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 June 30, 1998
[ ] 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 Number)
Incorporation or Organization)
9410 Owensmouth Avenue 91311
- ---------------------- -----
(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:
Page 1 of 22 pages
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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
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 August 12, 1998
- ------------------- ------------------------------
Common Stock, $.001 6,908,940 shares
par value
Exhibit Index on Page 20
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ORA ELECTRONICS, INC.
Form 10-Q
June 30, 1998
TABLE OF CONTENTS
Page
----
PART I - Financial Information 4
Item 1. Financial Statements 4
Balance Sheets as of June 30, 1998 and
March 31, 1998 4
Statements of Operations and Retained
Deficit for the three month periods
ended June 30, 1998 and 1997 6
Statements of Cash Flows for the
three month periods ended June 30,
1998 and 1997 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. 16
Item 1. Legal Proceedings. 16
Item 6. Exhibits and Reports on Form 8-K. 16
Signatures 19
Exhibit Index 20
Exhibits 21-22
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Part I - FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
ORA ELECTRONICS, INC.
Balance Sheets
June 30, March 31,
1998 1998
(Unaudited) (Audited)
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ASSETS
Current assets:
Cash and cash equivalents $ 111,501 $ 407,694
Trade accounts receivable, less allowance
for sales returns and doubtful accounts of
$2,305,991 ($2,022,043 at March 31, 1998) 1,256,833 2,112,292
Inventories 4,102,144 4,627,251
Prepaid expenses 166,703 74,276
------------ ------------
Total current assets 5,637,181 7,221,513
Property and equipment, net 6,189,943 6,231,494
Other assets:
Loan receivable, officer 587,184 579,833
Deferred expenses 302,592 304,875
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Total assets $ 12,716,900 $ 14,337,715
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 526,130 $ 488,604
Notes payable 482,651 1,355,847
Trade payables 1,134,509 2,925,677
Accrued interest 97,765 101,648
Other accounts payable and
accrued expenses 1,500,493 1,218,582
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Total current liabilities 3,741,548 6,090,358
Long-term debt 6,045,461 6,105,477
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Total liabilities 9,787,009 12,195,835
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Commitments and contingencies (Note 3)
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Stockholders' equity:
Preferred stock, $.001 par value,
authorized 5,000,000 shares,
none issued - -
Common stock, par value $.001 per share,
authorized 30,000,000 shares, issued
and outstanding 6,908,866 shares at
June 30, 1998 and 6,908,722 shares at
March 31, 1998 6,909 6,909
Additional paid in capital 6,125,380 6,125,380
Retained deficit (3,202,398) (3,990,409)
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Total stockholders' equity 2,929,891 2,141,880
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Total liabilities and stockholders'
equity $ 12,716,900 $ 14,337,715
============ ============
See accompanying notes to financial statements.
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ORA ELECTRONICS, INC.
Statements of Operations and Retained Deficit
For the Three Month Period Ended June 30, 1998 and 1997
(Unaudited)
Three Months
Ended
June 30,
1998 1997
---- ----
Net sales $ 3,457,005 $ 3,326,810
Costs of goods sold 2,237,443 1,723,838
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Gross profit 1,219,562 1,602,972
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Operating expenses:
Selling and shipping 654,019 563,992
Administrative and general 1,268,307 1,328,663
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Total operating expenses 1,922,326 1,892,655
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Operating loss (702,764) (289,683)
Interest expense (195,098) (198,236)
Other income and expense (Note 4) 1,685,873 (44,151)
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Income (loss) before income taxes 788,011 (532,070)
Provision for income taxes - -
----------- -----------
Net profit (loss) $ 788,011 $ (532,070)
Retained deficit, beginning
of period (3,990,409) (1,412,726)
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Retained deficit, end
of period $(3,202,398) $(1,944,796)
=========== ===========
Per common share information:
Net earnings (loss) $ 788,011 $ (532,070)
=========== ===========
Earnings (loss) per share:
Basic and diluted $ 0.11 $ (0.08)
=========== ===========
Weighted average shares outstanding
used in the per share calculation:
Basic and diluted 6,908,794 6,600,619
=========== ===========
See accompanying notes to financial statements.
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ORA ELECTRONICS, INC.
Statements of Cash Flows
For the Three Month Periods Ended June 30, 1998 and 1997
(Unaudited)
Three Months
Ended June 30,
1998 1997
---- ----
Cash flows from operating activities
Net income (loss) $ 788,011 $ (532,070)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 57,123 73,380
Provision for losses and sales returns 323,352 371,139
Changes in assets and liabilities:
Trade accounts receivable 532,107 1,454,043
Inventories 525,107 108,893
Prepaid expenses (92,426) 246,005
Trade payables (1,791,168) (1,135,096)
Accrued interest (3,882) (12,947)
Other accounts payable and
accrued expenses 281,908 6,647
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Net cash provided by operating activities 620,132 579,994
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Cash flows from investing activities:
Capital expenditures (13,289) -
Loan receivable, officer (7,351) (6,990)
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Net cash (used in) investing activities (20,640) (6,990)
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Cash flows from financing activities:
Repayment of line of credit (873,196) (821,594)
Borrowing (repayment) of long-term debt (22,489) 27,304
Common stock - 16
Additional paid in capital - 15,999
----------- -----------
Net cash (used in) financing activities (895,685) (778,275)
----------- -----------
Net decrease in cash and cash equivalents (296,193) (205,271)
Cash and cash equivalents, beginning of period 407,694 321,647
----------- -----------
Cash and cash equivalents, end of period $ 111,501 $ 116,376
=========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 172,845 $ 198,236
=========== ===========
Income taxes $ - $ -
=========== ===========
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 cellular telephones, personal communications systems ("PCS"),
pagers, computing devices and the Intelligent Transportation Systems industry.
The Company currently carries over 1,200 products which are sold to over 500
customers in the United States, and throughout North, Central and South
America. Among the Company's customers are major national and regional
retailers, service providers and wireless carriers, original equipment
manufacturers ("OEMs"), auto manufacturers, regional distributors and dealers.
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 months ended June 30, 1998 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, 1998 included in the Company's Annual
Report dated June 29, 1998 on Form 10-K filed with the Securities and Exchange
Commission.
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.
For comparative purposes, certain amounts in the financial statements
from the prior year quarter ended June 30, 1997 have been reclassified.
Note 3 - Legal Proceedings:
- ---------------------------
The Company was involved in a lawsuit titled ALLIANCE RESEARCH
CORPORATION V. TELULAR CORPORATION; including the counterclaim entitled TELULAR
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CORPORATION V. ALLIANCE RESEARCH CORPORATION, United States District Court for
the Central District of California, Case No. CV 94-1065-JSL.
The Company and Telular Corporation ("Telular") settled the lawsuit
pursuant to a Settlement Agreement and Mutual General Release dated March 2,
1998. According to the terms of the settlement, Telular Corporation will
receive from the Company cash payments totaling $1,500,000 over a two year
period and 300,000 shares of the Company's common stock and may receive
additional shares of common stock on February 1, 2000, if necessary to ensure
that the total shares of common stock received by Telular have a market value
of $1,500,000 as of such date. Pursuant to the settlement, the lawsuit was
dismissed with prejudice, although the Company is enjoined from selling its CDL
line of products. The Company has had no sales of such product line since
before April 1, 1996.
The Company has estimated the current value of the final settlement at
$1,685,797, all of which has been recognized and included in Administrative and
General expenses in periods prior to the quarter ended June 30, 1998.
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 ultimate outcome of such
proceedings will not have a material adverse effect on the Company's results of
operations or financial condition.
Note 4 - Sale of Certain Trademarks:
- ------------------------------------
In April, 1998, pursuant to the terms of a Second Deed of Amendment, the
company granted ORA Electronics (UK) Limited ("ORA UK") an exclusive
royalty-free right to use certain of the Company's trademarks, including,
without limitation, the "ORA" name, in perpetuity worldwide except for North,
Central, and South America. The total consideration paid by ORA UK to the
company for such perpetual right was 1,000,000 GBP, or approximately
$1,675,000, which is included in Other income on the Statement of Operations and
Retained Deficit for the quarterly period ended June 30, 1998. Gershon N.
Cooper, President and Chief Executive Officer of the company, is a former
member of the Board of Directors of ORA UK.
Note 5 - Recent Accounting Pronouncements:
- ------------------------------------------
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 128, Earnings per Share,
("SFAS 128") which is effective for financial statements for both interim and
annual periods ending after December 15, 1997. The Company adopted SFAS 128 in
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the third fiscal quarter of 1998. SFAS 128 replaces the presentation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
The Company's adoption of SFAS 128 required no change in the Company's
previously reported earnings (loss) per share.
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income"
("SFAS 130") effective for fiscal years beginning after December 15, 1997. The
new rules establish standards for the reporting of comprehensive income and its
components in financial statements. Comprehensive income consists of net income
and other gains and losses affecting stockholders' equity that, under generally
accepted accounting principles, are excluded from net income, such as unrealized
gains and losses on investments available for sale, foreign currency translation
gains and losses and minimum pension liability. The Company has adopted the
provisions of SFAS 130 as of April 1, 1998. For all periods presented in this
Quarterly Report, there was no comprehensive income.
In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information", ("SFAS 131") effective for fiscal years
beginning after December 15, 1997. The new rules establish revised standards
for public companies relating to the reporting of financial and descriptive
information about their operating segments in financial statements. SFAS 131
is effective for the Company in fiscal 1999. The Company currently evaluates
its operations as one segment.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Management's discussion and analysis should be read in conjunction
with the Company's financial statements and the notes thereto.
The following table sets forth, for the periods indicated, certain
statements of operations and retained deficit data for the Company expressed as
a percentage of net sales:
Three months ended June 30,
1998 1997
---- ----
Net sales 100.0% 100.0%
Cost of sales 64.7 51.8
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Gross profit 35.3 48.2
Selling and shipping expenses 18.9 17.0
Administrative and general expenses 36.7 39.9
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Loss from operations (20.3) (8.7)
Interest expense (5.6) (6.0)
Other income and expense 48.8 (1.3)
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Income (loss) before income taxes 22.8 (16.0)
Provision for income taxes - -
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Net income (loss) 22.8% (16.0)%
===== =====
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED JUNE 30, 1998
COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Net Sales. Net sales for the first fiscal quarter ended June 30, 1998 were
$3,457,005 compared to $3,326,810 in the same quarter of 1997, an increase
of 3.9%. The increase is primarily attributable to increased distribution of
the Company's wireless accessory line of products to mass merchandise retailers
during the quarter ended June 30, 1998 compared with the same period of the
prior year. The Company is continuing its efforts to diversify into alternative
channels of distribution.
Gross Profit. Gross profit for the first fiscal quarter ended June 30,
1998 was $1,219,562 compared to gross profit of $1,602,972 in the same quarter
of 1997. Gross profit as a percentage of net sales was 35.3% for the quarter
ended June 30, 1998 compared to gross profit as a percentage of net sales of
48.2% for the quarter ended June 30, 1997. Gross profit results for the quarter
ended June 30, 1998 include a $500,000 reduction in the carrying value of
inventory. Excluding the effects of the reduction in carrying value of
inventory, which is considered nonrecurring, the gross profit for the quarter
ended June 30, 1998 was $1,719,562 and gross profit as a percentage of net
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sales was 49.7%. Accordingly, there was an increase in gross profit of $116,590
or 7.3%, which is primarily attributable to the increase in net sales. The
increase in gross profit as a percentage of net sales from 48.2% to 49.7% is
primarily attributable to the Company's successful efforts to procure its
product inventory at lower prices, primarily from Taiwan and China.
Selling and Shipping Expense. Selling and shipping expense increased by
$90,027, or 16.0%, to $654,019 for the first quarter of fiscal 1999 compared
with $563,992 in the same period of the prior year. The increase in selling and
shipping expense is primarily attributable to an increase in travel expense
incurred by the Company's direct sales force in its effort to acquire new
customers.
Administrative and General Expense. Administrative and general expense
decreased by $60,356, or 4.5%, to $1,268,307 for the first quarter of fiscal
1999 compared with $1,328,663 in the same period of the prior year. The
decrease is primarily attributable to a reduction in legal fees.
Interest Expense. Interest expense for the first quarter of fiscal 1999
was $195,098 compared with $198,236 in the same period of the prior year. The
decrease of $3,138, or 1.6% is primarily attributable to a reduction in the
Company's usage of its line of credit during the quarter ended June 30, 1998
compared with the same period of the prior year.
Other Income and Expense. Other income for the first quarter of fiscal
1999 was $1,685,873 compared with Other expense of $44,151 in the same period
of the prior year. The difference is primarily attributable to approximately
$1,675,000 in royalty income received in the quarter ended June 30, 1998 as a
result of the Company granting to ORA Electronics (UK) Limited, an unaffiliated
company, an exclusive royalty-free right to use certain of the Company's
trademarks, including the "ORA" name, in perpetuity worldwide, excepting North,
Central and South America.
Income Taxes. The Company has made no provision for income taxes as it
has a history of net losses, which has resulted in tax loss carryforwards. At
June 30, 1998, the Company had available federal net operating loss
carryforwards of approximately $3,332,000, which expire in 2012 through 2013,
and state net operating loss carryforwards of approximately $1,666,000, which
expire in 2002 through 2003.
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 June 30, 1998, the Registrant had $111,501 in cash and cash
equivalents with a working capital surplus of $1,895,633, contrasted to
$407,694 in cash and cash equivalents with a working capital surplus of
$1,131,155 at March 31, 1998. Net cash provided by operating activities was
$620,132 for the first fiscal quarter ended June 30, 1998, compared with
net cash provided by operating activities of $579,994 for the first fiscal
quarter ended June 30, 1997. Working capital may vary from time to time as
a result of seasonality, new product introductions, capital expenditures
and changes in inventory levels.
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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%, with 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 had borrowing capacity
from this line of credit of approximately $2,000,000 at June 30, 1998.
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
all times during the quarter ended June 30, 1998, the Company was in compliance
with the covenant requirements.
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 June
30, 1998, the outstanding principal balance of such loan was $4,584,725. 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 $20,640 for the first three
months of fiscal 1999, compared with net cash used in investing activities
of $6,990 in the first three months of fiscal 1998. The decrease of $13,650 is
primarily attributable to a decrease in loans made to officers.
Cash flows used in financing activities increased to $895,685 in the
first three months of fiscal 1999 from $778,275 for the first three months
of fiscal 1998. This change is primarily a result of short term debt
reductions during the fiscal quarter ended June 30, 1998.
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
fiscal 1999.
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.
RECENT ACCOUNTING PRONOUNCEMENTS AND OTHER MATTERS
During February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") 128, Earnings per
Share," ("SFAS 128")which is effective for financial statements for both
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interim and annual periods ending after December 15, 1997. The Company adopted
SFAS 128 in the third fiscal quarter of 1998. SFAS 128 replaces the
presentation of primary and fully diluted earnings per share with basic and
diluted earnings per share. The Company's adoption of SFAS 128 required no
change in the Company's previously reported earnings per share.
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income"
("SFAS 130") effective for fiscal years beginning after December 15, 1997. The
new rules establish standards for the reporting of comprehensive income and its
components in financial statements. Comprehensive income consists of net income
and other gains and losses affecting stockholders' equity that, under generally
accepted accounting principles, are excluded from net income, such as unrealized
gains and losses on investments available for sale, foreign currency translation
gains and losses and minimum pension liability. The Company has adopted the
provisions of SFAS 130 as of April 1, 1998. For all periods presented in this
Quarterly Report, there was no comprehensive income.
In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information", ("SFAS 131") effective for fiscal years
beginning after December 15, 1997. The new rules establish revised standards
for public companies relating to the reporting of financial and descriptive
information about their operating segments in financial statements. SFAS 131
is effective for the Company in fiscal 1999. The Company currently evaluates
its operations as one segment.
The widespread use of computer programs that rely on two-digit dates to
perform computations and decision-making functions may cause computer systems to
malfunction prior to or in the year 2000 and lead to significant business delays
and disruptions in the U.S. and internationally. The Company has developed a
plan to minimize the impact of this "year 2000 problem" and periodically reports
on the status of its efforts to the Company's corporate officers and Board of
Directors. Pursuant to such plan, the Company is engaged in the process of
identifying programs used by its computer systems that may malfunction as a
result of the use of such two-digit dates and has initiated programs to rectify
any problems, including upgrading existing software packages, implementing new
year 2000 compliant systems or repairing existing software. The Company has also
begun communications with its significant suppliers to determine the extent to
which the Company's operations are vulnerable to those third parties' failure to
solve their own year 2000 issues. Management believes that the costs of
resolving potential year 2000 issues will not be material and that the necessary
revisions or replacements of material computer systems will be accomplished in a
timely manner.
SEASONALITY
The Company's markets are seasonal with sales typically higher in the
Company's third fiscal 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 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
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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, future sales levels, compliance with financial
covenants in loan agreements, the Company's ability to secure future
financing, the ability of the Company to address issues relating to the
"Year 2000 problem," costs associated with, and effectiveness of, the
Company's proposed new management information system, and the potential
outcome of any 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 of consumer acceptance of new product introductions,
competition, the Company's ability to retain existing customers and attract new
ones, the number and nature of customers and their product orders, the Company's
patents pending before the U.S. Patent and Trademark Office, 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, the ability
of the Company and the Company's suppliers to address issues relating to the
"Year 2000 problem" 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.
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Part II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to various claims and litigation that arise in the
ordinary course of its 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)
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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)
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)
10.5 Waiver and Third Amendment to Loan Agreement, dated
November 13, 1997 between the Company and FINOVA. (4)
10.6 Waiver and Fourth Amendment to Loan Agreement, dated
February 11, 1998 between the Company and FINOVA. (5)
10.7 Waiver and Fifth Amendment to Loan Agreement, dated
March 27, 1998, between the Company and FINOVA. (6)
10.8 Second Deed of Amendment, by and between the Company
and ORA Electronics (UK) Limited ("ORA UK"), dated
as of April 1, 1998. (5)
-17-
<PAGE>
10.9 Distribution Agreement, by and between Alliance Research
Corporation (predecessor to the Registrant) and Contactace
Limited (doing business as ORA UK), dated as of 1990. (5)
11 Statement re: Computation of Earnings 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.
(4) Incorporated by reference from the Registrant's Form
10-Q filed on February 14, 1998.
(5) Incorporated by reference from the Registrant's Form
8-K filed on April 17, 1998.
(6) Incorporated by reference from the Registrant's Form
10-K filed on June 29, 1998.
(b) Reports on Form 8-K.
--------------------
A Current Report on Form 8-K was filed on April 3, 1998, in connection
with the Company granting to ORA Electronics (UK) Limited ("ORA UK"), an
unaffiliated company, an exclusive royalty-free right to use certain of the
Company's trademarks, including, without limitation, the "ORA" name, in
perpetuity worldwide excepting North, Central and South America.
-18-
<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: August 14, 1998 By: /s/ JOHN M. BURRIS
------------------------------
John M. Burris, Duly Authorized
Representative and Chief Financial
Officer
-19-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- -----------------------------------------------------------------------------
11 Statement Re: Computation Of
Earnings Per Share 21
27 Financial Data Schedule 22
-20-
<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Three Months Ended June 30,
1998 1997
---- ----
Basic and diluted weighted average
number of shares of common stock
outstanding 6,908,794 6,600,719
=========== ===========
Net earnings (loss) $ 788,011 $ (532,070)
=========== ===========
Basic and diluted earnings $ 0.11 $ (0.08)
(loss) per share =========== ===========
-21-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 111,501
<SECURITIES> 0
<RECEIVABLES> 3,562,824
<ALLOWANCES> 2,305,991
<INVENTORY> 4,102,144
<CURRENT-ASSETS> 5,637,181
<PP&E> 6,189,943
<DEPRECIATION> 2,577,767
<TOTAL-ASSETS> 12,716,900
<CURRENT-LIABILITIES> 3,741,548
<BONDS> 0
0
0
<COMMON> 6,609
<OTHER-SE> 2,929,891
<TOTAL-LIABILITY-AND-EQUITY> 12,716,900
<SALES> 3,457,005
<TOTAL-REVENUES> 3,457,005
<CGS> 2,237,443
<TOTAL-COSTS> 1,922,326
<OTHER-EXPENSES> (1,685,873)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 195,098
<INCOME-PRETAX> 788,011
<INCOME-TAX> 0
<INCOME-CONTINUING> 788,011
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 788,011
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
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