SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
Commission File Number: 0-17493
OMNI U.S.A., INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0237223
(State of Incorporation) (IRS Employer Identification No.)
7502 MESA ROAD, HOUSTON, TEXAS 77028
(Address of principal executive offices)
(713) 635-6331
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 [ ]
At February 10, 1997, there were 2,122,206 shares of common stock $.004995 par
value outstanding.
<PAGE>
OMNI U.S.A., INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets -
December 31, 1996 and June 30, 1996
Consolidated Statements of Operations
For the Three Months and the Six Months Ended December 31, 1996 and
December 31, 1995
Consolidated Statements of Cash Flows
For the Three Months and the Six Months Ended December 31, 1996 and
December 31, 1995
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
<PAGE>
OMNI U.S.A., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND JUNE 30, 1996
ASSETS
December 31, 1996 June 30, 1996
----------------- -------------
CURRENT ASSETS
Cash ...................................... $ 94,414 $ 494,681
Accounts receivable, trade, net ........... 1,737,494 1,700,753
Accounts receivable, related parties ...... 106,095 86,808
Inventories ............................... 2,396,293 1,760,643
Tooling advance ........................... 120,000 120,000
Prepaid expenses .......................... 241,998 198,360
----------- -----------
TOTAL CURRENT ASSETS .......... 4,696,294 4,361,245
----------- -----------
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and amortization . 1,804,226 762,541
----------- -----------
OTHER ASSETS
Organizational cost ....................... 46,370 51,195
Intangible assets ......................... 359,438 132,600
Note receivable, affiliate ................ 853,397 853,397
Prepaid royalties ......................... 199,376 199,376
Long term deposits ........................ 60,559 60,559
----------- -----------
TOTAL OTHER ASSETS ............. 1,519,140 1,297,127
----------- -----------
TOTAL ASSETS ................................. $ 8,019,660 $ 6,420,913
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable .......................... $ 1,878,621 $ 1,746,005
Line of credit ............................ 1,190,055 1,505,635
Accrued expenses .......................... 644,075 452,724
Current portion of long-term debt ......... 358,392 215,868
----------- -----------
TOTAL CURRENT LIABILITIES ..... 4,071,143 3,920,232
----------- -----------
DEFERRED CREDITS ............................. 9,821 -0-
LONG-TERM DEBT ............................... 834,512 26,230
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ........................... 102 101
Common stock .............................. 10,466 9,020
Treasury stock ............................ (3,000) -0-
Equity contract notes ..................... 918,304 918,304
Subordinated convertible debentures ....... 380,015 -0-
Additional paid-in capital ................ 4,817,128 4,391,171
Retained earnings (deficit) ............... (3,116,862) (2,942,176)
Foreign currency translation adjustment ... 98,031 98,031
----------- -----------
TOTAL STOCKHOLDERS' EQUITY .... 3,104,184 2,474,451
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY .... $ 8,019,660 $ 6,420,913
=========== ===========
The accompanying notes are an integral part of the
consolidated financial statements.
1
<PAGE>
OMNI U.S.A., INC. AND SUBSIDIARIES
CONSOLIDAED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIXTH MONTHS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
For the For the For the For the
Three Three Six Six
Months Ended Months Ended Months Ended Months Ended
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES ...................................... $ 2,898,460 $ 1,817,294 $ 5,753,419 $ 3,534,871
COST OF SALES .................................. 2,152,106 1,315,691 4,279,370 2,563,060
----------- ----------- ----------- -----------
Gross Profit ............................. 746,354 501,603 1,474,049 971,811
OPERATING EXPENSES
Selling, general and administrative ......... 824,731 630,957 1,540,505 1,293,446
----------- ----------- ----------- -----------
Operating income (loss) .................. (78,377) (129,354) (66,456) (321,635)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest expense ............................ (58,569) (5,057) (89,239) (9,527)
Other, net .................................. 24,591 21,414 43,295 48,593
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE) ......................... (33,978) 16,357 (45,944) 39,066
----------- ----------- ----------- -----------
NET INCOME (LOSS) .............................. $ (112,355) $ (112,997) $ (112,400) $ (282,569)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE ...................... $ (0.07) $ (0.07) $ (0.09) $ (0.19)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING ...................... 2,073,022 1,793,112 1,941,924 1,714,299
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
2
<PAGE>
OMNI U.S.A, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS AND SIXTH MONTHS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ...................................... $ (112,355) $(112,998) $ (112,400) $(282,569)
Depreciation and amortization .......................... 64,050 44,228 115,279 92,853
Changes in operating assets and liabilities ............ (341,185) 79,075 (749,214) 268,700
----------- --------- ----------- ---------
Net Cash Provided (Used) by Operating Activities ....... (389,490) 10,305 (746,335) 78,984
----------- --------- ----------- ---------
Net Cash Provided (Used) by Investing Activities:
Capital expenditures ................................... (1,303,222) (86,749) (1,378,977) (195,282)
----------- --------- ----------- ---------
Cash flows from financing activities:
Proceeds from equity issuances ......................... 190,814 -- 742,130 --
Changes in long-term debt .............................. 983,774 (21,860) 982,915 14,715
----------- --------- ----------- ---------
Net Cash Provided (Used) by Financing Activities ....... 1,174,588 (21,860) 1,725,045 14,715
----------- --------- ----------- ---------
Net Change in Cash During the Period ................... (518,124) (98,304) (400,267) (101,583)
Cash at Beginning of the Period ........................ 612,538 149,867 494,681 153,146
----------- --------- ----------- ---------
Cash at End of the Period .............................. $ 94,414 $ 51,563 $ 94,414 $ 51,563
=========== ========= =========== =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE>
OMNI USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes that the disclosures made in this report are
adequate to make the information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest annual report
on Form 10-KSB. In the opinion of the Company, all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the financial
position of Omni U.S.A., Inc. and subsidiaries as of December 31, 1996 and the
results of their operations and cash flows for the three month periods and the
six month periods ended December 31, 1996 and 1995, have been included. The
results of operations for such interim periods are not necessarily indicative of
the results for the full year.
2. Primary and fully diluted income (loss) per share are based on the weighted
average number of shares of common stock outstanding. For the periods ended
December 31, 1996 and December 31, 1995, the Company's common stock equivalents
were antidilutive and therefore were not included in the computation of primary
and fully diluted income (loss) per share. Income (loss) per share is calculated
after a provision for interest (dividends) on equity contract notes.
3. Interest paid on debt for the three months ended December 31, 1996 and 1995,
was 58,569 and $5,057, respectively. Interest paid on debt for the six months
ended December 31, 1996 and 1995, was $89,239 and $9,527, respectively. No
interest was paid on equity contract notes for the three months or the six
months ended December 31, 1996 or December 31, 1995. No income taxes were paid
during the three months or the six months ended December 31, 1996 and 1995,
respectively.
4
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This report has been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information normally included in
annual reports has been condensed or omitted pursuant to such rules and
regulations. This report should be read in conjunction with the Company's latest
Form 10-KSB, a copy of which may be obtained by writing to the Public Relations
Department, Omni U.S.A., Inc., 7502 Mesa Road, Houston, Texas 77028.
SALE OF DEBENTURES
Omni sold Subordinated Convertible Debentures ("Debentures") in the
amount of $500,000 to an individual ("Holder") in July 1996. The Debentures have
an interest rate of 8% per year, payable semi-annually in common stock of Omni,
at the Company's option and are due June 30, 1999, payable in common stock of
Omni, at Omni's option. The obligations under these Debentures are subordinate
to all senior indebtedness.
The Debentures are convertible into common stock of Omni at the option
of Holder at any time. The number of shares into which the Debentures are
convertible, whether converted by Holder prior to maturity, or by the Company at
maturity, including any issuances for payment of interest, are calculated based
on a conversion price. The conversion price is defined as 75% of the average
closing bid price of the common stock for the five consecutive trading days
preceding the conversion date; however, the maximum conversion price is $2.50
per common share.
The Company recorded the Debentures as equity in the amount of $477,150,
which is net after $22,850 of costs related to the issuance.
Since issuance of the Debentures in July 1996 through December 31, 1996,
Holder has converted a total of $100,000 of Debentures into 94,596 common shares
at an average conversion price of $1.03 per share. In January 1997, Holder
converted an additional $25,000 of Debentures into 31,860 common shares at a
conversion price of $0.78 per share. All conversions include payments of related
interest in the form of common shares.
PURCHASE OF TREASURY SHARES
The Company purchased 2,000 of its common shares on the open market for
$3,000 ($1.50 per share) in December 1996 pursuant to a repurchase program
announced in November 1996. The Company also purchased 3,000 of its common
shares for $3,625 (average of $1.21 per share) in January 1997. The Company
intends to purchase additional shares for the treasury, which will be used in
connection with acquisitions or for employee awards.
5
<PAGE>
ACQUISITION OF BUTLER PRODUCTS CORP.
On October 4, 1996, the Company acquired 100% of the common stock of
Butler Products Corp. ("BPC"), a Kentucky corporation located in Butler,
Kentucky for $937,400. BPC is a manufacturer of stabilizer and landing gear
jacks and trailer products sold to manufacturers and distributors of heavy duty
trailers. The stock was purchased from the sole shareholders of BPC, Messrs.
Frank E. Jakubec and Dennis W. Swim, who were unaffiliated with the Company at
the time of acquisition. Terms of the transaction included payments to the
shareholders of BPC of $225,000 in cash, $500,000 in junior subordinated notes
due in 2003, and 150,000 shares of common stock of the Company valued at
$212,400. BPC has been engaged in the business of manufacturing jack and trailer
products for over 40 years. The Company intends to utilize the assets of BPC to
continue in that business.
The Company acquired trade receivables, inventories and other current
assets of about $730,000, property valued at about $810,000 for financial
statement purposes, and assumed trade payables, accrued expenses and debt of
about $850,000. In connection with the acquisition, the Company recognized about
$250,000 of goodwill, which it intends to amortize over 40 years.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $625,151 as of December 31, 1996, an
increase of $184,138 from June 30, 1996 and a decrease of $332,539 from
September 30, 1996. The change from June 30, 1996 was mostly attributable to the
sale of debentures of about $477,000 (net of costs of issuance), reduced by cash
payments of $225,000 in connection with the Butler acquisition, and increases in
inventory. The change from September 30, 1996 to June 30, 1996 results primarily
from the acquisition of Butler and increases in inventory. The current ratio was
1.1 at June 30, 1996, 1.3 at September 30, 1996, and 1.2 at December 31, 1996.
During the quarter ended December 31, 1996, the Company financed about $200,000
of equipment for use in its China manufacturing facility with long term debt.
The cash balance was $94,414 as of December 31, 1996, a decrease of
$400,267 compared with June 30, 1996. Generally, the Company has been providing
cash to fund business expansion in its China manufacturing facility and to
acquire Butler. Accounts receivable collection period was about 55 days for the
quarter and 56 days for the six months ended December 31, 1996. Inventories were
$2,396,293 as of December 31, 1996, which represents about 103 days cost of
sales. The Company believes that the current level of inventories is
appropriate.
6
<PAGE>
LINE OF CREDIT
In December, 1996, the Company renewed and increased to $1.9 million its
revolving line of credit, secured by substantially all of the Company's assets.
The Company believes that the increased working capital requirements to fund
anticipated and normal increase in sales activity for the last two quarters of
fiscal year ending June 30, 1997, can be adequately provided through operations
and the revolving line of credit.
7
<PAGE>
RESULTS OF OPERATIONS - RESULTS FOR QUARTER ENDED DECEMBER 31, 1996 COMPARED
WITH QUARTER ENDED DECEMBER 31, 1995
During the quarter ended December 31, 1996, the Company incurred a net
loss of $112,355 ($0.07 per share) compared with a net loss of $112,997 ($0.07
per share) for the quarter ended December 31, 1995. Sales increased by
$1,081,166 in the quarter ended December 31, 1996 compared with the quarter
ended December 31, 1995, however, decreased profit margin of about 2% and
increased selling, general and administrative expenses of approximately $190,000
and increased interest expense of about $50,000 reduced earnings.
Consolidated net sales were about $2,898,000 for the quarter ended
December 31, 1996, an increase of about 59% from net sales of about $1,817,000
for the quarter ended December 31, 1995. The approximately $1,080,000 increase
in net sales resulted from an increase in each product line. Sales of towing
products by Butler, the new-acquired subsidiary, for the quarter were about
$680,000, representing all of the increase in sales of towing products. Sales of
gear boxes increased about $400,000 compared with the same quarter in the
previous year, with increases occurring in all products. Sales of gear boxes
represented 72% of sales for the current quarter ended December 31, 1996,
compared with 90% of sales for the same quarter one year ago. Towing products
represented 28% of sales for the quarter ended December 31, 1996, and the
Company expects further improvement in sales of towing products as a result of
the acquisition of Butler.
Geographically, sales through the Houston distribution facility were 69%
of sales and increased by about $580,000 compared with the same quarter last
year, sales by the Hong Kong subsidiary decreased about $180,000, and sales by
Butler were $680,000 (23% of sales) in the current quarter, which was the first
quarter after the acquisition of Butler. Production from the Shanghai
manufacturing facility was about $50,000 for the quarter ended December 31,
1996.
The Company traditionally has lower sales in the first and second fiscal
quarters, and believes that fiscal 1997 will continue that sales pattern. In
addition, the Butler acquisition will continue to contribute to sales.
During the quarter ended December 31, 1996, two customers represented
approximately 32% of consolidated net sales.
Gross profit was $746,354 for quarter ended December 31, 1996 compared
with $501,603 in 1995; however, the gross profit margin decreased from 28% to
26%. Generally, the gross profit margin ranges from 25% to 30% for different
products the Company sells. The decrease in profit margin results primarily from
a different product mix. The Company expects gross margins to improve as more
complex gear products are designed, developed, and added to the products
distributed to market.
8
<PAGE>
Selling, general and administrative expenses were about $193,774 greater
in the quarter ended December 31, 1996 compared with the quarter ended December
31, 1995. Such expenses were about 28% of net sales compared to 35% for the
quarters ended December 1996 and 1995, respectively. The increase in selling,
general and administrative expenses is primarily personnel and professional fee
costs.
Other income is primarily attributed to interest receivable of about
$17,000 on the note receivable from Daniel Development Company dated June 30,
1995. Interest expense increased about $50,000 as a result of increased lines of
credit and long-term debt.
9
<PAGE>
RESULTS OF OPERATIONS - RESULTS FOR SIX MONTHS ENDED DECEMBER 31, 1996 COMPARED
WITH SIX MONTHS ENDED DECEMBER 31, 1995
The Company had a net loss of $112,400 ($0.09 per share) for the six
months ended December 31, 1996, compared with a net loss of $282,569 ($.19 per
share) for the six months ended December 31, 1995. The reduction in net loss
resulted from a significant increase in net sales, offset by a reduction in
gross profit as a percent of sales of about 2%, and increases in selling,
general and administrative and interest expenses.
Consolidated net sales were $5,753,419 for the first six months ended
December 31, 1996, an increase of about 63% from net sales of $3,534,871 for the
six months ended December 31, 1995. The increase in net sales for the six months
ended December 31, 1996 compared with the six months ended December 31, 1995
resulted from an increase in each product line. Sales of gear boxes increased
about $1.7 million and sales of towing products, resulting from the Butler
acquisition on October 4, 1996, provided increases in sales of towing products.
Sales of gear boxes represented 84% of sales for the six months ended December
31, 1996, compared with 88% of sales for the same period one year ago. the
Company expects to continue the trend of increased percentage of its sales
coming from the towing products category.
Geographically, sales through the Houston distribution facility
accounted for 81% of sales and increased by about $2 million compared with the
same period last year, but sales by the Hong Kong subsidiary decreased about
$470,000. Sales by Butler represented 12% of sales in the six months ended
December 31, 1996. Production from the Shanghai manufacturing facility was about
$140,000 for the six months ended December 31, 1996.
The Company traditionally has lower sales in the first and second fiscal
quarters, and believes that fiscal 1997 will continue that sales pattern. In
addition, the Butler acquisition will continue to contribute sales.
One customer represented 32% of net sales for the six months ended
December 31, 1996; no other customer represented more than 10% of net sales.
The Company sustained a gross profit margin reduction of 2% during the
six months ended December 31, 1996 versus the six months ended December 31,
1995, primarily as a result of different product mix. Generally, the gross
profit margin ranges from 25% to 30% for different products the Company sells.
10
<PAGE>
Selling, general and administrative expenses increased by about $247,000
in the six months ended December 31, 1996 compared to the six months ended
December 31, 1995. Such expenses were 27% of net sales compared to 37% for the
six months ended December 31, 1996 and 1995, respectively. Significant changes
in selling, general and administrative expenses for the six months ended
December 31, 1996 were personnel and professional fee costs (increase of about
$150,000), and rent (increase of about $50,000).
Other income is primarily attributed to interest receivable of about
$34,000 on the note receivable from Daniel Development Company dated June 30,
1995. Interest expense increased about $80,000 as a result of increased lines of
credit and long-term debt.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
There have been no material changes from the disclosure in the Company's
Form 10-KSB for the fiscal year ended June 30, 1996.
Item 2. CHANGE IN SECURITIES.
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMNI U.S.A., INC.
Date: February 10, 1997
By: /s/ JEFFREY DANIEL
Jeffrey Daniel
Chief Executive Officer
President
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 94
<SECURITIES> 0
<RECEIVABLES> 1,737
<ALLOWANCES> 0
<INVENTORY> 2,396
<CURRENT-ASSETS> 4,696
<PP&E> 1,804
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,019
<CURRENT-LIABILITIES> 4,017
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 3,094
<TOTAL-LIABILITY-AND-EQUITY> 8,019
<SALES> 5,753
<TOTAL-REVENUES> 5,753
<CGS> 4,279
<TOTAL-COSTS> 5,819
<OTHER-EXPENSES> 46
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 89
<INCOME-PRETAX> (112)
<INCOME-TAX> 0
<INCOME-CONTINUING> (112)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (112)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
