U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(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 No.)
Incorporation or Organization)
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>
WORLD DIAGNOSTICS, INC.
10KSB
TABLE OF CONTENTS
Page No.
PART I.......................................................................4
ITEM 1. DESCRIPTION OF BUSINESS..........................................4
ITEM 2. DESCRIPTION OF PROPERTY.........................................14
ITEM 3. LEGAL PROCEEDINGS...............................................14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............14
PART II.....................................................................14
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........14
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.......16
ITEM 7. FINANCIAL STATEMENTS............................................20
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
FINANCIAL DISCLOSURES...........................................20
PART III....................................................................21
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT...............22
ITEM 10. EXECUTIVE COMPENSATION..........................................25
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..26
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................28
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K................................28
EXHIBIT INDEX............................................................28
SIGNATURES...............................................................30
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
World Diagnostics, Inc. (the "Company") (OTCBB: WDGI), based in Miami
Lakes, FL, is an early stage business that began operations in February 1997 for
the purpose of servicing the growing international demand for medical diagnostic
tests and allied laboratory products.
The Company is a single source supplier and exporter of approximately
1,000 Company branded medical diagnostic test kits and allied laboratory
products, of which approximately 150 of these products represent approximately
80% of the Company's revenues. The products are marketed through the Company's
website, www.GLOBALeMED.com (which is also accessible through its other Internet
addresses: www.labtestkits.com and www.worlddiagnostics.com), and its
distributor network.
The Company has developed and distributes, under its own brand name, a
range of rapid immunodiagnostic products for point-of-care testing of certain
human medical conditions and infectious diseases, in addition to other medical
diagnostic tests and allied laboratory products. The Company's various rapid
diagnostic test kits incorporate proprietary, genetically engineered technology
to diagnose infectious diseases, such as HIV, Cholera, Hepatitis and
Tuberculosis, as well as various sexually transmitted diseases. These products
provide accurate and cost-effective diagnosis of acute and chronic conditions in
the areas of reproductive health, viral and bacterial infectious diseases,
gastrointestinal, hormonal, and autoimmune disorders, cancer and cardiac
markers, therapeutic drugs and drugs of abuse testing. The Company's products
are made to its specifications through a network of suppliers and contract
manufacturers, many of which are interchangeable.
The Company sells its medical diagnostic test kits and allied
laboratory products through its websites in conjunction with a network of 88
distributors covering 63 countries. The Company's GLOBALeMED business to
business e-commerce system serves as the Company's e-commerce solution for
medical professionals to purchase medical diagnostic and allied laboratory
products and access critical data and technology support online. The GLOBALeMED
system is a worldwide multilingual, multi-cultural platform utilized by the
Company's distributors to serve hospitals, clinical laboratories, physician's
offices and certain pharmacies primarily in emerging market nations.
In March 1998, the Company began to market its products by providing a
limited menu of medical diagnostic tests that it offered for sale through
international distributors. In May 1998 the Company acquired the assets of
Health Tech International, Inc., which consisted primarily of proprietary
distribution agreements and certain technology for rapid diagnostic tests. This
transaction was treated as a combination of companies under common control with
the Company being the surviving company. In July 1998 the Company received a US
Food and Drug Administration ("FDA") Good Manufacturing Practices ("GMP")
license from the FDA which is used for registering the Company's products for
sale in various countries
In March 1999, the Company posted its initial website
(www.labkits.com), which was used by the Company to recruit new distributors. In
June 1999, the Company added a rudimentary electronic shopping cart to the
website, making it a fully transactional website for purchasing medical
diagnostic test products online.
In September 1999, the Company began the design of its GLOBALeMED
e-commerce solution system, which became operational in November 1999. Local
sites were launched in Chile and Romania in February 2000, and in South Africa
in March 2000. As of June 2000, the Company has established fifteen such
localized websites. In South America, sites have been established for Argentina,
Chile, Colombia, Uruguay and Venezuela. In Europe, sites have been established
for Spain and Poland. In Eastern Europe, sites have been established for Romania
and the Czech Republic. In the Caribbean, sites have been established for
Jamaica and Trinidad and Tobago. In Africa and the Middle East, sites have been
established for South Africa and Egypt which also serves Kuwait. Localized
websites currently in development include Belgium, Holland, United Kingdom,
Hungry, Algeria and South Korea.
The GLOBALeMED system is designed to permit participants in each
country to purchase the Company's product offerings online, obtain technical
information, product support and training in multiple languages. These websites
provide for centralized online purchasing and serve as a resource on a local
basis with respect to news and information concerning healthcare matters of
community interests such as content provided by professional societies, event
calendars, bulletin boards, and hyperlinks to other related websites. The
GLOBALeMED system provides access to authoritative medical data through search
engines and alliances with internationally recognized organizations, enabling
professionals and businesses to obtain both local and global healthcare and
medical laboratory information. In addition, a technical staff is available by
telephone, fax, e-mail or online through the Company's website to support
customers. The continuing implementation of the Company's GLOBALeMED system is
dependent upon the Company's ability to continue to raise additional financing.
The Company's revenues are derived primarily from Latin-America, the
Caribbean and Eastern Europe, with the European Common Market, Asia, the Middle
East and Africa representing the Company's secondary source of revenues. The
Company's largest customer accounted for approximately 14% of the Company's
revenues in the fiscal year ended March 31, 2000 ("Fiscal Year 2000") and 21% of
its revenues in the fiscal year ended March 31, 1999 ("Fiscal Year 1999"). The
Company's annual sales grew to $1,463,417 from approximately $576,250 in Fiscal
Year 1999, and gross profit margins grew to 26% in Fiscal Year 2000 from 21% in
Fiscal Year 1999.
E-Commerce
The Internet has emerged as the fastest growing communication medium in
history and is dramatically changing how business communicates and shares
information. It has created new opportunities for conducting commerce,
streamlining complex processes, lowering costs and improving productivity.
Through the Internet, the Company is able to communicate with a large number of
buyers throughout a highly fragmented market who have significant dependence on
product range, technical information and support. The Company enables
distributors and end users of medical diagnostic tests and allied laboratory
products to efficiently identify, evaluate and buy over 1,000 of the Company's
products through the Company's website via a secure Internet based purchasing
solution.
The Company's GLOBALeMED system is comprised principally of the
following elements:
o Industry Focused Transactional Website
o Online Technical Support and Training Aids
o Multi-lingual/Multi-cultural Navigation
o Medical News and Information throughout the World
o Community of Professional Interests
o Global and Localized Website Orientation
o Links to Other Websites for Authoritative Data
The Company's transactional website is secure, easy to use and highly
functional for ordering product. The Company's GLOBALeMED solution connects
users with global health organizations providing authoritative information from
an international database concerning clinical studies and patient results,
disease states and healthcare conditions. In addition, it has a resource program
for frequently asked questions. The Company's website is user-friendly, with a
qualifying questionnaire that captures valuable information about customer
purchasing patterns, preferences and interests. This data is automatically added
to the Company's database to improve customer service and future data mining.
The Company's GLOBALeMED e-commerce solution seamlessly links
purchasers of medical diagnostic tests and allied laboratory products with the
its ability to efficiently deliver a wide range of products and services
unavailable from any other single source. The Company's supply chain integrates
a manufacturing base of numerous producers that provide timely delivery of
intermediate and finished goods to the Company, which conducts final inspection
and packaging before shipping directly to its customers. The Company's
GLOBALeMED solution offers a simplified electronic catalog to access technical
and product information, product selection, pricing, and an efficient order and
order-tracking mechanism.
The Company is continuing to establish its GLOBALeMED system in certain
target countries where management believes that its products will be in high
demand. The GLOBALeMED system is creating a growing customer base by providing
efficient online purchasing options, technical support, valuable information and
industry news, and a community of interests where professionals can access data,
obtain educational material and derive other benefits. Customers are able to
access the Company's global home page or a local website that is adapted to
local culture, languages and practices. The shopping cart option functions on a
transparent basis to facilitate centralized purchasing. The shopping cart
appears to the customer to be localized, while at the same time offering the
option to visit the Company's global website and home page, or access the
Company's GLOBALeMED websites in various other countries.
The Company's centralized purchasing from its suppliers is based upon
orders projected and received. Buying patterns differ around the world due to
different disease states, environmental and cultural biases. Accordingly,
forecasting levels of production from the Company's manufacturing network to
meet sales expectations is closely monitored in terms of amounts, types of
products, inventory requirements and timing of delivery. The Company recently
installed a new accounting and management system plans to integrate information
from its manufacturers and suppliers with its purchasing, sales forecasting and
inventory levels so as to provide prompt delivery where such service enhances
the Company's competitive position.
Brand Equity
The Company is concentrating on building brand equity through its
distributor network, branded product sales, and through the GLOBALeMED system.
Management considers brand equity to be important to build growth and recurring
revenues.
The Company's brand equity consists of the following components:
o World Diagnostics, WDI and GLOBALeMED
o "Smart Check" and "Smart Strip" Products Marketed Under the
WDI label
The Company plans to continue building brand equity through
advertising, marketing seminars and alliances that serve to increase sales and
drive customers to its GLOBALeMED system. These include:
o Local and Global Advertising in Trade Publications,
Newsletters, Medical Journals and Healthcare Publications
o Educational Seminars for Professional Societies on a
Country-by-Country Basis
o Trade Shows and Special Events for Medical Professionals
o Direct Marketing Initiatives and Special Promotions for Local
Groups
o Public Awareness Campaigns with Government and Non-Government
Organizations
o Partnering with Local ISPs and Portals on a Global and by
Country Basis
o Establishing Marketing Alliances with Medical Websites and
Businesses
Market Overview
The 1999 worldwide market for In Vitro Diagnostic ("IVD") test products
such as urine, blood and saliva is estimated to be in excess of $20 billion
annually, of which approximately 40% is in the US, 26% is in Europe, 12% is in
Japan and 22% is in recently developed economies and emerging market countries.
The moderately developed and emerging markets, whose aggregate market size is
approximately $5 billion, has two components: public and private sectors, about
$3.5 billion and $1.5 billion, respectively. It is estimated that nearly 95% of
this market is derived from imports (Source: U.S. Department of State 1999,
Theta Corporation, Diagnostic Consulting Group, Inc.). Tests for infectious
diseases performed in emerging markets are about 70% of the total market, with
growth in infectious disease tests exceeding 18% per annum. Of people worldwide
who are HIV positive, 95% are in emerging markets or developing countries. These
markets also have significant tuberculosis mortality rates and, of children who
die before their fifth birthday, 98% are in these emerging markets or developing
countries.
Diagnostic product sales are driven by several factors, including:
o The need for easier methods to diagnose disease states or
medical disorders so as to enable effective physician response
to the patient.
o Recognition that diagnostic products afford early detection of
diseases or medical disorders. o Prompt response to increases
in infectious disease disorders through rapid diagnosis and
isolation of infectious individuals.
o Government policies to contain (decrease) costs to the medical
and social system and to contain epidemic situations.
The vast majority of international end users typically buy from
numerous relatively small local distributors that often stock a limited range of
test kits and lack the expertise to provide timely delivery and technical
support. In emerging markets or moderately developed economies, the substantial
majority of medical laboratories are small in size and account for approximately
90% of diagnostic product sales. By contrast, diagnostic product sales in the US
are predominately to large labs. Smaller international accounts in highly
fragmented markets have been less desirable by large corporations as they are
too expensive to be managed or directly sold to by large corporations whose
equipment and diagnostic products are capital intensive and geared to larger
scale usage.
In moderately developed economies and emerging markets, price,
availability of products, ease of use and technical support are of major
importance. The highest diagnostic priority in moderately developed economies is
improvement in the efficiency and quality of physician care. In the emerging
markets it is to identify and contain infectious disease disorders. In both
markets, price delivery time, technical support and prompt response to inquiries
are important. In theses emerging markets an increasing amount of funds are
being provided by governments and development organizations, such as UNICEF,
USAID, the World Bank and the IMF, for the use of rapid diagnostic testing,
often at point of care or on-site, to identify and isolate 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
as well as containing epidemic situations. Moreover, population control is the
second largest growth area in diagnostic product sales behind infectious
diseases for the emerging markets countries. International funding of rapid
diagnostic products for pregnancy and ovulation detection is also supported by
UNICEF, USAID, the World Bank and the IMF.
Products
The Company's current catalog of approximately 1,000 products offers a
comprehensive commonly used range of medical diagnostic test kits and allied
laboratory products. A portion of these products were developed by the Company
and are made to specifications by various manufacturers and suppliers. Others
are made in generic form and packaged under the Company's label. The Company's
emphasis on rapid tests include cardiac markers such as Tropinin I for instant
point of care ("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.
In June 1998, the Company received certification for its whole blood
rapid HIV-1 and HIV-2 tests from the World Health Organization ("WHO") Special
Program for Sexually Transmitted Diseases, which has been a leading product for
revenue growth in certain countries. These tests, which have been designed by
the Company, are advanced technologies, having a 100% positive predictor value.
The Company has uniquely designed its HIV tests through genetic engineering to
identify HIV 1 and HIV 2, sub type 0 and sub type C seroconverter blood markers,
which are critical for early identification and complete screening purposes.
Concurrently with achieving WHO certification, the Company launched its first
proprietary rapid test product requiring no instrumentation and has
significantly expanded this product line.
The Company's diagnostic product line consists of four main groups and
are marketed under the World Diagnostics, Inc. or the WDI label.
o Qualitative Rapid POC Diagnostic Tests
Product brand name "Smart Check" for HIV, Syphilis, Ovulation,
Pregnancy, Drugs of Abuse, and others tests used for infectious
and immune complexes.
o Quantitative Laboratory Tests
Product brand name "Smart Check" or "Smart Strip" for blood
banking, hormones, cancer markers, infectious diseases, allergy,
fertility, gastrointestinal, immune and other disorders.
o Routine Urine and Latex Agglutination Tests
These products are demanded in emerging markets, offer lower
sensitivity; but sometimes are preferred by some governments
because they are inexpensive.
o Clinical Chemistry Reagents
This product group is fundamental to all laboratory operations.
While it is mature, it continues to be a widespread mode of
clinical testing.
Technology
The Company employs technologies utilizing some of the most modern
"formats" available in the medical laboratory diagnostics industry. Format
refers to the platform under which animal and human proteins are utilized to
determine quantitative or qualitative test results. The Company markets
diagnostic quantitative and qualitative test kits covering clinical chemistry,
amino acids and rapid diagnostic POC tests. The technology format primarily
utilized by the Company's products embodies color development for a
determination of results because most laboratories have instrumentation that can
obtain results through optical density readings.
Protein molecules called antibodies 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 a wide range of diagnostic
applications. The ability to detect the binding of antibodies to target antigens
forms the basis for immunodiagnostic testing. 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
and microbiology.
The Company'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 or antigens
are more highly specific to increase detection of such abnormalities earlier
than naturally formed antibodies. The Company offers four primary delivery
system formats using the genetically engineered antigens: (1) Dipsticks, (2)
Flow-through cassettes, (3) Microwell tests, and (4) A one-step lateral flow
delivery system. While most diagnostic test formats utilize a basic antibody
antigen concept, the four formats developed by the Company provide advanced
proprietary technology and differ in terms of speed, ease of use, sensitivity,
and specificity to address the particular needs of different tests.
In 1998, the Company also funded the development of a one-step rapid
urine HIV 1 & 2 diagnostic test in collaboration with an outside research party.
The company paid for such research collaboration through a licensing
arrangement, whereby the research suppliers may participate in future income
streams through royalties. This agreement was terminated in September 1999 due
to non-fulfillment by the research party. The Company believes the technical
know-how it possesses is proprietary and would consider entering into other
agreements with research and development firms to continue further development
of the rapid urine HIV test should circumstances be warranted.
Manufacturing
The Company obtains IVD products through various contract arrangements
with approximately 36 primary manufacturers and suppliers. The Company designs
its own format and instructs manufacturers to produce products according to the
Company's specifications. The Company inspects and tests for quality control
upon receipt of these products and periodically conducts field audits of its
suppliers to insure conformity to specifications and delivery schedules. These
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.
The Company maintains an FDA packaging, quality control and research
and development laboratory of approximately 1,200 square feet in Miami Lakes,
Florida. Supplies are generally various laboratories devoted to antigen
production, tissue culture, immunochemistry, and certain solid phase coating
process and filling. The Company uses biological, chemical and packaging
supplies and equipment generally available from multiple competing suppliers.
The Company requires all suppliers to manufacture the Company products in
compliance with GMP regulations governing the manufacture of medical devices.
The Company complies with the process for a registered FDA facility and with the
State of Florida.
It is the Company's responsibility to verify that each component
purchased from various suppliers and incorporated into the Company products is
in conformity with FDA specifications. Dr Martin Muy, a genetic immunologist and
Vice President-Technical Affairs, oversees the Company's quality control lab and
conducts audits of the Company's suppliers and contract manufacturers to verify
that Company specifications are met.
Marketing and Distribution
The Company intends to utilize its product positioning, advanced
proprietary technology and GLOBALeMED e-commerce solution to meet the needs of
its distributors. The Company's strategy is to transform its distributor base
into an effective network of localized representatives that expand the Company's
sales through conventional distribution methods and, at the same time, promote
and market the Company's GLOBALeMED system. Distributors typically begin by
first migrating their existing customer base on to the company's e-commerce
platform, and then to recruit new customers. In addition, distributors receive
commissions on all sales within its country, whether derived directly from its
customer base or indirectly from other customers buying buying through the
GLOBALeMED system.
During Fiscal Year 2000 the Company's distributor customer base grew by
approximately 67% to75 distributors serving approximately 63 countries from,
approximately 45 distributors in Fiscal Year 1999. As of June 30, 2000, the
number of distributors has increased to 88. The Company's non-distributor direct
end-user customer base grew 780% in Fiscal Year 2000, from 5 in Fiscal Year 1999
to 44 in Fiscal Year 2000, covering 17 countries. Since the establishment of the
Company's website, the Company has generated a substantial database of new
customer leads, of which the majority are non-distributor direct end-user
customer prospects that are screened and cultivated through e-mail and fax. In
addition, activity for the Company's website has increased from approximately
3,800viewed visits per month in March 1999 to 17,000 viewed visits per month as
of March 2000. The average length of time spent by a visitor to the site was
between 1 to 3 minutes in March 1999, as compared to 5 to 15 minutes in March
2000.
Through its website, the Company attracts new distributors who offer
the capability for the Company to distribute increasing volumes of its products,
promote the Company's brand name in the distributors respective country and
service end-user customers. At present, a substantial portion of the Company's
sales are derived from the Company's distributor base, many of which use the
Company's website to place orders or to promote the Company's product line. The
Company has its highest concentration of revenues from distributors in
Latin-America, the Caribbean, and Eastern Europe. These regions accounted for
approximately 78% of the Company's Fiscal Year 2000 revenues and 91% of revenues
in Fiscal Year 1999. Revenue from the European Common Market, Asia, the Middle
East and Africa continues to grow, having increased to 15% of total revenues in
Fiscal Year 2000, from 5% of total revenues in Fiscal Year 1999.
The Company plans to continue to recruit distributors in order to
increase sales and market penetration and use its distributor network as a means
to expand its GLOBALeMED system on a country-by-country basis. The Company is
concentrating on those countries and geographic regions where it believes that
it will have the greatest opportunity to establish growing market share and
critical mass for its GLOBALeMED system. To date, the Company has established
twelve such websites. Local websites created for the Company's distributors will
be maintained by the Company. In addition to providing localized services and
information, the Company will serve as a portal to other websites aligned with
the Company's GLOBALeMED system. These distributors are becoming logistical
support centers and serve as selling organizations to promote end users to
utilize the Company's e-commerce solution. The distributor network facilitates
and drives transactions through the local website to the Company's global
website, where orders are centrally processed. Distributors are able to keep
track of order status and fulfillment on a localized basis.
The Company concentrates on selling medical diagnostic test kits that
have significant repeat business. Once a customer's laboratory has standardized
its test menu and reference ranges for the Company's products, the Company
generally continues to be the provider of choice because of the need to maintain
consistent accurate test results.
Customers
The Company has recently begun efforts to convert many of its accounts
to online purchases through its GLOBALeMED e-commerce solution. Management
expects this process to grow at different rates, depending upon various factors
within each country. Approximately 74% of sales are to distributors and 26% of
sales are direct to end-users (i.e., clinics, laboratories, hospitals,
physicians' offices). The Company is actively marketing direct end users of its
products and makes presentations at medical conferences and trade shows
worldwide. The Company seeks a 30% gross profit margin on sales to distributors
and 45% on sales to end-users. The Company's single largest customer accounted
for approximately 14% of the Company's Fiscal Year 2000 revenues.
The Company has established numerous incentives for distributors based
upon their status that include: (i) discounts for pre-payment and prompt payment
after delivery of goods; (ii) incentive coupons and cumulative value promotions
for preferred customers who have good payment records; and (ii) other discounts
relating to online and special promotional offerings. The Company plans to
commence advertising and promotional campaigns aimed at end-user customers on a
country by country base to accelerate the transition of its customer base from
distributor to end-user customer denominated.
Competitive Conditions
The competitive landscape for e-commerce solutions in medical diagnostic
tests and allied laboratory products is extremely fragmented and limited in
scope, especially in the international market. Most competitors are sellers of
equipment or medical supplies. Some sell a limited range of diagnostic test
products. Websites include a few buying groups, trade associations, some small
niche distributors or manufacturers, a few large manufacturers, some publishers,
and a handful of virtual malls. About 75% of the websites researched by the
Company were US based. None were comparable to GLOBALeMED. Major medical
diagnostic companies (typically European or US) traditionally rely upon a master
distributor to manage an umbrella distribution network for both public and
private sector sales, which does not compete with the Company's strategy. The
Company has generally found that currently: (i) the market is highly fragmented
throughout the distributor and end-user landscape; (ii) website links are in an
early stage of development; (iii) no company has yet to establish a critical
mass or dominant market share in any particular area concerning the markets
served by the Company; and (iv) the majority of the Company's competitors are
small medical supply companies, buying groups, virtual malls and a few
manufacturers. There can be no assurance that a major US or European company
with greater resources than the Company will not develope a business which is
comparible to and/or competive with the Company.
Patents, Trademarks & Licenses
The Company 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 and suppliers.
Government Regulation
The Company maintains an FDA certified Good Manufacturing Practices
facility and has FDA approval for 464 of the approximately 1000 products it
offers for sale. 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 the
Company to distributors who have represented to the Company that such
Certificates of Exportability permit the sale of the Company's products in the
respective countries. The Company believes that the export of these products is
in compliance with applicable foreign law. An insignificant amount of the
Company's products are sold within the US 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 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.
Research and Development
The Company expended approximately $75,000 and $25,000 during Fiscal
Year 2000 and Fiscal Year 1999, respectively, on research and development
activities. These costs are borne by the Company and are not borne directly by
the Company's customers. Typically, the product life cycle for diagnostic
products is between 18 and 36 months. The Company's research and development is
limited to design specifications for its various contract suppliers, which
requires minimal capital expenditures and personnel. Accordingly, the Company
does not conduct any primary product research and development, but works closely
with its suppliers to implement appropriate changes, as required. The Company
does not consider these expenditures to be significant, nor does it anticipate
that they will become significant.
Employees
As of June 30, 2000 the Company had a total of 19 employees, 14 of
which were full-time employees and 5 of which were part-time employees.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's executive, administrative, technical affairs and
warehouse facilities are located in Miami Lakes, Florida, in approximately 3,500
square feet of general use space. The lease commenced September 1998 and
provides for an initial term of 2 years at $3,400 per month. There is an option
to renew and an option to occupy additional space within the complex. The
Company is negotiating a lease, to commence on or about October 2000, for a
larger facility consisting of 10,000 square feet in Miami Lakes, Florida. The
Company expects the term of the new lease to be for 10 years at $9,100 per month
base rent.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company may be a party to certain claims, suits
and complaints which arise in the ordinary course of business. Currently, there
are no such claims, suits or proceedings, which, in the opinion of management,
if decided against the Company would have a material adverse effect on the
Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Commencing third quarter 1998, the Company's common stock began trading
on the Over The Counter Bulletin Board under the trading symbol "WDGI." The
price set forth below reflect inter-dealer quotations, without retail markups,
markdowns or commissions, and do not necessarily represent actual transactions.
The prices in the table below represent the high and low sales price for the
common stock as reported on the OTC Bulletin Board Market for the periods
presented.
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 June 30 8 6.37
------- -------
Quarter Ending September 30 9.5 8
------- -------
Quarter Ending December 31 10 9
------- -------
2000
Quarter Ending March 31 11.25 9.13
------- -------
Quarter Ending June 30 11.50 1.75
------- -------
The last reported sales price of the common stock on June 30, 2000 was
$4.50 per share. The number of disclosed record holders of the Company's common
stock was 71 on June 30, 2000.
As of June 30, 2000, the Company is authorized to issue up to
10,000,000 shares of common stock par value $.001 per share, of which 4,313,827
shares are issued and outstanding. Of the outstanding shares, 2,673,827 are
restricted securities within the meaning of Rule 144 of the Securities Act of
1933, as amended (the "Securities Act"). As of March 31, 2000, 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 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 are not subject to
further call or redemption and are fully paid and non-assessable. The Company
has not declared any dividends and does not intend to declare any dividends in
the foreseeable future.
On June 21, 2000, the Company completed a private placement of $500,000
in equity financing consisting of units for 71,440 restricted shares of common
stock at a $7.00 per share price, together with warrants exercisable for an
additional 71,440 restricted shares of common stock at an exercise price of
$7.00 per share, or exchangeable without additional cash consideration, but
subject to certain restrictions and lock-up provisions, for 71,440 restricted
shares of the Company's common stock. The private placement was made to
"accredited investors" and was exempt from registration pursuant to Section 4(2)
of the Securities Act.
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.
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
financing of approximately $150,000. The Company intends to meet this and
related objectives by raising approximately $300,000 in additional equity
financing subsequent to the date of this filing. In addition, to meet its goals
for expanded revenue growth and inventory levels, the Company is currently
negotiating a $2,000,000 credit facility, secured by the Company's inventory and
accounts receivable, under which actual borrowing availability will be
formula-based. 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 and Africa 43 16
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 approximate amount of $300,000 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 and forgave all interest through such date. 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 $672,194 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 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 F-1
Consolidated Balance Sheet as of March 31, 2000 F-2
Consolidated Statements of Operations for each of
the two fiscal years ended March 31, 2000 and March
31, 1999 F-3
Consolidated Statements of Cash Flows for each of
the two fiscal years ended March 31, 2000 and March
31, 1999 F-4 - F5
Consolidated Statement of Shareholders Deficit for
each of the two fiscal years ended March 31, 2000
and March 31, 1999 F-6
Notes to Consolidated Financial Statements F-7 - F-13
<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.
CERTIFIED PUBLIC ACCOUNTANTS
F-1
<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-2
<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-3
<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 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-4
<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-5
<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>
F-6
<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-7
<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-8
<PAGE>
4. FIXED ASSETS
Fixed assets consist of the following at March 31, 2000:
[OBJECT OMITTED]
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:
[OBJECT OMITTED]
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.
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-9
<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-10
<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-11
<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: [OBJECT OMITTED]
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:
[OBJECT OMITTED]
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-12
<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-13
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
FINANCIAL DISCLOSURES.
On June 15, 2000, the Company dismissed its independent accountants,
PricewaterhouseCoopers LLP, and retained Gerson, Preston & Company, P.A. as the
Company's new independent accountants. The decision to change accountants was
not as a result of any disagreement between the Company and
PricewaterhouseCoopers LLP. The decision was made by the Chairman of the Board
and President of the Company, and ratified by the Company's Board of Directors.
PricewaterhouseCoopers LLP audited the Company's consolidated financial
statements for the fiscal years ended March 31, 1999 and 1998. Their reports on
such consolidated financial statements did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle, except that the reports of
PricewaterhouseCoopers LLP for the fiscal years ended March 31, 1999 and 1998
contained an emphasis of matter paragraph relating to the Company's ability to
continue as a "going concern."
In connection with its audits of the Company's financial statements as
of March 31, 1999 and for each of the two years in the period ended March 31,
1999 and through June 15, 2000, there were no disagreements with the Company's
former accountants on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of the former accountants,
would have caused them to make a reference to the subject matter of such
disagreements in connection with their reports.
During each of the two fiscal years ended March 31, 1999 and 1998 and
through June 15, 2000, there have been no reportable events (as defined in
Regulation S-K Item 304(a)(1)(v)).
The Company's former accountants have been requested to furnish the
Company with a letter, addressed to the Securities and Exchange Commission,
stating whether the former accountants agree or disagree with the statements
made by the Company concerning PricewaterhouseCoopers LLP. The letter from the
former accountants will be filed as Exhibit to an amendment to the Company's 8-K
filed on June 27, 2000, when received by the Company.
During the Company's fiscal years ended March 31, 1999 and 1998 and
through June 15, 2000, neither the Company nor anyone on its behalf has
consulted the Company's newly engaged accountants regarding either the
application of accounting principles to a specific transaction, whether
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, and neither a written report or oral advice
was provided that the Company concluded was an important factor considered by
the Company in reaching a decision as to the accounting, auditing or financial
reporting issue. During such period, neither the Company nor anyone on its
behalf consulted its new accountants on any matter that was either the subject
of a disagreement or a reportable event as defined in Item 304 of Regulation
S-K.
PART III
In late June 2000 the Company became aware of a technical defect in its
Certificate of Incorporation and By-laws which did not affect the Company's
status as a corporate entity under the of Delaware General Corporation Law (the
"DGCL"), but which required remedy by the Company. In February 1997, the Company
was organized as a "close corporation" under the DGCL. A close corporation is a
corporation which elects, under Section 342 of the DGCL, among other things, to:
be managed by its shareholders, and not by a board of directors; restrict the
transfer of its stock; and restrict the ownership of its stock to no more than
thirty stockholder. In the second quarter of 1999 the Company took action,
including the issuance of shares of common stock to more than thirty holders of
record, which revoked its status as a close corporation. Upon revocation of its
close corporation status the Company became a "regular" corporation under the
DGCL managed by its Board of Directors, however, the Company did not amend its
Certificate of Incorporation and By-laws at that time. Accordingly, the Company
intends to amend and restate its Certificate of Incorporation and By-laws and
ratify the election of its current Board of Directors, On July 11, 2000, in
connection with such action, the Company filed an Information Statement with the
Securities and Exchange Commission pursuant to Section 14(c) of the Exchange Act
and Rule 14c-2 thereunder.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
(a) The names, ages and positions of all executive officers of the
Company as of June 30, 2000 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 59 Chairman, Treasurer and Director
Paul R. Kamps 36 Vice President - Finance and Administration
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
Robert C. Mendes 32 Director of Information Technology
Trevor Campbell, MT, FMT 54 Director
Michael Kondracki 39 Director
Richard P. Humbert 56 Director
Orna L. Shulman 41 Director
</TABLE>
Ken Peters, Kenneth Lambley, Martin Muy and Trevor Campbell were
elected to their positions as officers and directors of the Company in February
1998; Maureen Besson was elected Secretary in February 1998 and Vice President -
Operations in October 1999; Barry Peters was elected Chairman of the Board in
October 1998; Michael Kondracki was elected as a director in November 1998;
Richard P. Humbert was elected as a director in May 2000; Robert Mendes was
appointed Director of Information Technology in May 2000; Paul R. Kamps was
elected Vice President - Finance and Administration in June 2000; and Orna L.
Shulman was elected as a director in June 2000.
KEN M. PETERS is President, Chief Executive Officer and founder of
World Diagnostics, Inc. From September 1995 to August 1996 Mr. Peters was an
independent consultant specializing in health care and biotechnology. From
September 1996 to January 1998 Mr. Peters was Vice President of Sales and
Marketing for Biodiagnostica, Inc. From 1984 to 1994 Mr. Peters held senior
international marketing positions with Pharmacia, AG, American Monitor Corp. and
Flow Laboratories, 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. 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 and Europe speaks Spanish fluently. Mr. Peters received a M.A. in
Economics from the University of New Mexico in 1972 and received his B.A. in
Business and Economics from 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 the Company
since October 1998. Since 1997 he has also served as the Chief Executive Officer
of MediaVest, Inc., a private-investment firm. From 1995 to 1997 Mr. Peters was
Chairman and Chief Executive Officer of All-Comm Media Corporation. Mr. Peters
has over 25 years experience in corporate development, management and finance.
He is Chairman of the Board 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 and
providing early stage financing for companies that included: Metpath, Inc.,
Integrated Resources, Inc., 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 his BA in Economics from Hofstra University in 1968, graduating magna cum
laude. Mr. Peters is the brother of Ken Peters, President of the Company.
PAUL R. KAMPS joined the Company as Vice President - Finance and
Administration in June 2000. Mr. Kamps is a CPA and Chartered Accountant, with
over 13 years of financial and operating experience at small and mid sized
companies, with particular emphasis in the international arena. From March 1999
to May 2000 Mr. Kamps was employed by E-Z Serve Convenience Stores as an
independent financial consultant. From October 1998 to February 1999 he was
employed by LKQ Corporation as Controller, as Controller. From November 1996 to
September 1998 he was employed by Proven Edge, Inc. as Controller, and from July
1995 to October 1996 Mr. Kamps was employed by Medical Resources, Inc. as a
Accounting Manager. Mr. Kamps received his Bachelor of Accounting Science, with
honors in 1989, from the University of South Africa, Johannesburg, South Africa,
and his Bachelor of Commerce in 1987 from the University of Witwatersrand,
Johannesburg, South Africa.
KENNETH LAMBLEY has served as the Vice President-Sales and Marketing of
the Company since December 1998. Prior to joining the Company Mr. Lambley was
employed by Seradyn Diagnostics, Inc. from January 1968 to December 1998 in
various executive capacities. At Seradyn, Mr. Lambley was employed 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 received his graduate degree in international marketing in
1965; he studied pharmacy in the Royal Army Medical Corps from 1963 through
1966.
MARTIN MUY, PH.D. has served as the Vice President-Technical Affairs of
the Company since April 1999. 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
June 1998 until 1999 Dr. Muy was employed as Senior Product Development Manager
for PharmaCorp (USA and Mexico), where he worked on commercialization of various
technologies. From September 1995 to June 19987 Dr. Muy was a post-doctoral
student of the University of Massachusetts and Oregon Health Sciences
University. Dr. Muy was also employed as Senior Product Development Manager for
PharmaCorp (USA and Mexico), where he worked on commercialization of various
technologies. 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.
MAUREEN BESSON has served as Vice President - Operations and Secretary
since June 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 1992 to 1994 Ms. Besson was occupied full time with
her family in Caracas. 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 first employed by the Company as Administrative Assistant to
the President in February 1997. 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.
ROBERT C. MENDES joined the Company as Director of Information
Technology in March 2000. Prior to joining the Company, Mr. Mendes was employed
by Blue Cross & Blue Shield of Florida since 1989. Mr. Mendes graduated from
Barry University in 1989 with a Bachelor's degree in Computer Data Processing
before working for Blue Cross & Blue Shield of Florida, where he began as a
Hardware/Software Support Specialist and later as Senior Systems Analyst upon
his departure. In 1997 he was certified as a Microsoft Certified Systems
Engineer, and as of January, 2000, became a Microsoft Certified Trainer.
TREVOR CAMPBELL has served as a director of the Company since February
1997. Since 1983 Mr. Campbell has been the owner and been President of Microlabs
Inc., Jamaica's largest private reference laboratory, which has 14 independent
laboratories in Jamaica. From 1981 to 1982 Mr. Campbell served as the President
of CASMET, the Caribbean Society of Medical Technologists. From 1977 to 1982,
Mr. Campbell was the sales liaison for Abbott Diagnostics 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 New York 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 Bank 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 companies.
From 1984 to 1990, Mr. Kondracki held various positions at Citibank and
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.
RICHARD P. HUMBERT has served as a director of the Company since May
2000. Mr. Humbert has 20 years experience in computer technology and information
systems. Mr. Humbert has been the Director of Information Technologies for
Panavision, the world's largest supplier of movie cameras and cinematography
equipment since July 1997. From August 1995 to June 1997 he was Director of MIS
for All-Comm Media Corporation. Prior thereto, he was President of MicroSystems,
Inc., a Washington D.C. based computer software engineering and consulting
company. Mr. Humbert attended Cornell University and subsequently, after serving
in the United States Marine Corps, received a B.A. degree in English from the
University of Maryland.
ORNA L. SHULMAN has served as a director of the Company since June
2000. Ms. Shulman has been the Chief Operation Officer of Intertech Corporation,
an international private investment firm, based in New York City, overseeing
investments in real estate, manufacturing and for emerging technology and
biotechnology companies in the United States and Israel, since 1989. Ms. Shulman
serves on the Board of Directors of the Times Square B.I.D.; Women's Leadership
Board of the John F. Kennedy School of Government, Harvard University; member of
the Advisory Board, Real Estate Center, the Wharton School, University of
Pennsylvania. She is also Trustee of the Washington Institute for Near East
Policy, and is a Board member of the Association of Foreign Investors in Real
Estate. Ms. Shulman holds a J.D. degree from Washington University School of
Law, the American University, and a Bachelors degree, cum laude, from Tufts
University.
All directors hold office until the next annual meeting of shareholders
of the Company and until there 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.
(b) Compliance with Section 16(a) of the Exchange Act.
To the Company's knowledge, based solely on the Company's review of
Forms 3 (Initial Statement of Beneficial Ownership of Securities), Forms 4
(Statement of Changes in Beneficial Ownership) and Forms 5 (Annual Statement of
Changes in Beneficial Ownership) furnished to the Company, all persons filed
such forms in a timely manner.
ITEM 10. EXECUTIVE COMPENSATION.
Ken Peters, the President and Chief Executive Officer of the Company,
received a salary of $58,000 and a bonus of $10,000 in Fiscal Year 2000 and a
salary of $58,000 and a bonus of $5,000 in Fiscal Year 1999. The Company
maintains a $2 million keyman life insurance policy on Mr. Peters under which
the Company is the beneficiary. No person received compensation in excess of
$100,000 per annum for Fiscal Year 2000 or Fiscal Year 1999. The Company
compensates its directors $1,500 annually to attend board meetings and, from
time to time, grants directors warrants to purchase shares of the Company's
common stock. No director has been granted more than 50,000 of such warrants.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following information relates to those persons who are known to the
Company to be the beneficial owners of five percent or more of the Company's
voting common stock.
AMOUNT AND PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER NATURE OF OWNER (4,313,827)
Ken Peters
11269 NW 15th Place
Pembroke Pines, FL 33026 953,450 22.10%
Barry Peters
680 Harbor Street
Venice, CA 90291 952,640(1) 22.08%
(1) Beneficially owned by Barry Peters as follows: 249,640 shares are
held by MediaVest, Inc., a Delaware corporation wholly owned by the Peters
Family Trust, and 703,000 shares are held by the Peters Family Trust, of which
Barry Peters is a trustee.
The following table has been completed for each of the shares of common
stock beneficially owned by directors, nominees, and executive officers of the
Company and all officers and directors as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND PERCENT OF CLASS
BENEFICIAL OWNER NATURE OF OWNER (4,313,827)
------------------------------------ ----------------------------------- --------------------
------------------------------------ ----------------------------------- --------------------
<S> <C> <C>
Ken Peters 953,450 22.10%
11269 NW 15th Place
Pembroke Pines, FL 33026
Barry Peters 952,640 (1) 22.08%
680 Harbor Street
Venice, CA 90291
MediaVest, Inc. 249,640 (2)
10801 National Blvd.
Suite 600 5.79%
Los Angeles, CA 90064
Peters Family Trust 703,000 (3) 16.31%
680 Harbor Street
Suite 600
Los Angeles, CA 90064
Trevor Campbell 15,000 *
6163 NW 182nd Terrace
Miami, FL 33015
Kenneth Lambley 2,500 *
6489 Hunters Green Court
Indianapolis, IN 46276
Martin Muy 25,000 (4) *
7489 Fairway Dr., Apt #403
Miami Lakes, FL 33014
Michael Kondracki 10,700 *
Deutche Bank Securities
Argentine Pouch - 9th Floor
31 West 52nd Street
New York, NY 10019
Richard P. Humbert 10,000 (5) *
818-3010 Beach Street
Venice, CA 90291
Orna L. Shulman 50,000 (6) *
Intertech Corporation
1500 Broadway
New York, NY 10036
Paul R. Kamps 10,000 *
7389 Fairway Drive, #149
Miami Lakes, FL 33014
Robert C. Mendes 10,000 *
1315 SW 99th Court
Miami, FL 33174
All Officers, Directors 2,039,290 (7) 47.27%
and Management as a group (10 Persons)
--------------------
<FN>
(1) Of the 952,640 shares beneficially owned by Barry Peters,
249,640 are held by MediaVest, Inc., a Delaware corporation
wholly owned by the Peters Family Trust, and 703,000 are held
by the Peters Family Trust, of which Barry Peters is a
trustee.
(2) Shares of MediaVest, Inc. are included as beneficially owned
by Barry Peters.
(3) Shares of the Peter Family Trust are included as beneficially
owned by Barry Peters.
(4) Includes 10,000 shares of Common Stock issuable upon exercise
of options to purchase 10,000 shares of Common Stock on or
before April 2002.
(5) Includes 10,000 shares of Common Stock issuable upon exercise
of warrants to be issued to Mr. Humbert exercisable through
June 2003.
(6) Includes 50,000 shares of Common Stock issuable upon exercise
of warrants to be issued to Ms. Shulman exercisable through
June 2003.
(7) Without duplication of the 952,640 shares shown as
beneficially owned by Barry Peters.
* Less than 2%
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1998, the Company entered into a $150,000 promissory note (the
"Note") with MediaVest, Inc., a Delaware corporation ("MediaVest"), controlled
by Barry Peters who is Chairman of the Board of the Company, and other lenders
under the Note. MediaVest participated in $50,000 of the $150,000 loan to the
Company. The Note bore interest at 10% per annum and had a maturity date of
August 24, 1998. The Company repaid $17,500 of the Note in December 1998 through
the issuance of 29,237 shares of common stock. MediaVest and the participant
lenders extended repayment of the Note until February 24, 1999 and forgave all
interest through that date, in exchange for which the Company issued 200,000
shares of common stock at $.125 per share to be allocated among the lenders
under the Note. In April 1999, the Company paid the outstanding balance of the
Note through the issuance of 101,090 shares of common stock and payment of
$45,000. The fair market value of the common stock was $7.00 per share at the
dates of extinguishments. 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 common stock at the
dates of extinguishments by 25%. During Fiscal Year 1999 MediaVest made
short-term non interest bearing loans to the Company in the aggregate of
$75,000, all of which were repaid in November 1999.
During Fiscal Year 1999 and Fiscal Year 2000 one of the largest
customers of the Company was Microlabs, Inc. Microlabs, Inc. purchases
represented approximately 21% of revenues for Fiscal Year 1999 and 8% of
revenues for Fiscal Year 2000. Trevor Campbell, one of the Company's directors
is the President and owner of Microlabs, Inc.
There are no other material transactions between the Company and any of
its affiliates except as set forth herein.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT INDEX
The following documents are filled herewith or have been included as
exhibits to previous filings with the Commission and are incorporated
herein by this reference.
EXHIBIT DOCUMENT
NO.
3.1 Certificate of Incorporation of World Diagnostics, Inc., filed
as Exhibit 2.1 to Form 10SB12G filed on October 13, 1999.
3.2 Certificate of Amendment of Certificate of Incorporation of
World Diagnostics, Inc., Filed as Exhibit 2.2 to Form 10SB12G
filed on October 13, 1999.
3.3 Bylaws of World Diagnostics, Inc., filed as Exhibit 2.3 to
Form 10SB12G filed on October 13, 1999.
4.0 Instruments Defining Rights o Security Holders: Form of Stock
Certificate, filed as Exhibit 3.0 to Form 10SB12G filed on
October 13, 1999.
4.1 Promissory Note, filed as Exhibit 4.1 to Form 10-QSB for the
period ended September 30, 1999 filed on February 15, 2000.
4.2 Warrant Certificate: Filed as Exhibit 4.2 to Form 10-QSB for
the period ended September 30, 1999 filed on February 15,
2000.
10.1 Acquisition of Health Tech International, Inc., filed as
Exhibit 6.1 to Form 10SB12G filed on October 13, 1999.
10.2 Keyman Insurance For Chief Executive Officer, filed as Exhibit
6.2 to Form 10SB12G filed on October 13, 1999.
10.3 Independent Contractor Agreement With Immunodiagnostics, Inc.,
filed as Exhibit 6.3 to Form 10SB12G filed on October 13,
1999.
10.4 Form Confidentiality Agreement With Management, filed as
Exhibit 6.4 to Form 10SB12G filed on October 13, 1999.
10.5 Form Letter Agreement Executed By Distributors, filed as
Exhibit 6.5 to Form 10SB12G filed on October 13, 1999.
10.6 Office Lease, Filed As Exhibit 6.6 to Form 10SB12G filed on
October 13, 1999.
11.0 Statement Re: Computation Of Per Share Earnings: Filed
Herewith.
16.0 Letter On Change In Certifying Accountants, to be filed as an
Exhibit to an amendment to the Company's 8-K filed on June 27,
2000, when received by the Company
21.0 Subsidiaries Of The Registrant: Filed Herewith
23.0 Consent of Gerson, Preston & Company, P.A.: Filed herewith
27. Financial Data Schedule: Filed herewith
(B) Reports On Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
2000.
<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 14, 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 14, 2000
-----------------------------------
Paul R. Kamps, Vice President-
Finance and Administration
/s/ Barry Peters July 14, 2000
---------------------------
Barry Peters, Director
/s/ Trevor Campbell July 14, 2000
-----------------------------------
Trevor Campbell, Director
/s Richard P Humbert July 14, 2000
-----------------------------------
Richard P. Humbert, Director
