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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 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 November 30,
1999 was 15,550,000.
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ORYX TECHNOLOGY CORP.
FORM 10-QSB
Table of Contents
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page
<S> <C>
Item 1. Financial Statements............................................. 3
Item 2. Management's Discussion and Analysis or Plan of Operation........ 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............... 13
Item 6. Exhibits and Reports on Form 8-K.................................. 13
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
November 30, February 28,
Assets 1999 1999
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,388,000 $ 1,570,000
Short term investments 2,262,000 -
Accounts receivable, net of allowance for doubtful
accounts of $40,000 and $118,000 100,000 696,000
Inventories - 384,000
Other current assets 83,000 278,000
------------ ------------
Total current assets 4,833,000 2,928,000
Property and equipment, net 355,000 434,000
Other assets 38,000 141,000
------------ ------------
$ 5,226,000 $ 3,503,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Capital lease and other short term obligations $ - $ 12,000
Accounts payable 82,000 355,000
Accrued liabilities 683,000 541,000
Deferred revenue 78,000 408,000
------------ ------------
Total current liabilities 843,000 1,316,000
Capital lease and other long term obligation, less current portion - 16,000
------------ ------------
Total liabilities 843,000 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; 15,550,000 and 13,290,464 issued and outstanding 15,000 13,000
Additional paid-in capital 23,908,000 20,144,000
Accumulated deficit (19,629,000) (18,075,000)
------------ ------------
Total stockholders' equity 4,383,000 2,171,000
------------ ------------
$ 5,226,000 $ 3,503,000
============ ============
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
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ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenue $ 415,000 $ 148,000 $ 680,000 $ 530,000
Cost of sales 115,000 202,000 614,000 723,000
------------ ----------- ----------- -----------
Gross profit 300,000 (54,000) 66,000 (193,000)
------------ ----------- ----------- -----------
Operating expenses:
Marketing and selling - - - -
General and administrative 378,000 429,000 1,416,000 1,052,000
Research and development 365,000 191,000 864,000 436,000
------------ ----------- ----------- -----------
Total operating expenses 743,000 620,000 2,280,000 1,488,000
------------ ----------- ----------- -----------
Loss from operations (443,000) (674,000) (2,214,000) (1,681,000)
Interest income (expense), net 53,000 32,000 125,000 3,000
Other expenses - - (76,000) -
------------ ----------- ----------- -----------
Loss from continuing operations (390,000) (642,000) (2,165,000) (1,678,000)
Discontinued operations:
Income from discontinued operations - 311,000 268,000 1,056,000
Income on disposal of discontinued operations - 146,000 345,000 146,000
------------ ----------- ----------- -----------
Income from discontinued operations - 457,000 613,000 1,202,000
------------ ----------- ----------- -----------
Net loss (390,000) (185,000) (1,552,000) (476,000)
Dividends (1,000) (2,000) (2,000) (3,000)
------------ ----------- ----------- -----------
Net loss attributable to common stock $ (391,000) $ (187,000) $(1,554,000) $ (479,000)
============ =========== =========== ===========
Basic and diluted loss per common share
from continuing operations $ (0.03) $ (0.05) $ (0.14) $ (0.13)
Basic and diluted income per common share
from discontinued operations $ - $ 0.04 $ 0.04 $ 0.09
------------ ----------- ----------- -----------
Basic and diluted net loss per common
share $ (0.03) $ (0.01) $ (0.10) $ (0.04)
============ =========== =========== ===========
Weighted average common shares used
to compute basic and diluted net loss
per share (Note 4) 15,539,000 13,157,000 15,142,000 13,136,000
============ =========== =========== ===========
</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>
Nine Months Ended
November 30,
----------------------------------
1999 1998
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,553,000) $ (476,000)
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Income from discontinued operations (268,000) (1,056,000)
Gain from sale of discontinued operations (345,000) -
Loss from asset disposition 8,000 -
Depreciation and amortization 92,000 93,000
Non-cash stock compensation 257,000 91,000
Recognized gain on sale of instruments business (146,000)
Changes in assets and liabilities:
Accounts receivable, net 35,000 (71,000)
Other current assets 33,000 454,000
Other assets 103,000 (35,000)
Deferred revenue - 47,000
Accounts payable (43,000) 33,000
Accrued liabilities 150,000 3,000
----------- ------------
Net cash used in continued operations (1,531,000) (1,063,000)
Net cash provided by discontinued operations 620,000 101,000
----------- ------------
Net cash used in operations (911,000) (962,000)
----------- ------------
Cash flows from investing activities:
Capital expenditures (60,000) (67,000)
Proceeds from assets dispositions 16,000 -
Proceeds from sale of short term investments 151,000 -
Purchase of short term investments (2,262,000) -
Proceeds from sale of discontinued operations 400,000 2,000,000
----------- ------------
Net cash provided by (used in) investing activities (1,755,000) 1,933,000
----------- ------------
Cash flows from financing activities:
Sale of note receivable - 500,000
Repayment of bank line of credit - (129,000)
Payment of capital lease obligations (9,000) -
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 83,000 -
Other (1,000) (20,000)
----------- ------------
Net cash provided by financing activities 3,484,000 372,000
----------- ------------
Net increase in cash and cash equivalents 818,000 1,343,000
Cash and cash equivalents at beginning of period 1,570,000 722,000
----------- ------------
Cash and cash equivalents at end of period $ 2,388,000 $ 2,065,000
=========== ============
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
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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 November 30, 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 November 30, 1999, and the results
of their operations and cash flows for the three and nine month periods ended
November 30, 1999 and November 30, 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
November 30, 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 $277,000 in
expense from inception of the Agreement to November 30, 1999.
NOTE 3 - INVENTORIES
The components of inventory were as follows:
<TABLE>
<CAPTION>
November 30, Feb 28,
1999 1999
------------------- ------------------
<S> <C> <C>
Raw materials $ - $ 75,000
Finished goods - 309,000
------------------- ------------------
$ - $ 384,000
=================== ==================
</TABLE>
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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 and nine month periods
ended November 30, 1999 and November 30, 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
November 30, 1999 which could be dilutive in future periods include common stock
options to purchase 3,309,233 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 affected 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 the operating results of Power Products for the fiscal year ended
February 28, 1998 were segregated and reported as discontinued operations. At
November 30, 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 DISCONTINUED 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. As of November 30, 1999, the
Company has received $249,000 in royalty payments from OAMI for the period
June 1, 1999 to August 31, 1999.
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, Instruments was a
wholly owned subsidiary of the Company. As part of the Sale, Instruments
redeemed 8,000,000 of the 10,000,000 shares of Class A Common Stock held by the
Company 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 $3,148,000
for the nine months ended November 30, 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 Operation
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.
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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 to Oryx Advanced Materials, Inc. ("OAMI"). 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 stockholders
to transfer product development efforts to CooperBussman so that the Company can
focus its efforts on investing in new business opportunities.
SurgX Corporation ("SurgX") is currently the subsidiary through which the
Company designs, manufactures and sells its surge protection products and
technology. The underlying technologies developed by SurgX are currently
licensed exclusively to two licensees, CooperBussmann and IRISO. Products
manufactured by these licensees and utilizing SurgX's proprietary technology are
targeted to be sold to OEMs in the computer, communication, and electronics
industries to provide protection against electrostatic discharge (ESD) events
through connectors and discrete devices at the printed circuit board level.
The proprietary SurgX technology for over-voltage protection is comprised of a
specialized polymer formulation containing inorganic solids, metal particles and
adhesion-promoting agents which can be tailored for use against surge threats at
different voltage and power levels.
The discrete TVS diode is the primary market addressed by SurgX. This market is
forecasted to be approximately $900 million in calendar year 1999 with an
estimated forecast annual average growth rate of 8% in terms of dollar value,
and 11% in terms of unit volume, through 2003. To a lesser extent, SurgX will
seek to participate in the varistor market, which is approximately the same size
as the diode segment. Within these markets the most important use criteria tends
to be cost. After cost, the level of capacitance, response time, size, energy
handling and leakage current are important criteria. It is the latter criteria
on which SurgX will initially compete. The low capacitance requirement of ESD
protection devices in many circuit designs will provide the initial entry into
the diode market segment.
The Company believes that its technology has competitive advantages over
traditional over-voltage protection devices. These include lower capacitance,
smaller footprint on the board and potential lower cost. Further, SurgX has a
hidden price advantage relative to a diode, because one bi-directional SurgX
component does the function of two unidirectional diodes. However, there can be
no assurances that customers will value the advantages of SurgX technology such
that they will change from the current over-voltage protection devices in use.
SurgX development activities have consisted of efforts to improve the electrical
performance of the SurgX material as well as assisting its licensees in
development activities with manufacturing process improvements, product cost
reductions and new product development. In November 1999, SurgX redirected its
development activities to focus primarily on the SurgX material and transferred
its new product development programs to CooperBussmann. In conjunction with this
transfer, the Company reduced its development capabilities accordingly, and
future development programs and activities for the Surgx products will be under
the direction and control of the Company's licensees. The Company believes that
development know-how transferred to CooperBussmann will provide the lower
response voltage performance and reduced product cost capable of expanding the
market for SurgX products. However, there can be no assurances that
CooperBussmann will
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continue to invest in these programs or that these programs will result in a
product that will be commercially viable.
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
operations, 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 with CooperBussmann and IRISO 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. In December 1999, IRISO paid the
Company $75,000 for their minimum royalty obligations to maintain their
exclusive rights for the Japan market. To date, CooperBussmann and IRISIO have
shipped only limited quantities of products incorporating SurgX technology.
To date, the Company has recorded $249,000 of royalty revenue from the license
of its Intragene technology. However, there can be no assurances that the
Company will receive any royalty revenue from the license of its Intragene
technology to 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. The
Company has not made any investments at this time. However, the Company can give
no assurance 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.
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 nine months ended November 30, 1999 and 1998
were segregated and reported as discontinued operations.
For the quarter ended November 30, 1999, revenues increased by $267,000 or 180%
from $148,000 for the quarter ended November 30, 1998, to $415,000 for the
quarter ended November 30, 1999. Revenues for the nine months ended
November 30, 1999 increased $150,000 or 28% from $530,000 for the nine months
ended November 30, 1998 to $680,000 for the nine months ended November 30, 1999.
The increase in revenue in both periods is primarily attributed to the royalty
revenue from OAMI and IRISO plus an increase in revenue from the sale of SurgX
liquid, offset by a reduced government contract revenue. Revenue in the future
is
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dependent on the success of the Company's Licensees. The Company has no view of
what level of revenue will be achieved in the future, if any at all.
The Company's gross profit increased from a deficit of $54,000 for the quarter
ended November 30, 1998, to a profit of $300,000 for the quarter ended
November 30, 1999, representing an increase of $354,000 or 656%. Gross profit
increased by $259,000 or 134% from a deficit of $193,000 for the nine months
ended November 30, 1998 to a profit of $66,000 for the nine months ended
November 30, 1999. The increase in gross profit is primarily attributable to
royalty revenue from OAMI and IRISO.
General and administrative expenses decreased from $429,000 for the quarter
ended November 30, 1998, to $378,000 for the quarter ended November 30, 1999,
representing a decrease of $51,000 or 12%. The decrease in general and
administrative expenses in the quarter ended November 30, 1999 is related to
reductions in legal, travel and auditing expenses partially offset by an
increase in investor relation expenses. General and administrative expenses
increased by $364,000 or 35% from $1,052,000 for the nine months ended November
30, 1998 to $1,416,000 for the nine months ended November 30, 1999. The increase
in general and administrative expenses in the nine month period is related to
increases 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 $191,000 in the quarter ended
November 30, 1998, to $365,000 for the quarter ended November 30, 1999,
representing an increase of $174,000 or 91%. The increase during the three
months period was primarily attributed to an increase in product development
programs which were recently transferred to CooperBussmann. This increase was
comprised of primarily labor and outside services. Research and development
expenses increased $428,000 or 98% from $436,000 for the nine months ended
November 30, 1998 to $864,000 for the nine months ended November 30, 1999. The
increase for the nine month period was primarily due to increased product
development programs and due to $255,000 of development funding from
non-government third parties recorded as an offset to research and development
expenses during the nine months ended November 30, 1998 compared to no
development funding recorded for the nine months ended November 30, 1999.
Liquidity and Capital Resources
The Company's working capital increased by $2,378,000 from a surplus of
$1,612,000 at February 28, 1999 to a surplus of $3,990,000 at November 30, 1999.
Cash and cash equivalents increased by $818,000 from $1,570,000 for the year
ended February 28, 1999 to $2,388,000 for the quarter ended November 30, 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 which provided cash proceeds to the Company of approximately $3,315,000,
offset by the acquisition of short term investments of $2,262,000. The Company
currently does not have outstanding any available debt or line of credit
facilities. Management believes the Company has sufficient working capital to
meet its fiscal 2000 operating plan.
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
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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 November 30, 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 November 30, 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
November 30, 1999, the Company's aggregate expenditures (excluding employee
costs) in connection with Year 2000 compliance have been less than $43,000 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 believes that CooperBussmann will be
substantially Year 2000 compliant. The Company has received a Year 2000 plan
from IRISO which appears to adequately address 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 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 CooperBussmann 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.
12
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Oryx Technology Corp. was held at the
Company's administrative offices, located at 1100 Auburn Street, Fremont,
California, on Monday, October 25, 1999 at 10:00 a.m. At the Annual
Meeting, 12,819,359 shares were represented in person or by proxy.
The vote for the nominated directors was as follows:
<TABLE>
<CAPTION>
NOMINEE IN FAVOR WITHHELD
------- -------- --------
<S> <C> <C>
Phillip Micciche 12,360,252 459,107
Mitchel Underseth 12,360,252 459,107
Andrew Intrater 12,360,252 459,107
John H. Abeles 12,360,252 459,107
Jay M. Haft 12,360,252 459,107
Richard Hubbard 12,360,252 459,107
Doug McBurnie 12,360,252 459,107
Ted Morgan 12,360,252 459,107
</TABLE>
The selection of PricewaterhouseCoopers LLP as independent auditors of the
Company was ratified by the following vote:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
12,393,439 402,200 23,700
</TABLE>
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
The Company did not file any Reports on Form 8-K during the quarter
ended November 30, 1999.
13
<PAGE>
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: January 14, 2000 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)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL STATEMENT OF ORYX TECHNOLOGY CORP FOR THE NINE MONTHS ENDED
NOVEMBER 30, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 2,388,000
<SECURITIES> 2,262,000
<RECEIVABLES> 140,000
<ALLOWANCES> 40,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,833,000
<PP&E> 742,000
<DEPRECIATION> 387,000
<TOTAL-ASSETS> 5,226,000
<CURRENT-LIABILITIES> 843,000
<BONDS> 0
0
89,000
<COMMON> 23,923,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,226,000
<SALES> 680,000
<TOTAL-REVENUES> 680,000
<CGS> 614,000
<TOTAL-COSTS> 2,894,000
<OTHER-EXPENSES> 76,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (125,000)
<INCOME-PRETAX> (2,165,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,165,000)
<DISCONTINUED> 613,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,554,000)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
