UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER 333-84934
WORLD HEALTH ALTERNATIVES, INC.
(Exact name of registrant as specified in its charter)
Florida 04-3613924
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
300 Penn Center Boulevard, Suite 201
Pittsburgh, Pennsylvania 15235
(Address of principal executive offices) (Zip Code)
412-829-7800
(Registrant's telephone number, including area code)
Not applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of October 29, 2003, there were 43,148,905 shares of the registrant's common
stock outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
1
World Health Alternatives, Inc. and Subsidiary
INDEX
Part I. Financial Information
Item 1. Consolidated Financial Statements and Notes to
Consolidated Financial Statements 3
Item 2. Plan of Operations and Management's Discussion and
Analysis of Financial Condition and Results of Operations 4
Item 3. Controls and Procedures 13
Part II. Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
2
PART I. FINANCIAL INFORMATION
WORLD HEALTH ALTERNATIVES, INC.
CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
TABLE OF CONTENTS
Condensed Financial Statements:
Condensed Balance Sheets at September 30, 2003 (Unaudited)
and December 31, 2002 (Audited)......................................F-1
Condensed Statements of Income for the three and nine
months ended September 30, 2003 and 2002 (Unaudited).................F-2
Condensed Statement of Changes in Shareholders' Equity
(deficit) for the nine months ended September 30,
2003 (Unaudited).....................................................F-3
Condensed Statements of Cash Flows for the nine months
ended September 30, 2003 and 2002 (Unaudited)........................F-4
Notes to Condensed Financial Statements.....................................F-5
3
WORLD HEALTH ALTERNATIVES, INC.
CONDENSED BALANCE SHEETS
SEPTEMBER 30, 2003 (UNAUDITED) AND DECEMBER 31, 2002 (AUDITED)
September 30, December 31,
2003 2002*
---------- ----------
ASSETS
Current assets:
Cash $ 15,878 $ 64,864
Accounts receivable 182,486 157,957
Prepaids 79,591 -
---------- ----------
Total current assets 277,955 222,821
---------- ----------
Property, plant and equipment, net 55,758 43,360
Non-current assets:
Other assets - 515
---------- ----------
Total assets $ 333,713 $ 266,696
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31,482 $ 38,720
Accrued liabilities 68,828 40,222
Income taxes payable - 27,000
---------- ----------
Total current liabilities 100,310 105,942
---------- ----------
Long Term Liabilities:
Note Payable 250,000 -
---------- ----------
Total long term liabilities 250,000 -
---------- ----------
Commitments and contingencies
Shareholders' equity (deficit):
Preferred stock, $.0001 par value,
100,000,000 shares authorized, none
issued and outstanding - -
Common stock, $.0001 par value,
200,000,000 shares authorized;
39,332,900 and 33,000,000 shares
issued and outstanding, respectively 3,933 3,300
Additional paid in capital 92,300 12,558
Retained earnings (deficit) (112,830) 144,896
---------- ----------
Total shareholders' equity (deficit) (16,597) 160,754
---------- ----------
Total liabilities and shareholders'
equity (deficit) $ 333,713 $ 266,696
========== ==========
*The balance sheet at December 31, 2002 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes to condensed financial statements
F-1
WORLD HEALTH ALTERNATIVES, INC.
CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Sales $ 945,761 $ 686,485 $ 2,731,000 $ 1,987,982
Cost of sales 485,270 469,950 1,620,918 1,302,257
----------- ----------- ----------- -----------
Gross profit 460,491 216,535 1,110,082 685,725
Selling, marketing, warehouse and
administrative expenses 274,135 216,209 1,288,041 649,496
----------- ----------- ----------- -----------
Operating income (loss) 186,356 326 (177,959) 36,229
Other income (expense):
Interest expense (43,150) (20,999) (113,661) (55,219)
Interest income 511 1,309 6,894 2,140
----------- ----------- ----------- -----------
Total other income (expense) (42,639) (19,690) (106,767) (53,079)
----------- ----------- ----------- -----------
Income (loss) before income taxes 143,717 (19,364) (284,726) (16,850)
----------- ----------- ----------- -----------
Income tax provision - - 27,000 -
----------- ----------- ----------- -----------
Net income (loss) $ 143,717 $ (19,364) $ (257,726) $ (16,850)
=========== =========== =========== ===========
Net income (loss) per share
- basic and diluted $ 0.00 $ 0.00 $ (0.01) $ 0.00
=========== =========== =========== ===========
Weighted average number of shares
- basic and diluted 39,332,900 33,000,000 39,051,884 33,000,000
=========== =========== =========== ===========
See the accompanying notes to condensed financial statements
F-2
WORLD HEALTH ALTERNATIVES, INC.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS'EQUITY DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(UNAUDITED)
Additional Retained
Common Stock Paid-in Earnings
Shares Amount Capital (Deficit) Total
----------- ------ ------- --------- ---------
Balance, December 31, 2002 33,000,000 $ 3,300 12,558 $ 144,896 $ 160,754
Common stock issued in
share exchange 4,725,400 473 (473) - -
Common stock issued for services 3,357,500 335 167,540 - 167,875
Common stock cancelled (1,750,000) (175) (87,325) - (87,500)
Net loss - September 30, 2003 - - - (257,726) (257,726)
----------- ------ ------- --------- ---------
Balance, September 30, 2003 39,332,900 3,933 92,300 (112,830) $ (16,597)
=========== ====== ======= ========= =========
See accompanying notes to condensed financial statements
F-3
WORLD HEALTH ALTERNATIVES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
2003 2002
---------- ---------
Cash flows from operating activities:
Net loss $ (257,726) $ (16,850)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation of property, plant and equipment 12,631 10,140
Stock issued for services 80,375 -
(Increase) decrease in:
Accounts receivable (24,529) 13,064
Other current assets (79,076) 1,809
Increase (decrease) in:
Accounts payable (7,238) 11,717
Accrued liabilities 28,606 (49,470)
Income taxes payable (27,000) (6,737)
---------- ---------
Net cash used in operating activities (273,957) (36,327)
---------- ---------
Cash flows from investing activities:
Purchases of property, plant and equipment (25,029) (32,601)
---------- ---------
Net cash used in investing activities (25,029) (32,601)
---------- ---------
Cash flows from financing activities:
Proceeds from note payable 250,000 -
Loan proceeds, related party - 144,900
---------- ---------
Net cash provided by financing activities 250,000 144,900
---------- ---------
Net increase (decrease) in cash and cash equivalents (48,986) 75,972
Cash and cash equivalents, beginning of year 64,864 5,802
---------- ---------
Cash and cash equivalents, end of year $ 15,878 $ 81,774
========= =========
Supplementary disclosure of cash activities:
Cash paid for interest $ 113,661 $ 55,219
========== =========
Cash paid for income taxes $ - $ -
========== =========
Cancelled common stock $ 87,500 $ -
========== =========
See accompanying notes to condensed financial statements
F-4
WORLD HEALTH ALTERNATIVES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of World Health
Alternatives, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of the results for the
interim periods presented have been included.
These results have been determined on the basis of generally accepted accounting
principles and practices applied consistently with those used in the preparation
of the Company's Annual Financial Statements for the year ended December 31,
2002. Operating results for the three and nine months ended September 30, 2003
are not necessarily indicative of the results that maybe expected for the year
ending December 31, 2003.
It is recommended that the accompanying condensed financial statements be read
in conjunction with the financial statements and notes for the year ended
December 31, 2002, found in the Company's Form 10-KSB and Form 8-K.
NOTE 2 - RELATED PARTY LOAN
In the second quarter of 2003, a significant shareholder loaned the company
$96,350 to fund operations. The related party loan was paid in full in the third
quarter of 2003.
NOTE 3 - NOTE PAYABLE
On January 8, 2003, the Company entered into a promissory note agreement with
PNC Bank providing for a $250,000 revolving line of credit. Under the terms of
the agreement, the Company is required to pay a 6.25% per annum interest rate on
any unpaid principal balance. The note matures on January 8, 2005 and is secured
by the personal property of the two majority shareholders of the Company.
NOTE 4 -COMMON STOCK
During the nine month period ending September 30, 2003, the Company issued
3,357,500 shares of common stock to consultants and attorneys. The Company
valued the shares at $0.05 per share and recorded stock based compensation of
$167,875. The Company then cancelled 1,750,000 shares of common stock issued to
a consultant, valued at $0.05 per share and recorded an adjustment to stock
based compensation of $87,500.
F-5
Item 2. Management's Discussion and Analysis or Plan of Operations
The following is a discussion and analysis of: a) our Plan of Operations
pertaining to our website advertising business; and b) financial condition and
results of operations pertaining to our medical staffing business which should
be read in conjunction with our financial statements and related notes appearing
in this Form 10-QSB.
For purposes of this Management's Discussion and Analysis and Plan of
Operations, the words "we" or "our" or "the Company" refer to World Health
Alternatives, Inc. and its wholly owned subsidiary, Better Solutions, Inc. This
discussion and analysis contains forward-looking statements based on our current
expectations, assumptions, estimates and projections overview. The words or
phrases "believe," "expect," "may," "should," "anticipates," or similar
expressions are intended to identify "forward-looking statements". Actual
results could differ materially from those projected in the forward-looking
statements as a result of a number of risks and uncertainties pertaining to our
medical staffing and website advertising businesses, including those risk
factors contained in our Post Effective Registration Statement which may be
reviewed at www.sec.gov.
PLAN OF OPERATIONS PERTAINING TO OUR WEBSITE ADVERTISING BUSINESS
Our Plan of Operations for our Website Advertising Business
Management plans to attempt to locate companies that will purchase advertising
on an advertising based website for a monthly fee in the following product
categories: nutritional products, such as vitamins, herbs, amino acids and
minerals; homeopathic products; sports clothing and equipment; organic and low
carbohydrate foods; and candles, incense, and aromatherapy products. Because our
clients will be charged a flat fee per month based on the length of their
agreement and the size of their advertisement, our fees will be similar to print
or newspaper advertising. We anticipate charging $65 to $120 per month to be
featured on our website. Management plans to organize the new website in such a
way to categorize different aspects within the various product lines to make it
easy for a consumer to be directed to a supplier or retailer that specializes in
the products they are searching for and also to help potential consumers gather
and research information on these products.
Plan of Operations to Date
From May 2003 to September 2003, we accomplished the following in our website
advertising business related Plan of Operations:
From February 2003 to May 2003
Richard E. McDonald, our President, spent approximately 5 hours per week
supervising the development of our renovated website.
4
May 2003
Design of Website
Our healthcare staffing business has an in-house graphic designer who completed
the design of an advertising website. We completed the website design in June of
2003 and made the site functional in July of 2003. Our President and graphic
designer will continuously evaluate the design of our website and our graphic
designer will update the design based on that evaluation. Most of the content
for our website will be derived from the actual advertisements submitted to us
by our clients. We will be providing the website folder for our advertising
clients to put their content material in, and our programmers and web hosting
company will be incorporating the advertisement into the folder.
May 2003
Website Hosting and Maintenance
We contacted several web hosting and maintenance companies to host and maintain
our website for our advertising based business. On May 1, 2003, we began using
the services of Internic.com for our web posting and maintenance on a month to
month basis, at a cost of $19.95 per month. We do not have a written agreement
with Internic.com, nor are we required to do so to obtain their services.
Internic advertises and lists our website through 57 different search engines
and regularly updates and maintains the listing. We also entered into an
agreement with Infranet in May 2003 to provide the actual web hosting for the
website. We pay Infranet $297 every 3 months for the hosting service.
May 2003
Website Sales Brochure
Our sales presentation originally consisted of a tri-fold brochure which
described our services and illustrated the advertising costs as well as our
contract terms; however, we decided to eliminate the tri-fold brochure from our
sales presentation because our initial marketing efforts indicated it was not
needed. We now use a sales brochure in paper form that contains the same
information.
June 2003
Advertisement Sales
During June of 2003, we began offering our advertising services for placement of
advertising. We placed our first customer advertisement on our website on July
31, 2003. In June 2003, we began using four of our sales representatives that
sell our healthcare staffing services to offer our website advertising services,
each of which spends approximately four hours per week to offer these
advertising services and to call upon our healthcare related database of clients
to obtain possible sales leads. Sales representatives are compensated strictly
on a 4% commission of the gross sales amount. We also plan to contact similar
suppliers and distributors of the former operating website to offer our
advertising services.
5
June 2003
Advertising our Services and Increase Website Traffic
On June 30, 2003, we ceased negotiations of our proposed agreement with
UltimatePromotion.com to list our website name on search engines. We were able
to avoid this expense by adding the additional service through Internic, who
currently lists our website name and address on 57 search engines. The
additional cost to be listed in all search engines was only $99.00 per year and
was a substantial savings compared to UltimatePromotion.com's proposed services.
June 2003 - July 2003
Transformation of our Website into an Advertising Business
During June and July 2003, we transformed our website into an advertising
business. Our website became operational on July 31, 2003; however, as noted
below, we have made the strategic decision to accumulate a minimum number of 50
advertisers prior to releasing the entire website to the public. During
September 2003, we temporarily disabled the website from the viewing public. We
used the services of Charactersink.com to accomplish this transformation. The
total cost of Charactersink.com's services was $1,400.
On July 1, 2003, we appointed Andy Harmon, one of our existing medical staffing
employees, to be the manager of our website advertising business. Mr. Harmon
will spend approximately five hours per week to oversee our website operations.
Mr. McDonald will no longer spend 5 hours per week on our website advertising
business, but instead will oversee Mr. Harmon's responsibilities in connection
with this business. Mr. McDonald will spend 2 hours per month on our website
operations. Mr. Harmon is currently an employee of our subsidiary, Better
Solutions, Inc. Mr. Harmon is responsible for:
o Overseeing the sales presentations of our sales representatives;
o Continually modifying the sales presentations to make necessary
improvements;
o Reviewing possible agreements and services of website consultants and
advertisers to promote our website advertising business; and
o Continually reviewing and evaluating our website content and design to
make any necessary improvements.
August - September 2003
We have continued are marketing efforts via phone sales through our existing
staff. We now have 7 advertisers under contract. We have made the strategic
decision to accumulate a minimum number of 50 advertisers prior to releasing the
entire website to the public. During September 2003, we temporarily disabled the
website from the viewing public; however, during the sales process we allow it
to be viewed by potential future advertisers. If and only if we reach a minimum
of 50 sponsors and advertisers, will we release the website back to the public.
6
Future Plan of Operations
Our future Plan of Operations is reflected below; however, the following steps
in our Plan of Operations, as reflected below in more detail, will not be
accomplished unless we accumulate a minimum number of 50 advertisers:
o Added Website Feature;
o Advertising Our Website;
o Database of Users/Visitors - Website Newsletter;
o Offering Additional Modes of Advertising to Existing and Prospective
Clients;
o Comment/Rating Feature to Website;
o Expanding Search Feature;
o Additional Sales Efforts; and
o Marketing Evaluation
Continued Advertising Sales Efforts
From August 2003 through August 2004, we will attempt to obtain additional
advertising customers through our sales representatives and increase the number
of banner advertisements and other advertisements for the website. We will also
attempt to extend or renew our existing contracts with our website advertising
clients. We plan to attempt to cross sell our advertising services to our
existing medical staffing clients.
Increased Sales Effort
During October of 2003, we increased the number of hours per week that each
salesperson works selling our website advertising from four hours per week to 10
hours per week. In November 2003, we plan to hire a full time salesperson to
work exclusively on our website advertising sales business.
Added Website Feature
During the period from October to December of 2003, we plan to add a feature to
our website that will enable users to post questions and/or concerns to our
advertising clients about using natural products and allow our advertisers to
respond. This feature will be in the form of a website bulletin board.
Website Evaluation
From December of 2003 until December 2004, our management will evaluate the
design and operational functions of our website. Our management will make
appropriate adjustments based on that evaluation and feedback obtained from our
website users, employees, and clients. We plan to conduct an evaluation of our
website every 6 months; however, beginning in December 2003, Andy Harmon, our
website manager, and Richard E. McDonald, our President, will have a monthly
meeting to evaluate the design and functional/operational aspects of the
website, and based on this evaluation make appropriate adjustments to the
website on an ongoing basis.
7
Advertising Our Website
On December 1, 2003, we plan to place advertisements to promote the advertising
services of our website. Mr. Harmon will oversee the placement of our
advertisements as well as their design. We plan to place these advertisements on
non-computer media such as print, radio and cable media to locate more diverse
types of users to our website. We plan to use local and national radio
advertising in 30 and 15 second spots and local cable channel advertising in
major cities in 30 and 60 second spots. We also plan to advertise in monthly
magazines such as sports and health related publications. We plan to spend $7000
for advertisements from December 2003 through August 2004.
Database of Users/Visitors - Website Newsletter
During January of 2004, we plan to develop an email mailing list of users and
visitors to our website in order to offer a direct email newsletter. We plan to
distribute this newsletter in electronic format starting February 1, 2004, The
newsletter will be free to users but we plan to charge our clients and/or other
advertisers for space within the newsletter. The newsletter advertising space
will be priced similar to our website advertising space fees. Andy Harmon will
be responsible for drafting the newsletter which will contain information
pertaining to new client listings, background information that we will write in
the form of a news article on our clients, improvements to the website, and new
additions or features that may be added to the website from time to time.
Offering Additional Modes of Advertising to Existing and Prospective Clients
During February 2004, we plan to offer for sale additional types of advertising
for the newsletter as well as other direct marketing materials that can be sent
to the database of newsletter subscribers. We will sell column inches of
advertising space in the website newsletter to our clients at the rate of $55
per inch. We also plan to sell the database as a direct mail list of known
health care products to our clients so they can send an exclusive advertisement
brochure of their own to the clients. The cost of this program will be based on
the size of the database at the time of the direct mailing and will be priced at
15 cents per address plus printing costs. The client would provide their full
brochure or advertisement in any format to be delivered to our mailing list of
users. We will not have to accomplish any design or development of the
advertisements since our clients will provide all copy. Andy Harmon will develop
the design of the newsletter. Our current sales force will sell the newsletter
and no additional sales force or expense will be incurred as a result.
Comment/Rating Feature to Website
June 2004 - We plan to develop a "comment" section for the website in which
users can review other users' comments pertaining to experiences with listed
advertisers and suppliers and enable users to generate a quality rating. Once we
accumulate fifty responses we will post the rating based on the consumer's
feedback.
8
Expanding Search Feature
July 2004 - We will expand and develop the search feature enabling users to
search advertisers by specific product ingredients, product name, manufacturer,
comment rating, product use or related keywords. Mr. Harmon will be responsible
for developing this search feature.
Additional Sales Efforts
Between April and May of 2004, we plan to add an additional salesperson to the
website that will spend approximately 40 hours per week attempting to sell
website advertising.
Marketing Evaluation
Between June and August of 2004, our President and Mr. Harmon will re-evaluate
our marketing program and material for website and make adjustments based on
client demand, Internet related trends, and user feedback.
Estimated Expenses of our Website Advertising Business and Ability to Meet Those
Expenses
We believe that our cash balance of $15,878 as of September 30, 2003, together
with our existing credit lines totaling $500,000, and expected future cash flows
from our operating activities in the medical staffing business based on past
cash flow, will be sufficient for us to meet our estimated website advertising
related expenses of approximately $8,526 (excluding any salary or commission
related expenses), as well as to provide us with funds for working capital,
anticipated capital expenditures and other needs for at least the next 12 months
at our current growth rate. No assurance can be given, however, that this will
be the case. In the longer term, we may require additional equity and debt
financing to meet our working capital needs, or to fund our acquisition
activities and increased growth, if any. There can be no assurance that
additional financing will be available when required or, if available, will be
available on satisfactory terms.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Since February 20, 2003, as a result of our acquisition of Better Solutions,
Inc., we operate a medical staffing business under the name MedTech that
provides staffing services to hospitals and other healthcare related facilities.
Our clients' staffing needs include nurses, pharmacists, medical technicians and
physicians. The following management's discussion of our financial condition and
results of operations pertains solely to our medical staffing business, Better
Solutions, Inc.
Three Months Ended September 30, 2003 and 2002
Sales. Sales for the three months ended September 30, 2003 increased by 38% to
$945,761 from $686,485 for the three months ended September 30, 2002. The
increase was primarily due to revenue generated by new offices opened in
Cleveland, Ohio and Boca Raton, Florida which began generating hourly consulting
service revenue in November 2002 and January 2003, respectively, but also
included a 12% increase in revenues by the Pittsburgh office when compared to
the prior three-month period.
Gross Profit. Gross profit is total revenues less cost of revenues. Gross profit
excludes general corporate expenses, finance expenses and income tax. For the
three months ended September 30, 2003 and 2002, respectively, our gross profit
was $460,491 and $216,535, which represented a 113% gross profit increase. The
increase in gross profit is due to increased revenue levels and additional
permanent placement fees received in the current quarter. Gross profit as a
percentage of sales increased to 48.7% for the three months ended September 30,
2003, from 31.5% for the three months ended September 30, 2002. The 17.2% gross
profit increase as a percentage of revenues is attributable to additional
permanent placement fees received in the current three-month period and an
overall margin increase on staffing contracts.
Selling, Marketing and Administrative Expenses. Selling, marketing and
administrative expenses increased to $274,135 from $216,209 for the three months
ended September 30, 2003 and 2002, respectively, representing a 27% increase in
such expense. This increase was due to operating costs at our new offices in
Cleveland, Ohio and Boca Raton, Florida.
Operating Income. The operating income increased to $186,356 from $326 for the
three months ended September 30, 2003 and 2002, respectively. This increase in
our operating income is a direct result of our increased revenues and gross
margin as discussed above under "Sales" and "Gross Profit".
10
Interest Expense. Interest expense increased to $43,150 from $20,999 for the
three months ended September 30, 2003 and 2002, respectively. This 105% increase
in interest expense is due to: (a) additional use of our factoring arrangement
to fund our operations; and (b) borrowings on our line of credit during the
current quarter ended September 30, 2003.
No federal or state income tax has been provided for the three months ended
September 30, 2003 due to the year to date loss. On January 1, 2002, Better
Solutions, with the consent of its shareholders, elected under the Internal
Revenue Code to be an S Corporation. In lieu of corporation income taxes, the
stockholders of an S Corporation are taxed on their proportionate share of a
company's taxable income. Therefore, no provision for income taxes was made for
the three months ended September 30, 2002. The S Corporation election by Better
Solutions ceased upon our acquisition of Better Solutions.
Nine Months Ended September 30, 2003 and 2002
Sales. Sales for the nine months ended September 30, 2003 increased by 37% to
$2,731,000 from $1,987,982 for the nine months ended September 30, 2002. The
increase was primarily due to revenue generated by new offices opened in
Cleveland, Ohio and Boca Raton, Florida, but also included a 10% increase in
revenues by the Pittsburgh office when compared to the prior nine-month period.
Gross Profit. Gross profit is total revenues less cost of revenues. Gross profit
excludes general corporate expenses, finance expenses and income tax. For the
nine months ended September 30, 2003 and 2002, respectively, our gross profit
was $1,110,082 and $685,725, which represented a 62% increase. The increase in
gross profit is due to the increased levels of revenues and additional permanent
placement fees received in the current year. Gross profit as a percentage of
sales increased to 40.6% for the nine months ended September 30, 2003 from 34.5%
for the nine months ended September 30, 2002. The 6.1% increase of gross profit
as a percentage of revenue is attributable to additional permanent placement
fees received in the current nine-month period.
Selling, Marketing and Administrative Expenses. Selling, marketing and
administrative expenses increased to $1,288,041 from $649,496 for the nine
months ended September 30, 2003 and 2002, respectively, representing a 98%
increase in such expense. The majority of this increase was due to $362,914 of
operating costs at our new offices in Cleveland, Ohio and Boca Raton, Florida.
Additionally, we incurred approximately $130,000 in expenses for services
associated with our acquisition of Better Solutions and approximately $94,000 of
legal and accounting costs associated with this acquisition and related
Securities and Exchange Commission filings. The remaining increases in selling,
marketing and administrative expenses were due to additional overhead costs
associated with operating our existing business.
11
Operating Income/(Loss). The $177,959 operating loss in the nine months ended
September 30, 2003 compared to $36,229 in operating income for the nine months
ended September 30, 2002 is a direct result of our increased expenses discussed
above.
Interest Expense. Interest expense increased to $113,661 from $55,219 for the
nine months ended September 30, 2003 and 2002, respectively. This 106% increase
in interest expense is due to: (a) additional use of our factoring arrangement
to fund our operations; and (b) borrowings on our line of credit during the
current nine month period ended September 30, 2003.
No federal or state income tax has been provided for the nine months ended
September 30, 2003 due to the current period loss. On January 1, 2002, Better
Solutions, with the consent of its shareholders, elected under the Internal
Revenue Code to be an S Corporation. In lieu of corporation income taxes, the
stockholders of an S Corporation are taxed on their proportionate share of the
Company's taxable income. Therefore, no provision for income taxes was made for
the nine months ended September 30, 2002.
Liquidity and Capital Resources
Cash decreased by $48,986 to $15,878 from $64,864 for the nine months ended
September 30, 2003. The decrease in cash during the first nine months of 2003 is
attributable to cash outflows from operations of $273,957 and $25,029 of cash
outflows associated with investing activities. These cash outflows were
partially offset by $250,000 of cash inflows from financing activities.
Cash used by operating activities totaled $273,957 in the nine months ended
September 30, 2003. Cash outflows included the $257,726 loss, a $24,529 increase
in accounts receivable to support a higher level of billings in the current
quarter, a $79,076 increase in other current assets due to rental deposits
required at the newly opened Cleveland, Ohio and Boca Raton, Florida offices,
prepayments of Better Solutions' insurance, and a $7,238 decrease in accounts
payable. These cash outflows were partially offset by cash inflows including
$80,375 of stock issued for services, a $28,606 increase in accrued liabilities
due to the timing of Better Solutions' payroll payments, and $12,631 of
depreciation.
Cash used by investing activities totaled $25,029 in the nine months ended
September 30, 2003 and related to the purchase of property, plant and equipment
to furnish Better Solutions' two new offices.
Cash inflows from financing activities were due to net borrowings of $250,000 on
the line of credit.
Cash increased by $75,972 to $81,774 from $5,802 during the nine months ended
September 30, 2002.
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The increase in cash during the first nine months of 2002 is attributable to
cash inflows associated with financing activities of $144,900. These cash
inflows were partially offset by cash outflows from operations of $36,327 and
$32,601 of cash outflows from investing activities.
Cash utilized by operating activities totaled $36,327 in the nine months ended
September 30, 2002. Cash outflows included $16,850 of the net loss, a $49,470
decrease in accrued liabilities, and a $6,737 reduction in income taxes payable.
These cash outflows were partially offset by a $13,064 decrease in accounts
receivable, a $1,809 decrease in other current assets, an $11,717 increase in
accounts payable, and $10,140 of depreciation.
Cash inflows from financing activities were due to $144,900 of loan proceeds
from related parties.
Cash used by investing activities totaled $32,601 in the nine months ended
September 30, 2002 and related to the purchase of property, plant and equipment
for the Pittsburgh, Pennsylvania operation.
ITEM 3. CONTROLS AND PROCEDURES
As of September 30, 2003, an evaluation was performed under the supervision and
with the participation of our management, including our Chief Executive Officer
and Principal Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on that evaluation,
our management, including our Chief Executive Officer and Principal Financial
Officer, concluded that our disclosure controls and procedures were effective as
of September 30, 2003.
There have been no significant changes in our internal control over financial
reporting during the quarter ended September 30, 2003, or subsequent to
September 30, 2003, that have materially affected or are reasonably likely to
materially affect, our internal control over financial reporting.
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PART II-- OTHER INFORMATION
ITEM 1. Legal Proceedings
We are subject to dispute and litigation in the ordinary course of our business.
None of these matters, in the opinion of our management, is material or likely
to result in a material effect on us based upon information available at this
time.
ITEM 2. Changes in Securities
Not Applicable
ITEM 3. Defaults upon Senior Securities
Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
Not Applicable
ITEM 5. Other Information
Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Description
3.1 Articles of Incorporation(1)
3.1(i) Amendment to Articles of Incorporation(4)
3.2 Bylaws(1)
3.3 Executed Agreement between us and Better Solutions(7)
3.4 Plan of Share Exchange/Articles of Share Exchange(5)
4. Specimen Stock Certificate(1)
10.1 Agreement with Barry Gewin(2)
10.2 Agreement with Tommi Ferguson(2)
10.3 Agreement with Global Health Trax, Inc(1)
10.4 Global Health Trax Correspondence dated April 25, 2002(2)
10.5 Agreement with EcoQuest International(3)
10.6 Agreement with Amerisource Funding, Inc.(5)
10.7 Agreement with C. Dillow & Company, Inc.(5)
10.8 Agreement with McGrow Consulting(5)
10.9 Agreement with PNC Bank, N.A.(5)
10.10 Agreement with Media 1 Financial Group LLC and David Wood(5)
10.11 Agreement between Better Solutions, Inc. and Barry Gewin(5)
10.12 Agreement between Better Solutions, Inc. and Tommi Ferguson(5)
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10.13 Real property Lease agreement between Penn Center Management
Corporation and Better Solutions, Inc.(5)
10.14 Real Property Lease agreement between HQ Global Workplaces and
us doing business as MedTech for Glades Road Center in Boca Raton,
Florida.(5)
10.15 Real Property Lease agreement between HQ Global Workplaces and
us doing business as MedTech for Cleveland Ohio, Bank One Center
Offices(5)
10.16 Automobile Lease Agreement between Better Solutions, Inc. and GMAC(5)
10.17 Automobile Lease Agreement between Better Solutions, Inc. and BMW
Financial Services(5)
10.18 Amended Agreement with David Wood and Media 1 Group, LLC(6)
31.1 Certification Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002
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(1) Denotes exhibits filed with our Registration Statement on Form SB-2 on March
28, 2002 and incorporated herein by reference.
(2) Denotes exhibits filed with our Registration Statement on Form SB-2 on
April 26, 2002 and incorporated herein by reference.
(3) Denotes exhibits filed with our Registration Statement on Form SB-2 on May
24, 2002 and incorporated by herein reference.
(4) Denotes exhibits filed with our Post Effective Amendment to our Registration
Statement on Form SB-2 on October 10, 2002 and incorporated herein by
reference.
(5) Denotes exhibits filed with our Post Effective Amendment 4 to our
Registration Statement on Form SB-2 on February 27, 2003 and
incorporated herein by reference.
(6) Denotes exhibits filed with our Post Effective Amendment 5 to our
Registration Statement on Form SB-2 on March 3, 2003 and incorporated
herein by reference.
(7) Denotes exhibits filed with our Post Effective Amendment 6 to our
Registration Statement on Form SB-2 on April 30, 2003 and incorporated
herein by reference.
15
We hereby incorporate the following additional documents by reference: (a) our
Registration Statement on Form SB-2 and all amendments thereto which was filed
on March 36, 2002, and amended on April 26, 2002, May 24, 2002, June 10, 2002,
and post-effectively amended on October 10, 2002, October 23, 2002, January 13,
2003, February 27, 2003, March 3, 2003, April 30, 2003, May 19, 2003, and on May
29, 2003; (b) our Forms 10-QSB for the periods ended March 31, 2002 which was
filed on September 3, 2002 and amended on September 30, 2002 and January 21,
2003; August 31, 2002 which was filed on October 23, 2003 and amended on January
21, 2003; November 30, 2002 which was filed on January 21, 2003; March 31, 2003
which was filed on May 16, 2003; and June 30, 2003 which was filed on August 13,
2003; and (c) our Form 8-K filings made on January 6, 2003 and on February 26,
2003.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORLD HEALTH ALTERNATIVES, INC.
By /s/Richard E. McDonald
Richard E. McDonald
President,
Principal Financial Officer,
Principal Accounting Officer,
Chairman of the Board of Directors
By /s/Marc D. Roup
Marc D. Roup
Chief Executive Officer and Director
Date: October 29, 2003
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