-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U6Gyo2aLnbPVaYVnRdPHK/BcXLIsqFyDTXf1IeDftoF458/5+u4hen0dng+yD+iS vJTrLTqZXzhLDIFE9TOFag== 0001015402-00-001043.txt : 20000420 0001015402-00-001043.hdr.sgml : 20000420 ACCESSION NUMBER: 0001015402-00-001043 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000419 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOCPLANET COM INC CENTRAL INDEX KEY: 0000312651 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 840645174 STATE OF INCORPORATION: CO FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-09065 FILM NUMBER: 604958 BUSINESS ADDRESS: STREET 1: 3000 W WARNER AVE STREET 2: SUITE 5200 CITY: SANTA ANA STATE: CA ZIP: 92704-5311 BUSINESS PHONE: 3032799375 MAIL ADDRESS: STREET 1: 370 17TH STREET STREET 2: SUITE 5200 CITY: DENVER STATE: CO ZIP: 802025638 FORMER COMPANY: FORMER CONFORMED NAME: DOCSALES COM INC DATE OF NAME CHANGE: 19990903 FORMER COMPANY: FORMER CONFORMED NAME: GOLDEN PHARMACEUTICALS INC DATE OF NAME CHANGE: 19940415 FORMER COMPANY: FORMER CONFORMED NAME: BENEDICT NUCLEAR PHARMACEUTICALS INC DATE OF NAME CHANGE: 19920703 10QSB 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 2000 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT FOR THE TRANSITION PERIOD FROM _______ TO _______ COMMISSION FILE NUMBER: 0-9065 DOCPLANET.COM, INC. (EXACT NAME Of Small Business Issuer AS SPECIFIED in Its Charter) COLORADO 84-0645174 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3000 W. WARNER AVENUE, SANTA ANA, CALIFORNIA 92704-5311 (Address of principal executive office)(Zip Code) (714)754-5800 Issuer's 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 [ ] The number of shares of common stock outstanding as of April 14, 2000, was 7,416,311 Transitional Small Business Disclosure Format: Yes [ ] NO [X] ================================================================================ PART I FINANCIAL INFORMATION --------------------- ITEM 1. FINANCIAL STATEMENTS
DOCPLANET.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS ------ FEBRUARY 29, AUGUST 31, 2000 1999 ------------- ----------- CURRENT ASSETS Cash $ 291,486 $ 57,073 Trade receivables, net of allowance for doubtful accounts of $214,505 and $220,384 at February 29, 2000 and August 31, 1999 1,205,112 1,131,242 Notes receivable 28,555 25,680 Inventories 597,218 514,027 Prepaid expenses and other 233,124 66,271 ------------- ----------- TOTAL CURRENT ASSETS 2,355,495 1,794,293 NOTES RECEIVABLE, less current maturities 70,562 85,902 PROPERTY, PLANT AND EQUIPMENT - AT COST 4,027,243 3,271,485 Less accumulated depreciation and amortization 1,585,994 1,228,405 ------------- ----------- TOTAL PROPERTY, PLANT & EQUIPMENT 2,441,249 2,043,080 ------------- ----------- TOTAL LONG-TERM ASSETS 2,511,811 2,128,982 OTHER ASSETS Intangibles- net of accumulated amortization of $3,425 and $2,900 at February 29, 2000 and August 31, 1999 12,644 9,600 Non-compete agreement 17,266 34,528 ------------- ----------- TOTAL OTHER ASSETS 29,910 44,128 ------------- ----------- TOTAL ASSETS $ 4,897,216 $ 3,967,403 ============= ===========
See Notes to Condensed Consolidated Financial Statements ITEM 1. FINANCIAL STATEMENTS (continued)
DOCPLANET.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - continued LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) ---------------------------------------------- FEBRUARY 29, AUGUST 31, 2000 1999 -------------- ------------- CURRENT LIABILITIES Notes payable $ 1,530,508 $ 1,041,924 Notes payable - related parties 500,000 500,000 Current maturities of long-term debt 50,000 50,000 Current maturities of capitalized lease obligations 240,730 312,956 Accounts payable 2,627,749 1,767,676 Accrued liabilities Salaries, wages and other compensation 168,998 101,254 Interest 206,589 845,393 Other 379,708 662,721 Deferred revenue - 27,780 -------------- ------------- TOTAL CURRENT LIABILITIES 5,704,282 5,309,704 LONG-TERM OBLIGATIONS, related parties - 5,819,985 CAPITALIZED LEASE OBLIGATIONS, less current maturities 175,837 131,272 CONTINGENCIES AND COMMITMENTS - - MINORITY INTEREST 1,000,000 1,000,000 -------------- ------------- TOTAL LIABILITIES 6,880,119 12,260,961 STOCKHOLDERS' EQUITY (DEFICIT) Common stock - no par value; 200,000,000 shares authorized; 7,417,092 issued and 7,314,311 outstanding at February 29, 2000; 4,158,722 issued and 4,055,941 outstanding at August 31, 1999. 36,276,724 24,989,858 Preferred stock - no par value; 10,000,000 shares authorized Class A 15%/ 30% cumulative convertible, 29,653 shares issued and outstanding at February 29, 2000 and August 31, 1999. 292,558 292,558 Addition Paid In Capital 1,554,682 - -------------- ------------- 38,123,964 25,282,416 Accumulated deficit (40,012,735) (33,481,842) -------------- ------------- (1,888,771) (8,199,426) Less common stock in treasury at cost, 102,781 shares at February 29, 2000 and August 31, 1999. 94,132 94,132 -------------- ------------- TOTAL STOCKHOLDERS' DEFICIT (1,982,903) (8,293,558) -------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT) $ 4,897,216 $ 3,967,403 ============== =============
See Notes to Condensed Consolidated Financial Statements ITEM 1. FINANCIAL STATEMENTS (continued)
DOCPLANET.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) SIX MONTHS ENDED FEBRUARY 29 AND 28, RESPECTIVELY -------------------------------- 2000 1999 --------------- --------------- NET SALES $ 3,835,562 $ 3,692,614 COST OF SALES 2,988,688 2,830,793 --------------- --------------- GROSS MARGIN 846,874 861,821 Selling, general and administrative expense 4,257,314 2,463,941 --------------- --------------- OPERATING LOSS (3,410,440) (1,602,120) OTHER INCOME/ (EXPENSE) Interest expense (1,587,215) (413,917) Interest expense from beneficial conversions (1,554,682) - Joint venture loss - (22,618) Settlement of accounts payable and other liabilities - 211,330 Other income/(expense) 51,362 23,656 --------------- --------------- TOTAL OTHER INCOME (EXPENSE) (3,090,535) (201,549) --------------- --------------- LOSS BEFORE INCOME TAX EXPENSE (6,500,975) (1,803,669) --------------- --------------- INCOME TAX EXPENSE (BENEFIT) - 1,258 --------------- --------------- NET LOSS $(6,500,975) $(1,804,927) LOSS ATTRIBUTABLE TO MINORITY INTEREST 29,918 6,247 --------------- --------------- NET LOSS APPLICABLE TO COMMON SHARES $(6,530,893) $(1,811,174) =============== =============== BASIC AND DILUTED LOSS PER SHARE $(1.43) $(.46) =============== =============== WEIGHTED AVERAGE SHARES OUTSTANDING 4,563,890 3,911,340 =============== ===============
See Notes to Condensed Consolidated Financial Statements ITEM 1. FINANCIAL STATEMENTS (continued)
DOCPLANET.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED FEBRUARY 29 AND 28, RESPECTIVELY -------------------------------- 2000 1999 --------------- --------------- NET SALES $ 2,035,193 $1,679,779 COST OF SALES 1,617,153 1,233,618 --------------- --------------- GROSS MARGIN 418,040 446,161 Selling, general and administrative expense 1,700,471 1,190,556 --------------- --------------- OPERATING LOSS (1,282,431) (744,395) OTHER INCOME/ (EXPENSE) Interest expense (1,070,074) (188,147) Interest expense from beneficial conversions (1,554,682) - Joint venture loss - (8,647) Settlement of accounts payable and other liabilities - 26,760 Other income/(expense) (3,412) 22,240 --------------- --------------- TOTAL OTHER INCOME (EXPENSE) (2,628,168) (147,794) --------------- --------------- LOSS BEFORE INCOME TAX EXPENSE (3,910,599) (892,189) --------------- --------------- INCOME TAX EXPENSE (BENEFIT) - 3,900 --------------- --------------- NET LOSS $(3,910,599) $ (896,089) --------------- --------------- LOSS ATTRIBUTABLE TO MINORITY INTEREST 14,959 6,247 --------------- --------------- NET LOSS APPLICABLE TO COMMON SHARES $(3,925,558) $(902,336) =============== =============== BASIC AND DILUTED LOSS PER SHARE $(.81) $(.23) --------------- --------------- WEIGHTED AVERAGE SHARES OUTSTANDING 4,798,485 3,911,340 --------------- ---------------
See Notes to Condensed Consolidated Financial Statements ITEM 1. FINANCIAL STATEMENTS (continued)
DOCPLANET.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED FEBRUARY 29 AND 28, RESPECTIVELY, --------------------------------- CASH FLOWS USED IN OPERATING ACTIVITIES 2000 1999 ---------------- --------------- Net loss $(6,530,893) $(1,804,927) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 371,807 180,542 Issuance of options expense 720,877 - Interest expenses from beneficial conversions 1,554,682 - Stock Grants 956,250 - Issuance of stock for service 249,212 - Settlement of accounts payable and other liabilities - (211,330) Joint venture loss - 22,618 Changes in assets and liabilities net of effects of acquisition and joint venture: (Increase) in accounts receivable (73,870) (16,994) (Increase) decrease in inventories (83,191) 82,141 (Increase) decrease in prepaid expenses and other (166,853) 13,160 Increase in accounts payable 860,073 44,989 Increase in deferred revenue - non-compete agreement - 250,000 Increase in accrued liabilities 252,307 226,822 ---------------- --------------- TOTAL ADJUSTMENTS 4,641,294 591,948 ---------------- --------------- NET CASH USED IN OPERATING ACTIVITIES (1,889,599) (1,212,979) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant, and equipment (755,758) (21,816) Proceeds from sale of equipment - 150,000 Increase investment in joint venture - (21,000) Decrease in notes receivable 12,465 - ---------------- --------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (743,293) 107,184 CASH FLOWS FROM FINANCING ACTIVITIES Issuance of preferred shares in subsidiary - 1,000,000 Dividends on preferred shares (30,081) (6,247) Borrowings under notes payable - related parties 370,000 469,200 Payments under notes payable - related parties (180,000) - Borrowings under notes payable - unrelated parties 579,475 - Issuance of Capital Stock 1,901,949 - Borrowings under capitalized lease and other long-term obligations - 21,816 Payments on capitalized lease and other long term obligations (62,622) (170,047) Borrowings on line of credit 3,654,000 3,946,126 Payments on line of credit (3,365,416) (4,124,785) ---------------- --------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 2,867,305 1,136,063 ---------------- --------------- NET INCREASE (DECREASE) IN CASH 234,413 30,268 CASH, BEGINNING OF YEAR 57,073 61,860 ---------------- --------------- CASH, END OF PERIOD $291,486 $92,128 ================ =============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES: Interest paid $249,040 $177,628 ================ =============== Income taxes paid (received) $ - $1,258 ================ =============== NON CASH FINANCING AND INVESTING ACTIVITIES: Purchase of equipment under Capital Leases $34,961 $ - ================ =============== Conversion of debt to common stock - related parties $ 6,929,103 $ - ================ =============== Conversion of debt to common stock - unrelated parties $ 529,475 $ - ================ ===============
See Notes to Condensed Consolidated Financial Statements DOCPLANET.COM, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF ACCOUNTING POLICIES The accompanying unaudited financial statements of DocPlanet.com, Inc., formerly known as docsales.com, inc., and Golden Pharmaceuticals, Inc., have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements. The accompanying unaudited financial statements and disclosures reflect all adjustments, which, in the opinion of the management, are necessary for a fair presentation of the results of operations, financial position, and cash flow of the Company. The results of operations for the periods indicated are not necessarily indicative of the results for the full year. The financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended August 31, 1999, as filed with the Securities and Exchange Commission. Basic and diluted earnings per share for the six months ended February 29, 2000 and February 28, 1999 is calculated as follows:
SIX MONTHS ENDED FEBRUARY 29 AND 28, RESPECTIVELY -------------------------------- 2000 1999 --------------- --------------- Net loss $(4,976,211) $(1,811,174) --------------- --------------- Weighted average shares outstanding for basic earnings per share calculation 4,563,890* 3,911,340* --------------- --------------- Diluted earnings per share Weighted average shares outstanding 4,563,890 3,911,340 Effect of exercise of options ** ** --------------- --------------- Weighted average shares outstanding for diluted earnings per share calculation 4,563,890 3,911,340 --------------- --------------- * Adjusted for the July 8, 1999, 32:1 reverse stock split of the Company's no par value Common Stock. In addition, all references to shares of Common Stock in the February 29, 2000 Consolidated Financial Statements and the Notes to the Consolidated Financial Statements have been revised for the effect of the fiscal 1999 reverse split. ** The effect of options and convertible shares was not included in the diluted earnings per share calculation for the quarters ended February 29, 2000 and February 28, 1999, as they would have been anti-dilutive. The total number of common shares not included in the diluted earnings per share calculation for the fiscal quarter ended February 29, 2000 and 1999, that could potentially dilute earnings per share in the future is 94,881 and 202,676, respectively.
RECLASSIFICATION - Certain reclassifications have been made to conform prior years' information with the current year presentation. USE OF ESTIMATES - The preparation of the Condensed Consolidated Financial Statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. These estimates are based upon management's best findings, after considering past and current events and assumptions about future events. Actual results could differ from those estimates. NOTE 2. REALIZATION OF ASSETS The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred operating losses of $(3,410,440) and $(3,792,339) respectively, during the six months ended February 29, 2000 and during the fiscal year ended August 31, 1999. In addition, at February 29, 2000, the Company had a negative working capital position of $(3,348,787) due primarily to $1,530,508 in short-term borrowings and $2,627,749 in accounts payable. The Company had a total stockholders' deficit of $(1,982,903) as of February 29, 2000. These factors among others raise substantial doubt that the Company will be able to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments related to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain replacement working capital financing, to obtain sufficient equity financing to re-capitalize the Company, and ultimately to attain profitability. To counteract the losses and negative capital described above, the Company has plans retained a financial advisory firm and is actively pursuing capital infusions from a variety of sources. In addition, the Company plans to increase revenue from its existing customer base, primarily by expanding the base of products that the Company offers and placing an increased focus on the marketing of medical and surgical supplies. Also, in fiscal 1999, the Company implemented a new e-commerce initiative that includes a new DocPlanet web site and an integrated e-commerce system that provides customers fingertip access to products categorized by specific use and formulary without having to consult a paper based catalog. The DocPlanet web site was completed in November 1999 and the Company is currently taking customer orders from the web site. NOTE 3. INVENTORIES Inventories consist of the following items that are stated at the lower cost or market, determined by the first-in, first-out ("FIFO) method: 2/29/00 08/31/99 ------------ ------------ Raw materials $14,393 $21,733 Work-in-progress 7,500 8,000 Finished goods 575,325 484,294 ----------- ----------- $597,218 $514,027 =========== =========== NOTE 4. NOTES PAYABLE AND LONG-TERM DEBT On April 2, 1999, the Company entered into an agreement with ALCO Financial Services, LLC ("ALCO") for a $1,500,000 revolving credit facility (the "ALCO Facility") bearing interest at prime plus three percent (3%). The first draw under this new credit facility was made on April 6, 1999 in the amount of $563,500 and was used to pay in full all amounts due under the Company's previous credit facility with Norwest Bank. The ALCO Facility is for a period of two years with a one-year renewal term. The ALCO Facility is collateralized by inventory, accounts receivable, fixtures, equipment and intangibles, and availability under the ALCO Facility is primarily determined based on eligible accounts receivable, and inventory. During the six months ending February 29, 2000, the Company received overadvances on the ALCO revolving facility in the amount of $700,000. The terms of this financing include the issuance of stock options on the Company's Common Stock, which vest according to a repayment period of sixty days followed by subsequent thirty-day periods. As of April 14, 2000, 186,667 options to purchase the Company's Common Stock are due. Repayment of $200,000 of the overadvance has been made during the period ending February 29, 2000, leaving a current overadvance balance of $500,000. NOTE 5. COMMON STOCK TRANSACTIONS On September 22, 1999, the Company received $50,000 from an outside investor for 12,500 shares of the Company's common stock. On October 19, 1999, the Board of Directors (the "Board") approved the grant of an aggregate of 300,000 shares of the Company's no par value Common Stock valued at an aggregate of approximately $956,250 with certain restrictions to one employee who is also a director of the Company and to a director of the Company. On October 20, 1999, the Company received $10,000 from one outside investor for approximately 2,857 shares of the Company's common stock. On November 9, 1999, the Company issued 60,000 shares of restricted common stock to two investors for $124,949. On November 10, 1999, the Company issued 6,000 shares of the Company's common stock to one consultant for services valued at $30,750. On November 24, 1999 the Company issued 56,250 of shares of common stock to one vendor for services. The market value for the related services was $168,750. On November 30, 1999 the Company issued 11,047 shares of the Company's common stock to one consultant for professional services valued at $49,712. On January 3, 2000, an outside investor exercised their conversion right by converting a $129,475 loan into 40,461 shares of restricted common stock. On January 3, 2000, the Company issued 161,429 shares of restricted common stock to an outside investor for purchase price of $517,000. On January 3, 2000, a related party exercised their conversion right by converting a $90,000 loan into 28,125 shares of restricted common stock. On January 31, 2000, a related party exercised their conversion right by converting a $400,000 promissory note into 100,000 shares of restricted common stock. As of February 29, 2000, the common stock certificate had not been issued, however the common stock is to be considered issued and outstanding. On February 29, 2000, the Board of Directors approved the private placement of an aggregate of 200,000 shares of common stock to two outside investors for a purchase price of $1,200,000. As of February 29, 2000, the common stock certificate had not been issued, however the common stock is to be considered issued and outstanding. By resolution dated December 21, 1999, the Board of Directors of the Company approved the conversion of loans from directors and officers, in whole or in part, into shares of the Company's common stock, no par value, at $3.00 per share. Pursuant to a Conversion Agreement, effective February 29, 2000, CEO, Charles R. Drummond exercised his right of conversion of his loans to the Company by converting all of the $6,839,103 of debt owed to him by the Company into 2,279,701 shares of the Company's restricted common stock. This debt includes accrued interest through February 29, 2000. On the commitment date of December 21, 1999, the fair value of the common stock (as determined by the closing quoted market price) was $3.625 per share, and the conversion price was $3.00 per share. Consequently the intrinsic value of the conversion feature of the debt was $.625 per share on 2,279,701 shares or $1,424,813. This beneficial conversion feature has been recognized as interest expense, and an increase in additional paid in capital as of February 29, 2000. As of February 29, 2000, the common stock had not been issued and the related obligation to issue common stock has been classified as common stock in the consolidated balance sheet. NOTE 6. 15/30 PREFERRED STOCK The Company's Charter provides for two classes of preferred stock. In 1987, the Company created a series of preferred stock, 15%/30% Cumulative Convertible Preferred Stock ("15/30 Preferred Stock"). The issue price was $10 per share and the maximum issuable shares under the series was 700,000 shares. In October 1990, the Company created a second series of preferred stock, Class A Convertible Preferred Stock ("Convertible Preferred Stock"). The issue price was $10 per share and the maximum issuable shares under the series was 200,000 shares. There are currently no shares of Convertible Preferred Stock outstanding. In 1988, the Company completed a public offering of equity securities comprised of units of one share of 15/30 Preferred Stock and two shares of Common Stock valued at $10 per unit. A total of 84,242 shares of 15/30 Preferred Stock were issued in this offering. Dividends on the 15/30 Preferred Stock were payable solely from the net profits generated from the sale of Iodine 123 HIPDM (as defined in the Certificate of Designations) ("HIPDM"). However, no net profits were ever generated from the sale of HIPDM and the underlying license rights related to HIPDM were fully impaired in 1991 and released upon termination of the license agreement on November 30, 1993. Each share of the 15/30 Preferred Stock may be converted into 0.32 shares of Common Stock. The Company is required to reserve Common Stock sufficient to allow conversion of all Preferred Stock and accrued dividends. The holders of the 15/30 Preferred Stock, in the event of liquidation of the Company, will receive an amount equal to the issue price before any holder of Common Stock or any other stock ranking junior to the Preferred Stock can be paid. As of February 29, 2000 and August 31, 1999, 54,589 of the 84,242 shares of Preferred Stock outstanding were converted into Common Stock. $469,644 of accrued dividends had been recorded on the 15/30 Preferred Stock and, as of February 29, 2000, $227,887 of the $469,644 in accrued dividends on the 15/30 Preferred Stock had been converted into Common Stock. After these dividend accruals, management determined that no dividends should have been recorded and, consequently, that no Common Stock should have been issued in payment of these dividends. Management expects to resolve this matter in fiscal 2000 and the related accrued dividends have been reclassified on the February 29, 2000 balance sheet as an offset to the accumulated deficit. At February 29, 2000, the holders of the 15/30 Preferred Stock can convert their shares into 9,452 shares of post-reverse split Common Stock including accrued dividends. Pursuant to the Certificate of Designations for the 15/30 Preferred Stock, in the event the Company completes an underwritten public offering of its Common Stock, in which the offering price is at least $32.00 per share, the 15/30 Preferred Stock will automatically convert to Common Stock. Commencing in 1991, the Company has the right but not the obligation, to convert all of the outstanding 15/30 Preferred Stock into Common Stock at 102% of the issue price. NOTE 7. RELATED PARTY TRANSACTIONS During the first six months of fiscal 2000, the company borrowed $190,000, net of repayments, from related parties. During the six months ended February 29, 2000, the Company recorded $586,989 of interest expense on loans from related parties. At February 29, 2000, the amounts outstanding under the related promissory notes were $500,000, ($470,000 payable to Arch G. Gothard III; $30,000 payable to John H. Grant). At February 29, 2000 $121,714 in accrued interest was payable on the related party notes. Certain of these loans are payable on demand and all such loans bear interest at the bank prime rate plus 2%. The $470,000 loan payable to Arch G. Gothard III was payable on April 1, 1998, and is past due at February 29, 2000. On January 3, 2000, the company issued 28,125 shares of restricted common stock to repay a $90,000 loan from a relative of the CEO, Charles R. Drummond. Effective February 29, 2000, CEO, Charles R. Drummond exercised his right of conversion of his loans to the Company by converting all of the $6,839,103 of debt owed to him by the Company into 2,279,701 shares of the Company's restricted common stock. This debt includes $1,079,118 of accrued interest through February 29, 2000. NOTE 8. CONTINGENCIES Due to the nature of its products, the Company is subject to regulation by a number of federal and state agencies, including the Federal Food and Drug Administration, the Drug Enforcement Agency and the State of California. The Company must comply with regulatory requirements. Should it violate such requirements, its ability to operate could be suspended or terminated. Management believes it has the control system and policies in place so that it will fully comply with regulatory requirements. QCP along with several other entities, including the manufacturers of the drugs, has been named as a defendant in approximately forty-seven lawsuits brought by numerous plaintiffs relating to personal injury claims caused by the use of phentermine and/or fenfluramine, collectively known as Phen-Fen. To date, QCP has been named in forty-five California lawsuits; however, it has been served court papers in only fifteen. Of the fifteen, the plaintiff from one lawsuit has recently dismissed QCP. QCP is also a third-party defendant in class action lawsuits in Nevada, West Virginia and Florida. QCP's involvement in each of these lawsuits is limited to its distribution or repackaging of these drugs. As of April 14, 2000, the outcome of these lawsuits is not reasonably determinable. NOTE 9. SUBSEQUENT EVENTS On March 1, 2000, the Company received $600,000 from an outside investor for 100,000 shares of common stock in a private placement. On March 24, 2000, the Company issued 2,000 shares of common stock to one vendor in consideration for services valued at $15,062. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following discussion should be read in conjunction with the selected financial data and the financial statements and notes thereto filed herewith. The statements contained in this report, if not historical, are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve risks and uncertainties that could cause actual results to differ materially from the financial results described in such forward looking statements. These risks and uncertainties include, among others, the level and rate of growth in the Company's operations, the capital requirements of the Company and the ability of the Company to achieve earnings per share growth through internal investment, strategic alliances, joint ventures and other methods. The success of the Company's business operations is, in turn, dependent on factors such as the effectiveness of the Company's marketing strategies to grow its customer base, the appeal of the Company's mix of products, the Company's success at entering into and collaborating with others to conduct effective strategic alliances and joint ventures, general competitive conditions within the health care market and general economic conditions. Further, any forward looking statements speak only as of the date on which such statement was made, and the Company undertakes no obligation to update any forward looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. Therefore, forward looking statements should not be relied upon as a prediction of actual future results. RECENT DEVELOPMENTS The Company had a net loss of $(6,530,893) during the six months ended February 29,2000, and, as of February 29,2000, the Company's current liabilities exceeded its current assets by $(3,348,787) and its total liabilities exceeded its total assets by $(1,982,903). These conditions as well as others, raise substantial doubt about the Company's ability to continue as a going concern. The Company's operations in fiscal 1999 and through the first six months of fiscal 2000 have consumed substantial amounts of cash and have generated significant net losses that reduced shareholders' equity to a deficit of $(1,982,903) at February 29, 2000. The Company has a current period operating loss and negative cash flow from operations, and is expected to have continuing losses and negative cash flow from operations in the near future. In response, management is currently reviewing a variety of debt and equity financing alternatives. However, none of the related financing alternatives has been finalized as of April 14, 2000 and no assurance can be given that management will be able to raise the funds necessary to assure a continuation of operations. RESULTS OF OPERATIONS SIX MONTHS ENDED FEBRUARY 29, 2000, COMPARED TO SIX MONTHS ENDED FEBRUARY 28, 1999, ($ ROUNDED TO NEAREST THOUSAND) NET SALES - Net sales for the six months ended February 29, 2000, increased $143,000 to $3,836,000 from $3,693,000 for the same period last year. The sales gain is primarily due to an increase in Point of Care revenue of $463,000. Partially offsetting the sales gain was lower sales of seasonal flu vaccines in the first quarter of this fiscal year. COST OF SALES - Cost of sales as a percentage of sales increased to 78% or $2,989,000 for the six months ended February 29, 2000, as compared to 77%, or $2,831,000, for the same period last year. Contributing to the slightly higher cost of sales percentage is the increase of sales of lower margin injectable vaccines during the first half of fiscal 2000. SELLING GENERAL AND ADMINISTRATIVE - Selling, general and administrative expenses (SG&A) for the six months ended February 29, 2000 were $4,257,000 compared to $2,464,000 during the comparable period last year. This increase is attributed to a $956,000 charge to compensation expense for grants of 300,000 shares of restricted Common Stock to two directors who are shareholders. The Board of Directors approved the grants on October 19, 1999. In addition, expenses to support the Company's E-Commerce initiative accounted for the majority of the balance of the increase. OTHER INCOME (EXPENSE) - Interest expense increased to $1,587,000 from $414,000 in the comparable period last year. This increase is primarily due to a $721,000 charge to interest expense related to the issuance of options on common stock for over advances on the Company's line of credit. In addition, the increase was also attributable to interest expense on working capital borrowings from shareholders who are also directors Interest expense from beneficial conversions for the first six months ended February 29, 2000 was $1,555,000. $1,425,000 of the expense is attributed to Charles R. Drummond's conversion of loans into the Company's restricted common stock. The balance of the expense is due to the benefical conversions of three other loans. Other income decreased to $51,000 for the six months ending February 29, 2000, from $212,000 for the same period last year. The decrease is attributed to the $211,000 gain on settlement of accounts payable and other liabilities related to the liquidation of Pharma Labs in the same period last year. This was offset by the recognition of $28,000 in fiscal 2000 of other revenue related to the amortization of the Pharma Labs non-compete agreement. NET LOSS - The net loss increased due to the reasons indicated in the preceeding paragraphs. THREE MONTHS ENDED FEBRUARY 29, 2000, COMPARED TO THREE MONTHS ENDED FEBRUARY 28, 1999, ($ ROUNDED TO NEAREST THOUSAND) NET SALES - Net sales for the three months ended February 29, 2000, were $2,035,000, an increase of $355,000 compared to $1,680,000 for the same period last year. The increase is due to additional sales of point of care, $187,000, increased sales of injectables, $50,000, and contract manufacturing, $86,000. COST OF SALES - Cost of sales as a percentage of sales was 79% or $1,617,000, in the quarter ended February 29, 2000, compared to 73% or $1,234,000 an increase of $383,000, for the comparable quarter last year. The increase in the cost of sales percentage is attributed to increased sales of lower margin products as a percent of sales. SELLING GENERAL AND ADMINISTRATIVE - SG&A expenses increased to $1,700,000 in the quarter ended February 29, 2000, from $1,191,000 during the same period last year. The increase is a result of additional consulting, support and depreciation expenses associated with the E-commerce business. OTHER INCOME (EXPENSE) - Interest expense for the quarter ending February 29, 2000, increased to $1,070,000 from $188,000 from the comparable period last year. This increase is due to the second quarter expense of $438,000 charge to interest expense related to the issuance of options on common stock for over advances on the Company's line of credit. Interest expenses from related parties and the line of credit also increased from the same period of last year due to larger loan balances. During the three months ending February 29, 1999, there was a $1,555,000 interest expense from beneficial conversions associated with the conversion of Charles R. Drummond's loans to the Company and three other loans into the Company's restricted common stock. Other income decreased to $(3,000) for the three months ending February 29, 2000, from $40,000 from the same period last year. The majority of the decrease is a result of a $27,000 gain on settlement of accounts payable and liabilities during the quarter ended February 28, 1999. NET LOSS - The net loss increased due to the reasons indicated in the preceeding paragraphs. LIQUIDITY AND CAPITAL RESOURCES The following table is presented to facilitate the discussion of the Company's current liquidity and sets forth the Company's liquidity position as of February 29, 2000, as compared to August 31, 1999. FEBRUARY 29, AUGUST 31, 2000 1999 ------------------------------ Current assets $2,355,000 $1,794,000 Current liabilities 5,704,000 5,310,000 ------------ ------------ Net working capital (deficiency) $(3,349,000) $(3,516,000) ============ ============ At February 29, 2000, current liabilities were $5,704,000 an increase of $395,000 from August 31, 1999. Current liabilities increased primarily due to the following: an additional borrowing on the line of credit, $290,000, and an increase in accounts payable, $860,000. Partially offsetting the above increases was a decrease in related party accrued interest of $724,000. The decrease in related party accrued interest is a result of Charles R. Drummond converting his loans to the Company into common stock. To help meet its working capital requirements, the Company has borrowed money from certain shareholders and directors of the Company. The loans are evidenced by promissory notes, which provide for interest at the prime rate plus 2%. The promissory notes are unsecured obligations. The amounts outstanding under the promissory notes in the aggregate were $500,000 ($470,000 payable to Arch G. Gothard, III and $30,000 payable to John Grant) at February 29, 2000 and April 14, 2000. As of February 29, 2000, the note payable of $470,000 to Arch G. Gothard was payable on demand or no later than April 1, 1998 and, accordingly, is past due. Pursuant to the December 21, 1999 Board resolution, the amounts outstanding under the promissory notes are eligible to convert into shares of the Company's common stock at $3.00 per share. The Company has suffered substantial recurring losses from operations. The Company incurred a net loss of $(3,906,000) during the fiscal year ended August 31, 1999 and a net loss of $(6,531,000) during the six months ended February 29, 2000. As of February 29, 2000, the Company's current liabilities exceeded its current assets by $3,349,000 and its total liabilities exceeded its total assets by $1,983,000. These factors, in combination with the matters discussed in the previous paragraphs raise substantial doubt about the Company's ability to continue as a going concern. The Company does not have any commitments for financing and there can be no assurance that any additional financing will be available to the Company on terms acceptable to the Company, if at all. The Company's ability to continue as a going concern is dependent upon its ability to obtain funding for the Company's capital requirements and operating losses. The Company's shareholder deficit and continuing losses create serious risk of loss for the holders of the Company's securities. DISCLOSURE OF SIGNIFICANT RISK AND UNCERTAINTY At August 31, 1998, the Company conducted a test for asset impairment in accordance with financial Accounting Standard 121. Key assumptions in the 1998 asset impairment test included the reversal of fiscal 1998 operating losses and sales declines, several years of significant sales growth and product cost reduction achieved through purchasing and volume efficiencies. At February 29, 2000, management is not aware of any material items which would impair the Company's assets as disclosed in the Consolidated Financial Statements. YEAR 2000 The Company recognizes the need to ensure its operations will not be adversely impacted by year 2000 software failures. The Company has addressed this risk to the availability and integrity of financial systems and the reliability of operational systems. The Company has completed processes of evaluating and managing the risks and costs associated with this problem. The Company has installed a new business software package to accommodate business growth and upgrade current systems. Management believes that this package is year 2000 compliant. Management believes that, with respect to the year 2000, only minor matters remain to be implemented with a few customers, and no major vendor is expected to encounter problems. Although management believes the installation of the year 2000 software to be sufficient to avoid any material interruption in its operations, there is no guarantee that a material failure in that system could not occur. The failure to correct a material year 2000 problem could result in an interruption in or a failure of, certain normal business activities or operations. As of April 14, 2000 the Company has not experienced any material interruption in its operations due to year 2000 software failures. FORWARD-LOOKING STATEMENTS This report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results could differ from those projected in any forward-looking statement for the reasons set forth herein as well as in other sections of the Company's report filed on Form 10-KSB for the year ended August 31, 1999, or for other unforeseen reasons. The forward-looking statements contained herein are made as of the date of this report and the Company assumes no obligation to update such forward-looking statements, or to update the reasons why actual results could differ from those projected in such forward-looking statements. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As previously reported, QCP along with several other entities, including the manufacturers of the drugs, has been named as a defendant in approximately forty-seven lawsuits brought by numerous plaintiffs relating to personal injury claims caused by the use of phentermine and/or fenfluramine, collectively known as Phen-Fen. There have been no material developments in there lawsuits since the date of the Company's last report. On March 24, 2000, the Company filed suit against a software technology company in the U.S. District Court for the Central District of California, Southern Division. The Company is suing for (1) misappropriation of trade secrets, (2) breach of contract, (3) breach of fiduciary duty, (4) unfair competition, (5) fraud, (6) conversion and (7) intentional interference with prospective economic advantage. The Company is seeking injunctive relief and damages arising from a breach of a development contract between the two companies. ITEM 2. CHANGES IN SECURITIES. On January 3, 2000, the board approved and the Company issued an aggregate of 201,890 shares of common stock to an investor for $646,475. No underwriter participated in this transaction, and the offering and sale of the securities were made solely to accredited investors under the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, as the sale was limited to accredited investors. On January 3, 2000 the Board approved the issuance of 28,125 shares of the Company's common stock to one investor for $90,000. No underwriter participated in this transaction, and the offering and sale of the Securities was made solely to an accredited investor under the exemption provided by Section 4 (2) of the Securities Act of 1933, as amended, as the sale was limited to one accredited investor. This was a related party transaction. On January 31, 2000, the board approved the issuance of an aggregate of 100,000 shares of common stock to an investor for a payment of a $400,000 promissory note. No underwriter participated in this transaction, and the offering and sale of the securities were made solely to accredited investors under the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, as the sale was limited to an accredited investor. On February 29, 2000, the board approved the issuance of 100,000 shares of common stock to one investor in exchange for $600,000. No underwriter participated in this transaction, and the offering and sale of the securities were made solely to accredited investors under the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, as the sale was limited to accredited investors. On February 29, 2000, the board approved the issuance of 100,000 shares of common stock to one investor in exchange for $600,000. No underwriter participated in this transaction, and the offering and sale of the securities were made solely to accredited investors under the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, as the sale was limited to accredited investors. On February 29, 2000, CEO, Charles R. Drummond exercised his right of conversion of his loans to the Company by converting all of the $6,839,103 of debt owed to him by the Company into 2,279,701 shares of the Company's common stock. In this related party transaction, no underwriter participated, and the offering and sale of the securities were made solely to accredited investors under the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, as the sale was limited to an accredited investors. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. On January 25, 2000, Arch G. Gothard, III resigned from the Company's Board of Directors as of that date. a) Exhibits 27 Financial Data Schedule.* b) Reports on Form 8-K Incorporated by reference to registrant's Current Report on Form 8-K, dated March 13, 2000, as filed with Securities and Exchange Commission. ____________ * Filed herewith SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DocPlanet.com, Inc. -------------------- (Registrant) DATED: April 14, 2000 BY: /s/ John H. Grant ---------------------------- John H. Grant, Vice Chairman (Chief Accounting Officer) EX-27 2
5 1 3-MOS AUG-31-2000 DEC-01-1999 FEB-29-2000 291486 0 1419617 214505 597218 2355495 4027243 1585994 4897216 5704282 0 0 292558 36276724 (40012735) 4897216 2035193 2035193 1617153 3317624 (2628168) 0 (2624756) (3910599) 0 (1282431) 0 0 0 (3925558) (.81) (.81)
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