U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB/A
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the fiscal year ended March 31, 2000
OR
[_] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
for the transition period from __________ to __________.
Commission File Number: 0-27627
WORLD DIAGNOSTICS, INC.
-----------------------
(Name of Small Business Issuer in Its Charter)
Delaware 65-0742342
--------------------------------- ----------
(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) No.)
15271 N.W. 60th Avenue, Suite 201,Miami Lakes, Florida 33014
------------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (305) 827-3304
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Each Class: Name of Each Exchange on
which Registered:
------------------- ----------------
Common Stock, $.001 par value None
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [_]
The issuer's revenues for its most recent fiscal year were $ 1,463,417.
The aggregate market value of 2,188,087 shares of the Company's common
stock held by non-affiliates was $9,846,392 as of June 30, 2000. The market
value of the shares was calculated based on the closing sales price of a share
of common stock on The OTC: Bulletin Board Market on such date.
As of June 30, 2000, 4,313,827 shares of the registrant's common stock,
par value $.001 per share, were outstanding.
Check whether the issuer has filed all documents and reports required
to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes [_] No [_] Not Applicable.
Transitional Small Business Disclosure Format Yes [_] No [X]
<PAGE>
PART II
This Form 10-KSB/A amends Part II, Item 6 and Item 7 of From 10-KSB
(Commission file Number 0-27627) filed by the Registrant on July 14, 2000, by
deleting said Items in their entirety and replacing said Items with the
following:
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Forward-Looking Statements
The statements contained in this Annual Report on Form 10-KSB that are not
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The Company intends that all forward-looking
statements be subject to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include statements in
which words such as "expect," "anticipate," "intend," "plan, "believe,"
"estimate," "consider," or similar expressions are used. These forward-looking
statements reflect the Company's views as of the date they are made with respect
to future events and financial performance. For ward-looking statements are not
guarantees of future performance. They involve many risks, uncertainties and
assumptions which could cause the actual results of the Company to differ
materially from any future results expressed or implied by such forward-looking
statements. Examples of such risks and uncertainties include, but are not
limited to: obtaining sufficient financing to maintain the Company's planned
operation, the Company's ability to sustain and increase revenue, the continued
acceptance and growth of the internet, the changing of market conditions and the
other risks detailed in "Management's Discussion and Analysis or Plan of
Operation" in this Annual Report on Form 10-KSB and elsewhere herein. The
Company does not have any intention or obligation to up-date these
forward-looking statements.
The following discussion should be read in conjunction with the Company's
consolidated financial statements.
During the Company's fiscal year ending March 31, 2001 the Company plans
to continue implementation of its GLOBALeMED system on a country-by-county
basis, with a goal of launching 8 additional sites by December 31, 2000, thereby
increasing its local websites from 17 to 25, covering a total of 25 countries.
In order to meet this objective the Company anticipates that it will require
additional financing of approximately $150,000. The Company intends to meet this
and related objectives by raising approximately $300,000 in additional equity
financing. In addition, to meet its goals for expanded revenue growth and
inventory levels, the Company anticipates entering into a $2,000,000 credit
facility, secured by the Company's inventory and accounts receivable, that will
be a formula-based loan. In connection with its planned expansion, the Company
intends to move its operations from its current 3,500 square foot facility in
Miami Lakes, Florida to a 10,000 square foot facility in Miami Lakes, Florida
and, during the course of the year, hire approximately 2 additional sales
representatives and 2 technical support persons.
The Year Ended March 31, 2000 compared to the Year Ended March 31, 1999.
Revenues. Revenues for the year ended March 31, 2000 were $1,463,417, a
net increase of $887,167 or 154% from $576,250 for the year ended March 31,
1999. The increase in revenues was attributable to (i) a 67% increase in the
number of distributors, (ii) increased sales volumes to existing accounts, and
(iii) a 780% increase in the non-distributor customer base. The following table
details the sales breakdown by geographic region.
Region Year Year
Ending Ending
3/31/00 3/31/99
(in thousands (000) )
Domestic Sales $114 $29
Caribbean 433 341
South America 526 129
Eastern Europe 135 34
Central America 41 15
Pacific Rim 92 10
Western Europe 79 2
Middle East 43 16
and Africa -- --
Total Revenue 1,463 576
South America, the Caribbean and Eastern Europe continued to be the
strongest markets for the Company and in the aggregate accounted for 74.8% of
total revenues for Fiscal Year 2000, down from 87.5% of total revenues for
Fiscal Year 1999. The lower percentage contribution to total revenues for these
markets points to the strong growth in both the number of distributors and
volume of sales in other markets that the Company sells to, all of which
demonstrated growth in excess of 100%.
Gross Profit. The Company's gross profit on product sales increased to
$384,556 for the Fiscal Year 2000 from $118,897 for Fiscal Year 1999. Gross
profit as a percentage of sales increased to 26.3% from 20.6% in the comparable
year of 1999. The improved gross profit margin was primarily the result of
improved purchasing and volume price discounts. Margins are expected to continue
to increase as a result of continued higher sales per order, enabling the
Company to achieve further efficiencies in volume purchasing.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased to $1,280,598 for Fiscal Year 2000 from
$496,972 for Fiscal Year 1999, an increase of $783,626 or 158%. During October
1999, the Company commenced implementation of its GLOBALeMED e-commerce business
to business website. Expenditures in the amount of $319,017 were incurred in
developing the site content, building individual country websites, promotion,
advertising and consultants fees to develop the site. Further significant
expenditures, in excess of 10% of projected Fiscal Year 2001 revenues are
expected to be incurred in the continued development of the GLOBALeMED system.
This includes expenditures incurred in developing additional country websites,
as well as promotion, marketing and advertising. Payroll and related tax
expenses was $434,132 for Fiscal Year 2000, an increase of $267,776 from the
$166,356 incurred during Fiscal Year 1999. The increased expenditure was due to
additional personnel hired for information technology, technical support, sales
and marketing as well as employee benefits. Professional fees and consultants
paid during Fiscal Year 2000 increased by $152,114 over the comparable amount in
Fiscal Year 1999. The increase is as a result of costs associated with the
Company's Registration Statement filed in November 1999 as well as costs
associated with the development of the GLOBALeMED infrastructure.
Interest Expense. Interest expense was incurred primarily on borrowings in
Fiscal Year 2000 from various private financing arrangements with non-affiliated
parties. On October 27, 1999 the Company entered into a $375,000 promissory note
(the "October Note") with detachable warrants. The October Note matured on March
31, 2000, bore 6% interest, and was increased to $410,000 through additional
borrowing in January 2000. In November 1999 the Board of Directors authorized
the issuance of 205,000 common stock purchase warrants associated with the
October Note. In connection with the issuance of the 205,000 common stock
purchase warrants associated with the October Note, a non-cash charge of
$239,850 was recorded as interest expense in Fiscal Year 2000, which represents
the present value discount of the debt computed as of the difference between the
total fair value of the common stock underlying the warrants, which was $9.25
per share at the date of the authorization of issuance, and the exercise price
of the warrants, which were $6.00.
Extraordinary Loss on Extinguishment of Debt. In April 1999, the Company's
Board of Directors authorized the issuance of 101,090 restricted common shares
and $45,000 in cash to extinguish the $107,500 outstanding balance of a
promissory note due to MediaVest, Inc., a company controlled by a shareholder
and the Chairman of the Board of the Company. MediaVest, Inc. participated in
$50,000 of the initial $150,000 loan to the Company. The fair market value of
the common stock on the date of issuance of the 101,090 shares 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 balances 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 this debt is $25,715, which is the difference between the fair
market value of the stock and the carrying amount of the debts extinguished.
Loss on Extension of Debt. On March 15, 2000 the Company entered into a
forbearance agreement which extended the maturity date of the October Note to
May 31, 2000. The Board of Directors authorized the issuance of 8,199 shares of
common stock in consideration of this forbearance and the Company recorded a
non-cash loss in connection with the issuance of the common stock of $67,642 as
a result of the extension of the due date to May 31, 2000.
Net Loss. The Company incurred a net loss of $1,701,820 or $(0.41) per
share for Fiscal Year 2000 and reported a net loss of $824,478 or $(0.27) per
share for the comparable period in 1999. Non-cash charges associated with
extinguishment of debt, extension of debt and equity adjustments totaled
$801,430 and $435,750 for Fiscal Year 2000 and Fiscal Year 1999, respectively.
The operating loss increased to $896,042 in Fiscal Year 2000 from $378,075 in
Fiscal Year 1999.
Liquidity and Capital Resources.
Since beginning operations in February 1997, the Company has continued to
sustain operating losses which have resulted in the use of its cash reserves.
The Company anticipates that it will continue to incur net losses for the
foreseeable future until it is able to generate sufficient revenues from product
sales to sustain its operations and fund expenditures related to future growth.
At March 31, 2000, the Company had cash and cash equivalents of $80,817
compared to $358,595 at March 31, 1999. The Company had negative working capital
of $676,444 and positive working capital of $135,744 at March 31, 2000 and March
31, 1999, respectively. The Company had current assets of $634,872 and
stockholders deficit of $522,035 at March 31, 2000. This compares to current
assets of $489,190 and stockholders equity of $150,022 a year earlier. These
decreases are due primarily to expenditures incurred to fund the growth of the
Company.
Cash used in operating activities was $777,150 and $347,991 in Fiscal Year
2000 and Fiscal Year 1999, respectively. Increased working capital investments
in accounts receivable of $308,837 and inventory of $85,245 were made to support
the growth in revenue in Fiscal Year 2000. This was offset in part by additional
funding as a result of the increase in accounts payable for the year ended March
31, 2000 of $400,373.
Cash utilized in investing activities was $132,400 in Fiscal Year 2000,
compared to $9,991 for Fiscal Year 1999, and related to the purchase of fixed
assets.
Net cash provided by financing activities was $631,772 and $716,577 for
Fiscal Year 2000 and Fiscal Year 1999, respectively, coming primarily from the
proceeds of Notes issued in Fiscal Year 2000 and from the exercise of stock
warrants in Fiscal Year 1999.
There is no assurance that the Company will generate significant revenue
or achieve profitability, or that the Company will not require additional
working capital or other funds at a later date for the maintenance and expansion
of operations. There is no assurance the Company 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 the
Company.
The report of the Company's independent certified public accounts in
connection with its audited financial statements as of March 31, 2000 and March
31, 1999 and for each of the two years then ended contains an explanatory
paragraph indicating factors which create substantial doubt about the Company's
ability to continue as a going concern. These factors include recurring net
losses since inception and uncertainty surrounding future equity financing
through anticipated offerings. In June 2000, the Company completed a private
placement of $500,000 of equity financing. The Company's ability to continue as
a going concern is dependent upon obtaining adequate financial resources through
securities offering or otherwise. The Company believes that it can obtain equity
financing through a contemplated offering. However, there can be no assurance
that such offering will be successful.
ITEM 7. FINANCIAL STATEMENTS.
The following financial statements are furnished as part of this Annual
Report on Form 10-KSB
Index to Financial Statements and Schedules
Pages
Report of Independent Certified Public Accountants
Fiscal Year Ended March 31, 2000 .............................. F-1
Report of Independent Certified Public Accountants
Fiscal Year Ended March 31, 1999 .............................. F-2
Consolidated Balance Sheet as of March 31, 2000 .................. F-3
Consolidated Statements of Operations for each
of the two fiscal years ended March 31, 2000
and March 31, 1999 .............................................. F-4
Consolidated Statement of Shareholders Deficit
for each of the two fiscal years ended
March 31, 2000 and March 31, 1999 ............................... F-5
Consolidated Statements of Cash Flows for each
of the two fiscal years ended March 31, 2000
and March 31, 1999 ........................................... F-6 - F-7
Notes to Consolidated Financial Statements .................... F-8 - F-15
<PAGE>
Board of Directors and Shareholders
World Diagnostics, Inc. and Subsidiary
July 5, 2000
Miami, Florida
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheet of World
Diagnostics, Inc. and Subsidiary at March 31, 2000 and the related consolidated
statements of operations, accumulated shareholders' deficit and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of World Diagnostics,
Inc. and Subsidiary at March 31, 2000 and the results of their operations and
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
The consolidated financial statements referred to above have been prepared
assuming that World Diagnostics, Inc. will continue as a going concern. As more
fully described in Note 3, the Company has incurred recurring operating losses,
negative cash flows from operating activities, and has negative working capital.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans as to these matters are also described in
Note 3. The accompanying consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
might result from the outcome of this uncertainty.
/s/ Gerson Preston & Company, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
World Diagnostics, Inc.
In our opinion, the statements of operations, stockholders' equity and
cash flows present fairly, in all material respects, the results of its
operations and its cash flows of World Diagnostics, Inc. for the year ended
March 31, 1999 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 audit 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 audit provides a reasonable basis for the opinion expressed
above.
The accompanying fianancial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has incurred recurring losses and negative
cash flows from operations in fiscal 1999. 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 facts 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 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
May 14, 1999
/s/
PricewaterhouseCoopers LLP
F-2
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
At March 31, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets
Cash and cash equivalents ................................... $ 80,817
Accounts receivable, less an allowance of $71,609 ........... 390,949
Inventory, net of reserve of $19,066 ........................ 127,729
Other current assets ........................................ 35,377
-----------
Total current assets ..................................... 634,872
Fixed assets, net of accumulated depreciation ................. 171,427
Other assets .................................................. 6,963
-----------
Total assets ............................................. $ 813,262
-----------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued expenses ....................... $ 622,995
Notes payable ............................................... 670,000
Current portion of obligations under capital leases ......... 14,071
-----------
Total current liabilities ................................ 1,307,066
Obligations under capital leases, net of current portion ...... 28,231
-----------
Total liabilities ........................................ 1,335,297
-----------
Shareholders' deficit
Common stock; $0.001 par value; 10,000,000 shares authorized;
4,281,827 shares issued and outstanding ................... 4,282
Additional paid-in capital .................................. 2,122,023
Accumulated deficit ......................................... (2,648,340)
-----------
Total shareholders' deficit .............................. (522,035)
-----------
Total liabilities and shareholders' deficit .............. $ 813,262
-----------
</TABLE>
Read Auditors' Report and Notes to Financial Statements
F-3
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
CONSOLIDATED (2000) STATEMENTS OF OPERATIONS
Years Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2 0 0 0 1 9 9 9
-------------------------------------------------------------------------------------
<S> <C> <C>
Revenues ........................................... $ 1,463,417 $ 576,250
Cost of good sold .................................. 1,078,861 457,353
----------- -----------
Gross profit ....................................... 384,556 118,897
Selling, general and administrative expenses ....... 1,280,598 496,972
----------- -----------
Loss from operations before other expenses ......... (896,042) (378,075)
Other expenses:
Loss on warrant inducement ....................... -- (374,250)
Loss due to extension of debt .................... (67,642) --
Interest expense (See Note 6) .................... (254,490) (26,611)
Other income ..................................... 10,292 --
----------- -----------
Loss from operations before extraordinary item ..... (1,207,882) (778,936)
Extraordinary loss on extinguishment of debt ....... (493,938) (45,542)
----------- -----------
Net loss ........................................... $(1,701,820) $ (824,478)
----------- -----------
Basic and dilutive loss per common share:
Loss from operations before extraordinary item (0.29) (0.25)
Extraordinary item (0.12) (0.02)
----------- -----------
Basic and diluted loss per common share: (0.41) (0.27)
----------- -----------
Weighted average number of common shares outstanding 4,210,256 3,070,528
----------- -----------
</TABLE>
Read Auditors' Report and Notes to Financial Statements
F-4
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
CONSOLIDATED (2000) STATEMENTS OF SHAREHOLDERS' DEFICIT
Years Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Common Stock Common
--------------- Stock Additional
Number of Subscription Paid-In Unearned Accumulated
Shares Amount Receivable Capital Compensation Deficit Total
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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, 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 shares ................. 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
Portion of the proceeds from issuance of debt
securities with detachable warrants allocable
to the warrants ............................. -- -- -- 260,350 -- -- 260,350
Loss due to extension of debt ................. -- -- -- 67,642 -- -- 67,642
Net loss ...................................... -- -- -- -- -- (1,701,820) (1,701,820)
========= ====== ======= =========== ======== =========== ===========
Balance, March 31, 2000 ....................... 4,281,827 $4,282 $ -- $ 2,122,023 $ -- $(2,648,340) $ (522,035)
========= ====== ======= =========== ======== =========== ===========
</TABLE>
Read Auditors' Report and Notes to Financial Statements
F-5
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
CONSOLIDATED (2000) STATEMENTS OF CASH FLOWS
Years Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2 0 0 0 1 9 9 9
-------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net loss .............................................. $(1,701,820) $ (824,478)
Adjustment to reconcile net loss to net cash used in
operating activities:
Loss on warrant inducements ....................... -- 374,250
Loss due to extension of debt ..................... 67,642 --
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 ............. 7,840 5,600
Amortization of debt discount ..................... 239,850 --
Depreciation and amortization ..................... 19,288 4,374
Provision for bad debts ........................... 87,967 4,573
Provision for excess inventory .................... -- 19,066
Changes in operating assets and liabilities:
Accounts receivable ............................. (396,804) (49,872)
Inventory ....................................... (85,245) (41,279)
Other current assets ............................ (25,128) (4,721)
Other assets .................................... (2,544) (2,919)
Accounts payable and accrued expenses ........... 425,820 105,915
----------- -----------
Net cash (used) in operating activities .... (777,150) (347,991)
----------- -----------
Investing activities
Purchases of fixed assets ............................. (132,400) (9,991)
----------- -----------
Financing activities
Net proceeds from issuance of common stock and warrants 16,250 29,744
Proceeds from the exercise of stock warrants .......... -- 575,750
Proceeds from notes payable ........................... 745,000 150,000
Payment of notes payable .............................. (120,000) (25,000)
Payments under capital lease obligations .............. (9,478) (918)
Proceeds from stock subscription receivable ........... -- 2,580
Decrease in cash overdraft ............................ -- (15,579)
----------- -----------
Net cash provided by financing activities .... 631,772 716,577
----------- -----------
Net (decrese) increase in cash and cash equivalents ..... (277,778) 358,595
Cash and cash equivalents, beginning of year ............ 358,595 --
----------- -----------
Cash and cash equivalents, end of year .................. $ 80,817 $ 358,595
----------- -----------
</TABLE>
continued
F-6
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
CONSOLIDATED (2000) STATEMENTS OF CASH FLOWS
Years Ended March 31, 2000 and 1999
continued
<TABLE>
<CAPTION>
2 0 0 0 1 9 9 9
--------------------------------------------------------------------------------------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for interest ................... $ 7,397 $ 1,611
Supplemental disclosure of non-cash investing and
financing activities:
Fixed assets acquired through capital lease agreements $41,336 $11,362
Forgiveness of debt payable to directors considered
to be a capital contribution ....................... $37,412 $ --
Issuance of common stock for extinguishment of debt .. $70,535 $26,542
Issuance of warrants for other assets ................ $ 4,250 $ --
</TABLE>
Read Auditors' Report and Notes to Financial Statements
F-7
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
The consolidated financial statements include the accounts of World
Diagnostics, Inc. and its wholly-owned subsidiary, GLOBALeMED.com, Inc.
World Diagnostics, Inc. (the "Company") was organized in Delaware on
February 2, 1997. GLOBALeMED.com, Inc. was organized in Delaware on
March 9, 2000. The Company markets medical diagnostic and laboratory
products derived from contract suppliers. The Company has proprietary
manufacturing agreements with 36 primary generic diagnostic products
manufacturers and has developed certain proprietary technology for
rapid diagnostic tests in the area of infectious diseases and other
diagnostic products. The products are sold predominately through
distributors, dealers and through the Company's GLOBALeMED e-commerce
system in 63 countries.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary.
All significant inter-company balances have been eliminated in
consolidation.
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 March 31, 2000 and 1999, substantially all
inventories represent finished goods held for sale. The Company
recorded a provision of approximately $19,000 for both years ended
March 31, 2000 and 1999, to reduce the carrying amount of the inventory
to its net realizable value.
Property and Equipment. Property and equipment are stated at cost and
depreciated using the straight-line method over the estimated useful
lives of the assets.
Long-Lived Assets. The Company reviews long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable.
2. SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of income and
expenses during the reported period. Actual results could differ from
those estimates.
Fair Value of Financial Instruments. The carrying amount of accounts
receivable, accounts payable and accrued expenses approximate fair
value because of their short duration. The carrying amount of debt
approximates fair value because the interest rates are similar to the
interest rates currently available to the Company.
F-8
<PAGE>
Income Taxes. The Company accounts for income taxes under Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes". Under SFAS 109, deferred income tax assets and liabilities are
determined based upon differences between financial reporting and tax
bases of assets and liabilities and are measured using currently
enacted tax rates. SFAS 109 requires a valuation allowance to reduce
the deferred tax assets reported if, based on the weight of the
evidence, it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
Revenue Recognition. Revenue is recognized when the product is shipped.
Research and Development Costs. Research and development costs are
charged to expense when incurred.
Earnings Per Share. Basic earnings per share is computed by dividing
income available to common shareholders by the weighted-average number
of common shares for the period. The computation of diluted earnings
per share is similar to basic earnings per share, except that the
denominator is increased to include the number of additional common
shares that would have been outstanding if the potentially dilutive
common shares, such as options, had been issued. Diluted earnings per
share are not presented because the effects would be anti-dilutive.
2. SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
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.
Technology and Content. Technology and content expenses consist
principally of payroll and related expenses for development, editorial,
systems, consultants and costs of acquired content.
Technology and content costs are generally expensed as incurred and
included in selling, general and administrative expenses, except for
certain costs relating to the development of internal-use software,
including those relating to the Company's Web sites, that are
capitalized and depreciated over estimated useful lives.
3. GOING CONCERN - UNCERTAINTY
As shown in the accompanying consolidated financial statements, the
Company has incurred recurring operating losses and negative cash flows
from operating activities and has negative working capital. These
conditions raise substantial doubt about the Company's ability to
continue as a going concern.
The Company has initiated several actions to generate working capital
and improve operating performances, including equity and debt
financing.
There can be no assurance that the Company will be able to successfully
implement its plans, or if such plans are successfully implemented,
that the Company will achieve its goals.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern and do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and
classification of liabilities that might result from the outcome of
this uncertainty.
F-9
<PAGE>
4. FIXED ASSETS
Fixed assets consist of the following at March 31, 2000:
Computer equipment and software .............. $ 159,590
Office furniture and equipment ............... 35,499
---------
195,089
Less accumulated depreciation and amortization (23,662)
---------
$ 171,427
Amounts subject to capital leases at March 31, 2000, included in
computer equipment and software above, total $46,292 net of accumulated
amortization of $9,555.
5. NOTES PAYABLE
Notes payable at March 31, 2000 consists of the following:
6% unsecured notes payable with detachable common
stock purchase warrants; matures May 31, 2000;
subsequent to year-end, $125,000 of the notes were
repaid ($50,000 of the repaid notes were to parties
related to a member of the Board of Directors) and
$285,000 were converted to shares of common
stock (see Note 10) ................................ $410,000
10% unsecured notes payable; subsequent to year-end,
the maturity date was extended to September 30, 2000
in exchange for the issuance of 26,000 common stock
purchase warrants exercisable at $1.00 per share ... 260,000
--------
$670,000
--------
MediaVest, Inc., a company controlled by a shareholder and director of
the Company, made short term non-interest bearing loans to the Company
in the aggregate of $75,000. These loans were repaid in November 1999.
6. COMMON 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.
F-10
<PAGE>
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
was exercisable into one share of the Company's common stock at $1 per
share until expiration on March 15, 1999. During 1999, 201,500 Warrants
were exercised at the original $1 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 1999.
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.
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 on May 26, 1998. The note bears 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 interest 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. 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.
F-11
<PAGE>
6. COMMON STOCK (Cont'd)
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.
The fair value of the options on the grant date was calculated using
the Black-Scholes Option Pricing Model.
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 extinguishments. 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
extinguishments 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.
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 World Diagnostics, Inc. 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 extinguishments. The
restricted common stock cannot be sold for a 12 month period form 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 extinguishments by 25%. An extraordinary loss of $468,223 was
recorded in the statement of operations for the year ended March 31,
2000 representing the difference between the discounted fair market
value of the common stock issued and the carrying amount of the note
extinguished.
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.
F-12
<PAGE>
6. COMMON STOCK (Cont'd)
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 year ended March 31, 2000 representing the
difference between the discounted fair market value of the common stock
issued and the carrying amount of the accounts payable extinguished.
In June 1999, two of the Company's directors forgave $37,412 in notes
payable and other liabilities due from the Company. This was treated as
a capital contribution and resulted in an increase of $37,412 in
additional paid-in capital.
In November 1999, the Company authorized the issuance of 205,000 Common
Stock Purchase Warrants in connection with the note payable of
$410,000. The Warrants are exercisable at any time on or before
September 30, 2000 at a price equal to the lower of either $6 per share
of common stock or the most recent issue price of World Diagnostics,
Inc.'s common stock prior to March 31, 2000. The Warrants do not have
registration rights or other conditions. The proceeds from the issuance
of the notes payable with the warrants, were allocated between the
warrants and the notes payable based on their relative fair values at
the time of issuance. The amount allocable to the warrants was
$260,350, as calculated using the Black-Scholes Pricing Model, and was
accounted for as additional paid-in capital. The difference between the
amount allocable to the warrants and the proceeds received from the
issuance of the warrants was $239,850 and was accounted for as a debt
discount, which was amortized to interest expense.
In March 2000, the Company authorized the issuance of 8,199 shares of
common stock (including 1,000 shares to parties related to a member of
the Board of Directors) to extend the due date of the $410,000 note to
May 31, 2000. The fair market value of the common stock was $11.00 per
share at the date of extension. The common stock is restricted and can
only be sold in accordance with Rule 144 or other applicable exemption.
Due to these restrictions, the Company
6. COMMON STOCK (Cont'd)
discounted the fair value of the Company's common stock at the date of
extension by 25%. The Company recorded $67,642 as a loss due to
extension of debt at March 31, 2000.
During the year ended March 31, 2000, 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 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 selling, general and administrative expenses in the
statement of operations for the year ended March 31, 2000.
F-13
<PAGE>
7. LEASES
The Company leases office facilities and equipment under long-term
leases. The office lease expires on September 30, 2000.
At March 31, 2000, future minimum lease payments, under operating and
capital leases are as follows:
Capitalized Operating
Leases Leases
-----------------------------------------------------------------------
2001 $ 18,984 $ 19,000
2002 17,230 -
2003 9,112 -
2004 3,567 -
2005 2,595 -
-----------------------------------------------------------------------
Total minimum lease payments 51,488 $ 19,000
-----------
Less amount representing interest ranging
from 7% to 18% (9,186)
-----------------------------------------------------------------------
Present value of net mininum lease payments 42,302
Less current portion (14,071)
-----------------------------------------------------------------------
Long-term obligations $ 28,231
-----------------------------------------------------------------------
Rent expense was approximately $46,000 and $34,000 for the years ended
March 31, 2000 and 1999, respectively.
8. DEFERRED INCOME TAXES
At March 31, 2000, the Company has available net operating loss
carryforwards of $2,070,000 which will expire through 2017.
After consideration of all the evidence, both positive and negative,
management has determined that a full valuation allowance is necessary
to reduce the deferred tax assets to the amount that will more likely
than not be realized.
8. DEFERRED INCOME TAXES (Cont'd)
Accordingly, components of the Company's net deferred income taxes at
March 31, 2000 and 1999 are as follows:
At March 31, 2 0 0 0 1 9 9 9
----------------------------------------------------------------------
Deferred tax assets:
Net operating loss carryforwards
and other minor items $ 704,000 $ 151,000
Valuation allowance for deferred tax asset (704,000) (151,000)
-----------------------------------------------------------------------
Total $ - $ -
-----------------------------------------------------------------------
9. 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 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.
One customer, a director and shareholder of the Company, accounted for
approximately 8% and 21.2% of sales for the years ended March 31, 2000
and 1999, respectively. The accounts receivable from this customer was
$12,755 at March 31, 2000.
Another customer accounted for 13.3% and 6.7% of sales for the years
ended March 31, 2000 and 1999, respectively. This same customer had an
accounts receivable balance of $58,597 at March 31, 2000. Substantially
all of the Company's sales in fiscal 2000 and 1999 were made to
international customers.
F-14
<PAGE>
9. CONCENTRATION OF CREDIT RISK (Cont'd)
Purchases from one supplier represented 13.7% and 0% of purchases for
the years ended March 31, 2000 and 1999, respectively. This same
supplier was owed $59,457 at March 31, 2000.
10. SUBSEQUENT EVENTS
The Company completed a private placement of $500,000, consisting of
71,440 shares of the Company's common stock priced at $7.00 per share
and warrants, exercisable at $7.00 per share or exchangeable, without
additional cash consideration, but subject to certain restrictions and
lock-up provisions, for an additional 71,440 shares of the Company's
common stock.
The Company issued 16,000 shares of common stock to non-employees for
services, 20,000 shares of common stock to employees and 60,000 common
stock purchase warrants to directors of the Company.
The Company authorized the issuance of shares of common stock to
noteholders as an inducement to convert their loan in its entirety,
waive all accrued interest, and exchange all outstanding common stock
purchase warrants. Noteholders of $285,000 of the notes elected to
convert their loan and 162,900 shares of common stock were authorized
to be issued.
F-15
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WORLD DIAGNOSTICS, INC.
Date: July 24, 2000 By: /s/ Ken Peters
---------------------------
Ken Peters, Director,
President and
Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signatures and Title Date
/s/ Paul R. Kamps July 24, 2000
------------------------------
Paul R. Kamps, Vice President-
Finance and Administration
/s/ Barry Peters July 24, 2000
------------------------
Barry Peters, Director
/s/ Trevor Campbell July 24, 2000
------------------------------
Trevor Campbell, Director
/s Richard P Humbert July 24, 2000
------------------------------
Richard P. Humbert, Director
