United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period ended March 31, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission file number 0-28920
Access Solutions International, Inc.
------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 05-0426298
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
650 Ten Rod Road
----------------
North Kingstown, RI 02852
(Address of principal executive offices)
(401) 295-2691
--------------
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
The number of shares of the issuer's Common Stock, $.0l par value, outstanding
as of September 30, 2000 was 3,963,940.
1
Access Solutions International, Inc.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed balance sheets--March 31, 2001 (unaudited)
and June 30, 2000 3
Condensed (unaudited) statements of operations --Three
months and nine months ended March 31, 2001 and 2000 5
Condensed (unaudited) statements of cash flows -- Nine
months ended March 31, 2001 and 2000 6
Notes to unaudited condensed financial
statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
Access Solutions International, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Access Solutions International, Inc.
Condensed Balance Sheets
March 31, June 30,
2001 2000
----------- -----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 140,147 $ 58,042
Trade accounts receivable, net of allowance for
doubtful accounts of $0 and $13,167 23,163 259,308
Inventories 26,549 25,407
Prepaid expenses and other current assets 32,118 39,129
----------- -----------
Total current assets 221,977 381,886
Notes receivable - PaperClip 315,533 2,220,722
Allowance for doubtful accounts - Notes Receivable (315,533) (2,220,722)
----------- -----------
Net Notes receivable - PaperClip -- --
Fixed assets, net 9,368 62,626
Other assets:
Deposits and other assets -- 5,121
----------- -----------
Total assets $ 231,345 $ 449,633
=========== ===========
See notes to unaudited condensed financial statements.
3
Access Solutions International, Inc.
Condensed Balance Sheets
March 31, June 30,
2001 2000
------------ ------------
(Unaudited)
Liabilities and stockholders' deficit Current liabilities:
Accounts payable $ 457,968 $ 611,789
Accrued salaries and wages 57,696 84,891
Accrued expenses 64,443 88,516
Deferred revenue-prepaid service contracts 380,370 485,661
------------ ------------
Total current liabilities 960,477 1,270,857
Notes payable 1,581,977 1,287,549
Total liabilities 2,542,454 2,558,406
------------ ------------
Stockholders' deficit:
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 (19,970,399) (19,768,063)
------------ ------------
(2,293,053) (2,090,717)
Treasury stock, at cost (1,259 shares) (18,056) (18,056)
------------ ------------
Total stockholders' deficit (2,311,109) (2,108,773)
------------ ------------
Total liabilities and stockholders' deficit $ 231,345 $ 449,633
============ ============
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)
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net sales:
Products $ 3,750 $ 7,350 $ 25,143 $ 94,694
Services 194,913 195,766 606,644 587,863
----------- ----------- ----------- -----------
Total net sales 198,663 203,116 631,787 682,557
----------- ----------- ----------- -----------
Cost of sales:
Products -- 392 245 11,446
Services 38,470 53,255 141,432 157,695
----------- ----------- ----------- -----------
Total cost of sales 38,470 53,647 141,677 169,141
----------- ----------- ----------- -----------
Gross profit 160,193 149,469 490,110 513,416
----------- ----------- ----------- -----------
Operating expenses:
Selling expense 30,405 34,675 96,495 112,693
General and administrative expense 88,174 86,977 243,203 293,570
Research and development expense 11,197 21,077 40,345 71,918
----------- ----------- ----------- -----------
Total operating expenses 129,776 142,729 380,043 478,181
----------- ----------- ----------- -----------
Profit from operations 30,417 6,740 110,067 35,235
----------- ----------- ----------- -----------
Interest / Other Income and Expense
Interest income (7,445) (726) (11,926) (785)
Interest expense 45,580 31,218 222,738 94,340
Other income (15,746) -- (23,620) --
Legal expense related to defense of patent 25,270 -- 83,392 --
Other expense 771 70 41,820 --
----------- ----------- ----------- -----------
Total interest / other expense 48,430 30,562 312,404 93,555
----------- ----------- ----------- -----------
Net loss ($ 18,013) ($ 23,822) ($ 202,337) ($ 58,320)
=========== =========== =========== ===========
Net Loss per common share (0.00) (0.00) (0.05) (0.01)
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
For the Nine Months Ended March 31,
(Unaudited)
2001 2000
--------- ---------
Cash flows from operating activities
Net loss ($202,337) ($ 58,320)
--------- ---------
Adjustments to reconcile net loss to net cash used by
operating activities:
Loss on disposition of fixed assets 40,755 --
Depreciation and amortization 17,624 56,544
Decrease in provision for doubtful accounts -
Trade receivables (8,167) (8,400)
Decrease in provision for PaperClip Allowance (23,620) --
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable 244,312 160,091
Inventories (1,142) (4,509)
Prepaid expenses and other current assets 7,012 17,529
Increase (decrease) in:
Accounts payable (153,821) 41,883
Accrued expenses (51,268) (349,151)
Deferred revenue - prepaid service contracts (105,291) (119,245)
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES (235,943) (263,578)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Pay-down of Notes Receivable - PaperClip 23,620 --
Purchases of fixed assets -- (435)
--------- ---------
NET CASH PROVIDED BY/(USED BY) INVESTING ACTIVITIES 23,620 (435)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Notes Payable - Litigation Advances 294,428 432,209
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 294,428 432,209
--------- ---------
NET INCREASE IN CASH 82,105 168,196
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 58,042 83,402
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 140,147 $ 251,598
========= =========
See notes to unaudited condensed financial statements.
6
Access Solutions International, Inc.
Notes to Unaudited Condensed Financial Statements
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10-01 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months and nine months ended
March 31, 2001 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. Form 10-KSB for the period ended June 30, 2000.
2. Legal Proceedings and Subsequent Events
On August 29, 1997, ASI filed a complaint against Data/Ware Development, Inc.,
("Data/Ware"), (Anacomp's predecessor) and Eastman Kodak Company ("Kodak")
alleging infringement of ASI's patents 4,775,969 and 5,034,914. The defendants
had 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, infringes 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 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 allocable to the
co-owner of the patent, ASI will receive net proceeds of approximately
$4,200,000, of which approximately $2,200,000 will be used to retire outstanding
debt and payables. Included in the debt is an issue of approximately $1,600,000
that is convertible into Common Stock of the Company, which the holder has
stated he will not convert.
2. PaperClip Financial Transactions
On January 29, 1997, in connection with a proposed merger between ASI and
PaperClip ("PaperClip"), ASI provided a $300,000 loan to PaperClip for use as
operating capital in exchange for a convertible promissory note together with a
security agreement granting ASI a security interest in all of PaperClip's
assets. The note bore interest at a rate of 12% per annum (payable quarterly)
and could be prepaid upon 30 days written notice to ASI. The note and
accumulated interest could be converted to PaperClip Common Stock at a rate of
$.25 per share and granted ASI unlimited registration rights in the event that
the note was converted into shares of PaperClip stock. No payments were ever
made by PaperClip against the note.
7
Access Solutions International, Inc.
Notes to Unaudited Condensed Financial Statements
On April 15, 1997, ASI and PaperClip entered into an Asset Purchase Agreement
for ASI to acquire substantially all the assets and liabilities of PaperClip
(the "Agreement"). On September 12, 1997, the agreement was amended (the
"Amended Agreement") to change the acquisition to a merger. As a result of this
amendment, a newly formed subsidiary of ASI would merge into PaperClip with
PaperClip surviving as a subsidiary of ASI (the "Merger"). Consummation of this
transaction was subject to various conditions, including approval by the
PaperClip stockholders. Under the terms of the Amended Agreement, the PaperClip
stockholders would have been entitled to receive an aggregate of approximately
1.5 million shares of ASI's Common Stock plus an equivalent number of ASI Class
B Warrants. Each Class B Warrant would have entitled the holder to purchase one
share of ASI Common Stock at an exercise price of $6.00 per share. In connection
with the Merger, the holders of PaperClip's outstanding 12% Convertible Notes
due December 1999 would exchange such notes for an aggregate of approximately
400,000 shares of non-voting redeemable preferred stock of PaperClip. After 18
months, the holders of the preferred stock would have the option to require the
surviving corporation or ASI to purchase such shares for cash or ASI Common
Stock and Class B Warrants. After 30 months, ASI would have the right to redeem
the Preferred Stock for cash or ASI Common Stock and Class B Warrants.
On April 15, 1997, ASI and PaperClip also entered into a Management Agreement
(the "Management Agreement") pursuant to which ASI would manage the day-to-day
operations of PaperClip for a fee of $50,000 per month up to a maximum of
$300,000 and advance funds to 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 also entered into a one-year distribution agreement effective
June 1, 1997 pursuant to which ASI acted as a distributor for PaperClip's
products in the United States to dealers and resellers.
On April 14, 1998, ASI and PaperClip agreed to extend the date for the
consummation of PaperClip's previously announced merger with and into a newly
formed wholly-owned subsidiary of Access Solutions. Pursuant to the terms of the
merger agreement, completion of the merger transaction was subject to certain
conditions, including a financing contingency. The merger transaction was not
consummated by this date because the financing contingency could not be
satisfied, and the merger agreement was extended to August 24, 1998 to allow
more time for the financing condition to be satisfied.
On August 24, 1998, the merger agreement was terminated. In connection with the
termination of the merger agreement, the Company wrote off all merger costs
incurred through June 1998. Costs relating to the discontinued acquisition
incurred after June 30, 1998 were expensed in the quarter ended September 30,
1998.
On November 2, 2000, ASI and PaperClip entered into an agreement whereby the
January 29, 1997, $300,000 convertible promissory note and accumulated interest
was exchanged for a new promissory note in the amount of $405,530 that is also
secured by the assets of PaperClip. The new promissory note requires 35 payments
of $11,265 and a final payment in the amount of $11,265. The note can be
accelerated upon the occurrence of certain events, including failure to meet any
payment obligation contained in the Note within five (5) days of when due,
discontinuation of business, insolvency or bankruptcy or transfer of PaperClip
or substantially all of its assets to any entity except ASI. If the indebtedness
is not paid when due (including as a result of the acceleration of the repayment
of the indebtedness), the indebtedness outstanding then would bear interest from
the date such payment was due at 15% percent per annum. In November 2000, the
note was recorded at the present value of its discounted payments at a 12% rate
in the amount of $339,153. Due to PaperClip's financial condition and payment
history, an allowance was established for the full amount of the note. ASI has
recorded three payments from PaperClip during FY 2001, for which the principal
and the allowance were reduced by the payment amounts less the imputed
interest..
8
Access Solutions International, Inc.
Notes to Unaudited Condensed Financial Statements
On November 2, 2000, ASI and PaperClip also entered into an agreement whereby
the additional indebtedness of PaperClip arising from Management Agreement
advances totaling $2,305,507, including accrued interest through December 31,
1999, was converted to 3,649,543 shares of PaperClip's Series A Preferred Stock,
$.01 par value per share (the "Series A Preferred Stock"). Each share of Series
A Preferred Stock is convertible into one share of Common Stock subject to an
adjustment in the conversion rate in the event that Paperclip issues shares of
Common stock or securities pursuant to which Common Stock is issuable at a per
share price of less than the price paid by the Company for the preferred shares.
PaperClip may in its sole discretion, require the conversion of all, but not
less than all, of the then outstanding Series A Preferred Stock if PaperClip's
Common Stock has traded for not less than sixty (60) consecutive days at a
closing price of not less than 150% of the implied conversion price of the
Series A Preferred Stock. PaperClip's Common Stock is publicly traded on the OTC
Bulletin Board. No value has been recorded on the Company's financial statements
for this investment due to PaperClip's recent deteriorating stock value and its
poor financial condition. PaperClip's Common Stock is presently traded on the
OTC Bulletin Board. As of December 31, 2000, there were approximately 777
holders of record of the Company's shares of Common Stock and as of May 15,
2001, PaperClip's Common Stock an ask price was approximately $.07 per share.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Factors That May Affect Future Performance
ASI has suffered recurring losses and negative cash flows from FY 1992 - 1999
and has had positive cash flows from operating activities only since July 1,
1999 (FY 2000). The recurring losses and negative cash flows from operating
activities raised 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 assets and classifications of liabilities or any other
adjustments that might be necessary should ASI be unable to continue as a going
concern. As a result of these continuing net losses, during the last 2 1/2
years, in order to do so, ASI has had to reduce its labor force to the minimum
amount necessary to service existing contracts. ASI has not been engaged in any
marketing or sales efforts to generate new contracts and does not expect any
significant increase in future revenue from operations as a result. Sales of
upgrades and media on occasion to existing customers have increased earnings to
a limited extent but there are no assurances that future sales of this type will
continue or that existing customers will continue to renew their service
contracts as their present optical archiving systems become more aged or
obsolete. The Company's primary current and expected near term operating results
are dependent on the sale of annual service contracts to existing customers. If
sufficient customers do not renew their contracts, it could result in
significant adverse operating results for ASI. The company has sufficient
operating revenue and capital at present to maintain operations; however, ASI
cautions that a number of important factors, including those mentioned above,
could cause ASI to fall short of the required minimum cash requirements to
maintain operations or may 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 the uncertainty of additional
funding should it become necessary, future capital needs, variable operating
results, lengthy sales cycles, dependence on ASI's COLD system product, rapid
technological change and new product development, reliance on single or limited
sources of supply, intense competition, 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.
9
Analysis of ASI's results for the years ended June 30, 1999, June 30, 2000 and
YTD March 31, 2001 demonstrates the achievement of positive direct operating
income when legal expense related to defense of ASI's patent totaling $140,813
for the year ended June 30, 1999 and $60,211 for the year ended June 30, 2000
are reclassified from General and Administration expense to Interest / Other
Income and Expense. The nine-month period ending March 31, 2001 already
classifies legal expense related to the defense of ASI's patent of $83,392 as a
line item of Interest / Other Income and Expense so no adjustment is required to
derive direct operating income for that period. Direct operating income is
defined as income from operations, net of expenses not related to the day to day
operations of the business, but inclusive of non-cash items such as depreciation
and amortization. Direct operating (loss)/ income for the annual periods ended
June 30, 1999, June 30, 2000 and for the nine months ended March 31, 2001 were
($378,071), $93,866 and $110,067. ASI has not yet realized a net income in any
of these periods and cannot predict whether or not it will achieve positive net
income in the future.
Recent Developments
-------------------
Settlement Agreement with Anacomp, Inc. and Eastman Kodak Company
On April 23, 2001, ASI announced that it had received a monetary settlement
pursuant to a signed settlement agreement with Anacomp, Inc. ("Anacomp") and
Eastman Kodak Company ("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 allocable to the
co-owner of the patent, ASI will receive net proceeds of approximately
$4,200,000, of which approximately $2,200,000 will be used to retire outstanding
debt and payables. Included in the debt is an issue of approximately $1,600,000
that is convertible into Common Stock of the Company, which the holder has
stated he will not convert.
This settlement represents a significant milestone and critical junction in the
long-term future of the Company. The management of ASI will be assessing various
strategic alternatives, which will best benefit its shareholders, customers and
employees.
System Sale
On May 11, 2001, ASI received a purchase order to sell a small Optical Archiving
System to an optical storage solutions provider in Kansas City, MO valued at
approximately $120,000. The purchase order includes future maintenance services
for one year on a warranty basis. The system shipped on May 14, 2001. There can
be no assurance that this sale will result in additional system sales or
additional maintenance revenues after the warranty period has expired.
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.
Access Solutions International, Inc. designs, develops, manufactures and markets
information storage and retrieval systems, including both software and hardware.
ASI is the developer of GIGAPAGE, an MVS/CICS COLD application providing storage
10
and access to terabytes of corporate data for business analysis, customer
service, regulatory and research applications. Services rendered by the Company
include post-installation maintenance and support. The Company sells extended
service contracts on the majority of the products it sells. Such contracts are
one year in duration with payments received either annually in advance of the
commencement of the contract or quarterly in advance. The Company recognizes
revenue from service contracts on a straight-line basis over the term of the
contract. As of March 31, 2001, the Company had deferred revenue in the amount
of $380,370, which it will recognize through March 31, 2001.
Three Months and Nine Months ended March 31, 2001 compared to Three Months and
Nine Months ended March 31, 2000
Net Sales
The Company's sales consist of sales of products and services. Products sold by
the Company consist of COLD systems, software and hardware including replacement
disk drives, subassemblies and miscellaneous peripherals. The Company 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.
Net sales for the three months ended March 31, 2001 were $198,663 compared with
$203,116 for the three months ended March 31, 2000, a decrease of $4,453 or 2%,
and $631,787 for the nine months ended March 31, 2001, compared with $682,557
for the nine months ended March 31, 2000, a decrease of $50,770 or 7%. Product
sales were $3,750 for the third quarter of Fiscal 2001 compared with $7,350 for
the third quarter of Fiscal 2000, a decrease of $3,600 or 49%, and $25,143 for
the nine months ended March 31, 2001 compared with $94,694 for the nine months
ended March 31, 2000, a decrease of $69,551 or 73%. Product sales decreased
because an upgrade sale to an existing customer was made in the second quarter
of Fiscal 2000 that was not similarly recognized in the second quarter or first
half of Fiscal 2001. Service revenues remained fairly constant at $194,913 for
the third quarter of Fiscal 2001, compared with $195,766 for the third quarter
of Fiscal 2000, a decrease of $853 and $606,644 for the nine months ended March
31, 2001 compared with $587,863 for the nine months ended March 31, 2000, an
increase of $18,781 or 3%. This increase was due to higher customer requested
services exclusive of services covered by ASI's standard service contracts.
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 $15,176 or
28% to $38,470 for the three months ended March 31, 2001 from $53,647 for the
three months ended March 31, 2000 and decreased 16% to $141,677 for the nine
months ended March 31, 2001 from $169,141 for the nine months ended March 31,
2000. Costs of sales for services decreased 28% to $38,470 for the three months
ended March 31, 2001 from $53,255 for the three months ended March 31, 2000 and
decreased 10% to $141,432 for the nine months ended March 31, 2001 from $157,695
for the nine months ended March 31, 2000. The cost of sales reduction for
products was volume related while the cost of sales for services resulted from
more effective maintenance contract and services coordination.
The Company's operating expenses include selling expenses, general and
administrative expenses. General and administrative expenses consist primarily
of employee compensation and overhead. Selling expenses consist primarily of
customer service and customer assistance services to existing customers.
11
Selling Expenses
Selling expenses decreased by $4,270 or 12% to $30,405 for the three months
ended March 31, 2001 from $34,675 for the three months ended March 31, 2000 and
decreased by $16,198 or 14% to $96,495 for the nine months ended March 31, 2001
from $112,693` for the nine months ended March 31, 2000.
General and Administrative Expenses
General and administrative expenses consist of employee compensation,
administrative expenses and customer support expenses. General and
administrative expenses increased 1% or $1,197 to $88,174 for the three months
ended March 31, 2001 from $86,977 for the three months ended March 31, 2000 and
decreased 17% or $50,366 to $243,203 for the nine months ended March 31, 2001
from $293,570 for the nine months ended March 31, 2000. This decrease was due to
lower salary and insurance costs.
Research and Development Expenses
ASI's total expenditures for research and development for Fiscal 2000 and Fiscal
1999 were $90,343 and $119,243, respectively. Fiscal 2001 research and
development expenses are substantially reduced from these levels as evidenced
from ASI's unaudited statements of operations (presented on page 5 and below)
and consist of one employee's part time payroll, depreciation on associated
equipment and various sundry items. Research and development expenses decreased
by 47% or $9,880 to $11,197 for the three months ended March 31, 2001 from
$21,077 for the three months ended March 31, 2000 and decreased by 44% or
$31,573 to $40,345 for the nine months ended March 31, 2001 from $71,918 for the
nine months ended March 31, 2000. The decrease in research and development was
primarily due to reduced personnel costs and decreased Research and Development
activities.
Interest / Other Income and Expense
Interest / Other Income and Expense consists of interest income, interest
expense, other income, other expense and non-interest legal expenses associated
with defense of ASI's patent.
Interest income which increased by $6,719 to $7,445 for the three months ended
March 31, 2001 from $726 for the three months ended March 31, 2000 and increased
by $11,141 to $11,926 for the nine months ended March 31, 2001 as compared to
$785 for the nine months ended March 31, 2000 consists of interest earned from
funds held on deposit at banks for imputed interest on payments made by
PaperClip under a renegotiated agreement that was signed on November 2, 2000
(See page 9). Interest income increased in FY 2001 because no such payments were
received by PaperClip in the prior FY 2000.
Other income consists primarily of return of principal received from PaperClip
regarding the above agreements and was $15,746 for the three months ended March
31, 2001 and $23,620 for the nine months ended March 31, 2001. As noted above,
no such payments were received from PaperClip in the prior fiscal year.
Interest expense increased $14,362 from $31,218 for the three months ended March
31, 2000 to $45,580 for the nine months ended March 31, 2001 and by $128,398 for
the nine months ended March 31, 2001 to $222,738 for the nine months ended March
31, 2001 as a result of accrued interest on amounts advanced to fund the
litigation against Kodak and Dataware. ASI borrowed funds at an annual interest
rate of 19% from a former stockholder, director and part owner of ASI's patent
to fund its patent infringement litigation against Dataware and Kodak. The
higher expense in the FY 2001 is a result of adjustments for under accruals of
interest payable in the quarter ended September 31, 2001 and prior FY 2000.
12
Other expense consists of foreign exchange losses, losses relating to the
disposition of assets and other miscellaneous expenses. Other expense was $771
for the three months ended March 31, 2001 and $41,820 for the nine months ended
March 31, 2001. No material other expense was incurred in the prior period ended
March 31, 2000.
Legal expenses related to defense of patent were $25,270 for the three months
ended March 31, 2001 and $83,392 for the nine months ended March 31, 2001 and
involved patent litigation against Dataware and Kodak relating to defense of its
patents 4,775,969 and 5,034,914. The higher legal expense levels are a result of
increased legal activity in order to effect the settlement. In the past, these
expenses have been classified as a General and Administrative expenses because
the outcome of the litigation was unknown. Now that a settlement has been
reached, these expenses are being reported under Interest / Other Income and
Expense to differentiate them as non-operating, patent defense associated costs.
Net Loss
As a result of the foregoing, the Company's net loss of $18,013 was only
slightly more favorable than the prior year's net loss of $23,822. Both results
were under one cent ($.01) per share calculated on 3,963,940 weighted average
shares outstanding. Net loss for the nine months ended March 31, 2001 increased
from $58,320 ($.01 per share on 3,963,940 weighted average shares outstanding)
to a net loss of $202,337 (.05 per share on 3,963,940 weighted average shares
outstanding) for the nine months ended March 31, 2001. The increased net loss
was primarily attributable to increased patent litigation legal expenses and the
associated loan expenses.
Liquidity and Capital Resources
The Company had a working capital deficit of $738,500 at March 31, 2001 as
compared to a working capital deficit of $888,971 at June 30, 2000.
Total cash used by operating activities during the nine-month periods ended
March 31, 2001 and 2000 was $235,943 and $263,578 respectively. The Company's
net losses for these periods were $202,337 and $58,320, respectively. In
addition to funding the Company's net loss, the major uses of capital for
operating activities during the nine-month period ended March 31, 2001 included
a reduction in accounts payable by $153,821, reduced deferred revenue on prepaid
service contracts by $105,291, and an accrued expense balance reduction of
$51,268. These amounts were offset by a reduction in accounts receivable of
$244,312.
Total cash provided by investing activities was $23,620, representing the
principal portion of a payment received against a Note Receivable from
PaperClip.
Cash provided by financing activities was $294,428 for the nine-month period
ended March 31, 2001 and $432,209 for the nine-month period ended March 31,
2000. This represented additional advances to fund legal expenses in connection
with the lawsuit against Dataware and Kodak. These advances are recorded as
legal expenses of ASI, and as such are included in Other Income and Interest
expenses on the unaudited Statement of Operations.
ASI has suffered recurring losses and negative cash flows from FY 1992 - 1999
and has had positive cash flows from operating activities only since July 1,
1999 (FY 2000). The recurring losses and negative cash flows from operating
activities raised 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
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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 assets and classifications of liabilities or any other
adjustments that might be necessary should ASI be unable to continue as a going
concern.
As of March 31, 2001, ASI had long term debt totaling $1,096,295 with accrued
interest of $485,683. The former amount includes 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 $446,295. 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 and interest income will be
sufficient to meet ASI's working capital requirements through March 2003.
In November 2000, advances receivable from PaperClip, already fully allowed for
were exchanged for 3,649,543 shares of Series A Convertible Preferred PaperClip
Stock, $.01 par value per share (the "Series A Preferred Stock"). The exchange
represented payment in full for advances and accrued interest receivable from
PaperClip pursuant to the Management Agreement. The shares of Series A Preferred
Stock were issued at the equivalent price of $0.71 per share (see notes to
unaudited financial statements, page 7 and Recent Developments). No value has
been recorded on the Company's financial statements for this investment due to
PaperClip's recent deteriorating stock value and its poor financial condition.
In addition, the January 29, 1997, $300,000 convertible promissory note and
accumulated interest was exchanged for a new non-interest bearing promissory
note in the amount of $405,530 that is also secured by the assets of PaperClip.
The new promissory note requires 35 payments of $11,265 and a final payment in
the amount of $11,265. The note was recorded in the amount of its discounted
present value at 12% for $339,153 prior to applying $23,620 against the
principal from payments on the note.
There can be no assurances that sales will increase or that any cost advantage
will result. While the Company believes that the current corporate
infrastructure could support significant increases in sales without a
proportionate increases in overhead costs, it also believes that an additional
Research and Development investment would be required to calibrate present
software and hardware products to existing optical storage technology and
enterprise expectations.
Seasonality and Inflation
To date, seasonality and inflation have not had a material effect on the
Company'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. The Company 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 the Company. Such statements contain a number
of risks and uncertainties, including, but not limited to, future capital needs,
uncertainty of additional funding, variable operating results, lengthy sales
cycles, dependence on the Company's COLD system product, rapid technological
change and product development, reliance on single or limited sources of supply,
intense competition, turnover in management, the Company's ability to manage
growth, dependence on significant customers, dependence on key personnel, and
the Company's ability to protect its intellectual property. See "Risk Factors"
in the Company's Prospectus dated October 16, 1997. The Company 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 the Company's securities.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
none
(b) Reports on Form 8-K
none
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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: May 21, 2001 By: /s/ Robert H. Stone
------------------------
Robert H. Stone
President and CEO
Date: May 21, 2001 By: /s/ Denis L. Marchand
-------------------------
Denis L. Marchand
Vice President of Finance and
Administration and
Chief Accounting Officer
(Principal Accounting Officer)
16