I have not posted on any thread for a long time as I have been working long hours on the development of my own new business’s infrastructure. I assure you that my absence from posting is in no way a reflection of my lack of support for any of the companies I hold in my portfolio. On the contrary, I still keep in regular contact with these companies but due to my time constraints, I haven’t been able to share my thoughts on the threads as much as I would like to.
However, given some of the more recent comments on the threads I want to make an exception to my recent practice of not posting.
I have followed this company closely for 18 months, and throughout last year and into the early part of this year I have spent literally 100’s of hours researching and writing about them and the potential of their business model. My time horizon for many of my investments is now much farther out than it was early last year. That said, I had been eagerly awaiting these latest financial results - as I am sure you all have. I wanted to know if these numbers would finally show the expected increase in contracts that I believe is out there for them. However, based on these results, the comments the company made in this last release about what it is that they expect, and the recent management changes in the company, and given my previous discussions and similar interviews with Mr. Pesut, which had been posted on the threads, I felt it was appropriate to conduct a similar interview. I also informed him that as before, it was my intention to post what was discussed with him on the ASI threads.
Although I am a strong advocate in long term investing, I believe that for a variety of reasons it is prudent to continually assess whether one, or all, of your holdings should be classified as a buy, sell, or hold. For the record, I will not be selling my shares in ASI based on these last financial results, and I look forward to seeing Mr. Pesut and everyone at ASI maximize the potential within this company.
Here is the text of our discussion.
How would you describe the health of the Company at this point?
The company is stronger today than it was a year ago or for that matter even 6 months ago. AMR has stated that they believe that we are uniquely positioned to take advantage of the budding evolution that will indeed take place in the e-manufacturing industry.
Our products allow companies to consolidate key data into their information systems. This data deals with their company’s productivity, labour process activity, material flows, and asset management systems. This information is so critical to an organization being able to make informed “Real Time” decisions that will help it reduce costs while also enhancing their productivity. This will become essential to compete in the Internet economy.
Our installed customer base demonstrates the trust and acceptance of our labour management products in very discerning and “World Class” companies. Our new Internet–based product lines are addressing the needs of the evolving and developing market around us. AMR has copies of Industry surveys that show that the amount of penetration in the vertical markets we are targeting is at only 1 to 2 % now. This means that our opportunities in these markets are significant.
We are currently installing the largest Time and Attendance contract in the United States. This installation is currently meeting customer expectations on is on schedule. Even though the installation isn’t completed as yet, our customer is already acting as a reference for us.
Some of our business strengths include:
· Recognized leader in labour management systems based on AMR as we are one of three companies they recommend.
· We are rapidly developing the grassroots skills to grow the business at an increased rate.
· We are well positioned in the airline industry with our workforce management offering. We also have a strong and growing presence in both manufacturing and the paper and forestry products industry.
· Data collection product ATLink installed at three sites at Imperial Tobacco, which are acting as references for us.
We have the ability to provide a complete system for firms who are either in, or are in the process of entering the Internet economy.
Can you comment on your existing Customer Base and what level of contribution to revenue do you expect from them going forward?
Our customer base is expanding but so to is the scope of our contracts with our existing customers. This is especially true with our more recent customers. Continental Airlines is in first phase of installation 1st 4 hubs.
Note: following my phone call with Mr. Pesut, I was able to determine that there are 52 sites within the Continental Airlines company. Therefore it can be assumed that depending on the success of the installation, ASI may have a strong lead in to additional sites within this company.
Can you comment on the Potential Customers you currently have in the pipeline, and when do you see these customers issuing Purchase Orders to ASI?
We have a very healthy pipeline of potential customers – stronger than we have had in the past but we are experiencing a delay in contract approvals. We are now ready for the time when the majority of firms have completed their e-business strategy, and will be ready to begin to implement their coordinated and system wide implementation plans. This delay in demand does not mean that we are losing customers to other firms; it is just that several of our potential customers are still putting their strategies together. The lull of the summer hasn’t helped much, but we are confident that we will be taking a healthy share of the e business infrastructure opportunity.
Mr. Pesut pointed me to an AMR Research alert to support what he was saying. amrresearch.com
Here is a summary of one of the AMR Research Alert commentaries that supports his comments . . .
”The roof of a house cannot be built until the size and shape of the house is known. Similarly, the e-business architecture of best-of-breed applications cannot be built without defined priorities and an integrated business strategy. E-business architecture is not built overnight and must be executed in bite-sized chunks to ensure business continuity. As more manufacturers reengineer their business processes around e-businesses, the application architecture and integrated back-office processes will emerge as the core enablers of scalability and organizational responsiveness.”
Recent alerts have focused on the need for organizations to address their whole information needs into a comprehensive plan. Mr. Pesut states that many of the firms they are talking to now are doing just that.
What are your revenue expectations for this upcoming Quarter and for the year?
Mr. Pesut told me that he could not discuss this, as this would be in violation of the new SEC rules, which would then require a public announcement. For obvious reasons, he was not willing to do that.
He referred me back to the Q2 results release and he stated that they are expecting their company’s growth to resume in Q 3 and that they expect to return to profitability by year-end.
I understand that about ½ of your expenses last Q were from an exceptional one time charge, however given your current Burn Rate (excluding this charge) how long would it be before ASI would be in a serious cash crunch?
Before I get to that point, let me state that this one time charge should thought of as a cashless exercise. By this I mean that the company did not have to drain any cash reserves to pay for it. It was an accounting exercise that involved a former employee’s option plan.
Now to address your question, most importantly our business model is such that our projections show us as being self-sustaining and our cash position strengthening over the next two Quarters. This statement excludes any other exceptional activity such as a merger or acquisition, etc. On top of this, we currently have access to the recently negotiated $2.25 million credit line from our bank and we also have the support of our two largest institutional investors - Princeton and Temple. At the end of June there was approximately $1.1 million in cash in our bank account.
Can you comment on the recent Management Changes within your organization?
We have taken the necessary steps to significantly strengthen our team focus on the upcoming business opportunities in E-business related markets. As a result, our Sales team’s organizational chart was flattened and we strengthened both of our Marketing and Operations areas. We brought in new management into the Operations area (which includes development and implementation) who is current with the latest technology but is also experienced in managing implementations and professional services in large organizations.
Why should an investor consider your company as good investment now?
I think that you have said it best in some of your past posts on the thread. You said that we are significantly undervalued based on your understanding of the market and the potential we offer.
Investors should take note:
· We have the proven products and solutions to address the current and upcoming market needs of the Internet focused business – addressing people productivity and reducing cost of Enterprise Application Integration.
· We have a proven delivery capability in our large sophisticated customer base.
· We have the financial backing necessary to succeed.
As the need for data and the dependence on the Internet continues to gain strength, we see the need for more integration within organizations – not less. We know we can reduce the costs of integration across e-business arena by a significant factor. We can do this through the sale of our proven off the shelf and tailorable products. Once again, this is what AMR Research has told us is needed.
To sum up, our record number of prospect engagements and opportunities encourages us, and we are eager to get on with building this company and taking it forward. Our shareholders who have been supporting us deserve to be rewarded for their support, and we will continue to strive to do just that.
At that point I thanked him for the time he spent answering my questions and I ended the call.
Unfortunately, writing this post has set me back a ½ day in my tight schedule and some of my appointments and calls had to be deferred to do this, but I am glad I did it. That said, I won’t make any promises that I will be able to respond to any follow up questions for a few days. So on that note, I hope this has helped some of you with your buy, sell, or hold decisions.
Good luck folks, and I’ll catch you all later.
Crazy Canuck |
