U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR 12(g) OF THE SECURITIES ACT OF
1934
OmniComm Systems, Inc.
Delaware 11-3349762
(State or Other Jurisdiction of (I.R.S. Employer
incorporation of oragnization) Identification No.)
3250 Mary Street, Ste. 307, Miami, FL. 33133
(Address of principal executive offices)
(Zip Code)
Issuer's telephone number: 305-448-4700
Securities to be registered under Section 12(b) of the
Act:
Title of each class Name of each exchange on which
to be registered each class is to be
registered
None None
Securities to be registered under Section 12(g) of the
Act:
Common Stock, $.001 par value<PAGE>
PART I
Item 1. BUSINESS
Forward-Looking Statements
Statements contained in this Form 10-SB that are not
historical fact are "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 Form 10-K 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 Form 10-K. 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.
Business
Coral Development Corp. ("Coral") was incorporated
under the laws of the State of Delaware on November 16,
1996 as a wholly owned subsidiary of Modern Technology
Corp. ("MTC") a Delaware corporation who received 403,000
shares of common stock of Coral in exchange for $30,000.
In June of 1997, Coral registered 403,000 shares of
common stock to be distributed to the shareholders of MTC
as a shared dividend. The registration and issuance of the
shares was subject to the provisions of Rule 419 ("Rule
419") of Regulation C of the Rules and Regulations of the
Securities Act of 1933, as amended.
Rule 419 sets forth the requirements that apply to
every registration statement filed under the Act relating
to an offering by a "blank check company". A "blank check
company" is a company that is a development stage company
that has no specific plan or purpose or has indicated that
its business plan is to engage in a merger or acquisition
with an unidentified company or companies, or other entity
or person. At the time of filing the registration
statement, Coral was a "blank check company". The main
requirements of Rule 419 are: escrowing the securities that
are subject to the registration statement prior to issuance
of the securities and consummating a transaction within 18
months of filing the registration statement.
Coral and OmniComm Systems, Inc. (the "Company")
entered into an Agreement and Plan of Merger on July 22,
1998. The terms of the agreement provided that all of the
issued and outstanding shares of OmniComm Systems, Inc.
would be exchanged for 940,000 shares of common stock of
Coral. The officers and directors of Coral would resign and
the name of Coral would be changed to OmniComm Systems,
Inc. Further, as part of the plan of merger, the five
OmniComm shareholders will receive options representing an
additional 2,687,000 shares of common stock of the Company.
The options will vest in the event the Company generates
$4,000,000 in gross revenue on a cumulative basis. The
issuance of the shares subject to the options will cause
substantial dilution to the existing shareholders.
Coral had until December 5, 1998 (18 months from the
filing date of the Form SB-2 - June 5, 1997) to finalize a
transaction. Prior to entering into the Agreement and Plan
of Merger, the Company acquired Education Navigator, Inc.
on June 26, 1998. The closeness in time of these two
transactions presented a logistical problem in completing
due diligence and providing audited financial statements
for OmniComm Systems, Inc. and especially Education
Navigator, Inc. which did not have audited financial
statements. To further complicate the matter, the financial
statements when completed needed to be presented in such a
way so as to show pro-forma information as if the mergers
had occurred a year earlier. Coral received a comment
letter from the Securities Exchange Commission concerning
the Post-Effective amendment to the SB-2. It was clear from
the comments that Coral and the Company would not make the
deadline on December 5, 1998 so the SB-2 was withdrawn.
Coral and the Company understood that if the SB-2 did not
go effective by December 5, 1998, they would have to re-
file the registration statement since it was very unlikely
that an extension would be given. The shares that had been
held in escrow pursuant to Rule 419 were returned to MTC.
Since the parties were specifically identified for
purposes of an acquisition it was felt that the
proscriptions of Rule 419 would not apply and the
safeguards for issuance of the shares such as the escrow
requirements would not have to be adhered to which would
shorten the time period for completing the transactions. In
addition, the Division of Corporate Finance had issued
Staff Legal Bulletin No. 4, which gave specific guidance to
the parties for the type of transaction that was
contemplated.
The Company and Coral continued with their plans to
finalize the merger and to become a reporting company. The
parties executed an Amended Agreement and Plan of Merger to
include MTC, the parent of Coral, as a party for the sole
purpose of issuing the shares in accordance with the
Agreement and Plan of Merger. A Form 10-SB was filed on
December 22, 1998 to register the common shares of Coral,
pursuant to Section 12(g) of the Securities Exchange Act of
1934.
The Company and Coral finalized the merger on February
17, 1999. None of the shares have been distributed to the
MTC shareholders.
BUSINESS OVERVIEW
OmniComm is an information and technology integration
company located in Coconut Grove, Florida. The Company
provides customized, integrated solutions for its
customers' networking needs by combining a comprehensive
offering of dynamic web and data base applications with its
expertise in designing and configuring networks.
From date of inception (February 28, 1997) to July 26,
1998, OmniComm Systems, Inc. (formerly known as The
Premisys Group, Inc.) was a systems integrator: a provider
of services and products designed to build, manage and
enhance computer network infrastructures, local and wide
area, for businesses.
On June 26, 1998, the Company, through its wholly
owned subsidiary OmniCommerce Systems, Inc. acquired all of
the issued and outstanding shares of Education Navigator,
Inc. a Florida corporation. OmniCommerce provides the
technical and business know how to integrate existing
legacy hardware networks and data into applications for e-
commerce, extranets, intranets, virtual private networks
(VPNs), and private networks.
Education Navigator had developed a number of
electronic commerce applications to be used over the
Internet. The following are overviews of the applications:
Enterprise E-Commerce: Enterprise e-commerce allows an
enterprise to access and transmit to vendors and client
critical pricing and product information where response
time is critical to maintaining or gaining a competitive
advantage. Enterprise e-commerce is a fully integrated
Internet business system. The system includes electronic
data interchange (EDI), purchase ordering and marketing
and full integration with legacy data applications and
procedures.
Retail Site: On a smaller scale than enterprise e-commerce,
but just as robust, a full retail site for businesses was
developed to establish a complete presence on the
Internet.
Remote Data Collection: Remote data collection provides for
the inputting of data from remote locations to a
centralized database using the Internet as the network.
The Company made a strategic decision during the
beginning of January 1999 to focus substantially all of its
resources on the development of its remote data collection
system for the collection of clinical data named
TrialMaster(TM). The Company had begun the development of the
application during the 4th calendar quarter of 1998.
The Company, however, will continue with its systems
integration business and its current projects with its
current client base including Office Depot, Republic
Industries, and Commercial Services International and other
private companies.
Y2K COMPLIANCE
Year 2000 Program
Introduction
The "Year 2000 Problem" arose because many existing
computer programs use only the last two digits to refer to
a year. Therefore, these computer programs do not properly
recognize a year that begins with "20" instead of the
familiar "19." If not corrected, many computer applications
could fail or create erroneous results. The problems
created by using abbreviated dates appear in hardware (such
as microchips), operating systems and other software
programs. The Company's Year 2000 ("Y2K") compliance
project is intended to determine the readiness of the
Company's business for the Year 2000. The Company defines
Y2K "compliance" to mean that the computer code will
process all defined future dates properly and give accurate
results.
Description of Areas of Impact and Risk
The Company has identified four areas where the Y2K
problem creates risk to the Company. These areas are: a)
internal Information Technology ("IT") systems; b) non-IT
systems with embedded chip technology; c) system
capabilities of third party businesses with relationships
with the Company, including product suppliers, customers,
service providers (such as telephone, power, logistics,
financial services) and other businesses whose failure to
be Y2K compliant could have a material adverse effect on
the Company's business, financial condition or results of
operations; and d) product liability claims arising out of
the non-performance of computer products distributed by the
Company.
Plan to Address Year 2000 Compliance
The Company has formed a Year 2000 Compliance Project
Team and began developing an overall plan to address Y2K
readiness issues. This plan includes five phases as
follows: Phase I is to create an inventory of the Company's
IT systems, non-IT systems and service providers (each of
these being referred to as "business components") that need
to be analyzed for Y2K compliance. During Phase I a
priority is established so that the Company will first
address the most important business components to determine
Y2K readiness. Phase II analyzes the identified business
components to determine which of the business components in
the inventory require additional effort to be Y2K
compliant. Phase III is the repair, modification or
replacement of business components which the analysis
determines are not Y2K compliant ("remediation"). Phase IV
consists of various types of testing to confirm that the
remediation process has resulted in the business components
being Y2K compliant. Phase V is the development of
contingency plans to address potential risks that the Y2K
compliance project may not fully address.
State of Readiness
IT Systems - The initial Phase I inventory and
prioritization process for the Company's U.S. based IT
systems has been completed. The Company's current focus in
this area is on testing and remediation, inventory
refinement, and test plan refinement. Approximately 92% of
all identified IT system business components have been
deemed to be Y2K compliant as of March 31, 1999 with
analysis of the remaining 8% continuing. Testing will
continue through July 1999 when all compliance testing is
anticipated to be completed. Even though the original
design of the Company's network and accounting software
system (the Company's system performing the primary
business functions of sales order entry, billing,
purchasing, distribution and inventory control) considered
the Y2K problem and is currently deemed compliant, the test
plan includes detailed testing of this business critical
system. Desktop hardware and software systems testing and
remediation is anticipated to be completed in June 1999.
Non-IT systems - Non-IT systems consist of any device
which is able to store and report date-related information,
such as access control systems, elevators, security systems
and other items containing a microprocessor or internal
clock. The phased plan approach utilized by the Company for
analysis of the IT systems is also being used for non-IT
systems. Phase I inventory and prioritization has been
completed for non-IT systems. Phase II analysis will be
performed on systems material to the Company's operations
with the assistance of the Company's vendors. The Company
currently plans to complete the Y2K compliance program for
all material non-IT systems by the end of June 1999.
Material Third Parties - The Company has created an
inventory of what it believes to be all material third
parties with whom the Company has a business relationship
in the U.S. Requests for binding Y2K compliance letters
were sent to these third parties beginning in March 1999.
The Company is currently reviewing the responses to these
requests to determine the Y2K readiness of these third
parties. For those critical third party suppliers, service
providers and customers that fail to respond to the
Company's survey, the Company intends to pursue alternative
means of obtaining Y2K readiness information, such as
review of publicly available information published by such
third parties. The Company plans to continue to review its
third party relationships throughout the Y2K compliance
program to ensure all material third party relationships
are addressed.
Product Liability - The Company does not make any
representations or warranties that the products it
distributes are or will be Y2K ready or compliant. In
certain countries where the Company or its subsidiaries
distribute products, the Company may have an obligation to
accept returns of products which fail because the product
is not Y2K ready. In most cases, these returns may be
passed on to the manufacturer. In those countries where
product return obligations may exist, the Company plans to
carefully review manufacturer representations regarding
products that are sold in material volumes by the Company
or its subsidiaries.
Contingency Planning and Risks
Upon completion of Phase I (inventory of components)
and Phase II (analysis of Y2K readiness) the Y2K compliance
project team will commence development of a contingency
plan to address risks arising from Y2K. While the Company
believes that its approach to Y2K readiness is sound, it is
possible that some business components are not identified
in the inventory, or that the scanning or testing process
does not result in analysis and remediation of all source
code. The Company will assume a third party is not Y2K
ready if no response or an inadequate response is received.
The Company's contingency plan will address alternative
providers and processes to deal with business interruptions
that may be caused by internal system or third party
providers failure to be Y2K ready to the extent it is
possible.
The failure to correct a material Y2K problem could
result in an interruption in, or a failure of, certain
normal business activities or operations. Such failure
could materially and adversely affect the Company's results
of operations, liquidity and financial condition. In
addition, the Company's operating results could be
materially adversely affected if it were to be held
responsible for the failure of any products sold by the
Company to be Y2K ready despite the Company's disclaimer of
product warranties and the limitation of liability
contained in its sales terms and conditions.
INDUSTRY OVERVIEW
Worldwide research and development expenditures by the
pharmaceutical and biotechnology industries reached an
estimated $40 billion in 1997, approximately $12 billion of
which was spent on preclinical and clinical trials.
Approximately $4 billion or more is estimated to have been
outsourced to contract research organizations (CROs), and
the pharmaceutical outsourcing industry is projected to be
growing 20-25% annually. Further, research and development
expenditures in 1997 for the top 50 pharmaceutical
companies in the world increased approximately 11% from the
previous year.
The Company believes that certain industry and
regulatory trends have led pharmaceutical, biotechnology,
cosmetic and device companies to increase research and
development for proprietary new drugs, cosmetic and medical
devices. These trends have required companies to conduct
increasingly complex clinical trials, and develop
multinational clinical trial capability, while seeking to
control internal fixed costs. The trends driving the
industry's growth can be summarized as follows:
Drug Development Pressures.
Globalization of Clinical Development and Regulatory
Strategy.
Increasingly Complex and Stringent Regulation; Need for
Technological Capabilities.
Competitive Pressures.
Growth of Biotechnology and Genomics Industries.
These trends have created even greater competitive demands
on the industry to bring products to market efficiently and
quickly. It has been estimated that for each day a given
product remains in clinical trials a company loses
approximately $1,000,000 in revenue per day.
CLINICAL TRIAL OVERVIEW
In order for a drug or device to be marketed in the
United States, Europe or Japan, the drug/device must
undergo extensive testing and regulatory review in order to
determine that the drug or device is safe and effective.
The following is an overview of the process that is
generally undertaken to bring a drug or device to market:
Preclinical Research (1 to 3.5 years). In vitro ("test
tube") and animal studies to establish the relative
toxicity of the drug over a wide range of doses and to
detect any potential to cause birth defects or cancer.
If results warrant continuing development of the drug,
the manufacturer will file an IND (Investigational New
Drug Application), upon which the FDA may grant
permission to begin human trials.
Clinical Trials (3.5 to 6 years)
Phase I (6 months to 1 year). Basic safety and
pharmacology testing in 20 to 80 human subjects, usually
healthy volunteers, includes studies to determine how the
drug works, how it is affected by other drugs, where it
goes in the body, how long it remains active, and how it
is broken down and eliminated from the body.
Phase II (1 to 2 years). Basic efficacy (effectiveness)
and dose-range testing in 100 to 200 afflicted volunteers
to help determine the best effective dose, confirm that
the drug works as expected, and provide additional safety
data.
Phase III (2 to 3 years). Efficacy and safety studies in
hundreds or thousands of patients at many investigational
sites (hospitals and clinics) can be placebo-controlled
trials, in which the new drug is compared with a "sugar
pill," or studies comparing the new drug with one or more
drugs with established safety and efficacy profiles in
the same therapeutic category.
Treatment Investigational New Drug ("TIND") (may span late
Phase II, Phase III, and FDA review). When results from
Phase II or Phase III show special promise in the
treatment of a serious condition for which existing
therapeutic options are limited or of minimal value, the
FDA may allow the manufacturer to make the new drug
available to a larger number of patients through the
regulated mechanism of a TIND. Although less
scientifically rigorous than a controlled clinical trial,
a TIND may enroll and collect a substantial amount of
data from tens of thousands of patients.
New Drug Application ("NDA") Preparation and Submission.
Upon completion of Phase III trials, the manufacturer
assembles the statistically analyzed data from all phases
of development into a single large document, the NDA,
which today comprises, on average, roughly 100,000 pages.
FDA Review & Approval (1 to 1.5 years). Careful scrutiny
of data from all phases of development (including a TIND)
to confirm that the manufacturer has complied with
regulations and that the drug is safe and effective for
the specific use (or "indication") under study.
Post-Marketing Surveillance and Phase IV Studies. Federal
regulation requires the manufacturer to collect and
periodically report to FDA additional safety and efficacy
data on the drug for as long as the manufacturer markets
the drug (post-marketing surveillance). If the drug is
marketed outside the U.S., these reports must include
data from all countries in which the drug is sold.
Additional studies (Phase IV) may be undertaken after
initial approval to find new uses for the drug, to test
new dosage formulations, or to confirm selected non-
clinical benefits, e.g., increased cost-effectiveness or
improved quality of life.
To alleviate the enormous amount of paperwork that is
generated and submitted for purposes of receiving approval,
the United States Food and Drug Administration ("FDA")
promulgated regulations on March 20, 1997 concerning the
electronic submission of data to the FDA: 21 CFR Part 11
"Electronic Records; Electronic Signatures; Final Rule".
Essentially, this regulation provided for the voluntary
submission of parts or all of regulatory records in
electronic format without an accompanying paper copy. More
recently, the FDA promulgated "Providing Regulatory
Submissions in Electronic Format-General Considerations".
CLINICAL DATA COLLECTION OVERVIEW
To support the applications for regulatory approvals,
clinical data must be collected. Clinical Data is collected
from the Clinical Report Forms (CRF) that are submitted to
and filled out by an investigator - doctor/research
assistant - who is participating in the clinical trial.
These forms can be 5 to 100 pages and document a series of
visits by patients over a period of time.
Once information is collected from the patient/study
subject by the investigators and the relevant portion of
the CRF is filled out it is then submitted to either the
sponsor of the study such as a pharmaceutical company or,
more typically, an entity that has contracted with the
sponsor to conduct the clinical trial, the Clinical
Research Organization (CRO). Double data entry is used to
insure error free data entry.
Validation and Edit Query
Part of the clinical data process is data review to
see whether the collected data is within certain parameters
of the clinical trial. This is called primary validation.
This data can be as simple as sex or age or as complex as
logical combinations of data such as blood pressure,
weight, and medication. If the data collected is outside of
the clinical trial parameters, the data collection process
will generate an edit query. This edit query must be
submitted to the investigator for resolution, and then
resubmitted for data processing.
Monitoring
Monitors are an integral and necessary part of the
clinical trial process. These individuals travel to the
clinical sites to ensure that the investigators are
complying with good clinical practice (GCP) standards.
Essentially, their role is to make sure clinical data is
being collected and submitted in a safe, timely and
accurate manner.
TRIALMASTER(TM)
Description
OmniComm provides a fully integrated solution for the
collection of clinical data utilizing its TrialMaster(TM)
application. In addition to the application, OmniComm can
provide the necessary infrastructure components to
establish the application worldwide including network
consulting and implementation, hardware procurement,
hosting, and maintenance.
TrialMaster(TM) is a browser-based system that collects,
validates, and manages clinical data via the Internet.
TrialMaster(TM) allows participants in the clinical trial
process to perform data collection and data management via
a direct, secure Internet connection. TrialMaster(TM)
automates the process of data collection and verification,
effectively reducing development and testing time for
medical drug and device research projects.
TrialMaster(TM) is an open electronic data collection
(EDC) system that is fully integratable with existing
legacy data systems such as Oracle(R) and Microsoft SQL(R). The
application utilizes standard browsers such as Internet
Explorer 4.0(R) and Netscape(R).
TrialMaster(TM) allows data to be entered directly from
a source document such as a patient record or doctor's
notes via a computer screen. TrialMaster(TM) differs from
other systems such as remote data entry (RDE) in that no
paper is used. In RDE, the data is entered from the source
document onto a CRF, and then the CRF data is entered into
an intermediate database at the clinical site via a data
entry program. With TrialMaster(TM) there is no intermediate
database allowing for data validation during the collection
process while the sources document is still available.
Further, TrialMaster(TM) allows for client side validation
eventhough the remote site is not connected to the
Internet. This is helpful in situations where an Internet
connection is unavailable or too slow.
Advantages
TrialMaster(TM) significantly impacts the clinical trial
process in the three areas: Data Collection, Validation and
Edit Queries, and Monitoring.
Data Collection
Typically, once the CRF is received the processing time
can be 1-3 days. TrialMaster(TM) reduces this time to a
matter of seconds. The data is entered directly to a
database from the source document via a computer screen
and the Internet at the clinical site.
Further, the time required to forward the CRF to the
clinical site and to have that form returned could take
a number of days. Since the transmission of the form and
data is over the Internet, using TrialMaster(TM) would take
minutes not days. Further, the printing costs for a large
trial can be substantial. TrialMaster reduces or, in some
cases, eliminates the printing charges.
Validation and Edit Query
The principal strength of the TrialMaster(TM) application is
the ability to validate data and to generate an edit
query(s) during the collection process.
It is critical that the data collected be "clean" data.
This process can be as simple as resolving spelling
mistakes or illegible writing; or as complex as the data
not meeting the parameters of the clinical trial.
Typically, these problems do not surface until after the
data is collected and submitted for processing. In order
to correct these problems, the clinical investigator must
resolve the discrepancies and resubmit the data for
processing a process that can take days or, or even
weeks.
TrialMaster(TM) provides for data validation during the
collection process while the source document is still
available. While the data is being inputted, it is
contemporaneously "cleansed" confirming that it falls
within the given parameters of the clinical trial. Not
only is the data validated, but also an edit query can be
submitted simultaneously to the clinical investigator
inquiring why the data falls outside of the given
parameters.
The ability to validate data in real time during the
clinical trial considerably shortens the period of time
to "lock" the clinical database at the conclusion of the
trial, as opposed to waiting 15 week which typically is
the case.
Monitoring
TrialMaster(TM) assists the monitors in doing their job more
efficiently. A monitor can review the progress of any
given clinical site remotely to determine whether that
site is processing data in a timely fashion. More
importantly, such real time access to data provides the
opportunity to determine if there are problems with a
clinical trial at an early stage of the trial.
EMPLOYEES
The Company and its wholly owned subsidiary,
OmniCommerce Systems, Inc., currently have eight (8) full
time employees.
SALES AND MARKETING
The Company has made a strategic decision to focus
substantially all of its resources on marketing and selling
its TrialMaster(TM) application. The Company is focusing its
marketing efforts on three (3) core groups: clinical and
academic research organizations; pharmaceutical companies;
and, device manufactures.
The Company has retained the services of Lawrence
Kronick as its consulting applications manager to assist
the Company in defining and formulating a strategic
marketing plan. Mr. Kronick has 15 years experience in the
sales and marketing of products and services within the
medical community throughout the United States, Europe, and
Asia.
COMPETITION
TrialMaster(TM) - Data Collection
There are other entities that compete with the
Company's Internet based data collection system,
TrialMaster(TM). Principally, the competitors include Phase
Forward Incorporated (www.phaseforward.com), CB
Technologies (www.MetaTrial.com), and a British based
company, RDE Ltd. Most of these competitors have
significantly greater financial, technical and marketing
resources, or name recognition than that of the Company.
Systems Integration
The market for the type of system integration services
the Company provides includes a large number of competitors
and is subject to rapid change. Primary competitors
include participants from a variety of market segments,
including systems consulting and implementation firms,
application software firms, service groups of computer
equipment companies, systems integration companies, and
general management consulting firms and programming
companies. Most of the competitors have significantly
greater financial, technical and marketing resources and
name recognition that the Company. In addition, the
Company competes with its clients' internal resources,
particularly where these resources represent a fixed cost
to the client. Such competition will impose additional
financial and pricing pressures on the Company.
The Company believes that the most significant
competitive factors it faces is a lack of operating history
and an attendant perception of a lack of experience in
competing in such a changing and competitive environment.
The Company believes, however, that its technical
expertise, the knowledge and experience of its principals
of the industry, quality of service and responsiveness to
client needs and speed in delivering solutions will allow
it to compete favorably within this environment.
INTELLECTUAL PROPERTY RIGHTS
The Company acquired Education Navigator, Inc., in
part, for its e-commerce applications that it had created
and implemented. The Company believes that some of these
applications such as TrialMaster(TM) may be subject to patent
and/or copyright protection. The Company is currently
investigating the viability of securing such protection.
Given the uncertainties of the patenting process especially
within the field of computer software and business
processes, no assurance can be given that such patent
protection will be secured.
The Company relies upon a combination of nondisclosure
and other contractual arrangements and trade secret,
copyright and trademark laws to protect its proprietary
rights and the proprietary rights of third parties from
whom the Company licenses intellectual property. The
Company enters into confidentiality agreements with its
employees and limits distribution of proprietary
information. There can be no assurance that the steps
taken by the Company in this regard will be adequate to
deter misappropriation of proprietary information or that
the Company will be able to detect unauthorized use and
take appropriate steps to enforce its intellectual property
rights.
The Company is in the process of registering the
trademarks "OMNICOMM SYSTEMS, INC.", AND "TRIALMASTER" with
the U.S. Patent and Trademark Office. The Company intends
to make such other state and federal filings as the Company
deems necessary and appropriate to protect its intellectual
property rights.
Item 2. Management's Discussion and Analysis or Plan of
Operation
The Company
The proposed business of Coral (n/k/a OmniComm
Systems, Inc.) was to provide a mechanism to take advantage
of business opportunities. Through inception, November 19,
1996, to February 17, 1999, the Company conducted no
business other than organizational activities.
On June 5, 1997, a registration statement relating to
a dividend distribution of 403,000 shares of the Company's
Common Stock was declared effective. The offering was made
pursuant to Rule 419. The Company realized no net
proceeds. The Rule 419 offering did not proceed due to
time limitations.
On July 22, 1998, Coral signed an Agreement and Plan
of Reorganization with the Company and its shareholders and
an Amendment thereto dated November 3, 1998("Agreement").
The essential terms of the Agreement are described above,
"Other Matters", "Acquisition of Education Navigator". The
Agreement was finalized on February 17, 1999. The Company
has filed a copy of the Agreement with the Securities and
Exchange Commission on Form 8-K. The Company shares owned
by MTC will be distributed to MTC shareholders on the basis
of one Coral share for each fifty (50) MTC shares.
OMNICOMM SYSTEMS, INC.
Results of Operations
The foregoing takes into account the accounts of the
Company's wholly owned subsidiary OmniCommerce.
OmniCommerce was formed in July 1998 for the purpose of
acquiring Education Navigator, Inc.
From the date of inception (February 28, 1997) to
December 31, 1997.
From the date of inception (February 28, 1997) through
December 31, 1997, the Company was a subchapter S
Corporation. During this period, the Company had a gross
profit of $45,423 on revenues of $210,373 and a net loss of
$16,040. A significant portion, approximately seventy-five
percent (75%), of the revenue generated during this period
was from a single client, Commercial Services
International, Inc. (CSI). The source of the revenue was
primarily from hardware procurement.
For the twelve month period ending December 31, 1998.
For the twelve-month period ending December 31, 1998
the Company had a gross profit of $466,776 on revenues of
$1,689,794 and a net loss of $295,367. The net loss is
primarily attributed to the acquisition of Education
Navigator, Inc.
Comparison between the twelve period ending December 31,
1997 and December 31, 1998.
For the twelve period ending December 31, 1997 the
Company had a gross profit of $45,423 on revenues of
$210,373 and a net loss of $16,040. For a similar period
ending December 31, 1998 the Company had an increase in
revenues of $1,479,421. The increase in revenue for the
period ending December 31, 1998 is due to a significant
increase in projects initiated by the Company's clients,
primarily CSI, which represents 78% of the total. During
this same period, there was an attendant increase in
selling, general and administrative expenses, and salaries
to $425,854 from $25,889 representing an increase of
$399,965. In addition to the costs associated with the
acquisition of Education Navigator, Inc., the Company hired
four additional full time employees, relocated its
operations to 3250 Mary Street, Suite 307, Miami, Florida
33133, and rented an additional 1750 square feet for the
operations of OmniCommerce Systems, Inc. located at 9400 S.
Dadeland Blvd., Suite 112, Miami, Florida 33156.
Plan of Operation
The Company currently has sufficient cash flow from
its systems integration projects to fund its day to day
operations. The Company has recently initiated a private
placement, see below, of 5 year, 10% convertible notes to
accredited investors. The proceeds from this offering
should be sufficient to assist in the marketing of the
TrialMaster application for the next 6 months and to make
the necessary debt payments to the Education Navigator
shareholders.
The Company intends to raise additional funds to
develop, market and implement the TrialMaster(TM) application.
The Company would expect to raise these funds through
additional private placements of debt or equity securities.
Private Placement
On January 18, 1999, Northeast Securities, Inc., as
placement agent, began the distribution of a Confidential
Private Placement Memorandum to accredited investors on
behalf of the Company. The terms of the offering are as
follows:
Amount: $400,000 Minimum/$750,000 Maximum, All or
none, Best Efforts.
Offering: 16 Units Minimum/30 Units Maximum. Each Unit
consists of a five (5) year convertible note in the
principal amount of $25,000, bearing 10% annual interest,
payable semi-annually with the principal convertible into
shares of common stock, $.001 par value, of the Company
("Common Stock" or "Shares") at $1.25 per Share, subject to
customary anti-dilution provisions. The Convertible Notes
may be called in whole or in part at a premium of 102% of
par into shares at the conversion price, as may be
adjusted, in the event the Company's Common Stock publicly
trades on a recognized exchange, NASDAQ or OTC Bulletin
Board, for a period of 20 consecutive trading days at a bid
price per share of $3.50 or greater, and provided the
Shares underlying the Convertible Note have been registered
and may be sold without restriction by the holders thereof.
Interest Adjustment: In the event holders demand
registration of the Shares underlying the Convertible Notes
and such registration statement is not effective within 90
days after the date of notice of demand by said holders,
the interest rate on the Convertible Notes beginning on the
next quarter following the expiration of the 90 day period,
shall increase to 15%, and shall remain at 15% until said
registration statement is effective, at which time the
interest rate shall revert back to 10%.
Price: $25,000 per Unit. The Company will accept
subscriptions for partial Units.
Registration Rights: Demand (so long as 50% of the
aggregate amount of the total offering files notices) and
Piggy-Back registration rights (subject
to underwriter's cut-back).
Use of Proceeds: Operating and Marketing Expenses
Conditions:
(1) Regulation D of the Securities Act of
1933, as amended.
(2) Suitability Standards; Accredited
Investors Only.
(3) Board of Directors: Northeast
Securities, placement agent, shall have the right
to designate one observer with the same notice
and reimbursement of expenses as other directors.
(4) Termination Date: March 31, 1999
(5) Placement Fee: 250,000 Common Shares at
a purchase price of $.001 per share at the
closing of the Minimum.
(6) The Company agrees not to issue equity
securities except ISO stock options and other
options or stock bonuses to employ consultants
and advisors.
(7) Northeast shall have a right of first
refusal to match any bonafide equity based
offering proposal.
(8) The Company shall have no more than
4,000,000 Shares outstanding on a fully diluted
basis prior to the placement of the Convertible
Notes.
Placement Agent Fees: 10% Commission (cash); 3%
NonAccountable expense allowance (cash); $7,500 advance
against non-accountable due diligence expense.
As of April 9, 1999, the Company had received net proceeds
of $674,250 as a result of the private placement.
LIQUIDITY
The sole source of revenue for the Company is from its
systems integration business and its current projects. The
Company has not derived any revenue from its TrialMaster(TM)
application.
The Company is generating adequate amounts of cash to
meet its current operational needs. With the acquisition
of Education Navigator, Inc. the Company, through its
wholly owned subsidiary OmniCommerce Systems, Inc., has
acquired certain Internet applications including, more
specifically, the TrialMaster application. To fully take
advantage of the TrialMaster(TM) application the Company
anticipates having to raise additional funds to market and
develop the infrastructure to support the applications. It
is possible that the Company could support such marketing
and infrastructure development from current cash flow.
However, the Company feels that such an approach would
diminish the ultimate value of the applications by not
bringing them to market as quickly as possible.
OTHER MATTERS
Acquisition of Education Navigator, Inc.
The Company decided during the beginning of 1998 to
diversify its range of services to include applications and
services related to the Internet. It is the Company's
belief that the Internet has become the network of choice
for business entities. The Company decided to search for a
company to acquire that was involved in the Internet as
opposed to internally developing the capability. It was
felt this approach would be more expedient and efficient
given the rapidly changing technology base concerning the
Internet.
The Company searched for an entity that had the
technological base to develop applications or render
services, primarily e-commerce, related to the Internet.
The Company was not primarily concerned with the financial
structure or resources of the entity; rather the Company
wanted to acquire a core technology base.
On April 6, 1998 the Company entered into a letter of
intent to acquire all of the issued and outstanding shares
of Education Navigator, Inc. During the next 45 days the
parties negotiated the terms and conditions of the proposed
merger and conducted due diligence. On June 26, 1998 the
parties entered into a Merger Agreement the principal terms
of which are set forth below.
The payment to the shareholders of EdNav of $600,000
was structured as follows: (a) seventy five thousand
dollars ($75,000) was paid on the closing (less a credit
for the $5,000 deposit previously paid by Company to the
EdNav shareholders); (b) five hundred twenty-five thousand
dollars ($525,000) was paid at closing by the delivery of
a promissory note issued by the Company which providing for
payments of principal as follows: $75,000 within sixty (60)
days of closing; $95,000 on or before December 31, 1998;
$177,500 on the first anniversary date of the closing;
$177,500 on the second anniversary date of the closing. In
addition, the shareholders of EdNav were issued 441,180
shares of common stock of the Company.
As part of the acquisition transaction, the two
shareholders of Education Navigator, Inc. entered into
convenants not to compete. The covenants prohibit the
shareholders from engaging in activities that compete with
OmniComm Systems, Inc. The Company employs one of the
shareholders and the convenant has been incorporated into
his employment contract. The covenants shall terminate on
June 26, 2001. The Company has agreed to pay the
shareholders $60,000 for entering into the convenants. The
payment of $60,000 is to be paid as follows: (a) $10,000
upon execution of this Agreement, (b)$10,000 on or before
December 31, 1998, (c) $10,000 on or before March 31, 1999,
(e) $15,000 on or before July 1, 1999, and (e) $15,000 on
or before July 1, 2000.
Factoring
In order to flatten its cash flow requirements the
Company entered into a factoring agreement with Bankest
Capital Corporation on March 3, 1998. The fees and charges
for the factoring arrangement are customary and reasonable.
The Company does not factor all invoices, but selectively
factors invoices as the need arises.
Item 3. Description of Property
OmniComm's principal executive offices currently are
located at 3250 Mary Street, Suite 307, Miami, Florida
33133. The Company currently is on a month to month lease
at this location. The Company has also entered into a five
year lease for space at 9400 South Dadeland Boulevard,
Suite 112, Miami, Florida 33131. The rent for this space
ranges from $25,000 to $29,000. The operations of
OmniCommerce will be conducted from this location. OmniComm
does not expect that any additional space will be required
for the foreseeable future.
Item 4. Security Ownership of Certain Beneficial Owners
and Management
The following table sets forth as of April 5,
1999 the number and percentage of shares beneficially owned
after giving effect to the consummation of the merger and
distribution of the shares of common stock of the Company,
owned of record and beneficially, by each officer and
director of the Company and by any other person owning more
than 5% of the Company's outstanding Common Stock, and by
all Officers and Directors as a group.
Shares of Percentage
Common After
Stock After Merger
Percentage
Merger and and Prior
To
Name Distribution Distribution (3) Merger(4)
Randall Smith(2) 421,461 26% 0%
Peter Knezevich(2) 281,640 18% 0%
Fred Sager 153,500 10% 0%
Clifton Middleton(2) 102,461 6% 0%
Hugh McCallum 102,461 6% 0%
Arthur Seidenfeld(1)(5) 193,096 12% 48%
Anne Seidenfeld(1) (5) 48,530 3% 12%
All directors and
officers as a group
(2) 805,562 50.5%
(1) May be deemed to be a parent and promoter as such
terms are defined under the Securities Act.
(2) Directors and/or Officers of the Company since
February 17, 1999
(3) At the time of filing the amended Form 10-SB none of
the shares have been distributed to the individuals
set forth above. However, after filing and
distribution there will be 1,593,000 shares
outstanding which reflects the 940,000 shares to be
issued to the OmniComm shareholders.
(4) All of the shares were owned by MTC prior to the
acquisition.
(5) As an affiliate of MTC may be construed to own that
percentage of shares held by MTC.
Item 5. Directors, Executive Officers, Promoters and
Control Persons
The officers and directors (giving effect to
the OmniComm acquisition) are as follows:
Name Age Position
Randall G. Smith 41 President and Director
Peter S. Knezevich 42 Chief Executive Officer &
Director
Clifton R. Middleton 51 Vice President
Randall G. Smith, 41, Director, President and Chief
Technical Officer. Mr. Smith has been a Director of
OmniComm Systems, Inc. since inception and shall serve as
a Director until the next annual meeting. Since inception
(June 30, 1998) Mr. Smith has been Director and Chief
Technical Officer of OmniCommerce Systems, Inc., the wholly
owned subsidiary of OmniComm Systems, Inc.
From December 1995 to May 1997, Mr. Smith was Director
of Operations for Global Communications Group, a Miami,
Florida, based systems integrator.
From November 1993 to December 1994, Mr. Smith was
General Manager and Chief Operating Officer of Genesis
International, a Charlotte, North Carolina, based regional
systems integrator.
From January 1989 to November 1993, Mr. Smith was
Executive Vice President and Chief Operating Officer of
CableNet, Inc., a Charlotte, North Carolina based
engineering company that developed, manufactured and
marketed world-wide computer interface products. Mr. Smith
developed the Company's first product; the universal
network adapter utilizing a proprietary dual ram-linked
RISC processor architecture.
Peter S. Knezevich, 42, Director, Chief Executive
Officer. Mr. Knezevich has been a Director of OmniComm
Systems, Inc., since October of 1997 and shall serve as a
Director until the next annual meeting. Since inception
(June 30, 1998) Mr. Knezevich has been Director and Chief
Operating and Financial Officer of OmniCommerce Systems,
Inc., the wholly owned subsidiary of OmniComm Systems, Inc.
From April 1995 to September 1997, Mr. Knezevich was
Vice President and General Counsel of Imaging Diagnostic
systems, Inc., a development stage, reporting and publicly
traded company.
From May 1994 to March 1995, Mr. Knezevich was in the
private practice of law.
From June 1991 to April 1994, Mr. Knezevich was an
associate with the Miami, Florida law firm of Ferrell and
Fertel, P.A.
Clifton R. Middleton, 51, Vice President and Director
of Internet Development and Applications. Since inception
(June 30, 1998) Mr. Middleton has been Director and
President of OmniCommerce Systems, Inc., the wholly owned
subsidiary of OmniComm Systems, Inc. Prior to June 1998,
for the past five years, he was President of Education
Navigator, Inc., acquired by OmniComm.
Item 6. Executive Compensation
The following sets forth the compensation paid to the
officers and directors during the past fiscal year ended
December 31, 1998. Officers and directors of Coral received
no remuneration.
Long Term
Name and Annual Compensation Compensation
Principal Securities
Underlying
Position Year Salary Bonus Options/SARs
Randall Smith 1997 0
President/Dir. 1998 $29,000
Peter Knezevich1997 0
CEO/Dir. 1998 $29,000
Clifton
Middleton 1998 $85,000 85,000
Vice President
Item 7. Certain Relationships and Related Transactions
As the parent of Coral Development, MTC beneficially
owns all of the issued and outstanding shares of Coral
Development totaling 403,000 shares of common stock for
which it paid $30,000.
The Company's wholly owned subsidiary, OmniCommerce
Systems, Inc., was incorporated on June 30, 1998. The
Company beneficially owns 100 shares of common stock of
OmniCommerce Systems, Inc. The Company has pledged these
shares as security for the obligations owed to the
shareholders Education Navigator, Inc. as a result of the
acquisition. OmniComm Systems, Inc. employs Clifton
Middleton, one of the shareholders of Education Navigator,
as its vice-president responsible for Internet applications
and development. Mr. Middleton is paid $85,000 per annum
and was granted an incentive stock option on June 26, 1998
to purchase 85,000 shares of common stock at $.60 per
share. The option shall vest over a 3-year period as
follows: 14,166, 28,334, and, 42,500.
In addition, the Company paid rent of $22,500 during
fiscal year 1997 to Mr. Lawton Jackson, vice president and
general counsel of the Company. Also, as of September 30,
1998, Mr. Jackson owed the Company $3,406.
Item 8. Description of Securities
The authorized capital stock of the Company consists
of 20,000,000 shares of Common Stock, $.001 par value per
share.
Holders of the Common Stock are entitled to receive
dividends when and as declared by the Company's Board of
Directors out of funds available therefore. Any such
dividends may be paid in cash, property or shares of the
Common Stock. The Company has not paid any dividends since
its inception and presently anticipates that all earnings,
if any, will be retained for development and expansion of
the Company's business, and that no dividends on the Common
Stock will be declared in the foreseeable future. Any
future dividends will be subject to the discretion of the
Company's Board of Directors and would depend upon, among
other things, future earnings, the operating and financial
condition of the Company, its capital requirements, and
general business conditions.
Each holder of Common Stock is entitled to one vote
per share on all matters, including the election of
directors, submitted to a vote of such class. Holders of
Common Stock do not have cumulative voting rights. The
absence of cumulative voting means that the holders of more
than 50% of the shares voting for the election of directors
can elect all directors if they choose to do so. In such
event, the holders of the remaining shares of the Common
Stock will not be entitled to elect any director. The
Board of Directors shall be elected each year to a one year
term. A majority of the shares entitled to vote,
represented in person or by proxy, constitutes a quorum at
a meeting of shareholders.
The Company has initiated a private placement of Units
pursuant to Section 4(2) and Regulation D, Rule 506 of the
Securities Act of 1933. See above, Item 13. Plan of
Operation - Private Placement. Each Unit consists of a five
(5) year convertible note, bearing 10% annual interest,
payable semi-annually with the principal convertible into
shares of common stock, $.001 par value, of the Company at
$1.25 per Share, subject to customary anti-dilution
provisions. The Convertible Notes may be called in whole or
in part at a premium of 102% of par into shares at the
conversion price, as may be adjusted, in the event the
Company's Common Stock publicly trades on a recognized
exchange, NASDAQ or OTC Bulletin Board, for a period of 20
consecutive trading days at a bid price per share of $3.50
or greater, and provided the Shares underlying the
Convertible Note have been registered and may be sold
without restriction by the holders thereof.
Miscellaneous Rights and Provisions
Shares of the Common Stock have no preemptive or
conversion rights, no redemption or sinking funds
provisions and are not liable to further call or
assessment. The outstanding shares of the Common Stock
are, and any shares sold pursuant to this offering will be,
fully paid and non-assessable. Each share of the Common
Stock is entitled to share ratably in any assets available
for distribution to holders of its equity securities upon
liquidation of the Company.
PART II
Item 1. Market Price of and Dividends on Registrant's
Common Equity and Other Shareholder Matters
The Common Stock has not traded. Until this
distribution Modern Technology Corp owned all shares.
There is no representation made that any trading market
will develop, or if developed that it will be sustained.
There is no indication of any potential trading prices.
As of April 6, 1999, assuming the distribution, the
Company will have approximately 370 shareholders of record.
The Company has not paid any dividends since inception
and does not anticipate paying any dividends.
Item 2. Legal Proceedings
None
Item 3. Changes in and Disagreements with Accountants
Not Applicable
Item 4. Recent Sales of Unregistered Securities
On or about December 1996, Coral Development issued
403,000 shares of common stock to MTC, the parent
corporation of Coral Development, in exchange for $30,000.
The shares were issued pursuant to an exemption from
registration contained in Section 4(2) of the Securities
Act of 1933.
On June 26, 1998, prior to executing the merger
agreement with Coral Development, the Company acquired
Education Navigator, Inc. In exchange for all the issued
and outstanding shares of Education Navigator, the Company
issued 441,180 shares of common stock of the Company to the
two shareholders of Education Navigator and issued
promissory notes in the amount of $525,000. The shares and
promissory notes were issued pursuant to an exemption from
registration contained in Section 4(2) of the Securities
Act of 1933. Subsequent to the acquisition of Education
Navigator, the Company executed an employment agreement
with Cliff Middleton, a shareholder of Education Navigator.
In addition, pursuant to Section 422 of the Internal
Revenue Code, the Company granted an incentive stock option
to Cliff Middleton for 85,000 common shares at $.60 per
share, vesting over 3 years beginning June 26, 1999.
On February 17, 1999, OmniComm Systems, Inc. and Coral
Development finalized the merger pursuant to the terms and
conditions set forth in the Agreement and Plan of
Reorganization. It is intended that all of the issued and
outstanding shares of OmniComm Systems, Inc. will be
exchanged for 940,000 shares of common stock of Coral
Development; or, 3.129 shares of OmniComm Systems for 1
share of Coral Development. The exchange and issuance of
shares were issued pursuant to an exemption from
registration contained in Section 4(2) of the Securities
Act of 1933.
Item 5. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of
Delaware provides for broad indemnification of officers and
directors and Section 326 of the General Corporation Law of
Delaware states as follows: When an officer, director or
stockholder shall pay any debt of a corporation for which
he is made liable by the provisions of this chapter, he may
recover the amount so paid in an action against the
corporation for money paid for its use, and in such action
only the property of the corporation shall be liable to be
taken and not the property of any stockholder.
Part III
Financial Statements
OmniComm Systems, Inc.: December 31, 1998 and 1997
Coral Development Corp.: December 31, 1998, June 30, 1998
and 1997
Education Navigator, Inc: December 31, 1997 and 1996
Exhibits
2 (a) Agreement and Plan of Reorganization dated July
22, 1998:Incorporated herein by reference to
Form 8-K, dated March 3, 1999. File No. 000-
25203
(b) Amendment to Agreement and Plan of
Reorganization: Incorporated herein by
reference to Form 10-SB dated December 20, 1998
3 (i) Certificate of Incorporation: Incorporated
herein by reference to Form SB-2 #333-6410
(ii) By-Laws: Incorporated herein by reference to
Form SB-2 #333-6410
10 (a) Employment Contract
(b) Factor Agreement
SIGNATURES
In accordance with Section 12 of the Securities
Exchange Act of 1934, the Registrant caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
OmniComm Systems, Inc.
Peter S. Knezevich,
Chief Executive Officer
Dated: April 9, 1999
OMNICOMM SYSTEMS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
I N D E X
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT 1
BALANCE SHEETS 2
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) 3
STATEMENTS OF OPERATIONS 4
STATEMENTS OF CASH FLOWS 5-6
NOTES TO THE FINANCIAL STATEMENTS 7-13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and Shareholders
OMNICOMM SYSTEMS, INC.
Miami, Florida
We have audited the accompanying balance sheet of OMNICOMM
SYSTEMS, INC. as of December 31, 1998 and 1997 and the related
statements of operations, statements of shareholders' equity
(deficit) and cash flows for the periods ended December 31, 1998
and 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based upon our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of OMNICOMM SYSTEMS, INC. as of December 31, 1998 and 1997, and
the results of its operations and its cash flows for the periods
ended December 31, 1998 and 1997, in conformity with generally
accepted accounting principles.
GREENBERG & COMPANY LLC
Springfield, New Jersey
January 15, 1999
(with the exception of note 9, which date
is March 24, 1999)
Page 1 of 13
OMNICOMM SYSTEMS, INC.
BALANCE SHEETS
A S S E T S
December 31,
1998 1997
CURRENT ASSETS
Cash $ 44,373 $ 16,077
Accounts Receivable 77,188 26,086
Inventory 4,240 -0-
Total Current Assets 125,801 42,163
PROPERTY AND EQUIPMENT - Net 33,352 6,800
OTHER ASSETS
Stockholder Loans 3,406 10,906
Intangible Assets, net 163,276 467
Goodwill, net 396,387 -0-
Other Assets 9,300 -0-
TOTAL ASSETS $ 731,522 $ 60,336
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 $ 286,478 $ 26,189
Notes Payable - Current 262,500 50,000
Sales Tax Payable 39,835 -0-
Due to Factoring Agent 139,012 -0-
Total Current Liabilities 727,825 76,189
Notes Payable - Long Term 182,500 -0-
Total Liabilities 910,325 76,189
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred Stock - 2,000,000 shares
authorized, none issued and outstanding
Common Stock - 10,000,000 shares
authorized, 2,941,180 and 1,875,000
issued and outstanding, respectively,
at no par value 132,604 187
Retained Earnings (Deficit) (311,407) (16,040)
(178,803) (15,853)
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ 731,522 $ 60,336
The accompanying notes are an integral part of these financial
statements.
Page 2 of 13
OMNICOMM SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
For The Period February 28, 1997 (inception) to December 31, 1998
Total
Share-
Common Stock Retained holders'
Number No Par Earnings Equity
of Shares Value (Deficit) (Deficit)
Issuance of
Common Stock 1,875,000 $ 187 $ -0- $ 187
Net Income (Loss)
for the period
Feb. 28, 1997
(inception) through
December 31, 1997 (16,040) (16,040)
BALANCES AT
DECEMBER 31, 1997 1,875,000 187 (16,040) (15,853)
Issuance of
Common Stock 625,000 63 63
Acquisition of
Education Navigator,
Inc. 441,180 132,354 132,354
Net Income (Loss)
for the Year Ended
December 31, 1998 (295,367) (295,367)
BALANCES AT
DECEMBER 31, 1998 2,941,180 $132,604 $(311,407) $(178,803)
The accompanying notes are an integral part of these financial statements.
Page 3 of 13
OMNICOMM SYSTEMS, INC.
STATEMENTS OF OPERATIONS
February 28, 1997
For the year ended (inception) to
December 31, 1998 December 31, 1997
REVENUES - SALES, Net $1,689,794 $210,373
COST OF SALES 1,223,018 164,950
GROSS MARGIN (LOSS) 466,776 45,423
OTHER EXPENSES
Depreciation and Amortization 128,196 717
Interest 15,428 5,620
Salaries and Wages 224,796 3,750
Factoring Fees 68,597 -0-
Rent 47,199 24,737
Independent Consultants 76,869 4,500
Selling, General and
Administrative 201,058 22,139
Income (Loss) Before Taxes (295,367) (16,040)
Income Taxes Expense (Benefit) -0- -0-
NET INCOME (LOSS) $ (295,367) $(16,040)
Net Income (Loss) Per Share $(.11) $(.01)
Weighted Average Number of
Shares Outstanding 2,675,375 1,875,000
The accompanying notes are an integral part of these financial statements.
Page 4 of 13
OMNICOMM SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
February 28, 1997
For the year ended (inception) to
December 31, 1998 December 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(295,367) $(16,040)
Adjustment to Reconcile Net Income
to Net Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 128,196 717
Change in Assets and Liabilities,
net of effects of acquisition of
Education Navigator Inc (EdNav):
(Increase) Decrease in Accounts
Receivable (37,157) (26,086)
(Increase) Decrease in Inventory (4,240) -0-
Increase (Decrease) in Other
Assests (9,300) (539)
Increase (Decrease) in Accounts
Payable and Accrued Expenses 260,289 26,189
Increase (Decrease) in Sales
Tax Payable 39,835 -0-
Increase (Decrease) in Due to
Factoring Agent 139,012 -0-
Net Cash Provided By (Used In)
Operating Activities 221,268 (15,759)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment (3,035) (7,445)
Purchase of EdNav, Net of Cash
Acquired (67,500) -0-
Net Cash Provided By (Used In)
Investing Activities (70,535) (7,445)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Proceeds from Note Payable -0- 50,000
(Payments of) Notes Payable (130,000) -0-
(Loans to) Payments From Stockholder 7,500 (10,906)
Proceeds from Common Stock Issuance 63 187
Net Cash Provided By (Used In)
Financing Activities (122,437) 39,281
The accompanying notes are an integral part of these financial statements.
Page 5 of 13
OMNICOMM SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(CONTINUED)
February 28, 1997
For the year ended (inception) to
December 31, 1998 December 31, 1997
Net Increase (Decrease) in Cash and
Cash Equivalents 28,296 16,077
Cash and Cash Equivalents at
Beginning of Period 16,077 -0-
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 44,373 $ 16,077
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Income Tax Paid $ -0- $ -0-
Interest Paid $ 1,636 $ 5,020
Non Cash Investing and Financing
Transactions:
Acquisition of all of the Outstanding
Common Stock of Education Navigator
Inc. during the year ended
December 31, 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
The accompanying notes are an integral part of these financial statements.
Page 6 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
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.
ADVERTISING
Advertising costs are expensed as incurred.
Page 7 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
INTANGIBLE ASSETS AND GOODWILL
Included in Intangible Assets are the following assets:
December 31, 1998
Cost Accum Amortization Asset
$120,000 $30,000 Covenant not to compete
87,500 14,583 Software development costs
539 180 Organization costs
$208,039 $44,763
December 31, 1997
Cost Accum Amortization Asset
$ 539 $ 72 Organization costs
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.
Included in Goodwill, as a result of the EdNav acquisition
(see Note 3), at December 31, 1998 is the cost of $475,665
and accumulated amortization of $79,278. 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:
December 31, 1998 December 31, 1997
% of % of
Customer Sales $ Total Sales Sales $ Total Sales
Commercial
Services Inc $1,289,594 76% $155,648 74%
Metropolitan
Mortgage -0- -0- 25,934 12%
Office Depot
Inc 176,965 10% -0- -0-
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.
Page 8 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
PROPERTY AND EQUIPMENT, At Cost
Property and equipment consists of the following:
December 31, 1998 December 31, 1997
Accumulated Accumulated
Cost Depreciation Cost Depreciation
Computer and
office
equipment $33,274 $4,636 $7,445 $645
Office
furniture 4,950 236 -0- -0-
$38,224 $4,872 $7,445 $645
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 1998 and 1997 was $4,573 and $645
respectively.
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.
Page 9 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
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 has been recognized during the periods
presented.
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
selling stockholders 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
of 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
Page 10 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
The following table shows the results of operations on a pro
forma basis for the periods 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 February 28, 1997 nor
which may result from future operations.
1/1/98-12/31/98 2/28/97-12/31/97
Revenues $1,775,835 $ 343,933
Income (Loss) before
extraordinary items (421,599) (325,358)
Net Income (Loss) (421,599) (325,358)
Earnings (Loss)
Per Share $(.14) $(.14)
Weighted Average
Shares Outstanding 2,942,106 2,317,106
Proforma adjustments to the results of operations are as
follows:
1/1/98-12/31/98 2/28/97-12/31/97
Depreciation -
Equipment $ 2,774 $ 5,548
Amortization:
Software developed 14,583 29,167
Covenant not to
Compete 30,000 60,000
Goodwill 79,278 158,555
(126,635) (253,270)
EdNav net income
(Loss):
1/1/98-6/30/98 403
1/1/97-12/31/97 (56,048)
Proforma Adjustment $(126,232) $(309,318)
NOTE 4: NOTES PAYABLE
At December 31, 1997 the Company owed $50,000 to a third
party. The note was payable on demand and bore interest at
two percent per month. The note was secured by all accounts
receivable of the Company. This note was repaid in 1998.
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.
Page 11 of 13
OMNICOMM SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
NOTE 5: 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. Rent expense for 1998 and 1997 was
$47,199 and $24,737, respectively.
NOTE 6: INCOME TAXES
Income taxes are accrued at the statutory U.S. and state
income tax rates.
During the period ended December 31, 1997 the Company elected
to be taxed as an 'S' corporation for federal and state
income tax purposes. Therefore, the corporate income is
taxed directly to the shareholders. This election was
terminated as of January 1, 1998.
Income tax expense is as follows:
December 31, 1998
Current tax expense (benefit):
Income tax at statutory rates $ -0-
Deferred tax expense (benefit):
Amortization of Goodwill and
Covenant (48,419)
Operating Loss Carryforward (58,943)
107,362
Valuation allowance (107,362)
Total Tax Expense (Benefit) $ -0-
The tax effect of significant temporary differences, which
comprise the deferred tax assets are as follows:
December 31, 1998
(Unaudited)
Deferred tax assets:
Amortization of Intangibles $ 48,419
Operating loss carryforwards 58,943
Gross deferred tax assets 107,362
Valuation allowance (107,362)
Net deferred tax assets $ -0-
Page 12 of 13
OMNICOMM STSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
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.
NOTE 7: RELATED PARTY TRANSACTIONS
The Company paid rent of $22,500 to a shareholder for the use
of office space during 1997.
The Company was owed $10,906 and $3,406 at December 31, 1997
and December 31, 1998, respectively, from shareholder. The
amounts are payable on demand. The interest rate is 6%
annually.
NOTE 8: 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 9: SUBSEQUENT EVENTS
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.
On January 18, 1999 the Company prepared a Confidential
Private Placement Memorandum. The offering consisted of
units consisting of a five (5) year term note in the
principal amount of $25,000, bearing 10% annual interest,
with principal and interest, convertible into shares of
common stock of the Company at $1.25 per share, including
registration rights. Pursuant to this offering the Company
has raised a total of $380,625 as of March 24, 1999.
Page 13 of 13
CORAL DEVELOPMENT CORP.
FINANCIAL STATEMENTS
DECEMBER 31, 1998
I N D E X
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT 1
BALANCE SHEETS 2
STATEMENT OF STOCKHOLDER'S EQUITY 3
STATEMENTS OF OPERATIONS 4-5
STATEMENTS OF CASH FLOWS 6
NOTES TO THE FINANCIAL STATEMENTS 7-8
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and Stockholders
CORAL DEVELOPMENT CORP.
Brooklyn, New York
We have reviewed the balance sheets of CORAL DEVELOPMENT CORP. (A
Development Stage Enterprise) as of December 31, 1998 and the
related statements of operations, stockholder's equity and cash
flows for the six month periods ended December 31, 1998 and 1997,
in accordance with standards established by the American
Institute of Certified Public Accountants.
A review of interim financial information consists principally of
obtaining an understanding of the system for the preparation of
interim financial information, applying analytical review
procedures to financial data, and making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an examination in accordance
with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements for
them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the balance sheet as of June 30, 1998, and
the related statements of operations, shareholder's equity and
cash flows for the year then ended (not presented herein); and in
our report dated August 6, 1998, we expressed an unqualified
opinion on those financial statements. In our opinion, the
information set forth in the accompanying balance sheet as of
June 30, 1998 is fairly stated in all material respects in
relation to the balance sheet from which it has been derived.
GREENBERG & COMPANY LLC
Springfield, New Jersey
January 21, 1999
Page 1 of 8
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
Dec 31, 1998 June 30,
(Unaudited) 1998
ASSETS
ASSETS
Current assets - cash $ 431 $ 1,299
Deferred registration costs 48,930 26,007
Organization expense 300 300
TOTAL ASSETS $49,661 $27,606
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accrued expense $ 8,465 $ -0-
Due to parent company 27,660 6,701
TOTAL CURRENT LIABILITIES 36,125 6,701
STOCKHOLDER'S EQUITY
Common stock par value $.001
Authorized: 20,000,000 shares
Shares Issued and Outstanding:
403,000 Shares 403 403
Additional paid in capital 29,897 29,897
(Deficit) accumulated during the
development stage (16,764) (9,395)
Total Stockholder's Equity 13,536 20,905
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $49,661 $27,606
Subject to the comments contained in the Accountants' Review Report.
Page 2 of 8
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD NOVEMBER 19, 1996 (INCEPTION) TO DECEMBER 31, 1998
(Deficit)
Common Accumulated Total
Stock Additional During the Stock-
# of $.001 par Paid in Development holder's
Shares Value Capital Stage Equity
Initial investment
in capital stock 403,000 $403 $29,897 $ -0- $30,300
BALANCE AT
DECEMBER 16, 1996 403,000 403 29,897 -0- 30,300
Net (Loss) for the
period (578)
(578)
BALANCE AT
JUNE 30, 1997
(Audited) 403,000 403 29,897 (578) 29,722
Net (Loss) for
the year ended
June 30, 1998 (8,817) (8,817)
BALANCE AT
JUNE 30, 1998
(Audited) 403,000 403 29,897 (9,395) 20,905
Net (Loss) for the
six months ended
December 31, 1998 (7,369) (7,369)
BALANCE AT
DECEMBER 31, 1998
(Unaudited) 403,000 $403 $29,897 $(16,764) $13,536
Subject to the comments contained in the Accountants' Review Report.
Page 3 of 8
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
FOR THE PERIOD NOVEMBER 19, 1996 (INCEPTION) TO DECEMBER 31, 1998
(Unaudited)
Period from
For the Three For the Three Nov. 19, 1996
Months Ended Months Ended (inception) to
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998
General and administrative
expenses $( 834) $(6,319) $(16,764)
Net (Loss) for the period $( 834) $(6,319) $(16,764)
Net (Loss) per share $ (0.00) $ (0.02) $ (0.04)
Weighted average common
shares outstanding 403,000 403,000 403,000
Subject to the comments contained in the Accountants' Review Report.
Page 4 of 8
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
FOR THE PERIOD NOVEMBER 19, 1996 (INCEPTION) TO DECEMBER 31, 1998
(Unaudited)
For the Six For the Six
Months Ended Months Ended
Dec. 31, 1998 Dec. 31, 1997
General and administrative
expenses $(7,369) $(7,439)
Net (Loss) for the period $(7,369) $(7,439)
Net (Loss) per share $ (0.02) $ (0.02)
Weighted average common
shares outstanding 403,000 403,000
Subject to the comments contained in the Accountants' Review Report.
Page 5 of 8
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative
For the Six For the Six Amounts
Months Ended Months Ended From
Dec 31, 1998 Dec 31, 1997 Inception
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $(7,369) $(7,439) $(16,764)
Changes In Assets
(Increase) in Organization Expense -0- -0- (300)
Increase (Decrease) in Accrued
Expenses 8,465 1,500 8,465
Net Cash Provided By (Used In)
Operating Activities 1,096 (5,939) (8,599)
CASH FLOWS FROM INVESTING ACTIVITIES -0- -0- -0-
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from Parent Company 20,959 4,451 27,660
Common Stock Issuance -0- -0- 30,300
(Increase) in Deferred Registration
Costs (22,923) (100) (48,930)
Net Cash Provided By (Used In)
Financing Activities (1,964) 4,351 9,030
Net Increase (Decrease) in Cash (868) (1,588) 431
Cash, Beginning of Period 1,299 3,515 -0-
CASH, END OF PERIOD $ 431 $ 1,927 $ 431
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Taxes $ -0- $ -0- $ -0-
Interest $ -0- $ -0- $ -0-
Subject to the comments contained in the Accountants' Review Report.
Page 6 of 8
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS
Coral Development Corp. (CDC) is a Delaware corporation.
CDC is in the development stage and has not begun any formal
operations. CDC's office is located in New York. The
principal purpose of CDC is to find and merge with an
operating company. The Company's fiscal year end is June
30.
On December 10, 1996 Modern Technology Corp. (Modern), the
parent company of Coral Development Corp., purchased 403,000
shares of the company for $30,300. The shares of the
Company were registered on June 6, 1997 with the Securities
and Exchange Commission. The intention of Modern is to
distribute those shares to Modern's stockholders in the form
of a dividend.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING POLICIES
Coral Development Corp.'s accounting policies conform to
generally accepted accounting principles. Significant
policies followed are described below.
ESTIMATES IN FINANCIAL STATEMENTS
The preparation of the 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 and disclosure of
contingent 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.
NOTE 3: INCOME TAXES
The Company follows Statement of Financial Accounting
Standards No. 109 (FAS 109), "Accounting for Income Taxes."
FAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in the Company's financial statements or tax
returns. The Company has net operating loss carry forwards
of approximately $16,000 available to reduce any future
income taxes. The tax benefit of these losses,
approximately $5,600, has been offset by a valuation
allowance due to the uncertainty of its realization.
Page 7 of 8
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
NOTE 4: DEFERRED REGISTRATION COSTS
As of December 31, 1998, the Company has incurred deferred
registration costs of $48,930 relating to expenses incurred
in connection with the Proposed Distribution (see Note 1).
Upon consummation of this Proposed Distribution, the
deferred registration costs will be charged to equity.
Should the Proposed Distribution prove to be unsuccessful,
these deferred costs, as well as additional expenses to be
incurred, will be charged to operations.
NOTE 5: INTERIM FINANCIAL REPORTING
The unaudited financial statements of the Company for the
period July 1, 1998 to December 31, 1998 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 8 of 8
CORAL DEVELOPMENT CORP.
FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
I N D E X
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT 1
BALANCE SHEETS 2
STATEMENT OF STOCKHOLDER'S EQUITY 3
STATEMENTS OF OPERATIONS 4
STATEMENTS OF CASH FLOWS 5
NOTES TO THE FINANCIAL STATEMENTS 6-7
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and Stockholders
CORAL DEVELOPMENT CORP.
Brooklyn, New York
We have audited the accompanying balance sheets of CORAL
DEVELOPMENT CORP. (A Development Stage Enterprise) as of June 30,
1998 and 1997 and the related statements of stockholder's equity,
operations and cash flows for the period ended June 30, 1998 and
1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
presents fairly, in all material respects, the financial position
of CORAL DEVELOPMENT CORP. (A Development Stage Enterprise) as of
June 30, 1998 and 1997, and the statement of its operations and
cash flows for the periods then ended, in conformity with
generally accepted accounting principles.
GREENBERG & COMPANY LLC
Springfield, New Jersey
August 6, 1998
Page 1 of 7
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
June 30,
1998 1997
ASSETS
ASSETS
Current assets - cash $ 1,299 $ 3,515
Deferred registration costs 26,007 25,907
Organization Expense 300 300
TOTAL ASSETS $27,606 $29,722
LIABILITIES AND STOCKHOLDER'S EQUITY
Due to parent company $ 6,701 $ -0-
TOTAL LIABILITIES 6,701 $ -0-
STOCKHOLDER'S EQUITY
Common stock par value $.001
20,000,000 shares authorized
403,000 shares issued and outstanding 403 403
Additional paid in capital 29,897 29,897
(Deficit) accumulated during the
development stage (9,395) (578)
TOTAL STOCKHOLDER'S EQUITY 20,905 29,722
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $27,606 $29,722
The accompanying notes are an integral part of this financial
statement.
Page 2 of 7
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD NOVEMBER 19, 1996 (INCEPTION) TO JUNE 30, 1998
(Deficit)
Common Accumulated Total
Stock Additional During the Stock-
# of $.001 par Paid in Development holder's
Shares Value Capital Stage Equity
Initial investment
in capital stock 403,000 $403 $29,897 $ -0- $30,300
Balance -
December 16, 1996 403,000 403 29,897 -0- 30,300
Net (Loss) for the
period (578)
(578)
Balance -
June 30, 1997 403,000 403 29,897 (578) 29,722
Net (Loss) for the
year ended
June 30, 1998 (8,817) (8,817)
BALANCE -
JUNE 30, 1998 403,000 $403 $29,897 $(9,395) $20,905
The accompanying notes are an integral part of this financial statement.
Page 3 of 7
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
Period from
For the Year Ended December 17, 1996
June 30, 1998 to June 30, 1997
General and administrative
expenses $(8,817) $ (578)
Net (Loss) for the period $(8,817) $ (578)
Net (Loss) per share $ (0.02) $ (0.00)
Weighted average common shares
outstanding 403,000 403,000
Cumulative amounts from inception:
General and administrative
expenses $ 9,395
Net (Loss) $(9,395)
Net (Loss) per share $ (0.02)
The accompanying notes are an integral part of this financial
statement.
Page 4 of 7
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
Cumulative
For The Period From Amounts
Year Ended 12/17/96 From
6/30/98 to 6/30/97 Inception
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $(8,817) $ (578) $ (9,395)
Changes In Assets
(Increase) in Organization Expense -0- -0- (300)
Net Cash (Used In) Operating
Activities (8,817) (578) (9,695)
CASH FLOWS FROM INVESTING ACTIVITIES -0- -0- -0-
CASH FLOWS FROM FINANCING ACTIVITIES
Loan from Parent Company 6,701 -0- 6,701
Common Stock Issuance -0- -0- 30,300
(Increase) in Deferred Registration
Costs (100) (25,907) (26,007)
Net Cash Provided By (Used In)
Financing Activities 6,601 (25,907) 10,994
Net Increase (Decrease) in Cash (2,216) (26,485) 1,299
Cash, Beginning of Period 3,515 30,000 -0-
CASH, END OF PERIOD $ 1,299 $ 3,515 $ 1,299
Supplemental Disclosures of
Cash Flow Information
Cash Paid During Period for:
Income Taxes $ -0- $ -0- $ -0-
Interest $ -0- $ -0- $ -0-
The accompanying notes are an integral part of this financial statement.
Page 5 of 7
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS
Coral Development Corp. (CDC) is a Delaware corporation.
CDC is in the development stage and has not begun any formal
operations. CDC's office is located in New York. The
principal purpose of CDC is to find and merge with an
operating company. The Company's fiscal year end is June
30.
On December 10, 1996 Modern Technology Corp., the parent
company of Coral Development Corp., purchased 403,000 shares
of the company for $30,300. The shares of the Company were
registered on June 6, 1997 with the Securities and Exchange
Commission. The intention of Modern Technology Corp. is to
distribute those shares to Modern Technology Corp.'s
stockholders in the form of a dividend.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING POLICIES
Coral Development Corp.'s accounting policies conform to
generally accepted accounting principles. Significant
policies followed are described below.
ESTIMATES IN FINANCIAL STATEMENTS
The preparation of the 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 and disclosure of
contingent 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.
NOTE 3: INCOME TAXES
The Company follows Statement of Financial Accounting
Standards No. 109 (FAS 109), "Accounting for Income Taxes."
FAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in the Company's financial statements or tax
returns. The Company has net operating loss carry forwards
of approximately $10,000 available to reduce any future
income taxes. The tax benefit of these losses,
approximately $3,500, has been offset by a valuation
allowance due to the uncertainty of its realization.
Page 6 of 7
CORAL DEVELOPMENT CORP.
(A WHOLLY OWNED SUBSIDIARY)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
NOTE 4: DEFERRED REGISTRATION COSTS
As of June 30, 1998, the Company has incurred deferred
registration costs of $26,007 relating to expenses incurred
in connection with the Proposed Distribution (see Note 1).
Upon consummation of this Proposed Distribution, the
deferred registration costs will be charged to equity.
Should the Proposed Distribution prove to be unsuccessful,
these deferred costs, as well as additional expenses to be
incurred, will be charged to operations.
NOTE 5: SUBSEQUENT EVENT
On July 22, 1998, the Company signed an Agreement and Plan
of Reorganization with Omnicomm Systems, Inc. (Omnicomm).
The agreement calls for Omnicomm to be merged into the
Company. Omnicomm is a privately held company engaged in
the computer software industry. The transaction is
contingent upon receiving shareholder approval from both
companies and also subject to the conditions of Rule 419 of
the Securities Act of 1933 and approval by the Securities
and Exchange Commission of a post-effective amendment to the
registration statement.
Page 7 of 7
EDUCATION NAVIGATOR, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
I N D E X
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT 1
BALANCE SHEETS 2
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) 3
STATEMENTS OF OPERATIONS 4
STATEMENTS OF CASH FLOWS 5
NOTES TO THE FINANCIAL STATEMENTS 6-9
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and Shareholders
EDUCATION NAVIGATOR, INC.
Miami, Florida
We have audited the accompanying balance sheet of EDUCATION
NAVIGATOR, INC. as of December 31, 1997 and 1996 and the related
statements of operations, statements of shareholders' equity
(deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based upon our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of EDUCATION NAVIGATOR, INC. as of December 31, 1997 and 1996,
and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted
accounting principles.
GREENBERG & COMPANY LLC
Springfield, New Jersey
November 5, 1998
Page 1 of 9
EDUCATION NAVIGATOR, INC.
BALANCE SHEETS
ASSETS
December 31,
1997 1996
CURRENT ASSETS
Cash $ 3,521 $ 4,328
Accounts Receivable 1,550 -0-
Total Current Assets 5,071 4,328
PROPERTY AND EQUIPMENT - Net 22,351 10,241
OTHER ASSETS
Deposit 2,807 2,807
Organization Costs, net 581 733
TOTAL ASSETS $ 30,810 $ 18,109
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 41,633 $ 8,604
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock - 100,000 shares
authorized, 1,000 issued and
outstanding at $.001 par value 1 1
Additional Paid In Capital 82,083 46,413
Retained Earnings (Deficit) (92,907) (36,859)
Less: Stock Subscription Receivable -0- (50)
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (10,823) 9,505
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ 30,810 $ 18,109
The accompanying notes are an integral part of these financial
statements.
Page 2 of 9
EDUCATION NAVIGATOR, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
For The Period September 24, 1996 (inception) to December 31, 1997
Total
Stock Share-
Number $.001 Additional Retained Subscrip- holders'
of Par Paid-In Earnings tion Equity
Shares Value Capital (Deficit) Receivable (Deficit)
Issuance of
Common Stock 1,000 $1 $46,413 $ -0- $ 46,414
Stock Subscription
Receivable $(50) (50)
Net Income (Loss)
for the period
Sept. 24, 1996
(inception) through
December 31, 1996 (36,859) (36,859)
BALANCES AT
DECEMBER 31, 1996 1,000 1 46,413 (36,859) (50) 9,505
Capital
Contribution 35,670 35,670
Stock Subscription
Payment 50 50
Net Income (Loss) for
the Year Ended
December 31, 1997 (56,048) (56,048)
BALANCES AT
DECEMBER 31, 1997 1,000 $1 $82,083 $(92,907) $-0- $(10,823)
The accompanying notes are an integral part of these financial statements.
Page 3 of 9
EDUCATION NAVIGATOR, INC.
STATEMENTS OF OPERATIONS
September 24,1996
For The Year Ended (inception) to
December 31, 1997 December 31, 1996
SALES, Net $133,560 $ -0-
COST OF SALES 90,689 -0-
GROSS PROFIT 42,871 -0-
OTHER EXPENSES
Depreciation and
Amortization Expense 3,893 562
Interest Expense -0- 363
Bad Debts 25,200 -0-
Selling, General and
Administrative 69,826 35,934
Income (Loss) Before Taxes (56,048) (36,859)
Income Taxes -0- -0-
NET INCOME (LOSS) $(56,048) $(36,859)
Earnings (Loss) Per Share $(56.05) $(36.86)
Number of Weighted Average
Shares Outstanding 1,000 1,000
The accompanying notes are an integral part of these financial statements.
Page 4 of 9
EDUCATION NAVIGATOR, INC.
STATEMENTS OF CASH FLOWS
September 24,1996
For the Year Ended (inception) to
December 31, 1997 December 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(56,048) $(36,859)
Adjustment to Reconcile Net Income
to Net Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 3,893 562
Change in Assets and Liabilities:
(Increase) Decrease in Accounts
Receivable (1,550) -0-
(Increase) Decrease in Deposit -0- (2,807)
(Decrease) Increase in Accounts
Payable and Accrued Expenses 33,029 8,604
Net Cash Provided By (Used In)
Operating Activities (20,676) (30,500)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (15,851) (10,778)
Organization Costs -0- (758)
Net Cash Provided By (Used In)
Investing Activities (15,851) (11,536)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Common Stock Issuance -0- 46,364
Additional Paid In Capital 35,720 -0-
Net Cash Provided By (Used In)
Financing Activities 35,720 46,364
Net Increase (Decrease) in Cash (807) 4,328
Cash At Beginning of Period 4,328 -0-
CASH AT END OF PERIOD $ 3,521 $ 4,328
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Income Tax Paid $ -0- $ -0-
Interest Paid $ 363 $ -0-
The accompanying notes are an integral part of these financial statements.
Page 5 of 9
EDUCATION NAVIGATOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS
Education Navigator, Inc. (the Company) was incorporated in
Florida in September 1996. The Company develops and
maintains dynamic internet web site applications for
business. The Company's customers are located throughout
North America.
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.
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.
ADVERTISING
Advertising costs are expensed as incurred.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentration of credit risk are accounts receivable.
The Company performs ongoing credit evaluations of its
customers but generally does not require collateral to
support customer receivables.
Page 6 of 9
EDUCATION NAVIGATOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
PROPERTY AND EQUIPMENT
The components of property and equipment at cost are as
follows:
12/31/97 12/31/96
Computer equipment $23,147 $ 7,296
Office Furniture 2,783 2,783
Office Equipment 699 699
26,629 10,778
Accumulated Depreciation (4,278) (537)
Property & Equipment, Net $22,351 $10,241
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 1997 and 1996 was $3,741 and $537,
respectively.
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.
ORGANIZATION COSTS
Organization costs of $758 were capitalized upon
incorporation. Amortization is recognized ratably over five
years. Amortization expense for 1996 and 1997 was $25 and
$152, respectively.
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.
Page 7 of 9
EDUCATION NAVIGATOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
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.
NOTE 3: SUBSEQUENT EVENT - ACQUISITION
On June 26, 1998 the Company was acquired by Omnicomm
Systems, Inc. (Omni) for $600,000 and 441,200 shares of Omni
stock.
NOTE 4: COMMITMENTS AND CONTINGENCIES
The company is currently in a lease for office and factory
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 under the lease. Rent expense for 1996 and 1997
was $2,132 and $21,482, respectively.
NOTE 5: INCOME TAXES
Income taxes are accrued at the statutory U.S. and state
income tax rates.
During the periods ended December 31, 1996 and 1997 the
Company elected to be taxed as an 'S' corporation for federal
and state income tax purposes. Therefore, the corporate
income is taxed directly to the shareholders. This election
was terminated as of June 26, 1998, when Omnicomm acquired
all of the outstanding stock of the Company.
Page 8 of 9
EDUCATION NAVIGATOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
NOTE 6: 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.
Page 9 of 9
Exhibit 10(a)
Employment Contract
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated as of ______
__, 1999, between OmniComm Systems, Inc., a Delaware corporation, having
it principal place of business located at 3250 Mary Street, Ste. 307,
Coconut Grove, Florida (the "Company"), and ___________(the "Employee").
WITNESSETH:
WHEREAS, the Company desires to employ the Employee as an
administrative assistant and the Employee desires to accept such
employment.
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee and the
Employee hereby accepts employment upon the terms and conditions
hereinafter set forth.
2. Term. This Agreement shall be at will. Either party in their
sole and absolute discretion may terminate the Agreement.
3. Salary. For all services rendered under this Agreement the
Company shall pay the Employee a base salary of $______ per annum in
equal semi-monthly installments.
4. Duties. The Employee shall be employed as an ____________ and,
subject to the direction of the Board of Directors and the Company's
officers designated by the Board of Directors, shall perform and
discharge well and faithfully the duties which may be assigned to her
from time to time by the Company in connection with the conduct of its
business.
5. Extent of Services. The Employee shall devote her entire time,
attention and energies to the business of the Company and shall not
during the term of the Agreement be engaged during normal business
hours, in any other business or professional activity, whether or not
such activity is pursued for gain, profit, or other pecuniary advantage.
6. Disclosure of Information. (a) The Employee recognizes and
acknowledges that the Company's trade secrets and proprietary
information and processes, as they may exist from time to time, are
valuable, special and unique assets of the Company's business, access to
and knowledge of which are essential to the performance of the
Employee's duties hereunder. The Employee will not, during or after the
term of her employment by the Company, in whole or in part, disclose
such secrets, information or processes to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever, nor
shall the Employee make use of any such property for her own purposes or
for the benefit of any person, firm, corporation or other entity except
the Company under any circumstances during or after the term of her
employment, provided that after the term of her employment these
restrictions shall not apply to such secrets, information and processes
which are then in the public domain provided that the Employee was not
responsible, directly or indirectly, for such secrets, information or
processes entering the public domain without the Company's consent. The
Employee agrees to hold as the Company's property, all memoranda, books,
papers, letters, formulas and other data, and all copies thereof and
therefrom, in any way relating to the Company's business and affairs,
whether made by him or otherwise coming into her possession, and on
termination of her employment, or on demand of the Company, at any time,
to deliver the same to the Company.
7. Inventions. The Employee hereby sells, transfers and assigns to
the Company or to any person, or entity designated by the Company, all
of the entire right, title and interest of the Employee in and to all
inventions, ideas, disclosures and improvements, whether patented or
unpatented, and copyrightable material, made or conceived by the
Employee, solely or jointly, or in whole or in part, during the term
hereof which (i) relate to methods, apparatus, designs, products,
processes or devices sold, leased, used or under construction or
development by the Company or any subsidiary, or (ii) otherwise relate
to or pertain to the business, functions or operations of the Company or
any subsidiary, or (iii) arise wholly or partly from the efforts of the
Employee during the term hereof. The Employee shall communicate
promptly and disclose to the Company, in such form as the Company
requests, all information, details and data pertaining to the
aforementioned inventions, ideas, disclosures and improvements; and,
whether during the term hereof or thereafter, the Employee shall execute
and deliver to the Company such formal transfers and assignments and
such other papers and documents as maybe required of the Employee at the
Company's expense to permit the Company or any person or entity
designated by the Company to file and prosecute the patent applications
and, as to copyrightable material, to obtain copyright thereon. Any
invention by the Employee within one (1) year following the termination
of this Agreement shall be deemed to fall within the provisions of this
paragraph unless proved by the Employee to have been first conceived and
made following such termination.
8. Covenant Not to Compete. (a) During the term hereof and for a
period of one (1) year thereafter, the Employee shall not compete,
directly or indirectly, with the Company, interfere with, disrupt or
attempt to disrupt the relationship, contractual or otherwise, between
the Company and any customer, client, supplier, consultant, or employee
of the Company and any customer, client, supplier, consultant or
employee of the Company, including, without limitation, employing or
being an investor (representing more than 5% equity interest) in, or
officer, director, or consultant to, any person or entity which employs
any former key or technical employee whose employment with the Company
was terminated after the date which is one year prior to the date of
termination of the Employee's employment therewith. An activity
competitive with an activity engaged in by the Company shall mean
performing services whether as an employee, officer, consultant,
director, partner, or sole proprietor for any person or entity engaged
in the business then engaged in by the Company, which services involve
systems integration (b) It is the desire and intent of the parties that
the provisions of this Section 8 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any
particular portion of this Section 8 shall be adjudicated to be invalid
or unenforceable, this Section 8 shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable,
such deletion to apply only with respect to the operation of this
Section in the particular jurisdiction in which such adjudication is
made. (c) Nothing in this Section 8 shall reduce or abrogate the
Employee's obligations during the term of this Agreement under Sections
4 and 5 hereof.
9. Remedies. If there is a breach or threatened breach of the
provisions of Section 5, 6(b), 7 or 8 of this Agreement, the Company
shall be entitled to an injunction restraining the Employee from such
breach. Nothing herein shall be construed as prohibiting the Company
from pursuing any other remedies for such breach or threatened breach.
10. Assignment. This Agreement may not be assigned by any party
hereto; provided that the Company may assign this Agreement: (a) to an
affiliate so long as such affiliate assumes the Company's obligations
hereunder; provided that no such assignment shall discharge the Company
of its obligations herein, or (b)in connection with a merger or
consolidation involving the Company or a sale of substantially all its
assets to the surviving corporation or purchaser as the case may be, so
long as such assignee assumes the Company's obligations thereunder.
11. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and sent by registered
mail to the Employee at her residence at________________ and to the
Company at its address set forth above, Attention:
12. Waiver or Breach. A waiver by the Company or the Employee of
a breach of any provision of this Agreement by the other party shall not
operate or be construed as a waiver of any subsequent breach by the
other party.
13. Entire Agreement. This instrument contains the entire
agreement of the parties. It may be changed only by an agreement in
writing signed by a party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
14. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Florida. All questions with respect to
the construction hereof and the rights and liabilities of the parties
hereto shall be governed by the laws of the State of Florida. Any
action or proceeding arising out of or relating hereto shall be brought
in Dade County, State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first hereinabove written.
OmniComm Systems, Inc.
By:____________________________
Employee
_______________________________Exhibit 10(b)
Factor Agreement
BANKEST CAPITAL CORP.
STANDARD FACTORING AGREEMENT
Omnicomm Systems, Inc.
3250 Mary Street, Ste. 307
Coconut Grove, FL 33133
Gentlemen:
The following shall constitute the terms upon which Bankest Capital
Corp. ("Bankest" and "we" and/or "us") shall act as sole factor of
Omnicomm Systems, Inc.("company" and "you" and/or "your") (see section
11 for the definition of certain capitalized terms):
SECTION 1 Sales and Approval of Receivables
1.1 You hereby sell, assign and transfer to us and we hereby purchase
from you all of your now outstanding and hereafter created or acquired
Receivables with full power to collect and otherwise deal therewith as
the sole exclusive owner thereof. You further sell and assign to us all
of your interest in the goods represented by the Receivables and in all
goods that may be returned by customers, all rights as an unpaid vendor
or lienor, all rights of stoppage in transit, replevin and reclamation
relating thereto, all rights in and to all security therefor and
guarantees thereof, and all rights against third parties with respect
thereto. Any goods so recovered or returned shall be set aside, marked
with our name and held for our account as owner. You shall notify us
promptly of all such returned or recovered goods.
1.2 (a) You will submit for our written approval the amount, terms of
payment and delivery, and all other conditions of each prospective sale
and each approved sale shall be made only in accordance with such
approval, which may be withdrawn at any time before actual delivery of
the merchandise or rendition of the services to the customer. We may,
in our sole judgment, and from time to time, establish credit lines for
sales to some or all of your customers and, provided sales to such
customers are on your normal selling terms which we have approved, all
sales to such customers within the established credit lines will be
Approved Receivables provided that delivery or performance is completed
while the credit line remains in effect. All of our credit approvals
will be in writing.
(b) We reserve the right to amend or withdraw a credit approval or
credit line at any time by advice to you, which advice will be promptly
confirmed in writing. A credit line will be automatically suspended
(i.e. withdrawn) during any period that the customer is 60 or more days
past due. We will reinstate any suspended credit line in accordance
with, and subject to, our credit line approval guidelines.
(c) Without limiting the foregoing, our approval shall
automatically be withdrawn if any terms are changed or if delivery is
made more than thirty days after the approved delivery date, or more
than thirty days after the date of approval if no delivery date is
specified. If the amount of any sale is increased without our prior
written consent, our approval shall apply only to the original amount
approved.
(d) We shall have no liability to you or to any customer for our
refusal to credit approve a Receivable or establish a credit line or for
our withdrawal of a credit approval or a credit line.
1.3 We shall assume the Credit Risk on all Approved Receivables. We
shall have full recourse to you for all other reasons (other than Credit
Risk), which cause us not to collect Receivables sold by you to us. We
shall have full recourse to you on all Non-Approved Receivables.
1.4 In the event that monies shall, at any time, be owing from one of
your customers for both Approved Receivables and Non-Approved
Receivables, we may, and you so authorize and approve us to , apply all
payments received first in reduction of the outstanding Approved
Receivables.
SECTION 2 Purchase Price, Commissions, Advances, and Reserve
2.1 We will purchase each Receivable at the Net Amount of thereof, less
our commission thereon (hereinafter, the "Purchase Price"). "Net
Amount" shall mean the face amount less all returns, discounts (which
may, at our option, be calculated on the longest or shortest terms),
credits or allowances of any nature at any time issued, owing, claimed
by customers, granted or outstanding, and out-of-pocket expenses as set
forth in the Reimbursable Out-of-Pocket Costs Schedule Attachment as
Schedule A.
2.2 Upon the Payment Date (as defined in Section 11.8 hereof) with
respect to any Receivable, the Purchase Price, less any debits or
reserves, shall be credited to your account. The credit balance of the
account shall be available for distribution to you, at your request. We
may retain from sums payable to you a reserve, which reserve may be
revised from time to time at our discretion, in order to provide for
Customer Disputes, possible credit losses on Non-Approved Receivables,
sums owing to us for goods/services purchased by you from any other firm
or company factored or otherwise financed by us, and the Obligations.
Amounts in your account shall also be subject to reduction for payment
of any charges or credits which may be charged to you pursuant to this
Agreement, and shall be given as security for all of your Obligations
hereunder or arising from any other agreement between you and us.
2.3 From time to time during the term of this Agreement and prior to
the Payment Date, upon you request and in our sole discretion, we may
advance funds ("Advance") to you up to seventy percent (70.0%) of the
Purchase Price of a Receivable. Any Advance in excess of the
percentages set forth above shall be deemed to be an Overadvance, which
Overadvance shall be made in our sole discretion and also subject to
this Agreement.
2.4 All Advances, Overadvances and other credits, charges or payments
specified herein, except for charges which reduce the Purchase Price
pursuant to Section 2.2, shall be charged to your account. You shall be
charged interest in the amount as and at such times as herein provided
on the outstanding balance of the account. The account shall be reduced
by all payments received with respect to a Receivable.
2.5 You will pay us a factoring commission, which commission shall be
due and payable at the time of our acceptance of the purchase or
assignment of each Receivable, in the form of a Discount in the amount
of the Applicable Factoring Commission Percentage of each Receivable
purchased by us (the "Applicable Factoring Commission Percentage"). The
Applicable Factoring Commission Percentage is predicated upon the number
of days the Receivables remain outstanding and shall be the percentage
set forth on the Factoring Commission Schedule attached hereto as
Schedule B. The minimum factoring commission on each invoice shall be
Five Dollars ($5.00).
2.6 During each contract year (the 12 months immediately following the
date hereof or any anniversary thereof you agree to pay to us Factoring
Commissions aggregating at least eighteen thousand Dollars
($18,000.00), ("Minimum Annual Commission"). If during any month the
aggregate factoring commissions paid by you is less than one thousand
five hundred Dollar ($1,500.00) ("Minimum Monthly Commission"), then
you shall pay to us, or we may charge your account with an amount equal
to the difference between the Minimum Monthly Commission and the
factoring commission actually paid during that month (the "Deficiency
Charge"). At such time as you exceed the Minimum Annual Commission, the
Minimum Monthly Commission shall be waived for the remainder of the
contract year and the Deficiency Charges paid during said contract year
shall be applied against subsequent factoring commission charges
incurred during said contract year.
2.7 We will charge you account our standard wire transfer fee on all
wire transfers, and you will reimburse us for exchanges on checks,
charges for returned items and all other back charges and other charges
and costs as stipulated in the Reimbursable Out-of-Pocket Costs Schedule
attached hereto. We may also, at our option, charge your account for all
amounts owing by you to us under this Agreement and all other
Obligations.
2.8 In the case of sales to customers located outside the continental
United States, you shall pay to us and we may conclusively charge to
your account (i) the amount of all fees, costs and commissions charged
to us by our correspondent foreign factors to which we re-assign or
through which we re-factor such sales, (ii) all premiums on any credit
insurance obtained by us in connection therewith, (iii) all currency
rate differentials, currency conversion charges, transmittal charges and
other costs and expenses relating thereto, and (iv) any and all sums
which we may be required to pay or assume under our arrangements with
any foreign factors. All charge-backs of foreign sales by such foreign
factors shall be binding on you and shall relieve us of the Credit Risk
with respect thereto. You acknowledge that we have informed us of the
terms of our arrangements with any and all such foreign factors,
including, without limitation, the Code of International Factoring
Customs (IFC76) and Master Agreement relating thereto; you consent
thereto and agree to fulfill and to assist in fulfilling those customs
as far as your part of the transactions in concerned; your failure to
comply with any thereof shall immediately relieve us of the Credit Risk
with respect to all affected Receivables. You shall affix to all
invoices to foreign customers such legend regarding payment thereof to
the foreign factor as we may from time to time require.
2.9 You shall pay us on demand any debit balance at any time existing
in your account.
SECTION 3 Interest
3.1 You will pay interest on the daily balance of all monies remitted,
paid or otherwise advanced to you or for your account net of all
payments received from you or on your behalf including the Purchase
Price of Receivables purchased by us hereunder which is credited to your
account on the Collection Date. Interest will be calculated daily at a
rate the greater of three percent (3.0%) per annum or three hundred
(300) basis points plus the Base Rate (the "Interest Rate") and will
be charged to your account monthly, in arrears. All other indebtedness
due by you to us) under this Agreement and on all other Obligations,
except those specifying a different rate, from the date incurred through
the date paid will be charged interest calculated daily at the greater
at that rate which is the maximum rate applicable by law, or rate of six
hundred basis points (6.0%) plus the Base Rate and, at our option, may
be charged to your account. Any publicly announced decrease or increase
in the Base Rate shall result in an adjustment to the Interest Rate on
the next business day. Interest shall be calculated on the basis of a
360-day year for the actual number of days elapsed. In no event shall
the Interest Rate exceed the maximum rate permitted by applicable law
and in the event excess interest is paid, it shall be considered a
repayment of the principal.
3.2 If a Receivable or any payment is charged back to you after the
Collection Date, you will pay us interest at the Interest Rate on such
Net Receivable or such payment from the Collection Date to the
chargeback date.
SECTION 4 Representations, Warranties and Covenants
4.1 You represent, warrant and covenant as to each Receivable sold and
assigned hereunder that, at the time of its creation, the Receivable is
a valid, bona fide account, representing an undisputed indebtedness
incurred by the named account debtor for goods actually sold and
delivered or for services completely rendered; there are no setoffs,
offsets or counterclaims, genuine or otherwise, against the Receivable;
the Receivable does not represent a sale to a parent, subsidiary or a
consignment, sale or return or a bill and hold transaction; no agreement
exists permitting any deduction or discount (other than the discount
stated on the invoice); you are the lawful owner of the Receivable and
have the right to sell and assign the same to us; the Receivable is free
of all security interests, liens and encumbrances other than those in
our favor, and the Receivable is due and payable in accordance with its
terms.
4.2 You shall not grant or suffer to exist any lien upon or security
interest in your inventory in favor of any party other than us without
our written consent, or prior knowledge.
4.3 You are a solvent corporation; duly incorporated and in good
standing under the laws of the State of Florida and qualified in all
States where such qualification is required; the execution, delivery and
performance of this Agreement have been duly authorized and are not in
contravention of any applicable law, your corporate charter or by-laws
or any agreement or order by which you are bound.
4.4 You shall not change your corporate name or the location of your
office or open any new offices without giving us at least thirty (30)
days prior written notice. At the present time, you carry on business
only at the above address and the addresses set forth below:
_______________________________________
4.5 All books and records pertaining to the Receivables or to any
inventory owned by you shall be maintained solely and exclusively at the
above addresses or the addresses listed in Section 4.4 and no such books
and records shall be moved or transferred without giving us thirty (30)
days prior written notice.
4.6 You shall not sell, lease, transfer or otherwise dispose of all or
substantially all of your property or assets, or consolidate with or
merge
into or with any corporation or entity without our prior written
consent, which consent will not be unreasonable withheld.
4.7 After our request, you shall hold all returned, replevied or
reclaimed goods coming into your possession in trust for us and all such
goods shall be segregated and identified as held in trust for our
benefit and you shall, at our request, and at your expense, deliver such
goods to such place or places as we may designate.
4.8 Receivables sold to us hereunder and represented by invoices
bearing the tradenames or styles set forth below are wholly owned by you
and the undertakings, representations and warranties made in connection
therewith shall be identical to and of the same force and effects as
those made with respect to invoices bearing your corporate name. The
tradenames or styles set forth below are the only tradenames or styles
under which you transact business.
Omnicomm Systems, Inc.
4.9 No discounts, credits or allowances will be issued, granted or
allowed by you to customers and no returns will be accepted without our
prior written consent; provided, however, that until we notify you to
the contrary, you may presume our consent. Discounts, credits or
allowances once issued may be claimed only by the customer; no third
party beneficiary rights are created hereby.
SECTION 5 Disputes, Chargebacks and Reserves
5.1 With respect to any Receivable, upon the occurrence of a breach of
any of the representations or warranties contained in Section 4.1, or
the assertion by a customer of a Dispute or other defense to payment,
other than financial inability, an Approved Receivable shall
automatically become a Non-Approved Receivable and we may charge back
such Receivable to you.
5.2 You will notify us promptly of and settle all Disputes at your cost
and expense, including attorneys' fees, and will pay us promptly the
amount of the Receivables affected thereby. However, if any Dispute is
not settled by you within thirty days after the maturity date of the
invoice or within such shorter period as we may determine, we may
settle, compromise or litigate such Dispute in our or your name upon
such terms as we in our sole discretion deem advisable and for your
account and risk. We may also in our discretion and without notice to
you take possession of and sell any returned goods at such prices and
upon such terms as we deem advisable. We may charge any deficiency, and
all costs and expenses, including attorney's fees, to your account, In
addition to all other rights to which we are entitled under this
Agreement, if there is any Dispute as to any Receivable, or if any
Receivable on which you have the Credit Risk or evidenced by an invoice
for less than Fifty Dollars ($50.00) is unpaid at its maturity, we may
at any time charge the amount of such Receivable back to your account.
Immediately upon the occurrence of any Dispute and regardless of the
date on which we charge back the affected Receivable, the Credit Risk on
such Receivable, to the extent theretofore borne by us, shall
automatically revert to you. We may also charge back the amount of any
Receivable which is not paid to us at maturity due to acts of God, war,
civil strife, currency restrictions, foreign political impediments or
the like.
5.3 We may, at our option, charge back to you all amounts owing on Non-
Approved Receivables which are not paid when due. We shall also have
the right to charge back to you any payment which we receive with
respect to a Non-Approved Receivable if such payment is subsequently
disgorged by us or disgorged by our assigns, whether as a result of any
proceeding in bankruptcy or otherwise.
5.4 A chargeback shall not constitute a resale to you of said
Receivables; however, upon payment by you to us of all monies due with
respect to such charge back Receivable, title thereto shall revert to
you, subject, however, to our continuing security interest therein. You
agree to indemnify and save us harmless from and against any and all
loss, costs and expenses, caused by or arising out of disputed
Receivables, including, but not limited to, collection expenses and
attorney's fees incurred with respect thereto. We may charge our normal
and standard late payment and/or delinquency charges to your customers.
SECTION 6 Administration
6.1 You shall, from time to time, execute and deliver to us
confirmatory schedules of Receivables sold to us, together with one copy
of each invoice and acceptable evidence of shipment and such other
documentation and proofs of delivery as we may require. Each invoice
shall bear a notice, in form satisfactory to us, that it has been sold
and assigned to and is payable United States dollars only to us.
However, the issuance of invoices to customers shall itself constitute
the assignment to us of the Receivables represented thereby. You will
keep all shipping and delivery receipts and copies of all invoices at
your office available for our inspection, and will deliver them to us
promptly at our request. The sale of your Receivables to us and our
ownership thereof will be properly reflected on your books. You agree
to prepare and mail all invoices or, at our option, you shall send all
of the invoices to us ready for mailing to the customers, in which event
the postage and clerical charges incurred by us in mailing the same will
be paid by you.
6.2 You agree to execute and deliver to us such further instruments of
assignments, financing statements and instruments of further assurance
as we may reasonably require. You authorize us to execute on your
behalf and file such UCC financing statements as we may deem necessary
in order to perfect and maintain the security interests granted by you
in accordance with this and any other agreement between you and us, and
you further agree that we may file this Agreement or a copy thereof as
such UCC financing statement. You agree to bear the cost of all filing
fees, filing taxes, search reports, legal fees and other charges
incurred by us in the perfection, protection and preservation of the
rights and collateral security herein granted to us.
6.3 If any remittances are made directly to you, your employees or
agents, you shall act as trustee of an express trust for our benefit,
hold the same as our property and deliver the same to us forthwith in
kind. We and/or such designee as we may from time to time appoint, are
hereby appointed your attorney-in-fact to endorse your name on may
remittances received by us where such endorsement is required to effect
collection; this power, being coupled with an interest is irrevocable.
6.4 We may, at all times, have access to, inspect and make extracts
from all your records, files and books of accounts. We may, at any time
after default by you hereunder, remove from your premises all such
records, files and books relating to the Receivables. You agree to
promptly furnish us within forty-five (45) days after the close of each
quarter financial statements unaudited and in such form and detail as we
may reasonably require. You also agree to prepare and furnish to us,
within ninety (90) days after the close of your fiscal year, financial
statements which have been audited and certified by an independent
certified public accountant which is acceptable to us. You authorize us
to communicate directly with your independent certified public
accountants and authorize such accountants to discuss your financial
condition and statements directly with us.
6.5 If we determine that the credit standing of a customer has
deteriorated after we have assumed the Credit Risk on a Receivable, you
shall, at our request, exercise such rights as you may have to reclaim
or stop the goods in transit, and you hereby grant us the right to take
such steps in your name or ours.
6.6 You authorize us to disclose such information as we deem
appropriate to persons making credit inquiries about you.
6.7 We will send you a monthly statement of your account which shall
constitute an account stated and be binding upon you with respect to the
matters reflected therein and any matters previously reported to you
which are incorporated therein, except to the extent that written
exceptions thereto are served upon us within thirty (30) days after such
statement is rendered.
6.8 You hereby agree to indemnify us for all costs and expenses
incurred by us in connection with Receivables for which credit approval
has not been given and in connection with Receivables which are unpaid
at maturity for reasons other than financial inability. Further, you
hereby agree to indemnify us for any liability for duties, forwarder's
fees, storage, shipping charges and other expense connected with the
Receivables and any losses occasioned by claims of Customers under
Receivables.
SECTION 7 Collateral Security
7.1 As collateral security for all Obligations, you hereby assign and
grant to us a continuing security interest in: (i) all of your presently
existing and hereafter created Receivables and general intangibles and
the proceeds thereof; (ii) all monies, securities and other property now
or hereafter held or received by, or in transit to us from or for you,
whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all of your deposits and credit balances in our
possession; (iii) all returned, reclaimed or repossessed goods and the
documents evidencing or relating to such goods; (iv) all books, records
and other property at any time evidencing or relating to the
Receivables; and (v) the proceeds of any insurance policies covering any
of the foregoing. Recourse to the collateral security herein provided
shall not be required, and you shall at all times remain liable for the
payment and performance of all of your Obligations upon demand by us.
7.2 By your execution of this Agreement, you also hereby grant to us
the right and authority to set-off and debit payments and charges you
owe us, which we are otherwise entitled to set-off and debit against the
account as specified in this Agreement directly against your account,
without prior notice or consent from you. We shall in good faith
endeavor to provide you written notice of such set-off or debit within
ten (10) days after same; provided however, that we shall have no
liability to you in respect of our failure to give such notice; and
further provided that our failure to give such notice shall have no
effect on our rights to set-off or debit as provided above.
SECTION 8 Events of Default
8.1 The occurrence of any of the following acts or events shall
constitute an Event of Default: (a) if you fail to make payment of any
of your Obligations when due, (b) if you fail to make any remittance
required by this Agreement, (c) if you commit any breach of any of the
terms, representations, warranties, covenants, conditions or provisions
of this Agreement, or of any present or future supplement or amendment
hereto or of any other agreement between us, (d) if you become insolvent
or unable to meet your debts as they mature, (e) if you deliver to us a
false financial statement, (f) if you call, or have called by a third
party, a meeting of creditors, (g) if you have commenced by or against
you any bankruptcy proceeding, insolvency, arrangement or similar
proceeding, (h) if you suspend or discontinue doing business for any
reason, (i) if a receiver or a trustee of any kind is appointed for you
or any of your property, (j) if any guarantor of your Obligations shall
become insolvent or have commenced by or against such guarantor any
bankruptcy proceeding, insolvency, arrangement or similar proceeding,
(k) if any guaranty of your Obligations is terminated, or (l) if any
change of ownership occurs with respect to more than twenty (20%)
percent of your capital stock.
8.2 Upon the occurrence of an Event of Default, we shall have the right
to terminate this Agreement and all other arrangements existing between
us forthwith and without notice, and all of your Obligations to us shall
mature and become immediately due and payable and we shall have the
right to withhold any further payment to you until all Obligations have
been paid in full. In addition, we shall have all the rights of a
secured party under the Uniform Commercial Code, including, without
limitation, the right to take possession of any collateral in which we
have a security interest and to dispose of same at public or private
sale and you will be liable for any deficiency. We shall not be
required to proceed against any Collateral but may proceed against you
directly. In the event we institute suit against you, you agree to pay
our costs and reasonable attorney's fees.
SECTION 9 Terms and Termination
This Agreement shall continue in full force and effect for one (1) year
or until terminated by either party hereto giving the other party not
less than 90 days prior written notice thereof. Notice of termination
shall be registered or certified mail; provided however, that you shall
not terminate this Agreement so long as you are indebted or obligated to
us in connection with any other financing arrangements. Notwithstanding
such notice of termination, our respective rights and obligations
arising out of transactions having their inception prior to the
specified date of termination shall not be affected by such termination
and all terms, provisions and conditions hereof, including but not
limited to, the security interests herein above granted to us, shall
continue in full force and effect until all Obligations have been paid
in full. All of the representations, warranties and covenants made
herein shall survive the termination of this Agreement.
SECTION 10 Modifications
This Agreement cannot be changed or terminated orally; it constitutes
the entire agreement between us and shall be binding upon respective
successors and assigns, but may not be assigned by you without our prior
written consent. No delay or failure on our part in exercising any
right, privilege, or option hereunder shall operate as a waiver thereof
or of any other right, privilege or option. No waiver whatsoever shall
be valid unless in writing, signed by us, and then only to the extent
therein set forth. If any term or provision of this Agreement is held
invalid under any statute, rule or regulation of any jurisdiction
competent to make such a decision, the remaining terms and provisions
shall not be affected, but shall remain in full force and effect. You
further acknowledge that during the course of the term of this
Agreement, we shall make credit determinations with respect to your
Receivables and shall refactor and otherwise assign such Receivables to
a Third Party, notwithstanding any such assignment of refactoring you
shall in no way rely on any credit determination relayed to us, or any
action or inaction taken by such Third Party with respect to the
Receivables, and that you shall look only to us as the party responsible
for credit determinations and administration of your Receivables and
this Agreement generally.
SECTION 11 Definitions
11.1 "Approved Receivable" - Any Receivable with respect to which we
have issued a credit approval which has not subsequently been withdrawn.
11.2 "Base Rate" - The rate of interest publicly announced from time to
time by Citibank N. A., New York, New York as its prime or base rate (or
equivalent).
11.3 "Credit Risk" - The risk that a customer will be financially unable
to pay a Receivable at maturity, provided the customer has received and
accepted the goods and/or services which gave rise to such Receivable,
without any Dispute.
11.4 "Dispute" - Any dispute, deduction, claim, offset, defense or
counterclaim of any kind, including, without limitation, any dispute
relating to goods or services already paid for or relating to
Receivables other than the Receivable on which payment is being
withheld.
11.5 "Net Receivable" - The gross face amount of a Receivable less the
discount offered by you and taken by us.
11.6 "Non-Approved Receivable" - Any Receivable with respect to which we
have either not issued a credit approval or have subsequently withdrawn
a credit approval as a result of a Dispute or otherwise.
11.7 "Obligations" - All loans, advances, debts, liabilities,
obligations, covenants and duties owing by you to us, direct or
indirect, absolute or contingent, due or to become due, now existing, or
hereafter arising, including, without limitation, invoices for goods or
services purchased by you from any company whose accounts are factored
or financed by us and indebtedness arising under any guaranty made by
you or issued by us on your behalf and the debit balance of your
account.
11.8 "Payment Date" - The earlier of the Wednesday of the week following
the week in which we receive payment of a Receivable or 120 days after
the due date of a Receivable, provided that such Receivable remains
unpaid solely because of the Customer's financial inability to pay.
11.9 "Receivables" - All presently existing and hereafter created
accounts, contract rights and general intangibles relating thereto, and
other forms of obligation for the payment of money arising out of the
sale of goods or rendition of services together will all proceeds
thereof, all guaranties and security therefor, and all goods and rights
represented thereby or arising therefrom including, but not limited to,
the right of stoppage in transit, replevin and reclamation.
SECTION 12 Entire Agreement, Governing Law, and Waiver of Jury
This Agreement embodies our entire agreement as to the subject matter
and supersedes all prior agreements as to the subject matter. This
shall be governed by and interpreted in accordance with the laws of the
State of Florida. EACH OF US HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY
IN ANY SUIT OR PROCEEDING ARISING UNDER OR RELATING TO TRANSACTIONS
UNDER THIS AGREEMENT.
SECTION 13 Acceptance
This proposal is submitted to you unsigned and shall constitute an
agreement between us only when signed by us.
Very truly yours,
BANKEST CAPITAL CORP.
By:______________________
Title:
The foregoing Factoring Agreement is accepted and agreed this
day of , 199 .
By: By:
Title: President Title:
Secretary
Attachments: [omitted]
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