<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 JUNE 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)
Bloomfield Business Park, 408 Bloomfield Drive, Units 1 & 2,
West Berlin, New Jersey 08091
(Registrant's former address)
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 August 14, 1997.
Common Stock, Par Value $.001 10,772,012 (post-split)
- ----------------------------- ---------------------------
(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 - June 30, 1997
(Unaudited) 2
Consolidated Statements of Operations
(Unaudited) - Six Months Ended June 30, 1997
and 1996 3
Consolidated Statements of Cash Flows
(Unaudited) - Six Months Ended June 30, 1997
and 1996 4
Notes to Consolidated Financial Statements
(Unaudited) 5 & 6
Item 2. Management's Discussion and Analysis 7
PART II. Other Information 8
Signature Page 9
<PAGE>
FORM 10-QSB PART I - FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
EFTEK CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(Unaudited)
Assets
Current Assets
- --------------
Cash $ 392,645
Receivables:
Trade 4,994
Related party 240,309
Other 900
Inventory 2,324
Prepaid expenses 49,538
----------
Total Current Assets 690,710
-------------------- ----------
Property and Equipment, Net (Note 2) 4,183,648
- --------------------------- ----------
Other Assets
- ------------
Patent costs, net (Note 2) 54,879
Organization costs, net (Note 2) 1,350
Deposits 7,300
----------
Total Other Assets 63,529
------------------ ----------
Total Assets 4,937,887
------------ ==========
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities
Current portion of long term debt 44,306
Accounts payable and accrued
liabilities 262,084
Income taxes payable 300
----------
Total Current Liabilities 306,690
-------------------------
Long Term Debt, Less Current Portion 153,470
- ------------------------------------ ----------
Total Liabilities 460,160
----------------- ----------
Stockholders' Equity
- --------------------
Common stock, $.001 par; authorized
25,000,000 shares; issued and
outstanding 10,772,012 shares 10,772
Additional paid in capital 6,681,924
Deficit (2,214,723)
----------
4,477,973
Common stock held in treasury
(14,434 shares), at cost 246
----------
Total Stockholders' Equity 4,477,727
-------------------------- ----------
Total Liabilities and Stockholders' Equity $ 4,937,887
------------------------------------------ ==========
See accompanying notes to financial statements
<PAGE>
FORM 10-QSB
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------------------------------------------
Revenues (Note 2) $ 8,831 $ 1,774 $ 71,117 $ 1,774
- -------- --------- --------- --------- ---------
Costs and Expenses
- ------------------
Costs of revenues 44,158 5,506 96,971 5,506
Selling, general and
administrative 205,054 210,419 428,639 273,126
Research and development 107,906 181,355
--------- --------- --------- ---------
Total Costs and Expenses 249,212 323,831 525,610 459,987
- ------------------------ --------- --------- --------- ---------
Loss From Operations (240,381) (322,057) (454,493) (458,213)
- -------------------- --------- --------- --------- ---------
Other Income (Expenses)
- ----------------------
Miscellaneous income 5,772 16,790 5,845 16,790
Interest income 4,053 7,621
Interest expense ( 25,709) ( 26,837)
Miscellaneous expense ( 3,746) ( 3,781)
--------- --------- --------- ---------
Total Other Income
(Expenses) ( 23,683) 20,843 ( 24,773) 24,411
------------------ --------- --------- --------- ---------
Net Loss $(264,064) $(301,214) $(479,266) $(433,802)
- -------- ========= ========= ========= =========
Net Loss Per Common
and Common
Equivalent Share (Note 2) $( .03) $( .06) $( .05) $( .10)
- ------------------ ========= ========= ========= =========
Weighted Average Common
and Common Equivalent
Shares Outstanding 10,038,629 4,741,898 9,564,050 4,356,509
- ----------------------- ========== ========= ========= =========
See accompanying notes to financial statements.
<PAGE>
FORM 10-QSB
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
1997 1996
---- ----
Cash Flows From Operating Activities
- ------------------------------------
Net loss for the period $( 479,266) $(433,802)
Adjustments to Reconcile Net Loss To
Net Cash Used In Operating Activities
-------------------------------------
Depreciation and amortization 3,982 3,964
Changes In Operating Assets
and Liabilities
- ---------------------------
Decrease in receivables 80,318 8,134
Increase in inventory ( 2,324)
Increase in prepaid expenses ( 5,418) ( 17,505)
Increase in intangible assets ( 2,634) ( 5,744)
Increase (decrease) in accounts
payable and accrued liabilities 70,755 ( 74,126)
----------- --------
Net Cash Used In Operating Activities ( 334,587) (519,079)
- ------------------------------------- ----------- --------
Cash Flows From Investing Activities
- ------------------------------------
Cash from acquisition 30,247
Purchases of equipment (1,313,075) (385,339)
----------- --------
Net Cash Used In Investing Activities (1,313,075) (355,092)
- ------------------------------------- ----------- --------
Cash Flows From Financing Activities
- ------------------------------------
Proceeds from long term debt, net 21,129
Proceeds from issuances of common stock 1,846,259 989,150
----------- --------
Net Cash Provided By Financing Activities 1,867,388 989,150
- ----------------------------------------- ----------- --------
Net Increase In Cash 219,726 114,979
- --------------------
Beginning Cash 172,919 391
- -------------- ----------- --------
Ending Cash $ 392,645 $ 115,370
- ----------- =========== ========
See accompanying notes to financial statements.
<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 six months ended June 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 June
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 six months ended June 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.
<PAGE>
FORM 10-QSB
Property and equipment consisted of the following at June 30, 1997:
Land $ 338,073
Building 293,700
Building improvements 810,439
Equipment 2,734,524
Furniture and fixtures 17,946
Leasehold improvements 2,500
----------
4,197,182
Less accumulated depreciation and
amortization 13,534
----------
Net property and equipment $ 4,183,648
==========
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 effected a previously approved
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 is stated to reflect the split.
<PAGE>
FORM 10-QSB
Item 2. MANAGEMENT'S DISCUSSION AND PLAN OF OPERATION
The Company's primary source of funds and liquidity to date has been
through the sale of its securities.
The Company believes there is a substantial and lucrative market for clean,
non-contaminated cullet. In an effort to tap this market, the Company
purchased in June of 1996 a 137 acre industrial compound including an
80,000 square foot industrial building as the site of the first processing
facility. The property was purchased for $650,000 with an additional
$792,212 of improvements made to date, of which $56,426 was made in the
last six months.
In addition to the building improvements, approximately $2,734,524 of
equipment and machinery were incurred through June 30, 1997 ($1,252,367 in
the last six months) in developing the processing line.
Management decided during January, 1997, to cease accepting 3 mix cullet
due to price discrepancies with suppliers and waiting for end user
qualification. However, it continues to receive and process "flint" glass
which has immediate end use. It is anticipated that the Company will
resume accepting cullet at an increased fee schedule, immediately upon
being "qualified" by certain of its end users, scheduled for September
1997.
The Company sold at various times in the second quarter, 1,342,153 shares
of its common stock in a Private Placement to mainly institutional foreign
investors for a consideration of $1,101,444. Although there is no
assurance, the Company believes that additional financing through Private
Placement, leasing agreements and mortgage loans are available and such
funds, in addition to tipping fees and, eventually, the sale of premium
cullet to end users should provide enough financing for the Company for the
next year.
<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, except for the
following action filed by the Company in state court on April 17, 1997 and
then removed to U.S. District Court for the District of New Jersey, Civil
Action No. 1-97-cv-02583(JEI), entitled Eftek Corporation v. Quality Design
Corporation, "Quality Design," a sole proprietorship, Charles Guerin, et
al. Eftek Corp. is suing the defendants for breach of contract and fraud
for damages in excess of $173,000. This action is being defended by the
defendants and is still in the discovery stage. Although the Company and
its attorneys are optimistic as to the success of this action, it is too
early in the litigation process to predict any outcome.
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
On May 22, 1997, the Board of Directors effected a previously approved
1 for 3 Reverse Stock Split.
Item 6. Exhibits and Reports on Forms 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
i. Notification of Private Placement filed April 11, 1997.
ii. Notification of Private Placement filed April 29, 1997.
iii. Notification of Private Placement filed May 20, 1997.
iv. Notification of 1 for 3 Reverse Stock Split filed June 6,
1997.
v. Notification of Private Placement and other events filed
June 17, 1997.
As a subsequent event, the Company filed the following Reports on Form 8-K:
i. Notification of Private Placement filed July 7, 1997.
<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: August 15, 1997 By:/s/Frank Whitmore
---------------------------
FRANK WHITMORE
President, Chief Executive
Officer, and Chairman of the
Board of Directors
Dated: August 15, 1997 By:/s/Gerard T. Wisla
---------------------------
GERARD T. WISLA
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000846476
<NAME> EFTEK CORP.
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<PERIOD-TYPE> 6-MOS
<CASH> 392,645
<SECURITIES> 0
<RECEIVABLES> 246,203
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 690,710
<PP&E> 4,197,182
<DEPRECIATION> 13,534
<TOTAL-ASSETS> 4,937,887
<CURRENT-LIABILITIES> 306,690
<BONDS> 0
0
0
<COMMON> 10,772
<OTHER-SE> 4,467,201
<TOTAL-LIABILITY-AND-EQUITY> 4,937,887
<SALES> 8,831
<TOTAL-REVENUES> 8,831
<CGS> 44,158
<TOTAL-COSTS> 249,212
<OTHER-EXPENSES> (2,023)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,709
<INCOME-PRETAX> (264,642)
<INCOME-TAX> 0
<INCOME-CONTINUING> (264,064)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (264,064)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
