================================================================================
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 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 10596
- --------------------------------------------------------------------------------
(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, 1995 was 2,640,131
================================================================================
1 of 14
<PAGE>
INDEX
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - December 31, 1995 and
June 30, 1995 ..................................................... 3
Condensed consolidated statements of operations - three months
ended December 31, 1995 and 1994; six months ended December
31, 1995 and 1994 ................................................. 4
Condensed consolidated statements of cash flows - six months
ended December 31, 1995 and 1994 .................................. 5
Notes to condensed consolidated financial statements -
December 31, 1995 ................................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................. 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .................................. 11
Signatures ........................................................ 12
Exhibit 11 - Computation of earnings per share - three months
and six months ended December 31, 1995 and 1994 ................... 13
2 of 14
<PAGE>
PART 1. FINANCIAL INFORMATION
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31 June 30
1995 1995
-----------------------
(Unaudited) (Note)
(000's omitted)
-----------------------
Assets
Current assets
Cash and cash equivalents $ 1,622 $ 1,366
Marketable securities 2,797 1,489
Accounts receivable, less allowances of $84
and $86, respectively 1,742 3,533
Inventories 3,721 3,817
Prepaid expenses 119 248
Other current assets 662 380
-----------------------
Total current assets 10,663 10,833
Property, plant and equipment 9,368 9,028
Less accumulated depreciation and amortization 4,769 4,427
-----------------------
4,599 4,601
Marketable securities - non-current 7,093 3,787
Deferred income taxes, net of valuation allowance 1,284 1,284
Excess of cost over assets acquired, net of
amortization of $944 and $868, respectively 1,592 1,668
Other assets 12 12
-----------------------
Total assets $ 25,243 $ 22,185
=======================
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 781 $ 2,035
Accrued expenses and taxes payable 2,260 1,566
Accrued compensation expense 797 524
Due to broker -- 259
Current portion of long-term obligations 894 231
-----------------------
Total current liabilities 4,732 4,615
Long-term obligations, less current portion 1,461 741
Deferred income - non-compete agreement 1,400 1,700
Stockholders' equity
Common stock, par value $.01 per share;
authorized 12,000,000 shares; issued 2,840,049
shares as of December 31, 1995 and 2,797,415
shares as of June 30, 1995 28 28
Additional paid-in capital 13,680 13,466
Note receivable from stockholder (170) (250)
Depreciation in marketable securities (535) --
Retained earnings 5,116 2,354
Less treasury shares at cost (199,918 shares -
1995 and 1994) (469) (469)
-----------------------
Total stockholders' equity 17,650 15,129
-----------------------
Total liabilities and stockholders' equity $ 25,243 $ 22,185
=======================
Note: The balance sheet at June 30, 1995 has been derived from the audited
consolidated financial statements at that date.
3 of 14
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
Three months ended Six months ended
December 31 December 31
------------------------- --------------------------
1995 1994 1995 1994
------------------------- --------------------------
(000's omitted, except per share data)
<S> <C> <C>
Net sales $ 7,222 $ 3,580 $ 16,509 $ 6,954
Cost of goods sold 4,039 2,104 8,671 4,147
------------------------- --------------------------
Gross profit 3,183 1,476 7,838 2,807
Selling, general and administrative 1,804 1,241 3,813 2,491
Provision for doubtful accounts 6 42 12 48
Depreciation and amortization
of property, plant and equipment 130 186 253 310
Net interest expense and
amortization of deferred note
issuance costs 67 45 97 67
Interest and other (income)
loss - net 54 (256) (462) (526)
------------------------- --------------------------
Income before income taxes 1,122 218 4,125 417
Provision for income taxes 211 3 1,363 6
------------------------- --------------------------
Net income $ 911 $ 215 $ 2,762 $ 411
========================= ==========================
Net income per common and common
equivalent share $ 0.34 $ 0.08 $ 1.03 $ 0.16
========================= ==========================
Number of shares used in computation 2,690,283 2,642,857 2,690,283 2,642,857
========================= ==========================
</TABLE>
4 of 14
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended
December 31
--------------------
1995 1994
--------------------
(000's omitted)
Operating activities
Net income $ 2,762 $ 411
Adjusted to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 418 547
Amortization of non-compete agreement (300) (300)
Provision (credit) for losses on accounts receivable (2) 46
Changes in operating assets and liabilities:
Accounts receivable 1,793 (214)
Inventories 96 (1,068)
Prepaid expenses and other current assets (153) (402)
Deferred taxes -- 6
Other assets -- 73
Accounts payable and accrued expenses and
other current liabilities 117 474
--------------------
Net cash provided by (used in) operating activities 4,731 (427)
Investing activities
Purchases of property and equipment (340) (406)
Net (purchases) sales of marketable securities (5,149) 741
--------------------
Net cash (used in) provided by investing activities (5,489) 335
Financing activities
Net proceeds from lines of credit and long-term
borrowings including reclassification 720 306
Repayment of loan receivable shareholder 80 --
Issuance of common stock 214 70
Repurchase of common stock for treasury -- (421)
--------------------
Net cash provided by (used in) financing activities 1,014 (45)
Net increase (decrease) in cash and cash equivalents 256 (137)
Cash and cash equivalents at beginning of year 1,366 182
--------------------
Cash and cash equivalents at end of year $ 1,622 $ 45
====================
5 of 14
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
December 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 six-month period ended December 31,
1995 are not necessarily indicative of the results that may be expected for the
year ending June 30, 1996.
Certain reclassifications have been made to the quarterly information to conform
to the current presentation.
Note B - Inventories
Inventories are stated at the lower of cost (first in, first out method) or
market.
Inventories consist of the following:
December 31 June 30
1995 1995
-------------------------------
Raw materials $2,232 $2,110
Work in process 874 1,195
Finished goods 615 512
-------------------------------
$3,721 $3,817
===============================
Note C - Net income per Common and Common Equivalent Share
Net 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 warrants.
Note D - Income Taxes
The Company uses the liability method in accordance with FASB Statement No. 109,
"Accounting for Income Taxes" 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. Deferred tax expense was based on items of income and
expenses 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.
6 of 14
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
December 31, 1995
Note E - Marketable Securities
On October 1, 1995, the Company reassessed its investment portfolio and
reclassified a portion of its marketable securities pursuant to FASB No. 115.
Accordingly, investment securities with a market value as of October 1, 1995 in
the amount of $709,000 were transferred to Available For Sale. These marketable
securities had an acquisition cost of $664,000. The Company has heretofore
adopted a policy of recognizing any permanent impairment in its value of these
securities as a change to the income statement. All other diminution or
increases in value are reflected through the stockholders' equity.
7 of 14
<PAGE>
PART 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
The following table sets forth the periods indicating the percentage
relationship to net sales of certain items from the consolidated statement of
operations:
Percent of Net Sales
Three months ended Six months ended
December 31 December 31
------------------ -------------------
1995 1994 1995 1994
------------------ -------------------
(000's omitted)
Net sales 100.00% 100.00% 100.00% 100.00%
Cost of goods sold 55.92 58.80 52.52 59.60
------------------ -------------------
Gross profit 44.08 41.20 47.48 40.40
Selling, general and administrative 23.98 34.70 23.10 35.80
Provision for doubtful accounts 0.08 1.20 0.07 0.70
Depreciation and amortization of
property and equipment 1.80 5.20 1.53 4.50
Interest expense and amortization of
deferred note issuance costs 0.94 1.30 0.59 1.00
Interest and other income - net 0.75 (7.20) (2.80) (7.60)
------------------ -------------------
Income before income taxes 15.53 6.00 24.99 6.00
Provision for income taxes 2.92 -- 8.26 0.10
------------------ -------------------
Net income 12.61 6.00 16.73 5.90
================== ===================
8 of 14
<PAGE>
THREE MONTHS ENDED DECEMBER 31, 1995 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1994
Revenues for the three months ended December 31, 1995 were $7,222,000, comprised
of net sales of the Company's TACTech subsidiary of $398,000 and the Company's
Omnirel subsidiary of $6,824,000. Net sales for the three months ended December
31, 1994 were $3,580,000, comprised of net sales of TACTech of $299,000 and net
sales of Omnirel of $3,281,000.
The 108% growth of Omnirel's sales was largely as a result of continued
fulfillment of a series of orders placed previously by General Electric for
multi-chip power module systems containing power hybrid componentry. These
orders accounted for 70% of Omnirel's revenues for the three months ended
December 31, 1995 compared to 38% for the comparable 1994 quarter.
Net sales for TACTech increased 33% for the three months ended December 31, 1995
compared to the comparable 1994 quarter due principally to an increase of
approximately 22% in the number of subscribers.
Omnirel and TACTech represent 87% and 13%, respectively, of the Company's
consolidated gross profit which grew to $3,183,000 during the quarter ended
December 31, 1995 from $1,476,000 for the quarter ended December 31, 1994.
Omnirel's costs of goods sold decreased 5% as a percentage of net sales
primarily due to increased efficiency in usage of its manufacturing facilities.
As a result of the increased consolidated revenues, selling and general
administrative expenses decreased to approximately 24% of revenues for the
quarter ended December 31, 1995 compared to 35% for the comparable 1994 period.
The $563,000 increase in selling, general and administrative expenses was due
primarily to increases in consolidated management incentive compensation expense
and in research and development expense, of approximately $207,000 and
approximately $209,000, respectively.
Interest income and other income net for the current reporting period was a loss
of $54,000 compared to income of $256,000 for the prior comparable quarter.
This loss or income is primarily comprised of interest, dividends, a fee for
non-compete agreement and net realized and unrealized gains and losses on
marketable securities.
During the quarter ended December 31, 1995, interest and dividend income
increased by $187,000 over the prior comparable quarter. This was offset by net
unrealized and realized losses in marketable securities of $534,000 as compared
to net unrealized and realized gains of $2,000 in the quarter ended December 31,
1994. The Company's general investment strategy is to invest in preferred
stocks and debt securities. In addition, subject to the review of the Board of
Directors, management may make long-term investments in marketable securities
(including common stocks) of publicly traded, large capitalization technology
issuers (generally, manufacturers of semiconductors and electronic components).
The Company's provision for income taxes increased significantly as a result of
substantially increased pretax income. 1994 operations reflect the Company's
utilization of net operating loss carryforwards and the related release of
valuation allowances previously established for such losses.
The backlog as of December 31, 1995 was $9,200,000 of which 14.4% was
represented by the order from General Electric. The growth rate of
9 of 14
<PAGE>
Omnirel sales for the quarter ended December 31, 1995 declined as compared to
the quarter ended September 30, 1995. This is attributable to the unusual
volume of shipments made to General Electric in the quarter ended September
30, 1995 and to the occurrence of the expected reduction in Omnirel's sales
to General Electric as Omnirel nears the fulfillment in the current fiscal
year of a series of orders previously placed by General Electric. While
additional sales to General Electric are likely, revenue from Omnirel's
principal customer is expected to significantly decline over the next several
years. The amount of the decline is dependant upon factors such as the level
of the customer's business, whether Omnirel continues as sole source supplier
and whether Omnirel can produce the products required by the customer based
upon changing technology. Omnirel continues to actively seek to increase its
other business as well as to obtain additional business from General Electric.
The Company does not presently expect any material decline in overall sales in
the 1996 fiscal year.
SIX MONTHS ENDED DECEMBER 31, 1995 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1994
Revenues for the six months ended December 31, 1995 were $16,509,000, comprised
of net sales of TACTech of $773,000 and Omnirel of $15,736,000. Net sales for
the six months ended December 31, 1994 were $6,954,000, comprised of net sales
of TACTech of $585,000 and net sales of Omnirel of $6,369,000.
The 147% growth of Omnirel's sales was largely as a result of continued
fulfillment of a series of orders placed previously by General Electric for
multi-chip power module systems containing power hybrid componentry. These
orders accounted for 74% of Omnirel's revenues for the six months ended December
31, 1995 compared to 38% for the comparable 1994 period.
Net sales for TACTech increased 32% for the six months ended December 31, 1995
compared to the comparable 1994 period due principally to an increase of
approximately 22% in the number of subscribers.
Omnirel and TACTech represent 90% and 10%, respectively, of the Company's
consolidated gross profit which grew to $7,838,000, during the six months ended
December 31, 1995 from $2,807,000 for the six months ended December 31, 1994.
Omnirel's cost of goods sold decreased 10% as a percentage of net sales
primarily due to increased efficiency in usage of its manufacturing facilities.
As a result of the increased consolidated revenues, selling and general
administrative expenses decreased to approximately 23% of revenues for the six
months ended December 31, 1995 compared to 36% for the comparable 1994 period.
The $1,322,000 increase in selling, general and administrative expenses was due
primarily to increases in consolidated management incentive compensation expense
and in research and development expense, of approximately $588,000 and
approximately $572,000, respectively.
Interest income and other income net for the current reporting period was a loss
of $462,000 compared to income of $526,000 for the prior comparable quarter.
This income is primarily comprised of interest, dividends, a fee for non-compete
agreement and net realized and unrealized gains and losses on marketable
securities.
10 of 14
<PAGE>
During the six month period ended December 31, 1995, interest and dividend
income decreased by $66,000 compared to the prior comparable period. This was
due principally to net realized and unrealized losses in marketable securities
of $310,000 for the six months ended December 31, 1995 as compared to net
unrealized and realized losses of $36,800 in the comparable 1994 period.
The Company's provision for income taxes increased significantly as a result of
substantially increased pretax income. 1994 operations reflect the Company's
utilization of net operating loss carryforwards and the related release of
valuation allowances previously established for such losses.
LIQUIDITY AND CAPITAL RESOURCES
Management expects that its internally generated funds and available bank lines
of credit will be sufficient to finance the continued operations of the Company.
During the current fiscal quarter, Omnirel reduced its intercompany debt to the
Company by $2,100,000.
Omnirel further increased its liquidity by placing a $1,500,000 five year
mortgage on its previously unencumbered manufacturing facility in Leominster,
Massachusetts.
11 of 14
<PAGE>
PART 2. OTHER INFORMATION
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
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 report on Form 8-K during the six months ended
December 31, 1995.
12 of 14
<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 February 14, 1996 \s\ Robert E. Schrader
-------------------- -------------------------------------
Robert E. Schrader
President and Chief Executive Officer
Date February 14, 1996 \s\ Martin S. Fawer
-------------------- -------------------------------------
Martin S. Fawer
Treasurer and Chief Financial Officer
13 of 14
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF
COMMON AND COMMON EQUIVALENT PER SHARE EARNINGS
Three months ended Six months ended
December 31 December 31
---------------- ----------------
1995 1994 1995 1994
---------------- ----------------
(000's omitted except per share data)
Average shares outstanding 2,640 2,548 2,640 2,548
Net effect of dilutive stock options
and warrants - based on the treasury
stock method using average market
price 50 95 50 95
---------------- ----------------
Shares used for computation 2,690 2,643 2,690 2,643
================ ================
Net income $ 911 $ 215 $2,762 $ 411
================ ================
Income per common and common equivalent
share:
Net income $ 0.34 $ 0.08 $ 1.03 $ 0.16
================ ================
14 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 1,622
<SECURITIES> 2,797
<RECEIVABLES> 1,826
<ALLOWANCES> 84
<INVENTORY> 3,721
<CURRENT-ASSETS> 10,663
<PP&E> 9,368
<DEPRECIATION> 4,769
<TOTAL-ASSETS> 25,243
<CURRENT-LIABILITIES> 4,732
<BONDS> 0
<COMMON> 28
0
0
<OTHER-SE> 17,622
<TOTAL-LIABILITY-AND-EQUITY> 25,243
<SALES> 7,222
<TOTAL-REVENUES> 7,222
<CGS> 4,039
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,940
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67
<INCOME-PRETAX> 1,122
<INCOME-TAX> 211
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 911
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
