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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998.
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 0-22-309
ASI SOLUTIONS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 13-3903237
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
780 THIRD AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 319-8400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant 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 registrant's Common Stock, par value $0.01 per
share, outstanding on November 10, 1998 was 6,522,408.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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ASI Solutions Incorporated
Consolidated Balance Sheets
September 30, 1998 and March 31, 1998
SEPTEMBER 30, MARCH 31,
1998 1998
(UNAUDITED)
--------------------- ---------------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,437,694 $ 964,106
Restricted cash 1,891,821
Accounts receivable, net 11,990,279 10,706,699
Prepaid expenses and other current assets 1,056,147 678,531
Deferred income taxes 106,158 106,158
--------------------- ---------------------
Total current assets 14,590,278 14,347,315
Property and equipment, net 5,244,724 5,318,524
Intangible assets, net 23,716,539 24,132,292
Deferred financing costs, net 414,444 460,075
Other assets 283,929 302,706
--------------------- ---------------------
Total assets $44,249,914 $44,560,912
===================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current portion, notes payable to bank $ 3,849,933 $ 4,951,602
Current portion, subordinated notes payable 1,666,666 1,666,666
Other acquisition debt 133,833 267,667
Accounts payable and accrued expenses 5,686,454 4,129,877
Accrued income taxes 275,051 171,864
--------------------- ---------------------
Total current liabilities 11,611,937 11,187,676
Deferred income taxes 423,140 423,140
Notes payable to bank, less current portion 12,573,960 13,668,558
Subordinated notes payable, less current portion 1,666,667 3,333,334
Other liabilities 418,302 252,663
--------------------- ---------------------
Total liabilities 26,694,006 28,865,371
Stockholders' Equity:
Common stock 65,225 65,123
Additional paid in capital 10,923,773 10,841,728
Accumulated other comprehensive income 19,338 9,382
Retained earnings 6,940,303 5,172,039
Treasury stock, 45,534 shares, at cost (392,731) (392,731)
--------------------- ---------------------
Total stockholders' equity 17,555,908 15,695,541
--------------------- ---------------------
Total liabilities & stockholders' equity $44,249,914 $44,560,912
===================== =====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ASI Solutions Incorporated
Unaudited Consolidated Statements Of Income
For the Three and Six Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenue $14,844,144 $5,905,076 $26,856,850 $12,605,351
Cost of services 7,214,098 3,319,218 13,077,631 6,763,941
------------------------------------- ------------------------------------
Gross profit 7,630,046 2,585,858 13,779,219 5,841,410
Operating expenses:
General and administrative 3,723,006 1,319,009 6,282,258 2,636,627
Sales and marketing 1,416,703 661,093 2,550,345 1,445,970
Research and development 456,974 360,600 916,506 835,244
------------------------------------- ------------------------------------
Income from operations 2,033,363 245,156 4,030,110 923,569
Interest expense (income), net 462,987 (51,009) 954,871 (113,241)
------------------------------------- ------------------------------------
Income before provision for income taxes 1,570,376 296,165 3,075,239 1,036,810
Provision for income taxes 656,556 127,317 1,306,975 449,892
------------------------------------- ------------------------------------
Net income $ 913,820 $ 168,848 $ 1,768,264 $ 586,918
===================================== ====================================
Basic earnings per share $0.14 $0.03 $0.27 $0.09
===================================== ====================================
Diluted earnings per share $0.14 $0.03 $0.27 $0.09
===================================== ====================================
Weighted average common shares outstanding:
Basic shares 6,476,874 6,381,041 6,476,874 6,243,618
Diluted effect of stock options and
warrants 85,073 197,222 136,723 156,710
------------------------------------- ------------------------------------
Diluted shares 6,561,947 6,578,263 6,613,597 6,400,328
===================================== ====================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ASI Solutions Incorporated
Unaudited Consolidated Statements of Cash Flows
For the Six Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Cash flow from operating activities:
Net income: $ 1,768,264 $ 586,918
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 1,223,365 393,808
Provision for doubtful accounts 17,922 15,000
Loss on fixed asset disposal 509
Changes in assets and liabilities:
Accounts receivable (1,223,484) (293,409)
Prepaid expenses and other current assets (447,036) 48,259
Other assets 11,804 11,908
Accounts payable and accrued expenses 1,609,654 (774,928)
Income taxes 85,300 (1,169,282)
Other liabilities 121,231
---------------------- ----------------------
Net cash provided by (used in) operating activities 3,167,529 (1,181,726)
---------------------- ----------------------
Cash flow from investing activities:
Fixed asset additions (659,067) (2,535,809)
Acquisition of business (1,016,500)
Other (40,333)
---------------------- ----------------------
Net cash used in investing activities (699,400) (3,552,309)
---------------------- ----------------------
Cash flow from financing activities:
(Repayment of debt) Proceeds from borrowings (3,996,768) 263,189
Restricted cash 1,891,821
Proceeds from issuance of common stock, net 82,147 10,091,352
---------------------- ----------------------
Net cash (used in) provided by financing activities (2,022,800) 10,354,541
---------------------- ----------------------
Effect of exchange rate changes on cash and cash
equivalents 28,259
Net increase in cash and cash equivalents 473,588 5,620,506
Cash and cash equivalents at beginning of period 964,106 60,190
---------------------- ----------------------
Cash and cash equivalents at end of period $ 1,437,694 $ 5,680,696
====================== ======================
</TABLE>
Supplemental disclosures of non-cash investing and
financing activities: Transfer of common stock back to the
Company in full satisfaction of Shareholder debt of
$389,191 in 1997.
The accompanying notes are an integral part of these financial statements.
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ASI Solutions Incorporated
Notes to Consolidated Financial Statements
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION:
--------------------------------------
On March 26, 1996, ASI Solutions Incorporated (the "Company") was incorporated
in the State of Delaware. Effective March 31, 1996, the Company issued
4,625,158 shares of Common Stock in exchange for substantially all of the issued
and outstanding shares of common stock of Proudfoot Reports Incorporated ("PRI")
and 95% of the common stock of Assessment Solutions Incorporated ("Assessment
Solutions"). During fiscal 1997, the remaining 5% of the outstanding common
stock of Assessment Solutions was redeemed. The initial stockholders of the
Company were also the principal stockholders of PRI and Assessment Solutions,
the two previously separate but commonly controlled companies. After the
reorganization, Assessment Solutions and PRI are wholly owned subsidiaries of
the Company. C3 Solutions Incorporated ("C3") was formed on September 16, 1996
as a wholly owned subsidiary of the Company. On August 29, 1997, the Company's
newly created subsidiary, T3 Solutions Incorporated ("T3"), acquired the assets
of Effective Learning Systems. On November 13, 1997, the Company's newly created
subsidiaries ("McLagan Partners") acquired substantially all of the assets and
business operations of McLagan Partners Incorporated and related entities. The
Company, Assessment Solutions, PRI, C3, T3 and McLagan Partners are hereinafter
referred to collectively as the "Company."
Effective April 16, 1997, the Company sold 1.8 million shares of common stock to
the public at a price of $6 per share in an initial public offering and pursuant
to an over-allotment option, the underwriter purchased 270,000 shares of common
stock at a price of $6 per share (the "Offering"). Proceeds from the Offering,
net of underwriters' discount and offering costs, were approximately $9,034,000.
Effective on the Offering date, the Company's Certificate of Incorporation (the
"Certificate") was restated to increase the number of authorized shares of
Common Stock to 18 million shares. In addition, effective on the Offering date,
the Board of Directors of the Company was authorized to issue up to 2 million
shares of Preferred Stock in one or more classes or series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences, and the number of shares constituting any series or the designation
of such series. However, pursuant to the Certificate, the holders of Preferred
Stock would not have cumulative voting rights with respect to the election of
directors. Any such Preferred Stock issued by the Company may rank prior to the
Common Stock as to dividend rights, liquidation preference or both, may have
full or limited voting rights and may be convertible into shares of Common
Stock.
The exchange described above has been accounted for as a reorganization since
all entities involved were under common control. The consolidated financial
statements reflect the interests attributable to the one controlling shareholder
of both combined entities at their historical basis of accounting. The
remaining interests have been accounted for as a purchase of minority interests
and the excess of the purchase price over the related historical cost of
$1,063,000 has been allocated to intangible assets. All intercompany accounts
and transactions have been eliminated in consolidation.
The accompanying unaudited interim financial statements of ASI Solutions
Incorporated have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain information and note
disclosures normally included in annual financial statements have been condensed
or omitted pursuant to those rules and regulations. In the opinion of
management, all adjustments, consisting of normal, recurring adjustments
considered necessary for a fair presentation, have been included. Although
management believes that the disclosures made are adequate to ensure that the
information presented is not misleading, it is suggested that these financial
statements be read in
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conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998.
The results of the six months ended September 30, 1998 and 1997 are not
necessarily indicative of the results of operations for the entire year.
The financial statements of foreign operations, where the local currency is
the functional currency, are translated into U.S. dollars using exchange rates
in effect at period end for assets and liabilities and average exchange rates
during each reporting period for results of operations. Adjustments resulting
from translation of financial statements are reflected as a separate component
of stockholders' equity.
2. OPERATIONS:
----------
THE COMPANY
ASI Solutions Incorporated is a leading national provider of a comprehensive
range of human resources outsourcing services for large organizations seeking to
hire, train and develop a higher quality, more effective workforce. The
Company's services are organized into five core areas; assessment and selection,
training and development, customer contact monitoring, employment process
administration and compensation research and consulting services. The Company
believes these services position the Company as a single-source solution for
many organizations that outsource all or a portion of their human resources
functions. The Company markets its services principally to Fortune 500
companies for which customer service, sales and call center functions are
critical components of their businesses. Industries served by the Company
include telecommunications, financial services, information technology, consumer
products and healthcare.
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which requires that changes in comprehensive income be shown in a
financial statement that is displayed with the same prominence as other
financial statements. SFAS 130 has been adopted by the Company in fiscal 1999.
There are no significant differences between comprehensive income and net income
in the periods presented.
In June 1997, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"), which changes the way public companies report
information about segments. SFAS 131, which is based on the management approach
to segment reporting, includes requirements to report selected segment
information quarterly and entity-wide disclosures about products and services,
major customers, and the material countries in which the entity holds and
reports revenues. SFAS 131 becomes effective in fiscal 1999. The effect of
this change will provide additional disclosure in the notes to the financial
statements.
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3. STOCKHOLDERS' EQUITY:
---------------------
A summary of the changes in Stockholders' Equity for the six months ended
September 30, 1998 is as follows:
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON ADDITIONAL COMPREHENSIVE RETAINED TREASURY
SHARES STOCK PAID-IN CAPITAL INCOME EARNINGS STOCK TOTAL
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1998 6,466,701 $65,123 $10,841,728 $ 9,382 $5,172,039 $(392,731) $15,695,541
Issuance of Common Stock for
Employee Stock Purchase Plan 10,173 102 82,045 82,147
Translation Adjustment 9,956 9,956
Net Income 1,768,264 1,768,264
----------------------------------------------------------------------------------------------
Balance, September 30, 1998 6,476,874 $65,225 $10,923,773 $19,338 $6,940,303 $(392,731) $17,555,908
==============================================================================================
</TABLE>
4. ACQUISITIONS:
------------
On November 13, 1997, the Company acquired substantially all of the assets
(primarily fixed assets of $483,978) and businesses of McLagan Partners
Incorporated and its related entities (collectively, "McLagan"). The
consideration paid by the Company for the assets of McLagan included (i) $15.5
million paid in cash; (ii) $5 million in subordinated notes bearing interest at
8 percent per annum and payable in three equal principal installments on each of
April 30, 1998, April 30, 1999 and April 30, 2000; and (iii) 50,000 shares of
the common stock, par value $.01 per share, of ASI, and the Company incurred
$828,188 of costs associated with the acquisition. The Company also discharged
approximately $1 million of McLagan's outstanding liabilities and agreed to make
deferred payments in the aggregate amount of $1 million, on April 30, 2000, to
certain employees of McLagan, provided that such employees continue to be
employed by McLagan as of such date.
The acquisition has been accounted for using the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets purchased
based upon the fair values at the date of the acquisition. As a result,
$22,294,210 of the purchase price has been allocated to goodwill, customer lists
and other intangibles which are being amortized on a straight line basis over
periods from 5 to 40 years. The Company has an incentive compensation program
with former officers of McLagan which provides for payments to such officers
when certain milestone earnings are attained. At the request of the officers,
$841,278 in connection with this incentive compensation program was paid to
employees in fiscal 1998.
On August 29, 1997, the Company acquired the assets of Effective Learning
Systems, a New Jersey based training organization, for approximately $1,000,000.
While the effect of this acquisition on the reported financial statements of the
Company was not significant, the Company did enter into three promissory notes,
requiring monthly payments through March 31, 1999 and bearing interest at a
monthly rate of 0.75%.
3
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
QUARTERLY COMPARISON OF RESULTS OF OPERATIONS
The Company's second quarter revenue increased 151.4% to $14.8 million from $5.9
million in the second quarter of fiscal 1998. 1999 second quarter net income was
$0.9 million, or 6.2% of revenue, up 441.2% from $0.2 million, or 2.9% of
revenue, in the second quarter of fiscal 1998. The increase in net income is
primarily due to increased volume, particularly in Employment Process
Administration, as well as to the inclusion of McLagan, the new compensation
survey and consulting business acquired in November 1997.
Assessment and Selection revenue was $2.4 million, an increase of $0.2 million,
or 9.7%, from the second quarter of last year. Volume with existing clients plus
the addition of new clients accounted for the increase.
Employment Process Administration revenue was $5.4 million, an increase of $2.6
million, or 92.7%, over last year's second quarter, due principally to higher
volume with a large telecommunications client and the expansion of services
provided to that client. Several smaller clients were also added.
Customer Contact Monitoring revenue was $0.7 million, an increase of $0.3
million, or 61.7% from the second quarter of last year. This is a new business
area and the increase was due to services provided to several new clients as we
continue to expand our customer base.
Training and Development revenue was $0.9 million, an increase of $0.5 million,
or 93.4% over last year's second quarter. Revenue from new programs introduced
in connection with the August 1997 acquisition of Effective Learning Systems
contributed to the increase along with services provided to a large technology
client. Several new clients have also been added.
Revenue for Compensation Surveys and Consulting, a new business area resulting
from the McLagan acquisition, was $5.4 million. The revenue consists of
compensation surveys and related consulting.
Cost of services increased $3.9 million, or 117.4%, to $7.2 million. The new
Compensation Survey and Consulting area accounted for $2.3 million of the
increase in expense, the largest component of which is compensation expense,
used to generate the $5.4 million in revenue. The remainder of the increase was
due to personnel additions, service delivery and equipment expenses associated
with higher business volume. As a percentage of revenue, cost of services was
48.6% compared to 56.2% in last year's second quarter.
General and administrative expense increased $2.4 million, or 182.0%, to $3.7
million. Compensation Surveys and Consulting accounted for most of the increase
with expenses totaling $2.1 million. Compensation expense was the largest single
component and was used to generate the $5.4 million in Compensation Surveys and
Consulting revenue. Overall, compensation and goodwill amortization
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were the largest expense items. As a percentage of revenue, general and
administrative expense increased from 22.3% to 25.1%.
Sales and marketing expense increased by $0.8 million, or 114.3%, to $1.4
million principally due to the addition of sales staff and to higher spending
incurred to promote business volume. Compensation Surveys and Consulting
accounted for $0.2 million of the increase. As a percentage of revenue, sales
and marketing expense decreased from 11.2% to 9.5%, as revenue growth exceeded
sales and marketing spending increases. Compensation Surveys and Consulting has
a relatively lower amount of sales and marketing expense.
Research and development expense was $0.5 million, up $0.1 million from last
year. As a percentage of revenue, research and development expense was 3.1%,
down from 6.1% last year due to the fact that Employment Process Administration,
which accounts for a large portion of the revenue increase, has a relatively
lower amount of research and development expense, and Compensation Survey and
Consulting services, which also accounts for a large portion of the revenue
increases, has no research and development expense.
As a percentage of pre-tax income, the provision for income taxes declined
slightly to 41.8% from 43.0%. The addition of Compensation Surveys and
Consulting results in lower state income tax expense.
Net interest expense was $463,000 compared to net interest income of $51,000
last year. The interest expense was primarily due to interest on the debt
incurred in the acquisition of McLagan and to interest related to the line of
credit.
(Percentages are based on actual amounts as opposed to the rounded amounts shown
above.)
YEAR TO DATE COMPARISON OF RESULTS OF OPERATIONS
The Company's year to date revenue increased 113.1% to $26.9 million from $12.6
million in the first half of fiscal 1998. Year to date net income was $1.8
million, or 6.6% of revenue, up 201.3% from $0.6 million, or 4.7% of revenue, in
the first half of fiscal 1998. The increase in net income is primarily due to
increased volume, particularly in Employment Process Administration, and the
inclusion of McLagan, the new compensation survey and consulting business
acquired in November 1997.
Assessment and Selection revenue was $4.9 million, a decrease of $0.3 million,
or 5.3%, from the first half of last year. While volume dropped slightly,
several new clients have been added.
Employment Process Administration revenue was $10.7 million, an increase of $5.3
million, or 100%, over last year's first half, due principally to higher volume
with a large telecommunications client and the expansion of services provided to
that client. Several new clients have also been added.
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Customer Contact Monitoring revenue was $1.3 million, an increase of 46% from
the first half of last year. This is a new business area and the increase was
due to services provided to several new clients, as we continue to expand our
customer base.
Training and Development revenue was $1.7 million, an increase of 48.1%.
Revenue from new programs introduced in connection with the August 1997
acquisition of Effective Learning Systems contributed to the increase along with
services provided to a large technology client and the addition of new clients.
Revenue for Compensation Surveys and Consulting, a new business area resulting
from the McLagan acquisition, was $8.2 million consisting of compensation
surveys for the financial services industry and related consulting services.
Cost of services increased $6.3 million, or 93.3%, to $13.1 million. The new
Compensation Surveys and Consulting area accounted for $3.2 million of the
increase. The remainder of the increase was due to personnel additions, service
delivery and equipment expenses associated with higher business volume. As a
percentage of revenue, cost of services was 48.7% compared to 53.7% in last
year's first half.
General and administrative expense increased $3.6 million, or 138.2%, to $6.3
million. Compensation Surveys and Consulting accounted for the majority of the
increase. Compensation and goodwill amortization were the largest expense
items. As a percentage of revenue, general and administrative expense
increased from 20.9% to 23.4%.
Sales and marketing expense increased by $1.1 million, or 76.4%, to $2.6 million
principally due to the addition of sales staff and to higher spending incurred
to promote business volume. As a percentage of revenue, sales and marketing
expense decreased from 11.5% to 9.5%, as revenue growth exceeded sales and
marketing spending increases. Compensation Surveys and Consulting has a
relatively lower amount of sales and marketing expense.
Research and development expense was $0.9 million, slightly higher than last
year. As a percentage of revenue, research and development expense was 3.4%,
down from 6.6% last year due to the fact that Employment Process Administration,
which accounts for a large portion of the revenue increase, has a relatively
lower amount of research and development expense, and Compensation Survey and
Consulting services which also accounts for a large portion of the revenue
increase has no research and development expense.
As a percentage of pre-tax income, the provision for income taxes declined
slightly to 42.5% from 43.4% due to lower state income tax expense related to
Compensation Surveys and Consulting.
Net interest expense was $1.0 million compared to net interest income of
$113,000 last year. The interest expense was primarily due to interest on the
debt incurred in the acquisition of McLagan and to interest related to the line
of credit.
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(Percentages are based on actual amounts as opposed to the rounded amounts shown
above.)
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise from capital requirements, capital
expenditures and principal and interest payments on debt. The Company funds its
operating and capital needs with cash flow generated from operations,
supplemented by short-term borrowings under bank lines of credit and long-term
equipment financing.
Cash flow provided by operations was $3.2 in the first six months of fiscal 1999
due to income generated from operations and increases in accounts payable and
accrued expenses. Cash flow used in investing activities of $699,000 was
primarily for fixed asset additions. Cash flow used in financing activities of
$2,022,800 was primarily for repayment of debt.
In November 1997, a new bank Credit Agreement was established which provided a
$15 million term loan and a $5 million revolving credit facility. This
agreement expires November 13, 2002. On September 30, 1998, there were
borrowings of $1,790,000 against the revolving credit facility and $13,875,000
was outstanding on the term loan. The Company also has two equipment notes
payable to a bank with a balance of $758,893 at September 30, 1998.
YEAR 2000 COMPLIANCE
The Company has conducted a review of its information systems at its ASI and
Proudfoot operations to identify those areas which could be affected by the
"Year 2000" issue. Key financial, informational and operational systems have
been inventoried and assessed, and detailed plans were developed for the
required systems modifications or replacements. Due to significant expansion
experienced by the Company during the last two years, the Company has created
new software or modified existing software to continue providing superior
customer service. Through that process these systems have become Year 2000
compliant. Also, as part of the expansion, the Company has purchased new
hardware and software that are certified by their manufacturers as Year 2000
compliant. Remaining hardware and software that are not compliant is minimal and
will be phased out by March 31, 1999, the Company's fiscal year end.
The Company estimates that there are no significant costs associated with the
finalization of its Year 2000 compliance plans and believes that any costs
incurred will be internal, non-incremental costs. In addition third party
customers and suppliers are in the process of providing written assurances for
the Company that they expect to be Year 2000 compliant over the next 12 months.
The Company has received assurance from the vast majority of these third parties
that they will be compliant. Management believes that third party non-compliance
will not materially impact the Company's operations.
As disclosed in Note 4 to the Financial Statements, in November 1997, the
Company acquired substantially all of the assets and businesses of McLagan
Partners Incorporated and its related entities ("McLagan"). The Company is in
the process of evaluating those areas of McLagan which could be affected by the
"Year 2000" issue. The effect, if any, on the Company's results of operations
if McLagan is not fully Year 2000 compliant is not reasonably estimable at this
time.
NOTE ON FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q and written and oral statements made by the
Company may contain, in addition to historical information, forward-looking
statements within the meaning of section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
The words "believe", "expect", "intend", "estimate" and "anticipate" and other
expressions which are predictions of or indicate future events and trends and
which do not relate to historical matters identify forward-looking statements.
In addition, the Company's discussion above regarding Year 2000 compliance
contains several forward-looking statements, including without limitation, the
Company's expectations as to when the phase out of non-compliant software and
hardware will be completed, its estimates of the costs involved in achieving
Year 2000 readiness and its belief that third-party non-compliance would not
materially impact the Company's operations. Any such statements are subject to
risks and uncertainties that could cause the actual results to differ materially
from those projected in such statements, including negative developments
relating to unforeseen project cancellations or the effect of a customer
delaying a project, negative developments relating to the Company's significant
customers, a reduction in the demand for the Company's services which could
impact capacity utilization as well as sales volume, the impact of intense
competition, changes in the industry, changes in the general economy such as
inflationary pressure, the availability of Year 2000 compliant replacement
software and hardware as well as qualified personnel and other information
technology resources and the actions of third parties and governmental agencies
with respect to Year 2000 issues. The Company undertakes no obligation to
publicly update or
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revise any forward-looking statement, whether as a result of new information,
future events or otherwise.
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The company held its Annual Meeting of Stockholders on August 5, 1998. At
the Annual Meeting, the Company's stockholders voted (i) to elect Bernard F.
Reynolds, Eli Salig, Seymour Adler, Ph.D., David Tory, Michael J. Boylan, Ilan
Kaufthal, Carl S. Koerner and F. Samuel Smith to serve as directors of the
Company until the 1999 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified; and (ii) to approve an amendment to
the Company's 1996 Stock Option and Grant Plan to increase the total number of
shares of common stock of the Company that may be issued thereunder from 800,000
to 1,200,000, each as described in the Company's Proxy Statement distributed to
stockholders in connection with the Annual Meeting. Set forth below are the
results of the stockholder votes at the Annual Meeting on the foregoing matters.
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS
<S> <C> <C>
Nominee Votes in Favor Votes Withheld
------- -------------- --------------
Bernard F. Reynolds 6,011,729 7,700
Eli Salig 6,011,729 7,700
Seymour Adler, Ph.D. 6,011,629 7,800
David Tory 6,016,729 2,700
Michael J. Boylan 6,016,729 2,700
Ilan Kaufthal 6,016,529 2,900
Carl S. Koerner 6,011,529 7,900
F. Samuel Smith 6,011,729 7,700
</TABLE>
APPROVAL OF AMENDMENT TO THE COMPANY'S
1996 STOCK OPTION AND GRANT PLAN
Votes in Favor Votes Against Abstentions Broker Non-Votes
-------------- ------------- ----------- ----------------
4,643,977 390,225 5,160 None indicated
8
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed as part of this report:
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
27.1 Financial Data Schedule.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ASI SOLUTIONS INCORPORATED
Date: November 11, 1998 By: /s/ MICHAEL J. MELE
--------------------
Michael J. Mele
Senior Vice President and Chief Financial Officer
(on behalf of the registrant and as principal
financial and accounting officer)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1998
<PERIOD-START> JUL-01-1998 JUL-01-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> 1,437,694 5,680,696
<SECURITIES> 0 0
<RECEIVABLES> 12,130,763 4,492,707
<ALLOWANCES> 140,484 29,413
<INVENTORY> 0 0
<CURRENT-ASSETS> 14,590,278 10,445,096
<PP&E> 8,163,276 6,004,533
<DEPRECIATION> 2,918,552 1,598,493
<TOTAL-ASSETS> 44,249,914 17,192,177
<CURRENT-LIABILITIES> 11,611,937 2,549,850
<BONDS> 0 0
0 0
0 0
<COMMON> 65,225 64,423
<OTHER-SE> 17,490,683 13,464,002
<TOTAL-LIABILITY-AND-EQUITY> 44,249,914 17,192,177
<SALES> 26,856,850 12,605,351
<TOTAL-REVENUES> 26,856,850 12,605,351
<CGS> 13,077,631 6,763,941
<TOTAL-COSTS> 22,826,740 11,681,782
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 15,000
<INTEREST-EXPENSE> 967,692 31,322
<INCOME-PRETAX> 3,075,239 1,036,810
<INCOME-TAX> 1,306,975 449,892
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,768,264 586,918
<EPS-PRIMARY> .27 .09
<EPS-DILUTED> .27 .09
</TABLE>
