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August 20, 2004
For Immediate Release
OMT Reports
Results for Second Quarter 2004
Winnipeg, Manitoba, August 20, 2004 --
The Board of Directors for OMT Inc. (TSXV: OMT)
announced today the Company’s consolidated
results for the six months ended June 30, 2004.
Description of Business
OMT Inc. (TSXV:OMT),
is a technology and content delivery provider in
the entertainment and broadcast industry. Intertain Media, the digital entertainment
division, and
iMediaTouch, the radio broadcast
solution group, distribute multi-media
content that is seen and
heard by millions of
people worldwide every day through television,
radio, satellite, cable and
Internet
broadcasts.
To learn more about the Company, its products
www.omt.net
Management’s
Discussion and Analysis
Certain
statements made in the following Management’s
Discussion and Analysis contain forward-looking
statements including, but not limited to,
statements concerning possible or assumed future
results of
operations of the Company.
Forward-looking statements represent the
Company’s intentions, plans, expectations and
beliefs, and are not guarantees of future
performance. Such forward-looking statements
represent our current views based on information
as at the date of this report. They involve
risks, uncertainties and assumptions and the
Company’s actual results could differ, which in
some cases may be material, from those
anticipated in these forward-looking
statements. Unless otherwise required by
applicable securities law, we disclaim any
intention or obligation to publicly update or
revise this information, whether as a result of
new information, future events or otherwise.
The Company cautions investors not to place
undue reliance upon forward-looking statements.
Results of
Operations
This review contains Management’s discussion of
the Company’s operational results and financial
condition, and should be read in conjunction
with our unaudited interim consolidated
financial statements for the six months ended
June 30, 2004 and the management discussion and
analysis that accompanies our audited
consolidated financial statements for the year
ended December 31, 2003.
The unaudited consolidated financial statements
provide a comparison of the six months ended
June 30, 2004 to the six months ended June 30,
2003 as well as a comparison of the three months
ended June 30, 2004 and the three months ended
June 30, 2003. These interim financial
statements have not been reviewed by the
company’s auditors.
An annual summary of historical results to meet
revised MD&A disclosure requirements follows.
This information will be provided in future
annual reports.
Annual Review
There were two
significant changes to the business in 2003.
The Oakwood Broadcast division was divested in
July 2003. This was followed in November 2003
by the acquisition of the assets of the former musicmusicmusic inc. to form the basis of the
new Intertain Media division.
The Oakwood Broadcast division contributed sales
of $844,000 in 2003. Sales in 2003 excluding
the Oakwood Broadcast division increased by 24%
from 2002. These sales included $1,541,000 from
a one- time solutions project.
The majority of sales for the iMediaTouch
division are to U.S. customers. Gross profit
for 2003 was negatively impacted by in excess of
$200,000 due to the appreciation of the Canadian
dollar vs the U.S. dollar.
Net income for 2003 was negatively impacted by
$252,000 in severance payments, a foreign
exchange loss of $133,000 and professional fees
on the disposition and acquisition.
Eight Quarter Review
Results for Q1 and Q2 of
2004 reflect the base business of the
iMediaTouch and Intertain Media divisions.
Intertain Media has a significant proportion of
recurring revenue. There have been no large
solutions projects to date in 2004. The
company’s business is not subject to significant
seasonality.
Gross profit increased from $502,000 in Q2 2003
to $572,000 in Q2 2004 despite the significant
decline in sales due to the divestiture of the
Oakwood Broadcast division and the major
solutions project completed in the first half of
2003. The increase in gross profit is due to a
significant improvement in gross profit margin
from 38.8% in Q2 2003 to 67.4% in Q2 2004. This
gross profit margin improvement is a direct
result of OMT’s focus on higher margin software
and technology sales combined with comparable
margins on the newly acquired Intertain Media
division.
Operating expenses have reduced to historic
levels following the completion of the
divestiture and acquisition.
Net loss of $139,000 ($.01/share) for Q2 2004
compares favourably to a net loss of $287,000
($.02/share) for Q2 2003. Management is pleased
with the magnitude of the improvement from the
last three quarters of 2003 and the relative
stability with the Q1 2004 loss of $137,000.
The common share financing that is currently
being pursued, if successful, would result in a
total reduction in interest, dividends and
non-cash interest accretion of $90,000 per
quarter. Management is strongly focused on
closing the balance of the gap to profitability
by increasing sales, with a particular focus on
emerging opportunities for the Intertain Media
division. A relatively modest sales increase of
$75,000 per quarter would be sufficient to close
the post-financing gap at current margins.
Total first half sales of $1,764,000 for 2004
would compare to sales of $1,268,000 in 2003
excluding Oakwood Broadcast and the one-time
solutions project which represents an increase
of 39%.
Gross profit of $1,165,000 for the current year
to date compares to $1,503,000 for the first
half of 2003. The gross profit margin improved
significantly from 41.1% in 2003 to 66.0% in
2004. A gross profit margin of 65% is
considered sustainable on the base business of
the iMediaTouch and Intertain Media divisions.
Operating expenses for the six month period have
decreased by 11.4% from the comparable period in
2003.
Net loss of $276,000 for the first six months of
2004 compares to a net loss of $40,000 for the
comparable period in 2003. The lower loss in
2003 was due to the gross profit contribution on
the one-time solutions project.
Liquidity
OMT had a working capital deficiency of
$1,068,000, a current ratio of .4:1, cash of
$123,000 and borrowings of $445,000 on its
operating credit of $600,000 at June 30, 2004.
This represents a decrease in working capital of
$230,000 since December 31, 2003.
Re-classification of long term debt due in
subsequent years to current liabilities as a
result of covenant defaults represents $382,000
of the working capital deficiency.
OMT was out of compliance with its financial
covenants with Bank of Nova Scotia, Business
Development Bank of Canada, and ENSIS Growth
Fund Inc. at June 30, 2004. However, all
lenders have waived compliance until September
30, 2004 at which time the Company’s financing
activities are expected to be complete and the
covenants will be in compliance. Renaissance
Capital Inc., a preferred shareholder, has
provided a guarantee of $100,000 in return for a
waiver of bank covenants by the Bank of Nova
Scotia until September 30, 2004. ENSIS Growth
Fund Inc. has waived all interest and principal
payments on its subordinated debt until
September 30, 2004. OMT is current on all
of its
principal and interest payments to other
lenders.
On June 30, 2004, a Letter of Engagement was
signed with Kingsdale Capital Markets Inc. to
raise a maximum of $2.5 Million in equity
financing in common shares. The financing will
be used to fund OMT’s business expansion plans
and will, as a condition of closing, include
conversion of all outstanding preferred shares
into common shares which will significantly
enhance the company’s financial position.
Related Party Transactions
The company has made operating lease
payments for equipment amounting to $2,381 plus
taxes to Capron Leases (Ron Paley) for the six
months ended June 30, 2004. There were no new
related party lease financings during the
period. These operating leases are on normal
commercial terms.
Subsequent to June 30, 2004, Renaissance Capital
Inc., a preferred shareholder, has provided a
guarantee for $100,000, to the Bank of Nova
Scotia to support the Company’s bank demand loan
and obtain a waiver of covenants until September
30, 2004, by which time the Company’s financing
is expected to be complete. The fee payable to
Renaissance Capital Inc. for providing this
guarantee is $25,000.
FOR FURTHER INFORMATION PLEASE CONTACT:
Scott Farr
Tel: 204.795.0790
Email: sfarr@omt.net
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