<PAGE>
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For the transition period from _______________ to ______________
Commission File No. 0-16335
OZO DIVERSIFIED AUTOMATION, INC.
7450 East Jewell Avenue, Suite A
Denver, Colorado 80231
Telephone: (303) 368-0401
Colorado 84-0922701
(State of Incorporation) (IRS Employer Identification No.)
Indicate by check mark 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 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 X No
As of September 30, 1997, Registrant had 458,164 shares of its $.10 par
value common stock outstanding.
1
<PAGE>
PART I - FINANCIAL INFORMATION
OZO Diversified Automation, Inc.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 525 $ 3,111
Accounts and notes receivable, net
of allowance for doubtful accounts
of $5,016 455,754 257,775
Inventories (Note 3) 255,204 388,425
Prepaid expenses 9,475 11,385
Other 2,082 0
------------ -------------
Total Current Assets 723,040 660,696
------------ -------------
PROPERTY AND EQUIPMENT
Manufacturing 151,953 149,328
Furniture and Fixtures 158,537 156,958
Capitalized Lease 195,246 195,246
Leasehold Improvements 5,010 0
Vehicle 10,820 10,820
------------ -------------
521,566 512,352
Less accumulated depreciation 360,782 326,199
------------ -------------
Total Property and Equipment 160,784 186,153
OTHER ASSETS
Deferred Financing Costs 10,383 16,254
------------ -------------
Total Assets $ 894,207 $ 863,103
------------ -------------
------------ -------------
</TABLE>
See notes to financial statements
2
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
OZO DIVERSIFIED AUTOMATION, INC.
BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of notes payable $ 47,869 $ 34,607
Accounts payable and accrued expenses 498,897 470,205
Note payable Bank 28,812 28,000
Note payable - Officer 50,000 84,500
------------ -----------
Total Current Liabilities 625,578 617,312
------------ -----------
OTHER LIABILITIES
Long Term Debt and Capitalized
Lease Obligation 331,782 387,387
------------ -----------
Total Liabilities 957,360 1,004,699
------------ -----------
SHAREHOLDERS' DEFICIENCY
Preferred stock, $.10 par value
authorized 1,000,000 shares
issued - none
Common stock, $.10 par value
authorized, 5,000,000 shares
issued and outstanding
458,164 shares 45,816 45,816
Capital in excess of par value 1,176,254 1,176,254
Accumulated deficit (1,285,223) (1,363,666)
------------- -----------
Total Shareholders' Deficiency (63,153) (141,596)
Total Liabilities &
Stockholders' Deficiency $ 894,207 $ 863,103
------------- -----------
------------- -----------
</TABLE>
See notes to financial statements
3
<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Net Sales $ 2,032,998 $ 1,490,301
Cost of Sales 1,181,231 773,018
------------ ------------
Gross Profit 851,767 717,283
------------ ------------
Operating Expenses:
Marketing & Sales 290,491 252,781
Research & Development 116,845 119,992
General and Administrative 365,988 471,165
------------ ------------
773,324 843,938
------------ ------------
Income (loss) before taxes 78,443 (126,655)
Provision for Income Taxes 15,689 -
Tax Benefit of Operating
Loss Carry Forward (15,689) -
------------ ------------
NET INCOME (LOSS) $ 78,443 $ (126,655)
------------ ------------
------------ ------------
NET INCOME (LOSS) PER SHARE $ 0.17 $ (0.28)
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements
4
<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net Income (Loss) $ 78,443 $ (126,655)
Adjustments to reconcile net income
to net cash used in
operating activities:
Depreciation 34,583 18,751
Amortization of deferred
financing costs 5,871 5,870
Other (2,082) (9,785)
Decrease (increase) in assets:
Accounts receivable (197,979) 16,019
Inventories 133,221 98,789
Prepaid expenses 1,910 6,644
(Decrease) in accounts
payable and accrued expenses (39,604) (83,165)
----------- -----------
Total adjustments (64,080) 53,123
----------- -----------
Net cash provided (used) in
operating activities 14,363 (73,532)
----------- -----------
Cash flows from investing activities:
Capital Expenditures (9,213) (11,760)
----------- -----------
Net cash (used) in
investing activities (9,213) (11,760)
----------- -----------
Cash flows from financing activities:
(Decrease) increase in notes payable (7,736) 83,317
----------- -----------
Net cash (used) provided by
financing activities (7,736) 83,317
----------- -----------
Net decrease in cash (2,586) (1,975)
Cash at beginning of period 3,111 3,162
----------- -----------
Cash at end of period $ 525 $ 1,187
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements
5
<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
<S> <C> <C>
Net Sales $ 604,809 $ 418,254
Cost of Sales 354,083 183,492
----------- -----------
Gross Profit 250,726 234,762
Operating Expenses:
Marketing & Sales 78,407 44,852
Research & Development 39,523 38,237
General and Administrative 115,971 189,369
----------- -----------
233,901 272,458
----------- -----------
Income (loss) before Taxes 16,825 (37,696)
Provision for Income Taxes 3,365 -
Tax Benefit of Operating
Loss Carry Forward (3,365) -
----------- -----------
NET INCOME (LOSS) $ 16,825 $ (37,696)
----------- -----------
----------- -----------
NET INCOME (LOSS) PER SHARE $ 0.04 $ (0.08)
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements
6
<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
In the opinion of Management of OZO Diversified Automation, Inc. (the
Company), the accompanying unaudited financial statements reflect all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly the financial position of the Company as of September 30, 1997
and the results of operations and changes in financial position
for the nine months ended September 30, 1997.
The results of operations for the nine months ended September 30, 1997 are
not necessarily indicative of the results that may be expected for the
year ending December 31, 1997.
These unaudited financial statements should be read in conjunction with
the Company's annual report on Form 10-KSB for the year ended
December 31, 1996.
NOTE 1 - A summary of significant accounting policies is currently on
file with the Securities and Exchange Commission on
Form 10-KSB.
NOTE 2 - Income Taxes:
At December 31, 1996, the Company had net operating loss
carryforwards totaling approximately $1,165,000 that may
be offset against future taxable income through 2011 and
research and development credits of approximately $51,000
expiring through 2011.
The Company has fully reserved the tax benefits of these
operating losses because the likelihood of realization of the tax
benefits cannot be determined. These carryforwards are subject
to review by the Internal Revenue Service.
Temporary differences between the time of reporting certain
items for financial and tax reporting purposes, primarily from
using different methods of reporting depreciation costs and
warranty and vacation accruals, are not considered significant
by management of the Company.
NOTE 3 - Inventories:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Raw Materials $ 215,503 $ 311,989
Work in process 10,324 76,436
Finished Goods 29,377 0
------------- ------------
$ 255,204 $ 388,425
------------- ------------
------------- ------------
</TABLE>
7
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the nine months ended September 30,1997, the Company had
revenues of $2,032,998, an increase of 36% over the
comparable period in 1996. During the quarter ended September 30, 1997,
the Company recorded sales of $604,809, an increase of 45% over
the same quarter in the previous year. The increase in revenues
can be attributed to several factors, including but not limited to,
a favorable marketplace where the demand for electronic goods (and
hence the Company's products) continues to grow steadily; realization
of benefits from an aggressive marketing campaign aimed at achieving
top line growth; and a favorable shift in customer demand towards
the Company's higher end products.
The Company posted earnings of $78,443 for the nine months ended
September 30, 1997. This is in comparison to a loss of $126,655
for the nine months ended September 30, 1996. Earnings per share during this
period improved to $0.17, compared to a loss of $0.28 recorded during the
first nine months of 1996. On a quarterly basis, earnings for the three
months ended September 30, 1997 were $16,825, compared to a loss of $37,696
for the same three months in 1996. While sales and earnings were lower
in third quarter as compared to each of the first two quarters of 1997,
this activity level is consistent with the seasonality of the business.
Overall, the Company is not only experiencing a favorable sales growth
for new systems, but is also enjoying a resurgence in its parts
and service businesses as the number of systems installed
worldwide continues to increase. As reported earlier, net earnings
continue to be favorably impacted by price increases secured for the
Company's products (beginning in first quarter 1997), aggressive cost
containment efforts adopted by Management in the fourth quarter of 1996 and
continuing into 1997, as well as the realization of benefits resulting from
numerous re-engineering projects that the Company has actively pursued over
the past twelve months.
In terms of business outlook, the Company continues to focus on the
depaneling application as the primary market for its premium routing
equipment, the PanelMASTER HS and the PanelROUTER SI. In September, the
Company attended the SMI trade show in San Jose, California, where the newly
designed PanelMASTER HS was introduced to the West Coast market. The new
design was extremely well-received, with the product receiving very favorable
feedback from trade show attendees, customers, and industry representatives.
The Company will continue its efforts to improve quality, performance,
and overall reliability on all core product lines.
As of October 28, 1997 the Company had a backlog of open orders of
approximately $368,000, compared to a backlog of $743,000 on
October 9, 1996. The reduction in backlog over levels experienced in
1996 is indicative of the Company's success in dramatically compressing
cycle times on all systems manufactured year to date. Since initiating
the re-engineering process late in 1996, the Company has been able
to reduce the total time required from receipt-of-order to ship date by
more than 60%. The current backlog combined with the forecast of orders
in subsequent quarters, in Management's opinion, provide the opportunity
for the Company to continue as a going concern.
Except for historical information contained herein, the statements in this
report are forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
which may cause the Company's actual results in future periods to differ
materially from forecasted results. These risks and uncertainties include,
among other things, product demand and acceptance, market competition, and
risks inherent in the Company's international operations. These and other
risks are described elsewhere herein and in the Company's other filings with
the Securities and Exchange Commission.
8
<PAGE>
PART II - OTHER INFORMATION
OZO Diversified Automation, Inc.
Items 1- 5 Not Applicable.
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits none.
b) No Reports on Form 8-K were filed during the quarter
ending September 30, 1997.
Item 7 Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
OZO DIVERSIFIED AUTOMATION, INC.
By: David J. Wolenski Brantley J. Halstead
David J. Wolenski Brantley J. Halstead
Principal Executive Officer Principal Accounting Officer
Principal Financial Officer Corporate Controller
Dated: November 13, 1997
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 525
<SECURITIES> 0
<RECEIVABLES> 455,754
<ALLOWANCES> 0
<INVENTORY> 255,204
<CURRENT-ASSETS> 723,040
<PP&E> 521,566
<DEPRECIATION> 360,782
<TOTAL-ASSETS> 894,207
<CURRENT-LIABILITIES> 625,578
<BONDS> 240,000
0
0
<COMMON> 45,816
<OTHER-SE> (108,969)
<TOTAL-LIABILITY-AND-EQUITY> 894,207
<SALES> 2,032,998
<TOTAL-REVENUES> 2,032,998
<CGS> 1,181,231
<TOTAL-COSTS> 1,181,231
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 78,443
<INCOME-TAX> 15,689
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,443
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
</TABLE>
