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 June 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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
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(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:
June 30, 2005
49,944,445
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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
June 30, 2005
Omni Medical Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheet
June 30, 2005
ASSETS
Current assets:
Cash and cash equivalents $ -
Accounts receivable, net, including unbilled amounts of
approximately $14,000 1,773,002
Short-term investments, at fair value 111,091
Employee advances 5,317
Prepaid expenses 55,587
-----------
Total current assets 1,944,997
Property & equipment, net 1,726,703
Other assets:
Deposits 7,763
Deferred financing costs 25,000
Goodwill 3,493,245
Intangible assets, net 1,886,117
-----------
Total other assets 5,412,125
-----------
TOTAL ASSETS $ 9,083,825
===========
See notes to condensed consolidated financial statements
F-2
Omni Medical Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheet [continued]
June 30, 2005
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 533,292
Bank overdraft 22,989
Accrued expenses 2,150,106
Line of credit 160,080
Notes payable, current portion 3,181,481
-----------
Total current liabilities 6,047,948
Convertible debt 1,315,582
Notes payable 2,837,247
Notes payable, net of current portion (3,181,481)
-----------
Total long-term liabilities 971,348
Total liabilities 7,019,296
Minority interest (179,047)
Stockholders' equity:
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; 49,944,445 issued and outstanding 49,944
Common stock to be issued under reorganization agreement
474,659 shares 475
Capital in excess of par value 6,004,900
Unrealized loss on investment (167,882)
Accumulated deficit (3,643,861)
-----------
Total stockholders' equity 2,243,576
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,083,825
===========
See notes to condensed consolidated financial statements
F-3
Omni Medical Holdings, Inc.
Unaudited Condensed Consolidated Statements of Operations
For the three month periods ended June 30, 2005 and 2004
2005 2004
Revenue $ 1,493,604 $ 397,867
Cost of sales 902,383 282,219
--------- ---------
Gross operating profit 591,221 115,648
General and administrative expenses 1,115,132 246,045
--------- ---------
Income (loss) from operations (523,911) (130,397)
Other income (expense):
Interest income - -
Interest expense (121,661) (11,468)
--------- ---------
Total other income (expense) (121,661) (11,468)
--------- ---------
Loss from operations before minority
interest (645,572) (141,865)
Minority interest 28,804 -
--------- ---------
Loss from operations before
income taxes (616,768) (141,865)
Provision for income taxes - -
--------- ---------
Net loss $(616,768) $(141,865)
========= =========
Other Comprehensive Income:
Unrealized gain (loss) on investments (29,454) -
--------- ---------
Total Comprehensive income (loss) $(646,222) $(141,865)
========= =========
Loss per share-basic and diluted $ (0.01) $ (0.01)
========= =========
Weighted average number of common shares
outstanding-basic and diluted 49,166,667 16,102,606
========== ==========
See notes to condensed consolidated financial statements
F-4
Omni Medical Holdings, Inc.
Unaudited Consolidated Statements of Cash Flows
For the three month periods ended June 30, 2005 and 2004
2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (616,768) $ (141,865)
Adjustments to reconcile net loss to net
cash used in operations:
Depreciation and amortization 202,086 51,112
Stock-based compensation expense - 3,366
Stock issued for services - 75,600
Minority interest (28,804) -
Changes in operating assets and
liabilities, net of effect of business
acquisition and disposition:
Accounts receivable (87,212) 13,525
Prepaid expenses 21,739 (67,741)
Accounts payable 189,512 53,124
Bank overdraft 22,989 -
Accrued expenses 258,491 (39,838)
------------- -----------
Net cash used in operating
activities (37,967) (52,717)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (96,569) (519)
Software development (97,004) -
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Net cash used in
investing activities (193,573) (519)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing (payments) on line of credit (3,373) 41,684
Proceeds from issuance of debt 250,000 -
Net payments of notes payable (29,936) (9,035)
Proceeds from the issuance of common stock - 14,650
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Net cash provided by financing
activities 216,691 47,299
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NET INCREASE (DECREASE) IN CASH (14,849) (5,937)
CASH AT BEGINNING OF PERIOD 14,849 6,140
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CASH AT END OF PERIOD $ 0 $ 203
============= ===========
See accompanying notes to financial statements
F-5
Omni Medical Holdings, Inc.
Consolidated Statements of Cash Flows [continued]
For the three month periods ended June 30, 2005 and 2004
2005 2004
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 64,132 $ 11,468
Cash paid for income taxes - -
BUSINESS ACQUISITIONS:
Fair value of assets acquired $ 1,357,006 $ -
Issuance of debt/assumption of liabilities (357,006) -
Common stock issued at acquisition (1,000,000)
----------- --------
Cash paid $ 0 $ 0
=========== ========
See accompanying notes to financial statements
F-6
Omni Medical Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2005
Note 1 BUSINESS, ORGANIZATION AND INTERIM FINANCIAL STATEMENTS
Business - Omni Medical Holdings, Inc. ("Omni"), a Utah corporation,
provides medical billing and transcription services, and electronic
medical record solutions to medical practitioners.
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 June 30, 2005 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 unaudited condensed
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10QSB and Item 310 (b) of
Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by accounting principles for complete financial
statements generally accepted in the United States of America. In the
opinion of management, the accompanying consolidated financial
statements contain all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the Company's financial
position as of June 30, 2005. There has not been any change in the
significant accounting policies of Omni Medical Holdings, Inc. for the
periods presented. 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, 2005.
Note 2 BUSINESS ACQUISITIONS
Effective March 1, 2005, Omni, entered into a share exchange agreement
("the agreement") with DataFuzion, Inc. a Colorado corporation and
provider of practice management, billing and collection services, and
electronic medical records solutions to medical practitioners. The
agreement calls for Omni to offer a shareholder exchange to the
DataFuzion shareholders in which they may transfer to Omni at closing
100% of the outstanding common stock of DataFuzion in exchange for
23,019,215 shares of common stock of Omni. The exchange will constitute
a 50% ownership of Omni for the shareholders of DataFuzion in the event
all shareholders of DataFuzion agree to exchange their respective common
shares. As of August 15, 2005 approximately 90% of the DataFuzion
shareholders had exchanged their shares for shares of Omni and Omni had
issued 21,772,966 shares of its common stock, with an additional 352,339
to be issued for a total issuance of 22,125,305 shares of common stock.
The following table summarizes the estimated fair values of the
DataFuzion assets acquired and liabilities assumed as of March 1, 2005,
the date of acquisition:
F-7
Omni Medical Holdings, Inc.
Notes to Consolidated Financial Statements
June 30, 2005
Note 2 BUSINESS ACQUISITIONS-[continued]
Cash $ 4,208
Accounts receivable, net 170,300
Property and equipment 1,545,547
Intangible assets 1,462,640
Other assets 26,470
Accounts payable (138,158)
Accrued expenses (1,206,843)
Notes payable (1,941,264)
Convertible debt (1,265,582)
Minority interest 134,268
Goodwill 3,420,945
-----------
Net assets acquired $ 2,212,531
===========
Effective April 15, 2005, the Company entered into an Stock Purchase
Agreement ("the Plum Creek agreement") whereby the Company acquired 100%
of the outstanding shares of Plum Creek Outpatient, Inc.,("Plum Creek")
an Illinois corporation and provider of medical supplies in exchange
for 1,000,000 shares of the Company's common stock that are "restricted
securities" as defined in Rule 144 of the Securities and Exchange
Commission. The Plum Creek agreement calls for a Revenue Bonus to be
paid to the sellers based on annual calculations of the combined revenue
of the Company and its affiliates relating to medical supplies during
two revenue bonus periods ending April 15, 2006 and 2007. The Company
also entered into a Put Option agreement whereby anytime during the two
year period from the date of acquisition the Company, at the request of
the seller, may be required to purchase some or all of the 1,000,000
issued shares at a price of $0.20 per share or issue additional shares
of the Company's common stock equal in number to the shortfall in
payment of the Put Price plus ten percent divided by the closing price
per share at the close of business on the last day of the payment
period.
The following table summarizes the estimated fair values of the Plum
Creek assets acquired and liabilities assumed as of April 15, 2005, the
date of acquisition:
Accounts receivable, net $ 426,960
Equipment 40,000
Accounts payable (5,000)
Accrued expenses (261,960)
---------
Net assets acquired $ 200,000
=========
F-8
Omni Medical Holdings, Inc.
Notes to Consolidated Financial Statements
June 30, 2005
Note 2 BUSINESS ACQUISITIONS-[continued]
On April 15, 2005 the Company also entered into an Asset Purchase
Agreement ("the Stat agreement") whereby the Company acquired the assets
of Stat Anesthesia, P.C., ("Stat") an Illinois corporation and medical
provider, in exchange for 4,000,000 shares of the Company's common stock
that were also "restricted securities" as defined in Rule 144 of the
Securities and Exchange Commission. Additionally, Stat signed an
Administrative Services Agreement with the Company in which the Company
will provide financial and administrative services for all of Stat's
operations. While the Company will have complete control over the
administrative and financial affairs of Stat, the Company will not be
involved in any way in the practice of medicine. The Stat agreement also
calls for a Revenue Bonus to be paid to the sellers based on annual
calculations of the combined revenue of the Company and its affiliates
relating to medical services during two revenue bonus periods ending
April 15, 2006 and 2007. The Company also entered into a Put Option
agreement whereby anytime during the two year period from the date of
acquisition the Company, at the request of the seller, may be required
to purchase some or all of the 4,000,000 issued shares at a price of
$0.20 per share or issue additional shares of the Company's common stock
equal in number to the shortfall in payment of the Put Price plus ten
percent divided by the closing price per share at the close of business
on the last day of the payment period.
The following table summarizes the estimated fair values of the Stat
assets acquired and liabilities assumed as of April 15, 2005, the date of
acquisition:
Accounts receivable, net $ 850,046
Equipment 40,000
Accrued expenses (90,046)
---------
Net assets acquired $ 800,000
=========
The DataFuzion, Plum Creek and Stat acquisitions were accounted for as
purchases and their results of operations are included in the Company's
financial statements from the date of acquisition.
The following proforma financial information presents results as if the
DataFuzion Plum Creek and Stat acquisitions had occurred at the beginning
of the three month periods ended June 30, 2005 and 2004:
2005 2004
Revenues $1,626,600 $1,410,890
Net loss (575,991) (54,144)
Basic and diluted loss per share $ (0.01) $ (0.01)
F-9
Omni Medical Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2004
Note 3 GOING CONCERN
The Company's financial statements for the periods ended June 30, 2005
and 2004 show incurred net losses of $616,768 and $141,865,
respectively, and has a working capital deficiency of $4,102,951, as of
June 30, 2005, raising substantial doubt about the company's ability to
continue as a going concern. Management's plans to address concerns
raised by this issue include:
a. Through the acquisition of Plum Creek Outpatient and administrative
services agreement with Stat Anesthesia, P.C., the Company believes it
has already acquired significant asset and adequate liquid assets for
operation. Furthermore, management believes these companies will provide
significant cash flow to provide for all corporate needs.
b. The Company also plans to raise additional capital and is working with
a number of financial sources to achieve this.
There is no assurance that these or any efforts will be successful.
However, management believes that these measures will enable the Company
to have adequate funds to support operations for the next twelve months.
F-10
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.
Overview:
Omni Medical Holdings (ONMH:OTCBB)provides a turn key back office suite of
products and services to doctors, clinics and hospitals throughout the
country. Omni continues to grow through its acquisition strategy and unique
combination of product offerings.
Omni Medical has positioned itself to offer a complete back office solution of
products and services for all medical practitioners.
Omni's DataFuzion subsidiary provides a complete line of integrated back-
office products including GE Centricity and Misys practice management and
electronic medical records solutions, and a proprietary web based decision
support reporting tools for physicians and hospitals (InfoBridgeTM. Our ASP
hosted products are designed to maximize practice performance by identifying
revenue enhancement and cost savings opportunities, while eliminating the
up front costs and ongoing expense of owning, upgrading, staffing and
maintaining multiple in-house operations and reporting systems.
When practitioners provide patient care, those actions must be documented,
usually by electronic dictation. Government and insurance regulations are such
that these important medical records, which effect patient health, must be in
readable form. Through our transcription division, this service can be
delivered to any practitioner in the world through our proprietary digital web
based system. All of our services are performed in the United States.
Medical billing and collections are the lifeblood of any healthcare facility,
with accurate and timely collections insuring an effective practice and high
standard of care. The billing process is automated through either of Omni's
Centricity or Misys based hubs. Our nearly twenty years of experience extends
to most medical areas, especially anesthesiology.
Omni's complete back office solution gives:
* New revenue opportunities to our customers;
* More streamlined workflow;
* Executive managers the ability to use disease management benchmarking data,
increasing revenue and providing better patient outcomes;
* Elimination of costly data errors;
* Ability to integrate hardware and software with other systems; and
* "Drill down" from multiple servers, and provides greater analytical
solutions.
The opportunities in the healthcare services market are enormous and the next
ten years will bring dramatic changes in how healthcare practitioners manage
and operate their practices. Omni Medical Holdings, along with its DataFuzion
subsidiary, is currently positioned to take advantage of those opportunities
now.
RESULTS OF OPERATIONS
Three months ended June 30, 2005.
---------------------------------
During the quarterly period ended June 30, 2005, we recorded revenue of
$1,493,604, an increase from revenue of $397,867 in the quarter ended June 30,
2004.
Cost of sales totaled $902,382, versus $282,219 in the first fiscal quarter
of 2005.
During the first fiscal quarter of 2005, we recorded general and
administrative expenses of $1,115,132. These expenses totaled $246,045 in the
year-ago period.
Interest expense was $121,661 and $11,468 for the three-month period ended
June 30, 2005, and June 30, 2004, respectively.
For the three-month period ended June 30, 2005, we incurred a loss of
$616,768, as compared to a loss of $141,865 for the three-month period ended
June 30, 2004.
Revenue increased 275% during the three months ended June 30, 2005, compared
to the three month period ended June 30, 2004, due to the acquisitions of
DataFuzion, Stat Anesthesia and Plum Creek Outpatient. Expenses increased 353%
versus the prior year due to higher operating costs associated with
DataFuzion. This included a 295% increase in depreciation expense and an 10
fold increase in interest expense over the previous year. Net loss increased
335% for the previously stated reason. We expect continued high levels of
depreciation as DataFuzion takes a conservative accounting approach to its
equipment and intangible assets. Interest expense will continue to remain high
until such time as the convertible bondholders exchange their debt for equity.
CAPITAL RESOURCE REQUIREMENTS
LIQUIDITY
As of June 30, 2005, Omni's working capital deficit was $4,102,951.
Our cash and cash equivalents at June 30, 2005, was $0, and we had a bank
overdraft of $22,989.
We currently have a commitment under an Employment Agreement with one
of the former owners of McCoy Business Services 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 March 1, 2005, Omni entered into an Employment Agreement with
Arthur D. Lyons, its chief executive officer and Douglas Davis, President
through March 1, 2010. The agreement provides compensation at an annual base
salary of $180,000, a $1,000 a month auto allowance, fully paid health
insurance and a bonus of 1% of gross revenue, paid quarterly to each.
During December 2003, Omni entered into a Loan Agreement and Security
Agreement with Presidential Financial Corporation allowing Omni 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 June 30, 2005, $160,080 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 effectively designed to ensure
that information required to be disclosed or filed by us is recorded,
processed or summarized, within the time periods specified in the rules and
regulations of the Securities and Exchange Commission. 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 April 2005, the Company entered into a Stock Purchase Agreement
whereby the Company acquired Plum Creek Outpatient, Inc. a provider of medical
supplies in exchange for 1,000,000 "restricted" shares of the Company's common
stock.
We issued all of these securities to persons who were either "accredited
investors," or "sophisticated investors" who, by reason of education, business
acumen, experience or other factors, were fully capable of evaluating the
risks and merits of an investment in our company; and each had prior access to
all material information about us. We believe that the offer and sale of
these securities were exempt from the registration requirements of the
Securities Act, pursuant to Sections 4(2) and 4(6) thereof, and Rule 506
of Regulation D of the Securities and Exchange Commission and from various
similar state 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.
-------------------
(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: 8/17/05 By: /s/ Arthur D. Lyons
--------- -----------------------------------
Arthur D. Lyons, CEO, Secretary
and Chairman of the Board
Date: 8/17/05 By: /s/ Douglas Davis
--------- -----------------------------------
Douglas Davis, President,
Treasurer and Director