SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[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, #402, Miami, FL. 33133
(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. 1,300,000 5%
Series A Convertible Preferred Stock, at par.
OMNICOMM SYSTEMS, INC.
Part I - Financial Information Page
Consolidated Balance Sheet -
September 30, 1999 and December 31, 1998
Consolidated Statements of Shareholders'
Equity(Deficit) B
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, 2,047,377 and 1,343,000
issued and outstanding, respectively,
at $.001 par value 1,095 391
Additional Paid in Capital 235,104 132,213
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
<TABLE>
OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
For The Period January 1, 1998 to September 30, 1999
<CAPTION>
5% Series A Convertible Total
Common Stock Preferred Stock Additional Retained Shareholders'
Number $.001 Number Paid in Earnings Equity
of Shares Value of Shares $ Par Capital (Deficit) (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C>
JAN. 1, 1998 1,002,250 $ 187 $ (16,040) $ (15,853)
Issuance of
Common Stock 199,750 63 63
Acquisition
of Education
Navigator
Inc. 141,000 141 $132,213 132,354
Net Income
(Loss) for
Year Ended
Dec 31, 1998 (295,367) (295,367)
BALANCES AT
DEC 31, 1998
(Audited) 1,343,000 391 132,213 (311,407) (178,803)
Issuance of
Common Stock 250,000 250 250
Issuance of
Common Stock
for Services 86,377 86 56,059 56,145
Issuance of
Common Stock 300,000 300 2,700 3,000
Issuance of
Common Stock
for Services 68,000 68 44,132 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 $1,095 1,300,000 $1,244,910 $235,104 $(1,617,618) $ (136,509)
</TABLE>
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 TrialMasterJ 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 undersigned thereunto duly authorized.
By: Peter Knezevich
Chief Executive Officer
Dated: December 2, 1999
