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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1996 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: 3331182
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THE ASHTON TECHNOLOGY GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-6650372
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10420 LITTLE PATUXENT PARKWAY, SUITE 490,
COLUMBIA, MARYLAND 21044-3559
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(410) 715-6800
(Address and telephone number of principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
Common Stock, par value $.01
Redeemable Common Stock Purchase Warrants
(Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) for 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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. (X)
The aggregate market value of the voting stock held by non-affiliates of
the registrant based on the closing selling price as reported on NASDAQ on
July 26, 1996 was $26,361,000.
The number of shares outstanding of the registrant's Common Stock, $.01
par value, was 7,562,500 at July 26, 1996.
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THE ASHTON TECHNOLOGY GROUP, INC.
FORM 10-KSB
YEAR ENDED MARCH 31, 1996
TABLE OF CONTENTS
ITEM NUMBER IN PAGE(S)
FORM 10-KSB
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PART I
1 Business............................................. 4 - 9
2 Properties........................................... 9
3 Legal Proceedings.................................... 9
4 Submission of Matters to a Vote of Security Holders.. 9
PART II
5 Market for Registrant's Common Equity and Related
Stockholder Matters.................................. 10
6 Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 10 - 17
7 Financial Statements and Supplementary Data.......... 17 - 33
8 Change in and Disagreements with Accountants on
Accounting and Financial Disclosure.................. 34
PART III
9 Directors and Executive Officers of the Registrant... 35 - 37
10 Executive Compensation............................... 38 - 39
11 Security Ownership of Certain Beneficial Owners
and Management....................................... 40 - 41
12 Certain Relationships and Related Transactions....... 41 - 45
13 Exhibits............................................. 45 - 48
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PART I
ITEM 1. BUSINESS
THE COMPANY
The Ashton Technology Group, Inc. ("Ashton" or the "Company") was formed
by Raymond T. Tate and incorporated in Delaware in February 1994, but did not
conduct business until late 1994. The Company seeks to exploit what it
believes are numerous commercial opportunities by applying technologies and
skills it has developed, as well as those developed by various other
companies, for the defense and intelligence agencies of the United States
government to areas of electronic commerce. In furtherance of such goals, in
1995, Ashton acquired a substantial minority interest in Computer Science
Innovations, Inc. ("CSI-Registered Trademark-"), an information technology
company headquartered in Melbourne, Florida. In October 1995, Ashton acquired
an 80% equity interest in Universal Trading Technologies Corporation
("UTTC"), another information technology company. The Company believes that
as a result of the current restructuring of the U.S. defense industry, the
Company will be able to add to its technological base either through
recruiting highly skilled individuals or through acquisitions of selected
information technology companies.
On May 2, 1996, the Company completed an initial public offering (the
"Offering") of 2,150,000 shares of common stock at an offering price of $4.50
per share and 2,150,000 warrants at $.25 per warrant. The common stock and
the warrants are separately tradable. The Company granted to the
underwriters the right to exercise over-allotment options of 322,500 shares
of common stock and/or 322,500 warrants at the public offering rate, within
45 days of May 2, 1996. On May 7, 1996, the underwriters exercised the
over-allotment options and offered an additional 322,500 shares of common
stock and 322,500 warrants to the public at $4.50 per share and $.25 per
warrant. As a result of the initial public offering, the Company received
net proceeds of approximately $10,395,000 and increased its total shares of
common stock and warrants outstanding by 2,472,500 each. The net proceeds
from the Offering were used to repay all notes payable to stockholders,
long-term debt and related accrued interest in existence through the date of
the Offering and provide working capital. Ashton also applied a portion of
the net proceeds from the Offering to increase its equity interest in
CSI-Registered Trademark- to 80% of the outstanding capital stock of
CSI-Registered Trademark-.
The Company, either directly or through its subsidiaries, intends to
aggressively pursue the development and marketing of:
(i) On-line transaction systems, with UTTC's Universal Trading System (the
"UTS-TM- system") being the Company's first product in this area. The
UTS-TM- system, when operational, will be an electronic securities
pricing and transaction system for trading exchange-listed and NASDAQ
National Market ("NASDAQ NMS") quoted securities on the Philadelphia
Stock Exchange (the "PHLX"). The PHLX is
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both a national securities exchange under Section 6
of the Exchange Act and a self regulatory organization.
(ii) Products for selected defense and intelligence agencies and private-sector
industries using neural network technologies developed by CSI-Registered
Trademark-. Neural networks employ advanced computing concepts, such as
artificial intelligence, to predict and anticipate outcomes of complex
problems.
(iii) Encryption and electronic authentication software and hardware systems
to provide security for firms engaged in electronic commerce transactions,
information transfer and critical communications through proprietary
networks, value-added service providers or via the World Wide Web
(Internet).
The Company, through CSI-Registered Trademark-, will also pursue various
crossover initiatives applying the technologies and skills developed for the
government market to the commercial market. CSI-Registered Trademark- has
recently entered into a commercial contract with Motorola Corporation
("Motorola") for integrating and testing a subsystem of Motorola's
Iridium-Registered Trademark- cellular telephone system.
The Company also intends to pursue a strategy focused on acquiring
advanced information technologies that were developed by other companies for
the defense and intelligence agencies of the U.S. government, which the
Company believes it will be able to reposition as products for use in
private-sector electronic commerce markets.
On June 6, 1996, a Memorandum of Principal Points to be included in a
Proposed Agreement between Ashton and Information Security Systems
Incorporated (ISSI) was executed. The Memorandum stated that 100% of the
shares of ISSI were to be exchanged for 300,000 shares of Common Stock of
Ashton's subject to certain conditions including the negotiation of a
Definitive Agreement.
While the Company's initiatives in on-line transaction systems and
neural network technologies may be conducted or provided by its subsidiaries,
UTTC and CSI-Registered Trademark-, Raymond T. Tate's expertise in
cryptography (the science of secret codes) will be directed towards designing
products which allows users of computer and telecommunications networks to
conduct secure and verifiable electronic transactions. The Company's
encryption products are being designed to provide the elements of
confidentiality, integrity, non-repudiation, access control and auditability
which the Company believes are necessary to allow the use of both "open" and
proprietary networks in the conduct of electronic commerce.
During the year ended March 31, 1996, Ashton incurred $346,504 of
development costs for the design and development of ATED, and UTTC incurred
$1,571,748 of development costs (including $1,349,952
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related to the acquisition of UTTC by Ashton) for the UTS-TM- system. These
costs were expensed as incurred and will not be passed to customers.
Ashton has designed the system architecture for a data encryption and
authentication system known as Ashton Technology Encryption Devices ("ATED"),
which is initially intended to provide a secure global telecommunications
system for the UTS-TM- system. Ashton has engaged an independent consulting
firm to assist in the design and development of ATED. In addition, Ashton
has engaged a hardware manufacturing firm to integrate and manufacture the
ATED device and has contracted with CSI-Registered Trademark- to develop the
attendant software. It is Ashton's current intention that ATED becomes its
lead product in a family of cryptologic devices available for the commercial
market. On July 18, 1996, Ashton announced that ATED entered its initial
production phase and quantities have been delivered.
ORGANIZATION AND OWNERSHIP STRUCTURE
Ashton owns (i) 80% of the outstanding common stock of UTTC and (ii)
approximately 47% of the outstanding Class A Common Stock (the
"CSI-Registered Trademark- Class A Common Stock") and approximately 5% of the
outstanding Non-Voting Class B Common Stock (the "CSI-Registered Trademark-
Class B Common Stock") of CSI-Registered Trademark- (shares of CSI-Registered
Trademark- Class A Common Stock and CSI-Registered Trademark-Class B Common
Stock are collectively referred to herein as the "CSI-Registered Trademark-
Shares"). The Company used a portion of the proceeds from the Offering to
acquire additional CSI-Registered Trademark- Shares sufficient to achieve an
80% equity interest in CSI-Registered Trademark-. Pursuant to letters, dated
November 6, 1995, January 18, 1996, March 27, 1996 and April 25, 1996
(collectively, the "Stockholder Letters"), to certain CSI-Registered
Trademark- shareholders (the "CSI-Registered Trademark- Shareholders"), the
Company acquired, upon completion of the Offering, CSI-Registered Trademark-
Shares owned by such CSI-Registered Trademark- Shareholders at a price equal
to $.4625 per share of CSI-Registered Trademark- Class A Common Stock and
$.4165 per share of CSI-Registered Trademark- Class B Common Stock, the fair
market value for such CSI-Registered Trademark- Shares as determined by an
independent appraisal of the CSI-Registered Trademark- Shares made by Stenton
Leigh Group (the "Appraised Value").
UNIVERSAL TRADING TECHNOLOGIES CORPORATION
UTTC was incorporated in Delaware in February 1995 with the business
objective of designing, developing, and implementing the UTS-TM- system and
future products appropriate for the securities trading market.
UTTC is currently developing the UTS-TM- system which, when operational,
will be an electronic securities pricing and transaction system for trading
exchange-listed and NASDAQ NMS quoted securities on the Philadelphia Stock
Exchange. The UTS-TM- system is being developed to provide institutional
money managers and others with an electronic pathway to execute trades of
large blocks of equity securities (in
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both exchange-listed and NASDAQ NMS quoted stocks) under the aegis of the
PHLX. The UTS-TM- system is intended to enable money managers to trade more
efficiently by providing low commission rates and the best available prices
and by lowering the market impact generally associated with large block
trades. The Company believes that improved trading performance will be one
of the primary benefits of using the UTS-TM- system.
The Company believes the UTS-TM- system will accomplish all of this
through the UTS-TM- system's expected ability to provide "liquidity" for the
execution of block trades, complete anonymity for buyers and sellers of
securities and security within a neutral electronic environment. The UTS-TM-
system is being designed to use computer and telecommunications technologies
to enable participants to receive system information and enter orders on-line
(initially, during the morning hours prior to the opening of trading on the
PHLX) for trade execution and to provide automated post market closing
clearing and settlement in conjunction with the PHLX and its members.
In September 1995, UTTC entered into a five-year contract with the PHLX
(the "PHLX Agreement"), which defines a business relationship that includes
the PHLX's employment of the UTS-TM- system on the exchange floor as a new
trading product of the PHLX. All trades through the UTS-TM- system will be
executed on the PHLX at the Volume Weighted Average Price ("VWAP"), the
average price for a specific stock weighted by the volume of shares of such
stock traded "regular way" during the day on all securities exchanges
throughout the United States as reported to the Consolidated Tape. As part
of their fiduciary duty under ERISA, pension plan sponsors have a
responsibility to obtain the best execution at the lowest possible cost.
VWAP has been recommended by some industry experts as providing the best
execution. Accordingly, the Company believes that VWAP is in increasing
demand by money management firms who invest on behalf of such pension funds.
The Company believes that trades related to institutional securities
transactions account for approximately half of all securities traded in the
U.S. domestic market and that computerized pricing and execution systems have
become an increasingly important form of trading for institutional investors.
The Company anticipates that this trend will result in a high demand for the
UTS-TM-system. UTTC will earn revenue on every share traded through the
UTS-TM- system and will, in the Company's judgment, need to achieve a market
share of less than 1% of all shares traded in the U.S. domestic equity
markets to meet the Company's expectations for a profitable business.
The system design of the UTS-TM- system is substantially complete and
Ashton has, pursuant to a time and material contract, hired CSI-Registered
Trademark- to commence development of the software for the UTS-TM- system
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based on system specifications provided to CSI-Registered Trademark- by UTTC.
The Company believes that the UTS-TM- system will be operational by the end
of the third fiscal quarter of 1997. However, there can be no assurance that
the UTS-TM- system will be operational in such time period or that the cost
of development will not exceed the Company's cost estimates of a minimum of
$3,000,000. UTTC will not generate revenue until the introduction of the
UTS-TM- system on the PHLX.
The operation of the UTS-TM- system at the PHLX is dependent upon
regulatory approval by the Securities and Exchange Commission (the
"Commission"). While the PHLX is in discussions with the Commission
regarding a proposed rule change, the Commission has not yet approved such
proposed rule change, and there is no assurance that such proposed rule
change will be approved or that any approval will be made by the end of the
second fiscal quarter of 1996. If Commission approval is not obtained, the
UTS-TM- system, as described, would not be utilized at the PHLX, and,
consequently, there could be a delay in implementing the UTS-TM- system
resulting in a potential material adverse effect on UTTC and the consolidated
operations of the Company.
COMPUTER SCIENCE INNOVATIONS, INC.
CSI-Registered Trademark- was incorporated in Florida in March 1983 and
specializes in utilizing computer technologies and sophisticated mathematical
techniques to address complex information retrieval and management problems.
CSI-Registered Trademark-'s principal business is the development of
sophisticated custom software products for both governmental and commercial
customers.
In the 1980's, CSI-Registered Trademark- specialized in a segment of the
U.S. defense industry commonly referred to as "C3I" (Command, Control,
Communications and Intelligence). To compete in this market, CSI-Registered
Trademark- conducted some pioneering work in the use of "trainable"
mathematical systems using neural network technology and knowledge based
expert systems for resolving "real-world" problems. These systems utilize
various techniques to "learn" and "recognize" patterns which enable these
systems to absorb, process and analyze vast amounts of data and predict
outcomes. CSI-Registered Trademark-'s efforts produced several systems for
its customers, which provided solutions to problems which the Company
believes were insolvable by other means. CSI-Registered Trademark-'s clients
in the U.S. defense industry include: The National Security Agency ("NSA"),
the White House Communications Agency, the United States Army, the United
States Air Force, and Motorola Corporation.
Currently, CSI-Registered Trademark- focuses upon its core defense and
intelligence agency business while applying technologies developed through
its defense-related business to commercial applications. These crossover
initiatives have recently resulted in CSI-Registered Trademark-'s receipt of
a commercial contract from Motorola to integrate and test a subsystem of
Motorola's Iridium-Registered Trademark-cellular telephone system, a system
being designed to enable
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handheld wireless telephones to receive voice, data, paging and facsimile
information anywhere in the world through a network of 66 low earth orbit
satellites.
ITEM 2. PROPERTIES
Ashton leases office space at 10420 Little Patuxent Parkway;
Columbia, Maryland.
ITEM 3. LEGAL PROCEEDINGS
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During fiscal year 1996, the Board of Directors and Stockholders
approved a total increase in the number of common stock and preferred
stock shares authorized by 15,000,000 and 1,000,000 respectively.
Therefore, at March 31,1996, the Company had 20,000,000 shares of
common stock and 1,000,000 shares of preferred stock authorized.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Effective May 2, 1996, the Company's common stock ("Common Stock") and
redeemable common stock purchase warrants ("Warrants") began trading on the
NASDAQ Small Cap Market. The following sets forth the high and low prices
for the Common Stock shares during the period indicated:
HIGH LOW
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May 2, 1996 through July 26, 1996: 15.50 7.00
The following sets forth the high and low prices for the Warrants during
the period indicated:
HIGH LOW
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May 2, 1996 through July 26, 1996: 9.25 3.25
On July 26, 1996, the closing price of the Common Stock was $9.00 and
the closing price of the Warrants was $3.75.
As of July 26, 1996, there were approximately 73 holders of record of
Common Stock and approximately 13 holders of record of Warrants.
DIVIDEND POLICY
No dividends have been declared on the Common Stock through July 26,
1996 and the Board of Directors has no current intention to declare or pay
dividends on the Common Stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS OF THE COMPANY
The following discussion of Ashton's and UTTC's results of operations
and liquidity and capital resources should be read in conjunction with the
consolidated financial statements and related notes of Ashton and UTTC for
the years ended March 31, 1995 and 1996.
RESULTS OF OPERATIONS OF ASHTON AND UTTC
Ashton, prior to its acquisition of its interest of CSI-Registered
Trademark- in June 1995, was a development stage company; UTTC is also a
development stage company. Neither Ashton nor UTTC has generated any
revenues nor does either of them have any history of operations or earnings
from the inception of each such company to date. Ashton's and UTTC's
activities from inception through March 31, 1996 have consisted of the
following:
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(i) Filing the necessary incorporation and organization documents, (ii)
Ashton acquiring equity interests in CSI-Registered Trademark- and UTTC,
(iii) designing the system architecture for ATED, (iv) hiring outside firms
and CSI-Registered Trademark- to assist in the design and development of
ATED, (v) seeking financing, (vi) UTTC designing the UTS-TM- system and (vii)
contracting with CSI-Registered Trademark- to commence development of the
UTS-TM- system software and entering into the PHLX Agreement.
During the year ended March 31, 1996, Ashton incurred $346,504 of
development costs for the design and development of ATED. Ashton also
incurred $513,050 of selling, general and administrative expenses which
include $160,058 of executive compensation and $89,863 of professional
services.
During the year ended March 31, 1996, UTTC incurred $1,571,748 of
development costs (including $1,349,952 related to the acquisition of UTTC by
Ashton) for the UTS-TM- system. UTTC also incurred $133,175 of labor costs.
During the year ended March 31, 1995, Ashton incurred startup expenses
totaling $64,560, which included $54,157 for executive compensation,
officer's life insurance and professional services and various other general
and administrative expenses of $10,403. During the fiscal year ended March
31, 1995, UTTC incurred start-up and development expenses of $49,279.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had cash and cash equivalents of $31,021.
The Company expects to satisfy its anticipated cash needs during the first 12
months of operations following the completion of the Offering from the net
proceeds received in the Offering of approximately $10,395,000 and from
revenues received from operations. The Company does not anticipate the need
to raise additional financing during the first 12 months of operations
following the completion of this Offering, although no assurances can be
given in this regard. The net proceeds from the Offering were utilized by the
Company towards the repayment of long-term debt and senior promissory notes,
the purchase of additional equity interests in CSI-Registered Trademark-,
funding of UTTC's development and marketing of the UTS-TM- system, funding of
software development by CSI, and working capital.
During the year ended March 31, 1996, the Company used cash for capital
expenditures and investment in subsidiaries. The Company received cash from
financing activities primarily from the sale of $650,000 of promissory notes
by Ashton in a private placement which netted to the Company, after deducting
expenses, $582,660. The Company also received $880,863 of proceeds from
loans from stockholders.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF CSI-Registered Trademark-
On June 16, 1995, Ashton acquired 650,798 shares of CSI-Registered
Trademark-Class A Common Stock and 16,726 shares of CSI-Registered Trademark-
Class B Common Stock which represent 26% of the total number of shares of
common stock outstanding and 47% of the outstanding voting shares of
CSI-Registered Trademark- for a purchase price of $667,524. On November 16,
1995, Ashton acquired an additional 2,000 Class A voting common shares and
42,000 Class B non-voting common shares, which increased its investment to
29% of the total number of common shares outstanding. This investment has
been accounted for by Ashton by the equity method as of March 31, 1996.
On May 7, 1996, Ashton acquired 469,155 shares of CSI-Registered
Trademark- Class A Common Stock and 1,557,210 shares of CSI-Registered
Trademark- Class B Common Stock for $865,565. This purchase increased the
Company's investment to 80% of the total number of shares of CSI-Registered
Trademark- common stock outstanding. Effective May 7, 1996, the total
investment by Ashton of CSI-Registered Trademark- will be accounted for by
the purchase method. On June 11, 1996, Ashton acquired an additional 12,053
of Class A voting common shares and 1,261 Class B non-voting common shares,
for $6,100, which increased its investment to 81% of the total number of common
shares outstanding.
OVERVIEW
In the past three years, CSI-Registered Trademark- has experienced a
significant decrease in government related revenues. Traditional governmental
customers of CSI-Registered Trademark- were subject to budget reductions and
two large system development projects approached completion. During this
period, CSI-Registered Trademark- identified several commercial areas of
interest and began applying technologies developed through its defense
related business in an attempt to create products for those new markets.
These areas - vehicle location, utility products (automatic meter reading and
power forecasting/power management) and systems services did not generate
adequate revenues to offset the decline in government business. In addition,
CSI-Registered Trademark- has bid on several large government opportunities
and necessary staffing resources were retained to perform them, but
CSI-Registered Trademark-'s bids were not successful; therefore, large losses
were incurred by CSI-Registered Trademark-.
CSI-Registered Trademark- intends to remain in the government contract
business; however, the percentage of total revenues that this business
segment represents has been decreasing for several years. CSI-Registered
Trademark-'s dependence on the government market has declined over the past
few years and represents approximately 38% of revenues as of March 31, 1996.
CSI-Registered Trademark- expects to continue to seek and obtain government
contracts; however, the annual percentage of revenues represented by these
contracts is expected to continue to decline. While CSI-Registered
Trademark- believes budgeted spending on information technology by the DOD
will increase, total government defense expenditures have been decreasing and
may continue to decrease primarily because of the perception of a reduced
military threat. Reductions in defense related expenditures could cause U.S.
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defense agencies to exercise their right to terminate existing contracts or
not to exercise renewal options. A significant reduction in government
contracts for CSI-Registered Trademark- may result in a material adverse
effect on CSI-Registered Trademark- and the consolidated operations of the
Company.
The end of the "cold war" and the diminished threat of communist
aggression has contributed to a decrease in defense spending. As a result,
CSI-Registered Trademark- management has attempted to shift CSI-Registered
Trademark-'s business emphasis from government to commercial applications
through the refocusing of CSI-Registered Trademark-'s skills and previously
developed technologies toward the commercial sector. In general,
CSI-Registered Trademark- has limited experience in the marketing and
distribution of commercial products and CSI-Registered Trademark- has
generated only modest revenues from its independent sale of such products.
CSI-Registered Trademark-is heavily dependent upon financing from the
Offering for the funds necessary to commercially market its products. There
can be no assurance that CSI-Registered Trademark- can market its commercial
products successfully or profitably.
Currently, CSI-Registered Trademark- focuses upon its core defense and
intelligence agency business while applying technologies developed through
its defense related business to commercial applications. These crossover
initiatives have resulted in CSI-Registered Trademark-'s receipt of a
commercial contract from Motorola to integrate and test a subsystem of
Motorola's Iridium-Registered Trademark- cellular telephone system, a system
being designed to enable handheld wireless telephones to receive voice, data,
paging and facsimile information anywhere in the world through a network of
66 low earth orbit satellites.
CSI-Registered Trademark- maintains extensive internal controls and
procedures to ensure compliance with the regulations and cost accounting
standards applicable to the performance of government contracts. For
example, CSI-Registered Trademark-monitors and controls the commencement of
work in the absence of a written contract document, a practice that is often
necessary to accommodate delays inherent in government contract
documentation, and generally will not commence work without a final contract.
This review process includes direct contact between CSI-Registered
Trademark-'s contract specialist and the government's contracting office to
validate the government's authorization to proceed with the assigned work.
This helps ensure that CSI-Registered Trademark- does not assume unwarranted
risk in the commencement of performance of its contract obligations.
CSI-Registered Trademark- also maintains an accounting structure and review
process to separately identify and classify certain non-reimbursable expenses
under government contracts. The expenditure of such non-reimbursable costs
is subject to final review and approval by CSI-Registered Trademark-'s Chief
Executive Officer.
CSI-Registered Trademark-'s accounting and record keeping system is
subject to the Defense Contractor Audit Agency's (DCAA) review, which occurs
on a regular basis. These reviews have resulted in no adjustments being made
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or substantive issues being raised. The last such review ended on March 19,
1996 for the fiscal years March 31, 1995 and March 31, 1994.
CSI-Registered Trademark-'s principal sources of revenue are a result of
government and commercial negotiated procurement contracts. Negotiated
procurement contracts include cost reimbursement type contracts (both cost
plus fixed fee and cost plus award fee), time and materials contracts, and
fixed price contracts. CSI-Registered Trademark-'s contract revenue for the
years ended March 31, 1996 and 1995 (including non-government contract
revenues) by contract type were as follows:
YEAR ENDED MARCH 31
--------------------------------
1996 1995
REVENUE PERCENT REVENUE PERCENT
------- ------- ------- -------
(IN THOUSANDS) (IN THOUSANDS)
Cost reimbursement $ 866 24% $ 1,011 40%
Time and materials 1,856 50% 772 31%
Fixed-price 945 26% 749 29%
Total Contract Revenue $ 3,667 100% $ 2,532 100%
Approximately 31% of CSI-Registered Trademark-'s contract revenue for
the year ended March 31, 1996 and 47% of contract revenue for the year ended
March 31, 1995 was derived from government contracts on which CSI-Registered
Trademark- is the prime contractor. While CSI-Registered Trademark- believes
budgeted spending on information technology by the DOD will increase, total
government defense related expenditures have been decreasing and may continue
to decrease primarily because of the perception of a reduced military threat.
Reductions in defense related expenditures could cause U.S. defense agencies
to exercise their right to terminate existing contracts or not to exercise
renewal options. A significant reduction in government contracts for
CSI-Registered Trademark- could result in a material adverse effect on
CSI-Registered Trademark- and the consolidated operations of the Company.
The contract with Motorola requires CSI-Registered Trademark- to perform
as an independent verification and validation company for Motorola's
satellite ground stations. Motorola has exercised all of its options and
also contracted for an additional Task Order under this contract.
CSI-Registered Trademark- expects to realize a total of approximately
$3,066,063 over a two-year period starting in August 1995 and ending in
August 1997. Through March 31, 1996, CSI-Registered Trademark- has invoiced
Motorola $1,072,457.
Expenses are incurred in three general areas for all contracts: direct
costs, overhead and general and administrative expenses. Direct costs
include payroll for employees and other direct expenses such as procurement
of hardware for customers and various direct billable charges. Overhead
includes salaries of
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<PAGE>
non-direct personnel, fringe benefits and other direct allocable expenses.
General and administrative expenses are all other non-allocable expenses
which are not chargeable to contracts.
Many of CSI-Registered Trademark-'s government contracts, while
extending for more than one year, are funded by procuring agencies of the
U.S. government on a fiscal year basis. This often results in a variance
between "funded backlog" and "contract backlog." Funded backlog represents
government contracts which have been funded by procuring agencies.
CSI-Registered Trademark-'s funded backlog generally varies over the course
of a year, depending upon government procurement and funding cycles. As a
result, year-to-year comparisons are not necessarily indicative of future
trends in company revenues. As of March 31, 1995, CSI-Registered
Trademark-'s contract backlog was approximately $1.7 million, of which
approximately $1.1 million was funded backlog, compared to approximately $1.2
million and approximately $720,000, respectively, for the fiscal year ending
March 31, 1994. As of March 31, 1996, CSI-Registered Trademark-'s contract
backlog was approximately $3.2 million, of which approximately $2.9 million
was funded backlog. There were seven active government contracts as of March
31, 1996, all of which are expected to be completed by March 31, 1997.
YEAR ENDED MARCH 31, 1996 COMPARED WITH YEAR ENDED MARCH 31, 1995
Revenues for the years ended March 31, 1996 increased by $1,135,000, or
44.8%, to approximately $3,667,000, from approximately $2,532,000 for the
year ended March 31, 1995. This increase was attributable to an increase in
commercial sales of $1,471,000, from approximately $789,000 for the year
ended March 31, 1995 to approximately $2,260,000 for the year ended March 31,
1996, while government revenue declined by $336,000, from approximately
$1,743,000 for the year ended March 31, 1995 to approximately $1,407,000 for
the year ended March 31, 1996. The increase in commercial sales was
primarily due to new contracts with Motorola, Ashton and a transit related
business. This increase in commercial revenues is directly attributable to
CSI-Registered Trademark-'s decision to aggressively pursue commercial work.
The decrease in government revenue was primarily due to fewer government
contracts.
Costs of revenues are direct costs, which include labor costs,
subcontract costs, material costs and other direct costs related to contract
revenue and overhead. Direct costs for the year ended March 31, 1996
increased by $506,000, or 20.4%, to approximately $2,986,000, from
approximately $2,480,000 for the year ended March 31, 1995. Direct costs,
expressed as a percentage of total revenues, decreased from 97.9% for the
year ended March 31, 1995 to 81.4% for the year ended March 31, 1996. This
change has occurred primarily due to the closing of CSI-Registered
Trademark-'s Maryland office.
Operating expenses include selling and administrative, material handling
and bid and proposal expenses. Operating expenses for the year ended March
31, 1996 decreased by $144,000, or 25.1%, to approximately $429,000, from
approximately $573,000 for the year ended March 31, 1995. Expressed as a
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<PAGE>
percentage of total revenues, operating expenses decreased for the year ended
March 31, 1996 to 11.7% from 22.6% for the year ended March 31, 1995. The
decrease is a result of tighter cost restraints, less bid and proposal
expenses, and the closing of CSI-Registered Trademark-'s Maryland office.
Interest expense for the year ended March 31, 1996 decreased by $2,000,
or 15.2%, to approximately $15,000, from approximately $17,000 in the year
ended March 31, 1995. This decrease was due to lower interest rates under
the Credit Facility and less of the Credit Facility being used. The Credit
Facility is used primarily for accounts receivable and financing, with
borrowing capped at $155,000 for fiscal year 1996. At March 31, 1996, the
credit line balance was reduced to zero. Future debt levels of
CSI-Registered Trademark- will be determined by ongoing working capital
needs, capital expenditures and other financing requirements.
No income tax expense was incurred for the year ended March 31, 1996 due
to the utilization of the available net operating loss carryforward.
Net income for the year ended March 31, 1996 increased by $710,000, or
152.1%, to approximately $243,000, from approximately $(467,000) in the year
ended March 31, 1995, based upon increased revenues and a decrease in
aggregate costs and expenses as discussed above.
INFLATION
Approximately 24.0% and 40.0% of CSI-Registered Trademark-'s contract
revenue for the years ended March 31, 1996 and 1995, respectively, were under
cost reimbursement type contracts, under which inflationary increases are
borne by the customer. Although CSI-Registered Trademark- performs on
several multi-year, fixed price and time and materials contracts, under which
it bears the risk of inflationary pressures on its costs, to date, it has not
been materially adversely affected by inflation.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities during year ended March 31, 1996 generated cash of
approximately $84,000, compared to cash used of approximately $102,000 during
year ended March 31, 1995, primarily reflecting profits, an increase in
current liabilities and a decrease in certain current assets. The cash used
in operations during the year ended March 31, 1995 was largely used to fund
the operating loss. Management of CSI-Registered Trademark- made a business
decision to continue commercial product development which, in turn, resulted
in a net operating loss.
The reduction in cash for the year ended March 31, 1996 was due to the
payment of its note payable to the bank of $155,000.
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<PAGE>
During the years ended March 31, 1996 and 1995, CSI-Registered
Trademark- invested approximately $37,000 and approximately $3,000,
respectively, in capital expenditures, primarily relating to acquisitions of
office and computer related equipment for use in performance of contracts and
for increased efficiency in CSI-Registered Trademark-'s administration.
CREDIT FACILITY
The Credit Facility is a revolving credit facility provided to
CSI-Registered Trademark- by SunBank N.A. in the principal amount of
$155,000. Aggregate amounts outstanding under the Credit Facility may not
exceed the lesser of (i) $155,000 or (ii) a variable amount calculated by
aggregating a specified set of CSI-Registered Trademark-'s accounts
receivable (the "Borrowing Base"). Interest on revolving loan advances made
under the Credit Facility is charged at the SunBank prime rate plus 1%. As
of March 31, 1996 there was no balance outstanding under the Credit Facility.
The weighted average interest rate on the Credit Facility during the year
ended March 31, 1996 was approximately 10.22%. The Credit Facility is
secured by a general lien on CSI-Registered Trademark-'s contract
receivables, accounts receivable, inventory, contract rights and equipment.
The Credit Facility requires CSI-Registered Trademark- to maintain, on a
monthly basis, certain ratios relating to current ratio, working capital,
tangible net worth, debt to equity and interest coverage. It also includes
certain covenants restricting, among other things, mergers or acquisitions,
sales of assets, additional borrowings, affiliated transactions and certain
other matters. As of March 31, 1995, CSI-Registered Trademark- was not in
compliance with certain covenants of the Credit Facility relating to interest
coverage ratio, minimum tangible net worth and minimum working capital
requirements. However, CSI-Registered Trademark-negotiated the renewal of
the Credit Facility with less stringent covenants through June 30, 1996.
Consequently, CSI-Registered Trademark- is in compliance with all covenants
of the Credit Facility.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OF
THE ASHTON TECHNOLOGY GROUP, INC.:
We have audited the accompanying consolidated balance sheet of The Ashton
Technology Group, Inc. (a Delaware corporation) and Subsidiary as of March
31, 1996, and the related statements of operations, changes in stockholders'
deficiency and cash flow for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of The Ashton Technology Group, Inc. and Subsidiary as of March 31, 1996, and
the results of its operations and its cash flow for the year then ended in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Baltimore, Maryland,
July 9, 1996
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<PAGE>
INDEPENDENT AUDITOR'S REPORT
TO THE STOCKHOLDERS OF
THE ASHTON TECHNOLOGY GROUP, INC.:
We have audited the accompanying balance sheet of The Ashton Technology
Group, Inc. (a development stage company) as of March 31, 1995, and the
related statements of operations, changes in stockholders' deficiency and
cash flow for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Ashton Technology Group,
Inc. and Subsidiary as of March 31, 1995 and the result of its operations and
its cash flow for the year then ended in conformity with generally accepted
accounting principles.
GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
New York, New York
January 10, 1996,
Except for the first part of the second paragraph
of Note 13 to which the date is May 1, 1996
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<PAGE>
THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (Note 2)
Total Current Assets 31,021 -
----------- ---------
----------- ---------
Property and equipment, net of accumulated depreciation of $5,348
and $0 (Notes 2 and 3) 21,359 -
Deferred offering costs (Note 2) 614,856 -
Investment in unconsolidated investee (Note 4) 708,844 -
Other assets 27,590 5,697
----------- ---------
TOTAL ASSETS $ 1,403,670 $ 5,697
----------- ---------
----------- ---------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable $ 941,366 $ -
Accrued interest 69,369 -
Accrued salaries 56,694 -
Accrued expenses - 102
Notes payable to stockholders (Note 6) 1,244,771 20,478
----------- ---------
Total current liabilities 2,212,200 20,580
Long-term debt (Note 5) 650,000 -
----------- ---------
Total liabilities 2,962,200 20,580
Commitments and contingencies (Note 12)
Stockholders' Deficiency (Note 7):
Preferred stock - $.01 par value; 1,000,000 shares authorized, none issued
Common Stock - $.01 par value; 20,000,000 shares authorized, 5,290,000 shares
issued and 5,090,000 shares outstanding in 1996 and 5,000,000 shares
authorized and 2,650,000 shares issued and outstanding in 1995 52,900 26,500
Additional paid-in capital 1,341,109 47,509
Treasury Stock, at cost, 200,000 shares (Note 6) (300,000) -
Less: Receivable in connection with issuance of common stock - (24,332)
Accumulated deficit (2,652,539) (64,560)
----------- ---------
Total stockholders' deficiency (1,558,530) (14,884)
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 1,403,670 $ 5,697
----------- ---------
----------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
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<PAGE>
THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATION
FOR THE YEARS ENDED MARCH 31,1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Development costs, including $1,349,952 write-off of
purchased intangible asset (Note 8) $ 1,918,252 $ -
Selling, general and administrative expenses 648,732 64,560
Interest 66,727 -
------------ -----------
Total costs and expenses 2,633,711 64,560
Equity in earnings of unconsolidated investee (45,732) -
------------ -----------
Net loss $ (2,587,979) $ (64,560)
============ ===========
Net loss per common share $ (0.49) $ (0.10)
============ ===========
Weighted average number of common shares outstanding 5,278,900 5,328,900
============ ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
-21-
<PAGE>
THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK RECEIVABLE IN
----------------- ADDITIONAL CONNECTION TOTAL
NUMBER OF PAID-IN TREASURY ACCUMULATED WITH ISSUANCE STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCK DEFICIT OF COMMON STOCK DEFICIENCY
------ ------ ------- ----- ------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock on March 31,1994:
In exchange for receivable from
stockholders ($.025/share) (Note 7) 2,215,000 $22,150 $ 40,984 $ - $ - $(63,134) $ -
In exchange for services recorded as
organization costs (Note 7) 150,200 1,502 2,253 - - - 3,755
In exchange for professional services
(Note 7) 284,800 2,848 - - - 7,120
Payment of general and administrative expenses
(Note 7) - - - - - 36,169 36,169
Payment of deferred financing costs (Note 7) - - - - - 2,633 2,633
Net loss - - - - (64,560) - (64,560)
------------------------------------------------------------------------------------
Balance at March 31, 1995 2,650,000 26,500 47,509 - (64,560) (24,332) (14,883)
Issuance of common stock in connection
with acquisition (Note 8) 2,640,000 26,400 1,293,600 - - - 1,320,000
Purchase of treasury stock (Note 6) (200,000) - - (300,000) - - (300,000)
Collection of receivable (Note 7) - - - - - 24,332 24,332
Net loss - - - - (2,587,979) - (2,587,979)
------------------------------------------------------------------------------------
Balance at March 31, 1996 5,090,000 $52,900 $1,341,109 $(300,000) $(2,652,539) $ - $(1,558,530)
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
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<PAGE>
THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,587,979) $(64,560)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 74,492 691
Write-off of purchased intangible asset 1,349,952 -
Equity in earnings of unconsolidated investee (45,732) -
General and administrative expenses paid by
issuance of loan payable to stockholder - 20,478
General and administrative expenses paid by
reduction in stock subscriptions receivable - 36,169
General and administrative expenses paid by
issuance of common stock - 7,120
Changes in operating assets and liabilities-
Increase in accounts payable and accrued expenses 1,067,327 102
------------ -----------
2,446,039 64,560
------------ -----------
Net cash used in operating activities (141,940) -
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (21,014) -
Purchase of investment in CSI (679,024) -
------------ -----------
Net cash used in investing activities (700,038) -
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance costs for initial public offering (614,856) -
Issuance costs for private placement (67,340) -
Proceeds from notes payable 1,530,863 -
Collection of receivables 24,322
------------ -----------
Net cash provided by financing activities 872,999 -
------------ -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 31,021
Cash and cash equivalents, beginning of year -
------------
Cash and cash equivalents, end of year $ 31,021 $ -
------------ -----------
------------ -----------
Supplemental schedule of noncash investing and financing activities:
Purchase of treasury stock in exchange for note payable $ 300,000 -
------------ -----------
------------ -----------
Deferred financing costs paid by reduction in stock subscription
receivable $ - $2,633
------------ -----------
------------ -----------
Organization costs paid by issuance of common stock $ - $3,755
------------ -----------
------------ -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
-23-
<PAGE>
THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
The accompanying consolidated financial statements for the year ended March
31, 1996 include the accounts of The Ashton Technology Group, Inc. ("Ashton")
and its subsidiary, Universal Trading Technologies Corporation ("UTTC")
(collectively, the "Company"). As described in Note 8, on October 25, 1995,
Ashton acquired 80% of the common stock of UTTC; therefore, the consolidated
financial statements for the year ended March 31, 1995, represent the
accounts of Ashton. The business combination has been accounted for as a
purchase. The results of operations of UTTC are included in the accompanying
consolidated financial statements at March 31, 1996 since the date of
acquisition. All significant intercompany transactions and balances have
been eliminated.
As described in Note 4, in June 1995, Ashton acquired 650,798 Class A
voting shares and 16,726 Class B non-voting common shares of Computer Science
Innovations, Inc. ("CSI-Registered Trademark-"). On November 16, 1995, Ashton
acquired an additional 2,000 Class A voting common shares and 42,000 Class B
non-voting common shares which increased its investment to 29% of the total
number of common shares outstanding. As of March 31, 1996, this investment has
been accounted for by Ashton using the equity method. In connection with the
Company's initial public offering of stock (the "Offering") on May 2, 1996,
described in Note 13, the Company purchased additional shares of Class A voting
and Class B non-voting common stock of CSI-Registered Trademark- which
enabled the Company to own 80% of each class of CSI's-Registered Trademark-
common stock.
Both the Company and CSI-Registered Trademark- are engaged in the design,
development and implementation of information technology products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEVELOPMENT STAGE COMPANY
For financial reporting purposes, Ashton was considered to be in the
development stage at March 31, 1995. Subsequent to June 16, 1995 (date of
acquisition of its investment in CSI-Registered Trademark-), the Company is no
longer considered to be in the development stage; however, it does continue to
undertake research and development activities. Research and development costs
are expensed as incurred, until the UTS-TM- system and ATED models are
functional. Subsequent costs will be capitalized and reported at the lower of
unamortized cost or net realizable value.
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<PAGE>
The Company has suffered significant losses in both fiscal year 1996 and
1995. This has been the result of incurring significant start-up and research
and development costs to commence its operations. The Company's completed
Offering in May 1996 (see Note 13) has provided it with working capital that is
expected to be sufficient until it is able to generate revenues to cover its
operating costs. Management expects to generate revenues by the end of the
third fiscal quarter of 1997 from the commencement of the UTS-TM- on-line
transaction system. However, there can be no assurance that the
UTS-TM- system will be operational in such time period or that the cost of
development will not exceed the Company's cost estimates of a minimum of
$3,000,000. In addition, product acceptance by the consumer of the
UTS-TM- system is uncertain at this time. UTTC has a
five-year agreement with PHLX as outlined in Note 12 which will allow the
Company to mass market the UTS-TM- system. Management also plans to generate
revenues through corporate acquisitions and the development of alternative uses
to its technology. Management believes that the revenue generating events
described above plus the profitable operations of CSI will enable the Company
to assume profitable operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers balances with an original maturity of three months or
less to be cash equivalents.
RECENT ACCOUNTING PRONOUNCEMENTS
Management does not believe that any recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on the accompanying financial statements.
PROPERTY AND EQUIPMENT
The components of property and equipment is stated at cost. Depreciation
of property and equipment is provided for using the straight-line method over
the estimated useful life of the assets as follows:
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<PAGE>
USEFUL LIVES
------------
Office Equipment 3 years
Computer Equipment 3 years
Furniture and Fixtures 7 years
Amortization of leasehold improvements is being provided for using the
straight-line method over the shorter of the useful life or term of the lease.
DEFERRED OFFERING COSTS
Deferred offering costs represent costs attributable to the Offering.
These costs are comprised primarily of accounting, legal, printing and certain
underwriting fees. Upon consummation of the Offering described in Note 13,
these costs were offset against the proceeds from the transaction.
NET LOSS PER SHARE
Net loss per common share is computed based upon the weighted average
number of common shares outstanding. Pursuant to Securities and Exchange
Commission Staff Accounting Bulletin No. 83, shares of common stock issued
or stock options granted during the 12-month period preceding the date of the
initial filing of a Registration Statement at prices below the Offering price
have been included in the weighted average number of shares outstanding since
inception. The Company uses the Treasury Stock method to determine the
dilutive effect of outstanding stock options and warrants.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following as of March 31, 1996:
Office equipment $ 2,567
Computer equipment 8,528
Furniture and fixtures 2,982
Leasehold improvements 12,630
-------
$26,707
Less-Accumulated depreciation 5,348
-------
Property and equipment, net $21,359
-------
-------
The Company did not own any property and equipment as of March 31, 1995.
Depreciation expense for the year ended March 31, 1996 was $5,348.
-26-
<PAGE>
4. INVESTMENT IN UNCONSOLIDATED INVESTEE:
In June 1995, the Company acquired 650,798 Class A voting common shares and
16,726 Class B non-voting common shares of CSI-Registered Trademark-, which
represents 26% of the total number of common shares outstanding, 47% of the
outstanding voting shares and 1.5% of the outstanding non-voting shares of
CSI-Registered Trademark- for a purchase price of $667,524, paid in cash. The
Dover Group, Inc., founder, advanced the Company substantially all of the funds
for this acquisition. This amount is included in notes payable to stockholders
(see Note 6). Additionally, the Dover Group, Inc. received warrants to purchase
500,000 shares of the Company's common stock at an exercise price of $8 per
share. The warrants are exercisable on or before October 10, 1998. In November
1995, the Company acquired an additional 2,000 Class A voting common shares and
42,000 Class B non-voting common shares for a purchase price of $11,500, paid in
cash. The purchases increased the Company's investment to 29% of the total
number of common shares outstanding.
In connection with the Offering described in Note 13, the Company purchased
an additional 469,155 shares of CSI's-Registered Trademark- Class A voting
stock and an additional 1,557,210 shares of Class B non-voting common stock for
$865,565 such that after such purchases, the Company now owns 80% of both Class
A and Class B common stock.
The total cumulative purchase price of $679,024 as of March 31, 1996
in this step acquisition, resulted in an excess of cost over the Company's
proportionate share of its equity in the fair value of the net assets of
CSI-Registered Trademark- (goodwill) of approximately $518,000 which is being
amortized over 15 years. The goodwill is included in Investment in
Unconsolidated Investee in the accompanying consolidated balance sheet as of
March 31, 1996. Amortization of goodwill for the year ended March 31, 1996 was
$25,900.
This investment has been accounted for using the equity method, with
resulting value of $708,844 as of March 31, 1996, reflecting the Company's share
of earnings of CSI-Registered Trademark-, since the investment dates, less
amortization of goodwill.
The following is a condensed balance sheet and statement of operations for
the unconsolidated investee:
1996 1995
---- ----
Current assets $1,048,097 $702,946
Property and equipment, net 165,015 244,069
Other assets 18,712 23,120
---------- --------
Total assets $1,231,824 $970,135
---------- --------
---------- --------
-27-
<PAGE>
1996 1995
---- ----
Current liabilities $ 431,305 $ 412,829
Stockholders' equity 800,519 557,306
---------- ----------
Total liabilities and stockholders' equity $1,231,824 $ 970,135
---------- ----------
---------- ----------
Revenue $3,666,864 $2,531,564
Expenses 3,423,651 2,998,191
---------- ----------
Net income (loss) $ 243,213 $ (466,627)
---------- ----------
---------- ----------
Net income (loss) per common share $.10 $(.19)
---- -----
---- -----
5. LONG-TERM DEBT:
In October 1995, the Company raised $650,000 by issuing 13 units through a
private placement. Each unit consists of a $49,000 10% non-convertible
promissory note due in April 1997 and a $1,000 10% convertible promissory note
due in October 1998. The non-convertible notes are subordinated to all existing
and future indebtedness of the Company. The non-convertible notes are
redeemable at the option of the Company in whole, but not in part, upon at least
30 days prior written notice to the note holders. The $1,000 convertible notes
are convertible into warrants to purchase 20,000 shares of common stock through
October 1998 at $8 per share. Interest is payable semiannually on these notes.
This debt was repaid subsequent to year end with the proceeds of the Offering.
(see note 13).
6. NOTES PAYABLE TO STOCKHOLDERS:
During fiscal year 1995, the Company had a non-interest bearing loan
payable of $20,478 to the Dover Group, Inc. ("Dover"), a stockholder, with no
set repayment terms.
As of March 31, 1996, the Company had a note payable in the amount of
$615,176 to Dover, which the Company issued in connection with the acquisition
of the common stock of CSI-Registered Trademark- (see Note 4). The note bears
interest at 10% per annum and is payable on October 1, 1996. In addition,
during fiscal year 1995, Dover loaned UTTC $43,430 at 10% interest per annum for
working capital requirements. The Note is payable with interest and due October
1, 1996 and was assumed by the Company in connection with the acquisition
described in Note 8.
As of March 31, 1996, the Company had a $100,000 loan payable to Medford
Financial, Inc. ("Medford"), a company whose principals are stockholders of the
Company. Medford has agreed to provide certain consulting services to the
Company over a three-year period. This loan bears interest at the rate of 10%
per annum and is payable, principal and interest, on April 26, 1996.
-28-
<PAGE>
In January 1996, the Company purchased 200,000 shares of its common stock
from a stockholder for an aggregate purchase price of $300,000. The purchase
price was paid by Ashton with a promissory note ("Note") of Ashton. Within two
business days after the Offering, two-thirds of the principal and accrued
interest are due and payable, and the remainder due in April 1997, or five
business days after the UTS-TM- system is ready for delivery to the PHLX. The
interest was subsequently forgiven by the stockholder.
In January 1996, an officer/stockholder loaned the Company $150,000 bearing
interest at 10% per annum which is due at the earlier of December 31, 1996 or
the initial public offering of stock by the Company.
The Company has other stockholder loans totaling $36,165 which bear no
interest and have no set repayment terms.
All of the loans mentioned above are included within Notes Payable to
Stockholders in the accompanying consolidated balance sheets and have been
repaid subsequent to year end with the proceeds of the offering (see Note 13).
7. STOCKHOLDERS' DEFICIENCY:
On March 31, 1994, the Company issued common stock in exchange for amounts
receivable from stockholders and for services rendered to the Company of
$10,875, of which $3,755 was capitalized as organization costs and $7,120 was
expensed. This transaction is reflected in the accompanying consolidated
statements of changes in stockholders' deficiency for the year ended March 31,
1995 since the Company had no other activity prior to April 1, 1994. In March
1995, the Company's stockholders paid general and administrative expenses and
deferred financing costs on behalf of the Company. The amounts paid reduced the
receivable in connection with the issuance of the common stock. During fiscal
1996, the Company collected the remaining $24,332 on the receivable in
connection with the issuance of common stock.
8. ACQUISITION OF UTTC:
In October 1995, the Company acquired 4,000,000 common shares of UTTC in
exchange for 2,640,000 shares of Ashton's common stock. This acquisition
represents 80% of the outstanding common shares of UTTC. The purchase price of
$1,320,000 resulted in an allocation of approximately $1,349,952 to UTTC's
Universal Trading System, an intangible asset with no alternative future use.
This amount has been considered to be a development cost which has been charged
to operations in the year ended March 31, 1996.
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<PAGE>
The following pro forma information assumes that the acquisition of the
common stock of UTTC occurred on April 1, 1994.
YEAR ENDED MARCH 31,
1996 1995
---- ----
Net loss $(2,637,834) $(113,839)
Loss per common share $(.50) $(.02)
9. INCOME TAXES:
As of March 31, 1996, the Company had a net operating loss carryforward of
approximately $1,200,000 to reduce future Federal taxable income which expires
through March 31, 2011. A deferred tax asset of approximately $ 450,000 exists
as of March 31, 1996 primarily due to this carryforward for which the Company
has provided a full valuation allowance due to the uncertainty about the future
realization of this tax benefit.
10. RELATED PARTY TRANSACTIONS:
During fiscal year 1996, the Company paid approximately $314,000 to
CSI-Registered Trademark- for the development of encryption coding and
UTS-TM- on-line transaction system. These expenses are reflected in development
costs as of March 31, 1996.
11. STOCK OPTIONS:
During January 1996, incentive stock options were granted to an Ashton
executive to purchase 350,000 shares of common stock at a purchase price of
$4.00 per share. These options vest on April 1, 1997 and become exercisable in
annual installments of 70,000 options on April 1, 1997, 70,000 options on April
1, 1998 and 210,000 options on April 1, 1999 and expire April 1, 2006.
12. COMMITMENTS AND CONTINGENCIES:
The Company leases office facilities under an operating lease expiring in
September 1998. Future minimum operating lease payments are as follows:
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<PAGE>
YEAR ENDING MARCH 31,
1997 $ 79,361
1998 82,060
1999 41,030
--------
$202,451
--------
--------
Rent expense under this operating lease for the year ended March 31, 1996
totaled $23,919.
In September 1995, UTTC entered into an agreement with the Philadelphia
Stock Exchange ("PHLX") whereby the PHLX has agreed to employ UTTC's
"UTS-TM-" system on its equity trading floor. In connection with this
agreement, UTTC is required to reimburse the PHLX up to $100,000 for the first
year of the agreement for marketing costs incurred by the PHLX. UTTC is also
required to assume up to $200,000 of the PHLX's initial technology development
costs in implementing the UTS-TM- system. UTTC is required to contribute to a
PHLX administered "claim fund" for potential claims relating to the
UTS-TM- system operations. UTTC is required to contribute $100,000 after
commencement of the UTS-TM- system trading and, if necessary, to make additional
contributions of up to $100,000 per year to such claim fund. The PHLX is also
entitled to receive an annual royalty from UTTC of 3% of annual gross revenue
based on UTTC's average revenue in the first three years of operations for each
year the PHLX Agreement is in effect. These payments are required to begin at
the end of the second full year of operation and continue for the life of the
PHLX Agreement.
In January 1996, the Company entered into a three-year employment agreement
with its chairman. This agreement provides for the payment of $200,000 per
year. The agreement contains provisions for certain additional compensation
arrangements, noncompete clauses and other benefits, as defined.
Each year, CSI-Registered Trademark-'s records are subject to a DCAA
review. During March 1996, CSI-Registered Trademark-'s records were reviewed
as of March 31, 1995 and 1994. No adjustments or substantive issues were raised
during the current year review.
13. SUBSEQUENT EVENTS:
In April 1996, an unrelated individual loaned the Company $250,000 bearing
interest at 10% per annum which is due at the earlier of May 30, 1996 or the
initial public offering of stock by the Company. This note ("Note") is
collateralized by 150,000 shares of Ashton held by Dover. The Company repaid
the
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<PAGE>
note at the time of the Offering. The issuance of this Note was intended to be
exempt from the registration requirement of the Securities Act of 1933, as
amended. However, the intended exemption from registration may not be available
to the Company. In permitting the Registration Statement to become effective,
the Securities & Exchange Commission shall not have been understood as having
ruled that the claimed exemptions for this transaction or any other transaction
are available in the circumstances set forth.
On May 2, 1996, Ashton's previously filed Registration Statement on Form
SB-2 became effective and the Company completed an initial public offering of
2,150,000 shares of common stock at an offering price of $4.50 per share and
2,150,000 warrants at $.25 per warrant. The common stock and the warrants are
separately tradable. The Company granted to the underwriters the right to
exercise over-allotment options of 322,500 shares of common stock and/or 322,500
warrants at the public offering rate, within 45 days of May 2, 1996. On May 7,
1996, the underwriters exercised the over-allotment options and offered an
additional 322,500 shares of common stock and 322,500 warrants to the public at
$4.50 per share and $.25 per warrant. As a result of the initial public
offering, the Company received net proceeds of approximately $10,395,000 and
increased its total shares of common stock and warrants outstanding by 2,472,500
each. The net proceeds from the Offering were used to repay all notes payable
to stockholders, long-term debt and related accrued interest in existence
through the date of the Offering and provide working capital. The net proceeds
were also used to purchase the additional shares of CSI-Registered Trademark-
stock as described in Note 4 and provide additional working capital. If the
initial public offering described above and the application of the proceeds
therefrom, had occurred on April 1, 1995, the loss per share would have been
$.33.
Concurrent with the initial public offering, the Company registered 760,000
additional warrants to purchase common stock. Such warrants are identical to
the warrants described in Notes 4 and 5 and were issuable automatically upon the
completion of the offering in exchange for the already existing outstanding
common stock shares.
On June 6, 1996, a Memorandum of Principal Points to be included in a
Proposed Agreement between Ashton and Information Security Systems Incorporated
(ISSI) was executed. The Memorandum stated that 100% of the shares of ISSI were
to be exchanged for 300,000 shares of Common Stock of Ashton's subject to
certain conditions including the negotiation of a Definitive Agreement.
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<PAGE>
On June 11, 1996, Ashton acquired an additional 12,053 of Class A voting
common shares and 1,261 Class B non-voting common shares of CSI-Registered
Trademark- for $6,100, which increased its investment to 81% of the total number
of common shares outstanding.
During June 1996, Ashton commenced negotiations with the landlord of the
PHLX office complex to arrange office space for personnel working on the
UTS-TM- project.
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<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On June 3, 1996, the Company, with the approval of its Board of
Directors, has decided not to coninue its relationship with Goldstein
Golub Kessler & Company as its independent public accountants.
Goldstein Golub Kessler & Company served as the Company's independent
public accountants for the year ended March 31, 1995. Goldstein Golub
Kessler & Company's reports on the financial statements of the Company
did not contain any adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope or
accounting principles. There have not been any disagreements between
the Company and Goldstein Golub Kessler & Company on any matter of
accounting principles or practices, financial statement disclosure or
audit scope or procedure. No "reportable event" (as defined in Item
304(a) (v) of Regulation S-K) has occurred within the Company's two
most recent fiscal years and any subsequent interim period preceding
June 3, 1996.
Arthur Andersen LLP has been engaged as the Company's Independent
public auditors effective June 3, 1996. The Company has not requested
or obtained any advice from Arthur Andersen LLP concerning any
material accounting, auditing, or financial reporting issue regarding
the application of accounting principles to a specified transaction or
the type of audit opinion that might be rendered on the Company's
financial statements.
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<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning each of the
directors and executive officers of Ashton:
NAME AGE POSITION
---- --- --------
Raymond T. Tate 72 President, Chairman of the Board,
Chief Executive Officer, Treasurer,
Principal Financial and Accounting
Officer
John A. Blohm 51 Executive Vice President,
Secretary and Director
Robert A. Eprile 42 Director
Dr. Ruth M. Davis 67 Director
Albert J. Baciocco, Jr. 65 Director
Raymond T. Tate has served as Chairman of the Board, President and Chief
Executive Officer of Ashton since its inception, as a Director of
CSI-Registered Trademark- since 1987 and as a Director and the Executive Vice
President, Principal Financial Officer and Secretary of UTTC since October 1995.
In 1979, Mr. Tate formed Raymond Tate Associates, Inc., a firm providing
consulting services in communications, satellites (including intelligence
satellites), communications hardware and systems and related technical areas.
From January 1978 to July 1979, Mr. Tate was the Deputy Assistant Secretary of
the U.S. Navy. From 1952 until January 1978, Mr. Tate served in various
capacities with the NSA, including as Deputy Director for communications
security for the last five years of such period. Mr. Tate also serves as
Director of BTG, Inc., a public company, and as a director of two private
companies that provide services to certain federal agencies. He has also served
or is currently serving on the following: Chairman, Advisory Committee on
Assessment of Defense Space Technology, National Research Council, and CIA
Advisory Panel. Mr. Tate received a B.A. from the University of Maryland and an
M.S. from George Washington University. He has been a guest lecturer at the
Harvard University, Kennedy Graduate School, and has given many lectures to
professional groups since his departure from the government in 1979.
John A. Blohm has served as Executive Vice President and a Director of
Ashton since December 1994, is a co-founder of CSI-Registered Trademark-
and has served as Chairman of the Board of Directors of CSI-Registered
Trademark- since 1983 and is a former President and Chief Executive Officer of
CSI-Registered Trademark-. He has over 27 years of experience in systems
development integration and engineering. Before co-founding
CSI-Registered Trademark-, Mr. Blohm was the Section Head of Real
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<PAGE>
Time Software for Harris Corporation, Government Systems Division. Mr. Blohm
serves on several alumni and advisory boards, including The Johns Hopkins
University Board of the Society of Engineering Alumni and the Florida Institute
of Technology School of Business Board of Overseers. He received his M.S. from
The American University and a Bachelor of Engineering Science from Johns Hopkins
University.
Robert A. Eprile is a co-founder of UTTC and has been involved in the
development of the UTS-TM- system since 1993. He has been President and Chief
Operating Officer of UTTC since its inception and has served as a Director of
Ashton since October 1995. From October 1986 to 1994, Mr. Eprile was President
of Eprile & Associates, a management consulting firm specializing in the
turn-around of troubled companies and the application of quantitative techniques
to finance and trading. Mr. Eprile's clients have included major U.S.
securities exchanges, commercial, investment and merchant banks, mutual fund and
money management firms and companies involved in finance, marketing and real
estate. From 1992 to 1993, Mr. Eprile was also Interim Chief Operating Officer
of TW ComCorp., a telecommunications distribution company where he managed a
successful turnaround. From October 1984 to October 1986, Mr. Eprile was Vice
President of SunRoad Enterprises, a San Diego based real estate development and
bank holding company. From March 1983 to October 1984, Mr. Eprile was Vice
President and Acting CFO for Instinet Corporation. Mr. Eprile received an
M.B.A. from Stanford University Graduate School of Business and a B.A. from
Oberlin College.
Dr. Ruth M. Davis is a Director of Ashton and since 1981, has been the
President and CEO of The Pymatuning Group, Inc., which specializes in industrial
modernization strategies and technology development. Dr. Davis' areas of
expertise include microelectronics, computers, information, automation and
robotics.
Since 1992, Dr. Davis has been the Chairman of the Board of Directors of
The Aerospace Corporation, a government chartered not-for-profit corporation
which is a think tank focusing on national aerospace policy issues. She also
serves on the Board of Air Products & Chemicals, Inc.; Betac Corporation,
BTG, Inc.; Ceridian Corporation; Consolidated Edison Company of New York;
Giddings & Lewis, Inc.; Institute for Defense Analyses; Premark
International, Inc.; Softech, Inc.; Sprint Corporation; SRI International;
SSDS, Inc.; The Principal Financial Group, Inc.; University of Maryland; USO
World Board of Governors; and Varian Associates. She also served as a member of
the Board of Regents of the National Library of Medicine from 1989 to 1992 and
as Chairman of its Board of Directors from 1991 to 1992.
From 1979 to 1981, Dr. Davis was Assistant Secretary of Energy for Resource
Applications, and from 1977 to 1979, was the Deputy Under Secretary of Defense
for Research and Advanced Technology. Prior to 1977, she served as Director of
the Institute for Computer Sciences and Technology at the National Bureau of
Standards, as the first Director of the National Center for Biomedical
Communications in the
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<PAGE>
Department of Health, Education, and Welfare and as Staff Assistant for
Intelligence and Reconnaissance in the Office of the Secretary of Defense.
Dr. Davis serves on the Board of the University of Pennsylvania's Board of
Overseers for the School of Engineering and Applied Science and on the USA
School of Business Administration Board. She was Regents' Lecturer at the
School of Engineering and Applied Sciences at the University of California,
Berkeley in 1987. Dr. Davis received a Ph.D. and M.A., summa cum laude, in
mathematics from the University of Maryland and received a B.A. in mathematics
from The American University in Washington, D.C.
Albert J. Baciocco, Jr. is President of The Baciocco Group, Inc., a
technical and management consulting practice, providing service in the areas of
strategic planning, technology investment and application, and business planning
and development. He retired from the U.S. Navy as a Vice Admiral in 1987 after
34 years of service, principally within the submarine force and directing the
Department of the Navy's research and technology development enterprise.
Admiral Baciocco is a Director of Honeywell, Inc. and Vectra Technology Inc. He
is a member of the Army Science Board and the Naval Studies Board of the
National Research Council. In addition, Admiral Baciocco also serves on the
Board of Directors for Oak Ridge Associated Universities; the Research
Development Foundation for the Medical University of South Carolina; and the
Board of Visitors to the Software Engineering Institute at Carnegie Mellon
University. He received his B.S. Degree in Engineering from the U.S. Naval
Academy in 1953 and has completed graduate level studies in the field of nuclear
engineering.
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<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the amount of all compensation paid by
Ashton for services rendered during the years ended March 31, 1995 and March 31,
1996, to Ashton's Chief Executive Officer, Raymond T. Tate, and John A. Blohm,
Executive Vice President of Ashton and Chairman of CSI-Registered Trademark-:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
RESTRICTED NUMBER LTIP ALL
STOCK AWARD(S) OF PAYOUTS OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OTHER($) ($) OPTIONS ($) COMP.($)
- --------------------------- ---- ------ ----- ----- --- ------- --- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond T. Tate, President 1995 -0- -0- $32,837(1) -0-(2) -0- -0- -0-
1996 50,000 -0- $78,808(1) -0- -0- -0- -0-
John A. Blohm, Executive Vice 1995 115,773 -0- -0- -0-(3) -0- -0--0-
President 1996 115,773 -0- -0- -0- 350,000(4) -0- -0-
Robert A. Eprile, President 1995 -0- -0- -0- -0- -0- -0- -0-
and Chief Operating Officer 1996 37,500 -0- -0- -0-(5) -0- -0- -0-
of UTTC
George H. Mulligan, President 1995 -0- -0- -0- -0- -0- -0- -0-
of CSI-Registered Trademark- 1996 62,500 -0- -0- -0- -0- -0- -0-
</TABLE>
(1) REPRESENTS PAYMENT OF THE PREMIUM OF A LIFE INSURANCE POLICY FOR THE
BENEFIT OF THE FAMILY OF MR. TATE IN THE AMOUNT OF $1,500,000.
(2) DOES NOT INCLUDE 1,107,500 SHARES OF COMMON STOCK PURCHASED AT A CASH PRICE
OF $31,567 BY MR. TATE FROM ASHTON ON MARCH 31, 1994.
(3) DOES NOT INCLUDE 12,500 SHARES OF COMMON STOCK RECEIVED BY MR. BLOHM FROM
DOVER.
(4) ON JANUARY 31, 1996, ASHTON'S BOARD OF DIRECTORS GRANTED MR. BLOHM OPTIONS
TO PURCHASE 350,000 SHARES OF COMMON STOCK AT A PURCHASE PRICE OF $4.00 PER
SHARE. THESE OPTIONS SHALL VEST ON APRIL 1, 1997 AND BECOME EXERCISABLE IN
ANNUAL INSTALLMENTS OF 70,000 OPTIONS ON APRIL 1, 1997, 70,000 OPTIONS ON
APRIL 1, 1998 AND 210,000 OPTIONS ON APRIL 1, 1999 AND SHALL EXPIRE ON
APRIL 1, 2006. THESE OPTIONS WILL TERMINATE IN THE EVENT THAT MR. BLOHM IS
NOT CONTINUOUSLY EMPLOYED BY THE COMPANY FROM THE DATE OF GRANT THROUGH
MARCH 31, 1997.
(5) DOES NOT INCLUDE 1,100,000 SHARES OF COMMON STOCK RECEIVED BY MR. EPRILE
FROM ASHTON IN EXCHANGE FOR 1,666,667 SHARES OF COMMON STOCK OF UTTC ON
OCTOBER 25, 1995.
Since inception, Ashton has not granted stock appreciation rights or
options (except those granted to Mr. Blohm) and does not have a defined benefit
or actuarial plan.
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<PAGE>
OPTION GRANTS TABLE
The information provided in the table below provides information with
respect to individual grants of stock options during the year ended March 31,
1996 of each of the executive officers named in the summary compensation table
above. Ashton did not grant any stock options or stock appreciation rights
during the year ended March 31, 1995 and did not grant any in the year ended
March 31, 1996 except for stock options to John A. Blohm.
OPTION GRANTS IN YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
- ----------------------------------------------------------------------------------------- AT ASSUMED ANNUAL RATES
(A) (B) (C) (D) (E) OF STOCK PRICE APPRECIATION
FOR OPTION TERM (2)
------------------------------
% OF TOTAL OPTIONS
OPTIONS GRANTED TO EMPLOYEES (F) (G)
GRANTED IN YEAR ENDED EXERCISE PRICE EXPIRATION
NAME (#) 3/31/96 (1) ($/SHARE) DATE 5% ($) 10% ($)
- ---- ------- -------------------- -------------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Raymond T. Tate -0- N/A N/A N/A N/A N/A
John A. Blohm 350,000 100% 4.00 4/01/06 878,500 2,229,500
Robert A. Eprile -0- N/A N/A N/A N/A N/A
George H. Milligan -0- N/A N/A N/A N/A N/A
</TABLE>
(1) THE PERCENTAGE OF TOTAL OPTIONS GRANTED TO EMPLOYEES IN FISCAL YEAR IS
BASED UPON OPTIONS GRANTED TO ALL OFFICERS, DIRECTORS, AND EMPLOYEES.
(2) THE POTENTIAL REALIZABLE VALUE OF EACH GRANT OF OPTIONS ASSUMES THAT THE
MARKET PRICE OF THE COMMON STOCK APPRECIATES IN VALUE FROM THE DATE OF
GRANT TO THE END OF THE OPTION TERM AT ANNUALIZED RATES OF 5% AND 10%,
RESPECTIVELY, AND AFTER SUBTRACTING THE EXERCISE PRICE FROM THE POTENTIAL
REALIZABLE VALUE.
AGGREGATED OPTION EXERCISES IN YEAR ENDED MARCH 31, 1996 AND YEAR END OPTION
VALUES
No executive officer named in the Summary Compensation Table exercised any
options during the years ended March 31, 1995 and March 31, 1996. The
information provided in the table below with respect to each of the executive
officers named in the Summary Compensation Table provides information which
reflects that no options were exercised during the year ended March 31, 1996 and
provides information as to an assumed value of $4.50 at the end of the year
ended March 31, 1996 and value of unexercised options.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED OPTIONS UNEXERCISED OPTIONS
SHARES ACQUIRED VALUE REALIZED AT FY-END (#) AT FY-END ($)
NAME ON EXERCISES (3) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
- ---- ---------------- ------ ------------------------- -----------------------------
<S> <C> <C> <C> <C>
Raymond T. Tate -0- -0- -0- -0-
John A. Blohm -0- -0- -0-/350,000 -0-/-0-
Robert A. Eprile -0- -0- -0- -0-
George H. Milligan -0- -0- -0- -0-
</TABLE>
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<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ASHTON
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock by (i) each person who is known by the Company to
own beneficially more than five percent of the Common Stock, (ii) each of
Ashton's officers and directors and (iii) all officers and directors as a group:
NO. OF SHARES OF
COMMON STOCK PERCENT
NAME/ADDRESS OF STOCKHOLDER PRESENTLY OWNED OWNED (1)
- ---------------------------- ---------------- ---------
Raymond T. Tate 1,107,500(2) 14.6
c/o The Ashton Technology Group, Inc.
10420 Little Patuxent Parkway
Suite 490
Columbia, MD 21044
John A. Blohm 12,500 *
c/o The Ashton Technology Group, Inc.
10420 Little Patuxent Parkway
Suite 490
Columbia, MD 21044
Robert A. Eprile 750,000 9.9
c/o The Ashton Technology Group, Inc.
10420 Little Patuxent Parkway
Suite 490
Columbia, MD 21044
Dr. Ruth M. Davis -0- -0-
Albert J. Baciocco, Jr. -0- -0-
All officers and directors of the 1,870,000 24.7
Company and its subsidiaries as a
group (5 persons)
The Dover Group, Inc. 1,098,500(3) 14.5
70 East Water Street
Toms River, NJ 08753
David N. Rosensaft 750,000 9.9
214 East 68th Street
Suite 120
New York, NY 10021
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<PAGE>
Medford Financial Inc. 400,000(4) 5.3
26 Highpoint Drive
Medford, NJ 08055
- -----------------------------
* REPRESENTS LESS THAN 1%.
(1) ASSUMES 7,562,500 SHARES OF COMMON STOCK OUTSTANDING.
(2) INCLUDES 1,000,000 SHARES OF COMMON STOCK HELD IN TRUST FOR THE BENEFIT OF
THREE OF MR. TATE'S ADULT CHILDREN FOR WHICH HIS WIFE SERVES AS TRUSTEE.
MR. TATE DISCLAIMS BENEFICIAL OWNERSHIP OF SUCH SHARES OF COMMON STOCK.
(3) INCLUDES 260,000 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANTS HELD BY DOVER. ALSO INCLUDES 325,000 SHARES OF COMMON STOCK HELD
BY MEMBERS OF THE EXTENDED RITTEREISER AND WEIMMER FAMILIES AND FAMILY
TRUSTS THAT CONTROL DOVER HELD AS FOLLOWS: (I) DR. F. E. WEIMMER, JR.,
PRESIDENT AND DIRECTOR OF DOVER, OWNS 10,000 SHARES OF COMMON STOCK,
(II) F. E. WEIMMER, SR., DIRECTOR OF DOVER, OWNS 130,000 SHARES OF COMMON
STOCK, (III) F. E. RITTEREISER, SR., DIRECTOR OF DOVER, OWNS 75,000 SHARES
OF COMMON STOCK, (IV) T. RITTEREISER, DIRECTOR OF DOVER, HOLDS 100,000
SHARES OF COMMON STOCK AS TRUSTEE FOR A. J. RITTEREISER AND 10,000 SHARES
OF COMMON STOCK AS TRUSTEE FOR A. WEIMMER AND J. WEIMMER.
(4) CONSISTS OF SHARES OF COMMON STOCK BENEFICIALLY OWNED BY VINCENT CASELLA
(152,000 SHARES), VINCENT VENDETTE (152,000 SHARES), LOUIS MORALES (76,000
SHARES), AND ROBERT EME (20,000 SHARES), EACH OF WHOM IS A PRINCIPAL OF
MEDFORD.
UTTC
The following table sets forth certain information regarding the beneficial
ownership of UTTC's common stock as of the date hereof by (i) each of the
Company' executive officers and directors; and (ii) all officers and directors
as a group.
NUMBER OF SHARES OF UTTC APPROXIMATE
COMMON STOCK PERCENT OF UTTC'S
NAME AND ADDRESS OF STOCKHOLDER PRESENTLY OWNED OUTSTANDING STOCK
- ------------------------------- --------------- -----------------
Raymond T. Tate -0- --
John A. Blohm -0- --
Robert A. Eprile 333,333 6.7%
Dr. Ruth M. Davis -0- --
Albert J. Baciocco, Jr. -0- --
All officers and directors of the 333,333 6.7%
Company and its subsidiaries as
a group (5 persons)
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 31, 1994, Ashton sold to each of Raymond T. Tate and Dover,
1,107,500 shares of Common Stock for nominal consideration in connection with
the organization of Ashton. The proceeds from the sale of such shares of Common
Stock ($63,134) were paid by such stockholders on behalf of Ashton to cover
expenses incurred in connection with the organization of Ashton and for working
capital.
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<PAGE>
On March 3, 1995, UTTC issued and sold 5,000,000 shares of its common stock
as follows: 2,000,000 shares to Robert A. Eprile, 2,000,000 shares to David N.
Rosensaft (then an officer and Director of UTTC) and 1,000,000 shares to Dover
at a purchase price of $25,000, $25,000 and $12,500, respectively. Accordingly,
these persons may be deemed to be founders of UTTC.
In March 1995, Dover agreed to loan up to $50,000 to UTTC in connection
with certain startup costs of UTTC's business. As of October 31, 1995, UTTC
owed Dover $43,430 as evidenced by an unsecured promissory note of UTTC in favor
of Dover, which is guaranteed by Ashton. This note bears an interest rate of
10% per annum and is due on October 1, 1996.
During fiscal year 1995, Ashton had a non-interest bearing loan payable of
$20,478 to Dover with no set repayment terms. The loan was repaid during fiscal
year 1996.
In March 1995, Ashton, Dover, Robert A. Eprile and David N. Rosensaft
entered into an agreement, dated as of March 7, 1995 (the "March Agreement"),
whereby Ashton agreed to purchase 51% of the common stock of UTTC in exchange
for Ashton's promise to (i) pay all of UTTC's incorporation expenses, (ii) pay
to UTTC $50,000 from the proceeds of a then contemplated private placement of
securities by Ashton and (iii) invest at least $3,000,000 in UTTC over a
24 month period after the completion of an initial public offering by Ashton.
This agreement contained provisions relating to the issuance to both Mr. Eprile
and Mr. Rosensaft warrants to purchase shares of the Common Stock, certain
provisions relating to the number of directors of UTTC, certain provisions
relating to Mr. Eprile's and Mr. Rosensaft's right to appoint UTTC Board members
and provisions relating to the amendment of UTTC's charter, all of which were
rendered void by an Agreement and Plan of Reorganization described below. The
March Agreement provided that if it is terminated because of a lack of funding
by Ashton, all of Ashton's interest in UTTC would revert back to Mr. Eprile and
Mr. Rosensaft. On January 19, 1996, the parties to the March Agreement
terminated the March Agreement and any rights thereunder.
On April 30, 1995, Dover entered into an agreement with Medford (the
principals of which are stockholders of Ashton) pursuant to which Medford agreed
to provide certain consulting services to the Company over a three-year period
and, in addition, to provide a standby loan of $100,000 to Ashton. In exchange,
Dover agreed to assign Medford 606,000 of its shares of common stock of UTTC.
On October 26, 1995, Ashton drew down the entire amount of this loan, which is
evidenced by an unsecured promissory note of Ashton in favor of Medford in the
original principal amount of $100,000 and bears an interest rate of 10% per
annum. This note was repaid on May 7, 1996.
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On June 6, 1995, Dover purchased an aggregate of 650,798 shares of
CSI-Registered Trademark- Class A Common Stock and 16,726 shares of
CSI-Registered Trademark- Class B Common Stock from certain of
CSI-Registered Trademark-'s stockholders (the "Selling Shareholders") in
exchange for $250,000 in cash and $417,524 in promissory notes issued by Dover
to the Selling Shareholders. On June 22, 1995, Dover assigned the 650,798
shares of CSI-Registered Trademark- Class A Common Stock to Ashton in partial
consideration of Ashton's issuance to Dover of warrants to purchase 500,000 of
the Common Stock at an exercise price of $8.00 per share, exercisable at any
time on or before October 10, 1998 (the "Dover Warrants"). Upon completion of
the Offering, the Dover Warrants automatically converted to warrants the same as
the Warrants offered to the public. In addition to the Dover Warrants, Ashton
issued a promissory note in favor of Dover, dated October 1, 1995, in the
original principal amount of $615,175.83. This note bears an interest rate of
10% per annum and is due on October 1, 1996. The proceeds from this note were
used as follows: $450,000 to repay Dover's advance of $450,000 to the Selling
Shareholders and $217,524 for working capital. This note was repaid on May 7,
1996.
On October 25, 1995, Ashton, UTTC, and each of the then stockholders of
UTTC, namely, Robert A. Eprile, David N. Rosensaft, Dover, and Medford entered
into an Agreement and Plan of Reorganization pursuant to which Ashton issued and
sold an aggregate of 2,640,000 shares of Common Stock to Mr. Eprile (1,100,000
shares), Mr. Rosensaft (1,100,000 shares), Medford (400,000 shares), and Dover
(40,000 shares) in exchange for Ashton acquiring an aggregate of 4,000,000
shares of common stock of UTTC (representing 80% of UTTC's outstanding Common
Stock) from Mr. Eprile (1,666,667 shares), Mr. Rosensaft (1,666,667 shares),
Dover (60,666 shares) and Medford (606,000 shares). Upon the completion of this
transaction, Ashton owned 80% of the outstanding common stock of UTTC and
Messrs. Eprile and Rosensaft and Dover collectively owned 20% of UTTC
(approximately 6.7% each). This agreement amended certain sections of the March
Agreement. The termination of the March Agreement in January 1996 did not
impact on the completion of the transactions contemplated by the
October Agreement.
Pursuant to the UTS Agreement, Ashton hired CSI-Registered Trademark-
to commence development of the first phase of the software for the
UTS-TM- system. The UTS Agreement authorizes CSI-Registered Trademark-
to expend up to $185,000 towards the development of such software. Pursuant to
the ATED Agreement, Ashton hired CSI-Registered Trademark- to commence the
first phase of the development of the software required for the encryption
server for ATED. The ATED Agreement, which is subject to a more definitive
agreement yet to be negotiated by the parties, authorizes CSI-Registered
Trademark- to spend up to $75,000 with the expectation that such definitive
agreement will provide for a total cost of this project not to exceed $350,000.
In addition, certain proceeds of the Offering will be used by UTTC to fund the
complete development of the UTS-TM- system software. See "Use of Proceeds."
Ashton expects to hire CSI-Registered Trademark- for such development pursuant
to another agreement to be negotiated between the
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parties. UTTC expects to pay CSI-Registered Trademark- a total of
approximately $700,000 to develop the software for the UTS-TM- system.
Ashton and UTTC entered into a consulting agreement, dated as of January
19, 1996 (the "Consulting Agreement"), with David N. Rosensaft, who is a
co-founder and former officer and director of UTTC. Pursuant to the Consulting
Agreement, Mr. Rosensaft will, among other things, serve as UTTC's securities
industry technology consultant. His primary responsibilities will be to assist
in the completion and implementation of the UTS-TM- system. The term of the
Consulting Agreement is for 13 months, subject to renewal by the mutual consent
of each of the parties. The Consulting Agreement provides various
confidentiality protections for UTTC's proprietary interest and also provides
that Mr. Rosensaft may not compete with the Company, UTTC or any of their
respective affiliates during the term of the Consulting Agreement and for a
period of 12 months after its termination. Until the UTS-TM- system is
operational, but in any event not late than June 30, 1996, Mr. Rosensaft will be
paid $12,500 per month (plus a prorated amount equal to 20% of gross
compensation) as a consulting fee. In addition, Mr. Rosensaft will be
reimbursed for approved expenses. After the UTS-TM- system becomes operational,
Mr. Rosensaft's compensation will change and be governed by UTTC's incentive
compensation program.
On January 19, 1996, Ashton and David N. Rosensaft executed a Stock
Purchase Agreement (the "Stock Purchase Agreement"), pursuant to which Ashton
purchased from Mr. Rosensaft 200,000 shares of Common Stock held by
Mr. Rosensaft for an aggregate purchase price of $300,000. The purchase price
was paid by Ashton with a promissory note of Ashton (the "Rosensaft Note") dated
January 19, 1996. On April 19, 1997 (the "Maturity Date"), the principal and
all accrued interest on the Rosensaft Note becomes due and payable; provided,
however, within two business days after the completion of the Offering, 2/3 of
the principal plus interest shall be due and payable and the remaining principal
plus interest shall be due and payable on the earlier of (x) the Maturity Date
or (y) five business days after the UTS-TM- system is ready for delivery to the
PHLX. Pursuant to the Stock Purchase Agreement, Ashton has a right to purchase
all of the shares of Common Stock held by Mr. Rosensaft for a purchase price of
$1.50 per share if the Offering shall not have occurred prior to the Maturity
Date.
On January 31, 1996, John A. Blohm loaned Ashton $150,000 and received a
promissory note bearing interest at the rate of 10% per annum and payable at the
earlier of December 31, 1996 or five business days after the completion of the
Offering. These funds were utilized for Ashton's general working capital. This
note was repaid on May 7, 1996.
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Two employees of the Company are relatives of Raymond T. Tate. These
employees will be reviewed by the Compensation Committee of the Board of
Directors. The Compensation Committee is comprised of the two outside Directors
and the Executive Vice President.
The Company believes that the transactions between the Company and its
officers, directors and other affiliates described above were on terms at least
as favorable to the Company as could be obtained from independent third parties.
The Company has adopted a policy that any future transactions between the
Company and its officers, directors, or other affiliates, will be reviewed on an
ongoing basis and submitted to the Audit Committee or other comparable body for
review where appropriate. Such future transactions will be on terms at least as
favorable to the Company as could be obtained from independent third parties and
will be approved by a majority of the directors that are not interested in such
transactions.
ITEM 13. EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
2. Agreement and Plan of Reorganization, dated as of
October 25, 1995, among Ashton, UTTC, Robert A. Eprile,
David N. Rosensaft, Dover and Medford. (Incorporated by
reference to Registration Statement No. 33-1182).
3. Certificate of Incorporation of Ashton filed February
16, 1994. (Incorporated by reference to Registration
Statement No. 33-1182).
3.1 Certificate of Amendment of Ashton filed October 27,
1995. (Incorporated by reference to Registration
Statement No. 33-1182).
3.1A Certificate of Amendment of Ashton filed December 7,
1995. (Incorporated by reference to Registration
Statement No. 33-1182).
3.2 Certificate of Amendment of Ashton to be filed in
February, 1996. (Incorporated by reference to
Registration Statement No. 33-1182).
3.3 Bylaws of Ashton. (Incorporated by reference to
Registration Statement No. 33-1182).
4. Specimen of Common Stock. (Incorporated by reference to
Registration Statement No. 33-1182).
4.1 Form of Representative's Warrant Agreement (including
Specimen of Redeemable Common Stock Purchase Warrant).
(Incorporated by reference to Registration Statement
No. 33-1182).
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4.2 Form of Warrant Agreement (including Specimen of
Redeemable Common Stock Purchase Warrant).
(Incorporated by reference to Registration Statement
No. 33-1182).
5. Opinion re: legality. (Incorporated by reference to
Registration Statement No. 33-1182).
10. Agreement, dated as of September 18, 1995, between UTTC
and Philadelphia Stock Exchange. (Incorporated by
reference to Registration Statement No. 33-1182).
10.1 Employment Agreement, dated as of January 1, 1996,
between Ashton and Raymond T. Tate. (Incorporated by
reference to Registration Statement No. 33-1182).
10.2 Employment Agreement, dated as of January 22, 1996,
between UTTC and Robert A. Eprile. (Incorporated by
reference to Registration Statement No. 33-1182).
10.3 Agreement, dated October 27, 1995, between Information
Security Systems Incorporated and Ashton. (Incorporated
by reference to Registration Statement No. 33-1182).
10.4 Agreement, dated as of March 7, 1995, among Dover,
Ashton, Robert A. Eprile and David N. Rosensaft.
(Incorporated by reference to Registration Statement
No. 33-1182).
10.5 Agreement, dated as of November 29, 1995, between
Ashton and CSI-Registered Trademark-. (Incorporated
by reference to Registration Statement No. 33-1182).
10.5A Agreement, dated February 7, 1996, between Ashton and
CSI-Registered Trademark-. (Incorporated by reference
to Registration Statement No. 33-1182).
10.6 Agreement, dated as of January 19, 1996, among Ashton,
UTTC and David N. Rosensaft. (Incorporated by reference
to Registration Statement No. 33-1182).
10.7 Escrow Agreement, dated as of January 19, 1996, among
Ashton, David N. Rosensaft and First United Equities
Corporation. (Incorporated by reference to Registration
Statement No. 33-1182).
10.8 Stock Purchase Agreement, dated as of January 19, 1996,
between Ashton and David N. Rosensaft. (Incorporated by
reference to Registration Statement No. 33-1182).
10.9 Assignment and Termination Agreement, dated as of
January 19, 1996, among Dover, Ashton, Robert A. Eprile
and David N. Rosensaft. (Incorporated by reference to
Registration Statement No. 33-1182).
10.10 Promissory note, dated as of January 19, 1996, in
principal amount of $300,000 issued by Ashton in favor
of David N. Rosensaft. (Incorporated by reference to
Registration Statement No. 33-1182).
10.11 Agreement, dated as of August 24, 1995, between
Motorola, Inc. and CSI-Registered Trademark-, as
amended. (Incorporated by reference to Registration
Statement No. 33-1182).
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10.12 Letter, dated December 8, 1995, from CSI-Registered
Trademark- to Ashton regarding issuance of Common
Stock of CSI-Registered Trademark-. (Incorporated by
reference to Registration Statement No. 33-1182).
10.12A Letter dated March 20, 1996, from George Milligan to
Ashton regarding the transfer of Common Stock of
CSI-Registered Trademark-. (Incorporated by reference
to Registration Statement No. 33-1182).
10.13 Sample CSI-Registered Trademark- Stockholder Letters,
dated February 6, 1995 and January 18, 1996, from
Ashton to certain CSI-Registered Trademark-
Shareholders. (Incorporated by reference to
Registration Statement No. 33-1182).
10.13A Form of CSI-Registered Trademark- Stockholder Letter,
dated March 27, 1996 from Ashton to certain
CSI-Registered Trademark- Shareholders. (Incorporated
by reference to Registration Statement No. 33-1182).
10.14 Agreement, dated April 30, 1995, between Dover and
Medford regarding consulting services to UTTC.
(Incorporated by reference to Registration Statement
No. 33-1182).
10.15 Lease Agreement, dated September 8, 1995, between
Columbia Mall, Inc. and Ashton. (Incorporated by
reference to Registration Statement No. 33-1182).
10.16 Lease Agreement, dated April 22, 1992, between Overlook
Development, Inc. and CSI-Registered Trademark-
(Incorporated by reference to Registration Statement
No. 33-1182).
10.17 Promissory Note, dated January 31, 1996, in principal
amount of $150,000 issued by Ashton in favor of John A.
Blohm. (Incorporated by reference to Registration
Statement No. 33-1182).
10.18 Form of 10% Subordinated Promissory Note due April 10,
1997, dated October 10, 1995, issued by Ashton
pursuant to a private placement. (Incorporated by
reference to Registration Statement No. 33-1182).
10.19 Form of 10% Subordinated Convertible Promissory Note
due October 10, 1998, dated October 10, 1995, issued by
Ashton pursuant to a private placement (including Form
of Warrant issued upon conversion of the note not
pursuant to a public offering). (Incorporated by
reference to Registration Statement No. 33-1182).
10.20 Promissory Note, dated October 1, 1995, in principal
amount of $43,430 issued by UTTC in favor of Dover and
guaranteed by Ashton. (Incorporated by reference to
Registration Statement No. 33-1182).
10.21 Promissory Note, dated October 26, 1995, in principal
amount of $100,000 issued by Ashton in favor of
Medford. (Incorporated by reference to Registration
Statement No. 33-1182).
10.22 Promissory Note, dated October 1, 1995, in principal
amount of $615,175.83 issued by Ashton in favor of
Dover. (Incorporated by reference to Registration
Statement No. 33-1182).
10.23 Common Stock Purchase Warrant of Ashton, dated June 27,
1995, held by Dover. (Incorporated by reference to
Registration Statement No. 33-1182).
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10.24 Common Stock Purchase Option of Ashton, dated January
30, 1996, held by John A. Blohm. (Incorporated by
reference to Registration Statement No. 33-1182).
10.25 Letter agreement, dated March 21, 1996, from Ashton to
CSI-Registered Trademark- regarding software for ATED
(including original letter agreement of December 11,
1995 as Exhibit A thereto). (Incorporated by reference
to Registration Statement No. 33-1182).
11. Statement re: Computation of per share earnings
(included in Note 1 to Financial Statement).
(Incorporated by reference to Registration Statement
No. 33-1182).
16. Letter on Changes in Registrant's Certifying
Accountant. (Incorporated by reference to Current
Report on Form 8-K, dated June 18, 1996).
21. Subsidiaries of Ashton. (Incorporated by reference to
Registration Statement No. 33-1182).
23. Consent of Goldstein Golub Kessler & Company, P.C.
(Incorporated by reference to Registration Statement
No. 33-1182).
23.1 Consent of Lester Morse, P.C. (Included in Exhibit 5).
(Incorporated by reference to Registration Statement
No. 33-1182).
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