U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(g) of the Securities Exchange Act of 1934
WORLD DIAGNOSTICS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 65-0742342
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
15271 NW 60TH Avenue, #201, 33014
Miami Lakes, Florida
(Address of principal executive offices)
Issuer's telephone number, including area code (305) 827-3304
Securities to be registered pursuant to Section 12(b) of the Act: NONE
Securities to be registered pursuant to Section 12(g) of the Act:
4,281,827 shares of Common Stock, $0.001 par value
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INDEX TO REGISTRATION STATEMENT ON FORM 10-SB
ITEMS IN FORM 10-SB
Part I
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PAGE
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Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . ..1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation. . .. . . . . . . . . . . . . . . . . . . . . . . .17
Item 3. Description of Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Item 4. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . .26
Item 5. Directors, Executive Officers, Promoters and Control Persons . . . . . . . . . .28
Item 6. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Item 7. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . .31
Item 8. Description of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Part II
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . .32
Item 2. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Item 3. Change in and Disagreements with Accountants on Accounting
and Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . .33
Item 4. Recent Sales of Unregistered Securities. . . . . . . . . . . . . . . . . . . . .33
Item 5. Indemnification of Directors and Officers. . . . . . . . . . . . . . . . . . . .34
Part F/S
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35-50
Part III
Item 1. Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
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PART I
FORWARD-LOOKING STATEMENTS
This Registration Statement of World Diagnostics, Inc. (also referred to as
"WDI" or the "Company") includes forward-looking statements within the meaning
of Section 21E(i)(1) of the Securities Exchange Act of 1934 (the "Act"). These
statements are based on management's beliefs and assumptions, and on information
currently available to management. Forward- looking statements include
statements in which words such as "expect," "anticipate," "intend," "plan,"
"believe," "estimate," "consider," or similar expressions are used. WDI does not
claim the safe harbor exemption due to its use of such forward looking
statements as this document is the initial registration of the Company.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions. The Company's future results and
stockholder values may differ materially from those expressed in these
forward--looking statements. Many of the factors that will determine these
results and values are beyond the Company's ability to control or predict. In
addition, the Company does not have any intention or obligation to up-date
forward-looking statements after the effectiveness of this Registration
Statement even when new information, future events or other circumstances have
made them incorrect or misleading.
ITEM 1. DESCRIPTION OF BUSINESS
WDI is an early stage Company that was formed in Delaware and became
operational in February of 1997. WDI acquired the assets of Health Tech
International, Inc. in May of 1998 through payment of $2,000. The primary assets
consisted of proprietary distribution agreements and certain technology for
rapid diagnostic tests. This transaction was treated as a combination of
companies under common control with WDI being the surviving company.
WDI was formed to service the international demand for various laboratory
diagnostic products. WDI is a single source supplier and exporter of
approximately 450 diagnostic test products of which 100 of these products
produce approximately 80% of the revenues. The diagnostic test products are
marketed through the Company's website, www.labtestkits.com, and distributor
network. WDI develops and distributes a comprehensive line of rapid
immunodiagnostic products for point-of-care testing of certain human medical
conditions and infectious diseases. WDI acts as a virtual manufacturer by having
its products made to its specifications through a network of suppliers and
contract manufacturers. As a virtual manufacturer, WDI is able to obtain
components constituting final WDI products on a more cost-effective basis, from
approximately 25 predominately interchangeable suppliers, than if it were to
operate such manufacturing facilities on its own. As such, WDI provides its
customers with diagnostic products without having the overhead expenses of a
typical manufacturer, while allowing WDI to maintain product design and quality
control.
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WDI has designed and developed various rapid diagnostic test kits that
incorporate proprietary, one-step, rapid tests that utilize genetically
engineered formatting to diagnose and help prevent the spread of infectious
diseases, such as HIV, Cholera, Hepatitis, Tuberculosis, and various sexually
transmitted diseases. These products provide accurate and cost-effective
diagnoses of acute and chronic conditions in the areas of reproductive health,
viral and bacterial infectious diseases, gastrointestinal, hormones, cancer,
cardiac, and autoimmune disorders. WDI products also are used for therapeutic
treatment and drug abuse testing.
WDI's primary revenues are derived from Latin America, the Caribbean,
Israel, the Middle East, Eastern Europe, the European Common Market, Asia and
the Pacific Rim. WDI provides a significant number of diagnostic reagents to
emerging and intermediate developed nations for which WDI is an affordable
single source supplier. WDI products are sold primarily outside the United
States through approximately 60 distributors who sell to professionals,
hospitals, physician offices, clinical laboratories, retail drug stores, and to
government agencies in connection with blood screening, disease containment and
drug interdiction programs. This customer base has been established through
direct marketing initiatives, and since September 1998, leads generated by the
Company's website, www.labtestkits.com. These customers are supported by sales
personnel and a technical staff that is available directly by telephone, fax,
E-mail or online through the Company's web site. WDI's largest customer
accounted for approximately 21% of its revenues in the fiscal year ended March
31, 1999 ("Fiscal Year 1999") and approximately 11% for the three months ended
June 30, 1999. The Company does not believe that the loss of any other single
customer would have a material and adverse impact on WDI's results.
During Fiscal Year 1999 WDI's annual sales grew from approximately $393,000
to $576,000 and gross profit margins grew from 17% to 21%. Also, the Company
launched its web site and registered a substantial number of its products in
various countries. In July, 1998 the Company received an FDA Good Manufacturing
Practices ("GMP") license from the U.S. Food and Drug Administration ("FDA")
which is used for registering the Company's products for sale in various
countries. The GMP license also enables the Company to conduct on-site packaging
and perform certain design manufacturing operations that it may choose to keep
within the Company to protect the proprietary aspects of its products.
In June 1998, WDI received certification for its whole blood rapid HIV test
from the World Health Organization's ("WHO") "Special Program for Sexually
Transmitted Diseases" located at their Caribbean Epidemiology Center ("CAREC")
for surveillance of infectious diseases. Concurrently with achieving WHO
certification, WDI launched its first proprietary rapid test product requiring
no instrumentation with a positive predictor value rating of 100%. WDI has since
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expanded its product line through internal development and acquisition of other
diagnostic tests that are economical, easy to use and which possess modern
technology.
In June 1998, WDI also completed a private placement of common stock and
warrants that resulted in WDI receiving net proceeds of $50,000 which has been
used for various working capital purposes. In October 1998, WDI received
approval from the NASD for its stock to trade on the Nasdaq Bulletin Board OTC
Market under trading symbol ("WDGI"). In addition during 1999, the Company
received additional proceeds totaling $575,750 through the exercise of common
stock purchase warrants.
A. INDUSTRY AND MARKET OVERVIEW
The 1999 worldwide market, for In-Vitro Diagnostic ("IVD") products is
estimated to be in excess of $20 billion. In-Vitro testing may be defined as
tests performed on bodily fluids which have been removed from the body such as
urine, blood and saliva. According to international and US domestic indicators
from the World Bank, Frost & Sullivan, IMS and Theta Corporation, the world wide
diagnostic market is the largest and fastest growing segment of the health care
market. Unit tests performed in the area of infectious diseases in third world
nations is approximately 70% of the total market. In emerging economies, growth
in the volume of infectious disease testing is more than 18% per annum.
The market for diagnostic product sales is influenced by several factors:
(1) availability of drugs for disorder treatment; (2) national government health
programs; (3) social security systems; and, (4) the availability of funds from
international organizations to contain the spread of infectious diseases. The
growth in the demand for diagnostic products is predicated upon the concept
that, the easier it is to diagnose a disease or medical disorder, the easier it
is for the physician to respond to the patient. Governments in emerging markets
are responding to increases in infectious disease disorders through the use of
rapid diagnostic testing products and the isolation of infectious individuals.
This policy is driven by the need to minimize costs to the medical and social
system for the general health and welfare improvement of populations, and to
also contain epidemic situations. Diagnostic products avoid more costly remedies
by early detection of diseases or medical disorders as well as containment in
non-treatable epidemic situations.
In developing and emerging growth nations, population control is the second
largest growth area in diagnostic product sales behind infectious diseases. The
demand for fertility diagnostic products is driven by the need for population
control fostered by international funding through such agencies as UNICEF, a
medical and educational arm of the United Nations, the World Bank and the
International Monetary Fund, to mention a few.
Another significant market factor is the issue of drug interdiction in
emerging growth nations. The desire of police and military institutions, to
utilize low cost delivery systems, presents WDI
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with meaningful sales opportunities. Revenue growth potential in this area of
diagnostics relates to the sales of drug detection systems. There also are other
areas of large consumption of drug detection testing systems such as criminal,
judicial and immigration testing. In Fiscal Year 1999, sales of such drug
detection systems increased from 1% of the Company's sales to 5% of the sales.
Emerging growth economies require several key features in the diagnostic
products they purchase that include: (1) ease of access, (2) low cost, (3)
efficient selection and (4) flexibility of use. WDI provides ease of access
through an expanding network of approximately 60 distributors in 60 countries,
and increasingly through its business-to-business web site. WDI sells its
products at a low cost, through WDI's virtual manufacturing system and its use
of advanced proprietary technology such as its HIV, one-step, rapid test. WDI
offers a comprehensive range of products available at a single source, which are
not limited to the requirements of any one manufacturer or supplier. The
interchangeable products may be used in open systems of diagnostic testing, as
compared to closed systems that do not permit the use of another manufacturer's
product. Interchangeable products offer customers flexibility and cost
advantages of generic alternatives. This can be a critical competitive advantage
for WDI.
WDI provides flexible open diagnostic test systems as compared to the
closed systems produced by larger companies for mature markets. A closed system
requires exclusive use of a company's products because its products are the only
ones that fit that particular company's analytical systems. Large corporations
in maturing markets typically sell closed systems which utilize only their own
reagents, and require capital intensive analyzers. These types of systems are
too costly for emerging growth economies to purchase outright, and their unit
cost per test is prohibitive to many customers without health care reimbursement
programs. As a result, the growing trend for non-U.S. markets is to use open
systems such as those offered by WDI, which enable the laboratory to use any
manufacturer's reagent.
Another significant trend in emerging markets is point of care ("POC")
testing with rapid diagnostic products. POC testing is the alternative to
central laboratory testing. The POC market is comprised of two general segments:
hospital testing and decentralized testing. Hospital and physician POC testing
is a growing practice and generally, is an extension of the hospital's central
lab. A number of diagnostic tests conducted in the hospital are most effectively
conducted at the bedside, in the emergency room or in a physician's office. For
emerging markets, on site or in the field testing of patients by non-physician
professionals for infectious diseases is one of the largest growing segments.
The international market for rapid POC diagnostic tests is estimated by sources
to be in excess of $8 billion for tests such as HIV, Hepatitis and sexually
transmitted diseases. The market size for minor human medical conditions
(pregnancy, diabetes, cholesterol, etc.) is estimated to be in excess of $1
billion world wide. In emerging markets the predominate demand in POC tests is
for those tests concerning the more critical infectious diseases.
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In emerging growth or moderately developed economies, the substantial
majority of the laboratories are small and account for approximately 90% of the
diagnostic product sales, whereas in the United States revenue produced from
sales of diagnostic products is predominately derived from large labs who may
account for approximately 5% of all U.S. laboratories, yet in sales orders
account for the overwhelming majority of total sales. On the other hand, outside
the United States there are very few large laboratories, the substantial
majority of labs are small, which accounts for the extreme fragmentation of the
market. These smaller accounts are less desirable to large corporate entities,
whose systems are typically geared to larger scale usage and are capital
intensive. WDI believes that these types of accounts are too expensive to be
managed or sold to directly by large corporations. The resultant market
situation is that the vast majority of these accounts currently buy from local
distributors.
WDI's experience is that distributors rarely stock a significant number of
items and often are weak in providing service and technical support. Due to the
fragmented market and large number of distributors in each country, individual
labs, clinics and hospitals have limited access to diagnostic products which
utilize advanced technology. Accordingly, small labs are highly receptive to
companies providing advanced technology, service, and technical support and to
opportunities to consolidate their purchases. WDI believes that by delivering
more products at affordable prices from a single consolidated source, and by
affording ease of access to products, through a network of regional distributors
and through its web site, which are supported by technical information and
direct help line, it will eventually build a substantial and valuable customer
base, and achieve brand name recognition for its products on an international
basis.
The Company's mission for fiscal year ending March 31, 2000 ("Fiscal Year
2000") is to continue to build its leadership as a single source provider of
diagnostic test kits to international markets. The Company will focus during
Fiscal Year 2000 on several priorities: 1) enlarging the Company's customer base
through continued international distributor growth and regional joint ventures;
2) expanding its business-to-business e-Commerce capabilities of its web site
and on-line technical support for customers; 3) continuing to build brand name
recognition and product registration in those regions which offer the greatest
opportunity for revenue growth; 4) improve efficiency of product delivery and
the management of its supplier network; and 5) bolster the Company's financial
resources.
B. TECHNOLOGY
WDI employs technologies which utilize some of the most modern "formats"
available in the laboratory diagnostics industry. The word format refers to the
platform under which animal and human proteins are utilized in order to
determine quantitative or qualitative test results. WDI
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markets diagnostic quantitative and qualitative test kits covering the following
areas: clinical chemistry, immunoassays and rapid diagnostic (POC) tests. The
technology format primarily utilized by the WDI products embodies color
development for a determination of results. The primary reason for utilizing
color development as the active determinant of measurement is that most
laboratories have instrumentation that can obtain results through optical
density readings. This platform ensures that WDI products can readily integrate
into most laboratories in its target markets.
Immunoassays utilize commercially produced protein molecules called
antibodies, which react with or bind to, specific antigens, such as other
antibodies, viruses, bacteria, hormones and drugs. The antibodies produced in
response to a particular antigen bind specifically to that antigen. This
characteristic allows for identification of antibodies to be used in a wide
range of diagnostic applications. The ability to detect the binding of
antibodies to target antigens forms the basis for immunoassay testing. In
immunoassays, antibodies are typically deposited onto a solid substrate. A
chemical label is then either incorporated onto the solid substrate or added
separately once the solid substrate has been exposed to the test sample. If the
target antigen is present in the test sample, the chemical label produces a
visually identifiable color change in response to the resulting antibody
reaction with the antigen. This provides a clear color endpoint for easy visual
verification of the test results. Using this platform, whether as a qualitative
or quantitative test, allows measurement of disorders covering product areas
such as infectious diseases, cancer markers, hormones, immune disorders,
fertility, therapeutic and drugs of abuse, serology, virology, microbiology and
other less significant areas.
WDI's antibody and antigen tests are designed and engineered to use
sophisticated molecular biology and DNA based genetic engineering techniques to
produce proprietary and specific antigens to manufacture sensitive and specific
kits for diagnosis. Natural immune systems of the human body produce antibodies
to defend against abnormalities such as bacteria, viruses and cancer. Antibodies
are produced in specific shapes and composition to attack and immobilize these
abnormalities. Genetically engineered antibodies are more highly specific to
increase detection of such abnormalities earlier than naturally formed
antibodies. WDI offers four primary delivery system formats using the
genetically engineered antigens: dipsticks, flow-through cassettes, microwell
tests and a one-step lateral flow delivery system. While most diagnostic test
formats utilize a basic antibody-antigen concept, the four formats developed by
WDI provide advanced proprietary technology and differ in terms of speed,
ease-of-use, sensitivity, and specificity to address the particular needs of
different tests.
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C. PRODUCTS
WDI believes that it's catalog of products offers the most comprehensive
commonly used range of laboratory diagnostic test kits to be found at a single
source. WDI's emphasis on rapid tests include cardiac markers such as Tropinin I
for instant POC myocardial infarction, cancer markers such as Prostate Specific
Antigen tests to screen for prostate cancer, sexually transmitted disease tests
for HIV, Gonorrhea, Chlamydia, Syphilis and infectious disease tests for
Cholera, Tuberculosis, Dengue Fever, Rotovirus, Rubella and HCV.
WDI's products are categorized into four primary product groups.
QUALITATIVE RAPID (POC) DIAGNOSTIC TESTS are marketed under the brand name
of Smart-Check such as Smart-Check HIV, Smart-Check Syphilis, Smart-Check
Ovulation, Smart-Check Pregnancy, Smart-Check Drugs of Abuse, and others tests
used in the identification and measurement of other infectious as well as
circulating immune complexes. These products accounted for approximately 15% of
WDI's revenues for Fiscal Year 1999. These products account for approximately
34% of WDI revenue for the three months period ended June 30, 1999, and may
increase as a percentage of revenues during the remainder of Fiscal Year 2000,
subject to the risk factors set forth in Section M herein.
QUANTITATIVE LABORATORY TESTS are marketed under the WDI brand label under
the specific company brand name. Quantitative tests include test kits for blood
banking, hormones, cancer markers, infectious diseases, allergy, fertility,
gastrointestinal, immune disorders and other less significant disorders. These
products accounted for approximately 43% of WDI's revenues for Fiscal Year 1999.
These products account for approximately 36% of WDI's revenue for the three
months period ended June 30, 1999.
ROUTINE URINE AND LATEX AGGLUTINATION TESTS are significantly demanded
formats in various emerging growth nations. These products offer lower
sensitivity due to the age of the technology; however, they are available at the
lowest cost and are preferred by some governments because they are inexpensive.
These products accounted for approximately 30% of WDI's revenues for Fiscal Year
1999. These products account for approximately 23% of WDI revenue for the three
months period ended June 30, 1999.
CLINICAL CHEMISTRY REAGENTS are another product group that is fundamental
to all laboratory operations. This product line, while the oldest and most
mature, continues to be a widespread mode of clinical testing. These products
accounted for approximately 12% of WDI's revenues for Fiscal Year 1999. These
products account for approximately 7% of WDI revenue for the three months period
ended June 30, 1999.
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D. PRODUCT LIFE CYCLES
In the developing and emerging international markets it is difficult to
estimate product life cycles. In the United States market product life cycles
are traditionally 18 to 36 months, primarily because of the health care
reimbursement systems, which create rising revenues upon product introductions
until price erosion occurs and new technologies are introduced. In the
developing and emerging international markets product life cycles are extended
for longer periods. In some instances, such as latex agglutination test formats,
which were introduced in western markets more than 25 years ago, product demand
continues. As a consequence, WDI's modern technology products, (easy to use,
non-equipment based flexible systems), are arriving before some of the larger
U.S. based corporations even begin to export their older advanced technology.
WDI believes that by offering modern technologies to developing and emerging
international markets, it will continue to gain market share over the next
several years.
E. VARIABILITY IN DEMAND
Sales levels for several of the Company's products are occasionally
affected by seasonal demand trends for certain sub tropical epidemic outbreaks
such as Dengue Fever, Malaria and other mosquito born diseases. In other parts
of the world, influenza and strep or other viral outbreaks would not have any
significant impact on sales. Sales for these products are not expected to exceed
more than 5% to 7% of annual revenues.
F. RESEARCH AND DEVELOPMENT
The Company will focus its scientific development efforts in two areas: 1)
the creation of new and improved diagnostic formats for its existing products;
and 2) new infectious disease products with increased sensitivity resulting from
DNA viral load detection, utilizing non-invasive specimens such as urine instead
of blood or serum. WDI believes it has obtained significant footholds in using
oligonucleotides for direct detection of a virus rather than the detection of
antibodies, and that this type of format will lead to faster detection of
disorders and provide more rapid treatment. Such a "test and treat" approach can
lower costs and reduce inappropriate therapy, while increasing the efficiency of
therapy among those patients most in need.
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WDI is currently focusing its research and development primarily in the
area of developing a one step whole blood rapid HIV test, which received
certification of test efficacy from the WHO in June 1998. During Fiscal Year
1999 and 1998 and the three months ended June 30, 1999, the Company has spent
minimal amounts on research and development projects. The Company will enter
into agreements with research and development firms to continue further
development of the rapid urine HIV test utilizing concepts developed by WDI. The
Company is awaiting the establishment of two evaluation sites for prospective
studies by the World Health Organization's Program for Sexually Transmitted
Diseases. One site will be a low prevalence site with less than a 1% incidence
of infected persons and the second site will be a high prevalence site with
greater than a 10% incidence of patients coming into the clinics. These sites
must be approved and confirmed by the Trinidad government before the WHO can
begin the study. It is expected that it will take about one year from the
commencement of the study to completion for the WHO evaluation. Due to the delay
in obtaining WHO approval of the sites, WDI does not expect to spend significant
funds on this project during Fiscal Year 2000.
On April 1, 1999, the Company hired a genetic immunologist. He is the Vice
President of Technical Affairs for the Company and he oversees the Company's
quality control lab in Miami Lakes, Florida, and conducts audits of its
suppliers and contract manufacturers to determine that WDI's specifications are
met. As a virtual manufacturer, it is the Company's responsibility to conduct
thorough investigation at its quality control lab that each of the components
that are purchased from various suppliers, and incorporated into the final WDI
product, are in conformity with FDA specifications.
G. MARKETING AND DISTRIBUTION
The Company contracts with approximately 60 distributors that sell its
products to end-users in about 60 countries outside the U.S. During Fiscal Year
1999, the WDI distributor customer base grew by approximately 50% from about 40
to the present amount. It's non-distributor customer base grew approximately
800%, from 5 to 40 non-distributor, direct end-user customers. It is estimated
that, since the establishment of the Company's website, WDI has generated
approximately 600 new customer leads, of which the majority are non-distributor
direct end-user customer prospects. Historically, the largest non-distributor,
direct end-user customer of the Company is located in Jamaica and is owned by
one of the members of the Company's Board of Directors. Sales to this company in
Fiscal Year 1999 accounted for approximately 21% of the Company's revenues and
sales to this company were approximately 11% of the WDI revenue for period ended
June 30, 1999.
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The Company sells its products to approximately 60 distributors, each of
whom, pursuant to a letter agreement have typically purchased an average of
$2,000 to $4,000 of WDI products on a monthly basis. These distributors are
located in approximately 60 countries, and each services end-user customers
located within the country in which the distributor is based. The substantial
majority of WDI sales are derived from WDI's distributor base. The Company has
its highest concentration of distributors in the Carribean, Latin and South
America. These regions accounted for approximately 85% of the Company's revenues
for Fiscal Year 1999. For the three month period ended June 30, 1999, revenues
attributable to this region were reduced to approximately 70% due to growth in
revenues from Eastern and Central Europe, South Africa, the Middle East and
Asia. WDI plans to attract additional distributors who have the capability to
distribute WDI products to developing and emerging markets, promote WDI's brand
names, accomplish the product registration requirements in these countries and
service the end-user customer.
As a further sales and marketing strategy, WDI offers various incentives to
distributors and end-users that include: discounts for payment before delivery
of goods and for payment within a specific number of days of delivery; incentive
coupons and cumulative value points to preferred customers; i.e. those who have
an established record of purchasing minimum volume, and paying for products
within specific time periods; plus other discounts relating to promotions.
As a part of its marketing initiative, WDI has created a multilingual,
graphically enhanced, web site, www.labtestkits.com. The web site has been
operational since September 1998 and transactional since June 1999. WDI expects
that its e-Commerce business-to-business end-user customer base will increase
through more wide spread use of the Internet.
Recently, the widespread adoption of intranets and the acceptance on the
Internet as a business communications platform has created a foundation for
business-to-business e-commerce that offers the potential to lower costs and
improve productivity. Business-to-business e-commerce is particularly well
suited for the medical laboratory and diagnostic test products market because of
its high degree of fragmentation and because of the inefficiencies inherent in
its traditional purchasing process.
WDI's strategic objective is to expand its position as an e-commerce
solution for the medical diagnostics products market. In order to implement this
objective, WDI intends to capitalize on its existing distributor network in
order to market and build recognition of the Company identity and brand name. To
accomplish this, we have entered into strategic relationships with various
distributors.
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H. MANUFACTURING
The Company operates as a virtual manufacturer through various contract
supplier arrangements of in-vitro diagnostic products. Such products come in
many forms, such as enzymatic clinical chemistry products, quantitative
immunodiagnostic assays and rapid immunodiagnostic products for POC and
detection of human medical conditions and illnesses. In most instances, the
Company either designs and develops the basic genetic formatting specifications,
or collaborates with its suppliers, to enable the suppliers to fulfill the
Company's design and manufacturing requirements. This allows the Company to
effectively control its own product development and product manufacturing needs
through a network of numerous manufacturing and packaging suppliers.
WDI maintains an FDA Good Manufacturing Practices packaging, quality
control and research and development laboratory facilities of approximately
1,000 square feet. Suppliers generally consist of various laboratories devoted
to antigen production, tissue culture, immunochemistry, and production areas,
dedicated to solid phase coating processes and filling. The Company uses
biological, chemical and packaging supplies and equipment, which are generally
available from multiple competing suppliers. The Company requires all of its
suppliers to manufacture WDI products in compliance with the GMP regulations of
the FDA governing the manufacture of medical devices. The manufacture of medical
diagnostic products is difficult, particularly with respect to the stability and
consistency of complex biological components. Because of these complexities,
manufacturing difficulties occasionally occur that delay the introduction of
products, result in excess manufacturing costs or require the replacement of
products already introduced into the distribution channel. Accordingly, WDI is
required to comply and complies with the process of a registered FDA facility
with the Federal Department of Health and Human Services and of the State of
Florida, and is prepared for routine federal and state inspections to confirm
the Company's compliance with the GMP regulatory requirements for in-vitro
diagnostic products.
I. GOVERNMENT REGULATION
The Company maintains an FDA certified good manufacturing practices
facility. The vast majority of the Company's sales occur outside the United
States. The Company has FDA approval for 70 of the approximately 100 products it
offers for sale. The Company believes that the export of these products is in
compliance with applicable foreign law. The Company has an FDA Registration
Certificate of Foreign Commerce for its FDA approved products. The Company also
has Certificates of Exportability 801(e) for all non-FDA approved products which
are provided by WDI to distributors who have represented to the Company that
such Certificates of Exportability permit the sale of the WDI products in the
respective countries. An insignificant amount of the Company's products are sold
within the USA which are subject to the 1976 Medical Device Amendments to the
Federal Food, Drug and Cosmetic Act as amended and/or provisions under the Safe
Medical Act
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of 1990, which governs the manufacture and marketing of medical devices,
including in vitro diagnostic test kits. In addition to the foregoing, the
Company's present and future operations or products may be subject to regulation
under the Occupational Safety and Health Act, Environmental Protection Act,
Resource Conversion and Recovery Act, Toxic Substances Control Act, Clinical
Laboratory Improvement Act and other present or possible future legislation and
regulations, as well as by governmental agencies with regulatory authority
relating to the Company's business.
J. PATENTS AND TRADE SECRETS
WDI has not applied for patent protection with respect to any of its
products. The Company protects its trade secrets through confidentiality and
non-competition agreements executed by its employees. The Company may file for
patent protection within the United States or other countries with respect to a
patent where economic protection for the product is needed and such patent can
be obtained. No assurance can be given that patents will be issued to WDI
pursuant to any future patent applications in the United States or abroad or
that WDI's patent portfolio will provide the Company with a meaningful level of
commercial protection. A large number of individuals and commercial enterprises
seek patent protection for technologies, products and processes in fields
related to WDI's areas of product development. To the extent such efforts are
successful, the Company may be required to obtain licenses in order to exploit
certain of its product strategies. There can be no assurance that such licenses
will be available to WDI at all or if so, on acceptable terms.
K. HUMAN RESOURCES
As of August 31, 1999, the Company had 12 full-time and two part-time
employees, none of whom are represented by a labor union. The Company has
experienced no work stoppages and believes that its employee relations are good.
L. YEAR 2000 COMPLIANCE
WDI believes that its internal systems are year 2000 compliant or will be
upgraded in connection with changes to information systems prior to the year
2000 without material cost or expense. Some computer systems and software
products are coded to accept only two digit entries to represent years. For
example, the year "1999" would be represented by "99." These computer systems
and products will need the ability to accept four digit entries to distinguish
years beginning with 2000 from prior years. Computer systems and products that
do not accept four digit year entries will need to be upgraded or replaced to
comply with such "Year 2000" requirements. The anticipated costs of any Year
2000 modifications are based on management's best estimates including the
continued availability of certain resources and other factors. There can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated.
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Specific factors that might cause such material differences include, but are not
limited to the availability or cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes and similar
uncertainties. In addition, there can be no assurance that Year 2000 compliance
problems will not be revealed in the future which could have a material adverse
affect on the Company's business, financial condition and results of operations.
Many of the Company's customers and suppliers may be affected by year 2000
issues that may require them to expend significant resources to modify or
replace their existing systems. This may result in those customers having
reduced funds to purchase the Company's products or in those suppliers
experiencing difficulties in producing or shipping products to the Company on a
timely basis or at all.
M. RISK FACTORS RELATING TO THE BUSINESS
The following factors, in addition to the other information discussed
elsewhere in this Registration, should be considered with respect to any
evaluation of the Company.
1. LIMITED OPERATING HISTORY; GOING CONCERN AUDITOR'S REPORT. The Company
was originally organized in February 1997 and has a limited operating history.
The Company is a relatively new business and no assurance can be given that the
Company will be successful. Accordingly, the Company's limited operating history
prohibits an effective evaluation of the potential success of the Company. The
Company's viability and continued operations are dependent upon future
profitability, its ability to generate cash flow from uncertainties related to
the diagnostics industry, and other business opportunities. The Company's
operations are subject to all the risks inherent in the establishment of a young
business enterprise. The likelihood of success for the Company must be
considered in light of the problems, expenses, complications, and delays
frequently encountered in connection with the development of a new business and
the competitive environment in which the Company operates. There can be no
assurance that the Company will be able to operate profitably in the future. Its
financial objectives must therefore be considered highly speculative. The WDI
financial statements for year ended March 31, 1999 were issued pursuant to a
going concern report by the WDI auditors. This report states that the
continuation of operations is dependent upon WDI's ability to obtain adequate
financial resources.
2. OPERATING LOSSES. WDI incurred a net loss of $824,478 for Fiscal Year
1999 and reported a loss of approximately $727,493 for the three months ended
June 30, 1999. At June 30, 1999 and March 31, 1999, the Company had an
accumulated deficit of $1,674,013 and $946,520, respectively, and positive
working capital of $91,039 and $135,744, respectively. WDI expects to continue
to incur losses for the foreseeable future. There can be no assurance that WDI
will generate significant revenues or achieve profitability.
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3. NEED FOR ADDITIONAL FINANCING. The Company is expected to require
additional working capital or other funds at a later date for the maintenance
and expansion of its operations. See Management Discussion and Analysis. There
is no assurance that WDI will be successful in obtaining additional financing or
that such financing will be available, nor if such financing becomes available
that it would be upon acceptable terms to WDI.
4. CONFLICTS OF INTEREST. The Company's Directors and Officers are, or may
become, in their individual capacities, officers, directors, controlling
shareholders and/or partners or other entities engaged in a variety of
businesses. Thus, there exists potential conflicts of interest including, among
other things, time, effort, and corporate opportunity, involved in participation
with other business entities. See "Certain Relationships and Related
Transactions."
5. SUBSTANTIAL COMPETITION AND TECHNOLOGICAL CHANGE. The markets in which
the Company operates are highly competitive and subject to rapid technological
change. A large number of companies are involved or are becoming involved in the
development and commercialization of diagnostic tests. Competitors include major
pharmaceutical and medical diagnostic companies, many of which have considerably
greater financial, technical, clinical and marketing than WDI. Such companies
may improve existing products more efficiently than WDI or may design and
develop new diagnostic products which are more accepted in the marketplace than
the Company's products. Further, the markets in which WDI competes and intends
to compete are undergoing, and are expected to continue to undergo, rapid and
significant technological change, and WDI expects competition to intensify as
technological advances in such fields are made.
Several of WDI's competitors have developed or may develop products that
are similar in design and capability to WDI's existing products or products
under development. WDI further anticipates that additional products for similar
applications will be developed and marketed by WDI's competitors. There can be
no assurance that WDI will have the resources, technical expertise or marketing,
distribution or support capabilities to compete successfully in the future or
that it will successfully develop technologies and products that are more
effective or affordable than those being developed by its competitors or that
developments by its competitors will not render WDI's products or
technologies obsolete or noncompetitive. In addition, WDI's competitors may
achieve patent protection, regulatory approval or commercialization earlier than
WDI and gain competitive advantages relative to WDI.
6. GROWTH AND EXPANSION RISKS. The ability of the Company to operate
successfully depends to a substantial degree upon its management and
consultants. The assembly of a strong management team is critical to the success
of the business.
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7. KEYMAN INSURANCE. While the Company has obtained keyman insurance on
its Chief Executive Officer in the sum of $500,000, the insurance may not be
enough to secure a replacement in the event of the loss of such officer.
8. CONTROL BY THE MANAGEMENT. The officers and directors of the Company
currently own approximately 48% of the outstanding common stock of the Company.
Accordingly, the Board of Directors and the officers of the Company will
exercise control over the Company, including control over the election of
directors and the appointment of officers of the Company.
9. POSSIBLE VOLATILITY OF SECURITIES PRICES. Prior to this Registration,
WDI's common stock has been quoted under symbol "WDGI" on the OTC Bulletin
Board. There can be no assurance that the Company will be able to maintain such
designation or that an active trading market can be developed and sustained.
Recent history relating to the market prices of newly public companies indicates
that there may be significant volatility in the market for such securities
because of the factors unrelated, as well as related, to such company's
operating performance. See Part II-Item 1, "Market Price of the Registrant's
Common Equity and Other Shareholder Matters".
10. LIMITED PRODUCT LIABILITY INSURANCE. WDI's business exposes it to
product liability risks relating to the manufacturing, marketing and sale of
diagnostic products. To date, WDI has not experienced any material product
liability claims, but any such claim arising in the future could have a material
adverse effect on WDI's business, financial condition and results of operations.
WDI has limited product liability insurance in effect which, in the event of any
legal action by third parties, could result in significant legal defense fees as
well as damages for liability. While WDI may seek to obtain additional insurance
in the future, the cost may be prohibitive. Therefore, WDI may have to rely on
unrelated companies from whom it purchases WDI product components to provide
such liability insurance. There can be no assurances that WDI will be able to
obtain product liability insurance or that companies from whom WDI product
components are purchased will be able to obtain product liability insurance. In
the event that WDI is held liable for a claim against which it is not
indemnified, or for damages exceeding the limits of its insurance coverage, or
if any claim or product recall results in significant adverse publicity against
WDI such claim or publicity could have a material adverse effect on WDI's
business, financial condition and results of operations.
11. DEPENDENCE ON SUPPLIERS. WDI contracts with approximately 25 suppliers
to manufacture and produce various components of WDI products. While there is an
agreement with each supplier, there can be no assurances that such contracts
will be fulfilled or that internal problems within these third parties will not
affect production or productivity in the future. While WDI believes that the
suppliers have the ability to meet production requirements, or be replaced,
there can be no assurances that the suppliers will meet all their contractual
obligations or that the company will not be affected upon event of a breach of
contract. WDI believes it can obtain suitable
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replacement products from other suppliers, however, the loss of a supplier may
still have some negative impact on operations.
12. NO DIVIDENDS ANTICIPATED TO BE PAID. WDI has never paid any dividends
and WDI does not anticipate paying dividends in the foreseeable future. The
future payment of dividends is directly dependent upon our future earnings, our
financial requirements and other factors to be determined by the Board of
Directors.
13. GOVERNMENT APPROVALS. WDI must obtain product and or company
registration in each country in which WDI products are sold. Government unrest,
politics, or other unforeseeable complications may prevent the further sale of
WDI products in a given country. Moreover, WDI has some contracts through
government entities the loss of which could have a material affect on the
business of the Company.
14. INTERNET SOLUTIONS UNCERTAINTY. Our business will suffer if the global
marketplace for WDI's products and services does not accept Internet solutions.
Business-to-business e-commerce is a new and emerging business practice that
remains largely untested in the marketplace. Growth in the demand for our
Internet-based purchasing solution for WDI's products and services depends on
the adoption of e-commerce and Internet solutions by worldwide industry
participants, which requires the acceptance of a new way of conducting business
and purchasing diagnostic test and laboratory products. WDI business could
suffer dramatically if e-commerce and Internet solutions are not accepted or not
perceived to be effective.
15. INTERNET TRAFFIC PERFORMANCE. The growth and increasing volume of
Internet traffic may cause performance problems which may adversely affect the
development of our Internet-based business. The growth of Internet traffic to
high volumes of use over a relatively short period of time has caused frequent
periods of decreased Internet performance, delays and, in some cases, system
outages. This decreased performance is caused by limitations inherent in the
technology infrastructure supporting the Internet and the internal networks of
Internet users. The international marketplace is less developed in its Internet
infrastructure, which may pose problems in the form of delays, interruptions and
communication failures. If Internet usage continues to grow rapidly, the
infrastructure of the Internet and its users may be unable to support the
demands of growing e- commerce usage, and the Internet's performance and
reliability may decline. If our existing or potential customers experience
frequent outages or delays on the Internet, the adoption or use of our
Internet-based, e-commerce purchasing solution may grow more slowly than we
expect or even decline. Consequently, the Company may have difficulty obtaining
new customers, or maintaining our existing customers, either of which could
reduce our potential revenues and have a negative impact on our business,
results of operations and financial condition.
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16. INTERNET SECURITY. Security and disruption problems with the Internet
or transacting business over the Internet may inhibit the growth of our
Internet-based business. The secure transmission of confidential information
over the Internet is essential to maintaining customer and supplier confidence.
Customers generally are concerned with security and privacy on the Internet and
any publicized security problems could inhibit the growth of the conducting
transactions. WDI may incur substantial expense to protect against and remedy
security breaches and their consequences, which include computer viruses and
other disruptive problems.
N. REPORTS TO SECURITY HOLDERS
The Company is not currently subject to the reporting requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. Upon
effectiveness of this Form 10-SB and in accordance with Nasdaq Rule 6530 the
Company intends hereafter to file annual and quarterly reports with the
Securities and Exchange Commission ("SEC"). The public may read and copy any
materials filed by the Company with the SEC at the SEC's Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the SEC's Public Reference Room by calling the
SEC at 1-800-SEC-0330. The Company is an electronic filer and the SEC maintains
an Internet site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC which
may be viewed at HTTP://WWW.SEC.GOV/. The Company maintains an Internet site at
http://www.labtestkits.com.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OPERATIONS
Except for the historical information contained herein, the matters
discussed in this report are by their nature forward-looking. For the reasons
stated in this report or in WDI's Securities and Exchange Commission filings, or
for various unanticipated reasons, actual results may differ materially. WDI's
operating results may fluctuate on a quarter-to-quarter basis as a result of a
number of factors, including the competitive and economic factors affecting
WDI's international markets, actions of distributors, manufacturing and
production delays or difficulties, adverse actions or delays in product reviews,
and the degree of acceptance that our new products achieve during the year.
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FORWARD LOOKING STATEMENTS
This Management's Discussion and Analysis of Results of Operations and
Financial Condition contain forward-looking statements that are based on current
expectations, estimates, forecasts and projections based on management's
beliefs. These statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions which are difficult to predict.
Therefore, actual outcomes and results may differ materially from what is
expressed or forecasted in forward-looking statements, whether as a result of
new information, future events or other.
REVENUES
For the first quarter of 1999 (period ending June 30, 1999), revenue
increased by 58% over the first quarter of 1998. For Fiscal Year 1999, revenues
increased by 46% to $576,250 for the year ended March 31, 1999 as compared to
$393,801 for the year ended March 31, 1998. The increase is primarily due to
larger sales volume, higher prices to new customers in emerging markets and
increased direct sales to end users such as physicians offices, hospitals,
private laboratories, clinics and government agencies. Due to the growth of the
business, during Fiscal 1999, the customer/distributor base grew from 45 at
March 31, 1998 to 108 at March 31, 1999.
Below is a breakdown of sales by region.
<TABLE>
<CAPTION>
Quarter Quarter Year Year
PERIOD ENDED, (IN THOUSANDS 000) 6/30/99 6/30/98 3/31/99 3/31/98
-------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
BREAKDOWN OF REVENUES:
- -------------------------------------------------------------------------------------------------------------------------
Domestic Sales 8 9 29 0
- -------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL REVENUES:
- -------------------------------------------------------------------------------------------------------------------------
Caribbean 96 92 341 256
- -------------------------------------------------------------------------------------------------------------------------
South America 87 46 129 120
- -------------------------------------------------------------------------------------------------------------------------
Eastern Europe 13 0 34 0
- -------------------------------------------------------------------------------------------------------------------------
Central America 6 1 15 12
- -------------------------------------------------------------------------------------------------------------------------
Pacific Rim 8 0 10 0
- -------------------------------------------------------------------------------------------------------------------------
Western Europe 22 0 2 0
- -------------------------------------------------------------------------------------------------------------------------
Other 0 4 16 6
---------- ----------- ---------- -----------
- -------------------------------------------------------------------------------------------------------------------------
Total Revenue 240 152 576 394
- ------------------------------------------ ------------------ ------------------- ------------------ ------------------
</TABLE>
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TWELVE MONTHS ENDED MARCH 31, 1999 VERSUS 12 MONTHS ENDED MARCH 31, 1998.
COST OF SALES AND GROSS PROFIT
The Company's gross profit on product sales increased to $118,897 in
Fiscal Year 1999 from $67,155 in Fiscal Year 1998. Gross profit increased as a
percentage of sales to 21% in Fiscal Year 1999 from 17% in Fiscal Year 1998.
Gross profit increased due to larger volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 182% from
$175,965 in Fiscal Year 1998 to $496,972 in Fiscal Year 1999. The increase in
selling, general and administrative expenses is primarily due to the overall
growth experienced by WDI. Payroll and related tax expenses increased by
$120,000 due to additional personnel hired for Technical Support, Sales and
Marketing. Professional fees increased by approximately $70,000 due to the
professional fees associated with the equity private placement and contemplated
offering. Rent expense increased by approximately $21,000 due to the addition of
additional office expense which includes a prefabricated cold room inventory
storage facility. Telephone expenses increased by approximately $26,000 due to
increased phone calls to international customers. Travel and entertainment
increased by approximately $23,000 due to increased international travel as the
president made visits to larger international customers. Bad debt expense
increased by $17,000 as the Company wrote off all old outstanding balances as of
March 31, 1999.
LOSS ON WARRANT INDUCEMENT
In June 1998, WDI completed the issuance of units in which it issued
400,000 shares of its common stock at $0.125 per share and issued 950,000 common
stock purchase warrants. Each warrant was exercisable into one share of common
stock at $1.00 per share and was to expire on March 15, 1999. During 1999,
201,500 warrants were exercised at $1.00. In March 1999, the Company extended
the warrant expiration date to June 30, 1999 and reduced the exercise price to
$0.50 per share. Due to the inducements, the remaining 748,500 warrants were
exercised in March 1999 at $0.50 per share. Due to the change in the warrant
terms, the Company recorded a non-cash loss of $374,250 in 1999.
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INTEREST EXPENSE
Interest expense was incurred primarily on borrowings in Fiscal Year
1999 from MediaVest, Inc., a company controlled by a shareholder and the
Chairman of the Board of the Company. On May 26, 1998, the Company entered into
a $150,000 promissory note with MediaVest. Inc. and note participants. The note
matured on August 24, 1998 and bore 10% interest. On August 24, 1998, MediaVest,
Inc. and WDI entered into a forbearance agreement which extended the maturity
date to February 24, 1999 and forgave all interest through such period. The
Board of Directors issued 200,000 shares of common stock to MediaVest, Inc. and
the note participants in consideration of the forbearance agreement. The fair
value was determined to be $0.125 per share. As a result, a non-cash loss of
$15,958 was recorded as interest expense in Fiscal Year 1999, which is the
difference between the total fair value of the common stock issued and the
amount of forgiven interest. The remaining $10,000 in interest expense
represents interest on the MediaVest, Inc. debt and other various notes payable.
EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT
On December 22, 1998, the Company's Board of Directors authorized the
issuance of 29,237 restricted shares of its common stock to extinguish
$17,500 of the Note. The fair market value of the common stock was $2.88 at the
date of extinguishment. The restricted common stock cannot be sold for an 18
month period and after that can only be sold in accordance with Rule 144. Due to
these restrictions, the Company discounted the fair value of the common stock by
25%. An extraordinary loss of $45,542 was recorded in the 1999 statement of
operations representing the discounted fair market value of the common stock
issued and the carrying amount of the Note extinguished.
NET LOSS
The net loss for Fiscal Year 1999 increased to $824,478 or $(.27) per
share from $108,210 or $(.42) per share compared to Fiscal Year 1998 of which
$446,403 was attributed to non-cash charges associated with equity transactions.
The loss from operations for Fiscal Year 1999 was $378,075 or ($0.25) per share
an increase of $269,865 over Fiscal Year 1998.
THREE MONTHS ENDED JUNE 30, 1999 VERSUS THREE MONTHS ENDED JUNE 30, 1998.
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COST OF SALES AND GROSS PROFIT
The Company's gross profit on product sales decreased to $42,069 in the
three months ended June 30, 1999 from $42,654 for the three months ended June
30, 1998. Gross profit decreased as a percentage of sales to 18% in 1999 from
28% in 1998. Gross profit decreased due to the accelerated expansion of the
Company in the first quarter of 1999. The Company's revenues increased rapidly
in the first quarter of 1999 which caused the Company to seek new suppliers and
manufacturers (some internationally). There were delivery delays which caused
more frequent ordering, increasing the freight costs of the products. These
delivery problems have been addressed and corrected in the second quarter of
1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 212% from
$91,144 in 1998 to $284,115 in 1999. The increase is a result of the overall
growth experienced by WDI, including additional personnel hired for Technical
Support, Sales and Marketing. Improvements were made to the Company's computer
systems to fully network the Company. The web site was redesigned to enhance
accessability to emerging countries without fiber optic phone systems on a
worldwide basis. Accounting costs related to the year-end audit increased by
$22,163.
During the three months ended June 30, 1999, the Company issued 15,500
shares of its common stock to various non-employee consultants for past services
rendered. The restricted shares cannot be sold for an eighteen month period and
after that can only be sold in accordance with Rule 144. Due to these
restrictions, the Company discounted the fair value of the Company's common
stock on the date of issuance by 25%. Due to the issuance of these shares, the
Company recorded $92,046 of compensation expense.
OTHER INCOME
Other income increased by $8,491 in the three months ended June 30,
1999 compared to the three months ended June 30, 1998 due to miscellaneous cash
receipts dealing with non-operating activities.
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EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT
In April 1999, the Company's Board of Directors issued 101, 090
restricted common shares and $45,000 in cash to extinguish the $107,500 note due
to MediaVest, Inc. The fair market value of the common stock on that date was
$7.00 per share. The restricted common stock cannot be sold for the first
eighteen months and after that may only be sold in accordance with Rule 144. The
Company discounted the fair value of the common stock by 25% on the date of the
extinguishment. The extraordinary non-cash loss on the extinguishment of debt is
$468,223 which is the difference between the fair market value of the stock and
the carrying amount of the note extinguished. In May 1999, the Company paid the
outstanding balance due to various vendors through the issuance of 6,000 shares
of common stock. The fair market value of the common stock on the date of
extinguishment was $7.50 per share. The restricted common stock cannot be sold
for the first eighteen months and after that may only be sold in accordance with
Rule 144. The Company discounted the fair value of the common stock by 25% on
the date of the extinguishment. The extraordinary non-cash loss on the
extinguishment of debt is $25,715 which is the difference between the fair
market value of the stock and the carrying amount of the note extinguished.
NET LOSS
The net loss for the three months ended June 30, 1999 increased to
$727,493 or $(.18) per share from $48,490 or $(.02) per share compared to the
three months ended June 30, 1998 of which $585,984 of the June 1999 loss was
attributed to non-cash charges associated with equity transactions. The loss
from operations for the June 1999 quarter was $242,046 or $(0.06) per share, an
increase of $193,556 over the June 1998 quarter. The loss increased primarily
due to higher operating expenses related to staff increases to support the
overall growth of the Company, technical training and expenses relating to
qualifying for the FDA Good Manufacturing Practices License website design
costs, computer network, and the new inventory storage facility.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, WDI had cash and cash equivalents of $99,275 compared
to $358,595 at March 31, 1999. Working capital, defined as current assets less
current liabilities, was $91,039 at June 30, 1999 as compared to $135,744 at
March 31, 1999. The Company had current assets of $291,843 and stockholders'
equity of $119,820 at June 30, 1999. This compares to current assets of $489,190
and stockholders' equity of $150,022 at March 31, 1999. These decreases are due
primarily to the growth of the Company. During the three months ended June 30,
1999, the Company used $203,495 in operating activities, compared to $75,390
during the three months ended June 30, 1998. During Fiscal Year 1999, the
Company used $347,991 in operating activities, compared to $56,710 used in
Fiscal Year 1998. The increase in cash used in operations was due to larger
inventory levels, larger accounts payable and larger accounts receivable
balances.
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Cash used in investing activities in the quarter ended June 30, 1999
and Fiscal Year 1999 consisted of fixed asset purchases such as a new computer
network, a cold room, website infrastructure, and other equipment and furniture.
There were no capital expenditures in fiscal year 1997.
Net cash flows provided by (used by) financing activities decreased
from $77,890 in the quarter ended June 30, 1998 to $(46,981) in the quarter
ended June 30, 1999. Cash flows provided by financing activities increased from
$56,155 in Fiscal Year 1998 to $716,577 in Fiscal Year 1999. The increase is
principally due to the proceeds received from the exercise of stock warrants,
and additional borrowings from MediaVest, Inc.
On May 26, 1998, the Company entered into a $150,000 promissory note
with MediaVest, Inc., a company controlled by a shareholder and director of the
WDI. The Note bore interest at 10% and had a maturity date of August 24, 1998.
The Company had an option to extend repayment on the Note for an additional 90
days. The Note was senior to all prior security interests and was collateralized
by all of the Company's assets and guaranteed by a director of the Company. On
August 24, 1998, the Company entered into a forbearance agreement with the
creditor. The forbearance agreement extended the maturity date of the Note to
February 24, 1999, and forgave all interest through February 24, 1999. In
consideration for this forbearance agreement, the Board authorized the issuance
of 200,000 shares of the Company's common stock to the creditor. The Board
determined that the fair value of the common stock was $.125 per share, the
same price recorded in a private placement of the Company's common stock
completed in June 1998. A loss in the amount of $15,958 was recorded in the 1999
statement of operations as interest expense which represented the difference
between the total fair value of the common stock issued and the amount of
interest forgiven.
On December 22, 1998, WDI authorized the issuance of 29,237 restricted
shares of its common stock to extinguish $17,500 of the Note. The fair market
value of the common stock was $2.88 at the date of extinguishment. The
restricted common stock cannot be sold for an 18-month period and after that can
only be sold in accordance with Rule 144. Due to these restrictions, WDI
discounted the fair value of the WDI common stock at the date of extinguishment
by 25%. An extraordinary loss of $45,542 was recorded in the 1999 statement of
operations representing the difference between the discounted fair market value
of the common stock issued and the carrying amount of the Note extinguished.
As of March 31, 1999, WDI did not pay the remaining balance on the
Note. As a result, WDI was in default under the Note agreement. WDI subsequently
obtained a waiver for this default. In April 1999, the Company paid the
outstanding balance due under the Note through the issuance of 101,090 shares of
common stock and $45,000 in cash.
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The report of our independent certified public accounts in connection
with our audited financial statements as of March 31, 1999 and March 31, 1998
and for each of the two years then ended contains an explanatory paragraph
indicating factors which create substantial doubt about WDI's ability to
continue as a going concern. These factors include recurring net losses in
Fiscal Year 1999 and 1998 and uncertainty surrounding future equity financing
through anticipated offerings. WDI's ability to continue as a going concern is
dependent upon obtaining adequate financial resources through a contemplated
securities offering or otherwise. WDI believes that it can obtain equity
financing through an anticipated offering. However, there can be no assurance
that such offering will be successful.
If an equity offering of WDI securities is not successful, the Company
intends to borrow additional funds from MediaVest, Inc. and other shareholders.
Furthermore, the Company has implemented new tighter credit policies for its
customers which has helped cash flow substantially. Also, the Company has been
able to acquire more favorable terms from its suppliers, which has helped manage
and improve the Company's working capital requirements.
In the quarter ended June 30, 1999 as well as Fiscal Years 1998 and
1999, the Company has continued to sustain operating losses which have resulted
in the use of some of its cash reserves. The Company anticipates that it will
continue to incur net losses for the foreseeable future.
YEAR 2000 COMPLIANCE
The Company believes that its internal systems are year 2000 compliant or
will be upgraded or replaced in connection with changes to information systems
prior to the year 2000. It is anticipated that the costs to comply will be
immaterial to the Company. See, "Risk Factors - Year 2000 Compliance."
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130 "Reporting Comprehensive Income" that establishes standards for
reporting and display of an alternative measurement and its components in a full
set of general-purpose financial statements. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. The Company adopted SFAS No. 130
in 1999.
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In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS No. 131"). SFAS No. 131 establishes standards for reporting operating and
geographical segments and the type and level of financial information to be
discussed about those segments. SFAS No. 131 is effective for fiscal years
beginning after December 15, 1997. The Company adopted SFAS No. 131 in the
current year and determined that it has one reportable operating segment.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). Among other provisions, SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
also requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. SFAS No. 133 is effective for financial statements for fiscal
years beginning after June 15, 1999. Management does not believe that this
standard will have a material effect on the financial statements.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's facilities are located in Miami Lakes, Florida. As of
August 31, 1999, the Company occupied approximately 3,500 square feet of office
and general use space. The lease provides for an initial term of 3 years at
$3,400 per month and options to renew, plus the option to occupy additional
space within the complex. WDI believes that its current facilities are adequate
for its present needs.
25
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information relates to those persons who are known to WDI
to be the beneficial owners of five percent or more of WDI's voting common
stock.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
- -----------------------------------------------------------------------------------------------------------------------
TITLE NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNER CLASS
-------- ------------------- ------------------- (4,281,827)
----------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Ken Peters 1,034,900 24.17%
11269 NW 15th Place
Pembroke Pines, FL 33026
- -----------------------------------------------------------------------------------------------------------------------
Common Barry Peters 952,640 (1) 22.24%
680 Harbor Street
Venice, CA 90291
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 249,640 of the shares beneficially owned by Barry Peters are held
by MediaVest, Inc., a Delaware corporation wholly owned by Barry Peters.
26
<PAGE>
The following table has been completed for each of the shares of common
stock beneficially owned by directors, nominees, and executive officers of WDI
and all officers and directors as a group.
<TABLE>
<CAPTION>
(1) (2) (3) (4)
- -----------------------------------------------------------------------------------------------------------------------
TITLE NAME AND ADDRESS AMOUNT AND NATURE
OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNER PERCENT OF CLASS
-------- ------------------- ------------------- ----------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Ken Peters 1,034,900 24.17%
11269 NW 15th Place
Pembroke Pines, FL 33026
- -----------------------------------------------------------------------------------------------------------------------
Common Barry Peters 952,640 22.34%
680 Harbor Street
Venice, CA 90291
- -----------------------------------------------------------------------------------------------------------------------
Common Kenneth Lambley 2,500 .06%
6489 Hunters Green Ct
Indianapolis, IN 46278
- -----------------------------------------------------------------------------------------------------------------------
Common Martin Muy 30,000(1) .70%
7489 Fairway Dr., Apt. #403
Miami Lakes, FL 33014
- -----------------------------------------------------------------------------------------------------------------------
Common Trevor Campbell 15,000 .35%
6163 NW 182nd Terrace
Miami, FL 33015
- -----------------------------------------------------------------------------------------------------------------------
Common Michael Kondracki 10,700 .25%
Deutche Bank Securities
Argentine Pouch - 9th Floor
31 West 52nd Street
New York, NY 10019
- -----------------------------------------------------------------------------------------------------------------------
All Officers and Directors
as a group (6 Persons) 2,045,740 47.87%
----------------------- -----------------------
</TABLE>
- ----------
(1) Includes an option to purchase 25,000 shares at $5.00 per share which may be
exercised on or before April 2002.
During October, 1999, the Board of Directors of the Company expect to
approve an Employee Stock Option Plan (the "Plan") which will authorize
approximately 300,000 shares of common stock to be exercised by participants
under the terms of the Plan.
27
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The names, ages and positions of all executive officers of the Company as
of August 31, 1999 are listed below, followed by a brief account of their
business experience during the past five years. Officers are normally appointed
annually by the Board of Directors at a meeting of the directors immediately
following the Annual Meeting of Stockholders.
The directors, executive officers and key management employees of the Company
are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ken M. Peters 52 President, Chief Executive Officer and Director
- ----------------------------------------------------------------------------------------------------------------------
Barry Peters 58 Chairman, Treasurer and Director
- ----------------------------------------------------------------------------------------------------------------------
Kenneth Lambley 60 Vice President - Sales and Marketing
- ----------------------------------------------------------------------------------------------------------------------
Martin Muy, Ph. D. 40 Vice President - Technical Affairs
- ----------------------------------------------------------------------------------------------------------------------
Maureen Besson 36 Vice President - Operations and Secretary
- ----------------------------------------------------------------------------------------------------------------------
Trevor Campbell, MT, FMT 54 Director
- ----------------------------------------------------------------------------------------------------------------------
Michael Kondracki 39 Director
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
All officers and directors assumed office in February of 1998, except for
Barry Peters who was appointed the Chairman of the Board in October 1998 and
Michael Kondracki, who became a Director in November, 1998.
KEN M. PETERS is President and founder of World Diagnostics, Inc. Mr.
Peters has extensive experience spanning a twenty-five year period in sales and
marketing of diagnostic products, particularly in the international marketplace.
From 1979 to 1982, Mr. Peters was the General Manager of Abbott Diagnostics, a
division of Abbott Laboratories, Inc., for the Caribbean, Central and South
America. From 1984 to 1994 , Mr. Peters held senior international marketing
positions with Pharmacia, AG, American Monitor Corp. and Flow Laboratories, Inc.
In addition, Mr. Peters was instrumental in assisting the launch of several
start-up ventures in the biotech industry, including Genus Diagnostics, Inc. and
BioAssay Systems Corp. Ken Peters has received numerous awards from the
Biomedical Marketing Association, and he has been recognized for outstanding
achievements by Who's Who in American Health Care Marketing. Mr. Peters has
published several articles in national journals concerning technology,
healthcare and marketing, and he has been quoted in national periodicals, such
as the Wall Street Journal, Clinical Chemistry Systems and others. He has spent
numerous years traveling throughout South America & Europe, speaks Spanish
fluently, and is well versed in international distribution. Mr. Peters received
a M.A. in Economics from the University of New Mexico in 1972 and received a
B.A. in Business and Economics from
28
<PAGE>
the City University of New York in 1969. Mr. Ken Peters, President of the
Company and Mr. Barry Peters, Chairman, are brothers.
BARRY PETERS has served as the Chairman of the Board of WDI since October
1998. He has also serves as the Chief Executive Officer of MediaVest, Inc., a
private investment firm, since 1997. Mr. Peters has 26 years experience in
corporate development, management and finance. He is Chairman of Appian
Graphics, Inc., a company specializing in multi-monitor computer displays. He is
the founder and former Chairman and Chief Executive Officer of All-Comm Media
Corporation (Nasdaq), a direct marketing and Internet marketing services company
(now Marketing Services Group, Inc.). Previously, Mr. Peters was instrumental in
sponsoring management buyouts, acquisitions and financial restructurings for
companies that included: ESB Ray-O-Vac Corp., Aydin Corporation, Exide
Corporation, Avco/Embassy Pictures Corp., Time/Warner, ITT Corporation, Allied
Signal Companies, Inc., Borg-Warner Corporation and F. Schumacher & Co., Inc.
Mr. Peters began his career as a Staff Financial Analyst for RCA Corporation.
Mr. Peters received a MBA in Finance from the Baruch School of Business in 1969,
and a BA in Economics from Hofstra University in 1968, graduating Magna Cum
Laude. Mr. Peters is the brother of Ken Peters.
KENNETH LAMBLEY has served as the Vice President-Sales and Marketing of the
Company since December, 1998. Prior to joining World Diagnostics, Inc., Mr.
Lambley was employed from 1968 to 1998, in various positions beginning in sales,
through marketing to a position as international sales director for Seradyn
diagnostics a subdivision of Dow Chemical which was later acquired by
Mitsubishi. During his thirty-year career, his responsibilities included sales
and marketing management for both diagnostic and pharmaceutical products that
included direct sales to regional management of the sales force and to
distribution management, including International. Mr. Lambley received his
undergraduate diploma from Nottingham College, in the United Kingdom in 1963;
and studied pharmacy in the Royal Army Medical Corps from 1963 through 1966, and
then he received his degree in international marketing in 1968.
MARTIN MUY, PH.D. has served as the Vice President-Technical Affairs of the
Company since April, 1999. Dr. Martin Muy is Vice President Technical Affairs.
Dr. Muy has over eight years experience in developing genetically engineered
diagnostic research and health technology products concerning microbiology and
immunology, and immunology assays. From 1998 until 1999, Dr. Muy was employed as
Senior Product Development Manager for PharmaCorp (USA and Mexico), where he
worked on commercialization of various technology. In addition, Dr. Muy has been
engaged by such companies BPL (UK), Schering Plough (USA), Ortman Biomedics
(Switzerland) and Epitope (USA). Dr. Muy also has been employed at various
Research Centers performing work, including: Earles A. Chiles Institute
Providence Medical Center; The Department of Infectious Diseases at the
University of Massachusetts Medical Center and Oregon Health Sciences
University. Dr. Muy received his Ph.D. in Biologic Sciences from Mexico
University in 1989, and his B.S. in 1985. Dr. Muy completed three post-doctoral
programs at the University of Oregon from 1991 through 1997.
29
<PAGE>
MAUREEN BESSON has served as Vice President of Operations and Corporate
Secretary for WDI since June of 1998. Ms. Besson has over ten years experience
in operations management commencing with the Intercontinental Hotel chain in
Caracas Venezuela from 1987 until 1992. From 1994 to 1997 Ms. Besson was in
charge of asset management for export products to South and Central America for
Bio Diagnostica Inc. Ms. Besson was the first employee of WDI as Administrative
Assistant to Ken Peters and, as such, her understanding of the operations of WDI
are extensive. Ms. Besson attended preparatory school in Syracuse New York and
completed her studies in business management abroad at the University of Nuevas
Profesiones in Venezuela in 1987.
TREVOR CAMPBELL has served as a Director of the Company since February,
1997. From 1981 to 1982 Mr. Campbell served as the President of CASMET, the
Caribbean Society of Medical Technologists. Mr. Campbell is also the owner and
President of Microlabs Inc., Jamaica's largest private reference laboratory,
which has 14 independent laboratories in Jamaica. From 1977 to 1982, Mr.
Campbell was the sales liaison for Abbott Diagnostic's Jamaican distribution
business in Jamaica. Mr. Campbell received a diploma in Medical Technology in
June,1967 at the Public Health Service for Jamaica. Subsequently, he studied
Business administration at the University of the West Indies, followed by a
two-year fellowship at the World Trade Institute in NY as a US AID Fellow
studying International Marketing.
MICHAEL G.S. KONDRACKI has served as a Director of the Company since
November 1998. Mr. Kondracki is a Director in Deutsche Banc Alex. Brown, the
Investment Banking Unit of Deutsche Bank AG. He has been with Deutsche since
1996, and currently is based in Buenos Aires, Argentina where he is responsible
for originating and executing structured and project financings for oil, gas,
power, mining, infrastructure and telecommunications companies throughout the
MercoSur. Prior to joining Deutsche, Mr. Kondracki was a Vice President at
Prudential Securities Incorporated where he originated and executed investment
banking transactions for North and South American emerging growth issuers. From
1984 to 1990, Mr. Kondracki held various positions at Citibank, Manufacturers
Hanover and he was also a Consultant to the Inter-American Development Bank. He
continues to serve as a Consultant to the U.S. Department of State. Mr.
Kondracki graduated from the University of Scranton magna cum laude in 1982,
completed a Fulbright Scholarship in Peru in 1983 and received his MBA from the
Stern School of Business at New York University in 1991. Mr. Kondracki is fluent
in Spanish and conversant in Portuguese.
All directors hold office until the next annual meeting of shareholders of
the Company and until their successors are elected and qualified. Officers hold
office until the first meeting of directors following the annual meeting of
shareholders and until their successors are elected and qualified, subject to
earlier removal by the Board of Directors.
30
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
Ken Peters, the Chief Executive Officer of WDI received a salary of $58,000
and a bonus of $5,000 in Fiscal Year 1999. No other person received in excess of
$58,000 per annum. WDI also compensates its directors $1,500 annually to attend
board meetings.
The Company expects to establish during October, 1999 a Stock Option Plan
which will authorize approximately 300,000 shares of common stock to certain
employees, officers and directors. No determination has been made with respect
to the amount of shares that shall be reserved for officers and directors under
the Stock Option Plan. The Company provides health insurance to some of its
executive officers.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On May 26, 1998, the Company entered into a $150,000 promissory note (the
"Note") with MediaVest, Inc. a Delaware corp. controlled by Barry Peters who is
Chairman of the Board of WDI and the brother of Ken Peters and other Note
participants. This Note bore interest at 10% per annum and had a maturity date
of August 24, 1998. MediaVest, Inc. and the participants gave the Company the
option of extending repayment on the Note for an additional 90 days. The Company
executed a Forbearance Agreement with MediaVest, Inc. and the participants which
granted the 90 day extension and extending the Note until February 24, 1999 and
forgiving all interest through that date. In consideration for this forbearance
the Company issued 200,000 shares at $.125 per share to be allocated among the
participants of the Note. The Company also repaid $17,500 of the Note in
December through the issuance of 29,237 shares restricted shares. In April of
1999, the Company paid the outstanding balance owed on the Note through the
issuance of 101,090 shares and $45,000 cash to MediaVest, Inc. and the
participants.
During Fiscal Year 1999 and the three months ended June 30, 1999, one of
the largest customers of WDI was Microlabs, Inc. Microlabs, Inc.'s purchases
represented approximately 21% of revenues for Fiscal Year 1999. Trevor Campbell,
one of WDI's directors is the President and owner of Microlabs, Inc. Sales to
Microlabs, Inc. for the three months ended June 30, 1999, are approximately 11%
of WDI's revenues.
There are no other material transactions between the Company and any of its
affiliates except as set forth herein.
31
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES
As of August 31, 1999, WDI is authorized to issue up to 10,000,000 shares
of common stock par value $.001 per share, of which 4,281,827 shares are issued
and outstanding. The holders of common stock are entitled to one vote per share
held and have the sole right and power to vote on all matters on which a vote of
stockholders is taken. Voting rights are non-cumulative. The holders of common
shares are entitled to receive dividends when and if declared by the Board of
Directors, out of funds legally available therefore and to share pro rata in any
distribution to the stockholders. Upon liquidation, dissolution, or winding up
of the Company, the holders of common stock are entitled to receive the net
assets of the Company in proportion to the respective number of shares held by
them after payment of liabilities which may be outstanding. The holders of
common stock do not have any preemptive rights to subscribe for or purchase any
shares of any class of stock. The outstanding shares of common stock of the
Company will not be subject to further call or redemption and will be fully paid
and non-assessable.
There are no provisions in the Certificate of Formation or bylaws that
would delay, defer, or prevent a change in control of the business of the
Company. However, the Company has not elected to be excluded from Delaware
General Statute '203, "Business Combinations with interested stockholders."
Pursuant to this statutory section, an "interested stockholder" (defined
generally as a person owning more than 15% or more of a corporation's voting
stock) is prevented from engaging in a "business combination" with WDI for three
years following the date the person became an "interested stockholder" unless,
the transaction is approved by the Company's Board of Directors and the vote of
two thirds of the outstanding shares not owned by such interested stockholder.
This statute could have the effect of discouraging, delaying or preventing
hostile takeovers, including those that might result in the payment of a premium
over market price or changes in control or management of the Company.
The Transfer Agent for the Company's Common Stock is Manhattan Transfer
Registrar Co., 58 Dorchester Rd., Lake Ronkonkoma N.Y. 11779, certificates to
P.O. Box 361 Holbrook, N.Y. 11741, Phone (516) 585-7341.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Commencing third quarter 1998, WDI's common stock began
trading on the Over The Counter Bulletin Board under the trading
symbol "WDGI" The following table sets forth the high and low bid
prices of the Company's Common Stock for each of the following
quarters:
32
<PAGE>
- ------------------------------------------------------------------------
1998 HIGH LOW
- ---- ---- ---
- ------------------------------------------------------------------------
Quarter Ending September 30 1.37 1.18
- ------------------------------------------------------------------------
Quarter Ending December 31 3.25 1.37
- ------------------------------------------------------------------------
1999
- ----
- ------------------------------------------------------------------------
Quarter Ending March 31 6.75 4.75
- ------------------------------------------------------------------------
Quarter Ending 8.0 6.37
June 30
- ------------------------------------------------------------------------
Quarter Ending September 30 9.5 8.0
- ------------------------------------------------------------------------
As of August 31, 1999, there were 4,281,827 shares issued and
outstanding and 46 shareholders. Of the outstanding shares
3,415,927 are restricted securities within the meaning of Rule 144
of the Securities Act of 1933. As of August 31, 1999, WDI has not
declared any dividends. There are no restrictions on the common
stock that limit the ability of the Company to pay dividends if
declared by the Board of Directors. The holders of common stock
are entitled to receive dividends when and if declared by the
Board of Directors, out of funds legally available therefore and
to share pro rata in any distribution to the stockholders.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings material to
its business or financial condition, nor has the Company been threatened with
any legal proceeding that would be material to its business or financial
condition.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On March 12, 1998, 2,580,000 shares were issued to six parties constituting
the directors, officers and related parties for which the Company received
$2,580 paid in cash or by promissory notes.
33
<PAGE>
In June 1998, the Company completed pursuant to Rule 504 of Regulation D of
the Securities Act of 1933, the issuance of 10,000 Units, each Unit comprised of
40 shares of common stock and 95 Redeemable Common Stock Purchase Warrants
exercisable for one share at $1.00 which expired March 15, 1999, for a purchase
price of $5.00 per Unit. During 1999, 201,500 Warrants were exercised at the
original exercise price of $1.00. The Company then extended the expiration on
the Warrants to June 30, 1999 and reduced the exercise price to $.50 per share.
The remaining 748,500 Warrants were exercised in March 1999.
MediaVest, Inc. loaned WDI $150,000 in May of 1998 (the "Note").
Subsequently, MediaVest, Inc. entered into a Participation Agreement also dated
May 26, 1998, as lead lender with ten other parties. A total of 330,327 shares
of the Company were issued in connection with the Note. Of these shares, 200,000
were issued at $.125 in August of 1998 as consideration for forbearance on the
loan, $17,500 of the loan was extinguished by payment of 29,327 restricted
shares in December of 1998, and the Company issued MediaVest 101,090 shares in
April of 1999 in payment of the Note. The Note participants were issued their
respective shares on February 22, 1999, February 26, 1999 and May 3, 1999.
WDI issued 15,500 shares to employees, contractors, and professionals for
services rendered to the Company in May and June of 1999.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The directors and officers of World Diagnostics. Inc. shall be indemnified
to the fullest extent allowed pursuant to the Delaware General Corporation Law,
section 145.
PART F/S
FINANCIAL STATEMENTS OF WORLD DIAGNOSTICS, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Balance Sheet as of June 30, 1999 (unaudited) and March 31, 1999 . . . . . . . . . . . . . . . . . . . . . 36
Statements of Operations for the three months ended June 30, 1999
and June 30, 1998 (unaudited) and year ended March 31, 1999 and
March 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Statements of Stockholders' Equity for the Period April 1, 1997 through
March 31, 1999 and June 30, 1999(audited). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Statements of Cash Flow for the three months ended June 30, 1999 and
June 30, 1998 (unaudited) and Fiscal Year Ended March 31, 1999
and March 31, 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
34
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
World Diagnostics, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, stockholders' equity and cash flows present fairly, in all material
respects, the financial position of World Diagnostics, Inc. as of March 31, 1999
and the results of its operations and its cash flows for the years ended March
31, 1999 and 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether these financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred recurring losses and negative
cash flows from operations in fiscal 1999 and 1998. Continuation of operations
is dependent on the Company's ability to obtain adequate financial resources
through the successful completion of a contemplated public offering, or
otherwise. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
PricewaterhouseCoopers LLP
May 14, 1999
35
<PAGE>
WORLD DIAGNOSTICS, INC.
BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
----------- -----------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 99,275 $ 358,595
Accounts receivable 134,096 82,112
Inventory, net of reserve of $19,066 at June 30, 1999
and March 31, 1999 42,985 42,484
Other current assets 15,487 5,999
----------- -----------
Total current assets 291,843 489,190
Fixed assets, net 49,914 16,979
Other assets 5,424 4,419
----------- -----------
Total assets $ 347,181 $ 510,588
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ -- $ 127,500
Current portion of obligations under capital leases 8,489 3,324
Accounts payable and accrued expenses 192,315 222,622
----------- -----------
Total current liabilities 200,804 353,446
Obligations under capital leases 26,557 7,120
----------- -----------
Total liabilities 227,361 360,566
Commitments (Note 5)
Stockholders' equity:
Common stock $0.001 par value; 10,000,000 shares
authorized, 4,281,827 and 3,410,737 shares issued and
outstanding at June 30, 1999 and March 31, 1999, respectively 4,282 3,410
Additional paid-in capital 1,794,031 1,100,972
Unearned compensation (4,480) (7,840)
Accumulated deficit (1,674,013) (946,520)
----------- -----------
Total stockholders' equity 119,820 150,022
----------- -----------
Total liabilities and stockholders' equity $ 347,181 $ 510,588
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
36
<PAGE>
WORLD DIAGNOSTICS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Three months ended Year ended
------------------------ ------------------------
June 30, June 30, March 31, March 31,
1999 1998 1999 1998
--------- --------- --------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $ 240,044 $ 151,823 $ 576,250 $ 393,801
Cost of goods sold 197,975 109,169 457,353 326,046
--------- --------- --------- ---------
Gross profit 42,069 42,654 118,897 67,755
Selling, general, and administrative expenses 284,115 91,144 496,972 175,965
--------- --------- --------- ---------
Loss from operations before other expenses (242,046) (48,490) (378,075) (108,210)
Other expenses:
Loss on warrant inducement (Note 6) -- -- 374,250 --
Interest expense -- -- 26,611 --
Other income 8,491 -- -- --
--------- --------- --------- ---------
Loss from operations before extraordinary item (233,555) (48,490) (778,936) (108,210)
Extraordinary loss on extinguishment of debt
(Note 3 and 8) 493,938 -- 45,542 --
--------- --------- --------- ---------
Net loss $(727,493) $ (48,490) $(824,478) $(108,210)
========= ========= ========= =========
Basic and dilutive loss per common share
Loss from operations before extraordinary item $ (0.06) $ (0.02) $ (0.25) $ (0.42)
Extraordinary items (0.12) -- (0.02) --
--------- --------- --------- ---------
Basic and diluted loss per common share $ (0.18) $ (0.02) $ (0.27) $ (0.42)
========= ========= ========= =========
Weighted average number of common shares outstanding 4,146,668 2,651,111 3,070,528 2,580,000
========= ========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
37
<PAGE>
WORLD DIAGNOSTICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common
Common Stock Stock Additional
------------------------- Subscription Paid-in
Shares Amount Receivable Capital
--------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance, April 1, 1997 2,580,000 $ 2,580 $ (2,580) $ --
Capital contribution, net -- -- -- 20,576
Net loss -- -- -- --
--------- ----------- ----------- -----------
Balance, March 31, 1998 2,580,000 2,580 (2,580) 20,576
Payment of stock subscription receivable -- -- 2,580 --
Issuance of common stock at $0.125 per share 400,000 400 -- 29,344
Issuance of common stock
due to forbearance agreement
at $0.125 per share 200,000 200 -- 24,800
Issuance of common stock for
extinguishment of debt at $2.16 per share 29,237 29 -- 63,013
Exercise of common stock purchase
warrants 201,500 201 -- 201,299
Proceeds from exercise of common stock
purchase warrants to be issued -- -- -- 374,250
Loss on warrant inducement -- -- -- 374,250
Issuance of stock options -- -- -- 13,440
Amortization of unearned compensation -- -- -- --
Net loss -- -- -- --
--------- ----------- ----------- -----------
Balance at March 31, 1999 3,410,737 $ 3,410 $ -- $ 1,100,972
========= =========== =========== ===========
Issuance of common stock for
extinguishment of debt at $5.25 per share 101,090 101 -- 530,622
Issuance of common stock from the
exercise of common stock purchase
warrants 748,500 749 -- (749)
Issuance of common stock for
extinguishment of debt at $5.63 per share 6,000 6 -- 33,744
Issuance of common stock for
compensation of employees and
non-employees at $6.04 and $5.63
per share 15,500 16 -- 92,030
Capital contribution from the forgiveness
of debt by shareholder -- -- -- 37,412
Amortization of unearned compensation -- -- -- --
Net loss -- -- -- --
--------- ----------- ----------- -----------
Balance at June 30, 1999 (unaudited) 4,281,827 $ 4,282 $ -- $ 1,794,031
========= =========== =========== ===========
<PAGE>
<CAPTION>
Unearned Accumulated Stockholders'
Compensation Deficit Equity
------------ ----------- -------------
<S> <C> <C> <C>
Balance, April 1, 1997 $ -- $ (13,832) $ (13,832)
Capital contribution, net -- -- 20,576
Net loss -- (108,210) (108,210)
----------- ----------- -----------
Balance, March 31, 1998 -- (122,042) (101,466)
Payment of stock subscription receivable -- -- 2,580
Issuance of common stock at $0.125 per share -- -- 29,744
Issuance of common stock
due to forbearance agreement
at $0.125 per share -- -- 25,000
Issuance of common stock for
extinguishment of debt at $2.16 per share -- -- 63,042
Exercise of common stock purchase
warrants -- -- 201,500
Proceeds from exercise of common stock
purchase warrants to be issued -- -- 374,250
Loss on warrant inducement -- -- 374,250
Issuance of stock options (13,440) -- --
Amortization of unearned compensation 5,600 -- 5,600
Net loss -- (824,478) (824,478)
----------- ----------- -----------
Balance at March 31, 1999 $ (7,840) $ (946,520) $ 150,022
=========== =========== ===========
Issuance of common stock for
extinguishment of debt at $5.25 per share -- -- 530,723
Issuance of common stock from the
exercise of common stock purchase
warrants
Issuance of common stock for
extinguishment of debt at $5.63 per share -- -- 33,750
Issuance of common stock for
compensation of employees and
non-employees at $6.04 and $5.63
per share -- -- 92,046
Capital contribution from the forgiveness
of debt by shareholder -- -- 37,412
Amortization of unearned compensation 3,360 -- 3,360
Net loss -- (727,493) (727,493)
----------- ----------- -----------
Balance at June 30, 1999 (unaudited) $ (4,480) $(1,674,013) $ 119,820
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
38
<PAGE>
WORLD DIAGNOSTICS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Three months ended Fiscal Year
---------------------------- --------------------------
June 30, June 30, March 31, March 31,
1999 1998 1999 1998
----------- ------------ ---------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (727,493) $ (48,490) $ (824,478) $ (108,210)
Adjustments to reconcile net loss to net cash used
in operating activities:
Loss on warrant inducements -- -- 374,250 --
Extraordinary loss on extinguishment of debt 493,938 -- 45,542 --
Common stock issued in lieu of interest -- -- 15,958 --
Common stock issued in lieu of compensation 92,046 -- - --
Amortization of unearned compensation 3,360 -- 5,600 --
Depreciation and amortization 2,492 -- 4,374 --
Provision for bad debts -- -- 4,573 6,289
Provision for excess inventory -- -- 19,066 7,500
Changes in operating assets and liabilities:
Accounts receivable (51,984) (8,340) (49,872) (10,851)
Inventory (501) 2,892 (41,279) (25,661)
Other current assets (9,488) 28 (4,721) (1,278)
Other assets (1,005) (2,600) (2,919) (1,500)
Accounts payable and accrued expenses (4,860) (18,880) 105,915 77,001
----------- ------------ ---------- -----------
Net cash used in operating activities (203,495) (75,390) (347,991) (56,710)
----------- ------------ ---------- -----------
Cash flow from investing activities:
Purchases of fixed assets (8,844) -- (9,991) --
----------- ------------ ---------- -----------
Net cash used in investing activities (8,844) -- (9,991) --
----------- ------------ ---------- -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock and warrants -- -- 29,744 --
Proceeds from the exercise of stock warrants -- -- 575,750 --
Proceeds from notes payable -- 80,083 150,000 20,000
Payment of notes payable (45,000) -- (25,000) --
Payments under capital lease obligation (1,981) -- (918) --
Proceeds from stock subscription receivable -- 2,580 2,580 --
Capital contribution -- -- -- 20,576
(Decrease) increase in cash overdraft -- (4,773) (15,579) 15,579
----------- ------------ ---------- -----------
Net cash (used in) provided by financing activities (46,981) 77,890 716,577 56,155
----------- ------------ ---------- -----------
Net (decrease) increase in cash and cash equivalents (259,320) 2,500 358,595 (555)
Cash and cash equivalents at beginning of year 358,595 -- -- 555
----------- ------------ ---------- -----------
Cash and cash equivalents at end of year $ 99,275 $ 2,500 $ 358,595 $ --
=========== ============ ========== ===========
Supplemental disclosure:
Cash paid during the year for interest $ -- $ -- $ 1,611 $ 120
=========== ============ ========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
39
<PAGE>
WORLD DIAGNOSTICS, INC.
STATEMENTS OF CASH FLOWS, CONTINUED
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In August 1998, the Company issued 200,000 shares of common stock to
MediaVest, Inc. in exchange for the extension of the Note maturity date
and forgiveness of all interest from July 1, 1998 through February 24,
1999. (See Note 6).
In December 1998, the Company issued 29,237 shares of restricted common
stock to extinguish notes payable in the amount of $17,500. (See Note 6).
During the year ended March 31, 1999, the Company acquired office
equipment in the amount of $11,362 through several capital lease
agreements.
During the three-month period ended June 30, 1999, the Company acquired
office equipment in the amount of $26,583 through several capital lease
agreements.
In May 1999, the Company issued 6,000 shares of restricted common stock
to extinguish accounts payable in the amount of $8,035. (See Note 8).
In June 1999, the Company issued 101,090 shares of restricted common
stock to extinguish notes payable in the amount of $62,500. (See Note 8).
In June 1999, two shareholders and directors of the Company forgave
$37,412 in liabilities due from the Company resulting in the recognition
of a capital contribution of $37,412. (See Note 8).
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
40
<PAGE>
WORLD DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF OPERATIONS
World Diagnostics, Inc. (the "Company") was organized in Delaware on
February 2, 1997. The Company has proprietary distribution agreements
with four generic diagnostic products' manufacturers and has exclusive
proprietary technology for rapid diagnostic tests in the area of
infectious diseases and other diagnostic products. The products are sold
predominately through distributors and dealers in twenty-nine countries.
The financial statements reflect the combination of World Diagnostics,
Inc. and Health Tech International. Effective March 31, 1998, these
companies effected a combination of companies under common control, with
World Diagnostics, Inc. being the surviving company. This combination was
treated similar to a pooling of interests. All significant intercompany
accounts and transactions have been eliminated from these financial
statements.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in
the financial statements, the Company incurred losses of $733,910,
$824,478 and $108,210 and had negative cash flows from operations of
$206,360, $347,991 and $56,710 during the three months ended June 30,
1999 and the fiscal years ended March 31, 1999 and 1998, respectively.
These factors including the uncertainty surrounding future equity
financing through anticipated offerings raise substantial doubt about the
Company's ability to continue as a going concern for a reasonable period
of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The
Company's ability to continue as a going concern is dependent upon
obtaining adequate financial resources through a contemplated securities
offering or otherwise. Management believes that it can obtain equity
financing through an anticipated offering. However, there can be no
assurance that such offering will be successful.
The accompanying unaudited consolidated financial statements as of and
for the three months ended June 30, 1999 have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission (the
"SEC"). Certain information and note disclosures normally included in
annual financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to those rules
and regulations, although the Company believes that the disclosures made
are adequate to make
41
<PAGE>
WORLD DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
BASIS OF PRESENTATION, CONTINUED
the information presented not misleading. The financial information
presented herein, which is not necessarily indicative of results to be
expected for the current fiscal year, reflects all adjustments which, in
the opinion of management, are necessary for a fair presentation of the
interim unaudited consolidated financial statements. It is suggested that
these consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's
Annual Report for the fiscal year ended March 31, 1999.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid investments with original maturities
of three months or less from the dates of purchase to be cash
equivalents.
INVENTORY
Inventory is stated at the lower of cost or market using the average cost
method. As of June 30, 1999 and March 31, 1999, substantially all
inventories represent finished goods held for sale. The Company recorded
a provision of approximately $0, $0, $19,000 and $8,000 for the three
months ended June 30, 1999 and 1998, and the years ended March 31, 1999
and 1998, respectively, to reduce the carrying amount of the inventory to
its net realizable value.
FIXED ASSETS
Fixed assets, consisting of furniture, fixtures and equipment, are
carried at cost less accumulated depreciation. Expenditures for repairs
and maintenance are generally charged to expense as incurred.
Retirements, sales and disposals of assets are recorded by removing the
cost and accumulated depreciation from the asset and accumulated
depreciation accounts with any resulting gain or loss reflected in
income. Depreciation is computed over the estimated useful lives of
depreciable assets using the straight-line method.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Such estimates consists principally of the
allowance for excess inventory and accrued expenses. Actual results could
differ from those estimates.
REVENUE RECOGNITION
Revenue from the sale of diagnostic tests and products is recognized upon
the shipment of product.
42
<PAGE>
WORLD DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INCOME TAXES
The Company follows the liability method in accounting for income taxes.
The liability method provides that deferred tax assets and liabilities
are recorded, using currently enacted tax rates, based upon the
difference between the tax bases of the assets and liabilities and their
carrying amounts for financial statement purposes.
The Company provides a valuation allowance against deferred tax assets
if, based on the weight of available evidence, it is more likely than not
that some or all of the deferred tax assets will not be realized.
LOSS PER SHARE
Basic loss per common share calculations are determined by dividing loss
available to common shareholders by the weighted average number of shares
of common stock outstanding during the year. Diluted loss per common
share calculations are determined by dividing loss available to common
shareholders by the weighted average number of shares of common stock and
dilutive common stock equivalents outstanding during the year.
STOCK BASED COMPENSATION
Statement of Financial Accounting Standard No. 123, Accounting for Stock
Based Compensation, requires that all transactions with non-employees in
which goods or services are the consideration received for the issuance
of equity instruments be accounted for based on the fair value of the
consideration received or the fair value of the equity instruments
issued, whichever is more reliably measurable.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130 "Reporting Comprehensive Income" that establishes standards
for reporting and display of an alternative measurement and its
components in a full set of general-purpose financial statements. SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997.
The Company adopted SFAS No. 130 in 1999.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS No. 131"). SFAS No. 131 establishes standards for
reporting operating and geographical segments and the type and level of
financial information to be discussed about those segments. SFAS No. 131
is effective for fiscal years beginning after December 15, 1997. The
Company adopted SFAS No. 131 in the current year and determined that it
has one reportable operating segment.
43
<PAGE>
WORLD DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
NEW ACCOUNTING PRONOUNCEMENTS, CONTINUED
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133"). Among other provisions, SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for
hedging activities. It also requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 133 is
effective for financial statements for fiscal years beginning after June
15, 1999. Management does not believe that this standard will have a
material effect on the financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to conform prior years' data to
current year presentation.
2. FIXED ASSETS:
Fixed assets consist of the following:
<TABLE>
<CAPTION>
Estimated
June 30, March 31, Useful
1999 1999 Lives
----------- --------- ---------
(unaudited)
<S> <C> <C> <C>
Computer equipment and software $25,024 $15,461 3 to 5 years
Office furniture and equipment 28,891 5,892 5 years
------- -------
53,915 21,353
Less: accumulated depreciation
and amortization (6,866) (4,374)
------- -------
$47,049 $16,979
======= =======
</TABLE>
Amounts subject to capital leases at June 30, 1999 and March 31, 1999,
included in fixed assets above, total $38,354 and $11,362, net of
accumulated amortization of $4,836 and $3,149, respectively. Depreciation
and amortization expense for the three months ended June 30, 1999 and
1998, and the year ended March 31, 1999 was $2,492, $0, and $4,374,
respectively.
44
<PAGE>
WORLD DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. NOTES PAYABLE:
Short-term notes payable consists of the following:
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
----------- ---------
(unaudited)
<S> <C> <C>
Note payable with MediaVest, Inc. $ -- $107,500
Other, due on demand -- 20,000
------- --------
$ -- $127,500
======= ========
</TABLE>
On May 26, 1998, the Company entered into a $150,000 promissory note (the
"Note") with MediaVest, Inc. (the "Creditor"), a company controlled by a
shareholder and director of the Company. The Note bore interest at 10%
and had a maturity date of August 24, 1998. The Company had an option to
extend repayment on the Note for an additional 90 days. The Note was
senior to all prior security interests and was collateralized by all of
the Company's assets and guaranteed by a director of the Company.
On August 24, 1998, the Company entered into a forbearance agreement with
the Creditor. The forbearance agreement extended the maturity date of the
Note to February 24, 1999, and forgave all interest through February 24,
1999. In consideration for this forbearance agreement, the Board of
Directors authorized the issuance of 200,000 shares of the Company's
common stock to the Creditor. Management determined that the fair value
of the common stock was $0.125 per share, the same price recorded in a
private placement of the Company's common stock completed in June 1998
(see Note 6). A loss in the amount of $15,958 was recorded in the 1999
statement of operations as interest expense which represented the
difference between the total fair value of the common stock issued and
the amount of interest forgiven.
As of March 31, 1999, the Company did not pay the remaining balance on
the Note. As a result, the Company was in default under the Note
agreement. The Company subsequently obtained a waiver for this default.
In April 1999, the Company paid the outstanding balance due under the
Note through the issuance of 101,090 shares of common stock and $45,000
in cash (See Note 8).
On December 22, 1998, the Company's Board of Directors authorized the
issuance of 29,237 restricted shares of its common stock to extinguish
$17,500 of the Note. The fair market value of the common stock was $2.88
at the date of extinguishment. The restricted common stock cannot be sold
for an 18-month period and after that can only be sold in accordance with
Rule 144. Due to these restrictions, the Company discounted the fair
value of the Company's common stock at the date of extinguishment by 25%.
An extraordinary loss of $45,542 was recorded in the 1999 statement of
operations representing the difference between the discounted fair market
value of the common stock issued and the carrying amount of the Note
extinguished.
45
<PAGE>
WORLD DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. NOTES PAYABLE, CONTINUED:
In June 1999, two shareholders and directors of the Company forgave a
total of $20,000 in notes payable due from the Company. This action was
treated as a capital contribution and resulted in an increase of
approximately $20,000 in additional paid-in capital. (See Note 8).
4. INCOME TAXES:
There is no benefit for income taxes for the year ended March 31, 1999
and 1998 reflected in the accompanying financial statements, due to net
operating losses
Deferred income taxes result from temporary differences between the tax
bases of assets and liabilities and their reported amounts in the
financial statements. A summary of the components of the net deferred
income taxes is as follows:
<TABLE>
<CAPTION>
1999
----------
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 4,087
Net operating loss carryforwards 139,205
Inventory reserve 7,175
Other 2,273
----------
Gross deferred tax asset 152,740
Deferred tax liability:
Amortization (1,918)
----------
Net deferred tax asset 150,822
Less: valuation allowance (150,822)
----------
Net deferred taxes $ --
==========
</TABLE>
46
<PAGE>
WORLD DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. INCOME TAXES, CONTINUED:
The benefit for income taxes differs from the amount computed by applying
the statutory federal income tax rate to net loss due to the following:
<TABLE>
<CAPTION>
1999 1998
----------- --------
<S> <C> <C>
Income tax provision statutory rate $ (280,323) $(36,791)
State income tax, net of Federal benefit (14,049) (3,718)
Change in valuation allowance 104,898 45,924
Loss on warrants inducement 127,245 --
Meals and entertainment 582 1,960
Loss on extinguishment of debt 20,910 --
Other 40,737 (7,375)
----------- --------
$ -- $ --
=========== ========
</TABLE>
The Company has net operating losses available for carryforward of
approximately $369,931. The loss carryforwards begin to expire in the
year 2017.
5. COMMITMENTS:
The Company leases office facilities, equipment, and a vehicle under
certain operating leases. The office lease expires on September 30, 2000.
At March 31, 1999, future minimum lease payments, under operating and
capital leases are as follows:
<TABLE>
<CAPTION>
Capitalized Operating
Fiscal Years Ending: Leases Leases
----------- ---------
<S> <C> <C>
2000 $ 4,813 $ 47,000
2001 4,813 19,000
2002 3,444 -
----------- ---------
Total minimum lease payments 13,070 $ 66,000
=========
Less: amount representing interest (2,626)
-----------
Present value of net minimum lease payments 10,444
Less: current portion (3,324)
-----------
Long-term obligations $ 7,120
===========
</TABLE>
47
<PAGE>
WORLD DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. COMMITMENTS, CONTINUED:
Rent expense was approximately $12,000, $5,841, $34,000 and $18,000 for
the three months ended June 30, 1999 and 1998, and the fiscal years ended
March 31, 1999 and 1998, respectively.
6. CAPITAL STOCK:
On June 15, 1998, the Company amended its Articles of Incorporation to
authorize the issuance of up to 10,000,000 shares of common stock, par
value $0.001 per share.
In June 1998, the Company completed a private placement of its common
stock in which it issued 400,000 shares of its common stock at $0.125 per
share. In connection with the private placement, the Company issued
950,000 common stock purchase warrants (the "Warrants"). Each Warrant is
exercisable into one share of the Company's common stock at $1.00 per
share and expire on March 15, 1999. During 1999, 201,500 Warrants were
exercised at the original $1.00 exercise price.
In March 1999, the Company extended the expiration date of the Warrants
to June 30, 1999, and reduced the exercise price to $0.50 per share. The
remaining 748,500 Warrants were exercised in March 1999. As a result of
the modification to the terms of the Warrants, the Company recorded a
loss of $374,250 during the year ended March 31, 1999. In April 1999, the
Company issued 748,500 shares of its common stock associated with the
exercise of the 748,500 Warrants (See Note 8).
In November 1998, a non-employee consultant was granted options to
purchase an aggregate 12,000 shares of common stock at $1.50. Pursuant to
SFAS No. 123 in accounting for this non-employee stock option grant, the
Company recorded unearned compensation in the amount of $13,440, which is
being amortized ratably over the vesting period of one year. Amortization
of the unearned compensation resulted in compensation expense of $3,360
and 5,600 during the three months ended June 30, 1999 and the year ended
March 31, 1999, respectively. The fair value of the options on the grant
date was calculated using the Black-Scholes option-pricing model with the
following assumptions: expected life - 3 years, risk-free interest rate
4.34%, volatility - 80%, and dividend yield - 0%.
During August 1998, the Company filed the necessary documents with the
National Association of Securities Dealers and its common stock began
trading on the over-the-counter market in October 1998.
48
<PAGE>
WORLD DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. CONCENTRATION OF CREDIT RISK:
Financial instruments, which potentially subject the Company to
significant concentrations of credit risk, consist principally of cash
and trade accounts receivable. The Company places its cash investments
with high quality financial institutions and believes that the risk of
loss is remote. The Company had cash balances on deposit with one bank at
March 31, 1999 that exceeded the balance insured by the F.D.I.C. in the
amount of $278,211.
The Company extends credit to its customers based upon an evaluation of
the customer's financial condition and credit history and generally does
not require collateral. The Company has historically incurred minimal
credit losses. In the three months ended June 30, 1999, two customers
accounted for approximately 23% of sales. At June 30, 1999, accounts
receivables from these customers were $29,986. In the three months ended
June 30, 1999 and year ended March 31, 1999, one customer, a director and
stockholder of the Company, accounted for approximately 11% and 21.2% of
sales, respectively. At June 30, 1999 and March 31, 1999, accounts
receivable from this customer were $10,749 and $17,272, respectively.
Substantially all of the Company's sales for the three months ended June
30, 1999 and fiscal years 1999 and 1998 were made to international
customers.
8. EVENTS SUBSEQUENT TO THE REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS (UNAUDITED):
In April 1999, the Company issued 748,500 shares of its common stock
associated with the March 1999 exercise of the 748,500 Warrants. This
action resulted in a $748 increase in the common stock account and a
corresponding $748 decrease in additional paid-in capital.
In April 1999, the Company paid the outstanding balance due under the
Note through the issuance of 101,090 shares of common stock and $45,000
in cash. The fair market value of the common stock was $7.00 at the date
of extinguishment. The restricted common stock cannot be sold for an
18-month period and after that can only be sold in accordance with Rule
144. Due to these restrictions, the Company discounted the fair value of
the Company's common stock at the date of extinguishment by 25%. An
extraordinary loss of $468,223 was recorded in the statement of
operations for the three months ended June 30, 1999 representing the
difference between the discounted fair market value of the common stock
issued and the carrying amount of the Note extinguished.
49
<PAGE>
WORLD DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. EVENTS SUBSEQUENT TO THE REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS (UNAUDITED), CONTINUED:
In May 1999, the Company paid the outstanding balance due to various
vendors through the issuance of 6,000 shares of common stock. The fair
market value of the common stock was $7.50 at the date of extinguishment.
The restricted common stock cannot be sold for an 18-month period and
after that can only be sold in accordance with Rule 144. Due to these
restrictions, the Company discounted the fair value of the Company's
common stock at the date of extinguishment by 25%. An extraordinary loss
of $25,715 was recorded in the statement of operations for the three
months ended June 30, 1999 representing the difference between the
discounted fair market value of the common stock issued and the carrying
amount of the Note extinguished.
During the three months ended June 30, 1999, the Company issued 15,500
shares of its common stock to various non-employee consultants for past
services rendered. Pursuant to the application of SFAS No. 123 in
accounting for the issuance of stock to non-employee consultants, the
Company recorded compensation expense based on the fair market value of
the shares issued since the fair value of the shares is more reliably
measurable. The restricted common stock cannot be sold for an 18-month
period and after that can only be sold in accordance with Rule 144. Due
to these restrictions, the Company discounted the fair value of the
Company's common stock at the date of issuance by 25%. Due to the
issuance of the shares, the Company recorded $92,046 in compensation
expense, which is included in selling, general and administrative
expenses in the statement of operations for the three months ended June
30, 1999.
In June 1999, two shareholders and directors of the Company forgave a
total of $37,412 in notes payable and other liabilities due from the
Company. This action was treated as a capital contribution and resulted
in an increase of approximately $37,412 in additional paid-in capital.
50
<PAGE>
PART III
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE
----
<S> <C> <C>
2.1 CERTIFICATE OF INCORPORATION OF WORLD DIAGNOSTICS, INC.. . . . . . . . . . . . . . . . . . . . . 53
2.2 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF WDI. . . . . . . . . . . . . . . . . 55
2.3 BYLAWS OF WORLD DIAGNOSTICS, INC.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
3.0 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS: FORM OF STOCK CERTIFICATE . . . . . . . . . . . 67
5.0 VOTING TRUST AGREEMENT: NOT APPLICABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
6.1 ACQUISITION OF HEALTH TECH INTERNATIONAL, INC. . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.2 KEYMAN INSURANCE FOR CHIEF EXECUTIVE OFFICER . . . . . . . . . . . . . . . . . . . . . . . . . . 89
6.3 INDEPENDENT CONTRACTOR AGREEMENT WITH IMMUNODIAGNOSTICS, INC.. . . . . . . . . . . . . . . . . . 90
6.4 FORM CONFIDENTIALITY AGREEMENT WITH MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 96
6.5 FORM LETTER AGREEMENT EXECUTED BY DISTRIBUTORS . . . . . . . . . . . . . . . . . . . . . . . . . 99
6.6 OFFICE LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
7.0 MATERIAL FOREIGN PATENTS: NOT APPLICABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
FILED HEREWITH.
</TABLE>
51
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, there unto duly authorized.
Date: September 30, 1999 WORLD DIAGNOSTICS, INC.
By: /s/ Ken Peters
-----------------------
Ken Peters
President
52
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
2.1 CERTIFICATE OF INCORPORATION OF WORLD DIAGNOSTICS, INC.
2.2 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF WDI
2.3 BYLAWS OF WORLD DIAGNOSTICS, INC.
3.0 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS: FORM OF STOCK CERTIFICATE
5.0 VOTING TRUST AGREEMENT: NOT APPLICABLE
6.1 ACQUISITION OF HEALTH TECH INTERNATIONAL, INC.
6.2 KEYMAN INSURANCE FOR CHIEF EXECUTIVE OFFICER
6.3 INDEPENDENT CONTRACTOR AGREEMENT WITH IMMUNODIAGNOSTICS, INC.
6.4 FORM CONFIDENTIALITY AGREEMENT WITH MANAGEMENT
6.5 FORM LETTER AGREEMENT EXECUTED BY DISTRIBUTORS
6.6 OFFICE LEASE
7.0 MATERIAL FOREIGN PATENTS: NOT APPLICABLE
FILED HEREWITH.
</TABLE>
EXHIBIT 2.1
CERTIFICATE OF INCORPORATION
OF
WORLD DIAGNOSTICS, INC.
A CLASS CORPORATION
FIRST: The name of the corporation is WORLD DIAGNOSTICS INC.
SECOND: Its registered office in the State of Delaware is to be located at 1313
N. Market Street, Wilmington, DE 19801-1151, County of New Castle. The
registered agent in charge thereof is The Company Corporation, 1313 N.
Market Street, Wilmington, DE 19801-1151.
THIRD: The nature of the business and the objects and purposes proposed to be
transacted, promoted and carried on, are to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The amount of total authorized shares of stock of this Corporation is
1,500 shares of NO par value.
FIFTH: The name and mailing address of the incorporator is: Regina Cephas,
1313 N. Market Street, Wilmington, DE 19801-1151.
SIXTH: All of the Corporation's issued stock, exclusive of treasury shares,
shall be represented by certificates and shall be held of record by not
more than thirty (30) percent.
SEVENTH: All of the issued stock of all classes shall be subject to one or more
of the restrictions on transfer permitted by Section 202 of the General
Corporation Law.
EIGHTH: The Corporation shall make an offering of any of its stock of any class
which would constitute a "public offering" within the meaning of the
United States Securities Act of 1933 as it may be amended from time to
time.
NINTH: Directors of the Corporation shall not liable to either the corporation
or its shareholders for monetary damages for a breach of fiduciary
duties unless the breach involves: (1) a director's duty of loyalty to
the corporation or its stockholders; (2) acts or commissions not in
good faith or which involve intentional misconduct or a knowing
violation of law; (3) liability for unlawful payments of dividends or
unlawful stock purchases or redemption by the
<PAGE>
corporation; or (4) a transaction from which the director derived an
improper personal benefit.
I, THE UNDERSIGNED, for the purposes of forming a corporation under the
laws of the State of Delaware, do make, file and record this Certificate and do
certify that the facts herein are true, and I have accordingly hereunto set my
hand.
Date: February 3, 1997
REGINA CEPHAS
-----------------
Regina Cephas
EXHIBIT 2.2
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
WORLD DIAGNOSTICS INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That a meeting of the Board of Directors of WORLD DIAGNOSTICS,
INC. resolutions were duly adopted setting forth a proposed
amendment of the Certificate of Incorporation of said corporation,
declaring said amendment to be advisable and calling a meeting of
the stockholders of said corporation for consideration thereof.
The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "FOURTH" so that, as amended,
said Article shall be and read as follows:
The Corporation shall have 10,000,000 shares at $.001 Par Value.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of said corporation was duly
called and held upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware at which the
<PAGE>
necessary number of shares as required by statute were voted in
favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the
State of Delaware.
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said WORLD DIAGNOSTICS INC. has caused this certificate
to be signed by KEN PETERS, an Authorized Officer, this 15th day of June, 1998.
By: KEN PETERS
-----------
TITLE OF OFFICER: President and Director
-----------------------
EXHIBIT 2.3
BY-LAWS
-OF-
WORLD DlAGNOSTICS, INC.
A Close Corporation
ARTICLE I - OFFICES
The office of the Corporation shall be located in the City, County and State
designated in the Certificate of Incorporation. The Corporation may also
maintain offices at such other places within or without the United States as the
Shareholders may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
SECTION 1 - ANNUAL MEETINGS:
The annual meeting of the shareholders of the Corporation shall be held within
five months after the close of the fiscal year of the corporation, for the
purpose of electing officers and transacting such other business as may properly
come before the meeting.
SECTION 2 - REGULAR MEETINGS:
The shareholders may provide by resolution, from time to time, for the holding
of regular meetings of the shareholders and may affix the time and place
thereof.
SECTION 3 - SPECIAL MEETINGS:
Special meetings of the shareholders may be called at any time by the President,
and shall be called by the President or the Secretary at the written request of
the holders of ten per cent (10%) of the shares then outstanding and entitled to
vote thereat, or as otherwise required under the provisions of the Corporation
Law.
SECTION 4 - PLACE OF MEETINGS:
All meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places within the United States as shall be
designated in the notices or waivers of notice of such meetings.
<PAGE>
SECTION 5 - NOTICE OF MEETINGS:
(a) Written notice of each meeting of shareholders, whether annual or special,
stating the time when and place where it is to be held, shall be served either
personally or by mail, not less than ten or more than fifty days before the
meeting, upon each shareholder of record entitled to vote as such meeting, and
to any other shareholder to whom the giving of notice may be required by law.
Notice of a special meeting shall also state the purpose or purposes for which
the meeting is called, and shall indicate that it is being issued by, or at the
direction of, the person or persons calling the meeting. If, at any meeting,
action is proposed to be taken that would if taken, entitle shareholders to
receive payment for their shares pursuant to the Business Corporation Law, the
notice of such meeting shall include a statement of that purpose and to that
effect. If mailed, such notice shall be directed to each such shareholder at his
address, as it appears on the records of the shareholders of the Corporation,
unless he shall have previously filed with the Secretary of the Corporation a
written request that notices intended for him be mailed to some other address,
in which case, it shall be mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of such notice and prior to the meeting,
or to any shareholder who attends such meeting, in person or by proxy, or to any
shareholder, who, in person or by proxy, submits a signed waiver of notice
either before or after such meeting. Notice of any adjourned meeting of
shareholders need not be given, unless otherwise required by statute.
SECTION 6 - CHAIRMAN OF MEETINGS:
At all meetings of the Shareholders, the President, if present, shall preside.
If there shall be no President, or he shall be absent, then a Chairman of the
meeting, chosen by the shareholders, shall preside.
SECTION 7 - QUORUM:
(a) Except as otherwise provided herein, or by statute, or in the Certificate of
Incorporation (such Certificate and any amendments thereof being hereinafter
collectively referred to as the "Certificate of Incorporation"), at all meetings
of shareholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of shareholders holding of record a majority of
the total number of shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to constitute a quorum for
the transaction of any business. The withdrawal of any shareholder after the
commencement of a meeting shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting. At any such
adjourned meeting at which a quorum is
<PAGE>
present, any business may be transacted which might have been transacted at the
meeting as originally called if a quorum had been present.
SECTION 8 - VOTING:
(a) Except as otherwise provided herein or by statute, or by the Certificate of
Incorporation, any corporate action, to be taken by vote of the shareholders,
shall be authorized by a majority of votes cast at a meeting of shareholders by
the holders of shares entitled to vote thereon.
(b) Except as otherwise provided herein or by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of stock
of the Corporation entitled to vote thereat, shall be entitled to one vote for
each share of stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent without a
meeting, may do so by proxy; provided, however, that the instrument authorizing
such proxy to act shall have been executed in writing by the shareholder
himself, or by his attorney-in-fact thereunto duly authorized in writing. No
proxy shall be valid after the expiration of eleven months from the date of its
execution, unless the persons executing it shall have specified therein the
length of time it is to continue in force. Such instrument shall be exhibited to
the Secretary at the meeting and shall be filed with the records of the
Corporation.
(d) Any resolution in writing, signed by all of the shareholders entitled to
vote thereon, shall be and constitute action by such shareholders to the effect
therein expressed, with the same force and effect as if the same had been duly
passed by unanimous vote at a duly called meeting of shareholders and such
resolution so signed shall be inserted in the Minute Book of the Corporation
under its proper date.
SECTION 9 - DUTIES AND POWERS:
The Shareholders shall be responsible for the control and management of the
affairs, property and interests of the Corporation, and may exercise all powers
of the Corporation.
SECTION 10 - CONTRACTS:
(a) No contract or other transaction between this Corporation and any other
Corporation shall be impaired, affected or invalidated, nor shall any
shareholder be liable in any way by reason of the fact that such shareholder of
this Corporation is interested in, or is a shareholder, director or officer of
such other Corporation, provided that such facts are disclosed or made known to
the remaining shareholders.
(b) Any shareholder, personally and individually, may be a party to or may be
interested in any contract or transaction of the Corporation, and no shareholder
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or
<PAGE>
made known to the other shareholders, and provided that the shareholders shall
authorize, approve or ratify such contract or transaction by a majority vote
not counting the shares of any such shareholder, notwithstanding the presence of
any such shareholder at the meeting at which such action is taken. The shares
of such shareholder or shareholders may be counted in determining the presence
of a quorum at such meeting. This Section shall not be construed to impair or
invalidate or in any way affect any contract or other transaction which would
otherwise be valid under the law (common, statutory, or otherwise) applicable
thereto.
SECTION 11- COMMITTEES:
The shareholders may, from time to time, designate from among its members an
executive committee and such other committees, and alternate members thereof,
as they deem desirable, each consisting of three or more members, with such
powers and authority (to the extent permitted by law) as may be provided in
such resolution. Each such committee shall serve at the pleasure of the
shareholders. At all meetings of a committee, the presence of all members of
the committee shall be necessary to constitute a quorum for the transaction of
business, except as otherwise provided for by the shareholders. Participation
of any one or more members of the committee by means of a conference telephone
or similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time, shall constitute presence in
person at any such meeting. Any action authorized in writing by all of the
members of a committee entitled to vote thereon and filed with the minutes of
the Committee shall be the act of the committee with the same force and effect
as if the same had been passed by unanimous vote at a duly called meeting of
the committee.
ARTICLE III - OFFICERS
SECTION 1 - NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE:
(a) The officers of the Corporation shall consist of a President, a Secretary,
a Treasurer, and such other officers, as the shareholders may, from time to
time, deem advisable. Any two or more offices may be held by the same person.
(b) The officers of the Corporation shall be elected by the shareholders at the
regular annual meeting of the shareholders.
(c) Each officer shall hold office until the annual meeting of the shareholders
next succeeding his election, and until his; successor shall have been elected
and qualified, or until his death, resignation or removal.
<PAGE>
SECTION 2 - RESIGNATION:
Any officer may resign at any time by giving written notice of such resignation
to the President or the Secretary of the Corporation, unless otherwise specified
in such written notice, such resignation shall take effect upon receipt thereof
by such officer, and the acceptance of such resignation shall not be necessary
to make it effective.
SECTION 3 - REMOVAL:
Any officer may be removed, either with or without cause, and a successor
elected by the shareholders at any time.
SECTION 4 - VACANCIES:
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by the shareholders.
SECTION 5 - DUTIES OF OFFICERS:
Officers of the Corporation shall, unless otherwise provided by the
shareholders, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these by-laws or may from time to time be specifically conferred or imposed by
the shareholders. The President shall be the chief executive officer of the
Corporation.
SECTION 6 - SURETIES AND BONDS:
In case the shareholders shall so require, any officer, employee or agent of
the Corporation shall execute to the Corporation a bond in such sum, and with
such surety or sureties as the shareholders may direct, conditioned upon the
faithful performance of his duties to the Corporation, including responsibility
for negligence and for the accounting for all property, funds or securities of
the Corporation which may come into his hands.
SECTION 7 - SHARES OF OTHER CORPORATIONS:
Whenever the Corporation is the holder of shares of any other Corporation, any
right or power of the Corporation as such shareholder (including the attendance,
acting and voting at shareholders, meetings and execution of waivers, consents,
proxies or other instruments,) may be exercised on behalf of the Corporation by
the President, any Vice President or such other person as the shareholder may
authorize.
<PAGE>
ARTICLE IV- SHARES OF STOCK
SECTION 1 - CERTIFICATE OF STOCK:
(a) The certificates representing shares of the Corporation shall be in such
form as shall be adopted by the shareholders, and shall be numbered and
registered in the order issued. They shall bear the holder's name and the number
of shares, and shall be signed by (i) the president or Vice President, and (ii)
the Secretary or Treasurer, or any Assistant Secretary or Assistant Treasurer,
and may bear the corporate seal.
(b) No certificate representing shares shall be issued until the full amount of
consideration therefor has been paid, except as otherwise permitted by law.
(c) The shareholders may authorize the issuance of certificates for fractions of
a share which shall entitle the holder to exercise voting rights, receive
dividends and participate in liquidating distributions, in proportion to the
fractional holdings; or it may authorize the payment in cash of the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined; or it may authorize the issuance, subject to such
conditions as may be permitted by law, of script in registered or bearer form
over the signatures of an officer or agent of the Corporation, exchangeable as
therein provided for full shares, but such script shall not entitle the holder
to any rights of a shareholder, except as therein provided.
SECTION 2 - LOST OR DESTROYED CERTIFICATES:
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the certificate
representing the same. The Corporation may issue a new certificate in the place
of any certificate theretofore issued by it, alleged to have been lost or
destroyed on production of such evidence of loss or destruction as the
shareholders in their discretion, may require, the shareholders may, in their
discretion, require the owner of the lost or destroyed certificate or his legal
representatives, to give the Corporation a bond in such sum as they may direct,
and with such surety or sureties as may be satisfactory to them, to indemnify
the Corporation against any claims, loss, liability or damage it may suffer on
account of the issuance of the new certificate. A new certificate may be issued
without requiring any such evidence or bond when, in the judgment of the
shareholders, it is proper so to do.
SECTION 3 - TRANSFERS OF SHARES:
(a) Transfers of shares of the Corporation shall be made on the share records of
the Corporation only by the holder of record thereof, in person or by his duly
authorized attorney, upon surrender for cancellation of the certificate or
certificates representing such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith,
<PAGE>
duly executed, with such proof of the authenticity of the signature and of
authority to transfer and of payment of transfer taxes as the Corporation or
agents may require.
The Corporation shall be entitled to treat the holder of record of any share or
shares the absolute owner thereof for all purposes and, accordingly, shall not
be bound to recognize any legal, equitable or other claim to, or interest in,
such share or shares on the part of any other. person, whether or not it shall
have express or other notice thereof, except as otherwise expressly provided by
law.
SECTION 4 - RECORD DATE:
In lieu of closing the share records of the Corporation, the shareholders may
fix, in advance, a date not exceeding fifty days, nor less than ten days, as the
record date for the determination of shareholder entitled to receive notice of,
or to vote at, any meeting of shareholders, or to consent to any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividends or allotment of any rights, or for the purpose
of any other action. If no record date is fixed, the record date for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if no notice is given, the day on which the
meeting is held; the record date for determining shareholders for any other
purpose shall be the close of business on the day on which the resolution of the
directors relating thereto is adopted when a determination of shareholders of
record entitled to notice of or to vote at any meeting of shareholders has been
made as provided for herein, such determination shall apply to any adjournment
thereof, unless the directors fix a new record date for the adjourned meeting.
ARTICLE V - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such amounts, and at such time or times as the
shareholders may determine.
ARTICLE VI - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the shareholders from time
to time, subject to applicable law.
ARTICLE VII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved from time
to time by the shareholders.
<PAGE>
ARTICLE VIII - AMENDMENTS
Except as otherwise provided by statute or by the Certificate of Incorporation,
all by-laws of the Corporation shall be subject to alteration or repeal, and new
by-laws may be made by a majority vote of the shareholders.
EXHIBIT 3.0
SEE LEGEND ON REVERSE
NUMBER SHARES
WD 1092 ***34900***
COMMON STOCK WORLD DIAGNOSTICS, INC.
Incorporated under the Laws of the State of Delaware
SEE REVERSE SIDE FOR CERTAIN DEFINITIONS
CUSIP 98145B 10 5
THIS CERTIFIES THAT KEN PETERS
is the owner of ****THIRTY FOUR THOUSAND NINE HUNDRED****
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE
PAR VALUE OF $.001 PER SHARE OF
- ----------------------------WORLD DIAGNOSTICS, INC.-----------------------------
(hereinafter called the "Corporation") transferable on the books of the
Corporation in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be held subject to all the provisions of the
Certificate of Incorporation and By-Laws of the Corporation and the amendments
from time to time made thereto, copies of which are or will be on file at the
principal office of the Corporation, to all of which the holder by acceptance
hereof assents.
This Certificate is not valid unless countersigned by the Transfer Agent and
Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated: 03/17/99
/s/ Maureen Besson WORLD DIAGNOSTICS, INC. /s/ Ken Peters
SECRETARY CORPORATE SEAL PRESIDENT
1997 DELAWARE
Countersigned and Registered:
MANHATTAN TRANSFER REGISTRAR CO.
(Holbrook, N.Y.)
Transfer Agent and Registrar
/s/ [ILLEGIBLE]
Authorized Signature
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ...Custodian...
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gift to Minors
survivorship and not as tenants Act ........................
in common (State)
Additional abbreviations may also be used though not in the above list.
* For Value Received, ______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITER NAME AND ADDRESS OF ASSIGNEE)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------ Shares
of the stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint ______________________________________________________
Attorney to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated __________________
Signature(s) Guaranteed _________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST:
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
By: ___________________________________________________________________________
THE SIGNATURES SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT
TO S.E.C. RULE 17 Ad-15
TRANSFER AGENT: Manhattan Transfer Registrar Co.
P.O. Box 361
Holbrook, New York 11741
(516) 585-7341
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF
THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
EXHIBIT 6.1
Asset Purchase Agreement
World Diagnostics,Inc. Health Tech International, Inc.
Initial: Initial:
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") dated as of the 1st
day of June, 1998, is made by and between Health Tech International, Inc., a
Florida corporation, (referred to herein as "HEALTH TECH" or the "Seller")
having an address at 15271 N.W. 60th Avenue, Suite 201, Miami Lakes, Florida
33014 and World Diagnostics, Inc., a Delaware Corporation (referred to herein as
"WDI" or the "Buyer"), having an address at 15271 NW 60th Avenue, Suite 201,
Miami Lakes, Florida 33014.
RECITALS
WHEREAS, Sellers and HEALTH TECH desire to sell, and Buyer desires to
purchase, certain of the assets to be owned by Sellers as more specifically set
Forth in Exhibit "A" (referred to herein as the "Conveyed Assets") which assets
include, but are not limited to, the proprietary distribution agreements for
four generic diagnostic products manufacturers and to Health Tech's exclusive
proprietary technology for rapid diagnostic tests in the area of infectious
diseases and other diagnostic products and for the consideration and upon the
terms and subject to the conditions included in this Agreement; and
WHEREAS the Parties, and their principals, as a result of this
agreement, will operate as World Diagnostics, Inc. after the closing;
- --------------------------------------------------------------------------------
ORIGINAL CONFIDENTIAL. PAGE: 1
<PAGE>
Asset Purchase Agreement
World Diagnostics,Inc. Health Tech International, Inc.
Initial: Initial:
NOW THEREFORE, in consideration of the premises and the mutual
promises, warranties, covenants and agreements made in this Asset Purchase
Agreement, the Parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Asset Purchase Agreement, the following terms shall
have the following meanings:
1.1 "Agreement" means any written or oral contract, agreement, contract
rights, license, franchise, lease, mortgage, indenture, instrument, commitment,
obligation, plan or arrangement, whether formal or informal.
1.2 "Ancillary Agreements" shall mean the agreements dated as of this
date and entered into by the parties hereto as to certain ancillary matters.
1.3 "WDI Common Stock" shall mean the Common Stock of WDI, $.001 par
value.
1.4 "Closing" shall mean the consummation of the transactions set forth
in this Agreement.
1.5 "Knowledge" shall mean actual knowledge or such knowledge that a
reasonable person in such circumstances would have reason to know.
1.6 "Assets" when referred to in this agreement includes, the
proprietary
- --------------------------------------------------------------------------------
ORIGINAL CONFIDENTIAL. PAGE: 2
<PAGE>
Asset Purchase Agreement
World Diagnostics,Inc. Health Tech International, Inc.
Initial: Initial:
distribution agreements for four generic diagnostic products manufacturers and
to Health Tech's exclusive proprietary technology for rapid diagnostic tests in
the area of infectious diseases and other diagnostic products described in
Exhibit A herein. Seller shall keep all right, title and interests in all assets
and liabilities not described in Exhibit A herein.
1.7 "Conveyed Assets" shall mean those assets of Sellers which are
being sold, transferred and conveyed under the terms of this Agreement from
Sellers to WDI, as specifically set forth in Exhibit "A". The Conveyed Assets
shall be delivered to Buyer subject to any Ancillary Agreements executed by
the parties hereto. The Conveyed Assets shall NOT include any any rights, which
accrue or may accrue to Sellers under this Agreement or any Ancillary
Agreements;
1.8 "Retained Assets" shall mean those assets not set Forth in Exhibit
"A" and all rights therein.
ARTICLE II
PURCHASE AND SALE
2.1 CONSIDERATION. The consideration for the transfer of Conveyed
Assets (See Exhibit "A") (the "Purchase Price") shall be Two Thousand Dollars
($2,000.00) which terms and conditions are set forth in Section 2.2 hereof.
2.2 TERMS OF SALE. Upon the terms and subject to the conditions set
forth in this
- --------------------------------------------------------------------------------
ORIGINAL CONFIDENTIAL. PAGE: 3
<PAGE>
Asset Purchase Agreement
World Diagnostics,Inc. Health Tech International, Inc.
Initial: Initial:
3.1 CORPORATE ORGANIZATION. WDI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to execute and deliver this
Agreement and each Ancillary Agreement to which it is a party, if any, to
perform its respective obligations hereunder and thereunder, and to consummate
the respective transactions contemplated hereby and thereby.
3.2 CAPITALIZATION. The authorized capital stock or WDI consists of
10,000,000 shares of $.001 par value common stock. In addition, WDI has issued
950,000. Warrants to purchase common stock. Each warrant can be exercised within
nine (9) months from the closing of a private placement, which shall occur
simultaneous with the closing of this Asset Purchase Agreement at price of $1.00
per share. Other than the warrants detailed in this Section 3.2, there are no
outstanding warrants, calls, puts, of any character providing for the purchase,
issuance or sale of any shares of the capital stock or any other securities of
WDI.
3.3 AUTHORIZATION. ENFORCEABILITY. All necessary and appropriate
corporate action has been or will be taken by WDI prior to the Closing with
respect to the execution and delivery of this Agreement and each Ancillary
Agreement to which it is a party and the performance by WDI of its respective
obligations hereunder and thereunder, and approval
- --------------------------------------------------------------------------------
ORIGINAL CONFIDENTIAL. PAGE: 4
<PAGE>
Asset Purchase Agreement
World Diagnostics,Inc. Health Tech International, Inc.
Initial: Initial:
by the members or holders of any class of securities of WDI of the execution and
delivery of this Agreement or any Ancillary Agreement to which WDI is a party or
the consummation of the respective transactions contemplated hereby or thereby
is not required. The execution and delivery of this Agreement and the Ancillary
Agreements to which WDI is a party, the consummation of the respective
transactions contemplated hereby or thereby, and the performance or satisfaction
of the respective terms and conditions hereof or thereof do not constitute and
will not constitute a breach or default (or an event which, with the lapse of
time or the giving or a notice, or both, would constitute a breach or default)
or conflict with, any agreement, deed, writ, order, decree, or judgment, to
which WDI is a party or by which WDI is bound, and do not and shall not violate
or conflict with any applicable federal, state or local law, rule, regulation,
writ, decree or order to which WDI is subject, nor shall they conflict with or
violate any term, provision or covenant of any agreement, mortgage, contract,
indenture, instrument or judgment applicable to WDI.
3.4 BROKER AND FINDERS. No finder, broker, agent or other intermediary
has acted on behalf of WDI or is entitled to a commission or finder's fee in
connection with the negotiation or consummation of this Agreement.
3.5 GOVERNMENTAL APPROVALS AND FILINGS. WDI is not required to obtain
any consent, approval or authorization of, or to make any declaration or filing
with, any
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governmental authority for the valid execution and delivery of this Agreement or
any Ancillary Agreement to which it is a party, the performance of its
obligations hereunder and thereunder or the consummation of the transactions
contemplated hereby or thereby.
3.6 FINANCIAL CONDITION. WDI is a recently formed corporation.
3.7 Taxes. There are no tax audits or investigations, local, state, or
Federal, concerning or related to WDI pending, nor are there any required taxes;
fees, assessments, or governmental charges of any type which are due and/or are
unpaid.
3.8 COMPLIANCE WITH LAW: LICENSES. WDI conducts its business in
compliance in all material respects with all applicable laws, governmental
regulations, and judicial and administrative decisions, and no notice stating or
asserting the lack of such compliance has been received. All license or permits
issuable by any governmental authority which are necessary for the operation of
the business of WDI have been obtained and are currently in full force and
effect.
3.10 INVESTMENT REPRESENTATIONS. WDI is acquiring the Conveyed Assets
for purposes of continuing the Business of Health Tech. Accordingly, WDI may
resell a portion or all of the assets in the ordinary course of its business.
3.11 LITIGATION. There is no suit, claim, action, litigation or
proceeding, administrative or judicial, or any governmental investigation
pending or, to the knowledge of
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ORIGINAL CONFIDENTIAL. PAGE: 6
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Asset Purchase Agreement
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WDI, threatened against WDI or involving any of its properties or assets,
including without limitation any claim, proceeding or litigation for the purpose
of challenging, enjoining, or preventing the execution and delivery of this
Agreement or any Ancillary Agreement to which WDI is a party, the performance of
the respective terms and conditions hereof or thereof or the consummation of the
respective transactions contemplated hereby or thereby. To the knowledge of WDI,
it is not subject to or in default under any order, writ, injunction or decree
of any court or governmental authority.
3.12 OTHER GOVERNMENTAL APPROVALS AND FILINGS. WDI is not required to
obtain any consent, approval or authorization of, or to make any declaration or
filing with, any governmental authority for the valid execution and delivery of
this Agreement or any Ancillary Agreement to which WDI is a party, the exchange
of the Shares, or the performance or consummation or the respective transactions
contemplated by this Agreement or such Ancillary Agreement.
3.13 SUBSIDIARIES. None.
3.14 DISTRIBUTION OF CONVERTIBLE DEBENTURES. None.
3.15 MATERIAL CONTRACTS. Except as set forth in WDI's balance sheet
attached hereto, WDI is not party to, and the properties or assets of WDI are
not subject to or bound under, any agreement of the following kind:
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Asset Purchase Agreement
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(a) Any lease of real or personal property, either as lessor or as
lessors, which is not terminable by WDI without penalty within 30 days after
notice;
(b) Any agreement with or obligation to any director, officer or
shareholder of WDI;
(c) Any agreement or instrument for or relating to the borrowing of
money, either as borrower or lender;
(d) Any agreement with or legal obligation to any salesmen,
representatives, agents, dealers or distributors;
(e) Any franchise or franchise agreement; or
(f) Any other agreement of any kind which is material to the
operations, business, financial condition, property or assets of WDI.
All agreements, if any, disclosed in this Agreement to which WDI is
party, or by which it or any of its properties or assets is bound, are in full
force and effect and are valid, binding and enforceable in accordance with
their respective terms, and WDI is not in material default or breach, nor, to
the knowledge of the WDI and its shareholders, has there occurred an event or
condition which, with the passage of time or the giving of notice (or both),
would constitute a material default or breach by WDI with respect to the payment
or performance of any obligation thereunder, and no claim of such a default has
been
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asserted and there is no basis upon which such a claim could validly be made.
3.16 FINANCIAL CONDITION. There will be no material change in the
financial condition of WDI errors the date of this Agreement until Closing.
3.17 INDEBTEDNESS. Except as disclosed in WDI's balance sheet, it is
not indebted to any person or entity for any reason.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS AND SHAREHOLDERS
Officers and Directors of HEALTH TECH represent and warrant to Buyer
as follows:
4.1 NO VIOLATION. Neither the execution, delivery or peformance of this
Agreement or any Ancillary Agreement(s) will (a) violate or result in a breach
or default under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the Conveyed Assets or any agreement, contract
or understanding to which HEALTH TECH is a party, (b) violate any order,
judgment, decree or law applicable to Sellers.
4.2 Corporate Organizations. HEALTH TECH is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Florida and has all requisite corporate power to execute and deliver this
Agreement and each Ancillary Agreement to which it is a party, to perform its
respective obligations hereunder and
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ORIGINAL CONFIDENTIAL. PAGE: 9
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Asset Purchase Agreement
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thereunder and to consummate the respective transactions contemplated hereby and
thereby.
4.3 Authorization. HEALTH TECH is authorized to issue ___________
shares of stock at ___________ par value and has all requisite power and
authority to execute and deliver this Agreement and each Ancillary Agreement to
which it is a party, perform its respective obligations thereunder, and
consummate the respective transactions contemplated hereby and thereby. All
necessary action has been taken by HEALTH TECH and the majority of its
shareholders with respect to the execution, delivery and performance of this
Agreement and each Ancillary Agreement to which they are a party. Health Tech
was incorporated in Florida on ___________ ______, 19__.
4.4 Enforceability. This Agreement and the Ancillary Agreements to
which Shareholders are a party constitute a valid and binding obligation of
Shareholders enforceable in accordance with their respective terms, except as
limited by bankruptcy insolvency or other such laws concerning the rights of
creditors generally and the application of equitable principles. The execution
and delivery of this Agreement and the Ancillary Agreements, the consumation of
the respective transactions contemplated hereby or thereby, and the performance
or satisfaction of the respective terms anc conditions hereof or thereof do not
constitute and will not constitute a breach or default (or
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Asset Purchase Agreement
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an event which, which, with the lapse of time or the giving of a notice, or
both, would constitute a breach or default) under conflict with, any Agreement,
deed, writ, order decree, or judgment, and do not and shall not violate or
conflict with any applicable federal, state or local law, rule or regulation to
which the Sellers are subject. Pursuant to the provisions of this Agreement
Seller will transfer to WDI valid title thereto, free and clear of all liens,
except as stated herein, security instruments, encumbrances, pledges, charges,
claims, voting trusts and restrictions or any nature whatsoever, other than
restrictions on transfer or a general nature arising under federal and state
laws, to the assets described in Exhibit A.
4.5 Brokers, Finders. No finder, broker, agent or other intermediary
has acted on behalf of HEALTH TECH or its Shareholders, or is entitled to a
commission or a finder's fee in connection with the negotiation or consummation
of the Agreement or any of the transactions contemplated thereby, except that
ViStra Growth Partners, Inc. is acting as its financial advisor.
4.6 Other Governmental Approvals and Filings. Other than as set forth
herein, Sellers, HEALTH TECH or its Shareholders, are not required to obtain any
consent, approval or authorization of, or to make any declaration or filing with
any governmental authority as a prerequisite to the valid execution and
delivery of this Agreement to any Ancillary Agreements to which HEALTH TECH or
the Shareholders are parties, the
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Asset Purchase Agreement
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purchase and sale of the Shares, or the performance or consummation of the
respective transactions contemplated by this Agreement of such Ancillary
Agreement.
4.7 Compliance with Law; Licenses. HEALTH TECH conducts business in
compliance in all material respects with all applicable laws, govermental
regulations, and judicial and administrative decisions, and no notice stating or
asserting the lack of such which are necessary for the operation of the business
HEALTH TECH and which concern assets being conveyed to WDI, have been obtained
and are currently in full force and effect.
4.8 Renewal; Survival. Each of the representations and warrantees set
forth in Article IV shall survive the Closing.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNITY
(a)HEALTH TECH agrees to hold harmless and indemnify WDI and its
shareholders, directors, officers, employees, representatives, agents,
successors, consultants and assigns from and against any past claim, loss,
damage, liability, expense
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Or cost of any kind or amount whatsoever (including, without limitation,
reasonable attorney's fees and expenses) which results from or arises out of any
breach of or default under any representation, warranty, covenant or agreement
made by HEALTH TECH in this Agreement, in any Schedule or Exhibit to this
Agreement. In any Ancillary Agreement or in any certificate or other agreement
or document furnished or to be furnished by or on behalf of Sellers, HEALTH
TECH, under this Agreement or in connection with the respective transactions
contemplated hereby or thereby.
(b) WDI agrees to indemnify and hold Sellers. HEALTH TECH, and their
respective directors, officers, employees, representatives, agents, successors,
consultants and assigns harmless from and against any future claims from the
date of this Agreement, claims, damages, losses, liabilities, expense or cost of
any kind or amount whatsoever (including, without limitation, reasonable
attorney's fees and expenses) which results from, or arises out of any breach
of or default under any representation, warranty, covenant or agreement made
by WDI in this Agreement, in any Schedule or Exhibit to this Agreement, in any
Ancillary Agreement or in any certificate or other agreement or document
furnished or to be furnished by or on behalf of WDI under this Agreement or in
connection with the respective transactions contemplated hereby or thereby.
5.2 NOTICE OF CLAIM. Subject to Section 5.3, in the event that any
party hereto
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ORIGINAL CONFIDENTIAL. PAGE: 13
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asserts a claim for indemnification hereunder, such party seeking
indemnification (the "Indemnified Party") shall give written notice to the other
party (the "Indemnifying Party") specifying the facts constituting the basis
for such claim and the amount, if known, of the claim asserted.
5.3 RIGHT TO CONTEST CLAIMS OF THIRD PARTIES. If an Indemnified Party
asserts a claim for indemnification hereunder because of a claim made by any
claimant not a party to this Agreement, the Indemnified Party shall give the
other party or parties reasonably prompt notice thereof, but in no event more
than three (3) business days after said assertion is actually known to the
Indemnified Party. The Indemnifying Party shall have the right, upon written
notice to the Indemnified Party, and using counsel reasonably satisfactory to
the Indemnified Party, to investigate, secure, contest or settle the claim
alleged by such third party (hereinafter called a "Third-Party Claim"), provided
that the Indemnified Party may participate voluntarily at its own expense, in
any such Third-Party Claim through representatives and counsel of its own
choice. Except as expressly provided otherwise in this Section 5.3, the
Indemnified Party shall not settle or compromise any Third-Party Claim for which
it seeks indemnification hereunder without the prior written consent of the
Indemnifying, Party (which shall not be unreasonably withheld) unless suit shall
have been instituted against it and the Indemnifying Party shall not have taken
control
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ORIGINAL CONFIDENTIAL. PAGE: 14
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Asset Purchase Agreement
World Diagnostics,Inc. Health Tech International, Inc.
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of the defense of such Third-Party Claim after notification thereof as provided
in this Section 5.3.
Except as provided otherwise in the immediately preceding paragraph
with regard to the Indemnified Party's voluntary participation, the Indemnifying
Party shall bear all costs of such Tnird-Party Claim and shall indemnify and
hold the Indemnified Party harmless against and from all costs, fees and
expenses of such Third-Party Claim. Unless and until the Indemnifying Party
elects to defend the Third-Party Claim the Indemnified Party shall have the full
right, at its option, to do so and to look to the Indemnifying Party under the
provisions of this Agreement for the amount of the costs, if any, of defending
the Contest. The failure of the Indemnifying Party to respond in writing to the
aforesaid notice Of the Indemnified Party with respect to such Third-Party Claim
within ten (10) business days after receipt thereof shall be deemed an election
not to defend the same. If the Indemnifying Party does not assume the defense of
any such Third-Party Claim, including any litigation resulting therefrom, (a)
the Indemnified Party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, setting such
claim or litigation, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party shall be entitled to participate in (but not to control)
the defense of such action, with its own counsel at its own
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ORIGINAL CONFIDENTIAL. PAGE: 15
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Asset Purchase Agreement
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expense.
The parties hereto shall make mutually available to each other all
relevant information in their possession relating to any such Third-Party Claim
and shall cooperate in the defense thereof.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS. Notwithstanding anything else to the contrary contained
in this Agreement, the following shall be conditions precedent to Closing:
(a) The conduct of a due diligence investigation with regard to WDI and
the Other Entities, the same to be completed within 7 days, and the same to be
satisfactory to Seller's Shareholders, HEALTH TECH and their respective counsel
in all respects;
(b) That the representations and warranties of WDI have been and are
true as of the date of Closing and have been certified as true;
(c) That all documents, contemplated hereby, or any ether documents
contemplated hereby or pursuant to the Understanding, are acceptable to HEALTH
TECH.
ARTICLE VII
MISCELLANEOUS PROVISIONS
8.1 Notice. All notices, requests, demands and other communications
required or
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ORIGINAL CONFIDENTIAL. PAGE: 16
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Asset Purchase Agreement
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permitted under this Agreement shall be deemed to have been duly given and made
if in writing upon beings served either by personal delivery or by telecopier
to the party for whom it is intended or two business days after being
deposited, postage prepaid, certified or registered mail, return receipt
requested (or such form of mail as may be substituted therefor by postal
authorities), in the United States mail, bearing the address shown in this
Section 8.1:
SELLER:
Health Tech International, Inc.
5271 NW 60th Avenue, Suite 201
Miami Lakes, FL 33014
Phone: (305) 827-3304
E-Mail: [email protected]
BUYERS:
World Diagnostics, Inc.
15271 NW 60th Avenue, Suite 201
Miami Lakes, FL 33014
Phone: (305) 827-3304
8.2 ENTIRE AGREEMENT. This Agreement, the Memorandum, the Ancillary
Agreements, the Schedules and Exhibits hereto and thereto, and all documents
contemplated hereby and thereby embody the entire agreement and understanding of
the parties hereto with respect to the subject matter hereof and thereof, and
supersede all prior and contemporaneous agreements and understanding relative to
said subject matter.
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Asset Purchase Agreement
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8.3 BINDING EFFECT: ASSIGNMENT. This Agreement and the various rights
and obligations arising hereunder shall inure to the benefit of and be binding
upon WDI, its successors and permitted assigns and HEALTH TECH, its successors
and permitted assigns. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be transferred or assigned (by operation of law
or otherwise) by any of the parties hereto without the prior written consent of
the other party (which consent shall not be unreasonably withheld).
8.4 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, expressed
or implied, is intended or shall be construed to confer upon or give to any
person, firm, corporation or legal entity, other than the parties hereto, any
rights, remedies or other benefits under or by reason of this Agreement.
8.5 COUNTERPARTS. This Agreement may be executed simultaneausly in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
8.6 CAPTIONS. The section headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement in construing
or interpreting any provision hereof.
8.7 EXPENSES AND TRANSACTIONS. Each party hereto shall pay all costs
and
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expenses incurred by it in connection with this Agreement and the
transactions contemplated hereby, including without limitation, the fees and
expenses of his or its counsel and certified public accountants.
8.8 AMENDMENT. This Agreement may not be changed, amended, terminated,
augmented, rescinded or discharged (other than in "accordance with its terms),
in whole or in part, except by a writing executed by the parties hereto.
8.9 OTHER AND FURTHER COVENANTS. The parties shall, in good faith,
execute such other and further instruments, assignments or documents as may be
necessary for the consummation of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, the parties hereto
shall assist and cooperate with each other in connection with these activities
8.10 GOVERNING LAW. This Agreement shall in all respects be construed
in accordance with and governed by the laws of the State or Florida (without
giving effect to conflict-of-laws principles).
8.11 PUBLICITY. The parties hereto agree to cooperate in determining
the contents and the manner of presentation and publication of any press
releases or public statements with respect to the transactions contemplated
hereby, but each party may make any public disclosure required, in its judgment,
by law or regulation.
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Asset Purchase Agreement
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first above written.
WITNESS: WORLD DIAGNOSTICS, INC.
/s/ Maria Elena L. de Mendoza By: /s/ Ken Peters
- -------------------------------------- ----------------------------------
Print Name: Maria Elena L. de Mendoza Its: President
--------------------------- ---------------------------------
/s/ Leo Greenfield
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Print Name: Leo Greenfield
---------------------------
HEALTH TECH INTERNATIONAL, INC.
/s/ Maria Elena L. de Mendoza By: /s/ Ken Peters
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Print Name: Maria Elena L. de Mendoza Its: President
--------------------------- ---------------------------------
/s/ Leo Greenfield
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Print Name: Leo Greenfield
---------------------------
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ORIGINAL CONFIDENTIAL. PAGE: 20
EXHIBIT 6.2
[LOGO OMITTED]
A PART OF LINCOLN NATIONAL CORPORATION
CONDITIONAL RECEIPT
NO COVERAGE UNDER THIS RECEIPT WILL BECOME EFFECTIVE UNLESS AND UNTIL ALL
CONDITIONS OF THIS RECEIPT ARE MET. N0 AGENT HAS THE AUTHORITY TO ALTER OR WAIVE
ANY OF ITS TERMS OF CONDITIONS. THIS RECEIPT PROVIDES NO COVERAGE FOR RIDERS OR
ADDITIONAL BENEFITS.
CONDITIONS WHICH MUST BE MET BEFORE INSURANCE MAY BECOME EFFECTIVE UNDER THIS
RECEIPT:
1. An amount equal to at least one full planned modal premium must be
submitted, i.e., it requested premium mode is monthly, then one month's
premium must be submitted;
2. All medical examinations, tests, x-rays, and electrocardiograms required by
the Company's rules must be completed within 60 days of this receipt;
3. The Proposed Insured must be, on the effective date indicated below, a
risk acceptable to the Company exactly as applied for according to the
Company's rules and practices, without modification of plan, premium rate,
or amount of coverage;
4. On the effective date, the state of health and all factors affecting the
insurability of the Proposed Insured must be as stated in applications
required by the Company;
5. The application may NOT request an amount of insurance that exceeds
$500,000;
6. The proposed insured has complied with all parts of the application; and
7. All required portions of the application must be completed, and each
question must be truthfully and completely answered.
EFFECTIVE DATE: If all conditions above are met, then this Receipt will provide
insurance effective on the latest of: a. the date of the application, or b. the
date of completion of all underwriting requirerments stated in "2." above.
END OF INSURANCE: Once begun, any insurance this receipt provides ends at the
earliest of: a. 60 days after the date of this Receipt: b. when the Company
sends a refund of the premium which was exchanged for this Receipt: or c. the
date any policy issued goes into effect.
IMPORTANT NOTE: The amount of insurance which may become effective under this
Receipt will not exceed the lower of: a. the amount of insurance applied for on
this application, or b. $500,000.
IF ANY OF THE ABOVE CONDITIONS IS NOT MET, OR IF THE PROPOSED INSURED DIES BY
SUICIDE, THE LIABILITY OF THE COMPANY WILL BE LIMITED TO THE RETURN OF THE
AMOUNT OF MONEY SUBMITTED.
I HAVE READ THE CONDITIONAL RECEIPT, AND I UNDERSTAND AND AGREE TO ITS TERMS,
CONDITIONS, AND LIMITS. THESE HAVE BEEN FULLY EXPLAINED TO ME BY THE AGENT.
X [ILLEGIBLE] 9-29-99
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Signature of Applicant Date
Any check for which this Conditional Receipt is issued must be made payable to
the Company. DO NOT MAKE A CHECK PAYABLE TO THE AGENT OR LEAVE THE PAYEE BLANK.
The first premium will not be considered paid unless any check, draft, ar other
instrument of payment (given as payment) is paid in accordance with its term.
Received $374.65 from WORLD DIAGNOSTICS INC. on 9-29-99 (Date), in connection
with an application for life insurance, including any riders for which
application has been made.
X [ILLEGIBLE] 9-29-99
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Signature of Agent Date
EXHIBIT 6.3
INDEPENDENT CONTRACTOR AGREEMENT
This Agreement is entered into on March 5, 1999, between World Diagnostics,
Inc. ("Company") located in Dade county, Florida, and Immunodiagnostics, Inc.
(the "Research Provider"), with offices in Bedford, Massachusetts.
1. Research Provider agrees to perform the services of designing,
manufacturing, and supplying ("Services"), as defined in Appendix A attached
hereto, for the active components of rapid biomedical single step diagnostic
test devices ("Units") to Company as ordered from time to time by Company.
Research Provider will also serve as a scientific consultant, on an as needed
basis, to the Company, whereby such duties may be to consult with the Company's
Board of Directors, Customers and Governmental Organizations pertaining to the
Company's business concerning the services of the Research Provider. In
addition, from time to time, the Research Provider may be required to train
Company personnel regarding techniques, systems, and methods for manufacture of
the non-active components and assembly of the components, including the
Services, into the finished product.
2. Research Provider shall determine the method, details, and means of
performing the Services. Research Provider shall provide the Company with copies
of all written information pertaining to the Services, and regular weekly
telephone briefings and written reports of the status of its Services. All
supplies, including raw materials, consumed by Research Provider in performing
the Services shall be at the expense of the Research Provider.
3. Research Provider shall supply the Services to Company at Research
Provider's out of pocket cost, plus a ten percent markup, and at the lowest
possible cost attainable by the Research Provider, which may be subject to
verification by an audit of the Research Prover's books and records. Upon
request in writing by the Company, Research Provider shall supply to Company
auditable records pertaining to such costs.
4. For a period of 36 months after delivery, Research Provider will accrue
royalty payments on a quarterly basis for Units shipped to customers by the
Company. Upon request in writing, Company shall supply to Research Provider
auditable records backing up all such sales. The royalties are earned on receipt
of funds from customers and payable at the beginning of the next quarter
according to the following schedule:
Unit Sales Quarterly Unit Pay-Out Accumulation Value
---------- ---------------------- ------------------
0- 10,000 $ .20/each $ 3,000.00
10,001 - 50,000 $ .15/each $ 7,500.00
50,001 - 250,000 $ .10/each $25,000.00
250,001 - 1,000,00 $ .07/each $70,000.00
1,000,001 $ .05/each
<PAGE>
5. As long as Research Provider accrues the equivalent of yearly royalties
on the sale of 500,000 Units, Research Provider shall not supply the same
Services to any third party for those products that are being made exclusively
for Company. If less than 500,000 units are sold per annum to customers, Company
may, at its sole option, maintain the exclusivity by paying to Research Provider
an amount equal to the difference between the royalty on 500,000 units and the
royalty on the units actually sold.
If the requirements for maintaining exclusivity are not met by the Company,
the relationship becomes non-exclusive, with Research Provider able to sell to
third parties, but except the Research Provider remains under the duty to
provide Services to Company as provided for in this Agreement on a non-exclusive
basis. With respect to all Services, Research Provider shall grant Company the
most favorable terms and conditions offered to any third party.
6. Research Provider may choose the location of work, but at the request of
the Company, agrees to provide services at Company's headquarters in Florida as
may be reasonably requested by the Company, whereby such requests shall provide
reasonable advanced notice, and shall not exceed 2 days per month. All travel
expenses shall be paid by the Company.
7. Either party may terminate this Agreement by giving one (1) year notice
to the other party. However, the proprietary information (paragraph 15),
confidentiality (paragraph 16), and non-competition (paragraph 17) provisions of
this Agreement shall survive forever, regardless for the reason for termination.
8. If either party defaults in the performance of this Agreement, or
materially breaches any of its provisions, if such default has not been cured
after 60 day's written notice, the non-breaching party may terminate this
Agreement.
9. Research Provider enters into this Agreement as, and shall continue to
be, an independent contractor. In no circumstance, shall Research Provider look
to Company as an employer. Research Provider shall not be entitled to any
benefits accorded to Company's employees, including worker's compensation,
disability insurance, or vacation or sick pay.
10. Research Provider shall pay, when as due, any and all payroll taxes
incurred as a result of Research Provider's compensation, including estimated
taxes and shall provide Company with a proof of payment on demand. Research
Provider indemnities Company for all claims, losses, costs, fees, liabilities,
or damages suffered by Company arising from a breach of this provision.
11. Research Provider represents that Research Provider has the
qualifications and ability to perform the Services in a professional manner,
without the advice, control, or supervision of Company. Research Provider shall
have the sole discretion and control of Research Provider's services and in the
manner in which they are performed.
<PAGE>
12. Research Provider agrees that all designs, plans, reports,
specifications, drawings, schematics, prototypes, models, inventions, know-how,
and all other information and items limited to Services provided to, or at the
request of, Company, made during the course of providing Services to Company,
shall be and are assigned to Company as its sole and exclusive property. On
Company's request, Research Provider agrees to assist Company, at Company's
expense, to obtain patents or copyrights for such Services, including the
disclosure of all pertinent information and data, the execution of all
applications, oaths and assignments, and all other instruments and papers that
Company shall deem necessary to apply for and to assign or convey to Company,
its successors, and assigns or nominees, the sole and exclusive right, title and
interest in such Services. The Services constitute proprietary information of
the Company. Research Provider agrees to obtain written assurances from
proprietary information arising from the Services, and provide the Company with
copies of such agreements within 10 days of the signing of this Agreement.
13. The written, printed, graphic, or electronically recorded materials
furnished for use by Company or by Research Provider to the Company are
proprietary information and are the property of Company. Proprietary information
includes, but is not limited to, pricing information, specific customer
requirements, customer and potential customer lists, and information on
Company's employees, agents, or divisions.
14. Research Provider shall maintain in confidence and shall not directly
or indirectly, disclose or use; either during or after the term of this
Agreement, any proprietary information, confidential information, or know-how
belonging to Company, whether or not it is in written or printed form, except to
the extent necessary to perform the services. On termination of Research
Provider's Services to Company, or at the request of Company before termination,
Research Provider shall deliver to Company material in Research Provider's
possession relating to the Services or Company business. The obligations on
proprietary information extend to information belonging to customers and
suppliers of Company about whom Research Provider may have gained knowledge as a
result of performing the Services.
15. Research Provider shall not, during the term of this Agreement, and for
a period of three years after the termination of this Agreement, for any reason,
either directly or indirectly, (a) call on, solicit, or take away any of
Company's customers or potential customers about whom Research Provider became
aware as a result of providing the Services to the Company either for Research
Provider or for any other person or entity; or (b) solicit or take away or
attempt to solicit or take away any of Company's employees or contractors either
for Research Provider or for any other person or entity.
<PAGE>
16. Any notices provided hereunder must be in writing and shall be deemed
effective on the earlier of personal delivery (including fax) or the third day
after mailing by first class mail to the recipient at the following addresses:
To Company:
World Diagnostics, Inc.
15721 N.W. 60th Avenue, Suite #203
Miami Lakes, Fla. 33014
Attention: Ken Peters
To Research Provider
Immunodiagnostics, Inc.
35 Wiggins Avenue
Bedford, Massachusetts 01730
Attention: Jay Raina
Or to such other addresses or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
17. If any term, provision, or part of this Agreement is found by a court
to be invalid, illegal, or incapable of being enforced by any rule, of law or
public policy, all other terms, provisions, and parts of this Agreement, shall
nevertheless remain in full force and effect. On determination that any term,
provision, or part of this Agreement is invalid, illegal, or incapable of being
enforced, all remaining terms shall remain in full force and effect.
18. This Agreement constitutes the final, complete, and exclusive
embodiment of the entire agreement and understanding between the parties related
to the subject matter of this Agreement and supersedes and preempts any prior of
contemporaneous understandings, agreements, or representations by or between the
Parties, written or oral. This Agreement shall be construed in accordance with
the State of Florida, or any other jurisdiction in which the Company has a valid
basis for asserting a claim.
19. This Agreement may be executed on separate copies, any one of which
need not contain signatures of more than one party, but all of which taken
together will constitute one and the same agreement.
20. This Agreement is intended to bind and insure to the benefit of and be
enforceable by Company and Research Provider, and their respective successors
and assigns, except that Research Provider may assign any of Research Provider's
rights and duties under this Agreement with Company's prior written consent.
<PAGE>
If the foregoing correctly sets forth our understanding, please so indicate
by signing below, and returning an executed copy of this agreement at the
aforementioned address
WORLD DIAGNOSTICS, INC.
By:
------------------------------
Ken Peters, President
IMMUNODIAGNOSTICS, INC.
By:
-----------------------
Jay Raina, President
Agreed and accepted this _____ day of
__________________, 1999.
<PAGE>
Appendix A to Independent Contractor Agreement Date: 3/5/99
The products listed below constitute the first design products to be
manufactured by Jay Raina, Ph.D. as requested by World Diagnostics Inc. to be
exclusively and custom manufactured for World Diagnostics as defined in the
agreement attached herewith.
Products
1) Rapid Urine HIV 1&2 Screen test
2) Rapid Whole Blood HIV 1&2 subtype C
It is understood and agreed to this day by terms relating to confidentiality and
exclusivity as stated in the independent contractor agreement.
- --------------------------- --------- --------------------- --------
Ken Peters - President Date Jay Raina Ph. D. Date
World Diagnostics Immunodiagnostics, Inc.
EXHIBIT 6.4
WORLD DIAGNOSTICS, INC.
CONFIDENTIALITY AGREEMENT
THIS CONFIDENTIALITY AGREEMENT (Agreement) is entered into on August 18,
1999 between World Diagnostics, Inc. and its affiliated companies (collectively
the Company), and Vincent Antoine.
In consideration of the commencement of the Employee's employment and the
compensation paid to the employee. Employee hereby acknowledges and agrees with
the Company as follows:
The Agreement shall become effective on the earlier of (1) commencement of
the Employee's employment with the Company or (2) the date and time at which any
confidential information is first disclosed to the Employee.
1. Confidential Information. The Company has and will develop compile, and own
certain proprietary techniques and confidential information that have great
value in its business (said techniques and information are referred to in
this Agreement collectively as Confidential Information). The Company has
and will have Confidential Information of its clients. (Clients shall mean
any persons or entities for whom the Company performs services or to whom
the Company sells products, or from whom the Company or the Employee
obtains information.) Confidential Information includes not only
information disclosed by the Company or its Clients to Employee in the
course of his or her employment, but also information developed or learned
by the Employee during the course of his or her employment with the
Company, such as inventions or other proprietary know-how. Confidential
Information is to be broadly defined. Confidential Information includes all
information that has or could have commercial value or other utility in the
business in which the Company or Clients are engaged or in which they
contemplate engaging. Confidential Information also includes all
information, of which the unauthorized disclosure could be detrimental to
the interests of the Company or Clients, whether or not such information is
identified as Confidential Information by the Company or Clients. By
example, and without limitation, Confidential Information includes any and
all information concerning teaching techniques, processes, formulas, trade
secrets, inventions, discoveries, improvements, research or development and
test results, specifications, data, know-how, formats, marketing plans,
business plans, strategies, forecasts, unpublished financial information,
budgets, projections, and customer and supplier identities, characteristics
and agreements.
<PAGE>
2. Protection of Confidentiall information. Employee agrees that at all times
during or after his or her employment with the Company. he or she will hold
in trust, keep confidential, and not disclose to any third party or make
any use of the Confidential Information of the Company or Clients except
for the benefit of the Company or Clients, and in the course of his or her
employment with the Company. Employee further agrees not to cause the
transmission, removal, or transport of Confidential Information or
inventions from the Company's principal place of business specified by the
Company at 15271 NW 60th Avenue, Hialeah. Florida, or such other place as
of business specified by the Company, without prior written approval of the
President of the Company.
3. Non-competition during employment. Except with the express prior written
consent of the President of the Company, Employee agrees that he or she
will not, during the period of his or her employment with the Company; (1)
engage in any employment or activity other than for the Company in any
business in which the Company is engaged or contemplates being engaged; (2)
induce any other employee of or consultant to the Company to engage in any
such employment activity; or (3) solicit any Clients or potential Clients
of the Company for services similar to those performed by the Company even
though not directly competitive with such services.
4. Delivery of Documents and Data on Termination of Employment. In the event
of termination (voluntary or otherwise) of Employee's employment with the
Company. Employee agrees, promptly and without request, to deliver to and
inform the Company of all documents and data pertaining to his or her
employment and the Confidential Information and inventions of the Company
or Clients, whether prepared by the Employee or otherwise coming into his
or her possession or control. Employee will not retain any written or other
tangible material containing any information concerning or disclosing any
of the Confidential Information or inventions of the Company or Clients.
5. Attorney's Fees. If any action is necessary to enforce this Agreement, the
prevailing party shall be entitled to recover its attorney's fees and
costs.
6 Understanding. Employee acknowledges and agrees that the protection set
forth in this Agreement is a material condition to his or her of employment
with and compensation by the Company.
7 Amendment and Binding Effect. This Agreement may not be amended except by
an instrument in writing signed by both parties. This Agreement shall be
binding on the heirs, executors, administrators,
<PAGE>
and other legal representatives and assigns of Employee, and is for the
benefit of the Company and its successors and assigns.
8. Governing Law. This Agreement shall be governed by the laws of the State of
Florida.
9. Entire Understanding. This Agreement expresses the entire understanding of
the parties about the described subject matter.
10. Severability. If a court finds any protection of this Agreement invalid
or unenforceble as appiled to any circumstance, the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall be interpreted so as best to effect the intent of the
parties hereto. The parties further agree to replace any such void or
unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic,
business, and other purposes of the void or unenforceable provision.
11 Employment at Will. Employment and compensation can be terminated, with or
without cause, and with or without notice, at any time, at the option of
the Company or the Employee. Nothing contained in this Confidentiality
Agreement shall limit or otherwise alter the foregoing.
By /s/ Vincent Antoine
---------------------------
Vincent Antoine
Address for Notification:
19221 NE 10th Ave
Apt # 302
North Miami Beach, FL 33179
By /s/ Ken Peters
---------------------------
Ken Peters, President
Dated: 08/30/1999
----------
EXHIBIT 6.5
World Diagnostics, Inc.
75271 NW 60 AVENUE SUITE 201 MIAMI LAKES FL 33014
TELEPHONE NUMBER: (305) 827-3304 FAX NUMBER: (305) 827-3305
LETTER OF AGREEMENT
This agreement is made as of he 4th day of February, 1999 by and between Garo
Lab (Representative) and World Diagnostics. Inc. Company.
1. APPOINTMENT: Subject to the terms set forth in this agreement, World
Diagnostics, Inc. appoints Garo Lab as it's exclusive Representative
/Agent/Distributor/Wholesaler for its products. The representatie shall
have the right to market, promote and sell World Diagnostics, Inc. products
in the territories hereinafter defined as independent contractor for World
Diagnostics, Inc.
2. AREAS OF DISTRIBUTION: Hungary
3 DUTIES OF REPRESENTATIVE: Shall make best efforts in market, promote,
distribute, sell demonstrate proper use of products, supply appropriate
customer support at customers place of business, comply with all local or
regional laws, rules and regulations of each country, maintain best efforts
of ongoing contact with all customers for the purpose of communicating
products and marketing information, maintain goodwill of World Diagnostics,
Inc. and shall conduct business in consistent manner with policies and
indemnify World Diagnostics, Inc. to any misrepresentations, obligations or
liabilities for its officers, directors, shareholders or employees.
4. MARKETING PROMOTIONS AND SAMPLING PROGRAMS. Programs will be mutually
defined between World Diagnostics, Inc. (WDI) and Garo Lab on an annual
basis. WDI commits to work in support with Garo Lab in the areas of
sampling. Trade shows, Symposiums and cooperative advertising. It is agreed
that WDI will assist and promote Garo Lab sales by contributing up to 50%
of an annual budget (WDI's share not to exceed $2,500.00 US) which would
constitute WDI's commitment to marketing through Symposiums. Garo Lab
agrees to provide plans and agendas 90 days in advance of commencement. WDI
reserves the right to review and be informed of all programs before WDI
accepts it's cost share of any program. Further, WDI agrees to provide
samples at a 50% rate at the highest distributor price level, up to $150.00
for any individual product in year one. That the total commitment of sample
credits will not exceed $2,500.00 US in the first year. In order for WDI to
assess the effectiveness of any sampling program, WDI requests quarterly
fol1ow up reports from Garo Lab. in a spread sheet format indicating
accounts sampled, forcast sales, response of client and current disposition
of prospective sale. All information provided remains the property of Garo
Lab and WDI represents that should the relationship between WDI and Garo
Lab end, WDI will not solicit any business directly from these clients for
a period of one year.
5. PRICING/PAYMENT OF TERMS: The price of products shall be set as per World
Diagnostics, Inc. In Appendix A, to be completed and agreed upon by July
31, 1999 upon product and volume list provided by Garo Lab. Prices are
subject to change within thirty days written notice to the representative.
The representative will bill customers directly and be invoiced directly by
World Diagnostics, Inc. and the reprresentative will deliver directly to
customer. Terms to Gara Lab will be 30 days net paid by either Letter of
Credit or directly wire transfer of Funds to World Diagnostics, Inc. bank
account. All products shipped directly to Garo Lab shall be F.O.B. World
Diagnostics, Inc., Miami Lakes, Florida.
6. DEFECTIVE PRODUCTS/RETURNS. If any products are damaged, adultered or
misbranded the representative sha11 promptly notify World Diagnostics, Inc.
within fifteen (15) on receipt of material and these shall be replaced at
no charge subject to World Diagnostics, Inc.'s verification. World
<PAGE>
World Diagnostics, Inc.
75271 NW 60 AVENUE SUITE 201 MIAMI LAKES FL 33014
TELEPHONE NUMBER: (305) 827-3304 FAX NUMBER: (305) 827-3305
Diagnostics, Inc. warrants that all products are safe and effective as
describe by product literature or other product information provided by
World Diagnostics, Inc. If the representative fails to notify World
Diagnostics, Inc. of damaged goods within 15 days, then products will have
been deemed acceptable by the representative.
7 CONFIDENTIAL INFORMATION: World Diagnostics, Inc. reserves the right to
terminate this agreement should the representative be in violation of the
disclosure of any confidential information which World Diagnostics, Inc.
wishes to be kept confidential or determines the dissemination of such
information to be injurious to their success ant profitability as a
Corporation.
8. COVENANTS NOT TO COMPETE: The representative shall not while maintaining an
agreement to sell, manufacture or distribute any products substantially
equivalent to any products currenctly available as of this agreement which
World Diagnostics, Inc. has been manufacturing and distributing with Garo
Lab.
9 TERM/TERMINATION: The terms of this agreement shall continue for one (1)
year from the date of its signing Either party reserves the right to
terminate this agreement at the end of one (1) year terms. All records of
the representative relating to customers actively involved in purchasing
World Diagnostics, Inc. products as well as all records, literature,
supplies and samples are to be provided to World Diagnostics, Inc., Inc.
Should this agreement be terminated.
10. INDEMNIFICATION: Garo Lab will hold World Diagnostics, Inc. harmless from
and against any and al1 liabilities or claims incurred by themselves in
their operations as a representative for World Diagnostics, Inc.'s Products
World Diagnostics, Inc. shall likewise indemnify and hold harmless the
representative should any claims, liabilities or judgments arise fron their
own manufacturing, marketing or other liabilities arising from their
ongoing operations.
11. MAINTENANCE OF INVENTORY: Representative shall maintain sufficient
inventory to satisfy customer demand on a qqarterly basis. Inventory
volumes to be stipulated in Appendix A. Appendix A can be suitable amended
if required for some reasons, if both parties agree mutually.
12. COMMUNICATION: All communicaations shall be in writing and shall be
considered delivered if posted by US mail return receipt requested as
follows or is sent by facsimile.
IF TO DISTRIBUTOR: Garo Lab
1222 Budapest
Mezo u. 50
IF TO WORLD DIAGNOSTICS, INC.: World Diagnostics, Inc.
15271 NW 60th Avenue
Suite 201
Miami Lakes, FL 33014
Attention: Ken Peters
By: By: /s/ Ken Peters
--------------------- -------------------------
Trudi Borbiro Ken Peters
President President, CEO
Garo Lab World Diagnostics, Inc.
[GRAPHIC OMITTED]
<PAGE>
World Diagnostics, Inc.
75271 NW 60 AVENUE SUITE 201 MIAMI LAKES FL 33014
TELEPHONE NUMBER: (305) 827-3304 FAX NUMBER: (305) 827-3305
APPENDIX A
MINIMUM QUANTITY SALES VOLUMES
------------------------------
First Year $20,000.00 US
Second Year $200,000.00 US
Third Year $200,000.00 US
Fourth Year and successive years therefore $200,000.00 US
MINIMUM INVENTORY QUANTITIES
----------------------------
TO BE DETERMINED BY JULY 31, 1999.
ORDERING
PRODUCT QUANTITIES PRICE
--------------------------------------------------------
See Attached Appendix Supplement
- -------------------------------------------------------------------------------
Terms: 30 days net. Letter of Credit or Wire Transfer
Delivery: 3 weeks from order confirmation on standard products
Freight: F.O.B. Miami, Florida, USA
/s/ Kent Peters
President and CEO
World Diagnostics, Inc.
Above signature is acknowledged, subscribed and sworn to before me on
February 1, 1999.
/s/ Claudie Marie Riefkohl Notary Public, County of DADE,
Claudie Marie Riefkohl State of FLORIDA.
My commissino expires: May 10th, 2002.
[SEAL]
CLAUDIE M. RIEFKOHL
COMMISSION # CC 741343
EXPIRES MAY 10, 2002
BONDED THRU
ATLANTIC BONDING CO., INC.
EXHIBIT 6.6
FIRST AMENDMENT TO LEASE BETWEEN HEALTH TECH INTERNATIONAL "TENANT" AND
AUDREY I. NEWMAN, LANDLORD, DATED SEPTEMBER 9TH, 1997,
FOR LEASED PREMISES AT SUITE #201, 15271 NW 60 AVENUE, MIAMI LAKES, FLORIDA
WHEREAS: Tenant and Landlord have entered into a Lease Contract (the "Lease")
for the above Promises, and
WHEREAS: The parties wish to amend said to incorporate changes they now wish to
make;
NOW THEREFORE: The parties agree to the following changes to the lease:
EFFECTIVE APRIL 1, 1998:
1. Change the Leased Premises from Suite 201 to Suites 201 and 106.
2. Change the Square Footage leased from 1,100 sq.ft. to 191O sq.ft.
3. Change the Security Deposit from $2,400.00 to $4,200.00.
4. Change the Rental Schedule to that shown below.
EFFECTIVE NOVEMBER 1, 1998:
1. Change the Leased Premises from Suite 201 to Suites 201, 106 and 107.
2. Change the Square Footage leased from 1,100 sq.ft. to 2775 sq.ft.
3. Change the Security Deposit from $4,200.00 to $6,120.00.
4. Change the Rental Schedule to that shown below.
Paragraph 1.1 RENTAL shall be deleted and in its place shall be substituted: 1.1
RENTAL. Lessee shall pay to the Lessor a total rental of One Hundred One
Thousand Nine Hundred Ninety Six Dolars ($101,996.0O) for the term of this lease
($95,996.00 if all discounts are earned), together with all other amounts payble
by the Lessee pursuant to the terms of this Lease. Said rental shall be paid in
installments in advance, without any set-off deductions whatsoever, ON OR BEFORE
the first day of each month during the term of this lease, the installments to
be in the amount of:
<TABLE>
<CAPTION>
RENT TAX PAYMENT RENT RENT PAYMENT
---- --- ------- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4/1/98 to 9/30/98 $ 2,300.00 $ 149.50 $ 2,449.50 $ 2,100.00 $ 136.50 $ 2,236.50
10/1/98 to 10/31/98 $ 2,360.00 $ 153.40 $ 2,513.40 $ 2,160.00 $ 140.40 $ 2.300.40
11/1/98 to 3/31/99 $ 3,310.00 $ 215.15 $ 3,525.15 $ 3,110.00 $ 202.15 $ 3,312.15
4/1/99 to 9/30/99 $ 3,360.00 $ 218.40 $ 3,578.40 $ 3,160.00 $ 205.40 $ 3,365.40
10/1/99 to 10/31/99 $ 3,423.00 $ 222.50 $ 3,645.5O $ 3,223.00 $ 209.50 $ 3,432.5O
11/1/99 to 3/31/00 $ 3,473.00 $ 225.75 $ 3,698.75 $ 3,273.00 $ 212.75 $ 3,485.75
4/1/00 to 9/93/00 $ 3,523.00 $ 229.00 $ 3,752.00 $ 3,323.00 $ 216.00 $ 3,539.00
TOTALS: $101,996.00 $ 95,996.00
</TABLE>
There should be no rent for the period 4/1/98 to 4/14/98 for 106, provided
however, if occupancy occurs on a day other than first day of the month then
the initial rent installment shall be prorated for the fraction of the month.
* Lessee, throughout the term of this lease, shall be entitled to a discount of
$20O.OO on each installment of rent which is RECEIVED by the Lessor on or before
the seventh 7th day of the month for which the installment is due. If the
installment is RECEIVED by Lessor after the seventh day of the month for which
the installment is due, the full amount as stipulated above, plus tax, shall be
due and receipt of any lesser amount shall be deemed a default under this lease.
If any installment remains unpaid on the last day of the month for which it is
due, Lessee shall pay a 5% late fee as additional rent, and interest on each
such installment and any associated late fees shall accrue at the rate of 1.5%
per month, after the first month, until paid.
** Should the Florida Sales tax change during the term of this lease, this
amount will change accordingly.
<PAGE>
In the event that Land1ord is unable to deliver Suite 107 to Tenant on or before
November 1, 1997, Tenant shall have the option of canceling this amendment upon
30 days prior written notice to Landlord, whereupon the Lease will revert to
the original terms and conditions.
Agreed to on the Date First Written Above by the Parties Below:
Witnesses
/s/ ILLEGIBLE
- ----------------------------------- Landlord: Audrey I. Newman
/s/ John McKendry By: /s/ Audrey I. Newman
- ----------------------------------- -----------------------------------
Audrey I. Newman
/s/ ILLEGIBLE
- ----------------------------------- Tenant: Health Tech International
/s/ ILLEGIBLE By: /s/ Ken Peters
- ----------------------------------- -----------------------------------
Ken Peters, President
