FORM SB-2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OmniComm Systems, Inc.
(Name of small business issuer in its charter)
Delaware 11-3349762
(State of incorporation) (IRS employer Ident. No.)
___________________________________________________
(Primary Standard Industrial Classification Code No.)
3250 Mary Street, Suite 402, Miami, Fl. 33133
(Address of principal office) (Zip Code)
Issuer's telephone number: (305) 448-4700
____________________________
Cornelis Wit, Chief Executive Officer
OmniComm Systems, Inc.
3250 Mary Street, Suite 402
Miami, Florida 33133
(305) 448-4700
(Name and address of agent of service)
__________________
If this Form is filed to register additional securities for an offering pursuan
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]_______________
If this Form is a post effective amendment flied pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]_______________
If this Form is a post effective amendment flied pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]_______________
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
(1)Estimated solely for purposes of calculating the registration fee pursuant to
Rule 457(c) of the Securities Act of 1933, as amended, on the basis of the
average high and low sales prices of the Registrant's Common Stock on the NASDAQ
Electronic Bulletin Board on July 7, 2000, for OMCM.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant files a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such dates as the Commission, acting pursuant to said
Section 8(a), may determine.
PROSPECTUS
4,883,497 Shares
OMNICOMM SYSTEMS, INC.
Common Stock
----------------------
This prospectus ("Prospectus") covers the resale of certain shares ("Shares") of
common stock, $.001 par value per share (the "Common Stock") of OmniComm
Systems, Inc. ("OmniComm" or the "Company") held or acquirable by certain
persons ("Selling Security Holders") named in this Prospectus. The Company will
not receive any of the proceeds from the sale of the Shares. The Shares covered
hereby include (i)shares of Common Stock that are issuable upon conversion of
previously-issued shares of Series A Convertible Preferred Stock (the "Series A
Preferred"),(ii) shares of Common Stock that are issuable upon conversion of the
10% Convertible Notes, (iii) shares of Common Stock issuable upon the exercise
of certain warrants, and (iv) Common Stock, held by certain Selling Security
Holders (the "Series A Holders", "Convertible Note Holders", "Warrant Holders",
and "Common Holders").
Except for the total number of shares to which this Prospectus relates as set
forth above, references in this Prospectus to the "number of Shares covered by
this Prospectus," or similar statements, and information in this Prospectus
regarding the number of Shares issuable to or held by the Selling Security
Holders and percentage information relating to the Shares of the outstanding
capital stock of the Company, are based upon the conversion ratio set forth in
the instruments establishing the rights of the Series A Preferred holders and
Convertible Note holder, and the exercise of all the warrants by the Warrant
Holders and registration of all the common stock held by the Common Holders and
assume that a total of 4,883,497 Shares are issued. See "Selling Security
Holders," "Plan of Distribution" and "Description of Capital Stock." The Shares
offered hereby represent approximately 97% of the Company's currently
outstanding Common Stock. The Shares are being offered on a continuous basis
pursuant to Rule 415 under the Securities Act of 1933, as amended (the
"Securities Act"). No underwriting discounts, commissions or expenses are
payable or applicable in connection with the sale of such Shares by the Selling
Security Holders. The Common Stock of the Company is quoted on the National
Association of Securities Dealers, Inc. (the "NASD") OTC Bulletin Board under
the symbol "OMCM". The Shares offered hereby will be sold from time to time at
the then prevailing market prices, at prices relating to prevailing market
prices or at negotiated prices. On July 7, 2000, the last reported sale price of
the Common Stock on the OTC Bulletin Board was $____ per share. This Prospectus
may be used by the Selling Security Holders or any broker-dealer who may
participate in sales of the Common Stock covered hereby.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE
AND INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE __ OF THIS PROSPECTUS.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------
The date of this Prospectus is July __, 2000.
OmniComm Systems, Inc.
Table of Contents
Form SB-2 Location in
Item No. Item Caption Prospectus
1 Front of Registration Statement and Outside Front
Cover of Prospectus
2 Inside Front and Outside Back Cover Pages of
Prospectus
3 Summary Information and Risk Factors
4 Use of Proceeds
5 Determination of Offering Price
6 Dilution
7 Selling Security Holders
8 Plan of Distribution
9 Legal Proceedings
10 Directors, Executive Officers, Promoters and
Control Persons
11 Security Ownership of Certain Beneficial Owners
and Management
12 Description of Securities
13 Interest of Named Experts and Counsel
14 Disclosure of Commission Position on Indemnification
for Securities Act Liabilities
15 Organization Within Last Five Years
16 Description of Business
17 Management's Discussion and Analysis or Plan of Operation
18 Description of Property
19 Certain Relationships and Related Transactions
20 Market for Common Equity and Related Stockholder Matters
21 Executive Compensation
22 Financial Statements
23 Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Miami,
State of Florida on July 10, 2000.
OmniComm Systems, Inc.
(Registrant)
By: /s/ Cornelis F. Wit
Name: Cornelis F. Wit
Title: Chief Executive Officer and Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and on the dates stated.
By: /s/Cornelis F. Wit
Title: Chief Executive Officer and Director
Date: July 10, 2000
By: /s/Ronald T. Linares
Title: Chief Financial and Accounting Officer
Date: July 10, 2000
By: /s/Randall G. Smith
Title: President and Director
Date: July 10, 2000
By: /s/ Guus Van Kesteren
Title: Director
Date: July 10, 2000
By: /s/ Peter S. Knezevich
Title: Director
Date: July 10, 2000
SUMMARY INFORMATION
OmniComm Systems, Inc. (the "Company" or "OmniComm") is positioned to take
advantage of and leverage the burgeoning growth in the pharmaceutical, biotech
and medical device industry. TrialMaster(tm) and WebIPA(tm) are Internet based
approaches that upgrade and integrate the significant components of the clinical
trial process - trial management and doctor/patient recruitment - into a
seamless connection between industry, doctors, and patients.
The amount of money and time spent on the current clinical trial model is
staggering. The following points are illustrative of the dynamics:
* It costs $600,000,000 to bring a drug to market
* 50% of clinical trials are delayed due to a lack of patients
* For every day Viagra was in clinical trials Pfizer lost $5,000,000 a day
* In the United States only 8% of the doctors and 5% of the eligible patients
are involved in clinical trial
The critical component in bringing a drug or medical device to market is the
process by which approval is sought to market the drug or device - a clinical
trial. The current clinical trial model is a business process that is antiquated
and fails to access the considerable resources available such as doctors and
patients who are critical resources for a successful clinical trial.
TrialMaster(tm) is a web-based application that manages the clinical trial
process including real time data collection and monitoring. It is expected that
by implementing TrialMaster(tm) industry will realize cost efficiencies by
improving data quality and integrity and shortening time to market.
WebIPA is a destination site where doctors/patients and industry converge to
benefit from each other's respective needs:
* Industry: The infrastructure for conducting clinical trials has not kept pace
with the demands for growth in the industry.
* Doctors: Doctors are seeking ways to more efficiently conduct their practice
or leverage skills and interests into an increase in revenue.
* Patients: Patients who are ill are seeking new therapies and drugs.
OmniComm will derive revenue from sponsors of clinical trials who utilize
TrialMaster(tm) to manage their trial and who access OmniComm's "Internet Trial
Ready" network of sites and patients.
RISKS RELATED TO OUR BUSINESS MODEL
OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT.
Although we were incorporated in 1997, we did not initiate our Internet
operations until August 1998. As a result, we have only a limited operating
history on which you can base an evaluation of our business and prospects. Our
prospects must be considered in light of the risks, uncertainties, expenses and
difficulties frequently encountered by companies in their early stages of
development, particularly companies in new and rapidly evolving markets like
ours. Our failure to successfully address these risks and uncertainties could
have a material adverse effect on our financial condition. Some of these risks
and uncertainties relate to our ability to:
- attract and maintain a base of end users;
- develop our infrastructure, including additional hardware and software,
- provide customer support, personnel and facilities, to support our business;
- develop and introduce desirable services;
- establish and maintain strategic relationships with distribution partners;
- establish and maintain relationships with industry ;
and
- respond effectively to competitive and technological developments.
WE ARE COMPETING IN A NEW MARKET WHICH MAY NOT DEVELOP OR IN WHICH WE MAY FAIL
TO GAIN MARKET ACCEPTANCE.
The market for our business model in the healthcare industry is new and
rapidly evolving. As a result, uncertainty as to the level of demand and market
acceptance exposes us to a high degree of risk. We cannot assure you that the
healthcare community will accept electronic data collection or utilizing the web
to enhance doctor and patient participation in the clinical trial industry. If
the market for electronic data collection or utilizing the web to enhance doctor
and patient participation in the clinical trial fails to develop, develops more
slowly than expected or becomes saturated with competitors, or if our services
do not achieve or sustain market acceptance, our business will suffer.
FAILURE TO EFFECTIVELY MANAGE GROWTH OF OUR OPERATIONS AND INFRASTRUCTURE COULD
DISRUPT OUR OPERATIONS AND PREVENT US FROM GENERATING THE REVENUES WE EXPECT.
We currently are experiencing a period of expansion in the development of
online clinical trials utilizing the TrialMaster(tm) system. To manage our
growth, we must successfully implement, constantly improve and effectively
utilize our operational and financial systems while aggressively expanding our
workforce. We must also maintain and strengthen the breadth and depth of our
current strategic relationships while rapidly developing new relationships. Our
existing or planned operational and financial systems may not be sufficient to
support our growth, and our management may not be able to effectively identify,
manage and exploit existing and emerging market opportunities. If we do not
adequately manage our potential growth, our business will suffer.
WE MAY BE UNABLE TO MAINTAIN OUR EXISTING RELATIONSHIPS WITH OUR DISTRIBUTION
PARTNERS OR TO BUILD NEW RELATIONSHIPS WITH OTHER DISTRIBUTION PARTNERS.
If we are not successful in developing and enhancing our relationships with
end users of our services, we could become less competitive and revenues may not
occur. We formed our existing relationships recently, and end users may not view
their relationships with us as significant to the success of their business. As
a result, they may reassess their commitment to us or decide to compete directly
with us in the future. We generally do not have agreements that prohibit our
distribution partners from competing against us directly or from contracting
with our competitors.
WE MAY BE UNABLE TO IMPLEMENT OUR ACQUISITION GROWTH STRATEGY, WHICH COULD HAVE
AN ADVERSE EFFECT ON OUR BUSINESS AND COMPETITIVE POSITION IN THE INDUSTRY.
Our business strategy includes increasing our market share and presence
through strategic acquisitions that complement or enhance our business. We do
not have substantial experience in completing and integrating large acquisitions
or multiple simultaneous acquisitions. In addition, we do not have experience
operating multiple remote offices. We may have difficulty integrating the
operations and realizing the results of these recently completed acquisitions.
We may not be able to identify, complete, integrate the operations or realize
the anticipated results of future acquisitions. Some of the risks that we may
encounter in implementing our acquisition growth strategy include:
- expenses associated with and difficulties in identifying potential targets and
the costs associated with acquisitions that are not completed;
- expenses, delays and difficulties of integrating the acquired company into our
existing organization;
- diversion of management's attention from other business matters;
- expenses of amortizing the acquired company's intangible assets;
- adverse impact on our financial condition due to the timing of the
acquisition; and
If any of these risks are realized, our business could suffer.
OUR FUTURE SUCCESS DEPENDS ON REVENUES FROM CLINICAL TRIAL PARTICIPANTS AND THE
ACCEPTANCE AND EFFECTIVENESS OF ONLINE CLINICAL TRIALS IS UNCERTAIN.
We plan to derive revenues from industry such as pharmaceutical, medical
device, and biotech companies. The market for our services on the Internet is
new and rapidly evolving. Industry has limited or no experience with Internet
based clinical trials, and may ultimately conclude that Internet based clinical
trials are not effective relative to traditional clinical trial models. As a
result, the market for Internet based clinical trials may not continue to emerge
or become sustainable. This makes it difficult to project our future revenues.
If the market for Internet based clinical trials fails to develop or develops
more slowly than we expect, our business will suffer.
WITHOUT THE CONTINUED DEVELOPMENT AND MAINTENANCE OF THE INTERNET AND THE
AVAILABILITY OF INCREASED BANDWIDTH, OUR BUSINESS MAY NOT SUCCEED.
Given the online nature of our business, without the continued development
and maintenance of the Internet infrastructure, we could fail to meet our
overall strategic objectives and ultimately fail to generate the revenues we
expect. This continued development of the Internet includes maintenance of a
reliable network with the necessary speed, data capacity and security, as well
as timely development of complementary products for providing reliable Internet
access and services. Because commerce on the Internet and the online exchange of
information is new and evolving, we cannot predict whether the Internet will
prove to be a viable commercial marketplace in the long term.
The Internet has experienced, and is likely to continue to experience,
significant growth in the numbers of users and amount of traffic. As the
Internet continues to experience increased numbers of users, increased frequency
of use and increased bandwidth requirements, the Internet infrastructure may be
unable to support the demands placed on it. In addition, increased users or
bandwidth requirements may impair the performance of the Internet. The Internet
has experienced a variety of outages and other delays as a result of damage to
portions of its infrastructure, and it could face outages and delays in the
future. These outages and delays could reduce the level of Internet usage.
FINANCIAL RISKS
WE MAY NOT BE ABLE TO FORECAST OUR REVENUES ACCURATELY BECAUSE WE HAVE A LIMITED
OPERATING HISTORY.
As a result of our limited operating history, we do not have historical
financial data for a significant number of periods upon which to forecast
quarterly revenues and results of operations. We believe that period-to-period
comparisons of our operating results are not meaningful and should not be relied
upon as indicators of future performance. In addition, our operating results may
vary substantially. The actual effect of these factors on the price of our
stock, however, will be difficult to assess due to our limited operating
history. In one or more future quarters, our results of operations may fall
below the expectations of securities analysts and investors, and the trading
price of our common stock may decline.
WE EXPECT NET LOSSES IN THE FUTURE AND MAY NEVER ACHIEVE PROFITABILITY, WHICH
MAY CAUSE OUR STOCK PRICE TO FALL.
In 1999, we had net loss of approximately $2,341,237. We expect net losses
and negative cash flow for the foreseeable future and significant increases in
our operating expenses over the next several years. With increased expenses, we
will need to generate significant additional revenues in order to achieve
profitability. As a result, we may never achieve or sustain profitability and,
if we do achieve profitability in any period, we may not be able to sustain or
increase profitability on a quarterly or annual basis.
WE MAY NOT BE ABLE TO MEET OUR STRATEGIC BUSINESS OBJECTIVES UNLESS WE OBTAIN
ADDITIONAL FINANCING, WHICH MAY NOT BE AVAILABLE TO US ON FAVORABLE TERMS OR AT
ALL.
The Company will need to raise additional funds to meet operational needs
and to fund its strategic business objectives. We cannot assure you that
additional financing will be available on terms favorable to us, or at all. If
adequate funds are not available or are not available on acceptable terms, our
ability to fund our expansion, take advantage of available opportunities,
develop or enhance services or products or otherwise respond to competitive
pressures would be significantly limited. If we raise additional funds by
issuing equity or convertible debt securities, the percentage ownership of our
shareholders will be reduced, and these securities may have rights, preferences
or privileges senior to those of our shareholders.
RISKS RELATED TO SALES, MARKETING AND COMPETITION
WE EXPECT COMPETITION TO INCREASE SIGNIFICANTLY IN THE FUTURE THAT COULD REDUCE
OUR REVENUES, POTENTIAL PROFITS AND OVERALL MARKET SHARE.
The market for Internet based clinical trials is competitive. Barriers to
entry on the Internet are relatively low, and we expect competition to increase
significantly in the future. We face competitive pressures from numerous actual
and potential competitors, both online and offline, many of which have longer
operating histories, greater brand name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than we do.
We cannot assure you that the Internet based clinical trials maintained by our
existing and potential competitors will not be perceived by the healthcare
community as being superior to ours.
RISKS RELATED TO OPERATIONS
WE MAY BE UNABLE TO ADEQUATELY DEVELOP OUR SYSTEMS, PROCESSES AND SUPPORT IN A
MANNER THAT WILL ENABLE US TO MEET THE DEMAND FOR OUR SERVICES.
We have just recently initiated our online operations and are developing
our ability to provide our TrialMaster(tm) on a transactional basis over the
Internet as an Application Service Provider. Our future success will depend on
our ability to develop effectively the infrastructure, including additional
hardware and software, and implement the services, including customer support,
necessary to meet the demand for our services. In the event we are not
successful in developing the necessary systems and implementing the necessary
services on a timely basis, our revenues could be adversely affected, which
would have a material adverse effect on our financial condition.
OUR BUSINESS OPERATIONS COULD BE SIGNIFICANTLY DISRUPTED IF WE LOSE MEMBERS OF,
OR FAIL TO INTEGRATE, OUR MANAGEMENT TEAM.
Our future performance will be substantially dependent on the continued
services of our management team and our ability to retain and motivate them. The
loss of the services of any of our officers or senior managers could harm our
business, as we may not be able to find suitable replacements.
WE MAY NOT BE ABLE TO HIRE AND RETAIN A SUFFICIENT NUMBER OF QUALIFIED EMPLOYEES
AND, AS A RESULT, WE MAY NOT BE ABLE TO GROW AS WE EXPECT OR MAINTAIN THE
QUALITY OF OUR SERVICES.
Our future success will depend on our ability to attract, train, retain and
motivate other highly skilled technical, managerial, marketing and customer
support personnel. Competition for these personnel is intense, especially for
engineers and programmers, and we may be unable to successfully attract
sufficiently qualified personnel. We have experienced difficulty in the past
hiring qualified personnel in a timely manner for these positions. The pool of
qualified technical personnel, in particular, is limited in Miami, Florida,
which is where our headquarters are located. We will need to increase the size
of our staff to support our anticipated growth, without compromising the quality
of our offerings or customer service. Our inability to locate, hire, integrate
and retain qualified personnel in sufficient numbers may reduce the quality of
our services.
RISKS RELATED TO GOVERNMENT REGULATION, CONTENT AND INTELLECTUAL PROPERTY
GOVERNMENT REGULATION MAY REQUIRE US TO CHANGE THE WAY WE DO BUSINESS.
The laws and regulations that govern our business change rapidly. The
United States government and the governments of states and foreign countries
have attempted to regulate activities on the Internet. Evolving areas of law
that are relevant to our business include privacy laws and proposed encryption
laws. More specifically, the Food and Drug Administration has been active in
looking at and developing regulatory guidance in the area of Internet based
clinical trials. Because of this rapidly evolving and uncertain regulatory
environment, we cannot predict how these laws and regulations might affect our
business. In addition, these uncertainties make it difficult to ensure
compliance with the laws and regulations governing the Internet.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, AND WE MAY BE LIABLE FOR
INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Our business could be harmed if unauthorized parties infringe upon or
misappropriate our proprietary systems, content, services or other information.
Our efforts to protect our intellectual property through copyright, trademarks
and other controls may not be adequate. In the future, litigation may be
necessary to enforce our intellectual property rights or to determine the
validity and scope of the proprietary rights of others, which could be time
consuming and costly. Intellectual property infringement claims could be made
against us as the number of our competitors grows. These claims, even if not
meritorious, could be expensive to defend and could divert our attention from
operating our company. In addition, if we become liable to third parties for
infringing their intellectual property rights, we could be required to pay a
substantial damage award and develop comparable non-infringing intellectual
property, to obtain a license or to cease providing the content or services that
contain the infringing intellectual property. We may be unable to develop non-
infringing intellectual property or obtain a license on commercially reasonable
terms, or at all.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements in "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks outlined
under "Risk Factors," that may cause our or our industry's actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus to conform these statements to actual results.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Securities. The Selling Security Holders will receive all of the proceeds. See
"Selling Security Holders".
SELLING SECURITY HOLDERS
The Series A Preferred, Convertible Note, Warrant, and Common Stock
Selling Security Shareholders are individuals and companies. The registration
statement of which this Prospectus is a part is being filed, and the Shares
offered hereby are included herein, pursuant to registration rights as provided
for in the subscription agreements entered into between the Company and the
Selling Security Holders (collectively, the "Registration Rights"). Due to the
uncertainty as to how many of the Selling Security Holders will convert either
the Series A Preferred or Convertible Notes or exercise the Warrants, the
Company is unable to determine the exact number of Shares that will actually be
sold pursuant to this Prospectus. The maximum numbers of Shares that the Selling
Security Holders will be able to convert, exercise, or register which are
subject to this registration statement are 4,883,497 Shares of the Company.
The Series A Preferred Holders
The Selling Security Holders identified in the table below as "Series A
Preferred Holders" acquired an aggregate of 4,313,500 shares of the Series A
Preferred in a private placement transaction. Upon conversion, each share of the
Series A Preferred is convertible into .67 of a share of Common Stock.
Accordingly, if all Series A Preferred Holders decide to convert the Company
would issue 2,875,665 common shares.
Registration Rights - Series A Preferred Holders
Pursuant to the terms and conditions of the subscription agreement for the
Series A Preferred, a majority of the Series A Preferred Holders may request
registration of the underlying common shares after the sixth (6) month following
the closing of the offering of the Series A Preferred. Pursuant to the terms and
conditions of the subscription agreement for the Series A Preferred, upon such a
request, the Company will: (a) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; (b) as soon as
practicable, use its best efforts to effect such registration (including,
without limitation, appropriate qualification under applicable regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within 20 days after receipt of such
written notice from the Company; and, (c) set forth in the written notice the
number of Registrable Securities each Holder may include in such registration.
The total number of Registrable Shares to be included shall be determined as a
percentage of the number of Registrable Shares issuable upon conversion of the
Preferred Shares beneficially owned by the Holder and the total number of shares
issued and outstanding.
The Convertible Note Holders
The Selling Security Holders identified in the table below as "Convertible
Note Holders" invested an aggregate of $862,500 in a private placement
transaction. Upon conversion, each $1.25 is equal to one share of Common Stock.
Accordingly, if all Convertible Note Holders decide to convert the Company would
issue 690,000 common shares.
Registration Rights - Convertible Note Holders
Pursuant to the terms and conditions of the subscription agreement for the
Convertible Note, if at any time or from time to time the Company shall
determine to register any of its securities, either for its own account or the
account of a security holder or holders, other than a registration relating
solely to employee benefit plans or a registration relating solely to a
Commission Rule transaction, the Company will: promptly give to each Holder
written
notice thereof; include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within 20 days after receipt of such written notice from the
Company, by any Shareholder; and,set forth in the written notice the number of
Registrable Securities each Shareholder may include in each such registration.
The total number of Registrable Shares to be included shall be determined as a
percentage of the number of Registrable Shares beneficially owned by the
Shareholder and the total number of shares issued and outstanding.
Warrant Holders
The Selling Security Holders identified in the table below as "Warrant Holders"
acquired warrants to purchase an aggregate of 112,500 shares of common stock.
Registration Rights - Warrant Holders
Pursuant to the terms and conditions of the warrant agreement, if at any time or
from time to time the Company shall determine to register any of its securities,
either for its own account or the account of a security holder or holders, other
than a registration relating solely to employee benefit plans or a registration
relating solely to a Commission Rule transaction, the Company will: promptly
give to each Holder written notice thereof; include in such registration (and
any related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within 20 days after receipt of such written
notice from the Company, by any Shareholder; and, set forth in the written
notice the number of Registrable Securities each Shareholder may include in each
such registration.
The following tables identifies each Selling Security Holder based upon
information provided to the Company, set forth as of July 7, 2000, with respect
to the Shares beneficially held by or acquirable by, as the case may be, each
Selling Security Holder and the shares of Common Stock beneficially owned by the
Selling Security Holder which are not covered by this Prospectus. No Selling
Security Holder has had any position, office or other material relationship with
the Company within the past three years. The percentage figures reflected in the
table assume conversion of all shares of: Series A Preferred into 2,875,665
shares of Common Stock and Convertible Notes into 690,000 shares of Common
Stock.
Selling Security Holders - Series A Preferred Holders
Amount to Amount Owned Before Percentage Owned
Name Be Offered The Offering After the Offering
Jaap Hoff 200,000 185,857 4.41%
Everest Investment 266,667 150,000 4.77%
Onno Schamhart 33,333 0 *
Financial Trading
& Consultancy 100,000 0 1.14%
Ad Klinkenberg 133,333 0 1.53%
Keijser and Co 66,667 0 *
De Heer Dreesens. 133,333 0 1.53%
Steve Yeung 66,667 0 *
Jan Willem van den
Dorpel 133,333 0 1.53%
Denison Smith 30,000 0 *
Apple Wouters 33,333 0 *
Leonard Epstein 33,333 0 *
Michiel Scholten 83,333 0 *
M.Visser 133,333 0 1.53%
Alvin Stroyny 33,333 0 *
NathanJacobson 100,000 0 1.14%
Guy Vercanteren 33,333 0 *
Abdel Karim Badr 46,667 0 *
Guy Brisette 60,000 0 *
Peter van Kesteren 8,333 0 *
Harvey Babbitt 30,000 0 *
Robert A. Wolfe 30,000 0 *
Peter Marchisello 13,333 0 *
Mary Jo Marchisello 16,667 0 *
Mary Jo Marchisello 30,000 0 *
Bert van Deun 100,000 0 1.14%
Max Power 33,333 0 *
Pieter Versteeg 66,667 0 *
Randall Smith 15,000 0 *
Eric B.Sivertsen 15,000 0 *
Frido van Kesteren 30,000 0 *
Carlos Muhletaler 30,000 0 *
Marianne Creyf-
Theeboom 73,333 0 *
van Moer Santerre
Luxembourg 166,667 0 1.91%
Profrigo SA NV 400,000 0 4.58%
Lawrence Terry 30,667 0 *
Banque Meespierson 66,667 0 *
Selling Security Holders - Convertible Note Holders
Amount to Amount Owned Before Percentage Owned
Name Be Offered The Offering After the Offering
Bert Amador 20,000 0 *
Debabrata Chakrabarty
IRA 20,000 0 *
Andrew&Marilyn Edson
Trustee 20,000 0 *
Michael Ettinger 30,000 0 *
Eva D. Glass 10,000 0 *
Claude Haussman 10,000 0 *
Charlotte Harowitz 60,000 0 *
Clifford Jacobson 40,000 0 *
Harvey Jacobson 10,000 0 *
Ronald Kassover 20,000 0 *
Harvey Manes 20,000 0 *
Abraham Masliansky 40,000 0 *
Richard B. Montanye 20,000 0 *
Modern Technology Corp80,000 0 *
Rachel Nevitt 20,000 0 *
Thomas & Rose Perretta20,000 0 *
Joseph H. Popolow IRA 10,000 0 *
Khal Racfert 40,000 0 *
Elliot& Arlene
Schwartz 20,000 0 *
Elliot Schwartz 30,000 0 *
Jacob & Yosepha
Solomon 10,000 0 *
Paul Sullivan 10,000 0 *
Martin Troll 20,000 0 *
Else Wolfermann 40,000 0 *
Louis & Irene Katz 20,000 0 *
Henk Kos 10,000 0 *
Cees Baas 20,000 0 *
Kleanthi Xenopoulos 20,000 0 *
Warrant Holders
Amount to Amount Owned Before Percentage Owned
Name Be Offered The Offering After the Offering
Wesley Pritchett 20,000 0 *
Andy Fiske 40,000 0 *
Noesis, N.V. 20,000 0 *
Linda Grable 35,000 0 *
First Stanford
Investments 20,000 0 *
Common Holders
Amount to Amount Owned Before Percentage Owned
Name Be Offered The Offering After the Offering
Jaap Hoff 185,857 185,857 4.41%
Park & Co. 71,710 71,710 *
Noesis International
Holding 179,599 179,599 2%
Noesis NV 300,000 300,000 3.40%
Water Oak Investments 295,666 295,666 3.30%
Everest Holdings 150,000 150,000 4.77%
Plan of Distribution
The registration statement of which this Prospectus forms a part has been filed
pursuant to Registration Rights. To the Company's knowledge, as of the date
hereof, no Selling Security Holder had entered into any agreement, arrangement
or understanding with any particular broker or market maker with respect to the
Shares offered hereby, nor does the Company know the identity of the brokers or
market makers which will participate in the offering.
The Shares covered hereby may be offered and sold from time to time by the
Selling Security Holders. The Selling Security Holders will act independently of
the Company in making decisions with respect to the timing, manner and size of
each sale. Such sale may be made on the OTC Bulletin Board or otherwise, at
prices and on terms then prevailing or at prices related to the then market
price, or in negotiated transactions. The Shares may be sold by one or more of
the following methods: (a) a block trade in which the broker-dealer engaged by
the Selling Security Holder will attempt to sell Shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by the broker-dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; and (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers.
To the best of the Company's knowledge, the Selling Security Holders have not,
as of the date hereof, entered into any arrangement with a broker or dealer for
the sale of shares through a block trade, special offering, or secondary
distribution of a purchase by a broker-dealer. In effecting sales, broker-
dealers engaged by the Selling Security Holders may arrange for other broker-
dealers to participate. Broker-dealers will receive commissions or discounts
from the Selling Security Holders in amounts to be negotiated.
In offering the Shares, the Selling Security Holders and any broker-
dealers who execute sales for the Selling Security Holders may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any profits realized by the Selling Security Holders and the
compensation of such broker-dealer may be deemed to be underwriting discounts
and commissions.
Rule 10b-6 under the Exchange Act prohibits participants in a distribution
from bidding for or purchasing for an account in which the participant has a
beneficial interest, any of the securities that are the subject of the
distribution. Rule 10b-7 under the Exchange Act governs bids and purchases made
to stabilize the price of a security in connection with a distribution of the
security.
This offering will terminate as to each Selling Security Holder on the
date on which all Shares offered hereby have been sold by the Selling Security
Holders. There can be no assurance that any of the Selling Security Holders will
sell any or all of the shares of Common Stock offered hereby.
Legal Proceedings
In the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County,
Florida, SPP Real Estate, Inc. filed suit on June __, 2000 for damages and other
relief against OmniComm Systems, Inc. concerning the breach of a lease for real
property.
Directors, Executive Officers, Promoters and Control Persons
Cornelius Wit, 54, Chief Executive Officer and Director. Mr. Wit has been a
Director of the Company since 1999 and shall serve until the next annual
meeting. Mr. Wit was appointed interim CEO of the Company on June 30, 2000. Mr.
Wit is President of Corporate Finance of Noesis Capital Corp., an international
banking and money management firm. Mr. Wit was formerly President and CEO of DMV
Inc., the North American subsidiary of Campina Melkunie.
Randall Smith, 42, President, Chairman and Director. Mr. Smith has been a
Director of the Company since 1997 and shall serve until the next annual
meeting. From 1997 until the present date Mr. Smith has been an officer and
director of OmniComm Systems, Inc. From December 1995 to May 1997 Mr. Smith was
Director of Operations for Global Communications Group.
Clifton Middleton, 52, Executive Vice President. Mr. Middleton is the Executive
Vice President responsible for Internet Applications. He has served in this
capacity since June of 1998. From 1993 to June of 1998 Mr. Middleton was
President of Education Navigator, Inc.
Peter S. Knezevich, 43, Director. Mr. Knezevich has been a Director of the
Company since 1998 and shall serve until the next annual meeting. From 1998
until June 30, 2000 Mr. Knezevich was CEO of the Company. From 1995 until 1997
Mr. Knezevich was vice president and general counsel for Imaging Diagnostic
Systems, Inc.
Guus van Kesteren, 59, Director. Mr. Van Kesteren has been a Director of the
Company since 1999 and shall serve until the next annual meeting. Mr. Van
Kesteren is a consultant to Noesis Capital Corp., an international banking and
money management firm. Mr. Van Kesteren was formerly Vice President of Jansen
Pharmaceuticals, a subsidiary of Johnson & Johnson, responsible for the
pharmaceutical business in South East Asia, Australia, and New Zealand.
Jan Vandamme, 40, Director. Mr. Vandamme has been a Director of the Company
since 1999 and shall serve until the next annual meeting. Mr Vandamme is CEO of
Profrigo SA, an 110-year old investment company which invests primarily in
internet and communication technology companies in both Europe and the US. Prior
of his involvement in Profrigo SA, Mr. Vandamme was the founder of United
Callers, one of Europe's first Internet Access and Service Provider companies.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial ownership of
our common stock as of March 29, 2000, with respect to (i) each person know to
us to be the beneficial owner of more than 5% of our common stock, (ii) each
director, (iii) each executive officer named in the summary Compensation Table,
and (iv) all of our directors and officers as a group:
Name and Address(1) # of Shares(2) % of Class
Randall Smith(3) 810,746 9.28%
Eugene Gordon 900,000 10.30%
Peter S. Knezevich(4) 645,285 7.38%
Clifton Middleton(5) 241,613 2.25%
Cees Wit 0 0
Guus Van Kesteren 0 0
Jan Vandamme 0 0
All directors and
Officers as a group
(7 people) 2,597,644 29.21%
(1) The address for each person, unless otherwise noted, is 3250 Mary Street,
Suite 402, Miami, Florida 33133.
(2) In accordance with Rule 13d-3 of the Exchange Act, shares that are not
outstanding, but that are subject to options, warrants, rights or conversion
privileges exercisable within 60 days from March 29, 2000.
(3) Includes 421,461 shares held of record, and 389,285 shares issuable upon
the exercise of currently exercisable stock options.
(4) Includes 256,000 shares held of record, and 389,285 shares issuable upon
the exercise of currently exercisable stock options.
(5) Includes 102,461 shares held of record, and 139,152 shares issuable upon
the exercise of currently exercisable stock options.
Description of Securities
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, $.001 par value per share and 10,000,000 million shares of
Preferred Stock, $.001 par value.
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.
On June 25, 1999 the Company amended its article of incorporation pursuant
to section Chapter 8, Subchapter VII, Section 228 and 242 of the laws of the
State of Delaware to authorize the issuance of preferred shares. In accordance
with Chapter 8, Subchapter VII, Section 151 of the laws of the State of Delaware
the Board of Directors of OmniComm Systems, Inc. shall have the authority to
divide the preferred stock into as many series as it shall from time to time
determine. The Board of Directors shall also determine the number of shares
comprising each series of preferred stock, which number may, unless otherwise
provided by the board of directors in creating such series, be increased from
time to time by action of the board of directors. Each series of preferred
stock shall be so designated as to distinguish such series from the shares of
each other series. All series of preferred stock shall be of equal rank and
have the same powers, preferences and rights, and shall be subject to the same
qualifications, limitations and restrictions, without distinction between the
shares of different series thereof; provided, however, that there may be
variations among different series of preferred stock as to dividend rates,
prices, terms, conditions of redemption, if any, liquidation rights, and terms
and conditions of conversion, if any, which variations may be fixed and
determined by the board of directors in their discretion.
On July 19, 1999 the Board of Directors, pursuant to Chapter 8, Subchapter
VII, Section 151 of the laws of the State of Delaware, filed a with the State of
Delaware a Certificate of Designation authorizing the creation of a 5% Series A
Convertible Preferred stock. The terms of the Preferred is as follows: (1) In
the event of liquidation, the holders of Preferred Stock will be entitled to
receive in preference to the holders of Common Stock an amount equal to their
original purchase price plus all accrued but unpaid dividends; (2) Dividends
shall be paid at the rate of 5.00% (five percent) per annum (365 days), payable
semi-annually, on January 1 and July 1 of each following year; (3) Conversion:
(a) Voluntary Conversion: The holders of Preferred Stock shall have the right to
convert at any time at the option of the holder, each share of Preferred Stock
into one share of Common Stock, subject to antidilution provisions set forth in
subsection (c) below; (b) Automatic Conversion: At any time after one year from
the date of the final Closing Date, the Company can require that all outstanding
shares of Preferred Stock be automatically converted at the conversion then in
effect if at the time (a) the closing bid price of the Company's Common Stock
has exceeded $3.00 for 20 consecutive trading days; (b) the Company's Common
Stock has been listed on the Nasdaq or such other comparable national stock
exchange and; (c) a registration statement covering the shares of Common Stock
issuable upon conversion of the Preferred Stock has been filed with the
Securities and Exchange Commission and declared effective. (4) Anti-Dilution:
Each share of Preferred Stock upon conversion into Shares shall have
proportional antidilution protection for stock splits, stock dividends,
combinations, and recapitalizations. The conversion price shall also be subject
to adjustment to prevent dilution in the event the Company issues additional
shares of Common Stock or equivalents at a purchase price less than the
applicable conversion price; (5) The Preferred Stock shall not be sold,
assigned, transferred or pledged except upon satisfaction of the conditions
specified in the subscription agreement executed by the Holder, which conditions
are intended to ensure compliance with the provisions of the Securities Act.
Each Holder will cause any proposed purchaser, assignee, transferee, or pledgee
of the Preferred Share or the Common Stock issuable upon conversion held by a
Holder to agree to take and hold such securities subject to the provisions and
conditions of the subscription agreement; (6) Each certificate representing (i)
the Preferred Stock and (ii) any other securities issued in respect of the
Preferred Stock upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall be stamped or otherwise imprinted with a
legend in the following form (in addition to any legend required under
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. COPIES OF THE AGREEMENT
COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE CORPORATION.
(7) A Holder shall have a right to vote that number of votes equal to
the number of shares of Common Stock issuable upon conversion of the
Preferred Stock.
Disclosure of Commission Position on
Indemnification for Securities Act Liabilities
Article VI of the Company's Articles of Incorporation authorizes the Company to
indemnify directors and officers as follows:
1. So long as permitted by law, no director of the corporation shall be
personally liable to the corporation or its shareholders for damages for breach
of any duty owed by such person to the corporation or its shareholders;
provided, however, that, to the extent required by applicable law, this Article
shall not relieve any person from liability for any breach of duty based upon an
act or omission (i) in breach of such person's duty of loyalty to the
corporation or its shareholders, (ii) not in good faith or involving a knowing
violation of law or (iii) resulting in receipt by such person of an improper
personal benefit. No amendment to or repeal of this Article and no amendment,
repeal or termination of effectiveness of any law authorizing this Article shall
apply to or effect adversely any right or protection of any director for or with
respect to any acts or omissions of such director occurring prior to such
amendment, repeal or termination of effectiveness.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the forgoing provisions, or
otherwise, the small business issuer has been advised that in the opninion of
the Securities and Exchange Commission such indemnification is against the
public policy as expressed in the Act and is, therefore, unenforceable.
Description of Business
BUSINESS DEVELOPMENT
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 become 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.
BUSINESS OF ISSUER
OmniComm Systems, Inc. (the "Company" or "OmniComm") is marketing and
implementing TrialMaster(tm) and WebIPA(tm). TrialMaster(tm) and WebIPA(tm) are
Internet based approaches that integrate the significant components of the
clinical trial process - trial management and doctor/patient recruitment - into
a seamless connection between industry, doctors, and patients.
The critical component in bringing a drug or medical device to market is the
process by which approval is sought to market the drug or device. The amount of
money and time spent on the process are enormous. The following points are
illustrative of the business process:
* It costs approximately $600,000,000 million to bring a drug to market
* 50% of clinical trials are delayed due to a lack of patients
* For every day a drug is in clinical trials a sponsor losses $1.3 million in
sales. A blockbuster drug could account for $5 million in sales.
* In the United States only 8% of the doctors and 4% of the eligible patients
are involved in clinical trials
A fundamental way that the Internet is transforming business is the way in which
it transforms institutional business processes such as clinical trials. The
Internet enables information to be easily and widely distributed and allows the
users of the information to use tools - web-based applications - to benefit from
and use the information.
WebIPA(tm) is the means by which the information is accessed and Trialmaster(tm)
is the tool by which the information is distributed and used.
Clinical Trial Industry Overview
Worldwide research and development expenditures by the pharmaceutical and
biotechnology industries reached an estimated $50 billion in 1999 with $24
billion being spent by US based pharmaceutical companies. Further, research and
development expenditures in 1999 for the top 50 pharmaceutical increased
approximately 14% from the previous year. It is estimated that pre-clinical and
clinical trial costs represent approximately one-third of the total spent on
research and development.
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, cosmetics and medical
devices. These trends have required companies to conduct increasingly complex
clinical trials, and develop multinational clinical trial capability, while
seeking to control 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.
CLINICAL TRIAL OVERVIEW
In order for a drug or device to be marketed in the United States, Europe or
Japan, the drug or medical device must undergo extensive testing and regulatory
review in order to determine that the drug or device is safe and effective. The
regulatory review process is time consuming and expensive. A new drug
application (NDA) can take up to 2 years before it is approved. This is in
addition to 3 to 5 years of studies required to provide the data to support the
NDA. The following is an overview of the process that is generally undertaken to
bring a drug or device to market:
(1) Preclinical Research (1 to 3.5 years). In vitro ("test tube") and animal
studies are used 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.
(2) Clinical Trials (3.5 to 6 years)
a. Phase I (6 months to 1 year). Basic safety and pharmacology testing is
conducted in 20 to 80 human subjects, usually healthy volunteer testing 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.
b. Phase II (1 to 2 years). Basic efficacy (effectiveness) and dose-range
testing is conducted 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.
c. Phase III (2 to 3 years). Efficacy and safety studies are conducted in
hundreds or thousands of patients at multiple investigational sites (hospitals
and clinics) which can be placebo-controlled trials, in which the new drug is
compared with a placebo or studies comparing the new drug with one or more
drugs with established safety and efficacy profiles in the same therapeutic
category.
d. 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.
e. 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
comprises, on average, 100,000 pages.
f. FDA Review & Approval (1 to 1.5 years). Careful scrutiny of data from all
phases of development (including a TIND) is used 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.
g. Post-Marketing Surveillance and Phase IV Studies. Federal regulation
requires the manufacturer to collect and periodically report to the FDA
additional safety and efficacy data on the drug for as long as the manufacturer
markets the drug (post-marketing surveillance).
To support an application for regulatory approval, clinical data must be
collected, reviewed and compiled. Clinical data is collected from the clinical
report forms (CRF) that are submitted to and filled out by an investigator,
typically a doctor or research assistant, who is participating in the clinical
trial. These CRFs can be 5 to 100 pages and document a series of visits by
patients over a period of time.
An integral part of the clinical trial process is the monitoring of the clinical
sites by monitors. These monitors visit sites throughout the clinical trial to
confirm that the sites are acting in accordance with good clinical practices and
filing out the documentation appropriately.
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 the clinical research organization (CRO), an entity that has contracted with
the sponsor to conduct the clinical trial. The data is then inputted manually
into a database. Typically, double data entry is used to avoid and resolve
errors.
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. Also, the FDA promulgated "Providing
Regulatory Submissions in Electronic Format-General Considerations". More
recently, the FDA promulgated a guidance document "Computerized Systems Used In
Clinical Trials" which provides guidance to industry when utilizing a computer
system in a clinical trial. The FDA, however, does not regulate the TrialMaster
system.
TRIALMASTER(tm)
OmniComm has developed and is marketing as an Application Service Provider
TrialMaster(tm). TrialMaster(tm) is a web-based business to business (B2B)
enterprise management system for conducting and managing clinical trials. The
Company utilizes a trial-independent database to quickly generate the necessary
trial data-infrastructure to proceed with the clinical trial process.
It enables participants in the clinical trial process such as pharmaceutical and
medical device companies, and clinical research organizations (CRO) to utilize
the inherent benefits of the Internet - pervasiveness, scalability, less costly,
and secure - to conduct and manage clinical trials in real-time.
In addition to the following core activities, TrialMaster incorporates
communications, time and financial management, and outcomes tracking. The list
is not exhaustive and all components are not currently available in the current
version but will be available during the middle of the year 2000.
TrialMaster(tm) significantly impacts the clinical trial process in the
following three areas: Data Collection, Validation and Edit Queries, and
Monitoring.
(1) Data Collection Comparison
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 per
patient and encompass a series of visits by patients over a period of time.
Current System
* The cost to process data is approximately $15.00 to $25.00 per page per
patient.
* The time to process the data can take anywhere from 1 - 4 weeks
TrialMaster(tm) System
* The cost to process the data is approximately 5-10 times less than the current
system per page per patient.
* The time to process the data is approximately 1 minute
(2) Validation and Edit Query Comparison
Upon submission, data is reviewed to see whether the collected data is within
certain parameters of the clinical trial, primary validation. If data is outside
of the clinical trial parameters or there are typographical errors or similar
data problems the data collection process will generate an edit query. This edit
query must be submitted to the investigator for resolution and resubmitted for
data processing.
Current System
* The cost to process an edit query is approximately $80-$100 per query. For a
large trial it would not be uncommon to generate 500-1000 edit queries a week.
* The time to process the data can take anywhere from 4-6 weeks
TrialMaster(tm) System
* The number of edit queries is significantly reduced or even eliminated because
the system does the validation when the data is inputted.
* The time to process the data is approximately 1 minute
(3) 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. Monitoring and its associated costs such as travel can make
up one quarter of the total costs of a clinical trial.
Current System
* The cost for a monitoring visit can vary between $1,000 to $3,000 per visit
per site. A trial can have as many as 3-7 visits.
* The time for each visit is usually 1 to 2 days.
TrialMaster(tm) System
* The number of visits can be reduced because the status of sites can be
monitored remotely and in real time.
* Monitoring hours can be reduced by 50% or more.
TrialMaster(tm) is an open system that is fully integratable with existing
legacy data systems such as Oracle(r) and Microsoft SQL(r). The application
utilizes a standard browser such as Internet Explorer 4.0(r).
The cost for implementing the application is based on a data point per page/per
patient fee that will increase or decrease depending on the size of the trial in
terms of patients/subjects and the length of time to conduct the trial.
Current Implementation
The Company is currently involved in a multi-center, multi-national
clinical trial with a major European based medical device company and a European
based clinical research organization. The clinical trial involves 400 patients
in 42 sites throughout Canada, Spain, Europe, and Scandinavia.
The Company is currently in negotiations with a US based pharmaceutical
company and a European based CRO to implement TrialMaster(tm).
WEBIPA(tm) - "ARE YOU INTERNET TRIAL READY(tm)"
Only 8% of the estimated 660,000 doctors and 4% of the eligible patients
participate in the clinical trial process. WebIPA.com is the means by which the
other 92% of the doctors and 96% of the eligible patients have the opportunity
to participate.
WebIPA.com is an Internet destination site where doctors/patients and industry
converge to benefit from each other's respective needs:
* Industry: The infrastructure for clinical trials has not kept pace with the
demands for growth in the industry. Accordingly, the conventional
infrastructure through which industry has been operating to conduct clinical
trials is inadequate. The critical components of this infrastructure are sites
for trials (doctors) and patients. Simply put, too many trials, not enough
patients and doctors.
* Doctors: As a result of managed care doctors have seen a drastic reduction in
income. Doctors are seeking ways to more efficiently conduct their practice or
leverage skills and interests into an increase in revenue.
* Patients: Patients who are ill are seeking new therapies and drugs to make
them well.
OmniComm is marketing TrialMaster(tm) to industry and, based on these contacts
and feedback, expects industry to move its clinical trial practice to the
Internet. OmniComm is marketing to doctors, through WebIPA, the concept of
"Internet Trial Ready". The Company is contracting with doctor groups to bring
them on-line for purposes of participating in clinical trials. De-identifiable
patient data will be utilized to connect industry with a patient through their
doctor to participate in trials.
This convergent approach has recently been endorsed by The IPA (Independent
Physician Association) Association of America to its membership of 883 doctor
groups encompassing 260,000 doctors and 12,000,000 patients. Also, the Company
has recently made "Internet Trial Ready" a 42 physician practice group with
approximately 250,000 patients. The Company has currently submitted contracts to
3 other groups.
CLINICAL TRIAL PATHWAYS
The Company owns approximately 70 URLs such as "breaststudy.com",
"livertrial.com", "cancertrial.com", "prostatetrial.com", and "aidstrial.com".
The Company through WebIPA plans to utilize these clinical trial pathways for
recruitment purposes and other clinical trial related opportunities.
SALES AND MARKETING
OmniComm has adopted a "push/pull" marketing strategy. The essential components
of the clinical trial industry are pharmaceutical/biotech/medical device,
doctors/patients, and opinion leaders. OmniComm is marketing to all three
components.
TrialMaster(tm)
Although TrialMaster(tm) can be used within any segment of the pharmaceutical,
biotech and medical device industry, to date, OmniComm has taken a deliberative
approach to marketing TrialMaster(tm) to the interventional cardiology market.
This is a $50 billion market, dominated by companies such as Guidant, Johnson &
Johnson, Medtronic, and Eli Lilly. The following are the relevant factors for
approaching the market:
* Access to "validators" for the market.
* Relatively standardized and advanced approach to clinical trial process.
* A very competitive market with relatively short product cycles providing for a
need to get products to market quickly.
* A number of products within the interventional market segment - coronary and
arterial stents - that have an incremental difference which need clinical trials
to show clinical and functional superiority.
* A tight group of opinion leaders within the market segment
The Company is also establishing relationships with "opinion leaders" and
decision-makers in other specialties within the clinical trial industry. In this
regard, the Company has created a Medical Advisory Board to advise the Company
on the development and marketing of the TrialMaster(tm) system. The Medical
Advisory Board will also provide a platform to contact these opinion leaders and
to provide information about the application. OmniComm is also using traditional
methods to market TrialMaster(tm), including advertising in trade periodicals
and attending a number of medical conventions including the European Society of
Cardiology, the American College of Cardiology, and The American Heart
Association.
Currently, the Company has one full time employee headquartered in the Company's
office in Amsterdam who is responsible for sales and marketing of
TrialMaster(tm). In addition, the Company has hired a part-time employee to
assist in the marketing of TrialMaster
WEBIPA
The sales and marketing functions for TrialMaster(tm) and WebIPA are separated
within OmniComm because the respective sales cycles are different.
To date, the Company's efforts to market WebIPA have involved The IPA
Association of America ("TIPAAA"). TIPAAA is a non-profit trade association
representing 883 independent physician associations (IPA) which encompass
approximately 260,000 doctors with a patient population of 12,000,000 patients.
TIPAAA has endorsed the "Internet Trial Ready" approach to its membership. The
Company has presented at the TIPAAA annual meeting during March 12-15, 2000. In
addition to TIPAAA, the Company is marketing directly to doctor groups and
doctors who have clinical trial experience.
COMPETITION
There are other entities that compete with the Company's Internet based data
collection system, TrialMaster(tm). Principally, the competitors include Phase
Forward Incorporated, CB Technologies, and Technologix. Most of these
competitors have significantly greater financial, technical and marketing
resources, or name recognition than that of 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.
MEDICAL ADVISORY BOARD
Given the Company's basic approach in developing and marketing the
TrialMaster(tm) application, the Company decided to form a Medical Advisory
Board. The purpose of the Board is to advise and consult the Company on the
development, implementation, and marketing of the TrialMaster(tm) application.
Currently, there are five members on the Board:
* Dr. Warren Grundfest: Director, School of BioMedical Engineering, University
of Southern California, Los Angeles, CA.
* Dr. Camilo Ricordi: Senior Researcher, Diabetes Research Institute, University
of Miami, Miami, FL.
* Dr. Bruce Murphy: Director of Medicine of the Arkansas Heart Hospital; and,
Chairman of the Board of the Arkansas Heart Institute, Little Rock, AK.
* Dr. Eugene Schiff: Professor of Medicine; Chief, Division of Hepatology;
Director, Center for Liver Diseases, University of Miami School of Medicine,
Miami, Florida. Dr. Schiff is the author of "Schiff's Diseases of the Liver".
* Dr. James Tcheng: Cardiology Associates, Assistant Professor of Medicine, Duke
University Medical Center
INTELLECTUAL PROPERTY RIGHTS
The Company relies upon a combination of nondisclosure and other
contractual arrangements and trade secrets, 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.
On May 18, 1999, the Company filed a provisional application for a patent on a
"Distributed System and Method for Collecting and Evaluating Clinical Data".,.
Serial No. 60/134,671. The Company filed its final application for the patent
on May 17, 2000
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.
Employees
The Company currently has 33 full time employees and 1 part time employee.
Management's Discussion and Analysis or Plan of Operation
Revenues:
Year ended December 31, 1999 compared to December 31, 1998.
Total revenues decreased to $1,259,214 for year 1999 from $1,689,794 for
year 1998. This decrease in revenue is attributed to a decision made by
management to cease its systems integration business during the 3rd quarter of
1999. All of the Company's revenue is attributed to its systems integration
business. The Company has earned no revenue from its TrialMaster( system.
Operating Expenses:
Year ended December 31, 1999 compared to December 31, 1998.
Total operating expenses increased to $2,561,092 for the year 1999 from
$762,143 for the year 1998. This substantial increase in operating expenses is
attributed to a number of factors including the aggressive development and
marketing or TrialMaster and the continuing financial obligations associated
with the acquisition of Education Navigator in June of 1998 and the decision to
focus the Company's resources on the development of the TrialMaster( Internet
system.
Salaries and Wages. Salaries and wages increased to $784,635 for the year
1999 from $239,108 for the year 1998. The increase in salaries and wages is
attributed to an increase in the number of employees. The Company currently has
20 employees and 1 part time employee.
Independent Consultants. Fees to independent consultants increased to
$557,751 for the year 1999 from $76,869 for the year 1998. The Company decided
to outsource a number of areas during the initial phase of developing, marketing
and implementing the TrialMaster( system. These areas concern product
development, marketing and sales, and medical/strategic consulting.
LIQUIDITY AND CAPITAL RESOURCES:
Period ending December 31, 1999 compared to December 31, 1998.
Cash and cash equivalents increased to $1,127,263 for 1999 from $44,373
for 1998 The increase is attributed to the cash received from the private
placement of the 5%, Series A Convertible Preferred shares.
Total liabilities increased to $1,326,299 for year 1999 from $910,325 for
1998 The increase in total liabilities are primarily attributed to the placement
of convertible notes totaling $862,500.
The Company has generated a loss of $2,341,237 for the year 1999, this is
an increase from $295,367 for the year 1998. The loss is primarily attributed to
the development and marketing of the TrialMaster( system and the continued
financial obligations associated with the acquisition of Education Navigator in
June of 1998.
The Company will require additional funds for the continued development and
marketing of TrialMaster and WebIPA. Accordingly, the Company will be required
to raise additional funds during the next 12 months in order to continue
operations. The Company plans to raise additional funds by either: entering into
a transaction(s) to privately place equity, either common or preferred stock, or
debt securities, or combinations of both; or, placing equity into the public
market through an underwritten secondary offering. At the present time there
are no written commitments by individuals or entities for the additional funds.
However, the Company is confident that it will secure the necessary funding for
the continued development and marketing of TrialMaster and WebIPA.
Description of Property
The Company's facilities are located at 3250 Mary Street, Suite 402,
Miami, Florida 33133 ("Miami Office"), 5680 West Cypress St., Suite I, Tampa,
Fl. 33607 ("Tampa Office"), and Droogbak 2D, Amsterdam 1013 GE, Netherlands
("Amsterdam Office"). The Miami office is the Company's headquarters. It is
rented at $9,975 per month and comprises approximately 5,048 sq. ft. The Tampa
office is the where the Company's software development activities are
headquartered. It is rented at $2,332 per month and comprises approximately
1,808 sq. ft. The Amsterdam office is the Company's European sales office. It is
rented at $2,257 per month and comprises approximately 1,540 sq. ft. The Company
believes that these facilities are adequate for its current and reasonably
foreseeable future needs.
Certain Relationships and Related Transactions
On December 16, 1999, the Company entered into a consulting agreement
("Agreement") with Guus van Kesteren and Cornelius Wit both of whom are
directors of the Company. The Agreement provides for compensation to be paid to
Van Kesteren and Wit in the event sales leads or contacts developed by Van
Kesteren and Wit result in sales of the Company's TrialMaster(tm) system.
Market for Common Equity and Related Stockholder Matters
The Company's common stock, $.001 par value, is traded on the over-the-counter
bulletin board market. The Company's preferred stock is not traded. There has
been trading in the Company's common stock since November 26, 1999. The symbol
for the Company's common stock is OMCM.
Quarter Ending
Fiscal Year High Bid Low Bid
December/1999 $5.75 $3.50
March/2000 $14.00 $2.00
The bid price which states over-the-counter market quotations reflect
inter-dealer prices without real mark-up, mark-down or commissions and may not
necessarily represent actual transactions.
The Company has approximately 388 shareholders of record of its common
stock as of December 31, 1999.
Executive Compensation
Summary Compensation Table
Long Term
Annual Compensation Compensation
Awards Payouts
Name Securities All
and Other Restricted Underlying Other
Principal Bonus Annual Stock Options/SARs LTIP Payouts Comp
Position Year Salary$ ($) Comp($) Award(s)($) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Peter S.
Knezevich 897,568/
CEO/Dir 1999 $84,278 $11,155 897,568
1998 $29,000
Randall
Smith
732,107/
Pres/Dir 1999 $84,278 $6,205 732,107
1998 $29,000
Clifton
Middleton 534,113/
Exec.VP 1999 $91,358 $6,237 534,113
1998 $85,000
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Percent of
Total
Options/SARs
Number of Securities Granted to Exercise of
Underlying Employees in Base Price Expiration
Name Options/SARs Granted Fiscal Year ($/Sh) Date
(a) (#) (b) (c) (d) (e)
Peter S. Knezevich 397,568/397,568 $ .25 6/14/04
500,000/500,000 $1.50 11/1/01
Randy Smith 397,568/397,568 $ .25 6/14/04
334,539/334,539 $1.50 11/1/01
Clifton Middleton 96,652/96,652 $ .25 6/25/04
250,000/250,000 $1.50 11/1/01
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
(Individual Grants)
Number of
Unexercised
Securities
Shares Underlying Value of Unexercised
Acquired Options/SARs At In-The-Money
On FY-End (#) Option/SARs At FY-End
Exercise Value Realized Exercisable ($) Exercisable
Name (#) ($) Unexercisable Unexercisable
(a) (b) (c) (d) (e)
Peter S. Knezevich 397,568/397,568 $1,391,488/0
500,000/500,000 0/$1,125,000
Randy Smith 397,568/397,568 $1,391,488/0
334,539/334,539 0/$752,713
Clifton Middleton 96,652/96,652 $338,282/0
250,000/250,000 0/$562,500
Other Expenses of Issuance and Distribution
The following are the expenses associated with this registration. None of the
expenses associated with this registration shall be borne by the Selling
Security Holders.
Registration Fee:
Legal Fees:
Accounting Fees:
Transfer Agent Fees:
Recent Sales of Unregistered Securities
Section 4(2) Transactions
On or about February 1997 OmniComm Systems, Inc. formerly known as The
Premisys Group, Inc. was incorporated. Contemporaneous with the incorporation of
OmniComm Systems, Inc. common stock was issued to Randy Smith and Lawton Jackson
totaling 1,875,000. On February 1, 1998, the Board of Directors of OmniComm
Systems, Inc. authorized the issuance of 625,000 shares of common stock to Peter
S. Knezevich. These shares were issued pursuant to Section 4(2) of the
Securities Act of 1933 in exchange for services rendered and to be rendered as
evidenced by a written employment agreement.
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
$.65 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. All of the issued and outstanding shares of OmniComm Systems,
Inc. were 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.
Both of the foregoing issuances concerning the merger transactions dated June
26, 1998 (acquisition of Education Navigator), and February 17, 1999 (merger
with Coral Development Corp.), relied on the exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 (the "Act"). The basis of
the exemption is a transaction by an issuer that does not involve a public
offering.
Critical to the application of the exemption is the availability of information
to the offeree and her sophistication. The availability of information can be
provided in two ways: access to information or disclosure.
In both transactions, the offerees were sophisticated; they have the financial
and business experience to evaluate the offer. In the Education Navigator
transaction the offerees were familiar with and professionals within the
computer and Internet market and had experience with the risks associated with
ventures involving start-up companies in the market. In the Coral/OmniComm
transaction the offerees have a level of sophistication sufficient to appreciate
the relative risks and benefits of being affiliated with a reporting company
including the statutory obligations, both federal and state.
In both transactions the offerees were provided with full disclosure pursuant to
agreements including audited financial information and written legal opinions.
Also, in both cases, counsel who had sufficient experience with transactions of
the type consummated represented the offerees.
The transaction involving Coral Development Corp. and MTC was a transaction
involving a parent and a subsidiary where the parent had access to corporate
information concerning the subsidiary.
Rule 506 Transaction - 10% Convertible Note
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. Northeast received the following placement
agent fees: 10% Commission (cash); 3% nonaccountable expense allowance (cash);
$7,500 advance against non-accountable due diligence expense. The offering was
closed on June 15, 1999 and as of August 1, 1999, the Company had received gross
proceeds of $862,500 as a result of the private placement.
The offer and sale of the notes were made in reliance upon Rule 506,
Regulation D of the Securities Act of 1933. The offerees and purchasers were
accredited investors who were provided with a private placement memorandum that
met the requirements of Regulation D and who executed investor questionnaires.
Rule 701 Transactions
Rule 701 of the Securities Act of 1933, as amended (the "Act") is an
exemption from registration for offers and sales of securities pursuant to
certain compensatory benefit plans and contracts relating to compensation
provided bonafide services are rendered not related to capital raising or
pursuant to a written contract relating to compensation.
The Company granted an incentive stock option in accordance with Internal
Revenue Code (IRC) Code Section 422 to Clifton Middleton to purchase 85,000
shares of common stock at $.65 a share over a three (3) year period. The options
were granted pursuant to Rule 701 of the Act. The options were granted pursuant
the Company's 1998 Incentive Stock Option Plan and pursuant to a contract
relating to compensation and in accordance with Rule 701 of the Act.
The Company appointed Dr. Warren S. Grundfest to the Company's Medical
Advisory Board. Dr. Grundfest was granted stock options and a stock bonus. The
options and bonus stock were granted pursuant to the Company's 1998 Incentive
Stock Option Plan and in accordance with Rule 701 of the Act.
The Company retained Mr. Lawrence Kronick to act as a consultant for the
Company to assist in marketing the Company's TrialMaster(tm) system. Mr. Kronick
was granted options pursuant to a written contract of compensation and pursuant
to the Company's 1998 Incentive Stock Option Plan and in accordance with Rule
701 of the Act.
The Company appointed Dr. Richard Murphy to the Company's Medical Advisory
Board. Dr. Murphy was granted stock options and a stock bonus. The options and
bonus stock were granted pursuant to the Company's 1998 Incentive Stock Option
Plan and in accordance with Rule 701 of the Act.
The Company appointed Dr. Sameer Mehta as its consulting Medical Director.
Dr. Mehta was granted stock options and a stock bonus. The options and bonus
stock were granted pursuant to the Company's 1998 Incentive Stock Option Plan
and in accordance with Rule 701 of the Act.
The Company granted stock option and bonuses to employees of the Company.
The stock bonuses totaled 51,377 shares of common stock. The options and bonus
stock were granted pursuant to the Company's 1998 Incentive Stock Option Plan
and in accordance with Rule 701 of the Act.
Regulation S and Section 4(2) - 5% Series A Convertible Preferred
On June 4, 1999, the Company entered into a private placement agreement
("Agreement") with Noesis Capital Corp. ("Noesis") wherein Noesis would act as
the placement agent for the offer and sale of the Company's 5% Series A
Convertible Preferred stock pursuant to and in accordance with Regulation S of
the Securities Act of 1933, as amended. Noesis received as a commission 10% of
the gross proceeds received by the Company and a warrant to purchase at par
value, $.001, 10% of the shares placed. The Company sold the preferred to
foreign investors and to a small group of US based investors of which all were
accredited investors. The offering was concluded on December 31, 1999. The
Company had received gross proceeds of $4,313,500.
Exhibits
(a) Exhibits
1 Financial Statements
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.
(c) Plan of Merger: Incorporated herein by reference to Form 10-SB/A dated
August 17, 1999.
(d) Agreement and Plan of Acquisition dated Janurary 26, 2000 of WebIPA:
Incorporated herein by reference to Form 8K dated February 9, 2000.
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
4 (a) Amendment to Article of Inc. - Authorization
to issue preferred shares. Incorporated herein by reference to Form 10-SB/A
dated August 17, 1999.
(b) Certificate of Designation - 5% Series A Convertible Preferred.
Incorporated herein by reference to Form 10-SB/A dated August 17, 1999.
(c) Certificate of Increase
10 (a) Employment Contract.
(i) Clifton Middleton - Employment Agreement. Incorporated herein by reference
to Form 10-SB/A dated August 17, 1999.
(ii) Peter S. Knezevich - Employment Agreement and Stock Option Agreement.
Incorporated herein by reference to Form 10-KSB dated March 29, 2000.
(iii) Randy Smith - Employment Agreement and Stock Option Agreement.
Incorporated herein by reference to Form 10-KSB dated March 29, 2000.
(b) Factor Agreement. Incorporated herein by reference to Form 10-SB/A dated
August 17, 1999.
(c) 1998 Stock Incentive Plan. Incorporated herein by reference to Form 10-
SB/A dated August 17, 1999.
(d) Consulting Contract - Larry Kronick. Incorporated herein by reference to
Form 10-SB/A dated August 17, 1999.
(e) Medical Advisory Board Agreement. Incorporated herein by reference to Form
10-SB/A dated August 17, 1999.
(f) Standard Agreement - Proprietary Protection. Incorporated herein by
reference to Form 10-SB/A dated August 17, 1999.
(b) Reports on Form 8-K
Incorporated herein by reference to Form 8-K File No. 000-25203
Undertakings
The undersigned registrant hereby undertakes:
To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereto) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
Exhibit 1
OMNICOMM SYSTEMS, INC.
FINANCIAL STATEMENTS
MARCH 31, 2000
INDEX
Page
Consolidated Balance Sheets
Consolidated Statements of Shareholders'
Equity (Deficit)
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Financial Statements
OMNICOMM SYSTEMS, INC
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31,2000 December 31, 1999
(Unaudited)
CURRENT ASSETS
Cash $ 49,509 $ 1,127,263
Accounts receivable 8,034 8,458
Inventory 6,169 10,166
Due from placement agent -0- -0-
Prepaid expenses 57,260 -0-
Total current assets 120,972 1,145,887
Property and equipment, net 459,177 353,183
OTHER ASSETS
Equity investment in
Medical Networks EMN 335,00 -0-
Shareholder loans 3,406 3,406
Intangible assets, net 141,311 169,629
Goodwill, net 198,194 237,832
Other assets 26,960 26,960
TOTAL ASSETS $ 1,285,020 $ 1,936,897
LIABILITIES AND SHAREHOLDERS'EQUITY
CURRENT LIABILITIES
Accounts payable
and accrued expenses $ 313,672 $ 284,381
Notes payable-current 177,500 177,500
Sales tax payable 1,177 1,818
Due to factoring agent -0- -0-
Total current liabilities 492,349 463,799
Notes payable - long term -0- -0-
Convertible notes 862,500 862,500
TOTAL LIABILITIES 1,354,849 1,326,299
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock-10,000,000 shares authorized,
4,263,500 and 4,117,500 issued and
outstanding,
respectively at par 3,812,093 3,872,843
Common Stock -20,000,000 shares authorized,
4,544,066 and 3,344,066 issued and outstanding,
respectively,
at $.001 par value 4,544 3,344
Additional paid in capital 241,840 238,007
Retained earnings
(deficit) (4,127,353) (2,652,644)
Stock subscriptions
receivable (952) (850,952)
TOTAL SHAREHOLDERS'S
EQUITY(DEFICIT) (69,829) 610,598
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ 1,285,019 $ 1,936,897
The accompanying notes are an integral part of these financial
statements.
<TABLE>
OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
For the three months ended For the year ended
March 31 December 31,
2000 1999 2000 1999
(unaudited)
<S> <C> <C> <C> <C>
Revenue-sales, net $ 24,978 $ 528,722 $ 1,259,214 $ 1,689,794
Cost of sales 35,120 225,291 1,005,338 1,223,018
Gross margin (loss) (10,142) 303,431 253,876 466,776
Other expenses
Salaries, benefits and related taxes 572,933 102,935 784,635 239,108
Rent 60,932 15,373 108,371 47,199
Consulting-medical advisory 42,000 -0- 210,503 -0-
Consulting-marketing/sales 48,000 50,547 237,630 76,869
Consulting-product development 28,435 -0- 109,618 -0-
Legal and professional fees 109,248 37,966 98,895 44,222
Travel 169,718 30,102 334,753 37,117
Telephone and internet 64,034 3,588 67,109 18,119
Factoring fees -0- 3,868 4,571 68,597
Selling, general and administrative 210,173 32,601 208,226 87,288
Interest expense, net 17,023 8,831 97,379 15,428
Depreciation and amortization 92,616 69,228 299,402 128,196
Total other expenses 1,415,113 355,039 2,561,092 762,143
(Loss) before taxes and preferred dividends (1,425,255) (51,608) (2,307,216) (295,367)
Income tax expense (benefit) -0- -0- -0- -0-
Preferred stock dividends (49,545) -0- (34,021) -0-
Net (loss) $ (1,474,709) $ (51,608) (2,341,237) (295,367)
Net (loss) per share $ (0.35) $ (0.04) $(1.27) $(.35)
Weighted average number of
Shares outstanding 4,214,396 1,459,667 1,840,550 855,046
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<TABLE>
OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the three months ended For the year ended
March 31 December 31,
2000 1999 2000 1999
(unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (1,474,709) $ (51,608) $(2,341,237) $(295,367)
Adjustment to reconcile net loss to net cash
Provided by (used in) operating activities
Depreciation and amortization 92,616 69,228 299,402 128,196
Stock issued for services -0- -0- 104,545 -0-
Changes in operating assests and
liabilities, net of
Effects of acquisition of
Education Navigator, Inc.(EdNav):
Accounts receivable 424 (58,924) 68,730 (37,157)
Inventory 3,997 (24,466) (5,926) (4,240)
Due from placement agent -0- (293,625) -0- -0-
Prepaid expenses (57,260) -0- -0- -0-
Other assets -0- 7,500 (17,660) (9,300)
Accounts payable and
accrued expenses 29,191 (103,725) (1,997) 260,289
Sales tax payable (641) (33,822) (38,018) 39,835
Due to factoring agent -0- 38,376 (139,012) 139,012
Net cash provided by (used in) operating activities (1,406,382) (451,066) (2,071,173) 221,268
CASH FLOWS FROM INVESTING ACTIVITIES
Equity investment in
European Medical Networks (335,000) -0- -0- -0-
Purchase of WebIPA 5,033 -0- -0- -0-
Purchase of EdNav, net of cash acquired -0- -0- -0- (67,500)
Purchase of property and equipment (130,654) -0- (347,405) (3,035)
Net cash provided by (used in) investing activities (460,621) -0- (347,405) (70,535)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from convertible notes -0- 666,750 742,875 -0-
Proceeds from the issuance of Preferred stock,
Net of issuance costs 789,250 -0- 3,022,843 -0-
Payments on notes payable -0- (130,000) (267,500) (130,000)
Issuance of common stock -0- -0- 3,250 63
Payments from Stockholder -0- -0- -0- 7,500
Net cash provided by financing activities 789,250 536,750 3,501,468 (122,437)
Net increase (decrease) in cash and cash equivalents(1,077,753) 85,684 1,082,890 28,296
Cash and cash equivalents at beginning of period 1,127,263 44,373 44,373 16,077
Cash and cash equivalents at end of period $ 49,509 $ 130,057 1,127,263 44,373
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 0 $ 0 -0- -0-
Interest $ 44,728 $ 1,532 67,297 1,636
</TABLE>
Non Cash Investing and Financing Transactions, March 31, 2000
Acquisition of all of the outstanding common
Stock of WebIPA, Inc. during the quarter
Ended March 31, 2000
Assets acquired, fair value $ 5,033
Cash acquired 5,033
Net cash paid for acquisition $ -0-
The accompanying notes are an integral part of these financial
statements.
<TABLE>
OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD JANUARY 1, 1999 TO MARCH 31, 2000
<CAPTION>
5% Series A Convertible Total
Common Stock Additional Preferred Stock Retained Shareholders
Number $0.001 Paid in Number Earnings Subscription Equity
Of Shares Value Capital of Shares $0.00 Par (Deficit) Receivable (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as
January 1, 1999 1,343,000 $1,343$132,213 - $(311,407) $(952) $(178,803)
Issuance of
Common Stock 250,000 250 250
Issuance of Common
Stock for Services 84,400 86 56,050 56,145
Issuance of Common
Stock 300,000 300 2,700 3,000
Issuance of Common
Stock for Services 68,000 68 44,132 44,200
Issuance of
Common Stock 1,296,666 1,297 2,903 4,200
Issuance of
Preferred Stock, net
Of $134,590
Issuance Costs 4,117,500 3,872,843 (850,000) 3,022,843
Net Loss for the
Year Ended
December 31, 1999 (2,341,237) (2,341,237)
Balances at
December 31, 1999 3,344,066 3,344 238,007 4,117,500 3,872,843(2,652,644)(850,952) 610,598
Receipt of
Subscription
Receivable 850,000 850,000
Acquisition of
WebIPA, Inc. 1,200,000 1,200 3,833 5,033
Issuance of
Preferred Stock 146,000 146,000 146,000
Issuance costs (206,750) (206,750)
Net (Loss) for the
Quarter Ended
March 31, 2000 (1,474,709) (1,474,709)
Balance at
March 31, 2000 4,544,066 $ 4,544 $241,840 4,263,500 $3,812,093 $(4,127,353)$ (952) $(69,828)
</TABLE>
The accompanying notes are an integral part of these financial statements.
NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS
OmniComm Systems, Inc. (the Company) was originally incorporated
in Florida in February 1997. The Company provides internet based
database applications that integrate significant components of the
clinical trial process, including the collection, compilation and
validation of data over the internet. The Company's primary
products include TrialMaster(tm) and WebIPA.
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
The Company's accounts include those of its two wholly owned
subsidiaries Omnicommerce and OmniTrial B.V. 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.
EARNINGS PER SHARE
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." SFAS 128 replaced the previously reported primary and
fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per
share excludes any dilutive effects of options, warrants, and
convertible securities. The diluted earnings per shared
calculation is very similar to the previously fully diluted
earnings per share calculation method. SFAS 128 became effective
December 31, 1997.
Basic earnings per share were calculated using the weighted
average number of shares outstanding of 4,214,396 and 1,459,667 at
March 31, 2000 and 1999 respectively. There were no differences
between basic and diluted earnings per share. Options to purchase
3,825,072 shares of common stock at prices ranging from $.25 to
$3.50 per share were outstanding during both periods, but were not
included in the computation of diluted earnings per share because
the options have an anti-dilutive effect. The effect of the
convertible debt and convertible preferred stock is anti-dilutive.
5% SERIES A CONVERTIBLE PREFERRED STOCK
During the year ended December 31, 1999, the Company designated
5,000,000 shares of its 10,000,000 authorized preferred shares as
5% Series A Convertible Preferred Stock. Each shares is
convertible into common stock at $1.50 per shares. In the event
of liquidation, these shareholders will be entitled to receive in
preference to the holders of common stock an amount equal to their
original purchase price plus all accrued but unpaid dividends.
Dividends are payable at the rate of 5% per annum, payable semi-
annually.
ADVERTISING
Advertising costs are expensed as incurred. Advertising expense
for the quarters ended March 31, 2000 and 1999 was $82,733 and
$1,254, respectively.
RECLASSIFICATIONS
Certain items from prior periods within the financial statements
have been reclassified to conform to current period
classifications.
INTANGIBLE ASSETS AND GOODWILL
Included in Intangible Assets are the following assets:
March 31, 2000
Accumulated
Cost Amortization
Covenant not to compete $120,000 $ 105,000
Software development costs 87,500 51,042
Organization costs 539 405
Debt acquisition costs 119,625 29,906
$327,664 $ 186,353
December 31, 1999
Accumulated
Cost Amortization
Covenant not to compete $120,000 $ 90,000
Software development costs 87,500 43,750
Organization costs 539 360
Debt acquisition costs 119,625 23,925
$327,664 $ 158,035
The covenant not to compete and the software development
costs were acquired as a result of the acquisition of Education
Navigator, Inc. (EdNav) on June 26, 1998. 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.
During the first nine months of 1999, the Company issued
Convertible Notes totaling $862,500. The fees of $119,625
associated with these notes are being amortized ratably over the
term of the notes, which is five years.
Included in Goodwill, as a result of the EdNav acquisition at
March 31, 2000 and December 1999 is the cost of $475,665 and
accumulated amortization of $277,471 and $237,833 respectively.
The goodwill is being amortized ratably over a period of three
years.
PROPERTY AND EQUIPMENT, AT COST
Property and equipment consists of the following:
March 31, 2000 December 31, 1999
Accumulated Accumulated
Cost Depreciation Cost Depreciation
Computer and
Office equipment $337,303 $78,335 $195,340 $30,146
Computer software 182,823 11,067 167,220 1,034
Office furniture 31,159 2,704 23,070 1,267
$551,284 $92,106 $385,630 $32,447
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
furniture and 3 years for software.
Depreciation expense for the three months ended March 31, 2000 and
1999 was $24,660 and $1,840 respectively.
REVENUE RECOGNITION POLICY
The Company recognized sales, for both financial statement and tax
purposes, when its 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 No. 109, "Accounting for Income
Taxes." SFAS 109 has as its basic objective the recognition of
current and deferred income tax assets and liabilities based upon
all events that have been recognized in the financial statements
as measured by the provisions of the enacted tax laws.
Valuation allowances are established when necessary to reduce
deferred tax assets to the estimated amount to be realized.
Income tax expense represents the tax payable for the current
period and the change during the period in the deferred tax assets
and liabilities.
STOCK OPTION PLAN
In 1998 the Company initiated a stock option plan. The Plan
provides for granting Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Restricted Stock Awards,
Phantom Stock Unit Awards and Performance Share Units.
During the second and third quarters of 1999, the Company issued
86,377 and 68,000, respectively, common shares to employees and
advisors under its stock bonus arrangement. The Company adopted
SFAS 123 to account for its stock based compensation plans. SFAS
123 defines the "fair value based method" of accounting for stock
based compensation. Under the fair value based method,
compensation cost is measured at the grant date based on the value
of the award and is recognized over the service period. In
accordance with this method, the Company recognized expense of
$56,145 and $44,200, respectively, during the second and third
quarters of 1999.
NOTE 3: OPERATIONS AND LIQUIDITY
The Company has incurred substantial losses in 1999 and 2000.
Until such time that the Company's products and services can be
successfully marketed the Company will continue to need to fulfill
working capital requirements through the sale of stock and
issuance of debt. The inability of the company to continue its
operations, as a going concern would impact the recoverability and
classification of recorded asset amounts.
The ability of the Company to continue in existence is dependent
on its having sufficient financial resources to bring products and
services to market for marketplace acceptance. As a result of its
significant losses, negative cash flows from operations, and
accumulated deficits for the periods ending March 31, 2000, there
is doubt about the Company's ability to continue as a going
concern.
Management believes that its current available working capital,
anticipated contract revenues and subsequent sales of stock and or
placement of debt instruments will be sufficient to meet its
projected expenditures for a period of at least twelve months from
March 31, 2000.
NOTE 4: ACQUISITION
WebIPA, Inc. Acquisition
On February 9, 2000, the Company acquired WebIPA, Inc., a Florida
corporation pursuant to an Agreement and Plan of Acquisition dated
Januray 26, 2000. In consideration of receiving all of the issued
and outstanding shares of WebIPA Inc., OmniComm issued 1,200,000
restricted shares of common stock to the shareholders of WebIPA
Inc.
NOTE 5: EQUITY INVESTMENT
European Medical Network (EMN) Investment
On March 20, 2000 the Company purchased a 25% interest in Medical
Network AG EMN, a Swiss company. The purchase price for 25% of the
current stock equity of EMN is $838,500 to be paid as follows:
Cash: US$645,000 paid as follows: March 20, 2000 - US$335,000,
April 20, 2000 - US$310,000; Stock: 41,883 shares of restricted
common stock of the Company. Pursuant to the terms of the stock
purchase agreement the shareholders of EMN entered into a
shareholders agreement that provides for the Company having one
board seat and the right to veto any sale of equity in excess of
49% of the total issued and outstanding equity of EMN.
NOTE 6: NOTES PAYBLE
At March 31, 2000 the Company owed $177,500 to the selling
stockholders of Education Navigator. The notes are payable over
two years and bear interest at 5.51% annually. The amount
payable during fiscal 2000 is $177,500.
NOTE 7: CONVERTIBLE NOTES
During the first quarter of 1999, the Company issued Convertible
Notes Payable in the amount of $862,500 pursuant to a Confidential
Private Placement Memorandum. There were costs of $119,625
associated with this offering. The Company also granted the agent
the option to purchase 250,000 common shares at $.001. The agent
exercised the option. The net proceeds to the Company were
$742,875. The notes bear interest at ten percent annually,
payable semi-annually. The notes are convertible after maturity,
which is five years, into shares of common stock of the Company at
$1.25 per share, including registration rights.
NOTE 8: COMMIMENTS AND CONTINGENCIES
The Company currently leases office space requiring minimum annual
base rental payments for the fiscal periods shown as follows:
2000 $150,327
2001 142,735
2002 153,547
2003 111,465
2004 95,964
Total $654,038
In addition, to annual base rental payments, the company must pay
an annual escalation for operating expenses as determined in the
lease.
NOTE 9: RELATED PARTY TRANSACTIONS
The Company was owed $3,406 and $3,406 at March 31, 2000 and
December 31, 1999, respectively, from a shareholder. The amount
is payable on demand. The interest rate is 6% annually.
NOTE 10: 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 (post-retirement). Therefore, no provision is required
under SFAS's 106 or 112.
NOTE 11: INTERIM FINANCIAL REPORTING
The unaudited financial statements of the Company for the period
from January 1, 2000 to March 31, 2000 and January 1, 1999 to
March 31, 1999 have been prepared by management from the books and
records of the Company, and reflect, in the opinion of management,
all adjustments necessary for a fair presentation of the financial
position and operations of the Company as of the period indicated
herein, and are of a normal recurring nature.
