASI filed a complaint against Data/Ware Development, Inc.,
("Data/Ware"), and Eastman Kodak Company ("Kodak") alleging infringement of two
of ASI's patents. The defendants counter-claimed and counter-sued ASI. The claim
stated that Data/Ware and Kodak collectively manufactured, used and/or sold
equipment for recording data on optical media and alleged that the manufacture
and sale of such equipment, and use by purchasers thereof, infringed one or more
of the Company's patents. The claim called for an order enjoining the defendants
from further infringement of its patents, damages and interest for infringement
and reasonable attorney's fees and such other relief that the court deemed
proper.
On May 27, 1998, in order to continue funding the patent infringement lawsuit,
ASI completed a financing agreement that called for the purchase of a 30%
interest in several of the Company's patents by a stockholder and former
director, for $100,000. These patents were the subject of the pending
Data/Ware/Kodak lawsuit . In addition, this same stockholder also loaned the
Company $650,000 and agreed to make additional advances up to $1,000,000 for
outstanding and future legal fees and costs incurred in connection with the
lawsuit.
The loan was secured by a first priority interest in these patents and bore
interest at the rate of 19% and was convertible into Common Stock under certain
circumstances. The loan had a term of the lesser of three years or completion of
the Company's patent litigation and converted to a demand note at the end of its
term. On May 27, 2000, ASI obtained an amendment to the loan agreement extending
the due date to May 27, 2003 and increasing the amount that could be borrowed
under the loan to $1,500,000.
With its remaining resources, ASI completed and stabilized the latest
development stage of its product, completed other customer contractual efforts
and upgraded its customers as appropriate. The impact of the product patent
infringement by Kodak/Anacomp and the marketing power of both companies,
however, overpowered any ongoing marketing efforts by ASI. In addition,
technological advancements, the system's applicability to only the mainframe and
published, limited financial resources reduced sales opportunities and customer
acceptance of ASI products. Consequently, in the fall of 1998, ASI retrenched
both in personnel and technological development efforts.
On April 23, 2001, ASI announced that it had received a monetary settlement
pursuant to a signed settlement agreement with Anacomp, Inc. ("Anacomp"),
successor to Data/Ware, and Kodak resolving its patent infringement lawsuit.
After the payment of its proportionate share of the legal fees and related
expenses and the share of the settlement allocated to the co-owner of the
patent, ASI received net proceeds of $4,175,583, $2,000,000 of which was used to
retire outstanding debt, including the liability to the stockholder, and
deferred payables.
The successful prosecution of the patent infringement case against Kodak/Anacomp
enabled ASI, after its legal fees and repayment to the stockholder who financed
the suit, to repay its long patient creditors and clean up other issues.
Unfortunately, the technology in the industry had changed and by-passed that of
ASI; the Company had only three full time employees, none of whom had any
development skills; and the cost to reenter the market and establish ASI as a
preferred provider was significantly greater than the Company's current
resources. Given its history and the current lack of management and systems
development depth, ASI was not a prime opportunity for outside investors.
Review of Alternatives
On April 23, 2001, ASI announced that it had received the monetary settlement
with Anacomp and Kodak. As a result of this settlement, ASI also announced that
management would be assessing strategic alternatives which would best benefit
its shareholders, customers and employees.
Over the ensuing months in 2001 and 2002, the Company contacted several
investment firms and professionals with contacts and/or clients in the small to
mid-sized technology field. The Board of Directors determined that to market the
Company aggressively would be disproportionately expensive compared to the value
of the Company. In addition, the value of the Company was perceived as its free
cash, an amount considered small to most of the potentially eligible investors
or buyers. Four prospective opportunities did arise through an investment
banking firm and two other independent sources. In each case, the prospective
acquirer was in an early to later stage technology development phase with
limited sales, a negative cash flow and incurring losses. In each case the Board
determined that the technological and financial risk to the current stockholders
was unacceptable.
The Board of Directors also determined that continuation of the current business
was also no longer viable. Having reduced all costs to a minimum, the Company
was operating at approximately breakeven cash flow and had little to no
opportunity to expand its customer base. Although current customers had to
continue to use the ASI system to retrieve information, most had or were in the
process of installing new technology for the future. Thus, the maintenance
contracts currently in place had a finite life. The Board did believe, however,
that the hardware and software maintenance contracts currently in place had some
present value to others in the maintenance field with appropriate economies of
scale, and accordingly decided to pursue this approach. Out of the various
companies contacted, five were identified, three expressed further interest, two
returned confidentiality agreements and both bid for the contracts.
As a result of this effort, 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, ASI 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. If all of the current contracts
remain in force and are renewed on the same basis and price over the next two
years, Access Solutions would earn $103,205 in deferred revenue and $228,310 in
gross margin from CUC.
In summary, during this period, the Company worked to maximize business
efficiencies and eliminated as many operating expenses as was prudent to
conserve cash, service existing customers and examine all options. In the end,
however, no party was prepared to provide capital or acquire the Company on a
basis favorable to ASI stockholders. The Board of Directors also considered
whether to continue maintaining operations, but determined that the lack of
sales, the lack of technologically qualified personnel remaining at the Company,
the lack of demand for its product and the downturn in the Company's market,
would only cause an erosion of the Company's cash and asset value, thus reducing
stockholder value without any assurance of a future recovery. In addition, the
Company's stock was trading below the anticipated cash liquidation value of the
shares. In light of these factors, the Board of Directors determined that
liquidation and dissolution of the company Company was the best way to maximize
stockholder value.
Consistent with these findings and conclusions, on September 17, 2002, the Board
of Directors unanimously approved the Plan, subject to stockholder approval, and
the orderly wind down of operations, including authorizing management to
immediately commence efforts to sell the majority of the Company's assets,
terminate commercial agreements and relationships, exit its commercial
obligations, and generally wind down the business and operations of the Company.
The Board determined that the immediate sale of such assets was the best way to
maximize stockholder value. As of the date of this Proxy Statement, the Company
has completed the sale of a substantial portion of its assets and paid or
settled a substantial portion of its liabilities. The Board of Directors'
decision was reached after no viable offers to acquire the Company were
received.
Conclusion of the Board of Directors
On September 17, 2002, our Board of Directors unanimously adopted the Plan. In
arriving at this conclusion, the Board considered a number of factors, including
alternatives to the proposal and the future prospects of the Company, as well as
the oral advice of investment counselor Newbury Piret Cos., Inc. Prior to and at
the meeting of the Board of Directors on September 17, 2002, the Board reviewed
its conclusions concerning the proposed acquisitions, and the investment and
strategic partnering opportunities. The Board of Directors had been kept
informed continuously of the Company's business affairs and financial condition,
and since April 2001, has had convened at numerous separate meetings to consider
these issues. The Board determined that the Company's current product is well
behind the current technology curve and that the cost to make it competitive in
an industry that is already crowded and dominated by several large companies
would be considerable and would require financing that would not be available to
the Company. In addition, the Company does not have any qualified personnel to
lead the Company to this new level. Accordingly, the Board of Directors
determined that it would not be advisable to continue to operate the Company on
an independent basis indefinitely if the potential for growth and availability
of financing were so limited. Further, after significant effort, the company had
not been successful in identifying a buyer or strategic alliance partner
acceptable to the Company. Based on this information, the Board of Directors
determined that distribution to the stockholders of cash proceeds from the sale
of the Company's assets would return the greatest value to the stockholders as
compared to other alternatives, and that liquidation would prevent future
erosion of stockholders' equity through potential net losses.
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 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 the date of
this Proxy Statement. The Board of Directors does not believe, however, that
there are viable alternatives to the Plan, and even if there are, that any of
our employees would continue to be available to execute them.
FACTORS TO BE CONSIDERED BY STOCKHOLDERS
IN DECIDING WHETHER TO APPROVE THE PLAN
There are many factors that the Company's stockholders should consider when
deciding whether to vote to ratify and approve the Plan. Such factors include
those set forth in the Company's publicly filed reports, as well as those
factors set forth below.
There are risks associated with forward-looking statements.
This Proxy Statement contains certain forward looking statements, including
statements concerning the estimated value of the Company's net assets, the
anticipated liquidation value per share of Common Stock as compared to its
market price absent the proposed liquidation, and the likelihood of stockholder
value resulting from sale of certain of its significant assets. Some of ASI's
other assets may be difficult for the Company 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 has recently
traded or may trade in the future, or that the liquidation value will exceed
zero. Stockholders who disagree with the Board of Directors' determination that
the ratification and adoption of the Plan is in the best interests of the
Company and its stockholders should vote "against" ratification and approval of
the Plan.
Stockholders may be liable to creditors of the Company for up to the amounts
they received from the Company if the Company's reserves are inadequate.
If the Plan is approved by the stockholders, a Certificate of Dissolution will
be filed with the State of Delaware dissolving the Company. Pursuant to the
Delaware General Corporation Law (the "DGCL"), the Company will continue to
exist for three years after the dissolution becomes effective or for such longer
period as the Delaware Court of Chancery shall direct, for the purpose of
prosecuting and defending suits against it and enabling the Company gradually to
close its business, to dispose of its property, to discharge its liabilities and
to distribute to its stockholders any remaining assets. Under the DGCL, in the
event the Company fails to create an adequate contingency reserve for payment of
its expenses and liabilities during this three-year period, each stockholder
could be held liable for payment to the Company's creditors of such
stockholder's pro rata share of amounts owed to creditors in excess of the
contingency reserve. The liability of any stockholder would be limited to the
amounts previously received by such stockholder from the Company (and from any
liquidating trust or trusts). Accordingly, in such event a stockholder could be
required to return all distributions previously made to such stockholder. In
such event, a stockholder could receive nothing from the Company under the Plan.
Moreover, in the event a stockholder has paid taxes on amounts previously
received, a repayment of all or a portion of such amount could result in a
stockholder incurring a net tax cost if the stockholder's repayment of an amount
previously distributed does not cause a commensurate reduction in taxes payable.
There can be no assurance that the contingency reserve established by the
Company will be currently adequate to cover all expenses and liabilities.
However, after a review of its assets and liabilities, the Company believes that
the reserves will be adequate and that a return of amounts previously
distributed will not be required. See "Contingent Liabilities; Contingency
Reserve; Liquidating Trust."
If ASI fails to retain the services of current key personnel, the Plan may not
succeed.
The success of the Plan depends in large part upon the Company's ability to
retain the services of certain of its current personnel to handle the sale of
the Company's remaining assets and settlement of the remaining liabilities.
Although we have retained the services of Thomas E. Gardner for this purpose,
the retention of qualified personnel is particularly difficult under the
Company's current circumstances.
ASI's stock transfer books will close on the final record date, after which it
will not be possible for stockholders to publicly trade in our stock.
The Company intends to close its stock transfer books and discontinue recording
transfers of Common Stock at the close of business on the date the Company files
the Certificate of Dissolution (the "Final Record Date"). Thereafter,
certificates representing the Common Stock shall not be assignable or
transferable on the books of the Company except by will, intestate succession or
operation of law. The proportionate interests of all of the stockholders of the
Company shall be fixed on the basis of their respective stock holdings at the
close of business on the Final Record Date, and, after the Final Record Date,
any distributions made by the Company shall be made solely to the stockholders
of record at the close of business on the Final Record Date, except as may be
necessary to reflect subsequent transfers recorded on the books of the Company
as a result of any assignments by will, intestate succession or operation of
law. For any other trades after the Final Record Date, the seller and the
purchaser of the stock will need to negotiate and rely on "due bill" contractual
obligations between themselves with respect to the allocation of stockholder
proceeds arising from ownership of the shares.
After the Company's wind-down, there may be no cash to distribute to
stockholders and if there is cash to distribute, the timing of any such
distribution is uncertain.
There is currently no firm timetable for the distribution of proceeds to
stockholders, because of contingencies inherent in winding up the Company's
business. The liquidation is expected to be concluded prior to the third
anniversary of the filing of the Certificate of Dissolution in Delaware by a
final liquidating distribution either directly to the stockholders or to a
liquidating trust. The proportionate interests of all of our stockholders will
be fixed on the basis of their respective stock holdings at the close of
business on the Final Record Date, and after such date, any distributions made
by the Company will be made solely to stockholders of record on the close of
business on the Final Record Date, except to reflect permitted transfers. We
are, however, currently unable to predict the precise nature, amount or timing
of any distribution to stockholders. The actual nature, amount and timing of all
distributions will be determined by the Board of Directors, in its sole
discretion, and will depend in part upon ASI's ability to convert its remaining
assets into cash.
Uncertainties as to the precise net value of ASI's non-cash assets and the
ultimate amount of its liabilities make it impracticable to predict the
aggregate net value ultimately distributable to stockholders. Claims,
liabilities and expenses from operations (including costs associated with ASI's
consultant's efforts to sell its remaining assets and settle its remaining
liabilities, taxes, legal and accounting fees and miscellaneous office expenses)
will continue to be incurred. These expenses will reduce the amount of cash
available for ultimate distribution to stockholders. However, no assurances can
be given that available cash and amounts received on the sale of assets will be
adequate to provide for ASI's obligations, liabilities, expenses and claims and
to make cash distributions to stockholders. If such available cash and amounts
received from the sale of assets are not adequate to provide for ASI's
obligations, liabilities, expenses and claims, the Company may not be able to
distribute meaningful cash, or any cash, to its stockholders.
The Company's inability to reach cash break-even and its resulting dissolution
could give rise to securities class action claims against it, which could
deplete the proceeds that are to be distributed to stockholders.
Securities class action claims have been brought against companies in the past
where the market price of the company's securities has fallen due to an
inability of the company to achieve operational profitability. Any such
litigation could be very costly and divert ASI's remaining resources from being
available for distribution to stockholders. Any adverse determination in this
kind of litigation could also deplete ASI's cash position, and reduce proceeds
that would otherwise be distributed to its stockholders.
The proceeds from the sale of ASI's assets may be less than anticipated.
Sales of the Company's remaining assets will be made on such terms as are
approved by the Board of Directors and may be conducted by competitive bidding,
public sales or privately negotiated sales. The prices at which ASI will be able
to sell these assets will depend largely on factors beyond its control. Because
some of its remaining assets, particularly intellectual property assets, may
decline in value over time, ASI may not be able to consummate the sale of these
assets in time to generate meaningful value. In addition, the Company may not
obtain as high a price for a particular asset as it might secure if it were not
in liquidation.
The Company may be unable to negotiate settlements with respect to its remaining
liabilities.
The Company is currently in the process of negotiating settlements with respect
to its remaining obligations and liabilities which include, without limitation,
building and facilities leases, tax obligations, claims by licensees, contracts
and trade payables with third parties. If ASI is unable to successfully
negotiate termination of these obligations, it will have fewer cash proceeds to
distribute to its stockholders.
The Company may continue to incur the expense of complying with public company
reporting requirements.
The Company has an obligation to continue to comply with the applicable
reporting requirements of the Securities Exchange Act of 1934, as amended, even
though compliance with such reporting requirements is economically burdensome.
In order to curtail expenses, after filing the Certificate of Dissolution, ASI
will seek relief from the Securities and Exchange Commission from the reporting
requirements under the Exchange Act, but there can be no assurance that such
relief will be granted. Until such relief is granted ASI will continue to make
obligatory Exchange Act filings. ASI anticipates that even if such relief is
granted in the future, ASI will continue to file current reports on Form 8-K to
disclose material events relating to its liquidation and dissolution along with
any other reports that the Securities and Exchange Commission may require.
ASI's Board members may have a potential conflict of interest in recommending
ratification and approval of the Plan.
Members of the Board of Directors, each of whom hold in-the-money stock options,
may be deemed to have a potential conflict of interest in recommending
ratification and approval of the Plan because the potential liquidation value
per share is greater than the current trading price of the common stock. See
"--Possible Effects of the Approval of the Plan Upon Directors and Officers."
Possible effects of the approval of the Plan upon directors and officers.
Other than as set forth below, it is not currently anticipated that liquidation
of the Company will result in any material benefit to any of our officers or to
directors who participated in the vote to adopt the Plan. The Board of Directors
may confer other benefits or bonuses to employees and officers of the Company,
including officers who are also directors, in recognition of their services to
the Company based on the performance of such employees and officers, including
performance during the Company's liquidation process.
The Plan was adopted by the unanimous vote of disinterested directors. It is
currently anticipated that the liquidation of the Company may result in a modest
increase in the value of ASI's shares and options held by each director who
participated in the vote on the Plan owns shares of common stock and/or options
to purchase shares of common stock and thus will benefit from the adoption of
the plan.
PRINCIPAL PROVISIONS OF THE PLAN
The Company will distribute pro rata to its stockholders, in cash or in-kind, or
sell or otherwise dispose of, all of its property and assets. To obtain the
highest price for the sale of the Company's assets and to preserve value for the
stockholders, the Company commenced the sale of its assets immediately after
approval of the Plan by the Board on September 17, 2002. As of the date of this
Proxy Statement, the Company has completed the sale of a substantial portion of
its assets and paid or settled a substantial portion of its liabilities and has
generally terminated its commercial agreements, relationships and overall
operations. All but two (2) employees have been laid off. In any case, the sale
of assets will be concluded prior to the third anniversary of the filing of the
Certificate of Dissolution with the Delaware Secretary of State by a final
liquidating distribution either directly to the stockholders or to one or more
liquidating trusts. Any sales of the Company's assets have been and will be made
in private or public transactions and on such terms as are approved by the Board
of Directors. It is not anticipated that any further votes of the Company's
stockholders will be solicited with respect to the approval of the specific
terms of any particular sales of assets approved by the Board of Directors. See
"Sales of the Company's Assets."
Subject to the payment or the provision for payment of the Company's
indebtedness and other obligations, the Company's cash on hand, together with
the cash proceeds of any sales of the Company's other assets, will be
distributed from time to time pro rata to the holders of the Common Stock. The
Company intends to establish a reasonable reserve (a "Contingency Reserve") in
an amount determined by the Board of Directors to be sufficient to satisfy the
liabilities, expenses and obligations of the Company not otherwise paid,
provided for or discharged. The net balance, if any, of any such Contingency
Reserve remaining after payment, provision or discharge of all such liabilities,
expenses and obligations will also be distributed to the Company's stockholders
pro rata. No assurances can be given that available cash and amounts received
from the sale of assets will be adequate to provide for the Company's
obligations, liabilities, expenses and claims and to make cash distributions to
stockholders. See "Liquidating Distributions; Nature, Amount;, Timing" and
"Contingent Liabilities; Contingency Reserve; Liquidating Trust" below.
If deemed necessary by the Board of Directors for any reason, the Company may,
from time to time, transfer any of its unsold assets to one or more trusts
established for the benefit of the stockholders of the Company, which property
would thereafter be sold or distributed on terms approved by its trustees. If
all of the Company's assets (other than the Contingency Reserve) are not sold or
distributed prior to the third anniversary of the effectiveness of the
dissolution of the Company, the Company will transfer in final distribution such
remaining assets to a trust. The Board of Directors may also elect in its
discretion to transfer the Contingency Reserve, if any, to such a trust. Any of
such trusts are referred to in this Proxy Statement as "liquidating trusts."
Notwithstanding the foregoing, to the extent that a distribution or transfer of
any asset cannot be effected without the consent of a governmental authority, no
such distribution or transfer shall be effected without such consent. In the
event of a transfer of assets to a liquidating trust, the Company would
distribute, pro rata to the holders of its capital stock, beneficial interests
in any such liquidating trust or trusts. It is anticipated that the interests in
any such trusts will not be transferable; therefore, although the recipients of
the interests would be treated for tax purposes as having received their pro
rata share of property transferred to the liquidating trust or trusts and will
thereafter take into account for tax purposes their allocable portion of any
income, gain or loss realized by such liquidating trust or trusts, the
recipients of the interests will not realize the value thereof unless and until
such liquidating trust or trusts distributes cash or other assets to them. The
Plan authorizes the Board of Directors to appoint one or more individuals or
entities to act as trustee or trustees of the liquidating trust or trusts and to
cause the Company to enter into a liquidating trust agreement or agreements with
such trustee or trustees on such terms and conditions as may be approved by the
Board of Directors. Approval and ratification of the Plan also will constitute
the approval by the Company's stockholders of any such appointment and any
liquidating trust agreement or agreements. For further information relating to
liquidating trusts, the appointment of trustees and the liquidating trust
agreements, reference is made to "Contingent Liabilities; Contingent Reserve;
Liquidating Trust."
The Company will close its stock transfer books and discontinue recording
transfers of shares of Common Stock on the earliest to occur of (i) the close of
business on the record date fixed by the Board of Directors for the final
liquidating distribution, (ii) the close of business on the date on which the
remaining assets of the Company are transferred to a liquidating trust, or (iii)
the Final Record Date, and, thereafter, certificates representing shares of
Common Stock will not be assignable or transferable on the books of the Company
except by will, intestate succession or operation of law. After the Final Record
Date, the Company will not issue any new stock certificates, other than
replacement certificates. Any person holding options, warrants or other rights
to purchase Common Stock must exercise such instruments or rights prior to the
Final Record Date. See "Final Record Date" and "Trading of the Common Stock and
Interests in the Liquidating Trust or Trusts" below.
Following approval of the Plan by the stockholders, a Certificate of Dissolution
will be filed with the State of Delaware dissolving the Company. The dissolution
of the Company will become effective, in accordance with the DGCL, upon proper
filing of the Certificate of Dissolution with the Secretary of State or upon
such later date as may be specified in the Certificate of Dissolution. Pursuant
to the DGCL, the Company will continue to exist for three years after the
dissolution becomes effective or for such longer period as the Delaware Court of
Chancery shall direct, for the purpose of prosecuting and defending suits,
whether civil, criminal or administrative, by or against it, and enabling the
Company gradually to settle and close its business, to dispose of and convey its
property, to discharge its liabilities and to distribute to its stockholders any
remaining assets, but not for the purpose of continuing the business for which
the Company was organized.
Abandonment; Amendment
Under the Plan, the Board of Directors may modify, amend or abandon the Plan,
notwithstanding stockholder ratification and approval, to the extent permitted
by the DGCL. The Company will not amend or modify the Plan under circumstances
that would require additional stockholder solicitations under the DGCL or the
federal securities laws without complying with the DGCL and the federal
securities laws.
Liquidating Distributions: Nature, Amount, Timing
Although the Board of Directors has not established a firm timetable for
distributions to stockholders if the Plan is ratified and approved by the
stockholders, the Board of Directors intends, subject to contingencies inherent
in winding up the Company's business, to make such distributions as promptly as
practicable. As of the date of this Proxy Statement, the Company has completed
the sale of substantially all of its assets and paid or settled substantially
all of its liabilities. The liquidation is expected to be concluded prior to the
third anniversary of the filing of the Certificate of Dissolution in Delaware by
a final liquidating distribution either directly to the stockholders or to a
liquidating trust. The proportionate interests of all of the stockholders of the
Company shall be fixed on the basis of their respective stock holdings at the
close of business on the Final Record Date, and after such date, any
distributions made by the Company shall be made solely to stockholders of record
on the close of business on the Final Record Date, except to reflect permitted
transfers. The Board of Directors is, however, currently unable to predict the
precise nature, amount or timing of this distribution or any other distributions
pursuant to the Plan. The actual nature, amount and timing of all distributions
will be determined by the Board of Directors, in its sole discretion, and will
depend in part upon the Company's ability to convert its remaining assets into
cash and pay and settle its significant remaining liabilities and obligations.
The Company does not plan to satisfy all of its liabilities and obligations
prior to making distributions to its stockholders, but instead will reserve
assets deemed by management and the Board of Directors to be adequate to provide
for such liabilities and obligations. See "Contingent Liabilities; Contingency
Reserve; Liquidating Trust." Management and the Board of Directors believe that
the Company has sufficient cash to pay its current and accrued obligations
without the sale of any of its assets.
Uncertainties as to the precise net value of the Company's non-cash assets and
the ultimate amount of its liabilities make it impracticable to predict the
aggregate net value ultimately distributable to stockholders. Claims,
liabilities and expenses from operations (including operating costs, salaries,
income taxes, payroll and local taxes, legal and accounting fees and
miscellaneous office expenses), although currently declining, will continue to
be incurred following stockholder approval of the Plan. These expenses will
reduce the amount of assets available for ultimate distribution to stockholders,
and, while the Company does not believe that a precise estimate of those
expenses can currently be made, management and the Board of Directors believe
that available cash and amounts received on the sale of assets will be adequate
to provide for the Company's obligations, liabilities, expenses and claims
(including contingent liabilities) and to make cash distributions to
stockholders. However, no assurances can be given that available cash and
amounts received on the sale of assets will be adequate to provide for the
Company's obligations, liabilities, expenses and claims and to make cash
distributions to stockholders. If such available cash and amounts received on
the sale of assets are not adequate to provide for the Company's obligations,
liabilities, expenses and claims, distributions of cash and other assets to the
Company's stockholders will be reduced.
Factors to be Considered with Respect to Sale of the Company's Assets
The sale by the Company of an asset will generally result in the recognition of
taxable gain or loss by the Company to the extent the fair market value of such
asset exceeds or, in the case of a loss, is less than the Company's tax basis in
such asset.
Sales of the Company's Assets
The Plan involves the sale of all of the assets of the Company. Agreements for
the sale of a substantial portion of the Company's assets and actual sales have
been concluded prior to the Special Meeting and approved by the Board of
Directors and officers of the Company.
Ratification and approval of the Plan will constitute approval of any such
agreements and sales. Sales of the Company's assets have been and will be made
on such terms as are approved by the Board of Directors and may be conducted by
either competitive bidding, public sales or privately negotiated sales. It is
not anticipated that any further stockholder votes will be solicited with
respect to the approval of the specific terms of any particular sales of assets
approved by the Board of Directors. The Company does not anticipate amending or
supplementing the Proxy Statement to reflect any such agreement or sale, unless
required by applicable law. The prices at which the Company has been and will be
able to sell its various assets depends largely on factors beyond the Company's
control, including, without limitation, the condition of financial markets, the
availability of financing to prospective purchasers of the assets, United States
and foreign regulatory approvals, public market perceptions, and limitations on
transferability of certain assets. In addition, the Company may not obtain as
high a price for a particular asset as it might secure if the Company were not
in liquidation.
Conduct of the Company Following Adoption of the Plan
Following ratification and approval of the Plan by the Company's stockholders,
the Company's activities will be limited to distributing its assets in
accordance with the Plan, establishing a contingency reserve for payment of the
Company's expenses and liabilities, including liabilities incurred but not paid
or settled prior to ratification of the Plan, selling any remaining assets of
the Company, and terminating any remaining commercial agreements, relationships
or outstanding obligations of the Company. Following the ratification and
approval of the Plan by the Company's stockholders, the Company shall continue
to indemnify its officers, directors, employees and agents in accordance with
its Restated Certificate of Incorporation, as amended, and bylaws, including for
actions taken in connection with the Plan and the winding up of the affairs of
the Company. The Company's obligation to indemnify such persons may be satisfied
out of the assets of any liquidating trust. The Board of Directors and the
trustees of any liquidating trust may obtain and maintain such insurance as may
be necessary to cover the Company's indemnification obligations under the Plan.
Reporting Requirements
Whether or not the Plan is ratified and approved, we have an obligation to
continue to comply with the applicable reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), even though compliance
with such reporting requirements is economically burdensome. If the Plan is
ratified and approved, in order to curtail expenses, we will, after filing our
Certificate of Dissolution, seek relief from the Securities and Exchange
Commission ("SEC") from the reporting requirements under the Exchange Act. We
anticipate that, if such relief is granted, we would continue to file current
reports on Form 8-K to disclose material events relating to our liquidation and
dissolution along with any other reports that the SEC might require.
Contingent Liabilities: Contingency Reserve; Liquidating Trust
Under the DGCL, the Company is required, in connection with its dissolution, to
pay or provide for payment of all of its liabilities and obligations. Following
the ratification and approval of the Plan by the Company's stockholders, the
Company will pay all expenses and fixed and other known liabilities, or set
aside as a Contingency Reserve cash and other assets which it believes to be
adequate for payment thereof. The Company is currently unable to estimate with
precision the amount of any Contingency Reserve which may be required, but any
such amount (in addition to any cash contributed to a liquidating trust, if one
is utilized) will be deducted before the determination of amounts available for
distribution to stockholders.
The actual amount of the Contingency Reserve will be based upon estimates and
opinions of management and the Board of Directors and derived from consultations
with outside experts and review of the Company's estimated operating expenses
and future estimated liabilities, including, without limitation, anticipated
compensation payments, estimated legal and accounting fees, operating lease
expenses, payroll and other taxes payable, miscellaneous office expenses,
expenses accrued in the Company's financial statements, and reserves for
litigation expenses. There can be no assurance that the Contingency Reserve in
fact will be sufficient. The Company has not made any specific provision for an
increase in the amount of the Contingency Reserve. Subsequent to the
establishment of the Contingency Reserve, the Company will distribute to its
stockholders any portions of the Contingency Reserve which it deems no longer to
be required. After the liabilities, expenses and obligations for which the
Contingency Reserve had been established have been satisfied in full, the
Company will distribute to its stockholders any remaining portion of the
Contingency Reserve.
If deemed necessary, appropriate or desirable by the Board of Directors for any
reason, the Company may, from time to time, transfer any of its unsold assets to
one or more liquidating trusts, or other structure it deems appropriate,
established for the benefit of the stockholders of the Company, which property
would thereafter be sold or distributed on terms approved by its trustees. The
Board of Directors and management may determine to transfer assets to a
liquidating trust in circumstances where the nature of an asset is not
susceptible to distribution (for example, interests in intangibles) or where the
Board of Directors determines that it would not be in the best interests of the
Company and its stockholders for such assets to be distributed directly to the
stockholders at such time. If all of the Company's assets (other than the
Contingency Reserve) are not sold or distributed prior to the third anniversary
of the effectiveness of the dissolution, the Company must transfer in final
distribution such remaining assets to a liquidating trust. The Board of
Directors may also elect in its discretion to transfer the Contingency Reserve,
if any, to such a liquidating trust. The purpose of a liquidating trust would be
to distribute such property or to sell such property on terms satisfactory to
the liquidating trustees, and distribute the proceeds of such sale after paying
those liabilities of the Company, if any, assumed by the trust, to the Company's
stockholders. Any liquidating trust acquiring all of the unsold assets of the
Company will assume all of the liabilities and obligations of the Company and
will be obligated to pay any expenses and liabilities of the Company which
remain unsatisfied. If the Contingency Reserve transferred to the liquidating
trust is exhausted, such expenses and liabilities will be satisfied out of the
liquidating trust's other unsold assets.
The Plan authorizes the Board of Directors to appoint one or more individuals or
entities to act as trustee or trustees of the liquidating trust or trusts and to
cause the Company to enter into a liquidating trust agreement or agreements with
such trustee or trustees on such terms and conditions as may be approved by the
Board of Directors. It is anticipated that the Board of Directors will select
such trustee or trustees on the basis of the experience of such individual or
entity in administering and disposing of assets and discharging liabilities of
the kind to be held by the liquidating trust or trusts and the ability of such
individual or entity to serve the best interests of the Company's stockholders.
Approval of the Plan by the stockholders will also constitute the approval by
the Company's stockholders of any such appointment and any liquidating trust
agreement or agreements.
The Company may decide to use a liquidating trust or trusts, and the Board of
Directors believes the flexibility provided by the Plan with respect to the
liquidating trusts to be advisable. The trust would be evidenced by a trust
agreement between the Company and the trustees. The purpose of the trust would
be to serve as a temporary repository for the trust property prior to its
disposition or distribution to the Company's stockholders. The transfer to the
trust and distribution of interests therein to the Company's stockholders would
enable the Company to divest itself of the trust property and permit the
Company's stockholders to enjoy the economic benefits of ownership thereof.
Pursuant to the trust agreement, the trust property would be transferred to the
trustees immediately prior to the distribution of interests in the trust to the
Company's stockholders, to be held in trust for the benefit of the stockholder
beneficiaries subject to the terms of the trust agreement. It is anticipated
that the interests would be evidenced only by the records of the trust and there
would be no certificates or other tangible evidence of such interests and that
no holder of Common Stock would be required to pay any cash or other
consideration for the interests to be received in the distribution or to
surrender or exchange shares of Common Stock in order to receive the interests.
It is further anticipated that pursuant to the trust agreements (i) a majority
of the trustees would be required to be independent of the Company's management;
(ii) approval of a majority of the trustees would be required to take any
action; and (iii) the trust would be irrevocable and would terminate after, the
earliest of (x) the trust property having been fully distributed, or (y) a
majority in interest of the beneficiaries of the trust, or a majority of the
trustees, having approved of such termination, or (z) a specified number of
years having elapsed after the creation of the trust.
UNDER THE DGCL, IN THE EVENT THE COMPANY FAILS TO CREATE AN ADEQUATE CONTINGENCY
RESERVE FOR PAYMENT OF ITS EXPENSES AND LIABILITIES, OR SHOULD SUCH CONTINGENCY
RESERVE AND THE ASSETS HELD BY THE LIQUIDATING TRUST OR TRUSTS BE EXCEEDED BY
THE AMOUNT ULTIMATELY FOUND PAYABLE IN RESPECT OF EXPENSES AND LIABILITIES, EACH
STOCKHOLDER COULD BE HELD LIABLE FOR THE PAYMENT TO CREDITORS OF SUCH
STOCKHOLDER'S PRO RATA SHARE OF SUCH EXCESS, LIMITED TO THE AMOUNTS THERETOFORE
RECEIVED BY SUCH STOCKHOLDER FROM THE COMPANY OR FROM THE LIQUIDATING TRUST OR
TRUSTS.
If the Company were held by a court to have failed to make adequate provision
for its expenses and liabilities or if the amount ultimately required to be paid
in respect of such liabilities exceeded the amount available from the
Contingency Reserve and the assets of the liquidating trust or trusts, a
creditor of the Company could seek an injunction against the making of
distributions under the Plan on the ground that the amounts to be distributed
were needed to provide for the payment of the Company's expenses and
liabilities. Any such action could delay or substantially diminish the cash
distributions to be made to stockholders and/or interest holders under the Plan.
Final Record Date
The Company intends to close its stock transfer books and discontinue recording
transfers of shares of Common Stock on the Final Record Date, and thereafter
certificates representing shares of Common Stock will not be assignable or
transferable on the books of the Company except by will, intestate succession or
operation of law. After the Final Record Date, the Company will not issue any
new stock certificates, other than replacement certificates. It is anticipated
that no further trading of the Company's shares will occur on or after the Final
Record Date. See "Trading of the Common Stock and Interests in the Liquidating
Trust or Trusts" below. All liquidating distributions from the Company or a
liquidating trust on or after the Final Record Date will be made to stockholders
according to their holdings of capital stock as of the Final Record Date.
Subsequent to the Final Record Date, the Company may at its election require
stockholders to surrender certificates representing their shares of the capital
stock in order to receive subsequent distributions. Stockholders should not
forward their stock certificates before receiving instructions to do so. If
surrender of stock certificates should be required, all distributions otherwise
payable by the Company or the liquidating trust, if any, to stockholders who
have not surrendered their stock certificates may be held in trust for such
stockholders, without interest, until the surrender of their certificates
(subject to escheat pursuant to the laws relating to unclaimed property). If a
stockholder's certificate evidencing the capital stock has been lost, stolen or
destroyed, the stockholder may be required to furnish the Company with
satisfactory evidence of the loss, theft or destruction thereof, together with a
surety bond or other indemnity, as a condition to the receipt of any
distribution.
Trading of the Common Stock and Interests in the Liquidating Trust or Trusts
The Company currently intends to close its stock transfer books on the Final
Record Date and to cease recording stock transfers and issuing stock
certificates (other than replacement certificates) at such time. Accordingly, it
is expected that trading in the shares will cease on and after such date.
It is anticipated that the interests in a liquidating trust or trusts will not
be transferable, although no determination has yet been made. Such determination
will be made by the Board of Directors and management prior to the transfer of
unsold assets to the liquidating trust and will be based on, among other things,
the Board of Directors and management's estimate of the value of the assets
being transferred to the liquidating trust or trusts, tax matters and the impact
of compliance with applicable securities laws. Should the interests be
transferable, the Company plans to distribute an information statement with
respect to the liquidating trust or trusts at the time of the transfer of assets
and the liquidating trust or trusts may be required to comply with the periodic
reporting and proxy requirements of the Exchange Act. The costs of compliance
with such requirements would reduce the amount which otherwise could be
distributed to interest holders. Even if transferable, the interests are not
expected to be listed on a national securities exchange or quoted through
Nasdaq, and the extent of any trading market therein cannot be predicted.
Moreover, the interests may not be accepted by commercial lenders as security
for loans as readily as more conventional securities with established trading
markets.
As stockholders will be deemed to have received a liquidating distribution equal
to their pro rata share of the value of the net assets distributed to an entity
which is treated as a liquidating trust for tax purposes (see "Certain Federal
Income Tax Consequences"), the distribution of non-transferable interests could
result in tax liability to the interest holders without their being readily able
to realize the value of such interests to pay such taxes or otherwise.
Absence of Appraisal Rights
Under the DGCL, the stockholders of the Company are not entitled to appraisal
rights for their shares of Common Stock in connection with the transactions
contemplated by the Plan.
Regulatory Approvals
No United States federal or state regulatory requirements must be complied with
or approvals obtained in connection with the liquidation.
EFFECT OF LIQUIDATION
The methods used by the Board of Directors and management in estimating the
values of the Company's assets are inexact and may not approximate values
actually realized. The Board of Directors' assessment assumes that estimates of
the Company's liabilities and operating costs are accurate, but those estimates
are subject to numerous uncertainties beyond the Company's control and also do
not reflect any contingent liabilities that may materialize. For all these
reasons, there can be no assurance that actual net proceeds distributed to
stockholders in liquidation may not be significantly less than the estimated
amount discussed in this Proxy Statement. Moreover, no assurance can be given
that any amounts to be received by the Company's stockholders in liquidation
will equal or exceed the price or prices at which the Common Stock has recently
traded or may trade in the future.
VOTE REQUIRED AND BOARD RECOMMENDATION
The ratification and approval of the Plan of Liquidation requires the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock. Members of the Board of Directors and the executive officers of
the Company who hold (or are deemed to hold) as of the Record Date an aggregate
of 13,891 shares of Common Stock (approximately 7.36% 0.35% of the outstanding
shares of Common Stock as of that date) have indicated that they will vote in
favor of the proposal.
The Board believes that the Plan of Liquidation is in the best interests of the
Company's stockholders and recommends a vote FOR this proposal. It is intended
that shares represented by the enclosed form of proxy will be voted in favor of
this proposal unless otherwise specified in such proxy.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material United States
federal income tax consequences affecting the Company's stockholders that are
anticipated to result from the dissolution and liquidation of the Company. This
discussion does not purport to be a complete analysis of all the potential tax
effects. Moreover, the discussion does not address the tax consequences that may
be relevant to any particular stockholder or to particular categories of
investors subject to special treatment under certain federal income tax laws
(such as dealers in securities, banks, insurance companies, tax-exempt
organizations, mutual funds, foreign individuals and entities, and persons who
acquired their Company stock upon exercise of stock options or in other
compensatory transactions). It also does not address any tax consequences
arising under the laws of any state, local or foreign jurisdiction. The
discussion is based upon the Internal Revenue Code of 1986, as amended, Treasury
Regulations, Internal Revenue Service ("IRS") rulings, and judicial decisions
now in effect, all of which are subject to change at any time; any such changes
may be applied retroactively. Distributions pursuant to the Plan may occur at
various times and in more than one tax year. No assurance can be given that the
tax treatment described herein will continue to be applicable at the time of
each distribution.
The following discussion assumes that the Company will liquidate in accordance
with the Plan in all material respects. No ruling has been requested from the
IRS with respect to the anticipated tax treatment of the Plan, and the Company
will not seek an opinion of counsel with respect to the anticipated tax
treatment. This discussion is not binding on the IRS or on any court. If any of
the anticipated tax consequences described herein proves to be incorrect, the
result could be increased taxation at the corporate and/or stockholder level,
thus reducing the benefit to the stockholders and the Company from the
liquidation. This discussion does not constitute legal advice to any
stockholder.
Federal Income Taxation of the Company
After the approval of the Plan and until the liquidation is completed, the
Company will continue to be subject to federal income tax on its taxable income,
if any. The Company will recognize gain or loss on sales of its assets pursuant
to the Plan. Upon the distribution of any property, other than cash, to
stockholders pursuant to the Plan, the Company will generally recognize gain or
loss as if such property were sold at its fair market value. The Company may
utilize any losses and net operating loss carry forwards that the Company has to
offset any gains recognized on sales or distribution of Company assets.
Federal Income Taxation of the Stockholders
As a result of the liquidation of the Company, stockholders will recognize gain
or loss equal to the difference between (i) the sum of the amount of cash
distributed to them and the fair market value (at the time of distribution) of
any property distributed to them, and (ii) their tax basis for their shares of
the Company's capital stock. A stockholder's tax basis in his or her shares will
depend upon various factors, including the stockholder's cost and the amount and
nature of any distributions received with respect thereto.
A stockholder's gain or loss will be computed on a "per share" basis. The
Company expects to make more than one liquidating distribution, each of which
will be allocated proportionately to each share of stock owned by a stockholder.
The value of each liquidating distribution will be applied against and reduce a
stockholder's tax basis in his or her shares of stock. Gain will be recognized
as a result of a liquidating distribution at such time as the aggregate value of
the distributions received by a stockholder with respect to a share exceeds his
or her tax basis for that share (and the amount of such gain shall equal such
excess). Any loss will generally be recognized only when the final distribution
from the Company has been received and then only if the aggregate value of all
liquidating distributions with respect to a share is less than the stockholder's
tax basis for that share. Gain or loss recognized by a stockholder will be
capital gain or loss provided the shares are held as capital assets, and will be
long term capital gain or loss if the stock has been held for more than one
year.
If it were to be determined that distributions were not treated as part of the
plan of liquidation, such distributions would be treated as dividends (and taxed
at ordinary income rates) to the extent of the company's current and accumulated
earnings and profits. While the Company has an accumulated earnings and profits
deficit, it is unclear whether asset sales will cause the Company to have
earnings and profits in the current or future years.
A stockholder's tax basis in any property (other than money) received in
distribution will be the fair market value of such property at the time of
distribution. Gain or loss realized upon the stockholder's future sale of that
property will be measured by the difference between the stockholder's tax basis
in the property at the time of such sale and the proceeds of such sale.
After the close of its taxable year, the Company will provide stockholders and
the IRS with a statement of the amount of cash distributed to the stockholders
and its best estimate as to the value of any property distributed to them during
that year. There is no assurance that the IRS will not challenge such valuation.
As a result of such a challenge, the amount of gain or loss recognized by
stockholders might be changed. Distributions of property other than cash to
stockholders could result in tax liability to any given stockholder exceeding
the amount of cash received, requiring the stockholder to meet the tax
obligations from other sources or by selling all or a portion of the assets
received.
It is possible that the Company will have liabilities not fully covered by its
Contingency Reserve for which the stockholders will be liable up to the extent
of any liquidating distributions they have received. (See "Contingent
Liabilities; Contingency Reserve; Liquidating Trust"). Such a liability could
require a stockholder to satisfy a portion of such liability out of prior
liquidating distributions received from the Company and the liquidating trust or
trusts. Payments by stockholders in satisfaction of such liabilities would
generally give rise to a capital loss, which, in the hands of individual
stockholders, could not be carried back to prior years to offset capital gains
realized from liquidating distributions in those years.
Liquidating Trusts
If the Company transfers assets to a liquidating trust or trusts, the Company
intends to structure such trust or trusts so that stockholders will be treated
for tax purposes as having received their pro rata share of the property
transferred to the liquidating trust or trusts, reduced by the amount of known
liabilities assumed by the liquidating trust or trusts or to which the property
transferred is subject. Assuming such treatment is achieved, assets transferred
to a liquidating trust will cause the stockholder to be treated in the same
manner for federal income tax purposes as if the stockholder had received a
distribution directly from the Company. The liquidating trust or trusts
themselves should not be subject to federal income tax, assuming that they are
treated as liquidating trusts for federal income tax purposes. After formation
of the liquidating trust or trusts, the stockholders must take into account for
federal income tax purposes their allocable portion of any income, gain or loss
recognized by the liquidating trust or trusts. As a result of the transfer of
property to the liquidating trust or trusts and the ongoing operations of the
liquidating trust or trusts, stockholders should be aware that they may be
subject to tax, whether or not they have received any actual distributions from
the liquidating trust or trusts with which to pay such tax. There can be no
assurance that the liquidating trust or trusts described in the Plan will be
treated as a liquidating trust or trusts for federal income tax purposes.
State and Local Tax
The Company may be subject to liability for state or local taxes with respect to
the sale of its assets. Stockholders may also be subject to state or local
taxes, including with respect to liquidating distributions received by them or
paid to a liquidating trust on their behalf, and with respect to any income
derived by a liquidating trust. Stockholders should consult their tax advisors
with respect to the state and local tax consequences of the Plan.
Backup Withholding
Unless a stockholder complies with certain reporting and/or certification
procedures or is an exempt recipient under applicable provisions of the Code and
Treasury regulations promulgated under the Code, such stockholder may be subject
to a 30.5% backup withholding tax with respect to any payments received pursuant
to the liquidation. Backup withholding generally will not apply to payments made
to certain exempt recipients such as corporations or financial institutions or
to stockholders who furnish a correct taxpayer identification number or provide
a certificate of foreign status and provides certain other required information.
If backup withholding applies, the amount withheld is not an additional tax, but
is credited against that stockholder's U.S. federal income tax liability.
The foregoing summary of United States Federal income tax considerations is
included for general information only and does not constitute legal advice to
any stockholder. The tax consequences of the Plan may vary depending upon the
particular circumstances of the stockholder. The Company recommends that each
stockholder consult its tax advisor regarding the federal, state and local
income and other tax consequences of the Plan.
THE COMPANY
Business
ASI, a Delaware corporation formed in 1986, 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.
The failure of the PaperClip merger and the Kodak/Anacomp lawsuit discussed
above under "Background and Reasons for the Plan - Company Background",
overpowered any ongoing marketing efforts by ASI. In addition, technological
advancements, the system's applicability to only the mainframe and published and
limited financial resources reduced sales opportunities and customer acceptance
of ASI products. Consequently, in the fall of 1998, ASI retrenched both in
personnel and technological development efforts.
As a result of the review by the Board of Directors of the Company's strategic
alternatives as summarized above under "Background and Reasons for the Plan
-Review of Alternatives", the Company announced the sale of its maintenance
contracts and the approval of the Plan.
Employees
As of June 30, 2002, ASI had 3 full time and 2 part-time employees. As of
September 18, 2002, ASI had 2 full time employee and 1 part-time employees.
Description of Property
ASI's principal offices are located in North Kingstown, Rhode Island, in a
leased facility consisting of approximately 4,200 square feet of space occupied
under a month-to-month lease commitment. ASI has committed to vacate the space
by October 31, 2002, without penalty.
Legal Proceedings
ASI is not involved in any legal proceedings as of the date of this Proxy
Statement.
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 fiscal year. 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 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
June 30, 2002, ASI had deferred revenue in the amount of $432,918.
ASI's primary operating expenses include maintenance and general and
administrative expenses. General and administrative expenses this fiscal year
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. The Company plans to sell its remaining assets including
inventory, property and equipment 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 initial distribution.
Results of Operations
Year Ended June 30, 2002 Compared to Year Ended June 30, 2001
The following table presents certain items from ASI's Statement of Operations,
and such amounts as percentages of net sales, for the periods indicated.
Products and service costs percentages are of net sales.
Year Ended June 30, 2002 Year Ended June 30, 2001
Net sales
Products $ 35,576 5% $ 146,162 15%
Support and services............ 671,431 95 799,816 85
------------- ---------- -------------- ----------
Total net sales............. 707,007 100 945,978 100
Cost of Sales
Products........................ 7,422 1 17,339 2
Support and services............ 205,650 29 237,060 25
------------- ---------- -------------- ----------
Total cost of sales......... 213,072 30 254,399 27
Gross profit........................ 493,935 70 691,579 73
------------- ---------- -------------- ----------
Operating expenses:
Selling......................... 132,688 19 118,429 13
General and administrative...... 389,401 55 429,801 45
------------- ---------- -------------- ----------
Total operating expenses............ 522,089 74 548,230 58
Other income and (expense), net..... 137,819 19 (213,272) (23)
------------- ---------- -------------- ----------
Profit (loss) before litigation
settlement..................... 109,665 15 (69,923) (8)
------------- ---------- -------------- ----------
------------- ---------- -------------- ----------
Litigation settlement............... - - 4,175,583 441
------------- ---------- -------------- ----------
------------- ---------- -------------- ----------
Net profit before provision for 109,665 15 4,105,660 433
income taxes
------------- ---------- -------------- ----------
------------- ---------- -------------- ----------
Provision for income taxes.......... 2,500 0 95,000 10
------------- ---------- -------------- ----------
------------- ---------- -------------- ----------
Net Profit ......................... $ 107,165 15% $ 4,010,660 423%
============= ========== ============== ==========
Net sales. Net sales decreased 25% to $707,007 for the year ended June 30, 2002
from $945,978. Product sales decreased 76% to $35,576 for the year ended June
30, 2002 from $146,162 for the year ended June 30, 2001 when a sale of an
optical storage system was recorded. Support and service revenues decreased by
16% to $671,431 for the year ended June 30, 2002 from $799,816 for the year
ended June 30, 2001. This reduction was due to the consolidation of sites for
one customer and the decision by three customers to reduce maintenance coverage.
Cost of sales. Cost of sales includes component costs, firmware, license costs,
third-party equipment maintenance contractors and certain overhead costs. Cost
of sales in the aggregate decreased 16% to $213,072 for the year ended June 30,
2002 from $254,399 for the year ended June 30, 2001, primarily due to the
decrease in service and support sales. Cost of sales for products decreased by
57% to $7,422 for the year ended June 30, 2002 from $17,339 for the year ended
June 30, 2001. This decrease in cost was directly attributable to the decrease
in product sales. Cost of services decreased by 13% to $205,560 for the year
ended June 30, 2002 from $237,060 for the year ended June 30, 2001, primarily
due to decreased sales and favorable renegotiation of third-party service
contracts. The Company's gross margin decreased to 70% from 73% due to the above
factors.
Sales and Support Service expenses. Selling expenses increased by 12% or $14,259
to $132,688 for the year ended June 30, 2002 from $118,429 for the year ended
June 30, 2001. These expenses have remained fairly static.
General and administrative expenses. General and administrative expenses consist
of administrative expenses and certain internal office and support expenses.
General and administrative expenses decreased $40,400 or 9% to $389,401 for the
year ended June 30, 2002 from $429,801 for the year ended June 30, 2001. This
improvement was primarily due to the reduction of one employee, mitigated to
some extent by higher insurance premiums, an increase in franchise taxes and an
increase in fees for normal contractual services.
Other income and expense. The Company incurred no interest expense during the
year ended June 30, 2002 and $240,504 during the year ended June 30, 2001. The
elimination of interest expense was due to the retirement of all outstanding
debt as of May, 2001. Interest income increased 52% to $43,341 for the year
ended June 30, 2002 from $22,462 for the year ended June 30, 2001. This increase
was attributed to the receipt of twelve payments of interest on a note
receivable from PaperClip Software, Inc. during FY 2002, compared to six
payments during FY 2001, and from increased interest earned on cash investments.
Miscellaneous income of $94,478 at June 30, 2002 represents a full year of
principal repayments on the note receivable from PaperClip Software, Inc., which
is fully reserved for as of June 30, 2002. Only six months of principal payments
were received during fiscal 2001. The loss on disposal of fixed assets of
$42,469 for the year ended June 30, 2001 is due to the disposal of non-fully
depreciated fixed assets.
Litigation settlement. For the year ended June 30, 2001, pursuant to the
settlement resolving its patent infringement lawsuit against defendants Anacomp
and Kodak, ASI received a net monetary award of $4,175,583.
Net income (loss) before provision for income taxes. As a result of the
foregoing, ASI's net income decreased to $109,665 for the year ended June 30,
2002 from $4,105,660 for the year ended June 30, 2001.
Provision for income taxes. The provision for income taxes is calculated after
considering book and tax timing differences. Note 7 to the financial statements
discusses the timing differences for the years ended June 30, 2002 and 2001.
Liquidity and Capital Resources
ASI had a working capital surplus of $2,010,003 at June 30, 2002 as compared to
a working capital surplus of $1,895,849 at June 30, 2001. The increase in
working capital was principally attributable to the increase in accounts
receivable and a decrease in accounts payable.
Total cash used by operating activities in fiscal year 2002 was $74,678. The
major uses of cash were an increase in trade receivables, a reduction of
accounts payable and provision for income taxes. These amounts represent
adjustments to net cash used by operating activities in the Company's Statement
of Cash Flows. The reduction of accounts payable noted in working capital and
cash used by operating activities was primarily attributable to repayment of old
payables.
During Fiscal 2002, cash used by investing activities totaled $909, reflecting
the acquisition of new office machinery.
In Fiscal 2001, ASI received a net monetary award of $4,175,583 that was related
to the settlement of the DataWare/Kodak patent infringement lawsuit. After the
payment of legal fees and the share of the settlement allocated to the co-owner
of the patent, on May 1, 2001, ASI received net proceeds of $4,175,586.
Approximately $2,000,000 has been used to retire outstanding debt and payables.
At June 30, 2002, ASI had federal and state net operating loss carryforwards
available to reduce any future taxable income in the approximate amount of
$10,707,000. These net operating loss carryforwards will expire in various
amounts between the years 2003 and 2022, if not previously utilized. In the
event of a change in the ownership of ASI, as defined in Section 382 of the
Internal Revenue Code, utilization of net operating loss carryforwards in
periods following such ownership changes can be significantly limited.
Management believes that ASI has incurred several changes of ownership under
these rules. As a result, utilization of the net operating loss carryforwards is
subject to various limitations, depending upon the year in which the net
operating loss originated. Management estimates that federal net operating loss
carryforwards in the approximate aggregate amount of $6,000,000 will be
available to offset taxable income that ASI may generate within the carryforward
period subject to a limitation of approximately $400,000 per year. Because the
underlying calculations are complex and are subject to review by the Internal
Revenue Service, these limitation amounts could be adjusted at a later date.
The PaperClip Note
On January 29, 1997, ASI provided a $300,000 loan to PaperClip for use as
operating capital in exchange for a convertible note of PaperClip (the
"PaperClip Note"). The PaperClip Note was due and payable on January 27, 1998,
bore interest at a rate of 12% per annum payable quarterly and was secured by a
first priority security interest in all of PaperClip's assets. At any time, all
or a portion of the outstanding principal amount of the PaperClip Note could be
converted into shares of PaperClip Common Stock at a conversion price of $.25
per share.
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.
ASI and PaperClip entered into a one-year non-exclusive regional distribution
agreement commencing June 1, 1997. Under the terms of this agreement, ASI acted
as a distributor for PaperClip's products in the United States to dealers and
resellers. ASI's sole compensation under this agreement was its gross profit on
any products sold, which was equal to any excess of the price at which ASI
distributes the products to its customers over the price at which PaperClip
licenses the products to ASI. The agreement expired on May 31, 1998 and was not
renewed.
In November, 2000, PaperClip entered into an agreement with ASI whereby the
Company's original secured advance to PaperClip in the amount of $300,000 and
accrued interest of $105,530 was restructured to an interest free note with the
principal amount of Four Hundred Five Thousand Five Hundred Thirty ($405,530)
Dollars with substantially the same security. Under the terms of the note,
PaperClip is to pay this note in thirty-five consecutive equal monthly
installments of Eleven Thousand Two Hundred Sixty-four and 72/100 ($11,264.72)
Dollars commencing on January 1, 2001 and continuing on the same day of each
successive month thereafter with a thirty sixth and final payment of all
indebtedness evidenced thereby on December 1, 2003. Although payments are
current on the note, ASI has fully reserved for the value of the new promissory
note (approximately $200,000) due to PaperClip's poor financial condition.
If the above described payments are not paid as and when due (including without
limitation payment being due as a result of the acceleration of the repayment of
the indebtedness noted below), the indebtedness outstanding under the note will
bear interest from the date such payment was due at fifteen (15%) percent per
annum. PaperClip may prepay the restructured note at any time after having given
at least thirty (30) days prior written notice to the Company. The repayment of
the indebtedness evidenced by the note may be accelerated at the election of the
Company, upon the happening of any of the following events:
(a) PaperClip (i) discontinues its business (as evidenced by a resolution of
PaperClip's Board of Directors or stockholders), (ii) applies for or consent to
the appointment of a receiver, trustee, custodian or liquidator of it or any of
its property, (iii) admits in writing of its inability to pay its debts as they
mature, except for the obligations set forth on Schedule 2.10 of the Disclosure
Schedules of the Series A Preferred Stock Purchase Agreement between PaperClip
and the Company dated October, 2000, (iv) makes a general assignment for the
benefit of creditors, (v) becomes adjudicated a bankrupt or insolvent or becomes
the subject of an order for relief under Title 11 of the United States Code or
(vi) files a voluntary petition in bankruptcy, or a petition or an answer
seeking reorganization or an arrangement with creditors or takes advantage of
any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or
liquidation law or statute, or answers, admitting the material allegations of a
petition filed against it in any such proceeding under any such law;
(b) An involuntary petition under any bankruptcy, reorganization or insolvency
law of any jurisdiction is filed against PaperClip, whether now or hereafter in
effect if, within one hundred and eighty days (180) following the service on
PaperClip of any such petition, is not discharged, released or vacated;
(c) PaperClip sells or transfers substantially all of its assets or business
units to someone other than ASI;
(d) PaperClip fails to pay any payment obligation contained in the restructured
note within five (5) days of when due;
(e) PaperClip is in default of any other material obligation contained in the
restructured note or in the Security Agreement dated January 29, 1997, as
amended, and the default has not been cured within ten (10) days after notice
from ASI, or, if the default is not capable of being cured within ten days,
PaperClip has not begun efforts satisfactory to ASI to cure the default within
that ten-day period.
The agreement also provided for ASI and PaperClip to convert the advanced
amount, including interest, of $2,305,506.10 as a result of the party's April
15, 1997 subsequently terminated merger activities into 3,649,543 shares of
PaperClip's Series A Preferred, $.01 par value Stock and to waive the management
fees of $300,000 earned by ASI under the April 15, 1997 agreement. No value has
been recorded on the Company's financial statements for this investment due to
Paperclip's deteriorating stock value and poor financial condition.
Seasonality and Inflation
Seasonality and inflation have not had a material effect on ASI's operations.
Financial Statements
ASI's audited financial statements for the two-year period ended June 30, 2002
are attached to this Proxy Statement as Exhibit B.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended June 30,
2002, the Company's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 2001, December 31, 2001 and March 31, 2002 and the Company's
Current Report on Form 8-K filed with the SEC on September 18, 2002 are
incorporated herein by reference.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the date of
the Special Meeting or any adjournment or postponement thereof shall be deemed
to be incorporated by reference herein and made a part hereof from the date of
the filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement to the extent that a
statement contained herein or in any other document subsequently filed with the
Commission which also is deemed to be incorporated by reference herein modified
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement.
The Company will provide without charge to each person to whom a copy of this
Proxy Statement is delivered, upon the written or oral request of such person, a
copy of any or all of the documents incorporated by reference herein (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to Thomas E. Gardner, c/o Point Gammon Corporation, One Providence
Washington Plaza, 4th Floor, Providence, RI 02903.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come before
the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
The Board of Directors encourages stockholders to attend the meeting. Whether or
not you plan to attend, you are urged to complete, date, sign and return the
enclosed proxy in the accompanying envelope. A prompt response will greatly
facilitate arrangements for the meeting and your cooperation will be
appreciated. Stockholders who attend this meeting may vote their stock
personally even though they have sent in their proxies.
By Order of the Board of Directors,
Thomas E. Gardner
Chairman
EXHIBIT INDEX
PAGE
EXHIBIT NUMBER
------
Exhibit A Plan of Complete Liquidation and Dissolution............... A-1
Exhibit B ASI Financial Statements for the Two Years ended
December 31, 2001.......................................... B-1
EXHIBIT A
PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION
OF
ACCESS SOLUTIONS INTERNATIONAL, INC.
This Plan of Complete Liquidation and Dissolution (the "Plan") is intended to
accomplish the complete liquidation and dissolution of Access Solutions
International, Inc., a Delaware corporation (the "Company"), in accordance with
the Delaware General Corporation Law and Section 331 of the Internal Revenue
Code of 1986, as amended (the "Code"), as follows:
1. The Board of Directors of the Company (the "Board of Directors") has
adopted this Plan and called a meeting (the "Meeting") of the holders
of the Company's Common Stock to take action on the Plan and ratify
the Company's actions taken to date on the Plan. If stockholders
holding a majority of the Company's outstanding common stock, par
value $0.01 per share (the "Common Stock"), vote for the adoption of
this Plan at the Meeting, the Plan shall constitute the adopted Plan
of the Company as of the date of the Meeting, or such later date on
which the stockholders may approve the Plan if the Meeting is
adjourned to a later date (the "Adoption Date"). The adoption of the
Plan by the stockholders of the Company shall constitute full and
complete authority for the Board of Directors and officers of the
Company, without further stockholder action, to proceed with the
dissolution and liquidation of the Company in accordance with any
applicable provision of Delaware law, including, without limitation,
Section 280 or Section 281(b) thereof.
2. After the Adoption Date, the Company shall not engage in any business
activities except to the extent necessary to preserve the value of its
assets, wind up its business affairs, and distribute its assets in
accordance with this Plan. No later than thirty (30) days following
the Adoption Date, the Company shall file Form 966 with the Internal
Revenue Service.
3. From and after the Adoption Date, the Company shall complete the
following corporate actions:
(a) The Company shall determine whether and when to (i) transfer the
Company's property and assets (other than cash, cash equivalents
and accounts receivable) to a liquidating trust (established
pursuant to Section 6 hereof), or (ii) collect, sell, exchange or
otherwise dispose of all of its property and assets in one or
more transactions upon such terms and conditions as the Board of
Directors, in its absolute discretion, deems expedient and in the
best interests of the Company and the stockholders, without any
further vote or action by the Company's stockholders. It is
understood that the Company will be permitted to commence the
sale and disposition of its assets as soon as possible following
the adoption of this Plan by the Company's Board of Directors in
order to attain the highest value for such assets and maximize
value for its stockholders. The Company's assets and properties
may be sold in bulk to one buyer or a small number of buyers or
on a piecemeal basis to numerous buyers. The Company will not be
required to obtain appraisals or other third party opinions as to
the value of its properties and assets in connection with the
liquidation. In connection with such collection, sale, exchange
and other disposition, the Company shall collect or make
provision for the collection of all accounts receivable, debts
and claims owing to the Company.
(b) The Company shall pay or, as determined by the Board of
Directors, make reasonable provision to pay, all claims and
obligations of the Company, including all contingent, conditional
or unmatured claims known to the Company and all claims which are
known to the Company but for which the identity of the claimant
is unknown.
(c) The Company shall distribute pro rata to its stockholders all
available cash including the cash proceeds of any sale, exchange
or disposition, except such cash, property or assets as are
required for paying or making reasonable provision for the claims
and obligations of the Company. Such distribution may occur all
at once or in a series of distributions and shall be in cash or
assets, in such amounts, and at such time or times, as the Board
of Directors or the Trustees (as defined in Section 6 hereof), in
their absolute discretion, may determine. If and to the extent
deemed necessary, appropriate or desirable by the Board of
Directors or the Trustees, in their absolute discretion, the
Company may establish and set aside a reasonable amount of cash
and/or property (the "Contingency Reserve") to satisfy claims
against the Company, including, without limitation, tax
obligations, and all expenses of the sale of the Company's
property and assets, of the collection and defense of the
Company's property and assets, and the liquidation and
dissolution provided for in this Plan.
4. The distributions to the Stockholders pursuant to Section 3, 6 and 7
hereof shall be in complete redemption and cancellation of all of the
outstanding Common Stock of the Company. As a condition to receipt of
any distribution to the Company's stockholders, the Board of Directors
or the Trustees, in their absolute discretion, may require the
stockholders to (i) surrender their certificates evidencing the Common
Stock to the Company or its agents for recording of such distributions
thereon or (ii) furnish the Company with evidence satisfactory to the
Board of Directors or the Trustees of the loss, theft or destruction
of their certificates evidencing the Common Stock, together with such
surety bond or other security or indemnity as may be required by and
satisfactory to the Board of Directors or the Trustees ("Satisfactory
Evidence and Indemnity"). As a condition to receipt of any final
distribution to the Company's stockholders, the Board of Directors or
the Trustees, in their absolute discretion, may require the
stockholders to (i) surrender their certificates evidencing the Common
Stock to the Company or its agent for cancellation or (ii) furnish the
Company with Satisfactory Evidence and Indemnity. The Company will
finally close its stock transfer books and discontinue recording
transfers of Common Stock on the earliest to occur of (i) the close of
business on the record date fixed by the Board of Directors for the
final liquidating distribution, (ii) the close of business on the date
on which the remaining assets of the Company are transferred to the
Trust or (iii) the date on which the Company files its Certificate of
Dissolution under the Delaware General Corporation Law (following any
post-dissolution continuation period thereunder), and thereafter
certificates representing Common Stock will not be assignable or
transferable on the books of the Company except by will, intestate
succession, or operation of law.
5. If any distribution to a stockholder cannot be made, whether because
the stockholder cannot be located, has not surrendered its
certificates evidencing the Common Stock as required hereunder or for
any other reason, the distribution to which such stockholder is
entitled (unless transferred to the Trust established pursuant to
Section 6 hereof) shall be transferred, at such time as the final
liquidating distribution is made by the Company, to the official of
such state or other jurisdiction authorized by applicable law to
receive the proceeds of such distribution. The proceeds of such
distribution shall thereafter be held solely for the benefit of and
for ultimate distribution to such stockholder as the sole equitable
owner thereof and shall be treated as abandoned property and escheat
to the applicable state or other jurisdiction in accordance with
applicable law. In no event shall the proceeds of any such
distribution revert to or become the property of the Company.
6. If deemed necessary, appropriate or desirable by the Board of
Directors, in its absolute discretion, in furtherance of the
liquidation and distribution of the Company's assets to the
stockholders, as a final liquidating distribution or from time to
time, the Company shall transfer to one or more liquidating trustees,
for the benefit of its stockholders (the "Trustees"), under a
liquidating trust (the "Trust"), any assets of the Company which are
(i) not reasonably susceptible to distribution to the stockholders,
including without limitation non-cash assets and assets held on behalf
of the stockholders (a) who cannot be located or who do not tender
their certificates evidencing the Common Stock to the Company or its
agent as herein above required or (b) to whom distributions may not be
made based upon restrictions under contract or law, including, without
limitation, restrictions of the federal securities laws and
regulations promulgated thereunder, or (ii) held as the Contingency
Reserve. The Board of Directors is hereby authorized to appoint one or
more individuals, corporations, partnerships or other persons, or any
combination thereof, including, without limitation, any one or more
officers, directors, employees, agents or representatives of the
Company, to act as the initial Trustee or Trustees for the benefit of
the stockholders and to receive any assets of the Company. Any
Trustees appointed as provided in the preceding sentence shall succeed
to all right, title and interest of the Company of any kind and
character with respect to such transferred assets and, to the extent
of the assets so transferred and solely in their capacity as Trustees,
shall assume all of the liabilities and obligations of the Company,
including, without limitation, any unsatisfied claims and
unascertained or contingent liabilities. Further, any conveyance of
assets to the Trustees shall be deemed to be a distribution of
property and assets by the Company to the stockholders for the
purposes of Section 3 of this Plan. Any such conveyance to the
Trustees shall be in trust for the stockholders of the Company. The
Company, subject to this Section and as authorized by the Board of
Directors, in its absolute discretion, may enter into a liquidating
trust agreement with the Trustees, on such terms and conditions as the
Board of Directors, in its absolute discretion, may deem necessary,
appropriate or desirable. Adoption of this Plan by a majority of the
outstanding Common Stock shall constitute the approval of the
stockholders of any such appointment, any such liquidating trust
agreement and any transfer of assets by the Company to the Trust as
their act and as a part hereof as if herein written.
7. Whether or not a Trust shall have been previously established pursuant
to Section 6, in the event it should not be feasible for the Company
to make the final distribution to its stockholders of all assets and
properties of the Company prior to November 27, 2005 then, on or
before such date, the Company shall be required to establish a Trust
and transfer any remaining assets and properties (including, without
limitation, any uncollected claims, contingent assets and the
Contingency Reserve) to the Trustees as set forth in Section 6.
8. After the Adoption Date, the officers of the Company shall, at such
time as the Board of Directors, in its absolute discretion, deems
necessary, appropriate or desirable, obtain any certificates required
from the Delaware tax authorities and, upon obtaining such
certificates, the Company shall file with the Secretary of State of
the State of Delaware a certificate of dissolution (the "Certificate
of Dissolution") in accordance with the Delaware General Corporation
Laws.
9. Adoption of this Plan by holders of a majority of the outstanding
Common Stock shall constitute the approval of the stockholders of the
sale, exchange or other disposition in liquidation of all of the
property and assets of the Company, whether such sale, exchange or
other disposition occurs in one transaction or a series of
transactions, and shall constitute ratification of all contracts for
sale, exchange or other disposition which are conditioned on adoption
of this Plan.
10. In connection with and for the purposes of implementing and assuring
completion of this Plan, the Company may, in the absolute discretion
of the Board of Directors, pay any brokerage, agency, professional and
other fees and expenses of persons rendering services to the Company
in connection with the collection, sale, exchange or other disposition
of the Company's property and assets and the implementation of this
Plan.
11. In connection with and for the purpose of implementing and assuring
completion of this Plan, the Company may, in the absolute discretion
of the Board of Directors, pay the Company's officers, directors,
employees, agents and representatives, or any of them, compensation or
additional compensation above their regular compensation, in money or
other property, as severance, bonus, acceleration of vesting of stock
or stock options, or in any other form, in recognition of the
extraordinary efforts they, or any of them, will be required to
undertake, or actually undertake, in connection with the
implementation of this Plan. Adoption of this Plan by a majority of
the outstanding Common Stock shall constitute the approval of the
Company's stockholders of the payment of any such compensation.
12. The Company shall continue to indemnify its officers, directors,
employees, agents and representatives in accordance with its
certificate of incorporation, as amended, and by-laws and any
contractual arrangements, for the actions taken in connection with
this Plan and the winding up of the affairs of the Company. The
Company's obligation to indemnify such persons may also be satisfied
out of the assets of the Trust. The Board of Directors and the
Trustees, in their absolute discretion, are authorized to obtain and
maintain insurance as may be necessary or appropriate to cover the
Company's obligation hereunder, including seeking an extension in time
and coverage of the Company's insurance policies currently in effect.
13. Notwithstanding authorization or consent to this Plan and the
transactions contemplated hereby by the Company's stockholders, the
Board of Directors may modify, amend or abandon this Plan and the
transactions contemplated hereby without further action by the
stockholders to the extent permitted by the Delaware General
Corporation Law.
14. The Board of Directors of the Company is hereby authorized, without
further action by the Company's stockholders, to do and perform or
cause the officers of the Company, subject to approval of the Board of
Directors, to do and perform, any and all acts, and to make, execute,
deliver or adopt any and all agreements, resolutions, conveyances,
certificates and other documents of every kind which are deemed
necessary, appropriate or desirable, in the absolute discretion of the
Board of Directors, to implement this Plan and the transaction
contemplated hereby, including, without limiting the foregoing, all
filings or acts required by any state or federal law or regulation to
wind up its affairs.
EXHIBIT B
Access Solutions International, Inc.
Index to Financial Statements
PAGE
Report of Independent Auditors B-2
Financial Statements:
Balance Sheet - June 30, 2002 B-3
Statements of Operations -
Years Ended June 30, 2002 and 2001 B-4
Statements of Stockholders' Equity (Deficit) -
Years Ended June 30, 2002 and 2001 B-5
Statements of Cash Flows -
Years Ended June 30, 2002 and 2001 B-6
Notes to Financial Statements B-7
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Access Solutions International, Inc.
We have audited the accompanying balance sheet of Access Solutions
International, Inc. as of June 30, 2002, and the related statements of
operations, stockholders' equity and cash flows for each of the two years in the
period ended June 30, 2002. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Access Solutions International,
Inc. as of June 30, 2002, and the results of its operations and its cash flows
for each of the two years in the period ended June 30, 2002, in conformity with
accounting principles generally accepted in the United States of America.
CARLIN, CHARRON & ROSEN LLP
August 8, 2002
ACCESS SOLUTIONS INTERNATIONAL, INC.
BALANCE SHEET
JUNE 30, 2002
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,350,692
Trade accounts receivable, net of allowance
for doubtful accounts of $17,375
290,668
Inventories 15,003
Prepaid expenses and other current assets 18,288
-----------
TOTAL CURRENT ASSETS 2,674,650
-----------
PROPERTY AND EQUIPMENT, NET 1,798
-----------
TOTAL ASSETS $ 2,676,448
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 147,156
Accrued salaries and wages 22,069
Accrued expenses 65,004
Deferred revenue 432,918
-----------
TOTAL CURRENT LIABILITIES 667,147
-----------
TOTAL LIABILITIES 667,147
-----------
COMMITMENTS AND CONTINGENCIES (Notes 1, 6 and 9) -
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 13,000,000
shares authorized, 3,965,199 shares
issued, and 3,963,940 shares outstanding 39,652
Additional paid-in capital 17,637,694
Accumulated deficit (15,649,989)
-----------
TOTAL 2,027,357
Treasury stock, at cost (1,259 shares) (18,056)
-----------
TOTAL STOCKHOLDERS' EQUITY 2,009,301
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,676,448
===========
See accompanying notes to the financial statements and independent auditors'
report.
ACCESS SOLUTIONS INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
YEAR ENDED JUNE 30,
2002 2001
---- ----
NET SALES
Products $ 35,576 $ 146,162
Support and services 671,431 799,816
---------- ----------
TOTAL NET SALES 707,007 945,978
---------- ----------
COST OF SALES
Products 7,422 17,339
Support and services 205,650 237,060
------- ----------
TOTAL COST OF SALES 213,072 254,399
GROSS PROFIT 493,935 691,579
---------- ----------
OPERATING EXPENSES
Selling expenses 132,688 118,429
General and administrative expenses 389,401 429,801
---------- ----------
TOTAL OPERATING EXPENSES 522,089 548,230
---------- ----------
PROFIT (LOSS) FROM OPERATIONS (28,154) 143,349
OTHER INCOME (EXPENSE)
Loss on disposal of fixed assets - (42,469)
Interest income 43,341 22,462
Interest expense - (240,504)
Litigation settlement - 4,175,583
Miscellaneous income 94,478 47,239
---------- ----------
TOTAL OTHER INCOME (EXPENSE) 137,819 3,962,311
---------- ----------
NET INCOME BEFORE PROVISION FOR
INCOME TAXES $ 109,665 $4,105,660
========== ==========
PROVISION FOR INCOME TAXES 2,500 95,000
NET INCOME $ 107,165 $4,010,660
========== ==========
NET INCOME PER COMMON SHARE $ .03 $ 1.01
========== ==========
Weighted average number of common shares outstanding 3,963,940 3,963,940
========== ==========
Diluted earnings per share $ .02 $ .88
========== ==========
See accompanying notes to the financial statements and independent auditors'
report.
ACCESS SOLUTIONS INTERNATIONAL, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
Stockholders' Equity (Deficit)
-------------------------------------------------------------------------------------------------------------------
Common Stock
---------------- Additional Accumulated Treasury Stock
Shares Amount Paid-In-Capital Deficit Shares Amount Total Equity
------ ------ --------------- ------- ------ ------ (Deficit)
---------
Balance at June 30, 2000 3,965,199 $ 39,652 $ 17,637,694 $(19,768,063) 1,259 (18,056) (2,108,773)
========= ======== ============= ============= ====== ======== ==========
Net income - 4,010,660 - - 4,010,660
Balance at June 30, 2001 3,965,199 $ 39,652 $ 17,637,694 $(15,757,154) 1,259 (18,056) 1,902,136
========= ======== ============= ============= ====== ======== ==========
Net income - 107,165 107,165
Balance at June 30, 2002 3,965,199 $ 39,652 $ 17,637,694 (15,649,989) 1,259 (18,056) 2,009,301
========= ======== ============= ============= ====== ======== ==========
See accompanying notes to the financial statements and independent auditors'
report.
ACCESS SOLUTIONS INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
YEAR ENDED JUNE 30,
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 107,165 $4,010,660
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 5,164 19,240
Loss on disposal of fixed assets - 42,469
Provision for doubtful accounts-trade receivables 13,031 (8,823)
Changes in operating assets and liabilities:
Decrease (Increase) in:
Trade accounts receivable (112,554) 76,986
Inventories 6,469 3,935
Prepaid expenses and other current assets 14,766 6,310
Increase (decrease) in:
Accounts payable (70,947) (393,686)
Accrued expenses and salaries and wages (102,739) 16,405
Deferred revenue 64,967 (117,710)
--------- ----------
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES (74,678) 3,655,786
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Fixed Assets (909) -
--------- ----------
NET CASH USED FOR INVESTING ACTIVITIES (909) -
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Note Payable - (1,287,549)
--------- ----------
NET CASH USED FOR FINANCING ACTIVITIES - (1,287,549)
--------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (75,587) 2,368,237
CASH AND CASH EQUIVALENTS, BEGINNING 2,426,279 58,042
--------- ----------
CASH AND CASH EQUIVALENTS, ENDING $2,350,692 $2,426,279
========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOWS INFORMATION
Cash paid for interest $ - 502,862
========= ==========
See accompanying notes to the financial statements and independent auditors'
report.
ACCESS SOLUTIONS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
1. NATURE OF OPERATIONS
Access Solutions International, Inc. (formerly Aquidneck Systems
International, Inc.) (the "Company" or "ASI") assembles and services
optical data storage systems consisting of integrated computer hardware and
software for the archival storage and retrieval of computer-generated
information. The Company's optical data storage systems have been sold
principally to a limited number of large organizations that need to store
and retrieve large quantities of computer-generated data. To date, the
Company's customers primarily operate in the financial services and
insurance industries. No new systems were sold in this year.
During 1996, the Company consummated an initial public offering (IPO) of
1,066,667 Units. Each Unit consisted of two shares of common stock and one
redeemable common stock purchase warrant. Each warrant entitles the holder
to purchase one share of common stock at an initial exercise price of $5.00
per share, subject to adjustments, through October 15, 2001. The shares of
common stock and warrants comprising the Units are separately tradable. An
over-allotment option to purchase an additional 160,000 Units upon the same
terms and conditions set forth above was exercised by the Company's
underwriter on October 29, 1996. An aggregate of 2,453,334 shares of common
stock and 1,226,667 warrants were issued by the Company, resulting in net
proceeds of $7,062,507.
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 resolving its patent infringement lawsuit against defendants
Anacomp and Kodak in the United States District Court for the District of
Rhode Island. After the payment of legal fees and the share of the
settlement allocated to the co-owner of the patent, on May 1, 2001, ASI
received net proceeds of $4,175,586. Approximately $2,000,000 has been used
to retire outstanding debt and payables.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
ACCESS SOLUTIONS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method. Inventories consist primarily
of components used in production, finished goods held for sale and for
service needs, and optical disk storage libraries purchased from
third-party vendors for resale to the Company's customers as part of
integrated systems. Base stock service inventories are maintained at
customer locations as required under service contracts.
The Company's products consist of integrated computer hardware and
software. Rapid technological change and frequent new product introductions
and enhancements could result in excess inventory quantities over current
requirements based on the projected level of sales. The amount of loss that
is reasonably possible should such technological developments be realized
is not estimable.
Fixed Assets
Fixed assets are stated at cost. Depreciation and amortization are computed
using the straight-line method over the estimated useful lives of the
assets. Assets recorded under capital leases are amortized over the
estimated useful lives or lease terms, whichever is shorter.
Revenue Recognition
Product revenues include the sale of optical archiving systems, software
licenses, peripheral hardware, and consumable media.
Revenue from the sale of optical archiving systems and software licenses is
recognized when the system is installed and only insignificant
post-installation obligations remain. In the case of systems installed
subject to acceptance criteria, revenue is recognized upon acceptance of
the system by the customer. Revenue from hardware upgrades is recognized
upon shipment.
Service revenues include post installation software and hardware
maintenance and consulting services.
ACCESS SOLUTIONS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company provides the first year of software maintenance to customers as
part of the software license purchase price and recognizes the revenue upon
installation of the software. Costs associated with initial year
maintenance are not significant and enhancements provided during this
period are minimal and are expected to be minimal. All software maintenance
contracts after the first year are billed in advance of the service period
and revenues are deferred and recognized ratably over the contract term.
Hardware maintenance is billed for varying terms, and is deferred and
recognized ratably over the term of the agreement. Revenues from consulting
services are recognized upon customers' acceptances or during the period in
which services are provided if customer acceptance is not required and such
amounts are fixed and determinable.
Software Development Costs
Development costs incurred in the research and development of new software
products and enhancements to existing software products are expensed as
incurred until technological feasibility has been established. After
technological feasibility is established and until the related product is
available for general release to customers, any additional material amounts
of development costs are capitalized and amortized to cost of sales over
the economic life of the related product. Costs eligible for capitalization
have not been significant to date.
Income Taxes
Income taxes are accounted using an asset and liability method of
accounting for deferred income taxes. Under this method, deferred tax
assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which those differences are expected to be recovered
or settled. The primary component of the Company's deferred tax asset as of
June 30, 2002, which is fully reserved, is net operating loss
carryforwards.
Earnings Per Common Share
In 2002 and 2001, earnings per common share is computed using the weighted
average number of shares of common stock outstanding during the period.
Diluted earnings per share is computed using the weighted average number of
shares of common stock and an additional 575,000 shares which represent
exercisable options at June 30, 2002.
ACCESS SOLUTIONS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the period reported. Actual results
could differ from those estimates.
Reliance on Single or Limited Sources of Supply
The Company currently purchases all of its optical disk storage libraries,
CPU boards, fiber optic channel hardware and high-density integrated
circuits from single or limited sources. Although there are a limited
number of manufacturers of these components, management believes that other
suppliers could provide similar products on comparable terms. Total or
partial loss of any such source, however, could cause a delay in
manufacturing and a possible loss of sales, which would affect operating
results adversely.
Stock Based Compensation
The Company measures compensation expense relative to employee stock-based
compensation plans using the intrinsic value-based method of accounting as
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees". However, the Company will disclose the pro
forma amounts of net income and earnings per share as though the fair
value-based method of accounting prescribed by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation",
had been applied. See the stock options note for these disclosures.
3. 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.
ACCESS SOLUTIONS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
3. PAPERCLIP MERGER, MANAGEMENT AGREEMENTS (CONTINUED)
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. Although payments on the
note are current, ASI has fully reserved for the value of the new promissory
note (approximately $200,000 at June 30, 2002) due to PaperClip's poor financial
condition.
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 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 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 would have piggyback registration rights
on the Converted Shares underlying the Preferred Stock. Such piggyback
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.
ACCESS SOLUTIONS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
4. INVENTORIES
Inventories at June 30, 2002 consist of the following:
Production inventory $ 371,596
Less - inventory reserves (356,593)
-----------
TOTAL INVENTORY AVAILABLE FOR SALE $ 15,003
===========
5. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 2002
consists of the following:
Computers and office equipment $ 57,483
Furniture and fixtures 9,313
----------
TOTAL 66,796
Accumulated depreciation and amortization (64,998)
--------
NET PROPERTY AND EQUIPMENT $ 1,798
=========
6. COMMITMENTS
Operating Lease
The Company leases building space for office and plant facilities. In
October, 1998, the Company entered into a new lease for approximately 40%
of the previous space utilized, through September 30, 2001. In October,
2001, the Company negotiated a month-to-month lease commitment for the same
space that may be terminated by either party with three months notice. This
notice was given August 1, 2001. Total rent expense for the years ended
June 30, 2002 and 2001 amounted to $43,222 and $35,909, respectively.
7. INCOME TAXES
The tax effects of net operating loss ("NOL") carryforwards and temporary
differences that give rise to deferred tax assets and liabilities at June
30, 2002 are as follows:
JUNE 30, 2002
Deferred tax assets:
Net operating loss carryforwards $ 4,283,000
Research and development costs capitalized
for tax purposes 531,000
------------
4,814,000
Valuation allowance (4,814,000)
------------
ACCESS SOLUTIONS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
7. INCOME TAXES (CONTINUED)
Net Deferred Tax Asset $
-----------
The Company records a valuation allowance for deferred tax assets, if based
on the weight of available evidence, it is more likely than not that some
portion or all of the deferred tax asset will not be realized. The Company
has determined that a full valuation allowance is required given its
history of operating losses since its inception.
At June 30, 2002, the Company has total federal and state NOL
carryforwards, prior to any limitations, available to reduce future taxable
income of approximately $10,707,000, which expire in various amounts
between the fiscal years 2003 and 2022, if not previously utilized. In the
event of an ownership change, as defined under Section 382 of the Internal
Revenue Code, utilization of NOL carryforwards in the period following the
ownership change can be significantly limited. The Company has incurred
several changes of ownership under these rules. As a result, utilization of
the NOLs is subject to various limitations, depending upon the year in
which the NOL originated. As of June 30, 2002 management estimates that
approximately $6,000,000 (after limitations) of the Company's federal NOL
carryforwards will be available to offset taxable income that may be
generated within the carryforward period subject to a limitation of
approximately $400,000 of utilization per year. However, because the
limitation calculations are complex and subject to review by the Internal
Revenue Service, these limitations could be adjusted.
The following reconciles approximate net income before provision for income
tax purposes to approximate taxable net income at June 30, 2002 and 2001:
2002 2001
---- ----
Net income before provision for
income tax purposes
$ 107,200 4,105,700
Legal fees - 377,200
Interest expense - 264,500
Paperclip write-off - 2,584,100
Research and development 213,300 213,300
Net operating loss carryforwards - 424,800
Section 1231 loss carryforwards 39,100 -
--------- ---------
Taxable net income $(145,200) 241,800
========= =========
The Company had timing differences relating to the capitalization of legal
fees and interest charges for income tax reporting in prior periods. Those
charges were deducted for June 30, 2001 tax reporting but had been expensed
as incurred in prior years for financial reporting.
ACCESS SOLUTIONS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
7. INCOME TAXES (CONTINUED)
The Company also had timing differences relating to expenses incurred
during a failed merger with Paperclip (Note 3). The Company had notes
receivable due from Paperclip that they expensed (set up allowances for)
for financial reporting purposes in prior years. However, the write-offs
were deducted for June 30, 2001 tax reporting when the Company determined
that the value of the notes could not be recovered.
Further, during the years ended June 30, 2002 and 2001, the Company had a
research and development tax deduction from research and development
expenses capitalized in prior periods for tax reporting purposes. The
Company also had a net operating loss carryforward deduction that was
utilized for the year ending June 30, 2001 and a section 1231 loss
carryforward deduction that was utilized for the year ending June 30, 2002.
The federal and state income tax provisions for the years ended June 30,
2002 and 2001 are summarized as follows:
2002 2001
---------- -----------
---------- -----------
Federal $ - 70,000
State 2,500 25,000
---------- -----------
---------- -----------
$ 2,500 95,000
========== ===========
8. STOCK OPTIONS
In August 1996, the Company adopted the 1996 Stock Option Plan pursuant to
which key employees of the Company, including directors who are employees,
are eligible to receive options to purchase common stock, at the discretion
of the Compensation Committee.
The Company has reserved 500,000 shares of common stock for issuance under
the 1996 Plan. Options granted under the 1996 Plan can be either incentive
stock options or non-qualified options, at the discretion of the
Compensation Committee.
On August 1, 1996 the Company granted options to purchase 263,351 shares of
Common Stock at an exercise price equal to $3.75 per share. The options
must be exercised within five years of the date of grant.
On June 15, 1999 the Company granted to employees non-qualified options
under the 1996 Plan to purchase 375,000 shares of Common Stock at an
exercise price equal to $.08 per share. The options vest immediately and
must be exercised by July 31, 2006.
On June 15, 1999 the Company also granted to non-employee directors
non-qualified options to purchase 200,000 shares of common stock at an
exercise price equal to $.08 per share. The options vest immediately and
must be exercised by July 31, 2006.
ACCESS SOLUTIONS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
8. STOCK OPTIONS (CONTINUED)
The Company has also granted options from time to time to consultants and
in connection with equity and debt offerings at exercise prices which were
not less than the fair market value of the common stock on the date the
option was granted.
As of June 30, 2002 and 2001, the following stock options were outstanding:
Exercise Number Outstanding
Price June 30, June 30,
Per Share 2002 2001
$ .08 575,000 575,000
3.75 45,393 45,393
222.00 1,014 1,014
399.60 9 9
-------- ---------
621,416 621,416
======= =========
ACCESS SOLUTIONS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
8. STOCK OPTIONS (CONTINUED)
The following is a summary of stock option activity for the years ended June 30, 2002
Exercise Weighted Average
------------------------------------
Number of Price Exercise Fair Value Remaining
Options Per Share Price At Grant Life
Outstanding July 1, 1996 10,256 $ 74-$399.60 $ 212.53 11 years
Granted to employees 263,351 $3.75 $3.75 $ 1.05 5 years
Cancelled (62,873) $ 74-$399.60
---------- ------------- ---------- ------- ---------
Outstanding June 30, 1997 210,734 $3.75-$399.60 $ 5.91 5-10 years
Granted to former employees 45,393 $3.75 $ 3.75 $ 3.75 10 years
Cancelled (121,478) $3.75-$399.60
---------- ------------- ---------- ------- ---------
Outstanding June 30, 1998 134,649 $3.75-$399.60 $ 8.67 4-10 years
Granted to employees and 575,000 $0.08 $ 0.08 $ 0.08 7 years
non-employee directors
---------- ------------- ---------- ------- ---------
Cancelled (88,175) $3.75-$399.60
---------- ------------- ---------- ------- ---------
Outstanding June 30, 1999 621,474 $0.08-$399.60 $1.04 7-9 years
Cancelled (58) $74.00-351.50
---------- ------------- ---------- ------- ---------
Outstanding June 30, 2000 621,416 $0.08-$399.60 $ 1.02 6-8 years
Cancelled - -
---------- ------------- ---------- ------- ---------
Outstanding June 30, 2001 621,416 $0.08-$399.60 $ 1.02 5-7 years
Cancelled - -
Outstanding June 30, 2002 621,416 $0.08-$399.60 $ 1.02 4-6 years
========== ============= ========== ======= =========
ACCESS SOLUTIONS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
8. STOCK OPTIONS (CONTINUED)
Stock-based compensation expense under the fair value-based method of
accounting would have resulted in pro forma net loss and loss per common
share approximating the following amounts:
2002 2001
As Reported Pro Forma As Reported Pro Forma
Net income $ 109,665 $ 109,665 $4,105,660 $ 4,105,660
========= ========= ========= ===========
Earnings per common share $ .03 $ .03 $ 1.04 $ 1.04
========== ======== ========= ===========
The fair value for each option granted reflecting the basis for the above
from pro forma disclosures was determined on the date of grant using the
Black-Scholes option-pricing model. The following assumptions were used in
determining fair value through the model:
2002 2001
Expected life 3 years 4 years
Risk-free yields 4.56% 4.80%
Expected volatility 50%* 50%*
* Since there were no employee grants in FY 2002, this assumption did not
influence the stock-based compensation expense calculation for FY 2002.
The Company recognizes forfeitures as they occur.
9. INTERNATIONAL SALES, MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
The Company sells optical archiving systems and related licenses for
software products to customers domestically and internationally.
International sales have all been denominated in U.S. dollars and were
approximately $101,232 and $99,800 in the years ended June 30, 2002 and
2001, respectively. The Company's foreign sales represented approximately
14% and 11% of total revenues for the year ended June 30, 2002 and 2001,
respectively.
Amounts due from four customers represented approximately 100% of total
accounts receivable outstanding at June 30, 2002.
The Company also has a concentration of credit represented by cash balances
in certain large commercial banks in amounts which occasionally exceed
current federal deposit insurance limits. The financial stability of these
institutions is continually reviewed by senior management.
ACCESS SOLUTIONS INTERNATIONAL, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
November 26, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas E. Gardner and Robert H. Stone, and each
or both of them, proxies, with full power of substitution to vote all shares of
stock of Access Solutions International, Inc. (the "Company") which the
undersigned is entitled to vote at the Special Meeting of Stockholders of the
Company to be held on Tuesday, November 26, 2002, at 10:00 a.m. local time, at
the offices of Edwards & Angell, LLP, 2800 Financial Plaza, Providence, Rhode
Island, and at any adjournments thereof, upon matters set forth in the Notice of
Special Meeting of Stockholders and Proxy Statement dated October 21, 2002, a
copy of which has been received by the undersigned.
The proxies named above will vote on the proposal set forth in the Notice of
Special Meeting and Proxy Statement as specified on this card. If a vote is not
specified, said proxies will vote FOR the ratification and approval of the Plan
of Complete Liquidation and Dissolution. If any other matters properly come
before the Special Meeting, said proxies will vote on such matters in accordance
with the recommendations of the Board of Directors.
SEE REVERSE SIDE
CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE
[X] Please mark your vote as indicated in this example.
1. To ratify and approve the Plan of Complete Liquidation and Dissolution.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please mark, sign, date and promptly return this proxy card using the enclosed
envelope.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ] (Please sign exactly as your
name appears hereon. If signing as attorney, executor, trustee or guardian,
please give your full title as such. If stock is held jointly, each owner should
sign. Please read reverse side before signing.)
Signature:________________________________
Date______________________________________
Signature:________________________________
Date______________________________________