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, 2004
[ ] 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.
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(Name of Small Business Issuer in its Charter)
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:
August 19, 2004
25,058,599
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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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, 2004
Omni Medical Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheet
June 30, 2004
ASSETS
Current assets:
Cash and cash equivalents $ 203
Accounts receivable, net, including unbilled amounts of
approximately $204,926 363,801
Employee advances 3,935
Prepaid expenses 71,575
-----------
Total current assets 439,514
Property & equipment, net 248,938
Other assets:
Deposits 380
Deferred financing costs 25,000
Goodwill 72,300
Intangible assets, net 470,385
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Total other assets 568,065
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TOTAL ASSETS $ 1,256,517
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See notes to condensed consolidated financial statements
F-2
Omni Medical Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheet [continued]
June 30, 2004
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 221,851
Accrued expenses 216,161
Line of credit 86,640
Notes payable, current portion 498,482
-----------
Total current liabilities 1,023,134
Notes payable, net of current portion 187,386
-----------
Total long-term liabilities 187,386
Total liabilities 1,210,520
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; 16,115,496 issued and outstanding 16,115
Common stock to be issued under reorganization agreement
474,659 shares 475
Capital in excess of par value 2,063,043
Deferred compensation expense (3,977)
Accumulated deficit (2,029,659)
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Total stockholders' equity 45,997
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,256,517
===========
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, 2004 and 2003
2004 2003
Revenue $ 397,867 $ 80,280
Cost of sales 282,219 4,989
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Gross operating profit 115,648 75,291
General and administrative expenses 246,045 82,944
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Income (loss) from operations (130,397) (7,653)
Other income (expense):
Interest income - 260
Interest expense (11,468) (6,305)
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Total other income (expense) (11,468) (6,045)
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Loss from continuing operations before
income taxes (141,865) (13,698)
Provision for income taxes - -
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Loss from continuing operations (141,865) (13,698)
Loss from discontinued operations - (33,736)
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Net loss $(141,865) $ (47,434)
========= =========
Loss per share basic and diluted:
Continuing operations $ (0.01) $ (0.01)
========= =========
Discontinued operations $ 0.00 $ (0.01)
========= =========
Net loss per share-basic and diluted $ (0.01) $ (0.01)
========= =========
Weighted average number of common shares
outstanding-basic and diluted 16,102,606 17,099,636
========== ==========
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, 2004 and 2003
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from continuing operations $ (141,865) $ (13,698)
Loss from discontinued operations - (33,736)
Adjustments to reconcile net loss to net
cash used in continuing operations:
Depreciation and amortization 51,112 5,264
Stock-based compensation expense 3,366 3,162
Stock issued for services 75,600 -
Changes in operating assets and
liabilities, net of effect of business
acquisition and disposition:
Accounts receivable 13,525 (33,684)
Prepaid expenses (67,741) (5,000)
Accounts payable 53,124 (18,223)
Accrued expenses (39,838) (30,074)
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Net cash used in operating
activities (52,717) (125,989)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (519) -
Payment for disposition of subsidiary, net - (36,000)
Payments for purchase of businesses - (150,000)
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Net cash used in investing
activities (519) (186,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on line of credit 41,684 -
Proceeds from issuance of debt - 75,378
Net payments of notes payable (9,035) (9,502)
Proceeds from the issuance of common stock 14,650 -
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Net cash provided by financing
activities 47,299 65,876
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NET INCREASE (DECREASE) IN CASH (5,937) (246,113)
CASH AT BEGINNING OF PERIOD 6,140 257,963
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CASH AT END OF PERIOD $ 203 $ 11,850
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See notes to condensed consolidated financial statements
F-5
Omni Medical Holdings, Inc.
Consolidated Statements of Cash Flows [continued]
For the years ended June 30, 2004 and 2003
2004 2003
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest in continuing operations $ 11,468 $ 6,305
Cash paid for interest in discontinued operations - 1,402
Cash paid for income taxes - -
BUSINESS ACQUISITIONS:
Fair value of assets acquired $ - $450,000
Issuance of debt/assumption of liabilities - (300,000)
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Cash paid $ - $150,000
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See notes to condensed consolidated financial statements
F-6
Omni Medical Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2004
Note 1 BUSINESS, ORGANIZATION AND INTERIM FINANCIAL STATEMENTS
Business - Omni Medical Holdings, Inc. ("Omni"), a Utah corporation,
provides medical billing and transcription services to medical
practitioners in Alabama, Mississippi, South Dakota and Kentucky.
Organization - The company was previously organized as Piezo
Instruments, Inc. ("Piezo"), a Utah corporation. Effective September 5,
2003, Piezo and Omni Medical of Nevada, Inc., a Nevada Corporation
("Omni Nevada") executed an Agreement and Plan of Reorganization (the
"Reorganization Agreement"), whereby Piezo agreed to acquire 100% of the
issued and outstanding shares of common stock of Omni Nevada in exchange
for up to 16,000,000 newly issued shares of common stock of Piezo, (of
which 12,443,062 have been issued as of June 30, 2004 and 474,659 shares
are to be issued as of June 30, 2004 for a total of 12,907,721 shares,)
or approximately 86% of the post-Reorganization Agreement outstanding
securities of Piezo. The transaction was accounted for as a reverse
acquisition of Piezo by Omni Nevada. Shares of common stock authorized
and issued have been retroactively restated to present the capital
structure of Piezo. Concurrent with the merger, Piezo changed its name
to Omni Medical Holdings, Inc.
Interim financial statements-The accompanying condensed consolidated
financial statements have been prepared 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. 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, 2004.
Note 2 DISCONTINUED OPERATIONS
Through May 2, 2003, Omni also produced handheld surgical instruments
used by ophthalmic surgeons in refractive, corneal and LASIK surgeries
and was also a developer of technology to ophthalmic surgeons,
specifically within the domain of anterior segment cataract extraction,
and foldable intra ocular lens placement as well as keratorefractive
procedures such as LASIK. Omni operated its surgical instruments
business through its wholly-owned subsidiary, Mastel Precision Surgical
Instruments, Inc ("MPSI") out of its facility in Rapid City, South
Dakota.
Effective May 2003, Omni entered into an agreement with one of its
officers and shareholders whereby Omni agreed to exchange 100% of the
common stock of MPSI and $36,000 cash for all shares of common stock of
Omni owned individually or jointly by the officer and his wife. As of
April 30, 2003, the assets of MPSI had a carrying value of approximately
$442,000 (primarily accounts receivable of approximately $53,000,
inventories of approximately $387,000 and property and equipment of
approximately $30,000) and MPSI's obligations and liabilities had a
carrying value of approximately $527,000 (primarily accounts payable of
approximately $226,000 and debt of approximately $286,000). Due to the
related party nature of the transaction, no gain was recognized and
shareholders equity was increased by $49,000. The results of operations
from MPSI have been retroactively restated as discontinued operations.
F-7
Omni Medical Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2004
Note 3 STOCKHOLDERS' EQUITY/SUBSEQUENT EVENTS
During the quarter ended June 30, 2004 the Company issued 99,309 shares
of its restricted common stock to offshore investors pursuant to
Regulation S, promulgated under the Securities Act of 1933, and received
consideration of $14,650.
Also during the three month period ended June 30, 2004, the Company
issued 756,000 shares of restricted common stock to various consultants
for services to be performed over a term of 1 to 2 years. Management has
estimated the fair market value of the fees at $75,600, of which $8,383
have been expensed and the remaining $67,217 have been recorded as a
prepaid expense to be amortized over the life of the contracts.
In June 2004, the Company issued 3,700,000 shares of common stock that
have been placed in escrow pending the completion of a loan agreement.
However, as of August 18, 2004 the terms of the agreement had not yet
been consummated.
In July 2004, the Company entered into a Stock Purchase Agreement ("The
agreement") with a London based investment company. Pursuant to the
agreement the Company has agreed to exchange 4,400,000 shares of its
restricted common stock for an equal value of non restricted shares in
an investment trust.
F-8
Item 2. Management's Discussion and Analysis
"SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995.
This Form 10-QSB contains forward looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Omni Medical Holdings, Inc. is referred to herein as
"we" or "our". The words or phrases "would be," "will allow," "intends to,"
"will likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "project," or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results could differ materially from
those projected in the forward looking statements as a result of a number of
risks and uncertainties. Statements made herein are as of the date of the
filing of this Form 10-QSB with the Securities and Exchange Commission and
should not be relied upon as of any subsequent date. Except as may otherwise
be required by applicable law, we do not undertake, and specifically disclaim,
any obligation to update any forward-looking statements contained in this Form
10-QSB to reflect occurrences, developments, unanticipated events or
circumstances after the date of such statement.
RESULTS OF OPERATIONS
For the three-month period ended June 30, 2004, the Company had revenue
from continuing operations totaling $397,867, as compared to revenue of
$80,280 for the three-month period ended June 30, 2003.
Cost of sales in the three months ended June 30, 2004, was $282,219.
Cost of sales totaled $4,989 during the same period in the prior year.
During the three months ended June 30, 2004, general and administrative
expenses totaled $246,045 versus a figure of $82,944 for the same period in
2003. As with the changes in revenue and cost of goods sold, this increase is
due to the fact that in May, 2003, we spun off our wholly-owned subsidiary,
Mastel Precision Surgical Instruments, and had very limited operations during
the rest of that quarter.
We incurred a net loss of $141,865 during the quarter ended June 30,
2004, as compared to a net loss of $47,434 in the year-ago period.
CAPITAL RESOURCE REQUIREMENTS
LIQUIDITY
As of June 30, 2004, our working capital deficit was $583,620. Our cash
balance decreased from $6,140 at March 31, 2004, to $203 at June 30, 2004.
The decrease was primarily the result of utilizing net cash of $52,717 to
fund operating activities for the year. We also used net cash of $519 in
investing activities during the three months ended June 30, 2004. During the
same period, financing activities provided $47,299 in net cash.
We currently have commitments under an Employment Agreement with
one of the former owners of MBM through May 30, 2005, renewable annually,
guaranteeing annual compensation of $50,000 plus a performance based bonus.
We also have an Employment Agreement with one of the former owners of McCoy
Business Services, Inc. through November 30, 2005, guaranteeing annual
compensation of $30,000 plus a performance based bonus. We currently lease
office space under an operating lease for $6,000 per month, which terminates
July 31, 2006.
Effective October 1, 2003, Omni entered into an Employment Agreement with
its chief executive officer and president through December 31, 2008. The
agreement provides compensation at an annual base salary of $150,000 and
increases to $180,000 annually the first month Omni's gross revenue exceeds
$450,000 in a month. The Agreement also provides for a $75,000 bonus to be
paid as of February 1, 2004, and awards stock options based upon revenue
targets. As of June 30, 2004, no stock options have been earned under the
Agreement. The $75,000 has been accrued in the attached financial statements.
To support the above activities and commitments, In this regard, we have
entered into a Stock Purchase Agreement with Langley Park Investments PLC as
discussed in Part II, Item 5, below. In addition, we have negotiated a
$600,000 loan from Stragegic Resources, LLC; however, the loan agreement has
not been executed and we can provide no assurance that it will ever be
consummated.
Item 3. Controls and Procedures.
--------------------------------
As of the end of the period covered by this Quarterly Report, we carried
out an evaluation, under the supervision and with the participation of our
President and Treasurer, of the effectiveness of our disclosure controls and
procedures. Based on this evaluation, our President and Treasurer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information required to be included in our periodic
Securities and Exchange Commission reports. It should be noted that the
design of any system of controls is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote. In addition, we reviewed our internal
controls over financial reporting, and there have been no changes in our
internal controls or in other factors in the last fiscal quarter that has
materially affected or is reasonably likely to materially affect our internal
control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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None; not applicable.
Item 2. Changes in Securities and Small Business Issuer Purchases of Equity
Securities.
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The following table provides information about all "unregistered" and
"restricted" securities that we have sold during the quarterly period
ended June 30, 2004, which were not registered under the Securities Act of
1933, as amended:
Date Number of Aggregate
Name of Owner Acquired Shares Consideration
------------- -------- ------ -------------
Various investors 4-16-04 99,309 (1) $14,650
Langley Park 6-14-04 3,720,930 (1) Equal value of
Investments PLC unrestricted shares
(906,167 shares) of
investment trust
Strategic Resources 6-14-04 3,700,000 (2) Security for $600,000
LLC loan (3)
Various 6-30-04 756,000 (2) Services valued at
consultants $75,600
(1) We believe that the offer and sale of these securities was exempt
from the registration requirements of the Securities Act pursuant to
Regulation S of the Securities and Exchange Commission.
(2) We believe that the offer and sale of these securities was exempt
from the registration requirements of the Securities Act, pursuant to Sections
4(2) and 4(6) thereof, and Regulation D of the Securities and Exchange
Commission and from various similar state exemptions.
(3) These shares have been issued and delivered to the escrow agent
identified in the Secured Loan Agreement between the parties. However, no
final agreement has been entered into and we can provide no assurance that
there will be any final agreement. If we do not enter into any such
agreement, we will re-obtain and cancel these shares.
Item 3. Defaults Upon Senior Securities.
------------------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
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None; not applicable.
Item 5. Other Information.
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On May 30, 2003, we signed an Asset Purchase Agreement with Medical
Billing Management, Inc., a Mississippi corporation ("MBM"), by and through
Margaret Brown, MBM's President, whereby we purchased all of MBM's tangible
assets related to medical billing and collection services provided by MBM.
This transaction was disclosed in a Current Report on Form 8-K dated May 30,
2004, and filed with the Securities and Exchange Commission on May 10, 2004.
See the Exhibit Index, Part II, Item 6 of this Report.
On July 14, 2004, which is subsequent to the period covered by this
Report, we entered into a Stock Purchase Agreement with Langley Park
Investments, PLC, a corporation organized under the laws of England and Wales
(the "Agreement"). Under the Agreement, we agreed to issue to Langley Park
4,400,000 "unregistered" and "restricted" shares of our common stock in
exchange for a number of shares of Langley Park that is equal to the market
value of our 4,400,000 shares (as determined by multiplying 4,400,000 by the
average of the closing bid price of our common stock immediately preceding
July 30, 2004) after adjusting for the exchange rate between the U.S. dollar
and the British pound. Based on this calculation, Langley Park was obligated
to issue 906,167 shares to us. We issued 3,720,930 of our shares to Langley
Park on June 14, 2004, and issued the remaining 679,070 shares on August 10,
2004.
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits.
31 302 Certification of Arthur D. Lyons.
32 906 Certification.
(b) Reports on Form 8-K.
Current Report on Form 8-K dated May 30, 2003, and filed May 10, 2004,
regarding Asset Purchase Agreement with MBM.
Current Report on Form 8-K dated May 10, 2004, and filed May 13, 2004,
regarding change in accountants.
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: 8/20/04 /s/ Arthur D. Lyons
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Arthur D. Lyons, President,
Treasurer and Director
Date: 8/20/04 /s/ John Globoker
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John Globoker, Vice President,
Secretary and Director