<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,
1998 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, West Berlin, NJ 08009
-----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(609)767-2300
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(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, 1998.
Common Stock, Par Value $.001 11,699,767
- - ----------------------------- ----------
(Class) (Outstanding)
Transitional small business disclosure format (check one): Yes No X
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<PAGE>
FORM 10-QSB
EFTEK CORPORATION
INDEX
Page(s)
PART I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet - September 30, 1998
(Unaudited) 3
Consolidated Statements of Operations
(Unaudited) - Nine Months and Three Months
Ended September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows
(Unaudited) - Nine Months Ended September 30, 1998
and 1997 5
Notes to Consolidated Financial Statements
(Unaudited) 6 & 7
Item 2. Management's Discussion and Analysis 8 & 9
PART II. Other Information 10
Signature Page 11
<PAGE>
FORM 10-QSB
PART I - FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
EFTEK CORPORATION
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(Unaudited)
Assets
Current Assets:
Cash $ 15,265
Receivables 156,347
Prepaid expenses 40,587
-----------
Total Current Assets 212,199
-----------
Property and Equipment, Net (Note 2) 4,623,277
-----------
Other Assets
Intangible assets, net (Note 2) 83,054
D eposits 3,900
-----------
Total Other Assets 86,954
-----------
Total Assets 4,922,430
===========
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of long term debt 215,528
Current portion of obligations
under capital leases 139,561
Accounts payable and accrued
liabilities 1,299,832
Income taxes payable 750
-----------
Total Current Liabilities 1,655,671
Long Term Debt, Less Current Portion 255,981
Obligations Under Capital Leases,
Less Current Portion (380,206)
-----------
Total Liabilities 2,291,858
-----------
Stockholders' Equity:
Common stock, $.001 par; authorized
25,000,000 shares; issued and
outstanding 11,699,767 shares 11,700
Additional paid in capital 6,971,772
Deficit (4,352,654)
-----------
2,630,818
Common stock held in treasury
(14,434 shares), at cost ( 246)
-----------
Total Stockholders' Equity 2,630,572
-----------
Total Liabilities and Stockholders' Equity $ 4,922,430
===========
See Accompanying Notes to Financials.
<PAGE>
FORM 10-QSB
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues (Note 2) $ 379,406 $ 87,077 $ 1,205,784 $ 158,194
--------- --------- ----------- ---------
Costs and Expenses
Costs of revenue 81,419 46,350 539,650 143,321
Depreciation and
amortization 129,316 1,991 387,304 5,973
Selling, general and
administrative 401,550 312,447 1,155,423 740,885
--------- --------- ----------- ---------
Total Costs and Expenses 612,285 360,788 2,082,377 890,179
--------- --------- ----------- ---------
Loss From Operations (232,879) (273,711) ( 876,593) (731,985)
--------- --------- ----------- ---------
Other Income (Expenses)
Miscellaneous income 4,341 398 9,341 6,243
Interest expense ( 30,863) ( 16,710) ( 61,365) ( 43,547)
--------- --------- ----------- ---------
Total Other Income
(Expenses) ( 26,522) ( 16,312) ( 52,024) ( 37,304)
--------- --------- ----------- ---------
Net Loss $(259,401) $(290,023)$( 928,617)$(769,289)
--------- --------- ----------- ---------
Net Loss Per Common
and Common
Equivalent Share (Note 2) $( .02) $( .03)$( .08)$( .08)
========= ========= =========== =========
Weighted Average Common
and Common Equivalent
Shares Outstanding 11,598,835 10,772,012 11,480,403 9,937,349
========== ========== =========== =========
<PAGE>
FORM 10-QSB
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
1998 1997
---- ----
Cash Flows From Operating Activities:
Net loss for the period $(928,617) $( 769,289)
Adjustments to Reconcile Net Loss To
Net Cash Used In Operating Activities
Depreciation and amortization 387,304 5,973
Changes In Operating Assets and Liabilities
(Increase) decrease in receivables ( 90,749) 10,574
Increase in inventory ( 2,324)
Increase in prepaid expenses ( 553) ( 7,918)
Increase in intangible assets ( 1,312) ( 7,693)
Increase in accounts payable and
accrued liabilities 561,666 235,070
--------- ---------
Net Cash Used In Operating Activities ( 72,261) ( 535,607)
--------- ---------
Cash Flows Used In Investing Activities
Purchases of equipment (178,023) (1,695,450)
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Cash Flows From Financing Activities
Proceeds from long term debt, net 5,679 246,915
Proceeds from issuances of common stock 227,868 1,842,174
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Net Cash Provided By Financing Activities 233,547 2,089,089
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Net Decrease In Cash ( 16,737) ( 141,968)
Beginning Cash 32,002 172,919
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Ending Cash $ 15,265 $ 30,951
========= =========
<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 (known as "GlassFlour") for use in
the fiberglass manufacturing industry. 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 three months and nine months
ended September 30, 1998 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, 1998 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, 1997.
Operating results for the nine months ended September 30, 1998
are not necessarily indicative of the results for the year ending
December 31, 1998.
<PAGE>
FORM 10-QSB
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.
Property and equipment consisted of the following at September
30, 1998:
Land $ 338,073
Building 317,081
Building improvements 892,784
Equipment 3,580,002
Furniture and fixtures 22,648
-----------
5,150,588
Less accumulated depreciation and
amortization 527,311
-----------
Net property and equipment $ 4,623,277
===========
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
The company uses Statement of Financial Accounting Standards No.
128 "Earnings Per Share" (SFAS No. 128) to compute its net loss per
common and common equivalent share. SFAS No. 128 requires basic
earnings per share which is computed by dividing reported earnings
available to common shareholders by the weighted average shares
outstanding and diluted earnings per share which reflects the
dilutive effect of common stock equivalents such as stock options and
warrants. The computation of diluted net loss per common and common
equivalent share was antidilutive in each of the periods presented.
<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, 1998 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
Effective October 1, 1997, CFC, Inc., a subsidiary of the Company
officially began production of GlassFlour. Accordingly, growth in revenues
and expenses for the three months and nine months ended are directly a result
of the emergence of the subsidiary from its development stage.
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS
ENDED SEPTEMBER 30, 1997
Revenue for the three months ended September 30, 1998 increased $292,329
(336%) over the three months ended September 30, 1997. This increase is
attributed to the commencement of operations of the GlassFlour product.
Costs of revenues increased $35,069 (76%) over the previous
year's three months, as the principal costs related to the production
of GlassFlour, waste removal, freight and labor increased.
Depreciation and amortization costs (non cash items) were $129,316 for
the three months ended September 30, 1998 as compared to $1,991 for the three
months ended September 30, 1997. The increase is attributable to the
property and equipment placed in service in October 1997 relating to
the operations of CFC, Inc.
Selling, General and Administrative costs increased $89,103
(29%) over the previous year's three months and are a direct result
of the operations that commenced in October 1997 as well as new costs
relating to the development of the Company's expansion program (see below).
Net loss for the three months increased $163,378 (56%) over the previous
year's three months principally due to the operations of CFC, Inc. that
commenced in October of 1997. However, subtracting the non-cash items of
depreciation and amortization costs of $129,316 would result in a loss of
operations of only $103,563. As a subsequent event, the Registrant has been
advised that one its end users has increased production demand.
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS
ENDED SEPTEMBER 30, 1997
Revenue for the nine months ended September 30, 1998 increased
$1,047,590 (662%) over the nine months ended September 30, 1997. The
increase is directly attributable to the Company's CFC, Inc.
operations which commenced October 1, 1997.
Costs of revenues, comprised principally of labor, freight and
waste removal, increased $396,329 (276%) compared to 1997. The
increase is directly attributable to the sale of CFC's GlassFlour
product, which began in October, 1997.
Depreciation and amortization costs (non-cash items) were $387,304 for
the nine months ended September 30, 1998 as compared to $5,973 for the nine
months ended September 30, 1997. The increase is attributable to the
property and equipment placed in service in October 1997 relating to
the operations of CFC, Inc.
Selling, General and Administrative expenses increased $414,538
(56%) compared to 1997. The increase includes the operating costs of
the CFC, Inc. processing facility as well as new costs relating to the
development of the Company's expansion program (see below).
Net loss for the nine months increased $159,328 (83%) over the previous
year's nine months principally due to the operations of CFC, Inc. that
commenced in October, 1997. However, subtracting the non-cash items of
depreciation and amortization costs of $387,304 would result in a loss of
operations of $489,289.
Expansion Program
The Company has completed its initial due diligence relating to it's
proposed expansion program. Due to customer demand (including
commitments to purchase up to 100% of a 120,000-ton capacity
processing facility), northern California has been selected as the
first expansion location. Management is currently pursuing various
financing options. Preliminary interest has been strong, and
although there is no assurance, the Company believes that funding
arrangements will be secured in the near future. The funding arrangements
are anticipated to include a provision for the injection of sufficient
working capital into the Berlin, New Jersey facility to ease its cash
flow difficulties which have developed due to insufficient
capitalization during its development phase.
<PAGE>
FORM 10-QSB
EFTEK CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no additional material legal actions proceeding
or litigation pending or threatened to the knowledge of the Company other
than set forth in previous submissions.
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>
FORM 10-QSB
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 13, 1998 By: /s/Frank Whitmore
------------------------
FRANK WHITMORE
President, Chief Executive
Officer, and Chairman of the
Board of Directors
Dated: November 13, 1998 By: /s/Gerard T. Wisla
------------------------
GERARD T. WISLA
Chief Financial Officer,
Secretary, Treasurer and Director
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000846476
<NAME> EFTEK CORP.
<MULTIPLIER> 1
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<PERIOD-TYPE> 9-MOS
<CASH> 15,265
<SECURITIES> 0
<RECEIVABLES> 156,347
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 212,199
<PP&E> 5,150,588
<DEPRECIATION> 527,311
<TOTAL-ASSETS> 4,922,430
<CURRENT-LIABILITIES> 1,655,671
<BONDS> 0
0
0
<COMMON> 11,700
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,922,430
<SALES> 1,205,784
<TOTAL-REVENUES> 1,205,784
<CGS> 539,650
<TOTAL-COSTS> 2,082,377
<OTHER-EXPENSES> (52,024)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (61,365)
<INCOME-PRETAX> (928,617)
<INCOME-TAX> 0
<INCOME-CONTINUING> (928,617)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (928,617)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
