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, 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.)
12 Spielman 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 November 17, 2000 there were 6,299,500 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
September 30, 2000 (Unaudited) and December 31, 1999 2
Condensed Consolidated Statements of Operations and Comprehensive
Loss Nine and Three Months Ended September 30, 2000 and 1999 and
Period from February 1, 1992 (Date of Inception) to
September 30, 2000 (Unaudited) 3
Condensed Consolidated Statement of Changes in Stockholders'
Deficiency Nine Months Ended September 30, 2000 and Period
from February 1, 1992 (Date of Inception) to
September 30, 2000 (Unaudited) 4-5
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2000 and 1999 and
Period from February 1, 1992 (Date of Inception)
to September 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
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
September December
ASSETS 30, 2000 31, 1999
------ ----------- -----------
(Unaudited) (Note 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 23,156 $ 77,486
Research and development grants receivable, net of allowance
of $63,708 and $150,000 37,781 39,363
Inventory 107,421
Prepaid expenses and sundry receivables 215,220 23,664
Advances to employees 16,041 22,955
----------- -----------
Total current assets 399,619 163,468
Furniture and equipment, net of accumulated depreciation of
$18,240 and $11,780 488,221 25,662
Loan financing costs, net of accumulated amortization of
$143,497 and $4,871 134,085 30,129
Other assets 14,319 26,698
----------- -----------
Totals $ 1,036,244 $ 245,957
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses $ 946,199 $ 427,229
Due to related parties 61,572 25,486
Current portion of long-term debt 3,350,817 925,000
----------- -----------
Total liabilities 4,358,588 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 (6,189,560) (3,753,767)
Unamortized interest cost (199,986)
Accumulated other comprehensive income - foreign currency
translation 76,708 56,987
----------- -----------
Total stockholders' deficiency (3,322,344) (1,131,758)
----------- -----------
Totals $ 1,036,244 $ 245,957
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 AND
PERIOD FROM FEBRUARY 1, 1992 (DATE OF INCEPTION)
TO SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------------- --------------------------
2000 1999 2000 1999 Cumulative
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue $ -- $ 122,722 $ -- $ 56,637 $ 334,702
General and administrative expenses 1,939,580 2,021,025 547,717 413,238 5,240,140
----------- ----------- ----------- ----------- -----------
Loss from operations (1,939,580) (1,898,303) (547,717) (356,601) (4,905,438)
Other income (expense):
Interest income 1,393 9,269 381 5,510 23,003
Interest expense (497,606) (377,148) (151,651) (125,716) (1,302,676)
----------- ----------- ----------- ----------- -----------
Net loss (2,435,793) (2,266,182) (698,987) (476,807) (6,185,111)
Other comprehensive income -
foreign currency translation 19,721 23,807 10,453 59,641 76,708
----------- ----------- ----------- ----------- -----------
Comprehensive loss $(2,416,072) $(2,242,375) $ (688,534) $ (417,166) $(6,108,403)
=========== =========== =========== =========== ===========
Basic net loss per common share $ (.39) $ (.40) $ (.11) $ (.07) $ (1.29)
=========== =========== =========== =========== ===========
Basic weighted average common shares
outstanding 6,176,667 5,619,722 6,257,500 6,002,500 4,717,149
=========== =========== =========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
PERIOD FROM FEBRUARY 1, 1992 (DATE OF INCEPTION)
TO SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accmu-
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 loss - foreign
currency translation 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>
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
PERIOD FROM FEBRUARY 1, 1992 (DATE OF INCEPTION)
TO SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accmu-
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 (2,435,793) (2,435,793)
Other comprehensive income -
foreign currency translation
adjustment 19,721 19,721
--------- ------ ---------- ----------- --------- ------- -----------
Balance, September 30, 2000 6,257,500 $6,257 $2,784,251 $(6,189,560) $ -- $76,708 $(3,322,344)
========= ====== ========== =========== ========= ======= ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 AND
PERIOD FROM FEBRUARY 1, 1992 (DATE OF INCEPTION)
TO SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
2000 1999 Cumulative
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net loss $(2,435,793) $(2,266,182) $(6,185,111)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 6,460 7,990 18,240
Amortization of loan financing costs 138,626 143,497
Amortization of interest expense 199,986 334,023 645,235
Foreign exchange (gain) loss 21,899 (9,640) 77,461
Costs of services paid through issuance of
common stock and stock options 1,252,300 1,322,330
Reserve for bad debts 150,000
Changes in operating assets and liabilities:
Research and development grants receivable 1,582 (125,551) (187,781)
Prepaid expenses and sundry receivables (191,556) (64,759) (215,220)
Inventory (107,421) (107,421)
Other assets (3,443) (1,555) (14,319)
Accounts payable and accrued expenses 518,970 194,838 946,199
----------- ----------- -----------
Net cash used in operating activities (1,850,690) (678,536) (3,406,890)
----------- ----------- -----------
Investing activities:
Purchases of furniture and equipment (452,293) (31,454) (506,461)
Repayments from (advances to) employees 6,914 (21,000) (16,041)
----------- ----------- -----------
Net cash used in investing activities (445,379) (52,454) (522,502)
----------- ----------- -----------
Financing activities:
Proceeds from long-term debt 2,425,817 3,350,817
Proceeds from sale of common stock 25,500 792,836 818,409
Loan financing costs (242,582) (277,582)
Advances from related parties, net 36,086 48,327 61,572
----------- ----------- -----------
Net cash provided by financing activities 2,244,821 841,163 3,953,216
----------- ----------- -----------
Effect of exchange rate changes on cash (3,082) (2,461) (668)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (54,330) 107,712 23,156
Cash and cash equivalents, beginning of period 77,486 117,899 --
----------- ----------- -----------
Cash and cash equivalents, end of period $ 23,156 $ 225,611 $ 23,156
=========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<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 September 30, 2000, and its results of
operations for the nine and three months ended September 30, 2000
and 1999, changes in stockholders' deficiency for the nine months
ended September 30, 2000, cash flows for the nine months ended
September 30, 2000 and 1999 and the related cumulative amounts for
the period from February 1, 1992 (date of inception) to September
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 conformity 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 consoli-dated 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 nine and three
months ended September 30, 2000 are not necessarily indicative of
the results of operations for the full year ending December 31,
2000.
As of September 30, 2000, the Company had not generated any
significant revenues from operations and, accordingly, it is in the
development stage. Management does not expect the Company to
generate any revenues from its planned operations prior to the first
quarter of the year ending December 31, 2001.
<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 September 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 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 September 30, 2000, the Company had a cash balance
of $23,156 and a working capital deficiency of approximately
$3,959,000. Its current liabilities included notes payable with a
principal balance of approximately $3,351,000, of which $925,000 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 closing of the proposed private
placement, the Company will have to obtain agreements from
sufficient noteholders, so that the amount of outstanding notes
payable for which it does not receive extensions through August 31,
2001, does not exceed $500,000. The agreement with the placement
agent expired on October 30, 2000. The Company has requested that
the placement continue on a non-exclusive basis but no funds have
been raised under this placement as of the date of the filing of
this report. Management is also attempting to obtain "bridge
financing" to provide the Company with working capital until such
time, if at all, that the proposed private placement can be
consummated, and additional financing can be obtained 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, or at all, consummate the proposed private
placement and/or obtain other sources of financing.
Management 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 December 31, 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.
<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
("SFAS") 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 nine and three months ended September 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 September 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 (A) 350,000
Due February 15, 2001 (C) 2,425,817
----------
Total $3,350,817
==========
(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 was charged to expense in the nine
months ended September 30, 2000 and $334,023 and $111,341 was
charged to expense in the nine and three months ended
September 30, 1999, respectively.
<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 September 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
$2,425,817 from the sale of 26 units, net of loan financing
costs of $242,582. 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 303,227 shares of
common stock reserved for issuance upon conversion of the 10%
Notes as of September 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 nine months ended September 30, 2000, the Company issued
255,000 shares of common stock upon the exercise of warrants at $.10
per share.
At September 30, 2000, warrants to purchase 603,227 shares of common
stock remained outstanding, all of which are exercisable at any time
through February 15, 2003, the expiration date. Additional
information with respect to the exercise prices and the number of
shares subject to the warrants outstanding as of September 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
--------
<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 cost 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 nine and
three months ended September 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 September 30, 2000, the Company had net operating loss
carryforwards of approximately $5,000,000 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 $2,000,000 from the utilization
of those net operating loss carryforwards by an equivalent valuation
allowance as of September 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 $668,000 and $280,000 during the nine and three months ended
September 30, 2000, respectively, and $617,000 and $167,000 during
the nine and three months ended September 30, 1999, respectively, no
credits for income taxes are included in the accompanying condensed
consolidated statements of operations.
Note 6 - Inventory:
Inventory, consisting principally of raw materials, is stated at the
lower of cost (using the first-in, first-out method) or market.
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7 - 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 chief operating decision maker (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 September 30, 2000 and for the nine and
three months ended September 30, 2000 and 1999 is shown below:
<TABLE>
<CAPTION>
United
States Canada Consolidated
----------- ----------- -----------
<S> <C> <C> <C>
Nine months ended September 30, 2000:
Revenue $ -- $ -- $ --
Expenses, net of interest income 1,766,870 668,923 2,435,793
----------- ----------- -----------
Net loss $(1,766,870) $ (668,923) $(2,435,793)
=========== =========== ===========
Three months ended September 30, 2000:
Revenue $ -- $ -- $ --
Expenses, net of interest income 593,299 105,688 698,987
----------- ----------- -----------
Net loss $ (593,299) $ (105,688) $ (698,987)
=========== =========== ===========
Total assets September 30, 2000 $ 967,720 $ 68,524 $ 1,036,244
=========== =========== ===========
Nine months ended September 30, 1999:
Revenue $ -- $ 122,722 $ 122,722
Expenses, net of interest income 1,580,453 808,451 2,388,904
----------- ----------- -----------
Net loss $(1,580,453) $ (685,729) $(2,266,182)
=========== =========== ===========
Three months ended September 30, 1999:
Revenue $ -- $ 56,637 $ 56,637
Expenses, net of interest income 256,919 276,525 533,444
----------- ----------- -----------
Net loss $ (256,919) $ (219,888) $ (476,807)
=========== =========== ===========
Total assets September 30, 1999 $ 181,258 $ 317,020 $ 498,278
=========== =========== ===========
</TABLE>
* * *
<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:
REVENUES
As of September 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 nine months ended September
30, 2000, the Company did not receive any of these grants. During the nine and
three months ended September 30, 1999, the Company received grants from the
Canadian government aggregating $122,722, and $56,637 respectively.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses were $1,939,580 and $547,717 for the
nine and three months ended September 30, 2000, compared to $2,021,025 and
$413,238 for the nine and three months ended September 30, 1999. The increase in
expenses in the quarter is primarily due to costs associated with establishing a
corporate structure to support full scale manufacturing and marketing efforts,
as well as continuing research and development in the United States.
INTEREST EXPENSE
Interest expense was $497,606 and $151,651 for the nine and three months
ended September 30, 2000 compared to $377,148 and $125,716 for the nine and
three months ended September 30, 1999. This increase was principally
attributable to the Company incurring additional debt to fund its operations.
As a result of the above, the Company incurred a net loss of $2,435,793
and $698,987 for the nine and three months ended September 30, 2000 as compared
to $2,266,182 and 476,807 for the nine and three months ended September 30,
1999.
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 inventory, tools, and molds to support start-up production and
to the marketing of its products. The Company intends to engage contract
manufacturers abroad to manufacture the Company's products. The Company has
entered into several agreements with distributors in Canada, the United States,
the United Kingdom, South Africa, India, and the Asian Pacific Rim (excluding
Taiwan). The Company intends to begin distribution of its products in the first
quarter of 2001. The Company's success will be dependent upon raising sufficient
capital to fund the manufacturing and marketing of the Company's products.
Management believes its DOCUPORT(TM) multi-function portable office device and
DOCUPEN(TM) portable scanner will be commercially accepted throughout
<PAGE>
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 $1,675,817. Since that time, the Company
has obtained an additional $800,000 for promissory notes and warrants.
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 Act of 1933 with minimum gross
proceeds of $2,000,000 and maximum gross proceeds of $5,000,000. A condition of
the proposed private placement is that the Company will have to obtain
agreements from its noteholders for the extension of the due dates of the loans.
To date, such extensions have been obtained from holders of approximately
$750,000 of the principal amount of the Company's outstanding debt, conditioned
upon the closing of financing. However, promissory notes with an aggregate
principal balance of $925,000 are now past due and currently payable. The
placement agent's exclusive rights under the agreement expired on October 30,
2000. The Company has requested that the placement continue on a non-exclusive
basis but no funds have been raised under this placement as of the date of the
filing of this quarterly report. Management is also attempting to obtain interim
and other financing to provide the Company with working capital. Such additional
financing may consist of 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. If the Company is not able to obtain additional financing,
its operations may have to be curtailed and, eventually, it may not be able to
continue its business operations.
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.
OTHER MATTERS
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 and the Company's other filings with the
Securities and Exchange Commission.
<PAGE>
PART II. Other Information
Item 1. Legal Proceedings
On or about November 15, 2000, an action was commenced against the
registrant in the state of North Carolina seeking approximately $36,000 plus
interests and costs in connection with services provided to The Registrant. The
registrant disputes the claim and intends to vigorously defend such claim.
None
Item 2. Changes in Securities and Use of Proceeds
During the three months ending September 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 September 30, 2000.
Item 5. Other Information
None
Item 6. Exhibits and 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.
DOCUPORT, INC.
By: /s/ Norman Docteroff
-------------------------------------
Norman Docteroff, President
Dated: November 20, 2000
