SECURITIES AND EXCHANGE COMISSION
Washington, D.C. 20549
FORM 10-QSB A/1
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended JUNE 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from _______ to ________
Commission file number: 0-25203
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OMNICOMM SYSTEMS, INC.
----------------------
(Name of small business issuer in its charter)
Delaware 11-3349762
-------- ----------
(State of incorporation) (IRS employer Ident. No.)
3250 Mary Street, #402, Miami, FL 33133
---------------------------------- -----
(Address of principal office) (Zip Code)
Registrant's telephone number: (305) 448-4700
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] NO [ ]
The number of shares outstanding of each of the issuer's classes of
equity as of June 30, 2000: 6,459,176 common stock $.001 par value.
<PAGE>
OMNICOMM SYSTEMS, INC.
Part I - Financial Information Page
----
Item 1.
Independent Accountants' Review Report 1
Consolidated Balance Sheet -
June 30, 2000 and December 31, 1999 2
Consolidated Statements of Shareholders' Equity(Deficit) -
January 1, 1999 to June 30, 2000 3-5
Consolidated Statements of Operations -
Three and six months ended June 30, 2000 and 1999 6
Consolidated Statement of Cash Flows -
Six months ended June 30, 2000 and 1999 7-8
Notes to Financial Statements 9-14
Items 2.
Managements' Discussion and Analysis of
Financial Condition and Results 14-16
Part II - Other Information 16
Item 1. Legal Proceedings: 16
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters To a Vote of
Security Holders: None
Item 5. Other Information 16-17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 17
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Stockholders of
Omnicomm Systems, Inc.
Miami, FL
We have reviewed the accompanying consolidated balance sheet of Omnicomm
Systems, Inc. as of June 30, 2000 and the related consolidated statements of
operations, shareholders' equity(deficit) and cash flows for the six-month
periods ended June 30, 2000 and 1999. These financial statements are the
responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Corporation will continue as a going concern. As discussed in Note 3 to the
financial statements [and Note 3 to the annual financial statements for the year
ended December 31, 1999(not presented herein)], certain conditions raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 3 to
the respective financial statements.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Omnicomm Systems, Inc. as of
December 31, 1999 and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated January 26, 2000, we expressed an unqualified
opinion on those consolidated financial statements and included an explanatory
paragraph concerning matters that raise substantial doubt about the
Corporation's ability to continue as a going concern. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 1999 is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
Greenberg & Company LLC
Springfield, NJ
September 8, 2000
1
<PAGE>
OMNICOMM SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
2000 1999
(Unaudited)
---------------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 214,602 $ 1,127,263
Accounts receivable 35,759 8,458
Inventory 5,046 10,166
Prepaid expenses 22,260 0
----------- -----------
Total current assets 277,667 1,145,887
----------- -----------
Property and equipment, net 564,667 353,183
----------- -----------
OTHER ASSETS
Investment in Medical Networks EMN, at cost 335,000 0
Shareholder loans 0 3,406
Intangible assets, net 119,256 169,629
Goodwill, net 158,555 237,832
Other assets 40,852 26,960
----------- -----------
TOTAL ASSETS $ 1,495,997 $ 1,936,897
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,403,024 $ 284,481
Notes payable - current 707,500 177,500
Sales tax payable 331 1,818
----------- -----------
Total current liabilities 2,110,855 463,799
----------- -----------
Notes payable - long term 0 0
Convertible notes 462,500 862,500
----------- -----------
TOTAL LIABILITIES 2,573,355 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 3,812,093 3,872,843
outstanding, respectively at par
Common Stock - 20,000,000 shares authorized,
6,459,176 and 3,344,066 issued and outstanding,
respectively, at $.001 par value 6,480 3,344
Additional paid in capital 1,536,238 238,007
Retained earnings (deficit) (6,137,905) (2,652,644)
Treasury stock (293,312) 0
Stock subscriptions receivable (952) (850,952)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY(Deficit) (1,077,358) 610,598
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ 1,495,997 $ 1,936,897
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
See accompanying independent accountants' review report.
2
<PAGE>
OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD JANUARY 1, 1999 TO JUNE 30, 2000
(unaudited)
<TABLE>
<CAPTION>
5% Series A Convertible Total
Common Stock Additional Preferred Stock Retained Shareholders'
Number $ 0.001 Paid In Number Earnings Subscription Treasury Equity
of Shares Value Capital of Shares $0.001 Par (Deficit) Receivable Stock (Deficit)
---------- ----------- ----------- --------- ----------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 1, 1998 1,002,250 $ 1,002 $ 0 0 $ 0 $ (16,040) $ (815) $ 0 $ (15,853)
Issuance of
common stock 199,750 200 (137) 63
Acquisition of
Education
Navigator, Inc. 141,000 141 132,213 132,354
Net (loss) for
year ended
December 31, 1998 (295,367) (295,367)
---------- ----------- ----------- --------- ----------- ----------- --------- --------- -----------
Balances at
December 31, 1998 1,343,000 1,343 132,213 0 0 (311,407) (952) 0 (178,803)
Issuance of
common stock 250,000 250 250
Issuance of common
stock for services 86,400 86 56,059 56,145
Issuance of
common stock 300,000 300 2,700 3,000
Issuance of common
stock for services 68,000 68 44,132 44,200
</TABLE>
The accompanying notes are an integral part of these financial statements.
See accompanying independent accountants' review report.
3
<PAGE>
<TABLE>
<CAPTION>
5% Series A Convertible Total
Common Stock Additional Preferred Stock Retained Shareholders'
Number $ 0.001 Paid In Number Earnings Subscription Treasury Equity
of Shares Value Capital of Shares $0.001 Par (Deficit) Receivable Stock (Deficit)
---------- ----------- ----------- --------- ----------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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) 0 $ 610,598
Issuance of common
stock for services 40,000 40 89,960 90,000
Issuance of common
stock 284,166 284 284
Exercise of stock
options 1,025,895 1,026 297,024 298,050
Purchase of treasury
stock in connection
with stock
appreciation rights (20,951) (293,312) (293,312)
Payment 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
</TABLE>
The accompanying notes are an integral part of these financial statements.
See accompanying independent accountants' review report.
4
<PAGE>
<TABLE>
<CAPTION>
5% Series A Convertible Total
Common Stock Additional Preferred Stock Retained Shareholders'
Number $ 0.001 Paid In Number Earnings Subscription Treasury Equity
of Shares Value Capital of Shares $0.001 Par (Deficit) Receivable Stock (Deficit)
---------- ----------- ----------- --------- ----------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance costs (206,750) (206,750)
Conversion of
convertible notes
payable 320,000 $ 320 $ 399,680 400,000
Exercise of stock
options 20,000 $ 20 $ 15,980 16,000
Exercise of stock
warrants 246,000 $ 246 $ 491,754 492,000
Net (loss) for the
Six months ended
March 31, 2000 (3,390,523) (3,390,523)
---------- ----------- ----------- --------- ----------- ----------- --------- --------- -----------
Balances at
June 30, 2000 6,459,176 $ 6,480 $ 1,536,238 4,263,500 $ 3,812,093 $(6,137,905) $ (952) $(293,312) $(1,077,358)
========== =========== =========== ========= =========== =========== ========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
See accompanying independent accountants' review report.
5
<PAGE>
OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended For the three months ended
June 30, June 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue - sales, net $ 40,760 $ 912,401 $ 15,782 $ 383,679
Cost of sales 46,524 634,524 11,404 409,233
----------- ----------- ----------- -----------
Gross margin (loss) (5,764) 277,877 4,378 (25,554)
----------- ----------- ----------- -----------
Other expenses
Salaries, benefits and related taxes 1,511,329 231,266 938,396 128,331
Rent 162,408 27,554 101,476 12,181
Consulting - medical advisory 89,000 0 47,000 0
Consulting - marketing sales 77,033 210,101 29,033 160,080
Consulting - product development 36,420 0 7,985 0
Legal and professional fees 405,978 70,374 206,731 32,407
Travel 310,443 105,690 140,724 71,792
Telephone and internet 141,347 9,143 77,313 3,921
Factoring fees 0 4,500 0 632
Selling, general and administrative 407,521 155,017 192,325 127,321
Interest expense, net 41,979 29,439 24,956 20,608
Depreciation and amortization 194,470 139,396 101,854 70,168
----------- ----------- ----------- -----------
Total other expenses 3,377,928 982,480 1,867,793 627,441
(Loss) before taxes and preferred dividends (3,383,692) (704,603) (1,863,415) (652,995)
Income tax expense (benefit) 0 0 0 0
Preferred stock dividends (101,569) 0 (52,115) 0
----------- ----------- ----------- -----------
Net (loss) $(3,485,261) $ (704,603) $(1,915,530) $ (652,995)
=========== =========== =========== ===========
Net (loss) per share $ (0.63) $ (0.46) $ (0.31) $ (0.41)
=========== =========== =========== ===========
Weighted average number of
shares outstanding 5,500,089 1,532,428 6,149,470 1,604,390
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
See accompanying independent accountants' review report.
6
<PAGE>
OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended
June 30,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) (3,485,261) $ (704,603)
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities
Common stock issued for services 90,000 -0-
Depreciation and amortization 194,470 139,396
Changes in operating assets and liabilities, net of
effects of acquisition of Education
Navigator, Inc. (EdNav)
Accounts receivable (27,301) 37,015
Inventory 5,120 2,555
Due from placement agent 0 (12,431)
Prepaid expenses (22,260) 0
Other assets (13,892) 2,500
Accounts payable and accrued expenses 1,118,544 14,745
Sales tax payable (1,487) (29,955)
Due to factoring agent -- (42,485)
----------- -----------
Net cash provided by (used in) operating activities (2,142,067) (593,263)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in European Medical Networks (335,000) -0-
Purchase of WebIPA 5,033 -0-
Purchase of property and equipment (272,900) (26,198)
----------- -----------
Net cash provided by (used in) investing activities (602,867) (26,198)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from convertible notes 0 742,875
Proceeds from notes payable 530,000 0
Proceeds from the issuance of preferred stock,
net of issuance costs 789,250 0
Issuance of common stock 284 56,145
Proceeds from stock warrant exercise 492,000 0
Proceeds from stock option exercise 20,739 0
Payments on notes payable -- (150,000)
----------- -----------
Net cash provided by financing activities 1,832,273 649,020
----------- -----------
Net increase (decrease) in cash and cash equivalents (912,661) 29,559
Cash and cash equivalents at beginning of period 1,127,263 44,373
----------- -----------
Cash and cash equivalents at end of period 214,602 $ 73,932
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
See accompanying independent accountants' review report.
7
<PAGE>
<TABLE>
<CAPTION>
For the six months ended
June 30,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 0 $ 0
Interest $ 44,728 $ 1,532
Non Cash Investing and Financing Transactions; June 30, 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
===========
Non Cash Investing and Financing Transactions (continued)
During the quarter ended June 30, 2000, $400,000 of convertible notes
payable were converted into 320,000 shares of common stock
During the six months ended June, 2000, 1,018,604 incentive
stock options were excercised. The options were excercised
utilizing stock appreciation rights. The net proceeds to the
company would have been $293,312. The Company
recorded a treasury stock transaction in the amount of
$293,312 to account for the stock appreciation rights
</TABLE>
The accompanying notes are an integral part of these financial statements.
See accompanying independent accountants' review report.
8
<PAGE>
OMNICOMM SYSTEMS, INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(unaudited)
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(TM).
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 5,500,089 and 1,532,428 for the six
months ended June 30, 2000 and 1999, respectively; and 6,149,470 and
1,604,390 for the three months ended June 30, 2000 and 1999,
respectively. There were no differences between basic and diluted
earnings per share. Options to purchase 3,605,497 shares of common
stock at prices ranging from $.25 to $6.50 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 are 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 share as 5%
Series A Convertible Preferred Stock. Each shares is convertible into
common stock at $1.50 per share. In the event of liquidation, these
shareholders will be entitled to receive in preference to the holders
of common stock an amount equal to their original purchase price plus
all accrued but unpaid dividends. Dividends are payable at the rate of
5% per annum, payable semi-annually.
ADVERTISING
Advertising costs are expensed as incurred.
9
<PAGE>
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:
June 30, 2000
Accumulated
Cost Amortization
-------- --------
Covenant not to compete $120,000 $120,000
Software development costs 87,500 58,334
Organization costs 539 450
Debt acquisition costs 119,625 35,888
Trademarks 1,363 0
Patents 4,901 0
-------- --------
$333,928 $214,672
======== ========
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 June 30,
2000 and December 1999 is the cost of $475,665 and accumulated
amortization of $317,110 and $237,833 respectively. The goodwill is
being amortized ratably over a period of three years.
10
<PAGE>
PROPERTY AND EQUIPMENT, AT COST
Property and equipment consists of the following:
June 30, 2000 December 31, 1999
-------------------- --------------------
Accumulated Accumulated
Cost Depreciation Cost Depreciation
-------- -------- -------- --------
Computer and
Office equipment 380,858 $ 76,964 $195,340 $ 30,146
Leasehold
Improvements 1,156 39 0 0
Computer software 227,433 9,664 167,220 1,034
Office furniture 47,108 5,221 23,070 1,267
-------- -------- -------- --------
$656,555 $ 91,888 $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 six months ended June 30, 2000 and 1999
was $58,557 and $4,336 respectively.
REVENUE RECOGNITION POLICY
The Company recognizes 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
11
<PAGE>
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.
As of June 30, 2000 the Company had issued 3,605,497 options to
purchase common stock at prices ranging from $0.25 to $6.50 per share
with expirations through August 19, 2011
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 June 30, 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 June 30, 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
January 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: INVESTMENT, AT COST
European Medical Network (EMN) Investment
On March 20, 2000 the Company entered into a stock purchase agreement
under which it agreed to purchase a 25% interest in Medical Network AG
EMN, a Swiss company ("EMN"). The agreement, set to close on April 20,
2000, provided that the purchase price for 25% of EMN's stock equity
was $838,500 to be paid partly in cash and stock. Two cash payments
totaling US $645,000 were to be paid in installments as follows:
$335,000 on March 20, 2000, upon which EMN would deliver 10% of its
stock equity, and $310,000 on April 20, 2000, upon which EMN would
deliver the remaining 15% of its stock equity. In addition, the Company
was to provide 41,883 shares of restricted common stock to EMN.
Pursuant to the terms of the stock purchase agreement, on March 20,
2000, EMN's shareholders entered into an agreement that provided for
the Company to have one seat on EMN's board of directors and the right
to veto any sale of equity in excess of 49% of the total issued and
outstanding equity of EMN.
On March 20, 2000, the Company paid EMN $335,000 and received 10% of
EMN's equity and a seat on EMN's board. On April 20, 2000, the Company
did not make the second payment of $310,000 or the stock payment of
41,883 shares to EMN and the stock purchase agreement did not close.
However, on July 11, 2000, the Company and EMN agreed to renegotiate
the terms of their agreement subject to the Company's success in
finding adequate financing. As part of the renegotiation the Company
has resigned its seat on EMN's board and offered to sell its 10%
interest back to EMN. Therefore, the investment is accounted for at
cost.
12
<PAGE>
NOTE 6: NOTES PAYBLE
Education Navigator
As of June 30, 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. At August 15, 2000 the Company was in default
under the terms of the promissory note governing the debt. In
accordance with the terms of the promissory note the Company will pay a
late charge equal to 5% of the $177,500 due on June 26, 2000. In
addition, the interest rate on the note will increase to the maximum
rate allowed by law in the State of Florida.
Short-term Borrowings
At June 30, 2000 the Company owed $530,000 under short-term notes
payable. The notes bear interest at rates ranging from 8.75% to 12%.
The average term of the promissory notes is 40 days. The notes are not
collateralized and the note holders were granted stock warrants in the
Company at a price of $2.25 per share. As of June 30, 2000 the Company
was in default on the three of the notes for a principal amount of
$300,000. Subsequent to June 30, 2000, the Company negotiated a
conversion of the debt into common stock of the Company with all three
parties for the principal amount due plus all accrued interest.
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. As of June
30, 2000 approximately $400,000 of the Convertible Notes had been
converted into 320,000 shares of common stock of the Company.
NOTE 8: COMMITMENTS AND CONTINGENCIES
The Company currently leases office space requiring minimum annual base
rental payments for the fiscal periods shown as follows:
2000 $ 75,469
2001 142,341
2002 139,965
2003 0
2004 0
--------
Total $357,775
========
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 $0 and $3,406 at June 30, 2000 and December 31,
1999, respectively, from a shareholder. The interest rate was 6%
annually.
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NOTE 10: INCOME TAXES
Income taxes are accrued at statutory US and state income tax rates.
Income tax expense is as follows:
6/30/00 6/30/99
Current tax expense(benefit):
Income tax at statutory rates $ -0- $ -0-
Deferred tax expense(benefit):
Amortization of Goodwill and
Covenant (48,306) (25,038)
Operating loss carryforward (1,310,946) (10,154)
1,359,252 35,192
Valuation allowance (1,359,252) (35,192)
Total Tax Expense(Benefit) -0- -0-
The tax effect of significant temporary differences, which comprise
the deferred tax assets are as follows:
6/30/00 12/31/99
Deferred tax assets:
Amortization of Intangibles $ 201,968 $ 153,662
Operating loss carryforwards 2,234,695 923,749
Gross deferred tax assets 2,436,663 1,077,411
Valuation allowance (2,436,663) (1,077,411)
Net deferred tax assets $ -0- $ -0-
The Company has net operating loss (NOL) carryforwards for income tax
purposes of approximately $5,800,000. This loss is allowed to be
offset against future income until the year 2020 when the NOL's will
expire. Other timing differences relate to depreciation and
amortization for the stock acquisition of EdNav (Note 2). The tax
benefits relating to all timing differences have been fully reserved
for in the valuation allowance account due to the lack of operating
history and substantial losses.
NOTE 11: POST-RETIREMENT 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 12: INTERIM FINANCIAL REPORTING
The unaudited financial statements of the Company for the period from
January 1, 2000 to June 30, 2000 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
FORWARD LOOKING STATEMENTS
In addition to historical information, this Quarterly Report contains "forward
looking statements". These statements can often be identified by the use of
forward-looking terminology such as "estimate", "project", "believe", "expect",
"may", "will", "should", "intends", or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy that involve risks and uncertainties. We wish to caution the reader
that these forward-looking statements, such as statements relating to timing,
costs and of the acquisition of, or investments in, existing business, the
revenue profitability levels of such businesses, and other matters contained in
this Quarterly Report regarding matters that are not historical facts, are only
predictions. No assurance can be given that plans for the future will be
consummated or that the future results indicated, whether expressed or implied,
will be achieved. While sometimes presented with numerical specificity, these
plans and projections and other forward-looking statements are based upon a
variety of assumptions, which we consider reasonable, but which nevertheless may
not be realized. Because of the number and range of the assumptions underlying
our projections and forward-looking statements, many of which are subject to
significant uncertainties and contingencies that are beyond our reasonable
control, some of the assumptions inevitably will not materialize, and
unanticipated events and circumstances may occur subsequent to the date of this
Quarterly Report. Therefore, our actual experience and results achieved during
the period covered by any particular projections or forward-looking statements
may differ substantially from those projected. Consequently, we or any other
person that these plans will be consummated or that estimates and projections
will be realized, and actual results may vary materially should not regard the
inclusion of projections and other forward-looking statements as a
representation. There can be no assurance that any of these expectations will be
realized or that any of the forward-looking statements contained herein will
prove to be accurate.
RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
Revenues:
Total revenues decreased to $40,760 from $912,401 for the six months ended June
30, 2000 compared to the corresponding period in fiscal year 1999. This
substantial decrease in revenue can be attributed to the Company changing its
focus away from computer systems integration to the development and marketing of
Internet based database products.
All of the Company's revenue for both periods presented is attributed to its
systems integration business. The Company has earned no revenue from its
TrialMaster(TM) or WebIPA(TM) Internet based systems.
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Cost of Sales:
Total cost of sales decreased to $46,524 from $634,524 for the six months ending
June 30, 2000 compared to the corresponding period in fiscal year 1999. The
decrease in cost of sales can be attributed to the Company's decision to
redeploy its resources on the development and marketing of the TrialMaster(TM)
Internet and WebIPA systems. The Company experienced a decrease in product and
service revenues in connection with the change in strategic focus and therefore
a corresponding decrease in cost of goods sold.
Salaries and Wages. Salaries and wages increased to $1,511,329 from $231,266 for
the six month period ending June 30, 2000 compared to the corresponding period
in fiscal year 1999. The Company currently has thirty two employees compared to
eight for the comparable period in fiscal 1999. All of the Company's employees
are directly involved in the development, marketing, and implementation of the
TrialMaster(TM) and WebIPA systems.
Selling, General and Administrative. Selling, general and administrative
expenses which includes; rent, telephone and Internet expenses and travel,
increased to $1,021,719 from $301,904 for the first six months of the fiscal
year 2000 compared to the corresponding period in fiscal year 1999. The
substantial increase in selling, general and administrative expenses is
attributed to the increase in resources expended related to the development and
marketing of the Company's TrialMaster(TM) and WebIPA systems. The Company
experienced increases in its, travel and general and administrative expenses in
connection with its decision to execute its Internet strategy. The Company
incurred significantly higher telephone and Internet access expenses related to
its move to an Internet based operating strategy. Rents increased during the
first six months in fiscal 2000 due to the opening of a Research and Development
facility in Tampa, Florida, and the establishment of OmniTrial B.V., a
wholly-owned subsidiary, in Amsterdam, The Netherlands.
Legal and Professional Fees. Legal and professional fees increased to $405,978
from $70,374 for the first six months of fiscal 2000 compared to the comparable
period in fiscal 1999. The increase is primarily attributable to Investment
Banking and Financial Advisory fees paid to First Stanford Healthcare in
conjunction with the Company's attempt to raise capital during the first half of
fiscal 2000.
Independent Consultants. Independent consulting expenses decreased to $202,453
from $210,101 for the six months ended June 30, 2000 compared to the
corresponding period in fiscal year 1999. The decrease can be attributed a
decrease in marketing fees that was created by hiring one of its consultants as
an employee, offset by increases in Medical Advisory and Product Development
Consulting Fees. The Company has retained the services of independent
programmers to assist in finalizing certain software issues related to the
application. In addition, the Company continues to retain the services of
consultants to assist in developing marketing strategies for the marketing and
sales of the TrialMaster(TM) system and WebIPA systems. The Company has
established a medical advisory board and the members are paid monthly retainers
ranging from $1,000 to $8,333 per month.
LIQUIDITY AND CAPITAL RESOURCES:
Cash and cash equivalents decreased to $214,602 from $1,127,263 during the first
six months of fiscal year 2000. The decrease can be attributed to the losses
incurred during the first and second quarters, the Company's investment in
European Medical networks of $335,000, the purchase of property and equipment
offset by the receipt of equity financing received from the issuance of
Series A Convertible Preferred Convertible Stock and from the exercise of
common stock warrants associated with the Series A Preferred shareholders.
The Company generated a loss of $3,485,261 from operations in the first six
months of fiscal year 2000 compared to a loss of $704,603 for the corresponding
period in 1999. The losses can be primarily attributed to the increased expenses
associated with the development and marketing of the TrialMaster(TM) and WebIPA
systems. The Company has incurred increased expenses in salaries and wages,
consulting fees, travel and professional fees in connection with developing and
marketing the Company's Internet based products.
15
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The Company's primary capital requirements are for daily operations and for the
continued development and marketing of TrialMaster(TM) and WebIPA systems.
Management believes that its current available working capital, anticipated and
subsequent sales of stock and or debt financing will be sufficient to meet its
projected expenditures for a period of at least twelve months from June 30,
2000. The Company's capital requirements, will need to be funded through debt
and equity financing, of which there can be no assurance that such financing
will be available or, if available, that it will be on terms favorable to the
Company.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
Revenues:
Total revenues decreased to $15,782 from $383,679 for the three months ended
June 30, 2000 compared to the corresponding period in fiscal year 1999. This
substantial decrease in revenue can be attributed to the Company
changing its focus away from computer systems integration to the development
and marketing of Internet based database products. The Company began the shift
away from systems integration during the second quarter of fiscal 1999. The
Company's transition to a Internet development and marketing oriented business
had been completed by the end of fiscal 1999.
All of the Company's revenue for both periods presented is attributed to its
systems integration business. The Company has earned no revenue from its
TrialMaster(TM) or WebIPA(TM) Internet based systems.
Cost of Sales:
Total cost of sales decreased to $11,404 from $409,233 for the three months
ending June 30, 2000 compared to the corresponding period in fiscal year 1999.
The decrease in cost of sales can be attributed to the Company's decision to
redeploy its resources on the development and marketing of the TrialMaster(TM)
Internet and WebIPA systems. The Company experienced a decrease in product and
service revenues in connection with the change in strategic focus and therefore
a corresponding decrease in cost of goods sold. The Company does not anticipate
any substantial increases in either revenues or cost of sales from its computer
systems integration business.
Other Expenses:
Salaries and Wages. Salaries and wages increased to $938,396 from $128,331 for
the three month period ending June 30, 2000 compared to the corresponding
period in fiscal year 1999. The Company currently has thirty two employees
compared to eight for the comparable period in fiscal 1999. All of the
Company's employees are directly involved in the development, marketing, and
implementation of the TrialMaster(TM) and WebIPA systems.
Selling, General and Administrative. Selling, general and administrative
expenses which includes; rent, telephone and Internet expenses and travel,
increased to $511,838 from $215,215 for the three months ended June 30,
2000 compared to the corresponding period in fiscal year 1999. The
substantial increase in selling, general and administrative expenses can be
attributed to the increase in resources expended related to the development
and marketing of the Company's TrialMaster(TM) and WebIPA systems. The Company
experienced increases in its, travel and general and administrative expenses in
connection with its decision to execute its Internet strategy. The Company
incurred significantly higher telephone and Internet access expenses related to
its move to an Internet based operating strategy. The Company anticipates that
telephone and Internet access charges will continue to grow on an absolute
dollar basis as it continues to expand its Internet businesses. Rents
increased during the three months ended June 30, 2000 due to the opening of a
Research and Development facility in Tampa, Florida, and the establishment of
OmniTrial B.V., a wholly-owned subsidiary, in Amsterdam, The Netherlands.
Legal and Professional Fees. Legal and professional fees increased to $206,731
from $32,407 for the three months ended June 30, 2000 compared to the
comparable period in fiscal 1999. The increase is primarily attributable
to Investment Banking and Financial Advisory fees paid to First Stanford
Healthcare in conjunction with the Company's attempt to raise capital during
the first half of fiscal 2000.
Independent Consultants. Independent consulting expenses decreased to $84,018
from $160,080 for the three months ended June 30, 2000 compared to the
corresponding period in fiscal year 1999. The decrease can be attributed to a
decrease in marketing fees that was created by hiring one of the Company's
consultants as an employee, offset by increases in Medical Advisory and Product
Development Consulting Fees. The Company has retained the services of
independent programmers to assist in finalizing certain software issues related
to the application. In addition, the Company continues to retain the services
of consultants to assist in developing marketing strategies for the marketing
and sales of the TrialMasterTM system and WebIPA systems. The Company has
established a medical advisory board and the members are paid monthly retainers
ranging from $1,000 to $8,333 per month.
PART II. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
In the Circuit Court of the 11th Judicial Circuit Court in and for
Miami-Dade County, Florida, SPP Real Estate, Inc. filed suit on May 24, 2000 for
damages and other relief against OmniComm Systems, Inc. alleging OmniComm's
breach of a lease for real property.
ITEM 5. OTHER INFORMATION
Private Placement
On January 18, 1999, Northeast Securities, Inc., as placement agent,
began the distribution of a Confidential Private Placement Memorandum to
accredited investors on behalf of the Company. The terms of the offering are as
follows:
Amount: $400,000 Minimum/$750,000 Maximum, All or none, Best Efforts.
Offering: 16 Units Minimum/30 Units Maximum. Each Unit consists of a
five (5) year convertible note in the principal amount of $25,000, bearing 10%
annual interest, payable semi-annually with the principal convertible into
shares of common stock, $.001 par value, of the Company ("Common Stock" or
"Shares") at $1.25 per Share, subject to customary anti-dilution provisions. The
Convertible Notes may be called in whole or in part at a premium of 102% of par
into shares at the conversion price, as may be adjusted, in the event the
Company's Common Stock publicly trades on a recognized exchange, NASDAQ or OTC
Bulletin Board, for a period of 20 consecutive trading days at a bid price per
share of $3.50 or greater, and provided the Shares underlying the Convertible
Note have been registered and may be sold without restriction by the holders
thereof.
Interest Adjustment: In the event holders demand registration of the
Shares underlying the Convertible Notes and such registration statement is not
effective within 90 days after the date of notice of demand by said holders, the
interest rate on the Convertible Notes beginning on the next quarter following
the expiration of the 90 day period, shall increase to 15%, and shall remain at
15% until said registration statement is effective, at which time the interest
rate shall revert back to 10%.
Price: $25,000 per Unit. The Company will accept subscriptions for
partial Units.
Registration Rights: Demand (so long as 50% of the aggregate amount of
the total offering files notices) and PiggyBack registration rights (subject to
underwriter's cut-back).
Use of Proceeds: Operating and Marketing Expenses
Conditions:
(1) Regulation D of the Securities Act of 1933, as amended.
(2) Suitability Standards; Accredited Investors Only.
(3) Board of Directors: Northeast Securities, placement agent, shall
have the right to designate one observer with the same notice and
reimbursement of expenses as other directors.
(4) Termination Date: March 31, 1999
(5) Placement Fee: 250,000 Common Shares at a purchase price of $.001
per share at the closing of the Minimum.
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(6) The Company agrees not to issue equity securities except ISO stock
options and other options or stock bonuses to employ consultants and
advisors.
(7) Northeast shall have a right of first refusal to match any bonafide
equity based offering proposal.
(8) The Company shall have no more than 4,000,000 Shares outstanding on
a fully diluted basis prior to the placement of the Convertible Notes.
Placement Agent Fees: 10% Commission (cash); 3%
Nonaccountable expense allowance (cash); $7,500 advance against
non-accountable due diligence expense.
The private placement was extended for an additional forty-five (45) days.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
On March 6, 2000 the company filed a current report on Form 8-K dated
March 6, 2000 reporting items 1,2,5,6 and 7 in connection with its
preliminary agreement to acquire 25% of the current stock equity of
Medical Network EMN Ltd. for cash and restricted common stock of
Omnicomm.
On February 9, 2000 the company filed a current report on Form 8-K
dated February 9, 2000 reporting items 1,2,5,6 and 7 in connection with
its acquisition WebIPA, Inc. pursuant to an Agreement and Plan of
Acquisition dated January 26, 2000.
On June 30, 2000 the company filed a current report on Form 8-K dated
June 30, 2000 reporting items 5 and 7 in connection organizational
changes occurring on that date. The Company announced that Cornelis F.
Wit a member of the Company's Board of Directors had been named interim
CEO. The Company also announced that Peter S. Knezevich had been
replaced as CEO and would remain on a Director of the Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto
duly authorized.
OMNICOMM SYSTEMS, INC.
Registrant
Date: August 30, 2000
/S/ DAVID GINSBERG, D.O.
------------------------
David Ginsberg, D.O.
Chief Executive Officer
/S/ RONALD T. LINARES
---------------------
Ronald T. Linares
Vice President and
Chief Financial and
Chief Accounting Officer
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
27.1 Financial Data Schedule
