U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 October 31, 1999
__ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to ___________
Commission file number Securities Act Registration No. 33-75276
OMNI Rail Products, Inc.
------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 68-0281098
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification NO.)
Incorporation or Organization)
975 SE Sandy Blvd. Portland, Oregon 97214
-----------------------------------------
(Address of Principal Executive Offices)
(503)230-8034
-------------
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes _____ 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: 1,703,098 Common Shares at
$.01 par value outstanding as of November 30, 1999
<PAGE>
OMNI RAIL PRODUCTS, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1999
INDEX
PART I. FINANCIAL
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets......................1
Unaudited Condensed Consolidated Statements of Operations............2
Unaudited Condensed Consolidated Statements of Cash Flows............3
Notes to Unaudited Condensed Consolidated Financial
Statements...........................................................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................8
PART II. OTHER INFORMATION...................................................13
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES...................................................................14
<PAGE>
OMNI RAIL PRODUCTS, INC., & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
October 31, April 30,
1999 1999
(Unaudited)
----------- -----------
Current Assets:
Cash $ 62,588 $ 36,280
Accounts receivable, net 2,073,367 1,478,337
Inventories, net 1,461,535 1,330,663
Prepaid expenses and deposits 81,103 51,241
----------- -----------
Total current assets 3,678,593 2,896,521
Real estate held for sale 1,400,000 1,400,000
Property, plant and equipment, net 1,964,151 1,904,156
----------- -----------
$ 7,042,744 $ 6,200,677
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current Liabilities:
Accounts Payable $ 1,708,890 $ 1,480,166
Accrued Liabilities 794,669 879,995
Notes Payable 1,578,199 1,693,135
Current portion of long-term debt 1,297,121 1,373,412
----------- -----------
5,378,879 5,426,708
Long-term debt, less current portion 1,474,163 1,403,115
Stockholders' equity (deficit):
Common Stock 17,031 17,031
Preferred stock -- 1,956
Additional paid in capital 2,371,836 2,369,880
Accumulated deficit (2,199,165) (3,018,013)
----------- -----------
Total stockholders' equity (deficit) 189,702 (629,146)
----------- -----------
$ 7,042,744 $ 6,200,677
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
1
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<TABLE>
<CAPTION>
OMNI RAIL PRODUCTS, INC. & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
October 31, October 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 3,973,828 $ 3,182,869 $ 7,394,617 $ 6,825,107
Cost of sales 2,770,540 2,315,735 5,239,160 5,013,587
----------- ----------- ----------- -----------
Gross profit 1,203,288 867,134 2,155,457 1,811,520
Selling expenses 265,534 212,474 488,319 532,172
Administrative expenses 328,415 283,520 640,035 575,150
Engineering 14,859 37,827 29,229 73,177
Restructuring charges -- -- -- (25,000)
----------- ----------- ----------- -----------
608,808 533,821 1,157,583 1,155,499
Earnings from operations 594,480 333,313 997,874 656,021
Other income (expense):
Interest expense (117,045) (148,524) (235,018) (310,377)
Miscellaneous income 24,276 52,523 55,992 111,846
----------- ----------- ----------- -----------
Total other expense (92,769) (96,001) (179,026) (198,531)
Earnings before income taxes 501,711 237,312 818,848 457,490
Income taxes -- -- -- --
----------- ----------- ----------- -----------
Net earnings $ 501,711 $ 237,312 $ 818,848 $ 457,490
=========== =========== =========== ===========
Basic earnings per share $ 0.29 $ 0.14 $ 0.48 $ 0.26
=========== =========== =========== ===========
Diluted earnings per share $ 0.16 $ 0.14 $ 0.26 $ 0.26
=========== =========== =========== ===========
Weighted average common
shares outstanding 1,703,098 1,703,098 1,703,098 1,767,414
Weighted average diluted
shares outstanding 3,209,342 1,703,098 3,209,342 1,767,414
See accompanying notes to unaudited condensed consolidated financial statements.
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OMNI RAIL PRODUCTS, INC. & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Six Months Six Months
Ended Ended
October 31 October 31
1999 1998
----------- -----------
Cash Flows from Operating Activities
<S> <C> <C>
Net Earnings $ 818,848 $ 457,490
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 96,779 79,105
Change in assets and liabilities:
Accounts receivable (595,030) 662,771
Inventories (130,872) 553,055
Prepaid expenses and deposits (29,862) (151,105)
Accounts payable 228,724 (74,839)
Accrued liabilities (85,326) (586,541)
----------- -----------
Net cash provided by operating activities 303,261 939,936
----------- -----------
Cash Flow from Investing Activities
Proceeds from sale of plant, property & equipment -- 226,672
Purchase of plant, property & equipment (156,774) (4,581)
----------- -----------
Net cash provided (used) in investing activities (156,774) 222,091
Cash Flows from Financing Activities
Common stock redemption -- (18,752)
Net payments on notes payable (114,936) (1,411,387)
Net borrowings on long term debt (5,243) --
----------- -----------
Net cash used in financing activities (120,179) (1,430,139)
----------- -----------
Increase (decrease) in cash 26,308 (268,112)
Cash at beginning of period 36,280 393,877
----------- -----------
Cash at end of period $ 62,588 $ 125,765
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
3
</TABLE>
<PAGE>
OMNI RAIL PRODUCTS, INC. & SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) INTERIM FINANCIAL INFORMATION
OMNI Rail Products, Inc. (the "Company") has prepared the accompanying
unaudited condensed consolidated financial statements, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and
regulations. In the opinion of Management, all adjustments (consisting of
normal recurring adjustments) considered necessary for fair presentation
have been included in the accompanying unaudited condensed consolidated
financial statements. Results for the period ended October 31, 1999 are not
necessarily indicative of the results that may be expected for the fiscal
year ending April 30, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto, for the fiscal
year ended April 30, 1999, included in the Company's Form 10-KSB.
(2) DESCRIPTION OF THE COMPANY, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES.
OMNI Products, Inc. ("OMNI"), the Company's wholly owned subsidiary, is a
supplier of premium virgin rubber and concrete/rubber highway-rail grade
crossing surfaces. OMNI supplies crossing surfaces to all major North
American railroads, numerous short line and regional railroads, independent
railway contractors, transit systems, ports, intermodal yards,
manufacturing facilities with rail access, and municipalities.
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make certain
estimates and assumptions that affect reported amounts of assets,
liabilities, revenues, and expenses. GAAP also requires disclosure of
contingent assets and liabilities. Actual results may differ from those
estimates.
Bank overdrafts of $207,949 and $357,702 are included in accounts payable
as of October 31, 1999 and April 30, 1999, respectively. Bank overdrafts
consist of outstanding checks that have not (1) cleared the bank and (2)
been funded by the Company's revolving credit facility (see Note 5). The
revolving credit facility and other senior debt activity is reported on a
net basis in the Consolidated Statements of Cash Flows.
The Company recognizes revenue as products are shipped. Certain
reclassifications have been made to the fiscal 1999 income statement in
order to conform with the fiscal 2000 presentation format.
4
<PAGE>
The Company conducts its business within one industry segment, the
production and sale or premium railroad crossing materials. For fiscal 1999
and 2000, the Company's operations had no components of other Comprehensive
income.
(3) COMPANY RESTRUCTURING
During Fiscal 1998, the Company began a restructuring plan to reduce the
over-capacity in its recycled rubber manufacturing operations and to
increase its concrete production capabilities. The refocus of business
stemed from changes in industry demand away from recycled rubber and more
toward virgin rubber and concrete crossings. The Company ceased production
of recycled rubber during fiscal 1998 at its Portland, Oregon, and
Lancaster, Pennsylvania, plants and liquidated its recycled rubber
manufacturing equipment and real estate at both locations during fiscal
1999. Some equipment, primarily concrete forms, was transferred to the
Company's remaining facilities. At the same time the Company extended
agreements with a pre-cast concrete company to produce the Company's
proprietary concrete and rubber grade crossings, and with an extruder of
virgin rubber products to make various rail product materials of virgin
rubber. The Company has completed its efforts in re-engineering the Company
and is now implementing plans to expand production and improve service
while ensuring continued quality production.
The Company, in conjunction with its restructuring, wrote down assets to be
liquidated, wrote-off excess and obsolete recycled rubber inventory and
accrued expected shutdown and liquidation costs. The asset write-down and
inventory write-off did not have an impact on the Company's liquidity.
Other charges were recorded as liabilities and were fully paid out during
fiscal year 1999.
(4) INVENTORIES
Inventories consist of the following at October 31, and April 30, 1999:
October 31 April 30
---------- ----------
Raw materials $ 180,832 $ 175,692
Finished goods 1,305,703 1,179,971
---------- ----------
1,486,535 1,355,663
Less allowance for excess or
obsolete inventory 25,000 25,000
---------- ----------
Inventories, net $1,461,535 $1,330,663
========== ==========
5
<PAGE>
(5) DEBT
On August 12, 1999, the Company entered into Amendment No. 11 to Loan and
Security Agreement ("Amendment") with its Senior lender Finova Capital
Corporation, ("Finova") that extended the due date of the Company's
borrowings until August 31, 2000. Under terms of the Amendment, the Company
reduced its line of credit facility to $1.8 million of total borrowing
availability (previously $3.5 million), and its interest rate to 1-1/2 %
over prime (previously 2-1/4% over prime). The Amendment also reinstates
certain financial covenants that were previously excused under the
Forbearance Agreement that include both senior debt and total debt coverage
ratios and waives all existing defaults as defined in the Forbearance
Agreement. As part of the Amendment an unused line fee equal to1/4% of the
unused line replaces the previous $12,500 annual fixed revolver fee.
The Amendment also extended and increased the term note borrowings to
$608,000 with interest at 2-1/4% over prime and monthly payments based on a
five-year term. The new term note replaced the previous Capital Expenditure
note balance and provided an additional $371,000 of term borrowings for the
Company's use in making capital expenditures. The Amendment also permits
the Company to borrow up to an additional $500,000 from other sources.
(6) BASIC AND DILUTED NET EARNINGS PER COMMOM SHARE
Net earnings per share ("EPS") is computed based on the provisions of
Statement of Financial Accounting Standards No. 128, Earnings per Share
("SFAS 128"). Under SFAS 128, Basic EPS is computed by dividing income
available to common shareholders by the weighted-average number of common
shares outstanding during the period. Contingently issuable shares, that
are issuable for little or no cash consideration are considered outstanding
common shares and included in the computation of basic EPS as of the date
that all necessary conditions have been satisfied. The computation of
diluted EPS is similar to the computation of basic EPS except that the
denominator is increased to include the number of additional common shares
that would have been outstanding if the dilutive potential common shares
had been issued.
The following table reconciles basic earnings per common share (EPS) to
diluted EPS for the three and six months ended October 31, 1999:
<TABLE>
<CAPTION>
Weighted 3 months 6 months
3 months 6 months Average Per share Per share
earnings earnings Shares amount amount
-------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings available to common
Shareholders $ 501,711 $ 818,848 1,703,098 $ 0.29 $ 0.48
Effect of dilutive securities:
Stock options 82,020 (0.01) (0.02)
Convertible notes 5,503 11,006 1,424,224 (0.12) (0.20)
---------- ---------- ---------- -------- --------
Diluted EPS $ 507,214 $ 829,854 3,209,342 $ 0.16 $ 0.26
========== ========== ========== ======== ========
6
</TABLE>
<PAGE>
The calculation of diluted earnings per share for the three and six months
ended October 31, 1998 excludes any potentially dilutive shares as such
shares would have an antidilutive affect.
(7) CONVERTIBLE PREFERRED STOCK SERIES B
The Company had authorized 1,000,000 shares of Series B convertible
preferred stock, of which 195,619 were issued and outstanding at April 30,
1999. The Series B preferred stock was convertible into a like number of
common shares had the Company reported gross annual revenues of $20,000,000
or annual pre-tax earnings of $1,500,000 during either of the fiscal years
ended April 30, 1998 or 1999. The Company neither reported gross annual
revenues of $20 million, nor annual pre-tax earnings of $1.5 million during
either of such fiscal years. Accordingly, the Company cancelled the series
B preferred stock effective as of the date of the issuance of its April 30,
1999 audited consolidated financial statements.
7
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
---------------------
The following discussion is intended to assist the reader in understanding
and evaluating the financial condition and results of operations of OMNI
Rail Products, Inc. and its operating subsidiary (the "Company"). The
following Selected Financial Data for the periods ended October 31, 1999
and 1998 have been derived from the unaudited financial statements of the
Company. This Selected Financial Data should be read in conjunction with,
and is qualified in its entirety by reference to, the financial statements
and related notes thereto included elsewhere in this Report.
Except for the historical information contained herein, the matters set
forth in this Report include forward-looking statements within the meaning
of the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially. These
risks and uncertainties are detailed throughout this Report and are
discussed from time to time in the Company's periodic reports filed with
the Securities and Exchange Commission. The forward-looking statements
included in this Report speak only as of the date hereof.
Results of Operations -- Quarter and six months ended October 31, 1999
compared with the Quarter and six months ended October 31, 1998
Quarters Ended Six Months Ended
October 31 October 31
--------------------- ---------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Revenue 3,973,828 3,182,869 7,394,617 6,825,107
- As a percent of revenue:
Gross Profit 30.3% 27.2% 29.2% 26.5%
Earnings from Operations 15.0% 10.5% 13.5% 9.6%
Net earnings 12.6% 7.5% 11.1% 6.7%
Basic earnings per share $0.29 $0.14 $0.48 $0.26
Diluted earnings per share $0.16 $0.14 $0.26 $0.26
REVENUE
The Company derives its revenue from the sale of premium highway-rail grade
crossings to railroads, general contractors and municipalities. Revenues for the
first six months of fiscal 2000, ended October 31, 1999, increased over the same
period last year by $569,510 or an increase of 8%. Total concrete crossing sales
for the period were down 29% over the same period last year, while virgin rubber
crossing sales were up 74%. The change in product sales mix is in part due to
the buying trends of the Company's major customers. Because the Company's
largest customers have different product preferences, the wide swings in their
individual annual buying patterns have a significant impact on the Company's
product sales mix.
8
<PAGE>
Revenues for the second quarter were up $790,959 over the same quarter last
year, or nearly a 25% increase. Rubber sales for the quarter were up 55% over
the same quarter last year, while concrete sales were down by 3%. The increase
in revenues for the quarter was mainly due to the Company having inventoried
product available for sale. Finished goods inventories were $640,591 higher at
October 31, 1999 versus the same month end period last year. The Company has
worked toward building inventory levels to meet the inconsistent demand
presented by the railroads. Much of the increase in inventory levels is due to
anticipated demand for the Company's products in the next calendar year. Also,
the Company's order backlog is higher this year compared to last year. The
Company has expanded its customer base, increasing the number of contractors and
smaller railroads while continuing its business with the larger railroads. As a
result of improved customer diversity, the Company has seen increased overall
demand and more consistency in its order flow.
By the end of the first quarter in fiscal 1999 (ended July 31, 1998) the Company
had liquidated all of its recycled rubber product line and closed two recycled
rubber operations. Approximately $100,000 of fiscal 1999 sales included the
Company's discontinued recycled rubber products. Sales of recycled rubber
products were eliminated by the end of the first quarter of fiscal 1999.
Virgin rubber products are produced at the Company's processing facility in
McHenry, Illinois, and are also purchased through an out source provider.
Concrete crossing materials are produced at the Company's Ennis, Texas facility
as well as by a third party provider.
COST OF SALES
Cost of sales increased by $225,573 in the six months ended October 31, 1999, as
compared to the same period last year, or an increase of 4%. The increase is
directly related to higher sales. At the same time, the percentage increase in
cost of sales was half the corresponding increase in revenues due to improvement
in the Company's gross margin. Much of the improvement in gross margin is due to
change in product mix with greater sales of higher margin virgin rubber products
and fewer sales of lower margin concrete products.
Cost of sales for the second quarter increased by $454,805 as compared to the
same quarter last year, or a 20% increase. As with the six months ended October
31, 1999, the increase in cost of sales for the quarter is due to the increase
in revenues albeit at a lesser rate due to improvement in the Company's gross
margin. An increase in higher margin virgin rubber sales helped improve the
gross margin for the period. The Company is also beginning to realize improved
operating results from sales of its redesigned concrete and embedded virgin
rubber crossing material ("ECR"). The Company began selling the new ECR product
in May of the current fiscal year and has now completely converted from its
former design to the new product.
SELLING EXPENSES
Selling expenses for the six months ended October 31, 1999, were $488,319
compared to $532,172 for the same period last year. The $43,853 decline, or 8%,
is mainly due to an approximate $80,000 decline in salaries and sales
commissions, resulting from a reduced sales commission rate and marketing
structure. At the same time, the Company incurred approximately $40,000 more in
advertising, marketing, promotional and travel and entertainment expenses that
have resulted in higher sales.
9
<PAGE>
Selling expense for the second quarter ended was up $53,060 or 25%. Sales
commissions for the quarter were up $40,585 or 26% mainly due to the increased
sales. Other promotional, marketing and travel and entertainment costs are also
up for the quarter due to increased marketing efforts by the Company.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the six months ended October 31, 1999,
were $640,035 representing a $64,885 or an 11% increase over the same six month
period last year. In the first quarter of fiscal 1999, general and
administrative salaries were dramatically reduced when the Company's then Chief
Executive Officer and Vice President of Operations were terminated and the
Company's Chief Financial Officer resigned. The Company's interim Chief
Financial Officer was paid as a consultant until August of 1998 when he accepted
a full time position with the Company. In October 1998, the Company's Vice
President of Sales and Marketing was promoted President and Chief Operating
Officer. Salaries are up due to the addition of these two officer positions. At
the same time, several other expense areas are down compared to last fiscal year
including professional and consulting fees, bank financing fees and insurance
costs. This decline was partially offset by $22,070 in a onetime, unforeseen
environmental expense incurred as part of the Company's withdrawal from the
recycled rubber business and final departure from its Portland, Oregon,
facility.
General and administrative expenses for the second quarter ended October 31,
1999 were up $44,895 or 16% compared to the same quarter last year. As with the
six-month period, increases came in the areas of salaries and human resource
related costs while declines occurred in consulting fees, payroll servicing
costs and financial fees and licenses.
ENGINEERING
One of the Company's engineers was laid off in December 1998. As a result,
Engineering costs for both the six months and second quarter ended October 31,
1999 are lower due to this termination. Costs for the Quarter are also lower as
outside consultants used last year for the Company's M-1003 certification
efforts were eliminated.
INTEREST EXPENSE
Interest expense for the six months ended October 31, 1999, was $235,018 as
compared to $310,377 for the same period ended October 31, 1998, a 24%
reduction. The decrease reflects the Company's substantial reduction of its term
debt and lower borrowing on the Company's revolving line of credit (a nearly
$1.2 million reduction in the average debt outstanding between fiscal year 2000
versus fiscal year 1999). The Company's line of credit and term debt borrowing
rates were lowered with Amendment No. 11 to the Finova financing agreement, but
at the same time, interest rates for the period increased by 1/4% due to the
increase in the prime lending rate. Interest expense for the quarter was down
$31,479 or 21%. Borrowing against the line of credit increased near the end of
10
<PAGE>
the quarter to finance the Company's working capital requirements. Both accounts
receivable and inventory are up compared to fiscal year ended April 30, 1999 and
last years second quarter ended October 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1999, the Company had a cash balance of $62,588. The Company's
operating activities generated cash of $304,709 during the first six months of
fiscal 2000.
The net working capital deficit at October 31, 1999, amounted to $1,700,286.
Although an improvement over the first quarter of fiscal 2000 and the fiscal
year ended April 30, 1999, the Company's current debt maturities and other
short-term commitments still exceed the Company's liquid assets available to pay
such obligations. The Company's largest mortgage is due in December 1999. The
Company is actively trying to sell the property that secures this mortgage.
On August 12, 1999, the Company entered into Amendment No. 11 to Loan and
Security Agreement ("Amendment") with its senior lender Finova Capital
Corporation, ("Finova") that extended the due date of the Company's borrowings
until August 31, 2000. Under terms of the Amendment, the Company has a reduced
line of credit facility ($1.8 million total availability, previously $3.5
million) with interest at 1-1/2 % over prime (previously 2-1/4% over prime). The
Amendment also reinstated certain financial covenants that were previously
excused under the Forbearance Agreement that include both senior debt and total
debt coverage ratios and waives all existing defaults as defined in the
Forbearance Agreement. As part of the Amendment the previous $12,500 annual
fixed revolver fee is eliminated and an unused line fee equal to 1/4% of the
unused line is put in its place.
The Amendment also extends and increases the term note borrowing availability to
$608,000 with interest at 2-1/4% over prime and monthly payments based on a
five-year term. The new term note replaced the capital expenditure note balance
and provides an additional $371,000 of term borrowings for the Company's use in
making capital expenditures. The Amendment also permits the Company to borrow up
to an additional $500,000 from other sources. Finova's debt facility and the
opportunity for additional financing will permit the Company to expand its
operating capacity to meet future needs.
The Company's capital expenditures for the six months ended October 31, 1999
were $156,774. Most of the expenditures were for costs to change existing
concrete forms and produce new rubber molds.
The Company's primary source of funds is from its operations. The Company is
restricted as to the amount it can borrow from Finova based on a percent of
eligible accounts receivable and inventory. Additionally, the Company likely
will need replacement debt or equity financing after the end of the Finova
agreement on August 31, 2000. The Company's debt will require restructuring or
additional financing must be found in the event sufficient funds are not
available to payoff certain debt that comes due in fiscal 2000. There can be no
assurance the Company will be able to complete the sale of real estate noted
above prior to the mortgage maturity date, nor can there be any assurance that
the Company will generate sufficient funds from its operations to satisfy the
working capital deficit.
11
<PAGE>
Year 2000 Compliance
The information presented below related to Year 2000 (Y2K) compliance contains
forward looking statements that are subject to risks and uncertainties. The
Company's actual results may differ significantly from those discussed below and
elsewhere in this Form 10-QSB regarding Year 2000 compliance.
Year 2000
The Y2K issue is the result of certain computer hardware, operating system
software and software application programs having been developed using two
digits rather than four to define a year. For example the clock circuit in
certain computer hardware may be incapable of holding a date beyond the year
1999; some operating systems may recognize a date using "00" as the year 1900
rather than 2000 and certain applications may have limited date processing
capabilities. These problems could result in the failure of major systems or
miscalculations, which could have a material impact on companies through
business interruption or shutdown, financial loss, damage to reputation, and
legal liability to third parties.
State of Readiness & Contingency Plans.
As discussed in the Company's annual report filed with the Commission on form
10-KSB, the Company has taken steps to ensure its electronic automated systems
have been reviewed, and where applicable, have been updated and made Y2K
compliant. The Company has incurred less than $5,000 since the fiscal year end
to complete its final Y2K readiness procedures.
The Company's most significant area of risk is with its vendors that may not be
prepared for Y2K issues. The Company's business operations rely upon third party
corporate service vendors, materials suppliers, outsourced operations partners,
distributors and others. The failure of external parties to resolve their own
Y2K issues in a timely manner could result in a significant financial risk to
the Company and could cause interruptions to the Company's operations. The
Company has taken and will take steps prior to year end to ensure any potential
risks or interruptions are kept to a minimum.
The Company's stock is traded on the OTC Electronic Bulletin Board under the
ticker symbol ORXR.
12
<PAGE>
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 a Vote of Security Holders
- -----------------------------------------------------------
The Annual meeting of the Company's shareholders was held on November 4,
1999. The following three directors were elected at the meeting (all were
directors prior to the meeting):
William E. Cook
Edward S. Smith
John E. Hart
Total shares voted were 1,302,991, with 1,295,363 shares voting for Messers
Cook and Smith, 7,628 shares withheld, and 1,290,139 shares voting for Mr.
Hart, 12,852 shares withheld. Directors hold office for a period of one
year from their election at the annual meeting of stockholders and until
their successors are duly elected and qualified.
Item 5. Other Information
- -------------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
--------
27 Financial Data Schedule October 31, 1999.
(b) Reports on Form 8-K
-------------------
None
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
OMNI Rail Products, Inc.
- ------------------------
Registrant
December 15, 1999 /s/ Robert E. Tuzik
- ----------------- -------------------
Date Robert E. Tuzik
President and Chief Operating Officer
December 15, 1999 /s/ M. Charles Van Rossen
- ----------------- -------------------------
Date M. Charles Van Rossen
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-END> OCT-31-1999
<CASH> 62,588
<SECURITIES> 0
<RECEIVABLES> 2,118,430
<ALLOWANCES> 45,063
<INVENTORY> 1,461,535
<CURRENT-ASSETS> 3,678,593
<PP&E> 4,050,176
<DEPRECIATION> 686,025
<TOTAL-ASSETS> 7,042,744
<CURRENT-LIABILITIES> 5,378,879
<BONDS> 0
0
0
<COMMON> 17,031
<OTHER-SE> 172,671
<TOTAL-LIABILITY-AND-EQUITY> 7,042,744
<SALES> 7,394,617
<TOTAL-REVENUES> 7,394,617
<CGS> 5,239,160
<TOTAL-COSTS> 1,157,583
<OTHER-EXPENSES> (55,992)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 235,018
<INCOME-PRETAX> 818,848
<INCOME-TAX> 0
<INCOME-CONTINUING> 818,848
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 818,848
<EPS-BASIC> .48
<EPS-DILUTED> .26
</TABLE>
