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 September 30, 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:
November 15, 2004
22,185,496
----------
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
September 30, 2004
Omni Medical Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheet
September 30, 2004
ASSETS
Current assets:
Cash and cash equivalents $ 931
Accounts receivable, net, including unbilled amounts of
approximately $244,029 429,710
Short-term investments, at fair value-Note 3 507,454
Employee advances 3,935
Prepaid expenses 74,961
-----------
Total current assets 1,016,991
Property & equipment, net 228,816
Other assets:
Deposits 380
Deferred financing costs 25,000
Goodwill 72,300
Intangible assets, net 433,287
-----------
Total other assets 530,967
-----------
TOTAL ASSETS $ 1,776,774
===========
See notes to condensed consolidated financial statements
F-2
Omni Medical Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheet [continued]
September 30, 2004
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 264,574
Accrued expenses 101,372
Line of credit 97,448
Notes payable, current portion 529,871
-----------
Total current liabilities 993,265
Notes payable, net of current portion 170,075
-----------
Total long-term liabilities 170,075
Total liabilities 1,163,340
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; 21,585,496 issued and outstanding 21,585
Common stock to be issued under reorganization agreement
474,659 shares 475
Capital in excess of par value 2,750,527
Deferred compensation expense (611)
Accumulated deficit (2,158,542)
-----------
Total stockholders' equity 613,434
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,776,774
===========
See accompanying notes to financial statements
F-3
Omni Medical Holdings, Inc.
Unaudited Condensed Consolidated Statements of Operations
For the three month and six month periods ended September 30, 2004 and 2003
For the three months ended For the Six months ended
September 30, September 30,
2004 2003 2004 2003
Revenue $ 409,637 $ 299,559 $ 807,505 $ 379,839
Cost of sales 250,514 199,485 532,733 204,474
--------- ---------- ----------- ----------
Gross operating profit 159,123 100,074 274,772 175,365
General and administrative
expenses 270,051 226,603 516,097 309,547
--------- ---------- ----------- ----------
Income (loss) from
operations (110,928) (126,529) (241,325) (134,182)
Other income (expense):
Interest income - - - 260
Interest expense (12,350) (11,673) (23,818) (17,978)
Loss on sale of assets (5,605) - (5,605) -
--------- ---------- ----------- ----------
Total other income
(expense) (17,955) (11,673) (29,423) (17,718)
--------- ---------- ----------- ----------
Loss from continuing
operations before income
taxes (128,883) (138,202) (270,748) (151,900)
Provision for income taxes - - - -
--------- ---------- ----------- ----------
Loss from continuing
operations (128,883) (138,202) (270,748) (151,900)
Loss from discontinued
operations - - - (33,736)
--------- ---------- ----------- ----------
Net loss $(128,883) $ (138,202) $ (270,748) $ (185,636)
========= ========== =========== ==========
Loss per share basic and diluted:
Continuing operations $ (0.01) $ (0.01) $ (0.01) $ (0.01)
========= ========== =========== ==========
Discontinued operations $ 0.00 $ 0.00 $ 0.00 $ 0.00
========= ========== =========== ==========
Net loss per share-basic
and diluted $ (0.01) $ (0.01) $ (0.01) $ (0.01)
========= ========== =========== ==========
Weighted average number of
common shares outstanding
-basic and diluted 16,562,509 13,457,914 16,380,172 14,420,323
========== ========== =========== ==========
See notes to condensed consolidated financial statements
F-4
Omni Medical Holdings, Inc.
Unaudited Consolidated Statements of Cash Flows
For the six month periods ended September 30, 2004 and 2003
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from continuing operations $ (270,748) $ (151,900)
Loss from discontinued operations - (33,736)
Adjustments to reconcile net loss to net
cash used in continuing operations:
Depreciation and amortization 102,007 36,688
Stock-based compensation expense 6,731 14,799
Stock issued for services 50,221 -
Loss on sale of assets 5,605 -
Changes in operating assets and
liabilities, net of effect of business
acquisition and disposition:
Accounts receivable (52,384) (41,415)
Prepaid expenses 1,252 (6,654)
Accounts payable 95,847 43,431
Accrued expenses (17,127) 24,740
------------- -----------
Net cash used in operating
activities (78,596) (114,047)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (519) (5,687)
Proceeds from sale of assets 720 -
Payment for disposition of subsidiary, net - (36,000)
Payments for purchase of businesses - (150,000)
------------- -----------
Net cash provided by (used in)
investing activities 201 (191,687)
CASH FLOWS FROM FINANCING ACTIVITIES
Deferred financing costs - (25,000)
Borrowings on line of credit 52,493 -
Proceeds from issuance of debt 78,000 75,378
Net payments of notes payable (72,957) (19,695)
Proceeds from the issuance of common stock 15,650 45,000
------------- -----------
Net cash provided by financing
activities 73,186 75,683
------------- -----------
NET INCREASE (DECREASE) IN CASH (5,209) (230,051)
CASH AT BEGINNING OF PERIOD 6,140 257,963
------------- -----------
CASH AT END OF PERIOD $ 931 $ 27,912
============= ===========
See accompanying notes to financial statements
F-5
Omni Medical Holdings, Inc.
Consolidated Statements of Cash Flows [continued]
For the six month periods ended September 30, 2004 and 2003
2004 2003
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest in continuing operations $ 23,818 $ 9,891
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 $ - $450,000
Issuance of debt/assumption of liabilities - (300,000)
----------- --------
Cash paid $ - $150,000
=========== ========
See accompanying notes to financial statements
F-6
Omni Medical Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 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 12,443,062 have been issued as of September 30, 2004 and 474,659
shares are to be issued as of September 30, 2004 for a total of
12,907,721 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
September 30, 2004
Note 3 STOCKHOLDERS' EQUITY
During the quarter ended June 30, 2004 the Company issued 99,309 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 $15,650.
During the six month period ended September 30, 2004, the Company issued
956,000 shares of restricted common stock to various consultants for
services to be performed over a term of 1 to 2 years. Management has
estimated the fair market value of the fees at $95,600, of which $23,221
have been expensed and the remaining $72,379 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 that
have been placed in escrow pending the completion of a loan agreement.
However, as of November 10, 2004 the terms of the agreement had not yet
been consummated.
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.
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 shares of its common
stock 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 three month period ended September 30, 2004 the Company's
President and Chief Executive Officer loaned the Company $29,500. The
loan is payable on demand, unsecured and interest free.
F-8
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 September 30, 2004.
--------------------------------------
During the quarterly period ended September 30, 2004, we recorded revenue of
$409,637, a 36.7% increase from revenue of $299,559 in the quarter ended
September 30, 2003.
Cost of sales totaled $250,514, versus $199,485 in the second fiscal quarter
of 2003. This increase is roughly commensurate with the amount of our revenue
increase.
During the second fiscal quarter of 2004, we recorded general and
administrative expenses of $270,051. These expenses totaled $226,603 in the
year-ago period.
Interest expense was $12,350 and $11,673 for the three-month period ended
September 30, 2004, and September 30, 2003, respectively.
For the three-month period ended September 30, 2004, we incurred a loss from
continuing operations of $128,883, as compared to a loss of $138,202 for the
three-month period ended September 30, 2003.
The reasons for the fluctuations from the three months ended September 30,
2003, to the three months ended September 30, 2004, are as discussed below
under the subheading "Six months ended September 30, 2004."
Six months ended September 30, 2004.
------------------------------------
Our revenue totaled $807,505 in the six months ended September 30, 2004, as
compared to revenue of $379,839 in the prior year period. This increase of
approximately 113% is principally due to our acquisition of Medical Billing
Management, Inc. ("MBM") on May 30, 2003. Cost of sales also rose
significantly, to $532,733 in the current period, from $204,474 in the six
months ended September 30, 2004. Again, this increase is principally the
result of our acquisition of MBM.
General and administrative expenses totaled $516,097 in the six month period
ended September 30, 2004. These expenses were $309,547 in the year-ago
period. This increase is primarily due to our acquisition of MBM, as well as
increases in consulting services fees.
During the six month periods ended September 30, 2004, and 2003, interest
expense totaled $23,818 and $17,978, respectively.
Net loss during the six months ended September 30, 2004, was $270,748, versus
$185,636 in the period ended September 30, 2003.
CAPITAL RESOURCE REQUIREMENTS
LIQUIDITY
As of September 30, 2004, Omni's working capital surplus was $23,726.
Our cash at September 30, 2004 was $931.
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 September 30, 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 September 30, 2004 $97,448 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.
----------------------------------------------------------------------
On August 10, 2004, we issued 679,070 "unregistered" and "restricted" shares
to Langley Park Investments PLC, a corporation organized under the laws of
England and Wales ("Langley Park"), pursuant to the terms of our Stock
Purchase Agreement with Langley Park, dated July 14, 2004. The terms of the
Stock Purchase Agreement were disclosed in our Quarterly Report for the
quarterly period ended June 30, 2004, which was filed with the Securities and
Exchange Commission on August 20, 2004. We believe that the offer and sale of
these securities was exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to
Regulation S of the Securities and Exchange Commission.
On September 7, 2004, we issued 600,000 "unregistered" and "restricted" shares
of common stock to our President and Chief Executive Officer as payment of
salary, interest and penalties totaling $137,500. We believe that the offer
and sale of these securities was exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof and Regulation D of the
Securities and Exchange Commission and from similar state registration
exemptions.
On September 28, 2004, we issued 50,000 "unregistered" and "restricted" shares
of our common stock to our Vice President and Secretary, John Globoker, as an
employee bonus. On the same date, we issued 220,000 such shares to Peter
Schlosser as compensation for investment banking services, and an additional
200,000 such shares to Robert Matheson in consideration of corporate
consulting services. We believe that the offer and sale of these securities
was exempt from the registration requirements of the Securities Act pursuant
to Section 4(2) thereof and Regulation D of the Securities and Exchange
Commission and from similar state registration exemptions.
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 and Reports on Form 8-K.
-------------------------------------------
(a) Exhibits.
31 302 Certification of Arthur D. Lyons.
32 906 Certification.
(b) Reports on Form 8-K.
None.
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: Nov. 17, 2004 /s/ Arthur D. Lyons
-------------- --------------------
Arthur D. Lyons, President,
Treasurer and Director
Date: Nov. 17, 2004 /s/ John Globoker
-------------- ------------------
John Globoker, Vice President,
Secretary and Director