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, 2000 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 11, 2000:
Common stock, $.00001 par value - 77,004,778 shares outstanding.
Transitional Small Business Disclosure Format:
Yes X ; No .
---- -----
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 2000
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
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Item I - FINANCIAL STATEMENTS (Unaudited)
Balance Sheets -
March 31, 2000 and December 31, 1999 3-4
Statement of Income -
Three Months Ended March 31, 2000 and 1999 5
Statement of Cash Flows -
Three Months Ended March 31, 2000 and 1999 6-7
Notes to Financial Statements 8
Item II - MANAGEMENT'S DISCUSSION AND ANALYSIS 9-11
PART II - OTHER INFORMATION 12
SIGNATURES 12
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<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 2000
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
3/31/00 12/31/99
Unaudited Audited
CURRENT ASSETS:
Cash $ 551,580 $ 344,598
Trade Accounts Receivable (Net of
allowance for doubtful accounts
of $39,735 & $34,011) 566,701 440,992
Other Receivables 76,275 76,275
Inventories 15,494 20,682
Prepaid Expendable Supplies 14,650 11,102
Other Prepaid Expenses 15,459 6,971
------------ -----------
Total Current Assets 1,240,159 900,620
FIXED ASSETS:
Property, Equipment & Improvements
(Net of Accumulated Depreciation &
Amortization of $1,771,742 & $1,685,944) 4,115,552 3,741,762
Leased Property under Capital Leases
(Amortization of $316,959 & $312,970) 316,876 422,007
Non Expendable Stock, Parts & Drums 146,103 139,146
------------ ------------
Total Fixed Assets, Net 4,578,531 4,302,915
OTHER ASSETS:
Security Deposits 42,634 42,634
License/Patent (Net of Accumulated Amortization
of $2,250 & $2,000) 25,328 25,578
Capitalized Permit Costs 53,542 53,542
Deferred Financing Costs 236,402 236,402
------------ -----------
Total Other Assets 357,906 358,156
------------ -----------
TOTAL ASSETS $6,176,596 $5,561,691
========== ==========
</TABLE>
3
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 2000
BALANCE SHEET
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
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3/31/00 12/31/99
Unaudited Audited
CURRENT LIABILITIES:
Accounts Payable - Trade $ 726,085 $ 741,621
Accrued Expenses 43,749 40,675
Taxes Withheld & Accrued 2,521 4,580
Officer's Loans 30,648 30,648
Current Portion of Long - Term
Debt 225,000 225,000
Current Portion of Capital Lease
Obligations 123,680 127,369
------------- ------------
Total Current Liabilities 1,151,683 1,169,893
LONG-TERM LIABILITIES:
Long - Term Debt (Net of Current Portion) 1,325,000 1,125,000
Long - Term Lease Obligations (Net of Current Portion) 247,447 268,737
----------- -------------
Total Long - Term Liabilities 1,572,447 1,393,737
STOCKHOLDERS' EQUITY (DEFICIT) :
Com. Stock par value .00001 per sh.
Authorized - 500,000,000 shares
Issued & Outstanding
March 31, 2000 - 75,694,678 755
Dec. 31, 1999 - 69,213,236 692
Capital in Excess of Par Value 8,792,027 8,125,503
Retained Earnings (Deficit) (5,340,316) (5,128,134)
------------ ------------
Total Stockholders' Equity (Deficit) 3,452,466 2,998,061
------------ ---------
TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY (DEFICIT) $ 6,176,596 $ 5,561,691
=========== =============
</TABLE>
4
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 2000
STATEMENT OF INCOME
-------------------
(Unaudited)
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THREE MONTHS ENDED
3/31/00 3/31/99
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<S> <C> <C>
REVENUES $ 755,357 $ 553,075
- --------
LESS: Cost of Operations 595,185 454,561
- ---- -------------- --------------
Gross Profit 160,172 98,514
LESS: General & Admin. Expenses 311,773 319,708
- ----
Advertising 902 7,623
Selling Expenses 47,384 54,090
-------------- --------------
Operating Income (Loss) (199,887) (282,907)
OTHER INCOME (EXPENSES):
Interest Income 176 18,029
Interest Expense (10,605) (6,021)
Income Tax Provision (1,867) (1,145)
--------------- ---------------
NET INCOME (LOSS) (212,183) (272,044)
- ------------------
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized Holding Gains 0 33,675
------------------ -------------
COMPREHENSIVE INCOME (LOSS) $ (212,183) $ (238,369)
- --------------------------- ============== ============
Number of Shares Outstanding 75,694,678 63,905,946
Earnings Per Share from Operations $ (.01) $ (.01)
=============== ===============
Earnings Per Share - Net Income (Loss) $ (.01) $ (.01)
=============== ===============
</TABLE>
5
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 2000
STATEMENT OF CASH FLOWS
-----------------------
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
3/31/00 3/31/99
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Customers $ 623,924 $ 486,866
Cash Paid to Suppliers & Employees (878,270) (654,128)
Interest & Dividends Received 176 983
Interest Paid (9,732) (6,021)
Income Taxes Paid (5,322) (680)
----------------- ----------------
Net Cash Provided (Used) by
Operating Activities (269,224) (172,980)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Equipment 0 24,000
Cash Purchases of Equipment & Facility (365,401) (592,561)
------------------ ----------------
Net Cash Provided (Used) in Investing
Activities (365,401) (568,561)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Stock & Conversion of
Warrants 666,587 150,000
Proceeds for Issuance of Long - Term Debt 200,000 640,000
Release of Restricted Cash 0 27,500
Repayment of Long-Term Debt &
Capital Lease Obligations (24,979) (16,375)
----------------- ---------------
Net Cash Provided (Used) by Financing
Activities 841,608 801,125
----------------- ---------------
NET INCREASE (DECREASE) IN CASH 206,983 59,584
CASH at Beginning of Period 344,597 300,213
----------------- ---------------
CASH at End of Period $ 551,580 $ 359,797
================= ===============
</TABLE>
6
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 2000
STATEMENT OF CASH FLOWS
-----------------------
(Unaudited)
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<CAPTION>
THREE MONTHS ENDED
3/31/00 3/31/99
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<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (212,183) $ (272,044)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation 89,787 87,477
Amortization 250 250
Expenses Paid in Stock 0 76,350
Bad Debt Expense 5,724 17,679
Inputed Interest Income 0 (17,046)
Loss from Discontinued Operations 0 22,759
(Increase) Decrease :
Trade Accounts Receivable (131,433) (66,209)
Inventories 5,188 (11,479)
Prepaid Expenses & Deposits (12,036) (1,693)
Increase (Decrease) in:
Accounts Payable (15,536) 71,783
Withholding Taxes Payable (2,059) (5,441)
Accrued Expenses 3,074 (75,366)
------------- ---------
$ (269,224) $ (172,980)
============== ===============
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<TABLE>
<CAPTION>
Supplemental schedule of non-cash
investing and financing activities:
<S> <C> <C> <C> <C> <C> <C>
Common Stock and Options issued for the
payment of accounts payable and accrued expenses. $ 0 $ 68,333
================ ==============
Common Stock issued for the payment of
underwriting costs, equipment and expenses. $ 0 $ 194,720
================ ==============
Revaluation of Available-for-sale-securities. $ 0 $ (33,675)
================ ==============
</TABLE>
7
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 2000
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, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000. For further
information, refer to the financial statements and footnotes thereto included in
the Company's 1999 annual report filed on form 10-K and Form 10-SB.
NOTE 2 - INVENTORIES
Inventories are comprised of the following major categories:
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3/31/00 12/31/99
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Shipping Supplies $ 3,000 $ 2,857
Reagents 12,494 17,825
------ ------
$ 15,494 $ 20,682
======== ========
</TABLE>
NOTE 3 - JOINT VENTURE
On May 6, 2000, the Company signed a joint venture agreement with Jones
Environmental Services, LLC ("JES"), which provides for the formation of KBF
Environmental Services, Inc., a jointly owned subsidiary, 80% owned by the
Company and 20% owned by JES. The subsidiary shall provide revenue for the
Company utilizing the existing sales force of both JES and the Company. The
agreement provides for the issuance of 5 million stock options to JES, which
vest based upon performance-based benchmarks. These benchmarks are based upon
achieving annualized revenues of $15 million.
8
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 2000
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, 2000
AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1999
Total revenues for the three months ended March 31, 2000 increased to $755,357
as compared to $553,075 for the same period in 1999, an increase of 37%. This
increase in revenues is due to the Company's move to New Jersey where there are
increased business opportunities, along with the Company's expansion of both
internal and external sales efforts, increased market penetration and the
expansion of the Company's recycling and commodity manufacturing capabilities.
Management expects this upward trend to continue. In this regard the company is
expanding both its internal and external sales efforts (see Note 3), increasing
its market penetration, and expanding its SST processing capabilities.
Aged trade accounts receivable are as follows:
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<CAPTION>
<S> <C> <C>
0 -30 days $ 429,488
30-45 days 76,546
45-60 days 38,997
60-90 days 28,586
90-120 days 5,562
120 + days 27,257
---------
$ 606,436
</TABLE>
An allowance in the amount of $39,735 has been provided against the foregoing
receivables, which are presented on the balance sheet net of said allowance.
Based upon the company's collection history, management believes this allowance
is adequate.
Trade accounts receivable collected in cash subsequently through May 11, 2000
was $246,196.
Cost of sales for the three months ended March 31, 2000 decreased to 79% of
revenues from 82% of revenues for the same period in 1999. This decrease is
primarily the result of the Company's fixed direct costs, which did not increase
directly with revenue. Management expects the percentage of cost of sales to
continue to decline as revenues increase.
General and administrative expenses decreased by 3% to $311,773 for the three
months ended March 31, 2000 from $319,708 for 1999. This decrease is primarily
due to the decrease in professional fees. Despite the decrease, management
continues to anticipate that legal fees relating to pending actions will be
significant ($100,000) during 2000.
9
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000
AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1999 (continued)
Selling expenses decreased by 12% to $47,384 for the three months ended March
31, 2000 as compared to $54,090 for the comparable period in 1999. This decrease
is due to a temporary decrease in the Company's sales force, which occurred
during the first quarter of 2000. The Company replenished its sales force during
the latter part of the first quarter of 2000. Sales costs will rise to previous
levels during the second quarter of this year.
The Company incurred a net loss of -$212,183 for the first three months of 2000,
a 22% increase from the net loss of -$272,044 for the same period in 1999, due
to the increase in sales and the decrease in other costs mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has working capital of $88,476 at March 31, 2000. This amount is
computed by subtracting current liabilities from current assets. As of March 31,
2000 the current liabilities include $225,000 of long-term debt that is payable
out of anticipated New World earnings only. Working capital without this debt is
$313,476.
During the second quarter of 2000, the Company raised $290,630 through the sale
of common stock in private placements and through the exercise of outstanding
common stock options. Management anticipates raising additional capital during
2000, through similar efforts, to subsidize its continued expansion and the
Company's Corporate Restructuring Plan.
Management believes that projected increases in sales during 2000 will have a
positive impact on cash flows from operations and coupled with capital input
during 2000 and the anticipated additional capital raises, will provide
sufficient working capital for the balance of 2000.
CERTAIN EVENTS
The Company is party to the following matters. In all matters listed,
Management's response has been and will be to vigorously contest the cases.
The first matter is entitled, Clean Earth Recycling, Inc. v. James Sullivan and
KBF. The action was filed in the Supreme Court of New York, Columbia County, on
July 9, 1998. The Complaint was originally filed against James Sullivan (an
employee of the Company) only and an Amended Complaint was subsequently filed
naming the Company as a defendant. The Amended Complaint seeks compensatory and
punitive damages, attorney's fees and costs of suit. The Amended Complaint also
seeks to prevent Sullivan and the Company from doing business with, soliciting
or contacting any customers or vendors who were customers or vendors of Clean
Earth at the time of Sullivan's employment. The Company filed a Verified Answer
to the Verified Complaint and a Verified Answer to the Amended Verified
Complaint with Counterclaims and served discovery upon Plaintiff's attorney. The
counterclaim seeks compensatory and punitive damages. Discovery is ongoing and
counsel is unable to evaluate the probability of an unfavorable outcome or range
of potential impact at this time.
10
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000
AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1999 (continued)
CERTAIN EVENTS (continued)
The second matter is entitled KBF Pollution Management, Inc. v. EPS
Environmental, Inc. d/b/a Solucorp Industries, Inc. and Joe Kemprowski v.
Lawrence Kreisler, et al. The action was filed in the Superior Court of New
Jersey, Law Division, Passaic County on October 7, 1998. The Complaint seeks
compensatory and punitive damages, attorney's fees and costs. Defendants filed
an Answer to the Complaint with Counterclaims and a Third-Party Complaint
seeking compensatory and punitive damages, attorney's fees and costs. Discovery
is ongoing and counsel is unable to evaluate the probability of an unfavorable
outcome or range of potential impact at this time.
The third matter is entitled Passaic Valley Sewage Commissioners v. American
Metals Recovery Corp. The action was filed in the Superior Court of New Jersey,
Chancery Division, Essex County on April 23, 1999 against the Company's wholly
owned subsidiary. The Complaint arises from alleged administrative deficiencies
and seeks declarations against the defendant as well as administrative remedies,
civil penalties, attorney's fees and costs. The Company filed and Answer to the
Complaint and served discovery. Discovery is ongoing and counsel is unable to
evaluate the probability of an unfavorable outcome or range of potential impact
at this time.
The Company is also involved in various collection matters in which the Company
is seeking payment for services rendered.
FORWARD-LOOKING STATEMENTS
When used herein, the terms "expect, plan, anticipate, believe" or similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements.
The Company has included certain forward-looking statements in this Management's
Discussion and Analysis of Results of Operations, Cash Flow and Financial
Condition. These statements are based on current expectations, estimates and
projections about the industries in which the Company operates, management's
beliefs and various assumptions made by management, which are difficult to
predict. Among the factors that could affect the outcome of the statements are
general industry, market conditions and growth rates. Therefore, actual outcomes
and their impact on the Company may differ materially from what is expressed or
forecasted. The Company undertakes no obligation to updated publicly any
forward-looking statements, whether as a result of new information, future
events, or otherwise.
11
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
MARCH 31, 2000
PART II - OTHER INFORMATION
Item II Part (c) - Sale of Securities not Registered
(a) The Company sold 2,483,000 shares of unregistered common stock
from January 1, 2000 through May 11, 2000, which were exempt
under section 4(2).
(b) There were no underwriters relating to this sale. The stock was
sold to accredited individual investors.
(c) The stock was sold for $665,740, all of which was received by
the registrant.
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, 2000,
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.
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Dated: May 11, 2000 /s/ LARRY KREISLER
-----------------------------------
LARRY KREISLER - PRESIDENT
Dated: May 11, 2000 /s/ KATHI KREISLER
------------------------------------
KATHI KREISLER SECRETARY /
TREASURER
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements dated March 31, 2000 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000810162
<NAME> KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
<MULTIPLIER> 1
<CURRENCY> U.S Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<EXCHANGE-RATE> 1.00
<CASH> 551,580
<SECURITIES> 0
<RECEIVABLES> 682,711
<ALLOWANCES> (39,735)
<INVENTORY> 15,494
<CURRENT-ASSETS> 1,240,159
<PP&E> 6,667,232
<DEPRECIATION> (2,088,701)
<TOTAL-ASSETS> 6,176,596
<CURRENT-LIABILITIES> 1,151,683
<BONDS> 0
0
0
<COMMON> 755
<OTHER-SE> 8,792,027
<TOTAL-LIABILITY-AND-EQUITY> 6,176,596
<SALES> 755,357
<TOTAL-REVENUES> 755,357
<CGS> 595,185
<TOTAL-COSTS> 595,185
<OTHER-EXPENSES> 360,059
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,605
<INCOME-PRETAX> (210,316)
<INCOME-TAX> 1,867
<INCOME-CONTINUING> (212,183)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (212,183)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>