UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended May 31, 1996
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number: 0-24506
DELTA-OMEGA TECHNOLOGIES, INC.
(Exact name of registrant as specified in charter)
Colorado 84-1100774
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
119 Ida Road, Broussard, Louisiana 70518
(Address of principal executive office)
Registrant's telephone number, including area code:
(318) 837-3011
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to filing
requirements for the past 90 days.
Yes X NO ___
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
12,546,807 Shares of Common Stock as of June 30, 1996.
Delta-Omega Technologies, Inc.
Index to Quarterly Report
Part I. FINANCIAL STATEMENTS
Item 1. Financial Statements Page
Consolidated Balance Sheet as of May 31, 1996. . . . . . . 1
Consolidated Statements of Operations,
three months and nine months ended
May 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows,
nine months ended May 31, 1996 and 1995 . . . . . . . . . 3
Notes to consolidated financial statements. . . . . . . . 4
Item 2. Management's discussion and analysis
of financial condition and results
of operations. . . . . . . . . . . . . . . . . . . 6
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
Part I. Item 1. Financial Statements
Delta-Omega Technologies, Inc.
Consolidated Balance Sheet
(Unaudited)
ASSETS
May 31,
1996
Current
Assets
Cash and equivalents $ 14,412
Accounts and notes receivable
Trade, net of allowance for losses 123,680
Other 94,734
Inventories 190,520
Prepaid expenses 7,534
Total current assets 430,880
Property and equipment, net of accumulated
depreciation 482,297
Intangible assets, net of accumulated
amortization 144,671
Other assets 12,124
Total assets 1,069,972
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Accounts payable 221,290
Current maturities of long-term debt
and leases 16,546
Advances from Shareholders 125,000
Other current and accrued liabilities 45,809
Total current liabilities 408,645
Long-term debt and leases,
net of current maturities 2,691
Shareholders equity:
Preferred Stock, 40,000,000 shares
authorized; outstanding 1,610,000
Series B, convertible, 7 percent cumulative,
non-participating, $.001 par value 1,610
Common stock, $.001 par value, shares
authorized, 100,000,000; issued and
outstanding 12,482,807 12,547
Additional paid-in capital 8,403,816
Retained deficit (7,759,337)
Total shareholders equity 658,636
Total liabilities and shareholders
equity $ 1,069,972
See accompanying notes to consolidated financial statements.
Delta-Omega Technologies, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
May 31, May 31,
1996 1995 1996 1995
Net sales and
gross revenues
Net product sales $249,257 $103,840 $545,978 $282,983
Net product sales,
related party 385 0 428 1,937
249,642 103,840 546,406 284,920
Cost of sales
and revenues 175,368 74,998 364,921 177,987
Gross profit 74,274 28,842 181,485 106,933
Cost and expenses
Selling, general
and administrative 241,449 337,519 946,229 1,065,274
Research and
development 5,893 3,838 51,118 131,427
Operating Loss (173,068) (312,515) (815,862)(1,089,768)
Non-operating income,
net 227 10,809 8,776 40,249
Interest expense (1,984) (1,379) (4,616) (6,449)
Net loss available to
common shareholders $(174,825) $(303,085)$(811,702)$(1,055,968)
Weighted average
shares outstanding 12,546,807 11,955,640 12,468,585 11,942,974
Net loss per
common share $ (.01) $ (.03) $ (.07) $ (.09)
See accompanying notes to consolidated financial statements.
Delta-Omega Technologies, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
May 31,
1996 1995
Net cash used in
operating activities $ (726,704) $ (1,038,178)
Cash flows from
investing activities:
Property acquisitions 5,674 (25,259)
Patent costs (4,844) (17,043)
Deposits 480 6,225
Net cash flows used in
investing activities 1,310 (36,077)
Cash flows from financing
activities:
Proceeds from issuance
of preferred stock 122,500 1,163,655
Proceeds from short
term note payable 42,500 0
Principal payments on
notes payable 6,466 (34,635)
Capital lease financing (20,078) 13,980
Net cash flows provided by
(used in) financing
activities 151,388 1,143,000
Net increase (decrease)
in cash and equivalents (574,006) 68,745
Cash and equivalents,
beginning of period 588,418 744,529
Cash and equivalents,
end of period $ 14,412 $ 813,274
See accompanying notes to consolidated financial statements.
Delta-Omega Technologies, Inc.
Notes to Consolidated Financial Statements
May 31, 1996
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, 1995 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, 1996.
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: Related party transactions
The Company received an advance of $125,000 from two (2) members
of its board of directors. The Company will convert
substantially all of the $125,000 to units of the outstanding
private placement.
The Company is leasing its present facilities from an affiliate
for five years at $6,000 per month commencing on March 1, 1996
with a renewal option for five additional years at $7,200 per
month. This agreement supersedes the October 1, 1993 lease
agreement for five years at $4,000 per month with a renewal
option for five additional years at $4,400 per month. The terms
of the October 1, 1993 agreement were amended and transferred
when the Company's facilities were relocated. In a separate
agreement, the Company issued 64,000 shares of common stock per
year in lieu of cash for the first two years rent under the
October 1, 1993 lease term. The remaining term of the October 1,
1993 lease agreement was paid in cash. The affiliate is
controlled by a member of the Company's board of directors.
The Company entered into an agreement on January 12, 1996 with
its Chairman of the Board granting him options to purchase
600,000 shares of common stock and warrants to purchase 600,000
shares of common stock in lieu of cash compensation for services
to be rendered. The warrants allow the acquisition of 600,000
shares of the Company's common stock at an exercise price of
$2.00 per share. Each option allows the acquisition of one share
of the Company's common stock at an exercise price of $.34. In
connection with these grants, two directors returned a total of
686,000 options previously outstanding.
The Company negotiated a short term promissory note with an
affiliate in the amount of $40,000. The promissory note is
effective March 1, 1996 and is payable on demand. The promissory
note bears an interest rate of 12% per annum. The affiliate is
controlled by the President and Chief Executive Officer of the
Company.
The Company entered into an agreement on September 1, 1994 with a
member of its board of directors to grant 137,000 options per
year in lieu of cash compensation for his services for fiscal
years 1995 and 1996. Each option allows the acquisition of one
share of the Company's common stock at an exercise price of
$2.00.
Note C: Accounts and Notes Receivable: Other
Accounts and notes receivable: other consists primarily of an
amount due from Tuboscope Vetco Environmental Services, Inc.
(TVES). This amount was previously classified as Construction in
Progress and represented Capital expenditures for the
construction of soil treatment equipment. This construction was
funded by the Company and was performed jointly between the
Company and TVES. With the termination of the letter of intent
between Delta-Omega and TVES effective December 15, 1995, TVES
has indicated that it will reimburse the Company for these
capital expenditures and retain title to that equipment. The
initial value to be recovered from TVES was estimated to be
$102,658. After negotiations between the Company and TVES, the
value to be recovered was adjusted to $90,000. Negotiations are
on-going relative to the full satisfaction of this acknowledged
debt.
Item 2. Management's discussion and analysis of financial
condition and results of operations
RESULTS OF OPERATIONS
For the three and nine months ended May 31, 1996, revenues
totaled $249,642 and $546,406 respectively as compared to
$103,840 and $284,920 for the same period in 1995. Gross margins
as a percent of revenue decreased due to a higher percentage of
the Company's total sales being lower margin products.
For the three and nine months ended May 31, 1996, operating
expenses totaled $247,342 and $997,347 respectively as compared
to $341,357 and $1,196,701 for the same periods in 1995. This
resulted in operating losses of $173,068 and $815,862
respectively as compared to the losses of $312,515 and $1,089,768
for the same periods in 1995.
Revenue for the current period was higher as compared to the same
period a year earlier. Sales for the same period in 1995 were
lower as a result of the Company's focus on soil washing and
related tests conducted for the EPA. The decrease in operating
expenses for the current period as compared to the same period a
year earlier was due to the termination of expenses incurred as a
result of the letter of intent signed between the Company and
TVES. Additionally, the Company reduced the number of employees
on its payroll and senior management instituted stringent
spending controls.
Other income consisting primarily of interest income was $8,776
for the nine months, a decrease of $31,473 when compared with the
year earlier period. This resulted from a decrease in investment
cash.
Interest expense was $4,616 for the nine months as compared to
$6,449 for the same period in the prior year. This decrease is
due to the pay down of debt used to finance equipment purchases.
LIQUIDITY AND CAPITAL RESOURCES
Operating cash at May 31, 1996 was $14,412. Operations used
$726,704 for the nine months as compared to $1,038,178 in the
prior year's nine months. This was due primarily to the higher
level of sales.
As discussed in the Company's 1995 10-KSB, the Company does not
have sufficient working capital available to maintain operations
at their current levels. The Company's ability to continue as a
going concern is dependent upon obtaining additional capital
investments in the near term and by increasing sales and reducing
or eliminating negative cash flow.
The Company has taken steps to reduce operating expenses and
negative cash flow by reducing selling and administrative
expenses in two of its divisions. Negative cash flow is expected
to decrease to approximately $50,000 per month. The Company
expects to fund this monthly cash loss with proceeds from the
private placement, discussed below, until the Company is able to
generate sufficient sales to fund its operating expenses. The
Company determined to raise up to a total of $1.5 million
pursuant to a private placement solely to accredited investors.
As an interim measure to improve liquidity, the Company borrowed
approximately $165,000, $125,000 in advances and a $40,000 short
term note payable, from three of its directors. The Company will
convert substantially all of the $165,000 to units of the private
placement. As of the date of this Form 10-QSB, the private
placement has not closed; however, it is expected to close by the
end of July, 1996.
Management believes, although no assurances can be made, that the
Company will be successful in its efforts to raise sufficient
funds from the private placement or from other borrowings from
directors to maintain its current level of operations. If the
Company is unable to raise these funds, the Company would be
required to curtail or cease operations and/or sell certain of
its properties to attempt to satisfy its obligations.
On May 17, 1996, the Company announced the award of its first
major contract to supply the United States military forces with
DOT 111/113 TM to be utilized for cleaning military aircraft and
aerospace ground equipment. The one-year contract provides for
an optional two-year extension and has a total estimated minimum
sales value of approximately $500,000 annually. This award will
have a material positive impact on the Company's liquidity once
receivables become due, which management estimates will occur
during the month of July, 1996. Shipments have commenced
pursuant to the terms of this contract.
The Company has no credit facilities.
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
Not applicable
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 and nine months ended May 31, 1996 and
1995 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: July 11, 1996