Cash crisis keeps Oncor stock falling Continued operation in doubt because of dwindling reserves

Investors dump shares

Company statement expresses confidence in turnaround


March 28, 1998|By Mark Guidera | Mark Guidera,SUN STAFF

Oncor Inc.'s stock tumbled further yesterday in the wake of the company's disclosure that its accountants question whether can continue operations because of dwindling cash reserves.

Shares of the Gaithersburg-based developer of gene-based cancer tests fell $2, or 44 percent, to close at $1.625.

More than 1.5 million shares -- 10 times the daily average -- traded hands as investors rushed to dump the stock. For the 52-week period, the stock is down almost 70 percent.

News of Oncor's precarious cash situation came a day after the company said it ousted founder and Chief Executive Officer Stephen Turner, and would seek to sell some revenue-producing divisions to raise badly needed cash.

In a terse statement yesterday, the company sought to shore up flagging investor confidence by stating that management believes it can raise capital and turn the company around.

Oncor is "considering alternative sources of cash" that management believes will become "assured in the next few weeks," the statement said.

"Management emphasizes that it fully expects to continue in existence for the foreseeable future," the statement added.

In its fourth-quarter and year-end earnings statement, which was released after the market closed Thursday, Oncor said it has only enough cash to fund operations until April 30.

While the company has mentioned in recent quarterly earnings statements filed with the Securities and Exchange Commission that it would need new cash to fund operations beyond April 30, yesterday's admission of its weak financial condition was the first widely disseminated public disclosure of the gravity of the situation.

Oncor said Thursday that it has about $5 million in cash and cash equivalent investments and that it had received another $5 million in January from a private placement of stock.

The company said net losses for the fourth quarter and the year, which ended Dec. 31, were $9.2 million, or 35 cents a share, and $30.9 million, or $1.21 a share, respectively.

The company reported revenue of $3.3 million for the fourth quarter and $13.4 million for the year.

By comparison, Oncor had net losses of $7.6 million, or 32 cents a share, and $29 million, or $1.26 a share, for the fourth quarter and 12 months of 1996. It had revenue of $3.6 million and $16 million in the same periods, respectively.

Oncor said yesterday that its accountants have told the company in an audit report that its cash position had fallen below a guideline that recommends a company have available cash reserves equal to or more than 12 months of losses.

Oncor needs about $20 million to meet that threshold.

In a conference call to major investors and analysts held after the market closed Thursday, Oncor's new chief executive officer, Jose Coronas, sought to calm concerns.

He said that the company and Lehman Brothers, its planning adviser, continue to seek a buyer for the company.

Coronas took the helm of Oncor Wednesday after the board voted to oust founder and CEO Turner.

The new CEO said that Oncor is in talks with potential buyers for some revenue-producing divisions and that company executives expect to be able to close a sale quickly. He declined to be more specific.

Coronas also declined to disclose how much the company thinks it can raise from selling divisions.

Oncor executives faced a barrage of tough questions from money managers, investor representatives and others participating in the call yesterday. Many wanted assurance that the company was seeing strong interest in its new gene-based test to predict the recurrence of breast cancer.

Company executives said they were "encouraged" by interest in the product but added that it hadn't been on the market long enough to estimate sales.

The turnaround strategy outlined by Coronas involves focusing Oncor on marketing the breast cancer test and developing new tests based on the same technology.

Some callers expressed dismay and anger that the company had waited until the 11th hour to address its serious financial situation.

Several participants in the conference call questioned Turner's sale of more than 249,000 Oncor shares Feb. 2. That sale raised more than $925,000.

In response, Coronas said that the sale was conducted with the knowledge of the board and that it was approved to raise cash for the company. None of the money, he said, went to Turner.

Pub Date: 3/28/98

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