FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-- or --
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended March 31, 1995
--------------
Commission file number 0-14328
-------
ZING TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 13-2650621
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
115 Stevens Avenue, Valhalla, New York 10595
--------------------------------------------
(Address of principal executive offices)
(Zip Code)
(914) 747-7474
Registrant's telephone number, including area code
No Change
(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 periods 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
--- ---
The number of shares of common stock, $.01 par value, outstanding
as of March 31, 1995 was 2,555,640.
Page 1 of 11
<PAGE>
INDEX
ZING TECHNOLOGIES, INC AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - March 31, 1995 and
June 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed consolidated statements of income - three months ended
March 31, 1995 and 1994; nine months ended March 31, 1995 and 1994 4
Condensed consolidated statements of cash flows - nine months ended
March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . 5
Notes to condensed consolidated financial statements -
March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . 7-8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . 10
Exhibit 11 - Computation of earnings per share - three months ended
March 31, 1995 and 1994; nine months ended March 31, 1995
and 1994. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Page 2 of 11
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
<TABLE><CAPTION>
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
A S S E T S
March 31 June 30
1995 1994
(unaudited) (note)
(000's omitted)
<S> <C> <C>
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 86 $ 182
Marketable securities . . . . . . . . . . . . . . . . . . . . . . 1,454 1,477
Accounts receivable, less reserves of
$151 and $97, respectively . . . . . . . . . . . . . . . . . . 3,734 2,384
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,799 2,391
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . 322 233
Other current assets . . . . . . . . . . . . . . . . . . . . . . 484 221
------- ------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . 9.879 6,888
Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . 8,886 8,178
Less accumulated depreciation and amortization . . . . . . . . . 3,965 3,046
------- ------
4,921 5,132
Marketable Securities . . . . . . . . . . . . . . . . . . . . . . . . 3,776 3,179
Deferred Income Taxes, net of valuation allowance . . . . . . . . . . 1,154 1,255
Excess of Cost over Assets Acquired, net of accumulated
amortization of $827 and $712, respectively . . . . . . . . . . . 1,706 1,821
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 85
------- -------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,448 $18,360
====== ======
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
Current Liabilities
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . $ 2,440 $ 1,383
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 942 357
Accrued compensation expense . . . . . . . . . . . . . . . . . . 431 300
Short positions in marketable equity securities . . . . . . . . . -- 447
Due to broker . . . . . . . . . . . . . . . . . . . . . . . . . . 1,490 367
Current portion of long-term debt . . . . . . . . . . . . . . . . 457 156
------ -------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . 5,760 3,010
Long-Term Obligations, less current portion . . . . . . . . . . . . . 875 626
Deferred Income - non-compete agreement . . . . . . . . . . . . . . . 1,850 2,300
Stockholders' Equity
Common Stock, par value $.01 per share: authorized 12,000,000
shares; shares issued of 2,755,558 and 2,695,571 respectively . 28 27
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 13,321 13,146
Note receivable from stockholder . . . . . . . . . . . . . . . . . . (250) (250)
Net unrealized loss on non-current marketable securities . . . . . . (319) (288)
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . 652 (163)
Less: treasury shares at cost (199,918 and
14,100 shares, respectively) . . . . . . . . . . . . . . . . . . (469) (48)
------- --------
12,963 12,424
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . $21,448 $18,360
====== ======
</TABLE>
Note: The balance sheet at June 30, 1994 has been derived from the audited
consolidated financial statements at that date.
Page 3 of 11
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
<TABLE><CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
March 31 March 31
1995 1994 1995 1994
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . $ 5,832 $ 2,844 $ 12,786 $ 8,288
Cost of goods sold . . . . . . . . . . . . . 3,138 1,753 7,285 4,719
------- ------- ------- --------
Gross profit . . . . . . . . . . . . . . . . 2,694 1,091 5,501 3,569
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . 2,130 1,052 4,620 3,283
Provision for doubtful accounts . . . . . . . 6 6 54 60
Depreciation and amortization . . . . . . . . 353 125 663 574
Interest expense and amortization of deferred
note issuance costs . . . . . . . . . . . 59 17 126 261
Interest and other income - net . . . . . . . 353 192 878 704
------- ------- ------- --------
Income before income taxes
and extraordinary item . . . . . . . . . 499 83 916 95
Provision for income taxes . . . . . . . . . 96 50 102 50
------- ------- ------- -------
Income before extraordinary item . . . . . . 403 33 814 45
Extraordinary item . . . . . . . . . . . . . -- -- -- 53
--------- -------- --------- -------
Net income . . . . . . . . . . . . . . . . . $ 403 $ 33 $ 814 $ 98
======= ======= ======= =======
Income per Common and Common Equivalent Share:
Income before extraordinary item . . . . . . $ .15 $ .01 $ .31 $ .02
Extraordinary item . . . . . . . . . . . . . -- -- -- .02
------- ------- ------- ------
Net income . . . . . . . . . . . . . . . . . $ .15 $ .01 $ .31 $ .04
====== ====== ====== ======
Number of shares used in computation 2,666,830 2,747,246 2,666,830 2,747,246
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 11
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
<TABLE><CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
March 31
1995 1994
(000's omitted)
<S> <C> <C>
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 814 $ 98
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 1,038 908
Provision for losses on accounts receivable . . . . . . . . . . . . . 54 60
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . -- 50
Amortization of non-compete agreement . . . . . . . . . . . . . . . . (450) (450)
Loss on sale of equipment . . . . . . . . . . . . . . . . . . . . . . (3) --
Changes in operating assets and liabilities:
(Increase) in accounts receivable . . . . . . . . . . . . . . . . . (1,404) (676)
(Increase) in inventory . . . . . . . . . . . . . . . . . . . . . . (1,408) (203)
(Increase) in prepaid expenses . . . . . . . . . . . . . . . . . . (89) (101)
(Increase) in current receivables . . . . . . . . . . . . . . . . . (263) (73)
Decrease in receivable from sale of division . . . . . . . . . . . -- 1,453
Decrease (increase) in deferred income tax . . . . . . . . . . . . 101 (2,000)
Decrease in excess of costs over assets acquired . . . . . . . . . -- 2,000
Decrease in other assets . . . . . . . . . . . . . . . . . . . . . 73 111
Increase (decrease) in accounts payable . . . . . . . . . . . . . . 1,057 (1,357)
Increase (decrease) in accrued expenses . . . . . . . . . . . . . . 138 (565)
(Decrease) in accrued interest expense . . . . . . . . . . . . . . -- (821)
Increase (decrease) in accrued compensation . . . . . . . . . . . . 131 (18)
Increase (decrease) in current portion of long term debt . . . . . 301 (11,592)
------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES . . . . . . 90 (13,176)
INVESTING ACTIVITIES
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . (708) (331)
Net sale (purchases) of marketable securities . . . . . . . . . . . . . . 518 (4,291)
------- ------
NET CASH (USED IN) INVESTING ACTIVITIES . . . . . . . . . . . . (190) (4,622)
------- ------
FINANCING ACTIVITIES
Issuance of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 176 --
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . (421) (43)
Income in long term borrowings . . . . . . . . . . . . . . . . . . . . . 249 --
------ --------
DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . (96) (17,841)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . 182 17,925
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . $ 86 $ 84
====== ======
</TABLE>
See notes to condensed consolidated financial statements.
Page 5 of 11
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1995
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles 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 management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
month periods ended March 31, 1995 are not necessarily indicative of the results
that may be expected for the year ending June 30, 1995.
NOTE B--INVENTORIES
Inventories are stated at the lower of cost (first in, first out method) or
market.
Inventories consist of the following:
March 31 June 30
1995 1994
-------- -------
Raw materials . . . . . . . . . . . . . . . . . $2,069 $1,341
Work in process . . . . . . . . . . . . . . . . 1,434 769
Finished goods . . . . . . . . . . . . . . . . . 296 281
----- -----
$3,799 $2,391
===== =====
NOTE C--INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Income per common and common equivalent share is based on the weighted
average number of shares of Common Stock outstanding during each period,
including Common Stock equivalents of dilutive stock options and warrants.
NOTE D--INCOME TAXES
As of July 1, 1993, the Company adopted FASB Statement No. 109, "Accounting
for Income Taxes." The change had no effect on net income. Under Statement
109, the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
The Company has available net operating loss carry forwards for income tax
purposes of approximately $6,484,000 at March 31, 1995. Omnirel pre acquisition
net operating loss carryforward for federal income tax purpose of $5,384,000 at
March 31, 1995 expires through 2007, subject to annual limitations under Sec 382
of the Internal Revenue Code.
Page 6 of 11
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage
relationship to net sales of certain items from the consolidated statement of
operations.
<TABLE><CAPTION>
Percent of Net Sales
Three Months Ended Nine Months Ended
March 31 March 31
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Cost of goods sold . . . . . . . . . . . . . . . . . . . 53.8 61.6 57.0 56.9
Gross profit . . . . . . . . . . . . . . . . . . . . . . 46.2 38.4 43.0 43.1
Selling, general and administrative expenses,
provision for doubtful accounts,
and depreciation and amortization . . . . . . . . . . 42.7 41.6 41.8 47.3
Interest expense and amortization of deferred
note issuance costs . . . . . . . . . . . . . . . . . 1.0 .6 .9 3.1
Interest and other income - net . . . . . . . . . . . . . 6.1 6.8 6.9 8.5
Income before income taxes
and extraordinary item . . . . . . . . . . . . . . . 8.6 2.9 7.2 1.1
Provision for income taxes . . . . . . . . . . . . . . . 1.6 1.8 .8 .6
Income before extraordinary item . . . . . . . . . . . . 6.9 1.2 6.4 .5
Extraordinary item . . . . . . . . . . . . . . . . . . . -- -- -- .6
Net income . . . . . . . . . . . . . . . . . . . . . . . 6.9 1.2 6.4 1.2
</TABLE>
FINANCIAL CONDITION AND RESULTS OF OPERATION
Three Months Ended March 31, 1995 and March 31, 1994
- ----------------------------------------------------
Largely as a result of revenues from an ongoing order by the principal
customer of the Company's Omnirel subsidiary, consolidated net sales for the
1995 period more than doubled, to $5,832,000 from $2,844,000 in the comparable
1994 period. During the quarter ended December 31, 1994, the Company had
expanded Omnirel's manufacturing capacity to allow it to fulfill the new order,
placed by General Electric for multichip power module systems containing power
hybrid componentry. With production expenses in the March 31, 1995 three month
period increasing by only 79% from the 1994 period because manufacturing
overhead and other fixed costs were spread over a larger sales base, gross
profits increased by 147% to $2,694,000, compared to $1,091,000.
Omnirel's net sales in the 1995 fiscal period accounted for 95% of
consolidated net sales compared to 92.4% of consolidated net sales in the 1994
period. The balance in each period is attributable to operations of the
Company's TACTech subsidiary. Net sales of TACTech increased approximately 38%
in the March 31, 1995 quarter compared to the 1994 period.
Page 7 of 11
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
Three Months Ended March 31, 1995 and March 31, 1994 (continued)
- ----------------------------------------------------
Selling, general and administrative costs in the third fiscal quarter of
1995 increased comparably to net sales, due in part to a charge of $391,488
taken in the 1995 period relating to the proposed restructuring of the Company
in which stock of TACTech and Omnirel would be distributed to shareholders of
the Company. The Company also recorded an increase in depreciation and
amortization expenses in the amount of $193,000 due to the re-evaluation of the
useful life of certain machinery and equipment owned by Omnirel and acquired by
Zing as part of the June 1991 acquisition of Omnirel.
The growth in sales and relative reduction in production costs enabled the
Company to earn $403,000, or $.15 per share, in the fiscal quarter ended March
31, 1995, a more than 12-fold increase from net income of $33,000, or
approximately $.01 per share, earned in the comparable 1994 period.
Nine Months Ended March 31, 1995 and March 31, 1994
- ---------------------------------------------------
Net income increased from $98,000 in the nine months ended March 31, 1994,
or $.04 per share, to $814,000, or $.31 per share, in the 1995 nine month
period. Results for the 1994 period include extraordinary income of $53,000, or
$.02 per share from the repurchase of the Company's Senior Subordinated Notes.
Revenue from the General Electric order helped boost net sales by over 54%.
Production costs increased comparably to net sales, and remained essentially
constant as a percentage of net sales, as the increased efficiency in usage of
manufacturing facilities achieved in the third fiscal quarter offset an increase
in manufacturing overhead expenses incurred in the prior quarter in anticipation
of the General Electric order. For similar reasons, gross profits increased by
54%, and gross profit margins were unchanged from the 1994 nine month period.
Selling, general and administrative expenses over the nine month period
increased by 40.7% over the comparable 1994 period, a smaller percentage
increase than was achieved in net sales even after taking the charge in the
third quarter relating to the pending restructuring of the Company.
Interest expenses declined in the 1995 nine month period by 51.7% due to
the Company's retirement in 1994 of all of its Senior Subordinated Notes. The
reduction was offset in part by an increase of $42,000 in interest charges
incurred in the third quarter of 1995 over the comparable 1994 three month
period.
Omnirel sales accounted for 93% and 92.4% of 1995 and 1994 fiscal period
sales, respectively. TACTech sales increased 40.7% over the two periods, due
principally to a Department of Defense contract and to increases in its
subscriber base, while Omnirel sales increased 55.4%.
Liquidity and Capital Resources
- -------------------------------
Omnirel finances its operations from internally generated cash, borrowings
from the Company, and from available bank lines of credit. Having expanded its
production capacity during the initial nine months of the 1995 fiscal year, it
does not expect to make significant additional capital expenditures during the
remainder of the fiscal year or during the 1996 fiscal year to fulfill
anticipated contractual commitments, whether or not the Company consummates its
anticipated restructuring.
The Company continued to build inventory in connection with the General
Electric order, although at a much smaller pace than during the first six months
of the 1995 fiscal year. Inventories are 58.9% higher than at June 30, 1994,
although accounts receivable have increased comparably.
Page 8 of 11
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibit is included herein:
(ii) Statement re: computation of earnings per share
The Company did not file any reports on Form 8-K for the three months ended
March 31, 1995.
Page 9 of 11
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
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 thereunto duly authorized.
ZING TECHNOLOGIES, INC.
---------------------------------------
(Registrant)
Date May 15, 1995 /ROBERT E. SCHRADER/
---------------------------- ----------------------------------------
Robert E. Schrader, President and
Chief Executive Officer
Date May 15, 1995 /MARTIN S. FAWER/
--------------------------- ----------------------------------------
Martin S. Fawer, Treasurer and
Chief Financial Officer
Page 10 of 11
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
<TABLE><CAPTION>
EXHIBIT 11-STATEMENT RE: COMPUTATION OF
COMMON AND COMMON EQUIVALENT PER SHARE EARNINGS
Three Months Ended Nine Months Ended
March 31, March 31,
1995 1994 1995 1994
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
Average shares outstanding . . . . . . . . . . . . . . . 2,556 2,681 2,556 2,681
Net effect of dilutive stock options and
warrants-based on the treasury stock
method using average market price . . . . . . . . . . 111 66 111 66
----- ----- ----- -----
Shares used for computation . . . . . . . . . . . . . . . 2,667 2,747 2,667 2,747
====== ====== ====== =====
Income before extraordinary item . . . . . . . . . . . . $ 403 $ 33 $ 814 $ 45
Extraordinary item . . . . . . . . . . . . . . . . . . . -- -- -- 53
--------- -------- --------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 403 $ 33 $ 814 $ 98
======= ======= ======= =======
Income per share before extraordinary item . . . . . . . $ .15 $ .01 $ .31 $ .02
Extraordinary item per share . . . . . . . . . . . . . . -- -- -- .02
------ ------ ------ ------
Net income per share . . . . . . . . . . . . . . . . . . $ .15 $ .01 $ .31 $ .04
====== ====== ====== =======
</TABLE>
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements as of March 31, 1995 and is qualfied in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 86,000
<SECURITIES> 5,230,000
<RECEIVABLES> 3,885,000
<ALLOWANCES> 151,000
<INVENTORY> 3,799,000
<CURRENT-ASSETS> 9,879,000
<PP&E> 8,886,000
<DEPRECIATION> 3,965,000
<TOTAL-ASSETS> 21,448,000
<CURRENT-LIABILITIES> 5,760,000
<BONDS> 875,000
<COMMON> 28,000
0
0
<OTHER-SE> 13,321,000
<TOTAL-LIABILITY-AND-EQUITY> 21,448,000
<SALES> 5,536,000
<TOTAL-REVENUES> 5,832,000
<CGS> 3,138,000
<TOTAL-COSTS> 2,130,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,000
<INTEREST-EXPENSE> 59,000
<INCOME-PRETAX> 499,000
<INCOME-TAX> 96,000
<INCOME-CONTINUING> 403,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 403,000
<EPS-PRIMARY> .16
<EPS-DILUTED> .15
</TABLE>
