<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, 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 June 30, 1996, there were 3,854,121 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,
1996 1995
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 464,078 $ 404,026
Receivables - net 5,064,323 5,085,172
Computer hardware held for resale 199,606 238,624
Other current assets 877,308 748,221
----------- -----------
TOTAL CURRENT ASSETS 6,605,315 6,476,043
PROPERTY AND EQUIPMENT (less
depreciation of $4,869,671 and
$4,612,375, respectively) 4,699,071 4,705,105
SOFTWARE (less amortization of
$8,567,974 and $7,689,103,
respectively) 5,972,119 6,193,625
COST EXCEEDING NET ASSETS ACQUIRED
(less amortization of $1,492,187
and $1,362,750, respectively) 1,408,233 1,537,673
OTHER ASSETS 617,006 602,755
----------- -----------
$19,301,744 $19,515,201
=========== ===========
</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,
1996 1995
------------ ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Revolving credit and bank note $ 1,575,000 $ 1,025,000
Accounts payable 1,865,270 1,157,573
Accrued expenses 1,483,422 2,292,514
Other current liabilities 1,299,406 1,606,063
----------- -----------
TOTAL CURRENT LIABILITIES 6,223,098 6,081,150
LONG-TERM OBLIGATIONS, NET OF CURRENT
MATURITIES 2,560,168 2,707,459
DEFERRED TAXES 617,000 617,000
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common stock 39,839 39,173
Additional paid-in capital 7,742,956 7,681,675
Retained earnings 2,539,125 2,809,186
----------- -----------
10,321,920 10,530,034
Less: treasury stock, at cost 420,442 420,442
----------- -----------
9,901,478 10,109,592
----------- -----------
$19,301,744 $19,515,201
=========== ===========
</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,
----------------------------
1996 1995
----------------------------
(Unaudited)
<S> <C> <C>
REVENUE
Computer and add-on hardware $ 810,845 $2,732,919
Services 3,668,822 4,095,822
Product licenses 1,143,996 1,504,817
---------- ----------
NET REVENUE 5,623,663 8,333,558
COST OF REVENUE
Computer and add-on hardware 726,568 2,369,445
Services 2,286,473 2,621,334
Product licenses and development 813,376 788,410
---------- ----------
TOTAL COST OF REVENUE 3,826,417 5,779,189
EXPENSES
Marketing and sales 928,746 1,144,630
General and administrative 953,131 854,422
Amortization of goodwill 64,718 63,887
---------- ----------
TOTAL EXPENSES 1,946,595 2,062,939
EARNINGS (LOSS) FROM OPERATIONS (149,349) 491,430
INTEREST EXPENSE - NET (112,352) (135,575)
---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES (261,701) 355,855
INCOME TAXES - 252,000
---------- ----------
NET EARNINGS (LOSS) $ (261,701) $ 103,855
========== ==========
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
NET EARNINGS $ (.06) $ .02
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 4,287,199 4,222,620
========== ==========
</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,
----------------------------
1996 1995
----------------------------
(Unaudited)
<S> <C> <C>
REVENUE
Computer and add-on hardware $ 2,084,099 $ 3,847,034
Services 8,353,353 8,236,703
Product licenses 1,910,875 2,758,707
----------- -----------
NET REVENUE 12,348,327 14,842,444
COST OF REVENUE
Computer and add-on hardware 1,771,776 3,233,417
Services 5,340,983 5,342,473
Product licenses and development 1,639,604 1,479,767
----------- -----------
TOTAL COST OF REVENUE 8,752,363 10,055,657
EXPENSES
Marketing and sales 1,774,570 2,220,718
General and administrative 1,725,593 1,698,787
Amortization of goodwill 129,439 129,440
----------- -----------
TOTAL EXPENSES 3,629,602 4,048,945
EARNINGS (LOSS) FROM OPERATIONS (33,638) 737,842
INTEREST EXPENSE - NET (236,423) (242,784)
----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES (270,061) 495,058
INCOME TAXES - 350,000
----------- -----------
NET EARNINGS (LOSS) $ (270,061) $ 145,058
=========== ===========
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
NET EARNINGS $ (.06) $ .03
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 4,198,337 4,213,901
=========== ===========
</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
March 31,
----------------------------
1996 1995
----------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (270,061) $ 145,058
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 1,204,718 1,110,502
Changes in assets and liabilities (440,971) (297,890)
---------- ----------
Total adjustments 763,747 812,612
---------- ----------
Net cash provided by
operating activities 493,686 957,670
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (248,004) (154,914)
Additions to software (599,733) (638,098)
Reduction of sales-type leases 59,678 83,990
Other assets (31,910) 5,000
---------- ----------
Net cash used for investing
activities (819,969) (704,022)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank and other notes 550,000 225,000
Reduction in long-term debt (225,612) (271,033)
Issuance of common stock 61,947 -
---------- ----------
Net cash provided by (used for)
financing activities 386,335 (46,033)
---------- ----------
CASH AND CASH EQUIVALENTS:
Net increase 60,052 207,615
Balance, beginning of year 404,026 10,381
---------- ----------
Balance, end of period $ 464,078 $ 217,996
========== ==========
</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 six months ended
June 30, 1996 and June 30, 1995, respectively.
The results disclosed in the Condensed Consolidated Income Statement for the six
months ended June 30, 1996 are not necessarily indicative of the results
expected for the full year.
<PAGE> 8
Item 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations
-----------------------------------------------------------
<TABLE>
Results of Operations
Second Quarter of 1996
compared to
Second Quarter of 1995
<CAPTION>
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1996 1995 Amount Percentage
---- ---- ------ ----------
<S> <C> <C> <C> <C>
Computer and add-on
hardware $ 811 $2,733 $(1,922) (70)%
Services 3,669 4,096 (427) (10)%
Product licenses 1,144 1,505 (361) (24)%
------ ------ ------- --
Net revenue $5,624 $8,334 $(2,710) (33)%
====== ====== ======= ==
Revenue net of
hardware costs $4,897 $5,964 $(1,067) (18)%
====== ====== ======= ==
</TABLE>
The decrease of approximately $1,922,000 in computer and add-on hardware revenue
for the second quarter of 1996, compared to the second quarter of 1995, resulted
from decreases in hardware revenue from all Company product lines.
Hardware margins decreased to approximately 10% in the second quarter of 1996,
from approximately 13% 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 decreased by approximately $427,000 or 10%. Gross margin
from services increased to approximately 38% from 36% 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> 9
Item 2
- continued -
Product license revenues decreased by approximately $361,000 or 24% in the
second 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 decreased by approximately $1,067,000 or 18% for
the three months ended June 30, 1996, compared to the same period in the prior
year. Revenue net of hardware costs increased in the tire and direct marketing
systems product lines while revenue net of hardware costs decreased for the
international trade, electronic time recording, and legal systems product lines.
Marketing and sales expenses decreased by approximately $216,000 or 19%. This
change primarily reflects sales staffing decreases due to turnover and reduced
commission expenses for the electronic time recording product line. Commission
expenses decreased as a result of the lower level of revenue for this product
line in the three months ended June 30, 1996, when compared to the same period
in 1995. General and administrative expenses increased by approximately $99,000
or 12%, compared to the second quarter of 1995. The change is a result of
increases in property taxes for Company-owned facilities and increased expense
for computer equipment rental and maintenance for the catalog direct marketing
systems product line.
Pretax loss from operations was approximately $149,000 for the second quarter of
1996, compared to pretax earnings from operations of approximately $491,000 for
the second quarter of 1995. The decrease in earnings resulted from a decrease in
contribution from the electronic time recording and direct marketing systems
product lines, partially offset by increases in contribution from the
international trade, tire, and legal systems product lines.
Net loss for the second quarter of 1996 was approximately $262,000, as compared
to net earnings of approximately $104,000 for the second quarter of 1995. The
change resulted from a decrease in earnings from operations of approximately
$641,000, partially offset by a decrease in net interest and income tax expense
of approximately $23,000 and $252,000, respectively.
<PAGE> 10
Item 2
- continued -
<TABLE>
Six Months Ended June 30, 1996
compared to
Six Months Ended June 30, 1995
<CAPTION>
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1996 1995 Amount Percentage
---- ---- ------ ----------
<S> <C> <C> <C> <C>
Computer and add-on
hardware $ 2,084 $ 3,847 $(1,763) (46)%
Services 8,353 8,236 117 1 %
Product licenses 1,911 2,759 (848) (31)%
------- ------- ------- --
Net revenue $12,348 $14,842 $(2,494) (17)%
======= ======= ======= ==
Revenue net of
hardware costs $10,576 $11,609 $(1,033) (9)%
======= ======= ======= ==
</TABLE>
The decrease of approximately $1,763,000 in computer and add-on hardware revenue
for the first six months of 1996, compared to the first six months of 1995,
resulted primarily from decreases in hardware revenue from all Company product
lines.
Hardware margins decreased to approximately 15% in the first six months of 1996,
from approximately 16% 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 remained approximately the same as the prior year. Service
revenue increases for the electronic time recording, tire, and direct marketing
systems product lines were offset by revenue decreases in the international
trade and legal systems product lines. Gross margin from services increased to
approximately 36% from 35%. 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 -
Product license revenue decreased by approximately $848,000 or 31% in the first
six months of 1996 compared to the same period in 1995. The change was a result
of revenue decreases from the international trade systems and electronic time
recording product lines, partially offset by increases from the tire, legal, and
direct marketing systems product lines.
Revenue net of hardware cost decreased by approximately $1,033,000 or 9%, in the
six months ended June 30, 1996 compared to the same period in the prior year.
Revenue net of hardware costs increased in the tire and direct marketing systems
product lines, while revenue net of hardware costs decreased for the electronic
time recording, international trade, and legal systems product lines.
Marketing and sales expenses decreased by approximately $446,000 or 20%.
This change primarily reflects sales staffing decreases due to turnover and
reduced commission expenses for the electronic time recording product line.
Commission expenses decreased as a result of the lower level of revenue for this
product line in the six months ended June 30, 1996, when compared to the same
period in 1995. General and administrative expenses increased by approximately
$27,000 or 2%, compared to the first six months of 1995.
Pretax loss from operations was approximately $34,000 for the first six months
of 1996, compared to earnings from operations of approximately $738,000 for the
first six months of 1995. The decrease in earnings resulted from a decrease in
contribution from the Company's electronic time recording and direct marketing
systems product lines. This decrease was partially offset by increases in
contribution from the Company's tire and legal systems product lines.
Net loss for the six months ended June 30, 1996 was approximately $270,000, as
compared to net earnings of approximately $145,000 for the comparable period in
1995. The change resulted from a decrease in earnings from operations of
approximately $771,000, which was partially offset by a decrease in net interest
expense of approximately $6,000 and a decrease in income tax expense of
approximately $350,000.
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, 1996 of
approximately $464,000, an increase of approximately $6,000 from December 31,
1995. The Company and its subsidiaries currently have a maximum line of credit
totaling $2,350,000, of which approximately $109,000 was available at June 30,
1996. This line was renewed through June 1997 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 decreased by approximately $41,000 or 7% in the first six months of
1996 compared to the same period in 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> 13
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders.
----------------------------------------------------
On May 10, 1996, the Company held an Annual Meeting of Stockholders
(the "Annual Meeting") to vote on the following proposals:
1. To elect five (5) members to the Board of Directors. Nominees for
Director were: (a) Alfred C. Angelone; (b) Christopher J. Crane; (c) William
A. Kulok; (d) James P. O'Halloran; and (e) Gordon J. Rollert; and
2. To ratify and confirm the appointment of BDO Seidman, LLP as the
independent accountants for the Company for the fiscal year ending December 31,
1996 ("Proposal No. 2").
<TABLE>
Of the 3,916,662 shares of the Company's Common Stock of record as of
March 22, 1996 able to be voted at the Annual Meeting, a total of 3,144,083
shares were voted, or approximately 80.27% of the Company's issued and
outstanding shares of Common Stock entitled to vote on these matters. Each of
the proposals was adopted, with the vote totals as follows:
<CAPTION>
Shares
Shares Voting Shares
Proposal Voting For Against Abstaining
- -------- ---------- ------- ----------
<S> <C> <C> <C>
Proposal No. 1
--------------
(a) Alfred C. Angelone 3,088,395 4,093 51,595
(b) Christopher J. Crane 3,088,395 4,173 51,515
(c) William A. Kulok 3,118,895 4,173 21,015
(d) James P. O'Halloran 3,128,393 4,173 11,517
(e) Gordon J. Rollert 3,128,595 4,173 11,315
Proposal No. 2 3,090,125 41,204 12,754
--------------
</TABLE>
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)
8/09/96 /s/ Alfred C. Angelone
- ------------ ------------------------------
(Date) (Signature)
Alfred C. Angelone
Chief Executive Officer
8/09/96 /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 (A)
CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996 CONDENSED CONSOLIDATED
INCOME STATEMENT FOR SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 464,078
<SECURITIES> 0
<RECEIVABLES> 5,179,463
<ALLOWANCES> 115,141
<INVENTORY> 199,607
<CURRENT-ASSETS> 6,605,315
<PP&E> 9,568,742
<DEPRECIATION> 4,869,670
<TOTAL-ASSETS> 19,301,744
<CURRENT-LIABILITIES> 6,223,098
<BONDS> 2,560,168
<COMMON> 39,839
0
0
<OTHER-SE> 9,861,638
<TOTAL-LIABILITY-AND-EQUITY> 19,301,744
<SALES> 12,348,327
<TOTAL-REVENUES> 12,348,327
<CGS> 1,771,776
<TOTAL-COSTS> 8,752,363
<OTHER-EXPENSES> 3,629,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 236,423
<INCOME-PRETAX> (270,061)
<INCOME-TAX> 0
<INCOME-CONTINUING> (270,061)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (270,061)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
