<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
Commission file number 33-26789-NY
EFTEK CORPORATION
(Name of small business issuer in its charter)
Nevada 93-0996501
(State or other jurisdiction of (I.R.S. Employer Identification No.
incorporation or organization)
324 New Brooklyn Road, Berlin, NJ 08009
(Address of principal executive offices) (Zip Code)
(609)767-2300
(Registrant's telephone number, including area code)
Check whether the issuer (1) 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 report), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
Applicable only to corporate issuers:
The number of shares outstanding of each of the issuer's classes of
common stock, as of November 14, 1997.
Common Stock, Par Value $.001 10,772,012
- ----------------------------- ------------
(Class) (Outstanding)
Transitional small business disclosure format(check one): Yes No X
--- ---
<PAGE>
FORM 10-QSB
EFTEK CORPORATION
INDEX
Page(s)
-------
PART I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet - September 30, 1997
(Unaudited) 2
Consolidated Statements of Operations
(Unaudited) - Nine Months Ended September 30, 1997
and 1996 3
Consolidated Statements of Cash Flows
(Unaudited) - Nine Months Ended September 30, 1997
and 1996 4
Notes to Consolidated Financial Statements
(Unaudited) 5 & 6
Item 2. Management's Discussion and Analysis 7 & 8
PART II. Other Information 9
Signature Page 10
<PAGE>
FORM 10-QSB PART I - FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
EFTEK CORPORATION
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(Unaudited)
Assets
------
Current Assets
- --------------
Cash $ 30,951
Receivables:
Trade 74,738
Related party 240,309
Other 900
Inventory 2,324
Prepaid expenses 52,038
---------
Total Current Assets 401,260
-------------------- ---------
Property and Equipment, Net (Note 2) 4,564,797
- --------------------------- ---------
Other Assets
- ------------
Patent costs, net (Note 2) 59,173
Organization costs, net (Note 2) 1,350
Deposits 7,300
---------
Total Other Assets 67,823
------------------ ---------
Total Assets 5,033,880
------------ =========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
- -------------------
Current portion of long term debt 144,306
Accounts payable and accrued
liabilities 426,399
Income taxes payable 300
---------
Total Current Liabilities 571,005
-------------------------
Long Term Debt, Less Current Portion 279,256
- ------------------------------------ ---------
Total Liabilities 850,261
----------------- ---------
Stockholders' Equity
- --------------------
Common stock, $.001 par; authorized
25,000,000 shares; issued and
outstanding 10,772,012 shares 10,772
Additional paid in capital 6,677,839
Deficit (2,504,746)
---------
4,183,865
Common stock held in treasury
(14,434 shares), at cost 246
---------
Total Stockholders' Equity 4,183,619
-------------------------- ---------
Total Liabilities and Stockholders'
Equity $ 5,033,880
----------------------------------- =========
<PAGE>
FORM 10-QSB
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues (Note 2) $ 87,077 $ 77,417 $ 158,194 $ 79,191
- -------- ------- ------- ------- -------
Costs and Expenses
- ------------------
Costs of revenues 46,350 8,317 143,321 13,823
Selling, general and
administrative 312,415 259,565 741,054 532,691
Research and development 300 181,655
------- ------- ------- -------
Total Costs and Expenses 358,765 268,182 884,375 728,169
- ------------------------ ------- ------- ------- -------
Loss From Operations (271,688) (190,765) (726,181) (648,978)
- -------------------- ------- ------- ------- -------
Other Income (Expenses)
- -----------------------
Miscellaneous income 398 111 6,243 16,901
Interest income 4,119 11,740
Interest expense ( 16,710) ( 43,547)
Miscellaneous expense ( 2,023) ( 5,804)
------- ------- ------- -------
Total Other Income
(Expenses) ( 18,335) 4,230 ( 43,108) 28,641
------------------ ------- ------- -------- -------
Net Loss $(290,023) $(186,535) $(769,289) $(620,337)
- -------- ======= ======= ======= =======
Net Loss Per Common
and Common
Equivalent Share (Note 2) $( .03) $( .03) $( .08) $( .12)
- ------------------- ======= ======= ======= =======
Weighted Average Common
and Common Equivalent
Shares Outstanding 10,772,012 6,705,313 9,937,349 5,133,990
- ----------------------- ========== ========= ========= =========
<PAGE>
FORM 10-QSB
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
1997 1996
---- ----
Cash Flows From Operating Activities
- ------------------------------------
Net loss for the period $( 769,289) $( 620,337)
Adjustments to Reconcile Net Loss To
Net Cash Used In Operating Activities
- --------------------------------------
Depreciation and amortization 5,973 5,946
Changes In Operating Assets
and Liabilities
- ---------------------------
(Increase) decrease in receivables 10,574 ( 42,402)
Increase in inventory ( 2,324)
Increase in prepaid expenses ( 7,918) ( 18,361)
Increase in intangible assets ( 7,693) ( 38,490)
Increase in accounts payable and
accrued liabilities 235,070 255,579
--------- ---------
Net Cash Used In Operating Activities ( 535,607) ( 458,065)
- ------------------------------------- --------- ---------
Cash Flows Used In Investing Activities
- ---------------------------------------
Purchases of equipment (1,695,450) (1,747,941)
--------- ---------
Cash Flows From Financing Activities
- ------------------------------------
Repayments to related party ( 4,776)
Payments from officer, net 760
Proceeds from long term debt, net 246,915
Proceeds from issuances of common stock 1,842,174 2,330,683
--------- ---------
Net Cash Provided By Financing Activities 2,089,089 2,326,667
- ----------------------------------------- --------- ---------
Net Increase (Decrease) In Cash ( 141,968) 120,661
- -------------------------------
Beginning Cash 172,919 391
- -------------- --------- ---------
Ending Cash $ 30,951 $ 121,052
- ----------- ========= =========
<PAGE>
FORM 10-QSB
EFTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business
-----------------------
EFTEK Corporation (the Company), incorporated in the state of Nevada,
is engaged in processing mixed cullet (broken glass) into a recycled,
uncontaminated product for use in fiberglass and glass container
manufacturing industries. The Company also develops and sells various
fire retardant chemicals.
2. Summary of Significant Accounting Policies
------------------------------------------
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Basis of Presentation
The financial statements for the nine months ended September 30, 1997
have been prepared without audit and, in the opinion of management,
reflect all adjustments necessary (consisting only of normal recurring
adjustments) to present fairly the Company's financial position at
September 30, 1997 and the results of its operations and its cash flows
for the interim and cumulative periods presented. Such financial
statements do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial
statements. For further information, refer to the financial statements
and footnotes thereto included in the Company's annual report on Form
10-KSB for the year ended December 31, 1996.
Operating results for the nine months ended September 30, 1997 are not
necessarily indicative of the results for the year ending December 31,
1997.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided
using the straight line method over the estimated useful lives of the
assets. Expenditures for maintenance and repairs are charged against
income as incurred. When assets are sold or retired, the cost and
accumulated depreciation are removed from the accounts and any gain or
loss is included in income.
FORM 10-QSB
Property and equipment consisted of the following at September 30,
1997:
Land $ 338,073
Building 293,700
Building improvements 889,886
Equipment 3,035,640
Furniture and fixtures 19,834
Leasehold improvements 2,500
---------
4,579,633
Less accumulated depreciation and
amortization 14,836
---------
Net property and equipment $ 4,564,797
=========
Intangible Assets
Certain intangible assets have been capitalized and are amortized over
the estimated useful lives of the assets using the straight-line
method. Patent costs are amortized over a period of 17 years.
Organization costs are amortized over a period of 5 years.
Net Loss Per Common and Common Equivalent Share
Net loss per common and common equivalent share is based upon the
weighted average number of common and common equivalent shares (stock
options and warrants) outstanding in each period. The computation of
fully diluted net loss per common and common equivalent share was
antidilutive in each of the periods presented.
3. Stock Split
-----------
On May 22, 1997, the Board of Directors authorized a one for three
reverse stock split. Accordingly, $19,955 was transferred from common
stock to additional paid in capital. All share and per share data,
including stock option information, is stated to reflect the split.
<PAGE>
FORM 10-QSB
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information set forth and discussed below for the three months and nine
months ended September 30, 1997 is derived from the Consolidated Financial
Statements included elsewhere herein. The financial information set forth
and discussed below is unaudited but, in the opinion of management,
reflects all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of such information. The Company's
results of operations for a particular quarter may not be indicative of
results expected during the other quarters or for the entire year.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1996.
- -------------------------------------------------------------------------
Revenue for the three months ended September 30, 1997 increased 12% to
$87,077 as compared to $77,417 in the three months period ended September
30, 1996, because of increased revenue from increased operations.
Cost of revenues for the three months ended September 30, 1997 increased
457% to $46,350 as compared to $8,317 in the three month period ended
September 30, 1996, because of the additional direct costs resulting from
increased operations.
Selling, general and administrative costs for the three months ended
September 30, 1997 increased 20% to $312,415 as compared to $259,565 in the
three month period ended September 30, 1996, due to the addition of
support expenses for the anticipated expansion of the Company.
Net loss for the three months ended September 30, 1997 increased 55% to
$290,023 as compared to $186,535 in the three month period ended September
30, 1996 for the reasons stated above.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1996.
- ------------------------------------------------------------------------
Revenue for the nine months ended September 30, 1997 increased 100% to
$158,194 as compared to $79,191 in the nine month period ended September
30, 1996, because of increased revenue from increased operations in the
third quarter.
Cost of revenues for the nine months ended September 30, 1997 increased
937% to $143,321 as compared to $13,823 in the nine month period ended
September 30, 1996, because of the additional direct costs resulting from
increased operations.
Selling, general and administrative costs for the nine months ended
September 30, 1997 increased 39% to $741,054 as compared to $532,691 in the
nine month period ended September 30, 1996, due to the addition of support
expenses for the anticipated expansion of the Company.
Research and development costs for the nine months ended September 30, 1997
were $0 as compared to $181,655 in the nine month period ended September
30, 1996.
Net loss for the nine months ended September 30, 1997 increased 24% to
$769,289 as compared to $620,337 in the nine month period ended September
30, 1996, for the reasons stated above.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As a subsequent event, the Company sold 57,143 shares of its common stock
on October 3, 1997 to a foreign bank for $42,643.
Prior to October, 1997, the Company was dependent on capital raising
activities through equity sales. As a subsequent event, the Company is now
gearing up to full operations and is receiving substantial revenue from
both sales to the client end users of its GlassFlour(tm) product as well as
income from the acceptance of the raw material mixed cullet. The Company
believes that sufficient income from these revenue streams as well as sales
from its Fire Doctor, Inc. subsidiary will be sufficient to continue
current operations for at least a six month period. However, the Company's
planned expansion, as well as increased personnel and support expenses for
the planned expansion, will require additional financing. To the greatest
extent possible, the Company intends to explore and negotiate debt
financing through mortgages, accounts receivable financing and/or equipment
financing. In the past, various financing sources dealt with by the
Company were reluctant to make debt financing available to the Company
until if or when the Company commenced commercial operations and sales.
The Company believes that it now meets the lending criteria and is
negotiating with the prior lending sources as well as new debt financing
sources for general working capital purposes as well as future expansion
plants, of which there is no assurance.
<PAGE>
FORM 10-QSB
EFTEK CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal actions proceeding or litigation
pending or threatened to the knowledge of the Company.
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 Forms 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
<PAGE>
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.
EFTEK CORPORATION
Dated: November 14, 1997 By:/s/Frank Whitmore
-----------------------------
FRANK WHITMORE
President, Chief Executive
Officer, and Chairman of the
Board of Directors
Dated: November 14, 1997 By:/s/Gerard T. Wisla
-----------------------------
GERARD T. WISLA
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000846476
<NAME> EFTEK CORP.
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<PERIOD-TYPE> 9-MOS
<CASH> 30,951
<SECURITIES> 0
<RECEIVABLES> 315,947
<ALLOWANCES> 0
<INVENTORY> 2,324
<CURRENT-ASSETS> 401,260
<PP&E> 4,579,633
<DEPRECIATION> 14,836
<TOTAL-ASSETS> 5,033,880
<CURRENT-LIABILITIES> 571,005
<BONDS> 0
0
0
<COMMON> 10,772
<OTHER-SE> 4,173,093
<TOTAL-LIABILITY-AND-EQUITY> 5,033,880
<SALES> 87,077
<TOTAL-REVENUES> 87,077
<CGS> 46,350
<TOTAL-COSTS> 358,765
<OTHER-EXPENSES> (2,023)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,710
<INCOME-PRETAX> (290,023)
<INCOME-TAX> 0
<INCOME-CONTINUING> (290,023)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (290,023)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
