SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
- ------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997.
X
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______.
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Commission file number: 1-12680
ORYX TECHNOLOGY CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 22-2115841
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
47341 Bayside Parkway
Fremont, California 94538
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 249-1144
Check whether the issuer (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 period 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 outstanding of the issuer's Common Stock as of May 31, 1997
was 13,124,821.
<PAGE>
ORYX TECHNOLOGY CORP.
FORM 10-QSB
Table of Contents
PART I. FINANCIAL INFORMATION Page
Item 1. Condensed Consolidated Financial Statements and
Notes to Condensed Consolidated Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 5. Other information 11
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<S> <C> <C>
May 31, 1997 February 28, 1997
-------------------- ---------------------
ASSETS
Current assets:
Cash and cash equivalents $ 239,000 $ 3,080,000
Accounts receivable, net 2,935,000 3,457,000
Inventories 5,130,000 4,795,000
Other current assets 343,000 171,000
------------ ------------
Total current assets 8,647,000 11,503,000
Property and equipment, net 2,516,000 2,674,000
Intangible assets, net 715,000 755,000
Other assets 337,000 380,000
------------ -------------
$12,215,000 $ 15,312,000
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings $ 215,000 $ 215,000
Capital lease obligations 59,000 137,000
Accounts payable 1,930,000 2,686,000
Accrued liabilities 2,171,000 1,951,000
-------------- ---------
Total current liabilities 4,375,000 4,989,000
Capital lease obligations, less current portion 184,000
35,000
Bank borrowings, less current portion 648,000 705,000
--------- ----------
Total liabilities 5,058,000 5,878,000
--------- ----------
Mandatorily redeemable securities 684,000 637,000
--------- ----------
Stockholders' equity:
Series A 2% Convertible Cumulative Preferred
Stock 107,000 107,000
Common Stock, 13,124,821 and 12,968,581
issued and outstanding 13,000 13,000
Additional paid in capital 19,141,000 18,920,000
Accumulated deficit (12,788,000) (10,243,000)
----------- -----------
Total stockholders' equity 6,473,000 8,797,000
----------- ------------
$12,215,000 $ 15,312,000
=========== ============
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
<PAGE>
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C>
Three Months Ended
May 31,
--------------------------------------
1997 1996
------------------ ---------------
Revenue $4,491,000 $ 6,805,000
Cost of sales 3,562,000 4,420,000
------------------ ---------------
Gross profit 929,000 2,385,000
------------------ ---------------
Operating expenses:
Marketing and selling 432,000 444,000
General and administrative 1,452,000 807,000
Research and development 1,530,000 840,000
------------------ ---------------
Total operating expenses 3,414,000 2,091,000
------------------ ---------------
Income (loss) from operations (2,485,000) 294,000
Interest expense, net 8,000 16,000
Equity in losses of investee - 20,000
------------------ ---------------
Income (loss) before income taxes (2,493,000) 258,000
Provision for income taxes 3,000 22,000
------------------ ---------------
Net income (loss) (2,496,000) 236,000
Dividends and accretion (49,000) (5,000)
------------------ ---------------
Net income (loss) attributable to
common shares ($2,545,000) $231,000
================== ===============
Net income (loss) per common share:
Primary ($0.20) $0.02
================== ===============
Fully diluted ($0.20) $0.01
================== ===============
Weighted average common shares and equivalents outstanding:
Primary 13,046,000 13,814,000
================== ===============
Fully Diluted 13,046,000 14,810,000
================== ===============
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
<PAGE>
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
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Three Months Ended
May 31,
-------------------------------------
---------------- ----------------
1997 1996
---------------- ----------------
Cash flows from operating activities:
Net income (loss) ($2,496,000) $236,000
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Equity in losses of investee - 20,000
Depreciation and amortization 238,000 109,000
Changes in assets and liabilities:
Accounts receivable, net 522,000 (74,000)
Inventories (335,000) (853,000)
Other current assets (172,000) 129,000
Other assets 43,000 (77,000)
Accounts payable (756,000) (1,549,000)
Accrued liabilities 220,000 134,000
---------------- ----------------
Net cash used in operating activities (2,736,000) (1,925,000)
---------------- ----------------
Cash flows from investing activities:
Proceeds from disposition of assets 145,000 -
Capital expenditures (187,000) (284,000)
Investment in DAS Devices, Inc. - (25,000)
---------------- ----------------
Net cash used in investing activities (42,000) (309,000)
---------------- ----------------
Cash flows from financing activities:
Repayment of bank line of credit - (352,000)
Repayment of notes payable to stockholders - (400,000)
Proceeds from issuance of common stock/warrants, net 215,000 899,000
Repayment of promissory note and capital lease obligations (284,000) (448,000)
Other 6,000
---------------- ----------------
---------------- ----------------
Net cash used in financing activities (63,000) (301,000)
---------------- ----------------
Net decrease in cash and cash equivalents (2,841,000) (2,535,000)
Cash and cash equivalents at beginning of period 3,080,000 3,939,000
================ ================
Cash and cash equivalents at end of period $ 239,000 $1,404,000
================ ================
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
<PAGE>
ORYX TECHNOLOGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - GENERAL
The information contained in the following Notes to Condensed Consolidated
Financial Statements is condensed; accordingly, the financial statements
contained herein should be reviewed in conjunction with the Company's Form
10-KSB for the year ended February 28, 1997.
The results of operations for the interim periods presented are not necessarily
indicative of the results expected for the entire year.
The financial information for the periods ended May 31, 1997, and 1996 included
herein is unaudited but includes all adjustments which, in the opinion of
management of the Company, are necessary to present fairly the financial
position of the Company and its subsidiaries at May 31, 1997, and the results of
their operations and cash flows for the three month periods ended May 31, 1997
and 1996.
NOTE 2 - STOCKHOLDERS' EQUITY
In April 1997, the Company issued 156,240 shares of Common Stock associated with
the exercise of warrants and received proceeds of $215,000.
NOTE 3 - INVENTORIES
The components of inventory were as follows:
May 31, 1997 February 28, 1997
----------------- -------------------
Raw materials $3,695,000 $3,090,000
Work-in-process 254,000 153,000
Finished goods 1,181,000 1,552,000
================= ===================
$5,130,000 $4,795,000
================= ===================
NOTE 4 - NET INCOME (LOSS) PER SHARE
Shares used in the computation of net loss per share for the three month period
ended May 31, 1997 was determined using the treasury stock method. Under the
treasury stock method, net income (loss) per common and common equivalent share
is computed using the weighted average number of shares and equivalents
outstanding during the respective period. Common stock equivalents were excluded
from the calculation of loss per share for the three months ended May 31, 1997
as their effect was antidilutive.
Shares used in the computation of net income per share for the three month
period ended May 31, 1996 was determined using the modified treasury stock
method. Under the modified treasury stock method, certain adjustments can occur
with respect to both weighted average shares and net income amounts utilized in
the calculations of earnings per share. The modified treasury stock method can
result in different earnings per share than those calculated using the treasury
stock method. Under the modified
<PAGE>
treasury stock method, all weighted average common equivalents are assumed
to be exercised, and the resulting proceeds are applied in steps. First, stock
is assumed to be repurchased up to a maximum of 20% of the actual outstanding
shares. Net income is then adjusted to reflect the after tax effect of using the
remaining proceeds to acquire U.S. government securities. Common stock and
common stock equivalents for the three month period ended May 31, 1996 included
shares issuable under stock options and warrants outstanding and shares issuable
upon conversion of preferred stock. Additionally, net income in the calculation
of earnings per share for the three month period ended May 31, 1996 includes an
adjustment to reflect the earnings attributable to holders of dilutive
securities in subsidiaries of the Company.
NOTE 5 - NEW CREDIT FACILITY
In May 1997, the Company entered into a borrowing facility which includes an
Accounts Receivable Revolving Batch Facility and an Inventory Line of Credit.
The Inventory Line of Credit provides for borrowings of up to $1.5 million. The
Accounts Receivable Revolving Batch Facility allows the Company to borrow up to
a maximum of $4 million, provided that any amount in excess of $3.5 million must
be supported by an equal amount of unused availability under the Inventory Line
of Credit.
NOTE 6 - NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." This
statement will be effective for the Company's fiscal year ending February 28,
1998. Under SFAS No. 128, primary earnings per share is replaced by basic
earnings per share and fully diluted earnings per share is replaced by diluted
earnings per share. The adoption of SFAS No. 128 is not expected to have a
material impact on earnings per share calculations. SFAS No. 128 will require
the retroactive restatement of all previously reported amounts upon adoption.
NOTE 7 - SUBSEQUENT EVENTS
On June 10, 1997, the Company drew down $1.3 million on the Accounts Receivable
Revolving Batch Facility and $750,000 on the Inventory Line of Credit. A portion
of these proceeds was used to retire a term loan of $521,000 associated with the
acquisition of Power Sensor, Inc. The remaining proceeds will be used for
general working capital requirements.
In June 1997, the Company was informed by an existing customer that the customer
would discontinue selling a power conversion product and therefore, cease to
purchase contract manufacturing services from the Company during the Company's
third fiscal quarter. Sales of such services to this customer accounted for 18%
of the Company's revenues for the quarter ended May 31, 1997.
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
This discussion and analysis is designed to be read in conjunction with the
Management's Discussion and Analysis set forth in the Company's Form 10-KSB for
the fiscal year ended February 28, 1997.
Some of the information in this report, including the discussion of the
Company's strategy, and various statements concerning the Company's plans for
expansion and expectations for growth for the Company constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Actual results could differ materially from those projected in the
forward-looking statements as a result of the risks and uncertainties described
under the caption "Risk Factors" set forth in Part I of the Company's Form
10-KSB, as amended, and those identified by the Company from time to time in
other filings with the Securities and Exchange Commission (the "Commission"),
press releases and other communications.
In addition to an analysis of recent and historical financial results, the Form
10-KSB, as amended, includes an analysis of certain of the risks of the
Company's business, including risks relating to the competitive environment in
which the Company operates. Although the Company has sought to identify the most
significant risks to its business, the Company cannot predict whether or to what
extent any of such risks may be realized nor can there be any assurance that the
Company has identified all possible problems which the Company might face. All
investors should carefully read the Form 10-KSB, as amended, together with this
Form 10-QSB and consider all such risks before making an investment decision
with respect to the Company's stock.
Business Segments
The Company has organized its operations into three operating segments: Power
Products, Instruments and Materials, and SurgX. In addition, a Corporate segment
includes certain activities that are not directly related to any other
operations. Three segments and related businesses are as follows:
Segment/Subsidiary Businesses
Oryx Power Products Corporation - Power Conversion Products
- Contract Manufacturing
Oryx Instruments and Materials - Material Analysis and Test Equipment
Corporation - Specialized Materials
- Contract R&D
SurgX Corporation - Surge Protection Components
Results of Operations
For the quarter ended May 31, 1997, revenues decreased by $2,314,000 or 34% from
$6,805,000 for the quarter ended May 31, 1996, to $4,491,000 for the quarter
ended May 31, 1997. The decrease in revenues was primarily attributable to the
termination of shipments of a power supply product to Pitney Bowes, which
represented 51% of the Company's consolidated revenues for the quarter ended May
31, 1996. The Company anticipates quarterly revenues to increase, compared to
the current quarter, by the fourth quarter of fiscal year 1998 as the TTS 2000
processing monitoring tool achieves market acceptance, demand for the
specialized materials product line continues to increase and Oryx Power Products
successfully secures new OEM customers. However, there can be no assurance of
any increase in revenues for the remaining three quarters, and any such increase
in revenues will be less than the Company had previously anticipated due to,
among other factors, the projected shortfalls in revenues from sales of DC/DC
power
<PAGE>
conversion products, and the recent notification of termination of sales
of contract manufacturing services to an existing customer. The sales of such
services to the existing customer accounted for 18% of the Company's revenues
for the quarter ended May 31, 1997. The Company expects revenues for fiscal year
1998 to be lower than those for fiscal year 1997 as any anticipated increases in
revenues during the next three quarters will be insufficient to offset the
Pitney Bowes revenue loss.
The Company's gross profit decreased from $2,385,000 for the quarter ended May
31, 1996, to $929,000 for the quarter ended May 31, 1997, representing a
decrease of $1,456,000 or 61%. The decrease in gross profit was principally
attributable to the reduction in shipments to Pitney Bowes. Operating losses are
anticipated to continue through at least the third quarter of fiscal 1998 and
there can be no assurance that any anticipated growth in quarterly revenues will
be realized or that the Company will return to profitability during fiscal year
1998.
Marketing and selling expenses decreased from $444,000 for the quarter ended May
31, 1996, to $432,000 for the quarter ended May 31, 1997, representing a
decrease of $12,000 or 3%. The decrease was primarily due to reduced selling
expenses associated with lower sales.
General and administrative expenses increased from $807,000 for the quarter
ended May 31, 1996, to $1,452,000 for the quarter ended May 31, 1997,
representing an increase of $645,000 or 80%. The increase in general and
administrative expenses was primarily due to increases in headcount resulting
from the Company's objective of developing an infrastructure to support each of
the subsidiaries and separation costs associated with management changes.
Research and development expenses increased from $840,000 in the quarter ended
May 31, 1996, to $1,530,000 for the quarter ended May 31, 1997, representing an
increase of $690,000 or 82%. Research and development spending increased as a
result of continued developmental efforts with respect to diagnostic test
equipment and surge protection components being undertaken primarily in the form
of increased headcount and consulting services .
The provision for income taxes decreased from $22,000 for the three month period
ended May 31, 1996 to $3,000 for the three month period ended May 31, 1997,
representing a decrease of $19,000 or 86%. This decrease is a result of the
Company not recording a U.S. tax provision due to the anticipated loss for
fiscal year 1998.
Liquidity and Capital Resources
The Company's working capital decreased by $2,242,000 from a surplus of
$6,514,000 at February 28, 1997 to a surplus of $4,272,000 at May 31, 1997,
primarily due to operating losses incurred during the quarter ended May 31,
1997. In May 1997, the Company entered into a borrowing facility which includes
an Accounts Receivable Revolving Batch Facility and an Inventory Line of Credit.
The Inventory Line of Credit provides for borrowings of up to $1.5 million
($750,000 of which is subject to an inventory appraisal). The Accounts
Receivable Revolving Batch Facility allows the Company to borrow up to a maximum
of $4 million, provided that any amount in excess of $3.5 million must be
supported by an equal amount of unused availability under the Line of Credit.
Under the Facility, the Company is required to sell on an undiscounted, limited
recourse basis, all accounts receivable. In exchange, the Company may borrow
under the Facility up to 85% of the face amount of eligible accounts receivable
(as defined), up to a maximum amount of $4 million. The interest rate is equal
to the greater of the institution's base rate plus 1.25% for the Account
Receivable Revolving and 2.0% for the Inventory Line of Credit or 7.0%. At May
31, 1997 the Company had not drawn down funds on these facilities.
On June 10, 1997, the Company drew down $1.3 million on its Account Receivable
Revolving Batch Facility and $750,000 on the Inventory Line of Credit. A portion
of these proceeds was used to retire a
<PAGE>
term loan of $521,000 associated with the acquisition of Power Sensors, Inc. The
remaining proceeds will be used for general working capital requirements.
In late June 1997, certain events required the Company to reassess its fiscal
year 1998 sales and liquidity projections. Due to slower than expected sales of
DC/DC power conversion products, future reductions in sales of contract
manufacturing services to an existing customer and delays in shipments of
diagnostic test equipment, the Company does not expect to meet the revenue
objectives in its fiscal year 1998 operating plan. This expected revenue
shortfall may require the Company to seek additional sources of liquidity to
sustain projected operating levels. Management is currently exploring a number
of alternatives to improve the Company's liquidity position including, but not
limited to, cost reduction measures, asset or technology sales, new licensing
arrangements and potential debt or equity private placement offerings. Although
management believes that sufficient funding and/or cost savings alternatives
exist, there can be no assurance that such transactions or measures can be
effected in time to meet the Company's needs, or at all, or that any funding
transactions will be on terms acceptable to the Company.
<PAGE>
Item 5. Other Information
On April 25, 1997, Arvind Patel resigned as President and Chief Executive
Officer. Mr. Patel was appointed Chairman of the Board. Philip J. Micciche was
appointed President and Chief Executive Officer and Director on April 25, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description of Document
11.1 Schedule of Computation of Earnings Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended May 31, 1997, the Company filed no Current Reports on
Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ORYX TECHNOLOGY CORP.
Dated: July 14, 1997 By: /s/ Philip J. Micciche
----------------------
Philip J. Micciche
Principal Executive Officer
/s/ Mitchel Underseth
----------------------
Mitchel Underseth
Principal Financial and
Accounting Officer
ORYX TECHNOLOGY CORP.
EXHIBIT 11.1
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
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Three months ended
May 31, 1997 May 31, 1996
--------------- ---------------
Primary:
Earnings:
Net Income (loss) ($2,545,000) $231,000
Deduct earnings attributable to holders of dilutive
subsidiary stock options - (43,000)
Add interest income on reinvested option and warrant
exercise proceeds (as determined by the modified
treasury stock method), net of tax 55,000
-
--------------- ---------------
As adjusted ($2,545,000) $243,000
=============== ===============
Shares:
Number of weighted average common shares outstanding 13,046,000 9,385,000
Add effect of dilutive convertible preferred stock,
options and warrants (as determined by the modified
treasury stock method) 4,429,000
-
--------------- ---------------
As adjusted 13,046,000 13,814,000
=============== ===============
Primary earnings (loss) per share ($0.20) $0.02
=============== ===============
Fully diluted:
Earnings:
Net Income (loss) ($2,545,000) $231,000
Deduct earnings attributable to holders of dilutive
subsidiary stock options - (43,000)
Add interest income on reinvested option and warrant
exercise proceeds (as determined by the modified
treasury stock method), net of tax 29,000
-
--------------- ---------------
As adjusted ($2,545,000) $217,000
=============== ===============
Shares:
Number of common shares outstanding 13,046,000 10,021,000
Add effect of dilutive convertible preferred stock,
options and warrants (as determined by the modified
treasury stock method) 4,789,000
-
--------------- ---------------
As adjusted 13,046,000 14,810,000
=============== ===============
Fully diluted earnings (loss) per share ($0.20) $0.01
=============== ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Financial Statements of Oryx Technology Corp. for the three months ended
May 31, 1997, and is qualified in its entirety by reference to such
Financial Statements.
</LEGEND>
<CIK> 0000915355
<NAME> Oryx Technology Corp.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Feb-28-1997
<PERIOD-START> Mar-01-1997
<PERIOD-END> May-31-1997
<EXCHANGE-RATE> 1.00
<CASH> 239,000
<SECURITIES> 0
<RECEIVABLES> 3,043,000
<ALLOWANCES> 108,000
<INVENTORY> 5,130,000
<CURRENT-ASSETS> 8,647,000
<PP&E> 4,138,000
<DEPRECIATION> 1,622,000
<TOTAL-ASSETS> 12,215,000
<CURRENT-LIABILITIES> 4,375,000
<BONDS> 0
684,000
107,000
<COMMON> 19,154,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,215,000
<SALES> 4,491,000
<TOTAL-REVENUES> 4,491,000
<CGS> 3,562,000
<TOTAL-COSTS> 3,562,000
<OTHER-EXPENSES> 3,463,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,000
<INCOME-PRETAX> (2,542,000)
<INCOME-TAX> (3,000)
<INCOME-CONTINUING> (2,545,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,545,000)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
