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 June 30, 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
or organization) Identification 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 June 30, 1997
- - ----------------------------- -------------------------------------
CLASS A COMMON STOCK 2,303,520 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
June 30, 1997 F-1
Consolidated Statements of Operations for the quarter ending
June 30, 1997 F-2
Consolidated Statement of Shareholders' Equity for the period
from August 9, 1990 to June 30, 1997 F-3
Consolidated Statements of Cash Flows for the quarter ending
June 30, 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
Management Update
The corporate strategy of Associated Technologies is to acquire technology
companies with strong existing management, growth potential and technology which
can be utilised in numerous market places. The first of these acquisitions was
Ogenic Technologies Pty Ltd ("Ogenic"). Further acquisitions are currently under
consideration.
Ogenic has undergone considerable refocusing over the past 12 months. It has
progressed from a company solely focused on the design and manufacture of radio
broadcasting equipment and software to an organisation which outsources the
majority of its manufacturing and one where over 50% of its employees are
involved with the development of software products for the automated play-out of
music and audio entertainment.
The first of the new generation of software products is Virtuoso, an audio
digital storage and play-out software package which operates on PC's connected
to a Local Area Network or a Wide Area Network and enables the complete
automation of the play-out needs for radio broadcasters. Virtuoso has been
delivered
2
<PAGE>
to Radio Singapore International and Radio Television Hong Kong who are the
national broadcasters of Singapore and Hong Kong.
The company has received $1.85 million for the development of the first of a
number of products which are based on Virtuoso for use in the broader commercial
entertainment industry. The first of these products is due for early release in
December. As further products are developed for release to other commercial
areas where automated play-out of music is required, the company will consider
the development of an automated play-out system for use in domestic home
entertainment environments.
The company has received approval from the Australian Government for a further
$1.5 million funding program utilizing the company's tax losses. This program is
to develop the Virtual Interactive Radio Station ("VIRS") a total audio
broadcasting software solution capable of automating program selection, advert
and traffic insertion and accounts and billing information. The Directors
consider that this automated play-out system and accounting package has
excellent sales potential both in the company's traditional radio broadcasting
market and commercial entertainment environments, especially those where
advertising may be used to generate income.
Throughout these development programs the company continues to generate income
from its traditional broadcasting market place. The results for the 6 months to
June 30, 1997 reflect an increase in manufacturing activity, mostly outsourced,
from orders received from Australia and Asia. These orders are the result of a
steady increase of sales and marketing activity.
Results of Operations
The group's trading subsidiary was acquired in June 1996. Accordingly, the
comparative 1996 figures at F-2 reflect initial administrative and acquisition
costs only. Please see page F-11 for comparative trading results.
In an industry where long lead times between initial contact and placement of
orders can be expected, the level of sales and marketing expenditure in the past
12 months has been modest and insufficient to immediately kick start sales of
Ogenic's traditional products. Sales prospects are however, starting to be
translated into orders and revenue with healthy gross profit margins of 50%.
The operating revenue for the quarter to June 30, 1997 was $439,451 (a 280%
improvement on the previous quarter) which after a cost of sales of $219,433,
resulted in a gross profit of $220,018. General and administrative expenses
totalled $409,674 and included $270,615 for wages and salaries of which $27,731
related to remuneration paid to the Directors of the company or its subsidiary.
Other major items of expenditure were finance charges of $43,433, professional
fees of $29,021, sales and marketing costs of $22,795 and premises and insurance
costs of $25,015.
Since March 31 1997, the Group has received orders totalling $2.45 million.
Included in these orders, is the sub-research contract referred to above with a
gross value of $1.85 million for research and development to be completed by
June 30, 1998. Under the contract with the principal researcher, the Group
retains the intellectual property rights from the research and development work
but is obliged to make a royalty payment of 10% on all sales of developed
products.
3
<PAGE>
Further contracts are anticipated from structured R&D programs involving the
raising of between $1.5 million and $4.5 million for the development and
commercialisation of new software products. The Directors remain confident that
these programs will be completed in the first half of 1998.
Liquidity and Capital Resources
The Company's cash liquidity greatly improved during the quarter with the
receipt of $1.85 million as an advance payment on account of contracted research
and development work and other deposits received on account of radio
broadcasting contracts.
Current assets include $750,000 relating to prepaid expenses associated with
proposed R&D structured funding programs with a total value of $6.7 million of
which $1.85 million had been received at June 30 1997. $312,500 will be expensed
in the period to June 30, 1998 whilst the remainder is dependent on the
successful completion of additional contracts.
Loans from related parties totalling $502,248, were converted to equity as shown
on page F-3 at prices which reflect the risk profiles attributable to each loan
and the economic impact of the loans on the corporations activities.
During the quarter, a further short term loan of $300,000 was secured and
applied against outstanding creditors and operating expenses.
Impact of Inflation
The Company believes that its activities are not materially affected by
inflation.
Foreign Currency Exposure
Income from Ogenic Technologies Pty Ltd ("Ogenic"), 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 June 30, 1997 was: US$1.00 = A$1.35 (December 31 1996
A$1.27)
4
<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 June 30, 1997 F-1
Financial Data Schedule
(b) Reports on Form 8-K.
None.
5
<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 : 19 August 1997
6
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS 6/30/97 12/31/96
(Unaudited) (Audited)
----------------- -----------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 5,733 $ 18,054
Funds on deposit 1,850,000 0
Accounts receivable 264,726 181,341
Inventories 296,834 187,062
Prepaid expenses 842,382 759,051
----------------- -----------------
TOTAL CURRENT ASSETS 3,259,675 1,145,508
PROPERTY, PLANT, AND EQUIPMENT
Equipment 376,220 425,003
Accumulated depreciation and amortization (299,884) (309,661)
------------------ ------------------
NET PROPERTY, PLANT AND EQUIPMENT 76,336 115,342
OTHER ASSETS
Joint Venture Investment 11,100 -
----------------- -----------------
11,100 -
----------------- -----------------
$ 3,347,111 $ 1,260,850
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 413,431 $ 155,256
Accrued expenses 279,917 324,287
Income in Advance 1,850,000 0
Loans (secured) 609,226 66,562
Accrued Employee Benefits 54,113 27,216
----------------- -----------------
TOTAL CURRENT LIABILITIES 3,206,687 573,321
NON-CURRENT LIABILITIES
Loans - related parties (unsecured) 119,832 500,321
----------------- -----------------
TOTAL LIABILITIES 3,326,519 1,073,642
SHAREHOLDERS' EQUITY
Common stock par value $.001:
25,000,000 shares authorized; 2,303,520 shares issued
(2,148,000 in 1996) 2,304 2,148
Additional paid-in capital 3,332,204 2,830,112
Foreign exchange reserve 84,142 0
(Deficit) accumulated during development stage (3,398,058) (2,645,052)
------------------ ------------------
TOTAL SHAREHOLDERS' EQUITY 20,592 187,208
----------------- -----------------
$ 3,347,111 $ 1,260,850
================= =================
</TABLE>
F-1
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
8/9/90 (date
Three Months Ended Six Months Ended of inception)
6/30/97 6/30/96 6/30/97 6/30/96 to 6/30/97
--------------- ------------- --------------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Operating revenue $ 439,451 $ 0 $ 596,003 $ 0 $ 1,055,886
Cost of sales (219,433) 0 (295,701) 0 (653,819)
--------------- ------------- --------------- -------------- -------------------
GROSS PROFIT 220,018 0 300,302 0 402,067
General and administrative expenses (409,674) (460,000) (800,173) (460,000) (2,586,804)
--------------- -------------- --------------- --------------- -------------------
Loss before other items (189,656) (460,000) (499,871) (460,000) (2,184,737)
--------------- --------- -------------- --------------- ------------------
Other Items:
Expenses of Voluntary Administration 0 0 0 0 (13,284)
Profit on sale of fixed assets 1,148 0 1,148 0 89,184
Goodwill on acquisition of Subsidiary
written off 0 0 0 0 (845,012)
Exchange loss on capitalisation of
subsidiary's loan (92,068) 0 (92,068) 0 (92,068)
Research and Development costs (73,989) 0 (162,215) 0 (352,141)
--------------- ------------- --------------- -------------- -------------------
(164,909) 0 (253,135) 0 (1,213,321)
INCOME (LOSS) BEFORE INCOME
TAXES (354,565) (460,000) (753,006) (460,000) (3,398,058)
PROVISION FOR INCOME TAXES 0 0 0 0 0
-------------- ------------- -------------- -------------- ------------------
NET INCOME (LOSS) $ (354,565) $ (460,000) $ (753,006) $ (460,000) $ (3,398,058)
=============== ============== ============== =============== ===================
Net income (loss) per weighted
average common share outstanding $ (0.16) $ (0.45) $ (0.35) $ (0.45) $ (2.86)
============== ============== ============== =============== ===================
Weighted average number of
common shares outstanding 2,149,730 1,029,011 2,148,860 1,022,838 1,184,759
============== ============= ============== ============== ==================
</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 June 30, 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 for prepaid expenses at
9/30/96 80,000 80 -
Issuance of common stock (restricted) at
$5.00 per share for prepaid expenses 150,000 150 749,850
at 9/30/96
Net loss for the year to 12/31/96 (2,644,052)
------------- ------------- ------------ ---------------
Balances at 12/31/96 2,148,000 2,148 2,830,112 (2,645,052)
Issuance of common stock (Reg S) at $4 per
share to retire debt at 6/30/97 95,605 96 382,322 0
Issuance of common stock (Reg S) at $2 per
share to retire debt at 6/30/97 59,915 60 119,770 0
Net loss for the period to 6/30/97 0 0 0 (753,006)
------------- ------------- ------------ ---------------
Balances at 6/30/97 $ 2,303,520 $ 2,304 $ 3,332,204 $ (3,398,058)
============= ============= ============ ===============
</TABLE>
F-3
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
8/9/90 (date
Six Months Ended of inception)
6/30/97 6/30/96 to 6/30/97
------------ ------------ --------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (753,006) $ (460,000) $ (3,398,058)
Adjustments to reconcile net (loss) to net
cash required by operating activities:
(Profit)/Loss on sale of non current assets 142 0 (87,894)
Stock issued for expenses 0 460,000 0
Depreciation 32,778 0 65,015
Goodwill written off 0 0 845,012
Accrued Employee Benefits 29,588 0 42,205
Changes in assets and liabilities:
Accounts receivable (98,046) 0 (300,085)
Inventories (125,721) 0 1,829
Prepaid expense (112,095) 0 (870,471)
Accounts payable 172,888 0 313,628
Accrued expenses 78,578 0 93,280
------------ ------------ --------------
(21,888) 460,000 102,519
------------- ------------ --------------
NET CASH REQUIRED BY
OPERATING ACTIVITIES (774,894) 0 (3,295,539)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of non current assets 0 0 713,797
Cash acquired from subsidiaries 0 104,353 147,939
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) 104,353 831,134
------------- ------------ --------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Loan Repayments - Bank 0 0 (657,307)
Stock sold 502,248 100,000 3,334,508
Loans - related parties 219,621 0 719,942
Loan repayments - other (68,369) 0 0
Loans - other 612,833 0 612,833
Loan repayments - related parties (596,379) 0 (1,644,307)
------------- ------------ --------------
NET CASH PROVIDED (REQUIRED)
BY FINANCING ACTIVITIES 669,954 100,000 2,365,669
------------ ------------ --------------
NET INCREASE IN CASH (116,790) 204,353 (98,736)
Foreign exchange translation adjustment 104,469 0 104,469
------------ ------------ --------------
(12,321) 204,353 5,733
CASH AT BEGINNING OF PERIOD 18,054 0 0
------------ ------------ --------------
CASH AT END OF PERIOD $ 5,733 $ 204,353 $ 5,733
============ ============ ==============
</TABLE>
F-4
<PAGE>
SUPPLEMENTAL FINANCING ACTIVITIES
During the period ended 30 June 1997, the Company issued 155,520 Regulation S
shares in satisfaction of loans due to related parties.
On 10 March 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 exercisable until 7
March 2002. The loan is secured over the Company's shares in its subsidiary,
Ogenic Technologies Pty Ltd.
In June 1997, the Company entered into a promissory agreement in regard to loan
funds advanced of $300,000. The promissory agreement bears no interest and is
repayable by December 1997. In lieu of interest, the borrower was granted an
option to purchase 205,000 shares in the Company at a price of $2 per share
exercisable until 30 June 2003.
On 16 May 1997, the Board of Directors resolved to set aside for issuance under
a Stock Option Plan (subject to formal approval by the Company's stockholders),
up to 1,000,000 shares of common stock options to be granted to employees of the
Company.
F-5
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements as of June 30, 1997 include the accounts
of the Company and its wholly-owned subsidiary Ogenic Technologies Pty Ltd,
Ogenic's 95% owned inactive subsidiary Ogenic Industries Pty Ltd and Ogenic's
dormant subsidiary Ogenic Sales 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.
Non Current Investments Investments are brought to account at cost.
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.
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.
F-6
<PAGE>
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 a
provision for deferred income tax or as an asset described as future income tax
benefit at rates 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. 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
$5.3m of which $1m relates to Associated Technologies and the balance relates to
its principal subsidiary Ogenic Technologies Pty Ltd. The Directors are
confident that the Research and Development syndication and funding arrangements
to be completed during 1998, will result in the full amount of the accumulated
tax losses being 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 and operating results improve. 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.
Inventories
With the exception of contract work in progress 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.
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.
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.
F-7
<PAGE>
Receivables
A provision is raised 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.
Research & Development
During the period to June 30 1997, the company's principal subsidiary Ogenic
Technologies Pty Ltd, incurred Research and Development Expenditures of $162,215
in the development of Virtuoso, a digital audio playback and recording system
for the radio broadcasting industry. Virtuoso has been designed to form the
foundation of the company's future PC based play-out software systems. These
systems are intended for traditional markets and new markets in the commercial
entertainment industries.
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 expenditure to date has,
therefore, been written off.
This accounting treatment is in accordance with the US G.A.A.P standards.
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 $4.3m 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 $530,000 in Research and Development of a new digital recording and playback
system for the radio broadcasting industry (Virtuoso). To date, all of the
amounts expended have been written off to profit and loss in accordance with US
G.A.A.P. standards.
There is a further intangible asset relating to a future income tax benefits
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.
Goodwill
Goodwill arising on consolidation of subsidiaries is capitalised and written off
over a maximum period of 5 years. However, in accordance with SEC practice and
in view of the fact that Ogenic represented the first acquisition of AT,
goodwill arising on the acquisition of Ogenic, was written off during the year
ended 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.
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.
F-8
<PAGE>
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company was incorporated under laws of the State of Nevada on August 9, 1990
and was in the development stage until it acquired its first operating
subsidiary, Ogenic in June 1996. The Company intends to provide software
products for use in the commercial entertainment industries. It sees its
traditional audio broadcasting market as one such market place. It also
considers a further market place for its play technologies may be the domestic
entertainment market.
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 six months ended June 30, 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, 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 $119,832 due to
companies associated with First Sydney Capital which is a shareholder in the
Company. Both Mr. Len McDowall and Mr. Alan Gallagher are Directors of First
Sydney Capital. The loan does not currently bear interest and no terms in regard
to interest, have been agreed.
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 Australian
Government for this R & D Syndication and documentation is progressing with a
view to completion prior to September 30, 1997.
In addition to the R&D Syndication, on June 30, 1997 Ogenic was appointed as a
sub-researcher under a structured R&D funding program with a total value of
$1.85 million over the year to June 30, 1998. This contract was arranged through
a related entity, First Sydney Capital. Further research contracts are
anticipated in the region of $1.5 million to $4.5 million over the next 12
months.
F-9
<PAGE>
NOTE 7: INTANGIBLE ASSETS
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-10
<PAGE>
ASSOCIATED TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Three months Three months Six months Six Months
ended ended ended ended
6/30/97 6/30/96 6/30/97 6/30/96
-------------- ------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Operating Revenue $ 439,451 $ 56,392 $ 596,003 $ 139,341
Cost of Sales (219,433) (65,924) (295,701) (137,857)
-------------- ------------- ------------------ -----------------
GROSS PROFIT 220,018 (9,532) 300,302 1,484
General and Administrative expenses (409,674) (800,660) (800,173) (894,669)
-------------- ------------- ------------------ -----------------
Loss before other items (189,656) (810,192) (499,871) (893,185)
Other Items:
Research and Design costs (73,989) (180,446) (162,215) (238,390)
Bankruptcy expenses 0 (62,961) 0 (112,222)
Debt forgiveness 0 619,647 0 619,647
Profit on sale of fixed asset 1,148 0 1,148 0
Exchange loss on capitalisation of
subsidiary's loan (92,068) 0 (92,068) 0
-------------- ------------ ------------------ ----------------
(164,909) 376,240 (253,135) 269,035
-------------- ------------ ----------------- ----------------
INCOME (LOSS) BEFORE INCOME TAXES (354,565) (433,952) (753,006) (624,150)
PROVISION FOR INCOME TAXES 0 0 0 0
------------- ------------ ----------------- ----------------
NET INCOME (LOSS) $ (354,565) $ (433,952) $ (753,006) $ (624,150)
============== ============= ================== ================
INCOME (LOSS) PER COMMON SHARE
Net income (loss) per weighted average
common share outstanding $ (0.16) $ (0.42) $ (0.35) $ (0.63)
=============== ============= ================= =================
Weighted average number of common
shares outstanding 2,149,730 1,029,011 2,148,000 1,014,898
============= ============ ============== ===================
</TABLE>
NB The Corporation's principal trading subsidiary Ogenic Technologies Pty Ltd,
was acquired on June 28 1996. The above statements have been prepared for
comparison purposes only and excludes the profit on the abortive R&D Syndication
in June 1996.
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Associated Technologies and Subsidiaries June 30, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,733
<SECURITIES> 0
<RECEIVABLES> 264,726
<ALLOWANCES> 0
<INVENTORY> 296,834
<CURRENT-ASSETS> 3,259,675
<PP&E> 376,220
<DEPRECIATION> (299,884)
<TOTAL-ASSETS> 3,347,111
<CURRENT-LIABILITIES> 3,206,687
<BONDS> 0
0
0
<COMMON> 2,304
<OTHER-SE> 18,288
<TOTAL-LIABILITY-AND-EQUITY> 3,347,111
<SALES> 596,003
<TOTAL-REVENUES> 596,003
<CGS> 295,701
<TOTAL-COSTS> 295,701
<OTHER-EXPENSES> 800,173
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (753,006)
<INCOME-TAX> 0
<INCOME-CONTINUING> (753,006)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (753,006)
<EPS-PRIMARY> (.35)
<EPS-DILUTED> (.35)
</TABLE>
