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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 21, 1999
REGISTRATION NO. 333
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OMNIS TECHNOLOGY CORPORATION
(EXACT NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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DELAWARE 7372 94-3046892
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NO.)
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981 INDUSTRIAL BLVD., BLDG. B
SAN CARLOS, CALIFORNIA 94070-4117
(650) 632-7100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE OF BUSINESS)
GWYNETH GIBBS
OMNIS TECHNOLOGY CORPORATION
981 INDUSTRIAL BLVD., BLDG. B
SAN CARLOS, CALIFORNIA 94070-4117
(650) 632-7100
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
STAFFORD MATTHEWS, ESQ.
LANDELS, RIPLEY & DIAMOND LLP
350 THE EMBARCADERO, SUITE 600
SAN FRANCISCO, CALIFORNIA 94105-1250
(415) 512-8700
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
At such time after the effective date of this registration statement as the
selling security holders shall determine.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the securities act
registration statement number of the earlier registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE REGISTRATION FEE(1)
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Common Stock, $0.10 par value.......................... $28,749,007 $8,710
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act based on the average of bid and
asked prices of the small business issuer's Common Stock in the over the
counter market on September 13, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 21, 1999
OMNIS TECHNOLOGY CORPORATION
4,070,944 SHARES OF COMMON STOCK
$7.062 PER SHARE
Omnis Technology Corporation ("we" or the "Company") develops and markets
software application development tools and related technical services through
its domestic and international operating subsidiaries. Astoria Capital Partners,
L.P. ("Astoria"), a significant shareholder of the Company, is offering for sale
3,543,344 shares of the Company's common stock, $0.10 par value ("Common
Stock"). The Company is also offering 500,100 shares of Common Stock that will
be reserved for issuance upon conversion of shares of Series A Convertible
Preferred Stock, $1.00 par value, currently held by Astoria (together with the
shares of Common Stock offered by Astoria, the "Shares"). We will not offer
these Shares to any party other than Astoria, or a transferee of the Series A
Convertible Preferred Stock. The Shares may be sold from time to time by
Astoria, or its transferees (also referred to as the "Selling Shareholders").
See "PLAN OF DISTRIBUTION" at Page 12.
We will not receive any proceeds from the sale of the Shares by the selling
shareholders or from the issuance of Shares upon conversion of shares of Series
A Convertible Preferred Stock. By agreement with Astoria, we will pay all of the
expenses incident to the registration of the Shares under the Securities Act of
1933, as amended (the "Securities Act") (other than underwriter's commissions
and discounts, if any, which will be paid by the selling shareholder).
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PRICE TO PUBLIC PROCEEDS TO SELLING SHAREHOLDERS(1)(2)
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Per Share................................ $ 7.062 $ 7.062
Total.......................... $28,749,007 $28,749,007
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(1) Before deducting certain expenses payable by the Company. Selling
shareholders have the right to use registered securities dealers as selling
agents and to pay them a fee in connection with the sale of Shares.
(2) Assuming all Shares are sold by the selling shareholders, including the
Shares offered by the Company and reserved for issuance to holders of the
Series A Convertible Preferred Stock upon conversion of such securities.
Our Common Stock currently trades on the OTC Bulletin Board under the
Trading Symbol "OMNS". On September 17, 1999, the Closing Bid Price for our
Common Stock was $7.125.
This Investment Involves A High Degree of Risk.
You Should Purchase Shares Only If You Can Afford A Complete Loss.
See "RISK FACTORS" Beginning On Page 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
September 21, 1999
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PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. IT IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT
IS IMPORTANT TO YOU. TO FULLY UNDERSTAND THE COMPANY AND THIS OFFERING, YOU
SHOULD READ THE ENTIRE PROSPECTUS. MOST IMPORTANTLY, YOU SHOULD READ THE "RISK
FACTORS" BEGINNING ON PAGE 4.
THE COMPANY
The Company, through our domestic and international subsidiaries, develops
and markets software application development tools and related technical
services. Our main products are the OMNIS 7(3TM) client/server application
development software group of products, and the more advanced OMNIS Studio rapid
application development (RAD) tools. At August 31, 1999, the Company had 37
employees, including 14 in product development, 9 in sales and marketing, 7 in
customer support and consulting, and 7 in finance and administration. Of these
37 employees, 31 employees are based in Europe, and 6 are located in the United
States.
OMNIS Studio(R) is our premium product line and was one of the first
commercially available application development tools that integrated ActiveX and
Java Beans components. OMNIS Studio enables the independent or team-based
developer to develop and deploy business applications for companies that access
all leading server databases, including Oracle(R), Sybase(R), DB2(R), and
Informix(R), as well as all ODBC-compliant databases, such as MS SQL Server(TM).
OMNIS 7(3TM) has been our main product line for a number of years and continues
to be an important source of revenue. OMNIS 7(3TM) is a cross-platform
application development tool for the development of form-based client/server
applications. The OMNIS Studio Web Client(TM) was announced in late 1998 and
released in April 1999. Using the Web Client(TM), OMNIS applications can be
viewed on the Internet using a standard web browser, such as newer versions of
Microsoft Internet Explorer or Netscape Navigator.
In addition to these products, we provide technical support and training to
assist our users in planning, analyzing, deploying and maintaining application
software based on our proprietary technology. We are in the process of reducing
the technical service component of our business and are concentrating our
efforts on the development and marketing of software products.
The Companies principal offices are located at 981 Industrial Blvd., Bldg.
B, San Carlos, California 94070-4117, telephone number (650) 632-7100.
CUSTOMERS, SALES AND LICENSING
We license our products to independent developers, value added resellers
(VARs), system integrators, and the internal development staffs of enterprises
that develop and deploy custom computer applications for a wide range of uses
including financial management, decision support, executive information, sales
and marketing, and multi-media authoring systems. We sell our products in North
America primarily through account representatives and we have non-exclusive
distributor relationships in a number of countries as well as an exclusive
distribution relationship in France. We have customers in a wide range of
industries, including financial services, pharmaceuticals, manufacturing,
telecommunications, aerospace, defense and education. We plan to expand sales
growth by making additional sales to our current customer base and increasing
the number of new customers.
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COMPETITION
The Company currently encounters direct and indirect competition from
several companies, including Sybase Corporation, Forte Software Inc., Magic
Software Enterprises and Centura Software Corporation (formerly Gupta
Corporation). As the market evolves, we anticipate that competition is likely to
increase from both existing and future market participants. We believe that the
broad functionality of our products, including cross platform capabilities and
important features for group development, application deployment and maintenance
has enabled us to compete effectively to date, particularly for professional
development environments in major enterprises. However, because of the rapid
pace of technological change in the computer software industry, factors such as
the product knowledge, ability, and experience of our personnel, brand name
recognition, customer support, and ongoing product maintenance and enhancement
may be more significant in maintaining our competitive advantage. We believe
that our ability to compete depends on factors both within and outside our
control, including the timing and success of new products developed by the
Company and our competitors, product performance and price, distribution, and
customer support.
RECENT DEVELOPMENTS
The Company has operated at a loss for several fiscal years. Fiscal 1999
was a year of change and consolidation for the Company. Losses incurred in
fiscal year 1998 dictated a rigorous cost cutting policy in fiscal 1999. Our new
management team has taken following steps to improve our cash flow:
- more aggressive marketing of our products;
- more focused research and development expenditures on products that have
a shorter return or "payback" period;
- improvement of operational efficiencies; and
- significant reduction of operating expenses.
In addition, we have (1) made substantial changes in the ownership and
management of the Company; (2) raised $1.2 million to settle all past due claims
of creditors and provide working capital; and (3) issued common and preferred
stock in exchange for debt and accrued interest of $1.1 million. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" at Page 33.
With these improvements we reduced cash used in operating activities from
$6,180,000 in fiscal 1998 to $2,514,000 in fiscal 1999. At June 30, 1999, we had
shareholders' equity of $1,306,000 and working capital of $477,000, both
improvements over shareholders' equity and working capital of $1,262,000 and
$390,000, respectively, at March 31, 1999. The Company also returned to
profitability in the third and fourth quarters of fiscal 1999 and in the first
quarter of fiscal 2000. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" at Page 26.
THE OFFERING
Shares of the Company's Common Stock are being offered with this Prospectus
by Astoria and by the Company. The Shares that we are offering will be reserved
for issuance upon conversion of 300,000 shares of Series A Convertible Preferred
Stock held by Astoria. See "SELLING SECURITY HOLDERS" at Page 11. We will not
sell or issue the Shares offered hereby to any other party.
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COMMON STOCK OFFERED HEREBY BY
ASTORIA..................... 3,543,444 shares of Common Stock
COMMON STOCK OFFERED HEREBY
THE COMPANY................... 500,100 shares of Common Stock
OFFERING PRICE................ $7.062 per share of Common Stock
USE OF PROCEEDS............... We will not receive any proceeds from the sale
of the Shares by Astoria or its transferees. In
addition, we will not receive any fee or other
payment in connection with the issuance of the
shares to Astoria, or its transferees, upon
conversion of the Series A Convertible
Preferred Stock. By agreement with Astoria, we
will pay all of the expenses of registration of
the Shares under the Securities Act (other than
underwriter's commissions and discounts, if
any, which will be paid by Astoria).
RISK FACTORS.................. The purchase of Shares offered hereby involves
a high degree of risk. See "RISK FACTORS"
beginning on Page 4.
SUMMARY CONSOLIDATED FINANCIAL DATA
The following financial information reflects the operations of the Company
for the fiscal years ended March 31, 1998 and 1999 and for the three month
periods ended June 30, 1998 and 1999 (unaudited). This summary financial
information has been derived from the consolidated financial statements of the
Company and its subsidiaries that appear later in this Prospectus. This data
should be read in conjunction with those consolidated financial statements and
related notes.
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THREE MONTHS ENDED
YEAR ENDED MARCH 31, JUNE 30,
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1998 1999 1998 1999
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(IN THOUSANDS, EXCEPT PER SHARE DATA)
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STATEMENTS OF OPERATIONS DATA:
Net Revenues............................... $ 7,983 $ 5,859 $ 1,374 $ 1,371
Total Operating Expenses................... 16,264 6,397 2,339 1,253
Operating Income (Loss).................... (8,281) (538) (965) 118
Net Income (Loss).......................... (8,352) (887) (1,081) 111
Basic and Diluted Net Income (Loss) per
share.................................... (4.07) (0.41) (0.51) 0.01
Weighted Average Common Shares
Outstanding.............................. 2,052,285 2,148,499 2,125,827 9,679,829
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AS OF MARCH 31, AS OF JUNE 30,
1999 1999
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(IN THOUSANDS)
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BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 271 $ 432
Working Capital............................................. 390 477
Total Assets................................................ 2,557 2,410
Long Term Debt.............................................. 28 16
Total Liabilities........................................... 1,295 1,104
Total Stockholders' Equity.................................. $1,262 $1,306
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RISK FACTORS
An investment in the securities offered hereby is speculative in nature and
involves a high degree of risk. In addition to the other information contained
in this Prospectus, the following factors should be considered carefully in
evaluating the Company and its business before purchasing the securities offered
by any selling shareholder. This Prospectus contains, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
The Company's actual results may differ materially from the results discussed in
the forward-looking statements. Factors that might cause or contribute to such
difference include, but are not limited to, those discussed below, as well as
those discussed elsewhere in this Prospectus.
QUARTERLY FLUCTUATIONS
OUR OPERATING RESULTS FLUCTUATE QUARTER TO QUARTER DUE TO A NUMBER OF FACTORS.
We have experienced significant quarterly fluctuations in operating results
and anticipate such fluctuations to continue in the future. We generally ship
orders as they are received and, as a result, typically have little or no
backlog. Quarterly revenues and operating results, therefore, depend on the
volume and timing of orders received during the quarter, which are difficult to
forecast. We have typically sold to large corporate enterprises, significant
customers, and distributors that often purchase in significant quantities, and
therefore, the timing of the receipt of such orders could cause significant
fluctuations in operating results. Historically, we have often recognized a
substantial portion of our license revenues in the last month of the quarter.
Service revenues tend to fluctuate as technical service projects, which may
continue over several quarters, are undertaken or completed, although we are in
the process of reducing this area of business.
Our operating results may also fluctuate due to factors such as
- the demand for our products,
- the size and timing of customer orders,
- changes in the proportion of revenues attributable to licenses and
service fees,
- commencement or conclusion of significant technical service projects,
- changes in pricing policies by the Company or our competitors,
- the number, timing, and significance of product enhancements and new
product announcements by the Company and our competitors,
- our ability to develop, introduce, and market new and enhanced versions
of our products on a timely basis,
- changes in the level of operating expenses,
- changes in our sales incentive plans,
- budgeting cycles of our customers,
- customer order deferrals in anticipation of enhancements or new products
offered by the Company or our competitors,
- nonrenewal of maintenance agreements,
- product life cycles,
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- software bugs and other product quality problems,
- personnel changes, including our ability to hire and retain key
employees,
- changes in our strategy,
- the level of international expansion,
- seasonal trends and general domestic and international economic and
political conditions, and
- our liquidity and the availability of funds, among others.
The development and introduction of new or enhanced products also requires
that we manage the transition from older, displaced products. The transitional
process must be managed effectively in order to (1) minimize disruptions in
customer ordering patterns, (2) avoid excessive levels of older product
inventory and (3) ensure that adequate supplies of new products can be delivered
to meet customer demand. Because we are continuously engaged in this product
development and transition process, our operating results may be subject to
considerable fluctuations, particularly when measured on a quarterly basis.
For the reasons described above, we believe that period-to-period
comparisons of our operating results are not necessarily meaningful and should
not be relied upon as indications of future performance. In addition, revenues
in quarters after a new product release may be significantly affected by the
amount of product upgrade revenue, which tends to increase soon after the
release of a new product and then decline rapidly.
EXPENSE LEVELS
OUR QUARTERLY EXPENSES TEND TO BE FIXED WHILE OUR REVENUES FLUCTUATE. THEREFORE,
NET INCOME DURING ANY PARTICULAR QUARTER MAY DIFFER FROM EXPECTATIONS.
Our expense levels are based, in significant part, on our expectations as
to future revenues and are, therefore, relatively fixed in the short term. If
revenue levels fall below expectations, net income is likely to be
disproportionately adversely affected because a proportionately smaller amount
of our expenses vary with our revenues. We cannot assure that we will be able to
achieve profitability on a quarterly or annual basis in the future. Due to all
the foregoing factors, it is likely that in some future quarter our operating
results will be below the expectations of public market analysts and investors.
In such event the price of our Common Stock would likely decline.
FUTURE OPERATING RESULTS
OUR ABILITY TO CONTINUE TO GENERATE REVENUES DEPENDS ON OUR ABILITY TO DEVELOP
SUCCESSFUL NEW PRODUCTS IN A HIGHLY COMPETITIVE INDUSTRY.
Our future operating results will depend, to a considerable extent, on our
ability to rapidly and continuously develop new and upgraded products that offer
our customers enhanced performance at competitive prices. Inherent in this
process are a number of risks. The development of new, enhanced software
products is a complex and uncertain process that requires high levels of
innovation from our designers and accurate anticipation of customer and
technical trends by our marketing staff. Once a product is developed, we must
rapidly bring it into production, a process that requires long lead times on
some product components and accurate forecasting of production volumes, among
other matters, in order to achieve acceptable product costs.
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We participate in a dynamic high technology industry and we believe that
changes in any of the following areas could have a material adverse effect on
our future financial position or results of operations:
- advances and trends in new technologies,
- competitive pressures in the form of new products or price reductions on
current products,
- the volume, mix, and timing of orders,
- changes in product mix,
- changes in overall demand for our products and services,
- changes in certain strategic partnerships or customer relationships,
- litigation or claims against the Company based on intellectual property,
regulatory or other factors,
- risks associated with changes in domestic or international economic
and/or political conditions or regulations either in the industries the
Company serves or generally,
- availability of necessary components, and
- our ability to attract and retain employees necessary to support growth.
NEED FOR LIQUIDITY; PRIOR LOSSES
WE HAVE OPERATED AT A LOSS FOR SEVERAL YEARS.
We expect to devote substantially all of our revenues to finance continuing
operations for the foreseeable future. We cannot assure that we will generate
revenues in the future sufficient to sustain operations or growth of our
business when and as required, or that other sources of capital or revenues will
be available to us for these purposes. Although we were profitable in the third
and fourth quarters of fiscal year 1999 and in the first quarter of fiscal year
2000, we have operated at a loss for the last several fiscal years. We cannot
assure that we will achieve or sustain profitability in future periods.
We do not have an established line of credit with a commercial bank. Such a
credit facility may be difficult to obtain with our historical operating
results. Accordingly, in order to obtain additional funds in the future, we may
need to seek additional equity capital that would be dilutive to our
shareholders at that time. We are not currently attempting to raise additional
capital, but such activity may be required to continue operations. We cannot
assure that we will be able to raise additional capital on commercially
reasonable terms should we need additional funds in the future.
KEY PERSONNEL AND MANAGEMENT
OUR SUCCESS DEPENDS IN LARGE PART ON OUR ABILITY TO ATTRACT AND RETAIN KEY
EMPLOYEES AND MANAGEMENT.
The success of the Company depends to a significant extent upon a number of
key management and technical personnel. If we lose one or more of them our
business could be adversely affected. In addition, we believe that our future
success will depend to a significant extent on our ability to recruit, hire and
retain highly skilled management and employees for product development, sales,
marketing, and customer service. Competition for such personnel in the software
industry is intense, and we cannot assure that we will be successful in
attracting and retaining such personnel.
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Considerable time and skill will be required to manage any future growth of
the Company. We cannot assure that we will be successful in managing any future
growth. Failure to manage such growth may have a material adverse effect on our
business, operating results or financial condition.
DEPENDENCE ON PRINCIPAL PRODUCTS
OUR SUCCESS ALSO DEPENDS ON A FEW PRINCIPAL PRODUCTS.
Any factor adversely affecting sales of our principal products, including
OMNIS Studio(R) and OMNIS Studio Web Client(TM), would have a material adverse
effect on the Company. The future financial performance of the Company will
depend in significant part upon the successful development, introduction and
customer acceptance of new or enhanced versions of our principal products and
other products. We cannot assure that we will be successful in marketing our
principal products or any new or enhanced products we may develop in the future.
In addition, competitive pressures or other factors may result in price erosion
that could have a material adverse effect on our results of operation.
INTELLECTUAL PROPERTY PROTECTION
OUR PRINCIPAL PRODUCTS INCLUDE PROPRIETARY TECHNOLOGY. WE MUST BE ABLE TO
PROTECT OUR INTELLECTUAL PROPERTY.
The OMNIS products include technologies developed by the Company. We rely
primarily on a combination of trade secret, copyright and trademark laws and
contractual provisions to protect our proprietary rights in such technologies.
We cannot assure that such laws and contractual provisions will adequately
protect our intellectual properties and other proprietary rights. We are in the
process of preparing appropriate patent applications for certain of our Studio
Web Client(TM) and other technologies. At this time we have not filed any final
patent applications and have not been granted any patents on any of our
proprietary technologies. We cannot assure that any such patents will be
granted. Patent protection may become important in the protection of the
commercial viability of our innovative products and the failure to obtain such
patent protection could have a materially adverse effect on the commercial
viability of such products. Our success, therefore, may in part depend on our
ability to obtain strong patent protection or licenses to strong patents in the
future. It is not possible to anticipate the breadth or degree of protection
that patents would afford any of our products or the underlying technologies. We
also cannot assure that any patents issued or licensed to the Company will not
be successfully challenged in the future or that any of our products will not
infringe the patents of third parties. See "BUSINESS -- 'INTELLECTUAL PROPERTIES
AND OTHER PROPRIETARY RIGHTS' " at Page 23.
INTERNATIONAL OPERATIONS
WE HAVE SIGNIFICANT INTERNATIONAL OPERATIONS, AND THERE ARE RISKS SPECIFIC TO
THAT BUSINESS.
We operate on a global basis with offices or distributors in Europe and
Asia as well as in North America. International operations are subject to
inherent risks, including the following:
- costs and difficulties in staffing and managing foreign operations,
- difficulties in obtaining and managing local distributors,
- the costs and difficulties in localizing products into languages other
than English for foreign markets,
- political or economic instability,
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- unexpected regulatory changes and fluctuations in interest or exchange
rates in the specific countries in which we distributes our products or
in international markets in general,
- longer receivables collection periods and greater difficulty in accounts
receivable collection,
- import/export duties and quotas,
- reduced protection for intellectual property rights in some countries,
and
- potentially adverse tax consequences.
Also, as we increase our international operations, seasonality may become
an increasing factor in our financial performance. One or more of these factors
may adversely affect our international revenues or overall financial performance
in the future.
DELAYS IN SALES AND COMMITMENTS
OUR CUSTOMERS OFTEN REQUIRE A SIGNIFICANT AMOUNT OF TIME TO COMMIT TO PURCHASE
OUR PRODUCTS.
Our products are typically used to develop applications that are critical
to a customer's business. The purchase of our products is often part of a
customer's larger business process, reengineering initiative, or implementation
of client/server computing. As a result, the acquisition and implementation of
our software products generally involves a significant commitment of management
attention and resources by prospective customers. Our sales process is often
subject to delays associated with a long approval process that typically
accompanies significant initiatives or capital expenditures. The sales cycle
associated with the license of our products is often lengthy and subject to a
number of significant delays over which we have little or no control. We may
continue to experience these and additional delays in the future. For this
reason, and the others described above, we believe that our quarterly operating
results are likely to vary significantly in the future.
CHANGES IN PRICING STRUCTURE
WE RECENTLY REDUCED THE PRICES OF OUR PRODUCTS, WHICH COULD RESULT IN LOWER
REVENUES IN FUTURE QUARTERS.
We recently announced a reduction in certain portions of our pricing
structure. There is no guarantee that this reduction in price will lead to
increased unit volume or other additional revenue streams to replace lost
revenue. A loss of revenues could lead to a significant cash flow strain on our
core operations. Additionally, we rely on increased revenues related to our new
OMNIS Studio product line, which has not generated revenues at the level we
originally projected. We cannot assure that this product line will generate the
revenues needed to sustain the Company in coming quarters and beyond. We have
committed to decreasing sales conflicts with our partners particularly in the
service revenue area and have already taken a number of steps in this regard.
This has had and will continue to have a negative effect on service revenues as
compared to previous quarters and years. We cannot guarantee that we will be
able to replace the decreasing service revenues with new or upgraded product
revenues.
YEAR 2000 ISSUES
YEAR 2000 SOFTWARE FAILURES MAY AFFECT THE COMPANY, OUR PRODUCTS, AND OUR
OPERATIONS.
We recognize that we must ensure that our products and operations will not
be adversely impacted by year 2000 software failures which can arise in software
applications that use a date field
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of only two digits to define the applicable year ("Year 2000 issues"). These
programs were designed and developed without considering the impact of the
upcoming change in the century. If not corrected, many computer applications
could fail or create erroneous results by or at the year 2000. We believe we
design our products to effectively handle the Year 2000 issue. The majority of
our internal applications were built using OMNIS products that we believe are
Year 2000 compliant. Therefore, we believe that we have mitigated our risks on
the Year 2000 issue with our internal applications. However, we cannot assure
that we are fully Year 2000 compliant or that will be free from Year 2000
compliance issues with respect to products furnished by third party
manufacturers, our own products, or suppliers. Problems may result in unforeseen
costs or interruptions or delays to the Company or our customers and therefore
have a material adverse effect on the Company. See "BUSINESS -- 'YEAR 2000
COMPLIANCE' " at Page 18.
DIVIDEND POLICY, RESTRICTIONS ON DIVIDENDS
THE COMPANY HAS NEVER DECLARED OR PAID DIVIDENDS ON OUR COMMON STOCK.
The Company has never declared or paid dividends on our Common Stock. The
Company intends to retain earnings, if any, for the operation and expansion of
the Company's business, and therefore does not anticipate paying any cash
dividends in the foreseeable future. See "DESCRIPTION OF SECURITIES" at Page 36.
POSSIBLE VOLATILITY OF PRICES OF OUR COMMON STOCK
OUR COMMON STOCK IS PUBLICLY TRADED ON THE OTC BULLETIN BOARD ONLY. THE MARKET
PRICE MAY FLUCTUATE SIGNIFICANTLY OVER TIME FOR A NUMBER OF REASONS.
In February 1998, The Nasdaq Stock Exchange de-listed the Company from the
Nasdaq SmallCap Market. The Company's Common Stock is currently traded on the
Nasdaq Bulletin Board ("BB") under the symbol "OMNS". It is not known at this
time when or if the Company will be re-listed on the Nasdaq SmallCap Market.
The stock market has from time to time experienced extreme price and volume
fluctuations that have been unrelated to the operating performance of particular
companies. The market prices of our Common Stock may be significantly affected
by quarterly variations in the Company's operating results, litigation involving
the Company, general trends in the software industry, actions by governmental
agencies, national economic and stock market conditions, industry reports and
other factors, many of which are beyond our control. Due to all of the foregoing
factors, it is likely that the Company's operating results will fall below the
expectations of the Company, securities analysts or investors in future
quarters. In such event, the trading price of our Common Stock would likely
decline, possibly significantly.
POSSIBLE LACK OF FINANCIAL RESOURCES OF SELLING SHAREHOLDERS
THE FINANCIAL RESOURCES OF SELLING SHAREHOLDERS MAY BECOME RELEVANT, AND IF IT
DOES, MAY BE INADEQUATE.
Astoria, or its transferees, may be deemed to be underwriters pursuant to
the Securities Act, and in that regard may become liable to the purchasers of
the Shares pursuant to the terms of the Securities Act if the selling
shareholders were to not comply with certain provisions of the Securities Act.
There can be no assurance that any selling shareholder has the financial
resources to discharge any such liability.
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SIGNIFICANT OWNERSHIP OF COMMON STOCK BY ASTORIA AND THE DIRECTORS AND EXECUTIVE
OFFICERS
A FEW INDIVIDUALS AND ENTITIES OWN A SIGNIFICANT PERCENTAGE OF OUR CAPITAL
STOCK.
Philip Barrett and Geoffrey Wagner, Directors of the Company, or entities
controlled by them, and Astoria own 17%, 23.4% and 36.2% respectively, of the
Common Stock of the Company. The Directors and Executive Officers of the Company
as a group collectively own 44.1% of the Common Stock of the Company.
In addition, Astoria presently holds all 300,000 of the outstanding shares
of Series A Convertible Preferred Stock. Each share of Series A Convertible
Preferred Stock presently converts into One and Six Hundred Sixty-Seven
Thousandths (1.667) shares of Common Stock, currently 500,100 shares. If all of
the shares of Series A Convertible Preferred Stock are converted by Astoria,
then Philip Barrett and Geoffrey Wagner, or entities controlled by them, and
Astoria will own 16.3%, 26.7% and 36.8% respectively, of the Common Stock of the
Company and the Directors and Executive Officers of the Company as a group
collectively will own 42.5% of the Common Stock of the Company. Until the
Preferred Stock is converted, the holders of Preferred Stock shall be entitled
to vote with the Common Stock on an as-converted basis on all matters required
or permitted to be submitted to the stockholders of the Company for their
approval and shall have such other voting rights as specifically provided by
Delaware law.
The Common and Preferred Stock ownership percentages set forth in this risk
factor include all of the shares, warrants and options described in the
footnotes to the table presented in the section entitled "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" at Page 42 hereof.
We can not assure that the individual and cumulative impact of the large
ownership positions of Astoria and members of our Board and Executive Officers
will not make the Company a less attractive investment for future investors
and/or public shareholders.
COMPETITION
THE SOFTWARE INDUSTRY IS HIGHLY COMPETITIVE.
The Company currently encounters direct and indirect competition from
several companies, including Sybase Corporation, Forte Software Inc., Magic
Software Enterprises and Centura Software Corporation (formerly Gupta
Corporation). As the market evolves, the Company anticipates that competition is
likely to increase from both existing and future market participants. Some
competitors have products with different features or more highly developed
products than the Company. In addition, some competitors have greater financial
resources than the Company and may be able to devote more resources to research
and development of new products and products enhancements and may be willing to
offer lower prices than the Company is prepared to offer for similar products.
If we are not able to compete effectively, our earnings and operations will be
materially and adversely effected. See "BUSINESS -- COMPETITION" at Page 22.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 contains certain safe
harbors regarding forward-looking statements. From time to time information that
we provide or statements made by our directors, officers or employees may
contain "forward-looking" information subject to numerous risks and
uncertainties. Any statements made under the caption "Risk Factors" above and
elsewhere in this Prospectus that are not statements of historical fact are
forward-looking statements including, but not limited to, statements concerning
the characteristics and growth of our markets or customers,
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our objectives or plans for future operations and products, future revenues and
costs and our expected liquidity and capital resources. Such forward-looking
statements are based on a number of assumptions and involve a number of risks
and uncertainties, and therefore actual results could materially differ. These
risks and uncertainties include, among others,
- our potential liquidity problems,
- significant variability in operating results, including variability in
product revenues and gross margins,
- fluctuating demand for new and established products,
- dependence on development of new products,
- increasing expenses for marketing and development of new products,
- historical lack of profitability,
- rapid technological change that affects our ability to respond to
customer or market demands,
- risks associated with global operations,
- the continued and future acceptance of our products,
- the rate of growth in the industries of our products,
- the presence of competitors with greater technical, marketing and
financial resources, and
- our ability to successfully expand our operations.
SELLING SECURITY HOLDERS
As of the date hereof, Astoria holds 3,543,344 shares of the Company's
Common Stock (36.2% of the outstanding shares) and 300,000 shares of the
Company's Series A Convertible Preferred Stock (100% of the outstanding shares).
See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" at Page 42
and "DESCRIPTION OF SECURITIES" at Page 36. The Series A Convertible Preferred
Stock may be converted at any time by the holder into 1.667 shares of Common
Stock, currently 500,100 shares, for no additional consideration. If all of the
shares of Series A Convertible Preferred Stock are converted by Astoria, then
Astoria will hold 39.7% of the outstanding shares of Common Stock of the
Company. The foregoing share ownership percentages include all of the shares,
warrants and options described in the footnotes to the table presented in the
section entitled "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT" at Page 42 hereof.
Only Astoria or its transferees may sell the Shares offered hereby
(including the Shares offered by the Company that will be issued to Astoria or
its transferees upon conversion of the Series A Convertible Preferred Stock).
Astoria is offering all 3,543,344 of its shares of Common Stock for sale hereby
and we are offering 500,100 shares of Common Stock. See "PLAN OF DISTRIBUTION"
at Page 12. Astoria has not elected to convert any of its shares of Series A
Convertible Preferred Stock as of the date hereof.
We have engaged in several transactions with Astoria over the last three
years. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" at Page 33.
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USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the 500,100
shares that are offered by the Company hereby at Page 11. Those Shares are
reserved for issuance upon conversion of 300,000 shares of Series A Convertible
Preferred Stock held by Astoria. See "SELLING SECURITY HOLDERS" above. We will
not receive any fees, commissions or other consideration in exchange for the
issuance of the Shares to Astoria or any transferee. We will not sell or issue
the 500,100 shares that we are offering hereby to any other party.
PLAN OF DISTRIBUTION
The Shares offered for sale by Astoria and the Shares offered by the
Company (when issued to Astoria or its transferees), may be sold from time to
time by Astoria or its transferees, as the case may be. See "SELLING SECURITY
HOLDERS" at Page 11. As of the date hereof, Astoria has not elected to convert
any Shares of Series A Convertible Preferred Stock. To our knowledge, Astoria
has not entered into any underwriting arrangements. The determination of if,
when, how and how many of the Shares to sell will be made by Astoria or its
transferees. The Company does not know and has no right to determine when, if
and how Shares are to be sold by the holders thereof.
We have agreed to pay all of the fees and expenses incident to the
registration of the Shares (other than underwriting discounts and commissions,
if any, which are to be paid by the selling shareholders).
In addition, we have agreed to indemnify Astoria against certain
liabilities, including liabilities under the Securities Act. Furthermore,
Astoria has agreed to indemnify the Company against certain liabilities,
including liabilities under the Securities Act. Such agreements also provide for
rights of contribution if such indemnification is not available.
WAYS IN WHICH THE SHARES MAY BE SOLD
The distribution of the Shares by Astoria or its transferees may be
effected in one or more transactions that may take place in one or more of the
following methods at (1) prevailing market prices at the time of sale, (2)
prices related to prevailing market prices or (3) negotiated prices:
- in the over-the-counter market, including ordinary broker's transactions,
- privately negotiated transactions or
- through sales to one or more dealers for resale of such shares as
principals.
In addition, Astoria or its transferees may also
- pledge all or a portion of the Shares owned as collateral for margin
accounts or in loan transactions, and the Shares may be resold pursuant
to the terms of such pledges, accounts or loan transactions (upon default
by a selling shareholder, the pledgee in such loan transaction would have
the same rights of sale as the selling shareholders under this
Prospectus),
- enter into exchange traded listed option transactions which require the
delivery of the Shares listed hereunder or
- transfer Shares owned in other ways not involving market makers or
established trading markets, including directly by gift, distribution, or
other transfer without consideration, and
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upon any such transfer the transferee would have the same rights of sale
as Astoria under this Prospectus.
In addition, any securities covered by this Prospectus which qualify for sale
pursuant to Rule 144 of the Securities Act may be sold under Rule 144 rather
than pursuant to this Prospectus.
USE OF BROKERS
Without limiting the foregoing, brokers may act as dealers by purchasing
any or all of the Shares either as agents for others or as principals for their
own accounts and reselling such Shares pursuant to this Prospectus. Such brokers
may receive compensation from the selling shareholders in the form of
commissions or discounts and may receive compensation from purchasers of the
Shares for whom they may act as agent or to whom they may sell as principal in
the form of commissions or discounts. Finally, the selling shareholders and any
brokers and dealers through whom sales of the Shares are made may be deemed to
be "underwriters" within the meaning of the Securities Act, and the commissions
or discounts and other compensation paid to such persons may be regarded as
underwriters' compensation.
To the extent required by law, the number of Shares to be sold, the
purchase price, the name of any agent or broker and any applicable commissions,
discounts or other compensation to such agents or brokers with respect to a
particular offering will be set forth in a Prospectus Supplement.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may not simultaneously engage in
market-making activities with respect to such Shares for a period of one or five
business days prior to the commencement of such distribution. In addition to,
and without limiting, the foregoing, Astoria and any other person participating
in a distribution will be subject to the applicable provisions of the Exchange
Act and the rules and regulations thereunder, including without limitation
Regulation M, which provisions may limit the timing of purchases and sales of
any of the Shares by Astoria or any such other person. All of the foregoing may
affect the marketability of the Shares.
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BUSINESS
THE COMPANY
"We shape our tools, and thereafter our tools shape us."
Marshall McLuhan,
Understanding Media (1964)
The Company, through our operating subsidiaries, OMNIS Software Inc., a
California corporation, OMNIS Holdings Limited and OMNIS Software Limited,
limited liability companies organized under the laws of England, and OMNIS
Software GmbH, a German corporation, develops and markets software application
development tools and related technical services.
Our main products are the OMNIS 7(3TM) client/server application
development software group of products, and the more advanced OMNIS Studio(R)
rapid application development (RAD) tool. OMNIS Studio(R) enables the
independent or team-based developer to develop and deploy business applications
for companies that access all leading server databases and ODBC-compliant
databases. These products are used by independent developers, system
integrators, value added resellers (VARs) and enterprises to deliver custom
information management applications for a wide range of uses including financial
management, decision support, executive information, sales and marketing, and
multi-media authoring systems.
In addition to these products, we provide technical support and training to
assist our users in planning, analyzing, implementing and maintaining
application software based on our proprietary technology. We are in the process
of reducing the professional and technical service component of our business and
are concentrating our efforts on the development and marketing of software
products.
HISTORY
The Company was incorporated under the laws of the State of Delaware on
August 5, 1987 pursuant to a reorganization of predecessor companies originally
incorporated under the laws of England in 1983. As used herein, the "Company"
and "we" refers to OMNIS Technology Corporation and its consolidated
subsidiaries.
In the first quarter of fiscal year 1998, Blyth Software, Inc. changed its
name to OMNIS Software Inc., Blyth Holdings Limited changed its name to OMNIS
Holdings Limited, Blyth Software Limited changed its name to OMNIS Software
Limited, and Blyth Software GmbH changed its name to OMNIS Software GmbH. In
September 1997, the Company's shareholders approved a proposed change of the
parent company's name from Blyth Holdings, Inc. to OMNIS Technology Corporation.
In September 1997, the Company's shareholders approved a 1-for-10 reverse
stock split of all the outstanding stock of the Company. All share and per share
amounts herein reflect that stock split.
In September 1998, the Company's shareholders approved an amendment to the
Certificate of Incorporation of the Company to increase the number of authorized
shares of Common Stock from 4,000,000 shares to 20,000,000 shares. The
Certificate of Amendment of the Certificate of Incorporation of the Company
effectuating the increase of the number of authorized shares of Common Stock to
20,000,000 shares was filed with the Delaware Secretary of State on February 9,
1999. On March 31, 1999 the Company filed with the Secretary of State of
Delaware a Certificate of Designations setting forth the rights, preferences and
privileges of 300,000 shares of Series A Convertible Preferred Stock.
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The Company has sold and repurchased shares of Series A Preferred Stock,
reissued shares of Series A Preferred Stock and issued shares of Common Stock as
more particularly described in "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS"
at Page 32.
RECENT DEVELOPMENTS
Fiscal 1999 was a year of change and consolidation for the Company. At the
beginning of the year the financial difficulties resulting from the losses
incurred by the Company in fiscal year 1998 dictated a rigorous cost cutting
policy. Our new management team has taken steps to improve our cash flow through
(1) more aggressive marketing of our products; (2) more focused research and
development expenditures on products that have a shorter return or "payback"
period; (3) improvement of operational efficiencies; and (4) a significant
reduction in operating expenses. With these improvements we reduced cash used in
operating activities from $6,180,000 in fiscal year 1998 to $2,514,000 in fiscal
year 1999.
At June 30, 1999, we had shareholders' equity of $1,306,000 and working
capital of $477,000, both improvements over shareholders' equity and working
capital of $1,262,000 and $390,000, respectively, at March 31, 1999.
In addition to the substantial reduction in operating expenses and
refocused development and marketing efforts, the improved financial performance
resulted principally from (1) substantial changes in the ownership and
management of the Company; (2) the raising of $1.2 million to settle past due
claims of creditors and provide working capital; and (3) the issuance of common
and preferred stock in exchange for debt and accrued interest of $1.1 million.
These changes, among others, resulted in the Company returning to profitability
in the third and fourth quarters of fiscal 1999 and the first quarter of fiscal
2000. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" at Page 33.
INDUSTRY BACKGROUND
EVOLUTION OF CLIENT/SERVER COMPUTING
The evolution of computing has been characterized by several distinct
stages. In the 1970s, mainframe and minicomputer systems with character-oriented
user terminals emerged as the principal structure for enterprise computing. This
was followed in the 1980s by the introduction of personal computers and
workstations, which primarily addressed personal productivity applications such
as word processing and spreadsheets. In the late 1980s local and enterprise-wide
networks connecting these desktop systems became increasingly prevalent,
initially for accessing file storage archives (file servers) and electronic mail
communications.
Building on this infrastructure, client/server computing emerged as an
important new architecture for corporate computing in the early 1990s. In the
client/server computing model, application software is divided into two
components: a "client" handling functions such as the user interface, local data
storage, manipulation and presentation, and a "server" handling tasks such as
data management and access, storage, and retrieval for multiple clients.
Generally the client software runs in a single-user desktop system, while the
server operates utilizing a shared mainframe, minicomputer or workstation, and
messages linking client and server are exchanged through connecting networks. In
the last several years the Internet has become a new alternative for the
dissemination and collection of information, with clients accessing data using
applications known as "browsers".
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The adoption of the client/server model by large enterprises has created a
strong market for application development tools to develop custom computer
programs for use in internal client/server environments and across the Internet.
The demand is to maximize the function and scalability of developed applications
and their rapid deployment throughout the business, while at the same time
reducing application development times and using finite software development
resources.
Software development tools based on object-oriented programming models are
generally recognized as the most efficient solution to enterprise application
development. Object-oriented programming languages aggregate functions and data
into classes and objects. Object-based application development tools then
provide a set of software components and libraries for the creation and storage
and manipulation of objects in the relevant programming language. This structure
enables re-use of the software in the development of other applications. By
contrast traditional non-object or imperative mode programming models require
the developer to "start from scratch" with each new application, which is
extremely inefficient.
The demand is also strong for "crossware" applications, or software
applications that can operate across the Internet with a wide variety of systems
or platforms (such as Windows, Windows NT, Macintosh and Linux), databases (such
as Oracle, Informix and Sybase), object types built with standard and custom
object languages, and component formats (such as Java Beans from JavaSoft and
ActiveX from Microsoft Corporation).
OMNIS STRATEGY
The Company's product strategy is to develop sophisticated crossware
object-based application development tools to enable independent software
developers and enterprises to build custom software applications that have the
following features:
- Integrate with existing systems and execute across a variety of
platforms, databases and components.
- Extend the client/server model across the Internet.
- Deliver superior object-oriented functionality at a lower cost than
applications developed using other software development tools.
- Develop reusable program components.
Our goal is to maintain a high level of technological innovation and,
through aggressive marketing and distribution, to significantly increase the
number of software developers and enterprises using OMNIS products.
The Company is a technology leader in the development and deployment of
component engineering software. We believe that our OMNIS 7(3TM) and OMNIS
Studio(R) product lines provide powerful tools for the prompt development and
deployment of Internet and client/server applications for such markets as health
care and pharmaceuticals, legal and administration, human resources and
accounting, manufacturing, education and government. These products provide the
capability to reuse software objects and to integrate objects from different
programming languages.
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THE COMPANY'S PRODUCTS
OMNIS STUDIO(R)
OMNIS Studio(R) is our premium product line and was one of the first
commercially available application development tools that integrated ActiveX and
Java Beans components. OMNIS Studio(R) is an object-oriented rapid application
development tool (RAD), offering efficient visual assembly of components and
objects. OMNIS Studio(R) currently provides cross-platform support for Windows95
and Windows98, Windows NT, Windows 3.1 and MacOS; a powerful code inspector; a
report writer; a multiple-mode debugger; and support for localization and
multi-lingual implementation. OMNIS Studio(R) includes conversion facilities to
assist in converting OMNIS 7(3TM) applications to OMNIS Studio(R); and we have
recently introduced an additional conversion tool to encourage existing OMNIS
7(3TM) to change to OMNIS Studio(R).
The OMNIS Studio(R) programming language combines a 4GL (fourth generation
object-oriented programming language) and its own "dot notation", a hierarchical
language that permits the user to manipulate any object down to its individual
attributes and events. It contains a proprietary set of Data Access Modules
(DAMs) that provide access to all industry-leading databases, including
Oracle(R), Sybase(R), DB2(R), and Informix(R), as well as most ODBC-compliant
databases such as MS SQL Server(TM). From within one integrated design
environment, the OMNIS SQL Browser enables access to different types of server
database and moves objects and data from one database to another.
A Linux version of OMNIS Studio(R) is being developed, with a beta version
released in July 1999 and an anticipated first release in the Fall of 1999. This
will enable OMNIS developers to create and deliver their application in Linux
environments in addition to existing platforms. In addition certain of the
external components of OMNIS Studio(R) are presently available in open source
format to provide working examples for developers interested in programming
their own components for use with OMNIS Studio(R).
The OMNIS Studio Web Client(TM) was announced in late 1998 and released in
April 1999. The OMNIS Studio Web Client(TM) is designed to use object-oriented
programming for the development of Internet based forms, using drag and drop and
wizards, and can include controls like dropdown lists, tabs and sidebars to ease
navigation through the solution in a web browser.
Using the Web Client(TM), OMNIS applications can be viewed on the Internet
using a standard web browser, such as newer versions of Microsoft Internet
Explorer or Netscape Navigator. The server application is developed using
standard OMNIS technology and runs a proprietary OMNIS engine that is located
between the web server and the database.
OMNIS 7(3TM)
OMNIS 7(3TM) has been our main product line for a number of years and
continues to be an important source of revenue. OMNIS 7(3TM) is a cross-platform
application development tool for the development of form-based client/server
applications.
The OMNIS Version Control System(VCS) and OMNIS Change Management Systeme
(CMS) provide format and library storage, version tracking, and application
life-cycle support. OMNIS 7(3TM) applications can be deployed under Windows 3.1,
Windows 95/98, NT, Power Macintosh and 68030 or 68040 Macs.
The OMNIS Web Enabler SDK permits the application to be adapted to access
information via the Internet.
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OMNIS 7(3TM) is currently available in two editions, the Workgroup and
Enterprise editions. OMNIS 7(3) Workgroup includes the OMNIS relational database
and the OMNIS Web Enabler SDK. OMNIS 7(3) Enterprise includes all of the
components of the Workgroup (to access any server database using the SQL
Browser) and the OMNIS VCS.
We intend to continue to maintain OMNIS 7(3TM) for the foreseeable future,
but we do not anticipate adding significant enhancements to the OMNIS 7(3TM)
functions. In general, we license OMNIS 7(3TM) only to existing OMNIS users
desiring to upgrade to the latest version of OMNIS 7(3TM).
OMNIS is a registered trademark of OMNIS Software Limited. OMNIS Studio(TM)
and OMNIS 7(3TM) are trademarks of OMNIS Technology Corporation and its
affiliates. All other products or service names mentioned herein are trademarks
of their respective owners.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to define the
applicable year in a date field. These programs were designed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or at the
year 2000.
Year 2000 compliance means that neither performance nor functionality of a
computer system is affected by dates prior to, during or after the Year 2000. In
particular (i) no value for current date will cause any interruption in
operation; (ii) date based functionality must operate consistently for dates
prior to, during and after Year 2000; (iii) in all interfaces and data storage,
the century in any date must be specified explicitly or by unambiguous algorithm
or inferencing rules wherever possible; and (iv) Year 2000 must be recognized as
a leap year.
We only certify the latest versions of the OMNIS 7(TM) and OMNIS Studio(R)
product lines, which are OMNIS 7(3TM) version 7.0 and above and OMNIS Studio 2.0
and above, as Year 2000 compliant as herein defined. All new versions of OMNIS
products will be tested to ensure continued compliance. Earlier versions of
OMNIS 7(3TM) and OMNIS Studio will store date data correctly, but may fail on
some date calculations under certain circumstances, some of which involve the
year 2000. OMNIS users have been advised of this issue and we provide for the
downloading of the latest version of the date functions applicable to the
particular platform.
Provided that developers use the current version of OMNIS 7(3TM) or OMNIS
Studio(R) in the manner designed they will generate Year 2000 compliant OMNIS
applications. It must be noted that both OMNIS Studio(R) and OMNIS 7(3TM)
provide a programming interface to other programs and external functions written
by external developers and can access data stored in remote databases. In all
cases the date data passed to the remote database from the OMNIS storage
contains the full 4 character year representation. However the Company cannot be
responsible for compliance within individual applications written by external
applications developers. The Company also does not accept any responsibility for
Year 2000 compliance with respect to any hardware on which our products are used
or any other software, including but not limited to operating system software,
server databases, data file systems and other software utilities. We believe we
have designed our current products to effectively handle the Year 2000 issue.
The majority of our internal applications were built using OMNIS products
which we believe are Year 2000 compliant. Therefore, we believe that we have
substantially mitigated our risks on the Year 2000 issue with our internal
applications. We are in the process of completing the testing and assessment of
Year 2000 compliance of our critical business systems for all third party
hardware and software and non-information technology (IT) systems used by the
Company. We expect to have
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such testing and assessment completed no later than October 31, 1999. We will
upgrade or replace all third party hardware or software and non IT systems in
use that are not compliant. We intend to establish, but have not yet
established, a contingency plan detailing actions that will be taken in the
event that any such upgrade or replacement is not compliant or that the
assessment of the Year 2000 issue is not successfully completed on a timely
basis. To date, we have not incurred any material costs directly associated with
our Year 2000 compliance efforts, except for compensation expense associated
with our employees who have devoted some of their time to our Year 2000
assessment and remediation efforts. As discussed above, we do not expect the
total cost of Year 2000 problems to be material to our business, financial
condition and operating results. However, during the months prior to the century
change, we will continue to evaluate new versions of our software products, new
software and information systems provided to us by third parties and any new
infrastructure systems that we acquire to determine whether they are Year 2000
compliant. Despite our current assessment, we may not identify and correct all
significant Year 2000 problems on a timely basis. Year 2000 compliance efforts
may involve significant time and expense, and unremediated problems could
materially adversely affect our business, financial condition or operating
results.
SALES, MARKETING AND DISTRIBUTION
SALES
We license our products to independent developers, VARs, system
integrators, and the internal development staffs of enterprises that develop and
deploy custom computer applications for a wide range of uses including financial
management, decision support, executive information, sales and marketing, and
multi-media authoring systems. The primary focus of our sales and marketing
efforts are independent developers of commercial or custom computer programs for
third parties. The introduction of the OMNIS Studio Web Client(TM) technology in
April 1999, and the anticipated release later this year of a Linux version of
OMNIS Studio(R), are expected to attract new customers.
We sell our products in North America primarily through account
representatives who pursue leads generated by our marketing department and
respond to incoming calls from current and new customers. Our North American
account representative personnel are primarily located at the corporate offices
in San Carlos, California. We also sell our products in Europe primarily through
a direct sales force operating from sales offices in the United Kingdom,
Germany, Scandinavia, and Benelux.
We plan to expand sales growth by making additional sales to our current
customer base and increasing the number of new customers. An important part of
our growth strategy is to widen market penetration and sales through VARs,
service providers and other partnerships. Because applications developed by
these partners require users of the applications to purchase deployment licenses
from the Company, we intend to develop additional revenue by encouraging these
partners to expand their development efforts using our software development
tools.
INTERNATIONAL DISTRIBUTION
We have non-exclusive distributor relationships in a number of countries as
well as an exclusive distribution relationship in France. All of our
distributors provide primary customer service and support for their markets. We
increased our distributor network in 1998 with the appointment of distributors
in Greece and South Africa, and are in the process of extending this distributor
network to access additional international markets. Distributors in Latin
America and in the Pacific Rim are managed from the San Carlos, California
office, while distributors in Europe, Middle East and Africa are managed from
the United Kingdom office.
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We have committed and continue to commit significant management time and
financial resources to developing direct and indirect international sales and
support channels. We cannot assure that we will be able to maintain or increase
international market demand for our products. To the extent that we are unable
to do so in a timely manner, our international sales will be limited, and our
business operating results and financial condition could be materially and
adversely effected.
International operations are subject to inherent risks, including,
- costs and difficulties in staffing and managing foreign operations;
- difficulties in obtaining and managing local distributors;
- costs and difficulties in localizing products into languages other than
English for foreign markets;
- political or economic instability, unexpected regulatory changes and
fluctuations in interest or exchange rates in the specific countries in
which we distribute our products or in international markets in general;
- longer receivables collection periods and greater difficulty in accounts
receivable collection;
- import/export duties and quotas;
- reduced protection for intellectual property rights in some countries;
and
- potentially adverse tax consequences.
Also, as we continue to operate more internationally, seasonality may become an
increasing factor in our financial performance. We cannot assure that we or our
distributors or resellers will be able to sustain or increase international
revenues from licenses or related technical services, or that the foregoing
factors will not have a material adverse effect on our future international
revenues and consequently on our business, operating results and financial
condition.
MARKETING
In support of our sales efforts, we conduct numerous marketing programs
including public relations efforts, trade conferences, seminars, direct mail
campaigns, and direct customer communications. We conduct user conferences in
the United States, the United Kingdom, and Germany and periodically conducts
meetings with customer groups to obtain direct feedback of customers' needs. We
also provide a variety of collateral marketing materials and demonstration
applications to stimulate customer interest. The Company recently sponsored and
made presentations at the Linux World exhibition in San Jose, California, held
during the week of August 9, 1999.
TECHNICAL SUPPORT SERVICES
We also provide levels of technical support and product training for our
customers. Registered users of our products can purchase an annual comprehensive
subscription service to obtain maintenance releases and associated technical
support and documentation. Other services under this program include telephone
technical support during regular business hours, applications notes, and access
to an electronic bulletin board where users can exchange development ideas and
commentary. The customer resource library provides in-depth analyses of specific
product features, example code, programming short cuts, and optimization
techniques. Our technical support team, comprised of experienced OMNIS
developers, focuses on problem solving and resolution in networking,
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connectivity, security and other technical issues. Technical support
representatives are regularly trained in basic and advanced uses of OMNIS
products.
We operate the technical support function through a consolidated database,
combining customer information from the United States, United Kingdom, and
German support center databases into single database structure. The global
support strategy includes a worldwide support center in the United Kingdom,
which supports the Company's United States, Canadian and United Kingdom
customers and certain of the foreign distributors of the Company. A support
center in Germany provides support for the Company's direct customers in Europe
and the Company's European based distributors. We provide technical information
and support via our Website to better provide technical support to our
customers. We are in the process of reducing the professional development and
technical services component of our operations relative to our efforts to
develop and market software products.
CUSTOMERS
We have customers in a wide range of industries, including financial
services, pharmaceuticals, manufacturing, telecommunications, aerospace, defense
and education. In fiscal year 1999 no customer accounted for more than 10% of
total net revenues. As is the case with many companies in the software industry,
the Company generally ships product as orders are received. As a result we have
historically operated with little backlog. Because of this short cycle between
receipt of an order and shipment, we do not believe that our backlog as of any
particular date is material.
Our products are designed to enable the development of applications that
operate in traditional client/server environments as well as across the
Internet. Some of our customers purchase copies of our products for evaluation
purposes. We cannot assure that these customers will broadly implement new
projects or that they will purchase additional products from us.
PRODUCT DEVELOPMENT
Since our inception in the United Kingdom, we have benefited from having a
global perspective in terms of customers, technological perspective, and product
development. Since 1985 our corporate research and development facilities have
been based in England.
We believe that developing new products is best accomplished with a
cross-disciplinary approach, combining the talents and perspectives of a
multi-faceted virtual development team that includes developers, customers,
VARs, sales and marketing, quality assurance, and technical service
representation. In the course of planning products, our product development team
filters industry trends, ideas from customers and potential customers, partners
and potential partners, feedback from our own sales, marketing, technical
support staffs, and general business information and then analyzes the potential
risks and benefits of pursuing a given strategy.
Rapid technological advances, frequent new product introductions, rapid
enhancements of existing products through new releases, and changing customer
requirements characterize the software industry. Our future success will largely
depend on our ability to enhance our current products and to successfully
develop new products that keep pace with technology trends, competitive
offerings and evolving customer requirements. In particular, we believe we must
continue to enhance the basic functionality of our products and extend the
product line to keep pace with the leading advances in hardware, operating
systems, programming languages, databases, and Internet-related technologies.
Any failure to anticipate new technology developments and customer needs or any
significant delays in product development and introduction could result in a
loss of competitiveness and revenues. Because of the complexity of software
products, new product introductions may contain undetected
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<PAGE> 24
software errors that, notwithstanding quality assurance testing by the Company,
are discovered only after a product has been installed and used by customers.
Although we are not aware of any material adverse effects from such errors to
date, we cannot assure that errors will not be discovered in the future. Such
errors could cause delays in shipments, loss of revenues or require significant
design changes that could adversely affect the Company's competitive position
and operating results. We cannot assure that any of the Company's product
development efforts will lead to a commercially viable product, and we are
unable to predict whether or when proposed new products, product enhancements,
or product extensions might be released or whether, when released, such products
will achieve market acceptance.
We market our products to customers for the development, deployment, and
management of client/server applications. Our license agreements with our
customers typically contain provisions designed to limit our exposure to
potential product liability claims. It is possible however that the limitation
of liability provisions contained in our license agreements may not be
enforceable as a result of existing or future laws or ordinances or unfavorable
judicial decisions in the applicable jurisdiction. Although we have not
experienced any product liability claims to date, the sale and support of our
products inherently includes the risk of such claims, which if made are likely
to be substantial in light of the use of our products in business-critical
applications. A successful product liability claim brought against us could have
a material adverse effect upon our business, operating results, and financial
condition.
COMPETITION
The applications development tools software market is rapidly changing and
intensely competitive. We currently encounter competition from several
companies, including Sybase Corporation, Forte Software Inc., Magic Software
Enterprises and Centura Software Corporation (formerly Gupta Corporation). In
addition, we compete indirectly with (i) the relational database vendors, such
as Oracle Corporation and Informix Software, Inc., who provide application
development tools primarily for customers who use their database technology;
(ii) 4GL application tools vendors such as Progress Software Corporation and
Cognoscente Software International Incorporated; (iii) CASE tools vendors such
as Knowledgeware Inc. and Intersolv Inc.; (iv) shrink-wrap database software
suppliers such as Lotus, Delphi, and ACIUS; and (v) developers in Java as
competition for the OMNIS Web Client(TM) technology.
We believe that our ability to compete depends on factors both within and
outside our control, including the timing and success of new products developed
by the Company and our competitors, product performance and price, distribution,
and customer support. We cannot assure that we will be able to compete
successfully with respect to these factors. In particular, competitive pressures
from existing and new competitors who offer lower prices or introduce new
products, including "native" products that fully utilize the capabilities of a
particular operating platform, could result in delays in purchase decisions by
or loss of sales to potential customers or cause the Company to institute price
reductions. Any of the foregoing could adversely affect the Company's results of
operations. In particular, software licenses which permit developers to develop
configurable applications and deliver those applications to end-users, have been
and may continue to be subject to significant pricing pressures which could have
an adverse effect on the Company's business and results of operations. We cannot
assure that the Company will be able to maintain our price structure or that
entry of future competitors in the Company's current market will not result in
pricing pressures in the future.
Additional competitive factors influencing the market for the Company's
products include product functionality and features, platforms, performance,
vendor and product reputation, product and service quality. These items may also
result in market confusion, delays in purchases, intensified
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competition, price restructuring, or price reductions. We believe that the broad
functionality of our products, including their cross platform capability and
important features for group development, application deployment and maintenance
has enabled the Company to compete effectively to date, particularly for
professional development environments in major enterprises.
Our future financial performance will depend on the growth of our sector of
the computing market and on our ability to compete effectively in this market.
We cannot assure that this market will continue to grow or that we will be able
to respond effectively to customer requirements and competitive offerings in
this market. As these markets evolve, we anticipate that competition is likely
to increase from both existing and future market participants, most of whom are
larger companies and have greater financial, technical, marketing, sales and
distribution resources and a larger installed base of customers than the
Company. Moreover, if such competition were to enter our market, we might be
required to increase defensive measures to maintain our position in these target
markets. This increased effort could adversely affect operating results due to
increased marketing programs, price declines, longer sales cycles, and increased
product development expenses, among other matters. We cannot assure that the
Company could compete effectively with such new products.
INTELLECTUAL PROPERTIES AND OTHER PROPRIETARY RIGHTS
The OMNIS products include technologies developed by the Company. We rely
primarily on a combination of trade secret, copyright and trademark laws, and
contractual provisions to protect our proprietary rights in such technologies.
Omnis(R) is a United States registered trademark of OMNIS Software Limited
(formerly Blythe Software Limited), a subsidiary of OMNIS Technology
Corporation. Omnis Studio(R) and OMNIS 7(TM) are trademarks of OMNIS Technology
Corporation and its affiliates.
License Agreements. In addition to trademark and copyright protections, we
license our products to end users on a "right to use" basis pursuant to a
perpetual license agreement that restricts use of products to a specified number
of users. We generally rely on shrink-wrap licenses that become effective when a
customer opens the package or installs the software. Because they are not
negotiated with or signed by the licensees, in order to retain exclusive
ownership rights to our software and technology, we generally provide our
software in object code only, with contractual restrictions on copying,
disclosure and transferability. We cannot assure that these protections will be
adequate, or that the Company's competitors will not independently develop
technologies that are substantially equivalent or superior to the Company's
technologies.
International Copyright Protection. Copyright and other protection for
intellectual property may be unavailable or restricted in certain foreign
countries. In addition, shrink-wrap licenses may be unenforceable under the laws
of certain jurisdictions. Nevertheless, we believe that our copyright and
license protections are important. However, because of the rapid pace of
technological change in the computer software industry, factors such as the
product knowledge, ability, and experience of the Company's personnel, brand
name recognition, customer support, and ongoing product maintenance and
enhancement may be more significant in maintaining the Company's competitive
advantage.
Patents. We are in the process of preparing appropriate patent applications
for certain of our Studio Web Client(TM) and other technologies. At this time we
have not filed any final patent applications and have not been granted any
patents on any of our proprietary technologies and there is no assurance that
any such patents will be granted. Patent protection may become important in the
protection of the commercial viability of the Company's innovative products and
the failure to obtain such patent protection could have an adverse effect on the
commercial viability of such products. Our success therefore may in part depend
on our ability to obtain strong patent protection or licenses to strong patents
in the future. It is not possible to anticipate the breadth or degree of
protection that
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<PAGE> 26
patents would afford any product of the Company or the underlying technologies.
We cannot assure that any patents issued or licensed to the Company will not be
successfully challenged in the future or that any OMNIS product will not
infringe the patents of third parties.
The level of research and development efforts in areas related to the OMNIS
products makes it possible that third parties will obtain patents or other
proprietary rights that may be necessary or useful to our products. In recent
years the practice of applying for and issuing software patents in the United
States and other jurisdictions has accelerated and the scope and validity of
such patents are frequently in dispute. In cases where third parties are the
first to invent a particular product or technology or the first to file for
patent protection for an invention, it is possible that such parties would
obtain patents that would be sufficiently broad to prevent the Company from
marketing the same or similar products. Although we are not presently aware that
any patents necessary to our products have been issued for which licenses are
not available to the Company, it is possible that applications for such patents
have been made or that such patents have been issued. The scope and validity of
such patents, if issued, the extent to which the Company may desire or need to
obtain licenses under such patents, and the cost and availability of such
licenses are currently unknown. In addition, others may independently develop or
obtain technology similar to that of the Company.
As the number of software products available in the market increases and
the functions and features of these products further overlap, the Company
anticipates that software products may become increasingly subject to
infringement claims. We cannot assure that third parties will not assert
infringement claims against the Company in the future with respect to any
current or future product. Any such assertion, whether with or without merit,
could require the Company to enter into expensive litigation or royalty
arrangements. If required, such royalty arrangements may not be available on
reasonable terms, or at all.
We are currently involved in litigation related to copyright infringement.
See "LEGAL PROCEEDINGS" at Page 36.
PRODUCTION
We use subcontractors in the United Kingdom to perform our manufacturing
operations, which include duplication and preparation of software media,
documentation, and packaging. The principal materials used in the manufacture of
the Company's products are CD-ROMs, boxes, binders, and multicolor printed
materials that we obtain from our manufacturers.
We utilize certain of our distributors in some international markets to
localize the products, including conversion of the product and product
documentation to native languages, where necessary. The distributor for that
market then handles the production of the resulting localized product.
We require that quality control tests be performed on all duplicated disks
and finished products. Quality control personnel work in the United Kingdom
operation to help ensure product quality. The Company produces software and
documentation based upon forecasts of monthly sales.
EMPLOYEES
At August 31, 1999, the Company had 37 employees, including 14 in product
development, 9 in sales and marketing, 7 in customer support and consulting, and
7 in finance and administration. Of these 37 employees, 31 employees are based
in Europe, and 6 are located in the United States. The Company's employees are
not represented by any collective bargaining organization, and we have never
experienced a work stoppage. Further, we believe our relationships with our
employees are good.
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Our success depends to a significant extent upon a number of key management
and technical personnel, the loss of one or more of who could adversely affect
our business. In addition, our future success will depend to a significant
extent on our ability to recruit, hire and retain highly skilled management and
employees for product development, sales, marketing, and customer service.
Competition for such personnel in the software industry is intense, and we
cannot assure that we will be successful in attracting and retaining such
personnel.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations, as well as other portions of this document, include certain
forward-looking statements about the Company's business and new products,
revenues, expenditures and operating and capital requirements. In addition,
forward-looking statements may be included in various other Company documents to
be issued concurrently or in the future and in oral or other statements made by
representatives of the Company to investors and others from time to time.
Forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ from predicted results. Such risks include, among
others
- our potential liquidity problems,
- significant variability in operating results, including variability in
product revenues and gross margins,
- fluctuating demand for new and established products,
- dependence on development of new products,
- increasing expenses for marketing and development of new products,
- historical lack of profitability,
- rapid technological change that affects the ability of the Company to
respond to customer or market demands,
- risks associated with global operations,
- the continued and future acceptance of the Company's products,
- the rate of growth in the industries of the Company's products,
- the presence of competitors with greater technical, marketing and
financial resources, and
- the ability of the Company to successfully expand our operations.
Any of such statements and the following discussion should be read in
conjunction with the "RISK FACTORS" section at Page 4 and the Company's audited
consolidated financial statements, including the notes thereto, included in this
Prospectus beginning on Page F-1.
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The following table sets forth, as a percentage of revenues, certain
consolidated statement of operations data for the periods indicated (subtotals
not adjusted for rounding):
<TABLE>
<CAPTION>
THREE
FISCAL YEAR MONTHS
ENDED ENDED
MARCH 31, JUNE 30,
------------ ------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Percent of Total Net Revenues:
Net revenues:
Product.................................................. 53% 73% 67% 81%
Services................................................. 47 27 33 19
---- ---- --- ---
Total net revenues......................................... 100 100 100 100
Operating expenses:
Cost of Product Revenues................................. 6 6 9 3
Cost of services revenues................................ 39 6 7 4
Selling and marketing.................................... 84 34 42 39
Research and development................................. 36 24 25 28
General and administrative............................... 38 39 87 18
---- ---- --- ---
Total operating expenses................................... 204 109 170 91
Operating income (loss).................................... (104) (9) (70) (9)
Other income (expense), net................................ (1) (6) (8) 0
---- ---- --- ---
Net income (loss).......................................... (105)% (15)% (79)% 8%
---- ---- --- ---
Gross margins:
Gross margin on product revenues......................... 88% 92% 87% 96%
Gross margin on service revenues......................... 18% 78% 78% 80%
</TABLE>
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED MARCH 31, 1998 AND 1999
TOTAL NET REVENUES
Total net revenues decreased 26% to $5.9 million in fiscal year 1999 from
$8 million in fiscal year 1998. International revenues accounted for 58% and 39%
of total net revenues in fiscal years 1999 and 1998, respectively. See Note 12
of the Notes to Consolidated Financial Statements. This decrease in net revenues
resulted from a planned reduction in professional consulting and other technical
services provided by the Company which were offset to a limited degree by an
increase in software product licensing revenues. We have reduced our consulting
service activities in order to focus on higher margin product related revenue
generating activities and have shifted consulting opportunities to our external
partners (we have committed to decreasing conflicts with such partners,
particularly in the service revenues area).
The Company's revenues are derived from two sources: fees from software
product licensing and fees for professional services, including consulting,
training, maintenance, and product support. Product revenues increased 1% to
$4.3 million in fiscal year 1999 from $4.2 million in fiscal year 1998.
Service revenues decreased 58% to $1.6 million in fiscal 1999 from $3.8
million in fiscal year 1998. The decrease in service revenues in fiscal year
1999 as compared to fiscal year 1998 was due to a planned reduction of the
provision of consulting services to third parties.
In fiscal years 1999 and 1998, no customer accounted for more than 10% of
total revenues.
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We sell our products in United States Dollars in North America, British
Pounds Sterling in the United Kingdom and German Deutsche Marks in Germany.
Because the Company recognizes revenues and expenses in United States Dollars,
British Pounds Sterling, and German Deutsche Marks but reports our financial
results in United States Dollars, changes in exchange rates may cause variances
in the Company's period-to-period revenues and results of operations in future
periods. Foreign exchange gains and losses have not been material to the
Company's performance to date.
COST OF PRODUCT REVENUES
Cost of product revenues is comprised of direct costs associated with
software product sales including software packaging, documentation, and physical
media costs. Cost of product revenues as a percentage of product revenues was 8%
in fiscal year 1999 as compared to 12% in fiscal year 1998. The decrease in cost
as a percentage of total net revenues was mainly due to decrease in the number
of employees in the production department.
COST OF SERVICES REVENUES
Cost of service revenues includes consulting, technical support,
maintenance services, and training, which consist primarily of personnel costs.
Cost of service revenues as a percentage of net service revenues decreased to
22% in fiscal year 1999 from 82% in fiscal year 1998. The decrease in cost of
service revenues as a percentage of service revenues in fiscal 1999 as compared
to fiscal years 1998 was primarily due to the planned reduction in consulting
services in year 1999. The reason for our reduction of service activities is
discussed in "Total Net Revenues" above.
SELLING AND MARKETING EXPENSES
Selling and marketing expenses decreased to $2.0 million in fiscal year
1999 from $6.7 million in fiscal year 1998, representing 34% and 84% of total
net revenues during such periods, respectively. The decrease in selling and
marketing expenses was primarily due to significant decreases in the number of
Company employee and consultant costs in the Company's marketing group at the
end of 1998. We expect selling and marketing expenses to remain significantly
lower in future periods.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses decreased to $1.4 million in fiscal year
1999 from $2.8 million in 1998, due to the consolidation of the Company's
worldwide research and development activities into our development facility in
England during 1998. Costs for the development of new software products and
substantial enhancements to existing software products are expensed as incurred
until technological feasibility has been established, at which time any
additional costs would be capitalized in accordance with SFAS 86 then in force.
We did not capitalize any research and development costs in fiscal years 1999 or
1998 because we believe our current process for developing software is
essentially completed concurrently with the establishment of technological
feasibility (as defined by SFAS 86). At the end of fiscal year 1997, we had
fully amortized the previously capitalized internal software development costs
and no such costs were recognized during fiscal years 1998 or 1999.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased to $2.3 million in fiscal
year 1999 from $3.1 million in fiscal year 1998. These decreases are related to
stringent cost controls and other cost conservation methods introduced during
fiscal year 1998 and continued in fiscal year 1999. General
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and administrative expenses for the fiscal year 1998 included a write-off of
approximately $500,000 of our lease deposit and $40,000 of additional lease
payments associated with our former headquarters in San Bruno, California as a
result of our successful negotiation with the landlord to vacate our lease
space.
OTHER INCOME (EXPENSE), NET
Other income (expense) is primarily comprised of interest income, interest
expense, gains and losses on foreign currency transactions, and other income.
Interest income reflects earnings from our cash position. Interest expense
primarily related to the Company's $1 million note payable and capital leases in
fiscal years 1998 and 1999. Interest expense was $249,000 in fiscal year 1999
and $146,000 in fiscal year 1998. Other expense pertains to loss from disposal
of assets and this decreased to $3,000 for the three months ended June 30, 1999
from $77,000 for the three months ended June 30, 1998. During the three months
ended June 30, 1998 the U.S. subsidiary had to dispose of excess equipment when
it downsized its staff from 75 to 12 employees.
INCOME TAX EXPENSE
Income tax expense was $4,000 in fiscal year 1999, compared to $17,000 in
fiscal year 1998. At March 31, 1999, the Company had net operating loss carry
forwards of approximately $37.6 million for federal income tax purposes, $8.7
million for state tax purposes and $5.9 million for foreign taxes. The Tax
Reform Act of 1986, as amended, and the California Conformity Act of 1987 impose
substantial restrictions on the utilization of net operating loss and tax credit
carry forwards in the event of an "ownership change," as defined by the Internal
Revenue Code. In fiscal year 1999 an "ownership change" of the Company occurred
for purposes of these rules; and the Company therefore is limited to
approximately $146,000 per year of federal and California net operating loss
carry forwards accrued through that date (a total of $2.9 million federal and
$0.7 million for California tax purposes).
INFLATION
We believe that inflation has not had a material impact on our operating
results to date and do not expect inflation to have a material impact on our
operating results in fiscal year 2000.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1999, AND JUNE 30,
1998
REVENUES
Total net revenues for the three months ended June 30, 1999, were
$1,371,000, representing a decrease of 0.2% as compared to total net revenues of
$1,374,000 for the three months ended June 30, 1998.
The change is due to a combination of the reduction in service revenues,
particularly as a result of the Company's decision to reduce conflicts with some
of our channel partners, and an increase in product revenues.
Product revenues increased during the three months ended June 30, 1999, to
$1,104,000 from $915,000 in the three months ended June 30, 1998.
This increase is due to the Company's decision to concentrate on
product-related revenue, rather than a mix of product and services revenue over
the past eighteen months. As a result of our shift in emphasis to
product-related revenue generating activities, among other things, we
experienced an
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increase in sales and revenues as described above, and customer discounts (that
we historically give to service customers) were reduced.
During the three months ending June 30, 1999, product revenues represented
81% of total net revenues as compared to 67% of total net revenues during the
same period in the prior year.
Service revenues for the three months ended June 30, 1999 decreased 42% to
$267,000 from $459,000 for the three months ended June 30, 1998. The majority of
this decrease is due to our decision to de-emphasize our consulting offerings
over the past 18 months. Maintenance revenue, which primarily consists of email
and telephone support to the Company's customers, decreased slightly during the
three months ended June 30, 1999, due to the decrease in the annual support fee
being charged to customers.
We do not expect to receive significant service revenues related to
consulting projects in future periods as it focuses on higher margin product
related revenue and shifts consulting opportunities to our external partners.
COST OF SALES
Cost of product revenues is comprised of direct costs associated with
software product sales including software packaging, documentation, and physical
media costs. Cost of service revenues is comprised of customer support
(maintenance) expenses, including technical support salaries and related
expenses, and consulting related costs, including consultant salaries and
related costs incurred in delivering customer consulting and training services.
Cost of product revenues as a percentage of product revenues decreased from
13% in the three months ended June 30, 1998 to 4% in the three months ended June
30, 1999. Cost of product revenues for the three months ended June 30, 1998
includes a write-off for inventory obsolescence that occurred during such
quarter.
Cost of service revenues decreased slightly as a percentage of service
revenues from 22% in the three months ended June 30, 1998, to 20% in the three
months ended June 30, 1999.
SELLING AND MARKETING EXPENSE
Selling and marketing expenses decreased to $530,000 for the three months
ended June 30, 1999, as compared to $579,000 for the three months ended June 30,
1998. The decrease in sales and marketing expenses was primarily due to
decreases in headcount in marketing and sales. The Company expects to increase
our marketing expenses during future periods as it rebuilds our marketing
efforts with partner focused programs designed to increase our installed base of
customers.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development costs increased to $385,000 for the three months
ended June 30, 1999, as compared to $337,000 for the three months ended June 30,
1998, primarily due to an increase of headcount at our Research and Development
Center in the United Kingdom. We continue to invest in the development of our
newer product line, OMNIS Studio, aimed at sales opportunities that we believe
will expand our installed base of customers.
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GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses decreased to $243,000 for the three
months ended June 30, 1999, as compared to $1,201,000 for the three months ended
June 30, 1998. General and administrative expenses for the three months ended
June 30, 1998 included a write-off of approximately $500,000 of our lease
deposit and $40,000 of additional lease payments made during such quarter
associated with our former headquarters in San Bruno, California as a result of
our successful negotiation with the landlord to vacate our lease space.
Additionally, we recognized a write-off related to the disposal of leased
equipment that resulted in a non-recurring charge of $110,000 during the quarter
ended June 30, 1998. We are continuing our efforts to reduce our operating
expenses where possible, including general and administrative expenses.
OTHER INCOME (EXPENSE)
Other income (expense) is comprised primarily of interest income earned on
cash and cash equivalents, interest expense, and any gain or loss on foreign
currency transactions. Interest income increased to $3,000 for the three months
ended June 30, 1999, from $2,000 for the three months ended June 30, 1998,
primarily due to higher average balances of cash and cash equivalents. Interest
expense decreased to $3,000 for the three months ended June 30, 1999, from
$37,000 for the three months ended June 30, 1998 primarily due to the conversion
of the promissory note to equity in March 1999.
PROPERTIES
During the initial part of fiscal year 1999 the Company had leased
approximately 22,178 square feet of office space in San Bruno, California under
a lease which expired in May 2002 and required payment of base monthly rental
payments of $58,772 plus a percentage of operating costs and property taxes. The
base monthly rent increased to $60,990 per month during 1998. The Company
negotiated a termination of this lease in August 1998 and now occupies 3,800
square feet of office space in San Carlos, California under a lease which
expires on August 31, 2000 and has a base monthly rent of $7,440.
We own property in the United Kingdom that it uses for research and
development. We also leased 2,738 square feet of office space for the European
sales headquarters office in Bracknell, England. The Bracknell lease, which was
to expire in February 2001, had monthly rental payments of $4,997 plus $2,096
for common area maintenance. We have negotiated an early termination of this
lease with the landlord and moved on June 15, 1999 to new offices near Watford,
England. This will result in substantial savings on rent and service charges
over a full year. The Company also leases 2,370 square feet of office space
(formerly our London sales office) in London, England. The lease, which expires
on November 1, 2012, has monthly rental payments of $3,820. During 1998, the
Company sublet all of the London office space for which it has been receiving a
rental of $2,216 per month plus 100% reimbursement for common area maintenance.
As a result of a sublease review, this has been increased to $3,820 per month,
backdated to November 1997. The sublease terminates on December 25, 1999.
We lease property in Germany for use as a sales office. The space is 457
square meters and has monthly rental payments of $6,678. The lease will expire
May 14, 2007, with a Company option to terminate the lease in May 2002.
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<PAGE> 34
We believe that these facilities are more than adequate to meet our
requirements for fiscal year 2000. All of the foregoing rental obligations are
in the local currency but for these purposes are stated in United States Dollars
as of March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, our principal sources of liquidity consisted of cash and
cash equivalents of $432,000 as compared to $132,000 at June 30, 1998. Our
working capital position increased to $477,000 at June 30, 1999 from a deficit
of ($3,037,000) at June 30, 1998. We have operated at a loss for the last
several fiscal years. Our new management team has taken several steps to improve
our cash flow and, with these improvements, we reduced cash used in operating
activities from $6,180,000 in fiscal year 1998 to $2,514,000 in fiscal year
1999. We had positive net cash flow provided by operating activities of $268,000
in the three months ended June 30, 1999 compared to negative cash flow used in
operating activities of ($488,000) in the three months ended June 30, 1998. We
returned to profitability in the third and fourth quarters of fiscal 1999 and in
the first quarter of fiscal 2000. However, we cannot assure that we will be able
to sustain profitability in the future.
The following transactions affected the Company's liquidity and capital
resources:
- On June 2, 1996, we sold $7.35 million of 8% Convertible Debentures (the
"Notes") under Regulation S of the Securities Act of 1933, as amended. As
of June 2, 1997, all of the Notes had either been redeemed or converted
and an aggregate of 1,120,221 shares of Common Stock had been issued upon
conversion of Notes. All of such shares are "restricted securities" as
defined under the Securities Act.
- We have engaged in several recent transactions with Astoria, including
the sale and issuance of Series A Preferred Stock and Common Stock, more
particularly described in "SELLING SECURITY HOLDERS" at Page 11.
- The Company also issued an additional 4,000,000 Common Shares in the
aggregate at a price of $0.25 per share, for aggregate purchase price of
$1,000,000, to certain members of the Board of Directors, including
Gwyneth Gibbs, President of the Company.
The proceeds from the sale of the Common Shares to the Board of Directors
primarily was used to satisfy the entire indebtedness owed to the Omnis Class 2
Creditors pursuant to the 1998 workout agreement previously entered into between
the Company and such creditors. Proceeds from the sale of 1,000,000 Common
Shares to Astoria in the amount of $250,000 is being used for Company working
capital purposes, primarily to enhance and expand our sales and marketing
activities. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" at Page 33.
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<PAGE> 35
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OCTOBER 1997 DEBT FINANCING AND CREDITORS COMMITTEE
In October 1997, the Company obtained an interim debt financing of
$1,000,000 with Astoria. This debt financing was secured by substantially all of
the Company's assets and was originally scheduled to be repaid by December 31,
1997. Astoria extended the due date of the notes payable to September 30, 1998.
The Company formed a committee of creditors in February 1998 to structure a
workout agreement pursuant to which the Company would repay our creditors over
time, with the objective of avoiding further litigation or formal bankruptcy
proceedings. A workout agreement was entered into in June 1998. The Company
began repayment to the creditors in the quarter ending September 30, 1998 and
fully repaid such creditors by March 31, 1999. The debt to Astoria was converted
to equity in March 1999. See the paragraph of this Section entitled "March 1999
Sale of Series A Convertible Preferred Stock and Common Stock" below.
1998 SALE AND REPURCHASE OF SERIES A CONVERTIBLE PREFERRED STOCK
In April 1998, the Company agreed to sell up to 126,000 shares of Series A
Convertible Preferred Stock of the Company (the "Convertible Preferred Stock"),
at a price of $8.03 per share, to Astoria, at its option, at such price per
share at any time prior to October 1, 1998. Each share of Convertible Preferred
Stock would convert into 10 shares of common stock. Between April 1 and October
1, 1998, Astoria purchased a total of 124,564 shares of Convertible preferred
stock from the Company. The proceeds were used to fund the Company's operations.
On December 31, 1998, the Company repurchased the 124,564 shares of Convertible
Preferred Stock from Astoria for an aggregate purchase price of $100 (or $.0008
per share). The Certificate Regarding Preferred Stock of the Omnis Technology
Corporation was filed with the Delaware Secretary of State on February 25, 1999,
eliminating the class of Convertible Preferred Stock then in effect.
MARCH 1999 SALE OF SERIES A CONVERTIBLE PREFERRED STOCK AND COMMON STOCK
In order to increase the capital of the Company to obtain additional
working capital and to eliminate our principal indebtedness, on March 19, 1999
the Board of Directors of the Company authorized the issuance of 300,000 shares
of a new Series A Convertible Preferred Stock and 7,600,000 shares of Common
Stock of the Company. The Restated Articles of Incorporation of the Company vest
in the Board of Directors the authority to issue such shares. On March 31, 1999
the Company filed with the Secretary of State of Delaware a Certificate of
Designations setting forth the rights, preferences and privileges of the new
Preferred Shares. Pursuant to the terms of a Letter of Intent entered into by
and between the subject parties as of February 22, 1999, on March 31, 1999, the
Company entered into a series of stock purchase agreements with Astoria Capital
Partners, L.P., Gwyneth Gibbs, president of the Company, and certain members of
the Board of Directors or their affiliates.
Under the terms of a stock purchase agreement with Astoria, the Company
agreed to issue and Astoria agreed to purchase 300,000 Preferred Shares at a
purchase price of $1.6667 per share for an aggregate Preferred Share purchase
price of $500,000; and to purchase 2,543,344 Common Shares at a purchase price
of $0.25 per share for an aggregate Common Share purchase price of $635,836. The
consideration for the securities purchased by Astoria was the cancellation of
the 1997 secured indebtedness and accrued interest of the Company to Astoria.
See the paragraph of this Section entitled "October 1997 Debt Financing and
Creditors Committee" above. The stock purchase agreement grants certain
registration rights and rights of first refusal to Astoria. The Company also
entered into a separate Common Stock Purchase Agreement with Astoria pursuant to
which Astoria
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<PAGE> 36
purchased an additional 1,000,000 Common Shares at a price of $0.25 per share
for an aggregate cash purchase price of $250,000.
The Common Stock Purchase Agreements grant registration rights and rights
of first refusal to Astoria. The Agreements provide that the Company register
Astoria's Common Stock as well as the Common Stock issuable upon conversion of
the Series A Convertible Preferred Stock with the SEC under the Securities Act
by September 30, 1999. The Shares are being registered and offered hereby
pursuant to the terms of the Common Stock Purchase Agreements. The Common Stock
Purchase Agreements further provide that if a registration statement covering
the Shares does not become effective by such date, the Company shall:
- reduce the consideration paid by Astoria for the securities by refunding
to Astoria 3% of the purchase price of the securities for each 30-day
period (pro-rated for periods of less than 30 days) by which such
effectiveness is delayed, and
- pay Astoria 3% of the purchase price for any period in excess of 30 days
that the effectiveness of the registration statement is suspended or the
registration statement is otherwise unavailable for use by Astoria,
excluding periods during which Astoria may sell the securities without
restriction under Rule 144.
Although the Company is using its best efforts to register Astoria's securities
as soon as possible, certain aspects of the registration process are beyond the
Company's control, including the time of review of the registration statement,
if any, by the SEC. Astoria has indicated to the Company that it would waive its
right to receive the foregoing payments, if any, if the Shares offered by this
Prospectus are registered and become available for sale within a reasonable time
after the target date. If (1) the securities are not registered by the target
date, (2) Astoria's right to the payments set forth above is valid and
enforceable and (3) Astoria does not waive its right to such payments, then the
Company's liquidity and, ultimately, its operations, could be materially
adversely effected. The Common Stock Purchase Agreements are included in the
exhibits to the registration statement of which this Prospectus is a part.
SALE OF COMMON STOCK TO BOARD MEMBERS
Pursuant to the terms of stock purchase agreements entered into with
certain members of the Board of Directors, including Mrs. Gibbs in March, 1999
(the "Board of Directors Agreements"), the Company also agreed to issue an
additional 4,000,000 Common Shares in the aggregate at a price of $0.25 per
share, for an aggregate purchase price of $1,000,000. The Board of Directors
Agreements do not grant any registration rights or rights of first refusal to
the parties. These transactions were approved by the disinterested directors of
the Company pursuant to Delaware law.
The Board of Directors Agreements includes the following:
- a stock purchase agreement between the Company and RCJ Capital Partners,
LP (of which Rockport Group LP is the sole general partner, and Director
Geoffrey Wagner is the sole general partner of Rockport Group LP), for
RCJ Capital Partners, LP to purchase 850,000 shares of the Common Stock
of the Company for a total price of $212,500,
- a stock purchase agreement between the Company and Rockport Group, LP, of
which Director Geoffrey Wagner is the sole general partner, for Rockport
Group, LP to purchase 1,420,000 shares of the Common Stock of the Company
for a total price of $355,000, and
- a stock purchase agreement between the Company and Philip and Debra
Barrett Charitable Remainder Trust, of which Director Philip Barrett is a
trustee and trustor, for Philip and
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<PAGE> 37
Debra Barrett Charitable Remainder Trust to purchase 1,650,000 shares of
the Common Stock of the Company for a total price of $412,500.
- a stock purchase agreement between the Company and Gwyneth Gibbs to
purchase 80,000 shares of the Common Stock of the Company for a total
price of $20,000.
The proceeds from the sale of the Common Shares to the Board of Directors
was primarily used to satisfy the entire indebtedness owed to the Omnis Class 2
Creditors pursuant to the 1998 workout agreement previously entered into between
the Company and such creditors. The $250,000 in proceeds from the sale of the
1,000,000 Common Shares to Astoria will be used for Company working capital
purposes, primarily to enhance and expand our sales and marketing activities.
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
In February 1998, The Nasdaq Stock Exchange de-listed the Company from the
Nasdaq SmallCap Market. The Company's Common Stock is currently traded on the
Nasdaq Bulletin Board ("BB") under the symbol "OMNS". It is not known at this
time when or if the Company will be re-listed on the Nasdaq SmallCap Market.
The following table sets forth the high and low closing prices for the
Company's Common Stock for fiscal years 1998, 1999 and the first quarter of
fiscal 2000, as adjusted for the 1 for 10 reverse stock split of the Company's
common stock in September 1997:
<TABLE>
<CAPTION>
HIGH LOW
CLOSING CLOSING
------------ -----------
<S> <C> <C>
FISCAL YEAR 1998
April 1 to June 30, 1997.................................... $11.880 $4.690
July 1 to September 30, 1997................................ $11.250 $6.250
October 1 to December 31, 1997.............................. $ 6.500 $0.500
January 1 to March 31, 1998................................. $ 0.875 $0.313
FISCAL YEAR 1999
April 1 to June 30, 1998.................................... $ 0.906 $0.587
July 1 to September 30, 1998................................ $ 0.906 $0.375
October 1 to December 31, 1998.............................. $ 0.562 $0.187
January 1 to March 31, 1999................................. $ 0.375 $0.100
FISCAL YEAR 2000
April 1 to June 30, 1999.................................... $ 2,187 $0.812
</TABLE>
On September 17, 1999, the closing price for the Company's Common Stock on
the Nasdaq Bulletin Board was $7.125 and there were approximately 143 holders of
record of the Company's Common Stock. This does not include shareholders whose
Common Stock is held in street name.
See "DESCRIPTION OF SECURITIES" at Page 36 and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" at Page 26.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain earnings, if any, to support the development of our
business and do not anticipate paying cash dividends for the foreseeable future.
Payment of future dividends, if any, will be at the discretion of
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<PAGE> 38
the board of directors after taking into account various factors, including our
financial condition, operating results and current and anticipated cash needs.
LEGAL PROCEEDINGS
LITIGATION
Compass Actions. In March 1998, we were sued by Compass Software
("Compass") in the Federal District Court for the Eastern District of Washington
claiming damages in the range of $2 Million for software copyright infringement
and related claims. We believe that the Compass' copyright infringement suit has
no merit and has vigorously defended against those claims.
In this connection we previously had sued Compass in 1994 for illegally
infringing and distributing our software products. This matter was settled with
an agreement that Compass would pay certain amounts and would not make illegal
copies of our software in the future. Compass failed to pay the promised amounts
when due. We then obtained a judgment for breach of contract against Compass. As
part of our efforts to enforce our judgment against Compass, we purchased, at a
judgment lien sale, certain intangible property of Compass including the rights
to the current infringement suit brought by Compass ("Execution Sale"). Compass
then requested the applicable court to set aside the Execution Sale. The court
granted the request and we have appealed this judgment. The appeal has been
briefed and is awaiting a date for oral argument. We have also filed a separate
lawsuit against Compass alleging additional acts of infringement related to the
1994 case.
BTN -- Germany. We entered into a professional development services
agreement with BTN Versandhandel GmbH of Leiferde, Germany for the development
of an OMNIS application. We developed and delivered a version of the application
to BTN. BTN failed to pay us as agreed, claiming there were flaws in the
application. We suspended the project awaiting their payment. BTN commenced
legal action against us in Germany claiming damages of approximately DM250,000
for failure to perform under the service agreement. We have countersued BTN
claiming the balance owed under the contract of approximately DM60,000. We
believe that the claim by BTN is meritless and intend to aggressively pursue our
counterclaim against BTN.
Creditors. As a result of the losses and negative cash flows incurred by
the Company fiscal year 1998, we were unable to meet our obligations. The
Company negotiated with a group of our creditors to structure a workout
agreement pursuant to which we would repay the creditors over time, thereby
possibly avoiding further litigation and collection activities or formal
bankruptcy proceedings. The workout plan was agreed to by this group of
creditors and was approved on June 19, 1998. We began repayment to customers in
the quarter ending September 1998. The Company paid all amounts owed to these
creditors in full at the end of March 1999.
DESCRIPTION OF SECURITIES
COMMON STOCK
At August 31, 1999, there were 20,000,000 shares of Common Stock
authorized, 9,681,607 of which were outstanding and held of record by
approximately 143 holders. This does not include shareholders whose Common Stock
is held in street name. As of June 30, 1999, 400,000 shares of the Company's
capital stock was reserved for issuance under warrants, and warrants for 183,729
shares
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<PAGE> 39
were outstanding. As of June 30, 1999, 1,312,347 shares of capital stock were
reserved for issuance under options, and options to purchase 1,037,549 shares
were outstanding.
Each share of Common Stock entitles the holder to one vote on all matters
submitted to a vote of the shareholders, and a majority vote is required for all
actions to be taken by shareholders. Holders of Common Stock do not have
cumulative voting rights which means that the holders of more than 50% of shares
voting for the election of Directors can elect all of the Directors if they
choose to do so, and in such event, the holders of the remaining shares will not
be able to elect any Directors. Our Bylaws require that only a majority of the
issued and outstanding shares of our Common Stock is required to transact
business at a shareholders' meeting. The Common Stock has no preemptive,
subscription or conversion rights.
In the event of a liquidation, dissolution or winding up of the Company,
holders of the Common Stock have the right to a ratable portion of the assets
remaining after payment of liabilities. All shares of Common Stock outstanding
and to be outstanding upon completion of this offering are and will be fully
paid and non-assessable.
The Company has never declared or paid dividends on our Common Stock. The
Company intends to retain earnings, if any, for the operation and expansion of
the Company's business, and therefore does not anticipate paying any cash
dividends in the foreseeable future. See "DIVIDEND POLICY" at Page 35.
PREFERRED STOCK
The Company is authorized to issue up to 300,000 shares of Preferred Stock,
par value $1.00, all of which has been designated Series A Convertible Preferred
Stock. All of the Series A Convertible Preferred Stock has been issued to
Astoria.
Conversion. Each share of the Preferred Stock is convertible at the option
of the holder thereof, at any time, into 1.667 shares of Common Stock (currently
500,100 shares). The conversion rate will be proportionately adjusted in the
event of a stock split, reverse stock split, stock dividend, reorganization or
recapitalization without consideration. In addition, the conversion rate is also
adjusted following certain diluting issuances of Company securities. The
Preferred Stock has no preemption rights or rights of first refusal (although
the purchase agreements with Astoria do provide such rights).
Voting. The holders of each share of Preferred Stock are entitled to vote
with the Common Stock on an as converted to Common Stock basis.
Dividends. The holders of shares of Preferred Stock are also entitled to
receive dividends, when, as and if declared by the Board of Directors of the
Corporation, at the rate per share of Twelve and One-Half Cents ($0.125) per
annum, payable in preference to all other shareholders. The right to dividends
on Preferred Stock is noncumulative. Such preferential dividends shall be
payable in cash; provided that any holder of Preferred Stock may elect to be
paid any such preferential dividends in shares of the Common Stock determined at
a price of One Dollar ($1.00) per share of Common Stock (as adjusted). In
addition to the preferred dividend, the holders of Preferred Stock are entitled
to fully participate in and be paid any dividends declared and paid to the
Common Stock or other stock of the Corporation on an as-converted to Common
Stock basis.
Liquidation Preference. Each holder of shares of Preferred Stock shall be
entitled to receive a liquidation preference amount in cash equal to One Dollar
and Sixty-Six and Seven-Tenths Cents ($1.667) per share (as adjusted for any
stock dividends, combinations, or splits with respect to such shares) plus any
declared but unpaid dividends thereon. After payment of the liquidation
preference
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<PAGE> 40
amount, the remaining assets and surplus funds of the Corporation legally
available for distribution, if any, shall be distributed ratably among all of
the shareholders of record of the Company, with full right of participation by
the holders of the Preferred Stock on an as-converted to Common Stock basis. A
consolidation or merger of the Company where the shareholders of this
Corporation do not retain at least fifty percent (50%) of the voting power of
and interest in the successor entity is deemed to be a liquidation.
DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS
EXECUTIVE OFFICERS
The following sets forth certain information regarding the executive
officers of the Company as of August 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Philip Barrett............ 43 Chairman of the Board
Gwyneth Gibbs............. 55 President and interim Chief Executive Officer
Geoffrey Wagner........... 42 Secretary
David R. Seaman........... 46 Chief Technical Officer
Larry A. Barcot........... 50 Vice President, North American Sales
Matthew R. Simmons........ 25 Vice President, North American Operations
</TABLE>
DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall be
composed of seven Directors divided into three classes composed of two members
in each of Classes I and II and three members in Class III. The Directors are
elected to serve staggered three-year terms, with the term of one class of
Directors expiring each year.
The members of the Board of Directors of the Company currently are Mr.
Philip Barrett, Mr. Gerald Chew, Mrs. Gwyneth Gibbs, Mr. Douglas Marshall and
Mr. Geoffrey Wagner.
The term of the following Class I Directors will expire at the 1999 Annual
Meeting of Shareholders:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE* PRINCIPAL OCCUPATION SINCE
---------------- ---- -------------------- --------
<S> <C> <C> <C>
Douglas 43 Vice President of Marketing -- Bank of America 1998
Marshall(1)........
Geoffrey Wagner(2)... 42 General Partner, Rockport Group L.P., a private 1998
investment firm
</TABLE>
There are no arrangements or understandings between any Director or
executive officer and any other person pursuant to which he or she is or was to
be selected as a Director or officer of the Company. The term of the following
Class III Director will expire at the 2000 Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE* PRINCIPAL OCCUPATION SINCE
---------------- ---- -------------------- --------
<S> <C> <C> <C>
Gwyneth Gibbs........ 56 President and Interim Chief Executive Officer 1999
of the Company
</TABLE>
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<PAGE> 41
The term of the following Class II Directors will expire at the 2001 Annual
Meeting of Shareholders:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE* PRINCIPAL OCCUPATION SINCE
---------------- ---- -------------------- --------
<S> <C> <C> <C>
Gerald Chew(1)....... 39 Executive Vice President of Ancora Capital & 1998
Management Group LLC and Managing Director of
The Cairn Group, a management consulting firm
Philip Barrett(2).... 43 Chairman of the Board 1998
</TABLE>
- -------------------------
* As of August 31, 1999.
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Except as described herein, each nominee or director has been engaged in
his principal occupation set forth above during the past five years; there is no
family relationship between any director or executive officer of the Company.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of twelve meetings and
did not take any action by written consent during the fiscal year ended March
31, 1999 and the first quarter of fiscal 2000. No Director serving during the
fiscal year attended fewer than 75% of the aggregate of all meetings of the
Board of Directors and the committees of the Board upon which such Director
served, except Mr. Marshall.
The Company has a Compensation Committee and an Audit Committee of the
Board; the Board of Directors does not have any nominating committee or any
committee performing such functions.
The Compensation Committee. The Compensation Committee is generally
responsible for evaluating and recommending to the Board of Directors of the
Company the granting of stock options to employees, including officers, and
other eligible persons, and the setting of compensation for the executive
officers of the Company. The executive officers of the Company have been
delegated the responsibility of administering compensation programs (other than
stock based) for the other employees of the Company, subject to overall budget
review and approval by the Board of Directors.
During the fiscal year ended March 31, 1999, the Compensation Committee of
the Board of Directors consisted of Messrs. Hanschen and Konrad from April 1,
1998 through July 17, 1998, and consisted of Directors Barrett and Chew and,
while he was a director, Mr. Hanschen, until February of 1999, when the Board of
Directors appointed Messrs. Chew and Marshall to such committee. Messrs. Chew
and Marshall are currently the members of such committee. The Compensation
Committee conducted two meetings during the past fiscal year.
The Audit Committee. The Audit Committee is generally responsible for
recommending engagement of the Company's independent public accountants and is
generally responsible for approving the services performed by such independent
public accountants and for reviewing and evaluating the Company's accounting
principles and our system of internal accounting controls.
During the last fiscal year, the Audit Committee of the Board of Directors
consisted of Messrs. Hanschen and Konrad from April 1, 1998 through July 17,
1998, and consisted of Messrs. Marshall and Wagner from July 17, 1998 until
February of 1999. In February 1999 the Board of Directors appointed Messrs.
Barrett and Wagner to such committee. Messrs. Barrett and
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<PAGE> 42
Wagner are currently the members of the Audit Committee, and such Audit
Committee conducted five meetings during the past fiscal year.
DIRECTOR COMPENSATION
The Company reimburses Directors for travel and other out-of-pocket
expenses incurred in attending Board meetings but no cash compensation is
otherwise paid to Directors.
The Directors of the Company are also entitled to receive warrants and
options under the 1993 Directors' Warrant Plan and the 1999 Stock Option Plan.
As of August 31, 1999, warrants to purchase approximately 131,375 shares of the
Company's Common Stock under the Director Plan were outstanding. See "EXECUTIVE
COMPENSATION" at Page 45.
OFFICER AND DIRECTOR BIOGRAPHICAL INFORMATION
PHILIP BARRETT
Mr. Barrett was appointed Chairman of the Company in February 1999. He is
the former President and owner of Oregon Pro Sport, a company that manages
professional sports teams including the Cascade Surge. Oregon Pro Sport was
founded by Mr. Barrett in January 1995 and sold in November 1998. Prior to that
time Mr. Barrett was the President and a partial owner of Supra Products, Inc.
Mr. Barrett commenced his employment with Supra Products, Inc. in September 1984
and worked in the sales, finance and marketing divisions of that company until
he became its President and partial owner in 1992. Supra Products was sold in
September 1994 to Berwind Industries, Inc.
GWYNETH GIBBS
Mrs. Gibbs joined the Company in October 1994, was initially responsible
for Research and Development in Europe and subsequently was assigned worldwide
responsibility for Research and Development in January 1998. Mrs. Gibbs was
appointed President and interim Chief Executive Officer of the Company in
October 1998, and was elected to the Board of Directors in February 1999. Prior
to joining the Company, Mrs. Gibbs was Technical Director of an intelligent
database start-up for 6 years, and before that held a number of positions in UK
development organizations.
GEOFFREY WAGNER
Mr. Wagner was appointed Secretary of the Company in February 1999. He is
currently the General Partner of Rockport Group L.P. In September 1990 Mr.
Wagner co-founded the Rockport Group L.P. and has been a General Partner since
its inception. Rockport Group, L.P. invests its capital in a variety of
industries, including technology, healthcare and apparel. Prior to 1990 Mr.
Wagner held sales executive positions at several leading Wall Street firms
including five years at Bear, Stearns & Co., Inc. and five years at Kidder,
Peabody & Co., Inc.
DAVID R. SEAMAN
Mr. Seaman is the Chief Technical Officer of the Company. He has served as
a Vice President of the Company since June 1990 and has served as Research and
Development Director since June 1982. He served as Managing Director of Blyth
Software, Ltd. (now OMNIS Software Ltd.) from September of 1990 until June of
1993.
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<PAGE> 43
LARRY A. BARCOT
Mr. Barcot is the Vice President of North American Sales and has served in
this position since April 1998. Mr. Barcot had been involved in the technology
industry since 1976. Since 1984, Mr. Barcot has provided consulting and software
development services for companies on an international basis with the majority
of software development projects completed using tools from OMNIS Software.
MATTHEW R. SIMMONS
Mr. Simmons is the Vice President of North American Operations and has
served in this position since January 1999. He joined the Company in August
1995, and has held a variety of positions within the UK Sales and Marketing
division. Prior to joining the Company, Mr. Simmons worked for a Rapid
Application Development tool vendor for 18 months.
GERALD CHEW
Mr. Chew is currently Executive Vice President of Ancora Capital &
Management Group, LLC since June 1998 and Managing Director of The Cairn Group
since February 1997. From August 1996 to February 1997, he was Chief Operating
Officer of SpotMagic, Inc. From November 1992 to July 1996, Mr. Chew served as
Executive Director of Strategy Development for U S WEST, Inc. Since December
1995, Mr. Chew has served as Director of MDSI Mobile Data Solutions, Inc. Mr.
Chew also serves as a Director of a number of private companies.
DOUGLAS MARSHALL
Mr. Marshall is currently Vice President with Bank of America where he has
held a number of marketing positions including Vice President of Advertising and
Marketing Communications as well as product development and management roles.
Prior to joining Bank of America in August of 1994, Mr. Marshall served as
Marketing Director and Northwest Region manager for US Travel, a global travel
management company. From June 1984 to July 1998, Mr. Marshall held a number of
marketing positions with Seafirst Bank, a Seattle, Washington-based subsidiary
of Bank of America Corporation.
KEY MANAGEMENT CHANGES
There have been several recent key management changes:
- During the first half of fiscal year 1998 the Chief Financial Officer of
the Company, Mr. Kenneth Holmes, held the position of interim Chief
Executive Officer and Chairman of the Board. Mr. Holmes left the Company
in October 1998 citing time constraints and to pursue other interests. At
that time, the then Vice President of Research and Development, Mrs.
Gwyneth Gibbs, was appointed President and interim Chief Executive
Officer.
- In January 1999 Mr. Kevin Doyle, the Vice President of Marketing, left
the Company to pursue other interests.
- In July 1998 Mr. David Colby and Mr. William Konrad resigned from the
Board of Directors stating time constraints with other business interests
were too demanding to permit them to serve as active directors of the
Company. At that time the Board of Directors appointed Mr. Philip
Barrett, Mr. Gerald Chew, Mr. Douglas Marshall and Mr. Geoffrey Wagner to
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<PAGE> 44
serve on as directors of the Company. Directors Chew and Barrett were
then elected by the shareholders in September 1998.
- Mr. Kenneth Holmes then resigned from the Board of Directors in October
1998 in connection with his departure from the Company. Mr. Richard
Hanschen was appointed Chairman of the Board at that time. Mr. Hanschen
then resigned as the Chairman of the Board and as a director of the
Company in December 1998. At that time Mr. Philip Barrett was appointed
Chairman of the Board.
- Mrs. Gwyneth Gibbs, the President and interim Chief Executive Officer of
the Company, was appointed as an additional director of the Company in
February 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth as of August 31, 1999, certain information
with respect to the beneficial ownership of the Company's voting securities by
(i) any person (including any "group" as that term is used in Section 13(d)(3)
of the Exchange Act) known by the Company to be the beneficial owner of more
than 5% of any class of the Company's voting securities, (ii) each Director and
each nominee for Director, (iii) each of the named executive officers identified
in the Summary Compensation Table appearing herein, and (iv) all Directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER PERCENT
OF SHARES OF TOTAL NUMBER OF PERCENT OF
OF OF SHARES OF TOTAL OF
PREFERRED PREFERRED COMMON COMMON
NAME AND ADDRESS(1) STOCK(2) STOCK(2) STOCK STOCK
------------------- --------- --------- --------- ----------
<S> <C> <C> <C> <C>
Astoria Capital Partners L.P...................... 300,000 100.0% 3,543,344 36.1%
735 Second Avenue
San Francisco, CA 94118
Philip Barrett(3)........................................................ 1,662,500 17.0%
Gerald Chew(4)........................................................... 109,500 1.1%
Gwyneth Gibbs(5)......................................................... 84,375 *
Douglas Marshall(6)...................................................... 109,500 1.1%
Geoffrey Wagner(7)....................................................... 2,292,500 22.9%
David Seaman(8).......................................................... 24,636 *
Matt Simmons(9).......................................................... 174,914 1.8%
Larry Barcot(10)(13)..................................................... 64,400+ *+
Kevin Doyle(11)(13)...................................................... + *+
Kenneth Holmes........................................................... 0 0.0%
All Directors and executive officers as a group (8 persons)(12)(13)...... 4,521,325+ 45.2%+
</TABLE>
- -------------------------
* Less than 1%
+ The number of options exercisable by Larry Barcot and Kevin Doyle within 60
days of the Record Date cannot be calculated; see the notes 10, 11 and 13
below.
(1) Except as otherwise indicated below, the persons whose names appear in the
table above have sole voting and investment power with respect to all
shares of stock shown as beneficially owned by them, subject to community
property laws, where applicable.
42
<PAGE> 45
(2) "Preferred Stock" refers to the Series A Convertible Preferred Stock, which
is convertible into 1.667 shares of the Common Stock.
(3) Mr. Barrett is one of our directors and is a member of the Audit Committee.
Includes Warrants to purchase 12,500 shares of Common Stock convertible
within 60 days of the Record Date held by Mr. Barrett and 1,650,000 shares
of Common Stock owned by Philip and Debra Barrett Charitable Remainder
Trust, of which Mr. Barrett is a trustor and a trustee. Grant of Warrants
subject to qualification with State securities laws.
(4) Mr. Chew is one of our directors. Represents 12,500 Warrants and 96,250
options to purchase shares of Common Stock convertible within 60 days of
the Record Date held by Mr. Chew. Grants subject to qualification with
State securities laws. The grant of the options is subject to ratification
of Proposal 3 hereof by the stockholders.
(5) Mrs. Gibbs is one of our directors. Includes options to purchase 4,375
shares of Common Stock exercisable within sixty (60) days of the Record
Date held by Mrs. Gibbs. As part of Proposal 3, the stockholders are being
asked to ratify the grant of stock options in the amount of 65,000 shares
of the common stock of the Company to Mrs. Gibbs under the Omnis Technology
Corporation 1999 Stock Option Plan, with one-third of such options vesting
on July 31, 2000 and 1/24 of the remainder of such options vesting each
month thereafter.
(6) Mr. Marshall is one of our directors. Represents 12,500 Warrants and 96,250
options to purchase shares of Common Stock convertible within 60 days of
the Record Date held by Mr. Marshall. Grants subject to qualification with
State securities laws. The grant of the options is subject to ratification
of Proposal 3 hereof by the stockholders.
(7) Mr. Wagner is one of our directors and is a member of the Audit Committee.
Includes Warrants to purchase 12,500 shares of Common Stock convertible
within 60 days of the Record Date held by Mr. Wagner, 1,420,000 shares of
Common Stock owned by Rockport Group LP, of which Mr. Wagner is the sole
general partner, 850,000 shares of Common Stock owned by RCJ Capital
Partners LP, of which Rockport Group LP is the sole general partner;
Director Geoffrey Wagner is the sole general partner of Rockport Group LP;
and 10,000 shares of Common Stock purchased on April 5, 1999 by a trust of
which the reporting person's wife is the sole beneficiary; the reporting
person disclaims beneficial ownership of such 10,000 shares except to the
extent of his pecuniary interest in such shares. Grant of Warrants subject
to qualification with State securities laws.
(8) Includes options to purchase 13,854 shares of Common Stock exercisable
within sixty (60) days of the Record Date held by Mr. Seaman.
(9) Includes options to purchase 1,634 shares of Common Stock exercisable
within sixty (60) days of the Record Date held by Mr. Simmons.
(10) Represents options to purchase 60,000 shares of Common Stock exercisable
within sixty (60) days of the Record Date held by Mr. Barcot. In addition,
under the Employment Agreement effective April 1, 1998 between the Company
and Mr. Barcot, Mr. Barcot is entitled to receive options for 240,000
shares of the Company's common stock vesting over six years, except that in
the event that the Company's average closing sale price of its common stock
for the ten trading days ending on September 30, 1999 ("Average Closing
Sale Price") meets or exceeds $6 per share, then a certain number of shares
will vest on September 30, 1999 based on a sliding scale from 60,000 shares
related to a price of $6 per share up to a maximum of 240,000 shares
related to a price of $18 per share (in which event Mr. Doyle would have a
total of 240,000 options vested). If the maximum number of options so
vested, Mr. Doyle would own 4,400 shares and have 240,000 options
exercisable within 60 days of the Record Date (which would relate to 2.3%
of "Percent of Total Common Stock" in the table above).
43
<PAGE> 46
(11) The Employment Agreement dated as of April 1, 1998 between the Company and
Mr. Doyle terminated on January 15, 1999, except that in the event the
Average Closing Sale Price meets or exceeds $6 per share, then a certain
number of shares will vest on September 30, 1999 based on a sliding scale
from 75,000 shares related to a price of $6 per share up to a maximum of
300,000 shares related to a price of $18 per share, in which case Mr. Doyle
will have 3 months after September 30, 1999 to exercise the option with
respect to any such vested shares. If 300,000 options so vested, Mr. Doyle
would have 300,000 vested options exercisable within 60 days of the Record
Date (which would relate to 2.9% of "Percent of Total Common Stock" in the
table above).
(12) Includes the shares, options, and warrants described in footnotes 3 through
10.
(13) If the Average Closing Sale Price (defined in note 10 above) on September
30, 1999 meets or exceeds $6, then a certain number of shares will vest for
Mr. Barcot and Mr. Doyle on September 30, 1999 based on a sliding scale
from 135,000 shares (total) related to a price of $6 per share up to a
maximum of 540,000 shares (total) related to a price of $18 per share. If
the maximum number of such options vest on September 30, 1999, then the
group of Directors and executive officers would have 5,001,325 of such
shares, warrants and options (which would relate to 47.7% of "Percent of
Total Common Stock" in the table above).
44
<PAGE> 47
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table shows, as to the Chief Executive Officer and each of
the other current executive officers and former executive officers whose salary
plus bonus exceeded $100,000, information concerning compensation awarded to,
earned by or paid for services to the Company in all capacities during the last
three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------- ------------
OTHER ANNUAL ALL OTHER
YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS COMPENSATION($)
---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Gwyneth Gibbs(1)....... 1999 79,084 33,298 22,916 5,000 --
Interim Chief
Executive 1998 77,117 -- 23,264 -- --
Officer, Vice
President 1997 64,323 -- 21,862 1,000 --
--
David R. Seaman(2)..... 1999 143,635 -- 51,393 5,000 --
Chief Technical
Officer 1998 141,329 -- 34,967 2,000 --
and Research & 1997 124,225 -- 54,967 1,000 --
Development Director
--
Larry Barcot(3)........ 1999 80,000 30,000 -- 240,000 --
1998 -- -- -- -- --
1997 -- -- -- -- --
--
Matthew Simmons(4)..... 1999 45,124 -- 81,428 3,500 --
1998 32,520 -- 63,314 -- --
1997 24,121 -- 17,367 500 --
--
Kevin Doyle(5)......... 1999 79,167 32,500 -- 300,000 --
1998 -- -- -- -- --
1997 -- -- -- -- --
--
Kenneth Holmes(6)...... 1999 53,098 56,667 -- 100,000 --
1998 53,447 26,681 -- -- --
1997 -- -- -- -- --
</TABLE>
- -------------------------
(1) Mrs. Gibbs, 56*, is paid in U.K. pounds sterling, which have been converted
into U.S. dollars at the average exchange rate for the applicable fiscal
year. "Other Annual Compensation" represents amounts contributed to the
OMNIS Software Limited Retirement Scheme on Mrs. Gibbs' behalf (an aggregate
of $20,482 in 1997, $21,459 in 1998 and $20,921 in 1999). See "Directors,
Executive Officers and Control Persons -- Officer and Director Biographical
Information" at Page 40 for Mrs. Gibbs' biographical information.
(2) Mr. Seaman, 46*, is paid in U.K. pounds sterling, which have been converted
into U.S. dollars at the average exchange rate for the applicable fiscal
year. "Other Annual Compensation" represents the value of the use of an
automobile and amounts paid or reimbursed for automobile
45
<PAGE> 48
use ($16,805 in 1997, $3,343 in 1998 and $12,875 in 1999) and amounts
contributed to the OMNIS Holdings Limited Retirement Benefits Scheme and the
OMNIS Software Limited Retirement Scheme on Mr. Seaman's behalf (an
aggregate of $39,204 in 1997, $31,807 in 1998 and $38,381 in 1999). See
"Directors, Executive Officers and Control Persons -- Officer and Director
Biographical Information" at Page 40 for Mr. Seaman's biographical
information.
(3) See "Directors, Executive Officers and Control Persons -- Officer and
Director Biographical Information" at Page 40 for biographical information
on Mr. Barcot, 50*.
(4) Mr. Simmons, 25*, is paid in U.K. pounds sterling, which have been converted
into U.S. dollars at the average exchange rate in effect for the applicable
fiscal year. "Other Annual Compensation" represents the value of the use of
an automobile and amounts paid or reimbursed for automobile use ($10,059 in
1998 and $3,603 in 1999), a mobile phone ($322 in 1999), amounts contributed
to the OMNIS Software Limited Retirement Scheme on Mr. Simmons' behalf (an
aggregate of $419 in 1998 and $1,807 in 1999) and commissions ($17,696 in
1997, $57,683 in 1998 and $71,135 in 1999). See "Directors, Executive
Officers and Control Persons -- Officer and Director Biographical
Information" at Page 40 for Mr. Simmons' biographical information.
(5) Mr. Doyle, 43*, served as Vice President of Marketing for the Company since
he joined the Company in April of 1998 until his employment terminated as of
January 15, 1999. Prior to joining the Company, Mr. Doyle has had over 22
years of technology consulting experience, including over 14 years
experience developing and delivering solutions using the products of OMNIS
Software. Mr. Doyle was a founder of the Macintosh Consultants Network,
formed in 1988.
(6) Mr. Holmes, 33*, served as Chairman, interim Chief Executive Officer, and
Chief Financial Officer of the Company from February 1998, and Director of
Finance from his joining the Company in August of 1997, until he resigned
from the Board of Directors in October 1998. Prior to joining the Company,
Mr. Holmes served as Assistant Controller of NeXT Software, Inc. from July
1996 to March 1997. From March 1994 to July 1996, Mr. Holmes was Controller
at ENlighten Software Solutions, Inc., a worldwide independent supplier of
software for system administration. Mr. Holmes was an accountant with KPMG
Peat Marwick LLP from August 1991 through March 1994.
(*) Ages are as of August 31, 1999.
46
<PAGE> 49
STOCK OPTION GRANTS AND EXERCISES
The following table shows, as to the individuals named in the Summary
Compensation Table above (the "Named Executive Officers"), information
concerning stock options granted during the fiscal year ended March 31, 1999.
This table also sets forth hypothetical gains or "option spreads" for the
options at the end of their respective ten-year terms, as calculated in
accordance with the Rules of the Securities and Exchange Commission. Each gain
is based on an arbitrarily assumed annualized rate of compound appreciation of
the market price at the date of the grant of 5% and 10% from the date the option
was granted to the end of the option term. The 5% and 10% rates of appreciation
are specified by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock prices.
The Company does not necessarily agree that this method properly values an
option. Actual gains, if any, on option exercises are dependent on the future
performance of the Company's Common Stock and overall market conditions.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
--------------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
OPTIONS STOCK PRICE
NUMBER OF GRANTED TO APPRECIATION OF
SECURITIES EMPLOYEES IN OPTION TERM(3)
UNDERLYING OPTIONS FISCAL EXERCISE PRICE EXPIRATION ---------------------
GRANTED(1)(#) YEAR(2) ($/SH) DATE 5%($) 10%($)
------------------ ------------ -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
David R. Seaman...... 5,000 0.68% 0.75 5/19/08 2,358 5,977
Gwyneth Gibbs........ 5,000 0.68% 0.75 5/19/08 2,358 5,977
Larry Barcot......... 240,000 32.81% 0.78 4/1/08 117,880 298,731
Matt Simmons......... 3,500 0.48% 0.75 5/19/08 1,651 4,184
Kevin Doyle(4)....... 300,000 41.01% 0.78 4/1/08 147,350 373,414
Kenneth Holmes(5).... 100,000 13.67% 0.75 5/19/08 47,167 119,531
</TABLE>
- -------------------------
(1) Options granted under the Company's 1987 Stock Option Plan or 1996 Stock
Option Plan are granted with an exercise price not less than at 100% of fair
market value of the Company's Common Stock at the date of grant and
generally vest over a four-year period.
(2) During the fiscal year ended March 31, 1999, the Company granted a total of
731,500 options and warrants to employees subject to certain vesting
schedules and other conditions.
(3) This column sets forth hypothetical gains or "option spreads" for the
options at the end of their respective ten-year terms, as calculated in
accordance with the rules of the Securities and Exchange Commission. Each
gain is based on an arbitrarily assumed annualized rate of compound
appreciation of the market price at the date of grant of 5% and 10% from the
date the option was granted to the end of the option term. The 5% and 10%
rates of appreciation are specified by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of future performance of the Company's Common Stock and overall
market conditions.
(4) The Employment Agreement dated as of April 1, 1998 between the Company and
Mr. Doyle terminated on January 15, 1999, except that in the event the
average of the closing price of a share of Common Stock on each of the days
from September 21, 1999 through September 30, 1999 meets or exceeds $6, then
a certain number of shares will vest based on a sliding scale from 75,000
shares related to a price of $6 per share up to a maximum of 300,000 shares
related
47
<PAGE> 50
to a price of $18 per share, in which case Mr. Doyle will have 3 months
after September 30, 1999 to exercise the option with respect to any such
vested shares.
(5) Mr. Holmes resigned in October of 1998 prior to the vesting of any options
granted to him.
(6) Employees who are eligible may participate in the 1994 Stock Purchase Plan
("Purchase Plan") to purchase up to $25,000 of shares of the Common Stock of
the Company during each calendar year at 85% of fair market value as
described in more detail below in "Other Employee Benefit Plans -- 1994
Employee Stock Purchase Plan." None of Mrs. Gibbs, Mr. Seaman, Mr. Simmons
or Mr. Barcot elected to purchase shares under the Purchase Plan during
fiscal 1999. As of July 27, 1999, Mrs. Gibbs, Mr. Seaman, Mr. Simmons and
Mr. Barcot are eligible to participate in the Purchase Plan.
No options were exercised by the Named Executive Officers during the last fiscal
year. The following table shows, as to the Named Executive Officers, the value
of unexercised options at March 31, 1999. None of these options were
in-the-money as of March 31, 1999.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS/SARS
AT MARCH 31, 1999(#)(1)
-----------------------------------
NAME EXERCISABLE UNEXERCISABLE VALUE
---- ----------- ------------- -----
<S> <C> <C> <C>
Gwyneth Gibbs.............................................. 2,395 4,179 $--
David R. Seaman............................................ 11,610 29,032 --
Matthew Simmons............................................ 291 3,810 --
Larry Barcot............................................... 0 240,000 --
Kevin Doyle(2)............................................. 0 300,000 --
Kenneth Holmes(3).......................................... 0 0 --
</TABLE>
- -------------------------
(1) The Company has not granted any stock appreciation rights and our stock
plans do not provide for the granting of such rights.
(2) The Employment Agreement dated as of April 1, 1998 between the Company and
Mr. Doyle terminated on January 15, 1999, except that in the event the
average of the closing price of a share of Common Stock on each of the days
from September 21, 1999 through September 30, 1999 meets or exceeds $6, then
a certain number of shares will vest based on a sliding scale from 75,000
shares related to a price of $6 per share up to a maximum of 300,000 shares
related to a price of $18 per share, in which case Mr. Doyle will have 3
months after September 30, 1999 to exercise the option with respect to any
such vested shares.
(3) Mr. Holmes resigned in October of 1998 prior to the vesting of any options
granted to him.
OTHER EMPLOYEE BENEFIT PLANS
EMPLOYMENT CONTRACTS
David M. Seaman. The Service Agreement effective April 1, 1990 between the
Company and Mr. Seaman retains Mr. Seaman as the Company's Chief Technical
Officer for an initial term of four (4) years, which is automatically renewed
for subsequent two year terms unless the agreement is terminated by either party
by delivery of six months prior notice. The Service Agreement was automatically
renewed for two-year terms in April 1994, April 1996, and April 1998. It
provides for an annual base salary of 48,000 pounds sterling, with annual
increases based on a United Kingdom consumer index throughout the term of the
agreement. In addition, Mr. Seaman is entitled to (1) an
48
<PAGE> 51
annual incentive bonus of 25% of his base salary if certain annual profitability
goals are achieved (no bonuses have been paid to date), (2) an automobile and
payments or reimbursements for automobile expenses, and (3) Company
contributions to a retirement plan on his behalf. See "OMNIS Holdings Limited
Retirement Benefits Scheme" and "OMNIS Software Limited Retirement Benefits
Scheme."
Larry Barcot. The Employment Agreement effective April 1, 1998 between the
Company and Mr. Barcot provides employment on an at-will basis with an annual
salary of $80,000. In addition, Mr. Barcot is entitled to receive up to 150% of
his annual salary if certain profitability goals are achieved and to options for
240,000 shares of the Company's common stock vesting over six years, though such
shares may vest earlier on September 30, 1999 if the Company's average closing
sale price of its common stock for the ten trading days ending on September 30,
1999 ("Average Closing Sale Price") meets or exceeds certain levels.
Kevin Doyle. The Employment Agreement dated as of April 1, 1998 between the
Company and Mr. Doyle terminated on January 15, 1999, except that in the event
the average of the closing price of a share of Common Stock on each of the days
from September 21, 1999 through September 30, 1999 meets or exceeds $6, then a
certain number of shares will vest based on a sliding scale from 75,000 shares
related to a price of $6 per share up to a maximum of 300,000 shares related to
a price of $18 per share, in which case Mr. Doyle will have 3 months after
September 30, 1999 to exercise the option with respect to any such vested
shares.
OMNIS HOLDINGS LIMITED RETIREMENT BENEFITS SCHEME
The Company, through its United Kingdom subsidiary, OMNIS Holdings Limited
(formerly Blyth Holdings Limited), sponsors a retirement plan, the OMNIS
Retirement Benefits Scheme ("OHL Retirement Plan"). The only participant in the
OHL Retirement Plan is David R. Seaman. Participation in the OHL Retirement Plan
is frozen; no additional employees may participate. The OHL Retirement Plan
provides retirement benefits upon attainment of normal retirement age and
incidental benefits in case of death or termination of employment prior to
retirement. A participant's normal retirement benefit is 66.66% of his final
remuneration; reduced if the participant has less than ten years of service with
OMNIS Holdings Limited. OMNIS Holdings Limited makes annual contributions under
the OHL Retirement Plan to fund promised retirement benefits. The OHL Retirement
Plan is partially insured through the Sun Life Assurance Society. The assets
held under the OHL Retirement Plan which are not used to pay insurance premiums
are held in trust for investment purposes for the benefit of the OHL Retirement
Plan. OMNIS Holdings Limited retains the right to terminate the OHL Retirement
Plan at any time upon thirty days prior written notice.
OMNIS SOFTWARE LIMITED RETIREMENT BENEFITS SCHEME
The Company also sponsors a retirement plan called the OMNIS Software Ltd.
Retirement Benefits Scheme ("OMNIS Software Retirement Plan") for substantially
all employees of OMNIS Software Limited (formerly Blyth Software Limited). The
OMNIS Software Retirement Plan provides retirement benefits upon attainment of
normal retirement age and incidental benefits in case of death or termination of
employment prior to retirement. OMNIS Software Limited makes annual
contributions under the OMNIS Software Retirement Plan to fund promised
retirement benefits. In addition, participants are entitled to make voluntary
contributions under the OMNIS Software Retirement Plan to increase their
benefits. Currently, OMNIS Software Limited contributes an amount equal to 1/8%
of each participants' compensation under the OMNIS Software Retirement Plan.
OMNIS Software Limited retains the right to terminate the OMNIS Software
Retirement Plan at any time upon thirty days prior written notice.
49
<PAGE> 52
401(k) EMPLOYEE SAVINGS PLAN
The Company established a 401(k) Employee Savings and Retirement Plan (the
"401(k) Plan") in November 1992. The 401(k) Plan is a qualified profit sharing
plan and salary deferral program under the Federal tax laws and is administered
by the Company. All employees of the Company (except for certain specifically
excluded classifications as defined in the 401(k) Plan) are eligible to
participate in the 401(k) Plan on the first day of each quarter upon attainment
of age 21. Participants may defer from 1% to 15% of their total salary
(including bonuses and commissions) each pay period through contributions to the
401(k) Plan. The Company makes a matching contribution of 10% of the amount
contributed by the participant up to a maximum of 15% of the salary deferral.
All salary deferral and Company matching contributions are credited to separate
accounts maintained in trust for each participant and are invested, at the
participant's direction, in one or more of the investment funds available under
the 401(k) Plan. All account balances are adjusted at least annually to reflect
the investment earnings and losses of the trust fund.
Each participant is fully vested in the portion of his or her account under
the 401(k) Plan in which such participant contributed. The portion contributed
by the Company vests over live years. Distribution may be made from a
participant's account upon termination of employment, retirement, disability,
death or in the event of financial hardship or attainment of age 59 1/2.
The federal tax laws limit the amount which may be added to a participant's
account for any one year under a qualified plan such as the 401 (k) Plan to the
lesser of (i) $30,000 or (ii) 25% of the Participant's compensation (net of
salary deferral contributions) for the year. In addition, not more than $9,500
of compensation may be deferred by a participant through salary deferral
contributions in any one calendar year.
This program was suspended in fiscal year 1998 and the Company plans to
reinstate it in fiscal year 2000, if appropriate under the circumstances.
1987 STOCK OPTION PLAN
Under the Company's Amended and Restated 1987 Stock Option Plan (the "1987
Plan"), incentive stock options to purchase shares of common stock were granted
to directors, officers, key employees and consultants. The 1987 Plan had a
ten-year term that expired in 1997. Options granted and outstanding under the
1987 Plan remain in force until exercised by the holder, terminated as a result
of the holder terminating employment, or the term expires or otherwise
terminates under the terms of the 1987 Plan.
Options were issued at prices not less than 100 percent and 85 percent, for
incentive and non-statutory options, respectively of the estimated fair value of
the Common Stock on the date of grant and are exercisable for periods not
exceeding ten years from the date of grant. Options granted to stockholders who
own greater than 10 percent of the outstanding stock at the time of grant are
exercisable for periods not exceeding five years from the date of grant and must
be issued at prices not less than 110 percent of the estimated fair value at the
date of grant. Options granted under the 1987 Plan generally vest ratably over
four years following the date of grant, although the Board of Directors may
issue options that vest over a period up to five years. The Company has certain
repurchase rights and rights of first refusal on shares purchased under the 1987
Plan.
1993 DIRECTORS' AND ADVISORS' WARRANT PLANS
The 1993 Directors' Warrant Plan (the "Director Plan") was adopted by the
Board of Directors in September 1993 and was approved by the stockholders in
August 1994. The Director Plan
50
<PAGE> 53
provided for automatic non-discretionary grants of warrants to non-employee
Directors ("Outside Directors"). Each Outside Director elected on or after the
date of adoption of the Director Plan was automatically granted a warrant to
purchase a certain number of shares of Common Stock upon the date he or she
became a Director of the Company pursuant to a vesting schedule related to the
term of such Director (an "Initial Warrant"). After becoming a Director, each
Outside Director was automatically granted a warrant to purchase an additional
number shares of Common Stock on September 1 of each year, provided that he or
she had served for at least six (6) months as of such date and was then serving
as an Outside Director ("Subsequent Warrant"). In July of 1998 the Directors'
Plan was amended to increase the number of shares reserved to the plan to
300,000 shares, to increase the Initial Warrant to 30,000 shares and to increase
the Subsequent Warrant to 5,000 shares. Directors Mr. Barrett, Mr. Chew, Mr.
Marshall, and Mr. Wagner each received a warrant to purchase 30,000 shares when
they were appointed to the Board of Directors. Mr. Hanschen received a warrant
to purchase 5,000 shares as of September 1, 1998. As of the Record Date,
warrants to purchase approximately 131,375 shares of the Company's Common Stock
under the Director Plan were outstanding.
Under the Company's 1993 Advisors' Warrant Plan (the "Advisors Plan"),
warrants to purchase shares of common stock have been granted to advisors; under
the Advisors' Plan, such warrants terminated sixty (60) days after an advisor
ceased to be an Advisor to the Company. The Company originally reserved 12,000
shares of common stock for issuance under the Advisors Plan. In July, 1998, the
disinterested directors of the Company amended the Advisors Plan to increase the
number of shares reserved for issuance to 100,000 shares. In connection with the
issuance of convertible debentures in 1995, 1996 and 1997, the Company granted
certain additional warrants to purchase shares of common stock. The warrants
expire at various dates between 1999 and 2002.
1994 EMPLOYEE STOCK PURCHASE PLAN
The 1994 Employee Stock Purchase Plan (the "Purchase Plan") was adopted by
the Board of Directors in May 1994 and the shareholders of the Company in August
1994. As a result of a 1-for-10 reverse split approved by the shareholders at
the 1997 Annual Meeting (the "Reverse Split"), the total of 400,000 shares of
Common stock then reserved for issuance under the Purchase Plan were split into
40,000 shares. In July 1998 the Board of Directors amended the Purchase Plan to
increase the number of shares of common stock of the Company reserved for
issuance under the Plan to 250,000 and this amendment was approved by the
shareholders in the 1998 Annual Meeting. As of March 31, 1999 the number of
shares of common stock of the Company elected to be purchased by participating
employees of the Company was 39,340 when adjusted for the reverse stock split in
1997 under the terms of the Plan.
Administration. The Board of Directors or its Compensation Committee (the
"Plan Administrator") administers the Purchase Plan, which is intended to
qualify under Section 423 of the Code. The Compensation Committee of the Board
of Directors currently acts as Plan Administrator of the Purchase Plan. All
questions of interpretation or application of the Purchase Plan are determined
by the Plan Administrator, and its decisions are final, conclusive and binding
upon all participants.
Eligibility and Participation; Withdrawal. Company employees are eligible
to participate in the Purchase Plan if they are customarily employed for at
least 20 hours per week and more than five months per year. Moreover, the Board
may designate that such employees of its subsidiaries are eligible to
participate in the Purchase Plan. However, no employee may be granted the right
to purchase more than $25,000 of common stock in any calendar year determined
with reference to the grant date of the right to purchase during the applicable
offering period.
51
<PAGE> 54
Eligible employees become participants in the Purchase Plan by filing with
the payroll office of the Company a subscription agreement authorizing payroll
deductions prior to the applicable offering date of up to 10 percent of the
employee's compensation for an Offering Period (as defined below). An employee
may withdraw from the Purchase Plan at any time by giving written notice to the
Company. In such a case, all of the payroll deductions credited to the
employee's account and not yet used to purchase common stock are refunded.
Offering Periods. The Purchase Plan is implemented by consecutive and
overlapping offering periods of two years ("Offering Periods") with a new
Offering Period commencing on the first trading day on or after October 1 and
April 1 of each year. The Plan Administrator may change the commencement date
and duration of Offering Periods without obtaining shareholder approval.
Purchase Price. The purchase price per share at which shares are sold to
employees under the Purchase Plan is 85 percent of the lower of the fair market
value of the Company's common stock (a) on the date of commencement of the
Offering Period or (b) on the applicable Exercise Date within such Offering
Period. The applicable "Exercise Date" is the last day of the particular six-
month exercise period within the Offering Period. The fair market value of the
Company's common stock on a given date is determined with reference to the
closing sale price for the Company's common stock or the average of the closing
bid and ask prices for the common stock on the date of such determination
pursuant to standards set forth in the Plan. In the absence of an established
market for the common stock, the fair market value shall be determined in good
faith by the Board of Directors.
1996 STOCK OPTION PLAN
In anticipation of the termination of the 1987 Plan, shareholders of the
Company approved the 1996 Stock Option Plan (the "1996 Plan") for either
non-qualified or incentive stock options. Generally options under the 1996 Plan
vest over a four-year period. The Company originally reserved 45,000 shares of
common stock for issuance under the 1996 Plan. In September, 1997, shareholders
of the Company amended the Plan to increase the number of shares reserved for
issuance to 130,000 shares. In September, 1998, shareholders of the Company
amended the 1996 Plan to increase the number of shares reserved for issuance to
600,000 shares.
Options must be issued at prices not less than 100 percent and 85 percent,
for incentive and non-statutory options, respectively of the estimated fair
value of the Common Stock on the date of grant and are exercisable for periods
not exceeding ten years from the date of grant. Options granted to stockholders
who own greater than 10 percent of the outstanding stock at the time of grant
are exercisable for periods not exceeding five years from the date of grant and
must be issued at prices not less than 110 percent of the estimated fair value
at the date of grant. Options granted under the 1996 Plan generally vest ratably
over four years following the date of grant, although the Board of Directors may
issue options that vest over a period up to five years. The Company has certain
repurchase rights and rights of first refusal on shares purchased under the 1996
Plan.
1999 STOCK OPTION PLAN
In April 1999, the Board of Directors determined that it was in the best
interests of the Company to adopt the Omnis Technology Corporation 1999 Stock
Option Plan (the "1999 Plan") to consolidate options to be issued to directors,
officers, key employees, consultants and advisors under a single option plan and
to terminate the Directors Plan, the separate 1993 Advisors Plan and the 1996
Plan, except as to warrants and options then issued and outstanding under such
plans. The Board of Directors adopted the 1999 Plan and 1,500,000 shares of the
common stock of the Company were
52
<PAGE> 55
reserved for issuance under the 1999 Plan. The Board of Directors plans to
present the 1999 Plan for approval to the shareholders of the Company at their
1999 annual meeting.
Options must be issued at prices not less than 100 percent and 85 percent,
for incentive and non-statutory options, respectively of the estimated fair
value of the Common Stock on the date of grant and are exercisable for periods
not exceeding ten years from the date of grant. Options granted to stockholders
who own greater than 10 percent of the outstanding stock at the time of grant
are exercisable for periods not exceeding five years from the date of grant and
must be issued at prices not less than 110 percent of the estimated fair value
at the date of grant. Options granted under the 1999 Plan generally vest ratably
over four years following the date of grant, although the Board of Directors may
issue options that vest over a period up to five years. The Company has certain
repurchase rights and rights of first refusal on shares purchased under the 1999
Plan.
Subject to the approval of the shareholders, in April 1999 we granted
incentive stock options to our employees to acquire a total of 411,000 shares of
the common stock of the Company at an exercise price of $1.02 per share, with
the right to exercise such options vesting over a three-year period. In July
1999 the disinterested directors approved a grant of options to purchase an
aggregate of 258,000 shares of Common stock to Directors Gerald Chew, Douglas
Marshall and Gwyneth Gibbs, at an exercise price of $3.88 per share. The options
of Mr. Chew and Mr. Marshal vest on July 31, 1999, and the option of Mrs. Gibbs
vests over a period ending July 31, 2002, with one-third of the options vesting
on July 31, 2000 and the remainder vesting pro rata over the remaining 24-month
period. No stock options were offered or granted to either Directors Barrett or
Wagner and no commitments exist to offer or grant any such options or equivalent
rights to such person at any time. The Company will ask the stockholders to
ratify the grant of stock options to the above listed Directors and officers of
the Company under the 1999 Plan at the their 1999 meeting.
See also "DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS" at Page 38
and "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" at Page 33.
In addition, on July 31, 1999, pursuant to prior commitments made by the
Company, the Board separately granted nonincentive stock options to Mr. David
Ferri and to Mr. Carlton Baab effective as of that date. Mr. Ferri and Mr. Baab
have been consultants to the Company. The option granted to Mr. Ferri is for
25,000 shares of Common Stock at an exercise price of $1.02 per share, and is
fully vested. The option granted to Mr. Baab is for 50,000 shares of Common
Stock at an exercise price of $1.02 per share, and vests over a period ending
July 31, 2002.
CHANGE IN ACCOUNTANTS AND LEGAL COUNSEL
On November 10, 1998 the independent public accounting firm of Deloitte &
Touche LLP resigned as the independent public accountants of the Company. On
March 15, 1999 the independent public accounting firm of Grant Thornton LLP, was
engaged as the independent public accountants of the Company. During the 1999
fiscal year the law firm of Wilson, Sonsini, Goodrich & Rosati also withdrew as
legal counsel for the Company. The law firm of Landels Ripley & Diamond, LLP,
350 The Embarcadero, San Francisco, California 94105-1250, has since been
retained as general legal counsel for the Company; and the law firm of Finnegan,
Henderson, Farabow, Garret & Dunner, LLP of Washington, D.C. and Palo Alto,
California has been retained as patent counsel for the Company.
The validity of the issuance of the securities offered hereby will be
passed upon for the Company and the selling shareholders by Landels, Ripley &
Diamond LLP.
53
<PAGE> 56
Landels Ripley & Diamond, LLP have agreed to accept 27,500 shares of our
Common Stock in lieu of approximately $50,000 of accrued and unpaid legal fees.
The Company's Board of Directors authorized the issuance of such shares on July
21, 1999, but the shares have not yet been issued.
EXPERTS
The consolidated financial statements of the Company, including the notes
thereto, together with the independent auditors' reports thereon are presented
beginning on Page F-1.
The financial statements for the year ended March 31, 1998 included in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein and elsewhere in the registration
statement (which report expresses an unqualified opinion and includes an
explanatory paragraph concerning certain factors which raise substantial doubt
about the Company's ability to continue as a going concern), and have been so
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
The financial statements of the Company for the year ended March 31, 1999
appearing in this prospectus have been audited by Grant Thornton LLP,
independent certified public accountants, as set forth in their reports
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of said firms as experts in accounting and auditing.
DISCLOSURE OF COMMISSION PROVISIONS OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
The Company is incorporated in Delaware. Delaware law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. The Certificate of Incorporation and
Bylaws of the Company, as well as certain indemnity agreements with its
directors, executive officers and key employees and with the directors,
executive officers and key employees of its subsidiaries, provide the maximum
indemnity allowed to directors and executive officers by the Delaware General
Corporation Law, as well as certain additional procedural protections. In
addition, the indemnity agreements provide that directors and executive officers
will be indemnified to the fullest possible extent not prohibited by law against
all expenses (including attorney's fees) and settlement amounts paid or incurred
by them in any action or proceeding. The indemnification provision in the
indemnity agreements entered into between the Company and its directors and
executive officers may be sufficiently broad to permit indemnification of the
Company's officers and directors for liabilities arising under the Securities
Act.
The Company has also agreed to indemnify Astoria against certain
liabilities, including liabilities under the Securities Act. Furthermore,
Astoria has agreed to indemnify the Company against certain liabilities,
including liabilities under the Securities Act. Such agreements also provide for
rights of contribution if such indemnification is not available.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to any charter provision, by-law, contract, arrangement, statute or
otherwise, we have been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
54
<PAGE> 57
WHERE YOU CAN GET MORE INFORMATION
This Prospectus constitutes part of a Registration Statement on Form SB-2
that the Company has filed with the SEC under the Securities Act with respect to
the Shares. This Prospectus does not contain all of the information contained in
the Registration Statement. For further information about the Company and the
securities offered hereby, refer to the Registration Statement and its Exhibits.
Any statements contained in this Prospectus concerning the provisions of any
documents are not necessarily complete, and in each instance, reference is made
to the copy of such document filed as an Exhibit to the Registration Statement
or otherwise filed with the SEC. Each such statement is qualified in its
entirety by such reference.
At your request, we will provide you, without charge, a copy of any
exhibits to the registration statement incorporated by reference in this
prospectus. If you want more information, write or call us at:
Omnis Technology Corporation
981 Industrial Boulevard, Building B
San Carlos, California 94070-4117
(650) 632-7100
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and files reports and
other information with the SEC in accordance therewith. Such reports and other
information filed by the Company are available for inspection and copying at the
public reference facilities of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's Regional Offices located at 7 World Trade Center, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material may be obtained by mail
from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. The SEC also maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, that file electronically with the SEC.
The Company will send a copy of its Annual Report on Form 10-KSB/A to
security holders in conjunction with the filing as of March 31, 1999 with the
SEC of its Form 10-KSB/A for fiscal year 1999. The Annual Report includes
audited financial statements. Additional copies of the Annual Report can be
obtained from the Company at the address and telephone number listed above or
from the SEC as described above.
55
<PAGE> 58
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORTS............................... F-2
CONSOLIDATED BALANCE SHEETS................................. F-4
CONSOLIDATED STATEMENTS OF OPERATIONS....................... F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY............. F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS....................... F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................. F-8
</TABLE>
F-1
<PAGE> 59
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of OMNIS Technology Corporation:
We have audited the accompanying consolidated balance sheet of OMNIS
Technology Corporation and subsidiaries as of March 31, 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of OMNIS
Technology Corporation and subsidiaries at March 31, 1999, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
San Francisco, California
June 1, 1999
F-2
<PAGE> 60
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of OMNIS Technology Corporation:
We have audited the accompanying consolidated statements of operations of
OMNIS Technology Corporation and subsidiaries, and the related consolidated
statements of stockholders' equity (deficiency), and cash flows for the year
ended March 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations of OMNIS Technology Corporation
and subsidiaries and their cash flows for the year ended March 31, 1998 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses and negative cash flows
from operations, has a working capital and stockholders' deficiency at March 31,
1998, limited cash resources, and significant past due amounts due to creditors.
These matters, among others, raise substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
DELOITTE & TOUCHE LLP
San Jose, California
May 22, 1998
F-3
<PAGE> 61
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1999
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 271 $ 432
Accounts receivable (less allowances for doubtful accounts
of $150 and $140, respectively)........................ 764 786
Inventories............................................... 13 12
Other current assets...................................... 609 335
-------- --------
Total current assets.............................. 1,657 1,565
Property, furniture and equipment, net...................... 890 835
Other assets................................................ 10 10
-------- --------
Total assets...................................... $ 2,557 $ 2,410
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 82 $ 49
Accounts payable.......................................... 240 275
Accrued liabilities....................................... 533 365
Deferred revenue.......................................... 412 399
-------- --------
Total current liabilities......................... 1,267 1,088
Long-term debt.............................................. 28 16
-------- --------
Total liabilities................................. 1,295 1,104
Commitments and contingencies (Note 11)
Stockholders' equity:
Convertible Preferred stock -- $1.00 par value; 300,000
shares authorized; issued and outstanding: 300,000
shares................................................. 300 300
Common stock -- $.10 par value; 20,000,000 shares
authorized; issued and outstanding: 9,679,829 shares... 967 967
Paid-in capital........................................... 45,180 45,150
Accumulated deficit....................................... (45,386) (45,275)
Accumulated other comprehensive income.................... 201 164
-------- --------
Total stockholders' equity........................ 1,262 1,306
-------- --------
Total liabilities and stockholders' equity........ $ 2,557 $ 2,410
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 62
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31, JUNE 30,
----------------------- -----------------------
1998 1999 1998 1999
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues:
Product.................................. $ 4,198 $ 4,277 $ 915 $ 1,104
Services................................. 3,785 1,582 459 267
---------- ---------- ---------- ----------
Total net revenues............... 7,983 5,859 1,374 1,371
---------- ---------- ---------- ----------
Operating expenses:
Cost of product revenues................. 505 333 121 41
Cost of service revenues................. 3,104 347 101 54
Selling and marketing.................... 6,714 2,002 579 530
Research and development................. 2,875 1,418 337 385
General and administrative............... 3,066 2,297 1,201 243
---------- ---------- ---------- ----------
Total operating expenses......... 16,264 6,397 2,339 1,253
---------- ---------- ---------- ----------
Operating income (loss).................... (8,281) (538) (965) 118
Other income (expense):
Interest income.......................... 83 7 2 3
Interest expense and other, net.......... (137) (352) (114) (6)
---------- ---------- ---------- ----------
Total other income (expense)..... (54) (345) (112) (3)
---------- ---------- ---------- ----------
Income (Loss) before income taxes.......... (8,335) (883) (1,077) 115
Income tax expense......................... (17) (4) (4) (4)
---------- ---------- ---------- ----------
Net Income (Loss).......................... $ (8,352) $ (887) $ (1,081) $ 111
========== ========== ========== ==========
Net Income (Loss) per share -- basic and
diluted.................................. $ (4.07) $ (0.41) $ (0.51) $ 0.01
========== ========== ========== ==========
Weighted average common shares
outstanding.............................. 2,052,285 2,148,499 2,125,827 9,679,829
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 63
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SERIES A ACCUMULATED
PREFERRED STOCK COMMON STOCK OTHER COMPREHENSIVE
----------------- ------------------ PAID-IN ACCUMULATED COMPREHENSIVE INCOME
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT INCOME (LOSS)
-------- ------ --------- ------ ------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, April 1, 1997.... -- $ -- 1,737,353 $174 $41,038 $(36,147) $ 267
Common stock options and
warrants exercised....... -- -- 2,500 -- 10 -- 10
Common stock issued upon
conversion of debt (net
of issuance costs of
$148).................... -- -- 372,283 37 1,773 -- --
Common stock issued........ -- -- 13,691 1 60 -- --
Net loss................... -- -- -- -- -- (8,352) -- $(8,352)
Foreign currency
translation adjustment... -- -- -- -- -- -- (116) (116)
-------
Comprehensive loss......... -- -- -- -- -- -- -- $(8,468)
-------- ----- --------- ---- ------- -------- ----- =======
Balances, March 31, 1998... -- $ -- 2,125,827 $212 $42,881 $(44,499) $ 151
Preferred stock issued..... 124,564 125 -- -- 875 -- --
Redemption of preferred
stock.................... (124,564) (125) -- -- 125 -- --
Common and preferred stock
issued upon conversion of
debt..................... 300,000 300 2,543,344 254 582 -- --
Stock issued in conjunction
with private placement
(net of issuance costs of
$35)..................... -- -- 5,000,000 500 715 -- --
Common stock issued........ -- -- 10,658 1 2 -- --
Net loss................... -- -- -- -- -- (887) -- $ (887)
Foreign currency
translation adjustment... -- -- -- -- -- -- 50 50
-------
Comprehensive loss......... -- -- -- -- -- -- -- $ (837)
-------- ----- --------- ---- ------- -------- ----- =======
Balances, March 31, 1999... 300,000 300 9,679,829 967 45,180 (45,386) 201
Legal fees charged to stock
Issuance costs
(unaudited).............. -- -- -- -- (30) -- --
Net income (unaudited)..... -- -- -- -- -- 111 -- 111
Foreign currency
translation adjustment
(unaudited).............. -- -- -- -- -- -- (37) (37)
-------
Comprehensive income
(unaudited).............. -- -- -- -- -- -- -- $ 74
-------- ----- --------- ---- ------- -------- ----- =======
Balance, June 30, 1999
(unaudited).............. 300,000 $ 300 9,679,829 $967 $45,150 $(45,275) $ 164
======== ===== ========= ==== ======= ======== =====
<CAPTION>
TOTAL
STOCK
HOLDERS'
EQUITY
(DEFICIENCY)
------------
<S> <C>
Balances, April 1, 1997.... $ 5,332
Common stock options and
warrants exercised....... 10
Common stock issued upon
conversion of debt (net
of issuance costs of
$148).................... 1,810
Common stock issued........ 61
Net loss................... (8,352)
Foreign currency
translation adjustment... (116)
Comprehensive loss......... --
-------
Balances, March 31, 1998... $(1,255)
Preferred stock issued..... 1,000
Redemption of preferred
stock.................... --
Common and preferred stock
issued upon conversion of
debt..................... 1,136
Stock issued in conjunction
with private placement
(net of issuance costs of
$35)..................... 1,215
Common stock issued........ 3
Net loss................... (887)
Foreign currency
translation adjustment... 50
Comprehensive loss......... --
-------
Balances, March 31, 1999... 1,262
Legal fees charged to stock
Issuance costs
(unaudited).............. (30)
Net income (unaudited)..... 111
Foreign currency
translation adjustment
(unaudited).............. (37)
Comprehensive income
(unaudited)..............
Balance, June 30, 1999
(unaudited).............. $ 1,306
=======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 64
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
MARCH 31 JUNE 30
------------------ ----------------
1998 1999 1998 1999
------- ------- ------- -----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $(8,352) $ (887) $(1,081) $ 111
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization expense.................. 653 423 119 79
Accrued convertible debenture interest................. 131 -- -- --
Loss on write-off of lease deposit..................... -- -- 500 --
Provision for inventory evaluation..................... -- -- 50 --
Legal fees capitalized to stock issuance............... -- -- -- (30)
Loss on disposal of property........................... -- 100 79 --
Changes in operating assets and liabilities:
Accounts receivable.................................. 1,102 (163) (113) (21)
Inventories.......................................... (55) 61 7 --
Other current assets................................. 44 16 238 274
Accounts payable and accrued liabilities............. 363 (1,614) (173) (133)
Deferred revenue..................................... (66) (450) (114) (14)
------- ------- ------- -----
Net cash provided by (used for) operating
activities...................................... (6,180) (2,514) (488) 268
------- ------- ------- -----
Cash flows from investing activities:
Purchases of property, furniture and equipment............ (423) (17) (3) (42)
Proceeds from sale of fixed assets........................ 81 77 16 1
Other assets.............................................. (400) 390 -- --
------- ------- ------- -----
Net cash provided by (used for) investing
activities...................................... (742) 450 13 (41)
------- ------- ------- -----
Cash flows from financing activities:
Net borrowings (repayments) on line of credit............. 100 (145) -- --
Repayments of debt........................................ (246) (30) (12) (45)
Proceeds from issuance long-term debt..................... 1,098 -- -- --
Proceeds from preferred stock issuance.................... -- 1,000 482 --
Net proceeds from common stock issuance................... 61 1,218 -- --
Exercise of stock options and warrants.................... 10 -- -- --
------- ------- ------- -----
Net cash provided by (used for) financing
activities...................................... 1,023 2,043 355 (45)
------- ------- ------- -----
Effect of exchange rate changes on cash..................... (9) 50 11 (21)
------- ------- ------- -----
Increase (decrease) in cash and equivalents................. (5,908) 29 (110) 161
Cash and equivalents -- beginning of year................... 6,150 242 242 271
------- ------- ------- -----
Cash and equivalents -- end of year......................... $ 242 $ 271 $ 132 $ 432
======= ======= ======= =====
Cash paid for:
Interest.................................................. $ 34 $ 141 -- --
Income taxes.............................................. $ 13 $ 3 -- --
</TABLE>
NONCASH TRANSACTIONS:
During fiscal 1999, a note payable for $1,000,000 plus accrued interest of
$135,836 were converted into 300,000 shares of preferred stock and 2,543,344
shares of common stock. See Note 6.
During fiscal 1998, convertible debenture noteholders converted $1,828,000
of 8% debentures, plus accrued interest of $130,000, into 372,283 shares of
common stock. Such amount has been recorded net of issuance costs of $148,000 in
the consolidated statements of stockholders' equity (deficiency). See Note 6.
Also, during fiscal 1998 the Company acquired assets under capital lease in
the amount of $333,000.
See notes to consolidated financial statements.
F-7
<PAGE> 65
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization -- OMNIS Technology Corporation and its subsidiaries (the
"Company" or "OMNIS"), develops, markets, and supports software products for the
development and deployment of applications for accessing multi-user databases in
workgroup and enterprise-wide client/server computing environments. The
Company's family of products is used by enterprises, system integrators, value
added resellers (VARs) and independent developers to deliver custom information
management applications for a wide range of users including financial
management, decision support, executive information, sales and marketing, and
multi-media authoring systems. In addition to these products, OMNIS provides
technical support and training to help customers plan, analyze, implement, and
maintain application software based on the Company's technology.
The consolidated financial statements include OMNIS Technology Corporation
and its wholly owned subsidiaries, OMNIS Holdings Limited, OMNIS Software
Limited, OMNIS Software Inc., and OMNIS Software GmbH.
Significant accounting policies applied in the preparation of the
accompanying consolidated financial statements of the Company follow:
Basis of Presentation -- The financial statements for 1998 were prepared on
a basis which contemplated the Company's continuation as a going concern and the
realization of its assets and liquidation of its liabilities in the ordinary
course of business. The Company had an accumulated deficit of $44,499,000 at
March 31, 1998, negative cash flows from operations of $6,921,000 in fiscal
1998, had working capital and stockholders' deficiencies of $3,016,000 and
$1,255,000, respectively, at March 31, 1998, limited cash resources, and
significant past due amounts to creditors. These matters, among others, raised
substantial doubt about its ability to continue as a going concern for a
reasonable period of time. The financial statements for 1998 did not include any
adjustments relating to the recoverability or classification of assets or the
amounts and classification of liabilities that might result from the outcome of
this uncertainty. The Company's continued existence was dependent on its ability
to obtain additional financing sufficient to allow it to meet its obligations as
they become due and to achieve profitable operations.
During fiscal 1999, the Company raised $2,218,000 from equity transactions
and was able to pay off its obligations. At March 31, 1999 the Company had
working capital and stockholders equity of $390,000 and $1,262,000,
respectively.
Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany balances and transactions are
eliminated in consolidation.
Revenue Recognition -- In October 1997, the American Institute of Certified
Public Accountants issued Statement of Position 97-2 ("SOP 97-2"), "Software
Revenue Recognition" which provides generally accepted accounting principles for
recognizing revenue on software transactions. SOP 97-2 requires that revenue
from software arrangements be allocated to each element of the arrangement based
on the relative fair values of the elements, such as software products,
upgrades, enhancements, post contract customer support, installation, or
training. Under SOP 97-2, the determination of fair value is based on the
objective evidence which is specific to the vendor. If such evidence of fair
value
F-8
<PAGE> 66
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
for each element of the arrangement does not exist, all revenue from the
arrangement is deferred until such time that evidence of fair value does exist
or until all elements of the arrangement are delivered. SOP 97-2 was amended in
February 1995 by Statement of Position 98-4 ("SOP 98-4") "Deferral of the
Effective Date of a Provision of SOP 97-2" and was amended again in December
1998 by Statement of Position 98-9 ("SOP 98-9") "Modification of SOP 97-2,
Software Revenue Recognition with Respect to Certain Transactions." These
amendments deferred and then clarified, respectively, the specification of what
was considered vendor specific objective evidence of fair value for the various
elements in a multiple element arrangement. SOP 98-9 is effective for all
transactions entered into by the Company in fiscal 2000. The adoption of this
statement is not expected to have a material impact on the Company's operating
results, financial position or cash flows.
Product Revenue -- The Company recognizes revenue for product sales upon
persuasive evidence of an arrangement, delivery of the software and
determination that collection of a fixed or determinable fee is considered
probable.
Service Revenue -- Service revenue is generated from consulting, technical
support, and training. Each element is value based on the relative fair value
specific to the company. Product support revenue is recognized ratably over the
related contractual term, generally one year. Revenue from consulting and
training is recognized when the services are provided.
Cost of Product and Service Revenues -- Cost of product revenues includes
cost of production materials and related documentation and amortization of
capitalized software development costs. Cost of service revenues principally
includes payroll and other costs associated with the customer support function.
Other costs specifically identifiable with the revenue source have been
classified accordingly.
Cash Equivalents -- The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.
Inventories -- Inventories, principally finished goods, are stated at the
lower of cost on a first-in, first-out (FIFO) basis, or market value.
Property, Furniture and Equipment -- Property, furniture, and equipment are
stated at cost. Equipment with a capital lease is recorded at the present value
of the minimum lease payments at the date of acquisition. Depreciation and
amortization is computed on a straight-line basis over the estimated useful
lives of the assets or lease term whichever is shorter, which range from 3 to 25
years. Leasehold improvements are amortized on a straight-line basis over the
shorter of the lease term or the estimated useful lives of the assets.
Long-Lived Assets -- The Company has adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting For The Impairment Of
Long-Lived Assets And For Long-Lived Assets To Be Disposed Of" (SFAS 121), which
requires that long-lived assets, certain identifiable intangibles, and goodwill
related to those assets used by an entity be reviewed for impairment whenever
events or changes indicate that the carrying amount of an asset may not be
recoverable. The Company's policy is to review the recoverability of all
intangible assets at a minimum on an annual basis, and in addition whenever
events or changes indicate that the carrying amount of an asset may not be
recoverable.
F-9
<PAGE> 67
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
Capitalized Software Development Costs -- Software development costs are
capitalized when technological feasibility has been established. The Company did
not capitalize any software development costs in fiscal 1999 or 1998 because we
did not believe our current process for developing software is essentially
completed concurrently with the establishment of technical feasibility (as
defined by SFAS 86). No amortization of capitalized software development costs
were charged to cost of product revenues was none for both years ended March 31,
1999 and 1998.
Income Taxes -- Income taxes are accounted for using the asset and
liability approach for financial reporting which requires recognition of
deferred tax liabilities and assets for the expected future tax consequences of
temporary differences between the financial statement carrying amounts and the
tax bases of assets and liabilities and net operating loss and tax credit carry
forwards. Valuation allowances are established when necessary to reduce deferred
tax assets to the amounts expected to be realized.
Stock-Based Compensation -- The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board ("APB") Opinion No. 25, "Accounting For Stock Issued to
Employees."
Net Loss Per Share -- Net loss per share is computed based on the weighted
average number of common shares outstanding during the period. Net loss per
share excludes dilution and is computed by dividing net loss by the weighted
average number of shares of common stock outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
However, due to the Company's net loss position for all periods presented,
diluted EPS excludes common equivalent shares, as their effect is anti-dilutive.
Concentration of Credit Risk and Significant Risks and
Uncertainties -- Financial instruments which potentially subject the Company to
a concentration of credit risk principally consist of cash, cash equivalents and
accounts receivable. The Company places its cash and cash equivalents with what
it believes are high quality financial institutions. The Company sells its
products primarily to companies in North America and Europe. To reduce credit
risk, management performs ongoing credit evaluations of its customers' financial
condition. The Company maintains reserves for potential credit losses.
The Company does not currently have an established line of credit with a
commercial bank. Such a credit facility may be difficult to obtain with the
Company's historical operating results. Accordingly, in order to obtain
additional funds in the future, the Company may need to seek additional equity
capital which would be dilutive to current stockholders. The Company is not
currently attempting to raise additional capital, but such activity may be
required to continue operations. There can be no assurance that the Company will
be able to raise additional capital on commercially reasonable terms should the
Company need additional funds in the future.
The Company's future operating results will depend, to a considerable
extent, on its ability to rapidly and continuously develop new products that
offer its customers enhanced performance at competitive prices. Inherent in this
process are a number of risks. The development of new, enhanced software
products is a complex and uncertain process requiring high levels of innovation
from the Company's designers as well as accurate anticipation of customer and
technical trends by the
F-10
<PAGE> 68
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
marketing staff. Once a product is developed, the Company must rapidly bring it
into production and distribution in order to achieve acceptable product
revenues.
The Company participates in a dynamic high technology industry and believes
that changes in any of the following areas could have a material adverse effect
on the Company's future financial position or results of operations: advances
and trends in new technologies; competitive pressures in the form of new
products or price reductions on current products; changes in product mix;
changes in overall demand for products and services offered by the Company;
changes in certain strategic partnerships or customer relationships; litigation
or claims against the Company based on intellectual property, patent product,
regulatory or other factors; risks associated with changes in domestic or
international economic and/or political conditions or regulations; availability
of necessary components, and the Company's ability to attract and retain
employees necessary to support growth.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Foreign Currency Translation -- All assets and liabilities of operations
outside the United States are translated into U.S. dollars from their functional
currency, which is the local currency, at year-end exchange rates. Income and
expense items are translated at the average exchange rate for the year. Gains
and losses resulting from translation are included in stockholders' equity.
Gains and losses on foreign currency transactions have been included in the
statements of operations. Such gains and losses have not been significant for
the years ended March 31, 1999 and 1998.
Fair Value of Financial Instruments -- The fair value of cash and cash
equivalents, accounts receivable and accounts payable approximate carrying value
due to the short-term nature of such instruments. The fair value of long-term
obligations approximates carrying value based on terms available for similar
instruments.
Recent Accounting Pronouncements -- In June 1997, the Financial Accounting
Standards Board issued SFAS No. 130 "Reporting Comprehensive Income," which
requires that an enterprise report, by major components and as a single total,
the change in its net assets during the period from non-owner sources; and SFAS
No. 131 "Disclosures about Segments of an Enterprise and Related Information,"
which establishes annual and interim reporting standards for an enterprises
business segment and related disclosures about its products, services,
geographic areas, and major customers. The Company operates in one segment.
Adoption of these statements did not impact the Company's consolidated financial
position, results of operations or cash flows. Both statements are effective for
the Company's fiscal year ended March 31, 1999.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which defines derivatives, requires that
all derivatives be carried at fair value, and provides for hedge accounting when
certain conditions are met. SFAS No. 133 as amended by SFAS No. 137, is
effective for the Company in fiscal 2002. Although the Company has not fully
assessed the implications of SFAS Nos. 133 and 137, the Company does not believe
that the
F-11
<PAGE> 69
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
adoption of these statements will have a material impact on the Company's
financial position or results of operations.
UNAUDITED INTERIM FINANCIAL INFORMATION
The financial information as of June 30, 1999 and for the three months
ended June 30, 1998 and 1999 is unaudited, but includes all adjustments
(consisting only of normal recurring adjustments) that the Company considers
necessary for fair presentation of the financial position at such dates and the
results of operations and cash flows for the periods then ended. Operating
results for the three months ended June 30, 1999 are not necessarily indicative
of results that may be expected for the entire year.
2. OTHER CURRENT ASSETS
Other current assets consist of:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1999
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Receivable from trust....................................... $259 $ --
Other receivable............................................ 148 137
VAT receivable.............................................. -- 40
Prepaid insurance........................................... 80 36
Prepaid rent................................................ 53 44
Other....................................................... 69 78
---- ----
Total..................................................... $609 $335
==== ====
</TABLE>
3. PROPERTY, FURNITURE, AND EQUIPMENT
Property, furniture and equipment consist of:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1999
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Land and building........................................... $ 691 $ 675
Office equipment, furniture and fixtures.................... 2,887 2,842
Automobiles................................................. 120 117
------- -------
Total....................................................... 3,698 3,634
Accumulated depreciation and amortization................... (2,808) (2,799)
------- -------
Property, furniture and equipment -- net.................... $ 890 $ 835
======= =======
</TABLE>
F-12
<PAGE> 70
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
4. ACCRUED LIABILITIES
Accrued liabilities consist of:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1999
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Salaries and benefits....................................... $131 $178
Professional fees........................................... 76 76
Other....................................................... 326 126
---- ----
Total..................................................... $533 $366
==== ====
</TABLE>
5. LINE OF CREDIT
The Company's wholly-owned subsidiary in Germany, OMNIS Software GmbH, has
a bank line of credit that allows the subsidiary to borrow up to $35,000 at
March 31, 1999, automatically upon overdraft of the subsidiary's operating bank
account. Interest on the overdraft is at 10%. Borrowings under the line of
credit are secured by all assets of OMNIS Software GmbH and a money market
account. At March 31, 1999 and June 30, 1999, there were no borrowings under the
line of credit.
6. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1999
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Capital lease obligations................................... $ 72 $61
Note payable to finance company(1).......................... 38 4
---- ---
110 65
Less current portion........................................ 82 49
---- ---
Total long-term debt...................................... $ 28 $16
==== ===
</TABLE>
- -------------------------
(1) The original amount financed was $33,428 at 6.75% per annum. Nine
installments of $3,820 were required, the last coming due in July 1999. The
note was paid in full in July 1999.
Conversion of Note -- In October 1997, the Company closed an interim debt
financing of $1,000,000 with a significant stockholder of the Company. In March
1999, the promissory note plus accrued interest of $135,836 were converted into
300,000 shares of preferred stock and 2,543,344 shares of common stock for an
aggregate purchase price of $1,135,836.
7. STOCKHOLDERS' EQUITY
Warrants -- In July 1998, the 1993 Director's Warrant Plan was amended to
increase the number of shares of common stock reserved for issuance by 260,000
shares (from 40,000 shares to an
F-13
<PAGE> 71
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
aggregate of 300,000 shares). The 1993 Advisors' Plan was also amended to
increase the number of common shares reserved for issuance by 82,500 shares
(from 17,500 shares to an aggregate of 100,000 shares). All shares of capital
stock issued under the 1993 Advisors' Plan must be issued at or above the fair
market value of such shares at the time of issuance thereof.
The following summarizes warrants outstanding:
<TABLE>
<CAPTION>
WARRANTS EXERCISE PRICE
-------- ----------------
<S> <C> <C>
Warrants outstanding at April 1, 1997....................... 100,562 $10.90 - $160.00
Granted................................................... 4,500 $ 4.13 - $6.88
Exercised................................................. (2,500) $ 4.13
Canceled.................................................. (27,000) $33.75 - $160.00
-------
Warrants outstanding at March 31, 1998...................... 75,562 $ 4.13 - $160.00
Granted................................................... 125,000 $ 0.44
Exercised................................................. --
Canceled.................................................. (16,833) $65.00 - $160.00
-------
Warrants outstanding at March 31, 1999...................... 183,729 $ 0.44 - $ 58.50
Granted................................................... -0- --
Exercised................................................. -0- --
Canceled.................................................. -0- --
Warrants outstanding at June 30, 1999....................... 183,729 $ 0.44 - $ 58.50
=======
</TABLE>
The warrants expire at various dates between 1999 and 2002. At March 31,
1999, there were 78,896 warrants exercisable.
Employee Stock Purchase Plan -- The Company offers a benefit to its
employees to purchase shares of the Company's common stock through its 1994
Employee Stock Purchase Plan (the "Plan"). The Company originally reserved
22,500 shares of common stock for issuance under the Plan. In September, 1998,
stockholders of the Company amended the Plan to increase the number of shares
reserved for issuance to 250,000 shares. The Plan permits eligible employees to
purchase common stock through payroll deductions of up to a maximum of 10% of
their eligible compensation at 85% of the fair market value at the beginning or
end of each six-month purchase period. During fiscal years 1999 and 1998, 10,658
shares were issued at a weighted average price of $0.28 per share and 13,691
shares were issued at a weighted average price of $4.50 per share, respectively.
The weighted average fair value of the fiscal 1999 and 1998 awards was
considered insignificant. At March 31, 1999, 216,791 shares have been reserved
for future issuance.
Convertible Preferred Stock -- The Company has outstanding 300,000 shares
of convertible Series A preferred stock. Dividends shall be paid at the option
of the Board of Directors at the rate of $0.125 per share per annum, in
preference to all other stockholders. Preferred stock ranks senior to the
company's common stock as to liquidation rights. Each share of preferred stock
may be converted, at the option of the holder, into 1.667 shares of common
stock. In effecting the conversion, any unpaid dividends on the preferred stock
shall be disregarded.
F-14
<PAGE> 72
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
8. STOCK OPTIONS
The Company has employee stock options outstanding under three different
stock option plans. Under the Company's Amended and Restated 1987 Stock Option
Plan ("the 1987 Plan"), incentive stock options to purchase shares of common
stock have been granted to directors, officers, key employees, and consultants.
The 1987 Plan had a ten year term which expired in 1997. Options granted and
outstanding under the 1987 Plan remain in force until either exercised by the
holder, canceled when the holder terminates employment, or until the 10 year
term expires. In anticipation of the termination of the 1987 Plan, the
stockholders of the Company approved the 1996 Stock Plan ("the 1996 Plan"). The
1996 Plan has been administered by a committee of the Board which has been
empowered to grant options to purchase up to 600,000 shares of common stock, of
either non-qualified or incentive stock options. In April 1999, the Board of
Directors adopted the Omnis Technology Corporation 1999 Stock Option Plan (the
"1999 Plan") to consolidate options to be issued to directors, officers, key
employees and consultants under a single option plan and terminated the
Directors Plan, the Advisors Plan and the 1996 Plan, except as to warrants and
options then issued and outstanding under such plans. 1,500,000 shares of the
common stock of the Company were reserved for issuance under the 1999 Plan. The
Board of Directors plans to present the 1999 Plan for approval to the
stockholders of the Company at their 1999 annual meeting. Subject to the
approval of the stockholders, in April 1999 the Company granted incentive stock
options to its employees to acquire a total of 411,000 shares of the common
stock of the Company at an exercise price of $1.02 per share, with the right to
exercise such options vesting over a three-year period.
Under these Plans, the exercise price for the option is determined at the
time of the granting of the option, but in the case of incentive stock options,
the exercise price shall not be less than the fair market value on the date of
the grant. Generally, under these Plans, the right to exercise an option vests
ratably and becomes exercisable over a fixed period of up to four years as
designated in the relevant option agreement.
F-15
<PAGE> 73
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
The following tables summarize the activity under the 1987, 1996 and 1999
Plans through June 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------
WEIGHTED
OPTIONS AVERAGE
AVAILABLE EXERCISE
FOR GRANT SHARES PRICE
--------- --------- --------
<S> <C> <C> <C>
Balances, April 1, 1997............................... 138,745 156,151 $17.20
Additional authorization............................ 85,000 -- --
Granted (weighted average fair value: $1.14 per
share)........................................... (126,075) 126,075 7.09
Canceled............................................ 245,577 (245,577) 9.71
--------- --------- ------
Balances, March 31, 1998.............................. 343,247 36,649 $24.96
Additional authorization............................ 470,000 -- --
Granted (weighted average fair value: $0.76 per
share)........................................... (731,500) 731,500 0.77
Canceled............................................ 132,550 (132,550) 1.08
--------- --------- ------
Balances, March 31, 1999.............................. 214,297 635,599 $ 2.11
========= ========= ======
Additional authorization............................ 1,500,000 -- --
Granted (weighted average fair value: $1.02 per
share)........................................... (410,000) 410,000 1.02
Canceled............................................ 8,050 (8,050) 8.69
--------- --------- ------
Balances, June 30, 1999............................... 1,312,347 1,037,549 $ 1.63
========= ========= ======
</TABLE>
Additional information regarding options outstanding under the 1987 and
1996 Plans as of March 31, 1999 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------ OPTIONS EXERCISABLE
WEIGHTED ------------------------------
AVERAGE WEIGHTED WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- --------------- ----------- ------------------- -------- ------------------- --------
<S> <C> <C> <C> <C> <C>
$ 0.75 - 0.78... 604,500 9.13 $ 0.78 -- $ --
5.13 - 8.75.. 7,900 8.17 6.63 2,977 6.68
15.63 - 23.75.. 3,620 4.85 20.35 3,358 20.47
33.13 - 52.50.. 19,579 6.01 37.88 18,226 38.23
------- ---- ------ ------ ------
635,599 7.50 $ 2.11 24,561 $34.68
</TABLE>
F-16
<PAGE> 74
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
Additional information regarding options outstanding under all three Plans
as of June 30, 1999 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------- OPTIONS EXERCISABLE
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- ---------------- ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 0.75 - 0.7813 601,000 9.13 $ 0.78 63,058 $ 0.77
1.02 407,000 9.79 1.02 -- --
5.13 - 8.75 7,600 8.17 6.63 3,301 6.66
15.63 - 23.75 3,620 4.85 20.35 3,445 20.35
33.13 - 52.50 18,329 6.01 37.88 17,304 37.05
--------- ---- ------ ------ ------
1,037,549 7.22 $ 1.63 87,108 $ 9.03
</TABLE>
ADDITIONAL STOCK PLAN INFORMATION
The Company accounts for its stock-based awards using the intrinsic value
method in accordance with APB No. 25 and its related interpretations.
Accordingly, as the Company awards stock options with exercise prices equal to
fair market value, no compensation expense has been recognized in the financial
statements for employee stock arrangements.
SFAS No. 123, Accounting For Stock-Based Compensation,("SFAS 123") requires
the disclosure of pro forma net loss and net loss per share had the Company
adopted the fair value method as of the beginning of fiscal 1996. Under SFAS
123, the fair value of stock-based awards to employees is calculated through the
use of option pricing models, even though such models were developed to estimate
the fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option awards.
These models also require subjective assumptions, including future stock price
volatility and estimated term. These calculations were made using the
Black-Scholes option pricing model with the following weighted average
assumptions: expected life, 36 months following vesting; stock volatility, 140%
and 40% in 1999 and 1998 respectively; risk free interest rates, 5.7% and 5.9%
in 1999 and 1998 respectively; and no dividends during the expected term. The
Company's calculations are based on a multiple option valuation approach and
forfeitures are recognized as they occur. If the computed fair values of the
1999 and 1998 awards had been amortized to expense over the vesting period of
the awards, pro forma net loss would have been $1,168,000 ($0.54 per share) in
1999 and $8,396,000 ($4.09 per share) in 1998. However, the impact of
outstanding non-vested stock options granted prior to 1996 has been excluded
from the pro forma calculation; accordingly, the 1999 and 1998 pro forma
adjustments are not indicative of future period pro forma adjustments, when the
calculation will apply to all applicable stock options.
F-17
<PAGE> 75
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
9. INCOME TAXES
Income tax expense consists of:
<TABLE>
<CAPTION>
1999 1998
----- -----
(IN THOUSANDS)
<S> <C> <C>
Current:
Federal.......................................... $-- $--
State............................................ 3 13
Foreign.......................................... 1 4
--- ---
Total......................................... $ 4 $17
=== ===
</TABLE>
Pretax foreign income (loss) was $624,000 and ($1,059,000) in 1999 and
1998, respectively.
The effective tax rate differs from the federal statutory income tax rate
principally due to the unavailability of net operating loss carryforwards or
carrybacks and permanent differences.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, as well as operating loss
carry forwards. Significant components of the Company's net deferred tax assets
are as follows:
<TABLE>
<CAPTION>
MARCH 31,
1999
--------------
(IN THOUSANDS)
<S> <C>
Deferred tax assets
Net operating losses............................ $ 15,883
Depreciation.................................... 702
Accruals and reserves recognized in different
periods...................................... 1,278
Tax credits..................................... 690
Capitalized software............................ --
--------
Total............................................. 18,553
Valuation allowance............................... (18,553)
--------
Net deferred tax assets...................... $ --
========
</TABLE>
The net operating losses included in deferred tax assets at March 31, 1998
includes $366,000 of tax benefits relating to the exercise and sale by employees
of certain stock options. If the Company becomes profitable, the benefit
associated with the stock compensation will be recorded as an adjustment to
stockholders' equity.
Due to uncertainties surrounding the timing of realizing the benefits of
its deferred tax assets in future tax returns, the Company has placed a full
valuation allowance against its net deferred tax assets at March 31, 1999 and
1998. The net change in the valuation allowance was an increase of $940,000 in
1999.
F-18
<PAGE> 76
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
At March 31, 1999, the Company had net operating loss carryforwards of
$37.6 million for federal income tax purposes, $8.7 million for state tax
purposes, and $5.9 million for foreign tax purposes which expire at various
dates through 2019.
The Tax Reform Act of 1986, as amended, and the California Conformity Act
of 1987 impose substantial restrictions on the utilization of net operating loss
and tax credit carry forwards in the event of an "ownership change," as defined
by the Internal Revenue Code. An "ownership change" took place in 1999, and the
Company is limited to using approximately $146,000 per year of federal and
California net operating loss carry forwards accrued through that date (a total
of $2.9 million federal and $0.7 million California).
10. RETIREMENT PLANS
The Company sponsors two defined contribution plans for its employees in
the United Kingdom ("the UK"). Both plans have been approved by the UK's
Department of Inland Revenue. The Company's subsidiary OMNIS Software Limited
sponsors the OMNIS Retirement Benefits Scheme ("the ORB Plan"). The only
participant in the ORB Plan is the Chief Technical Officer of OMNIS Software
Limited. The ORB Plan provides retirement benefits upon attaining normal
retirement age, and incidental benefits in the case of death or termination of
employment prior to retirement. OMNIS Software Limited makes annual
contributions based on the participant's salary to fund these retirement
benefits. The ORB Plan is partially insured through the Sun Life Assurance
Society. OMNIS Software Limited retains the right to terminate the ORB Plan at
any time upon 30 days' written notice.
OMNIS Software Limited sponsors the OMNIS Software Limited Retirement
Benefits Scheme ("the OSL Plan") for substantially all of its employees in the
United Kingdom. The OSL Plan provides retirement benefits upon attaining normal
retirement age, and incidental benefits in the case of death or termination of
employment prior to retirement. OMNIS Software Limited contributes an amount
ranging from 5% to 8% of each participant's compensation to fund such benefits.
In addition, participants are entitled to make voluntary contributions under the
OSL Plan.
The Company contributed a total of $85,000 and $153,000 to the ORB and OSL
plans for the years ended March 31, 1999 and 1998, respectively.
The Company sponsors the OMNIS Software Inc. 401(k) Savings and Retirement
Plan ("the Plan") for its employees based in the United States. Employees
meeting the eligibility requirements, as defined, may contribute specified
percentages of their salaries. Under the Plan, which is qualified under Section
401(k) of the federal tax laws, the Company's Board of Directors, at its sole
discretion, may make a discretionary profit-sharing contribution to the Plan.
Moreover, the Company is not obligated, but may at its discretion, pay certain
administrative costs on behalf of the Plan. For the years ended March 31, 1999
and 1998, discretionary contributions of $3,000 and $14,000, respectively, were
made to the Plan.
F-19
<PAGE> 77
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
11. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases its facilities under non-cancelable operating lease
agreements expiring in 2002. Rent expense on these leases is recognized ratably
over the entire lease term. The Company is required to pay property taxes,
insurance and normal maintenance costs.
Future minimum rental commitments under equipment capital leases and
non-cancelable operating leases as of March 31, 1999 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING LEASES LEASES
----------- ------- ---------
(IN THOUSANDS)
<S> <C> <C>
March 31,
2000............................................... $63 $265
2001............................................... 17 127
2002............................................... -- 88
2003............................................... -- 15
--- ----
Total minimum lease payments......................... 80 $495
--- ====
Less: Amount representing interest................. (8)
---
Lease obligations.................................... $72
===
</TABLE>
Equipment under capital leases had a net book value of $64,000 and $263,000
at March 31, 1999 and 1998, respectively.
Rent expense of $921,000 and $876,000 was incurred in 1999 and 1998,
respectively. Rent expense during the three month period ending June 30, 1999
was $71,000.
LITIGATION
Compass Actions. In March 1998, the Company was sued by Compass Software
("Compass") in the Federal District Court for the Eastern District of Washington
claiming damages in the range of $2 Million for software copyright infringement
and related claims. The Company believes that the Compass' copyright
infringement suit has no merit and has vigorously defended against those claims.
The Company previously had sued Compass in 1994 for illegally infringing
and distributing our software products. This matter was settled with an
agreement that Compass would pay certain amounts and would not make illegal
copies of the Company's software in the future. Compass failed to pay the
promised amounts when due. The Company then obtained a judgment for breach of
contract against Compass. As part of the Company's efforts to enforce its
judgment against Compass, the Company purchased, at a judgment lien sale,
certain intangible property of Compass including the rights to the current
infringement suit brought by Compass ("Execution Sale"). Compass then requested
the applicable court to set aside the Execution Sale. The court granted the
request and the Company has appealed this judgment. The appeal has been briefed
and is awaiting a date for oral
F-20
<PAGE> 78
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
argument. The Company has also filed a separate lawsuit against Compass alleging
additional acts of infringement related to the 1994 case.
BTN -- Germany. The Company entered into a professional development
services agreement with BTN Versandhandel GmbH of Leiferde, Germany for the
development of an OMNIS application. The Company developed and delivered a
version of the application to BTN. BTN failed to pay the Company as agreed,
claiming there were flaws in the application. The Company suspended the project
awaiting their payment. BTN commenced legal action against the Company in
Germany claiming damages of approximately DM250,000 for failure to perform under
the service agreement. The Company has countersued BTN claiming the balance owed
under the contract of approximately DM60,000. The Company believes that the
claim by BTN is meritless and intend to aggressively pursue its counterclaim
against BTN.
12. SEGMENT INFORMATION
For 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." The Company is engaged in one industry
segment, however it manages its businesses in two geographical locations: North
America and Europe. The Company operates in one reportable segment, the
development and sale of application and development software tool products to
businesses. The following table presents information concerning the Company's
North American and European operations.
F-21
<PAGE> 79
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND JUNE 30, 1999
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 ARE UNAUDITED)
Segment information consists of :
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
--------------------- --------------------
MARCH 31 MARCH 31, JUNE 30, JUNE 30,
1998 1999 1998 1999
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue by geographic region(1):
United States of America.................... $4,905 $2,456 $ 591 $ 519
United Kingdom.............................. 2,592 2,631 589 644
Germany..................................... 486 772 194 208
------ ------ ------ ------
Total.................................... $7,983 $5,859 $1,374 $1,371
====== ====== ====== ======
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Export sales from North America(2):
(included in total North America sales above):
Mexico.................................................. $184 $141 $35 $ 39
Others in Latin America................................. 12 12 2 3
Asia.................................................... 35 18 12 0
Australia............................................... 39 114 12 39
Canada.................................................. 154 148 27 47
Europe.................................................. 2 2 -- 2
---- ---- --- ----
Total................................................ $426 $435 $88 $130
==== ==== === ====
No customer accounted for revenues in excess of 10% in
1999 and 1998.
</TABLE>
- -------------------------
(1) Revenues are broken out by ship to location.
(2) Revenues broken out by ship to location of the customer.
F-22
<PAGE> 80
- ------------------------------------------------------
- ------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL OR
BUY ANY SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION IN THIS
PROSPECTUS IS CURRENT AS OF SEPTEMBER 21, 1999.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 1
Summary Consolidated Financial
Information....................... 3
Risk Factors........................ 4
Forward Looking Statements.......... 10
Selling Security Holders............ 11
Use of Proceeds..................... 12
Plan of Distribution................ 12
Business............................ 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 26
Certain Relationships and Related
Transactions...................... 33
Market for Common Equity and Related
Shareholder Matters............... 35
Dividend Policy..................... 35
Legal Proceedings................... 36
Description of Securities........... 36
Directors, Officers, and Control
Persons........................... 38
Security Ownership of Certain
Beneficial Owners and
Management........................ 42
Executive Compensation.............. 45
Change in Accountants and Legal
Counsel........................... 53
Experts............................. 54
Disclosure of Commission's Position
of Indemnification for Securities
Act Liabilities................... 54
Where You Can Get More Information.. 55
Financial Statements................ F-1
</TABLE>
UNTIL AUGUST 16, 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS THAT BUY, SELL OR TRADE THESE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
4,070,944 SHARES
OMNIS TECHNOLOGY
CORPORATION
COMMON STOCK
--------------------
PROSPECTUS
--------------------
September 21, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 81
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated in Delaware. Section 102(b)(7) of the General
Corporation Law of the State of Delaware provides that a certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director provided that such provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its shareholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 (relating to liability for
unauthorized acquisitions or redemptions of, or dividends on, capital stock) of
the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit.
Article Eighth of the Company's Certificate of Incorporation contains such a
provision.
The Bylaws of the Company have implemented the applicable statutory
framework by requiring that the Company indemnify its officers and directors to
the extent permitted by Delaware law- in addition, the Bylaws grant the Company
the right to indemnify employees and agents of the Company in accordance with
Delaware law to the extent determined by the Board of Directors.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. The Company has entered into
indemnity agreements with each of its directors, executive officers and key
employees and with the directors, executive officers and key employees of its
subsidiaries that provide the maximum indemnity allowed to directors and
executive officers by the Delaware General Corporation Law, as well as certain
additional procedural protections. In addition, the indemnity agreements provide
that directors and executive officers will be indemnified to the fullest
possible extent not prohibited by law against all expenses (including attorney's
fees) and settlement amounts paid or incurred by them in any action or
proceeding, including any derivative action by or in the right of the Company,
on account of their services as directors or executive officers of the Company
or as directors or officers of any other company or enterprise when they are
serving in such capacities at the request of the Company. The Company will not
be obligated pursuant to such agreements to indemnify or advance expenses to an
indemnified party with respect to proceedings or claims initiated by the
indemnified party and not by way of defense, except with respect to proceedings
specifically authorized by the Board of Directors or brought to enforce a right
to indemnification under the indemnity agreement or any statute or law, Under
the indemnification agreements, the Company is not obligated to indemnify the
indemnified party (i) for any expenses incurred by the indemnified party with
respect to any proceeding instituted by the indemnified party to enforce or
interpret the agreement, if a court of competent jurisdiction determines that
each of the material assertions made by the indemnified party in such proceeding
was not made in good faith or was frivolous; (ii) with respect to any claim,
issue or matter as to which the indemnified party shall have been adjudged by a
court to be liable to the Company in the performance of his duty to the Company
unless such court determines indemnification for such expenses as determined is
appropriate; (iii) on account of any suit against the indemnified party for
profits arising out of a purchase or sale by the indemnified party of securities
of the Company in violation of the provisions of sec.16(b) of the Securities
Exchange Act of 1934 or any similar successor statute; (IV) any acts or
omissions or transactions from which a
II-1
<PAGE> 82
director may not be relieved of liability under applicable law; and (v) for
expenses or liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) which have been paid directly to such indemnified person by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company.
The indemnification provision in the indemnity agreements entered into
between the Company and its directors and executive officers, may be
sufficiently broad to permit indemnification of the Company's officers and
directors for liabilities arising under the Securities Act.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with the issuance and distribution of the securities being offered hereby. Items
marked with an asterisk (*) represent estimated expenses. The Company has agreed
to pay all the costs and expenses of this offering.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 8,710
Legal Fees and Expenses..................................... **
Printing.................................................... 8,000*
Accounting Fees and Expenses................................ 29,000*
Miscellaneous............................................... 5,000*
Total............................................. $ **
</TABLE>
- -------------------------
* Estimate
** To be filed by amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Pursuant to Note Purchase Agreements dated October 14, 1997 and October 31,
1997, the Company borrowed $1,000,000.00 from a significant shareholder. Copies
of the Note Purchase Agreements are filed as Exhibits 10.1 and 10.2 to the
Company's 8-K filed on June 16, 1998. The issuance of the Notes was exempt from
the registration requirements of the Securities Act of 1993, as amended,
pursuant to Section 4(2) thereof.
In April 1998, the Company agreed to sell up to 126,000 shares of Series A
Convertible Preferred Stock of the Company (the "Convertible Preferred Stock"),
at a price of $8.03 per share, to Astoria, at its option, at such price per
share at any time prior to October 1, 1998. Each share of Convertible Preferred
Stock would convert into 10 shares of common stock. Between April 1 and October
1, 1998, Astoria purchased a total of 124,564 shares of Convertible preferred
stock from the Company. The proceeds were used to fund the Company's operations.
In connection with the sale of Series A Preferred Stock, the Company filed a
Form D pursuant to the rules promulgated in the Securities Act of 1993, as
amended. On December 31, 1998, the Company repurchased the 124,564 shares of
Convertible Preferred Stock from Astoria for an aggregate purchase price of $100
(or $.0008 per share). In connection with the purchase of the Series A Preferred
Stock, the Company filed a Form S-8 pursuant to the rules promulgated in the
Securities Act of 1993, as amended.
On March 19, 1999, the Board of Directors of the Company authorized the
issuance of 300,000 shares of Series A Convertible Preferred stock (the
"Preferred Shares") and 7,600,000 shares of Common stock (the "Common Shares")
(collectively, the Preferred Shares and the Common Shares shall be referred to
as the "Shares"). On March 31, 1999 the Company entered into stock purchase
agreements with Astoria, Gwyneth Gibbs, president of the Company and certain
II-2
<PAGE> 83
members of the Board of Directors or their affiliates. Under the terms of the
Stock Purchase Agreement with Astoria, the Company agreed to issue and Astoria
agree to purchase 300,000 Preferred Shares at a purchase price of $1.6667 per
share for an aggregate purchase price of $500,000 and 2,543,344 Common Shares at
a purchase price of $0.25 per share, for an aggregate purchase price of $635,836
(collectively, the "Astoria Shares"). The Astoria Shares were issued and sold to
Astoria in consideration of the cancellation of the indebtedness of the Company
to Astoria. The Company also entered into a Common Stock Purchase Agreement with
Astoria whereby Astoria purchased 1,000,000 Common Shares at a price of $0.25
per share for an aggregate purchase price of $250,000. The Common Stock Purchase
Agreement and Stock Purchase Agreement grant certain registration rights and
rights of first refusal to Astoria. Pursuant to the terms of the stock purchase
agreements entered into with certain members of the Board of Directors,
including Ms. Gibbs (the "Board of Directors Agreements"), the Company agreed to
issue, in the aggregate 4,000,000 Common Shares at a price of $0.25 per share,
for aggregate purchase price of $1,000,000. The Board of Directors Agreements do
not grant any registration rights or rights of first refusal to the parties. The
proceeds from the sale of the Common Shares to the Board of Directors was used
to satisfy the debt owed, in its entirety, to the Omnis Class 2 Creditors (the
"Creditors") pursuant to the Work Out Agreement entered into between the Company
and the Creditors. The proceeds from the sale of the Shares to Astoria will be
used for working capital purposes. The issuance of the Shares was exempt from
the registration requirements of the Securities Act of 1993, as amended,
pursuant to Section 4(2) thereof.
During fiscal years 1999 and 1998, 10,658 shares of the Company's common
stock were issued to employees of the Company under the Company's 1994 Employee
Stock Purchase Plan at a weighted average price of $0.28 per share and 13,691
shares were issued at a weighted average price of $4.50 per share, respectively.
In connection with the purchase of the Common Stock, the Company filed a Form
S-8 pursuant to the rules promulgated in the Securities Act of 1993, as amended.
ITEM 27. EXHIBITS.
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation, as amended and
corrected through February 9, 1999.(7)
3.2 Certificate of Amendment of Certificate of Incorporation
dated February 9, 1999.(16)
3.3 Certificate of Designations dated March 31, 1998, as
corrected.(7)
3.4 Certificate Regarding Series A Preferred Stock of the Omnis
Technology Corporation dated February 25, 1999.(16)
3.5 Certificate of Designations dated March 31, 1999.(14)
3.6 Bylaws, as amended.(15)
5.1 Legal Opinion of Landels, Ripley & Diamond, LLP
10.1 Definitive Trust Deed dated October 26, 1983 among Blyth
Holdings Limited, Blyth Software Limited and Geoffrey Paul
Smith, Paul Nelson Wright and Suntrust Limited (relating to
pension scheme).(1)
10.2 Service Agreement dated July 30, 1990 between OMNIS
Technology Corporation and David Seaman.(2)
10.3 Deed of Guarantee dated June 1, 1993 between OMNIS
Technology Corporation and A. Levy & Son Limited.(3)
10.4 Form of Subscription Agreement for purchase of Units of the
Company's securities.(3)
</TABLE>
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<PAGE> 84
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.5 Form of Stock Purchase Warrant sold to purchaser of Units of
the Company's securities.(3)
10.6 Common Stock Purchase Agreement dated March 31, 1993 between
OMNIS Technology Corporation and General Reinsurance
Corp.(4)
10.7 Form of Indemnification Agreement entered into between the
Company and all of its directors and certain of its
officers.(4)
10.8 OMNIS Technology Corporation Amended and Restated 1987 Stock
Option Plan, as amended.(4)
10.9 OMNIS Technology Corporation 1993 Directors' Warrant Plan
and form of Director's Warrant.(9)
10.10 OMNIS Technology Corporation 1994 Employee Stock Purchase
Plan, as amended.(10)
10.11 Registration Rights Agreement effective as of January 3,
1994, between the Company and Migration Software Systems
Limited.(4)
10.12 Warrant to Purchase Shares of Common Stock dated January 3,
1994 granted to Migration Software Systems Limited.(4)
10.13 Warrant to Purchase Common Stock issued to Swartz
Investments, Inc.(5)
10.14 Form of Registration Rights Agreement among the Company,
Purchasers of 8% Convertible Debentures due March 31, 1997
and Swartz Investments, Inc.(5)
10.15 Form of Warrant to Purchase Common Stock issued to certain
persons affiliated with Swartz Investments, LLC.(6)
10.16 Form of Registration Rights Agreement among the Company and
Swartz Investments, LLC and its designees.(6)
10.17 Note Purchase Agreement dated as of October 14, 1997.(7)
10.18 Note Purchase Agreement dated as of October 31, 1997.(7)
10.19 Series A Convertible Preferred Stock Purchase Agreement
dated as of April 1, 1998.(7)
10.20 Employee Agreement between the Company and Kevin Doyle dated
April 1, 1998.(7)
10.21 Employee Agreement between the Company and Larry Barcot
dated April 1, 1998.(7)
10.22 Shareholder Rights Agreement dated April 1, 1998.(7)
10.23 The 1996 Stock Plan and form of Option Agreement.(8)
10.23 The 1993 Advisors' Warrant Plan and form of warrant.(9)
10.24 Omnis Technology Corporation 1999 Stock Option Plan and form
of Stock Option Agreement.(16)
10.25 Series A Convertible Preferred Stock Purchase Agreement
dated December 31, 1998.(13)
10.26 Stock Purchase Agreement with Astoria Capital Partners, L.P.
("Astoria") dated March 31, 1999.(14)
10.27 Common Stock Purchase Agreement with Astoria dated March 31,
1999.(14)
10.28 Common Stock Purchase Agreement with Gwyneth Gibbs dated
March 31, 1999.(14)
10.29 Common Stock Purchase Agreement with Philip and Debra
Barrett Charitable Remainder Trust dated March 31, 1999.(14)
10.30 Common Stock Purchase Agreement with RCJ Capital Partners
dated March 31, 1999.(14)
10.31 Common Stock Purchase Agreement with Rockport Group, L.P.
dated March 31, 1999.(14)
16.1 Letter dated November 11, 1998 from Deloitte & Touche LLP to
the Securities and Exchange Commission.(12)
21.1 Subsidiaries of the Company.(2)
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Grant Thornton LLP.
</TABLE>
II-4
<PAGE> 85
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
23.3 Consent of Landels, Ripley & Diamond LLP (contained in such
firms opinions filed as Exhibit 5.1 hereto)
27.1 Financial data schedule.(16)(17)
</TABLE>
- -------------------------
(1) Incorporated by reference to the Annual Report on Form 10-K filed by the
Company with the Commission on July 13, 1990.
(2) Incorporated by reference to the Annual Report on Form 10-K filed by the
Company with the Commission on June 28, 1991.
(3) Incorporated by reference to the Annual Report on Form 10-K filed by the
Company with the Commission on June 26, 1992.
(4) Incorporated by reference to the Annual Report filed by the Company with
the Commission on June 28, 1994.
(5) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on April 7, 1995.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996.
(7) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on June 16, 1998.
(8) Incorporated herein by reference to the Registrant's Annual Report on Form
10-K, as amended, for the fiscal year ended March 31, 1997, filed by the
Registrant with the Commission on July 29, 1997.
(9) Incorporated herein by reference to the Registrant's Registration Statement
on Form S-8 (Registration Number 33-81008) filed June 30, 1994.
(10) Incorporated herein by reference to the Registrant's Registration Statement
on Form S-8 (Registration Number 333-38449) filed October 22, 1997.
(11) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on March 19, 1998.
(12) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on November 12, 1998.
(13) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on January 15, 1999.
(14) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on April 5, 1999.
(15) Incorporated herein by reference to the Annual Report on Form 10-KSB, as
amended, for the fiscal year ended March 31, 1998, filed by the Company
with the Commission on June 29, 1998.
(16) Incorporated herein by reference to the Annual Report on Form 10-KSB, as
amended, for the fiscal year ended March 31, 1999, filed by the Company
with the Commission on July 29, 1999.
(17) Incorporated herein by reference to the Quarterly Report on Form 10-QSB for
the quarter ended June 30, 1999, filed by the Company with the Commission
on August 16, 1999.
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<PAGE> 86
ITEM 28. UNDERTAKINGS.
(a) The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be treated as a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To file a post-effective amendment to remove from registration any of
the securities being registered which remain unsold at the termination of the
offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
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<PAGE> 87
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Gwyneth
Gibbs, his true and lawful attorneys-in-fact and agents, with full power of
substitution and re-substitution for him and in his name, place, and stead in
any and all capacities to sign any and all pre- or post-effective amendments to
this Registration Statement, and to file the same with all exhibits thereto, and
all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agent and each of them full
power and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form SB-2 and authorizes this
registration statement to be signed on its behalf by the undersigned, in the
city of San Francisco, State of California, on September 16, 1999.
OMNIS TECHNOLOGY CORPORATION
By: /s/ GWYNETH M. GIBBS
------------------------------------
Gwyneth M. Gibbs
President and Interim Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1933, as
amended, this registration statement has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ GWYNETH M. GIBBS President and Interim September 16, 1999
- ----------------------------------------------------- Chief Executive Officer
Gwyneth M. Gibbs
/s/ PHILIP D. BARRETT Chairman September 16, 1999
- -----------------------------------------------------
Philip D. Barrett
/s/ GEOFFREY P. WAGNER Director September 16, 1999
- -----------------------------------------------------
Geoffrey P. Wagner
/s/ GERALD F. CHEW Director September 16, 1999
- -----------------------------------------------------
Gerald F. Chew
/s/ DOUGLAS MARSHALL Director September 16, 1999
- -----------------------------------------------------
Douglas Marshall
</TABLE>
II-7
<PAGE> 88
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation, as amended and
corrected through February 9, 1999.(7)
3.2 Certificate of Amendment of Certificate of Incorporation
dated February 9, 1999.(16)
3.3 Certificate of Designations dated March 31, 1998, as
corrected.(7)
3.4 Certificate Regarding Series A Preferred Stock of the Omnis
Technology Corporation dated February 25, 1999.(16)
3.5 Certificate of Designations dated March 31, 1999.(14)
3.6 Bylaws, as amended.(15)
5.1 Legal Opinion of Landels, Ripley & Diamond, LLP
10.1 Definitive Trust Deed dated October 26, 1983 among Blyth
Holdings Limited, Blyth Software Limited and Geoffrey Paul
Smith, Paul Nelson Wright and Suntrust Limited (relating to
pension scheme).(1)
10.2 Service Agreement dated July 30, 1990 between OMNIS
Technology Corporation and David Seaman.(2)
10.3 Deed of Guarantee dated June 1, 1993 between OMNIS
Technology Corporation and A. Levy & Son Limited.(3)
10.4 Form of Subscription Agreement for purchase of Units of the
Company's securities.(3)
10.5 Form of Stock Purchase Warrant sold to purchaser of Units of
the Company's securities.(3)
10.6 Common Stock Purchase Agreement dated March 31, 1993 between
OMNIS Technology Corporation and General Reinsurance
Corp.(4)
10.7 Form of Indemnification Agreement entered into between the
Company and all of its directors and certain of its
officers.(4)
10.8 OMNIS Technology Corporation Amended and Restated 1987 Stock
Option Plan, as amended.(4)
10.9 OMNIS Technology Corporation 1993 Directors' Warrant Plan
and form of Director's Warrant.(9)
10.10 OMNIS Technology Corporation 1994 Employee Stock Purchase
Plan, as amended.(10)
10.11 Registration Rights Agreement effective as of January 3,
1994, between the Company and Migration Software Systems
Limited.(4)
10.12 Warrant to Purchase Shares of Common Stock dated January 3,
1994 granted to Migration Software Systems Limited.(4)
10.13 Warrant to Purchase Common Stock issued to Swartz
Investments, Inc.(5)
10.14 Form of Registration Rights Agreement among the Company,
Purchasers of 8% Convertible Debentures due March 31, 1997
and Swartz Investments, Inc.(5)
10.15 Form of Warrant to Purchase Common Stock issued to certain
persons affiliated with Swartz Investments, LLC.(6)
10.16 Form of Registration Rights Agreement among the Company and
Swartz Investments, LLC and its designees.(6)
10.17 Note Purchase Agreement dated as of October 14, 1997.(7)
10.18 Note Purchase Agreement dated as of October 31, 1997.(7)
10.19 Series A Convertible Preferred Stock Purchase Agreement
dated as of April 1, 1998.(7)
10.20 Employee Agreement between the Company and Kevin Doyle dated
April 1, 1998.(7)
10.21 Employee Agreement between the Company and Larry Barcot
dated April 1, 1998.(7)
10.22 Shareholder Rights Agreement dated April 1, 1998.(7)
10.23 The 1996 Stock Plan and form of Option Agreement.(8)
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.23 The 1993 Advisors' Warrant Plan and form of warrant.(9)
10.24 Omnis Technology Corporation 1999 Stock Option Plan and form
of Stock Option Agreement.(16)
10.25 Series A Convertible Preferred Stock Purchase Agreement
dated December 31, 1998.(13)
10.26 Stock Purchase Agreement with Astoria Capital Partners, L.P.
("Astoria") dated March 31, 1999.(14)
10.27 Common Stock Purchase Agreement with Astoria dated March 31,
1999.(14)
10.28 Common Stock Purchase Agreement with Gwyneth Gibbs dated
March 31, 1999.(14)
10.29 Common Stock Purchase Agreement with Philip and Debra
Barrett Charitable Remainder Trust dated March 31, 1999.(14)
10.30 Common Stock Purchase Agreement with RCJ Capital Partners
dated March 31, 1999.(14)
10.31 Common Stock Purchase Agreement with Rockport Group, L.P.
dated March 31, 1999.(14)
16.1 Letter dated November 11, 1998 from Deloitte & Touche LLP to
the Securities and Exchange Commission.(12)
21.1 Subsidiaries of the Company.(2)
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Grant Thornton LLP.
23.3 Consent of Landels, Ripley & Diamond LLP (contained in such
firms opinions filed as Exhibit 5.1 hereto)
27.1 Financial data schedule.(16)(17)
</TABLE>
- -------------------------
(1) Incorporated by reference to the Annual Report on Form 10-K filed by the
Company with the Commission on July 13, 1990.
(2) Incorporated by reference to the Annual Report on Form 10-K filed by the
Company with the Commission on June 28, 1991.
(3) Incorporated by reference to the Annual Report on Form 10-K filed by the
Company with the Commission on June 26, 1992.
(4) Incorporated by reference to the Annual Report filed by the Company with
the Commission on June 28, 1994.
(5) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on April 7, 1995.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996.
(7) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on June 16, 1998.
(8) Incorporated herein by reference to the Registrant's Annual Report on Form
10-K, as amended, for the fiscal year ended March 31, 1997, filed by the
Registrant with the Commission on July 29, 1997.
(9) Incorporated herein by reference to the Registrant's Registration Statement
on Form S-8 (Registration Number 33-81008) filed June 30, 1994.
<PAGE> 90
(10) Incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 (Registration Number 333-38449) filed October 22,
1997.
(11) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on March 19, 1998.
(12) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on November 12, 1998.
(13) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on January 15, 1999.
(14) Incorporated by reference to the Current Report on Form 8-K filed by the
Company with the Commission on April 5, 1999.
(15) Incorporated herein by reference to the Annual Report on Form 10-KSB, as
amended, for the fiscal year ended March 31, 1998, filed by the Company
with the Commission on June 29, 1998.
(16) Incorporated herein by reference to the Annual Report on Form 10-KSB, as
amended, for the fiscal year ended March 31, 1999, filed by the Company
with the Commission on July 29, 1999.
(17) Incorporated herein by reference to the Quarterly Report on Form 10-QSB
for the quarter ended June 30, 1999, filed by the Company with the
Commission on August 16, 1999.
<PAGE> 1
Exhibit 5.1
September 14, 1999
Omnis Technology Corporation
981 Industrial Blvd., Bldg. B
San Carlos, California 94070-4117
Re: Registration Statement on Form SB-2; Omnis Technology Corporation.
(the "Company")
Gentlemen:
This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission with respect to the public offering by the
Company of 500,100 shares of Common Stock, $0.10 par value ("Common Stock") and
3,544,344 shares of Common Stock (the "Selling Security Holder Shares") being
registered by the Company on behalf of the selling security holder listed in the
Registration Statement (the "Selling Security Holder").
In connection therewith, we have examined and relied upon original,
certified, conformed, photostat or other copies of (i) the Articles of
Incorporation, as amended, and Bylaws of the Company; (ii) resolutions of the
Board of Directors of the Company authorizing the offering and the issuance of
the Common Stock and the Selling Security Holder Shares and related matters;
(iii) the Registration Statement and the exhibits thereto; and (iv) such other
documents and instruments as we have deemed necessary for the expression of the
opinion herein contained. In all such examinations, we have assumed the
authenticity of original documents, the genuineness of all signatures on
original documents, and the conformity to originals or certified documents of
all copies submitted to us as conformed, photostat or other copies. In passing
upon certain corporate records and documents of the Company, we have necessarily
assumed the correctness and completeness of the statements made or included
therein by the Company, and we express no opinion thereon. We have also
conducted various meetings, discussions and conversations with the officers,
directors and employees of the Company regarding the offer and sale of the
Common Stock and the Selling Security Holder Shares. Nothing has come to our
attention in the representation of the Company or the Selling Security Holder
that would make it unreasonable to assume that the foregoing documents will be
utilized in the manner intended as set forth in those documents. However, we
have not independently verified any of the facts or representation contained in
such documents.
As to the various questions of fact material to this opinion, we have
relied, to the extent we deemed reasonably appropriate, upon representations or
certificates of officers or directors of the Company and upon documents, records
and instruments furnished to us by the Company, without independently checking
or verifying the accuracy of such documents, records and instruments.
<PAGE> 2
In rendering this Opinion, we have assumed that: (i) each other party
that has executed or will execute a document, instrument or agreement to which
the Company or Selling Security Holder is a party duly and validly executed and
delivered each document, instrument or agreement to which such party is a
signatory and that such party's obligations set forth therein are its legal,
valid and binding obligations, enforceable in accordance with their respective
terms; (ii) each person executing any document, instrument or agreement on
behalf of any such party is duly authorized to do so; and (iii) each natural
person executing any instrument, document or agreement referred to herein is
legally competent to do so.
We are members of the Bar of the State of California and do not purport
to be conversant with the laws of jurisdictions other than California and the
United States of America. Accordingly, we do not express any opinion as to the
effect on the transactions described herein of the laws of any state or
jurisdiction other than the federal laws of the United States of America and the
laws of the State of California.
Based upon the foregoing, we are of the opinion that the Common Stock
and the Selling Security Holder Shares, when sold, will be legally issued, fully
paid and non-assessable.
The opinions expressed herein have been carefully considered and reflect
what we regard as the likely manner in which the Common Stock and the Selling
Security Holder Shares will be issued based upon the statutory provisions,
regulations promulgated thereunder, and interpretations thereof by the
Securities and Exchange Commission ("SEC") and the courts having jurisdiction
over such matters as of the date of this opinion. However, a numbers of
questions raised by the matters on which we have not expressed an opinion herein
have not been definitely answered by statute, regulations, SEC interpretations
or court decisions. We assume no obligation to revise or supplement this opinion
letter should applicable law be changed by legislative, judicial or
administrative action or otherwise.
Except as set forth herein, we have made no independent attempts to
verify the facts or representations or assumptions made herein except to the
extent we deem reasonable under ABA Formal Opinion 335 and in connection with
our position as counsel to the issuer. Reference to "us" or "our" is limited to
a reference to the lawyer who signs this opinion letter or any lawyer of this
firm who has been active in preparing the relevant documents. Any inaccuracy in
any fact or representation by the Company or the Selling Security Holder, or any
amendment to any documents or any material cited herein, or any changes in the
affairs of the Company or Selling Security Holder after the date of this opinion
letter may effect all or part of this opinion letter.
Except as expressly set forth below, this opinion may not be filed with
or furnished to any other person or any governmental agency, and may not be
quoted in whole or in part or otherwise referred to in any context, without, in
each instance, our prior written consent, and without in each instance, the
exercise of due diligence on the part of the Company and the Selling Security
Holders to verify that there are no material errors or omissions of fact and no
changes in the facts or in the text of material provided to us.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to use our name under the caption "Experts and Legal
Counsel" in the prospectus comprising part of the Registration Statement.
Very truly yours,
LANDELS, RIPLEY & DIAMOND, LLP
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use of this Registration Statement on Form SB-2 of OMNIS
Technology Corporation and subsidiaries of our report dated June 1, 1999
appearing in the Prospectus, which is part of this Registration Statement. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
GRANT THORNTON LLP
San Francisco, California
SEPTEMBER 15, 1999
3
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form SB-2 of Omnis
Technology Corporation and subsidiaries of our report dated May 22, 1998 (which
expresses an unqualified opinion and includes an explanatory paragraph
concerning certain factors which raise substantial doubt about the Company's
ability to continue as a going concern) appearing in the Prospectus, which is
part of this Registration Statement. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
San Jose, California
September 15, 1999
