Attached files
file | filename |
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EX-31.2 - MAM SOFTWARE GROUP, INC. | v173408_ex31-2.htm |
EX-32.1 - MAM SOFTWARE GROUP, INC. | v173408_ex32-1.htm |
EX-31.1 - MAM SOFTWARE GROUP, INC. | v173408_ex31-1.htm |
EX-32.2 - MAM SOFTWARE GROUP, INC. | v173408_ex32-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
quarterly period ended December 31, 2009
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 000-27083
AFTERSOFT
GROUP, INC.
(Exact
name of registrant as specified
in its
charter)
DELAWARE
|
84-1108035
|
|
(State
or other jurisdiction of
|
(I.R.S.
employer
|
|
incorporation
or organization)
|
identification
no.)
|
Maple
Park, Maple Court, Tankersley, Barnsley, UK S75 3DP
(Address
of principal executive offices)(Zip code)
011 44
124 431 1794
(Registrant’s
telephone number, including area code)
Second
Floor, 9 Lower Bridge Street, Chester, UK CH1 1RS
(Former
address, changed
since
last report)
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 ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes ¨ No
¨
Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See definition of
“large accelerated filer,” “accelerated filer,” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ¨ Accelerated filer
¨ Non-accelerated
filer ¨ Smaller reporting
company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes ¨ No x
The registrant has 84,042,708 shares of
common stock outstanding as of February 11, 2010.
Page
|
||||
PART
I. Financial Information:
|
||||
Item
1.
|
Financial
Statements
|
1
|
||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
2
|
||
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
7
|
||
Item
4T.
|
Controls
and Procedures
|
8
|
||
PART
II. Other Information:
|
8
|
|||
Item
1.
|
Legal
Proceedings
|
8
|
||
Item1A.
|
Risk
Factors
|
9
|
||
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
9
|
||
Item
3.
|
Defaults
Upon Senior Securities
|
9
|
||
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
9
|
||
Item
5.
|
Other
Information
|
9
|
||
Item
6.
|
Exhibits
|
10
|
||
Signatures
|
11
|
PART
I—FINANCIAL INFORMATION
Unless
the context indicates or requires otherwise, (i) the term “Aftersoft”
refers to Aftersoft Group, Inc. and its principal operating subsidiaries;
(ii) the term “MAM Software” refers to MAM Software Limited; (iii) the
term “ASNA” refers to Aftersoft Network N.A, Inc. and its subsidiaries;
(iv) the term “EXP” refers to EXP Dealer Software Limited and its
subsidiaries; (v) the term “DSS” refers to Dealer Software and Services
Limited; and (vi) the terms “we,” “our,” “ours,” “us” and the “Company”
refer collectively to Aftersoft Group, Inc.
Index
to Financial Statements
Consolidated
Balance Sheets
|
F-1
|
|
Consolidated
Statements of Operations and Comprehensive Loss
(Unaudited)
|
F-2
|
|
Consolidated
Statements of Cash Flows (Unaudited)
|
F-3
|
|
Notes
to Consolidated Financial Statements (Unaudited)
|
F-5
|
1
Consolidated
Balance Sheets
(In
thousands, except share data)
|
December 31,
|
June 30,
|
|
|||||
|
2009
|
2009
|
|
|||||
|
(Unaudited)
|
|
||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$
|
2,075
|
$
|
1,663
|
||||
Accounts
receivable, net of allowance of $109 and $87
|
3,024
|
2,154
|
||||||
Inventories
|
444
|
318
|
||||||
Prepaid
expenses and other current assets
|
377
|
507
|
||||||
Total
Current Assets
|
5,920
|
4,642
|
||||||
Property
and Equipment, Net
|
968
|
1,028
|
||||||
Other
Assets
|
||||||||
Goodwill
|
9,293
|
9,548
|
||||||
Amortizable
intangible assets, net
|
3,165
|
3,566
|
||||||
Software
development costs, net
|
1,635
|
1,691
|
||||||
Other
long-term assets
|
86
|
179
|
||||||
Total
Assets
|
$
|
21,067
|
$
|
20,654
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable
|
$
|
1,618
|
$
|
1,386
|
||||
Accrued
expenses and other
|
4,385
|
3,162
|
||||||
Payroll
and other taxes
|
333
|
278
|
||||||
Derivative
liabilities
|
243
|
-
|
||||||
Current
portion of long-term debt, net of debt discount
|
5,933
|
1,598
|
||||||
Current
portion of deferred revenue
|
432
|
482
|
||||||
Taxes
payable
|
633
|
708
|
||||||
Total
Current Liabilities
|
13,577
|
7,614
|
||||||
Long-Term
Liabilities
|
||||||||
Deferred
revenue, net of current portion
|
411
|
748
|
||||||
Deferred
income taxes
|
778
|
880
|
||||||
Long-term
debt, net of current portion
|
217
|
4,713
|
||||||
Other
|
188
|
199
|
||||||
Total
Liabilities
|
15,171
|
14,154
|
||||||
Commitments
and contingencies
|
||||||||
STOCKHOLDERS'
EQUITY
|
||||||||
Preferred
stock:
|
||||||||
Par
value $0.0001 per share; 10,000,000 shares authorized, none issued and
outstanding
|
-
|
-
|
||||||
Common
stock:
|
||||||||
Par
value $0.0001 per share; 150,000,000 shares authorized, 83,773,264 and
83,462,337 shares issued and outstanding, respectively
|
8
|
8
|
||||||
Additional
paid-in capital
|
29,419
|
30,219
|
||||||
Accumulated
other comprehensive loss
|
(590
|
)
|
(482
|
)
|
||||
Accumulated
deficit
|
(22,941
|
)
|
(23,245
|
)
|
||||
Total
Stockholders' Equity
|
5,896
|
6,500
|
||||||
Total
Liabilities and Stockholders' Equity
|
$
|
21,067
|
$
|
20,654
|
The
Accompanying Notes Are an Integral Part of these Consolidated Financial
Statements
F-1
AFTERSOFT
GROUP, INC.
Consolidated
Statements of Operations and Comprehensive Loss
(Unaudited)
(In
thousands except for share and per share data)
For the Three Months Ended
|
For the Six Months Ended
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenues
|
$
|
6,746
|
$
|
5,005
|
$
|
12,958
|
$
|
10,850
|
||||||||
Cost
of revenues
|
2,487
|
2,235
|
5,434
|
4,990
|
||||||||||||
Gross
profit
|
4,259
|
2,770
|
7,524
|
5,860
|
||||||||||||
Operating
expenses
|
||||||||||||||||
Research
and development
|
763
|
709
|
1,607
|
1,494
|
||||||||||||
Sales
and marketing
|
620
|
561
|
1,264
|
1,160
|
||||||||||||
General
and administrative
|
2,322
|
1,478
|
3,227
|
2,983
|
||||||||||||
Depreciation
and amortization
|
289
|
260
|
571
|
528
|
||||||||||||
Total
operating expenses
|
3,994
|
3,008
|
6,669
|
6,165
|
||||||||||||
Operating
income (loss)
|
265
|
(238
|
)
|
855
|
(305
|
)
|
||||||||||
Other
income (expense)
|
||||||||||||||||
Interest
expense
|
(352
|
)
|
(428
|
)
|
(730
|
)
|
(800
|
)
|
||||||||
Write
down of investment available-for-sale securities
|
-
|
(3,957
|
)
|
-
|
(3,957
|
)
|
||||||||||
Interest
income
|
-
|
13
|
-
|
13
|
||||||||||||
Change
in fair value of derivative liabilities
|
277
|
-
|
315
|
-
|
||||||||||||
Gain
on settlement of liability
|
-
|
-
|
50
|
-
|
||||||||||||
Other,
net
|
(1
|
)
|
11
|
(1
|
)
|
13
|
||||||||||
Total
other Net
|
(76
|
)
|
(4,361
|
)
|
(366
|
)
|
(4,731
|
)
|
||||||||
Income
(loss) before provision for income taxes
|
189
|
(4,599
|
)
|
489
|
(5,036
|
)
|
||||||||||
Provision
for income taxes
|
426
|
198
|
646
|
313
|
||||||||||||
Net
Loss
|
(237
|
)
|
(4,797
|
)
|
(157
|
)
|
(5,349
|
)
|
||||||||
Reversal
of unrealized loss on investments in available-for-sale
securities
|
-
|
1,556
|
-
|
808
|
||||||||||||
Foreign
currency translation loss
|
(234
|
)
|
(2,595
|
)
|
(108
|
)
|
(3,643
|
)
|
||||||||
Total
comprehensive loss
|
$
|
(471
|
)
|
$
|
(5,836
|
)
|
$
|
(265
|
)
|
$
|
(8,184
|
)
|
||||
Loss
per share attributed to common stockholders - basic and
diluted
|
$
|
-
|
$
|
(0.05
|
)
|
$
|
-
|
$
|
(0.06
|
)
|
||||||
Weighted
average shares outstanding - basic and diluted
|
83,765,095
|
92,814,017
|
83,630,793
|
92,773,620
|
The
Accompanying Notes Are an Integral Part of these Consolidated Financial
Statements
F-2
AFTERSOFT
GROUP, INC.
Consolidated
Statements of Cash Flows
(Unaudited)
(In
thousands)
For the Six Months Ended
|
||||||||
December 31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$
|
(157
|
)
|
$
|
(5,349
|
)
|
||
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
||||||||
Depreciation
and amortization
|
571
|
528
|
||||||
Write
down of investments in available-for-sale securities
|
-
|
3,957
|
||||||
Debt
discount and debt issuance cost amortization
|
315
|
409
|
||||||
Fair
value of stock issued for services
|
32
|
17
|
||||||
Gain
on settlement of liability
|
(50
|
)
|
-
|
|||||
Deferred
income taxes
|
(102
|
)
|
-
|
|||||
Change
in fair value of derivative liabilities
|
(315
|
)
|
-
|
|||||
Warrants
issued for settlement of service agreement
|
36
|
-
|
||||||
Changes
in assets and liabilities
|
||||||||
Accounts
receivable
|
(951
|
)
|
742
|
|||||
Inventories
|
(141
|
)
|
367
|
|||||
Prepaid
expenses and other assets
|
122
|
236
|
||||||
Accounts
payable
|
266
|
(1,032
|
)
|
|||||
Accrued
expenses and other liabilities
|
1,388
|
(233
|
)
|
|||||
Deferred
revenue
|
(371
|
)
|
(229
|
)
|
||||
Taxes
payable
|
(52
|
)
|
(154
|
)
|
||||
Net
cash provided by (used in) operating activities
|
591
|
(741
|
)
|
The
Accompanying Notes Are an Integral Part of these Consolidated Financial
Statements
F-3
AFTERSOFT
GROUP, INC.
Consolidated
Statements of Cash Flows (continued)
(Unaudited)
(In
thousands)
Cash flows from investing
activities:
|
||||||||
Purchase
of property and equipment
|
(68
|
)
|
(95
|
)
|
||||
Capitalized
software development costs
|
(67
|
)
|
(119
|
)
|
||||
Net
cash used in investing activities
|
(135
|
)
|
(214
|
)
|
||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from sale of Parent company common stock, net of cash issuance
costs
|
-
|
841
|
||||||
Proceeds
from long-term debt, net of cash issuance costs
|
-
|
500
|
||||||
Payments
on long-term debt
|
(221
|
)
|
(258
|
)
|
||||
Net
cash provided by (used in) financing activities
|
(221
|
)
|
1,083
|
|||||
Effect
of exchange rate changes
|
177
|
(777
|
)
|
|||||
Net
increase (decrease) in cash and cash equivalents
|
412
|
(649
|
)
|
|||||
Cash
and cash equivalents, beginning of period
|
1,663
|
1,964
|
||||||
Cash
and cash equivalents, end of period
|
$
|
2,075
|
$
|
1,315
|
||||
Supplemental
disclosures of cash flow information
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$
|
414
|
$
|
373
|
||||
Income
taxes
|
$
|
175
|
$
|
104
|
||||
Supplemental disclosures of
non-cash investing and financing activities:
|
||||||||
Value
of distributed shares
|
$
|
-
|
$
|
29
|
||||
Value
of retired shares
|
$
|
-
|
$
|
2,126
|
||||
Cumulative
effect to retained earnings due to adoption of accounting
standard
|
$
|
461
|
$
|
-
|
||||
Cumulative
effect to additional paid-in-capital due to adoption of accounting
standard
|
$
|
868
|
$
|
-
|
||||
Cumulative
effect to debt discount due to adoption of accounting
standard
|
$
|
310
|
$
|
-
|
||||
Value
of warrants issued for amended debt covenants
|
$
|
-
|
$
|
15
|
||||
Issuance
of debt for property, plant, and equipment
|
$
|
-
|
$
|
403
|
||||
Gain
on sale of Parent company common stock
|
$
|
-
|
$
|
337
|
||||
Shares
of Parent company common stock remitted in exchange for Parent company
obligations
|
$
|
-
|
$
|
193
|
||||
Parent
company obligations assumed by Company
|
$
|
-
|
$
|
(140
|
)
|
|||
Loss
on settlement of Parent company obligations
|
$
|
-
|
$
|
53
|
The
Accompanying Notes Are an Integral Part of these Consolidated Financial
Statements
F-4
AFTERSOFT
GROUP, INC.
December
31, 2009
(Unaudited)
NOTE
1. MANAGEMENT’S
REPRESENTATIONS
The
consolidated financial statements included herein have been prepared by
Aftersoft Group, Inc. (“Aftersoft” or the “Company”), without audit, pursuant to
the rules and regulations of the US Securities and Exchange Commission (“SEC”).
Certain information normally included in the consolidated financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America has been omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of management, all
adjustments (consisting primarily of normal recurring accruals) considered
necessary for a fair presentation have been included.
Operating
results for the three and six months ended December 31, 2009 are not necessarily
indicative of the results that may be expected for the year ending June 30,
2010. It is suggested that the consolidated financial statements be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Company’s Annual Report on Form 10-K for the year ended June 30,
2009, which was filed with the SEC on September 25, 2009. The
Company has evaluated subsequent events through February 11, 2010, the filing
date of this Quarterly Report on Form 10-Q, and determined that no subsequent
events have occurred that would require recognition in the condensed
consolidated financial statements or disclosure in the notes thereto, other than
as disclosed in the accompanying notes.
NOTE
2. BASIS OF
PRESENTATION
On
November 24, 2008, Auto Data Network, Inc. (“ADNW”), the former parent of
Aftersoft, distributed a dividend of the 71,250,000 shares of Aftersoft common
shares that ADNW owned at such time in order to complete the previously
announced spin-off of Aftersoft’s business. The dividend shares were
distributed in the form of a pro rata dividend to the holders of record as of
November 17, 2008 (the “Record Date”) of ADNW’s common and convertible preferred
stock. Each holder of record of shares of ADNW common and preferred stock as of
the close of business on the Record Date was entitled to receive 0.6864782
shares of Aftersoft's common stock for each share of common stock of ADNW held
at such time, and/or for each share of ADNW common stock that such holder would
own, assuming the convertible preferred stock owned on the Record Date was
converted in full. Prior to the spin-off, ADNW owned approximately
77% of Aftersoft’s issued and outstanding common stock. Subsequent to and as a
result of the spin-off, Aftersoft is no longer a subsidiary of ADNW (see Note
3).
Aftersoft
is a leading provider of business and supply chain management solutions
primarily to automotive parts manufacturers, retailers, tire and service chains,
independent installers and wholesale distributors in the automotive aftermarket.
The Company conducts its businesses through wholly owned subsidiaries with
operations in Europe and North America. MAM Software Limited (“MAM”) is based in
Barnsley, United Kingdom (“UK”) and Aftersoft Network, NA, Inc. (“ASNA”) and MAM
Software Inc. (“MAM US”) have offices in the United States (“US”) in Dana Point,
California, and Allentown, Pennsylvania.
Liquidity
At
December 31, 2009, the Company had cash and cash equivalents of $2,075,000, an
improvement of $412,000 from June 30, 2009. During the period ended December 31,
2009, the Company had $135,000 of capital expenditures and made payments of
$221,000 on long-term debt. Starting in January 2010, the Company will start to
make payments on the $5,000,000 Term Note. The payments are approximately
$208,000 per month. The Company expects to make the monthly payments on this
debt and the other outstanding obligations from operating cash flow. The Company
does not expect to be able to make the $2,917,000 balloon payment due in
November 2010 on the Term Loan or to pay off the $1,000,000 Revolver due at the
same time from internally generated cash flow. The Company is currently seeking
debt and/or equity financing and other activities to raise the necessary
capital. There can be no assurances that such funding will be available on
acceptable terms, in a timely fashion or even available at all.
Principles
of Consolidation
The
consolidated financial statements of the Company include the accounts of the
Company and its wholly owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated in the consolidated financial
statements.
F-5
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
Concentrations
of Credit Risk
The
Company has no significant off-balance-sheet concentrations of credit risk such
as foreign exchange contracts, options contracts or other foreign hedging
arrangements.
Cash
and Cash Equivalents
The
Company maintains cash balances at financial institutions that are insured by
the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At December
31, 2009 and June 30, 2009, the Company did not have balances in these accounts
in excess of the FDIC insurance limits. For banks outside of the United States,
the Company maintains its cash accounts at financial institutions which it
believes to be credit worthy.
The
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents to the extent the funds are not
being held for investment purposes.
Customers
The
Company performs periodic evaluations of its customers and maintains allowances
for potential credit losses as deemed necessary. The Company generally does not
require collateral to secure its accounts receivable. Credit risk is managed by
discontinuing sales to customers who are delinquent. The Company estimates
credit losses and returns based on management’s evaluation of historical
experience and current industry trends. Although the Company expects to collect
amounts due, actual collections may differ from the estimated
amounts.
One
customer accounted for approximately 19.4% and 15.2% of the Company’s revenue
for the three and six month periods ended December 31, 2009, respectively. No
such concentration existed during the three and six month periods ended December
31, 2008.
One
customer accounted for approximately 15.% of the Company’s accounts receivable
at December 31, 2009. No such concentration existed at June 30,
2009.
Segment
Reporting
The
Company operates in one reportable segment. The Company evaluates
financial performance on a Company-wide basis.
Geographic
Concentrations
The
Company conducts business in the US, Canada and the UK. For customers
headquartered in their respective countries, the Company derived 21% of its
revenues from the US, 1% from Canada and 78% from its UK operations during the
three months ended December 31, 2009, compared to 23% of its revenues from the
US, 2% from Canada and 75% from the UK for the three months ended December 31,
2008.
The
Company derived 24% of its revenues from the US, 1% from Canada and 75% from its
UK operations during the six months ended December 31, 2009 compared to 22% of
its revenues from the US, 2% from Canada and 76% from the UK for the six months
ended December 31, 2008. At December 31, 2009, the Company maintained 63% of its
net property and equipment in the UK and the remaining 37% in the
US.
F-6
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
Use
of Estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Significant estimates made by the
Company’s management include, but are not limited to, the derivatives,
collectability of accounts receivable, the realizability of inventories, the
fair value of investments in available-for-sale securities, the recoverability
of goodwill and other long-lived assets, valuation of deferred tax assets and
liabilities, and the estimated value of warrants and shares issued for non-cash
consideration. Actual results could materially differ from those
estimates.
Fair
Value of Financial Instruments
The
Company’s financial instruments consist principally of cash and cash
equivalents, investments in available-for-sale securities, accounts receivable,
accounts payable, accrued expenses and debt instruments.
Financial
assets and liabilities that are remeasured and reported at fair value at each
reporting period are classified and disclosed in one of the following three
categories:
|
·
|
Level 1 – Fair value based on
quoted prices in active markets for identical assets or
liabilities.
|
|
·
|
Level 2 – Fair value based on
significant directly observable data (other than Level 1 quoted prices) or
significant indirectly observable data through corroboration with
observable market data. Inputs would normally be (i) quoted prices in
active markets for similar assets or liabilities, (ii) quoted prices in
inactive markets for identical or similar assets or liabilities or (iii)
information derived from or corroborated by observable market
data.
|
|
·
|
Level 3 – Fair value based on
prices or valuation techniques that require significant unobservable data
inputs. Inputs would normally be a reporting entity’s own data and
judgments about assumptions that market participants would use in pricing
the asset or liability.
|
Available-for-Sale
Securities
Management
determines the appropriate classification of its investments in equity
securities with readily determinable fair values that are not accounted for
under the equity method of accounting at the time of purchase and re-evaluates
such classification as of each balance sheet date. The specific identification
method is used to determine the cost basis of securities disposed of. Unrealized
gains and losses on the marketable securities are included as a separate
component of accumulated other comprehensive loss, net of tax. At December
31, 2009, investments consist of corporate stock with a carrying value of
$0. During the year ended June 30, 2009, the Company wrote down its
investment in available-for-sale securities to $0, which is now the Company’s
new cost basis in the securities. The Company will not recognize any
gain or loss on the securities unless they are sold.
Inventories
Inventories
are stated at the lower of cost or current estimated market value. Cost is
determined using the first-in, first-out method. Inventories consist primarily
of hardware that will be sold to customers. The Company periodically reviews its
inventories and records a provision for excess and obsolete inventories based
primarily on the Company’s estimated forecast of product demand and production
requirements. Once established, write-downs of inventories are considered
permanent adjustments to the cost basis of the obsolete or excess
inventories.
F-7
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
Property
and Equipment
Property
and equipment are stated at cost, and are being depreciated using the
straight-line method over the estimated useful lives of the related assets,
ranging from three to five years. Leasehold improvements are amortized using the
straight-line method over the lesser of the estimated useful lives of the assets
or the related lease terms. Equipment under capital lease obligations is
depreciated over the shorter of the estimated useful lives of the related assets
or the term of the lease. Maintenance and routine repairs are charged to expense
as incurred. Significant renewals and betterments are capitalized. At the time
of retirement or other disposition of property and equipment, the cost and
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in the consolidated statements of operations. Depreciation
expense was $53,000 and $46,000 for the three months ended December 31, 2009 and
2008, respectively, and $103,000 and $84,000 for the six months ended December
31, 2009 and 2008, respectively.
Software
Development Costs
Costs
incurred to develop computer software products to be sold or otherwise marketed
are charged to expense until technological feasibility of the product has been
established. Once technological feasibility has been established, computer
software development costs (consisting primarily of internal labor costs) are
capitalized and reported at the lower of amortized cost or estimated realizable
value. Purchased software development cost is recorded at its estimated fair
market value. When a product is ready for general release, its capitalized costs
are amortized using the straight-line method over a period of three years. If
the future market viability of a software product is less than anticipated,
impairment of the related unamortized development costs could occur, which could
significantly impact the recorded loss of the Company. Amortization expense was
$55,000 and $27,000 for the three months ended December 31, 2009 and 2008,
respectively, and $106,000 and $85,000 for the six months ended December 31,
2009 and 2008, respectively.
Amortizable
Intangible Assets
Intangible
assets that have finite useful lives be amortized over their useful lives.
Amortizable intangible assets consist of completed software technology,
customer relationships and automotive data services and are recorded at cost.
Completed software technology and customer relationships are amortized using the
straight-line method over their estimated useful lives of 8 to 10 years, and
automotive data services are amortized using the straight-line method over their
estimated useful lives of 20 years. Amortization expense on amortizable
intangible assets was $181,000 and $187,000 for the three months ended December
31, 2009 and 2008, respectively, and $362,000 and $359,000 for the six months
ended December 31, 2009 and 2008, respectively.
Goodwill
Goodwill
and intangible assets that have indefinite useful lives are not to be amortized
but rather be tested at least annually for impairment.
Goodwill
is subject to impairment reviews by applying a fair-value-based test at the
reporting unit level, which generally represents operations one level below the
segments reported by the Company. An impairment loss is recorded for any
goodwill that is determined to be impaired, which resulted in an $850,000
impairment charge in fiscal 2009. The impairment related to ASNA as a
result of continuing operating losses and less optimistic operating forecasts.
The estimated fair value of ASNA was determined using present value techniques.
There can be no assurance, however, that market conditions will not change or
demand for the Company’s products and services will continue which could result
in additional impairment of goodwill in the future. The Company performs
impairment testing on all existing goodwill at least annually.
F-8
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
For the
six months ended December 31, 2009, goodwill activity was as
follows:
$
|
9,548,000
|
|||
Effect
of exchange rate changes
|
(255,000
|
)
|
||
Balance,
December 31, 2009
|
$
|
9,293,000
|
Long-Lived
Assets
The
Company’s management assesses the recoverability of long-lived assets (other
than goodwill discussed above) upon the occurrence of a triggering event by
determining whether the depreciation and amortization of long-lived assets over
their remaining lives can be recovered through projected undiscounted future
cash flows. The amount of long-lived asset impairment, if any, is measured based
on fair value and is charged to operations in the period in which long-lived
asset impairment is determined by management. At December 31, 2009, the
Company’s management believes there is no impairment of its long-lived assets.
There can be no assurance, however, that market conditions will not change or
demand for the Company’s products and services will continue, which could result
in impairment of long-lived assets in the future.
Issuance
of Stock to Non-Employees for Non-Cash Consideration
All
issuances of the Company’s stock to non-employees for non-cash consideration
have been assigned a per share amount equaling either the market value of the
shares issued or the value of consideration received, whichever is more readily
determinable. The majority of the non-cash consideration received pertain to
services rendered by consultants and others.
The
measurement date for the fair value of the equity instruments issued is
determined at the earlier of (i) the date at which a commitment for performance
by the consultant or vendor is reached or (ii) the date at which the consultant
or vendor’s performance is complete. In the case of equity instruments issued to
consultants, the fair value of the equity instrument is recognized over the term
of the consulting agreement. An asset acquired in exchange for the
issuance of fully vested, non-forfeitable equity instruments should not be
presented or classified as an offset to equity on the grantor’s balance sheet
once the equity instrument is granted for accounting purposes.
Stock-Based
Compensation
For
valuing stock options awards, the Company has elected to use the Black-Scholes
valuation model. For the expected term, the Company has historically
used a simple average of the vesting period and the contractual term of the
option. Volatility is a measure of the amount by which the Company’s stock price
is expected to fluctuate during the expected term of the option. For volatility
the Company considers its own volatility as applicable for valuing its options
and warrants. Forfeitures are estimated at the time of grant and
revised, if necessary, in subsequent periods if actual forfeitures differ from
those estimates. The risk-free interest rate is based on the relevant US
Treasury Bill Rate at the time each grant. The dividend yield represents the
dividend rate expected to be paid over the option’s expected term; the Company
currently has no plans to pay dividends.
On June
12, 2008, the Company’s shareholders approved the Aftersoft Group Inc. 2007
Long-Term Stock Incentive Plan. The maximum aggregate number of shares of common
stock that may be issued under the plan, including stock awards, and stock
appreciation rights is limited to 15% of the shares of common stock outstanding
on the first trading day of any fiscal year. The Company issued restricted
shares to its management and board members in fiscal 2009 and to
board members in fiscal 2010 under this plan (see Note 7).
F-9
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
Revenue
Recognition
Software
license revenue is recognized when persuasive evidence of an arrangement exists,
delivery of the product component has occurred, the fee is fixed and
determinable, and collectability is probable. If any of these criteria are not
met, revenue recognition is deferred until such time as all of the criteria are
met.
The
Company accounts for delivered elements in accordance with the residual method
when arrangements include multiple product components or other elements and
vendor-specific objective evidence exists for the value of all undelivered
elements. Revenues on undelivered elements are recognized once delivery is
complete.
In those
instances where arrangements include significant customization, contractual
milestones, acceptance criteria or other contingencies (which represents the
majority of the Company’s arrangements), the Company accounts for the
arrangements using contract accounting, as follows:
|
1)
|
When customer acceptance can be
estimated, expenditures are capitalized as work in process and deferred
until completion of the contract at which time the costs and revenues are
recognized.
|
|
2)
|
When customer acceptance cannot
be estimated based on historical evidence, costs are expensed as incurred
and revenue is recognized at the completion of the contract when customer
acceptance is obtained.
|
The
Company records amounts collected from customers in excess of recognizable
revenue as deferred revenue in the accompanying consolidated balance
sheet.
Revenues
for maintenance agreements, software support, on-line services and information
products are recognized ratably over the term of the service
agreement.
Advertising
Expense
The
Company expenses advertising costs as incurred. For the three months ended
December 31, 2009 and 2008, advertising expense totaled $4,000 and $18,000,
respectively. For the six months ended December 31, 2009 and 2008, advertising
expense totaled $32,000 and $28,000, respectively.
Foreign
Currency
Management
has determined that the functional currency of its subsidiaries is the local
currency. Assets and liabilities of the UK subsidiaries are translated into US
dollars at the period-end exchange rates. Income and expenses are translated at
an average exchange rate for the period and the resulting translation (loss)
adjustments are accumulated as a separate component of stockholders’ equity,
which totaled ($234,000) and ($2,595,000) for the three months ended December
31, 2009 and 2008, respectively, and ($108,000) and ($3,643,000) for the six
months ended December 31, 2009 and 2008, respectively.
Foreign
currency gains and losses from transactions denominated in other than respective
local currencies are included in income. The Company had no foreign currency
transaction gains (losses) for any period presented.
F-10
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
Comprehensive
Loss
Comprehensive
loss includes all changes in equity (net assets) during a period from non-owner
sources. For the three and six months ended December 31, 2009, the components of
comprehensive loss consist of changes in foreign currency translation gains
(losses). For the three and six months ended December 31, 2008,
comprehensive loss also consisted of changes in unrealized loss on investments
in available-for-sale securities.
Income
Taxes
Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period the enactment occurs.
Deferred taxation is provided in full in respect of taxation deferred by timing
differences between the treatment of certain items for taxation and accounting
purposes. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
Basic
and Diluted Earnings (Loss) Per Share
Basic
earnings (loss) per common share are computed based on the weighted average
number of shares outstanding for the period. Diluted earnings (loss) per share
are computed by dividing net income (loss) by the weighted average shares
outstanding assuming all potential dilutive common shares were issued. During
periods in which the Company incurs losses, common stock equivalents, if any,
are not considered, as their effect would be anti-dilutive. For the
three and six months ended December 31, 2009 and 2008, there were no dilutive
shares. A total of 22,498,135 common stock purchase warrants and debt
convertible into 3,386,616 shares were excluded from the computation of diluted
loss per share as their effect would have been anti-dilutive for the three and
six months ended December 31, 2009. For the three and six months ended December
31, 2008 a total of 21,798,135 common stock purchase warrants and debt
convertible into 3,361,345 shares were excluded from the computation of diluted
loss per share as their effect would have been anti-dilutive.
Recent
Accounting Pronouncements
In
September 2009, the accounting standard regarding multiple deliverable
arrangements was updated to require the use of the relative selling price method
when allocating revenue in these types of arrangements. This method allows
a vendor to use its best estimate of selling price if neither vendor specific
objective evidence nor third party evidence of selling price exists when
evaluating multiple deliverable arrangements. This standard update must be
adopted no later than July 1, 2010 and may be adopted prospectively for
revenue arrangements entered into or materially modified after the date of
adoption or retrospectively for all revenue arrangements for all periods
presented. The Company is currently evaluating the impact this standard update
will have on its consolidated financial statements.
In
September 2009, the accounting standard regarding arrangements that include
software elements was updated to require tangible products that contain software
and non-software elements that work together to deliver the products essential
functionality to be evaluated under the accounting standard regarding multiple
deliverable arrangements. This standard update must be adopted no later than
July 1, 2010 and may be adopted prospectively for revenue arrangements
entered into or materially modified after the date of adoption or
retrospectively for all revenue arrangements for all periods presented. The
Company is currently evaluating the impact this standard update will have on its
consolidated financial statements.
F-11
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
In
January 2010, the Financial Accounting Standards Board issued guidance to amend
the disclosure requirements related to recurring and nonrecurring fair value
measurements. The guidance requires new disclosures on the transfers of assets
and liabilities between Level 1 (quoted prices in active market for identical
assets or liabilities) and Level 2 (significant other observable inputs) of the
fair value measurement hierarchy, including the reasons and the timing of the
transfers. Additionally, the guidance requires a roll forward of activities on
purchases, sales, issuance, and settlements of the assets and liabilities
measured using significant unobservable inputs (Level 3 fair value
measurements). The guidance will become effective for the Company with the
reporting period beginning January 1, 2010, except for the disclosure on the
roll forward activities for Level 3 fair value measurements, which will become
effective for the Company with the reporting period beginning July 1, 2011.
Other than requiring additional disclosures, adoption of this new guidance will
not have a material impact on the Company’s consolidated financial
statements.
Effective
July 1, 2009, the Company adopted the accounting standard that provides
guidance for determining whether an equity-linked financial instrument, or
embedded feature, is indexed to an entity’s own stock. The standard
applies to any freestanding financial instruments or embedded features that have
the characteristics of a derivative, and to any freestanding financial
instruments that are potentially settled in an entity’s own common stock. As a
result of the adoption, 5,083,333 of the Company’s issued and outstanding common
stock purchase warrants previously treated as equity pursuant to the derivative
treatment exemption were no longer afforded equity treatment. These warrants
have an average exercise price of $0.21 and expiration dates of December 31,
2013. In addition, amounts related to the embedded conversion feature of
convertible notes issued previously treated as equity pursuant to the derivative
treatment exemption were also no longer afforded equity treatment. As such,
effective July 1, 2009, the Company reclassified the fair value of these common
stock purchase warrants and recorded the fair value of the embedded conversion
features, which both have exercise price reset features, from equity to
liability status as if these warrants and embedded conversion features were
treated as a derivative liability since the earliest date of issue in December
2007. On July 1, 2009, the Company reclassified from additional paid-in
capital, as a cumulative effect adjustment, approximately $868,000 to derivative
liabilities, increased the debt discount and derivative liabilities by a gross
amount of approximately $310,000, decreased accumulated deficit by approximately
$619,000 for the change in fair value of derivative liabilities for the period
from December 2007 through June 30, 2009 and increased accumulated deficit by
approximately $158,000 for additional amortization of debt discount for the
period from December 2007 through June 30, 2009. The fair value of the common
stock purchase warrants was approximately $235,000 and the embedded conversion
feature was approximately $8,000 on December 31, 2009. The total
value of these derivative liabilities declined from $558,000 to $243,000 for the
six months ended December 31, 2009 and from approximately $520,000 to $243,000
for the three months ended December 31, 2009. As such, the Company recognized
approximately $315,000 gain from the change in fair value of the derivative
liabilities for the six months ended December 31, 2009 and $277,000 for the
three months ended December 31, 2009.
All
future changes in the fair value of these warrants and embedded conversion
features will be recognized in earnings until such time as the warrants are
exercised or expire and the debt is converted to common stock or repaid. These
common stock purchase warrants and conversion feature do not trade in an active
securities market, and as such, the Company estimates the fair value of these
warrants and conversion feature using the Black-Scholes option pricing model
using the following assumptions:
December
31
|
July
1,
|
|||||||
2009
|
2009
|
|||||||
Annual
dividend yield
|
0.0
|
%
|
0.0
|
%
|
||||
Expected
life (years)
|
1.00
- 4.00
|
4.50
|
||||||
Risk-free
interest rate
|
0.45%-2.65
|
%
|
0.54%-2.51
|
%
|
||||
Expected
volatility
|
146
|
%
|
175
|
%
|
F-12
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
Expected
volatility is based primarily on historical volatility. Historical volatility
was computed using weekly pricing observations for recent periods. The Company
believes this method produces an estimate that is representative of the
Company’s expectations of future volatility over the expected term of these
warrants and conversion features. The Company currently has no reason to believe
future volatility over the expected remaining life of these warrants and
conversion feature is likely to differ materially from historical volatility.
The expected life is based on the remaining term of the warrants and conversion
features. The risk-free rate is based on the US Treasury rate that corresponds
to the expected term of the warrants and conversion feature.
Determining
which category an asset or liability falls within the hierarchy requires
significant judgment. The Company evaluates its hierarchy disclosures each
quarter. Liabilities measured at fair value on a recurring basis are summarized
as follows (unaudited):
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
Fair
Fair value of warrants
|
-
|
$
|
-
|
$
|
235,000
|
$
|
235,000
|
|||||||||
Fair
Fair value of embedded conversion feature related to convertible
notes
|
-
|
-
|
$
|
8,000
|
$
|
8,000
|
||||||||||
Total
|
$
|
-
|
$
|
-
|
$
|
243,000
|
$
|
243,000
|
The
following table details the approximate fair value measurements within the fair
value hierarchy of the Company’s derivative liabilities using Level 3
Inputs:
Balance
as of June 30, 2009
|
$
|
-
|
||
Cumulative
effect of adoption
|
558,000
|
|||
Change
in fair value
|
(315,000
|
)
|
||
Balance
as of December 31, 2009
|
$
|
243,000
|
The
Company has no assets that are measured at fair value on a recurring basis.
There were no assets or liabilities measured at fair value on a non-recurring
basis during the three and six months ended December 31, 2009.
NOTE 3. TRANSACTIONS WITH FORMER PARENT
COMPANY
On
November 24, 2008 (the “Dividend Distribution Date”), ADNW distributed the
dividend of the 71,250,000 shares of the Company’s common stock that ADNW owned
at such time in order to complete the spin-off of Aftersoft’s businesses. The
dividend shares were distributed in the form of a pro rata dividend to the
holders of record as of November 17, 2008 (the “Record Date”) of ADNW’s common
and convertible preferred stock. Each holder of record of shares of ADNW common
and preferred stock as of the close of business on the Record Date was entitled
to receive 0.6864782 shares of the Company’s common stock for each share of
common stock of ADNW held at such time, and/or for each share of ADNW common
stock that such holder would own, assuming the convertible preferred stock owned
on the Record Date was converted in full. Prior to the spin-off, ADNW
owned approximately 77% of the Company’s issued and outstanding common stock.
Subsequent to and as a result of the spin-off, the Company is no longer a
subsidiary of ADNW.
ADNW
attempted to settle an old outstanding obligation of ADNW of $775,000 with Mr.
Blumenthal (see Note 6) for 4,400,000 shares of ADNW common stock. The value of
the shares declined and Mr. Blumenthal elected not to accept the ADNW shares as
full compensation, and later demanded that the Company settle ADNW’s liability
with additional or different consideration. In April 2008, the Company accepted
the 4,400,000 shares from ADNW valued at $484,000 in exchange for attempting to
settle ADNW’s liability. The difference between the value of the ADNW shares and
the amount of ADNW’s initial obligation of $291,000 was recorded as general and
administrative expense in the consolidated statement of operations during such
period.
F-13
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
In August
2009, the Company received correspondence from Mr. Blumenthal (see Note
6).
During
the year ended June 30, 2009, the Company liquidated 5,231,622 common shares of
ADNW for net proceeds of $889,000, and issued 2,000,000 common shares of ADNW in
settlement of ADNW obligations. As a result of the Company’s ownership of
certain ADNW securities, the Company received approximately 13,965,295 shares of
its own common stock in connection with the spin-off dividend
distribution. On December 31, 2008, the Company retired 13,722,112 of
the shares. The remaining 243,183 shares were used by the Company for rounding
of fractional shares issued in respect of the spin-off dividend, to make
adjustments for the benefit of the holders of ADNW’s Series B Convertible
Preferred Stock which received fewer shares in connection with the spin-off than
the number to which they were entitled as a result of a calculation error
relating to the Series B conversion rate, and for other minor
adjustments.
As a
result of the above transactions, the Company no longer owns any shares of ADNW
stock as of June 30, 2009.
NOTE 4. INVESTMENT IN AVAILABLE -FOR-SALE
SECURITIES
The
Company received a total of 4,433,284 shares of First London PLC (formerly First
London Securities) from the sale of EXP. The shares had been listed for trading
on the London Plus Exchange, but effective September 30, 2009, the shares were
delisted.
The
Company owns approximately 3% of the outstanding shares of First London PLC, and
completely wrote down its investment and recognized a loss of $4,723,000 because
of an other-than-temporary impairment as of June 30, 2009. The recognition of
this impairment loss in the statement of operations resulted in the reversal in
other comprehensive loss of a previously unrealized loss of $184,000 for
the year ended June 30, 2009. At December 31, 2008, investments consist of
corporate stock with an unrealized loss of $932,000.
Factors
considered in determining whether impairments are other-than-temporary include
(i) the length of time and extent to which fair value has been less than
the amortized cost basis, (ii) the financial condition and near-term
prospects of the investee and (iii) the Company’s intent and ability to
hold an investment for a period of time sufficient to allow for any anticipated
recovery in market value.
NOTE 5. LONG -TERM DEBT
Long-term
debt consists of the following as of December 31, 2009 and June 30,
2009:
December 31,
2009
|
June 30,
2009
|
|||||||
ComVest
term loan, net of debt discount of $229,000 and $303,000
|
$
|
4,771,000
|
$
|
4,697,000
|
||||
ComVest
revolver
|
1,000,000
|
1,000,000
|
||||||
Secured
notes
|
324,000
|
388,000
|
||||||
McKenna
note
|
42,000
|
150,000
|
||||||
Homann
note
|
-
|
63,000
|
||||||
Other
notes
|
13,000
|
13,000
|
||||||
6,150,000
|
6,311,000
|
|||||||
Less
current portion
|
(5,933,000
|
)
|
(1,598,000
|
)
|
||||
Long
term portion
|
$
|
217,000
|
$
|
4,713,000
|
F-14
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
ComVest
Loan Agreement
On
December 21, 2007, the Company entered into a Revolving Credit and
Term Loan Agreement (the “Loan Agreement”) with ComVest Capital LLC (“ComVest”),
as lender, pursuant to which ComVest agreed to extend a $1,000,000 secured
revolving Credit Facility and a $5,000,000 Term Loan. The Loan Agreement
contains customary affirmative and negative covenants, including maximum limits
for capital expenditures per fiscal year, and ratios for liquidity. In
connection with obtaining a waiver for a violation of loan covenants at March
31, 2008, the Company reduced the exercise price from $0.3125 per share to $0.11
per share for one million warrants held by ComVest (see below), recognizing the
incremental fair value of the modified warrants of $24,000 as additional
interest expense.
As of
June 30, 2008, in connection with obtaining a waiver for a violation of loan
covenants, the Company and ComVest amended the Loan Agreement and modified
certain covenants. The cash flow ratio coverage was reduced and the lender
agreed to extend from January 1, 2009 until January 1, 2010 the start of the
loan amortization. As part of the amendment, ComVest required the Company to
reduce the exercise price from $0.39 to $0.11 for 2,000,000 warrants held by
ComVest (see below). The incremental fair value of the modified warrants is
$15,000, which was recorded as an additional debt discount and is being
amortized over the remaining life of the term loan.
As of
December 31, 2008, in connection with obtaining a waiver for violation of
certain loan covenants, the Company and ComVest agreed to increase the interest
on the $1,000,000 Credit Facility (described below) from 9.5% to 11%. The
amendment did not meet the requirements of a Modification or Exchange of Debt
Instruments, therefore no adjustment to the financial statements was
required.
Pursuant
to a waiver and amendment, the annual interest rate was restored to 9.5% as the
Company became compliant with the covenant as of the close of the quarter ended
on March 31, 2009.
Effective
April 22, 2009, the Company and ComVest amended the loan agreement and modified
certain covenants relating to the required ratio of (a) Earning Before Interest,
Depreciation, and Amortization, minus capital expenditures incurred to (b) debt
service (all interest and principal payments) ("Debt Service") (the "EBIDA
Ratio") contained in the Loan Agreement (the "Covenant"). Pursuant to the April
22, 2009 Amendment, the Covenant requires that the applicable minimum EBIDA
Ratio be met as of the end of the quarter for such fiscal quarter. Prior to the
April 22, 2009 Amendment, the Covenant required that the applicable minimum
EBIDA Ratio be met as of the end of each quarter of any fiscal year for the four
(4) consecutive quarters then ended. The minimum EBIDA Ratios
themselves were not modified by the April 22, 2009 Amendment, and remain at
0.71:1.00 for the quarter ended March 31, 2009; 0.50:1.00 for the quarter ended
June 30, 2009; and 1.25:1.00 for the quarter ended on and after September 30,
2009.
After
obtaining the above waivers, the Company is not in violation of any loan
covenants at each of the periods ended December 31, 2009 and June 30,
2009.
Credit Facility and Revolving Credit
Note. Pursuant to the terms of the Loan Agreement, the Credit Facility
became available on December 21, 2007 (the “Closing Date”), and the initial
maturity date was November 30, 2009. The Company had the option of
extending the maturity date of the Credit Facility for one additional year,
through November 30, 2010 upon written notice to ComVest provided that no
default or event of default have occurred and are continuing at that time, and
provided that the maturity date of the Credit Facility has not been accelerated
due to prepayment in full of the Term Loan. On September 9,
2009 the Company notified ComVest of its election to extend the
maturity date of the credit facility to November 30, 2010.
F-15
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
The
Credit Facility provides for borrowing capacity of an amount up to (at any time
outstanding) the lesser of the borrowing base at the time of each advance under
the Credit Facility, or $1,000,000. The borrowing base at any time is an amount
determined in accordance with a borrowing base report the Company is required to
provide to ComVest, based upon the Company’s Eligible Accounts and Eligible
Inventory, as such terms are defined in the Loan Agreement.
In
connection with the Credit Facility, the Company issued a Revolving Credit Note
(the “Credit Note”) payable to ComVest in the principal amount of $1,000,000,
bearing interest at a rate per annum equal to the greater of (a) the prime rate,
as announced by Citibank, N.A. from time to time, plus two percent (2%), or (b)
nine and one-half percent (9.5%). The interest rate, which was 9.5% from the
Closing Date through December 31, 2008, had been increased from 9.5% to 11% in
connection with obtaining a waiver from ComVest for violation of certain loan
covenants as described above. As of April 1, 2009, the
Company had regained compliance with the loan covenants and the interest rate
was reduced from 11% back to 9.5%. The applicable interest rate will be
increased by four hundred (400) basis points during the continuance of any event
of default under the Loan Agreement. Interest is computed on the daily unpaid
principal balance and is payable monthly in arrears on the first day of each
calendar month commencing January 1, 2008. Interest is also payable upon
maturity or acceleration of the Credit Note.
The
Company has the right to prepay all or a portion of the principal balance on the
Credit Note at any time, upon written notice, with no penalty. The Credit Note
is secured pursuant to the provisions of certain Security
Documents.
The
Company also has the option to terminate the Credit Facility at any time upon
five business days’ prior written notice, and upon payment to ComVest of all
outstanding principal and accrued interest of the advances on the Credit
Facility, and prorated accrued commitment fees. The Credit Facility commitment
also terminates, and all obligations become immediately due and payable, upon
the consummation of a Sale, which is defined in the Loan Agreement as certain
changes of control or sale or transfers of a material portion of the Company’s
assets.
At
December 31, 2009, the Company had drawn down the $1,000,000 Credit Facility in
full. The interest rate as of December 31, 2009 was
9.5%.
Term Loan and Convertible Term Note.
Pursuant to the terms of the Loan Agreement, ComVest extended to the
Company a Term Loan in the principal amount of $5,000,000, on the Closing Date.
The Term Loan is a one-time loan, and unlike the Credit Facility, the principal
amount is not available for re-borrowing.
The Term
Loan is evidenced by a Convertible Term Note (the “Term Note”) issued by the
Company on the Closing Date, and payable to ComVest in the principal amount of
$5,000,000. The Term Note bears interest at a rate of eleven percent (11%) per
annum, except that during the continuance of any event of default, the interest
rate will be increased to sixteen percent (16%).
As
amended (see ”ComVest Loan Agreement” above), the Term Note is repayable in 11
equal monthly installments of approximately $208,333, payable on first day of
each calendar month commencing January 1, 2010 through November 1, 2010, with
the balance of $2,708,333 due on November 30, 2010.
The
Company has the option to prepay the principal balance of the Term Note in whole
or in part, at any time, upon 15 days’ prior written notice. The Company will be
required to prepay the Term Loan in whole or part under certain circumstances.
In the event that the Company prepays all or a portion of the Term Loan, the
Company will ordinarily pay a prepayment premium in an amount equal to (i) three
percent (3%) of the principal amount being prepaid if such prepayment is made or
is required to be made on or prior to the second anniversary of the Closing
Date, and (ii) one percent (1%) of the principal amount being prepaid if such
prepayment is made or is required to be made subsequent to the second
anniversary of the Closing Date.
F-16
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
The
principal and interest payable on the Term Note is convertible into shares of
the Company’s common stock at the option of ComVest. In addition, the
Company may require conversion of the principal and interest under certain
circumstances. The initial conversion price was $1.50 per
share. The number of shares issuable upon conversion of the
Term Note (the “Conversion Shares”), and/or the conversion price, may be
proportionately adjusted in the event of any stock dividend, distribution, stock
split, stock combination, stock consolidation, recapitalization or
reclassification or similar transaction. In addition, the number of Conversion
Shares, and/or the conversion price may be adjusted in the event of certain
sales or issuances of shares of the Company’s common stock, or securities
entitling any person to acquire shares of common stock, at any time while the
Term Note is outstanding, at an effective price per share which is less than the
then-effective conversion price of the Term Note (see Note
2).
On July
3, 2008, the conversion price for the Term Note was reduced from $1.50 to $1.49
as a result of certain anti-dilution protection contained therein following the
issuance by the Company of additional shares of common stock and warrants to
purchase common stock. Consequently, the number of shares issuable upon
conversion of the principal amount of the Tern Note was increased to 3,361,345
shares from 3,333,333 shares, which was accounted for in the change in fair
value of derivative liabilities.
On
December 31, 2009, the conversion price for the Term Note was reduced from $1.49
to $1.48 as a result of certain anti-dilution protection contained therein
following the issuance by the Company of additional shares of common stock and
warrants to purchase common stock. Consequently, the number of shares issuable
upon conversion of the principal amount of the Tern Note was increased to
3,386,616 shares from 3,361,345 shares, which was accounted for in the change in
fair value of derivative liabilities.
The
Company incurred a closing fee of $100,000 in connection with the Term Loan. In
connection with the Credit Facility, the Company has agreed to pay an annual
commitment fee of $15,000, on December 1 of each year, commencing December 1,
2008, and on any termination date (pro-rated, if applicable), that the Credit
Facility is in effect, as well as a collateral monitoring and administrative fee
of $1,500 per month.
The
expenses of this financing were approximately $641,000, which included a
finder’s fee of $300,000, lender fees of $190,000 and professional and due
diligence fees of approximately $151,000. The net proceeds to the Company were
approximately $4,359,000. The fees were allocated between debt issuance costs
and debt discount. The debt issuance costs of $478,000 were recorded on the date
of entering into the agreement in other assets in the accompanying consolidated
balance sheets and are being amortized and charged to interest expense over the
term of the loan using the effective interest method. The balance of the Debt
issuance costs was approximately $44,000 as of December 31, 2009 and is included
in Other long-term assets in the accompanying consolidated balance
sheet. Amortization of the issuance costs was approximately $38,000
and $89,000 for the three and six months ended December 31, 2009, respectively,
and $66,000 and $132,000 for the three and six months ended December 31,2008,
respectively. A debt discount of $163,000 was recorded in the consolidated
balance sheet on the date of entering into the agreement as a reduction in the
carrying value of the debt, and is being amortized and charged to interest
expense over the term of the loan using the effective interest method. The
Company also issued warrants to ComVest to purchase shares of the Company’s
Common Stock (see below). The relative fair value of these warrants was
approximately $868,000 and recorded in the debt discount. Additionally, due to
the adoption of the accounting standard that provides guidance for determining
whether an equity-linked financial instrument, or embedded feature, is indexed
to an entity’s own stock, the Company recorded an additional $310,000 of debt
discount as if incurred on the date of the agreement (see Note
2). The balance of the debt discount is approximately $229,000 as of
December 31, 2009.
F-17
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
Warrants. In connection with
the Loan Agreement, the Company issued warrants to ComVest to purchase the
following amounts of shares of the Company’s Common Stock, exercisable after the
Closing Date and expiring December 31, 2013: a) Warrant to purchase 1,000,000
shares of common stock at an exercise price of $0.3125 per share; b) Warrant to
purchase 2,000,000 shares of common stock at an exercise price of $0.39 per
share; and c) Warrant to purchase 2,083,333 shares of common stock at an
exercise price of $0.3625 per share; (each, a “Warrant”) (the 5,083,333 shares
collectively issuable upon exercise of the Warrants are referred to herein as
the “Warrant Shares”). The exercise prices of certain of these
warrants were amended, as described under “ComVest Loan Agreement” above. The relative fair value
of the Warrant Shares is $868,000 using a Black Scholes valuation model and also
contains a cashless exercise feature. The warrant valuation was
computed using a 3.5% risk-free interest rate, a 99% volatility and a six-year
life. The value of the Warrant Shares is included in debt discount, is recorded
in the consolidated balance sheet as a reduction in the carrying value of the
debt, and is being amortized and charged to interest expense over the term of
the loan using the effective interest method.
The
number of shares issuable upon exercise of the Warrants, and/or the applicable
exercise prices, may be proportionately adjusted in the event of any stock
dividend, distribution, stock split, stock combination, stock consolidation,
recapitalization or reclassification or similar transaction. In addition, the
number of shares issuable upon exercise of the Warrant Shares, and/or the
applicable exercise prices may be adjusted in the event of certain issuances of
shares of the Company’s common stock, or securities entitling any person to
acquire shares of common stock, at any time while the Warrants are outstanding,
at an effective price per share which is less than the then-effective exercise
prices of the Warrants.
The
Company also granted certain registration rights and piggyback registration
rights to the holder(s) of the securities underlying the Term Note and
Warrants. The registration for the sales of the securities underlying
the Term Note and Warrants was declared effective by the Securities and Exchange
Commission on May 1, 2009.
The
Company issued warrants to purchase 250,000 shares of common stock as
compensation to a consultant for assistance in securing the $5,000,000 Term
Loan. The warrants were valued at $42,000 using a Black-Scholes valuation model
and are included in debt issuance cost. The warrant valuation was computed using
a 3.5% risk free interest rate, a 99% volatility and a six-year
life.
Amortization
of debt discount was $86,000 and $139,000, and amortization of debt issuance
costs was $14,000 and $66,000, for the three months ended December 31, 2009 and
2008, respectively. Amortization of debt discount was $192,000 and $277,000, and
amortization of debt issuance costs was $34,000 and $132,000 for the six months
ended December 31, 2009 and 2008, respectively. The unamortized debt
discount related to the debt issuance costs, the warrants and the conversion
feature was $11,000, $179,000 and $39,000, respectively.
Homann
Note
The
Company repaid the note payable to Homann Tire LTD (“Homann”) during the three
months ended September 30, 2009. This note in the principal
amount of $125,000, with interest at 8% per annum, had an initial maturity date
of April 29, 2009. The terms of the note included interest only payments of $833
per month. A principal payment of $25,000 was made in April 2007. The remaining
balance of $125,000 was payable on April 2009. On April 3,
2009, the Company amended the payment terms and agreed to repay the note in six
monthly installments of $21,450 which includes interest at 10%. The
amendment did not meet the requirements of a Modification or Exchange of Debt
Instruments, therefore no adjustment to the financial statements was required.
The final payment was made in September 2009.
F-18
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
McKenna
Note
The
Company issued an unsecured note payable to Mr. A. McKenna in the original
amount of $825,000, which was due July 2009, with interest at 8% per annum,
payable in 24 monthly installments of $37,313 including interest. The Company is
currently paying $18,650 per month including interest pursuant to the current
payment schedule and the note will be fully paid by March 2010. In
February 2009, the Company orally advised Mr. McKenna that it would reduce the
monthly payment to the current $18,650 per month, but there is no written
amendment to the note between the Company and Mr. McKenna. Since
February 2009, the note holder has accepted the reduced monthly payments, and
has not notified the Company of any violations of the terms and conditions of
the payment agreement. The Company expects to satisfy this obligation from
free cash flow.
Secured
Notes
The
Company has secured notes totaling $324,000 payable over 12 to 48 months with
monthly payments of $4,137 and quarterly payments of $6,278. The
notes bear interest rates of 5.49% to 9.54% and are secured by leasehold
improvements and equipment with a carrying value of $324,000.
NOTE 6. COMMITMENTS AND
CONTINGENCIES
Legal
Matters
From time
to time, the Company is subject to various legal claims and proceedings arising
in the ordinary course of business. The ultimate disposition of these
proceedings could have a materially adverse effect on the consolidated financial
position or results of operations of the Company.
(1)
|
On
August 1, 2007, the Company and Mr. McKenna entered into an agreement that
settled all outstanding actions by Mr. McKenna against the Company and its
subsidiaries related to the initial action against CarParts Technologies,
Inc., which is now known as ASNA. Pursuant to the settlement, the Company
paid Mr. McKenna $2,000,000 in cash, issued him an 8% promissory note in
the principal amount of $825,000, which is payable over 24 months, and
issued Mr. McKenna 1,718,750 shares of the Company’s Common Stock, which
represented $825,000 at a value of $0.48 per share (the closing price of
the Company’s Common Stock on the date of settlement). Mr. McKenna was
also entitled to warrants to purchase an equivalent number of shares of
Common Stock at the same price. Upon entering this agreement all parties
agreed to withdraw all existing litigation and claims. The Company
finalized its agreement with McKenna on December 6, 2007 and revised its
litigation accrual to $3,650,000 to reflect the settlement. The shares
were issued in August 2007. In November 2007, the Company amended the
settlement agreement and issued 1,718,750 warrants to purchase Common
Stock for $0.48 per share. The warrants were issued to replace the Common
Stock included in the settlement agreement. In February 2009, the Company
orally advised Mr. McKenna that it would reduce the monthly payment on the
note to $18,650 per month from $37,313 per month, but there is no written
amendment to the note between the Company and Mr.
McKenna. Since February 2009, the note holder has accepted the
reduced monthly payments, and has not notified the Company of any
violations of the terms and conditions of the payment agreement. The
Company expects to satisfy this obligation from free cash
flow.
|
(2)
|
The
Company entered into a settlement agreement with Mr. Arthur Blumenthal, a
former shareholder of Anderson BDG, Inc. Mr. Blumenthal’s lawsuit against
the Company’s parent ADNW emanated from an agreement Mr. Blumenthal had
with a subsidiary of the Company, ASNA (f/k/a CarParts Technologies, Inc.)
for the purchase of Anderson BDG, that had not been settled although it
was past due. The Company assumed the liability as part of a plan of
spinning off certain businesses into the Company and renegotiated the
agreement with Mr. Blumenthal, the terms of which required the Company to
make a payment of $50,000 cash and the issuance to Mr. Blumenthal and
registration of 300,000 shares of the Company’s common stock, which were
issued in fiscal 2007 and valued at $0.48 per share, (the closing price of
the Company’s common stock on the date of settlement) or $144,000. The
Company subsequently completely settled the lawsuit with Mr. Blumenthal
and repaid his notes in fiscal
2008.
|
F-19
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
On August
21 2009, the Company’s counsel received two notifications on behalf of the
Company from Mr. Blumenthal’s counsel. One letter makes certain demands on the
Company in respect of Mr. Blumenthal’s sale of the software program VAST to one
of the Company’s predecessor organizations, and asserts that the Company owes
Mr. Blumenthal $936,776. The second letter asserts certain rights of Mr.
Blumenthal with respect to his employment with the Company and asserts that the Company owes Mr.
Blumenthal approximately $136,612. Since the fall of 2009, the Company has had
ongoing discussions with Mr. Blumenthal’s attorneys in an effort to resolve
without litigation matters surrounding Mr. Blumenthal’s claims. As a gesture to
demonstrate good faith, the Company paid to Mr. Blumenthal $60,000 during
December 2009 and has paid $40,000 subsequent to the close of the quarter,
during the pendency of negotiations. These negotiations to try to reach a
good faith settlement with Mr. Blumenthal are continuing however, based on the
negotiations through the date of this quarterly report, the Company is uncertain
whether a settlement will be attainable. Should a settlement not be reached,
there is a strong likelihood that litigation will be commenced. The
Company intends to vigorously defend itself.
Indemnities
and Guarantees
The
Company has made certain indemnities and guarantees, under which it may be
required to make payments to a guaranteed or indemnified party, in relation to
certain actions or transactions. The Company indemnifies its directors,
officers, employees and agents, as permitted under the laws of the State of
Delaware. In connection with its facility leases, the Company has indemnified
its lessors for certain claims arising from the use of the facilities. In
connection with its customers’ contracts the Company indemnifies the customer
that the software provided does not violate any US patent. The duration of the
guarantees and indemnities varies, and is generally tied to the life of the
agreement. These guarantees and indemnities do not provide for any limitation of
the maximum potential future payments the Company could be obligated to make.
Historically, the Company has not been obligated nor incurred any payments for
these obligations and, therefore, no liabilities have been recorded for these
indemnities and guarantees in the accompanying consolidated balance
sheet.
The
Company has agreed to indemnify ComVest and its directors, officers, employees,
attorneys and agents against, and to hold ComVest and such persons harmless
from, any and all losses, claims, damages and liabilities and related expenses,
including reasonable counsel fees and expenses, they may incur, arising out of,
related to, or as a result of, certain transactions or events in connection with
the Credit Facility and Term Loan (see Note 5).
NOTE 7. STOCKHOLDERS’
EQUITY
On July
3, 2008, the Company sold to an investor group, 5,231,622 shares of ADNW common
stock for $889,000 before fees and expenses. The Company incurred cash expenses
and fees of approximately $48,000 and agreed to issue to the selling agent
five-year warrants to purchase for $0.30 per share 1,000,000 shares of common
stock. The warrants were valued at $137,978 using a Black-Scholes valuation
model, with a risk free interest rate of 1.84 %, a volatility of 117% and a
five-year life. This transaction resulted in a gain of $337,000, which is
recorded as an increase to additional paid-in capital.
During
the quarter ended September 30, 2008, the Company reached an agreement with
three creditors of ADNW, and issued them 2,000,000 shares of ADNW common stock
owned by the Company in satisfaction of certain obligations of ADNW totaling
$140,000. At the time of settlement, the ADNW shares were trading at less than
the carrying value of the shares held by the Company, and the Company incurred a
loss of $53,000 on the settlement, which is recorded as a reduction to
additional paid-in-capital.
During
the quarter ended September 30, 2008, the Company approved the issuance of
483,000 shares to the non-management members of the Board of Directors under the
Company’s 2007 Long-Term Incentive Plan. The shares are being issued over a
three-year period. On October 6, 2008, the Company issued 47,890 shares of these
awards, which were valued at $7,184.
F-20
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
On
October 6, 2008, the Company issued a director of the Company 35,000 shares of
common stock in lieu of $8,750 of cash compensation.
On
November 24, 2008 (the “Dividend Distribution Date”), ADNW distributed the
dividend of the 71,250,000 shares of the Company’s common stock that ADNW owned
at such time in order to complete the spin-off of the Company’s businesses. The
dividend shares were distributed in the form of a pro rata dividend to the
holders of record as of November 17, 2008 (the “Record Date”) of ADNW’s common
and convertible preferred stock. Each holder of record of shares of ADNW common
and preferred stock as of the close of business on the Record Date was entitled
to receive 0.6864782 shares of the Company’s common stock for each share of
common stock of ADNW held at such time, and/or for each share of ADNW common
stock that such holder would own, assuming the convertible preferred stock owned
on the Record Date was converted in full. Prior to the spin-off, ADNW
owned approximately 77% of the Company’s issued and outstanding common stock.
Subsequent to and as a result of the spin-off, the Company is no longer a
subsidiary of ADNW.
As a
result of the Company’s ownership of certain ADNW securities, the Company
received approximately 13,965,295 shares of its own common stock in connection
with the spin-off dividend distribution. On December 31, 2008, the
Company retired 13,730,413 of the shares. The remaining 234,882 shares were used
by the Company for rounding of fractional shares issued in respect of the
spin-off dividend, to make adjustments for the benefit of the holders of ADNW’s
Series B Convertible Preferred Stock which received fewer shares in connection
with the spin-off than the number to which they were entitled as a result of a
calculation error relating to the Series B conversion rate, and for other minor
adjustments. The value of these shares of approximately $29,000 was
recorded as a distribution.
On July
6, 2009, the Company issued 36,537 shares of common stock to certain directors,
which were valued at approximately $4,000, and on October 7, 2009, the Company
issued 125,265 shares of common stock to certain directors, which were valued at
approximately $13,000, each under the Company’s 2007 Long-Term Incentive
Plan.
On
September 30, 2009, the Company issued 149,125 shares of common stock to
certain directors in lieu of cash compensation fees, which were valued at
approximately $15,000.
On
December 31, 2009, the Company issued 700,000 warrants exercisable at $0.08 per
share in settlement of a contract. The estimated fair value of the
warrants is $36,000 using the Black-Scholes valuation model and also
contains a cashless exercise feature. The warrant valuation was
computed using a 2.65% risk-free interest rate, a 146.7% volatility and a
four-year life. The value of the warrants is included in general and
administrative expenses in the consolidated statement of operations and
comprehensive loss.
NOTE
8. SUBSEQUENT EVENTS
On
January 4, 2010, the Company issued 152,679 shares of common stock to
certain directors in lieu of cash compensation fees, which were valued at
$10,688.
On
January 6, 2010, the Company issued 116,765 shares of common stock to certain
directors, which were valued at the $8,171 under the Company’s 2007 Long-Term
Incentive Plan.
Effective
January 31, 2010, Ian Warwick, CEO, and Simon Chadwick, COO, resigned from the
Company. Pursuant to the terms of the Separation Agreements entered into on
January 20, 2010 with Messrs. Warwick and Chadwick, the Company agreed to pay to
them an aggregate of $525,000 in termination payments, payable over six months,
and additional payments of an aggregate of $125,000 if certain events
occur. In connection with their resignations, the Company closed its
Chester UK offices, and moved its principal executive offices to that of its
U.K.-based subsidiary, MAM Software, Ltd., located at Maple Park, Maple Court,
Tankersley, Barnsley, UK S75 3DP.
F-21
AFTERSOFT
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
December
31, 2009
(Unaudited)
Effective
February 1, 2010, Michael Jamieson was appointed to serve as the Company’s
Interim CEO. Mr. Jamieson will also be nominated to the Company’s
Board of Directors, to stand for election at the Company’s upcoming Annual
Meeting of Stockholders, which has been set for April 21, 2010.
F-22
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Some
of the statements contained in this Quarterly Report on Form 10-Q, which are not
purely historical, are forward-looking statements, including, but not limited
to, statements regarding the Company’s objectives, expectations, hopes, beliefs,
intentions or strategies regarding the future. In some cases, you can identify
forward-looking statements by the use of the words “may,” “will,” “should,”
“expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” or “continue” or the negative of those terms or other
comparable terminology. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, our actual results could differ
materially from those disclosed in these statements due to various risk factors
and uncertainties affecting our business. We caution you not to place undue
reliance on these forward-looking statements. We do not assume responsibility
for the accuracy and completeness of the forward-looking statements and we do
not intend to update any of the forward-looking statements after the date of
this report to conform them to actual results. You should read the following
discussion in conjunction with our financial statements and related notes
included elsewhere in this report. For a more complete understanding of our
industry, the drivers of our business and our current period results, you should
read the following Management’s Discussion and Analysis of Financial Condition
and Results of Operation in conjunction with our Annual Report on Form 10-K for
the year ended June 30, 2009 and our other filings with the SEC.
Overview
Aftersoft
Group Inc. is a technology holding company that has two wholly owned
subsidiaries based in the US (ASNA and MAM US) and one in the U.K. (MAM), which
operate independently from one another. We have and continue to market and
develop business management software solutions that manage both the business and
supply chain for small- and medium-sized firms in the automotive aftermarket.
The automotive aftermarket includes those businesses that supply servicing,
parts, oil, tires, and performance extras to the retail market.
We
believe that the largest single issue facing the automotive aftermarket at this
time is the down turn of the global economy, especially the economics in which
we operate. The constraint of credit within the US and U.K. markets is forcing
automobile owners to retain their existing automobiles far longer than they may
have previously planned. This phenomenon is forcing owners to seek out more
economic ways of maintaining their vehicles, and we believe this presents an
opportunity to the Company. The need for consumers to maintain their vehicles
longer requires service suppliers to offer a wide range of services at highly
competitive prices. We believe that this can be achieved only by those
businesses that are able to efficiently manage their businesses and find methods
to reduce costs without affecting service levels, which may best be done through
investments in ‘up to date’ management information systems, specifically those
designed for the automotive market. However, we have recently noticed that some
businesses wishing to invest in new management systems are also finding their
access to credit reduced. This may have a detrimental effect on our revenues if
customers are unable to fund purchases. We still believe that the aftermarket
landscape will continue to change over the next 18 months, with the convergence
of the aftermarket and tire markets, but this rate of change maybe slower than
first expected. Management still believes that the desire of parts manufacturers
to produce and control their own product catalogues, rather than allowing this
information to be made available by third-party catalog suppliers, will present
opportunities to the Company.
Our
revenue and income is derived primarily from the sale of software, services and
support. In the U.K., we also earn a percentage of our revenue and income from
the sale of hardware systems to clients. In the three months ended December 31,
2009, we generated revenues of $6,746,000 and had a net loss of $237,000, 78.2%
of these revenues came from the UK market., In the six months ended December 31,
2009, we generated revenues of $12,958,000 with a net loss of $157,000. 74.9% of
these revenues come from the U.K. market.
2
Our
headquarters was formerly in Chester, U.K., and was moved to Barnsley U.K.
effective February 1, 2010. We maintain additional offices for our US
operating subsidiary in Dana Point, California, Allentown, Pennsylvania and, for
our U.K. operating subsidiary, in Sheffield, Northampton and Wareham in the
U.K.
The
software that we sell is mainly a Microsoft Windows TM -based
technology, although we do still have an older ‘Green Screen’ terminal-based
product. The four main products that we sell in the US each relate to a specific
component of the automotive aftermarket supply chain. First is “warehouse
distribution.” Into this market we sell our Direct Step product, which enables
large warehouses with millions of parts to locate, manage, pack and deliver the
parts with ease and efficiency. Second, these parts are distributed to the next
business in the chain, which is the “jobber.” Into this market segment we sell
our Autopart product, which manages a jobber’s whole business (i.e., financial,
stock control and order management) but more importantly enables the jobber to
quickly identify the parts that his client needs, either via the internet or
telephone, so that the correct product for the vehicle on the ramp can be
supplied. The third, and next segment of the automotive aftermarket supply chain
is the “installer,” which repairs and maintains automobiles. The installer needs
systems that enable him to efficiently and simply manage his businesses, whether
as a single entity or national multi-site franchise. Into this segment we sell
VAST. The fourth segment is the “Open Webs.” This technology allows these three
separate business solutions to connect to each other to allow, among other
processes, ordering, invoicing and stock checking to take place in real-time
both up and down the supply chain. The U.K. market differs from that of the US
in that it does not have the same number of large warehouse distribution
centers, so we do not sell the Direct Step product in the U.K. We continue to
sell the Autopart product to the jobber market, but sell Autowork and Autocat+
to the installer market.
To date,
our management has identified four areas that it believes we need to focus
on.
The first
area is the release of one of our U.K. products developed by MAM, our U.K.
subsidiary, under a Software as a Service (SaaS) model. This is where software
solutions are made available to end-users via the Internet and does not require
them to purchase the software directly but ‘rent’ it over a fixed period of
time. Our management believes that this will be a rapidly growing market for the
U.K. as businesses continue to look for ways of reducing capital expenditures
while maintaining levels of service. Once this has been successfully deployed in
the U.K., we will look to use a similar model in the US.
The
second area of focus is the sales and marketing strategy within the U.S. market.
To date, although increased resources have been made available for sales and
marketing, they have not brought the levels of return that management had
expected. Our management has reviewed the U.S. business’ sales processes and
marketing efforts and made what it believes are significant improvements that
will be successful over the next six months.
The third
area of focus relates to the continued sales and market initiatives tied to the
Autopart and Autocat products within the U.S. market. A senior member of the
U.K. management team has been appointed to join the U.S. business to head the
efforts relating to this product along with a complementary DirectStep product.
To date this move has proved successful, as we have increased levels of service
and knowledge of our U.S. staff members, and management believes that this will
lead to significant revenue increases within the next six months. While
management believes that this is the correct route to follow, it is aware that
this effort and the move of personnel may affect the U.K. business following the
transfer of a key member of former U.K. management.
The
fourth area is within the U.K. market and we are continually working to
sustain the previous year’s levels of growth in the U.K. business by focusing on
additional vertical markets, which share common issues to that of the automotive
market. We have developed a reputation of high levels of service and knowledge
within the automotive market; and are now working on replicating this reputation
in these additional verticals markets. Management intends to carefully monitor
this expansion as a result of the current state of the global
economy.
3
Recent
Events
Effective
January 31, 2010, Ian Warwick, CEO and director, and Simon Chadwick, COO and
director, resigned from those positions with our Company. Pursuant to
the terms of the Separation Agreements we entered into on January 20, 2010 with
Messrs. Warwick and Chadwick, we agreed to pay to them an aggregate of $525,000
in termination payments, payable over six months, and additional payments of an
aggregate of $125,000 if certain events occur. In connection with
their resignations, we closed our Chester UK offices, and moved our principal
executive offices to that of our U.K.-based subsidiary, MAM Software, Ltd.,
located at Maple Park, Maple Court, Tankersley, Barnsley, UK S75
3DP.
Effective
February 1, 2010, Michael Jamieson was appointed to serve as our Interim
CEO. Mr. Jamieson will also be nominated to our Board of Directors,
to stand for election at our upcoming Annual Meeting of Stockholders, which has
been set for April 21, 2010.
Critical
Accounting Policies
There
were no changes to those policies disclosed in the Annual Report on Form 10-K
for the fiscal year ended June 30, 2009 except as discussed below.
Effective
July 1, 2009, we adopted the accounting standard that provides guidance for
determining whether an equity-linked financial instrument, or embedded feature,
is indexed to an entity’s own stock. The standard applies to any
freestanding financial instruments or embedded features that have the
characteristics of a derivative, and to any freestanding financial instruments
that are potentially settled in an entity’s own common stock. As a result of the
adoption, 5,083,333 of our issued and outstanding common stock purchase warrants
previously treated as equity pursuant to the derivative treatment exemption were
no longer afforded equity treatment. These warrants have an average exercise
price of $0.21 and expiration dates of December 31, 2013. In addition, amounts
related to the embedded conversion feature of convertible notes issued
previously treated as equity pursuant to the derivative treatment exemption were
also no longer afforded equity treatment. As such, effective July 1, 2009, we
reclassified the fair value of these common stock purchase warrants and recorded
the fair value of the embedded conversion features, which both have exercise
price reset features, from equity to liability status as if these warrants and
embedded conversion features were treated as a derivative liability since the
earliest date of issue in December 2007.
Impact
of Currency Exchange Rate
Our net
revenue derived from sales in currencies other than the U.S. dollar was 78% and
75% for the three and six month periods ended December 31, 2009, respectively,
as compared to 75% and 76% for the corresponding periods in 2008. As
the US dollar strengthens in relation to the Great Britain Pound (“GBP”), as it
has recently done, our revenue and income, which is reported in US dollars, is
negatively impacted. Changes in the currency values occur regularly
and in some instances may have a significant effect on our results of
operations.
Income
and expenses of our MAM subsidiary are translated at the average exchange rate
for the period. During the three and six month periods ended December 31, 2009,
the exchange rate for MAM’s operating results was US$1.6372 per GBP1, compared
with US$1.7364 per GBP1 for the three and six month periods ended December 31,
2008.
4
Assets
and liabilities of our MAM subsidiary are translated into US dollars at the
quarter-end exchange rates. The exchange rate used for translating
our MAM subsidiary was US$1.5922 per GBP1 at December 31, 2009 and US$1.6520 per
GBP1 at June 30, 2009.
Currency
translation (loss) and gain adjustments are accumulated as a separate component
of stockholders’ equity, which totaled ($234,000) and ($2,595,000) for the three
months ended December 31, 2009 and 2008, respectively, and ($108,000) and
($3,643,000) for the six months ended December 31, 2009 and 2008,
respectively.
As of
December 31, 2009, we had a backlog of unfilled orders of business management
systems of $1,644,000 compared to a backlog of $2,883,000 at December 31,
2008. We expect to fill approximately 65% of such backlog during the
next six months.
Results
of Operations
Our
results of operations for the three months and six months ended December 31,
2009 compared with the three months and six months ended December 31, 2008 were
as follows:
Revenues. Revenues were
$6,746,000 and $12,958,000 for the three and six months ended December 31, 2009,
respectively, an increase of 34.8% and 19.4%, respectively, compared with
revenues of $5,005,000 and $10,850,000 for the three and six months ended
December 31, 2008, respectively. US operations increased
revenue by $633,000 and the UK operation increased revenue by $1,475,000 for the
six month periods. Our U.S. operation experienced higher revenues for
the three and six month periods ended December 31, 2009 than it did during the
2008 periods due to increased maintenance revenue and increased software
revenue. UK revenues were positively impacted by increased
systems sales to a large customer. The strength of the US dollar vs.
the British Pound had a negative effect on reported revenue for our UK
operations.
Cost of Revenues. Total cost
of revenues for the three months and six months ended December 31, 2009, were
$2,487,000 and $5,434,000, respectively, compared with $2,235,000 and $4,990,000
for the same periods of December 31, 2008, respectively. The increase
in cost of sales was 11.3% and 8.9%, respectively, for the three month and six
month periods. This increase was less than the increase in revenue
because of higher margin system sales during the three and six month periods
ended December 31, 2009.
Operating Expenses. The
following tables set forth, for the periods indicated, our operating expenses
and the variance thereof:
|
|
For the Three Months
|
|
|
|
|
|
|
|
|||||||
(In thousands)
|
|
Ended December 31,
|
|
|
|
|
|
|
|
|||||||
|
|
2009
|
|
|
2008
|
|
|
Variance $
|
|
|
Variance %
|
|
||||
Research
and development
|
$
|
763,000
|
$
|
709,000
|
$
|
54,000
|
7.6
|
%
|
||||||||
Sales
and marketing
|
620,000
|
561,000
|
59,000
|
10.5
|
%
|
|||||||||||
General
and administrative
|
2,322,000
|
1,478,000
|
844,000
|
57.1
|
%
|
|||||||||||
Depreciation
and amortization
|
289,000
|
260,000
|
29,000
|
11.2
|
%
|
|||||||||||
Total
Operating Expenses
|
$
|
3,994,000
|
$
|
3,008,000
|
$
|
986,000
|
32.8
|
%
|
(In thousands)
|
|
For the Six Months
Ended December 31,
|
|
|
|
|
|
|
|
|||||||
|
|
2009
|
|
|
2008
|
|
|
Variance $
|
|
|
Variance %
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research
and development
|
$
|
1,607,000
|
$
|
1,494,000
|
$
|
113,000
|
7.6
|
%
|
||||||||
Sales
and marketing
|
1,264,000
|
1,160,000
|
104,000
|
9.0
|
%
|
|||||||||||
General
and administrative
|
3,227,000
|
2,983,000
|
244,000
|
8.2
|
%
|
|||||||||||
Depreciation
and amortization
|
571,000
|
528,000
|
43,000
|
8.1
|
%
|
|||||||||||
Total
Operating Expenses
|
$
|
6,669,000
|
$
|
6,165,000
|
$
|
504,000
|
8.2
|
%
|
5
Operating
expenses increased by $986,000, or 32.8% for the three months ended December 31,
2009 compared with the three months ended December 31, 2008, and increased by
$504,000 or 8.2% for the six months ended December 31, 2009, compared with the
six months ended December 31, 2008. This is due to the following:
Research and Development Expenses.
Research and Development expenses increased by $54,000 for
the three month period ended December 31, 2009 and increased by $113,000 for the
six month period ended December 31, 2009 compared to the same periods in the
prior fiscal year, each representing a 7.6% increase. The increase
for the three and six month periods ended December 31, 2009 is primarily a
result of an increase in the number of personnel working on development projects
during the quarter ended December 31, 2009.
Sales and Marketing Expenses.
Sales and Marketing expenses increased by $59,000 or 10.5% during the
three months ended December 31, 2009 as compared with the same period in 2008,
and increased by $104,000 or 9.0% for the six months ended December 31, 2009
compared with the six months ended December 31, 2008. This increase is due to an
increase in attendance at trade shows and an increase in sales personnel within
the U.S. operation during the three and six month periods ended December 31,
2009 when compared with the same periods in the prior fiscal year.
General and Administrative Expenses.
General and Administrative expenses increased by $844,000 or 57.1% for
the three months ended December 31, 2009 as compared to the same period in 2008,
and increased $244,000 or 8.2% for the six months ended December 31, 2009 as
compared with the same period in 2008. The increase is the result of
increased accruals for the settlement of liabilities and employee separation
expenses. Pursuant to the terms of the Separation Agreements we
entered into on January 20, 2010 with Messrs. Warwick and Chadwick, we agreed to
pay to them an aggregate of $525,000 in termination payments, payable over six
months, and additional payments of an aggregate of $125,000 if certain events
occur.
Depreciation and Amortization
Expenses. Depreciation and amortization expenses increased $29,000, or
11.2%, and $43,000, or 8.1%, for the three and six month periods ended December
31, 2009, respectively, as compared to the same periods in 2008, which is
primarily due to increased capital expenditures at our U.K.
businesses.
Interest Expense. Interest
expense decreased by $76,000 or 17.8% to $352,000 for the three months ended
December 31, 2009, as compared to the three months ended December 31, 2008, and
decreased $70,000 or 8.8% to $730,000 for the six months ended December 31, 2009
as compared to the six months ended December 31, 2008. The decrease
in interest expense is related to a reduction in our total interest bearing
liabilities and a reduction in amortization of debt discount and debt
issuance costs, which are included in interest expense. For the three
months ended December 31, 2009 we paid or incurred $313,000 in interest
expense to ComVest. For the six months ended December 31, 2009,
we paid or incurred $628,000 in interest expense.
Other Income (expense). During
the three and six month periods ended December 31, 2009, the Company had income
from the change in fair value of derivative liabilities of $277,000 and $315,000
respectively. Other income includes $50,000 from the net settlement of an
outstanding liability for the six month period. The three and
six month periods ended December 31, 2009 did not have any write down of
available-for-sale securities. The three and six month periods ended December
31, 2008 includes a write down of $3,957,000 available-for-sale securities
because of an other-than-temporary decline in the market value of the
securities.
6
Income Taxes. Income taxes
increased by $228,000, or 115.2%, to $426,000 for the three month period ended
December 31, 2009, and increased by $333,000, or 106.4%, to $646,000 for the six
month period ended December 31, 2009 as compared to the same periods in 2008,
due to a increase in earnings for our U.K. subsidiaries for the respective
periods.
Net Loss. As a result of the
above, we recorded a net loss of $237,000 for the three month period ended
December 31, 2009, compared with a net loss of $4,797,000 for the three month
period ended December 31, 2008, and realized a net loss of $157,000 for the six
months ended December 31, 2009, compared with a net loss of $5,349,000 for the
six months ended December 31, 2008.
Liquidity
and Capital Resources
To date,
most of our profits have been generated in Europe, but with the introduction of
new products and efforts to streamline U.S. operations, we expect to see an
increase in overall revenues with a contribution from U.S. operations in fiscal
2010.
At
December 31, 2009, we had cash and cash equivalents of $2,075,000, an
improvement of $412,000 from June 30, 2009. During the period ended
December 31, 2009, we had $135,000 of capital expenditures and made payments of
$221,000 on long-term debt. Starting in January 2010, we will start
to make payments on the $5,000,000 Term Note. The payments are
approximately $208,000 per month. We expect to make the monthly
payments on this debt and the other outstanding obligations from operating cash
flow. We do not expect to be able to make the $2,917,000
balloon payment due in November 2010 on the Term Loan or to pay off the
$1,000,000 Revolver due at the same time from internally generated cash
flow. We are currently seeking debt and/or equity financing and other
activities to raise the necessary capital. There can be no assurances
that such funding will be available on acceptable terms, in a timely fashion or
even available at all.
We expect
to see continued growth from both the US and UK operations during fiscal 2010,
with strong growth in revenues and operating income from the US operation. We
have identified a number of opportunities to widen our client base within the
automotive industry and are actively pursuing those at this time. We also expect
to see increases in revenue over the next two quarters, specifically due to
additional products that have been developed by the US operation which are
currently being released to customers, and the reintroduction of our Autopart
line of products in the US market.
We intend
to continue to work at maximizing customer retention by supplying and developing
products that streamline and simplify customer operations, thereby increasing
their profit margin. By supporting our customers’ recurring revenues, we expect
to continue to build our own revenue stream. We believe that we can continue to
grow our customer base through additional sales personnel, targeted media and
marketing campaigns and products that completely fit clients’ requirements. We
also intend to service existing clients to higher levels and increasingly
partner with them so that together we’ll both achieve our goals.
Revenues
in the UK are continuing to generate positive cash flow and more than offset the
loss in the US operations, corporate expenses and interest payments resulting in
a positive cash flow for the quarter. Our current plans still require us to hire
additional sales and marketing staff, to expand within the U.S. market, to
target new vertical markets effectively in the U.K. and to support expanded
operations overall.
We
believe our plan will strengthen our relationships with our existing customers
and provide new income streams by targeting new vertical markets for our
AutoPart product.
The
Company experienced a positive cash flow because of strong operating results in
our U.K. business.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
applicable.
7
ITEM
4T. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and
Procedures
As of the
end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company’s management,
including the Company’s Chief Executive Officer and the Company’s Chief
Financial Officer, of the effectiveness of the design and operation of the
Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on this
evaluation, the Company’s Chief Executive Officer and Chief Financial Officer
concluded that the Company’s disclosure controls and procedures are effective as
of December 31, 2009.
(b) Changes in internal control over
financial reporting
There
were no changes in the Company’s internal control over financial reporting in
the Company’s second fiscal quarter of the fiscal year ending June 30, 2010
covered by this Quarterly Report on Form 10-Q, that have materially affected, or
are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
PART
II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
From time
to time, the Company is subject to various legal claims and proceedings arising
in the ordinary course of business. The ultimate disposition of these
proceedings could have a materially adverse effect on the consolidated financial
position or results of operations of the Company.
|
(1)
|
On August 1, 2007 the Company and
Mr. McKenna entered into an agreement resolving all outstanding actions by
Mr. McKenna against the Company and its subsidiaries related to the
initial action against CarParts Technologies, Inc., which is now known as
ASNA. The agreement provided that the Company would pay Mr. McKenna
$2,000,000 in cash, $825,000 on a promissory note with an interest rate of
8% amortized in equal payments over a 24-month period (see Note 6) and in
addition would issue Mr. McKenna 1,718,750 shares of Common Stock of the
Company, which represented an aggregate number of shares of common stock
of the Company that the parties determined fairly represented $825,000
(assuming a price of $0.48 per share of common stock, the closing price of
the Company’s common stock on the date of settlement). Mr. McKenna was
also entitled to warrants to purchase an equivalent number of shares of
common stock at the same price, which was valued at $412,000 (using the
Black-Scholes valuation model) and recorded as an additional litigation
cost for the year ended June 30, 2007. Upon entering this agreement all
parties agreed to withdraw all existing litigation and claims. The Company
recorded the settlement with McKenna as of June 30, 2007. The shares were
issued in fiscal 2008 (see Note 6). This settlement was amended during
fiscal 2008 (see Note 6).
|
|
(2)
|
Additionally,
the Company entered into a settlement agreement with Mr. Arthur
Blumenthal, a former shareholder of Anderson BDG, Inc. Mr. Blumenthal’s
lawsuit against the Company’s parent ADNW emanated from an agreement Mr.
Blumenthal had with a subsidiary of the Company, ASNA (f/k/a CarParts
Technologies, Inc.) for the purchase of Anderson BDG, that had not been
settled although it was past due. The Company assumed the liability as
part of a plan of spinning off certain businesses into the Company and
renegotiated the agreement with Mr. Blumenthal, the terms of which
required the Company to make a payment of $50,000 cash and the issuance to
Mr. Blumenthal and registration of 300,000 shares of the Company’s common
stock, which were issued in fiscal 2007 and valued at $0.48 per share,
(the closing price of the Company’s common stock on the date of
settlement) or $144,000. The Company subsequently completely settled the
lawsuit with Mr. Blumenthal and repaid his notes in fiscal
2008.
|
8
On August
21 2009, the Company’s counsel received two notifications on behalf of the
Company from Mr. Blumenthal’s counsel. One letter makes certain demands on the
Company in respect of Mr. Blumenthal’s sale of the software program VAST to one
of the Company’s predecessor organizations, and asserts that the Company owes
Mr. Blumenthal $936,776. The second letter asserts certain rights of Mr.
Blumenthal with respect to his employment with the Company and asserts that the Company owes Mr.
Blumenthal approximately $136,612. Since the fall of 2009, the Company has had
ongoing discussions with Mr. Blumenthal’s attorneys in an effort to resolve
without litigation matters surrounding Mr. Blumenthal’s claims. As a gesture to
demonstrate good faith, the Company paid to Mr. Blumenthal $60,000 during
December 2009 and has paid $40,000 subsequent to the close of the quarter,
during the pendency of negotiations. These negotiations to try to reach a
good faith settlement with Mr. Blumenthal are continuing however, based on the
negotiations through the date of this quarterly report, the Company is uncertain
whether a settlement will be attainable. Should a settlement not be reached,
there is a strong likelihood that litigation will be commenced. The
Company intends to vigorously defend itself.
ITEM
1A. RISK FACTORS
Not
applicable.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On
October 7, 2009, the Company issued 125,265 shares of common stock to certain
directors, which were valued at the $12,526.
The
above transactions were not registered under the Securities Act in reliance
on an exemption from registration set forth in Section 4(2) thereof and Rule 506
of Regulation D promulgated thereunder as a transaction by the Company not
involving any public offering and the purchaser met the “accredited investor”
criteria required by he rules and regulations promulgated under the Securities
Act.
On
December 31, 2009, we issued warrants to purchase an aggregate of 700,000 shares
of the Company’s common stock, $0.0001 par value per share, at an exercise price
of $0.08 per share, for a period of five (5) years (the
“Warrants”). The number of shares issuable upon exercise of the
Warrants, and/or the applicable exercise prices, may be proportionately adjusted
in the event of any stock dividend, distribution, stock split, stock
combination, stock consolidation, recapitalization or reclassification or
similar transaction.
The above
transactions were registered under the Securities Act of 1933, as amended (the
“Securities Act”), in reliance upon the exemptions from the registration
requirements of the Securities Act set forth in Section 4(2) thereof and/or Rule
506 of Regulation D promulgated thereunder as transactions by the Company not
involving any public offering.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No
matters were submitted to a vote of security holders in the second quarter of
the Company’s fiscal year ending June 30, 2010.
ITEM
5. OTHER INFORMATION.
There
have been no material changes to the procedures by which security holders may
recommend nominees to the Company’s Board of Directors.
9
ITEM
6. EXHIBITS
Exhibit
Number
|
|
Description
|
10.1
|
Letter
Agreement between Aftersoft Group, Inc. and Commonwealth Associates LP,
with exhibits.(incorporated herein by reference to Exhibit 10.1 of the
Company’s Current Report on Form 8-K filed January 6,
2010).
|
|
10.2
|
Separation
Agreement dated January 20, 2010 between Aftersoft Group, Inc. and Ian
Warwick (incorporated herein by reference to Exhibit 10.1 of the Company’s
Current Report on Form 8-K filed January 22, 2010).
|
|
10.3
|
Separation
Agreement dated January 20, 2010 between Aftersoft Group, Inc. and Simon
Chadwick (incorporated herein by reference to Exhibit 10.2 of the
Company’s Current Report on Form 8-K filed January 22,
2010).
|
|
31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
32.2
|
Certification
of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
10
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Aftersoft
Group, Inc.
|
||
Date
February 11, 2010
|
By:
|
/s/ Michael Jamieson
|
Michael
Jamieson
|
||
Interim
Chief Executive Officer
(Principal
Executive Officer)
|
||
Date
: February 11, 2010
|
By:
|
/s/ Charles F. Trapp
|
Charles
F. Trapp
|
||
Chief
Financial Officer
(Principal
Financial
Officer)
|
11
EXHIBIT
INDEX
Exhibit
Number
|
|
Description
|
10.1
|
Letter
Agreement between Aftersoft Group, Inc. and Commonwealth Associates LP,
with exhibits.(incorporated herein by reference to Exhibit 10.1 of the
Company’s Current Report on Form 8-K filed January 6,
2010).
|
|
10.2
|
Separation
Agreement dated January 20, 2010 between Aftersoft Group, Inc. and Ian
Warwick (incorporated herein by reference to Exhibit 10.1 of the Company’s
Current Report on Form 8-K filed January 22, 2010).
|
|
10.3
|
Separation
Agreement dated January 20, 2010 between Aftersoft Group, Inc. and Simon
Chadwick (incorporated herein by reference to Exhibit 10.2 of the
Company’s Current Report on Form 8-K filed January 22,
2010).
|
|
31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
32.2
|
Certification
of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|