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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
For the quarter period ended September 30, 1998
- OR -
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number 0-14328
ZING TECHNOLOGIES, INC.
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(Exact Name of small business issuer 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)
(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)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 November
5, 1998 was 2,406,443.
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<PAGE>
INDEX
ZING TECHNOLOGIES, INC. AND SUBSIDIARY
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - September 30, 1998
and June 30, 1998................................................... 3
Condensed consolidated statements of operations - three months
ended September 30, 1998 and 1997................................... 4
Condensed consolidated statements of cash flows - three months
ended September 30, 1998 and 1997................................... 5
Notes to condensed consolidated financial statements -
September 30, 1998.................................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 8
PART II. OTHER INFORMATION
Item 5. Other Information................................................... 12
Item 6. Exhibits and Reports on Form 8-K.................................... 14
Signatures.......................................................... 15
2
<PAGE>
PART 1. FINANCIAL INFORMATION
Zing Technologies, Inc. and Subsidiary
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
------------------------------
(Unaudited) (Note)
(000's omitted, except
share data)
------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 279 $ 1,092
Marketable securities 18,038 19,462
Accounts receivable, less allowances of $78 and $72, respectively 3,693 2,451
Inventories 5,388 5,188
Prepaid expenses 266 192
Other current assets 500 511
------------------------------
Total current assets 28,164 28,896
Property, plant and equipment 12,115 11,657
Less accumulated depreciation and amortization 6,624 6,417
------------------------------
5,491 5,240
Deferred income taxes, net of valuation allowance 771 771
Excess of cost over assets acquired, net of amortization of $1,363
and $1,325, respectively 1,172 1,210
Other assets 59 54
------------------------------
Total assets $ 35,657 $ 36,171
==============================
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 2,153 $ 1,418
Accrued expenses and taxes payable 663 719
Accrued compensation expense 403 811
Loan payable - bank 8,400 7,700
Due to broker 2,297 2,993
Current portion of long-term obligations 502 502
------------------------------
Total current liabilities 14,418 14,143
Long-term obligations, less current portion 2,885 3,013
Stockholders' equity
Common stock, par value $.01 per share; authorized 12,000,000
Shares; issued 3,058,037 shares as of September 30, 1998 and
3,058,037 shares as of June 30, 1998 30 30
Additional paid-in capital 15,169 15,113
Note receivable from stockholders (383) (383)
Accumulated other comprehensive loss (1,038) (654)
Retained earnings 9,347 9,438
Less treasury shares at cost (644,394 shares at September 30, 1998,
and 615,638 shares at June 30, 1998) (4,771) (4,529)
------------------------------
Total stockholders' equity 18,354 19,015
------------------------------
Total liabilities and stockholders' equity $ 35,657 $ 36,171
==============================
</TABLE>
Note: The consolidated balance sheet at June 30, 1998 has been derived from the
audited consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
3
<PAGE>
Zing Technologies, Inc. and Subsidiary
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended,
September 30
1998 1997
------------------------
<S> <C> <C>
Net sales $ 5,969 $ 5,086
Cost of goods sold 3,826 3,188
------------------------
Gross profit 2,143 1,898
Selling, general and administrative expenses 1,754 1,649
Depreciation and amortization of property,
plant and equipment 155 137
Interest expense 272 245
Interest and other income - net 53 (1,311)
------------------------
Income (loss) before income taxes (91) 1,178
Provision for income taxes -- 205
------------------------
Net (loss) income $ (91) $ 973
========================
Net income (loss) per common share - basic $ (.04) $ .37
========================
Net income (loss) per common share - diluted $ (.04) $ .37
========================
Average number of outstanding shares - basic 2,421,030 2,598,911
========================
Average number of outstanding shares - diluted 2,421,030 2,626,386
========================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
Zing Technologies, Inc. and Subsidiary
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended,
September 30
1998 1997
-------------------
(000's omitted)
<S> <C> <C>
Operating activities
Net (loss) income $ (91) $ 973
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Depreciation and amortization 269 243
Amortization of non-compete agreement -- (150)
Changes in operating assets and liabilities:
Accounts receivable (1,242) (329)
Inventories (200) (139)
Prepaid expenses and other current assets (63) 171
Accounts payable and accrued expenses 271 (46)
Other - net (5) --
-------------------
Net cash provided by (used in) operating activities (1,061) 723
Investing activities
Purchases of property and equipment (482) (279)
Net sales of marketable securities 1,040 1,407
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Net cash provided by investing activities 558 1,128
Financing activities
Proceeds from borrowings 700 195
Reduction of borrowings (824) (1,054)
Exercise of stock options 56 --
Repurchase of common stock for treasury (242) (1,080)
Increase in loans receivable to shareholders -- (174)
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Net cash used in financing activities (310) (2,113)
Net decrease in cash and cash equivalents (813) (262)
Cash and cash equivalents at beginning of period 1,092 857
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Cash and cash equivalents at end of period $ 279 $ 595
===================
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
Zing Technologies, Inc. and Subsidiary
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1998
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-QSB and Article 10 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 month period ended September 30,
1998 are not necessarily indicative of the results that may be expected for the
year ending June 30, 1999.
Comprehensive Income
As of July 1, 1998, the Company adopted Statement 130, "Reporting Comprehensive
Income." Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components' however, the adoption of this Statement
had no impact on the Company's net income or shareholders' equity. Statement 130
requires unrealized gains or losses on the Company's available-for-sale
securities, which prior to adoption were reported separately in shareholders'
equity to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of Statement
130.
During the first quarter of 1998 and 1997, total comprehensive income (loss)
amounted to $(475) and $1,485.
Inventories
Inventories are stated at the lower of cost (first in, first out method) or
market. Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
-------------------------------
(000's omitted)
<S> <C> <C>
Raw materials $2,788 $2,585
Work in process 1,803 1,795
Finished goods 797 808
-------------------------------
$5,388 $5,188
==============================
</TABLE>
6
<PAGE>
Zing Technologies, Inc. and Subsidiary
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement 128,
"Earnings per Share." Statement 128 replaced the previously reported primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants, and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented in accordance with and where appropriate, restated to conform to the
Statement 128 requirements.
The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations and other related disclosures as required by
Statement 128:
<TABLE>
<CAPTION>
Three months ended,
September 30
1998 1997
------------------------
(000's omitted,
except share data)
<S> <C> <C>
Numerator
Numerator for basic and diluted earnings
per share - income (loss) available
to common stockholders $ (91) $ 973
========================
Denominator
Denominator for basic earnings per share -
weighted-average shares 2,421,030 2,598,911
Effect of dilutive securities:
Warrants -- 1,217
Options held by Omnirel employees
exercisable into Zing common shares
-- 26,258
------------------------
Denominator for diluted earnings per share -
adjusted weighted-average shares and
assumed conversions 2,421,030 2,626,386
========================
Basic earnings per share $ (.04) $ .37
========================
Diluted earnings per share $ (.04) $ .37
========================
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
ZING TECHNOLOGIES, INC. AND SUBSIDIARY
The following table sets forth the periods indicating the percentage
relationship to net sales of certain items from the consolidated statement of
operations:
<TABLE>
<CAPTION>
Percent of Net Sales
Three months ended September 30,
1998 1997
------ ------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 64.1 62.7
Gross profit 35.9 37.3
Selling, general and administrative expenses 29.4 32.4
Depreciation and amortization of property
and equipment and excess of costs
over assets acquired 2.6 2.7
Interest expense 4.6 4.8
Interest and other income - net .8 (25.8)
Income (loss) before income taxes (1.5) 23.2
Provision for income taxes -- 4.0
Net (loss) income (1.5) 19.2
</TABLE>
Three months ended September 30, 1998 compared to three months ended
September 30, 1997
Zing Technologies, Inc. ("Zing" or the "Company"), a holding company with one
wholly owned operating subsidiary, Omnirel LLC ("Omnirel"), reported a net loss
of $91,000 or $(.04) per share (basic and diluted) for the three months ended
September 30, 1998. For the quarter ended September 30, 1997, the Company
reported income of $973,000 or $.37 (basic and diluted) per share. The reported
loss is attributable to realized losses, in the approximate amount of $400,000,
from sales of marketable securities in the Company's investment portfolio.
Omnirel sales for the three months ended September 30, 1998 were $5,969,000 as
compared to sales of $5,086,000 for the three month period ended September 30,
1997. The increase in sales from period to period is attributable to several
factors set forth as follows:
o Approximately $400,000 of the increase is attributable to a shipment of
a new multi-chip power module product to an aircraft equipment
manufacturer.
o Approximately $600,000 of the increase is attributable to a series of
ongoing orders for discrete semi-conductor devices to a
telecommunication equipment manufacturer.
o Included in the sales are revenues generated by the continued
fulfillment of a series of orders placed by General Electric for
multi-chip power modules containing power hybrid components. Sales to
General Electric accounted for 25% and 24% of the sales, respectively,
in each of the three month periods ended September 30, 1998 and 1997
and, accordingly, accounted for approximately $280,000 of the current
period's increase in sales.
o These increases in revenue were affected by decreases of approximately
$390,000 in sales of Omnirel's other product lines. One such line,
which is primarily sold through distributors, decreased $270,000 as a
result of the distributor's reducing inventory stocking levels.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION (Continued)
Three months ended September 30, 1998 compared to three months ended
September 30, 1998 (continued)
The Omnirel gross profit for the three months ended September 30, 1998 was
$2,143,000 as compared to $1,898,000 for the three months ended September 30,
1997. The increase of $245,000 is primarily attributed to the increase in sales
volume. The gross profit, expressed as a percentage of sales, was 36% and 37%,
respectively, in each of the quarters ending September 30, 1998 and 1997. This
decrease in the gross profit percentage is attributed to an increase in overhead
costs due to the transition of new products from research and development to the
production process.
For the three months ended September 30, 1998 the selling, general and
administrative expenses for the Company were $1,754,000 as compared to
$1,649,000 for the three months ended September 30, 1997. Omnirel recorded
increases in selling expenses and research and development in the current
reporting period in the amount of approximately $160,000 and $55,000,
respectively. The increase in selling expense is primarily attributable to
Omnirel's conversion to a regional direct sales force from a system of sales
through independent sales representatives. These increases were offset by a
reduction of approximately $88,000 in the Company's professional fees during the
current reporting period.
Interest expense increased approximately $27,000 during the current quarter
ended September 30, 1998 as compared to the prior comparable quarter of which
$12,000 and $15,000 is attributable to Omnirel and the Company, respectively.
These increases were attributed to increased borrowings for working capital and
equipment purchases (Omnirel) and increases attributable to borrowings by the
Company, the proceeds of which were used to finance the investment portfolio.
Interest and other income, net, decreased approximately $1,364,000 resulting in
a net expense of $53,000 during the three months ended September 30, 1998 from
$1,311,000 of net income during the three months ended September 30, 1997.
Interest and other income is primarily comprised of revenues from dividends and
interest and from realized gains and losses on sales of securities. Dividend and
interest income declined to $361,000, while the Company realized losses on
securities of $414,000 in the current reporting period. The Company realized
dividend and interest income of $94,000, and realized securities gains of
$1,120,000 in the 1997 period. In addition, the Company, since May 1993 had been
reporting quarterly income of $150,000 attributable to amortization of a
covenant not to compete which emanated from the sale of the net assets of their
electronic component distribution business to Arrow Electronics. This covenant
terminated in the last reporting quarter of the fiscal year ending June 30,
1998.
As a result of a current operating loss, net operating loss carryforward and
non-taxable dividends, there has been no provision for income taxes during the
current reporting quarter.
Liquidity and Capital Resources
During the quarter ended September 30, 1998, proceeds from sales of marketable
securities along with the proceeds from borrowings were used to repurchase
shares of the Company's common stock in the open market at a total cost of
$242,000, or approximately $8.39 per share, to reduce bank debt, amounts due to
brokers and to acquire equipment. Management expects that the Company's
internally generated funds and available credit facilities will be sufficient to
finance the acquisition of fixed assets and equipment, and the continued
operations of the Company. The Company does not expect that it will be obligated
to make any payments under its guaranty of an affiliate's credit facility.
Recent volatility in the securities markets has not materially adversely
affected the Company's liquidity.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (Continued)
Three months ended September 30, 1998 compared to three months ended
September 30, 1998 (continued)
Impact of Year 2000
Computer systems and electronic devices which are based on software programs
which process dates with two digits rather than four to define the applicable
year may assume that all years occur only in the 20th century. This could cause
a system failure or miscalculation causing disruptions of operations controlled
by such systems or devices, including, among other things, an inability to
process transactions, send invoices, control equipment or engage in similar
normal business activities. In the Company's case, its exposure to this
potential phenomenon is concentrated principally in the operations of its
Omnirel subsidiary.
The following discussion is based on management's best estimates, which were
derived using numerous assumptions of future events, including the continuing
availability of basic utilities and other resources, the availability of trained
personnel at reasonable cost, and the ability of third parties to cure
noncompliant software. There can be no guarantee that these assumptions will
prove accurate, and accordingly the actual results may materially differ from
those anticipated.
Evaluation Efforts
The Company's Omnirel subsidiary is well along in its assessment of all systems
that could be significantly affected by the Year 2000 problem, including
information technology systems, software and hardware (embedded chips) used in
production and manufacturing systems, manufacturing equipment, and HVAC systems.
Based on a review of Omnirel's product line, the Company does not believe that
the products Omnirel has sold and will continue to sell require remediation to
be Year 2000 compliant. Additionally, the Company is gathering information about
the Year 2000 compliance efforts of Ominrel's significant suppliers and
subcontractors and continues to monitor their compliance.
Readiness and Compliance Plan
Omnirel has separated its Year 2000 compliance efforts into four major segments:
Information Technology (Software and Hardware); Telecommunications Systems;
Manufacturing Equipment; and Compliance by Vendors and Customers.
Information Technology
Omnirel upgraded its main business system software in March 1998. As a result
those systems are capable of processing transactions with dates beyond December
31, 1999. Omnirel's assessment of its networking software has led it to conclude
that upgrades will be needed. The Company plans to upgrade these systems by
March 1999.
Omnirel is currently evaluating its secondary software systems used to minimize
clerical tasks, a process expected to be completed by March 1999 as well.
Omnirel completed its evaluation of all information technology hardware, other
than computer systems used with manufacturing equipment, and determined that
most of these systems can be made Year 2000 compliant with minor operating
system software modifications. A few hardware systems will require
microprocessor board replacement, but the Company does not anticipate that any
computer hardware systems will require replacement to become compliant. Omnirel
expects to complete all needed upgrade efforts by March 1999.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION (Continued)
Three months ended September 30, 1998 compared to three months ended September
30, 1998 (continued)
Telecommunications Systems
Omnirel's telephone system was replaced in September 1998 and is certified as
Year 2000 compliant.
Manufacturing Equipment
The Company is engaged in the evaluation of Omnirel's manufacturing and HVAC
equipment, a process it expects to complete by June 1999. To date it has
determined that individual units that have integrated computer systems will not
accurately process 21st Century dates, and it is working with the relevant
equipment manufacturers to assess and, if necessary, upgrade the integrated
computer systems. Omnirel's manufacturing equipment does not require date
processing for efficient operation, and accordingly the Company does not
anticipate an interruption in manufacturing as a result of the advent of the
Year 2000.
Compliance by Vendors and Customers
Omnirel is engaged in the process of requesting Year 2000 compliance
certificates from its vendors. Most have provided such certification. The
Company expects to achieve compliance from all critical suppliers by June 1999.
Beginning in January 1999, Omnirel intends to begin requesting similar
compliance certificates from its principal customers, a process that it expects
to complete by June 1999. Omnirel cannot ensure that its customers will either
be in Year 2000 compliance, or will comply with Omnirel's request for
certification. Omnirel may assist its customers, to the extent of its ability,
to become Year 2000 compliant if it appears that lack of compliance will
adversely affect its customers' ability to continue ordering and paying for
Omnirel products.
Cost of Year 2000 Compliance
The Company estimates, based on its evaluations and actions taken to date, that
the aggregate cost of achieving Year 2000 compliance will be approximately
$100,000. The costs are comprised of internal personnel expenses and outside
consulting service costs for evaluation and upgrade of systems, acquisition
costs for new equipment and componentry and licensing and purchase fees for new
or upgraded software.
Between July and September 1998, the Company expended approximately $10,000 for
its Year 2000 compliance efforts.
Contingency Plan
Since the Company believes that Omnirel's information technology systems will be
Year 2000 compliant, it has not developed and does not plan on developing a
contingency plan for noncompliant information technology systems.
Since Omnirel's manufacturing systems do not require accurate date processing
for its operations, the Company plans, in the event of its inability to upgrade
such systems, to power down and restart the equipment with a fictitious
historical date so that normal operations can continue until compliance is
achieved.
11
<PAGE>
PART 2. 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 in 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 undo 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 58%, 24%,
and 27% of Omnirel's sales revenues for the fiscal year ended June 30, 1996
(each such fiscal year ended on June 30, a "Fiscal Year"), Fiscal Year 1997 and
Fiscal Year 1998, respectively. A single project accounted for approximately 58%
of Fiscal Year 1996 sales, 24% of Fiscal Year 1997 sales and 27% of Fiscal Year
1998 sales. Omnirel does not anticipate that sales to such customer will change
significantly for Fiscal Year 1999 as compared to Fiscal Year 1998.
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
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.
12
<PAGE>
ITEM 5. OTHER INFORMATION, continued
Selling Prices
Omnirel is subject to continued or increased pressure to change its selling
prices for its products, 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 effect 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
expenditures 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 business of Omnirel continues 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 could suffer a
corresponding or greater decline. In such event, Omnirel would have to seek
replacement markets in other industries. There can be no assurance that such
markets would be available or that Omnirel would be successful in penetrating
them.
13
<PAGE>
ITEM 5. OTHER INFORMATION, continued
Dependence on Key Personnel
The business of Omnirel is substantially dependent upon the active participation
and technical expertise of its executive officers. Omnirel is dependent upon the
services of John F. Catrambone, its President. Omnirel maintains a key-man life
insurance policy on Mr. Catrambone in the amount of $2,500,000. Omnirel's Board
of Directors regularly re-evaluates 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 or 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 favorably 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.
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 in preferred stock. 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 Zing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits is included herein:
No exhibit is included herein.
The Company did not file any report on Form 8-K during the three months ended
September 30, 1998.
14
<PAGE>
Zing Technologies, Inc. and SubsidiarY
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 November 9, 1998 Robert E. Schrader
- --------------------- -------------------------------------
Robert E. Schrader
President and Chief Executive Officer
Date November 9, 1998 Martin S. Fawer
- --------------------- -------------------------------------
Martin S. Fawer
Treasurer and Chief Financial Officer
15
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