U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period Ended March 31, 1996
Commission File No. 0-16176
ASHA CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1016459
- ------------------------------ ----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
600 C Ward Drive, Santa Barbara, California 93111
-----------------------------------------------------------
(Address of Principal Executive Offices including zip code)
(805) 683-2331
------------------------------
(Registrant's telephone number)
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 (or for such shorter period that the
Registrant was required to file such report(s), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
There were 7,074,367 shares of the Registrant's Common Stock outstanding as of
May 1, 1996.
ASHA CORPORATION
FORM 10-Q
INDEX
-----
Part I. Financial Information
Item 1. Financial Statements Page
Balance Sheets - March 31, 1996 and September 30, 1995 3-4
Statement of Operations for the six months ended
March 31, 1996 and 1995 and the period from June 20,
1986 (inception) through March 31, 1996 5
Statement of Cash Flows for the six months ended
March 31, 1996 and 1995 and the period from June 20,
1986 (inception) through March 31, 1996 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information and Signatures 10-11
ASHA CORPORATION
(A Development Stage Company)
BALANCE SHEET
March 31, 1996 and September 30, 1995
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 114,917 $ 12,804
Marketable Securities 1,514,784 --
Accounts receivable 104,881 1,624,272
Receivable from employees 24,829 14,066
Note Receivable 32,485 32,485
Federal Income Taxes Receivable 15,373 --
Stock Option Receivable -- 6,192
Interest Receivable 7,260 --
Prepaid Expenses and Deposits -- 16,673
TOTAL CURRENT ASSETS 1,814,529 1,706,492
Property and equipment, less
accumulated depreciation 185,976 147,407
Other Receivables<F1> 829,345 829,345
Investment Joint Venture 437,404 429,702
WIP Joint Venture 439,831 -0-
TOTAL ASSETS $3,707,085 $3,112,946
_______________
<FN>
<F1>
$1,000,000 license payment due August 1997 from NVG, discounted $170,655.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements. Notes
to the financial statements for the year ended September 30, 1995
substantially apply to these interim financial statements and are not repeated
here.
ASHA CORPORATION
(A Development Stage Company)
BALANCE SHEET
March 31, 1996 and September 30, 1995
March 31, September 30,
1996 1995
---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to Bank $ -- $ 85,000
Accounts payable 36,331 74,723
Accrued payrolls 111,057 92,683
Payroll taxes payable 25,668 24,325
401K payable 3,802 --
Note payable Taisun 0 45,000
Debt capital lease 10,624 10,624
TOTAL CURRENT LIABILITIES 187,482 332,355
Stockholders' Equity:
Preferred stock, $.001 par value:
10,000,000 shares authorized,
-0- shares issued
Common stock, $.00001 par value:
800,000,000 shares authorized,
issued and outstanding:
7,074,367 shares at March 31,
1996, and 6,891,837 shares at
September 30, 1995 77 69
Additional paid-in capital 5,889,928 5,139,936
Deficit accumulated during the
development stage (2,315,851) (2,298,671)
3,574,154 2,841,334
Less Treasury Stock at Cost 42,163 42,163
Stock Options Receivable 12,388 18,580
3,519,603 2,780,591
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,707,085 $3,112,946
The accompanying notes are an integral part of the financial statements. Notes
to the financial statements for the year ended September 30, 1995
substantially apply to these interim financial statements and are not repeated
here.
ASHA CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
for the three and six month periods ended March 31, 1996 and 1995 and
the period from June 20, 1986 (date of inception) through March 31, 1996
<TABLE>
<CAPTION>
June 20,
1986
Three Months Ended Six Months Ended (Inception
Date)
March 31, March 31, Through
1996 1995 1996 1995 March 31,
1996
--------- --------- ---------- ----------
- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
License and right of
first refusal $ 25,000 $ -- $1,351,000 $3,503,000 $
6,420,345
Contract services 115,953 485,524 115,953 485,524
4,847,386
Interest 9,877 14,460 12,849 21,463
860,740
$ 150,830 $ 499,984 $1,479,802 $4,009,987
$12,128,471
Expenses:
Research & Development $ 94,353 $ 264,840 $ 515,930 $ 419,165 $
5,010,685
Officers' salaries 193,286 126,129 304,199 217,680
2,714,832
Consulting fees -- -- -- --
440,132
Legal & accounting 20,475 18,931 51,263 44,257
666,064
Patent application 193 10,927 12,701 12,577
410,185
Taxes & licenses 32,746 31,399 53,854 44,451
482,428
General & administrative 238,631 149,329 521,225 316,235
4,328,929
Depreciation &
amortization 12,155 13,974 24,310 27,949
315,840
$ 591,839 $ 615,529 $1,483,482 $1,082,314
$14,369,095
Income(Loss) before
income taxes $(441,009) $(115,545) $ (3,680) $2,927,673
$(2,240,624)
Income taxes 13,500 -- 13,500 56,000
75,227
Net income(Loss) $(454,509) $(115,545) $ (17,180) $2,871,673
$(2,315,851)
Net income(loss) per share $ (.087) $ (.017) $ (.004) $ .400 $
.365
Weighted average common
shares outstanding 7,072,111 6,722,524 6,924,367 7,185,757
6,343,042
</TABLE>
The accompanying notes are an integral part of the financial statements.
Notes to the financial statements for the year ended September 30, 1995
substantially apply to these interim financial statements and are not repeated
here.
ASHA CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
for the six month periods ended March 31, 1996 and 1995 and the period
from June 30, 1986 (date of inception) through March 31, 1996
June 20, 1986
Six Months Ended (Date of Inception)
March 31, Through
1996 1995 March 31, 1996
----------- ----------- --------------
Cash flows from operating
activities:
Net income (loss) $ (17,180) $ 2,871,673 $(2,315,851)
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Depreciation and amortization 24,310 27,949 315,840
Issuance of common stock for
services -- 10,500 706,188
Stock options granted to
officers -- 41,250
Stock options granted to
consultant -- 65,473
Investee loss reported -- 28,500
Gain on sale of equipment -- (5,870)
Loss on sale of marketable -- 1,121
Loss on joint venture -- 470,298
Reduction (increase) in
carrying value of market-
able securities 11,500
Decrease (increase) in
receivables 1,508,628 (2,534,118) (135,902)
Reduction of officer
receivable -- 20,515
Increase in receivables from
contract -- (829,345)
Decrease (increase) in pre-
paid expenses and deposits 232 19,056 (16,441)
Increase (decrease) in ac-
counts payable and bank
overdraft (38,392) 127,724 36,331
Increase in income
tax payable -0- 56,000 -0-
Increase in accrued payroll
and payroll payable 23,519 8,178 140,527
Net cash provided by
(used in) operating
Operating activities $1,501,117 586,962 $(1,465,866)
The accompanying notes are an integral part of the financial statements.
Notes to the financial statements for the year ended September 30, 1995
substantially apply to these interim financial statements and are not repeated
here.
ASHA CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
for the six month periods ended March 31, 1996 and 1995 and the period
from June 30, 1986 (date of inception) through March 31, 1996
June 20, 1986
Six Months Ended (Date of Inception)
March 31, Through
1996 1995 March 31, 1996
----------- ----------- --------------
Cash flows from investing
activities:
Investment in marketable
securities $(1,514,784) $ (51,390) $(1,780,612)
Proceeds from sale of
marketable equity securities 253,207
Additions to property and
equipment (56,687) (38,232) (489,195)
Deposits on equipment -- (6,079)
Proceeds from sale of equipment -- 18,959
Loan to officer -- 20,515 (53,000)
Investment in joint venture (447,533) (900,000) (1,376,033)
Additions to organization costs (2,082)
Net cash used in investing
activities $(2,019,004) $ (969,107) $(3,434,835)
Cash flows from financing
activities:
Net borrowing under line of
credit agreement 85,000
Additions to notes payable 23,516
Payments on notes payable (85,000) (108,516)
Loan from(payments to) officer --
Increase in related party debt (45,000) -0-
Proceeds from issuance of
common stock 750,000 1,896,303
Proceeds of exercise of common
stock warrant -- 3,097,899
Proceeds of exercise of stock
options to officers 15,000 64,312
Purchase of common stock for
treasury (22,375) (42,163)
Principal payments on obliga-
tions under capital lease -- (733)
Net cash provided by (used)
in) financing activities $ 620,000 $ (7,375) $ 5,015,618
Net increase (decrease) in cash
and cash equivalents $ 102,113 $ (389,520) $ 114,917
Cash and cash equivalents at
beginning of period $ 12,804 $ 625,820
Cash and cash equivalents at
end of period $ 114,917 $ 236,300 $ 114,917
The accompanying notes are an integral part of the financial statements.
Notes to the financial statements for the year ended September 30, 1995
substantially apply to these interim financial statements and are not repeated
here.
ASHA CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The financial statements included herein have been prepared by ASHA
Corporation, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and include all adjustments which are, in
the opinion of management, necessary for a fair presentation. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The Company
believes that the disclosures are adequate to make the information presented
not misleading; however, it is suggested that these financial statements and
the accompanying notes be read in conjunction with the financial statements
and notes thereto in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995. The financial data for the interim periods may
not necessarily be indicative of results to be expected for the year.
On February 1, 1994 the Company effected a 1 for 85 reverse split of the
Company's outstanding Common Stock. All share numbers and per share amounts
give retroactive effect to the reverse stock split.
On June 29, 1994 the Company purchased 3,700 shares of its own common stock.
On October 25, 1994 the Company purchased an additional 5,000 shares.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following should be read in conjunction with the attached Financial
Statements and Notes thereto of the Company.
THREE MONTHS ENDED MARCH 31, 1996 VERSUS THREE MONTHS ENDED MARCH 31, 1995
During the three months ended March 31, 1996, the Company had approximately
$151,000 in revenue as compared to approximately $500,000 in revenue during
the corresponding period last year. The decrease in revenues was a result of
a decrease in contract services revenue. Contract services revenue declined
approximately $370,000 from the prior year because the Company generally now
provides these services in connection with the option and license agreements
for Gerodisc instead of under separate agreements for prototype development.
Expenses for the three months ended March 31, 1996, were up by approximately
$134,000 over the corresponding period last year. Research and development
expenses decreased by approximately $170,000 because beginning in the quarter
ended March 31, 1996, the Company started capitalizing certain of its expenses
related to the world car project. Officers' salaries increased by
approximately $67,000 primarily as a result of a bonus to an officer. General
and administrative expenses increased by approximately $289,000 as a result of
the addition of a part-time employee for public relations, increased
directors' meetings, full promotion of European marketing to additional OEM's,
annual report mailings and annual meeting activities, and the leasing of two
vehicles for Sales and Marketing and the Chief Executive Officer. The net
loss of $(454,509) for the three months ended March 31, 1996, was
substantially greater than the net loss of $(115,545) for the three months
ended March 31, 1995. The decrease was due to the reduced revenues and
increased expenses described above.
SIX MONTHS ENDED MARCH 31, 1996, VERSUS SIX MONTHS ENDED MARCH 31, 1995
During the six months ended March 31, 1996, the Company had approximately
$1,480,000 in revenue as compared to approximately $4,010,000 in revenue
during the corresponding period last year. The decrease in revenues was a
result of a decrease in license and right of first refusal revenue. The
decrease is due to the fact that during the six months ended March 31, 1995,
the Company entered into a new license agreement with a major customer and
amended a prior license agreement with an existing major customer which
resulted in substantial revenues. During the quarter ended March 31, 1996,
the Company entered into one new license agreement with a foreign first tier
supplier.
Expenses for the six months ended March 31, 1996, were up by approximately
$401,000 over the corresponding period last year. Research and development
expenses increased by approximately $97,000 as a result of the Company's work
on the advanced development of the GERODISC technology, and the research and
development associated with racing activities in the U.S. and Europe. Four
new patents for GERODISC have been applied for since the inception of ASHA
racing development. Officers' salaries increased by approximately $87,000
primarily as a result of bonuses to two officers. General and administrative
expenses increased by approximately $223,000 as a result of the addition of a
part-time employee for public relations, increased directors meetings, full
promotion of European marketing to additional OEM's including the purchase of
a vehicle for demonstration of the Gerodisc, annual report mailings and annual
meeting activities, and the leasing of two vehicles for Sales and Marketing
and the Chief Executive Officer. The net loss of $(17,180) for the six months
ended March 31, 1996, was substantially less than the net income of $2,871,673
for the six months ended March 31, 1995. The decrease was due to the reduced
revenues and increased expenses described above.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had working capital of approximately
$1,627,047 as compared to approximately $1,374,000 at September 30, 1995. The
increase is due to the sale of stock in a private transaction for $750,000.
The Company believes that it has sufficient liquidity to maintain the
Company's current level of activities for the remainder of the current fiscal
year. However, the Company is exploring the possibility of raising additional
funds to finance additional marketing and other activities.
During the six months ended March 31, 1996, cash provided by operating
activities was approximately $1,501,000 as compared to approximately $587,000
provided by operating activities for the six months ended March 31, 1995. The
increase was a result of the decrease in receivables, a non-cash asset, of
$1,508,628.
Cash used in investing activities during the six months ended March 31, 1996
was approximately $2,019,000 as compared to approximately $969,000 used in
investing activities during the six months ended March 31, 1995. The increase
was primarily due to the investment of approximately $1,515,000 in marketable
securities which consist of certificates of deposit and commercial paper, all
with maturity dates of less than one year.
Cash provided by financing activities for the six months ended March 31, 1996
was $620,000 as compared to $(7,375) used in financing activities during the
six months ended March 31, 1995. The change was primarily due to the fact
that the Company raised $750,000 from the private sale of Common Stock during
the three months ended December 31, 1995.
The Company expects to invest an additional $750,000 in the ASHA/TAISUN joint
venture during calendar year 1996. The Company has no other commitments to
make material capital expenditures.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASHA CORPORATION
Date: May 15, 1996 By /s/ Alain J-M Clenet
-----------------------
Alain J-M Clenet
Chief Executive Officer
By /s/ John C. McCormack
-----------------------
John C. McCormack
President and Treasurer
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- ------------------------------
27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages 3-5 of the
Company's Form 10-Q for the year to date, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000789547
<NAME> ASHA CORPORATION
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1996
<CASH> 114,917
<SECURITIES> 1,514,784
<RECEIVABLES> 184,828
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,814,529
<PP&E> 185,976
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,707,085
<CURRENT-LIABILITIES> 187,482
<BONDS> 0
<COMMON> 77
0
0
<OTHER-SE> 3,628,628
<TOTAL-LIABILITY-AND-EQUITY> 3,267,254
<SALES> 140,953
<TOTAL-REVENUES> 150,830
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 749,076
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (598,246)
<INCOME-TAX> 13,500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (611,746)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
