UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Qtr. Ended: March 31,1999 File No.: 2-20954-NY
KBF POLLUTION MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-2687588
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 JASPER STREET PATERSON NEW JERSEY 07522
(Address of principal executive offices)
(973) 942-7700
(Registrant's telephone number, including area code)
Indicate by check mark 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
Indicate the number of shares outstanding of each of the registrant's classes of
stock as of May 18, 1999:
Common stock, $.00001 par value - 63,905,946 shares outstanding.
Transitional Small Business Disclosure Format:
Yes X ; No .
---- ----
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 1999
INDEX
PART I - FINANCIAL INFORMATION
Item I - FINANCIAL STATEMENTS (Unaudited)
Balance Sheets -
March 31, 1999 and December 31, 1998 3-4
Statement of Income -
Three Months Ended March 31, 1999 and 1998 5
Statement of Cash Flows -
Three Months Ended March 31, 1999 and 1998 6-7
Notes to Financial Statements 8
Item II - MANAGEMENT'S DISCUSSION AND ANALYSIS 9-11
PART II - OTHER INFORMATION 12
SIGNATURES 12
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 1999
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
3/31/98 12/31/98
Unaudited Audited
--------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 359,797 $ 300,213
Cash - Restricted 0 27,500
Trade Accounts Receivable (Net of
allowance for doubtful accounts
of $31,137 & $31,183) 430,173 421,411
Marketable Securities - Restricted 120,266 86,591
Inventories 24,186 12,707
Prepaid Expendable Supplies 13,821 13,821
Other Prepaid Expenses 60,617 58,924
---------- ----------
Total Current Assets 1,008,860 921,167
FIXED ASSETS:
Property, Equipment & Improvements
(Net of Accumulated Depreciation &
Amortization of $1,449,673 & $1,371,641) 2,399,330 1,923,229
Leased Property under Capital Leases
(Amortization of $292,102 & $287,226) 83,651 88,527
Non Expendable Stock, Parts & Drums 137,768 137,768
---------- ----------
Total Fixed Assets, Net 2,620,749 2,149,524
OTHER ASSETS:
Security Deposits 2,844 2,844
Other Receivables 367,866 350,820
License/Patent (Net of Accumulated Amortization
of $1,250 & $1,000) 13,672 13,922
Capitalized Permit Costs 31,150 47,279
---------- ----------
Total Other Assets 415,532 414,865
---------- ----------
TOTAL ASSETS $4,045,411 $3,485,556
========== ==========
</TABLE>
3
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 1999
BALANCE SHEET
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
3/31/99 12/31/98
Unaudited Audited
--------- -------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable - Trade $ 334,703 $ 383,367
Accrued Expenses 47,192 191,509
Taxes Withheld & Accrued 58 5,801
Deposit Payable 0 40,000
Current Portion of Long - Term
Debt 80,000 0
Current Portion of Capital Lease
Obligations 67,768 67,768
----------- -----------
Total Current Liabilities 529,721 688,445
LONG-TERM LIABILITIES:
Long - Term Debt 560,000 0
Long - Term Lease Obligations 143,710 160,085
----------- -----------
Total Long - Term Liabilities 703,710 160,085
STOCKHOLDERS' EQUITY (DEFICIT) :
Com. Stock par value .00001 per sh
Authorized - 500,000,000 shares
Issued & Outstanding
March 31, 1999 - 63,905,946 639
Dec. 31, 1998 - 64,034,660 640
Capital in Excess of Par Value 6,780,095 6,367,040
Unrealized Gain (Loss) on Available-for-Sale Securities (339,755) (373,430)
Retained Earnings (Deficit) (3,629,269) (3,357,224)
----------- -----------
Total Stockholders' Equity (Deficit) 2,811,710 2,637,026
----------- -----------
TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY (DEFICIT) $ 4,045,141 $ 3,485,556
=========== ===========
</TABLE>
4
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 1999
STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
3/31/99 3/30/98
------- -------
<S> <C> <C>
REVENUES $ 553,075 $ 1,080,799
LESS: Cost of Operations 431,802 311,522
------------ ------------
Gross Profit 121,273 769,277
LESS: General & Admin. Expenses 319,708 215,063
Advertising 7,623 242
Selling Expenses 54,090 17,226
------------ ------------
Operating Income (Loss) (260,148) 536,746
OTHER INCOME (EXPENSES):
Interest Income 18,029 309
Interest Expense (6,021) (8,358)
Income Tax Provision (1,145) (1,033)
------------ ------------
NET INCOME (LOSS) FROM OPERATIONS (249,285) 527,664
Loss from Discontinued Operations (22,759) 0
------------ ------------
NET INCOME (LOSS) (272,044) 527,664
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized Holding Gains 33,675 0
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ (238,369) $ 527,664
============ ============
Number of Shares Outstanding 63,905,946 56,388,565
Earnings Per Share from Operations $ (.01) $ .01
============ ============
Earnings Per Share - Net Income (Loss) $ (.01) $ .01
============ ============
</TABLE>
5
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 1999
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
3/31/99 3/31/98
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Customers $ 486,866 $ 427,910
Cash Paid to Suppliers & Employees (654,128) (288,864)
Interest & Dividends Received 983 0
Interest Paid (6,021) (8,455)
Income Taxes Paid (680) (380)
--------- ---------
Net Cash Provided (Used) by
Operating Activities (172,980) 130,211
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Equipment 24,000 0
Cash Purchases of Equipment & Facility (592,561) (678,215)
--------- ---------
Net Cash Provided (Used) in Investing
Activities (568,561) (678,215)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Stock &
Warrants 150,000 506,670
Proceeds for Issuance of Long - Term Debt 640,000 0
Release of Restricted Cash 27,500 0
Repayment of Long-Term Debt &
Capital Lease Obligations (16,375) (12,351)
--------- ---------
Net Cash Provided (Used) by Financing
Activities 801,125 494,319
--------- ---------
NET INCREASE (DECREASE) IN CASH 59,584 (53,685)
CASH at Beginning of Period 300,213 224,643
--------- ---------
CASH at End of Period $ 359,797 $ 170,958
========= =========
</TABLE>
6
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 1999
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
3/31/99 3/31/98
------- -------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $(272,044) $ 527,664
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation 87,477 52,414
Amortization 250 299
Expenses Paid in Stock 76,350 0
Bad Debt Expense 17,679 12,599
Interest Income (17,046) 0
Loss from Discontinued Operations 22,759 0
(Increase) Decrease :
Trade Accounts Receivable (66,209) (652,889)
Inventories (11,479) 598
Prepaid Expenses & Deposits (1,693) (8,965)
Increase (Decrease) in:
Accounts Payable 71,783 145,944
Withholding Taxes Payable (5,441) (78)
Accrued Expenses (75,366) 52,625
--------- ---------
$(172,980) $ 130,211
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Common Stock and Options issued for the
payment of accounts payable and accrued expenses $ 68,333 $ 0
========= =========
Common Stock issued for the payment of
underwriting costs, equipment and expenses $ 194,720 $ 0
========= =========
Revaluation of Available-for-sale-securities $ (33,675) $ 0
========= =========
</TABLE>
7
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions and item 310(b) of Regulations S-B. 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 fair presentation have been included. Operating results
for the three months ended March 31, 1999 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999. For further
information, refer to the financial statements and footnotes thereto included in
the Company's 1998 annual report filed on form 10-K and Form 10-SB.
NOTE 2 - INVENTORIES
Inventories are comprised of the following major categories:
3/31/99 12/31/98
------- --------
Shipping Supplies $ 3,560 $ 2,857
Reagents 20,626 9,850
------- -------
$24,186 $12,707
======= =======
NOTE 3 - NOTES PAYABLE
As of the date of this report, the Company concluded $1,100,000 of debt
financing through AMR, Inc., its wholly owned subsidiary, of which, $640,000 has
been collected as of March 31, 1999. The terms of the obligation call for
repayment over 24 months utilizing the net pre-tax revenues of the subsidiary,
with interest computed at 61/2%. The note also provides for a conversion feature
into KBF Pollution Management common stock should any of the obligation remain
at the end of the second year. The package includes a business-unit-specific
profit participation component for the lender, after the note has been
satisfied.
8
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES SET FORTH ELSEWHERE IN THIS REPORT.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 AS COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1998
Total revenues for the three months ended March 31, 1999 decreased to $553,075
as compared to $1,080,799 for the same period in 1998, a decrease of 49%. The
Company attributes the decrease predominantly to the non-recurring initial
license fee of $500,000 received during the first quarter of 1998. Total
revenues for the three months ended March 31, 1999, as compared to the same
period in 1998, without this licensing fee, decreased by 5%. Management
anticipates increased revenues in conjunction with its move to New Jersey where
there are increased business opportunities.
Trade accounts receivable has remained relatively constant. Current trade
accounts receivable are as follows:
0 -30 days $301,113
30-45 days 60,210
45-60 days 27,809
60-90 days 21,059
90-120 days 1,295
120 + days 49,824
--------
$461,310
Trade accounts receivable collected in cash subsequently through May 17, 1999
was $276,984.
Cost of sales for the three months ended March 31, 1999 increased to 78% of
revenues from 29% of revenues for the same period in 1998. This increase is
primarily the result of the non-recurring initial license fee of $500,000
included in sales in the first quarter of 1998. The percentage cost of sales
without regard to this license fee in 1998 was 54% of sales. The increase from
54% in 1998 to 78% in 1999 is primarily related to increased facility overhead
costs associated with the significantly larger facility in New Jersey and
depreciation expenses related newly acquired equipment.
General and administrative expenses increased by 48% to $319,708 for the three
months ended March 31, 1999 from $215,063 for 1998. This increase is primarily
due to the professional fees paid during the first quarter of 1999 related to
the on-going legal action with Solucorp Industries.
Selling expenses increased by 210% to $54,090 for the three months ended March
31, 1999 as compared to $17,226 for the comparable period in 1998. This increase
is due to the increased sales force undertaken by management in 1999.
9
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 AS COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1998 (continued)
The Company incurred a net loss of -$272,044 for the first three months of 1999,
a 151% decrease from the net profit of $527,664 for the same period in 1998, due
to the decrease in sales and other costs mentioned above. Included in this loss
is a $22,759 net loss from discontinued operations of the Long Island facility.
LIQUIDITY AND CAPITAL RESOURCES
Management believes that its current cash position and current operations will
provide adequate cash flow to meet current obligations.
The Company has working capital of $479,139 at March 31, 1999 as compared to
$232,722 at December 31, 1998. In addition, the Company continues to have a
positive cash flow of $59,584 at March 31, 1999 as compared to the positive cash
flow of $75,570 at December 31, 1998.
As set forth in footnote 3, the Company borrowed an additional $460,000 in the
second quarter of 1999. These funds will be used to finance additional
expansion.
LONG ISLAND FACILITY
KBF has ceased operations at the Long Island, New York facility, and anticipates
no further costs related to it.
10
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 AS COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1998 (continued)
YEAR 2000
The Company's State of Readiness
The Company's information technology systems are presently year 2000 compliant.
All internal programs were written by Company's management with the year 2000
issue incorporated into the initial writing of the programs. The programs have
been tested and management is satisfied that they are working properly.
Year 2000 compliance of the Company's non-information technology system has been
addressed and management feels that systems in place are year 2000 compliant.
Management has received verbal confirmation from many of the third parties that
provide services or products to the Company, and have been assured that they are
year 2000 compliant. The Company is presently developing questionnaires to be
answered by the third parties regarding their level of year 2000 compliance so
that management has written confirmation as to their status before the year is
complete.
The Costs to Address the Company's Year 2000 Issues
Management believes the estimated costs in connection with the third party
compliance will not be significant.
The Risks of the Company's Year 2000 Issues
Given the nature of the business, management does not believe there is any
significant risk and will not be any negative impact on their operations from
any source.
The Company's Contingent Plans
Due to management's comfort with internal control over the information
technology and non-information technology, the Company does not have a
contingency plan. Regarding third parties, management believes any potential
problems or losses arising from the unknown should be minimal.
11
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 1999
PART II - OTHER INFORMATION
Item VI - Exhibits and Reports on Form 8-K
Exhibits No. Description
------------- -----------
27 Financial Data Schedule
Reports on Form 8-K for the three months ended March 31, 1999,
there were no reports filed on Form 8-K.
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 thereunto duly authorized.
KBF POLLUTION MANAGEMENT, INC.
Dated: May 19, 1999 LARRY KREISLER
------------------------------------
LARRY KREISLER - PRESIDENT
Dated: May 19, 1999 KATHI KREISLER
------------------------------------
KATHI KREISLER SECRETARY /
TREASURER
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements dated March 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 359,797
<SECURITIES> 120,266
<RECEIVABLES> 311,366
<ALLOWANCES> (31,137)
<INVENTORY> 24,186
<CURRENT-ASSETS> 888,594
<PP&E> 4,224,756
<DEPRECIATION> (1,741,775)
<TOTAL-ASSETS> 4,045,141
<CURRENT-LIABILITIES> 529,721
<BONDS> 0
0
0
<COMMON> 642
<OTHER-SE> 6,440,337
<TOTAL-LIABILITY-AND-EQUITY> 4,045,141
<SALES> 505,260
<TOTAL-REVENUES> 553,075
<CGS> 431,802
<TOTAL-COSTS> 431,802
<OTHER-EXPENSES> 381,421
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,021
<INCOME-PRETAX> (248,140)
<INCOME-TAX> 1,145
<INCOME-CONTINUING> (249,285)
<DISCONTINUED> (22,759)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (272,044)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
