U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------- ---------------
Commission File No. 000-26177
OMNI MEDICAL HOLDINGS, INC.
---------------------------
(Name of Small Business Issuer in its Charter)
UTAH 87-0425275
---- ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
1107 Mt. Rushmore Road, Suite 2
Rapid City, South Dakota 57701
-------------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (605) 718-0380
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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.
(1) Yes X No (2) Yes X No
--- --- --- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
December 31, 2004
22,139,140
----------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
-------------------------------
The Financial Statements of the Registrant required to be filed with
this 10-QSB Quarterly Report were prepared by management, and commence on the
following page, together with Related Notes. In the opinion of management,
the Financial Statements fairly present the financial condition of the
Registrant.
Omni Medical Holdings, Inc.
Condensed Consolidated Financial Statements
December 31, 2004
Omni Medical Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheet
December 31, 2004
ASSETS
Current assets:
Cash and cash equivalents $ 16,420
Accounts receivable, net, including unbilled amounts of
approximately $275,000 398,721
Short-term investments, at fair value-Note 3 161,326
Employee advances 3,935
Prepaid expenses 57,640
-----------
Total current assets 638,042
Property & equipment, net 200,191
Other assets:
Deposits 730
Deferred financing costs 25,000
Goodwill 72,300
Intangible assets, net 396,190
-----------
Total other assets 494,220
-----------
TOTAL ASSETS $ 1,332,453
===========
See notes to condensed consolidated financial statements
F-2
Omni Medical Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheet [continued]
December 31, 2004
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 176,412
Accrued expenses 121,931
Line of credit 71,606
Notes payable, current portion 696,731
-----------
Total current liabilities 1,066,680
Notes payable, net of current portion 60,256
-----------
Total long-term liabilities 60,256
Total liabilities 1,126,936
Stockholders' equity-Note 3:
Preferred stock, no par value, 1,000,000 shares authorized,
no shares issued and outstanding -
Common stock, par value $0.001 per share; 50,000,000
shares authorized; 22,139,140 issued and outstanding 22,139
Common stock to be issued under reorganization agreement
474,659 shares 475
Capital in excess of par value 2,752,173
Unrealized loss on investment (161,327)
Accumulated deficit (2,407,943)
-----------
Total stockholders' equity 205,517
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,332,453
===========
See accompanying notes to financial statements
F-3
Omni Medical Holdings, Inc.
Unaudited Condensed Consolidated Statements of Operations
For the three month and nine month periods ended December 31, 2004 and 2003
For the three months ended For the Nine months ended
December 31, December 31,
2004 2003 2004 2003
Revenue $ 414,411 $ 363,476 $ 1,221,915 $ 743,315
Cost of sales 310,213 242,119 842,946 446,593
--------- ---------- ----------- ----------
Gross operating profit 104,198 121,357 378,969 296,722
General and administrative
expenses 243,384 275,703 752,942 585,250
--------- ---------- ----------- ----------
Income (loss) from
operations (139,186) (154,346) (373,973) (288,528)
Other income (expense):
Interest income 29 - 29 260
Interest expense (16,389) (8,750) (46,745) (26,728)
Loss on sale of assets (16,274) - (21,878) -
Realized loss on
investment (77,582) - (77,582) -
--------- ---------- ----------- ----------
Total other income
(expense) (110,216) (8,750) (146,176) (26,468)
--------- ---------- ----------- ----------
Loss from continuing
operations before income
taxes (249,402) (163,096) (520,149) (314,996)
Provision for income taxes - - - -
--------- ---------- ----------- ----------
Loss from continuing
operations (249,402) (163,096) (520,149) (314,996)
Loss from discontinued
operations - - - (33,736)
--------- ---------- ----------- ----------
Net loss $(249,402) $ (163,096) $ (520,149) $ (348,732)
========= ========== =========== ==========
Other Comprehensive Income:
Unrealized gain (loss) on
investments (161,327) - (161,327)
--------- ---------- ----------- ----------
Total Comprehensive income
(loss) $(410,729) $ (163,096) $ (681,476) $ (348,732)
========= ========== =========== ==========
Loss per share basic and diluted:
Continuing operations $ (0.01) $ (0.01) $ (0.03) $ (0.02)
========= ========== =========== ==========
Discontinued operations $ 0.00 $ 0.00 $ 0.00 $ 0.00
========= ========== =========== ==========
Net loss per share-basic
and diluted $ (0.01) $ (0.01) $ (0.03) $ (0.02)
========= ========== =========== ==========
Weighted average number of
common shares outstanding
-basic and diluted 22,011,934 14,166,781 19,108,566 14,601,451
========== ========== =========== ==========
See notes to condensed consolidated financial statements
F-4
Omni Medical Holdings, Inc.
Unaudited Consolidated Statements of Cash Flows
For the nine month periods ended December 31, 2004 and 2003
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from continuing operations $ (520,149) $ (314,996)
Loss from discontinued operations - (33,736)
Adjustments to reconcile net loss to net
cash used in continuing operations:
Depreciation and amortization 151,752 69,055
Stock-based compensation expense 7,342 39,196
Stock issued for services 67,725 -
Loss on sale of assets 21,878 -
Realized loss on investment 77,582
Changes in operating assets and
liabilities, net of effect of business
acquisition and disposition:
Accounts receivable (21,395) (172,178)
Prepaid expenses 2,568 (2,421)
Deposits (350) -
Accounts payable 7,685 113,940
Accrued expenses 3,432 150,666
------------- -----------
Net cash used in operating
activities (201,930) (150,474)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,114) (16,387)
Proceeds from sale of assets 1,021 -
Proceeds from sale of investments 107,219 -
Payment for disposition of subsidiary, net - (36,000)
Payments for purchase of businesses - (250,000)
------------- -----------
Net cash provided by (used in)
investing activities 107,126 (302,387)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of dissenter's common stock - (120)
Deferred financing costs - (25,000)
Borrowings on line of credit 26,650 -
Proceeds from issuance of debt 78,000 75,378
Net payments of notes payable (15,916) (20,633)
Proceeds from the issuance of common stock 16,350 166,000
------------- -----------
Net cash provided by financing
activities 105,084 195,625
------------- -----------
NET INCREASE (DECREASE) IN CASH 10,280 (257,236)
CASH AT BEGINNING OF PERIOD 6,140 257,963
------------- -----------
CASH AT END OF PERIOD $ 16,420 $ 727
============= ===========
See accompanying notes to financial statements
F-5
Omni Medical Holdings, Inc.
Consolidated Statements of Cash Flows [continued]
For the nine month periods ended December 31, 2004 and 2003
2004 2003
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest in continuing operations $ 23,818 $ 19,802
Cash paid for interest in discontinued operations - 1,402
Cash paid for income taxes - -
NON-CASH OPERATING ACTIVITIES:
Stock issued as prepaid expenses $ 72,379 $ -
NON-CASH INVESTING ACTIVITIES:
Stock issued for short-term investments $ 507,454 $ -
NON-CASH FINANCING ACTIVITIES:
Stock issued to relinquish debt $ 137,500 $ -
BUSINESS ACQUISITIONS:
Fair value of assets acquired $ - $790,000
Issuance of debt/assumption of liabilities - (540,000)
----------- --------
Cash paid $ - $250,000
=========== ========
See accompanying notes to financial statements
F-6
Omni Medical Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
December 31, 2004
Note 1 BUSINESS, ORGANIZATION AND INTERIM FINANCIAL STATEMENTS
Business - Omni Medical Holdings, Inc. ("Omni"), a Utah corporation,
provides medical billing and transcription services to medical
practitioners in Alabama, Mississippi, South Dakota and Kentucky.
Organization - The company was previously organized as Piezo
Instruments, Inc. ("Piezo"), a Utah corporation. Effective September 5,
2003, Piezo and Omni Medical of Nevada, Inc., a Nevada Corporation
("Omni Nevada") executed an Agreement and Plan of Reorganization (the
"Reorganization Agreement"), whereby Piezo agreed to acquire 100% of the
issued and outstanding shares of common stock of Omni Nevada in exchange
for up to 16,000,000 newly issued shares of common stock of Piezo, (of
which 12,913,815 were issued as of March 31, 2004, 480,753 shares were
issued in July 2004 and 474,659 shares are to be issued as of December
31, 2004 for a total of 13,869,227 shares,) or approximately 86% of the
post-Reorganization Agreement outstanding securities of Piezo. The
transaction was accounted for as a reverse acquisition of Piezo by Omni
Nevada. Shares of common stock authorized and issued have been
retroactively restated to present the capital structure of Piezo.
Concurrent with the merger, Piezo changed its name to Omni Medical
Holdings, Inc.
Interim financial statements- The accompanying condensed consolidated
financial statements have been prepared without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. The
interim financial statements reflect all adjustments that, in the
opinion of management, are necessary in order to make the financial
statements not misleading. Certain information and disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It is
suggested that these unaudited condensed consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's Annual Report
on Form 10-KSB for the fiscal year ended March 31, 2004.
Note 2 DISCONTINUED OPERATIONS
Through May 2, 2003, Omni also produced handheld surgical instruments
used by ophthalmic surgeons in refractive, corneal and LASIK surgeries
and was also a developer of technology to ophthalmic surgeons,
specifically within the domain of anterior segment cataract extraction,
and foldable intra ocular lens placement as well as keratorefractive
procedures such as LASIK. Omni operated its surgical instruments
business through its wholly-owned subsidiary, Mastel Precision Surgical
Instruments, Inc ("MPSI") out of its facility in Rapid City, South
Dakota.
Effective May 2003, Omni entered into an agreement with one of its
officers and shareholders whereby Omni agreed to exchange 100% of the
common stock of MPSI and $36,000 cash for all shares of common stock of
Omni owned individually or jointly by the officer and his wife. As of
April 30, 2003, the assets of MPSI had a carrying value of approximately
$442,000 (primarily accounts receivable of approximately $53,000,
inventories of approximately $387,000 and property and equipment of
approximately $30,000) and MPSI's obligations and liabilities had a
carrying value of approximately $527,000 (primarily accounts payable of
approximately $226,000 and debt of approximately $286,000). Due to the
related party nature of the transaction, no gain was recognized and
shareholders equity was increased by $49,000. The results of operations
from MPSI have been retroactively restated as discontinued operations.
F-7
Omni Medical Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
December 31, 2004
Note 3 STOCKHOLDERS' EQUITY
During the nine months ended December 31, 2004 the Company issued
147,200 shares of its of restricted common stock to offshore investors
pursuant to Regulation S, promulgated under the Securities Act of 1933,
and received consideration of $16,350.
During the nine month period ended December 31, 2004, the Company issued
981,000 shares of restricted common stock to various consultants for
services to be performed over a term of 6 months to 2 years. Management
has estimated the fair market value of the fees at $97,100, of which
$40,725 have been expensed and the remaining $56,375 have been recorded
as a prepaid expense to be amortized over the life of the contracts.
In June 2004, the Company issued 3,700,000 shares of common stock and
placed the shares in escrow pending the completion of a loan agreement.
However, the loan agreement was never completed and on November 12, 2004
the stock certificate was cancelled.
In July 2004, the Company issued 480,753 shares of common stock pursuant
to the September 5, 2003 Reorganization agreement. These shares are in
addition to the original 12,913,815 shares issued during the year ended
March 31, 2004. The shareholders tendered in a timely fashion according
to the terms of the agreement, but had subsequently lost his certificate.
Also in July 2004, the Company entered into a Stock Purchase Agreement
("The agreement") with a London based investment company. On September
30, 2004, pursuant to the agreement, the Company exchanged 4,400,000
shares of its restricted common stock for 906,167 shares in an off-shore
investment trust. On that date the investment trust shares were trading
at a price equivalent to $.56 per share for a total investment of
$507,454. The Company has classified the investment as available for
sale and carries the investment at fair market value in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". The Company also
issued 220,000 shares of its common stock to an investment banker as
compensation in this transaction. Management has estimated the fair
market value of these services at $22,000 which has been recorded as an
expense in the accompanying financial statements. The investment banker
also received 22,500 shares in the investment trust.
On September 7, 2004 by unanimous consent the Company's board of
directors approved and authorized the exchange of 600,000 shares of the
Company's common stock to the Company's President and Chief Executive
Officer in return for all accrued salary and any interest or penalties
in connection with the accrued salary totaling $137,500.
On September 28, 2004 the Company issued 50,000 to its Vice President
for services. Management has estimated the fair market value of the
services to be $5,000, which has been recorded as an expense in the
accompanying financial statements.
Note 4 RELATED PARTY TRANSACTIONS
During the nine month period ended December 31, 2004 the Company's
President and Chief Executive Officer loaned the Company $43,000. The
loan is payable on demand, unsecured and interest free. The balance of
the loan as of December 31, 2004 is $42,320.
F-8
Omni Medical Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
December 31, 2004
Note 5 SUBSEQUENT EVENTS
In January 2005, the Company placed stop orders on two stock
certificates totaling 500,000 shares. These shares were issued to
consultants who in the opinion of management are not fulfilling the
terms of their contract. The Company will continue to show these shares
as issued and outstanding until they are returned to the Company.
Also in January 2005, the Company transferred 22,500 shares of its short
terms investments in exchange for 220,000 shares of its own common stock
that had previously been issued to an investment banker. The 220,000
shares were included in issued and outstanding shares as of December 31,
2004.
F-9
Item 2. Management's Discussion and Analysis
"SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995.
This Form 10-QSB contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Omni Medical Holdings, Inc. is referred to herein as
"we" or "our". The words or phrases "would be," "will allow," "intends to,"
"will likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "project," or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results could differ materially from
those projected in the forward looking statements as a result of a number of
risks and uncertainties. Statements made herein are as of the date of the
filing of this Form 10-QSB with the Securities and Exchange Commission and
should not be relied upon as of any subsequent date. Except as may otherwise
be required by applicable law, we do not undertake, and specifically disclaim,
any obligation to update any forward-looking statements contained in this Form
10-QSB to reflect occurrences, developments, unanticipated events or
circumstances after the date of such statement.
RESULTS OF OPERATIONS
Three months ended December 31, 2004.
------------------------------------
During the quarterly period ended December 31, 2004, we recorded revenue of
$414,411, a 14% increase from revenue of $363,476 in the quarter ended
December 31, 2003.
Cost of sales totaled $310,213, versus $242,119 in the third fiscal quarter
of 2003. This increase is due to higher expenses and lower operating margins
of McCoy Business Services. McCoy is engaged in providing medical
transcription services and was acquired December 1, 2003.
During the third fiscal quarter of 2004, we recorded general and
administrative expenses of $243,384. These expenses totaled $275,703 in the
year-ago period.
Interest expense was $16,389 and $8,750 for the three-month period ended
December 31, 2004, and December 31, 2003, respectively.
For the three-month period ended December 31, 2004, we incurred a loss from
continuing operations of $249,402, as compared to a loss of $163,096 for the
three-month period ended December 31, 2003.
During the three months ended December 31, 2004, we had an unrealized loss on
investments of $161,327, which gave us a total comprehensive loss of $410,729.
The reasons for the fluctuations from the three months ended December 31,
2003, to the three months ended December 31, 2004, are as discussed below
under the subheading "Nine months ended December 31, 2004."
Nine months ended December 31, 2004.
------------------------------------
Our revenue totaled $1,221,915 in the nine months ended December 31, 2004, as
compared to revenue of $743,315 in the prior year period. This increase of
approximately 64% is principally due to our acquisition of Medical Billing
Management, Inc. ("MBM") on May 30, 2003 and McCoy Business Services on
December 1, 2003.
Cost of sales also rose significantly, to $842,946 in the current period, from
$446,593 in the nine months ended December 31, 2004. Again, this increase is
principally the result of our acquisitions.
General and administrative expenses totaled $752,942 in the nine month period
ended December 31, 2004. These expenses were $585,250 in the year-ago
period. This increase is primarily due to our acquisitions, as well as
increases in consulting services fees.
During the nine month periods ended December 31, 2004, and 2003, interest
expense totaled $46,745 and $26,728, respectively.
Net loss during the nine months ended December 31, 2004, was $520,149, versus
$348,732 in the period ended December 31, 2003.
During the quarter ended December 31, 2004, we had an unrealized loss on
investments of $161,327, for a total comprehensive loss of $681,476.
CAPITAL RESOURCE REQUIREMENTS
LIQUIDITY
As of December 31, 2004, Omni's working capital deficit was $428,638.
Our cash at December 31, 2004 was $16,420.
We currently have a commitment under an Employment Agreement with one
of the former owners of McCoy through November 30, 2005, guaranteeing annual
compensation of $30,000 plus a performance based bonus. We currently
lease office space under an operating lease for $6,000 per month, which
terminates July 31, 2006.
Effective October 1, 2003, Omni entered into an Employment Agreement with
Arthur D. Lyons, its chief executive officer and president through December
31, 2008. The agreement provides compensation at an annual base salary of
$150,000 and increases to $180,000 annually the first month Omni's gross
revenue exceeds $450,000 in a month. The Agreement also provides for a
$75,000 bonus to be paid as of February 1, 2004, and awards stock options
based upon revenue targets. As of December 31, 2004, no stock options have
been earned under the Agreement. We have been paying Mr. Lyons' salary since
March, 2004. His salary for the period from October, 2003, through February,
2004, has been paid through the issuance of "unregistered" and "restricted"
shares of our common stock. See Part II, Item 2 of this Quarterly Report.
During December 2003, Omni entered into a Loan Agreement and Security
Agreement with Presidential Financial Corporation allowing the Company to
borrow up to 80% of its accounts receivable or $300,000, whichever is less.
The loan is secured by accounts receivable and other tangible assets of Omni
and accrues interest at prime plus 2%. As of December 31, 2004 $71,606 was
owed on the line of credit.
Item 3. Controls and Procedures.
--------------------------------
As of the end of the period covered by this Quarterly Report, we carried
out an evaluation, under the supervision and with the participation of our
President and Treasurer, of the effectiveness of our disclosure controls and
procedures. Based on this evaluation, our President and Treasurer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information required to be included in our periodic
Securities and Exchange Commission reports. It should be noted that the
design of any system of controls is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote. In addition, we reviewed our internal
controls over financial reporting, and there have been no changes in our
internal controls or in other factors in the last fiscal quarter that has
materially affected or is reasonably likely to materially affect our internal
control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
----------------------------
None; not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
----------------------------------------------------------------------
In January 2005, the Company placed stop orders on two stock
certificates totaling 500,000 shares. These shares were issued to consultants
who in the opinion of management are not fulfilling the terms of their
contract. The Company will continue to show these shares as issued and
outstanding until they are returned to the Company.
Also in January 2005, the Company transferred 22,500 shares of its
short term investments in exchange for 220,000 shares of its own common stock
that had previously been issued to an investment banker. The 220,000 shares
were included in issued and outstanding shares as of December 31, 2004.
Item 3. Defaults Upon Senior Securities.
------------------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
--------------------------------------------------------------
None; not applicable.
Item 5. Other Information.
----------------------------
None; not applicable.
Item 6. Exhibits.
-------------------
(a) Exhibits.
31 302 Certification of Arthur D. Lyons.
32 906 Certification.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMNI MEDICAL HOLDINGS, INC.
Date: Feb. 11, 2005 /s/ Arthur D. Lyons
-------------- --------------------
Arthur D. Lyons, President,
Treasurer and Director
Date: Feb. 11, 2005 /s/ John Globoker
-------------- ------------------
John Globoker, Vice President,
Secretary and Director