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 JUNE 30, 2000.
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 000-28451
DOCUPORT, INC.
------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22-3649272
----------------------------- ---------------------
(State or Other Jurisdiction (I.R.S.Employer or
Incorporation of Organization) Identification No.)
81 Two Bridges Road
Fairfield, New Jersey 07004
(973) 882-3177
------------------------------------------------------
(Address and telephone number, including area
code, of registrant's principal executive office)
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 |_|
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date.
As of June 30, 2000 there were 6,257,500 shares of Common Stock, $.001 par
value, outstanding.
Documents Incorporated by reference: The Company incorporates by reference
various exhibits from the Company's Annual Report on Form 10-KSB, file No.
000-28451, which was filed on April 17, 2000.
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
PAGE
----
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets June 30, 2000
(Unaudited) and December 31, 1999 2
Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss) Six and Three Months Ended June
30, 2000 and 1999 and Period from February 1, 1992 (Date of
Inception) to June 30, 2000 (Unaudited) 3
Condensed Consolidated Statement of Changes in Stockholders'
Deficiency Six Months Ended June 30, 2000 and Period from
February 1, 1992 (Date of Inception) to June 30, 2000
(Unaudited) 4-5
Condensed Consolidated Statements of Cash Flows Six Months
Ended June 30, 2000 and 1999 and Period from February 1, 1992
(Date of Inception) to June 30, 2000 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements
(Unaudited) 7-12
Item 2. Management's Discussion and Analysis or Plan of Operation 13-15
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
----------- -----------
(Unaudited) (Note 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 63,334 $ 77,486
Research and development grants receivable, net
of allowance of $150,000 38,380 39,363
Prepaid expenses and sundry receivables 196,764 23,664
Advances to employees 5,074 22,955
----------- -----------
Total current assets 303,552 163,468
Furniture and equipment, net of accumulated depreciation of
$16,679 and $11,780 55,265 25,662
Loan financing costs, net of accumulated amortization of
$65,063 and $4,871 132,518 30,129
Other assets 14,551 26,698
----------- -----------
Totals $ 505,886 $ 245,957
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses $ 547,185 $ 427,229
Due to related parties 41,694 25,486
Current portion of long-term debt 2,550,817 925,000
----------- -----------
Total liabilities 3,139,696 1,377,715
----------- -----------
Commitments
Stockholders' deficiency:
Preferred stock, par value $.001 per share;
2,000,000 shares authorized; none issued -- --
Common stock, par value $.001 per share; 12,000,000
shares authorized; 6,257,500 and 6,002,500 shares
issued and outstanding 6,257 6,002
Additional paid-in capital 2,784,251 2,759,006
Deficit accumulated during the development stage (5,490,573) (3,753,767)
Unamortized interest cost (199,986)
Accumulated other comprehensive income - foreign
currency translation 66,255 56,987
----------- -----------
Total stockholders' deficiency (2,633,810) (1,131,758)
----------- -----------
Totals $ 505,886 $ 245,957
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
2
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
SIX AND THREE MONTHS ENDED JUNE 30, 2000 AND 1999 AND
PERIOD FROM FEBRUARY 1, 1992 (DATE OF INCEPTION)
TO JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999 Cumulative
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue $ -- $ 66,085 $ -- $ 66,085 $ 334,702
General and administrative expenses 1,391,865 1,607,787 695,793 271,263 4,692,423
----------- ----------- ----------- ----------- -----------
Loss from operations (1,391,865) (1,541,702) (695,793) (205,178) (4,357,721)
Other income (expense):
Interest income 1,014 3,759 436 3,759 22,622
Interest expense (345,955) (251,432) (200,864) (125,716) (1,151,025)
----------- ----------- ----------- ----------- -----------
Net loss (1,736,806) (1,789,375) (896,221) (327,135) (5,486,124)
Other comprehensive income (loss) -
foreign currency translation 9,268 (35,834) 9,574 (23,211) 66,255
----------- ----------- ----------- ----------- -----------
Comprehensive loss $(1,727,538) $(1,825,209) $ (886,647) $ (350,346) $(5,419,869)
----------- ----------- ----------- ----------- -----------
Basic net loss per common share $ (.28) $ (.35) $ (.14) $ (.06) $ (1.16)
----------- ----------- ----------- ----------- -----------
Basic weighted average common shares
outstanding 6,157,500 5,287,917 6,237,500 5,966,250 4,681,877
=========== =========== =========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
SIX MONTHS ENDED JUNE 30, 2000 AND
PERIOD FROM FEBRUARY 1, 1992 (DATE OF INCEPTION)
TO JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accumu-
lated
Other
Compre-
Deficit hensive
Accumulated Income-
Common Stock Additional During the Unamortized Foreign
----------------------- Paid-in Development Interest Currency
Shares Amount Capital Stage Cost Translation Total
--------- ----------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock in 1992
for $.0000251 per share 2,900,000 $ 73 $ 73
Issuance of common stock in 1996
for no consideration 115,000
Recapitalization to effect the ex-
change of shares on reverse
acquisition 1,507,500 4,449 $ (4,449)
Net loss from inception to December
31, 1997 (515,703) (515,703)
Other comprehensive income -
foreign currency translation adjust-
ment from inception to December
31, 1997 $ 25,285 25,285
--------- ----------- ---------- ------ ----------
Balance, December 31, 1997 4,522,500 4,522 (520,152) 25,285 (490,345)
Transfer of common stock in 1998
from existing stockholders in ex-
change for consulting services $ 70,000 70,000
Net loss (226,479) (226,479)
Other comprehensive income -
foreign currency translation
adjustment 32,453 32,453
--------- ----------- --------- ---------- ------ ----------
Balance, December 31, 1998 4,522,500 4,522 70,000 (746,631) 57,738 (614,371)
Issuance of common stock in
January 1999 to existing
stockholders in exchange
for consulting services 230,000 230 22,770 23,000
Recapitalization to effect the
exchange of shares on
reverse acquisition 115,000 115 (115)
Issuance of common stock in
March 1999 for $.10 per share 53,000 53 5,247 5,300
Issuance of common stock in
March 1999 for $2.00 per
share, including services
valued at $1.90 per share 647,000 647 1,293,353 1,294,000
Issuance of common stock in
April 1999 for $2.00 per
share, net of offering costs
of $147,164 435,000 435 722,401 722,836
Effect of repricing outstanding
warrants 645,350 $(645,350)
Amortization of interest cost 445,364 445,364
Net loss (3,007,136) (3,007,136)
Other comprehensive income
(loss) - foreign currency trans-
lation adjustment (751) (751)
--------- ----------- --------- ---------- -------- ------ ----------
Balance, December 31, 1999 6,002,500 6,002 2,759,006 (3,753,767) (199,986) 56,987 (1,131,758)
--------- ----------- --------- ---------- -------- ------ ----------
</TABLE>
4
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
SIX MONTHS ENDED JUNE 30, 2000 AND
PERIOD FROM FEBRUARY 1, 1992 (DATE OF INCEPTION)
TO JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accumu-
lated
Other
Compre-
Deficit hensive
Accumulated Income-
Common Stock Additional During the Unamortized Foreign
----------------------- Paid-in Development Interest Currency
Shares Amount Capital Stage Cost Translation Total
--------- ----------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 6,002,500 $ 6,002 $ 2,759,006 $(3,753,767) $(199,986) $ 56,987 $(1,131,758)
Issuance of common stock upon
the exercise of warrants for
$.10 per share 255,000 255 25,245 25,500
Amortization of interest cost 199,986 199,986
Net loss (1,736,806) (1,736,806)
Other comprehensive income -
foreign currency translation
adjustment 9,268 9,268
--------- ----------- ----------- ----------- --------- ----------- -----------
Balance, June 30, 2000 6,257,500 $ 6,257 $ 2,784,251 $(5,490,573) $ -- $ 66,255 $(2,633,810)
========= =========== =========== =========== ========= =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999 AND
PERIOD FROM FEBRUARY 1, 1992 (DATE OF INCEPTION)
TO JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
2000 1999 Cumulative
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net loss $(1,736,806) $(1,789,375) $(5,486,124)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 5,572 3,039 18,576
Amortization of loan financing costs 60,192 65,063
Amortization of interest expense 199,986 222,682 645,350
Foreign exchange (gain) loss 11,495 (9,640) 77,461
Costs of services paid through issuance of
common stock and stock options 1,252,300 1,322,300
Reserve for bad debts 150,000
Changes in operating assets and liabilities:
Research and development grants receivable 983 (67,369) (188,380)
Prepaid expenses and sundry receivables (173,100) (18,917) (196,698)
Other assets (4,644) (1,559) (5,974)
Accounts payable and accrued expenses 117,847 88,342 545,124
----------- ----------- -----------
Net cash used in operating activities (1,518,475) (320,497) (3,053,302)
----------- ----------- -----------
Investing activities:
Purchases of furniture and equipment (34,500) (16,407) (72,910)
Deposit on purchases of equipment 16,726
Payments of costs in connection with acquisition
of patents (610) (1,018) (9,506)
Repayments from (advances to) employees 17,881 (21,000) (5,074)
----------- ----------- -----------
Net cash used in investing activities (503) (38,425) (87,490)
----------- ----------- -----------
Financing activities:
Proceeds from long-term debt 1,625,817 2,550,817
Proceeds from sale of common stock 25,500 792,836 818,409
Loan financing costs (162,581) (197,581)
Advances from related parties, net 16,208 44,037 41,693
----------- ----------- -----------
Net cash provided by financing activities 1,504,944 836,873 3,213,338
----------- ----------- -----------
Effect of exchange rate changes on cash (118) (1,263) (9,212)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (14,152) 476,688 63,334
Cash and cash equivalents, beginning of period 77,486 117,899 --
----------- ----------- -----------
Cash and cash equivalents, end of period $ 63,334 $ 594,587 $ 63,334
=========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of presentation and unaudited interim financial statements:
Unaudited interim financial statements:
Docuport, Inc. and its subsidiary, which are in the development stage, are
referred to herein as the "Company." In the opinion of management, the
accompanying unaudited condensed consolidated financial statements reflect
all adjustments, consisting of normal recurring accruals, necessary to
present fairly the financial position of the Company as of June 30, 2000,
and its results of operations for the six and three months ended June 30,
2000 and 1999, changes in stockholders' deficiency for the six months
ended June 30, 2000, cash flows for the six months ended June 30, 2000 and
1999 and the related cumulative amounts for the period from February 1,
1992 (date of inception) to June 30, 2000. Information included in the
condensed consolidated balance sheet as of December 31, 1999 has been
derived from, and certain terms used herein are defined in, the audited
consolidated financial statements of the Company as of December 31, 1999
and for the years ended December 31, 1999 and 1998 and the period from
February 1, 1992 (date of inception) to December 31, 1999 (the "Audited
Financial Statements") included in the Company's Annual Report on Form
10-KSB (the "10-KSB") for the year ended December 31, 1999 that was
previously filed with the United States Securities and Exchange Commission
(the "SEC"). Pursuant to the rules and regulations of the SEC, certain
information and disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted from these condensed consolidated financial
statements unless significant changes have taken place since the end of
the most recent fiscal year. Accordingly, these unaudited condensed
consolidated financial statements should be read in conjunction with the
Audited Financial Statements and the other information also included in
the 10-KSB.
The results of the Company's operations for the six and three months ended
June 30, 2000 are not necessarily indicative of the results of operations
for the full year ending December 31, 2000.
As of June 30, 2000, the Company had not generated any revenues from
operations and, accordingly, it is still in the development stage.
Management does not expect the Company to generate any revenues from its
planned operations prior to the fourth quarter of the year ending December
31, 2000.
7
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of presentation and unaudited interim financial statements
(concluded):
Additional financing requirements:
As of June 30, 2000, the Company was a development stage enterprise that
was still in the process of designing and formulating marketing plans for
highly portable imaging devices. It had not generated any significant
revenues from such operations on a sustained basis. As a result, it had
generated losses and cash flow deficiencies from its inception, although a
substantial portion of the losses was attributable to noncash charges for
the fair value of shares and warrants that were issued for services,
compensation and other expenses. As of June 30, 2000, the Company had a
cash balance of only $63,334 and a working capital deficiency of
approximately $2,836,000. Its current liabilities included notes payable
with a principal balance of approximately $2,551,000, of which $575,000
was past due and payable on demand and the remainder was payable at
various dates through February 15, 2001.
Management has been attempting to renegotiate the terms of the Company's
outstanding notes payable and obtain additional financing for the Company
to enable it to fully develop planned operations. In August 2000, a
placement agent agreed, subject to certain conditions, to sell, on a best
efforts basis, units of one share of the Company's common stock and a
warrant to purchase one share of its common stock at $5.00 per unit
through a proposed private placement intended to be exempt from
registration pursuant to the provisions of Regulation D of the Securities
Act of 1933 with minimum gross proceeds of $2,000,000 and maximum gross
proceeds of $5,000,000. Each warrant would be exercisable at $8.00 per
share during the three year period subsequent to the closing of the
offering. However, prior to the commencement of the proposed private
placement, the Company will have to obtain agreements from substantially
all of its noteholders for the extension of the due dates of the loans.
The agreement with the placement agent will expire on October 30, 2000
unless extended by mutual agreement. Management is also attempting to
obtain "bridge financing" to provide the Company with working capital
until such time, if any, that the proposed private placement can be
consummated, and additional financing through other issuances of equity
securities, loans from financial institutions and/or strategic alliances.
However, management cannot assure that the Company will be able to obtain
the required loan extensions on favorable terms, consummate the proposed
private placement and/or obtain other sources of financing.
Management believes, but cannot assure, that the Company's lenders will
not require the repayment of the outstanding notes payable and that the
Company will be able to continue to operate on at least a limited basis
during the year ending June 30, 2001 without any additional financing.
However, if the Company is not able to obtain additional financing, its
operations may have to be curtailed during that period and, eventually, it
may not be able to continue to operate.
8
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2 - Earnings (loss) per common share:
As further explained in Note 2 of the notes to the Audited Financial
Statements, the Company presents basic earnings (loss) per share and, if
appropriate, diluted earnings per share in accordance with the provisions
of Statement of Financial Accounting Standards No. 128, "Earnings per
Share." Diluted per share amounts have not been presented in the
accompanying unaudited condensed consolidated statements of operations
because the Company incurred losses in the six and three months ended June
30, 2000 and 1999, and the assumed effects of the exercise of outstanding
warrants were anti-dilutive. Such warrants, however, could dilute basic
earnings per share in the future.
Note 3 - Long-term debt:
At June 30, 2000, long-term debt consists of notes payable that bear
interest at 10% and are due and payable at maturity as shown below:
Due August 28, 1998 (A) $ 50,000
Due August 1, 2000 (A) (B) 525,000
Due November 10, 2000 350,000
Due February 15, 2001 (C) 1,625,817
----------
Total $2,550,817
==========
(A) The Company is currently in default and, as a result, the note is
due on demand.
(B) On February 10, 1999, the noteholders agreed to extend the due date
to August 1, 2000. As consideration for the extension, the Company
reduced the exercise price of existing warrants to purchase 315,000
shares of common stock held by the noteholders from $1.67 per share
to $.10 per share, and issued to the noteholders warrants to
purchase an additional 157,500 shares of common stock at an exercise
price of $.10 per share. The cost of these additional warrants was
estimated to be $645,350, of which $199,986 and $88,645 was charged
to expense in the six and three months ended June 30, 2000,
respectively, and $222,682 and $111,341 was charged to expense in
the six and three months ended June 30, 1999, respectively.
9
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3 - Long-term debt (concluded):
(C) On January 28, 2000, the Company commenced a private offering (the
"New Offering") to "Accredited Investors" of units of 10%
convertible promissory notes that are due February 15, 2001 (the
"10% Notes"). The New Offering was intended to be exempt from
registration pursuant to the provisions of Regulation D of the
Securities Act of 1933. As of June 30, 2000, the expiration date of
the New Offering (as extended by the Company from the initially
scheduled expiration date of February 15, 2000), the Company had
received proceeds of $1,625,817 from the sale of 26 units, net of
loan financing costs of $162,581. Interest on the 10% Notes is
payable upon the payment of the principal balance. The 10% Notes are
convertible at any time, subject to Company approval, at $8.00 per
share and, accordingly, there were 203,227 shares of common stock
reserved for issuance upon conversion of the 10% Notes as of June
30, 2000. However, if the Company receives proceeds of at least
$3,000,000 from the consummation of equity or debt financing prior
to the due date of the 10% Notes, the due date will become
accelerated and they will become convertible at $6.40 per share.
Note 4 - Warrants:
During the six months ended June 30, 2000, the Company issued 255,000
shares of common stock upon the exercise of warrants at $.10 per share.
At June 30, 2000, warrants to purchase 400,000 shares of common stock
remained outstanding, all of which will be exercisable at any time through
February 15, 2003, the date on which they all expire. Additional
information with respect to the exercise prices and the number of shares
subject to the warrants outstanding as of June 30, 2000 follows:
Exercise Number
Price of Shares
-------- ---------
$8.00 203,227
4.00 10,000
2.00 315,000
1.67 15,000
.10 60,000
-------
603,227
=======
10
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4 - Warrants (concluded):
The Company issued certain of the warrants described above to employees at
exercise prices that were equivalent to or greater than fair value at the
date of grant. As further explained in Note 1 of the notes to the Audited
Financial Statements, the Company accounts for warrants granted to
employees pursuant to APB 25 and, accordingly, it did not record any
compensation costs as a result of issuances of warrants to employees. The
pro forma amounts of compensation cost, net loss and net loss per share
for the six and three months ended June 30, 2000 and 1999 using a fair
value based method of accounting for the warrants granted, as required by
SFAS 123, have not been presented because they do not differ materially
from the corresponding historical amounts.
Note 5 - Income taxes:
As of June 30, 2000, the Company had net operating loss carryforwards of
approximately $4,300,000 available to reduce future Federal taxable income
which, if not used, will expire at various dates through 2020. The Company
had no other material temporary differences as of that date. Due to the
uncertainties related to, among other things, the changes in the ownership
of the Company, which could subject those loss carryforwards to
substantial annual limitations, and the extent and timing of its future
taxable income, the Company offset the deferred tax assets attributable to
the potential benefits of approximately $1,249,000 from the utilization of
those net operating loss carryforwards by an equivalent valuation
allowance as of June 30, 2000.
The Company had also offset the potential benefits from net operating loss
carryforwards by equivalent valuation allowances during 1999. As a result
of the increases in the valuation allowance of $388,000 and $205,000
during the six and three months ended June 30, 2000, respectively, and
$450,000 and $32,000 during the six and three months ended June 30, 1999,
respectively, no credits for income taxes are included in the accompanying
condensed consolidated statements of operations.
11
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6 - Segment and geographic information:
Pursuant to the provisions of SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information," the Company is required to report
segment information in the same format reviewed by the Company's
management (the "management approach"). The Company operates principally
in one industry segment consisting of the development, manufacture and
sale of highly portable imaging devices. Prior to 1999, the Company
conducted its operations principally in Canada. Commencing in 1999, the
Company also expanded its operations to the United States.
Information about the Company's operations and assets in different
geographic locations as of June 30, 2000 and for the six and three months
ended June 30, 2000 and 1999 is shown below:
United
States Canada Consolidated
----------- ----------- -----------
Six months ended June 30, 2000:
Revenue $ -- $ -- $ --
Expenses, net of interest income 1,173,571 563,235 1,736,806
----------- ----------- -----------
Net loss $(1,173,571) $ (563,235) $(1,736,806)
=========== =========== ===========
Three months ended June 30, 2000:
Revenue $ -- $ -- $ --
Expenses, net of interest income 603,590 292,631 896,221
----------- ----------- -----------
Net loss $ (603,590) $ (292,631) $ (896,221)
=========== =========== ===========
Total assets June 30, 2000 $ 441,216 $ 64,670 $ 505,886
=========== =========== ===========
Six months ended June 30, 1999:
Revenue $ -- $ 66,085 $ 66,085
Expenses, net of interest income 1,323,534 531,926 1,855,460
----------- ----------- -----------
Net loss $(1,323,534) $ (465,841) $(1,789,375)
=========== =========== ===========
Three months ended June 30, 1999:
Revenue $ -- $ 66,085 $ 66,085
Expenses, net of interest income 84,532 308,688 393,220
----------- ----------- -----------
Net loss $ (84,532) $ (242,603) $ (327,135)
=========== =========== ===========
Total assets June 30, 1999 $ 571,154 $ 182,287 $ 753,441
=========== =========== ===========
* * *
12
<PAGE>
Item 2. Management's discussion and analysis of financial condition and results
of Operations:
The following discussion and analysis should be read in conjunction with the
Company's condensed consolidated financial statements and the notes related
thereto. The discussion of results, causes and trends should not be construed to
infer conclusions that such results, causes or trends necessarily will continue
in the future.
RESULTS OF OPERATIONS:
The following table sets forth for the periods indicated the amounts included in
the Company's consolidated statement of operations:
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended Three Months Ended Three Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
---------------- ---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues $ 0 $ 66,085 $ 0 $ 66,085
General and
administrative 1,391,865 1,607,787 695,793 271,263
Interest expense-net 344,941 247,673 200,428 121,957
Net Loss $(1,736,806) $(1,789,375) $ (896,221) $ (327,135)
</TABLE>
REVENUES
As of June 30, 2000, the Company had not generated any revenues from
operations and, accordingly is still within its developmental stage. In the
past, the Canadian government has provided companies with research and
development grants which were available to the Company as a reimbursement to the
Company of taxes payable to the Canadian government. Research and development
grants are available as a percentage of research and development expenses, and
are not available for expenses related to currency exchange losses, financing
fees or other expenses outside of Canada. During the six and three months ended
June 30, 2000, the Company was not eligible for any of these grants. During the
six and three months ended June 30, 1999, the Company received grants from the
Canadian government aggregating $66,085.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses decreased to $1,391,865 and $695,793
for the six and three months ended June 30, 2000 compared to $1,607,787 and
$271,263 for the six and three months ended June 30, 1999. This decrease in
expenses is primarily due to a non-cash charge of $1,252,300 associated with the
cost of services paid through the issuance of Common Stock, during the six month
period ended June 30, 1999. This decrease was offset, to some extent, by
increased expenditures in 2000 for consulting and travel costs, as well as
establishing the Company's headquarters in the United States.
INTEREST EXPENSE
Interest expense was $345,955 and $200,864 for the six and three months
ended June 30, 2000 compared to $251,432 and $125,716 for the six and three
months ended June 30, 1999. This increase was principally attributable to the
increase in the Company's short-term debt.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital and capital requirements will depend upon
numerous factors, including the level of resources that the Company devotes to
the purchase of manufacturing equipment to support start-up production and to
the marketing aspects of its products. The Company intends to construct
production and/or assembly centers abroad to manufacture, market and sell the
Docuport in the international market. The Company has entered into an agreement
with Thomson Consumer Electronics, Inc., to manufacture, market and sell the
Docuport in Canada and the United States under its RCA brand name. The Company
intends to begin distribution of the Docuport in the United States, Canada,
Europe and Asia in the fourth quarter of the year ending December 31, 2000.
The Company's success will be dependent upon raising sufficient capital to
establish a production and assembly facility to manufacture the Docuport. The
Company believes the Docuport will be commercially accepted throughout the
national and international markets. The Company does not have all the financing
in place at this time, nor may it ever, to meet these objectives.
During the year ending December 31, 1999, the Company raised funds through
the sale of securities in order to satisfy its cash requirements and liquidity
obligations. During March, 1999 and April 1999, the Company sold 1,135,000
shares of Common Stock for an aggregate sum of $792,836 net of $147,164 of
offering costs. Commencing in February 2000 and through June 30, 2000 the
Company, through a private offering, sold a combination of convertible
debentures and warrants for a sum of $1,625,817.
Management is currently attempting to renegotiate the terms of the
Company's outstanding notes payable and obtain additional financing for the
Company to enable it to fully develop its planned operations. In August 2000, a
placement agent agreed, subject to certain conditions, to sell, on a best
efforts basis, units of one share of the Company's common stock and a warrant to
purchase one share of its common stock at $5.00 per unit through a proposed
private placement intended to be exempt from registration pursuant to the
provisions of Regulation D of the Securities Ace of 1933 with minimum gross
proceeds of $2,000,000 and maximum gross proceeds of $5,000,000. Each warrant
would be exercisable at $8.00 per share during the three-year period subsequent
to the closing of the offering. However, prior to the commencement of the
proposed private placement, the Company will have to obtain agreements from its
noteholders for the extension of the due dates of the loans. The agreement with
the placement agent will expire on October 30, 2000 unless extended by mutual
agreement. Management is also attempting to obtain "bridge financing" to provide
the Company with working capital until such time, if any, that the proposed
private placement can be consummated, and additional financing through other
issuances of equity securities, loans from financial institutions and/or
strategic alliances. However, management cannot assure that the Company will be
able to obtain the required loan extensions on favorable terms, consummate the
proposed private placement and/or obtain other sources of financing.
The Company's computer systems and equipment successfully transitioned to
the Year 2000 with no significant issues. The Company continues to monitor its
systems for latent problems that could surface at key dates or events in the
future. It is not anticipated that there will be any significant problems
related to these events.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations includes forward-looking statements that may or may not
materialize. Additional information on factors that could potentially affect the
Company's financial results may be found in the Company's filings with the
Securities and Exchange Commission.
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OTHER MATTERS
The Form 10-QSB, other than historical financial information, may consist
of forward-looking statements that include risks and uncertainties, including,
but not limited to, statements contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations". Such statements are
based upon many assumptions and are subject to risks and uncertainties. Actual
results could differ materially from the results discussed in the
forward-looking statements due to a number of factors, including, but not
limited to, those identified in the preceding paragraphs.
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PART II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
During the three months ending June 30, 2000, there were no changes in
securities.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
No matters were submitted to a vote of the Company's shareholders during
the quarterly period ended June 30, 2000.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(a) A Form 8-K/A was filed by the registrant on May 15, 2000
with respect to the change of the Company's principal
accountant from BDO Dunwoody to J.H. Cohn, LLP, effective May
5, 2000.
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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.
DOCUPORT, INC.
By: /s/ Norman Docteroff
-------------------------------------
Norman Docteroff, President
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