-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I5mW32hro4yQYaVDwCJbVJwK+kAQX9hyVjo3jY/pWwHR+Ox9u6wUUYVmVTvvGp3P JnTJ+mmY89Mia29ETE1Opw== 0001047469-99-001035.txt : 19990114 0001047469-99-001035.hdr.sgml : 19990114 ACCESSION NUMBER: 0001047469-99-001035 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19990113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OZO DIVERSIFIED AUTOMATION INC /CO/ CENTRAL INDEX KEY: 0000812152 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 840922701 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-16335 FILM NUMBER: 99505489 BUSINESS ADDRESS: STREET 1: 7450 EAST JEWELL AVE STE A CITY: DENVER STATE: CO ZIP: 80231 BUSINESS PHONE: 3033680401 MAIL ADDRESS: STREET 1: 7450 E JEWELL AVE STREET 2: STE A CITY: DENVER STATE: CO ZIP: 80231 10QSB/A 1 10QSB/A FORM 10-QSB/A1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 (Mark One) (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _________ to ________ Commission File No. 0-16335 OZO DIVERSIFIED AUTOMATION, INC. 7450 East Jewell Avenue, Suite A Denver, Colorado 80231 Telephone (303)-368-0401 Colorado 84-0922701 - ------------------------ ------------------------------------ (State of Incorporation) (IRS Employer Identification Number) Indicate by check mark whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ----- As of September 30, 1998, Registrant had 483,164 shares of its $0.10 par value common stock outstanding. 1 PART I - FINANCIAL INFORMATION OZO Diversified Automation, Inc. BALANCE SHEETS ASSETS
September 30, 1998 December 31, 1997 ------------------ ----------------- (Unaudited) CURRENT ASSETS Cash $607 $7,526 Accounts and notes receivable, net 131,296 255,414 Inventories (See Note 3) 366,866 358,498 Prepaid expenses 11,215 25,631 -------- -------- Total Current Assets 509,984 647,069 -------- -------- PROPERTY AND EQUIPMENT Manufacturing 40,391 149,703 Furniture & Fixtures 83,581 169,747 Capitalized Leases 204,814 204,814 Leasehold Improvements 5,010 5,010 Vehicle 10,820 10,820 -------- -------- 344,616 504,094 Less accumulated depreciation 199,302 362,271 -------- -------- Total Property and Equipment 145,314 177,823 -------- -------- OTHER ASSETS Deferred Financing Costs 2,255 8,126 Other 2,859 2,859 -------- -------- 5,114 10,985 -------- -------- TOTAL ASSETS $660,412 $835,877 -------- -------- -------- --------
2 OZO Diversified Automation, Inc. BALANCE SHEETS (CONTINUED) LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 1998 December 31, 1997 ------------------ ----------------- (Unaudited) CURRENT LIABILITIES Current portion of notes payable and Capitalized lease obligation $281,835 $280,036 Accounts payable and accrued expenses 149,902 401,687 Note payable - Bank 27,415 27,415 Note payable - Officer 78,609 0 Note payable - Director 75,000 - ---------- ---------- Total Current Liabilities $612,761 709,138 ---------- ---------- LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATION 82,429 126,731 ---------- ---------- Total Liabilities 695,190 835,869 ---------- ---------- SHAREHOLDERS' EQUITY Preferred stock $0.10 par value, Authorized 1,000,000 shares, Issued - none Common stock, $0.10 par value, Authorized 5,000,000 shares, Issued and outstanding - 483,164 (1998) Issued and outstanding - 478,164 (1997) 48,316 47,816 Capital in excess of par value 1,198,004 1,193,004 Accumulated deficit (1,281,098) (1,240,812) ---------- ---------- Total Shareholders' (Deficiency) Equity (34,778) 8 ---------- ---------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $660,412 $835,877 ---------- ---------- ---------- ----------
3 OZO Diversified Automation, Inc. STATEMENT OF OPERATIONS (UNAUDITED)
Nine Months Ended September 30, 1998 1997 ---- ---- Net Sales $1,352,919 $2,032,998 Cost of Sales 802,615 1,181,231 ---------- ---------- Gross Profit 550,304 851,767 ---------- ---------- Operating Expenses: Marketing & Sales 119,660 290,491 Research & Development 105,421 116,845 General & Administrative 365,508 365,988 ---------- ---------- 590,589 773,324 ---------- ---------- Income before Taxes (40,285) 78,443 Provision for Income Taxes ---- 15,689 Tax Benefit of Operating Loss Carryforwards ---- (15,689) ---------- ---------- NET INCOME (LOSS) (40,285) $78,443 ---------- ---------- ---------- ---------- NET INCOME (LOSS) PER COMMON SHARE ($0.08) $0.17 ---------- ---------- ---------- ---------- NET INCOME (LOSS) PER COMMON SHARE ASSUMING DILUTION ($0.08) $0.17 ---------- ---------- ---------- ---------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 480,942 458,164 ---------- ---------- ---------- ---------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ASSUMING DILUTION 480,942 458,164 ---------- ---------- ---------- ----------
4 OZO Diversified Automation, Inc. STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended September 30, ------------------------------- 1998 1997 ---- ---- Cash flows for operating activities: Net Income ($40,285) $78,443 Adjustments to reconcile net income to net cash Used in operating activities: Depreciation 38,929 34,583 Amortization of deferred financing costs 5,871 5,871 Other (2,082) Decrease (increase) in assets: Accounts receivable 124,118 (197,979) Inventories (8,369) 133,221 Prepaid expenses 14,416 1,910 Increase (decrease) in Accounts payable and Accrued expenses (249,986) (39,604) -------- ------- Net cash provided (used) by operating activities (115,306) 14,363 -------- ------- Cash flows from investing activities: Capital expenditures (6,421) (9,213) -------- ------- Net cash provided (used) by investing activities (6,421) (9,213) -------- ------- Cash flows from financing activities: Payments of long-term debt and capitalized lease Obligations (44,302) (7,736) Proceeds from officer loan 213,200 ---- Payments on officer loan (134,590) ---- Proceeds from director loan 75,000 Payments on director loan 0 Proceeds from issuance of common stock 5,500 ---- -------- ------- Net cash provided (used) by financing activities 114,808 (7,736) -------- ------- Net increase (decrease) in cash (6,919) (2,586) Cash at beginning of period 7,526 3,111 Cash at end of period $607 $525 -------- ------- -------- -------
5 OZO Diversified Automation, Inc. STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended September 30, -------------------------------- 1998 1997 ---- ---- Net Sales $359,798 $604,809 Cost of Sales 182,970 354,083 -------- -------- Gross Profit 176,828 250,726 -------- -------- Operating Expenses: Marketing & Sales 15,346 78,407 Research & Development 24,979 39,523 General & Administrative 132,846 115,971 -------- -------- 173,171 233,901 -------- -------- Income before Taxes 3,657 16,825 Provision for Income Taxes 731 3,365 Tax Benefit of Operating Loss Carryforwards (731) (3,365) -------- -------- NET INCOME (LOSS) $3,657 $16,825 -------- -------- -------- -------- NET INCOME (LOSS) PER COMMON SHARE $0.01 $0.04 -------- -------- -------- -------- NET INCOME (LOSS) PER COMMON SHARE ASSUMING DILUTION $0.01 $0.04 -------- -------- -------- -------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 483,164 458,164 -------- -------- -------- -------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ASSUMING DILUTION 483,164 458,164 -------- -------- -------- --------
6 OZO Diversified Automation, Inc. NOTES TO FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) The unaudited financial statements included herein were prepared from the records of the Company in accordance with Generally Accepted Accounting Principles and reflect all adjustments which are, in the opinion of Management, necessary to provide a fair statement of the results of operation and financial position for the interim periods. Such financial statements generally conform to the presentation reflected in the Company's Form 10-KSB filed with the Securities and Exchange Commission for the year ended December 31, 1997. The current interim period reported herein should be read in conjunction with the Company's Form 10-KSB subject to independent audit at the end of the year. The results of operations for the nine months ended September 30, 1998, are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. Note 1 - A summary of significant accounting policies is currently on file with the Securities and Exchange Commission on Form10-KSB Note 2 - Income Taxes. At December 31, 1997, the Company had net operating loss carryforwards totaling approximately $962,000, that may be offset against future taxable income through 2011 and research and development credits of approximately $60,000 expiring through 2012. The Company has fully reserved the tax benefits of these operating losses because the likelihood of realization of the tax benefits cannot be determined. These carryforwards are subject to review by the Internal Revenue Service. Temporary differences between the time of reporting certain items for financial and tax reporting purposes, primarily from using different methods of reporting depreciation cost and warranty and vacation accruals, are not considered significant by Management of the Company. Note 3 - Inventories
September 30, 1998 December 31, 1997 Raw Materials $324,867 $358,498 Work in Progress 8,000 ---- Finished Goods 34,000 ---- -------- -------- Total $366,867 $358,498 -------- -------- -------- --------
7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the nine months ended September 30, 1998, the Company had revenues of $1,352,919, a 33.5% decrease from revenues of $2,032,998, recorded for the first nine months of 1997. For the quarter ended September 30, 1998, the Company had revenues of $359,798, a 40.5% decrease from revenues of $604,809, recorded for the third quarter of 1997. The decrease in revenues is primarily a result of weak economic conditions in Asia, as well as, capital spending curtailments by large Original Equipment Manufacturers (OEMs) in North America. These spending curtailments are also directly attributable to the uncertain business conditions in Asia. While Management cannot predict a timetable for a recovery in the Asian markets, it is believed that the weak business conditions in Asia will extend well into the second half of the year and possibly into the first half of 1999. Management is in the process of refocusing its sales efforts in markets that remain less affected by the Asian financial situation. Because of the decrease in total revenues reported during the first nine months of 1998, the Company posted a loss of $40,285, a 151.3% decrease from net income of $78,443, reported for the same period in 1997. Despite a decrease in total revenues reported during the third quarter of 1998, the Company posted a gain of $3,657, a 78.3% decrease from net income of $16,825, reported for the same period in 1997. In anticipation of an extended downturn in sales, Management has continued to undertake internal measures to reduce fixed costs and to match expense spending against projected revenues. The Company will voluntarily enforce its cost containment program for as long as conditions warrant. The Company continues to focus on the depaneling application market with its premium routing equipment, the 18HS PanelMASTER and the 16SI PanelROUTER. Both of these strategic product groups are continuously analyzed for improvements and incorporating requirements defined by our customers. In August, the Company attended the SMTrends Trade Show in Huntsville, Alabama, and the SMI Trade Show in San Jose, California. In addition, marketing efforts have been increased in the European Union, and in Central and South America. Management has also reemphasized customer service, and is continuing production process improvements in an effort to preserve operating margins. The Company's Current Liabilities as of September 30, 1998, are $612,761, approximately $102,777, higher than Current Assets of $509,984. Included in the Current Liabilities as of September 30, 1998, are $240,000, in notes which are due December 30, 1998. As disclosed in the 1997 10-KSB report, Management is in the process of addressing the Company's debt obligations, and expects to have this issue resolved well in advance of the due date. Please see Part II, Note 5, for more information. Additionally, a $75,000 loan was made from a director of the Company to partially fund the operating loss incurred to date. 8 Cash flow from operating activities was a negative $115,306, for the nine months ended September 30, 1998, as compared to a positive $14,363, for the same period in 1997. This is directly attributable to reduced sales and a decrease in Accounts Payable. The negative operating cash flow had been primarily funded by the aforementioned loan from a director of the Company in addition to a loan from an officer which is payable upon demand with interest at 2.0 percentage points above the prime rate. As of September 30, 1998, the balance on these loans was approximately $75,000 and $78,609 respectively. During the third quarter the Company wrote-off assets which were fully depreciated and no longer in service. These write-offs included $109,311 in manufacturing equipment, and $92,587 in furniture and fixtures. As of October 26, 1998, the Company had an open order backlog of approximately $304,700, compared to a backlog of $368,000, on October 28, 1997. The open order backlog reflects an upturn in business conditions both domestically and internationally. However, as mentioned above, business conditions have continued to adversely impact the Company's open order backlog and remain unpredictable. The foregoing discussion does not give any effect to the completion of a sale of the Company's depaneling and routing business as described in Part II, Item 5 of this report. If the proposed transaction is completed, of which there can be no assurance, the Company's historical business will be discontinued. Year 2000 Compliance Although there can be no assurance, the company does not anticipate that it will suffer any adverse impact as a result of Year 2000 (Y2K) computer software issues either as a result of third party non-compliance or as a result of internal matters. None of the information technology or other software and hardware systems utilized by the Company incorporates technology that is incapable of recognizing dates beyond December 31, 1999. Internally developed computer software sold with the Company's equipment is not date dependent. There are no date fields contained within this software. The software is designed to operate on IBM-compatible personal computers. The current version of the operating system sold with the Company's equipment, MS DOS 6.22, the Company has been informed, is Year 2000 compatible by means of an upgrade to a more recent release. Third-party software sold with the Company's equipment is limited to one product. The vendor of this product is GraphiCode, Inc. GraphiCode, Inc. has assured the Company that its software product, Etchmaster, is also Year 2000 compatible. 9 The Company is currently upgrading its ERP software to Macola Progression Series (Version 7.0/7.5) which is completely Year 2000 compliant. This upgrade will be completed by December 1999. All our other software products used internally, primarily Office Automation and Engineering, are the most recent releases of the products, and the Company has been led to believe these releases are also Year 2000 compatible. In making the foregoing determination, the Company has assessed embedded systems contained in its facility and manufacturing equipment. As a result, the Company has not established a contingency plan to come into effect in the event of a Y2K catastrophe and management does not believe that such a plan is necessary. Of course, the Company is dependent on facilities outside of their control, such as electrical power supplies, banking facilities, transportation facilities (such as airlines) and communications facilities. While the Company believes, based on public reports and some notifications it has received, that these outside facilities are or will be Y2K compliant, the Company does not have any other basis for determining their compliance. The operations of the Company would be significantly and adversely affected if any of these facilities are adversely affected by the millennium and other issues related to Y2K. Except for historical information contained herein, the statements in this report are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to differ materially, from forecasted results. These risks and uncertainties include, among other things, product demand and acceptance, market competition, and risks inherent in the Company's international operations. These and other risks are described elsewhere herein and in the Company's other filings with the Securities and Exchange Commission. 10 PART II - OTHER INFORMATION OZO Diversified Automation, Inc. Items 1-4 Not Applicable. Item 5. On October 6, 1998, the Company announced that it had reached a nonbinding agreement in principle to sell its automation and depaneling business to JOT Automation, Inc., the U.S. subsidiary of JOT Automation Group Oyj, of Finland. The nature of the proposed transaction will be an asset sale between OZO and JOT, as opposed to a common stock purchase by JOT from OZO's current shareholders. The proposed transaction was originally scheduled to close before the end of the year. However, it was and is subject to satisfactory completion of due diligence, preparation of definitive agreements, and OZO shareholder approval among other standard closing conditions. In its report on Form 8-K reporting an event of November 4, 1998, the Company reported that it had entered into an Asset Purchase Agreement with JOT Automation, Inc., of Dallas Texas. Following execution by both parties of that Agreement, the Company continued negotiating certain of the documents with respect thereto, and prepared and filed with the Securities and Exchange Commission a preliminary proxy statement in accordance with SEC Regulation 14A. The staff members of the Commission's Division of Corporation Finance elected to review the Company's preliminary proxy statement. The decision to review the proxy statement has three consequences to OZO: The shareholder vote on the proposed transaction between OZO and JOT Automation described in the preliminary proxy statement cannot occur prior to the end of 1998, which means that the completion of the transaction (if approved by the shareholders, of which there can be no assurance) cannot occur on January 2, 1999, as scheduled in the Asset Purchase Agreement; The shareholders of OZO will not be able to elect directors at the shareholder meeting when the meeting is held; and The Company has been asked to file amended versions of it 1997 Form 10KSB and 1998 third quarter Form 10QSB. 11 As a result of those consequences the Company and JOT Automation, Inc., have entered into an amendment to the Asset Purchase Agreement which provides that the completion of the transaction will take place on the first business day not earlier than three days after approval of the transaction by the shareholders of OZO. In addition, JOT Automation has made certain accommodations for OZO to make expenditures necessary or appropriate to maintain and improve the Excluded Assets and to repay certain outstanding debt, which will become due before the transaction with JOT Automation can be completed. OZO will have to repay these extraordinary expenditures to JOT automation at the completion of the transaction (if completed, of which there can be no assurance). Also as a result of the delay in finalizing the proxy statement, OZO has elected to extend the record date for determining shareholders entitled to notice of and to vote at, the meeting. The record date for the forthcoming meeting will be December 31, 1998. OZO's Board of Directors and Officers have identified certain assets that are not for sale. They will determine if a new business is to be established in the public shell, or if the proceeds from the proposed transaction will be returned, in whole or in part, to the shareholders. Per the Company's corporate bylaws, the current common stock shareholders must approve the proposed transaction before it may be completed. If the proposed transaction is approved, OZO's Board of Directors and Officers will determine the next course of action regarding the disposition of the remaining operations. As part of the proposed transaction, JOT Automation, Inc., will acquire the OZO name and trademark. The OZO public shell, after the completion of the agreement with JOT, will likely change its name. This will be a decision to be considered by the Board of Directors (and likely to be a condition of the final agreement with JOT). Item 6 Exhibits and Reports on Form 8-K a) Exhibits - none b) No Reports on Form 8-K were filed during the quarter ending September 30, 1998, however, subsequent to September 30, 1998, the Company filed reports on Form 8-K on November 4, 1998, and December 15, 1998 Item 7 Not Applicable 12 SIGNATURES 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. OZO DIVERSIFIED AUTOMATION, INC. By: /s/ /s/ ---------------------------- ---------------------------- David J. Wolenski Brantley J. Halstead Principal Executive Officer Principal Accounting Officer Principal Financial Officer Chief Financial Officer Dated: January 5, 1999 13 -----END PRIVACY-ENHANCED MESSAGE-----