CC,
Thanks to you and all the others who have kept this thread informed with facts about the company.
I first bought ADSN last March, and I've followed it fairly closely since then. Based upon the facts that you have posted, together with my own Due Diligence, it is my opinion, that now is a good time to buy and accumulate additional shares of ADSN. I placed an order to buy on Friday.
I am posting the results of my DD on the company below. All of the information was taken from the ADSN website (http://www.advsysintl.com), or from corporate filings.
Regards,
Barry
____________________________________________________________________
General
Advanced Systems International, Inc. ("AdSys"), a Nevada corporation, is the holding company for one operating subsidiary, Automatic Time Systems Corp. ("ATS").
ATS is a developer and supplier of time and attendance and data integration software applications. ATS' product offering includes the application software, hardware, implementation services and ongoing support necessary for deployment of enterprise-wide data management. ATS markets its products through direct sales and in conjunction with strategic partners.
AdSys and ATS are headquartered in Southfield, Michigan, a suburb of Detroit.
The Company employs 56 full time employees. None of the employees is represented by a union.
During 1998 and early 1999, AdSys received an aggregate of approximately $2.4 million from investors through equity sales made pursuant to exemptions from registration. AdSys continues to offer shares on a private-placement basis.
AdSys is authorized to issue 20,000,000 shares of Common Stock, $.001 par value per share, of which 11,646,590 are issued and outstanding as of March 15, 1999.
The website is located at advsysintl.com
Background
ATS was formed in 1995 to acquire substantially all the assets and certain liabilities of Automated Time Systems Corp. This acquisition was completed in early 1996.
AdSys was formed in October 1996, originally named Bennington Corporation. From October 1996 to May 1997, Bennington had no assets, shareholders or operations. In May 1997, Bennington issued 2,000,000 shares for aggregate consideration of $20,000.
In June 1997, Bennington consummated an equity placement of 980,000 shares for aggregate consideration of $980,000. On July 8, 1997, Bennington, then a publicly-held (but not traded) shell company, acquired ATS via a "reverse takeover" merger. In that transaction, the ATS shareholders received 4,906,667 (62%) of Bennington's then outstanding common shares, with the prior Bennington shareholders retaining the balance of 2,980,000 shares (38%). Bennington then changed its name to Advanced Systems International, Inc.
Principal Products
ATS has developed and markets two software products. The first product, ATServer(R), is an application to track employee time and attendance data at labor intensive companies. The second product, ATLink(TM), is an integration (or bridging) application that allows various data collection devices (such as bar code scanners) to send information on a vast array of transactions from the warehouse or manufacturing floor to a central location. With these products, employee and inventory data are provided in "real time", and are made available to managers and supervisors throughout the organization. As a result, critical business decisions for supply or labor allocations can be made based on current and accurate data.
In order to provide a complete solution, ATS bundles implementation services, on-going support for its products, and third-party hardware together with its software products. Key markets include automotive, automotive supply, packaged goods, pharmaceuticals, food processing and other manufacturing industries.
For a typical implementation, ATS representatives work with customers to develop a strategy that provides a tailored time and attendance and/or data collection solution. Once that strategy is defined, a functional specification is developed, and the ATS professional services team configures and modifies the existing software to meet requirements.
When the implementation is complete, ATS provides a full range of support on an on-going, automatic renewal that the client can select to fit their needs. Typical installations can take from 2 to 6 months depending on the complexity of the management reporting requested, the number of sites and users, and the timeline of the customer.
ATS's customers tend to be large industrial companies, and the initial contracts tend to be for significant contract sizes. In 1997, one customer accounted for 84% of ATS's revenues, and in 1998, 5 customers accounted for 72% of total revenues. However, recurring revenues for a particular contract with a customer after the initial sale and installation tend to be significantly lower than in the initial phase, coming primarily from fees for support and maintenance services.
Advanced Systems International, Inc. achieved significant growth, as well as profitability, for the six month period ended June 30, 1999. ADSYS anticipates continued positive earnings in 1999 resulting from installations at several Fortune 1000 companies, in industries such as automotive supply, food processing, entertainment, furniture manufacturing, paper processing and other manufacturing sectors.
ADSYS has entered into a software marketing agreement with Electronic Data Systems. The focus of the agreement is to reach automotive, automotive-supplier, entertainment and other clients currently under contract with EDS. The EDS agreement provides added credibility for ADSYS products and services, as well as revenue growth potential as the relationship matures.
ATSERVER(R) Competition
The time and attendance industry can be categorized as mature. Two companies dominate the sector: Kronos Incorporated and Simplex Time Recorder Co. Kronos has released a client/server time and attendance application. Simplex has not released an open client/server time and attendance solution.
Because the ATServer(R) was developed with Perot Systems for DaimlerChrysler, ATS has gained a strong foundation, with several functioning client/server sites in the Automotive and Automotive Supplier sectors. Some current customers include Johnson Controls, Dana Corporation, Volvo Trucking and New Venture Gear.
While ATS's main sales to date have been in the automotive industry, ATS has recently begun to enter new vertical markets. New verticals include manufacturing (Sauder Furniture), food processing (Sara Lee Foods) and paper (Blandin Paper). Success in entering these new sectors indicates that ATServer(R) can successfully operate in different sectors. As a result, the Company expects to be able to continue to increase its market share of the time and attendance industry.
ATLINK(TM) Competition
ATLink(TM) falls under the distributed transaction processing ("DTP") segment of Middleware. The segment is fragmented and mainly comprised of small private and public companies. Three large competing companies are i2 Technologies, Teklogix and Epic Data.
Revenues
ADSYS reported second quarter 1999 revenues of $2.2 million. This is a 25% increase over the first quarter of 1999 and a 240% increase from Q2 1998. Net earnings for the most recent quarter were $375,353 ($0.03 per share), an increase of 23% over the previous quarter.
Revenues for the first two quarters of 1999 were $3,964,637, a 312% increase over the same period last year with earnings of $681,695 ($0.06 per share).
ADSYS enjoyed net earnings of $681,695 for the first six months of 1999, as compared with a net loss of $363,451 for the six month period ended June 30, 1998. This difference is largely attributable to a significant increase in sales to $3,964,637 in the first six months of 1999, from $961,313 for the first six months of 1998. The growth in sales reflects the continued expansion of their ATServer customer list, as well as further sales penetration at existing client sites. Revenue for this period was derived primarily from sales of ATServer software, hardware, and related implementation and maintenance, although ADSYS also engaged in the implementation of our first ATLink client in the second quarter of 1999.
Management
Gerald Pesut, President & CEO
Howard Tarnoff, Vice President of Sales and Marketing
Michael K. Anderson, Vice President of North American Sales
Robert DeMerell, CPA, Corporate Controller
Paul F. Abraham, Manager Engineering
Shawn Rechkemmer, Director Support Services
Employment Agreements
ATS entered into an employment agreement with Gerald A. Pesut dated November 15, 1996 (amended March 13, 1998). Under the agreement, Mr. Pesut was engaged to serve as Chief Executive Officer for salary at the rate of $200,000 per year. Mr. Pesut is entitled to bonuses based on ATS' achievement of certain sales targets. Pursuant to the agreement, Mr. Pesut also received options to acquire up to 500,000 shares of AdSys stock at the price of $1.00 per share (repriced to $.50 per share in September, 1998). The agreement may be terminated by the Company at any time for any reason, either with or without cause.
Similarly, Mr. Pesut may terminate his employment at any time. If the Company terminates the agreement other than for cause or if Mr. Pesut terminates the agreement for good cause (as defined in the employment agreement), Mr. Pesut is entitled to severance compensation equal to 12 months salary together with any bonus accrued up to the date of termination. In computing the bonus under the severance arrangement, ATS is deemed to have attained 100% of the bonus targets for the performance period in which the termination occurs. Upon a change in control of AdSys, Mr. Pesut's options will accelerate and vest 100%. The employment agreement also contains a covenant not to compete, which would prohibit Mr. Pesut from engaging in activities in competition with ATS or AdSys for a two year period commencing on the date of termination of his employment.
ATS entered into an agreement with Howard Tarnoff dated July 22, 1998. Mr. Tarnoff was engaged as Vice President of Sales, at a salary rate of $145,000 per year. Mr. Tarnoff is entitled to bonuses of $50,000 each year if revenue goals are met, with a guaranteed bonus of $50,000 for the first year. Mr. Tarnoff also received options to acquire up to 200,000 shares of AdSys stock at the market price on the date of grant (repriced to $0.50 per share in September 1998), and will receive options for an additional 100,000 shares at the end of 1999 if revenue goals are met. Mr. Tarnoff's employment is "at will." However, Mr. Tarnoff is entitled to severance compensation if ATS terminates his employment (up to 12 months if termination is in the first contract year, 6 months if in the second year, and 60 days if thereafter). The employment agreement also contains a covenant not to compete, which would prohibit Mr. Tarnoff from engaging in competition with ATS for a 2 year period commencing on the date of termination of his employment.
ATS entered into an employment agreement with Robert DeMerell dated January 8, 1999. Mr. DeMerell was originally engaged as Corporate Controller (subsequently promoted to CFO, Secretary and Treasurer), at a salary rate of $80,000 per year. Mr. DeMerell may receive quarterly bonuses of $5,000, based on goals and targets to be established from time to time. Mr. DeMerell also received options to acquire up to 150,000 shares of AdSys stock at $.50 per share. Mr. DeMerell's employment is "at will." However, Mr. DeMerell is entitled to 30 days severance pay if ATS terminates the employment. The employment agreement also contains a covenant not to compete, which would prohibit Mr. DeMerell from engaging in competition with ATS for a 2 year period commencing on the date of termination of his employment.
Customers
1. The Budd Company - Automotive Supplier
2. Chrysler Corporation - Auto Manufacturer
3. Dana Corp./Spicer Driveshaft Division - Automotive Supplier
4. Hillshire Farms & Kahn's - Food Processing
5. ITT Automotive - Automotive Supplier
6. Lear Corporation - Automotive Supplier
7. Mazda/Ford (AAI) - Auto Manufacturer
8. Sara Lee - Food Processing
9. Welch's Food - Food Processing
10. Sauder Furniture - Furniture Manufacturer
11. John Morrell & Company - Food Processing
12. Technicolor - Entertainment
13. Cold Springs Farm - Poultry Processor
14. King & Prince - Seafood Processor
15. Spraying Systems - Industrial Components
16. Technicolor Entertainment Services - Entertainment
17. Peregrine - Automotive Suppl
18. Rolls-Royce Allison - Auto Manufacturer
19. New Venture Gear - Automotive Supplier
20. Camco - Appliance Manufacturer
Partners
QAD
SAP
Baan
PeopleSoft
Oracle Corp
EDS
Price Waterhouse/Coopers
MicroSoft
Intermec
LXE
Hand Held Products
Control Module, Inc.
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