<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, 1997 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.
Yes: X No:
----- -----
As of March 31, 1997, there were 3,292,963 shares of Common Stock of the
Registrant outstanding.
<PAGE> 2
PART I
Item 1
<TABLE>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 763,838 $ 674,239
Receivables - net 3,527,869 3,753,971
Computer hardware held for resale 91,948 87,750
Other current assets 781,210 710,130
----------- -----------
TOTAL CURRENT ASSETS 5,164,865 5,226,090
PROPERTY AND EQUIPMENT (less
depreciation of $3,268,982 and
$3,194,815, respectively) 4,274,663 4,352,408
SOFTWARE (less amortization of
$5,720,851 and $5,433,284,
respectively) 4,410,355 4,657,840
COST EXCEEDING NET ASSETS ACQUIRED
(less amortization of $1,460,888
and $1,403,960, respectively) 869,188 873,205
OTHER ASSETS 1,487,239 1,520,435
----------- -----------
$16,206,310 $16,629,978
=========== ===========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 3
<TABLE>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit and bank note $ 600,000 $ 795,000
Accounts payable 1,285,631 1,360,585
Accrued expenses 1,426,576 1,484,794
Other current liabilities 1,485,725 1,585,796
----------- -----------
TOTAL CURRENT LIABILITIES 4,797,932 5,226,175
LONG-TERM OBLIGATIONS, NET OF CURRENT
MATURITIES 2,922,122 3,011,976
DEFERRED TAXES 380,000 380,000
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common stock 40,884 39,842
Additional paid-in capital 7,396,431 7,344,564
Retained earnings 2,201,383 2,159,863
----------- -----------
9,638,698 9,544,269
Less: treasury stock, at cost 1,532,442 1,532,442
----------- -----------
8,106,256 8,011,827
----------- -----------
$16,206,310 $16,629,978
=========== ===========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 4
<TABLE>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
March 31,
----------------------------
1997 1996
----------------------------
(Unaudited)
<S> <C> <C>
REVENUE
Computer and add-on hardware $ 641,436 $1,273,254
Services 3,240,315 4,684,531
Product licenses 1,198,005 766,877
---------- ----------
NET REVENUE 5,079,756 6,724,662
COST OF REVENUE
Computer and add-on hardware 552,688 1,045,208
Services 1,834,684 3,054,509
Product licenses and development 735,762 826,227
---------- ----------
TOTAL COST OF REVENUE 3,123,134 4,925,944
EXPENSES
Marketing and sales 1,019,295 845,824
General and administrative 711,215 772,463
Amortization of goodwill 56,928 64,720
---------- ----------
TOTAL EXPENSES 1,787,438 1,683,007
EARNINGS FROM OPERATIONS 169,184 115,711
INTEREST EXPENSE - NET (111,664) (124,071)
---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES 57,520 (8,360)
INCOME TAXES 16,000 -
---------- ----------
NET EARNINGS (LOSS) $ 41,520 $ (8,360)
========== ==========
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
NET EARNINGS $.011 ($.002)
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 3,660,060 4,125,565
========== ==========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 5
<TABLE>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31,
----------------------------
1997 1996
----------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 41,520 $ (8,360)
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Depreciation and amortization 421,159 595,839
Changes in assets and liabilities (114,898) (1,092,636)
--------- -----------
Total adjustments 306,261 (496,797)
--------- -----------
Net cash provided by (used for)
operating activities 347,781 (505,157)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (12,740) (61,070)
Additions to software (40,082) (309,483)
Reduction of sales-type leases 47,491 28,834
Other assets 36,349 (30,645)
--------- -----------
Net cash provided by (used for)
investing activities 31,018 (372,364)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in bank and
other notes (195,000) 675,000
Reduction in long-term debt (94,200) (107,904)
--------- -----------
Net cash provided by (used for)
financing activities (289,200) 567,096
--------- -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) 89,599 (310,425)
Balance, beginning of year 674,239 404,026
--------- -----------
Balance, end of period $ 763,838 $ 93,601
========= ===========
</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, 1997 and March 31, 1996, respectively.
The results disclosed in the Condensed Consolidated Statement of Operations for
the three months ended March 31, 1997 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
-----------------------------------------------------------
In addition to the historical information contained herein, the discussions
contained in this document include forward-looking statements. By way of
example, the discussions include statements regarding revenues, gross margins,
future marketing efforts, and potential acquisitions. Such statements involve a
number of risks and uncertainties, including but not limited to those discussed
below and those identified from time to time in the Company's filings with the
Securities and Exchange Commission. These risks and uncertainties could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements. The Company
assumes no obligation to update these forward-looking statements to reflect
events or circumstances arising after the date hereof.
<TABLE>
Results of Operations
First Quarter of 1997
compared to
First Quarter of 1996
<CAPTION>
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1997 1996 Amount Percentage
---- ---- ------ ----------
<S> <C> <C> <C> <C>
Computer and add-on
hardware $ 641 $1,273 $ (632) (50%)
Services 3,240 4,685 (1,445) (31%)
Product licenses 1,198 767 431 56%
------ ------ ------- ---
Net revenue $5,079 $6,725 $(1,646) (24%)
====== ====== ======= ===
Revenue net of
hardware costs $4,527 $5,679 $(1,152) (20%)
====== ====== ======= ===
</TABLE>
The decrease of approximately $632,000 in computer and add-on hardware revenue
for the first quarter of 1997, compared to the first quarter of 1996, resulted
from decreases in hardware revenue from the international trade product line
which was sold in December 1996 along with decreases in hardware revenue from
the electronic time recording and the direct marketing systems product lines.
This decrease was partially offset by increases in computer and add-on hardware
revenue from the tire and legal systems product lines.
<PAGE> 8
Item 2
- continued -
Hardware margins decreased to approximately 14% in the first quarter of 1997,
from approximately 18% in the same period in 1996. 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 revenues to offset the
historical downward trend in hardware revenue and margins.
Revenue from services decreased by approximately $1,445,000 or 31%. The decrease
in revenue from services resulted from the sale of the international trade
product line in 1996 along with a decrease in service revenue from the
electronic time recording product line. This decrease was partially offset by
increases in revenue from services by the tire, legal systems, and direct
marketing systems product lines. Gross margin from services in the first
quarter of 1997 increased to approximately 43% from 35% of revenue from
services in the first quarter of 1996. The Company's revenue and margin from
services fluctuate from period to period due to changes in the mix of contracts
and projects.
Product license revenues increased by approximately $431,000 or 56% in the first
quarter of 1997 compared to the same period in 1996. The change was a result of
increases from the electronic time recording and tire systems product lines,
partially offset by decreases from the direct marketing and legal systems
product lines and the sale of the international trade product line.
Revenue net of hardware costs decreased by approximately $1,152,000 or 20% for
the three months ended March 31, 1997, compared to the same period in the prior
year. Revenue net of hardware costs decreased due to the sale of the
international trade product line along with decreases in revenue net of hardware
costs for all Company product lines except tire systems.
Marketing and sales expenses increased by approximately $173,000 or 21%. This
change primarily reflects increases in sales staffing and increased commission
expenses for all existing Company product lines, partially offset by the
expenses related to the international trade product line, which was sold in
1996. General and administrative expenses decreased by approximately $61,000 or
8%, compared to the first quarter of 1996. The change is primarily the result of
the elimination of the general and administrative expenses of the international
trade product line sold in December 1996.
<PAGE> 9
Item 2
- continued -
Pretax income from operations was approximately $169,000 for the first quarter
of 1997, compared to pretax earnings from operations of approximately $116,000
for the first quarter of 1996. The increase in earnings resulted from an
increase in contribution from the electronic time recording, tire, and legal
systems product lines, partially offset by a decrease in contribution from the
direct marketing systems product line, and the elimination of the contribution
from the international trade product line which was sold in 1996.
Net earnings for the first quarter of 1997 were approximately $42,000, as
compared to a net loss of approximately $8,000 for the first quarter of 1996.
The change resulted from an increase in earnings from operations of
approximately $53,000, a decrease in net interest expense of approximately
$13,000, partially offset by an increase in income tax expense of $16,000.
<PAGE> 10
Liquidity and Capital Resources
The Company had total cash and cash equivalents at March 31, 1997 of
approximately $764,000, an increase of approximately $90,000 from December 31,
1996. The Company and its subsidiaries currently have a maximum line of credit
totaling $2,000,000, of which approximately $1,265,000 was available at March
31, 1997.
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.
Over the past two years, the Company has expended significant working capital on
the development of a new generation of software products. The level of these
expenditures decreased by approximately $264,000 or 87% in the first three
months of 1997 compared to the same period in 1996. However, 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 primarily from its cash
from operations and bank debt.
The Company has experienced significant fluctuations in its quarterly operating
results and anticipates such fluctuations in the future. Quarterly revenues and
operating results depend on the volume and timing of orders received during the
quarter which are difficult to forecast. The Company typically receives a
substantial portion of its product orders in the last month of the quarter.
Orders are shipped as received and, as a result, the Company often has little or
no backlog except for support and service revenue. The Company acknowledges the
potential adverse impact that such fluctuations and general 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> 11
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits -
The following exhibit is filed with this report:
27 Financial Data Schedule
(b) Reports on Form 8-K
On January 15, 1997, the Company announced that it had completed a
corporate reorganization resulting in the spin-off of the
Company's wholly owned subsidiary, TradePoint Systems Inc., to
Christopher J. Crane, the Company's former President.
<PAGE> 12
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)
5/13/97 /s/ Alfred C. Angelone
- ------------ ------------------------------
(Date) (Signature)
Alfred C. Angelone
Chief Executive Officer
5/13/97 /s/ Terrence C. McCarthy
- ------------ ------------------------------
(Date) (Signature)
Terrence C. McCarthy
Vice President and Treasurer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1997 CONDENSED CONSOLIDATED
INCOME STATEMENT FOR THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 763,838
<SECURITIES> 0
<RECEIVABLES> 3,636,557
<ALLOWANCES> 108,688
<INVENTORY> 91,948
<CURRENT-ASSETS> 5,164,865
<PP&E> 7,543,645
<DEPRECIATION> 3,268,982
<TOTAL-ASSETS> 16,206,310
<CURRENT-LIABILITIES> 4,797,932
<BONDS> 2,922,122
0
0
<COMMON> 40,884
<OTHER-SE> 8,065,372
<TOTAL-LIABILITY-AND-EQUITY> 16,206,310
<SALES> 5,079,756
<TOTAL-REVENUES> 5,079,756
<CGS> 552,688
<TOTAL-COSTS> 3,123,134
<OTHER-EXPENSES> 1,787,438
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 111,664
<INCOME-PRETAX> 57,520
<INCOME-TAX> 16,000
<INCOME-CONTINUING> 41,520
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,520
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0,01
,
</TABLE>
