U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
[ ] 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. 0-26177
OMNI MEDICAL HOLDINGS, INC.
(Name of Small Business Issuer in its Charter)
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UTAH 87-0425275
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(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:
September 30, 2003
10,760,840
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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.
Unaudited Consolidated Balance Sheet
September 30,
2003
ASSETS
Current assets:
Cash and cash equivalents $ 27,912
Accounts receivable, net, including unbilled amounts
of approximately, $123,000 230,215
Prepaid expenses 6,654
-----------
Total current assets 264,781
-----------
Property and equipment, net 214,695
Deferred financing costs 25,000
Goodwill 36,000
Intangible assets 314,114
-----------
$ 854,590
===========
LIABILITIES
Current liabilities:
Trade accounts payable $ 85,837
Accrued expenses 36,446
Notes payable, current portion 473,991
-----------
Total current liabilities 596,274
Notes payable, net of current portion 147,228
-----------
Total liabilities 743,502
-----------
Minority interest 20,482
SHAREHOLDERS' EQUITY
Common stock, par value $0.001 per share; authorized
50,000,000; issued and outstanding, 10,760,849 shares 10,761
Common stock to be issued, 4,146,872 4,147
Capital in excess of par value 1,629,005
Deferred compensation expense (35,105)
Accumulated deficit (1,518,202)
-----------
Total stockholders' equity 90,606
-----------
$ 854,590
===========
See notes to consolidated financial statements.
2
Omni Medical Holdings, Inc.
Unaudited Consolidated Statements of Operations
Three Months Ended Six Months Ended
September 30, September 30,
2003 2002 2003 2002
Revenue $ 299,559 $ 43,027 $ 379,839 $ 43,027
Cost of sales 199,485 17,619 204,474 17,619
---------- --------- --------- --------
Gross operating profit 100,074 25,408 175,365 25,408
General and administrative expenses 230,005 63,020 312,949 63,020
---------- --------- --------- --------
Loss from operations (129,931) (37,612) (137,584) (37,612)
Other income (expense):
Interest income - 226 260 226
Interest expense (11,673) (2,164) (17,978) (2,164)
---------- --------- --------- --------
Total other income (11,673) (1,938) (17,718) (1,938)
Loss from continuing operations
before minority interest (141,604) (39,550) (155,302) (39,550)
Minority interest 3,402 - 3,402 -
---------- --------- --------- --------
Loss from continuing operations (138,202) (39,550) (151,900) (39,550)
Loss from discontinued operations - (14,913) (33,736) (44,767)
---------- --------- --------- --------
Net loss $ (138,202) $ (54,463)$(185,636)$ (84,317)
========== ========= ========= ========
Loss per share basic and diluted:
Continuing operations $ (0.01) $ (a)$ (0.01)$ (a)
Discontinued operations - (a) (a) (a)
---------- --------- --------- --------
$ (0.01) $ (a)$ (0.01) $ (a)
========== ========= ========= ========
Weighted average number of common
shares outstanding 13,457,914 19,971,427 14,420,323 19,709,802
========== ========== ========== ==========
See notes to consolidated financial statements.
(a) Less than $0.01 per share.
3
Omni Medical Holdings, Inc.
Unaudited Consolidated Statement of Shareholders' Equity
Shares Additional
issued and to Amount Amount Paid-in
be issued Issued To be Issued Capital
Balances, April 1, 2003 20,620,247 $ 20,620 $ 0 $ 1,564,299
Disposition of subsidiary
(unaudited) (7,795,520) (7,795) 31,721
Sale of common stock pursuant
to private placements (unaudited) 92,216 92 44,908
Earned compensation expense
(unaudited) - - - -
Repurchase of dissenter's common
stock (unaudited) (9,222) (9) - (111)
-----------
12,907,721
Acquisition of Piezo on
September 5, 2003 (unaudited) 2,000,000 2,147 4,147 (11,812)
Net loss (unaudited) - - - -
----------- ------- ----------- -----------
Balances, September 30, 2003
(unaudited) 14,907,721 $10,761 $ 4,147 $ 1,629,005
=========== ======= =========== ===========
[CONTINUED]
Omni Medical Holdings, Inc.
Unaudited Consolidated Statement of Shareholders' Equity
Deferred Advance
compensation Accumulated receivable
expense deficit shareholder Total
Balances, April 1, 2003 $(41,111) $(1,332,566) $(24,708) $ 186,534
Disposition of subsidiary
(unaudited) 24,708 48,634
Sale of common stock pursuant
to private placements (unaudited) 45,000
Earned compensation expense
(unaudited) 14,799 14,799
Repurchase of dissenter's common
stock (120)
Acquisition of Piezo on
September 5, 2003 (unaudited) (8,793) (18,605)
Net loss (unaudited) (185,636) (185,636)
------- ----------- ---------- --------
Balances, September 30, 2003
(unaudited) $(35,105) $(1,518,202) $ 90,606
======= =========== ========== ========
See notes to consolidated financial statements.
4
Omni Medical Holdings, Inc.
Unaudited Consolidated Statements of Cash Flows
Six Months Ended
September 30,
----------------
2003 2002
Loss from continuing operations $ (151,900) $ (39,550)
Adjustments to reconcile net loss to net cash
used in continuing operations:
Stock-based compensation expense 14,799 13,334
Depreciation and amortization 36,688 -
Minority interest (3,402) -
Changes in operating assets and liabilities, net
of effects of business acquisition:
Accounts receivable (41,415) (57,986)
Prepaid expenses (6,654) -
Accounts payable 38,739 (71,953)
Accrued expenses 24,740 (7,855)
---------- ----------
Net cash used in continuing operations (88,405) (164,010)
---------- ----------
Net cash used in discontinuing operations (32,905) (39,783)
---------- ----------
Net cash used in operating activities (121,310) (203,793)
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (5,687) (45,270)
Payment for disposition of subsidiary, net (28,737) -
Payment for purchase of business (150,000) (65,000)
---------- ---------
Net cash used in investing activities (184,424) (110,270)
---------- ---------
Cash flows from financing activities:
Deferred financing costs (25,000) -
Payments of notes payable (19,695) (19,867)
Proceeds from issuance of debt 75,378 125,000
Proceeds from issuance of common stock 45,000 597,500
---------- ---------
Net cash provided by financing activities 75,683 702,633
---------- ---------
(Decrease) increase in cash and cash
equivalents (230,051) 388,570
Cash and cash equivalents:
Beginning of period 257,963 9,344
---------- ---------
End of period $ 27,912 $ 397,914
Supplemental disclosure of cash flow information:
Cash paid for interest for continuing
operations $ 9,891 $ 2,164
========== =========
Cash paid for interest for discontinued
operations $ 1,402 $ 18,652
========== =========
See notes to consolidated financial statements.
5
Supplemental disclosure of non-cash investing and
financing activities:
Conversion of debt to equity $ 45,000
Business acquisitions:
Fair value of assets acquired $ 450,000 $ 184,761
Issuance of debt/assumption of liabilities (300,000) (89,761)
Common stock issued at acquisition - (30,000)
---------- ---------
Cash paid $ 150,000 $ 65,000
========== =========
See notes to consolidated financial statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business, organization and interim financial statements:
Business:
Omni Medical Holdings, Inc. ("Omni"), a Nevada corporation, provides
medical billing and transcription services to medical practitioners in
Alabama, Mississippi and South Dakota.
Organization:
The Company was previously organized as Piezo Instruments, Inc. ("Piezo"),
a Utah corporation. Effective September 5, 2003, Piezo and Omni 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 in exchange for up to 16,000,000 newly issued
shares of common stock of Piezo, (of which 12,907,721 have been issued
through October 31, 2003, or approximately 87% of the post-Reogranization
Agreement outstanding securities of Piezo). The transaction was accounted
for as a reverse acquisition of Piezo by Omni. 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.
At the closing, and excluding the 16,000,000 shares exchanged for Omni, the
outstanding common stock of Piezo amounted to 2,000,000 shares, after
taking into account a 1 for 14.5 reverse split and the following
transactions: 1. In consideration of the closing of the Reorganization
Agreement, certain principal stockholders of Piezo (i) delivered 1,466,379
post-split shares of Piezo for cancellation, which included 225,000 post-
split shares of common stock underlying an option granted to one of the
canceling stockholders; and (ii) waived any registration rights that had
been granted to them or were applicable to any of the cancelled shares. In
exchange for the cancellation of these shares and the waiver of any
registration rights, Piezo issued an aggregate of 500,000 post-split newly
issued shares of common stock to the canceling stockholders. 2. Piezo
issued 293,104 shares of common stock to certain principal stockholders of
Piezo in exchange for services to be rendered under a six month consulting
agreement, resulting in consulting expense of approximately $8,800, of
which approximately $7,300 is deferred at September 30, 2003.
As of October 31, 2003, the deadline for completing the share exchange
transaction with Piezo, approximately 81% of Omni's outstanding shares had
been tendered to the Company in accordance with the instructions for
exchanging shares (8,760,849 shares were issued through September 30, 2003
and an additional 4,146,872 shares were available to be issued in October
2003). The other 19% had either dissented or had taken no action
whatsoever and continue to own a minority interest in the Company's
operating subsidiary.
Interim financial statements:
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB 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.
There has not been any change in the significant accounting policies of
Omni Medical Holdings, Inc. for the periods presented.
7
1. Business, organization and interim financial statements (continued):
Interim financial statements (continued):
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. These condensed consolidated financial statements
should be read in conjunction with a reading of the Omni consolidated
financial statements and notes thereto included in the Company's Form 8-K/A
filed with the Securities and Exchange Commission ("SEC") in November 2003
as well as the 2002 Piezo annual report filed on Form 10-KSB with the SEC.
In the opinion of Management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The results for these interim periods are not necessarily
indicative of results for the entire year.
2. Business acquisitions:
Effective May 30, 2003, Omni, through its wholly-owned subsidiary, Omni
Medical Services, Inc., ("OMS"), completed an asset purchase agreement with
Medical Billing Management, Inc. ("MBM"), a corporation based in the state
of Mississippi and a provider of medical billing and collection services to
medical practitioners. The aggregate purchase price was $450,000,
including $150,000 paid at closing, $75,000 payable on November 30, 2003
and $225,000 payable on May 31, 2004. The $225,000 payable on May 31, 2004
is subject to an adjustment which is to be calculated based on the amount
by which revenues for the year ending May 31, 2004 are greater or lesser
than a baseline amount.
The following table summarizes the estimated fair values of the assets
acquired as of May 30, 2003, the date of acquisition. The allocation of
the purchase price is subject to refinement.
Accounts Receivable, net $ 62,000
Furniture and equipment 78,000
Intangible asset customer list 310,000
------------
Net assets acquired $ 450,000
============
Effective July 10, 2002, Omni entered into an asset purchase agreement with
A&V Digital Transcription Services ("A&V"), a general partnership and
provider of medical transcription services based in the state of Alabama.
On September 4, 2002, Omni formed Omni Medical Services, Inc., (formerly
Mastel Precision Health Information Services, Inc. and a wholly owned
subsidiary of Omni) to operate the transcription services business acquired
from A&V.
The aggregate purchase price was $95,000, including $65,000 in cash,
assumption of liabilities of $90,000 and common stock valued at $30,000.
The following table summarizes the estimated fair values of the assets
acquired and the liabilities assumed at July 10, 2002, the date of
acquisition.
Current assets $ 8,000
Property, plant and equipment 109,000
Intangible asset customer list 32,000
Goodwill 36,000
---------
Total assets acquired 185,000
---------
Current liabilities (19,000)
Long-term debt (71,000)
---------
Total liabilities assumed (90,000)
---------
Net assets acquired $ 95,000
8
2. Business acquisitions (continued):
The MBM and A&V acquisitions were accounted for as purchases and their
results of operations are included in the Company's financial statements
from the dates of acquisition. Goodwill arising on the acquisition of A&V
is expected to be fully deductible for tax purposes. Intangible assets
(customer lists) acquired from MBM and A&V are expected to be amortized
over 5 years.
The following unaudited proforma financial information presents results as
if the MBM acquisition had occurred at the beginning of the respective
periods (the impact of the A&V acquisition on 2002 unaudited proforma
operating results was not significant).
Six months ended
September 30,
2003 2002
Revenues $ 432,845 $ 869,111
Net (loss) income $ (245,278) $ 19,416
Basic and diluted loss per share $ (0.02) *
* Less than $0.01 per share
3. 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
intraocular 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 approximately $49,000. The results of operations from MPSI
have been retroactively restated as discontinued operations.
4. Managements plans:
Omni financial statements for the years ended March 31, 2003 and 2002 (not
included herein) and for the six months ended September 30, 2003 and 2002
show that Omni has incurred net losses of $515,090, $186,720, $185,636 and
$84,317, respectively, and has a working capital deficiency of $331,491, as
of September 30, 2003. Management's plans to address concerns raised by
this issue includes:
a. The disposition of MPSI will allow the Company to concentrate on its
medical billing and transcription operations, which management believes
can be operated more profitably than MPSI. MPSI's operating losses for
the years ended March 31, 2003 and 2002 were approximately $325,000 and
$122,000, respectively.
b. Management expects that cash flows will increase as result of the
Company's disposition of MPSI and it's acquisition of transcription
businesses.
9
4. Managements plans (continued):
c. In early June, the company retained the services of Windstone Capital,
an investment banking firm in Phoenix, Arizona to raise capital for
additional acquisitions. A private placement offering began in early
November and management believes the firm will be successful in raising
$800,000, the maximum amount of the offering.
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.
5. COMMITMENTS:
In 2003, the Company retained the services of an investment banking firm to
raise capital for future acquisitions. Through September 30, 2003 the
Company has paid $25,000 in deferred financing costs which will be offset
against the future equity proceeds.
In conjunction with the MBM acquisition, Omni entered into an employment
agreement with one of MBM's former owners, guaranteeing employment with
Omni through May 30, 2004 at an annual salary of $50,000 plus a performance
based bonus.
Omni has signed letters of intent to acquire two medical transcription
businesses, one based in Kentucky and the other based in Iowa. The
Kentucky and Iowa businesses will cost $360,000 and $255,000,
respectively, of which approximately $270,000 is to be paid at closing and
the balances would be subject to earn out provisions over one to two years.
These acquisitions are expected to be financed by future equity capital.
6. Contingencies:
On October 1, 2003, certain minority shareholders of Omni, notified the
Company that they believe that Omni has taken actions that have diluted
their interests. These minority shareholders demanded the return of
certain assets or a substantial financial settlement to be reached within 15
days. These minority shareholders have notified the Company of their
intentions to make a filing with the American Arbitration Association
pursuant to the Agreement for the Exchange of Common Stock dated April 15,
2002 if the matter is not resolved within the 15 day time frame. No such
filing has been made and there have been no stated monetary damages claimed.
Management believes that the issue raised by these minority shareholders is
without merit and management intends to vigorously defend any action, if
filed. However, it is too early to determine the ultimate outcome of the
matter.
7. Basic and Diluted Loss Per Share
The Company determines basic and diluted loss per share in accordance with
SFAS No. 128, Earnings Per Share. The basic net loss per common share is
computed by dividing the net loss by the weighted average number of shares
outstanding during a period. Diluted net loss per common share is computed by
dividing the net loss, adjusted on an as if converted basis, by the weighted
average number of common shares outstanding plus potential dilutive
securities. For the three and six months ended September 30, 2003 and 2002,
there are no potential dilutive securities. Therefore, diluted loss per share
is equivalent to basic loss per share. During the three and six months ended
September 30, 2003, the weighted average number of shares includes the effect
of shares of common stock to be issued.
10
Item 2. Management's Discussion and Analysis or Plan of Operation.
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"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.
RECENT EVENTS
Omni Medical Holdings is in the business of providing medical services to
doctors, clinics and hospitals. Currently, we provide medical transcription,
billing and collection services. We are actively acquiring companies in these
industries as well as other medical services related areas.
Discussion of Corporate Restructuring
The past six months have been ones of great change for our Company. Effective
May 2003, we entered into an agreement with one of its officers and
shareholders whereby we agreed to exchange 100% of the common stock of MPSI
and $36,000 cash for all shares of common stock of our Company owned
individually or jointly by the officer and his wife, a total of 9,656,264
shares. As of April 30, 2003, the assets of MPSI had a carrying value of
$462,000 and MPSI's obligations and liabilities had a carrying value of
$532,000. Due to the related party nature of the transaction, no gain was
recognized and additional paid-in capital was increased by $34,000. The
results of operation from MPSI have been retroactively restated as
discontinued operations.
Effective May 30, 2003, we completed an asset purchase agreement with Medical
Billings Management Inc. ("MBM"), a corporation based in the state of
Mississippi. The aggregate purchase price was $450,000, including $150,000
paid at closing, a working capital loan of $75,000 payable on November 30,
2003 and $225,000 payable on May 31, 2004, (subject to an adjustment based on
actual revenues through May 2004).
In early June, we retained the services of Windstone Capital, an investment
banking firm in Phoenix, Arizona to raise capital for additional
acquisitions. A private placement offering began in early November and
management believes the firm will be successful in raising $800,000, the
maximum amount of the offering.
In early July, Mastel Precision, Inc. changed its name to Omni Medical
Holdings, Inc., a Nevada corporation. On September 3, the name was again
changed, this time to Omni Medical of Nevada. This was done in order to
facilitate the impending reorganization with Piezo Instruments, Inc.
Concurrent with the merger, Piezo changed its name to Omni Medical Holdings,
Inc.
10
Effective September 5, 2003, Piezo Instruments Inc. ("Piezo") (OTCBB: PEZO)
announced the closing of the acquisition of a majority of the outstanding
securities of Omni Medical Holdings Inc., which changed its name to "Omni
Medical of Nevada Inc." on Sept. 3, 2003 ("Omni"). Terms of the agreement and
plan of reorganization provided for Piezo to issue up to 16,000,000 post-split
shares of its common stock to the shareholders of Omni for all of the
outstanding common stock of Omni. Piezo will attempt to complete the
acquisition of the remaining outstanding securities of Omni within the next 30
days. Piezo is the Registrant.
At the closing, and excluding the shares exchanged for Omni, the outstanding
common stock of Piezo amounted to 2,000,000 shares, after taking into account
a 1 for 14.5 reverse split and the following transactions: 1. In consideration
of the closing of the Reorganization Agreement, certain principal stockholders
of Piezo (i) delivered 1,466,379 post-split shares of Piezo for cancellation,
which included 225,000 post-split shares of common stock underlying an option
granted to one of the canceling stockholders; and (ii) waived any registration
rights that had been granted to them or were applicable to any of the
cancelled shares. In exchange for the cancellation of these shares and the
waiver of any registration rights, Piezo issued an aggregate of 500,000 post-
split newly issued shares of common stock to the canceling stockholders. 2.
Piezo issued 293,104 shares of common stock to certain principal stockholders
of Piezo in exchange for services to be rendered under a six month consulting
agreement, resulting in consulting expense of approximately $8,800, of which
approximately $7,300 is deferred at September 30, 2003.
As of October 31, 2003, the deadline for completing the share exchange
transaction with Piezo, 81% of Omni's outstanding shares had been tendered to
the Company in accordance with the instructions for exchanging shares
(8,760,849 shares were issued through September 30, 2003 and an additional
4,146,872 shares were available to be issued in October 2003). The other 19%
had either dissented or had taken no action whatsoever and continue to own a
minority interest in the Company's operating subsidiary.
Omni Medical also announced the addition of Lance Weaver to the Board of
Directors effective October 1, 2003. Mr. Weaver is a local businessman and
stockholder in the company.
Discussion of Impending Acquisitions
Omni Medical Holdings, Inc. announced signed letters of intent for two
medical transcription acquisitions. One company, located in Kentucky, is
expected to add significant revenue in the coming year. Furthermore, it is
currently undergoing a $60,000 system upgrade to integrate the very latest in
transcription technology. Acquiring this technology, along with their 20 year
operating experience, will greatly enhance Omni's ability to deliver the
highest quality medical transcription service. Omni is also looking forward to
using this as a platform for additional acquisitions and product capability.
The second letter of intent is to acquire an Iowa based medical transcription
company. The operation in Iowa has a nine year history in providing
transcription services. This company will be merged with existing activities
and the Kentucky transcription company resulting in greater efficiencies and
economies of scale. This acquisition will increase our presence to five
states and increase revenue to nearly $3 million annually. Both acquisitions
are scheduled to close December 1, 2003.
The Kentucky company has a total purchase price of $360,000. One third of that
amount will be paid at closing. The balance will be subject to an earn out
over the following eight quarters. The Iowa company has a total purchase price
of $225,000. At closing, $150,000 will be paid with the balance subject to a
one year earn out provision. Both of these acquisitions are contingent upon
raising additional equity capital.
11
Results of Operations.
----------------------
For the six-month period ended September 30, 2003, we had revenues totaling
$380,000 compared to revenues of $43,000 for the six-month period ended
September 30, 2002. During the six-month period ended September 30, 2002,
revenues represented less than three months of transcription services due to
the acquisition of A&V becoming effective in July 2002. During the six-month
period ended September 30, 2003, A&V's revenues were for a full six
months, while the acquisition of MBM, effective May 30, 2003, accounted for
four months of medical billings revenue. During the three-month period ended
September 30, 2003, we had revenues totaling $300,000, comprised of revenues
from medical billings of $266,000 and revenues from transcription services of
$34,000. Our revenues during the comparable period in 2002 was $43,000, all
derived from transcription services.
Cost of sales for the six-month period ended September 30, 2003, was $204,000
compared to $18,000 during the same period in the prior year. Cost of sales
increased during the six months ended September 30, 2003 due to having six
months of transcription costs and four months of medical billings costs while
the same period in 2002 had only two full month's of transcription costs due
to the July acquisition of A&V. For the three-months ended September 30, 2003
and 2002, cost of sales was $199,000 and $18,000 respectively.
General and administrative expenses for the six months ended September 30,
2003, were $312,000 compared to $63,000 for the same period in 2002. Salaries
and benefits were $97,000 and $10,000 for the six-month periods ended
September 30, 2003 and 2002 respectively. The increase in salaries and
benefits is primarily due to increased personnel due to the acquisition of
MBM. Professional fees increased from $15,000 during the six months ended
September 30, 2002 to $90,000 for the same period in 2003 primarily due to
legal fees incurred due to the acquisitions of MBM and Piezo and the
accounting and audit costs for the fiscal year ended March 31, 2003. Lease
and rental costs increased from $6,000 for the six-month period ended
September 30, 2002 to $33,000 for the comparable period in 2003 due to the
fact that we are doing business in three states and incurring rent and
equipment lease costs to support the increased workforce. For the six months
ended September 30, 2003, we recorded amortization of $24,000 for the customer
lists acquired from the A&V and MBM acquisitions, while no amortization was
recorded for the same period in 2002.
General and administrative expenses for the three-month period ended September
30, 2003, were $230,000 compared to $63,000 for the comparable period in 2002.
Salaries and benefits were $72,000 for the three-month period ended September
30, 2003, compared to $10,000 for the same period in 2002 due to the
additional costs of the MBM employees.
Interest expense was $12,000 and $18,000 for the three-month and six-month
periods ended September 30, 2003, respectively, compared to $2,000 for both
the three-month and six-month periods ended September 30, 2002, due to the
interest bearing debt assumed from the A&V acquisition in July 2002 and
imputed interest on the MBM acquisition liabilities.
Liquidity and Capital Resources.
--------------------------------
As of September 30, 2003, our working capital deficit was $331,000, compared
to surplus of $113,000 as of March 31, 2003. Our cash balance decreased from
$258,000 at March 31, 2003, to $28,000 at September 30, 2003. The decrease of
$230,000 was primarily the result of utilizing cash to fund continuing
operating activities for the first half of the year of $88,000, cash used to
fund discontinued operations of $33,000, cash paid for the acquisition of MBM
of $150,000, net cash paid to the shareholders of MPSI of $29,000, and $25,000
of deferred financing costs, offset by $45,000 raised from the issuance of
common stock and $75,000 of proceeds from the working capital loan from MBM.
We currently have commitments under an employment agreement with one of the
former owners of MBM through May 30, 2004 guaranteeing annual compensation of
$50,000 plus a performance based bonus. We currently lease office space under
an operating lease for $6,000 per month, which terminates July 31, 2006.
To support the above activities and commitments, we will need to seek
additional financing including equity financing. With the assistance of
Windstone Capital, we are currently involved in offering a private placement
of securities. The offering calls for a 12% cumulative convertible
preferred shares with warrants, with a fixed conversion price. The maximum
offering amount is $800,000, and if all warrants are exercised, could
eventually total $3,000,000. It is anticipated that such financing should be
completed within 60 days.
Item 3. Controls and Procedures.
----------------------------------
A review and evaluation was performed by our Company's management, including
our Chief Executive Officer (the "CEO") and Chief Operating Officer (the
"COO"), of the effectiveness of the design and operation of our disclosure
controls and procedures as of a date within 90 days prior to the filing of
this quarterly report. Based on that review and evaluation, our CEO
and our COO have concluded that our Company's current disclosure controls and
procedures, as designed and implemented, were effective. There have been no
significant changes in our internal controls or in other factors that could
significantly affect our internal controls subsequent to the date of their
evaluation. There were no significant material weaknesses identified in the
course of such review and evaluation and, therefore, no
corrective measures were taken by us.
13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
----------------------------
None; not applicable.
Item 2. Changes in Securities and Use of Proceeds.
----------------------------------------------------
Effective as of September 5, 2003, our Company; Omni Medical of
Nevada, Inc., a Nevada corporation ("Omni"), and the stockholders of Omni (the
"Omni Stockholders"), executed an Agreement and Plan of Reorganization (the
"Reorganization Agreement"), whereby we agreed to acquire 100% of the issued
and outstanding shares of common stock of Omni in exchange for 16,000,000
post-split shares of our common stock or approximately 88.8% of the
post-Reorganization Agreement outstanding securities of our Company.
At the initial closing, and excluding the securities to be exchanged
for Omni's outstanding securities, the outstanding common stock of our Company
amounted to approximately 2,000,000 shares or approximately 11.1% of the
post-Reorganization Agreement outstanding common stock of our Company, after
taking into account (i) a reverse split on the basis of one for 14.5 shares
owned of our outstanding common stock; (ii) the issuance of an option to
acquire 225,000 of our post-split shares of "restricted securities" (common
stock); (iii) the cancellation of 1,466,379 post-split shares of our common
stock that were held by certain of our principal stockholders, that included
the 225,000 post-split shares of common stock underlying the option in the
preceding subparagraph; (iv) the issuance of an aggregate of 500,000
post-split newly issued shares of our "restricted securities" (common stock)
in consideration of the cancellation of such shares and the option referenced
in the two preceding subparagraphs and the waiver by the canceling
stockholders of any registration rights that had been granted to them or were
applicable to any of the cancelled shares or the option; and (v) the issuance
of (or the agreement to issue) an aggregate of 293,104 shares of our common
stock for and in consideration of non-capital raising services to be rendered
pursuant to a written Consulting Agreement during the period that will
commenced on the closing and will be effective for a period of six months
thereafter, and which shares shall be registered on Form S-8 of the Securities
and Exchange Commission promptly after the closing when we are "current" in
the filing of all of our reports that were required to be filed by us with the
Securities and Exchange Commission for the preceding 12 month period. For
more information on the Agreement and Plan see our Current Report on Form 8-K
dated September 5, 2003 and filed September 23, 2003. See Part II, Item 6.
Also, pursuant to the Reorganization Agreement, the current
officers and directors of Omni were designated to serve on the Board of
Directors of Piezo and as executive officers of Piezo until the next
respective annual meetings of the stockholders and the Board of Directors and
until their respective successors are elected and qualified or until their
prior resignations or terminations. Effective on September 5, 2003, they
were: Arthur D. Lyons, President, CEO, Secretary and Director; and Charles d.
Arbeiter, COO, Treasurer and Director. The directors and executive officers
of Piezo resigned, in seratim, on closing of the Reorganization Agreement.
On October 16, 2003, we filed a Definitive Information Statement
with the Securities and Exchange Commission regarding amending of our
Articles of Incorporation to change the name of our Company to "Omni Medical
Holdings, Inc." and to allow our stockholders to take action without the
consent of all of our stockholders. These amendments were unanimously adopted
by our Board of Directors and a majority of our stockholders and became
effective October 20, 2003.
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.
----------------------------
See Item 2.
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.
Current Report on Form 8-K filed with the Securities and
Exchange Commission on August 6, 2003*
Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 5, 2003*
Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 23, 2003 and an amended Current Report on
Form 8-K was filed on September 30, 2003*
Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 14, 2003*
* Incorporated by reference.
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: 03/08/04 By: /s/ Arthur D. Lyons
--------- -----------------------------------
Arthur D. Lyons, President,
Treasurer and Director
Date: 03/09/04 By: /s/ John Globoker
--------- -----------------------------------
John Globoker, Vice President,
Secretary and Director