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, 1999
( ) 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)
3499 Hwy. 9 No., Ste. 3B, 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, 1999 is 11,940,521.
<PAGE>
File Number
0-17394
Corfacts, Inc. & Subsidiary
Form 10-QSB
September 30, 1999
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet at September 30, 1999 3.
Consolidated Statements of Operations for the
three months and nine months ended
September 30, 1999 and 1998 5.
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1999 and 1998 7.
Notes to Consolidated Financial Statements 8.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10.
PART II - OTHER INFORMATION 14.
Item 1. Legal Proceedings 14.
Item 2. Changes in Securities 14.
Item 3. Defaults Upon Senior Securities 14.
Item 4. Submission of Matters to a Vote of
Securityholders 14.
Item 5. Other Information 14.
Item 6. Exhibits and Reports on Form 8-K 14.
Signatures 15.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CORFACTS, INC. & SUBSIDIARY
BALANCE SHEET
September 30,1999
-----------------
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $1,496,135
Interest bearing deposits, restricted 38,280
Interest receivable 7,861
Accounts receivable, net of allowance for
bad debts of $44,510 280,751
Prepaid expenses 44,834
Deferred Taxes 10,500
Other receivable-municipal tax liens, net 10,715
---------
Total Current Assets 1,889,076
---------
Property and equipment, at cost,
less accumulated depreciation of $131,780 416,065
Other assets
Loan receivable, officer 94,743
Customer lists, net of accumulated
amortization of $75,550 158,745
Goodwill, net of accumulated amortization
of $23,638 180,157
Security deposits 34,054
---------
Total Other Assets 467,699
---------
TOTAL ASSETS $2,772,840
=========
<PAGE>
cont'd. - Balance Sheet
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 363,182
Deferred revenue 40,000
Income taxes payable 140,174
Current portion of note payable - shareholder 44,392
Current portion of note payable - purchase 24,505
Current portion of capitalized lease obligations 67,053
---------
Total Current Liabilities 679,306
---------
Capitalized lease obligations, net of
current portion 140,845
Note payable - shareholder, net of current portion 91,072
Note payable - purchase, net of current portion 75,752
Deferred Taxes 33,200
Stockholders' equity
Common stock, no par value, 20,000,000 shares
authorized; 11,940,521 shares issued and
outstanding in 1999 1,284,052
Retained earnings 468,613
----------
TOTAL STOCKHOLDERS' EQUITY 1,752,665
----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,772,840
==========
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF OPERATIONS
Nine months ended
September 30,
1999 1998
---- ----
(Unaudited)
Revenue:
Revenue telemarketing $ 4,060,200 $ 2,526,659
Income from tax liens, net 998 1,150
Interest income 33,666 33,851
--------- ---------
Total revenues 4,094,864 2,561,660
Direct operating expenses 1,858,857 1,238,985
--------- ---------
Gross Profit 2,236,007 1,322,675
Costs & expenses:
Selling, general & administrative 1,416,328 769,130
Depreciation and amortization 97,518 45,086
Interest expense 26,182 15,158
--------- ---------
Total costs & expenses 1,540,028 829,374
--------- ---------
Income before income taxes 695,979 493,301
Provision for income taxes 295,790 192,400
--------- ---------
Net income $400,189 $300,901
========= =========
Basic earnings per common share $ .034 $ .025
========= =========
Average common shares outstanding 11,940,521 11,940,521
========== ==========
Diluted earnings per common share $ .030 $ .024
========== ==========
Average common shares and equivalents
outstanding for diluted earnings
per common share 13,380,521 12,648,521
========== ==========
<PAGE>
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF OPERATIONS
Three months ended
September 30,
1999 1998
---- ----
(Unaudited)
Revenue:
Revenue telemarketing $ 1,484,314 $ 865,635
Income from tax liens, net 784 -
Interest income 11,179 12,896
--------- --------
Total revenues 1,496,277 878,531
Direct operating expenses 637,306 462,327
--------- --------
Gross Profit 858,971 416,204
Costs & expenses:
Selling, general & administrative 523,870 287,886
Depreciation and amortization 37,621 15,062
Interest expense 9,885 4,741
--------- --------
Total costs & expenses 571,376 307,689
--------- --------
Income before income taxes 287,595 108,515
Provision for income taxes 125,380 25,600
--------- --------
Net income $162,215 $ 82,915
========= ========
Basic earnings per common share $ .014 $ .007
========= ========
Average common shares outstanding 11,940,521 11,940,521
========== ==========
Diluted earnings per common share $ .012 $ .007
========== ==========
Average common shares and equivalents
outstanding for diluted earnings
per common share 13,380,521 12,648,521
========== ==========
<PAGE>
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF CASH FLOWS
Nine months ended
September 30,
1999 1998
---- -----
(Unaudited)
Cash flows from operating activities:
Net income $400,189 $300,901
Adjustments to reconcile net income
to net cash used in operations:
Depreciation and amortization 97,518 45,086
Bad debts provision 23,000 21,015
Deferred income taxes 83,225 167,300
Increase in accounts receivable (172,320) (86,122)
Increase in interest receivable (6,812) -
(Increase) decrease in prepaid
expenses 15,829 (57,532)
Increase in other assets (4,735) ( 8,957)
Increase (decrease) in accounts payable
and other liabilities 208,760 (58,674)
------- -------
Net cash provided by operating
activities 644,654 323,017
------- -------
Cash flows used in investing activities:
Purchase of assets (102,500) -
Redemption of tax lien certificate 2,350 9,180
Purchase of equipment ( 92,276) (19,896)
Net cash used in investing ------- -------
activities (192,426) (10,716)
------- -------
Cash flows from financing activities:
Repayment of note to shareholder (15,921) -
Repayment of acquisition note (7,743) -
Proceeds from issuance of common stock - 2,479
Repayment of capitalized lease
obligations ( 57,468) (25,182)
Net cash used in financing ------- -------
activities ( 81,132) (22,703)
------- -------
Net increase in cash and cash
equivalents 371,096 289,598
Cash and cash equivalents at
beginning of period 1,125,039 786,907
--------- ---------
Cash and cash equivalents at
end of period $1,496,135 $1,076,505
========= =========
<PAGE>
CORFACTS, INC. & SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 1999
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, 1999 and 1998
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, 1999.
It is suggested that the interim financial statements be read
in conjunction with the audited consolidated financial
statements for the year ended December 31, 1998 as filed with
the Securities and Exchange Commission on Form 10-KSB
(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
on the operations of its significant subsidiary and to pursue
potential acquisitions and investments deemed appropriate for
the Company to generate an additional return on equity.
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
accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary.
Intercompany transactions and balances have been eliminated in
consolidation.
NOTE 3 - RELATED PARTY TRANSACTIONS
Receivables have been generated by transactions with the
President which total $94,743. This note is secured by
2,414,316 shares of Company stock.
The Note Payable, generated by the purchase of Metro
Marketing, Inc., is payable to the Vice President and
shareholder of the Company and bears an interest rate of 7%.
During the nine months ended September 30, 1999 and 1998,
interest expense on this note was $7,510 and $7,947, respectively.
NOTE 4 - INCOME TAXES
The Company and its wholly owned subsidiary file a
consolidated Federal income tax return. Corfacts uses the
asset and liability method in providing income taxes on all
transactions that have been recognized in the consolidated
financial statements. The asset and liability method required
that deferred taxes be adjusted to reflect the tax rates at
which future taxable amounts will be settled or realized. The
effects of tax rate changes on future deferred tax liabilities
and deferred tax assets, as well as other changes in income tax
laws, are recognized in net earnings in the period such changes
are enacted. Valuation allowances are established when
necessary to reduce deferred tax assets to amounts expected to
be realized.
Deferred taxes consist of the following at:
September 30, 1999
------------------
Total deferred tax assets $ 10,500
Less: Valuation allowance -
Deferred tax liability (33,200)
------
Net deferred tax liability $ (22,700)
======
Through September 30, 1999, utilization of net operating
loss carryforwards has been substantially reduced. Most of the
deferred tax liability is attributable to net operating loss
carryforwards primarily related to fixed assets.
The reconciliation of income tax computed at the U.S.
Federal statutory rates to income tax expense at September 30,
1999 and September 30, 1998 is as follows:
Percentage of
Pretax Income
----------------
1999 1998
---- ----
Tax at US statutory rates 34.0% 34.0%
State income taxes, net of
federal tax benefit 6.0% 6.0%
Other adjustments 2.0% (1.0%)
----- -----
Income tax provision 42.0% 39.0%
==== ====
<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, 1999 COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1999
The Company is reporting net income of $400,189 on total revenues of
$4,094,864 for the nine months ended September 30, 1999 as compared
to net income of $300,901 on total revenues of $2,561,660 for the
comparable nine months ended September 30, 1998.
Basic earnings per share for the nine months ended September 30, 1999
were $.034 as compared to basic earnings per share of $.025 for the
same period in 1998.
Selling, general and administrative costs were $1,416,328 for
the nine months ended September 30, 1999 as compared to
$769,130 for the nine months ended September 30, 1998. The
Company moved to a larger facility in December 1998, which
resulted in rent and utility expenses of $114,264 for the nine
months ended September 30, 1999 as compared to $21,858 for the
same period in 1998, representing an increase in expense of
$92,406. Depreciation and amortization expense for the nine
months ended September 30, 1999 was $97,518 as compared to
$45,086 for the same period in 1998. This increase in
depreciation and amortization of $52,432 is attributable to the
purchase of additional equipment and furniture necessary for
the Company's expansion, as well as amortization related to the
purchase of assets of the Company's recent acquisition. Selling
expenses increased $328,567 to $685,013 for the nine months
ended September 30, 1999 as compared to $356,446 for the nine
months ended September 30, 1998. Selling expenses increased
due to the addition of sales and administrative staff who have
been hired to promote the Company's new financial and custom
telemarketing divisions.
During the first quarter of 1999, the Company purchased the
assets of a local telemarketing company which specializes in
custom script writing tailored to any industry. This
transaction further diversifies the services provided by Metro
Marketing, the wholly owned subsidiary of Corfacts. The
customer base of this new acquisition has shown immediate
growth. The Company is continuing to concentrate on the custom
needs of larger companies for various telemarketing projects,
such as the subscription sales, completion of surveys and lead
generation for their products and services. The primary growth
in revenue this year is due to the development of the custom
telemarketing division.
During the second quarter of 1999, the Company purchased the
assets of an inbound service in Wayne, New Jersey. In October
1999, the Company purchased the assets of another inbound
telemarketing company, Paramount Inc., which is currently
located in Middletown, New Jersey. These accounts will be
serviced out of the existing Wayne, New Jersey location.
The Company recorded $33,666 in interest income for the nine
months ended September 30, 1999 as compared to interest income
of $33,851 for the same period last year.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1998
The Company is reporting net income of $162,215 on total
revenues of $1,496,277 for the quarter ended September 30, 1999
as compared to net income of $82,915 on total revenues of
$878,531 for the comparable quarter ended September 30, 1998.
Basic earnings per share for the quarter ended September 30, 1999
were $.014 as compared to basic earnings per share of $.007 for
the same quarter in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $1,209,770 at September 30, 1999,
as compared to $1,084,556 at December 31, 1998. Working capital has
continued to grow, despite the Company's acquisitions during the first
and second quarters of 1999. The Company plans on investing only a
small amount on sales and marketing for the new inbound division to
expand its service capabilities. With the purchase of additional
equipment and software, the inbound service division will now be able to
offer voice mail, order entry and 800 number service, which will
broaden its customer base. This equipment and software will also
be able to handle the increase in customer capacity that will occur
in October, 1999 with the purchase of the assets of another inbound
telemarketing operation and the additional accounts which will be
the result of a salesperson dedicated to promoting these new services.
Management is continually considering various additional equity
funding alternatives to increase its already positive working
capital to further support its planned acquisitions and improve
the value of the Company for its shareholders. To this end, the
Board of Directors has authorized management, if and when it
deems appropriate, to purchase back for the Company's treasury,
shares of the Company's common stock when it feels the current
market price is under valued. The Board of Directors has also
authorized management, as market conditions permit, to undertake
selective warrant programs to provide incentives to market makers.
The Company feels with the right combination of capital, marketing
assistance and management support it will be an attractive parent
company which can support the acquisition of additional subsidiaries,
while maintaining the current growth rate in its existing subsidiary.
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 analyze the
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 in the 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 expressed in the forward-looking
statements contained or incorporated by reference 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.
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:
None
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 1, 1999 /s/ Larry Finkelstein
Larry Finkelstein
President, Chairman and CFO
November 1, 1999 /s/ Ariel Freud
Ariel Freud
Vice President, Director
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 1, 1999 /s/ Larry Finkelstein
Larry Finkelstein
President, Chairman and CFO
November 1, 1999 /s/ Ariel Freud
Ariel Freud
Vice President, Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,496,135
<SECURITIES> 0
<RECEIVABLES> 333,122
<ALLOWANCES> 44,510
<INVENTORY> 0
<CURRENT-ASSETS> 1,889,076
<PP&E> 547,845
<DEPRECIATION> 131,780
<TOTAL-ASSETS> 2,772,840
<CURRENT-LIABILITIES> 679,306
<BONDS> 0
0
0
<COMMON> 1,284,052
<OTHER-SE> 468,613
<TOTAL-LIABILITY-AND-EQUITY> 2,772,840
<SALES> 4,060,200
<TOTAL-REVENUES> 4,094,864
<CGS> 1,858,857
<TOTAL-COSTS> 1,540,028
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,182
<INCOME-PRETAX> 695,979
<INCOME-TAX> 295,790
<INCOME-CONTINUING> 400,189
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 400,189
<EPS-BASIC> .034
<EPS-DILUTED> .030
</TABLE>
