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 March 31, 1998
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 May 14, 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
March 31,1998 and June 30, 1997
Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended March 31, 1998 and March 31,
1997
Condensed Consolidated Statements of Cash Flows
Three Months and Nine Months Ended March 31, 1998 and March 31,
1997
Notes to Condensed Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition and Results
of Operations
2
<PAGE>
OMNI U.S.A., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND JUNE 30, 1997
ASSETS
March 31, 1998 June 30, 1997
----------- -----------
CURRENT ASSETS
Cash .......................................... $ 63,333 $ 279,756
Accounts receivable, trade, net ............... 2,150,192 2,060,436
Accounts receivable, related parties .......... 75,639 60,654
Inventories ................................... 3,035,100 2,243,751
Prepaid expenses .............................. 37,607 130,457
Notes Receivable .............................. 13,340 66,668
----------- -----------
TOTAL CURRENT ASSETS .............. 5,375,211 4,841,722
----------- -----------
PROPERTY AND EQUIPMENT, net of
Accumulated depreciation and
amortization .................................. 1,737,601 1,846,332
----------- -----------
OTHER ASSETS
Organizational cost ........................... 23,263 39,615
Intangible assets ............................. 231,148 318,345
Long term deposits ............................ 0 60,559
----------- -----------
TOTAL OTHER ASSETS ................. 254,411 418,519
----------- -----------
TOTAL ASSETS ..................................... $ 7,367,223 $ 7,106,573
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable .............................. $ 2,218,712 $ 1,562,493
Line of credit ................................ 1,828,448 1,677,969
Accrued expenses .............................. 633,046 941,947
Current portion of long-term debt ............. 226,151 226,151
----------- -----------
TOTAL CURRENT LIABILITIES ......... 4,906,364 4,408,560
----------- -----------
LONG-TERM DEBT ................................... 649,085 753,854
----------- -----------
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) ................... (3,566,905) (3,371,676)
Foreign currency translation adjustment ....... 169,375 98,031
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ........ 1,811,774 1,944,159
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ........ $ 7,367,223 $ 7,106,573
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
OMNI U.S.A., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND THE NINE MONTHS
ENDED MARCH 31, 1998 AND MARCH 31, 1997
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
31-MAR-98 31-MAR-97 31-MAR-98 31-MAR-97
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
NET SALES ................ $ 4,450,351 $ 4,219,926 $ 10,890,516 $ 9,973,345
----------- ----------- ------------ -----------
COST OF SALES ............ 3,240,987 3,220,749 8,063,841 7,500,120
----------- ----------- ------------ -----------
Gross Profit ....... 1,209,364 999,177 2,826,675 2,473,225
----------- ----------- ------------ -----------
OPERATING EXPENSES
Selling, general and
administrative ...... 991,582 892,257 2,825,034 2,433,097
----------- ----------- ------------ -----------
Operating income
(loss) ........... 217,782 106,920 1,641 40,128
----------- ----------- ------------ -----------
OTHER INCOME (EXPENSE)
Interest expense ..... (79,663) (67,883) (220,560) (157,122)
Other, net ......... 18,372 20,478 23,688 64,156
----------- ----------- ------------ -----------
OTHER INCOME (EXPENSE) ... (61,291) (47,405) (196,872) (92,966)
----------- ----------- ------------ -----------
NET INCOME (LOSS) ........ $ 156,491 $ 59,515 $ (195,231) $ (52,838)
=========== =========== ============ ===========
NET LOSS PER COMMON SHARE $ 0.04 $ 0.01 $ (0.06) $ (0.08)
=========== =========== ============ ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,523,092 3,020,319 3,524,181 1,967,320
=========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE>
OMNI U.S.A., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS AND THE NINE MONTHS
ENDED MARCH 31, 1998 AND MARCH 31, 1997
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
31-MAR-98 31-MAR-97 31-MAR-98 31-MAR-97
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................. 156,491 59,515 (195,231) (52,838)
-------- -------- -------- ----------
Adjustments to reconcile net income
(loss) to net cash (used) provided
by operating activities:
Depreciation and amortization 55,416 44,238 166,014 159,514
Changes in operating assets
and liabilities:
Accounts receivable ...... (584,062) 66,740 (33,397) (339,285)
Inventories .............. (896,673) 217,597 (791,349) (373,815)
Prepaid expenses ......... 181,138 5,000 92,850 5,000
Long Term Deposits ....... 60,559 0 60,559 0
Intangible Assets ........ (21,124) 0 103,551 0
Notes Receivable ......... 13,332 95,375 53,328 51,737
Accounts payable and
accrued expenses ...... 685,242 (69,433) 347,325 254,534
-------- -------- -------- ----------
Total adjustments ..... (506,172) 359,517 (1,119) (242,315)
-------- -------- -------- ----------
Net cash (used)
provided by operating
Activities ......... (349,681) 419,032 (196,350) (295,153)
-------- -------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures ............ (24,183) (71,683) (57,283) (1,450,659)
-------- -------- -------- ----------
Net cash used by
investing activities (24,183) (71,683) (57,283) (1,450,659)
-------- -------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings/(Payments) on line
of credit ........................ 451,001 (67,360) 150,479 895,930
Payments on long-term debt ........ (58,603) 0 (104,769) 0
Purchase of Treasury Stock ........ 0 (11,813) (8,500) (14,813)
Proceeds from equity issues ....... 0 0 0 732,604
-------- -------- -------- ----------
Net cash provided/(used) by
financing activities ...... 392,398 (79,173) 37,210 1,613,721
-------- -------- -------- ----------
NET INCREASE(DECREASE) IN CASH ....... 18,534 268,176 (216,423) (132,091)
CASH AT BEGINNING OF PERIOD .......... 44,799 94,414 279,756 494,681
-------- -------- -------- ----------
CASH AT END OF PERIOD ................ 63,333 362,590 63,333 362,590
======== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<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 are 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 March 31, 1998, and the
results of their operations and cash flows for the nine month and three month
periods ended March 31, 1998, and March 31, 1997, 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 income /(loss) per common share is calculated as follows:
FOR THE FOR THE FOR THE FOR THE
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
31-MAR-98 31-MAR-97 31-MAR-98 31-MAR-97
------- ------- -------- --------
Net Income (Loss) ................. 156,491 59,515 (195,231) (52,838)
Interest on Equity Contract
Notes ............................. -- (18,366) -- (36,732)
Dividends on Preferred Stock ...... -- (8359) -- (16,718)
------- ------- -------- --------
Net Income (Loss )attributable
to Common Shares ................ 156,491 32,790 (195,231) (133,013)
======= ======= ======== ========
3. Interest paid on debt for the three months ended March 31, 1998 and 1997, was
$79,663 and $67,883 respectively. Interest paid on debt for the nine months
ended March 31, 1998 and March 31, 1997 was $220,560 and $157,122, respectively.
No income taxes were paid during the three months or nine months ended March 31,
1998 and 1997, respectively.
6
<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 March 31, 1998, the same current
ratio as of December 31, 1997, September 30, 1997 and June 30, 1997. The Company
had working capital of $468,847 as of March 31, 1998 and working capital of
$433,162 as of June 30, 1997. This represents an increase of $35,685 from June
30, 1997. The change in working capital from June 30, 1997 was due to an
increase in accounts receivable of $104,741 and an increase in inventory of
$791,349 and the line of credit of $150,479, together with an increase in
accounts payable and accrued expenses of $347,325, and a decrease in prepaid
expenses of $92,850 and notes receivable of $53,328.
The cash balance was $63,333 as of March 31, 1998; a decrease of $216,423
compared to June 30, 1997. The decrease in cash is substantially related to use
of cash to fund inventory purchases and receivables during period of higher
sales activity. Accounts receivable balance of $2,150,192 as of March 31, 1998
increased $104,741 compared to June 30, 1997. The receivable collection period
decreased from 52 days to 43 days from June 30, 1997 to March 31, 1998,
respectively.
Inventory balance as of March 31, 1998 was $3,035,100; an increase of
$791,349 compared to June 30,1997. At March 31, 1998, the Company's inventory
turnover was 3.6 times per year compared to 4.2 times per year at June 30, 1997.
The Company has increased inventory to meet higher customer demands during peak
sales season.
The increase in receivables, inventories and the increase in payables
resulted from the seasonal increase in activity through the third quarter ended
March 31,1998, and is expected to continue through the fiscal year end June
30,1998.
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, if required.
The Company repurchased Common Stock under a repurchase program announced
in 1996. The repurchase program expired December 31, 1997. The Company
repurchased 57,500 shares at an average cost per share of $0.99. The Company
intends to use these shares for acquisitions or for employee awards.
7
<PAGE>
RESULTS OF OPERATIONS - RESULTS FOR THE QUARTER ENDED MARCH 31, 1998 COMPARED
WITH THE QUARTER ENDED MARCH 31,1997
The Company had net income of $156,491 ($0.04 per share) for the quarter
ended March 31, 1998, compared with net income of $59,515 ($0.01 per share) for
the quarter ended March 31,1997. 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 income of $217,782 for the
quarter ended March 31, 1998 compared to operating income of $106,920 for the
quarter ended March 31, 1997. The net increase is partially due to new product
introduction and seasonal sales increases.
Consolidated net sales were $4,450,351 in the third quarter of fiscal year
1998; a 5.5% increase over net sales of $4,219,926 in the third quarter of
fiscal year 1997. Omni Gear(R) product sales continued to be strong during the
third quarter representing 75% of total sales compared to 82% of total sales for
the same period last year, with Butler(TM) sales representing 22% of total sales
compared to 16% of total sales for the same period last year. Omni Resources
sales were 3% of sales compared to 2% for the same period last year. The Company
ended the quarter with a consolidated backlog of approximately $6,000,000, which
will contribute to fourth quarter performance.
For the quarter ended March 31, 1998, Omni Gear(R) sales were $3,342,539,
a decrease of $118,525 over the same period last year. Omni Resources sales were
$126,863, an increase of $24,898 and Butler(TM) product sales were $980,949, an
increase of $311,049 over the same period last year. The decrease in Omni
Gear(R) and increase in Butler(TM) sales is partially due to a realignment of
product lines as a result of the Butler Products acquisition. Production from
the Shanghai facility was $295,653 for the quarter ended March 31, 1998 compared
to $65,942 for the same period last year.
Gross profit, as a percentage of sales, was approximately 26% for the
quarter ended March 31, 1998.This compares to a 24% margin for the quarter ended
March 31, 1997.
Selling, general and administrative expenses were $991,582 for the quarter
ended March 31, 1998, an increase of $99,325 or approximately 10% over the
quarter ended March 31, 1997. These expenses were approximately 23% of net sales
compared to 22% for the quarter ended March 31, 1997. The increase in these
expenses occurred in the Shanghai facility, partially related to freight and
duty fees of additional equipment and other expenses related to increasing
production from that facility, and related to increased production and new
product introductions by Butler(TM).
8
<PAGE>
RESULTS OF OPERATIONS - RESULTS FOR THE NINE MONTHS ENDED MARCH 31, 1998
COMPARED WITH THE NINE MONTHS ENDED MARCH 31, 1997
The Company had a net loss of $195,231 ($0.06 per share) for the nine
months ended March 31, 1998, compared with a net loss of $52,838 ($0.08 per
share) for the nine months ended March 31, 1997. The most significant factors in
the net loss through the nine months ended March 31, 1998 versus the nine months
ended March 31,1997 is the late season push in sales experienced by the Company
in the first quarter ended September 30,1997. The Company had an operating
income of $1,641 for the nine months ended March 31,1998, compared to operating
income of $40,128 for the nine months ended March 31,1997. 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.
Consolidated net sales were $10,890,516 in the nine months ended March 31,
1998; a 10% increase over net sales of $9,973,345 in the nine months ended March
31, 1997. Omni Gear(R) product sales represent 73% of total sales compared to
81% of total sales for the same period last year. Butler(TM) product sales
represent 24% of total sales compared to 13% of total sales for the same period
last year. Omni Resources sales represent 3% of total sales compared to 6% 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 and a realignment of product lines subsequent
to the acquisition.
For the nine months ended March 31, 1998, Omni Gear(R) sales were
$7,946,411, a decrease of $184,217 compared with the same period last year. Omni
Resources sales were $436,030, a decrease of $69,712 and Butler(TM) product
sales were $2,559,427 an increase of $1,209,448 for the period ended March 31,
1998. Production from the Shanghai facility was $715,671 for the nine months
ended March 31, 1998 compared to $208,757 for the same period last year. The
nine month period ended March 31, 1998 included nine 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 March 31, 1997.
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
$6,000,000, which will contribute to fourth quarter performance.
Gross profit, as a percentage of sales, was approximately 26% for the nine
months ended March 31, 1998. This compares to a 25% margin for the nine months
ended March 31, 1997, due primarily to overall product mix.
Selling, general and administrative expenses were $2,825,034 for the nine
months ended March 31, 1998, an increase of $391,937 or approximately 17% over
the nine months ended March 31, 1997. These expenses were approximately 26% of
net sales compared to 25% for the nine months ended March 31, 1997. The increase
in these expenses occurred 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 and related to increased production and
new product introductions by Butler(TM).
9
<PAGE>
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.
10
<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.
11
<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: May 15, 1998 OMNI U.S.A., INC.
By: /S/ JEFFREY K. DANIEL
Jeffrey K. Daniel
President and Chief Executive
Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM MARCH 31,1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 63
<SECURITIES> 0
<RECEIVABLES> 2,239
<ALLOWANCES> 0
<INVENTORY> 3,035
<CURRENT-ASSETS> 5,375
<PP&E> 1,737,601
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,367
<CURRENT-LIABILITIES> 4,906
<BONDS> 0
0
0
<COMMON> 18
<OTHER-SE> 1,794
<TOTAL-LIABILITY-AND-EQUITY> 7,367
<SALES> 10,891
<TOTAL-REVENUES> 10,891
<CGS> 8,064
<TOTAL-COSTS> 2,825
<OTHER-EXPENSES> 24
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 221
<INCOME-PRETAX> (195)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (195)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
