SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 28, 1996
Commission file number 1-13656
OMNI MULTIMEDIA GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 04-2729490
(State of Organization) (I.R.S. Employer
Identification Number)
50 Howe Avenue
Millbury, Massachusetts 01527
(508) 865-4451
(Address, including zip code, and telephone number,
including area code, of issuer's principal executive offices)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Number of Shares Outstanding
as of February 13, 1997
Common Stock, $.01 par value 9,511,623
OMNI MULTIMEDIA GROUP, INC.
INDEX
Part I. Financial Information.
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheet -
as of March 30, 1996 (Audited) and December 28, 1996 (Unaudite....... 2
Condensed Consolidated Statements of Operations (Unaudited)
for the three and nine month periods ended December 28, 1996
and December 30, 1995................................................ 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the nine months ended December 28, 1996 and December 30, 1995.... 5
Notes to Condensed Consolidated Financial Statements................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 7
Part II. Other Information.
Item 1. Legal Proceedings............................................ 10
Item 2. Changes in Securities........................................ 10
Item 3. Defaults Upon Senior Securities.............................. 10
Item 4. Submission of Matters to a Vote of Security-Holders.......... 10
Item 5. Other Information............................................ 10
Item 6. Exhibits and Reports on Form 8-K............................. 10
Signatures............................................................. 11
- ----------
OMNI MULTIMEDIA GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
December 28, March 30,
1996 1996
(Unaudited) (Audited)
Current Assets
Cash and cash equivalents $5,209,426 $ 5,706,822
Accounts receivable, net of
allowance for doubtful accounts
of $250,000 at December 28, 1996
and $25,000 at March 30, 1996 3,131,729 1,306,212
Stock Subscriptions -- 1,790,374
Inventories 1,299,909 966,665
Prepaid expenses and other
current assets 841,545 812,103
Deferred tax assets, net 101,844 101,844
------------- -------------
10,584,453 10,684,020
------------- -------------
Property and equipment, net 20,966,263 8,427,275
Due from related parties 661,872 532,761
Other assets, net 1,450,821 954,230
-------------- --------------
$ 33,663,409 $20,598,286
============ ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-1-
OMNI MULTIMEDIA GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
December 28, March 30,
1996 1996
(Unaudited) (Audited)
Current liabilities
Accounts payable $ 2,005,637 $ 1,775,225
Line of credit 1,806,315 1,068,967
Current portion of long-term debt
and capital lease obligations 2,888,000 1,025,600
Accrued expenses 925,212 332,561
Income taxes payable -- 190,063
------------------ ---------------
7,625,164 4,392,416
------------ --------------
Long-term debt 4,377,142 2,207,479
Capital lease obligations 8,665,123 1,760,919
Deferred tax liability 141,761 141,761
--------------- ---------------
13,184,026 4,110,159
Stockholders' Equity
Convertible Preferred stock; $.01 par value;
1,000,000 shares authorized; 14 Series A shares
issued and outstanding
Common Stock; $.01 par value; 14,000,000 shares 1 --
authorized; 9,444,476 shares issued and outstanding
at December 28, 1996 38,909 38,899
Additional paid-in-capital 21,238,646 11,635,675
Retained earnings (accumulated deficit) (7,689,181) 421,137
------------- ---------------
13,588,375 12,095,711
Less cost of treasury stock (634,156) --
-------------- -----------------
12,854,219 12,095,711
$ 33,663,409 $ 20,598,286
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-2-
OMNI MULTIMEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 28, December 30, December 28, December 30,
1996 1995 1996 1995
------ ------ ------ -----
<S> <C> <C> <C> <C>
Net sales $ 4,009,797 $ 7,409,591 $ 8,625,275 $15,121,368
Cost of goods sold 4,402,877 5,545,520 10,274,001 11,329,189
-------------- ------------- ------------- -----------
Gross profit ( 393,080) 1,864,071 ( 1,648,726) 3,792,179
--------------- ------------- ------------- ------------
Operating expenses
Selling 1,371,084 532,370 2,986,717 1,503,979
General and administrative 1,288,368 530,574 2,810,965 1,383,819
--------------- -------------- -------------- ------------
2,659,452 1,062,943 5,797,682 2,887,798
--------------- ------------- --------------
Income (loss) from operations ( 3,052,532) 801,128 ( 7,446,408) 904,383
Other income 260,585 26,555 503,951 64,945
---------------- --------------- --------------- --------------
( 2,791,947) 827,683 6,942,457 969,328
Other expenses
Interest expense 439,024 84,438 864,737 176,307
Write-off of deferred finance costs -- 91,777 -- 91,777
Other expenses 234,350 1,200 303,124 2,445
---------------- ---------------- --------------- ---------------
673,374 177,415 1,167,861 270,529
--------------- -------------- -------------- -------------
Income (loss) before income taxes ( 3,465,321) 650,268 ( 8,110,318) 698,799
Income tax provision -- 266,000 -- 290,000
-------------------- -------------- -------------------- -------------
Net income (loss) $ (3,465,321) $ 384,268 $ (8,110,318) $ 408,799
============= ============= ============= ============
Primary net income (loss) per share $ (0.44) $ 0.13 $ (1.55) $ 0.15
Primary weighted average common shares
outstanding 7,815,740 2,957,206 5,246,307 2,756,974
Fully diluted net income (loss) per
share $ (0.37) $ 0.13 $ (0.95) $ 0.15
Fully weighted average Common shares
outstanding 9,444,476 2,957,206 8,498,149 2,756,974
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-3-
OMNI MULTIMEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Ended
December 28, December 30,
1996 1995
------ -----
Cash flows from operating activities:
Net income (loss) $ (8,110,318) $ 408,799
Adjustments to reconcile net income (loss) to net cash used by operating
activities:
Depreciation and amortization 1,784,306 398,178
Warrants issued in connection with stock restructuring 200,000 --
Write off of deferred finance costs -- 91,777
Provision for losses on accounts receivable 345,183 21,570
Gain on disposal of fixed asset (590) 26,265
Increase in accounts receivable (743,204) (3,154,919)
Increase in inventories (95,851) (522,144)
(Increase) decrease in prepaid expenses and other current assets 30,922 (450,451)
Increase in refundable income taxes -- --
Increase in deferred income taxes -- 39,000
Increase in other assets (386,208) (339,109)
Increase (decrease) in accounts payable (396,807) 1,290,366
Increase (decrease) in accrued expenses (50,757) 50,511
Increase (decrease) in income taxes payable (190,063) 254,107
------------- -------------
Net cash (used in) by operating activities (7,613,387) (1,886,020)
Cash flows from investing activities:
Expenditures for property and equipment (4,646,203) (1,470,973)
-----------
Proceeds from sale of fixed assets 18,100 --
Purchase of A.I. Acquisition, net of cash acquired 125,971 --
-------------- --------------
Net cash used in investing activities (4,502,132) (1,470,973)
Cash flows from financing activities:
Repayments on long-term borrowing and capital lease obligations (1,494,968) (738,264)
Repayments on notes payable - redeemable Common Stock -- (346,000)
Repayments on notes payable - redeemable Preferred Stock -- (307,000)
Repayments on Interim financing -- (325,000)
Proceeds from long term borrowing 3,342,900 579,138
Advances (Repayments) on revolving line of credit, net (464,217) 565,384
Decrease in subscription receivable 1,790,374 --
Proceeds from issuance of Preferred Stock 9,352,982 --
Purchase of treasury stock (684,156) --
Repayments on loans from stockholders -- (25,000)
Proceeds from issuance of Common Stock -- 4,081,496
Increase in due from related parties (129,111) (27,314)
Increase in debt issue costs (95,681) --
----------------- -------------------
Net cash provided by financing activities 11,618,123 3,457,440
Increase in cash and cash equivalents 497,346 100,447
Cash and cash equivalents, beginning of period 5,706,822 266,674
-------------- -------
Cash and cash equivalents, end of period $ 5,209,426 $ 367,121
============== ============
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
-4-
OMNI MULTIMEDIA GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of OMNI MultiMedia Group, Inc. (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete consolidated financial
statements.
In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) considered necessary for a fair statement of the
interim financial data have been included. Results from operations for the three
and nine month period ended December 28, 1996 and December 30, 1995 are not
necessarily indicative of the results that may be expected for the fiscal year
ending ________________, 1997.
For further information, refer to the consolidated financial statements
and the footnotes thereto for the year ended March 30, 1996, filed with the
Securities and Exchange Commission in accordance with Rule 15(d)-2 of the
Exchange Act of 1934.
Net income (loss) per share is computed based upon the weighted average
number of common and dilutive common equivalent shares outstanding during the
period.
Note 2.
Nine Months Ended
December 28, December 30
1996 1995
---------------- -----------
Net Sales $ 15,090,629 $ 27,624,318
Cost of goods sold 15,610,303 22,252,310
------------- -------------
Gross profit (519,674) 5,372,008
Operating expenses:
Selling 3,993,339 2,574,302
General and administration 3,865,550 2,899,320
-------------- ------------
7,858,889 5,473,622
-------------- ------------
Income (loss) from operations (8,378,563) (101,614)
Other income 536,889 102,230
Other expenses
Interest expense 987,871 369,448
Other expenses 328,142 103,793
--------------- ------------
1,316,013 473,241
--------------- ------------
Loss before income taxes (9,157,687) (472,625)
Income tax - 290,000
--------------- ------------
Net loss $ (9,157,687) $ (792,625)
--------------- ------------
-5-
Item Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements of the Company (including the Notes
thereto) appearing elsewhere in this Prospectus.
Results of Operations
Three Months Ended December 28, 1996 Compared to the Three Months Ended December
30, 1995.
Nine Months Ended December 28, 1996 Compared to the Nine Months Ended December
30, 1995.
Liquidity and Capital Resources
Inflation
Potential Quarterly Fluctuations and Seasonality of Business
-6-
Three Months Ended December 28, 1996 ("Third Quarter 1997") compared to
the Three Months Ended December 30, 1995 ("Third Quarter 1996").
Net sales decreased to $4,009,797 for Third Quarter 1997, a decrease of
46% over net sales of $7,409,591 in Third Quarter 1996. This decrease was
primarily due to the faster than expected decline in demand for software
duplication services for 3 1/2" diskettes, which the Company believes to be
industry-wide. This decline was combined with the start-up phase of the
Company's CD-ROM manufacturing facility, which did not become fully operational
until the end of the second fiscal quarter.
In addition, revenues from the Company's CD-ROM manufacturing
operations and 4 CD's electronic catalog have not increased as originally
forecast. The Company anticipates that the expansion of its sales force will
result in increased sales over the next fiscal quarters.
Selling expenses in Third Quarter 1997 were $1,371,084, a 157% increase
over selling expenses of $532,370 in Third Quarter 1996. This increase was
primarily due to increased advertising costs, the cost of hiring sales staff for
the sale of CD-ROM products from the new Massachusetts CD-ROM manufacturing
facility and increased payroll associated with the operation of the Company's
sales organization in California, which it acquired during the second quarter.
General and administrative expenses were $1,288,368 in Third Quarter
1997, a 143% increase over general and administrative expenses of $530,573 in
Third Quarter 1996. This increase was primarily due to increases in
administrative staffing associated with the California facility, MIS and SIMIX
manufacturing systems, and the greater cost of operating two facilities, as well
as increased travel, consulting, public relations and professional fees.
During Third Quarter 1997, the Company incurred a one-time charge of
$200,000 in connection with the restructuring of its Series A Convertible
Preferred Stock (the "Preferred Stock"). This amount represents a $50,000
consulting fee, an expense associated with the issuance of
8
warrants for financial consulting services. During Third Quarter 1997, the
Company and a private investor group either purchased and converted or redeemed
approximately $9,352,982 of the Company's Preferred Stock. Of the 1,050 shares
of Preferred Stock issued in May 1996, only 14 shares remain issued and
outstanding.
As a result of decreases in net selling and increased sales, general
and administrative expenses, the Company incurred a loss from operations of
$3,465,321 in Third Quarter 1997, as contrasted to income from operations of
$650,268 in Third Quarter 1996.
As a result of the factors described above, the Company incurred a net
loss $3,465,321 in Third Quarter 1997 as compared to a net income of $34,268 in
Third Quarter 1996. This translates to a net loss of $ 0.44 and $ 0.37for
primary and fully diluted earnings per share, respectively, in Third Quarter
1997 as contrasted to a net profit of $0.13 per share in Third Quarter 1996.
During Third Quarter 1997, there were 7,815,740 common shares outstanding on a
weighted average basis for primary and fully diluted earnings per share,
respectively, as contrasted to 2,957,206 shares issued and outstanding on a
weighted average basis for Third Quarter 1996.
LIQUIDITY AND CAPITAL RESOURCES
Management anticipates that its current cash position, together with
cash generated from anticipated results of operations and credit and equipment
lease facilities will be adequate for at least the next 12 months. The Company
routinely explores acquisitions and, although not currently anticipated, the
Company may seek additional capital to finance future acquisitions, strategic
partnerships, or to provide additional working capital. Should results of
operations not be as anticipated, the Company may be required to seek additional
financing which may not be available on terms favorable to the Company, if at
all.
At December 28, 1996, the Company had cash and cash equivalents of
$5,209,426. Cash used in operating activities for the nine months ended December
28, 1996 was $7,613,387, compared to cash used in operating activities for the
nine months ended December 30, 1995 of $1,886,020, primarily reflecting the net
loss for the period. Cash used in investing activities included $(4,646,203) of
expenditures for property and equipment in connection with the start-up of the
8
Company's CD-ROM manufacturing facility. Cash provided by financing activities
was $11,618,123 during the nine months ended December 28, 1996, reflecting
principally the proceeds from the issuance of the Company's Series A Preferred
Stock in May 1996.
9
Part II. Other Information.
Item 1. Legal Proceedings.
[Not applicable.]
Item 2. Changes in Securities.
[Not applicable.]
Item 3. Defaults upon Senior Securities.
[Not applicable.]
Item 4. Submission of Matters to a Vote of Security-Holders.
No matters have been submitted to a vote of security-holders during the
period covered by this report.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 11. Statement regarding computation of per share earnings.
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K.
The Company filed an amendment to a Current Report on Form 8-K/A
to include the audited financial statements of Allenbach Industries, Inc. for
the fiscal years ended December 31, 1994 and 1995 and the audited pro-forma
condensed combined financial statements of the Registrant.
-10-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMNI MULTIMEDIA GROUP, INC.
Date: February 18, 1997 By: /s/ Paul F. Johnson
--------------------
Paul F. Johnson, President and
Chief Executive Officer
Date: February 18, 1997 By: /s/ Robert E. Lee
------------------
Robert E. Lee, Treasurer and
Chief Financial Officer
-11-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMNI MULTIMEDIA GROUP, INC.
Date: February 18, 1997 By:
-----------------------------
Paul F. Johnson, President and
Chief Executive Officer
Date: February 18, 1997 By:
Robert E. Lee, Treasurer and
Chief Financial Officer
OMNI MULTIMEDIA GROUP, INC.
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 28, December 30, December 28, December 30,
1996 1995 1996 1995
------ ------ ------ -----
<S> <C> <C> <C> <C>
Net income(loss) $ (3,465,321) $ 384,268 $ 8,110,318 $ 408,799
Primary weighted common
shares outstanding:
Common Stock 7,815,740 2,751,500 5,246,307 2,667,167
Stock options -- (1) 64,651 -- (1) 49,905
Stock warrants -- (1) 141,055 -- (1) 39,902
----------- ----------- --------------
Weighted average shares 7,815,740 2,957,206 5,246,307 2,756,974
=========== =========== ============== ============
Net income per share ($ 0.44) 0.13 ($ 1.55) $ 0.15
=========== =========== ============== ============
Fully diluted weighted
common shares outstanding:
Common Stock 7,815,740 2,751,500 5,246.307 2,667,167
Stock Options --(1) 64,651 --(1) 49,905
Stock Warrants --(1) 141,055 --(1) 39,902
Shares attributable
to Preferred Stock
converted using the
if converted method
Fully diluted weighted 1,628,736 -- 3,251,842 --
------------ ------------ ------------- ------------
average shares 9,444,476 2,957,206 8,498,149 2,756,974
============ ============ ============= ============
Fully diluted net income
(loss per share) ($ 0.37) $ 0.13 ($ 0.95) $ 0.15
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AT DECEMBER 28, 1996 AND THE COMPANY'S STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 28, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-END> DEC-28-1996
<CASH> 5,209,426
<SECURITIES> 0
<RECEIVABLES> 3,381,729
<ALLOWANCES> 250,000
<INVENTORY> 1,299,909
<CURRENT-ASSETS> 10,584,453
<PP&E> 24,762,089
<DEPRECIATION> 3,795,826
<TOTAL-ASSETS> 33,663,409
<CURRENT-LIABILITIES> 7,625,164
<BONDS> 0
0
1
<COMMON> 38,909
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 33,663,409
<SALES> 4,009,797
<TOTAL-REVENUES> 4,009,797
<CGS> 4,402,877
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 234,350
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 439,024
<INCOME-PRETAX> (3,465,321)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,465,321)
<EPS-PRIMARY> (0.44)
<EPS-DILUTED> (0.37)
</TABLE>
