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, 1997
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, 1998 there were 3,523,092 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
December 31, 1997 and June 30, 1997
Condensed Consolidated Statements of Operations
Three Months and Six Months Ended December 31, 1997 and December 31, 1996
Condensed Consolidated Statements of Cash Flows
Three Months and Six Months Ended December 31, 1997 and December 31, 1996
Notes to Condensed 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, 1997 AND JUNE 30, 1997
ASSETS
December 31,1997 June 30, 1997
----------- -----------
CURRENT ASSETS
Cash ........................................ $ 44,799 $ 279,756
Accounts receivable, trade, net ............. 1,576,831 2,060,436
Accounts receivable, related parties ........ 2,688 60,654
Inventories ................................. 2,138,427 2,243,751
Prepaid expenses ............................ 218,745 130,457
Notes Receivable ............................ 26,672 66,668
----------- -----------
TOTAL CURRENT ASSETS ............ 4,008,162 4,841,722
----------- -----------
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and
amortization ................................ 1,768,834 1,846,332
----------- -----------
OTHER ASSETS
Organizational cost ......................... 23,210 39,615
Intangible assets ........................... 210,077 318,345
Long term deposits .......................... 60,559 60,559
----------- -----------
TOTAL OTHER ASSETS ............... 293,846 418,519
----------- -----------
TOTAL ASSETS ................................... $ 6,070,842 $ 7,106,573
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ............................ $ 1,230,492 $ 1,562,493
Line of credit .............................. 1,377,447 1,677,969
Accrued expenses ............................ 936,031 941,947
Current portion of long-term debt ........... 226,151 226,151
----------- -----------
TOTAL CURRENT LIABILITIES ....... 3,770,121 4,408,560
----------- -----------
LONG-TERM DEBT ................................. 707,688 753,854
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock ................................ 17,885 17,885
Additional paid-in capital .................. 5,248,560 5,248,560
Treasury Stock .............................. (57,141) (48,641)
Retained earnings (deficit) ................. (3,723,396) (3,371,676)
Foreign currency translation adjustment ..... 107,125 98,031
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ...... 1,593,033 1,944,159
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ...... $ 6,070,842 $ 7,106,573
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
OMNI U.S.A., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
31-DEC-97 31-DEC-96 31-DEC-97 31-DEC-96
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES ................... $ 3,109,114 $ 2,898,460 $ 6,440,165 $ 5,753,419
----------- ----------- ----------- -----------
COST OF SALES ............... 2,351,525 2,152,106 4,856,202 4,279,370
----------- ----------- ----------- -----------
Gross Profit .......... 757,589 746,354 1,583,963 1,474,049
----------- ----------- ----------- -----------
OPERATING EXPENSES
Selling, general and
administrative .............. 945,027 824,731 1,800,102 1,540,505
----------- ----------- ----------- -----------
Operating income (loss) (187,438) (78,377) (216,139) (66,456)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest expense ........ (69,943) (58,569) (140,897) (89,239)
Other, net ............ 6,109 24,591 5,316 43,295
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE) ...... (63,834) (33,978) (135,581) (45,944)
----------- ----------- ----------- -----------
NET INCOME (LOSS) ........... $ (251,272) $ (112,355) $ (351,720) $ (112,400)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE ... $ (0.07) $ (0.07) $ (0.10) $ (0.09)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING ... 3,523,918 2,073,022 3,524,702 1,941,924
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
OMNI U.S.A., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS AND THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
31-DEC-97 31-DEC-96 31-DEC-97 31-DEC-96
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................ (251,272) (112,355) (351,720) (112,400)
---------- ---------- ---------- ----------
Adjustments to reconcile net income
(loss) to net cash (used) provided
by operating activities:
Depreciation and amortization .......... 169,789 64,050 215,298 115,279
Changes in operating assets
and liabilities:
Accounts receivable ................. 208,819 3,288 541,571 (42,131)
Inventories ......................... 400,674 (545,073) 105,324 (635,650)
Prepaid expenses .................... (83,196) 2,788 (88,288) (43,638)
Notes Receivable .................... 26,664 0 39,996 0
Accounts payable and
accrued expenses ................... (402,943) 197,812 (328,823) (27,795)
---------- ---------- ---------- ----------
Total adjustments ................ 319,807 (277,135) 485,078 (633,935)
---------- ---------- ---------- ----------
Net cash (used) provided
by operating activities ......... 68,963 (389,490) 133,358 (746,335)
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures ........................ (13,127) (1,303,222) (13,127) (1,378,977)
---------- ---------- ---------- ----------
Net cash used by
investing activities ............. (13,127) (1,303,222) (13,127) (1,378,977)
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings/(Payments) on line
of credit ................................... (524,678) (118,868) (300,522) (413,547)
Payments on long-term debt ................... (20,676) (16,514) (46,166) (39,662)
Purchase of Treasury Stock ................... (2,125) (3,000) (8,500) (3,000)
Proceeds from equity issues .................. 0 190,814 0 742,130
Proceeds from issuance of debt .............. 0 1,122,156 0 1,439,124
---------- ---------- ---------- ----------
Net cash provided/(used)
by financing activities (547,479) 1,174,588 (355,188) 1,725,045
---------- ---------- ---------- ----------
NET INCREASE(DECREASE) IN CASH .................. (492,071) (518,124) (234,957) (400,267)
CASH AT BEGINNING OF PERIOD ..................... 536,870 612,538 279,756 494,681
---------- ---------- ---------- ----------
CASH AT END OF PERIOD ........................... 44,799 94,414 44,799 94,414
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
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, 1997, and the
results of their operations and cash flows for the six month and three month
periods ended December 31, 1997, and December 31, 1996, have been included. The
results of operations for such interim periods are not necessarily indicative of
the results for the full year.
2. The net loss per common share is calculated as follows:
FOR THE FOR THE FOR THE FOR THE
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
31-DEC-97 31-DEC-96 31-DEC-97 31-DEC-96
-------- -------- -------- --------
Net Loss ....................... (251,272) (112,355) (351,720) (112,400)
Interest on Equity Contract
Notes .......................... (18,366) (36,732)
Dividends on Preferred Stock ... (8,359) (16,718)
-------- -------- -------- --------
Net Loss attributable to
Common Shares .................. (251,272) (139,080) (351,720) (165,850)
======== ======== ======== ========
3. Interest paid on debt for the three months ended December 31, 1997 and 1996,
was $69,943 and $58,569 respectively. Interest paid on debt for the six months
ended December 31, 1997 and December 31, 1996 was $140,897 and $89,239,
respectively. No interest was paid on equity contract notes for the quarter
ended December 31, 1997. No income taxes were paid during the three months or
six months ended December 31, 1997 and 1996, respectively.
<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 Investor
Relations Department, Omni U.S.A., Inc., 7502 Mesa Road, Houston, Texas 77028.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current ratio was 1.1 as of December 31, 1997, the same
current ratio as of September 30, 1997 and June 30, 1997. The Company had
working capital of $238,041 as of December 31, 1997 and working capital of
$433,162 as of June 30, 1997. This balance represents a decrease of $195,121
from June 30, 1997. The change in working capital from June 30, 1997 was due to
a decrease in accounts receivable of $541,571 and a decrease in inventory of
$105,324 and repayments on the line of credit of $300,522 with an increase in
accounts payable and accrued expenses of $328,395. Net repayments on the line of
credit during the quarter ended December 31, 1997 were $524,678.
The cash balance was $44,799 as of December 31, 1997; a decrease of
$234,957 compared to June 30, 1997. Accounts receivable as of December 31, 1997
decreased $541,571 compared to June 30, 1997. The receivable collection period
decreased from 52 days to 48 days from June 30, 1997 to December 31, 1997,
respectively.
Inventories decreased $105,324 during the quarter ended December 31, 1997.
At December 31, 1997, the Company's inventory turnover was 4 times per year
compared to 4.2 times per year at June 30, 1997.
The decrease in cash, receivables, inventories and the increase in
payables resulted from the seasonal decrease in activity.
The Company believes that between its access to the revolving credit
facility and its ability to generate funds internally, it has adequate capital
resources to meet its working capital requirements for the foreseeable future,
given its current working capital requirements and known obligations, and
assuming current levels of operations. In addition, the Company believes that it
has the ability to raise additional financing in the form of debt or equity to
fund additional capital expenditures.
The Company continued to repurchase Common Stock under a repurchase
program announced in 1996. The repurchase program expired December 31, 1997.
Since announcement and through the quarter ended December 31, 1997, the Company
repurchased 57,500 shares at an average cost per share of $0.99, including 2,000
shares purchased in the quarter ended December 31, 1997 at $1.06 per share. The
Company intends to use these shares for acquisitions or for employee awards.
<PAGE>
RESULTS OF OPERATIONS - RESULTS FOR THE QUARTER ENDED DECEMBER 31, 1997 COMPARED
WITH THE QUARTER ENDED DECEMBER 31, 1996
The Company had a net loss $251,272 ($0.07 per share) for the quarter
ended December 31, 1997, compared with a net loss of $112,355 ($0.07 per share)
for the quarter ended December 31, 1996. For the quarter ended December 31, 1996
only, earnings per share are calculated after preferred stock dividends and a
provision for interest (dividends) on equity contract notes ($26,725 in the
second quarter of 1996). Effective June 30, 1997, all preferred series of stock
under which dividends were being paid was tendered to the Company and the
Company was released from any obligation under equity contract notes, and
therefore no longer provides for such interest and dividends in its earnings per
share calculation. The Company had an operating loss of $187,438 for the quarter
ended December 31, 1997 compared to operating loss of $78,377 for the second
quarter ended December 31, 1996. The net loss is primarily attributed to the
lower margin product mix of Butler(TM) products and operating costs of the
Shanghai facility as it increases production.
Consolidated net sales were $3,109,114 in the second quarter of fiscal
year 1998; a 7% increase over net sales of $2,898,460 in the second quarter of
fiscal year 1997. Omni Gear(R) product sales continued to be strong during the
second quarter representing 71% of total sales compared to 72% of total sales
for the same period last year, with Butler(TM) sales representing 27% of total
sales compared to 22% of total sales for the same period last year. Sales from
Omni Resources were 2% of sales compared to 6% for the same period last year.
The Company ended the quarter with a consolidated backlog of approximately
$7,000,000, which will contribute to third and fourth quarter performance.
For the quarter ended December 31, 1997, Omni Gear(R) sales were
$2,204,064, an increase of $206,561 over the same period last year. Omni
Resources sales were $117,126, a decrease of $103,753 and Butler(TM) product
sales were $787,924, an increase of $107,846 over the same period last year.
Production from the Shanghai facility was $364,297 for the quarter ended
December 31, 1997.
Gross profit, as a percentage of sales, was approximately 24% for the
quarter ended December 31, 1997. This compares to a 26% margin for the quarter
ended December 31, 1996, due primarily to product mix associated with Butler(TM)
sales.
Selling, general and administrative expenses were $945,027 for the quarter
ended December 31, 1997, an increase of $120,296 or approximately 15% over the
quarter ended December 31, 1996. These expenses were about 30% of net sales
compared to 28% for the quarter ended December 31, 1996.
<PAGE>
RESULTS OF OPERATIONS - RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
COMPARED WITH THE SIX MONTHS ENDED DECEMBER 31, 1996
The Company had a net loss of $351,720 ($0.10 per share) for the six
months ended December 31, 1997, compared with a net loss of $112,400 ($0.09 per
share) for the six months ended December 31, 1996. For the six months ended
December 31, 1996 only, earnings per share are calculated after preferred stock
dividends and a provision for interest (dividends) on equity contract notes
($53,450 in the second quarter of 1996). Effective June 30, 1997, all preferred
series of stock under which dividends were being paid was tendered to the
Company and the Company was released from any obligation under Equity Contract
Notes, and therefore no longer provides for such interest and dividends in its
earnings per share calculation. The Company had an operating loss of $216,139
for the six months ended December 31, 1997 compared to operating loss of $66,456
for the six months ended December 31, 1996.
Consolidated net sales were $6,440,165 in the six months ended December
31, 1997; a 12% increase over net sales of $5,753,419 in the six months ended
December 31, 1996. Omni Gear(R) product sales continue to be strong during the
first half representing 71% of total sales compared to 88% of total sales for
the same period last year, with Butler(TM) sales representing 25% of total sales
compared to 10% of total sales for the same period last year. The change in
sales percentages reflects the increased proportion of Butler(TM) sales as a
result of the Butler Products Corporation acquisition. The six months ended
December 31, 1996 include Butler(TM) sales from October 1, 1996, the date of
acquisition.
For the six months ended December 31, 1997, Omni Gear(R) sales were
$4,603,872, a decrease of $65,692 compared with the same period last year. Omni
Resources sales were $309,167, a decrease of $94,610 and Butler(TM) product
sales were $1,527,126 an increase of $847,047 for the period ended December 31,
1997. Production from the Shanghai facility was $420,018 for the six months
ended December 31, 1997. The six-month period ended December 31, 1997 included
six months of sales by Butler while the same period last year included only the
sales from October 1, 1996 (the date of the Butler Products acquisition),
through December 31, 1996.
The Company traditionally has lower sales in the first and second
quarters, with a significant portion of its sales in the third and fourth
quarters. Management believes that fiscal 1998 will continue in that sales
pattern. The Company ended the quarter with a backlog of approximately
$7,000,000, which will contribute to third and fourth quarter performance.
Gross profit, as a percentage of sales, was approximately 25% for the six
months ended December 31, 1997. This compares to a 26% margin for the six months
ended December 31, 1996, due primarily to overall Company product mix.
Selling, general and administrative expenses were $1,766,754 for the six
months ended December 31, 1997, an increase of $226,249 or approximately 15%
over the six months ended December 31, 1996. These expenses were about 27% of
net sales compared to 27% for the six months ended December 31, 1996. The
increase in these expenses occurred
<PAGE>
primarily in the Shanghai facility, partially related to freight and duty fees
of additional equipment and other expenses related to increasing production from
that facility.
SHANGHAI OMNI GEAR MANUFACTURING FACILITY
The Shanghai Omni Gear manufacturing facility ("SOG") was established to
provide Omni Gear a low cost source of high quality planetary and helical gear
drive systems not previously existing. Since formation, SOG has developed a
highly trained, low cost labor force which utilizes locally supplied raw
materials and components to produce gear systems for export to agricultural,
industrial, and construction OEM's in North America and Europe. Its secondary
focus is supplying local Joint Venture OEM's that require local sources of high
quality gearboxes for their production. SOG, with its investment in its
employees and in manual and CNC machining and gear cutting equipment, will
supply OEM's as the low cost industry leader in quality. SOG's initial
production commenced in the first and second quarters of fiscal 1998. Its
scheduled production for the remainder of fiscal 1998 will contribute to the
Company's overall profitability.
CAUTIONARY STATEMENT
The following is a "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995:
With the exception of historical facts, the statements contained in Item 2
of this form 10-QSB are forward looking statements. Actual results may differ
materially from those contemplated by the forward-looking statements. These
forward looking statements involve risks and uncertainties, including but not
limited to, the following risks: 1) cyclical downturns affecting the markets for
capital goods, 2) substantial increases in interest rates, 3) availability or
material increases in the costs of select raw materials, and 4) actions taken by
competitors with regard to such matters as product offerings pricing, and
delivery. Investors are directed to the Company's documents, such as its Annual
Report on Form 10-KSB, Form 10-QSB's and Form 8-KSB filed with the Securities
and Exchange Commission.
<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, 1997.
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.
<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.
Date: February 10, 1998 OMNI U.S.A., INC.
By: /s/ JEFFREY K. DANIEL
Jeffrey K. Daniel
President and Chief
Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM CONSOLIDATED BALANCE SHEET, STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 45
<SECURITIES> 0
<RECEIVABLES> 1,580
<ALLOWANCES> 0
<INVENTORY> 2,138
<CURRENT-ASSETS> 4,008
<PP&E> 1,769
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,071
<CURRENT-LIABILITIES> 3,770
<BONDS> 0
0
0
<COMMON> 18
<OTHER-SE> 1,575
<TOTAL-LIABILITY-AND-EQUITY> 6,071
<SALES> 6,440
<TOTAL-REVENUES> 6,440
<CGS> 4,856
<TOTAL-COSTS> 6,656
<OTHER-EXPENSES> 136
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (141)
<INCOME-PRETAX> (352)
<INCOME-TAX> 0
<INCOME-CONTINUING> (352)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (352)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
