As filed with the Securities and Exchange Commission on September __, 2001
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 1
To Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OmniComm Systems, Inc.
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(Name of small business issuer in its charter)
Delaware 11-3349762
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(State of incorporation) (IRS employer Ident. No.)
541511
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(Primary Standard Industrial Classification Code No.)
3250 Mary Street, Suite 402, Miami, Fl. 33133
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(Address of principal office) (Zip Code)
Issuer's telephone number: (305) 448-4700
____________________________
David Ginsberg, Chief Executive Officer
OmniComm Systems, Inc.
3250 Mary Street, Suite 402
Miami, Florida 33133
(305) 448-4700
(Name and address of agent of service)
__________________
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]_______________
If this Form is a post effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]_______________
If this Form is a post effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]_______________
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [_]
CALCULATION OF REGISTRATION FEE
(1)Estimated solely for purposes of calculating the registration fee pursuant to
Rule 457(c) of the Securities Act of 1933, as amended, on the basis of the
average high and low sales prices of the Registrant's Common Stock on the NASDAQ
Electronic Bulletin Board on September 10, 2001, for OMCM.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant files a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such dates as the Commission, acting pursuant to said
Section 8(a), may determine.
Title of Each Class Proposed Amount Proposed Maximum Maximum Aggregate Amount of
of Securities to be To be Offering Offering Registration
Registered Registered Price Per Unit Price Fee (1)
Common Stock
Par value
$.001 per share 4,665,600 $0.57 $2,659,392 $702.08
(1) The Registrant paid $3,858.92 in connection with its initial filing of
a Form SB-2 Registration Statement covering the resale of certain
common shares on November 14, 2000.
SUBJECT TO COMPLETION
Prospectus Dated September 10, 2001
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
4,665,600 Shares
OMNICOMM SYSTEMS, INC.(TM)
Common Stock
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This prospectus ("Prospectus") covers the resale of certain shares ("Shares") of
common stock, $.001 par value per share (the "Common Stock") of OmniComm
Systems, Inc. ("OmniComm" or the "Company") held or acquirable by certain
persons ("Selling Security Holders") named in this Prospectus. The Company will
receive approximately $125,500 in proceeds from the sale of the Shares. The
Shares covered hereby include (i) shares of Common Stock that are issuable upon
conversion of previously-issued shares of Series A Convertible Preferred Stock
(the "Series A Preferred"), (ii) shares of Common Stock that are issuable upon
conversion of the 10% Convertible Notes (the "Convertible Notes"), (iii) shares
of Common Stock issuable upon the exercise of certain warrants, and (iv) Common
Stock, held by certain Selling Security Holders (the "Series A Holders",
"Convertible Note Holders", "Warrant Holders", and "Common Holders").
Except for the total number of shares to which this Prospectus relates as set
forth above, references in this Prospectus to the "number of Shares covered by
this Prospectus," or similar statements, and information in this Prospectus
regarding the number of Shares issuable to or held by the Selling Security
Holders and percentage information relating to the Shares of the outstanding
capital stock of the Company, are based upon the conversion ratio set forth in
the instruments establishing the rights of the Series A Preferred Holders and
Convertible Note holder, and the exercise of all the warrants by the Warrant
Holders and registration of all the common stock held by the Common Holders and
assumes that a total of 4,665,600 Shares are issued. See "Selling Security
Holders," "Plan of Distribution" and "Description of Capital Stock." The Shares
offered hereby represent approximately 37% of the Company's currently
outstanding Common Stock. The Shares are being offered on a continuous basis
pursuant to Rule 415 under the Securities Act of 1933, as amended (the
"Securities Act"). No underwriting discounts, commissions or expenses are
payable or applicable in connection with the sale of such Shares by the Selling
Security Holders. The Common Stock of the Company is quoted on the National
Association of Securities Dealers, Inc. (the "NASD") OTC Bulletin Board under
the symbol "OMCM". The Shares offered hereby will be sold from time to time at
the then prevailing market prices, at prices relating to prevailing market
prices or at negotiated prices. On September 10, 2001, the last reported sale
price of the Common Stock on the OTC Bulletin Board was $0.57 per share. This
Prospectus may be used by the Selling Security Holders or any broker-dealer who
may participate in sales of the Common Stock covered hereby.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is September 10, 2001.
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Table of Contents
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Location
Item in
No. Item Caption Prospectus
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1 Front of Registration Statement and Outside Front Cover of Prospectus
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2 Inside Front and Outside Back Cover Pages of Prospectus
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3 Summary Information and Risk Factors 5
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4 Use of Proceeds 9
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5 Determination of Offering Price 9
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6 Dilution 9
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7 Selling Security Holders 10
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8 Plan of Distribution 12
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9 Legal Proceedings 13
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10 Directors, Executive Officers, Promoters and Control Persons 13
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11 Security Ownership of Certain Beneficial Owners and Management 14
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12 Description of Securities 15
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13 Interest of Named Experts and Counsel 16
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14 Disclosure of Commission Position on Indemnification for Securities Act 16
Liabilities
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15 Organization Within Last Five Years 16
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16 Description of Business 17
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17 Management's Discussion and Analysis of Plan of Operation 27
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18 Description of Property 35
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19 Certain Relationships and Related Transactions 35
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20 Market for Common Equity and Related Stockholder Matters 35
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21 Executive Compensation 36
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22 Financial Statements 73
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23 Changes In and Disagreements with Accountants on Accounting and Financial 37
Disclosure
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PART II INFORMATION NOT REQUIRED IN PROSPECTUS
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24 Indemnification of Directors and Officers 37
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25 Other Expenses of Issuance and Distribution 38
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26 Recent Sales of Unregistered Securities 38
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27 Exhibits 41
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28 Undertakings 42
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PART I INFORMATION REQUIRED IN PROSPECTUS
ITEM NO. 3 SUMMARY INFORMATION
OmniComm Systems, Inc. (the "Company" or "OmniComm") is positioned to take
advantage of and leverage the burgeoning growth in the pharmaceutical, biotech
and medical device industries. TrialMaster(R) is an Internet based approach that
upgrades and integrates the significant components of the clinical trial
process-trial management and doctor/patient recruitment - into a seamless
connection between industry, doctors, and patients.
The amount of money and time spent on the current clinical trial model is
staggering. The following points are illustrative of the dynamics:
. It can cost as much as $500,000,000 to bring a drug to market
. 50% of clinical trials are delayed due to a lack of patients
. Drug companies lose as much as $1 million in potential revenue for
each day a trial is delayed on a blockbuster drug such as Viagra(TM)
. In the United States only 2% of the doctors and 5% of the eligible
patients are involved in clinical trials
One of the critical component in bringing a drug or medical device to market is
the process by which approval is sought to market the drug or device - a
clinical trial. The current clinical trial model is a business process that is
antiquated and fails to access the considerable resources available such as
doctors and patients that are critical for a successful clinical trial.
TrialMaster is an Internet-based application that manages the clinical trial
process including real time data collection and monitoring. It is expected that
by implementing TrialMaster the clinical trial industry ("Industry") will
realize cost efficiencies by improving data quality and integrity and shortening
the time to market for medical products and drugs.
OmniComm will derive revenue from sponsors of clinical trials who utilize
TrialMaster to manage their trials.
RISKS RELATED TO OUR BUSINESS MODEL
OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT.
Although we were incorporated in 1997, we did not initiate our Internet
operations until August 1998. As a result, we have only a limited operating
history on which you can base an evaluation of our business and prospects. Our
prospects must be considered in light of the risks, uncertainties, expenses and
difficulties frequently encountered by companies in their early stages of
development, particularly companies in new and rapidly evolving markets like
ours. Our failure to successfully address these risks and uncertainties could
have a material adverse effect on our financial condition. Some of these risks
and uncertainties relate to our ability to:
. attract and maintain a base of end users;
. develop our infrastructure, including additional hardware and
software;
. provide customer support, personnel and facilities, to support our
business;
. develop and introduce desirable services;
. establish and maintain strategic relationships with distribution
partners;
. establish and maintain relationships with industry; and
. respond effectively to competitive and technological developments.
3
WE ARE COMPETING IN A NEW MARKET, WHICH MAY NOT DEVELOP, OR IN WHICH WE MAY FAIL
TO GAIN MARKET ACCEPTANCE.
The market for our business model in the healthcare industry is new and rapidly
evolving. As a result, uncertainty as to the level of demand and market
acceptance exposes us to a high degree of risk. We cannot assure you that the
healthcare community will accept electronic data collection or utilization of
the Internet to enhance doctor and patient participation in the clinical trial
industry. If the market for electronic data collection or utilization of the
Internet to enhance doctor and patient participation in the clinical trial fails
to develop, develops more slowly than expected or becomes saturated with
competitors, or if our services do not achieve or sustain market acceptance, our
business will suffer.
FAILURE TO EFFECTIVELY MANAGE THE GROWTH OF OUR OPERATIONS AND INFRASTRUCTURE
COULD DISRUPT OUR OPERATIONS AND PREVENT US FROM GENERATING THE REVENUES WE
EXPECT.
We currently are experiencing a period of expansion in the development of online
clinical trials utilizing the TrialMaster system. To manage our growth, we must
successfully implement, constantly improve and effectively utilize our
operational and financial systems while aggressively expanding our workforce. We
must also maintain and strengthen the breadth and depth of our current strategic
relationships while rapidly developing new relationships. Our existing or
planned operational and financial systems may not be sufficient to support our
growth, and our management may not be able to effectively identify, manage and
exploit existing and emerging market opportunities. If we do not adequately
manage our potential growth, our business will suffer.
WE MAY BE UNABLE TO MAINTAIN OUR EXISTING RELATIONSHIPS WITH OUR DISTRIBUTION
PARTNERS OR TO BUILD NEW RELATIONSHIPS WITH OTHER DISTRIBUTION PARTNERS.
If we are not successful in developing and enhancing our relationships with end
users of our services, we could become less competitive and revenues may not
occur. We formed our existing relationships recently, and end users may not view
their relationships with us as significant to the success of their business. As
a result, they may reassess their commitment to us or decide to compete directly
with us in the future. We generally do not have agreements that prohibit our
distribution partners from competing against us directly or from contracting
with our competitors.
WE MAY BE UNABLE TO IMPLEMENT OUR ACQUISITION GROWTH STRATEGY, WHICH COULD HAVE
AN ADVERSE EFFECT ON OUR BUSINESS AND COMPETITIVE POSITION IN THE INDUSTRY.
Our business strategy may include increasing our market share and presence
through strategic acquisitions that complement or enhance our business. We do
not have substantial experience in completing and integrating large acquisitions
or multiple simultaneous acquisitions. In addition, we do not have experience
operating multiple remote offices. We may have difficulty integrating the
operations and realizing the results of these recently completed acquisitions.
We may not be able to identify, complete, integrate the operations or realize
the anticipated results of future acquisitions. Some of the risks that we may
encounter in implementing our acquisition growth strategy include:
. expenses associated with and difficulties in identifying potential
targets and the costs associated with acquisitions that are not
completed;
. expenses, delays and difficulties of integrating the acquired company
into our existing organization;
. diversion of management's attention from other business matters;
. expense of amortizing the acquired company's intangible assets;
. adverse impact on our financial condition due to the timing of the
acquisition, and
. If any of these risks are realized, our business could suffer.
4
OUR FUTURE SUCCESS DEPENDS ON REVENUES FROM CLINICAL TRIAL PARTICIPANTS AND THE
ACCEPTANCE AND EFFECTIVENESS OF ONLINE CLINICAL TRIALS IS UNCERTAIN.
We plan to derive revenues from industries such as pharmaceutical, medical
device, and biotech companies. The market for our services on the Internet is
new and rapidly evolving. Industry has limited or no experience with Internet
based clinical trials, and may ultimately conclude that Internet based clinical
trials are not effective relative to traditional clinical trial models. As a
result, the market for Internet based clinical trials may not continue to emerge
or become sustainable. This makes it difficult to project our future revenues.
If the market for Internet based clinical trials fails to develop or develops
more slowly than we expect, our business will suffer.
WITHOUT THE CONTINUED DEVELOPMENT AND MAINTENANCE OF THE INTERNET AND THE
AVAILABILITY OF INCREASED BANDWIDTH, OUR BUSINESS MAY NOT SUCCEED.
Given the online nature of our business, without the continued development and
maintenance of the Internet infrastructure, we could fail to meet our overall
strategic objectives and ultimately fail to generate the revenues we expect.
This continued development of the Internet includes maintenance of a reliable
network with the necessary speed, data capacity and security, as well as timely
development of complementary products for providing reliable Internet access and
services. Because commerce on the Internet and the online exchange of
information is new and evolving, we cannot predict whether the Internet will
prove to be a viable commercial marketplace in the long term.
The Internet has experienced, and is likely to continue to experience,
significant growth in the numbers of users and amount of traffic. As the
Internet continues to experience increased numbers of users, increased frequency
of use and increased bandwidth requirements, the Internet infrastructure may be
unable to support the demands placed on it. In addition, increased users or
bandwidth requirements may impair the performance of the Internet. The Internet
has experienced a variety of outages and other delays as a result of damage to
portions of its infrastructure, and it could face outages and delays in the
future. These outages and delays could reduce the level of Internet usage.
FINANCIAL RISKS
WE MAY NOT BE ABLE TO FORECAST OUR REVENUES ACCURATELY BECAUSE WE HAVE A LIMITED
OPERATING HISTORY.
As a result of our limited operating history, we do not have historical
financial data for a significant number of periods upon which to forecast
quarterly revenues and results of operations. We believe that period-to-period
comparisons of our operating results are not meaningful and should not be relied
upon as indicators of future performance. In addition, our operating results may
vary substantially. The actual effect of these factors on the price of our
stock, however, will be difficult to assess due to our limited operating
history. In one or more future quarters, our results of operations may fall
below the expectations of securities analysts and investors, and the trading
price of our common stock may decline.
WE EXPECT NET LOSSES IN THE FUTURE AND MAY NEVER ACHIEVE PROFITABILITY, WHICH
MAY CAUSE OUR STOCK PRICE TO FALL.
In 2000, we had net loss of approximately $6,275,051. We expect net losses and
negative cash flow for the foreseeable future and significant increases in our
operating expenses over the next several years. With increased expenses, we will
need to generate significant additional revenues in order to achieve
profitability. As a result, we may never achieve or sustain profitability and,
if we do achieve profitability in any period, we may not be able to sustain or
increase profitability on a quarterly or annual basis.
WE MAY NOT BE ABLE TO MEET OUR STRATEGIC BUSINESS OBJECTIVES UNLESS WE OBTAIN
ADDITIONAL FINANCING, WHICH MAY NOT BE AVAILABLE TO US ON FAVORABLE TERMS OR AT
ALL.
The Company will need to raise additional funds to meet operational needs and to
fund its strategic business objectives. We cannot assure you that additional
financing will be available on terms favorable to us, or at all. If adequate
funds are not available or are not available on acceptable terms, our ability to
fund our expansion, take advantage of available opportunities, develop or
enhance services or products or otherwise respond to competitive pressures would
be significantly limited. If we raise additional funds by issuing equity or
convertible debt securities, the percentage ownership of our shareholders will
be reduced, and these securities may have rights, preferences or privileges
senior to those of our shareholders.
5
RISKS RELATED TO SALES, MARKETING AND COMPETITION
WE EXPECT COMPETITION TO INCREASE SIGNIFICANTLY IN THE FUTURE THAT COULD REDUCE
OUR REVENUES, POTENTIAL PROFITS AND OVERALL MARKET SHARE.
The market for Internet based clinical trials is competitive. Barriers to entry
on the Internet are relatively low, and we expect competition to increase
significantly in the future. We face competitive pressures from numerous actual
and potential competitors, both online and offline, many of which have longer
operating histories, greater brand name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than we do.
We cannot assure you that the Internet based clinical trials maintained by our
existing and potential competitors will not be perceived by the healthcare
community as being superior to ours.
RISKS RELATED TO OPERATIONS
WE MAY BE UNABLE TO ADEQUATELY DEVELOP OUR SYSTEMS, PROCESSES AND SUPPORT IN A
MANNER THAT WILL ENABLE US TO MEET THE DEMAND FOR OUR SERVICES.
We have just recently initiated our online operations and are developing our
ability to provide TrialMaster on a transactional basis over the Internet as an
Application Service Provider. Our future success will depend on our ability to
develop effectively the infrastructure, including additional hardware and
software, and implement the services, including customer support, necessary to
meet the demand for our services. In the event we are not successful in
developing the necessary systems and implementing the necessary services on a
timely basis, our revenues could be adversely affected, which would have a
material adverse effect on our financial condition.
OUR BUSINESS OPERATIONS COULD BE SIGNIFICANTLY DISRUPTED IF WE LOSE MEMBERS OF,
OR FAIL TO INTEGRATE, OUR MANAGEMENT TEAM.
Our future performance will be substantially dependent on the continued services
of our management team and our ability to retain them. The loss of the services
of any of our officers or senior managers could harm our business, as we may not
be able to find suitable replacements.
WE MAY NOT BE ABLE TO HIRE AND RETAIN A SUFFICIENT NUMBER OF QUALIFIED EMPLOYEES
AND, AS A RESULT, WE MAY NOT BE ABLE TO GROW AS WE EXPECT OR MAINTAIN THE
QUALITY OF OUR SERVICES.
Our future success will depend on our ability to attract, train, retain and
motivate other highly skilled technical, managerial, marketing and customer
support personnel. Competition for these personnel is intense, especially for
engineers and programmers, and we may be unable to successfully attract
sufficiently qualified personnel. We have experienced difficulty in the past
hiring qualified personnel in a timely manner for these positions. The pool of
qualified technical personnel, in particular, is limited in Miami, Florida,
which is where our headquarters are located. We will need to increase the size
of our staff to support our anticipated growth, without compromising the quality
of our offerings or customer service. Our inability to locate, hire, integrate
and retain qualified personnel in sufficient numbers may reduce the quality of
our services.
RISKS RELATED TO GOVERNMENT REGULATION, CONTENT AND INTELLECTUAL PROPERTY
GOVERNMENT REGULATION MAY REQUIRE US TO CHANGE THE WAY WE DO BUSINESS.
The laws and regulations that govern our business change rapidly. The United
States government and the governments of states and foreign countries have
attempted to regulate activities on the Internet. Evolving areas of law that are
relevant to our business include privacy laws and proposed encryption laws. More
specifically, the Food and Drug Administration has been active in looking at and
developing regulatory guidance in the area of Internet based clinical trials.
Because of this rapidly evolving and uncertain regulatory environment, we cannot
predict how these laws and regulations might affect our business. In addition,
these uncertainties make it difficult to ensure compliance with the laws and
regulations governing the Internet.
6
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, AND WE MAY BE LIABLE FOR
INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Our business could be harmed if unauthorized parties infringe upon or
misappropriate our proprietary systems, content, services or other information.
Our efforts to protect our intellectual property through copyright, trademarks
and other controls may not be adequate. In the future, litigation may be
necessary to enforce our intellectual property rights or to determine the
validity and scope of the proprietary rights of others, which could be time
consuming and costly. Intellectual property infringement claims could be made
against us as the number of our competitors grows. These claims, even if not
meritorious, could be expensive to defend and could divert our attention from
operating our company. In addition, if we become liable to third parties for
infringing their intellectual property rights, we could be required to pay a
substantial damage award and develop comparable non-infringing intellectual
property, to obtain a license or to cease providing the content or services that
contain the infringing intellectual property. We may be unable to develop non-
infringing intellectual property or obtain a license on commercially reasonable
terms, or at all.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements in "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere. These statements relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks outlined
under "Risk Factors," that may cause our or our industry's actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus to conform these statements to actual results.
ITEM NO. 4 USE OF PROCEEDS
The gross proceeds to the Registrant from the sale of 115,000 shares of common
stock, $.001 par value, at prices ranging from $0.45 to $2.25 per share, is
estimated to be approximately $125,500. Those proceeds would result from the
exercise of stock warrants. There is no guarantee that any of the stock warrants
will be exercised. The Registrant expects to use the maximum possible gross
proceeds as shown below:
General working capital $125,500 100%
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Total $125,500 100%
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ITEM NO. 5 DETERMINATION OF OFFERING PRICE
The Series A Preferred, and Convertible Note shares have conversion rates that
are contractually specified in the instruments establishing the rights of the
Series A Holders and Convertible Note Holders. The Warrants have negotiated
exercise prices built into the instrument. The Common Stock is only being
registered and was previously issued as consideration for consulting and
professional services.
ITEM NO. 6 DILUTION
As of the effective date of this registration statement none of the Selling
Security Holders will be diluted by virtue of this offering. The current price
of Registrant's common stock exceeds the conversion price of the Series A
Preferred, and the Convertible Note, and also exceeds the strike price of the
Warrants.
7
ITEM NO. 7 SELLING SECURITY HOLDERS
The Series A Preferred, Convertible Note, Warrant, and Common Stock Selling
Security Shareholders are individuals and companies. The registration statement
of which this Prospectus is a part is being filed, and the Shares offered hereby
are included herein, pursuant to registration rights as provided for in the
subscription agreements entered into between the Company and the Selling
Security Holders (collectively, the "Registration Rights"). Due to the
uncertainty as to how many of the Selling Security Holders will convert either
the Series A Preferred or Convertible Notes or exercise the Warrants, the
Company is unable to determine the exact number of Shares that will actually be
sold pursuant to this Prospectus. The maximum numbers of Shares that the Selling
Security Holders will be able to convert, exercise, or register which are
subject to this registration statement are 4,665,600 Shares of the Company.
The Series A Preferred Holders
The Selling Security Holders identified in the table below as "Series A
Preferred Holders" acquired an aggregate of 4,168,500 shares of the Series A
Preferred in a private placement transaction. Upon conversion, each $1.50 of the
Series A Preferred is equal to one share of Common Stock. Accordingly, if all
the Series A Preferred Holders decide to convert, the Company would issue
2,779,000 common shares.
Registration Rights - Series A Preferred Holders
Pursuant to the terms and conditions of the subscription agreement for the
Series A Preferred, a majority of the Series A Preferred Holders may request
registration of the underlying common shares after the sixth (6) month following
the closing of the offering of the Series A Preferred. Pursuant to the terms and
conditions of the subscription agreement for the Series A Preferred, upon such a
request, the Company will: (a) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; (b) as soon as
practicable, use its best efforts to effect such registration (including,
without limitation, appropriate qualification under applicable regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within 20 days after receipt of such
written notice from the Company; and, (c) set forth in the written notice the
number of Registrable Securities each Holder may include in such registration.
The total number of Registrable Shares to be included shall be determined as a
percentage of the number of Registrable Shares issuable upon conversion of the
Preferred Shares beneficially owned by the Holder and the total number of shares
issued and outstanding.
The Convertible Note Holders
The Selling Security Holders identified in the table below as "Convertible Note
Holders" invested an aggregate of $425,000 in a private placement transaction.
Upon conversion, each $1.25 is equal to one share of Common Stock. Accordingly,
if all Convertible Note Holders decide to convert the Company would issue
340,000 common shares.
Registration Rights - Convertible Note Holders
Pursuant to the terms and conditions of the subscription agreement for the
Convertible Note, if at any time or from time to time the Company shall
determine to register any of its securities, either for its own account or the
account of a security holder or holders, other than a registration relating
solely to employee benefit plans or a registration relating solely to a
Commission Rule transaction, the Company will: promptly give to each Holder
written notice thereof; include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 20 days after receipt of such written notice from the
Company by any Shareholder; and set forth in the written notice the number of
Registrable Securities each Shareholder may include in each such registration.
The total number of Registrable Shares to be included shall be determined as a
percentage of the number of Registrable Shares beneficially owned by the
Shareholder and the total number of shares issued and outstanding.
Warrant Holders
The Selling Security Holders identified in the table below as "Warrant Holders"
acquired warrants to purchase an aggregate of 115,000 shares of common stock.
8
Registration Rights - Warrant Holders
Pursuant to the terms and conditions of the warrant agreement, if at any time or
from time to time the Company shall determine to register any of its securities,
either for its own account or the account of a security holder or holders, other
than a registration relating solely to employee benefit plans or a registration
relating solely to a Commission Rule transaction, the Company will: promptly
give to each Holder written notice thereof; include in such registration (and
any related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within 20 days after receipt of such written
notice from the Company, by any Shareholder; and, set forth in the written
notice the number of Registrable Securities each Shareholder may include in each
such registration.
The following tables identify each Selling Security Holder based upon
information provided to the Company, set forth as of September 10, 2001, with
respect to the Shares beneficially held by or acquirable by, as the case may be,
each Selling Security Holder and the shares of Common Stock beneficially owned
by the Selling Security Holder which are not covered by this Prospectus. No
Selling Security Holder has had any position, office or other material
relationship with the Company within the past three years. The percentage
figures reflected in the table assumes conversion of all shares of: Series A
Preferred into 2,779,000 shares of Common Stock and Convertible Notes into
340,000 shares of Common Stock.
Selling Security Holders - Series A Preferred Holders
Percentage
Amount to Amount Owned Before Owned After
Name Be Offered The Offering The Offering
---- ---------- -------------------- ------------
Jaap Hoff 200,000 205,459 3.12%
Everest Investment 266,667 260,377 4.05%
Onno Schamhart 33,333 33,334 *
Financial Trading & Cons. 100,000 0 *
Ad Klinkenberg 133,334 17,500 1.16%
Jos Dreesens 133,334 35,000 1.29%
Steve Yeung 66,667 17,500 *
Jan Willem van den Dorpel 133,333 16,667 1.15%
Denison Smith 30,000 0 *
Appie Wouters 33,333 0 *
Leonard Epstein 33,333 0 *
Michiel Scholten 83,333 0 *
M. Visser 133,333 0 1.02%
Alvin Stroyny 33,333 3,500 *
Nathan Jacobson 100,000 25,000 *
Guy Vercauteren 33,333 0 *
Abdel Karim Badr 46,667 0 *
G. I. A. Foundation 60,000 0 *
Peter van Kesteren 8,333 0 *
Harvey Babbitt 30,000 0 *
Peter Marchisello 13,333 0 *
Mary Jo Marchisello 46,667 0 *
Bert Van Deun 100,000 0 *
Max Power 33,333 0 *
Pieter Versteeg 66,667 0 *
Randall Smith 15,000 0 *
Eric B. Sivertsen 15,000 0 *
Frido van Kesteren 30,000 0 *
Carlos Muhletaler 30,000 0 *
Marianne Creyf-Theeboom 73,333 0 *
Van Moer Santerre Luxembourg 166,667 0 1.28%
Profrigo SA NV 400,000 245,000 4.96%
Lawrence Terry 30,667 0 *
Durango Global 66,667 0 *
9
Selling Security Holders - Convertible Note Holders
Amount to Amount Owned Before Percentage Owned
Name Be Offered The Offering After the Offering
---- ---------- -------------------- ------------------
Bert Amador 20,000 0 *
Michael Ettinger 30,000 0 *
Eva D. Glass 10,000 0 *
Charlotte Horowitz 60,000 0 *
Harvey Jacobson 10,000 0 *
Ronald Kassover 20,000 0 *
Thomas & Rose Perretta 20,000 0 *
Khal Racfert 40,000 0 *
Elliot & Arlene Schwartz 20,000 0 *
Elliot Schwartz 30,000 0 *
Jacob & Yoseph Solomon 10,000 0 *
Henk Kos 10,000 0 *
Cees Baas 20,000 0 *
Kleanthi Xenopoulos 20,000 0 *
Louis & Irene Katz 20,000 0 *
Warrant Holders
Amount to Amount Owned Before Percentage Owned
Name Be Offered The Offering After the Offering
---- ---------- -------------------- ------------------
Wesley Pritchett 20,000 0 *
Andy Fiske 40,000 0 *
Noesis, N.V. 20,000 536,498 4.28%
Linda Grable 35,000 226,038 2.01%
Common Holders
Amount to Amount Owned Before Percentage Owned
Name Be Offered The Offering After the Offering
---- ---------- -------------------- ------------------
Noesis Int'l Holding 163,600 163,600 1.26%
Water Oak Investments 295,666 295,666 2.27%
Everest Holdings 230,377 260,377 3.77%
Noesis N.V. 536,498 536,498 4.12%
ITEM NO. 8 PLAN OF DISTRIBUTION
The registration statement of which this Prospectus forms a part has been filed
pursuant to the Registration Rights. To the Company's knowledge, as of the date
hereof, no Selling Security Holder had entered into any agreement, arrangement
or understanding with any particular broker or market maker with respect to the
Shares offered hereby, nor does the Company know the identity of the brokers or
market makers which will participate in the offering.
The Shares covered hereby may be offered and sold from time to time by the
Selling Security Holders. The Selling Security Holders will act independently of
the Company in making decisions with respect to the timing, manner and size of
each sale. Such sale may be made on the OTC Bulletin Board or otherwise, at
prices and on terms then prevailing or at prices related to the then market
price, or in negotiated transactions. The Shares may be sold by one or more of
the following methods: (a) a block trade in which the broker-deal engaged by the
Selling Security Holder will attempt to sell Shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
(b) purchases by the broker-dealer as principal and resale by such broker or
dealer for its account
10
pursuant to this Prospectus; and (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. To the best of the
Company's knowledge, the Selling Security Holders have not, as of the date
hereof, entered into any arrangement with a broker or dealer for the sale of
shares through a block trade, special offering, or secondary distribution of a
purchase by a broker-dealer. In effecting sales, broker-dealers engaged by the
Selling Security Holders may arrange for other broker-dealers to participate.
Broker-dealers will receive commissions or discounts from the Selling Security
Holders in amounts to be negotiated.
In offering the Shares, the Selling Security Holders and any broker-dealers who
execute sales for the Selling Security Holders may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any profits realized by the Selling Security Holders and the
compensation of such broker-dealer may be deemed to be underwriting discounts
and commissions.
Rule 10b-6 under the Exchange Act prohibits participants in a distribution from
bidding for or purchasing for an account in which the participant has a
beneficial interest, any of the securities that are the subject of the
distribution. Rule 10b-7 under the Exchange Act governs bids and purchases made
to stabilize the price of a security in connection with a distribution of the
security.
This offering will terminate as to each Selling Security Holder on the date on
which all Shares offered hereby have been sold by the Selling Security Holders.
There can be no assurance that any of the Selling Security Holders will sell any
or all of the shares of Common Stock offered hereby.
ITEM NO. 9 LEGAL PROCEEDINGS
On or about September 6, 2000, the Company's wholly owned subsidiary, OmniTrial
B.V. ("OmniTrial") submitted a petition for bankruptcy protection from the
bankruptcy court of the Netherlands. The court appointed a liquidating trustee
and the case is still pending. The Company claimed that certain assets of
OmniTrial were paid for by the Company and therefore should not be part of the
liquidating assets of OmniTrial. The bankruptcy trustee rejected that claim and
told the Company that as part of the OmniTrial bankruptcy estate the assets
would be sold to diminish any deficiency of the estate. On July 5, 2001 the
Company signed a settlement agreement providing for the return of the assets to
the Company in exchange for a payment of $10,000.
On January 26, 2001, a former employee of the Company, Eugene A. Gordon, filed a
lawsuit in the Circuit Court of the 11th Judicial Circuit in and for Dade
County, Florida alleging breach of his employment contract with the Company. The
plaintiff alleges the Company owes him more than $100,000 for back payment of
salary according to the terms of his employment contract. The Company disputes
Mr. Gordon's allegations and is vigorously defending this lawsuit. As part of
its defense, the Company recently filed a counterclaim against Mr. Gordon and a
counter-suit against his wife, Ileana Bravo.
On February 2, 2001, an advertising firm, Wray Ward Laseter, filed a lawsuit in
the Superior Court of North Carolina against the Company. The plaintiff alleged
claims totaling approximately $84,160 against the Company for fees associated
with advertising, marketing and public relations services provided between June
and September 2000. On or about April 27, 2001, the Company and Wray Ward
Laseter entered into a settlement agreement which provides that the plaintiff
dismiss the lawsuit with prejudice and release its claims against the Company in
return for a series of payments totaling $66,000. To date the Company has made
three payments totaling $35,450 under the settlement agreement.
On February 16, 2001, a staffing agency, Temp Art, Inc. filed a lawsuit in the
County Court in and for Miami-Dade County, Florida. The plaintiff alleges the
Company breached its contract and owes approximately $13,126 for back payment of
services rendered plus interest and costs. On or about September 10, 2001, the
Company and Temp Art entered into a settlement agreement which provides that the
plaintiff dismiss the lawsuit with prejudice and release its claims against the
Company in return for a payment in the amount of $15,700.
ITEM NO. 10 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Dr. David Ginsberg, 53, Chief Executive Officer and President. Dr. Ginsberg has
been Chief Executive Officer and President since August 1, 2000. Prior to
joining the Company Dr. Ginsberg served as Vice President of Field Operations
for Wyeth-Ayerst from 1998 to 2000. Dr. Ginsberg served as President of Concorde
Clinical Research from 1994 to 1997.
11
Cornelis F. Wit, 55, Director. Mr. Wit has been a Director of the Company since
1999 and shall serve until the next annual meeting. Mr. Wit served as interim
CEO of the Company from June 30, 2000 until August 1, 2000. Mr. Wit is President
of Corporate Finance of Noesis Capital Corp., an international banking and money
management firm. Mr. Wit was formerly President and CEO of DMV Inc., the North
American subsidiary of Campina Melkunie.
Randall G. Smith, 44, Chief Technical Officer, Chairman and Director. Mr. Smith
has been a Director of the Company since 1997 and shall serve until the next
annual meeting. From 1997 until the present date Mr. Smith has been an officer
and director of OmniComm Systems, Inc. Mr. Smith served as President of the
Company until August 1, 2000. From December 1995 to May 1997 Mr. Smith was
Director of Operations for Global Communications Group.
Ronald T. Linares, 38, Chief Financial Officer. Mr. Linares has served as Chief
Financial Officer since April 2000. Mr. Linares was the Chief Financial Officer
of First Performance Corp., a financial consulting firm, from 1996 to 1999. From
1992 to 1996 Mr. Linares served in various senior financial positions within the
Kenny Rogers Roasters Company including Chief Financial Officer of Foodquest,
Inc. from 1994 to 1996.
Guus van Kesteren, 60, Director. Mr. van Kesteren has been a Director of the
Company since 1999 and shall serve until the next annual meeting. Mr. van
Kesteren is a consultant to Noesis Capital Corp., an international banking and
money management firm. Mr. van Kesteren was formerly Vice President of Janssen
Pharmaceutica, a subsidiary of Johnson & Johnson, responsible for the
pharmaceutical business in South East Asia, Australia, and New Zealand.
Harold Blue, 39, Director. Mr. Blue is Executive Vice President and Chief
Operating Officer at Commonwealth Associates where he focuses on managing
Commonwealth's relationships with its portfolio companies. Since September 2000,
Mr. Blue has served as Vice Chairman of Proxymed, Inc., a healthcare information
systems company; between August 1993 until September 2000 he served as
Proxymed's Chairman and Chief Executive Officer. Mr. Blue serves as a director
of Proxymed Inc., MonsterDaata Inc., Healthwatch Inc., Futurelink, eB2B Inc and
Notify.
ITEM NO. 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of our common stock as of September 10, 2001, with respect to (i) each
person know to us to be the beneficial owner of more than 5% of our common
stock, (ii) each director, (iii) each executive officer named in the summary
Compensation Table, and (iv) all of our directors and officers as a group:
Name and Address (1) # of Shares (2) % of Class
-------------------- --------------- ----------
David Ginsberg (3) 1,492,423 9.79%
Randall G. Smith (4) 1,100,546 7.22%
Ronald T. Linares (5) 241,357 1.58%
Cornelius Wit (6) 229,899 1.51%
Guus van Kesteren (7) 305,001 2.00%
Harold Blue -0- 0%
Jan Vandamme -0- 0%
-------------- ----------
All Directors and Officers as a
group (7 people) 3,369,226 22.11%
============== ==========
(1) The address for each person, unless otherwise noted, is 3250 Mary Street,
Suite 402, Miami, Florida 33133.
(2) In accordance with Rule 13d-3 of the Exchange Act, shares that are not
outstanding, but that are subject to options, warrants, rights or
conversion privileges exercisable within 60 days from August 10, 2001.
(3) Includes 556,667 shares issuable upon the exercise of currently exercisable
stock options, 400,000 shares issuable upon conversion of the Company's 8%
Series B Convertible Stock, and 400,000 shares issuable upon conversion of
stock warrants.
(4) Includes 132,000 shares issuable upon the exercise of currently exercisable
stock options, and 20,000 shares issuable upon conversion of stock
warrants.
(5) Includes 228,000 shares issuable upon the exercise of currently exercisable
stock options.
(6) Includes 210,000 shares issuable upon the exercise of currently exercisable
stock options.
12
(7) Includes 210,000 shares issuable upon the exercise of currently exercisable
stock options and 70,700 shares issuable upon the exercise of currently
exercisable stock warrants.
ITEM NO. 12 DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, $.001 par value per share and 10,000,000 shares of Preferred
Stock, $.001 par value.
Holders of the Common Stock are entitled to receive dividends when and as
declared by the Company's Board of Directors out of funds available therefore.
Any such dividends may be paid in cash, property or shares of the Common Stock.
The Company has not paid any dividends since its inception and presently
anticipates that all earnings, if any, will be retained for development and
expansion of the Company's business, and that no dividends on the Common Stock
will be declared in the foreseeable future. Any future dividends will be subject
to the discretion of the Company's Board of Directors and would depend upon,
among other things, future earnings, the operating and financial condition of
the Company, its capital requirements, and general business conditions.
Each holder of Common Stock is entitled to one vote per share on all matters,
including the election of directors, submitted to a vote of such class. Holders
of Common Stock do not have cumulative voting rights. The absence of cumulative
voting means that the holders of more than 50% of the shares voting for the
election of directors can elect all directors if they choose to do so. In such
event, the holders of the remaining shares of the Common Stock will not be
entitled to elect any director. The Board of Directors shall be elected each
year to a one-year term. A majority of the shares entitled to vote, represented
in person or by proxy, constitutes a quorum at a meeting of shareholders.
On June 25, 1999 the Company amended its articles of incorporation pursuant to
section Chapter 8, Subchapter VII, Section 228 and 242 of the laws of the State
of Delaware to authorize the issuance of preferred shares. In accordance with
Chapter 8, Subchapter VII, Section 151 of the laws of the State of Delaware the
Board of Directors of OmniComm Systems, Inc. shall have the authority to divide
the preferred stock into as many series as it shall from time to time determine.
The Board of Directors shall also determine the number of shares comprising each
series of preferred stock, which number may, unless otherwise provided by the
board of directors in creating such series, be increased from time to time by
action of the board of directors. Each series of preferred stock shall be so
designated as to distinguish such series from the shares of each other series.
All series of preferred stock shall be of equal rank and have the same powers,
preferences and rights, and shall be subject to the same qualifications,
limitations and restrictions, without distinction between the shares of
different series thereof; provided, however, that there may be variations among
different series of preferred stock as to dividend rates, prices, terms,
conditions of redemption, if any, liquidation rights, and terms and conditions
of conversion, if any, which variations may be fixed and determined by the board
of directors in their discretion.
On July 19, 1999 the Board of Directors, pursuant to Chapter 8, Subchapter VII,
Section 151 of the laws of the State of Delaware, filed with the State of
Delaware a Certificate of Designation authorizing the creation of a 5% Series A
Convertible Preferred stock. The terms of the Preferred are as follows: (1) In
the event of liquidation, the holders of Preferred Stock will be entitled to
receive in preference to the holders of Common Stock an amount equal to their
original purchase price plus all accrued but unpaid dividends; (2) Dividends
shall be paid at the rate of 5.00% (five percent) per annum (365 days), payable
semi-annually, on January 1 and July 1 of each following year; (3) Conversion:
(a) Voluntary Conversion: The holders of Preferred Stock shall have the right to
convert at any time at the option of the holder, each share of Preferred Stock
into one share of Common Stock, subject to antidilution provisions set forth in
subsection (c) below; (b) Automatic Conversion: At any time after one year from
the date of the final Closing Date, the Company can require that all outstanding
shares of Preferred Stock be automatically converted at the conversion then in
effect if at the time (a) the closing bid price of the Company's Common Stock
has exceeded $3.00 for 20 consecutive trading days; (b) the Company's Common
Stock has been listed on the Nasdaq or such other comparable national stock
exchange and; (c) a registration statement covering the shares of Common Stock
issuable upon conversion of the Preferred Stock has been filed with the
Securities and Exchange Commission and declared effective. (4) Anti-Dilution:
Each share of Preferred Stock upon conversion into Shares shall have
proportional antidilution protection for stock splits, stock dividends,
combinations, and recapitalizations. The conversion price shall also be subject
to adjustment to prevent dilution in the event the Company issues additional
shares of Common Stock or equivalents at a purchase price less than the
applicable conversion price; (5) The Preferred Stock shall not be sold,
assigned, transferred or pledged except upon satisfaction of the conditions
specified in the subscription agreement executed by the Holder, which conditions
are intended to ensure compliance with the provisions of the Securities Act.
Each Holder will cause any proposed purchaser, assignee, transferee, or pledgee
of the Preferred Share or the Common Stock issuable upon conversion held by a
Holder to agree to take and
13
hold such securities subject to the provisions and conditions of the
subscription agreement; (6) Each certificate representing (i) the Preferred
Stock and (ii) any other securities issued in respect of the Preferred Stock
upon any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall be stamped or otherwise imprinted with a legend in the
following form (in addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. COPIES OF THE AGREEMENT
COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE CORPORATION.
(7) A Holder shall have a right to vote that number of votes equal to the number
of shares of Common Stock issuable upon conversion of the Preferred Stock.
ITEM NO. 13 INTEREST OF NAMED EXPERTS AND COUNSEL
None.
ITEM NO. 14 DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
Article VI of the Company's Articles of Incorporation authorizes the Company to
indemnify directors and officers as follows:
1. So long as permitted by law, no director of the corporation shall be
personally liable to the corporation or its shareholders for damages for breach
of any duty owed by such person to the corporation or its shareholders;
provided, however, that, to the extent required by applicable law, this Article
shall not relieve any person from liability for any breach of duty based upon an
act or omission (i) in breach of such person's duty of loyalty to the
corporation or its shareholders, (ii) not in good faith or involving a knowing
violation of law or (iii) resulting in receipt by such person of an improper
personal benefit. No amendment to or repeal of this Article and no amendment,
repeal or termination of effectiveness of any law authorizing this Article shall
apply to or effect adversely any right or protection of any director for or with
respect to any acts or omissions of such director occurring prior to such
amendment, repeal or termination of effectiveness.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the forgoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against the public policy as
expressed in the Act and is, therefore, unenforceable.
ITEM NO. 15 BUSINESS WITHIN PAST FIVE YEARS
BUSINESS DEVELOPMENT
Coral Development Corp. ("Coral") was incorporated under the laws of the State
of Delaware on November 16, 1996 as a wholly owned subsidiary of Modern
Technology Corp. ("MTC") a Delaware corporation who received 403,000 shares of
common stock of Coral in exchange for $30,000.
In June of 1997, Coral registered 403,000 shares of common stock to be
distributed to the shareholders of MTC as a shared dividend. The registration
and issuance of the shares was subject to the provisions of Rule 419 ("Rule
419") of Regulation C of the Rules and Regulations of the Securities Act of
1933, as amended.
Rule 419 sets forth the requirements that apply to every registration statement
filed under the Act relating to an offering by a "blank check company". A "blank
check company" is a company that is a development stage company that has no
specific plan or purpose or has indicated that its business plan is to engage in
a merger or acquisition with an unidentified company or companies, or other
entity or person. At the time of filing the registration
14
statement, Coral was a "blank check company". The main requirements of Rule 419
are: escrowing the securities that are subject to the registration statement
prior to issuance of the securities and consummating a transaction within 18
months of filing the registration statement.
Coral and OmniComm Systems, Inc. (the "Company" or "OmniComm") entered into an
Agreement and Plan of Merger on July 22, 1998. The terms of the agreement
provided that all of the issued and outstanding shares of OmniComm Systems, Inc.
would be exchanged for 940,000 shares of common stock of Coral. The officers and
directors of Coral would resign and the name of Coral would be changed to
OmniComm Systems, Inc. Further, as part of the plan of merger, the five OmniComm
shareholders would receive options representing an additional 2,687,000 shares
of common stock of the Company. The options would vest in the event the Company
generates $4,000,000 in gross revenue on a cumulative basis. The issuance of the
shares subject to the options would cause substantial dilution to the existing
shareholders.
Coral had until December 5, 1998 (18 months from the filing date of the Form SB-
2 - June 5, 1997) to finalize a transaction. Prior to entering into the
Agreement and Plan of Merger, the Company acquired Education Navigator, Inc. on
June 26, 1998. The closeness in time of these two transactions presented a
logistical problem in completing due diligence and providing audited financial
statements for OmniComm Systems, Inc. and especially Education Navigator, Inc.
which did not have audited financial statements. To further complicate the
matter, the financial statements when completed needed to be presented in such a
way so as to show pro-forma information as if the mergers had occurred a year
earlier. Coral received a comment letter from the Securities Exchange Commission
concerning the Post-Effective amendment to the SB-2. It was clear from the
comments that Coral and the Company would not make the deadline on December 5,
1998 so the SB-2 was withdrawn. Coral and the Company understood that if the SB-
2 did not go effective by December 5, 1998, they would have to re-file the
registration statement since it was very unlikely that an extension would be
given. The shares that had been held in escrow pursuant to Rule 419 were
returned to MTC.
Since the parties were specifically identified for purposes of an acquisition it
was felt that the proscriptions of Rule 419 would not apply and the safeguards
for issuance of the shares such as the escrow requirements would not have to be
adhered to which would shorten the time period for completing the transactions.
In addition, the Division of Corporate Finance had issued Staff Legal Bulletin
No. 4, which gave specific guidance to the parties for the type of transaction
that was contemplated.
The Company and Coral continued with their plans to finalize the merger and to
become a reporting company. The parties executed an Amended Agreement and Plan
of Merger to include MTC, the parent of Coral, as a party for the sole purpose
of issuing the shares in accordance with the Agreement and Plan of Merger. A
Form 10-SB was filed on December 22, 1998 to register the common shares of
Coral, pursuant to Section 12(g) of the Securities Exchange Act of 1934. The
Company and Coral finalized the merger on February 17, 1999.
OMNITRIAL B.V. BANKRUPTCY
On or about September 6, 2000, the Company's wholly owned subsidiary, OmniTrial
B.V. ("OmniTrial") submitted a petition for bankruptcy protection from the
bankruptcy court of the Netherlands. The court appointed a liquidating trustee
and the case is still pending. The Company claimed that certain assets of
OmniTrial were paid for by the Company and therefore should not be part of the
liquidating assets of OmniTrial. The bankruptcy trustee rejected that claim and
told the Company that as part of the OmniTrial bankruptcy estate the assets
would be sold to diminish any deficiency of the estate. On July 5, 2001 the
Company signed a settlement agreement providing for the return of the assets to
the Company in exchange for a payment of $10,000.
ITEM NO. 16 DESCRIPTION OF BUSINESS
BUSINESS OF ISSUER
THE CLINICAL TRIALS OPPORTUNITY
With increasing pressure to be first to market, sponsors of clinical studies
have been undertaking a comprehensive re-examination of every phase of drug and
medical device development. The process includes exploring new approaches to
discovery, continues by identifying therapeutic targets that optimize core
competencies, and finishes by moving compounds more quickly into and through
better-designed global clinical trials. Achieving this ambitious goal requires
modifying many traditional approaches to drug and medical device development.
15
Large pharmaceutical companies are using a combination of approaches at every
step. To access new technologies that can lead to pipelines full with promising
new therapies, sponsors are increasing the headcount in the Research and
Development phase while continuing to make strategic alliances and licensing
agreements with biotechnology firms. The need to conduct faster trials creates
significant outsourcing opportunities for various types of contract services.
Even dollar-conscious sponsors see outside contractors as partners in shortening
the clinical trials process. Outside contractors offer an attractive global
infrastructure, allow sponsors to shift fixed costs, and provide a way for
sponsors to manage peaks and valleys in the research pipeline. If the promise of
technology results in the development of new chemical entities, sponsors need
structured processes to send the successful ones through well-designed and
efficient clinical trials to yield clean data.
Although the pharmaceutical industry is very healthy, it is currently in flux.
The requirements of sponsors are changing as technology evolves and competition
increases. Since all dollars flow from the sponsors, contract service providers
continue to reinvent themselves to suit the markets changing needs. Part of this
process requires that stumbling blocks be acknowledged and addressed. Despite
recent passage of the FDA Modernization Act that shortens FDA review time,
studies are actually getting longer, more complex and more costly. Case report
forms, remote data entry and remote data capture lack industry standards.
Investigators and doctors who view conducting clinical trials as a way to make
easy money typically underestimate the requisite effort and cost of studies.
As an application software provider, ("ASP"), OmniComm's portal technology,
TrialMaster, places the Company in a unique position to leverage the rapid
transformation taking place in the market and become a market leader in the
ownership and operation of proprietary software applications urgently needed to
streamline and modernize the clinical trials industry.
OmniComm Systems, Inc. is marketing and implementing TrialMaster and WebIPA.
TrialMaster and WebIPA are Internet based approaches that integrate the
significant components of the clinical trial process - trial management and
doctor/patient recruitment - into a seamless connection between industry,
doctors and patients.
The critical component in bringing a drug or medical device to market is the
process by which approval is sought to market the drug or device. The amount of
money and time spent on the process are enormous. The following points are
illustrative of the business process:
. It can cost as much as $500 million to bring a drug to market
. 50% of clinical trials are delayed due to a lack of patients
. For every day Viagra was in clinical trials Pfizer lost approximately
$1,000,000 a day
. In the United States less than 2% of the doctors and less than 5% of
the eligible patients are involved in clinical trial
A fundamental way in which the Internet is transforming business is the way in
which it changes institutional business processes such as clinical trials. The
Internet enables information to be easily and widely distributed and allows the
users of the information to use tools - web-based applications - to benefit from
and use the information.
The Company's current business strategy focuses on the continued development,
marketing and sale of its TrialMaster product. The Company believes the domestic
clinical trial industry with its inherent inefficiencies, vast size and
considerable growth afford the greatest opportunity for revenue growth. The
Company expects to devote the majority of its human and capital resources to
TrialMaster over the next 12 to 18 months
CLINICAL TRIAL INDUSTRY OVERVIEW
Worldwide research and development expenditures by the pharmaceutical and
biotechnology industries reached an estimated $50 billion in 1999 with $24
billion being spent by US based pharmaceutical and medical device companies.
Further, research and development expenditures in 1999 for the top 50
pharmaceutical companies increased approximately 14% from the previous year. It
is estimated that pre-clinical and clinical trial costs represent approximately
one-third of the total spent on research and development.
Pre-clinical and clinical trials historically were performed almost exclusively
by in-house personnel at the major pharmaceutical companies. Over the last two
decades pharmaceutical companies have transitioned to a model that includes the
outsourcing of clinical trial management to clinical research organization
("CRO"), which has resulted in significant growth in the outsource contract
segment of the clinical trials industry.
16
The Company believes that certain industry and regulatory trends have led
pharmaceutical, biotechnology and medical device companies to increase research
and development for proprietary new drugs and medical devices. These trends have
required companies to conduct increasingly complex clinical trials, and develop
multinational clinical trial capability, while seeking to control internal fixed
costs. The trends driving the industry's growth can be summarized as follows:
Increasing Cost Containment Pressures. The increasing pressure to control
rising health care costs, and the penetration of managed health care and health
care reform, have caused changes in the pharmaceutical industry. A number of
pharmaceutical companies have publicly committed to hold net effective price
increases in line with inflation. In the area of clinical development, many
pharmaceutical and biotechnology companies are seeking to reduce the high fixed
costs associated with peak-load staffing by reducing internal clinical staff and
relying on a combination of internal resources and external resources thereby
shifting fixed costs to variable costs.
Managed Care. Managed care providers and insurance carriers have become major
participants in the delivery of pharmaceuticals along with pharmacy benefits
organizations. These companies limit the selection of drugs from which
affiliated physicians may prescribe, thus increasing the competition to develop
more effective products in a shorter time frame.
Consolidation. As pharmaceutical companies seek to create economies of scale,
there have been several large mergers within the industry, and as a result of
these mergers, the pharmaceutical industry has experienced large scale employee
lay-offs and cutbacks.
Competitive And Regulatory Factors. Factors such as competition from generic
drugs following patent expiration, more stringent regulatory requirements and
the increasing complexity of clinical trials have resulted in increasing market
pressure on profit margins.
Globalization of Clinical Research and Development. Due to the increasing cost
of new drug development, many projects that are not expected to achieve
sufficient annual worldwide revenue are abandoned. Pharmaceutical companies are
increasingly attempting to maximize returns from their drugs by pursuing
regulatory approvals in multiple countries simultaneously rather than
sequentially. A pharmaceutical company seeking approval in a country in which it
lacks experience or internal resources will frequently turn to an outsource
vendor for assistance in interacting with regulators or in organizing and
conducting clinical trials.
Complex and Stringent Regulation; Need for Technology Capabilities.
Increasingly complex and stringent regulatory requirements have increased the
volume of data required for regulatory filings and escalated the demand for data
collection and analysis during the drug development process. In recent years,
the FDA and the corresponding regulatory agencies of Canada, Japan and Europe
have developed many common standards for pre-clinical and clinical studies and
the format and content of applications for new drug approvals. Further, the FDA
encourages the use of computer-assisted filings in an effort to expedite the
approval process. As regulatory requirements have become more complex, the
pharmaceutical and biotechnology industries are increasingly outsourcing to
leverage data management expertise, technological capabilities and global
presence.
Escalating Research and Development Expenditures. R&D expenditures in 1999 for
the major pharmaceutical companies in the world increased approximately 14% from
the previous year. Such expenditures have resulted from an increased emphasis on
developing effective products for the treatment of chronic disorders and life
threatening acute conditions such as infectious diseases. One of the reasons the
cost of developing therapies for chronic disorders, such as arthritis,
Alzheimer's disease and osteoporosis is higher, is because the treatments must
be studied for a longer period to demonstrate their effectiveness in curbing the
chronic disorder and to determine any possible long-term side effects.
Reducing Drug Development Time Requirements. Pharmaceutical and biotechnology
companies face increased pressure to bring new drugs to market in the shortest
time, thereby reducing costs, maintaining market share and speeding revenue
production. Currently, total development of a new drug takes approximately 8 to
12 years, a significant portion of a drug's 20 year period for protection under
U.S. patent laws. Pharmaceutical and biotechnology companies are attempting to
increase the speed of new product development and maximize the period of
marketing exclusivity and thus economic returns for their products, by
outsourcing development activities. Some pharmaceutical companies are beginning
to contract with one organization to conduct preclinical and all phases of
clinical trials for new product programs rather than contracting phases of drug
development to several different companies.
17
New Drug Development Pressures. R&D expenditures have increased as a result of
the constant pressure to develop and patent products, and to respond to the
demand for products for an aging population and for the treatment of chronic
disorders and life-threatening conditions. In response to this pressure, trial
sponsors are outsourcing preclinical/clinical trials in order to use internal
resources to develop additional drugs.
Growth of Biotechnology Industry. The biotechnology industry and the number of
drugs produced by it which require FDA approval have grown substantially over
the past decade. Many biotechnology companies have chosen not to expend
resources to develop sufficient staff or expertise to conduct clinical trials
in-house, but rather have utilized outside providers to perform these services.
These trends have created even greater competitive demands on the industry to
bring products to market efficiently and quickly.
RECENT TRENDS IN THE PHARMACEUTICAL INDUSTRY
--------------------------------------------
The pharmaceutical and CRO industry is experiencing 11-20% annual growth. At
this point, the industry seems to grow from its own momentum, fueled by the
demographics of an aging population and the changing demands of pharmaceutical,
biotech and medical device sponsors.
Discovering and developing new chemical entities is the life-force of the
pharmaceutical and biotechnology industries. Without them, Research and
Development has no purpose. Currently, it is estimated that there are about
4,700 pharmaceutical compounds and 1,000 biotech compounds in pre-clinical
studies, and 2,900 pharmaceutical and 1,000 biotech candidates in some phase of
clinical development or regulatory review.
Suddenly, technology has created the possibility that sponsors can dramatically
increase the number of new chemical entities they discover and slate for
development. This capability could not have come at a better time. Sponsors need
many new chemical entities ("NCEs") in their pipelines so that a stream of
innovative products can be generated to feed investors' demands for sustained
double-digit earnings growth. The current thinking is that drug companies will
have to become about three times as productive to grow 10% annually. PhRMA's
March 1997 survey says that big pharmaceutical companies require three target
NCEs annually, medium-sized companies require two, and small companies require
at least one just to maintain revenue growth in a highly competitive
environment.
Some sponsors have set annual targets for the number of products to come to
market. Bristol-Myers Squibb plans to double the number of drugs it has in early
development, and then double that number again by 2003. Also, the company hopes
to introduce three products a year annually by 2003. Currently, Bristol-Myers
Squibb launches approximately one new drug annually. Glaxo Wellcome Inc.'s goal
is to introduce three new drugs per year.
The fact that Research and Development budgets are at all time highs suggests
that companies are seriously exploring innovative high tech methods for the
discovery process. According to a September 1997 article, "Their Growth Has Just
Begun," pharmaceutical and biotechnology companies anticipated spending $33
billion on R&D in 1997. Of that, $16.32 billion was spent on clinical
development.
The reality is that despite tremendous R&D expenditures, the industry has been
slow to invest in new technologies. Industry observers estimate that the
industry spends only about $600 million, or 3% of the $16.32 billion clinical
development dollars on clinical information systems management. This is in sharp
contrast to the aerospace and auto motive industries, in which technology
purchases are estimated to be 5% of industry revenues.
At present, the industry shows historic 10% annual growth in clinical spending,
which has obvious implications for all phases of pre-clinical and clinical trial
testing. According to UBS Securities LLC, about $3.1 billion was outsourced to
CROs in 1997, an estimated $3.7 billion in 1998, $4.3 billion by 1999 and $5.1
billion by 2000, representing 17.4% annual growth in this four year period. A
variety of outside contractors besides CROs stand to benefit from this positive
trend, most notably site management organizations, technology vendors,
individual sites and physician practice management organizations.
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CLINICAL TRIAL OVERVIEW
THE INDUSTRY
In order for a drug or medical device to be marketed in the United States,
Europe or Japan, the drug or device must undergo extensive testing and
regulatory review to determine that it is safe and effective.
To support an application for regulatory approval, clinical data must be
collected, reviewed and compiled. Clinical data is collected from case report
forms ("CRF") that are submitted to and filled out by an investigator, typically
a doctor or research assistant who is participating in the clinical trial. These
CRFs can be five to one hundred pages long and document a series of visits by
patients over a period of time.
Once information is collected about the patient by the investigator and the
relevant portion of the CRF is filled out, it is then submitted to either the
sponsor of the study or the CRO. The data is then inputted manually into a
database. Typically, double data entry is used in order to resolve errors.
TrialMaster allows participants in the clinical trial process such as a sponsor
or CRO to perform data collection, handling and transmission via a direct,
secure Internet connection. After the CRFs are Internet enabled and the
validation criteria encoded, the CRF forms are distributed via the Internet from
the Company's server to the sites where the clinical trials are to take place.
In addition to installing the application, OmniComm provides the necessary
infrastructure components including network consulting and implementation,
hardware procurement, hosting and maintenance.
The regulatory review process is time consuming and expensive. A new drug
application (NDA) can take up to 2 years before it is approved. This is in
addition to 3 to 5 years of studies required to provide the data to support the
NDA. The following is an overview of the process that is generally undertaken to
bring a drug or device to market:
(1) Preclinical Research (1 to 3.5 years). In vitro ("test tube") and animal
studies are used to establish the relative toxicity of the drug over a wide
range of doses and to detect any potential to cause birth defects or cancer. If
results warrant continuing development of the drug, the manufacturer will file
an IND (Investigational New Drug Application), upon which the FDA may grant
permission to begin human trials.
(2) Clinical Trials (3.5 to 8 years)
a. Phase I (6 months to 1 year). Basic safety and pharmacology testing is
conducted in 20 to 100 human subjects, usually healthy volunteer testing
includes studies to determine how the drug works, how it is affected by
other drugs, where it goes in the body, how long it remains active, and how
it is broken down and eliminated from the body.
b. Phase II (1 to 2 years). Basic efficacy (effectiveness) and dose-range
testing is conducted in 100 to 1,000 afflicted volunteers to help determine
the best effective dose, confirm that the drug works as expected, and
provide additional safety data.
c. Phase III (2 to 5 years). Efficacy and safety studies are conducted in
1,000 to 10,000 patients at multiple investigational sites (hospitals and
clinics) which can be placebo-controlled trials, in which the new drug is
compared with a placebo or studies comparing the new drug with one or more
drugs with established safety and efficacy profiles in the same therapeutic
category.
d. Treatment Investigational New Drug ("TIND") (may span late Phase II, Phase
III, and FDA review). When results from Phase II or Phase III show special
promise in the treatment of a serious condition for which existing
therapeutic options are limited or of minimal value, the FDA may allow the
manufacturer to make the new drug available to a larger number of patients
through the regulated mechanism of a TIND. Although less scientifically
rigorous than a controlled clinical trial, a TIND may enroll and collect a
substantial amount of data from tens of thousands of patients.
e. New Drug Application ("NDA") Preparation and Submission. Upon completion of
Phase III trials, the manufacturer assembles the statistically analyzed
data from all phases of development into a single large document, the NDA,
which comprises, on average, 100,000 pages.
19
f. FDA Review and Approval (1 to 1.5 years). Careful scrutiny of data from all
phases of development (including a TIND) is used to confirm that the
manufacturer has complied with regulations and that the drug is safe and
effective for the specific use (or "indication") under study.
g. Post-Marketing Surveillance and Phase IV Studies. Federal regulation
requires the manufacturer to collect and periodically report to the FDA
additional safety and efficacy data on the drug for as long as the
manufacturer markets the drug (post-marketing surveillance).
An integral part of the clinical trial process is the monitoring of the clinical
sites by monitors. These monitors visit sites throughout the clinical trial to
confirm that the sites are acting in accordance with good clinical practices and
filing out the documentation appropriately.
GOVERNMENT REGULATION
---------------------
To alleviate the enormous amount of paperwork that is generated and submitted
for purposes of receiving approval, the United States Food and Drug
Administration ("FDA") promulgated regulations on March 20, 1997 concerning the
electronic submission of data to the FDA: 21 CFR Part 11 "Electronic Records;
Electronic Signatures; Final Rule". Essentially, this regulation provided for
the voluntary submission of parts or all of regulatory records in electronic
format without an accompanying paper copy. Also, the FDA promulgated "Providing
Regulatory Submissions in Electronic Format- General Considerations". More
recently, the FDA promulgated a guidance document "Computerized Systems Used In
Clinical Trials" which provides guidance to industry when utilizing a computer
system in a clinical trial. The FDA, however, does not regulate the TrialMaster
system.
THE OMNICOMM SOLUTION
TRIALMASTER
OmniComm has developed and is marketing TrialMaster as an Application Service
Provider. TrialMaster is a web-based B2B enterprise management system for
conducting and managing clinical trials. The Company utilizes a trial-
independent database to quickly generate the necessary trial data infrastructure
to proceed with the clinical trial process.
TrialMaster enables participants in the clinical trial process to utilize the
inherent benefits of the Internet - pervasiveness, scalability, efficiency and
security - to conduct and manage clinical trials in a real-time paperless
electronic environment.
In addition to its core activities, TrialMaster incorporates communications,
time and financial management and outcomes tracking.
TrialMaster is an open system that is fully integratable with existing legacy
data systems such as Oracle(R) and Microsoft SQL(R). The application utilizes a
standard browser such as Internet Explorer 4.0(R).
The cost for implementing the application is based on a data point per page/per
patient fee that will increase or decrease depending on the size of the trial in
terms of patients/subjects and the length of time to conduct the trial.
TrialMaster allows clinical data to be entered directly from a source document
such as a patient record or doctor's notes via computer. The clinical data is
transmitted via the Internet to a secure server where the data is validated and
stored.
TrialMaster significantly impacts the clinical trial process in the following
three areas: Data Collection, Validation/Edit Queries, and Monitoring.
20
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A. Data Collection Comparison
Clinical data is collected from the Clinical Report Forms ("CRF") that are submitted to and filled out by an
investigator - a doctor or research assistant - who is participating in the clinical trial. These forms can be
five to one hundred pages per patient and encompass a series of visits by patients over a period of time.
------------------------------------------------------------------------------------------------------------------
Current System TrialMaster System
The cost to process data is approximately $7.00 to The cost to process the data is approximately five to ten
$25.00 per page per patient. times less per page per patient.
The time to process the data can take anywhere from The time to process the data is approximately one minute.
one to eight weeks.
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B. Validation and Edit Query Comparison
Upon submission, data is reviewed to see whether the collected data is within certain parameters of the clinical
trial, primary validation. If data is outside of the clinical trial parameters or there are typographical errors
or similar data problems the data collection process will generate an edit query. This edit query must be
submitted to the investigator for resolution and resubmitted for data processing.
------------------------------------------------------------------------------------------------------------------
Current System TrialMaster System
The cost to process an edit query is approximately The number of edit queries is significantly reduced or
$80-$115 per query. For a large trial it is not even eliminated because the system does the validation
uncommon to generate 500-1,000 edit queries a week. when the data is inputted.
The time to process the data for each patient can The time to process the data is approximately one minute.
take anywhere from three to eight weeks.
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C. Monitoring
Study monitors are an integral and necessary part of the clinical trial process. These individuals travel to
clinical sites to ensure that the investigators are complying with good clinical practice ("GCP") standards.
Essentially, their role is to make sure clinical data is being collected and submitted in a safe, timely and
accurate manner. Monitoring and its associated costs such as travel can make up one quarter of the total costs
of a clinical trial.
------------------------------------------------------------------------------------------------------------------
Current System TrialMaster System
The cost for a monitoring visit can vary from $1,000 The number of visits can be reduced because the status of
to $3,000 per visit per site. A trial can require as sites can be monitored remotely and in real time.
many as three to seven visits.
Monitoring hours can be reduced by 50%. In addition,
The time for each visit is usually one to two days. monitoring visits can be more efficiently scheduled due
to the availability of more accurate and complete
information on the trials.
------------------------------------------------------------------------------------------------------------------
TRIALMASTER ENTERPRISE MANAGER
------------------------------
Description
-----------
With the use of the TrialMaster technology, OmniComm Enterprise Manager
("Enterprise Manager") incorporates management tools into the Internet-based
system that allow the home office, field managers and project managers to track
the activity of hundreds clinical trials, including principal investigator and
sub-investigator financial data, patient accruals, budgeted patient accruals,
payments and projected payments.
21
TrialMaster's Enterprise Manager significantly enhances the management of
clinical trials through faster and more accurate communication, cleaner
information and real-time reporting on hundreds of studies going on throughout
the country and around the world.
TrialMaster's robust standard features give the manager the capability to
successfully manage hundreds of clinical trials from start to finish.
Product Features
----------------
As part of the TrialMaster design, our clients are provided with the tools for
clinical trial creation and tracking technology as well as a robust milestone
tracking and alert system. TrialMaster automatically monitors targets and
exceptions, trial progression and verifications based on the clients
requirements. Some of the Enterprise Manager features include:
. Milestones / Payment Schedule
. Document Transmittal
. Study Maintenance
. Drug Request Approval
. Letter Template
. Budget Maintenance
. Archive Processing
. Grant and Addenda Approval
. Audit Sub-system
. Alerts - Trial Duration, Email, Check Requests, Inactivity, Budgetary,
Investigator, Grant Approval, Investigator/Institution and Payment
. Data Export - Real time and on-demand
SALES AND MARKETING
OmniComm has adopted a "push/pull" marketing strategy. The essential components
of the clinical trial industry are pharmaceutical/biotech/medical device,
doctors/patients, and opinion leaders. OmniComm is marketing to all three
components. The Company is focusing a large portion of its sales efforts at
small and mid-size pharmaceutical, medical device and clinical research
organizations. These types of clients are considered a prototypical client since
TrialMaster is capable of providing both an operating efficiency to the clinical
trial process as well as potential cost savings. Small and mid-size companies
are unlikely to have the technological resources necessary to develop a product
like TrialMaster.
TrialMaster
TrialMaster can be used within any segment of the pharmaceutical, biotech and
medical device industry. To date, OmniComm has taken a deliberative approach to
marketing TrialMaster to the pharmaceutical and medical device industries. This
is a $50 billion market, dominated by companies such as Pfizer, Johnson &
Johnson, Medtronic, and Eli Lilly. The following are the relevant factors for
approaching these markets:
. Access to "validators" for the market.
. Relatively standardized and advanced approach to clinical trial
process.
. A very competitive market with relatively short product cycles
providing for a need to get products to market quickly.
. A number of products within the interventional market segment -
. A tight group of opinion leaders within the market segment with which
we have direct relationships.
The Company is also establishing relationships with "opinion leaders" and
decision-makers in other specialties within the clinical trial industry. In this
regard, the Company has created a Medical Advisory Board to advise the Company
on the development and marketing of the TrialMaster system. The Medical Advisory
Board will also provide a platform to contact these opinion leaders and to
provide information about the application. OmniComm is also using traditional
methods to market TrialMaster, including advertising in trade periodicals and
attending a number of medical conventions including, the American College of
Cardiology, Drug Information Association and The American Heart Association.
22
Current Implementation
The Company is involved in conducting or developing multi-center, clinical
trials for ten clients. In addition, the Company completed in 2000 a multi-
center, multi-nation clinical trial with a European based medical device company
and a European based clinical research organization. The clinical trial
encompassed 400 patients in 42 sites throughout Canada, Western Europe, and
Scandinavia.
The Company is in negotiations with several US based pharmaceutical and clinical
research organization's to implement TrialMaster. The Company executed a
Strategic Alliance Agreement with ClinARC in October 2000 providing for a joint
effort at promoting ClinARC's CRO services and OmniComm's TrialMaster product.
The agreement has a one-year duration.
COMPETITION
The Company competes in the electronic data capture (EDC) market. This industry
can be characterized as rapidly evolving, highly competitive and fragmented.
There are other entities that compete with the Company's Internet based data
collection system, TrialMaster. The principal competitors include Phase Forward
Incorporated, CB Technologies, PHT Clinical Networks and eResearch Technology.
Most of these competitors have significantly greater financial, technical and
marketing resources, or name recognition than that of the Company. In addition,
other companies could enter the EDC market due to the vast size of the market
opportunity. The Company believes that the most significant competitive
factors it faces are a lack of operating history and an attendant perception of
a lack of experience in competing in such a changing and competitive
environment.
The Company believes, however, that its technical expertise, the knowledge and
experience of its principals of the industry, quality of service, responsiveness
to client needs and speed in delivering solutions will allow it to compete
favorably within this environment. Further, the Company believes that none of
the aforementioned companies have developed an approach to the clinical trial
process that is as malleable and customizable as TrialMaster.
MEDICAL ADVISORY BOARD
Given the Company's basic approach in developing and marketing the TrialMaster
application as if it were a medical device, the Company has formed a Medical
Advisory Board. The purpose of the Board is to advise and consult the Company on
the development, implementation and marketing of the TrialMaster application.
Currently, there is one member on the Board:
Dr. Gervasio Lamas: brings to OmniComm a wealth of practical and academic
experience in the design and execution of clinical trials, and many years of
experience and contacts in the pharmaceutical industry, device industry and
federal government. Dr. Lamas is a graduate of Harvard University (1974), and
the NYU School of Medicine (1978). Dr. Lamas completed his medical and
cardiology training at Harvard Medical School and Brigham and Women's Hospital
in Boston, Massachusetts, where he was on the faculty until 1993. He has
authored or co- authored over 100 publications and reports in numerous research
areas in the cardiovascular field, with a particular focus on the treatment of
patients with coronary disease and disorders of heart rhythm. His research has
led to first author publications in medical journals such as the "New England
Journal of Medicine" and "Circulation." At present, Dr. Lamas serves as
Principal Investigator, Study Chairman, Co-Chairman, or National Leader in many
ongoing national and international multi-center trials in the fields of coronary
disease, congestive heart failure, cardiac pacing and preventive cardiology. In
these roles, he coordinates the activities of a network of over 200 clinical
centers worldwide.
INTELLECTUAL PROPERTY RIGHTS
The Company relies upon a combination of non-disclosure and other contractual
arrangements and trade secret, copyright and trademark laws to protect its
proprietary rights and the proprietary rights of third parties from whom the
Company licenses intellectual property. The Company enters into confidentiality
agreements with its employees and limits distribution of proprietary
information. There can be no assurance that the steps taken by the Company in
this regard will be adequate to deter misappropriation of proprietary
information or that the Company will be able to detect unauthorized use and take
appropriate steps to enforce its intellectual property rights.
23
On May 18, 1999, the Company filed a provisional application and on May 17, 2000
the Company filed its follow up formal application for the patent on the
TrialMaster product. (Described in the applications as the "Distributed System
and Method for Collecting and Evaluating Clinical Data" Serial No. 60/134,671
for the provisional application, Serial No. 09/573,101 for the formal
application.) The Company is in the process of registering a number of
trademarks including "OMNICOMM SYSTEMS, INC.," and has registered "TRIALMASTER,"
as well as copyrights on any computer software applications produced by the
Company. The Company intends to make such other state and federal registrations
as the Company deems necessary and appropriate to protect its intellectual
property rights.
EMPLOYEES
The Company currently has 18 full time employees and 1 part time employee. The
Company believes that relations with its employees are good. None of its
employees are represented by a union. The Company has employment agreements with
its Chief Executive Officer, Chief Financial Officer and Chief Technical
Officer. The loss of the services of any of its executive officers could have a
materially adverse effect on the business or operations of the Company. The
Company stresses the importance of attracting, retaining and motivating
employees capable of advancing the Company's business goals.
24
ITEM NO. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
FORWARD-LOOKING STATEMENTS
--------------------------
Statements contained in this Form SB-2 that are not historical fact are "forward
looking statements". These statements can often be identified by the use of
forward-looking terminology such as "estimate", "project", "believe", "expect",
"may", "will", "should", "intends", or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy that involve risks and uncertainties. We wish to caution the reader
that these forward-looking statements, such as statements relating to timing,
costs and of the acquisition of, or investments in, existing business, the
revenue or profitability levels of such businesses, and other matters contained
in this Form SB-2 regarding matters that are not historical facts, are only
predictions. No assurance can be given that plans for the future will be
consummated or that the future results indicated, whether expressed or implied,
will be achieved. While sometimes presented with numerical specificity, these
plans and projections and other forward-looking statements are based upon a
variety of assumptions, which we consider reasonable, but which nevertheless may
not be realized. Because of the number and range of the assumptions underlying
our projections and forward-looking statements, many of which are subject to
significant uncertainties and contingencies that are beyond our reasonable
control, some of the assumptions inevitably will not materialize, and
unanticipated events and circumstances may occur subsequent to the date of this
Form SB-2. Therefore, our actual experience and results achieved during the
period covered by any particular projections or forward-looking statements may
differ substantially from those projected. Consequently, the inclusion of
projections and other forward- looking statements should not be regarded as a
representation by us or any other person that these plans will be consummated or
that estimates and projections will be realized, and actual results may vary
materially. There can be no assurance that any of these expectations will be
realized or that any of the forward-looking statements contained herein will
prove to be accurate. The Company does not undertake any obligation to update
or revise any forward-looking statement made by it or on its behalf, whether as
a result of new information, future events or otherwise.
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following information should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and other information set forth in this
report.
General
The Company changed the focus of its core business during 1999. The company is
a provider of Internet based database products that integrate significant
components of the clinical trial process, including the collection, compilation
and validation of clinical trial data. Prior to 1999 the Company was a computer
systems integrator providing services and hardware sales for the installation of
local and wide area networks.
The Company expects to continue phasing out the systems integration segment of
its business throughout 2001. Virtually all of the Company's personnel are
involved in the development and marketing of the Company's TrialMaster product.
Six Months Ended June 30, 2001 Compared With the Period Ended June 30, 2000
Results of Operations
Revenues
Revenues for the period ended June 30, 2001 were $57,179 compared to $40,760 for
the same period in 2000. Revenues associated with the Company's Internet based
clinical trial products were approximately $33,981 and $0 for 2001 and 2000
respectively. Systems integration revenues in 2001 were approximately $23,198
versus $40,760 in fiscal 2000. The Company expects systems integration revenues
in 2001 to parallel the results achieved in 2000.
The Company's TrialMaster product is currently being sold as an application
service provider ("ASP") that provides electronic data capture ("EDC") and other
services such as an enterprise management suite which assists its clients in the
pharmaceutical, biotechnology and medical device industries in accelerating the
completion of clinical trials.
TrialMaster contracts provide for pricing that is based on both the size and
duration of the clinical trial. Size parameters include the number of patients
participating in the trial and the number of data points being collected per
patient. The client will pay a trial setup fee based on the previously
mentioned factors, and then pay an on-going maintenance fee for the duration of
the clinical trial that provides software, network and site support during the
trial. Generally, these contracts will range in duration from 4 months to
several years. Setup fees are generally earned prior to the inception of a
trial, however, the revenues will be recognized in accordance with SEC Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" which
requires that the revenues be recognized ratably over the life of the contract.
The maintenance fee revenues are earned and recognized monthly. Costs
associated with contract revenues are recognized as incurred.
Cost of Sales
Cost of sales was $38,198 for the period ended June 30, 2001 versus $46,524 for
the period ended June 30, 2000. The decrease in cost of sales is attributable
to the Company's curtailment of its systems integration business segment.
Included in cost of sales is $21,950 in labor costs associated with clinical
trial production and support in 2001 compared with $0 in 2000. The Company
anticipates increasing production labor costs on an absolute basis as its trial
revenues increase. We expect labor costs to decrease on a relative percentage
basis as we increase our trial base and develop economies of scale with regard
to trial production.
The Company does not anticipate that systems integration costs will be a
significant source of expense in 2001. The Company anticipates that the
commercialization of its database product TrialMaster and its related components
will be the source of most of its cost of sales.
26
Other Expenses
Salaries, Employee Benefits and Related Expenses
Salaries and related expenses is the Company's biggest expense at 60.5% of total
Other Expenses for 2001. Salaries and related expenses totaled $993,116 in 2001
compared to $1,511,329 in 2000. The Company increased its personnel in 2000 in
anticipation of marketing both TrialMaster and WebIPA. The increase encompassed
additional computer programmers, and increased sales and marketing personnel.
The Company has reduced its sales and marketing personnel primarily through the
closure of its European office based on its decision to focus on building its
clinical trial clientele domestically in the US. In addition, the Company was
able to reduce its research and development personnel through the consolidation
of its Tampa, Florida and Miami, Florida offices. The Company currently employs
approximately 17 employees out of its Miami corporate office. The Company
expects to increase headcount within its technology and sales & marketing based
functions in concert with anticipated increases in TrialMaster clients during
fiscal 2001.
Rent
Rent expense was $77,986 for the period ended June 30, 2001 compared with
$162,408 for the comparable period in fiscal 2000. The decrease can be
attributed to $36,989 paid as a lease settlement in 2000 and approximately
$29,117 in rent expense for the Company's office in Amsterdam incurred in fiscal
2000 which did not recur in 2001 due to the closure of the Amsterdam office in
connection with the bankruptcy filing of the Company's European subsidiary,
OmniTrial B.V.
Consulting Expenses
Consulting expenses, which are comprised of medical advisory, product
development and marketing and sales consultants were $0 for the period ended
June 31, 2001 compared to $202,453 in fiscal 2000. The decrease can be
attributed to several factors. There was a decrease in marketing and sales
consulting expense of $77,033 caused by the conversion of two sales consultants
into marketing executives of the Company. There was a decrease of $89,000 in
medical advisory consulting expenses that is directly correlated to a
restructuring of the Company's medical advisory board. Product development fees
were reduced by $36,420 through the discontinued use of temporary employees
within the Company's research and development function.
Legal and Professional Fees
Legal and professional fees decreased to $100,917 in the period ended June 30,
2001 compared to $405,978 in the same period in 2000. The decrease can be
attributed to investment banking and financial advisory fees totaling $334,766
in 2000 versus $45,000 in fiscal 2001. Legal and accounting fees were $55,917
in 2001 compared to $71,212 for the same period in fiscal 2000.
Telephone and Internet
Telephone and Internet related costs were reduced by $84,091 due to decreased
telephone and Internet access costs associated with the closing of the Company's
offices in Amsterdam, the Netherlands and Tampa, Florida, and a decrease in
overall long-distance charges associated with the closed facilities. In
addition, there were credits due which were not recognized during the first six
months of 2000 totaling approximately $37,200 for excess charges by the
Company's long distance and network access provider. The Company does not
anticipate any increase in access charges during fiscal 2001 based on its own
existing communications infrastructure and its projected 2001 clinical trial
workload.
Selling, General and Administrative
Selling, general and administrative expenses ("SG&A") include all office
oriented expenses, advertising, public relations and marketing costs and all
other expenses not directly chargeable to either cost of sales or specifically
detailed income statement categories. These expenses were approximately $51,874
in fiscal 2001 compared to $407,521 in fiscal 2000. A portion of the decrease
is a result of expenditures for advertising ($111,449), conferences and seminars
($56,056), marketing ($40,252) and general office related costs ($100,129) in
comparison with fiscal 2000. In addition, the Company had SG & A expenses of
approximately $47,761 in its European operation.
27
Depreciation and Amortization
Depreciation and amortization expense was $182,933 for fiscal 2001 compared with
$194,470 for fiscal 2000. The decrease is a result of an increase in
depreciation expense in 2001 of approximately $11,136 that is associated with
additional computer and office equipment and in amortization expense from debt
acquisition costs of $7,417 offset by a $30,000 decrease in the amortization of
the non-compete covenant associated with the Education Navigator acquisition in
1998
Three Months Ended June 30, 2001 Compared With the Period Ended June 30, 2000
Results of Operations
Revenues
Revenues for the period ended June 30, 2001 were $16,084 compared to $15,782 for
the same period in 2000. Revenues associated with the Company's Internet based
clinical trial products were approximately $15,633 and $0 for 2001 and 2000
respectively. Systems integration revenues in 2001 were approximately $451
versus $15,782 in fiscal 2000.
The Company's TrialMaster product is currently being sold as an application
service provider ("ASP") that provides electronic data capture ("EDC") and other
services such as an enterprise management suite which assists its clients in the
pharmaceutical, biotechnology and medical device industries in accelerating the
completion of clinical trials.
TrialMaster contracts provide for pricing that is based on both the size and
duration of the clinical trial. Size parameters include the number of patients
participating in the trial and the number of data points being collected per
patient. The client will pay a trial setup fee based on the previously
mentioned factors, and then pay an on-going maintenance fee for the duration of
the clinical trial that provides software and network support during the trial.
Generally, these contracts will range in duration from 12 months to several
years. The maintenance fee revenues are earned and recognized monthly. Costs
associated with contract revenues are recognized as incurred.
Cost of Sales
Cost of sales was $21,713 for the period ended June 30, 2001 versus $11,404 for
the period ended June 30, 2000. The increase in cost of sales is attributable
to increased labor costs for clinical trial production and support.
The Company does not anticipate that systems integration costs will be a
significant source of expense in 2001. The Company anticipates that the
commercialization of its database product TrialMaster and its related components
will be the source of most of its cost of sales.
Other Expenses
Salaries, Employee Benefits and Related Expenses
Salaries and related expenses is the Company's biggest expense at 57.6% of total
Other Expenses for 2001. Salaries and related expenses totaled $431,264 in 2001
compared to $938,396 in 2000. The Company increased its personnel in 2000 in
anticipation of marketing both TrialMaster and WebIPA. The increase encompassed
additional computer programmers, and increased sales and marketing personnel.
The Company has reduced its sales and marketing personnel primarily through the
closure of its European office based on its decision to focus on building its
clinical trial clientele domestically in the US. In addition, the Company was
able to reduce its research and development personnel through the consolidation
of its Tampa, Florida and Miami, Florida offices. The Company currently employs
approximately 17 employees out of its Miami corporate office. The Company
expects to increase headcount within its technology based functions in concert
with anticipated increases in TrialMaster clients during fiscal 2001 and is
likely to increase its sales and marketing force in an effort to increase market
penetration
28
Rent
Rent expense was $36,610 for the period ended June 30, 2001 compared with
$101,476 for the comparable period in fiscal 2000. The decrease can be
attributed to $36,989 paid as a lease settlement in 2000 and approximately
$14,842 in rent expense for the Company's office in Amsterdam incurred in fiscal
2000 which did not recur in 2001 due to the closure of the Amsterdam office in
connection with the bankruptcy filing of the Company's European subsidiary,
OmniTrial B.V.
Consulting Expenses
Consulting expenses, which are comprised of medical advisory, product
development and marketing and sales consultants were $0 for the period ended
June 30, 2001 compared to $84,018 in fiscal 2000. The decrease can be attributed
to several factors. There was a decrease in marketing and sales consulting
expense of $29,033 caused by the conversion of two sales consultants into
marketing executives of the Company. There was a decrease of $47,000 in medical
advisory consulting expenses that is directly correlated to a restructuring of
the Company's medical advisory board. Product development fees were reduced by
$7,985 through the discontinued use of temporary employees within the Company's
research and development function.
The Company may incur marketing and sales consulting expense over the next 6 to
18 months as we seek to increase our market penetration. We view the additional
consulting expense as a cost effective means of stepping up our sales efforts
without incurring additional fixed salary costs.
Legal and Professional Fees
Legal and professional fees decreased to $58,419 in the period ended June 30,
2001 compared to $206,731 in the same period in 2000. The decrease can be
attributed to investment banking and financial advisory fees totaling $189,766
in 2000 versus $45,000 in fiscal 2001. Legal and accounting fees were $13,419
in 2001 compared to $13,870 for the same period in fiscal 2000.
Telephone and Internet
Telephone and Internet related costs decreased by $54,496 due to the decreased
telephone and Internet access costs associated with the closing of the Company's
offices in Amsterdam, the Netherlands and Tampa, Florida. The Company does not
anticipate an increase in access charges during fiscal 2001 based on its own
existing communications infrastructure and its projected 2001 workload.
Selling, General and Administrative
Selling, general and administrative expenses ("SG&A") includes all office
oriented expenses, advertising, public relations and marketing costs and all
other expenses not directly chargeable to either cost of sales or specifically
detailed income statement categories. These expenses were approximately $25,967
in fiscal 2001 compared to $192,325 in fiscal 2000. The significant components
of the decrease are a result of decreased expenditures for advertising
($99,632), and general office related costs ($18,965) in comparison with fiscal
2000. In addition, the Company had SG & A expenses of approximately $47,761 in
its European operation during fiscal 2000.
Depreciation and Amortization
Depreciation and amortization expense was $95,605 for fiscal 2001 compared with
$101,854 for fiscal 2000. The decrease are a result of increased in
depreciation expense in 2001 of approximately $3,433 that is associated with
additional computer and office equipment, and amortization of debt acquisition
costs of $7,417 offset by a $15,000 decrease in the amortization of the non-
compete covenant associated with the Education Navigator acquisition in 1998.
Liquidity and Capital Resources
The Company changed its primary focus to providing Internet based database
applications to the clinical trial industry in mid 1998. At that time it began
phasing out its systems integration business segment. Since the Company made
TrialMaster and its related components its primary business, the Company has
relied primarily on the proceeds from the sale of debt and equity securities to
fund its operations.
29
Cash and cash equivalents decreased by $83,060 to $7,898 at June 30, 2001. This
was the result of cash provided by financing activities of $1,229,100 offset by
cash used in operating activities of approximately $1,290,652 and $21,508 in
investing activities. The significant components of the activity include a loss
from operations of approximately $1,725,048, an increase in debt acquisition
costs of $66,750 related to a private placement of the Company's debt, the
purchase of property and equipment of approximately $21,508, offset by an
increase in accounts payable and accrued expenses of approximately $237,524 and
approximately $1,229,100 the company raised through the sale of debt and equity
securities.
Because of the losses experienced in 1999, 2000 and the first six months of
2001, the Company has needed to continue utilizing the proceeds from the sale of
debt and equity securities to fund its working capital needs. The capital
markets during the latter half of fiscal 2000 continuing through the present
provided a difficult climate for the raising of capital because of the decline
in value of publicly held technology stocks and the corresponding apprehension
on the part of investors to invest in technology oriented firms. The softness
in the capital markets coupled with the losses experienced caused working
capital shortfalls. To compensate for its working capital needs the Company has
used a combination of equity financing and short-term bridge loans.
The Company's primary capital requirements are for daily operations and for the
continued development and marketing of the TrialMaster system. The Company's
Management believes that its current available working capital, anticipated and
subsequent sales of stock and or debt financing will be sufficient to meet its
projected expenditures for a period of at least twelve months from June 30,
2001. The Company's capital requirements will need to be funded through debt
and equity financing, of which there can be no assurance that such financing
will be available or, if available, that it will be on terms favorable to the
Company.
Year Ended December 31, 2000 Compared With the Year Ended December 31, 1999
Results of Operations
Revenues
Revenues for the year ended December 31, 2000 were $70,976 compared to
$1,259,214 for the same period in 1999. The substantial decrease is
attributable to the Company significantly curtailing its systems integration
business segment. Revenues associated with the Company's Internet based
clinical trial products were approximately $17,825 and $0 for 2000 and 1999
respectively. Systems integration revenues in 2000 were approximately $53,151.
The Company expects systems integration revenues in 2001 to parallel the results
achieved in 2000
The Company's TrialMaster product is currently being sold as an application
service provider ("ASP") that provides electronic data capture ("EDC") and other
services such as an enterprise management suite which assists its clients in the
pharmaceutical, biotechnology and medical device industries in accelerating the
completion of clinical trials.
TrialMaster contracts provide for pricing that is based on both the size and
duration of the clinical trial. Size parameters include the number of patients
participating in the trial and the number of data points being collected per
patient. The client will pay a trial setup fee based on the previously
mentioned factors, and then pay an on-going maintenance fee for the duration of
the clinical trial that provides software and network support during the trial.
Generally, these contracts will range in duration from 12 months to several
years. The maintenance fee revenues are earned and recognized monthly. Costs
associated with contract revenues are recognized as incurred.
Cost of Sales
Cost of sales was $52,492 or 74.0% for the year ended December 31, 2000 versus
$1,005,338 or 79.8% for the year ended December 31, 1999. The absolute decrease
in cost of sales is attributable to the Company's curtailment of its systems
integration business segment. The decrease in cost of sales on a percentage
basis is primarily the result of the Company providing more high margin
installation services in 2000 than hardware sales.
The Company does not anticipate that systems integration costs will be a
significant source of expense in 2001. The Company's anticipates that the
commercialization of its database product TrialMaster and its related components
will be the source of most of its cost of sales.
30
Other Expenses
Salaries, Employee Benefits and Related Expenses
Salaries and related expenses is the Company's biggest expense at 47.6% of total
Other Expenses for 2000. Salaries and related expenses totaled $2,895,108 in
2000 compared to $784,635 in 1999. The marked increase is attributable to an
increase in headcount from approximately 8 employees during 1999 to an average
of 23 employees in 2000. In addition, two employees were accounted for as
consultants in 1999 and subsequently converted to full-time employees in 2000.
The Company increased its personnel in 2000 in anticipation of marketing both
TrialMaster and WebIPA. The increase encompassed additional computer
programmers, and increased sales and marketing personnel. The Company has
reduced its sales and marketing personnel primarily through the closure of its
European office based on its decision to focus on building its clinical trial
clientele domestically in the US. In addition, the Company was able to reduce
its research and development personnel through the consolidation of its Tampa,
Florida and Miami, Florida offices.
Rent
Rent expense was $242,471 for the year ended December 31, 2000 compared with
$108,371 for the comparable period in 1999. The increase can be attributed to
approximately $32,728 in rent expense for the Company's office in Amsterdam and
an increase of approximately $20,990 in rent expense for the Company's Tampa
office. In addition, the Company relocated its corporate office in November
1999 to a larger facility within the same office building. The move created
approximately $80,000 in additional rent expense in 2000.
Consulting Expenses
Consulting expenses, which are comprised of medical advisory, product
development and marketing and sales consultants were $269,998 for the year ended
December 31, 2000 compared to $557,751 in fiscal 1999. The decrease of $287,753
was caused by several factors. There was a decrease in marketing and sales
consulting expense of $130,030 caused by the conversion of two sales consultants
into marketing executives of the Company. There was a decrease of $117,470 in
medical advisory consulting expenses that is directly correlated to a
curtailment of the Company's medical advisory board. In addition, there was
medical advisory consulting expense recognized in connection with the payment of
stock bonuses to several members of the medical advisory board in 1999. Product
development fees were reduced by $40,253 through the reduced use of temporary
employees within the Company's research and development function.
Legal and Professional Fees
Legal and professional fees increased to $613,797 in the year ended December 31,
2000 compared to $98,895 in the same period in 1999. The increase can be
attributed to investment banking and financial advisory fees totaling $496,889
in 2000. Legal and accounting fees were $116,908 in 2000 compared to $98,895
for the same period in fiscal 1999.
Telephone and Internet
Telephone and Internet related costs increased by $130,749 due to the increased
telephone and Internet access costs associated with the Company's additional
offices in Amsterdam, the Netherlands and Tampa, Florida. The Company
anticipates a reduction in access charges due to the closure of its European
offices and the recent closing of its Tampa office.
Selling, General and Administrative
Selling, general and administrative expenses ("SG&A") includes all office
oriented expenses, advertising, public relations and marketing costs and all
other expenses not directly chargeable to either cost of sales or specifically
detailed income statement categories. These expenses were approximately
$617,006 in fiscal 2000 compared to $208,226 in fiscal 1999. A portion of the
increase is a result of increased expenditures for advertising ($160,000),
marketing ($87,000) and public relations ($30,000) in comparison with fiscal
1999. In addition, the Company had SG & A expenses of approximately $79,000 in
its European operation.
31
Impairment of Equity Investment
On March 20, 2000 the Company entered into a stock purchase agreement under
which it agreed to purchase a 25% interest in Medical Network AG EMN, a Swiss
company ("EMN"). The agreement was set to close on April 20, 2000, provided that
the purchase price for 25% of EMN's stock equity was $838,500 to be paid partly
in cash and stock. Two cash payments totaling US $645,000 were to be paid in
installments as follows: $335,000 on March 20, 2000, upon which EMN would
deliver 10% of its stock equity, and $310,000 on April 20, 2000, upon which EMN
would deliver the remaining 15% of its stock equity. In addition, the Company
was to provide 41,883 shares of restricted common stock to EMN.
On March 20, 2000, the Company paid EMN $335,000, received 10% of EMN's equity
and a seat on EMN's board. On April 20, 2000, the Company did not make the
second payment of $310,000 or the stock payment of 41,883 shares to EMN and the
stock purchase agreement did not close. On July 11, 2000, the Company and EMN
agreed to renegotiate the terms of their agreement subject to the Company's
success in finding adequate financing. As part of the renegotiation the Company
has resigned its seat on EMN's board and offered to sell its 10% interest back
to EMN. The Company accounts for its investment in EMN under the cost method of
accounting. The Company has established a valuation allowance of $335,000
against its investment in EMN to reflect the uncertainty of the fair market
value of the investment as of December 31, 2000.
Loss on Subsidiary Bankruptcy
As discussed in Item Fifteen of this filing OmniTrial BV, the Company's European
subsidiary, filed for bankruptcy protection on or about September 6, 2000. In
connection with the bankruptcy filing the Company has recognized a loss of
approximately $78,131 which represents the value of the assets of OmniTrial
immediately prior to the bankruptcy filing. The Company believes it is unlikely
that any of the assets of OmniTrial will be recovered through the bankruptcy
proceeding.
The Company has negotiated a settlement with the trustee which would provide (i)
settlement of all matters relating to the case, (ii) release the Company from
further claims, and (iii) return the servers to the Company in exchange for an
amount to be paid to the trustee.
Depreciation and Amortization
Depreciation and amortization expense was $370,278 for fiscal 2000 compared with
$299,402 for fiscal 1999. The increase is a result of an increase in
depreciation expense in 2000 of approximately $108,147 that is associated with
additional computer and office equipment offset by a $30,000 decrease in the
amortization of the non-compete covenant associated with the Education Navigator
acquisition in 1998.
Preferred Stock Dividends
Preferred stock dividends increased to $208,137 in fiscal 2000 compared with
$34,021 for the comparable period in 1999. The expense in fiscal 2000
represents a full year's worth of dividends payable to preferred shareholders
versus an average period outstanding of approximately 50 days in 1999.
Liquidity and Capital Resources
The Company changed its primary focus to providing Internet based database
applications to the clinical trial industry in mid 1998. At that time it began
phasing out its systems integration business segment. Since the Company made
TrialMaster and its related components its primary business the Company has
relied primarily on the proceeds from the sale of debt and equity securities to
fund its operations.
Cash and cash equivalents decreased by $1,036,305 to $90,958 at December 31,
2000. This was the result of cash provided by financing activities of $3.8
million offset by cash used in operating activities of approximately $4.2
million and $664 thousand in investing activities. The significant components
of the activity include a loss from operations of approximately $6.3 million,
cash used in an equity investment in EMN of $335,000, the purchase of property
and equipment of approximately $333,765, offset by an increase in accounts
payable and accrued expenses of approximately $795,000 and approximately $3.9
million the company raised through the sale of debt and equity securities.
32
Because of the losses experienced in 1999 and 2000 the Company has needed to
continue utilizing the proceeds from the sale of debt and equity securities to
fund its working capital needs. The capital markets during the latter half of
fiscal 2000 provided a difficult climate for the raising of capital because of
the decline in value of publicly held technology stocks and the corresponding
apprehension on the part of investors to invest in technology oriented firms.
The softness in the capital markets coupled with the losses experienced caused
working capital shortfalls. To compensate for its working capital needs the
Company has used a combination of equity financing and short-term bridge loans.
The Company's primary capital requirements are for daily operations and for the
continued development and marketing of the TrialMaster system. The Company's
Management believes that its current available working capital, anticipated and
subsequent sales of stock and or debt financing will be sufficient to meet its
projected expenditures for a period of at least twelve months from December 31,
2000. The Company's capital requirements, will need to be funded through debt
and equity financing, of which there can be no assurance that such financing
will be available or, if available, that it will be on terms favorable to the
Company.
ITEM NO. 18 DESCRIPTION OF PROPERTY
The Company's facilities are located at 3250 Mary Street, Suite 402, Miami,
Florida 33133 ("Miami Office"), and 5680 West Cypress Street, Suite I, Tampa,
Florida 33607 ("Tampa Office"). The Miami Office is the Company's headquarters,
and costs $9,352 per month and comprises approximately 5,048 square feet. The
Tampa Office is where the Company's software development activities were located
through February 2001. The Tampa Office is rented for $2,449 per month and
comprises approximately 1,540 square feet. The Company is currently attempting
to negotiate a lease termination settlement with the Tampa landlord since it has
moved all of its staffing functions out of that office. The Company believes
that these facilities are adequate for its current and reasonably foreseeable
future needs.
ITEM NO. 19 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Cornelis F. Wit, a Director of the Company, is also currently an officer of
Noesis Capital Corp. Noesis Capital Corp. has served as placement agent for the
Company on three private placements of securities.
On December 16, 1999, the Company entered into a consulting agreement
("Agreement") with Guus van Kesteren and Cornelis F. Wit both of whom are
directors of the Company. The Agreement provides for compensation to be paid to
van Kesteren and Wit in the event sales leads or contacts developed by van
Kesteren and Wit result in sales of the Company's TrialMaster system.
ITEM NO. 20 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock, $.001 par value, is traded on the over-the-counter
bulletin board market. The Company's preferred stock is not traded. There has
been trading in the Company's common stock since November 26, 1999. The symbol
for the Company's common stock is OMCM.
Quarter Ending Fiscal Year High Bid Low Bid
-------------------------- -------- -------
---------------------------------------------------------------------------------------------------------------------
December 1999 $5.75 $3.50
---------------------------------------------------------------------------------------------------------------------
June 2000 $6.75 $2.06
---------------------------------------------------------------------------------------------------------------------
September 2000 $4.25 $1.50
---------------------------------------------------------------------------------------------------------------------
December 2000 $2.25 $0.63
---------------------------------------------------------------------------------------------------------------------
March 2001 $1.56 $0.38
---------------------------------------------------------------------------------------------------------------------
June 2001 $0.56 $0.25
---------------------------------------------------------------------------------------------------------------------
The bid price which states over-the-counter market quotations reflects inter-
dealer prices without real mark-up, mark-down or commissions and may not
necessarily represent actual transactions.
The Company has approximately 403 shareholders of record of its common stock as
of September 10, 2001.
33
ITEM NO. 21 EXECUTIVE COMPENSATION
Summary Compensation Table
-----------------------------------------------------------------------------------------------------------
Long term Compensation
-----------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
-----------------------------------------------------------------------------------------------------------
Other Securities
-----------------------------------------------------------------------------------------------------------
Name Annual Restricted Under- All other
-----------------------------------------------------------------------------------------------------------
And Compen- Stock Lying LTIP Compen-
-----------------------------------------------------------------------------------------------------------
Principal sation Awards Options Payout sation
-----------------------------------------------------------------------------------------------------------
Position Year Salary Bonus ($) ($) ($) SARs (#) ($) ($)
-------- ---- ------ --------- --------
($)
-----------------------------------------------------------------------------------------------------------
David Ginsberg,
CEO/Director 2000 $134,255 $-0- $ -0- $-0- 240,000 $-0- $16,759
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Peter Knezevich
CEO/Director 2000 $131,231 $-0- $ -0- $-0- -0- $-0- $ 5,300
-----------------------------------------------------------------------------------------------------------
1999 $ 84,278 $-0- $ -0- $-0- 897,568 $-0- $ 4,000
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Randall Smith
President/Director 2000 $119,831 $-0- $ -0- $-0- 336,539 $-0- $ 6,800
-----------------------------------------------------------------------------------------------------------
1999 $ 84,278 $-0- $6,205 $-0- 732,107 $-0- $ 4,000
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Clifton Middleton
Vice President 2000 $100,899 $-0- $ -0- $-0- 252,000 $-0- $ 3,000
-----------------------------------------------------------------------------------------------------------
1999 $ 91,358 $-0- $6,237 $-0- 534,113 $-0- $ 3,000
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Gene Gordon
Vice President 2000 $115,000 $-0- $ -0- $-0- 2,000 $-0- $ 6,600
-----------------------------------------------------------------------------------------------------------
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-----------------------------------------------------------------------------------------------------------
Individual Grants
-----------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
-----------------------------------------------------------------------------------------------------------
Number of
-----------------------------------------------------------------------------------------------------------
Securities % of Total
-----------------------------------------------------------------------------------------------------------
Underlying Options/SARs
-----------------------------------------------------------------------------------------------------------
Options/ Granted to
-----------------------------------------------------------------------------------------------------------
SARs Employees in Exercise or Base Expiration
-----------------------------------------------------------------------------------------------------------
Name Granted (#) Fiscal Year Price ($/Share) Date
---- ----------- ----------- --------------- ----
-----------------------------------------------------------------------------------------------------------
David Ginsberg 200,000 10.8% $5.50 12/31/07
-----------------------------------------------------------------------------------------------------------
David Ginsberg 40,000 2.2% $2.61 8/2/05
-----------------------------------------------------------------------------------------------------------
Peter Knezevich -0- 0.0% -0 n/a
-----------------------------------------------------------------------------------------------------------
Randall Smith 2,000 0.1% $2.50 7/30/09
-----------------------------------------------------------------------------------------------------------
Clifton Middleton 2,000 0.1% $2.50 7/30/09
-----------------------------------------------------------------------------------------------------------
Gene Gordon 2,000 0.1% $2.50 7/30/09
-----------------------------------------------------------------------------------------------------------
34
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
Number of
----------------------------------------------------------------------------------------------------------------------------
Securities Value of
----------------------------------------------------------------------------------------------------------------------------
Underlying Unexercised
----------------------------------------------------------------------------------------------------------------------------
Unexercised In-the-money
----------------------------------------------------------------------------------------------------------------------------
Options/SARs at Options/SARs at
----------------------------------------------------------------------------------------------------------------------------
Shares FY End (#) FY End ($)
Acquired
----------------------------------------------------------------------------------------------------------------------------
On Exercise Value
----------- -----
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --- ------------ ----------- ------------- ----------- -------------
----------------------------------------------------------------------------------------------------------------------------
David Ginsberg -0- $-0- 240,000/ -0- -0- -0-
----------------------------------------------------------------------------------------------------------------------------
Peter Knezevich -0- $-0- -0- -0- -0- -0-
----------------------------------------------------------------------------------------------------------------------------
Randall Smith -0- $-0- 2,000 334,539 -0- -0-
----------------------------------------------------------------------------------------------------------------------------
Clifton -0- $-0- 2,000 250,000 -0- -0-
Middleton
----------------------------------------------------------------------------------------------------------------------------
Gene Gordon -0- $-0- 2,000 -0- -0- -0-
----------------------------------------------------------------------------------------------------------------------------
ITEM NO. 22 FINANCIAL STATEMENTS
The Registrants financial statements have been included as Exhibit 99 to
the Registration Statement filed on Form SB-2.
ITEM NO. 23 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
35
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM NO. 24 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VI of the Company's Articles of Incorporation authorizes the Company to
indemnify directors and officers as follows:
1. So long as permitted by law, no director of the corporation shall be
personally liable to the corporation or its shareholders for damages for breach
of any duty owed by such person to the corporation or its shareholders;
provided, however, that, to the extent required by applicable law, this Article
shall not relieve any person from liability for any breach of duty based upon an
act or omission (i) in breach of such person's duty of loyalty to the
corporation or its shareholders, (ii) not in good faith or involving a knowing
violation of law or (iii) resulting in receipt by such person of an improper
personal benefit. No amendment to or repeal of this Article and no amendment,
repeal or termination of effectiveness of any law authorizing this Article shall
apply to or effect adversely any right or protection of any director for or with
respect to any acts or omissions of such director occurring prior to such
amendment, repeal or termination of effectiveness.
In addition, the Company currently carries Directors and Officers liability
insurance providing coverage against liability claims and providing
reimbursement for legal representation of Directors and Officers.
ITEM NO. 25 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the expenses associated with this registration. None of the
expenses associated with this registration shall be borne by the Selling
Security Holders.
Registration Fee: $ 3,155
Legal Fees: $ 5,000
Accounting Fees: $ 3,500
Transfer Agent Fees: $ 1,000
-------
Total Expenses: $12,655
=======
ITEM NO. 26 RECENT SALES OF UNREGISTERED SECURITIES
Section 4(2) Transactions
On or about February 1997 OmniComm Systems, Inc. formerly known as The Premisys
Group, Inc. was incorporated. Contemporaneous with the incorporation of OmniComm
Systems, Inc. common stock was issued to Randy Smith and Lawton Jackson totaling
1,875,000. On February 1, 1998, the Board of Directors of OmniComm Systems, Inc.
authorized the issuance of 625,000 shares of common stock to Peter S. Knezevich.
These shares were issued pursuant to Section 4(2) of the Securities Act of 1933
in exchange for services rendered and to be rendered as evidenced by a written
employment agreement.
On or about December 1996, Coral Development issued 403,000 shares of common
stock to MTC, the Parent corporation of Coral Development, in exchange for
$30,000. The shares were issued pursuant to an exemption from registration
contained in Section 4(2) of the Securities Act of 1933.
On June 26, 1998, prior to executing the merger agreement with Coral
Development, the Company acquired Education Navigator, Inc. In exchange for all
the issued and outstanding shares of Education Navigator, the Company issued
441,180 shares of common stock of the Company to the two shareholders of
Education Navigator and issued promissory notes in the amount of $525,000. The
shares and promissory notes were issued pursuant to an exemption from
registration contained in Section 4(2) of the Securities Act of 1933. Subsequent
to the acquisition of Education Navigator, the Company executed an employment
agreement with Cliff Middleton, a shareholder of Education Navigator. In
addition, pursuant to Section 422 of the Internal Revenue Code, the Company
granted an incentive stock option to Cliff Middleton for 85,000 common shares at
$.65 per share, vesting over 3 years beginning June 26, 1999.
On February 17, 1999, OmniComm Systems, Inc. and Coral Development finalized the
merger pursuant to the terms and conditions set forth in the Agreement and Plan
of Reorganization. All of the issued and outstanding shares of OmniComm Systems,
Inc. were exchanged for 940,000 shares of common stock of Coral Development; or,
3.129 shares
of OmniComm Systems for 1 share of Coral Development. The exchange and issuance
of shares were issued pursuant to an exemption from registration contained in
Section 4(2) of the Securities Act of 1933.
Both of the foregoing issuances concerning the merger transactions dated June
26, 1998 (acquisition of Education Navigator), and February 17, 1999 (merger
with Coral Development Corp.), relied on the exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 (the "Act"). The basis of
the exemption is a transaction by an issuer that does not involve a public
offering.
Critical to the application of the exemption is the availability of information
to the offeree and her sophistication. The availability of information can be
provided in two ways: access to information or disclosure.
In both transactions, the offerees were sophisticated; they have the financial
and business experience to evaluate the offer. In the Education Navigator
transaction the offerees were familiar with and professionals within the
computer and Internet market and had experience with the risks associated with
ventures involving start-up companies in the market. In the Coral/OmniComm
transaction the offerees have a level of sophistication sufficient to appreciate
the relative risks and benefits of being affiliated with a reporting company
including the statutory obligations, both federal and state.
In both transactions the offerees were provided with full disclosure pursuant to
agreements including audited financial information and written legal opinions.
Also, in both cases, counsel who had sufficient experience with transactions of
the type consummated represented the offerees.
The transaction involving Coral Development Corp. and MTC was a transaction
involving a parent and a subsidiary where the parent had access to corporate
information concerning the subsidiary.
Rule 506 Transaction - 10% Convertible Note
On January 18, 1999, Northeast Securities, Inc., as placement agent, began the
distribution of a Confidential Private Placement Memorandum to accredited
investors on behalf of the Company. Northeast received the following placement
agent fees: 10% Commission (cash); 3% nonaccountable expense allowance (cash);
$7,500 advance against non-accountable due diligence expense. The offering was
closed on June 15, 1999 and as of August 1, 1999, the Company had received gross
proceeds of $862,500 as a result of the private placement.
The offer and sale of the notes were made in reliance upon Rule 506,
Regulation D of the Securities Act of 1933. The offerees and purchasers were
accredited investors who were provided with a private placement memorandum that
met the requirements of Regulation D and who executed investor questionnaires.
Rule 701 Transactions
Rule 701 of the Securities Act of 1933, as amended (the "Act") is an exemption
from registration for offers and sales of securities pursuant to certain
compensatory benefit plans and contracts relating to compensation provided
bonafide services are rendered not related to capital raising or pursuant to a
written contract relating to compensation.
The Company granted an incentive stock option in accordance with Internal
Revenue Code (IRC) Code Section 422 to Clifton Middleton to purchase 85,000
shares of common stock at $.65 a share over a three (3) year period. The options
were granted pursuant to Rule 701 of the Act. The options were granted pursuant
the Company's 1998 Incentive Stock Option Plan and pursuant to a contract
relating to compensation and in accordance with Rule 701 of the Act.
The Company appointed Dr. Warren S. Grundfest to the Company's Medical Advisory
Board. Dr. Grundfest was granted stock options and a stock bonus. The options
and bonus stock were granted pursuant to the Company's 1998 Incentive Stock
Option Plan and in accordance with Rule 701 of the Act.
The Company retained Mr. Lawrence Kronick to act as a consultant for the Company
to assist in marketing the Company's TrialMaster(tm) system. Mr. Kronick was
granted options pursuant to a written contract of compensation and pursuant to
the Company's 1998 Incentive Stock Option Plan and in accordance with Rule 701
of the Act.
The Company appointed Dr. Richard Murphy to the Company's Medical Advisory
Board. Dr. Murphy was granted stock options and a stock bonus. The options and
bonus stock were granted pursuant to the Company's 1998 Incentive Stock Option
Plan and in accordance with Rule 701 of the Act.
The Company appointed Dr. Sameer Mehta as its consulting Medical Director. Dr.
Mehta was granted stock options and a stock bonus. The options and bonus stock
were granted pursuant to the Company's 1998 Incentive Stock Option Plan and in
accordance with Rule 701 of the Act.
The Company granted stock option and bonuses to employees of the Company. The
stock bonuses totaled 51,377 shares of common stock. The options and bonus stock
were granted pursuant to the Company's 1998 Incentive Stock Option Plan and in
accordance with Rule 701 of the Act.
Regulation S and Section 4(2) - 5% Series A Convertible Preferred
On June 4, 1999, the Company entered into a private placement agreement
("Agreement") with Noesis Capital Corp. ("Noesis") wherein Noesis would act as
the placement agent for the offer and sale of the Company's 5% Series A
Convertible Preferred stock pursuant to and in accordance with Regulation S and
Section 4(2) of the Securities Act of 1933, as amended. Noesis received as a
commission 10% of the gross proceeds received by the Company and a warrant to
purchase at par value, $.001, 10% of the shares placed. The Company sold the
preferred to foreign investors and to a small group of US based investors of
which all were accredited investors. The offering was concluded on December 31,
1999. The Company had received gross proceeds of $4,313,500.
Rule 506 - Common Stock
On July 24, 2000, the Company entered into a private placement agreement
("Agreement") with Noesis Capital Corp. ("Noesis") wherein Noesis would act as
the placement agent for the offer and sale of the Company's common stock
pursuant to and in accordance with Rule 506, Regulation D of the Securities Act
of 1933, as amended. Noesis was entitled to receive as a commission 8% of the
gross proceeds received by the Company and a warrant to purchase at $1.10 per
share, 10% of the shares placed. In addition, Noesis was granted a 2% non-
accountable expense allowance. The Company sold the common stock to foreign
investors and to a small group of US based investors of which all were
accredited investors. The offering was concluded on October 15, 2000. The
Company had received gross proceeds of $668,334 and incurred investment banking
fees of $66,833.
Rule 506 Transaction - 12% Convertible Note
On January 1, 2001, Noesis Capital Corp., as placement agent, began the
distribution of a Confidential Private Placement Memorandum to accredited
investors on behalf of the Company. Noesis received the following placement
agent fees: 5% commission (cash); warrants to purchase a number of shares equal
to 10% of the number of shares issuable upon conversion of the Notes sold in the
offering, at an exercise price of $.50 per share, exercisable for a period of
five (5) years, commencing on the final closing date of the offering. The
offering was closed on June 15, 2001. The Company received gross proceeds of
$1,555,000 as a result of the private placement.
The offer and sale of the notes were made in reliance upon Rule 506, Regulation
D of the Securities Act of 1933. The offerees and purchasers were accredited
investors who were provided with a private placement memorandum that met the
requirements of Regulation D and who executed investor questionnaires.
Rule 506 - 8% Series B Convertible Preferred
On August 31, 2001, the Company entered into an Agency Agreement ("Agreement")
with Commonwealth Associates, LP. ("Commonwealth") wherein Commonwealth would
act as the placement agent for the offer and sale of the Company's 8% Series B
Convertible Preferred stock pursuant to and in accordance with Rule 506,
Regulation D of the Securities Act of 1933, as amended. Commonwealth received as
a commission 10% of the gross proceeds received by the Company and an option to
purchase Placement Agent Units ("Units") equal to 15% of the shares placed. The
Units consist of (a) 10,000 shares (the "Preferred Shares") of Series B
Convertible Preferred Stock of the Company ("Preferred Stock"), each share of
Preferred Stock convertible into 40 shares of common stock, par value $.001 per
share (the "Common Stock") and (b) 5-year warrants (the "Warrants") to purchase
400,000 shares of Common Stock at an exercise price of $.25 per share of Common
Stock, at an exercise price of $100,000 per Unit. The Company sold the
preferred stock to a small group of US based investors all of which were
accredited investors. The offering was concluded on September 9, 2001. The
Company received gross proceeds of $2,000,000.
ITEM NO. 27 EXHIBITS
(a) Exhibits
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(2) (a) Agreement and Plan of Reorganization dated July 22, 1998: Incorporated herein by
reference to Form 8-K, dated March 3, 1999. File No. 000-25203
---------------------------------------------------------------------------------------------------------------------
(b) Amendment to Agreement and Plan of Reorganization: Incorporated by herein by
reference to Form 10-SB dated December 20, 1998.
---------------------------------------------------------------------------------------------------------------------
(c) Plan of Merger: Incorporated herein by reference to From 10-SB/A dated August 17,
1999.
---------------------------------------------------------------------------------------------------------------------
(d) Agreement and Plan of Acquisition of WebIPA dated January 26, 2000: Incorporated
herein by reference to Form 8-K dated February 9, 2000.
---------------------------------------------------------------------------------------------------------------------
(3) (a) (i) Certificate of Incorporation: Incorporated herein by reference to Form SB-2 File
No. 333--6410
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(ii) By-Laws: Incorporated herein by reference to Form SB-2 File No. 333-6410.
---------------------------------------------------------------------------------------------------------------------
(4) (a) Amendment to Articles of Incorporation - Authorization to issue Preferred Shares.
Incorporated herein by reference to Form 10-SB/A dated August 17, 1999.
---------------------------------------------------------------------------------------------------------------------
(b) Certificate of Designation - 5% Series A Convertible Preferred Stock. Incorporated
herein by reference to From 10-SB/A dated August 17, 1999.
---------------------------------------------------------------------------------------------------------------------
(c) Certificate of Increase - 5% Series A Convertible Preferred Stock. Incorporated
herein by reference to Form 10-KSB dated March 29, 2000.
---------------------------------------------------------------------------------------------------------------------
(d) Certificate of Designation - 8% Series B Convertible Preferred Stock
---------------------------------------------------------------------------------------------------------------------
(5) Opinion of Counsel,
---------------------------------------------------------------------------------------------------------------------
(10) (a) Employment Contracts
---------------------------------------------------------------------------------------------------------------------
(i) Randall G. Smith - Employment Agreement and Stock Option Agreement.
---------------------------------------------------------------------------------------------------------------------
(ii) David Ginsberg, D.O. - Employment Agreement and Stock Option Agreement.
---------------------------------------------------------------------------------------------------------------------
(ii) Ronald T. Linares. - Employment Agreement and Stock Option Agreement.
---------------------------------------------------------------------------------------------------------------------
(b) 1998 Stock Incentive Plan. Incorporated herein by reference to Form 10SB-A dated
August 17, 1999.
---------------------------------------------------------------------------------------------------------------------
(c) Medical Advisory Board Agreement. Incorporated herein by reference to Form 10SB-A
dated August 17, 1999.
---------------------------------------------------------------------------------------------------------------------
(d) Standard Agreement - Proprietary Protection. Incorporated herein by reference to
Form 10-SB/A dated August 17, 1999.
---------------------------------------------------------------------------------------------------------------------
(23) Consent of Greenberg & Company, LLC., Registrants Independent Auditors dated September
12, 2001.
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(99) Financial Statements
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(b) Reports on Form 8-K
Incorporated by reference to Form 8-K File No. 000-25203
ITEM NO. 28 UNDERTAKINGS
The undersigned registrant hereby undertakes:
To file, during any period in which offers or sales are being made, a post-
effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereto) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
That, for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
SIGNATURES
----------
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Miami,
State of Florida on September 26, 2001.
OmniComm Systems, Inc.
(Registrant)
By: /s/ David Ginsberg
-----------------------------
Name: David Ginsberg
Title: Chief Executive Officer and President
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in the
capacities and on the dates stated.
By: /s/David Ginsberg
----------------------------------
Title: Chief Executive Officer and President
Date: September 26, 2001
By: /s/Ronald T. Linares
-------------------------------------
Title: Chief Financial and Accounting Officer
Date: September 26, 2001
By: /s/Randall G. Smith
------------------------------------
Title: Chief Technical Officer and Director
Date: September 26, 2001
By: /s/ Guus van Kesteren
--------------------------------------
Title: Director
Date: September 26, 2001
By: /s/ Harold Blue
----------------------------------------------------------------------
Title: Director
Date: September 26, 2001
By: /s/Cornelis F. Wit
-------------------------------------------------------------------------
Title: Director
Date: September 26, 2001
Exhibit Index
Exhibit Description
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(d) Certificate of Designation - 8% Series B Convertible Preferred Stock
-------------------------------------------------------------------------------------------------------------------
(5) Opinion of Counsel, Jonathan D. Leinwamd, P.A.
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(10) (a) Employment Contracts
-------------------------------------------------------------------------------------------------------------------
(i) Randall G. Smith - Employment Agreement and Stock Option Agreement.
-------------------------------------------------------------------------------------------------------------------
(ii) David Ginsberg, D.O. - Employment Agreement and Stock Option Agreement.
-------------------------------------------------------------------------------------------------------------------
(ii) Ronald T. Linares. - Employment Agreement and Stock Option Agreement.
-------------------------------------------------------------------------------------------------------------------
(23) Consent of Greenberg & Company, LLC., Registrants Independent Auditors dated August
13, 2001.
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(99) Financial Statements
-------------------------------------------------------------------------------------------------------------------