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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
/X/ ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1999.
OR
TRANSITION REPORT UNDER 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)
Issuer'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
August 31, 1999 was 15,522,000.
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ORYX TECHNOLOGY CORP.
FORM 10-QSB
Table of Contents
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements ............................................. 3
Item 2. Management's Discussion and Analysis or Plan of Operations ....... 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................................. 12
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1999 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,806,000 $ 1,570,000
Short term investments 2,231,000 -
Accounts receivable, net of allowance for doubtful
accounts of $66,000 and $118,000 27,000 696,000
Inventories - 384,000
Other current assets 173,000 278,000
------------ ------------
Total current assets 5,237,000 2,928,000
Property and equipment, net 375,000 434,000
Other assets 43,000 141,000
------------ ------------
$ 5,655,000 $ 3,503,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Capital lease and other short term obligations $ 3,000 $ 12,000
Accounts payable 50,000 355,000
Accrued liabilities 802,000 541,000
Deferred revenue 78,000 408,000
------------ ------------
Total current liabilities 933,000 1,316,000
Capital lease and other long term obligation, less current portion - 16,000
------------ ------------
Total liabilities 933,000 1,332,000
Stockholders' equity:
Series A 2% Convertible Cumulative Preferred Stock, $0.001 par value; 3,000,000
shares authorized; 3,750 shares issued and outstanding,
liquidation value $94,000 89,000 89,000
Common Stock, $0.001 par value; 25,000,000 shares
authorized; 15,522,000 and 13,290,464 issued and outstanding 15,000 13,000
Additional paid-in capital 23,856,000 20,144,000
Accumulated deficit (19,238,000) (18,075,000)
------------ ------------
Total stockholders' equity 4,722,000 2,171,000
------------ ------------
$ 5,655,000 $ 3,503,000
============ ============
</TABLE>
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ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
AUGUST 31, AUGUST 31,
-------------------------------- --------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenue $ 77,000 $ 160,000 $ 266,000 $ 382,000
Cost of sales 158,000 212,000 500,000 521,000
------------ ------------ ------------ ------------
Gross profit (81,000) (52,000) (234,000) (139,000)
------------ ------------ ------------ ------------
Operating expenses:
Marketing and selling - - - -
General and administrative 592,000 332,000 1,038,000 623,000
Research and development 316,000 172,000 499,000 245,000
------------ ------------ ------------ ------------
Total operating expenses 908,000 504,000 1,537,000 868,000
------------ ------------ ------------ ------------
Loss from operations (989,000) (556,000) (1,771,000) (1,007,000)
Interest income (expense), net 38,000 2,000 72,000 (29,000)
Other expenses (67,000) - (76,000) -
------------ ------------ ------------ ------------
Loss from continuing operations (1,018,000) (554,000) (1,775,000) (1,036,000)
Discontinued operations:
Income from discontinued operations - 392,000 268,000 745,000
Income on disposal of discontinued operations 345,000 345,000
------------ ------------ ------------ ------------
Income from discontinued operations 345,000 392,000 613,000 745,000
------------ ------------ ------------ ------------
Net loss (673,000) (162,000) (1,162,000) (291,000)
Dividends - - (1,000) (1,000)
------------ ------------ ------------ ------------
Net loss attributable to common stock $ (673,000) $ (162,000) $ (1,163,000) $ (292,000)
============ ============ ============ ============
Basic and diluted loss per common share
from continuing operations $ (0.06) $ (0.04) $ (0.12) $ (0.08)
Basic and diluted income per common share
from discontinued operations $ 0.02 $ 0.03 $ 0.04 $ 0.06
------------ ------------ ------------ ------------
Basic and diluted net loss per common share $ (0.04) $ (0.01) $ (0.08) $ (0.02)
============ ============ ============ ============
Weighted average common shares used
to compute basic and diluted net loss
per share (Note 4) 15,418,000 13,125,000 14,946,000 13,125,000
============ ============ ============ ============
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
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ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31,
---------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,162,000) $ (291,000)
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Income from discontinued operations (268,000) (745,000)
Gain from sale of discontinued operations (345,000)
Loss from asset disposition 8,000 -
Depreciation and amortization 63,000 63,000
Non-cash stock compensation 178,000 11,000
Changes in assets and liabilities:
Accounts receivable, net 108,000 -
Inventories - -
Other current assets (5,000) 491,000
Other assets 98,000 (11,000)
Deferred revenue - 47,000
Accounts payable (75,000) 44,000
Accrued liabilities 269,000 31,000
----------- -----------
Net cash used in continued operations (1,131,000) (360,000)
Net cash provided by (used in) discontinued operations 620,000 (337,000)
----------- -----------
Net cash used in operations (511,000) (697,000)
----------- -----------
Cash flows from investing activities:
Capital expenditures (51,000) (58,000)
Proceeds from assets dispositions 16,000 -
Proceeds from sale of short term investment 151,000 -
Purchase of short term investment (2,231,000) -
Proceeds from sale of discontinued operations 400,000 2,000,000
----------- -----------
Net cash provided by (used in) investing activities (1,715,000) 1,942,000
----------- -----------
Cash flows from financing activities:
Repayment of bank line of credit - (129,000)
Payment of capital lease obligations (6,000) -
Proceeds from (repayment of) notes payable (19,000) 21,000
Proceeds from exercise of warrants for common stock 3,430,000 -
Proceeds from exercise of options for common stock 58,000 -
Other (1,000) (12,000)
----------- -----------
Net cash provided by (used in) financing activities 3,462,000 (120,000)
----------- -----------
Net increase in cash and cash equivalents 1,236,000 1,125,000
Cash and cash equivalents at beginning of period 1,570,000 722,000
----------- -----------
Cash and cash equivalents at end of period $ 2,806,000 $ 1,847,000
=========== ===========
</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, as amended, for the year ended February 28, 1999.
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 August 31, 1999 and 1998
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 August 31, 1999, and the results
of their operations and cash flows for the three month periods ended August 31,
1999 and August 31, 1998.
NOTE 2 - STOCKHOLDERS' EQUITY
On August 11, 1998, the Company entered into a seventeen month Marketing
Agreement (the "Agreement") to receive investor relation services from
Continental Capital. The Company agreed to issue to Continental Capital up to
202,500 shares of common stock in consideration for services to be received. At
August 31, 1999, all 202,500 shares of common stock have been issued. In
addition, a warrant to purchase 60,000 shares of common stock at $1.09 per share
with a two-year term was issued to Continental Capital. The Company is
recognizing expense as the services are received, and recorded $225,000 in
expense from inception of the agreement to August 31, 1999.
NOTE 3 - INVENTORIES
The components of inventory were as follows:
AUGUST 31, FEB 28,
1999 1999
---------- ----------
Raw materials $ - $ 75,000
Finished goods - 309,000
---------- ----------
$ - $ 384,000
========== ==========
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NOTE 4 - INCOME (LOSS) PER SHARE
Basic earnings per share is computed by dividing income or 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
August 31, 1999 and August 31, 1998, all common stock securities outstanding
were considered anti-dilutive and were excluded from the calculations of diluted
net loss per share. Net income (loss) has not been adjusted for any period
presented for purposes of computing basic and diluted earnings per share.
Anti-dilutive securities and common stock equivalents at August 31, 1999 which
could be dilutive in future periods include common stock options to purchase
3,452,000 shares of common stock, warrants to purchase 1,838,019 shares of
common stock, 3,750 shares of Series A preferred stock which may be converted
into 44,000 shares of common stock and the minority interest investment and
subsidiary stock options to purchase 304,000 shares in the Company's SurgX
subsidiary which could reduce the Company's share of profits in the calculation
of earnings per share in future periods.
NOTE 5 - CREDIT FACILITY
In March 1998, the Company amended its credit facility with KBK Financial Inc.,
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 expired in March 1999 and the Inventory Credit Line expired in
August 1999.
NOTE 6 - COMPREHENSIVE INCOME
In March 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income." Comprehensive income, as
defined, includes all changes in equity during a period from non-owner sources
including unrealized gains and losses on available-for-sale securities. There is
no difference between net loss attributable to common stock and comprehensive
loss for all periods presented.
NOTE 7 - NEW ACCOUNTING STANDARD
In June 1998, the FASB issued Statement of Financial Accounting Standard No.
133, "Accounting for Derivative Instruments and Hedging Activities," (SFAS No.
133) which establishes accounting and reporting standards for derivative
instruments, and for hedging activities. It requires that an entity recognizes
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Management has not yet
evaluated the effects of this change on its operations. The Company will adopt
SFAS No. 133 as required for its second quarterly filing in fiscal 2001. The
Company currently does not hold any instruments which would be effected by SFAS
No. 133.
NOTE 8 - POWER PRODUCTS DISPOSITION
On March 2, 1998, the Company sold substantially all of the properties, assets,
rights, business and certain liabilities of its Oryx Power Products Corporation
subsidiary ("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 this
disposition, all losses were recognized as if the transaction was completed as
of February 28, 1998. The sale of the Power Products business has 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 were segregated and reported as discontinued operations. At August 31,
1999, the Company had not yet recorded any additional consideration related to
the sale of Power Products, as the sales contingencies conditions required for
such additional consideration had not been met.
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NOTE 9 - INSTRUMENTS AND MATERIALS DISCOUNTINUED OPERATIONS
On August 18, 1999, pursuant to the terms of an Asset Purchase Agreement dated
as of June 1, 1999 by and among Oryx Technology Corp. ("Oryx") and Oryx Advanced
Materials Inc. ("OAMI"), Oryx sold to OAMI certain specified assets associated
with Oryx' carbon target assembly manufacturing and related materials coating
business (the "Materials" business) for a cash payment of $400,000 and the
assumption of substantially all of the liabilities associated with such
business. The Company retained ownership of approximately $280,000 in accounts
receivable balances relating to the Materials business subsequent to the
disposition. In addition, Oryx licensed to OAMI certain patents and other
technology associated with the purchased assets. OAMI will pay Oryx royalty
payments over ten years, with a maximum royalty payment of $2.2 million for the
first three years, based on OAMI's gross profits.
In addition, on February 27, 1998, Corus Investments Ltd., a Bahamas Company,
acquired 8,000,000 shares of the authorized Class A Common Stock of Oryx
Instruments and Materials Corporation (the "Instruments" business) for a
purchase price of $500,000 (the "Sale"). Prior to the Sale, I&M was a wholly
owned subsidiary of the Registrant. As part of the Sale, I&M redeemed 8,000,000
of the 10,000,000 shares of Class A Common Stock held by the Registrant for an
aggregate redemption price of $1,500,000.
These two dispositions (collectively referred to as the "I&M Disposition") have
been aggregated as they represent the final sale of one business segment.
Revenue from the Instruments and Materials segment was $1,049,000 and $2,161,000
for the six months ended August 31, 1999 and 1998, respectively. Income taxes
related to the Instruments and Materials businesses and the tax benefit
resulting from the gain on disposal of the Materials business were immaterial.
Transaction costs related to the disposal were $55,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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, 1999.
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995,
particularly statements regarding market opportunities, market share growth,
competitive growth, new product introductions, success of research and
development, research and development expenses, customer acceptance of new
products, gross margin and selling, general and administrative expenses. These
forward-looking statements involve risks and uncertainties, and the cautionary
statements set forth below identify important factors that could cause actual
results to differ materially from those predicted in any such forward looking
statements. Such factors include, but are not limited to, adverse changes in
general economic conditions, including adverse changes in the specific markets
for the Company's products, adverse business conditions, adverse changes in
customers order patterns, increased competition, lack of acceptance of new
products, pricing pressures, lack of success in technological advancement, risks
associated with sales to foreign customers (including the downturn of economic
trends and unfavorable currency movements in the Asia Pacific marketplace),
risks associated with the Company's efforts to comply with Year 2000
requirements, and other factors.
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.
8
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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 and the entire business of Oryx Power
Products Corporation. Through fiscal 1999 and through the first quarter of
fiscal 2000, the Company was organized into two operating segments: SurgX
Corporation and a Materials business segment which were supported by a corporate
segment providing all administrative and accounting functions. On August 18,
1999 the Company completed it final stage of its restructuring plan and sold
pursuant to an Asset Purchase Agreement dated June 1, 1999, its Materials
business segment. Oryx Technology Corp today is a licensing entity with its
source of income coming from royalties from its Surgx and Intragene
technologies. As a result, the Company believes that it is in the best
long-term interests of its shareholders to transfer product development
efforts to CooperBussmann so that the Company can focus its efforts on
investing in new business opportunities.
In the course of selling various business units described above, the Company had
disposed of business segments which had accounted for substantially all of its
revenues. While the Company believes that this downsizing of its operations has
substantially reduced its losses and provided capital to support on-going
development activities, the actual long-term impact on the Company's business
and financial condition cannot be certain.
In the absence of increased sales of the Company's Surgx technology, through its
two licensees, CooperBussmann and Iriso, such restructuring may have sharply
reduced the Company's revenues without creating opportunities to offset the lost
revenues. While the Company has assisted these two licensees in the past and
expects to be available to assist them in the future with their efforts to
exploit the SurgX technologies, the Company's future royalties from its SurgX
technology will be based solely upon the successful sales, marketing and
manufacturing efforts of CooperBussmann and IRISIO, its licensees. While the
license agreements contain minimum annual royalty payment requirements for the
licensees to maintain their exclusive rights, there can be no assurance that the
licensees will pay the minimum royalty or that these minimum royalty payments
will provide enough revenue to support the Company's operations. In the case of
CooperBussmann, minimum royalty payments through 2001 have already been paid to
maintain exclusivity, and there can be no assurances that the Company will
receive any royalty payments from CooperBussmann through this time period unless
CooperBussmann is successful in selling products using SurgX technology. To
date, CooperBussmann and IRISIO have shipped only limited quantities of products
incorporating SurgX technology.
Further, there can be no assurances that the Company will receive any
royalty revenue from the license of its Intragene technology to Oryx Advanced
Materials, Inc. ("OAMI"). There are no minimum annual royalty payment
requirements under the Company's license with OAMI. The Company's future
royalties from its license of the Intragene technology will be based solely upon
the successful sales, marketing and manufacturing efforts of OAMI. Although
management of OAMI was previously employed by the Company, OAMI is a new entity
and there can be no assurances that it will be successful in manufacturing and
selling products based upon the Intragene technology.
The Company has embarked upon a new corporate strategy to focus its
capital and management resources on investing in promising new business
opportunities. However, the Company can give no assurances that, in the event
it does receive royalty revenue from any of its licensees, it will be able to
successfully utilize such revenue for investment opportunities or other
purposes in a manner which will increase the value of the Company.
9
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RESULTS OF OPERATIONS
The sale of the Instruments and Material businesses has been accounted for as a
discontinued operation, and accordingly, the operating results of the
Instruments and Material businesses as they represent the final sale of one
business segment for the three and six months ended August 31, 1999 and 1998
were segregated and reported as discontinued operations.
For the quarter ended August 31, 1999, revenues decreased by $83,000 or 52% from
$160,000 for the quarter ended August 31, 1998, to $77,000 for the quarter ended
August 31, 1999. Revenues for the six months ended August 31, 1999 decreased
$116,000 or 30% from $382,000 for the six months ended August 31, 1998 to
$266,000 for the six months ended August 31, 1999. The decrease in revenue in
both periods is primarily attributed to the reduced government contract revenue
offset by an increase in revenue from the sale of SurgX liquid. Due to reduced
government contract billings and delay in the Company's licensees launching
Surgx products, the Company anticipates quarterly revenues to be at lower levels
during the remainder of fiscal 2000.
The Company's gross deficit increased from $52,000 for the quarter ended August
31, 1998, to $81,000 for the quarter ended August 31, 1999, representing an
increase of $29,000 or 56%. Gross deficit increased by $95,000 or 68% from
$139,000 for the six months ended August 31, 1998 to $234,000 for the six months
ended August 31, 1999. The increase in gross deficit is primarily attributable
to higher revenue of SurgX liquid at a loss and from government development
expenses not covered by government contract billing. The Company's government
contracts expired during the quarter ending August 31, 1999.
General and administrative expenses increased from $332,000 for the quarter
ended August 31, 1998, to $592,000 for the quarter ended August 31, 1999,
representing an increase of $260,000 or 78%. General and administrative expenses
increased by $415,000 or 67% from $623,000 for the six months ended August 31,
1998 to $1,038,000 for the six month ended August 31, 1999. The increase in
general and administrative expenses in both periods is related to increase in
compensation, severance, legal and investor relation expenses associated with a
marketing program entered into with Continental Capital on August 11, 1998.
Research and development expenses increased from $172,000 in the quarter ended
August 31, 1998, to $316,000 for the quarter ended August 31, 1999, representing
a increase of $144,000 or 84%. Research and development expenses increased
$254,000 or 104% from $245,000 for the six month ended August 31, 1998 to
$499,000 for the six months ended August 31, 1999. During the three months and
six months ended August 31, 1998 the Company recorded development funding from
non-government third parties of $128,000 and $255,000, respectively, as an
offset to its research and development expenses. No development funding was
recorded for the three months and six months ended August 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased by $2,692,000 from a surplus of
$1,612,000 at February 28, 1999 to a surplus of $4,304,000 at August 31, 1999.
Cash and cash equivalents increased by $1,236,000 from $1,570,000 for the year
ended February 28, 1999 to $2,806,000 for the quarter ended August 31, 1999.
This increase in cash and cash equivalents is primarily due to the exercise of
934,335 publicly traded warrants for 1,962,100 shares of the Company's common
stock that provided cash proceeds to the Company of approximately $3,315,000,
offset by acquisition of short term investments of $2,231,000. Management
believes the Company has sufficient capital to meet its fiscal 2000 operating
plan, however, in the event the
10
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Company does not meet its operating plan, there can be no assurance that the
Company will be able to raise equity or capital through the sale of equity,
debt financing, an asset sale or development contract in a timely manner, or
at all.
YEAR 2000 ISSUE
Many currently installed computer systems, software products and other equipment
utilizing microprocessors are coded to accept only two digit entries in the date
code field. These date code fields will need to accept four digit entries to
distinguish twenty-first century dates from twentieth century dates. This is
commonly referred to as the "Year 2000 issue."
The Company is aware of the Year 2000 issue and has commenced a program to
identify, remediate, test and develop plans to address the Year 2000 issue. The
Company has no legacy mainframe or mini-computer systems. Its corporate networks
and computing hardware operate exclusively on Novell NetWare and Microsoft
Windows Operating Systems. The Company relies on its fully integrated Macola
Progression MIS system for all accounting, manufacturing, and procurement
functions. The Company does not currently make use of EDI or other forms of
electronic data exchange (other than e-mail) with any of its customers, business
partners, financial institutions or suppliers. Further, the Company has no
substantial data collection, automated manufacturing, or automated testing
systems which could be materially adversely affected by Year 2000 problems.
As of August 31, 1999, the Company had completed several Year 2000 projects,
including an upgrade of its Novell Network Operating systems and tape backup
software, evaluation of workstations for Year 2000 compliance, evaluation of the
Company's MIS system and testing of beta software for the MIS system, evaluation
of the Company's email and servers, evaluation of network routing, interconnect,
and firewall hardware and software compliance and evaluation of the Company's
telephone and voicemail equipment. The Company's review of the Year 2000 issue
with respect to its internal systems preliminarily suggests no material
problems.
As of August 31, 1999, the following Year 2000 projects are completed or in
process: A new Y2K Compliant email system has been installed and tested and the
conversion of email from the old system has been completed; the new compliant
Netcellent (MACOLA) V6.7 MIS system has been installed and related databases
have been converted to Year 2000 compliant formats. This was completed prior to
the 1999 fiscal year end, and the final 1999 inventory and financial close were
completed on the new system and data without problems. A list of critical
vendors has been identified and questionnaires have been sent to these vendors.
Vendor response has been quite favorable with most having programs in place. The
company is working with or will replace any remaining vendors who are not
compliant. Evaluation of equipment containing embedded controllers is ongoing
during 1999, although none is currently considered mission critical. As of
August 31, 1999, the Company's aggregate expenditures (excluding employee costs)
in connection with Year 2000 compliance have been less than $40,000 and the
Company estimates that the total cost of its Year 2000 projects will be
approximately $50,000.
The Company has on-going discussions with CooperBussmann and IRISO, the
Company's primary licensees, with respect to their state of readiness for year
2000. CooperBussmann has a detailed Y2K plan which has been in place since 1996
and has completed most major phases. They provide regular status reports on
implementation, and the Company feels CooperBussmann will be Year 2000
compliant. The Company has received a Year 2000 plan from IRISO which appears
adequately address in the appropriate areas.
The Company currently does not anticipate that the cost of Year 2000 compliance
will be material to its financial condition or results of operations. However,
satisfactorily addressing the Year 2000 issue is
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dependent on many factors, some of which are not completely within the
Company's control. Should the Company's internal systems or the internal
systems of one or more significant vendors, manufacturers or suppliers fail
to achieve Year 2000 compliance, the Company's business and its results of
operations could be adversely affected. The failure to correct a material
Year 2000 problem could result in an interruption in, or failure of, certain
normal business activities or operations. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the uncertainty of
the Year 2000 readiness of third-party suppliers and customers, the Company
is unable to determine at this time whether the consequences of Year 2000
failures will have a material impact on the Company's result's of operations,
liquidity or financial condition. However, in the event that the Company's
primary licensees, CooperBussmann and Iriso, or their respective customers or
vendors suffer a material interruption in business activity due to computer
malfunctions resulting from Year 2000 noncompliance, licensing revenues to
the Company from Cooper Bussmann and/or Iriso and the Company's financial
condition could be materially adversely affected. The Company's Year 2000
compliance project is expected to significantly reduce the Company's level of
uncertainty about the Year 2000 issue and, in particular, about the Year 2000
compliance and readiness of third parties it deals with. The Company believes
that, with the implementation of new business systems and completion of the
project as scheduled, the possibility of significant interruptions of normal
operations should be reduced.
Readers are cautioned that forward-looking statements contained in the Year 2000
Update should read in conjunction with the Company's disclosures about
forward-looking statements in Item 2 above.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description of Document
----------- -----------------------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
On September 2, 1999, the Company filed a Current Report on
Form 8-K to report the sale of its Materials business segment.
12
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ORYX TECHNOLOGY CORP.
Dated: October 15, 1999 By: /s/ Philip J. Micciche
----------------------
Philip J. Micciche
President, Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ Mitchel Underseth
---------------------
Mitchel Underseth
Chief Financial Officer and Director
(Principal Financial and Accounting Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ORYX TECHNOLOGY CORP. FOR THE SIX MONTHS ENDED AUGUST
31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> AUG-31-1999
<CASH> 2,806,000
<SECURITIES> 2,231,000
<RECEIVABLES> 93,000
<ALLOWANCES> 66,000
<INVENTORY> 0
<CURRENT-ASSETS> 5,237,000
<PP&E> 733,000
<DEPRECIATION> 358,000
<TOTAL-ASSETS> 5,655,000
<CURRENT-LIABILITIES> 933,000
<BONDS> 0
0
89,000
<COMMON> 23,871,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,655,000
<SALES> 266,000
<TOTAL-REVENUES> 266,000
<CGS> 500,000
<TOTAL-COSTS> 2,037,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (72,000)
<INCOME-PRETAX> (1,775,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,775,000)
<DISCONTINUED> 613,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,163,000)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
