U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2000
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-17394
CORFACTS INC. AND SUBSIDIARY
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
New Jersey 22-2478379
(State or other jurisdiction of (I.R.S. Employer ID No.)
incorporation or organization)
3499 Hwy. 9 No., Ste. 3B, Freehold, NJ 07728
(Address of principal executive offices)
(800) 696-7788
(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 during the past 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
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Transitional Small Business Disclosure Format: Yes No x
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The number of shares outstanding of the registrant s common stock, no par
value, at March 31, 2000 is 11,940,521.
Corfacts, Inc. & Subsidiary
Form 10-QSB
March 31, 2000
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet at March 31, 2000 . . . . . . . 3
Consolidated Statements of Operations for the
Three months ended March 31, 2000 and 1999 . . . . . . . . 4
Consolidated Statements of Cash Flows for the
Three months ended March 31, 2000 and 1999 . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . . 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . .10
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . .10
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . .10
Item 4. Submission of Matters to a Vote of Security holders. . . .10
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . .10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . .10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
CORFACTS , INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 2000
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $1,227,237
Interest bearing deposits, restricted 40,234
Interest receivable 6,535
Accounts receivable, net of allowance for
doubtful accounts of $32,826 358,043
Note Receivable 22,472
Prepaid expenses and other current assets 75,890
Other receivable-municipal tax liens, net 7,738
---------
Total Current Assets 1,738,149
---------
Property and equipment, at cost, less
accumulated depreciation of $219,277 673,646
Goodwill and customer lists, net of accumulated
amortization of $134,335 414,005
Other assets
Loan receivable, officer 74,493
Deferred taxes 11,340
Security deposits 66,619
Total Other Assets 152,452
---------
TOTAL ASSETS $2,978,252
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 349,089
Deferred revenue 87,000
Customer deposits 41,395
Current portion of note payable - shareholder 54,836
Current portion of note payable - other 40,405
Current portion of capitalized lease obligations 143,602
-------
Total Current Liabilities 716,327
-------
Capitalized lease obligations, net of
current portion 302,798
Note payable - shareholder, net of current portion 62,547
Note payable - other, net of current portion 71,934
Deferred Taxes 32,237
Stockholders' equity
Common stock, no par value, 20,000,000 shares
authorized; 11,940,521 shares issued and
outstanding at March 31, 2000 1,284,052
Retained earnings 508,357
---------
TOTAL STOCKHOLDERS' EQUITY 1,792,409
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,978,252
=========
See notes to consolidated financial statements.
CORFACTS, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
2000 1999
------ ------
REVENUE
Revenue telemarketing $ 1,655,463 $1,312,127
Income from tax liens, net - 214
Interest income 11,295 10,477
--------- ---------
TOTAL REVENUES 1,666,758 1,322,818
DIRECT OPERATING EXPENSES 845,315 592,169
--------- ---------
GROSS PROFIT 821,443 730,649
COSTS & EXPENSES
Selling, general & administrative 616,720 388,825
Depreciation and amortization 64,621 27,862
Interest expense 17,955 8,061
------- -------
Total costs & expenses 699,296 424,748
------- -------
Income before income taxes 122,147 305,901
Provision for income taxes (49,000) (122,360)
------- -------
Net income $ 73,147 $183,541
======= =======
Basic earnings per common share $ .006 $ .015
======= =======
Average common shares outstanding 11,940,521 11,940,521
========== ==========
Diluted earnings per common share $ .006 $ .014
======= =======
Average common shares and equivalents
outstanding for diluted earnings
per common share 13,068,484 13,085,521
========== ==========
See notes to consolidated financial statements.
CORFACTS, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
2000 1999
------ ------
Cash flows from operating activities:
Net income $ 73,147 $183,541
Adjustments to reconcile net income
to net cash used in operations:
Depreciation and amortization 64,621 27,862
Bad debts provision 17,000 7,500
Deferred income taxes 3,122 63,590
Changes in assets and liabilities:
Accounts receivable 37,025 (70,881)
Interest receivable (3,530) (1,151)
Prepaid expenses 4,152 60,230
Other assets - 824
Security deposits (3,317) -
Accounts payable & accrued expenses (57,347) 8,738
Deferred revenue (3,800) -
Accrued taxes (73,208) -
Customer deposits (7,115) -
Net cash provided by operating ------- -------
activities 50,750 280,253
Cash flows used in investing activities: ------- -------
Purchase of assets in acquisitions - ( 30,500)
Redemption of tax lien certificate 4,069 184
Purchase of equipment ( 2,878) (31,910)
Net cash provided by (used in) investing ------- -------
activities 1,191 ( 62,226)
------- -------
Cash flows from financing activities:
Notes receivable advances (7,746) -
Repayment of note to shareholder (8,723) -
Repayment of acquisition notes (9,630) -
Repayment of capitalized lease
obligations ( 33,985) (20 947)
Net cash (used in) financing ------- -------
activities ( 60,084) (20,947)
Net increase (decrease) in cash and cash ------- ------
equivalents ( 8,143) 197,080
Cash and cash equivalents at
beginning of period 1,235,380 1,125,039
--------- ---------
Cash and cash equivalents at
end of period $1,227,237 $1,322,119
========= =========
See notes to consolidated financial statements.
CORFACTS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
Corfacts, Inc. through its subsidiary (Metro Marketing, Inc.) is a leading
provider of inbound and outbound telemarketing services, on both a business to
business and business to consumer basis. Founded in 1983, as the Business
Journal of New Jersey, Inc., in 1990 the company changed its name to Corfacts,
Inc. The company is headquartered in Freehold, New Jersey and has 4 facilities
throughout the state of New Jersey.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10
of Regulation S-X. 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 a fair presentation have
been included. Operating results for the three month period ended March 31,
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
consolidated financial statements and footnotes thereto included in the
company's Annual Report on form 10-KSB for the year ended December 31, 1999.
NOTE 2 - EARNINGS PER SHARE
The Company computes earnings per share in accordance with Statements of
Financial Accounting Standards (SFAS) No. 128. Basic EPS excludes dilution and
is computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts resulted in the issuance of common stock that then shared in the
earnings of the entity.
NOTE 3 - RELATED PARTY TRANSACTIONS
Receivables have been generated by transactions with the President which total
$74,493. This note is secured by 2,414,316 shares of Company stock.
The Note Payable, generated by the purchase of Metro Marketing, Inc., is
payable to the Vice President and shareholder of the Company and bears an
interest rate of 7%. During the three months ended March 31, 2000 and 1999,
interest expense on this note was $7,510 and $7,947 respectively.
CORFACTS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
NOTE 4 - INCOME TAXES
The Company and its wholly owned subsidiary file a consolidated Federal income
tax return. Corfacts uses the asset and liability method in providing income
taxes on all transactions that have been recognized in the consolidated
financial statements. The asset and liability method requires that deferred
taxes be adjusted to reflect the tax rates at which future taxable amounts
will be settled or realized. The effects of tax rate changes on future
deferred tax liabilities and deferred tax assets, as well as other changes
in income tax laws, are recognized in net earnings in the period such changes
are enacted. Valuation allowances are established when necessary to reduce
deferred tax assets to amounts expected to be realized.
Deferred taxes consist of the following at:
March 31, 2000
Total deferred tax assets $ 11,340
Less: Valuation allowance -
Deferred tax liability (32,237)
------
Net deferred tax liability $ (20,897)
======
Through March 31, 2000, utilization of net operating loss carry-forwards has
been substantially reduced. Most of the deferred tax liability is attributable
to fixed assets.
The reconciliation of income tax computed at the U.S. Federal statutory rates
to income tax expense at March 31, 2000 and March 31, 1999 is as follows:
Percentage of
Pretax Income
2000 1999
-----------------
Tax at US statutory rates 34.0% 34.0%
State income taxes, net of
federal tax benefit 6.0% 6.0%
Other adjustments 0.0% (1.0%)
---- ----
Income tax provision 40.0% 39.0%
==== ====
NOTE 5 - COMPREHENSIVE INCOME
There were no items of other comprehensive income in 2000 and 1999 and thus,
net income is equal to comprehensive income for each period presented.
CORFACTS , INC. & SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The analysis of the Company's financial condition, capital resources and
operating results should be viewed in conjunction with the accompanying
financial statements, including the notes thereto.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,2000 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1999
The Company is reporting net income of $73,147 on total revenues of $1,666,758
for the three months ended March 31, 2000 as compared to net income of $183,541
on total revenues of $1,322,818 for the comparable three months ended March
31, 1999.
Basic earnings per share for the three months ended March 31, 2000 were $.006 as
compared to basic earnings per share of $.015 for the same period in 1999.
Direct operating expenses rose from $592,169 for the three months ended March
31, 1999 to $845,315 for the current period, an increase from 44.8% to 50.7%,
primarily due to increased operating expenses for custom telemarketing.
Management anticipates this ratio will improve during the year, as it
anticipates more custom telemarketing projects to commence in the later
quarters of 2000.
Selling, general and administrative costs were $616,720 for the three months
ended March 31, 2000 as compared to $388,825 for the three months ended March
31, 1999. The increase in selling, general and administrative expenses is
directly related to the additional sales, administrative and MIS personnel
needed for the growth in custom telemarketing. Depreciation and amortization
expense for the three months ended March 31, 2000 was $64,621 as compared to
$27,862 for the same period in 1999. This increase in depreciation and
amortization of $36,759 is attributable to the purchase of additional
equipment and furniture necessary for the Company's expansion, as well as
amortization related to the acquisitions that were completed during 1999.
The Company recorded $11,295 in interest income for the three months ended
March 31, 2000 as compared to interest income of $10,477 for the same period
last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $1,021,822 at March 31, 2000, as compared to
$962,109 at December 31, 1999. Due to the Company s continued profitability,
working capital has continued to grow. The Company's acquisitions in 1999 of
inbound services have not yet shown a significant amount of growthand have had
a minimal impact on the Company s working capital.
Management is continually considering various additional equity funding
alternatives to increase its already positive working capital to further
support its planned acquisitions and improve the value of the Company for its
shareholders. During 1999, the Company completed three acquisitions absorbed
by the Metro Marketing telemarketing subsidiary without material impact on
liquidity. The Board of Directors has also authorized management, as market
conditions permit, to undertake selective warrant programs to provide
incentives to market makers. The Company feels with the right combination of
capital, marketing assistance and management support it will be an attractive
parent company which can support the acquisition of additional subsidiaries,
while maintaining the current growth rate in its existing subsidiary.
FORWARD LOOKING AND OTHER STATEMENTS
Forward looking statements above and elsewhere in this report that suggest that
the Company will increase revenues, remain profitable and achieve significant
growth through acquisitions are subject to risks and uncertainties. Forward-
looking statements include the information concerning possible or assumed future
results of operations and cash flows. These statements are identified by words
such as believes, expects, anticipates or similar expressions. Such
forward looking statements are based on the beliefs of Corfacts , Inc. and its
Board of Directors in which they attempt to analyze the Company s competitive
position in its industry and the factors affecting its business. Stockholders
should understand that each of the foregoing risk factors, in addition to those
discussed elsewhere in this document and in the documents which are
incorporated by reference herein, could affect the future results of
Corfacts, Inc. and could cause those results to differ materially from those
expressed in the forward-looking statements contained or incorporated by
reference herein. In addition there can be no assurance that Corfacts, Inc.
and its Board have correctly identified and assessed all of the factors
affecting the Company s business.
CORFACTS, INC. & SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Legal proceedings:
The Company, its President and a management employee are the
defendants in a lawsuit filed by a former employee of the company
for alleged improper termination. The company and its co-defendants
deny the allegations and intend to vigorously defend their position.
Any outcome and its effect on the financial position of the company,
if any, cannot be determined at this time.
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 Form 8-K:
None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
May 10, 2000 /s/ Larry Finkelstein
Larry Finkelstein
President, Chairman and CFO
May 10, 2000 /s/ Ariel Freud
Ariel Freud
Vice President, Director
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.
May 10, 2000 /s/ Larry Finkelstein
Larry Finkelstein
President, Chairman and CFO
May 10, 2000 /s/ Ariel Freud
Ariel Freud
Vice President, Director