U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File No. 000-26177
OMNI MEDICAL HOLDINGS, INC.
(Name of Small Business Issuer in its Charter)
UTAH 87-0425275
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
1107 Mt. Rushmore Road, Suite 2
Rapid City, South Dakota 57701
-------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number: (605) 718-0380
N/A
(Former Name or Former Address, if changed since last Report)
Securities Registered under Section 12(b) of the Exchange Act: None
Name of Each Exchange on Which Registered: None
Securities Registered under Section 12(g) of the Exchange Act:
$0.001 par value common stock
Check whether the Registrant (1) 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.
(1) Yes X No (2) Yes X No
--- --- --- ---
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this Form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
State Registrant's revenues for its most recent fiscal year: March 31,
2005 - $1,755,986.
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of a specified
date within the past 60 days.
July 13, 2005 - $2,932,602.60. There are approximately 24,438,355 shares
of common voting stock of the Registrant beneficially owned by non-affiliates.
These computations are based upon the bid price for the common stock of the
Registrant on the OTC Bulletin Board of the National Association of Securities
Dealers, Inc. (the "NASD") on July 13, 2005, or $0.12 per share.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Not Applicable.
Check whether the Registrant has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes No
-- ---
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the Registrant's
classes of common equity, as of the latest practicable date:
July 13, 2005
44,249,898
DOCUMENTS INCORPORATED BY REFERENCE
A description of "Documents Incorporated by Reference" is contained
in Part III, Item I.
Transitional Small Business Issuer Format Yes X No
--- ---
PART I
Item 1. Description of Business.
------------------------
Business Development.
---------------------
Effective May 30, 2003, Omni Medical Holdings, Inc. ("Omni Medical
Holdings," "Omni," "OMH," the "Company" or "we," "our," "us" and words of
similar import), through our wholly-owned subsidiary, Omni Medical
Services, Inc.("OMS"), completed an Asset Purchase Agreement with Medical
Billing Management, Inc. ("MBM"), a corporation based in 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 (that was paid in February 2004) and
$225,000 payable on May 31, 2004. The May 31, 2004 payment was subject to an
adjustment which is to be calculated based on a multiple of the amount by
which revenues for the year ending May 31, 2004 are more or less than a
baseline amount. The adjustment will be recorded as an adjustment to the
acquisition cost of MBM. For more information regarding this Agreement, see
our 8-K Current Report filed with the Securities and Exchange Commission on
May 10, 2004.
On May 10, 2004, our Board of Directors resolved to dismiss Gelfand,
Hochstadt Pangburn, P.C., as our principal independent accountant and to
retain Mantyla McReynolds, Certified Public Accountants, of Salt Lake City,
Utah, as our new principal independent accountant, and to audit our financial
statements for the fiscal year ended March 31, 2004. See Part III, Item 13,
for reference to our 8-K Current Report respecting this action that was filed
with the Securities and Exchange Commission on May 13, 2004.
Effective March 1, 2005, we acquired a majority interest in DataFuzion,
Inc. ("DataFuzion") in an exchange for shares of our common stock. The
transaction involved the exchange of 23,019,215 of our shares for 100%
(approximately 36,000,000 shares) of the DataFuzion shares. There were no
relationships between any affiliates, officers, directors or the shareholders
of either of these companies in this transaction. It is our intent to acquire
100% of the DataFuzion shares over the next 60 days. Assuming all shares are
acquired in exchange for our shares, our total outstanding shares will be
approximately 46,038,430. Audited financial statements for DataFuzion were
anticipated to be filed with the Securities and Exchange Commission within the
required 75 day period under Form 8-K; however, they were timely and are
included in this Annual Report under Item 7. For additional information
regarding this transaction, see our 8-K Current Report filed with the
Securities and Exchange Commission on March 4, 2005.
Business.
---------
The company provides a turn key back office suite of products and
services to healthcare practitioners and facilities throughout the United
States. Omni is engaged in providing transcription, billing and collection
services in addition to practice management, electronic medical records and
other information technology products.
Principal Products or Services and their Markets.
-------------------------------------------------
Omni's DataFuzion subsidiary provides a complete line of integrated back-
office products including GE Centricity and Misys practice management and
electronic medical records solutions, and a proprietary web based decision
support reporting tools for physicians and hospitals (InfoBridgeTM ) . Our ASP
hosted products are designed to maximize practice performance by identifying
revenue enhancement and cost savings opportunities, while eliminating the
upfront costs and ongoing expense of owning, upgrading, staffing and
maintaining multiple in-house operations and reporting systems.
When practitioners provide patient care, those actions must be
documented, usually by electronic dictation. Government and insurance
regulations are such that these important medical records, which effect
patient health, must be in readable form. Through our transcription division,
this service can be delivered to any practitioner in the world through our
proprietary digital web based system. Transcription has become an important
and essential service in all healthcare practices. According to a trade
association, medical transcription is a fragmented $15 billion industry, with
transcription expenses projected to approach $25 billion over the next five
years. All of our services are performed in the United States.
Medical billing and collections are the lifeblood of any healthcare
facility, with accurate and timely collections insuring an effective practice
and high standard of care. The billing process is automated through either of
Omni's Centricity or Misys based hubs. Our nearly twenty years of experience
extends to most medical areas, especially anesthesiology. As for billing and
collections, it is estimated that the outsourced market for these services
could currently total as much as $50 billion annually and grow to $75 billion
in five years. Like transcription, billing continues to remain a fragmented
market that lends itself to consolidation over the next five years.
Medical service companies are highly fragmented, so we believe this
industry lends itself to a systematic consolidation strategy. Along with a
disciplined sales approach, this combination can be a very successful growth
strategy in this fragmented marketplace.
There is a great need in the medical industry to upgrade or embrace a
technology infrastructure so as to operate in a more efficient manner. Over
the next ten years, healthcare practitioners of all sizes will actively
utilize IT advances and integrate them into their regular practice usage.
While there are no industry figures available, DataFuzion estimates a direct
potential of over $2.5 billion for its products each year.
According to government studies, the medical industry is growing at a
rate of 8% annually, with estimates as high as 12% in the coming years. The
need for medical services by healthcare providers is expected to at least
mirror that growth rate. It is widely known that an increasingly aging
population, along with a country that will spare no expense for personal
consumption of medical care, will contribute to this growth. Healthcare
providers will continue to remain under pressure to reduce operating expense
and expand margins, forcing practices to find more efficient ways to operate
and deliver their services. This outsourcing trend allows the health care
provider to focus time and resources on providing health care, giving the
opportunity for growth potential to medical service providers like Omni.
Distribution Methods of the Products or Services.
-------------------------------------------------
The finished product (e.g., transcribed lines) is distributed digitally
through electronic transmission to the client. Medical billings are either
mailed or sent electronically first to the insurance companies. The patient
is then billed for any difference that was not received from their insurance
company. Insurance company and patient payments are remitted to a banking
institution lockbox designated under the doctor's name or healthcare facility.
Collections activities involve following up with either the insurance
companies or patient for any payment not yet received within a designated
amount of time.
Status of any Publicly Announced New Product or Service.
--------------------------------------------------------
None; not applicable.
Competitive Business Conditions.
--------------------------------
Healthcare services (e.g., transcription, billing, collections) is a
highly fragmented industry. Two of our largest competitors are Medquist, Inc.
("MEDQ") and IDX Systems Corporation ("IDXC"), both of which are large and
well funded publicly traded companies, with substantially more assets and
resources that Omni. The primary competition comes from the healthcare
facility itself. Due to the overhead expense of providing these services
internally, more healthcare facilities will be looking to outsource these
duties to reduce costs.
Transcription has become an important and essential service in all
healthcare practices. According to the "MTIA" (a transcription trade
association), medical transcription is a fragmented $15 billion industry, with
revenues projected to approach $25 billion over the next five years.
Medical billing and collections are the lifeblood of any healthcare
facility. Accurate and timely collections ensure an efficient practice and
high standard of care. Although no industry figures are available, it is
known that approximately $1.5 trillion was spent on health care in the United
States last year. Assuming that half of that amount occurred at the point of
care, that would be a potential billing market of $750 billion. Health care
providers that use billing services generally pay between 6-10% of the amount
collected on their behalf. This would put the potential estimated revenue for
billing services somewhere between $45-75 billion, and growing at a rate of 8%
annually. With the rising cost of health care and an aging population, in
five years the market could well be generating over $100 billion in annual
revenue. Within the billing industry, there are generally no subcontractors,
and all work from the corporate office.
According to United State Government studies, the medical industry is
growing at a rate of 8% annually, with estimates as high as 12% in the coming
years. The need for medical services by healthcare providers will continue to
mirror that growth rate. It is widely known that an increasingly aging
population, along with a country that will spare no expense for personal
consumption of medical care, will contribute to this growth. Healthcare
providers will also remain under pressure to reduce operating expense and
expand margins. The effect is that services currently provided internally
will now be more readily outsourced. The outsourcing trend allows the health
care provider to focus time and resources on providing health care, giving the
opportunity for growth potential to medical service providers like Omni.
Sources and Availability of Raw Materials and Names of Principal
Suppliers.
----------
None; not applicable.
Dependence on One or a Few Major Customers.
-------------------------------------------
At March 31, 2005, one customer accounted for 11% of accounts receivable.
During the years ended March 31, 2005 and 2004 two customers accounted for 28%
and 35% of sales, respectively.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements or Labor Contracts.
------------------------------
DataFuzion has developed, InfoBridge , a proven system that allows
healthcare enterprises of all sizes to focus on reports that can help increase
revenue, decrease administrative costs, improve accuracy of A/R data and
collections, and reconcile payor reimbursements. InfoBridge utilizes a
process which easily and instantly consolidates and standardizes disparate
data from all systems and locations into a single reporting format. Reports
are then published to the internet and are available to only viewers who
possess passwords for secure access.
Need for any Governmental Approval of Principal Products or Services.
---------------------------------------------------------------------
Government regulations concerning the privacy of patient's health records
are being phased in at this time. Known as "HIPPA," the effects of these
regulations have been for all healthcare providers and vendors to upgrade both
security and technology of patient records. For Omni as a vendor, we are
compliant with HIPPA regulations, and we believe these regulations will only
encourage healthcare providers to outsource more medical services.
Effect of Existing or Probable Governmental Regulations on Business.
--------------------------------------------------------------------
Sarbanes-Oxley Act.
-------------------
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of
2002 (the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act imposes a wide variety
of new regulatory requirements on publicly-held companies and their insiders.
Many of these requirements will affect us. For example:
*our chief executive officer and chief financial officer must now certify the
accuracy of all of our periodic reports that contain financial statements;
*our periodic reports must disclose our conclusions about the effectiveness
of our disclosure controls and procedures; and
*we may not make any loan to any director or executive officer and we may not
materially modify any existing loans.
The Sarbanes-Oxley Act has required us to review our current procedures and
policies to determine whether they comply with the Sarbanes-Oxley Act and the
new regulations promulgated thereunder. We will continue to monitor our
compliance with all future regulations that are adopted under the Sarbanes-
Oxley Act and will take whatever actions are necessary to ensure that we are
in compliance.
Small Business Issuer.
----------------------
The integrated disclosure system for small business issuers adopted by
the Securities and Exchange Commission in Release No. 34-30968 and effective
as of August 13, 1992, substantially modified the information and financial
requirements of a "Small Business Issuer," defined to be an issuer that has
revenues of less than $25 million; is a U.S. or Canadian issuer; is not an
investment company; and if a majority-owned subsidiary, the parent is also a
small business issuer; provided, however, an entity is not a small business
issuer if it has a public float (the aggregate market value of the issuer's
outstanding securities held by non-affiliates) of $25 million or more.
The Securities and Exchange Commission, state securities commissions
and the North American Securities Administrators Association, Inc. ("NASAA")
have expressed an interest in adopting policies that will streamline the
registration process and make it easier for a small business issuer to have
access to the public capital markets.
We are deemed to be a "small business issuer," and we have selected to
comply with the "small business issuer" disclosure requirements of Regulation
SB of the Securities and Exchange Commission.
Reporting Obligations.
----------------------
Section 14(a) of the Exchange Act requires all companies with securities
registered pursuant to Section 12(g) of the Exchange Act to comply with the
rules and regulations of the Securities and Exchange Commission regarding
proxy solicitations, as outlined in Regulation 14A. Matters submitted to
stockholders of our Company at a special or annual meeting thereof or pursuant
to a written consent will require our Company to provide our stockholders with
the information outlined in Schedules 14A or 14C of Regulation 14; preliminary
copies of this information must be submitted to the Securities and Exchange
Commission at least 10 days prior to the date that definitive copies of this
information are forwarded to our stockholders.
We are also required to file annual reports on Form 10-KSB and quarterly
reports on Form 10-QSB with the Securities Exchange Commission on a regular
basis, and will be required to timely disclose certain material events (e.g.,
changes in corporate control; acquisitions or dispositions of a significant
amount of assets other than in the ordinary course of business; and
bankruptcy) in a current report on Form 8-K.
"Penny Stock" Designation.
--------------------------
Our common stock is "penny stock" as defined in Rule 3a51-1 of the
Securities and Exchange Commission. Penny stocks are stocks:
* with a price of less than five dollars per share;
* that are not traded on a "recognized" national exchange;
* whose prices are not quoted on the NASDAQ automated quotation
system; or
* in issuers with net tangible assets less than $2,000,000, if the
issuer has been in continuous operation for at least three years, or
$5,000,000, if in continuous operation for less than three years, or with
average revenues of less than $6,000,000 for the last three years.
Section 15(g) of the Exchange Act and Rule 15g-2 of the Securities
and Exchange Commission require broker/dealers dealing in penny stocks to
provide potential investors with a document disclosing the risks of penny
stocks and to obtain a manually signed and dated written receipt of the
document before making any transaction in a penny stock for the investor's
account. You are urged to obtain and read this disclosure carefully before
purchasing any of our shares.
Rule 15g-9 of the Securities and Exchange Commission requires
broker/dealers in penny stocks to approve the account of any investor for
transactions in these stocks before selling any penny stock to that investor.
This procedure requires the broker/dealer to:
* get information about the investor's financial situation,
investment experience and investment goals;
* reasonably determine, based on that information, that transactions
in penny stocks are suitable for the investor and that the investor can
evaluate the risks of penny stock transactions;
* provide the investor with a written statement setting forth the
basis on which the broker/dealer made his or her determination; and
* receive a signed and dated copy of the statement from the
investor, confirming that it accurately reflects the investor' financial
situation, investment experience and investment goals.
Compliance with these requirements may make it harder for our
stockholders to resell their shares.
Research and Development.
-------------------------
None; not applicable.
Cost and Effects of Compliance with Environmental Laws.
-------------------------------------------------------
None; not applicable.
Number of Employees.
--------------------
Our Company currently employs 75 full-time employees.
Item 2. Description of Property.
------------------------
Omni has an interest in four parcels of real property: 1609 West
Street, Montgomery, Alabama, that it is purchasing; 1867 Crane Ridge Drive,
Suite #250-A, Jackson, Mississippi, 1107 Mt. Rushmore Road, Suite 2, Rapid
City, South Dakota, and 2120 West Littleton, Littleton, Colorado, which are
leased.
Item 3. Legal Proceedings.
------------------
To the knowledge of our management, no director or executive officer is
party to any action in which any has an interest adverse to us.
An action has been brought by holders of promissory notes issued by our
Company's majority-owned subsidiary, DataFuzion, Inc. for enforcement of the
notes and possession of substantially all assets of DataFuzion which are
alleged to secure payment of the notes. Plaintiffs filed a motion for
possession of the assets, which was denied by the court. DataFuzion does not
dispute the execution or delivery of the notes and has recorded the notes in
these financial statements. In addition, DataFuzion has some claims against
some of the Plaintiffs which may give rise to offsets or counterclaims against
some(but in all likelihood, not all) of the Plaintiffs. Those claims have not
yet been pled or fully factually explored. The current status of this matter
is that the Plaintiffs have filed a Motion for Summary Judgement, seeking
judgment for the notes balances(without enforcement of their claimed
security interest). DataFuzion has sought and obtained an extension of time
to respond to this Motion, and has initiated settlement discussions with
Plaintiffs. Those settlement negotiations are ongoing.
Three former employees of DataFuzion have also brought action against
the Company seeking back pay in total of approximately $60,000. DataFuzion
disputes the claims but has offered settlement of approximately $12,000, which
has been rejected. Discovery is ongoing and a settlement conference is
scheduled for August 2005.
Two shareholders of the DataFuzion have brought action against DataFuzion
for royalties due them related to new sales of DataFuzion's "Infobridge"
software. DataFuzion disputes the amounts owed and has entered into
settlement negotiations with the shareholders.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matter was submitted to our shareholders during the last quarter of
our current fiscal year.
PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Small
Business Issuer Purchases of Equity Securities.
-----------------------------------------------
Market Information.
-------------------
There has never been any "established trading market" for our shares of
common stock. Our common stock is presently quoted on the OTC Bulletin Board
of the NASD under the symbol "ONMH" as reflected below. No assurance can be
given that any market for our common stock will develop in the future or be
maintained. If an "established trading market" ever develops in the future,
the sale of "restricted securities" (common stock) pursuant to Rule 144 of the
Securities and Exchange Commission by members of management or others may have
a substantial adverse impact on any such market.
The range of high and low bid quotations for our common stock during
each quarter for the last year, are shown below. Prices are inter-dealer
quotations as reported by the NQB, LLC, and do not necessarily reflect
transactions, retail markups, mark downs or commissions.
Stock Quotations
----------------
Quarter Ended High Low
------------- ---- ---
April 1, 2004 through
June 30, 2004 $0.90 $0.17
July 1, 2004 through
September 30, 2004 $0.51 $0.22
October 1, 2004 through
December 31, 2004 $0.26 $0.15
January 1, 2005 through
March 31, 2005 $0.20 $0.12
Recent Sales of Unregistered Securities.
----------------------------------------
Sale of Common Stock Shares Consideration
-------------------- ------ -------------
Private placement 627,953 $15,000
Shares issued for Investment
in Langley Trust 4,400,000 $507,454
Acquisition of DataFuzion, Inc.
on March 1, 2005 22,125,305 $2,212,531
Issuance of common stock for
services 1,881,000 $188,100
Issuance of common stock to
relieve debt 650,000 $142,500
Holders.
--------
As of July 13, 2005, there were 44,249,898 shares of our common stock
outstanding and approximately 413 stockholders of record.
Dividends.
----------
We have not paid any cash dividends since our inception and do not
anticipate or contemplate paying dividends in the foreseeable future. It is
the present intention of our management to utilize all available funds for the
development of our business.
Securities Authorized For Issuance under Equity Compensation Plans.
-------------------------------------------------------------------
We do not have any Equity Compensation Plans presently in place.
Use of Proceeds From the Sale of Registered Securities.
-------------------------------------------------------
None.
Purchases of Equity Securities.
-------------------------------
None.
Item 6. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
"SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995.
This Form 10-KSB 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-KSB 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-KSB to reflect occurrences, developments, unanticipated events or
circumstances after the date of such statement.
Results of Operations.
----------------------
The year ended March 31, 2005.
------------------------------
During the year ended March 31, 2005, we recorded revenue of $1,755,986,
as compared to revenue of $1,181,146 in the year ended March 31, 2004.
This increase was principally due to the creation of new accounts, the
acquisition of DataFuzion and McCoy Business Services. Cost of sales also
rose significantly to $1,158,847 in the current year, from $748,710 in the
fiscal year ended March 31, 2004. This increase is principally the result of
consulting expenses, acquisition costs with respect to DataFuzion and an
increase in the number of employees. There was also a significant accounting
change, creating an additional charge off, that we believe more conservatively
and consistantly recognizes revenue for all our subsidiary companies.
During the fiscal year end of 2005, we recorded general and
administrative expenses of $1,335,432. These expenses totaled $916,631 in the
year-ago period. This increase is primarily due to the increase in our
employees.
Interest expense was $83,541 and $37,298 for the year ended March 31,
2005, and March 31, 2004, respectively.
For the year ended March 31, 2005, we incurred a loss from continuing
operations of $925,741, as compared to a loss of $521,493 for the year ended
March 31, 2004.
Capital Resource Requirements.
------------------------------
Liquidity.
----------
As of March 31, 2005, our working capital deficit was $4,449,589. Our
cash at March 31, 2005 was $14,849.
We currently have a commitment under an Employment Agreement with one
of the former owners of McCoy Business Services through November 30, 2005,
guaranteeing annual compensation of $30,000 plus a performance based bonus.
We currently lease office space under operating leases for approximately
$16,000 per month, which terminate through 2010.
Effective March 1, 2005, Omni entered into an Employment Agreement with
Arthur D. Lyons, its chief executive officer and Douglas Davis, President
through March 1, 2010. The agreement provides compensation at an annual base
salary of $180,000, a $1,000 a month auto allowance, fully paid health
insurance and a bonus of 1% of gross revenue, paid quarterly to each.
During December 2003, we entered into a Loan Agreement and Security
Agreement with Presidential Financial Corporation allowing us to borrow up to
80% of our accounts receivable or $300,000, whichever is less. The loan is
secured by our accounts receivable and other tangible assets and accrues
interest at prime plus 2%. As of March 31, 2005, $163,453 was owed on the line
of credit.
Through our April 15, 2005, acquisition of Plum Creek Outpatient and
administrative services agreement with Stat Anesthesia, P.C., We believe that
we have already acquired significant assets and adequate liquid assets for
operation. Net collectable accounts receivable acquired is estimated to be in
excess of $1.4 million with no long term debt. Furthermore, we believe those
companies will provide significant cash flow to provide for all corporate
needs. We also plan to raise additional capital and is working with a number
of financial sources to achieve this.
Item 7. Financial Statements.
---------------------
Omni Medical Holdings, Inc.
Report of Independent Registered Public Accounting Firm
and
Consolidated Financial Statements
March 31, 2005
Omni Medical Holdings, Inc.
TABLE OF CONTENTS
Page
Report of Independent Registered Public Accounting Firm . . . . . . . . . 1
Consolidated Balance Sheet - March 31, 2005 . . . . . . . . . . . . . . 2-3
Consolidated Statements of Operations for the Years Ended March 31,
2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Stockholders' Equity for the Years Ended
March 31, 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the Years Ended March 31,
2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 8-19
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Omni Medical Holdings, Inc.
We have audited the accompanying consolidated balance sheet of Omni Medical
Holdings Inc. as of March 31, 2005 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years ended March 31,
2005 and 2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform an audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Omni Medical
Holdings, Inc., and subsidiaries as of March 31, 2005 and the results of
operations and cash flows for the years ended March 31, 2005 and 2004, in
conformity with accounting principles generally accepted in the United States
of America.
The accompanying financial statements have been prepared assuming that Omni
Medical Holdings, Inc. will continue as a going concern. As discussed in Note
12 to the financial statements, the Company has accumulated losses from
operations and a deficit in working capital. These issues raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 12. The financial
statements do not include any adjustment that might result from the outcome of
this uncertainty.
/s/ Mantyla McReynolds
Mantyla McReynolds
Salt Lake City, Utah
May 6, 2005
F-1
Omni Medical Holdings, Inc.
Consolidated Balance Sheet
March 31, 2005
ASSETS
Current assets:
Cash and cash equivalents $ 14,849
Accounts receivable, net, including unbilled amounts of
approximately $25,186-Note 1 408,784
Short-term investments, at fair value-Note 1 140,545
Employee advances 5,317
Prepaid expenses 77,326
----------
Total current assets 646,821
Property & equipment, net-Notes 1& 5 1,694,230
Other assets:
Deposits 7,763
Deferred financing costs-Note 14 25,000
Goodwill-Note 1 3,493,245
Intangible assets, net-Notes 1 & 6 1,847,103
----------
Total other assets 5,373,111
----------
TOTAL ASSETS $7,714,162
==========
See accompanying notes to financial statements
F-2
Omni Medical Holdings, Inc.
Consolidated Balance Sheet [continued]
March 31, 2005
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 338,780
Accrued expenses 1,539,609
Line of credit- Note 8 163,453
Current portion of long-term debt-Note 9 3,054,568
----------
Total current liabilities 5,096,410
Convertible debt-Note 9 1,265,582
Notes payable-Note 9 2,668,553
Current portion of long-term debt-Note 9 (3,054,568)
----------
Total long-term liabilities 879,567
Total liabilities 5,975,977
Minority interest-Note 3 (150,243)
Stockholders' equity:-Note 7
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; 44,944,445 issued and outstanding 44,944
Common stock to be issued under reorganization agreement
474,659 shares 475
Capital in excess of par value 5,009,899
Unrealized loss on investments (138,428)
Accumulated deficit (3,028,462)
------------
Total stockholders' equity 1,888,428
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,714,162
============
See accompanying notes to financial statements
F-3
Omni Medical Holdings, Inc.
Consolidated Statements of Operations
For the years ended March 31, 2005 and 2004
2005 2004
Revenue $ 1,755,986 $ 1,181,146
Cost of sales 1,158,847 748,710
----------- -----------
Gross operating profit 597,139 432,436
General and administrative expenses 1,335,432 916,631
----------- -----------
Income (loss) from operations (738,293) (484,195)
Other income (expense):
Interest expense (83,541) (37,298)
Loss on sale of assets (21,878) -
Realized loss on sale of investments (98,003) -
----------- -----------
Total other income (expense) (203,422) (37,298)
Loss from continuing operations before minority
interest (941,715) (521,493)
Minority interest 15,974 -
------------ -----------
Loss from continuing operations before income tax (925,741) (521,493)
Provision for income taxes - -
------------ -----------
Net loss before discontinued operations (925,741) (521,493)
Loss from discontinued operations, net of taxes-
Note 4 - (33,736)
------------ -----------
Net loss before cumulative effect of a change in
accounting principle (925,741) (555,229)
Cumulative effect on prior years of change in
accounting principle-Note 2 (214,926) -
------------ -----------
Net loss $ (1,140,667) $ (555,229)
============ ===========
Loss per share basic and diluted:
Continuing operations $ (0.05) $ (0.04)
============ ===========
Discontinued operations $ 0.00 $ 0.00
============ ===========
Cumulative effect of a change in accounting
principle $ (0.01) $ 0.00
============ ===========
Net loss per share-basic and diluted $ (0.06) $ (0.04)
============ ===========
Weighted average number of common shares
outstanding-basic and diluted 20,258,947 14,708,706
============ ===========
Pro forma amounts assuming the new revenue
recognition policy is applied retroactively:
Net loss (925,741) (770,155)
============ ===========
Net loss per share-basic and diluted $ (0.05) $ (0.05)
============ ===========
See accompanying notes to financial statements
F-4
Omni Medical Holdings, Inc.
Consolidated Statements of Stockholders' Equity
For the Years Ended March 31, 2005 and 2004
Common Additional
Shares Common stock to Paid in
Issued Stock be issued Capital
Balance, March 31, 2003 20,620,247 20,620 - 1,564,299
Disposition of subsidiary (7,795,520) (7,795) 31,720
Sale of common stock pursuant to
private placements 92,216 92 44,908
Repurchase of dissenter's common
stock (9,222) (9) (111)
Acquisition of Piezo on September
5, 2003 2,000,000 1,525 475 (17,091)
Sale of common stock pursuant to
stock purchase agreement 577,125 577 224,673
Sale of common stock pursuant to
private placement 235,000 235 120,765
Issuance of common stock for
services 15,000 15 4,485
Earned compensation expense
Net loss for year ended
March 31, 2004
----------- ------- ------- ----------
Balance, March 31, 2004 15,734,846 15,260 475 1,973,648
Sale of common stock pursuant
to private placement 627,953 628 14,722
Shares issued for Investment
in Langley Trust 4,400,000 4,400 503,054
Acquisition of DataFuzion, Inc.
on March 1, 2005 22,125,305 22,125 2,190,406
Issuance of common stock for
services 1,881,000 1,881 186,219
Issuance of common stock to
relieve debt 650,000 650 141,850
Earned compensation expense
Comprehensive income:
Unrealized loss on investments
Net loss for the year ended
March 31, 2005
----------- ------- ------- -----------
Balance, March 31, 2005 45,419,104 $44,944 $ 475 $ 5,009,899
[CONTINUED]
Omni Medical Holdings, Inc.
Consolidated Statements of Stockholders' Equity
For the Years Ended March 31, 2004 and 2003
Deferred Total
Compen- Unrealized Advance Stockholders'
sation loss on Accumulated Receivable Equity
Expense Investments Deficit Shareholder (Deficit)
Balance, March 31, 2003 $(41,111) $ - $(1,332,566)$ (24,708)$ 186,534
Disposition of subsidiary 24,708 48,633
Sale of common stock
pursuant to private
placements 45,000
Repurchase of dissenter's
common stock (120)
Acquisition of Piezo on
September 5, 2003 (8,793) (23,884)
Sale of common stock
pursuant to stock
purchase agreement 225,250
Sale of common stock
pursuant to private
placement 121,000
Issuance of common
stock for services 4,500
Earned compensation
expense 42,562 42,562
Net loss for year ended
March 31, 2004 (555,229) (555,229)
-------- ------- ----------- -------- ----------
Balance, March 31, 2004 (7,342) - (1,887,795) $ - $ 94,246
Sale of common stock
pursuant to private
placement 15,350
Shares issued for
Investment in Langley
Trust 507,454
Acquisition of
DataFuzion, Inc.
on March 1, 2005 2,212,531
Issuance of common
stock for services 188,100
Issuance of common
stock to relieve debt 142,500
Earned compensation
expense 7,342 7,342
Comprehensive income:
Unrealized loss on
investments (138,428) (138,428)
Net loss for the year
ended March 31, 2005 (1,140,667) (1,140,667)
----------
Total Comprehensive Income (1,279,095)
------- -------- ----------- -------- ----------
Balance, March 31, 2005 $ 0 $(138,428) $(3,028,462) $ - $1,888,428
======= ======== =========== ======== ==========
See accompanying notes to financial statements
F-5
Omni Medical Holdings, Inc.
Consolidated Statements of Cash Flows
For the years ended March 31, 2005 and 2004
2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from continuing operations $(1,140,667) $ (521,493)
Loss from discontinued operations - (33,736)
Adjustments to reconcile net loss to net
cash used in continuing operations:
Depreciation and amortization 255,224 116,680
Stock-based compensation expense 7,342 33,769
Stock issued for services 131,375 4,500
Loss on sale of assets 21,878 -
Realized loss on investments 98,003 -
Minority interest (15,974)
Cumulative effect of change in accounting
principle 214,926 -
Changes in operating assets and liabilities,
net of effect of business acquisition and
disposition:
Accounts receivable (76,084) (298,074)
Employee advances (1,382) (3,935)
Prepaid expenses 2,668 (3,834)
Inventories disposed of with subsidiary 400,888
Deposits (348) (380)
Accounts payable 31,895 (103,931)
Accrued expenses 214,267 225,741
------------- ------------
Net cash used in operating activities (256,877) (183,805)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (9,018) (15,649)
Proceeds from the sale of assets 1,021 -
Proceeds from sale of investments 130,478 -
Software development (32,335)
Payment for disposition of subsidiary, net - (36,000)
Payments for purchase of businesses - (475,094)
------------- ------------
Net cash provided by (used in)
investing activities 90,146 (526,743)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of dissenter's common stock - (120)
Deferred financing costs - (25,000)
Borrowings on line of credit 118,497 44,956
Proceeds from issuance of debt 86,600 75,000
Payments of notes payable (49,215) (27,361)
Proceeds from the issuance of common stock 15,350 391,250
-------------- ------------
Net cash provided by financing
activities 171,232 458,725
-------------- ------------
NET INCREASE (DECREASE) IN CASH 4,501 (251,823)
CASH AT BEGINNING OF YEAR 6,140 257,963
CASH ACQUIRED IN DATAFUZION ACQUISITION 4,208 -
============== ============
CASH AT END OF YEAR $ 14,849 $ 6,140
============== ============
See accompanying notes to financial statements
F-6
Omni Medical Holdings, Inc.
Consolidated Statements of Cash Flows [continued]
For the years ended March 31, 2005 and 2004
2005 2004
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest in continuing operations $ 19,089 $ 37,298
Cash paid for interest in discontinued operations - 1,402
Cash paid for income taxes - -
SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING ACTIVITIES:
Stock issued as prepaid expenses $ 56,725 $ 0
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock issued for short-term investments $ 507,454 $ 0
Stock issued to relinquish debt $ 142,500 $ 0
BUSINESS ACQUISITIONS:
Fair value of assets acquired $ 6,764,378 $ 795,968
Issuance of debt/assumption of liabilities (4,551,847) (320,874)
Common stock issued at acquisition (2,212,531) 0
----------- -----------
Cash paid $ 0 $ 475,094
=========== ===========
See accompanying notes to financial statements
F-7
Omni Medical Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2005
Note 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - Omni Medical Holdings, Inc. ("Omni"), a Utah corporation,
provides medical billing and transcription services, and electronic
medical record solutions to medical practitioners.
Organization- The company was previously organized as Piezo Instruments,
Inc. ("Piezo"), a Utah corporation. Effective September 5, 2003, Piezo
and Omni Medical of Nevada, Inc., a Nevada Corporation ("Omni Nevada")
executed an Agreement and Plan of Reorganization (the "Reorganization
Agreement"), whereby Piezo agreed to acquire 100% of the issued and
outstanding shares of common stock of Omni Nevada in exchange for up to
16,000,000 newly issued shares of common stock of Piezo, (of which
12,913,815 were issued as of March 31, 2004, 480,753 shares were issued
in July 2004 and 474,659 shares are to be issued as of March 31, 2005
for a total of 13,869,227 shares,) or approximately 86% of the post-
Reorganization Agreement outstanding securities of Piezo. The
transaction was accounted for as a reverse acquisition of Piezo by Omni
Nevada. Shares of common stock authorized and issued have been
retroactively restated to present the capital structure of Piezo.
Concurrent with the merger, Piezo changed its name to Omni Medical
Holdings, Inc.
Principles of consolidation-The accompanying consolidated financial
statements include the accounts of Omni Medical Holdings, Inc., its
wholly owned subsidiary, Omni Medical Services, Inc. and its majority
owned subsidiaries, Omni Medical of Nevada, Inc and DataFuzion, Inc. All
significant intercompany balances and transactions are eliminated.
Cash and cash equivalents- The Company considers all highly liquid
investments with original maturities at the date of purchase of three
months or less to be cash equivalents.
Revenue recognition- The Company recognizes revenue according to Staff
Accounting Bulletin 104, Revenue Recognition which clarifies U.S.
generally accepted accounting principles for revenue transactions. The
Company recognizes revenue from medical billing, medical transcription
services and from data hosting services. Fees for the medical billing
services are primarily based on a percentage of net collections on our
clients' accounts receivable. The Company recognizes revenue and bills
its customers for these services when the customers receive payment on
those accounts receivable. Revenues on the medical transcription and data
hosting services are recognized monthly as services are performed for our
clients.
Use of estimates in preparation of financial statements- The preparation
of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent 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.
Bad debt and allowance for doubtful accounts- The allowance for doubtful
accounts is maintained at a level sufficient to provide for estimated
credit losses based on evaluating known and inherent risks in the
receivables portfolio. The Company provides an allowance for doubtful
accounts which, based upon management's evaluation of numerous factors,
including economic conditions, a predictive analysis of the outcome of
the current portfolio and prior credit loss experience, is deemed
adequate to cover reasonably expected losses inherent in outstanding
receivables. The allowance at March 31, 2005 is $10,239.
F-8
Omni Medical Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2005
Note 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES[continued]
Concentrations of credit risk-The Company grants credit to its
customers, generally without collateral. At March 31, 2005, one customer
accounted for 11% of accounts receivable. During the years ended March
31, 2005 and 2004 two customers accounted for 28% and 35% of sales,
respectively.
Property and equipment- Property and equipment are stated at cost.
Expenditures for maintenance and repairs are charged to expense as
incurred. The following is a summary of the estimated useful lives and
depreciation methods used in computing depreciation expense:
Depreciation Estimated
Asset Method useful life
Computer Equipment Straight-line 3-5 years
Office Equipment Straight-line 5-7 years
Furniture & Fixtures Straight-line 7 years
Computer Software Straight-line 3 years
Leasehold improvements Straight-line 7 years
Equipment - Manufacturing Straight-line 7 years
Building & Land - Alabama Straight-line 25 years
Goodwill and intangible assets-The Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 142 "Goodwill and Other
Intangible Assets". SFAS No. 142 addresses the accounting and reporting
for acquired goodwill and other intangible assets. The Company's
goodwill consists $3,420,945 applicable to the DataFuzion, Inc.
acquisition in March 2005, $36,000 applicable to the A&V medical
transcription acquisition in July 2002 and $36,300 applicable to the
Medical Billing Management purchase in May 2003. The Company continually
tests goodwill for impairment and recognizes a loss when the carrying
value exceeds the fair value. The Company has recorded no impairment
charges for the years ended March 31, 2005 and 2004.The intangible asset
consists of software development and a trademark acquired in the
acquisition of DataFuzion, Inc., customer lists acquired in the
acquisitions of A&V, Medical Billing Management and McCoy Business
Services, Inc. as well as a trade name and non-compete agreements
acquired in the McCoy acquisition. The intangible assets are being
amortized over their useful life of between 2 and 7 years.
Software development costs include costs incurred in the development or
enhancement of the "Infobridge" software. These costs are capitalized
after the preliminary project stage is complete, when management with
the relevant authority authorizes and commits to the funding of the
project, when it is probable that the project will be completed and when
the software will be used to perform the function intended.
Capitalization ceases no later than the point at which the project is
substantially complete and ready for its intended use. The Company
expenses software development costs, as incurred during the planning and
post-implementation phases of development.
F-9
Omni Medical Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2005
Note 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
Amortization expense for the next five years is expected to be as
follows:
Year ended
3/31/2006 $215,295
3/31/2007 181,963
3/31/2008 177,657
3/31/2009 55,785
3/31/2010 -
Income taxes- The Company complies with the provisions of Statement of
Financial Accounting Standards No. 109 [the Statement], "Accounting for
Income Taxes." The Statement requires an asset and liability approach
for financial accounting and reporting for income taxes, and the
recognition of deferred tax assets and liabilities for the temporary
differences between the financial reporting basis and tax basis of the
Company's assets and liabilities at enacted tax rates expected to be in
effect when such amounts are realized or settled.
Net Loss Per Common share-In accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," basic loss per
common share is computed using the weighted average number of common
shares outstanding. Diluted earnings per share is computed using
weighted average number of common shares plus dilutive common share
equivalents outstanding during the period using the treasury stock
method. During the years ended March 31, 2005 and 2004 there were no
common share equivalents outstanding. However, the Company's acquired
subsidiary DataFuzion, Inc. has approximately 5 million common share
equivalents that upon approval by the Company's Board of Directors could
become convertible into the Company's common stock on a proportional
basis. These shares were excluded from the computation of diluted
earnings per share because the effect would have been antidilutive.
Stock based compensation-SFAS No. 123, "Accounting for Stock-Based
Compensation" allows companies to choose wether to account for employee
stock-based compensation on a fair-value method, or to account for such
compensation under the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). The Company has chosen to account for stock-based
compensation using APB 25. At March 31, 2005, the Company had no stock
option plans.
Fair value of financial instruments- The carrying amounts of the
Company's cash and cash equivalents, accounts receivable and accounts
payable approximate fair values due to the short maturities of these
instruments. The carrying value of the Company's short-term borrowings
approximates fair value based on the Company's current incremental
borrowing rate for similar types of borrowing arrangements. The fair
values of the company's receivables and payables to related parties are
not practicable to estimate due to the related party nature of the
underlying transactions and indefinite payments terms.
Derivative transactions- In the past the Company has utilized certain
short-term derivative instruments, options and puts of marketable equity
securities, for trading purposes. The Company accounted for these
transactions at fair value, based on market quotes and cash settlements.
These transactions exposed the Company to certain market and credit
risks related to the underlying investment and the counter-party,
F-10
Omni Medical Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2005
Note 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES[continued]
respectively. The Company had no such transaction during the year ended
March 31, 2005 and held no derivative instruments at March 31, 2005 and
2004.
Short-term investments-In accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" The Company has classified its investments
as available for sale and records the investment at fair market value.
Recent Accounting pronouncements- On December 16, 2004, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standard ("SFAS") No. 123(R) Share-Based Payment, which is a
revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS
No. 123 (R) supercedes Accounting Principles Board ("APB") Opinion No.
25, Accounting for Stock issued to Employees. SFAS. No. 123(R) requires
all share-based payments to employees , including grants of employee
stock options, to be recognized in the income statement based on their
fair values. SFAS No. 123(R) must be adopted by the Company no later
than July 1, 2005. The Company expects to adopt SFAS No. 123(R) on July
1, 2005. When the Company adopts SFAS No. 123(R), it may elect the
modified prospective method or the modified retrospective method. The
Company has not yet determined which method it will elect. The Company
currently accounts for share-based payments to employees using APB
Opinion No. 25 and the intrinsic value method and, as a result,
generally recognizes no compensation cost for employee stock options.
The impact of adoption of SFAS No. 123 (R) cannot be determined at this
time because it will depend on levels of share-based payments granted in
the future.
Note 2 CHANGE IN ACCOUNTING PRINCIPLE
In order to be consistent with its newly acquired subsidiary DataFuzion,
Inc., the Company changed its revenue recognition policy during the year
ended March 31, 2005. The change relates to the Company's medical
billing services. Formerly, the Company recognized revenue from medical
billing services when the service was performed for the client based on
the Company's percentage of the clients estimated collections. The
change allows the Company to recognize revenue based on a percentage of
actual net collections on clients' accounts receivable. The impact of
this change is $214,926 of revenue previously recognized in fiscal year
ended March 31, 2004 being deferred to fiscal year ending March 31,
2005.
Note 3 BUSINESS ACQUISITIONS
Effective March 1, 2005, Omni, entered into a share exchange agreement
("the agreement") with DataFuzion, Inc. a Colorado corporation and
provider of practice management, billing and collection services, and
electronic medical records solutions to medical practitioners. The
agreement calls for Omni to offer a shareholder exchange to the
DataFuzion shareholders in which they may transfer to Omni at closing
100% of the outstanding common stock of DataFuzion in exchange for
23,019,215 shares of common stock of Omni. The exchange will constitute
a 50% ownership of Omni for the shareholders of DataFuzion in the event
all shareholders of DataFuzion agree to exchange their respective common
shares. As of July 8, 2005 approximately 90% of the DataFuzion
shareholders had exchanged their shares for shares of Omni and Omni had
issued 21,772,966 shares of its common stock, with an additional 352,339
to be issued for a total issuance of 22,125,305 shares of common stock.
The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed as of March 1, 2005, the date of
acquisition:
F-11
Omni Medical Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2005
Note 3 BUSINESS ACQUISITIONS-[continued]
Cash $ 4,208
Accounts receivable, net 170,300
Property and equipment 1,545,547
Intangible assets 1,462,640
Other assets 26,470
Accounts payable (138,158)
Accrued expenses (1,206,843)
Notes payable (1,941,264)
Convertible debt (1,265,582)
Minority interest 134,268
Goodwill 3,420,945
-----------
Net assets acquired $ 2,212,531
===========
The DataFuzion acquisition was accounted for as a purchase and their
results of operations are included in the Company's financial statements
from the date of acquisition.
The following proforma financial information presents results as if the
DataFuzion acquisition had occurred at the beginning of the years ended
March 31, 2005 and 2004:
2005 2004
Revenues $ 2,982,315 $ 1,493,324
Net loss (1,770,489) (1,135,015)
Basic and diluted loss per share $ (0.09) $ (0.08)
Note 4 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
F-12
Omni Medical Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2005
Note 4 DISCONTINUED OPERATIONS
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.
Note 5 PROPERTY AND EQUIPMENT
The major categories of property and equipment are as follows:
3/31/2005
Computer Equipment $ 887,311
Office Equipment 97,214
Furniture & Fixtures 25,854
Computer Software 1,026,453
Equipment - Manufacturing 45,050
Building & Land - Alabama 85,000
Leasehold Improvements 18,510
Accumulated depreciation (491,162)
----------
Net property and equipment 1,694,230
==========
Included in these balances are $1,010,750 of assets purchased under
capital leases.
Depreciation expense was for the years ended March 31, 2005 and 2004 was
$113,798 and $36,514 respectively.
Note 6 INTANGIBLE ASSETS
Intangible assets consist of the following:
Software development costs $1,800,132
Customer lists 431,953
Non-compete agreement 100,000
Trade name 60,000
Trademark 1,270
Accumulated amortization (546,252)
----------
Net intangible assets 1,847,103
==========
Amortization expense for the years ended March 31, 2005 and 2004 was
$141,426 and $80,166 respectively.
F-13
Omni Medical Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2005
Note 7 STOCKHOLDERS' EQUITY
During the year ended March 31, 2005 the Company issued 147,200 shares
of its of restricted common stock to offshore investors pursuant to
Regulation S, promulgated under the Securities Act of 1933, and received
consideration of $15,350.
During the year ended March 31, 2005, the Company issued 1,831,000
shares of restricted common stock to various consultants for services
to be performed over a term of 6 months to 2 years. Management has
estimated the fair market value of the fees at $183,100, of which
$131,375 have been expensed and the remaining $51,725 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 and
placed the shares in escrow pending the completion of a loan agreement.
However, the loan agreement was never completed and on November 12, 2004
the stock certificate was cancelled.
In July 2004, the Company issued 480,753 shares of common stock pursuant
to the September 5, 2003 Reorganization agreement. These shares are in
addition to the original 12,913,815 shares issued during the year ended
March 31, 2004. The shareholders tendered in a timely fashion according
to the terms of the agreement, but had subsequently lost the
certificate.
Also in July 2004, the Company entered into a Stock Purchase Agreement
("The agreement") with a London based investment company. On September
30, 2004, pursuant to the agreement, the Company exchanged 4,400,000
shares of its restricted common stock for 906,167 shares in an off-shore
investment trust. On that date the investment trust shares were trading
at a price equivalent to $.56 per share for a total investment of
$507,454. The Company has classified the investment as available for
sale and carries the investment at fair market value in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities".
On September 7, 2004 by unanimous consent the Company's board of
directors approved and authorized the exchange of 600,000 shares of the
Company's common stock to the Company's President and Chief Executive
Officer in return for all accrued salary and any interest or penalties
in connection with the accrued salary totaling $137,500. The board also
approved and authorized the issuance of 500,000 shares to a company
owned by the Company's Chief Executive Officer as payment on the above
loan made to the Company.
On September 28, 2004 the Company issued 50,000 to its Vice President
for services. Management has estimated the fair market value of the
services to be $5,000, which has been recorded as an expense in the
accompanying financial statements.
Effective March 1, 2005, Omni, entered into a share exchange agreement
("the agreement") with DataFuzion, Inc. a Colorado corporation and
provider of practice management, billing and collection services, and
electronic medical records solutions to medical practitioners. The
agreement calls for Omni to offer a shareholder exchange to the
DataFuzion shareholders in which they may transfer to Omni at closing
100% of the outstanding common stock of DataFuzion in exchange for
23,019,215 shares of common stock of Omni. The exchange will constitute
a 50% ownership of Omni for the shareholders of DataFuzion in the event
all shareholders of DataFuzion agree to exchange their respective common
shares. As of July 8, 2005 approximately 90% of the DataFuzion
shareholders had exchanged their shares for shares of Omni and Omni had
issued 22,125,305 shares of its common stock.
F-14
Omni Medical Holdings, Inc.
Notes to Financial Statements
March 31, 2005
Note 7 STOCKHOLDERS' EQUITY[continued]
During the year ended March 31, 2004, 327,216 shares of common stock of
the Company were issued in private placements at prices ranging from
$0.50 to $0.75 per share. The sale of 200,000 shares at $0.50 per share
was with the wife of the Company's chief executive officer and
president.
In December 2003, the Company entered into a Stock Escrow Agreement with
an unrelated third party through which the Company issued 577,125 shares
of restricted common stock to offshore investors pursuant to Regulation
S, promulgated under the Securities Act of 1933. Pursuant to the
agreement the escrow agent remitted 40 percent (40%) of the offer price
or, $225,250 to the Company.
In March 2004, the Company issued 15,000 shares of restricted common
stock to an individual as an exit fee related to a possible acquisition
of the individuals company. Management has estimated the fair market
value of the exit fee as $4,500, which has been recorded as an expense
in the accompanying financial statements.
Note 8 LINE OF CREDIT
On December 19, 2003 the Company entered into a loan agreement and
security agreement with Presidential Financial Corporation allowing the
Company to borrow up to 80% of its accounts receivable or $300,000
whichever is less. The loan is secured by accounts receivable and other
tangible assets of the Company and accrues interest at prime plus 2%. As
of March 31, 2005, the Company owed $163,453 on the line of credit.
F-15
Omni Medical Holdings, Inc.
Notes to Financial Statements
March 31, 2005
Note 9 LONG-TERM DEBT
The following is a summary of the Company's indebtedness as of
March 31, 2005:
Note payable, interest at 5%, payable in a
lump sum payment, originally due, May 2004,
collateralized by the assets of MBM $316,284
Note payable, interest at 5%, payable in
quarterly payments of $30,000, due November
2005, collateralized by the assets of McCoy 202,867
Note payable, interest at 8%, payable in
monthly installments of $1,956, due July
2009 collateralized by all of the assets of
the company 86,079
Note payable, interest at 7.9%, payable in
monthly installments of $590, due July 2016,
collateralized by land and building 53,415
Note payable, interest at 5%,
payable in monthly installments of $375,
originally due September 2004, unsecured 11,314
Note payable, interest at 10%, originally
payable in September 2004, unsecured 32,000
Note payable, related party, interest free,
due on demand, unsecured 36,090
Note payable, interest at 10% payable in
monthly payments of $92,852, due in June
2005, collateralized by equipment 541,216
Convertible debt, with interest between 10%
and 12%, payable on demand, unsecured 1,265,582
Capital leases payable, with interest at
between 8.45% and 34.17% , payable in
monthly installments totaling $23,586, due
from September 2007 to January 2010
collateralized by equipment 939,288
Note payable, imputed interest at 10%, due
on demand, unsecured 450,000
----------
Total $3,934,135
==========
F-16
Omni Medical Holdings, Inc.
Notes to Financial Statements
March 31, 2005
Note 9 LONG-TERM DEBT[continued]
Future minimum note payments as of March 31, 2005, are approximately as
follows:
Year Ending March 31: Amount
2006 $3,054,568
2007 241,292
2008 262,069
2009 201,748
Thereafter 174,458
----------
$3,934,135
==========
Note 10 LEASES
The following is a schedule by years of future minimum lease payments
required under operating leases that have initial or remaining
noncancellable lease terms in excess of one year as of March 31, 2005:
Year ended Total
March 31, 2006 $ 191,436
March 31, 2007 117,176
March 31, 2008 79,204
March 31, 2009 81,361
Thereafter 420
---------
Totals $ 469,597
=========
Rent expense for the years ended March 31, 2005 and 2004 were $134,733
and $90,296, respectively.
Note 11 INCOME TAXES
Below is a summary of deferred tax asset calculations on net operating
loss carry forward amounts. Loss carry forward amounts expire through
2024. A valuation allowance is provided when it is more likely than not
that some portion of the deferred tax asset will not be realized.
NOL
Description Balance Tax Rate
Federal Income Tax $2,803,536 $953,202 34%
Valuation allowance (953,202)
--------
Deferred tax asset 3/31/2004 $ 0
========
The valuation increased $314,752 from $638,450 at December 31, 2004.
F-17
Omni Medical Holdings, Inc.
Notes to Financial Statements
March 31, 2005
Note 12 GOING CONCERN
The Company's financial statements for the years ended March 31, 2005
and 2004 show incurred net losses of $1,140,667 and $555,229,
respectively, and has a working capital deficiency of $4,421,589, as of
March 31, 2005, raising substantial doubt about the company's ability to
continue as a going concern. Management's plans to address concerns
raised by this issue include:
a. Through the acquisition of Plum Creek Outpatient and administrative
services agreement with Stat Anesthesia, P.C., (See note 15) the Company
believes it has already acquired significant asset and adequate liquid
assets for operation. Net collectable accounts receivable acquired is
estimated to be in excess of $1.4 million with no long term debt.
Furthermore, management believes these companies will provide
significant cash flow to provide for all corporate needs.
b. The Company also plans to raise additional capital and is working
with a number of financial sources to achieve this.
There is no assurance that these or any efforts will be successful.
However, management believes that these measures will enable the Company
to have adequate funds to support operations for the next twelve months.
Note 13 RELATED PARTY TRANSACTIONS
During the year ended March 31, 2005 the Company's President and Chief
Executive Officer loaned the Company $43,000. The loan is payable on
demand, unsecured and interest free. The balance of the loan as of March
31, 2005 is $36,090.The Company's board of directors approved and
authorized the issuance of 500,000 shares to a company owned by the
Company's Chief Executive Officer as payment on the loan.
On September 7, 2004 by unanimous consent the Company's board of
directors approved and authorized the exchange of 600,000 shares of the
Company's common stock to the Company's President and Chief Executive
Officer in return for all accrued salary and any interest or penalties
in connection with the accrued salary totaling $137,500.
Note 14 COMMITMENTS AND CONTINGENCIES
In 2003, the Company retained the services of an investment banking firm
to raise capital for future acquisitions. Through March 31, 2005 the
Company has paid $25,000 in deferred financing costs which will be
offset against future equity proceeds.
In conjunction with the McCoy acquisition, Omni entered into an
employment agreement with one of the McCoy's former owners, guaranteeing
employment with Omni through November 30, 2005 at an annual salary of
$30,000 plus performance based bonuses and benefits.
Omni entered into an employment agreements with its chief executive
officer and president. The agreements provide compensation to both
individuals at an annual base salary of $180,000, a $1,000 a month auto
allowance, fully paid health insurance and a bonus of 1% of gross
revenue, paid quarterly.
An action has been brought by holders of promissory notes issued by the
Company's majority owned subsidiary, DataFuzion, Inc. for enforcement of
the notes and possession of substantially all assets of DataFuzion
which are alleged to secure payment of the notes. Plaintiffs filed a
motion for possession of the assets, which was denied by the Court.
DataFuzion does not dispute the execution or delivery of the
F-18
Omni Medical Holdings, Inc.
Notes to Financial Statements
March 31, 2005
Note 14 COMMITMENTS AND CONTINGENCIES[continued]
notes and has recorded the notes in these financial statements. In
addition, DataFuzion has some claims against some of the Plaintiffs
which may give rise to offsets or counterclaims against some(but in all
likelihood, not all) of the Plaintiffs. Those claims have not yet been
pled or fully factually explored. The current status of this matter is
that the Plaintiffs have filed a Motion for Summary Judgement, seeking
judgement for the notes balances(without enforcement of their claimed
security interest). DataFuzion has sought and obtained an extension of
time to respond to this Motion, and has initiated settlement discussions
with Plaintiffs . Those settlement negotiations are ongoing.
Three former employees of DataFuzion have also brought action against
the Company seeking back pay in total of approximately $60,000.
DataFuzion disputes the claims but has offered settlement of
approximately $12,000, which has been rejected. Discovery is ongoing and
a settlement conference is scheduled for August 2005.
Two shareholders of DataFuzion have brought action against DataFuzion
for royalties due them related to new sales of DataFuzion's
"Infobridge" software. DataFuzion disputes the amounts owed and has
entered into settlement negotiation with the shareholders.
Note 15 SUBSEQUENT EVENTS
Effective April 15, 2005, the Company acquired 100% of the outstanding
shares of Plum Creek Outpatient, Inc., an Illinois corporation ("Plum
Creek") in exchange for 1,000,000 shares of the Company's common stock
that are "restricted securities" as defined in Rule 144 of the
Securities and Exchange Commission. The Company also acquired the assets
of Stat Anesthesia, P.C., an Illinois corporation ("Stat"), in exchange
for 4,000,000 shares of our common stock that were also "restricted
securities" as defined in Rule 144 of the Securities and Exchange
Commission. Additionally, Stat signed an Administrative Services
Agreement with the Company in which the Company will provide financial
and administrative services for all of Stat's operations. While the
Company will have complete control over the administrative and financial
affairs of Stat, the Company will not be involved in any way in the
practice of medicine.
F-19
DataFuzion, Inc.
Report of Independent Registered Public Accounting Firm
and
Financial Statements
December 31, 2004
DataFuzion, Inc.
TABLE OF CONTENTS
Page
Report of Independent Registered Public Accounting Firm . . . . . . . . 1
Balance Sheet - December 31, 2004 . . . . . . . . . . . . . . . . . 2-3
Statements of Operations for the Years Ended December 31, 2004 and
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Stockholders' Deficit for the Years Ended December 31,
2004 and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Statements of Cash Flows for the Years Ended December 31, 2004 and 2003 6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . .7-14
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
DataFuzion, Inc.
We have audited the accompanying balance sheet of DataFuzion Inc. as of
December 31, 2004 and the related statements of operations, stockholders'
deficit, and cash flows for the years ended December 31, 2004 and 2003. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform an audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DataFuzion, Inc., as of
December 31, 2004 and the results of operations and cash flows for the years
ended December 31, 2004 and 2003, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that
DataFuzion, Inc. will continue as a going concern. As discussed in Note 11 to
the financial statements, the Company has accumulated losses from operations
and a deficit in working capital. These issues raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 11. The financial statements do not
include any adjustment that might result from the outcome of this uncertainty.
/s/ Mantyla McReynolds
Mantyla McReynolds
Salt Lake City, Utah
May 6, 2005
F-1
DataFuzion, Inc.
Balance Sheet
December 31, 2004
ASSETS
Current assets:
Cash and cash equivalents $ 1,099
Accounts receivable, net of allowance for doubtful
accounts of $8,000 139,232
Employee advances 1,832
Prepaid expenses 19,109
---------
Total current assets 161,272
Property, equipment & improvements - Notes 1& 3 1,469,505
Other assets:
Intangible assets, net - Note 1& 4 1,411,899
---------
Total other assets 1,411,899
---------
TOTAL ASSETS $3,042,676
=========
See accompanying notes to financial statements
F-2
DataFuzion, Inc.
Balance Sheet [continued]
December 31, 2004
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 117,368
Bank overdraft 17,208
Related party payable-Note 12 534,843
Accrued expenses 468,414
Payroll and payroll taxes payable 330,440
Current portion of long term liabilities-Note 7 2,177,318
----------
Total current liabilities 3,645,591
Long-term Liabilities
Convertible debt-Note 7 1,037,576
Notes payable-Note 7 1,805,086
Current portion of long term liabilities-Note 7 (2,177,318)
----------
Total long-term liabilities 665,344
----------
Total liabilities 4,310,935
Stockholders' deficit:-Note 5
Preferred stock, no par value per share; 10,000,000
Shares authorized; -0- issued and outstanding -
Common stock, par value $0.001 per share; 100,000,000
shares authorized; 36,149,628 issued and outstanding 36,150
Capital in excess of par value 5,535,516
Accumulated deficit (6,839,925)
----------
Total stockholders' deficit (1,268,259)
----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $3,042,676
==========
See accompanying notes to financial statements
F-3
DataFuzion, Inc.
Statements of Operations
For the years ended December 31, 2004 and 2003
2004 2003
Revenue $ 954,897 $ 276,395
Expenses:
General and administrative 1,045,749 672,028
Depreciation expenses 277,561 122,134
----------- ----------
Total Expenses 1,323,310 794,162
----------- ----------
Income (loss) from operations (368,413) (517,767)
Other income (expense):
Other income 67 -
Other expense (1,750) -
Interest expense (278,571) (284,786)
----------- ----------
Total other income (expense) (280,254) (284,786)
----------- ----------
Loss from operations before income taxes (648,667) (802,553)
Provision for income taxes - -
----------- ----------
Net loss $ (648,667) $ (802,553)
=========== ==========
Net loss per share-basic and diluted $ (0.02) $ (0.03)
=========== ===========
Weighted average number of common shares
outstanding-basic and diluted 31,541,843 27,237,643
=========== ===========
See accompanying notes to financial statements
F-4
DataFuzion, Inc.
Statement of Stockholders' Deficit
For the Years Ended December 31, 2004 and 2003
Total
Additional Stockholders'
Shares Common Paid in Accumulated Equity
Issued Stock Capital Deficit (Deficit)
Balance
January 1, 2003 24,821,400 $24,821 $4,005,240 $(5,388,705) $(1,358,644)
Conversions of debt
to equity 2,471,615 2,472 167,819 170,291
Sale of common stock
pursuant to private
placements 726,105 726 194,324 195,050
Issuance of common
stock for services 312,500 313 30,937 31,250
Net loss for year ended
December 31, 2003 (802,553) (802,553)
----------- ------- --------- ----------- -----------
Balance,
December 31, 2003 28,331,620 28,332 4,398,320 (6,191,258) (1,764,606)
Conversions of debt
to equity 4,965,508 4,966 415,048 420,014
Sale of common stock
pursuant to private
placements 2,402,500 2,402 677,598 680,000
Issuance of common
stock for services 450,000 450 44,550 45,000
Net loss for year ended
December 31, 2004 (648,667) (648,667)
---------- ------- --------- ---------- -----------
Balance,
December 31, 2004 36,149,628 36,150 5,535,516 (6,839,925) (1,268,259)
See accompanying notes to financial statements
F-5
DataFuzion, Inc.
Statements of Cash Flows
For the years ended December 31, 2004 and 2003
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (648,667) $ (802,553)
Adjustments to reconcile net loss to net
cash used in continuing operations:
Depreciation and amortization 277,561 122,134
Allowance for doubtful accounts 5,000 3,000
Shares issued for services 45,000 31,250
Changes in operating assets and liabilities:
Accounts receivable 4,011 (108,344)
Employee advances - (1,383)
Prepaid expenses (13,951) 29,842
Accounts payable 72,723 10,500
Accrued expenses 138,070 391,229
------------ ------------
Net cash used in operating activities (120,254) (324,325)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,538,035) (35,705)
Software development costs (408,824) (224,434)
------------ ------------
Net cash used in investing activities (1,946,859) (260,139)
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft 15,244 1,964
Proceeds from issuance of debt 1,339,421 3,595
Payments of debt (175,000) (1,055)
Convertible debentures 208,547 360,791
Proceeds from the issuance of common stock 680,000 195,050
------------ ------------
Net cash provided by financing
activities 2,068,212 560,345
------------ ------------
NET INCREASE (DECREASE) IN CASH 1,099 (24,119)
CASH AT BEGINNING OF YEAR 0 24,119
------------ ------------
CASH AT END OF YEAR 1,099 0
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 208,653 $ 127,512
Cash paid for income taxes - -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Conversion of debt to equity $ 420,014 $ 170,291
See accompanying notes to financial statements
F-6
DataFuzion, Inc.
Notes to Financial Statements
December 31, 2004
Note 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - DataFuzion, Inc. ("DataFuzion"), a Colorado corporation,
provides practice management, billing and collection services, and
electronic medical records solutions to medical practitioners. The
Company was originally organized as Urology Partners of America, Inc.
Cash and cash equivalents- The Company considers all highly liquid
investments with original maturities at the date of purchase of three
months or less to be cash equivalents.
Revenue recognition- The Company recognizes revenue according to Staff
Accounting Bulletin 104, Revenue Recognition which clarifies U.S.
generally accepted accounting principles for revenue transactions. The
Company recognizes revenue from two sources, medical billing services
and data hosting services. Fees for the medical billing services are
primarily based on a percentage of net collections on our clients'
accounts receivable. The Company recognizes revenue and bills its
customers for these services when the customers receive payment on
those accounts receivable. Revenues for the data hosting services are
recognized monthly as services are performed for our clients.
Use of estimates in preparation of financial statements- The preparation
of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent 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.
Bad debt and allowance for doubtful accounts- The allowance for doubtful
accounts is maintained at a level sufficient to provide for estimated
credit losses based on evaluating known and inherent risks in the
receivables portfolio. The Company provides an allowance for doubtful
accounts which, based upon management's evaluation of numerous factors,
including economic conditions, a predictive analysis of the outcome of
the current portfolio and prior credit loss experience, is deemed
adequate to cover reasonably expected losses inherent in outstanding
receivables. The allowance at December 31, 2004 is $8,000.
Property and equipment- Property and equipment, including equipment
under capital leases, are stated at cost, less accumulated depreciation.
Expenditures for maintenance and repairs are charged to expense as
incurred. The following is a summary of the estimated useful lives and
depreciation methods used in computing depreciation expense:
Depreciation Estimated
Asset Method useful life
Computer Equipment Straight-line 5 years
Office Furniture & Equipment Straight-line 7 years
Computer Software Straight-line 3 years
Leasehold Improvements Straight-line 7 years
F-7
DataFuzion, Inc.
Notes to Financial Statements
December 31, 2004
Note 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES[continued]
Concentrations of credit risk-The Company grants credit to its
customers, generally without collateral. At December 31, 2004, four
customers accounted for 59% of accounts receivable, with each of those
customers accounting for more than 10% of the total accounts receivable
balance. During the years ended December 31, 2004 three customers
accounted for 56% of sales, and during the year ended December 31, 2003
one customer accounted for 63% of sales.
Intangible assets- The Company's intangible assets include a trademark
and software development costs.
Trademark-The trademark represents the cost of registering trademarks
with the United States Patent and Trademark office. The Company expects
the trademark to contribute to cash flows indefinitely and therefore
deems the trademark to have an indefinite useful life.
Software development costs include costs incurred in the development or
enhancement of the "Infobridge" software. These costs are capitlized
after the preliminary project stage is complete, when management with
the relevant authority authorizes and commits to the funding of the
project, when it is probable that the project will be completed and when
the software will be used to perform the function intended.
Capitalization ceases no later than the point at which the project is
substantially complete and ready for its intended use. The Company
expenses software development costs, as incurred during the planning and
post-implementation phases of development. The Company amortizes
software on a straight line basis over its estimated useful life,
generally seven years.
Income taxes- The Company complies with the provisions of Statement of
Financial Accounting Standards No. 109 [the Statement], "Accounting for
Income Taxes." The Statement requires an asset and liability approach
for financial accounting and reporting for income taxes, and the
recognition of deferred tax assets and liabilities for the temporary
differences between the financial reporting basis and tax basis of the
Company's assets and liabilities at enacted tax rates expected to be in
effect when such amounts are realized or settled.
Net Loss Per Common share-In accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," basic loss per
common share is computed using the weighted average number of common
shares outstanding. Diluted earnings per share is computed using
weighted average number of common shares plus dilutive common share
equivalents outstanding during the period using the treasury stock
method. Options to purchase 850,000 and 225,000 shares of common stock
outstanding during 2004 and 2003 respectively, were excluded from the
computation of diluted earnings per share because the effect would have
been antidilutive.
Fair value of financial instruments- The carrying amounts of the
Company's cash and cash equivalents, accounts receivable and accounts
payable approximate fair values due to the short maturities of these
instruments. The carrying value of the Company's short-term borrowings
approximates fair value based on the Company's current incremental
borrowing rate for similar types of borrowing arrangements. The fair
values of the Company's receivables and payables to related parties are
not practicable to estimate due to the related party nature of the
underlying transactions and indefinite payments terms.
DataFuzion, Inc.
Notes to Financial Statements
December 31, 2004
Note 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES[continued]
Stock based compensation-SFAS No. 123, "Accounting for Stock-Based
Compensation" allows companies to choose wether to account for employee
stock-based compensation on a fair-value method, or to account for such
compensation under the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). The Company has chosen to account for stock-based
compensation using APB 25. At December 31, 2004, the Company had no
stock option plans. If the Compensation cost for the Company's
compensation plan had been determined consistent with SFAS No. 123 the
Company's net income and net income per common share would have changed
to the pro forma amounts indicated below:
2004 2003
Net loss, as reported $(648,667) $(802,553)
Compensation cost under fair value-based
accounting method, net of tax 54,426 33,692
--------- ---------
Net loss, pro forma $(703,093) $(836,245)
Net loss per share-basic and diluted:
As reported $ (0.02) $ (0.03)
Pro forma $ (0.02) $ (0.03)
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes opton-pricing model with the following
assumptions: dividend yield of 0%, expected volatility of 0%, risk-free
interest rate of 3% and exptected lives of 3,650 days.
Recent Accounting pronouncements- On December 16, 2004, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standard ("SFAS") No. 123(R) Share-Based Payment, which is a
revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS
No. 123 (R) supercedes Accounting Principles Board ("APB") Opinion No.
25, Accounting for Stock issued to Employees. SFAS. No. 123(R) requires
all share-based payments to employees , including grants of employee
stock options, to be recognized in the income statement based on their
fair values. SFAS No. 123(R) must be adopted by the Company no later
than July 1, 2005. The Company expects to adopt SFAS No. 123(R) on July
1, 2005. When the Company adopts SFAS No. 123(R), it may elect the
modified prospective method or the modified retrospective method. The
Company has not yet determined which method it will elect. The Company
currently accounts for share-based payments to employees using APB
Opinion No. 25 and the intrinsic value method and, as a result,
generally recognizes no compensation cost for employee stock options.
The impact of adoption of SFAS No. 123 (R) cannot be determined at this
time because it will depend on levels of share-based payments granted in
the future. Had the Company adopted SFAS No. 123(R) in prior periods,
the impact would have approximated the impact of SFAS No. 123 described
above under Stock based compensation.
F-9
DataFuzion, Inc.
Notes to Financial Statements
December 31, 2004
Note 2 BUSINESS ACQUISITIONS
Effective June 30, 2004, the Company completed an asset purchase
agreement with The TriZetto Group, Inc., ("TriZetto"), a Deleware
corporation and a provider of healthcare information technology products
and services. The aggregate purchase price was $800,000, including
$720,000 payable at closing, and $80,000 payable in 120 days after
closing. The Trizetto acquisition was accounted for as purchase and
their results of operations are included in the Company's financial
statements from the date of acquisition
The following table summarizes the estimated fair values of the assets
acquired as of June 30, 2004, the date of acquisition.
Computer equipment $ 150,000
Computer software 614,157
Accounts receivable 35,843
----------
Net assets acquired $ 800,000
==========
Note 3 PROPERTY AND EQUIPMENT
The major categories of property and equipment are as follows:
12/31/04
Computer Equipment $ 710,098
Office Furniture & Equipment 64,577
Computer Software 950,551
Leasehold Improvements 18,509
Accumulated depreciation (274,230)
----------
Net property and equipment 1,469,505
==========
Included in these balances are $845,970 of assets purchased under
capital leases. Depreciation and amortization expense was $277,561 in
2004, and $122,134 in 2003.
Note 4 INTANGIBLE ASSETS
Intangible assets consist of the following:
Software development costs $1,703,128
Trademark 1,270
Accumulated amortization (292,499)
----------
$1,411,899
==========
F-10
DataFuzion, Inc.
Notes to Financial Statements
December 31, 2004
Note 5 STOCKHOLDERS' EQUITY
During the year ended December 31, 2004, 2,402,500 shares of common
stock of the Company were issued in private placements at prices ranging
from $0.10 to $0.50 per share. The Company also converted $420,016 of
debt into 4,965,508 shares of its common stock.
In November 2004, the Company issued 450,000 shares of common stock to
three individuals as an incentive to pay-off a bank loan for the
Company (See Note 16). Management has estimated the fair market value of
the compensation as $45,000, which has been recorded as an expense in the
accompanying financial statements.
During the year ended December 31, 2003, 726,105 shares of common stock
of the Company were issued in private placements at prices ranging from
$0.10 to $0.50 per share. The Company also converted $170,291 of debt
into 2,471,615 shares of its common stock.
Note 6 LINE OF CREDIT
In November 2004, the Company's $625,000 line of credit was called by the
bank. Three individuals who personally guaranteed the note paid $450,000
to pay off the line and the Company paid the additional $175,000. The
$450,000 is included below in long term debt.
Note 7 LONG-TERM DEBT
The following is a summary of the Company's indebtedness as of December
31, 2004:
Note payable, interest at 10% payable in
monthly payments of $92,852, due in June
2005, collateralized by equipment $ 541,216
Convertible debt, with interest between 10%
and 12%, payable on demand, unsecured 1,240,582
Capital leases payable, with interest at
between 8.45% and 34.17% , payable in
monthly installments totaling $23,586, due
from September 2007 to November 2009
collateralized by equipment 813,870
Note payable, imputed interest at 10%, due
on demand, unsecured 450,000
-----------
Total $ 3,045,668
===========
Future minimum note payments as of December 31, 2004, are approximately as
follows:
Year Ending December 31: Amount
2005 $2,380,324
2006 177,479
2007 190,733
2008 169,735
Thereafter 127,397
----------
$3,045,668
==========
F-11
DataFuzion, Inc.
Notes to Financial Statements
December 31, 2004
Note 8 LEASES
The following is a schedule by years of future minimum lease payments
required under operating leases that have initial or remaining
noncancellable lease terms in excess of one year as of December 31,
2004:
Year ended Total
December 31, 2005 $ 96,170
December 31, 2006 95,439
December 31, 2007 74,708
Thereafter 78,977
--------
Totals $345,294
========
Rent expense for the years ended December 31, 2004 and 2003 was $51,325
and $72,245 respectively.
Note 9 INCOME TAXES
Below is a summary of deferred tax asset calculations on net operating
loss carry forward amounts. Loss carry forward amounts expire through
2024. A valuation allowance is provided when it is more likely than not
that some portion of the deferred tax asset will not be realized.
NOL
Description Balance Tax Rate
Federal Income Tax $4,078,606 $1,386,726 34%
Valuation allowance (1,386,726)
----------
Deferred tax asset 12/31/2004 $ 0
The valuation allowance increase $220,547 from $1,166,179 as of December
31, 2003
Note 10 STOCK OPTION PLAN
In March 1998 the Company's Board of Directors adopted the Company's
Incentive Stock Option Plan ("The Plan"). The Plan grants options to
officers and key employees of the Company to purchase up to 7,500,000
shares of the Company's common stock. At prices determined by the Board
of Directors at the time of grant. The options fully vest upon the date
of grant.
Changes in stock options for the year ended December 31, 2004 is as
follows:
F-12
DataFuzion, Inc.
Notes to Financial Statements
December 31, 2004
Note 10 STOCK OPTION PLAN-[continued]
Weighted
Average
Exercise
Shares Price
Outstanding @ 12/31/03 225,000 $ 0.40
Granted 625,000 0.40
Exercised 0 0.00
Forfeited/expired 0 0.00
Outstanding @ 12/31/04 850,000 0.40
Exercisable 850,000 0.40
Weighted average fair value of options
granted during year $ 0.30
Weighted average fair value of shares
issued under Incentive Stock Option Plan N/A
Note 11 GOING CONCERN
The Company's financial statements for the years ended December 31, 2004
and 2003 show incurred net losses of $648,667 and $802,553,
respectively, and a working capital deficiency of $3,484,319 as of
December 31, 2004, raising substantial doubt about the Company's ability
to continue as a going concern. Management's plans to address concerns
raised by this issue include pursuing additional sources of liquidity in
the form of commercial credit or additional sales of the Company's
equity securities to fund a combination of short-term working capital
requirements and growth.
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.
Note 12 RELATED PARTY TRANSACTIONS
A member of the Company's Board of Directors has loaned the Company
$203,006 plus accumulated interest at 12% of $220, 258. The loan is
unsecured and due on demand.
The Company's Chief Executive Officer is owed deferred salary with
interest in the amount of $111,579. This amount has been accrued for in
these financial statements.
Note 13 COMMITMENTS AND CONTINGENCIES
An action has been brought by holders of promissory notes issued by the
Company for enforcement of the notes and possession of substantially
all assets of the Company which are alleged to secure payment of the
notes. Plaintiffs filed a motion for possession of the assets, which was
denied by the Court. The Company does not dispute the execution or
delivery of the notes and has recorded the notes in these
F-13
DataFuzion, Inc.
Notes to Financial Statements
December 31, 2004
Note 13 COMMITMENTS AND CONTINGENCIES[continued]
financial statements. In addition, the Company has some claims against
some of the Plaintiffs which may give rise to offsets or counterclaims
against some(but in all likelihood, not all) of the Plaintiffs. Those
claims have not yet been pled or fully factually explored. The current
status of this matter is that the Plaintiffs have filed a Motion for
Summary Judgement, seeking judgement for the notes balances(without
enforcement of their claimed security interest). The Company has sought
and obtained an extension of time to respond to this Motion, and has
initiated settlement discussions with Plaintiffs . Those settlement
negotiations are ongoing.
Three former employees of the Company have also brought action against
the Company seeking back pay in total of approximately $60,000. The
Company disputes the claims but has offered settlement of approximately
$12,000, which has been rejected. Discovery is ongoing and a settlement
conference is scheduled for August 2005.
Two shareholders of the Company have brought action against the Company
for royalties due them related to new sales of the Company's
"Infobridge" software. The Company disputes the amounts owed and has
entered into settlement negotiation with the shareholders.
Note 14 SUBSEQUENT EVENTS
Effective March 1, 2005, the Company entered into a share exchange
agreement ("the agreement") with Omni Medical Holdings, Inc..("Omni").
The agreement calls for Omni to offer a shareholder exchange to the
DataFuzion shareholders in which they may transfer to Omni at closing
100% of the outstanding common stock of DataFuzion in exchange for
23,019,215 shares of common stock of Omni. The exchange will constitute
a 50% ownership of Omni for the shareholders of DataFuzion in the event
all shareholders of DataFuzion agree to exchange their respective common
shares.
F-14
Omni Medical Holdings, Inc.
Pro Forma Financial Statements
December 31, 2004
Omni Medical Holdings, Inc.
Pro Forma Balance Sheet
December 31, 2004
(Unaudited)
ASSETS
Pro Forma Giving
Effect to
Omni Medical Datafuzion Acquisition as of
Holdings, Inc. Inc. Adjustments December 31, 2004
Current Assets:
Cash and cash
equivalents 16,420 1,099 - 17,519
Accounts receivable, net 398,721 139,232 - 537,953
Short-term investments,
at fair value 161,326 - - 161,326
Employee advances 3,935 1,832 - 5,767
Prepaid expenses 57,640 19,109 - 76,749
-------- --------- ------- ----------
Total current assets 638,042 161,272 - 799,314
Property & equipment, net 200,191 1,469,505 - 1,669,696
Other assets:
Deposits 730 - - 730
Deferred financing costs 25,000 - - 25,000
Goodwill 72,300 - 3,353,964 3,426,264
Intangible assets, net 396,190 1,411,899 - 1,808,089
--------- ---------- ---------- -----------
Total other assets 494,220 1,411,899 3,353,964 5,260,083
--------- ---------- ---------- -----------
Total assets 1,332,453 3,042,676 3,353,964 7,729,093
========= ========== ========== ===========
See accompanying notes to Pro Forma Financial Statements.
Omni Medical Holdings, Inc.
Pro Forma Balance Sheet (continued)
December 31, 2004
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Pro Forma Giving
Effect to
Omni Medical Datafuzion Acquisition as of
Holdings, Inc. Inc. Adjustments December 31, 2004
Current Liabilities:
Accounts Payable 176,412 117,368 - 293,780
Accrued expenses 121,931 1,130,691 - 1,252,622
Line of credit 71,606 17,208 - 88,814
Notes payable, current
portion 696,731 2,380,324 - 3,077,055
--------- ---------- -------- -----------
Total current
liabilities 1,066,680 3,645,591 - 4,712,271
Long-term Liabilities
Notes payable, net of
current portion 60,256 665,344 - 725,600
--------- ---------- -------- ------------
Total long-term
liabilities 1,126,936 4,310,935 - 5,437,871
Minority interest (126,826) (126,826)
Stockholders' equity
Preferred stock - - - -
Common stock 22,614 36,150 (14,025) 44,739
Capital in excess of
par value 2,752,173 5,535,516 (3,345,110) 4,942,579
Unrealized loss on
investment (161,327) - - (161,327)
Accumulated deficit (2,407,943) (6,839,925) 6,839,925 (2,407,943)
---------- ---------- ---------- -----------
Total stockholders'
equity 205,517 (1,268,259) 3,480,790 2,418,048
---------- ---------- ---------- -----------
Total liabilities and
Stockholders' Equity 1,332,453 3,042,676 3,353,964 7,729,093
========== ========== ========== ===========
See accompanying notes to Pro Forma Financial Statements
Omni Medical Holdings, Inc.
Pro Forma Statement of Operations
For the Year Ended March 31, 2004
(Unaudited)
Pro Forma Giving
Effect to
Omni Medical Datafuzion Acquisition as of
Holdings, Inc. Inc. Adjustments March 31, 2005
Revenue 1,181,146 312,178 - 1,493,324
Cost of sales 748,710 - - 748,710
---------- -------- --------- ------------
Gross operating profit 432,436 312,178 - 744,614
General and
administrative expenses 916,631 640,712 - 1,557,343
---------- -------- --------- ------------
Income (loss) from
operations (484,195) (328,534) - (812,729)
Other income (expenses)
Interest income - - - -
Interest expense (37,298) (251,252) - (288,550)
Realized loss on
investment - - - -
---------- -------- --------- ------------
Total other income
(expense) (37,298) (251,252) - (288,550)
---------- -------- --------- ------------
Loss from continuing
operations before income
taxes (521,493) (579,786) - (1,101,279)
Provision for income
taxes - - - -
---------- -------- --------- ------------
Loss from continuing
operations before income
taxes (521,493) (579,786) - (1,101,279)
Loss from discontinued
operations (33,736) - - (33,736)
---------- -------- --------- ------------
Net loss $ (555,229) $(579,786) - $ (1,135,015)
========== ======== ========= ============
Loss per share basic and
diluted:
Continuing operations $ (0.04) $ (0.02)
========== =========
Discontinued operations$ (0.01) $ -
========== =========
Net loss per share-basic
and diluted $ (0.04) $ (0.02)
========== =========
Weighted average number
of common shares
outstanding-basic and
diluted 14,708,706 26,372,463
========== ==========
See accompanying notes to Pro Forma Financial Statements
Omni Medical Holdings, Inc.
Pro Forma Statement of Operations
For the Nine Months Ended December 31, 2004
(Unaudited)
Pro Forma Giving
Effect to
Omni Medical Datafuzion Acquisition as of
Holdings, Inc. Inc. Adjustments December 31, 2004
Revenue 1,221,915 867,559 - 2,089,474
Cost of sales 842,946 - - 842,946
---------- -------- --------- ------------
Gross operating profit 378,969 867,559 - 1,246,528
General and
administrative expenses 752,942 1,491,429 - 2,244,371
---------- -------- --------- ------------
Income (loss) from
operations (373,973) (623,870) - (997,843)
Other income (expenses)
Interest income 29 - - 29
Interest expense (46,745) (216,520) - (263,265)
Loss on sale of assets (21,878) - - (21,878)
Realized loss on
investment (77,582) - - (77,582
---------- -------- --------- ------------
Total other income
(expense) (146,176) (216,520) - (362,696)
---------- -------- --------- ------------
Loss from continuing
operations before income
taxes (520,149) (840,390) - (1,360,539)
Provision for income
taxes - - - -
---------- -------- --------- ------------
Loss from continuing
operations before income
taxes (520,149) (840,390) - (1,360,539)
Loss from discontinued
operations - - - -
---------- -------- --------- ------------
Net loss $ (520,149) $(840,390) - $ (1,360,539)
========== ======== ========= ============
Loss per share basic and
diluted:
Continuing operations $ (0.03) $ (0.03)
========== =========
Discontinued operations$ - $ -
========== =========
Net loss per share-basic
and diluted $ (0.03) $ (0.03)
========== =========
Weighted average number
of common shares
outstanding-basic and
diluted 19,108,566 31,541,843
========== ==========
See accompanying notes to Pro Forma Financial Statements
Omni Medical Holdings, Inc.
Notes to Pro Forma Financial Statements
December 31, 2004
(Unaudited)
Note 1 DESCRIPTION OF TRANSACTION
Effective March 1, 2005, Omni Medical Holdings, Inc. ("Omni"), entered
into a share exchange agreement ("the agreement") with DataFuzion, Inc.
a Colorado corporation and provider of practice management, billing and
collection services, and electronic medical records solutions to medical
practitioners. The agreement calls for Omni to offer a shareholder
exchange to the DataFuzion shareholders in which they may transfer to
Omni at closing 100% of the outstanding common stock of DataFuzion in
exchange for 23,019,215 shares of common stock of Omni. The exchange
will constitute a 50% ownership of Omni for the shareholders of
DataFuzion in the event all shareholders of DataFuzion agree to exchange
their respective common shares. As of July 8, 2005 approximately 90% of
the DataFuzion shareholders had exchanged their shares for shares of
Omni and Omni had issued 21,772,966 shares of its common stock, with an
additional 352,339 to be issued for a total issuance of 22,125,305
shares of common stock.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
---------------------
On May 10, 2004, our Board of Directors resolved to dismiss Gelfand,
Hochstadt Pangburn, P.C., as our principal independent accountant and to
retain Mantyla McReynolds, Certified Public Accountants, of Salt Lake City,
Utah, as our new principal independent accountant, and to audit our financial
statements for the fiscal year ended March 31, 2004. See Part III, Item 13 of
this Annual Report.
Item 8(a). Controls and Procedures.
------------------------------------
As of the end of the 90 day period at the end of this Annual Report, we
carried out an evaluation, under the supervision and with the participation
of our Chief Executive Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on this
evaluation, our Chief Executive Officer concluded that our disclosure controls
and procedures are effective in timely alerting them to material information
required to be included in our periodic reports that are filed with the
Securities and Exchange Commission. It should be noted that the design of any
system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote. In addition, we reviewed our internal
controls, and there have been no significant changes in our internal controls
or in other factors that could significantly affect those controls subsequent
to the date of their last evaluation.
Item 8(b). Other Information.
------------------------------
Effective April 15, 2005, Omni Medical Holdings, Inc. ("we," "our," "us"
or words of similar import) acquired 100% of the outstanding shares of Plum
Creek Outpatient, Inc., an Illinois corporation ("Plum Creek"), in exchange
for
1,000,000 shares of our common stock that are "restricted securities" as
defined in Rule 144 of the Securities and Exchange Commission.
We also acquired the assets of Stat Anesthesia, P.C., an Illinois
corporation ("Stat"), in exchange for 4,000,000 shares of our common stock
that were also "restricted securities" as defined in Rule 144 of the
Securities and Exchange Commission. Additionally, Stat signed an
Administrative Services Agreement with us in which we will provide financial
and administrative services for all of Stat's operations. While we will have
complete control over the administrative and financial affairs of Stat, we
will not be involved in any way in the practice of medicine. Peter Pollachek
will be retained as a consultant to us for a period of two years.
For more information regarding these two acquisitions see our 8-K Current
Report filed with the Securities and Exchange Commission on April 21, 2005.
See Part III, Item 13.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
Identification of Directors and Executive Officers.
---------------------------------------------------
The following table sets forth the name, address, age and position
of each officer and director of the Company:
Name Age Position
---- --- --------
Arthur D. Lyons 46 CEO, CFO and Director
Douglas Davis 53 President, Treasurer and Director
John Globoker 31 Corporate Vice President, Secretary
and Director
Lance Weaver 45 Director
Robert Bauers 55 Director
Term of Office.
---------------
Directors are elected by our stockholders to serve until the next
annual meeting of our stockholders or until their successors have been elected
and have duly qualified. Officers are appointed to serve until the annual
meeting of our Board of Directors following the next annual meeting of our
stockholders and until their successors have been elected and have qualified.
The following is a summary of the business experience of each of our
current directors and executive officers:
Arthur D. Lyons. Since 1980, Mr. Lyons has held positions with
Merrill Lynch, E.F. Hutton, Prudential Securities and PaineWebber as
investment representative, pension consultant, trader and portfolio manager.
In 1999, Mr. Lyons formed LHM Trading, an investment firm, and in 2000,
founded Interstate Advisors, Inc., a registered investment advisor. Mr.
Lyons' broad financial experience has provided him with a solid background in
the financial and investment fields. He holds a B.A. Degree in sociology with
a minor in accounting from Samford University in Birmingham, Alabama, in 1979.
Douglas Davis, President, Treasurer & Director - Since DataFuzion's
inception in 1996, Mr. Davis has arranged and negotiated all structuring of
the financing of the company as well as managed day to day operations. For
over 20 years prior, Mr. Davis has served as CEO and CFO with experience in
financing, mergers, acquisitions, compliance, operations, and marketing. As a
principal and advisor, Mr. Davis has structured transactions raising several
hundred million dollars of capitalization for private companies in the
healthcare, telecommunications, real estate and securities industries that
were posturing for private or public growth. Mr. Davis was Chairman, CEO and
the largest shareholder of a Denver-based holding company from 1988-1994. Mr.
Davis has managed numerous due diligence operations, as well as strategic
planning and structuring of company business plans. Mr. Davis has held several
securities licenses, and was a senior partner/principal in a national
broker/dealer from 1983 to 1988 helping to manage its significant growth and
eventual sale to Shearson-Lehman Brothers in 1989. Mr. Davis holds a Bachelor
of Science from the University of Colorado and is a C.F.P.
John L. Globoker. Mr. Globoker was appointed Corporate Vice President
and Secretary October, 1, 2003. He graduated from the University of Northern
Colorado in Greeley, Colorado and earned his MBA from National American
University in 2002. John has extensive marketing experience in the areas of
human resources, finance and marketing primarily through his association with
the Nash Finch Co. Mr. Globoker joined the Company in mid 2003, and was
promoted to senior management shortly thereafter.
Lance Weaver. Director, graduated in 1982 from the South Dakota School
of Mines and Technology with a degree in Mechanical Engineering. Over the past
twenty years, he has owned and operated several businesses. Currently he is
Vice President and shareholder in Lloyd's, Inc., an international company,
based in Rapid City, South Dakota, that engineers and manufactures inspection
and security robots and cameras.
Robert Bauers, Director, Robert Bauers is a successful and seasoned CEO and
entrepreneur, serving numerous companies from positions of governance and
management. Robert is currently Chairman of Tatonka Capital Corp., a finance
company specializing in government projects. Founded in 1993, Tatonka
currently provides financing in excess of $100 million to municipal and
federal government entities. Previously, Mr. Bauers was a principal in First
Municipal Leasing Corporation that was sold in 1988 to Bank One Corporation
where he served as Executive Vice President of Bank One's Leasing Corporation.
Staying on as head of Bank One's Municipal Division until 1992, volume
increased five-fold. Mr. Bauer is also currently President of First Western
Restaurants Corporation., a Wendy's franchise that operates eleven restaurants
in Colorado with revenues exceeding $20 million annually. He holds a Bachelor
of Science in Business Administration from the University of Colorado and is
on the University of Colorado Dean's Advisory Council.
Family Relationships.
---------------------
There are no family relationships between Mr. Lyons, Mr. Davis, Mr.
Globoker and Mr. Weaver.
Involvement in Certain Legal Proceedings.
-----------------------------------------
During the past five years, none of our present or former directors,
executive officers or persons nominated to become directors or executive
officers:
(1) Filed a petition under the federal bankruptcy laws or any state
insolvency law, nor had a receiver, fiscal agent or similar officer appointed
by a court for the business or property of such person, or any partnership in
which he was a general partner at or within two years before the time of such
filing, or any corporation or business association of which he was an
executive officer at or within two years before the time of such filing;
(2) Was convicted in a criminal proceeding or named subject of a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him or her from or
otherwise limiting his involvement in any type of business, securities or
banking activities;
(4) Was found by a court of competent jurisdiction in a civil
action, by the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated any federal or state securities law, and
the judgment in such civil action or finding by the Securities and Exchange
Commission has not been subsequently reversed, suspended, or vacated.
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
We believes all forms required to be filed under Section 16 of the
Exchange Act for all of our directors and executive officers have been timely
filed.
Audit Committee.
----------------
We have not adopted an audit committee as of the date of this Report. We
will disclose when and if we do adopt an audit committee in the future.
Code of Ethics.
---------------
We have adopted a Code of Ethics and it was attached as Exhibit 14 to our
Annual Report for the year ended March 31, 2004. See Part III, Item 13, of
this
Annual Report.
Item 10. Executive Compensation.
-----------------------
Cash Compensation.
------------------
The following table shows the aggregate compensation that we have paid to
directors and executive officers for services rendered during the periods
indicated:
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
ities All
Name and Year or Other Rest- Under- LTIP Other
Principal Period Salary Bonus Annual rictedlying Pay- Comp-
Position Ended ($) ($) Compen-Stock Optionsouts ensat'n
-----------------------------------------------------------------
Arthur D. 3/31/05 180000 0 0 0 0 0 0
Lyons 3/31/04 0 0 0 600000 0 0 0
President, 6/30/03 6000* 0 0 0 17777* 0 2200*
CEO,
Director
Charles D.
Arbeiter 3/31/04 0 0 0 0 0 0 0
COO, Treas. 6/30/03 0 0 0 0 8889* 0 0
Director
John Globoker 3/31/05 40000 0 0 0 0 0 0
Corp. V.P., 3/31/04 30000 0 0 0 0 0 0
Secretary,
Director
Lance Weaver 3/31/05 0 0 0 0 0 0 0
director 3/31/04 0 0 0 0 0 0 0
Douglas Davis 3/31/05 15000 0 0 0 0 0 0
President
Treasurer
Director
Robert Bauers 3/31/05 0 0 0 0 0 0 0
Director
We do not have any stock option, bonus, profit sharing, pension or
similar plan; however, we may adopt such a plan in the future to attract
and/or retain members of management or key employees.
Compensation of Directors
We do not compensate our Directors.
Employment Agreements
In conjunction with the McCoy Business Services acquisition, we entered
into an Employment Agreement with one of the McCoy's former owners,
guaranteeing employment with us through November 30, 2005, at an annual salary
of $30,000, plus performance based bonuses and benefits.
We entered into an Employment Agreement with our chief executive
officer and President commencing October 1, 2003, through December 31, 2008.
The Agreement provides compensation at an annual base salary of $180,000, a
$1,000 a month auto allowance, fully paid health insurance and a bonus of 1%
of gross revenue, paid quarterly.
Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
----------------------------
The following table sets forth information concerning the beneficial
ownership of Omni common stock as of July 13, 2005, by each director and
executive officer, all directors and officers as a group, and each person
known to beneficially own 5% or more of its outstanding common stock.
Name and Address Percentage
of Beneficial Owner Shares Owned(1) Owned(1)
------------------- --------------- --------
Arthur D. Lyons 2,268,937 5.1%
2319 Huntington Place
Rapid City, SD 57702
John L. Globoker 50,000 (3)
Robert Bauers 3,279,350 7.4%
7660 Valmont Road
Boulder, CO 80301
Douglas Davis 0 0
Lance Weaver 114,234 (3)
and Cindy Weaver
3921 Mary Drive
Rapid City, SD 57702
Peter Pollacheck 4,000,000 9.0%
27240 Dutton Road
Beecher, IL 60401
Langley Park Investments 4,400,000 9.9%
One Great Cumberland Place
London, UK W1H7AL
Al Rieman 2,503,301 5.7%
216 N. Berry Pine Road
Rapid City, SD 57702
LHM Trading (2) 3,195,721 7.2%
1107 Mt. Rushmore Road #2
Rapid City, SD 57701
Totals: 19,811,543 44.8%
(1) Based upon 44,249,898 outstanding shares.
(2) LHM Trading is controlled by Arthur D. Lyons,
CEO, Secretary and a Director of Omni.
(3) Less than 1%.
Changes in Control.
-------------------
To our knowledge, there are no present arrangements or pledges of our
securities that may result in a change in control of our company.
Item 12. Certain Relationships and Related Transactions.
-----------------------------------------------
Transactions with Management and Others.
----------------------------------------
During the year ended March 31, 2005, our Company's President and Chief
Executive Officer loaned us $43,000. The loan is payable on demand, unsecured
and interest free. The balance of the loan as of March 31, 2005, is $36,090.
Our Board of Directors approved and authorized the issuance of 500,000 shares
of our common stock to a company owned by this person as payment on the loan.
On September 7, 2004 by unanimous consent, our Company's Board of
Directors approved and authorized the exchange of 600,000 shares of our
common stock to our President and Chief Executive Officer in return for all
accrued salary and any interest or penalties in connection with the accrued
salary totaling $137,500.
In 2003, weretained the services of an investment banking firm to raise
capital for future acquisitions. Through March 31, 2005, we have paid $25,000
in deferred financing costs which will be offset against future equity
proceeds.
In conjunction with the McCoy Business Services acquisition, we entered
into an Employment Agreement with one of the McCoy's former owners,
guaranteeing employment with us through November 30, 2005 at an annual salary
of $30,000 plus performance based bonuses and benefits.
We entered into an Employment Agreements with our Chief Executive
Officer and President. The Agreements provide compensation to both
individuals
at an annual base salary of $180,000, a $1,000 a month auto allowance, fully
paid health insurance and a bonus of 1% of gross revenue, paid quarterly.
An action has been brought by holders of promissory notes issued by our
Company's majority-owned subsidiary, DataFuzion, Inc. for enforcement of the
notes and possession of substantially all assets of DataFuzion which are
alleged to secure payment of the notes. Plaintiffs filed a motion for
possession of the assets, which was denied by the court. DataFuzion does not
dispute the execution or delivery of the notes and has recorded the notes in
these financial statements. In addition, DataFuzion has some claims against
some of the Plaintiffs which may give rise to offsets or counterclaims against
some(but in all likelihood, not all) of the Plaintiffs. Those claims have not
yet been pled or fully factually explored. The current status of this matter
is that the Plaintiffs have filed a Motion for Summary Judgement, seeking
judgment for the notes balances(without enforcement of their claimed
security interest). DataFuzion has sought and obtained an extension of time
to
respond to this Motion, and has initiated settlement discussions with
Plaintiffs. Those settlement negotiations are ongoing.
Three former employees of DataFuzion have also brought action against
the Company seeking back pay in total of approximately $60,000. DataFuzion
disputes the claims but has offered settlement of approximately $12,000, which
has been rejected. Discovery is ongoing and a settlement conference is
scheduled for August 2005.
Transactions with Promoters.
----------------------------
Except as outlined under the caption "Transactions with Management,"
during the past two years, there have been no material transactions, series of
similar transactions or currently proposed transactions, to which our company
or any of our subsidiaries was or is to be a party, in which the amount
involved exceeded $60,000 and in which any director or executive officer, or
any security holder who is known to us to own of record or beneficially more
than five percent of our common stock, or any member of the immediate family
of any of the foregoing persons, or any promoter or founder had a material
interest.
Item 13. Exhibits.
---------
Reports on Form 8-K.
8-K Current Report dated December 1, 2003 and filed March 2, 2004,
regarding an Asset Purchase Agreement with McCoy Business Services.*
8-K Current Report dated May 30, 2003 and filed May 10, 2004, regarding
an Asset Purchase Agreement with Medical Billing Management.*
8-K Current Report dated May 10, 2004 and filed May 13, 2004, regarding
the change in accountants.*
8-K Current Report dated April 15, 2005 and filed April 21, 2005,
regarding the acquisitions of Plum Creek Outpatient, Inc. and Stat Anesthesia,
P.A.*
Exhibits*
(i)
Where Incorporated
in this Report
--------------
None.
(ii)
Exhibit
Number Description
------ -----------
21 Subsidiaries of the Company
31.1 302 Certification of Arthur D. Lyons
32 906 Certification
* Summaries of all exhibits contained within this
Report are modified in their entirety by reference
to these Exhibits.
** These documents and related exhibits have been
previously filed with the Securities and Exchange
Commission and are incorporated herein by reference.
ITEM 14. Principal Accountant Fees and Services.
---------------------------------------
The following is a summary of the fees billed to us by our principal
accountants during the fiscal years ended March 31, 2004 and 2003:
Fee category 2005 2004
------------ ---- ----
Audit fees $22,053 $17,000
Audit-related fees $ 8,158 $18,000
Tax fees $ 3,609 $ 0
All other fees $ 0 $ 0
Total fees $33,820 $35,000
Audit fees. Consists of fees for professional services rendered by
our principal accountants for the audit of Omni's annual financial statements
and the review of financial statements included in Omni's Forms 10-QSB or
services that are normally provided by our principal accountants in connection
with statutory and regulatory filings or engagements.
Audit-related fees. Consists of fees for assurance and related services
by our principal accountants that are reasonably related to the performance of
the audit or review of Omni's financial statements and are not reported under
"Audit fees."
Tax fees. Consists of fees for professional services rendered by our
principal accountants for tax compliance, tax advice and tax planning.
All other fees. Consists of fees for products and services provided by
our principal accountants, other than the services reported under "Audit
fees," "Audit-related fees" and "Tax fees" above. The fees disclosed in this
category include due diligence, preparation of pro forma financial statements
as a discussion piece for a Board member, and preparation of letters in
connection with the filing of Current Reports on Form 8-K.
SIGNATURES
In accordance with the requirements of the Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
OMNI MEDICAL HOLDINGS, INC.
Date: 7/14/05 By: /s/ Arthur D. Lyons
--------- -----------------------------------
Arthur D. Lyons, CEO, CFO
and Director
Date: 7/14/05 By: /s/ John Globoker
--------- -----------------------------------
John Globoker, Vice President,
Secretary and Director
Date: 7/14/05 By: /s/ Douglas Davis
--------- -----------------------------------
Douglas Davis, President,
Treasurer and Director