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 DECEMBER 31, 1995.
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ___________________ to
_________________.
Commission file number: 33-2150-LA
APPLIED TECHNOLOGY, INC.
(Exact name of small business issuer as specified in its charter)
Nevada
95-3932052 (State or other jurisdiction
of (I.R.S. Employer
incorporation or organization)
Identification No.)
4212 Highland Drive, Salt Lake City, Utah 84124
(Address of principal executive offices) (Zip Code)
(801) 272-2457
(Issuer's telephone number)
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 No XX
The number of shares of the issuer's common stock (par value $0.001 per
share) outstanding as of December 31, 1995 were 7,076,518 shares.
APPLIED TECHNOLOGY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS
ASSETS
December 31, March 31,
Current Assets 1995 1995
Cash $1,852 $ 295,086
Certificate of
Deposit - 477,375
Accounts Receivable 30,890 50,280
Current portion of notes
receivable from related
party - Note 3 431,645 381,445
Total Current Assets 464,387 1,204,186
Property and Equipment
Equipment 52,456 48,829
Vehicles - Note 4 - 144,750
52,456 193,579
Less - Accumulated
depreciation (12,923) (4,028)
Net Property and Equipment 39,533 189,551
Other Assets
Capitalized software development
costs, net of accumulated
amortization of $223,759
- Note 2 1,860,256 1,944,876
Long-term portion of notes
receivable from related
party - Note 3 1,139,340 1,214,540
Total Other Assets 2,999,596 3,159,416
TOTAL ASSETS $3,503,516 $4,553,153
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accrued expenses $136,194 $197,263
Short term note payable
- Note 4 0 475,000
Notes payable to related
parties - Note 4 0 144,750
Total Current Liabilities 136,194 817,013
Stockholders' Equity (Deficit)
Common stock - $.001 par value;
15,000,000 shares authorized;
7,076,518 shares issued and
outstanding at 12/31/95 and
at 03/31/95 7,076 7,076
Additional paid in
capitaL 9,274,285 9,274,285
Notes receivable from
shareholders (3,586,350) (3,585,350)
Deferred compensation (941,964) (941,964)
Cumulative translation
adjustments - Note 2 36,898 36,898
Accumulated deficit (1,460,223) (1,053,805)
Total Stockholders
Equity (Deficit) $3,329,722 $3,737,140
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $3,465,916 $4,554,153
<PAGE>
APPLIED TECHNOLOGY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1995 1994 1995 1994
Net revenue $2,648 $1,000,000 3,207 2,021,000
Cost of revenue 0 87,794 0 1,380,589
Gross Profit (loss) 2,648 912,206 3,207 1,882,941
General and administrative
expenses 134,817 241,832 372,025 514,840
Operating (loss) (132,169) 670,374 (368,818) 1,368,101
Other income (expense):
Interest (expense) 0 (3,100) 0 (4,650)
Prior period adjustment (37,600) (361,250) 0 (361,250)
Total Other (Expenses) (37,600) (364,350) 0 (365,900)
Net (Loss) Before
discontinued operations (169,769) 306,024 (368,818) 1,002,201
Prior Period Adj. -
change in depreciation. -- 146,324
Net (loss) $(169,769) $452,348 (368,818) 1,002,201
Net (Loss) per weighted
average shares of common
stock outstanding $(0.02) $0.06 (0.05) 0.14
Weighted average shares
outstanding 7,076,518 7,079,780 7,076,518 7,054,705
<PAGE>
APPLIED TECHNOLOGY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
December 31, December 31,
1995 1994
Net income (loss) $(132,169) $ 1,002,201
Adjustments to reconcile net
(loss) to net cash provided
(used) by operating activities:
Depreciation - Equipment 4,455 119,914
Depreciation - Software 109,685 0
114,140 119,914
(Increase) decrease in:
Accounts receivable 60,009 (57,221)
Accounts receivable-related
parties 25,000 0
Accounts payable and accrued
expenses (61,782) 1,245,224
Note Receivable and
receivable 2,375 (2,000,000)
25,602 (811,997)
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES 7,573 310,118
CASH FLOWS FROM INVESTING
ACTIVITIES
Notes Receivable-stock
purchases 0 4,338,000
Non cash purchase of assets 0 400,000
Payments on notes receivable 0 (611,602)
Purchase of software development (50,560) (1,755,889)
Purchase of property and equipment (2,065) (6,395)
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (52,625) 2,364,114
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from Equity transactions 0 (2,641,605)
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 0 (2,641,605)
NET INCREASE (DECREASE) IN CASH (45,052) 32,627
CASH AT BEGINNING OF PERIOD 46,904 33
CASH AT END OF PERIOD $1,852 $32,660
<PAGE>
APPLIED TECHNOLOGY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED UNAUDITED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
Nine Months Ended
December 31, 1995
Additional
Common Stock Paid-in Retained
Shares Amount Capital Deficit
Balances - 3/31/95 7,076,518 $7,076 $9,274,285 $(1,053,805)
Net (Loss) 0 0 0 (236,649)
Balances - 6/30/95 7,076,518 $7,076 $9,274,285 $(1,290,454)
Net (Loss) 0 0 0 (169,769)
Balances - 9/30/95 7,076,518 $7,076 $9,274,285 $(1,460,223)
Net (Loss) 0 0 0 (169,769)
Balances - 12/31/95 7,076,518 $7,076 $9,274,285 $(1,629,992)
<PAGE>
APPLIED TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated unaudited condensed financial statements have
been prepared by management in accordance with the instructions on Form
10-QSB and, therefore, do not include all information and footnotes required
by generally accepted accounting principles and should therefore be read in
conjunction with the Company's Annual Report to Shareholders on Form 10-KSB
for fiscal year ended March 31, 1995. These statements include all normal
recurring adjustments which the Company believes necessary for a fair
presentation of the statements. The interim operating results are not
necessarily indicative of the results for the full year, ending March 31,
1996.
2. Accounting Policies
Since its inception, Applied Objects, Ltd., a wholly-owned subsidiary of
Applied Technology, Inc., has been designing, developing and refining
object-oriented technology designed to simplify the work of computer
programmers in developing computer software. The Company accounts for
software development cots in accordance with Statement of Financial
Accounting Standards No. 86, Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed. Costs incurred in creating computer
software products are charged to operations as research and development
expense prior to the development of a detailed program design or working
model. After the detailed program design and working model have been
established, costs of producing products masters are capitalized as software
development costs. Software production costs are recognized as cost of sales
when the related sales are recognized. Costs of maintenance and customer
support are recognized as expense when the related revenue is recognized or
when those costs are incurred, whichever occurs first. Amortization of
capitalized costs begins when the product sis released for sale to customers.
Amortization is computed using the greater of (a) the ratio that current
revenues from the software bear to current and estimated future revenues from
the software or (b) the straight line method over the remaining estimated
economic life of the software, which is presently estimated to be five (5)
years. Unamortized costs are carried at the lower of cost or net realizable
value.
The Company's primary functional currency is the British Pound. Foreign
currency financial statement amounts are translated in United States Dollars
on the basis of the year end rate for all assets and liabilities and the
weighted average rate for the year for all income and expense amounts.
Translation adjustments resulting therefrom are accumulated in the
stockholders' equity section of the consolidated balance sheet.
3. Notes Receivable from a Related Party
In November 1994, the Company sold to a shareholder a non-exclusive right to
market, demonstrate, and distribute the Company's licensed software product
limited to the Pacific Rim area through December 31, 2005, in exchange for
notes receivable in the amount of $2,000,000. The Company has no obligation
relating to the rights sold. The balances of the notes receivable at
December 31, 1995 were as follows:
Notes receivable from a company, interest accrues at 7.99% and 6.72%,
monthly payments of $20,000 and $30,000 beginning December 1994 through
December 1999 and 1997, respectively.
1,595,985
Less Current Portion (419,045)
Total Long-Term Notes Receivable $1,176,940
4. Notes Payable
In conjunction with the acquisition of three vehicles in December 1994, the
Company issued notes payable to certain officers/stockholders of the Company
in the aggregate amount of $144,750. As of the date of this report, such
transactions have been rescinded. Title to the vehicles were returned to the
officer/stockholders and no payments were made on such notes.
A note payable to a bank, secured by a certificate of deposit held by the
Company, in the amount of $475,000, was repaid during the current quarter by
return of the certificate of deposit.
5. Additional footnotes included by reference.
Except as indicated in the footnotes above, there has been no other material
change in the information disclosed in the notes to the financial statements
included in the Company's Annual Report on Form 10-KSB for the year ended
March 31, 1995. Therefore those footnotes are included herein by reference.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
INTRODUCTION
Applied Technology, Inc., a Nevada corporation ("ATI"), through its
wholly-owned subsidiary, Applied Objects Ltd. ("AOL"), a private corporation
organized under the laws of England and Wales, is engaged in the design,
development and refining of object-oriented technology designed to simplify
the work of computer programmers in developing computer software. A
recapitalization was effected of AOL in May 1994 and as a result thereof the
outstanding capital stock of AOL was transferred to ATI, certain intellectual
property rights and equipment was transferred to AOL and AOL's principal
executive officers received 1,000,000 shares of common stock of ATI and
entered into long-term employment agreements with AOL. The term "Company"
collectively refers to ATI and AOL, unless the context otherwise requires.
The Company has been engaged in the development of discrete
independent modules containing reusable programming language or objects which
can be easily incorporated or plugged into operating systems and applications
or other programs for the purpose of effecting time and effort economies for
the programmers. In 1990, the Company completed research and development of
the Technology. In the early part of 1994, the Company initiated the
recapitalization of AOL, which resulted in a change of management and
consultants. In connection with such reorganization, the Company also
acquired certain intellectual property rights that AOL had been developing.
The Company, during the fiscal year ending March 31, 1995, completed the
development of its product, entered into its first distribution agreement,
commenced construction of its marketing and distribution structure and began
searching for acquisitions.
Previously, the Company has utilized the Technology in the development
of an object warehouse whereby computer programmers and developers can access,
browse and purchase object components from the warehouse through the Internet
system of computer networks. Programmers use the components in the
development of their own applications. The research and development phase of
the Technology was completed in 1990, with the Company since such date
engaged in the production of software product masters. Sales by AOL prior to
the aforementioned recapitalization consisted principally of specifically
designed software programs for business entities in Europe. The software and
technology which such programs served as the basis for the completion of the
Technology are now being marketed by the Company. During the fiscal year
ended March 31, 1995, the Company's sole revenues were derived from the sale
to Trade Holdings, Inc. for $2 million non-exclusive distribution rights to
the Company's software technology in East Asia, the Pacific Rim, Australia,
and New Zealand. At the time of the sale, THI also acquired 2,500,000 of the
Company's common stock, representing 35.5% of the outstanding shares, for a
promissory note of $3,750,000.
As disclosed in its previous quarterly reports, the Company had
developed a plan to market the Technology by carrying out three (3) strategic
objectives: (1) marketing and sales of the Technology as a business
application tool kit, along with other software programs offered by other
companies, directly to various types of end-users through the Object
Warehouse located on the Internet; (2) licensing the Technology (a) to
software manufacturers for deployment of components in their applications and
(b) for joint redevelopment of software users' internal applications through
the use of the Technology; and (3) acquisition of other software companies that
own or control the rights to software products that could be improved by the
Technology. The first phase of the Object Warehouse was completed on May 4,
1995 as the first marketing of the Object Warehouse commenced through putting
up a home page on the Internet. However, during quarter ended December 31,
1995, the Company's limited capital resources prevented it from completing
its strategic objective. As a result, the Object Warehouse had to be
dismantled and the Company ceased operations.
Plan of Operations
The Company realized no revenue during the quarter ended December 31,
1995 and had no operations during that time.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. There are no Exhibits attached to this Form 10-QSB.
(b) Reports on Form 8-K. None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized as of the 10th day of October, 1997.
APPLIED TECHNOLOGY, INC.
By:
Name: W. Scott Lawler
Title: Chief Operating Officer
(as of December 31, 1995)
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