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: June 30, 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 August 19, 1999:
Common stock, $.00001 par value - 66,463,500 shares outstanding.
Transitional Small Business Disclosure Format:
Yes X ; No .
----- -----
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 1999
INDEX
PART I - FINANCIAL INFORMATION
Item I - FINANCIAL STATEMENTS (Unaudited)
Balance Sheets -
June 30, 1999 and December 31, 1998 3-4
Statement of Income -
Six Months Ended June 30, 1999 and 1998 5
Three Months Ended June 30, 1999 and 1998 6
Statement of Cash Flows -
Six Months Ended June 30, 1999 and 1998 7-8
Notes to Financial Statements 9
Item II - MANAGEMENT'S DISCUSSION AND ANALYSIS 10-13
PART II - OTHER INFORMATION 14
SIGNATURES 14
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 1999
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
6/30/99 12/31/98
Unaudited Audited
--------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 203,483 $ 300,213
Cash - Restricted 0 27,500
Trade Accounts Receivable (Net of
allowance for doubtful accounts
of $36,059 & $31,183) 474,200 421,411
Marketable Securities - Restricted 68,721 86,591
Inventories 15,918 12,707
Prepaid Expendable Supplies 13,821 13,821
Other Prepaid Expenses 58,069 58,924
------------ ------------
Total Current Assets 834,212 921,167
FIXED ASSETS:
Property, Equipment & Improvements
(Net of Accumulated Depreciation &
Amortization of $1,533,082 & $1,371,641) 3,144,847 1,923,229
Leased Property under Capital Leases
(Amortization of $296,978 & $287,226) 78,775 88,527
Non Expendable Stock, Parts & Drums 137,768 137,768
------------ ------------
Total Fixed Assets, Net 3,361,390 2,149,524
OTHER ASSETS:
Security Deposits 33,744 2,844
Other Receivables 384,911 350,820
License/Patent (Net of Accumulated Amortization
of $12,061 & $1,000) 13,421 13,922
Other Intangibles 77,945 47,279
------------ ------------
Total Other Assets 510,021 414,865
------------ ------------
TOTAL ASSETS $ 4,705,623 $ 3,485,556
============ ============
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 1999
BALANCE SHEET
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
6/30/99 12/31/98
Unaudited Audited
--------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable - Trade $ 614,792 $ 383,367
Accrued Expenses 48,296 191,509
Taxes Withheld & Accrued 58 5,801
Deposit Payable 0 40,000
Current Portion of Capital Lease
Obligations 67,768 67,768
-------------- ------------
Total Current Liabilities 730,914 688,445
LONG-TERM LIABILITIES:
Long - Term Debt 1,119,000 0
Long - Term Lease Obligations 126,962 160,085
-------------- ------------
Total Long - Term Liabilities 1,245,962 160,085
STOCKHOLDERS' EQUITY (DEFICIT) :
Com. Stock par value .00001 per sh.
Authorized - 500,000,000 shares
Issued & Outstanding
June 30, 1999 - 64,713,500 647
Dec. 31, 1998 - 64,034,660 640
Capital in Excess of Par Value 7,008,312 6,367,040
Unrealized Gain (Loss) on Available-for-Sale Securities (391,300) (373,430)
Retained Earnings (Deficit) (3,888,912) (3,357,224)
-------------- ------------
Total Stockholders' Equity (Deficit) 2,728,747 2,637,026
-------------- ------------
TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY (DEFICIT) $ 4,705,623 $ 3,485,556
============== ============
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 1999
STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
6/30/99 6/30/98
------- -------
<S> <C> <C>
REVENUES $ 1,088,297 $ 1,944,771
LESS: Cost of Operations 884,755 647,142
Gross Profit 203,542 1,297,629
LESS: General & Admin. Expenses 591,517 456,732
Selling Expenses 144,235 44,584
-------------- ---------------
Operating Income (Loss) (532,210) 796,313
OTHER INCOME (EXPENSES):
Interest Income 35,746 7,226
Interest Expense (10,449) (14,173)
Income Tax Provision (2,015) (1,494)
-------------- ---------------
NET INCOME (LOSS) FROM OPERATIONS (508,928) 787,872
Loss from Discontinued Operations (22,759) 0
-------------- ---------------
NET INCOME (LOSS) (531,687) 787,872
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized Holding Losses (391,300) 0
-------------- ---------------
COMPREHENSIVE INCOME (LOSS) $ (922,987) $ 787,872
============== ===============
Number of Shares Outstanding 64,713,500 56,388,565
Earnings Per Share from Operations $ (.01) $ .01
============== ===============
Earnings Per Share - Net Income (Loss) $ (.01) $ .01
============== ===============
</TABLE>
See accompanying notes to financial statements.
-5-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 1999
STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
6/30/99 6/30/98
------- -------
<S> <C> <C>
REVENUES $ 535,221 $ 863,972
LESS: Cost of Operations 452,954 346,025
-------------- --------------
Gross Profit 82,267 517,947
LESS: General & Admin. Expenses 272,335 204,901
Selling Expenses 81,693 25,857
-------------- --------------
Operating Income (Loss) (271,761) 287,189
OTHER INCOME (EXPENSES):
Interest Income 17,716 6,917
Interest Expense (4,428) (5,815)
Income Tax Provision (1,170) (461)
-------------- --------------
NET INCOME (LOSS) (259,643) 287,830
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized Holding Losses (51,545) 0
-------------- --------------
COMPREHENSIVE INCOME (LOSS) $ (311,188) $ 287,830
============== ==============
Number of Shares Outstanding 64,713,500 56,388,565
Earnings Per Share from Operations $ (.01) $ .01
============== ==============
Earnings Per Share - Net Income (Loss) $ (.01) $ .01
============== ==============
</TABLE>
See accompanying notes to financial statements.
-6-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 1999
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
6/30/99 6/30/98
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Customers $ 973,138 $ 1,786,971
Cash Paid to Suppliers & Employees (1,047,516) (1,355,043)
Interest & Dividends Received 1,655 7,226
Interest Paid (10,649) (14,370)
Income Taxes Paid (680) (2,493)
----------------- ---------------
Net Cash Provided (Used) by
Operating Activities (84,052) 422,291
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Equipment 24,000 0
Cash Purchases of Intangible Assets (7,568) 0
Cash Purchases of Equipment (1,264,987) (1,060,698)
------------------ ---------------
Net Cash Provided (Used) in Investing
Activities (1,248,555) (1,060,698)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Stock &
Warrants 150,000 506,670
Proceeds from Long-Term Debt 1,119,000 50,000
Repayment of Long-Term Debt &
Capital Lease Obligations (33,123) (26,462)
----------------- ---------------
Net Cash Provided (Used) by Financing
Activities 1,235,877 530,208
----------------- ---------------
NET INCREASE (DECREASE) IN CASH (96,730) (108,199)
CASH at Beginning of Period 300,213 224,643
----------------- ---------------
CASH at End of Period $ 203,483 $ 116,444
================= ===============
</TABLE>
-7-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 1999
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
6/30/99 6/30/98
------- -------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (531,687) $ 787,872
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation 175,762 104,828
Amortization 500 598
Expenses Paid in Stock 76,350 0
Bad Debts 22,601 (11,003)
Interest Income (34,091) 0
Loss from Discontinued Operations 22,759 0
(Increase) Decrease :
Restricted Cash 27,500 0
Trade Accounts Receivable (115,159) (905,884)
Inventories (3,211) (1,051)
Prepaid Expenses & Deposits (30,045) 153,930
Increase (Decrease) in:
Accounts Payable 384,372 264,904
Withholding Taxes Payable (5,441) (7,433)
Accrued Expenses (74,262) 35,530
-------------- --------------
$ (84,052) $ 422,291
============== ==============
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Common Stock and Options issued for the
payment of accounts payable and accrued expenses. $ 100,833 $ 0
============== ==============
Common Stock issued for the payment of
Underwriting costs, equipment & expenses. $ 351,220 $ 0
============== ==============
Common Stock received for the
payment of other receivables. $ 0 $ 500,000
============== ==============
Revaluation of Available-for-sale-securities. $ 17,870 $ 0
============== ==============
</TABLE>
-8-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 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 six months ended June 30, 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:
6/30/99 12/31/98
--------- ---------
Shipping Supplies $ 2,857 $ 2,857
Reagents 13,061 9,850
--------- ---------
$ 15,918 $ 12,707
========= =========
NOTE 3 - NOTES PAYABLE
As of the date of this report, the Company concluded $1,225,000 of debt
financing through AMR, Inc., its wholly owned subsidiary, of which $1,119,000
has been collected as of June 30, 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 6.5%. 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 he lender, after the note has been
satisified.
NOTE 4 - SUBSEQUENT EVENTS
The Company sold 1,750,000 shares of common stock to a private investor for
$300,000 in July 1999.
-9-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 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 - SIX MONTHS ENDED JUNE 30, 1999
AS COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998
Total revenues for the six months ended June 30, 1999 decreased to $1,088,297 as
compared to $1,944,771 for the same period in 1998, a decrease of 45%. The
Company attributes the decrease predominantly to the non-recurring initial
license fee of $500,000 received during the first quarter of 1998 and royalty
income of $283,206, relating to the terminated Solucorp Industries agreement
(see 10KSB 12/31/98). The decrease in revenues from 1998 to 1999 without regard
to this income is 6%. Management anticipates increased revenues in conjunction
with its move to New Jersey where there are increased business opportunities.
Trade accounts receivable has increased 10% over the past three months, most of
which is 0-30 days. Current trade accounts receivable are as follows:
0 -30 days $369,290
30-45 days 37,292
45-60 days 29,403
60-90 days 9,548
90-120 days 9,205
120 + days 55,521
--------
$510,259
Trade accounts receivable collected in cash subsequently through August 19,199
was $263,936.
Cost of sales for the six months ended June 30, 1999 increased to 81% of
revenues from 33% of revenues for the same period in 1998. This increase is
primarily the result of the non-recurring license fee of $500,000 and royalty
income of $283,206 relating to the terminated Solucorp Industries agreement
included in the sales in the first six months of 1998. The percentage cost of
sales without regard to this income in 1998 was 56% of sales. The increase from
56% in 1998 to 81% in 1999 is primarily related to increased facility overhead
costs associated with the significantly larger facility in New Jersey and
depreciation expenses related to newly acquired equipment.
General and administrative expenses increased by 23% to $591,517 for the six
months ended June 30, 1999 from $456,732 for 1998. This increase is primarily
due to the increase in legal fees related to the on-going legal action with
Solucorp Industries, increases in mangement personnel, and additional
administrative staffing.
Selling expenses increased by 223% to $144,235 for the six months ended June 30,
1999 as compared to $44,584 for the comparable period in 1998. This increase is
due to the increased sales effort undertaken by management in 1999.
-10-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1999
AS COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998 (continued)
The Company incurred a net loss of -$531,687 for the first six months of 1999, a
249% decrease from the net profit of $787,872 for the same period in 1998, due
to the decrease in sales and the increase in 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
The Company has working capital of $103,298 at June 30, 1999 as compared to
$232,722 at December 31, 1998.
As set forth in Footnote 3 & 4, the Company borrowed an additional $106,000, and
sold common stock for $300,000 in the third quarter of 1999. These funds will be
used for working capital and to finance additional expansion.
The Company experienced negative cash flows of $96,730 during the period. This
is due predominantly to changes in receivables and payables.
Management believes that its current cash position and current operations, and
the funds discussed in Notes 3 & 4, will provide adequate cash flow to meet
current obligations.
LONG ISLAND FACILITY
KBF has ceased operations at the Long Island, New York facility, and anticipates
no further costs related to it.
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.
-11-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1999
AS COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998 (continued)
YEAR 2000 (continued)
The Company's State of Readiness
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.
-12-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30,1999
AS COMPARED TO THE THREE MONTHS ENDED JUNE 30,1998
Total revenues for the three months ended June 30, 1999 decreased to $535,221 as
compared to $863,972 for the same period in 1998, a decrease of 39%. The Company
attributes the decrease predominantly to the non-recurring royalty income of
$283,206 received during the second quarter of 1998. The decrease in revenues
from 1998 to 1999 without regard to this income is 9.5%. Management anticpates
increased revenues in conjunction with its move to New Jersey where there are
increased business opportunities.
Cost of sales for the three months ended June 30, 1999 increased to 85% of
revenues from 40% of revenues for the same period in 1998. This increase is
primarily due to the non-recurring royalty income of $283,206 relating to the
terminated Solucorp Industries agreement included in the second quarter 1998
revenue. The percentage cost of sales without regard to this income in 1998 was
60% of sales. The increase from 60% to 85% in 1999 is primarily related to
increased facility overhead costs associated with the significantly larger
facility in New Jersey and depreciation expenses related to newly acquired
equipment.
General and administrative expenses increased by 25% to $272,335 for the three
months ended June 30, 1999 from $204,901 for 1998. This increase is due to
professional fees paid during the second quarter relating to the on-going legal
action with Solucorp, increases in management personnel, and additional
administrative staffing.
Selling Expenses increased 215% to $81,693 in the second quarter of 1999 from
$25,857 for 1998. This increase is due primarily to the additional sales effort
undertaken by management in 1999.
The Company incurred net loss of -$259,643 for the second quarter of 1999, a
190% decrease from the net income $287,830 for the same period in 1998, due to
the decrease in sales and the other costs mentioned above.
-13-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 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 six months ended
June 30,1999, 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: August 19, 1999 LARRY KREISLER
--------------------------------
LARRY KREISLER - PRESIDENT
Dated: August 19, 1999 KATHI KREISLER
--------------------------------
KATHI KREISLER SECRETARY /
TREASURER
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000810162
<NAME> KBF Pollution Management, Inc.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 203,483
<SECURITIES> 68,721
<RECEIVABLES> 510,259
<ALLOWANCES> (36,059)
<INVENTORY> 15,918
<CURRENT-ASSETS> 834,212
<PP&E> 5,191,450
<DEPRECIATION> (1,830,060)
<TOTAL-ASSETS> 4,705,623
<CURRENT-LIABILITIES> 730,914
<BONDS> 0
0
0
<COMMON> 647
<OTHER-SE> 6,617,012
<TOTAL-LIABILITY-AND-EQUITY> 4,705,623
<SALES> 1,088,297
<TOTAL-REVENUES> 1,088,297
<CGS> 884,755
<TOTAL-COSTS> 884,755
<OTHER-EXPENSES> 735,752
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,449
<INCOME-PRETAX> (506,913)
<INCOME-TAX> 2,015
<INCOME-CONTINUING> (508,928)
<DISCONTINUED> (22,759)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (531,687)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
