SECURITIES AND EXCHANGE COMMISION
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 quarter ended September 30, 2000
( ) Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to _________________
Commission file number: 33-75236
Longport, Inc.
--------------------------------------------
(Name of Small Business Issuer in its charter)
Delaware 23-2715528
--------------------------- --------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Organization) Identification Number)
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 were 17,933,097 shares of the Registrants common stock, $.001 par value
Outstanding on September 30, 2000.
<PAGE>
Longport, Inc
Form 10-QSB
INDEX
Part 1. Financial Information Page
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
as of September 30, 2000............................ 1-2
Consolidated Condensed Statements of
Operations for the three and nine months
Ended September 30, 2000 and 1999................... 3
Consolidated Condensed Statements of
Cash Flows for the nine months ended September
30, 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
<PAGE>
LONGPORT, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
ASSETS
------
Current Assets:
Cash and cash equivalents $ 491,232
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $3,600 298,544
Inventories 56,765
Prepaid expenses and other 6,919
Deposits 277,700
Marketable securities 200,000
-----------
Total Current Assets 1,331,160
-----------
Property and Equipment, at cost:
Medical equipment 711,002
Computer equipment 38,041
Office furniture and equipment 21,302
-----------
770,345
Less accumulated depreciation (200,671)
-----------
Net Property and Equipment 569,674
-----------
Other Assets:
Deposits 4,336
Account receivable, net of current portion 371,000
Intangible assets, net of accumulated amortization of $60,261 77,691
-----------
Total Other Assets 453,027
-----------
Total Assets $ 2,353,861
===========
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
1
<PAGE>
LONGPORT, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 57,332
Accrued expenses 12,086
Accrued Medicare obligation 100,000
-----------
Total Current Liabilities 169,418
-----------
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,
17,933,097 shares issued and outstanding 17,933
Paid in capital 8,000,812
Accumulated deficit (5,806,865)
Accumulated other comprehensive loss (27,437)
-----------
Total Stockholders' Equity 2,184,443
-----------
Total Liabilities and Stockholders' Equity $ 2,353,861
===========
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
LONGPORT, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
--------------- ---------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net Revenues:
<S> <C> <C> <C> <C>
Wound clinic management fees $ 9,500 $ 48,000 $ 68,000 $ 144,000
License and marketing fees 30,000 59,000 86,000 230,000
Territorial license fees -- -- -- 1,100,000
Scanner enhancement revenue -- 90,000 90,000 120,000
License purchase option -- 90,000 -- 120,000
Other 2,888 3,600 15,785 16,722
------------ ------------ ------------ ------------
Total Revenues 42,388 290,600 259,785 1,730,722
------------ ------------ ------------ ------------
Operating Expenses:
General and administrative 317,937 207,841 1,329,071 602,528
Stock compensation expense -- -- 602,910 --
Research and development expense 4,500 41,968 143,700 65,185
------------ ------------ ------------ ------------
Total Operating Expenses 322,437 249,809 2,075,681 667,713
------------ ------------ ------------ ------------
Operating Income (Loss) (280,049) 40,791 (1,815,896) 1,063,009
------------ ------------ ------------ ------------
Other Income (Expense):
Interest income 12,080 13,292 54,584 13,887
------------ ------------ ------------ ------------
Total Other Income (Expense) 12,080 13,292 54,584 13,887
------------ ------------ ------------ ------------
Income (Loss) Before Provision for Income Taxes (267,969) 54,083 (1,761,312) 1,076,896
Provision for income taxes -- -- 9,682 --
------------ ------------ ------------ ------------
Net Income (Loss) $ (267,969) $ 54,083 $ (1,770,994) $ 1,076,896
============ ============ ============ ============
Net Income (Loss) Per Share of Common Stock:
Basic $ (.02) $ -- $ (.10) $ .06
Diluted $ (.02) $ -- $ (.10) $ .06
Weighted Average Number of Common Shares Outstanding:
Basic 17,932,816 17,634,412 18,097,711 17,005,734
Diluted 17,932,816 18,795,556 18,097,711 17,851,907
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
3
<PAGE>
LONGPORT, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
----------- -----------
Cash Flows From Operating Activities:
Net income (loss) $(1,770,994) $ 1,076,896
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization 127,095 21,225
Common stock issued for services 93,970 --
Compensation from issuance of stock options 602,910 --
Changes in assets and liabilities:
Accounts receivable 75,185 (867,521)
Other receivables 6,444 (500)
Prepaid expenses and other (72,846) (14,062)
Inventories (38,452) (6,329)
Accounts payable and accrued expenses 18,382 (12,202)
----------- -----------
Net Cash Provided (Used) By Operating Activities (958,306) 197,507
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (195,907) (305,815)
Note receivable (50,000) --
Employee advances 48,844 --
Investment in marketable securities (200,000) --
Payment for European license rights -- (87,952)
Payment for patents and copyrights -- (1,248)
----------- -----------
Net Cash (Used) By Investing Activities (397,063) (395,015)
----------- -----------
Cash Flows From Financing Activities:
Issuance of common stock 75,000 2,508,500
Purchase of treasury stock (547,500) (17,355)
Payment of dividends -- (171,084)
----------- -----------
Net Cash Provided (Used) By Financing Activities (472,500) 2,320,061
----------- -----------
Effect of exchange rate changes on cash and cash equivalents (26,805) --
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (1,854,674) 2,122,553
Cash and Cash Equivalents at Beginning of Period 2,345,906 127,853
----------- -----------
Cash and Cash Equivalents at End of Period $ 491,232 $ 2,250,406
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ --
Income taxes 9,682 --
Supplemental Disclosure of Noncash Investing and
Financing Activities:
Repayment of note receivable and account receivable
through return of shares of the Company's common stock 74,000 --
Common stock issued for stock subscription receivable -- 100,000
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
4
</TABLE>
<PAGE>
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 nine months ended September 30, 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 and nine months
ended September 30, 2000 and 1999. For the three and nine months ended September
30, 2000, options and warrants to purchase 2,825,714 common shares were excluded
from the calculation of diluted net income (loss) per share, as their effect
would have been antidilutive.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2000 1999 2000 1999
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Net income (loss) $ (267,969) $ 54,083 $ (1,770,994) $ 1,076,896
============ ============ ============ ==============
Weighted average common shares outstanding:
Weighted average common shares outstanding -
Basic 17,932,816 17,634,412 18,097,711 17,005,734
Dilutive securities -- 1,161,144 -- 846,173
------------ ------------ ------------ --------------
Weighted average common shares outstanding -
Diluted 17,932,816 18,795,556 18,097,711 17,851,907
============ ============ ============ ==============
Net income (loss) per common share:
Basic $ (.02) $ -- $ (.10) $ .06
Diluted $ (.02) $ -- $ (.10) $ .06
5
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
The three months ended September 30, 2000 vs.
the three months ended September 30, 1999
Revenues for 2000 were $42,388 compared to $290,600 for 1999. Revenues from
licensee fees decreased from $59,000 in 1999 to $30,000 in 2000. Due to the
termination of the company's scanner enhancement agreement in May 2000, revenues
from scanner enhancements decreased from $90.000 in 1999 to $ 0 in 2000. Revenue
from license purchase options decreased from $ 90.000 in 1999 to $ 0 in 2000.
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 $322,437 in 2000 from $249,809 in 1999. The Company
increased its general and administrative expenses from $207,841 in 1999 to
$317,937 in 2000. This increase can be attributed to the hiring of additional
employees and consultants in order to help facilitate commercialization of our
scanner. Research and development expenses were $4,500 in 2000 compared to
$41,968 in 1999. The Company expects research and development expenses to
increase as it begins to use the scanners in different medical applications.
The Company experienced a net loss of $267,969 in 2000, compared to net income
of $54,083 for 1999. This significant change is the result of the increase in
general and administrative for 2000 as compared to 1999 coupled with the
decrease in revenue.
The nine months ended September 30, 2000 vs.
the nine months ended September 30, 1999.
Revenues for 2000 were $259,785 compared to $1,730,722 for 1999. Revenues from
license fees and territorial license fees decreased from $1,330,000 in 1999 to
$86,000 in 2000. This significant decrease in revenues is directly attributed to
a licensing agreement, which called for a one-time license fee of $1,000,000 in
1999. The Company does not expect to generate significant revenues in the future
from license fees. Due to the termination of the company's scanner enhancement
agreement in May 2000, revenues from the scanner enhancements decreased from
$120,000 in 1999 to $ 90.000 in 2000. Revenues from license purchase options
decreased from $120,000 in 1999 to $ 0 in 2000. The Company believes the
majority of its future revenues will be from scanner sales or leases.
Total expenses increased to $2,075,681 in 2000 from $667,713 in 1999. The main
component of the increase in expenses in 2000 is from a one time expense
associated with the issuance of stock options to outside consultants of $602,910
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 $602,528 in
1999 to $1,329,071 in 2000. This increase can be attributed to the hiring of
additional employees and consultants in order to help facilitate
commercialization of the scanner. We also incurred over $100,000 of legal and
expert fees associated with the lawsuit against attorneys who previously brought
a lawsuit against the Company on behalf of Supra Medical Corp.
-6-
<PAGE>
Research and Development expenses were $143,700 in 2000 compared to $65,185 in
1999. The Company expects research and development expenses to continue to
increase as it begins to use the scanner in different medical applications.
The Company experienced a net loss of $1,770,994 in 2000, compared to a net
income of $1,076,896 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 license fee of $1,000,000 in 1999.
Strategy to Achieve Profitable Operations
Management expects the revenues for the fourth quarter to be derived from the
sale and/or lease of the Longport Digital Scanner ("LDS"). 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. The LDS now has been approved for Medicare and private insurance
reimbursement. The Company has been granted the U.S. Patent in June 2000 for the
LDS. The final areas of concern for commercialization and then profitability are
"peer acceptance" and production and distribution.
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 (applications) in the field of medicine. It is the 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 sixty 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 September 30, 2000, the Company has $491,232 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 first quarter of 2001.
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 did receive
delivery on the first scanner produced by SRA on August 22, 2000. Longport
International Ltd., together with its manufacturer, SRA Developments Ltd, has
successfully addressed the relevant Essential Requirements of the European
Medical Devices Directorate (93/42/EEC) for its high-resolution ultrasound
imaging technology. This, together with adherence to the ISO-9001 subset
BS-EN-46001 manufacturing quality standard enables a CE mark to be placed on the
Company's ultrasound system, which is to be marked under the name EPISCAN
Recently issued Accounting Standards
The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin
(SAB) 101, Revenue Recognition in Financial Statements, in December 1999. The
SAB summarizes certain of the SEC staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. In June
2000, the SEC issued SAB 101B, which delays the implementation date of SAB 101
until no later then the fourth fiscal quarter of the fiscal year beginning after
December 15,1999. The Company does not believe that adoption of this SAB will
have a material impact on its financial statements.
-7-
<PAGE>
In March 2000, the Financial Accounting Statements Board (FASB) issued FASB
interpretation (FIN) 44. Accounting for Certain Transaction Involving Stock
Compensation, which clarifies the application of APB 25 for certain issues. The
interpretation is effective July 1, 2000, expect for the provisions that relate
to modifications that directly or indirectly reduce the exercise price of an
award and the definition of am employee, which are effective after December
15,1998. The company does not believe that adoption of FIN 44 will have a
material impact on its financial statements.
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.
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: November 20, 2000 Longport, Inc.
/s/ James R. McGonigle
------------------------------------------------
James R. McGonigle
Chief Executive Officer, Chief Financial Officer
(Principal Accounting Officer) and Director
-9-
