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 AUGUST 31, 2000.
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,
2000 was 16,704,671.
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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 ........ 8
PART II. OTHER INFORMATION
Item 5. Other Information ................................................. 20
Item 6. Exhibits and Reports on Form 8-K .................................. 20
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ORYX TECHNOLOGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
Assets August 31, February 29,
2000 2000
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,675,000 $ 4,529,000
Short term investments -- 989,000
Accounts receivable, net of allowance for doubtful
accounts of $0 and $40,000 13,000 50,000
Other current assets 155,000 127,000
------------ ------------
Total current assets 3,843,000 5,695,000
Property and equipment, net 261,000 262,000
Investments 1,080,000 --
Other assets 32,000 32,000
------------ ------------
$ 5,216,000 $ 5,989,000
============ ============
Liabilities, Mandatorily Convertible Redeemable
Preferred Stock and Stockholders' Equity
Current liabilities:
Accounts payable $ 32,000 $ 43,000
Accrued liabilities 404,000 672,000
Deferred revenue 19,000 19,000
------------ ------------
Total current liabilities 455,000 734,000
Series A 2% mandatorily convertible redeemable Preferred Stock 89,000 89,000
$0.001 par value; 3,000,000 shares authorized;
3,750 shares issued and outstanding,
Stockholders' equity:
Common Stock, $0.001 par value; 25,000,000 shares
authorized; 16,704,671 and 16,457,682 issued
and outstanding 17,000 16,000
Additional paid-in capital 25,583,000 25,237,000
Accumulated deficit (20,928,000) (20,087,000)
------------ ------------
Total stockholders' equity 4,672,000 5,166,000
------------ ------------
$ 5,216,000 $ 5,989,000
============ ============
</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 Six Months Ended
August 31, August 31,
------------- ------------- ------------- -------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Revenue $ 83,000 $ 77,000 $ 144,000 $ 266,000
Cost of sales 18,000 158,000 144,000 500,000
------------- ------------- ------------- -------------
Gross profit (loss) 65,000 (81,000) -- (234,000)
------------- ------------- ------------- -------------
Operating expenses:
General and administrative 435,000 592,000 854,000 1,038,000
Research and development 45,000 316,000 67,000 499,000
------------- ------------- ------------- -------------
Total operating expenses 480,000 908,000 921,000 1,537,000
------------- ------------- ------------- -------------
Loss from operations (415,000) (989,000) (921,000) (1,771,000)
Interest income (expense), net 55,000 38,000 121,000 72,000
Income (loss) on investments, net (40,000) -- (40,000) --
Other income (expenses) -- (67,000) -- (76,000)
------------- ------------- ------------- -------------
Loss from continuing operations (400,000) (1,018,000) (840,000) (1,775,000)
Discontinued operations:
Income from discontinued operations -- -- -- 268,000
Income on disposal of discontinued operation -- 345,000 -- 345,000
------------- ------------- ------------- -------------
Income from discontinued operations -- 345,000 -- 613,000
------------- ------------- ------------- -------------
Net loss (400,000) (673,000) (840,000) (1,162,000)
Dividends -- -- (1,000) (1,000)
------------- ------------- ------------- -------------
Net loss attributable to Common Stock $ (400,000) $ (673,000) $ (841,000) $ (1,163,000)
============= ============= ============= =============
Basic and diluted loss per common share
from continuing operations $ (0.02) $ (0.06) $ (0.05) $ (0.12)
============= ============= ============= =============
Basic and diluted income per common share
from discontinued operations $ -- $ 0.02 $ -- $ 0.04
============= ============= ============= =============
Basic and diluted net loss per common share $ (0.02) $ (0.04) $ (0.05) $ (0.08)
============= ============= ============= =============
Weighted average common shares used to
compute basic and diluted net loss per share
basic and diluted net loss per share (Note 3) 16,705,000 15,418,000 16,677,000 14,946,000
============= ============= ============= =============
</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,
------------------------------
2000 1999
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($840,000) $ (1,162,000)
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Income from discontinued operations - (268,000)
Gain from sale of discontinued operations - (345,000)
Equity in loss of investor 40,000 -
Loss from asset disposition - 8,000
Depreciation and amortization 42,000 63,000
Non-cash stock compensation 11,000 178,000
Changes in assets and liabilities:
Accounts receivable, net 37,000 108,000
Other current assets (28,000) (5,000)
Other assets - 98,000
Accounts payable (11,000) (75,000)
Accrued liabilities (268,000) 269,000
----------- ----------
Net cash used in continuing operations (1,017,000) (1,131,000)
Net cash provided by discontinued operations - 620,000
----------- ----------
Net cash used in operations (1,017,000) (511,000)
----------- ----------
Cash flows from investing activities:
Capital expenditures (41,000) (51,000)
Proceeds from assets disposition - 16,000
Proceeds from sale of short term investment 993,000 151,000
Purchase of short term investment (4,000) (2,231,000)
Purchase of investments (1,120,000) -
Proceeds from sale of discontinued operations - 400,000
----------- ----------
Net cash used in investing activities (172,000) (1,715,000)
----------- ----------
Cash flows from financing activities:
Payment of capital lease obligations - (6,000)
Repayment of notes payable - (19,000)
Proceeds from exercise of warrants for Common Stock 12,000 3,430,000
Proceeds from exercise of options for Common Stock 324,000 58,000
Payment of dividends (1,000) (1,000)
----------- ----------
Net cash provided by financing activities 335,000 3,462,000
----------- ----------
Net increase (decrease) in cash and cash equivalents (854,000) 1,236,000
Cash and cash equivalents at beginning of period 4,529,000 1,570,000
----------- ----------
Cash and cash equivalents at end of period $ 3,675,000 $2,806,000
----------- ----------
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
5
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ORYX TECHNOLOGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - GENERAL
The information contained in the following Notes to Condensed Consolidated
Financial Statements is condensed; accordingly, the financial statements
contained herein should be reviewed in conjunction with the Company's Form
10-KSB for the year ended February 29, 2000.
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, 2000 and 1999
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, 2000, and the results
of their operations and cash flows for the three and six month periods ended
August 31, 2000 and August 31, 1999.
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 recognized
expense as the services were received, and recorded expense of $55,000 and
$108,000 during the three-month and six-month period ended August 31, 1999,
respectively.
NOTE 3 - INCOME (LOSS) PER SHARE
Basic and diluted earnings per share for the periods presented have been
computed by dividing income or loss available to common stockholders by the
weighted average common shares outstanding for the period. Due to the net losses
from continuing operations incurred for the three month periods ended August 31,
2000 and August 31, 1999, all common stock equivalents outstanding were
considered anti dilutive and were excluded from the calculations of diluted net
loss per share. No adjustments were made to net loss attributable to common
stock in the calculation of basic or diluted earnings per share in fiscal 2001
or 2000. Anti dilutive securities and common stock equivalents at August 31,
2000 which could be dilutive in future periods include common stock options to
purchase 3,315,000 shares of common stock, warrants to purchase 1,243,000 shares
of common stock, 3,750 shares of Series A preferred stock which may be converted
into 44,000 shares of common stock 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 4 - 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.
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NOTE 5 - 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. The Company will adopt
SFAS No. 133 as required for its first quarterly filing in fiscal 2002. The
Company currently does not hold any instruments which would be affected by SFAS
No. 133.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements. SAB
101 provides guidance for revenue recognition under certain circumstances. SAB
101 is effective for the Company's fiscal year ending February 28, 2001.
Implementation of SAB 101 is not expected to require the Company to change
existing revenue recognition policies and therefore is not expected to have a
material effect on the Company's financial position or results of operations.
NOTE 6 - 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. or Oryx, and Oryx Advanced
Materials Inc. or 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 August 31, 2000, the
Company has received and recognized $249,000 in royalty payments from OAMI for
fiscal 2000, plus $83,000 during the three-month period ended August 31, 2000.
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.
The disposal of OAMI and Oryx Instruments and Materials have been aggregated as
they represent the final sale of one business segment, and the operating results
of OAMI and Oryx Instruments and Materials have been segregated and reported as
discontinued operations. Prior year financial statements have been restated to
include the results of operations of OAMI and Oryx Instruments and Materials as
discontinued operations. Revenue from discontinued operations was $1,049,000 and
$4,037,000 for the year ended February 29, 2000 and February 28, 1999,
respectively. Income taxes related to the discontinued operations and the tax
benefit resulting from the gain on disposal of the OAMI business were
immaterial. Transaction costs related to the OAMI disposal were $55,000. The
Company has no remaining assets or liabilities relating to the Instruments and
Materials business as of August 31, 2000. Revenue from discontinued operations
was $1,049,000 for the six-month period ended August 31, 1999.
NOTE 7 - INVESTMENTS
In July 2000, the Company purchased 166,666 shares of Series A preferred stock
from LOTS Technology for $500,000 cash and received additional equity in the
form of stock options for 333,333 shares of common stock
7
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in exchange for management services. The Company will account for the investment
under the cost method. No value was ascribed to the stock options received.
In July 2000, the Company purchased 1,851,852 shares of Series A preferred stock
from S-2 Technologies for $500,000 and received additional equity in the form of
a warrant for 700,000 shares of common stock in exchange for management
services. The Company has the right to appoint one director to S2 Technologies'
Board of Directors. Philip Micciche, CEO of the Company, is currently the
Company's designee on the S2 Technologies Board. The Company will account for
the investment under the equity method. The Company's chief financial officer's
brother also serves in an executive capacity for S-2 Technologies.
In July 2000, the Company provided a $100,000 bridge loan to Net Conversions.
The bridge loan is convertible to equity at a discount rate. The Company will
account for the investment under the cost method.
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 for
the fiscal year ended February 29, 2000. As used herein, "we", "our", "us" and
the like refer to Oryx Technology Corp.
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 by our licensees, success of
research and development efforts by our licensees and customer acceptance of new
products. 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 our products, adverse business conditions, dependence upon
our licensees for the commercial success of our products, adverse changes in
customer order patterns, increased competition, lack of acceptance of new
products, lack of success in technological advancement, and other factors.
All investors should carefully read the Form 10-KSB together with this Form
10-QSB, and consider all such risks before making an investment decision with
respect to the Company's stock.
Business Segments
During fiscal 1998 we initiated a restructuring of our operations. Through
fiscal 1998, we designed, manufactured and marketed specialized components,
analytical equipment and instrumentation products for original equipment
manufacturers, in the information technology industry. We operated three
majority owned subsidiaries, focusing on three distinct market segments:
o power conversion products (Oryx Power Products Corporation);
o electrical surge protection products (SurgX Corporation); and
o materials analysis and test equipment and specialized materials products
(Oryx Instruments and Materials Corporation).
8
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During the later part of fiscal 1998 we embarked upon a major restructuring
program which resulted in
o the sale on February 27, 1998 of the test equipment portion of the business
of Oryx Instruments and Materials Corporation;
o the sale on March 2, 1998 of substantially all of the business of Oryx
Power Products Corporation in its entirety.
o the sale on August 18, 1999 of the remaining operations of Oryx Instruments
and Materials Corporation, consisting of the carbon target assembly and
related materials coating business.
As a result of our restructuring, we disposed of substantially all of our
operating businesses which accounted for substantially all of our revenue. In
the absence of increased sales of our SurgX and Intragene technologies through
our licensees, which to date has not occurred, such restructuring has sharply
reduced our revenues without creating opportunities to offset the lost revenues.
Today we have two primary focuses:
o collecting royalties for our SurgX and Intragene technologies; from
our SurgX licensees, Cooper Bussmann and IRISO Electronics, Inc. , and
from our Intragene technology licensee, Oryx Advanced Materials, Inc.;
and
o investing and providing management services in technology start-up
companies through our wholly-owned investment and management services
company, Oryx Ventures, LLC.
SurgX Corporation
SurgX Corporation, or SurgX, is currently the subsidiary through which we
license our surge protection technology. The underlying technologies developed
by SurgX are currently licensed exclusively to two licensees, Cooper Electronics
Technology, Inc., or Cooper Bussmann, and IRISO Electronics Company, Ltd., or
IRISO. Products manufactured by these licensees utilizing SurgX's proprietary
technology are targeted to be sold to original equipment manufacturers, or OEMs,
in the computer, communication, and electronics industries to provide protection
against electrostatic discharge, or ESD, events through discrete devices at the
printed circuit board level.
As the information technology industry increases capacity and performance, it is
requiring faster speeds, smaller chip geometries and lower operating voltages.
These developments have been accompanied by increases in product susceptibility
to failures from over-voltage threats mainly from ESD. Failure to address these
problems can result in the destruction of chips and circuitry. These threats can
originate from inside or outside the products and can arise from such factors as
ESD, induced lightning effects, spurious line transients and other complex
over-voltage sources. During the last decade, new products have emerged to
address protection of integrated circuits from ESD. Related specialized products
range from wrist straps worn by electronics assembly workers, to special
anti-static packaging of both components and sub-assemblies as well as board
level protection devices such as diodes and varistors.
The global market for all over-voltage protection devices currently is estimated
at approximately $2.1 billion and includes some more mature transient voltage
suppression, or TVS, devices such as gas discharge tubes, varistors, and diodes.
The major markets targeted for new surge protection devices and technologies
such as those represented by our technology are telecommunication, automotive
and computers. Sales of surge protection devices are divided among varistors
(40%), diodes (40%), and gas discharge tubes and surge resistor networks (20%).
9
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Our licensees, Cooper Bussmann and IRISO, have sole responsibility for
manufacturing, sales and marketing of products using our SurgX technology. The
discrete TVS diode is the primary market targeted by our licensees. This market
is forecasted to be approximately $900 million in calendar year 2000 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, our licensees
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 competes. The low capacitance requirement of ESD
protection devices in many circuit designs have provide the initial entry into
the diode market segment. Our licensees have not focused on the low price, high
volume diode market since, to date, they have not been able to achieve product
costs competitive with diodes. However, they are currently focusing on cost
reduction initiatives to reduce product cost to better compete in the high
volume, low price diode market.
Cooper Bussmann is a leading manufacturer of fuses and its target market for
SurgX is the growing electronics market. Cooper Bussmann had initially taken on
the manufacturing of discrete components using SurgX. In fiscal 2000, to address
the market requirements of high volume and low cost, Cooper Bussmann initiated
offshore manufacturing through an Asian contract manufacturer. The current
capacity of this contract manufacturer is ten million units per month with the
ability to expand and handle increased capacity in the future to accommodate
anticipated demand for products incorporating SurgX technology. During fiscal
2000, Cooper Bussmann also formed Cooper Electronic Technologies, Inc. to handle
research and development, sales and marketing functions to support the marketing
of Cooper Bussmann products incorporating SurgX and other technologies.
Due to the transfer of manufacturing offshore and the reorganization of Cooper
Bussman in fiscal 2000, sales of SurgX products have been minimal through the
first six months of fiscal 2000. Cooper Bussmann's restructuring of its
manufacturing and other operations has facilitated its successful marketing of
our SurgX technology and SurgX technology has been designed-in products offered
by eighteen OEMs and is also in active product evaluation with numerous major
OEM's.
IRISO received a 15-year co-license to manufacture and sell our SurgX technology
exclusively in Japan for board level ESD protection. These products are marketed
under the SurgX trademarks. In fiscal 1999 IRISO started volume production and
sales of the 0805 surface mount components. Sales in fiscal 2000 have been
minimal with IRISO shipping production quantities to two major OEMs and in
lesser amounts to five other customers. Eleven customers are currently
evaluating IRISO products incorporating the SurgX technology. During the first
six months of fiscal 2001 shipments of products incorporating SurgX technology
have reached as high as one million units per month.
Prior to fiscal year 2000, SurgX employees were dedicated to product development
and SurgX's approach to the market consisted of two parallel product paths: on
board-level ESD protection and on-chip ESD protection. During fiscal year 2000,
all SurgX research and development efforts were transferred to Cooper Electronic
Technologies, Inc., a business unit of Cooper Bussmann dedicated to technical
sales, marketing and development support of overvoltage protection technologies
and other technologies of Cooper Bussmann.
We are currently in the process of transferring the Surgx liquid manufacturing
process to our two licensees. Cooper Bussman is currently manufacturing their
own requirements of SurgX liquid as well as supplying our licensee, IRISO, with
their requirement of SurgX liquid until they get their manufacturing process
operational which is expected to be in January 2001.
We rely on our licensees, Cooper Bussmann and IRISO, for technological
improvements to the SurgX technology. At present, we do not support any research
and development or manufacturing activities internally. Our success will depend
upon our licensees' ability to maintain a competitive position with respect to
our proprietary and other enhanced technology and to continue to attract and
retain qualified personnel in all phases of operations. Our business is, to a
large degree, dependent upon the enhancement of the SurgX current technology.
Critical to our success and future profitability will be the capacity of our
licensees to improve this technology.
Our future royalties from the licenses of our SurgX are based solely upon the
successful sales, marketing, manufacturing and development efforts of our
licensees.
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While the license agreements for our SurgX technology 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 payments will provide enough revenue to continue
to support our operations. In the case of Cooper Bussmann, minimum royalty
payments through June 2001 have already been satisfied to maintain exclusivity,
and there can be no assurances that we will receive any royalty payments from
Cooper Bussmann through this time period unless Cooper Bussmann is successful in
selling products using SurgX technology in excess of the minimum royalty
payments, and such sales have not yet been material. To date, Cooper Bussmann
and IRISO have shipped only limited quantities to customers of products
incorporating SurgX technology.
Oryx Ventures, LLC
We have established Oryx Ventures, LLC, a Delaware limited liability company, to
act as an investment and management services entity for us. Oryx Ventures is
wholly-owned by Oryx and will be managed by Oryx employees. We plan to
contribute investment funds to Oryx Ventures from our existing cash balances and
from our internal cash flow generated from future royalty income from licensing
our SurgX and Intragene technologies. However, at present, we are limiting the
activities of Oryx Ventures to management services and are not actively seeking
additional investments since August 31, 2000, in order to conserve cash
resources at Oryx. Oryx will receive the profits and losses from Oryx Ventures
as well as any assets distributed by Oryx Ventures upon liquidation or
otherwise.
Oryx Ventures invests funds in early stage financings and provide management
services at the direction of its board of managers, primarily with
technology-oriented start-up companies. Companies under consideration must be
led by a passionate entrepreneur with a promising, proprietary technology. In
addition to providing capital, the Oryx Venture team will work closely with the
founder providing strategic and management services in all areas of business,
including administration, operations, finance, marketing and sales. We believe
there is a significant opportunity for Oryx Ventures to help these companies
bridge the funding gap between friends and family investors and the higher
minimum investment levels required by the major venture funds. Typically, Oryx
Ventures will receive equity, warrants or stock, in such companies as partial
consideration for the services it provides. These services may include: senior
executive mentoring, sales and marketing strategy, business development
activities, assistance in fund raising and administrative services such as
accounting, human resources and information technology services.
To date, we have invested in three technology companies: LOTS Technology, Inc.,
a developer of digital optical storage technology, NetConversions, an
early-state, data marketing company with a proprietary technology that allows
for real-time analysis of consumer online buyer behavior, and S2 Technologies,
Inc., an early-stage middleware and software tools development company.
LOTS Technology
LOTS proprietary technology is a replacement product for the high-end magnetic
media drives that can no longer keep pace with the growth in digital data
storage. The company, which developed the technology with major funding from
government contracts, plans to supply large-volume data storage systems to three
broad markets of commercial and government customers, including general purpose
computing, networked data storage, digital video and data acquisition system
companies. We made a direct investment of $500,000 in the company and are
receiving additional equity in the form of stock options for our senior advisory
services with our total ownership in excess of 6.5%.
NetConversions
NetConversions, which represents our second investment, has a unique solution
that incorporates an innovative approach to behavior profiling and promotions
allowing e-commerce managers maximum flexibility to change their website
marketing. It is a turnkey ASP solution that requires minimal client integration
and engineering. Oryx has provided a bridge loan of $100,000 that is convertible
to equity at a discounted rate.
S2 Technologies
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In August 2000, we invested $500,000 in S2 Technologies. We are also providing
senior management advisory services in exchange for additional equity in the
company. Our total ownership in S2 Technologies is in excess of 25.5%. S2's
focus is to provide value-added tools that address the development, integration
and verification phases of the embedded software. The goal is to increase
software developers' and engineers' productivity and improve their products time
to market. The company expects to have a Beta release of their core products in
the spring of next year.
Our investment strategy involves a number of special risks, including:
o increased operating expenses to support investment in our new
management services venture;
o strain on managerial and operational resources as management tries to
support multiple businesses;
o potential issuance of securities in connection with raising capital to
fund investments or using our equity in connection with our investment
strategy may lessen the rights of holders of our currently outstanding
securities;
o being deemed as investment company and subjected to the requirements
of the Investment Company Act of 1940; and
o the need to incur additional debt.
We may not be able to successfully address these problems. Moreover, our future
operating results will depend to a significant degree upon our ability to invest
in early stage development companies and insure their follow-on financing,
growth and success. In addition, many of the investment opportunities we are
currently examining are in early-stage companies with limited operating
histories and limited or no revenues. These investments may have a negative
impact on our financial statements. Further, we may not be able to successfully
develop these young companies and there can be no assurances that we will either
recoup our investments or receive any return on our investment in any company.
Effects of Various Accounting Methods on our Results of Operations
Our portfolio companies are early stage development companies that generate net
losses, and we expect these losses to continue in the future. On a quarterly
basis we evaluate the carrying value of our ownership interest and advances in
each of our portfolio companies for possible impairment. In our assessment of
carrying value for each portfolio company, we consider achievement of financial
plan objectives and milestones, overall market conditions for their products or
services, assessment of competitive technologies and the ability to raise
capital for future funding requirements.
The various interests that we have acquired in our portfolio companies are
accounted for by either the equity method or cost method. The Company does not
anticipate accounting for its investment using the consolidation method, as the
Company's investment strategy does not contemplate obtaining greater than 50%
voting rights or effective control of its portfolio companies. The applicable
accounting method used to record our investments in our portfolio companies is
determined by our voting interest and level of influence we exercise over each
portfolio company. In general we will use the equity method when our ownership
level exceeds 20% but is not greater than 50%. When our ownership is less than
20% and we do not exercise significant influence we use the cost method. Whether
or not we exercise significant influence with respect to a portfolio company
depends on an evaluation of several factors including: our management capacity
and decision making authority relative to our management services we provide to
the portfolio company, level of representation on the portfolio company's board
of directors and level of voting rights associated with our equity holdings.
12
<PAGE>
<TABLE>
Our portfolio companies as of August 31, 2000 were :
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
Company Accounting Method Date of Voting Ownership Derivative Ownership
Initial from Management Services
Investment
------------------------ --------------------- ---------------- ---------------------- --------------------------
<S> <C> <C> <C> <C>
Lots Technologies Cost Method July 7, 2000 2.2% 4.4%
------------------------ --------------------- ---------------- ---------------------- --------------------------
S2- Technologies Equity Method July 20, 2000 18.5% 7.0%
------------------------ --------------------- ---------------- ---------------------- --------------------------
Net Conversions Cost Method June 19, 2000 N/A 0%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Cost to support Oryx Ventures activities are primarily related to salaries,
legal cost and travel expenses associated with evaluation of investment
opportunities and providing management services to our portfolio companies. As
of August 31, 2000 there were three executives involved with Oryx Ventures.
Currently Oryx Ventures only receives equity in consideration for providing
management services to its portfolio companies. In the future it is anticipated
that Oryx Ventures will add a component of cash remuneration in any new
management services agreement entered into.
Results of Operations
Consolidated Results of Continuing Operations
For the quarter ended August 31, 2000, revenues increased by $6,000 or 8% from
$77,000 for the quarter ended August 31, 1999, to $83,000 ended for the quarter
August 31, 2000. Revenues for the six months ended August 31, 2000 decreased
$122,000 or 46% from $266,000 for the six months ended August 31,1999 to
$144,000 for the six months ended August 31, 2000. During the three months ended
August 31, 2000 revenue of $83,000 were from royalty revenue from our Intragene
technology licensee, compared to $77,000 revenue for the three months ended
August 31, 2000 which was derived solely from SurgX liquid. This revenue shift
to royalty reflects the transfer of the manufacturing of SurgX liquid to our
licensing companies. The decrease in revenue for the six months ended August 31,
2000 is primarily attributed to the absence of government contract revenue and a
decrease of sales of SurgX liquid, offset by royalty revenue. Revenue in the
future will be derived from royalties from our SurgX and Intragene technologies.
Future royalties will be based solely upon the successful sales, marketing,
manufacturing and development efforts of our licensees, and we have no view of
what level of revenue will be achieved in the future.
The Company's gross profit increased from $81,000 deficit for the quarter ended
August 31, 1999, to $65,000 profit for the quarter ended August 31, 2000,
representing an increase of $146,000 or 180%. Gross profit was breakeven for the
six months ended August 31, 2000 compared with a gross deficit of $234,000 for
the six months ended August 31, 1999. The increase in gross profit during the
three months ended August 31, 2000 is primarily due to no cost associated with
the $83,000 royalty revenue offset by some cost related to SurgX liquid shipped
to IRISO. The decrease in gross deficit for the six months ended August 31, 2000
is primarily attributed to the elimination of government contract sales and
costs and lower sales of SurgX liquid, which were generating negative margins
during the six months, ended August 31, 1999.
General and administrative expenses decreased from $592,000 for the quarter
ended August 31, 1999, to $435,000 for the quarter ended August 31, 2000,
representing a decrease of $157,000 or 27%. General and administrative expenses
decreased by $184,000 or 18% from $1,038,000 for the six months ended August 31,
1999 to $854,000 for the six months ended August 31, 2000. The decrease in
general and administrative expenses is related to decrease in compensation,
travel, and investor relation expenses associated with a marketing program
entered into with Continental Capital on August 11, 1999, offset by an increase
in expenses related to new Oryx Ventures investment entity. The general and
administrative expenses related to Oryx Ventures were $144,000 and $226,000 for
the three and the six months period ended August 31, 2000.
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<PAGE>
Research and development expenses decreased from $316,000 in the quarter ended
August 31, 1999, to $45,000 for the quarter ended August 31, 2000, representing
a decrease of $271,000 or 86%. Research and development expenses decreased by
$432,000 or 87% from $499,000 for the six months ended August 31, 1999 to
$67,000 for the six months ended August 31, 2000. This reduction was due to the
transfer of our SurgX research and development activities to Cooper Electronic
Technologies. We anticipate minimal development expenditures in the future.
During the quarter ended August 31, 2000, we recorded $40,000 of expenses
related to our investments, of which $20,000 is our percentage share of the
losses on S-2 Technologies, Inc. as a result of applying the equity method to
the S2 Technologies, Inc. investment and $20,000 resulting from writing off an
initial investment on I-Lease for proof of concept. These transactions reflect
the investment activities of our Oryx Ventures entity that was formed this
fiscal year.
Interest income increased by $17,000 or 45% from $38,000 for the three months
ended August 31, 1999 to $55,000 for the three months ended August 31, 2000.
Interest income increased from $72,000 in the six months ended August 31, 1999,
to $121,000 for the six months ended August 31, 2000, representing and increase
of $49,000 or 68%. We anticipate less interest income in the future since cash
and cash equivalent balance decreased due to the investments made during the
quarter.
Liquidity and Capital Resources
The Company's working capital decreased by $1,573,000 from a surplus of
$4,961,000 at February 29, 2000 to a surplus of $3,388,000 at August 31, 2000.
Cash and cash equivalents decreased by $854,000 from $4,529,000 for the year
ended February 29, 2000 to $3,675,000 for the six months ended August 31, 2000.
This decrease in cash and cash equivalents is primarily due to $1,120,000 cash
used for investment by Oryx Ventures and $841,000 net loss from continued
operations for the six months ended August 31, 2000 plus changes in working
capital items, offset by proceeds of $993,000 from redemption of short term
investments and by proceeds of $336,000 from the exercise of warrants and stock
options for common stock. Management believes the Company has sufficient capital
to meet its fiscal 2001 operating plan, however, in the event the 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.
Factors Affecting Future Results
You should carefully consider the following factors, together with all of
the other information contained or incorporated by reference in this report,
before you decide to purchase or trade shares of our common stock. These factors
could cause our future results to differ materially from those expressed or
implied in forward-looking statements made by us. The risks and uncertainties
described below are not the only ones we face. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also alarm our business. The trading price of our common stock could decline due
to any of these risks, and you may lose all or part of you investment.
Our corporate restructuring strategy from an operating company to a technology
licensing and investment and management services company may not be successful.
During fiscal years 1998 and 1999 we disposed of substantially all of
our operating businesses and we are now a licensing entity with our primary
source of income deriving from royalties from our SurgX technology licensed to
Cooper Bussmann and IRISO and our Intragene technology licensed to Oryx Advanced
Materials, Inc. In the course of selling various business units, we disposed of
operations which had accounted for substantially all of our revenues. While we
believe that this downsizing has substantially reduced our losses and enabled us
to focus on key strategic businesses, the actual impact cannot be certain. In
the absence of increased sales of our SurgX and Intragene technologies through
our licensees, such restructuring has sharply reduced our revenues without
creating opportunities to offset equally the lost revenues.
14
<PAGE>
Our strategy of relying on licensing royalties and using the proceeds
to fund the acquisition of other businesses and technologies presents special
risks.
We have shifted the strategic focus of our business from an operating
business exploiting our own developed technologies to a licensing and investment
business where we intend to use the royalty revenues from our licensed SurgX and
Intragene technologies to fund investments in start-up technology companies.
This investment strategy involves a number of special risks, including:
o increased operating expenses to support investment in our new
management services venture;
o strain on managerial and operational resources as management tries to
support multiple businesses;
o potential issuance of securities in connection with raising capital to
fund investments or using our equity in connection with our investment
strategy may lessen the rights of holders of our currently outstanding
securities; and
o the need to incur additional debt.
We may not be able to successfully address these problems. Moreover,
our future operating results will depend to a significant degree upon our
ability to invest in early stage development companies and insure their
follow-on financing, growth and success. In addition, many of the investment
opportunities we are currently examining are in early-stage companies with
limited operating histories and limited or no revenues. These investments may
have a negative impact on our financial statements. Further, we may not be able
to successfully develop these young companies and there can be no assurances
that we will either recoup our investments or receive any return on our
investment in any company.
We are dependent on the licensees of our SurgX and Intragene technologies for
substantially all of our revenues.
Our future royalties from the licenses of our SurgX and Intragene
technologies are based solely upon the successful sales, marketing,
manufacturing and development efforts of our licensees.
While the license agreements for our SurgX technology 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 payments will provide enough revenue to
continue to support our operations. In the case of Cooper Bussmann, minimum
royalty payments through June 2001 have already been satisfied to maintain
exclusivity, and there can be no assurances that we will receive any royalty
payments from Cooper Bussmann through this time period unless Cooper Bussmann is
successful in selling products using SurgX technology in excess of the minimum
royalty payments, and such sales have not yet been material. To date, Cooper
Bussmann and IRISO have shipped only limited quantities to customers of products
incorporating SurgX technology.
Although we have received approximately $332,000 in royalty revenue
from licensing our Intragene technology to Oryx Advanced Materials, Inc., or
OAMI, there can be no assurances that we will receive any future royalty revenue
from OAMI. There are no minimum annual royalty payment requirements under our
license with OAMI. Our future royalties from our 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 us, 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. OAMI is currently in default under its agreement with us due to its
failure to make required royalty payments of approximately $50,000 which were
due on July 15, 2000. We are currently negotiating with OAMI to restructure the
royalty
15
<PAGE>
arrangement to take into account a slow-down in OAMI's business. There can be no
assurance that we will reach a satisfactory agreement with OAMI.
We may not be able to raise sufficient funds to finance our acquisition
strategy.
At present, our sole sources of revenue are licensing royalties payable
by the licensees of our SurgX and Intragene technologies. We anticipate, based
on management's internal forecasts and assumptions relating to our operations,
that our existing capital resources will be sufficient to satisfy our
contemplated cash requirements for at least the next twelve months.
However, we may not have sufficient funds to finance our proposed
strategy of seeking investments in or acquisitions of new technologies. In
addition, in the event that our plans change or our cash projections and
assumptions prove inaccurate, we could be required to seek additional financing
to support existing operations. Our present business plan may require us to
raise additional funds, however we have no current arrangements with respect to
sources of additional financing, and there can be no assurance that we would be
able to obtain additional financing if and when needed, or that, if available,
such additional financing would be on the terms acceptable to us.
We may incur significant costs to avoid investment company status and may suffer
adverse consequences if deemed to be an investment company.
We may incur significant costs to avoid investment company status and
may suffer other adverse consequences if deemed to be an investment company
under the Investment Company Act of 1940. Some equity investments in other
businesses made by us may constitute investment securities under the 1940 Act.
We may be deemed to be an investment company if we were to own investment
securities with a value exceeding 40% of our total assets, subject to certain
exclusions. Investment companies are subject to registration under, and
compliance with, the 1940 Act unless a particular exclusion or Commission safe
harbor applies. If we were to be deemed an investment company, we would become
subject to the requirements of the 1940 Act. As a consequence, we would be
prohibited from engaging in business or issuing our securities as we have in the
past and we might be subject to civil and criminal penalties for noncompliance.
In addition, certain of our contracts might be voidable, and a court-appointed
receiver could take control of Oryx and liquidate our business.
Although our investment securities currently comprise less than 40% of
our assets, fluctuations in the value of these securities or of our other assets
may cause this limit to be exceeded. This would require us to attempt to reduce
our investment securities as a percentage of our total assets. This reduction
can be attempted in a number of ways, including the disposition of investment
securities and the acquisition of non-investment security assets. If we sell
investment securities, we may sell them sooner than we otherwise would. These
sales may be at depressed prices and we may never realize anticipated benefits
from, or may incur losses on, these investments. Some investments may not be
sold due to contractual or legal restrictions or the inability to locate a
suitable buyer. Moreover, we may incur tax liabilities when we sell assets. We
may also be unable to purchase additional investment securities that may be
important to our operating strategy. If we decide to acquire non-investment
security assets, we may not be able to identify and acquire suitable assets and
businesses.
We depend on certain key employees, and the loss of any of those employees may
harm our business.
Our performance is substantially dependent on the performance of our
executive officers and other key employees, in particular, Philip Micciche, our
president and chief executive officer, and Mitchel Underseth, our chief
financial officer. The familiarity of these individuals with the industry makes
them especially critical to our success. In addition, our success in our
investment strategy is dependent on our ability to attract and retain high
quality personnel with skills necessary to evaluate and manage investments in
high-tech startup companies. The loss of the services of any of our executive
officers or key employees may harm our business. Competition for such personnel
is intense.
16
<PAGE>
We have a history of unprofitability; recent operating losses and accumulated
deficit and may not be profitable in the future.
Since our initial public offering in April 1994, we have not been
profitable on a quarterly or annual basis except for the quarters ended May 31,
1996, August 31, 1996 and November 30, 1996. At August 31, 2000, we had an
accumulated deficit of $20,929,000. We anticipate operating losses will continue
through fiscal year 2001. There can be no assurance that we will receive any
licensing royalty revenues from the licensees of our SurgX and Intragene
technologies or that our licensees will be successful in marketing and selling
products incorporating our SurgX or Intragene technologies. There can also be no
assurances that our new management services and investment business related to
start-up companies will be profitable in the future.
We rely on our licensees, Cooper Bussmann, IRISO and Oryx Advanced Materials, to
manufacture and market products incorporating our SurgX and Intragene
technologies and there can be no assurance that they will be successful in doing
so.
We rely exclusively on our licensees to manufacture and market products
incorporating our SurgX and Intragene technologies. Our SurgX licensees have
developed low-cost manufacturing processes using our licensed technology.
However, there can be no assurance that they will be able to incorporate
manufacturing process improvement in the future to further reduce product cost
and enhance product performance to allow them to compete in the high volume, low
price diode market.
Further, manufacturing development results produced by our licensees in
the future will be influenced by numerous factors, including:
o the availability of funding;
o technological developments by our licensees, their customers and
competitors;
o increases in expenses associated with product development;
o market acceptance of products incorporating the SurgX and Intragene
technologies;
o our licensees' ability to successfully control their costs of
development, overhead and other costs; and
o our licensees' capacity to develop and manage the introduction of
new products.
We rely exclusively on our licensees for research and development in connection
with our SurgX and Intragene technologies.
The development, design and manufacture of technology constantly
undergo rapid and significant change. We rely on our licensees, Cooper Bussmann
and IRISO, for technological improvements to the SurgX technology and our
licensee, Oryx Advanced Materials, for technological improvements to the
Intragene technology. At present, we do not support any research and development
or manufacturing activities internally. Our success will depend upon our
licensees' ability to maintain a competitive position with respect to our
proprietary and other enhanced technology and to continue to attract and retain
qualified personnel in all phases of our operations. Our business is, to a large
degree, dependent upon the enhancement of the SurgX and Intragene current
technology. Critical to our success and future profitability will be the
capacity of our licensees to improve this technology. Product development and
enhancement involve substantial research and development expenditures and a high
degree of risk, and there is no assurance that these product development efforts
will be successful, will be accepted by the market, or that such development
efforts can be completed on a cost-effective or timely basis, or that there will
be sufficient funds to support
17
<PAGE>
development efforts. There can be no assurance that future technological
developments will not render existing or proposed SurgX or Intragene products
uneconomical or obsolete.
We may experience fluctuations in future operating results which may adverse
affect the price of our common stock.
Our quarterly operating results have in the past been, and will in the
future be, subject to significant fluctuation, which could adversely affect the
price of our common stock. Our operating results are impacted by numerous
factors, such as
o market acceptance of SurgX products;
o Cooper Bussmann's and IRISO's continued marketing, sales and
financial support of SurgX technology;
o overall economic trends; and
o possible negative impact on our financial statements due to the
accounting treatment of our investment in portfolio companies.
In addition, customer orders may involve design-in requirements, thus
making the timing of customer orders difficult to predict and uneven.
Our expense levels are based in part on our expectations as to future
royalty revenues and, in particular, volume shipments of SurgX products by
Cooper Bussmann and IRISO. We may be unable to adjust spending in a timely
manner to compensate for any delay in product development or revenue shortfall.
Any weakening in demand for our products or delays in acceptance of the SurgX
technology would have a material adverse effect on our operating results.
Potential intellectual property claims and litigation could subject us to
significant liability for damages and invalidation of our proprietary rights.
Litigation may be necessary in the future to enforce our patents and
other intellectual property rights, to protect our trade secrets or to determine
the validity and scope of the proprietary rights of others.
Litigation could harm our business and result in:
o substantial settlement or related costs, including indemnification
of customers;
o diversion of our or our licensee's management and technical
resources;
o discontinuing the use and sale of infringing products;
o expending significant resources to develop non-infringing
technology; and
o obtaining licenses to infringed technology.
Our success is heavily dependent upon our proprietary technologies. We
rely on a combination of patent, trademark, copyright and trade secret laws,
nondisclosure and other contractual provisions, and technical measures to
protect our intellectual property rights. Our patents, trademarks or copyrights
may be challenged and invalidated or circumvented. Our patents may not be of
sufficient scope or strength or be issued in all countries where our products
can be sold. The expiration of some of our patents may harm our business.
18
<PAGE>
Others may develop technologies that are similar or superior to our
technologies, duplicate our technologies or design around our patents. Effective
intellectual property protection may be unavailable or limited in some foreign
countries. Despite efforts to protect our proprietary rights, unauthorized
parties may attempt to copy or otherwise use aspects of processes and devices
that we regard as proprietary. Policing unauthorized use of our proprietary
information is difficult, and the steps we have taken may not prevent
misappropriation of our technologies.
If our licensees are unable to successfully compete in the market for products
using our SurgX and Intragene technologies, our business would be adversely
affected.
The licensees of our SurgX and Intragene technologies are engaged in
certain highly competitive and rapidly changing segments of the electronic
components industry in which technological advances, costs, consistency and
reliability of supply are critical to competitive position. Our licensees
compete or may subsequently compete, directly or indirectly, with a large number
of companies which may provide products or components comparable to those
provided by us. In addition, competitors are likely to be larger,
better-capitalized, more established and have greater access to resources
necessary to produce a competitive advantage.
We have not paid and do not intend to pay any dividends on our common stock.
We have not paid any cash dividends on our common stock since our
inception and do not anticipate paying cash dividends on our common stock in the
foreseeable future. The future payment of dividends is directly dependent upon
our future earnings, our financial requirements and other factors to be
determined by our board of directors, as well as the possible consent of
lenders, underwriters or others. For the foreseeable future, it is anticipated
that any earnings which may be generated from our operations will be used to
finance our growth and will not be paid to holders of common stock.
The price of our common stock has been volatile and may continue to experience
volatility.
The market price of our common stock has been, and in the future could
be, significantly affected by factors such as:
o actual or anticipated fluctuations in operating results;
o announcements of technical innovations;
o new products or new contracts;
o competitors or their customers;
o developments with respect to patents or proprietary rights;
o changes in financial estimates by securities analysts; and
o general market conditions.
Further, the trading prices of the stocks of many technology companies,
including our share price, are at or near historical highs and reflect
price/earnings ratios substantially above historical levels. There can be no
assurance that these trading prices and price/earnings ratios will be sustained.
Charter provisions limit the authority of our stockholders, and therefore
minority stockholders may not be able to significantly influence Oryx's
governance or affairs.
19
<PAGE>
Our board of directors has the authority to issue shares of preferred
stock and to determine the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by shareholders. The rights of the holders of common stock will be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of our outstanding voting stock.
The conversion or exercise of currently outstanding convertible securities and
warrants would result in significant dilution to holders of our common stock.
As a result of various other transactions previously entered by us, as of August
31, 2000, there were convertible securities and private warrants and options
currently outstanding for the conversion and purchase of up to approximately
4,602,000 shares of common stock. These represent significant additional
potential dilution for our existing stockholders. These underlying shares of
common stock are not included in currently outstanding shares. In addition, as a
result of the anti-dilution provisions included in certain of these derivative
securities, there may be further dilution based on the price at which we issue
other securities in the future.
PART II
OTHER INFORMATION
Item 5. Other Information
None
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 August 31, 2000.
20
<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: October 13, 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)
21
