SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 28, 1996
Commission file number 1-13656
OMNI MULTIMEDIA GROUP, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 04-2729490
(State of Organization) (I.R.S. Employer
Identification Number)
50 Howe Avenue
Millbury, Massachusetts 01527
(508) 865-4451
(Address, including zip code, and telephone number,
including area code, of issuer's principal executive offices)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Number of Shares Outstanding
----- as of November 15, 1996
----------------------------
Common Stock, $.01 par value 5,889,498 shares
Series A Preferred Stock, $.01 par value 591 shares
OMNI MULTIMEDIA GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION.
---------------------
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS PAGE
----
<S> <C>
Condensed Consolidated Balance Sheet -
as of March 30, 1996 (Audited) and September 28, 1996 (Unaudited).................................. 1
Condensed Consolidated Statements of Operations (Unaudited)
for the three months ended September 30, 1995 and September 28, 1996............................... 3
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the six months ended September 30, 1995 and September 28, 1996................................. 4
Notes to Condensed Consolidated Financial Statements................................................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................................. 6
PART II. OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.......................................................................... 8
ITEM 2. CHANGES IN SECURITIES...................................................................... 8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................................................ 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS........................................ 9
ITEM 5. OTHER INFORMATION.......................................................................... 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................................................... 9
SIGNATURES........................................................................................... 10
</TABLE>
<TABLE>
<CAPTION>
OMNI MULTIMEDIA GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
------
September 28, March 30,
1996 1996
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Current Assets
Cash and cash equivalents $9,208,351 $ 5,706,822
Accounts receivable, net of
allowance for doubtful accounts
of $85,000 at September 28, 1996 and
$25,000 at March 30, 1996 1,514,187 1,306,212
Stock Subscription -- 1,790,374
Inventories 1,035,695 966,665
Prepaid expenses and other
current assets 760,926 812,103
Refundable income taxes 15,850 --
Deferred tax assets, net 101,844 101,844
----------- -----------
12,636,853 10,684,020
----------- -----------
Property and equipment, net 18,320,398 8,427,275
Due from related parties 542,980 532,761
Other assets, net 1,068,803 954,230
----------- -----------
$32,569,034 $20,598,286
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
OMNI MULTIMEDIA GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 28, March 30,
1996 1996
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Current liabilities
Accounts payable $1,287,552 $1,775,225
Line of credit 1,150,057 1,068,967
Current portion of long-term debt
and capital lease obligations 2,081,000 1,025,600
Accrued expenses 348,805 332,561
Income taxes payable -- 190,063
----------- -----------
4,867,414 4,392,416
----------- -----------
Long-term debt 3,768,784 2,207,479
Capital lease obligations 6,987,378 1,760,919
Deferred tax liability 141,761 141,761
------------ -----------
Stockholders' Equity
Convertible Preferred Stock; $.01 par value;
1,000,000 shares authorized; 856 Series
A shares issued and outstanding 9 --
Common Stock, $.01 par value; 14,000,000
shares authorized; 4,433,449 and 3,889,950 shares issued
and outstanding at September 28, 1996 and
March 30, 1996, respectively 38, 901 38,899
Additional paid-in-capital 20,988,646 11,635,675
Retained earnings (accumulated deficit) (4,223,859) 421,137
----------- -----------
16,803,697 12,095,711
----------- -----------
$32,569,034 $20,598,286
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
OMNI MULTIMEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
-------------------- ----------------- ------------------ --------------
<S> <C> <C> <C> <C>
Net sales $ 2,183,289 $ 5,450,120 $ 4,615,478 $ 7,711,778
Cost of goods sold 2,959,807 4,024,578 5,871,124 5,783,669
--------------- ------------ -------------- ------------
Gross profit (loss) (776,518) 1,425,542 (1,255,646) 1,928,109
---------------- ------------ ------------- ------------
Operating expenses
Selling 974,773 630,727 1,615,633 971,609
General and administrative 842,992 451,241 1,522,597 853,245
----------------- ------------- -------------- -------------
1,817,765 1,081,968 3,138,230 1,824,854
--------------- ------------ -------------- ------------
Income (loss) from operations (2,594,283) 343,574 (4,393,876) 103,255
Other income 147,223 17,890 243,366 38,390
----------------- -------------- --------------- --------------
( 2,447,060) 361,464 (4,150,510) 141,645
--------------- -------------- ------------- -------------
Other expenses
Interest expense 343,583 45,236 425,713 91,869
Other expenses 34,350 - 68,774 1,245
------------------------------------- ---------------- ---------------
377,933 45,236 494,487 93,114
---------------- --------------- --------------- --------------
Income (loss) before income taxes (2,824,993) 316,228 (4,644,997) 48,531
Income tax provision - 23,544 - 24,000
---------------------- --------------- -------------------- --------------
Net income (loss) $ (2,824,993) $ 292,684 $ (4,644,997) $ 24,531
============ ============= ============ ===============
Primary net income (loss) per share $ (0.70) $ 0.10 $ (1.17) $ 0.01
Primary weighted average common
shares outstanding 4,033,232 2,943,050 3,961,591 2,864,192
Fully diluted net income (loss)
per share $ (0.64) $ 0.10 $ (1.05) $ 0.01
Fully diluted weighted average
(common shares outstanding) 4,433,449 2,987,980 4,433,449 2,987,980
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
OMNI MULTIMEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
September 28, September 30,
1996 1995
------------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (4,644,997) $ 24,531
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 1,010,186 225,541
Provision for losses on accounts receivable 219,468 --
(Gain) loss on disposal of fixed asset (590) 26,265
Increase in accounts receivable (427,443) (1,960,122)
Increase in inventories (69,030) (1,366,287)
Decrease in prepaid expenses
and other current assets 51,177 176,084
Increase in refundable income taxes (15,850) --
Increase in other assets (112,517) (800,761)
Increase (decrease) in accounts payable (487,673) 1,658,997
Decrease in accrued expenses 16,244 31,059
Decrease in income taxes payable (190,063) --
------------ ------------
Net cash used in operating activities (4,651,088) (1,984,693)
------------ ------------
Cash flows from investing activities:
Expenditures for property and equipment (4,246,004) (697,899)
Proceeds from sale of fixed assets 18,100 --
------------ ------------
Net cash used in investing activities (4,227,904) (697,899)
------------ ------------
Cash flows from financing activities:
Repayments on long-term borrowing and capital
lease obligations (706,387) (117,035)
Repayments on notes payable - redeemable
Common Stock -- (346,000)
Repayments on notes payable - redeemable
Preferred Stock -- (298,000)
Repayment on Interim Financing -- (325,000)
Proceeds from long term borrowing 1,952,900 38,950
Net advances (repayments) on revolving line of credit 81,090 173,456
Repayments on loans from stockholders -- (25,000)
Decrease in stock subscription receivable 1,790,374 --
Proceeds from issuance of Preferred Stock 9,352,982 --
Proceeds from issuance of Common Stock -- 4,072,496
Increase in due from related parties (10,219) (19,712)
Increase in debt issue costs (80,219) --
------------ ------------
-4-
Net cash provided by financing activities 12,380,521 3,154,155
------------ ------------
Increase in cash and cash equivalents 3,501,529 471,563
Cash and cash equivalents, beginning of period 5,706,822 266,674
------------ ------------
Cash and cash equivalents, end of period $ 9,208,351 $ 738,237
============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
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OMNI MULTIMEDIA GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of OMNI MultiMedia Group, Inc. (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete consolidated financial
statements.
In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) considered necessary for a fair statement of the
interim financial data have been included. Results from operations for the three
month period ended September 28, 1996 are not necessarily indicative of the
results that may be expected for the fiscal year ending March 29, 1997.
For further information, refer to the consolidated financial statements
and the footnotes thereto for the year ended March 30, 1996, contained in the
Company's Annual Report on Form 10- KSB as amended.
Net income (loss) per share is computed based upon the weighted average
number of common and dilutive common equivalent shares outstanding during the
period.
NOTE 2. SIGNIFICANT EVENT
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
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.
GENERAL
The following discussion and analysis should be read in conjunction
with the Condensed Consolidated Financial Statements of the Company (including
the Notes thereto) included under Item 1 of this report.
RESULTS OF OPERATIONS
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THREE MONTHS ENDED SEPTEMBER 28, 1996 ("SECOND QUARTER 1997") COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 1995 ("SECOND QUARTER 1996")
Net sales decreased to $2,183,289 for Second Quarter 1997, a decrease
of 60% over net sales of $5,450,120 in Second Quarter 1996. This decrease was
primarily due to the faster than expected decline in demand for software
duplication services for 31/2" diskettes, which the Company believes to be
industry-wide. This decline was combined with the start-up phase of the
Company's CD-ROM manufacturing facility, during which the Company deferred
accepting orders until the new facility was fully operational, which occurred at
the very end of the first fiscal quarter. This facility is now fully
operational, with several CD-ROM manufacturing lines running. The Company
expects revenues from its CD-ROM manufacturing operations to increase during the
current quarter and expects continued increased production from the facility
over time. Management estimates that this facility as currently configured can
produce approximately $35 to $40 million in annual revenues from the manufacture
of CD-ROM titles. In addition, the facility has room for additional capacity and
management expects to add additional capacity over time on an as-needed basis.
In addition, during Second Quarter 1997, the Company delayed its
planned promotion of its 4CD's electronic catalog, which had appeared on the
Internet on a trial basis, while the Company added five language capabilities
for instructions appearing on the home page. The Company anticipates that adding
language capability for product descriptions will be commenced in the near
future. The Company is actively soliciting orders on the Internet. Initial sales
are modest, and the Company expects sales in this sector to increase in the next
quarter.
Selling expenses in Second Quarter 1997 were $974,773, a 55% increase
over operating expenses of $630,727 in Second Quarter 1996. This increase was
due to costs associated with the costs of hiring sales staff to run the new
CD-ROM manufacturing facility.
General and administrative expenses were $842,992 in Second Quarter
1997, an increase of 87% over general and administrative expenses of $451,241 in
Second Quarter 1996. This increase was due primarily to increases in
administrative staffing, principally MIS, and SIMIX manufacturing systems, as
well as increased travel, consulting, public relations and professional fees.
As a result of decreases in net sales and increases in manufacturing
operations, and increased sales, general and administrative expenses, the
Company incurred a loss from operations of $2,594,283 in Second Quarter 1997, as
contrasted to income from operations of $343,574 in Second Quarter 1996.
As a result of the factors described above, the Company incurred a net
loss of $2,824,993 in Second Quarter 1997 as compared to a net income of
$292,684 in Second Quarter 1996. This translates to a net loss of $0.70 and
$0.64 per share for primary and fully diluted earnings per share, respectively,
in Second Quarter 1997 as contrasted to a net profit of $.10 per share in Second
Quarter 1996. During Second Quarter 1997, there were 4,033,232 and 4,433,449
common shares outstanding on a weighted average basis for primary and fully
diluted earnings per share,
-7-
respectively, as contrasted to 2,943,050 shares issued and outstanding on a
weighted average basis for Second Quarter 1996.
LIQUIDITY AND CAPITAL RESOURCES
During Second Quarter 1997, the Company was in the process of acquiring
through a wholly owned subsidiary, of substantially all of the assets of
Allenbach Industries, Inc. ("Allenbach"), a software replication and CD-ROM
manufacturing facility in California and Minnesota. The Company also announced
it had entered into a letter of intent to acquire another company. Management
used and expects to issue a combination of cash and stock to acquire these
assets. Completion of the second acquisition is anticipated over the next 30
days.
Management anticipates that its current cash position, together with
cash generated from anticipated results of operations and credit and equipment
lease facilities will be adequate for at least the next 12 months. The Company
routinely explores acquisitions and, although not currently anticipated, the
Company may seek additional capital to finance future acquisitions, strategic
partnerships, or to provide additional working capital.
At September 28, 1996, the Company had cash and cash equivalents of
$9,208,351. Cash used in operating activities for the six months ended September
28, 1996 was ($4,651,088), compared to cash used in operating activities for the
six months ended September 30, 1995 of $(1,984,693), primarily reflecting the
net loss for the period. Cash used in investing activities included ($4,
246,004) of expenditures for property and equipment in connection with the
start-up of the Company's CD-ROM manufacturing facility. Cash provided by
financing activities was $12,380,521 during Second Quarter 1997, reflecting
principally the proceeds from the issuance of the Company's Series A Preferred
Stock in May 1996.
GENERAL
PART II. OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
[Not applicable.]
ITEM 2. CHANGES IN SECURITIES.
[Not applicable.]
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
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[Not applicable.]
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
At the Company's Annual Meeting of Stockholders held on September 26,
1996, the Company's stockholders approved the election of Paul F. Johnson by
vote of 3,095,814 for and 324,390 withheld; for Robert E. Lee by vote of
2,007,495 for and 1,314,712 withheld; Richard A. Pilotte by vote of 2,996,815
for and 324,751 withheld; Ronald F. Ladner by vote of 2,997,456 for and 324,751
withheld and Richard L. Wise by vote of 2,003,937 for and 1,318,830 withheld, as
members of the Board of Directors. The Company's stockholders also ratified the
selection of Price Waterhouse LLP as independent auditors for the Company for
the fiscal year ending March 29, 1997 by the following vote: 3,033,804 shares in
favor and 8,687 shares against. The Company's stockholders failed to approve an
amendment to the Company's 1994 Stock Option Plan (the "Plan") to increase from
270,000 to 2,000,000 the aggregate number of shares of Common Stock of the
Company reserved for issuance under the Plan by a vote of 1,475,809 shares
against, 1,408,830 shares in favor and 8,475 shares abstaining. Finally, the
Company's stockholders failed to approve an amendment to the Company's
Certificate of Incorporation which required approval by two-thirds of the shares
voting, to increase from 14,000,000 to 19,000,000 the aggregate number of
authorized shares of Common Stock of the Company by a vote of 1,891,620 shares
in favor, 1,427,510 shares against and 4,077 shares abstaining.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit 10u. Employment Agreements between Paul F. Johnson,
Robert E. Lee, Richard A. Pilotte, and the Company.
Exhibit 11. Statement regarding computation of per share
earnings.
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K on October 18,
1996 reporting the acquisition on October 4, 1996 of
substantially all of the assets of Allenbach, Inc., by a
wholly-owned subsidiary of the Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMNI MULTIMEDIA GROUP, INC.
Date: November 26, 1996 By: /s/ Paul F. Johnson
------------------------ -------------------------------
Paul F. Johnson, President and
Chief Executive Officer
Date: November 26, 1996 By: /s/ Robert E. Lee
----------------------- ------------------------------
Robert E. Lee, Treasurer and
Chief Financial Officer
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