As filed with the Securities and Exchange Commission on January __, 2001
Registration Statement No. 333-_______
===============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------------------------------------------------
WORLD DIAGNOSTICS INC.
(Name of Small Business Issuer in its Charter)
Delaware 541990 65-0742342
-------- ------ ----------
(State or jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization Industrial Classification Identification No.)
Code Number)
15271 N.W. 60th Avenue, Miami Lakes, Florida 33014 (305) 827-3304
-----------------------------------------------------------------
(Address and telephone number of principal executive offices)
Ken Peters, President
World Diagnostics Inc.
15271 N.W. 60th Avenue
Miami Lakes, Florida 33014
(305) 827-3304
(Name, address and telephone number of agent for service)
Copies of all communications to:
Craig R. Parker, Esq.
Herrick, Feinstein LLP
Two Park Avenue
New York, NY 10016
(212) 592-1561
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this registration statement.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
<PAGE>
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Proposed
Title of Each Class of Maximum Proposed Maximum
Securities to be Amount to be Offering Price Aggregate Offering Amount of
Registered Registered per Unit (1) Price Registration Fee
--------------------------- ----------------------- ----------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Common stock, $.001 par
value.................... 3,206,760 SHARES $.703 $2,254,352 $563.59
--------------------------- ----------------------- ----------------- --------------------- -----------------
Common stock, $.001 par
value (2)(3)............. 2,250,000 SHARES $1.375 $3,093,750 $773.44
--------------------------- ----------------------- ----------------- --------------------- -----------------
Common stock, $.001 par
value (2)(4)............. 2,250,000 SHARES $1.625 $3,656,250 $914.06
--------------------------- ----------------------- ----------------- --------------------- -----------------
Class A Warrants ........ 2,250,000 WARRANTS 0 0 0
--------------------------- ----------------------- ----------------- --------------------- -----------------
Class B Warrants ........ 2,250,000 WARRANTS 0 0 0
--------------------------- ----------------------- ----------------- --------------------- -----------------
Total....................................................... $2,251.09
--------------------------------------------------------------------- --------------------- -----------------
</TABLE>
(1) ESTIMATED SOLELY FOR PURPOSES OF CALCULATING THE REGISTRATION
FEE PURSUANT TO RULE 457(A) BASED ON THE AVERAGE OF THE
CLOSING BID AND ASKED PRICE FOR OUR COMMON STOCK, $.001 PAR
VALUE AS REPORTED ON THE NASDAQ OTC BULLETIN BOARD ON JANUARY
9, 2001. WITH RESPECT TO THE SHARES ISSUABLE UPON EXERCISE OF
THE WARRANTS, THE REGISTRATION PRICE PER SHARE IS BASED ON THE
EXERCISE PRICE OF THE WARRANTS.
(2) PURSUANT TO RULE 416 PROMULGATED UNDER THE SECURITIES ACT,
THIS REGISTRATION STATEMENT ALSO REGISTERS SUCH NUMBER OF
ADDITIONAL SHARES OF COMMON STOCK THAT MAY BE ISSUED UPON
EXERCISE OF THE WARRANTS AND FOR OTHER ADJUSTMENTS TO PREVENT
DILUTION RESULTING FROM STOCK SPLITS, STOCK DIVIDENDS OR
SIMILAR TRANSACTIONS.
(3) REPRESENTS THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
OF THE CLASS A WARRANTS.
(4) REPRESENTS THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
OF THE CLASS B WARRANTS.
---------------------
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY ___, 2001
WORLD DIAGNOSTICS INC.
7,706,760 SHARES OF COMMON STOCK
2,250,000 CLASS A COMMON STOCK WARRANTS
2,250,000 CLASS B COMMON STOCK WARRANTS
================================================================================
The selling securityholders of World Diagnostics Inc. listed on pages 23
through 28 of this prospectus are selling up to the following amounts of shares
of our common stock and warrants to purchase shares of our common stock:
* 3,206,760 shares currently owned,
* 2,250,000 Class A Warrants,
* 2,250,000 Class B Warrants, and
* 4,500,000 shares issuable upon the exercise of all 4,500,000 Class A and
Class B Warrants
The selling securityholders are also selling up to 2,250,000 Class A
Warrants to acquire 2,250,000 shares of common stock at an exercise price of
$1.375 per share, and up to 2,250,000 Class B Warrants to acquire 2,250,000
shares of common stock at an exercise price of $1.625 per share. We are
registering certain of the securities offered by this prospectus pursuant to
registration rights that were granted to certain selling securityholders. We
will not receive any of the proceeds from the sale of common stock or warrants
by the selling securityholders, but we will receive all of the proceeds from the
exercise of the warrants if and to the extent that any of the warrants are
exercised.
The selling securityholders' shares and warrants may be offered from time
to time by the selling securityholders directly to purchasers or to or through
broker-dealers who may act as agents or principals. The selling securityholders
intend
to sell the shares and warrants into the public market from time to time.
The selling securityholders will pay all brokerage commissions and
discounts attributable to the sale of the shares and warrants plus brokerage
fees. We are responsible for all other costs, expenses and fees incurred in
registering the shares and warrants offered by this prospectus.
Our common stock is traded under the symbol "WDGI" on the Nasdaq OTC
Bulletin Board, and we will apply to have our Class A Warrants and Class B
Warrants listed on the Nasdaq OTC Bulletin Board
INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This date of this prospectus is __________ ___, 2001
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
PROSPECTUS SUMMARY................................................1
RISK FACTORS......................................................4
Risks Relating to Our Company................................4
Risks Relating to Our Strategy and Industry..................7
Risks Relating to the Offering..............................12
FORWARD-LOOKING STATEMENTS.......................................14
USE OF PROCEEDS..................................................15
CAPITALIZATION...................................................15
PLAN OF DISTRIBUTION.............................................16
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.........17
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.....18
SECURITY OWNERSHIP OF PRINCIPAL AND SELLING SECURITYHOLDERS AND
MANAGEMENT.......................................................23
DESCRIPTION OF SECURITIES........................................29
Delaware Anti-Takeover Law..................................32
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES.......................................33
ORGANIZATION WITHIN LAST FIVE YEARS..............................33
DESCRIPTION OF BUSINESS..........................................33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................44
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................49
EXECUTIVE COMPENSATION...........................................50
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.............................................52
LEGAL MATTERS....................................................53
EXPERTS..........................................................53
HOW YOU CAN GET MORE INFORMATION ABOUT US........................53
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS......................F-1
FINANCIAL STATEMENTS............................................F-1
(i)
<PAGE>
PROSPECTUS SUMMARY
Read this entire prospectus carefully. The following summary is qualified
by the more detailed information, including "Risk Factors," appearing elsewhere
in this prospectus. As used in this prospectus, unless the context otherwise
requires, the terms "we," "us," or "our" shall mean World Diagnostics Inc. For
more information about us, see "How You Can Get More Information About Us."
OUR BUSINESS
We began operations in February 1997 for the purpose of selling medical
diagnostic test kits and allied laboratory products in emerging international
markets.
We are a supplier and exporter of approximately 1,000 different kinds of
medical diagnostic test kits and allied laboratory products. The products are
sold to medical professionals through a network of 96 distributors covering 76
countries and through our website, www.GLOBALeMED.com, which is also accessible
through our other Internet addresses: www.labtestkits.com and
www.worlddiagnostics.com. Our company-branded products include rapid
immunodiagnostic products for point-of-care testing of certain human medical
conditions and infectious diseases, and incorporate proprietary, genetically
engineered technology to diagnose infectious diseases, such as HIV, cholera,
hepatitis and tuberculosis, as well as various sexually transmitted diseases.
Our GLOBALeMED business-to-business e-commerce website serves as our
e-commerce solution for medical professionals to purchase medical diagnostic and
allied laboratory products and provides access to medical and laboratory test
kit data and technology support online. The GLOBALeMED system is a worldwide
system available in multiple languages and may be utilized by our distributors
to serve end-users of our products, such as hospitals, clinical laboratories,
physician's offices and certain pharmacies primarily in the emerging
international markets, such as the Caribbean, South America and Eastern Europe.
OUR LOCATION
Our executive offices are located at 15271 N.W. 60th Avenue, Miami Lakes,
Florida 33014. Our telephone number is (305) 827-3304 and our facsimile number
is (305) 827-3305. Our Internet web site is located at www.GLOBALeMED.com, which
is also accessible through these Internet addresses: www.labtestkits.com and
www.worlddiagnostics.com.
1
<PAGE>
THE OFFERING
Common stock offered by
selling securityholders...... 7,706,760 shares (1)
Class A Warrants offered by
selling securityholders...... 2,250,000 warrants
Class B Warrants offered by the
selling securityholders...... 2,250,000 warrants
Common Stock Outstanding:
Before the offering....... 7,235,620 shares
After the offering (1).... 11,735,620 shares
Use of Proceeds.............. We will not receive any
proceeds from the sale of
shares of common stock or
warrants by the selling
securityholders. However,
we may receive proceeds from
the exercise of the warrants
to purchase our common stock
and plan to use such
proceeds, if any, for sales
and marketing of our
products, expansion of our
distribution network,
working capital and other
general corporate purposes.
OTC Bulletin Board Symbol for the
the common stock.......... WDGI
Proposed OTC Bulletin Board
Symbol:
Class A Warrants..........
Class B Warrants..........
(1) This figure assumes that all Class A Warrants and Class B Warrants are
exercised and therefore includes all 4,500,000 shares of common stock issuable
upon possible exercise of these warrants.
2
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following summary financial information is taken from our financial
statements included elsewhere in this prospectus and should be read along with
the financial statements and the related notes.
Year ended
March 31, Six Months Ended September 30,
CONSOLIDATED STATEMENT OF 2000 2000 1999
OPERATIONS DATA: ----------- ------------ -----------
(audited) (unaudited) (unaudited)
Revenues $ 1,463,417 $ 1,134,296 $ 541,008
=========== =========== =========
Loss from operations before $(1,207,882) $ (834,189) $(427,803)
extraordinary item
Extraordinary loss on (493,938) (89,415) (493,938)
extinguishment of debt ----------- ---------- ---------
Net Loss $(1,701,820) $ (923,604) $(921,741)
=========== ========== =========
Basic and dilutive common loss per
share:
Loss from operations before
extraordinary item (0.29) (0.19) (0.10)
Extraordinary item (0.12) (0.02) (0.12)
----------- ----------- ---------
(0.41) (0.21) (0.22)
----------- ----------- ---------
Weighted average number of common
shares outstanding 4,210,256 4,469,544 4,134,316
The following table summarizes our balance sheet as of September 30, 2000
and March 30, 2000. See "Use of proceeds" and "Capitalization."
<TABLE>
<CAPTION>
Actual Actual Proforma(1) Proforma as Adjusted(2)
CONSOLIDATED BALANCE March 31, September 30, September 30, September 30,
SHEET DATA: 2000 2000 2000 2000
--------- ------------- ------------- ----------------------
(audited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents $80,817 $8,886 $2,133,886 $8,688,386
Working capital (deficit) (672,194) (594,515) 1,530,485 8,084,985
Total assets 813,262 1,061,930 3,186,930 9,741,430
Long-term debt, less
current portion 28,231 20,363 20,363 20,363
Total shareholders equity
(deficit) (522,035) (410,767) 1,904,233 8,458,733
<FN>
(1) Reflects the issuance of 2,250,000 shares of common stock, together with
Class A Warrants and Class B Warrants in November and December 2000 at
proceeds of $1 per share, net of expenses of $125,000. Also reflects the
issuance of 233,915 shares of common stock to convert $190,000 of 10%
unsecured notes Payable.
(2) Reflects the exercise of Class A Warrants at $1.375 per share and Class B
Warrants at $1.625 per share, net of estimated expenses of $200,000
associated with the issuance of the warrants. On December 29, 2000, the last
reported sale price of the common stock on the Nasdaq OTC Bulletin Board was
$0.75 per share. As of the date of this prospectus the price of the common
stock is less than the exercise price of the warrants. Additionally, this
exercise of the warrants is contingent on the effective date of this
prospectus. If this prospectus is not effective by March 31, 2001 the
exercise price of the warrants decreases and the warrants may be exercised
on a cash-less basis.
</FN>
</TABLE>
3
<PAGE>
RISK FACTORS
In addition to the other information specified in this prospectus, the
following risk factors should be considered carefully in evaluating us and our
business before making an investment in our securities. An investment in our
securities is speculative in nature and involves numerous risks. No purchase of
the common stock or warrants should be made by any person who cannot afford to
lose the entire amount of such investment.
RISKS RELATING TO OUR COMPANY
WE HAVE A LIMITED OPERATING HISTORY ON WHICH YOU CAN EVALUATE US.
We were organized in February 1997 and have a limited operating history.
Accordingly, it is difficult to project future revenue growth based on past
performance of our business. As a result, our ability to increase sales and
profits is difficult to evaluate. Our continued operations are dependent upon
future profitability, our ability to generate cash flow and upon our ability to
identify and take advantage of other business opportunities, all of which
contingencies are equally difficult to evaluate. Our financial success must
therefore be considered highly speculative.
WE CANNOT PREDICT OUR SUCCESS BECAUSE OUR BUSINESS MODEL OF SELLING THROUGH
DISTRIBUTORS AND VIA THE INTERNET IS UNPROVEN.
The success of our business depends on our distribution network and
commercial acceptance of our GLOBALeMED Internet-based system for selling
medical diagnostic products and allied medical laboratory products online. We
cannot predict whether we will increase sales to the volume or at prices we need
to become profitable. Although our distributor network and Internet usage
e-commerce are growing rapidly, we cannot be certain that this growth will
continue in its present form, or at all, or that Internet growth will mean
increased sales for us.
WE ARE VULNERABLE TO THE UNCERTAINTIES AND DIFFICULTIES FREQUENTLY ENCOUNTERED
BY EARLY STAGE COMPANIES.
As a new company, we are subject to the uncertainties and difficulties
encountered by early stage businesses, such as our ability to implement sales
and marketing plans and attain, retain and motivate qualified personnel. Our
distributor network will require that we provide new and different customer
services that meet the needs of our customers and we do not know whether we will
be able to adapt to those changes.
We do not know whether we will successfully implement our strategy to
increase sales online through our GLOBALeMED system, whether we will generate
sufficient net cash flow from operations, or whether we will be able to obtain
sufficient funding to satisfy all of our obligations.
4
<PAGE>
OUR AUDITORS INCLUDED A GOING CONCERN UNCERTAINTY IN THEIR AUDITOR'S REPORT.
The report of our independent certified public accountants in connection
with the 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 that create substantial doubt about our ability to continue
as a going concern. Factors considered in this assessment include recurring net
losses since inception and uncertainty surrounding future equity financing.
Although we recently completed an equity financing of $2.250 million, no
assurance can be given that these funds will be adequate to finance our business
until it becomes profitable, or that additional sources of financing will be
available on terms acceptable to the company.
WE EXPECT TO CONTINUE TO INCUR LOSSES IN THE FUTURE.
To date we have not been profitable. We have incurred significant losses
since inception and we expect further losses in the future. We reported a net
loss of $923,604, including an extraordinary loss from debt extinguishments of
$89,415 for the six months ended September 30, 2000. As of September 30, 2000,
our accumulated deficit was $3,571,945. Although our revenues have grown in
recent quarters, we cannot be certain that our revenues will continue to grow or
that we will obtain sufficient revenues to achieve profitability.
OUR GROWTH WILL LIKELY REQUIRE ADDITIONAL CAPITAL, WHICH MIGHT NOT BE AVAILABLE
WHEN NEEDED.
We may require additional working capital and other funds in order to hire
additional personnel to support our customers, increase our advertising and
marketing program, and operate our business as we expand our operations. We may
not be able to raise additional capital in the future on terms acceptable to us,
or at all, to meet these plans. If we require additional financing and
acceptable sources of financing are insufficient or unavailable, we will be
required to modify our growth and operating plans in accordance with the extent
of available funding.
WE MAY ENCOUNTER DIFFICULTIES PURSUING OUR EXPANSION STRATEGY AND MANAGING OUR
GROWTH, EITHER OF WHICH COULD HINDER OUR SUCCESS.
Our ability to generate sufficient cash flows from operations will depend
upon continued growth in many different geographic and economically diverse
markets. The successful, timely and cost-effective expansion of our business is
likely to place a significant strain on our personnel and also require
increasing our staff and changing they way in which we do business so that we
may meet the needs of customers within different countries and markets. Our
continued growth depends upon a number of factors, including our ability to:
* form joint ventures or other strategic alliances to expand our sales,
support our distributors with advertising and provide them with other
assistance in order to grow their customer base and the sales of our
products;
* continue to maintain and develop adequate billing and management
information systems, especially with regard to those business record
systems that provide us with important information about our customers,
such as buying patterns, pricing and frequency of purchases;
5
<PAGE>
* continue to maintain and develop an adequate business information system
to accommodate increasing numbers of customers while at the same time
maintaining high standards of quality and reliability;
* successfully develop our brand in the markets in which we operate in
order to build confidence in our products and brand equity;
* adapt our GLOBALeMED website to different geographic markets and
evolving cultural trends; and
* respond appropriately to changes in the medical diagnostics industry,
including technological advances regarding new tests and formats that
enable our customers to receive modern products and information about
how to use such products.
WE DEPEND HEAVILY ON KEY PERSONNEL TO SUCCEED.
Due to the specialized nature of our business, we are dependent upon the
continued efforts of our management and key personnel. While we have obtained
keyman life insurance on our President in the amount of $2,000,000, the
insurance may not be enough to secure a replacement in the event of his loss. We
consider our management team to be essential to the near term success of our
business. The loss of the services of any key employee would likely have a
material adverse effect on our business. We do not have employment agreements
with any members of our management team.
Our success also depends on our ability to attract and retain additional
highly qualified management, technical, marketing and sales personnel. These
individuals are in high demand and we may not be able to attract the staff we
need on terms acceptable to the company. The hiring process is intensely
competitive and may have a negative effect upon our ability to attract qualified
people. This recruitment effort could be time consuming and potentially divert
the attention of our management from our operations.
OUR FUTURE FINANCING AGREEMENTS MAY CONTAIN RESTRICTIONS THAT AFFECT OUR ABILITY
TO TAKE CERTAIN BUSINESS ACTIONS, INCLUDING PURSUING OUR EXPANSION STRATEGY.
We plan to enter into borrowing arrangements with secured and unsecured
lenders for working capital needs, including receivable and inventory financing.
The restrictions and covenants in any future financing agreements may adversely
affect our ability to enter into other financing arrangements, pursue our
expansion strategy or to engage in other business activities that may be in our
interest. Events beyond our control may affect our ability to comply with
financing covenants, including covenants requiring compliance with certain
financial ratios. A breach of any of these covenants, including our inability to
comply with the required financial ratios could result in a default under our
obligations and inability to conduct our business.
6
<PAGE>
RISKS RELATING TO OUR STRATEGY AND INDUSTRY
THE CONTINUED EXPANSION OF OUR BUSINESS OUTSIDE THE UNITED STATES PRESENTS US
WITH CERTAIN SPECIAL RISKS.
Our business strategy is to continue to build our distribution network and
our e-commerce system of local GLOBALeMED websites, country-by-country, in order
to expand our business and increase our revenues. As we continue to develop our
international operations, we will increasingly become subject to a number of
special risks affecting multi-national businesses, such as trade barriers,
currency regulations and other laws governing foreign-based companies, political
risks and changes in laws and policies affecting importation and usage of
medical products as well as the use of Internet services. In addition, as a
result of our customers being located outside of the United States, it will be
very difficult for us to institute cost effective collection proceedings with
respect to any of our accounts receivable that may become in default.
WE OPERATE IN A HIGHLY COMPETITIVE AND TECHNICAL ENVIRONMENT.
The markets in which we operate are highly competitive and subject to
rapid technological change. A large number of companies are involved or are
becoming involved in the development and sale of diagnostic tests, both through
distributors and over the Internet. Competitors include major pharmaceutical and
medical diagnostic companies, many of which have considerably greater financial,
technical, clinical and marketing resources than we do. Although we believe that
several of our products, such as our rapid HIV whole blood test, have distinct
advantages, we may not be able to exploit these advantages because our
competitors may improve existing products more efficiently than we do or may
design and develop new diagnostic products that are more accepted in the
marketplace than our products. Further, the markets in which we currently
compete and intend to compete in the future are undergoing, and are expected to
continue to undergo, rapid and significant technological change, and we expect
both local and international competition to intensify as technological advances
in such fields are made.
WE RELY ON TELECOMMUNICATIONS INFRASTRUCTURE PROVIDERS FOR THE
DISTRIBUTION OF OUR WEBSITES.
Telecommunications infrastructures are different in each of the countries
where we sell our products and offer our services through our GLOBALeMED
website. We cannot control or influence how customers connect to the Internet in
these countries.
Our business depends in significant part on the capacity, expandability,
affordability, reliability and security of the telecommunications
infrastructures we utilize. The use of our websites and the distribution of our
products and services require Internet users to initiate connections between
their personal computers and local or regional dial up points of presence, or
POPs. Because we depend on third-party telecommunications carriers, we do not
have direct control over network reliability and certain aspects of service
quality. Network capacity constraints at particular POPs, especially at times of
peak usage, can prevent or delay access to connect to those POPs. A natural
disaster, fire and flooding, power loss, software related system failures and
various similar events that affect the POPs or the telecommunications lines we
use, or that affects a nation's telecommunications network in general, could
cause interruptions in our services and loss of revenues. Poor network
performance could result in lower customer satisfaction with our e-commerce
solution and have a material adverse effect on our sales and business plan.
7
<PAGE>
OUR BUSINESS PROSPECTS ARE DEPENDENT ON CONTINUED GROWTH AND ACCEPTANCE OF THE
INTERNET AND E-COMMERCE.
Our business will suffer if the global marketplace for our products and
services does not accept the Internet as a business tool. Business-to-business
e-commerce is a new and emerging business practice that remains largely untested
in the international marketplace. Much of our future growth and profitability
will depend on the success of our GLOBALeMED e-commerce system where our
customers can buy our diagnostic tests online and obtain customer support
services. Growth in the demand for our Internet-based purchasing solution for
our products and services depends on the adoption of e-commerce and Internet
solutions by worldwide industry participants, which requires the acceptance of a
new way of conducting business and purchasing diagnostic tests and laboratory
products. A number of factors, in general, may inhibit Internet usage, including
inadequate network infrastructure, security and privacy concerns, fraud,
government regulation, high telecommunication tariffs, inconsistent quality of
service, fulfillment logistics and non-availability of cost-effective service.
If widespread commercial acceptance of the Internet does not develop, we likely
will not be able to implement our e-commerce business, which will prevent us
from obtaining enough customers to be profitable.
THE INTERNET'S INFRASTRUCTURE MAY NOT BE ABLE TO SERVICE DEMAND.
The growth and increasing volume of Internet traffic may cause performance
problems that may adversely affect the development of our Internet-based
business. The growth of Internet traffic to high volumes of use over a
relatively short period of time has caused frequent periods of decreased
Internet performance, delays and, in some cases, system outages. This decreased
performance is caused by limitations inherent in the technology infrastructure
supporting the Internet and the internal networks of Internet users. The
international marketplace is even less developed in its Internet infrastructure,
which may pose problems in the form of delays, interruptions and communication
failures. If Internet usage continues to grow rapidly, the infrastructure of the
Internet and its users may be unable to support the demands of growing
e-commerce usage, and the Internet's performance and reliability may decline. If
our existing or potential customers experience delays on the Internet, the
adoption or use of our Internet-based, e-commerce purchasing solution may grow
more slowly than we expect or even decline. Consequently, we may have difficulty
obtaining new customers, or maintaining our existing customers, either of which
could reduce our potential revenues and have a negative impact on our business,
results of operations and financial condition.
WE DEPEND ON THIRD PARTY INTERNET SERVICE PROVIDERS FOR OUR WEBSITE TO BE
AVAILABLE TO OUR CUSTOMERS.
Use of our Internet website and our GLOBALeMED solution is dependent upon
third-party Internet service providers who provide access to the Internet for us
and our customers. We have no control over these third parties. If Internet
service providers do not provide Internet services or the quality services fall
below a satisfactory standard, our business could be significantly harmed.
8
<PAGE>
ACTUAL AND PERCEIVED SECURITY RISKS AND OTHER DISRUPTIVE EVENTS WITH RESPECT TO
THE INTERNET OR OUR COMPUTER SYSTEMS COULD HARM US.
Both our infrastructure and the infrastructure of Internet service
providers may be vulnerable to unauthorized access, computer viruses or similar
disruptive problems and system failures. Security and disruption problems with
the Internet or our website may inhibit our growth strategy to expand the usage
of our GLOBALeMED e-commerce system. The secure transmission of confidential
information over the Internet is essential to maintaining customer and supplier
confidence. Customers generally are concerned with security and privacy on the
Internet and any publicized security problems could inhibit the growth of the
conducting transactions. Our computer systems are also subject to damage caused
by fire, flooding, telecommunications failures, power loss, software-related
system failures and various similar events. Any of these events, whether
intentional or accidental, could lead to interruptions, delays or cessation of
service. Third parties could also potentially jeopardize the security of
confidential information stored in our computer systems or our customers'
computer systems. Protecting against the threat of security breaches or
alleviating problems caused by breaches may be expensive to solve and could
require us to spend significant capital or other resources. In addition, we
could lose customers if our service, or the Internet in general, is perceived as
not having adequate data security.
Although we maintain redundant computing and/or communication resources,
if there should be a complete failure of such systems, our insurance policies
will not adequately compensate us for any losses that may occur due to such
failures or interruptions in our business.
OUR STRATEGY TO INCREASE SALES THROUGH THE DEVELOPMENT OF OUR BRAND MAY NOT
SUCCEED.
We believe that, to be successful, we must enhance our name recognition,
both with customers and suppliers. We believe that name recognition will become
an increasingly important competitive factor as the number of Internet sites
grows. We have only been selling our products for less than three years under
our brand name, and we intend to continue our marketing campaign in order to
build name recognition for our brand in many countries outside the United States
and Europe. Our marketing campaign may not accomplish this goal because it is an
expensive and time-consuming process, and we have a number of competitors with
greater financial resources than we do, many of whom have well-established brand
names. If we do not succeed in promoting our name, we may not be able to
generate sufficient revenues.
WE DO NOT MAINTAIN A RESEARCH STAFF AND RELY UPON OUTSIDE MANUFACTURERS TO
DESIGN AND PRODUCE PRODUCTS FOR US.
We contract with approximately 37 suppliers to manufacture and produce
various components of our products. While there is an agreement with each
supplier, there can be no assurance that such contracts will be fulfilled or
that internal problems within these third parties will not affect production or
productivity in the future. While we believe that the suppliers have the ability
to meet production requirements, there can be no assurance that the suppliers
will meet all their contractual obligations or that we will not be adversely
affected in the event of a breach of contract. We believe it is possible to
obtain suitable replacement products from other suppliers. However, the loss of
a supplier may still have some negative impact on our operations.
9
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OUR SUCCESS DEPENDS ON OUR ABILITY TO SELECT AND OBTAIN PRODUCTS THAT ARE WIDELY
NEEDED.
It is important to our business to select and obtain products that are
widely needed by the medical community. We have decided to focus our procurement
efforts with suppliers of the following:
* New and improved diagnostic formats for our existing products, and
* New infectious disease diagnostic products with increased sensitivity
resulting from DNA viral load detection, utilizing non-invasive
specimens such as urine instead of blood or serum.
If we are unable to obtain these products or if we are unable to obtain them in
quantities sufficient to supply our customers, it will be detrimental to our
operations by limiting our ability to compete and achieve our business plan
will be damaged.
OUR PRODUCTS REQUIRE GOVERNMENT APPROVALS IN EACH COUNTRY WHERE OUR PRODUCTS ARE
SOLD.
In order to sell our products we must obtain product or company
registration in each country in which our products are sold. This process can be
expensive and time consuming, and could have an adverse affect on our ability to
generate sales or penetrate a market. Government unrest, politics, or other
unforeseeable complications may also prevent us from selling our products in a
given country. Moreover, some of our contracts are obtained through government
entities, such as the recent award from the Government of South Africa, the loss
of which could have a material affect on our sales and the operations of our
business.
OUR PRODUCTS AND PROCESSES ARE SUBJECT TO GOVERNMENT REGULATION.
The vast majority of our sales occur outside the United States. We believe
that the export of these products is in compliance with applicable foreign law.
We have FDA Certificates of Foreign Government for FDA approved products, and
also have FDA Certificates of Exportability 801(e) that are provided by us to
distributors who have undertaken the product registration process in their
respective countries on our behalf. Although an insignificant amount of our
products are sold within the USA, they are nevertheless subject to the 1976
Medical Device Amendments to the Federal Food, Drug and Cosmetic Act, and
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, our 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 our business.
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OUR PRODUCTS ARE NOT PROTECTED BY PATENTS.
The diagnostics industry in the United States is relatively mature and its
technology changes about every 2 to 5 years, making patent protection
unnecessary and too costly. Thus, we have not applied for patent protection with
respect to any of our products that we have obtained the right to sell or which
have been developed for us. We protect our trade secrets through confidentiality
and non-competition agreements executed by our employees. We do not expect to
file for patent protection within the United States or other countries, but if
we choose to do so because economic protection for the product is needed and
such patent can be obtained, no assurance can be given that patents will be
issued to us pursuant to any future patent applications in the United States or
abroad or that our patents, when and if issued, will provide us with a
meaningful level of commercial protection. A large number of individuals and
commercial enterprises seek patent protection for technologies, products and
processes in fields related to the areas of product development that we are
involved in. To the extent such efforts are successful, we may be required to
obtain licenses in order to exploit certain of our product strategies. There can
be no assurance we would be able to obtain those licenses at all or on
acceptable terms acceptable to us.
WE HAVE LIMITED PRODUCT LIABILITY INSURANCE.
Our business exposes us to product liability risks relating to the
manufacturing, marketing and sale of diagnostic products. To date, we have not
experienced any product liability claims, but any such claim arising in the
future could have a material adverse effect on our business, financial condition
and results of operations. We have limited product liability insurance in effect
which, in the event of any legal action by third parties, could result in
significant legal defense fees as well as damages for liability. While we may
seek to obtain additional insurance in the future, the cost may be prohibitive.
Therefore, we may have to rely on those companies from whom we purchase our
product components to provide such liability insurance. There can be no
assurances that we will be able to obtain product liability insurance or that
companies from whom our product components are purchased will be able to obtain
product liability insurance. In the event that we are held liable for a claim
against which it is not indemnified, or for damages exceeding the limits of our
insurance coverage, or if any claim or product recall results in significant
adverse publicity against us, such claim or publicity could have a material
adverse effect on our business, financial condition and results of operations.
NEW OR AMENDED GOVERNMENT REGULATIONS COULD ADVERSELY AFFECT OUR BUSINESS.
There are currently few laws or regulations that are designed to
specifically regulate communications or commerce on the Internet. Due to the
increasing popularity and use of the Internet and other factors, however, laws
and regulations may be adopted in the future that address issues such as user
privacy, pricing, taxation and the characteristics and quality of products and
services. As use of the Internet has become more pervasive, governments in
Europe and the United States have recently intensified their attention to
increased regulation of Internet services and electronic commerce. The United
States and some nations in Europe have proposed or enacted legislation to
restrict the free flow of information through the Internet that is deemed to be
objectionable. United States regulators have been investigating the use of
personal information by Internet companies. The European Union Directive 95/EC
on the Protection of Individuals with Regard to the Processing of Personal Data
and on Free Movement of Data dated October 25, 1998, regulates and limits the
free flow of information through the Internet. Moreover, the applicability to
the Internet of existing laws governing issues such as intellectual property
ownership and infringement, copyright, trademark, trade secret, obscenity,
libel, employment and personal privacy is uncertain and developing. Because our
service can be accessed from anywhere in the world, we may be subject to
regulation even in markets where we have no operations, which regulation could
subject us to significant additional administrative, business and compliance
costs. In addition, increased regulation of the Internet generally could
increase the cost of transmitting data over, and conducting business through,
the Internet or decrease the growth of the Internet including e-commerce
transactions.
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RISKS RELATING TO THE OFFERING
THERE IS ONLY A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK AND WARRANTS.
Prior to the date of this prospectus, there has not been any public market
for our warrants and there is only a limited public market for our common stock.
The price of our warrants and common stock will be subject to substantial
fluctuations. You may be unable to sell your warrants or common stock quickly at
the current market price.
Our common stock has been publicly traded on the Nasdaq OTC Bulletin Board
only since September 1998, so there is a limited history of prices. During that
time, the price of our common stock has been highly volatile, ranging as high as
$11.50 during March 2000 and as low as $.10 when it began initial trading. The
low trading volume may adversely affect our stockholders' ability to sell shares
of our common stock quickly or at the current market price. Attempts to buy or
sell relatively small amounts of our common stock could cause the market price
to fluctuate significantly. Because of the limited trading market, the price of
our common stock could be adversely affected by the sale of shares by the
selling securityholders pursuant to this offering. Other sales of substantial
amounts of our common stock, or the perception that such sales might occur,
would also likely adversely affect the market prices for our common stock.
The trading price of the common stock could also be subject to significant
fluctuations in response to variations in our quarterly results of operations,
announcements of technological innovations or new products or services of our
competitors, developments or disputes with respect to proprietary rights,
general trends in the telecommunications industry and overall markets and
conditions and other factors. The market for securities of early-stage,
technology-based small market capitalization companies has been highly volatile
in recent years, often as a result of factors unrelated to a company's
operations.
Prior to this offering there has been no public market for the warrants
and there can be no assurance that an active public trading market will develop
or be sustained after this offering.
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<PAGE>
FUTURE SALES OF OUR COMMON STOCK MAY LOWER ITS MARKET PRICE.
Future sales of common stock in the public by existing stockholders could
materially adversely affect the market price of our common stock. In addition to
the shares of common stock being sold by the selling securityholders in this
offering, substantial numbers of shares of common stock are, or will be, freely
tradable in the near future. After the completion of this offering, up to
approximately 3,206,760 shares of previously restricted common stock will be
freely transferable without restriction or further registration under the
Securities Act, by persons other than our "affiliates." Approximately 2,144,000
shares of the remaining common stock issued by us prior to this offering will
still be "restricted securities" and may be publicly sold only if registered
under the Securities Act or sold in accordance with an applicable exemption from
registration, such as Rule 144. Sales of substantial amounts of shares in the
public market following the expiration of restrictions imposed by Rule 144, or
the prospect of such sales, could cause the market price of our common stock to
fall. These sales also might make it more difficult for us to sell equity
securities in the future at times and prices that we deem appropriate.
THERE IS A RISK OF DILUTION TO OUR EXISTING STOCKHOLDERS.
The exercise or conversion of warrants into common stock will dilute
existing stockholders and affect the market price of our common stock. As of
December 29, 2000, we had outstanding options and warrants to acquire as many as
5,017,784 shares of our common stock. This includes the warrants held by the
selling securityholders to acquire shares of common stock. More options will be
granted in the future when we adopt a stock option plan. The exercise or
conversion of outstanding stock options, warrants or other convertible
securities will dilute the percentage ownership of our other stockholders. We
lack control over the timing of any exercise or the number of shares offered or
sold if exercises occur.
WE ARE SUBJECT TO THE PENNY STOCK RULES.
Our common stock is subject to the penny stock rules promulgated under the
Securities Exchange Act of 1934. The penny stock rules regulate broker-dealer
practices in connection with transactions in penny stocks. Penny stocks
generally are equity securities with a price per share less than $5.00. These
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized disclosure document
that provides information about penny stock and the nature and level of risks in
the penny stock market. The broker-dealer also must provide the customer with
the current bid and offer quotations for the penny stocks, the compensation of
the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations and the broker-dealer and salesperson
compensation information must be given to the customer in writing before or with
the customer's confirmation.
In addition, the penny stock rules require that, prior to a transaction in
a penny stock not otherwise exempt from such rules, the broker-dealer must make
a special written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser's written agreement to the
transaction. These disclosure and documentation requirements may have the effect
of reducing the trading activity in the secondary market for our securities. The
penny stock rules may make it more difficult for stockholders to sell the common
stock.
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STATE SECURITIES LAWS MAY LIMIT SECONDARY TRADING.
Secondary trading in common stock and warrants being sold in this offering
will not be possible in each state until the shares of common stock and warrants
are qualified for sale under the applicable securities laws of the state or
there is confirmation that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in the state. There can
be no assurance that we will be successful in registering or qualifying the
common stock or warrants for secondary trading, or identifying an available
exemption for secondary trading in our common stock or warrants in every state.
If we fail to register or qualify, or to obtain or verify an exemption for the
secondary trading of, the common stock or warrants in any particular state, the
shares of common stock and warrants could not be offered or sold to, or
purchased by, a resident of that state. In the event that a significant number
of states refuse to permit secondary trading in our common stock or warrants,
the market for the common stock and warrants could be adversely affected.
WE ARE NOT LIKELY TO RECEIVE SUBSTANTIAL FINANCIAL BENEFIT FROM THIS OFFERING.
This offering is for the selling securityholders. Therefore, except for
any amounts we receive from the exercise by the selling securityholders of the
warrants, one-half of which are "callable" by the company under certain
circumstances while the other half are not "callable" by the company, to
purchase common stock, we will not receive any financial benefit from this
offering. We have agreed to pay for all offering expenses, except sales
commissions, whether or not we receive any benefits.
FORWARD-LOOKING STATEMENTS
Information specified in this prospectus contains "forward looking
statements" which can be identified by the use of forward-looking terminology
such as "believes," "could," "possibly," "probably," "anticipates," "estimates,"
"projects," "expects," "may," "will," or "should" or the negative thereof or
other variations thereon or comparable terminology. Such statements are subject
to certain risks, uncertainties and assumptions. No assurances can be given that
the future results anticipated by the forward-looking statements will be
achieved. The following matters constitute cautionary statements, identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties that could cause actual results to vary
materially from the future results covered in such forward-looking statements.
Among the key factors that have a direct bearing on our results of operations
are the effects of various governmental regulations, the fluctuation of the
direct costs and the costs and effectiveness of our operating strategy. Other
factors could also cause actual results to vary materially from the future
results covered in such forward-looking statements. Such forward-looking
statements are subject to certain risks and uncertainties, including those
described in the section captioned "Risk Factors" above.
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<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from this offering. However, if all of
the outstanding warrants to purchase shares by the selling securityholders are
exercised, we will receive approximately $6,750,000 or approximately $6,550,000
after deducting estimated expenses in connection with the registration of the
common stock and warrants. Management will have broad discretion in the use of
any proceeds received by us in connection with the exercise of warrants. We
expect to use such proceeds, if any, to provide working capital, increase our
sales and marketing expenditures, deployment of our GLOBALeMED website into
additional countries, investing in new computer and office equipment and general
corporate purposes.
CAPITALIZATION
The following table shows our capitalization at September 30, 2000 on an
actual, proforma and proforma as adjusted basis to give effect to the issuance
of 2,250,000 shares of common stock, 2,250,000 Class A Warrants and 2,250,000
Class B Warrants, which occurred in November and December 2000, and 4,500,000
shares of common stock issuable upon exercise of the Class A and Class B
Warrants and our receipt of the net proceeds from the exercise of such warrants.
The as adjusted column does not include 296,000 shares of common stock issuable
upon the exercise of other options and warrants granted or issued by us to date.
As of September 30, 2000
Proforma
Actual Proforma(1) As Adjusted(2)
---------- ----------- --------------
Shareholders equity
Common stock, $0.001 par value;
25,000,000 shares authorized; 4,751 7,236 11,736
4,751,705 issued and outstanding,
actual; 7,235,620 issued and
outstanding, proforma; 11,735,620
issued and outstanding
proforma as adjusted
Additional paid-in capital 3,156,427 5,468,942 12,018,942
Accumulated deficit (3,571,945) (3,571,945) (3,571,945)
---------- ---------- -----------
Total shareholders equity and
capitalization (410,767) 1,904,233 8,458,733
========== ========== ===========
(1) Reflects the issuance of 2,250,000 shares of common stock, together with
Class A Warrants and Class B Warrants in November and December 2000 at proceeds
of $1 per share, net of expenses of $125,000. Also reflects the Issuance of
233,915 shares of common stock to convert $190,000 of 10% unsecured notes
Payable.
(2) Reflects the exercise of Class A Warrants at $1.375 per share and Class B
Warrants at $1.625 per share. As of the date of this prospectus the price of the
common stock is less than the exercise price of the warrants. Additionally, this
exercise of the warrants is contingent on the effective date of this prospectus.
If this prospectus is not effective by March 31, 2001 the exercise price of the
warrants decreases and the warrants may be exercised on a cash-less basis.
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<PAGE>
PLAN OF DISTRIBUTION
The selling securityholders may from time to time sell all or a portion of
the common stock and warrants offered by the selling securityholders in
transactions at prevailing market prices on the Nasdaq OTC Bulletin Board, in
privately negotiated transactions at negotiated prices, or in a combination of
such methods of sale. The selling securityholders may sell the common stock and
warrants offered in this registration statement to purchasers directly or may
from time to time offer the common stock and warrants through dealers or agents
who may receive compensation in the form of discounts, concessions or
commissions from the selling securityholders or the purchasers of the common
stock and warrants for whom they may act as agent. The selling securityholders
and any persons who participate in the sale of the common stock and warrants
offered in this registration statement may be deemed to be "underwriters" within
the meaning of the Securities Act and any commissions paid or discounts or
concessions allowed to any person and any profits received on resale of the
common stock and warrants offered may be deemed to be underwriting compensation
under the Securities Act.
In order to comply with the securities laws of certain states, if
applicable, the securities offered will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions, the securities may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or an exemption from any
registration or qualification requirement is available and the requirements
therefore have been satisfied.
We will receive no proceeds from the sale by the selling securityholders
of the securities offered. However, we will receive cash payments from the
selling securityholders to the extent they exercise their warrants to purchase
additional shares of common stock. All of the expenses incurred in connection
with the registration of the securities offered will be paid by us, except for
compensation of brokers or dealers and any transfer fees incurred in connection
with the sale of the securities by the selling securityholders, which
compensation and fees will be paid by the selling securityholders.
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock currently is quoted on the Nasdaq OTC Bulletin Board
under the symbol "WDGI." The high and low bid prices for each quarter since
September 28, 1998, the date that the Nasdaq OTC Bulletin Board commenced
quotation of our common stock, to the present are presented below. The
quotations reflect inter-dealer prices without adjustment for retail markups,
markdowns or commissions and do not necessarily represent actual transactions.
These prices may not necessarily be indicative of any reliable market value.
High Low
---- ---
Fiscal year ended March 31, 1999
September 28, 1998 through $ 1.37 $1.18
September 30, 1998
Quarter ended December 31, 1998 $ 3.25 $1.37
Quarter ended March 31, 1999 $ 6.75 $4.75
Fiscal year ended March 31, 2000
Quarter ended June 30, 1999 $ 8.00 $6.37
Quarter ended September 30, 1999 $ 9.50 $8.00
Quarter ended December 31, 1999 $10.00 $9.00
Quarter ended March 31, 2000 $11.25 $9.13
Fiscal year ending March 31, 2001
Quarter ended June 30, 2000 $11.50 $1.75
Quarter ended September, 30, 2000 $ 4.88 $2.00
Quarter ended December 31, 2000 $ 2.19 $0.75
On December 29, 2000, the last reported sale price of the common stock on
the Nasdaq OTC Bulletin Board was $0.75 per share.
As of the date of this prospectus, there were 7,235,620 shares of common
stock held of record by approximately 582 holders.
There are no restrictions in our amended and restated certificate of
incorporation or amended and restated bylaws that restrict us from declaring
dividends. The Delaware General Corporation Law, however, does prohibit us from
declaring dividends where, after giving effect to the distribution of the
dividend:
(1) we would not be able to pay our debts as they become due in the usual
course of business; or
(2) our total assets would be less than the sum of our total liabilities,
plus the amount that would be needed to satisfy the rights of
stockholders who have preferential rights superior to those receiving
the distribution.
We have not declared any dividends. We do not plan to declare any
dividends in the foreseeable future.
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DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS
OUR DIRECTORS AND EXECUTIVE OFFICERS
The directors, executive officers and key management employees of the
company are:
NAME POSITION
---- --------
Ken M. Peters President and Director
Barry Peters Chairman, Treasurer and Director
Paul R. Kamps Executive Vice President -
Finance and Operations
Kenneth Lambley Vice President - Sales and
Marketing
Martin Muy, Ph.D. Vice President - Technical
Affairs
Maureen Besson Vice President and Secretary
Trevor Campbell, Director
MT, FMT
Michael Kondracki Director
Richard P. Humbert Director
Orna L. Shulman Director
Nava Swersky Sofer Director
Ken Peters, Kenneth Lambley, Martin Muy and Trevor Campbell were elected
to their positions as our officers and directors 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; Paul R. Kamps was elected Executive Vice
President - Finance and Operations in September 2000; Orna L. Shulman was
elected as a director in June 2000; and Nava Swersky Sofer was elected as a
director in January 2001.
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<PAGE>
KEN M. PETERS, age 52, is President and founder of our company. 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, our President and Mr. Barry Peters, Chairman, are brothers.
BARRY PETERS, age 60, has served as the Chairman of the Board of our
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 the former Chairman of the Board and CEO of Appian
Graphics, Inc., a company specializing in multi-monitor computer displays, where
he served from January 1999 to June 2000. 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 known as 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, age 36, joined our company as Vice President - Finance and
Administration in June 2000 and became Executive Vice President - Finance and
Administration in September 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. 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 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.
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<PAGE>
KENNETH LAMBLEY, 60, has served as the Vice President-Sales and Marketing
of our company since December 1998. Prior to joining us, 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., age 40, has served as the Vice President-Technical
Affairs of our 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, age 36, has served as Vice President and Secretary of our
company 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 World Diagnostics 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.
TREVOR CAMPBELL, age 54, has served as a director of our 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.
20
<PAGE>
MICHAEL G.S. KONDRACKI, age 39, has served as a director of our 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, age 56, has served as a director of our 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, age 41, has served as a director of our 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.
21
<PAGE>
NAVA SWERSKY SOFER, age 39, has served as a director of our company since
January 2001. Ms. Swersky Sofer is General Partner of Columbine Ventures, a
biomedical venture capital fund she founded in 2000. Since relocating to Israel
in 1999, Ms. Swersky Sofer has managed a portfolio of biotechnology companies,
including serving as chairman & CEO of ARP Biomed, an Israeli oncology company,
chairman of Vitality Biotechnologies, an American-Israeli agricultural
biotechnology company; and director and strategic advisor to Discovery
Therapeutics, Inc., an American biopharmaceutical company with products in
advanced clinical trials for neurological and cardio-renal applications. Since
1997 Ms. Swersky Sofer has also been an advisor to Renaissance Partners, a
European biomedical investment fund. Ms. Swersky Sofer is a special advisor to
the Israeli government and, since 1999, has served as head of Israel's
biotechnology consortium Da'at, a $50 million government-industry effort which
incorporates the ten leading Israeli companies and five academic institutions
and supports the creation of novel technologies in drug discovery, drug
development and bio-informatics. From 1996to 1999, Ms. Swersky Sofer was a
partner at Sanderling, a Menlo Park, California-based venture capital firm with
over $200 million under management focused on early stage investments in the
biomedical field. Prior to joining Sanderling, Ms. Swersky Sofer was a member of
the senior management group of Ciba-Geigy Limited (now Novartis) and worldwide
Head of Pharma Policy at the company's headquarters in Basel, Switzerland,
responsible for the company's activities in this field in over 120 countries.
Ms. Swersky Sofer received her law degree (L.L.B.) in 1986 from Tel Aviv
University and an MBA in 1990 from IMD International in Lausanne, Switzerland,
as well as diplomas from the Sorbonne in Paris, the Instituto Trentino in Italy
and the Goethe Institute in Munich, Germany. She is a member of the Israel Bar
Association and a retired Captain of the Israel Defense Forces.
All directors hold office until the next annual meeting of our
stockholders and until their successors are elected and qualified. Officers hold
office until the first meeting of directors following the annual meeting of
stockholders and until their successors are elected and qualified, subject to
earlier removal by the Board of Directors.
22
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL
AND SELLING SECURITYHOLDERS AND MANAGEMENT
The following table sets forth certain common stock, Class A Warrant
and Class B Warrant beneficial ownership information of:
(1) each person known by us to be the beneficial owner of more than 5% of
the outstanding shares of common stock,
(2) each of our executive officers and directors,
(3) all of our executive officers and directors as a group, and
(4) each selling securityholder, based upon information available to us as
of the date of this prospectus.
The information below is based on 7,235,620 shares of common stock
outstanding, 2,250,000 Class A Warrants outstanding and 2,250,000 Class B
Warrant outstanding on December 29, 2000. Except as otherwise indicated, all
securities are owned directly.
<TABLE>
<CAPTION>
Percent of Class
Amount and Securities ----------------
Nature of Securities Beneficially Owned Before After
Name Beneficial Ownership to be Sold After Offering Offering Offering**
---- -------------------- ---------- -------------- -------- ----------
<S> <C> <C> <C> <C> <C>
OFFICERS, DIRECTORS AND
5% STOCKHOLDERS (INCLUDING
CERTAIN SELLING SECURITYHOLDERS):
Ken Peters 932,450 0 932,450 12.88 7.95
11269 NW 15th Place
Pembroke Pines, FL 33026
Barry Peters 847,640 (1) 0 847,640 11.71 7.22
680 Harbor Street
Venice, CA 90291
Peters Family Trust 598,000 (2) 0 598,000 8.26 5.10
680 Harbor Street
Suite 600
Los Angeles, CA 90064
Trevor Campbell 15,000 0 15,000 * *
6163 NW 182nd Terrace
Miami, FL 33015
Kenneth Lambley 10,000 0 10,000 * *
6489 Hunters Green Court
Indianapolis, IN 46276
Martin Muy 25,000 (3) 0 25,000 * *
7489 Fairway Dr., Apt #403
Miami Lakes, FL 33014
<FN>
----------------------------
**Assumes exercise of all Class A and Class B Warrants.
</FN>
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Percent of Class
Amount and Securities ----------------
Nature of Securities Beneficially Owned Before After
Name Beneficial Ownership to be Sold After Offering Offering Offering**
---- -------------------- ---------- -------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Michael Kondracki 10,700 0 10,700 * *
Deutche Bank Securities
Argentine Pouch - 9th Floor
31 West 52nd Street
New York, NY 10019
Richard P. Humbert 7,500 (4) 0 7,500 * *
818-3010 Beach Street
Venice, CA 90291
Orna L. Shulman 50,000 (5) 0 50,000 * *
Intertech Corporation
1500 Broadway
New York, NY 10036
Nava Swersky Sofer 50 0 0 0 0 0
Dizengoff Street
64332 Tel Aviv, Israel
Paul R. Kamps 0 0 0 0 0
7389 Fairway Drive, #149
Miami Lakes, FL 33014
Trefoil Tech Investors, 1,500,000 (6) 1,500,000 0 20.73 0
L.P. 500,000 Class A Warrants 500,000 0 22.22 0
500,000 Class B Warrants 500,000 0 22.22 0
Randy William Frankel 600,000 (6) 600,000 0 8.29 0
200,000 Class A Warrants 200,000 0 8.88 0
200,000 Class B Warrants 200,000 0 8.88 0
Greenwood Partners, L.P. 600,000 (6) 600,000 0 8.29 0
200,000 Class A Warrants 200,000 0 8.88 0
200,000 Class B Warrants 200,000 0 8.88 0
Silverman Partners 600,000 (6) 600,000 0 8.29 0
200,000 Class A Warrants 200,000 0 8.88 0
200,000 Class B Warrants 200,000 0 8.88 0
George Szakacs 450,000 (6)(7) 450,000 0 6.22 0
150,000 Class A Warrants (8) 150,000 0 6.66 0
150,000 Class B Warrants (9) 150,000 0 6.66 0
Edward S. Gutman 600,000 (6)(10) 600,000 0 8.29 0
200,000 Class A Warrants (11) 200,000 0 4.44 0
200,000 Class B Warrants (12) 200,000 0 4.44 0
All officers and directors 1,898,290
as a group (10 persons)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Percent of Class
Amount and Securities ----------------
Nature of Securities Beneficially Owned Before After
Name Beneficial Ownership to be Sold After Offering Offering Offering**
---- -------------------- ---------- -------------- -------- ----------
<S> <C> <C> <C> <C> <C>
SELLING SECURITYHOLDERS:
W. Stewart Cahn 48,600 (13) 48,600 0 * *
W. Stewart Cahn IRA 5,000 5,000 0 * *
Rollover
Cahn Capital Corp. 9,000 9,000 0 * *
Robert Cunningham 29,000 29,000 0 * *
Catherine A. Madigan 15,000 15,000 0 * *
Chatham Venture Profit 15,000 15,000 0 * *
Sharing Plan & Trust
Perry S. Oretzsky, Profit 15,000 15,000 0 * *
Sharing Trust
Philip P. Puschel 15,000 15,000 0 * *
Lawrence Weissman 24,000 (14) 15,000 0 * *
Gerald Yellin 52,666 52,666 0 * *
Steven Altman 300,000 (6) 300,000 0 4.16 0
100,000 Class A Warrants 100,000 0 4.44 0
100,000 Class B Warrants 100,000 0 4.44 0
Penelope Alexandra Collins 75,000 (6) 75,000 0 1.03 0
25,000 Class A Warrants 25,000 0 1.11 0
25,000 Class B Warrants 25,000 0 1.11 0
Cowan Ventures 150,000 (6) 150,000 0 2.07
50,000 Class A Warrants 50,000 0 2.22 0
50,000 Class B Warrants 50,000 0 2.22 0
Harvey S. Feuerstein 75,000 (6) 75,000 0 1.03 0
25,000 Class A Warrants 25,000 0 1.11 0
25,000 Class B Warrants 25,000 0 1.11 0
Alvin H. Shrago 75,000 (6) 75,000 0 1.03 0
25,000 Class A Warrants 25,000 0 1.11 0
25,000 Class B Warrants 25,000 0 1.11 0
Linda Feinberg 75,000 (6) 75,000 0 1.03 0
25,000 Class A Warrants 25,000 0 1.11 0
25,000 Class B Warrants 25,000 0 1.11 0
Gutman Family Foundation 150,000 (6) 150,000 0 2.07 0
50,000 Class A Warrants 50,000 0 2.22 0
50,000 Class B Warrants 50,000 0 2.22 0
The HRG Trust 150,000 (6) 150,000 0 2.07 0
50,000 Class A Warrants 50,000 0 2.22 0
50,000 Class B Warrants 50,000 0 2.22 0
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Percent of Class
Amount and Securities ----------------
Nature of Securities Beneficially Owned Before After
Name Beneficial Ownership to be Sold After Offering Offering Offering**
---- -------------------- ---------- -------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Paul Karp 150,000 (6) 150,000 0 2.07 0
50,000 Class A Warrants 50,000 0 2.22 0
50,000 Class B Warrants 50,000 0 2.22 0
Mark D. Greenberg 75,000 (6) 75,000 0 1.03 0
25,000 Class A Warrants 25,000 0 1.11 0
25,000 Class B Warrants 25,000 0 1.11 0
Harvey Kibel 75,000 (6) 75,000 0 1.03 0
25,000 Class A Warrants 25,000 0 1.11 0
25,000 Class B Warrants 25,000 0 1.11 0
Augustus LaRocca 198,990 (6)(15) 198,990 0 2.75 0
50,000 Class A Warrants 50,000 0 2.22 0
50,000 Class B Warrants 50,000 0 2.22 0
Joseph LaRocca 198,990 (6)(15) 198,990 0 2.75
50,000 Class A Warrants 50,000 0 2.22 0
50,000 Class B Warrants 50,000 0 2.22 0
John J. Minio 150,000 (6) 150,000 0 2.07 0
50,000 Class A Warrants 50,000 0 2.22 0
50,000 Class B Warrants 50,000 0 2.22 0
Edith & Darrin Prescott 75,000 (6) 75,000 0 1.03 0
25,000 Class A Warrants 25,000 0 1.11 0
25,000 Class B Warrants 25,000 0 1.11 0
Eugene Raia 75,000 (6) 75,000 0 1.03 0
25,000 Class A Warrants 25,000 0 1.11 0
25,000 Class B Warrants 25,000 0 1.11 0
Alan Richard Silberman 75,000 (6) 75,000 0 1.03 0
25,000 Class A Warrants 25,000 0 1.11 0
25,000 Class B Warrants 25,000 0 1.11 0
Joel Stuart 150,000 (6) 150,000 0 2.07 0
50,000 Class A Warrants 50,000 0 2.22 0
50,000 Class B Warrants 50,000 0 2.22 0
Global Wire & Cable 300,00 (6) 300,000 0 4.16 0
Pension 100,000 Class A Warrants 100,000 0 4.44 0
100,000 Class B Warrants 100,000 0 4.44 0
Gail Szakacs 75,000 (6) 75,000 0 1.03 0
25,000 Class A Warrants 25,000 0 1.11 0
25,000 Class B Warrants 25,000 0 1.11 0
Steven White 150,000 (6) 150,000 0 2.07 0
50,000 Class A Warrants 50,000 0 2.22 0
50,000 Class B Warrants 50,000 0 2.22 0
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Percent of Class
Amount and Securities ----------------
Nature of Securities Beneficially Owned Before After
Name Beneficial Ownership to be Sold After Offering Offering Offering**
---- -------------------- ---------- -------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Wolcot Capital, Inc. 150,000 (6) 150,000 0 2.07 0
50,000 Class A Warrants 50,000 0 2.72 0
50,000 Class B Warrants 50,000 0 2.72 0
William Chaikin 205,863 (16) 205,863 0 2.84 0
The Chaikin Family Trust 163,863 163,863 0 2.26 0
Howard Engelman 283,363 (17) 123,500 0 1.70 0
Glenroy Partners 95,007 95,007 0 1.31 0
Martin Gilman 92,477 92,477 0 1.27 0
Andrea L. Tessler 5,000 5,000 0 * 0
Jerome M. White 308,432 (6)(18) 308,432 0 4.26 0
100,000 Class A Warrants (19) 100,000 0 2.22 0
100,000 Class B Warrants (20) 100,000 0 2.22 0
The White Family Trust 150,000 (6) 150,000 0 2.07 0
50,000 Class A Warrants 50,000 0 2.22 0
50,000 Class B Warrants 50,000 0 2.22 0
Indian Wells Partners 77,000 77,000 0 1.0 0
Seymour Zises 25,000 25,000 0 * 0
Selig A. Zises 15,000 15,000 0 * 0
Henry L. Hoffman 48,576 48,576 0 * 0
Sadie J. Cahn 12,144 12,144 0 * 0
Barry J. Effron 12,144 12,144 0 * 0
Thierry Liverman 22,844 22,844 0 * 0
Wayne Steck 12,144 12,144 0 * 0
Kimberly L. Peters 42,216 (21) 42,216 0 * 0
Sloane E. Peters 25,000 25,000 0 * 0
Austin R. Peters 25,000 25,000 0 * 0
Marcia Peters 5,000 5,000 0 * 0
Andrew Messina 35,000 (22) 35,000 0 * 0
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Percent of Class
Amount and Securities ----------------
Nature of Securities Beneficially Owned Before After
Name Beneficial Ownership to be Sold After Offering Offering Offering**
---- -------------------- ---------- -------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Stacy E. Messina 41,072 (23) 41,072 0 * 0
Alexis Messina 20,000 20,000 0 * 0
Chloe Messina 20,000 20,000 0 * 0
</TABLE>
--------------------
* Less than 1%
(1) Includes:
(a) 249,640 held by MediaVest, Inc., a Delaware corporation wholly owned by
Barry Peters; and
(b) 598,000 held by the Peters Family Trust, of which Barry Peters is a
trustee.
(2) Shares of the Peter Family Trust are included as beneficially owned by
Barry Peters.
(3) Includes 10,000 shares of common stock issuable upon exercise of currently
exercisable options.
(4) Includes 10,000 shares of common stock issuable upon exercise of currently
exercisable options.
(5) Includes 50,000 shares of common stock issuable upon exercise of currently
exercisable options.
(6) Includes all shares of common stock issuable upon exercise of the Class A
Warrants and Class B Warrants held by such securityholder.
(7) Includes 100,000 shares of common stock and 200,000 shares of common stock
issuable upon exercise of the Class A Warrants and Class B Warrants owned
by Gobal Wire & Cable Pension, of which Mr. Szakacs is the beneficiary.
(8) Includes 100,000 Class A Warrants owned by Global Wire & Cable Pension, of
which Mr. Szakacs is the beneficiary.
(9) Includes 100,000 Class B Warrants owned by Global Wire & Cable Pension, of
which Mr. Szakacs is the beneficiary.
(10) Includes:
(a) 50,000 shares of common stock and 100,000 shares of common stock
issuable upon exercise of the Class A Warrants and Class B Warrants
owned by the Gutman Family Foundation, of which Mr. Gutman is the
President; and
(b) 50,000 shares of common stock and 100,000 shares of common stock
issuable upon exercise of the Class A Warrants and Class B Warrants
owned by the HRG Trust, of which Mr. Gutman is a trustee.
(11) Includes 50,000 Class A Warrants owned by the Gutman Family Foundation, of
which Mr. Gutman is the President and 50,000 Class A Warrants owned by the
HRG Trust, of which Mr. Gutman is a trustee.
(12) Includes 50,000 Class B Warrants owned by the Gutman Family Foundation, of
which Mr. Gutman is the President and 50,000 Class B Warrants owned by the
HRG Trust, of which Mr. Gutman is a trustee.
(13) Includes:
(a) 5,000 shares of common stock owned by W. Stewart Cahn IRA Rollover, of
which Mr. Cahn is the beneficiary; and
(b) 9,000 shares of common stock owned by Cahn Capital Corp., of which Mr.
Cahn is the President and part owner.
(14) Includes 9,000 shares of stock owned by Cahn Capital Corp., of which Mr.
Weissman is a part owner.
(15) Includes 48,990 shares of common stock beneficially owned by Joseph and
Augustus LaRocca as joint tenants.
(16) Includes 163,863 shares of common stock owned by the Chaikin Family Trust,
of which Mr. Chaikin is a Trustee.
(17) Includes 159,863 shares of common stock owned by Glenroy Partners, of which
Mr. Engelman is the general partner.
28
<PAGE>
(18) Includes:
(a) 50,000 shares of common stock and 100,000 shares of common stock
issuable upon exercise of the Class A Warrants and Class B Warrants
owned by The White Family Trust, of which Mr. White is a Trustee.
(b) 70,000 shares of common stock owned by Indian Wells Partners, of which
Mr. White is the general partner.
(19) Includes 50,000 Class A Warrants owned by The White Family Trust, of which
Mr. White is a Trustee.
(20) Includes 50,000 Class B Warrants owned by The White Family Trust, of which
Mr. White is a Trustee
(21) Includes 1/2 of the 12,144 shares of common stock (6,072 shares) owned by
Ms. Peters and Stacy Messina as tenants in common.
(22) Includes:
(a) 4,000 shares of common stock owned by Stacy and Andrew Messina as joint
tenants; and
(b) 11,000 shares of common stock owned by Mr. Messina's wife, Stacy, as
custodian for their two minor children.
Excludes 40,000 shares of common stock owned directly by Mr. Messina's
two minor children.
(23) Includes:
(a) 4,000 shares of common stock owned by Stacy and Andrew Messina as joint
tenants,
(b) 11,000 shares of common stock owned by Ms. Messina, as custodian for
their two minor children,
(c) 20,000 shares of common stock owned by Mrs. Messina's husband, Andrew;
and
(d) 1/2 of the 12,144 shares of common stock (6,072 shares) owned by Ms.
Messina and Kimberly Peters as tenants in common.
Excludes 40,000 shares of common stock owned directly by Mrs. Messina's
two minor children.
The persons or entities named in this table, based upon the information
they have provided to us, have sole voting and investment power with respect to
all shares of common stock beneficially owned by them. The shares beneficially
owned and percentage of ownership are based on the total shares outstanding
before this offering and the total shares to be outstanding after the offerings
assuming no exercise of any of the Class A or Class B Warrants.
DESCRIPTION OF SECURITIES
The following summary of certain provisions of our capital stock is
subject to, and qualified in its entirety by, the provisions of our Amended and
Restated Certificate of Incorporation, and our Amended and Restated Bylaws that
are referenced as exhibits to this Registration Statement and by provisions of
applicable law.
COMMON STOCK
As of the date of this prospectus we are authorized to issue up to
25,000,000 shares of common stock, $.001 par value. As of the date of this
prospectus, there are 7,235,620 shares of common stock issued and outstanding.
Holders of common stock are entitled to receive ratably such dividends as may be
declared by the board of directors out of funds legally available therefor. In
the event of our liquidation, dissolution or winding up, holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any outstanding senior securities,
subject to the rights of holders of preferred stock. Holders of common stock
have no preemptive rights and have no rights to convert their common stock into
any other securities. The outstanding shares of common stock are, and the shares
of common stock issuable upon exercise of the warrants will be, when issued,
validly issued, fully paid and nonassessable. The holders of common stock are
entitled to one vote per share on each matter submitted to a vote of
stockholders.
29
<PAGE>
PREFERRED STOCK
As of the date of this prospectus we are authorized to issue up to
5,000,000 shares of preferred stock, $.001 par value per share. The preferred
stock may be issued in one or more series, on such terms and with such rights,
preferences and designations as our board of directors may determine except to
the extent set forth in our Amended and Restated Articles of Incorporation. The
preferred stock may be issued without action by our stockholders. As of the date
of this prospectus, there were no outstanding shares of preferred stock. Any
future issuance of preferred stock could adversely affect the rights of the
holders of common stock, and therefore reduce the value of our common stock. In
particular, specific rights granted to future holders of preferred stock could
be used to restrict our ability to merge with, or sell our assets, to a
third-party, which would preserve control by the present owners.
THE CLASS A AND CLASS B WARRANTS
As of the date of this prospectus, we have outstanding:
* 2,250,000 Class A Warrants exercisable until October 1, 2005 for
2,250,000 shares of common stock at a price of $1.375 per share of
common stock, subject to the company's right to redeem the warrants for
$.10 per warrant as discussed below; and
* 2,250,000 Class B Warrants exercisable until October 1, 2005 for
2,250,000 shares of common stock at a price of $1.625 per share of
common stock.
We issued the warrants in connection with a private placement of common
stock and detachable Class A Warrants and Class B Warrants in November and
December, 2000. The private placement was closed to new subscribers on December
29, 2000. Under the terms of the subscription agreement, we are required to file
a registration statement covering the common stock, the warrants and the common
stock issuable upon exercise of the warrants within thirty days of the closing
of the private placement.
Warrants may be exercised in whole or in part from time to time until
they expire or have been fully exercised. As of December 31, 2000, warrant
holders holding unexercised warrants have the right to acquire 4,500,000 shares
of common stock. Other rights and characteristics of the warrants are described
below
We are obligated to register the warrants and the common stock issuable
upon exercise of the warrants. If the registration statement for the common
stock and warrants is not declared effective by March 31, 2001, the exercise
price of both the Class A Warrants and the Class B Warrants will be reduced by
25% and the warrants may be exercised at any time on a cashless basis. If the
registration statement for the common stock and warrants is not declared
effective by June 30, 2001, the exercise price of the warrants will be reduced
to $0.25.
30
<PAGE>
We have the right to redeem the Class A Warrants at any time at $.10
per warrant, upon 30 days prior written notice, if the following two conditions
are met:
(1) the closing bid price of our common stock must exceed $3.50 per share,
subject to adjustment for stock splits and reclassification, for 14
consecutive trading days, and
(2) the warrants and our common stock for which the warrants may be
exercised must have had a registration statement in effect
continuously for the 30 days preceding the date that we give the
notice of redemption.
The holders of the Class A Warrants may exercise the warrants and
purchase our common stock at any time after we give the notice of redemption and
prior to the date that we redeem the Class A Warrants. If the holders of the
Class A Warrants do not exercise the warrants, and the Class A Warrants are
redeemed by us, Class A Warrant holders will lose their right to exercise the
warrants. We do not have the right to redeem the Class B Warrants.
If, at any time prior to the exercise of the warrants, we issue to the
holders of our common stock any common stock by way of a stock dividend or stock
split then the per share warrant price on the date of such stock dividend or
stock split will be adjusted accordingly.
If we consolidate with or merge into another corporation, or sell all
or substantially all of our assets as part of a reorganization, or issue a
security convertible into our common stock as a dividend on our common stock, or
reclassify or reorganize our capital structure, each Class A and Class B Warrant
will be replaced by the securities or properties issuable or distributable in
respect on one share of common stock upon such consolidation, merger, sale,
reclassification or reorganization.
If we sell all or substantially all of our assets, other than as part
of a reorganization, or distribute our assets in dissolution or liquidation for
cash, other than as part of such a reorganization, then each Class A and Class B
Warrant may be converted into 1/3 of a share of our common stock.
If we issue additional common stock, warrants or rights to acquire
common stock and such issuance has a negative economic impact on the value of
the Class A or Class B Warrants, the common stock issued with the warrants or
the common stock issuable upon exercise of the Class A or Class B Warrants, we
will adjust the terms of the warrants to provide terms that are no less
advantageous than those of the issuance of the security which is deemed to have
caused the negative economic impact on the value of the warrants. Generally, we
have agreed that the issuance of common stock at less than $1.00 per share or
warrants that may be exercised for common stock at an exercise price which is
less than the exercise prices of the warrants are will be deemed to have a
negative economic impact on the value of the warrants.
REGISTRATION RIGHTS
A majority of the common stock and all of the warrants offered in
connection with this prospectus were issued in transactions in which we granted
the purchasers registration rights. Except with respect certain of the
securities registered under this prospectus, we do not have any other securities
in which the holder has the right to require us to register securities. We may
issue securities in the future and grant the holders of those securities the
right to cause us to register said securities.
31
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SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of common stock in the public
market could adversely affect market prices prevailing from time to time. Under
the terms of this offering, the shares of common stock being sold by the selling
securityholders may be resold without restrictions or further registration under
the Securities Act of 1933, except that any shares held or purchased by our
"affiliates," as that term is defined under the Securities Act, may generally
only be sold in compliance with the limitations of Rule 144 under the Securities
Act.
Approximately 2,144,000 outstanding shares of common stock not included
in this offering are restricted securities within the meaning of Rule 144 and
may not be sold in the absence of registration under the Securities Act unless
an exemption from registration is available, including the exemption from
registration offered by Rule 144. These shares will become freely tradable at
various times between January 2001 and September 2001. In general, under Rule
144, as currently in effect, a person who has beneficially owned restricted
shares for at least one year, including a person who may be deemed to be our
affiliate, may sell within any three-month period a number of shares of common
stock that does not exceed a specified maximum number of shares. This maximum is
equal to the greater of 1% of the then outstanding shares of our common stock or
the average weekly trading volume in the common stock during the four calendar
weeks immediately preceding the sale. Sales under Rule 144 are also subject to
restrictions relating to manner of sale, notice and availability of current
public information about us.
In addition, under Rule 144(k) of the Securities Act, a person who is
not our affiliate, has not been an affiliate of ours within three months prior
to the sale and has beneficially owned shares for at least two years would be
entitled to sell such shares immediately without regard to volume limitations,
manner of sale provisions, notice or other requirements of Rule 144.
DELAWARE ANTI-TAKEOVER LAW
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in certain business combinations with a person or
affiliate or associate of such person who is an "interested stockholder" for a
period of three years from the date such person became an interested stockholder
unless: (1) the transaction resulting, in the acquiring person's becoming an
interested stockholder, or the business combination, is approved by the board of
directors of the corporation before the person becomes an interested
stockholder, (2) the interested stockholder acquires 85% or more of the
outstanding voting stock of the corporation in the same transaction which makes
it an interested stockholder (excluding shares owned by directors who are also
officers, and excluding certain employee stock option plans) and (3) on or after
the date the person becomes an interested stockholder, the business combination
is approved by the corporation's board of directors and by the holders of at
least 66 and 2/3% of the corporation's outstanding voting stock at an annual or
special meeting excluding shares owned by the interested stockholder. Except as
otherwise specified in Section 203, an "interested stockholder" is defined as
(a) any person that is the owner of 15% or more of the outstanding voting stock
of the corporation. (b) any person that is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock of
the corporation at any time within the three year period immediately prior to
the date on which it is sought to be determined whether such person is an
interested stockholder or (c) the affiliates and associates of any such person.
By restricting our ability to engage in business combinations with an interested
person the application of Section 203 to us may provide a barrier to hostile or
unwanted takeovers. Under Delaware law, we could have opted out of Section 203
but elected to be subject to its provisions.
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TRANSFER AGENT
The transfer agent and registrar for the common stock and warrants is
Manhattan Transfer Registrar Company which is located at 58 Dorchester Road,
Lake Ronkonkoma, New York 11779, telephone (631) 585-7341, facsimile (631)
585-7569.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our directors and officers are indemnified as provided by the Delaware
General Corporation Law and our Certificate of Incorporation and Bylaws. We have
been advised that in the opinion of the SEC indemnification for liabilities
arising under the Securities Act is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities is asserted by one of our directors,
officers, and controlling persons in connection with the securities being
registered, we will, unless in the opinion of our legal counsel the matter has
been settled by controlling precedent, submit the question of whether such
indemnification is against public policy to a court of appropriate jurisdiction.
We will then be governed by the court's decision.
ORGANIZATION WITHIN LAST FIVE YEARS
We were incorporated February 2, 1997 under the laws of the state of
Delaware.
DESCRIPTION OF BUSINESS
We are 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.
We are a single source supplier and exporter of approximately 1,000
products of which many are company branded medical diagnostic test kits along
with original equipment manufacturer and other trade name branded allied
laboratory products. Approximately 150 of these products represent approximately
80% of our revenues. The products are marketed through our distributor network
and our website, www.GLOBALeMED.com, which is also accessible through its other
Internet addresses: www.labtestkits.com and www.worlddiagnostics.com.
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We have developed and distributed, under our 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. Our 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. Our products are made to specifications
through a network of suppliers and contract manufacturers, many of which are
interchangeable.
We sell our medical diagnostic test kits and allied laboratory products
through our websites in conjunction with a network of 96 distributors covering
76 countries. Our GLOBALeMED business-to-business e-commerce system serves as
our e-commerce solution for medical professionals to purchase medical diagnostic
and allied laboratory products and to access critical data and technical support
online. The GLOBALeMED system is a worldwide multilingual, multi-cultural
platform utilized by our distributors to serve hospitals, clinical laboratories,
physicians' offices and certain pharmacies primarily in the international and
emerging market nations.
In March 1998, we began to market our products by providing a limited
menu of medical diagnostic tests that we offered for sale through international
distributors serving particular countries. In May 1998, we 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
us as the surviving company. In July of 1999, we received certificates of
registration for product sales including a Certificate of Foreign Government and
a Certificate of Exportability 801(e) from the US Department of Health and Human
Services.
In March 1999, we posted our initial website, www.labkits.com, which we
used to recruit new distributors. In June 1999, we 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, we began the design of our 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 November 2000, we have established seventeen 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, Poland the Netherlands and Austria. In Eastern Europe, sites have been
established for Romania and the Czech Republic. In the Caribbean, sites have
been established for Jamaica, Dutch Antilles and Trinidad and Tobago. In Africa
and the Middle East, sites have been established for South Africa and Egypt
which also serves Kuwait. In Asia a site has been developed for South Korea.
Localized web sites pending current agreements with local distributors include
Sudan, Botswana, Nigeria, Algeria, Saudi Arabia, United Kingdom, Belgium,
Hungary, Thailand and Malaysia.
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The GLOBALeMED system is designed to permit participants in each
country to purchase our 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
interest such as content provided by professional societies, event calendars,
bulletin boards, local country-by-country, and hyperlinks to other related local
and global 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 our
website to support customers. The continuing implementation of our GLOBALeMED
system is dependent upon our ability to continue to raise additional financing.
Our revenues are derived primarily from Latin America, the Caribbean
and Eastern Europe, with the European Common Market, Asia, the Middle East and
Africa representing our secondary source of revenues. For the six months ended
September 30, 2000, our largest customer accounted for approximately 18% of our
revenues. In the fiscal years ended March 31, 2000 and 1999, our single largest
customers accounted for approximately 14% and 21% of each year's respective
annual revenues. Our sales grew to $1,134,296 for the six months ended September
30, 2000 from $541,008 for the six months ended September 30, 1999 and to
$1,463,417 for the year ended March 31, 2000 from approximately $576,250 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, we are able to communicate with a large number of buyers
throughout a highly fragmented market and provide these buyers with a range of
products, technical information and support. Currently less than 1% of sales are
transacted through direct online purchases, but we do obtain 99% of our business
from end users and distributors through leads or correspondence conducted via
the Internet. We are trying to create a brand image by providing information and
technical support and eventually expect to convert people to direct online
purchases as the international community becomes more confident with transacting
purchases on line. We enable distributors and end users of medical diagnostic
tests and allied laboratory products to efficiently identify, evaluate and buy
over 1,000 of our products through our website via an Internet based purchasing
solution.
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Our GLOBALeMED system is comprised principally of the following
elements:
* Industry Focused Transactional Website
* Online Technical Support and Training Aids
* Multi-lingual/Multi-cultural Navigation
* Medical News and Information throughout the World
* Community of Professional Interests
* Global and Localized Website Orientation
* Links to Other Websites for Authoritative Data
Our transactional website is secure, easy to use and highly functional
for ordering product. Our 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. Our 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 our database to improve
customer service and future data mining.
Our GLOBALeMED e-commerce solution seamlessly links purchasers of
medical diagnostic tests and allied laboratory products with the ability to
efficiently deliver a wide range of products and services unavailable from any
other single source. Our supply chain integrates a manufacturing base of
numerous producers that provide timely delivery of intermediate and finished
goods to us. We conduct final inspection and packaging before shipping directly
to our customers. Our GLOBALeMED solution offers a simplified electronic catalog
to access technical and product information, product selection, pricing, and an
efficient order and order-tracking mechanism.
We are continuing to establish our GLOBALeMED system in certain target
countries where management believes that its products will be in high demand.
Particular emphasis is being placed on adding marketing support features and
services for our local GLOBALeMED distributors, whose mission is to promote the
system and sell our branded products. 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 our 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 our global website and home page, or
access our GLOBALeMED websites in various other countries.
Our centralized purchasing from our suppliers is based upon orders
projected and received. Buying patterns differ around the world due to different
medical practices, disease states, environmental and cultural biases.
Accordingly, forecasting levels of production from our manufacturing network to
meet sales expectations is closely monitored in terms of amounts, types of
products, inventory requirements and timing of delivery. We recently installed a
new accounting and management system and plan to integrate information from our
manufacturers and suppliers with our purchasing, sales forecasting and inventory
levels so as to provide prompt delivery where such service enhances our
competitive position.
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BRAND EQUITY
We are concentrating on building brand equity through our distributor
network, branded product sales, and through the GLOBALeMED system. Our
management considers brand equity to be important to build growth and recurring
revenues.
Our company name image and brand equity consists of the following
components:
* World Diagnostics, WDI and GLOBALeMED
* "Smart Check," "Smart Strip" and "Advantage" products marketed under
the WDI label
We plan to continue building brand equity through advertising,
marketing seminars and alliances that serve to increase sales and drive
customers to our GLOBALeMED website. These include:
* Local and global advertising in trade publications, newsletters,
medical journals and healthcare publications
* Educational seminars for professional societies on a
country-by-country basis
* Trade shows and special events for medical professionals
* Direct marketing initiatives and special promotions for local groups
* Public awareness campaigns with government and non-government
organizations
* Partnering with local ISPs and portals on a global and by country
basis
* Establishing marketing alliances with medical websites and businesses
MARKET OVERVIEW
The 1999 worldwide market for In Vitro Diagnostic 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, with aggregate market size of approximately $5
billion, has two components: public and private sectors, about $3.5 billion and
$1.5 billion, respectively. It is estimated that nearly 92% 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 persons worldwide who are HIV
positive, 95% are in emerging markets or developing countries. These markets
also have significant tuberculosis mortality rates and 98% of children who die
before their fifth birthday reside in emerging markets or developing countries.
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Diagnostic product sales are driven by several factors, including:
* The need for easier methods to diagnose disease states or medical
disorders so as to enable effective physician response to the
patient.
* Recognition that diagnostic products afford early detection of
diseases or medical disorders.
* Prompt response to increases in infectious disease disorders through
rapid diagnosis and isolation of infectious individuals.
* Government policies to contain or 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 laboratories. Smaller international accounts in
highly fragmented markets have been less desirable for large corporations as
these accounts are too expensive to be managed or directly sold to by large
corporations.
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 these 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
Our current catalog of approximately 1,000 products offers a
comprehensive commonly used range of medical diagnostic test kits and allied
laboratory products, which are made to specifications by various manufacturers
and suppliers, as well as in generic form and packaged under our label. Our
emphasis on rapid tests include cardiac markers such as Tropinin I for instant
point of care, known as 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.
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In June 1998, we received certification of the sensitivity and efficacy
for our whole blood rapid HIV-1 and HIV-2 tests from the World Health
Organization Special Program for Sexually Transmitted Diseases, which is a
leading product for revenue growth in certain countries. These tests, which have
been designed for us and are proprietary in nature, are advanced technologies,
having a 100% positive predictor value. These HIV tests have been designed
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 World Health
Organization certification, we launched our first proprietary rapid test product
requiring no instrumentation and has significantly expanded this product line.
Our diagnostic product line consists of four main groups and is
marketed under the World Diagnostics Inc. or the WDI label.
* Qualitative Rapid POC Diagnostic Tests
Product brand name "Smart Check" and "Smart Strip" for HIV, syphilis,
ovulation, pregnancy, drugs of abuse, and others tests used for
infectious and immune complexes.
* Quantitative Laboratory Tests
Product brand name "Avantage" for blood banking, hormones, cancer
markers, infectious diseases, allergy, fertility, gastrointestinal,
immune and other disorders.
* 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.
* 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
We employ 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. We market diagnostic quantitative and
qualitative test kits covering clinical chemistry, immunoassays and rapid
diagnostic POC tests. The technology format primarily utilized by our 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 phase polymer or particle. A chemical label is then either
incorporated onto the solid substrate or added separately once the solid phase
substrate has been exposed to the test sample. If the target molecule 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 rate of color or endpoint color development 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.
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Our 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. We offer 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 provide advanced proprietary technology and
differ in terms of speed, ease of use, sensitivity, and specificity to address
the particular needs of different tests.
MANUFACTURING
We obtain in vitro diagnostic products through various contract
arrangements with approximately 36 primary manufacturers and suppliers. We
inspect and test for quality control upon receipt of these products and
periodically conduct field audits of our 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.
Product packaging, quality control and our research and development
laboratory are located in Miami Lakes, Florida. Supplies are generally sourced
from various laboratories devoted to antigen production, tissue culture,
immunochemistry, and certain solid phase coating process and filling. We use
biological, chemical and packaging supplies and equipment generally available
from multiple competing suppliers. We require all suppliers who manufacture our
products to be in compliance with FDA regulations governing the manufacture of
medical devices.
It is our responsibility to verify that each component purchased from
various suppliers and incorporated into our products is in conformity with FDA
specifications. Dr Martin Muy, a genetic immunologist and our Vice
President-Technical Affairs, oversees our quality control lab and conducts
audits of our suppliers and contract manufacturers to verify that our
specifications are met.
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MARKETING AND DISTRIBUTION
We intend to utilize our product positioning, advanced proprietary
technology and GLOBALeMED e-commerce solution to meet the needs of our
distributors and the end-user customer. Our strategy is to make our distributor
base into an effective network of localized representatives that expand our
sales through conventional distribution methods and, at the same time, promote
and market our GLOBALeMED system. Distributors typically fulfill this function
by first providing basic distribution of our products within a country and then
initiating efforts to migrate their existing customer base on to the company's
e-commerce platform. Distributors receive commissions on all sales within their
country, whether derived directly from their customer base or indirectly from
other customers buying through the GLOBALeMED system.
During the year ended March 31, 2000 our distributor customer base grew
by approximately 67% to75 distributors serving approximately 63 countries from,
approximately 45 distributors in the year ended March 31, 1999. As of November
30, 2000, the number of distributors has increased to 96. Our 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 our website, we have generated a substantial database of new
customer leads, of which the majority are non-distributor direct end-user
customer prospects that may be screened and cultivated through e-mail and fax.
In addition, activity for our website has increased from approximately 3,800
viewed visits per month in March 1999 to 100,000 viewed visits per month as of
November 2000. The average length of time spent by a visitor to our site was
between 1 to 3 minutes in March 1999, as compared to 5 to 15 minutes in November
2000.
Through our website, we attract new distributors who offer the
capability for us to distribute increasing volumes of our products, promote our
brand name in the distributors respective country and service end-user
customers. At present, a substantial portion of our sales are derived from our
distributor base, many of which use our website to place orders or to promote
our product line. We have our highest concentration of revenues from
distributors in Latin America, the Caribbean, and Eastern Europe. These regions
accounted for approximately 75% of our fiscal year 2000 revenues and 88% 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.
We plan to continue to recruit distributors in order to increase sales
and market penetration and use our distributor network as a means to expand our
GLOBALeMED system on a country-by-country basis. We are concentrating on those
countries and geographic regions where we believe that we will have the greatest
opportunity to establish growing market share and critical mass for our
GLOBALeMED system. To date, we have established seventeen such websites. Local
websites created for our distributors will be maintained by us. In addition to
providing localized services and information, we will serve as a portal to other
websites aligned with our GLOBALeMED system. Our distributors are becoming
product support centers and serve as selling representatives to promote
end-users to utilize our GLOBALeMED system. The distributor network facilitates
and drives transactions through the local website to our global website, where
orders are centrally processed. Distributors are able to keep track of order
status and fulfillment on a localized basis.
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We concentrate on selling medical diagnostic test kits that are
anticipated to have significant repeat business. Once a customer's laboratory
has standardized its test menu and reference ranges for our products, there is a
good likelihood that we will continue to be the provider of choice because of
the need to maintain consistent accurate test results.
CUSTOMERS
We have recently begun efforts to access new end-user customers and to
convert many of our accounts to online purchasers through our GLOBALeMED system.
Management expects this process to grow at different rates, depending upon
various factors within each country. Approximately 78% of sales are to
distributors and 22% of sales are direct to end-users. We are actively marketing
direct end-users of our products and make presentations at medical conferences
and trade shows worldwide. We seek a 30% gross profit margin on sales to
distributors and 45% on sales to end-users. Our single largest customer
accounted for approximately 14% of our fiscal year 2000 revenues.
We have established numerous incentives for distributors such as:
* discounts for pre-payment and prompt payment after delivery of goods,
* incentive coupons and cumulative value promotions for preferred
customers who have good payment records; and
* other discounts relating to online and special promotional offerings.
We plan to commence selective advertising and promotional campaigns
aimed at end-user customers on a country-by-country base to accelerate the
transition of our customer base from distributor to end-user denominated
customers.
COMPETITIVE CONDITIONS
The competitive landscape for Internet e-commerce business 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 us were U.S. based. 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 our strategy. We have generally found that:
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* the market is highly fragmented throughout the distributor and
end-user segments,
* website links are in an early stage of development,
* there is no directly comparable website to the GLOBALeMED system,
* no company has yet to establish a critical mass or dominant market
share in any particular area in the markets served by us, and
* the majority of our competitors are small medical supply companies,
buying groups, virtual malls and a few manufacturers.
PATENTS AND TRADEMARKS
We have not applied for patent protection with respect to any of the
products that we have obtained the right to sell or which have been developed
for us. We do not expect to file for patent protection within the United States
or other countries as relates to product technology because of the low barriers
to entry in the market and the relatively short product cycles, as the result of
the rapid emergence of new product technologies. We anticipate filing trademark
applications for our branded product names including "SmartCheck," "Smartstrip"
as well as our "GLOBALeMED" name. We protect our trade secrets through
confidentiality and non-competition agreements executed by our employees and
suppliers.
GOVERNMENT REGULATION AND FOREIGN GOVERNMENTAL APPROVAL
We maintain an FDA certified Good Manufacturing Practices facility and
have FDA approval for 464 of the approximately 1000 products we offer for sale.
We have an FDA Registration Certificate of Foreign Government for its FDA
approved products. We also have Certificates of Exportability for all non-FDA
approved products which are provided by us to distributors who have represented
to us that such Certificates of Exportability permit the sale of our products in
their respective countries. We believe that the export of these products is in
compliance with applicable foreign law. An insignificant amount of our 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, our 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 our business.
RESEARCH AND DEVELOPMENT
We expended approximately $75,000 and $25,000 during fiscal year 2000
and fiscal year 1999, respectively, on research and development activities.
Typically, the product life cycle for diagnostic products is between 18 and 36
months. Our research and development is limited to design specifications for our
various contract suppliers, and requires minimal capital expenditures and
personnel. Accordingly, we do not conduct any primary product research and
development, but work closely with our suppliers to implement appropriate
changes to our products, as required. We do not consider these expenditures to
be significant, nor do we anticipate that they will become significant.
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EMPLOYEES
As of November 30, 2000 we had a total of 17 employees, 13 of whom were
full-time employees and 4 of whom were part-time employees.
PROPERTIES
Our 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 provided for
an initial term of 2 years at $3,400 per month. We are currently occupying the
same space on a month-to-month basis. The company has signed a lease, to
commence on February 1, 2001, for a larger facility consisting of approximately
10,000 square feet in Miami Lakes, Florida. The term of the new lease is for 10
years at $9,100 per month base rent. We have the right to terminate the lease at
the end of years three and five upon prior notice and payment to the landlord of
approximately $170,000 and $100,000, respectively.
LEGAL PROCEEDINGS
From time to time, we 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, us would have a material adverse effect on our financial
position.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
prospectus. This discussion contains forward-looking statements that involve
risks and uncertainties.
During our fiscal year ending March 31, 2001 we plan to continue
implementation of our GLOBALeMED system on a country-by-county basis, with a
goal of launching 3 additional sites by March 31, 2001, thereby increasing our
local websites from 17 to 20. In addition to increasing the number of local
websites, we plan to make further enhancements to our current sites to improve
functionality, navigability and ease of use. Although currently less than 5% of
the company's sales are derived from direct purchases over the Internet, the
GLOBALeMED system serves as a significant lead generator for new business,
recruitment of new distributors and existing distributor sales. It is
particularly important in providing online technical support and as a marketing
tool for us with regard to promoting efficiency in product selection, evaluation
and pricing and advancing overall simplicity in doing business with the company.
While the growth and further development of the GLOBALeMED system continues to
be an important focus, the current sales and marketing effort is concentrated
and dependent upon traditional distributors. In connection with our planned
expansion, we intend to move operations from our current 3,500 square foot
facility in Miami Lakes, Florida to a 10,000 square foot facility in Miami
Lakes, Florida and hire additional sales and technical support representatives.
To meet our goals for expanded revenue growth and inventory levels, we are
currently negotiating a $1,500,000 credit facility, secured by our inventory and
accounts receivable, that will have a formula based on borrowing availability.
44
<PAGE>
Fiscal Year Ended March 31, 2000 compared to Fiscal Year Ended March 31, 1999.
RESULTS OF OPERATIONS
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
* a 67% increase in the number of distributors,
* increased sales volumes to existing accounts, and
* a 780% increase in the non-distributor customer base. The following
table details our sales breakdown by geographic region.
Region Year Ended 3/31/00 Year Ended 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 our
strongest markets 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 we sell to.
Gross Profit. Our 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 us to achieve
further efficiencies in volume purchasing.
45
<PAGE>
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, we commenced implementation of our GLOBALeMED e-commerce business to
business website. Expenditures in the amount of $319,017 were incurred in
developing the site content, building individual country websites, promotion,
advertising and consultants fees to develop the site. Further we expect to incur
significant expenditures, in excess of 10% of projected fiscal year 2001
revenues 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 a Form 10
that we 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, we entered into a $375,000
promissory note with detachable warrants. This 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, our 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 the issuance, and the exercise
price of the warrants, which were $6.00.
Loss on Warrant Inducement. 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. 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 fiscal 2000 there were no
modifications to warrants that resulted in a loss.
Extraordinary Loss on Extinguishment of Debt. In April 1999, our 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 corporation controlled by a stockholder and our
Chairman of the Board of Directors. MediaVest, Inc. participated in $50,000 of
the initial $150,000 loan to us. 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. We 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, we 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. We 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.
46
<PAGE>
Loss on Extension of Debt. On March 15, 2000, we entered into a
forbearance agreement, which extended the maturity date of the October note to
May 31, 2000. Our Board of Directors authorized the issuance of 8,199 shares of
common stock in consideration of this forbearance and we 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. We 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.
Six months ended September 30, 2000 compared to six months ended September 30,
1999.
RESULTS OF OPERATIONS
Revenues. For the six months ended September 30, 2000, revenues
increased by $593,288 or 110% over the six months ended September 30,1999. The
increase in revenues was a result of sales to a larger distributor base and a
higher level of sales to existing customers.
South America, the Caribbean and Eastern Europe are our strongest
markets in combination accounted for 79% of total revenue for the six months
ended September 30, 2000 compared to 86% of total revenue for the six months
ended September 30, 1999. Strong growth continues to be experienced in other
geographic regions of the world and should begin to account for an increasing
percentage of total revenue going forward. In particular, sales in Africa are
expected to increase significantly as a percentage of our total revenue
beginning in October 2000, as a result of a government tender award with the
South African government that we secured for the supply of rapid diagnostic
tests. The contract is for an initial period of one year.
Sales returns have historically, and continue to be insignificant.
Customers have a 15 day right of return, following product receipt. Because of
extensive product quality control and review, which is conducted prior to
product shipment, the return rate as a percentage of sales is anticipated to
remain at a low percentage.
Gross Profit. Our gross profit on product sales increased to $273,548
for the six months ended September 30, 2000 from $91,894 during the same period
in 1999. Gross profit as a percentage of sales was 24.2% for the six months
ended September 30, 2000, compared to 17% for the six months ended September 30,
1999. The improved gross profit margin was primarily the result of better
purchasing and volume price discounts. Margins are expected to continue to
improve as a result of continued higher sales per order, allowing us to achieve
further efficiencies in volume purchasing. Our goal is to increase the level of
sales to non-distributor end user customers, including those that shop directly
on our GLOBALeMED website, enabling us to achieve an overall gross profit
percentage above 30%.
Selling, General and Administrative Expense. Selling, general and
administrative increased to $1,088,404 for the six months ended September 30,
2000 from $515,609 for the six months ended September 30, 1999. The increase in
these expenditures is due primarily to the overall growth experienced by us. In
particular, development of our GLOBALeMED e-commerce business to business
website, together with additional expenditures in payroll as a result of new
hires; extensive travel related to sales and marketing; and professional and
legal fees, incurred as a result of promulgation of SEC reporting requirements
for bulletin board companies all accounted for the increased expenditures.
47
<PAGE>
Extraordinary Loss on Extinguishment of Debt. In June 2000, we issued
190,998 shares of common stock to convert $285,000 of 6% unsecured notes
payable. In exchange for the shares, the note holders waived all accrued
interest and exchanged all outstanding common stock purchase warrants issued in
conjunction with the debt. We recognized an extraordinary loss of $89,415 from
the conversion.
In the six months ended September 30, 1999, the extraordinary loss on
extinguishment of debt was approximately $493,000 due to a larger extinguishment
of debt and higher market prices for our stock in the six months ended September
30, 1999.
Net Loss. We incurred a net loss of $923,604 or $(0.21) per share and a
net loss of $921,741 or $(0.22) a share for the six months ended September 30,
2000 and 1999. A non-cash charge associated with equity adjustments of $89,415
and $493,938 was included in the six months ended September 30, 2000 and 1999
respectively. Excluding the effect of these extraordinary items, the operating
loss increased to $834,189 in the six months ended September 2000 from $427,803
for the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since beginning operations in February 1997, we have continued to
sustain operating losses, which have resulted in the use of cash. We anticipate
that we will continue to incur net losses for the foreseeable future until we
are able to generate sufficient revenues from product sales to sustain our
operations and fund expenditures related to future growth.
At September 30, 2000, we had cash and cash equivalents of $8,886
compared to $80,817 at March 31, 2000. We had negative working capital of
$594,515 and $672,194 at September 30, 2000 and March 31, 2000 respectively. We
had current assets of $857,819 and a stockholders deficit of $410,767 at
September 30, 2000. This compares to current assets of $634,872 and stockholders
deficit of $522,035 at March 31, 2000.
Cash used in operating activities was $777,150 for the fiscal year
ended March 31, 2000 and $661,505 for the six months ended September 30, 2000.
Cash utilized in investing activities was $132,400 for the fiscal year ended
March 31, 2000, and $25,550 for the six months ended September 30, 2000 and
related to the purchase of fixed assets.
Net cash provided by financing activities was $631,772 for the fiscal
year ended March 31, 2000 and $615,124 for the six months ended September 30,
2000 coming primarily from the proceeds of promissory notes issued in the fiscal
year ended March 31, 2000 and from the proceeds of a private placement in the
six months ended September 30, 2000.
During the year ended March 31, 2000, we entered into two promissory
notes with third parties for approximately $700,000 (6% promissory note for
$410,000 and 10% promissory note for $260,000). These notes are
uncollateralized. These note agreements do not contain any financial covenants.
In June 2000, the 6% note was repaid through the issuance of common stock and
$125,000 in cash payments. The 10% note had a maturity date of May 31, 2000. Due
to liquidity problems, we issued 28,000 warrants to extend the maturity of this
note payable to September 30, 2000. At September 30, 2000, we issued another
28,000 warrants to extend the maturity of the note to December 31, 2000. In
December 2000 we issued 233,915 shares of common stock to convert $190,000 of
10% unsecured notes payable. In exchange for the shares, the note holders waived
$15,915 in accrued interest. As of January 1, 2001, the company has not repaid
the remaining outstanding balance of $70,000.
Additionally, there was an uncollteralized bridge loan due to certain
members of the Board of Directors and a shareholder. The outstanding balance of
$145,000 was repaid in October 2000.
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.
48
<PAGE>
The reports of our independent certified public accountants in
connection with our audited financial statements as of March 31, 2000 and March
31, 1999 and for each of the two years then ended contain explanatory paragraphs
indicating factors which create substantial doubt about our ability to continue
as a going concern. These factors include recurring net losses since inception
and uncertainty surrounding future equity financing through anticipated
offerings. Our ability to continue as a going concern is dependent upon
obtaining adequate financial resources through securities offering or otherwise.
We believe that we can obtain equity financing through future contemplated
offerings. However, there can be no assurance that such offerings will be
successful.
INFLATION
The rate of inflation has not had a material impact on our operations.
Moreover, if inflation remains at its recent levels, it is not expected to have
a material impact on our operations for the foreseeable future.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 is effective for fiscal years
beginning after June 15, 2000. We believe that the effect of SFAS No. 133 is
immaterial on our operations and financial position.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 summarizes certain areas of the Staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements and is effective for our fourth fiscal quarter ending March 31, 2001.
We have adopted SAB 101 for each period presented in the accompanying statement
of operations. There are no significant adjustments posted as a result of the
adoption of SAB 101.
In the six months ended September 30, 1999, the extraordinary loss on
extinguishment of debt was approximately $493,000 due to a larger extinguishment
of debt and higher market prices for the Company's stock in the six months ended
September 30, 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1998, we issued a $150,000 promissory note to MediaVest, Inc., a
Delaware corporation, owned by Barry Peters who is Chairman of our Board of
Directors, and other lenders under the note. MediaVest participated in $50,000
of the $150,000 loan to us. The note bore interest at 10% per annum and had a
maturity date of August 24, 1998. We 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 we issued 200,000
shares of common stock at $.125 per share to be allocated among the lenders
under the note. In April 1999, we 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 common stock is restricted common stock and 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, we 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 us in the aggregate of $75,000, all of which were
repaid in November 1999.
During the fiscal year ended March 31, 2000 and for the six months
ended September 30, 2000, one of our largest customers was Microlabs, Inc.
Purchases by Microlabs, Inc.'s represented approximately 14% of our revenues for
the fiscal year ended March 31, 2000. Trevor Campbell, one of our directors, is
the President and owner of Microlabs, Inc.
In September 2000, we received a $145,000 interest bearing unsecured
bridge loan from members of our Board of Directors and a stockholder. This loan
was repaid in full in October 2000.
49
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation
we paid for the period beginning on our date of inception and ending on March
31, 2000 for services of our President. We have not paid any executive officer
in excess of $100,000, including salary and benefits, during the periods ended
March 31, 1998 to March 31, 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------- ----------------------------------------------
Awards Payouts
------ -------
Securities Restricted All Other
Name and Other Annual Underlying Stock LTIP Compen-
Principal Year Salary Bonus Compensation Options/SARs Awards Payouts sation
Position(s) ($) ($) ($) (#) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ken Peters,
President 2000 58,000 0 0 0 0 0
1999 58,000 5,000 0 0 0 0
1998 48,000 0 0 0 0 0
</TABLE>
OPTION/SAR GRANTS IN YEAR 2000
<TABLE>
<CAPTION>
Percent of Total
Number of Securities Options/SARs Granted
Underlying Options/ to Employees in Exercise or Base Expiration
Name SARs Granted (#) Fiscal Year Price ($/sh) Date
(a) (b) (c) (d) (e)
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Ken Peters 60,000 (1) 20.2% $1.00 10/16/05
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Paul Kamps 40,000 (2) 13.5% $1.00 10/16/05
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Paul Kamps 60,000 (3) 20.2% $1.00 06/21/05
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<FN>
(1) vest over a three year period at a rate of one third per year, subsequent to 9/30/00.
(2) vest over a three year period at a rate of one third per year, subsequent to 9/30/00.
(3) vest over a three year period at a rate of one third per year, subsequent to 9/30/00.
</FN>
</TABLE>
COMPENSATION OF DIRECTORS
We compensate our directors at the rate of $1,500 annually to attend
board meetings and, from time to time, grant directors warrants to purchase
shares of our common stock.
In May 2000, as an inducement to join our Board of Directors, we
granted Richard P. Humbert the right to purchase, for $500, warrants to purchase
10,000 shares of common stock at an exercise price of $3.50 per share. The
warrants will be exercisable at any time for a period of 3 years. The shares
issued upon exercise of the warrants may not be transferred without our written
consent. The $3.50 warrant price per share is subject to adjustment to be equal
to the lowest sales price for any equity securities issued by us during the
period firm May 2000 through September 5, 2000. The warrant shares are
restricted securities under Rule 144 of the Securities Act.
50
<PAGE>
In June 2000, as an inducement to join our Board of Directors, we
granted Orna L. Shulman the right to purchase, for $2,500, warrants to purchase
50,000 shares of common stock at an exercise price of $3.50 per share. The
warrants will be exercisable at any time for a period of 3 years. The shares
issued upon exercise of the warrants may not be transferred without our written
consent. The $3.50 warrant price per share is subject to adjustment to be equal
to the lowest price of any equity securities issued by us during the period from
June 2000 through October 4, 2000. The warrant shares will be restricted
securities under Rule 144 of the Securities Act.
In October 2000, we granted Barry Peters options to purchase 50,000
shares of common stock at an exercise price of $1.00 per share. The options vest
and are exercisable at a rate of 1/3 per year commencing on the date which is
one year from the date of issuance. The option shares will be restricted
securities under Rule 144 of the Securities Act.
51
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On June 15, 2000, we changed our independent accountants,
PricewaterhouseCoopers LLP, and retained Gerson, Preston & Company, P.A. as our
new independent accountants. The decision to change accountants was not as a
result of any disagreement between us and PricewaterhouseCoopers LLP. The
decision was made by our Chairman of the Board and President, and ratified by
our Board of Directors.
PricewaterhouseCoopers LLP audited our 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 our ability to continue as
a "going concern."
In connection with its audits of our 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 our 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-B Item 304(a)(1)(v).
Our former accountants have been requested to furnish us with a letter,
addressed to the SEC, stating whether the former accountants agree or disagree
with the statements made us concerning PricewaterhouseCoopers LLP. When received
by us the letter from the former accountants will be filed as Exhibit to an
amendment to our Form 8-K/A filed on August 11, 2000.
During our fiscal years ended March 31, 1999 and 1998 and through June
15, 2000, neither we nor anyone on our behalf has consulted our 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 our financial statements, and neither a
written report or oral advice was provided that we concluded was an important
factor considered by us in reaching a decision as to the accounting, auditing or
financial reporting issue. During such period, neither we nor anyone on our
behalf consulted our 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-B.
52
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LEGAL MATTERS
The legality of the issuance of the securities offered pursuant to this
prospectus will be passed upon for us by Herrick, Feinstein LLP, 2 Park Avenue,
New York, New York 10016.
EXPERTS
Our financial statements included in the prospectus, to the extent and
for the period indicated in their reports with respect thereto, have been
audited by Gerson, Preston and Company, P.A. and PricewaterhouseCoopers, LLP,
independent certified public accountants, as stated in their reports appearing
elsewhere herein, which include explanatory paragraphs regarding our ability to
continue as a going concern, and are included in reliance upon such report given
upon the authority of that firm as experts in accounting and auditing.
HOW YOU CAN GET MORE INFORMATION ABOUT US
The reports, proxy statements and other information that we file will
be available for inspection and copying, for a specified fee, at the SEC's
public reference room located at Room 1024, 450 Fifth Street, NW, Washington,
D.C. 20549, and the public reference facilities in the SEC's Northeast Regional
Office, 7 World Trade Center, New York, New York 10048; and its Midwest Regional
Office, Citicorp Center, 500 West Madison Street, Suite 2400, Chicago, Illinois
60661. Copies of such material may also be obtained at prescribed rates by
writing to the SEC's Public Reference Section, 450 Fifth Street, NW, Washington,
D.C. 20549 upon payment of the fees prescribed by the SEC. Please call the SEC
at 1-800-SEC-0330 for more information on the operation of its Public reference
Rooms. The SEC also maintains a Web site that contains reports, proxy and
information statements and other materials that are filed through the SEC's
Electronic Data Gathering, Analysis, and Retrieval system. This Web Site can be
accessed at http://www.sec.gov.
53
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports of Independent Accountants............................................................................F-2
Consolidated Balance Sheets as of March 31, 2000
and September 30, 2000 (unaudited)...................................................................F-4
Consolidated Statements of Operations for the years ended
March 31, 2000 and 1999 and for the six months
ended September 30, 2000 and 1999 (unaudited)........................................................F-5
Consolidated Statements of Cash Flows for the years ended
March 31, 2000 and 1999 and for the six months
ended September 30, 2000 and 1999 (unaudited)........................................................F-6
Consolidated Statements of Shareholders' Deficit for the years ended March 31,
2000, 1999 and 1998 and for the six months
ended September 30, 2000.............................................................................F-8
Notes to Consolidated Financial Statements....................................................................F-10
</TABLE>
F-1
<PAGE>
AUDITOR'S REPORT
Board of Directors and Shareholders
World Diagnostics, Inc. and Subsidiary
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.
July 5, 2000
Miami, Florida
/s/ Gerson Preston & Company, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
World Diagnostics, Inc.
In our opinion, the statements of operations, stockholders' equity and
cash flows present fairly, in all material respects, the results of its
operations and its cash flows of World Diagnostics, Inc. for the year ended
March 31, 1999 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether these financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has incurred recurring losses and negative
cash flows from operations in fiscal 1999. Continuation of operations is
dependent on the Company's ability to obtain adequate financial resources
through the successful completion of a contemplated public offering, or
otherwise. These facts raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Miami, Florida
May 14, 1999
/s/ PricewaterhouseCoopers
F-3
<PAGE>
FINANCIAL STATEMENTS
World Diagnostics Inc and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, September 30,
2000 2000
-------------- -------------
(unaudited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 80,817 $ 8,886
Accounts Receivable, net of an allowance of $71,609 at March 31,
2000 and $87,714 at September 30, 2000 390,949 489,703
Inventory, net 127,729 336,557
Other current assets 35,377 22,673
----------- -----------
Total current assets 634,872 857,819
Fixed assets, net of accumulated depreciation 171,427 177,874
Other assets 6,963 26,237
=========== ===========
Total assets $ 813,262 $ 1,061,930
=========== ===========
Liabilities and Shareholders' Deficit
Current Liabilities
Accounts payable and accrued expenses $ 622,995 $ 1,032,167
Notes payable 670,000 405,000
Current portion of obligations under capital leases 14,071 15,166
----------- -----------
Total current liabilities 1,307,066 1,452,333
Obligations under capital leases, net of current portion 28,231 20,363
----------- -----------
Total Liabilities 1,335,297 1,472,696
----------- -----------
Shareholders Deficit
Common stock; $0.001 par value; 10,000,000 shares authorized
4,281,827 and 4,751,705 shares issued and outstanding
at March 31, 2000 and September 30, 2000, respectively 4,282 4,751
Additional paid in capital 2,122,023 3,156,427
Accumulated deficit (2,648,340) (3,571,944)
----------- -----------
Total Shareholders deficit (522,035) (410,766)
=========== ===========
Total Liabilities and Shareholders Deficit $ 813,262 $ 1,061,930
=========== ===========
</TABLE>
Read auditors report and notes to the financial statements.
F-4
<PAGE>
WORLD DIAGNOSTICS INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended March 31, Six Months Ended September 30
2000 1999 2000 1999
---------------- -------------- -------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $ 1,463,417 $ 576,250 $1,134,296 541,008
Cost of goods sold 1,078,861 457,353 860,748 449,114
----------- ---------- ---------- -----------
Gross profit 384,556 118,897 273,548 91,894
Selling, general and administrative expenses 1,280,598 496,972 1,088,404 515,609
----------- ---------- ---------- -----------
Loss from operations before other expenses (896,042) (378,075) (814,856) (423,715)
Other expenses:
Loss on warrant inducement - (374,250) - -
Loss due to extension of debt (67,642) - - -
Interest expense (254,490) (26,611) (19,333) (4,088)
Other Income 10,292 - - -
----------- ---------- ---------- -----------
Loss from operations before extraordinary
Item (1,207,882) (778,936) (834,189) (427,803)
Extraordinary loss on extinguishment of debt (493,938) (45,542) (89,415) (493,938)
----------- ---------- ---------- -----------
Net Loss $(1,701,820) $ (824,478) $ (923,604) $ (921,741)
=========== ========== ========== ===========
Basic and dilutive common loss per share:
Loss from operations before extraordinary
Item $ (0.29) $ (0.25) $ (0.19) $ (0.10)
Extraordinary item (0.12) (0.01) (0.02) (0.12)
----------- ---------- ---------- -----------
Basic and diluted common loss per share: $ (0.41) $ (0.26) $ (0.21) $ (0.22)
----------- ---------- ---------- -----------
Weighted average number of common shares
outstanding 4,210,256 3,070,528 4,469,544 4,134,316
</TABLE>
Read auditors report and notes to the financial statements.
F-5
<PAGE>
WORLD DIAGNOSTICS INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended March 31, Six Months Ended September 30,
2000 1999 2000 1999
----------- ------------ ----------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net Loss $(1,701,820) $ (824,478) $ (923,604) $ (921,741)
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 89,415 493,938
Common stock issued in lieu of interest - 15,958 - -
Common stock issued in lieu of compensation 92,046 - 47,160 92,046
Amortization of unearned compensation 7,840 5,600 - -
Amortization of debt discount 239,850 - - -
Depreciation and amortization 19,288 4,374 19,103 11,503
Bad Debt expense 87,967 4,573 91,251 -
Provision for excess inventory - 19,066 - -
Changes in operating assets and liabilities:
Accounts receivable (396,804) (49,872) (190,006) (75,845)
Inventory (85,245) (41,279) (208,828) (25,229)
Other current assets (25,128) (4,721) 12,704 (5,048)
Other assets (2,544) (2,919) (19,274) (1,005)
Accounts payable and accrued expenses 425,820 105,915 420,574 97,631
----------- ------------ ----------- ------------
Net cash (used) in operating activities (777,150) (347,991) (661,505) (333,750)
----------- ------------ ----------- ------------
Investing activities
----------- ------------ ----------- ------------
Purchase of fixed assets (132,400) (9,991) (25,550) (42,880)
----------- ------------ ----------- ------------
Financing activities
Net proceeds from issuance of common stock and
warrants 16,250 29,744 601,897 -
Proceeds from the exercise of stock warrants - 575,750 - -
Payments under capital lease obligations (9,478) (918) (6,773) 28,711
Proceeds from notes payable 745,000 150,000 145,000 5,000
Payment of notes payable (120,000) (25,000) (125,000) -
Proceeds from stock subscription receivable - 2,580
Decrease in cash overdraft - (15,579)
----------- ------------ ----------- ------------
Net cash provided by financing activities 631,772 716,577 615,124 33,711
----------- ------------ ----------- ------------
Net increase/(decrease) in cash and cash equivalents (277,778) 358,595 (71,931) (324,919)
Cash and cash equivalents, beginning of period 358,595 - 80,817 358,595
----------- ------------ ----------- ------------
Cash and cash equivalents, end of period $ 80,817 $ 358,595 $ 8,886 $ 15,676
=========== ============ =========== ============
</TABLE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
CONSOLIDATED (2000) STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Sept. 30,
2000 1999 2000
------- ------- ---------
<S> <C> <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 $285,000
Issuance of warrants for other assets ................ $ 4,250 $ -- $ --
</TABLE>
Read auditors report and notes to the financial statements.
F-6
<PAGE>
World Diagnostics, Inc. and Subsidiary
Consolidated Statements of Shareholders' Deficit
<TABLE>
<CAPTION>
Common Stock
------------------ Stock Additional
Number of Subscription Paid-in Unearned Accum.
Shares Amount Receivable Capital Comp. 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 at March 31, 1999 3,410,737 $3,410 $ - $1,100,972 $(7,840) $(946,520) $ 150,022
Issuance of common stock
for extinguishment of debt
at $5.25 per share 101,090 101 - 530,622 - - 530,723
Issuance of common stock
from the exercise of common
Stock purchase warrants 748,500 749 - (749) - - -
Issuance of common stock
for extinguishment of debt
at $5.63 per share 6,000 6 - 33,744 - - 33,750
Issuance of common stock
for compensation of employees
and non-employees at $6.04
and $5.63 per share 15,000 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)
Issuance of common stock
to non-employees at $1.31 16,000 16 - 20,944 - - 20,960
Issuance of common stock
to employees at $1.31 20,000 20 - 26,180 - - 26,200
Issuance of common stock in a private
placement at $7.00 per share, net of
issuance costs 71,440 71 - 499,929 - - 500,000
Conversion of debt and warrants to equity, 190,998 191 - 385,621 - - 385,812
Through issuance of common stock
Issuance of common stock in a private placement
at $1 per share, plus issuance of one share
for each warrant exchanged 171,440 171 - 99,829 - - 100,000
Proceeds of warrant subscriptions - - 1,900 - - - 1,900
Net Loss - - - - - (923,604) (923,604)
=======================================================================================
Balance September 30, 2000 4,751,705 4,751 - 3,156,426 - (3,571,944) (410,767)
=======================================================================================
</TABLE>
Read auditors report and notes to the financial statements.
F-7
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 2000 and for the six months ended September
30, 1999 and 2000 is unaudited)
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 76 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.
UNAUDITED INTERIM FINANCIAL DATA The unaudited consolidated balance
sheet as of September 30, 2000 and the unaudited consolidated
statements of operations and cash flows for the six months ended
September 30, 2000 and 1999 and the unaudited consolidated statement of
shareholders' deficit for the six months ended September 30, 2000 have
been prepared on the same basis as the audited financial statements
and, in the opinion of management, reflect all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the
Company's financial position, results of operations and cash flows. The
data disclosed in the notes to the financial statements for these
interim periods is unaudited. Operating results for interim periods are
not necessarily indicative of operating results for an entire year.
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 September 30, 2000 and March 31, 2000,
substantially all inventories represent finished goods held for sale.
The Company recorded a reserve of approximately $19,000 as of September
30, 2000 and March 31, 2000, 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. Expenditures for repairs and maintenance are
generally charged to expense as incurred. Retirements, sales and
disposals of assets are recorded by removing the cost and accumulated
depreciation from the asset and accumulated depreciation accounts with
any resulting gain or loss reflected in income. 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. Management believes that there is no impairment as of
March 31, 2000.
F-8
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 2000 and for the six months ended September
30, 1999 and 2000 is unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
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.
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. Such estimates consist principally
of the allowance for doubtful accounts, allowance for excess inventory
and accrued expenses. 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.
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. Research and development costs which
are included in selling, general and administration expenses amounted
to $25,000 and $75,000 for the years ended March 31, 1999 and 2000,
respectively.
LOSS PER SHARE. Basic loss per share is computed by dividing loss
available to common shareholders by the weighted-average number of
common shares for the period. The computation of diluted loss per share
is similar to basic loss 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 loss per share are not presented
because the effects would be anti-dilutive.
F-9
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 2000 and for the six months ended September
30, 1999 and 2000 is unaudited)
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-10
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 2000 and for the six months ended September
30, 1999 and 2000 is unaudited)
4. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
March 31, September 30,
2000 2000 Useful lives
--------- ------------- ------------
(audited) (unaudited)
<S> <C> <C> <C>
Computer equipment and software $159,590 $173,204 3-5 years
Office furniture and equipment 35,499 47,435 5 years
-------- --------
195,089 220,639
Less accumulated depreciation (23,662) (42,765)
======== ========
$171,427 $177,874
======== ========
</TABLE>
Amounts subject to capital leases at March 31, 2000 and September 30,
2000, included in computer equipment and software above, total $46,292
net of accumulated amortization of $9,555 and $14,184 respectively.
5. NOTES PAYABLE
Notes payable at March 31, 2000 and September 30, 2000, consists of the
following:
<TABLE>
<CAPTION>
March 31, September 30,
2000 2000
--------- -------------
(audited) (unaudited)
<S> <C> <C>
6% uncollateralized notes payable with detachable common stock purchase
warrants; matures May 31, 2000; in June 2000, $125,000 of the notes
were repaid ($50,000 of the repaid notes were to parties related to a
member of the Board of Directors) and $285,000 were converted to
shares of common stock (see Note 10) $ 410,000 $ -
10% uncollateralized notes payable; matures in May 2000; maturity
extended to September 30, 2000 in exchange for the issuance of 28,000
common stock purchase warrants exercisable at $1.00 per share. Maturity
extended to December 31, 2000 for the issuance of an additional 28,000
common stock purchase warrants exercisable at $1.00 per share. 260,000 260,000
Uncollateralized bridge loan from members of the Board of Directors and a
shareholder. This loan was repaid in full in October 2000. 145,000 145,000
--------- ---------
Total notes payable $ 670,000 $ 405,000
========= =========
</TABLE>
MediaVest, Inc., a company controlled by a shareholder and director of
the Company, made a short term non-interest bearing loans to the
Company in the aggregate of $75,000. These loans were repaid in
November 1999.
F-11
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 2000 and for the six months ended September
30, 1999 and 2000 is unaudited)
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.
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.
F-12
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 2000 and for the six months ended September
30, 1999 and 2000 is unaudited)
6. COMMON STOCK (CONT'D)
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 $749 increase in the common stock account and a
corresponding $749 decrease in additional paid-in capital.
In May 1999, the Company paid the outstanding balance due to various
vendors through the issuance of 6,000 shares of common stock. The fair
market value of the common stock was $7.50 at the date of
extinguishment. The restricted common stock cannot be sold for a
12-month period from the date of issuance and after that can only be
sold in accordance with Rule 144 or other applicable exemption. Due to
these restrictions, the Company discounted the fair value of the
Company's common stock at the date of extinguishment by 25%. An
extraordinary loss of $25,715 was recorded in the statement of
operations for the 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 discounted the fair value of the
Company's common stock at the date of extension by 25%. The Company
recorded $67,642 as a loss due to extension of debt at March 31, 2000.
During the year ended March 31, 2000, the Company issued 15,500 shares
of its common stock to various non-employee consultants for past
services rendered. Pursuant to the application of SFAS No. 123 in
accounting for the issuance of stock to non-employee consultants, the
Company recorded expense based on the fair market value of the shares
issued since the fair value of the shares is more reliably measurable.
The restricted common stock cannot be sold for a 12-month period from
the date of issuance and after that can only be sold in accordance with
Rule 144 or other applicable exemption. Due to these restrictions, the
Company discounted the fair value of the Company's common stock at the
date of issuance by 25%. Due to the issuance of the shares, the Company
recorded $92,046 in selling, general and administrative expenses in the
statement of operations for the year ended March 31, 2000.
F-13
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 2000 and for the six months ended September
30, 1999 and 2000 is unaudited)
6. COMMON STOCK (CONT'D)
In June 2000, 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 or exchangeable,
without additional cash consideration but subject to certain
performance contingencies being met, for an additional 71,440 shares of
the Company's common stock. In August 2000, the Company received
$100,000 through an exchange agreement with each participant in the
private placement, with early exchange of the 71,440 warrants for
71,440 shares of the Company's common stock and the issuance of 100,000
shares of the Company's common stock priced at $1.00 per share.
The Company also issued 16,000 shares of common stock to non-employees
and 20,000 shares of common stock to employees for past services
rendered. Pursuant to the application of SFAS No. 123 in accounting for
the issuance of stock to employee and 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 $47,160 selling, general and administrative expenses in the
statement of operations for the year ended March 31, 2000.
In June 2000, the Company issued 190,998 shares of common stock to
convert $285,000 of 6% unsecured notes payable. In exchange for the
shares, the note holders waived all accrued interest and exchanged all
outstanding common stock purchase warrants issued in conjunction with
the debt. The Company recognized an extraordinary loss of $89,415 from
the conversion. The remaining balance of $125,000 of the 6% unsecured
notes payable was repaid in June 2000, of which $25,000 was to a party
related to a member of the Board of Directors.
7. LEASES
The Company leases office facilities and equipment under long-term
leases. The office lease expired on September 30, 2000. The Company is
currently occupying the space on a short term lease which expires on
January 31, 2001. The Company has executed a lease for new office space
commencing February 1, 2001 with a 10 year term.
At March 31, 2000, future minimum lease payments under capital leases
are as follows:
F-14
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 2000 and for the six months ended September
30, 1999 and 2000 is unaudited)
March 31, September 30,
2000 2000
Capitalized Capitalized
Leases Leases
(audited) (unaudited)
---------- ------------
2001 $ 18,984 $ 9,372
2002 17,230 17,230
2003 9,112 9,112
2004 3,567 3,567
2005 2,595 2,595
-------- --------
Total minimum lease
payments 51,488 41,876
Less amount representing
interest ranging from
7% to 18% (9,186) (6,347)
-------- --------
Present value of net
minimum lease payments 42,302 35,529
Less current portion (14,071) (15,166)
-------- --------
Long-term obligations $ 28,231 $ 20,363
======== ========
Rent expense was approximately $46,000 and $23,000 for the periods
ended March 31, 2000 and September 30, 2000.
F-15
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 2000 and for the six months ended September
30, 1999 and 2000 is unaudited)
8. DEFERRED INCOME TAXES
At September 30, 2000, the Company has available net operating loss
carryforwards of $2,904,000 which will expire through 2018.
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.
Accordingly, components of the Company's net deferred income taxes at
March 31, 2000 and September 30, 2000 are as follows:
March 31, September 30,
2000 2000
------------------------------------------------------------
(audited) (unaudited)
Deferred tax assets:
Net operating loss
carryforwards and other
minor items $ 704,000 $ 988,000
Valuation allowance for
deferred tax asset (704,000) (988,000)
------------------------------------------------------------
Total $ - $ -
============================================================
The benefit for income taxes differs from the amount computed by
applying the statutory federal income tax rate to net loss due to the
following:
2000 1999
-------- -------------
Income tax provision statutory rate $(578,619) $ (280,323)
State income tax, net of Federal benefit (93,600) (14,049)
Change in valuation allowance 435,091 104,898
Loss on warrants inducement - 127,245
Meals and entertainment 3,261 582
Loss on extinguishment of debt 195,106 20,910
Other 38,761 40,737
--------- ----------
$ - $ -
========= ==========
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. Historically, actual losses have been
within management's estimates.
One customer, controlled by a director and shareholder of the Company,
accounted for approximately 21%, 8% and 9% of sales for the periods
ended March 31, 1999, March 31, 2000 and September 30, 2000
respectively. The accounts receivable from this customer was $12,755 at
March 31, 2000 and $22,878 at September 30, 2000.
F-16
<PAGE>
WORLD DIAGNOSTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 2000 and for the six months ended September
30, 1999 and 2000 is unaudited)
Another customer accounted for 7%, 13.% and 15% of sales for the
periods ended March 31, 1999, March 31, 2000 and September 30, 2000,
respectively. This same customer had an accounts receivable balance of
$58,597 at March 31, 2000 and $99,169 at September 30, 2000.
Substantially all of the Company's sales in fiscal 1999 and 2000 and
the period ended September 30, 2000 were made to international
customers
Purchases from one supplier represented 11%, 14% and 0% of purchases
for the periods ended September 30, 2000, March 31, 2000 and 1999,
respectively. This same supplier was owed $59,457 at March 31, 2000 and
$81,927 at September 30, 2000.
10. SUBSEQUENT EVENTS
On October 26, 2000 World Diagnostics Inc. (the "Company") commenced
closure of a private placement of $2,250,000, consisting of 45 Units
priced at $50,000 per Unit, each consisting of (i) 50,000 shares of the
Company's Common Stock, (ii) 50,000 "A". Warrants to purchase Common
Stock at $1.375 per share, and (iii) 50,000 "B" Warrants to purchase
Common Stock at $1.625 per share. The $2,250,000 private placement was
completely funded as of December 1, 2000. Under the subscription
documents, the Company is required to file a registration statement for
the Common Stock, the A Warrants and the B Warrants within 30 days of
the closing of the offering.
In December 2000 the Company issued 233,915 shares of Common Stock to
convert $190,000 of 10% unsecured notes payable. In exchange for the
shares, the note holders waived $15,915 in accrued interest and
extended the due date of the note to December 31, 2000. The remaining
balance of $70,000 on the note was due on December 31, 2000 and remains
unpaid as of January 11, 2001.
In October 2000, we granted Barry Peters options to purchase 50,000
shares of common stock at an exercise price of $1.00 per share, and Ken
Peters options to purchase 60,000 shares of common stock at an exercise
price of $1.00 per share. The options vest and are exercisable at a
rate of 1/3 per year commencing on the date which is one year from the
date of issuance. The option shares will be restricted securities under
Rule 144 of the Securities Act.
F-17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Delaware General Corporation Law and our Certificate of
Incorporation and Bylaws provide that we may indemnify any and all of our
officers, directors, employees or agents or former officers, directors,
employees or agents, against expenses actually and necessarily incurred by them,
in connection with the defense of any legal proceeding or threatened legal
proceeding, except as to matters in which such persons shall be determined to
not have acted in good faith and in our best interest.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, or persons controlling us
pursuant to the foregoing provisions, we have been informed that, in the opinion
of the SEC, that type of indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
Item 25. Other Expenses of Issuance and Distribution
The expenses to be paid by the Registrant in connection with the
issuance and distribution of the securities being registered are estimated to be
as follows:
SEC Registration Fee $ 2,251
Printing and Engraving Expenses $ 10,000
Accounting Fees and Expenses $ 20,000
Legal Fees and Expenses $ 70,000
Blue Sky Expenses, and other Fees $ 7,000
Transfer Agent Fees $ 3,000
Miscellaneous $ 2,000
Total $114,250
========
Item 26. Recent Sales of Unregistered Securities
During the past three years, the Registrant sold the following
securities that were not registered under the Securities Act:
On March 12, 1998, we issued 2,580,000 shares of our common stock to
six directors and officers, for which we received $2,580. The issuance was made
pursuant to an exemption under Section 4(2) of the Securities Act of 1933
In June 1998, we completed a private placement in which we issued
400,000 shares of common stock at $0.125 per share. The issuance was made
pursuant to an exemption under Rule 504 of Regulation D of the Securities Act.
II-1
<PAGE>
In April 1999, we issued 748,500 shares of common stock for $.50 per
share in connection with the exercise of warrants issued to certain of our
founders. The issuance was made pursuant to an exemption under Section 4(2) of
the Securities Act.
In April 1999, we issued 101,900 shares of common stock in
consideration for the extinguishment of notes payable in the amount of $62,400.
The issuance was made pursuant to an exemption under Section 4(2) of the
Securities Act.
In May 1999, we issued 6,000 shares of common stock to various vendors
in consideration for services rendered in the amount of $8,035. The issuance was
made pursuant to an exemption under Section 4(2) of the Securities Act.
During 1999, we issued 201,500 shares of common stock in connection
with the exercise of warrants at the price of 1.00 per share. The issuance was
made pursuant to an exemption under Section 4(2) of the Securities Act.
During the six months ended September 30, 1999, we issued 15,500 shares
of common stock to various consultants for services rendered. The issuance was
made pursuant to an exemption under Section 4(2) of the Securities Act.
In October 1999, we issued 188,598 shares of common stock to fifteen
persons in consideration for the extinguishment of notes payable in the amount
of $410,000 plus accrued interest of $20,499. The issuance was made pursuant to
an exemption under Section 4(2) of the Securities Act.
On June 1, 2000, we issued 190,998 shares of common stock to fifteen
persons upon the conversion of an aggregate of $285,000 of our bridge loan
obligations to such parties into common stock. The common stock was issued
pursuant to an exemption under Section 3(a)(9) of the Securities Act.
On June 19, 2000, we issued 71,440 shares of common stock at $7.00 per
share, and 71,440 warrants exercisable at $7.00 per share to purchase 71,440
shares of common stock. In July 2000, we issued 100,000 shares of common stock
at $1.00 per share as an inducement for the above warrant holders to exercise an
early exchange of their warrants for common stock. In connection with such
exchange, we issued an additional 71,440 shares of common stock. The issuance
was made pursuant to an exemption under Rule 506 of Regulation D of the
Securities Act.
On June 21, 2000, we issued an aggregate of 16,000 shares of common
stock to six consultants in consideration for services rendered. The common
stock was issued pursuant to an exemption under Section 4(2) of the Securities
Act.
In October through December 2000, pursuant to a private placement, we
issued 2,250,000 shares of common stock at $1.00 per share, together with
2,250,000 Class A Warrants to purchase a like number of shares of common stock
at an exercise price of $1.375 per share, and 2,250,000 Class B Warrants to
purchase a like number of shares of common stock at an exercise price of $1.625
per share. The issuance was made pursuant to an exemption under Rule 506 of
Regulation D of the Securities Act.
In December 2000, we issued 233,915 shares of common stock to three
persons upon the conversion of an aggregate of $190,000 of our bridge loan and
$15,915 of related accrued interest obligations to such parties into common
stock. The common stock was issued pursuant to an exemption under Section
3(a)(9) of the Securities Act.
II-2
<PAGE>
Item 27. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
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 Amended and Restated Certificate of Incorporation of World Diagnostics
Inc., filed as Annex I to Definitive Information Statement filed August
7, 2000.
3.4 Amended and Restated By-Laws of World Diagnostics Inc., filed as Annex II
to Definitive Information Statement filed on August 7, 2000.
3.3 Bylaws of World Diagnostics, Inc., filed as Exhibit 2.3 to Form 10SB12G
filed on October 13, 1999.
4.0 Form of Common 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.
4.3. Form of Class A Warrant Certificate, filed as Exhibit 4.1 to Form 8-K
filed on November 20, 2000.
4.4. Form of Class B Warrant Certificate, filed as Exhibit 4.2 to Form 8-K
filed on November 20, 2000.
5.1 Opinion of Herrick, Feinstein LLP re: legality*
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
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.
10.7 Office Lease, Dated August 15, 2000.*
11 Statement Re: Computation of Per Share Earnings.
16 Letter On Change In Certifying Accountants, to be filed as an Exhibit
to an amendment to our Amended 8-K filed on July 2, 2000, when received by us.
23.1 Consent of Herrick, Feinstein LLP (included in Exhibit 5.1).
23.2 Consent of Gerson Preston & Company, P.A.
23.3 Consent of PricewaterhouseCoopers LLP.*
24 Power of Attorney (filed as part of the signature page to this registration
statement).
</TABLE>
* To be filed on amendment.
Item 28. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act, may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its Counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE>
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total dollar value
of securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table; and
(iii) To include additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at the time to be the initial bona
fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act (the "ACT") may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by one of our directors, officers or controlling persons in the successful
defense of any action, suit or proceeding) is asserted by one of our directors,
officers or controlling persons in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification is against public policy as expressed
in the Act, and we will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Miami Lakes, Florida, on the 12th day of January,
2001.
WORLD DIAGNOSTICS INC.
By: /s/ Ken Peters
-----------------------------
Name: Ken Peters
Title: President and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Ken Peters and Barry Peters, his
true and lawful attorney-in-fact and agent, with full power of substitution and
re-substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all pre- and post-effective amendments to this
registration statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in or about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any one of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ Paul Kamps Executive Vice President - January 12, 2001
-------------------------- Finance and Administration
Paul Kamps (principal financial officer)
/s/ Barry Peters Chairman & Director January 12, 2001
--------------------------
Barry Peters
/s/ Ken Peters President (principal executive January 12, 2001
-------------------------- officer) & Director
Ken Peters
/s/ Richard P. Humbert Director January 12, 2001
--------------------------
Richard P. Humbert
__________________________ Director January 12, 2001
Orna L. Shulman
__________________________ Director January 12, 2001
Michael Kondracki
/s/ Trevor Campbell Director January 12, 2001
--------------------------
Trevor Campbell
__________________________ Director January 12, 2001
Nava Swersky Sofer
II-6
