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FORM 10-QSB
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, 1997
Commission file number 0-14328
ZING TECHNOLOGIES, INC.
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(Exact Name of registrant as specified in its charter)
NEW YORK 13-2650621
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
115 Stevens Avenue, Valhalla, New York 10595
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(Address of principal executive offices)
(Zip Code)
(914) 747-7474
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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 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, 1997 was 2,490,699.
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INDEX
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - March 31, 1997 and
June 30, 1996..............................................................................3
Condensed consolidated statements of operations - three months ended
March 31, 1997 and 1996; nine months ended
March 31, 1997 and 1996....................................................................4
Condensed consolidated statements of cash flows - nine months ended
March 31, 1997 and 1996....................................................................5
Notes to condensed consolidated financial statements -
March 31, 1997.............................................................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................7-9
PART II. OTHER INFORMATION
Item 5. Other Information......................................................................10-12
Item 6. Exhibits and Reports on Form 8-K..........................................................12
Signatures................................................................................13
Exhibit 11 - Computation of earnings per share - three months
and nine months ended March 31, 1997 and 1996.............................................14
Exhibit 27 - Financial Data Schedule......................................................15
</TABLE>
Page 2 of 14
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ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
A S S E T S
<TABLE>
<CAPTION>
MARCH 31 JUNE 30
1997 1996
---------------------------------
(UNAUDITED) (NOTE)
---------------------------------
(000'S OMITTED)
---------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents.................................................. $ 625 $ 727
Marketable securities...................................................... 21,537 19,927
Accounts receivable, less reserves of
$148 and $135, respectively............................................. 3,066 2,352
Inventories................................................................ 5,277 4,290
Prepaid expenses........................................................... 272 145
Other current assets....................................................... 454 341
---------- -----------
Total Current Assets............................................................ 31,231 27,782
Property, Plant and Equipment................................................... 10,967 10,002
Less accumulated depreciation and amortization............................. 5,772 5,181
--------- ----------
5,195 4,821
Deferred Income Taxes, net of valuation allowance............................... 1,095 1,095
Excess of Cost Over Assets Acquired, net of amortization
amortization of $1,135 and $1,021, respectively............................ 1,401 1,515
Other Assets.................................................................... 37 38
-------- --------
TOTAL ASSETS............................................................... $ 38,959 $ 35,251
======== ========
L I A B I L I T I E S A N D S T O C K H O L DE R S' E Q U I T Y
Current Liabilities
Accounts payable........................................................... $ 1,953 $ 1,495
Accrued expenses & taxes payable........................................... 1,405 1,698
Accrued compensation expense............................................... 441 666
Loan payable - bank........................................................ 300 5,831
Due to broker.............................................................. 11,154 2,229
Short position in marketable equity securities............................. - 1,026
Current portion of long-term obligations.................................. 70 39
-------- --------
Total Current Liabilities....................................................... 15,333 12,984
Long-Term Obligations, less current portion..................................... 2,995 1,445
Deferred Income - non-compete agreement......................................... 650 1,100
Stockholders' Equity
Common Stock, par value $.01 per share: authorized 12,000,000
shares; issued 2,890,617 shares as of March 31, 1997 and
2,874,117 shares as of June 30, 1996....................................... 28 28
Additional paid-in capital................................................. 13,912 13,860
Note receivable from stockholder........................................... (140) (170)
Net unrealized gain (loss) on marketable securities........................ (307) 220
Retained earnings.......................................................... 8,930 6,767
Less: treasury shares at cost 399,918 shares at
March 31, 1997 and 255,018 shares at June 30, 1996...................... (2,442) (983)
-------- -------
Total Stockholders' Equity 19,981 19,722
-------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................. $ 38,959 $ 35,251
======== ========
Note: The balance sheet at June 30,1996 has been derived from the audited consolidated statements at that date.
</TABLE>
See notes to condensed consolidated financial statements.
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ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
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(000'S OMITTED, EXCEPT PER SHARE DATA)
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<S> <C> <C> <C> <C>
Net Sales...................................................... $ 5,405 $ 4,910 $ 15,505 $ 21,419
Cost of goods sold............................................. 2,981 2,802 8,785 11,473
----- ----- ------- -------
Gross Profit................................................... 2,424 2,108 6,720 9,946
Selling, general and administrative expenses................... 1,954 1,598 5,451 5,423
Provision for doubtful accounts ............................... 6 --- 18 ---
Depreciation and amortization of property, plant, equipment
and excess of costs over assets acquired.................. 158 136 450 389
Interest expense .............................................. 190 58 700 155
Interest and other (income) loss - net......................... (669) (394) (2,407) (856)
Minority interest in income of consolidated subsidiary......... --- 31 --- 31
----- ----- ------- -------
Income before income taxes..................................... 785 679 2,508 4,804
Provision for income taxes..................................... --- 188 345 1,551
----- ----- ------- -------
Net income..................................................... $ 785 $ 491 $ 2,163 $ 3,253
===== ===== ======= ========
Net income per Common and Common Equivalent Share.............. $ 0.31 $ 0.18 $ 0.86 $ 1.23
Number of shares used in computation........................... 2,486,000 2,680,000 2,499,000 2,653,000
</TABLE>
See notes to condensed consolidated financial statements.
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ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
1997 1996
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(000'S OMITTED)
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<S> <C> <C>
OPERATING ACTIVITIES
Net income ..................................................... $ 2,163 $ 3,253
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization............................... 705 643
Amortization of non-complete agreement...................... (450) (450)
Provision for losses on accounts receivable................. 18 4
Changes in operating assets and liabilities:
Accounts receivable..................................... (724) 927
Inventories............................................. (987) 224
Prepaid expenses and other current assets............... (239) 150
Accounts payable and accrued expenses .................. (50) 649
Other .................................................. --- (5)
Unrealized losses (gains) on marketable securities................ (527) ---
------ ------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES.................... (71) 5,395
INVESTING ACTIVITIES
Purchases of property and equipment............................... (965) (588)
Net increases of marketable securities............................ (1,610) (5,855)
Net borrowing on securities....................................... 2,068 ---
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES.................... (507) (6,443)
FINANCING ACTIVITIES
Proceeds from lines of credit and long-term borrowings ........... 2,088 712
Repayment of loan receivable shareholder.......................... 30 80
Repurchase of common stock for treasury........................... (1,459) (390)
Issuance of common stock.......................................... --- 222
Exercise of stock warrants........................................ 22 ---
Reduction of notes payable and long-term debt..................... (205) ---
----- -----
NET CASH PROVIDED BY FINANCING ACTIVITIES.............................. 476 624
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................... (102) (424)
Cash and cash equivalents at beginning of period.................. 727 1,366
----- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................. $ 625 $ 942
===== =====
</TABLE>
See notes to condensed consolidated financial statements.
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ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principals 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 nine-month period ended March 31, 1997
are not necessarily indicative of the results that may be expected for the year
ending June 30, 1997.
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:
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<CAPTION>
March 31, June 30,
1997 1996
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<S> <C> <C>
Raw materials................................ $ 2,980 $ 2,472
Work in process.............................. 1,551 1,294
Finished goods............................... 746 524
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$ 5,277 $ 4,290
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</TABLE>
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 -- SUBSEQUENT EVENTS
On January 30, 1997, the Company's TACTech subsidiary filed a registration
statement with the Securities and Exchange Commission registering the Company's
90% ownership in TACTech for distribution in the previously announced proposed
spinoff of TACTech stock. An amendment to such registration statement was filed
on May 2, 1997.
In April 1997, the Company entered into a $7,500,000 line of credit and
borrowed this amount from Fleet Bank with interest at a fixed rate of 5.6875%
and an expiration date of March 2, 1998. Proceeds from the loan were used to
reduce borrowings under the Company's brokerage margin account. Marketable
securities, principally preferred stocks with a fair market value of
approximately $15,000,000, were used as collateral for the borrowing from Fleet
Bank.
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ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
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,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Net sales ............................................................. 100.00% 100.00% 100.00% 100.00%
Cost of goods sold......................................................... 55.15 57.07 56.66 53.56
------ ----- ----- -----
Gross profit............................................................... 44.85 42.93 43.34 46.44
Selling, general and administrative expenses............................... 36.14 32.56 35.16 25.32
Provision for doubtful accounts............................................ .11 -- .12 --
Depreciation and amortization of property and equipment ................... 2.93 2.76 2.90 1.82
Interest expense and amortization of
deferred note issuance cost........................................... 3.51 1.19 4.52 0.73
Interest and other income - net............................................ (12.35) (8.02) (15.54) (4.00)
Minority interest.......................................................... -- (0.63) -- (0.15)
------ ----- ----- -----
Income before income taxes................................................. 14.51 13.81 16.18 22.42
Provision for income taxes................................................. -- 3.80 2.23 7.24
------ ----- ----- -----
Net income............................................................... 14.51% 10.01% 13.95% 15.18%
======= ====== ====== ======
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
The Company reported net income of $785,000 or $.31 per share, compared to
$491,000 or $.18 per share for the comparable quarter. Compared to the
comparable quarter in 1996 wherein most of the income was derived from Omnirel,
the Company's material operating subsidiary, most of the current reporting
quarter's income was generated by the Company's investment portfolio. The
Company's subsidiaries, Omnirel and TACTech, increased their current reporting
income by 22% and 72%, respectively, over the comparable quarter.
Revenues for the quarter ended March 31, 1997 were $5,405,000, comprised of
net sales of the Company's Omnirel subsidiary of $4,836,000 and the Company's
TACTech subsidiary of $569,000. Net sales for the quarter ended March 31, 1996
were $4,910,000, comprised of net sales of the Company's Omnirel subsidiary and
TACTech of $4,500,000 and $410,000, respectively.
There was a net increase in revenue from the comparable quarter in the
approximate amount of $500,000. Included in Omnirel's revenues is a continued
fulfillment of a series of orders placed by General Electric for multi-chip
power modules systems which accounted for 20% of Omnirel's revenues for the
quarter ended March 31, 1997, as compared to 27% in the comparable quarter in
1996. This decrease was partially offset by an increase of 71% in revenues of
other products and services
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ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
(continued)
from the comparable quarter in 1996. This increase was significantly attributed
to an increase in product sold through Omnirel's exclusive distributor, Zeus
Electronics/An Arrow Company, and the addition of a significant customer.
Product sold to such distributor and new customer represented approximately 28%
in the aggregate of the current quarter's sales volume as compared to 7% in the
prior period.
Net sales of TACTech increased 28% for the quarter ended March 31, 1997
compared to the quarter ended March 31, 1996 due principally to an increase of
approximately 30% in the number of TACTech subscribers.
Profits from Omnirel and TACTech represent 76% and 24%, respectively, of
the Company's consolidated gross profit of $2,424,000 as compared to 81% and
19%, respectively, of consolidated gross profit of $2,108,000 during the
comparable 1996 quarter. Omnirel's cost of goods sold for the quarter (expressed
as a percentage of sales revenues) was 61.7% and remained relatively constant
compared to the prior reporting quarter (62.3%).
Selling, general and administrative expenses increased during the current
reporting quarter to $1,954,000 from $1,598,000 in the comparable quarter. The
increase in selling, general and administrative expenses expressed as a
percentage of sales revenues increased to 36.1% from 32.6%. The increase is
primarily attributed to increases in selling and research and development
expenses at Omnirel of $120,000 and $105,000, respectively, and an overall
general increase in consolidated general and administrative expenses of
$173,000.
Consolidated interest expense increased approximately $130,000 during the
current reporting quarter from the comparable 1996 quarter primarily
attributable to borrowings from a bank and a brokerage house for capital
required to both increase and maintain the Company's investment portfolio.
Interest income and other income increased to $669,000 for the current
reporting quarter as compared to $394,000 for the comparable quarter. Interest
and dividend income increased approximately $101,000 over the 1996 quarter.
Realized and unrealized gains on securities grew to approximately $174,000
during the current quarter from a loss of $10,000 reported in the quarter ended
March 31, 1996. The increase in dividends is attributed to the significantly
increased portfolio of preferred stocks as compared to the portfolio as at the
end of third quarter of fiscal 1996.
Prior to the quarter ended March 31, 1997, the Company recognized a
decrease in value in its preferred stock portfolio as reported in its financial
statements. During the quarter ended March 31, 1997, primarily as a result of
the redemption of all of its preferred stock portfolio (other than the preferred
stock acquired during such quarter), the Company generated a capital loss for
tax purposes offsetting a recognizable capital gain reported through the nine
months ended March 31, 1997 and reducing the effective tax rate to 14%. As a
result, the Company has not provided an income tax provision for the quarter
ended March 31, 1997.
The backlog as at March 31, 1997 was approximately $10,900,000 of which
less than 15% (or $1,570,000) represented the orders from General Electric
compared to a backlog as at March 31, 1996 of approximately $9,300,000 of which
12% (or $948,000) represented orders from General Electric.
NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO NINE MONTHS ENDED MARCH 31, 1996
The Company reported net income of $2,163,000 or $.86 per share for the
nine months ended March 31, 1997 as compared to $3,253,000 or $1.23 per share
for the nine months ended March 31, 1996. Compared to the comparable nine month
period, wherein substantially all of the income was derived from Omnirel, the
Company's material operating subsidiary, substantially all of the current
reporting period's income was generated by the Company's investment portfolio.
Revenues for the nine months ended March 31, 1997 were $15,505,000
comprised of net sales of the Company's Omnirel subsidiary of $13,900,000 and
the Company's TACTech subsidiary of $1,605,000. Net sales for the nine months
ended March 31, 1996 were $21,419,000 comprised of net sales of Omnirel of
$20,236,000 and TACTech of $1,183,000.
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ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO NINE MONTHS ENDED MARCH 31, 1996
(CONTINUED)
Omnirel sales include revenues generated by the continued fulfillment of a
series of orders placed by General Electric for multi-chip power modules
containing power hybrid components. During the nine months ended March 31, 1997,
these revenues declined to approximately $2,900,000 (or 21%) of total sales from
approximately $12,800,000 (or 60%) of total sales in the prior comparable
reporting period. Revenues from other products and service segments increased
48% over the comparable period. This increase was significantly attributed to an
increase in product sold through Omnirel's exclusive distributor, Zeus
Electronics/An Arrow Company, and the addition of a significant customer.
Product sold to such distributor and new customer represented approximately 18%
in the aggregate of the current period's sales revenue as compared to 4% in the
prior period.
Net sales of TACTech increased 35% for the nine months ended March 31, 1997
as compared to the comparable 1996 period due principally to an increase of
approximately 30% in the number of TACTech subscribers.
Profits for the nine months ended March 31, 1997 at Omnirel and TACTech
represent 76% and 24%, respectively, of the Company's consolidated $6,720,000
gross profit, as compared to 88% and 12%, respectively, of the consolidated
gross profit of $9,946,000 during the nine months ended March 31, 1996.
Omnirel's cost of goods sold increased 8.5% as a percentage of net sales for the
current reporting period as compared to the comparable period in 1996. This was
primarily attributed to the reduction of production volume in the series of
orders placed by General Electric. Due to the reduction of unit volume for these
multi-chip power modules, there was an increase in labor and manufacturing
overhead rates (expressed as a percentage of net sales) of 2.7% and 3.6%,
respectively.
The consolidated selling, general and administrative expenses were
approximately $5,400,000 from period to period. The two factors affecting this
category during the nine months ended March 31, 1997 were a decrease of
consolidated selling, general and administrative costs of $200,000, and an
increase in research and development of approximately $200,000 at Omnirel.
Consolidated interest expense grew to $700,000 during the nine months ended
March 31, 1997 from $155,000 during the comparable 1996 reporting period.
Approximately $400,000 of the increase is attributable to borrowings from a bank
and a brokerage house for capital required to increase and maintain the
Company's investment portfolio. In addition, approximately $140,000 of this
increase is attributable to a mortgage executed at the end of calendar year 1995
on Omnirel's plant facility located in Leominster, Massachusetts and financing
of additional production equipment. A loan in the amount of $5,000,000 due to
Fleet Bank, as well as all loans due to a brokerage house, were fully repaid on
January 31, 1997 with the proceeds from the redemption of all of the preferred
stocks in the Company's investment portfolio.
For the nine months ended March 31, 1997, interest and other net income
grew to approximately $2,407,000, an increase of $1,550,000 from the prior
reporting period. This net increase from the comparable period is attributed to
an increase in dividends and interest of approximately $1,070,000 and realized
gains of approximately $595,000, offset by an increase of unrealized losses of
approximately $115,000. There was an increase in the quantity of preferred
shares held during this reporting period as compared to the nine months ended
March 31, 1996.
Prior to the quarter ended March 31, 1997, the Company recognized a
decrease in value in its preferred stock portfolio as reported in its financial
statements. During the quarter ended March 31, 1997, primarily as a result of
the redemption of all of its preferred stock portfolio (other than the
preferred stock acquired during such quarter), the Company generated a capital
loss for tax purposes offsetting a recognizable capital gain reported through
the nine months ended March 31, 1997 and reducing the effective tax the
Company has not provided an income tax provision for the quarter ended
March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Management expects that the Company's internally generated funds and
available bank lines of credit will be sufficient to finance the continued
operations of the Company.
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ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
When used in this Form 10-QSB, and in future filings by Zing with the
Securities and Exchange Commission, in Zing's press releases and in any oral
statements made with the approval of an authorized Zing executive officer, the
words or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks and uncertainties, including those discussed under the caption "Risk
Factors and Cautionary Statements" below, that could cause actual results to
differ materially from historical earnings or those presently anticipated or
projected. Zing wishes to caution readers not to place undue reliance on such
"forward-looking statements", which speak only as of the date made. Zing wishes
to advise readers that factors listed below could affect Zing's financial
performance and could cause Zing's actual results for future periods to differ
materially from any opinion or statements expressed with respect to future
periods in any current statements.
Zing will NOT undertake and specifically declines any obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
SALES TO SIGNIFICANT CUSTOMER
Sales of various industrial products to General Electric represented 63%,
and 58% of Omnirel's sales revenues for the fiscal year ending June 30, 1995
(each such fiscal year ending on June 30, a "Fiscal Year") and Fiscal Year 1996.
A single project accounted for approximately 63% of Fiscal Year 1995 sales and
58% of Fiscal Year 1996 sales. In Fiscal 1995 and 1996, Omnirel depended on
sales to General Electric arising from such project. As a result of the
continued anticipated decrease in sales to General Electric in Fiscal Year 1997
as the series of orders from such project continues to be fulfilled, there can
be no assurance that Omnirel will be able to compensate for the loss of such
sales in future periods or future Fiscal Years.
THE ENVIRONMENT FOR THE POWER HYBRID MODULE BUSINESS
The following factors can materially affect the Company's performance: the
rapidly changing environment for the power hybrid module business which might
cause market acceptance of Omnirel's existing products to decrease; the
cancellation or rescheduling of one or several material orders; the perceived
absolute or relative overall value of these products by the purchasers,
including the features and pricing compared to other competitive products, the
level of availability of Omnirel products and substitutes and the ability and
willingness of purchasers to acquire newer or more advanced models; and pricing,
purchasing, financing, operational, advertising and promotional decisions by
intermediaries in the distribution channels, which could affect the supply of,
or end user demand for, Omnirel products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Page 10 of 14
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ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
Changes in the amount and rate of growth in Omnirel's selling, general and
administrative expenses, as well as the impact of unusual items resulting from
Omnirel's ongoing evaluation of its business strategies and organizational
structures can materially affect the Company's performance.
SELLING PRICES
Omnirel is subject to continued or increased pressure to change its selling
prices for Omnirel's product, which can affect margins.
RAW MATERIALS
Difficulties in obtaining raw materials, supplies and other items needed
for the production of products and capacity constraints may have an affect on
Omnirel's ability to ship some products.
DEVELOPMENT AND MARKETING
Omnirel is subject to difficulties or delays in the development,
production, testing and marketing of products, including, but not limited to,
the failure to ship new products and technologies when anticipated; the failure
of customers to accept these products or technologies when planned; difficulties
or delays in the design and production of custom product orders and changes in
the commercial viability of the end user products of which these products are a
party; any defects in products; the failure of a critical Omnirel vendor or
supplier to deliver material required by Omnirel; and failures of manufacturing
economies to develop when planned.
ASSETS AND EXPENDITURES
Omnirel's business is also subject to the acquisition of fixed assets and
other assets, including inventories and receivables; the making or incurring of
any expenditure and expenses including, but not limited to, depreciation and
research and development expenses; and the revaluation of assets including, but
not limited to, specialized inventories or related expenses; and the amount of,
and any changes to, tax rates.
PRODUCTION LOSSES AND REWORK COSTS
Omnirel's business is also subject to the occurrences of production losses
and rework costs on new or custom programs in excess of those anticipated during
the pricing process.
DECLINE IN DEFENSE AND/OR AEROSPACE SPENDING
Although Omnirel's military, defense and aerospace business represents a
decreasing percentage of its overall sales in recent years (and, therefore, is
decreasing in its significance), the businesses of both Omnirel and TACTech
continue to depend to a substantial extent upon sales to military, defense and
aerospace contractors. In the event that military, defense and/or aerospace
spending were to decline significantly over the next several years, sales by
Omnirel and TACTech could suffer a corresponding or greater decline. In such
event, both companies would have to seek replacement markets in other
industries. There can be no assurance that such markets would be available or
that either company would be successful in penetrating them.
DEPENDENCE ON KEY PERSONNEL
The businesses of Omnirel and TACTech are substantially dependent upon the
active participation and technical expertise of their executive officers. Zing
is dependent upon the services of its Chief Executive Officer and President,
Robert E. Schrader. Omnirel is dependent upon the services of John F.
Catrambone, its Chief Executive Officer, while TACTech is dependent upon Malcolm
Baca, its Executive Vice President and Chief Operating Officer. The Company
currently maintains
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ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
key-man life insurance policies on both such executive officers in the amounts
of $1,600,000 and $1,700,000, respectively Omnirel also maintains a key-man life
insurance policy on Mr. Catrambone in the amount of $2,500,000. Zing does not
maintain such insurance on Mr. Schrader. Both the Company's and Omnirel's Board
of Directors regularly re-evaluate the need for and the amount of such key-man
life insurance. There can be no assurance, however, that Zing or Omnirel can
obtain executives of comparable expertise and commitment in the event of death,
or that the business of Zing would not suffer material adverse effects as the
result of the death (notwithstanding coverage by key-man insurance), disability
or voluntary departure of any such executive officer.
COMPETITION
Although the market for multi-chip power modules and packaged semiconductor
components is fragmented and no single company maintains a dominant position, it
is nevertheless highly competitive among the five manufacturers (including
Omnirel) who collectively account for approximately 50% of sales to such market.
Omnirel believes that its products and technologies can compete favorable with
the products of its principal competitors. Nevertheless a few of these
competitors have greater financial, marketing, servicing and research and
development resources than those of Omnirel. There can be no assurance that
existing or potential competitors will not develop and market products that are
superior or perceived to be superior to multi-chip power modules and other
products supplied by Omnirel.
TACTech's license agreements are cancelable on thirty (30) days notice.
Approximately 50% of TACTech's information for its data bases comes from
numerous companies in the private sector. Accordingly, there can be no assurance
that existing arrangements with private suppliers of data will continue in
effect or, if they are canceled, that TACTech will be able to enter into
arrangements with other suppliers on terms as beneficial to TACTech as those
presently in effect. Moreover, there can be no assurance that other companies,
including existing customers of TACTech, will not avail themselves of sources of
data to develop their own software and data base services either in competition
with TACTech or to enable them to have their own sources for such services.
TACTech's software services and data bases are protected by trade secret
provisions of license agreements and by copyright laws, but because such
provisions and laws are frequently difficult or costly to enforce, there can be
no assurance that such protection will prove effective.
TECHNOLOGICAL CHANGES AND NEW PRODUCT DEVELOPMENT
In the event of changes in the structure of the computer hardware systems
used by subscribers to operate TACTech's data base software, TACTech would incur
capital costs for new equipment and development costs in connection with the
reconfiguring of its software programs, which cost could be substantial and
could have an adverse effect on TACTech's profitability. In addition, TACTech
regularly incurs capital costs in connection with its new product development in
advance of their being ready for market, and there can be no assurance that such
new products will prove profitable.
INVESTMENT PORTFOLIO
Consistent with the limitations imposed by the Board of Directors, Zing has
invested in common stock of large capitalization issuers in the field of
electronic equipment manufacturing and/or semiconductor manufacturing or
distribution, and preferred stocks. Like any other investor, Zing is subject to
fluctuations in the trading prices and values of Zing's investments and general
stock market conditions as a result of numerous factors outside the control of
Zing. These fluctuations and stock market conditions could materially and
adversely affect the Company.
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 nine months ended
March 31, 1997.
Page 12 of 14
<PAGE>
<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 14, 1997 \s\ Robert E. Schrader
---------------------------------
Robert E. Schrader, President and
Chief Executive Officer
Date: May 14, 1997 \s\ Martin S. Fawer
---------------------------------
Martin S. Fawer, Treasurer and
Chief Executive Officer
Page 13 of 14
<PAGE>
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
EXHIBIT 11-STATEMENT RE: COMPUTATION OF
COMMON AND COMMON EQUIVALENT PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
--------------------------------------------------
(000's Omitted, except per share data)
--------------------------------------------------
<S> <C> <C> <C> <C>
Average shares outstanding....................................... 2,482 2,638 2,495 2,609
Net effect of dilutive stock warrants - based
on the treasury stock method using average market price..... 4 42 4 44
----- ----- ----- ------
Shares used for computation...................................... 2,486 2,680 2,499 2,653
===== ===== ===== =====
Net income....................................................... $ 785 $ 491 $ 2,163 $ 3,253
===== ===== ======= =======
Income per Common and Common
Equivalent Share:
Net income....................................................... $ 0.31 $0.18 $ 0.86 $ 1.23
======= ===== ====== ======
</TABLE>
Page 14 of 14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 625
<SECURITIES> 21,537
<RECEIVABLES> 3,214
<ALLOWANCES> 148
<INVENTORY> 5,277
<CURRENT-ASSETS> 31,231
<PP&E> 10,967
<DEPRECIATION> 5,772
<TOTAL-ASSETS> 38,959
<CURRENT-LIABILITIES> 15,333
<BONDS> 2,995
0
0
<COMMON> 28
<OTHER-SE> 19,953
<TOTAL-LIABILITY-AND-EQUITY> 38,959
<SALES> 5,405
<TOTAL-REVENUES> 5,405
<CGS> 2,424
<TOTAL-COSTS> 2,424
<OTHER-EXPENSES> 2,118
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 190
<INCOME-PRETAX> 785
<INCOME-TAX> 0
<INCOME-CONTINUING> 785
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 785
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
