<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Quarter Ended Commission File Number
JUNE 30, 1996 3331182
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THE ASHTON TECHNOLOGY GROUP, INC.
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(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-6650372
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(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
10420 LITTLE PATUXENT PARKWAY, SUITE 490, COLUMBIA, MARYLAND 21044-3559
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Issuer's telephone number, including area code: 410-715-6800
NOT APPLICABLE
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL
YEAR IF CHANGED SINCE LAST REPORT)
Number of shares of common stock outstanding on June 30, 1996: 7,562,500
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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) of the Securities Exchange Act of 1934 during
the preceding 12 months (of 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
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THE ASHTON TECHNOLOGY GROUP, INC.
INDEX - FORM 10-QSB
JUNE 30, 1996
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - June 30, 1996 and March 31,
1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations -
For the Three Months Ended June 30, 1996 and 1995 . . . . . . 5
Consolidated Statements of Cash Flows -
For the Three Months Ended June 30, 1996 and 1995 . . . . . . 6
Notes to Unaudited Consolidated Financial Statements. . . . . 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION
ITEMS 1 THROUGH 5 HAVE BEEN OMITTED SINCE THE ITEMS ARE EITHER
INAPPLICABLE OR THE ANSWER IS NEGATIVE . . . . . . . . . . . . . . . . . . 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND MARCH 31, 1996
ASSETS JUNE 30, 1996 MARCH 31, 1996
Current Assets: (UNAUDITED) (AUDITED)
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Cash and cash equivalents $5,591,927 $ 31,021
Contracts receivable, net of allowance for
doubtful accounts 815,831 -
Prepayments and other current assets 349,976 -
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Total Current Assets 6,757,734 31,021
Property and equipment, net 398,033 21,359
Deferred offering costs - 614,856
Investment in unconsolidated investee - 708,844
Goodwill, net 611,633 -
Other assets 21,461 27,590
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TOTAL ASSETS $7,788,861 $1,403,670
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Accounts payable and accrued expenses $ 464,207 $1,067,429
Notes payable to stockholders 43,430 1,244,771
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Total current liabilities 507,637 2,312,200
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Long-term debt 650,000
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Total liabilities 507,637 2,962,200
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Minority interest 255,569 -
Commitments and contingencies
Stockholders' Equity (Deficiency)
Preferred stock - $.01 par value - -
Common Stock - $.01 par value 75,625 52,900
Warrants outstanding, exercise price of $5.85 618,125 -
Additional paid-in capital 9,898,192 1,341,109
Treasury Stock - (300,000)
Accumulated deficit (3,566,287) (2,652,539)
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Total stockholders' equity (deficiency) 7,025,655 (1,558,530)
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TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $7,788,861 $1,403,670
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
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THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30,1996 AND 1995
1996 1995
(UNAUDITED) (UNAUDITED)
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Revenues $1,413,645 $ -
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Costs and expenses:
Cost of revenues 1,060,504 -
Development costs 380,277 -
Selling, general and administrative expenses 790,149 10,000
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Total costs and expenses 2,230,930 10,000
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Interest income, net 6,743 -
Minority interest in earnings of subsidiary (31,706) -
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Loss before provision for income taxes (842,248) -
Provision for income taxes (71,500) -
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Net loss $(913,748) $ (10,000)
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Net loss per common share $ (0.13) $ -
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Weighted average number of common shares
outstanding 6,777,234 5,328,900
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS
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THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
1996 1995
(UNAUDITED) (UNAUDITED)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(913,748) $(10,000)
Adjustments to reconcile net loss to net
cash used in operating activities, net
of acquired business in 1996:
Depreciation and amortization 120,384
Changes in operating assets and liabilities-
Decrease in contracts receivable, net 152,381 -
Increase in prepayments and other (274,727) -
Decrease in accounts payable and accrued expenses (1,034,527)
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(1,036,489) -
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Net cash used in operating activities (1,950,237) (10,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (298,202) -
Cash paid for acquisition of CSI,
net of cash acquired (483,728) (667,524)
Increase in minority interest 31,706 -
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Net cash used in investing activities (750,224) (667,524)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance costs for initial public offering (282,001) -
Proceeds from initial public offering 10,394,709 -
Proceeds from notes payable 250,000 677,524
Payment of notes payable (2,101,341) -
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Net cash provided by financing activities 8,261,367 677,524
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NET INCREASE IN CASH AND CASH EQUIVALENTS 5,560,906 -
Cash and cash equivalents, beginning of year $ 31,021 -
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Cash and cash equivalents, end of year $5,591,927 $ -
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
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THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARIES NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The accompanying consolidated financial statements for the three months
ended June 30, 1996 include the accounts of The Ashton Technology Group,
Inc. ("Ashton") and its subsidiaries, Universal Trading Technologies
Corporation ("UTTC") and Computer Science Innovations, Inc. ("CSI-
Registered Trademark-") (collectively, the "Company"). The financial
statements for the quarter ended June 30, 1995 represent the accounts of
Ashton. On October 25, 1995, Ashton acquired 80% of the common stock of
UTTC and on May 2, 1996, Ashton purchased additional shares of CSI-
Registered Trademark- which enabled the Company to own 80% of both classes
of CSI's-Registered Trademark- common stock. These business combinations
have been accounted for as a purchase. Prior to June 30, 1995, Ashton had
an investment in CSI-Registered Trademark- that was accounted for using the
equity method.
The accompanying consolidated financial statements have been prepared by
the Company, without audit, and reflect all adjustments which in the
opinion of management, are necessary for a fair statement of the results of
the interim periods presented. All adjustments were of a normal recurring
nature. Certain information and footnote disclosures normally included in
the annual consolidated financial statements which are prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. Accordingly, the Company believes that although the
disclosures are adequate to make the information presented not misleading,
the consolidated financial statements should be read in conjunction with
the footnotes contained in the Company's 10-KSB for the fiscal year ended
March 31, 1996.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. INITIAL PUBLIC OFFERING OF STOCK
On May 2, 1996, Ashton's previously filed Registration Statement on Form
SB-2 became effective and 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 322,400 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 $10,394,709 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 and provide the Company with additional working capital.
Concurrent with the initial public offering, the Company registered 760,000
additional warrants to purchase common stock. The warrants were issuable
automatically upon the completion of the offering in exchange for the
already existing outstanding common stock shares.
3. ACQUISITIONS
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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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 1997 COMPARED TO FIRST QUARTER OF FISCAL 1996.
The results of operations for the first quarter of fiscal 1997 are not
comparable to the first quarter of fiscal 1996 because 1996 includes
the accounts of Ashton only, while 1997 includes the accounts of Ashton
and its subsidiaries, UTTC and CSI-Registered Trademark-.
Revenues and the related cost of revenue are exclusively from CSI-
Registered Trademark- as Ashton and UTTC have not yet generated
revenue. These revenues are derived from the execution of
CSI's-Registered Trademark- long-term contracts.
During the quarter ended June 30, 1996, the Company incurred $380,227
of development costs on a consolidated basis. Ashton and UTTC incurred
$210,885 and $169,392 of development costs, respectively.
CSI-Registered Trademark- did not incur any development costs during
the first quarter of fiscal 1997. Ashton's development costs were
for the design and development of Ashton Technology Encryption
Devices ("ATED"). UTTC's development costs were for the development
of the Universal Trading System-TM- (the "UTS-TM- system").
During the quarter ended June 30, 1996, the Company incurred $790,149
of selling, general and administrative costs on a consolidated basis.
Ashton incurred $524,391 of selling, general and administrative costs
which include $162,278 of labor costs, $125,616 of directors and
officers insurance and $72,500 of market research expense. UTTC
incurred $146,730 of selling, general and administrative costs which
include $69,194 of labor costs. CSI-Registered Trademark- incurred
$119,028 of selling, general and administrative costs.
Liquidity: The Company believes that it has sufficient liquid
assets to sustain operations for the remainder of fiscal year 1997
and beyond. At June 30, 1996, the Company had cash and cash
equivalents of $5,591,927. Company's Completed Offering in May 1996
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. Management also plans to
generate revenue 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-Registered Trademark-, will enable the Company to
maintain sufficient working capital.
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PART II - OTHER INFORMATION
(ITEMS 1 THROUGH 5 HAVE BEEN OMITTED SINCE THE ITEMS ARE EITHER
INAPPLICABLE OR THE ANSWER IS NEGATIVE)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
Exhibit 11 - Earnings per share computation.
Exhibit 27 - Financial Data Summary
(B) Reports on Form 8-K
- June 18, 1996 - Letter for Changes in Registrant's Certifying
Accountant
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EXHIBIT INDEX
EXHIBIT 11 PAGE
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Earnings per share computation . . . . . . . . . . . . . . 11
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EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
THREE MONTHS ENDED
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JUNE 30, 1996 JUNE 30, 1995
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Weighted average common shares outstanding 6,738,334 5,290,000
Dilutive effect of common equivalent shares(a) 38,900 38,900
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Weighted average shares outstanding 6,777,234 5,328,900
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Net loss $(913,748) $ (10,000)
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Fully diluted earnings per share (b) $ (.13) $ -
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(a) CALCULATES THE DILUTIVE EFFECT OF OUTSTANDING STOCK OPTIONS BASED UPON THE
"TREASURY STOCK METHOD".
(b) AS FULLY DILUTED EARNING PER SHARE AND PRIMARY EARNINGS PER SHARE ARE
EQUAL, ONLY FULLY DILUTED EARNINGS PER SHARE WILL BE DISCLOSED IN THE FORM
10-QSB.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Ashton Technology Group, Inc.
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(REGISTRANT)
Date: August 19, 1996 By: /s/ Raymond T. Tate
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Raymond T. Tate
Chief Executive Officer and
Chief Financial Officer
(principal financial officer)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,591,927
<SECURITIES> 0
<RECEIVABLES> 815,831
<ALLOWANCES> 12,500
<INVENTORY> 0
<CURRENT-ASSETS> 6,757,734
<PP&E> 398,033
<DEPRECIATION> 90,107
<TOTAL-ASSETS> 7,788,861
<CURRENT-LIABILITIES> 507,637
<BONDS> 0
0
0
<COMMON> 75,625
<OTHER-SE> 6,950,030
<TOTAL-LIABILITY-AND-EQUITY> 7,788,861
<SALES> 1,413,645
<TOTAL-REVENUES> 1,413,645
<CGS> 1,060,504
<TOTAL-COSTS> 1,060,504
<OTHER-EXPENSES> 1,170,426
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,743)
<INCOME-PRETAX> 842,248
<INCOME-TAX> 71,500
<INCOME-CONTINUING> 913,748
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 913,748
<EPS-PRIMARY> 0
<EPS-DILUTED> (.13)
</TABLE>
