SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
Commission file number 0-24506
Delta-Omega Technologies, Inc.
(Exact name of small business issuer as specified in its Charter)
Colorado 84-1100774
(State of Incorporation) (I.R.S. Employer
Identification Number)
119 Ida Road, Broussard, Louisiana 70518
(Address of principal executive offices) (Zip Code)
(318) 837-3011
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to
be filed by Sections 13 or 15(d) of the Securities 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........
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the
issuer's classes of common equity as of the latest practicable
date:...12,760,320 shares of common stock as of March 31, 1997
This document is comprised of pages
Delta-Omega Technologies, Inc.
Index to Quarterly Report
Part I
Financial Statements
Item 1. Financial Statements Page
Consolidated Balance Sheet as of
February 28, 1997 .. . .. . .. . .. . .. . .. . . 2
Consolidated Statements of Operations,
three and six months ended February 28,
1997 and 1996.. . .. . .. . .. . .. . .. . .. . . 3
Statements of Cash Flows, six months ended
February 28, 1997 and 1996. .. . .. . .. . .. . . 4
Notes to consolidated financial
statements . .. . .. . .. . .. . .. . .. . .. . . 5
Item 2. Management's discussion and analysis
of financial condition and
results of operations . .. . .. . .. . . 5
Part II
Other Information
Item 1. Legal Proceedings. .. . .. . .. . .. . . 8
Item 2. Changes in Securities . .. . .. . .. . . 8
Item 3. Defaults Upon Senior Securities . .. . . 8
Item 4. Submission Of Matters To A Vote Of
Security Holders . .. . .. . .. . .. . . 8
Item 5. Other Information. .. . .. . .. . .. . . 8
Item 6. Exhibits And Reports on Form 8-K. .. . . 8
Signatures . .. . .. . .. . .. . .. . .. . .. . . 9
<PAGE>
Part I.
Item 1. Financial Statements
Delta-Omega Technologies, Inc.
Consolidated Balance Sheet
(Unaudited)
ASSETS
February 28,
1997
Current Assets
Cash and equivalents $ 989,952
Accounts and notes receivable
Trade, net of allowance for losses 149,175
Other 60,000
Inventories 170,352
Prepaid expenses 8,158
Total current assets 1,377,637
Property and equipment, net of
accumulated depreciation 469,538
Intangible assets, net of
accumulated amortization 127,005
Other assets 10,212
Total assets $ 1,984,392
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable 144,164
Current maturities of
long-term debt and leases 22,350
Other current and accrued
liabilities 16,036
Total current liabilities 182,550
Long-term debt and leases, net
of current maturities 48,724
Shareholders' equity:
Convertible, 7 percent cumulative,
non-participating preferred
stock, $.001 par value, shares
authorized, 40,000,000; issued
and outstanding 1,595,000
Series B, 2,471,667 Series C 4,067
Common stock, $.001 par value,
shares authorized, 100,000,000;
issued and outstanding 12,760,320 12,760
Additional paid-in capital 10,324,060
Retained deficit (8,587,769)
Total shareholders' equity 1,753,118
Total liabilities and
shareholders' equity $ 1,984,392
See accompanying notes to consolidated financial
statements.<PAGE>
Delta-Omega Technologies, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
February 28, February 28,
1997 1996 1997 1996
Net sales and gross
revenues
Net product sales $ 303,475 $ 158,910 $ 599,085 $ 296,764
Cost of sales and
revenues 222,442 123,894 443,902 189,553
Gross profit 81,033 35,016 155,183 107,211
Cost and expenses
Selling, general
and administrative 266,794 294,683 547,275 704,780
Research and
development 79,005 31,039 97,311 45,225
Operating Loss (264,766) (290,706) (489,403)(642,794)
Other income, net 8,590 2,696 16,681 8,549
Interest expense (1,367) (1,499) (3,079) (2,632)
Net loss available to
common shareholders $(257,543) $(289,509)$(475,801)$(636,877)
Weighted average
shares outstanding 12,755,320 12,440,140 12,743,597 12,429,474
Net loss per common
share $ (.02) $ (.02) $ (.04) $ (.05)
See accompanying notes to consolidated financial
statements.
<PAGE>
Delta-Omega Technologies, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
February 28,
1997 1996
Net cash used in operating
activities $ (491,943) $ (573,623)
Cash flows from investing
activities:
Property acquisitions (49,235) (8,257)
Patent costs (15,427) (4,844)
Proceeds from sale of
property and equipment 800 0
Deposits 0 980
Net cash flows used in investing
activities (63,862) (12,121)
Cash flows from financing
activities:
Proceeds from borrowing 25,836 40,000
Principal payments on notes
payable (4,200) (3,903)
Capital lease financing (12,031) (17,296)
Net cash flows provided by
(used in) financing activities 9,604 18,801
Net increase (decrease) in cash
and equivalents (546,200) (566,943)
Cash and equivalents, beginning
of period 1,536,152 588,418
Cash and equivalents, end
of period $ 989,952 $ 21,475
See accompanying notes to consolidated financial
statements.
<PAGE>
Delta-Omega Technologies, Inc.
Notes to Consolidated Financial Statements
February 28, 1997
Note A: Basis of presentation
The financial statements presented herein include the accounts of
Delta-Omega Technologies, Inc. and Delta-Omega Technologies, Ltd.
Intercompany balances and transactions have been eliminated in
consolidation.
The financial statements presented herein have been prepared by
the Company in accordance with the accounting policies in its
annual 10-KSB report for the year ended August 31, 1996 and
should be read in conjunction with the notes thereto. Results of
operations for the interim periods are not necessarily indicative
of results of operations which will be realized for the fiscal
year ending August 31, 1997.
In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) which are necessary for a fair
presentation of operating results for the interim periods
presented have been made.
Interim financial data presented herein are unaudited.
Note B: Shareholders' equity
The Company entered into four agreements to issue stock options
in lieu of cash for technical and marketing services rendered for
the period May 1, 1996 through January 31, 1997 and in accordance
with the terms of certain employment agreements. As per these
agreements, on March 10, 1997 the Company issued 32,330 stock
options with exercise prices ranging from $.75 to $1.00 per
share. The stock options granted are not part of the Company's
non-qualified stock option plan established in 1991. There was
no compensation expense recorded upon issuance of these options
because the exercise price exceeded the market price of the
Company's common shares on the measurement date. Therefore,
since there was no compensation expense associated with these
options, the Company properly provided no accounting recognition.
For meeting cash requirements, the Company will continue to use a
stock option arrangement that is not part of the Company's 1991
non-qualified stock option plan.
Item 2. Management's discussion and analysis of financial
condition and results of operations
This Quarterly Report on Form 10-QSB includes certain statements
that may be deemed to be "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical
facts, included in this Form 10-QSB that address activities,
events or developments that the Company expects, believes or
anticipates will or may occur in the future, including such
matters as future capital, research and development expenditures
(including the amount and nature thereof), repayment of debt,
business strategies, expansion and growth to the Company's
operations and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses
made, by the Company in light of its experience and its
perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate
in the circumstances. Such statements are subject to a number of
assumptions, risks and uncertainties, including general economic
and business opportunities (or lack thereof) that may be
presented to and pursued by the Company, changes in laws or
regulations and other factors, many of which are beyond the
control of the Company. Readers are cautioned that any such
statements are not guarantees of future performance and that
actual results or developments may differ materially from those
projected in the forward-looking statements.
RESULTS OF OPERATIONS
For the three and six months ended February 28, 1997, revenues
totaled $303,475 and $599,085 respectively as compared to
$158,910 and $296,764 for the same periods in 1996. Gross
margins as a percent of revenue for the six months ended
decreased due to a higher percentage of the Company's total sales
being derived from markets that are more competitive and yield
lower margins. As sales volumes continue to improve, average
unit cost will decrease, thereby increasing gross margins.
For the three and six months ended February 28, 1997, operating
expenses totaled $345,799 and $644,586 respectively as compared
to $325,722 and $750,005 for the same periods in 1996. This
resulted in operating losses of $257,543 and $475,801
respectively as compared to the losses of $289,509 and $636,877
for the same periods in 1996.
Revenue for the current period was higher as compared to the same
period a year earlier. This increase was due primarily to the
increased sales derived from the supply contract to furnish a
military aircraft cleaning compound for one (1) year and a
contract to supply chemical cleaning products to a large
specialized waste handling and container cleaning company that
serves the oil industry in the Gulf Coast region. Through
February 28, 1997, the U.S. Air Force contract generated
approximately $270,000 in sales. Operating expenses for the
current period as compared to the same period a year earlier
decreased due to the implementation of divisional budgets and
stringent cost controls instituted by management. Research and
Development increased for the current period as compared to the
same period in fiscal year 1996 due primarily to the expenses
incurred during the demonstration of a new technology for
recovering barite and oil from spent drilling muds.
Other income consisting primarily of interest income was $16,681
for the six months, an increase of $8,132 when compared with the
same period in the prior year. This resulted from an increase in
investment cash.
Interest expense was $3,079 for the six months as compared to
$2,632 for the same period in the prior year. This increase is
due to debt incurred to finance equipment purchases.
LIQUIDITY AND CAPITAL RESOURCES
Operating cash at February 28, 1997 was $989,952. Operations
used $546,200 for the second quarter of fiscal year 1997 as
compared to $566,943 in the second quarter of fiscal year 1996.
This decrease was due primarily to the higher level of sales.
The Company enhanced its liquidity in the third quarter of fiscal
year 1996 by completing a private offering of Series C Preferred
Stock solely to accredited investors and raised approximately
$1.8 million. Commencing in June 1996 as amended in August 1996,
the Company offered Units of 2,471,667 Shares of Series C
Preferred Stock and Class Z Warrants at an offering price of $.75
per Unit, with a minimum investment of 25,000 Units, or $18,750.
The Company paid ten percent (10%) concessions to certain
broker/dealers who consummated sales of the Units. Proceeds from
this offering are used to fund the recurring losses and negative
cash flows until the Company is able to generate sufficient sales
to become profitable. A portion of the proceeds were used to
expand the Company's technical capabilities, with the addition of
advanced degreed personnel and the purchase of specialized
laboratory equipment.
On May 17, 1996, the Company announced the award of its first
major contract to supply the United States Air Force with DOT
111/113TM to be utilized for cleaning military aircraft and
aerospace ground equipment. The one-year contract provides for an
optional two-year extension and has the potential to generate
approximately $600,000 annually. The Company was notified in
April, 1997 that the contract option was exercised for the twelve
month period beginning June 1, 1997.
The Company has successfully demonstrated a new technology for
recovering barite and oil from spent drilling muds. This unique
technology has commercial potential for the oil and gas
exploration business. A full scale on-site demonstration was
conducted in January 1997. All indications to this point are
positive and the economic viability is presently being evaluated.
Management believes, although no assurances can be made, that
sales will continue to increase and cash flows from operations
will improve in fiscal year 1997. In an effort to improve sales,
the Company announced the selection of a Vice President of Sales
and Marketing. Mr. David "Andy" Gordon will assume this position
beginning on May 5, 1997. He brings a proven record of sales
management abilities gained from over fifteen years experience
with the Water Energy Management Group of Nalco Chemical Company.
The Company has no unused credit facilities at this time.
Part II
Other Information
Item 1. Legal Proceedings
not applicable
Item 2. Changes in Securities
not applicable
Item 3. Defaults Upon Senior Securities
not applicable
Item 4. Submission Of Matters To Vote Of Security Holders
not applicable
Item 5. Other information
not applicable
Item 6. Exhibits And Reports On Form 8-K
a) Exhibits
not applicable
b) Reports On Form 8-K
not applicable
<PAGE>
SIGNATURES
The financial information furnished herein has not been audited
by an independent accountant; however, in the opinion of
management, all adjustments (only consisting of normal recurring
accruals) necessary for a fair presentation of the results of
operations for the three months and six months ended February 28,
1997 and 1996 have been included.
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Delta-Omega Technologies, Inc.
(Registrant)
/s/ James V. Janes III
James V. Janes III
President
(Principal Officer)
/s/ Marian A. Bourque
Marian A. Bourque
Date: April 14, 1997 Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 989,952
<SECURITIES> 0
<RECEIVABLES> 239,175
<ALLOWANCES> (30,000)
<INVENTORY> 170,352
<CURRENT-ASSETS> 1,377,637
<PP&E> 923,659
<DEPRECIATION> (454,121)
<TOTAL-ASSETS> 1,984,392
<CURRENT-LIABILITIES> 182,550
<BONDS> 0
0
4,067
<COMMON> 12,760
<OTHER-SE> 1,736,291
<TOTAL-LIABILITY-AND-EQUITY> 1,984,392
<SALES> 158,910
<TOTAL-REVENUES> 158,910
<CGS> 123,894
<TOTAL-COSTS> 123,894
<OTHER-EXPENSES> 325,722
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,499
<INCOME-PRETAX> (289,509)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (289,509)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
