U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 SEPTEMBER 30, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-17394
Corfacts Inc. and Subsidiary
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
New Jersey 22-2478379
------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer ID No.)
incorporation or organization)
41 East Main Street, Freehold, NJ 07728
----------------------------------------
(Address of principal executive offices)
Registrant s telephone number, including area code
--------------------------------------------------
(800) 696-7788
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities 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
Transitional Small Business Disclosure Format: Yes x No
The number of shares outstanding of the registrant s common
stock, no par value, at September 30, 1997 is 11,909,402.
<PAGE>
File Number
-----------
0-17394
Corfacts, Inc. & Subsidiary
Form 10-QSB
September 30, 1997
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet at
September 30, 1997 3.
Consolidated Statements of Operations for the
nine months ended September 30, 1997
and 1996 5.
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1997 and 1996 6.
Notes to Consolidated Financial Statements 7.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9.
PART II - OTHER INFORMATION 12.
Item 1. Legal Proceedings 12.
Item 2. Changes in Securities 12.
Item 3. Defaults Upon Senior Securities 12.
Item 4. Submission of Matters to a Vote of
Securityholders 12.
Item 5. Other Information 12.
Item 6. Exhibits and Reports on Form 8-K 12.
Signatures 13.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CORFACTS, INC. & SUBSIDIARY
BALANCE SHEET
September 30, 1997
ASSETS ------------------
Current Assets
Cash and cash equivalents $ 681,303
Interest receivable 5,475
Accounts receivable, net of allowance for
bad debts of $13,361 70,679
Prepaid expenses 11,172
Notes receivable 1,436
Officer loans 25,669
Other receivable-municipal tax liens, net 23,652
-------
Total Current Assets 819,386
-------
Property and equipment, at cost, less
accumulated depreciation of $24,316 126,255
Other assets -------
Loan receivable, officer 128,913
Investment in partnership 2,166
Customer lists, net of accumulated
amortization of $24,785 114,010
Goodwill, net of accumulated amortization
of $8,675 130,120
Security deposits 18,166
----------
Total Other Assets 393,375
----------
TOTAL ASSETS $1,339,016
==========
<PAGE>
cont'd. - Balance Sheet
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 177,148
Deferred revenue 5,010
Corporate taxes payable 5,290
Deferred corporate taxes 5,289
Current portion of capitalized lease obligations 32,915
-------
Total Current Liabilities 225,652
-------
Capitalized lease obligations, net of current
portion 48,694
-------
Deferred corporate taxes 5,289
-------
Note payable - shareholder 151,385
-------
Stockholders' equity
Common stock, no par value, 20,000,000 shares
authorized; 11,909,402 shares issued and
outstanding in 1997 1,281,573
Retained(deficit) (373,577)
----------
TOTAL STOCKHOLDERS' EQUITY 907,996
----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,339,016
==========
See notes to accompanying financial statements.
<PAGE>
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF OPERATIONS
Nine months ended
September 30,
1997 1996
--------- --------
Revenue:
Revenue telemarketing $1,508,142 $145,815
Equity in earnings of
unconsolidated investee 50 192
Income from tax liens, net 2,781 3,396
Interest income 13,385 15,226
--------- -------
Total revenues 1,524,358 164,629
Direct operating expenses 932,901 42,055
--------- -------
Gross Profit 591,457 122,574
--------- -------
Costs & expenses:
General & administrative 333,612 190,639
Depreciation and amortization 34,928 7,192
Interest expense 15,485 -
------- -------
Total costs & expenses 384,025 197,831
------- -------
Net income (loss) before taxes 207,432 (75,257)
Provision for income taxes 16,093 -
--------- --------
Net income (loss) $ 191,339 $(75,257)
========= ========
Net income (loss) per share $ .016 $ (.006)
========= ========
Weighted average shares
outstanding 11,909,402 11,909,402
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF CASH FLOWS
Nine months ended
September 30,
1997 1996
------ -------
Cash flows from operating activities:
Net income (loss) $191,339 $(75,257)
Adjustments to reconcile net income
(loss) to net cash used in
operations:
Depreciation and amortization 34,928 7,192
Bad debts provision 8,134 -
Increase in accounts receivable (13,025) ( 5,865)
Increase in prepaid expenses (11,172) (10,000)
Increase in other assets (12,657) -
Increase in accounts payable
and other liabilities 77,416 29,520
Net cash provided by (used in) ------- -------
operating activities 274,963 (54,410)
------- -------
Cash flows from investing activities:
Redemption of (purchase of)
tax lien certificate 10,598 (3,396)
Increase in partnership
investment (50) (192)
Net cash provided by (used in) ------ ------
investing activities 10,548 (3,588)
------ ------
Cash flows from financing activities:
Repayment of capitalized lease
obligations (28,861) -
Loan to Officer - (5,000)
Repayment from (payment to) buyer 18,357 (8,093)
------- -------
Net cash used in financing activities (10,504) (13,093)
------- -------
Net increase (decrease) in cash and
cash equivalents 275,007 (71,091)
Cash and cash equivalents at
beginning of period 406,296 518,136
Cash and cash equivalents at -------- --------
end of period $681,303 $447,045
======== ========
<PAGE>
CORFACTS, INC. & SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed consolidated interim financial
statements included herein have been prepared by Corfacts, Inc.
(the "Company"), without audit, in accordance with generally
accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures
made are adequate to make the information presented not
misleading.
In the opinion of management, the information furnished for
the nine month period ended September 30, 1997 and 1996 includes
all adjustments, consisting solely of normal recurring accruals
necessary for a fair presentation of the financial results for
the respective interim periods and is not necessarily indicative
of the results of operations to be expected for the entire
fiscal year ending December 31, 1997. It is suggested that the
interim financial statements be read in conjunction with the
audited consolidated financial statements for the year ended
December 31, 1996, as filed with the Securities and Exchange
Commission on Form 10-KSB and Form 8-Kfiled on January 21,1997.
(Commission File Number 0-17394).
NOTE 2 - NATURE OF BUSINESS
Corfacts, Inc. was organized in 1983, originally as the
Business Journal of New Jersey, Inc. Since selling the magazine
business in 1990, and discontinuance and sale of the information
division in August 1991, the Company has directed its efforts to
seek potential acquisitions and investments deemed appropriate
for the Company to generate a return on equity.
NOTE 3 - PURCHASE OF SUBSIDIARY
On December 31, 1996 the Company entered into a merger and
acquisition plan to acquire all of the shares and assets of
Metro Marketing, Inc. a telemarketing firm, effective July 1,
1996. The Company issued 3,904,088 shares of common stock and
the balance of the purchase price in the sum of $151,385 shall
be paid pursuant to the terms of a promissory note. The total
value is approximately $287,589 (exclusive of acquisition
costs). The acquisition was accounted for as a purchase in
accordance with Accounting Principles Board Opinion No. 16. The
excess (approximately $277,590) of the total acquisition cost
over the recorded value of assets acquired was allocated
$138,795 to customer lists and $138,795 to goodwill and are
being amortized over 7 years and 20 years respectively. The
accompanying balance sheet includes the assets and liabilities
of Metro Marketing Inc. at September 30, 1997. The accompanying
consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary for the nine months
ended September 30, 1997. Intercompany transactions have been
eliminated in consolidation.
The proforma results of operations that follow below assume
that the acquisition occurred at the beginning of the period
ended September 30, 1996. The proforma calculations include
adjustments for the estimated effect on the Company's historical
results of operations for depreciation, amortization, interest
and Officer salary related to the acquisition.
Condensed Historical and Proforma Information:
For the nine months ended
September 30, 1997 September 30, 1996
------------------ ------------------
Historical (Proforma)
Total revenue $1,524,358 $394,124
Direct operating expenses 932,901 216,287
Cost and expenses 384,025 294,638
Provision for taxes 16,093 -
---------- ---------
Net income (loss) $ 191,339 $(116,801)
========== =========
Income (loss) per share $ .016 $ (.010)
========== =========
Weighted average shares
outstanding 11,909,402 11,909,402
========== ==========
NOTE 4 - DUE FROM RELATED PARTIES
Receivables have been generated by transactions with related
parties, which are summarized as follows:
Current Long-term
------- ---------
Due from Buyer: $ 1,436 $ -
Due from Officers 25,669 128,913
------- --------
$27,105 $128,913
NOTE 5 - OTHER RECEIVABLES AND INVESTMENT IN PARTNERSHIP
Included in other receivables are municipal tax liens which
subject the Company to the potential loss of investment.
Additionally the Company has an investment in a partnership
where the partnership s only assets are municipal tax liens. If
the Company or partnership is forced to foreclose on the real
estate listed as collateral, there is a potential for total loss
from the investment if the property cannot be sold.
<PAGE>
CORFACTS, INC. & SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The analysis of the Company's financial condition, capital
resources and operating results should be viewed in conjunction
with the accompanying financial statements, including the notes
thereto.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1996
The first acquisition by the Company, of which the Company plans
several, was completed in January of 1997, with an effective
date for accounting purposes of July 1, 1996. The operations of
the Company's new subsidiary, Metro Marketing, Inc. are included
in the nine months ended September 30, 1997. The Company
acquired a telemarketing company which it hopes to be the
teleservices arm of several industries including future
subsidiaries of Corfacts.
The Company is reporting net income of $191,339 on total
revenues of $1,524,358 for the nine months ended September 30,
1997 as compared to a loss of $75,257 on total revenues of
$164,629 for the nine month period ended September 30, 1996.
About the subsidiary, Metro Marketing, Inc.
Metro Marketing recorded revenues of $1,509,277 for the nine
months ended September 30, 1997 as compared to proforma revenues
of $375,310 for the same nine month period in 1996. Net income
for Metro Marketing for the nine months ended September 30, 1997
was $244,938, as compared to a proforma loss of $34,292 for the
nine months ended September 30, 1996.
Revenues for Metro Marketing increased by $1,133,967, or
approximately 287.5%. Prior to July 1996, Metro Marketing
limited its telemarketing services to one particular industry.
Since July 1996, the Company has expanded its services to other
industries and has expanded the type of telemarketing services
they provide. This has enabled the Company to competitively bid
on projects for major corporations and government organizations.
As a percentage of sales, the net income for 1997 was 16.2% for
the nine months, as compared to a net loss of 9.1% for the same
proforma period last year. Management believes that its efforts
will continue to improve the profitability of its newly acquired
subsidiary.
<PAGE>
ITEM 2. MANAAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
The Company has also begun a concerted effort to install quality
assurance procedures to enhance the level of services from being
a telemarketing company to a total teleservices company.
Management believes that it will be able to accomplish this
without significantly depleting the working capital of the
parent company, or incurring a loss in the subsidiary.
Corporate overhead for the nine months ended September 30, 1997
declined due to a reduction in Officer's salary and consulting
fees. The Company recorded $13,385 in interest income for the
nine months ended September 30, 1997 as compared to interest
income of $15,226 for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $593,734 at September 30,
1997, as compared to $420,374 at December 31, 1996. Current
year profitability has continued to increase working capital
for the nine month period.
The Company is reducing its partnership investment and
receivables from tax liens as these certificates are
satisfied. The Company has used the proceeds to supplement
the cash balances of the Company. The Company s goal is to
keep liquid resources available to support approved subsidiary
plans or partially fund future acquisitions. Most of the cash
available in the Company has been invested in 90 day FDIC
insured Certificates of Deposit at various local banking
institutions or placed in interest bearing money market
accounts. The interest rates on these Certificates and money
market accounts have been averaging between 3.75% and 5.2%.
Management reviews the Certificates as they mature.
Management is considering various additional equity funding
alternatives to increase its existing working capital in an
effort to support its planned acquisitions and planned
corporate structure. The Company believes with the right
combination of capital, marketing assistance and management
support it will be able to pursue ongoing growth through the
acquisition of additional subsidiaries, while maintaining the
current growth rate in its existing subsidiary. At the same
time management wants to monitor and direct the Company's growth
in ways that strengthen the Company s balance sheet,liquidity and
income capacity to maximize the value of the Company s common stock.
This in turn can help the Company raise additional capital as well as
provide for greater equity purchasing power in acquisitions.
Forward looking and other statements.
Forward looking statements above and elsewhere in this report
that suggest that the Company will increase revenues, become
profitable and achieve significant growth through acquisitions
are subject to risks and uncertainties. Forward-looking
statements include the information concerning possible or
assumed future results of operations and cash flows. These
statements are identified by words such as believes, expects
anticipates or similar expressions. Such forward looking statements are
based on the beliefs of Corfacts, Inc. and its Board of Directors in
which they attempt to analyzethe Company s competitive position in its
industry and the factors affecting its business. Stockholders should
understand that each of the foregoing risk factors, in addition to those
discussed elsewhere in this document and inthe documents which are
incorporated by reference herein,could affect the future results of
Corfacts, Inc. and could cause those results to differ materially from
those expressedin the forward-looking statements contained or incorporated
byreference herein. In addition there can be no assurance that
Corfacts, Inc. and its Board have correctly identified and
assessed all of the factors affecting the Company s business.
<PAGE>
CORFACTS, INC. & SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Legal proceedings:
None
Item 2. Changes in securities:
None
Item 3. Defaults upon senior securities:
None
Item 4. Submission of matters to a vote of security
holders:
None
Item 5. Other information:
None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits - None
(b) Reports on Form 8-K - filed January 21, 1997
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
November 14, 1997 /s/ Larry Finkelstein
---------------------
Larry Finkelstein,
President, Chairman
/s/ Ariel Freud
---------------
Ariel Freud,
Vice President, Director
/s/ Trudy Katz
--------------
Trudy Katz,
Accounting and Finance
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 thereunto duly authorized.
November 14, 1997 /s/ Larry Finkelstein
---------------------
Larry Finkelstein,
President, Chairman
/s/ Ariel Freud
---------------
Ariel Freud,
Vice President, Director
/s/ Trudy Katz
--------------
Trudy Katz,
Accounting and Finance
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 681,303
<SECURITIES> 0
<RECEIVABLES> 90,951
<ALLOWANCES> 13,361
<INVENTORY> 0
<CURRENT-ASSETS> 819,386
<PP&E> 150,571
<DEPRECIATION> 24,316
<TOTAL-ASSETS> 1,339,016
<CURRENT-LIABILITIES> 225,652
<BONDS> 0
0
0
<COMMON> 1,281,573
<OTHER-SE> (373,577)
<TOTAL-LIABILITY-AND-EQUITY> 907,996
<SALES> 1,508,142
<TOTAL-REVENUES> 1,524,358
<CGS> 932,901
<TOTAL-COSTS> 1,316,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,485
<INCOME-PRETAX> 207,432
<INCOME-TAX> 16,093
<INCOME-CONTINUING> 191,339
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 191,339
<EPS-PRIMARY> .016
<EPS-DILUTED> 0
</TABLE>
