<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended: June 30, 1995 Commission File Number: O-14741
------------- -------
ASA International Ltd.
------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
<TABLE>
<S> <C>
Delaware 02-0398205
-------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
10 Speen Street, Framingham, MA 01701
---------------------------------------- -----------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 508-626-2727
------------
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.
X
Yes: ----- No: -----
As of June 30, 1995, there were 3,787,517 shares of
Common Stock of the Registrant outstanding.
<PAGE> 2
PART I
Item 1
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 217,996 $ 10,381
Receivables - net 5,843,211 5,228,384
Computer hardware held for resale 241,885 313,836
Other current assets 953,966 901,642
----------- -----------
TOTAL CURRENT ASSETS 7,257,058 6,454,243
PROPERTY AND EQUIPMENT (less
depreciation of $4,492,042 and
$4,226,580, respectively) 4,702,905 4,813,453
SOFTWARE (less amortization of
$7,058,514 and $6,342,913,
respectively) 6,408,270 6,485,771
COST EXCEEDING NET ASSETS ACQUIRED
(less amortization of $1,234,144
and $1,104,704, respectively) 1,666,278 1,795,718
OTHER ASSETS 527,565 581,745
----------- -----------
$20,562,076 $20,130,930
=========== ===========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 3
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit and bank note $ 1,200,000 $ 975,000
Accounts payable 1,716,238 1,994,103
Accrued expenses 3,025,964 2,368,444
Income taxes 344,123 -
Other current liabilities 1,457,610 1,912,243
----------- -----------
TOTAL CURRENT LIABILITIES 7,743,935 7,249,790
LONG-TERM OBLIGATIONS, NET OF CURRENT
MATURITIES 2,903,848 3,111,905
DEFERRED TAXES 117,000 117,000
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common stock 39,173 39,173
Additional paid-in capital 7,681,632 7,681,632
Retained earnings 2,496,930 2,351,872
----------- -----------
10,217,735 10,072,677
Less: treasury stock, at cost 420,442 420,442
----------- -----------
9,797,293 9,652,235
----------- -----------
$20,562,076 $20,130,930
=========== ===========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 4
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED INCOME STATEMENTS
<CAPTION>
Three Months Ended
June 30,
----------------------------
1995 1994
----------------------------
(Unaudited)
<S> <C> <C>
REVENUE
Computer and add-on hardware $ 2,732,919 $ 1,042,484
Services 4,095,822 4,147,030
Product licenses 1,504,817 1,080,595
----------- -----------
GROSS REVENUE 8,333,558 6,270,109
COST OF COMPUTER AND ADD-ON HARDWARE 2,369,445 944,259
----------- -----------
REVENUE NET OF HARDWARE COSTS 5,964,113 5,325,850
EXPENSES
Cost of services 2,621,334 2,525,198
Cost of product licensing and development 788,410 359,766
Marketing and sales 1,144,630 1,218,656
General and administrative 854,422 983,258
Amortization of goodwill 63,887 65,553
----------- -----------
TOTAL EXPENSES 5,472,683 5,152,431
EARNINGS FROM OPERATIONS 491,430 173,419
INTEREST EXPENSE - NET (135,575) (121,202)
----------- -----------
EARNINGS BEFORE INCOME TAXES 355,855 52,217
INCOME TAXES 252,000 25,847
----------- -----------
NET EARNINGS $ 103,855 $ 26,370
----------- -----------
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE:
NET EARNINGS $.02 $.01
----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 4,222,620 4,205,748
========= =========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 5
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED INCOME STATEMENTS
<CAPTION>
Six Months Ended
June 30,
----------------------------
1995 1994
----------------------------
(Unaudited)
<S> <C> <C>
REVENUE
Computer and add-on hardware $ 3,847,034 $ 2,220,301
Services 8,236,703 8,201,700
Product licenses 2,758,707 2,218,572
----------- -----------
GROSS REVENUE 14,842,444 12,640,573
COST OF COMPUTER AND ADD-ON HARDWARE 3,233,417 1,988,199
----------- -----------
REVENUE NET OF HARDWARE COSTS 11,609,027 10,652,374
EXPENSES
Cost of services 5,342,473 5,199,258
Cost of product licensing and development 1,479,767 607,269
Marketing and sales 2,220,718 2,434,119
General and administrative 1,698,787 1,954,454
Amortization of goodwill 129,440 131,107
----------- -----------
TOTAL EXPENSES 10,871,185 10,326,207
EARNINGS FROM OPERATIONS 737,842 326,167
INTEREST EXPENSE - NET (242,784) (223,405)
----------- -----------
EARNINGS BEFORE INCOME TAXES 495,058 102,762
INCOME TAXES 350,000 50,867
----------- -----------
NET EARNINGS $ 145,058 $ 51,895
----------- -----------
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE:
NET EARNINGS $.03 $.01
----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 4,213,901 4,205,748
========= =========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 6
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended
June 30,
----------------------------
1995 1994
----------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 145,058 $ 51,895
Adjustments to reconcile net earnings
to net cash provided by (used for)
operating activities:
Depreciation and amortization 1,110,502 871,484
Changes in assets and liabilities,
net of effects of acquisitions/
dispositions (297,890) 554,717
----------- -----------
Total adjustments 812,612 1,426,201
----------- -----------
Net cash provided by operating activities 957,670 1,478,096
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (154,914) (129,234)
Additions to software (638,098) (1,507,849)
Reduction of (increases to) sales-type
leases 83,990 (13,662)
Other assets 5,000 35,000
----------- -----------
Net cash used for investing activities (704,022) (1,615,745)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank and other notes 225,000 175,030
Reduction in long-term debt (271,033) (214,023)
----------- -----------
Net cash used for financing activities (46,033) (38,993)
----------- -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) 207,615 (176,642)
Balance, beginning of year 10,381 365,146
----------- -----------
Balance, end of period $ 217,996 $ 188,504
=========== ===========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 7
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
------------------------------
As permitted by the rules of the Securities and Exchange
Commission applicable to quarterly reports on Form 10-Q,
these notes are condensed and do not contain all
disclosures required by generally accepted accounting
principles. Reference should be made to the financial
statements and related notes included in the Company's
Annual Report on Form 10-K.
In the opinion of management, the accompanying financial
statements reflect all adjustments which were of a normal
recurring nature necessary for a fair presentation of the
Company's results of operations for the three and six
months ended June 30, 1995 and June 30, 1994, respectively.
The results disclosed in the Condensed Consolidated Income
Statement for the six months ended June 30, 1995 are not
necessarily indicative of the results expected for the full
year.
Note 2
------
In June 1995, the Company renewed its revolving line of
credit through June 1996. The facility was renewed under
the same terms as the original November 1994 Agreement.
<PAGE> 8
Item 2
Management#s Discussion and Analysis of Financial Condition
and Results of Operations
-----------------------------------------------------------
<TABLE>
Results of Operations
Second Quarter of 1995
compared to
Second Quarter of 1994
<CAPTION>
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1995 1994 Amount Percentage
---- ---- ------ ----------
<S> <C> <C> <C> <C>
Computer and add-on
hardware $ 2,733 $ 1,042 $ 1,691 162%
Services 4,096 4,147 (51) (1%)
Product licenses 1,505 1,081 424 39%
------- ------- ------- ----
Gross revenue $ 8,334 $ 6,270 $ 2,064 33%
------- ------- ------- ----
Revenue net of
hardware costs $ 5,964 $ 5,326 $ 638 12%
======= ======= ======= ====
</TABLE>
The increase of approximately $1,691,000 in computer and
add-on hardware revenue for the second quarter of 1995,
compared to the second quarter of 1994, resulted primarily
from an increase in revenue from the direct marketing
systems product line. Revenue from computer and add-on
hardware also increased for the other Company product
lines, except electronic time recording.
Hardware margins increased to approximately 13% in the
second quarter of 1995, from approximately 9% in the same
period in 1994. Margins on computer and add-on hardware do
fluctuate based on the mix of computer hardware and
ancillary hardware products sold. Accordingly, the
Company expects hardware gross margins in the future to
continue to fluctuate. The Company continues to direct its
efforts toward building service and product license revenue
to offset the historical decline in hardware revenue and
margins.
Product license revenue increased by approximately
$424,000 or 39% in the second quarter of 1995 compared to
the same period in 1994. The change was a result of
revenue increases from the international trade, electronic
time recording, and direct marketing systems product lines,
partially offset by decreases from the tire and legal
systems product lines.
Revenue from services decreased by approximately $51,000
or 1%. Gross margin from services decreased to
approximately 36% from 39% of revenue from services. The
Company's revenue and margin from services fluctuate from
period to period due to its existing mix of contracts and
projects.
<PAGE> 9
Item 2
- continued -
Revenue net of hardware cost increased by approximately
$638,000 or 12%, in the three months ended June 30, 1995
compared to the same period in the prior year, with all
product lines improving for the period except for legal
systems.
Cost of product licensing and development for the second
quarter of 1995 increased for all Company product lines,
except for legal systems. The change resulted from
increases in third-party license costs and the amortization
of capitalized software, coupled with lower capitalization
of internal costs of software product development.
Marketing and sales expenses decreased by approximately
$74,000 or 6%. General and administrative expenses
decreased by approximately $129,000 or 13%, compared to
the second quarter of 1994. These changes reflect the cost
reductions and controls enacted by the Company in the prior
year.
Pretax earnings from operations were approximately
$491,000 for the second quarter of 1995, compared to pretax
earnings from operations of approximately $173,000 for the
second quarter of 1994. The increase in earnings resulted
from an increase in contribution from all of the Company#s
product lines, except for legal systems.
Net earnings for the second quarter of 1995 were
approximately $104,000, as compared to net earnings of
approximately $26,000 for the comparable period in 1994.
The change resulted from an increase in earnings from
operations of approximately $318,000, which was partially
offset by an increase in net interest expense of
approximately $14,000 and an increase in income tax expense
of approximately $226,000.
In recent years due to several recurring permanent
book-tax differences, the Company has recorded effective
tax expense well in excess of statutory rates.
<PAGE> 10
Item 2
- continued -
<TABLE>
Six Months Ended June 30, 1995
compared to
Six Months Ended June 30, 1994
<CAPTION>
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1995 1994 Amount Percentage
---- ---- ------ ----------
<S> <C> <C> <C> <C>
Computer and add-on
hardware $ 3,847 $ 2,220 $ 1,627 73%
Services 8,236 8,202 34 -
Product licenses 2,759 2,219 540 24%
------- ------- ------- --
Gross revenue $14,842 $12,641 $ 2,201 17%
------- ------- ------- --
Revenue net of
hardware costs $11,609 $10,652 $ 957 9%
======= ======= ======= ==
</TABLE>
The increase of approximately $1,627,000 in computer and
add-on hardware revenue for the first six months of 1995,
compared to the first six months of 1994, resulted
primarily from increases in revenue from the international
trade, tire, and direct marketing systems product lines,
partially offset by a decrease in revenue from the
electronic time recording and legal systems product lines.
Hardware margins increased to approximately 16% in the
first six months of 1995, from approximately 10% in the
same period in 1994. Margins on computer and add-on
hardware do fluctuate based on the mix of computer hardware
and ancillary hardware products sold. Accordingly, the
Company expects hardware gross margins in the future to
continue to fluctuate. The Company continues to direct its
efforts toward building service and product license revenue
to offset the historical decline in hardware revenue and
margins.
Product license revenue increased by approximately
$540,000 or 24% in the first six months of 1995 compared to
the same period in 1994. The change was a result of
revenue increases from the international trade, electronic
time recording, and direct marketing systems product lines,
partially offset by decreases from the tire and legal
systems product lines.
Revenue from services remained approximately the same as
the prior year. Service revenue increases for the
international trade, tire, and direct marketing systems
product lines were offset by revenue decreases in the
electronic time recording and legal systems product lines.
Gross margin from services decreased to approximately 35%
from 37%. The Company#s revenue and margin from services
fluctuate from period to period due to its existing mix of
contracts and projects.
<PAGE> 11
Item 2
- continued -
Revenue net of hardware cost increased by approximately
$957,000 or 9%, in the six months ended June 30, 1995
compared to the same period in the prior year. Revenue net
of hardware cost increased in the international trade,
electronic time recording, and direct marketing systems
product lines, while revenue net of hardware cost decreased
for the tire and legal systems product lines.
Marketing and sales expenses decreased by approximately
$213,000 or 9%. General and administrative expenses
decreased by approximately $256,000 or 13%, compared to the
first six months of 1994. These changes reflect the cost
reductions and controls enacted by the Company in the prior
year.
Pretax earnings from operations were approximately
$738,000 for the first six months of 1995, compared to
approximately $326,000 for the first six months of 1994.
The increase in earnings resulted from an increase in
contribution from the Company's international trade and
direct marketing systems product lines. This increase was
partially offset by decreases in contribution from the
Company's electronic time recording, tire, and legal
systems product lines.
Net earnings for the six months ended June 30, 1995 were
approximately $145,000, as compared to approximately
$52,000 for the comparable period in 1994. The change
resulted from an increase in earnings from operations of
approximately $412,000, which was partially offset by an
increase in net interest expense of approximately $19,000
and an increase in income tax expense of approximately
$299,000.
In recent years due to several recurring permanent
book-tax differences, the Company has recorded effective
tax expense well in excess of statutory rates.
<PAGE> 12
Liquidity and Capital Resources
The Company had total cash and cash equivalents at June
30, 1995 of approximately $218,000, an increase of
approximately $208,000 from December 31, 1994. Its working
capital position as of June 30, 1995, was slightly
negative. However, the Company and its subsidiaries
currently have a maximum line of credit totaling
$2,350,000, of which $1,075,000 was available at June 30,
1995. This line was renewed in June 1995 through June 1996
under the same terms.
Over the past two years, the Company has expended
signficant working capital on the development of a new
generation of software products. The level of these
expenditures has decreased in the current period. However,
with the revolution in software technology, the Company
will have to continue to fund product development in order
to retain existing clients and to attract new clients. The
Company intends, as it has in the past, to fund this
development from its cash from operations.
The Company expects to continue to pursue strategic
acquisitions. These acquisitions have been and are
expected to continue to be financed in a number of ways.
Management believes, subject to the conditions of the
financial markets, that it should be able to continue its
program of acquisitions.
The Company's hardware and software license revenues can
fluctuate as a result of a number of factors, particularly
trends in the overall economy, client buying patterns, and
hardware and software technological developments.
Consequently, the Company could be subject to material
variations in operating results. As the uncertainties of
the economy are incalculable, the Company acknowledges the
potential adverse impact that economic uncertainty could
have on its ability to maintain liquidity, raise additional
capital, and continue its program of acquisitions. Subject
to the foregoing, the Company believes that based on the
level of operating revenue, cash on hand, and available
bank debt, it has sufficient capital to finance its ongoing
business.
<PAGE> 13
PART II
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits - None
(b) Reports on Form 8-K - None
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ASA International Ltd.
---------------------------
(Registrant)
8/11/95 /s/ Alfred C. Angelone
----------- ----------------------------
(Date) (Signature)
Alfred C. Angelone
Chief Executive Officer
8/11/95 /s/ Terrence C. McCarthy
----------- ----------------------------
(Date) (Signature)
Terrence C. McCarthy
Vice President and Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1995
CONDENSED CONSOLIDATED INCOME STATEMENT FOR SIX MONTHS ENDED JUNE 30, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 217,996
<SECURITIES> 0
<RECEIVABLES> 5,932,945
<ALLOWANCES> 89,734
<INVENTORY> 241,886
<CURRENT-ASSETS> 7,257,058
<PP&E> 9,194,948
<DEPRECIATION> 4,492,042
<TOTAL-ASSETS> 20,562,076
<CURRENT-LIABILITIES> 7,743,893
<BONDS> 2,903,848
<COMMON> 39,173
0
0
<OTHER-SE> 9,758,164
<TOTAL-LIABILITY-AND-EQUITY> 20,562,076
<SALES> 14,842,444
<TOTAL-REVENUES> 14,842,444
<CGS> 3,233,417
<TOTAL-COSTS> 10,055,657
<OTHER-EXPENSES> 4,048,945
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 242,784
<INCOME-PRETAX> 495,059
<INCOME-TAX> 350,000
<INCOME-CONTINUING> 145,059
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 145,059
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
