ACCUFACTS PRE EMPLOYMENT SCREENING INC
FILING TYPE: 10QSB
DESCRIPTION: QUARTERLY REPORT
FILING DATE: MAY 21, 2001
PERIOD END: MAR 31, 2001
PRIMARY EXCHANGE: OVER THE COUNTER BULLETIN BOARD
TICKER: APES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 2001.
/ / Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transaction period from to
Commission file number 001-14995
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
(Exact Name of Small Business Issuer
as Specified in Its Charter)
DELAWARE 13-4056901
-------- ----------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
6 GREENE STREET, NEW YORK, NEW YORK 10013
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(Address of Principal Executive Offices)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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___
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
TITLE OF EACH CLASS SHARES OUTSTANDING AS OF MAY 11,2001
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Common Stock, par 6,627,471
Value $.01 per share
Transitional Small Business Disclosure Format (check one):
Yes___ No_X_
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Condensed Balance Sheet as of March 31, 2001 1
Consolidated Condensed Statements of Operations for the
Three Months Ended March 31, 2001 and 2000 3
Consolidated Statements of Cash Flows for the Three Months 4
Ended March 31, 2001 and 2000
Notes to Financial
Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operation 6
PART II OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 2. Change in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
Signature 10
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
- ---------------------------------------------------------- -------------- --------------
MARCH 31,
2001 DECEMBER 31,
(UNAUDITED) 2000
- ---------------------------------------------------------- -------------- --------------
ASSETS
Current Assets:
Cash $ 382,872 $ 234,354
Accounts receivable, net 616,148 684,309
Prepaid expense 102 9,855
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Total Current Assets 999,020 928,518
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Property and Equipment, Net 500,810 509,173
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Other Assets:
Security deposits 8,553 8,553
Intangible assets, net 141,798 144,955
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Total Other Assets 150,351 153,508
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Total Assets $ 1,650,283 $ 1,591,199
===================================================================== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit $ 54,471 $ 58,764
Current maturities of capital lease obligations 9,240 9,889
Accounts payable and accrued expenses 806,012 764,726
Loan payable to stockholder 31,280 31,280
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Total Current Liabilities 901,003 864,659
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Other Liabilities:
Capital lease obligations, less current maturities 32,655 36,020
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Total Liabilities 933,658 900,679
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Commitments
Stockholders' Equity:
Preferred stock -- --
Common stock 66,275 66,275
Additional paid-in capital 1,319,821 1,319,821
Accumulated deficit (669,471) (695,576)
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Total Stockholders' Equity $ 716,625 $ 690,520
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Total Liabilities and Stockholders' Equity $ 1,650,283 $ 1,591,199
===================================================================== ===========
The accompanying notes are an integral part of these financial statements.
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ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
- ---------------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31,
2001 2000
- ---------------------------------------------------------- -------------- -------------
Revenue $ 1,082,490 $ 982,405
Cost of sales 796,959 659,661
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Gross profit 285,531 322,744
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General and administrative expenses 253,979 312,121
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Operating income 31,552 10,623
Other income (expense):
Other income 1,238 --
Amortization expense (3,157) --
Interest expense, net (3,528) (1,532)
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Income before income taxes 26,105 9,091
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Income taxes -- 15,451
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Net income (loss) 26,105 (6,360)
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Weighted average number of common shares outstanding 6,627,471 6,627,471
- --------------------------------------------------------------------- -----------
Net income (loss) per share $ 0.00 $ 0.00
===================================================================== ===========
Unaudited - See accompanying notes to condensed financial statements.
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ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- ------------------------------------------------------------------------------------
MARCH 31, MARCH 31,
2001 2000
- ------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $ 26,105 $ (6,360)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 42,652 16,044
Changes in current assets and liabilities 119,200 30,060
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Total adjustments 161,852 (14,016)
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Net cash provided by (used in) operating
activities 187,957 (20,376)
- ---------------------------------------------------------- --------- ---------
Cash flows from investing activities:
Purchases of property and equipment (31,132) (77,826)
- ---------------------------------------------------------- --------- ---------
Net cash used in investing activities (31,132) (77,826)
- ---------------------------------------------------------- --------- ---------
Cash flows from financing activities:
Repayments on capital lease obligations (4,014) (2,062)
Net repayments of note payable, bank (4,293) (4,166)
- ---------------------------------------------------------- --------- ---------
Net cash used in financing activities (8,307) (6,228)
- ---------------------------------------------------------- --------- ---------
Net increase (decrease) in cash 148,518 (104,430)
Cash - beginning of period 234,354 298,331
- ---------------------------------------------------------- --------- ---------
Cash - end of period $ 382,872 $ 193,901
- ---------------------------------------------------------- --------- ---------
Supplemental disclosures:
Interest paid $ 3,528 $ 1,670
Income taxes paid -- 1,305
- ---------------------------------------------------------- --------- ---------
Unaudited - See accompanying notes to condensed financial statements.
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ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS FOR PRESENTATION
The accompanying consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete statements. Management believes that all adjustments, specifically
normal recurring adjustments, necessary for a fair presentation of such
financial statements have been included. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
If such differences prove significant and material, Accufacts Pre-Employment
Screening, Inc. (the "Company") will file an amendment to this report on Form
10-QSB.
NOTE 2. DESCRIPTION OF BUSINESS
Accufacts Pre-Employment Screening, Inc. ("Accufacts") was incorporated on
October 6, 1994 in the State of New York. On August 31, 1998, Accufacts
consummated a merger with a public shell, Southern Cargo Company ("Southern"), a
Florida corporation. Southern, simultaneously with this merger, changed its name
to Accufacts Pre-Employment Screening Inc. ("APES") and shortly thereafter
re-incorporated in the State of Delaware. Under the terms of the merger all of
the outstanding shares of Accufacts were acquired by Southern in exchange for
3,750,000 shares of Southern's $.01 par value common stock. This transaction was
accounted for as a reverse acquisition whereby Accufacts was the acquirer for
accounting purposes.
Accufacts and its subsidiary acts as an information service bureau and
are engaged primarily in the business of verifying job applicant background
information for employers using databases and a national network of agents
throughout the United States.
On October 13, 1999, APES acquired all of the net assets of Maglio,
Inc. ("Maglio"), a Florida corporation, by merging Maglio with and into
Maglio-Accufacts Pre-Employment Screening, Inc. ("MAPES"), a wholly-owned
subsidiary established by APES. The acquisition was accounted for using the
purchase method of accounting and was completed by issuing 177,471 shares of
APES common stock consisting of 174,971 shares of common stock in consideration
for the acquisition and 2,500 shares of common stock in consideration for a
stockholder of Maglio entering into a non-compete agreement. The purchase price
over the fair value of the net assets acquired was $120,125 and is being
amortized using the straight-line method over 20 years. The fair value of the
non-competition agreement was $5,313 and is being amortized using the
straight-line method over the term of the agreement.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the financial statements and the notes thereto
included in this Quarterly Report on Form 10-QSB. This report contains
forward-looking statements. The term, "forward-looking statements," is defined
in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. When used in this Report as well as
our other filings with the Securities and Exchange Commission, press releases
and oral statements, words or phrases such as "believes", "anticipates",
"expects", "intends", "will likely result in", "estimates", "projects" or
similar expressions are intended to denote forward-looking statements. The
possible results that may be suggested by forward-looking statements are subject
to risks and uncertainties that may cause actual results to differ materially.
Some of the factors which might cause such differences include, without
limitation, risks associated with expansion of marketing efforts; limited sales
and marketing experiences; heightened competition; general economic and business
conditions; our ability or inability to implement our business strategy and/or
maintain our cost efficiency; dependence on proprietary technology, including,
without limitation, the adequacy of patent and trade secret protection;
continued availability of key personnel; retention of key personnel and
recruitment of additional qualified skilled personnel.
Accufacts was founded in 1994 to provide pre-employment screenings and
background checks for our clients. Following a merger with Southern Cargo (a
public shell) in 1998, we became a public company and changed the corporate name
to Accufacts Pre-Employment Screening, Inc.
In general, Accufacts' business is to provide a variety of background
reports regarding client employee candidates. These may include such items as:
criminal background checks, social security number verifications, employment
verifications, professional license verifications, education verifications,
credit reports, driving records, and other related reports. We believe that
obtaining such background checks is a proven, prudent part of a client's hiring
process. Falsification of employment application data is not uncommon, and
courts have held employers liable for harm caused by employees, especially when
there is a pattern of behavior. Furthermore, statistics indicate that
pre-employment screenings lead to increased employee integrity and decreased
turnover, which improves client business performance.
The market for background checks/pre-employment screenings is highly
competitive. Most competitors are small local firms, but a few large national
companies exist in the market. Accufacts competes on both levels. Overall, we
have successfully developed proprietary software tools incorporating the latest
technologies. This enables our clients to submit orders and track the status of
the research at any time. We customize reports upon request. We also have an
automated client service program that is available on-line, 24 hours a day,
every day. This ensures the fastest response and best client support available.
The acquisition of Maglio, Inc. was a major step for the company. It
increased our client base and provided additional resources that we believe will
expand our position in the market. During 2000 and the first quarter of 2001,
the focus of management's attention was on completing the integration of the
Maglio acquisition. We anticipate that this will be fully completed during the
second quarter of this year. We are continuing to refine operations, increase
revenues through new aggressive marketing initiatives, and generate a stream of
positive earnings. We believe that we are poised to leverage competitive
advantages to generate profitable growth.
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Revenues for the three months ended March 31, 2001 were $1,082,490, up
$100,085, an increase of 10.19% in revenues for the three months ended March 31,
2000, which were $982,405. The increase in revenues was consistent with
management's expectations and results primarily from ongoing marketing efforts.
Cost of sales for the three months ended March 31, 2001 was $ 796,959,
up $137,298 (20.81%) from $659,661, the cost of sales for the three months ended
March 31, 2000. Much of this increase was directly related to the corresponding
increase in revenues for the quarter. Additional costs were incurred due to
certain increases in subcontracting levels related to specific background
checks.
General administrative expenses for the three months ended March 31,
2001 were $285,531, down $37,213, or 11.53% from $322,744 for the three months
ended March 31, 2000. This decrease was generally due to efficiencies realized
from the consolidation of the Maglio acquisition.
Operating income for the quarter ended March 31, 2001 was $31,522, an
increase from the $10,623 generated in the three months ended March 31, 2000.
Net income for the period was $26,105, an increase from a loss of $6,360 for the
same period in 2000.
Net cash provided by operating activities for the three months ended
March 31, 2001 was $187,957, compared to net cash used in operations of $20,376
for the three month period ended March 31, 2000. Net cash used in investing
activities for the three months ended March 31, 2001 was $31,132, down from
$77,826 for the three-month period March 31, 2000.
The Company intends to increase its business through the use of operating
profits, borrowings, and additional capital raisings. The Company believes that
its anticipated cash flow from operations as well as availability of funds from
existing bank facilities will provide the liquidity to meet current foreseeable
cash needs.
At March 31, 2001, Accufacts had total assets of $1,650,283, compared with
$1,591,199 at March 31, 2000, representing an increase of 3.71%. For the same
periods, the company had total liabilities of $933,658 at March 31, 2001
compared to $900,679 at March 31, 2000, an increase of $32,979.
The Company has a $75,000 line of credit with Chase Manhattan Bank through
June 30, 2001. As of March 31, 2001, there was $54,471 outstanding on the line.
The line bears interest at the prime rate plus two (2) percent, and is secured
by the assets of the Company and is personally guaranteed by a stockholder of
the firm. The Company also has a $25,000 business checking/overdraft line of
credit. It bears interest at the prime rate plus six (6) percent and is secured
by the assets of the Company.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities and Use or Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
On May 18, 2001, on the written consent of a majority of the Board of Directors,
the Company amended its By-laws to so provide that the Company is not
exclusively obligated to hold the annual meeting of shareholders the last
business day of September, but rather, may at the discretion of the Board of
Directors, call an Annual Meeting at such time and date that is agreed upon by
the majority of the Board of Directors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
NUMBER DESCRIPTION OF EXHIBIT
2.1 Plan and Agreement of Merger of Maglio, Inc. and Maglio-Accufacts
Pre-Employment Screening, Inc., dated October 11, 1999, by and among
Accufacts Pre-Employment Screening, Inc., Maglio-Accufacts
Pre-Employment Screening, Inc., and Maglio, Inc. (1)
2.2 Supplemental Agreement, dated as of October 11, 1999, by and among
Accufacts Pre-Employment Screenings, Inc., Maglio, Inc.,
Maglio-Accufacts Pre-Employment Screening, Inc., and Richard J. Maglio.
(1)
3.1 Articles of Incorporation of Accufacts Pre-Employment Screening, Inc.
and Certificate of Merger (2)
3.2 By-laws of Accufacts Pre-Employment Screening, Inc. (2)
3.3 Certificate of Incorporation of Maglio-Accufacts Pre-Employment
Screening, Inc. (4)
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3.4 By-laws of Maglio-Accufacts Pre-Employment Screening, Inc. (4)
3.5 Amendment to By-laws of Accufacts Pre-Employment Screening, Inc.*
4.1 Specimen of Common Stock Certificate of Accufacts Pre-Employment
Screening, Inc. (2)
4.2 Asset Purchase Agreement dated August 26, 1998 between Southern Cargo,
Inc. and Accufacts Pre-Employment Screening, Inc. (2)
4.3 Shareholder Rights and Registration Rights Agreement, dated as of
October 11, 1999, by and between Accufacts Pre-Employment Screening,
Inc. and Richard J. Maglio (1)
10.1 Employment Agreement, dated September 1, 1998, between the Registrant
and Philip Luizzo (2)
10.2 Amendment, dated October 5, 1999, to the Employment Agreement, dated
September 1, 1998, between the Registrant and Philip Luizzo (3)
10.3 Employment Agreement, dated September 1, 1998, between the Registrant
and John Svedese (2)
10.4 Employment Agreement, dated October 11, 1999, by and among the
Registrant, Maglio- Accufacts Pre-Employment Screening, Inc., and
Richard J. Maglio (4)
10.5 Lease Agreement, dated April 1, 1997, between the Registrant and 6
Greene Street Associates, LLC, as amended (4)
10.6 Lease Agreement, dated August 28, 1998, between Maglio, Inc. and CB
Sanlando Center, Inc. (4)
16.1 Letter on Change in Certifying Accountant (5)
16.2 Letter on Change in Certifying Accountant (6)
21.1 List of Subsidiaries (4)
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(1) Filed as an exhibit to the Registrant's Current Report on Form 8-K,
dated October 13, 1999, filed with the Securities and Exchange
Commission on October 28, 1999, and is incorporated by reference
herein.
(2) Filed as an exhibit to the Registrant's Form 10-SB filed with the
Securities and Exchange Commission on May 7, 1999 and is incorporated
by reference herein.
(3) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1999 filed with the Securities and
Exchange Commission on November 15, 1999 and is incorporated by
reference herein.
(4) Filed as an exhibit to the Registrant's Annual Report on Form 10-KSB
for the year ended December 31, 1999 and is incorporated by reference
herein.
(5) Filed as an exhibit to the Registrant's Current Report on Form 8-K
dated December 8, 2000, filed with the Securities and Exchange
Commission on December 13, 2000 and is incorporated by reference
herein.
(6) Filed as an exhibit to the Registrant's Current Report on Form 8-K/A
dated December 8, 2000 filed with the Securities and Exchange
Commission on December 18, 2000 and is incorporated by reference
herein.
* Annexed hereto
(b) Reports on Form 8-K
No current reports on Form 8-K were filed for the period.
-8-
Signature
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.
Accufacts Pre-Employment
Screening, Inc.
By: ______________________________
Philip Luizzo, Chairman,
Chief Executive Officer, and
President
Date: May 21, 2001
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