<PAGE> 1
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
Commission File No. 0-25548
ORBIT TECHNOLOGIES, INC.
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Delaware 841 00 1269
- ------------------------------ -----------
(State of Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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2011 Palomar Airport Road, Suite 100, Carlsbad, California 92009
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(Address of Principal Executive Offices)
(619) 930-8944
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(Issuer's Telephone Number, Including Area Code)
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past 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 No X
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The number of outstanding shares of the registrants's only class of
common stock as of March 31, 1997: 20,303,028.
Transitional Small Business Disclosure Format: Yes No X
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<PAGE> 2
ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
MARCH 31, 1996
PART I - FINANCIAL INFORMATION
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ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS F-1
At March 31, 1996 and December 31, 1995
CONSOLIDATED STATEMENTS OF OPERATIONS F-2
For the Three Months Ended March 31, 1996 and 1995
CONSOLIDATED STATEMENTS OF CASH FLOWS F-3
For the Three Months Ended March 31, 1996 and 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-4 to F-9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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PART II - OTHER INFORMATION
<PAGE> 3
ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Note 2)
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<CAPTION>
At At
March 31, 1996 Dec. 31, 1995
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(Unaudited)
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CURRENT ASSETS
Cash $ 29,395 $ 4,703
Prepaid expenses 10,353 10,353
Advances to officer 1,341 1,341
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TOTAL CURRENT ASSETS 41,089 16,397
PROPERTY AND EQUIPMENT - At cost, net of accumulated
depreciation 275,254 213,887
INTANGIBLE ASSETS, Net of accumulated amortization 81,920 83,203
OTHER ASSETS 4,015 4,015
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TOTAL ASSETS $ 402,278 $ 317,502
=========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 579,377 $ 533,527
Accrued expenses 466,766 288,654
Due to stockholders 199,350 199,350
Notes payable (Note 3) 2,466,713 2,404,524
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TOTAL CURRENT LIABILITIES 3,712,206 3,426,055
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COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Note 4)
STOCKHOLDERS' DEFICIENCY:
Preferred stock - par value $.01 per share; 1,000,000
shares authorized; 1,000,000 and -0- shares issued
and outstanding at March 31, 1996 and December 31,
1995, respectively 10,000 -
Common stock - par value $.01 per share; 50,000,000
shares authorized; 20,428,637 shares issued and
outstanding as of March 31, 1996 and December 31,
1995 204,287 204,287
Additional paid-in capital 8,481,736 8,291,736
Accumulated deficit (11,528,657) (11,108,832)
Unearned compensation and financing charges (360,000) (478,450)
Notes receivable from stockholders (117,294) (17,294)
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TOTAL STOCKHOLDERS' DEFICIENCY (3,309,928) (3,108,553)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 402,278 $ 317,502
=========== ===========
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See notes to consolidated financial statements.
F-1
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ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
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1996 1995
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REVENUE $ - $ -
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OPERATING EXPENSES
Research and development 12,209 148,931
General and administrative 225,056 176,233
Compensatory element of stock
options 90,000 -
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TOTAL OPERATING EXPENSES (327,265) 325,164
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OPERATING LOSS (327,265) (325,164)
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OTHER EXPENSE
Financing costs 28,450 39,700
Interest expense 64,110 18,250
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TOTAL OTHER EXPENSE 92,560 57,950
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NET LOSS $ (419,825) $ (383,114)
========== ==========
PER SHARE DATA:
NET LOSS PER COMMON SHARE $(.02) $(.02)
===== =====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON STOCK EQUIVALENTS
OUTSTANDING 25,799,309 17,589,367
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 5
ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
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1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (419,825) $ (383,114)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 4,000 4,009
Amortization of deferred finance costs 28,450 39,700
Compensatory element of stock options 90,000 -
Accrued interest 52,421 18,250
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Sub-total (244,954) (321,155)
Cash Provided By (Used In) the Change in
assets and liabilities:
Increase in prepaid expenses - (6,941)
Increase in accounts payable 45,850 79,757
Increase in accrued expenses 125,691 3,242
Increase in due to shareholders - 12,650
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NET CASH USED IN OPERATING ACTIVITIES (73,413) (232,447)
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CASH FLOWS FROM INVESTING ACTIVITIES
Cost of patents - (4,479)
Capital expenditures (64,084) (538)
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NET CASH USED IN INVESTING ACTIVITIES (64,084) (5,017)
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CASH FLOWS FROM FINANCING ACTIVITIES
Loan repayments (27,561) -
Loan proceeds 189,750 250,000
Deferred financing costs - (8,316)
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NET CASH PROVIDED BY FINANCING
ACTIVITIES 162,189 241,684
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INCREASE IN CASH 24,692 4,220
CASH - BEGINNING 4,703 13,864
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CASH - ENDING $ 29,395 $ 18,084
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See notes to consolidated financial statements.
F-3
<PAGE> 6
ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions in Item 310 of Regulation S-B.
Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of Company management, the accompanying
unaudited consolidated financial statements and related notes
included thereto contain all adjustments (consisting solely of
normal recurring adjustments) necessary to present fairly its
financial position as of March 31, 1996 and the results of its
operations and cash flows for the three months ended March 31,
1996 and 1995.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles,
which contemplate continuation of the Company as a going
concern. However, for the year ended December 31, 1995, the
Company incurred a net loss of $4,147,782 and, as of that
date, had a stockholders' deficiency and a working capital
deficiency of $3,108,553 and $3,409,658, respectively. The
Company had a net loss of $419,825 for the three months ended
March 31, 1996. The Company is also in default on a
significant number of loan agreements which total
approximately $1,475,000 in principal and interest as of
December 31, 1995 and is in arrears with substantially all of
its other payables and accrued liabilities. The Company
requires additional funds to continue research and development
efforts and complete the necessary work to commercialize its
technologies. Until completion of the development of a
technology and the commencement of sales, the Company will
have no operating revenues, but will continue to incur
substantial expenses and operating losses. No assurances can
be given that the Company can complete development of any
technology or that, if any technology is fully developed, it
can be manufactured on a large scale basis or at a feasible
cost. Further, no assurance can be given that any technology
will receive market acceptance. These factors raise
substantial doubt about the Company's ability to continue as a
going concern.
The Company is exploring additional sources of working capital
including private borrowings, sales of its securities, joint
ventures and licensing of technologies. While no assurance
can be given, management believes the Company can raise
adequate capital to keep the Company functioning at a minimum
level of operation in 1996 and 1997. During 1996, the
Company's proceeds from all financing activities amounted to
$428,250, of which $189,750 was received as of March 31, 1996.
F-4
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ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
NOTE 2 - GOING CONCERN (Continued)
The Company is exploring ways to reduce its existing
liabilities including exchanging certain of its liabilities
for shares of its common stock. During the fourth quarter of
1996, the Company exchanged $965,000 of principal on various
promissory notes outstanding at December 31, 1995 for shares
of common stock.
To date, the Company has not been successful in restructuring
the remaining debt and the Company continues to be in default
under such agreements. Further, one group of note holders,
representing $600,000 of the promissory notes outstanding as
of December 31, 1995, has filed a lawsuit against the Company
to recover loans and other monies provided to the Company (see
Note 4).
The Company's ability to continue as a going concern is
dependent upon obtaining the additional financing,
restructuring and/or curing the defaults on its debt,
completion of research and development and the successful
marketing of its technologies. These financial statements do
not include any adjustments relating to the recoverability of
recorded asset amounts that might be necessary as a result of
the above uncertainty. Management believes that actions
presently being taken, as discussed above, provide the
opportunity for the Company to continue as a going concern.
NOTE 3 - CAPITALIZATION
Borrowings Under Convertible Notes Payable
During 1996, the Company has borrowed $228,250, of which
$89,750 was received as of March 31, 1996, in one year
promissory notes bearing interest at 10% per annum. $77,250
of the notes and related accrued interest are convertible into
common stock at 50% of the asked market price at any time,
with automatic conversion upon the effectiveness of the
Registration Statement under the Securities Act of 1933. The
remaining $151,000 of the notes and related accrued interest
are convertible into common stock at prices ranging from
$0.10 - $0.22 per share of debt.
Issuance of Preferred Stock
During the first quarter of 1996, the Company borrowed
$200,000 pursuant to a one year promissory note which was
satisfied by issuance of 1,000,000 shares of preferred stock.
Such stock is automatically convertible into 2,000,000 shares
of common stock on or prior to the due date of the note. The
board of directors issued a resolution granting each share of
preferred stock three votes and assigned such voting rights to
one of the Company's officers.
F-5
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ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
NOTE 3 - CAPITALIZATION (Continued)
Conversion of Debt to Equity
During November of 1996 and February 1997, The Company and
certain of its debt holders agreed to convert principal of
$1,142,000 and related accrued interest of $129,000 into
6,590,595 shares of common stock. Of such principal to be
converted, 965,000 was outstanding as of December 31, 1995.
To induce the note holders to an early conversion, the Company
reduced the conversion rate provided for in certain of the
convertible loan agreements. Substantially, all of the debt
conversions were executed at the conversion rate of $0.22.
NOTE 4 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
Litigation/Disputes
a) The Metafuse technology was utilized to coat copper-alloy
resistance welding electrodes (welding tips) through the
fusion of titanium carbide or molybdenum tungsten onto and
into copper-alloy welding tips ("TiTRODEs"). TiTRODE
electrodes have been successfully tested by the Chrysler
Corporation ("Chrysler") for use on its assembly lines.
Chrysler has conducted 18 months of testing on the TiTRODE
type electrodes and has since integrated them into certain
of its manufacturing plants. TiTRODE type electrodes are
being sold to Chrysler by a Canadian corporation, with
which the Company claims to have an oral agreement
beginning in January 1994, whereby the two parties would
share net revenues derived from the sale of TiTRODEs. The
net revenues from the sale of TiTRODEs to Chrysler have not
been dispersed to the Company and the Company has requested
an informal accounting to determine the amount of money due
to it pursuant to the above referenced oral agreement. No
revenue has been recognized to date from this venture, as
the Company cannot predict the outcome of this request.
The Company intends to retain legal counsel to enforce its
oral agreement.
b) In October 1995, the Company commenced an internal audit of
its debt and equity structure. In February 1996,
preliminary findings of the internal audit suggested that
certain stock issuance to former officers and related
entities were without consideration. This resulted in a
request made by the Company upon certain individuals,
including former directors and officers of the Company, to
surrender stock issued to and held by them for purposes of
cancellation. One of the individuals,
F-6
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ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
NOTE 4 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
subject to the internal audit and request to surrender
stock for cancellation, Adrian Joseph, the Company's
former chairman and president, has initiated a judicial
action in the Superior Court of California, County of San
Diego, seeking a declaration of his rights in and to
Orbit stock. The Company has sought to cancel all stock
held, possessed or controlled by Mr. Joseph either in his
individual capacity, his family or corporations. The
Company and current management prevailed in that action
as the court denied the challenge of Joseph. Although
Joseph's stock was not cancelled, the court prevented
Joseph from interfering with the business of the Company
for a period of one year or the length of any action
brought by the parties.
c) Emerson v. Orbit Technologies, Inc. et al.. Plaintiff
claims that Richard A. Wall, a former officer of Orbit,
caused restricted stock to be issued to her without
disclosing the restriction. Emerson seeks damages of
approximately $125,000. Orbit is named as the issuing
corporation. Plaintiff failed to timely serve Wall and he
has been dismissed in the main action. Orbit has filed a
cross complaint against Wall for indemnification and, in
addition, is seeking to invalidate his Orbit stock holdings
and recover monies as a result of Wall's actions. Wall has
filed a motion to dismiss Orbit's indemnification which is
pending. No discovery has yet been conducted and, thus, it
is impossible to estimate the chances of success. However,
since Orbit received no consideration for the stock, the
Company counsel believes there are strong affirmative
defenses to Emerson's claims. Orbit intend to vigorously
defend and pursue all claims in this action.
Orbit has also cross-claimed against Wall seeking to
invalidate all his Orbit stock holdings and recover
monies Wall earned from the sale of Orbit stock.
d) Orbit Technologies, Inc. v. First Liberty Investment Group,
Inc. ("First Liberty"). This is an action to recover
investment banking fees paid to the defendant by Orbit. A
settlement was reached in March of 1997, whereby First
Liberty agreed to pay Orbit $15,000 in full settlement of
all obligations.
F-7
<PAGE> 10
ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
NOTE 4 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
e) Joseph v. Orbit Technologies, Inc.. Adrian Joseph, Orbit
former CEO, President and Chairman, filed an action for
declaratory relief seeking to validate his stock holdings
in Orbit. Orbit has cross-claimed against Joseph and Tatum
Singletary, another former officer, seeking to invalidate
their stock and to recover millions of dollars earned by
said individuals from the sale of Orbit stock. If Orbit is
unsuccessful, and the disputed stock is validated, the
Company counsel believes that it should not result in any
monetary award against Orbit. An adverse outcome merely
affects the debt/equity structure of the Company. The
Company intends to vigorously pursue this action.
f) Jeffer, Mangels, Butler & Marmaro, LLP v. Orbit
Technologies, Inc.. Action by former attorneys of Orbit to
compel arbitration to recover attorney fees. Orbit
stipulated to arbitration of fee dispute and stipulated to
entry of interim arbitration award in the amount of
approximately $110,000, subject to any defenses, offsets or
claims, which Orbit is asserting by way of a separate legal
malpractice action.
The malpractice action has been filed as a
cross-complaint in the case of Joseph v. Orbit
Technologies, Inc. Whether it will remain a claim in
that action or will be sent back to the arbitrator is an
issue currently pending before the court. The Company
has retained a law firm to handle the legal malpractice
claims on a contingency basis.
g) Sansone v. Joseph, et al. Action by shareholder to recover
on $50,000 notre signed by Joseph and Orbit. Orbit has
defaulted. Plaintiff has obtained a judgement against
Joseph for the full amount of the debt and has attached
$60,000 of sales proceeds owed to Joseph against which to
collect. Joseph has cross-claimed against Orbit for
indemnification. Given the nature of the claim, Orbit is
seeking to consolidate this claim with the case of Joseph
v. Orbit Technologies, Inc. Based on documents reviewed to
date, the Company counsel believes that Orbit's exposure to
Joseph on the cross-claim appear minimal.
h) Benveniste, et. al. vs. Orbit and Its Officers. The action
was filed on March 6, 1997 in the Los Angeles Superior
Court. The action is to collect principal, interest and
other fees and damages relating to various promissory notes
executed between the plaintiffs and Orbit during 1995
aggregating $600,000 and loans made during 1991 aggregating
$197,000.
F-8
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ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
NOTE 4 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
The plaintiffs allege that the defendants violated the
securities laws of the state of California and made
negligent misrepresentations related to Company's
technologies, thereby inducing them to loan monies to the
Company. The plaintiffs also allege that, pursuant to an
oral agreement with an officer of the Company, the
exercise price for various stock options to acquire Orbit
stock was reduced to $0.10 per share and the conversion
price under various convertible loan agreements between
the plaintiffs and Orbit was also reduced to $0.10.
Further, the plaintiffs allege that they have not
received 500,000 shares of Orbit stock promised as
additional compensations under such agreements and that
debt related to the 1991 loans of $197,000 is not
reflected on the Company's books.
Management contends that all of the debt and related fees
and shares of common stock are properly reflected on
Orbit's books as of December 31, 1995. The Company's
records reflect that the debt related to the 1991 loans
of $191,000 and related accrued interest was converted
into 226,550 common shares of Orbit in 1993. Management
also contends that there was no oral agreement to reduce
the exercise and conversion prices of certain financial
instruments. Further, management contends that there
were no violations of securities laws, that no
misrepresentations were made to plaintiffs and all other
complaints are without merit.
Management has attempted to restructure these loan
agreements and has been unsuccessful to date.
F-9
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Item 2. Management's Discussion and Analysis or Plan of Operation
When used in this discussion, the words "believes" and
"anticipates" or similar expressions are intended to identify forward looking
statements. Such statements are subject to certain risks and uncertainties
which could cause actual results to differ materially from those projected.
See Exhibit 99 to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995 and incorporated herein by reference. Readers are cautioned
not to place undue reliance on these forward looking statements which speak
only as the date hereof. The Company undertakes no obligation to publically
release the results of any revisions to these forward looking statements which
may be made to reflect events or circumstances after the date hereof or to
reflect the occurance of unanticipated events.
Plan of Operation
Since its incorporation in 1985, Orbit and its subsidiaries
have engaged in the research, development, acquisition and licensing of
technologies. Initially, Orbit concentrated its efforts in the areas of
coating technologies and new materials technologies. During the period
1985-1994, Orbit completed much of the essential research and development for
each of these technologies and in the process has developed specific, discrete
product lines for each technology; and, has developed multiple vertical market
applications, such as, for the aerospace, automotive, construction, waste
stabilization and containment, and other industries.
Orbit's business plan generally, and its plan of operation
over the next twelve month period is to focus on specific technologies
discussed herein for multiple market applications and then possibly license
each to an unaffiliated entity which will engage in manufacturing, marketing,
joint venture and sub-licensing strategies with respect to each technology or
application thereof as best suits each technology. Orbit has entered into a
specific Teaming Agreement with Ecology & Environmental, Inc., to exploit
Orbit's CSF technologies, although no assurances can be given that such
technologies can be successfully marketed as contemplated.
Until completion of the development of a technology and the
commencement of sales of technology, Orbit will have no operating revenues but
will continue to incur substantial expenses. No assurances can be given that
Orbit can complete development of any technology or that, if any technology is
fully developed, it can be manufactured on a large scale basis or at a feasible
cost. Further, no assurance can be given that any technology will receive
market acceptance. Being a development stage entity, Orbit is subject to all
the risks inherent in the establishment of a new enterprise and the marketing
and manufacturing of a new product, many of which risks are beyond the control
of Orbit.
Orbit does not expect to make any significant capital
purchases in 1996, except for possible equipment in support of TiTRODE and
Ceramic Silicone Foam.
Orbit will require additional financing. No assurance can be
given that additional financing can be obtained, or if obtainable, that the
terms will be satisfactory to Orbit. Orbit has working capital for
approximately six months from the date hereof. In order to finance its
proposed business, Orbit will need to obtain additional financing commitments
prior to the six-month period. Until such financing is available, Orbit will
continue to operate at a minimal level. Orbit is exploring additional sources
of working capital including borrowing, sales of securities, joint ventures and
the licensing of technologies. While no assurance can be given, Management
believes Orbit can raise adequate capital to keep Orbit functioning at a
minimum level of operation in 1996.
Results of Operations
Three Months Ended March 31, 1996 vs. 1995. Orbit had revenues of $ -0- for
the three months ended March 31, 1996 and 1995, respectively. General and
administrative expenses increased from $176,233 in the first three months of
1995 to $225,056 in the first three months of 1996 as a result of an
increase in employees and consulting expenses. Orbit's focus is on the
commercialization of technology. Research and development expenses decreased
in the three months ended March 31, 1996 to $12,209 from $148,931 in 1995.
Compensatory element of stock options in the three months ended March 31, 1996
was $90,000 from $-0- in 1995.
<PAGE> 13
For the three months ending March 31, 1996 and 1995, Orbit
incurred operating losses of $327,265 and $325,164, respectively.
TiTRODES are being sold to Chrysler Corporation by an entity
unaffiliated with Orbit (Huys Industries, Inc.) under an agreement Orbit claims
by which the parties would share equally net revenues derived from the sale of
TiTRODES to Chrysler Corporation. The net revenues from the sale of TiTRODES
to Chrysler Corporation have not been disbursed to Orbit and Orbit has
requested an accounting to determine the amount of money due to it pursuant to
the above referenced agreement. Orbit at this time cannot predict the outcome
of this request for an accounting.
Liquidity and Capital Resources
At March 31, 1996, Orbit had a stockholders' deficiency and a
working capital deficit of $3,309,928 and $3,671,117, respectively. Orbit had
a ratio of liabilities to tangible assets of 10 to 1 as of March 31, 1996.
Orbit is also in default on notes which total $2,466,713 in principal and
interest as of March 31, 1996.
During 1996, Orbit has borrowed $228,250, of which $89,750 was
received as of March 31, 1996, in one year promissory notes bearing interest at
10% per annum. Further, Orbit is in discussions with certain investment
bankers about offerings to raise additional capital. No assurance can be given
that Orbit can successfully obtain any working capital or complete any proposed
offerings or if obtained, that such funding will not cause a dilution to
shareholders of Orbit.
During 1996, Orbit has borrowed$228,250, of which $89,750 was
received as of March 31, 1996, in one-year promissory notes bearing interest at
10% annum. Further, Orbit is in discussions with certain investment bankers
about offerings to raise additional capital. No assurance can be given that
Orbit can successfully obtain any working capital or complete any proposed
offerings or if obtained, that such funding will not cause a dilution to
shareholders of Orbit.
Orbit is exploring ways to reduce its existing liabilities
including exchanging some of such liabilities with affiliates and others for
shares of its Common Stock. No assurance can be given that such efforts will
be successful.
To date, Orbit has funded its operations from the private
sales of Common Stock or notes (most of which have been converted into Common
Stock). Such sales have been able to fund only minimal operations and
technological developments. Development and exploitation of technologies have
been delayed by lack of adequate funding.
However, Orbit has been awarded small R & D contracts based on
initial positive results of tests conducted by the Idaho National Engineering
Laboratory (INEL) for use of Orbit's Ceramic Silicon Foam (CSF) material for
stabilizing radioactive calcine waste. Orbit has made additional proposals for
continue evaluation of CSF for use at INEL and believes those proposals will
continue to receive positive consideration for future contracts.
In May, 1996, Orbit was awarded a contract to participate in
the Department of Energy's Landfill Stabilization Project to evaluate materials
for treating existing hazardous waste at the Idaho National Engineering
Laboratory's Subsurface Disposal Areas. These landfill sites are composed of a
variety of mixed waste materials including radioactive waste. Several
different materials have been selected for testing and Orbit was awarded a
category sole source contract to test and evaluate its CSF. The contract
provides for initial bench testing with options that can be exercised for more
extensive field testing.
In November 1996, Orbit signed a Teaming Agreement with
Ecology and Environment, Inc. (International Specialists in the Environment),
for the sole purpose of identifying and pursuing mutually agreeable business
opportunities within the U. S. Departments of Energy and Defense, and other
federal and state government agencies and private sectors where the
environmental application of the CSF technology is possible. Identification
and pursuit of business opportunities includes technology development, I. e.,
both system design and application identification and construction, sales and
client development efforts, the bid/proposal process, and the contract
negotiation process regarding awarded projects.
Other Matters.
In October 1995, Orbit commenced an internal audit of its
books and records to examine its debt and equity structure. In February 1996,
preliminary findings of the internal audit indicated that substantial
irregularities existed in the
<PAGE> 14
books, records and affairs of Orbit at the direction and behest of former
Directors and Officers of Orbit. This resulted in a request made by Orbit upon
certain individuals, including former Directors and Officers, to surrender
stock issued to and held by them for purposes of cancellation.
Adrian Joseph, a former Director and Officer of Orbit, and a
subject of the internal audit was asked to surrender stock for cancellation.
Mr. Joseph, and a small group of individuals claiming to be shareholders,
presented an action by shareholder consent reinstating Joseph's control of
Orbit. When current management refused to accept what it believed was a faulty
shareholder consent, Mr. Joseph initiated a judicial action in the Superior
Court of California, County of San Diego seeking a declaration of his rights in
and to Orbit and the subject stock. In that action, in which Joseph alleged to
represent Orbit, James B. Lahey et al., representing current management at that
time, sought to cancel all stock held, possessed or controlled by Mr. Joseph
either in his individual capacity, or through his family or affiliated
corporations. Although Joseph's stock was not canceled in that judicial action
due to the nature of the proceeding, the court confirmed the defective nature
of the shareholder consent and prevented Mr. Joseph from interfering with the
business of Orbit for a period of one year or the length of any action brought
by the duly confirmed and recognized Officers and Directors of Orbit, James B.
Lahey, et al., against Joseph. (See also Part II, Item 1. Legal Proceedings.
Orbit Technologies Inc. vs. James B. Lahey, et al.)
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. See Part II, Item 6. Exhibits and Reports on
Form 8-K.
ITEM 2. CHANGES IN SECURITIES
On March 15, 1996, an interest bearing note for $200,000 was
exchanged for one million shares of Preferred Stock to S. A. Power USA
Corporation. From the date of issuance, the Preferred Shares were issued with
the understanding that they may be converted by the holder to two million
shares of Common Stock on or before the anniversary date of the issuance but
would automatically convert to Common Stock on the anniversary date if not
previously converted. It was later learned that the Company had not filed a
Certificate of Designation setting forth the preferences with the Delaware
Secretary of State. Consequently, the Preferred Shares were improperly issued.
During the quarter, Orbit also converted debt instruments of the Company
totaling $84,975 into 653,654 shares of Common Stock. Orbit is in discussions
with S. A. Power USA Corporation concerning a novation relating to the subject
transaction. None of these securities have been registered under the
Securities Act of 1933.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT:
(1) Financial Statements.
(2) Exhibits - See (C) below.
(B) REPORTS ON FORM 8-K. None.
(C) EXHIBITS
Exhibit Number Exhibit
3.( i ) Restated Certificate of
Incorporation (as amended).(1)
3.( ii ) Amended and Restated Bylaws.(1)
10. 1995 Stock Option Plan and Form
S-8 Registration Statement.(1)*
11. Computation of Earnings Per Share (See
Exhibit 27, Part II, Item 1, Financial Data
Schedule).
<PAGE> 15
27. Financial Data Schedule.
Note: Certain previously filed exhibits are no longer being
incorporated by reference (and therefore not numerically listed) as the
underlying documents have either expired or are no longer material or relevant.
________
*Management Compensation Plan
(1) Previously filed as part of the Form-10 filed in May 1995 or
Form 10-KSB for 1995 and which are hereby incorporated by reference.
<PAGE> 16
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ORBIT TECHNOLOGIES INC.
Registrant
Date: April 29, 1997 By: //S// JAMES B. LAHEY
---------------------------------------
James B. Lahey, Chief Executive Officer
Chairman of the Board of Directors
Date: April 29, 1997 By: //S// JAMES A GIANSIRACUSA
--------------------------------------
James A. Giansiracusa,
Secretary/Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ORBIT
TECHNOLOGIES, INC. AND SUBSIDIARIES BALANCE SHEET AS OF MARCH 31, 1996 AND
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 30
<SECURITIES> 0
<RECEIVABLES> 1
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41
<PP&E> 307
<DEPRECIATION> 32
<TOTAL-ASSETS> 402
<CURRENT-LIABILITIES> 3,712
<BONDS> 0
0
10
<COMMON> 204
<OTHER-SE> (3,722)
<TOTAL-LIABILITY-AND-EQUITY> 402
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93
<INCOME-PRETAX> (420)
<INCOME-TAX> 0
<INCOME-CONTINUING> (420)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (420)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
