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, 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 August 10, 2000:
Common stock, $.00001 par value - 84,458,053 shares outstanding.
Transitional Small Business Disclosure Format:
Yes X ; No .
--- ---
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 2000
INDEX
PART I - FINANCIAL INFORMATION
Item I - FINANCIAL STATEMENTS (Unaudited)
Balance Sheets -
June 30, 2000 and December 31, 1999 3-4
Statement of Income -
Six Months Ended June 30, 2000 and 1999 5
Three Months Ended June 30, 2000 and 1999 6
Statement of Cash Flows -
Six Months Ended June 30, 2000 and 1999 7-8
Notes to Financial Statements 9
Item II - MANAGEMENT'S DISCUSSION AND ANALYSIS 10-13
PART II - OTHER INFORMATION 14
SIGNATURES 14
FINANCIAL DATA SCHEDULE 15
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 2000
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
6/30/00 12/31/99
Unaudited Audited
--------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 369,899 $ 344,598
Trade Accounts Receivable (Net of
allowance for doubtful accounts
of $39,127 & $34,011) 519,716 440,992
Other Receivables 161,541 76,275
Inventories 14,636 20,682
Prepaid Expendable Supplies 14,504 11,102
Other Prepaid Expenses 12,675 6,971
---------- ----------
Total Current Assets 1,092,971 900,620
FIXED ASSETS:
Property, Equipment & Improvements
(Net of Accumulated Depreciation &
Amortization of $1,839,632 & $1,685,944) 4,232,207 3,741,762
Leased Property under Capital Leases
(Net of Accumulated Amortization
of $340,063 & $312,970) 449,361 422,007
Non-Expendable Stock, Parts & Drums 144,641 139,146
---------- ----------
Total Fixed Assets, Net 4,826,209 4,302,915
OTHER ASSETS:
Security Deposits 42,634 42,634
License/Patent (Net of Accumulated Amortization
of $2,500 & $2,000) 25,078 25,578
Capitalized Permit Costs 53,542 53,542
Deferred Financing Costs 236,402 236,402
---------- ----------
Total Other Assets 357,656 358,156
---------- ----------
TOTAL ASSETS $6,276,836 $5,561,691
========== ==========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 2000
BALANCE SHEET
LIABILITIES & STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
6/30/00 12/31/99
Unaudited Audited
--------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable - Trade $ 386,503 $ 741,621
Accrued Expenses 172,926 40,675
Taxes Withheld & Accrued 3,460 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 131,690 127,369
----------- -----------
Total Current Liabilities 950,227 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) 234,205 268,737
----------- -----------
Total Long - Term Liabilities 1,559,205 1,393,737
STOCKHOLDERS' EQUITY:
Com. Stock par value .00001 per sh
Authorized - 500,000,000 shares
Issued & Outstanding
June 30, 2000 - 83,698,053 833
Dec. 31, 1999 - 69,213,236 692
Capital in Excess of Par Value 9,626,672 8,125,503
Treasury Stock (7,828) 0
Retained Earnings (Deficit) (5,852,273) (5,128,134)
----------- -----------
Total Stockholders' Equity 3,767,404 2,998,061
----------- -----------
TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY $ 6,276,836 $ 5,561,691
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 2000
STATEMENT OF INCOME
(Unaudited)
SIX MONTHS ENDED
6/30/00 6/30/99
------- -------
REVENUES $ 1,266,513 $ 1,088,297
LESS: Cost of Operations 1,236,338 907,514
------------ ------------
Gross Profit 30,175 180,783
LESS: General & Admin. Expenses 602,394 591,517
Selling Expenses 115,777 144,235
------------ ------------
Operating Income (Loss) (687,996) (554,969)
OTHER INCOME (EXPENSES):
Interest Income 382 35,746
Interest Expense (31,083) (10,449)
Income Tax Provision (5,443) (2,015)
------------ ------------
NET INCOME (LOSS) (724,140) (531,687)
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized Holding Losses 0 (17,870)
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ (724,140) $ (549,557)
============ ============
Number of Shares Outstanding 83,698,053 64,713,500
Earnings Per Share from Operations $ (.01) $ (.01)
============ ============
Earnings Per Share - Net Income (Loss) $ (.01) $ (.01)
============ ============
See accompanying notes to financial statements.
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<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 2000
STATEMENT OF INCOME
(Unaudited)
THREE MONTHS ENDED
6/30/00 6/30/99
------- -------
REVENUES $ 511,157 $ 535,221
LESS: Cost of Operations 641,154 452,954
------------ ------------
Gross Profit (129,997) 82,267
LESS: General & Admin. Expenses 290,623 272,335
Selling Expenses 67,492 81,693
------------ ------------
Operating Income (Loss) (358,115) (271,761)
OTHER INCOME (EXPENSES):
Interest Income 206 17,716
Interest Expense (20,478) (4,428)
Income Tax Provision (3,576) (1,170)
------------ ------------
NET INCOME (LOSS) (511,960) (259,643)
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized Holding Losses 0 (51,545)
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ (511,960) $ (311,188)
============ ============
Number of Shares Outstanding 83,698,053 64,713,500
Earnings Per Share from Operations $ (.01) $ (.01)
============ ============
Earnings Per Share - Net Income (Loss) $ (.01) $ (.01)
============ ============
See accompanying notes to financial statements.
-6-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 2000
STATEMENT OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
6/30/00 6/30/99
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Customers $ 1,182,673 $ 973,138
Cash Paid to Suppliers & Employees (2,083,889) (1,047,516)
Interest & Dividends Received 382 1,655
Interest Paid (30,783) (10,649)
Income Taxes Paid (7,773) (680)
----------- -----------
Net Cash Provided (Used) by
Operating Activities (939,390) (84,052)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Equipment 0 24,000
Cash Purchases of Intangible Assets 0 (7,568)
Cash Purchase of Treasury Stock (7,828) 0
Cash Purchases of Equipment (676,109) (1,264,987)
----------- -----------
Net Cash Provided (Used) in Investing
Activities (683,937) (1,248,555)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Stock &
Warrants 1,478,840 150,000
Proceeds from Issuance of Long-Term Debt 200,000 1,119,000
Repayment of Long-Term Debt &
Capital Lease Obligations (30,211) (33,123)
----------- -----------
Net Cash Provided (Used) by Financing
Activities 1,648,629 1,235,877
----------- -----------
NET INCREASE (DECREASE) IN CASH 25,302 (96,730)
CASH at Beginning of Period 344,597 300,213
----------- -----------
CASH at End of Period $ 369,899 $ 203,483
=========== ===========
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<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 2000
STATEMENT OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
6/30/00 6/30/99
------- -------
RECONCILIATION OF NET INCOME TO NET
CASH FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $(724,140) $(531,687)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation 180,782 175,762
Amortization 500 500
Expenses Paid in Stock 0 76,350
Bad Debts 5,116 22,601
Interest Income 0 (34,091)
Loss from Discontinued Operations 0 22,759
(Increase) Decrease :
Restricted Cash 0 27,500
Non-expendable Stock, Parts & Drums (5,495) 0
Trade Accounts Receivable (83,840) (115,159)
Other Receivables (85,266) 0
Inventories 6,046 (3,211)
Prepaid Expenses & Deposits (9,106) (30,045)
Increase (Decrease) in:
Accounts Payable (355,118) 384,372
Withholding Taxes Payable (1,120) (5,441)
Accrued Expenses 132,251 (74,262)
--------- ---------
$(939,390) $ (84,052)
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Common Stock and Options issued for the
payment of accounts payable and accrued expenses $ 0 $ 100,833
========= =========
Common Stock issued for the payment of
Underwriting costs, equipment & expenses $ 22,469 $ 351,200
========= =========
Revaluation of Available-for-sale-securities $ 0 $ 17,870
========= =========
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<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 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 six months 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 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:
6/30/00 12/31/99
------- --------
Shipping Supplies $ 2,700 $ 2,857
Reagents 11,936 17,825
------- -------
$14,636 $20,682
======= =======
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.
-9-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2000
AS COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999
Total revenues for the six months ended June 30, 2000 increased to $1,266,513 as
compared to $1,088,297 for the same period in 1999, an increase of 16%. This
increase in revenues is due to the Company's recent sales activities and
expansion of its recycling and commodity manufacturing center, resulting in
increased market penetration. Management expects this upward trend to continue
with momentum into the third and fourth quarters of this year. The Company has
recently entered into several material services agreements based on its current
sales and marketing activities through KBF Environmental Services, Inc. (see
Note 3) and has recently begun expanded operating hours to respond to market
demand. In addition, the Company has completed a remedial services agreement for
$278,143 in site work beginning in the third quarter of 2000.
Aged trade accounts receivable are as follows:
0 -30 days $ 331,074
30-45 days 62,027
45-60 days 31,611
60-90 days 13,555
90-120 days 85,891
120 + days 34,685
---------
$ 558,843
=========
An allowance in the amount of $39,127 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 August 10, 2000
was $216,337.
Cost of operations for the six months ended June 30, 2000 increased to 98% of
revenues from 83% of revenues for the same period in 1999. This increase is
primarily the result of a non-recurring administrative permit fee of $102,000
expensed during the second quarter of 2000. The percentage cost of operations
without regard to this item in 2000 was 90%. The increase from 83% in 1999 to
90% in 2000 is primarily related to increased labor costs incurred to prepare
the facility for increased production related to the current sales and marketing
activities (see Note 3).
General and administrative expenses increased by 2% to $602,394 for the six
months ended June 30, 2000 from $591,517 for 1999. This increase is primarily
due to the increase in costs related to the Company's development of its
information systems and corporate website.
Selling expenses decreased by 20% to $115,777 for the six months ended June 30,
2000 as compared to $144,235 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 and the early
-10-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2000
AS COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999 (continued)
part of the second quarter. Sales costs will rise to and exceed previous levels
during the second half of this year.
The Company incurred a net loss of -724,140 for the first six months of 2000, a
36% increase from the net loss of -531,687 for the same period in 1999, due to
the increase in costs of operations mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has working capital of $142,744 at June 30, 2000. This amount is
computed by subtracting current liabilities from current assets. As of June 30,
2000 the current liabilities include $225,000, which is the current portion of
the long-term debt that is payable out of anticipated New World Recycling, Inc.,
(a wholly owned subsidiary) earnings only. Working capital without this debt
would be $367,744.
During the third quarter of 2000, the Company raised an additional $38,000
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. In addition the capital input
during the first half of the year 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.
-11-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2000
AS COMPARED TO THE SIX MONTHS ENDED JUNE 30, 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 an 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
Financial Condition and Results of Operations. 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 and 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.
-12-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2000
AS COMPARED TO THE THREE MONTHS ENDED JUNE 30,1999
Total revenues for the three months ended June 30, 2000 decreased to $511,157 as
compared to $535,221 for the same period in 1999, a decrease of 4%. This
decrease in revenue is directly related to the delayed sale of recovered
products during the second quarter in anticipation of processing these materials
in the Company's expanded commodity manufacturing infrastructure in the third
quarter of 2000. Management anticipates increased recovered product sales in
future periods.
Cost of operations for the three months ended June 30, 2000 increased to 125% of
revenues from 85% of revenues for the same period in 1999. This increase is
primarily due to the non-recurring administrative permit fee of $102,000
expensed during the second quarter of 2000. The percentage cost of operations
without regard to this item in 2000 would be 102%. The increase from 85% in 1999
to 102% in 2000 is primarily related to increased labor costs incurred to
prepare the facility for anticipated production related to the May 6, 2000 joint
venture agreement (see Note 3). The cost of operations was also a higher
percentage due to the delayed recovered product sales discussed above.
General and administrative expenses increased by 7% to $290,623 for the three
months ended June 30, 2000, from $272,335 in 1999. This increase is due to
approximately $18,000 of expenses related to the Company's development of its
information systems and corporate website.
Selling expenses decreased by 17% to $67,492 in the second quarter of 2000 from
$81,693 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
and the early part of the second quarter. Sales costs will rise to previous
levels during the second half of this year.
The Company incurred a net loss of -$511,960 for the second quarter of 2000, a
97% increase from the net loss of - $259,643 for the same period in 1999, due to
the decrease in sales from recovered products, the increase in the costs of
operations, and the decrease in selling expenses discussed above.
-13-
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
JUNE 30, 2000
PART II - OTHER INFORMATION
Item II Part (c) - Sale of Securities not Registered
(a) The Company sold 7,606,775 shares of unregistered common stock and
7,248,167 options were exercised from January 1, 2000 through
August 10, 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 $1,082,240 and the option proceeds were
$434,602, 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 six months ended
June 30, 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.
Dated: August 10, 2000 KEVIN KREISLER
----------------------------------------
KEVIN KREISLER - PRESIDENT
Dated: August 10, 2000 KATHI KREISLER
----------------------------------------
KATHI KREISLER SECRETARY /
TREASURER
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