United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period ended December 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission file number 0-28920
Access Solutions International, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 05-0426298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
650 Ten Rod Road
North Kingstown, RI 02852
(Address of principal executive offices)
(401) 295-2691
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
The number of shares of the issuer's Common Stock, $.0l par value, outstanding
as of January 15, 1998 was 3,963,940.
<PAGE>
Access Solutions International, Inc.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed balance sheets--December 31, 1997
(unaudited) and June 30, 1997 3
Condensed (unaudited) statements of operations --Three
months and six months ended December 31, 1997 and 1996 5
Condensed (unaudited) statements of cash flows -- Six
months ended December 31, 1997 and 1996 6
Notes to unaudited condensed financial
statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
Access Solutions International, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Access Solutions International, Inc.
Condensed Balance Sheets
December 31, June 30,
1997 1997
(Unaudited)
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $45,128 $1,889,446
Trade accounts receivable, net allowance for
doubtful accounts of $41,652 and $53,199 691,528 238,914
Inventories 414,254 461,812
Prepaid expenses and other current assets 146,754 183,159
------------- ------------
Total current assets 1,297,664 2,773,331
Fixed assets, net 375,270 328,309
Other assets:
Advances - PaperClip 1,418,632 529,052
Notes receivable - PaperClip 300,000 300,000
Deposits and other assets 42,905 49,527
Deferred acquisition costs 173,485 -
------------ ------------
Total other assets 1,935,022 878,579
------------ ------------
Total assets $3,607,956 $3,980,219
========== ==========
See notes to unaudited condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Access Solutions International, Inc.
Condensed Balance Sheets
December 31, June 30,
1997 1997
(Unaudited)
Liabilities and stockholders' equity
Current liabilities:
<S> <C> <C>
Notes payable to shareholder $282,368 $ -
Accounts payable 499,441 227,490
Current installments of capital lease obligations 19,659 25,257
Accrued expenses 148,196 143,227
Accrued salaries and wages 143,977 204,604
Deferred revenue-prepaid service contracts 462,609 329,841
------- -------
Total current liabilities 1,556,250 930,419
Capital lease obligations, excluding current installments - 6,716
-------------- -----
Total liabilities 1,556,250 937,135
Stockholders' equity:
Common stock, $.01 par value, 13,000,000
shares authorized, 3,965,199 39,652 39,652
shares issued
Additional paid-in capital 17,637,694 17,637,694
Accumulated deficit (15,607,584) (14,616,206)
------------ ------------
2,069,762 3,061,140
Treasury stock, at cost (1,259 shares) (18,056) (18,056)
-------- --------
Total stockholders' equity 2,051,706 3,043,084
---------- ---------
Total liabilities and stockholders' equity $3,607,956 $3,980,219
Note: The balance sheet at June 30, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to unaudited condensed financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Access Solutions International, Inc.
Condensed Statements of Operations (Unaudited)
For the Three Months For the Six Months
Ended December 31, Ended December 31,
1997 1996 1997 1996
Net sales:
<S> <C> <C> <C> <C>
Products $305,421 $109,527 $498,834 $281,988
Services 244,255 171,824 375,898 302,498
------- ------- ------- -------
Total net sales 549,676 281,351 874,732 584,486
------- ------- ------- -------
Cost of sales:
Products 74,489 33,940 212,938 54,252
Services 83,652 59,907 154,865 115,265
------ ------ ------- -------
Total cost of sales 158,141 93,847 367,803 169,517
------- ------ ------- -------
Gross profit 391,535 187,504 506,929 414,969
------- ------- ------- -------
Operating expenses:
General and administrative expense 280,094 477,181 563,144 754,132
Research and development expense 268,135 489,536 644,366 909,961
Selling expense 184,386 218,090 375,746 433,399
------- ------- ------- -------
Total operating expenses 732,615 1,184,807 1,583,256 2,097,492
------- --------- --------- ---------
Loss from operations (341,080) (997,303) (1,076,327) (1,682,523)
--------- --------- ----------- -----------
Other income and expenses:
Interest and other income 53,796 43,144 88,618 46,387
Interest expense (2,922) (16,334) (3,669) (98,489)
------ ------- ------- -------
Total other income/(expenses) 50,874 26,810 84,949 (52,102)
------ ------ ------ --------
Net loss (290,206) (970,493) (991,378) (1,734,625)
Net Loss per common share (0.07) (0.39) (0.25) (0.51)
Weighted average number of
common shares 3,963,940 2,457,952 3,963,940 3,369,899
See notes to unaudited condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Access Solutions International, Inc.
Condensed Statements of Cash Flows
For the Six Months Ended December 31,
(Unaudited)
1997 1996
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net loss ($991,378) ($1,734,625)
---------- ------------
Adjustments to reconcile net loss to net cash used by operating activities:
Write-off of capital lease - 230,297
Depreciation and amortization 81,020 53,718
Provision for doubtful accounts (11,547) (11,667)
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable (441,067) 85,742
Inventories 47,558 (3,037)
Deposits - 76,605
Prepaid expenses and other current assets 36,405 (106,329)
Increase (decrease) in:
Accounts payable 271,951 (604,726)
Accrued expenses (55,658) (274,407)
Deferred revenue - Prepaid service contracts 132,768 (30,059)
------- --------
Total adjustments 61,430 (548,403)
------ ---------
Cash used by operating activities (929,948) (2,319,028)
--------- -----------
Cash flows from investing activities:
Additions to fixed assets (126,519) (10,367)
Additions to other assets 5,160 -
Loans and advances to PaperClip (889,580) -
Deferred acquisition costs (173,485) -
--------- ------------
Cash provided/(used) for investing activities (1,184,424) (10,367)
----------- ------------
Cash flows from financing activities:
Proceeds from initial public offering - 9,200,013
Costs relating to initial public offering - (2,039,780)
Proceeds from related party loans 282,368 -
Proceeds from bridge loans - 37,694
Repayments of bridge loans - (1,500,000)
Repayments on capital lease obligations (12,314) (60,844)
Net (payments) borrowings under note payable-bank - (290,000)
Deferred financing costs - 581,065
---------- -----------
Cash provided by financing activities 270,054 5,928,148
------- ---------
Net increase/(decrease) in cash 1,844,318 3,598,753
Cash equivalents, beginning of period 1,889,446 537,831
--------- -------
Cash and cash equivalents, end of period $ 45,128 $ 4,136,584
========= ===========
See notes to unaudited condensed financial statements.
</TABLE>
<PAGE>
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10-01 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months and six months ended
December 31, 1997 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1998. For further information, refer to the
financial statements and footnotes thereto included in the Access Solutions
International, Inc. Form 10-KSB for the period ended June 30, 1997.
2. PaperClip Merger and Management Agreements
On April 15, 1997, ASI and PaperClip Software, Inc. ("PaperClip") entered into
an Asset Purchase Agreement for ASI to acquire substantially all the assets and
liabilities of PaperClip (the "Agreement"). On September 12, 1997, the agreement
was amended (the "Amended Agreement") to change the acquisition to a merger. As
a result of this amendment, a newly-formed subsidiary of ASI will merge into
PaperClip with PaperClip surviving as a subsidiary of ASI (the "Merger").
Consummation of this transaction is subject to various conditions, including
approval by the PaperClip stockholders. Under the terms of the Amended
Agreement, the PaperClip stockholders will be entitled to receive an aggregate
of approximately 1.5 million shares of ASI's Common Stock plus an equivalent
number of ASI Class B Warrants. Each Class B Warrant will entitle the holder to
purchase one share of ASI Common Stock at an exercise price of $6.00 per share.
In connection with the Merger, the holders of PaperClip's outstanding 12%
Convertible Notes due December 1999 will exchange such notes for an aggregate of
approximately 400,000 shares of non-voting redeemable preferred stock of
PaperClip. After 18 months, the holders of the preferred stock will have the
option to require the surviving corporation or ASI to purchase such shares for
cash or ASI common stock and Class B Warrants. After 30 months, ASI will have
the right to redeem the Preferred Stock for cash or ASI Common Stock and Class B
Warrants.
On January 29, 1997, ASI provided a $300,000 loan to PaperClip for use as
operating capital in exchange for a convertible note from PaperClip (the "Bridge
Loan").
On April 15, 1997, ASI and PaperClip also entered into a management agreement
(the "Management Agreement") which provides for ASI to manage the day-to-day
operations of PaperClip and to advance funds on behalf of PaperClip pursuant to
an operating budget, in each case until the closing of the Merger or the
termination of the Merger Agreement.
ASI and PaperClip also entered into a one-year distribution agreement effective
June 1, 1997 pursuant to which ASI acts as a distributor for PaperClip's
products in the United States to dealers and resellers.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company's sales consist of sales of products and services. Products sold by
the Company consist of COLD systems, software and hardgoods including
replacement disk drives, subassemblies and miscellaneous peripherals. Services
rendered by the Company include post-installation maintenance and support. The
Company recognizes revenue from customers upon installation of COLD systems and,
in the case of COLD systems installed for evaluation, upon acceptance by such
customers of the products. The Company sells extended service contracts on the
majority of the products it sells. Such contracts are one year in duration with
payments received either annually in advance of the commencement of the contract
or quarterly in advance. The Company recognizes revenue from service contracts
on a straight line basis over the term of the contract. The unearned portion of
the service revenue is reflected as deferred revenue. As of December 31, 1997,
the Company had deferred revenue in the amount of $462,609, which it will
recognize through December 31, 1998.
The Company's operating results have in the past and may in the future fluctuate
significantly depending upon a variety of factors which vary substantially over
time, including industry conditions; the timing of orders from customers; the
timing of new product introductions by the Company and competitors; customer
acceleration, cancellation or delay of shipments; the length of sales cycles;
the level and timing of selling, general and administrative and research and
development expenses; specific feature needs of customers; and production
delays. A substantial portion of the Company's quarterly revenues are derived
from the sale of a relatively small number of COLD systems which range in price
from approximately $150,000 to $900,000. As a result, the timing of recognition
of revenue from a single product order has in the past and may in the future
have a significant impact on the Company's net sales and operating results for
particular financial periods. This volatility is counter-balanced by the
increase in sales of annual service contracts which generally accompanies an
increase in systems sales.
The Company's primary operating expenses include selling expenses, general and
administrative expenses and research and development expenses. General and
administrative expenses consist primarily of employee compensation and customer
support expenses. Research and development expenses include compensation paid to
internal research and development staff members and expenses incurred in
connection with the retention of independent research and development
consultants. The Company utilizes its own employees for research and development
functions except in certain circumstances involving product enhancements. In
those circumstances, the Company regularly retains independent experts to
consult and design new software modules which are subsequently evaluated and
tested by the Company's internal research and development staff. Upon successful
testing of such product enhancements, the Company's internal staff integrates
the new products with the Company's existing COLD systems and products.
The Company's total expenditures for research and development for Fiscal 1997
and Fiscal 1996 were $1,651,322 and $1,713,094, respectively. Due to the
completion of all customer commitments to the GIGAPAGE product in the second
quarter of Fiscal 1998, it is anticipated that development costs for Fiscal 1998
will be substantially reduced from prior levels.
The Company has historically incurred net losses and anticipates that further
net losses will be incurred prior to the time, if ever, that the Company
achieves profitability. However, the Company took certain steps in Fiscal 1997
intended to limit the incurrence of future net losses. Such steps include: (i)
the October, l997 reduction in the Company's workforce; (ii) other reductions in
overhead costs and expenses; and (iii) entering into the merger agreement with
PaperClip Software, Inc. The immediate effect realized by the implementation of
these measures was to reduce average monthly operating expenses during the
period from November through December 1997 to approximately $230,000. Average
operating expenses for the three months ended September, 1997 were approximately
$280,000 per month. During the second half of Fiscal 1997, average operating
expenses approximated $331,000 per month. The Company does not believe that
these steps, particularly the reduction in the workforce, have to date or will
in the future materially adversely impact the Company's revenues and earnings.
Of the 9 employees terminated in October, 1997, one was a salesperson, one was
field support, five were product development personnel and two were
administrative staff. The terminated product development personnel were working
on customer product enhancements which were completed. As a result of the
foregoing, the reduction in workforce has not materially adversely affected the
Company's operations. As of December 31, 1997, the Company had 14 employees.
The Company has entered into a Merger Agreement with PaperClip pursuant to which
a newly-formed subsidiary of the Company will merge with and into PaperClip,
with PaperClip surviving as a subsidiary of the Company. Since April 15, 1997,
the Company has been managing the day-to-day operations of PaperClip and
advancing agreed-upon funds pursuant to a Management Agreement. In addition, in
January 1997, the Company provided a $300,000 Bridge Loan to PaperClip for use
as operating capital. Effective June 1, 1997, the Company entered into a one
year distribution agreement with PaperClip.
Results of Operations
The following discussion should be read in conjunction with the unaudited
condensed financial statements and notes thereto of Access Solutions
International, Inc. contained elsewhere herein.
Three Months and Six Months ended December 31, 1997 Compared to Three Months and
Six Months ended December 31, 1996
Net Sales
Net sales for the three months ended December 31, 1997 were $549,676 compared
with $281,351 for the three months ended December 31, 1996, an increase of
$268,325 or 95%, and $874,732 for the six months ended December 31, 1997,
compared with $584,486 for the six months ended December 31, 1996, an increase
of $290,245 or 50%. Product sales were $305,421 for the second quarter of Fiscal
1998 compared with $109,527 for the second quarter of Fiscal 1997, an increase
of $195,893 or 179%, and $498,834 for the six months ended December 31, 1997
compared with $281,988 for the six months ended December 31, 1996, an increase
of $216,846 or 77%. Product sales increased because the second quarter Fiscal
1998 results included a sale of a medium size optical archiving system and there
were no such sales in the first half of Fiscal 1997. Service revenues were
$244,255 for the second quarter of Fiscal 1998, compared with $171,824 for the
second quarter of Fiscal 1997, an increase of $72,432 or 42%, and $375,898 for
the six months ended December 31, 1997 compared with $302,497 for the six months
ended December 31, 1996, an increase of $73,401 or 24%. The increases in service
revenues were attributable to renewal of the Company's service contracts at
higher rates with all of the Company's customers and to consulting services
rendered in the second quarter of Fiscal 1998.
Cost of Sales
Cost of sales includes component costs, firmware license costs, labor, travel
and certain overhead costs. Costs of sales in the aggregate increased 69% to
$158,141 for the three months ended December 31, 1997 from $93,847 for the three
months ended December 31, 1996 and increased 117% to $367,803 for the six months
ended December 31, 1997 from $169,517 for the six months ended December 31,
1996, in each case as a result of higher sales. In addition, the gross margin
percentage increased to 71% for the three months ended December 31, 1997 from
67% for the three months ended December 31, 1996 and decreased to 58% for the
six months ended December 31, 1997 from 71% for the six months ended December
31, 1996. The gross margin percentage decreased for the six months ended
December 31, 1997 because the first quarter of Fiscal 1998 included service
sales at the older customer contract rates and sales of PaperClip Software which
must be purchased at a distributors' discount until the merger with PaperClip is
completed.
The gross margin for product sales increased to 76% for the three months ended
December 31, 1997 from 69% for the three months ended December 31, 1996 and
decreased to 57% for the six months ended December 31, 1997 from 81% for the six
months ended December 31, 1996. The gross margin percentage on product sales
decreased for the six months ended December 31, 1997 because the first quarter
of Fiscal 1998 included sales of PaperClip Software which must be purchased at a
distributors' discount until the merger with PaperClip is completed. The gross
margin on services increased to 66% for the three months ended December 31, 1997
from 65% for the three months ended December 31, 1996 and decreased to 59% for
the six months ended December 31, 1997 from 62% for the six months ended
December 31, 1996. These gross margin changes are due to service contract
renewals at improved price levels that did not take effect until the second
quarter of Fiscal 1998.
General and Administrative Expenses
General and administrative expenses consist of administrative expenses and
customer support expenses. General and administrative expenses decreased 41% or
$197,087 to $280,094 for the three months ended December 31, 1997 from $477,181
for the three months ended December 31, 1996 and decreased 25% or $190,988 to
$563,144 for the six months ended December 31, 1997 from $754,132 for the six
months ended December 31, 1996. The decreases were primarily due to reductions
in legal expenses and administrative personnel. Legal expenses incurred in the
first half of Fiscal 1998 related to the PaperClip acquisition were capitalized
while legal expenses incurred in the first half of Fiscal 1997 in connection
with a bridge loan pursuant to the Company's October 1996 IPO were not.
Research and Development Expenses
Research and development expenses decreased by 45% or $221,401 to $280,094 for
the three months ended December 31, 1997 from $477,181 for the three months
ended December 31, 1996 and decreased by 29% or $265,595 to $644,366 for the six
months ended December 31, 1997 from $909,961 for the six months ended December
31, 1996. The decrease in research and development expenses was primarily due to
reduced depreciation expense from the conversion of the Company's capital
mainframe lease to an operating lease and to payroll reductions of development
personnel during the second quarter of Fiscal 1998.
Selling Expenses
Selling expenses decreased by $33,704 or 15% to $184,386 for the three months
ended December 31, 1997 from $218,090 for the three months ended December 31,
1996 and decreased by $57,653 or 13% to $375,746 for the six months ended
December 31, 1997 from $433,399 for the six months ended December 31, 1996. The
decreases were primarily the result of lower payroll expenses which were
partially offset by increased commissions expense and investor relations costs
which were not incurred in the first half of Fiscal 1998.
Other Income and Expenses
Other income and expenses consisted of interest expense which decreased 82% or
$13,412 to $2,922 for the three months ended December 31, 1998 from $16,334 for
the three months ended December 31, 1997 and 96% or $94,820 to $3,669 for the
six months ended December 31, 1997 from $98,489 for the six months ended
December 31, 1996. These interest expense reductions were the result of
repayments of a bank loan of approximately $220,000 and a bridge loan of
approximately $1,500,000 in October, 1996 from the proceeds of the Company's
initial public offering. Interest and other income decreased by $30,914 to
$12,230 for the three months ended December 31, 1997 from $43,143 for the three
months ended December 31, 1996 and was unchanged at approximately $46,000 for
the six months ended December 31, 1997 as compared to the six months ended
December 31, 1996. Included in the above amount for the three and six months
ending December 31, 1997 was miscellaneous income of approximately $43,000 from
the proceeds of an insurance reimbursement related to a damaged shipment.
Net Loss
As a result of the foregoing, the Company's net loss decreased 70% to $290,206
($.07 per share on 3,963,940 weighted average shares outstanding) for the three
months ended December 31, 1997 from $970,493 ($.39 per share on 2,457,952
weighted average shares outstanding) during the three months ended December 31,
1996 and decreased 43% to a loss of $991,378 ($.25 per share on 3,963,940
weighted average shares outstanding) for the six months ended December 31, 1997
from $1,734,625 ($.51 per share on 3,369,899 weighted average shares
outstanding) for the six months ended December 31, 1996.
Liquidity and Capital Resources
The Company had a working capital deficit of $258,586 at December 31, 1997 as
compared to a working capital surplus of $1,842,912 at June 30, 1997.
Total cash used by operating activities during the six month periods ended
December 31, 1997 and 1996 was $929,948 and $2,319,028, respectively. The
Company's net losses for these periods were $991,378 and $1,734,625,
respectively. In addition to funding the Company's net loss, the major uses of
capital for operating activities during the six month period ended December 31,
1997 included an increase in accounts receivable due to increased sales during
the period. The Company's major source of cash from operating activities was an
increase in accounts payable of approximately $272,000 and a deferred revenue
increase of $132,768.
Cash used by investing activities for the six month periods ended December 31,
1997 and 1996 was $1,184,424 and $10,367, respectively. The major use of cash
for investing activities in Fiscal 1998 was for loans and advances to PaperClip
Software, Inc. totaling $889,580 and deferred acquisition costs of $173,485 for
legal and accounting fees related to the acquisition.
Cash provided by financing activities was $270,054 for the six month period
ended December 31, 1997 and $5,928,148 for the six month period ended December
31, 1996. The major source of cash for financing activities during the six month
period ended December 31, 1997 consisted of loans by a director of the Company
secured by certain accounts receivable of the Company. Cash provided by
financing activities for the six month period ended December 31, 1996 was
obtained from the Company's $9,200,000 initial public offering in October, 1996,
which was partially offset by IPO related expenses, and repayment of an
outstanding bridge loan and an outstanding bank loan.
The Company has suffered recurring losses from operations and has negative cash
flows from operating activities. As a result, the Company's independent
accountants in their report dated August 8, 1997 on the audited financial
statements for the year ended June 30, 1997 included an explanatory paragraph
that described factors raising substantial doubt about the Company's ability to
continue as a going concern.
As of December 31, 1997, the Company had no significant long-term debt. The
Company believes that the remaining proceeds from the IPO, together with the
funds generated from operations, will be sufficient to meet the Company's
working capital requirements only through February 1998. The Company has entered
into secured lines of credit with Mr. Chace, pursuant to which Mr. Chace loaned
the Company an aggregate of $354,000 to date, secured by certain accounts
receivable. The lines of credit are payable in full on or before February 17,
1998. On December 30, 1997, the Company entered into a letter of intent with
Joseph Stevens Company, Inc. to undertake a private offering of a minimum of 10
and a maximum of 40 Placement Units for a purchase price of $50,000 per
Placement Unit. Pursuant to the terms of the letter of intent, no less than 50%
of the Placement Units sold in the private placement are to be sold pursuant to
orders received through the Company. Each Placement Unit consists of a 10%
one-year mandatorily convertible promissory note in the principal amount of
$50,000 and 20,000 warrants, each warrant being exercisable for three years to
purchase one share of the Company's common stock at an exercise price equal to
the lower of $.75 or 80% of the lowest average closing bid price of the Common
Stock on the Nasdaq market for the five consecutive trading days immediately
preceding the initial, any interim or the final closing dates of the Placement
Units offering. If the offering of the Placement Units is not consummated and /
or the Company has insufficient funds from operations, further equity or debt
financing will be sought. There can be no assurance that additional funds can be
obtained on acceptable terms, if at all. If additional financing is not
available, the Company's business will be materially adversely affected.
The Company has suffered recurring losses from operations and has negative cash
flows from operating activities. As a result, the Company's independent
accountants in their report dated August 2, 1996 on the audited financial
statements for the year ended June 30, 1996 included an explanatory paragraph
that described factors raising substantial doubt about the Company's ability to
continue as a going concern.
The Company believes that its current corporate infrastructure can support
significant increases in sales without proportionate increases in costs.
However, there can be no assurances that sales will increase or that any cost
advantage will result.
Seasonality and Inflation
To date, seasonality and inflation have not had a material effect on the
Company's operations.
Forward Looking Statements
Statements contained in this Form 10-QSB that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The Company cautions that a
number of important factors could cause actual results for Fiscal 1998 and
beyond to differ materially from those expressed in any forward-looking
statements made by or on behalf of the Company. Such statements contain a number
of risks and uncertainties, including, but not limited to, future capital needs,
uncertainty of additional funding, variable operating results, lengthy sales
cycles, dependence on the Company's COLD system product, rapid technological
change and product development, reliance on single or limited sources of supply,
intense competition, turnover in management, the Company's ability to manage
growth, dependence on significant customers, dependence on key personnel, and
the Company's ability to protect its intellectual property. See "Risk Factors"
in the Company's Prospectus dated October 16, 1997. The Company cannot assure
that it will be able to anticipate or respond timely to changes which could
adversely affect its operating results in one or more fiscal quarters. Results
of operations in any past period should not be considered indicative of results
to be expected in future periods. Fluctuations in operating results may result
in fluctuations in the price of the Company's securities. In addition, the
Company's proposed acquisition of PaperClip involves numerous risks and
uncertainties including the potential inability to integrate successfully the
operations and services of the acquired businesses and the diversion of
management's attention from other business concerns. There can be no assurances
that the Company will complete its proposed acquisition or that, if completed,
it will be successfully integrated into the Company's operations or provide an
acceptable return on the Company's investment.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Merger Agreement dated as of November 12, 1997 between PaperClip and
ASI (incorporated by reference to Exhibit A of the Proxy
Statement/Prospectus filed as part of ASI's Registration Statement on
Form S-4, File No. 333-40181)
2.2 First Amendment to Management Agreement dated November 12, 1997
(incorporated by reference to Exhibit 2.2 of ASI's Registration
Statement on Form S-4, File No. 333-40181)
2.3 Form of Amendment to Merger Agreement dated as of January 8, 1998
(incorporated by reference to Exhibit A of the Proxy
Statement/Prospectus filed as part of ASI's Registration Statement on
Form S-4, File No. 333-40181)
10.1 ASI's 1997 Non-Employee Director Stock Option Plan (incorporated by
reference to Exhibit 10.6 of ASI's Registration Statement on Form S-4,
File No. 333-40181)
10.2 Employment Termination Agreement and Release dated September 30, 1997
(incorporated by reference to Exhibit 10.10 of ASI's Registration
Statement on Form S-4, File No. 333-40181)
10.3 Letter Agreement dated November 20, 1997 between Malcolm G. Chace and
ASI and Secured Line of Credit Note dated November 20, 1997, and First
Amendment to Loan Agreement and Promissory Note dated as of January 5,
1998 (incorporated by reference to Exhibit 10.11 of ASI's Registration
Statement on Form S-4, File No. 333-40181)
10.4 Second Amendment to Loan Agreement and Promissory Note dated as of
January 27, 1998 between Malcolm G. Chace and ASI
10.5 Letter Agreement dated December 10, 1997 between Malcolm G. Chace and
ASI, and Secured Line of Credit Note dated December 10, 1997
(incorporated by reference to Exhibit 10.12 of ASI's Registration
Statement on Form S-4, File No. 333-40181)
10.6 Letter Agreement dated December 30, 1997 between Malcolm G. Chace and
ASI, and Secured Line of Credit Note dated December 30, 1997
(incorporated by reference to Exhibit 10.13 of ASI's Registration
Statement on Form S-4, File No. 333-40181)
10.7 First Amendment to Loan Agreement and First Amendment to Secured Line
of Credit Note, each dated as of January 27, 1998 between Malcolm G.
Chace and ASI
10.8 Second Amendment to Loan Agreement and Second Amendment to Secured Line
of Credit Note, each dated as of February 10, 1998 between Malcolm G.
Chace and ASI
10.10 Letter of Intent with Joseph Stevens & Company, Inc. dated December 30,
1997 (incorporated by reference to Exhibit 2.6 of ASI's Registration
Statement on Form S-4, File No. 333-40181)
27 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K dated November 12, 1997 relating to the Merger Agreement with
PaperClip Software, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
issuer caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Access Solutions International, Inc.
Date: February 13, 1997 /s/ Robert H. Stone
------------------------------------
Robert H. Stone
President and CEO
Date: February 13, 1997 /s/ Denis L. Marchand
------------------------------------
Denis L. Marchand
Vice President of Finance and
Administration and Chief Accounting
Officer (Principal Accounting
Officer)
Exhibit 10.4
SECOND AMENDMENT TO LOAN AGREEMENT AND PROMISSORY NOTE
THIS AMENDMENT is made as of the 27th day of January, 1998, by and between
MALCOLM G. CHACE, an individual having an address at 731 Hospital Trust Tower,
Providence, Rhode Island 02903 (the "Lender") and ACCESS SOLUTIONS
INTERNATIONAL, INC., a Delaware corporation having an address at 650 Ten Rod
Road, North Kingstown, Rhode Island 02852 (the "Borrower").
W I T N E S S E T H T H A T:
WHEREAS, the Borrower executed and delivered to the Lender a certain letter
agreement dated November 20, 1997, pursuant to which the Lender agreed to loan
to the Borrower the maximum principal sum of $180,000 ("Loan Agreement"), which
Loan Agreement is incorporated by reference herein and made a part hereof; and
WHEREAS, the Borrower executed and delivered to the Lender a certain
Promissory Note dated November 20, 1997 in the principal amount of $180,000,
which Note is hereby incorporated by reference herein and made a part hereof
(the "Note"); and
WHEREAS, the Borrower and the Lender executed a First Amendment to Loan
Agreement and Promissory Note dated as of January 5, 1998, pursuant to which the
maturity date of the Note was extended to January 30, 1998.
WHEREAS, the parties desire to further extend the maturity date of the Note
to February 27, 1998; and
WHEREAS, the parties hereto desire to amend the Loan Agreement and the Note
in the manner hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. All outstanding obligations under the Loan Agreement and the Note,
including principal, interest, and fees, shall be due and payable on February
27, 1998.
2. Security for the Note is evidenced by, among other things, a Security
Agreement dated November 20, 1997, and as further amended on the date hereof,
and UCC financing statements filed with the Rhode Island Secretary of State
("Security Instruments"). All references to the Note in the Security Instruments
shall be deemed to include this amendment to the Note and any other amendments
which may be executed.
3. Except as modified and amended hereby, the Note shall remain in full
force and effect and is in all other respects ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year indicated above.
LENDER: BORROWER
ACCESS SOLUTIONS INTERNATIONAL, INC.
/s/ Malcolm G. Chace
- ------------------------------- By: /s/ Robert H. Stone
Malcolm G. Chace -----------------------------------------
Robert H. Stone
President and CEO
Exhibit 10.7
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT is made as of the 27th day of January, 1998, by
and between MALCOLM G. CHACE ("Lender") and ACCESS SOLUTIONS INTERNATIONAL,
INC., a Delaware corporation ("Borrower").
W I T N E S S E T H T H A T:
WHEREAS, Lender and Borrower are parties to a certain letter agreement
dated December 30, 1997 ("Loan Agreement") which Loan Agreement is incorporated
by reference herein and made a part hereof, and pursuant to which the Lender
agreed to loan to the Borrower the maximum principal sum of $200,000; and
WHEREAS, the parties desire to increase the maximum principal amount
available for borrowing under the Loan Agreement, to extend the maturity date
for repayment and to reflect the granting by Borrower of a security interest in
additional collateral.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. INCREASE IN AVAILABILITY. The maximum principal amount available for
borrowing under the Loan Agreement is being increased from $200,000 to $290,000.
Therefore, the first sentence of the Loan Agreement is amended to read as
follows:
"This letter is written to set forth our agreement whereby
MALCOLM G. CHACE ("Lender"), will lend to ACCESS SOLUTIONS
INTERNATIONAL, INC., a Delaware corporation ("Borrower"),
the maximum principal sum of Two Hundred Ninety Thousand
Dollars ($290,000) (the "Loan")."
2. EXTENSION OF MATURITY DATE. The maturity date for repayment of the Loan
is being extended from February 17, 1998 to February 27, 1998. Therefore, the
third sentence of the second paragraph of the Loan Agreement is amended to read
as follows:
"The Loan shall be due and payable on February 27, 1998,
unless repaid in full prior to that time."
3. SECURITY. Security for the Note is evidenced by, among other things, a
Security Agreement dated December 30, 1997, and as further amended on the date
hereof, and UCC Financing Statements filed with the Rhode Island Secretary of
State ("Security Instruments"). All references to the Letter Agreement in the
Security Instruments shall be deemed to include this amendment to the Loan
Agreement and any other amendments that may be executed.
4. MISCELLANEOUS. Except as modified and amended hereby, the Loan Agreement
shall remain in full force and effect and is in all other respects ratified and
confirmed.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement
to be duly executed as of the day and year first above written.
/s/ Malcolm G. Chace
------------------------------------
Malcolm G. Chace
ACCESS SOLUTIONS INTERNATIONAL, INC.
BY: /s/ Robert H. Stone
----------------------------------
Robert H. Stone
President and CEO
Exhibit 10.7
FIRST AMENDMENT TO SECURED LINE OF CREDIT NOTE
THIS FIRST AMENDMENT is made as of the 27th day of January, 1998 between
MALCOLM G. CHACE, an individual with an office at 731 Hospital Trust Building,
Providence, Rhode Island 02903 ("Lender"), and ACCESS SOLUTIONS INTERNATIONAL,
INC., a Delaware corporation, having an address at 650 Ten Rod Road, North
Kingstown, Rhode Island 02852 ("Borrower").
W I T N E S S E T H T H A T:
WHEREAS, Borrower has executed and delivered to Lender a certain Secured
Line of Credit Note dated December 30, 1997, in the principal amount of Two
Hundred Thousand Dollars ($200,000) ("Note"); and
WHEREAS, the parties desire to amend the Note in the manner hereinafter set
forth;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
1. The maximum principal amount under the Note is being increased from
$200,000 to $290,000. Therefore, all references to "Two Hundred Thousand
Dollars" and/or "$200,000" shall be deleted and replaced with "Two Hundred
Ninety Thousand Dollars" and/or "$290,000", as appropriate.
2. The maturity date of payment of all amounts due under the Note is being
extended from February 17, 1998 to February 27, 1998. Therefore, all references
to "February 17, 1998" shall be deleted and replaced with "February 27, 1998."
3. All references in the Note to that certain Loan Agreement shall be
deemed to refer to such agreement as amended by documents executed as of even
date herewith.
4. All references in the Note to the Security Agreement shall be deemed to
refer to such agreement as amended by documents executed as of even date
herewith, and all references in the Security Agreement to the Note shall be
deemed to include this amendment to the Note and any other amendments which may
be executed in connection herewith.
5. Except as modified and amended hereby, the Note shall remain in full
force and effect and is in all other respects ratified and confirmed.
6. This Amendment is intended to take effect as a sealed instrument and
shall be construed in accordance with and governed by the laws of the State of
Rhode Island.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year indicated above.
WITNESSES: LENDER:
/s/ Michael Prescott /s/ Malcolm G. Chace
- ------------------------------- -------------------------------------
Michael Prescott Malcolm G. Chace
BORROWER:
ACCESS SOLUTIONS INTERNATIONAL, INC.
/s/ Michael Prescott
- ------------------------------ BY: /s/ Robert H. Stone
Michael Prescott ----------------------------------
Robert H. Stone
President and CEO
Exhibit 10.8
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT is made as of the 10th day of February, 1998, by
and between MALCOLM G. CHACE ("Lender") and ACCESS SOLUTIONS INTERNATIONAL,
INC., a Delaware corporation ("Borrower").
W I T N E S S E T H T H A T:
WHEREAS, Lender and Borrower are parties to a certain letter agreement
dated December 30, 1997 ("Loan Agreement") which Loan Agreement is incorporated
by reference herein and made a part hereof, and pursuant to which the Lender
agreed to loan to the Borrower the maximum principal sum of $200,000; and
WHEREAS, Borrower and Lender executed a First Amendment to Loan Agreement
dated as of January 27, 1998, pursuant to which the maximum principal amount
available for borrowing under the Loan Agreement was increased to $290,000, the
maturity date for repayment was extended, and additional collateral was granted
to Lender; and
WHEREAS, the parties desire to further amend the Loan Agreement to increase
the maximum principal amount available for borrowing under the Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. INCREASE IN AVAILABILITY. The maximum principal amount available for
borrowing under the Loan Agreement is being increased from $290,000 to $330,000.
Therefore, the first sentence of the Loan Agreement is amended to read as
follows:
"This letter is written to set forth our agreement whereby
MALCOLM G. CHACE ("Lender"), will lend to ACCESS SOLUTIONS
INTERNATIONAL, INC., a Delaware corporation ("Borrower"),
the maximum principal sum of Three Hundred Thirty Thousand
Dollars ($330,000) (the "Loan")."
2. MISCELLANEOUS. Except as modified and amended hereby, the Loan Agreement
shall remain in full force and effect and is in all other respects ratified and
confirmed.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement
to be duly executed as of the day and year first above written.
/s/ Malcolm G. Chace
-------------------------------------
Malcolm G. Chace
ACCESS SOLUTIONS INTERNATIONAL, INC.
BY: /s/ Robert H. Stone
----------------------------------
Robert H. Stone
President and CEO
Exhibit 10.8
SECOND AMENDMENT TO SECURED LINE OF CREDIT NOTE
THIS SECOND AMENDMENT is made as of the 10th day of February, 1998 between
MALCOLM G. CHACE, an individual with an office at 731 Hospital Trust Building,
Providence, Rhode Island 02903 ("Lender"), and ACCESS SOLUTIONS INTERNATIONAL,
INC., a Delaware corporation, having an address at 650 Ten Rod Road, North
Kingstown, Rhode Island 02852 ("Borrower").
W I T N E S S E T H T H A T:
WHEREAS, Borrower has executed and delivered to Lender a certain Secured
Line of Credit Note dated December 30, 1997, in the principal amount of Two
Hundred Thousand Dollars ($200,000) ("Note"); and
WHEREAS, Borrower has executed and delivered to Lender a First Amendment to
Secured Line of Credit Note dated as of January 27, 1998, pursuant to which
principal amount of the Note was increased to $290,000, and the maturity date
for repayment was extended; and
WHEREAS, the parties desire to further amend the Note in the manner
hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
1. The maximum principal amount under the Note is being increased from
$290,000 to $330,000. Therefore, all references to "Two Hundred Ninety Thousand
Dollars" and/or "$290,000" shall be deleted and replaced with "Three Hundred
Thirty Thousand Dollars" and/or "$330,000", as appropriate.
2. All references in the Note to that certain Loan Agreement shall be
deemed to refer to such agreement as amended by documents executed as of even
date herewith.
3. All references in the Note to the Security Agreement shall be deemed to
refer to such agreement as amended by documents executed as of even date
herewith, and all references in the Security Agreement to the Note shall be
deemed to include this amendment to the Note and any other amendments which may
be executed in connection herewith.
4. Except as modified and amended hereby, the Note shall remain in full
force and effect and is in all other respects ratified and confirmed.
5. This Amendment is intended to take effect as a sealed instrument and
shall be construed in accordance with and governed by the laws of the State of
Rhode Island.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year indicated above.
WITNESSES: LENDER:
/s/ Michael Prescott /s/ Malcolm G. Chace
- ------------------------------- ---------------------------------
Michael Prescott Malcolm G. Chace
BORROWER:
ACCESS SOLUTIONS INTERNATIONAL, INC.
/s/ Michael Prescott
- ------------------------------- BY: /s/ Robert H. Stone
Michael Prescott ----------------------------------
Robert H. Stone
President and CEO
<TABLE> <S> <C>
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(Replace this text with the legend)
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<NAME> Access Solutions International, Inc.
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<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> Jul-01-1997
<PERIOD-END> Dec-31-1997
<EXCHANGE-RATE> 1
<CASH> 45,127
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<RECEIVABLES> 733,180
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<INVENTORY> 414,254
<CURRENT-ASSETS> 1,297,664
<PP&E> 1,325,244
<DEPRECIATION> 949,974
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0
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<COMMON> 39,652
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<TOTAL-LIABILITY-AND-EQUITY> 3,607,956
<SALES> 549,676
<TOTAL-REVENUES> 549,676
<CGS> 158,141
<TOTAL-COSTS> 732,615
<OTHER-EXPENSES> (53,796)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,922
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<EPS-PRIMARY> (.07)
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