SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 1O-Q SB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended June 30, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to ____________ to ____________
Commission file number ____________
AccuFacts Pre-Employment Screening, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-4056901
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6 Greene Street, New York, NY 10013
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 212-966-0666
NA
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
Indicate by check X whether the registrant: (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 _____
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
6,450,000 at August 19, 1999
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets for June 30, 1999 (Unaudited) and
December 31, 1998............................................... 2
Statement of Operations for Three Months Ended
June 30, 1998 and 1999 and Six Months Ended
June 30, 1998 and 1999
Statement of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 (Unaudited)
Notes to Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II OTHER INFORMATION
SIGNATURES
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<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
BALANCE SHEET
June 30, 1999 (Unaudited) and December 31, 1998
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ASSETS
June 30, 1999 December 31, 1998
------------- -----------------
(Unaudited)
CURRENT ASSETS
Cash $ 4,386 $ 52,497
Accounts receivable 375,291 289,395
-------- --------
Total Current Assets 379,677 341,892
-------- --------
PROPERTY AND EQUIPMENT, net 70,074 85,827
-------- --------
OTHER ASSETS
Security deposits 2,708 2,708
Intangible asset 14,883 16,783
-------- --------
Total Other Assets 17,591 19,491
-------- --------
TOTAL ASSETS $467,342 $447,210
======== ========
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<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
BALANCE SHEET
June 30, 1999 (Unaudited) and December 31, 1998
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS= EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 155,734 $ 152,350
Current maturities of capital lease obligations 11,180 9,179
Note payable, bank 66,603 63,335
Loans payable, stockholder 26,280 26,280
--------- ---------
Total Current Liabilities 259,797 251,144
--------- ---------
OTHER LIABILITIES
Deferred income taxes payable 40,000 40,000
Capital lease obligations, less current maturities 3,325 9,760
--------- ---------
Total Other Liabilities 43,325 49,760
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TOTAL LIABILITIES 303,122 300,904
--------- ---------
COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares authorized,
none issued and outstanding -- --
Common stock, $0.01 par value, 50,000,000 authorized,
6,118,000 and 6,075,000 issued and outstanding at June 30,
1999 (unaudited) and December 31, 1998, respectively 61,180 60,750
Common stock subscribed, 332,000 and 375,000 at June 30,
1999 (unaudited) and December 31, 1998, respectively 3,320 3,750
Additional paid in capital 944,470 944,470
Stock subscription receivable (664,000) (750,000)
Accumulated deficit (180,750) (112,664)
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TOTAL STOCKHOLDERS' EQUITY 164,220 146,306
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 467,342 $ 447,210
========= =========
</TABLE>
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<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
STATEMENT OF OPERATIONS
(Unaudited)
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<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUES $ 462,607 $ 439,030 $ 858,285 $ 803,618
COST OF SALES 323,612 261,926 585,480 548,555
----------- ----------- ----------- -----------
GROSS PROFIT 138,995 177,104 272,805 255,063
GENERAL AND
ADMINISTRATIVE EXPENSES 191,890 109,991 336,051 211,180
----------- ----------- ----------- -----------
OPERATING (LOSS) INCOME (52,895) 67,113 (63,246) 43,883
OTHER EXPENSE
Interest expense, net 2,437 2,211 4,100 3,894
----------- ----------- ----------- -----------
(LOSS) INCOME BEFORE
INCOME TAXES (55,332) 64,902 (67,346) 39,989
INCOME TAXES (BENEFIT) 370 (188) 740 338
----------- ----------- ----------- -----------
NET (LOSS) INCOME $ (55,702) $ 65,090 $ (68,086) $ 39,651
=========== =========== =========== ===========
NET (LOSS) INCOME PER
SHARE, BASIC AND DILUTED $ (0.01) $ 0.01 $ (0.01) $ (0.01)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 6,164,264 6,075,000 6,086,253 6,075,000
</TABLE>
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<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998 (Unaudited)
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<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (68,086) $ 39,653
--------- ---------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 17,653 16,605
(Increase) decrease in accounts receivable (85,896) 2,637
Increase in security deposits -- (508)
Increase (decrease) in accounts payable and accrued expenses 3,384 (18,901)
--------- ---------
TOTAL ADJUSTMENTS (64,859) (167)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (132,945) 39,486
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment -- (20,594)
Purchase of intangible asset -- (19,000)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES -- (39,594)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments on capital lease obligations (4,434) (2,252)
Net advances (repayments) of note payable, bank 3,268 (1,295)
Proceeds from issuance of common stock subscribed in
connection with offering 86,000 --
--------- ---------
NET CASH PROVIDED BY(USED IN) FINANCING
ACTIVITIES 84,834 (3,547)
--------- ---------
NET DECREASE IN CASH (48,111) (3,655)
CASH - Beginning 52,497 3,655
--------- ---------
CASH - Ending $ 4,386 $ --
========= =========
</TABLE>
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<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
STATEMENT OF CASH FLOWS, continued
For the Six Months Ended June 30, 1999 and 1998 (Unaudited)
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1999 1998
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the periods for:
Interest $ 4,108 $ 3,913
Income taxes $ 1,305 $ --
Noncash investing and financing activities:
Additions to capital leases $ -- $25,334
Issuance of shares resulting from transfer from common
stock subscribed $ 430 $ --
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<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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NOTE 1 - Presentation
The balance sheets of the Company as of June 30, 1999, the related
statements of operations and cash flows for the six months ended June 30,
1999 and 1998 and the three months ended June 30, 1999 and June 30, 1998
included in the financial statements have been prepared by the Company
without audit. In the opinion of management, the accompanying financial
statements include all adjustments (consisting of normal, recurring
adjustments) necessary to summarize fairly the Company's financial position
and results of operations. The results of operations for the six months
ended June 30, 1999 are not necessarily indicative of the results of
operations for the full year or any other interim period.
NOTE 2 - Description of Business
Accufacts Pre-Employment Screening, Inc. ("Accufacts") was incorporated on
October 6, 1994 in the State of New York. On August 31, 1998 Accufacts
consummated a merger with a public shell, Southern Cargo Company
("Southern"), a Florida corporation. Southern simultaneously with this
merger changed its name to Accufacts Pre-Employment Screening Inc. (the
"Company") and shortly thereafter re-incorporated in the State of Delaware.
Under the terms of the merger all of the outstanding shares of Accufacts
were acquired by Southern in exchange for 3,750,000 shares of Southern's
$.01 par value common stock. This transaction was accounted for as a
reverse acquisition whereby Accufacts was the acquirer for accounting
purposes. The historical financial statements prior to August 31, 1998 are
those of Accufacts.
The Company acts as an information service bureau and is engaged primarily
in the business of verifying job applicant background information for
employers using databases and a national network of agents throughout the
United States.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT
This Quarterly Report on Form 10-Q contains forward-looking statements. The
term, "forward-looking statements," is defined in Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in
this Form 10-Q and other filings with the Securities and Exchange Commission, in
our press releases, and in our oral statements, words or phrases such as
"believes," "anticipates," "expects," "intends" "will likely result,"
"estimates," "projects" or similar expressions are intended to denote
forward-looking statements. The possible results that may be suggested by
forward-looking statements are subject to risks and uncertainties that may cause
actual results to differ materially. Some of the factors might cause such
differences include risks associated with expansion of marketing effort; limited
sales and marketing experience; heightened competition; general economic and
business conditions; the ability of AccuFacts to implement its business strategy
and maintain and enhance its competitive strengths; the ability of Accufacts to
maintain its cost efficiency competition; continued availability of key
personnel; dependence on proprietary technology, including the adequacy of
patent and trade secret protection; retention of key personnel and recruitment
of additional qualified skilled personnel.
Do not place undue reliance on forward-looking statements. The forward-looking
statements speak only as of the date made and may not reflect events or
circumstances which occur thereafter. Carefully review and consider the various
disclosures we make in this report and in our other public filings to advise
interested parties of the risks factors and other uncertainties that may affect
our business.
THE SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS
ENDED JUNE 30, 1998
Revenues for the six months ended June 30, 1999 were $858,285, up $54,667 or
6.8% as compared to the six months ended June 30, 1998. The increase in revenues
reflected increased marketing efforts by the Company during the period.
Gross profit for the six months ended June 30, 1999 was $272,805, up $17,742, or
6.9% from the six months ended June 30, 1998.
Cost of sales for the six months ended June 30, 1999 was $585,480 up $36,925 or
6.7% from the six months ended June 30, 1998.
The increase in cost of sales and the resulting reduction in gross profit
reflect the cost of personnel and support of personnel in the increased
marketing efforts.
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<PAGE>
Net cash (used in) provided by operating activities for the six months ended
June 30, 1999 and 1998 was ($132,945) and $39,486. Net cash used in investing
activity was $-0- and $39,594 for the six months ended June 30, 1999 and 1998,
respectively. The net cash used in investing activities for the six months ended
June 30, 1998 was for the purchase of property and equipment and a marketing
list. The Company's financing activities included net borrowing from a bank and
subscritpions received relating to stock subscribed from the private placement
offering. The Company's financing activities resulted in net cash provided by
(used in) financing activity of $84,834 and ($3,547) for the six months ended
June 30, 1999 and 1998, respectively.
General and administrative expenses for the six months ended June 30, 1999 were
$336,051, up $124,871 or 59% from the quarter ended June 30, 1998. This increase
reflects, among other things, payment in the first half of 1999 of the increased
legal and accounting costs incurred in conjunction with the 504D offering of
common stock, which terminated on December 18, 1998, the preparation of audited
financial statements, and the preparation for the filing of a Form 10 SB
registration statement with the Securities and Exchange Commission, as well as
expenses related to the introduction and construction of two new websites for an
enhanced e-commerce initiative, the development of new software programs to
achieve more automation of marketing efforts and an increased level of
attendance at national trade shows, and the implementation of new employment
contracts for executive officers.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital at June 30, 1999 was $119,880 as compared to $90,748 at June 30,
1998. The increase in working capital reflects the increase in liquidity
provided to the Company by the proceeds of the 504D offering. Subsequent to June
30, the Company received additional payments of the subscriptions payable under
the 504D offering. $553,500 in subscriptions receivable remain outstanding from
the offering. Current cash projections indicate that the funding requirements of
the Company over the next twelve months will be met from cash sales of search
services and the remaining proceeds from the subscription receivable relating to
the 504D offering.
PART II
OTHER INFORMATION
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 hereunto duly authorized.
Date: August 19, 1999.
AccuFacts Pre-Employment Screening, Inc.,
a Delaware corporation
By: /s/ Philip Luizzo
----------------------------------------
Philip Luizzo, President,
Chief Executive Officer,
(Principal Executive Officer)
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