UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997
----------------------------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 33-55254-45
ASSOCIATED TECHNOLOGIES
(Exact name of registrant as specified in its charter)
NEVADA 87-0485306
(State or other jurisdiction of incorporation (IRS Employer Identification
or organization) Number)
1204 THIRD AVENUE, SUITE 172
NEW YORK, NY 10021
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 988-0394
--------------------------
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 reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ] Yes [ ] No
Class Outstanding as of March 31, 1997
- -------------------------------- ----------------------------------
CLASS A COMMON STOCK 2,148,000 shares
Par Value $0.001
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Financial Statements Page
Consolidated Balance Sheets as at December 31, 1996 and
March 31, 1997 F-1
Consolidated Statements of Operations for the quarter ending
March 31, 1997 F-2
Consolidated Statement of Shareholders' Equity for the period
from August 9, 1990 to March 31, 1997 F-3
Consolidated Statements of Cash Flows for the quarter ending
March 31, 1997 F-4
Selected Notes to Consolidated Financial Statements F-5
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The operating revenue for the quarter to March 31 was $156,552 which after a
cost of sales of $76,268, resulted in a gross profit of $80,284. General and
administrative expenses totalled $390,499 and included $169,383 for wages and
salaries of which $28,638 related to remuneration paid to the Directors of the
company or its subsidiary. Other major items of expenditure were finance charges
of $35,284, professional fees of $50,767, sales and marketing costs of $23,412
and premises and insurance costs of $29,108.
Since the end of the financial year to December 31, 1996, the Company has sought
to consolidate its position in the Australian and Asian market place. Although
operating revenue declined marginally in the quarter, customer orders worth
$300,000 had been received by March 31. In the month of April, orders totalling
$235,000 were received and verbal confirmation has been received in regard to a
further order totalling $340,000. These sales and orders represent a mixture of
both analogue and software sales and are expected to be completed by August 31
1997. There remains prospects for further substantial orders.
2
<PAGE>
At the same time, the Research and Development program has continued with its
main objective being the completion of the Virtuoso product which is the first
phase of the VIRS project. At the date of this report, Virtuoso Version 1 has
been released and is being installed in two major Asian Government broadcasting
facilities.
Management has concentrated its efforts on locating funding for the R&D
development work. During the quarter, short term loan funds of $300,000 were
secured and applied against outstanding creditors and operating expenses.
The Company is still awaiting a final determination from the Australian
Government in regard to the proposed R&D Syndication program/grant and the
Directors are confident that, as expected, one of these will be in place by June
30, 1997.
At the same time, the Information Memorandum prepared for the purposes of the
second structured R&D program (involving the raising of $6.7 million to be used
for the development and commercialisation of 3 new ranges of software products),
has been completed and the Company's principal agent Main Camp has commenced
marketing. Again, the Directors are confident that the program will be fully
subscribed by June 30, 1997.
Liquidity and Capital Resources
Short term funding shortfalls are currently being funded by loans. The Company
is currently negotiating with interested parties for an additional working
capital loan of $500,000 which will fund operating expenses until the R&D
funding is finalised.
Current assets include $750,000 relating to prepaid expenses associated with one
of these R&D programs.
Impact of Inflation
The Company believes that its activities are not materially affected by
inflation.
Foreign Currency Exposure
Income from Ogenic Technologies Pty Limited, the Company's operating subsidiary,
will be in the form of Cash received from customers for sales of products,
services, and technology, and the reimbursement of funds expended on Research &
Development. In the main, contracts are negotiated in Australian Dollars, with
liabilities incurred in Australian Dollars.
Exchange Rate
The Exchange Rate at March 31, 1997 was: $US1.00 = $AU1.27
3
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included in this filing:
Page
Financial Statements as of March 31, 1997 F-1
Financial Data Schedule
(b) Reports on Form 8-K.
None.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ASSOCIATED TECHNOLOGIES
By: s/ Alan James Gallagher
Alan James Gallagher, President (Acting)
Dated : 9 May 1997
-------------------
5
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS 3/31/97 12/31/96
(Unaudited) (Audited)
----------------- -----------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 24,887 $ 18,054
Accounts receivable 22,090 181,341
Inventories 160,573 187,062
Prepaid expenses 773,404 759,051
----------------- -----------------
TOTAL CURRENT ASSETS 980,954 1,145,508
PROPERTY, PLANT, AND EQUIPMENT
Equipment 407,471 425,003
Accumulated depreciation and amortization (303,295) (309,661)
----------------- ------------------
NET PROPERTY, PLANT AND EQUIPMENT 104,176 115,342
OTHER ASSETS
Joint Venture Investment 11,850 -
----------------- -----------------
11,850 -
----------------- -----------------
$ 1,096,980 $ 1,260,850
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 156,613 $ 155,256
Accrued expenses 211,416 324,287
Loans 301,726 66,562
Accrued Employee Benefits 39,849 27,216
----------------- -----------------
TOTAL CURRENT LIABILITIES 709,604 573,321
NON-CURRENT LIABILITIES
Loans - related parties 598,609 500,321
----------------- -----------------
TOTAL LIABILITIES $ 1,308,213 $ 1,073,642
================= =================
SHAREHOLDERS' EQUITY Common stock par value $.001:
25,000,000 shares authorized; 2,148,000 shares issued 2,148 2,148
Additional paid-in capital 2,830,112 2,830,112
(Deficit) accumulated during development stage (3,043,493) (2,645,052)
------------------ ------------------
TOTAL SHAREHOLDERS' EQUITY (211,233) 187,208
------------------ -----------------
$ 1,096,980 $ 1,260,850
================= =================
</TABLE>
F-1
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
5/3/88
Three Months Ended (Date of
March 31, inception) to
1997 1996 3/31/97
------------------ ------------------ ----------------------
<S> <C> <C> <C>
Operating revenue $ 156,552 $ 0 $ 616,435
Cost of sales (76,268) 0 (434,386)
------------------ ------------------ ----------------------
GROSS PROFIT 80,284 0 182,049
General and administrative expenses (390,499) 0 (2,247,817)
------------------ ------------------ ----------------------
Loss before other items (310,215) 0 (2,065,768)
------------------ ------------------ ----------------------
Other Items:
Expenses of Voluntary Administration 0 0 (13,284)
Profit on sale of land and building 0 0 88,036
Goodwill on acquisition of Subsidiary
written off 0 0 (845,012)
Research and Development costs (88,226) 0 (278,152)
Performance bond guarantee 0 0 (22,363)
Debt forgiveness 0 0 60,790
------------------ ------------------ ----------------------
(88,226) 0 (1,009,985)
INCOME (LOSS) BEFORE
INCOME TAXES (398,441) 0 (3,075,753)
PROVISION FOR INCOME TAXES 0 0 0
------------------ ------------------ ----------------------
NET INCOME (LOSS) $ (398,441) $ 0 $ (3,075,753)
================== ================== =======================
Net income (loss) per weighted
average common share outstanding $ (0.19) $ .00 $ (2.79)
================== ================== =======================
Weighted average number of
common shares outstanding 2,148,000 1,000,786 1,104,186
================== ================= ======================
</TABLE>
F-2
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Period from August 9, 1990 (Date of Inception) to March 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Common Stock Paid-in Development
Shares Amount Capital Stage
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Balances at 8/9/90 (Date of Inception) 0 $ 0 $ 0 $ 0
Issuance of common stock (restricted) at
$.001 per share at 8/9/90 1,000,000 1,000 0
Net loss for period (1,000)
------------- ------------- ------------ --------------
Balances at 12/31/90 1,000,000 1,000 0 (1,000)
Net income for year 0
------------- ------------- ------------ --------------
Balances at 12/31/91 1,000,000 1,000 0 (1,000)
Net income for year 0
------------- ------------- ------------ --------------
Balances at 12/31/92 1,000,000 1,000 0 (1,000)
Net income for year 0
------------- ------------- ------------ --------------
Balances at 12/31/93 1,000,000 1,000 0 (1,000)
Net income for year 0
------------- ------------- ------------ --------------
Balances at 12/31/94 1,000,000 1,000 0 (1,000)
Net income for year 0
------------- ------------- ------------ --------------
Balances at 12/31/95 1,000,000 1,000 0 (1,000)
Issuance of common stock (restricted) at
$5.00 per share for cash at 1/10/96 20,000 20 99,980
Issuance of common stock (80,000 Regulation S
and 100,000 restricted) at par to acquire
subsidiary and associated loan at
6/28/96 (Value based on assets received) 180,000 180 -
Issuance of common stock (restricted) at
$2.00 per share for expenses at 6/28/96 230,000 230 459,770
Issuance of common stock (restricted) at
$2.00 per share to retire debt at
9/30/96 270,000 270 539,730
Issuance of common stock (Regulation S)
at $4.50 per share to retire debt at
9/30/96 218,000 218 980,782
Issuance of common stock (restricted) at
$0.001 per share 80,000 80 -
Issuance of common stock (restricted) at
$5.00 per share for prepaid expenses 150,000 150 749,850
Net loss for period to 12/31/96 (2,644,052)
------------- ------------- ------------ ---------------
Balances at 12/31/96 2,148,000 $ 2,148 $ 2,830,112 $ (2,645,052)
Net loss for the period to 3/31/97 (398,441)
------------- ------------- ------------ ---------------
Balances at 3/31/97 2,148,000 2,148 2,830,112 (3,043,493)
============= ============= ============ ===============
</TABLE>
F-3
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
5/3/88
Three Months Ended (Date of
March 31, inception) to
1997 1996 3/31/97
----------------- ------------------ -----------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (398,441) $ 0 $ (3,043,493)
Adjustments to reconcile net (loss) to net cash required
by operating activities:
Net book value of assets sold 0 0 625,761
Depreciation 11,166 0 43,403
Goodwill written off 0 0 845,012
Accrued Employee Benefits 0 0 12,617
Changes in assets and liabilities:
Accounts receivable 158,421 0 (43,618)
Inventories 26,489 0 154,039
Prepaid expense (14,371) 0 (772,747)
Accounts payable (146,603) 0 (5,863)
Accrued expenses 48,886 0 63,588
----------------- ------------------ ------------------
83,988 0 922,192
----------------- ------------------ ------------------
NET CASH REQUIRED BY
OPERATING ACTIVITIES (314,453) 0 (2,121,301)
INVESTING ACTIVITIES
Cash acquired from subsidiaries 0 0 147,939
Investment in joint venture (11,850) 0 (11,850)
Purchase of Fixed Assets 0 0 (18,752)
----------------- ------------------ -------------------
NET CASH PROVIDED (REQUIRED)
BY INVESTING ACTIVITIES (11,850) 0 117,337
FINANCING ACTIVITIES
Loan Repayments - Bank 0 0 (657,307)
Stock sold 0 0 2,832,260
Loans - related parties 99,789 0 600,100
Loan repayments - other (68,369) 0 0
Loans - other 301,726 0 301,726
Loan repayments - related parties 0 0 (1,047,928)
----------------- ------------------ ------------------
NET CASH PROVIDED (REQUIRED)
BY FINANCING ACTIVITIES 333,136 0 2,028,851
----------------- ------------------ ------------------
NET INCREASE IN CASH 6,833 0 24,887
CASH AT BEGINNING OF PERIOD 18,054 0 0
----------------- ------------------ ------------------
CASH AT END OF PERIOD $ 24,887 $ 0 $ 24,887
================= ================== ==================
</TABLE>
SUPPLEMENTAL FINANCING ACTIVITIES
During the period ended June 30, 1996, the Company issued 180,000 shares (80,000
Regulation S and 100,000 of restricted stock to acquire a 100% shareholding in
and inter-company loan with a subsidiary with net liabilities of $844,832
(excluding the inter-company loan). During the period ended September 30, 1996,
the Company issued 270,000 shares of restricted stock to retire debt of
$540,000, 150,000 shares of restricted stock for prepaid expenses of $750,000,
218,000 shares of Regulation S stock to retire debt of $981,000 and 80,000
shares of restricted stock at nominal value. Since December 31 1996, the Company
has not issued any further shares.
On March 10, 1997 the Company entered into a promissory agreement in regard to
loan funds advanced of $300,000. In addition to interest at 10% per annum on the
amount outstanding, the Company entered into a stock option agreement with the
lender for 120,000 shares at a price of $2.50 per share exerciseable until March
7, 2002.
F-4
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements as of March 31, 1997 include the accounts
of the Company and its wholly-owned subsidiary Ogenic Technologies Pty Ltd
("Ogenic") and Ogenic's 95% owned inactive subsidiary Ogenic Industries Pty Ltd.
All significant inter-company balances and transactions have been eliminated in
consolidation.
Accounting Methods
The Company recognizes income and expenses based on the accrual method of
accounting.
Cash and Cash Equivalents
All short term investments purchased with an original maturity of three months
or less are considered to be cash equivalents. Cash and cash equivalents
primarily include cash on hand and amounts on deposit with financial
institutions.
Dividend Policy
The Company has not yet adopted any policy regarding payment of dividends.
Income Taxes
The Company records the income tax effect of transactions in the same year that
the transactions enter into the determination of income, regardless of when the
transactions are recognized for tax purposes. Tax credits are recorded in the
year realized. Since the Company has not yet realized income as of the date of
this report, no provision for income taxes has been made.
In February 1992, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, which
supersedes substantially all existing authoritative literature for accounting
for income taxes and requires deferred tax balances to be adjusted to reflect
the tax rates in effect when those amounts are expected to become payable or
refundable. At March 31, 1997 a deferred tax asset has not been recorded. This
is in accordance with the policy of Directors set out in the financial
statements to December 31 1996.
Trading Securities
The Company has adopted the reporting requirements of Statement of Financial
Accounting Standards No. 115 whereby trading securities are reported at market
value.
F-5
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are translated to US
dollars at the exchange rate at the balance sheet date. Income statement items
are translated at an average currency exchange rate. The resulting translation
adjustment is recorded as a separate component of stockholders' equity.
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company was incorporated under laws of the State of Nevada on August 9, 1990
and has been in the developmental stage since incorporation. The Company intends
to operate in the industries of manufacturing electronic broadcasting equipment
and precision sheet metal products through its subsidiary Ogenic Technologies
Pty Ltd, an Australian company.
NOTE 3: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principals for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company's management, all
adjustments (consisting of normal accruals) considered necessary for a fair
presentation of these financial statements have been included. Operating results
for the three months ended March 31, 1997 are not necessarily indicative of the
results that can be expected for the year ending December 31, 1997.
NOTE 4: RELATED PARTY TRANSACTIONS
The Company's subsidiary Ogenic Technologies Pty Ltd, leases property in Perth,
Western Australia and the Company utilises office space in New York and Sydney,
Australia when necessary.
Included under non-current liabilities are loans totalling $598,609 due to
companies associated with the Main Camp Group which is a shareholder in the
Company. Mr. Len McDowall and Mr. Alan Gallagher are Directors of one or more of
these companies. One of these loans ($121,391) bears interest at 12%. No terms
in regard to interest have been agreed in relation to the other loans.
NOTE 5: RESEARCH AND DEVELOPMENT
On June 29, 1996, a Research and Development syndicate was entered into by
Ogenic with a joint venture party for funding over a 2 year period of $1.7
million. Details of the key terms of these agreements have been provided in
previous filings.
In December 1996, these agreements were unwound as a result of the inability to
complete the transaction within the specified time period following a change of
policy by the Australian Government. After extensive lobbying, Ogenic's
syndication was allowed to proceed subject to appropriate approvals by the
Government.
At the date of this report, Ogenic has received approval from the Grants
Committee of the Australian Government for the R & D Syndication proposal and is
currently awaiting Tax Concession Committee approval. If this approval is
received Ogenic will proceed with a new series of agreements with a new investor
prior to June 30 1997.
F-6
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
In addition and as noted in the December 31 accounts, proposals for an
additional structured Research and Development Program involving funding of $6.7
million, are well advanced. The program is expected to be in place before the
end of the June quarter.
NOTE 7: INTANGIBLE ASSETS
As noted in the financial statements to December 31, no account has been taken
of the intangible or contingent assets to which the Company has title. These
include the Company's existing analogue product range, the released version of
Virtuoso, general technological and market knowledge in regard to the radio
broadcasting industry and the income tax benefit that may arise once the Company
has secured its Research and Development funding programs.
F-7
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Three months Three Months
ended ended
3/31/97 3/31/96
------------------ ------------------
<S> <C> <C>
Operating Revenue $ 156,552 $ 82,949
Cost of Sales (76,268) (71,933)
------------------ ------------------
GROSS PROFIT 80,284 11,016
General and Administrative expenses (391,703) (94,009)
------------------ ------------------
Loss before other items (311,419) (82,993)
Other Items:
Research and Design costs (88,226) (57,944)
Bankruptcy expenses 0 (49,261)
Exchange gain 1,204 0
----------------- -----------------
(87,022) (107,205)
----------------- ------------------
INCOME (LOSS) BEFORE INCOME TAXES (398,441) (190,198)
PROVISION FOR INCOME TAXES 0 0
----------------- -----------------
NET INCOME (LOSS) $ (398,441) $ (190,198)
================= =================
INCOME (LOSS) PER COMMON SHARE
Net income (loss) per weighted average common share
outstanding $ (0.19) $ (0.19)
================== =================
Weighted average number of common shares outstanding 2,148,000 1,000,786
================= =================
</TABLE>
F-8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Associated Technologies and Subsidiaries March 31,1997 financial
statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000894565
<NAME> Associated Technologies
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 24,887
<SECURITIES> 0
<RECEIVABLES> 22,090
<ALLOWANCES> 0
<INVENTORY> 160,573
<CURRENT-ASSETS> 980,954
<PP&E> 407,471
<DEPRECIATION> (303,295)
<TOTAL-ASSETS> 1,096,980
<CURRENT-LIABILITIES> 709,604
<BONDS> 0
0
0
<COMMON> 2,148
<OTHER-SE> (213,381)
<TOTAL-LIABILITY-AND-EQUITY> 1,096,980
<SALES> 156,552
<TOTAL-REVENUES> 156,552
<CGS> 76,268
<TOTAL-COSTS> 76,268
<OTHER-EXPENSES> 390,499
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (398,441)
<INCOME-TAX> 0
<INCOME-CONTINUING> (398,441)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (398,441)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
