United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period ended September 30, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission file number 0-28920
Access Solutions International, Inc.
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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 [ ]
The number of shares of the issuer's Common Stock, $.0l par value, outstanding
as of September 30, 2001 was 3,963,940.
Access Solutions International, Inc.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed balance sheets--September 30, 2001 (unaudited)
and June 30, 2001 3
Condensed (unaudited) statements of operations --Three
months ended September 30, 2001 and 2000 5
Condensed (unaudited) statements of cash flows -- Three
months ended September 30, 2001 and 2000 6
Notes to unaudited condensed financial
statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Access Solutions International, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Access Solutions International, Inc.
Condensed Balance Sheets
September 30, June 30,
2001 2001
(Unaudited)
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Assets
Current assets:
Cash and cash equivalents $2,149,426 $2,426,279
Trade accounts receivable, net of allowance for
doubtful accounts of $2,000 and $4,344 95,403 191,145
Inventories 21,957 21,472
Prepaid expenses and other current assets 205,339 32,819
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Total current assets 2,472,125 2,671,715
Fixed assets, net 4,671 6,038
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Total assets $2,476,976 $2,677,753
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See notes to unaudited condensed financial statements.
3
Access Solutions International, Inc.
Condensed Balance Sheets
September 30, June 30,
2001 2001
(Unaudited)
------------ ------------
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable $ 181,080 $ 218,103
Accrued salaries and wages 23,711 29,341
Accrued expenses 64,827 65,471
Provision for income taxes -- 95,000
Deferred revenue-prepaid service contracts 300,097 367,951
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Total current liabilities 569,715 775,866
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Total liabilities 569,715 775,866
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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 (15,752,209) (15,757,403)
------------ ------------
1,925,137 1,919,943
Treasury stock, at cost (1,259 shares) (18,056) (18,056)
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Total stockholders' equity 1,907,081 1,901,887
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Total liabilities and stockholders' equity $ 2,476,796 $ 2,677,753
============ ============
See notes to unaudited condensed financial statements.
4
Access Solutions International, Inc.
Condensed Statements of Operations (Unaudited)
Three months ending
September 30,
2001 2000
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Net sales:
Products $ 4,915 $ 7,367
Services 164,030 209,261
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Total net sales 168,945 216,628
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Cost of sales:
Products 115 245
Services 36,165 53,457
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Total cost of sales 36,280 53,702
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Gross profit 132,665 162,926
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Operating expenses:
General and administrative expense 145,895 166,244
Selling expense 33,857 32,533
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Total operating expenses 179,752 198,777
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Profit/(Loss) from operations (47,087) (35,851)
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Other revenue and (expenses):
Interest income 28,661 80
Interest expense -- (31,561)
Miscellaneous income 23,620 --
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Total other revenue (expenses) 52,281 (31,481)
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Net income (loss) $ 5,194 ($ 67,332)
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Primary net loss per common share $ .00 ($ .02)
=========== ===========
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,
2001 2000
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Cash flows from operating activities
Net income (loss) $ 5,194 ($ 67,332)
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Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 1,367 14,143
Provision for doubtful accounts (2,344) (13,167)
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade accounts receivable 98,086 263,378
Inventories (485) 136
Prepaid expenses and other current assets (172,520) (14,073)
Increase (decrease) in:
Accounts payable (37,023) 16,751
Accrued expenses (6,274) 11,891
Provision for income taxes (95,000) --
Deferred revenue - prepaid service contracts (67,854) (87,850)
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Net Cash PROVIDED BY (used FOR)
operating activities (276,853) 123,877
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Cash flows from financing activities
Deferred financing costs -- 77,223
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Net Cash Provided by financing
activities -- 77,223
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Net (decrease) INCREASE in cash and cash
equivalents (276,853) 201,100
Cash and cash equivalents, BEGINNING 2,426,279 58,042
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Cash and cash equivalents, ending $ 2,149,426 $ 259,142
=========== ===========
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, 2001
are not necessarily indicative of the results that may be expected for the year
ended June 30, 2002. For further information, refer to the financial statements
and footnotes thereto included in the Access Solutions International, Inc.
("ASI") annual report on Form 10-KSB for the year ended June 30, 2001.
2. Paperclip Merger, Management Agreements
On April 15, 1997, the Company and PaperClip entered into an agreement for the
Company to acquire substantially all the assets and liabilities of PaperClip,
which was later amended to change the acquisition to a merger. The Company and
PaperClip also entered into a management agreement (the "Management Agreement")
which allowed the Company to manage the day-to-day operations of PaperClip and
to advance funds on behalf of PaperClip pursuant to an operating budget, in each
case until the closing of the Merger or the termination of the Merger Agreement.
On January 29, 1997, the Company provided a $300,000 bridge loan to PaperClip
for use as operating capital in exchange for a 12% convertible note from
PaperClip secured by substantially all the assets of PaperClip. In addition, the
Company had made unsecured advances to PaperClip of $140,813, $1,252,689, and
$529,052 during the years ended June 30, 1999, 1998 and 1997, respectively, for
funding of working capital requirements.
The Company and PaperClip also entered into a one-year distribution agreement
effective June 1, 1997 pursuant to which the Company acted as a distributor for
PaperClip's products in the United States to dealers and resellers.
Ultimately, the merger agreement was terminated on August 24, 1998. Accordingly,
the Company wrote off approximately $2,443,000 effective June 30, 1998 and
approximately $141,000 effective June 30, 1999 in connection with the terminated
merger.
In November of 2000, PaperClip Software Inc. and ASI entered into an agreement
whereby the indebtedness to ASI in the amount of $300,000, plus all accrued
interest through December 31, 1999 in the amount of $105,300, will be paid for
by the execution and delivery of a new promissory note from PaperClip to ASI in
the aggregate principal amount of $405,300. All amounts due under the new Note
will be paid for over a period of three (3) years in thirty-six (36) equal
installments of $11,265 beginning on January 1, 2001. Although payments on the
note are current, ASI has fully reserved for the value of the new promissory
note due to PaperClip's poor financial condition.
7
As a result of advances issued to PaperClip from November 12, 1997 through
August 24, 1998, PaperClip was indebted to ASI in the amount of $2,305,506
including accrued interest through December 31, 1999. In November 2000, ASI
exchanged the above indebtedness for 3,649,543 shares of PaperClip's Series A
Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"). Each
share of Preferred Stock is convertible into one share of PaperClip's common
stock ("common stock") subject to anti-dilution protection in the event of a
stock split, stock dividend, recapitalization or similar change to the capital
structure of PaperClip. The shares are convertible at anytime at ASI's option or
at PaperClip's option, provided that immediately prior to conversion, the common
stock had traded for not less than 60 consecutive days at a closing price of
150% of the implied conversion price. The implied conversion price was derived
by dividing the amount of the additional indebtedness by the number of shares of
common stock issuable upon conversion by ASI of the preferred stock. The
"Converted Shares" would equal 27.5% of the then outstanding Common Stock. The
holders of the converted common stock would have piggy back registration rights
on the Converted Shares underlying the Preferred Stock. Such piggy-back
registration rights on the converted stock would expire with respect to the
holder when such shares were eligible for sale pursuant to Rule 144(k)
promulgated and the rules and regulations of the Securities Act of 1933. The
preferred stock is not entitled to dividends and will have a liquidation
preference equal to $2,305,506. No value has been recorded on the Company's
financial statements for this investment due to PaperClip's deteriorating stock
value and its poor financial condition.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
ASI's net sales consist of sales primarily of support and services. Products
sold by ASI consist of COLD systems, software and hardware including replacement
disk drives, subassemblies and miscellaneous peripherals. Support and services
rendered by ASI include post-installation maintenance and support. ASI
recognizes revenue from customers upon installation of COLD systems and, in the
case of COLD systems installed for evaluation, upon acceptance by such customers
of the products. ASI had no system sales in the current year. ASI sells extended
service contracts on the majority of the products it has sold. Such contracts
are one year in duration with payments received either annually in advance of
the commencement of the contract or quarterly in advance. ASI recognizes revenue
from service contracts on a straight-line basis over the term of the contract.
The unearned portion of the service revenue is reflected as deferred revenue. As
of September 30, 2001, ASI had deferred revenue in the amount of $300,097.
ASI's operating results have in the past and may in the future fluctuate
significantly depending upon the renewal of service contracts; the competitive
technological advancements made by the industry; and the control of general and
administrative expenses. The revenue from service contracts is recognized on a
straight-line basis over the term of the contract.
ASI's primary operating expenses include maintenance and general and
administrative expenses. General and administrative expenses consisted this
fiscal year primarily of legal fees, employee compensation, office rental and
normal contractual services.
In the past, ASI has expended substantial development resources to meet customer
commitments. The majority of these services were provided at no charge to honor
commitments made for added features when the systems were sold. These resource
expenditures have in the past placed a high overhead burden on the GIGAPAGE
product line offerings. After completion of GIGAPAGE 3.0, which occurred at the
end of the second quarter of Fiscal 1998, management concluded that all
significant product commitments had been met. In the future, development of any
new features will not be initiated unless customers make a financial commitment
to cover the minimum engineering costs.
Results of Operations
The following discussion should be read in conjunction with the unaudited
condensed financial statements and notes thereto of Access Solutions
International, Inc. contained elsewhere herein.
Three Months Ended September 30, 2001 Compared to Three Months Ended September
30, 2000
Net Sales
Net sales for the three months ended September 30, 2001 was $168,945 compared
with $216,628 for the three months ended September 30, 2000, a decrease of
$47,683 or 22%. Product sales were $4,915 for the first quarter of Fiscal
2002,compared with $7,367 for the first quarter of Fiscal 2001, a decrease of
$2,452 or 33%. Service revenues were $164,030 for the first quarter of Fiscal
2002 compared with $209,261 for the first quarter of Fiscal 2001, a decrease of
$45,231 or 22%. This decrease was primarily due to the consolidation of services
to two customers.
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 32% to
$36,280 for the three months ended September 30, 2001 from $53,702 for the three
months ended September 30, 2000.
9
The cost of product sales decreased 53% to $115 for the three months ended
September 30, 2001 from $245 for the three months ended September 30, 2000. The
decrease in product related cost of sales was a result of lower sales and a
greater mix of higher margin media than peripherals. The cost of services
decreased by 32% to $36,165 for the three months ended September 30, 2001 from
$53,457 for the three months ended September 30, 2000, primarily due to lower
sales and renegotiated third-party contracts.
General and Administrative Expenses
General and administrative expenses consist of administrative expenses and
technical support. General and administrative expenses decreased 12% or $20,349
to $145,895 for the three months ended September 30, 2001 from $166,244 for the
three months ended September 30, 2000. This decrease was primarily due to
reduced personnel costs and legal fees and to lower depreciation expense
following the disposal of several fixed assets in Fiscal Year 2000.
Selling Expenses
Selling expenses increased by $1,324 or 4% to $33,857 for the three months ended
September 30, 2001 from $32,533 for the three months ended September 30, 2000.
This increase was the result of higher personnel costs.
Other Income and Expenses
Other income and expenses consisted of interest income and interest expense.
Interest income increased $28,581 from $80 for the three months ended September
30, 2000 to $28,661 for the three months ended September 30, 2001. This increase
was due to interest earned on the cash received as the result of a legal
settlement agreement with Anacomp, Inc. and the Eastman Kodak Company in May,
2001. Interest expense decreased 100% to $0 for the three months ended September
30, 2001 from $31,561 for the three months ended September 30, 2000. This
elimination of interest expense is the result of the retirement of an
outstanding note in May, 2001. Miscellaneous income of $23,620 at September 30,
2001 represents principal repayments on the note receivable from PaperClip
Software, Inc., which is fully reserved for as of June 30, 2001. Consequently,
other income and expenses in the aggregate increased $83,762 or 266% to $52,281
income for the three months ended September 30, 2001 from a loss of $31,481 for
the three months ended September 30, 2000.
Net Income (Loss)
As a result of the foregoing, ASI's realized a net profit of $5,194 ($.00 per
share on 3,963,940 weighted average shares outstanding) for the three months
ended September 30, 2001, an increase of $72,526 from a net loss of $67,332
($.02 per share on 3,963,940 weighted average shares outstanding) during the
three months ended September 30, 2000.
Liquidity and Capital Resources
ASI had a working capital surplus of $1,902,410 as of September 30, 2001
compared to a working capital deficit of $864,938 at September 30, 2000.
Total cash used by operating activities during the three-month period ended
September 30, 2001 was $276,853, compared to the three-month period ended
September 30, 2000 in which operating activities provided a total of $123,877.
For the three months ended September 30, 2001, the major use of cash was a
pre-payment of income taxes, the repayment of old payables and a reduction in
pre-paid service contracts. Cash provided during the three-month period ended
September 30, 2000 was primarily the result of an improvement in billing
procedures.
No cash was provided by financing activities during the three months ended
September 30, 2001. In comparison, $77,223 was provided by financing activities
for the three-month period ended September 30, 2000, the result of an increase
in a long term note payable. This debt was retired in May, 2001.
10
In previous years, ASI has suffered recurring losses from operations, has had an
accumulated deficit, and has incurred negative cash flows from operating
activities. Without the proceeds from the settlement mentioned above, the
recurring losses and negative cash flow from operating activities would raise
substantial doubt about the Company's ability to continue as a going concern.
However, the cash received from the settlement has provided the Company the
opportunity to reevaluate its market position and opportunities and maintain a
sufficient level of working capital to continue as a going concern for at least
the remainder of the current fiscal year.
Seasonality and Inflation
To date, seasonality and inflation have not had a material effect on ASI's
operations.
Forward Looking Statements
Statements contained in this Form 10-QSB that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. In addition, words such as
"believes"", "will", "should" "anticipates", "expects" and similar expressions
are intended to identify forward looking statements. ASI cautions that a number
of important factors could cause actual results for Fiscal 2002 and beyond to
differ materially from those expressed in any forward-looking statements made by
or on behalf of ASI. Such statements contain a number of risks and
uncertainties, including, but not limited to the outcome of management's
assessment of ASI's long-term strategic alternatives, ongoing capital needs,
variable operating results, dependence on ASI's COLD system product, competing
with rapid technological change and new product development, reliance on single
or limited sources of supply, intense competition, turnover in management,
dependence on significant customers and dependence on key personnel. ASI cannot
assure that it will be able to anticipate or respond timely to changes that
could adversely affect its operating results in one or more fiscal quarters.
Results of operations in any past period should not be considered indicative of
results to be expected in future periods. Fluctuations in operating results may
result in fluctuations in the price of ASI's securities.
Recent Developments
In November of 2000, PaperClip Software, Inc. and ASI entered into an agreement
whereby the indebtedness to ASI in the amount of $300,000, plus all accrued
interest through December 31, 1999 in the amount of $105,300, will be paid for
by the execution and delivery of a new promissory note from PaperClip to ASI in
the aggregate principal amount of $405,300. All amounts due under the new Note
are to be paid for over a period of three (3) years in thirty-six (36) equal
installments of $11,265 beginning on January 1, 2000. Although payments are
current on the note, ASI has fully reserved for the value of the new promissory
note due to PaperClip's poor financial condition.
11
As a result of advances issued to PaperClip from November 12, 1997 through
August 24, 1998, PaperClip is indebted to ASI in the amount of $2,305,506
including interest. ASI will exchange the above indebtedness for shares of a new
class of PaperClip convertible preferred stock (the "Preferred Stock"). Each
share of Preferred Stock will be convertible into one share of PaperClip's
common stock ("common stock") subject to anti-dilution protection in the event
of a stock split, stock dividend, recapitalization or similar change to the
capital structure of PaperClip. The shares are convertible at anytime at ASI's
option or at PaperClip's option, provided that immediately prior to conversion,
the common stock has traded for not less than 60 consecutive days at a closing
price of 150% of the implied conversion price. The implied conversion price is
derived by dividing the amount of the additional indebtedness by the number of
shares of common stock issuable upon conversion by ASI of the preferred stock.
The "Converted Shares" would equal 27.5% of the then outstanding Common Stock.
The holders of the converted common stock will have piggyback registration
rights on the Converted Shares underlying the Preferred Stock. Such piggy back
registration rights on the converted stock will expire with respect to the
holder when such shares are eligible for sale pursuant to Rule 144(k)
promulgated and the rules and regulations of the Securities Act of 1933. The
preferred stock will not be entitled to dividends and will have a liquidation
preference equal to $2,305,506. No value has been recorded on the Company's
financial statements for this investment due to PaperClip's deteriorating stock
value and its poor financial condition.
On April 23, 2001, ASI announced that it had received a monetary settlement
pursuant to a signed settlement agreement with Anacomp, Inc. ("Anacomp") and
Kodak. As a result of this settlement, ASI also announced that management would
be assessing strategic alternatives which will best benefit its shareholders,
customers and employees.
12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the issuer
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Access Solutions International, Inc.
Date: November 19, 2001 /s/ Robert H. Stone
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Robert H. Stone
President and CEO
14