UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended MARCH 31, 1998
OR
[ ] Transition Report Under Section 13 or 15(d)
of the Exchange Act
For the Transition Period From____________ to___________
Commission File Number 1-10185
DOCUCON, INCORPORATED
(Exact name of small business issuer as specified in its charter)
Delaware 74-2418590
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7461 Callaghan Road
San Antonio, Texas 78229
(Address of principal executive offices)
(210) 525-9221
(Issuer's telephone number)
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___
State the number of shares outstanding of each of the issuer's classes
of common equity as of May 1, 1998. 13,161,792
<PAGE>
DOCUCON, INCORPORATED
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION (UNAUDITED)
Item 1: Balance Sheets - March 31, 1998, and December 31, 1997 3
Statements of Operations - For the Three Months Ended
March 31, 1998 and 1997 5
Statements of Cash Flows - For the Three Months Ended
March 31, 1998 and 1997 6
Notes to Financial Statements 7
Management's Discussion and Analysis of Financial Condition
Item 2: and Results of Operations 10
PART II. OTHER INFORMATION 13
SIGNATURES 14
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<PAGE>
DOCUCON, INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1998 DECEMBER 31,
ASSETS (UNAUDITED) 1997
----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary cash investments .................... $ 3,498,005 $ 4,597,183
Accounts receivable-trade, net of allowance for doubtful
accounts of $4,444-
U.S. Government .................................... 186,489 620,934
Commercial ......................................... 222,829 335,300
Unbilled revenues ...................................... 1,554,803 1,472,075
Other receivables ...................................... 405,024 405,336
Prepaid expenses and other ............................. 99,348 77,044
----------- ------------
Total current assets ................. 5,966,498 7,507,872
----------- ------------
PROPERTY AND EQUIPMENT:
Conversion systems ..................................... 4,621,856 4,589,473
Building and improvements .............................. 1,745,491 1,744,499
Land ................................................... 230,000 230,000
Furniture and fixtures ................................. 205,602 205,602
----------- ------------
Total property and equipment ......... 6,802,949 6,769,574
Less- Accumulated depreciation ......................... (4,765,546) (4,680,368)
----------- ------------
Net property and equipment ........... 2,037,403 2,089,206
----------- ------------
OTHER, net ............................................... 469,092 472,490
----------- ------------
Total assets ......................... $ 8,472,993 $ 10,069,568
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
DOCUCON, INCORPORATED
BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
MARCH 31,
1998 DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED) 1997
----------- ----
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable .......................................... $ 215,201 $ 482,076
Accrued liabilities ....................................... 476,796 616,615
Income taxes payable ...................................... 125,000 191,000
Revolving term note ....................................... -- 504,000
Current maturities of long-term debt ...................... 29,163 30,722
Current maturities of capital lease obligations ........... 16,040 15,798
----------- ------------
Total current liabilities .................... 862,200 1,840,211
----------- ------------
LONG-TERM DEBT .............................................. 1,478,736 1,485,079
----------- ------------
CAPITAL LEASE OBLIGATIONS ................................... 46,215 49,547
----------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 10,000,000 shares
authorized-
Series A, 60 shares authorized, 12 shares outstanding as
of March 31, 1998, and December 31, 1997 .............. 12 12
Common stock, $.01 par value, 25,000,000 shares authorized;
13,160,792 and 13,043,556 shares outstanding as of March
31, 1998, and December 31, 1997, respectively ........... 131,608 130,436
Additional paid-in capital ................................ 9,975,776 9,971,346
Accumulated deficit ....................................... (4,021,554) (3,407,063)
----------- ------------
Total stockholders' equity ................... 6,085,842 6,694,731
----------- ------------
Total liabilities and stockholders' equity ... $ 8,472,993 $ 10,069,568
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
DOCUCON, INCORPORATED
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATING REVENUES ...................................................... $ 612,996 $ 2,489,647
------------ ------------
COSTS AND EXPENSES:
Production ............................................................ 684,336 1,780,139
Research and development .............................................. 67,751 56,564
General and administrative ............................................ 294,438 221,992
Marketing ............................................................. 117,223 175,122
Depreciation and amortization ......................................... 88,575 115,662
------------ ------------
1,252,323 2,349,479
------------ ------------
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS ...................... (639,327) 140,168
OTHER INCOME (EXPENSE):
Interest income ....................................................... 64,025 443
Interest expense ...................................................... (36,716) (48,355)
Other, net ............................................................ 5,527 8,835
------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ............ (606,491) 101,091
Income tax expense .................................................... 8,000 3,000
------------ ------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS ............................ (614,491) 98,091
Preferred stock dividend requirements ................................. 8,250 13,063
------------ ------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS APPLICABLE TO COMMON
STOCKHOLDERS .......................................................... (622,741) 85,028
Loss from discontinued operations ..................................... -- (142,193)
------------ ------------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS ..................... $ (622,741) $ (57,165)
============ ============
Basic earnings (loss) from continuing operations per common share ..... $ (.05) $ .01
Basic loss from discontinued operations per common share .............. -- (.01)
------------ ------------
BASIC EARNINGS (LOSS) PER COMMON SHARE ................................. $ (.05) $ --
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING .................... 13,152,489 12,318,872
============ ============
Diluted earnings (loss) from continuing operations per common share and
common share equivalents ............................................ $ (.05) $ .01
Diluted loss from discontinued operations per common share and
common share equivalents ............................................ -- (.01)
------------ ------------
DILUTED EARNINGS (LOSS) PER COMMON SHARE AND COMMON SHARE
EQUIVALENTS ........................................................... $ (.05) $ --
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING ............................................... 13,152,489 13,554,943
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
DOCUCON, INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
-----------------------
1998 1997
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from continuing operations .................. $ (614,491) $ 98,091
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities-
Depreciation and amortization ............................. 88,575 115,662
Changes in current assets and current liabilities-
Decrease in receivables and unbilled revenues ........... 464,500 693,894
(Increase) decrease in prepaid expenses and other ....... (22,304) 70,636
Decrease in accounts payable and accrued liabilities .... (406,694) (857,019)
Decrease in income taxes payable ........................ (66,000) (10,491)
Decrease in deferred revenues ........................... -- (2,100)
----------- ---------
Net cash provided by (used in) operating activities (556,414) 108,673
----------- ---------
NET CASH USED BY DISCONTINUED OPERATIONS ........................ -- (61,222)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .......................................... (33,375) (32,744)
----------- ---------
Net cash used in investing activities ............. (33,375) (32,744)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances under line of credit ................................. -- 570,000
Payments under line of credit ................................. (504,000) (750,000)
Principal payments under capital lease obligations ............ (3,090) (2,707)
Net proceeds from exercise of stock options ................... 5,603 4,259
Principal payments on long-term debt .......................... (7,902) (9,203)
----------- ---------
Net cash used in financing activities ............. (509,389) (187,651)
----------- ---------
NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS ............. (1,099,178) (172,944)
CASH AND TEMPORARY CASH INVESTMENTS, beginning of period ........ 4,597,183 198,152
----------- ---------
CASH AND TEMPORARY CASH INVESTMENTS, end of period .............. $ 3,498,005 $ 25,208
=========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for-
Interest .................................................... $ 37,487 $ 47,319
=========== =========
Income taxes ................................................ $ 64,225 $ 13,491
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
DOCUCON, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1
The financial statements included herein have been prepared by Docucon,
Incorporated (the Company), without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. However, all adjustments have been
made which are, in the opinion of the Company, necessary for a fair presentation
of the results of operations for the periods covered. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is recommended that these financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997. Certain reclassifications have been made in the prior period financial
statements to conform with the current period presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Since its inception, the Company has incurred cumulative net losses of
approximately $4.0 million. The cumulative net losses have been funded primarily
through the Company's public offering of common stock, issuances of preferred
stock, the exercise of warrants and options, debt financing and the sale of its
software division in the fourth quarter of 1997 for $6.5 million. The Company
has taken steps which it believes will improve its operating results including
exiting the litigation support services market, selling its software division
and focusing on the Company's document conversion business. The Company's
management believes that it is likely that the Company's operating results for
the remainder of 1998 will improve and will generate sufficient working capital,
along with available cash, to sustain its operations throughout the year.
However, there can be no assurances that the Company's focus on document
conversion will improve its operating results.
NOTE 2
Discontinued operations-
As previously discussed, in November 1997, the Company sold its software
division to a third party for $6.5 million. Included in other current
receivables and in other, net, on the accompanying balance sheets are escrowed
amounts of $400,000 each related to the sale of the software division. These
escrowed funds secure the payment of any liability of the Company to the
purchaser under the terms of the purchase agreement and are scheduled to be
released to the Company in the amount of $400,000 in November 1998 and $400,000
in November 1999. Management of the Company believes that the entire $800,000
held in escrow will be paid to the Company. As a result of the sale, the
division has been accounted for as a discontinued operation and, accordingly,
the Company has restated its financial statements for all periods presented in
accordance with Accounting Principle Board Opinion No. 30. The following table
provides certain information related to the discontinued operation:
THREE
MONTHS ENDED
MARCH 31, 1997
--------------
Revenues $ 707,388
=========
Loss from discontinued operations $(142,193)
=========
-7-
<PAGE>
DOCUCON, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 3
Substantially all of the Company's unbilled revenues at March 31, 1998, and
December 31, 1997, relate to conversion services performed for agencies of the
U.S. Government. The Company's ability to invoice these unbilled revenues is
dependent upon a number of factors including quality control acceptance and the
availability of funding to the respective agencies. The Company was contacted in
mid-1997 and informed that funding for certain conversion services being
performed had been depleted. Management elected to complete work that had been
placed in production at that time despite the lack of assurance that funding
would become available. As a result, the Company has been unable to invoice
approximately $1.2 million of conversion services that were performed during
1997. The conversion products associated with the $1.2 million of unbilled
revenues have been shipped to the customer and are in various stages of quality
control review. Management of the Company, based upon its past operating history
and its ongoing discussions with various governmental personnel regarding the
availability of additional funding, believes that all of such unbilled revenues
will be invoiced and collected during 1998. However, there can be no assurances
that the customer will accept all of the work product nor are there any
assurances that sufficient funding will be made available to enable the Company
to invoice the unbilled revenues. The inability of the Company to realize its
unbilled revenues would have a material adverse effect on the Company's future
results of operations and its financial position.
NOTE 4
Common stock and preferred stock-
Each share of the Company's preferred stock ($25,000 stated value) is
convertible into 33,333 shares of common stock and earns cash dividends of 11
percent per annum. As of March 31, 1998, cumulative undeclared dividends on the
preferred stock approximated $250,000. As these dividends are undeclared, they
have not been recorded as a reduction of the Company's equity.
NOTE 5
Subsequent events-
In April 1998, the Company's board of directors granted options to certain
members of the Company's senior management, subject to shareholder approval, to
purchase 500,000 shares of the Company's common stock at an exercise price of $1
per share under a Time Accelerated Restricted Stock Award Plan (TARSAP). In
April 1998, the Company appointed a new president and chief executive officer.
The Company's board of directors granted this employee options, subject to
shareholder approval, to purchase 900,000 shares of the Company's common stock
at an exercise price of $1 per share under a TARSAP. Two hundred thousand of the
TARSAP options vest and become exercisable in September 2001 while the remainder
vest and become exercisable in March 2005. Vesting and exercisability of the
TARSAP options is accelerated, in 80,000 share increments, for each $.50 per
share incremental increase in the quoted market price per share of the Company's
common stock above $1 per share.
-8-
<PAGE>
DOCUCON, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (Continued)
As a result of the disposition of the Company's software division in 1997, in
April 1998, certain of the affirmative covenants relating to the Company's
mortgage note payable to a financial institution were modified. The note
agreement contains various affirmative and negative covenants and requires the
Company to maintain (as modified and as defined in the note agreement): (i) a
current ratio of not less than 1:1, (ii) a debt-to-net worth ratio of not more
than .75:1, (iii) a quarterly debt coverage ratio of not less than 1.25:1
beginning in the quarterly period ending September 30, 1998, and (iv) a minimum
tangible net worth of $5.5 million. Management believes that the Company will be
able to maintain compliance with all of the requirements under the note payable,
as modified, based upon anticipated operating results for 1998. However, if the
Company is unable to comply with such requirements in the future, the Company
could be found to be in technical default under the note payable and the lender
would have the right to demand immediate repayment of the entire amount
outstanding. The Company believes that sufficient resources would be available
to fund repayment in the event of such acceleration. In connection with
obtaining modifications to the note agreement, the Company was required to
reserve, out of its cash balances, one year's worth of debt service payments of
approximately $173,000.
-9-
<PAGE>
DOCUCON, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's operations during the quarter ended March 31, 1998, resulted in a
net loss applicable to common stockholders of $622,741 compared to a net loss
applicable to common stockholders of $57,165 for the same quarter in 1997. The
1997 quarter included a loss from discontinued operations of $142,193. In
November 1997, the Company sold its software division to a third party for $6.5
million.
Revenues from continuing operations decreased 75 percent to $612,996 for the
quarter ended March 31, 1998, as compared to the same quarter in 1997. The
decrease is due to what management believes to be a temporary discontinuation of
funding for a specific project being performed under a Department of Defense
(DOD) contract.
Production costs from continuing operations decreased 62 percent for the quarter
ended March 31, 1998, over the comparable 1997 period due to the decreased
revenue levels.
Research and development costs from continuing operations increased 20 percent
for the quarter ended March 31, 1998, compared to the respective period in 1997
as the Company continues to devote resources to the development of new
conversion capabilities.
Marketing expenses from continuing operations decreased 33 percent for the
quarter ended March 31, 1998, as compared to the same period in 1997, primarily
due to decreased commissions resulting from a decrease in the number of
salespeople.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company's operations have been primarily supplemented
through borrowings, capital lease agreements, an initial public offering of the
Company's Common Stock in 1989, the exercise of warrants and options, private
preferred stock placements and the sale of its software division.
The Company has the ability to perform services under two DOD contracts. One
contract was awarded in 1996 and extended through April 1998. The other contract
was awarded in December 1997 for a term of one year with four additional option
years. The contracts have a potential value of $77.8 million. However, there can
be no assurances that the full potential value of the contracts will be realized
or that the terms of the contracts will extend through the optional years.
Substantially all of the Company's unbilled revenues at March 31, 1998, and
December 31, 1997, relate to conversion services performed for agencies of the
U.S. Government. The Company's ability to invoice these unbilled revenues is
dependent upon a number of factors including quality control acceptance and the
availability of funding to the respective agencies. The Company was contacted in
mid-1997 and informed that funding for certain conversion services being
performed had been depleted. Management elected to complete work that had been
placed in production at that time despite the lack of assurance that funding
would become available. As a result, the Company has been unable to invoice
approximately $1.2 million of conversion services that were performed during
1997. The conversion products associated with the
-10-
<PAGE>
DOCUCON, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
$1.2 million of unbilled revenues have been shipped to the customer and are in
various stages of quality control review. Management of the Company, based upon
its past operating history and its ongoing discussions with various governmental
personnel regarding the availability of additional funding, believes that all of
such unbilled revenues will be invoiced and collected during 1998. However,
there can be no assurances that the customer will accept all of the work product
nor are there any assurances that sufficient funding will be made available to
enable the Company to invoice unbilled revenues. The inability of the Company to
realize its unbilled revenues would have a material adverse effect on the
Company's future results of operations and its financial position.
In March 1998, the General Services Administration (GSA) awarded a Federal
Supply Schedule to the Company which is effective until September 30, 2002.
Federal Supply Schedules are centralized contracts established by the GSA for
the use of all government agencies. There are no limitations to order size or
cumulative order value under such contracts. Under the Federal Supply Schedule
awarded to the Company, any government agency can buy a wide variety of document
conversion services directly from the Company.
In March 1994, the Company purchased the assets and assumed certain liabilities
of J. Feuerstein Systems. In November 1997, the Company sold the assets of the
division to Bowne & Co., Inc., for $6.5 million. A total of $800,000 was placed
in an escrow account as security for certain representations and warranties made
to the buyer. Management does not anticipate any material claims to be made
against the representations and warranties and expects the funds will be
released from escrow on November 25, 1998, and November 25, 1999, in two amounts
of $400,000 each. Including the escrowed funds, net cash proceeds after expenses
relating to the sale were approximately $5.7 million. Cash proceeds were used to
pay down the Company's $504,000 line-of-credit balance after year-end and to
fund continuing operations. The Company plans to invest excess proceeds in
short-term securities which would be available for capital or operational needs.
In October 1996, the Company obtained long-term financing to replace the
existing mortgage note for its office building with a December 1996 maturity.
The new note bears interest at a fixed rate of 9.5 percent, payable monthly to a
commercial bank, and is being amortized over a 20-year term with a 5-year
maturity. The note is secured by the Company's building, other fixed assets,
accounts receivable and inventory. Approximately $68,000 of debt issuance costs
were incurred in connection with this refinancing. In April 1998, certain of the
affirmative covenants relating to this note were modified. The Company believes
that it will be able to maintain compliance with all of the requirements under
the note payable, as modified, based upon anticipated operating results for
1998. However, if the Company is unable to comply with such requirements in the
future, the Company could be found in technical default under the note payable
and the lender would have the right to demand immediate repayment of the entire
amount outstanding. The Company believes that sufficient resources would be
available to fund repayment in the event of such acceleration. In connection
with obtaining modifications to the note agreement, the Company was required to
reserve, out of its cash balances, one year's worth of debt service payments of
approximately $173,000. The Company utilizes the building for office and
production space and believes that the building will fulfill its needs for the
foreseeable future.
-11-
<PAGE>
DOCUCON, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company expects to fund its operations and marketing activities through
utilization of cash on hand and cash generated from operations. These funds are
expected to be adequate for the Company's needs for at least the next 12 months.
At December 31, 1997, $504,000 was outstanding under a line of credit which was
repaid in its entirety in January 1998. The Company voluntarily terminated the
line of credit in April 1998. While the Company may consider and evaluate, from
time to time, acquisitions and opportunities for future growth, the Company has
not entered into any agreements with respect to future acquisitions. Should the
Company enter into any such agreements, the Company would, in all likelihood, be
required to raise outside capital to consummate such transactions.
NASDAQ SMALLCAP MARKET SYSTEM
On March 31, 1998, the Company received notice that it was subject to delisting
on the NASDAQ SmallCap Market System because the Company's average closing bid
price per share had not exceeded $1.00 during the prior 30-day period. The
notice provides that the Company's shares are subject to delisting 90 days after
receipt of the notice unless the Company's per share bid price is $1.00 or
greater for 10 consecutive trading days within the 90-day period. Management is
currently evaluating its response to the above-described notice and shall take
such action as it deems appropriate to maintain the listing.
-12-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Matters - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOCUCON, INCORPORATED
(Registrant)
By /s/ DOUGLAS P. GILL
Douglas P. Gill,
President and Chief
Executive Officer
By /s/ LORI TURNER
Lori Turner,
Vice President of
Finance and
Treasurer
Dated: May 11, 1998
-14-
EXHIBIT 11
DOCUCON, INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
COMPUTATION OF BASIC EARNINGS (LOSS) PER SHARE:
Net income (loss) from continuing operations ........................ $ (614,491) $ 98,091
Less- Preferred stock dividend requirements ....................... (8,250) (13,063)
------------ ------------
Net income (loss) from continuing operations applicable to common
stockholders .................................................... (622,741) 85,028
Loss from discontinued operations ................................. -- (142,193)
------------ ------------
Net loss applicable to common stockholders ........................ $ (622,741) $ (57,165)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING ........... 13,152,489 12,318,872
============ ============
Basic earnings (loss) from continuing operations per common share ..... $ (.05) $ .01
Basic loss from discontinued operations per common share .............. -- (.01)
------------ ------------
BASIC EARNINGS (LOSS) PER COMMON SHARE .................................. $ (.05) $ --
============ ============
COMPUTATION OF DILUTED EARNINGS (LOSS) PER SHARE:
Net income (loss) from continuing operations .......................... $ (614,491) $ 98,091
Preferred stock dividend requirements ................................. (8,250) (13,063)
Increase applicable to common stock for preferred
stock dividends not incurred upon assumed conversion
of preferred stock .................................................. 8,250 13,063
------------ ------------
Net income (loss) from continuing operations applicable
to common stockholders used for computation ....................... (614,491) 98,091
Net loss from discontinued operations applicable to common stockholders -- (142,193)
------------ ------------
Net loss applicable to common stockholders used for computation ....... $ (614,491) $ (44,102)
============ ============
Weighted average number of shares of common stock outstanding ......... 13,152,489 12,318,872
Weighted average incremental shares outstanding upon assumed conversion
of options and warrants ............................................. 331,818 605,707
Weighted average incremental shares outstanding upon assumed conversion
of the preferred stock .............................................. 399,996 630,364
------------ ------------
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK
EQUIVALENTS OUTSTANDING USED FOR COMPUTATION .......................... 13,884,303 13,554,943
============ ============
Diluted earnings (loss) from continuing operations per common share
and common share equivalents ...................................... $ (.04) $ .01
Diluted loss from discontinued operations per common share and common
share equivalents ................................................. -- (.01)
------------ ------------
DILUTED EARNINGS (LOSS) PER COMMON SHARE AND COMMON SHARE EQUIVALENTS (a) $ (.04)(a) $ --
============ ============
</TABLE>
(a) This calculation is submitted in accordance with Item 601(b)(11)
of Regulation S-K although it is not required by SFAS No. 128
because it is antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DOCUCON,
INCORPORATED'S CONDENSED BALANCE SHEET AS OF MARCH 31, 1998, AND ITS CONDENSED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
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0
12
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</TABLE>
