U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to _______________________
Commission file number 333-1182
THE ASHTON TECHNOLOGY GROUP, INC.
(Exact Name of Small Business Issuer as Indicated in Its Charter)
Delaware 22-6650372
(State of Incorporation) (I.R.S. Employer
Identification No.)
1900 Market Street, Suite 701
Philadelphia, PA 19103
(Address of Principal Executive Offices)
(215) 751-1900
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
-- --
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of common stock, as of June 30, 1997: 7,562,500
<PAGE>
THE ASHTON TECHNOLOGY GROUP, INC.
INDEX - FORM 10-QSB
June 30, 1997
Part I - Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1997
and March 31, 1997...............................................4
Consolidated Statements of Operations-
For the Three Months Ended June 30, 1997 and 1996................5
Consolidated Statements of Cash Flows-
For the Three Months Ended June 30, 1997 and 1996................6
Notes to Unaudited Consolidated Financial Statements.............7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................10
Part II- Other Information
Item 1. Legal Proceedings.................................................12
Items 2 through 4 have been omitted since the items are either inapplicable or
the answer is negative.
Item 5. Other Information.................................................12
Item 6. Exhibits and Reports on Form 8-K..................................12
Signatures.................................................................12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
The Ashton Technology Group, Inc. and Subsidiaries
Consolidated Balance Sheets
As of June 30, 1997 and March 31, 1997
<TABLE>
<CAPTION>
June 30, 1997 March 31, 1997
ASSETS (UNAUDITED) (AUDITED)
-------------- --------------
Current Assets:
<S> <C> <C>
Cash and cash equivalents $1,276,170 $60,841
Contracts receivable, net of allowance for doubtful accounts 1,200,832 1,483,163
Prepayments and other current assets 142,338 98,903
--------- ---------
Total Current Assets 2,619,340 1,642,907
Property and equipment, net 1,007,886 1,041,449
Goodwill, net 564,916 575,581
Private placement costs 348,343 --
Development costs 236,140 --
Other assets 79,100 106,693
--------- ---------
Total Assets $4,855,725 $3,366,630
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
Current Liabilities
<S> <C> <C>
Accounts payable and accrued expenses $1,304,415 $1,937,752
Billings in excess of costs and estimated earnings 85,986 52,722
--------- ---------
Total current liabilities 1,390,401 1,990,474
--------- ---------
Long-term debt 3,013,000 13,000
--------- ---------
Total liabilities 4,403,401 2,003,474
--------- ---------
Minority Interest 310,972 300,279
--------- ---------
Commitments and contingencies
Stockholders' Equity (Deficiency):
Preferred stock - $.01 par value -- --
Common stock - $.01 par value 75,625 75,625
Additional paid-in capital 10,482,197 10,482,197
Accumulated deficit (10,416,470) (9,494,945)
----------- ----------
Total stockholders' equity (deficiency) 141,352 1,062,877)
----------- ----------
Total liabilities and
Stockholders' Equity (Deficiency) $4,855,725 $3,366,630
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
The Ashton Technology Group, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Three Months Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
UNAUDITED) (UNAUDITED)*
---------- ------------
Revenues $1,334,202 $1,016,675
---------- ----------
Costs and expenses:
<S> <C> <C>
Cost of revenues $1,104,916 $663,534
Development costs 36,913 380,277
Selling, general and administrative expenses 861,899 669,765
Depreciation & Amortization 116,909 120,384
--------- ---------
Total costs and expenses 2,120,637 1,883,960
--------- ---------
Loss from operations (786,435) (817,285)
Other costs and revenues:
Interest income 19,949 6,743
Interest expense (50,379) --
Private placement costs (55,002) --
Minority interest in earnings of subsidiary (10,693) 31,706
--------- -------
Loss before provision for income taxes (882,560) (842,248)
Provision for income taxes 38,966 (71,500)
--------- ---------
Net loss $(921,526) $(913,748)
========= =========
Net loss per common share $(.12) $(.13)
========= =========
Weighted average number of common shares outstanding 7,562,500 6,777,234
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- ----------
* Eliminates intercompany transactions between Ashton and its subsidiaries.
<PAGE>
The Ashton Technology Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(921,526) $(913,748)
Adjustments to reconcile net loss to net cash (used in) provided operating
activities:
Depreciation and amortization 182,604 120,384
Increase in minority interest of subsidiary 10,693 --
Changes in operating asset and liabilities
Decrease in contracts receivable, net 282,331 152,381
Decrease in other assets 27,593 --
Increase in prepayment and other (43,435) (274,727)
Increase in billing in excess of costs & estimated earnings 33,264 --
Decrease in accounts payable and accrued expenses (633,337) (1,034,527)
---------- ----------
Net cash used in operating activities (1,061,813) (1,950,237)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (61,873) (298,202)
Cash paid for acquisition of CSI, net of cash acquired: -- (483,728)
Development costs (257,640) --
Increase in minority interest -- --
---------- ---------
Net cash used in investing activities (319,513) (750,224)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance costs for private placement (403,345) --
Issuance costs for initial public offering -- (282,001)
Proceeds from initial public offering -- 10,394,709
Proceeds from private placement 3,000,000 --
Proceeds from notes payable -- 250,000
Payment of notes payable -- (2,101,341)
--------- ----------
Net cash provided by financing activities 2,596,655 8,261,367
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS: 1,215,329 5,560,906
Cash and cash equivalents, beginning of period 60,841 31,021
--------- ---------
Cash and cash equivalents, end of period $1,276,170 $5,591,827
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARIES NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements for the three
months ended June 30, 1997 include the accounts of the Ashton Technology Group,
Inc. ("Ashton") and its subsidiaries, Universal Trading Technologies Corporation
("UTTC"), Computer Science Innovations, In. ("CSI(R)") and Gomez Advisors, Inc.
("Gomez" and, together with Ashton, UTTC and CSI(R), the "Company"). The
financial statements for the year ended March 31, 1997 do not include Gomez,
which was formed by Ashton as a wholly-owned subsidiary on May 21, 1997.
The accompanying unaudited consolidated financial statements have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial statements and in accordance with the
instructions for Form 10-QSB. Accordingly, they do not contain all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, the
accompanying unaudited consolidated financial statements have been prepared on
the same basis as the audited statements and include all adjustments, consisting
only of normal recurring adjustments, which are necessary for a fair statement
of the results of the interim periods presented. These financial statements
should be read in conjunction with the footnotes contained in the Company's Form
10-KSB for the fiscal year ended March 31, 1997.
The preparation of interim financial statements, in conformity with
generally accepted accounting principles, also requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities; the disclosure of contingent assets and liabilities at the date of
the interim 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 Registration Statement on Form SB-2 became
effective and Ashton 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 offering price 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 Offering, the Company received
net proceeds of approximately $10,395,000 ($9,498,000 after out-of-pocket
expenses associated with the Offering) and increased its total shares of common
stock and warrants outstanding by 2,472,500 each.
Concurrent with the 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. PROCEEDS FROM PRIVATE PLACEMENT
On April 18, 1997, UTTC completed a private placement of $3,000,000 notes,
consisting of $2,550,000 nonconvertible and $450,000 convertible notes, to
accredited investors. The convertible notes are convertible into 450,000 shares
of UTTC common stock. These notes bear interest at 9% per annum, payable
annually on January 31, and are due on January 31, 1999. The Company received
net proceeds of approximately $2,596,655 after deducting debt issue costs of
$403,345. The debt issue costs will be amortized over the term of the notes.
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-QSB constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievements of the
Company to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
risks, uncertainties and other important factors include, among others: general
economic and business conditions; industry trends; competition; material costs;
ability to develop markets; changes in business strategy or development plans;
availability, terms and deployment of capital; availability of qualified
personnel; changes in government regulation and other factors referenced in this
Form 10-QSB. Such forward-looking statements speak only as of the date of this
Form 10-QSB. The Company expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking statement contained
herein to reflect any change in the Company's expectations with regard thereto
or any change in events, conditions or circumstances on which any such statement
is based.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 1998 COMPARED TO FIRST QUARTER OF FISCAL 1997
On a consolidated basis, the Company had revenues of $1,334,202 for the
quarter ended June 30, 1997 compared to revenues of $1,016,675 for the quarter
ended June 30, 1996. All of the Company's revenues, and the related "cost of
revenues", were generated by CSI(R).
During the three months ended June 30, 1997, the Company incurred a net
loss of $921,000 as compared to the three months ended June 30, 1996, in which
the Company incurred a net loss of $913,748. If losses continue at this rate and
no additional financings take place, the Company may not meet certain NASDAQ
Small Cap Market listing requirements.
Development Costs and Expenses
During the three months ended June 30, 1997, the Company incurred $257,640
of development costs of which $21,500 was expenses and $236,140 was capitalized.
For the three months ended June 30, 1996, the Company incurred development costs
of $380,277 which was expensed.
On April 8, 1997, the Company announced that UTTC had completed development
of its UTS(TM) VWAP(TM) trading system. Under generally accepted accounting
principles, the Company expenses development costs until the system is ready for
commercial use and thereafter capitalizes any additional development costs.
Although the UTS(TM) VWAP(TM) trading system has been operationally ready since
April of 1997, trading on the system can not begin until the Securities and
Exchange Commission ("SEC") approves Rule 237 proposed by the Philadelphia Stock
Exchange ("PHLX"). Management expects that an amendment to the proposed rule,
reflecting enhancements made to the system since the SEC first published the
proposed rule in the Federal Register on September 4, 1996, may be submitted by
the PHLX to the SEC by September 30, 1997. If the SEC chooses to re-publish the
proposed rule and amendments in the Federal Register, the notification period
will be a minimum of 35 days and a maximum of 90 after such publication.
Until the SEC approves the PHLX proposed Rule 237, the UTS(TM) VWAP(TM)
system will not be introduced at the PHLX and the UTS(TM) VWAP(TM) will not
generate any revenue. Failure of the UTS(TM) VWAP(TM) system to generate
revenues for UTTC could have an adverse effect on the financial position of the
Company. There can be no assurance that the SEC will approve the rule change.
Capital Equipment
During the three months ended June 30, 1997, the Company spent $61,873 for
the acquisition of equipment, as compared to $298,202 for the three months ended
June 30, 1996.
Selling, General and Administrative Expenses
During the three months ended June 30, 1997, the Company incurred $861,899
of Selling, General and Administrative ("SG&A") expenses, as compared to
$669,765 for the three months ended June 30, 1996. On a per company basis, SG&A
costs were $617,720 for Ashton, $95,246 for UTTC, $121,652 for CSI(R) and
$27,281 for Gomez.
Liquidity
At June 30, 1997, the Company had cash and cash equivalents of $1,276,170.
The Company is actively pursuing alternatives for raising additional
financing, including borrowings and further debt and equity offerings, which
management believes are currently available to the Company. However, there can
be no assurance that the Company will be able to raise additional financing on
favorable terms, if at all, or that it will be able to do so on a timely basis.
There can be no assurance that the Company's actual cash requirements will not
exceed its anticipated cash requirements or that additional cash requirements or
additional financing will not be required.
Gomez Advisors, Inc. ("Gomez")
On May 21, 1997, the Company formed a wholly-owned subsidiary, Gomez, a
Delaware corporation, which will be headquartered at 101 Federal Street, Boston,
Massachusetts 02110, and Mr. Julio Gomez, a leading independent authority on the
Internet and the world of on-line investing, was named its President and Chief
Executive Officer. Also joining Gomez is Mr. John Robb who previously worked
with Mr. Gomez at Forrester Research in Cambridge, Massachusetts.
Gomez is expected to provide banks, broker-dealers, insurance companies and
other financial intermediaries with advice concerning the business potential of
the Internet as a tool for use in marketing and in the interactive distribution
of financial products. The range of services that is expected to be provided by
Gomez include strategy development, marketing, product and interface design and
implementation planning.
Subsequent Events
On August 6, 1997, the Company requested the PHLX to withdraw its common
stock and warrants from listing. Although the Company's securities had been
approved for listing on the PHLX, the PHLX never appointed a specialist because
of the potential conflict of interest between their obligations as specialists
and their participation in the Company's UTS(TM) trading system.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Previously filed.
(Items 2 through 4 have been omitted since the items are either inapplicable or
the answer is negative)
ITEM 5. OTHER INFORMATION
See "Subsequent Events" in Item 2 of Part I above.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
Exhibit 11 -- Earnings Per Share Computation.
Exhibit 27 -- Financial Data Schedule
(B) Reports on Form 8-K
April 18, 1997 -- Press release Regarding Initial Online
Trading Product
April 30, 1997 -- Changes in Certifying Accountant
April 30, 1997 -- Letter Regarding Changes in Certifying
Accountant.
<PAGE>
EXHIBIT INDEX
Exhibit 11 Page
Earnings Per Share Computation...........................................14
Exhibit 27
Financial Data Schedule..................................................15
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant causes this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
THE ASHTON TECHNOLOGY GROUP, INC.
Dated: As of August 19, 1997 By: /s/ Robert A. Eprile
--------------------------------
Robert A. Eprile
Chairman of the Board
and Treasurer
Exhibit 11
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three
Months Ended Year Ended
June 30, 1997 March 31, 1997
------------- --------------
<S> <C> <C>
Weighted average common shares outstanding 7,562,500 7,341,314
Dilutive effect of common equivalent shares (a) -- --
--------- -----------
Weighted average shares outstanding 7,562,500 7,341,314
========= =========
Net loss $(921,526) $(6,842,406)
========= ===========
Fully diluted earnings per share (1) $(.12) $(.93)
========= ===========
</TABLE>
- --------
a Calculates the dilutive effect of outstanding stock options based upon the
"Treasury Stock Method".
1 As fully diluted earning per share and primary earnings per share are
equal, only fully diluted earning per share will be disclosed in the Form
10-QSB.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 1,276,170
<SECURITIES> 0
<RECEIVABLES> 1,200,832
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,619,340
<PP&E> 1,007,886
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,855,725
<CURRENT-LIABILITIES> 1,390,401
<BONDS> 3,013,000
0
0
<COMMON> 75,625
<OTHER-SE> 65,727
<TOTAL-LIABILITY-AND-EQUITY> 4,855,725
<SALES> 1,334,202
<TOTAL-REVENUES> 1,334,202
<CGS> 1,104,916
<TOTAL-COSTS> 2,120,637
<OTHER-EXPENSES> 898,812
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,379
<INCOME-PRETAX> (882,560)
<INCOME-TAX> 38,966
<INCOME-CONTINUING> (921,526)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (921,526)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
