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 JUNE 30, 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
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(Exact name of small business issuer as specified in its charter)
New Jersey 22-2478379
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(State or other jurisdiction of (I.R.S. Employer ID No.)
incorporation or organization)
41 East Main Street, Freehold, NJ 07728
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(Address of principal executive offices)
Registrant s telephone number, including area code
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(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 June 30, 1997 is 11,909,402.
File Number
0-17394
Corfacts, Inc. & Subsidiary
Form 10-QSB
June 30, 1997
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet at June 30, 1997 3.
Consolidated Statements of Operations for the
six months ended June 30, 1997 and 1996 5.
Consolidated Statements of Cash Flows for the
six months ended June 30, 1997 and 1996 6.
Notes to Consolidated Financial Statements 7.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 9.
PART II - OTHER INFORMATION 12.
Item 1. Legal Proceedings 12.
Item 2. Changes in Securities 12.
Item 3. Defaults Upon Senior Securities 12.
Item 4. Submission of Matters to a Vote of
Securityholders 12.
Item 5. Other Information 12.
Item 6. Exhibits and Reports on Form 8-K 12.
Signatures 13.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CORFACTS, INC. & SUBSIDIARY
BALANCE SHEET
June 30, 1997
-------------
ASSETS
Current Assets
Cash and cash equivalents $ 568,048
Interest receivable 3,650
Accounts receivable, net of allowance for
bad debts of $12,361 75,230
Prepaid expenses 19,012
Notes receivable 14,345
Officer loans 25,669
Other receivable-municipal tax liens, net 29,368
-------
Total Current Assets 735,322
Property and equipment, at cost, less
accumulated depreciation of $18,431 132,141
Other assets
Loan receivable, officer 128,913
Investment in partnership 2,166
Customer lists, net of accumulated
amortization of $19,828 118,967
Goodwill, net of accumulated amortization
of $6,940 131,855
Security deposits 10,166
-------
Total Other Assets 392,067
TOTAL ASSETS $1,259,530
==========
cont'd. - Balance Sheet
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 137,415
Deferred revenue 740
Corporate taxes payable 4,290
Deferred corporate taxes 4,290
Current portion of capitalized lease obligations 31,696
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Total Current Liabilities 178,431
--------
Capitalized lease obligations, net of
current portion 59,532
--------
Deferred corporate taxes 4,290
--------
Note payable - shareholder 151,385
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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) (415,681)
---------
TOTAL STOCKHOLDERS' EQUITY 865,892
---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,259,530
==========
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF OPERATIONS
Six months ended
June 30,
1997 1996
------ ------
Revenue:
Revenue telemarketing $1,007,674 $ -
Equity in earnings of
unconsolidated investee 50 127
Income from tax liens, net 2,925 2,296
Interest income 8,122 10,236
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Total revenues 1,018,771 12,659
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Direct operating expenses 608,502 -
--------- ------
Gross Profit 410,269 12,659
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Costs & expenses:
General & administrative 216,336 66,188
Depreciation and amortization 22,349 -
Interest expense 9,482 -
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Total costs & expenses 248,167 66,188
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Net income (loss) before taxes 162,102 (53,529)
Provision for income taxes 12,868 -
Net income (loss) $ 149,234 $(53,529)
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Net income (loss) per share $ .013 $ (.007)
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Weighted average shares
outstanding 11,909,402 8,005,314
========== =========
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF CASH FLOWS
Six months ended
June 30,
1997 1996
---- ----
Cash flows from operating activities:
Net income (loss) $149,234 $(53,529)
Adjustments to reconcile net income
(loss) to net cash used in
operations:
Depreciation and amortization 22,349 -
Bad debts provision 7,134 -
(Increase) decrease in accounts
receivable (14,751) 545
Increase in prepaid expenses (19,012) -
Increase in other assets (4,657) -
Increase (decrease) in accounts
payable and other liabilities 30,416 (4,470)
Net cash provided by (used in) ------- -----
operating activities 170,713 (57,454)
------- ------
Cash flows from investing activities:
Redemption of (purchase of)
tax lien certificate 4,880 (2,296)
Increase in partnership
investment (50) (126)
Net cash provided by (used in) ----- -----
investing activities 4,830 (2,422)
----- -----
Cash flows from financing activities:
Repayment of capitalized lease
obligations (19,239) -
Loan to Officer - (5,000)
Repayment from buyer 5,448 891
------ -----
Net cash used in financing activities (13,791) (4,109)
------ -----
Net increase (decrease) in cash and
cash equivalents 161,752 (63,985)
Cash and cash equivalents at
beginning of period 406,296 518,136
Cash and cash equivalents at ------- -------
end of period $568,048 $454,151
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CORFACTS, INC. & SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 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 six month
period ended June 30, 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 June 30,
1997. The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary for the six months
ended June 30, 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 June 30, 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 six months ended
June 30, 1997 June 30, 1996
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Historical (Proforma)
Total revenue $1,007,674 $242,154
Direct operating expenses 608,502 167,040
Cost and expenses 248,167 170,187
Provision for taxes 12,868 0
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Net income (loss) $ 149,234 $(95,073)
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Income (loss) per share $ .013 $ (.008)
========= =======
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: $14,345 $ -
Due from Officers 25,669 128,913
------ -------
$40,014 $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
SIX MONTHS ENDED JUNE 30, 1997, COMPARED TO THE SIX MONTHS ENDED JUNE 30,
1996
The first acquisition by the Company, of which the Company plans 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 six months ended June 30, 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 $149,234 on total revenues of
$1,007,674 for the six months ended June 30, 1997 as compared to a loss of
$53,529 on total revenues of $12,659 for the six month period ended
June 30, 1996.
About the subsidiary, Metro Marketing, Inc.
Metro Marketing recorded revenues of $1007,757 for the six months ended
June 30, 1997 as compared to proforma revenues of $242,154 for the same six
month period in 1996. Net income for Metro Marketing for the six months
ended June 30, 1997 was $182,674, as compared to a proforma loss of $41,544
for the six months ended June 30, 1996.
Revenues for Metro Marketing increased by $778,179, or approximately 339%.
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 18.1% for the six months, as compared to a net
loss of 18.1% for the same proforma period last year. Management believes
that its efforts will continue to improve the profitability of its newly
acquired subsidiary.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - (Continued)
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 six months ended June 30, 1997 declined due to a
reduction in Officer's salary and consulting fees. The Company recorded
$8,122 in interest income for the six months ended June 30, 1997 as compared
to interest income of $10,236 for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $556,891 at June 30, 1997, as compared to
$534,737 at June 30, 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 components
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 3.75% and 4.75%. Management reviews these
Certificates as they mature.
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.
August 14, 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.
August 14, 1997 /s/ Larry Finkelstein
Larry Finkelstein,
President, Chairman
/s/ Ariel Freud
Ariel Freud,
Vice President, Director
/s/ Trudy Katz
Trudy Katz,
Accounting and Finance