SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended September 30, 1997
[ ] Transition report pursuant to section 13 or 15(d) of the Exchange Act of
1934
For the transition period from ___________________ to ______________________
Commission file No. 33-75236
LONGPORT, INC.
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(Exact name of registrant as specified in its charter)
Delaware 23-2715528
- ------------------------------- -------------------
(State or other jurisdiction of IRS Employer ID No.
Incorporation or organization)
791 South Chester Rd. Swarthmore, Pa. 19081
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(Address of principal executive offices)
610-328-5006
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- ---------------------------------------------------
(Registrants telephone number, including area code)
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
--- ---
As of September 30, 1997, 14,185,135 shares of common stock were outstanding.
<PAGE>
LONGPORT, INC.
FORM 10-QSB
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet
as of September 30, 1997 1-2
Consolidated Statements of
Operations for the three months
and nine months ended September 30,
1997 and 1996 3-4
Consolidated Statements of Cash
Flows for the nine months ended
September 30, 1997 and 1996 5-6
Notes to Financial Statements 7
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 8-11
Part II. Other Information and Signatures 12-14
<PAGE>
LONGPORT, INC.
CONSOLIDATED
BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
CASH $ 5,372
ACCOUNTS RECEIVABLE:
TRADE 34,436
INTEREST AND OTHER 1,887
INVENTORIES 4,759
NOTE RECEIVABLE 26,000
--------
TOTAL CURRENT ASSETS 72,454
PROPERTY AND EQUIPMENT, AT COST:
MEDICAL EQUIPMENT 248,993
COMPUTER EQUIPMENT 49,492
OFFICE FURNITURE AND EQUIPMENT 45,137
RESEARCH EQUIPMENT 50,240
--------
393,862
LESS ACCUMULATED DEPRECIATION (331,232)
--------
NET PROPERTY AND EQUIPMENT 62,630
OTHER ASSETS:
NOTES RECEIVABLE --
INTANGIBLE ASSETS, NET OF ACCUMULATED
AMORTIZATION OF $100,358 24,167
--------
TOTAL OTHER ASSETS 24,167
TOTAL ASSETS $159,251
========
The accompanying notes are an integral part
of these consolidated financial statements.
1
<PAGE>
LONGPORT, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 33,351
ACCRUED EXPENSES:
SALARIES AND PAYROLL TAXES 11,995
INTEREST 2,087
OTHER 10,300
CURRENT PORTION OF LONG-TERM DEBT --
-----------
TOTAL CURRENT LIABILITIES 57,733
LONG-TERM DEBT, NET OF CURRENT PORTION --
-----------
COMMITMENTS AND CONTINGENCIES --
STOCKHOLDERS' EQUITY:
PREFERRED STOCK: $.001 PAR VALUE, 1,000,000
SHARES AUTHORIZED, NONE ISSUED OR
OUTSTANDING --
COMMON STOCK: $.001 PAR VALUE, 25,000,000
SHARES AUTHORIZED, 14,185,135 SHARES
ISSUED AND OUTSTANDING 14,185
TREASURY STOCK (3,600)
PAID IN CAPITAL 2,483,525
ACCUMULATED DEFICIT (2,392,592)
-----------
TOTAL STOCKHOLDERS' EQUITY 101,518
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 159,251
The accompanying notes are an integral part
of these consolidated financial statements.
2
<PAGE>
LONGPORT, INC. FOR THE THREE MONTHS
CONSOLIDATED STATEMENTS OF ENDED SEPTEMBER 30, 1997
OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
NET REVENUES:
MEDICAL SUPPLY SALES & COMMISSIONS $ 1,805
MEDICAL EQUIPMENT RENTALS 800
MANAGEMENT FEES SCANNERS 27,849
----------
TOTAL REVENUES 30,454
OPERATING EXPENSES:
COST OF MEDICAL SUPPLY SALES 2,380
COST OF MEDICAL EQUIPMENT RENTALS 2,500
GENERAL AND ADMINISTRATIVE 60,049
----------
TOTAL OPERATING EXPENSES 65,529
OPERATING INCOME (LOSS) (35,075)
----------
OTHER INCOME (EXPENSE):
INTEREST INCOME --
OTHER INCOME --
GAIN/(LOSS) ON DISPOSAL OF ASSETS --
INTEREST EXPENSE --
OTHER MISC. EXPENSE (93)
----------
TOTAL OTHER INCOME (EXPENSE) (93)
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (35,168)
PROVISION FOR INCOME TAXES 1,696
----------
NET INCOME (LOSS) ($36,864)
==========
NET LOSS PER SHARE OF COMMON STOCK ($0.00)
==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 11,967,532
==========
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE>
LONGPORT, INC. FOR THE NINE MONTHS
CONSOLIDATED STATEMENTS OF ENDED SEPTEMBER 30, 1997
OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
NET REVENUES:
MEDICAL SUPPLY SALES & COMMISSIONS $ 8,899
MEDICAL EQUIPMENT RENTALS 13,470
MANAGEMENT FEES 79,590
SCANNERS --
----------
TOTAL REVENUES 101,959
OPERATING EXPENSES:
COST OF MEDICAL SUPPLY SALES 6,278
COST OF MEDICAL EQUIPMENT RENTALS 3,500
GENERAL AND ADMINISTRATIVE 223,349
RESEARCH AND DEVELOPMENT EXPENSE --
----------
TOTAL OPERATING EXPENSES 233,127
OPERATING INCOME (LOSS) (131,168)
----------
OTHER INCOME (EXPENSE):
INTEREST INCOME 325
OTHER INCOME --
OTHER EXPENSE (845)
GAIN/(LOSS) ON DISPOSAL OF ASSETS (3,900)
INTEREST EXPENSE (318)
----------
TOTAL OTHER INCOME (EXPENSE) (4,738)
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (135,906)
PROVISION FOR INCOME TAXES 2,177
----------
NET INCOME (LOSS) ($138,083)
==========
NET LOSS PER SHARE OF COMMON STOCK ($0.01)
==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 12,359,734
==========
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
LONGPORT, INC. FOR THE NINE MONTHS ENDED
CONSOLIDATED STATEMENTS OF CASH FLOWS SEPTEMBER 30, 1997
(UNAUDITED)
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CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) ($138,083)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)
TO NET CASH (USED) BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 65,482
GAIN/LOSS ON ASSET DISPOSAL 3,900
ISSUANCE OF COMMON STOCK FOR SERVICES
AND TECHNOLOGY --
PROVISION FOR BAD DEBTS 4,300
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) IN ACCOUNTS RECEIVABLE (9,595)
(INCREASE) DECREASE IN OTHER RECEIVABLES 2,684
(INCREASE) IN PREPAID EXPENSES --
(INCREASE) IN INVENTORIES (329)
INCREASE IN ACCOUNTS PAYABLE AND
ACCRUED EXPENSES (15,687)
---------
NET CASH (USED) BY OPERATING ACTIVITIES (87,328)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (15,775)
PROCEEDS FROM ASSET DISPOSAL 3,600
DECREASE IN NOTES RECEIVABLE 13,750
---------
NET CASH (USED) BY INVESTING ACTIVITIES 1,575
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM BORROWING 2,000
PRINCIPAL PAYMENTS ON NOTES PAYABLE (55,200)
ISSUANCE OF COMMON STOCK AND WARRANTS 141,400
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 88,200
---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,447
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,925
---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 5,372
=========
The accompanying notes are an integral part
of these consolidated financial statements.
5
<PAGE>
LONGPORT, INC. FOR THE NINE MONTHS ENDED
CONSOLIDATED STATEMENTS OF CASH FLOWS SEPTEMBER 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
INTEREST $ 318
INCOME TAXES 2,177
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
COMMON STOCK RETURNED TO TREASURY
IN EXCHANGE FOR EQUIPMENT 3,600
COMMON STOCK ISSUED FOR DEBT RETIREMENT 4800
The accompanying notes are an integral part of
these consolidated financial statements.
6
<PAGE>
LONGPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying financial information of the Company is prepared in
accordance with the rules prescribed for filing condensed interim
financial statements and, accordingly, does not include all disclosures
that may be necessary for complete financial statements prepared in
accordance with generally accepted accounting principles. The disclosures
presented are sufficient, in management's opinion, to make the interim
information presented not misleading. All adjustments, consisting of
normal recurring adjustments, which are necessary so as to make the
interim information not misleading, have been made. Results of operations
for the nine months ended September 30, 1997 are not necessarily
indicative of results of operations that may be expected for the year
ending December 31, 1997. It is recommended that this financial
information be read with the complete financial statements included in the
Company's Form 10-KSB dated December 31, 1996 previously filed with the
Securities and Exchange Commission.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of operations
The three months ended September 30, 1997 vs. the three months ended
September 30, 1996.
The Company's operations have been streamlined and General and
Administrative expenses leveled. The Company's revenues continue to be primarily
from Management Fees, through the wound centers at West Jersey Health System's
Camden hospital and West Hudson Hospital, and equipment sales and rentals
derived from the relationships. The Company's expenses remain essentially
unchanged from month to month, including salaries, consulting services and
office expenses.
Overall, the Company's revenues were down 48.17% from the same period
of 1996, $30,454 for 1997, compared to $58,759 for 1996. The decrease resulted
from a lower patient population than anticipated at the wound centers, that has
led to a decrease in equipment rentals. The 1996 revenues also reflected income
related to the Scanner technology. The Company continues to work with the wound
center client's to increase patient populations. Management anticipates
additional wound center clients before the end of 1997 and into 1998, that may
reduce the Company's dependence on its current two clients. The Company does
generate revenues from private patients, but this segment remains small and
outside the Company's focus on securing additional healthcare providers as
clients.
The Company's expenses have leveled during 1997. The overall expenses
are lower when compared to the same period of 1996, $65,529 for 1997, compared
to $67,596 for 1996. This 3% drop resulted from reduced General and
Administrative expenses, but was offset somewhat by increases in the cost of
products for sale and rent. The Net income figures, however, do not make a fair
comparison due to the one-time write-off taken by the Company in the third
quarter of 1996 (related to two transactions caused by the Supra Medical federal
lawsuit). The Company has not incurred any similar expenses in 1997. Thus, the
figures for other income/expenses and net loss are not compared.
8
<PAGE>
The nine months ended September 30, 1997 vs. the nine months ended
September 30, 1996
The Company's revenues for 1997 are lower than the figures for the
period ending September 30, 1996, $101,959 and $149,705 respectively. The
Company's revenue generating sources have not changed. Management fees are lower
due to the one-time start-up fees paid by West Hudson Hospital in 1996. Also, as
described above, lower than expected patient populations in the wound centers
has resulted in lower revenues from equipment rentals. The Company continues to
focus efforts on securing new business in the form of additional wound center
management agreements with larger healthcare providers. The private patient
business remains a small segment of the Company's business and those revenues
are not expected to play a significant part in the Company's growth. The Company
recently had the federal lawsuit, filed against it by Supra Medical, withdrawn
by Supra. The Company also reached an agreement with UMDS whereby the Company
secured full international rights to the Soft Tissue Ultrasound Scanner
technology. The combined effect of the removal of negative litigation and the
securing of the Scanner technology were significant milestones for the Company.
See Part II Litigation.
For the nine month period ended September 30, 1997, the Company
incurred Total Operation Expenses of $233,127 compared to $239,389 in Operating
Expenses for the same period in 1996, a decrease of 2.61%. Management's efforts
to make the Company's operations more cost effective reduced overhead and
administration expenses during 1996 and have been able to maintain that level
through 1997. General and Administrative expenses have been reduced by between
the two periods, from $232,575 for the nine month period in 1996 to $223,349 for
the nine month period in 1997.
The Company's lower expenses leaves it in a much better position from
which to begin an expansion. However, the Company's Net Loss figures again do
not provide a fair comparison due to the significant write-offs taken by the
Company in 1996. Due to the size of Longport, the write-offs resulted in a loss
figure that did not accurately reflect the Company's operations.
9
<PAGE>
Strategy to Achieve Profitable Operations
Management expects the revenues for 1997 to roughly equal the revenues
of 1996. This has been mainly due to the lawsuit filed against the Company by
Supra Medical. However, that lawsuit has been dropped by Supra Medical without
the Company having to pay anything to Supra Medical. Importantly, as part of the
settlement of the Federal lawsuit, the United Medical and Dental Schools of
Guy's and St. Thomas' Hospitals ("UMDS") assigned to the Company all patent
rights held by UMDS in the Soft Tissue Ultrasound Scanner ("Scanner")
technology, including a worldwide license for the fractal analysis software
utilized in the Scanner. See Part II. Legal Proceedings. The Delaware County
lawsuit between the Company and Supra Medical has also been settled without the
Company paying anything to Supra. Thus, the Company has no outstanding
litigation.
The Company anticipates obtaining future consulting service clients,
which should lead to additional revenues from the rental and sales of equipment
to those clients. The Company continues to negotiate with other healthcare
providers to provide consulting services. The removal of all litigation and the
securing of all rights to the Scanner technology, should make it easier for the
Company to secure additional clients. Also, Management is negotiating for
business relationships for the development and manufacture of the Scanner
technology, including FDA clearance to commercially market the Scanner.
Cash flow problems continue to exist, but have stabilized. While the
Company continues to operate without significant working capital, there is
little debt and operating expenses are under control. Management intends to
negotiate future relationships that will improve the Company's cash flow,
increase working capital, and incur minimal expenses. See Liquidity and Capital
Resources and Part II. Legal Proceedings.
Overall, the Company anticipates growth in revenues in 1998. Management
looks to create new relationships that will increase revenues, while controlling
the Company's expenses and debt. The Company continues to explore the
possibility of additional debt or equity financing to provide additional
capital, for the development of the Scanner technology and the expansion of the
business, but can make no assurances that financing can be obtained.
Liquidity and Capital Resources
As of September 30, 1997, the Company has reduced debt and has no more
long term debt or outstanding secured or unsecured Notes. The Company has sold
additional shares of its Common Stock to private investors, who were already
shareholders. Management anticipates that it will have to sell additional
shares of restricted Common Stock to fund any expansions of the business and the
development of the Scanner technology. Management has been able to reduce the
Company's current liabilities from $118,823 as of September 30, 1996, to $57,733
as of September 30, 1997. The Company has eliminated all long term debt.
Management does not expect to incur any significant short-term or long-term
debts within the next twelve months.
10
<PAGE>
The Company did raise capital through the private sale of stock to
current shareholders through October 31, 1997. In September and October, the
Company sold a total of 310,000 shares of the Company's restricted Common Stock.
The shares were sold at the price of fifteen ($.15) cents per share, netting
the Company $46,500.
The Company anticipates growth from management fees, and sales and
rentals of equipment during 1998. Any new Wound Healing Centers contracts will
essentially mirror the relationships the Company now has with West Jersey Health
System and West Hudson Hospital. The Company intends to continue its practice of
acting as a management consultant to the healthcare provider, for a set monthly
fee. In addition, the Company continues to explore the possibility of debt
financing and public or private placements of its common stock, but cannot
provide any assurances that any such financing can be secured.
The Company learned that Medicare Region D is challenging payments made
to the Company's closed subsidiary, Longport Medical, Inc. during 1995 and 1996.
All amounts paid are being challenged and Management does not yet know how much,
if any, will need to be repaid to Medicare.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
The Statements made under the Management's Discussion and Analysis of
Financial Condition and Results of Operations, and other statements within this
document, that are not based on historical facts, are forward looking statements
that involve risks and uncertainties, including but not limited to, market
acceptance risks, the effect of economic conditions, the impact of competition
and pricing, product development, commercialization and technology difficulties,
the results of financing efforts, and other risks detailed in the Company's
Securities and Exchange Commission filings.
11
<PAGE>
Part II
Other Information
Item 1. Legal Proceedings
The Company agreed to a universal settlement with Supra Medical Corp.
as to all outstanding litigation. The Federal District Court action, entitled
Supra Medical Corp. v. James R. McGonigle, et al., civil action no. 96-3737, was
dropped by Supra Medical Corp. against all parties. The Company paid nothing in
the settlement of this matter. As part of this agreement, the matter Longport,
Inc. v. Supra Medical Corp. et al., civil action number 95-14754, was also
discontinued by the Company and Supra Medical. See copy of the Settlement
Agreement attached hereto as Exhibit ____.
Additionally, the Company reached an agreement with UMDS Hugh Lewis
d/b/a Square Wave Systems ("Lewis"), regarding the Scanner technology. UMDS and
Lewis have granted Longport all rights in the Scanner technology, including an
unrestricted license to the image analysis software utilized by the Scanner.
UMDS agreed to return the 100,000 shares of Longport, Inc. Common Stock the
Company originally issued to UMDS as payment under the Research Agreement
between the Company and UMDS. The Research Agreement has been voided.
The Company agreed to pay UMDS and Lewis a royalty, of one (1%) percent
each, on the Company's Gross Revenues from Scanner related business. The royalty
payments will last for five (5) years, beginning on the date the Company secures
FDA clearance to market the Scanner.
Management is reviewing the Company's options concerning legal action
against Supra Medical, its Board of Directors, and its attorneys, due to the
damages caused by the Federal Court action. Due to legal expenses, the Company
did not have enough capital to pay certain creditors and turned over assets to
creditors, including its office building in Swarthmore and medical equipment, as
payment on debt.
12
<PAGE>
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 Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits None.
b) Reports on Form 8-K None.
13
<PAGE>
SIGNATURE
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.
Longport, Inc.
Dated: November 11, 1997 ---------------------------------------
James R. McGonigle
President/Chief Accounting Officer
---------------------------------------
Peter E. Cavanaugh
Vice President
14
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,372
<SECURITIES> 0
<RECEIVABLES> 36,323
<ALLOWANCES> 0
<INVENTORY> 4,759
<CURRENT-ASSETS> 72,454
<PP&E> 393,862
<DEPRECIATION> (331,232)
<TOTAL-ASSETS> 159,251
<CURRENT-LIABILITIES> 57,733
<BONDS> 0
0
0
<COMMON> 14,185
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 159,251
<SALES> 1,805
<TOTAL-REVENUES> 30,454
<CGS> 2,380
<TOTAL-COSTS> 65,529
<OTHER-EXPENSES> (93)
<LOSS-PROVISION> (35,168)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (35,168)
<INCOME-TAX> 1,011
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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</TABLE>
