SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly
period ended: September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 for the transition
period from _____to______
Commission file number: 0-25203
OMNICOMM SYSTEMS, INC.
(Name of small business issuer in its charter)
Delaware 11-3349762
(State of incorporation) (IRS employer Ident. No.)
3250 Mary Street, #307, Miami, FL. 33313
(Address of principal office) (Zip Code)
Registrant's telephone number: (305) 448-4700
Indicate by check mark whether the Registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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_____
The number of shares outstanding of each of the
issuer's classes of equity as of September 30, 1999:
2,047,377 common stock $.001 par value.
OMNICOMM SYSTEMS, INC.
Part I - Financial Information Page
Consolidated Balance Sheet -
September 30, 1999 and December 31, 1998
Consolidated Statements of Shareholders'
Equity(Deficit) -
January 1, 1998 to September 30, 1999
Consolidated Statements of Operations -
Three months and Nine months ended
September 30, 1999 and 1998
Consolidated Statement of Cash Flows -
Nine months ended September 30, 1999
and 1998
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results
Part II - Other Information
Item 2, Changes in Securities
Item 5, Other Information
Item 6, Exhibits and Reports on Form 8-K
Signature Page
OMNICOMM SYSTEMS, INC.
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
I N D E X
Page
CONSOLIDATED BALANCE SHEETS 1
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) 2
CONSOLIDATED STATEMENTS OF OPERATIONS 3-4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
NOTES TO THE FINANCIAL STATEMENTS 6-13
OMNICOMM SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
A S S E T S
Sept. 30,
1999 December 31,
(Unaudited) 1998
CURRENT ASSETS
Cash $ 187,310 $ 44,373
Accounts Receivable 35,186 77,188
Inventory 1,158 4,240
Total Current Assets 223,654 125,801
PROPERTY AND EQUIPMENT - Net 235,854 33,352
OTHER ASSETS
Stockholder Loans 8,406 3,406
Intangible Assets, net 197,947 163,276
Goodwill, net 277,471 396,387
Other Assets 1,800 9,300
TOTAL ASSETS $ 945,132 $ 731,522
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 140,311 $ 286,478
Notes Payable - Current 67,500 262,500
Sales Tax Payable 11,330 39,835
Due to Factoring Agent -0- 139,012
Total Current Liabilities 219,141 727,825
Notes Payable - Long Term -0- 182,500
Convertible Notes 862,500 -0-
Total Liabilities 1,081,641 910,325
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred Stock - 8,000,000 shares
authorized, none issued and
outstanding at $.001 par value -0- -0-
5% Series A Convertible Preferred Stock,
2,000,000 shares authorized,1,300,000
and -0- issued and outstanding,
respectively, at par 1,244,910 -0-
Common Stock - 20,000,000 shares
authorized, 1,679,377 and 1,343,000
issued and outstanding, respectively,
at $.001 par value 236,199 132,604
Retained Earnings (Deficit) (1,617,618) (311,407)
(136,509) (178,803)
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ 945,132 $ 731,522
The accompanying notes are an integral part of these financial
statements.
Page 1 of 13
OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
For The Period January 1, 1998 to September 30, 1999
Total
5% Series A Convertible Share-
Common Stock Preferred Stock Retained holders'
Number $.001 Number Earnings Equity
of Shares Value of Shares $ Par (Deficit) (Deficit)
JAN. 1, 1998 1,002,250 $ 187 $ (16,040) $ (15,853)
Issuance of
Common Stock 199,750 63 63
Acquisition
of Education
Navigator
Inc. 141,000 132,354 132,354
Net Income
(Loss) for
Year Ended
Dec 31, 1998 (295,367) (295,367)
BALANCES AT
DEC 31, 1998
(Audited) 1,343,000 132,604 (311,407) (178,803)
Issuance of
Common Stock 250,000 250 250
Issuance of
Common Stock
for Services 86,377 56,145 56,145
Issuance of
Common Stock 300,000 3,000 3,000
Issuance of
Common Stock
for Services 68,000 44,200 44,200
Issuance of
Preferred Stock,
net of $95,090
Issuance Costs 1,300,000 1,244,910 1,244,910
Net Income
(Loss) for nine
months ended
Sept 30 1999 (1,306,211)(1,306,211)
BALANCES AT
SEPT 30 1999
(Unaudited) 2,047,377 $236,199 1,300,000 $1,244,910 $(1,617,618) $ (136,509)
The accompanying notes are an integral part of these financial statements.
Page 2 of 13
OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
September 30,
1999 1998
REVENUES - SALES, Net $ 244,536 $423,116
COST OF SALES 187,279 314,995
GROSS MARGIN 57,257 108,121
OTHER EXPENSES
Depreciation and Amortization 84,780 63,324
Interest Expense 21,638 (481)
Salaries and Wages 194,801 75,980
Factoring Fees 71 22,230
Rent 17,349 12,303
Independent Consultants 154,060 24,468
Selling, General and
Administrative 186,166 44,890
Income (Loss) Before Taxes (601,608) (134,593)
Income Tax Expense (Benefit) -0- (43,735)
NET INCOME (LOSS) $(601,608) $(90,858)
Net Income (Loss) Per Share,
Basic & Diluted $(.32) $(.07)
Weighted Average Number of
Shares Outstanding 1,895,247 1,343,000
The accompanying notes are an integral part of these financial statements.
Page 3 of 13
OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the nine months ended
September 30,
1999 1998
REVENUES - SALES, Net $ 1,156,937 $1,375,857
COST OF SALES 821,803 916,820
GROSS MARGIN 335,134 459,037
OTHER EXPENSES
Depreciation and Amortization 224,176 63,324
Interest Expense 51,077 1,719
Salaries and Wages 426,067 126,989
Factoring Fees 4,571 31,881
Rent 44,903 27,975
Independent Consultants 365,511 50,935
Selling, General and
Administrative 525,040 139,702
Income (Loss) Before Taxes (1,306,211) 16,512
Income Tax Expense (Benefit) -0- 3,265
NET INCOME (LOSS) $(1,306,211) $ 13,247
Net Income (Loss) Per Share,
Basic & Diluted $(.79) $.01
Weighted Average Number of
Shares Outstanding 1,655,612 1,226,834
The accompanying notes are an integral part of these financial statements.
Page 4 of 13
OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended
September 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(1,306,211) $ 13,247
Adjustment to Reconcile Net Income
to Net Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 224,176 63,324
Change in Assets and Liabilities,
net of effects of acquisition of
Education Navigator Inc (EdNav):
(Increase) Decrease in Accounts
Receivable 42,002 (178,910)
(Increase) Decrease in Inventory 3,082 -0-
(Increase) Decrease in Other Assets 2,500 7,500
Increase (Decrease) in Accounts
Payable and Accrued Expenses (146,167) 202,350
Increase (Decrease) in Sales
Tax Payable (28,505) 36,592
Increase (Decrease) in Due to
Factoring Agent (139,012) -0-
Net Cash Provided By (Used In)
Operating Activities (1,348,135) 144,103
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment (222,808) (2,168)
Purchase of Ed Nav, Net of Cash Acquired -0- (67,500)
Net Cash (Used In) Investing Activities (222,808) (69,668)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Proceeds from Convertible Notes,
net of issuance costs of $119,625 742,875 -0-
(Payments of) Notes Payable (377,500) (87,500)
Issuance of Common Stock 103,595 63
Issuance of Series A Convertible
Preferred 5% Stock, net of
issuance costs of $95,090 1,244,910 -0-
Net Cash Provided By (Used In)
Financing Activities 1,713,880 (87,437)
Net Increase (Decrease) in Cash and
Cash Equivalents 142,937 (13,002)
Cash and Cash Equivalents at
Beginning of Period 44,373 16,077
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 187,310 $ 3,075
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Income Tax Paid $ -0- $ -0-
Interest Paid $ 27,982 $ 1,719
The accompanying notes are an integral part of these financial statements.
Page 5 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS
OmniComm Systems, Inc. (the Company) formerly The Premisys
Group, Inc. was incorporated in Florida in February 1997.
The Company is a computer systems integrator providing
services and hardware sales for the installation of local and
wide area networks. The Company's customers are located
throughout North America.
In addition, the Company is developing a web based database
application for the collection, compilation, and validation
of clinical data over the internet. The application is
called TrialMaster.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid, short-term
investments with maturities of 90 days or less. The carrying
amount reported in the accompanying balance sheets
approximates fair value.
CONSOLIDATION
During the period from July 1, 1998 through December 31, 1998
the accounts of the Company's wholly owned subsidiary,
Omnicommerce Systems Inc. (Omnicommerce) were included in the
consolidated financial position and results of operations and
cash flows. Omnicommerce was formed in July 1998 for the
purpose of acquiring Education Navigator, Inc. (See Note 3,
Acquisition.) All significant intercompany transactions have
been eliminated in consolidation.
ACCOUNTS RECEIVABLE
Accounts receivable are judged as to collectibility by
management and an allowance for bad debts is established as
necessary. As of each balance sheet date, no reserve was
considered necessary.
COMMON STOCK
During the period January 1, 1998 to December 31, 1998 the
Company had authorized common stock of 10,000,000 shares with
no par value. On February 17, 1999 Omnicomm shareholders
exchanged all of their issued and outstanding common stock
for Coral Development Corp (Coral) common stock at the ratio
of 3.129 Omnicomm shares for one share of Coral in a reverse
merger (see footnote 10.)
Page 6 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Continued)
Concurrently, Omnicomm changed its common stock from no par
to $.001 per share and increased the number of authorized
shares from 10,000,000 to 20,000,000. All share and per
share information has been restated retroactively for all
periods to include the equivalent number shares exchanged in
the transaction and the redenomination of par value.
5% SERIES A CONVERTIBLE PREFERRED STOCK
During the quarter ended September 30, 1999, the company
designated 2,000,000 shares of its 10,000,000 authorized
preferred shares as 5% Series A Convertible Preferred Stock.
Each share is convertible into common stock at $1.50 per
share. In the event of liquidation, these shareholders will
be entitled to receive in preference to the holders of common
stock an amount equal to their original purchase price plus
all accrued but unpaid dividends. Dividends are payable at
the rate of 5% per annum semi-annually.
ADVERTISING
Advertising costs are expensed as incurred.
INTANGIBLE ASSETS AND GOODWILL
Included in Intangible Assets are the following assets:
Sept 30, 1999
Accumulated
Cost Amortization
Covenant not to compete $120,000 $ 75,000
Software development costs 87,500 36,458
Organization costs 539 315
Debt acquisition costs 119,625 17,944
$327,664 $129,717
December 31, 1998
Accumulated
Cost Amortization
Covenant not to compete $120,000 $30,000
Software development costs 87,500 14,583
Organization costs 539 180
Debt acquisition costs -0- -0-
$208,039 $44,763
The covenant not to compete and the software development
costs were acquired as a result of the acquisition of EdNav
(see Note 3). The covenant is for a two year period and is
being amortized ratably over that time. The software
development costs were capitalized and are being amortized
ratably over a three year period as that is the expected life
of the various products.
Page 7 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Continued)
During the first nine months of 1999, the Company issued
Convertible Notes totaling $862,500. The fees of $119,625
associated with these notes are being amortized ratably over
the term of the notes, which is five years. During the first
nine months of 1999, the amortization was $17,944.
Included in Goodwill, as a result of the EdNav acquisition
(see Note 3), at September 30, 1999 and December 31, 1998 is
the cost of $475,665 and accumulated amortization of $198,194
and $79,278, respectively. The goodwill is amortized ratably
over a three year period.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentration of credit risk are accounts receivable. Major
customers are as follows:
For the nine months ended
Sept 30, 1999 Sept 30, 1998
% of % of
Customer Sales $ Total Sales Sales $ TotalSales
Commercial
Services Inc $941,108 81% $1,086,439 79%
Office Depot
Inc $114,994 10% $ 114,719 8%
The Company performs ongoing credit evaluations of its
customers but generally does not require collateral to
support customer receivables. The loss of any one of these
customers could have a material adverse effect on the
financial condition of the company.
PROPERTY AND EQUIPMENT, At Cost
Property and equipment consists of the following:
December 31, 1998 Sept 30, 1999
Accumulated Accumulated
Cost Depreciation Cost Depreciation
Computer and
office
equipment $33,274 $4,636 $256,082 $24,412
Office
furniture 4,950 236 4,950 766
$38,224 $4,872 $261,032 $25,178
Renewals and betterments are capitalized; maintenance and
repairs are expensed as incurred.
Depreciation is calculated using the straight line method
over the asset's estimated useful life, which is 5 years for
equipment and 7 years for office furniture.
Depreciation expense for for the nine months ended September
30, 1999 and 1998 was $20,307 and $-0- respectively.
Page 8 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Continued)
REVENUE RECOGNITION POLICY
The company recognizes sales, for both financial statement
purposes and for tax purposes, when the products are shipped
and when services are provided.
ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes." SFAS 109 has as its
basic objective the recognition of current and deferred
income tax assets and liabilities based upon all events that
have been recognized in the financial statements as measured
by the provisions of the enacted tax laws.
Valuation allowances are established when necessary to
reduce deferred tax assets to the estimated amount to be
realized. Income tax expense represents the tax payable for
the current period and the change during the period in the
deferred tax assets and liabilities.
STOCK OPTION PLAN
In 1998 the Company initiated a stock option plan. The Plan
provides for granting Incentive Stock Options, Nonqualified
Stock Options, Stock Appreciation Rights, Restricted Stock
Awards, Phantom Stock Unit Awards and Performance Share
Units. In 1998 the Company granted an option to an employee
(see Note 3., Acquisition) to purchase 85,000 shares of
common stock. The option is exercisable after one year. No
compensation expense was recognized during 1998.
During the second and third quarters of 1999, the Company
issued 86,377 and 68,000, respectively, common shares to
employees and advisors under its stock bonus arrangement.
The Company adopted SFAS 123 to account for its stock based
compensation plans. SFAS 123 defines the "fair value based
method" of accounting for stock based compensation. Under
the fair value based method, compensation cost is measured
at the grant date based on the value of the award and is
recognized over the service period. In accordance with this
method, the Company recognized expense of $56,145 and
$44,200, respectively, during the second and third quarters
of 1999.
Page 9 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Continued)
NON CASH INVESTING AND FINANCING TRANSACTIONS:
Acquisition of all of the Outstanding Common Stock of
Education Navigator Inc. during the nine months ended
September 30, 1998
Assets Acquired, Fair Value $ 732,354
Notes to Sellers Issued (525,000)
Common Stock Issued (132,354)
Cash Acquired (7,500)
Net Cash Paid for Acquisition $ 67,500
NOTE 3: ACQUISITION
On June 26, 1998 the Company acquired all of the outstanding
common stock of Education Navigator, Inc. (EdNav). The
purchase has been accounted for under the purchase method in
accordance with APB Opinion 16. The Company paid the
sellingstockholders of EdNav $600,000 ($75,000 downpayment
and $525,000 in a promissory note) and issued 441,180 shares
of common stock of the Company to the selling stockholders
EdNav. The Company valued these shares at $.30 each based
principally on the earnings potential of the combined
operations. Therefore, the total purchase price was
$732,354.
The Company also granted a stock option to one selling
stockholder to purchase 85,000 shares of the Company for
$.60 per share. The option is pursuant to a stock option
plan (which has 3,000,000 shares reserved under the plan)
and is exercisable over the next three years at 14,166
shares, 28,334 shares and 42,500 shares, respectively.
EdNav is an Internet company that has developed and is
developing dynamic web applications for business. The
acquisition of EdNav is accounted for as under the purchase
method. All results of EdNav's operations are included in
the financial statements from June 26, 1998 forward. The
acquisition resulted in $475,665 recorded as goodwill, which
will be amortized ratably over 3 years.
The fair value of the assets acquired were as follows:
Cash $ 7,500
Accounts receivable 13,945
Computer and office equipment 27,744
Covenant not to compete 120,000
Software developed 87,500
Goodwill 475,665
$732,354
The following table shows the unaudited results of
operations on a pro forma basis for the period presented as
though the companies had combined at the beginning of the
period. This information is presented for informational
purposes only and does not purport to be indicative of the
results of operations that actually would have resulted if
the acquisition had been consummated on January 1, 1998 nor
which may result from future operations.
Page 10 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Continued)
1/1/98-9/30/98
Revenues $1,460,791
Income (Loss) before
extraordinary items (111,927)
Net Income (Loss) (111,927)
Earnings (Loss)
Per Share $(.08)
Weighted Average
Shares Outstanding 1,320,318
Proforma adjustments to the results of operations are as
follows:
1/1/98-9/30/98
Depreciation $ 2,774
Amortization:
Software developed 14,583
Covenant not to Compete 30,000
Goodwill 79,278
126,635
EdNav net income (Loss):
1/1/98-6/30/98 403
Proforma Adjustment $127,038
NOTE 4: NOTES PAYABLE
At December 31, 1998 the Company owed $445,000 to the
selling stockholders of Ed Nav (see Note 3). The notes are
payable over the next two years and bear interest at 5.51%
annually. The amount payable in the fiscal year 1999 is
$262,500 and the amount due in the fiscal year 2000 is
$182,500. At September 30, 1999 the Company owed a total of
$67,500 on these notes.
NOTE 5: CONVERTIBLE NOTES
During the first quarter of 1999, the Company issued
Convertible Notes Payable in the amount of $862,500 pursuant
to a Confidential Private Placement Memorandum. There were
costs of $119,625 associated with this offering. The
Company also granted the agent the option to purchase
250,000 common shares at $.001. The agent exercised the
option. The net proceeds to the Company was $742,875. The
notes bear interest of ten (10) percent annually, payable
semi-annually. The notes are convertible after maturity,
which is five (5) years, into shares of common stock of the
Company at $1.25 per share, including registration rights.
Page 11 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Continued)
NOTE 6: COMMITMENTS AND CONTINGENCIES
The company is currently in a lease for office space
requiring minimum annual base rental payments for the fiscal
periods shown as follows:
1999 $ 25,747
2000 26,552
2001 27,357
2002 28,161
2003 28,966
Total $136,783
In addition to annual base rental payments, the company must
pay an annual escalation for operating expenses as
determined in the lease.
NOTE 7: INCOME TAXES
Income taxes are accrued at the statutory U.S. and state
income tax rates.
Income tax expense is as follows:
9/30/99 9/30/98
Current tax expense (benefit):
Income tax at statutory rates $ -0- $3,265
Deferred tax expense (benefit):
Amortization of Goodwill and
Covenant (25,038) -0-
Operating Loss Carryforward (10,154) -0-
35,192 3,265
Valuation allowance (35,192) -0-
Total Tax Expense (Benefit) $ -0- $3,265
The tax effect of significant temporary differences, which
comprise the deferred tax assets are as follows:
9/30/99 12/31/98
Deferred tax assets:
Amortization of Intangibles $ 73,457 $ 48,419
Operating loss carryforwards 69,097 58,943
Gross deferred tax assets 142,554 107,362
Valuation allowance (142,554) (107,362)
Net deferred tax assets $ -0- $ -0-
During 1998 the Company incurred a net operating loss (NOL)
for income tax purposes of approximately $170,000. This loss
is allowed to be offset against future income until the year
2018 when the NOL will expire. Other timing differences
relate to depreciation and amortization for the stock
acquisition of EdNav (Note 3).
The tax benefits relating to all timing differences have been
fully reserved for in the valuation allowance account due to
the lack of operating history and substantial losses.
Page 12 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Continued)
NOTE 8: RELATED PARTY TRANSACTIONS
The Company was owed $8,406 and $3,406 at September 30, 1999
and December 31, 1998, respectively from a shareholder. The
amount is payable on demand. The interest rate is 6%
annually.
NOTE 9: POSTRETIREMENT EMPLOYEE BENEFITS
The Company does not have a policy to cover employees for any
health care or other welfare benefits that are incurred after
employment (postretirement). Therefore, no provision is
required under SFAS's 106 or 112.
NOTE 10: REVERSE MERGER
On February 17, 1999 Omnicomm merged with Coral Development
Corp. (Coral) in a reverse merger. In consideration of
receiving all of the issued and outstanding shares of
Omnicomm, Coral will issue 940,000 restricted shares of
common stock to the shareholders of Omnicomm. Coral had
403,000 shares issued and outstanding prior to the merger.
The merger was accounted for as a reverse merger since
Omnicomm is the continuing entity as a result of the
recapitalization. Accordingly, a recapitalization occurred
and no goodwill was recorded and the operating results of
Coral have been included in the financial statements from the
date of consummation of the merger. On this basis, the
historical financial statements prior to February 17, 1999
represent the consolidated financial statements of Omnicomm.
The historical shareholders' equity accounts of Omnicomm as
of September 30, 1999 have been retroactively restated for
all periods presented to reflect the issuance of the
additional 940,000 shares. All share and per share amounts
have been retroactively restated for all periods to include
the equivalent number of shares received in the transaction.
NOTE 11: INTERIM FINANCIAL REPORTING
The unaudited financial statements of the Company for the
period from January 1, 1999 to September 30, 1999 have been
prepared by management from the books and records of the
Company, and reflect, in the opinion of management, all
adjustments necessary for a fair presentation of the
financial position and operations of the Company as of the
period indicated herein, and are of a normal recurring
nature.
Page 13 of 13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation
Forward Looking Statements
In addition to historical information, this Quarterly Report contains
"forward looking statements". These statements can often be identified
by the use of forward-looking terminology such as "estimate", "project",
"believe", "expect", "may", "will", "should", "intends", or
"anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy that involve risks
and uncertainties. We wish to caution the reader that these forward-
looking statements, such as statements relating to timing, costs and of
the acquisition of, or investments in, existing business, the revenue
profitability levels of such businesses and other matters contained in
this Quarterly Report regarding matters that are not historical facts,
are only predictions. No assurance can be given that plans for the
future will be consummated or that the future results indicated, whether
expressed or implied, will be achieved. While sometimes presented with
numerical specificity, these plans and projections and other forward-
looking statements are based upon a variety of assumptions, which we
consider reasonable, but which nevertheless may not be realized.
Because of the number and range of the assumptions underlying our
projections and forward-looking statements, many of which are subject to
significant uncertainties and contingencies that are beyond our
reasonable control, some of the assumptions inevitably will not
materialize, and unanticipated events and circumstances may occur
subsequent to the date of this Quarterly Report. Therefore, our actual
experience and results achieved during the period covered by any
particular projections or forward-looking statements may differ
substantially from those projected. Consequently, the inclusion of
projections and other forward-looking statements should not be regarded
as a representation by us or any other person that these plans will be
consummated or that estimates and projections will be realized, and
actual results may vary materially. There can be no assurance that any
of these expectations will be realized or that any of the forward-
looking statements contained herein will prove to be accurate.
RESULTS OF OPERATION
Revenues:
Total revenues decreased to $244,536 from $423,116 and $1,156,937 from
$1,375,857 for the three and nine month periods ending September 30,
1999 compared to the corresponding periods in fiscal year 1998. This
decrease in revenue is primarily attributed to a decrease in projects
initiated by Office Depot and Commercial Services International.
Substantially all of the revenue is attributed to three clients:
Commercial Services International, Office Depot, and Republic
Industries. Of these three, Commercial Services International is
responsible for 81% of the total revenue.
All of the Company's revenue is attributed to its systems integration
business. The Company has earned no revenue from its TrialMasterTM
system.
Operating Expenses:
Total operating expenses increased to $658,865 from $242,714 and
$1,641,345 from $442,525 for the three and ninth month periods ending
September 30, 1999 compared to the corresponding periods in fiscal year
1998. This substantial increase in operating expenses is attributed to
a number of factors including the continuing financial obligations
associated with the acquisition of Education Navigator in June of 1998
and the decision to focus the Company's resources on the development of
the TrialMasterTM Internet system.
Salaries and Wages. Salaries and wages increased to $194,801 from
$75,980 and $426,067 from $126,989 for the three and ninth month periods
ending September 30, 1999 compared to the corresponding periods in
fiscal year 1998. The increase in salaries and wages is attributed to an
increase in the number of employees currently employed by the Company.
The Company currently has thirteen employees.
Independent Consultants. Fees to independent consultants increased to
$154,060 from $24,468 and $365,511 from $50,935 for the three and ninth
month periods ending September 30, 1999 compared to the corresponding
period in fiscal year 1998. The Company decided to outsource a number of
areas during the initial phase of developing, marketing and implementing
the TrialMasterTM system. These areas concern product development,
marketing and sales, and medical/strategic consulting.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $186,166 from $44,890 and $525,040 from $139,702
for the three and ninth month periods ending September 30, 1999 compared
to the corresponding periods in fiscal year 1998. The substantial
increase in selling, general and administrative expenses is attributed
to the increase in operations related to the development and marketing
of the Company's TrialMasterTM system.
LIQUIDITY AND CAPITAL RESOURCES:
Cash and cash equivalents increased to $187,310 from $44,373 for the
period ending September 30, 1999 compared to the period ending December
31, 1998. The increase is attributed to the cash received from the
private placement of the 5%, Series A Convertible Preferred shares. See
Item 2.
Total liabilities increased to $1,081,641 from $910,325 for the period
ending September 30, 1999 compared to the period ending December 31,
1998. The increased in total liabilities are primarily attributed to the
placement of convertible notes totaling $862,500.
The Company generated losses of $601,608 and $1,306,211 from operations
for the three and nine month periods ending September 30, 1999 compared
to a loss of $90,858 and income of $13,247 for the corresponding period
in fiscal year 1998. The loss is primarily attributed to the continued
financial obligations associated with the acquisition of Education
Navigator in June of 1998 and the development and marketing of the
TrialMasterTM system.
The Company has initiated a private placement of 5% Series A Convertible
Preferred Shares to accredited investors pursuant to Regulation S of the
Securities Act of 1933, as amended. See Item 2.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Preferred Stock
On June 28, 1999, the Company amended its articles of incorporation
to create a class of preferred stock. The Company shall have the
authority to issue 10,000,000, $.001 par value preferred shares. The
board of directors of the Company shall have the authority to divide the
preferred into series or classes and to designate the respective rights
of each series or class.
5% Series A Convertible Preferred Stock
On July 19, 1999, the Company filed a certificate of designation
authorizing the creation of a 5% Series A Convertible Preferred stock
("Preferred Stock"). The preferences of the Preferred Stock are as
follows:
1. In the event of liquidation, the holders of Preferred Stock will be
entitled to receive in preference to the holders of Common Stock an
amount equal to their original purchase price plus all accrued but
unpaid dividends.
2. Dividends shall be paid at the rate of 5.00% (five percent) per annum
(365 days), payable semi-annually, on January 1 and July 1 of each
following year.
3. Conversion: (a) Voluntary Conversion: The holders of Preferred Stock
shall have the right to convert at any time at the option of the holder,
each share of Preferred Stock into one share of Common Stock, subject to
antidilution provisions set forth in subsection (c) below. (b) Automatic
Conversion: At any time after one year from the date of the final
Closing Date, the Company can require that all outstanding shares of
Preferred Stock be automatically converted at the conversion then in
effect if at the time (a) the closing bid price of the Company's Common
Stock has exceeded $3.00 for 20 consecutive trading days; (b) the
Company's Common Stock has been listed on the Nasdaq or such other
comparable national stock exchange and; (c) a registration statement
covering the shares of Common Stock issuable upon conversion of the
Preferred Stock has been filed with the Securities and Exchange
Commission and declared effective.
4. Anti-Dilution: Each share of Preferred Stock upon conversion into
Shares shall have proportional antidilution protection for stock splits,
stock dividends, combinations, and recapitalizations. The conversion
price shall also be subject to adjustment to prevent dilution in the
event the Company issues additional shares of Common Stock or
equivalents at a purchase price less than the applicable conversion
price.
5. The Preferred Stock shall not be sold, assigned, transferred or
pledged except upon satisfaction of the conditions specified in the
subscription agreement executed by the Holder, which conditions are
intended to ensure compliance with the provisions of the Securities Act.
Each Holder will cause any proposed purchaser, assignee, transferee, or
pledgee of the Preferred Share or the Common Stock issuable upon
conversion held by a Holder to agree to take and hold such securities
subject to the provisions and conditions of the subscription agreement.
6. Each certificate representing (i) the Preferred Stock and (ii) any
other securities issued in respect of the Preferred Stock upon any stock
split, stock dividend, recapitalization, merger, consolidation or
similar event, shall be stamped or otherwise imprinted with a legend in
the following form (in addition to any legend required under applicable
state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES
AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.
7. A Holder shall have a right to vote that number of votes equal to the
number of shares of Common Stock issuable upon conversion of the
Preferred Stock.
In addition to the foregoing, a holder of the Preferred Stock shall
have registrations rights shares of Common Stock issuable upon
conversion of the Preferred Stock.
Issuance of Unregistered Securities
The Company issued 1,300,000 of its Series A 5% Convertible
Preferred Shares ("Shares") realizing gross proceeds of $1,244,910 from
the placement of the shares. Attendant to the issuance of the Shares the
Company issued 300,000 shares of its common stock realizing gross
proceeds of $3,000.
The Company issued shares of common stock totaling 68,000 shares to
employees and members of its Medical Advisory Board. The shares were
issued pursuant to Rule 701 and Sec. 4(2) of the Act.
Item 5. Other Information
See Item 2, above.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K filed March 3, 1999; Items 1,2,5, and 6.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersibned thereunto duly authorized.
By: Peter Knezevich
Chief Executive Officer
Dated: November 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 187310
<SECURITIES> 0
<RECEIVABLES> 35186
<ALLOWANCES> 0
<INVENTORY> 1158
<CURRENT-ASSETS> 223654
<PP&E> 327664
<DEPRECIATION> 129717
<TOTAL-ASSETS> 945132
<CURRENT-LIABILITIES> 219141
<BONDS> 862500
0
1244910
<COMMON> 236199
<OTHER-SE> (1617618)
<TOTAL-LIABILITY-AND-EQUITY> 945132
<SALES> 1156937
<TOTAL-REVENUES> 1156937
<CGS> 821803
<TOTAL-COSTS> 1590268
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51077
<INCOME-PRETAX> (1306211)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1306211)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1306211)
<EPS-BASIC> (.79)
<EPS-DILUTED> (.79)
</TABLE>
