SECURITIES AND EXCHANGE COMMISSION
Washington, DC 25049
-----------------------
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 September 30, 1997
( ) 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 0-21903
ORA ELECTRONICS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 95-4607830
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(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
9410 Owensmouth Avenue, Chatsworth, CA 91311
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(Address of Principal Executive Offices)(Zip Code)
(818) 772-2700
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(Registrant's Telephone Number, Including Area Code)
(No Change)
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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.
Yes ..X.. No .....
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
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Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ..... No ..... Not Applicable ..X..
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 13, 1997
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Common Stock, $.001 par value 6,605,714 shares
Exhibit Index on Page 19
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ORA ELECTRONICS, INC.
Form 10-Q
September 30, 1997
TABLE OF CONTENTS
Page
----
PART I - Financial Information. 4
Item 1. Financial Statements 4
Balance Sheets as of September 30, 1997 and
March 31, 1997 4
Statements of Operations for the three and six month
periods ended September 30, 1997 and 1996 6
Statements of Cash Flows for the six month
periods ended September 30, 1997 and 1996 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 11
PART II - Other Information. 15
Item 1. Legal Proceedings. 15
Item 6. Exhibits and Reports on Form 8-K. 16
Signatures 18
Exhibit Index 19
Exhibits 20-21
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PART I -FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
ORA ELECTRONICS, INC.
Balance Sheets
September 30, March 31,
1997 1997
(Unaudited) (Audited)
----------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 92,322 $ 321,647
Trade accounts receivable, less
allowance for sales returns and
doubtful accounts of $2,201,470
($1,716,671 at March 31, 1997) 3,075,112 3,499,517
Inventories 4,369,596 5,449,028
Federal tax refund -- 219,927
Prepaid expenses 73,127 65,892
------------ ------------
Total current assets 7,610,157 9,556,011
Property and equipment, net 6,175,618 6,301,378
Other assets:
Loan receivable, officer 565,405 551,337
Deferred expenses 298,578 319,578
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Total assets $ 14,649,758 $ 16,728,304
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 63,440 $ 63,186
Notes payable 1,249,974 1,257,197
Trade payables 2,463,742 3,738,108
Accrued interest 107,964 110,717
Other accounts payable and accrued
expenses 1,628,885 1,556,906
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Total current liabilities 5,514,005 6,726,114
Long-term debt 5,633,958 5,601,516
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Total liabilities 11,147,963 12,327,630
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See accompanying notes to financial statements.
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Stockholders' equity:
Preferred stock, $.001 par value,
5,000,000 shares authorized,
none issued -- --
Common stock, par value $.001 per share,
authorized 30,000,000 shares, issued
and outstanding 6,604,373 shares at
September 30, 1997 and 6,589,068
shares at March 31, 1997 6,604 6,589
Additional paid in capital 5,825,585 5,806,810
Retained (deficit) (2,330,394) (1,412,725)
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Total stockholders' equity 3,501,795 4,400,674
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Total liabilities and stockholders'
equity $ 14,649,758 $ 16,728,304
============ ============
See accompanying notes to financial statements.
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<TABLE>
ORA ELECTRONICS, INC.
Statements of Income and Retained Earnings (Deficit)
For the Three Month and Six Month Periods
Ended June 30, 1997 and 1996
(Unaudited)
<CAPTION>
Three months Six months
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 4,917,170 $ 5,177,546 $ 8,243,980 $ 8,200,208
Cost of goods sold 3,347,466 2,470,192 5,071,304 6,189,650
----------- ----------- ----------- -----------
Gross profit 1,569,704 2,707,354 3,172,676 2,010,558
----------- ----------- ----------- -----------
Operating expenses:
Selling and shipping expenses 650,042 769,157 1,214,034 1,589,989
Administrative and general
expenses 1,124,946 1,183,133 2,497,760 2,070,070
----------- ----------- ----------- -----------
Total operating expenses 1,774,988 1,952,290 3,711,794 3,660,059
----------- ----------- ----------- -----------
Operating income (loss) (205,284) 755,064 (539,118) (1,649,501)
Interest expense 180,314 269,802 378,550 507,361
----------- ----------- ----------- -----------
Net income (loss) (385,598) 485,262 (917,668) (2,156,862)
Retained earnings (deficit),
beginning of period (1,944,796) (1,373,907) (1,412,726) 1,268,217
----------- ----------- ----------- -----------
Retained earnings (deficit),
end of period $(2,330,394) $ (888,645) $(2,330,394) $ (888,645)
=========== =========== =========== ===========
Per share information:
Net income (loss) $ (385,598) $ 485,262 $ (917,668) $(2,156,862)
Earnings (loss) per share:
Primary $ (0.06) $ 485.26 $ (0.14) $ (2,156.86)
=========== =========== =========== ===========
Number of shares used in the
per share calculation:
Primary 6,604,373 1,000 6,604,373 1,000
Pro forma per share information:
(Note 4)
Pro forma earnings (loss) per share:
Primary $ (0.06) $ 0.07 $ (0.14) $ (0.33)
=========== =========== =========== ===========
Pro forma number of shares used
in the per share calculation:
Primary 6,604,373 6,604,373 6,604,373 6,604,373
</TABLE>
See accompanying notes to financial statements.
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ORA ELECTRONICS, INC.
Statements of Cash Flows
For the Six Month Periods Ended September 30, 1997 and 1996
(Unaudited)
Six Months Ended September 30,
1997 1996
---- ----
Cash flows from operating activities:
Net loss $ (917,668) $(2,156,862)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 146,760 179,778
Provision for losses and sales returns 713,055 2,444,360
Changes in assets and liabilities:
Accounts receivable (60,394) (879,976)
Inventories 851,176 (1,577,220)
Prepaid expenses 212,692 320,889
Accounts payable, accrued interest
and other accrued expenses (1,205,140) 2,613,883
----------- -----------
Net cash provided by (used in) operating
activities (259,519) 944,852
----------- -----------
Cash flows from investing activities:
Capital expenditures -- (55,524)
Loan receivable, officer (14,069) (454,756)
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Net cash used in investing activities (14,069) (510,280)
----------- -----------
Cash flows from financing activities:
Additional paid in capital 18,775 --
Common stock 15 --
Repayment of line of credit (7,223) 500,000
Repayment of notes payable -- (275,000)
Borrowing (repayment) of long-term debt 32,696 (30,230)
----------- -----------
Net cash provided by financing activities 44,263 194,770
----------- -----------
Net increase (decrease) in cash and cash
equivalents (229,325) 629,342
Cash and cash equivalents at beginning of period 321,647 357,994
----------- -----------
Cash and cash equivalents at end of period $ 92,322 $ 987,336
=========== ===========
Supplemental disclosure of cash flow
information:
Interest paid $ 229,692 $ 402,169
=========== ===========
Income taxes paid $ -- $ --
=========== ===========
See accompanying notes to financial statements.
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ORA ELECTRONICS, INC.
Notes to Financial Statements
(Unaudited)
NOTE 1 - DESCRIPTION OF BUSINESS
ORA Electronics, Inc. (the "Company") is a developer and supplier of interface,
connectivity solutions and peripheral accessories for wireless communication
devices. The Company's products supplement the effectiveness of cellular
telephones, personal communications systems ("PCS"), pagers, computing devices
and the Intelligent Transportation Systems industry. The Company is a supplier
to major retailers, cellular and PCS service providers and original equipment
manufacturers.
NOTE 2 - BASIS OF INTERIM PRESENTATION
Interim financial statements and information are unaudited; however, in the
opinion of management all adjustments necessary for a fair presentation of the
interim results have been made. All such adjustments were of a normal recurring
nature. The results for the three and six months ended September 30, 1997 are
not necessarily an indication of results to be expected for the entire fiscal
year. The accompanying financial statements have been prepared in accordance
with the instructions to Form 10-Q and do not include all of the information and
the footnotes required by generally accepted accounting principles for complete
statements. All information reported in this Form 10-Q should be read in
conjunction with the Company's annual financial statements and notes thereto for
the fiscal year ended March 31, 1997 filed with the Securities and Exchange
Commission on June 30, 1997.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 3 - LEGAL PROCEEDINGS
The Company filed suit in 1994 seeking a declaratory judgment that certain
patents held by Telular Corporation ("Telular") are invalid. Telular
counterclaimed, contending that its patents are valid and infringed.
On February 1, 1996, the United District Court for the Central District of
California (the "District Court") granted Telular's motion for partial summary
judgment against the Company, determining that Telular's patents are valid and
that CDL infringes, and permanently enjoining the Company from further sales of
CDL.
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The Company appealed the issuance of the permanent injunction, and the partial
summary judgment order on which it is based, to the United States Court of
Appeals for the Federal Circuit (the "Federal Circuit"). The Company filed a
motion in the Federal Circuit requesting a stay of the permanent injunction
pending appeal. The Federal Circuit granted the motion in part, finding that the
Company had established a strong likelihood that it would prevail on the merits
of its appeal at least as to whether CDL units that are compatible with certain
Motorola cellular telephones infringe the patent. The Federal Circuit lifted the
injunction with respect to Motorola-compatible CDL's.
The Company filed its appellate brief on April 29, 1996. Telular filed its
opposition on July 25, 1996. The Company filed its Reply Brief on August 26,
1996. The Federal Circuit heard oral argument on January 28, 1997.
On April 29, 1997, the Federal Circuit issued an opinion affirming the District
Court's February 1, 1996 ruling against the Company. As a result, the District
Court's determination that Telular's patents are valid and that CDL infringes,
and that the Company is permanently enjoined from further sales of CDL, have
been upheld on appeal.
The case against the Company has been returned to the District Court for a trial
to determine the amount of damages to be assessed. The damages phase of the
trial will most likely result in a money judgment against the Company. Because
discovery on damages issues is pending, the Company is unable to provide an
estimate of the amount or range of potential damages that will be assessed.
However, the Company has assumed a minimum estimate of damages to be
approximately $200,000, and accordingly, accrued that amount at March 31, 1997
as a reserve for this contingency. The potential upper limit of damages may be
much higher and could have a material adverse affect on the Company's financial
position, results of operations and cash flow.
On August 4, 1997, Telular asked for summary judgment on the issues of whether
the case against the Company is an exceptional case and whether the infringement
by the Company was willful. If summary judgment is granted on these issues, it
is likely that the actual damage award will be trebled and that Telular will be
entitled to an award of attorneys' fees.
The Company is involved in other legal proceedings, many of which arise in the
ordinary course of its business. While any litigation contains an element of
uncertainty, management believes that the outcome of such proceedings will not
have a material adverse effect on the Company's results of operations.
NOTE 4 - PRO FORMA EARNINGS (LOSS) PER SHARE
The pro forma earnings (loss) per share data is presented to show the effect on
primary earnings (loss) per share assuming the Company's merger with North
American Energy of Delaware, Inc. had occurred at the beginning of the three
month period ended September 30, 1996 instead of the actual merger date of
December 20, 1996.
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NOTE 5 - LINE OF CREDIT
On April 7, 1997, the Company secured a $5,000,000 line of credit from a finance
company. The initial term of the line of credit is two years with provisions for
automatic renewals thereafter in one-year increments. The line is secured by all
inventory, equipment, accounts receivable and intellectual property. Borrowings
incur interest at 1% above the reference rate of Citibank, N.A. and there is an
unused line fee of 0.5%. The Company's funds are swept daily and capital is made
available based on 70% of eligible accounts receivable and 35% of eligible
inventory.
Under the line of credit facility, the Company is required to maintain various
covenants, including meeting certain net worth requirements, a liquidity ratio,
a debt service coverage ratio and restrictions of capital expenditures,
additional indebtedness and the payment of dividends. At September 30, 1997, the
Company was not in compliance with the debt service coverage ratio or the net
worth requirement. On November 13, 1997, these covenant violations were waived
by the finance company and the covenants were reset at levels that the Company
anticipates can be successfully achieved.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 TO
THREE MONTHS ENDED SEPTEMBER 30, 1996
Revenues decreased by $260,376, or 5.0%, to $4,917,170 for the second
quarter of fiscal 1998 compared to $5,177,546 for the same period of the prior
year. This decrease primarily reflects a continuation of a trend of lower orders
being received by consumer electronics retailers who have reported same store
sales decreases and reductions in cellular telephone activations as compared
with the prior year. Retailers have reported that their cellular telephone
activations are lower as a result of reduced financial incentives offered to
them by cellular telephone carriers. The Company believes that its traditional
retail customers may face increased competitive pressures from cellular service
providers and that, consequently, orders for its cellular products from such
retailers may continue to decline. The Company is exploring alternative channels
of distribution.
Gross profit decreased by $1,137,650, or 42.0%, to $1,569,704 for the
second quarter of fiscal 1998 compared with $2,707,354 for same period of the
prior year, while gross profit as a percentage of net sales decreased to 31.9%
from 52.3%. The decreases in gross profit and gross profit as a percentage of
net sales are primarily attributable to a reduction in the carrying value of the
Company's merchandise inventory of approximately $700,000 during the quarter
ended September 30, 1997, combined with a continuation of competitive pressures
among the Company's large retail customers and the resulting pressure on
wholesale prices.
Selling and shipping expenses decreased by $119,115, or 15.5%, to $650,042
for the second quarter of fiscal 1998 compared with $769,157 in the same period
of the prior year. The decreases in selling and shipping expenses are
attributable to lower costs of shipping, warehousing, freight and sales
commissions, which primarily resulted from lower sales, combined with lower
expenditures for media and catalogue advertising, including reductions in
personnel.
Administrative and general expenses decreased by $58,187, or 5.0%, to
$1,124,946 for the second quarter of fiscal 1998 compared with $1,183,133 in the
same period of the prior year. The decrease is primarily attributed to a
reduction in personnel.
Losses from operations were $205,284 for the second quarter of fiscal 1998
compared with an operating profit of $755,064 in the same period of the prior
year. The decrease in operating profit is primarily a result of the reduction in
carrying value of the Company's merchandise inventory during the quarter ended
September 30, 1997 of approximately $700,000, combined with a decrease in gross
profit and gross profit margin, as a result of continuing competitive pressures
among the Company's major retail customers.
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Interest expense for the second quarter of fiscal 1998 was $180,314
compared with $269,802 in the same period of the prior year. This reduction is
primarily a result of decreased borrowings under the Company's line of credit.
The net loss was $385,598 for the second quarter of fiscal 1998 versus net
income of $485,262 in the same period of the prior year.
COMPARISON OF SIX MONTHS ENDED SEPTEMBER 30, 1997 TO SIX MONTHS ENDED
SEPTEMBER 30, 1996
Revenues increased by $43,773, or 0.5%, to $8,243,980 for the six months of
fiscal 1998 ended September 30, 1997, compared with $8,200,208 for the same
period of the prior year. The increase is primarily attributable to higher sales
in the first quarter of fiscal 1998, partially offset by the decrease in sales
of $260,376 noted for the current quarter ended September 30, 1997.
Gross profit increased by $1,162,117, or 57.8%, to $3,172,675 for the six
months of fiscal 1998 ended September 30, 1997 compared with $2,010,558 for same
period of the prior year, while gross profit as a percentage of net sales
increased to 38.5% from 24.5%. These comparisons are significantly impacted by
the reduction in carrying value of trade accounts receivable and merchandise
inventory totaling approximately $2,671,000, which occurred in the fiscal
quarter ended June 30, 1996 and is more fully discussed in the Company's
quarterly report for the period ended June 30, 1997. Excluding the effects of
those carrying value adjustments, and after giving effect to the $700,000
carrying value adjustment of merchandise inventory taken in the quarter ended
September 30, 1997, as previously discussed, there was a decrease in gross
profit for the six month period ended September 30, 1997 of approximately
$809,000, or 17.3%, and a resultant gross profit as a percentage of net sales of
approximately 47% for the six month period ended September 30, 1997. The
resultant decreases in gross profit and gross profit as a percentage of net
sales are primarily attributable to a continuation of competitive pressure among
the Company's large retail customers and the resulting pressure on wholesale
prices.
Selling and shipping expenses decreased by $375,955, or 23.6%, to
$1,214,034 for the six months of fiscal 1998 ended September 30, 1997 compared
with $1,589,989 in the same period of the prior year. The decrease in selling
and shipping expenses is primarily attributable to lower costs of shipping and
warehousing, combined with lower expenditures for media and catalogue
advertising, including reductions in personnel.
Administrative and general expenses increased by $427,689, or 20.1%, to
$2,497,760 for the six months of fiscal 1998 ended September 30, 1997 compared
with $2,070,070 for the same period of the prior year. The increase is primarily
attributable to an increase in the accrual for bad debt expenses of
approximately $300,000 and an increase in professional fees of approximately
$100,000 for the fiscal quarter ended June 30, 1997.
Losses from operations decreased by $1,110,383 or 67.3%, to $539,118 for
the six months of fiscal 1998 ended September 30, 1997 compared with a
$1,649,501 loss in the same period of the prior year. The decrease is primarily
attributable to the reduction in carrying values for the Company's trade
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accounts receivable and merchandise inventory during the quarter ended June 30,
1996 of approximately $2,671,000, partially offset by a reduction in the
carrying value of merchandise inventory of approximately $700,000 during the
quarter ended September 30, 1997.
Interest expense for the six months of fiscal 1998 ended September 30, 1997
was $378,550 compared with $507,361 in the same period of the prior year. This
reduction is primarily a result of decreased borrowings under the Company's line
of credit.
The net loss decreased by $1,239,194, or 57.5%, to $917,668 for the six
months of fiscal 1998 ended September 30, 1997 compared with $2,156,862 in the
same period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are to fund working capital needs,
primarily accounts receivable and inventories. Historically, the Company has
satisfied these working capital requirements principally through cash flow from
operations and bank borrowings.
At September 30, 1997, the Registrant had $92,322 in cash and cash
equivalents with a working capital surplus of $2,096,152, contrasted to $321,647
in cash and cash equivalents with a working capital surplus of $2,829,897 at
March 31, 1997. Net cash provided by operating activities was $259,519 for the
six months ended September 30, 1997, compared with net cash provided by
operating activities of $944,852 for the six months ended September 30, 1996.
Working capital may vary from time to time as a result of seasonality, new
product introductions, capital expenditures and changes in inventory levels.
To supplement cash flow from operations, if necessary, the Company
maintains a $5,000,000 revolving credit facility to be used for general working
capital purposes. The credit agreement (dated April 4, 1997) with FINOVA Capital
Corporation ("FINOVA") allows the Company to borrow funds at Citibank N.A.'s
reference rate plus 1% and there is an unused line fee of 0.5%. The Company's
funds are swept daily and capital is made available based on 70% of eligible
accounts receivable and 35% of eligible inventory. Based on the Company's level
of underlying collateral and the formulas utilized to calculate eligible
collateral, the Company generally has capital available of approximately
$2,000,000 from this line of credit.
Under the FINOVA facility, the Company is required to maintain various
covenants, including meeting certain net worth requirements, a liquidity ratio,
a debt service coverage ratio and restrictions of capital expenditures,
additional indebtedness and the payment of dividends. At September 30, 1997, the
Company was not in compliance with the debt service coverage ratio or the net
worth requirement. On November 13, 1997, all covenant violations were waived by
FINOVA and the covenants were reset at levels that the Company anticipates can
be successfully maintained. However, the Company's ability to maintain such
covenants depends, in part, upon its ability to penetrate new distribution
channels. No assurances can be given as to the Company's ability to do so.
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A loan from the Aid Association for Lutherans ("AAL") obtained by the
Company to purchase its headquarters and distribution facility in Chatsworth,
California is, by its terms, callable by AAL upon six months notice. As of
September 30, 1997, the outstanding principal balance of such loan was
$4,633,885. Such loan bears interest at 9.875% per year, is payable in monthly
installments of $43,418, representing both principal and interest, matures in
February 2019 and is secured by the real property on which the facility is
located.
Net cash used in investing activities was $14,069 for the first six months
of fiscal 1998, compared with net cash used in investing activities of $510,280
for the first six months of fiscal 1997. This decrease is primarily attributable
to a reduction in loans made to officers of approximately $450,000 and a
reduction in capital expenditures.
Cash flows provided by financing activities were $44,263 for the first six
months of fiscal 1998, compared with cash flows provided by financing activities
of $194,770 for the first six months of fiscal 1997. The decrease is primarily
attributable to a reduction in usage of the Company's line of credit.
The Company is currently evaluating its management information systems as
part of its strategy and growth expectations for the future. The likely result
of this evaluation will be a systems conversion for the Company's core business
processes. Although, the ultimate cost of a systems conversion has not yet been
determined, the Company believes that it will incur expenses of between $100,000
and $150,000 related to this project in late fiscal 1998 or early fiscal 1999.
The Company is currently involved in a patent infringement lawsuit whereby
it has been enjoined from selling its Cellular Data Link ("CDL") product line. A
determination by the court as to money damages to be assessed, based on the
Company's prior sales of CDL products, has yet to be made. Although the extent
of the liability for this matter is presently unknown, total damages, including
attorneys' fees for both sides, could have a material adverse impact on the
Company's financial condition.
The Company believes that available cash, cash flow from operations and
available borrowings through its credit facility, will be sufficient to meet
operating needs and capital expenditure requirements for the foreseeable future,
although no assurances can be given.
SEASONALITY
The Company's markets are seasonal with sales typically higher in the
Company's third quarter due to increased demand from mass-market retailers
during the year-end holiday season.
FORWARD LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of that term in the Private Securities Litigation Reform Act
of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the
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Securities Exchange Act of 1934). Additional written or oral forward-looking
statements may be made by the Company from time to time, in filings with the
Securities Exchange Commission or otherwise. Statements contained herein that
are not historical facts are forward-looking statements made pursuant to the
safe harbor provisions referenced above. The matters discussed herein with
respect to the introduction of new products by the Company, the Company's
ability to penetrate new distribution channels, future sales levels, compliance
with financial covenants in loan agreements, the Company's ability to secure
future financing and the potential outcome of pending litigation involving the
Company, among others, are forward looking statements. In addition, when used in
this discussion, the words "anticipates," "expects," "intends," "plans" and
variations thereof and similar expressions are intended to identify
forward-looking statements.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified based on current
expectations. Consequently, future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements contained in this Quarterly Report. Statements in
this Quarterly Report, particularly in the Notes to Financial Statements, "Part
1, Item 2, Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Part II, Item 1, Legal Proceedings" describe
certain factors, among others, that could contribute to or cause such
differences. Other factors that could contribute to or cause such differences
include, but are not limited to, unanticipated developments in any one or more
of the following areas: the receptivity of consumers to new consumer electronics
technologies, the rate and consumer acceptance of new product introductions,
competition, the number and nature of customers and their product orders,
pricing, foreign manufacturing, sourcing and sales (including foreign government
regulation, trade and importation concerns and fluctuation in exchange rates),
borrowing costs, changes in taxes due to changes in the mix of U.S. and non U.S.
revenue, pending or threatened litigation, the availability of key personnel and
other risk factors which may be detailed from time to time in the Company's
Securities and Exchange Commission filings.
Readers are cautioned not to place undue reliance on any forward-looking
statements contained herein, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of unexpected
events.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported in the Company's Form 8-K filed on December 20, 1996
and the Company's Form 10-K filed on June 30, 1997, the Company is currently
involved in a lawsuit titled ALLIANCE RESEARCH CORPORATION v. TELULAR
CORPORATION, including the counterclaim entitled TELULAR CORPORATION v. ALLIANCE
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RESEARCH CORPORATION, United States District Court for the Central District of
California, Case No. CV 94-1065-JSL.
On August 4, 1997, Telular filed a motion for summary judgment on the
issues of whether the case against the Company is an exceptional case and
whether the infringement by the Company was willful. If summary judgment is
granted on these issues, it is likely that the actual damage award will be
trebled and that Telular will be entitled to an award of attorneys' fees.
In addition to the above-described litigation, the Company is party to
other claims and litigation that arise in the normal course of business. While
any litigation contains an element of uncertainty, management believes that the
ultimate outcome of these claims and litigation will not have a material adverse
effect on the Company's results of operations or financial condition.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit No. Description
----------- -----------
2.1 Plan of Reorganization of North American Energy of Delaware,
Inc. (1)
2.2 Agreement and Plan of Merger between ORA Electronics, Inc., a
Delaware corporation, and North American Energy of Delaware,
Inc., a Delaware corporation. (2)
3.1 Restated Certificate of Incorporation of ORA Electronics, Inc.
(2)
3.2 Bylaws of ORA Electronics, Inc. (2)
4.1 Specimen Common Stock Certificate of ORA Electronics, Inc. (2)
4.2 Specimen Class A Warrant Certificate. (2)
4.3 Specimen Class B Warrant Certificate. (2)
4.4 Specimen Class C Warrant Certificate. (2)
4.5 Specimen Class D Warrant Certificate. (2)
4.6 Warrant Agreement between the Company and Continental Stock
Transfer & Trust Company (the "Warrant Agent"), dated as of
December 20, 1996. (2)
-16-
<PAGE>
4.7 Letter Agreement, dated June 10, 1997, from Sheppard, Mullin,
Richter & Hampton LLP to the Warrant Agent. (3)
10.1 Loan and Security Agreement, dated April 4, 1997, by and
between the Company and FINOVA Capital Corporation ("FINOVA").
(3)
10.2 Amendment to Loan Agreement, dated April 4, 1997, between the
Company and FINOVA. (3)
10.3 Collateral Assignment, Patent Mortgage and Security Agreement,
dated as of April 4, 1997, by and between the Company and
FINOVA. (3)
10.4 Waiver and Second Amendment to Loan Agreement, dated June 26,
1997, between the Company and FINOVA. (3)
11 Statement re: Computation of Earnings (loss) Per Share.
27 Financial Data Schedule.
- ---------------
(1) Incorporated by reference from the Form 8-K/A filed on December 20,
1996, by North American Energy of Delaware, Inc., predecessor to the
Registrant.
(2) Incorporated by reference from the Registrant's Form 8-K filed on
December 20, 1996.
(3) Incorporated by reference from the Registrant's Form 10-K filed on
June 30, 1997.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the
fiscal quarter ended September 30, 1997.
-17-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ORA ELECTRONICS, INC.
(Registrant)
Dated: November 14, 1997 By: /s/ John M. Burris
---------------------------------
John M. Burris, Duly Authorized
Representative and Chief Financial
Officer
-18-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- --------------------------------------------------------------------------------
11 Statement Re: Computation Of Earnings (loss)
Per Share 20
27 Financial Data Schedule 21
-19-
<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS (LOSS) PER SHARE
Three Months Ended September 30,
1997 1996
---- ----
Primary average shares outstanding 6,604,373 1,000
Net income (loss) per share $ (385,598) $ 485,262
=========== ===========
Primary earnings (loss) per share $ (0.06) $ 485.26
=========== ===========
Six Months Ended September 30,
1997 1996
---- ----
Primary average shares outstanding 6,604,373 1,000
Net income (loss) per share $ (917,668) $(2,156,862)
=========== ===========
Primary earnings (loss) per share $ (0.14) $ (2,156.86)
=========== ===========
-20-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1998
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 92,322 92,322
<SECURITIES> 0 0
<RECEIVABLES> 5,276,582 5,276,582
<ALLOWANCES> 2,201,470 2,201,470
<INVENTORY> 4,369,596 4,369,596
<CURRENT-ASSETS> 7,610,157 7,610,157
<PP&E> 8,961,693 8,961,693
<DEPRECIATION> 2,786,075 2,786,075
<TOTAL-ASSETS> 14,649,758 14,649,758
<CURRENT-LIABILITIES> 5,514,005 5,514,005
<BONDS> 0 0
0 0
0 0
<COMMON> 6,604 6,604
<OTHER-SE> 3,495,191 3,495,191
<TOTAL-LIABILITY-AND-EQUITY> 14,649,758 14,649,758
<SALES> 4,917,170 8,495,191
<TOTAL-REVENUES> 4,917,170 8,243,980
<CGS> 3,347,466 5,071,304
<TOTAL-COSTS> 1,774,988 3,711,794
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 180,314 378,550
<INCOME-PRETAX> (385,598) (917,668)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (385,598) (917,668)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (385,589) (917,668)
<EPS-PRIMARY> (0.06) (0.14)
<EPS-DILUTED> (0.06) (0.14)
</TABLE>
