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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 FOR THE QUARTER ENDED DECEMBER 31, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from
_______________ to ________________
Commission File number 0-16449
OMNIS TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-3046892
(State of incorporation) (IRS Employer Identification No.)
851 Traeger Avenue
San Bruno, California 94066
(Address of principal executive offices)
(650) 829-6000
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 February 4, 1998 there were 2,124,177 shares of registrant's Common Stock,
$.10 par value, outstanding.
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OMNIS TECHNOLOGY CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets -
December 31, 1997 and March 31, 1997 2
Condensed Consolidated Statements of Operations -
Three and nine months ended December 31, 1997 and 1996 3
Condensed Consolidated Statements of Cash Flows -
Nine months ended December 31, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
1
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1997
------------- -------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $204,000 $6,150,000
Trade accounts receivable, less allowance for
doubtful accounts and returns of $157,000 and
$676,000, respectively 1,034,000 1,743,000
Inventory 81,000 18,000
Other current assets 1,011,000 686,000
------------- -------------
Total current assets 2,330,000 8,597,000
------------- -------------
Property, furniture and equipment, net 1,487,000 1,450,000
Prepaid deposits 400,000 -
------------- -------------
Total Assets $4,217,000 $10,047,000
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilites:
Accounts payable and accrued liabilities $2,822,000 $2,051,000
Deferred revenue 885,000 927,000
Current portion of long term debt 1,182,000 91,000
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Total current liabilites 4,889,000 3,069,000
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Long term debt, net of unamortized issuance costs of
$0 and $128,000, respectively 95,000 1,646,000
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Total Liabilites 4,984,000 4,715,000
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Stockholders' Equity (Deficiency):
Common stock 212,000 174,000
Paid-in capital 42,880,000 41,038,000
Accumulated deficit (44,007,000) (36,147,000)
Foreign currency translation adjustment 148,000 267,000
------------- -------------
Total stockholders' equity (deficiency) (767,000) 5,332,000
------------- -------------
Total Liabilities and Stockholders' Equity (Deficiency) $ 4,217,000 $ 10,047,000
------------- -------------
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</TABLE>
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net revenues:
Products $ 491,000 $ 1,128,000 $ 3,432,000 $ 3,578,000
Services 909,000 1,272,000 3,179,000 4,654,000
------------- ------------- ------------- -------------
Total net revenues 1,400,000 2,400,000 6,611,000 8,232,000
Costs and expenses:
Cost of product revenues 104,000 92,000 376,000 644,000
Cost of service revenues 735,000 903,000 2,877,000 3,292,000
Selling & marketing 1,305,000 1,217,000 6,287,000 3,707,000
Research & development 718,000 790,000 2,545,000 2,052,000
General and administrative 810,000 836,000 2,379,000 2,206,000
------------- ------------- ------------- -------------
Total costs and expenses 3,672,000 3,838,000 14,464,000 11,901,000
------------- ------------- ------------- -------------
Operating loss (2,272,000) (1,438,000) (7,853,000) (3,669,000)
------------- ------------- ------------- -------------
Other income (expense), net: (8,000) 41,000 9,000 (81,000)
------------- ------------- ------------- -------------
Loss before income taxes (2,280,000) (1,397,000) (7,844,000) (3,750,000)
Income tax expense 1,000 1,000 16,000 29,000
------------- ------------- ------------- -------------
Net loss $ (2,281,000) $ (1,398,000) $ (7,860,000) $ (3,779,000)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic and diluted net loss per common share: $ (1.07) $ (1.23) $ (3.77) $ (3.61)
Shares used in computation of basic and
diluted net loss per common share 2,123,224 1,133,648 2,082,195 1,045,895
</TABLE>
3
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
December 31
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (7,860,000) $ (3,779,000)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization expense 543,000 650,000
Capitalized software development cost
amortization expense - 300,000
Convertible debenture interest capitalized 131,000 -
Change in assets and liabilities:
Net (increases) decreases in assets:
Trade accounts receivable 708,000 (103,000)
Inventory (63,000) 51,000
Other current assets (326,000) 251,000
Prepaid deposits (400,000) 52,000
Net increases (decreases) in liabilities:
Accounts payable and accrued liabilities 778,000 (258,000)
Deferred revenue (42,000) (201,000)
Bank overdraft (7,000) -
------------ ------------
Net cash used for operating activities (6,538,000) (3,037,000)
------------ ------------
Cash flows from investing activities:
Purchases of property, furniture and equipment (580,000) (257,000)
Proceeds from sale of fixed assets 30,000 -
------------ ------------
Net cash used for investing activities (550,000) (257,000)
------------ ------------
Cash flows from financing activities:
Exercise of stock options - 122,000
Proceeds from stock issuance 71,000 -
Net proceeds from issuance of debt 1,186,000 6,464,000
------------ ------------
Net cash provided by financing activities 1,257,000 6,586,000
------------ ------------
Effect of exchange rate changes on cash (115,000) (3,000)
Net increase (decrease) in cash and equivalents (5,946,000) 3,289,000
Cash and equivalents at beginning of period 6,150,000 5,129,000
------------ ------------
Cash and equivalents at end of period $ 204,000 $ 8,418,000
------------ ------------
------------ ------------
NON CASH INVESTING AND FINANCING ACTIVITIES
Conversion of convertible subordinated debentures into common stock $ 1,880,000 $ 2,794,000
------------ ------------
------------ ------------
</TABLE>
4
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited financial information furnished herein reflects all
adjustments, consisting only of normal recurring items, which in the opinion of
management are necessary to fairly state the Company's financial position, the
results of its operations and the changes in its financial position for the
periods presented. These financial statements should be read in conjunction
with the Company's audited financial statements for the year ended March 31,
1997. The results of operations for the period ended December 31, 1997 are
not necessarily indicative of results to be expected for any other interim
period or the fiscal year ending March 31, 1998.
2. The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share" (SFAS 128). SFAS 128 requires a dual presentation of
basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing
net income (loss) by the weighted average of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities and other contracts to issue stock were exercised or converted into
common stock. However, the Company's reported diluted net loss per share for
all periods presented is based on the weighted average number of common shares
outstanding during the period as the effect of such securities would be
anti-dilutive. In September 1997, the Company effected a 1 for 10 reverse stock
split. All share data has been restated to give effect for this stock split.
3. In October 1997, the Company closed an interim debt financing of
$1,000,000 with a significant stockholder. This debt financing is secured by
substantially all the Company's assets and is scheduled to be repaid by March
31, 1998. The Company must raise additional capital in the quarter ending
March 31, 1998 in order to repay such debt financing and for operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview". There can be no assurance that the Company will be
able to raise any capital in this time frame, or at all. In addition, if the
Company is successful in raising capital, there can be no assurance that it
will be able to do so on commercially reasonable terms. The Company is
currently nearly out of cash, and if the Company is not able to raise
additional capital, the Company may be forced to discontinue operations
and the Company's secured creditors will have first claim on substantially
all of the Company's assets. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
5
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
THIS REPORT ON FORM 10-Q INCLUDES A NUMBER OF FORWARD-LOOKING STATEMENTS
THAT REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND
FINANCIAL PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN
RISKS AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED IN "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND THE COMPANY'S
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM HISTORICAL OR ANTICIPATED RESULTS.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
OMNIS Technology Corporation develops and markets tools that enable
software application development. The Company markets its products primarily
through its indirect channel consisting of VAR's, Distributors, and OEM
relationships. The Company also maintains a direct sales force that consist of
an inside telesales group that focuses primarily on large, end-user customers.
OMNIS Technology Corporation has experienced significant losses in
each of the past two years, including the quarter ended December 31, 1997.
As a result of this and other factors, the Company used approximately $6 million
of cash during the nine months ended December 31, 1997. The Company has
recently raised $1 million in secured debt financing from a stockholder, which
is secured by substantially all of the Company's assets. In November 1997, the
Company took several actions expected to reduce future operating costs and cash
outflows including a 15% reduction in headcount, a significant cut in marketing
expenses, and a stringent expense monitoring program. These decisions lead to a
significantly lower net loss during the third fiscal quarter, and management
expects that there will be significant expense and cash flow savings during the
fourth quarter of fiscal 1998 as a result of these actions. See "Liquidity and
Capital Resources." However, the Company is currently almost out of cash and
must raise additional funds in the near future in order to continue operations.
There can be no assurance that the Company will be able to raise additional
financing in this time frame on commercially reasonable terms, or at all. If
the Company is unsuccessful in raising this capital, the Company will be
required to cease operations and its secured creditors will have a first claim
on substantially all of the Company's assets.
The Company has experienced significant quarterly fluctuations in
operating results during this and previous quarters and expects that these
fluctuations will continue in future periods. These fluctuations have been a
result of several factors including pricing strategies employed by the Company
or its competitors, the timing of new product releases or enhancements to
existing products, and seasonality. In fiscal year 1997 and continuing through
the first nine months of fiscal 1998, operations of the Company have generated
negative cash flows. While the Company's management team has taken steps to
improve the Company's cash flow, the Company continues to generate a negative
cash flow and does not expect to become profitable until the fiscal fourth
quarter of 1998 or later. Accordingly, the Company is seeking to raise
significant additional funds to fund operations until such time as the Company
achieves profitability and positive cash flow.
6
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During the fourth quarter of fiscal 1998, the Company will be focusing
on sales opportunities that yield rapid deployment of its existing embedded
database technology, especially in the fields of database publishing and digital
content management. The Company has committed to decreasing sales conflicts
with its partners particularly in the service revenue area and has already taken
a number of steps in this regard. This has had and the Company expects that it
will continue to have a negative effect on service revenues as compared to
previous quarters. There can be no guarantee that the Company will be able
replace the decreasing service revenues with new product revenues.
During the quarter ended December 31, 1997, the Company lost many
executive level employees, and in February 1998 the CEO and Chairman of the
Company resigned. In addition, Mr. Christopher J. Steffen, a member of the
Board of Directors, resigned as a director of the Company. The CFO of the
Company has assumed the interim position of CEO and Chairman, however, the
CFO has limited management experience and no significant experience running a
public company.
The Company is entering into negotiations with its US-based unsecured
creditors in attempts to negotiate a favorable settlement of outstanding
payables. There is no guarantee that this group will reach any settlement of
these debts, which will negatively impact the Company's ability to reach its
cash flow targets and may force the Company to cease operations.
In the period of November 1997 through January 1998, the Company
reduced its worldwide headcount by approximately 40% including attrition
during the period that was not replaced. The expenses related to these
employees during the quarter up to the date of layoff as well as the
severance cost for these employees were approximately $400,000.
7
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RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
REVENUES
Total net revenues for the quarter ended December 31, 1997 were
$1,400,000, representing a decrease of 42% as compared to total net revenues
of $2,400,000 for the three months ended December 31, 1996. This decrease is
due primarily to a product return by one significant customer. See product
revenue section below. During the three months ending December 31, 1997,
product revenues, excluding this product return, represented 55% of total net
revenues as compared to 47% of total net revenues the same period in the
prior year as the Company continues its efforts to increase the percentage of
high margin product related revenues as compared to lower margin service
revenues. Total net revenues for the nine months ended December 31, 1997
decreased 20% to $6,611,000, from $8,232,000 for the nine months ended
December 31, 1996. During the nine months ended December 31, 1997 product
revenues, excluding this product return, increased to 56% of total net
revenues from 43% of total net revenues in the same period in the prior year.
Product revenues were $491,000 for the three months ended December
31, 1997, compared to $1,128,000 for the three months ended December 31,
1996. Product revenues were $3,432,000 for the nine months ended December
31, 1997, compared to $3,578,000 for the nine months ended December 31, 1996.
The decrease in product revenues of 56% and 4% for the three and nine months
ended December 31, 1997, respectively, relates to the effective sales return
from a single customer of product revenue originally recognized in the
quarter ended September 30, 1997. Subsequent to recognizing revenue in the
quarter, this customer had a change in leadership and experienced delays in
some of its product introductions. Although this customer has not defaulted
on its agreement with the Company to date, the Company believes that because
of this change in circumstances at this customer, the customer does not
intend to meet their obligations. Accordingly the Company is recognizing a
sales return. The Company intends to enforce its contractual rights in the
event of a default by this customer.
Service revenues for the three months ended December 31, 1997
decreased 28% to $909,000 from $1,272,000 for the three months ended December
31, 1996. Service revenues for the nine months ended December 31, 1997
decreased 32% to $3,179,000 from $4,654,000 for the nine months ended December
31, 1996. The decrease in service revenues was a result of the completion of
two large non-recurring consulting engagements that represented approximately
$300,000 in the quarter ended December 31, 1996 and $1,200,000 of the Company's
service revenues for the nine months ended December 31, 1996. The Company
expects service revenues related to consulting projects to continue to decrease
in future periods as it focuses on higher margin product related revenue and
shifts consulting opportunities to its external partners.
COST OF SALES
Cost of product revenues is comprised of direct costs associated with
software product sales including software packaging, documentation and physical
media costs. Cost of service revenues is comprised of customer support
(maintenance) expenses, including technical support salaries and related
expenses, and consulting related costs, including consultant salaries and
related costs incurred in delivering customer consulting and training services.
Cost of product revenues as a percentage of product revenues increased
from 8.2% in the three months ended December 31, 1996 to 9.5% in the three
months ended December 31, 1997. Cost of product revenues as a percentage of
product revenues decreased from 18% in the nine months ended December 31, 1996
to 9.3% in the nine months ended December 31, 1997. The increase in cost of
product revenues in the three month period is due to an increase in packaging
costs related to development of the Studio product line. The decrease in the
cost of product revenues as a percentage of product revenues in the nine month
period was primarily due to the absence of amortization of software
8
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development costs. This decrease is partially offset by an increase in costs
related to increased packaging costs of the new Studio product line. The
Company no longer capitalizes research and development costs and has fully
amortized all software development costs captured in previous fiscal years.
Cost of service revenues increased as a percentage of services revenue
from 71% in the three months ended December 31, 1996 to 81% in the three months
ended December 31, 1997. Cost of service revenues increased as a percentage of
services revenue from 70.7% in the nine months ended December 31, 1996 to 90.5%
in the nine months ended December 31, 1997. The increase in cost of service
revenues as a percentage of service revenues was primarily due to lower billing
rates charged to customers and lower utilization rates for the Company's
consulting staff as well as costs associated with the development of training
materials for the Company's new products. The Company expects service revenues
margins related to consulting projects to continue to be lower in the future as
compared to service revenues margin in the fiscal year ended March 31, 1997 as
the Company focuses on higher margin product related revenue and shifts
consulting opportunities to its external partners.
SELLING EXPENSE
Selling expenses remained relatively constant with $896,000 for the
three months ended December 31, 1996 as compared to $898,000 for the three
months ended December 31, 1997. Selling expenses increased from $2,736,000 for
the nine months ended December 31, 1996 to $2,968,000 for the nine months ended
December 31 1997. These increases in selling expenses were primarily due to
increases in headcount and higher commissions paid to sales personnel as a
result of higher product sales during these periods. In November 1997, the
Company had a reduction-in-force which included a significant number of sales
related employees. As costs associated with the reduction-in-force are included
in total selling expenses for the quarter ending December 31, 1997 and are
non-recurring, the Company expects sales costs to decrease in the near term.
MARKETING EXPENSE
Marketing expenses for the three months ended December 31, 1997 were
$407,000, which was slightly higher with marketing expenses of $321,000 for the
three months ended December 31, 1996. Marketing expenses increased from
$971,000 for the nine months ended December 31, 1996 to $3,319,000 for the nine
months ended December 31, 1997. These increases in marketing costs were
primarily due to costs associated with the Company's lead generation effort,
including trade shows and advertising, as well as start-up costs associated with
the introduction of new products and public relations costs for both periods.
In November 1997 the Company had a reduction-in-force which included a
significant number of marketing related employees. As costs associated with the
reduction-in-force are included in the total marketing related expenses for the
quarter ending December 31, 1997 and are non-recurring, the Company expects
marketing costs to decrease in the near term. The Company expects significant
decreases in marketing expenses during future periods as it focuses its
marketing effort on its existing installed base.
9
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RESEARCH AND DEVELOPMENT EXPENSE
Research and development costs decreased to $718,000 for the three
months ended December 31, 1997 as compared to $790,000 for the three months
ended December 31, 1996, primarily due to decreased headcount. Research and
development costs increased to $2,545,000 for the nine months ended December
31, 1997 as compared to $2,052,000 for the nine months ended December 31,
1996. This is mainly due to increased staffing to support the new Studio
product line in fiscal Q1 and Q2 1998. The Company has streamlined its
development resources, eliminating projects that do not relate to its core
technologies and projects for which the Company can not forecast revenues in
the near future or at all. The Company continues to invest in the
development of its newer product lines aimed at sales opportunities that the
Company believes will expand its markets but expects research and development
expense to decrease in future quarters as they decrease the use of expensive
consultants in favor of better utilizing the Company's employees.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses remained constant at $810,000
and $2,379,000 for the three and nine months ended December 31, 1997,
respectively from $836,000 and $2,206,000 for the three and nine months ended
December 31, 1996, respectively. Expenses during these periods were impacted
by an increase in rent expense and expenses associated with the move of the
Company's headquarters to new facilities in San Bruno, California. The lease
on the Company's previous facilities, which was at a below-market rate,
terminated in May 1997, and the rent for the Company's new facilities is at
market rate. The Company is currently seeking to sublease all or a portion
of its current facility to reduce these expenses in the near term. General
and Administrative expenses for the quarter ended December 31, 1997 also
included non-recurring expenses related to the reduction-in-force in November
1997. The Company is taking steps to reduce its general and administrative
expenses and expects these expenses to continue to decrease in future periods.
OTHER INCOME (EXPENSE)
Other income (expense) is comprised primarily of interest income
earned on cash and cash equivalents, interest expense, and any gain or loss on
foreign currency transactions. Interest income decreased to $2,000 for the
three months ended December 31, 1997 from $165,000 for the three months ended
December 31, 1996, primarily due to lower average balances of cash and cash
equivalents. Interest expense decreased to $26,000 for the three months ended
December 31, 1997 from $120,000 for the three months ended December 31, 1996 due
primarily to full conversion of the 8% Convertible Debentures during this
period. Interest income decreased to $80,000 for the nine months ended December
31, 1997 from $332,000 for the nine months ended December 31, 1996, primarily
due to lower average balances of cash and cash equivalents. Interest expense
decreased to $90,000 for the nine months ended December 31, 1997 from $408,000
for the nine months ended December 31, 1996 due primarily to full conversion of
the 8% Convertible Debentures during this period.
10
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RISK FACTORS
The Company has experienced significant quarterly fluctuations in
operating results and anticipates such fluctuations in the future. The
Company generally ships orders as received and, as a result, typically has
little or no backlog. Quarterly revenues and operating results, therefore,
depend on the volume and timing of orders received during the quarter, which
are difficult to forecast. Furthermore, the Company has typically sold to
large corporate enterprises which often purchase in significant quantities
and therefore the timing of the receipt of such orders could cause
significant fluctuations in operating results. Historically, the Company has
often recognized a substantial portion of its license revenues in the last
month of each quarter. Service revenues tend to fluctuate as consulting
projects, which may continue over several quarters, are undertaken or
completed. Operating results may also fluctuate due to factors such as the
demand for the Company's products, the size and timing of customer orders,
changes in product and selling strategies, the introduction of new products
and product enhancements by the Company or its competitors, changes in the
proportion of revenues attributable to licenses and service fees,
commencement or conclusion of significant consulting projects, changes in the
level of operating expenses, use of outside consultants, costs of terminating
employees and competitive conditions in the industry.
The Company's staffing and other operating expenses are based on
anticipated revenue, a substantial portion of which is not typically generated
until the end of each quarter. As a result, despite careful planning, delays in
the receipt of orders can cause significant variations in operating results from
quarter to quarter.
A number of additional factors have, from time to time, caused and may
in the future cause the Company's revenues and operating results to vary
substantially from period-to-period. These factors include: pricing
competition, delays in introduction of new products or product enhancements,
size and timing of demand for existing products and shortening of product life
cycle, inventory obsolescence and general economic conditions.
The Company's future operating results will depend, to a considerable
extent, on its ability to rapidly and continuously develop new products that
offer its customers enhanced performance at competitive prices. Inherent in
this process are a number of risks. The development of new, enhanced software
products is a complex and uncertain process requiring high levels of innovation
from the Company's management as well as accurate anticipation of customer and
technical trends. Once a product is developed, the Company must rapidly bring
it into production, a process that requires long lead times on some product
components and accurate forecasting of production volumes, among other things,
in order to achieve acceptable product costs.
The Company's operating expenses may increase if it expands its
operations. The Company plans to make significant investments in marketing
and expansion of its sales channel in an effort to increase its presence in
the increasingly competitive client/server market place. Future operating
results will be adversely affected if net revenues do not increase
accordingly. For example, the Company's poor financial performance during
the first nine months of fiscal 1998 are due in large part to expenditures in
sales and marketing in advance of revenues.
During the quarter ended December 31, 1997, the Company lost many
executive level employees, and in February 1998 the CEO and Chairman of the
Company resigned. In addition, Mr. Christopher J. Steffen, a member of the
Board of Directors, resigned as a director of the Company. The CFO of the
Company has assumed the interim position of CEO and Chairman, however, the
CFO has limited management experience and no significant experience running a
public company. There is no guarantee that the Company will be able to
attract new quality leadership in the near term or at all, or that the
remaining leadership will be able to meet the challenge of running the
Company.
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In February 1998, The Nasdaq Stock Exchange de-listed the Company
from the Nasdaq National Market. The Company is now traded on the Nasdaq
bulletin board. This de-listing is expected to have a negative impact on the
liquidity of the Company's outstanding common shares. Additionally, due to
the Company's poor financial performance, among other factors, the per share
price of the Company's stock has been and is expected to continue to be
negatively impacted in the near term and beyond.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company's principal sources of liquidity
consisted of cash and equivalents of $204,000.
The Company's working capital position decreased to a working
capital deficit of $2.6 million at December 31, 1997 from $6.4 million at
March 31, 1997. This decrease in working capital during the third quarter of
fiscal 1998 was primarily due to a decrease in cash which was used in
operations, the Company's net loss during the nine months ended December 31,
1997 and an increase in short-term borrowings.
In November of 1997, the Company took several actions expected to
reduce future operating costs including a 15% reduction in headcount, a
significant cut in marketing expenses, and instituted a stringent expense
monitoring plan. Management expects that there will be significant expense and
cash flow savings during the fourth quarter of fiscal 1998 as compared to the
third quarter of fiscal 1998 as a result of these actions.
The Company has operated at a loss for the last four years. In
fiscal year 1997 and the first three quarters of fiscal year 1998, operations
of the Company generated a negative cash flow. Although the Company's
management team has taken steps to improve the Company's cash flow through
(i) more effective marketing of its products; (ii) focusing research and
development expenditures on products that have a shorter payback period; and
(iii) improving operational efficiencies, the Company continues to generate a
negative cash flow and does not expect to reach break-even until late fiscal
year 1998 or later. There can be no assurance that the Company will be able
to significantly reduce its cash used by operations or achieve profitability
in the near future or at all. The Company does not currently have an
established line of credit with a commercial bank. Such a credit facility
may be difficult to obtain with the Company's historical operating results.
In November of 1997 a significant stockholder advanced the Company a
short-term secured loan in anticipation of the Company raising additional
equity, as previously discussed. This loan has an interest rate of 10% is
due in March, 1998, subject to any extensions, and is secured by
substantially all of the Company's assets. Accordingly, the Company is
exploring various options to raise additional capital to repay such debt
financings and support management's current efforts to improve the Company's
operating performance but has not finalized any plans. However, the Company
must raise additional capital in the near future in order to repay this debt
and continue operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations --Overview".
12
<PAGE>
OMNIS TECHNOLOGY CORPORATION
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On February 12, 1998, the Company issued a press release
announcing that its CEO and Chairman had resigned. A copy
of this press release is attached as Exhibit 99.1.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
99.1 Press Release Dated February 12, 1998
(b) Reports on Form 8-K
None.
13
<PAGE>
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.
Date: February 17, 1998 OMNIS TECHNOLOGY CORPORATION
(Registrant)
/s/ Ken Holmes
--------------------------
Ken Holmes
President and Chief
Executive Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 86,000
<SECURITIES> 118,000
<RECEIVABLES> 1,191,000
<ALLOWANCES> 157,000
<INVENTORY> 81,000
<CURRENT-ASSETS> 2,330,000
<PP&E> 4,234,000
<DEPRECIATION> 2,747,000
<TOTAL-ASSETS> 4,217,000
<CURRENT-LIABILITIES> 4,889,000
<BONDS> 0
0
0
<COMMON> 212,000
<OTHER-SE> (979,000)
<TOTAL-LIABILITY-AND-EQUITY> 4,217,000
<SALES> 491,000
<TOTAL-REVENUES> 1,400,000
<CGS> 839,000
<TOTAL-COSTS> 3,672,000
<OTHER-EXPENSES> 8,000
<LOSS-PROVISION> 157,000
<INTEREST-EXPENSE> 26,000
<INCOME-PRETAX> (2,280,000)
<INCOME-TAX> 1,000
<INCOME-CONTINUING> (2,281,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,281,000)
<EPS-PRIMARY> (1.07)
<EPS-DILUTED> (1.07)
</TABLE>
<PAGE>
Exhibit 99.1
FOR IMMEDIATE RELEASE
[OMNIS LETTERHEAD]
Meredith Dudley
Public Relations
[email protected]
(650) 829-7159
Kenneth Holmes
Chief Financial Officer
[email protected]
(650) 829-7172
OMNIS APPROVES NEW CHIEF FINANCIAL OFFICER
TIMOTHY NEGRIS STEPS DOWN AS CEO AND CHAIRMAN
SAN BRUNO, CA, February 12, 1998 -- OMNIS Technology Corp., (NASDAQ:
"OMNS") announced today that Kenneth P. Holmes, Jr., who has been managing
the company's day-to-day operations, has been named Chief Financial Officer,
as well as acting CEO & Chairman, effective immediately. Mr. Holmes assumes
the responsibilities of Timothy Negris who resigned as CEO & Chairman.
As Director of Finance, Mr. Holmes has been taking the company through a
restructuring and cost reduction program since November 1997. This
restructuring is expected to have cut total company quarterly expenses 35% by
the fourth fiscal quarter ending March 31, 1998. "So far, our strategy to
reduce our break-even point has been successful, and as planned, it has not
had a significant impact on our revenue stream," said Mr. Holmes. "Moving
forward, we will continue to strive toward profitability through further
efficient reduction of expenses and measured growth in revenues."
The Company is also beginning a search for additional executives. "We
are pleased with the progress that Ken has made on the financial side and are
seeking senior executives to complement his work and to focus on our strong
existing distribution channel," said Richard Hanschen, senior board member.
"Our goal is to bring on leaders with organizational skills and a
customer-focused approach to management because our loyal and committed
technical following and customer base deserve great leadership from
individuals who can return OMNIS to market prominence."
-MORE-
<PAGE>
OMNIS APPROVES NEW CFO/2
OMNIS TECHNOLOGY CORPORATION
OMNIS is a leader in developing and deploying component engineering
software. The OMNIS Studio and OMNIS 7 product lines support the full life
cycle of applications and are ideal for the rapid development and deployment
of sophisticated Web and client/server applications, providing true re-use of
software objects and the unique ability to integrate objects from disparate
programming languages. OMNIS Studio is the first component engineering system
to integrate JavaBean and ActiveX components.
THE STATEMENTS IN THIS PRESS RELEASE MAY CONTAIN FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISK AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
FROM PREDICTED RESULTS. SUCH RISKS INCLUDE, AMONG OTHERS, SIGNIFICANT
VARIABILITY IN OPERATING RESULTS, INCLUDING VARIABILITY IN PRODUCT REVENUES
AND GROSS MARGINS, FLUCTUATING DEMAND FOR NEW AND ESTABLISHED PRODUCTS,
DEPENDENCE ON NEW PRODUCTS, DEPENDENCE ON MARKET ACCEPTANCE OF NEW PRODUCTS,
INCREASING EXPENSES FOR MARKETING AND DEVELOPMENT OF NEW PRODUCTS, HISTORICAL
LACK OF PROFITABILITY, RAPID TECHNOLOGICAL CHANGE AND RISKS ASSOCIATED WITH
GLOBAL OPERATIONS. FURTHER RISKS ARE DESCRIBED IN THE COMPANY'S FORM 10-K
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1997, AND OTHER
RISKS DETAILED FROM TIME TO TIME IN THE COMPANY'S REPORTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE COMPANY UNDERTAKES NO OBLIGATION TO
PUBLICLY RELEASE THE RESULT 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 OCCURRENCE OF UNANTICIPATED EVENTS.
###
Copyright 1998. OMNIS is a registered trademark of OMNIS Software, Inc. OMNIS
Studio and OMNIS 7 are trademarks of OMNIS Software, Inc.
