Update on Brand X removable storage maker
New SYQT 10-Q bits:
Lots of raw materials on hand, apparently problems in production, wrong parts, lack of capital equipment etc limit production.
<<are comprised of the following:
December 31, September 30,
1997 1997
------------ -------------
(In thousands)
Raw materials $18,774 $13,675
Work in process 6,421 6,840
Finished goods 7,407 6,222
------------ -------------
$32,602 $26,737
============ =============>>
No increase in the LOC and an extension only for 3 months until March 7, 98. Very little open availability on the LOC, under $10 million open at present.
<On January 17, 1997, the Company renegotiated its domestic line of credit
with a financial institution, continuing the existing terms and extending
the line through March 7, 1998. In February 1998, the Company extended the
line to May 7, 1998. The line provides for a limit on borrowings of the
lesser of $30.0 million or a combination of 80 percent of eligible accounts
receivable and 40 percent of eligible finished goods inventory. As of
December 31, 1997, approximately $20.6 million of borrowings were
outstanding under the line.>
<<. NOTE: 7 - LITIGATION
On March 7, 1997, RKS Design, Inc. filed suit against the Company alleging
that the Company failed to pay $48,394.21 of interest charges on fees charged
for design services rendered with respect to its EZ Flyer and SyJet products.
The suit requests damages including profits associated with these products,
interest and attorneys' fees. The Company has filed a counterclaim asserting,
inter alia, that no amount is owing to RKS, and that the Company is entitled
to a refund of certain overpayments made to RKS. The Company does not believe
that this claim will have a material adverse affect on the Company, or on its
financial position or its results of operations.>>
No retail distribution planned for Quest, OEM only.
<<. Management has decided to focus its other new product,
Quest, exclusively on Original Equipment Manufacturer (OEM) opportunities. The
cost of distribution into the OEM channel is less than that of the retail
marketplace. The production ramp-up for Quest will only occur with the support
of OEM demand for this product. Increasing SparQ shipments over the next
several quarters will require additional manufacturing equipment to support
the anticipated ramp in units of production. The additional manufacturing
equipment will require incremental capital spending of up to an additional $20
to $30 million. The Company plans to finance the efforts to ramp the SparQ
units of production>>
SYQT anticipates additional operating losses
<<and the related working capital requirements by issuing additional capital stock
either through the exercise of existing stock warrants or issuance of new
securities. The Company will need additional funds to support the capital
spending and working capital requirements of the SparQ ramp, and to fund
anticipated operating losses>>
Total sales of SPARQ and SPARQ carts in the quarter was around $6 million, cartridge sales decreased 59% by volume from prior year quarter. Total EZFLyer AND SyJet and related cart sales were around $21 million in the quarter.
<<. The Company shipped approximately 75 percent
more drives during the current quarter; however, the number of cartridges
shipped decreased by 59 percent during the current quarter, as compared to the
number of units shipped during the comparable prior year's quarter. The decline
in the number of cartridges shipped resulted primarily from the decrease in net
revenue from the "Legacy" products which were comprised of predominantly
cartridge shipments. The percentage mix of net revenue by product family as
compared to the comparable prior year's quarter was:
Current Year Prior Year
Q1 Q1
------------ ----------
Legacy products 14% 66%
EZ Flyer and SyJet products 66% 34%
SparQ products 20% 0%
Total 100% 100%
The Company began shipments of its newest product, SparQ, during the quarter
ended December 31, 1997.
Factors such as slow sell through rates in the sales channels, price pressures
on the Company's products, and competitive product introductions may continue to
have an adverse impact on net revenue.>>
Apparenlty 240 million share is not anywhere near enough for SYQT, approval will be needed to authorize more shares.
<<The Company raised significant financing during the quarter ended December 31,
1997. See Part II, Item 2 of this Form 10-Q. The Company will require additional
equity funding which, if successful, will cause further dilution of the common
stock. The ability to raise cash through further equity funding may require
shareholder approval of an increase in the Company's authorized common stock,
or to otherwise approve such equity funding.>>
<<DILUTION OF COMMON STOCK
At December 31, 1997, the Company had issued and outstanding 46 shares of Series
3 preferred stock, 57,155 share of Series 4 preferred stock, and 30,000 shares
of Series 5 preferred stock. Several of the Company's financings have included
significant warrant coverage which, when exercised, will result in significant
proceeds to the Company. Assuming the conversion of all outstanding preferred
stock, the exercise of existing warrants and the fulfillment of other existing
commitments, a substantial portion of the Company's 240 million shares of
authorized>>
More trouble from Iomega:
<<In interrogatory
responses served December 3, 1997, Iomega asserted that SyQuest's recently
introduced SparQ product and not yet introduced Quest product infringe
Iomega's design patent and that it is investigating whether it believes that
the SparQ or Quest products infringe Iomega's utility patent. The Court has
set a trial date of January 11, 1999. SyQuest believes it has meritorious
defenses to Iomega's allegations and intends to defend the case vigorously.>>
Designer problems:
<<On March 7, 1997, RKS Design, Inc. filed suit against the Company alleging
that the Company failed to pay $48,394.21 of interest charges on fees charged
for design services rendered with respect to its EZ Flyer and SyJet products.
The suit requests damages including profits associated with these products,
interest and attorneys' fees. The Company has filed a counterclaim asserting,
inter alia, that no amount is owing to RKS, and that the Company is entitled
to a refund of certain overpayments made to RKS. The Company does not believe
that this claim will have a material adverse affect on the Company, or on its
financial position or its results of operations.>> |
