-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L+lUJ0p3A8YemzwxQVhbBVmnm2aomSfkm7hXFS6xKipNWt8AlpfgwirYMuYAw6rl JSzqFgefZ7zXxQg1SURSaQ== /in/edgar/work/0000950170-00-001874/0000950170-00-001874.txt : 20001121 0000950170-00-001874.hdr.sgml : 20001121 ACCESSION NUMBER: 0000950170-00-001874 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OMNICOMM SYSTEMS INC CENTRAL INDEX KEY: 0001034592 STANDARD INDUSTRIAL CLASSIFICATION: [7389 ] IRS NUMBER: 113349762 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-25203 FILM NUMBER: 773507 BUSINESS ADDRESS: STREET 1: 3250 MARY STREET STREET 2: SUITE 402 CITY: MIAMI STATE: FL ZIP: 33133 BUSINESS PHONE: 7184693132 MAIL ADDRESS: STREET 1: 3250 MARY STREET STREET 2: SUITE 307 CITY: MIAMI STATE: FL ZIP: 33133 FORMER COMPANY: FORMER CONFORMED NAME: CORAL DEVELOPMENT CORP DATE OF NAME CHANGE: 19970225 10QSB 1 0001.txt FORM 10QSB SECURITIES AND EXCHANGE COMISSION Washington, D.C. 20549 FORM 10-QSB [Mark One} [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended SEPTEMBER 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 ------- 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 September 30, 2000: 7,304,729 common stock $.001 par value, 4,356,948 preferred stock no par value. OMNICOMM SYSTEMS, INC. Part I - Financial Information Page - ------------------------------ ---- Item 1. Consolidated Balance Sheet - September 30, 2000 and December 31, 1999 1 Consolidated Statements of Shareholders' Equity - 2-5 January 1, 1999 to September 30, 2000 Consolidated Statements of Operations - Three and nine months ended September 30, 2000 and 1999 6 Consolidated Statement of Cash Flows - Nine months ended September 30, 2000 and 1999 7-8 Notes to Financial Statements 9-14 Items 2. Managements' Discussion and Analysis of Financial Condition and Results 15-18 Part II - Other Information 18 Item 1. Legal Proceedings: 18 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: None Item 6. Exhibits and Reports on Form 8-K 18 Signatures 19 Exhibit 27.1 Financial Data Schedule 20 OMNICOMM SYSTEMS, INC --------------------- FINANCIAL STATEMENTS -------------------- SEPTEMBER 30, 2000 ------------------ I N D E X --------- Page ---- CONSOLIDATED BALANCE SHEETS 1 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) 2-4 CONSOLIDATED STATEMENTS OF OPERATIONS 5 CONSOLIDATED STATEMENTS OF CASH FLOWS 6-7 NOTES TO THE FINANCIAL STATEMENTS 8-13 OMNICOMM SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS
ASSETS ------ September 30 December 31, 2000 1999 (Unaudited) ------------------------------------ CURRENT ASSETS Cash $ 3,789 $ 1,127,263 Accounts receivable 46,869 8,458 Inventory 4,670 10,166 Prepaid expenses 12,494 -0- ----------- ----------- Total current assets 67,822 1,145,887 ----------- ----------- Property and equipment, net 584,349 353,183 ----------- ----------- OTHER ASSETS Equity investment in Medical Networks EMN, at cost 335,000 -0- Shareholder loans -0- 3,406 Intangible assets, net 105,939 169,629 Goodwill, net 118,916 237,832 Other assets 39,802 26,960 ----------- ----------- TOTAL ASSETS $ 1,251,828 $ 1,936,897 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) ---------------------------------------------- CURRENT LIABILITIES Accounts payable and accrued expenses $ 1,222,877 $ 284,481 Notes payable - current 512,500 177,500 Deferred revenue 39,376 -0- Sales tax payable -0- 1,818 ----------- ----------- Total current liabilities 1,774,753 463,799 ----------- ----------- Notes payable - long term - - Convertible notes 462,500 862,500 ----------- ----------- TOTAL LIABILITIES 2,237,253 1,326,299 ----------- ----------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY (DEFICIT) Preferred stock - 10,000,000 shares authorized, 4,356,948 and 4,117,500 issued and 4,002,265 3,872,843 outstanding, respectively at par Common Stock - 20,000,000 shares authorized, 7,304,729 and 3,344,066 issued and outstanding, respectively, at $.001 par value 7,326 3,344 Additional paid in capital 2,848,721 238,007 Retained earnings (deficit) (7,549,285) (2,652,644) Treasury stock, cost method, 20,951 shares (293,312) -0- Stock subscriptions receivable (1,140) (850,952) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (985,425) 610,598 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 1,251,828 $ 1,936,897 =========== ===========
The accompanying notes are an integral part of these financial statements. OMNICOMM SYSTEMS, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD JANUARY 1, 1999 TO SEPTEMBER 30, 2000
5% Series A Convertible ----------------------- Common Stock Additional Preferred Stock Retained ------------ ---------- --------------- -------- Number $ 0.001 Paid In Number Earnings Subscription Treasury ------ ------- ------- ------ -------- ------------ -------- of Shares Value Capital of Shares $0.00 Par (Deficit) Receivable Stock --------- ----- ------- --------- --------- --------- ---------- ----- January 1, 1998 1,002,250 $ 1,002 $ -0- -0- $ -0- $ (16,040) $ (815) $ -0- Issuance of common stock 199,750 200 (137) Acquisition of Education Navigator, Inc. 141,000 141 132,213 Net (loss) for year ended December 31, 1998 (295,367) --------- ----- ------- --------- --------- --------- ---------- ----- Balances at December 31, 1998 1,343,000 1,343 132,213 - - (311,407) (952) Issuance of common stock 250,000 250 Issuance of common stock for services 86,400 86 56,059 Issuance of common stock 300,000 300 2,700 Issuance of common stock for services 68,000 68 44,132 Issuance of common stock 1,296,666 1,297 2,903 Issuance of preferred stock, net of $134,590 issuance costs 4,117,500 3,872,843 (850,000) Total ----- Shareholders' ------------- Equity ------ (Deficit) --------- January 1, 1998 $ (15,853) Issuance of common stock 63 Acquisition of Education Navigator, Inc. 132,354 Net (loss) for year ended December 31, 1998 (295,367) --------- Balances at December 31, 1998 (178,803) Issuance of common stock 250 Issuance of common stock for services 56,145 Issuance of common stock 3,000 Issuance of common stock for services 44,200 Issuance of common stock 4,200 Issuance of preferred stock, net of $134,590 issuance costs 3,022,843
OMNICOMM SYSTEMS, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD JANUARY 1, 1999 TO SEPTEMBER 30, 2000
5% Series A Convertible ----------------------- Common Stock Additional Preferred Stock Retained ------------ ---------- --------------- -------- Number $ 0.001 Paid In Number Earnings Subscription Treasury --------- ------- ------- ------ -------- ------------ -------- of Shares Value Capital of Shares $0.00 Par (Deficit) Receivable Stock --------- ------- ------- --------- --------- --------- ---------- ----- Net loss for the year ended December 31, 1999 (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) Issuance of common stock for services 40,000 40 89,960 Issuance of common stock 284,166 284 Exercise of stock options 1,025,895 1,026 297,024 Purchase of treasury stock in connection with stock appreciation rights (20,951) (293,312) Payment of subscription receivable 850,000 Acquisition of WebIPA, Inc. 1,200,000 $ 1,200 $ 3,833 Issuance of preferred stock 146,000 146,000 Issuance costs (206,750) Conversion of convertible notes Total ----- Shareholders' ------------- Equity ------ (Deficit) --------- Net loss for the year ended December 31, 1999 (2,341,237) ---------- Balances at December 31, 1999 $ 610,598 Issuance of common stock for services 90,000 Issuance of common stock 284 Exercise of stock options 298,050 Purchase of treasury stock in connection with stock appreciation rights (293,312) Payment of subscription receivable 850,000 Acquisition of WebIPA, Inc. 5,033 Issuance of preferred stock 146,000 Issuance costs (206,750) Conversion of convertible notes
OMNICOMM SYSTEMS, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD JANUARY 1, 1999 TO SEPTEMBER 30, 2000
5% Series A Convertible ----------------------- Common Stock Additional Preferred Stock Retained ------------ ---------- --------------- -------- Number $ 0.001 Paid In Number Earnings Subscription Treasury ------ ------- ------- ------ -------- ------------ -------- of Shares Value Capital of Shares $0.00 Par (Deficit) Receivable Stock --------- ----- ------- --------- --------- --------- ---------- ----- payable 320,000 $ 320 $399,680 Exercise of stock options 20,000 $ 20 $ 15,980 Exercise of stock warrants 481,834 $ 482 $963,186 Exercise of stock warrants 187,954 $ 188 $ - $ (188) Conversion of preferred stock to common stock 66,667 $ 67 $ 99,933 (100,000) $(100,000) Conversion of notes payable to common stock 91,608 $ 92 $206,026 Issuance of common stock for services 70,990 $ 71 $188,784 Issuance of common stock, net of issuance 192,500 $ 192 $346,308 costs of $38,500 Issuance of preferred stock for services 126,781 $ 190,172 Conversion of notes payable to preferred stock 66,667 $ 100,000 Net (loss) for the Nine months ended September 30, 2000 (4,896,641) --------- ----- ------- --------- --------- ---------- ---------- ----- Total ----- Shareholders' ------------- Equity ------ (Deficit) --------- payable 400,000 Exercise of stock options 16,000 Exercise of stock warrants 963,668 Exercise of stock warrants - Conversion of preferred stock to common stock (0) Conversion of notes payable to common stock 206,118 Issuance of common stock for services 188,855 Issuance of common stock, net of issuance 346,500 costs of $38,500 Issuance of preferred 190,172 stock for services Conversion of notes payable to preferred stock 100,000 Net (loss) for the Nine months ended September 30, 2000 (4,896,641) ----------
OMNICOMM SYSTEMS, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD JANUARY 1, 1999 TO SEPTEMBER 30, 2000
5% Series A Convertible ----------------------- Common Stock Additional Preferred Stock Retained ------------ ---------- --------------- -------- Number $ 0.001 Paid In Number Earnings Subscription Treasury ------ ------- ------- ------ -------- ------------ -------- of Shares Value Capital of Shares $0.00 Par (Deficit) Receivable Stock --------- ----- ------- --------- --------- --------- ---------- ----- Balances at September 30, 2000 7,304,729 $ 7,326 $2,848,721 4,356,948 $4,002,265 $(7,549,285) $ (1,140) $ (293,312) ========= ======= ========== ========= ========== =========== ========= ========== Total ----- Shareholders' ------------- Equity ------ (Deficit) --------- Balances at September 30, 2000 $ (985,425) ==========
The accompanying notes are an integral part of these financial statements. OMNICOMM SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the nine months ended For the three months ended September 30 September 30 --------------------------- ---------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Revenue - sales, net $ 51,914 $ 1,156,937 $ 11,154 $ 244,536 Cost of sales 43,436 821,803 (3,088) 187,279 -------- ----------- -------- --------- Gross margin 8,478 335,134 14,242 57,257 -------- ----------- -------- --------- Other expenses Salaries, benefits and related taxes 2,373,022 426,067 861,694 194,801 Rent 203,250 44,903 40,842 17,349 Consulting - medical advisory 117,667 159,345 28,667 159,345 Consulting - marketing sales 83,033 198,780 6,000 (11,322) Consulting - product development 59,365 6,036 22,945 6,036 Legal and professional fees 533,047 84,301 127,069 13,027 Travel 331,671 206,234 21,228 100,544 Telephone and internet 167,821 29,613 26,474 20,135 Factoring fees -0- 4,571 -0- 71 Selling, general and administrative 527,362 206,242 119,840 52,461 Interest expense, net 62,492 51,077 20,512 21,638 Depreciation and amortization 291,468 224,176 96,999 84,780 -------- ----------- -------- --------- Total other expenses 4,750,198 1,641,345 1,372,270 658,865 (Loss) before taxes and preferred dividends (4,741,720) (1,306,211) (1,358,028) (601,608) Income tax expense (benefit) -0- -0- -0- -0- Preferred stock dividends (154,921) -0- (53,353) -0- -------- ----------- -------- --------- Net (loss) $(4,896,641) $ (1,306,211) $ (1,411,381) $ (601,608) =========== ============ ============ ========== Net (loss) per share $ (0.82) $ (0.79) $ (0.21) $ (0.32) =========== ============ ============ ========== Weighted average number of shares outstanding 5,975,431 1,655,612 6,782,576 1,895,247 =========== ============ ============ ==========
The accompanying notes are an integral part of these financial statements. OMNICOMM SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the nine months ended September 30 ---------------------------------- 2000 1999 ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) $ (4,896,641) $(1,306,211) Adjustment to reconcile net loss to net cash provided by (used in) operating activities Common stock issued for services 278,855 -0- Preferred stock issued for services 190,172 -0- Accrued placement agent fee (38,500) -0- Depreciation and amortization 291,468 224,176 Changes in operating assets and liabilities, net of effects of acquisition of Education Navigator, Inc. (EdNav) Accounts receivable (38,411) 42,002 Inventory 5,496 3,082 Due from placement agent -0- -0- Prepaid expenses (12,494) -0- Shareholder loans 3,406 -0- Other assets (12,842) 2,500 Accounts payable and accrued expenses 938,396 (146,167) Sales tax payable (1,818) (28,505) Deferred revenue 39,376 -0- Due to factoring agent -0- (139,012) ------------ ----------- Net cash provided by (used in) operating activities (3,253,537) (1,348,135) ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES Equity investment in European Medical Networks (335,000) -0- Purchase of WebIPA 5,033 -0- Purchase of property and equipment (333,911) (222,808) ------------ ----------- Net cash provided by (used in) investing activities (663,878) (222,808) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from convertible notes -0- 742,875 Proceeds from notes payable 680,000 -0- Proceeds from the issuance of preferred stock, net of issuance costs 789,250 1,244,910 Issuance of common stock 385,284 103,595 Proceeds from stock warrant exercise 963,668 -0- Proceeds from stock option exercise 20,739 -0- Payments on notes payable (45,000) (377,500) ------------ ----------- Net cash provided by financing activities 2,793,941 1,713,880 ------------ ----------- Net increase (decrease) in cash and cash equivalents (1,123,475) 142,937 Cash and cash equivalents at beginning of period 1,127,263 44,373 ------------ ----------- Cash and cash equivalents at end of period $ 3,789 $ 187,310 ============ =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Income taxes $ -0- $ -0- ============ ========== Interest $ 26,736 $ 27,982 ============ ==========
Non Cash Investing and Financing Transactions; September 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- ============ 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.
The accompanying notes are an integral part of these financial statements. NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS ------------------------------------- OmniComm Systems, Inc. (the Company) was originally incorporated in Florida in February 1997. The Company provides Internet based database applications that integrate significant components of the clinical trial process, including the collection, compilation and validation of data over the Internet. The Company's primary products include TrialMaster(R) 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 share 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 5,975,431 and 1,655,612 for the nine months ended September 30, 2000 and 1999; and 6,782,576 and 1,895,247 for the three months ended September 30, 2000 and 1999 respectively. There were no differences between basic and diluted earnings per share. Options to purchase 4,049,669 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 shares as 5% Series A Convertible Preferred Stock. Each share 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. Advertising costs were $126,093 and $2,197 for the nine months ended September 30, 2000 and 1999 respectively. Reclassifications ----------------- Certain items from prior periods within the financial statements have been reclassified to conform to current period classifications. INTANGIBLE ASSETS AND GOODWILL ------------------------------ Included in Intangible Assets are the following assets: September 30, 2000 ------------------ Accumulated ----------- Cost Amortization ---- ------------ Covenant not to compete $120,000 $ 120,000 Software development costs 87,500 65,625 Organization costs 539 494 Debt acquisition costs 119,625 41,869 Trademarks 1,363 0 Patents 4,901 0 --------- --------- $333,928 $ 227,988 ========= ========= 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. Amortization expense was $30,000 on the covenant not to compete, and $21,875 for software development costs for the nine months ended September 30, 2000. 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. Amortization expense of the debt acquisition costs totaled $17,944 for the nine months ended September 30, 2000. Included in Goodwill, as a result of the EdNav acquisition at September 30, 2000 and December 31, 1999 is the cost of $475,665 and accumulated amortization of $356,749 and $237,833 respectively. The goodwill is being amortized ratably over a period of three years. Goodwill amortization totaled $118,916 for the nine months ended September 30, 2000. PROPERTY AND EQUIPMENT, AT COST ------------------------------- Property and equipment consists of the following:
September 30, 2000 December 31, 1999 ----------------------- ------------------------ Accumulated Accumulated ------------ ------------ Cost Depreciation Cost Depreciation --------- ------------ -------- ------------ Computer and Office equipment 440,858 $ 79,660 $195,340 $30,146 Leasehold Improvements 1,699 114 0 0 Computer software 228,262 48,596 167,220 1,034 Office furniture 49,093 7,193 23,070 1,267 --------- -------- -------- ------- $ 719,912 $135,563 $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 leasehold improvements, equipment and furniture and 3 years for software. Depreciation expense for the nine months ended September 30, 2000 and 1999 was $99,539 and $20,307 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 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, and $41,980 during the third quarter of 2000. As of September 30, 2000 the Company had issued 4,049,677 options to purchase common stock at prices ranging from $0.25 to $6.50 per share with expiration dates through December 16, 2010. 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 the 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 September 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 September 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: EQUITY INVESTMENT ----------------- European Medical Network (EMN) Investment, at cost -------------------------------------------------- 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, 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 renogiatiation the Company has resigned its seat on EMN's board and offered to sell its 10% interest back to EMN. The Company accounts for its investment in EMN under the cost method of accounting. NOTE 6: NOTES PAYBLE ------------ Education Navigator ------------------- As of September 30, 2000, the Company owed $157,500 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 notes the Company will pay a late charge equal to 5% of the $177,500 due at maturity, 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 September 30, 2000 the Company owed $355,000 under short-term notes payable. The notes bear interest at rates ranging from 8% to 12%. The average term of the promissory notes is 40 days. One of the notes is collateralized by common stock owned by an Officer of the Company, the other three notes are not collateralized. The note holders were granted stock warrants in the Company at a price of $2.25 per share. As of September 30, 2000 the Company was in default on the two of the notes with face value amounts of $200,000 and principal owed of approximately $175,000. 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 September 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 $ 38,221 2001 142,341 2002 139,965 2003 0 2004 0 -------- Total $320,527 ========
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 September 30, 2000 and December 31, 1999, respectively, from a shareholder. The interest rate was 6% annually. NOTE 10: 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 11: INCOME TAXES ------------ Income taxes are accrued at statutory US and state income tax rates. Income tax expense is as follows: 9/30/00 9/30/99 Current tax expense (benefit): Income tax at statutory rates $ -0- $ -0- Deferred tax expense (benefit): Amortization of goodwill and Covenant (72,458) (25,038) Operating loss carryforward (1,792,607) (10,154) ------------ ----------- 1,865,065 35,192 Valuation allowance (1,865,065) (35,192) ------------ ----------- Total tax expense (benefit) $ -0- $ -0- ============ =========== The tax effect of significant temporary differences, which comprise the deferred tax assets are as follows: 9/30/00 12/31/99 Deferred tax assets: Amortization of intangibles $ 226,120 $153,662 Operating loss carryforwards 2,716,356 923,749 ----------- ----------- Gross deferred tax assets 2,942,476 1,077,411 Valuation allowance (2,942,476) (1,077,411) ----------- ----------- Net deferred tax asset $ -0- $ -0- ----------- ----------- NOTE 12: INTERIM FINANCIAL REPORTING --------------------------- The unaudited financial statements of the Company for the period from January 1, 2000 to September 30, 2000 and January 1, 1999 to September 30, 1999 have been prepared by management from the books and records of the Company, and reflect, in the opinion of management, all adjustments necessary for a fair presentation of the financial position and operations of the Company as of the period indicated herein, and are of a normal recurring nature. 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 NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999 Revenues: Total revenues decreased to $51,914 from $1,156,937 for the nine months ended September 30, 2000 compared to the corresponding period in fiscal year 1999. The substantial decrease in revenue can be attributed to the Company changing its focus from computer systems integration to the development and marketing of Internet based database products for the clinical trial industry. All of the Company's revenue for 1999 can be attributed to its systems integration business. The Company has earned approximately $4,167 in revenue from its clinical trial operations during fiscal 2000. The Company anticipates that substantially all of its future revenues will come from the sale and servicing of its Internet based solutions to the clinical trial industry. Revenue sources will include short and long-term consulting engagements associated with the Company's on-going pharmaceutical and health care industry clients. Cost of Sales: Total cost of sales decreased to $43,436 from $821,803 for the nine months ending September 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 to the development and marketing of the TrialMaster 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 anticipates that its cost of sales will increase as it increases revenues generated from its clinical trial operations. Other Expenses: Salaries and Wages. Salaries and wages increased to $2,373,022 from $426,067 for the nine month period ending September 30, 2000 compared to the corresponding period in fiscal year 1999. The Company currently has twenty seven employees compared to fifteen 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 and WebIPA systems. Selling, General and Administrative. Selling, general and administrative expenses which includes; rent, telephone and Internet expenses and travel, increased to $1,230,104 from $491,563 for the first nine months of the fiscal year 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 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 nine 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 $533,047 from $84,301 for the first nine 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 an investment bank in conjunction with the Company's attempt to raise capital during the first half of fiscal 2000. Independent Consultants. Independent consulting expenses decreased to $260,065 from $364,161 for the nine months ended September 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 an increase in Product Development Consulting Fees. The Company retained the services of independent programmers to assist in finalizing certain software issues related to its software applications. 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 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 $3,789 from $1,127,263 during the first nine months of fiscal year 2000. The decrease can be attributed to the losses incurred during the first nine months of fiscal 2000, the Company's investment in European Medical networks of $335,000, and the purchase of property and equipment offset by the receipt of equity financing received from the issuance of Series A Convertible Preferred Convertible Stock, from the exercise of common stock warrants associated with the Series A Preferred shareholders, and from funds received through bridge financing in the form of interest bearing debt. The Company generated a loss of $4,896,641 from operations during the first nine months of fiscal year 2000 compared to a loss of $1,306,211 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 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. The Company's primary capital requirements are for daily operations and for the continued development and marketing of TrialMaster 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 September 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 SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999 Revenues: Total revenues decreased to $11,154 from $244,536 for the three months ended September 30, 2000 compared to the corresponding period in fiscal year 1999. This substantial decrease in revenue can be attributed to the Company moving 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 an Internet development and marketing oriented business had been completed by the end of fiscal 1999. All of the Company's revenue for 1999 were attributable to its systems integration business. The Company earned approximately $4,167 in revenue from its clinical trial oriented businesses during the three months ended September 30, 2000. Cost of Sales: Total cost of sales decreased to $(3,088) from $182,279 for the three months ending September 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 to the development and marketing of the TrialMaster Internet and WebIPA systems. The Company experienced a decrease in product and service revenues in connection with the change in its strategic focus and therefore a corresponding decrease in cost of goods sold. The Company does not anticipate any substantial increases in the cost of sales from its computer systems integration business. Other Expenses: Salaries and Wages. Salaries and wages increased to $861,694 from $194,801 for the three month period ending September 30, 2000 compared to the corresponding period in fiscal year 1999. The Company currently has twenty seven employees compared to fifteen 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 $208,384 from $190,560 for the three months ended September 30, 2000 compared to the corresponding period in fiscal year 1999. The 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 and WebIPA systems. The Company experienced a decrease in its, travel expenses as it worked to limit its operating expenses during the quarter. The Company incurred slightly 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 September 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 $127,069 from $13,027 for the three months ended September 30, 2000 compared to the comparable period in fiscal 1999. The increase is primarily attributable to investment banking and financial advisory fees paid to an investment bank in conjunction with the Company's attempt to raise capital during the first half of fiscal 2000. Independent Consultants. Independent consulting expenses decreased to $57,612 from $154,059 for the three months ended September 30, 2000 compared to the corresponding period in fiscal year 1999. The decrease can be attributed to a decrease in Medical Advisory fees offset by an increase in Product Development Consulting Fees. The Company 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. 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. The parties have reached a settlement of their claims and are in the final stages of executing that settlement. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data Schedule (b) Reports on Form 8-K 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 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 June 30, 2000 the company filed a current report on Form 8-K dated June 30, 2000 reporting items 5 and 7 in connection with 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 as Director of the Company. On September 20, 2000 the company filed a current report on Form 8-K dated July 31, 2000 reporting items 5 and 7 in connection organizational changes occurring on that date. The Company announced that David Ginsberg, D.O. had been named President and CEO. The Company also announced that Peter S. Knezevich had resigned as a Director of the Company as of August 1, 2000. The Company announced at the same time the closing of its wholly owned European subsidiary, OmniTrial B.V.. On September 5, 2000 OmniTrial applied for bankruptcy in The Netherlands and a Trustee was appointed by a Dutch bankruptcy court to liquidate its assets. 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: November 20, 2000 /s/ David Ginsberg, D.O. ------------------------ David Ginsberg,D.O. President and Chief Executive Officer /s/ Ronald T. Linares --------------------- Ronald T. Linares Vice President and Chief Financial and Chief Accounting Officer EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- 27.1 Financial Data Schedule EX-27.1 2 0002.txt
5 9-MOS DEC-31-2000 SEP-30-2000 3,789 0 46,869 0 4,670 (131,665) 584,349 135,563 1,251,828 1,774,753 0 0 4,002,265 2,855,047 (7,843,737) 1,251,828 51,914 51,914 43,436 43,436 4,678,706 0 62,492 (4,741,720) 0 (4,741,720) 0 0 0 (4,896,641) (0.82) (0.82)
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