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, 1998
[ ] 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.
(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
(Address of principal executive offices)
610-328-5006
(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, 1998, 15,591,282 shares of common stock were outstanding.
<PAGE>
LONGPORT, INC.
FORM 10-QSB
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
as of September 30, 1998 1-2
Consolidated Condensed Statements of
Operations for the three months
and nine months ended September 30,
1998 and 1997 3-4
Consolidated Condensed Statements of Cash
Flows for the nine months ended September
30, 1998 and 1997 5-6
Notes to Consolidated Condensed 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 12-13
<PAGE>
LONGPORT, INC. AND SUBSIDIARY SEPTEMBER 30, 1998
CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
CASH $ 51,509
ACCOUNTS RECEIVABLE:
TRADE, NET OF ALLOWANCE FOR DOUBTFUL
ACCOUNTS OF $3,600 66,802
INTEREST AND OTHER 1,887
PREPAID EXPENSES 2,750
INVENTORIES 3,400
NOTE RECEIVABLE 7,500
---------
TOTAL CURRENT ASSETS 133,848
---------
PROPERTY AND EQUIPMENT, AT COST:
MEDICAL EQUIPMENT 394,148
COMPUTER EQUIPMENT 6,615
OFFICE FURNITURE AND EQUIPMENT 7,901
---------
408,664
LESS ACCUMULATED DEPRECIATION (272,867)
---------
NET PROPERTY AND EQUIPMENT 135,797
---------
OTHER ASSETS:
NOTES RECEIVABLE
INTANGIBLE ASSETS, NET OF ACCUMULATED
AMORTIZATION OF $33,333 16,667
---------
TOTAL OTHER ASSETS 16,667
---------
TOTAL ASSETS $ 286,312
=========
The accompanying notes are an integral part of these
consolidated condensed financial statements
1
<PAGE>
LONGPORT, INC. AND SUBSIDIARY SEPTEMBER 30, 1998
CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 36,066
ACCRUED EXPENSES:
SALARIES AND PAYROLL TAXES 7,313
DEFERRED REVENUE 12,286
-----------
TOTAL CURRENT LIABILITIES 55,665
LONG-TERM DEBT, NET OF CURRENT PORTION 0
-----------
COMMITMENTS AND CONTINGENCIES --
STOCKHOLDER'S 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,
15,591,282 SHARES ISSUED & OUTSTANDING 15,591
PAID IN CAPITAL 2,958,119
ACCUMULATED DEFICIT (2,738,063)
===========
235,647
LESS TREASURY STOCK, AT COST (30,000 COMMON SHARES) (5,000)
-----------
TOTAL STOCKHOLDERS' EQUITY 230,647
===========
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 286,312
===========
The accompanying notes are an integral part of these
consolidated condensed financial statements
2
<PAGE>
FOR THE THREE MONTHS
LONGPORT, INC. AND SUBSIDIARY ENDED SEPTEMBER 30,
CONSOLIDATED CONDENSED STATEMENTS OF 1998 1997
OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
NET REVENUES:
MEDICAL SUPPLY SALES $ 2,621 $ 1,805
MEDICAL EQUIPMENT RENTALS 4,325 800
MANAGEMENT FEES 21,472 27,849
LICENSE FEES 33,214 --
TERRITORIAL LICENSE FEES 75,500 --
------------ ------------
TOTAL REVENUES 137,132 30,454
------------ ------------
OPERATING EXPENSES:
COST OF MEDICAL SUPPLY SALES -- 2,380
COST OF MEDICAL EQUIPMENT RENTALS 3,223 2,500
GENERAL AND ADMINISTRATIVE 105,009 60,649
------------ ------------
TOTAL OPERATING EXPENSES 108,232 65,529
------------ ------------
OPERATING INCOME (LOSS) 28,900 (35,075)
------------ ------------
OTHER INCOME (EXPENSE):
OTHER EXPENSE (93)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) 0 (93)
------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 28,900 (35,168)
PROVISION FOR INCOME TAXES -- 1,696
------------ ------------
NET INCOME (LOSS) $ 28,900 ($ 36,864)
============ ============
NET LOSS PER SHARE OF COMMON STOCK:
BASIC $ 0.00 $ 0.00
DILUTED $ 0.00 $ 0.00
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
BASIC 15,478,130 11,967,532
DILUTED 15,478,130 11,967,532
The accompanying notes are an integral part of these
consolidated condensed financial statements
3
<PAGE>
FOR THE NINE MONTHS ENDED
LONGPORT, INC. AND SUBSIDIARY SEPTEMBER 30,
CONSOLIDATED CONDENSED STATEMENTS OF 1998 1997
OPERATIONS (UNAUDITED) (UNAUDITED)
- --------------------------------------------------------------------------------
NET REVENUES:
MEDICAL SUPPLY SALES 7,844 $ 8,899
MEDICAL EQUIPMENT RENTALS 7,525 13,470
MANAGEMENT FEES 76,500 79,590
LICENSE FEES 125,214 --
TERRITORIAL LICENSE FEES 75,500 --
------------ ------------
TOTAL REVENUES 292,583 101,959
============ ============
OPERATING EXPENSES:
COST OF MEDICAL SUPPLY SALES 3,403 6,278
COST OF MEDICAL EQUIPMENT RENTALS 5,024 3,500
GENERAL AND ADMINISTRATIVE 535,346 223,349
------------ ------------
TOTAL OPERATING EXPENSES 543,773 233,127
============ ============
OPERATING INCOME (LOSS) (251,190) (131,168)
------------ ------------
OTHER INCOME (EXPENSE):
INTEREST INCOME -- 325
OTHER EXPENSE -- (845)
GAIN (LOSS) ON DISPOSAL OF ASSETS -- (3,900)
INTEREST EXPENSE -- (318)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) 0 (4,738)
============ ============
(LOSS) BEFORE PROVISION FOR
INCOME TAXES (251,190) (135,906)
PROVISION FOR INCOME TAXES -- 2,177
------------ ------------
NET LOSS ($ 251,190) ($ 138,083)
============ ============
NET LOSS PER SHARE OF COMMON STOCK:
BASIC ($ 0.02) ($ 0.01)
DILUTED ($ 0.02) ($ 0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
BASIC 15,275,294 12,359,734
DILUTED 15,275,294 12,359,734
The accompanying notes are an integral part of these
consolidated condensed financial statements
4
<PAGE>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
LONGPORT, INC. AND SUBSIDIARY 1998 1997
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (UNAUDITED)
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) ($251,190) ($138,083)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH (USED) BY
OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 18,000 65,482
GAIN ON EQUIPMENT DISPOSAL 3,900
PROVISION FOR BAD DEBTS 4,300
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) IN ACCOUNTS RECEIVABLE (62,526) (9,595)
DECREASE IN OTHER RECEIVABLES 1,200 2,684
DECREASE IN PREPAID EXPENSES 16,750
(INCREASE) IN INVENTORIES (1,200) (329)
INCREASE (DECREASE) IN ACCOUNTS PAYABLE
AND ACCRUED EXPENSES 42,818 (15,687)
--------- ---------
NET CASH (USED) BY OPERATING ACTIVITIES (236,148) (87,328)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (103,490) (15,775)
PROCEEDS FROM ASSET DISPOSAL -- 3,600
PAYMENTS RECEIVED ON NOTES RECEIVABLE 11,250 13,750
--------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (92,240) 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 343,500 141,400
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 343,500 88,200
--------- ---------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 15,112 2,447
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 36,397 2,925
========= =========
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 51,509 $ 5,372
========= =========
The accompanying notes are an integral part of these
consolidated condensed financial statements
5
<PAGE>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
LONGPORT, INC. AND SUBSIDIARY 1998 1997
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (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 ISSUED FOR MEDICAL EQUIPMENT $62,500 --
COMMON STOCK ISSUED FOR DEBT RETIREMENT -- 4,800
COMMON STOCK RETURNED TO TREASURY IN
EXCHANGE FOR EQUIPMENT -- 3,600
The accompanying notes are an integral part of these
consolidated condensed financial statements
6
<PAGE>
LONGPORT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED 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, 1998 are not necessarily indicative of results of operations
that may be expected for the year ending December 31, 1998. 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, 1997 previously filed with the Securities and Exchange Commission.
2. As of December 31, 1997, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share", which specifies
the method of computation, presentation and disclosure for earnings per
share. SFAS No. 128 requires the presentation of two earnings per share
amounts, basic and diluted.
Basicearnings per share is calculated using the average number of common
shares outstanding. Diluted earnings per share is computed on the basis of
the average number of common shares outstanding plus the dilutive effect of
outstanding stock options using the "treasury stock" method.
The basic and diluted earnings per share are the same since the Company had
a net loss for 1998 and 1997 and the inclusion of stock options and
warrants would be antidilutive. Options and warrants to purchase 1,185,714
and 1,429,714 shares of common stock at September 30, 1998 and 1997
respectively were not included in the computation of diluted earnings per
share because the Company had a net loss and their effect would be
antidilutive.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of operations
The three months ended September 30, 1998 vs.
the three months ended September 30, 1997.
------------------------------------------
The Company's operations have undergone a significant transformation as
management has become more focused on the development of the Scanner technology.
This development has been the driving force behind the dramatic increase in
general and administrative expenses. This has also been a driving force behind
the Company's increased revenues, which more than doubled from the three-month
period for 1997. The Company's revenues from Management Fees, through the wound
centers at West Jersey Health System's Camden hospital and West Hudson Hospital,
have been far eclipsed by the licensing fees that are related to the Company=s
general wound healing programs, including the scanner and the topical hyperbaric
oxygen products. The Company's regular expenses, such as salaries and general
office expenses remain essentially unchanged from month to month, with the
increase coming from expenses related to the development and refinement of the
scanner.
Overall, the Company's revenues more than quadrupled from the same period
of 1997, $137,132 for 1998, compared to $30,454 for 1997. The increase resulted
primarily from two sources. The sale of territorial licenses resulted in revenue
of $75,500, and licensing fees produced $33,214. Unfortunately, there was no
similar revenue stream for licensing fees in 1997, so these figures cannot be
adequately compared. The revenues for management fees remain essentially static,
but product sales and rentals increased by $4,541.
The Company's general and administrative expenses have increased rather
dramatically between the two periods, nearly doubling from the figure for 1997,
$60,649 versus $105,009 for 1998. Management believes that these figures are not
proper comparisons regarding the Company=s performance since the level of
activity directed towards the Scanner has changed as a result of the Company=s
securing full patent and intellectual property rights after June 30, 1997. The
Company=s expenses related to daily business activities has not increased, as
evidenced by the static nature of the cost of medical supplies and equipment
rentals. The increases in general and administrative expenses are directly
related to the Scanner's development.
The Company's stability and focus can be seen in the comparison of three
figures in its balance Sheet: Medical Equipment, Total Current Liabilities, and
Stockholders' Equity. Medical equipment has better than tripled since September
30, 1997, reflecting the purchase of additional Scanners for research projects.
The Company now has Scanners at the West Jersey and West Hudson Wound Healing
Centers, and multiple Scanners committed to various research projects.
Management is in the final stages of submitting the Scanner as a finished
product for Federal Drug Administration approval.
8
<PAGE>
The nine months ended September 30, 1998 vs.
the nine months ended September 30, 1997
----------------------------------------
Comparison of the Company's operations for the nine-month period
essentially follows that of the three-month period comparison described above.
The Company has almost tripled revenues for the nine-month period in 1998, as
compared to 1997. However, since the increase can be attributed to the revenues
from licensing fees, which did not exist in 1997, the figures are not proper for
comparison. The same holds true for the expenses, which also more than doubled
for 1998, as compared to 1997. This increase is directly related to the research
and development of the scanner technology. These figures do not make a fair
comparison, since the Company did not obtain the additional rights to the
technology until after June 30, 1997, and thus did not have as great a focus on
the development of the technology as it presently has.
9
<PAGE>
Strategy to Achieve Profitable Operations
Management expects the revenues for 1998 to continue to grow over and above
those for 1997, directly as a result of the licensing relationships it now
promotes. This will likely correspond with increasing expenses related to the
development of the Scanner, and the eventual filing for FDA Medical Device
marketing clearance. The Company anticipates obtaining future licensing and
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.
Management continues negotiating for business relationships for the marketing of
the Scanner technology, in anticipation of filing for FDA clearance to
commercially market the Scanner.
Cash flow problems essentially no longer exist. The revenues currently
coming in permit the Company to meet its regular obligations, including
salaries. The Company seeks outside sources for additional Capital as needed to
fund research projects or significant portions of the Scanner development
projects. Otherwise, the Company utilizes the cash remaining on a monthly basis
to support ongoing research and marketing activities. Management intends to
negotiate future relationships that will not damage the Company's current cash
flow, or incur significant 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 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
The Company's Current Liabilities are approximately at the same level as
that of September 30, 1997. Management does not expect to incur significant
liabilities in the future. As for the stockholders' equity, it has increased to
$230,647 for 1998 versus $101,518 for 1997.
As of September 30, 1998, the Company's Current Liabilities were $55,665,
with no long-term debt. 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 does not expect to incur any significant short-term or
long-term debt within the next twelve months.
The Company raised capital through the private sale of common stock to
current shareholders through September 30, 1998. In July, an option was
exercised for 100,000 shares at $.10 per share, and in September, the Company
sold 70,000 shares at $.60 per share.
10
<PAGE>
The Company anticipates growth from additional license agreements,
management fees, and sales and rentals of equipment during 1998. New license
agreements and Wound Healing Center contracts will essentially mirror the
agreements the Company now has in place. The Company intends to continue its
practice of acting as a management consultant to healthcare providers, for a
fixed monthly fee. In addition, the Company continues to explore the possibility
of public or private placements of its common stock, but cannot provide any
assurance that any such financing can be obtained.
The Company learned that Medicare Region D is challenging payments made to
the Company's closed subsidiary, Longport Medical, Inc. during 1995 and 1994.
All amounts paid are being challenged and Management does not yet know whether
any amounts will need to be repaid to Medicare. As of September 30, 1998, no
hearing date has been scheduled.
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 continues in its pursuit of recovery for damages against the
attorneys who brought the federal lawsuit against the Company on behalf of Supra
Medical Corp. There have been no significant events to report during this three
month period.
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.
12
<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: October 5, 1998 ------------------------------------
James R. McGonigle
President/Chief Accounting Officer
------------------------------------
Peter E. Cavanaugh
Vice President
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM FORM 10-QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 51,509
<SECURITIES> 0
<RECEIVABLES> 70,402
<ALLOWANCES> 3,600
<INVENTORY> 3,400
<CURRENT-ASSETS> 133,848
<PP&E> 408,664
<DEPRECIATION> (272,867)
<TOTAL-ASSETS> 286,312
<CURRENT-LIABILITIES> 55,665
<BONDS> 0
0
0
<COMMON> 15,591
<OTHER-SE> 215,056
<TOTAL-LIABILITY-AND-EQUITY> 286,312
<SALES> 7,844
<TOTAL-REVENUES> 292,583
<CGS> 3,403
<TOTAL-COSTS> 543,773
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (251,190)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (251,190)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
