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 Quarter Ended December 31, 1995
Commission File No. 0-16176
ASHA CORPORATION
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(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
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(Address of Principal Executive Offices)
(805) 683-2331
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(Registrant's Telephone Number, Including Area Code)
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
February 26, 1996.
ASHA CORPORATION
FORM 10-Q
INDEX
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Part I. Financial Information
Item 1. Financial Statements Page
Balance Sheet - December 31, 1995 and September 30, 1995 3
Statement of Operations for the three months ended
December 31, 1995 and 1994 and the period from June 20,
1986 (inception) through December 31, 1995 5
Statement of Cash Flows for the three months ended
December 31, 1995 and 1994 and the period from June 20,
1986 (inception) through December 31, 1995 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
December 31, 1995 and September 30, 1995
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,396 $ 12,804
Marketable Securities 1,349,404 --
Accounts receivable 1,503,576 1,624,272
Receivable from employees 10,687 14,066
Note Receivable 32,485 32,485
Federal Income Taxes Receivable 15,373 --
Stock Option Receivable -- 6,192
Interest Receivable 7,831 --
Prepaid Expenses and Deposits -- 16,673
---------- ----------
Total Current Assets 2,938,752 1,706,492
Property and equipment, less
accumulated depreciation 156,728 147,707
Other Receivables<F1> 829,345 829,345
Investment Joint Venture 429,702 429,702
---------- ----------
Total Assets $4,354,527 $3,112,946
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to Bank $ -- $ 85,000
Accounts payable 156,556 74,723
Accrued payrolls 96,683 92,683
Payroll taxes payable 2,444 24,325
401K payable 10,300 --
Note payable Taisun 110,000 45,000
Debt capital lease 10,624 10,624
---------- ----------
Total Current Liabilities 386,607 332,355
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 December 31,
1995, 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 (1,861,342) (2,298,671)
---------- ----------
4,028,663 2,841,334
Less Treasury Stock at Cost 42,163 42,163
Stock Options Receivable 18,580 18,580
---------- ----------
3,967,920 2,780,591
Total Liabilities and Stockholders' Equity $4,354,527 $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)
Statement of Operations
for the three month period ended December 31, 1995 and 1994 and
the period from June 20, 1986 (date of inception) through December 31, 1995
[CAPTION]
June 20, 1986
Three Months Ended (Date of Inception)
December 31, December 31, Through
1995 1994 December 31, 1995
------------ ------------ -----------------
[S] [C] [C] [C]
Revenues:
License and right of
first refusal $1,326,000 $3,503,000 $ 6,395,345
Contract services -- -- 4,731,433
Interest 2,972 7,003 850,863
---------- ---------- -----------
$1,328,972 $3,510,003 $11,977,641
Expenses:
Research and Development $ 421,577 $ 158,493 $ 4,916,332
Officers' salaries 110,913 92,525 2,521,546
Consulting fees -- -- 440,132
Legal and accounting 30,788 25,326 645,589
Patent application 12,508 1,650 409,992
Taxes and licenses 21,108 11,512 449,682
General and administrative 282,594 160,128 4,090,298
Depreciation and amortization 12,155 13,975 303,685
---------- ---------- -----------
$ 891,643 $ 463,639 $13,777,256
Income (Loss) before income
taxes $ 437,329 $3,046,364 $(1,799,615)
Income taxes -- 56,000 61,727
---------- ---------- -----------
Net income (Loss) $ 437,329 $2,990,364 $(1,861,342)
Net income (loss) per share $ .062 $ .445 $ (.294)
Weighted average common
shares outstanding 7,072,111 6,772,396 6,323,983
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 three month period ended December 31, 1995 and the period from
June 30, 1986 (date of inception) through December 31, 1995
[CAPTION]
June 20, 1986
Three Months Ended (Date of Inception)
December 31, December 31, Through
1995 1994 December 31, 1995
------------ ------------ -----------------
[S] [C] [C] [C]
Cash flows from operating
activities:
Net income (loss) $ 437,329 $ 2,990,364 $(1,861,342)
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Depreciation and amortization 12,155 13,975 303,685
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 119,057 (3,311,334) (1,525,473)
Reduction of officer
receivable -- 20,515
Increase in receivables from
contract -- (829,345)
Decrease (increase) in pre-
paid expenses and deposits 4,679 19,056 (11,994)
Increase (decrease) in ac-
counts payable and bank
overdraft 81,833 8,940 156,556
Pension Deferral 10,300 10,300
Increase in accrued payroll
and payroll payable (17,881) 4,791 99,127
Net cash provided by
(used in) operating
Operating activities $ 647,472 $ (207,708) $ 2,319,511
Cash flows from investing
activities:
Investment in marketable
securities (1,349,404) (99,060) (1,625,232)
Proceeds from sale of
marketable equity securities 253,207
Additions to property and
equipment (21,416) (1,950) (453,984)
Deposits on equipment -- (6,079)
Proceeds from sale of equipment -- 18,959
Loan to officer -- 20,515 (53,000)
Investment in joint venture -- (928,500)
Additions to organization costs (2,082)
Net cash used in investing
activities $(1,370,880) $ (80,495) $ 2,786,711
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 65,000 110,000
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 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 $ 730,000 $ (22,375) $ 5,105,618
Net increase (decrease) in cash
and cash equivalents $ 6,592 $ (310,578) 19,396
Cash and cash equivalents at
beginning of period $ 12,804 $ 625,820
Cash and cash equivalents at
end of period $ 19,396 $ 315,242 $ 19,396
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 DECEMBER 31, 1995, VERSUS THREE MONTHS ENDED DECEMBER 31,
1994
During the three months ended December 31, 1995, the Company had approximately
$1,329,000 in revenue as compared to approximately $3,510,000 in revenue
during the corresponding period last year. The decrease in revenues was a
result of a decrease in license and first refusal revenue. The decrease is
due to the fact that during the three months ended December 31, 1994, 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 December 31, 1995, the Company
entered into one new license agreement with a racing team and two option
agreements with other new customers which did not generate as much revenue.
Expenses for the three months ended December 31, 1995, were up by
approximately $428,000 over the corresponding period last year. Research and
development expenses increased by approximately $263,000 as a result of the
Company's work on the ASHA/TAISUN joint venture and the advanced development
of the GERODISC technology. Officers' salaries increased by approximately
$18,000 primarily as a result of the addition of a new President of the
Company. General and administrative expenses increased by approximately
$122,000 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 and overall additional Gerodisc activities.
The net income of $437,329 for the three months ended December 31, 1995, was
substantially less than the net income of $2,990,364 for the three months
ended December 31, 1994. The decrease was due to the reduced revenues and
increased expenses described above.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1995, the Company had working capital of approximately
$2,552,000 as compared to approximately $1,374,000 at September 30, 1995. The
increase is primarily due to the sale of stock in a private transaction for
$750,000 and the net income generated during the three months ended December
31, 1995. 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 three months ended December 31, 1995, cash provided by operating
activities was approximately $647,000 as compared to approximately $(208,000)
used in operating activities for the three months ended December 31, 1994.
The increase was a result of the net income for the three months ended
December 31, 1995. The Company had a decrease in receivables, a non-cash
asset, of $119,000.
Cash used in investing activities during the three months ended December 31,
1995 was approximately $1,371,000 as compared to approximately $80,000 used in
investing activities during the three months ended December 31, 1994. The
increase was primarily due to the investment of approximately $1,349,000 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 three months ended December 31,
1995 was $730,000 as compared to $(22,000) used in financing activities during
the three months ended December 31, 1994. 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, 1994.
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: March 5, 1996 By /s/ Alain J-M Clenet
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Alain J-M Clenet
Chief Executive Officer
By /s/ John C. McCormack
------------------------------------
John C. McCormack
President and Treasurer
EXHIBIT INDEX
[CAPTION]
EXHIBIT METHOD OF FILING
- ------- ------------------------------
[S] [C] [C]
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
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1995
<CASH> 19,396
<SECURITIES> 1,349,404
<RECEIVABLES> 1,559,265
<ALLOWANCES> 0
<INVENTORY> 1,635,673
<CURRENT-ASSETS> 2,938,752
<PP&E> 168,883
<DEPRECIATION> 12,155
<TOTAL-ASSETS> 4,354,527
<CURRENT-LIABILITIES> 386,607
<BONDS> 0
<COMMON> 69
0
0
<OTHER-SE> 922,121
<TOTAL-LIABILITY-AND-EQUITY> 4,022,594
<SALES> 1,325,000
<TOTAL-REVENUES> 1,328,972
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 891,643
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 437,329
<INCOME-TAX> 0
<INCOME-CONTINUING> 437,329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 437,329
<EPS-PRIMARY> .062
<EPS-DILUTED> .062
</TABLE>
