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, 1998
( ) 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
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(Address of principal executive offices)
Registrant s telephone number, including area code
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(800) 696-7788
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, 1998 is 11,909,402.
File Number
0-17394
Corfacts, Inc. & Subsidiary
Form 10-QSB
March 31, 1998
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheetat March 31, 1998 3.
Consolidated Statements of Operations for the
three months ended March 31, 1998 and 1997 5.
Consolidated Statements of Cash Flows for the
three months ended March 31, 1998 and 1997 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
March 31,1998
ASSETS
Current Assets
Cash and cash equivalents $ 981,585
Interest bearing deposits, restricted 36,250
Interest receivable 1,250
Accounts receivable, net of allowance for bad
debts of $26,380 108,216
Prepaid expenses 8,228
Other receivable-municipal tax liens, net 20,630
Deferred taxes 95,100
---------
Total Current Assets 1,251,259
---------
Property and equipment, at cost, less
accumulated depreciation of $45,069 118,435
Other assets
Loan receivable, officer 107,244
Investment in partnership 2,166
Customer lists, net of accumulated
amortization of $33,046 105,749
Goodwill, net of accumulated amortization
of $13,797 124,998
Security deposits 18,166
----------
Total Other Assets 358,323
----------
TOTAL ASSETS $1,728,017
==========
cont'd. - Balance Sheet
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 194,456
Deferred revenue 6,290
Income taxes payable 10,900
Deferred taxes 13,000
Current portion of note payable - shareholder 8,281
Current portion of capitalized lease obligations 35,503
----------
Total Current Liabilities 268,430
Capitalized lease obligations, net of current
portion 33,085
Note payable - shareholder, net of current portion 143,104
----------
176,189
Stockholders' equity
Common stock, no par value, 20,000,000 shares
authorized; 11,909,402 shares issued and
outstanding in 1998 1,281,573
Retained earnings 1,825
----------
TOTAL STOCKHOLDERS' EQUITY 1,283,398
----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,728,017
==========
See notes to the consolidated financial statements.
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF OPERATIONS
Three months ended
March 31,
1998 1997
------------------------
Revenue
Revenue telemarketing $ 862,176 $ 434,346
Income from tax liens, net 650 1,125
Interest income 9,617 4,206
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Total revenues 872,443 439,677
Direct operating expenses 361,516 259,696
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Gross Profit 510,927 179,981
Costs & expenses
General & administrative 233,702 96,442
Depreciation and amortization 14,877 10,978
Interest expense 5,360 4,347
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Total costs & expenses 253,939 111,767
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Income before income taxes 256,988 68,214
Provision for income taxes 113,100 4,915
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Net income $143,888 $ 63,299
========== ==========
Basic earnings per common share $ .012 $ .005
========== ==========
Average common shares outstanding 11,909,402 11,909,402
========== ==========
Diluted earnings per common share $ .011 $ .005
========== ==========
Average common shares and equivalents
outstanding for diluted earnings
per common share 12,617,402 11,909,402
========== ==========
See notes to the consolidated financial statements.
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF CASH FLOWS
Three months ended
March 31,
1998 1997
------------------
Cash flows from operating activities:
Net income $143,888 $ 63,299
Adjustments to reconcile net
income
to net
cash used in operations:
Depreciation and amortization 14,877 10,978
Bad debts provision 6,000 2,134
Deferred income taxes 112,100 -
(Increase) in accounts receivable (60,056) (81,701)
(Increase) decrease in prepaid expenses 8,257 (320)
Increase in other assets - (1,011)
Decrease
in accounts payable
and other liabilities (18,353) (9,755)
Net cash (used in) provided by operating -------- --------
activities 206,713 (16,376)
Cash flows from investing activities: -------- --------
Purchase of equipment (6,127) (19,509)
Net cash used in investing -------- --------
activities (6,127) (19,509)
-------- --------
Cash flows from financing activities:
Repayment of capitalized lease
obligations (5,908) (3,821)
(Advances to) repayment from buyer - 5,399
Net cash provided by (used in) -------- --------
financing activities (5,908) 1,578
-------- --------
Net increase (decrease) in cash and
cash equivalents 194,678 (34,307)
Cash and cash equivalents at
beginning of period 786,907 406,296
Cash and cash equivalents at -------- --------
end of period $ 981,585 $371,989
========= ========
See notes to the consolidated financial statements.
CORFACTS, INC. & SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1998
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, 1998 and 1997 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, 1998. It is suggested
that the interim financial statements be read in conjunction
with the audited consolidated financial statements for the year
ended December 31, 1997, as filed with the Securities and
Exchange Commission on Form 10-KSB (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.
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
accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary.
Intercompany transactions and balances have been eliminated in
consolidation.
NOTE 3 - DUE FROM RELATED PARTIES
Receivables have been generated by transactions with the
President which total $107,244. No interest has been charged
on these amounts during the period as the officer generally
waives his right to auto expense reimbursement. 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%.
NOTE 4 - DURING THE YEAR, THE COMPANY ADOPTED FASB STATEMENT
NO. 130 - REPORTING COMPREHENSIVE INCOME
Statement No. 130 requires the reporting of comprehensive
income and its components in addition to net income from
operations. Comprehensive income is a more inclusive financial
reporting methodology that includes disclosure of certain
financial information that historically has not been recognized
in the calculation of net income. To date, FASB Statement No.
130 does not have a material effect on the Company's financial
position or the results of operations.
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, 1998, COMPARED TO THE THREE MONTHS
ENDED MARCH 31, 1997
The Company is reporting pre-tax income of $256,988 and net
income of $143,888 on total revenues of $872,443 for the
quarter ended March 31, 1998 as compared to pre-tax income of
$68,214 and net income of $63,299 on total revenues of $439,677
for the comparable quarter ended March 31, 1997.
Pre-tax earnings per share were $.022 for the quarter ended
March 31, 1998 as compared to pre-tax earnings of $.006 in
1997. Basic earnings per share for the quarter ended March 31,
1998 were $.012 as compared to basic earnings per share of
$.005 for the same quarter in 1997.
Management has remained focused on completing a strategic
alliance or other suitable business ventures to further
increase the operating revenue of the Company. Presently the
Company is evaluating lease or purchase alternatives for its
operational office in Freehold, New Jersey, as its present
lease is expiring during the third quarter of 1998.
All of the current growth comes from the telemarketing
operations of Metro Marketing, the subsidiary acquired July
1996. Management expects the strong revenue growth in its
subsidiary to continue. Management is actively seeking other
suitable mergers and or acquisitions to enhance and utilize the
services of its subsidiary, Metro Marketing.
The Company now believes with its present corporate management
and new marketing subsidiary it has uniquely positioned itself
to provide added value to traditional small businesses which
may need capital, management experience and marketing assistance.
The Company recorded $9,617 in interest income for the three
months ended March 31, 1998 as compared to interest income of
$4,206 for the same period last year.
ABOUT THE SUBSIDIARY, METRO MARKETING INC.
Metro Marketing recorded revenues of $867,124 for the quarter
ended March 31, 1998 as compared to revenues of $434,346 for the
quarter ended March 31, 1997.
Revenues for Metro Marketing increased by $432,778, or
approximately 100%. Management believes that its efforts will
continue to improve the profitability of its newly acquired
subsidiary. The Company is now aggressively marketing its
services to other areas of the medical industry and a wider
variety of other financial and service industries. 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $982,829 at March 31, 1998,
as compared to $845,668 at December 31, 1997. The primary
reason for this increase in working capital is the
profitability of the Company. In addition to the income from
operations, the Company was able to utilize the deferred tax
as set recorded in 1997 toward first quarter earnings. The net
deferred tax asset of $194,200 was reduced to $82,100 at the
end of thefirst quarter of 1998 due to first quarter pre-tax
earnings of $256,988. Therefore, a major component of the current
tax expense of $112,100 will not require cash outlays by the Company.
Management is also 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. To this end, the
Board of Directors has authorized management, if and when it
deems appropriate, to purchase back for the Company's treasury,
shares of the Company's common stock when it feels the current
market price is under valued. 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, 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:
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 14, 1998 /s/ Larry Finkelstein
---------------------------
Larry Finkelstein,
President, Chairman and CFO
/s/ Ariel Freud
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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 14, 1998 /s/ Larry Finkelstein
----------------------------
Larry Finkelstein,
President, Chairman and CFO
/s/ Ariel Freud
----------------------------
Ariel Freud,
Vice President, Director