SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-3
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
September 5, 2003
-----------------
Date of Report
(Date of Earliest Event Reported)
Omni Medical Holdings, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Utah 0-26177 87-0425275
---- ------- ----------
(State or other (Commission File No.) (IRS Employer I.D. No.)
Jurisdiction)
1107 Mt. Rushmore Road, Suite 2
Rapid City, South Dakota 57701
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(Address of Principal Executive Offices)
(605) 718-0380
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Registrant's Telephone Number
Piezo Instruments, Inc.
4685 South Highland Drive, #202
Salt Lake City, Utah 84117
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(Former Name or Former Address if changed Since Last Report)
Item 1. Changes in Control of Registrant.
---------------------------------
(a) Effective as of September 5, 2003, the Registrant ("Piezo "); Omni
Medical of Nevada, Inc., a Nevada corporation ("Omni"), and the stockholders
of Omni (the "Omni Stockholders"), executed an Agreement and Plan of
Reorganization (the "Reorganization Agreement"), whereby Piezo agreed to
acquire 100% of the issued and outstanding shares of common stock of Omni in
exchange for 16,000,000 post-split shares of common stock of Piezo, or
approximately 88.8% of the post-Reorganization Agreement outstanding
securities of Piezo.
At the closing, and excluding the securities to be exchanged for the Omni
Shares, the outstanding common stock of Piezo amounted to approximately
2,000,000 shares or approximately 11.1% of the post-Reorganization Agreement
outstanding common stock of Piezo, after taking into account (i) a reverse
split on the basis of one for 14.5 shares owned of the outstanding common
stock of Piezo; (ii) the issuance of an option to acquire 225,000 post-split
shares of "restricted securities" (common stock) of Piezo; (iii) the
cancellation of 1,466,379 post-split shares of common stock of Piezo that were
held by certain principal stockholders of Piezo, that included the 225,000
post-split shares of common stock underlying the option in the preceding
subparagraph; (iv) the issuance of an aggregate of 500,000 post-split newly
issued shares of "restricted securities" (common stock) of Piezo in
consideration of the cancellation of such shares and the option referenced in
the two preceding subparagraphs and the waiver by the canceling stockholders
of any registration rights that had been granted to them or were applicable to
any of the cancelled shares or the option; and (v) the issuance of (or the
agreement to issue) an aggregate of 293,104 shares of common stock of Piezo
for and in consideration of non-capital raising services to be rendered
pursuant to a written Consulting Agreement during the period that will
commence on the closing and shall be effective for a period of six months
thereafter, and which shares shall be registered on Form S-8 of the Securities
and Exchange Commission promptly after the closing when the reorganized Piezo
is deemed to be "current" in the filing of all Reports that were required to
be filed by it with the Securities and Exchange Commission for the preceding
12 month period.
At the closing, Piezo acquired the shares of the majority stockholders of
Omni and exchanged 9,053,811 shares of the 16,000,000 shares to be issued to
the Omni Stockholders pursuant to the Reorganization Agreement, resulting in
Omni becoming a majority-owned subsidiary of Piezo on closing. Piezo will
attempt to complete the acquisition of the remaining shares of Omni within the
next thirty (30) days.
Accordingly, and assuming all of the Omni Stockholders become party to
the Reorganization Agreement, there will be 18,000,000 post-Reorganization
Agreement outstanding shares of common stock of the reorganized Piezo.
Since the Omni Stockholders will also be the controlling shareholders of
Piezo, the transaction will be accounted for as a reverse acquisition of Piezo
by Onmi and a recapitalization of Omni.
By virtue of (i) the percentage of Piezo acquired under the
Reorganization Agreement by the Omni Stockholders; and (ii) the provisions of
the Reorganization Agreement that provided for the election of the current
officers and directors of Omni to the Board of Directors of Piezo, this
Reorganization Agreement may be deemed to have involved a "change of control."
The source of the consideration used by the Omni Stockholders to acquire
their interest in Piezo will be the exchange of their respective shares of the
outstanding securities of Omni.
The primary basis of the "control" by the Omni Stockholders is stock
ownership.
The principal terms of the Reorganization Agreement were:
1. Prior to the completion of the Reorganization Agreement, Piezo was
required to have effected a reverse split of its outstanding common stock on
the basis of one share for 14.5 shares owned, which became effective on the
opening of business on August 25, 2003. All computations herein take into
account this reverse split.
2. In consideration of the closing of the Reorganization Agreement,
certain principal stockholders of Piezo (i) delivered 1,466,379 post-split
shares of Piezo for cancellation to its treasury, which included 225,000 post-
split shares of common stock underlying an option granted to one of the
canceling stockholders; and (ii) waived any registration rights that had been
granted to them or were applicable to any of the cancelled shares. In
exchange for the cancellation of these shares and the waiver of any
registration rights, Piezo issued an aggregate of 500,000 post-split newly
issued shares of "restricted securities" to the canceling stockholders.
3. The issuance of 9,053,811 shares of common stock ("restricted
securities") of Piezo at closing in exchange for a majority of the outstanding
shares of Omni. The acquisition of the remaining shares of Omni will be
completed as soon as possible. Following the acquisition of all of the shares
of Omni, the 16,000,000 shares of Piezo to be exchanged pursuant to the
Reorganization Agreement will represent approximately 88.8% of the post-
Reorganization Agreement outstanding common stock of Piezo.
4. As a condition of the closing, certain principal stockholders of
Piezo executed and delivered to Piezo a Lock-Up/Leak-Out Agreement that covers
shares of common stock of Piezo owned by them or acquired by them pursuant to
the Reorganization Agreement. The Lock-Up/Leak-Out Agreement shares includes
the 500,000 shares of newly issued "restricted securities" referenced in
paragraph 2 above, and the 293,104 shares referenced in paragraph 5 below,
along with approximately 371,340 additional securities of Peizo that were
owned by such principal stockholders prior to the closing of the
Reorganization Agreement. Pursuant to the terms of the Lock-Up/Leak-Out
Agreement, these stockholders will collectively be allowed to sell 1% of the
outstanding securities of Piezo in the aggregate during any three month period
for a period of 12 months from the closing of the Reorganization Agreement,
and all are required to be made in "broker's transactions" as that term is
defined in Rule 144 of the Securities and Exchange Commission. Piezo has
adequate measures in place to ensure compliance with the Lock-Up/Leak-Out
Agreement.
5. The reorganized Piezo adopted and ratified a Consulting Agreement and
the issuance of an aggregate of 293,104 shares of common stock of Piezo in
consideration of non-capital raising services to be rendered for a period of
six months following the closing of the Reorganization Agreement and which
such shares shall be registered on Form S-8 of the Securities and Exchange
Commission as soon as practicable after the closing of the Reorganization
Agreement when the reorganized Piezo is deemed to be "current" in the filing
of all reports that were required to be filed by it with the Securities and
Exchange Commission for the preceding 12 month period. The closing of the
Reorganization Agreement may be deemed to be a "back door" registration of
Omni's securities under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which requires that this Current Report substantially contain
the type of information that would have been contained in a 10-SB Registration
Statement had Omni filed such a registration statement with the Securities and
Exchange Commission, including audited financial statements of Omni and an
unaudited pro forma balance sheet and income statement that takes into account
the closing of the Reorganization Agreement. This Current Report is prepared
to comply with the Securities and Exchange Commission's pronouncements
respecting "back door" registrations; however, the current audited financial
statements of Omni for the years ended March 31, 2003 and 2002, and the
required pro forma financial statements at March 31, 2003, are not yet
available, such financial statements will be filed with the Securities and
Exchange Commission as an amendment to this Current Report. Piezo will also
be promptly required to file reviewed financial statements of Omni for the
quarter ended June 30, 2003, together with pro forma financial statements at
such date that take into account the closing of the Reorganization Agreement.
Piezo intends to notify the Securities and Exchange Commission of the
potential applicability of its "back door" pronouncements to the
Reorganization Agreement and this Current Report when all such information has
been filed, and the Securities and Exchange Commission will either have
substantive comments that must be satisfied by Piezo prior to it being
determined to be "current" in the filing requirements to which it is subject
under the Exchange Act, or it will advise Piezo that it has no comments, at
which time Piezo would be deemed to be "current" and in compliance with its
required filing requirements, so long as all other Exchange Act reports
subsequently required to be filed by it had been filed. Piezo was believed to
be in compliance with all filing requirements of the Exchange Act prior to the
completion of the Reorganization Agreement.
6. Following the closing of the Reorganization Agreement, Piezo will
provide its stockholders with an information statement to consider and act
upon an amendment to Piezo's Articles of Incorporation to change its name to
"Omni Medical Holdings, Inc." and that in the interim, Piezo filed a dba in
the State of Utah to conduct business under that name and obtained a new Cusip
Number and OTC Bulletin Board Symbol for such name. A Preliminary Information
Statement respecting the name change only was filed by Piezo with the
Securities and Exchange Commission on September 17, 2003, that had a
stockholder mailing date of September 29, 2003, and a planned effective date
of the name change of October 20, 2003, depending upon satisfying any comments
posed by the Securities and Exchange Commission; this Preliminary Information
Statement will be amended on September 23, 2003, to include the right of
Piezo's stockholders to take action without a meeting in accordance with the
1992 amendments to the Utah Revised Business Corporation Act, and to remove
the requirement of the Board of Directors contained in its Articles of
Incorporation to approve transfers of its authorized securities. The
amendment extends the mailing date to October 3, 2003, and sets a meeting of
the stockholders to consider the proposed amendments on October 13, 2003. The
Preliminary Information Statement, as amended, is incorporated herein by
reference. See Item 7.
7. The designation of the directors and executive officers nominated by
the Omni Stockholders as directors and executive officers of Piezo, with the
resignation of the pre-Reorganization Agreement directors and executive
officers, in seriatim.
Prior to the completion of the Reorganization Agreement, and taking into
account the one for 14.5 reverse split and the cancellation of the 1,466,379
post-split shares owned by certain principal stockholders, there were
1,207,038 outstanding shares of Piezo's common stock. Following the closing,
and taking into account the issuance of the 500,000 "restricted" securities
referenced in paragraph 2 above in consideration of the cancellation of the
above referenced shares, the issuance of 293,104 shares referenced in
paragraph 5 pursuant to the Consulting Agreement to be registered on Form S-8,
and the acquisition of the remaining shares of Omni, there will be 18,000,000
shares of the reorganized Piezo issued and outstanding.
A copy of the Reorganization Agreement, including all material exhibits
and related instruments, accompanies this Current Report, which, by this
reference, is incorporated herein; the foregoing summary is modified in its
entirety by such reference. See Item 7, Exhibit 2.
(b)(i) To the knowledge of management and based upon a review of the
stock ledger maintained by Piezo's transfer agent and registrar, the following
table sets forth the beneficial ownership of persons who owned more than five
percent of Piezo's common stock prior to the closing of the Reorganization
Agreement, and the share holdings of the then members of management:
Name Positions Held Shares Owned %
---- -------------- ------------ ---
Thomas J. Howells President and -0- 0
Director
Kathleen L. Morrison Vice President -0- 0
and Director
Travis T. Jenson Secretary/Treasurer -0- 0
and Director
Jenson Services, Inc. Stockholder 1,241,380 50.7%
Ralph M. and Stockholders 287,672* 11.7%
Shirley Wilkerson
Totals: 1,529,052 62.4%
* These shares include 34,622 shares held in the name of W-Group,
an entity controlled by Ralph M. And Shirley Wilkerson; and
20,695 shares held in the name of Eadac Investments Ltd., an
entity controlled by Ralph M. And Shirley Wilkerson.
(b)(ii) To the knowledge of management and based upon a review of the
stock ledger maintained by Piezo's transfer agent and registrar, the
following table sets forth the beneficial ownership of persons who owned more
than five percent of Piezo's common stock following the closing of
the Reorganization Agreement, and the share holdings of the new members of
management:
Name Positions Held Shares Owned %(1)
---- -------------- ------------- ----
Arthur D. Lyons President, CEO, 1,668,937 15.5%
Secretary and
Director
Charles D. Arbeiter COO, Treasurer 1,835,852 17.1%
and Director
Al Rieman Stockholder 2,503,301 23.3%
LHM Trading (2) Stockholder 3,045,721 28.3%
Totals: 9,053,811 84.1%
(1) Excludes the 294,103 shares that are to be issued under the
Consulting Agreement referenced in paragraph 5 above as they
cannot be issued until Piezo is determined to be "current" in
the filing of all reports that are required to have been filed
by it under the Exchange Act with the Securities and Exchange
Commission during the past 12 months, and is therefore based
upon 10,760,849 outstanding shares.
(2) LHM Trading is controlled by Arthur D. Lyons, the President,
CEO, Secretary and a Director of Piezo.
Item 2. Acquisition or Disposition of Assets.
-------------------------------------
(a) See Item 1.
The consideration exchanged under the Reorganization Agreement was
negotiated at "arms length," and the directors of Piezo used criteria used in
similar uncompleted proposals involving Piezo in the past, including the
relative value of the assets of Piezo in comparison to those of Omni; Omni's
present and past business operations; the future potential of Omni; its
management; and the potential benefit to the stockholders of Piezo. The
directors determined that the consideration for the exchange was reasonable,
under these circumstances.
No director, executive officer or five percent or more stockholder of
Piezo had any direct or indirect interest in Omni or the Omni
Stockholders prior to the completion of the Reorganization Agreement;
similarly, no nominee to become a director or any Omni Stockholder or any
beneficial owner of any Omni Stockholder had any interest in Piezo prior to
the closing of the Reorganization Agreement.
(b) Piezo is a successor to and intends to continue the business
operations intended to be conducted by Omni. All references to "Omni" below
take into account information, where applicable, of its predecessors.
References to "Piezo," where applicable, also include Omni as its majority-
owed subsidiary.
Part I
Organization and Business Development and Business.
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Organization and Business Development.
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References to the "Company," "our," "we," "us" and words of similar
import refer to Piezo, Omni or the combined Piezo and its majority-owned
subsidiary, Omni, as applicable.
Piezo.
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For information regarding the organization and business development of
Piezo through December 31, 2002, see Part I, Item 1, of its 10-KSB Annual
Report for the year ended December 31, 2002, which was filed with the
Securities and Exchange Commission on March 26, 2003, and is incorporated
herein by reference. See Item 7.
Piezo effected a reverse split of its outstanding common stock on the
basis of one share for 14.5 shares owned, which became effective on the
opening of business on August 25, 2003.
On September 5, 2003, the Omni Stockholders outlined in Item (b)(ii)
above executed and delivered the Reorganization Agreement with Piezo pursuant
to which Omni became a majority-owned subsidiary of Piezo.
Piezo filed a "dba" with the State of Utah, its state of incorporation,
on September 5, 2003, to do business under the name "Omni Medical Holdings,
Inc., and immediately prior to this filing, Omni changed its name to "Omni
Medical of Nevada, Inc."
Piezo filed a Preliminary Information Statement to effect a name change
with the Securities and Exchange Commission on September 17, 2003, that had a
stockholder mailing date of September 29, 2003, and a planned effective date
of a name change to "Omni Medical Holdings, Inc." of October 20, 2003,
depending upon satisfying any comments posed by the Securities and Exchange
Commission. This Preliminary Information Statement will amended on September
23, 2003, to include the right of Piezo's stockholders to take action without
a meeting in accordance with the 1992 amendments to the Utah Revised Business
Corporation Act, and to remove the requirement of the Board of Directors
contained in its Articles of Incorporation to approve transfers of its
authorized securities. The amendment extends the mailing date to October 3,
2003, and sets a meeting of the stockholders to consider the proposed
amendments on October 13, 2003.
Omni.
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Omni was organized under the laws of the State of South Dakota in August,
1994, under the name "Mastel Precision Surgical Instruments," ("MPSI").
On April 15, 2002, MPSI entered into an Agreement for the Exchange of
Common Stock (the "Daycor Agreement") with Daycor Corporation, a Nevada
Corporation ("Daycor"). Pursuant to the Agreement, the shareholders of MPSI
sold to Daycor 100% of the issued and outstanding shares of MPSI in exchange
for 11,000,000, $.001 par value, newly issued shares of voting common stock of
Daycor. Daycor was organized in the State of Nevada in 1998, and had no
principal operations at the time of the closing of the Daycor Agreement; it
had effected a limited offering of its securities pursuant to Rule 504 of
Regulation D of the Securities and Exchange Commission in May, 1998, and had
approximately 100 stockholders from that offering who had represented that
they were "accredited investors" as that term is defined in Regulation D.
The transaction was accounted for as a reverse acquisition of Daycor by
MPSI, since shareholders of MPSI owned approximately 86% of the post
acquisition common stock of the consolidated entity immediately after the
completion of the transaction. For accounting purposes, the acquisition has
been treated as an acquisition of Daycor by MPSI and as a recapitalization of
MPSI. Shares of common stock authorized and issued have been retroactively
restated to present the capital structure of Daycor. Concurrent with the
merger, Daycor changed its name to Mastel Precision, Inc.
Effective July 10, 2002, Omni entered into an Asset Purchase Agreement
with A&V Digital Transcription Services ("A&V"), a general partnership engaged
in the medical transcription market that was based in the State of Alabama.
On September 4, 2002, Omni formed Mastel Precision Health Information
Services, Inc. as a wholly-owned subsidiary in the State of South Dakota
("MPHI"), to operate the transcription services business acquired from A&V.
Effective May 2, 2003, Omni exchanged 100% of the common stock of MPSI,
its wholly-owned subsidiary, and $36,000 in cash for all of the common stock
of Omni owned individually or jointly by one of Omni's officer's, Doug Mastel,
and his wife. As a result of this exchange, the officer assumed all
obligations and liabilities of MPSI, in addition to acquiring all of its all
assets. MPSI's net losses for the years ended March 31, 2003 and 2002, were
$375,110 and $186,720, respectively.
On May 31, 2003, Omni acquired Medical Billing Management ("MBM").
On September 5, 2003, the Omni Stockholders outlined in Item (b)(ii)
above executed and delivered the Reorganization Agreement with Piezo pursuant
to which Omni became a majority-owned subsidiary of Piezo.
Business.
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Piezo engaged in engineering, research, development and merchandising of
electronic and electronic and electromechanical devices, equipment, and
accessories until 1987; these activities were unsuccessful and it ceased
active operations in 1987.
Omni is a medical service company providing transcription, billing and
collection services to healthcare providers throughout the United States.
Based in Rapid City, South Dakota, Omni currently has offices in three states
with approximately 30 full and part-time employees. Growth plans include both
additional acquisitions in various medical service areas, as well as internal
sales growth.
Principal Products or Services and Their Markets.
-------------------------------------------------
Omni provides medical transcription service to hospitals and healthcare
facilities currently in Alabama and South Dakota. Whenever a health care
provider makes a diagnosis or provides a patient treatment, those actions must
be documented. Government and insurance regulations are such that these
important medical records, which affect patient health, must be in readable
form. This results in the health care provider dictating the patient
treatment in some form and someone else typing that dictation. Due to the
obvious importance of this task, a transcriptionist must have a level of
training well beyond a normal typist. This would include detailed knowledge
of medical terminology and working knowledge of heath and science principles
in a variety of medical disciplines. Transcription has become an important
and essential service in all healthcare practices. Clients are usually
charged a line rate of $0.11 - $0.18, depending on the work involved.
Transcriptionists are usually hired on a subcontract basis, work out their
home and are compensated on a per line basis. Quality assurance and other
management personnel are full-time employees, provide services at the
corporate office and are compensated on a salary basis.
Omni also provides medical billing and collections services in the State
of Mississippi. Medical billing and collections are the lifeblood of any
healthcare facility. Accurate and timely collections insure an efficient
practice and high standard of care.
Omni is currently operating in three states. The market, however, can
encompass the entire country made possible through the electronic transfer of
data. It is the intention of Omni Medical to focus its marketing efforts on
mid-size metropolitan cities throughout the United States. Its expansion and
acquisition strategies will position Omni to become a nationwide provider of
medical services.
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.
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None; not applicable.
Dependence on One or a Few Major Customers.
-------------------------------------------
None; not applicable.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements or Labor Contracts.
------------------------------
None; not applicable.
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, it is
compliant with HIPPA regulations and believes these regulations will only
encourage healthcare providers to outsource more medical services.
Effect of Existing or Probable Governmental Regulations on Business.
--------------------------------------------------------------------
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. The present laws, rules and regulations
designed to promote availability to the small business issuer of these capital
markets and similar laws, rules and regulations that may be adopted in the
future will substantially limit the demand for "blank check" companies like
our Company, and may make the use of these companies obsolete.
We are also subject to the Sarbanes-Oxley Act of 2002. This Act creates
a strong and independent accounting oversight board to oversee the conduct of
auditors of public companies and strengthens auditor independence. It also
requires steps to enhance the direct responsibility of senior members of
management for financial reporting and for the quality of financial
disclosures made by public companies; establishes clear statutory rules to
limit, and to expose to public view, possible conflicts of interest affecting
securities analysts; creates guidelines for audit committee members'
appointment, compensation and oversight of the work of public companies'
auditors; prohibits certain insider trading during pension bund blackout
periods; and establishes a federal crime of securities fraud, among other
provisions.
Research and Development.
-------------------------
None; not applicable.
Cost and Effects of Compliance with Environmental Laws.
-------------------------------------------------------
None; not applicable.
Number of Employees.
--------------------
Our Company currently employs 29 employees, of which 25 are full-time.
Management's Discussion and Analysis or Plan of Operation.
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Forward-looking Statement.
--------------------------
Statements made in this Form 8-K Current Report which are not purely
historical are forward-looking statements with respect to the goals, plan
objectives, intentions, expectations, financial condition, results of
operations, future performance and business of our Company, including, without
limitation, (i) our ability to raise capital, and (ii) statements preceded by,
followed by or that include the words "may", "would", "could", "should",
"expects", "projects", "anticipates", "believes", "estimates", "plans",
"intends", "targets" or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and
important factors (many of which are beyond our Company's control) that could
cause actual results to differ materially from those set forth in the
forward-looking statements, including the following, general economic or
industry conditions, nationally and/or in the communities in which our Company
conducts business, changes in the interest rate environment, legislation or
regulatory requirements, conditions of the securities markets, our ability to
raise capital, changes in accounting principles, policies or guidelines,
financial or political instability, acts of war or terrorism, other economic,
competitive, governmental, regulatory and technical factors affecting our
Company's operations, products, services and prices.
Accordingly, results actually achieved may differ materially from
expected results in these statements. Forward-looking statements speak only
as of the date they are made. Our Company does not undertake, and
specifically disclaims, any obligation to update any forward-looking
statements to reflect events or circumstances occurring after the date of such
statements.
Plan of Operations.
-------------------
The past two fiscal years have been difficult ones financially for Omni
due primarily to the operations MPSI. While MPSI had bright future prospects,
the past three years were a tremendous drain on Omni. Omni managed to
continue operations by raising capital and reducing expenses. In April 2003,
the management determined that the best course of action would be to privately
spin-off MPSI and focus on the medical service area. This area includes
medical transcription and billing and is characterized by positive cash flow,
good operating margins, low debt and no inventory or Research and development
costs. On May 2, 2003, the spin-off was completed to a former director and
executive officer (see the heading "Organization and Business Development" of
the caption "Organization and Business Development and Business," above) and
on May 31, 2003, Omni acquired MBM. MBM's long, profitable operating history
and consistent revenue make it a significant acquisition. As Omni management
undertakes an ongoing acquisition strategy in this area, it believes that the
Company's future is very positive. Omni Cash flow is now positive, its debt
is at a low level and its revenue is higher than it has been in over two
years.
Description of Property.
------------------------
Omni has an interest in three parcels of real property: 1609 West
Street, Montgomery, Alabama, that it is purchasing; 1867 Crane Ridge Drive,
Suite #250-A, Jackson, Mississippi, and 1107 Mt. Rushmore Road, Suite 2, Rapid
City, South Dakota, both of which are leased.
Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
The following table sets forth certain information as of September
22, 2003, regarding current beneficial ownership of the shares of our common
stock by (i) each person known by us to own more than 5% of the outstanding
shares of our common stock, (ii) each of our executive officers and directors,
and (iii) all of our executive officers and directors as a group. Except as
noted, each person has sole voting and sole investment or dispositive power
with respect to the shares shown. The information presented is based upon
10,760,849 outstanding shares of common stock.
Name Positions Held Shares Owned %
---- -------------- ------------
Arthur D. Lyons President, CEO, 1,668,937 15.5%
Secretary and
Director
Charles D. Arbeiter COO, Treasurer 1,835,852 17.1%
and Director
Al Rieman Stockholder 2,503,301 23.3%
LHM Trading* Stockholder 3,045,721 28.3%
Totals: 9,053,811 84.1%
All executive officers and directors 6,550,510 60.9%
of the Company as a group (2 persons)
* LHM Trading is a business entity controlled by Arthur D. Lyons,
the President, CEO, Secretary and a Director of our Company.
Contractual Arrangements Regarding Changes in Control.
------------------------------------------------------
See Item 1 of this Current Report, above.
Directors and Executive Officers, Promoters and Control Persons.
----------------------------------------------------------------
Identify of directors and Executive Officers.
---------------------------------------------
The following delineates certain information concerning our newly
designated directors and executive officers:
Positions
Positions with with
Name Age the Company Omni
---- --- ----------- ----------
Arthur D. Lyons 45 President, CEO, President, CEO,
Secretary and Secretary and
Director Director
Charles D. Arbeiter 43 COO, Treasurer COO, Treasurer
and Director and Director
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.
Charles D. Arbeiter. Mr. Arbeiter has worked for American Express
and Financial Network as a senior manager providing financial advice to
individuals, corporate clients and banks. He has been active in the financial
services industry since 1985 as a certified financial planner, district
manager and registered investment advisor. He is currently responsible for a
15 member financial planning practice in Rapid City, South Dakota, and is
active in both civic and professional organizations. He is a 1982 graduate of
Sioux Falls (SD) College with a B.S. Degree in business.
Family Relationships.
---------------------
There are no family relationships between Mr. Lyons and Mr. Arbeiter.
Pending 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.
Involvement in Certain Legal Proceedings.
-----------------------------------------
To the knowledge of our management and during the past 10 years, no
present or former director, person nominated to become a director, executive
officer, promoter or control person of our Company:
(1) Was a general partner or executive officer of any business
by or against which any bankruptcy petition was filed,
whether at the time of such filing or two years prior
thereto;
(2) Was convicted in a criminal proceeding or named the 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 from or otherwise limiting, the following activities:
(i) Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant,
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
or continuing any conduct or practice in connection
with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the
purchase or sale of any security or commodity or
in connection with any violation of federal or
state securities laws or federal commodities
laws;
(4) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal
or state authority barring, suspending or otherwise limiting
for more than 60 days the right of such person to engage in
any activity described above under this Item, or to be
associated with persons engaged in any such activity;
(5) Was found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange 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; or
(6) Was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to
have violated any federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed,
suspended or vacated.
Executive Compensation.
-----------------------
The following table sets forth the aggregate compensation paid by the
Company 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
Period Salary Bonus Annual ricte dlying Pay- Comp-
Position Ended ($) ($) Compen- Stock Options outs ensat'n
---------------------------------------------------------------------
Arthur D.
Lyons
President, 6/30/03 6000* 0 0 0 17777* 0 2200*
CEO,
Secretary
Director
Charles D. 6/30/03 0 0 0 0 8889* 0 0
Arbeiter
COO, Treas.,
Director
Thomas J. 3/31/03 0 0 0 0 0 0 0
Howells 12/31/02 0 0 0 0 0 0 0
prior
President,
Director
Kathleen L. 3/31/03 0 0 0 0 0 0 0
Morrison 12/31/02 0 0 0 0 0 0 0
Prior
Vice Pres.,
and Director
Travis T. 3/31/03 0 0 0 0 0 0 0
Jenson 12/31/02 0 0 0 0 0 0 0
Prior
Sec., Tres.,
and Director
Gene 3/31/03 0 0 0 0 0 0 0
Yamamoto 12/31/02 0 0 0 0 0 0 0
Prior
President,
Director
Yujiro 3/31/03 0 0 0 0 0 0 0
Yamamoto 12/31/02 0 0 0 0 0 0 0
Prior 12/31/01 0 0 0 0 0 0 0
President 12/31/00 0 0 0 0 0 0 0
Director
Buck 3/31/03 0 0 0 0 0 0 0
Wilkerson 12/31/02 0 0 0 0 0 0 0
Secretary 12/31/01 0 0 0 0 0 0 0
Treasurer, 12/31/00 0 0 0 0 0 0 0
Director
Valerie 3/31/03 0 0 0 0 0 0 0
Keating, 12/31/02 0 0 0 0 0 0 0
Director 12/31/01 0 0 0 0 0 0 0
12/31/00 0 0 0 0 0 0 0
* Received from Omni.
None of our present directors and executive officers have received
any cash or other remuneration for services rendered to us; and no
compensatory arrangements have yet been set for service in these capacities.
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.
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
All reports required to be filed pursuant to Section 16(a) of the
Exchange Act have been or will be timely filed.
Audit, Nominating and Compensation Committees.
----------------------------------------------
We have no audit, nominating or compensation committees.
Certain Relationships and Related Transactions.
-----------------------------------------------
Transactions with Management and Others.
----------------------------------------
During the years ended March 31, 2003 and 2002,Omni transferred inventory
with a carrying value of approximately $20,000 and $25,000, respectively, to
an officer and shareholder of Omni in exchange for a receivable. The
shareholder used the inventory for promotional and other sales purposes on
behalf of Omni. Omni entered into an agreement with the officer and
shareholder whereby the receivable was settled in exchange for 32,944 shares
of treasury stock, which management believes is the fair value of the stock.
Accordingly, the amounts receivable from the shareholder to Omni have been
shown as a reduction of stockholders equity at March 31, 2003 and 2002.
At March 31, 2002, Omni owed $41,129 to one of its shareholders and
officers. Interest on the advance was at 8% and the advance was due to be
repaid in May 2005. In April 2002, the advance, together with accrued
interest of $3,871 was converted to 197,232 shares of Omni common stock.
Included in interest expense for the year ended March 31, 2002 is $3,871
relating to the advance.
Description of Securities.
--------------------------
Market Price of and Dividends on Piezo's Common Equity and Related Stockholder
Matters.
--------
Market Information.
-------------------
The Company's shares are traded on the OTC Bulletin Board under the
symbol "ONMH"; however, there is and has been no "established trading market"
for these securities.
Their has never been a publicly-traded market for the securities of Omni.
Holders.
--------
The number of record holders of the Company's common stock as of
September 22, 2003, is approximately 206. Omni had approximately 100
stockholders on that date. The Company is in the process of exchanging its
securities with the Omni Stockholders, pending a determination of whether all
are still "accredited investors" as represented at the time of their
respective investments in Omni.
Dividends.
----------
The Company has not declared any cash dividends with respect to its
common stock and does not intend to declare dividends in the foreseeable
future. The future dividend policy of the Company cannot be ascertained with
any certainty, and until the Company completes any acquisition, reorganization
or merger, as to which no assurance may be given, no such policy will be
formulated. There are no material restrictions limiting, or that are likely to
limit, the Company's ability to pay dividends on its common stock.
Legal Proceedings.
------------------
Neither the Company nor Omni is not a party to any pending legal
proceeding and, to the knowledge of management; no federal, state or local
governmental agency is presently contemplating any proceeding against the
Company or Omni. No director, executive officer or affiliate of the Company,
Omni or owner of record or beneficially of more than five percent of the
Company's or Omni's common stock is a party adverse to the Company or Omni or
has a material interest adverse to the Company or Omni in any proceeding.
Changes in and Disagreements with Accountants.
----------------------------------------------
Mantyla, McReynolds & Associates, 5872 South 900 East, Suite 250, Salt
Lake City, Utah 84121, has been retained as the Company's auditor for the past
four years. During that period, there has been no disagreements between the
Company and its auditors.
Gelfond Hochstadt Pangburn, P.C. of Denver, Colorado, audited the
financial statements of Omni for the years ended March 31, 2002 and 2001, and
have been retained to audit the financial statements of Omni for the years
ended March 31, 2003 and 2002. It is anticipated that Gelfond Hochstadt
Pangburn, P.C. will be named as the Company's auditors in the near future, and
an 8-K Current Report respecting any such engagement will be timely filed with
the Securities and Exchange Commission.
Recent Sales of Unregistered Securities.
----------------------------------------
On November 5, 2002, pursuant to Unanimous Consent of the Company's Board
of Directors, the Company resolved to issue 18,000,000 shares of the Company's
"unregistered" and "restricted" $0.001 par value common stock to Jenson
Services, Inc., a Utah corporation, in consideration of $5,000 being advanced
to the Company to meet accounts payable obligations. These shares were
cancelled as a condition to the closing of the Reorganization Agreement with
Omni. See Item 1, above.
Except as indicated under Item 1, above, no other "restricted
securities" of the Company have been issued during the past three years.
Indemnification of Directors and Officers.
------------------------------------------
Section 16-10a-902(1) of the Utah Revised Business Corporation Act
authorizes a Utah corporation to indemnify any director against liability
incurred in any proceeding if he or she acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his or her conduct was unlawful.
Section 16-10a-902(4) prohibits a Utah corporation from indemnifying a
director in a proceeding by or in the right of the corporation in which the
director was adjudged liable to the corporation or in a proceeding in which
the director was adjudged liable on the basis that he or she improperly
received a personal benefit. Otherwise, Section 16-10a-902(5) allows
indemnification for reasonable expenses incurred in connection with a
proceeding by or in the right of a corporation.
Unless limited by the Articles of Incorporation, Section 16-10a-905
authorizes a director to apply for indemnification to the court conducting the
proceeding or another court of competent jurisdiction. Section 16-10a-907(1)
extends this right to officers of a corporation as well.
Unless limited by the Articles of Incorporation, Section 16-10a-903
requires that a corporation indemnify a director who was successful, on the
merits or otherwise, in defending any proceeding to which he or she was a
party against reasonable expenses incurred in connection therewith. Section
16-10a-907(1) extends this protection to officers of a corporation as well.
Pursuant to Section 16-10a-904(1), the corporation may advance a
director's expenses incurred in defending any proceeding upon receipt of an
undertaking and a written affirmation of his or her good faith belief that he
or she has met the standard of conduct specified in Section 16-10a-902.
Unless limited by the Articles of Incorporation, Section 16-10a-907(2) extends
this protection to officers, employees, fiduciaries and agents of a
corporation as well.
Regardless of whether a director, officer, employee, fiduciary or agent
has the right to indemnity under the Utah Revised Business Corporation Act,
Section 16-10a-908 allows the corporation to purchase and maintain insurance
on his or her behalf against liability resulting from his or her corporate
role.
Financial Statements of Omni.
-----------------------------
These audited financial statements for Omni will be provided as
soon as they are available, but within 75 days from the date of this Current
Report or on or before November 19, 2003. See Item 7.
These pro forma financial statements will be provided as soon as
they are available, but within 75 days from the date of this Current Report or
on or before November 19, 2003. See Item 7.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
---------
(a) Financial Statements of Businesses Acquired.
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2003 AND 2002
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
YEARS ENDED MARCH 31, 2003 AND 2002
CONTENTS
Independent auditors' report 1
Financial statements:
Consolidated balance sheets 2
Consolidated statements of operations 3
Consolidated statements of shareholders' (deficit) equity 4
Consolidated statements of cash flows 5
Notes to consolidated financial statements 6 - 16
INDEPENDENT AUDITORS' REPORT
Board of Directors
Mastel Precision, Inc.
We have audited the accompanying consolidated balance sheet of Omni Medical
Holdings, Inc. and subsidiaries ("the Company") as of March 31, 2003, and the
related consolidated statements of operations, shareholders' (deficit) equity
and cash flows for the years ended March 31, 2003 and 2002. 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 audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit 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
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Omni
Medical Holdings, Inc. and subsidiaries as of March 31, 2003, and the results
of their operations and their cash flows for the years ended March 31, 2003
and 2002 in conformity with accounting principles generally accepted in the
United States of America.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The proforma balance sheet as of March
31, 2003 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has not
been subjected to the auditing procedures applied in the audit of the basic
financial statements, and, accordingly, we express no opinion on it.
/s/Gelfond Hochstadt Pangburn, P.C.
Gelfond Hochstadt Pangburn, P.C.
September 2, 2003
Denver, Colorado
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2003
Unaudited
Profoma Historical
(Note 1)
Current assets:
Cash $ 215,691 $ 257,963
Accounts receivable, net of allowance for
doubtful accounts of $54,950 (Note 5) 8,820 79,252
Inventory (Note 5) 400,888
---------- ---------
Total current assets 224,511 738,103
Property and equipment, net (Notes 4 and 5) 143,787 174,169
Goodwill 36,000 36,000
Intangible asset 27,980 27,980
---------- ---------
Total assets $ 432,278 $ 976,252
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,416 $ 272,658
Accrued expenses 5,130 30,258
Notes payable, current portion (Note 5) 33,991 322,680
---------- ---------
Total current liabilities 45,537 625,596
Notes payable, net of current portion (Note 5) 164,122 164,122
---------- ---------
Total liabilities 209,659 789,718
---------- ---------
Commitments (Notes 5, 6 and 7)
Shareholders' equity (Notes 6 and 9):
Common stock, $.001 par value, 20,000,000 shares
authorized; 13,416,417 shares issued and
outstanding at March 31, 2003 8,345 13,417
Additional paid in capital 1,576,043 1,571,502
Deferred compensation expense (41,111) (41,111)
Accumulated deficit (1,320,658) (1,332,566)
Advance receivable, shareholder (Note 6) (24,708)
---------- ----------
Total shareholders' equity 222,619 186,534
---------- ----------
Total liabilities and shareholders' equity $ 432,278 $ 976,252
========== ==========
See notes to consolidated financial statements.
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 2003 AND 2002
2003 2002
Revenues $ 1,080,474 $ 836,466
Cost of sales 520,663 241,776
----------- ----------
Gross profit 559,811 594,690
General and administrative expenses 1,060,581 716,380
----------- ----------
Loss from operations (500,770) (122,690)
Other income(expense):
Interest income 32,400 18
Interest expense (46,720) (65,048)
----------- ----------
Net loss $ (515,090) $ (186,720)
=========== ==========
See notes to consolidated financial statements.
ONMI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
YEARS ENDED MARCH 31, 2003 AND 2002
Additional Deferred
Common Paid-in Compensation
Shares Stock Capital Expense
Balance, April 1, 2001 10,946,829 10,947 786,659
Issuance of common stock in
exchange for note payable 43,829 44 19,956
Issuance of common stock to
employees 1,314,878 1,315 78,685 (80,000)
Earned compensation expense 12,222
Advance receivable, shareholder
Net loss
---------- ------- ---------- ---------
Balances, March 31, 2002 12,305,536 12,306 885,300 (67,778)
Issuance of common stock in
exchange for note payable 197,232 197 44,803
Sale of common stock pursuant
to private placements 197,232 197 44,803
Stock transferred to employees by
majority shareholder 52,500
Sale of common stock pursuant to
private placements 666,667 667 499,333
Issuance of common stock in
business acquisition 30,000 30 29,970
Earned compensation expense 26,667
Issuance of common stock for services 19,750 20 14,793
Net loss
---------- ------- ---------- ---------
Balances, March 31, 2003 13,416,417 $13,417 $1,571,502 $ (41,111)
========== ======= ========== =========
[CONTINUED]
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
YEARS ENDED MARCH 31, 2003 AND 2002
Advance
Accumulated receivable,
Deficit shareholder Total
Balance, April 1, 2001 (630,756) (20,470) 146,380
Issuance of common stock in
exchange for note payable 20,000
Issuance of common stock to
employees
Earned compensation expense 12,222
Advance receivable, shareholder (4,238) (4,238)
Net loss (186,720) (187,720)
---------- -------- ---------
Balances, March 31, 2002 (817,476) (24,708) (12,356)
Issuance of common stock in
exchange for note payable 45,000
Sale of common stock pursuant
to private placements 45,000
Stock transferred to employees by
majority shareholder 52,500
Sale of common stock pursuant to
private placements 500,000
Issuance of common stock in
business acquisition 30,000
Earned compensation expense 26,667
Issuance of common stock for services 14,813
Net loss (515,090) (515,090)
----------- -------- ---------
Balances, March 31, 2003 $(1,332,566) $(24,708) $ 186,534
=========== ======== =========
See notes to consolidated financial statements.
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 2003 AND 2002
2003 2002
Net loss $ (515,090) $ (186,720)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 25,937 11,806
Stock-based compensation expense 93,980 12,222
Changes in operating assets and liabilities,
net of effects of business acquisition:
Accounts receivable 9,418 201,417
Inventory 146,807 98,633
Accounts payable 996 (100,669)
Accrued expenses (11,135) 23,248
--------- -----------
Net cash (used in) provided by operating
activities (249,087) 59,937
--------- -----------
Cash flows from investing activities:
Purchase of property and equipment (54,960) (926)
Payment for purchase of business, net of
cash acquired (65,000)
--------- -----------
Net cash used in investing activities (119,960) (926)
--------- -----------
Cash flows from financing activities:
Notes payable 125,000
Payments of notes payable (52,334) (49,667)
Proceeds from issuance of common stock 545,000
--------- -----------
Net cash provided by (used in) financing
activities 617,666 (49,667)
--------- -----------
Net increase in cash 248,619 9,344
Cash, beginning 9,344
--------- -----------
Cash, ending $ 257,963 $ 9,344
========= ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 45,713 $ 65,048
========= ===========
Supplemental disclosure of non-cash investing
and financing activities:
Inventory transferred to shareholder (Note 6) $ $ 4,238
========= ===========
Conversion of debt to equity (Note 6) $ 45,000 $ 20,000
========= ===========
Business acquisition (Note 2):
Fair value of assets acquired $ 184,761
Liabilities assumed (89,761)
Common stock issued (30,000)
---------
Cash paid $ 65,000
=========
See notes to consolidated financials statements.
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2003 AND 2002
1. Business, disposition of MPSI and management's plans:
Business:
Omni Medical Holdings, Inc. ("the Company" or "Omni") formerly known as Mastel
Precision, Inc., a Nevada corporation, provides medical billing and
transcription services to medical practitioners. At March 31, 2003, the
Company's medical transcription operations were located in Alabama. In May
2003, the Company acquired a medical billing operation in Mississippi (Note
10).
Through May 2, 2003, the Company also produced handheld surgical instruments
used by ophthalmic surgeons in refractive, corneal and LASIK surgeries and was
also a developer of technology to ophthalmic surgeons, specifically within the
domain of anterior segment cataract extraction, and foldable intraocular lens
placement as well as keratorefractive procedures such as LASIK. The Company
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.
Disposition of MPSI:
Effective May 2003, the Company entered into an agreement with one of its
officers and shareholders whereby the Company agreed to exchange 100% of the
common stock of MPSI and $36,000 cash for all shares of common stock of the
Company owned individually or jointly by the officer and his wife, a total of
5,072,100 shares. As of April 30, 2003, the assets of MSPI had a carrying
value of approximately $442,000 (unaudited) and MPSI's obligations and
liabilities had a carrying value of approximately $527,000 (unaudited). Due
to the related party nature of the transaction, no gain was recognized and
shareholders' equity was increased by approximately $49,000 (unaudited).
MPSI's net loss for the month ended April 30, 2003 of $34,000 (unaudited) and
the related changes to the assets and liabilities, is not reflected in the
accompanying unaudited proforma consolidated balance sheet.
The accompanying unaudited proforma consolidated balance sheet gives effect to
the disposition transaction as if it had been consummated on March 31, 2003.
The following unaudited proforma financial information presents results as if
the disposition of MPSI had occurred at the beginning of the years ended March
31, 2003 and 2002
Year ended March 31,
2003 2002
Revenues $96,000 $ -
Cost of sales 62,000 -
General and administrative expenses 184,000 143,000
Other income (expense) 20,000 (4,000)
Net loss 129,000 147,000
The unaudited proforma consolidated balance sheet and income statements do not
purport to be indicative of the financial position of the Company had the
transaction occurred on March 31, 2003.
Management's plans:
The Company has incurred losses during the years ended March 31, 2003 and
2002, and has an accumulated deficit of $1,332,566 at March 31, 2003.
Management's plans to address concerns raised by this issue includes:
a. The disposition of MPSI will allow the Company to concentrate on its
medical billing and transcription operations, which management
believes can be operated more profitably than MPSI. MPSI's operating
losses for the years ended March 31, 2003 and 2002 were approximately
$325,000 and $122,000, respectively.
b. Management expects that cash flows will increase as a result of the
Company's disposition of MPSI and it's acquisition of transcription
businesses (Notes 2 and 10).
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2003 AND 2002
1. Business, disposition of MPSI and management's plans (continued):
Management's plans (continued):
c. The Company has been successful in raising limited amounts of capital
through the sale of its common stock. In June 2003, the Company
raised an additional $45,000 in a private placement. Management
believes that additional equity financing will be available from the
Company's private placements.
d. In September 2003, the Company completed a merger agreement with Piezo
Instruments, Inc., a publicly trading Utah corporation. (Note 10).
Management believes that this transaction will allow the Company
access to additional sources of debt and equity financing.
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.
2. Business combinations:
On April 15, 2002, MPSI entered into an Agreement for the Exchange of Common
Stock ("the Agreement") with Daycor Corporation ("Daycor"), a Nevada
Corporation. Pursuant to the Agreement, the shareholders of MPSI sold to
Daycor 100% of the issued and outstanding shares of MPSI in exchange for
11,000,000, $.001 par value, newly issued shares of voting common stock of
Daycor.
The transaction was accounted for as a reverse acquisition of Daycor by MPSI,
since the shareholders of MPSI owned approximately 86% of the post acquisition
common stock of the consolidated entity immediately after the completion of
the transaction. For accounting purposes, the acquisition has been treated as
an acquisition of Daycor by MPSI and as a recapitalization of MPSI. Shares of
common stock authorized and issued have been retroactively restated to present
the capital structure of Daycor. Concurrent with the merger, Daycor changed
its name to Mastel Precision, Inc.
Effective July 10, 2002 the Company entered into an asset purchase agreement
with A&V Digital Transcription Services ("A&V"), a general partnership based
in the state of Alabama. The results of operations of A&V have been included
in the consolidated financial statements since date of acquisition. A&V is a
provider of medical transcription services. As a result of the acquisition,
the Company entered into the medical billing and transcription market. On
September 4, 2002 the Company formed Mastel Precision Health Information
Services, Inc. ("MPHIS") (a wholly owned subsidiary of the Company) to operate
the transcription services business acquired from A&V.
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2003 AND 2002
2. Business combinations (continued):
The aggregate purchase price was $95,000, including $65,000 in cash,
assumption of liabilities of $89,761 and common stock valued at $30,000. The
value of the common stock issued was determined by management based on other
stock transactions with third parties.
The following table summarizes the estimated fair values of the assets
acquired and the liabilities assumed at July 10, 2002, the date of
acquisition.
Current assets $ 7,477
Property, plant and equipment 109,000
Intangible asset customer list 32,284
Goodwill 36,000
---------
Total assets acquired 184,761
---------
Current liabilities (18,948)
Long-term debt (70,813)
--------
Total liabilities assumed (89,761)
--------
Net assets acquired $ 95,000
========
The amount included for property, plant and equipment reflects a decrease of
$36,000, and the amount included for goodwill reflects an increase of $36,000,
from the Company's initial allocation of the purchase price that was shown in
the Company's unaudited financial statements for the nine months ended
December 31, 2002.
The accompanying financial statements for the year ended March 31, 2003
include the accounts of Omni, MPSI, A&V (from July 10, 2002) and MPHIS.
Intercompany balances and transactions have been eliminated on consolidation.
3. Significant accounting policies:
Cash and cash equivalents:
Cash and cash equivalents include cash on hand, money market accounts and
short-term investments purchased with an original maturity of three months or
less.
Accounts receivable and concentration of credit risk:
The Company grants credit to its customers, generally without collateral. At
March 31, 2003, no one customer accounted for 10% or more of accounts
receivable. During the years ended March 31, 2003 and 2002, no one customer
accounted for 10% or more of sales.
Allowance for doubtful accounts:
The Company records an allowance for doubtful accounts based on specifically
identified amounts management believes to be uncollectible. An additional
allowance is recorded based on certain percentages of aged receivables, which
are determined based on historical experience and assessment of financial
conditions affecting our customers.
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2003 AND 2002
3. Significant accounting policies (continued):
Inventories:
Inventories consist of surgical instruments and related components and are
valued by using the average cost method at the lower of cost or market.
Property and equipment are recorded at cost. Depreciation is provided by use
of straight-line and accelerated methods over the estimated useful lives of
the assets ranging from 5 to 10 years.
Goodwill and intangible assets:
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS
No. 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. Use of the pooling-of-
interests method is prohibited after that date. SFAS No. 142 addresses the
accounting and reporting for acquired goodwill and other intangible assets.
It changes the accounting for goodwill and other intangible assets with
indefinite lives from an amortization method to an impairment-only approach
and requires intangible assets with finite lives to be amortized over their
useful lives. These statements were effective for the Company on April 1,
2002 and goodwill of $36,000 (which is expected to be fully tax-deductible),
applicable to the medical transcription segment, was recorded on the
acquisition of A&V in July 2002. A goodwill impairment test will be performed
annually in the fourth quarter or upon significant changes in the Company's
business environment.
The intangible asset consists of a customer list arising from the acquisition
of A&V, and is being amortized on a straight-line basis over 5 years
(approximately $6,500 per year). Amortization expense for the year ended
March 31, 2003 was approximately $4,300.
Revenue recognition:
Revenue is recognized at the time goods are shipped and services are
performed.
Advertising:
Costs related to advertising and promotion of products are charged to sales
and marketing expense as incurred. Advertising and promotion costs were
approximately $101,200 and $171,700 for the years ended March 31, 2003 and
2002, respectively.
Research and development:
Research and development costs are expensed as incurred. Research and
development expense for the years ended March 31, 2003 and 2002 was
approximately $24,000 and $8,000, respectively.
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2003 AND 2002
3. Significant accounting policies (continued):
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 payment terms.
Derivative transactions:
During the year ended March 31, 2003, the Company 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, respectively. Included in interest income
for the year ended March 31, 2003 is approximately $30,300 of gains from these
transactions. The Company held no derivative instruments at March 31, 2003.
Stock-based compensation:
SFAS No. 123 "Accounting for Stock-Based Compensation" allows companies to
choose whether 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 employee stock-based compensation using APB 25. At March 31, 2003, the
Company had no stock option plans.
Income taxes:
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based upon the differences between the financial
statement carrying amounts and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse.
Comprehensive income:
SFAS No. 130, Reporting Comprehensive Income, establishes requirements for
disclosure of comprehensive income. During the years ended March 31, 2003 and
2002, the Company did not have any components of comprehensive income to
report.
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2003 AND 2002
3. Significant accounting policies (continued):
Recently issued accounting pronouncements:
In January 2003, the Financial Accounting Standards Board ("FASB") issued SFAS
Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"),
which changes the criteria by which one company includes another entity in its
consolidated financial statements. FIN 46 requires a variable interest entity
("VIE") to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns or both. The
consolidation requirements of FIN 46 apply immediately to VIE's created after
January 31, 2003, and apply in the first fiscal period beginning after June
15, 2003, for VIE's created prior to February 1, 2003. As the Company does not
currently have an interest in a VIE, management does not expect that the
adoption of FIN 46 will have a significant immediate impact on the financial
condition or results of operations of the Company.
In November 2002, the FASB issued SFAS Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees and Indebtedness of Others. FIN 45 elaborates on the
disclosures to be made by the guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued.
It also requires that a guarantor recognize, at the inception of a guarantee,
a liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002, while the provisions of the disclosure
requirements are effective for financial statements of interim or annual
reports ending after December 15, 2002. The Company is currently evaluating
the recognition provisions of FIN 45, but does not expect that the adoption of
FIN 45 will have a significant immediate impact on the financial condition or
results of operations of the Company, as the Company has made no guarantees.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which addresses accounting and financial
reporting for the impairment or disposal of long-lived assets. This statement
was effective for the Company on April 1, 2002. The adoption of SFAS No. 144
did not have an impact on the financial condition or results of operations of
the company.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation Transition and Disclosure. This statement amends SFAS No. 123,
Accounting for Stock-Based Compensation and establishes two alternative
methods of transition from the intrinsic value method to the fair value method
of accounting for stock-based employee compensation. In addition, SFAS No.
148 requires prominent disclosure about the effects on reported net income and
requires disclosure for these effects in interim financial information. The
provisions for the alternative transition methods are effective for fiscal
years ending after December 15, 2002 and the amended disclosure requirements
are effective for interim periods beginning after December 15, 2002. The
Company plans to continue accounting for stock-based compensation under APB
25. Therefore, this pronouncement is not expected to impact the Company's
financial position or results of operations.
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2003 AND 2002
3. Significant accounting policies (continued):
Use of estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 balance sheet and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
4. Property and equipment:
At March 31, 2003, property and equipment consist of the following:
Unaudited
Proforma Historical
(Note 1)
Office furniture and equipment $ 24,000 $ 99,351
Equipment 45,050 119,404
Land and building 85,000 85,000
-------- ----------
154,050 303,755
Less accumulated depreciation and amortization 10,263 129,586
-------- ----------
$ 143,787 $ 174,169
======== ==========
5. Notes payable:
At March 31, 2003, notes payable consist of the following:
Unaudited
Proforma Historical
(Note 1)
Note payable, interest at 9.5%, payable in monthly
installments of $2,000, originally due July 15, 2003,
collateralized by inventory and accounts receivable $ 83,932
Note payable, interest at 10.5%, payable in monthly
installments of $5,635, originally due April 1, 2003,
collateralized by inventory, accounts receivable, equipment
and real estate owned by the Company's majority shareholder 204,757
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2003 AND 2002
5. Notes payable (continued):
Unaudited
Proforma Historical
(Note 1)
Note payable, interest at 8%, payable in
monthly installments of $1,956, due July
2009, collateralized by all of the assets
of MPHIS $ 115,923 $ 115,923
Note payable, interest at 7.9%, payable in
monthly installments of $590, due July 2016,
collateralized by land and building 58,385 58,385
Note payable, interest at 24%, payable in
monthly installments of $905, due May 2004 12,931 12,931
Note payable, related party, interest at 5%,
payable in monthly installments of $375, due
September 2004 10,874 10,874
--------- --------
198,113 486,802
Less current portion 33,991 322,680
--------- --------
$ 164,122 $ 164,122
========= ========
Future minimum note payments as of March 31, 2003, are approximately as
follows:
Years ending March 31,
2004 $ 322,680
2005 26,265
2006 20,277
2007 21,957
2008 45,773
Thereafter 49,850
---------
$ 486,802
==========
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2003 AND 2002
6. Related party transactions:
During the years ended March 31, 2003 and 2002 the Company transferred
inventory with a carrying value of approximately $20,000 and $25,000,
respectively, to an officer and shareholder of the Company in exchange for a
receivable. The shareholder used the inventory for promotional and other
sales purposes on behalf of the Company. The Company entered into an
agreement with the officer and shareholder whereby the receivable was to be
settled in exchange for 32,944 shares of treasury stock, which management
believes is the fair value of the stock. Accordingly, the amounts receivable
from the shareholder have been shown as a reduction of stockholders equity at
March 31, 2003 and 2002. This agreement was terminated in connection with the
disposition of MPSI in May 2003, and the receivable was acquired by the
shareholder.
At March 31, 2002, the Company owed $41,129 to one of its shareholders and
officers. Interest on the advance was at 8% and the advance was due to be
repaid in May 2005. In April 2002, the advance, together with accrued
interest of $3,871 was converted to 197,232 shares of common stock. Included
in interest expense for the year ended March 31, 2002 is $3,871 relating to
the advance.
7. Commitments:
Operating lease:
The Company leases its operating facility on a month-to-month basis. The
lease may be canceled upon 30 days notice by the Company. The Company also
leases office equipment under operating leases with various terms through
February 2004. Total lease expense for the years ended March 31, 2003 and
2002 was approximately $33,000 and $36,000, respectively.
8. Income taxes:
At March 31, 2003 the Company has a net operating loss carryforward of
approximately $1,690,000, expiring on various dates through 2023 if not
utilized. The net operating loss carry forwards may be subject to certain
limitations due to the disposition of MPSI and to business acquisitions and
other transactions. A valuation allowance has been provided to reduce to zero
deferred tax assets arising from net operating losses and temporary
differences because the future utilization cannot be assured at this time.
9. Shareholders' equity:
During the year ended March 31, 2002, 43,829 shares of common stock were
issued in exchange for a note payable in the amount of $20,000. Also during
the year ended March 31, 2002, 1,314,878 shares of common stock were issued
pursuant to employment agreements to two of the Company's directors. Theses
shares were valued at $80,000 at the date of issuance. Compensation expense
of $67,778 and $41,111 has been deferred at March 31, 2002 and March 31, 2003,
respectively, in accordance with the terms of the employment agreements.
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2003 AND 2002
9. Shareholders' equity (continued):
During the year ended March 31, 2003, 863,889 shares of common stock were
issued in private placements at prices ranging from $0.22 to $0.75 per share;
197,232 shares of common stock were issued in exchange for a note payable to
an officer of the Company in the amount of $45,000 and 30,000 shares of common
stock valued at $30,000 were issued in connection with the Company's
acquisition of the assets of A&V. During the year ended March 31, 2003, the
Company's founding shareholder awarded 230,100 of his shares of the Company's
common stock to Company employees. The Company has accounted for this award
as a capital contribution by the founding shareholder resulting in
compensation expense and an increase in additional paid-in capital of $52,500.
Also during the year ended March 31, 2003, the Company reserved 130,000 shares
of common stock for issuance to employees as compensation. Certain employees
and directors were awarded 19,750 shares of common stock valued at $0.75 per
share resulting in compensation expense of $14,813.
10. Subsequent events:
Effective May 30, 2003, the Company entered into an asset purchase agreement
with Medical Billings Management Inc., a corporation based in the state of
Mississippi. As a result of the acquisition, the Company expanded its medical
transcription and medical billings business. Under the terms of the
agreement, the Company purchased certain operating assets and assumed certain
lease obligations of Medical Billings Management Inc., in exchange for
$450,000 ($150,000 paid at closing, $75,000 payable six months after closing
and $225,000 payable on May 31, 2004, subject to an earn-out provision based
on actual revenues).
On September 5, 2003, the Company completed a merger with Piezo Instruments,
Inc., ("Piezo"), a Utah Corporation. Piezo is effectively a public shell
company with no significant assets or liabilities. Under the terms of the
agreement and plan of reorganization, the shareholders of the Company sold
100% of the issued and outstanding shares of the Company to Piezo in exchange
for 16,000,000 newly issued shares of voting common stock of Piezo. The
transaction is expected to be accounted for as a reverse acquisition of Piezo
by the Company since the shareholders of the Company own approximately 89% of
the post-acquisition common stock of the consolidated entity immediately after
the completion of the transaction.
OMNI MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MASTEL PRECISION, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2003 AND 2002
11. Contingencies:
On October 1, 2003, (unaudited) some of the minority shareholders of the
entity formerly known as Daycor, notified the Company that they believe that
Omni has taken actions that have diluted their interests. These minority
shareholders have demanded the return of certain assets or a substantial
financial settlement to be reached within 15 days. These minority
shareholders have notified the Company of their intentions to make a filing
with the American Arbitration Association pursuant to the Agreement for the
Exchange of Common Stock dated April 15, 2002 if the matter is not resolved
within the 15 day timeframe. There have been no stated monetary damages
claimed. Management believes that the issue raised by these minority
shareholders is without merit and management intends to vigorously defend any
action, if filed. However, it is too early to determine the ultimate outcome
of the matter.
Omni Medical Holdings, Inc.
Unaudited Consolidated Balance Sheet
September 30,
2003
ASSETS
Current assets:
Cash and cash equivalents $ 27,912
Accounts receivable, net, including unbilled amounts
of approximately, $123,000 230,215
Prepaid expenses 6,654
-----------
Total current assets 264,781
-----------
Property and equipment, net 214,695
Deferred financing costs 25,000
Goodwill 36,000
Intangible assets 314,114
-----------
$ 854,590
===========
LIABILITIES
Current liabilities:
Trade accounts payable $ 85,837
Accrued expenses 36,446
Notes payable, current portion 473,991
-----------
Total current liabilities 596,274
Notes payable, net of current portion 147,228
-----------
Total liabilities 743,502
-----------
Minority interest 20,482
SHAREHOLDERS' EQUITY
Common stock, par value $0.001 per share; authorized
50,000,000; issued and outstanding, 10,760,849 shares 10,761
Common stock to be issued, 4,146,872 4,147
Capital in excess of par value 1,629,005
Deferred compensation expense (35,105)
Accumulated deficit (1,518,202)
-----------
Total stockholders' equity 90,606
-----------
$ 854,590
===========
See notes to consolidated financial statements.
2
Omni Medical Holdings, Inc.
Unaudited Consolidated Statements of Operations
Three Months Ended Six Months Ended
September 30, September 30,
2003 2002 2003 2002
Revenue $ 299,559 $ 43,027 $ 379,839 $ 43,027
Cost of sales 199,485 17,619 204,474 17,619
---------- --------- --------- --------
Gross operating profit 100,074 25,408 175,365 25,408
General and administrative expenses 230,005 63,020 312,949 63,020
---------- --------- --------- --------
Loss from operations (129,931) (37,612) (137,584) (37,612)
Other income (expense):
Interest income - 226 260 226
Interest expense (11,673) (2,164) (17,978) (2,164)
---------- --------- --------- --------
Total other income (11,673) (1,938) (17,718) (1,938)
Loss from continuing operations
before minority interest (141,604) (39,550) (155,302) (39,550)
Minority interest 3,402 - 3,402 -
---------- --------- --------- --------
Loss from continuing operations (138,202) (39,550) (151,900) (39,550)
Loss from discontinued operations - (14,913) (33,736) (44,767)
---------- --------- --------- --------
Net loss $ (138,202) $ (54,463)$(185,636)$ (84,317)
========== ========= ========= ========
Loss per share basic and diluted:
Continuing operations $ (0.01) $ (a)$ (0.01)$ (a)
Discontinued operations - (a) (a) (a)
---------- --------- --------- --------
$ (0.01) $ (a)$ (0.01) $ (a)
========== ========= ========= ========
Weighted average number of common
shares outstanding 13,457,914 19,971,427 14,420,323 19,709,802
========== ========== ========== ==========
See notes to consolidated financial statements.
(a) Less than $0.01 per share.
3
Omni Medical Holdings, Inc.
Unaudited Consolidated Statement of Shareholders' Equity
Shares Additional
issued and to Amount Amount Paid-in
be issued Issued To be Issued Capital
Balances, April 1, 2003 20,620,247 $ 20,620 $ 0 $ 1,564,299
Disposition of subsidiary
(unaudited) (7,795,520) (7,795) 31,721
Sale of common stock pursuant
to private placements (unaudited) 92,216 92 44,908
Earned compensation expense
(unaudited) - - - -
Repurchase of dissenter's common
stock (unaudited) (9,222) (9) - (111)
-----------
12,907,721
Acquisition of Piezo on
September 5, 2003 (unaudited) 2,000,000 2,147 4,147 (11,812)
Net loss (unaudited) - - - -
----------- ------- ----------- -----------
Balances, September 30, 2003
(unaudited) 14,907,721 $10,761 $ 4,147 $ 1,629,005
=========== ======= =========== ===========
[CONTINUED]
Omni Medical Holdings, Inc.
Unaudited Consolidated Statement of Shareholders' Equity
Deferred Advance
compensation Accumulated receivable
expense deficit shareholder Total
Balances, April 1, 2003 $(41,111) $(1,332,566) $(24,708) $ 186,534
Disposition of subsidiary
(unaudited) 24,708 48,634
Sale of common stock pursuant
to private placements (unaudited) 45,000
Earned compensation expense
(unaudited) 14,799 14,799
Repurchase of dissenter's common
stock (120)
Acquisition of Piezo on
September 5, 2003 (unaudited) (8,793) (18,605)
Net loss (unaudited) (185,636) (185,636)
------- ----------- ---------- --------
Balances, September 30, 2003
(unaudited) $(35,105) $(1,518,202) $ 90,606
======= =========== ========== ========
See notes to consolidated financial statements.
4
Omni Medical Holdings, Inc.
Unaudited Consolidated Statements of Cash Flows
Six Months Ended
September 30,
----------------
2003 2002
Loss from continuing operations $ (151,900) $ (39,550)
Adjustments to reconcile net loss to net cash
used in continuing operations:
Stock-based compensation expense 14,799 13,334
Depreciation and amortization 36,688 -
Minority interest (3,402) -
Changes in operating assets and liabilities, net
of effects of business acquisition:
Accounts receivable (41,415) (57,986)
Prepaid expenses (6,654) -
Accounts payable 38,739 (71,953)
Accrued expenses 24,740 (7,855)
---------- ----------
Net cash used in continuing operations (88,405) (164,010)
---------- ----------
Net cash used in discontinuing operations (32,905) (39,783)
---------- ----------
Net cash used in operating activities (121,310) (203,793)
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (5,687) (45,270)
Payment for disposition of subsidiary, net (28,737) -
Payment for purchase of business (150,000) (65,000)
---------- ---------
Net cash used in investing activities (184,424) (110,270)
---------- ---------
Cash flows from financing activities:
Deferred financing costs (25,000) -
Payments of notes payable (19,695) (19,867)
Proceeds from issuance of debt 75,378 125,000
Proceeds from issuance of common stock 45,000 597,500
---------- ---------
Net cash provided by financing activities 75,683 702,633
---------- ---------
(Decrease) increase in cash and cash
equivalents (230,051) 388,570
Cash and cash equivalents:
Beginning of period 257,963 9,344
---------- ---------
End of period $ 27,912 $ 397,914
Supplemental disclosure of cash flow information:
Cash paid for interest for continuing
operations $ 9,891 $ 2,164
========== =========
Cash paid for interest for discontinued
operations $ 1,402 $ 18,652
========== =========
See notes to consolidated financial statements.
5
Supplemental disclosure of non-cash investing and
financing activities:
Conversion of debt to equity $ 45,000
Business acquisitions:
Fair value of assets acquired $ 450,000 $ 184,761
Issuance of debt/assumption of liabilities (300,000) (89,761)
Common stock issued at acquisition - (30,000)
---------- ---------
Cash paid $ 150,000 $ 65,000
========== =========
See notes to consolidated financial statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business, organization and interim financial statements:
Business:
Omni Medical Holdings, Inc. ("Omni"), a Nevada corporation, provides
medical billing and transcription services to medical practitioners in
Alabama, Mississippi and South Dakota.
Organization:
The Company was previously organized as Piezo Instruments, Inc. ("Piezo"),
a Utah corporation. Effective September 5, 2003, Piezo and Omni executed
an Agreement and Plan of Reorganization (the "Reorganization Agreement"),
whereby Piezo agreed to acquire 100% of the issued and outstanding shares
of common stock of Omni in exchange for up to 16,000,000 newly issued
shares of common stock of Piezo, (of which 12,907,721 have been issued
through October 31, 2003, or approximately 87% of the post-Reogranization
Agreement outstanding securities of Piezo). The transaction was accounted
for as a reverse acquisition of Piezo by Omni. Shares of common stock
authorized and issued have been retroactively restated to present the
capital structure of Piezo. Concurrent with the merger, Piezo changed its
name to Omni Medical Holdings, Inc.
At the closing, and excluding the 16,000,000 shares exchanged for Omni, the
outstanding common stock of Piezo amounted to 2,000,000 shares, after
taking into account a 1 for 14.5 reverse split and the following
transactions: 1. In consideration of the closing of the Reorganization
Agreement, certain principal stockholders of Piezo (i) delivered 1,466,379
post-split shares of Piezo for cancellation, which included 225,000 post-
split shares of common stock underlying an option granted to one of the
canceling stockholders; and (ii) waived any registration rights that had
been granted to them or were applicable to any of the cancelled shares. In
exchange for the cancellation of these shares and the waiver of any
registration rights, Piezo issued an aggregate of 500,000 post-split newly
issued shares of common stock to the canceling stockholders. 2. Piezo
issued 293,104 shares of common stock to certain principal stockholders of
Piezo in exchange for services to be rendered under a six month consulting
agreement, resulting in consulting expense of approximately $8,800, of
which approximately $7,300 is deferred at September 30, 2003.
As of October 31, 2003, the deadline for completing the share exchange
transaction with Piezo, approximately 81% of Omni's outstanding shares had
been tendered to the Company in accordance with the instructions for
exchanging shares (8,760,849 shares were issued through September 30, 2003
and an additional 4,146,872 shares were available to be issued in October
2003). The other 19% had either dissented or had taken no action
whatsoever and continue to own a minority interest in the Company's
operating subsidiary.
Interim financial statements:
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by accounting principles for complete
financial statements generally accepted in the United States of America.
There has not been any change in the significant accounting policies of
Omni Medical Holdings, Inc. for the periods presented.
7
1. Business, organization and interim financial statements (continued):
Interim financial statements (continued):
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. These condensed consolidated financial statements
should be read in conjunction with a reading of the Omni consolidated
financial statements and notes thereto included in the Company's Form 8-K/A
filed with the Securities and Exchange Commission ("SEC") in November 2003
as well as the 2002 Piezo annual report filed on Form 10-KSB with the SEC.
In the opinion of Management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The results for these interim periods are not necessarily
indicative of results for the entire year.
2. Business acquisitions:
Effective May 30, 2003, Omni, through its wholly-owned subsidiary, Omni
Medical Services, Inc., ("OMS"), completed an asset purchase agreement with
Medical Billing Management, Inc. ("MBM"), a corporation based in the state
of Mississippi and a provider of medical billing and collection services to
medical practitioners. The aggregate purchase price was $450,000,
including $150,000 paid at closing, $75,000 payable on November 30, 2003
and $225,000 payable on May 31, 2004. The $225,000 payable on May 31, 2004
is subject to an adjustment which is to be calculated based on the amount
by which revenues for the year ending May 31, 2004 are greater or lesser
than a baseline amount.
The following table summarizes the estimated fair values of the assets
acquired as of May 30, 2003, the date of acquisition. The allocation of
the purchase price is subject to refinement.
Accounts Receivable, net $ 62,000
Furniture and equipment 78,000
Intangible asset customer list 310,000
------------
Net assets acquired $ 450,000
============
Effective July 10, 2002, Omni entered into an asset purchase agreement with
A&V Digital Transcription Services ("A&V"), a general partnership and
provider of medical transcription services based in the state of Alabama.
On September 4, 2002, Omni formed Omni Medical Services, Inc., (formerly
Mastel Precision Health Information Services, Inc. and a wholly owned
subsidiary of Omni) to operate the transcription services business acquired
from A&V.
The aggregate purchase price was $95,000, including $65,000 in cash,
assumption of liabilities of $90,000 and common stock valued at $30,000.
The following table summarizes the estimated fair values of the assets
acquired and the liabilities assumed at July 10, 2002, the date of
acquisition.
Current assets $ 8,000
Property, plant and equipment 109,000
Intangible asset customer list 32,000
Goodwill 36,000
---------
Total assets acquired 185,000
---------
Current liabilities (19,000)
Long-term debt (71,000)
---------
Total liabilities assumed (90,000)
---------
Net assets acquired $ 95,000
8
2. Business acquisitions (continued):
The MBM and A&V acquisitions were accounted for as purchases and their
results of operations are included in the Company's financial statements
from the dates of acquisition. Goodwill arising on the acquisition of A&V
is expected to be fully deductible for tax purposes. Intangible assets
(customer lists) acquired from MBM and A&V are expected to be amortized
over 5 years.
The following unaudited proforma financial information presents results as
if the MBM acquisition had occurred at the beginning of the respective
periods (the impact of the A&V acquisition on 2002 unaudited proforma
operating results was not significant).
Six months ended
September 30,
2003 2002
Revenues $ 432,845 $ 869,111
Net (loss) income $ (245,278) $ 19,416
Basic and diluted loss per share $ (0.02) *
* Less than $0.01 per share
3. Discontinued operations:
Through May 2, 2003, Omni also produced handheld surgical instruments used
by ophthalmic surgeons in refractive, corneal and LASIK surgeries and was
also a developer of technology to ophthalmic surgeons, specifically within
the domain of anterior segment cataract extraction, and foldable
intraocular lens placement as well as keratorefractive procedures such as
LASIK. Omni operated its surgical instruments business through its wholly-
owned subsidiary, Mastel Precision Surgical Instruments, Inc ("MPSI") out
of its facility in Rapid City, South Dakota.
Effective May 2003, Omni entered into an agreement with one of its officers
and shareholders whereby Omni agreed to exchange 100% of the common stock
of MPSI and $36,000 cash for all shares of common stock of Omni owned
individually or jointly by the officer and his wife. As of April 30, 2003,
the assets of MPSI had a carrying value of approximately $442,000
(primarily accounts receivable of approximately $53,000 inventories of
approximately $387,000 and property and equipment of approximately $30,000)
and MPSI's obligations and liabilities had a carrying value of
approximately $527,000 (primarily accounts payable of approximately
$226,000 and debt of approximately $286,000). Due to the related party
nature of the transaction, no gain was recognized and shareholders' equity
was increased by approximately $49,000. The results of operations from MPSI
have been retroactively restated as discontinued operations.
4. Managements plans:
Omni financial statements for the years ended March 31, 2003 and 2002 (not
included herein) and for the six months ended September 30, 2003 and 2002
show that Omni has incurred net losses of $515,090, $186,720, $185,636 and
$84,317, respectively, and has a working capital deficiency of $331,491, as
of September 30, 2003. Management's plans to address concerns raised by
this issue includes:
a. The disposition of MPSI will allow the Company to concentrate on its
medical billing and transcription operations, which management believes
can be operated more profitably than MPSI. MPSI's operating losses for
the years ended March 31, 2003 and 2002 were approximately $325,000 and
$122,000, respectively.
b. Management expects that cash flows will increase as result of the
Company's disposition of MPSI and it's acquisition of transcription
businesses.
9
4. Managements plans (continued):
c. In early June, the company retained the services of Windstone Capital,
an investment banking firm in Phoenix, Arizona to raise capital for
additional acquisitions. A private placement offering began in early
November and management believes the firm will be successful in raising
$800,000, the maximum amount of the offering.
There is no assurance that these or any efforts will be successful.
However, management believes that these measures will enable the Company to
have adequate funds to support operations for the next twelve months.
5. COMMITMENTS:
In 2003, the Company retained the services of an investment banking firm to
raise capital for future acquisitions. Through September 30, 2003 the
Company has paid $25,000 in deferred financing costs which will be offset
against the future equity proceeds.
In conjunction with the MBM acquisition, Omni entered into an employment
agreement with one of MBM's former owners, guaranteeing employment with
Omni through May 30, 2004 at an annual salary of $50,000 plus a performance
based bonus.
Omni has signed letters of intent to acquire two medical transcription
businesses, one based in Kentucky and the other based in Iowa. The
Kentucky and Iowa businesses will cost $360,000 and $255,000,
respectively, of which approximately $270,000 is to be paid at closing and
the balances would be subject to earn out provisions over one to two years.
These acquisitions are expected to be financed by future equity capital.
6. Contingencies:
On October 1, 2003, certain minority shareholders of Omni, notified the
Company that they believe that Omni has taken actions that have diluted
their interests. These minority shareholders demanded the return of
certain assets or a substantial financial settlement to be reached within 15
days. These minority shareholders have notified the Company of their
intentions to make a filing with the American Arbitration Association
pursuant to the Agreement for the Exchange of Common Stock dated April 15,
2002 if the matter is not resolved within the 15 day time frame. No such
filing has been made and there have been no stated monetary damages claimed.
Management believes that the issue raised by these minority shareholders is
without merit and management intends to vigorously defend any action, if
filed. However, it is too early to determine the ultimate outcome of the
matter.
7. Basic and Diluted Loss Per Share
The Company determines basic and diluted loss per share in accordance with
SFAS No. 128, Earnings Per Share. The basic net loss per common share is
computed by dividing the net loss by the weighted average number of shares
outstanding during a period. Diluted net loss per common share is computed by
dividing the net loss, adjusted on an as if converted basis, by the weighted
average number of common shares outstanding plus potential dilutive
securities. For the three and six months ended September 30, 2003 and 2002,
there are no potential dilutive securities. Therefore, diluted loss per share
is equivalent to basic loss per share. During the three and six months ended
September 30, 2003, the weighted average number of shares includes the effect
of shares of common stock to be issued.
10
(b) Pro Forma Financial Information.
Proforma balance sheets and statements of operations as of the most recent
year and interim periods have not been presented as management believes that
they would not differ from the historical September 30, 2003 balance sheets
and statements of operations already presented since Piezo had no significant
assets, liabilities or operating activities.
(c) Exhibits.
Attached:
---------
2.1 Agreement and Plan of Reorganization*
Exhibit A & A-1 Omni Stockholders
Exhibit B Piezo Financial Statements for
the years ended December 31, 2002
and 2001(1)
Exhibit B-1 Piezo Financial Statements for
The period ended June 30, 2003(2)
Exhibit C Exceptions to Piezo Financial
Statements
Exhibit D Omni Financial Statements
for the years ended March 31,
2002 and 2001 ("Audited", and the
nine months ended December 31, 2002
(Unaudited)(3)
Exhibit E Exceptions to Omni Financial
Statements
Exhibit F Investment Letter
Exhibit G Piezo Compliance Certificate
Exhibit H Omni Compliance Certificate
Schedule 1.5.1 Canceling Principal Stockholders
Schedule 1.5.2 Shares Issued in Consideration
Of Cancellation and Waiver of
Registration Rights
Schedule 1.6.1 Piezo Stockholders Subject to
Lock-Up/Leak-Out Agreement
Schedule 1.6.2 Lock-Up/Leak-Out Agreement
Schedule 1.7.1 Consulting Agreement
99.1 Letter to Omni Stockholders*
99.2 Accredited/Sophisticated Investor Questionnaire*
99.3 Letter of Instructions*
99.4 Acknowledgment*
* Previously filed with the Securities and Exchange Commission.
Incorporated by Reference:
--------------------------
10-KSB Annual Report for the year ended December 31, 2002, filed with the
Securities and Exchange Commission on March 26, 2003.
10-QSB Quarterly Report for the quarter ended June 30, 2003, filed with the
Securities and Exchange Commission on July 16, 2003.
Preliminary Information Statement filed with the Securities and Exchange
Commission on September 17, 2003.
Amended Preliminary Information Statement filed with the Securities and
Exchange Commission on September 23, 2003.
(1) Incorporated by reference from the 10-KSB Annual Report of Piezo
for the year ended December 31, 2002.
(2) Incorporated by reference from the 10-QSB Quarterly Report of
Peizo for the quarter ended June 30, 2003.
(3) See the caption "Financial Statements of Omni," above, and Item
7.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
OMNI MEDICAL HOLDINGS, INC.
Date: 03/08/04 /s/ Arthur D. Lyons
-------- ------------------------
Arthur D. Lyons
Director and President