UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO.1
TO
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) of THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to ____________________
Commission file number ______________________________________
WORLD DIAGNOSTICS, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 65-0742342
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
15271 N.W. 60TH AVENUE, SUITE #201, MIAMI LAKES, FLORIDA 33014
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(Address of principal executive offices)
(305) 827-3304
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
1
<PAGE>
WORLD DIAGNOSTICS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 1999
----------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 18,345 $ 358,595
Accounts receivable 229,512 82,112
Inventory, net of reserve of $19,066 at December 31, 1999
and March 31, 1999 133,156 42,484
Other current assets 23,931 5,999
----------- -----------
Total current assets 404,944 489,190
Fixed assets, net 130,054 16,979
Other assets 10,963 4,419
----------- -----------
Total assets $ 545,961 $ 510,588
=========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Notes payable $ 375,000 $ 127,500
Current portion of obligations under capital leases 13,114 3,324
Accounts payable and accrued expenses 411,475 222,622
----------- -----------
Total current liabilities 799,589 353,446
Obligations under capital leases 31,946 7,120
----------- -----------
Total liabilities 831,535 360,566
Commitments
Stockholders' (deficit) equity:
Common stock $0.001 par value; 10,000,000 shares
authorized, 4,281,827 and 3,410,737 shares issued and
outstanding at Dec. 31, 1999 and March 31, 1999, respectively 4,282 3,410
Additional paid-in capital 1,810,281 1,100,972
Unearned compensation -- (7,840)
Accumulated deficit (2,100,137) (946,520)
----------- -----------
Total stockholders' (deficit) equity (285,574) 150,022
----------- -----------
Total liabilities and stockholders' (deficit) equity $ 545,961 $ 510,588
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
WORLD DIAGNOSTICS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues $ 386,813 $ 129,389 927,891 $ 394,490
Cost of goods sold 299,492 103,243 744,001 291,467
----------- ----------- ----------- -----------
Gross profit 87,321 26,146 183,890 103,023
Selling, general, and administrative expenses 341,493 99,153 846,787 256,202
----------- ----------- ----------- -----------
Loss from operations before other expenses (254,172) (73,007) (662,897) (153,179)
Other expenses:
Interest expense 5,515 9,486 6,381 9,486
Other income 283 -- 9,599 --
----------- ----------- ----------- -----------
Loss from operations before extraordinary item (259,404) (82,493) (659,679) (162,665)
Extraordinary loss on extinguishment of debt -- -- 493,938 --
----------- ----------- ----------- -----------
Net loss $ (259,404) $ (82,493) $(1,153,617) $ (162,665)
=========== =========== =========== ===========
Basic and dilutive loss per common share:
Loss from operations before extraordinary item $ (0.06) $ (0.03) $ (0.16) $ (0.06)
Extraordinary items -- -- (0.12) --
----------- ----------- ----------- -----------
Basic and diluted loss per common share $ (0.06) $ (0.03) $ (0.27) $ (0.06)
=========== =========== =========== ===========
Weighted average number of common shares outstanding 4,281,827 3,008,391 4,238,776 2,881,504
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
WORLD DIAGNOSTICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON
COMMON STOK STOCK ADDITIONAL
------------------- SUBSCRIPTION PAID-IN UNEARNED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT RECEIVABLE CAPITAL COMPENSATION DEFICIT EQUITY
--------- -------- --------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1997 2,580,000 $ 2,580 $ (2,580) $ -- $ -- $ (13,832) $ (13,832)
Capital contribution, net -- -- -- 20,576 -- -- 20,576
Net loss -- -- -- -- -- (108,210) (108,210)
--------- -------- --------- ----------- --------- ----------- ----------
Balance, March 31, 1998 2,580,000 2,580 (2,580) 20,576 -- (122,042) (101,466)
Payment of stock subscription receivable -- -- 2,580 -- -- -- 2,580
Issuance of common stock at $0.125 per share 400,000 400 -- 29,344 -- -- 29,744
Issuance of common stock
due to forbearance agreement
at $0.125 per share 200,000 200 -- 24,800 -- -- 25,000
Issuance of common stock for
extinguishment of debt at $2.16 per share 29,237 29 -- 63,013 -- -- 63,042
Exercise of common stock purchase
warrants 201,500 201 -- 201,299 -- -- 201,500
Proceeds from exercise of common stock
purchase warrants to be issued -- -- -- 374,250 -- -- 374,250
Loss on warrant inducement -- -- -- 374,250 -- -- 374,250
Issuance of stock options -- -- -- 13,440 (13,440) -- --
Amortization of unearned compensation -- -- -- -- 5,600 -- 5,600
Net loss -- -- -- -- -- (824,478) (824,478)
--------- -------- --------- ----------- --------- ----------- ----------
Balance at March 31, 1999 3,410,737 $ 3,410 $ -- $ 1,100,972 $ (7,840) $ (946,520) $ 150,022
========= ======== ========= =========== ========= =========== ==========
Issuance of common stock for
extinguishment of debt at $5.25 per share 101,090 101 -- 530,622 -- -- 530,723
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 -- -- 33,750
Issuance of common stock for
compensation of employees and
non-employees at $6.04 and $5.63
per share 15,500 16 -- 92,030 -- -- 92,046
Capital contribution from the forgiveness
of debt by shareholder -- -- -- 37,412 -- -- 37,412
Amortization of unearned compensation -- -- -- -- 7,840 -- 7,840
Proceeds from stock purchase warrants 16,250 16,250
Net loss -- -- -- -- -- (1,153,617) (1,153,617)
--------- -------- --------- ----------- --------- ----------- -----------
Balance at December 31, 1999 (unaudited) 4,281,827 $ 4,282 $ -- $ 1,810,281 $ -- $(2,100,137) $ (285,574)
========= ======== ========= =========== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
WORLD DIAGNOSTICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (259,404) $ (82,493) $(1,153,617) $ (162,665)
Adjustments to reconcile net loss to net cash used
in operating activities:
Extraordinary loss on extinguishment of debt -- -- 493,938 --
Common stock issued in lieu of compensation -- -- 92,046 --
Amortization of unearned compensation 1,120 -- 7,840 --
Depreciation and amortization 4,348 -- 9,540 --
Changes in operating assets and liabilities:
Accounts receivable (72,046) (14,861) (147,400) (7,299)
Inventory (64,964) (18,061) (90,672) (53,430)
Other current assets 3,195 (1,644) (17,932) (3,579)
Other assets (5,540) -- (6,544) (2,600)
Accounts payable and accrued expenses 124,062 (1,742) 214,299 11,732
----------- ----------- ----------- -----------
Net cash used in operating activities (269,229) (118,801) (598,502) (217,841)
----------- ----------- ----------- -----------
Cash flow from investing activities:
Purchases of fixed assets (68,340) (11,673) (81,343) (11,673)
----------- ----------- -----------
Net cash used in investing activities (68,340) (11,673) (81,343) (11,673)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from notes payable 400,000 35,530 450,000 160,000
Payment of notes payable (75,000) -- (120,000) --
Proceeds from issuance of warrants 16,250 94,000 16,250 94,000
Payments under capital lease obligation (2,651) -- (6,655) --
Proceeds from stock subscription receivable -- -- -- 2,580
Decrease in cash overdraft -- -- -- (15,579)
----------- ----------- ----------- -----------
Net cash provided by financing activities 338,599 129,530 339,595 241,001
----------- ----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents 1,030 (944) (340,250) 11,487
Cash and cash equivalents at beginning of period 17,315 12,431 358,595 --
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 18,345 $ 11,487 $ 18,345 $ 11,487
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
WORLD DIAGNOSTICS, INC.
STATEMENTS OF CASH FLOWS, CONTINUED
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In May 1999, the Company issued 6,000 shares of restricted common stock
to extinguish accounts payable in the amount of $8,035.
In June 1999, the Company issued 101,090 shares of restricted common
stock to extinguish notes payable in the amount of $62,500.
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.
For the nine months ended December 1999, the Company acquired office
equipment in the amount of $41,272 through capital lease agreements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
<PAGE>
WORLD DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
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 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 which are
primarily located in the Caribbean, South America, Eastern Europe and
Asia.
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 information for the three and nine months ended December 31, 1999 and
1998 has not been audited by independent certified public accountants,
but includes all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for such periods. Certain
information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to the requirements of the
Securities and Exchange Commission, although the Company believes that
the disclosures included in these interim financial statements are
adequate to make the information not misleading. It is suggested that
these consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in
the Company's Annual Report on Form 10-SB (see File Number 000-27627) on
file with the Securities and Exchange Commission.
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 $1,153,617,
$824,478 and $102,810 and had negative cash flows from operations of
$598,502, $347,991 and $56,710 during the nine months ended December 31,
1999 and the fiscal years ended March 31, 1999 and 1998, respectively.
These factors including the uncertainty surrounding future equity
financing through a contemplated offering 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
7
<PAGE>
classification of liabilities that might be necessary should the Company
be unable to implement its business plan and continue as a going concern.
The Company's ability to continue as a going concern is dependent upon
obtaining adequate financial resources. The Company has retained an
investment banking firm to assist in the private placement of equity
securities. No assurance can be made that the private placement will be
successful.
2. NOTES PAYABLE:
In April 1999, the Company paid the outstanding balance due under the
Note to MediaVest, Inc. a Company controlled by the Chairman and
shareholder of WDI 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 a 12 month period from the date of issuance and after that can only
be sold in accordance with Rule 144 or other applicable exemption. 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 nine months ended December 31, 1999 representing the
difference between the discounted fair market value of the common stock
issued and the carrying amount of the Note extinguished.
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 $20,000
in additional paid-in capital. (See Note 3).
On September 29, 1999, the Company received a loan of $50,000 from
MediaVest, Inc., a Company controlled by a shareholder and Chairman of
WDI. The loan is not collateralized, non interest bearing and is due on
demand. In November 1999, the loan was repaid in full.
In November 1999, MediaVest, Inc., a Company controlled by a shareholder
and director loaned $25,000 to the Company which was repaid.
3. COMMON STOCK
In April 1999, the Company issued 748,500 shares of its common stock
associated with the March 1999 exercise of 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 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 a 12 month period from the
date of issuance and after that can only be sold in accordance with Rule
144 or other applicable exemption. 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 nine months ended December 31, 1999
representing the difference between the discounted fair
8
<PAGE>
WORLD DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
market value of the common stock issued and the carrying amount of the
accounts payable extinguished.
During the nine months ended December 31, 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 a 12 month
period from the date of issuance and after that can only be sold in
accordance with Rule 144 or other applicable exemption. 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 nine months ended December 31, 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 $37,412 in additional paid-in capital. (See Note 3).
In November 1999, the Company authorized the issuance of a $375,000
aggregate loan through the issuance of five month 6% Subordinated
Promissory Notes with interest and principal payable on March 31, 2000
and 187,500 Common Stock Purchase Warrants at a purchase price of $.10
per warrant. The warrants are exercisable at any time on or before
September 30, 2000 at a price equal to the lower of either $6.00 per
share of common stock or the most recent issue price of WDI Common Stock
prior to March 31, 2000. The Promissory Notes are unsecured and the
warrants have no registration rights or other conditions. $50,000 of this
loan has been subscribed to by the children of the Chairman and Director
of the Company.
4. RELATED PARTIES
The Company has a customer, Micro Services Industries, that is also a
director and shareholder of the Company. Micro Services Industries
accounted for 8% of the revenue for the nine months ended December 31,
1999.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 5
The purpose of this Amendment No.1 to 10-QSB filing is to include certain
information in the statements of operations (unaudited) for the nine months
ended December 31, 1999 and December 31, 1998 which were inadvertently not
delivered in the Edgar Filing of February 15, 2000.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORLD DIAGNOSTICS, INC.
Dated: FEBRUARY 25, 2000 By: /s/ KEN M. PETERS
----------------------------------
Ken M. Peters, President
and Chief Financial Officer
