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, 1999
( ) 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)
Registrant s telephone number, including area code
(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 June 30, 1999 is 11,940,521.
File Number
0-17394
Corfacts, Inc. & Subsidiary
Form 10-QSB
June 30, 1999
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet at June 30, 1999 3.
Consolidated Statements of Operations for the
three months and six months ended June 30,
1999 and 1998 5.
Consolidated Statements of Cash Flows for the
six months ended June 30, 1999 and 1998 7.
Notes to Consolidated Financial Statements 8.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10.
PART II - OTHER INFORMATION 14.
Item 1. Legal Proceedings 14.
Item 2. Changes in Securities 14.
Item 3. Defaults Upon Senior Securities 14.
Item 4. Submission of Matters to a Vote of
Securityholders 14.
Item 5. Other Information 14.
Item 6. Exhibits and Reports on Form 8-K 14.
Signatures 15.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CORFACTS, INC. & SUBSIDIARY
BALANCE SHEET
June 30,1999
------------
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $1,296,819
Interest bearing deposits, restricted 38,280
Interest receivable 5,205
Accounts receivable, net of allowance for
bad debts of $36,510 180,946
Prepaid expenses 28 470
Other receivable-municipal tax liens, net 10,715
---------
Total Current Assets 1,560,435
Property and equipment, at cost,
less accumulated depreciation of $107,454 355,462
Other assets
Loan receivable, officer 94,743
Investment in partnership 2,166
Customer lists, net of accumulated
amortization of $64,803 169,492
Goodwill, net of accumulated amortization
of $21,090 182,705
Security deposits 35,693
--------
Total Other Assets 484,799
--------
TOTAL ASSETS $2,400,696
==========
cont'd. - Balance Sheet
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 315,352
Deferred revenue 30,000
Income taxes payable 66,485
Deferred taxes 3,065
Current portion of note payable - shareholder 35,203
Current portion of note payable - purchase 24,020
Current portion of capitalized lease obligations 56,308
--------
Total Current Liabilities 530,433
Capitalized lease obligations, net of
current portion 89,849
Note payable - shareholder, net of current portion 107,901
Note payable - purchase, net of current portion 82,063
Stockholders' equity
Common stock, no par value, 20,000,000 shares
authorized; 11,940,521 shares issued and
outstanding in 1999 1,284,052
Retained earnings 306,398
---------
TOTAL STOCKHOLDERS' EQUITY 1,590,450
---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,400,696
==========
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF OPERATIONS
Six months ended
June 30,
1999 1998
(Unaudited)
Revenue
Revenue telemarketing $ 2,575,886 $1,661,024
Income from tax liens, net 214 1,150
Interest income 22,487 20,955
--------- ---------
Total revenues 2,598,587 1,683,129
Direct operating expenses 1,221,551 776,658
--------- ---------
Gross Profit 1,377,036 906,471
Costs & expenses
General & administrative 892,458 481,244
Depreciation and amortization 59,897 30,024
Interest expense 16,297 10,417
--------- --------
Total costs & expenses 968,652 521,685
Income before income taxes 408,384 384,786
Provision for income taxes 170,410 166,800
--------- --------
Net income $237,974 $217,986
========= ========
Basic earnings per common share $ .020 $ .018
========= ========
Average common shares outstanding 11,940,521 11,909,402
========== ==========
Diluted earnings per common share $ .018 $ .017
========== ==========
Average common shares and equivalents
outstanding for diluted earnings
per common share 13,380,521 12,617,402
========== ==========
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF OPERATIONS
Three months ended
June 30,
1999 1998
------------------
(Unaudited)
Revenue
Revenue telemarketing $ 1,263,759 $ 798,848
Income from tax liens, net - 500
Interest income 12,010 11,338
--------- --------
Total revenues 1,275,769 810,686
Direct operating expenses 629,382 415,142
--------- --------
Gross Profit 646,387 395,544
Costs & expenses
General & administrative 503,633 247,542
Depreciation and amortization 32,035 15,147
Interest expense 8,236 5,057
--------- --------
Total costs & expenses 543,904 267,746
Income before income taxes 102,483 127,798
Provision for income taxes 48,050 53,700
-------- --------
Net income $ 54,433 $ 74,098
======== ========
Basic earnings per common share $ .005 $ .006
======== ========
Average common shares outstanding 11,940,521 11,909,402
========== ==========
Diluted earnings per common share $ .004 $ .006
========== ==========
Average common shares and equivalents
outstanding for diluted earnings
per common share 13,380,521 12,617,402
========== ==========
CORFACTS, INC. & SUBSIDIARY
STATEMENTS OF CASH FLOWS
Six months ended
June 30,
1999 1998
------------------
Cash flows from operating activities:
Net income $237,974 $217,986
Adjustments to reconcile net income
to net cash used in operations:
Depreciation and amortization 59,897 30,024
Bad debts provision 15,000 13,015
Deferred income taxes 63,590 165,000
Increase in accounts receivable (62,349) (70,392)
Increase in interest receivable (4,156) -
(Increase) decrease in prepaid
expenses 32,193 (5,918)
Decrease in other assets (6,374) 10,003
Increase (decrease) in accounts payable
and other liabilities 77,241 (51,556)
------- -------
Net cash provided by operating
activities 413,016 308,162
Cash flows used in investing activities: ------- -------
Purchase of assets of Advanced
Marketing (30,500) -
Purchase of assets of EZ
Connection - down payment (72,000) -
Redemption of (income from) tax
lien certificate 184 (700)
Purchase of equipment (77,666) (15,496)
-------- --------
Net cash used in investing
activities (179,982) (16,196)
-------- --------
Cash flows from financing activities:
Repayment of note to shareholder (8,281) -
Repayment of note to EZ Connection (1,917) -
Repayment of capitalized lease
obligations (51,056) (16,476)
------- --------
Net cash used in financing
activities (61,254) (16,476)
Net increase in cash and cash ------- --------
equivalents 171,780 275,490
Cash and cash equivalents at
beginning of period 1,125,039 786,907
--------- --------
Cash and cash equivalents at
end of period $1,296,819 $1,062,397
========== ==========
CORFACTS, INC. & SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1999
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, 1999 and 1998 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, 1999 It is suggested
that the interim financial statements be read in conjunction
with the audited consolidated financial statements for the year
ended December 31, 1998 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 - RELATED PARTY TRANSACTIONS
Receivables have been generated by transactions with the
President which total $ 94,743. 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 six months ended June 30, 1999 and 1998, interest
expense on this note was $5,154 and $5,298 respectively.
The Note Payable, generated by the purchase of assets of EZ
Connection on June 1, 1999 is payable to EZ Connection, Inc.
and bears an interest rate of 8%. During the six months ended
June 30, 1999 and 1998, interest expense on this note was $720
and $0 respectively.
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, 1999 COMPARED TO THE SIX MONTHS ENDED
June 30, 1998
The Company is reporting net income of $237,974 on total
revenues of $2,598,587 for the six months ended June 30, 1999
as compared to net income of $217,986 on total revenues of
$1,683,129 for the comparable six months ended June 30, 1998.
Basic earnings per share for the six months ended June 30, 1999
were $.020 as compared to basic earnings per share of $.018 for
the same period in 1998.
General and administrative costs were $892,458 for the six
months ended June 30, 1999 as compared to $481,244 for the six
months ended June 30, 1998. The Company moved to a larger
facility in December 1998, which resulted in rent and utility
expenses of $73,000 for the six months ended June 30, 1999 as
compared to $15,000 for the same period in 1998. Selling
expenses increased $202,612 to $410,418 for the six months
ended June 30, 1999 as compared to $207,806 for the six months
ended June 30, 1998. Selling expenses increased due to the
addition of sales and administrative staff who have been hired
to promote the Company's new financial and custom telemarketing
divisions.
During the first quarter of 1999, the Company purchased the
assets of a local telemarketing company which specializes in
custom script writing tailored to any industry. This
transaction further diversifies the services provided by Metro
Marketing, the wholly owned subsidiary of Corfacts. The
customer base of this new acquisition, when combined with the
existing resources and personnel of the Company will provide
the opportunity for immediate growth.
During the second quarter of 1999, the Company purchased the
assets of EZ Connection, an answering service in Wayne, New
Jersey. EZ Connection provides inbound telemarketing services
to approximately 200 clients in the northern New Jersey area.
EZ Connection is currently billing approximately $325,000 on an
annualized basis. The purchase price for this transaction of
$180,000 consisted of a down payment of $72,000 and a four year
note at 8% for the balance of $108,000.
The Company recorded $22,487 in interest income for the six
months ended June 30, 1999 as compared to interest income of
$20,955 for the same period last year.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS
ENDED June 30, 1998
The Company is reporting net income of $54,433 on total
revenues of $1,275,769 for the quarter ended June 30, 1999 as
compared to net income of $74,098 on total revenues of $810,686
for the comparable quarter ended June 30, 1998.
Basic earnings per share for the quarter ended June 30, 1999
were $.005 as compared to basic earnings per share of $.006 for
the same quarter in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $1,030,002 at June 30, 1999,
as compared to $1,084,556 at December 31, 1998. The primary
reason for the decrease in working capital is the down payment
of $72,000 in cash and the short term portion of the note for
the purchase of assets of EZ Connection. Management believes
that this is a temporary reduction in working capital because
the Company continues to be profitable and the answering
service acquisition described above is currently operating on
its own. The Company is projecting to spend a minimal amount
on sales and marketing for the new acquisition to promote the
additional services that will be available with the purchase of
additional equipment and software. The Company will now be able
to offer voice mail, order entry and 800 number service, which
will broaden its customer base by making out of state sales
cost effective. This equipment and software will also be able
to handle the anticipated increase in customer capacity, which
will be the result of a salesperson dedicated to promoting
these new services.
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. 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.
August 14, 1999 /s/ Larry Finkelstein
Larry Finkelstein,
President, Chairman and CFO
August 14, 1999 /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.
August 14, 1999 /s/ Larry Finkelstein
Larry Finkelstein,
President, Chairman and CFO
August 14, 1999
/s/ Ariel Freud
Ariel Freud, Vice President, Director