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 June 30, 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 August 14, 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>
June 30, December 31,
2000 1999
---------------- ----------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 448,328 $ 658,629
Restricted cash held in escrow 251,147 -
Prepaid and other assets 219,528 86,121
---------------- ----------------
Total current assets 919,003 744,750
Property and equipment, net 136,952 82,023
---------------- ----------------
Total assets $ 1,055,955 $ 826,773
================ ================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 383,171 $ 174,417
Accrued expenses 53,740 87,353
Other payables 250,000 -
Current portion of long-term obligations 17,853 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 1,454,764 1,017,187
---------------- ----------------
Long-term obligations, less current portion 27,279 35,949
Minority interest 335,014 -
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 279,750 166,000
Deficit accumulated during the development stage (1,266,552) (617,363)
---------------- ----------------
Total stockholders' deficiency (761,102) (226,363)
---------------- ----------------
Total liabilities and stockholders' deficiency $ 1,055,955 $ 826,773
================ ================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- 2 -
<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 Six Months Ended (Date Of Inception)
June 30, June 30, Through June 30,
2000 2000 2000
------------------------ ----------------------- ----------------------
<S> <C> <C> <C>
Operating expenses:
Sales and marketing $ 60,798 $ 130,327 $ 165,469
General and administrative 283,171 633,045 1,225,573
Depreciation and amortization 12,065 17,794 22,088
------------------------ ----------------------- ----------------------
Total operating expenses 356,034 781,166 1,413,130
------------------------ ----------------------- ----------------------
Other (income) expense:
Interest income (6,791) (14,195) (30,821)
Other income (7,550) (8,920) (9,820)
Interest expense 2,780 6,319 9,243
------------------------ ----------------------- ----------------------
Total other income (11,561) (16,796) (31,398)
------------------------ ----------------------- ----------------------
Loss attributable to minority interest (115,677) (115,180) (115,180)
------------------------ ----------------------- ----------------------
Net loss $ (228,796) $ (649,190) $ (1,266,552)
======================== ======================= ======================
Basic and diluted net loss per share $ (0.01) $ (0.03) $ (0.06)
======================== ======================= ======================
Basic and diluted weighted average number of
common shares outstanding 22,570,000 22,535,000 22,515,350
======================== ======================= ======================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- 3 -
<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
Six Months Ended (Date Of Inception)
June 30, Through June 30,
2000 2000
-------------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (649,190) $ (1,266,552)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 17,794 22,088
Minority interest 335,014 335,014
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 (133,407) (193,708)
Increase in accounts payable 208,754 383,171
Increase (decrease) in accrued expenses (33,613) 53,740
-------------------- ------------------
Net cash used in operating activities (139,698) (385,297)
-------------------- ------------------
Cash flows from investing activities -
Purchases of property and equipment (73,222) (106,419)
-------------------- ------------------
Cash flows from financing activities:
Repayment of long-term obligations (16,234) (33,809)
Repayment of obligation to potential stockholder (25,000) -
Payment for common stock rescinded (35,000) -
Refund due to stockholder - -
Proceeds from issuance of other payables 250,000 250,000
Restricted cash held in escrow for payment of
other payables (251,147) (251,147)
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 2,619 940,044
-------------------- ------------------
Net increase in cash and cash equivalents (210,301) 448,328
Cash and cash equivalents, beginning of period 658,629 -
-------------------- ------------------
Cash and cash equivalents, end of period $ 448,328 $ 448,328
==================== ==================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 4,312 $ 6,824
==================== ==================
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 rece$vable 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.
- 4 -
<PAGE>
DOCTORSURF.COM, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
Notes To Condensed Consolidated Financial Statements (Unaudited)
For the Three Months and Six Months Ended June 30, 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, to engage in the business of development and marketing of
an emergency medical card. During the six months ended June 30, 2000, 2,000,000
shares of common stock, $.001 par value, of Emc911 were issued to the Company
upon the incorporation of Emc911 and 2,000,000 shares of common stock were sold
to investors at $.25 per share for gross proceeds of $500,000. As of June 30,
2000, there were 4,000,000 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 and six
month periods ended June 30, 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 enterprise, 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 six month period
ended June 30, 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 D) raises
substantial doubt about its ability to continue as a going concern.
NOTE B-RESTRICTED CASH HELD IN ESCROW
On April 24, 2000, the Company issued a Confidential Private Placement
Memorandum for the sale of up to 4,000,000 shares of its series A convertible
preferred stock at $2.50 per share, with minimum
- 5 -
<PAGE>
proceeds of $500,000. In May and June 2000, a total of $250,000 was received
from investors and was deposited into escrow with First Community Bank of
America in St. Petersburg, Florida. Due to market conditions, the Company
withdrew the offering under the private placement and subsequently returned all
of the money collected in escrow.
NOTE C-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.
The Company has a gross deferred tax asset as of June 30, 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 D-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 June 30, 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. As of the
date of this Report, seven additional investors with a total of 95,000 shares
had opted to rescind for a total amount of $95,000. The Company is not in a
position to pay cash to these investors and is therefore issuing promissory
notes bearing interest at 8% per year.
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 $350. 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.
- 6 -
<PAGE>
NOTE E-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"). However, because the Company is located in
Florida, the Florida blue sky laws require the Company to register as an
issuer/dealer with the Florida Division of Securities before it offers
securities to residents of Florida or any other state. Upon approval from the
Florida Division of Securities, the Company will be allowed to issue the
25,000,000 shares of common stock registered pursuant to the Form SB-2 in the
states of Florida, California, Louisiana, and Georgia. The Company intends to
apply for approval under the securities laws of the states not listed above.
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.
NOTE F-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. 4.
- 7 -
<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 June 30, 2000. In order to
fund its operations through June 30, 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 prior to 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 $60,798 and $130,327 for the three months and six months ended June 30,
2000, respectively.
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 $283,171 and $633,045 for the three
months and six months ended June 30, 2000, respectively.
Interest income (expense), net. Interest income, net of interest
expense was $4,011 and $7,876 for the three months and six months ended June 30,
2000, respectively.
Income taxes. The Company has no income tax provision for the periods
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 and six months ended June 30, 2000.
- 8 -
<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
$535,761 at June 30, 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 used in operating activities was $139,698 for the six months
ended June 30, 2000. The usage of cash attributable to the net operating loss as
well as an increase in an increase in prepaid and other assets of $133,407, a
decrease in accrued expenses of $33,613, partially offset by an increase in
minority interest $335,014, an increase in contributed services $44,950, an
increase in issuance of common stock for services of $70,000 and an increase in
accounts payable of $208,754. During the six months ended June 30, 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 $73,222 during the six months
ended June 30, 2000, representing the purchase of property and equipment.
Net cash provided by financing activities was $2,619 during the six
months ended June 30, 2000, representing proceeds from issuance of other
payables of $250,000, 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 $16,234, repayment of
obligation to potential stockholder of $25,000, payment for common stock
rescinded of $35,000 and restricted cash held in escrow for payment of other
payables of $251,147.
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 14, 1999 and will expire on August 25, 2000. As of
June 30, 2000, 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. As of the date of this Report, seven additional
investors with a total of 95,000 shares had opted to rescind for a total amount
of $95,000. The Company is not in a position to pay cash to these investors and
is therefore issuing promissory notes to these investors bearing interest at 8%
per year.
- 9 -
<PAGE>
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 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 $350. 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.
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.
The Company does not expect cash flows from operations to be sufficient
in the next twelve months. The Company is presently being funded through
borrowings from several of its shareholders and is in the process of discussions
with financial institutions for additional borrowings. The Company is also
considering raising capital either through a private placement or an initial
public offering. There can be no assurance that additional borrowings and/or
such capital would be raised in sufficient amounts to meet the Company's
financial needs in the next twelve months. Currently, if the shareholders
discontinue their funding, the Company may have to cease operations.
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.
- 10 -
<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 (the "SEC"). However, because the Company is located in
Florida, the Florida blue sky laws require the Company to register as an
issuer/dealer with the Florida Division of Securities before it offers
securities to residents of Florida or any other state. Upon approval from the
Florida Division of Securities, the Company will be allowed to issue the
25,000,000 shares of common stock registered pursuant to the Form SB-2 in the
states of Florida, California, Louisiana, and Georgia. The Company intends to
apply for approval under the blue sky laws of the states not listed above.
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. 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. (2)
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.
- 11 -
<PAGE>
(2) Incorporated by reference to the Company's Quarterly Report on
Form 10-QSB for the quarter ended March 31, 2000.
(b) Reports on Form 8-K.
During the three months ended June 30, 2000, the Company filed no
reports on Form 8-K.
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: August 16, 2000 By: /s/George L. Stuart, Jr.
-------------------------
George L. Stuart, Jr.
Chief Executive Officer,
and Director
- 12-
