<PAGE>
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, 1999
- 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
10, 1999 was 2,406,837.
1
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INDEX
ZING TECHNOLOGIES, INC. AND SUBSIDIARY
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - September 30, 1999 and
June 30, 1999 ....................................................... 3
Condensed consolidated statements of operations - three months ended
September 30, 1999 and 1998 ......................................... 4
Condensed consolidated statements of cash flows - three months ended
September 30, 1999 and 1998 ......................................... 5
Notes to condensed consolidated financial statements -
September 30, 1999 .................................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................... 8
PART II OTHER INFORMATION
Item 5. Other Information ................................................... 13
Item 6. Exhibits and Reports on Form 8-K .................................... 15
Signatures........................................................... 16
2
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PART I FINANCIAL INFORMATION
ZING TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Item 1. Financial Statements (Unaudited) SEPTEMBER 30, JUNE 30,
1999 1999
--------------------- -------------------
(Unaudited) (Note)
(000's omitted, except
share data)
-----------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,357 $ 880
Marketable securities 22,410 21,931
Accounts receivable, less allowances of $77 and $71, respectively 3,540 4,048
Inventories 4,909 4,464
Prepaid expenses 246 214
Other current assets 512 632
--------------------- --------------------
Total current assets 32,974 32,169
Property, plant and equipment, net 5,999 5,986
Deferred income taxes, net of valuation allowance 756 608
Excess of cost over assets acquired, net of amortization of $1,516
and $1,478, respectively 1,019 1,057
Other assets 71 70
--------------------- --------------------
Total assets $40,819 $39,890
--------------------- --------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,832 $ 1,569
Accrued expenses 1,165 1,101
Accrued compensation expense 535 904
Loan payable - bank 8,200 7,700
Due to broker 3,689 3,514
Current portion of long-term obligations 700 722
--------------------- --------------------
Total current liabilities 16,121 15,510
Long-term obligations, less current portion 3,074 3,231
Stockholders' equity
Common stock, par value $.01 per share; authorized 12,000,000 Shares;
issued 3,081,681 shares as of September 30, 1999
and June 30, 1999 30 30
Additional paid-in capital 15,295 15,295
Note receivable from stockholders (396) (396)
Accumulated other comprehensive income, net 183 411
Retained earnings 11,519 10,816
Less treasury shares at cost (674,844 shares at September 30, 1999
and June 30, 1999) (5,007) (5,007)
--------------------- --------------------
Total stockholders' equity 21,624 21,149
--------------------- --------------------
Total liabilities and stockholders' equity $40,819 $39,890
===================== ====================
</TABLE>
Note: The consolidated balance sheet at June 30, 1999 has been derived from
the audited consolidated financial statements at that date.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
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Zing Technologies, Inc. and Subsidiary
Condensed Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
SEPTEMBER 30
1999 1998
--------------------------------------
<S> <C> <C>
Net sales $ 6,002 $ 5,969
Cost of goods sold 3,792 3,826
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Gross profit 2,210 2,143
Selling, general and administrative expenses 1,322 1,328
Research and development of product and process technology 446 426
Depreciation and amortization of property, plant and equipment 148 155
Interest expense 279 272
Interest and other (income) loss - net (893) 53
--------------------------------------
Income (loss) before income taxes 908 (91)
Provision for income taxes 205 -
--------------------------------------
Net (loss) income $ 703 $ (91)
Net income (loss) per common share - basic $ .29 $ (.04)
======================================
Net income (loss) per common share - diluted $ .29 $ (.04)
======================================
Average number of outstanding shares - basic 2,406,837 2,421,030
======================================
Average number of outstanding shares - diluted 2,417,700 2,421,030
======================================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
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Zing Technologies, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
SEPTEMBER 30
1999 1998
--------------------------------------
(000's omitted)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 703 $ (91)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 290 269
Changes in operating assets and liabilities:
Accounts receivable 508 (1,242)
Inventories (445) (200)
Prepaid expenses and other current assets 88 (63)
Accounts payable and accrued expenses (42) 271
Other - net (1) (5)
------------ -----------
Net cash provided by (used in) operating activities 1,101 (1,061)
INVESTING ACTIVITIES
Purchases of property and equipment (265) (482)
Net purchases sales of marketable securities (855) 1,040
------------ -----------
Net cash provided by (used in) investing activities (1,120) 558
FINANCING ACTIVITIES
Proceeds from borrowings 675 700
Reduction of borrowings (179) (824)
Exercise of stock options - 56
Repurchase of common stock for treasury - (242)
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Net cash provided (used in) financing activities 496 (310)
Net increase (decrease) in cash and cash equivalents 477 (813)
Cash and cash equivalents at beginning of period 880 1,092
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Cash and cash equivalents at end of period $1,357 $ 279
============ ===========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
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Zing Technologies, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1999
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,
1999 are not necessarily indicative of the results that may be expected for the
year ending June 30, 2000.
COMPREHENSIVE INCOME
Comprehensive income is composed of unrealized gains or losses on the Company's
available-for-sale securities.
During the first quarter of fiscal 2000 and 1999, total comprehensive income
(loss) amounted to $475 and $(475).
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,
1999 1999
------------------------------------------
(000's omitted)
<S> <C> <C>
Raw materials $2,097 $1,677
Work in process 1,831 1,870
Finished goods 981 917
------------------------------------------
$4,909 $4,464
===========================================
</TABLE>
6
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Zing Technologies, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
SEPTEMBER 30
1999 1998
-------------------------------------
(000's omitted, except share data)
<S> <C> <C>
NUMERATOR
Numerator for basic and diluted earnings per share - income (loss) available to
common stockholders $ 703 $ (91)
-------------------------------------
DENOMINATOR
Denominator for basic earnings per share - weighted-average shares 2,406,837 2,421,030
Effect of dilutive securities:
Subsidiary options exercisable into Zing common shares 10,863 -
Denominator for diluted earnings per share - adjusted weighted-average shares
and assumed conversions 2,417,700 2,421,030
-------------------------------------
-------------------------------------
Basic earnings per share $ .29 $ (.04)
-------------------------------------
-------------------------------------
Diluted earnings per share $ .29 $ (.04)
-------------------------------------
-------------------------------------
</TABLE>
7
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Zing Technologies, Inc. and Subsidiary
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
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,
1999 1998
-----------------------------------------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 63.2 64.1
Gross profit 36.8 35.9
Selling, general and administrative expenses 22.0 22.3
Research and development of product and process technology 7.4 7.1
Depreciation and amortization of property and equipment and excess
of costs over assets acquired 2.5 2.6
Interest expense 4.7 4.6
Interest and other (income) loss - net (14.9) .8
Income (loss) before income taxes 15.1 (1.5)
Provision for income taxes 3.4 -
Net income (loss) 11.7 (1.5)
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998
Zing Technologies, Inc. ("Zing" or the "Company"), a holding company with one
wholly owned operating subsidiary, Omnirel LLC ("Omnirel"), reported net income
of $703,000 or $.29 per share (basic and diluted) for the three months ended
September 30, 1999. For the quarter ended September 30, 1998 the Company
reported a net loss of $91,000 or $(.04) per share (basic and diluted).
Omnirel sales for the three months ended September 30, 1999 were $6,002,000 as
compared to sales of $5,969,000 for the three month period ended September 30,
1998. The $34,000 increase in sales from period to period is attributable to
several offsetting factors set forth as follows:
Sales of discrete power semiconductor devices to a manufacturer of undersea
telecommunication cable systems increased approximately $1,100,000 for the three
months ended September 30, 1999 as compared to the 1998 period. This increase
was offset by decreases in sales of power hybrids and modules due to a decline
in custom product shipments amounting to approximately $1,030,000, and the
completion of certain programs for power hybrids and modules that were ongoing
during the quarter ended September 30, 1998. Net sales included 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 20% and 25% of the sales, respectively, in each of the three month
periods ended September 30, 1999 and 1998 and, accordingly, sales were
approximately $291,000 less in the current quarter as compared to the prior year
quarter.
8
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Zing Technologies, Inc. and Subsidiary
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION (CONTINUED)
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998 (CONTINUED)
The Omnirel gross profit for the three months ended September 30, 1999 was
$2,210,000 as compared to $2,143,000 for the three months ended September 30,
1998. The increase of approximately $67,000 was primarily attributed to a
favorable materials price variance related to the mix of products shipped. The
gross profit, expressed as a percentage of sales, was 37% and 36%, respectively,
in each of the quarters ending September 30, 1999 and 1998. Labor and overhead
costs increased because of higher direct labor rates for skilled workers and
increased manpower staffing, utility cost increases and equipment depreciation
in overhead.
Selling, general and administrative expenses were $1,322,000 and $1,328,000,
respectively, for the three months ended September 30, 1999 and 1998. The
decrease from period to period as expressed in dollars and percentages was
insignificant.
Research and development costs related to product and process technology were
reclassified and presented separately effective in the third quarter of fiscal
1999. This presentation is continued for the first quarter of the fiscal year
2000. The amount expended for the three months ended September 30, 1999 was
$446,000 as compared to $426,000 in the comparable three months ended September
30, 1998.
Interest expense increased approximately $7,000 to $279,000 during the quarter
ended September 30, 1999 compared to $272,000 during the quarter ended September
30, 1998. This increase is primarily attributable to increased borrowings used
to finance the Company's investment portfolio.
Interest and other income-net amounted to approximately $881,000 during the
quarter ended September 30, 1999 as compared to a loss of $53,000 in the quarter
ended September 30, 1998. This increase of $934,000 was primarily the result of
the Company realizing net gains on the sale of marketable securities.
For the fiscal quarter ended September 30, 1999, the difference between the
effective tax rate and the federal tax rate of 34% is primarily due to
non-taxable dividends included in other income, tax credits and state taxes. As
a result of a current operating loss, net operating loss carryforward and
non-taxable dividends, there was no provision for income taxes during the
quarter ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended September 30, 1999, proceeds from operations and from
borrowing were used to acquire equipment, purchase marketable securities and for
ongoing operations. Management expects that the Company's internally generated
funds and available bank credit facilities will be sufficient to continue
financing equipment purchases and continued operations. Recent volatility in the
securities markets has not materially adversely affected the Company's
liquidity.
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.
9
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Zing Technologies, Inc. and Subsidiary
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION (CONTINUED)
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998 (CONTINUED)
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 has completed 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 will require remediation
to be Year 2000 compliant. Additionally, the Company is gathering information
about the Year 2000 compliance efforts of Omnirel'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. The following
is the status of each major segment:
INFORMATION TECHNOLOGY
The Company upgraded its main business system software programs in March 1998
and as a result the main business software programs are capable of processing
transactions with dates beyond December 31, 1999. The Company has completed the
upgrade of its networking software. The Company has completed the evaluation of
secondary software programs used to minimize clerical tasks. The Company has
acquired software for these secondary programs upgrades or has selected
alternate programs and the installation of these upgrades are expected to be
completed by November 1999.
The Company has performed an evaluation of all information technology hardware
within the Company (excluding computer systems used with manufacturing
equipment) for Year 2000 compliance. The evaluation revealed that the majority
of the hardware systems can be made Year 2000 compliant with a minor operating
system software modification. A small number of the hardware systems will
require replacement of the microprocessor board. The Company does not expect to
replace any computer hardware systems in order to become Year 2000 compliant.
The upgrade of the Company's information technology equipment is expected to be
completed November 1999.
TELECOMMUNICATION SYSTEMS
The Company replaced its telephone system in September 1998. The new telephone
system is Year 2000 compliant.
10
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Zing Technologies, Inc. and Subsidiary
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION (CONTINUED)
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998 (CONTINUED)
MANUFACTURING EQUIPMENT
The Company has completed the evaluation of manufacturing equipment and HVAC
systems. The Company has determined that certain pieces of manufacturing
equipment with integrated computer systems will not recognize the date "00" as
the year 2000. The Company is working with equipment manufacturers in order to
upgrade the computer systems incorporated in manufacturing equipment to become
Year 2000 compliant. The Company is aware of the fact that equipment may contain
an embedded microprocessor chip, however most of the Company's manufacturing
equipment does not require the processing of dates in order to operate. The
Company believes that the inability of certain pieces of equipment to interpret
a date field "00" as the year 2000 will not prevent the equipment from operating
and consequently does not anticipate an interruption in its ability to
manufacture products as a result of the Year 2000 issue. The Company has
determined that its HVAC systems are Year 2000 compliant and the Company has
received certification statements from the equipment manufacturers.
COMPLIANCE BY VENDORS AND CUSTOMERS
The Company has requested Year 2000 compliance certificates from vendors. The
majority of the Company's vendors have provided certification indicating that
the Year 2000 issue will not cause an interruption in their ability to provide
products and services.
The Company has not received compliance certificates from key customers although
it continues to issue requests for them. The Company does not expect any
material interruption in business from its key customers, even if their
operations are not Year 2000 compliant, although the Company may experience
delays in receipt of payments and/or reorders.
COST OF YEAR 2000 COMPLIANCE
The total Year 2000 project cost is estimated at approximately $100,000.
The estimated costs are comprised of anticipated expenditures for internal
manpower costs for evaluation and upgrade of systems, consulting services for
evaluation of systems, cost for the purchase of new equipment and componentry
and costs for the purchase of new software programs. Omnirel has expended
approximately $60,000 on its Year 2000 effort through September 30, 1999.
CONTINGENCY PLAN
The Company believes that its information technology systems will be capable of
processing transactions beyond December 31, 1999 and, consequently, the Company
does not have a contingency plan for information systems.
The Company's manufacturing equipment does not require processing of dates to
operate. In the event that the Company is not able to upgrade manufacturing and
other equipment to operate beyond December 31, 1999, the Company plans to power
down the equipment and restart the equipment with a fictitious historical date
in order to resume operations until the problem can be corrected.
SUMMARY
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of
11
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Zing Technologies, Inc. and Subsidiary
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION (CONTINUED)
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998 (CONTINUED)
future events, including the continued availability of certain resources and
other factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
12
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Zing Technologies, Inc. and Subsidiary
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 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.
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.
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
13
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Zing Technologies, Inc. and Subsidiary
ITEM 5. OTHER INFORMATION (CONTINUED)
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.
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.
14
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Zing Technologies, Inc. and Subsidiary
ITEM 5. OTHER INFORMATION (CONTINUED)
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, 1999.
15
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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 11, 1999 ROBERT E. SCHRADER
----------------------------------------
Robert E. Schrader
President and Chief Executive Officer
Date NOVEMBER 11, 1999 MARTIN S. FAWER
----------------------------------------
Martin S. Fawer
Treasurer and Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
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