<PAGE>
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 MAY 31, 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: 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)
1100 Auburn Street
Fremont, California 94538
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 492-2080
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,
1998 was 13,124,821.
1
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ORYX TECHNOLOGY CORP.
FORM 10-QSB
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
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
</TABLE>
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
May 31, 1998 February 28, 1998
---------------- -------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,280,000 $ 722,000
Accounts receivable, net 743,000 1,100,000
Inventories 416,000 397,000
Other current assets 217,000 670,000
Net assets of discontinued operations - 1,060,000
-------------- ----------------
Total current assets 3,656,000 3,949,000
Property and equipment, net 509,000 490,000
Other assets 1,092,000 1,114,000
-------------- ----------------
$ 5,257,000 $ 5,553,000
-------------- ----------------
-------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings $ 4,000 $ 129,000
Capital lease obligations 11,000 16,000
Deferred revenue 870,000 874,000
Accounts payable 313,000 431,000
Accrued liabilities 884,000 998,000
-------------- ----------------
Total current liabilities 2,082,000 2,448,000
Deferred gain 646,000 646,000
Capital lease obligations, less current 12,000 12,000
portion
Bank borrowings, less current portion 18,000 -
-------------- ----------------
Total liabilities 2,758,000 3,106,000
-------------- ----------------
Stockholders' equity:
Series A 2% Convertible Cumulative
Preferred Stock 107,000 107,000
Common Stock, 13,124,821 issued and
outstanding 13,000 13,000
Additional paid in capital 19,893,000 19,711,000
Accumulated deficit
(17,514,000) (17,384,000)
-------------- ----------------
Total stockholders' equity 2,499,000 2,447,000
-------------- ----------------
$ 5,257,000 $ 5,553,000
-------------- ----------------
-------------- ----------------
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
3
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ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
May 31,
------------------------------
1998 1997
------------- -----------
<S> <C> <C>
Net Revenue $ 1,287,000 $ 1,942,000
Cost of sales 943,000 1,390,000
------------- -----------
Gross profit 344,000 552,000
------------- -----------
Operating expenses:
Marketing and selling 58,000 266,000
General and administrative 311,000 916,000
Research and development 73,000 1,269,000
------------- -----------
Total operating expenses 442,000 2,451,000
------------- -----------
Loss from operations (98,000) (1,899,000)
Interest income (expense), net (31,000) 14,000
------------- -----------
Loss from continuing operations (129,000) (1,885,000)
------------- -----------
Loss from discontinued operations - (658,000)
------------- -----------
Net loss (129,000) (2,543,000)
Dividends (1,000) (2,000)
------------- -----------
Net loss attributable to Common Stock $ (130,000) $(2,545,000)
------------- ------------
------------- ------------
Basic and diluted loss per common share from
continuing operations $ (0.01) $ (0.15)
------------- -----------
------------- -----------
Basic and diluted loss per common share from
discontinued operations $ - $ (0.05)
------------- -----------
------------- -----------
Basic and diluted net loss per common share $ (0.01) $ (0.20)
------------- -----------
------------- -----------
Weighted average common shares used to compute
basic and diluted net loss per share (Note 4) 13,125,000 13,046,000
------------- -----------
------------- -----------
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
4
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ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
May 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(129,000) $(2,543,000)
Adjustments to reconcile net loss
to net cash provided by (used in) operating
activities:
Loss from discontinued operations - 658,000
Depreciation and amortization 34,000 100,000
Changes in assets and liabilities:
Accounts receivable, net 357,000 196,000
Inventories (19,000) (83,000)
Other current assets 453,000 (150,000)
Other assets 22,000 (90,000)
Accounts payable (118,000) (391,000)
Accrued liabilities 64,000 319,000
----------- -----------
Net cash provided by (used in) continued
operations 664,000 (1,984,000)
Net cash provided by (used in) discontinued
operations 1,060,000 (340,000)
----------- -----------
Net cash provided by (used in) operations 1,724,000 (2,324,000)
----------- -----------
Cash flows from investing activities:
Capital expenditures (53,000) (129,000)
----------- -----------
Net cash used in investing activities (53,000) (129,000)
----------- -----------
Cash flows from financing activities:
Repayment of bank line of credit (129,000) -
Proceeds from (repayment of) notes payable 22,000 (6,000)
Proceeds from issuance of common stock warrants,
net - 215,000
Other (6,000) 6,000
----------- -----------
Net cash provided by (used in) financing
activities (113,000) 215,000
----------- -----------
Net increase (decrease) in cash and cash
equivalents 1,558,000 (2,238,000)
Cash and cash equivalents at beginning of period 722,000 2,389,000
----------- -----------
Cash and cash equivalents at end of period $2,280,000 $ 151,000
----------- -----------
----------- -----------
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
5
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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, 1998.
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, 1998 and 1997
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 subsidiary at May 31, 1998, and the
results of their operations and cash flows for the three month periods ended
May 31, 1998 and May 31, 1997.
NOTE 2 - STOCKHOLDERS' EQUITY
The Company issued options to former key employees of Oryx Power Products
Corporation in connection with the sale of substantially all of the properties,
assets, rights, business and certain liabilities of Oryx Power Products
Corporation ("Power Products") to Todd Power Corporation. The increase in paid
in capital for the three month period ended May 31, 1998 reflects the fair
market value of these options.
NOTE 3 - INVENTORIES
The components of inventory were as follows:
<TABLE>
<CAPTION>
May 31, February 28,
1998 1998
------------- --------------
<S> <C> <C>
Raw materials $ 102,000 $ 84,000
Finished goods 314,000 313,000
------------- --------------
$ 416,000 $ 397,000
------------- --------------
------------- --------------
</TABLE>
NOTE 4 - LOSS PER SHARE
Basic earnings per share is computed by dividing loss available to common
stockholders by the weighted average common shares outstanding for the
period. Diluted earnings per share reflects the weighted average common
shares outstanding plus the potential effect of dilutive securities which are
convertible to common shares such as options, warrants, and preferred stock.
Due to the net losses from operations incurred for the three month periods
ended May 31, 1998 and May 31, 1997, all common stock equivalents outstanding
were considered anti-dilutive and were excluded from the calculations of
diluted net loss per share.
6
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NOTE 5 - NEW CREDIT FACILITY
In March 1998, the Company amended its credit facility reducing the Accounts
Receivable Revolving Batch Facility and Inventory Credit Line from $4,000,000
and $1,500,000 respectively, to a maximum borrowing of $500,000 each. Under
the amended agreement, the Accounts Receivable Revolving Batch Facility
expires in March 1999 and the Inventory Credit Line expires in May 1999. At
May 31, 1998, the Company did not have amounts outstanding under the Accounts
Receivable Revolving Batch Facility or the Inventory Credit Line.
NOTE 6 - NEW ACCOUNTING STANDARD
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130 establishes
standards for reporting and display of comprehensive income and its
components in a financial statement that is displayed with the same
prominence as other financial statements for the periods beginning after
December 15, 1997. Comprehensive income, as defined, includes all changes in
equity (net assets) during a period from non-owner sources including
unrealized gains and losses on available-for-sale securities.
Reclassification of financial statements for earlier periods for comparative
purposes is required. It is not expected that adoption of SFAS 130 will have
an impact on the Company's consolidated financial statements.
In June 1997, the FASB issued SFAS No. 131 ("SFAS 131"), "Disclosure about
Segments of an Enterprise and Related Information." This statement
establishes standards for the way companies report information about
operations segments in annual financial statements for the periods beginning
after December 15, 1997. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. It is not expected that adoption of SFAS 131 will have an impact
on the Company's consolidated financial statements.
NOTE 7 - DISPOSITION
On March 2, 1998, the Company sold substantially all of the properties,
assets, rights, business and certain liabilities of Power Products for
$2,000,000 in cash and a contingent additional amount up to $4,000,000 to be
calculated based upon sales of certain specified products to specified
customers during the fourteen month period immediately following the closing
of the transaction. As the Company had a loss on disposal, all losses were
recognized as if the transaction was completed as of February 28, 1998. The
sale of Power Products had been accounted for as a discontinued operation and
accordingly the net assets held for sale and operating results of Power
Products for the fiscal year ended February 28, 1998 and three months ended
May 31, 1997 were segregated and reported as discontinued operations. At May
31, 1998, the Company had not yet recorded any of the additional
consideration related to the sale of Power Products as the sales
contingencies had not been meet.
7
<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, 1998.
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 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,
together with this Form 10-QSB, and consider all such risks before making an
investment decision with respect to the Company's securities
BUSINESS SEGMENTS
During fiscal 1998, the Company embarked upon a major restructuring program
which resulted in the sale on February 27, 1998 of the Instruments business
segment of Oryx Instruments and Materials Corporation, and the sale on March
2, 1998 of substantially all the assets of Oryx Power Products Corporation.
Following this restructuring, the Company has organized into two operating
segments: SurgX Corporation and a Materials business segment. In addition,
a corporate segment includes certain activities that are not related to any
other operations. The businesses are as follows:
<TABLE>
<CAPTION>
Segment/Subsidiary Businesses
------------------ ----------
<S> <C>
SurgX Corporation - Surge Protection Components
Materials - Sputtering Target Assemblies
</TABLE>
In the course of selling the business units described above, the Company
disposed of business segments which had accounted for a substantial majority
of its revenues. While the Company believes that this downsizing will
substantially reduce its losses and provide capital to support on-going
development activities, the actual future impact of the downsizing cannot be
determined with any certainty.
RESULTS OF OPERATIONS
Operating results for the Instruments business segment, sold February 27,
1998, are reflected in the financial statements for the quarter ended May
31, 1997. Therefore, for comparison purposes, operating results for the
Instruments business segment for the quarter ended May 31, 1997 are
identified below:
8
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED
MAY 31, 1997 MAY 31, 1998
------------ ------------
Instruments
Oryx Instruments Business Oryx
Technology Business Segment as % Technology
Consolidated Segment of Total Consolidated
---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 1,942,000 $ 887,000 46% $ 1,287,000
Cost of sales 1,390,000 659,000 47% 943,000
---------------- -------------- --------------
Gross Profit 552,000 228,000 41% 344,000
Operating expenses:
Marketing and sales 266,000 237,000 89% 58,000
General and administrative 916,000 117,000 13% 311,000
Research and development 1,269,000 545,000 43% 73,000
---------------- -------------- --------------
Total operating expenses 2,451,000 899,000 442,000
Loss from operations $ (1,899,000) $ (671,000) 35% $ (98,000)
---------------- -------------- --------------
---------------- -------------- --------------
</TABLE>
For the quarter ended May 31, 1998, revenues decreased by $655,000 or 34%
from $1,942,000 for the quarter ended May 31, 1997, to $1,287,000 for the
quarter ended May 31, 1998. This decrease in revenues reflects the loss of
sales from the Instruments business segment, partially offset by an increase
in sales of sputtering target assemblies from the retained Materials business
segment.
The Company's gross profit decreased from $552,000 for the quarter ended May 31,
1997, to $344,000 for the quarter ended May 31, 1998, representing a decrease of
$208,000 or 38%. The decrease in gross profit is primarily attributable to the
loss of gross profit contribution from the Instruments business segment.
Marketing and selling expenses decreased from $266,000 for the quarter ended May
31, 1997, to $58,000 for the quarter ended May 31, 1998, representing a decrease
of $208,000 or 78%. The decrease is primarily due to the reduction of marketing
and sales expenses directly related to the Instruments business segment.
Marketing and sales expenses are expected to continue at this level as the
remaining business segments require minimum direct marketing and sales support.
General and administrative expenses decreased from $916,000 for the quarter
ended May 31, 1997, to $311,000 for the quarter ended May 31, 1998, representing
a decrease of $605,000 or 66%. The decrease in general and administrative
expenses is due to an overall reduction in expenses of supporting the new
organization structure, a management separation expense incurred during the
quarter ended May 31, 1997, and the reduction in general and administrative
costs directly associated with the Instruments business segment.
Research and development expenses decreased from $1,269,000 in the quarter ended
May 31, 1997, to $73,000 for the quarter ended May 31, 1998, representing a
decrease of $1,196,000 or 94%. Research and development spending decreased as a
result of the elimination of research and development expenses associated with
the Instruments business segment, elimination of SurgX development activities
related to on-chip (integrated circuit) ESD protection, and an increase in
development funding which offset research and development expenses. The
Company anticipates research and development costs to increase as development
activities on improvements in electrical performance and reductions in
manufacturing costs for its SurgX technology continue. The Company believes
these development objectives must be achieved to enhance the commercial
viability of this technology.
9
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While the Company believes it has adequate resources to support these
activities, there can be no assurance that any technological enhancements can
be commercially developed, or that, if developed, will actually increase the
commercial viability of the SurgX technology. The Company's research and
development expenses in the past were partially funded with development
contracts which are now substantially exhausted. While the Company is
actively pursuing new development funding contracts, there can be no
assurance that the Company will be successful in securing new contracts.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased by $73,000 from a surplus of $1,501,000
at February 28, 1998 to a surplus of $1,574,000 at May 31, 1998. Cash and cash
equivalents increased by $1,558,000 from $722,000 for the year ended February
28, 1998 to $2,280,000 for the quarter ended May 31, 1998. This increase in
cash and cash equivalents is primarily due to proceeds from the sale of the
business of Oryx Power Products Corporation and the Instruments business
segment. Management believes it has sufficient capital to meet its fiscal year
1999 operating plan. In the event the Company does not meet its operating plan,
however, there can be no assurance that the Company will be able to raise
capital through an asset sale or development contract in a timely manner, or at
all.
PART II
OTHER INFORMATION
10
<PAGE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Document
----------- -----------------------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
During the quarter ended May 31, 1998, the Company filed two Current
Reports on Form 8-K.
11
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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 15, 1998 By: /s/ Philip J. Micciche
-----------------------------------
Philip J. Micciche
Principal Executive Officer
/s/ Mitchel Underseth
-----------------------------------
Mitchel Underseth
Principal Financial and Accounting
Officer
12
<TABLE> <S> <C>
<PAGE>
<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,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-31-1998
<CASH> 2,280,000
<SECURITIES> 0
<RECEIVABLES> 867,000
<ALLOWANCES> 124,000
<INVENTORY> 416,000
<CURRENT-ASSETS> 3,656,000
<PP&E> 853,000
<DEPRECIATION> 344,000
<TOTAL-ASSETS> 5,257,000
<CURRENT-LIABILITIES> 2,082,000
<BONDS> 0
0
107,000
<COMMON> 19,906,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,257,000
<SALES> 1,287,000
<TOTAL-REVENUES> 1,287,000
<CGS> 943,000
<TOTAL-COSTS> 1,385,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,000
<INCOME-PRETAX> (129,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (129,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (130,000)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
