UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark one)
[X] Annual Report Pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1996
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 (I.R.S. Employer
incorporation or organisation) Identification No.)
1204 THIRD AVENUE, SUITE 172 NEW YORK, NY 10021
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code:(212) 988 0394
Securities registered pursuant to section 12(b) of the Act: NONE
Securities registered pursuant to section 12(g) of the Act: NONE
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 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
Indicate by check mark if disclosure of delinquent filers in response to Item 40
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of April 10, 1997 the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold or
the average bid and ask price of such stock was $3,463,650
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of March 5, 1997
- -------------------------------------------------------------------------------
$0.001 PAR VALUE CLASS A COMMON STOCK 2,148,000
DOCUMENTS INCORPORATED BY REFERENCE
None
Page 1
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
- -------------------------------------------------------------------------------
Corporate Strategy
Associated Technologies ("ASCT") was originally incorporated on the 9th of
August 1990 under the laws of the State of Nevada. A subsequent change in
control of the company and the appointment of a new board of directors occurred
on the 10th of January 1996.
On that date, ASCT entered into an investment banking agreement with Sydney
investment banker First Sydney Capital Limited, with the intent to acquire
specialist technology companies with existing interests and growth strategies in
the substantial markets of Asia and the Pacific Basin.
The Pacific Rim countries are the fastest growing economies in the world. These
countries include Australia and New Zealand, the "Tiger" economies of South East
and North East Asia, several NIE's (newly industrialising countries) and the
NAFTA countries (North American Free Trade Association).
Rapid growth in these countries has led to a demand for advanced technology and
products to establish or enhance telecommunications infrastructure, of which
broadcasting systems are an important component.
The business of NASD OTC Bulletin Board listed company ASCT, is the
identification and acquisition of technological assets which are undervalued in
their country of origin and which, by accessing the US capital markets and
Pacific Rim consumer end-markets, can generate substantial shareholder wealth.
Ogenic Technologies Pty Ltd ("Ogenic") is a wholly owned subsidiary of ASCT and
represents the first acquisition of assets which will be used to profit from
high growth, Pacific Rim telecommunications, information technology, broadcast
and commercial entertainment markets.
General
On 28th June, 1996, the company acquired all of the issued and outstanding
capital of Ogenic, an Australian based operating company which develops and
manufactures both analogue and digital radio broadcasting equipment and
software. Ogenic was acquired following the completion of a creditor protection
administration (the Australian equivalent of chapter XI re-organisation)
controlled by Ernst & Young. The acquisition was funded by and promoted by
Chancellor Group Inc. with First Sydney Capital.
Subsequent to the appointment of the Administrator, Ogenic sought legal redress
against the former directors of the company for breaches of fiduciary duty which
were instrumental in causing Ogenic's liquidity problems. Ogenic has since been
awarded judgement against these directors in all 10 pleas sought and
compensation has been paid by the directors and applied against the costs of the
action.
The Company's immediate future is its investment in Ogenic Technologies, which
is developing digital sound solutions and products and in bringing these
products to the market progressively over the next 2 years.
As stated in the June quarter report, Ogenic had obtained approval from the
Industry Research and Development Board for funding via an R&D syndication. This
first syndication was bought to a close by a change of government policy which
abolished existing tax concessions. As a result of significant lobbying of
members of the Australian Parliament the syndication proposals of Ogenic were
reinstated. A successful outcome will result in funding of US$1.7 million for
research and development over the next two years.
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In addition and separate to the above, Ogenic has commenced the preparation of
an information memorandum to raise US$4.8 million by means of an Australian tax
effective investment structure. The fundraiser for this project is Main Camp
Limited who are also shareholders of AT. Main Camp Limited have raised US$200
million under such structures since 1995. Under this program the first tranche
of funding is due in the first week of July 1997. The investors will receive a
return by means of a royalty on product sales developed under this funding
program.
Future Development - OGENIC TECHNOLOGIES PTY LTD - ASCT's First Acquisition
Ogenic has held a strong position in the Australian marketplace for over 21
years and in recent times, it has expanded into Asia with its first sales into
Singapore and Hong Kong.
Ogenic plans to focus its broadcast industry expansion towards the developing
Asian markets such as China, India, Philippines, Thailand and Indonesia which
require traditional robust audio broadcasting products. Using a digital product
range, Ogenic plans to enter the more sophisticated and competitive markets in
Asia such as Singapore and Hong Kong and then expand into Europe and the USA.
As mentioned above, Ogenic has embarked upon an R&D program to upgrade its
existing computerised station management products into a range of all digital
audio broadcasting products to be known as the Virtual Interactive Radio Station
("VIRS"). The first of these products is Virtuoso(TM), a state of the art PC
playout system.
Virtuoso(TM) is to be sold as a stand-alone product and will also form a module
within the suite of VIRS products. The VIRS product range is expected to be the
first fully integrated, all digital radio station to include DAB1 capability,
Internet connection for sales, rental and broadcasting of sound files, automatic
listener voice interactive modules and extensive systems management software.
From the development of the VIRS product range, additional products are planned
for use as audio-on-demand distribution hubs and fully automated multi-service
playout systems for the entertainment industry.
With this digital product range, Ogenic will enter Australia and the more
sophisticated and commercial markets in Asia (such as Singapore and Hong Kong)
and then expand into the USA and Europe. Technology upgrades for existing radio
stations in these countries from AM/FM equipment to "DAB" and station management
systems, are expected to be in the region of US $1.7 billion over the following
10 years.
New Products For New Market Places
Ogenic plans to expand its software range to suit the requirement of the hotel
and commercial entertainment industries. Such modifications are considered
technically minor and early market entry could occur by the last quarter of
1997. Market penetration is due to commence in Australia followed by the US and
Europe. Preliminary estimates of market size for these applications of Ogenic's
products and associated hardware, are $8.32 billion per annum. Accepting the
newness of these products, Ogenic's estimates of the total qualified market size
from 1997 to 2001, indicate the said market capital expenditure of US$330
million.
Ogenic Staff
Ogenic has a team of 30 people, the majority of whom are in their 30's. This
team is projected to expand to 40 full time staff over the next three years,
with contractors adding an extra 20 during peak R&D periods.
- --------
1 Digital Audio Broadcasting
2 Based on Ogenic's business plan growth stategy of technology ranging from 4
years in Australia and the USA, to 15 years in less developed countries.
Page 3
<PAGE>
Ogenic Facilities
Ogenic has a 5 year lease on an office and production facility of 15,780 square
feet on 2.77 acres of land near the international airport in Perth, Western
Australia. This represents an adequate area for Ogenic's requirements over this
period.
Corporate Objectives
Ogenic's corporate objectives are as follows:
oTarget the high growth Pacific Rim telecommunications, broadcasting commercial
entertainment markets. oAccess the US capital markets which have become global
in scope. oUse the convergence of telecommunications, information technology and
broadcast technologies to redesign existing product and produce and market
systems integration products. oTo facilitate the sale or rental of sound files
to commercial and consumer end-users via the Internet and Cable mediums. oTo be
a market focused and innovative developer of software for the broadcast and
entertainment industries. oTo achieve strong and consistent corporate growth.
For further information review www.ogenic.com.au
Industry Narrative
The Company's stated industry target is the technology industry, particularly
concentrating on businesses with a USA/Australasia-Pacific focus. The Company
anticipates encountering significant competition both in locating other suitable
businesses due to competition from companies in similar positions, and having
acquired additional businesses in bringing the company to a profitable status.
Employees
Associated Technologies has no salaried employees. The services of experienced
banking and administrative personnel, who handle the day to day business
activities of the Company and maintain its books and records, are provided to
the Company by related parties (See Item 11 - "Executive Compensation").
Offices
The company maintains a registered office at 1800 East Sahara, Suite 107, Las
Vegas, Nevada 89104 USA (See Item 2 - "Properties").
The Company maintains an administrative office at 1204 Third Avenue, Suite 172,
New York NY 10021 USA (See Item 2 - "Properties").
The Company maintains an Australasian-Pacific office at Level 5, 151 Macquarie
Street, Sydney NSW 2000 Australia (See Item 2 - "Properties").
Ogenic maintains offices and manufacturing facilities at 34 Great Eastern
Highway, South Guildford, Western Australia.
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<PAGE>
ITEM 2. PROPERTIES
- -------------------------------------------------------------------------------
The Company owns no properties and utilises space on a rent-free basis in the
office of one of its principal shareholders, First Sydney Capital. This
arrangement is expected to continue for the foreseeable future. The Company has
no agreements with respect to the maintenance or future acquisition of office
facilities, however, following the successful acquisition of Ogenic, it is
anticipated that the office of the Company will be moved in the medium term.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------------------------------------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
- -------------------------------------------------------------------------------
No matter was submitted to the Company's security holders for a vote during the
fiscal year ending December 31, 1996.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
- -------------------------------------------------------------------------------
The Company's $0.001 par value common stock commenced trading in July 1996.
As of February 1997, there were 400 record holders of the Company's common
stock. The Company has not previously declared or paid any dividends on its
common stock and does not anticipate declaring any dividends in the foreseeable
future.
The trading market for the Company's $.0001 par value common stock commenced in
July 1996 on the NASDAQ Bulletin Board. In the period between commencement of
trading and April 1997 the shares have traded in the range of $0.50 to $7.50.
The information below was provided by brokers and does not necessarily represent
prices of actual sales of the Company's common stock, nor does it take into
account any brokerage discounts, commissions, or fees.
Quarter High Bid High Ask Low Bid Low Ask
------------------ ----------- ---------- --------- ---------
First 1996 $ .00 $ .00 $ .00 $ .00
Second 1996 .00 .00 .00 .00
Third 1996 7.00 7.50 .00 .00
Fourth 1996 7.00 7.50 3.00 3.375
Page 5
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------------------------------------------------------
Associated Technologies
Summary of Operations
December 1996
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Total Assets 1,260,850 0 0 0 0
Revenues 459,883 0 0 0 0
Operating Expenses 1,785,631 0 0 0 0
Net Earnings (Loss) (2,644,052) 0 0 0 0
Per Share Data Earnings (Loss) (1.88) 0 0 0 0
Average Common Shares 1,409,414 1,000,000 1,000,000 1,000,000 1,000,000
Outstanding
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION
- -------------------------------------------------------------------------------
Financial Position
As of December 31 1996, the company had total assets of $1.26 million. These
assets exclude goodwill of $845,012 representing the excess of liabilities over
assets acquired by the company when purchasing Ogenic. This goodwill on
acquisition has been written off in the year. However, total assets does include
$750,000 in prepaid expenses relating to the proposed US $4.8 million funded R &
D program. Current liabilities consisting of accounts payable and accrued
liabilities are approximately $573,321 and other liabilities of approximately
$500,321 relate to loans advanced to the company or its subsidiary by
shareholders.
Ability of the Company to Continue
At the date of this report, funding for the Company's immediate needs is being
negotiated through a US based merchant bank and is expected to be finalised
within the next few weeks.
Funding for Ogenic's various R&D and commercialisation projects are expected to
be forthcoming from private investors under two separate funding programs. Sales
generated from the company's existing and newly developed project range are
expected to be cash positive and provide additional working capital finance.
It is not intended at this stage that any further funds will be sought from the
market.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -------------------------------------------------------------------------------
See ITEM 14.
Page 6
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------------------------
On April 10, 1997 the Company's prior auditors, Smith & Company resigned.
Neither of Smith & Company's reports on the financial statements for the past
two years contained an adverse opinion or disclaimer of opinion, or was modified
as to uncertainty, audit scope or accounting principles.
There were no disagreements between Smith & Company and the Company on any
matter of accounting principles, financial statement disclosure or auditing
scope or procedure during the two most recent fiscal years and through the
present date.
None of the items of Regulation S-K Section 229.304 items (a)(1)(v)(A) through
(D) are applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- -------------------------------------------------------------------------------
The following table shows the positions held by the Company's officers and
directors. The directors will serve until their successors have been elected and
have qualified
Name Position
Alan James GALLAGHER (Acting) President & CEO Chairman
Deryck Fletcher Gow GRAHAM Vice President
Leonard Noel McDOWALL Director & CFO
Secretary & Treasurer
Alan James Gallagher
(Acting) President
Mr. Gallagher is a lawyer, accountant and company secretary with over thirty
years commercial experience including directorships of public and private
companies. He holds degrees in law and accounting and has undertaken courses
covering company secretarial duties and management, and is a member of tax and
banking institutes.
During a career spanning twenty years with Westpac Banking Corporation of
Australia, he filled many positions in areas such as Staff Research and
Industrial Relations as Senior Legal Officer, Manager Corporate Finance and
Assistant Chief Accountant. Mr. Gallagher entered private legal practice as
Managing Partner of the Sydney, Australia CBD firm Barwick & Co., where he
practised law in the fields of commerce, banking and taxation until 1990, during
which time he filled a number of outside positions including treasurer of the
Medico-Legal Society. He is now Managing Director of Main Camp Management Pty
Ltd, a specialist funding organisation.
Deryck Fletcher Gow Graham
Vice President
Mr. Graham has been in senior management positions in Australian public
companies for 10 years and in the capacity of executive director for 7 years. He
has been on the board of private companies for the past 15 years. During his
Page 7
<PAGE>
employ as executive director of Eagle Aircraft Australia Ltd, Mr. Graham was
responsible for the organisation's marketing and public relations in addition to
overviewing and reporting to the board on Ogenic's administrative operations.
He has had extensive experience with dealing at board and ministerial levels
with South East Asian and Australian companies and governments and has
established substantial joint ventures with the Malaysian Government and the
Petronas Oil Company of Malaysia.
Mr. Graham's industry experience spans real estate, mining, aerospace
manufacturing, electronics and software. In addition to Mr. Graham's corporate
experience, his management style is strongly founded on marketing and promotion.
He has a Diploma of Company Directorship, numerous marketing certificates and is
a member of the Australian Institute of Company Directors. Mr. Graham is
currently Managing Director of Ogenic, ASCT's wholly owned subsidiary.
Leonard Noel McDowall
Director, Treasurer and CFO
Mr. McDowall has been a Chartered Accountant for over 25 years, most of those as
inaugural Chairman and Managing Partner of Bird Cameron, Chartered Accountants,
which employed 1000 people in 50 offices in Australia and Hong Kong. Mr.
McDowall established Bird Cameron's Mergers and Acquisitions division in 1987.
He has substantial experience in all facets of financial management with
particular emphasis on structuring and negotiation of joint ventures and capital
raisings. Following his retirement from the accounting profession, he
established the Australian Investment Bank, Ausyork Securities Limited which
merged with First Sydney Capital Limited, of which he is Managing Director.
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------------------------------------------------------
The following directors receive remuneration: (a) Deryck Graham as Managing
Director of Ogenic Technologies receives remuneration of $82,950 in that
capacity; (b) Len McDowall received directors fees of $15,800 paid from Ogenic
Technologies.
The Company has made no other arrangements for the remuneration of its officers
and directors, except that they will be entitled to receive reimbursement for
actual, demonstrable out-of-pocket expense, including travel expenses if any,
made on the Company's behalf in the investigation of business opportunities and
others. No remuneration has been paid to the Company's officers or directors
prior to the filing of this form. There are no agreements or understandings with
respect to the amount or remuneration that officers and directors are expected
to receive in the future. No present prediction or representation can be made as
to the compensation or other remuneration which may ultimately be paid to the
Company's management, since upon the successful consummation of a business
opportunity, substantial changes may occur in the structure of the Company and
its management. At such time, contracts may be negotiated with new management
requiring the payment of annual salaries or other forms of compensation which
cannot presently be anticipated. Use of the term "new management" is not
intended to preclude the possibility that any of the present officers or
directors of the company might be elected to serve in the same or similar
capacities upon the Company's decision to participate in other business
opportunities.
There are no plans, proposals, arrangements or understandings with respect to
the sale of additional securities to affiliates, current shareholders or other
prior to the location of a business opportunity.
Page 8
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------------
The following table sets forth, as of April 10, 1997, information regarding the
beneficial ownership of shares by each person known by the Company to own
beneficially, more than 5% or more of the outstanding shares by each of the
directors and officers and by the directors and officers as a group.
<TABLE>
<CAPTION>
Title Name and Address of Amount and Nature Percent
of Beneficial Owner of Beneficial of
Class Ownership Class
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Business and Research
Management Pty Ltd 150,000(1) 7%
Level 1, 96 Tamar Street
Ballina NSW 2478
Common FYEO AVV 400,000 18.6%
Dominicanessenstraat 22
Oranjested, Aruba
Common First Sydney Investments Pty Ltd 150,000(2) 7%
Level 5, 151 Macquarie Street
Sydney NSW 2000
Common Four Star Ranch Inc. 177,900 8.3%
3098 S Highland Drive
Suite 460
Salt Lake City UT 84106
Common Salter Power Shervington 110,000(3) 5.11%
(ATF Ogenic Limited)
52 Ord Street,
West Perth WA 6005, Australia
Common Alan Gallagher 0(1) 0.00%
Level 1, 85 Tamar Street
Ballina NSW 2478
Common Len McDowall 0(2) 0.00%
48 Moncur Street
Woollahra NSW 2025
Common Deryck Graham 0(3) 0.00%
22B John Street
North Fremantle WA 6159
All Officers and Directors as a group 110,000 5.11%
(3 persons)
</TABLE>
(1) Mr. Gallagher is part of Business and Research but does not control the
entity.
(2) Mr. McDowall is part of First Sydney but does not control the entity.
(3) Mr. Graham has an interest in Ogenic Limited which is beneficial owner of
the Salter shares.
Page 9
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------------------------------
No officer, director, nominee for election as a director, or associates of such
officers, director or nominee is or has been in debt to the Company during the
last fiscal year. However, the Company's major shareholders have made oral
undertakings to make loans to the Company in amounts sufficient to enable it to
satisfy its reporting requirements and other obligations incumbent on it as a
public company, and to fund both the day to day operations of its subsidiaries
and, on a limited basis, the process of investigating possible merger and
acquisition candidates. The Company's status as a publicly-held corporation may
enhance its ability to locate potential business ventures. The loans will be
interest free and are intended to be repaid at a future date, if or when the
Company shall have received sufficient funds through any business acquisition.
The loans are intended to provide for the payment of filing fees, professional
fees, printing and copying fees and other miscellaneous fees and on-lending to
its new wholly owned subsidiary Ogenic for operating expenses.
ITEM 14. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Financial Statements and Financial Statement Schedules
Financial Statements - December 31, 1996, 1995, 1994
The following exhibit is included:
(27) Financial Data Summary
Reports on Form 8-K
Not applicable
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorised.
Date: 15 April, 1997
ASSOCIATED TECHNOLOGIES
By: S\ Alan Gallagher
Alan Gallagher, President, CEO & Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
S\ Alan Gallagher President, CEO & 15 April, 1997
- --------------------------
Alan Gallagher Director
S\ Leonard McDowall Treasurer & CEO 15 April, 1997
- --------------------------
Leonard McDowall Secretary & Director
Page 11
<PAGE>
STANTON PARTNERS
5 ORD STREET
WEST PERTH 6005
WESTERN AUSTRALIA
Telephone Number: (09) 481-3144
Facsimile: (09) 321-1204
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Associated Technologies
We have audited the accompanying consolidated balance sheets of Associated
Technologies as of December 31, 1996 and 1995, and the related consolidated
statements of operations, changes in stockholders' equity (deficit), and
consolidated cash flows for the years ended December 31, 1996, 1995, and 1994
and for the period of August 9, 1990 (date of inception) to December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with general accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Associated Technologies as of December 31, 1996 and 1995, and the consolidated
results of its operations, changes in stockholders' equity (deficit) and its
consolidated cash flows for the years ended December 31, 1996, 1995, and 1994
and for the period of August 9, 1990 (date of inception) to December 31, 1996 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company and its subsidiary will continue as a going concern. As shown
in the consolidated financial statements, the Company and its subsidiary has a
consolidated working capital deficiency of $186,864 at December 31, 1996 and a
consolidated accumulated deficit of $2,645,052. The Company and its subsidiary
have suffered losses from operations and have a substantial need for working
capital.
This raises substantial doubt about the Company's and its subsidiary's ability
to continue as a going concern. Managements' plans in regard to these matters
are described in Note 1(o) to the consolidated financial statements. The
accompanying financial statements do not include any adjustments that may result
from the outcome of this uncertainty.
The value of the asset, Prepayment totalling $750,000 as referred to in Note 8
is dependent upon the Company's agent successfully raising funds in the near
future as envisaged and referred to in Note 1 (o) to the consolidated financial
statements.
Stanton Partners
Public Accountants
/s/ Stanton Partners
Perth, Western Australia
April 15, 1997
Page 12
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31 1996
<TABLE>
<CAPTION>
ASSETS
Notes 12/31/96 12/31/95
---------- -------------- ----------
CURRENT ASSETS
<S> <C> <C> <C>
Cash $ 18,054 $ 0
Accounts receivable 6 181,341 0
Inventories 7 187,062 0
Prepaid expenses 8 759,051 0
-------------- ----------
TOTAL CURRENT ASSETS 1,145,508 0
-------------- ----------
PROPERTY, PLANT, AND EQUIPMENT
Equipment 10 425,003 0
Accumulated depreciation and amortization (309,661) 0
-------------- ----------
NET PROPERTY, PLANT, AND EQUIPMENT 115,342 0
-------------- ----------
GOODWILL 11 0 0
-------------- ----------
0 0
-------------- ----------
TOTAL ASSETS $ 1,260,850 $ 0
============== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 155,256 $ 0
Accrued expenses 12 324,287 0
Loans 13 66,562 0
Provisions 14 27,216 0
-------------- ----------
TOTAL CURRENT LIABILITIES 573,321 0
-------------- ----------
LONG-TERM LIABILITIES 15 500,321 0
-------------- ----------
TOTAL LIABILITIES 1,073,642 0
-------------- ----------
SHAREHOLDERS' EQUITY Common stock par value $.001:
25,000,000 shares authorized; 2,148,000
shares issued(1,000,000 at 12/31/95) 2,148 1,000
Additional paid-in capital 2,830,112 0
(Deficit) accumulated (2,645,052) (1,000)
-------------- ----------
TOTAL SHAREHOLDERS' EQUITY 187,208 0
-------------- ----------
$ 1,260,850 $ 0
============== ==========
</TABLE>
Page 13
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
Consolidated 8/9/90 (date of
Year ended inception) to
Notes 12/31/96 12/31/95 12/31/94 12/31/96
--------------- --------------- --------------- ----------------------
<S> <C> <C> <C> <C> <C>
Operating revenue 2 $ 459,883 $ 0 $ 0 $ 459,883
Cost of sales 358,118 0 0 358,118
--------------- --------------- --------------- ----------------------
GROSS PROFIT 101,765 0 0 101,765
General and administrative expenses (1,785,631) 0 0 (1,786,631)
--------------- --------------- --------------- ----------------------
Loss before other items (1,683,866) 0 0 (1,684,866)
Other items 3 (960,186) 0 0 (960,186)
INCOME (LOSS) BEFORE
INCOME TAXES 4 (2,644,052) 0 0 (2,645,052)
PROVISION FOR INCOME
TAXES 0 0 0 0
--------------- --------------- --------------- ----------------------
NET INCOME (LOSS) $ (2,644,052) $ 0 $ 0 $ (2,645,052)
=============== =============== =============== ======================
INCOME (LOSS) PER COMMON
SHARE
Net income (loss) per weighted
average common share
outstanding - ordinary $ (1.34) $ 0 $ 0
=============== =============== ===============
Net income (loss) after other items per
weighted average common share
outstanding - ordinary $ (1.88) $ 0 $ 0
=============== =============== ===============
Weighted average number of
common shares outstanding 1,409,414 1,000,000 1,000,000
=============== =============== ===============
</TABLE>
Note: The consolidated accounts for the economic entity includes the results of
Ogenic Technologies Pty Ltd for the period from June 29, 1996 to December 31,
1996. Details of the operating results of the subsidiary for the full financial
year are provided on page 15.
Page 14
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
STATEMENTS OF OPERATIONS OF OGENIC TECHNOLOGIES PTY LTD
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Year Ended
----------------------------------------
12/31/96 12/31/95
------------------ ------------------
<S> <C> <C> <C>
Operating revenue 2 $ 599,224 $ 2,912,742
Cost of sales (495,975) (1,488,945)
------------------ ------------------
GROSS PROFIT 103,249 1,423,797
General and administrative expenses (1,235,382) (4,091,942)
------------------ ------------------
Loss before other items (1,132,133) (2,668,145)
------------------ ------------------
Abnormal Items 3 193,745 (1,580,949)
INCOME (LOSS) BEFORE INCOME TAXES 4 (938,388) (4,249,094)
PROVISION FOR INCOME TAXES 0 0
------------------ ------------------
NET INCOME (LOSS) $ (938,388) $ (4,249,094)
================== ==================
</TABLE>
Page 15
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
COMBINED STATEMENTS OF OPERATIONS OF ASSOCIATED TECHNOLOGIES AND
OGENIC TECHNOLOGIES PTY LTD
FOR THE YEAR ENDED DECEMBER 31 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Year Ended
---------------------------------------
12/31/96 12/31/95
------------------ ------------------
<S> <C> <C> <C>
Operating revenue 2 $ 599,224 $ 2,912,742
Cost of sales (495,975) (1,488,945)
------------------ ------------------
GROSS PROFIT 103,249 1,423,797
General and administrative expenses (2,720,184) (4,091,942)
------------------ ------------------
Loss before other items (2,616,935) (2,668,145)
------------------ ------------------
Other Items 3 193,745 (1,580,949)
INCOME (LOSS) BEFORE
INCOME TAXES 4 (2,423,190) (4,249,094)
PROVISION FOR INCOME TAXES 0 0
------------------ ------------------
NET INCOME (LOSS) $ (2,423,190) $ (4,249,094)
================== ==================
</TABLE>
The above statement includes the operating results of AT and Ogenic as if they
had been grouped throughout the year and excludes any adjustments on
consolidation.
Page 16
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
PERIOD FROM AUGUST 9, 1990 (DATE OF INCEPTION) TO DECEMBER 31, 1996
<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 0
Net loss for period - - - (1,000)
------------- ------------- ----------------- ------------------
Balances at 12/31/90 1,000,000 1,000 0 (1,000)
Net income for year - - - -
------------- ------------- ----------------- ------------------
Balances at 12/31/91 1,000,000 1,000 0 (1,000)
Net income for year - - - -
------------- ------------- ----------------- ------------------
Balances at 12/31/92 1,000,000 1,000 0 (1,000)
Net income for year - - - -
------------- ------------- ----------------- ------------------
Balances at 12/31/93 1,000,000 1,000 0 (1,000)
Net income for year - - - -
------------- ------------- ----------------- ------------------
Balances at 12/31/94 1,000,000 1,000 0 (1,000)
Net income for year - - - -
------------- ------------- ----------------- ------------------
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
$0.001 per share to acquire subsidiary
and associated intercompany debt at 6/28/96 180,000 180 0
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
$5.00 per share for prepaid expenses at 9/30/96 150,000 150 749,850
Issuance of common stock (restricted) at
$0.001 per share at 9/30/96 80,000 80 0
Net loss for year - - - (2,644,052)
------------- ------------- ----------------- ------------------
Balances at 12/31/96 2,148,000 $ 2,148 $ 2,830,112 $ (2,645,052)
============= ============= ================= ==================
</TABLE>
Page 17
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
8/9/90 (date to
Year Ended inception)
12/31/96 12/31/95 and 94 to 12/31/96
------------------ ---------------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (2,644,052) $ 0 $ (2,645,052)
Adjustments to reconcile net (loss) to net cash
required by operating activities:
Profit on sale of land and buildings (88,036) 0 (88,036)
Depreciation 32,237 0 32,237
Amortisation of goodwill 845,012 0 845,012
Provisions 12,617 0 12,617
Changes in assets and liabilities:
Accounts receivable (202,039) 0 (202,039)
Inventories 127,550 0 127,550
Prepaid expense (758,376) 0 (758,376)
Accounts payable 140,740 0 140,740
Accrued expenses 14,702 0 14,702
------------------ ---------------------- -----------------
124,407 0 124,407
------------------ ---------------------- -----------------
NET CASH REQUIRED BY
OPERATING ACTIVITIES (2,519,645) 0 (2,520,645)
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of land and buildings 713,797 0 713,797
Purchases of Fixed Assets (18,752) 0 (18,752)
Cash acquired from subsidiaries 147,939 0 147,939
------------------ ---------------------- -----------------
NET CASH PROVIDED BY
INVESTING ACTIVITIES 842,984 0 842,984
CASH FLOWS FROM FINANCING
ACTIVITIES
Loan repayments - Bank (657,307) 0 (657,307)
Proceeds from sale of shares 2,831,260 0 2,832,260
Loans - related parties 500,321 0 500,321
Loan repayments - related parties (1,047,928) 0 (1,047,928)
Other loans 68,369 0 68,369
------------------ ---------------------- -----------------
NET CASH PROVIDED (REQUIRED)
BY FINANCING ACTIVITIES 1,694,715 0 1,695,715
------------------ ---------------------- -----------------
NET INCREASE (DECREASE)
IN CASH 18,054 0 18,054
CASH AT BEGINNING OF PERIOD 0 0 0
------------------ ---------------------- -----------------
CASH AT END OF PERIOD $ 18,054 $ 0 $ 18,054
================== ====================== =================
Cash paid for interest: $ 84,502 $ 0 $ 84,502
================== ====================== =================
</TABLE>
Page 18
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
1. Statement of Accounting Policies
The financial statements have been prepared on the basis of historical
costs and do not take into account changing money values. Cost is based
on the fair values of the consideration given in exchange for assets. The
accounting policies have been consistently applied, unless otherwise
stated.
The following is a summary of the significant accounting policies adopted
by the economic entity in the preparation of financial statements.
a) Accounting Methods
The Company recognises income and expense based on the accrual
method of accounting.
b) Dividend Policy
The Company has not yet adopted any policy regarding payment of
dividends.
c) Non Current Investments
Investments are brought to account at cost.
d) Property, Plant and Equipment
Property, plant and equipment are brought to account at cost,
less, where applicable, any accumulated depreciation or
amortisation. The carrying amount of property, plant and equipment
is reviewed annually by Directors to ensure it is not in excess of
the recoverable amount from these assets. The recoverable amount
is assessed on the basis of the expected net cash flows which will
be received from the assets employed and subsequent disposal. The
expected net cash flows have not been discounted to their present
values in determining recoverable amounts.
The depreciable amount of all fixed assets including buildings and
capitalised lease assets, but excluding freehold land, is
depreciated over their useful lives commencing from the time the
asset is held ready for use.
The gain or loss on disposal of all fixed assets is determined as
the difference between the carrying amount of the asset at the
time of disposal and the proceeds of disposal, and is included in
operating profit before income tax of the economic entity in the
year of disposal.
e) Income Tax
The economic entity adopts a liability method of tax effect
accounting whereby the income tax expense shown in the Profit &
Loss Account is based on the operating profit before income tax
adjusted for permanent differences.
Timing differences which arise due to the different accounting
periods in which items of revenue and expense are included in the
determination of operating profit before income tax and taxable
income are brought to account either as provision for deferred
income tax or an asset described as future income tax benefit at
the rate of income tax applicable to the period in which the
benefit will be received or the liability will become payable.
Future income tax benefits are not brought to account unless
realisation of the asset is assured beyond any reasonable doubt.
Future income tax benefits in relation to tax losses are not
brought to account unless there is virtual certainty of
realisation of the benefit. The amount of benefit brought to
account or which may be realised in the future is based on the
assumption that no adverse change will occur in income tax
legislation and the anticipation that the economic entity will
derive sufficient future assessable income and comply with the
conditions of deductibility imposed by the Law to permit a future
income tax benefit to be claimed.
At the date of this report, the economic entity has tax losses of
approximately $5.3 million of which $1 million relates to
Associated Technologies and the balance relates to its principal
subsidiary Ogenic Technologies Pty Ltd. The Directors have every
confidence that Research and Development syndication and funding
arrangements will be completed prior to the June 30, 1997. In this
event, it is likely that the full
Page 19
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1996
amount of the accumulated tax losses will be recovered against
future taxable income. The Directors have, however, adopted a
conservative view in regard to these losses until such time as
full documentation is completed. Accordingly, no value has been
included in the accounts for the future income tax benefit that is
expected to arise in the foreseeable future. This treatment is in
accordance with US G.A.A.P. and Australian accounting standards.
(Note: Australian accounting standards require virtual certainty
before such a benefit can be brought to account)
f) Inventories
With the exception of contract work in progress (Note 1 g) all
inventories are valued at the lower of cost and net realisable
value. The cost of manufactured products includes direct
materials, direct labour and an appropriate portion of variable
and fixed overheads. Overheads are applied on the basis of normal
operating capacity. Costs are assigned on the basis of weighted
average.
g) Construction Contracts
All contracts which are on a fixed price basis are accounted for
on the basis that profit is recognised in proportion to the
progress of each contract when the following conditions are
satisfied:
-Total contract revenues to be received can be reliably estimated.
-The costs to complete the contract can be reliably estimated.
-The stage of contract completion can be reliably determined and
is at least 30% of the total contract; - The costs attributable to
the contract to date can be clearly identified and can be compared
with prior estimates.
h) Foreign Currency
Foreign currency transactions are translated into US currency at
the rate of exchange at the date of the transaction. At balance
date amounts payable to and by the company in foreign currencies
have been translated to US currency at rates of exchange at the
balance sheet date. Exchange differences relating to short term
monetary items and long term monetary items of an indeterminate
life are brought to account in the Profit & Loss Account when they
arise.
i) Operating Revenue
Sales revenue represents revenue earned from the sale of the
group's products, net of returns, trade allowances and duties and
taxes paid. Other revenue includes interest income, proceeds from
disposal of non current assets and insurance recoveries.
j) Receivables
A provision is recorded for any doubtful debts based on a review
of all outstanding amounts at year end. Bad debts are written off
during the period in which they are identified.
k) Research & Development
During the year the company's principal subsidiary Ogenic
Technologies Pty Ltd, incurred Research and Development
Expenditures of $388,433 in the development of Virtuoso, a digital
audio playback and recording system for the radio broadcasting
industry. At the date of this report Virtuoso is in the final
stages of beta testing and debugging and is expected to be
released in April 1997.
Although the Directors are of the opinion that there will be
significant sales of Virtuoso in the future and that this
expenditure could be capitalised under Australian Standards, the
Company has adopted a conservative approach in regard to the
capitalisation of Research & Development and all expenditures to
date have , therefore, been charged to expense.
This accounting treatment is in accordance with the US G.A.A.P
standards.
l) Basis of consolidation
The consolidated accounts of the economic entity include the
operating results of subsidiaries from the date of acquisition.
For the purposes of providing shareholders with full disclosure,
the operating results of
Page 20
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1996
subsidiaries acquired during the year are shown separately on page
15 and the combined results of the Company and Ogenic for the year
ended December 31, 1996 as if they had been together for the
entire year are shown on page 16.
m) Intangible Assets
The company's principal trading subsidiary which was acquired in
June 1996, possesses significant core technology which has not
been recorded in the company's books. This core technology was
valued by Ernst & Young at $4.3 million in 1996 for the purposes
of the proposed Research and Development Syndication.
In addition since November 1995, Ogenic Technologies Pty Ltd has
spent in excess of $380,000 in Research and Development of a new
digital recording and playback system for the radio broadcasting
industry. To date, all of the amounts expended have been written
off to profit and loss in accordance with US G.A.A.P.
standards.
As mentioned in note 1e), there is a further intangible asset
relating to a future income tax benefit which has also not been
brought to account. This treatment is consistent with the
Directors' conservative approach to the recognition of intangible
assets and is in accordance with both US G.A.A.P. and Australian
accounting standards.
n) Goodwill
Goodwill arising on consolidation of subsidiaries is capitalised
and written off over a maximum period of 5 years. However, in
accordance with U.S. practice and in view of the fact that Ogenic
represents the first acquisition of the Company, goodwill arising
on the acquisition of Ogenic has been charged to expense during
the year.
At the date of acquisition and following the capitalisation of the
subsidiary's loan to equity, Ogenic had net liabilities of
$844,832. Goodwill on consolidation has therefore been calculated
as:
Acquisition $ 180
Net liabilities acquired 844,832
-------------
Goodwill arising on acquisition $ 845,012
=============
o) Going concern basis
The accounts have been drawn up on a going concern basis
because:-
i) The Company expects to receive a short term working capital
loan of US$500,000 to finance its activities until income
can be generated from sales or subcontract research work.
ii) The Company expects to finalise a Research & Development
Syndication agreement before June 30, 1997 which will
provide income of $1.58 million over the next two years to
fund Research and Development programs.
iii) The Company expects to complete agreements with other
interested investors for a joint venture software
development with a value of at least $4.8 million.
As none of the above funding agreements have been
formalised or finally agreed at the date of this report,
our auditors have stated on page 12 that there is
"substantial doubt" about whether the Company can continue
as a going concern.
The Directors however have every confidence that all three
funding agreements will be finalised before June 30, 1997.
The status of each of these are as follows:
(a) Short term working capital loan
Currently working through a merchant bank and
finalising details with potential investors.
Page 21
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1996
(b) Research & Development Syndication agreement This
program has been approved by the Government's
Grants Committee and is awaiting Tax Concession
Committee approval. An international merchant bank
has indicated that it is willing to fund or be the
investor under this program.
(c) Joint Venture Software Development A draft
Memorandum of Information has been prepared and is
in the process of being finalised. Main Camp has
informed the Directors that they are willing to
seek out investors for the project and that they
fully expect that it will be fully subscribed.
Page 22
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1996
<TABLE>
<CAPTION>
Consolidated Ogenic Technologies Pty Ltd
Year ended Year ended Year ended Year Ended
12/31/96 12/31/95 12/31/96 12/31/95
---------- ---------- ---------- ----------
US$ US$
2. Operating Revenue
<S> <C> <C> <C>
Sales revenue 459,883 - 557,541 2,710,380
Other revenue
Insurance Revenue - - - 4,611
Interest Received 1,550 - 2,210 14,019
Proceeds on disposal of
non- current assets 713,797 - 713,797 22,340
Customs Bounty 11,542 - 11,542 78,769
Recovery of Export market
development expenses - - 23,160 18,883
Foreign Exchange Gains - - - 28,214
Other 3,786 - 4,772 35,526
---------- ---------- ---------- ----------
730,675 - 755,481 202,362
========= ========= ========= =========
3. Other items (no income tax applicable)
Expense:
a) Loss on disposal of fixed assets - - - 189,051
b) Provision for decrement in value - - - 268,459
of land & buildings
c) Write off inter company loan with - - - 208,225
UK subsidiary
d) Write off all prior period Research - - - 544,445
and Design Costs
e) Write off all current period 189,926 - 388,432 718,062
Research & Design costs
f) Expenses of Voluntary 13,284 - 125,506 157,605
Administration
g) Goodwill on acquisition written 845,012
off
---------- ---------- ---------- ----------
1,048,222 - 513,938 2,085,847
========= ========= ========= =========
</TABLE>
Page 23
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1996
<TABLE>
<CAPTION>
Consolidated Ogenic Technologies Pty
Ltd
Year ended Year ended Year ended Year Ended
12/31/96 12/31/95 12/31/96 12/31/95
---------- ---------- ---------- ----------
US$ US$
Income:
<S> <C> <C> <C>
Profit on disposal of Land & Buildings 88,036 - 88,036 -
Advance payment written off in lieu of
completion of contract on cost plus basis - - - 504,898
Debts forgiven at conclusion of Voluntary - - 619,647 -
Administration
--------- ---------- ---------- ----------
88,036 - 707,683 504,898
========= ========= ========= =========
Total other items (960,186) - 193,745 (1,580,949)
========= ========= ========= =========
</TABLE>
4. Operating Profit/(Loss)
(i) Operating profit/(loss) before income tax has been determined after
Charging as expense:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Auditors remuneration 7,800 - 11,387 14,260
Provision for employee entitlements 16,750 - 27,216 45,075
Depreciation:
32,237 - 172,105
- - Plant and Equipment - - 60,675 7,915
- - Motor Vehicles - - - 8,485
- - Buildings 4,418
Interest attributable to: 62,605 - -
21,897 - 83,413 117,273
- - Related Corporations 83,721
- - Other persons - - 3,004
(294)
Finance Charges relating to finance 150,042 - 718,062
lease 388,432
Research and Development expenses
-
Bad Debts - 219,879
- - 9,501
- - Related Corporations - -
- - Other Persons
</TABLE>
Page 24
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1996
<TABLE>
<CAPTION>
Consolidated Ogenic Technologies Pty
Ltd
Year ended Year ended Year ended Year Ended
12/31/96 12/31/95 12/31/96 12/31/95
---------- ---------- ---------- ----------
US$ US$
Crediting
Interest Attributable to:
<S> <C> <C> <C> <C>
- - Related Corporations - - - -
- - Other Persons - - 2,210 14,019
(ii) Directors Remuneration
Income received or due and receivable **62,642 - *94,542 61,279
</TABLE>
* $45,437 relates to consulting fees paid to companies under the control of
or related to DFG Graham
** $ 17,092 relates to fees paid to companies related to DFG Graham
5. Income Tax
No provision for taxation has been made in the accounts. At December 31,
1996 the entity has tax losses of approximately $5.3 million. Although
the Directors believe that these losses will be recoverable against
future income which will arise in the foreseeable future, no provision
has been made in the accounts for the benefit which is likely to accrue.
This treatment is in accordance with the Directors conservative approach
to the recognition of intangible assets.
6. Receivables
<TABLE>
<CAPTION>
Consolidated
As at As at
12/31/96 12/31/95
---------- ----------
Current
<S> <C> <C>
Project Debtors 112,909 -
Trade Debtors 48,668 -
Other 19,764 -
---------- ----------
181,341 -
========= =========
</TABLE>
Page 25
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1996
<TABLE>
<CAPTION>
Consolidated
As at As at
12/31/96 12/31/95
---------- ----------
7. Inventories
<S> <C> <C>
Work in Progress 71,115 -
Raw materials 115,947 -
Finished Goods - -
---------- ----------
187,062 -
========== =========
8. Prepaid Expenses
Prepaid expenses are as follows:
a) Undertakings provided by the company's agents for assistance with 750,000 -
capital raisings and stock promotion*
b) Other prepayments 9,051 -
--------- ---------
759,051 -
========= =========
</TABLE>
* The value of this prepaid item is dependent upon the successful completion
of the capital raising planned before June 30, 1997.
9. Subsidiaries
Subsidiary companies are as follows:
<TABLE>
<CAPTION>
Book Value of % of Shares Held Contribution to
Investment Consolidated
Profit/(Loss) for the
Year
12/31/96 12/31/95 12/31/96 12/31/95 12/31/96 12/31/95
-------- -------- -------- -------- -------- --------
$ $ % % $ $
<S> <C> <C> <C> <C> <C> <C>
Ogenic Technologies Pty Ltd 180 - 100 - (774,238) -
Ogenic Industries Pty Ltd 150 - 95 - - -
(Formerly Printed Circuit
Technologies Pty Ltd)
PKE Licensing Pty Ltd - - 100 - - -
-
</TABLE>
Both Ogenic Industries Pty Ltd and PKE Licensing Pty Ltd are dormant companies.
Page 26
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1996
<TABLE>
<CAPTION>
Consolidated
As at As at
12/31/96 12/31/95
---------- ----------
10. Property, Plant and Equipment
<S> <C> <C>
Plant and Equipment at cost 407,472 -
Less accumulated depreciation (292,130) -
---------- ----------
115,342 -
========= =========
Motor vehicles at cost 17,531 -
Less accumulated depreciation (17,531) -
---------- ----------
- -
========= =========
Total Property, Plant and Equipment 115,342 -
========= =========
</TABLE>
* On 3rd September 1996 Ogenic Technologies Pty Ltd sold land &
buildings for gross sales proceeds of $711,000 in order to reduce
bank debt. The company leased back the larger part of the building
after the sale on a 5 year lease rental.
11. Goodwill
Goodwill is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Purchase price of subsidiary - -
Net assets/(liabilities) acquired 845,012 -
---------- ----------
Goodwill arising on purchase of subsidiary 845,012 -
========= =========
</TABLE>
The recoverability of the carrying amount of goodwill is dependent upon
the successful development and exploitation of the groups Research and
Development activities and commercial success of its existing product
range.
12. Accrued Expenses
<TABLE>
<CAPTION>
Current:
(Unsecured)
<S> <C>
Other Accrued liabilities 319,713 -
Employee Entitlements - -
Deposits in advance 2,765 -
Other loan - related party 1,807 -
-
---------- ----------
Total 324,287 -
========= =========
</TABLE>
Page 27
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1996
<TABLE>
<CAPTION>
Consolidated
As at As at
12/31/96 12/31/95
---------- ----------
13. Loans
Current:
<S> <C> <C>
(Unsecured)
Loans secured over contract receivable 66,562
=========
14. Provisions
Employee entitlements 27,216 -
========= =========
15. Long Term Liabilities
(Unsecured)
Loan - related party* 382,418
(Secured)
Loan - Related Party** 117,903 -
---------- ----------
Total Non Current Liabilities 500,321 -
========= =========
</TABLE>
National Australia Bank retains a registered mortgage debenture over the assets
of Ogenic Technologies Pty Ltd as security for performance bonds totalling
$116,069.
* This loan is with Chancellor Group and is denominated in Australian
Dollars. Subsequent to the year end the loan was transferred to Project
and General Management on the 23rd January 1997.
* * This loan is with First Sydney Investments Ltd, a related party and
shareholder in Associated Technologies. The loan is secured by a floating
charge over the assets of the company and bears interest at 12% per
annum. First Sydney has advised that the loan will not be recalled until
the company has sufficient working capital or profits.
16. Commitments
<TABLE>
<CAPTION>
Rental commitments in regard to the entity's operating premises:
<S> <C> <C>
i) not later than 1 year 61,578 -
ii) later than 1 year and not later than 2 years 68,014 -
iii) later than 2 years and not later than 3 years 69,532 -
iv) later than 3 year and not later than 4 years 72,039 -
v) more than 4 years 48,262 -
---------- ----------
319,425 -
========= =========
</TABLE>
Page 28
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1996
17. Contingent Assets and Liabilities
There were no known contingent liabilities at the balance sheet date.
As a result of legal action against former Directors, Ogenic Technologies
Pty Ltd re-acquired the technology rights to a needle disposing device
during the year. Negotiations are continuing with a view to realising the
economic potential of the Company's investment. As no firm monetary value
can be placed on anticipated cash flows and in view of contingent
liabilities in regard to litigation expenses which attach to these cash
flows, no value has been brought to account.
18. Amendment of Prior Filings
The 10-Q filing for the quarter ended September 30, 1996 included an
intangible technology asset at $3,406,078. The value of this asset was
determined by the previous management of the Company and represented the
excess of the price paid for Ogenic over the net assets acquired.
On closer review by the current management and after discussions with the
Company's auditors and other advisors, it has been agreed:
a) that as the purchase of Ogenic had been made through a related
company, it was not possible to regard the acquisition price as being
at arms length.
b) that as the acquisition of Ogenic was the first acquisition to be made
by the Company (previously a shell company), it was not possible to
include any amount of goodwill or technology in the consolidated
balance sheet.
Accordingly, the accounts have been amended:
i) to reflect a cost to the Company of the investment in Ogenic
calculated on the nominal value of the shares issued for the
acquisition i.e. $180.
ii) so that the good will on consolidation (footnote 1) has been
treated as an expense in the year of acquisition.
The Directors are in the process of amending and refiling the 10-Q
for September 30th to reflect these changes.
Page 29
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from Associated Technologies and Subsidiaries
December 31, 1996 financial statements and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000894565
<NAME> Associated Technologies
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 18,054
<SECURITIES> 0
<RECEIVABLES> 181,341
<ALLOWANCES> 0
<INVENTORY> 187,062
<CURRENT-ASSETS> 1,145,508
<PP&E> 425,003
<DEPRECIATION> (309,661)
<TOTAL-ASSETS> 1,260,850
<CURRENT-LIABILITIES> 573,321
<BONDS> 0
0
0
<COMMON> 2,148
<OTHER-SE> 185,060
<TOTAL-LIABILITY-AND-EQUITY> 1,260,850
<SALES> 459,883
<TOTAL-REVENUES> 459,883
<CGS> 358,118
<TOTAL-COSTS> 358,118
<OTHER-EXPENSES> 1,701,129
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,502
<INCOME-PRETAX> (2,644,052)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,683,866)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,683,866)
<EPS-PRIMARY> (1.88)
<EPS-DILUTED> (1.88)
</TABLE>
