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 MARCH 31, 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 March 31, 2000 there were 6,227,500 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>
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 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:
Three Months Ended Three Months Ended
March 31,2000 March 31,1999
------------- -------------
Revenues 0 0
Expenses
General and administrative (696,072) (1,336,524)
Other income and expenses
Interest income 578 0
Interest expense (145,091) (125,716)
Net loss for the quarter (840,585) (1,462,240)
REVENUES
As of March 31, 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 three months ended March
31, 2000 and 1999, the Company was not eligible for any of these grants.
12
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses decreased to $696,072 for the three
months ended March 31, 2000 compared to $1,336,524 for the three months ended
March 31, 1999. This decrease in expenses is primarily due to a decrease in
non-cash charges of $1,252,300 associated with the cost of services paid through
the issuance of Common Stock, during the three month period ended March 31,
1999. This decrease was offset, to some extent, by increased expenditures in
consulting and travel costs, as well as establishing the Company's headquarters
in the United States.
INTEREST EXPENSE
Interest expense was $145,091 for the three months ended March 31, 2000
compared to $125,623 for the three months ended March 31, 1999. This increase
was principally attributable to the increase in the Company's short-term debt.
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 third 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 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 April, 2000 the
Company, through a private offering, sold a combination of convertible
debentures and warrants for a sum of $850,000. Subsequent to March 31, 2000, the
Company has raised an additional $400,000 through a
13
<PAGE>
private offering of convertible promissory notes and warrants. The Company
contemplates seeking additional financing or conducting a public offering in
order to satisfy additional cash requirements and its liquidity obligations.
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.
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.
14
<PAGE>
PART II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
During the three months ending March 31, 2000, the Company issued 225,000
shares of Common Stock upon the exercise of warrants for $.10 per share.
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 March 31, 2000.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
In accordance with Item 601 of Regulation S-B, the following
Exhibit from the Company's 8-K filed February 10, 2000 is
incorporated by reference:
Exhibit 10.1 Marketing Rights and Supply Agreement,
dated January 14, 2000, by and between Docuport and
Thomson Consumer Electronics, Inc.
(b) During the quarter ended March 31, 2000, a Form 8-K was filed
by the registrant on February 10, 2000, with respect to a
Marketing Rights and Supply Agreement entered into between the
Company and Thomson Consumer Electronics, Inc.
15
<PAGE>
(c) A Form 8-K was filed by the registrant on April 3, 2000 with
respect to a change of the Company's principal accountant from
BDO Dunwoody to J.H. Cohn, LLP, effective March 30, 2000.
16
<PAGE>
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
Date: May 22, 2000
17
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
PAGE
----
Part I - Financial Information
Item 1. Financial Statements
Report of Independent Public Accountants 2
Condensed Consolidated Balance Sheets
March 31, 2000 (Unaudited) and December 31, 1999 3
Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss)
Three Months Ended March 31, 2000 and 1999 and Period
from February 1, 1992 (Date of Inception) to March 31,
2000 (Unaudited) 4
Condensed Consolidated Statement of Changes in Stockholders'
Deficiency
Three Months Ended March 31, 2000 and Period from February 1,
1992 (Date of Inception) to March 31, 2000 (Unaudited) 5-6
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999 and Period
from February 1, 1992 (Date of Inception) to March 31, 2000
(Unaudited) 7
Notes to Condensed Consolidated Financial Statements (Unaudited) 8-11
Item 2. Management's Discussion and Analysis or Plan of Operation 12-14
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 17
1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Docuport, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
DOCUPORT, INC. AND SUBSIDIARY (A Development Stage Company) as of March 31,
2000, and the related condensed consolidated statements of operations and
comprehensive income (loss), changes in stockholders' deficiency and cash flows
for the three months ended March 31, 2000 and for the period from February 1,
1992 (date of inception) to March 31, 2000. These condensed consolidated
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review of the condensed consolidated financial statements referred
to above, we are not aware of any material modifications that should be made to
the accompanying condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1999, and the related consolidated statements of operations and comprehensive
income (loss), changes in stockholders' deficiency and cash flows for the year
then ended and for the period from February 1, 1992 (date of inception) to
December 31, 1999, which are not presented herein, and in our report dated April
7, 2000, we expressed an unqualified opinion on those consolidated financial
statements. Our opinion on the consolidated statements of operations and
comprehensive income (loss), changes in stockholders' deficiency and cash flows
for the period from February 1, 1992 (date of inception) to December 31,1999,
insofar as it related to amounts for the period from February 1, 1992 (date of
inception) through December 31, 1998, was based solely on the report of other
auditors. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1999, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
The accompanying condensed consolidated statements of operations and
comprehensive income (loss) and cash flows for the three months ended March 31,
1999 were not audited or reviewed by us and, accordingly, we do not express an
opinion or any other form of assurance on them.
J.H. Cohn LLP
Roseland, New Jersey
May 16, 2000
2
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
March December
ASSETS 31, 2000 31, 1999
----------- -----------
(Unaudited) (Note 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 235,484 $ 77,486
Research and development grants receivable, net of
allowance of $150,000 39,186 39,363
Prepaid expenses and sundry receivables 60,061 23,664
Advances to employees 18,815 22,955
----------- -----------
Total current assets 353,546 163,468
Furniture and equipment, net of accumulated depreciation of
$13,713 and $11,780 29,977 25,662
Loan financing costs, net of accumulated amortization of
$24,246 and $4,871 95,754 30,129
Other assets 26,831 26,698
----------- -----------
Totals $ 506,108 $ 245,957
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses $ 523,388 $ 427,229
Due to related parties 46,528 25,486
Current portion of long-term debt 1,775,000 925,000
----------- -----------
Total liabilities 2,344,916 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; 6,227,500 and 6,002,500 shares issued and
outstanding 6,227 6,002
Additional paid-in capital 2,781,281 2,759,006
Deficit accumulated during the development stage (4,594,352) (3,753,767)
Unamortized interest cost (88,645) (199,986)
Accumulated other comprehensive income - foreign currency
translation 56,681 56,987
----------- -----------
Total stockholders' deficiency (1,838,808) (1,131,758)
----------- -----------
Totals $ 506,108 $ 245,957
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 AND
PERIOD FROM FEBRUARY 1, 1992 (DATE OF INCEPTION)
TO MARCH 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
2000 1999 Cumulative
----------- ----------- -----------
<S> <C> <C> <C>
Revenue $ -- $ -- $ 334,702
General and administrative expenses 696,072 1,336,524 3,996,630
----------- ----------- -----------
Loss from operations (696,072) (1,336,524) (3,661,928)
Other income (expense):
Interest income 578 22,186
Interest expense (145,091) (125,716) (950,161)
----------- ----------- -----------
Net loss (840,585) (1,462,240) (4,589,903)
Other comprehensive income (loss) -
foreign currency translation (306) (12,623) 56,681
----------- ----------- -----------
Comprehensive income (loss) $ (840,891) $(1,474,863) $(4,533,222)
=========== =========== ===========
Basic net loss per common share $ (.14) $ (.30) $ (.98)
=========== =========== ===========
Basic weighted average common shares outstanding 6,077,500 4,868,333 4,634,014
=========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
THREE MONTHS ENDED MARCH 31, 2000 AND
PERIOD FROM FEBRUARY 1, 1992 (DATE OF INCEPTION)
TO MARCH 31, 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
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock in 1992
for $.0000251 per share 2,900,000 $ 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)
Other comprehensive income -
foreign currency translation adjust-
ment from inception to December
31, 1997 $ 25,285
---------- ----------- ----------- -----------
Balance, December 31, 1997 4,522,500 4,522 (520,152) 25,285
Transfer of common stock in 1998
from existing stockholders in ex-
change for consulting services $ 70,000
Net loss (226,479)
Other comprehensive income -
foreign currency translation adjustment 32,453
---------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 4,522,500 4,522 70,000 (746,631) 57,738
Issuance of common stock in
January 1999 to existing
stockholders in exchange
for consulting services 230,000 230 22,770
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
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
Issuance of common stock in
April 1999 for $2.00 per
share, net of offering costs
of $147,164 435,000 435 722,401
Effect of repricing outstanding
warrants 645,350 $ (645,350)
Amortization of interest cost 445,364
Net loss (3,007,136)
Other comprehensive income
(loss) - foreign currency trans-
lation adjustment (751)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 6,002,500 6,002 2,759,006 (3,753,767) (199,986) 56,987
----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
Total
-----------
<S> <C>
Issuance of common stock in 1992
for $.0000251 per share $ 73
Issuance of common stock in 1996
for no consideration
Recapitalization to effect the ex-
change of shares on reverse acquisition
Net loss from inception to December
31, 1997 (515,703)
Other comprehensive income -
foreign currency translation adjust-
ment from inception to December
31, 1997 25,285
-----------
Balance, December 31, 1997 (490,345)
Transfer of common stock in 1998
from existing stockholders in ex-
change for consulting services 70,000
Net loss (226,479)
Other comprehensive income -
foreign currency translation adjustment 32,453
-----------
Balance, December 31, 1998 (614,371)
Issuance of common stock in
January 1999 to existing
stockholders in exchange
for consulting services 23,000
Recapitalization to effect the
exchange of shares on
reverse acquisition
Issuance of common stock in
March 1999 for $.10 per share 5,300
Issuance of common stock in
March 1999 for $2.00 per
share, including services
valued at $1.90 per share 1,294,000
Issuance of common stock in
April 1999 for $2.00 per
share, net of offering costs
of $147,164 722,836
Effect of repricing outstanding
warrants
Amortization of interest cost 445,364
Net loss (3,007,136)
Other comprehensive income
(loss) - foreign currency trans-
lation adjustment (751)
-----------
Balance, December 31, 1999 (1,131,758)
-----------
</TABLE>
5
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
THREE MONTHS ENDED MARCH 31, 2000 AND
PERIOD FROM FEBRUARY 1, 1992 (DATE OF INCEPTION)
TO MARCH 31, 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
----------- ----------- ----------- ----------- ----------- -----------
<S> <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
Issuance of common stock in
March 2000 upon the exercise
of warrants for $.10 per share 225,000 225 22,275
Amortization of interest cost 111,341
Net loss (840,585)
Other comprehensive income
(loss) - foreign currency trans-
lation adjustment (306)
----------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 2000 6,227,500 $ 6,227 $ 2,781,281 $(4,594,352) $ (88,645) $ 56,681
=========== =========== =========== =========== =========== ===========
<CAPTION>
Total
-----------
<S>
Balance, January 1, 2000 $(1,131,758)
Issuance of common stock in
March 2000 upon the exercise
of warrants for $.10 per share 22,500
Amortization of interest cost 111,341
Net loss (840,585)
Other comprehensive income
(loss) - foreign currency trans-
lation adjustment (306)
-----------
Balance, March 31, 2000 $(1,838,808)
===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 AND
PERIOD FROM FEBRUARY 1, 1992 (DATE OF INCEPTION)
TO MARCH 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
2000 1999 Cumulative
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net loss $ (840,585) $(1,462,240) $(4,589,903)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,182 367 15,186
Amortization of loan financing costs 19,375 24,246
Amortization of interest expense 111,341 111,341 556,705
Foreign exchange loss 65,966
Costs of services paid through issuance of
common stock and stock options 1,252,300 1,322,300
Reserve for bad debt 150,000
Changes in operating assets and liabilities:
Research and development grants receivable 177 3,474 (189,186)
Prepaid expenses and sundry receivables (36,397) (70,004) (59,995)
Other assets (115) 250 (1,445)
Accounts payable and accrued expenses 96,159 6,285 523,436
----------- ----------- -----------
Net cash used in operating activities (647,863) (158,227) (2,182,690)
----------- ----------- -----------
Investing activities:
Purchases of furniture and equipment (6,248) (90) (44,658)
Deposit on purchases of equipment (16,726)
Payments of costs in connection with acquisition
of patents (267) (9,163)
Repayments from (advances to) employees 4,140 (18,815)
----------- ----------- -----------
Net cash used in investing activities (2,375) (90) (89,362)
----------- ----------- -----------
Financing activities:
Proceeds from long-term debt 850,000 1,775,000
Proceeds from sale of common stock 22,500 70,000 815,409
Loan financing costs (85,000) (120,000)
Proceeds from (repayment to) related parties 21,042 (176) 46,527
----------- ----------- -----------
Net cash provided by financing activities 808,542 69,824 2,516,936
----------- ----------- -----------
Effect of exchange rate changes on cash (306) (1,139) (9,400)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 157,998 (89,632) 235,484
Cash and cash equivalents, beginning of period 77,486 117,899 --
----------- ----------- -----------
Cash and cash equivalents, end of period $ 235,484 $ 28,267 $ 235,484
=========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
7
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Unaudited interim financial statements:
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 Docuport, Inc. and its subsidiary, a
company in the development stage, (the "Company") as of March 31,
2000, and their results of operations and cash flows for the three
months ended March 31, 2000 and 1999 and the period from February 1,
1992 (date of inception) to March 31, 2000, and changes in
stockholders' deficiency for the three months ended March 31, 2000
and the period from February 1, 1992 (date of inception) to March
31, 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 March 31, 2000, (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 three months ended
March 31, 2000 are not necessarily indicative of the results of
operations for the full year ending December 31, 2000.
As of March 31, 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.
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 and, if appropriate, diluted
earnings (loss) per share in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS 128"). Diluted per share amounts have not been
presented in the accompanying unaudited condensed consolidated
statements of operations because the Company incurred losses in 2000
and 1999, and the assumed effects of the exercise of warrants were
anti-dilutive. Such warrants however, could dilute basic earnings
per share in the future.
8
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3 - Long-term debt:
At March 31, 2000, long-term debt consists of notes payable that
bear interest at 10% and which is due and payable upon the maturity
of the notes as follows:
Note payable, due August 28, 1998 (A) $ 50,000
Notes payable, due August 1, 2000 (B) 525,000
Notes payable, due November 10, 2000 350,000
Notes payable, due February 15, 2001 (C) 850,000
----------
Total $1,775,000
==========
(A) The Company is currently in default and, as a result,
the note is due on demand.
(B) On February 10, 1999, the Company negotiated with the
noteholders for an extension until August 1, 2000, in
which to repay these obligations. In consideration for
the extension, the Company reduced the exercise price of
the existing warrants from $1.67 per share, split
adjusted to $.10 per share, and issued to the
noteholders an additional 157,500 warrants having an
exercise price of $.10 per share. The cost of these
additional warrants is estimated to be $645,350, of
which $111,341 has been expensed for each of the three
month periods ended March 31, 2000 and 1999. The balance
of $88,645 is reflected as unamortized interest cost at
March 31, 2000.
(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 expired on February 15, 2000 (unless extended
by the Company at its sole and absolute discretion) and
is intended to be exempt from registration pursuant to
the provisions of Regulation D of the Securities Act of
1933. The 10% Notes are convertible at any time at the
holder's option, subject to Company approval, at the
rate of $8.00 per share. Interest on the 10% Notes is
payable upon the payment of the principal balance.
However, if the Company intends to pay the full
principal amount plus any accrued interest upon the
closing of any equity or debt financing of at least
$3,000,000, the 10% Notes may be converted earlier at
$6.40 per share. The Company has extended the New
Offering and issued $400,000 of 10% Notes subsequent to
March 31, 2000.
Note 4 - Warrants:
During the three months ended March 31, 2000, warrantholders
exercised 225,000 warrants and purchased 225,000 shares of common
stock at $.10 per share.
9
<PAGE>
DOCUPORT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4 - Warrants (concluded):
At March 31, 2000, the Company had outstanding warrants to purchase
430,000 shares of common stock that are exercisable through August
28, 2002. The following table summarizes the outstanding warrants as
of March 31, 2000:
Exercisable Number
Price Outstanding
----------- -----------
$4.00 10,000
2.00 315,000
1.67 15,000
.10 90,000
--------
430,000
=======
The compensation cost, pro forma loss and net loss per share for
2000 and 1999 using a fair value based method of accounting for the
warrants granted, as required by SFAS 123, would not differ
materially from the corresponding historical amounts.
Note 5 - Income taxes:
As of March 31, 2000, the Company had net operating loss
carryforwards of approximately $4,000,000 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 $1,197,000 from the utilization
of those net operating loss carryforwards by an equivalent valuation
allowance as of March 31, 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 $336,000 and $545,000 during the three months ended March 31,
2000 and 1999, respectively, no credits for income taxes are
included in the accompanying condensed consolidated statements of
operations.
10
<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 and for the three months ended March 31,
2000 and 1999 is shown below:
<TABLE>
<CAPTION>
United
States Canada Consolidated
----------- ----------- ------------
<S> <C> <C> <C>
2000
----
Revenue $ -- $ -- $ --
Expenses, net of interest income 569,981 270,604 840,585
----------- ----------- -----------
Net loss $ (569,981) $ (270,604) $ (840,585)
=========== =========== ===========
Total assets $ 380,066 $ 126,042 $ 506,108
=========== =========== ===========
1999
----
Revenue $ -- $ -- $ --
Expenses, net of interest income 1,239,002 223,238 1,462,240
----------- ----------- -----------
Net loss $(1,239,002) $ (223,238) $(1,462,240)
=========== =========== ===========
Total assets $ 58,113 $ 72,031 $ 130,144
=========== =========== ===========
</TABLE>
* * *
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 235,484
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 353,546
<PP&E> 43,690
<DEPRECIATION> 13,713
<TOTAL-ASSETS> 506,108
<CURRENT-LIABILITIES> 2,344,916
<BONDS> 0
0
0
<COMMON> 6,227
<OTHER-SE> (1,845,035)
<TOTAL-LIABILITY-AND-EQUITY> 506,108
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 696,072
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145,091
<INCOME-PRETAX> (840,585)
<INCOME-TAX> 0
<INCOME-CONTINUING> (840,585)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (840,585)
<EPS-BASIC> (.14)
<EPS-DILUTED> (.14)
</TABLE>
