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: September 30, 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 September 30, 1997, there were 3,300,036 shares of Common Stock of
the Registrant outstanding.
<PAGE>
PART I
Item 1
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1,027,170 $ 674,239
Receivables - net 4,601,796 3,753,971
Computer hardware held for resale 77,730 87,750
Other current assets 781,474 710,130
----------- -----------
TOTAL CURRENT ASSETS 6,488,170 5,226,090
PROPERTY AND EQUIPMENT (less
depreciation of $3,463,519 and
$3,194,815, respectively) 4,239,827 4,352,408
SOFTWARE (less amortization of
$6,302,031 and $5,433,284, respectively) 3,829,938 4,657,840
COST EXCEEDING NET ASSETS ACQUIRED
(less amortization of $1,576,727
and $1,403,960, respectively) 753,348 873,205
OTHER ASSETS 1,227,236 1,520,435
----------- -----------
$16,538,519 $16,629,978
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Revolving credit and bank note $ 0 $ 795,000
Accounts payable 839,383 1,360,585
Accrued expenses 1,874,244 1,484,794
Other current liabilities 2,106,015 1,585,796
----------- -----------
TOTAL CURRENT LIABILITIES 4,819,642 5,226,175
LONG-TERM OBLIGATIONS, NET OF CURRENT
MATURITIES 2,884,446 3,011,976
DEFERRED TAXES 380,000 380,000
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common stock 40,954 39,842
Additional paid-in capital 7,393,165 7,344,564
Retained earnings 2,552,754 2,159,863
----------- -----------
9,986,873 9,544,269
Less: treasury stock, at cost 1,532,442 1,532,442
----------- -----------
8,454,431 8,011,827
----------- -----------
$16,538,519 $16,629,978
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
September 30,
----------------------------
1997 1996
----------------------------
(Unaudited)
REVENUE
<S> <C> <C>
Computer and add-on hardware $ 894,520 $ 1,104,993
Services 3,673,790 3,528,164
Product licenses 1,670,837 1,840,090
------------ ------------
NET REVENUE 6,239,147 6,473,247
COST OF REVENUE
Computer and add-on hardware 803,012 848,508
Services 2,181,041 2,318,764
Product licenses and development 795,310 899,324
------------ ------------
TOTAL COST OF REVENUE 3,779,363 4,066,596
EXPENSES
Marketing and sales 1,186,327 1,200,382
General and administrative 718,818 974,326
Amortization of goodwill 57,589 64,763
------------ ------------
TOTAL EXPENSES 1,962,734 2,239,471
EARNINGS FROM OPERATIONS 497,050 167,180
INTEREST EXPENSE - NET (78,822) (87,542)
OTHER EXPENSE (184,000) -
------------ ------------
EARNINGS BEFORE INCOME TAXES 234,228 79,638
INCOME TAXES 94,000 -
------------ ------------
NET EARNINGS $ 140,228 $ 79,638
============ ============
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
NET EARNINGS $.04 $.02
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 3,546,037 4,333,398
============ ============
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended
September 30,
----------------------------
1997 1996
----------------------------
(Unaudited)
REVENUE
<S> <C> <C>
Computer and add-on hardware $ 2,897,394 $ 3,189,092
Services 10,753,844 11,881,517
Product licenses 4,269,711 3,750,965
------------ ------------
NET REVENUE 17,920,949 18,821,574
COST OF REVENUE
Computer and add-on hardware 2,625,121 2,620,284
Services 6,198,880 7,659,746
Product licenses and development 2,343,262 2,538,927
------------ ------------
TOTAL COST OF REVENUE 11,167,263 12,818,957
EXPENSES
Marketing and sales 3,290,995 2,974,953
General and administrative 2,174,186 2,699,920
Amortization of goodwill 172,768 194,201
------------ ------------
TOTAL EXPENSES 5,637,949 5,869,074
EARNINGS FROM OPERATIONS 1,115,737 133,543
INTEREST EXPENSE - NET (276,846) (323,966)
OTHER EXPENSE (184,000) -
------------ ------------
EARNINGS (LOSS) BEFORE INCOME TAXES 654,891 (190,423)
INCOME TAXES 262,000 -
------------ ------------
NET EARNINGS (LOSS) $ 392,891 $ (190,423)
============ ============
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
NET EARNINGS $.11 ($.04)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 3,484,036 4,365,663
============ ============
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
----------------------------
1997 1996
----------------------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings (loss) $ 392,891 $ (190,423)
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Depreciation and amortization 1,318,638 1,766,338
Loss on write-down of investment 184,000 -
Changes in assets and liabilities (598,550) (306,547)
------------ ------------
Total adjustments 904,088 1,459,791
------------ ------------
Net cash provided by operating
activities 1,296,979 1,269,368
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (156,121) (253,895)
Additions to software (41,766) (849,313)
Reduction (increases) in sales-type
leases (34,268) 78,710
Other assets 123,599 (36,894)
------------ ------------
Net cash used for investing activities (108,556) (1,061,392)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in bank and
other notes (795,000) 100,000
Decrease in long-term debt (37,295) (331,033)
Issuance of common stock (3,197) 61,947
------------ ------------
Net cash provided by (used for)
financing activities (835,492) (169,086)
------------ ------------
CASH AND CASH EQUIVALENTS:
Net increase 352,931 38,890
Balance, beginning of year 674,239 404,026
------------ ------------
Balance, end of period $ 1,027,170 $ 442,916
============= ============
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
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 nine months ended
September 30, 1997 and September 30, 1996, respectively.
The results disclosed in the Condensed Consolidated Statement of Operations for
the nine months ended September 30, 1997 are not necessarily indicative of the
results expected for the full year.
Note 2 - Other Expense
- ----------------------
In 1990, the Company sold the assets of its BIT unit which provided computer
systems to the hardgoods distribution market segment. A portion of the
consideration paid consisted of a promissory note for $300,000 with a five-year
term at 6% interest (discounted value of $272,000 at 10% interest) and 10,000
shares of Class B Non-Voting Stock of the acquiring corporation, Distribution
Management Systems, Inc. (DMS). The DMS shares, originally valued at $334,000,
and included under the category of Other Assets on the Balance Sheet, were
written down to net realizable value of approximately $150,000 at September 30,
1997. The writedown of approximately $184,000 has been recorded as an other
expense for the period ended September 30, 1997.
Note 3 - Litigation
- -------------------
In August 1997, the Company settled the suit and countersuit with a customer
which were outstanding at December 31, 1996. The action was settled without
material adverse effect on the financial condition of the Company.
<PAGE>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4 - New Accounting Standards Not Yet Adopted
- -------------------------------------------------
In June 1997, the Financial Accounting Standards Board issued two new disclosure
standards. Results of operations and financial position will be unaffected by
implementation of these new standards.
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and display of
comprehensive income, its components, and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which supersedes SFAS No. 14, "Financial Reporting for Segments of
a Business Enterprise," establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas, and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
Both of these new standards are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Due to the recent issuance of these standards,
management has been unable to fully evaluate the impact, if any, they may have
on future financial statement disclosures.
<PAGE>
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.
Results of Operations
Third Quarter of 1997
compared to
Third Quarter of 1996
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1997 1996 Amount Percentage
---- ---- ------ ----------
Computer and add-on
hardware $ 894 $ 1,105 $ (211) (19%)
Services 3,674 3,528 146 4%
Product licenses 1,671 1,840 (169) (9%)
-------- -------- -------- --------
Net revenue $ 6,239 $ 6,473 $ (234) (4%)
========= ======== ======== ========
REVENUE
Net revenue. The Company designs and develops proprietary enterprise and
point-solution software for the electronic time and labor recording market, for
catalog direct marketers, and for the automotive and legal markets. The
Company's revenues are derived from the sale of third party computer and add-on
hardware, from the licensing of the Company's software products, and from client
service and support. The Company's total revenues decreased by approximately
$234,000, or 4%, for the quarter ended September 30, 1997, compared to the
quarter ended
<PAGE>
Item 2
- continued -
September 30, 1996. Revenue from existing businesses increased by approximately
$1,470,000, or 31% for the period, when approximately $1,710,000 in revenue from
the Company's international trade product line, which was sold in December 1996,
is excluded from the third quarter results for 1996.
Computer and add-on hardware. Hardware revenues are derived from the resale
of third-party hardware products to the Company's clients in conjunction with
the licensing of the Company's software. Hardware revenues decreased by
approximately $211,000, or 19%, for the three months ended September 30, 1997,
compared to the same period in 1996. Hardware revenue from existing businesses
increased by approximately $276,000, or 45% for the period, when approximately
$487,000 in hardware revenue from the Company's international trade product line
is excluded from the third quarter results for 1996. The increase in hardware
revenues from existing businesses was due primarily to the increase of hardware
unit sales accompanying increased product license sales.
Services. Services are comprised of fees generated from training,
consulting, and ongoing client support provided under self-renewing maintenance
agreements. Service revenues increased by approximately $146,000, or 4%, for the
three months ended September 30, 1997, compared to the three months ended
September 30, 1996. Service revenue from existing businesses increased by
approximately $1,028,000, or 39%, for the period, when compared to the third
quarter of 1996, and the service revenue from the international trade product
line of approximately $882,000 for the 1996 period is eliminated. The change was
due to increases in software license revenues which were accompanied by client
requirements for training and consulting services, and to the increase in
support revenues as a result of a larger installed client base.
Product licenses. The Company's software license revenues are derived
primarily from the licensing of the Company's enterprise and point-solution
products. Software license revenues decreased by approximately $169,000, or 9%,
for the third quarter of 1997, compared to the same period in 1996. Product
license revenue from existing businesses increased by approximately $170,000, or
11%, for the period, when compared to the third quarter of 1996, and the product
license revenue from the international trade product line of approximately
$339,000 for the 1996 period is eliminated. The increase in dollar amount was
primarily due to increased market acceptance of the Company's software products,
and the increased capacity created by growth in the Company's direct sales force
and marketing efforts.
<PAGE>
Item 2
- continued -
COST OF REVENUE
Computer and add-on hardware. Cost of hardware revenues consists primarily
of the costs of third-party hardware products. Cost of hardware revenues
decreased by approximately $46,000, or 5%, for the three months ended September
30, 1997, compared to the prior period. The cost of hardware revenue from
existing businesses increased by approximately $300,000, or 60%, when
approximately $346,000 in cost of hardware from the Company's international
trade product line is excluded from the third quarter results for 1996. The
increase in dollar amount for the cost of hardware revenues for the three months
ended September 30, 1997 was due primarily to increased unit sales of hardware
products accompanying increased product license sales and a decrease in gross
margin on hardware product sales as highlighted below.
The gross margin percentage for hardware sales decreased to 10% for the
three months ended September 30, 1997, from 23%, in the same period in 1996.
Margins on computer and add-on hardware do fluctuate based on the mix of
computer and ancillary hardware products sold. Accordingly, the Company expects
hardware gross margins to continue to fluctuate in the future. The Company
continues to direct its efforts toward building service and license revenues to
offset the historical decline in hardware revenue and margins.
Services. Cost of services consists of the costs incurred in providing
client training, consulting, and ongoing support as well as other client
service-related expenses. Cost of services decreased by approximately $138,000
for the three months ended September 30, 1997, compared to the third quarter of
1996. The decrease reflects the elimination of the cost of service related to
the international trade product line which was sold in December 1996. The gross
margin percentage for services for the third quarter of 1997 increased to
approximately 41% from 34% of revenue from services in the third 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 licenses and development. Cost of software license revenues
consists of the costs of amortization of capitalized software costs, and the
costs of sublicensing third-party software products. The amount also includes
the expenses associated with the development of new products and the enhancement
of existing products (net of capitalized software costs), which consist
primarily of employee salaries, benefits, and associated overhead costs. Cost of
software license revenues and development decreased by approximately $104,000
for the quarter ended September 30, 1997, compared to the same period in 1996.
The change primarily reflects the elimination of the expenses related to the
international trade product line. The cost of product licenses as a percentage
of product license revenue may fluctuate from period to period due to the mix of
sales of third-party software products in each
<PAGE>
Item 2
- continued -
period contrasted with certain fixed expenses such as the amortization of
capitalized software.
EXPENSES
Marketing and sales. Marketing and sales expenses consist primarily of
employee salaries, benefits, commissions and associated overhead costs, and the
cost of marketing programs such as direct mailings, trade shows, seminars, and
related communication costs. Sales and marketing expenses remained approximately
the same for the quarter ended September 30, 1997, compared to the third quarter
in 1996. The change in sales and marketing expenses primarily reflects increases
in sales staffing and the higher sales commissions associated with increased
revenues, offset by the elimination of expenses related to the international
trade product line.
General and administrative. General and administrative expenses consist
primarily of employee salaries and benefits for administrative, executive, and
finance personnel and associated overhead costs, as well as consulting,
accounting, and legal expenses. General and administrative expenses decreased by
approximately $256,000, or 26%, for the three months ended September 30, 1997,
compared to the same period in 1996. The change primarily reflects the
elimination of the expenses related to the international trade product line and
the Company's efforts to leverage its existing infrastructure.
Net earnings for the third quarter of 1997 were approximately $140,000, as
compared to net earnings of approximately $80,000 for the third quarter of 1996.
The change resulted from an increase in earnings from operations of
approximately $330,000, a decrease in net interest expense of approximately
$9,000, partially offset by other expense of $184,000 and an increase in income
tax expense of $94,000.
<PAGE>
Item 2
- continued -
Nine Months Ended September 30, 1997
compared to
Nine Months Ended September 30, 1996
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1997 1996 Amount Percentage
---- ---- ------ ----------
Computer and add-on
hardware $ 2,897 $ 3,189 $ (292) (9%)
Services 10,754 11,882 (1,128) (9%)
Product licenses 4,270 3,751 519 14%
-------- -------- -------- --------
Net revenue $17,921 $18,822 $ (901) (5%)
======== ======== ======== ========
REVENUE
Net revenue. The Company's net revenues decreased by approximately
$901,000, or 5%, for the period ended September 30, 1997, compared to the period
ended September 30, 1996. Revenue from existing businesses increased by
approximately $3,653,000, or 26% for the period, when approximately $4,554,000
in revenue from the Company's international trade product line, which was sold
in December 1996, is excluded from the results for the first nine months of
1996.
Computer and add-on hardware. Hardware revenues decreased by approximately
$292,000, or 9%, for the nine months ended September 30, 1997, compared to the
same period in 1996. Hardware revenue from existing businesses increased by
approximately $688,000, or 31% for the period, when approximately $980,000 in
hardware revenue from the Company's international trade product line is excluded
from the results for the first nine months of 1996. The increase in hardware
revenues was due primarily to the increase of hardware unit sales accompanying
increased product license sales.
Services. Service revenues decreased by approximately $1,128,000, or 9%,
for the nine months ended September 30, 1997, compared to the nine months ended
September 30, 1996. Service revenue from existing businesses increased by
approximately $1,582,000, or 17%, for the period when compared to the first nine
months of 1996 and revenue from the international trade product line of
approximately $2,710,000 is
<PAGE>
Item 2
- continued -
eliminated. The change was due to increases in software license revenues that
were accompanied by client requirements for training and consulting services.
Product licenses. Software license revenues increased by approximately
$519,000, or 14%, for the first nine months of 1997 compared to the same period
in 1996. Product license revenue from existing businesses increased by
approximately $1,383,000, or 48%, for the period when compared to the first nine
months of 1996 and software license revenue from international trade product
line of approximately $864,000 is eliminated. The increase in dollar amount was
primarily due to increased market acceptance of the Company's software products,
and the increased capacity created by growth in the Company's direct sales force
and marketing efforts.
COST OF REVENUE
Computer and add-on hardware. Cost of hardware revenues remained
approximately the same for the nine months ended September 30, 1997, compared to
the prior period. The change in dollar amount for the cost of hardware revenues
for the nine months ended September 30, 1997 was due primarily to increased unit
sales of hardware products accompanying increased product license sales coupled
with a decrease in gross margin on hardware product sales as highlighted below.
These increases in cost were offset by the elimination of the cost of hardware
related to the international trade product line which was sold in December 1996.
The gross margin percentage for hardware sales decreased to 9% for the nine
months ended September 30, 1997, from 18%, in the same period in 1996. Margins
on computer and add-on hardware do fluctuate based on the mix of computer and
ancillary hardware products sold. Accordingly, the Company expects hardware
gross margins to continue to fluctuate in the future. The Company continues to
direct its efforts toward building service and license revenues to offset the
historical decline in hardware revenue and margins.
Services. Cost of services decreased by approximately $1,461,000, or 19%,
for the nine months ended September 30, 1997, compared to the first nine months
of 1996. The decrease reflects the elimination of the cost of service related to
the international trade product line. The gross margin percentage for services
for the first nine months of 1997 increased to approximately 42% from 35% of
revenue from services in the first nine months 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 licenses and development. Cost of software license revenues and
development decreased by approximately $196,000, or 8%, for the
<PAGE>
Item 2
- continued -
period ended September 30, 1997, compared to the same period in 1996. The change
primarily reflects the elimination of the expenses related to the international
trade product line. The cost of product licenses as a percentage of product
license revenue may fluctuate from period to period due to the mix of sales of
third-party software products in each period contrasted with certain fixed
expenses such as the amortization of capitalized software.
EXPENSES
Marketing and sales. Marketing and sales expenses increased by
approximately $316,000, or 11%, for the period ended September 30, 1997,
compared to the first nine months in 1996. The change in sales and marketing
expenses primarily reflects increases in sales staffing and the higher sales
commissions associated with increased revenues, partially offset by the expenses
related to the international trade product line, which was sold in December
1996.
General and administrative. General and administrative expenses decreased
by approximately $526,000, or 19%, for the nine months ended September 30, 1997,
compared to the same period in 1996. The change primarily reflects the
elimination of the expenses related to the international trade product line and
the Company's efforts to leverage its existing infrastructure.
Net earnings for the nine months ended September 30, 1997 was approximately
$393,000, as compared to a net loss of approximately $190,000 for the comparable
period in 1996. The change resulted from an increase in earnings from operations
of approximately $982,000, and a decrease in net interest expense of
approximately $47,000, which were partially offset by an increase in other
expense of $184,000 and income tax expense of approximately $262,000.
<PAGE>
Liquidity and Capital Resources
The Company had total cash and cash equivalents at September 30, 1997 of
approximately $1,027,000, an increase of approximately $353,000 from December
31, 1996. The Company and its subsidiaries currently have a maximum line of
credit totaling $2,000,000, all of which was available at September 30, 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 $808,000, or 95%, in the first nine
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. Large orders for the Company's products
often have a lengthy sales cycle while the customer evalutes and receives
approvals for the purchase of the products. It may be difficult to accurately
predict the sales cycle of any large order. If one or more large orders fail to
close as forecasted in a fiscal quarter, the Company's revenues and operating
results could be materially adversely affected. In addition, 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.
The Company's future financial performance is also dependent in large part on
the successful development, introduction, and customer acceptance of new and
enhanced versions of its software products. Due to the rapid change in vendor
hardware platforms, operating systems, and updated versions, the complexity and
expense of developing, testing, and maintaining the Company's products has
increased. There can be no assurance that these efforts will be successful or
result in significant product enhancements.
<PAGE>
Liquidity and Capital Resources
- continued -
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.
New Accounting Standards Not Yet Adopted
- ----------------------------------------
In June 1997, the Financial Accounting Standards Board issued two new disclosure
standards. Results of operations and financial position will be unaffected by
implementation of these new standards.
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and display of
comprehensive income, its components, and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which supersedes SFAS No. 14, "Financial Reporting for Segments of
a Business Enterprise," establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas, and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
Both of these new standards are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Due to the recent issuance of these standards,
management has been unable to fully evaluate the impact, if any, they may have
on future financial statement disclosures.
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits -
The following exhibits are filed with this report:
27 Financial Data Schedule.
(b) Reports on Form 8-K - None.
<PAGE>
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)
11/13/97 /s/ Alfred C. Angelone
- ------------ ------------------------------
(Date) (Signature)
Alfred C. Angelone
Chief Executive Officer
11/13/97 /s/ Terrence C. McCarthy
- ------------ ------------------------------
(Date) (Signature)
Terrence C. McCarthy
Vice President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1997 CONDENSED
CONSOLIDATED INCOME STATEMENT FOR NINE MONTHS ENDED SEPTEMBER 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,027,170
<SECURITIES> 0
<RECEIVABLES> 4,728,282
<ALLOWANCES> 126,486
<INVENTORY> 77,730
<CURRENT-ASSETS> 6,488,170
<PP&E> 7,703,346
<DEPRECIATION> 3,463,519
<TOTAL-ASSETS> 16,538,519
<CURRENT-LIABILITIES> 4,819,642
<BONDS> 2,884,446
<COMMON> 40,954
0
0
<OTHER-SE> 8,413,477
<TOTAL-LIABILITY-AND-EQUITY> 16,538,519
<SALES> 17,920,949
<TOTAL-REVENUES> 17,920,949
<CGS> 2,625,121
<TOTAL-COSTS> 11,167,263
<OTHER-EXPENSES> 5,821,949
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 276,846
<INCOME-PRETAX> 654,891
<INCOME-TAX> 262,000
<INCOME-CONTINUING> 392,891
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 392,891
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
