United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
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(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period ended September 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to
Commission file number 0-28920
Access Solutions International, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 05-0426298
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
650 Ten Rod Road
North Kingstown, RI 02852
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(Address of principal executive offices)
(401) 295-2691
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(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
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The number of shares of the issuer's Common Stock, $.0l par value, outstanding
as of December 31, 2000 was 3,963,940.
Access Solutions International, Inc.
INDEX
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PART I. FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
Condensed balance sheets--September 30, 2000 (unaudited)
and June 30, 2000 3
Condensed (unaudited) statements of operations --Three
months ended September 30, 2000 and 1999 5
Condensed (unaudited) statements of cash flows -- Three
months ended September 30, 2000 and 1999 6
Notes to unaudited condensed financial
statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
Access Solutions International, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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Access Solutions International, Inc.
Condensed Balance Sheets
September 30, June 30,
2000 2000
(Unaudited)
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Assets
Current assets:
Cash and cash equivalents $259,142 $ 58,042
Trade accounts receivable,
net of allowance for
doubtful accounts of $0 and $13,167 9,097 259,308
Inventories 25,272 25,407
Prepaid expenses and other current assets 53,202 39,129
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Total current assets 346,713 381,886
Fixed assets, net 53,605 62,626
Other assets:
Deposits and other assets -- 5,121
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Total assets $400,318 $449,633
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See notes to unaudited condensed financial statements.
3
Access Solutions International, Inc.
Condensed Balance Sheets
September 30, June 30,
2000 2000
(Unaudited)
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Liabilities and stockholders' deficit Current liabilities:
Accounts payable $ 628,540 $ 611,789
Accrued salaries and wages 100,353 84,891
Accrued expenses 84,947 88,516
Deferred revenue-prepaid service contracts 397,811 485,661
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Total current liabilities 1,211,651 1,270,857
Notes payable 1,364,772 1,287,549
Total liabilities 2,576,423 2,558,406
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Stockholders' equity:
Common Stock, $.01 par value, 13,000,000
shares authorized, 3,965,199 shares issued 39,652 39,652
Additional paid-in capital 17,637,694 17,637,694
Accumulated deficit (19,835,395) (19,768,063)
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(2,158,049) (2,090,717)
Treasury stock, at cost (1,259 shares) (18,056) (18,056)
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Total stockholders' equity (2,176,105) (2,108,773)
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Total liabilities and stockholders' equity $ 400,318 $ 449,633
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Note: The balance sheet at June 30, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to unaudited condensed financial statements.
4
Access Solutions International, Inc.
Condensed Statements of Operations (Unaudited)
Three months ending
September 30,
2000 1999
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Net sales:
Products $ 7,367 $ 22,040
Services 209,261 203,921
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Total net sales 216,628 225,961
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Cost of sales:
Products 245 5,733
Services 53,457 57,428
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Total cost of sales 53,702 63,161
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Gross profit 162,926 162,800
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Operating expenses:
General and administrative expense 148,039 88,208
Research and development expense 18,205 21,339
Selling expense 32,533 38,317
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Total operating expenses 198,777 147,864
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Profit/(Loss) from operations (35,851) 14,936
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Other revenue and expenses:
Interest income (80) (44)
Interest expense 31,561 31,561
Other expense -- --
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Total other expenses 31,481 31,517
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Net loss $ (67,332) $ (16,581)
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Primary net loss per common share $ (.02) $ (.00)
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Weighted average number of
common shares 3,963,940 3,963,940
See notes to unaudited condensed financial statements.
5
Access Solutions International, Inc.
Condensed Statements of Cash Flows (Unaudited)
For the Three Months Ended
September 30,
2000 1999
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Cash flows from operating activities
Net loss $ (67,332) $ (16,581)
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Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 14,143 19,315
Provision for doubtful accounts (13,167) 4,200
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade accounts receivable 263,378 25,304
Inventories 136 (2,440)
Prepaid expenses and other current assets (14,073) 11,154
Deposits and other assets -- --
Increase (decrease) in:
Accounts payable 16,751 (31,284)
Accrued expenses 11,891 (362,183)
Deferred revenue - prepaid service contracts (87,850) (124,545)
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Net Cash PROVIDED BY (used FOR) operating activities 123,877 (414,492)
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Cash flows from investing activities
Sale of property and equipment -- --
Additions to other assets -- (435)
Loans and advances written off related to PaperClip -- --
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Net cash (used FOR) provided by investing activities -- (435)
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Cash flows from financing activities
Reallocation of patent litigation fees -- 352,359
Deferred financing costs 77,223 --
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Net Cash Provided by financing activities 77,223 352,359
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Net INCREASE (decrease) in cash and cash equivalents 201,100 (62,568)
Cash and cash equivalents, BEGINNING 58,042 83,402
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Cash and cash equivalents, ending $ 259,142 $ 20,834
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See notes to unaudited condensed financial statements.
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Access Solutions International, Inc.
Notes to Unaudited Condensed Financial Statements
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10-01 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended September 30, 2000
are not necessarily indicative of the results that may be expected for the year
ended June 30, 2001. For further information, refer to the financial statements
and footnotes thereto included in the Access Solutions International, Inc.
("ASI") annual report on Form 10-KSB for the year ended June 30, 2000.
2. Legal Proceedings
On August 29, 1997, the Company filed a complaint in the United States District
Court for the District of Rhode Island against Data/Ware Development, Inc.
("Data/Ware") and Eastman Kodak Company, Inc. ("Kodak") alleging infringement of
the Company's patents. The claim states that Data/Ware and Kodak collectively
manufacture, use and/or sell equipment for recording data on optical media and
alleges that the manufacture and sale of such equipment, and use by purchasers
thereof, infringes one or more of the Company's patents. The claim calls 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 deems proper. The outcome of this claim cannot be
determined at this time.
3. PaperClip Merger, Management Agreements and Subsequent Events
ASI is currently in negotiations with PaperClip Software, Inc. concerning
payment of advances ASI made to PaperClip in the amount of $2,220,722, which ASI
wrote off in June, 1998. PaperClip is considering executing a $405,300 note
payable in 36 equal installments to ASI over a three year period, with the
balance to be conveyed to ASI in the form of shares of a new class of PaperClip
convertible preferred stock.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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Overview
ASI's sales consist of sales of products and services. Products sold by ASI
consist of COLD systems, software and hardware including replacement disk
drives, subassemblies and miscellaneous peripherals. Services rendered by ASI
include post-installation maintenance and support. ASI recognizes revenue from
customers upon installation of COLD systems and, in the case of COLD systems
installed for evaluation, upon acceptance by such customers of the products. ASI
sells extended service contracts on the majority of the products it sells. Such
contracts are one year in duration with payments received annually 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 September 30, 2000,
ASI had deferred revenue in the amount of $397,811.
ASI's operating results have in the past and may in the future fluctuate
significantly depending upon a variety of factors which vary substantially over
time, including industry conditions; the timing of orders from customers; the
timing of new product introductions by ASI and competitors; customer
acceleration, cancellation or delay of shipments; the length of sales cycles;
the level and timing of selling, general and administrative and research and
development expenses; specific feature needs of customers; and production
delays. A substantial portion of ASI's quarterly revenues is derived from the
sale of a relatively small number of COLD systems, which range in price from
approximately $150,000 to $500,000. As a result, the timing of recognition of
revenue from a single product order has in the past and may in the future have a
significant impact on ASI's net sales and operating results for particular
financial periods. This volatility is counter balanced by the increase in sales
of annual service contracts, which generally accompanies an increase in systems
sales.
ASI's primary operating expenses include selling expenses, general and
administrative expenses and research and development expenses. General and
administrative expenses consist primarily of employee compensation, customer
support and patent litigation expense (see Note 2 of Item 1). Research and
development expenses include compensation paid to internal research and
development staff members and expenses incurred in connection with the retention
of independent research and development consultants. ASI utilizes its own
employees for research and development functions except in certain circumstances
involving product enhancements. In those circumstances, ASI regularly retains
independent experts to consult and design new software modules which are
subsequently evaluated and tested by ASI's internal research and development
staff. Upon successful testing of such product enhancements, ASI's internal
staff integrates the new products with ASI's existing COLD systems and products.
ASI's total expenditures for research and development for Fiscal 2000 and Fiscal
1999 were $90,343 and $119,243, respectively. Fiscal 2000 research and
development expenses were substantially reduced from prior levels due to
reductions in depreciation expense. Several assets became fully depreciated
during FY 2000, significantly reducing net depreciation expense.
ASI has historically incurred net losses and anticipates that further net losses
will be incurred prior to the time, if ever, that ASI achieves profitability.
However, ASI has recently taken certain steps intended to limit the occurrence
8
of future net losses. Such steps include: (i) searching for joint development
and marketing agreements or a synergistic acquisition candidate which would be
expected to increase sources of revenues at minimum cost. (ii) Critical reviews
of all procedures and costs to ensure maximum efficiency and effectiveness are
achieved in ASI's operations. While no assurance can be given that such steps
will be sufficient to limit losses, which may be incurred in the future, ASI
believes that such steps, when fully implemented, may enable ASI to realize
improved operating results. ASI does not believe that these steps have to date
or will in the future materially adversely impact ASI's revenues and earnings.
Results of Operations
The following discussion should be read in conjunction with the unaudited
condensed financial statements and notes thereto of Access Solutions
International, Inc. contained elsewhere herein.
Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999
Net Sales
Net sales for the three months ended September 30, 2000 was $216,628 compared
with $225,961 for the three months ended September 30, 1999, a decrease of
$9,333 or 4%. Product sales were $7,367 for the first quarter of Fiscal 2000
compared with $22,040 for the first quarter of Fiscal 1999, a decrease of
$14,674 or 67%. Service revenues were $209,261 for the first quarter of Fiscal
2000 compared with $203,921 for the first quarter of Fiscal 1999, an increase of
$5,340 or 3%.
Cost of Sales
Cost of sales includes component costs, firmware license costs, labor, travel
and certain overhead costs. Costs of sales in the aggregate decreased 15% to
$53,702 for the three months ended September 30, 2000 from $63,161 for the three
months ended September 30, 1999.
The cost of product sales decreased 96% to $245 for the three months ended
September 30, 2000 from $5,733 for the three months ended September 30, 1999.
The decrease in product related cost of sales was a result of lower sales and a
greater mix of higher margin peripherals than media. The cost of services
decreased by 7% to $53,457 for the three months ended September 30, 2000 from
$57,428 for the three months ended September 30, 1999, primarily due to
renegotiated third-party contracts.
General and Administrative Expenses
General and administrative expenses consist of administrative expenses and
technical support. General and administrative expenses increased 68% or $59,831
to $148,039 for the three months ended September 30, 2000 from $88,208 for the
three months ended September 30, 1999. This increase was primarily due to higher
personnel costs and increased legal fees. In FY 2000, it was recognized that
legal expenses previously incurred relative to the DataWare patent infringement
lawsuit should be shared by the co-owner of the suit. Consequently, one third of
legal costs were rebilled to Malcolm Chace, III, resulting in a significant
reduction of legal costs in Fiscal 2000. No rebilling for previous periods was
reported for Fiscal 2001.
9
ASI's Director's and Officers insurance decreased significantly as a result of
the Company's renegotiations with a different carrier, resulting in decreased
rates of up to 28%.
Research and Development Expenses
Research and development expenses decreased by 15% or $3,134 to $18,205 for the
three months ended September 30, 2000 from $21,339 for the three months ended
September 30, 1999. The decrease in research and development was primarily due
to reduced depreciation for ASI as a result of the company's downsizing in
Fiscal 1999.
Selling Expenses
Selling expenses decreased by $5,784 or 15% to $32,533 for the three months
ended September 30, 2000 from $38,317 for the three months ended September 30,
1999. The decrease was primarily the result of further reduced personnel costs
due to more efficient utilization of labor and reduced depreciation for ASI as a
result of the company's downsizing in Fiscal 1999.
Other Income and Expenses
Other income and expenses consisted of interest expense and interest income,
both of which had no significant change.
Net Loss
As a result of the foregoing, ASI's net loss increased to $67,332 ($.02 per
share on 3,963,940 weighted average shares outstanding) for the three months
ended September 30, 2000 from a net loss of $16,581 ($.005 per share on
3,963,940 weighted average shares outstanding) during the three months ended
September 30, 1999.
Liquidity and Capital Resources
ASI had a working capital deficit of $864,938 as of September 30, 2000 compared
to a working capital deficit of $1,018,487 at September 30, 1999.
Total cash provided by operating activities during the three-month period ended
September 30, 2000 was $123,877, compared to the three-month period ended
September 30, 1999 in which operating activities used a total of $414,492. ASI's
net losses were $67,332 for the three-month period ended September 30, 2000 and
$16,581 the three-month period ended September 30, 1999. Capital provided by
operating activities during the three-month period ended September 30, 2000 was
primarily the result of improved collection of trade receivables.
No cash was used for and provided by investing activities for the three-month
period ended September 30, 2000, compared to 1999 when investing activities used
$435.
Cash provided by and used for financing activities was $77,223 for the
three-month period ended September 30, 2000 and $352,359 for the three-month
period ended September 30, 1999. Cash provided by investing activities derived
from an increase in long term notes payable. The advances, along with the
principal, which accrue interest at an annual rate of 19%, convert to a demand
note at the lesser of three years or the completion of the company's patent
litigation.
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ASI has suffered recurring losses from operations and has negative cash flows
from operating activities. The recurring losses and negative cash flows from
operating activities raise substantial doubt about ASI's ability to continue as
a going concern. As a result, ASI's independent accountants in their report
dated December 12, 2000 on the audited financial statements for the year ended
June 30, 2000 included an explanatory paragraph that described factors raising
substantial doubt about ASI's ability to continue as a going concern. The
financial statements do not include any adjustments relating to the
recoverability of asset and classifications of liabilities or any other
adjustments that might be necessary should ASI be unable to continue as a going
concern.
As of September 30, 2000, ASI had long term debt totaling $1,364,772 with
accrued interest of $296,057. This amount included gross proceeds in the amount
of $650,000 from a loan to ASI in conjunction with the sale of a 30% interest in
the Company's patents for $100,000 and advances of $418,715. The loan principal
bears interest at a rate of 19% and converts to a demand note at the lesser of
three years or the completion of the company's patent litigation. ASI believes
that funds generated from operations will be sufficient to meet ASI's working
capital requirements through December, 2000. If ASI has insufficient funds from
the above noted operations, further equity or debt financing will be sought.
There can be no assurance that such additional funds can be obtained on
acceptable terms, if at all. If additional financing is not available, ASI's
business will be materially adversely affected. If ASI has insufficient funds
from the above noted operations, further equity or debt financing will be
sought. There can be no assurance that such additional funds can be obtained on
acceptable terms, if at all. If additional financing is not available, ASI's
business will be materially adversely affected.
ASI believes that its current corporate infrastructure can support significant
increases in sales without proportionate increases in costs. However, there can
be no assurances that sales will increase or that any cost advantage will
result.
Seasonality and Inflation
To date, seasonality and inflation have not had a material effect on ASI's
operations.
Forward Looking Statements
Statements contained in this Form 10-QSB that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. In addition, words such as
"believes", "anticipates", "expects" and similar expressions are intended to
identify forward looking statements. ASI cautions that a number of important
factors could cause actual results for Fiscal 2001 and beyond to differ
materially from those expressed in any forward-looking statements made by or on
behalf of ASI. Such statements contain a number of risks and uncertainties,
including, but not limited to, future capital needs, variable operating results,
uncertainty of additional funding requirements, lengthy sales cycles, dependence
on ASI's COLD system product, rapid technological change and product
development, reliance on single or limited sources of supply, intense
competition, recent turnover in management, ASI's ability to manage growth,
dependence on significant customers, dependence on key personnel, and ASI's
ability to protect its intellectual property. ASI cannot assure that it will be
able to anticipate or respond timely to changes which could adversely affect its
operating results in one or more fiscal quarters. Results of operations in any
past period should not be considered indicative of results to be expected in
future periods. Fluctuations in operating results may result in fluctuations in
the price of ASI's securities.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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(b) Reports on Form 8-K
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None
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
issuer caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Access Solutions International, Inc.
Date: April 30, 2001 /s/ Robert H. Stone
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Robert H. Stone
President and CEO
Date: April 30, 2001 /s/ Denis L. Marchand
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Denis L. Marchand
Vice President of Finance and Chief Accounting
Officer (Principal Accounting Officer)
13