As filed with the Securities and Exchange Commission on July 3, 1996
Registration No. 33-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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OMNI MULTIMEDIA GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2729490
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
PAUL F. JOHNSON, PRESIDENT
OMNI MultiMedia Group, Inc.
50 Howe Avenue
Millbury, Massachusetts 01527-3298
(508) 865-4451
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive office and name, address and telephone
number of agent for service)
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Copies to:
NEIL H. ARONSON, Esquire
ANN CATHERINE BONIS, Esquire
O'Connor, Broude & Aronson
950 Winter Street, Suite 2300
Waltham, Massachusetts 02154
(617) 890-6600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
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, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Proposed
Title of Each Class Proposed Maximum Maximum Amount of
of Securities to Be Amount to Be Offering Price Aggregate Registration
Registered Registered(1) per Share(2) Offering Price(2) Fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value, underlying 1,050
shares of Series A
Convertible Preferred
Stock, $.01 par value 2,500,000 $7.00 $17,500,000.00 $ 6,034.48
Common Stock, $.01 par
value, underlying Placement
Agent's Warrants
108,808 $9.65 $1,049,997.20 $ 362.07
Common Stock,$.01 par
value, underlying Common
Stock Purchase Warrants
48,000 $5.35 $256,800.00 $ 88.55
- --------------------------------------------------------------------------------------------------------------------
Total Registration Fee $ 6,485.10
- --------------------------------------------------------------------------------------------------------------------
(1) Pursuant to Rule 416 there are also registered hereunder such additional indeterminate number of shares of
Common Stock that may become issuable pursuant to antidilution adjustments, stock splits, stock dividends
and similar adjustments.
(2) Estimated in accordance with Rule 457 solely for the purposes of calculating the registration fee and based
upon the closing price on the American Stock Exchange ("AMEX") of the registrant's Common Stock on June 28,
1996 of $7.00 per share.
</TABLE>
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 OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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OMNI MULTIMEDIA GROUP, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 501(B)
<TABLE>
<CAPTION>
Item Number Location in
and Caption Prospectus
----------- ----------
<S> <C> <C>
1. Forepart of the Registration Statement and Forepart of the Registration
Outside Front Cover Page and Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front Cover Page;
of Prospectus Outside Back Cover Pages
3. Summary Information; Risk Factors and Ratio Prospectus Summary; Risk
of Earnings to Fixed Factors - Not applicable
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not applicable
6. Dilution Not applicable
7. Selling Security Holders Selling Security Holders
8. Plan of Distribution Plan of Distribution
9. Description of Securities to Be Registered Not Applicable
10. Interests of Named Experts and Counsel Legal Matters
11. Material Changes Recent Developments
12. Incorporation of Certain Information Available Information;
by Reference Incorporation by Reference
13. Disclosure of Commission Position on Not applicable
Indemnification for Securities Act
Liabilities
</TABLE>
i
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 be 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.
ii
Subject to Completion: Dated July 3, 1996
PROSPECTUS
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OMNI MULTIMEDIA GROUP, INC.
2,656,808 SHARES OF COMMON STOCK
This Prospectus relates to 2,656,808 shares (the "Shares") of Common
Stock, $.01 par value (the "Common Stock"), of OMNI MultiMedia Group, Inc., a
Delaware corporation ("OMNI" or the "Company"), for reoffer or resale from time
to time by the Selling Security Holders (the "Selling Security Holders"). Of the
Shares being registered hereunder, 2,500,000 are being registered pursuant to
the terms of certain demand registration rights agreements between the Company
and certain Selling Security Holders who were investors in the Company's 1996
Private Placement (the "Private Placement") of its Series A Convertible
Preferred Stock, $.01 par value (the "Series A Preferred Shares"). Such shares
are reserved for possible issuance upon conversion of the Series A Preferred
Shares into Common Stock. An additional 108,808 shares of Common Stock are being
registered pursuant to the terms of a warrant issued to Dunwoody Securities,
LLC, the placement agent in the Private Placement, to purchase these shares at
an exercise price of $9.65 per share (the "Placement Agent's Warrant"). The
remaining 48,000 shares are issuable upon exercise by certain Selling Security
Holders who were granted stock options in April 1995 to purchase Common Stock at
an exercise price of $5.35 per share (the "Advisor Options"). See "Selling
Security Holders."
This offering is not being underwritten. The Shares may be sold by the
Selling Security Holders and/or their registered representatives from time to
time at prices to be determined at the time of such sales. No minimum is
required to purchase and no arrangement exists to have funds received by such
Selling Security Holders and/or their registered representatives to be placed in
an escrow, trust or similar account or arrangement, unless the proceeds come
from a purchaser residing in a state in which the sale of the Shares has not yet
been qualified. See "Plan of Distribution."
The sale of the Shares being offered hereby, when made, will be made
through customary brokerage channels either through broker-dealers acting as
agents or brokers for the Selling Security Holders or through broker-dealers
acting as principals who may then resell the Shares on the AMEX or otherwise, or
by private sales on the AMEX or otherwise, at negotiated prices related to the
prevailing market prices at the time of the sales or by a combination of such
methods of offering. Thus, the period of distribution of such Shares will be
over an extended period of time. The Selling Security Holders may effect these
transactions by selling Shares to or through broker-dealers or by pledges of the
Shares to broker-dealers who may, from time to time, themselves effect
distributions of the Shares or interests therein in their capacity as
broker-dealers. See "Plan of Distribution."
The Selling Security Holders and any broker-dealer who acts in
connection with the sale of Shares hereunder may be deemed to be "underwriters"
as that term is defined in the Securities Act of 1933, as amended (the
"Securities Act"), and any commission received by them and profit on any
resale of the Shares as principal might be deemed to be underwriting discounts
and commissions under the Securities Act. The Selling Security Holders will pay
or assume brokerage commissions or discounts incurred in connection with the
sale of their Shares, which commissions or discounts will not be paid or assumed
by the Company.
The Company's Common Stock is traded on the AMEX under the symbol
"OMG". The Shares may be offered for sale on the AMEX or in privately negotiated
transactions. On June 28, 1996, the closing price of the Company's Common Stock
on the AMEX was $7.00 per share.
The Company will receive no part of the proceeds of any sale of Shares
by the Selling Security Holders. The Company will receive the exercise price
upon the exercise of the Advisor Options and the Placement Agent's Warrant
resulting in the acquisition of a certain amount of the Shares by certain of the
Selling Security Holders. The Company is paying all of the expenses of
registering 2,656,808 of the Shares, estimated to be $57,000 for filing,
exchange listing, legal, accounting and miscellaneous fees and expenses, and has
agreed to indemnify certain of the Selling Security Holders in certain
circumstances against certain liabilities, including liabilities under the
Securities Act. The Company will not pay any discounts, concessions or
commissions payable to underwriters, dealers or agents incident to the offering
of the Shares.
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THESE SECURITIES INVOLVE CERTAIN RISKS TO THE INVESTORS. SEE "RISK FACTORS"
CONTAINED ELSEWHERE IN THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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THE DATE OF THIS PROSPECTUS IS JULY , 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copies thereof may be
obtained, at prescribed rates, at the public reference facilities maintained by
the Commission at the Public Reference Section, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located
at 7 World Trade Center, 13th Floor, New York, New York 10048; 5670 Wilshire
Boulevard, 14th Floor, Los Angeles, California 90036-3648; and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained at prescribed rates by writing to the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company's Common Stock is listed for trading on the AMEX. Reports and
other information concerning the Company can be inspected at the offices of the
AMEX located at 86 Trinity Place, New York, New York 10006-1881.
The Company has filed a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Act"), covering the Shares included in
this Prospectus. This Prospectus does not contain all the information set forth
in or annexed to exhibits to the Registration Statement filed by the Company
with the Commission and reference is made to such Registration Statement and the
exhibits thereto for the complete text thereof. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement, including the exhibits filed as part thereof, copies
of which may be obtained at prescribed rates upon request to the Commission in
Washington, D.C. Although statements contained herein concerning the provisions
of any documents are true and correct in all material respects, any such
statements are not necessarily complete, and, in each instance, such statements
are qualified in their entirety by reference to such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE SELLING SECURITY HOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER BY THE SELLING SECURITY HOLDERS TO SELL ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL FOR THE SELLING SECURITY HOLDERS TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been previously filed by the Company
with the Commission under the Act and the Exchange Act, are incorporated by
reference in this Prospectus:
(1) Annual Report on Form 10-KSB for the fiscal year ended March 30, 1996;
(2) Description of the Company's Common Stock in the Company's Form 8-A
Registration Statement, dated April 11, 1995, as amended.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering described herein shall be deemed to be
incorporated by reference into this Prospectus from the respective dates those
documents are filed.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Prospectus to the extent
that a statement contained herein or in any subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement or this Prospectus.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents which have been incorporated herein by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents.) Requests should be
directed to Robert E. Lee, Executive Vice President, OMNI MultiMedia Group,
Inc., 50 Howe Avenue, Millbury, Massachusetts 01527-3298, telephone: (508)
865-4451.
3
RISK FACTORS
INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK. THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED BY SUCH FORWARD-LOOKING STATEMENTS AS A RESULT
OF CERTAIN FACTORS DISCUSSED IN THIS PROSPECTUS, INCLUDING THE RISK FACTORS SET
FORTH BELOW. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION
PRESENTED BELOW PRIOR TO MAKING ANY PURCHASE OF THE SHARES.
NO ASSURANCE OF FUTURE PROFITABILITY; ANTICIPATED LOSSES
The Company had limited net earnings after taxes of $132,057 for the year
ended April 1, 1995 and $324,200 for the year ended March 30, 1996. The Company
expects to incur significant costs in marketing its 4CD's catalog and its
anticipated expansion of its software and CD-ROM manufacturing operations. The
Company expects to incur significant losses during the start-up phase of at
least $1,800,000 during the fiscal quarter ended June 30, 1996 in connection
with the start -up of its new CD-ROM manufacturing operations and no assurance
can be given that the Company will continue to operate profitably in the future.
RISKS ASSOCIATED WITH NEW CD-ROM DUPLICATION SERVICES
The Company intends to use a significant portion of funding from the net
proceeds from the recent exercise of the public warrants for the purchase and
lease of capital equipment, including equipment that will enable the Company to
duplicate CD-ROMs at its facility. Management estimates that the cost to
purchase and install the first line of CD-ROM equipment, including related
leasehold improvements, is approximately $8,000,000. The Company anticipates
that existing bank and equipment lease financing, together with a portion of the
proceeds from the warrant redemption, will be available to fund additional
proposed expansion costs associated with additional production lines, although
no assurance can be given that such financing will be available or that, if
available, will be on terms favorable to the Company. If such funds are not
adequate, the Company may use a portion of the proceeds from the Private
Placement to augment its capital expenditure requirements. In addition, the
Company anticipates expanding its CD-ROM operations and could also use a portion
of the proceeds from the Private Placement for such purposes.
No assurance can be given that the Company can successfully manufacture and
market its CD-ROM duplication services or that if the Company is successful that
the Company will generate revenues or be profitable from its CD-ROM duplication
services. The Company's success in providing CD-ROM duplication services will
depend, in part, on its ability to obtain the necessary equipment, develop
customers to use the CD-ROM duplication services, train qualified personnel and
to provide such service at a competitive price. If the Company is not able to
provide competitive
4
CD-ROM duplication services, its results of operations and financial condition
could be materially and adversely affected.
UNCERTAIN ACCEPTANCE OF NEW CD-ROM CATALOG AND LIMITED INTERNET MARKETING
EXPERIENCE
To date, the Company has had only very limited experience in direct
Internet marketing, has provided only a limited number of 4CD's catalogs on a
trial basis, and no assurance can be given that the Company's catalog will be
accepted in the CD-ROM marketplace. The Company's success will depend, in part,
on its ability to distribute CD-ROM titles at a competitive price, to develop
active customers, to stimulate additional purchases from existing customers, to
provide efficient telemarketing, customer service and shipping operations, and
to obtain favorable pricing terms from CD-ROM developers and distributors. Lack
of consumer acceptance of the Company's 4CD's Internet catalog, lack of consumer
interest generally in purchasing products over the Internet, problems in the
effective marketing of this service, the purchasing of CD-ROM products, or
receipt and shipping of customer orders, could have a material adverse effect on
the Company's results of operations and financial condition.
UNCERTAIN ABILITY TO MANAGE ANTICIPATED GROWTH AND EXPANSION
The Company plans to issue the 4CD's catalog over the Internet, to expand
its telemarketing organization and to expand its software duplication services
to include replication of CD-ROM titles, resulting in a significant increase in
the electronic catalog, publication, and duplication services offered by the
Company. As a result, the Company's anticipated growth, of which no assurance
can be given, will place increasing pressure on management.
This anticipated growth is also dependent on a number of factors, including
the Company's ability to hire, train and assimilate qualified personnel, the
adequacy of its financial resources, its ability to identify new markets in
which it can successfully compete and its ability to adapt its publishing,
telemarketing and software and CD-ROM duplication resources to accommodate
expanded operations. If the Company is not able to manage its anticipated growth
effectively, the quality of its services, its ability to recruit and retain key
personnel, and its results of operations could be materially and adversely
affected.
DEPENDENCE ON THE CD-ROM AND MULTIMEDIA PRODUCTS MARKET
The products to be featured in 4CD's are expected to be sold to users of
CD-ROM titles and multimedia products. Any decline in the sales of or decrease
in demand for CD-ROM titles and multimedia products could have a material
adverse effect on the Company's operations and financial condition.
5
SIGNIFICANT COMPETITION
The barriers to entry in the software duplication industry are currently
relatively low, so that competitors with or without significant economic
resources could enter the software duplication industry. The Company also
competes with regional CD-ROM manufacturers. Certain of these competitors, such
as KAO Information Systems, Inc. and Disk Manufacturing, Inc., have financial
and other resources greater than those of the Company. In addition, other large
companies, such as Time-Warner and Sony, are also involved in the manufacture of
CD-ROMs and could compete directly with the Company.
The software and CD-ROM marketplaces are highly competitive. The Company
expects to compete with consumer electronic and computer retail stores,
including superstores, and other direct marketers of software, CD-ROM and
computer related products. Certain hardware and software vendors are selling
their products directly through their own catalogs. Certain competitors of the
Company, including Micro Warehouse, Inc., PC Connection and other companies
which now sell or which may in the future sell CD-ROM products through catalogs,
have financial and other resources significantly greater than those of the
Company. No assurance can be given that the Company can compete effectively
against existing competitors or new competitors that may enter these markets. In
addition, price is an important competitive factor in these markets, and there
can be no assurance that the Company will not be subject to increased price
competition, which could have a material adverse effect on the Company's
operations and financial condition.
DECREASED DEMAND FOR DISKETTE DUPLICATION; CHANGING METHODS OF SOFTWARE AND
CD-ROM DISTRIBUTION
The manner in which software and CD-ROM products are distributed and sold
is changing and new methods of distribution and sale may emerge or expand.
Management believes that software developers are beginning to migrate from use
of floppy diskettes to CD-ROM and other higher-capacity storage media and that
this trend will intensify over the next several years. As a result, managements
believes that the Company must successfully transition its operations to provide
competitive manufacturing capabilities for CD-ROM products. There can be no
assurance that the Company will be successful in transitioning to successfully
market its capabilities as a manufacturer of CD-ROM and other storage media.
In addition, software developers have sold, and may intensify their efforts
to sell, their products directly to end users. From time to time certain
developers have instituted programs for the direct sale of larger order
quantities of software to certain major corporate accounts and these types of
programs may continue to be developed and used by various developers. In
addition, certain major developers have implemented programs for master copy
distribution or site licensing of software. These programs generally grant an
organization the right to make any number of copies of software for distribution
within the organization provided that the organization pays a fee to the
developer for each copy made. Also, developers may attempt to increase the
volume of software products distributed electronically through down-loading or
through CD-ROM unlocking technology to end
6
users' microcomputers. Any of these competitive programs, if successful, could
have a material adverse effect on the Company's operations and financial
condition.
BROAD DISCRETION IN USE OF PROCEEDS; FUTURE CAPITAL NEEDS; POSSIBLE NEED FOR
ADDITIONAL FINANCING; SUBSTANTIALLY ALL ASSETS PLEDGED
Virtually all of the $9,000,000 in anticipated net proceeds from the
Private Placement is allocated toward working capital and general corporate
purposes. Accordingly, management of the Company will have broad discretion in
applying these net proceeds. Further, the Company has reserved the right to
reallocate all net proceeds toward working capital and general corporate
purposes. It is anticipated that the Company will expend significant amounts of
capital to market 4CD's, expand its software duplication services and develop
CD-ROM duplication services. In addition, the Company intends to consider
acquisitions of complementary businesses. If the net proceeds are inadequate for
completion of the Company's anticipated expansion, additional financing may be
necessary for the continued support of the Company's proposed products and
operations. No assurance can be given that the Company will be able to secure
additional financing or that such financing will be available on favorable
terms. If the Company is unable to obtain such additional financing, the
Company's ability to maintain its current level of operations could be
materially and adversely affected and the Company may be required to reduce its
overall expenditures.
The Company has revolving line of credit and term loan facilities with a
financial institution, pursuant to which it has pledged substantially all of its
assets. The cancellation by this or any other lender of the Company's credit
facilities, or any capital lease arrangements, would have a material adverse
effect on the Company's operations and financial condition.
RELIANCE ON SIGNIFICANT CUSTOMERS
During the fiscal year ended March 30, 1996, net sales of software
duplication services to three customers, Prodigy, America OnLine, Inc. and
Microcom, accounted for approximately 45%, 18% and 11%, respectively, of the
Company's net sales. During the fiscal years ended April 1, 1995 and April 2,
1994, net sales of software duplication services to one customer, Prodigy,
accounted for approximately 32% and 35%, respectively, of the Company's net
sales. In December 1994 and March 1995, the Company's manufacturing agreements
with Prodigy and Microcom expired. Since that time, sales to these two customers
have been conducted on a purchase order basis and have increased. Given that the
manufacturing agreements allowed cancellation with little or no penalty, the
Company does not believe that the absence of written agreements significantly
alters its relationship with these two customers. While the Company believes
that its relationships with its significant customers are favorable, the loss of
any of these customers could have a material adverse effect on the Company's
business.
7
POTENTIAL QUARTERLY FLUCTUATIONS AND SEASONALITY OF BUSINESS
The Company may experience variability in its net sales and net income on a
quarterly basis as a result of many factors, including the condition of the
software, CD-ROM and multimedia products industry in general, shifts in demand
for software and hardware products and industry announcements of new products or
upgrades. The Company's planned operating expenditures are based on sales
forecasts. If revenues do not meet expectations in any given quarter, or if
costs of operations are greater than anticipated, operating results may be
materially adversely affected.
Management believes that demand for duplication services for consumer
products can be seasonal, with increases in the fall reflecting increased demand
relative to the new school year and holiday gift purchases. Management believes
that seasonality may intensify as the Company distributes products through its
4CD's subsidiary. Increased seasonality would likely be reflected in a slowdown
in buying in the summer months from consumers, schools and universities. This
seasonality in business could also result in significant quarterly variations in
financial results.
RELIANCE ON CD-ROM DISTRIBUTORS
The Company purchases multimedia products from approximately 15 suppliers.
Approximately 20% of these products are purchased directly from software
manufacturers and the balance from distributors. The Company's largest
distributors are American Software and Hardware Distributors, Merisel, Inc. and
Ingram Micro, Inc. During the fiscal year ended March 30, 1996, purchases of
products from these three distributors constituted approximately 21%, 20% and
7%, respectively, of the Company's finished software product purchases. There
are no supply agreements between the Company and any of these distributors.
While the loss of any one of these suppliers could cause a short-term disruption
in the availability of products purchased from it, the Company believes,
although no assurance can be given, that it would be able to obtain alternative
sources of distribution for such products without materially affecting product
cost. Distributors provide the Company with substantial incentives in the form
of discounts, advertising allowances, rebates and return policies. A reduction
in or discontinuance of such incentives could have a material adverse effect on
the Company's operations and financial condition. In addition, no assurance can
be given that a distributor will not produce and distribute its own multimedia
catalog.
COST OF SHIPPING
Management expects shipping to be a significant expense in the operation of
the Company's business. The Company forwards its products to customers by
overnight delivery and surface services. As is customary in the direct response
industry, the Company generally passes the costs of overnight delivery and
parcel shipments directly to customers as separate shipping and handling
charges. Any increases in shipping rates may have an adverse effect on the
Company's operations and financial condition.
8
DEPENDENCE UPON KEY PERSONNEL; POSSIBLE LACK OF AVAILABILITY OF QUALIFIED
PERSONNEL
The Company is dependent to a large degree on the experience and abilities
of its Chairman and President, Paul F. Johnson; its Executive Vice President and
Chief Financial Officer, Robert E. Lee; and Richard A. Pilotte, its Vice
President of Operations. The loss of the services of any of these individuals
could have a material adverse effect on the Company. The Company has entered
into employment agreements, containing noncompetition restrictions, with each of
Messrs. Johnson, Lee and Pilotte. The Company is the sole beneficiary of
key-person life insurance policies, each in the amount of approximately
$1,000,000, on the lives of Messrs. Johnson, Lee and Pilotte.
The Company's future success and growth strategy will depend in large part
upon its ability to attract and retain highly skilled managerial, technical and
marketing personnel. Competition for such personnel in the Company's industry is
intense. No assurance can be given that the Company will be successful in
attracting or retaining the qualified personnel necessary for its business and
anticipated growth, and the failure to attract or retain such personnel could
have a material adverse effect on the Company's business and results of
operations.
CONTROL BY CURRENT PRINCIPAL STOCKHOLDERS
The Company's current principal stockholders, Paul F. Johnson, Robert E.
Lee, Richard A. Pilotte and Charanjit S. Anand, own approximately 32% of the
outstanding shares of Common Stock of the Company. As the Company's bylaws do
not provide for cumulative voting, these individuals will likely be able to
exert significant influence over all matters requiring approval by the
stockholders of the Company, including the election of directors.
POSSIBLE ACQUISITIONS AND JOINT VENTURES
The Company intends to use a portion of the net proceeds from the Private
Placement to acquire businesses or product lines similar, complementary, or
related to the Company's current business. Although the Company routinely
explores potential acquisitions, none is currently being negotiated and no
portion of the net proceeds has been allocated to specific acquisitions. The
Company's acquisition and expansion plans will subject the Company to all of the
risks incident to the expansion of an emerging business, particularly the
possible adverse impact associated with the integration of new and acquired
businesses into the Company's existing operations and the coordination and
operation of joint ventures. In particular, newly-acquired businesses and joint
ventures frequently encounter unforeseen expenses, difficulties, complications
and delays, and no assurance can be given that the Company will be successful in
meeting its business objectives. In addition, no assurance can be given that the
Company will pursue or consummate any such business opportunities in the future
or that any such business opportunity, if consummated, will prove beneficial to
the Company.
9
POSSIBLE ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK;
PREFERRED STOCK CURRENTLY OUTSTANDING; RESERVATION OF SHARES OF COMMON STOCK
UPON CONVERSION OF PREFERRED STOCK
The Company is authorized to issue up to 14,000,000 shares of Common Stock,
of which 3,889,950 shares of Common Stock are issued and outstanding as of the
date of this Prospectus. The Company's Board of Directors has authority, without
action or vote of the stockholders, to issue all or part of the authorized but
unissued shares. Any such issuance would dilute the percentage ownership
interest of stockholders and may further dilute the book value of the Common
Stock.
In addition, the Company is authorized to issue up to 1,000,000 shares of
Preferred Stock, $ .01 par value per share (the "Preferred Stock"), of which
1,050 shares are designated as Series A Preferred Stock. All of these shares of
Series A Preferred Stock are issued and outstanding as of the date of this
Prospectus. The Preferred Stock may be issued in one or more series, the terms
of which may be determined at the time of issuance by the Board of Directors,
without further action by stockholders, and may include voting rights (including
the right to vote as a series on particular matters), preferences as to
dividends and liquidation, conversion and redemption rights and sinking fund
provisions. The issuance of the Series A Preferred Stock and the issuance of any
additional shares of Preferred Stock could adversely affect the rights of the
holders of Common Stock and, therefore, reduce the value of the Common Stock. In
particular, specific rights granted to holders of Preferred Stock could be used
to restrict the Company's ability to merge with or sell its assets to a third
party, thereby preserving control of the Company by its then owners, and may
adversely affect the voting power of holders of the Common Stock.
The Company has reserved 2,500,000 shares of Common Stock for issuance upon
conversion of the Series A Preferred Stock, which shares are being registered
hereunder. Although management believes that this amount is sufficient to cover
such conversions, in the event that such amount is not sufficient, shareholder
approval will have to be obtained to increase the number of shares of Common
Stock that the Company is authorized to issue. No assurance can be given that
such shareholder approval will be obtained.
POSSIBLE VOLATILITY OF STOCK PRICE; POSSIBLE DELISTING
No assurance can be given that an active trading market in the Company's
securities will be sustained. The Company believes factors such as quarterly
fluctuations in financial results and announcements of new technology in the
software and CD-ROM industries may cause the market price of the Company's
securities to fluctuate, perhaps substantially. These fluctuations, as well as
general stock market and economic conditions, such as recessions or high
interest rates, may adversely affect the market price of the securities.
The Company's Common Stock currently trades on the American Stock Exchange.
In the future, the Company's securities may no longer qualify for listing on
this or any other national
10
exchange. Any delisting of the Company's Common Stock would have a serious and
adverse impact on the trading market and price of the Company's Common Stock.
NO DIVIDENDS ON COMMON STOCK
The Company has not paid cash dividends on its Common Stock since its
inception and does not anticipate paying any cash dividends on its Common Stock
in the foreseeable future. The Company currently intends to reinvest earnings,
if any, in the development and expansion of its business. The Company's
agreement with its primary lender prohibits the payment of cash dividends
without the lender's prior consent.
LIMITATION ON OFFICERS' AND DIRECTORS' LIABILITIES UNDER DELAWARE LAW
Pursuant to the Company's Certificate of Incorporation, as authorized under
applicable Delaware law, directors of the Company are not liable for monetary
damages for breach of fiduciary duty, except in connection with a breach of the
duty of loyalty, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for dividend payments or
stock repurchases illegal under Delaware law or for any transaction in which a
director has derived an improper personal benefit. In addition, the Company's
bylaws provide that the Company must indemnify its officers and directors to the
fullest extent permitted by Delaware law for all expenses incurred in the
settlement of any actions against such persons in connection with their having
served as officers or directors of the Company.
ANTI-TAKEOVER MEASURES; POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER
PROVISIONS
The Company, as a Delaware corporation, is subject to the General
Corporation Law of the State of Delaware, including Section 203 thereof, an
anti-takeover law enacted in 1988. In general, the law restricts the ability of
a publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder. As a
result, potential acquirors may be discouraged from attempting to effect an
acquisition transaction with the Company, thereby possibly depriving holders of
the Company's securities of certain opportunities to sell or otherwise dispose
of such securities at above-market prices pursuant to such transactions. As a
result of the application of Section 203 and certain change in control
provisions contained in the employment contracts of Messrs. Johnson, Lee and
Pilotte, potential acquirors of the Company may find it more difficult or be
discouraged from attempting to effect an acquisition transaction with the
Company, thereby possibly depriving holders of the Company's securities of
certain opportunities to sell or otherwise dispose of such securities at
above-market prices pursuant to such transactions.
FUTURE SALES OF COMMON STOCK
Of the 3,889,950 shares of Common Stock outstanding as of the date of this
Prospectus, 1,613,000 shares of Common Stock have not been registered under the
Securities Act, and are
11
"restricted securities" under Rule 144 of the Securities Act ("Rule 144").
Ordinarily, under Rule 144, a person holding restricted securities for a period
of two years may, every three months, sell in ordinary brokerage transactions or
in transactions directly with a market maker an amount equal to the greater of
one percent of the Company's then outstanding Common Stock or the average weekly
trading volume during the four calendar weeks prior to such sale. Rule 144 also
permits sales by a person who is not an affiliate of the Company and who has
satisfied a three-year holding period without any quantity limitation.
Currently, all of these shares are eligible for immediate resale under Rule 144
subject to the volume trading limitations described above. Future sales under
Rule 144, via a registration statement or otherwise, may have a depressive
effect on the market price of the Common Stock.
SUBSTANTIAL SHARES OF COMMON STOCK RESERVED FOR THE EXERCISE OR GRANT OF OPTIONS
AND WARRANTS; REGISTRATION RIGHTS OF WARRANT HOLDERS
The Company has reserved 338,000 shares of Common Stock for issuance upon
exercise of options granted or available for grant to employees, officers,
directors and consultants, as well as an aggregate of 286,000 shares of Common
Stock for issuance upon exercise of the Representative's Warrant from the IPO,
and the 2,500,000 shares of Common Stock issuable upon conversion of the Series
A Preferred Stock, and the 108,808 shares of Common Stock issuable upon
conversion of the Placement Agent's Warrant.. The existence of the
aforementioned options and warrants may prove to be a hindrance to future
financing by the Company. The holders of such options and warrants may exercise
them at a time when the Company would otherwise be able to obtain additional
equity capital on terms more favorable to the Company.
12
THE COMPANY
GENERAL
OMNI MultiMedia Group, Inc. ("OMNI" or the "Company") provides a wide range
of software duplication and fulfillment services for major software producing
firms serving the general computer user and users within the specific fields of
financial and insurance services. The software duplication and fulfillment
services of OMNI include inbound telemarketing, packaging, printing, direct
shipment and a wide array of software duplication services for clients. In
addition, OMNI has recently developed an extensive online multimedia catalog
featuring popular software and CD-ROM titles, as well as related hardware
peripherals, and has introduced this catalog on the Internet.
Current clients include Prodigy Services Company ("Prodigy"),
MCI/Newscorp., Cheyenne Software, Hasbro, Inc., Flagtower MultiMedia, Inc.,
Microcom, Inc. ("Microcom"), John Hancock Insurance, Bay Networks (formerly
Wellfleet Communications, Inc.), Chipcom Corporation, Digital Equipment
Corporation ("DEC"), Sun Life of Canada and others. OMNI provides a wide range
of services, including software duplication, virus testing, printing of user
manuals, and packaging and shipping of these materials. OMNI is continuing to
develop an inbound telemarketing function which takes orders directly from
software users purchasing products through print ads and other advertising
media. In some instances, computer peripheral hardware is drop shipped to the
Company, where it is tested and then shipped with software to the Company's
clients or directly to the clients' customers.
In April 1995, OMNI completed an initial public offering (the "IPO") of
1,138,500 units, each unit consisting of one share of Common Stock and one
Warrant, raising net proceeds of approximately $4,076,000 (including funds
received in connection with the Underwriters' exercise of their over-allotment
option). No proceeds from the IPO remain. OMNI has used a portion of the IPO
proceeds to expand its manufacturing and shipping capabilities, including CD-ROM
replication. With respect to CD-ROM replication, management has used a portion
of the net proceeds of the IPO to commence installation of state-of-the-art
CD-ROM manufacturing operations. These operations are being installed in a
separate, specially prepared section of the Company's existing facility, and
will enable the Company to produce CD-audio, CD-ROM, CD-interactive and CD-video
media and the new DVD format. The first of the projected five CD-ROM production
lines has just become operational as of the date of this report. In addition,
management estimates that these new operations will have the capacity to produce
CDs that have greater information storage capacity than the same size of CDs
currently on the market. No assurance can be given that the Company can
successfully manufacture and market its CD-ROM replication services or that if
the Company is successful that the Company will generate revenues or be
profitable from its CD-ROM replication services.
In February 1996, the Company announced its intent to redeem all of the
1,138,500 Warrants. Prior to redemption, 1,138,450 Warrants were exercised at a
price of $6.63 per share, resulting in gross proceeds to the Company of
approximately $7,548,000. Of this amount, the Company has allocated $1,000,000
to the purchase and lease of capital equipment related to its manufacturing
13
facilities, $500,000 for marketing activities, $1,500,000 for advertising
activities, and the balance for working capital and general corporate purposes.
In May 1996, the Company completed a Private Placement (the "Private
Placement"), which raised approximately $9,400,000 in net proceeds through the
sale of 1,050 shares of Series A Preferred Stock. The Private Placement was
completed to provide the Company with additional equity financing for possible
acquisitions and to provide additional net worth to reduce the current cost of
bank and equipment lease financings, as well as for general working capital
purposes.
OMNI has developed an online multimedia catalog that it believes will
provide consumers and businesses with a cost-effective method of purchasing
software titles and hardware peripherals. By selling over the Internet, OMNI
expects it can avoid or reduce many of the costs associated with catalogs, such
as catalog printing, mailing and telephonic order processing.
COMPANY DEVELOPMENTS SINCE THE IPO
During the 14 months since the Company's IPO, the Company has focused on
several areas, including constructing its CD-ROM manufacturing operations,
expanding its sales activities in software replication, and preparing for the
introduction of its 4CD's multimedia catalog:
CD-ROM Manufacturing Operations. Since the IPO, much of management's focus
has centered on the design and construction of state-of-the-art CD-ROM
manufacturing operations and marketing of the Company's capabilities to provide
these services to CD-ROM developers. As part of this program, the Company has
expended approximately $2,500,000 in leasehold improvements, including basic
infrastructure improvements such as significantly expanded electrical services
and water handling and purification systems, as well as environmental controls.
As of March 30, 1996, management had purchased or leased approximately
$4,030,000 in CD-ROM equipment to allow the first production line to become
fully operational. Funds for the first line have been made available from
proceeds of the IPO and exercise of the Warrants, bank credit facilities and
equipment leasing facilities. Management expects to add four additional
production lines over the next four to nine months at an estimated cost of
$2,500,000 per additional line and intends to use a portion of the proceeds from
exercise of the Warrants, as well as anticipated equipment lease facilities, to
fund the expansion. Management does not expect significant additional
expenditures for leasehold improvements for the next four production lines. The
cost of each additional production line is significantly less than the first
line due to the Company's ability to use mastering, resin handling and printing
equipment to operate several production lines simultaneously.
Software Duplication Services. During the past year, the Company has
experienced a significant increase in demand for software duplication and
related services. This increased demand has been generated from both existing
customers, such as Prodigy and Microcom, and new customers such as Hasbro, Inc.,
Cheyenne Software and others. Management is devoting significant efforts to
expanding the Company's customer base to mitigate the risks associated with
sales concentration. In addition, management has used a portion of the proceeds
from the IPO and
14
exercise of the Warrants to expand its fulfillment capabilities, including
purchasing advanced PBX, telephony and data networking systems to support its
telemarketing, fulfillment and shipping systems, and to expand its sales force.
4CD's Internet Catalog. Following the IPO, the Company decided to provide
the 4CD's catalog over the Internet rather than through traditional mailing of
paper catalogs. This decision was made in part based on the success of Internet
providers, such as Prodigy and America OnLine, and the increasing use of the
Internet as a means of commerce. Management expects that providing such services
via an online catalog will significantly reduce catalog production costs,
provide better access to a worldwide market, and provide maximum flexibility in
product presentation. By comparison, the costs of marketing via traditional
print catalogs have continued to rise with the costs of paper and mailing. The
Company believes that the costs of fulfilling customer orders will be
significantly reduced by handling orders via online requests rather than through
traditional telemarketing order processing, although the Company expects to add
additional telemarketing personnel to handle telephone inquiries as well as
provide telemarketing services for its replication fulfillment services
described above. Since the IPO, the Company has spent approximately $550,000 in
completing development of the 4CD's catalog, and marketing the Company's catalog
to CD-ROM developers. The Company provides the catalog online for the purpose of
solicitation of orders from the general public.
OMNI RESOURCES CORPORATION (SOFTWARE DUPLICATION AND CD-ROM REPLICATION)
The Company was founded as a manufacturer of magnetic 5 1/4 inch disks for
sale under the Company's label to individuals and retail outlets. During the
1980's, as the use of personal computers began to expand, the Company evolved
into a software duplication company. As a result of this evolution, the Company
now provides a comprehensive array of services for software publishers. These
services include:
o Duplication/Replication o Warehousing/Inventory
o Assembly o Customized Encryption and
o Fulfillment Services Serialization
o In-House Printing o Packaging/Design/Sourcing
o Inbound Telemarketing
The Company's customers during the past 12 months included Prodigy,
Cheyenne Software, Bay Networks (formerly Wellfleet Communications, Inc.),
Chipcom Corporation, Microcom, John Hancock Insurance, and DEC.
The Company provides its clients with in-house duplication services in
which the Company copies its customers' software programs onto blank diskettes.
The Company has the ability to copy software programs onto 3 1/2" and 5 1/4"
diskettes, tapes, data cartridges and personal computer memory cards
("PC-MCIA"). PC-MCIA cards enhance the utility of portable computers and
electronic equipment by adding additional memory and other capabilities. During
15
the duplication process, the Company certifies blank diskettes, checks the
publisher's master diskette for over 4,000 known computer viruses, duplicates,
copy protects (utilizing sophisticated encryption techniques, if required),
serializes, labels and packages the diskette. The Company can also manufacture
in-house the packages for the diskettes, including the sleeve, manual and other
materials, such as promotion brochures or other information. The Company's
extensive quality assurance laboratories are designed to minimize defect
problems in diskette replication. The Company's clean room facilities are fully
equipped to duplicate all popular sizes of diskettes and data cartridges.
The Company also provides comprehensive design, multicolor printing, and
packaging functions for clients as well as external packaging. The Company has
recently expanded its design capabilities through the purchase of advanced
computer hardware and software. The Company believes that this technology,
together with its design team, allows it to provide a comprehensive design
facility for its customers. Often, clients make last minute changes in software
or user reference materials, which require the Company's services. Other clients
who publish rates and other sales information through diskette (e.g., insurance
agents and other sales personnel) use OMNI's services to constantly update and
distribute software to field sales personnel. OMNI's production facilities allow
for quick reconfiguration to process large (over 5,000 disks per hour) or much
smaller production runs.
OMNI's production services are available 24 hours per day seven days per
week to meet customer shipping requirements. OMNI drop ships worldwide. The
Company provides for warehousing services, which allow for shipping directly
from the Company's warehouse. OMNI maintains an extensive security and tracking
system to ensure inventory control. OMNI is also serving as a fulfillment house
for software publishers marketing software directly to end users, which enables
OMNI to take, process and ship orders directly to end users.
During the past year, the Company has expanded its services to include
inbound telemarketing to receive and ship consumer orders. This service allows
the Company's clients to outsource the cost of a separate inbound telemarketing
group, resulting in cost efficiencies, particularly for smaller volume software
developers and for other software developers seeking to limit overhead costs. In
addition, as part of the services previously provided and currently offered by
the Company, clients will forward certain computer hardware, primarily modems,
to the Company for quality control testing. After the Company performs such
quality control tests, the computer hardware is bundled with software that has
been duplicated by the Company. The Company believes that the expansion of its
inbound telemarketing services and manufacturing and shipping facilities,
together with its broad range of duplication services, will allow it to provide
enhanced outsourcing capability for software publishers.
MARKETS
Markets for the Company's software duplication and CD-ROM replication
services include developers, brokerage, insurance and other financial services
organizations.
16
Software developers utilizing the Company's services include both large and
small organizations. Brokerage firms and other financial services organizations
use the Company's services to provide pricing and other software-based
information and training programs to their field offices on an as-needed basis.
The market for the Company's services includes organizations seeking to
augment their own software duplication and CD-ROM replication capabilities,
businesses seeking to outsource their entire duplication and replication
services, and organizations which have no mass duplication or replication
capabilities. By providing state-of-the-art duplication and replication
capabilities, and by attaining economies of scale, the Company believes it is
often able to provide these services at a substantial cost reduction, with
higher quality than if the customer attempted to provide duplication or
replication and shipping services directly. Management also believes that the
trend in outsourcing will allow the Company to continue to attract major
developers and financial service organizations as clients. The Company intends
to use a portion of the proceeds from the exercise of the Warrants and the
Private Placement to further market its duplication/replication capabilities.
Management believes that software developers are beginning to migrate from
use of floppy diskettes to CD-ROM and other higher-capacity storage media and
that this trend will intensify over the next several years. As a result,
management believes that the Company must successfully transition its operations
to provide competitive manufacturing capabilities for CD-ROM products. There can
be no assurance that the Company will be successful in transitioning to
successfully market its capabilities as a manufacturer of CD-ROM and other
storage media. The Company's plan is to continue to expand its capabilities to
provide a full range of services from duplication and replication to inbound
telemarketing and fulfillment of customer orders. This will allow the Company's
customers to concentrate their efforts and funds on development rather than
having to spend additional funds and management resources on manufacturing and
shipping. This is particularly critical for CD-ROM replication. Management
estimates that a full CD-ROM replication line costs $4 to $6 million to acquire
and install, as compared to less than $500,000 for a software duplication line.
As a result, management believes that the trend towards use of CD-ROMs will
result in fewer small developers replicating CD-ROMs on their own as many small
software duplicators will be unable to afford the cost of CD-ROM equipment or be
capable to perform highly complex functions necessary to replicate CD-ROMs.
COMPETITION
Management believes that the software duplication market is fragmented, and
that no single company controls this market. Management believes that
competition in the software duplication market is based primarily on five key
factors: capacity, service, quality of performance, price and geographic
proximity. The barriers to entry into the software duplication market are
relatively low, so that competitors with or without significant economic
resources could enter the software duplication market at any time. However, as
the CD-ROM marketplace
17
expands, management expects that the economic barriers to entry with regard to
manufacturing CD-ROM products will be greater than the barriers to entry in the
software duplication market due to the significantly higher cost of CD-ROM
manufacturing equipment as compared to software duplication equipment.
The Company competes primarily with other software duplicators such as R.R.
Donnelley & Sons Company and KAO Information Systems, Inc. to provide the
aforementioned services to large and medium-size software publishing firms, as
well as to provide overflow manufacturing services. The Company also expects
that large national printing companies and regional printing companies may
expand their services and provide software duplication and CD-ROM replication
services for small and medium sized software and CD-ROM authors.
The trend toward independent contract manufacturing in the computer
hardware industry, where companies subcontract to independent manufacturers to
provide various manufacturing processes (evidenced by companies such as
Solectron Corporation), is also evident in the software industry, where there
are a number of smaller publishers, as well as larger companies (such as DEC),
who look to the cost flexibility and professional capabilities of outside
manufacturers. Independent contract manufacturing enables these companies to
reduce their manufacturing, equipment and overhead costs. OMNI is currently the
sole vendor for Prodigy and Microcom and is currently discussing providing
similar services for other software publishers. The Company has used a portion
of the proceeds from the IPO and exercise of the Warrants to provide an enhanced
range of services from inbound telemarketing through shipping to the end user.
The Company expects to use a portion of its funds to continue to improve and
expand its marketing and sales programs.
The Company's strategy is to compete on the basis of its quality (including
accuracy), comprehensive services and price. The Company's success will depend
on its ability to obtain business from software publishers. To do so, the
Company must maintain its quality and level of service and continue to enhance
its software duplication process to keep pace with any technological changes.
Many companies are capable of providing duplication and replication, and the
Company's clients could also decide to provide duplication and replication at
their facilities. Some of the Company's competitors are well-established and
have greater financial and other resources than the Company.
The Company believes that a number of factors will affect its competitive
position in the future, including its ability to respond to competitive
developments and technological changes; its ability to duplicate and manufacture
software and CD-ROM packages on a cost-effective basis; and general domestic and
international economic conditions.
The CD-ROM manufacturing and duplication marketplaces are highly
competitive. The Company competes with regional CD-ROM manufacturers and
duplicators. Certain of these competitors, such as KAO Information Systems, Inc.
and Disk Manufacturing, Inc., have financial and other resources significantly
greater than those of the Company. No assurance can be given
18
that the Company can compete effectively against existing competitors or new
competitors that may enter the market. In addition, price is an important
competitive factor in the CD-ROM manufacturing and duplication markets, and
there can be no assurance that the Company will not be subject to increased
price competition, which could have a material adverse effect on the Company's
operations and financial condition.
TECHNOLOGICAL CHANGES
At this time, all software manufacturing is primarily done through
duplication of the software program onto diskettes and replications onto CD's.
The technology exists for the computer software industry to change its
distribution techniques and deliver software programs and manuals
electronically, via modem, satellite, or fiber optic transmissions, or through
other media, such as CD-ROM. The Company can currently provide its customers
with duplication and replication services using CD-ROM technology. The Company
intends to use a significant portion of the net proceeds from the exercise of
the Warrants to expand its CD-ROM facilities and to develop software downloading
capabilities through its 4CD's Internet catalog.
Electronic distribution of software products has not achieved widespread
adoption, in part because of potential problems, including the perceived
increased likelihood of piracy (i.e., copying of software programs), inventory
controls, and accounting controls, such as verifiable means of determining the
number of copies made and collection of amounts due from customers. Software
publishers may also be concerned that such methods will limit their ability to
track and market to end-users. As these problems are addressed, the demand for
electronic distribution will likely increase, which could cause a reduction in
the growth in demand, or a decline, in current production and distribution
methodologies. Management believes that, by keeping current with the electronic
distribution market and using a portion of the net proceeds from the exercise of
the Warrants and the Private Placement to make such changes, it will be able to
adapt to the changes in distribution techniques.
MANUFACTURING AND SUPPLIES
The Company provides its services at its Millbury, Massachusetts facility.
The Company's facilities include clean rooms for software replication and CD-ROM
duplication, as well as temperature controlled facilities to insure that changes
in heat or humidity do not damage diskettes. The Company's packaging areas are
designed to be quickly reconfigured to address different production schedules.
As part of the Company's plan to expand its CD-ROM manufacturing and
duplication services, management intends to use a portion of the net proceeds
from the exercise of the Warrants to expand its state-of-the-art CD
manufacturing operations. These operations are being installed in a separate,
specially prepared section of the Company's existing facility, and will enable
the Company to produce CD-audio, CD-ROM, CD-interactive and CD-video media and
the new DVD format. The first of the projected five CD-ROM production lines has
just become
19
operational as of the date of this report. In addition, management estimates
that this new system will have the capacity to produce CDs that have greater
information storage capacity than the same size CDs currently on the market. No
assurance can be given that the Company can successfully manufacture and market
its CD-ROM duplication services or that if the Company is successful that the
Company will generate revenues or be profitable from its CD-ROM duplication
services.
To date, the Company has expended approximately $2,500,000 for leasehold
improvements, principally related to the development of a CD-ROM manufacturing
capability, including water-handling and purification, systems, environmental
controls, clean room facilities, additional electrical generators and structural
modifications. Management believes that only minor additional leasehold
improvements will be required during the current fiscal year. Management
estimates that the cost to purchase and install the first state-of-the-art
system, including related leasehold improvements, was approximately $8,000,000.
This cost was higher than originally anticipated due to the decision to place
this new facility within the Company's current premises, the purchase of more
powerful and versatile equipment, and designs to allow increased production
capacity. The cost of each additional production line is estimated at $2,500,000
with a total of approximately four additional production lines estimated to be
added during the current fiscal year.
The Company purchases diskettes and other materials in bulk from various
suppliers located in the United States. The principal supplies used include
diskettes, labels, sleeves and resins. The Company endeavors to acquire
diskettes, labels, sleeves and resins on a volume discount basis. The Company
has multiple suppliers of these materials and management believes that these
materials could be obtained elsewhere if needed without a significant delay or
increased cost.
SIGNIFICANT CUSTOMERS
During the fiscal year ended March 30, 1996, net sales of software
duplication services to three customers, Prodigy, America OnLine, Inc. and
Microcom, accounted for approximately 45%, 18% and 11%, respectively, of the
Company's net sales. While the Company believes that its relationships with
these customers are favorable, the loss of any of these customers would have a
material adverse effect on the Company's business.
In December 1994 and March 1995, the Company's manufacturing agreements
with Prodigy and Microcom expired. Since that time, sales to these two customers
have been conducted on a purchase order basis and have increased. Given that the
manufacturing agreements allow for cancellation with little or no penalty, the
Company does not believe that the absence of written agreements significantly
alters its relationship with these two customers.
SALES AND MARKETING
20
The Company markets its software duplication services through its sales
force of nine persons, consisting of two sales people, six telemarketing sales
people and one independent sales representative. The sales force is paid a base
salary, plus commissions based on performance. Over the past year, in order to
address customer demand, the Company has established an inbound telemarketing
function which takes orders directly from customers purchasing products through
print ads and other advertising media and ships software, and in some instances,
hardware for its vendors. The Company intends to use a portion of the net
proceeds received from the exercise of the Warrants to expand its telemarketing
function and to promote its duplication and replication services, which are
anticipated to include CD-ROM replication.
THE 4CD 'S MULTIMEDIA CATALOG
GENERAL
The Company has developed an extensive online multimedia catalog featuring
popular software and CD-ROM titles, as well as related hardware peripherals.
OMNI has introduced this catalog on the Internet.
The Company had intended to distribute 4CD's as a printed catalog and had
test marketed the paper print 4CD's catalog in anticipation of producing the
paper print version on a regular basis. However, subsequent to the IPO, the
Company determined that use of the Internet medium for 4CD's would allow for
greater flexibility, as titles and products offered in 4CD's can be changed on a
daily basis. The Company also determined that due to increased costs of paper
and mailing, as well as the low costs of entry associated with the Internet,
distributing 4CD's on the Internet was more cost efficient. The Company expended
approximately $65,000 toward development of the paper print version of 4CD's in
Fiscal 1995, which represented the printing and mailing costs of the test
market. This amount was treated as a marketing expense. In addition, the Company
has expended approximately $550,000 since the IPO toward development of the
Internet catalog. Of this amount, approximately $90,000 was allocated toward
prepaid advertising, $100,000 toward set-up of the home page, and the balance
for equipment purchases and working capital. 4CD's became accessible on the
Internet in April 1996 and began taking orders in June 1996.
Historically, software and peripherals have been sold primarily through
traditional channels of distribution such as retail stores. Increased consumer
familiarity with microcomputers and software, however, has led to the
establishment of new sales channels, such as specialty catalogs and superstores.
While catalogs have historically been used to market traditional consumer
products and apparel, they have recently gained widespread acceptance from
vendors and consumers as an effective channel for the sale of computer hardware,
software and peripheral products.
Management of the Company believes that publication of 4CD's, featuring
CD-ROM titles and multimedia products, can provide a convenient and
cost-efficient method for customers in
21
the retail consumer, business, education and government markets to purchase
CD-ROM and multimedia products for the following reasons:
o Broad Product Selection. 4CD's is expected to offer a comprehensive line
of approximately 500 CD-ROM titles and other multimedia products and to
continually add products on a weekly basis. Software titles include all
types of CD software, such as software for games or business or
educational uses. Hardware and other equipment include CD drives and
bundles, which are CD drives bundled with software, sound cards and
speakers; full multimedia systems with CD drives, speakers, sound cards
and software bundles; and accessories such as sound cards, video cards,
speakers, tables and scanners. Management believes, based upon
independent market surveys and articles, that retail outlets carry only a
few of the most popular CD-ROM titles and multimedia products. Management
also believes that electronics catalogs can generally offer a more
comprehensive selection of products than existing retail outlets.
o Detailed Product Descriptions. Electronic catalogs are a reference source
which can provide detailed information explaining new and current product
capabilities, key features and system requirements, thereby stimulating
consumer purchases. 4CD's will contain detailed descriptions of every
product featured, as well as information about applications and computing
environment and reviews of specific products.
o Customer Convenience and Technical Support. Online catalogs and toll-free
telephone number support allow customers to purchase CD-ROM hardware and
titles from the convenience of their homes or offices. These products are
also easy to ship on an overnight basis if needed immediately by the
customer. The Company also plans to increase its inbound telemarketing
staff to provide technical assistance to customers. The Company believes
that this level of technical support will allow it to compete more
effectively with retailers.
o Competitive Pricing. The anticipated lower overhead typically associated
with electronic direct marketing facilitates competitive pricing in an
increasingly price-sensitive market. 4CD's intends to offer products at
prices that management currently estimates will generally range from 20%
to 50% below manufacturers' suggested retail prices.
MULTIMEDIA AND INTERNET MARKETS
IDG Marketing Services estimates that the installed base of CD-ROM players
in the United States will increase from 9.8 million units in 1993 to 54.1
million units by 1996. Home PCs now include CD-ROM drives as standard equipment.
IDG's report also found that small businesses, consumers and the education
market account for over 70% of current PC and multimedia product purchases.
According to a Multimedia World Marketing survey, 75% of multimedia users expect
to purchase CD-ROMs from catalogs. Significant increases in
22
computing power at lower costs with the advent of pentium chip technologies and
the rapid cost declines in CD-ROM hardware suggest that the market might grow at
even higher rates. Link Resources reports that the average multimedia buyer has
a higher income level, spends more on hardware and software, and looks beyond
traditional retail channels for multimedia purchases.
USA Today recently reported that consumers and companies expect to buy over
$22 billion in goods and services over the Internet in the next several years.
In addition, as CD-ROMs continue to grow in popularity, it is expected that
CD-ROM titles will generally supplant 3 1/2" floppy disks as the recording media
of choice for published titles.
4CD's is designed to provide consumers and businesses with a cost-effective
method of purchasing titles. By selling over the Internet, Omni can avoid many
of the costs typically associated with catalogs (e.g., catalog printing, mailing
and order processing). At the same time, OMNI already has developed the
infrastructure, through its in-house talent in designing, printing and
fulfillment, to provide the services necessary to meet customer demands.
To date, the Company has had only very limited experience in direct
Internet marketing and has only recently provided the 4CD's catalog to the
general public, and no assurance can be given that the Company's catalog will be
accepted in the CD-ROM marketplace or over the Internet. The Company's success
will depend, in part, on its ability to successfully promote its website and to
distribute CD-ROM titles at a competitive price, to develop active customers, to
stimulate additional purchases from existing customers, to provide efficient
telemarketing, customer service and shipping operations, and to obtain favorable
pricing terms from CD-ROM developers and distributors. Lack of consumer
acceptance of the Company's 4CD's Internet catalog, competition from other
electronic and paper catalogs or other methods of distribution, lack of consumer
interest in purchasing products over the Internet, or problems in the effective
marketing of this service, the purchasing of CD-ROM products, or receipt and
shipping of customer orders, could have a material adverse effect on the
Company's results of operations and financial condition.
STRATEGY
4CD's strategy is to offer premier products to customers based on a
cost-plus methodology designed to attract buyers and establish long-term
relationships. Revenues will be derived from advertising, co-op dollars and
publishing of proprietary titles.
4CD's is expected to include over 5,000 titles within the next six months.
Titles are available from distributors already used by OMNI with delivery of
many titles on a "just-in-time" basis, thereby reducing the risk of obsolete
inventory.
The Company expects to provide the following information through the 4CD's
online catalog:
23
* Weekly product specials
* Industry news, reviews and information
* Free product demos and shareware files from leading manufacturers
available for downloading
* The 4CD's FaxBack Service, a program designed to provide in-depth product
literature, which can be retrieved via the customer's fax machine
* Pre/post technical support services provided by OMNI's technical staff
* Closeout specials
* Exclusive software offered only by 4CD's
* Online chats with software authors
* Availability in French, Spanish, Italian and German language versions
* Pre-order section for announced software releases
Direct online marketing provides a convenient and cost-effective method for
individuals, businesses, and schools to purchase CD-ROM titles, as well as
drives and peripheral equipment, for the following reasons:
* BROAD PRODUCT SELECTION. Online catalogs allow customers to view a broad
range of titles as well as hardware and peripheral products.
* DETAILED PRODUCT DESCRIPTIONS. Online catalogs serve as a convenient
reference source providing detailed information explaining new and
current product capabilities, key features and system requirements.
* COMPETITIVE PRICING. Low overhead associated with online marketing allows
competitive pricing strategies in an increasingly price sensitive market.
* CUSTOMER CONVENIENCE. Online catalogs and 800 telephone number support
allow customers to purchase CD-ROM hardware and titles from the
convenience of their homes or offices. CD-ROMs and software titles are
also easy to ship on an overnight basis if needed immediately by the
customer.
OMNI has also developed a plan to provide "one stop shopping" for
developers through a comprehensive advertising package for CD-ROM publishers and
peripheral manufacturers. Revenues are anticipated to be derived both by
advertising charges for catalog space and by fulfillment services (including
in-bound telemarketing, order fulfillment and warehousing). Also, by offering
CD-ROM replication services, OMNI will be able to provide smaller developers
with the capability to correct bugs in programs or end user manuals quickly and
provide for immediate shipment to the consumer.
COMPETITION
24
To date, only limited online services exist for customers wishing to
purchase software and CD-ROM titles. The trend towards contract manufacturing in
the computer hardware industry (evidenced by companies such as Solectron) is
even more applicable to the software and CD-ROM industry, where there are a
number of smaller publishers as well as larger companies (such as Kodak, America
OnLine, Inc. and DEC) who look to the flexibility and lower cost of relying on
outside manufacturers and distribution channels. OMNI believes that many
developers will be attracted to using the 4CD's catalog as it is planned to
provide a single comprehensive web site of titles and consumer information.
The software and CD-ROM marketplaces are highly competitive. The Company
expects to compete with consumer electronic and computer retail stores,
including superstores, and other direct marketers of software, CD-ROM and
computer related products. Certain hardware and software vendors are selling
their products directly through their own catalogs. Certain competitors of the
Company, including Micro Warehouse, Inc., PC Connection and other companies
which now sell or which may in the future sell CD-ROM products through catalogs,
have financial and other resources significantly greater than those of the
Company. No assurance can be given that the Company can compete effectively
against existing competitors or new competitors that may enter these markets. In
addition, price is an important competitive factor in these markets, and there
can be no assurance that the Company will not be subject to increased price
competition, which could have a material adverse effect on the Company's
operations and financial condition.
PURCHASING
The Company purchases multimedia products from approximately 15 suppliers.
Approximately 20% of these products are purchased directly from software
manufacturers and the balance from distributors. The Company's largest
distributors are American Software and Hardware Distributors, Merisel, Inc. and
Ingram Micro, Inc. During the fiscal year ended March 30, 1996, purchases of
products from these three distributors constituted approximately 21%, 20% and
7%, respectively, of the Company's finished software product purchases. There
are no supply agreements between the Company and any of its distributors. The
loss of any of these distributors could have a short-term disruption in the
availability of products purchased by it, although the Company believes that it
would be able to obtain alternative sources of distribution for such products
without materially affecting product cost. Distributors provide the Company with
substantial incentives in the form of discounts, advertising allowances, rebates
and return policies. A reduction in or discontinuance of such incentives could
have a material adverse effect on the Company's operations and financial
condition. In addition, no assurance can be given that a distributor and others
will not produce and distribute their own multimedia catalogs.
The Company anticipates that its volume purchases will enable it to obtain
more favorable product pricing than consumers and many businesses could obtain.
Many of the Company's suppliers are expected to make funds available to the
Company in the form of advertising allowances and incentives to promote and
increase sales of their products. Generally, the
25
Company has been able to return any unsold or obsolete inventory to its vendors.
In addition, the Company typically receives price protection should a vendor
subsequently lower its price. Management believes that, based on current
industry practices, favorable return and price protection policies will
continue. Any change in these policies could have a material adverse impact on
the Company's operations and financial condition.
EMPLOYEES
As of March 30, 1996, the Company employed 139 persons on a full-time basis
and 8 persons on a part-time basis. Of these employees, 119 are employed in
production, 19 in administration and 9 in sales. None of these employees is
represented by a union. The Company believes that its relations with its
employees are satisfactory. During the next several months following the date of
this report, the Company anticipates commencing full-scale CD-ROM manufacturing
production and expects to hire up to 50 additional employees to staff the CD-ROM
facilities. As a result, management may reallocate a portion of the proceeds
from the exercise of the Warrants and the Private Placement, together with
anticipated funds from operations, to hire and train employees, commence
manufacturing operations and complete the installation and testing of the CD-ROM
equipment. Certain key manufacturing employees have already been hired or
identified by the Company and the Company intends to hire and train other
production personnel on an as-needed basis based on customer demand. Management
currently anticipates that losses from start-up and related costs will be
approximately $1,800,000 in the first quarter, although no assurance can be
given that costs will not significantly increase or that customer demand will
meet management's expectations.
USE OF PROCEEDS
The Company will receive no part of the proceeds of any sale or
transactions made by the Selling Shareholders. The Selling Security Holders have
agreed to assume all of the costs and fees relating to the registration of the
shares of Common Stock covered by this Prospectus. The Company will not pay any
discounts, concessions or commissions payable to underwriters, dealers or agents
incident to the offering of the shares of Common Stock covered by this
Prospectus.
SELLING SECURITY HOLDERS
The following table sets forth the name of each Selling Stockholder, the
number of shares of Common Stock offered hereby and, with regard to investors
who purchased shares of Series A Preferred Stock in the Private Placement, the
number of shares of Series A Preferred Stock currently held by such Selling
Stockholder. In connection with this Registration Statement, the Company has
reserved 2,500,000 shares of Common Stock for possible issuance in connection
with the conversion of the Series A Preferred Stock. The Series A Preferred
Stock converts into Common Stock based upon a formula equal to the purchase
price paid by the Selling Stockholder in the Private Placement and an accretion
rate of eight percent per annum divided by the lesser
26
of (a) $9.65 or (b) 85% of the average closing bid price of the Company's Common
Stock as reported on the American Stock Exchange for the five days preceding the
date any such shares are converted into Common Stock. On June 28, 1996, the
closing bid price of the Company's Common Stock as reported on the American
Stock Exchange was $7.00.
<TABLE>
<CAPTION>
Shares of Series Common Stock
Selling Stockholder: A Preferred Stock: Offered Hereby(1):
-------------------- ------------------ ------------------
<S> <C> <C>
Cameron Capital, Ltd. 125 297,619
Leonardo, L.P. 85 202,381
Banque Scandinive en Suisse 75 178,571
Canadian Imperial Holdings, Ltd. 65 154,762
Chaim Gross 50 119,048
Nelson Partners 50 119,048
Olympus Securities, Ltd. 50 119,048
The Tail Wind Fund, Ltd. 50 119,048
Capital Ventures International 50 119,048
Gracechurch & Co. 40 95,238
Reg-S Investment Fund, Ltd. 40 95,238
Richcourt $ Strategies, Inc. 40 95,238
The Otato Limited Partnership 40 95,238
Gundyco in Trust for RRSP 550-98867-18 40 95,238
Societe Generale 40 95,238
Legong Investments, N.V. 40 95,238
Faisal Finance (Switzerland) S.A. 35 83,333
Wood Gundy in Trust RRSP 550-99119 35 83,333
Lake Management LDC 25 59,524
GAM Arbitrage Investments 20 47,619
Nachum Stein 20 47,619
Carousel Investments 15 35,714
AG Super Fund International Partners, L.P. 10 23,810
Raphael, L.P. 10 23,810
Dunwoody Securities, LLC (2) -- 108,808
O'Connor, Broude & Aronson (3) -- 48,000
--------
2,656,808
-----------------
</TABLE>
(1) Assumes that all of the 2,500,000 shares of Common Stock being
registered hereunder in connection with the Private Placement are
issued to the holders of the Series A Preferred Stock upon conversion
at a conversion rate of $4.20 per share.
27
(2) In connection with the Private Placement, the Placement Agent may
transfer portions of the Warrant to its employees and other brokers and
their employees. Each share is exercisable for a period through May 29,
2001 at an exercise price of $9.65 per share.
(3) Includes options issued to seven attorneys at O'Connor, Broude and
Aronson to purchase up to an aggregate of 48,000 shares of Common Stock
on or before April 19, 2000 at an exercise price of $5.35 per share.
PLAN OF DISTRIBUTION
The shares of Common Stock covered hereby may be offered and sold from time
to time by the Selling Security Holders. The Selling Security Holders will act
independently of the Company in making decisions with respect to the timing,
market, or otherwise at prices related to the then current market price or in
negotiated transactions.
The Common Stock covered by this Prospectus may be sold by the Selling
Security Holders in one or more transactions on the AMEX or otherwise at market
prices then prevailing or in privately negotiated transactions. The sale of the
Shares being offered hereby, when made, will be made through customary brokerage
channels either through broker-dealers acting as agents or brokers for the
Selling Security Holders or through broker-dealers acting as principals who may
then resell the Shares on the AMEX or otherwise, or by private sales on the AMEX
or otherwise, at negotiated prices related to prevailing market prices at the
time of the sales, or by a combination of such methods of offering. Thus, the
period of the distribution of such securities may occur over an extended period
of time. The Selling Security Holders may effect these transactions by selling
Shares to or through broker-dealers or by pledges of the Shares to
broker-dealers who may, from time to time, themselves effect distributions of
the Shares or interests therein in their capacity as broker-dealers. In
effecting sales, broker-dealers engaged by the Selling Security Holders may
arrange for other broker-dealers to participate. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Security Holders in connection with such sales.
The Selling Security Holders and any broker-dealer who acts in connection
with the sale of Shares hereunder may be deemed to be "underwriters" as that
term is defined in the Securities Act of 1933, as amended (the "Securities
Act"), and any commission received by them and profit on any resale of the
Shares as principal might be deemed to be underwriting discounts and commissions
under the Securities Act. In addition, any Shares covered by this Prospectus
which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this Prospectus. The Selling Security Holders will pay or
assume brokerage commissions or underwriting discounts incurred in connection
with the sale of their Shares, which commissions or discounts will not be paid
or assumed by the Company. The Company will not receive any part of the proceeds
of any sale of Common Stock by the Selling Security Holders.
28
The Company has advised the Selling Security Holders that during such time
as they may be engaged in a distribution of Common Stock included herein they
are required to comply with Rules 10b-6 and 10b-7 under the Exchange Act (as
those Rules are described in more detail below) and, in connection therewith,
that they may not engage in any stabilization activity, except as permitted
under the Exchange Act, are required to furnish each broker-dealer through which
Common Stock included herein may be offered copies of this Prospectus, and may
not bid for or purchase any securities of the Company or attempt to induce any
person to purchase any securities except as permitted under the Exchange Act.
The Selling Security holders have agreed to inform the Company when the
distribution of the shares of Common Stock included herein is completed.
Rule 10b-6 under the Exchange Act prohibits, with certain exceptions,
participants in a distribution from bidding for or purchasing, for an account in
which the participant has a beneficial interest, any of the securities that are
the subject of the distribution. Rule 10b-7 governs bids and purchases made in
order to stabilize the price of a security in connection with a distribution of
the security.
This offering will terminate on the date on which all Shares have been sold
by the Selling Security Holders.
RECENT DEVELOPMENTS
No material changes in the Company's affairs have occurred since March 30,
1996 which have not been described in the Company's Annual Report on Form 10-KSB
or on a Current Report on Form 8-K.
LEGAL MATTERS
Certain legal matters relating to the securities offered hereby will be
passed upon for the Company by O'Connor, Broude & Aronson, Bay Colony Corporate
Center, 950 Winter Street, Suite 2300, Waltham, Massachusetts 02154. Certain
attorneys in the firm of O'Connor, Broude & Aronson were issued options, which
expire on April 20, 2000 to purchase up to 48,000 shares of Common Stock at a
price equal to $5.35 per share.
EXPERTS
The financial statements of the Company appearing in the Company's Annual
Report on Form 10-KSB for the fiscal year ended March 30, 1996 have been audited
by Price Waterhouse LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
29
=======================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN
AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER A SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
CIRCUMSTANCES OF THE COMPANY OR THE FACTS HEREIN SET
FORTH SINCE THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
Available Information.............................
Incorporation by Reference
of Certain Information .........................
Risk Factors .....................................
The Company.......................................
Recent Developments ..............................
Use of Proceeds...................................
Selling Security Holders..........................
Plan of Distribution..............................
Legal Matters.....................................
Experts ..........................................
=======================================================
=======================================================
2,656,808 SHARES OF COMMON STOCK
OMNI MULTIMEDIA GROUP, INC.
----------------
PROSPECTUS
----------------
JULY __, 1996
=======================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with this Registration Statement (items marked with an asterisk (*) represent
estimated expenses):
SEC Filing Fees ..................................... $ 6,485.10
American Stock Exchange Listing ..................... $17,500.00
Printing Costs*...................................... $ 1,000.00
Legal Fees*.......................................... $25,000.00
Accounting Fees*..................................... $ 5,000.00
Miscellaneous*....................................... $ 2,014.90
----------
Total*...................................... $57,000.00
==========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Delaware General Corporation Law, Section 102(b)(7), enables a corporation
in its original certificate of incorporation or an amendment thereto validly
approved by stockholders to eliminate or limit personal liability of members of
its Board of Directors for violations of a director's fiduciary duty of care.
However, the elimination or limitation shall not apply where there has been a
breach of the duty of loyalty, failure to act in good faith, engaging in
intentional misconduct or knowingly violating a law, paying a dividend or
approving a stock repurchase which was deemed illegal or obtaining an improper
personal benefit. The Company's Certificate of Incorporation includes the
following language:
"To the maximum extent permitted by Section 102(b)(7) of the General
Corporation Law of Delaware, a director of this Corporation shall not be
personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the Corporation or
its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit."
Delaware General Corporation Law, Section 145, permits a corporation
organized under Delaware law to indemnify directors and officers with respect to
any matter in which the director or officer acted in good faith and in a manner
he reasonably believed to be not opposed to the best interests
II-1
of the Company, and, with respect to any criminal action, he had reasonable
cause to believe his conduct was lawful. The Bylaws of the Company include the
following provision:
"Reference is made to Section 145 and any other relevant provisions to
the General Corporation Law of the State of Delaware. Particular reference
is made to the class of persons, hereinafter called "Indemnitees," who may
be indemnified by a Delaware corporation pursuant to the provisions of such
Section 145, namely, any person or the heirs, executors, or administrators
of such person, who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, by reason of the
fact that such person is or was a director, officer, employee, or agent of
such corporation or is or was serving at the request of such corporation as
a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise. The Corporation
shall, and is hereby obligated to , indemnify the Indemnitees, and each of
them, in each and every situation where the Corporation is obligated to
make such indemnification pursuant to the aforesaid statutory provisions.
The Corporation shall indemnify the Indemnitees, and each of them, in each
and every situation where, under the aforesaid statutory provisions, the
Corporation is not obligated, but is nevertheless permitted or empowered,
to make such indemnification, it being understood that, before making such
indemnification with respect to any situation covered under this sentence,
(i) the Corporation shall promptly make or cause to be made, by any of the
methods referred to in Subsection (d) of such Section 145, a determination
as to whether each Indemnitee acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, in the case of any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful, and (ii) that no
such indemnification shall be made unless it is determined that such
Indemnitee acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Corporation, and, in the
case of any criminal action or proceeding, had no reasonable cause to
believe that his conduct was unlawful."
ITEM 16. EXHIBITS
The following exhibits are filed herewith:
Exhibit:
--------
5(a) Opinion of O'Connor, Broude & Aronson.
24 (a) Consent of Price Waterhouse, LLP.
24(b) Consent of O'Connor, Broude & Aronson (contained in
Exhibit 5(a)
27 Financial Data Schedule
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
ii-2
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(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;
(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 of 1933, each such post-effective amendment shall be deemed to be
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 remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the Offering.
(b) The undersigned Registrant hereby undertakes to provide to the
Underwriter at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriter to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a director, officer, or controlling person of
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, 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 Act and will be governed by the final
adjudication of such issue.
(d) The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of the registration
statement as of the time it was declared effective.
II-3
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be 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.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Millbury, Commonwealth of Massachusetts, on the 2nd
day of July, 1996.
OMNI MULTIMEDIA GROUP, INC.
Date: July 2, 1996 By:/s/ Paul F. Johnson
-----------------------
Paul F. Johnson
Chief Executive Officer and President
In accordance with the Securities Exchange Act of 1934, as amended, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Capacity Date
---- -------- ----
<S> <C> <C>
/s/ Paul F. Johnson President, Chief Executive Officer, July 2, 1996
- ----------------------------- Chairman of the Board of
Paul F. Johnson Directors and Secretary
(Principal Executive Officer)
/s/ Robert E. Lee Executive Vice President, Chief July 2, 1996
- ----------------------------- Financial Officer, Director
Robert E. Lee and Treasurer
(Principal Financial and
Principal Accounting Officer)
/s/ Richard A. Pilotte Vice President of Operations and July 2, 1996
- ---------------------------- Director
Richard A. Pilotte
/s/ Richard L. Wise Director July 2, 1996
- ----------------------------
Richard L. Wise
/s/ Ronald F. Ladner Director July 2, 1996
- ---------------------------
Ronald F. Ladner
</TABLE>
II-5
EXHIBIT 5(a)
O'CONNOR, BROUDE & ARONSON
ATTORNEYS AT LAW
THE BAY COLONY CORPORATE CENTER
ROUTE 128 AND WINTER STREET
950 WINTER STREET, SUITE 2300
WALTHAM, MASSACHUSETTS 02154
--------
617-890-6600
July 2, 1996
Board of Directors
OMNI MultiMedia Group, Inc.
50 Howe Street
Millbury, Massachusetts 01527-3298
Re: OMNI MultiMedia Group, Inc.
---------------------------
Gentlemen:
This firm represents OMNI MultiMedia Group, Inc., a Delaware corporation
(hereinafter the "Corporation"), in connection with the proposed public offering
described below.
In our capacity as securities counsel to the Corporation, we are familiar
with the Certificate of Incorporation of the Corporation. We are also familiar
with the corporate proceedings taken by the Corporation in connection with the
preparation and filing of the Corporation's Registration Statement on Form S-3
(the "Registration Statement") thereto covering a public offering by the
Corporation of 2,656,808 shares of its Common Stock, $.01 par value per share
(the "Common Stock"), consisting of: (i) up to 2,500,000 shares of Common Stock
issuable to certain investors in the Corporation's 1996 Private Placement upon
conversion of the issued Series A Convertible Preferred Stock (the "Private
Placement"); (ii) 108,808 shares of Common Stock underlying a warrant issued to
the placement agent in the Private Placement; and (iii) 48,000 shares of Common
Stock underlying stock options granted to certain of the Corporation's advisors.
Based upon the foregoing, we are of the opinion that:
1. The Corporation is duly organized and validly existing under the
laws of the State of Delaware.
2. The Shares are issued in compliance with the General Corporation
Law of the State of Delaware, fully paid and non-assessable.
Board of Directors
Re: OMNI MultiMedia Group, Inc.
July 2, 1996
Page 2
This opinion is provided solely for the benefit of the addressee hereof and
is not to be relied upon by any other person or party. Nevertheless, we hereby
consent to the use of this opinion and to all references to our firm in or made
part of the Registration Statement.
Very truly yours,
O'CONNOR, BROUDE & ARONSON
By: /s/ Neil H. Aronson
-----------------------
Neil H. Aronson
NHA:ACB:tav
EXHIBIT 24(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
May 31, 1996 appearing on page F-3 of OMNI MultiMedia Group, Inc.'s Annual
Report on Form 10-KSB for the year ended March 30, 1996. We also consent to the
reference to us under the heading "Experts."
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Boston, Massachusetts
July 2, 1996
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> MAR-30-1996
<CASH> 5,706,822
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 3,097,186
<INVENTORY> 25,000
<CURRENT-ASSETS> 966,665
<PP&E> 10,684,020
<DEPRECIATION> 8,427,275
<TOTAL-ASSETS> 20,598,286
<CURRENT-LIABILITIES> 4,392,416
<BONDS> 0
0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 20,598,286
<SALES> 18,929,165
<TOTAL-REVENUES> 18,929,165
<CGS> 14,236,153
<TOTAL-COSTS> 14,236,153
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (205,254)
<INCOME-PRETAX> 546,663
<INCOME-TAX> 222,463
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 324,000
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