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 quarter ended June 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.
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(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
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(Address of principal executive offices)
(Zip Code)
(610) 328-5006
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(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
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There are 17,939,229 shares of the Registrants common stock, $.001 par value
outstanding on June 30, 2000.
<PAGE>
Longport, Inc
Form 10-QSB
INDEX
Part I. Financial Information Page
----
Item 1. Financial Statements
Consolidated Balance Sheet
as of June 30,2000.......................................... 1-2
Consolidated Condensed Statements of
Operations for the three and six months
ended June 30, 2000 and 1999................................ 3
Consolidated Condensed Statements of
Cash Flows for the six months ended June
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
JUNE 30, 2000
ASSETS
------
Current Assets:
Cash and cash equivalents $ 765,257
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $3,600 289,480
Inventories 56,269
Prepaid expenses and other 20,320
Deposits 277,700
Marketable securities 200,000
-----------
Total Current Assets 1,609,026
-----------
Property and Equipment, at cost:
Medical equipment 594,516
Computer equipment 35,138
Office furniture and equipment 18,659
-----------
648,313
Less accumulated depreciation (164,051)
-----------
Net Property and Equipment 484,262
-----------
Other Assets:
Deposits 4,336
Account receivable, net of current portion 436,062
Intangible assets, net of accumulated amortization of $58,062 79,890
-----------
Total Other Assets 520,288
-----------
Total Assets $ 2,613,576
===========
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
JUNE 30, 2000
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 34,497
Accrued expenses 8,532
Accrued Medicare obligation 100,000
-----------
Total Current Liabilities 143,029
-----------
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,
17,939,229 shares issued and outstanding 17,939
Paid in capital 8,008,317
Accumulated deficit (5,538,896)
Accumulated other comprehensive loss (16,813)
-----------
Total Stockholders' Equity 2,470,547
-----------
Total Liabilities and Stockholders' Equity $ 2,613,576
===========
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 Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Revenues:
Wound clinic management fees $ 25,500 $ 48,000 $ 58,500 $ 96,000
License and marketing fees 26,000 93,000 56,000 171,000
Territorial license fees -- -- -- 1,100,000
Scanner enhancement revenue -- 30,000 90,000 30,000
Other 7,769 34,352 12,897 43,122
------------ ------------ ------------ ------------
Total Revenues 59,269 205,352 217,397 1,440,122
------------ ------------ ------------ ------------
Operating Expenses:
General and administrative 640,419 177,199 1,011,134 394,687
Stock compensation expense -- -- 602,910 --
Research and development expense 85,200 17,468 139,200 23,217
------------ ------------ ------------ ------------
Total Operating Expenses 725,619 194,667 1,753,244 417,904
------------ ------------ ------------ ------------
Operating Income (Loss) (666,350) 10,685 (1,535,847) 1,022,218
------------ ------------ ------------ ------------
Other Income (Expense):
Interest income 23,965 594 42,504 595
------------ ------------ ------------ ------------
Total Other Income (Expense) 23,965 594 42,504 595
------------ ------------ ------------ ------------
Income (Loss) Before Provision for Income Taxes (642,385) 11,279 (1,493,343) 1,022,813
Provision for income taxes 101 -- 9,682 --
------------ ------------ ------------ ------------
Net Income (Loss) $ (642,486) $ 11,279 $ (1,503,025) $ 1,022,813
============ ============ ============ ============
Net Income (Loss) Per Share of Common Stock:
Basic $ (.04) $ -- $ (.08) $ .06
Diluted $ (.04) $ -- $ (.08) $ .06
Weighted Average Number of Common Shares Outstanding:
Basic 18,124,087 17,219,829 18,181,069 16,678,396
Diluted 18,124,087 18,011,484 18,181,069 17,262,018
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 SIX MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
---- ----
Cash Flows From Operating Activities:
Net income (loss) $(1,503,025) $ 1,022,813
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization 88,276 14,150
Common stock issued for services 77,481 --
Compensation from issuance of stock options 602,910 --
Changes in assets and liabilities:
Accounts receivable 43,187 (904,122)
Other receivables 6,444 (3,062)
Prepaid expenses and other (86,247) (3,860)
Inventories (37,956) (5,604)
Accounts payable and accrued expenses (8,007) (23,663)
----------- -----------
Net Cash Provided (Used) By Operating Activities (816,937) 96,652
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (73,875) (36,314)
Note receivable (50,000) --
Employee advances 48,844 --
Investment in marketable securities (200,000) --
----------- -----------
Net Cash (Used) By Investing Activities (275,031) (36,314)
----------- -----------
Cash Flows From Financing Activities:
Issuance of common stock 75,000 1,558,500
Purchase of treasury stock (547,500) --
----------- -----------
Net Cash Provided (Used) By Financing Activities (472,500) 1,558,500
----------- -----------
Effect of exchange rate changes on cash and cash equivalents (16,181) --
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (1,580,649) 1,618,838
Cash and Cash Equivalents at Beginning of Period 2,345,906 127,853
----------- -----------
Cash and Cash Equivalents at End of Period $ 765,257 $ 1,746,691
=========== ===========
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 through return of shares
of the Company's common stock 50,000 --
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 six months ended June 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 six months
ended June 30, 2000 and 1999. For the three and six months ended June 30, 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 and six months ended June 30, 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.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ (642,486) $ 11,279 $ (1,503,025) $ 1,022,813
============ ============ ============ ============
Weighted-average common shares outstanding:
Weighted average common shares outstanding -
Basic 18,124,087 17,219,829 18,181,069 16,678,396
Dilutive securities -- 791,655 -- 583,622
------------ ------------ ------------ ------------
Weighted-average common shares outstanding -
Diluted 18,124,087 18,011,484 18,181,069 17,262,018
============ ============ ============ ============
Net income (loss) per common share:
Basic $ (.04) $ -- $ (.08) $ .06
Diluted $ (.04) $ -- $ (.08) $ .06
</TABLE>
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
The three months ended June 30, 2000 vs.
the three months ended June 30, 1999
Revenues for 2000 were $59,269 compared to $205,352 for 1999. Revenues from
licensee fees and territorial license fees decreased from $93,000 in 1999 to
$26,000 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 $725,619 in 2000 from $194,667 in 1999. The Company
increased its general and administrative expenses from $177,199 in 1999 to
$640,419 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 $85,200 in 2000 compared to
$17,468 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 $642,486 in 2000, compared to net income
of $11,279 for 1999. This significant change is the result of the increase in
general and administrative expenses and research and development expenses for
2000 as compared to 1999 coupled with the decrease in revenue.
The six months ended June 30, 2000 vs.
the six months ended June 30, 1999.
Revenues for 2000 were $217,397 compared to $1,440,122 for 1999. Revenues from
license fees and territorial license fees decreased from $1,271,000 in 1999 to
$56,000 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. The Company believes the majority of its future revenues will
be from scanner sales or leases.
Total expenses increased to $1,753,244 in 2000 from $417,904 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 $394,687 in
1999 to $1,011,134 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.
Research and Development expenses were $139,200 in 2000 compared to $23,217 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 $1,503,025 in 2000, compared to a net
income of $1,022,813 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.
-6-
<PAGE>
Strategy to Achieve Profitable Operations
Management expects the revenues for 2000 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 June 30, 2000, the Company has $765,257 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.
The Company mutually agreed to terminate its scanner enhancement agreement with
Health link International. As part of this agreement the Company repurchased
350,000 of its shares from Health link for $1.35 per share, or $472,150.
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 and expects to have the European
"CE" marked designation by the third quarter 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-
<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.
The annual meeting of the shareholders was held on June 2, 2000. Five directors,
James McGonigle, William Mullin, Bonita Weyrauch, Lee Cohen and Peter Cavanaugh
were elected.
FOR AGAINST ABSTAIN
--- ------- -------
McGonigle 12,682,855 20,000 154,384
Mullin 12,682,855 20,000 154,384
Weyrauch 12,702,855 -0- 154,384
Cohen 12,702,855 -0- 154,384
Cavanaugh 12,682,855 20,000 154,384
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: August 11, 2000 Longport, Inc.
/s/ James R. McGonigle
---------------------------------------
James R. McGonigle
Chief Executive Officer,
Chief Financial Officer
(Principal Accounting Officer)
and Director
-9-
