<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 March 31, 1998
[ ] 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 March 31, 1998, Registrant had 478,164 shares of its $.10 par
value common stock outstanding.
1
<PAGE>
PART I - FINANCIAL INFORMATION
OZO Diversified Automation, Inc.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 3,430 $ 7,526
Accounts and notes receivable, net 333,139 255,414
Inventories 364,265 358,498
Prepaid expenses 21,462 25,631
------------ -------------
Total Current Assets 722,296 647,069
------------ -------------
PROPERTY AND EQUIPMENT
Manufacturing 149,703 149,703
Furniture and Fixtures 169,747 169,747
Capitalized Lease 204,814 204,814
Leasehold Improvements 5,010 5,010
Vehicle 10,820 10,820
------------ -------------
540,094 540,094
Less accumulated depreciation 374,156 362,271
------------ -------------
Total Property and Equipment 165,938 177,823
OTHER ASSETS
Deferred Financing Costs 6,169 8,126
Other 2,859 2,859
------------ -------------
9,028 10,985
Total Assets $ 897,262 $ 835,877
------------ -------------
------------ -------------
</TABLE>
See notes to financial statements
2
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
OZO DIVERSIFIED AUTOMATION, INC.
BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of notes payable
and Capitalized Lease Obligation $ 280,126 $ 280,036
Accounts payable and accrued expenses 371,437 401,687
Note payable Bank 27,415 27,415
Note payable - Officer 75,968 0
------------ -----------
Total Current Liabilities 754,946 709,138
------------ -----------
LONG TERM DEBT AND CAPITALIZED
LEASE OBLIGATION 111,981 126,731
------------ -----------
Total Liabilities 866,927 835,869
------------ -----------
SHAREHOLDERS' EQUITY
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
478,164 shares 47,816 47,816
Capital in excess of par value 1,193,004 1,193,004
Accumulated deficit (1,210,485) (1,240,812)
------------- -----------
Total Shareholders' Equity 30,335 8
Total Liabilities &
Stockholders' Equity $ 897,262 $ 835,877
------------- -----------
------------- -----------
</TABLE>
See notes to financial statements
3
<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Net Sales $ 583,146 $ 676,044
Cost of Sales 340,093 386,659
------------ ------------
Gross Profit 243,053 289,385
------------ ------------
Operating Expenses:
Marketing & Sales 57,583 105,096
Research & Development 40,820 37,914
General and Administrative 114,322 114,840
------------ ------------
212,725 257,850
------------ ------------
Income before taxes 30,328 31,535
Provision for Income Taxes (6,066) (6,307)
Tax Benefit of Operating
Loss Carry Forward 6,066 6,307
------------ ------------
NET INCOME $ 30,328 $ 31,535
------------ ------------
------------ ------------
EARNINGS PER COMMON SHARE $ 0.06 $ 0.07
------------ ------------
------------ ------------
EARNINGS PER COMMON SHARE
ASSUMING DILUTION $ 0.04 $ 0.06
------------ ------------
------------ ------------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 478,164 458,164
------------ ------------
------------ ------------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING ASSUMING DILUTION 818,427 573,164
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements
4
<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 30,328 $ 31,535
Adjustments to reconcile net income
to net cash used in
operating activities:
Depreciation 11,885 11,412
Amortization of deferred
financing costs 1,957 1,957
Other 0 (2,082)
Decrease (increase) in assets:
Accounts receivable (77,725) (94,820)
Inventories 5,767 96,139
Prepaid expenses 4,168 10,885
Increase (decrease) in accounts
payable and accrued expenses (30,250) 39,465
----------- -----------
Net cash (used) provided by
operating activities (65,405) 15,561
----------- -----------
Cash flows from investing activities:
Capital Expenditures 0 (4,476)
----------- -----------
Net cash (used) by investing
activities 0 (4,476)
----------- -----------
Cash flows from financing activities:
Payments of long term debt and
capitalized lease obligations (14,600) (12,929)
Proceeds from short term borrowings 0 60,000
Payment of short term borrowings 0 (54,000)
Proceeds from officer loan 85,000 (80,000)
Payment of officer loan (9,091) 74,094
----------- -----------
Net cash provided (used) by
financing activities 61,309 (12,835)
----------- -----------
Net increase (decrease) in cash (4,096) (1,750)
Cash at beginning of period 7,526 3,111
----------- -----------
Cash at end of period $ 3,430 $ 1,361
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements
5
<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
The unaudited financial statements included herein were prepared from
the records of the Company in accordance with Generally Accepted
Accounting Principles and reflect all adjustments which are, in the
opinion of Management, necessary to provide a fair statement of
the results of operations and financial position for the interim
periods. Such financial statements generally conform to the
presentation reflected in the Company's Form 10-KSB filed with the
Securities and Exchange Commission for the year ended December 31,
1997. The current interim period reported herein should be read in
conjunction with the Company's Form 10-KSB subject to independent
audit at the end of the year.
The results of operations for the three months ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the
year ending December 31, 1998.
6
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the first three months ended March 31,1998, the Company had
revenues of $583,146, a 13.7% decrease from revenues of $676,044
recorded for the first quarter of 1997. The decrease in revenues
is primarily a result of weak economic conditions in Asia, as well
as capital spending curtailments on the part of large OEMs in
North America (again, directly attributable to the uncertainty of
business conditions in Asia). While Management cannot predict a
timetable for a recovery in the Far Eastern markets, it is believed
that the weak business conditions in Asia (relative to the electronics
industry), will extend well into the second half of the year.
Management is in the process of refocusing its sales efforts in
markets that remain largely unaffected by the crisis in Asia.
Despite the decrease in total revenues reported during the first
quarter of 1998, the Company posted earnings of $30,328, a 3.8%
reduction from net income of $31,535 reported during the same period
in 1997. Earnings per share during this period dropped slightly to
$0.06, compared to $0.07 per share which was recorded during first
quarter of 1997. The Company has been able to maintain its earnings
performance in the first quarter despite weak market conditions in
Asia, due to an aggressive cost containment effort initiated by
Management. In anticipation of the detrimental effect of the Asian
crisis, internal measures were taken to reduce fixed costs and to
match expense spending patterns against projected revenues. The
Company will voluntarily enforce its austerity program for as long
as conditions warrant.
From a business perspective, the Company continues to focus on the
depaneling application as the primary market for its premium routing
equipment, the PanelMASTER 18HS and the PanelROUTER 16SI. Both of
these strategic product groups have been upgraded substantially in
the past nine months in order to achieve a superior performance
advantage against competitors' equipment. In March, the Company
attended the NEPCON West trade show in Anaheim, California, where
both products were displayed and demonstrated. Feedback from trade
show attendees was positive, and the Company expects to continue
its aggressive marketing campaign which includes attending the
NEPCON East trade show in Boston in June. In addition, the
Company has taken steps to grow and optimize its frontline sales
force in the U.S. and abroad. During the first four months of 1998
the Company added three new sales representative organizations in
North America. Other sales and distribution agreements are expected
to be implemented overseas in the upcoming months.
The Company's Current Liabilities as of March 31, 1998 are $754,946,
approximately $32,650 higher than Current Assets of $722,296.
Included in the Current Liabilities as of March 31, 1998 are
$240,000 in notes which became current as of December 30, 1997.
As disclosed in the 1997 10-KSB report, Management is in the process
of securing a refinancing package for the Company's debt, and expects
to have the issue resolved well in advance of the December 30, 1998
due date.
Cash flow from operating activities was ($65,405) for the
quarter ended March 31, 1998, as compared to $15,561 for the same
period in 1997. This was predominantly a result of payment delays
from two customers on orders that were shipped on time in the first
quarter. In both cases, payments were received in May, and the accounts
were brought current. Accordingly, the Company borrowed $75,909
from an officer of the Company primarily to cover the cash flow
deficiency.
7
<PAGE>
As of May 8, 1998 the Company had a backlog of open orders of
approximately $237,000, compared to a backlog of $409,000 on the same
date in 1997. 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 March 31, 1998.
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 Chief Financial Officer
Dated: May 15, 1998
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,430
<SECURITIES> 0
<RECEIVABLES> 333,139
<ALLOWANCES> 0
<INVENTORY> 364,265
<CURRENT-ASSETS> 722,296
<PP&E> 540,094
<DEPRECIATION> 374,156
<TOTAL-ASSETS> 897,262
<CURRENT-LIABILITIES> 754,946
<BONDS> 0
0
0
<COMMON> 47,816
<OTHER-SE> (17,481)
<TOTAL-LIABILITY-AND-EQUITY> 897,262
<SALES> 583,146
<TOTAL-REVENUES> 583,146
<CGS> 340,093
<TOTAL-COSTS> 340,093
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 30,328
<INCOME-TAX> 0<F1>
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,328
<EPS-PRIMARY> .06
<EPS-DILUTED> .04
<FN>
<F1>Although the Company's tax liability in first quarter 1998 was $6,066, this
amount was offset in its entirety by loss carryforwards from previous years.
The net tax liability for the quarter ending March 31, 1998 is zero.
</FN>
</TABLE>
