As filed with the Securities and Exchange Commission on November 29, 1996
Registration No. __________
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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, 2,779,133 $3.00 $8,337,399 $2,500
$.01 par value,
underlying 381
shares of Series A
Convertible Preferred
Stock, $.01 par value
================================================================================================================
</TABLE>
(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 November 26, 1996 of $3.00 per share.
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.
OMNI MULTIMEDIA GROUP, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 501(B)
<TABLE>
<CAPTION>
Item Number Location in
and Caption Prospectus
----------- ----------
<S> <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 November 29, 1996
PROSPECTUS
OMNI MULTIMEDIA GROUP, INC.
2,779,133 SHARES OF COMMON STOCK
This Prospectus relates to 2,779,133 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"). The
2,779,133 Shares being registered hereunder are being registered pursuant to the
terms of certain 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 Stock"). Such shares are reserved for
possible issuance upon conversion of the Series A Preferred Stock into Common
Stock. 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 American Stock
Exchange ("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 November 26, 1996, the closing price of the Company's Common
Stock on the AMEX was $3.00 per share.
The Company will receive no part of the proceeds of any sale of Shares
by the Selling Security Holders. The Company is paying all of the expenses of
registering the Shares, estimated to be $50,000 for filing, exchange listing,
legal, accounting and miscellaneous fees and expenses. The Company will not pay
any discounts, concessions or commissions payable to underwriters, dealers or
agents incident to the offering of the Shares.
--------------------
THESE SECURITIES INVOLVE CERTAIN RISKS TO THE INVESTORS. SEE "RISK
FACTORS" CONTAINED ELSEWHERE IN THIS PROSPECTUS.
--------------------
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.
--------------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER , 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 BY REFERENCE OF CERTAIN INFORMATION
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) Current Report on Form 8-K dated October 18, 1996;
(2) Quarterly Report of Form 10-QSB for the quarterly period ended
September 28, 1996;
(3) Quarterly Report on Form 10-QSB for the quarterly period ended
June 29, 1996;
(4) Annual Report on Form 10-KSB for the fiscal year ended March 30,
1996;
(5) Definitive Proxy Statement dated September 4, 1996;
(6) 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; CURRENT AND 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 incurred losses of approximately $1,800,000 during the first quarter
ended June 29, 1996 and approximately $2,800,000 during the second quarter ended
September 28, 1996. These losses could continue as the Company expects to incur
significant costs in marketing its 4CD's catalog and its anticipated startup and
expansion of its CD-ROM manufacturing operations. No assurance can be given that
the Company will operate profitably in the future.
RISKS ASSOCIATED WITH NEW CD-ROM DUPLICATION SERVICES
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 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, 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.
4
UNCERTAIN ABILITY TO MANAGE ANTICIPATED GROWTH AND EXPANSION
The Company has only recently issued the 4CD's catalog over the
Internet, has expanded its telemarketing organization and 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,
from its recent and proposed acquisition, and other 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.
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 larger 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
5
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 users' microcomputers. Any of these
competitive programs, if successful, could have a material adverse effect on the
Company's operations and financial condition.
POSSIBLE NEED FOR ADDITIONAL FINANCING; SUBSTANTIALLY ALL ASSETS PLEDGED
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. 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.
6
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. 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. The Company does not expect these companies to be material customers
in the current fiscal year.
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
7
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.
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 and Richard A. Pilotte, own approximately 19% of the outstanding shares
of Common Stock of the Company. As the Company's bylaws do not provide for
cumulative voting, these individuals may 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 has used and intends to continue to use a portion of the
net proceeds from the May 1996 Private Placement to acquire businesses or
product lines similar, complementary, or related to the Company's current
business. The Company's acquisition and expansion plans will subject the Company
to all of the risks incident to the expansion of an emerging business,
8
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.
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 6,393,336 shares of Common Stock are issued and outstanding as
of this date. 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 were designated as Series A Preferred Stock. As of this date, 527
of these shares of Series A Preferred Stock are issued and outstanding. 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 2,779,133 shares of Common Stock for issuance
upon conversion of the Series A Preferred Stock, which shares are being
registered hereunder. 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.
9
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 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
10
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.
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,
the 2,779,133 shares of Common Stock issuable upon conversion of the Series A
Preferred Stock, and an aggregate of 408,808 shares of Common Stock issuable
upon conversion of certain warrants issued to the Placement Agent for the
Private Placement and to certain consultants to the Company. 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.
11
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.
Clients during the past twelve months have included 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
12
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 DURING THE CURRENT FISCAL YEAR
During the nine months since the exercise of the Warrants, 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 September 28, 1996, management had purchased or leased approximately
$9,000,000 in CD-ROM equipment to allow five production lines to become fully
operational. Funds for these lines have been made available from proceeds of the
IPO, exercise of the Warrants, bank credit facilities and equipment leasing
facilities.
13
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.
Allenbach Industries, Inc. On October 4, 1996, the Company, through a
wholly-owned subsidiary, completed the acquisition of substantially all of the
assets of Allenbach Industries, Inc. ("Allenbach"), a privately held corporation
having its principal place of business in San Jose, California. Allenbach
conducts a software manufacturing and fulfillment business, maintaining
manufacturing facilities in San Jose, California and Bloomington, Minnesota. The
acquisition took the form of an asset sale in which Allenbach transferred
substantially all of its assets to a subsidiary of the Company in exchange for
the subsidiary's assumption of certain specified liabilities and the issuance of
shares of the Company's Common Stock, the number of which is to be calculated
based upon the attainment of certain performance objectives. The Company has
entered into an Employment Agreement (the "Agreement") with Philip Kessler, the
former President and Chief Executive Officer of Allenbach.
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 Customized Encryption and
o Assembly Serialization
o Fulfillment Services o Packaging/Design/Sourcing
o In-House Printing o Inbound Telemarketing
o Warehousing/Inventory
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
14
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.
15
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
incapable of performing 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 expands, management expects that the economic barriers to
entry with regard to manufacturing
16
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, exercise of the Warrants and the Private Placement
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 that the Company
can compete effectively against existing competitors or new competitors that
17
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. The Company can currently provide its customers with duplication
and replication services using CD-ROM technology.
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 has used a portion of the net proceeds from the
exercise of the Warrants and the Private Placement to expand its
state-of-the-art CD manufacturing operations. These operations were installed in
a separate, specially prepared section of the Company's existing facility, and
enable the Company to produce CD-audio, CD-ROM, CD-interactive and CD-video
media and the new DVD format. All five of the projected five CD-ROM production
lines have become operational. In addition, management estimates that this new
system will have the capacity to
18
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 $9,000,000. 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 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.
19
SALES AND MARKETING
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.
20
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 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 offers 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.
21
MULTIMEDIA AND INTERNET MARKETS
According to a Multimedia World Marketing survey, 75% of multimedia
users expect to purchase CD-ROMs from catalogs. Significant increases in
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.
22
The Company expects to provide the following information through the
4CD's online catalog:
* 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.
23
COMPETITION
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.
24
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 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 September 28, 1996, the Company employed approximately 260
people. None of these employees is represented by a union. The Company believes
that its relations with its employees are satisfactory. During the past several
months, the Company commenced full-scale CD-ROM manufacturing production and
hired additional employees to staff the CD-ROM facilities. As a result,
management reallocated 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. No assurance can be given 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 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 Series A Preferred Stock currently held by such Selling
Stockholder, the number of shares of Common Stock offered hereby, and the
percentage of the Company's Common Stock that will be held by such Selling
Stockholder, assuming conversion of all shares of Series A Preferred Stock and
that 9,000,000 shares of Common Stock will be issued and outstanding subsequent
to such conversions. In connection with this Registration Statement, the Company
has reserved 2,779,133 shares of Common Stock for 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 and an accretion rate of eight percent per annum
divided by the lesser 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.
All of the Selling Stockholders have submitted Notices of Conversion to the
Company, and the number of shares of Common Stock offered hereby reflects the
number calculated in such conversion notices.
<TABLE>
<CAPTION>
Shares of Series Common Stock Percentage of
Selling Stockholder: A Preferred Stock: Offered Hereby: Class After Offering:
- -------------------- ------------------ --------------- ---------------------
<S> <C> <C> <C>
Anasazi C.P. Baker 14 92,222 1.0%
Cameron Capital, Ltd. 55 400,867 4.4%
Capital Ventures International 36 263,137 2.9%
Allyson Cohen Trust 4 29,623 *
Edward Cohen 14 92,222 1.0%
Jeffrey Cohen 4 29,623 *
Robert Cohen 12 88,870 *
Stephanie Cohen Trust 2 14,811 *
Donaldson Werren Holdings, Ltd. 4 34,798 *
Eveven Clearing Corp. 7 46,111 *
Faisal Finance (Switzerland) S.A. 20 145,831 1.6%
S. Marcus Finkle 26 191,843 2.1%
Charles Hirsch 9 66,652 *
Lenore Katz 2 14,811 *
Kelly Green, Ltd. 24 177,740 1.9%
Katznah West Pension Plan 2 17,363 *
David Lawi 4 29,623 *
Leonardo, L.P. 10 67,005 *
Brad Marsh 4 35,208 *
Emanuel Pinez 48 355,481 3.9%
Olympus Securities, Ltd. 3 21,571 *
Raleigh Trust 9 66,652 *
Reg-S Investment Fund, Ltd. 5 36,216 *
Stephanie Rubin 8 70,006 *
Harold Schein 28 207,364 2.3%
The Tail Wind Fund, Ltd. 18 112,994 1.2%
Stephen J. Wilson 9 70,489 *
---------- ----------
381 2,779,133
</TABLE>
______________________
*Less than one percent
25
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.
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.
26
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
September 28, 1996 which have not been described in the Company's Quarterly
Report on Form 10-QSB 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.
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.
27
================================================================================
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.............................. 2
Incorporation by Reference
of Certain Information .......................... 3
Risk Factors ...................................... 4
The Company........................................ 12
Use of Proceeds.................................... 25
Selling Security Holders........................... 25
Plan of Distribution............................... 26
Recent Developments ............................... 27
Legal Matters...................................... 27
Experts ........................................... 27
================================================================================
================================================================================
2,779,133 SHARES OF COMMON STOCK
OMNI MULTIMEDIA GROUP, INC.
----------------------
PROSPECTUS
----------------------
NOVEMBER __, 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 ...................................... $ 2,500
American Stock Exchange Additional Listing ........... $ 17,500
Legal Fees*........................................... $ 15,000
Accounting Fees*...................................... $ 10,000
Miscellaneous*........................................ $ 5,000
---------
Total*....................................... $ 50,000
=========
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."
II-1
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 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
No. Title
------- -----
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)
II-2
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:
(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
II-3
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.
(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 29th
day of November, 1996.
OMNI MULTIMEDIA GROUP, INC.
Date: November 29, 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, November 29, 1996
Paul F. Johnson Chairman of the Board of
Directors and Secretary
(Principal Executive Officer)
/s/ Robert E. Lee
--------------------------------- Executive Vice President, Chief November 29, 1996
Robert E. Lee Financial Officer, Director
and Treasurer
(Principal Financial and
Principal Accounting Officer)
/s/ Richard A. Pilotte
-------------------------------- Vice President of Operations and November 29, 1996
Richard A. Pilotte Director
/s/ Richard L. Wise
-------------------------------- Director November 29, 1996
Richard L. Wise
/s/ Ronald F. Ladner
------------------------------- Director November 29, 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
November 29, 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 2,779,133 shares of its Common Stock, $.01 par value per
share (the "Common Stock"), issuable upon conversion of the issued Series A
Convertible Preferred Stock (the "Private Placement").
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.
November 29, 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
November 29, 1996
