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 quarter Ended March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-28097
DOCTORSURF.COM, INC.
(Exact name of small business issuer as specified in its charter)
STATE OF FLORIDA 59-3569844
---------------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6925 112th Circle North, Suite 101, Largo, Florida 33773
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (727) 546-6476
Indicate by check mark whether the issuer (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. [X] Yes [ ] No
The number of shares outstanding of the Issuer's common stock at $.01 par value
as of May 12, 2000 was 22,570,000.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS.
<TABLE>
DOCTORSURF.COM, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 745,181 $ 658,629
Prepaid and other assets 171,190 86,121
------------- -------------
Total current assets 916,371 744,750
Property and equipment, net 123,097 82,023
------------- -------------
Total assets $ 1,039,468 $ 826,773
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses $ 385,018 $ 261,770
Current portion of long-term obligations 18,800 25,417
Common stock subject to rescission offer - $.01 par value,
750,000 shares issued and outstanding 750,000 750,000
Subscription receivable - (45,000)
Obligation to potential stockholder - 25,000
------------- -------------
Total current liabilities 1,153,818 1,017,187
------------- -------------
Long-term obligations, less current portion 31,710 35,949
Minority interest 385,747 -
Commitments and contingencies
Stockholders' deficiency:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
no preferred shares issued or outstanding - -
Common stock, $.01 par value; 95,000,000 shares authorized;
22,570,000 and 22,500,000 shares issued and outstanding 225,700 225,000
Additional paid-in capital 280,250 166,000
Deficit accumulated during the development stage (1,037,757) (617,363)
------------- -------------
Total stockholders' deficiency (531,807) (226,363)
------------- -------------
Total liabilities and stockholders' deficiency $ 1,039,468 $ 826,773
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
<TABLE>
DOCTORSURF.COM, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<CAPTION>
For The Period
From May 14, 1999
Three Months Ended (Date Of Inception)
March 31, Through March 31,
2000 2000
------------------ ------------------
<S> <C> <C>
Operating expenses:
Sales and marketing $ 69,529 $ 104,671
General and administrative 349,874 942,403
Depreciation and amortization 5,729 10,023
------------------ ------------------
Total operating expenses 425,132 1,057,097
------------------ ------------------
Other (income) expense:
Interest income (7,404) (24,030)
Other income (1,370) (2,270)
Interest expense 3,539 6,463
------------------ ------------------
Total other income (5,235) (19,837)
------------------ ------------------
Income attributable to minority interest 497 497
------------------ ------------------
Net loss $ (420,394) $ (1,037,757)
================== ==================
Basic and diluted net loss per share $ (0.02) $ (0.05)
================== ==================
Basic and diluted weighted average number of
common shares outstanding 22,500,000 22,500,000
================== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
DOCTORSURF.COM, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<CAPTION>
For The Period
From May 14, 1999
Three Months Ended (Date Of Inception)
March 31, Through March 31,
2000 2000
------------------ -------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (420,394) $ (1,037,757)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 5,729 10,023
Minority interest 385,747 385,747
Contributed services 44,950 210,950
Issuance of common stock for services 70,000 70,000
Changes in operating assets and liabilities:
Increase in prepaid and other assets (85,069) (145,370)
Increase in accounts payable and accrued expenses 123,248 385,018
------------------ -------------------
Net cash provided by (used in) operating activities 124,211 (121,389)
------------------ -------------------
Cash flows from investing activities -
Purchases of property and equipment (46,803) (79,999)
------------------ -------------------
Cash flows from financing activities:
Repayment of long-term obligations (10,856) (28,431)
Repayment of obligation to potential stockholder (25,000) -
Payment for common stock rescinded (35,000) -
Refund due to stockholder - -
Proceeds from issuance of common stock - 225,000
Proceeds from issuance of common stock subject to rescission offer 70,000 750,000
Proceeds from subscription receivable 10,000 -
------------------ -------------------
Net cash provided by financing activities 9,144 946,569
------------------ -------------------
Net increase in cash and cash equivalents 86,552 745,181
Cash and cash equivalents, beginning of period 658,629 -
------------------ -------------------
Cash and cash equivalents, end of period $ 745,181 $ 745,181
================== ===================
Supplemental disclosures of cash flow information:
================== ===================
Cash paid during the period for interest $ 3,539 $ 6,052
Cash paid during the period for income taxes $ - $ -
================== ===================
Supplemental disclosures of noncash investing and financing activities:
Issuance of common stock for subscription receivable $ - $ 45,000
================== ===================
Cancellation of common stock issued for subscription receivable $ 35,000 $ 35,000
================== ===================
Long-term obligation for capital lease incurred for
purchase of property and equipment $ - $ 53,121
================== ===================
Short-term obligation incurred for prepaid insurance policy $ - $ 25,820
================== ===================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
DOCTORSURF.COM, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
Notes To Condensed Consolidated Financial Statements (Unaudited)
For The Three Months Ended March 31, 2000
NOTE A-BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include
the accounts of DoctorSurf.com, Inc. and its subsidiary Emc911.com, Inc.
(collectively the "Company"). All intercompany balances and transactions have
been eliminated.
On January 27, 2000, the Company formed Emc911.com, Inc. ("Emc911"), as
a Florida corporation, as a subsidiary of the Company, to engage in the business
of development and marketing of an emergency medical card. During the three
months ended March 31, 2000, 1,541,000 shares of common stock, $.001 par value,
of Emc911 were sold to investors at $.25 per share, for gross proceeds of
$385,250. As of March 31, 2000, there were 3,541,000 shares of common stock of
Emc911 issued and outstanding, of which the Company owned 2,000,000 shares.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instruction to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. For further information, refer
to the financial statements and footnotes included in the Company's Form 10-KSB
for the period from May 14, 1999 (date of inception) to December 31, 1999.
The accompanying condensed consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
reflected in the consolidated financial statements, the Company is a development
stage enterpirse, which has yet to generate revenues to support further
operations. Certain shareholders of the Company have contributed their personal
services to the Company. The value of these services for the three month period
ended March 31, 2000 has been estimated to be $44,950 and has been recorded as
compensation expense in the accompanying condensed consolidated statement of
operations. In order to fund operations to date, the Company has relied on
funding raised from sales of the Company's equity securities. The Company has
incurred operating losses since inception and the contingency surrounding equity
shares issued as part of the Private Placement Memorandum (see Note C) raises
substantial doubt about its ability to continue as a going concern.
NOTE B-INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards No.
109 ("SFAS 109"), Accounting for Income Taxes. Under SFAS 109, the Company uses
the asset and liability method which recognizes the amount of current and
deferred taxes payable or refundable at the date of the financial statements as
a result of all events that have been recognized in the financial statements and
as measured by the provisions of enacted tax laws.
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<PAGE>
The Company has a gross deferred tax asset as of March 31, 2000 that is
comprised of the potential future tax benefit of its operating losses to date.
Management has evaluated the available evidence regarding the future taxable
income and other possible sources of realization of deferred tax assets. A 100
percent valuation allowance has been established by management against the gross
deferred tax asset as it is more likely than not that the deferred tax asset
will not be realized.
NOTE C-COMMITMENTS
Pursuant to a Private Placement Memorandum dated June 1999 (the
"Placement"), the Company offered 750,000 shares of the Company's common stock
for $1 per share. As of March 31, 2000, all of the 750,000 shares offered had
been sold. Due to a possible violation of the Securities Act of 1933
requirements, the Company has issued a memorandum to the purchasers of the
shares enabling them to sell their shares back to the Company at any time
through August 25, 2000 for the original issuance price of $1. As such, the
proceeds from the issuance of the 750,000 shares of common stock have been
classified outside of equity in the accompanying condensed consolidated balance
sheet under the caption Common Stock Subject to Rescission Offer. During January
2000, two investors who had requested refunds for shares purchased in
conjunction with the Placement were paid $35,000 for their 35,000 shares. These
shares were subsequently reissued to new investors for $1 per share.
The Company leases approximately 1,800 square feet of office space for
its executive offices and its operations in Largo, Florida. The facility is
located at 6925 112th Circle North, Suite 101, Largo, Florida, 33773. The lease
expires on August 31, 2000 and is renewable at the option of the Company for an
additional one-year term. The monthly lease payments are $1,200, plus applicable
sales tax. In January 2000, the Company entered into a lease addendum agreeing
to lease an additional 1,100 square feet. The additional monthly rental payment
is $4,400. In addition, the commencement date of the original lease was changed
to February 1, 2000. This new lease is renewable at the option of the Company
for an additional two-year term.
NOTE D-SIGNIFICANT EVENTS
On March 7, 2000, the Company's registration statement on Form SB-2
Post-Effective Amendment No. 2 was declared effective by the Securities and
Exchange Commission (the "SEC") in select states. The 25,000,000 shares of
common stock registered thereunder are approved for issuance in the states of
California, Louisiana, and Georgia. Approval for issuance in additional states
is pending from the SEC. Pursuant to the Company's marketing plan, these
registered shares will be issued at no cost to doctors who become secured
members on the Company's web site. The fair market value of these shares will be
charged to operations as promotion costs at the time of their issuance.
On April 24, 2000, the Company issued a Confidential Private Placement
Memorandum for the sale of up to 4,000,000 shares of Series A Preferred Stock at
$2.50 per share. As of May 15, 2000, no shares under the Private Placement
Memorandum had been offered to investors.
NOTE E-EARNINGS (LOSS) PER SHARE
Basic and diluted net loss per common share is computed by dividing
loss available to common stockholders by the weighted-average number of common
shares outstanding during the period.
- 6 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Overview
The Company was formed to provide a premier Internet web site for
physicians and dentists (collectively "doctors") that will be dedicated to
doctor education, that will provide communication and information exchange using
state of the art technology and security, doctor authentication and a
combination of Internet protocols. Since its incorporation, the Company
primarily has focused on organizing activities and the development of its web
site.
The Company is a development stage company and has not generated any
revenue since its inception on May 14, 1999 through March 31, 2000. In order to
fund its operations through March 31, 2000, the Company has relied on funding
raised from sales of the Company's equity securities.
The Company develops, designs, programs and hosts an Internet web site
for doctors. The Company's web site address is www.DoctorSurf.com. The Company
web site became fully operational during the three months ended March 31, 2000.
Operating expenses include sales and marketing costs, general and
administrative costs and depreciation and amortization expense. Other income
(expense) consists primarily of interest income associated with cash maintained
in a money market fund and interest expense associated with borrowings to
finance capital equipment expenditures and other working capital needs.
Results of Operations
Sales and marketing expenses. Sales and marketing expenses consist
primarily of advertising and promotional expenses. Sales and marketing expenses
were $69,529 for the three months ended March 31, 2000.
General and administrative expenses. General and administrative
expenses consist primarily of personnel costs related to general management
functions, finance, accounting, payroll expenses and professional fees related
to legal, audit and tax matters, and web site hosting and update expenses.
General and administrative expenses were $349,874 for the three months ended
March 31, 2000.
Interest income (expense), net. Interest income, net of interest
expense was $3,865 for the three months ended March 31, 2000.
Income taxes. The Company has no income tax provision for the period
presented due to its net operating loss. The net operating loss may be carried
forward for up to 20 years. As such, the Company does not anticipate any
liability for income taxes for the fiscal year ended December 31, 2000. See Note
B to the condensed consolidated financial statements.
Management believes that there was no material effect on operations or
the financial condition of the Company as a result of inflation in the three
months ended March 31, 2000.
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<PAGE>
Liquidity and Capital Resources
The Company has financed its operations through the sale of equity
securities issued by the Company. The Company had a working capital deficit of
$237,447 at March 31, 2000. The Company estimates that it will need additional
funds for on-going web site development, marketing, promotions, and for general
working capital purposes over the next 12 months.
Net cash provided by operating activities was $124,211 during for the
three months ended March 31, 2000. Cash provided was attributable to the net
operating loss as well as an increase in minority interest $385,747, an increase
in contributed services $44,950, an increase in issuance of common stock for
services of $70,000, an increase in accounts payable and accrued expenses
$123,248, partially offset by an increase in prepaid and other assets of
$85,069. During the three months ended March 31, 2000 the Company was in its
development stage and did not generate any revenues. During 2000, management
expects that the Company will generate revenues through advertising and
sponsorships, and fees and commissions on transactions and sales occurring
through its web site, which will have future positive cash effects in its
operating activities.
Net cash used in investing activities was $46,803 during the three
months ended March 31, 2000, representing the purchase of property and
equipment.
Net cash provided by financing activities was $9,144 during the three
months ended March 31, 2000, representing proceeds from issuance of common stock
subject to a rescission offer of $70,000, proceeds from a subscription
receivable of $10,000, partially offset by repayments of long-term obligations
of $10,856, repayment of obligation to potential stockholder of $25,000 and
payment of common stock rescinded of $35,000.
From June through August 1999, 750,000 shares of common stock of the
Company were sold to accredited investors at $1.00 per share, for gross proceeds
of $750,000. Proceeds were used for general working capital purposes. The shares
were sold to a limited number of investors in a private placement that was not
registered under the federal securities laws. For federal securities law
purposes, however, the private placement and the free share offering may be
considered a single offering. If considered a single offering, the exemption
from registration that the Company relied on in making the private placement
would not be available and the private placement would not be exempt from
registration under the federal securities laws. Because of that possibility, the
Company has offered to each investor in the private placement the right to
resell their shares to the Company and receive a refund of the price paid by
them of $1 per share.
The private placement investors' right to sell their shares to the
Company began on August 25, 1999 and will expire on August 25, 2000. To date,
two investors accepted the Company's offer to resell their shares and received a
refund of the purchase price. If all purchasers in the private placement accept
the Company's offer, the Company could have a potential liability of $750,000.
If this were to occur, the Company cannot be certain that the Company would have
sufficient funds to repurchase the shares that were sold in the private
placement.
The Company's condensed consolidated financial statements have been
prepared assuming that it will continue as a going concern. The Company's losses
from operations since its inception and its $750,000 potential liability
associated with its private placement raise substantial doubt as to its ability
to continue as a going concern. If all of the Company's private placement
investors accept the offer to
- 8 -
<PAGE>
resell their shares, the Company may have to obtain financing for the monies to
be refunded to the private placement investors. Even if no other private
placement investors request a refund on their purchase price, the Company may
need to raise additional capital to fund operations.
The Company leases approximately 1,800 square feet of office space for
its executive offices and its operations in Largo, Florida. The facility is
located at 6925 112th Circle North, Suite 101, Largo, Florida, 33773. The lease
expires on August 31, 2000 and is renewable at the option of the Company for an
additional one-year term. The monthly lease payments are $1,200, plus applicable
sales tax. On January 20, 2000, the Company entered into a lease addendum
agreeing to lease an additional 1,100 square feet. The additional monthly rental
payment is $4,400. In addition, the commencement date of the original lease was
changed to February 1, 2000. This new lease is renewable at the option of the
Company for an additional two-year term.
On January 27, 2000, the Company formed Emc911.com, Inc. ("Emc911"), as
a Florida corporation, as a subsidiary of the Company, to engage in the business
of development and marketing of an emergency medical card. During the three
months ended March 31, 2000, 1,541,000 shares of common stock, $.001 par value,
of Emc911 were sold to investors at $.25 per share, for gross proceeds of
$385,250. As of March 31, 2000, there were 3,541,000 shares of common stock of
Emc911 issued and outstanding, of which the Company owned 2,000,000 shares.
Management believes that cash expected to be generated from operations,
current cash reserves, and existing financial arrangements will not be
sufficient for the Company to meet its capital expenditures and working capital
needs for its operations as presently conducted. The Company's future liquidity
and cash requirements will depend on a wide range of factors, including expected
results from operations as revenues are generated. In particular, as the Company
does not expect cash flows from operations to be sufficient in the next twelve
months, the Company is considering raising capital either through a private
placement or an initial public offering. There can be no assurance that such
capital would be raised in sufficient amounts to meet the Company's financial
need in the next twelve months.
Year 2000 Statement
The Company has not incurred any problems as a result of Year 2000
readiness. However, no assurances can be given that the Company's Year 2000
efforts are appropriate, adequate, or complete. In addition, the Company is
unable to fully determine the effect of a failure of its own systems or those of
any third party with whom it conducts business, but any significant failures
could have a material adverse affect on the Company's financial condition,
results of operations and cash flows.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
From time to time, the Company may become involved in litigation
arising in the ordinary course of its business. The Company is not presently
subject to any material legal proceedings.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
Item 3. - Not applicable.
Item 4. - Not applicable.
Item 5. OTHER INFORMATION.
On March 7, 2000, the Company's registration statement on Form SB-2
Post-Effective Amendment No. 2 was declared effective by the Securities and
Exchange Commission in certain states. The 25,000,000 shares of common stock
registered thereunder are approved for issuance in the states of California,
Georgia and Louisiana. Approval for issuance in additional states is pending.
Pursuant to the Company's marketing plan, these registered shares will be issued
at no cost to doctors who become members of the Company's web site. Doctors may
become members and participate fully in the web site even if they do not wish to
receive shares in the free stock offering.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
The following exhibits are filed with this report:
10.1 Lease Addendum between Pinellas Center For The Visually Impaired, Inc.
and DoctorSurf.com, Inc. dated January 20, 2000.(1)
23.1 List of Subsidiaries.
27.1 Financial Data Schedule (for SEC use only).
- -------
(1) Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999.
(b) Reports on Form 8-K.
None.
- 10 -
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DoctorSurf.com, Inc.
Date: May 15, 2000 By: /s/George L. Stuart, Jr.
--------------------------------------
George L. Stuart, Jr.
Chief Executive Officer,
and Director
- 11 -
EXHIBIT 23.1
LIST OF SUBSIDIARIES
Emc911.com, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 745,181
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 916,371
<PP&E> 128,826
<DEPRECIATION> 5,729
<TOTAL-ASSETS> 1,039,468
<CURRENT-LIABILITIES> 1,153,818
<BONDS> 0
0
0
<COMMON> 225,700
<OTHER-SE> (757,507)
<TOTAL-LIABILITY-AND-EQUITY>(531,807)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,539
<INCOME-PRETAX> (420,394)
<INCOME-TAX> 0
<INCOME-CONTINUING> (420,394)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (420,394)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
