FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2000
Commission file number: 33-75236
Longport, Inc.
(Name of Small Business Issuer in its charter)
Delaware 23-2715528
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
740 South Chester Rd.
Swarthmore, PA 19081
(Address of principal executive offices)
(Zip Code)
(610) 328-5006
(Issuer's telephone number, including area code)
Indicate by check mark whether the Issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 ___
There are 18,288,360 shares of the Registrants common stock, $.001 par value,
outstanding on April 30, 2000.
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Longport, Inc.
Form 10-QSB
INDEX
Part I. Financial Information Page
----
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
as of March 31, 2000........................................... 1-2
Consolidated Condensed Statements of
Operations for the three months ended
March 31, 2000 and 1999........................................ 3
Consolidated Condensed Statements of Cash
Flows for the three months ended March 31, 2000
and 1999....................................................... 4
Notes to Consolidated Condensed Financial Statements........... 5
Item 2. Management's Discussion and
Analysis of Financial Condition
And Results of Operations...................................... 6-7
Part II. Other Information and Signatures.............................. 8-9
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LONGPORT, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
ASSETS
------
Current Assets:
Cash and cash equivalents $ 1,960,300
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $3,600 306,235
Interest receivable 7,952
Inventories 54,739
Prepaid expenses and other 31,747
Deposits 277,700
-----------
Total Current Assets 2,638,673
-----------
Property and Equipment, at cost:
Medical equipment 588,892
Computer equipment 26,823
Office furniture and equipment 17,844
-----------
633,559
Less accumulated depreciation (124,431)
-----------
Net Property and Equipment 509,128
-----------
Other Assets:
Deposits 4,336
Account receivable, net of current portion 478,125
Intangible assets, net of accumulated
amortization of $54,197 83,755
Note receivable 50,000
-----------
Total Other Assets 616,216
-----------
Total Asset $ 3,764,017
===========
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
1
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LONGPORT, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 68,835
Accrued expenses 10,662
Accrued Medicare obligation 100,000
-----------
Total Current Liabilities 179,497
-----------
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,
18,288,360 shares issued and outstanding 18,288
Paid in capital 8,463,976
Accumulated deficit (4,896,410)
Accumulated other comprehensive loss (1,334)
-----------
Total Stockholders' Equity 3,584,520
-----------
Total Liabilities and Stockholders' Equity $ 3,764,017
===========
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
2
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<TABLE>
<CAPTION>
LONGPORT, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
---- ----
<S> <C> <C>
Net Revenues:
Wound clinic management fees $ 33,000 $ 48,000
License and marketing fees 30,000 78,000
Territorial license fees -- 1,100,000
Scanner enhancement revenue 90,000 --
Other 5,128 8,770
------------ ------------
Total Revenues 158,128 1,234,770
------------ ------------
Operating Expenses:
General and administrative 370,715 223,236
Stock compensation expense 602,910 --
Research and development expense 54,000 --
------------ ------------
Total Operating Expenses 1,027,625 223,236
------------ ------------
Operating Income (Loss) (869,497) 1,011,534
------------ ------------
Other Income (Expense):
Interest income 18,539 --
------------ ------------
Total Other Income (Expense) 18,539 --
------------ ------------
Income (Loss) Before Provision for Income Taxes (850,958) 1,011,534
Provision for income taxes 9,581 --
------------ ------------
Net Income (Loss) $ (860,539) $ 1,011,534
============ ============
Net Income (Loss) Per Share of Common Stock:
Basic $ (.05) $ .06
Diluted $ (.05) $ .06
Weighted Average Number of Common Shares Outstanding:
Basic 18,238,053 16,130,949
Diluted 18,238,053 16,740,971
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
3
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LONGPORT, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
---- ----
Cash Flows From Operating Activities:
Net income (loss) $ (860,539) $ 1,011,534
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization 44,791 7,075
Common stock issued for services 10,989 --
Compensation from issuance of *stock options 602,910 --
Changes in assets and liabilities:
Accounts receivable (15,631) (907,247)
Other receivables (1,508) --
Prepaid expenses and other (97,674) 14,461
Inventories (36,426) --
Accounts payable and accrued expenses 28,461 9,248
----------- -----------
Net Cash Provided (Used) By Operating Activities (324,627) 135,071
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (59,121) (36,314)
Note receivable (50,000) --
Employee advances 48,844 --
----------- -----------
Net Cash (Used) By Investing Activities (60,277) (36,314)
----------- -----------
Cash Flows From Financing Activities:
Issuance of common stock 75,000 --
Purchase of treasury stock (75,000) --
----------- -----------
Net Cash Provided By Financing Activities -- --
----------- -----------
Effect of exchange rate changes on cash and cash equivalents (702) --
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (385,606) 98,757
Cash and Cash Equivalents at Beginning of Period 2,345,906 127,853
----------- -----------
Cash and Cash Equivalents at End of Period $ 1,960,300 $ 226,610
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ --
Income taxes 9,581 --
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
4
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LONGPORT, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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 three months ended March 31, 2000 are
not necessarily indicative of results of operations that may be expected for the
year ending December 31, 2000. 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, 1999 previously filed with the Securities and Exchange
Commission.
2. Basic earnings per common share is calculated by dividing net income (loss)
for the period by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is calculated by dividing net
income (loss) for the period by the weighted average number of common shares
outstanding during the period increased by the dilutive potential common shares
("dilutive securities") that were outstanding during the period. Dilutive
securities include outstanding stock options and warrants. Dilutive securities
relating to stock options and warrants are included in the calculation of
diluted earnings per share using the treasury stock method.
The schedule below summarizes the elements included in the calculation of basic
and diluted net income (loss) per common share for the three months ended March
31, 2000 and 1999. For the three months ended March 31, 2000, warrants to
purchase 3,325,714 common shares were excluded from the calculation of diluted
net income (loss) per share, as their effect would have been antidilutive. For
the three months ended March 31, 1999 options and warrants to purchase 1,185,714
common shares were excluded from the calculation of diluted net income (loss)
per share, as their effect would have been antidilutive.
Three Months Ended
March 31,
---------
2000 1999
---- ----
Net income (loss) $ (860,539) $ 1,011,534
============ ============
Weighted-average common shares outstanding:
Weighted average common shares outstanding -
Basic 18,238,053 16,130,949
Dilutive securities -- 610,022
------------ ------------
Weighted-average common shares outstanding -
Diluted 18,238,053 16,740,971
============ ============
Net income (loss) per common share:
Basic $ (.05) $ .06
Diluted $ (.05) $ .06
5
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
The three months ended March 31, 2000 vs.
the three months ended March 31, 1999
Revenues for 2000 were $158,128 compared to $1,234,770 for 1999. Revenues from
licensee fees and territorial license fees decreased from $1,178,000 in 1999 to
$30,000 in 2000. This significant decrease in revenues is directly attributed to
a licensing agreement, which called for a one-time fee of $1,000,000 in 1999.
The Company also received $90,000 in scanner enhancement revenue as part of the
$5,000,000 Healthlink International agreement. The Company does not expect to
generate significant revenues in the future from license fees. The Company
believes the majority of its future revenues will be from scanner sales or
leases.
Total expenses increased to $1,027,625 in 2000 from $223,236 in 1999. The main
component of the increases in expenses in 2000 is from a one time expense
associated with the issuance of stock options to outside consultants that the
Company believes are important to the long-term future growth of the Company.
The Company valued the stock options using the Black- Scholes option pricing
model. The Company also incurred expenses associated with two studies on the
Longport Digital Scanner. The Company believes there will be additional costs
associated with future studies of the scanner in helping to evaluate the market
potential for the scanner in specific medical disciplines. The Company increased
its general and administrative expenses from $223,236 in 1999 to $370,715 in
2000. This increase can be attributed to the hiring of additional employees and
consultants in order to help facilitate commercialization of the scanner.
Research and Development expenses were $54,000 in 2000 compared to none in 1999.
The Company expects this amount to increase as it begins to use the scanner in
different medical applications.
The Company experienced a net loss of $860,539 in 2000, compared to a net profit
of $1,011,534 for 1999. This significant change is the result of the expense
associated with the issuance of stock options in 2000 and the one time
territorial licensee fee of $1,000,000 in 1999. The Company also continues to
receive revenue from its ongoing management of two wound healing centers.
Strategy to Achieve Profitable Operations
Management expects the revenues for 2000 to continue to grow directly as a
result of the sale and lease of the Longport Digital Scanner. After receiving
FDA marketing clearance in June 1999, the Company has spent significant time and
effort on the commercialization process for the scanner. Studies have begun and
data continues to be collected in order to gain "peer acceptance" for our
scanner. We also underwent the task of hiring experts to help us determine the
many reimbursement issues which exist. Reimbursement is critical within the
medical community because it represents the dollar amount a physician can bill
either Medicare or private health insurance for performing a medical procedure
using our product. This also helped the Company in determining which medical
disciplines to enter first and the price for which a physician is willing to
pay. The final areas of concern for commercialization and then profitability are
"peer acceptance" and production and distribution.
6
<PAGE>
The "peer acceptance" can occur in many different ways and this is an on-going
process. We have initiated several United States based studies in various
disciplines, which we believe will lead to articles being published about the
scanner and its advantages. It is these so called "white papers" which the
medical community tends to want to see prior to purchasing scanners. The Company
believes that one of the primary advantages to its scanner is that it has
numerous uses in the field of medicine. The same scanner can be used to help
diagnose pressure ulcers or help in the diagnosis of a burn. It is these
different medical "disciplines" or "specialties" that allows the Company to have
one primary product, but have several different markets and multiple
applications.
The production and distribution of the scanner are the final areas the Company
is faced with as we begin full commercialization of the scanner. We presently
have two manufacturers that can produce scanners, however, both companies have a
lead-time of approximately 60 days for delivery of a unit. The Company does not
expect to be profitable in 2000 as it ramps up its production and marketing for
the Longport Digital Scanner. The Company expects to be ready to fully market
the scanner later this year.
Liquidity and Capital Resources
As of March 31, 2000, the Company has $1,960,300 in cash and cash equivalents
and no long-term debt. The Company expects that additional cash will need to be
raised in order to produce and market the Company's scanners. The timing of
raising additional financing will be directly related to when the Company begins
to fully commercialize the scanner. At this time, the Company believes that full
commercialization will begin in the fourth quarter of 2000.
Longport International LTD.
The Company formed Longport International, LTD, a wholly owned subsidiary, in
1999 to be the marketing arm of the Company for business generated outside North
America. Longport International, LTD began building new scanners using our
second manufacturer, SRA Developments LTD ("SRA"). The Company is awaiting
delivery of its first scanner produced by SRA and expects to have the European
"CE" marked designation by the third quarter of 2000. The Company does not
believe that Longport International, LTD will generate any revenues until after
the "CE" mark is received.
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.
7
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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.
Reports on Form 8-K: During the three months covered by this report, the Company
filed no reports on form 8-K.
8
<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 thereto duly authorized.
Date: May 10, 2000 Longport, Inc.
/s/ James R. McGonigle
----------------------
James R. McGonigle
Chief Executive Officer, Chief Financial Officer
(Principal Accounting Officer), and Director
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,960,300
<SECURITIES> 0
<RECEIVABLES> 787,960
<ALLOWANCES> 3,600
<INVENTORY> 54,739
<CURRENT-ASSETS> 2,638,673
<PP&E> 633,559
<DEPRECIATION> 124,431
<TOTAL-ASSETS> 3,764,017
<CURRENT-LIABILITIES> 179,497
<BONDS> 0
0
0
<COMMON> 18,288
<OTHER-SE> 3,566,232
<TOTAL-LIABILITY-AND-EQUITY> 3,764,017
<SALES> 0
<TOTAL-REVENUES> 158,128
<CGS> 0
<TOTAL-COSTS> 1,027,625
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (850,958)
<INCOME-TAX> 9,581
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (860,539)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
