<PAGE>
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, 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 February 12, 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, 1998 and June 30, 1998
Condensed Consolidated Statements of Operations
Three Months and Six Months Ended December 31, 1998 and December 31, 1997
Condensed Consolidated Statements of Cash Flows
Three Months and Six Months Ended December 31, 1998 and December 31, 1997
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
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND JUNE 30, 1998
<TABLE>
<CAPTION>
ASSETS
(Unaudited) (Audited)
December 31, June 30,
1998 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 164,936 $ 278,297
Accounts receivable, trade net 1,558,149 2,585,473
Accounts receivable, related parties 217,656 92,396
Inventories 3,368,599 2,924,748
Prepaid expenses 96,882 52,918
----------- -----------
TOTAL CURRENT ASSETS 5,406,222 5,933,832
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and amortization 1,969,755 2,110,538
OTHER ASSETS-primarily intangible assets, net 264,476 280,607
----------- -----------
TOTAL ASSETS $ 7,640,453 $ 8,324,977
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 2,875,643 $ 2,466,175
Line of credit 1,357,836 1,965,186
Accrued expenses 437,902 605,077
Current portion of long-term debt 165,787 165,787
----------- -----------
TOTAL CURRENT LIABILITIES 4,837,168 5,202,225
----------- -----------
LONG-TERM DEBT 758,741 815,130
----------- -----------
STOCKHOLDERS' EQUITY
Common stock 17,885 17,885
Additional paid-in capital 5,248,560 5,248,560
Treasury stock (57,141) (57,141)
Retained deficit (3,262,791) (2,999,713)
Foreign currency translation adjustment 98,031 98,031
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 2,044,544 2,307,622
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 7,640,453 $ 8,324,977
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
OMNI U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS AND THE SIX MONTHS ENDED DECEMBER 31 1998 AND DECEMBER 31, 1997
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMER 31, DECEMER 31,
1998 1997 1998 1997
-------------------------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 3,409,658 $ 3,109,114 $ 7,215,648 $ 6,440,165
COST OF SALES 2,504,551 2,351,525 5,295,826 4,856,202
-------------------------- ----------- -----------
GROSS PROFIT 905,107 757,589 1,919,822 1,583,963
OPERATING EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE 1,084,609 945,027 2,048,857 1,800,102
-------------------------- ----------- -----------
OPERATING INCOME (LOSS) (179,502) (187,438) (129,035) (216,139)
-------------------------- ----------- -----------
OTHER INCOME (EXPENSE)
COMMISSION INCOME (EXPENSE) 5,867 35,483
INTEREST EXPENSE (91,169) (69,943) (174,126) (140,897)
OTHER, NET 7,955 6,109 4,600 5,316
-------------------------- ----------- -----------
TOTAL OTHER INCOME (EXPENSE) (77,347) (63,834) (134,043) (135,581)
-------------------------- ----------- -----------
NET INCOME (LOSS) $ (256,849) $ (251,272) $ (263,078) $ (351,720)
========================== =========== ===========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ (0.07) $ (0.07) $ (0.07) $ (0.10)
========================== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,523,092 3,523,918 3,523,092 3,524,702
========================== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
OMNI U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
-------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (263,078) $ (351,720)
=========== ===========
Adjustments to reconcile net (loss) to net cash provided by operating
activities:
Depreciation and amortization 197,473 215,298
Changes in operating assets and liabilities:
Accounts receivable 902,064 541,571
Inventories (443,851) 105,324
Prepaid expenses (43,964) (88,288)
Notes receivable -- 39,996
Accounts payable and accrued expenses 242,293 (328,823)
----------- -----------
Total adjustments 854,015 485,078
----------- -----------
Net cash provided by operating activities 590,937 133,358
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (40,559) (13,127)
Net cash used by investing activities (40,559) (13,127)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit 5,807,810 --
Payments on line of credit (6,415,160) (300,522)
Payments on long-term debt (56,389) (46,166)
Purchase of Treasury Stock -- (8,500)
----------- -----------
Net cash (used) provided by financing activities (663,739) (355,188)
----------- -----------
NET INCREASE (DECREASE) IN CASH (113,361) (234,957)
----------- -----------
CASH AT BEGINNING OF PERIOD 278,297 279,756
----------- -----------
CASH AT END OF PERIOD $ 164,936 $ 44,799
=========== ===========
</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, 1998, and the results of their operations and cash flows
for the six month and three month periods ended December 31, 1998, and
December 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. Basis and diluted income (loss) per share is based on the weighted average
number of shares of common stock outstanding. For the periods ended December
31, 1998 and December 31, 1997, the Company's common stock equivalents were
antidilutive and therefore were not included in the computation of basic and
diluted income (loss) per share.
3. Interest paid on debt for the three months ended December 31, 1998 and
1997, was $91,169 and $69,943 respectively. Interest paid on debt for the six
months ended December 31, 1998 and December 31, 1997 was $174,126 and
$140,897, respectively. No income taxes were paid during the three months or
six months ended December 31, 1998 and 1997, respectively.
4. SEGMENT INFORMATION: The Company and its subsidiaries are engaged in the
business of designing, developing and distributing power transmissions and
trailer and implement components used for agricultural, industrial and other
purposes. Selected financial information by business segment with respect to
these activities for the periods indicated are as follows:
<PAGE>
SEGMENT INFORMATION
<TABLE>
<CAPTION>
Corporate
Omni Butler Omni and
Domestic Domestic Foreign Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Six months ended 12/31/98:
Sales 4,765,172 1,843,539 606,937 -- 7,215,648
Sales-inter-segment -- -- 812,689 (812,689) --
Income from operations 148,509 95,844 (223,388) (150,000) (129,035)
Interest expense 117,149 46,204 10,773 -- 174,126
Identifiable assets 3,259,531 2,069,021 2,311,901 -- 7,640,453
Depreciation and amortization 33,315 31,834 132,324 -- 197,473
Capital expenditures -- -- 40,559 -- 40,559
Quarter ended September 30, 1997:
Sales 2,399,808 739,203 64,806 -- 3,203,817
Income from operations 250,394 12,301 (243,518) (75,000) (55,823)
Interest expense 50,591 20,363 -- -- 70,954
Identifiable assets 3,463,036 1,900,265 1,909,235 7,272,536
Depreciation and amortization 16,713 13,650 15,146 45,509
Capital expenditures -- -- -- --
</TABLE>
5. MAJOR CUSTOMERS: During the six months ended December 31, 1998 the Company
and its subsidiaries had consolidated sales of $873,074 to a domestic
customer for a total of 12% of consolidated sales.
6. MAJOR VENDOR: During the six months ended December 31, 1998 the Company
and its subsidiaries had consolidated purchases of $2,532,619 for a total of
approximately 48% of consolidated purchases from one vendor.
<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, 1998, the
same current ratio as of September 30, 1998 and June 30, 1998. The Company
had working capital of $569,054 as of December 31, 1998 and working capital
of $731,607 as of June 30, 1998. This balance represents a decrease of
$(162,553) from June 30, 1998. The change in working capital from June 30,
1998 was due to a decrease in accounts receivable of over 1 million dollars
and an increase in inventory of $450,000 and repayments on the line of credit
of about $600,000 with an increase in accounts payable and accrued expenses
of $250,000.
The cash balance was $164,936 as of December 31, 1998; a decrease of
$(113,361) compared to June 30, 1998. Accounts receivable as of December 31,
1998 decreased by over 1 million dollars compared to June 30, 1998. The
receivable collection period was 42 days at December 31, 1998 compared with
40 days at June 30, 1998.
Inventories increased $200,000 during the quarter ended December 31,
1998. At December 31, 1998, the Company's inventory turnover was 124 days
compared to 60 days at June 30, 1998.
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.
<PAGE>
RESULTS OF OPERATIONS - RESULTS FOR THE QUARTER ENDED DECEMBER 31, 1998
COMPARED WITH THE QUARTER ENDED DECEMBER 31, 1997
The Company had a net loss ($256,849) ($0.07 per share) for the
quarter ended December 31, 1998, compared with a net loss of $251,272 ($0.07
per share) for the quarter ended December 31, 1997. The Company had an
operating loss of ($179,502) for the quarter ended December 31, 1998 compared
to operating loss of ($187,438) for the quarter ended December 31, 1997. The
net loss is primarily attributed to the lower margin product mix and
operating costs of the Shanghai facility as it increases production.
Consolidated net sales were $3,409,658 in the second quarter of
fiscal year 1999; a 10% increase over net sales of $3,109,114 in the second
quarter of fiscal year 1998. Omni Gear-Registered Trademark- product sales
continued to be strong during the second quarter representing 75% of total
sales compared to 71% of total sales for the same period last year, with
Butler(TM) sales representing 25% of total sales compared to 27% of total
sales for the same period last year.
Gross profit, as a percentage of sales, was 26.5% for the quarter
ended December 31, 1998. This compares to a 24% margin for the quarter ended
December 31, 1997.
Selling, general and administrative expenses were $1,084,609 for the
quarter ended December 31, 1998, an increase of $140,000. These expenses were
about 32% of net sales compared to 30% for the quarter ended December 31,
1997.
RESULTS OF OPERATIONS - RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
COMPARED WITH THE SIX MONTHS ENDED DECEMBER 31, 1997
The Company had a net loss of ($263,078) ($0.07 per share) for the
six months ended December 31, 1998, compared with a net loss of ($351,720)
($0.10 per share) for the six months ended December 31, 1997. The Company had
an operating loss of ($129,035) for the six months ended December 31, 1998
compared to operating loss of $216,139 for the six months ended December 31,
1997.
Consolidated net sales were $7,215,648 in the six months ended
December 31, 1998; a 12% increase over net sales of $6,440,165 in the six
months ended December 31, 1997. Omni Gear-Registered Trademark- product sales
continue to be strong during the first half representing 75% of total sales
compared to 71% of total sales for the same period last year, with Butler(TM)
sales representing 25% of total sales compared to 25% of total sales for the
same period last year. Production from the Shanghai facility for the six
months ended December 31, 1998 was approximately $950,000 compared to $42,018
for the six months ended December 31, 1997.
For the six months ended December 31, 1998, Omni Gear-Registered
Trademark- sales were $4,765,172. Butler(TM) product sales were $1,843,539 an
increase of $316,413 compared to sales of $1,527,126 for the same period last
year.
<PAGE>
Although the Company has been increasing its first and second
quarter sales, the Company historically has experienced 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 1999 will continue
in that sales pattern.
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 $2,048,857 for the
six months ended December 31, 1998, an increase of $248,755 compared to SG&A
of $1,800,102 for the six months ended December 31, 1997. These expenses were
about 28% of net sales compared to 27% for the six months ended December 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.
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. Late in the second quarter of fiscal year 1999, SOG received an order
for monthly deliveries of its largest planetary drive. Its scheduled
production for the remainder of fiscal 1999 will contribute to the Company's
overall profitability.
YEAR 2000.
The Company recognizes the need to ensure that its operations will
not be adversely impacted by the Year 2000 software issues. Processing errors
potentially arising from calculations using the Year 2000 date are a known
risk. The Company is in the process of identifying internal software and
imbedded technology Year 2000 risks. The Company has performed internal test
operations using dates subsequent to Year 2000 (specifically, the Company's
financial and inventory systems) and has not encountered problems which are
material to the Company's operations. The Company anticipates the completion
of the identification and verification process to be completed within fiscal
year 1999.
<PAGE>
More specifically, the Company has performed test operations on its
operating software and hardware. The Company maintains all customer and
vendor information through "Maximizer," a software program developed by
Multiactive in Vancouver, B.C. The Company has tested and received written
assurances of this programs year 2000 compliance. The Company maintains
inventory, including purchase orders and sales orders and financial reporting
through "Keystone," a software company based out of Houston. The Company has
received written assurances that the upgraded system, to be installed within
the next ninety (90) days, is year 2000 compliant. While the Company has not
identified any problems with its Novell local area network, the Company has
determined to upgrade its network to coincide with the upgraded "Keystone"
software. Total cost for the Houston facility conversion is estimated to be
approximately $10,000 over the next ninety (90) days.
The Kentucky facility utilizes manual machines for its
manufacturing, which are not operated by computer driven controls. The
Kentucky facility maintains inventory manually, and has already completed
installation and is operating financial controls using "Cima." The Company
has received written assurances that "Cima" is year 2000 compliant.
The Company's Shanghai facility is heavily reliant on manual
machining equipment, which are not operated by computer driven controls. In
addition, the Shanghai facility utilizes HAAS CNC equipment. The CNC
equipment is manufactured by HAAS, a California based company. The Company
has received written assurances that such equipment is year 2000 compliant.
The Shanghai facility tracks inventory and financial operations with "New
Views." The Company has received written assurances that "New Views" is year
2000 compliant. While the Shanghai facility has not identified any problems
with its local area network, it is in the process of upgrading its network,
including the server and additional work stations, to a year 2000 compliant
platform. Total cost for the Shanghai facility conversion is estimated to be
less than $15,000 over the next 120 days.
As a result of the Company's year 2000 assessment, the Company has
not encountered problems which have not already been addressed or that would
have a material effect on the Company's business, results of operations, or
financial condition. The Company has not developed a contingency plan in the
event a material issue arises.
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
<PAGE>
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, 1998.
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 12, 1999 OMNI U.S.A., INC.
By: /s/ Jeffrey K. Daniel
-------------------------------
Jeffrey K. Daniel
President and Chief Executive Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q SB
PERIOD ENDING DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 164,936
<SECURITIES> 0
<RECEIVABLES> 1,558,149
<ALLOWANCES> 30,000
<INVENTORY> 3,368,599
<CURRENT-ASSETS> 5,406,222
<PP&E> 1,969,755
<DEPRECIATION> 429,963
<TOTAL-ASSETS> 7,640,453
<CURRENT-LIABILITIES> 4,837,168
<BONDS> 0
0
0
<COMMON> 17,885
<OTHER-SE> 2,026,659
<TOTAL-LIABILITY-AND-EQUITY> 7,640,453
<SALES> 7,215,648
<TOTAL-REVENUES> 7,215,648
<CGS> 5,295,826
<TOTAL-COSTS> 7,394,683
<OTHER-EXPENSES> 40,083<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (174,126)
<INCOME-PRETAX> (129,035)
<INCOME-TAX> 0
<INCOME-CONTINUING> (263,078)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (263,078)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
<FN>
<F1>Includes commission income of $35,483 and other income of $4,600.
</FN>
</TABLE>
