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, 1997
( ) 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)
41 East Main Street, Freehold, NJ 07728
----------------------------------------
(Address of principal executive offices)
Registrant s telephone number, including area code
--------------------------------------------------
(908) 780-1188
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
Transitional Small Business Disclosure Format:Yes x No
The number of shares outstanding of the registrant s common
stock, no par value, at March 31, 1997 is 11,909,402.
File Number 0-17394
Corfacts, Inc. & Subsidiary
Form 10-QSB
March 31, 1997
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet at March 31, 1997 3.
Consolidated Statements of Operations for the
three months ended March 31, 1997 and 1996 5.
Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1996 6.
Notes to Consolidated Financial Statements 7.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10.
PART II - OTHER INFORMATION 13.
Item 1. Legal Proceedings 13.
Item 2. Changes in Securities 13.
Item 3. Defaults Upon Senior Securities 13.
Item 4. Submission of Matters to a Vote of
Securityholders 13.
Item 5. Other Information 13.
Item 6. Exhibits and Reports on Form 8-K 13.
Signatures 14.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CORFACTS, INC. & SUBSIDIARY
BALANCE SHEET
March 31,1997
ASSETS
Current Assets
Cash and cash equivalents $ 371,989
Interest receivable 3,150
Accounts receivable, net of allowance for
bad debts of $7,361 147,774
Prepaid expenses 320
Notes receivable 14,394
Officer loans 25,669
Other receivable-municipal tax liens, net 34,156
-------
Total Current Assets 597,452
-------
Property and equipment, at cost, less
accumulated depreciation of $13,754 96,317
Other assets
Loan receivable, officer 128,913
Investment in partnership 2,116
Customer lists, net of accumulated
amortization of $14,871 123,924
Goodwill, net of accumulated amortization
of $5,205 133,590
Security deposits 6,520
---------
Total Other Assets 395,063
---------
TOTAL ASSETS $1,088,832
==========
cont'd. - Balance Sheet
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 103,059
Deferred revenue 2,880
Corporate taxes payable 1,638
Deferred corporate taxes 1,638
Current portion of capitalized lease obligations 14,675
-------
Total Current Liabilities 123,890
Capitalized lease obligations, net of current portion 31,961
-------
Deferred corporate taxes 1,639
-------
Note payable - shareholder 151,385
-------
Stockholders' equity
Common stock, no par value, 20,000,000 shares
authorized; 11,909,402 shares issued and
outstanding in 1997 1,281,573
Retained deficit (501,616)
---------
TOTAL STOCKHOLDERS' EQUITY 779,957
---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,088,832
==========
See notes to the consolidated financial statements.
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF OPERATIONS
Three months ended
March 31,
1997 1996
-----------------
Income:
Revenue telemarketing $ 434,346 $ -
Equity in earnings of
unconsolidated investee - 185
Income from tax liens, net 1,125 1,148
Interest income 4,206 4,227
------- -------
Total revenues 439,677 5,560
Direct operating expenses 259,696 -
Gross Profit 179,981 5,560
Costs & expenses:
General & administrative 96,442 33,318
Depreciation and amortization 10,978 -
Interest expense 4,347 -
------- ------
Total costs & expenses 111,767 33,318
Net income (loss) before taxes 68,214 (27,758)
Provision for income taxes 4,915 -
Net income (loss) $ 63,299 $(27,758)
========= ========
Net income (loss) per share $ .005 $ (.003)
========= ========
Weighted average shares
outstanding 11,909,402 8,005,314
See notes to the consolidated financial statements.
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF CASH FLOWS
Three months ended
March 31,
1997 1996
-------------------
Cash flows from operating activities:
Net income (loss) $63,299 $(27,758)
Adjustments to reconcile net
income (loss)
to net cash used in operations:
Depreciation and amortization 10,978 -
Bad debts provision 2,134 -
(Increase) decrease in accounts
receivable (81,701) 2,320
Increase in prepaid expenses (320) -
Increase in other assets (1,011) -
Decrease in accounts
payable and other liabilities (9,755) (3,705)
Net cash used in operating ------- ------
activities (16,376) (29,143)
------- ------
Cash flows from investing activities:
Redemption of tax lien certificate - (1,333)
Purchase of equipment (19,509) -
Net cash used in investing ------- ------
activities (19,509) (1,333)
------- ------
Cash flows from financing activities:
Repayment of capitalized lease
obligations (3,821) -
(Advances to) repayment from buyer 5,399 (7,932)
Net cash provided by (used in) ------ ------
financing activities 1,578 (7,932)
------ ------
Net decrease in cash and
cash equivalents (34,307) (38,408)
Cash and cash equivalents at
beginning of period 406,296 518,136
Cash and cash equivalents at ------- -------
end of period $371,989 $479,728
======== ========
CORFACTS, INC. & SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed consolidated interim financial
statements included herein have been prepared by Corfacts,
Inc. (the "Company"), without audit, in accordance with
generally accepted accounting principles for interim financial
information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the
disclosures made are adequate to make the information
presented not misleading.
In the opinion of management, the information furnished for
the three month period ended March 31, 1997 and 1996 includes
all adjustments, consisting solely of normal recurring
accruals necessary for a fair presentation of the financial
results for the respective interim periods and is not
necessarily indicative of the results of operations to be
expected for the entire fiscal year ending December 31, 1997.
It is suggested that the interim financial statements be read
in conjunction with the audited consolidated financial
statements for the year ended December 31, 1996, as filed with
the Securities and Exchange Commission on Form 10-KSB and Form
8-K filed on January 21, 1997. (Commission File Number 0-17394).
NOTE 2 - NATURE OF BUSINESS
Corfacts, Inc. was organized in 1983, originally as the
Business Journal of New Jersey, Inc. Since selling the
magazine business in 1990, and discontinuance and sale of the
information division in August 1991, the Company has directed
its efforts to seek potential acquisitions and investments
deemed appropriate for the Company to generate a return on
equity.
NOTE 3 - PURCHASE OF SUBSIDIARY
On December 31, 1996 the Company entered into a merger and
acquisition plan to acquire all of the shares and assets of
Metro Marketing, Inc. a telemarketing firm, effective July 1,
1996. The Company issued 3,904,088 shares of common stock and
the balance of the purchase price in the sum of $151,385 shall
be paid pursuant to the terms of a promissory note. The total
value is approximately $287,589 (exclusive of acquisition
costs). The acquisition was accounted for as a purchase in
accordance with Accounting Principles Board Opinion No. 16.
The excess (approximately $277,590) of the total acquisition
cost over the recorded value of assets acquired was allocated $138,795
to customer lists and $138,795 to goodwill and are being amortized over
7 years and 20 years respectively. The accompanying balance sheet includes
the assets and liabilities of Metro Marketing Inc. at March 31,
1997. The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiary for the quarter ended March 31, 1997. Intercompany
transactions have been eliminated in consolidation.
The proforma results of operations that follow below assume
that the acquisition occurred at the beginning of the period
ended March 31, 1996. The proforma calculations include
adjustments for the estimated effect on the Company's
historical results of operations for depreciation, amortization, interest
and Officer salary related to the acquisition.
Condensed Historical and Proforma Information:
For the three months ended
March 31, 1997 March 31, 1996
Historical (Proforma)
-------------------------------
Total revenue $439,677 $123,440
Direct operating expenses 259,696 62,293
Cost and expenses 111,767 80,834
Provision for taxes 4,915 725
-------- --------
Net income (loss) $ 63,299 $(20,412)
-------- --------
Income (loss) per share $ .006 $ (.002)
======== ========
Weighted average shares
outstanding 11,909,402 11,909,402
NOTE 4 - DUE FROM RELATED PARTIES
Receivables have been generated by transactions with
related parties, which are summarized as follows:
Current Long-term
Due from Buyer: $14,494 $ -
Due from Officers 25,669 128,913
------- -------
$40,063 $128,913
======= ========
NOTE 5 - OTHER RECEIVABLES AND INVESTMENT IN PARTNERSHIP
Included in other receivables are municipal tax liens which
subject the Company to the potential loss of investment.
Additionally the Company has an investment in a partnership
where the partnership s only assets are municipal tax liens.
If the Company or partnership is forced to foreclose on the
real estate listed as collateral, there is a potential for
total loss from the investment if the property cannot be sold.
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, 1997 COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 1996
The first of acquisition by the Company, of which the Company
plans to be several, was completed in January of 1997, with an
effective date for accounting purposes of July 1, 1996. The
operations of the Company's new subsidiary, Metro Marketing,
Inc. are included in the quarter ended March 31, 1997. The
Company acquired a telemarketing company which it hopes to be
the teleservices arm of several industries including future
subsidiaries of Corfacts.
The Company is reporting net income of $63,299 on total
revenues of $439,677 for the quarter ended March 31, 1997 as
compared to a loss of $27,758 on total revenues of $5,560 for
the three month period ended March 31, 1996.
ABOUT THE SUBSIDIARY, METRO MARKETING INC.
Metro Marketing recorded revenues of $434,346 for the quarter
ended March 31, 1997 as compared to proforma revenues of $117,880
for the quarter ended March 31, 1996. Net income for Metro Marketing
for the quarter ended March 31, 1997 was $77,413, as compared to proforma
income of $7,346 for the quarter ended March 31, 1996.
Revenues for Metro Marketing increased by $316,466, or approximately 269%.
Prior to July 1996, Metro Marketing limited its telemarketing services to
one particular industry. Since July 1996, the Company has expanded its
services to other industries and has expanded the type of telemarketing
services they provide. This has enabled the Company to competitively bid
on projects for major corporations and government organizations. As a
percentage of sales, the net income for 1997 was 17.8% for the three months,
as compared to 6.2% for the same proforma period last year.
Management believes that its efforts will continue to improve the
profitability of its newly acquired subsidiary. The Company has also
begun a concerted effort to install quality assurance procedures to
enhance the level of services from being a telemarketing company to a
total teleservices company. Management believes that it will be able to
accomplish this without significantly depleting the working capital of the
parent company, or incurring a loss in the subsidiary.
Corporate overhead for the three months ended March 31, 1997 declined
slightly due to a reduction in Officer's salary and consulting fees. The
Company recorded $4,206 in interest income for the three months ended
March 31, 1997 as compared to interest income of $4,227 for the same period
last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $473,562 at March 31, 1997, as compared
to $560,449 at March 31, 1996. The loss in the prior year, the purchase of
equipment and the increase in net accounts payable due to the larger
operating cycle are the major compoments of the decrease in working capital.
Additional receivables related to the increase in revenue of Metro Marketing,
Inc. is the major component of the net cash used in operations.
The Company is reducing its partnership investment and receivables from tax
liens as these certificates are satisfied. The Company has used the proceeds
to supplement the cash balances of the Company. The Company s goal is to
keep liquid resources available to support approved subsidiary
plans or partially fund future acquisitions. Most of the cash available in
the Company has been invested in 90 day FDIC insured Certificates of Deposit
at various local banking institutions. The interest rates on these
Certificates have been averaging between 2.75% and 4.5%. Management reviews
these Certificates as they mature.
The Company's financial leverage as measured by debt to equity is .71 to 1.0.
and when measured by liabilities to equity is 3.97 to 1.0.
Management is considering various additional equity funding alternatives to
increase its existing working capital in an effort to support its planned
acquisitions and planned corporate structure. The Company believes with the
right combination of capital, marketing assistance and management support it
will be able to pursue ongoing growth through the acquisition of additional
subsidiaries, while maintaining the current growth rate in its existing
subsidiary. At the same time management wants to monitor and direct the
company's growth in ways that strengthen the Company's balance sheet,
liquidity and income capacity to maximize the value of the Company's common
stock. This in turn can help the Company raise additional capital as well
as provide for greater equity purchasing power in acquisitions.
Forward looking and other statements.
Forward looking statements above and elsewhere in this report
that suggest that the Company will increase revenues, become
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:
None
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:
(a) Exhibits - None
(b) Reports on Form 8-K - filed January 21, 1997
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 20, 1997 /s/ Larry Finkelstein
Larry Finkelstein,
President, Chairman
/s/ Ariel Freud
Ariel Freud,
Vice President, Director
/s/ Trudy Katz
Trudy Katz,
Accounting and Finance
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 20, 1997 /s/ Larry Finkelstein
Larry Finkelstein,
President, Chairman
/s/ Ariel Freud
Ariel Freud,
Vice President, Director
/s/ Trudy Katz
Trudy Katz,
Accounting and Finance
12