SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
X
- ------ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30,
1996.
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: 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 November 30, 1996 was 10,918,725.
<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 Statement 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Resultsof Operations 8
PART II. OTHER INFORMATION
Item 5. Other information 10
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
November 30, February 29,
1996 1996
----------- -----------
ASSETS
<CAPTION>
Current assets:
<S> <C> <C>
Cash and cash equivalents ..................................................... $ 1,583,000 $ 3,939,000
Accounts receivable, less allowance for doubtful
accounts of $197,000 and $139,000 ............................................ 3,228,000 2,690,000
Inventories ................................................................... 5,362,000 3,880,000
Other current assets .......................................................... 256,000 128,000
=========== ==========
Total current assets ................................................... 10,301,000 10,765,000
Property and equipment, net ..................................................... 2,270,000 1,298,000
Investment ...................................................................... 27,000 20,000
Intangible assets, net .......................................................... 58,000 49,000
Other assets .................................................................... 366,000 208,000
============ ===========
$13,022,000 $12,340,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit $ $ 352,000
Notes payable to stockholders - 400,000
Promissory note payable and current portion
of capital lease obligations 7,000 1,044,000
Accounts payable 2,739,000 3,186,000
Accrued liabilities 1,699,000 1,085,000
Total current liabilities 4,445,000 6,067,000
Capital lease obligations, less current portion - 34,000
========= =========
Total liabilities 4,445,000 6,101,000
Stockholders' equity:
Series A 2% Convertible Cumulative Preferred
Stock 107,000 832,000
Common Stock, 10,918,725 and 9,228,668
issued and outstanding 11,000 9,000
Additional paid in capital 15,993,000 13,629,000
Accumulated deficit (7,534,000) (8,231,000)
Total stockholders' equity 8,577,000 6,239,000
============ ==========
$13,022,000 $ 12,340,000
</TABLE>
See the accompanying notes to these condensed
consolidated financial statements.
<PAGE>
<TABLE>
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
November 30, .. November 30,
------------ ------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue ......................................................... $ 7,204,000 $ 4,713,000 $ 20,982,000 $ 11,516,000
Cost of sales ................................................... 4,563,000 3,887,000 13,622,000 8,855,000
------------ ------------ ------------ ------------
Gross profit .................................................... 2,641,000 826,000 7,360,000 2,661,000
------------ ------------ ------------ ------------
Operating expenses:
Marketing and selling .......................................... 479,000 438,000 1,356,000 1,115,000
General and administrative ..................................... 1,379,000 608,000 3,244,000 1,788,000
Research and development ....................................... 616,000 778,000 1,927,000 1,914,000
------------ ------------ ------------ ------------
Total operating expenses ..................................... 2,474,000 1,824,000 6,527,000 4,817,000
------------ ------------ ------------ ------------
Income (loss) from operations ................................... 167,000 (998,000) 833,000 (2,156,000)
Interest (income) expense, net .................................. (9,000) 22,000 (1,000) 60,000
Equity in losses of investee .................................... -- 28,000 20,000 131,000
------------ ------------ ------------ ------------
Income (loss) before income taxes ............................... 176,000 (1,048,000) 814,000 (2,347,000)
Provision for income taxes ...................................... 16,000 -- 108,000 --
------------ ------------ ------------ ------------
Net income (loss) ............................................... 160,000 (1,048,000) 706,000 (2,347,000)
Preferred stock dividend ........................................ (2,000) (4,000) (9, 000) (10,000)
------------ ------------ ------------ ------------
Net income (loss) attributable to
common shares .................................................. $ 158,000 ($ 1,052,000) $ 697,000 ($ 2,357,000)
============ ============ ============ ============
Net income (loss) per common share: ............................. $ 0.01 ($ 0.18) $ 0.05 ($ 0.41)
============ ============ ============ ============
Weighted average common shares
and equivalents outstanding: ................................... 14,630,048 5,886,987 14,286,653 5,724,415
============ ============ ============ ============
</TABLE>
See the accompanying notes to these condensed
consolidated financial statements.
<PAGE>
<TABLE>
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended November 30,
-----------
----------- -----------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) .................................................................................. $ 706,000 ($2,347,000)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Equity in losses of investee ...................................................................... 20,000 131,000
Depreciation and amortization ..................................................................... 376,000 294,000
Changes in assets and liabilities:
Accounts receivable, net ........................................................................ (538,000) 600,000
Inventories ..................................................................................... (1,482,000) (938,000)
Other current assets ............................................................................ 128,000 (82,000)
Other assets .................................................................................... (158,000) (45,000)
Accounts payable ................................................................................ (447,000) 606,000
Accrued liabilities ............................................................................. 614,000 (160,000)
----------- -----------
Net cash provided by (used in) operating activities .............................................. (781,000) (1,941,000)
----------- -----------
Cash flows from investing activities:
Capital expenditures ................................................................................ (1,357,000) (623,000)
Investment in DAS Devices, Inc. ..................................................................... (27,000) (52,000)
----------- -----------
Net cash used in investing activities ............................................................ (1,384,000) (675,000)
----------- -----------
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 ................................................ 1,641,000 1,164,000
Payment of preferred stock dividend ................................................................. (9,000) (10,000)
Repayment of promissory note and capital lease obligations .......................................... (1,071,000) 86,000
----------- -----------
Net cash provided by/(used in) financing activities ............................................... (191,000) 1,240,000
----------- -----------
Net increase/(decrease) in cash ..................................................................... (2,356,000) (1,376,000)
Cash and cash equivalents at beginning of period .................................................... 3,939,000 1,376,000
=========== ===========
Cash and cash equivalents at end of period ........................................................... $ 1,583,000 $ 0
=========== ===========
</TABLE>
See the accompanying notes to these condensed
consolidated financial statements.
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 from that which would appear in the annual
consolidated financial statements; accordingly, the financial statements
contained herein should be reviewed in conjunction with the Company's Form
10-KSB for the year ended February 29, 1996.
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 November 30, 1996, and 1995
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 November 30, 1996, and the
results of their operations for the three and nine month periods ended November
30, 1996 and 1995, and their cash flows for the nine month period ended November
30, 1996.
NOTE 2 - STOCKHOLDERS' EQUITY
In May, 1996, the Company sold 792,000 shares of Common Stock of the Company to
a limited group of institutional non-US Investment firms pursuant to Regulation
S of the Securities Act of 1993 resulting in net proceeds of approximately
$900,000.
In September 1996, the Company's underwriters paid $371,000 to exercise 100,000
Unit Purchase Warrants. Pursuant to the terms of the Unit Purchase Warrant
issued by the Company in April 1994, the Company issued to the underwriters
200,000 shares of common stock and 100,000 warrants.
For the three month period ended November 30, 1996, 3,000 shares of Convertible
Cumulative Preferred Stock were converted into 35,000 shares of Common Stock.
Also, during this period, the Company issued 150,000 shares of common stock and
received proceeds of $266,000 associated with the exercise of stock options and
warrants.
NOTE 3 - INVENTORIES
The components of inventory were as follows:
November 30, February 29,
1996 1996
--------- ----------
Raw Materials 2,821,000 $2,453,000
Work-in-process 495,000 136,000
Finished goods 2,046,000 1,291,000
========= ==========
5,362,000 $3,880,000
========= ==========
NOTE 4 - NET INCOME (LOSS) PER SHARE
Net loss per share for the three and nine month periods ended November 30, 1995
were 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 outstanding during the respective
periods; common stock equivalents were excluded because the Company was in a
loss position.
Net income per share for the three and nine month periods ended November 30,
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 treasury stock method, all weighted average common equivalents are
assumed exercised whether individually dilutive or not, and the related 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 and nine
month periods ended November 30, 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 and nine month periods ended November 30, 1996 includes an
adjustment to reflect the earnings attributable to holders of dilutive
securities in subsidiaries of the Company.
NOTE 5 - SUBSEQUENT EVENTS
On December 19, 1996, Oryx Power Products Corporation, a subsidiary of the
Company, acquired all of the assets, assumed a portion of the liabilities, and
hired key personnel of Power Sensors Corporation, an Illinois corporation, for 6
percent of the outstanding Series A Common Stock of Oryx Power Products
Corporation and cash of $120,000. Power Sensors is a developer and manufacturer
of DC-to-DC power conversion products. This acquisition will be accounted as a
purchase whereby the fair market value of the assets and liabilities acquired,
including in-process research and development, will be recorded. Management is
currently evaluating the fair market value of the purchase of the acquired
assets and liabilities.
On December 23, 1996, the Company sold 1,134,000 shares of its common stock to a
group of four institutional non-US investment firms pursuant to Regulation S of
the Securities Act of 1933, resulting in net proceeds of $1,954,000. In
connection with the Regulation S placement, the Company paid to Yorkton
Securities Inc. the sum of $215,000 and further issued to them a warrant
to purchase 91,000 shares of common stock at $1.90 per share in full payment
of placement agent fees. $475,000 of the proceeds from the Regulation S
offering was used to repurchase the remaining underwriters' Unit Purchase
Warrants issued by the Company in April, 1994. The Unit Purchase Warrants, if
fully exercised, would have constituted ownership of approximately 900,000
shares of common stock of the Company.
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 29, 1996.
In addition to an analysis of recent and historical financial results, the Form
10-KSB 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, 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
Corporation Test Equipment
- Specialized Materials
- Contract R&D
SurgX Corporation - Surge Protection
Components
Results of Operations
For the quarter ended November 30, 1996, revenues increased by $2,491,000 or 53%
from $4,713,000 for the quarter ended November 30, 1995, to $7,204,000 for the
quarter ended November 30, 1996. The growth in revenues between the quarter to
quarter periods was attributable to continued growth in sales of a new power
supply to an existing OEM customer of the Power Products subsidiary, and to a
lesser extent, sales of the Company's specialized materials product line.
Revenues for the nine months ended November 30, 1996 increased $9,466,000 or 82%
from $11,516,000 for the nine months ended November 30, 1995 to $20,982,000 for
the nine months ended November 30, 1996. The growth in revenues from period to
period was primarily related to sales of the new power supply and increased
shipments from its specialized materials product line and diagnostic test
equipment. During the quarter ended November 30, 1996, the Company was notified
by its OEM customer that it would discontinue purchasing the above mentioned
power supply during the Company's fourth quarter. Revenues from the sale of
this power supply to the OEM customer for the three months and nine month
periods ended November 30, 1996, accounted for 56% and 50% of total
consolidated revenue, respectively. During the next two to three quarters,
this loss in revenue will not be completely offset by the Company's
anticipated increases in revenue from sales of diagnostic test equipment
and DC-to-DC power conversion products resulting from the Power Sensors
acquisition.
The Company's gross profit increased from $826,000 for the quarter ended
November 30, 1995, to $2,641,000 for the quarter ended November 30, 1996,
representing an increase of $1,815,000 or 220%. Gross profit increased by
$4,699,000 or 177% from $2,661,000 for the nine months ended November 30, 1995
to $7,356,000 for the nine months ended November 30, 1996. The increase in gross
profit for both periods in 1996 as compared to 1995 was attributable to
increased revenues and cost containment programs from the Company's Power
Products subsidiary and increased revenues from the Instruments & Materials
subsidiary. Gross profit during the next two to three quarters will be at lower
levels than the three months ended November 30, 1996 due to lower revenues, as
discussed above, and expected integration costs associated with the Power
Sensors acquisition. The Company anticipates operating losses in the fourth
quarter of fiscal 1997 and the first and second quarters of fiscal 1998.
Marketing and selling expenses increased from $438,000 for the quarter ended
November 30, 1995, to $479,000 for the quarter ended November 30, 1996,
representing an increase of $41,000 or 9%. Marketing and selling expenses
increased by $241,000 or 22% from $1,115,000 for the nine months ended November
30, 1995 to $1,356,000 for the nine months ended November 30, 1996. The increase
in both periods was primarily due to increased sales and marketing expenses
associated with the roll-out of the Company's diagnostic test equipment.
General and administrative expenses increased from $608,000 for the quarter
ended November 30, 1995, to $1,379,000 for the quarter ended November 30, 1996,
representing an increase of $771,000 or 127%. General and administrative
expenses increased by $1,456,000 or 81% from $1,788,000 for the nine months
ended November 30, 1995 to $3,244,000 for the nine months ended November 30,
1996. The increase in general and administrative expenses for both periods was
primarily due to increases in headcount with the Company's objective of
developing an infrastructure to support each of the subsidiaries.
Research and development expenses decreased from $778,000 in the quarter ended
November 30, 1995, to $616,000 for the quarter ended November 30, 1996,
representing a decrease of $162,000 or 21%. Research and development expenses
increased $13,000 or 1% from $1,914,000 for the nine months ended November 30,
1995 to $1,927,000 for the nine months ended November 30, 1996. Development
funding, which offsets research and development expenses, was $520,000 and
$876,000 for the three month and nine month period ended November 1996,
respectively. Development funding for fiscal year 1996 was zero. Such
development funding is likely to fluctuate as the Company finds different
development projects. 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.
The equity in losses of investee of $0 for the three months ended November 30,
1996, and $20,000 for the nine months ended November 30, 1996, represents the
Company's share of losses of Das Devices, Inc. for the periods.
The provision for income taxes of $16,000 and $108,000 for the three month and
nine months ended November 30, 1996, respectively, is based upon the annual
estimated effective tax rate. For year ended February 29, 1996, there was no tax
provision due to losses incurred by the Company.
Liquidity and Capital Resources
The Company's working capital increased by $1,192,000 from a surplus of
$4,698,000 at February 29, 1996 to a surplus of $5,890,000 at November 30, 1996,
as a result of funds provided by the Company's Regulation S Equity offering of
its securities in May 1996 and from the exercise of warrants and stock options
during the period. Based upon the recently completed offering in December 1996
(see note 5), the Company's need for near term additional financing has somewhat
diminished. However, the Company is currently negotiating with a number of banks
for a $2-3 million credit line and, in the near future, intends to establish
such a facility, on acceptable terms, to support anticipated operations based
upon anticipated demand for its products for the next twelve months. There can
be no assurance that the Company will be able to obtain such financing on
commercially acceptable terms. The ratio of current assets to current
liabilities was 1.77:1 at February 29,. 1996 and 2.34:1 at November 30, 1996.
<PAGE>
PART II
OTHER INFORMATION
Item 5. Other Information
On October 11, 1996, Andrew G. Wilson resigned as Principal Financial
and Accounting Officer. Mitchel Underseth was appointed Principal Financial
and Accounting Officer on November 25, 1996.
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 Date Schedule
(b) Reports on Form 8-K
During the quarter ended November 30, 1996, the Company filed
no Current Reports on Form 8-K.
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: January 14, 1997 By: /s/ Arvind Patel
Arvind Patel
Principal Executive Officer
/s/ Mitchel Underseth
Mitchel Underseth
Principal Financial and
Accounting Officer
<TABLE>
ORYX TECHNOLOGY CORP.
EXHIBIT 11.1
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
Three months ended Nine monthsended
November 30, November 30, November 30, November 30
1996 1995 1996 1995
------------ ------------ ------------ ------------
Earnings:
<CAPTION>
<S> <C> <C> <C> <C>
Net Income (loss) attributable to common shares ................... $ 158,000 ($ 1,052,000) $ 697,000 ($ 2,357,000)
Deduct earnings attributable to holders of dilutive
subsidiary stock options ........................................ (49,000) -- (134,000) --
Add interest income on reinvested option and warrant
exercise proceeds (as determined by the modified
treasury stock method), net of tax ............................... 46,000 146,000
-------- --------------- ------- -----
As adjusted ........................................................ $ 155,000 ($ 1,052,000) $ 709,000 ($ 2,357,000)
============ ============ ============ ============
Shares:
Number of weighted average common shares outstanding .............. 10,724,032 5,886,987 10,124,605 5,724,415
Add effect of dilutive convertible preferred stock,
options and warrants (as determined by the modified
treasury stock method) ........................................... 3,906,016 4,162,048
As adjusted ........................................................ 14,630,048 5,886,987 14,286,653 5,724,415
========= ========= ========== =========
Earnings (loss) per share .......................................... $ 0.01 ($ 0.18) $ 0.05 ($ 0.41)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Financial Statements of Oryx Technology Corp. for the nine months ended
November 30, 1996, and is qualified in its entirety by reference to such
Financial Statements.
</LEGEND>
<CIK> 0000915355
<NAME> Oryx Technology Corp.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1996
<PERIOD-END> NOV-30-1996
<EXCHANGE-RATE> 1.00
<CASH> 1583
<SECURITIES> 0
<RECEIVABLES> 3228
<ALLOWANCES> 197
<INVENTORY> 5362
<CURRENT-ASSETS> 128
<PP&E> 3520
<DEPRECIATION> 1250
<TOTAL-ASSETS> 13022
<CURRENT-LIABILITIES> 4445
<BONDS> 0
0
107
<COMMON> 11
<OTHER-SE> 15993
<TOTAL-LIABILITY-AND-EQUITY> 13022
<SALES> 20982
<TOTAL-REVENUES> 20982
<CGS> 13622
<TOTAL-COSTS> 13622
<OTHER-EXPENSES> 6527
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 814
<INCOME-TAX> 108
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 697
<EPS-PRIMARY> .05
<EPS-DILUTED> 0
</TABLE>
