<PAGE>
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 June 30, 1996
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 including zip code)
(805) 683-2331
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(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 7,076,217 shares of the Registrant's Common Stock outstanding as of
June 30, 1996.
<PAGE>
ASHA CORPORATION
FORM 10-Q
INDEX
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Part I. Financial Information
Item 1. Financial Statements Page
Balance Sheets - June 30, 1996 and September 30, 1995 3-4
Statement of Operations for the three and nine month
periods ended June 30, 1996 and 1995 and the period from
June 20, 1986 (inception) through June 30, 1996 5
Statement of Cash Flows for the nine month periods ended
June 30, 1996 and 1995 and the period from June 20,
1986 (inception) through June 30, 1996 6-7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
Part II. Other Information and Signatures 11
Signatures 12
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<PAGE>
ASHA CORPORATION
(A Development Stage Company)
ASHA CORPORATION
(A Development Stage Company)
BALANCE SHEET
June 30, 1996 and September 30, 1995
June 30 September 30,
1996 1995
----------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 601,586 $ 12,804
Marketable Securities 247,548 -
Accounts receivable 220,391 1,624,272
Receivable from employees 28,064 14,066
Note Receivable 18,356 32,485
Federal Income Tax Receivable 30,037 -
Stock Option Receivable - 6,192
Interest Receivable - -
Prepaid Expenses and Deposits 1,495 16,673
TOTAL CURRENT ASSETS 1,147,477 1,706,492
Property and equipment, less
accumulated depreciation 287,731 147,407
Other Receivables(1) 891,401 829,345
Investment Joint Venture 429,702 429,702
WIP Joint Venture 666,561 -0-
TOTAL ASSETS $ 3,422,872 $ 3,112,946
________________
(1) $1,000,000 license payment due August 1997 from NVG, discounted $108,599
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.
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<PAGE>
ASHA CORPORATION
(A Development Stage Company)
BALANCE SHEET
June 30, 1996 and September 30, 1995
June 30 September 30,
1996 1995
----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to Bank $ - $ 85,000
Accounts payable 89,468 74,723
Accrued payrolls 79,471 92,683
Payroll taxes payable - 24,325
401K payable 4,202 -
Note payable Taisun - 45,000
Debt capital lease 73,139 10,624
TOTAL CURRENT LIABILITIES 246,280 332,355
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:
7,084,917 shares at June 30,
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 (2,615,774) (2,298,671)
3,274,231 2,841,334
Less Treasury Stock at Cost 81,907 42,163
Stock Options Receivable 15,732 18,580
3,176,592 2,780,591
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,422,872 $ 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.
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<PAGE>
ASHA CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
for the three and nine month periods ended June 30, 1996 and 1995 and
the period from June 20, 1986 (date of inception) through June 30, 1996
<TABLE>
<CAPTION> June 20, 1986
Three Months Ended Nine Months Ended (Inception Date)
June 30, June 30, Through
1996 1995 1996 1995 June 30, 1996
--------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
License and right of
first refusal $ 30,000 $ 90,000 $1,381,000 $3,593,000 $ 6,450,345
Contract services 252,448 195,000 368,401 680,524 5,099,834
Interest 38,002 10,645 50,851 32,108 898,742
$ 320,450 $ 295,645 $1,800,252 $4,305,632 $12,448,921
Expenses:
Research & Development $ 175,527 $ 397,436 $ 691,457 $ 816,601 $ 5,186,212
Officers' salaries 60,836 102,625 365,035 320,305 2,775,668
Consulting fees -- -- -- -- 440,132
Legal & accounting 31,068 17,813 82,331 62,070 697,132
Patent application 25,757 9,924 38,458 22,501 435,942
Taxes & licenses 43,850 25,864 97,704 70,315 526,278
General & administrative 264,276 131,534 785,501 447,769 4,593,205
Depreciation &
amortization 32,559 22,220 56,869 50,169 348,399
$ 633,873 $ 707,416 $2,117,355 $1,789,730 $15,002,968
Income(Loss) before
income taxes $(313,423) $(411,771) $ (317,103) $2,515,902 $(2,554,047)
Income taxes -- 800 -- 56,800 61,727
Net income(Loss) $(313,423) $(412,571) $ (317,103) $2,459,102 $(2,615,774)
Net income(loss)
per share $ (.0444) $ (.0606) $ (.0451) $ .3596 $ (.4112)
Weighted average common
shares outstanding 7,065,752 6,807,900 7,036,061 6,838,230 6,361,154
</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.
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<PAGE>
ASHA CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
for the nine month periods ended June 30, 1996 and 1995 and the period
from June 30, 1986 (date of inception) through June 30, 1996
June 20, 1986
Nine Months Ended (Date of Inception)
June 30, Through
1996 1995 June 30, 1996
----------- ----------- ----------------
Cash flows from operating
activities:
Net income (loss) $ (317,103) $ 2,459,102 $(2,615,774)
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Depreciation and amortization 56,869 50,169 348,399
Issuance of common stock for
services -- 58,266 706,188
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 1,327,827 (2,176,848) (316,703)
Reduction of officer
receivable -- 20,515 20,515
Increase in receivables from
contract -- -- (829,345)
Decrease (increase) in pre-
paid expenses and deposits (14,859) 19,056 (31,532)
Increase (decrease) in ac-
counts payable and bank
overdraft 3,627 112,033 78,350
Increase in accrued payroll
and payroll payable (33,335) 5,424 83,673
Net cash provided by
(used in) operating
Operating activities $1,023,026 $ 547,717 $(1,943,957)
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.
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<PAGE>
ASHA CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
for the nine month periods ended June 30, 1996 and 1995 and the period
from June 30, 1986 (date of inception) through June 30, 1996
June 20, 1986
Nine Months Ended (Date of Inception)
June 30, Through
1996 1995 June 30, 1996
----------- ----------- ----------------
Cash flows from investing
activities:
Investment in marketable
securities $ (247,548) $ -- $ (513,376)
Proceeds from sale of
marketable equity securities -- 246,546 253,207
Additions to property and
equipment (120,549) (61,489) (553,057)
Deposits on equipment -- -- (6,079)
Proceeds from sale of equipment -- -- 18,959
Loan to officer (18,356) -- (71,356)
Investment in joint venture (666,561) (900,000) (1,595,061)
Additions to organization costs -- -- (2,082)
Net cash used in investing
activities $(1,053,014) $ (714,943) $(2,468,845)
Cash flows from financing
activities:
Net borrowing under line of
credit agreement -- -- --
Additions to notes payable -- -- 108,516
Payments on notes payable (85,000) -- (108,516)
Increase (decrease) in related
party debt (45,000) -- --
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 -- 15,000 64,312
Purchase of common stock for
treasury -- (22,375) (42,163)
Principal payments on obliga-
tions under capital lease (1,230) -- (1,963)
Net cash provided by (used)
in) financing activities $ 618,770 $ (7,375) $ 5,014,388
Net increase (decrease) in cash
and cash equivalents $ 588,782 $ (174,601) $ 601,586
Cash and cash equivalents at
beginning of period $ 12,804 $ 625,820 $ --
Cash and cash equivalents at
end of period $ 601,586 $ 451,219 $ 601,586
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.
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<PAGE>
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. During
the quarter ended June 30, 1996, the Company received 6,359 shares of its own
common stock as repayment of a Note Receivable from a former officer. The
Company retired the stock.
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<PAGE>
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 JUNE 30, 1996 VERSUS THREE MONTHS ENDED MARCH 31, 1995
During the three months ended June 30, 1996 , the Company had approximately
$300,000 in revenue as compared to approximately $295,000 in revenue during
the corresponding period last year. The increase in revenues was a result of
an increase in contract services revenue and short term investments. Contract
Services revenue increased by approximately $57,000 from the prior year
because the Company recaptured a portion of the discount related to a
receivable due from New Venture Gear in August of 1997.
Expenses for the three months ended March 31, 1996, were down by approximately
$70,000 over the corresponding period last year. Research and development
expenses decreased by approximately $222,000 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 decreased by
approximately $42,000 primarily as a result of the reduction of salary by an
officer. General and administrative expenses increased by approximately
$143,000 as a result of consulting fees, costs of a private placement,
additional support personnel as well as overall increases in repairs and
maintenance, supplies and benefits due to increased research and development
and world car personnel, and full promotion of European marketing to
additional OEM's. The net loss of $(313,423) for the three months ended June
30, 1996, was less than the net loss of $(412,571) for the three months ended
June 30, 1996. The decrease was due to the increased revenues and decreased
expenses described above.
NINE MONTHS ENDED JUNE 30, 1996, VERSUS NINE MONTHS ENDED JUNE 30, 1995
During the nine months ended June 30, 1996, the Company had approximately
$1,800,000 in revenue as compared to approximately $4,306,000 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 as well as
contract revenues. The decrease in license and right of first refusal
revenues is due to the fact that the Company entered into several new license
agreements during the nine months ended June 30, 1995. The decrease in
contract revenues is due to the fact that during the nine months ended June
30, 1996, the Company included in its option to license agreements, the
development of prototypes, which had the effect of shifting the classification
of revenues from such activities to license and right of first refusal
revenue.
Expenses for the nine months ended June 30, 1996, were up by approximately
$327,000 over the corresponding period last year. Research and development
expenses decreased by approximately $125,000 as a result of the Company's
capitalization policy on world car project costs. Officers' salaries
increased by approximately $45,000 primarily as a result of bonuses to two
officers. General and administrative expenses increased by approximately
$338,000 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. Increased consulting fees, costs of a private placement, additional
support personnel as well as overall increases due to increased research and
development and world car personnel. The net loss of $(317,103) for the nine
months ended June 30, 1996,
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<PAGE>
was substantially less than the net income of $2,516,000 for the nine months
ended June 30, 1995. The decrease was due to the reduced revenues and
increased expenses described above.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company had working capital of approximately $900,000
as compared to approximately $1,374,000 at September 30, 1995. The decrease
is due to the net loss of $(317,103), increased expenditures on research and
development and investment in a joint venture which more than offset the
$750,000 received from the private sale of stock. The Company believes that
it has sufficient liquidity to maintain the Company's current level of
activities for the reminder 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 nine months ended June 30, 1996, cash provided by operating
activities was approximately $1,025,000 as compared to approximately $548,000
provided by operating activities for the nine months ended June 30, 1995. The
increase was a result of the decrease in receivables, a non-cash asset.
Cash used in investing activities during the nine months ended June 30, 1996
was approximately $1,050,000 as compared to approximately $674,000 used in
investing activities during the nine months ended June 30, 1995. The increase
was primarily due to the investment of approximately $247,000 in marketable
securities which consist of certificates of deposit and commercial paper, all
with maturity dates of less than one year and additional investment in a joint
venture of approximate $600,000.
Cash provided by financing activities for the nine months ended June 30, 1996
was $620,000 as compared to $(7,375) used in financing activities during the
nine months ended June 30, 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.
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<PAGE>
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
On April 26, 1996, the Company held an Annual Meeting of Shareholders at which
Alain J-M Clenet, Sheila R. Ronis, Neil McCarthy, Robert J. Sinclair and
Lawrence Cohen were each reelected to the Board of Directors. In addition,
the Company's shareholders ratified the appointment of McDirmid, Mikkelsen &
Secrest, P.S. as the Company's auditors, and approved an amendment to the
Company's 1994 Stock Option Plan to increase the number of shares included in
the plan from 240,000 to 750,000. The following sets forth the votes cast
for, against or withheld, as well as the number of abstentions and broker non-
votes, as to each of the matters presented at the meeting:
1. ELECTION OF DIRECTORS
NOMINEES FOR WITHHELD
Alain J-M Clenet 5,467,476 Shares 18,002 Shares
Sheila R. Ronis 5,469,501 Shares 15,977 Shares
Neil McCarthy 5,469,360 Shares 16,118 Shares
Robert J. Sinclair 5,469,501 Shares 15,977 Shares
Lawrence Cohen 5,467,525 Shares 17,953 Shares
2. APPOINTMENT OF McDIRMID, MIKKELSEN & SECREST, P.S.
ABSTENTIONS AND
FOR AGAINST BROKER NON-VOTES
5,242,243 Shares 234,131 Shares 8,804 Shares
3. AMENDMENT TO THE 1994 STOCK OPTION PLAN
ABSTENTIONS AND
FOR AGAINST BROKER NON-VOTES
3,760,810 Shares 132,265 Shares 1,583,703 Shares
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
During the quarter ended June 30, 1996, the Company filed one Report on Form
8-K dated April 26, 1996, reporting information under Item 4. Changes in
Registrant's Certifying Accountants, concerning a change in the Company's
independent accountants to Arthur Andersen LLP.
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<PAGE>
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: August 19, 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
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<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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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> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1996
<CASH> 601,586
<SECURITIES> 247,548
<RECEIVABLES> 296,848
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,147,477
<PP&E> 287,731
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,422,872
<CURRENT-LIABILITIES> 246,280
<BONDS> 0
<COMMON> 77
0
0
<OTHER-SE> 3,176,515
<TOTAL-LIABILITY-AND-EQUITY> 3,422,872
<SALES> 1,749,401
<TOTAL-REVENUES> 1,800,252
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,117,355
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (317,103)
<INCOME-TAX> 0
<INCOME-CONTINUING> (317,103)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (317,103)
<EPS-PRIMARY> (.045)
<EPS-DILUTED> (.045)
</TABLE>
