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 December 31, 1994
-----------------
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 December
31, 1994 was 2,548,340.
Page 1 of 12
<PAGE>
INDEX
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - December 31, 1994 and
June 30, 1994 . . . . . . . . . . . . . . . . . . . . . . 3
Condensed consolidated statements of operations - three months
ended December 31, 1994 and 1993; six months
ended December 31, 1994 and 1993 . . . . . . . . . . . . 4
Condensed consolidated statements of cash flows - six months
ended December 31, 1994 and 1993 . . . . . . . . . . . . 5
Notes to condensed consolidated financial statements -
December 31, 1994 . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . 7-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . 11
Exhibit 11 - Computation of earnings per share - three months
ended December 31, 1994 and 1993; six months
ended December 31, 1994 and 1993 . . . . . . . . . . . . 12
Page 2 of 12
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
A S S E T S
December 31 June 30
1994
-------------------------------
(unaudited) (note)
(000's omitted)
-------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 45 $ 182
Marketable securities . . . . . . . . . . . . . . . . . . . . . . 1,343 1,477
Accounts receivable, less reserves of
$143 and $97, respectively . . . . . . . . . . . . . . . . . . 2,552 2,384
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,459 2,391
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . 377 233
Other current assets . . . . . . . . . . . . . . . . . . . . . . 479 221
-------- ------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . 8,255 6,888
Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . 8,584 8,178
Less accumulated depreciation and amortization . . . . . . . . . 3,516 3,046
------- ------
5,068 5,132
Marketable Securities . . . . . . . . . . . . . . . . . . . . . . . . 3,426 3,179
Deferred Income Taxes, net of valuation allowance . . . . . . . . . . 1,249 1,255
Excess of Cost over Assets Acquired, net of accumulated
amortization of $791 and $715, respectively . . . . . . . . . . . 1,744 1,821
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 85
------- -------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,754 $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 . . . . . . . . . . . . . . . . . . . . . . . . $ 2,156 $ 1,383
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 570 357
Accrued compensation expense . . . . . . . . . . . . . . . . . . 235 300
Short positions in marketable equity securities . . . . . . . . . -- 447
Due to broker . . . . . . . . . . . . . . . . . . . . . . . . . . 1,300 367
Current portion of long-term debt . . . . . . . . . . . . . . . . 156 156
------ -------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . 4,417 3,010
Long-Term Obligations, less current portion . . . . . . . . . . . . . 932 626
Deferred Income - non-compete agreement . . . . . . . . . . . . . . . 2,000 2,300
Stockholders' Equity
Common Stock, par value $.01 per share: authorized 12,000,000
shares; shares issued of 2,748,258 and 2,695,571, respectively 27 27
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 13,216 13,146
Note receivable from stockholder . . . . . . . . . . . . . . . . . . (250) (250)
Net unrealized loss on noncurrent marketable securities . . . . . . . (367) (288)
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . 248 (163)
Less: treasury shares at cost (199,918 and
14,100 shares, respectively) . . . . . . . . . . . . . . . . . . (469) (48)
------- -------
12,405 12,424
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . $19,754 $18,360
======= =======
See notes to condensed consolidated financial statements.
Note: The balance sheet at June 30, 1994 has been derived from the audited consolidated financial statements at that date.
</TABLE>
Page 3 of 12
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE><CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
---------------------------------------------------------
1994 1993 1994 1993
(000's omitted, except per share data)
--------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . $ 3,580 $ 2,747 $ 6,954 $ 5,444
Cost of goods sold . . . . . . . . . . . . . 2,104 1,451 4,147 2,966
------ ------- ------- -------
Gross profit . . . . . . . . . . . . . . . . 1,476 1,296 2,807 2,478
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . 1,241 1,174 2,491 2,231
Provision for doubtful accounts . . . . . . . 42 33 48 54
Depreciation and amortization . . . . . . . . 186 223 310 449
Interest expense and amortization of deferred
note issuance costs . . . . . . . . . . .
45 15 67 244
Interest and other income - net . . . . . . . 256 249 526 512
------ ------ ------ ------
Income before income taxes
and extraordinary item . . . . . . . . . 218 100 417 12
Provision for income taxes . . . . . . . . . 3 -- 6 --
------- --------- ------- ---------
Income before extraordinary item . . . . . . 215 100 411 12
Extraordinary item . . . . . . . . . . . . .
-- -- -- 53
--------- -------- --------- --------
Net income . . . . . . . . . . . . . . . . .
$ 215 $ 100 $ 411 $ 65
======= ======= ======= ========
Income per Common and Common Equivalent Share:
Income before extraordinary item . . . . . . $ .08 $ .04 $ .16 $ --
Extraordinary item . . . . . . . . . . . . . -- -- -- .02
------ ------ ------ -----
Net income . . . . . . . . . . . . . . . . . $ .08 $ .04 $ .16 $ .02
===== ===== ===== =====
Number of shares used in computation 2,642,857 2,755,447 2,642,857 2,755,447
See notes to condensed consolidated financial statements.
</TABLE>
Page 4 of 12
<PAGE>
<TABLE><CAPTION>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
December 31
1994 1993
------------------------
(000's omitted)
------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 411 $ 65
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 547 631
Provision for losses on accounts receivable . . . . . . . . . . . . . 46 54
Amortization of non-compete agreement . . . . . . . . . . . . . . . . (300) (300)
Changes in operating assets and liabilities:
(Increase) in accounts receivable . . . . . . . . . . . . . . . . . (214) (530)
(Increase) in inventory . . . . . . . . . . . . . . . . . . . . . . (1,068) (88)
(Increase) in prepaid expenses and other current assets . . . . . . (402) (170)
Decrease in receivable from sale of division . . . . . . . . . . . -- 1,453
Decrease in deferred income taxes . . . . . . . . . . . . . . . . . 6 --
Decrease in other assets . . . . . . . . . . . . . . . . . . . . . 73 91
Increase (decrease) in accounts payable and accrued expenses . . . 474 (2,808)
(Decrease) in current portion of long term debt . . . . . . . . . . -- (11,664)
------- -------
NET CASH (USED-IN) OPERATING ACTIVITIES . . . . . . . . . . . . (427) (13,266)
INVESTING ACTIVITIES
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . (406) (174)
Net sales (purchases) of marketable securities . . . . . . . . . . . . . 741 (4,285)
------ ------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES . . . . . . 335 (4,459)
------ ------
FINANCING ACTIVITIES
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . 70 --
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . (421) (43)
Increase in long term borrowings . . . . . . . . . . . . . . . . . . . .
306 --
-------- -------
NET CASH (USED-IN) FINANCING ACTIVITIES . . . . . . . . . . . .
(45) (43)
-------- ------
DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . (137) (17,768)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . 182 17,925
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . $ 45 $ 157
======= =======
See notes to condensed consolidated financial statements.
</TABLE>
Page 5 of 12
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1994
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 six
month periods ended December 31, 1994 are not necessarily indicative of the
results that may be expected for the year ending June 30, 1995.
NOTE B--INVENTORIES
<TABLE><CAPTION>
Inventories consist of the following:
December 31 June 30
1994 1994
---------------- ------------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . $2,038 $1,341
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . 1,170 769
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . 251 281
----- -----
$3,459 $2,391
===== =====
</TABLE>
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
During the six months ended December 31, 1993, the Company adopted FASB
Statement No. 109, "Accounting for Income Taxes." As permitted under the
Statement, the Company has elected not to restate the financial statements of
prior years. 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. Prior to the adoption
of Statement 109, income tax expense was determined using the deferred method.
Deferred tax expense was based on items of income and expense that were
reported in different years in the financial statements and tax returns and
were measured at the tax rate in effect in the year the difference originated.
The Company has available net operating loss carry forwards for federal income
tax purposes of approximately $7,761,000 at December 31, 1994. Omnirel pre
acquisition net operating loss carryforward for federal income tax purpose of
$5,514,000 at December 31, 1994 expires through 2007, subject to annual
limitations under Sec. 382 of the Internal Revenue Code.
Page 6 of 12
<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 Six Months Ended
December 31 December 31
----------------------------------------
1994 1993 1994 1993
----------------------------------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Cost of goods sold . . . . . . . . . . . . . . . . . . . 58.8 52.8 59.6 54.5
Gross profit . . . . . . . . . . . . . . . . . . . . . . 41.2 47.2 40.4 45.5
Selling, general and administrative expenses, provision
for doubtful accounts, depreciation and
amortization . . . . . . . . . . . . . . . . . . . . 41.1 52.1 41.0 50.2
Interest expense and amortization of deferred note
issuance costs . . . . . . . . . . . . . . . . . . . 1.3 .5 1.0 4.5
Interest and other income - net . . . . . . . . . . . . . 7.2 9.1 7.6 9.4
Income before income taxes
and extraordinary item . . . . . . . . . . . . . . . . 6.0 3.6 6.0 0.2
Provision for income taxes . . . . . . . . . . . . . . . .0 .0 .1 .0
----- ----- ----- -----
Income before extraordinary item . . . . . . . . . . . . 6.0 3.6 5.9 0.2
Extraordinary item . . . . . . . . . . . . . . . . . . . .0 .0 .0 1.0
----- ----- ----- -----
Net income . . . . . . . . . . . . . . . . . . . . . . . 6.0 3.6 5.9 1.2
===== ===== ===== =====
</TABLE>
FINANCIAL CONDITION AND RESULTS OF OPERATION
Three Months Ended December 31, 1994 and December 31, 1993
- - - - ----------------------------------------------------------
On a consolidated basis, the Company earned $215,000 or $.08 per share for the
quarter ended December 31, 1994 compared to income of $100,000 or $.04 per share
for the quarter ended December 31, 1993. Each of the Company's subsidiaries,
during the quarter ended December 31, 1994 increased sales revenues at a rate
greater than corresponding aggregate expenses compared to the comparable quarter
ending December 31, 1993.
Revenue for the three months ended December 31, 1994 were $3,580,000, composed
of net sales of TACTech of $299,000 and net sales of Omnirel of $3,281,000. Net
sales for the three months ending December 31, 1993 were $2,747,000, comprised
of net sales of TACTech of $220,000 and net sales of Omnirel of $2,527,000. For
the quarter ended December 31, 1994 net sales increased 36% and 30% respectively
for TACTech and Omnirel over the prior comparable quarter.
While Omnirel's gross profit, due to an increase in net sales, increased
slightly in the three months ended December 31, 1994 compared to the 1993
period, its gross profit margins declined by 6.8% from period to period, due
largely to an increased percentage of industrial (non-military) components in
the subsidiary's overall product mix which are less profitable at current
volumes. Additionally, Omnirel incurred an increase in manufacturing overhead
related to an increase in production capacity to enable Omnirel to
Page 7 of 12
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
satisfy a significant new order received from General Electric, a principal
customer, for multi-chip power module systems containing power hybrid
componentry.
On a consolidated basis, gross profit for the December 31, 1994 three month
period increased 13.9% over the prior year's period. Improvements in both net
sales and gross profit margin from the Company's TACTech unit complemented the
improvement in Omnirel net sales, and helped offset the decline in Omnirel gross
profit margin.
On a consolidated basis, selling, general and administrative expenses were
$1,241,000 for the three months ending December 31, 1994 as compared to
$1,174,000 for the three months ending December 31, 1993. Selling, general and
administrative expenses declined 8% as a percentage of consolidated gross
revenues from the prior comparable quarter due primarily to the improvement in
net revenues for each of the subsidiaries without a comparable increase in
related selling costs.
Depreciation and amortization expense for the three months ending December 31,
1994 was $186,000 compared to 223,000 for the comparable quarter ending
December 31, 1993. As a result of the adoption of FASB Statement No. 109, the
excess of cost over the assets acquired was reduced approximately $1,275,000.
As a result the amortization of this intangible asset decreased.
Six Months Ended December 31, 1994 and December 31, 1993
- - - - --------------------------------------------------------
On a consolidated basis, the Company reported income of $411,000 or $.16 per
share for the six months ended December 31, 1994 as compared to income of
$65,000 or $.03 per share which included extraordinary income of $53,000 or $.02
per share representing income realized from the repurchase by the Company of
$11,650,000 face value of its Senior Subordinated Notes.
Revenue for the six months ended December 31, 1994 were $6,954,000, composed
of net sales of TACTech of $585,000 and net sales of Omnirel of $6,369,000. Net
sales for the six months ending December 31, 1993 were $5,444,000 composed of
net sales of TACTech of $411,000 and net sales of Omnirel of $5,033,000. For
the six months ended December 31, 1994 net revenues increased 24% and 27%
respectively for TACTech and Omnirel over the prior comparable period.
Omnirel's increase is primarily due to its increase in sales of industrial (non-
military) products. The increases in TACTech revenues were due, in part, to
payments received from the Department of Defense, pursuant to a contract it
received to develop and test an information parts management system, and in
part to increases in its subscriber base.
Improvements from the 1994 six month period over the 1993 period in
consolidated gross profits, and the decline in gross profit margins, are
attributable to the same causes as affected the three month periods.
On a consolidated basis gross profit was $2,807,000 for the six months ending
December 31, 1994 as compared to $2,478,000 for the prior comparable period
ending December 31, 1993. The Company's increase in gross profit is attributed
primarily to TACTech improvement in net sales without a comparable increase in
fixed costs.
Consolidated selling, general and administrative expenses, provision for
doubtful accounts, depreciation and amortization for the six months ending
December 31, 1994 were $2,849,000 compared to $2,734,000 for the comparable
period ending December 31, 1993. As a percentage of consolidated revenues these
expenses were reduced to 41% for the period ending December 31, 1994 from 50.2%
for the comparable quarter. This is, again, primarily attributable to an
increase in consolidated revenues without a comparable increase in selling
costs.
Interest expense was reduced to $67,000 in the six months ending December 31,
1994 from $244,000
Page 8 of 12
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ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
for the comparable period ending December 31, 1993 as a result of the Company
retiring all of its Senior Subordinated Notes.
Liquidity and Capital Resources
- - - - -------------------------------
Management expects that its current resources will be sufficient to finance
the continued operations of the Company's Omnirel and TACTech subsidiaries.
Omnirel operations are funded from internally generated cash, from intercompany
borrowings, and from available bank lines of credit. The Company does not
foresee the need to expend capital beyond its ability to obtain financing from
such sources. TACTech's capital needs are immaterial to the Company on a
consolidated basis.
During the six months ended December 31, l994, warrants to purchase 52,687
shares were exercised, thereby providing an additional $70,500 in liquidity and
capital for the period.
The principal change in the Company's holdings of liquid and capital assets
relates to the 44.7% increase in inventory levels from the 1993 fiscal year-
ended June 30, 1994. The increase is due primarily to products being
manufactured by Omnirel to fulfill the General Electric order. Omnirel also
acquired additional manufacturing equipment to help it satisfy that order, which
helped boost the Company's backlog by more than $10,000,000 to approximately
$16,000,000 at December 31, 1994. It does not expect to incur significant
additional capital expenditures to fulfill the order.
Page 9 of 12
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ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibit is included herein:
11. Statement re: computation of earnings per share
The Company did not file any reports on Form 8K for the three months ended
December 31, 1994.
Page 10 of 12
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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: February 14, 1995 /s/ Robert E. Schrader
-------------------------
Robert E. Schrader, President and
Chief Executive Officer
Date: February 14, 1995 /s/ Martin S. Fawer
----------------------
Martin S. Fawer, Treasurer and
Chief Financial Officer
Page 11 of 12
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
EXHIBIT 11-STATEMENT RE: COMPUTATION OF
COMMON AND COMMON EQUIVALENT PER SHARE EARNINGS
<TABLE><CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1994 1993 1994 1993
-------------------------------------------------
(000's omitted, except per share data)
-------------------------------------------------
<S> <C> <C> <C> <C>
Average shares outstanding . . . . . . . . . . . . . . . 2,548 2,681 2,548 2,681
Net effect of dilutive stock options and
warrants-based on the treasury stock
method using average market price . . . . . . . . . . 95 74 95 74
---- ----- ---- -----
Shares used for computation . . . . . . . . . . . . . . . 2,643 2,755 2,643 2,755
Income before extraordinary Item . . . . . . . . . . . . ---- ----- ----- 12
Extraordinary Item . . . . . . . . . . . . . . . . . . . ---- ----- ----- 53
====== ====== ===== =====
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 215 $ 100 $ 411 $ 65
Income per Share before extraordinary Item ---- ----- ----- -----
Extraordinary Item Per Share ---- ----- ----- 0.02
====== ====== ====== ======
Net Income per Share $ .08 $ .04 $ .16 $ .02
</TABLE>
Page 12 of 12
