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 NOVEMBER 30, 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 ______.
- ------
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 November 30, 1997 was 13,124,821.
<PAGE>
ORYX TECHNOLOGY CORP.
FORM 10-QSB
Table of Contents
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 3. Other information ............................................. 11
Item 4. Exhibits and Reports on Form 8-K ............................... 11
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<S> <C> <C>
November 30, February 28,
1997 1997
------------------ ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 761,000 $ 3,080,000
Accounts receivable,net 1,832,000 3,457,000
Inventories 4,274,000 4,795,000
Other current assets 508,000 171,000
---------- -------
Total current assets 7,375,000 11,503,000
Property and equipment, net 2,395,000 2,674,000
Intangible assets, net 632,000 755,000
Other assets 272,000 380,000
------- -------
$10,674,000 $ 15,312,000
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings $1,063,000 $ 215,000
Capital lease obligations 20,000 137,000
Accounts payable 2,257,000 2,686,000
Accrued liabilities 2,078,000 1,951,000
-------------- ---------
Total current liabilities 5,418,000 4,989,000
Capital lease obligations, less current portion 38,000 184,000
Borrowings, less current portion 259,000 705,000
------- -------
Total liabilities 5,715,000 5,878,000
--------- ---------
Mandatorily redeemable securities 778,000 637,000
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Stockholders' equity:
Series A 2% Convertible Cumulative Preferred
Stock, 4,500 shares issued and outstanding 107,000 107,000
Common Stock, 13,124,821 and 12,968,581 shares
issued and outstanding, respectively 15,000 13,000
Additional paid in capital 19,617,000 18,920,000
Accumulated deficit (15,558,000) (10,243,000)
------------ ------------
Total stockholders' equity 4,181,000 8,797,000
--------- ---------
$10,674,000 $ 15,312,000
=========== ============
See the accompanying notes to these condensed consolidated financial statements.
</TABLE>
<TABLE>
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
November 30 , November 30,
-------------------------------- --------------------------------
1997 1996 1997 1996
--------------- -------------- --------------- --------------
Revenue $4,110,000 $7,204,000 $13,811,000 $20,982,000
Cost of sales 3,330,000 4,563,000 11,714,000 13,622,000
--------------- -------------- --------------- --------------
Gross profit 780,000 2,641,000 2,097,000 7,360,000
--------------- -------------- --------------- --------------
Operating expenses:
Marketing and selling 510,000 479,000 1,522,000 1,356,000
General and administrative 900,000 1,379,000 3,298,000 3,244,000
Research and development 691,000 616,000 3,624,000 1,927,000
--------------- -------------- --------------- --------------
Total operating expenses 2,101,000 2,474,000 8,444,000 6,527,000
--------------- -------------- --------------- --------------
Income (loss) from operations (1,321,000) 167,000 (6,347,000) 833,000
Interest (income) expense, net 94,000 (9,000) 166,000 (1,000)
Equity loss on investment - - - 20,000
Net gain on sale of investment (1,383,000) - (1,383,000) -
--------------- -------------- --------------- --------------
Income (loss) before income taxes (32,000) 176,000 (5,130,000) 814,000
Provision for income taxes 19,000 16,000 42,000 108,000
--------------- -------------- --------------- --------------
Net income (loss) (51,000) 160,000 (5,172,000) 706,000
Dividends and accretion (48,000) (2,000) (143,000) (9,000)
--------------- -------------- --------------- --------------
Net income (loss) attributable to
common shares ($99,000) $158,000 ($5,315,000) $697,000
=============== ============== =============== ==============
Net income (loss) per common share: ($0.01) $0.01 ($0.40) $0.05
=============== ============== =============== ==============
Weighted average common shares
and equivalents outstanding: 13,124,821 14,630,048 13,124,821 14,286,653
=============== ============== =============== ==============
See the accompanying notes to these condensed consolidated financial statements.
</TABLE>
<TABLE>
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
<S> <C> <C>
Nine Months Ended November 30,
----------------------------------------
----------------- ------------------
1997 1996
----------------- ------------------
Cash flow from operating activities:
Net income (loss) ($5,172,000) $706,000
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Equity in losses of investee - 20,000
Gain on sale of investment (1,383,000) -
Depreciation and amortization 744,000 376,000
Changes in assets and liabilities:
Accounts receivable, net 1,625,000 (538,000)
Inventories 521,000 (1,482,000)
Other current assets (337,000) 128,000
Other assets 108,000 (158,000)
Accounts payable (429,000) (447,000)
Accrued liabilities 127,000 614,000
----------------- ------------------
Net cash used in operating activities (4,196,000) (781,000)
----------------- ------------------
Cash flows from investing activities:
Proceeds from disposition of assets 145,000 -
Capital expenditures (487,000) (1,357,000)
Investment in other - (27,000)
Net proceeds from sale of shares of an investment 1,383,000 -
----------------- ------------------
Net cash provided by (used in) investing activities 1,041,000 (1,384,000)
----------------- ------------------
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 693,000 1,641,000
Proceeds from borrowings 918,000 -
Payment of preferred stock dividend (1,000) (9,000)
Repayment of long-term debt and capital lease obligations (778,000) (1,071,000)
Other 4,000 -
----------------- ------------------
----------------- ------------------
Net cash provided by (used in) financing activities 836,000 (191,000)
----------------- ------------------
Net decrease in cash and cash equivalents (2,319,000) (2,356,000)
Cash and cash equivalents at beginning of period 3,080,000 3,939,000
================= ==================
Cash and cash equivalents at end of period $761,000 $1,583,000
================= ==================
See the accompanying notes to these condensed consolidated financial statements.
</TABLE>
ORYX TECHNOLOGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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, as amended, 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 November 30, 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 at November 30, 1997, and the results of its operations
and its cash flows for the three and nine month periods ended November 30, 1997
and 1996.
NOTE 2- STOCKHOLDERS EQUITY
In November 1997, the Company's subsidiary SurgX sold 333,333 common shares or
3.2% of its then outstanding common shares to a third party for proceeds, net of
issuance costs, of $485,000. The Company recorded the proceeds as an increase to
additional paid-in capital.
NOTE 3 - INVENTORIES
The components of inventory were as follows:
November 30, 1997 February 28, 1997
------------------- -------------------
Raw materials $2,600,000 $ 3,090,000
Work-in-process 185,000 153,000
Finished Goods 1,489,000 1,552,000
=================== ===================
$4,274,000 $ 4,795,000
=================== ===================
NOTE 4 - NET INCOME (LOSS) PER SHARE
Shares used in the computation of net loss per share for the three and nine
month periods ended November 30, 1997 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 and
equivalents outstanding during the respective period. Common stock equivalents
were excluded from the calculation of loss per share for the three and nine
months ended November 30, 1997 as their effect was antidilutive.
Shares used in the computation of 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 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 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 - 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. SFAS No. 128 will require the retroactive restatement of all
previously reported amounts upon adoption. Had the Company applied the
provisions of SFAS No. 128 during the interim periods presented herein, basic
earnings per share for the three and nine months ended November 30, 1996 would
have been $0.02 and $0.07, respectively, and dilutive earnings per share for
those periods would have been equivalent to primary earnings per share. Earnings
per share reported for the three and nine months ended November 30, 1997 would
not have changed under SFAS No. 128.
NOTE 6- BORROWINGS
Under the Company's Revolving Account Transfer and Purchase Agreement (the
"Facility") which was executed in May 1997 with a financial institution (the
"Lender"), the Company sells all trade accounts receivable and has the option to
draw advances up to 85% of eligible accounts up to $4,000,000. Accordingly,
accounts receivable at November 30, 1997 were due from the lender under the
Facility.
To the extent that advances are drawn against eligible outstanding accounts
receivable, the Company reduces the balance of accounts receivable. The Company
must pay interest on said advance in the form of a discount equal to the
lender's base rate plus 3.5% per annum. At November 30, 1997, advances drawn
against outstanding eligible accounts receivable under the Facility totaled $
1,194,000.
Under the Company's Inventory Line of Credit, which was executed in May 1997,
the Company has the ability to borrow up to 40% of eligible inventory. At
November 30, 1997, the Company had $918,000 outstanding under the Inventory Line
of Credit.
<PAGE>
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, as
amended, 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 November 30, 1997, revenues decreased by $3,094,000 or 43%
from $7,204,000 for the quarter ended November 30, 1996, to $4,110,000 for the
quarter ended November 30, 1997. Revenues for the nine months ended November 30,
1997 decreased $7,171,000 or 34% from $20,982,000 for the nine months ended
November 30, 1996 to $13,811,000 for the nine months ended November 30, 1997.
The decrease in revenues for both periods, partially offset by increases in
sales of the Company's test equipment and specialized materials, was primarily
attributable to the termination of shipments of a power supply product to Pitney
Bowes. Revenues from the sale of this power supply to Pitney Bowes for the three
month and nine month periods ended November 30, 1996 , accounted for 56% and 50%
of total consolidated revenue, respectively compared to 0% and 1% of total
consolidated revenue for the three and nine months ended November 30, 1997. The
Company anticipates a modest increase in revenues in the fourth quarter as
compared with third quarter of fiscal 1998. However, there can be no assurances
that the Company will be able to achieve growth in quarterly revenues or even
maintain current quarterly revenue levels . The Company expects revenues for
fiscal year 1998 to be lower than those for fiscal year 1997 .
The Company's gross profits decreased from $2,641,000 for the quarter ended
November 30, 1996, to $780,000 for the quarter ended November 30, 1997,
representing a decrease of $1,861,000 or 71%. Gross profit decreased by
$5,263,000 or 72% from $7,360,000 for the nine months ended November 30, 1996 to
$2,097,000 for the nine months ended November 30, 1997. The decrease in gross
profit for both periods, partially offset by increases in gross profits from
increased sales of test equipment and specialized materials, was principally
attributable to the reduction in shipments to Pitney Bowes.
Marketing and selling expenses increased from $ 479,000 for the quarter ended
November 30, 1996, to $510,000 for the quarter ended November 30, 1997,
representing an increase of $31,000 or 6%. Marketing and selling expenses
increased by $166,000 or 12% from $1,356,000 for the nine months ended November
30, 1996 to $1,522,000 for the nine months ended November 30, 1997. The increase
in both periods was due to increased sales and marketing activities associated
with the Company's TTS 2000 Process Monitoring Tool, partially offset by lower
wages and marketing expenses in the Company's Power Products subsidiary.
General and administrative expenses decreased from $1,379,000 for the quarter
ended November 30, 1996, to $900,000 for the quarter ended November 30, 1997,
representing a decrease of $479,000 or 35%. General and administrative expenses
increased by $54,000 or 2% from $3,244,000 for the nine months ended November
30, 1996 to $3,298,000 for the nine months ended November 30, 1997. The decrease
in general and administrative expenses for the three months ended November 30,
1997 was primarily attributable to lower professional service fees and headcount
reductions The increase in general and administrative expenses for the nine
months ended November 30, 1997, was primarily due to increases in costs
associated with the Company's objective of developing each subsidiary's
individual infrastructure.
Research and development expenses increased from $616,000 in the quarter ended
November 30, 1996, to $691,000 for the quarter ended November 30, 1997,
representing an increase of $75,000 or 12%. Research and development expenses
increased $1,697,000 or 88% from $1,927,000 for the nine months ended November
30, 1996 to $3,624,000 for the nine months ended November 30, 1997. Development
funding, which offsets research and development expenses was $510,000 and
$540,000 for the three month and nine month periods ended November 1997,
respectively, compared to $520,000 and $876,000 for the three month and nine
month periods ended November 1996, respectively. Research and development
spending increased for both periods as a result of continued developmental
efforts with respect to diagnostic test equipment and surge protection devices
being undertaken primarily in the form of increased headcount, outside
professional services and prototype material cost.
During the third quarter ended November 30, 1997, the Company sold 2,000,000
Series A Preferred shares of DAS Devices, Inc. for a total consideration of
$1,400,000 resulting in a gain of approximately $ 1,383,000.
Operating losses are anticipated to continue through at least the fourth quarter
of fiscal 1998 and there can be no assurance that any anticipated growth in
quarterly revenues or improvements in gross profits and cost reductions will be
realized in the fourth quarter or in any future period.
The provision for income taxes of $19,000 for the three months ended November
30, 1997 and $42,000 for the nine months ended November 30, 1997 is based upon
the annual estimated state franchise taxes and foreign tax provisions. No
provision for federal income taxes was provided because of anticipated losses
for fiscal year 1998.
Liquidity and Capital Resources
The Company's working capital decreased by $4,557,000 from a surplus of
$6,514,000 at February 28, 1997 to a surplus of $1,957,000 at November 30, 1997,
primarily as a result of operating losses. The ratio of current assets to
current liabilities was 2.30:1 at February 28, 1997 and 1.36:1 at November 30,
1997.
Cash and cash equivalents decreased by $2,319,000 from $3,080,000 at February
28, 1997 to $761,000 at November 30, 1997. The decrease in cash was attributable
to cash used in operations of $4,196,000 resulting from the Company's net loss
offset by non-cash items, working capital changes and utilization of the
Facility under which the Company had received advances against eligible accounts
receivable of approximately $1,194,000. In addition to operating activities,
financing and investing activities provided $1,877,000 of net proceeds from the
sale of DAS Device securities, the sale of approximately 3% of the outstanding
securities of the Company's SurgX subsidiary, and utilization of the Company's
Line of Credit. Available borrowing capacity under the Inventory Line of Credit
and the Facility totaled $ 1,095,000 at November 30, 1997.
The Company anticipates operating losses to continue through the end of this
fiscal year and 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 and potential debt or convertible preferred
private placement offerings. Although management believes that sufficient
funding and/or cost saving 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 offered on terms
acceptable to the Company.
<PAGE>
PART II
OTHER INFORMATION
Item 3. Other Information
In November 1997, the Company moved its corporate operations into the facility
of its SurgX subsidiary located at 1100 Auburn Street, Fremont, California
94538.
Item 4. 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 November 30, 1997, 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, 1998 By: /s/ Philip J. Micciche
----------------------
Philip J. Micciche
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
<S> <C> <C> <C> <C>
Three months ended
Nine months ended
November 30, November 30, November 30, November 30,
1997 1996 1997 1996
-------------- ------------ ------------ -------------
Earnings:
Net Income (loss) attributable to common holders ($99,000) $158,000 ($5,315,000) $697,000
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 ($99,000) $155,000 ($5,315,000) $709,000
============== =========== ============= ============
Shares:
Number of weighted average common shares outstanding 13,124,821 10,274,302 13,124,821 10,124,605
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 13,124,821 14,630,048 13,124,821 14,286,653
========== ========== ========== ==========
Earnings (loss) per share ($0.01) $0.01 ($0.40) $0.05
======= ===== ======= =====
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ORYX TECHNOLOGY CORP.
EXHIBIT-27.1
FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from the
Financial Statements of Oryx Technology Corp. for the nine months ended November
30, 1997, and is qualified in its entirety by reference to such Financial
Statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Feb-28-1997
<PERIOD-START> Mar-01-1997
<PERIOD-END> Nov-30-1997
<EXCHANGE-RATE> 1
<CASH> 761,000
<SECURITIES> 0
<RECEIVABLES> 2,113,000
<ALLOWANCES> 281,000
<INVENTORY> 4,274,000
<CURRENT-ASSETS> 7,375,000
<PP&E> 4,438,000
<DEPRECIATION> 2,043,000
<TOTAL-ASSETS> 10,674,000
<CURRENT-LIABILITIES> 5,418,000
<BONDS> 0
778,000
107,000
<COMMON> 15,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,674,000
<SALES> 13,811,000
<TOTAL-REVENUES> 13,811,000
<CGS> 11,714,000
<TOTAL-COSTS> 11,714,000
<OTHER-EXPENSES> 7,204,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166,000
<INCOME-PRETAX> (5,273,000)
<INCOME-TAX> 42,000
<INCOME-CONTINUING> (5,315,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,315,000)
<EPS-PRIMARY> (0.40)
</TABLE>
