U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2000
/ / Transition report under Section 13 or 15(d) of the Exchange Act
For the transaction period from to
------------ ------------
Commission file number 001-14995
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
(Exact Name of Small Business Issuer 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, New York 10013
(Address of Principal Executive Offices)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
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___
APPLICABLE ONLY TO ISSUER INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes___ No___
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 6,627,471 as of May 11, 2000
Transitional Small Business Disclosure Format (check one):
Yes___ No_X_
<PAGE>
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets for March 31, 2000 (unaudited) and
December 31, 1999................................................. 3
Consolidated Statement of Operations for Three Months Ended
March 31, 2000 and 1999 (unaudited)............................... 5
Consolidated Statement of Cash Flows for the Three Months
Ended March 31, 2000 and 1999 (unaudited)......................... 6
Notes to Unaudited Consolidated Financial Statements.............. 8
Item 2. Management's Discussion and Analysis or Plan of Operations........ 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 10
Item 2. Changes in Securities and Use of Proceeds......................... 10
Item 3. Defaults Upon Senior Securities .......................... 10
Item 4. Submission of Matters to a Vote of Security Holders............... 10
Item 5. Other Information................................................. 10
Item 6. Exhibits and Reports on Form 8-K.................................. 11
Signatures................................................................... 12
Exhibits..................................................................... 13
-2-
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 2000 (Unaudited) and December 31, 1999
- --------------------------------------------------------------------------------
ASSETS
March 31,
2000 December 31,
(Unaudited) 1999
------------------------------
CURRENT ASSETS
Cash $ 193,901 $ 298,331
Accounts receivable 702,024 636,463
---------- ----------
Total Current Assets 895,925 934,794
---------- ----------
PROPERTY AND EQUIPMENT, net 220,022 155,084
---------- ----------
OTHER ASSETS
Security deposits 8,554 8,554
Prepaid expenses 54,405 68,572
Deferred income tax asset 212,600 185,600
Intangible asset, net 154,476 157,632
---------- ----------
Total Other Assets 430,035 420,358
---------- ----------
TOTAL ASSETS $1,545,982 $1,510,236
========== ==========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 2000 (Unaudited) and December 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
2000 December 31,
(Unaudited) 1999
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 207,390 $ 194,056
Current maturities of capital lease obligations 7,698 8,295
Note payable, bank 39,108 43,274
Loans payable, stockholder 21,280 21,280
Deferred income tax liability 219,000 184,000
----------- -----------
Total Current Liabilities 494,476 450,905
----------- -----------
OTHER LIABILITIES
Capital lease obligations, less current maturities -- 1,465
----------- -----------
TOTAL LIABILITIES 494,476 452,370
----------- -----------
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,
6,627,471 issued and outstanding 66,275 66,275
Additional paid in capital 1,319,821 1,319,821
Accumulated deficit (334,590) (328,230)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,051,506 1,057,866
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,545,982 $ 1,510,236
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2000 and 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
REVENUES $ 982,405 $ 395,678
COST OF SALES 659,661 261,868
----------- -----------
GROSS PROFIT 322,744 133,810
GENERAL AND ADMINISTRATIVE EXPENSES 312,121 144,161
----------- -----------
OPERATING INCOME (LOSS) 10,623 (10,351)
OTHER EXPENSE
Interest expense, net 1,532 1,663
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 9,091 (12,014)
INCOME TAXES 15,451 370
----------- -----------
NET LOSS $ (6,360) $ (12,384)
=========== ===========
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.00) $ (0.00)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
6,627,471 6,075,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2000 and 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (6,360) $ (12,384)
--------- ---------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 16,044 8,827
(Increase) decrease in accounts receivable (65,561) 4,342
Decrease (increase) in prepaid expense 14,167 (4,472)
Increase (decrease) in accounts payable and accrued expenses 13,334 (39,071)
Increase in deferred income taxes 8,000 --
--------- ---------
TOTAL ADJUSTMENTS (14,016) (30,374)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (20,376) (42,758)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (77,826) --
Purchase of intangible asset -- --
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (77,826) --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments on capital lease obligations (2,062) (1,423)
Net repayments of note payable, bank (4,166) (5,690)
--------- ---------
NET CASH USED IN FINANCING
ACTIVITIES (6,228) (7,113)
--------- ---------
NET DECREASE IN CASH (104,430) (49,871)
CASH - Beginning 298,331 52,497
--------- ---------
CASH - Ending $ 193,901 $ 2,626
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS, continued
For the Three Months Ended March 31, 2000 and 1999 (Unaudited)
- --------------------------------------------------------------------------------
2000 1999
---- ----
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the periods for:
Interest $1,536 $1,670
Income taxes $9,222 $1,305
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Presentation
The balance sheets of the Company as of March 31, 2000, the related
statements of operations and cash flows for the three months ended March
31, 2000 and 1999 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 three months ended March 31, 2000 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. ("APES")
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.
APES and its subsidiary 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.
On October 13, 1999, APES acquired all of the net assets of Maglio, Inc.
("Maglio"), a Florida corporation, by merging Maglio with and into
Maglio-Accufacts Pre-Employment Screening, Inc. ("MAPES"), a wholly-owned
subsidiary established by APES. The acquisition was accounted for using the
purchase method of accounting and was completed by issuing 177,471 shares
of APES common stock consisting of 174,971 shares of common stock in
consideration for the acquisition and 2,500 shares of common stock in
consideration for a stockholder of Maglio entering into a non-compete
agreement. The purchase price over the fair value of the net assets
acquired was $120,125 and is being amortized using the straight-line method
over 20 years. The fair value of the non-competition agreement was $5,313
and is being amortized using the straight -line method over the term of the
agreement.
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<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations.
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Financial Statements and the Notes thereto
included in this Quarterly Report on Form 10-QSB. This Report contains
forward-looking statements. The term, "forward-looking statements," is defined
in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. When used in this Report as well as
our other filings with the Securities and Exchange Commission, press releases
and oral statements, words or phrases such as "believes," "anticipates,"
"expects," "intends," "will likely result in," "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 which may cause actual results to differ materially.
Some of the factors which might cause such differences include, without
limitation, risks associated with expansion of marketing efforts; limited sales
and marketing experiences; heightened competition; general economic and business
conditions; our ability or inability to implement our business strategy and/or
maintain our cost efficiency; dependence on proprietary technology, including,
without limitation, the adequacy of patent and trade secret protection;
continued availability of key personnel; retention of key personnel and
recruitment of additional qualified skilled personnel.
THE THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS
ENDED MARCH 31, 1999.
Revenues for the three months ended March 31, 2000 were $982,405, up
$586,727, or 148.3%, from $395,678 for the three months ended March 31, 1999.
The increase in revenues was due to the October 1999 acquisition of Maglio,
Inc., a Florida corporation engaged in providing pre-employment screening
services, by Maglio-Accufacts Pre-Employment Screening, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company. Along with this
acquisition there was also increased marketing efforts in cross selling new
product lines to a broader client base along with strengthening of the Company's
business to business internet exposure.
Cost of sales for the three months ended March 31, 2000 was $659,661,
up $397,793, or 151.9%, from $261,868 for the three months ended March 31, 1999.
Gross profit for the three months ended March 31, 2000 was $322,744, up
$188,934, or 141.2%, from $133,810 for the three months ended March 31, 1999.
The Company's cost of sales and gross profits rose in proportion with the
increase in revenues. With the combining of operations in New York and Florida,
which will take place in the second quarter of 2000, the Company expects to
become more efficient and generate a higher gross profit rate.
General administrative expenses for the three months ended March 31,
2000 were $312,121, up $167,960, or $116.5%, from $144,161 for the three months
ended March 31, 1999. This increase was attributable to, among other things, the
increased overhead of running two current operations and the development of
programs and internal systems which will make it possible to consolidate these
two operations into a seamless new office and easy to manage profit center.
There was also an increase in continued development and marketing to attract
more business to business internet ordering.
-9-
<PAGE>
Net losses for the three months ended March 31, 2000 were $6,360, down
$6,024, or 48.6%, from $12,384 for the three months ended March 31, 1999. The
Company believes that by combining the New York and Florida operations, it will
be able to reduce the amount of time allocated to general and administrative
matters as well as reduce costs of revenue, and focus more on marketing.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the three months ended March 31,
2000 was $20,376, down $22,382, or 52.3%, from $42,758 for the three month
period ended March 31, 1999. Net cash used in investing activities for the three
months ended March 31, 2000 was $77,826, up from -0- for the three month period
March 31, 1999. This was attributable to the increased investment in equipment
and continued development of software to increase the capabilities and
efficiency of operations.
Working Capital.
Working capital at March 31, 2000 was $401,449, as compared to $483,889 at
December 31, 1999. The Company intends to increase its business through the use
of operating profits and borrowings and additional capital raisings. The Company
believes that its anticipated cash flow from operations as well as availability
of funds from existing bank facilities will provide the liquidity to meet its
current foreseeable cash needs for at least a year.
The Company currently has a bank source of funding:
o Line of credit in the amount of $100,000 ($39,108 which was
outstanding at March 31, 2000) with an annual percentage rate of
7.75%.
o An overdraft protection on Business Checking Account of $25,000 ($0 of
which was outstanding as of March 31, 2000) with an annual percentage
rate of 13.75%.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit No. Description
- ----------- -----------
2.1 Plan and Agreement of Merger of Maglio, Inc. and Maglio-Accufacts
Pre-Employment Screening, Inc., dated October 11, 1999, by and among
Accufacts Pre-Employment Screening, Inc., Maglio-Accufacts
Pre-Employment Screening, Inc. and Maglio, Inc. (1)
2.2 Supplemental Agreement, dated as of October 11, 1999, by and among
Accufacts Pre-Employment Screening, Inc., Maglio-Accufacts
Pre-Employment Screening, Inc., Maglio, Inc. and Richard J. Maglio (1)
3.1 Articles of Incorporation of Accufacts Pre-Employment Screening, Inc.
and Certificate of Merger (2)
3.2 By-laws of Accufacts Pre-Employment Screening, Inc. (2)
3.3 Certificate of Incorporation of Maglio-Accufacts Pre-Employment
Screening, Inc. (4)
3.4 By-laws of Maglio-Accufacts Pre-Employment Screening, Inc. (4)
4.1 Specimen of Common Stock Certificate of Accufacts Pre-Employment
Screening, Inc. (2)
4.2 Asset Purchase Agreement, dated August 26, 1998, between Southern
Cargo, Inc. and Accufacts Pre-Employment Screening, Inc. (2)
4.3 Shareholder Rights and Registration Rights Agreement, dated as of
October 11, 1999, by and between Accufacts Pre-Employment Screening,
Inc. and Richard J. Maglio (1)
10.1 Employment Agreement, dated September 1, 1998, between the Registrant
and Philip Luizzo (2)
10.2 Amendment, dated October 5, 1999, to the Employment Agreement, dated
September 5, 1998, between the Registrant and Philip Luizzo (3)
10.3 Employment Agreement, dated September 1, 1998, between the Registrant
and John Svedese (2)
10.4 Employment Agreement, dated October 11, 1999, by and among the
Registrant, Maglio-Accufacts Pre-Employment Screening, Inc. and
Richard J. Maglio (4)
10.5 Lease Agreement, dated April 1, 1997, between the Registrant and 6
Greene Street Associates, LLC., as amended (4)
10.6 Lease Agreement, dated August 28, 1998, between Maglio, Inc. and CB
Sanlando Center, Inc. (4)
21.1 List of Subsidiaries (4)
27.1 Financial Data Schedule
(1) Filed as an exhibit to the Registrant's Current Report on Form 8-K, dated
October 13, 1999, filed with the Securities and Exchange Commission on
October 28, 1999 (SEC File No.: 001-14995), and is incorporated by
reference herein.
(2) Filed as an exhibit to the Registrant's Form 10-SB filed with the
Securities and Exchange Commission on May 7, 1999 (SEC File No.:
001-14995), and is incorporated by reference herein.
(3) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1999 filed with the Securities and
Commission on November 15, 1999 (SEC File No.: 001-14995), and is
incorporated by reference herein.
(4) Filed as an exhibit to the Registrant's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1999 filed with the Securities and
Exchange Commission on April 11, 2000 (SEC File No.: 001- 14995) and is
incorporated by reference herein.
(b) Reports on Form 8-K. The Registrant did not file, or cause to be
filed, any reports on Form 8-K during the quarter for which this
report on Form 10-QSB is filed.
-11-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ACCUFACTS PRE-EMPLOYMENT SCREENING,
INC.
Date: May 12, 2000 By: /s/ Philip Luizzo
-----------------
Philip Luizzo, President
and Chief Executive Officer
(Principal Executive Officer)
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<PAGE>
Exhibits
Exhibit No. Description
- ----------- -----------
27.1 Financial Data Schedule
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The financial data schedule contains summary financial information extracted
from the March 31, 2000 unaudited balance sheet and income statement and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001085545
<NAME> ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-1-2000
<PERIOD-END> Mar-31-2000
<CASH> 193,901
<SECURITIES> 0
<RECEIVABLES> 706,863
<ALLOWANCES> 4,839
<INVENTORY> 0
<CURRENT-ASSETS> 895,925
<PP&E> 344,576
<DEPRECIATION> 124,554
<TOTAL-ASSETS> 1,545,982
<CURRENT-LIABILITIES> 494,476
<BONDS> 0
0
0
<COMMON> 66,275
<OTHER-SE> 985,231
<TOTAL-LIABILITY-AND-EQUITY> 1,545,982
<SALES> 982,405
<TOTAL-REVENUES> 982,405
<CGS> 659,661
<TOTAL-COSTS> 659,661
<OTHER-EXPENSES> 312,121
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,532
<INCOME-PRETAX> 9,091
<INCOME-TAX> 15,451
<INCOME-CONTINUING> (6,360)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,360)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
