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 September 30, 2004
Commission File Number: 0-17493
OMNI U.S.A., INC.
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(Exact name of registrant as specified in its charter)
Nevada 88-0237223
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(State of Incorporation) (IRS Employer Identification No.)
7502 Mesa Road, Houston, Texas 77028
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(Address of principal executive offices)
(713) 635-6331
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(Issuer's Telephone Number)
Issuer's internet address: www.ousa.com
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 November 12, 2004, there were 1,171,812 shares of common stock $.004995 par
value outstanding.
OMNI U.S.A., INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
September 30, 2004 and June 30, 2004
Condensed Consolidated Statements of Operations
Three Months Ended September 30, 2004 and September 30, 2003
Condensed Consolidated Statements of Cash Flows
Three Months Ended September 30, 2004 and September 30, 2003
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
OMNI U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2004 June 30, 2004
(unaudited)
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ASSETS
CURRENT ASSETS
Cash $ 423,541 $ 533,022
Accounts receivable, trade, net 3,082,266 2,042,392
Accounts receivable, related parties 19,114 24,740
Inventories, net 4,246,105 4,013,221
Prepaid expenses 374,434 200,041
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TOTAL CURRENT ASSETS 8,145,460 6,813,416
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PROPERTY AND EQUIPMENT, net of
Accumulated depreciation and amortization 1,507,585 1,522,830
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OTHER ASSETS
Primarily intangible assets, net 335,090 329,756
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TOTAL ASSETS $ 9,988,135 $ 8,666,002
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,626,916 $ 2,430,084
Line of credit 2,022,843 347,040
Accrued expenses 367,082 256,031
Current portion of long-term debt 684,394 1,344,134
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TOTAL CURRENT LIABILITIES 5,701,235 4,377,289
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LONG-TERM DEBT 947,461 1,014,436
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock (1,227,079 shares issued and 1,171,812
outstanding) 6,129 6,129
Additional paid-in capital 5,372,815 5,372,815
Treasury Stock (55,267 shares) (100,071) (100,071)
Retained earnings (deficit) (2,050,561) (2,109,413)
Foreign currency translation adjustment 111,127 104,817
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TOTAL STOCKHOLDERS' EQUITY 3,339,439 3,274,277
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 9,988,135 $ 8,666,002
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
OMNI U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months For the three months
ended ended
September 30, 2004 September 30, 2003
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NET SALES $ 4,371,801 $ 3,543,233
COST OF SALES 3,199,978 2,792,474
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Gross Profit 1,171,823 750,759
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OPERATING EXPENSES
Selling, general and administrative 1,033,288 838,820
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Operating income/(loss) 138,535 (88,061)
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OTHER INCOME (EXPENSE)
Interest expense (85,392) (95,405)
Other, net 5,711 3,511
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OTHER EXPENSE (79,681) (91,894)
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NET INCOME/(LOSS) BEFORE INCOME TAXES 58,854 (179,955)
INCOME TAXES - -
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NET INCOME/(LOSS) 58,854 (179,955)
COMPREHENSIVE INCOME - Foreign Currency
Translation Adjustment 6,310 6,872
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NET AND COMPREHENSIVE INCOME/(LOSS) $ 65,164 ($ 173,083)
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BASIC INCOME/(LOSS) PER SHARE $ 0.06 ($ 0.15)
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
OMNI U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months For the three months
ended ended
September 30, 2004 September 30, 2003
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income/(loss) $ 58,854 $ (179,955)
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Adjustments to reconcile net loss to net cash (used) provided by
operating activities:
Depreciation and amortization 93,302 92,771
Changes in operating assets and liabilities:
Accounts receivable and notes receivable (1,034,248) 1,454,320
Inventories (232,884) (217,448)
Prepaid expenses (174,393) (22,484)
Accounts payable and accrued expenses 307,883 (237,001)
Other assets (8,967) (6,875)
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Total adjustments (1,049,307) 1,063,283
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Net cash (used) provided by operating
activities (990,453) 883,328
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (74,426) (49,277)
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Net cash used by investing activities (74,426) (49,277)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit 6,978,499 2,921,241
Payments on line of credit (5,302,696) (4,014,370)
Payments on long-term debt (726,715) (57,027)
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Net cash provided (used) by financing activities 949,088 (1,150,156)
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TRANSLATION EFFECT OF FOREIGN CURRENCIES 6,310 6,872
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NET DECREASE IN CASH (109,481) (309,233)
CASH AT BEGINNING OF PERIOD 533,022 709,230
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CASH AT END OF PERIOD $ 423,541 $ 399,997
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The consolidated financial statements have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. As permitted under those rules, certain footnotes or
other financial information that are normally required by generally
accepted accounting principles in the United States (GAAP) have been
condensed or omitted. The Company believes that the disclosures made in
this report are adequate to make the information presented not misleading.
These condensed financial statements should be read in conjunction with
the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-KSB.
The Company's management is responsible for the unaudited financial
statements included in this document. In the opinion of the Company, all
adjustments, consisting of normal recurring adjustments, necessary to
present fairly the financial position of Omni U.S.A., Inc. and
subsidiaries as of September 30, 2004, and the results of their operations
and cash flows for the three months ended September 30, 2004, and 2003,
have been made in accordance with GAAP.
There are significant operations in Mainland China; however, the
functional exchange rate for those operations is the U.S. dollar. The
foreign currency translation adjustment primarily arises from the
translation of amounts from operations in Hong Kong and Japan in which the
functional currency is that of the foreign location.
2. EARNINGS PER SHARE:
Basic and diluted income/(loss) per share is based on the weighted average
number of shares of common stock outstanding. For the periods ended
September 30, 2004 and 2003, the Company's weighted average shares are
calculated as follows:
September 30, 2004 September 30, 2003
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Weighted average common shares outstanding 1,171,812 1,171,812
When the Company is in a net loss position, all common stock equivalents
are considered anti-dilutive and are therefore not included in the
calculation of earnings per share. During the three month period ended
September 30, 2004, the Company had positive net income; however, the
exercise price of all common stock equivalents exceeded its average fair
value. Accordingly, all common stock equivalents were considered
anti-dilutive during the period and are therefore not included in the
calculation of earnings per share.
3. MAJOR CUSTOMERS AND VENDORS:
During the fiscal quarters ended September 30, 2004 and September 30,
2003, the Company and its subsidiaries had consolidated sales of $596,796
and $321,646 to a domestic customer for a total of 13.7% and 9.1% of
consolidated sales. During the three months ended September 30, 2004 and
September 30, 2003, the Company and its subsidiaries had consolidated
purchases of $1,601,147 and $1,063,496 from two vendors for a total of 59%
and 51% of consolidated purchases.
4. REVOLVING LINE OF CREDIT AND LONG-TERM DEBT:
The Company previously had a revolving line of credit with a financing
company, which provided for maximum borrowings of $4,000,000. The line of
credit bore interest at prime plus 1-2% dependent upon certain financial
ratios, required maintenance of certain levels of income and tangible net
worth and was secured by essentially all of the U.S. assets of the
Company. The line of credit matured in June 2003 and was not in compliance
with its minimum financial reporting covenants at June 30, 2003. The
Company continued to borrow under the line of credit under verbal
extensions and waivers from the financing company until the financing
company halted borrowings in May 2004. The line of credit was repaid and
replaced with a factoring facility and inventory term loan with another
financing company. Borrowings under the line of credit at June 30, 2004
and 2003 amounted to $0 and $2,515,461, respectively.
On August 4, 2004, the Company entered into a revolving line of credit
agreement with a new financing company with maximum borrowings up to
$5,000,000, dependent upon qualifying trade accounts receivable and
inventory balances. The line of credit matures August 3, 2007, bears
interest a prime plus 1.75% and incurs an unused line of credit fee of
.25%. The credit line is subject to certain financial ratio and reporting
covenants. The line of credit is secured by all of the assets of the
Company and personal guarantees by two officers of the Company of
$1,000,000 each. Proceeds received under the line of credit agreement were
used to repay any amounts owed under the inventory note payable.
Outstanding borrowings amounted to $1,969,246 at September 30, 2004.
The Company also maintains a line of credit with a foreign financial
institution, which provides for maximum borrowings of $1,000,000 based on
the creditworthiness of the Company's customers serviced by the Company's
foreign subsidiary. Outstanding borrowings amounted to $53,597 and
$347,040 at September 30, 2004 and June 30, 2004, respectively. The
foreign line of credit matures November 30, 2004 and bears interest at
5.625%. Management is currently in negotiations to renegotiate the terms
and due dates of this foreign line of credit under what it believes will
be comparable terms.
5. INCOME TAXES
The difference between the expected income tax benefit/(expense) at
September 30, 2004 of $(20,010) and $61,185 at September 30, 2003 which
would be determined by applying the statutory U.S. income tax rate of 34%
to income/(loss) before income tax expense, is primarily due to the
decrease/increase in the deferred tax valuation allowance.
6. OPERATING LEASES
The Company leases equipment and office, warehouse and manufacturing space
in Houston, TX; Butler, KY; Shanghai, China; and Hong Kong, and Brazil.
The Houston facility is a combination office/warehouse facility of
approximately 40,000 square feet, which the Company uses as its
headquarters and as an Omni Gear assembly center, inventory warehouse,
warranty repair, quality control, testing and inspection, and distribution
center. The Houston facility is leased from a real estate investment
company located in Houston, Texas, under a long-term lease expiring July
2005. The Butler facility is a 35,000 square feet manufacturing facility.
The Shanghai facility leases buildings in a manufacturing complex
containing approximately 130,000 square feet.
7. LITIGATION AND CONTINGENCIES
The Company, from time to time, is a party to various legal proceedings
that constitute ordinary routine litigation incidental to the Company's
business. In the opinion of management, all such matters are either
adequately covered by insurance or are not expected to have a material
adverse effect on the Company.
8. 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, construction and industrial equipment.
Selected financial information by business segment with respect to these
activities for the first quarter ended September 30th is as follows
2004 2003
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Net Sales
Power Transmission Components $3,443,366 $2,740,136
Trailer and Implement Components 928,435 803,097
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Total Omni U.S.A., Inc. $4,371,801 $3,543,233
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Income (Loss) from Operations
Power Transmission Components $ 141,067 ($ 15,161)
Trailer and Implement Components (2,532) (72,900)
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Total Omni U.S.A., Inc. $ 138,535 ($ 88,061)
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Net Income (Loss)
Power Transmission Components $ 78,077 ($ 68,718)
Trailer and Implement Components (19,223) (111,237)
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Total Omni U.S.A., Inc. $ 58,854 ($ 179,955)
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Identifiable Assets
Power Transmission Components $7,469,505 $6,846,488
Trailer and Implement Components 2,518,630 2,562,280
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Total Omni U.S.A., Inc. $9,988,135 $9,408,768
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Revenues
Domestic Customers $3,595,217 $3,093,997
Foreign Customers 776,584 449,236
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Total Revenues $4,371,801 $3,543,233
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Property and Equipment (Net)
Domestic $ 489,913 $ 504,974
Foreign 1,017,672 1,160,882
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Total Property and Equipment $1,507,585 $1,665,856
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Depreciation and Amortization
Power Transmission Components $ 68,682 $ 63,358
Trailer and Implement Components 24,620 29,413
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Total Omni U.S.A., Inc. $ 93,302 $ 92,771
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Interest Expense
Power Transmission Components $ 71,128 $ 66,110
Trailer and Implement Components 14,264 29,295
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Total Omni U.S.A., Inc. $ 85,392 $ 95,405
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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. This report should be read in conjunction
with the Company's latest Form 10-KSB, a copy of which may be obtained by
visiting the Company's home page at www.ousa.com, or 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 primary capital requirements are for routine working capital
needs that are generally met through a combination of internally generated
funds, revolving line of credit facilities, and credit terms from suppliers. The
Company's line of credit facilities had an outstanding balance of $2,022,843 at
September 30, 2004. The Company had working capital of $2,444,225 as of
September 30, 2004 and working capital of $2,436,127 as of June 30, 2004, an
increase of $8,098. The increase in working capital from June 30, 2004 was due
to increases in sales, net operating income and borrowings from the line of
credit, offset by payments on notes payable.
The increase of $1,039,874 in accounts receivable, trade, net and
$1,675,803 in the line of credit was primarily due to the factoring facility
being converted to the new revolving line of credit with a new financing
company.
The Company had a cash balance of $423,541 as of September 30, 2004;
reflecting a negative cash flow of $109,481 compared to the June 30, 2004 cash
balance of $533,022. The Company's cash used by operating activities for the 3
months ended September 30, 2004 of ($990,453) consisted of the net income for
the period and increases in accounts payable, offset by combined increases in
inventory, accounts receivable, and prepaid expenses.
The Company's cash used in investing activities for the three months ended
September 30, 2004 of $74,426 consisted of net capital expenditures for the
period.
Net cash provided by financing activities for the three months ended
September 30, 2004 of $949,088 consisted primarily of borrowings on the line of
credit offset by payments on notes payable.
The Company's current ratio was 1.43 as of September 30, 2004, which is an
8% decrease when compared to the June 30, 2004 current ratio of 1.56.
The Company believes that between its access to the line of credit
facilities and its anticipated ability to generate funds internally, it has
adequate capital resources to meet its working capital requirements for the next
fiscal year, given its current working capital requirements, known obligations,
and assuming current levels of operations. If however, operations do not remain
at current levels and the Company is unable to access or renew its line of
credit facilities or service its long term debt facilities, the Company will be
required to reduce its operations accordingly which may have a negative impact
on the Company to meet the needs of it customers, suppliers and credit
providers. In addition, the Company believes that it has the ability to raise
additional financing in the form of debt to fund additional capital
expenditures, if required.
Results for the Quarter ended September 30, 2004 compared with the Quarter ended
September 30, 2003
The Company had net sales of $4,371,801 for the three months ended
September 30, 2004. This represents an increase of 23% compared to the three
months ended September 30, 2003 net sales of $3,543,233. Management believes
that the increase in sales is due to the annual sales cycle of the industry
during this time of year and some June 2004 deliveries that were delayed until
the three months ended September 30, 2004. The following table indicates the
Company's net sales comparison and percentage of change for the three months
ended September 30, 2004 and 2003:
QUARTER QUARTER
ENDED % ENDED % DOLLAR %
NET SALES 9/30/04 OF TOTAL 9/30/03 OF TOTAL CHANGE CHANGE
--------- ------- -------- ------- -------- ------ ------
Power Transmission Components $3,443,366 79% $2,740,136 77% $703,230 26%
Trailer and Implement Components 928,435 21% 803,097 23% $125,338 16%
Consolidated $4,371,801 100% $3,543,233 100% $828,568 23%
Gross profit for the three months ended September 30, 2004 increased
$421,064 to $1,171,823, compared to gross profit for the three months ended
September 30, 2003 of $750,759. The increase in sales and gross profit was
primarily attributable to an increase in sales in both business segments. Gross
profit as a percentage of net sales for the three months ended September 30,
2004 increased to 27% as compared to 21% for the three months ended September
30, 2003. This increase was primarily due to the product mix of sales with
increased sales of higher margin power transmission components for the period.
Selling, general and administrative expenses increased $194,468 to
$1,033,288 in the three months September 30, 2004 compared to $838,820 in the
three months ended September 30, 2003. The increase was attributed to the
increased operational support required by the increase in sales activity for the
period.
Income from operations for the Company increased $226,596 to a gain of
$138,535 for the three months ended September 30, 2004, compared to an operating
loss of $88,061 for the three months ended September 30, 2003. Income from
operations as a percentage of sales was 3% in the three months ended September
30, 2003 compared to a loss of 2% in the three months ended September 30, 2003.
This increase is principally the result of increase in sales and margins.
Interest expense decreased $10,013 to $85,392 for the three months ended
September 30, 2004 from $95,405 for the three months ended September 30, 2003.
The decrease resulted from improved terms from the new line of credit.
Other income (expense) was income of $5,711 for the three months ended
September 30, 2004 compared to $3,511 for the three months ended September 30,
2003.
The Company's net income increased $238,809, resulting in a net income of
$58,854, or $0.06 per share, for the three months ended September 30, 2004
compared to a net loss of ($179,955) or ($0.15) per share, for the three months
ended September 30, 2003.
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. Forward-looking statements
discuss future expectations, plans, strategies, activities or events. They often
include words such as believe, expect, anticipate, intend or plan, or words with
similar meaning or with future or conditional verbs such as will, would, should,
or may. The Company does not plan to update these forward-looking statements to
reflect events or changes that occur after they are made.
Actual results may differ materially from those contemplated by the
forward-looking statements. The Company cannot guarantee that any forward
looking statement will be realized, although the Company and its management
believe that it has been prudent in its plans and assumptions. Investors are
further directed to the Company's documents, such as its Annual Report on Form
10-KSB, Forms 10-QSB's and Forms 8-KSB filed with the Securities and Exchange
Commission. Achievement of future results and these forward-looking statements
involve risks and uncertainties, including but not limited to, the following:
1) acts or threats of war or terrorism, and the effects of such acts or
threats on the Company, its employees, its debtors, customers and vendors
as well as the local and international economies in which the Company
sells its products,
2) changes in the availability of debt and equity capital resulting in
increased costs, shareholder dilution, or reduced liquidity and lack of
working capital,
3) cyclical downturns affecting the markets for our products over which we
have no control,
4) our lack of ability to generate profitable operations and positive cash
flows from those operations,
5) the effects of our failure to timely pay our outstanding debts,
6) substantial increases in interest rates,
7) availability or material increases in the costs of select raw materials,
The Company undertakes no obligation to publicly update or otherwise
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. All subsequent written and oral forward looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the applicable cautionary statements.
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, 2004.
Item 6(a). Exhibits
Exhibit 31.1
Exhibit 32.1
Item 6(b). Reports on filed Form 8-K.
None
Item 7. Controls and Procedures.
Evaluation of disclosure controls and procedures. Within 90 days prior to
the date of this report, the Company carried out an evaluation, under the
supervision and with the participation of our management, including our
Chief Executive, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on this evaluation, the
Company's Chief Executive Officer concluded that the Company's disclosure
controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under
the Securities Exchange Act of 1934 (the "Exchange Act")) are effective to
ensure that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported to the Company's management within the time
periods specified in the Securities and Exchange Commission's rules and
forms.
Changes in internal controls. Subsequent to the date of their evaluation,
there were no significant changes in the Company's internal controls or in
other factors that could significantly affect the Company's disclosure
controls and procedures, and there were no corrective actions required
with regard to significant deficiencies and material weaknesses based on
such evaluation.
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: November 15, 2004 OMNI U.S.A., INC.
By: /s/ Jeffrey K. Daniel
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Jeffrey K. Daniel
President and Chief Executive Officer
EXHIBIT INDEX
Exhibits
Exhibit 31.1
Exhibit 32.1