SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER: 0-9065
DocPlanet.com, Inc.
(Exact Name Of Small Business Issuer as Specified in Its Charter)
COLORADO 84-0645174
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3000 W. WARNER AVENUE, SANTA ANA, CALIFORNIA 92704-5311
(Address of principal executive office)(Zip Code)
(714) 754-5800
Issuer's telephone number, including area code
docsales.com, inc.
(FORMER NAME IF CHANGED SINCE THE LAST REPORT)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 [ ]
The number of shares of common stock outstanding as of January 19, 2000, was
4,504,595.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PART I
FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DOCPLANET.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
------
NOVEMBER 30, AUGUST 31,
1999 1999
------------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 105,756 $ 57,073
Trade receivables, net of allowance for doubtful accounts of
$218,235 and $220,384 at November 30, 1999 and August 31, 1999 1,141,737 1,131,242
Notes receivable 21,094 25,680
Inventories 630,814 514,027
Prepaid expenses and other 148,090 66,271
------------- -----------
TOTAL CURRENT ASSETS 2,047,491 1,794,293
NOTES RECEIVABLE, less current maturities 70,562 85,902
PROPERTY, PLANT AND EQUIPMENT - AT COST 3,615,249 3,271,485
Less accumulated depreciation and amortization 1,366,563 1,228,405
------------- -----------
TOTAL PROPERTY, PLANT & EQUIPMENT 2,248,686 2,043,080
------------- -----------
TOTAL LONG-TERM ASSETS 2,319,248 2,128,982
OTHER ASSETS
Intangibles- net of accumulated amortization of $2,973
and $2,900 at November 30, 1999 and August 31, 1999 9,027 9,600
Non-compete agreement 26,218 34,528
------------- -----------
TOTAL OTHER ASSETS 35,245 44,128
------------- -----------
TOTAL ASSETS $ 4,401,984 $ 3,967,403
============= ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
DOCPLANET.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) - continued
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
NOVEMBER 30, AUGUST 31,
1999 1999
-------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 2,153,798 $ 1,041,924
Notes payable - related parties 600,000 500,000
Current maturities of long-term debt 50,000 50,000
Current maturities of capitalized lease obligations 308,721 312,956
Accounts payable 1,998,574 1,767,676
Accrued liabilities
Salaries, wages and other compensation 114,043 101,254
Interest 902,851 845,393
Other 537,043 662,721
Deferred revenue - 27,780
-------------- -------------
TOTAL CURRENT LIABILITIES 6,665,030 5,309,704
LONG-TERM OBLIGATIONS, related parties 5,769,985 5,819,985
CAPITALIZED LEASE OBLIGATIONS, less current maturities 192,601 131,272
CONTINGENCIES AND COMMITMENTS - -
MINORITY INTEREST 1,000,000 1,000,000
-------------- -------------
TOTAL LIABILITIES 13,627,616 12,260,961
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock - no par value; 200,000,000 shares authorized;
4,607,376 issued and 4,504,595 outstanding at November 30, 1999
and August 31, 1999, respectively. 26,663,119 24,989,858
Preferred stock - no par value; 10,000,000 shares authorized
Class A 15%/ 30% cumulative convertible, 29,653 shares issued and
outstanding at November 30, 1999 and August 31, 1999, respectively. 292,558 292,558
-------------- -------------
26,955,677 25,282,416
Accumulated deficit (36,087,177) (33,481,842)
-------------- -------------
(9,131,500) (8,199,426)
Less common stock in treasury at cost, 102,781 shares at
November 30, 1999 and August 31, 1999, respectively 94,132 94,132
-------------- -------------
TOTAL STOCKHOLDERS' DEFICIT (9,225,632) (8,293,558)
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT) $ 4,401,984 $ 3,967,403
============== =============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
DOCPLANET.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30,
----------------------------------
1999 1998
------------ --------------------
<S> <C> <C>
NET SALES $ 1,800,369 $ 2,012,835
COST OF SALES 1,371,535 1,597,175
------------ --------------------
GROSS MARGIN 428,834 415,660
Selling, general and administrative expense 2,556,843 1,273,385
------------ --------------------
OPERATING LOSS (2,128,009) (857,725)
OTHER INCOME/ (EXPENSE)
Interest expense (517,141) (225,770)
Joint venture loss - (13,971)
Settlement of accounts payable and other liabilities - 184,570
Other income 39,815 1,416
------------ --------------------
TOTAL OTHER INCOME (EXPENSE) (477,326) (53,755)
------------ --------------------
LOSS BEFORE INCOME TAX EXPENSE (2,605,335) (911,480)
------------ --------------------
INCOME TAX EXPENSE (BENEFIT) - (2,642)
------------ --------------------
NET LOSS (2,605,335) (908,838)
BASIC AND DILUTED LOSS PER SHARE $ (.60) $ (.23)
============ ====================
WEIGHTED AVERAGE SHARES OUTSTANDING 4,336,495 3,911,340
============ ====================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
DOCPLANET.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
NOVEMBER 30,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss $(2,605,335) $ (908,838)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 147,041 89,744
Issuance of options expense 282,850 -
Stock Grants 956,250 -
Issuance of stock for service 249,212 -
Settlement of accounts payable and other liabilities - (184,570)
Joint venture loss - 13,971
Changes in assets and liabilities net of effects of acquisition and joint venture:
(Increase) decrease in accounts receivable (10,495) (21,827)
(Increase) decrease in inventories (116,787) 73,789
Increase of non-compete receivable - (250,000)
(Increase) decrease in prepaid expenses and other (61,893) 23,170
Increase (decrease) in accounts payable 230,898 312,283
Decrease in income taxes payable - -
Increase in deferred revenue - non-compete agreement - 250,000
Increase in accrued liabilities (83,211) 162,460
------------ ------------
TOTAL ADJUSTMENTS 1,593,865 469,020
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (1,011,470) (439,818)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment (343,764) (21,816)
Increase investment in joint venture - -
Decrease in notes receivable - -
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (343,764) (21,816)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under notes payable - related parties 380,000 294,600
Payments under Notes payable - related parties (180,000) -
Borrowings under Notes Payable - unrelated parties 569,475 -
Issuance of Capital Stock 184,949 -
Borrowings under capitalized lease and other long-term obligations 63,424 21,816
Payments on capitalized lease and other long term obligations (6,330) (62,924)
Borrowings on line of credit 392,399 2,295,637
Payments on line of credit - (2,117,552)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,403,917 431,577
------------ ------------
NET INCREASE (DECREASE) IN CASH 48,683 (30,057)
CASH, BEGINNING OF YEAR 57,073 61,860
CASH, END OF QUARTER 105,756 $ 31,803
SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES:
Interest paid $ 115,000 $ 90,600
============ ============
Income taxes paid (received) - $ (2,642)
============ ============
Purchase of equipment under Capital Leases $ 34,961 -
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
DOCPLANET.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
The accompanying unaudited financial statements of DocPlanet.com, Inc., formerly
known as docsales.com, inc., and Golden Pharmaceuticals, Inc., have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
annual financial statements.
The accompanying unaudited financial statements and disclosures reflect all
adjustments, which, in the opinion of the management, are necessary for a fair
presentation of the results of operations, financial position, and cash flow of
the Company. The results of operations for the periods indicated are not
necessarily indicative of the results for the full year.
The financial statements should be read in conjunction with the audited
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended August 31, 1999, as filed with the
Securities and Exchange Commission.
Basic and diluted earnings per share for the three months ended November 30,
1999 and 1998 is calculated as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30TH,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net loss $(2,605,335) $ (908,838)
------------ ------------
Weighted average shares outstanding for
basic earnings per share calculation 4,336,495* 3,911,340*
------------ ------------
Diluted earnings per share
Weighted average shares outstanding 4,336,495 3,911,340
Effect of exercise of options ** **
------------ ------------
Weighted average shares outstanding for
diluted earnings per share calculation 4,336,495 3,911,340
------------ ------------
<FN>
* Adjusted for the July 8, 1999, 32:1 reverse stock split of the Company's
no par value Common Stock. In addition, all references to shares of Common
Stock in the November 30, 1999 Consolidated Financial Statements and the Notes
to the Consolidated Financial Statements have been revised for the effect of
the fiscal 1999 reverse split.
** The effect of options and convertible shares was not included in the
diluted earnings per share calculation for the quarters ended November 30, 1999
and 1998, as they would have been anti-dilutive. The total number of common
shares not included in the diluted earnings per share calculation for the fiscal
quarter ended November 30, 1999 and 1998, that could potentially dilute earnings
per share in the future is 100,012 and 46,380, respectively.
</TABLE>
<PAGE>
RECLASSIFICATION- Certain reclassifications have been made to conform prior
years' information with the current year presentation.
USE OF ESTIMATES - The preparation of the Condensed Consolidated Financial
Statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenue and expenses during the reported period. These estimates are based upon
management's best findings, after considering past and current events and
assumptions about future events. Actual results could differ from those
estimates.
NOTE 2. REALIZATION OF ASSETS
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company incurred operating
losses of $(2,128,009) and $(3,792,339) respectively, during the three months
ended November 30, 1999 and during the fiscal year ended August 31, 1999. In
addition, at November 30, 1999, the Company had a negative working capital
position of $(4,617,539) due primarily to $2,803,798 in short term borrowings
and $1,998,574 in accounts payable. The Company had a total stockholders'
deficit of $(9,225,632) as of November 30, 1999. These factors among others
raise substantial doubt that the Company will be able to continue as a going
concern for a reasonable period of time.
The financial statements do not include any adjustments related to the
recoverability and classification of assets and liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
obtain replacement working capital financing, to obtain sufficient equity
financing to re-capitalize the Company, and ultimately to attain profitability.
To counteract the losses and negative capital described above, the Company has
retained a financial advisory firm and is actively pursuing capital infusions
from a variety of sources. In addition, the Company plan's to increase revenue
from its existing customer base, primarily by expanding the base of products
that the Company offers and placing an increased focus on the marketing of
medical and surgical supplies. Also, in fiscal 1999, the Company implemented a
new e-commerce initiative that includes a new DocPlanet web site and an
integrated e-commerce system which provides customers fingertip access to
products categorized by specific use and formulary without having to consult a
paper based catalog. The DocPlanet web site was completed in November 1999 and
the Company is currently taking customer orders from the web site.
NOTE 3. INVESTMENT IN JOINT VENTURE
On February 12, 1996, QCP entered into a joint venture agreement with VNA to
form RxDirect, a mail order/direct delivery pharmacy. VNA agreed to contribute
$300,000 to fund the start up of operations of which $250,000 has been
contributed to date. In 1998, QCP recorded RxDirect under the equity method on
QCP's Financial Statements. As of November 30, 1999, QCP had contributed
$245,000 in services and operational support and has a balance of $175,777 in
loans to RxDirect for working capital and to fund operations.
On October 13, 1998, the Company and VNA entered into an agreement whereby VNA
would withdraw from the joint venture upon payment of a withdrawal fee.
Consequently, as of October 13, 1998, RxDirect became a wholly owned subsidiary
of QCP and is included as such in the November 30, 1999 financial statements.
Under the terms of the withdrawal agreement, VNA agreed to pay a $154,000
withdrawal fee, including accounts receivable of $47,761. The Company collected
$52,000 of the $154,000 and has written off the remaining $102,000.
NOTE 4. NOTES PAYABLE AND LONG-TERM DEBT
On April 2, 1999, the Company entered into an agreement with ALCO Financial
Services, LLC ("ALCO") for a $1,500,000 revolving credit facility (the "ALCO
Facility") bearing interest at prime plus three percent (3%). The first draw
under this new credit facility was made on April 6, 1999 in the amount of
$563,500 and was used to pay in full all amounts due under the Company's
previous credit facility with Norwest Bank. The ALCO Facility is for a period
of two years with a one-year renewal term. The ALCO Facility is collateralized
by inventory, accounts receivable, fixtures, equipment and intangibles, and
availability under the ALCO Facility is primarily determined based on eligible
accounts receivable, and inventory.
<PAGE>
In the first quarter of fiscal 2000, the Company received overadvances on the
ALCO revolving facility in the amount of $392,399. The terms of this financing
include the issuance of stock options on the Company's Common Stock, which vest
according to repayment period of sixty days followed by subsequent thirty-day
periods. As of January 19, 2000, 110,000 options to purchase the Company's
Common Stock are due and repayment of the advance has not been made.
On September 7, 1999, the Company executed a convertible promissory note in the
amount of $400,000 to an unrelated third party. This note pays interest at a
rate of 10% annually and is due on May 1, 2000. In addition, the note is
convertible at anytime by the holder at a conversion rate of $4.00 per share of
the Company's common stock.
On September 3, 1999 the Company received $50,000 from one outside investor.
The related financing is classified as a short-term note payable within the
consolidated balance sheet.
On November 5, 1999 and November 8, 1999 the Company received $133,746 and
$85,729 respectively, from an outside investor and a related party. The related
financing is classified as a short-term note payable and short-term note payable
to related party within the consolidated balance sheet.
NOTE 5. COMMON STOCK TRANSACTIONS
On July 7, 1999, the stockholders approved up to a forty to one reverse
stock split on the Company's Common Stock, no par value, and the directors
subsequently approved a 32 to 1 reverse stock split. The reverse stock split
became effective July 8, 1999 and the Common Stock is currently being quoted and
traded on a post reverse stock split basis. All references to the number of
shares, per share amounts, stock option date and market prices of the Company's
Common Stock have been restated in accordance with the reverse stock split.
On September 22, 1999, the Company received $50,000 from an outside investor for
12,500 shares of the Company's common stock. As of November 30, 1999 the common
stock has not been issued and the related obligation to issue common stock has
been classified as common stock on the consolidated balance sheet.
On October 19, 1999, the Board of Directors (the "Board") approved the grant of
an aggregate of 300,000 shares of the Company's no par value Common Stock
valued at an aggregate of approximately $956,250 with certain restrictions to
one employee who is also a director of the Company and to a director of the
Company.
On October 20, 1999, the Company received $10,000 from one outside investor for
approximately 2,857 shares of the Company's common stock. As of November 30,
1999, the common stock has not been issued and the related obligation to issue
common stock has been classified as common stock in the consolidated balance
sheet.
On November 9, 1999, the Company issued 60,000 shares of restricted common stock
to two investors for $124,949.
<PAGE>
On November 10, 1999, the Company issued 6,000 shares of the Company's common
stock to one consultant for services valued at $30,750.
November 24, 1999 the Company issued 56,250 of shares of common stock to
one vendor for services. The market value for the related services was
$168,750.
On November 30, 1999 the Company issued 11,047 shares of the Company's common
stock to one consultant for professional services valued at $49,712.
NOTE 6. 15/30 PREFERRED STOCK
The Company's Charter provides for two classes of preferred stock. In 1987, the
Company created a series of preferred stock, 15%/30% Cumulative Convertible
Preferred Stock ("15/30 Preferred Stock"). The issue price was $10 per share
and the maximum issuable shares under the series was 700,000 shares. In October
1990, the Company created a second series of preferred stock, Class A
Convertible Preferred Stock ("Convertible Preferred Stock"). The issue price
was $10 per share and the maximum issuable shares under the series was 200,000
shares. There are currently no shares of Convertible Preferred Stock
outstanding.
In 1988, the Company completed a public offering of equity securities comprised
of units of one share of 15/30 Preferred Stock and two shares of Common Stock
valued at $10 per unit. A total of 84,242 shares of 15/30 Preferred Stock were
issued in this offering. Dividends on the 15/30 Preferred Stock were payable
solely from the net profits generated from the sale of Iodine 123 HIPDM (as
defined in the Certificate of Designations) ("HIPDM"). However, no net profits
were ever generated from the sale of HIPDM and the underlying license rights
related to HIPDM were fully impaired in 1991 and released upon termination of
the license agreement on November 30, 1993.
Each share of the 15/30 Preferred Stock may be converted into 0.32 shares of
Common Stock. The Company is required to reserve Common Stock sufficient to
allow conversion of all Preferred Stock and accrued dividends. The holders of
the 15/30 Preferred Stock, in the event of liquidation of the Company, will
receive an amount equal to the issue price before any holder of Common Stock or
any other stock ranking junior to the Preferred Stock can be paid.
As of November 30, 1999 and August 31 1999, 54,589 of the 84,242 shares of
Preferred Stock outstanding were converted into Common Stock. $469,644 of
accrued dividends had been recorded on the 15/30 Preferred Stock and, as
of November 30, 1999, $227,887 of the $469,644 in accrued dividends on the
15/30 Preferred Stock had been converted into Common Stock. After these
dividend accruals, management determined that no dividends should have been
recorded and, consequently, that no Common Stock should have been issued
in payment of these dividends. Management expects to resolve this matter in
fiscal 2000 and the related accrued dividends have been reclassified on the
November 30, 1999 balance sheet as an offset to the accumulated deficit. At
November 30, 1999, the holders of the 15/30 Preferred Stock can convert their
shares into 9,452 shares of post-reverse split Common Stock including
accrued dividends.
Pursuant to the Certificate of Designations for the 15/30 Preferred Stock, in
the event the Company completes an underwritten public offering of its Common
Stock, in which the offering price is at least $32.00 per share, the 15/30
Preferred Stock will automatically convert to Common Stock. Commencing in 1991,
the Company has the right but not the obligation to convert all of the
outstanding 15/30 Preferred Stock into Common Stock at the 102% of the issue
price.
<PAGE>
NOTE 7. RELATED PARTY TRANSACTIONS
During the first quarter of fiscal 2000, the Company borrowed $200,000, net of
repayments, from related parties. During the three months ended November 30,
1999, the Company recorded $172,457 in interest expense on loans from related
parties. At November 30, 1999, the amounts outstanding under the related
promissory notes was $6,270,000 ($5,770,000 payable to Charles R. Drummond;
$470,000 payable to Arch G. Gothard III; $30,000 payable to John H. Grant).
At November 30 1999 $902,851 in accrued interest was payable on the related
party notes. Certain of these loans are payable on demand and all such loans
bear interest at the bank prime rate plus 2%. Certain of these loans
($1,425,000 payable to Charles R. Drummond; $470,000 payable to Arch G.
Gothard III at November 30, 1999) were payable on April 1, 1998, and were
past due at November 30, 1999. By letter dated October 29th, 1999, Charles
R. Drummond committed not to demand payment of, or take action to collect
promissory notes, including those past due, owed to him until August 31, 2000
or such time as the Company has the ability to pay such notes. All amounts
due to Mr. Drummond at November 30, 1999 were subordinate to all amounts due
under the ALCO Facility.
On October 19, 1999, the Board of Directors (the "Board") approved the grant of
an aggregate of 300,000 shares of the Company's no par value Common Stock
valued at an aggregate of approximately $956,000 with certain restrictions to
an employee who is also a director of the Company and to a director of
the Company.
On November 8, 1999 the Company received a loan in the amount of $100,000 from a
relative of the Chairman, Charles R. Drummond, and was repaid with
restricted common stock of the Company on December 28, 1999.
<PAGE>
NOTE 8. CONTINGENCIES
Due to the nature of its products, the Company is subject to regulation by a
number of federal and state agencies, including the Federal Food and Drug
Administration, the Drug Enforcement Agency and the State of California. The
Company must comply with regulatory requirements. Should it violate such
requirements, its ability to operate could be suspended or terminated.
Management believes it has the control system and policies in place so that it
will fully comply with regulatory requirements.
QCP along with several other entities including the manufacturers of the drugs,
has been named as a defendant in approximately forty-seven lawsuits brought by
numerous plaintiffs relating to personal injury claims caused by the use of
phentermine and/or fenfluramine, collectively known as Phen-Fen. To date, QCP
has been named in forty-five California lawsuits; however, it has been served
court papers in only fifteen. Of the fifteen, the plaintiff from one lawsuit
has recently dismissed QCP. QCP is also a third-party defendant in class action
lawsuits in Nevada, West Virginia and Florida. QCP's involvement in each of
these lawsuits is limited to its distribution or repackaging of these drugs. As
of January 19th, 2000, the outcome of these lawsuits is not reasonably
determinable.
NOTE 9. SUBSEQUENT EVENTS
On December 21, 1999 the board approved the conversion of loans from
Directors and Officers, in whole or in part, into Common Stock of the Company at
$3.00 per share. As of January 14, 2000 no such conversion has been executed.
On December 28, 1999 the board of directors approved the issuance of 201,890 of
restricted shares of the Company's common stock to repay loans to the Company
in the amount of $737,475. $219,475 of the related loan amount was received in
November 1999 of which $100,000 was obtained from a related party and is
recorded within current liabilities in the November 30, 1999 consolidated
balance sheet. $518,000 of the loan was received in December 1999 and was not
recorded within the Consolidated Balance Sheet at November 30, 1999.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the selected
financial data and the financial statements and notes thereto filed herewith.
The statements contained in this report, if not historical, are forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, and involve risks and uncertainties that could cause actual results to
differ materially from the financial results described in such forward looking
statements. These risks and uncertainties include, among others, the level and
rate of growth in the Company's operations, the capital requirements of the
Company and the ability of the Company to achieve earnings per share growth
through internal investment, strategic alliances, joint ventures and other
methods. The success of the Company's business operations is, in turn,
dependent on factors such as the effectiveness of the Company's marketing
strategies to grow its customer base, the appeal of the Company's mix of
products, the Company's success at entering into and collaborating with others
to conduct effective strategic alliances and joint ventures, general competitive
conditions within the health care market and general economic conditions.
Further, any forward looking statements speak only as of the date on which such
statement was made, and the Company undertakes no obligation to update any
forward looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. Therefore, forward looking statements should not be
relied upon as a prediction of actual future results.
RECENT DEVELOPMENTS
The Company had a net loss of ($2,605,335) during the three months ended
November 30, 1999, and, as of November 30, 1999, the Company's current
liabilities exceeded its current assets by $(4,617,539) and its total
liabilities exceeded its total assets by ($9,225,632). These conditions as well
as others, raise substantial doubt about the Company's ability to continue as a
going concern.
The Company's operations in fiscal 1999 and through the first three months of
fiscal 2000, have consumed substantial amounts of cash and have generated
significant net losses which reduced shareholder's equity to a deficit of
($9,225,632) at November 30, 1999. The Company has a current period operating
loss and negative cash flow from operations, and is expected to have continuing
losses and negative cash flow from operations in the near future.
In response, management is currently reviewing a variety of debt and equity
financing alternatives. However, none of the related financing alternatives has
been finalized as of January 19, 2000 and no assurance can be given that
management will be able to raise the funds necessary to assure a continuation of
operations.
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 1999, COMPARED TO THREE MONTHS ENDED NOVEMBER
30, 1998, ($ ROUNDED TO NEAREST THOUSAND)
NET SALES - Net Sales for the three months ended November 30, 1999 decreased
$213,000 to $1,800,000 from $2,013,000 for the same period last year. This
sales decrease was primarily attributed to the decrease in sales of seasonal flu
vaccines. In the fiscal quarter ended November 30, 1998, the Company had
secured lower cost contracts with seasonal flu vaccine manufacturers. In the
quarter ended November 30, 1999 these lower cost contracts have ended and the
Company is currently focusing on higher margin products such as point of care
pharmaceuticals. In addition, approximately $30,000 of the decrease is due to
the liquidation of Pharma Labs, which was winding down operations in the same
period last year, and has since been completely liquidated and contributed no
sales revenue in the quarter ended November 30, 1999.
<PAGE>
COST OF SALES- Cost of Sales as a percentage of sales decreased to 76.2% for the
quarter ended November 30, 1999 from 79.3% in the same period last year. This
decrease is due to the Company's focus on sales of higher margin, lower cost
point of sale pharmaceuticals combined with an increased focus on competitive
purchasing.
SELLING GENERAL AND ADMINISTRATIVE- Selling, general and administrative expenses
(SG&A) for the three months ended November 30, 1999 were $2,557,000 compared to
$1,273,000 during the comparable quarter last year. This increase is due to
a $956,000 charge to compensation expense for grants of 300,000 shares of
restricted Common Stock to two directors who are shareholders. The grants were
approved by the board of directors on October 19, 1999. In addition, $328,000 of
the increase is primarily attributable to increased professional services
related to the Company's E-Commerce initiative.
OTHER INCOME (EXPENSE)- Other expense increased to ($477,000) from ($54,000) in
the quarter ended November 30, 1999 versus the same period in the prior fiscal
year. This increase is primarily due to a $283,000 charge to interest
expense related to the issuance of options on common stock for over advances on
the Company's line of credit. In addition, the increase was also attributable to
a $185,000 gain recognized on settlement of accounts payable and other
liabilities related to the liquidation of Pharma Labs in the same period in the
prior year. This was offset by the recognition of $28,000 in other revenue
related to the amortization of the Pharma Labs non-compete agreement in the
quarter ended November 30, 1999.
NET LOSS- The net loss increased due to the reasons indicated in the preceeding
paragraphs.
LIQUIDITY AND CAPITAL RESOURCES
The following table is presented to facilitate the discussion of the Company's
current liquidity and sets forth the Company's liquidity position as of November
30, 1999, as compared to August 31, 1999.
<TABLE>
<CAPTION>
NOVEMBER 30, AUGUST 31,
1999 1999
-------------- ------------
<S> <C> <C>
Current assets $ 2,048,000 $ 1,794,000
Current liabilities 6,665,000 5,310,000
-------------- ------------
Net working capital (deficiency) $ (4,617,000) $(3,516,000)
============== ============
</TABLE>
At November 30, 1999, current liabilities were $6,665,000; an increase of
$1,355,000 from August 31, 1999. Currently liabilities increased primarily due
to the following: Issuance of a short term note payable in the amount of
$400,000 in September of 1999, $392,000 increased borrowing relating to
over-advances on the Company's line of credit and $420,000 additional financing
related to the issuance of an additional short term note payable.
To help meet its working capital requirements, the Company has borrowed money
from certain shareholders and directors of the Company. The loans are evidenced
by promissory notes, which provide for interest at the prime rate plus 2%. The
promissory notes are unsecured obligations. The amounts outstanding under the
promissory notes in the aggregate were $6,270,000 ($5,770,000 payable to Charles
R. Drummond; $470,000 payable to Arch G. Gothard, III; $30,000 payable to John
Grant) at November 30, 1999 and January 19, 1999. Certain of the promissory
notes ($1,425,000 payable to Charles R. Drummond and $470,000 payable to Arch G.
Gothard, at November 30,1999) were payable on demand or no later than April 1,
1998 and, accordingly, are past due. Pursuant to a letter dated October 29,
1999, Charles R. Drummond committed not to demand payment of, or take any action
to collect, the promissory notes owed him until August 31, 2000 or such time as
the Company has the ability to repay such promissory notes. The promissory
notes payable to Charles R. Drummond at November 30, 1999 were fully
subordinated to the amounts due under the Company's line of credit.
<PAGE>
The Company has suffered substantial recurring losses from operations. The
Company incurred a net loss of ($3,906,000) during the fiscal year ended August
31, 1999 and a net loss of ($2,605,000) during the three months ended November
30, 1999. As of November 30, 1999, the Company's current liabilities
exceeded its current assets by $4,617,000 and its total liabilities exceeded its
total assets by $9,226,000. These factors, in combination with the matters
discussed in the previous paragraphs raise substantial doubt about the Company's
ability to continue as a going concern. The Company does not have any
commitments for financing and there can be no assurance that any additional
financing will be available to the Company on terms acceptable to the Company,
if at all. The Company's ability to continue as a going concern is dependent
upon its ability to obtain funding for the Company's capital requirements and
operating losses. The Company's shareholder deficit and continuing losses create
serious risk of loss for the holders of the Company's securities.
DISCLOSURE OF SIGNIFICANT RISK AND UNCERTAINTY
At August 31, 1998, the Company conducted a test for asset impairment in
Accordance with financial Accounting Standard 121. Key assumptions in the 1998
asset impairment test included the reversal of fiscal 1998 operating losses and
sales declines, several years of significant sales growth and product cost
reduction achieved through purchasing and volume efficiencies.
At November 30, 1999, management is not aware of any material items, which
would impair the Company's assets as disclosed in the Consolidated Financial
Statements.
YEAR 2000
The Company recognizes the need to ensure its operations will not be adversely
impacted by year 2000 software failures. The Company has addressed this risk to
the availability and integrity of financial systems and the reliability of
operational systems. The Company has completed processes of evaluating and
managing the risks and costs associated with this problem. The Company has
installed a new business software package to accommodate business growth and
upgrade current systems. Management believes that this package is year 2000
compliant. Management believes that, with respect to the year 2000, only minor
matters remain to be implemented with a few customers, and no major vendor is
expected to encounter problems.
Although management believes the installation of the year 2000 software to be
sufficient to avoid any material interruption in its operations, there is no
guarantee that a material failure in that system could not occur. The failure
to correct a material year 2000 problem could result in an interruption in or a
failure of, certain normal business activities or operations.
As of January 19, 2000 the Company has not experienced any material interruption
in its operations due to year 2000 software failures.
<PAGE>
FORWARD-LOOKING STATEMENTS
This report on Form 10-QSB contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Actual results could
differ from those projected in any forward-looking statement for the reasons set
forth herein as well as in other sections of the Company's report filed on Form
10-KSB for the year ended August 31, 1999, or for other unforeseen reasons. The
forward-looking statements contained herein are made as of the date of this
report and the Company assumes no obligation to update such forward-looking
statements, or to update the reasons why actual results could differ from
those projected in such forward-looking statements.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As previously reported, QCP along with several other entities, including the
manufacturers of the drugs, has been named as a defendant in approximately
forty-seven lawsuits brought by numerous plaintiffs relating to personal
injury claims caused by the use of phentermine and/or fenfluramine, collectively
known as Phen-Fen. There have been no material developments in there lawsuits
since the date of the Company's last report.
ITEM 2. CHANGES IN SECURITIES.
On September 22, 1999, the Company issued 12,500 shares of the Company's common
Stock to one investor for $50,000. No underwriter participated in this
transaction, and the offering and sale of the securities were made solely to
accredited investors under the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, as the sale was limited to accredited
investors.
On October 19, 1999, the Board of Directors (the "Board") approved the grant of
an aggregate of 300,000 shares of the Company's common stock to an employee
who is a director and shareholder and a director who is a shareholder. The
Company was under no obligation to issue these securities and therefore, it is
the Company's position that the issue of these securities was not a "sale"
within the meaning of the Securities Act of 1933, as amended.
On October 20, 1999 the Board approved the issuance, of 2,857 shares of the
Company's common Stock to one investor for $10,000. No underwriter
participated in this transaction, and the offering and sale of the Securities
was made solely to an accredited investor under the exemption provided by
Section 4 (2) of the Securities Act of 1933, as amended, as the sale was
limited to one accredited investor.
On November 9, 1999, the board approved and the Company issued an aggregate of
60,000 shares of common stock to two investors for $124,949. No underwriter
participated in this transaction, and the offering and sale of the securities
were made solely to accredited investors under the exemption provided by Section
4(2) of the Securities Act of 1933, as amended, as the sale was limited to
accredited investors.
On November 10, 1999, the board approved and the Company issued 6,000
shares of the Company's common stock to one consultant for services valued at
$30,750.
On November 24, 1999 the board approved and the Company issued 56,250 shares of
the Company's common stock to one vendor for services valued at $168,750.
On November 30, 1999 the board approved the issuance of 11,047 shares of the
Company's common stock to one consultant for services valued at $49,712.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On October 19, 1999 a meeting of security holders was held in order to authorize
the change in corporate name from docsales.com inc. to DocPlanet.com inc. The
name change passed with 2,670,423 votes "FOR" the proposal, 3,526 votes
"AGAINST" and 26,067 votes "WITHHELD".
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<PAGE>
a) Exhibits
27 Financial Data Schedule.*
b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the period covered by
this report.
- --------
* Filed herewith
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DocPlanet.com, Inc.
--------------------
(Registrant)
DATED: January 14, 2000 BY: /s/ John H. Grant
--------------------------------
John H. Grant, Vice Chairman
(Chief Accounting Officer)
<PAGE>
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