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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO _______________
COMMISSION FILE NUMBER 0-26941
ENTREPORT CORPORATION
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(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
FLORIDA 65-0703923
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(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2790 BUSINESS PARK DRIVE, SUITE B, SAN DIEGO, CALIFORNIA 92083
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
760-597-4800
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(ISSUER'S TELEPHONE NUMBER)
10455 SORRENTO VALLEY ROAD, SUITE 204, SAN DIEGO, CALIFORNIA 92121
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED
SINCE LAST REPORT)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 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
--- ---
As of August 3, 2000, the Company had 11,581,113 shares of its $.001
par value common stock issued and outstanding.
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EntrePort Corporation
Form 10-QSB Index
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Balance Sheets at June 30, 2000 and December 31, 1999.............2
Condensed Statements of Operations for the
three month periods ended June 30, 2000 and 1999
and for the six month periods ended June 30, 2000 and 1999............3
Condensed Statements of Cash Flows for the
six month periods ended June 30, 2000 and 1999........................4
Notes to Condensed Financial Statements.....................................5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.............8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. ...................................................11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. ...........................11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. .....................................11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. .................11
ITEM 5. OTHER INFORMATION. ...................................................11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. ....................................11
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EntrePort Corporation
Condensed Balance Sheets
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
(UAUDITED) (NOTE)
------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,560,695 $ 1,458,139
Other current assets 69,948 205,397
------------------------------
Total current assets 5,630,643 1,663,536
Investment in Sportsware Technologies, Inc. 399,500 399,500
Property and equipment at cost, net 580,501 97,317
Website development costs, net 460,373 181,381
Other assets 15,012 91,884
------------------------------
$ 7,086,029 $ 2,433,618
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 412,257 $ 194,268
Accrued liabilities 219,698 263,399
Current portion of lease payable 84,245 -
Note payable to officer - 20,000
------------------------------
Total current liabilities 716,200 477,667
Long term portion of lease payable 102,122 -
Stockholders' equity:
Common stock, $.001 par value; 50,000,000 shares authorized,
11,581,113 and 7,834,974 issued and outstanding at
June 30, 2000 and December 31, 1999, respectively 11,581 7,835
Additional paid-in capital 10,184,571 3,845,753
Deferred compensation (86,090) -
Accumulated deficit (3,842,355) (1,897,637)
------------------------------
Total stockholders' equity 6,267,707 1,955,951
------------------------------
$ 7,086,029 $ 2,433,618
==============================
</TABLE>
SEE ACCOMPANYING NOTES.
Note: The Balance Sheet at December 31, 1999 is derived from the audited
financial statements at that date, but does not include all of the disclosures
required by generally accepted accounting principles.
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<TABLE>
EntrePort Corporation
Condensed Statements of Operations
(UNAUDITED)
=============================================================================================================
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 66,909 $ 11,414 $ 72,029 $ 11,414
Costs and expenses:
Cost of revenues 538,736 - 538,736 -
Research and development 99,440 69,928 146,865 69,928
Selling, general and administrative 538,838 233,778 1,440,040 610,595
--------------------------------------------------------------
Total costs and expenses 1,177,014 303,706 2,125,641 680,523
--------------------------------------------------------------
Loss from operations (1,110,105) (292,292) (2,053,612) (669,109)
Interest income 86,739 - 108,894 -
--------------------------------------------------------------
Net loss $ (1,023,366) $ (292,292) $ (1,944,718) $ (669,109)
==============================================================
Net loss per common share
(basic and diluted) $ (0.09) $ (0.05) $ (0.20) $ (0.12)
==============================================================
Weighted average shares used in
computing net loss per common share
(basic and diluted) 11,581,113 6,281,410 9,817,541 5,652,422
==============================================================
SEE ACCOMPANYING NOTES.
</TABLE>
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EntrePort Corporation
Condensed Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
2000 1999
------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,944,718) $ (669,109)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 94,721 -
Issuance of common stock options for services 124,566 -
Issuance of common stock and warrants for services 74,000 335,900
Changes in operating assets and liabilities 301,415 58,426
------------------------------
Net cash flows used in operating activities (1,350,016) (274,783)
INVESTING ACTIVITIES
Purchases of property and equipment (337,795) (102,536)
Investment in Sportsware Technologies, Inc. - -
Increases in website development costs (332,735) -
------------------------------
Net cash flows used in investing activities (670,530) (102,536)
FINANCING ACTIVITIES
Re-payments on notes payable (20,000) -
Issuance of common stock for cash, net 6,143,102 600,400
------------------------------
Net cash flows provided by financing activities 6,123,102 600,400
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Increase in cash and cash equivalents 4,102,556 223,081
Cash and cash equivalents at beginning of period 1,458,139 -
------------------------------
Cash and cash equivalents at end of period $ 5,560,695 $ 223,081
==============================
SUPPLEMENTAL DISCLOSURE OF NON CASH
FINANCING ACTIVITIES
Capital lease obligations $ 186,367 $ -
==============================
</TABLE>
See accompanying notes.
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EntrePort Corporation
Notes to Condensed Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB, and, in the opinion of
management, contain all adjustments, consisting of normal recurring adjustments
necessary to present fairly the financial position as of June 30, 2000 and the
results of operations for the three and six month periods ended June 30, 2000
and 1999.
Certain information and footnote disclosures normally included in financial
statements have been omitted or condensed. These condensed financial statements
should be read in conjunction with the financial information included in the
Company's 1999 Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission. The results of operations for the period ended June 30,
2000 are not necessarily indicative of the results that may be attained for the
entire fiscal year.
During the three months ended June 30, 2000, the Company emerged from the
development stage, as defined in Statement of Financial Standards ("SFAS") No.7.
Certain adjustments recorded in the December 31, 1999 financial statements
relate to the six month period ended June 30, 1999. The Company has restated the
June 30, 1999 results of operations in the accompanying financial statements to
reflect these adjustments.
2. COMPREHENSIVE LOSS
Comprehensive loss for all periods presented is the same as net loss.
3. NET LOSS PER SHARE
The Company computes net loss per share following SFAS No. 128, EARNINGS PER
SHARE. SFAS 128 requires the presentation of basic and diluted income (loss) per
share amounts. Under the provisions of SFAS No. 128, basic net income (loss) per
share is computed by dividing the net income (loss) available to common
shareholders for the period by the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share is computed
by dividing the net income (loss) for the period by the weighted average number
of common and common equivalent shares outstanding during the period. Common
equivalent shares, composed of incremental common shares issuable upon the
exercise of stock options, are included in diluted net income (loss) per share
to the extent these shares are dilutive. Common equivalent shares are not
included in the computation of diluted net loss per share for the three and six
month periods ended June 30, 2000 and 1999 because the effect would be
anti-dilutive.
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4. FINANCING AGREEMENT
The Company entered into an equipment financing lease agreement with
International Business Machines Corporation ("IBM") in May 2000. Principal
amount due at June 30, 2000 is $186,367. The term lease payable is due in
monthly principal and interest payments of $6,928 through May 2003. Borrowings
under the financing agreement are secured by specific equipment, with interest
at a rate of 18.7%.
5. COMMON STOCK
The Company raised approximately $3.0 million as a result of a private placement
offering during the period August 1999 to January 2000, for which the Company
incurred $87,700 in financing costs related to the offering and issued 50,850
shares of common stock to various finders in connection with the private
placement (valued at $101,700). These costs have been charged as a reduction to
additional paid-in-capital. In January 2000, the Company issued 140,000 shares
of common stock at $2.00 to private investors for cash proceeds of $280,000.
In March 2000, the Company sold 3,525,000 shares of common stock at $2.00 per
share to private investors for cash proceeds of $7,050,000. The Company incurred
$1,248,019 in transaction costs related to the offering. In conjunction with the
offering, warrants to purchase 377,500 shares of the Company's common stock at a
price of $2.00 were issued to the placement agent. The warrants are fully
exercisable and expire in March 2005.
In January 2000, the Company issued 5,000 shares of common stock as
consideration for the extension of a note payable. In March 2000, the Company
issued 25,000 shares of common stock to an employee as a recruiting incentive.
The Company has expensed $60,000 related to these two transactions.
6. STOCK OPTION PLAN
During the six month period ended June 30, 2000, the Company granted 844,000
stock options to employees, consultants and a board member with vesting periods
ranging from immediate to three years. The options are for the purchase of
common stock of the Company at prices ranging from $2.00 to $7.00 per share.
During the six month period ended June 30, 2000, the Company recorded
compensation expense of $124,566 related to options outstanding to employees and
consultants. Options to purchase 470,000 shares of common stock of the Company
at prices ranging from $2.00 to $5.00 per share were cancelled during the six
month period ended June 30, 2000.
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7. SALE TO METROSPLASH.COM
In March 2000, the Company sold to Metrosplash.com Inc. its ERT1 website in
exchange for 100,000 restricted common shares of Metrosplash.com. The unlaunched
ERT1 website was targeted to the African American professional. The Company will
record no gain or loss on the transaction as the website had no net book value
at the time of the sale and the value of Metrosplash.com shares is not readily
determinable.
8. LITIGATION
From time to time the Company is involved in legal proceedings, claims and
litigation arising in the ordinary course of business. Management believes,
however, that the ultimate outcome of all pending litigation should not have a
material adverse effect on the Company's financial position or liquidity.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
REVENUES
For the three and six months ended June 30, 2000, revenues were $66,909 and
$72,029 compared to $11,414 and $11,414 for the same periods in fiscal 1999, an
increase of $55,495 or 486% for the three months and $60,615 or 531% for the six
months ended June 30, 2000. The increase for both the three and six month
periods consists of membership revenue as a result of the launch our I
Succeed.com website on April 25, 2000 and sponsorship revenue as a result of
hosting of real estate seminars during the six months ended June 30, 2000.
The Company's ability to increase revenue for the remainder of the fiscal year
is dependent on increasing subscriber membership and increasing the number of
company hosted seminars.
GROSS PROFIT (LOSS)
Gross profit (loss) on revenues was $(471,827) and $(466,707) for the three and
six months ended June 30, 2000 compared to $11,414 and $11,414 for the same
periods in fiscal 1999, a decrease of $483,241 or (4234%) for the three months
and $478,121 or (4189%) for the six months ended June 30, 2000. The decrease in
gross margin was due to significant start-up costs of the Company's I
Succeed.com website incurred during the three and six months ended June 30,
2000. During fiscal 2000, the Company incurred direct costs related to website
hosting, depreciation and amortization, website content and seminar hosting that
did not occur in fiscal 1999.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expenses were $99,440 and $146,865 for the three and
six months ended June 30, 2000 compared to $69,928 and $69,928 for the same
periods in fiscal 1999, an increase of $29,512 or 42% for the three months and
$76,937 or 110% for the six months ended June 30, 2000. The increase in research
and development expense was due to an increased effort to complete the
development of the Company's I Succeed.com website during the second quarter of
fiscal 2000. The Company expects to increase funding for research and
development of the current I Succeed.com website and future websites in future
periods.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expenses were $538,838 and $1,440,040 for
the three and six months ended June 30, 2000 compared to $233,778 and $610,595
for the same periods in fiscal 1999, an increase of $305,060 or 131% for the
three months and $829,445 or 136% for the six months ended June 30, 2000. The
increase in the selling, general and administrative expense was due to build-up
of the selling and general and administrative infrastructure during the six
months ended June 30, 2000 that includes selling, customer support, business
development, accounting, legal, human resources, information technology and
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investor relations support functions. Selling and general and administrative
expenses are expected to decrease as a percentage of revenues in the near-term
due to planned increases in revenues.
INTEREST INCOME
Net interest income was $86,739 and $108,894, or 130% and 151% of revenues,
respectively, for the three and six months ended June 30, 2000 compared to no
interest income or expense for the same periods in fiscal 1999. The increase for
the three and six month periods was due primarily to increased investment of
proceeds from the two private placements of the Company's common stock that
occurred during the period from December 1999 through March 2000.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our activities to date primarily through the sale of debt and
equity securities. From March through May 1999, we conducted the private
placement sale of convertible notes payable for gross proceeds of $695,000. The
notes bore interest on the principal amount at a rate of six percent (6%) per
annum. The principal amount of the notes was convertible into shares of common
stock at rates of $2.00 to $3.00 per share. In June 1999, all $695,000 in
principal was converted into a total of 267,500 shares of common stock. In
August 1999, the Company sold 99,710 shares of common stock for $199,420 in a
private placement. Additionally, during the period August 1999 to January 2000,
we conducted the private placement sale of 1,424,430 shares of common stock at
$2.00 per share for gross proceeds of $2,848,860. During February and March
2000, we completed our private placement managed by Roth Capital Partners Inc.
and sold 3,525,000 shares of common stock at $2.00 per share for net proceeds
amounting to $5,801,981.
As of June 30, 2000, we had working capital of $4,914,443. Our plan of
operations over the next six months includes the upgrade and enhancement of our
initial Web portal devoted to real estate and the development of other industry
specific Web portals. We believe that our current cash balance will be
sufficient to fund the current plan of operations for at least the remainder of
the current year.
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FORWARD LOOKING STATEMENTS
This report contains forward-looking statements that are based on our beliefs as
well as assumptions made by and information currently available to us. When used
in this filing, the words "believe," "endeavor," "expect," "anticipate,"
"estimate," "intends," and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks,
uncertainties and assumptions, including, without limitation, the Company's
development stage status and lack of commercial operations or revenues; the
Company's present financial condition and the risks and the availability of
additional capital as and when required; the risks and uncertainties concerning
technological changes; increased competition; and general economic conditions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated, or projected. We caution potential investors not
to place undue reliance on any such forward-looking statements, all of which
speak only as of the date made.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any material litigation.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended June 30, 2000, the Company sold and issued the
following unregistered securities:
STOCK OPTIONS
During the three month period ended June 30, 2000, the Company granted options
to employees, consultants and a board member to purchase an aggregate of 393,000
shares of common stock with vesting periods ranging, from two to three years and
with exercise prices ranging from $2.00 to $7.00 per share. Options to purchase
45,000 shares of common stock at prices ranging from $2.00 to $5.00 per share
were cancelled during April 2000. No consideration was paid to the Company by
any recipient of any of the foregoing options for the grant of any such options.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Inapplicable.
ITEM 5. OTHER INFORMATION.
Inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
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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.
EntrePort Corporation
(Registrant)
Dated: August 3, 2000 By: /s/ William A. Shue
---------------------------------
William A. Shue,
Chief Executive Officer
Dated: August 3, 2000 By: /s/ Ronald D. Suokko
---------------------------------
Ronald D. Suokko,
Chief Accounting Officer
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