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 November 30, 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:...13,270,231 shares of common
stock as of December 31, 1997
This document is comprised of 11 pages
Delta-Omega Technologies, Inc.
Index to Quarterly Report
Part I
Financial Statements
Item 1. Financial Statements Page
Consolidated Balance Sheet as of
November 30, 1997. . . . . . . . . . . . . . 2
Consolidated Statements of Operations,
three months ended November 30,
1997 and 1996. . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows,
three months ended November 30, 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. . . . . . . . . . . .. . . 9
Item 2. Changes in Securities . . . .. . . . . . .. . 9
Item 3. Defaults Upon Senior Securities. . .. . . . . 9
Item 4. Submission Of Matters To A Vote
Of Security Holders . . . . . . . . . . . . 9
Item 5. Other Information. . . . . . . . . . . . . . 9
Item 6. Exhibits And Reports on Form 8-K .. . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . 10
Part I. Item 1. Financial Statements
Delta-Omega Technologies, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
November 30,
1997
______________
<S> <C>
Current Assets
Cash and equivalents $59,725
Accounts and notes receivable
Trade, net of allowance for losses 150,252
Other 5,615
Inventories 231,019
Prepaid expenses 14,979
__________
Total current assets 461,590
Property and equipment, net of
accumulated depreciation 480,544
Intangible assets, net of
accumulated amortization 135,798
Other assets 11,383
___________
Total assets $1,089,315
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable 164,514
Current maturities of long-term
debt and leases 22,105
Other current and accrued liabilities 51,069
__________
Total current liabilities 237,688
Long-term debt and leases, net of
current maturities 32,124
Shareholders' equity:
Convertible, 7 percent cumulative,
non-participating preferred stock,
$.001 par value, shares authorized,
40,000,000; issued and outstanding
1,590,700 series B, 2,471,667 series C
4,062 Common stock, $.001 par value,
shares authorized, 100,000,000; issued
and outstanding 13,230,235 13,230
Additional paid-in capital 10,562,641
Retained deficit (9,760,430)
____________
Total shareholders' equity 819,503
____________
Total liabilities and shareholders' equity $1,089,315
============
</TABLE>
See accompanying notes to consolidated financial statements.
Delta-Omega Technologies, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
1997 1996
______ ______
<S> <C> <C>
Net sales and gross revenues
Net product sales $322,029 $295,610
Cost of sales and revenues 213,900 221,460
_________ __________
Gross profit 108,129 74,150
Cost and expenses
Selling, general and
administrative 306,612 280,481
Research and development 104,575 18,306
_________ ___________
Operating Loss (303,058) (224,637)
Other income, net 2,418 8,091
Interest expense (2,628) (1,712)
Net loss available to common
shareholders $(303,268) $(218,258)
========== ===========
Weighted average shares
outstanding 13,230,235 12,731,873
============ ============
Net loss per common share $ (.02) $ (.02)
</TABLE>
See accompanying notes to consolidated financial statements.
Delta-Omega Technologies, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
1997 1996
________ ________
<S> <C> <C>
Net cash used in
operating activities $(276,407) $(248,679)
Cash flows from investing
activities:
Property acquisitions (5,204) (15,214)
Patent costs (20) (427)
Deposits (940) 0
__________ ___________
Net cash flows used in
investing activities (6,164) (15,641)
Cash flows from financing activities:
Principal payments on bank
notes payable (2,296) (2,036)
Capital lease financing and
other notes (1,982) (1,807)
___________ ___________
Net cash flows provided by (used in)
financing activities (4,278) (3,843)
Net increase (decrease) in
cash and equivalents (286,849) (268,163)
Cash and equivalents,
beginning of period 346,574 1,536,152
___________ ____________
Cash and equivalents,
end of period $59,725 $1,267,989
=========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
Delta-Omega Technologies, Inc.
Notes to Consolidated Financial Statements
November 30, 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, 1997 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, 1998.
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
During the first quarter of fiscal 1998, Baer & Company, L.L.C. was
issued 39,996 shares of $.001 par value common stock for expenses
incurred from July 1996 through November 1997 while raising funds on
behalf of the Company. 27,370 shares were issued at a price of $.43775
per share. The remaining 12,626 shares were issued at a price of $.6661
per share. The prices per share are based on the average of the bid and
last trade value of the Company's stock during the period in which the
fund raising expenses were incurred.
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 months ended November 30, 1997, revenues totaled $322,029
as compared to $295,610 for the same period in 1996. The increase in
revenue was due primarily to the expanded sales effort of the Company's
new oilfield specialty product line. The Company expects increased sales
from these specialty chemicals and processes as more product recognition
is gained in the oil and gas markets. In November 1997, the Company
acquired three (3) new Underwriters Laboratories listings for its
firefighting foam concentrate product line. These listings enable the
Company to pursue sales in the refinery, petro-chemical and marine
industries.
Cost of sales as a percentage of sales for the three months ended
decreased due to improved efficiencies in the Company's manufacturing
facility and increased unit volume of products manufactured. If sales
continue to increase, the Company expects production volume to increase,
therefore costs of sales as a percentage of sales will decrease until
full production capacity is reached.
For the three months ended November 30, 1997, selling, general and
administrative expenses totaled $306,612 as compared to $280,481 for the
same period in fiscal 1997. Selling, general and administrative
expenses for the current period increased due primarily to the addition
of a Vice President of Sales and Marketing and increased travel expenses.
Research and Development expenses for the current period totaled $104,575
as compared to $18,306 for the same period in fiscal 1997. The increase
in Research and Development expenses was due primarily to the expenses
associated with perfecting and preparing to demonstrate a new technology
for recovering barite and oil from spent drilling muds (MRP).
Increased operating and research and development expenses resulted in a
net loss available to common shareholders of $303,268 as compared to the
net loss of $224,637 for the same period in fiscal 1997.
Other income consisting primarily of interest income was $2,418 for the
three months, a decrease of $5,673 when compared with the same period in
the prior year. This resulted from a decrease in investment cash.
Interest expense was $2,628 for the three months as compared to $1,712
for the same period in the prior year. This increase is due to debt
incurred to finance equipment purchases.
LIQUIDITY AND CAPITAL RESOURCES
The Company considers cash and cash equivalents as its principal measure
of liquidity. These items total $59,725 at November 30, 1997. Net cash
used by operating activities in the current period was $276,407. The
Company's primary cash requirements are for operating expenses,
particularly Research and Development expenses, raw material purchases
and capital expenditures. Since the Company commenced operations, it has
incurred recurring losses and negative cash flows from operations. The
Company does not have sufficient working capital available to maintain
operations at their current levels. These factors raise substantial
doubt about the Company's ability to continue as a going concern. The
Company's ability to continue as a going concern is dependent upon
obtaining additional capital investments or generation of adequate sales
revenue and profitability from operations.
To obtain additional capital, the Company's board of directors authorized
lowering the exercise price of the Class "E" Warrants to $.75 per share
and called the warrants in January 1998. The holders of the Class "E"
Warrants have 30 days (until February 9, 1998) to exercise their
warrants, otherwise the warrants will expire. If all the warrants are
exercised, the Company will receive approximately $750,000. The
Company's board of directors also authorized the Company's management to
sell up to 2 million shares of treasury common stock at the best
negotiated price. For immediate capital requirements, the Company
expects to negotiate loans from board of director members until
sufficient funds are generated from operations or successful completion
of the above mentioned offerings occurs if ever.
The Company has successfully field tested a unique technology for
recovering barite and oil from spent drilling muds. This process
technology utilizes a proprietary cleaning mixture which separates the
oil from the barite within an aqueous medium. The process recovers more
than 95% of the barite at high purity levels. This material can be
reused as a constituent in the production of water or oil based drilling
muds. The synthetic oil recovered in this process can be sold or reused
in mud applications. The mud recycling process (MRP) offers significant
cost savings over current management practices involving spent drilling
muds. The market value of the recovered barite and oils is expected to
more than offset processing costs. The Company is currently in contact
with major drilling mud companies to optimize the MRP technology to
their specific needs and reuse markets. Moreover, based on the MRP
technology, the Company has developed two secondary processing
technologies designed to meet the environmental concerns of several
major oil companies. Initiation of these technologies is expected in the
second quarter of fiscal 1998. No estimates of revenues is possible in
this early stage of development because the results of this technology
have to be commercially explored.
The Company entered into a exclusive worldwide license agreement with
Gradient Technology, Inc., for a leading edge portfolio of patent
pending demil "conversion" technologies to address the U.S. Government's
drive toward "resource recovery and reuse" in demilitarization
operations. Demilitarization or "demil" is a term used to describe the
removal of conventional munitions, including bombs, rockets, torpedos
and shells from the inventory of stored ammunition. The blending of
these licensed technologies with the Company's highly advanced chemical
process and separation know-how should position the Company to offer
cost efficient explosive conversion and/or recovery services to the U.S.
Government.
The Company has also completed a worldwide strategic alliance with
Nalco/Exxon Energy Chemicals, L.L.C. This strategic alliance is designed
to strengthen both the Company's product lines and research capabilities
in the expanding oil exploration market.
Management believes, although no assurances can be made, that sales will
continue to increase and cash flows from operations will improve in
fiscal year 1998.
The Company has no unused credit facilities at this time.
Part II
Other Information
Part II. 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
Financial Data Schedule
Filed Herewith
b) Reports On Form 8-K
not applicable
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 ended
November 30, 1997 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
Chief Accounting Officer
Date: January 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> NOV-30-1997
<CASH> 59,725
<SECURITIES> 0
<RECEIVABLES> 150,252
<ALLOWANCES> 0
<INVENTORY> 231,019
<CURRENT-ASSETS> 461,590
<PP&E> 1,050,220
<DEPRECIATION> (569,676)
<TOTAL-ASSETS> 1,089,315
<CURRENT-LIABILITIES> 237,688
<BONDS> 32,124
0
4,062
<COMMON> 13,230
<OTHER-SE> 802,211
<TOTAL-LIABILITY-AND-EQUITY> 1,089,315
<SALES> 322,029
<TOTAL-REVENUES> 322,029
<CGS> 213,900
<TOTAL-COSTS> 213,900
<OTHER-EXPENSES> 411,187
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,628
<INCOME-PRETAX> (303,268)
<INCOME-TAX> 0
<INCOME-CONTINUING> (303,268)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (303,268)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
