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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTER ENDED JUNE 30, 1999
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.)
981 Industrial Road, Building B
San Carlos, CA 94070
(Address of principal executive offices)
(650) 632-7100
(Registrant's telephone number)
Check 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 July 28, 1999 there were 9,682,146 shares of registrant's Common Stock,
$.10 par value, outstanding.
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet -
June 30, 1999 and March 31, 1999 3
Condensed Consolidated Statements of Operations -
Three months ended June 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows -
Three months ended June 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5 Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, March 31,
1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $ 432,000 $ 271,000
============ ============
Trade accounts receivable, less allowance for
doubtful accounts and returns of $190,295 and
$150,049, respectively 786,000 764,000
Inventory 12,000 13,000
Other current assets 335,000 609,000
------------ ------------
Total current assets 1,565,000 1,657,000
------------ ------------
Property, furniture and equipment, net 835,000 890,000
Other assets 10,000 10,000
------------ ------------
Total assets $ 2,410,000 $ 2,557,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 640,000 $ 773,000
============ ============
Current portion of long term debt 49,000 82,000
Deferred revenue 399,000 412,000
------------ ------------
Total current liabilities 1,088,000 1,267,000
------------ ------------
Long term debt 16,000 28,000
------------ ------------
Total liabilities 1,104,000 1,295,000
------------ ------------
Stockholders' Equity:
Preferred stock 300,000 300,000
Common stock 967,000 967,000
Paid-in capital 45,150,000 45,180,000
Accumulated deficit (45,275,000) (45,386,000)
Foreign currency translation adjustment 164,000 201,000
------------ ------------
Total stockholders' equity 1,306,000 1,262,000
------------ ------------
Total liabilities and stockholders' equity $ 2,410,000 $ 2,557,000
============ ============
</TABLE>
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net Revenues:
Products $ 1,104,000 $ 915,000
Services 267,000 459,000
----------- -----------
Total net revenues 1,371,000 1,374,000
Costs and Expenses:
Cost of product revenues 41,000 121,000
Cost of service revenues 54,000 101,000
Sales and marketing 530,000 579,000
Research and development 385,000 337,000
General and administrative 243,000 1,201,000
----------- -----------
Total costs and expenses 1,253,000 2,339,000
----------- -----------
Operating Income (Loss) 118,000 (965,000)
----------- -----------
Other Income (Expense):
Interest income 3,000 2,000
Interest expense and other, net (6,000) (114,000)
----------- -----------
Total other income (expense) (3,000) (112,000)
----------- -----------
Income (loss) before Income Taxes 115,000 (1,077,000)
Income Tax Expense 4,000 4,000
----------- -----------
Net income (loss) $ 111,000 $(1,081,000)
=========== ===========
Net income (loss) per common share: $ 0.01 $ (0.51)
Weighted average number of common
shares outstanding 9,679,829 2,125,827
</TABLE>
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30
---------------------------
1999 1998
---------- ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 111,000 $ (1,081,000)
Adjustments to reconcile net income (loss) to net cash
used for operating activities:
Depreciation and amortization expense 79,000 119,000
Loss on write-off of prepaid expense -- 500,000
Provision for inventory evaluation -- 50,000
Legal fees capitalized to stock issuance costs (29,000) --
Change in assets and liabilities:
Trade accounts receivable (21,000) (113,000)
Inventory -- 7,000
Loss on disposal of property 1,000 79,000
Other current assets 274,000 238,000
Accounts payable and accrued liabilities (133,000) (173,000)
Deferred revenue (14,000) (114,000)
---------- ------------
Net cash provided by (used for) operating activities 268,000 (488,000)
---------- ------------
Cash Flows from Investing Activities:
Purchases of property, furniture and equipment (42,000) (3,000)
Proceeds from sale of fixed assets 1,000 16,000
---------- ------------
Net cash provided by (used for) investing activities (41,000) 13,000
---------- ------------
Cash Flows from Financing Activities:
Net proceeds from preferred stock issuance -- 482,000
Repayments of debt (45,000) (127,000)
---------- ------------
Net cash provided by (used for) financing activities (45,000) 355,000
---------- ------------
Effect of Exchange Rate Changes on Cash (21,000) 11,000
Net increase (decrease) in cash and equivalents 161,000 (110,000)
Cash and equivalents at beginning of period 271,000 242,000
---------- ------------
Cash and Equivalents at end of period $ 432,000 $ 132,000
========== ============
</TABLE>
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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, 1999.
The results of operations for the period ended June 30, 1999 are not necessarily
indicative of results to be expected for any other interim period or the fiscal
year ending March 31, 2000.
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, unless the effect of such securities would be anti-dilutive.
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
THIS REPORT ON FORM 10-QSB 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
This Item 2, as well as other portions of this document, include certain
forward-looking statements about the Company's business, revenues, expenditures
and operating and capital requirements. In addition, forward-looking statements
may be included in various other Company documents to be issued concurrently or
in the future and in oral or other statements made by representatives of the
Company to investors and others from time to time. Forward-looking statements
are subject to risks and uncertainties that could cause actual results to differ
materially from predicted results. Such risks include, among others
- the Company's liquidity,
- significant variability in operating results, including variability
in product revenues and gross margins,
- fluctuating demand for new and established products,
- dependence on development of new products,
- increasing expenses for marketing and development of new products,
- historical lack of profitability,
- rapid technological change that affects the ability of the Company
to respond to customer or market demands,
- risks associated with global operations,
- the continued and future acceptance of the Company's products,
- the rate of growth in the industries of the Company's products,
- the presence of competitors with greater technical, marketing and
financial resources, and
- the ability of the Company to successfully expand its operations.
Any of such statements and this discussion should be read in conjunction with
the discussion of "Risk Factors" in this Item 2 and the Company's audited
consolidated financial statements,
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including the notes thereto, included in its annual report for the fiscal year
ended March 31, 1999, on Form 10-KSB/A filed with the Commission on July 29,
1999.
OVERVIEW
The Company, through its domestic and international subsidiaries, develops and
markets software application development tools and related technical services.
Its main products are the OMNIS 7(3)(TM) client/server application development
software group of products, and the more advanced OMNIS Studio(TM) rapid
application development (RAD) tools. The Company markets its products primarily
through its indirect channel consisting of VAR's, Distributors, and OEM
relationships.
The Company has operated at a loss for the last several years except the
three quarters ending June 30, 1999. The Company's new management team has taken
steps to improve the Company's cash flow through (i) more aggressive marketing
of its products; (ii) focusing research and development expenditures on products
that have a shorter return or "payback" period; (iii) improving operational
efficiencies and (iv) significantly reducing operating expenses. With these
improvements, the Company reduced cash used in operations from $6,180,000 in
fiscal year 1998 to $2,514,000 in fiscal year 1999, the Company had positive
cash flow provided by operating activities of $268,000 in the three months ended
June 30, 1999 compared to negative cash flow used for operating activities of
$488,000 in the three months ended June 30, 1998. The company also had a net
profit of $111,000 in the three months ended June 30,1999. However, there can be
no assurance that the Company will be able to sustain profitability in the near
future or thereafter.
While the Company is not currently seeking additional financing, there can
be no assurance that the Company will be able to raise additional capital at any
time in the future on commercially reasonable terms, or at all, should the need
arise to fund future operations. If the Company is unsuccessful in raising
capital when needed, the Company may be required to cease operations.
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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1999, AND JUNE 30,
1998
REVENUES
Total net revenues for the three months ended June 30, 1999, were
$1,371,000, representing a decrease of 0.2% as compared to total net revenues of
$1,374,000 for the three months ended June 30, 1998.
The change is due to a combination of the reduction in service revenues,
particularly as a result of the Company's decision to reduce conflicts with some
of its channel partners, and an increase in product revenues.
Product revenues increased during the three months ended June 30, 1999, to
$1,104,000 from $915,000 in the three months ended June 30, 1998.
This increase is due to the Company's decision to concentrate on
product-related revenue, rather than a mix of product and service revenue, over
the past 18 months.
During the three months ending June 30, 1999, product revenues represented
81% of total net revenues as compared to 67% of total net revenues during the
same period in the prior year.
Service revenues for the three months ended June 30, 1999 decreased 42% to
$267,000 from $459,000 for the three months ended June 30, 1998. The majority of
this decrease is due to the Company's decision to de-emphasize its consulting
offerings over the past 18 months. Maintenance revenue, which primarily consists
of fees from email and telephone support to the Company's customers, decreased
slightly during the period ending June 30, 1999, due to the decrease in the
annual support fees being charged to customers.
The Company does not expect to receive significant service revenues
related to consulting projects 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 decreased
from 13% in the three months ended June 30, 1998 to 4% in the three months ended
June 30, 1999. Cost of product revenues for the three months ended June 30, 1998
includes a write-off for inventory obsolescence.
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Cost of service revenues decreased slightly as a percentage of service
revenues from 22% in the three months ended June 30, 1998, to 20% in the three
months ended June 30, 1999.
SALES AND MARKETING EXPENSE
Sales and marketing expenses decreased to $530,000 for the three months
ended June 30, 1999, as compared to $579,000 for the three months ended June 30,
1998. The decrease in sales and marketing expenses was primarily due to
decreases in headcount in marketing and sales. The Company expects to increase
its marketing expenses during future periods as it rebuilds its marketing
efforts with partner focused programs designed to increase its installed base of
customers.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development costs increased to $385,000 for the three months
ended June 30, 1999, as compared to $337,000 for the three months ended June 30,
1998, primarily due to an increase of headcount at the Research and Development
Center of the Company in the United Kingdom. The Company continues to invest in
the development of its newer product line, OMNIS Studio, aimed at sales
opportunities that the Company believes will expand its installed base of
customers.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses decreased to $243,000 for the three
months ended June 30, 1999, as compared to $1,201,000 for the three months ended
June 30, 1998. General and administrative expenses for the three months ended
June 30, 1998 included a write-off of approximately $540,000 of the Company's
lease deposit associated with the Company's former headquarters in San Bruno,
California, as a result of its successful negotiation with its U.S. facility
landlord to vacate its lease space.
Additionally the Company recognized a write-off related to the disposal of
leased equipment that resulted in a non-recurring charge of $110,000 during the
quarter ended June 30, 1998. The Company is continuing its efforts to reduce its
operating expenses where possible, including general and administrative
expenses.
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 increased to $3,000 for the three months
ended June 30, 1999, from $2,000 for the three months ended June 30, 1998,
primarily due to higher average balances of cash and cash equivalents. Interest
expense decreased to $3,000 for the three months ended June 30, 1999, from
$37,000 for the three months ended June 30, 1998, primarily due to the
conversion of a promissory note from the Company to a significant shareholder to
equity stock in March 1999.
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PROPERTIES
During the initial part of fiscal year 1999 the Company had leased
approximately 22,178 square feet of office space in San Bruno, California, under
a lease which expired in May 2002 and required payment of base monthly rental
payments of $58,772 plus a percentage of operating costs and property taxes. The
base monthly rent increased to $60,990 per month during 1998. The Company
negotiated a termination of this lease in August 1998 and now occupies 3,800
square feet of office space in San Carlos, California, under a lease which
expires on August 31, 2000, and has a base monthly rent of $7,440.
The Company owns property in the United Kingdom that it uses for research
and development. The Company also leased 2,738 square feet of office space for
the European sales headquarters office in Bracknell, England. The Bracknell
lease, which expired in February 2001, had monthly rental payments of $4,997
plus $2,096 for common area maintenance. The Company has agreed an early
termination of this lease with the landlord and moved on June 15, 1999 to new
offices near Watford, England. This will result in substantial savings on rent
and service charges over a full year. The Company also leases 2,370 square feet
of office space (formerly its London sales office) in London, England. That
lease, which expires on November 1, 2012, has monthly rental payments of $3,820.
During the year, the Company sublet all of the London office space, for which it
has been receiving a rental of $2,216 per month plus 100% reimbursement for
common area maintenance. As a result of a sublease review, this has been
increased to $3,820 per month, backdated to November 1997. The sublease
terminates on December 25, 1999.
The Company leases property in Germany for use as a sales office. The
space is 457 square meters and has monthly rental payments of $6,678. The lease
will expire May 14, 2007, with a Company option to terminate the lease in May
2002.
The Company believes that these facilities are more than adequate to meet its
requirements for fiscal year 2000. All of the foregoing rental obligations are
in the local currency but for these purposes are stated in United States Dollars
as of March 31, 1999.
RISK FACTORS
QUARTERLY FLUCTUATIONS
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, significant customers, and distributors that 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 the quarter. Service revenues tend to fluctuate as technical
service projects, which may continue over several quarters, are undertaken or
completed. Operating results may also fluctuate
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due to factors such as the demand for the Company's products, the size and
timing of customer orders, changes in the proportion of revenues attributable to
licenses and service fees, commencement or conclusion of significant technical
service projects, changes in pricing policies by the Company or its competitors,
the number, timing, and significance of product enhancements and new product
announcements by the Company and its competitors, the ability of the Company to
develop, introduce, and market new and enhanced versions of the Company's
products on a timely basis, changes in the level of operating expenses, changes
in the Company's sales incentive plans, budgeting cycles of its customers,
customer order deferrals in anticipation of enhancements or new products offered
by the Company or its competitors, nonrenewal of maintenance agreements, product
life cycles, software bugs and other product quality problems, personnel
changes, changes in the Company's strategy, the level of international
expansion, seasonal trends and general domestic and international economic and
political conditions, among others.
The development and introduction of new or enhanced products also requires
the Company to manage the transition from older, displaced products in order to
minimize disruptions in customer ordering patterns and excessive levels of older
product inventory and to ensure that adequate supplies of new products can be
delivered to meet customer demand. Because the Company is continuously engaged
in this product development and transition process, its operating results may be
subject to considerable fluctuations, particularly when measured on a quarterly
basis.
Accordingly, the Company believes that period-to-period comparisons of its
operating results are not necessarily meaningful and should not be relied upon
as indications of future performance. In addition, revenues in quarters after a
new product release may be significantly affected by the amount of upgrade
revenue, which tends to increase soon after the release of a new product and
then decline rapidly.
EXPENSE LEVELS
The Company's expense levels are based, in significant part, on the
Company's expectations as to future revenues and are therefore relatively fixed
in the short term. If revenue levels fall below expectations, net income is
likely to be disproportionately adversely affected because a proportionately
smaller amount of the Company's expenses vary with its revenues. There can be no
assurance that the Company will be able to achieve profitability on a quarterly
or annual basis in the future. Due to all the foregoing factors, it is likely
that in some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such event the price of
the Company's common stock would likely be materially adversely affected.
FUTURE OPERATING RESULTS
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
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high levels of innovation from the Company's designers as well as accurate
anticipation of customer and technical trends by the marketing staff. Once a
product is developed, the Company must rapidly bring it into production in order
to achieve acceptable product costs.
The Company participates in a dynamic high technology industry and
believes that changes in any of the following areas could have a material
adverse effect on the Company's future financial position or results of
operations: advances and trends in new technologies; competitive pressures in
the form of new products or price reductions on current products; the volume,
mix, and timing of orders; changes in product mix; changes in overall demand for
products and services offered by the Company; changes in certain strategic
partnerships or customer relationships; litigation or claims against the Company
based on intellectual property, regulatory or other factors; risks associated
with changes in domestic or international economic and/or political conditions
or regulations either in the industries the Company serves or generally; and the
Company's ability to attract and retain employees necessary to support growth.
INTELLECTUAL PROPERTY PROTECTION
The OMNIS products include technologies developed by the Company. The
Company relies primarily on a combination of trade secret, copyright and
trademark laws and contractual provisions to protect its proprietary rights in
such technologies. There is no assurance that such laws and contractual
provisions will adequately protect the intellectual properties and other
proprietary rights of the Company. The Company is in the process of preparing
appropriate patent applications for certain of its Studio Web Client and other
technologies. At this time the Company has not filed any final patent
applications and has not been granted any patents on any of its proprietary
technologies and there is no assurance that any such patents will be granted.
Patent protection may become important in the protection of the commercial
viability of the Company's innovative products, and the failure to obtain such
patent protection could have an adverse effect on the commercial viability of
such products. The Company's success therefore may in part depend on its ability
to obtain patent protection or licenses to patents in the future. It is not
possible to anticipate the breadth or degree of protection that patents would
afford any product of the Company or the underlying technologies. There can be
no assurance that any patents issued or licensed to the Company will not be
successfully challenged in the future or that any OMNIS product will not
infringe the patents or other intellectual property rights of third parties.
INTERNATIONAL OPERATIONS
The Company operates on a global basis with offices or distributors in
Europe and Asia as well as in North America. International operations are
subject to inherent risks, including costs and difficulties in staffing and
managing foreign operations; difficulties in obtaining and managing local
distributors; the costs and difficulties in localizing products into languages
other than English for foreign markets; political or economic instability,
unexpected regulatory changes and fluctuations in interest or exchange rates in
the specific countries in which the Company distributes its products or in
international markets in general; longer receivables collection periods and
greater difficulty in accounts receivable collection; import/export duties and
quotas; reduced protection for intellectual property rights in some countries;
and potentially
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adverse tax consequences. Also, as the Company continues to operate more
internationally, seasonality may become an increasing factor in its financial
performance. There can be no assurance that these factors or any combination of
these factors will not adversely affect the international revenues or overall
financial performance of the Company.
CHANGES IN PRICING STRUCTURE
The Company has recently announced a reduction in certain portions of its
pricing structure for fiscal year 1999 and beyond. There is no guarantee that
this reduction in prices will lead to increased unit volume or other additional
revenue streams to replace this lost revenue, which could lead to a significant
cash flow strain on the core operations of the Company. Additionally, the
Company is relying on increased revenues related to its new OMNIS Studio product
line, which have not generated revenues as originally projected by the Company.
There is no assurance that this product line will generate the revenues needed
to sustain the Company in coming quarters and beyond. 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 will continue to have a negative effect on service revenues as compared
to previous quarters and years. There can be no guarantee that the Company will
be able to replace the decreasing service revenues with new product revenues.
YEAR 2000
Many existing computer programs use only two digits to define the
applicable year in a date field. These programs were designed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or at the
year 2000.
Year 2000 compliance means that neither performance nor functionality of a
computer system is affected by dates prior to, during or after the year 2000. In
particular (i) no value for current date will cause any interruption in
operation; (ii) date based functionality must operate consistently for dates
prior to, during and after Year 2000; (iii) in all interfaces and data storage,
the century in any date must be specified explicitly or by unambiguous algorithm
or inferencing rules wherever possible; and (iv) Year 2000 must be recognized as
a leap year.
We only certify the latest versions of the OMNIS 7 and OMNIS Studio
product lines, which are OMNIS 7(3) version 7.0 and above and OMNIS Studio 2.0
and above, as Year 2000 compliant as herein defined. All new versions of OMNIS
products will be tested to ensure continued compliance. Earlier versions of
OMNIS 7(3) and OMNIS Studio will store date data correctly, but may fail on some
date calculations under certain circumstances, some of which involve the year
2000. OMNIS users have been advised of this issue, and the Company provides for
the downloading of the latest version of the date functions applicable to the
particular platform.
Provided that developers use the current version of OMNIS 7(3) or OMNIS
Studio in the manner designed, they will generate Year 2000 compliant OMNIS
applications. It must be noted that both OMNIS Studio and OMNIS 7(3) provide a
programming interface to other programs
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and external functions written by external developers and can access data stored
in remote databases. In all cases the date data passed to the remote database
from the OMNIS storage contains the full 4 character year representation.
However the Company cannot be responsible for compliance within individual
applications written by external applications developers. The Company also does
not accept any responsibility for Year 2000 compliance with respect to any
hardware on which our products are used or any other software, including but not
limited to operating system software, server databases, data file systems and
other software utilities. We believe we have designed our current products to
effectively handle the Year 2000 issue.
The majority of our internal applications were built using OMNIS products
which we believe are Year 2000 compliant. Therefore, we believe that it has
substantially mitigated our risks on the Year 2000 issue with our internal
applications. We are in the process of completing the testing and assessment of
Year 2000 compliance for all third party hardware and software and
non-information technology ("non IT") systems used by the Company. We expect to
have such testing and assessment completed no later than October 31, 1999. We
will upgrade or replace all third party hardware or software and non IT systems
in use that are not compliant. We intend to establish, but have not yet
established, a contingency plan detailing actions that will be taken in the
event that any such upgrade or replacement is not compliant or that the
assessment of the Year 2000 issue is not successfully completed on a timely
basis. The internal costs of such Year 2000 compliance is not known at this
time. We cannot assure that we are or will be fully Year 2000 compliant or that
Year 2000 compliance issues will not arise with respect to products furnished by
third party manufacturers, our own products, or suppliers that may result in
unforeseen costs or delays to the Company and therefore have a material adverse
effect on the Company.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 contains certain safe
harbors regarding forward-looking statements. From time to time information
provided by the Company or statements made by its directors, officers or
employees may contain "forward-looking" information subject to numerous risks
and uncertainties. Any statements made herein that are not statements of
historical fact are forward-looking statements including, but not limited to,
statements concerning the characteristics and growth of the Company's markets or
customers, the Company's objectives or plans for future operations and products
and the Company's expected liquidity and capital resources. Such forward-looking
statements are based on a number of assumptions and involve a number of risks
and uncertainties, and therefore actual results could materially differ. These
risks and uncertainties include, among others, the Company's continuing
liquidity problems, significant variability in operating results, including
variability in product revenues and gross margins, fluctuating demand for new
and established products, dependence on development of new products, increasing
expenses for marketing and development of new products, historical lack of
profitability, rapid technological change that affects the ability of the
Company to respond to customer or market demands, risks associated with global
operations, the continued and future acceptance of the Company's products, the
rate of growth in the industries of the Company's products, the presence of
competitors with greater technical, marketing and financial resources, and the
ability of the Company to successfully expand its operations.
15
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company's principal sources of liquidity consisted
of cash and cash equivalents of $432,000, as compared to $132,000 at June 30,
1998. The Company's working capital position increased to $390,000 at March 31,
1999 and to $477,000 at June 30, 1999 from a deficit of $3,037,000 at June 30,
1998.
The Company has operated at a loss for the last several years except the
three quarters ending June 30, 1999. The Company's new management team has taken
steps to improve the Company's cash flow through (i) more aggressive marketing
of its products; (ii) focusing research and development expenditures on products
that have a shorter return or "payback" period; (iii) improving operational
efficiencies and (iv) significantly reducing operating expenses. With these
improvements, the Company reduced cash used in operations from $6,180,000 in
fiscal year 1998 to $2,514,000 in fiscal year 1999, the Company had positive
cash flow provided by operating activities of $268,000 in the three months ended
June 30, 1999 compared to negative cash flow used for operating activities of
$488,000 in the three months ended June 30, 1998. The Company also had a net
profit of $111,000 in the three months ended June 30, 1999. However, there can
be no assurance that the Company will be able to sustain profitability in the
near future or thereafter.
In February 1998, the Nasdaq Stock Exchange de-listed the Company from the
Nasdaq SmallCap Market. The Company is now traded on the Nasdaq Bulletin Board
(BB). This has had a negative impact on the liquidity of the Company's
outstanding common shares. It is not known at this time when or if the Company
will be re-listed on the Nasdaq SmallCap Market.
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. Accordingly, in order to obtain
additional funds in the future, the Company may need to seek additional equity
capital which would be dilutive to current stockholders. The Company is not
currently attempting to raise additional capital, but such activity may be
required to continue operations. There can be no assurance that the Company will
be able to raise additional capital on commercially reasonable terms should the
Company need additional funds in the future.
16
<PAGE> 17
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Compass Actions. In March 1998, the Company was sued by Compass Software
("Compass") in the Federal District Court for the Eastern District of Washington
claiming damages in the range of $2 Million for software copyright infringement
and related claims. The Company believes that Compass' copyright infringement
suit has no merit and has vigorously defended against those claims.
In this connection the Company previously had sued Compass in 1994 for
illegally infringing and distributing our software products. This matter was
settled with an agreement that Compass would pay certain amounts and would not
make illegal copies of the Company's software in the future. Compass failed to
pay the promised amounts when due. The Company then obtained a judgment for
breach of contract against Compass. As part of its efforts to enforce our
judgment against Compass, the Company purchased, at a judgment lien sale,
certain intangible property of Compass including the rights to the current
infringement suit brought by Compass ("Execution Sale"). Compass then requested
the applicable court to set aside the Execution Sale. The court granted the
request and the Company has appealed this judgment. The appeal has been briefed
and is awaiting a date for oral argument. The Company has also filed a separate
lawsuit against Compass alleging additional acts of infringement related to the
1994 case.
BTN - Germany. The Company entered into a professional development services
agreement with BTN Versandhandel GmbH ("BTN") of Leiferde, Germany for the
development of an OMNIS application. The Company developed and delivered a
version of the application to BTN. BTN failed to pay the Company as agreed,
claiming there were flaws in the application. The Company suspended the project
awaiting BTN's payment. BTN commenced legal action against the Company in
Germany claiming damages of approximately DM250,000 for failure to perform under
the service agreement. The Company has countersued BTN claiming the balance owed
under the contract of approximately DM60,000. The Company believes that the
claim by BTN is meritless and intend to aggressively pursue its counterclaim
against BTN.
Creditors. As a result of the losses and negative cash flows incurred by the
Company fiscal year 1998, the Company was unable to meet its obligations. The
Company negotiated with a group of its creditors to structure a workout
agreement pursuant to which we would repay the creditors over time, thereby
possibly avoiding further litigation and collection activities or formal
bankruptcy proceedings. The workout plan was agreed to by this group of
creditors and was approved on June 19, 1998. The Company began repayment to
customers in the quarter ending September 1998. The Company paid all amounts
owed to all of these creditors in full by the end of March 1999.
17
<PAGE> 18
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation, as amended and
corrected through February 9, 1999.(7)
3.2 Certificate of Amendment of Certificate of Incorporation
dated February 9, 1999. (16)
3.3 Certificate of Designations dated March 31, 1998, as
corrected.(7)
3.4 Certificate Regarding Series A Preferred Stock of the Omnis
Technology Corporation dated February 25, 1999.(16)
3.5 Certificate of Designations dated March 31, 1999.(14)
3.6 Bylaws, as amended.(15)
10.1 Definitive Trust Deed dated October 26, 1983 among Blyth
Holdings Limited, Blyth Software Limited and Geoffrey Paul
Smith, Paul Nelson Wright and Suntrust Limited (relating to
pension scheme).(1)
10.2 Service Agreement dated July 30, 1990 between OMNIS Technology
Corporation and David Seaman.(2)
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C>
10.3 Deed of Guarantee dated June 1, 1993 between OMNIS
Technology Corporation and A. Levy & Son Limited.(3)
10.4 Form of Subscription Agreement for purchase of Units of the
Company's securities.(3)
10.5 Form of Stock Purchase Warrant sold to purchaser of Units
of the Company's securities.(3)
10.6 Common Stock Purchase Agreement dated March 31, 1993
between OMNIS Technology Corporation and General
Reinsurance Corp.(4)
10.7 Form of Indemnification Agreement entered into between the
Company and all of its directors and certain of its
officers.(4)
10.8 OMNIS Technology Corporation Amended and Restated 1987
Stock Option Plan, as amended.(4)
10.9 OMNIS Technology Corporation 1993 Directors' Warrant Plan
and form of Director's Warrant.(9)
10.10 OMNIS Technology Corporation 1994 Employee Stock Purchase
Plan, as amended.(10)
10.11 Registration Rights Agreement effective as of January 3, 1994,
between the Company and Migration Software Systems Limited.(4)
10.12 Warrant to Purchase Shares of Common Stock dated January 3,
1994 granted to Migration Software Systems Limited.(4)
10.13 Warrant to Purchase Common Stock issued to Swartz
Investments, Inc.(5)
10.14 Form of Registration Rights Agreement among the Company,
Purchasers of 8% Convertible Debentures due March 31, 1997 and
Swartz Investments, Inc.(5)
10.15 Form of Warrant to Purchase Common Stock issued to certain
persons affiliated with Swartz Investments, LLC.(6)
10.16 Form of Registration Rights Agreement among the Company and
Swartz Investments, LLC and its designees.(6)
10.17 Note Purchase Agreement dated as of October 14, 1997.(7)
10.18 Note Purchase Agreement dated as of October 31, 1997.(7)
10.19 Series A Convertible Preferred Stock Purchase Agreement
dated as of April 1, 1998.(7)
10.20 Employee Agreement between the Company and Kevin Doyle
dated April 1, 1998.(7)
10.21 Employee Agreement between the Company and Larry Barcot
dated April 1, 1998.(7)
10.22 Shareholder Rights Agreement dated April 1, 1998.(7)
10.23 The 1996 Stock Plan and form of Option Agreement.(8)
</TABLE>
19
<PAGE> 20
<TABLE>
<S> <C>
10.24 The 1993 Advisors' Warrant Plan and form of warrant.(9)
10.25 Omnis Technology Corporation 1999 Stock Option Plan and
form of Stock Option Agreement. (16)
10.26 Series A Convertible Preferred Stock Purchase Agreement
dated December 31, 1998.(13)
10.27 Stock Purchase Agreement with Astoria Capital Partners,
L.P. ("Astoria") dated March 31, 1999.(14)
10.28 Common Stock Purchase Agreement with Astoria dated March
31, 1999.(14)
10.29 Common Stock Purchase Agreement with Gwyneth Gibbs dated
March 31, 1999.(14)
10.30 Common Stock Purchase Agreement with Philip and Debra
Barrett Charitable Remainder Trust dated March 31,
1999.(14)
10.31 Common Stock Purchase Agreement with RCJ Capital Partners
dated March 31, 1999.(14)
10.32 Common Stock Purchase Agreement with Rockport Group, L.P.
dated March 31, 1999.(14)
16.1 Letter dated November 11, 1998 from Deloitte & Touche LLP to
the Securities and Exchange Commission.(12)
21.1 Subsidiaries of the Company.(2)
23.1 Independent Auditors' Consent. (16)
23.2 Independent Auditors' Consent. (16)
27.1 Financial data schedule.
</TABLE>
- -----------
(1) Incorporated by reference to the Annual Report on Form 10-K filed by the
Company with the Commission on July 13, 1990.
(2) Incorporated by reference to the Annual Report on Form 10-K filed by the
Company with the Commission on June 28, 1991.
(3) Incorporated by reference to the Annual Report on Form 10-K filed by the
Company with the Commission on June 26, 1992.
(4) Incorporated by reference to the Annual Report filed by the Company with
the Commission on June 28, 1994.
(5) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on April 7, 1995.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996.
20
<PAGE> 21
(7) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on June 16, 1998.
(8) Incorporated herein by reference to the Registrant's Annual Report on Form
10-K, as amended, for the fiscal year ended March 31, 1997, filed by the
Registrant with the Commission on July 29, 1997.
(9) Incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 (Registration Number 33-81008) filed June 30, 1994.
(10) Incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 (Registration Number 333-38449) filed October 22,
1997.
(11) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on March 19, 1998.
(12) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on November 12, 1998.
(13) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on January 15, 1999.
(14) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on April 5, 1999.
(15) Incorporated herein by reference to the Annual Report on Form 10-KSB, as
amended, for the fiscal year ended March 31, 1998, filed by the Company
with the Commission on June 29, 1998.
(16) Incorporated herein by reference to the Annual Report on Form 10-KSB, as
amended by Form 10-KSB/A for the fiscal year ended March 31, 1999, filed
by the Company with the Commission on July 29, 1999.
(b) Reports were filed by the Company on Form 8-K during the last quarter of the
period covered by this report as follows:
FORM 8-K. On April 5, 1999, the Company filed a Form 8-K report
regarding the Company entering into a stock purchase agreements with an
affiliate of an existing shareholder and with certain members of the Board
of Directors.
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: August 16, 1999 OMNIS TECHNOLOGY CORPORATION
(Registrant)
/s/ Gwyneth Gibbs
----------------------------------------
Gwyneth Gibbs
President, interim Chief
Executive Officer, and interim
Chief Financial Officer
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation, as amended and
corrected through February 9, 1999.(7)
3.2 Certificate of Amendment of Certificate of Incorporation
dated February 9, 1999. (16)
3.3 Certificate of Designations dated March 31, 1998, as
corrected.(7)
3.4 Certificate Regarding Series A Preferred Stock of the Omnis
Technology Corporation dated February 25, 1999.(16)
3.5 Certificate of Designations dated March 31, 1999.(14)
3.6 Bylaws, as amended.(15)
10.1 Definitive Trust Deed dated October 26, 1983 among Blyth
Holdings Limited, Blyth Software Limited and Geoffrey Paul
Smith, Paul Nelson Wright and Suntrust Limited (relating to
pension scheme).(1)
10.2 Service Agreement dated July 30, 1990 between OMNIS Technology
Corporation and David Seaman.(2)
10.3 Deed of Guarantee dated June 1, 1993 between OMNIS
Technology Corporation and A. Levy & Son Limited.(3)
10.4 Form of Subscription Agreement for purchase of Units of the
Company's securities.(3)
10.5 Form of Stock Purchase Warrant sold to purchaser of Units
of the Company's securities.(3)
10.6 Common Stock Purchase Agreement dated March 31, 1993
between OMNIS Technology Corporation and General
Reinsurance Corp.(4)
10.7 Form of Indemnification Agreement entered into between the
Company and all of its directors and certain of its
officers.(4)
10.8 OMNIS Technology Corporation Amended and Restated 1987
Stock Option Plan, as amended.(4)
10.9 OMNIS Technology Corporation 1993 Directors' Warrant Plan
and form of Director's Warrant.(9)
10.10 OMNIS Technology Corporation 1994 Employee Stock Purchase
Plan, as amended.(10)
10.11 Registration Rights Agreement effective as of January 3, 1994,
between the Company and Migration Software Systems Limited.(4)
10.12 Warrant to Purchase Shares of Common Stock dated January 3,
1994 granted to Migration Software Systems Limited.(4)
10.13 Warrant to Purchase Common Stock issued to Swartz
Investments, Inc.(5)
10.14 Form of Registration Rights Agreement among the Company,
Purchasers of 8% Convertible Debentures due March 31, 1997 and
Swartz Investments, Inc.(5)
10.15 Form of Warrant to Purchase Common Stock issued to certain
persons affiliated with Swartz Investments, LLC.(6)
10.16 Form of Registration Rights Agreement among the Company and
Swartz Investments, LLC and its designees.(6)
10.17 Note Purchase Agreement dated as of October 14, 1997.(7)
10.18 Note Purchase Agreement dated as of October 31, 1997.(7)
10.19 Series A Convertible Preferred Stock Purchase Agreement
dated as of April 1, 1998.(7)
10.20 Employee Agreement between the Company and Kevin Doyle
dated April 1, 1998.(7)
10.21 Employee Agreement between the Company and Larry Barcot
dated April 1, 1998.(7)
10.22 Shareholder Rights Agreement dated April 1, 1998.(7)
10.23 The 1996 Stock Plan and form of Option Agreement.(8)
10.24 The 1993 Advisors' Warrant Plan and form of warrant.(9)
10.25 Omnis Technology Corporation 1999 Stock Option Plan and
form of Stock Option Agreement. (16)
10.26 Series A Convertible Preferred Stock Purchase Agreement
dated December 31, 1998.(13)
10.27 Stock Purchase Agreement with Astoria Capital Partners,
L.P. ("Astoria") dated March 31, 1999.(14)
10.28 Common Stock Purchase Agreement with Astoria dated March
31, 1999.(14)
10.29 Common Stock Purchase Agreement with Gwyneth Gibbs dated
March 31, 1999.(14)
10.30 Common Stock Purchase Agreement with Philip and Debra
Barrett Charitable Remainder Trust dated March 31,
1999.(14)
10.31 Common Stock Purchase Agreement with RCJ Capital Partners
dated March 31, 1999.(14)
10.32 Common Stock Purchase Agreement with Rockport Group, L.P.
dated March 31, 1999.(14)
16.1 Letter dated November 11, 1998 from Deloitte & Touche LLP to
the Securities and Exchange Commission.(12)
21.1 Subsidiaries of the Company.(2)
23.1 Independent Auditors' Consent. (16)
23.2 Independent Auditors' Consent. (16)
27.1 Financial data schedule.
</TABLE>
- -----------
(1) Incorporated by reference to the Annual Report on Form 10-K filed by the
Company with the Commission on July 13, 1990.
(2) Incorporated by reference to the Annual Report on Form 10-K filed by the
Company with the Commission on June 28, 1991.
(3) Incorporated by reference to the Annual Report on Form 10-K filed by the
Company with the Commission on June 26, 1992.
(4) Incorporated by reference to the Annual Report filed by the Company with
the Commission on June 28, 1994.
(5) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on April 7, 1995.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996.
(7) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on June 16, 1998.
(8) Incorporated herein by reference to the Registrant's Annual Report on Form
10-K, as amended, for the fiscal year ended March 31, 1997, filed by the
Registrant with the Commission on July 29, 1997.
(9) Incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 (Registration Number 33-81008) filed June 30, 1994.
(10) Incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 (Registration Number 333-38449) filed October 22,
1997.
(11) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on March 19, 1998.
(12) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on November 12, 1998.
(13) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on January 15, 1999.
(14) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on April 5, 1999.
(15) Incorporated herein by reference to the Annual Report on Form 10-KSB, as
amended, for the fiscal year ended March 31, 1998, filed by the Company
with the Commission on June 29, 1998.
(16) Incorporated herein by reference to the Annual Report on Form 10-KSB, as
amended by Form 10-KSB/A for the fiscal year ended March 31, 1999, filed
by the Company with the Commission on July 29, 1999.
21
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUL-30-1999
<CASH> 432,000
<SECURITIES> 0
<RECEIVABLES> 786,000
<ALLOWANCES> 0
<INVENTORY> 12,000
<CURRENT-ASSETS> 335,000
<PP&E> 835,000
<DEPRECIATION> 79,000
<TOTAL-ASSETS> 2,410,000
<CURRENT-LIABILITIES> 1,088,000
<BONDS> 0
0
300,000
<COMMON> 9,679,829
<OTHER-SE> 39,000
<TOTAL-LIABILITY-AND-EQUITY> 2,410,000
<SALES> 0
<TOTAL-REVENUES> 1,371,000
<CGS> 95,000
<TOTAL-COSTS> 1,253,000
<OTHER-EXPENSES> 3,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,000)
<INCOME-PRETAX> 115,000
<INCOME-TAX> 4,000
<INCOME-CONTINUING> 111,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,000
<EPS-BASIC> 0.01
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