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 June 30, 2000
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
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 [ ] No [x]
The number of shares outstanding of the registrant's common stock, no par
value, at June 30, 2000 is 11,946,521.
File Number
0-17394
Corfacts, Inc. & Subsidiary
Form 10-QSB
June 30, 2000
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet at June 30, 2000 3.
Consolidated Statements of Operations for the
three months and six months ended June 30,
2000 and 1999 5.
Consolidated Statements of Cash Flows for the
six months ended June 30, 2000 and 1999 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
June 30,2000
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $1,212,337
Interest bearing deposits, restricted 40,234
Interest receivable 11,515
Accounts receivable, net of allowance for
doubtful accounts of $47,826 352,458
Note receivable 36,661
Prepaid income tax 63,139
Prepaid expenses and other current assets 61,729
Other receivable-municipal tax liens, net 2,834
---------
Total Current Assets 1,780,907
---------
Property and equipment, at cost, less
accumulated depreciation of $266,776 628,670
Goodwill and customer lists, net of accumulated
amortization of $151,458 396,882
Other assets
Loan receivable, officer 74,493
Deferred taxes 11,340
Security deposits 62,117
--------
Total Other Assets 147,950
--------
TOTAL ASSETS $2,954,409
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 411,915
Deferred revenue 109,102
Current portion of note payable - shareholder 46,764
Current portion of note payable - purchase 41,182
Current portion of capitalized lease obligations 148,219
--------
Total Current Liabilities 757,182
Capitalized lease obligations, net of
current portion 257,037
Note payable - shareholder, net of current portion 61,743
Note payable - purchase, net of current portion 61,342
Deferred taxes 32,237
Stockholders' equity
Common stock, no par value, 20,000,000 shares
authorized; 11,946,521 shares issued and
outstanding in 2000 1,284,952
Retained earnings 499,916
---------
TOTAL STOCKHOLDERS' EQUITY 1,784,868
---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,954,409
=========
See notes to the consolidated financial statements.
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF OPERATIONS
(Unaudited)
Six months ended
June 30,
2000 1999
Revenue:
Revenue telemarketing $ 3,164,505 $2,575,886
Income from tax liens, net 4,000 214
Interest income 24,328 22,487
--------- ---------
Total revenues 3,192,833 2,598,587
Direct operating expenses 1,700,863 1,221,551
--------- ---------
Gross Profit 1,491,970 1,377,036
Costs & expenses:
Selling, general & administrative 1,217,093 892,458
Depreciation and amortization 129,244 59,897
Interest expense 35,227 16,297
--------- ---------
Total costs & expenses 1 381,564 968,652
--------- ---------
Income before income taxes 110,406 408,384
Provision for income taxes 45,700 170,410
------- -------
Net income $ 64,706 $237,974
======= =======
Basic earnings per common share $ .005 $ .020
======= =======
Average common shares outstanding 11,946,521 11,940,521
========== ==========
Diluted earnings per common share $ .005 $ .018
======= =======
Average common shares and equivalents
outstanding for diluted earnings
per common share 13,062,612 13,380,521
========== ==========
See notes to the consolidated financial statements.
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
June 30,
2000 1999
Revenue:
Revenue telemarketing $ 1,509,042 $1,263,759
Income from tax liens, net 4,000 -
Interest income 13,033 12,010
--------- ---------
Total revenues 1,526,075 1,275,769
Direct operating expenses 855,548 629,382
--------- ---------
Gross Profit 670,527 646,387
Costs & expenses:
Selling, general & administrative 600,373 503,633
Depreciation and amortization 64,623 32,035
Interest expense 17,272 8,236
------- -------
Total costs & expenses 682,268 543,904
(Loss)income before income taxes (11,741) 102,483
(Benefit from) provision for
income taxes ( 3,300) 48,050
------- -------
Net (loss) income $( 8,441) $ 54,433
======= =======
Basic earnings per common share $ (.001) $ .005
======= =======
Average common shares outstanding 11,946,521 11,940,521
========== ==========
Diluted earnings per common share $ (.001) $ .004
======= ========
Average common shares and equivalents
outstanding for diluted earnings
per common share 13,062,612 13,380,521
========== ==========
See notes to the consolidated financial statements.
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
2000 1999
Cash flows from operating activities:
Net income $ 64,706 $237,974
Adjustments to reconcile net income
to net cash used in operations:
Depreciation and amortization 129,244 59,897
Bad debts provision 31,400 15,000
Deferred income taxes 3,122 63,590
Changes in assets and liabilities:
Accounts receivable 28,210 (62,349)
Interest receivable (8,510) (4,156)
Prepaid expenses and other current
assets 12,313 32,193
Other assets 1,185 (6,374)
Accounts payable and accrued expenses (18,048) 77,241
Deferred revenue 18,302 -
Accrued taxes (130,347) -
Customer deposits (24,983) -
Net cash provided by operating ------- -------
activities 106,594 413,016
------- -------
Cash flows used in investing activities:
Purchase of assets - (102,500)
Redemption of tax lien certificate 8,972 184
Exercise of employee stock option 900 -
Purchase of equipment (5,401) (77,666)
Net cash used in investing ------- -------
activities 4,471 (179,982)
------- -------
Cash flows from financing activities:
Notes receivable advances (21,935) -
Repayment of note to shareholder (17,599) (8,281)
Repayment of acquisition notes (19,445) (1,917)
Repayment of capitalized lease
obligations (75,129) (51,056)
Net cash used in financing ------- -------
activities (134,108) (61,254)
------- -------
Net increase (decrease) in cash and
cash equivalents (23,043) 171,780
Cash and cash equivalents at
beginning of period 1,235,380 1,125,039
Cash and cash equivalents at --------- ---------
end of period $1,212,337 $1,296,819
========= =========
See notes to the consolidated financial statements.
CORFACTS, INC. & SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
Corfacts, Inc. through its subsidiary (Metro Marketing, Inc.) is a leading
provider of inbound and outbound telemarketing services, on both a business
to business and business to consumer basis. Founded in 1983, as the Business
Journal of New Jersey, Inc., in 1990 the company changed its name to Corfacts,
Inc. The company is headquartered in Freehold, New Jersey and has 4 facilities
throughout the state of New Jersey.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three
month period ended June 30, 2000 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2000. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the company?s Annual Report on form 10-KSB for the year
ended December 31, 1999.
NOTE 2 - EARNINGS PER SHARE
The Company computes earnings per share in accordance with Statements of
Financial Accounting Standards (?SFAS?) No. 128. Basic EPS excludes dilution
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts resulted in the issuance of common stock that then shared in the
earnings of the entity. Common equivalent shares have been excluded from the
computation of diluted EPS since their affect is antidilutive.
NOTE 3 - RELATED PARTY TRANSACTIONS
Receivables have been generated by transactions with the President which
total $74,493. 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 six months ended June 30, 2000 and 1999,
interest expense on this note was $3,953 and $5,154 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:
June 30, 2000
Total deferred tax assets $ 11,340
Less: Valuation allowance -
Deferred tax liability (32,237)
------
Net deferred tax liability $ (20,897)
======
Through June 30, 2000, 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 June 30, 2000 and June 30, 1999 is as follows:
Percentage of
Pretax Income
2000 1999
Tax at US statutory rates 34.0% 34.0%
State income taxes, net of
federal tax benefit 6.0% 6.0%
Other adjustments .0% (1.0%)
----- -----
Income tax provision 40.0% 39.0%
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
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED June 30, 1999
The Company is reporting net income of $64,706 on total revenues of $3,192,833
for the six months ended June 30, 2000 as compared to net income of $237,974
on total revenues of $2,598,587 for the comparable six months ended June 30,
1999.
Basic earnings per share for the six months ended June 30, 2000 were $0.005
as compared to basic earnings per share of $0.020 for the same period in 1999.
Selling, general and administrative costs were $1,217,093 for the six months
ended June 30, 2000 as compared to $892,458 for the six months ended June 30,
1999. The increase in selling, general and administrative expenses is
directly related to the additional sales, administrative and MIS personnel
needed for the growth in the custom telemarketing division. Depreciation and
amortization expense for the six months ended June 30, 2000 was $129,244 as
compared to $59,897 for the same period in 1999. This increase in
depreciation and amortization of $69,347 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 three
acquisitions in 1999.
The Company recorded $24,328 in interest income for the six months ended June
30, 2000 as compared to interest income of $22,487 for the same period last
year.
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1999
The Company is reporting a net loss of $8,441 on total revenues of $1,526,075
for the quarter ended June 30, 2000 compared to net income of $54,433 on
total revenues of $1,275,769 for the comparable three months ended June 30,
1999.
Basic loss per share for the quarter ended June 30, 2000 was $.001 as compared
to basic earnings per share of $.005 for the same quarter in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $1,023,725 at June 30, 2000, as compared to
$962,109 at December 31, 1999. Working capital has continued to grow, despite
the Company's acquisitions during 1999. The Company's inbound acquisitions
from 1999 have not yet shown a significant amount of growth, however, this
has had a minimal effect on the Company's working capital.
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, be 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.
August 14, 2000 /s/ Larry Finkelstein
Larry Finkelstein,
President, Chairman and CFO
August 14, 2000 /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.
August 14, 2000 /s/ Larry Finkelstein
Larry Finkelstein,
President, Chairman and CFO
August 14, 2000 /s/ Ariel Freud
Ariel Freud,
Vice President, Director
