<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: March 31, 1996 Commission File Number: O-14741
-------------- -------
ASA International Ltd.
-----------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 02-0398205
- - -------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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 March 31, 1996, there were 3,787,517 shares of Common Stock of the
Registrant outstanding.
<PAGE> 2
PART I
Item 1
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 93,601 $ 404,026
Receivables - net 6,394,482 5,085,172
Computer hardware held for resale 223,203 238,624
Other current assets 676,507 748,221
----------- -----------
TOTAL CURRENT ASSETS 7,387,793 6,476,043
PROPERTY AND EQUIPMENT (less
depreciation of $4,739,582 and
$4,612,375, respectively) 4,638,968 4,705,105
SOFTWARE (less amortization of
$8,093,015 and $7,689,103,
respectively) 6,099,196 6,193,625
COST EXCEEDING NET ASSETS ACQUIRED
(less amortization of $1,427,470
and $1,362,750, respectively) 1,472,953 1,537,673
OTHER ASSETS 624,770 602,755
----------- -----------
$20,223,680 $19,515,201
=========== ===========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 3
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit and bank note $ 1,700,000 $ 1,025,000
Accounts payable 1,875,555 1,157,573
Accrued expenses 1,813,015 2,292,514
Other current liabilities 1,482,669 1,606,063
----------- -----------
TOTAL CURRENT LIABILITIES 6,871,239 6,081,150
LONG-TERM OBLIGATIONS, NET OF CURRENT
MATURITIES 2,634,209 2,707,459
DEFERRED TAXES 617,000 617,000
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common stock 39,173 39,173
Additional paid-in capital 7,681,675 7,681,675
Retained earnings 2,800,826 2,809,186
----------- -----------
10,521,674 10,530,034
Less: treasury stock, at cost 420,442 420,442
----------- -----------
10,101,232 10,109,592
----------- -----------
$20,223,680 $19,515,201
=========== ===========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 4
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
REVENUE
Computer and add-on hardware $1,273,254 $1,114,115
Services 4,684,531 4,140,881
Product licenses 766,877 1,253,890
---------- ----------
NET REVENUE 6,724,662 6,508,886
COST OF REVENUE
Computer and add-on hardware 1,045,208 863,972
Services 3,054,509 2,721,138
Product licenses and development 826,227 691,357
---------- ----------
TOTAL COST OF REVENUE 4,925,944 4,276,467
EXPENSES
Marketing and sales 845,824 1,076,088
General and administrative 772,463 844,365
Amortization of goodwill 64,720 65,553
---------- ----------
TOTAL EXPENSES 1,683,007 1,986,006
EARNINGS FROM OPERATIONS 115,711 246,413
INTEREST EXPENSE - NET (124,071) (107,209)
---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES (8,360) 139,204
INCOME TAXES -- 98,000
---------- ----------
NET EARNINGS (LOSS) $ (8,360) $ 41,204
========== ==========
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
NET EARNINGS $ (.002) $ .01
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 4,125,565 4,387,467
========== ==========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 5
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (8,360) $ 41,204
Adjustments to reconcile net earnings
to net cash provided by (used for)
operating activities:
Depreciation and amortization 595,839 555,077
Changes in assets and liabilities (1,092,636) 116,196
----------- ---------
Total adjustments (496,797) 671,273
----------- ---------
Net cash provided by (used for)
operating activities (505,157) 712,477
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (61,070) (8,434)
Additions to software (309,483) (194,346)
Reduction of sales-type leases 28,834 93,161
Other assets (30,645) (83,146)
----------- ---------
Net cash used for investing
activities (372,364) (192,765)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank and other notes 675,000 50,000
Reduction in long-term debt (107,904) (203,994)
----------- ---------
Net cash provided by (used for)
financing activities 567,096 (153,994)
----------- ---------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) (310,425) 365,718
Balance, beginning of year 404,026 10,381
----------- ---------
Balance, end of period $ 93,601 $ 376,099
=========== =========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 6
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 months ended
March 31, 1996 and March 31, 1995, respectively.
The results disclosed in the Condensed Consolidated Income Statement for the
three months ended March 31, 1996 are not necessarily indicative of the results
expected for the full year.
<PAGE> 7
Item 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
First Quarter of 1996
compared to
First Quarter of 1995
<TABLE>
<CAPTION>
(000's omitted)
------------------ ----------------------
Revenue Increase/(Decrease)
------------------ ----------------------
1996 1995 Amount Percentage
---- ---- ------ ----------
<S> <C> <C> <C> <C>
Computer and add-on
hardware $1,273 $1,114 $ 159 14%
Services 4,685 4,141 544 13%
Product licenses 767 1,254 (487) (39%)
------ ------ ----- ---
Net revenue $6,725 $6,509 $ 216 3%
====== ====== ===== ===
Revenue net of
hardware costs $5,679 $5,645 $ 34 1%
====== ====== ===== ===
</TABLE>
The increase of approximately $159,000 in computer and add-on hardware revenue
for the first quarter of 1996, compared to the first quarter of 1995, resulted
primarily from increases in revenue from the legal and direct marketing systems
product lines, partially offset by decreases in revenue for the other Company
product lines.
Hardware margins decreased to approximately 18% in the first quarter of 1996,
from approximately 22% in the same period in 1995. 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.
Revenue from services increased by approximately $544,000 or 13%. Gross margin
from services increased to approximately 35% from 34% of revenue from services.
The Company's revenue and margin from services fluctuate from period to period
due to changes in the mix of contracts and projects.
<PAGE> 8
Item 2
- continued -
Product license revenues decreased by approximately $487,000 or 39% in the first
quarter of 1996 compared to the same period in 1995. The change was a result of
decreases from the electronic time recording and international trade systems
product lines, partially offset by increases from the tire, legal, and direct
marketing systems product lines.
Revenue net of hardware costs remained the same for the three months ended March
31, 1996, compared to the same period in the prior year. Revenue net of hardware
cost increased in the electronic time recording, tire, and direct marketing
systems product lines while revenue net of hardware cost decreased for the
international trade and legal systems product lines.
Marketing and sales expenses decreased by approximately $230,000 or 21%. General
and administrative expenses decreased by approximately $70,000 or 9%, compared
to the first quarter of 1995. These changes reflect the continuing effort by the
Company to balance revenue and costs. The cost reductions included severing
specific employees, not replacing employees as they left voluntarily, delaying
hiring decisions previously budgeted, combining functions, and hiring temporary
employees as opposed to full-time employees (thus reducing employee benefit
costs).
Pretax earnings from operations were approximately $116,000 for the first
quarter of 1996, compared to pretax earnings from operations of approximately
$246,000 for the first quarter of 1995. The decrease in earnings resulted from a
decrease in contribution from the electronic time recording, international
trade, and direct marketing systems product lines, partially offset by increases
in contribution from the tire and legal systems product lines.
Net loss for the first quarter of 1996 was approximately $8,000, as compared to
net earnings of approximately $41,000 for the first quarter of 1995. The change
resulted from a decrease in earnings from operations of approximately $130,000,
along with an increase in net interest expense of approximately $17,000,
partially offset by a decrease in income tax expense of approximately $98,000.
<PAGE> 9
Liquidity and Capital Resources
The Company had total cash and cash equivalents at March 31, 1996 of
approximately $94,000, a decrease of approximately $310,000 from December 31,
1995. The Company and its subsidiaries currently have a maximum line of credit
totaling $2,350,000, of which $650,000 was available at March 31, 1996. This
line is scheduled to expire in June 1996. The Company expects to negotiate a
renewal on approximately 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 increased in the current period over the first quarter of 1995.
As rapid change in software technology continues, the Company will fund further
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'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 and raise additional capital. 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> 10
PART II
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits - None
(b) Reports on Form 8-K - None
<PAGE> 11
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)
5/13/96 /s/ Alfred C. Angelone
- - ------------ ------------------------------
(Date) (Signature)
Alfred C. Angelone
Chief Executive Officer
5/13/96 /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 CONDENSED
CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996 CONDENSED CONSOLIDATED INCOME
STATEMENT FOR THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 93,601
<SECURITIES> 0
<RECEIVABLES> 6,521,753
<ALLOWANCES> 127,271
<INVENTORY> 223,203
<CURRENT-ASSETS> 7,387,792
<PP&E> 9,378,551
<DEPRECIATION> 4,739,582
<TOTAL-ASSETS> 20,223,680
<CURRENT-LIABILITIES> 6,871,239
<BONDS> 2,634,209
0
0
<COMMON> 39,173
<OTHER-SE> 10,062,059
<TOTAL-LIABILITY-AND-EQUITY> 20,223,680
<SALES> 6,724,663
<TOTAL-REVENUES> 6,724,663
<CGS> 1,045,945
<TOTAL-COSTS> 4,925,945
<OTHER-EXPENSES> 1,683,008
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124,071
<INCOME-PRETAX> (8,360)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,360)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,360)
<EPS-PRIMARY> (0.002)
<EPS-DILUTED> (0.002)
</TABLE>
