ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
FILING TYPE: 10QSB
DESCRIPTION: QUARTERLY REPORT
FILING DATE:
PERIOD END: JUNE 30, 2003
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 JUNE 30, 2003
/ / 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)
2180 STATE ROAD 434 WEST SUITE 4150
LONGWOOD, FLORIDA 32779
(407) 682-5051
----------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
6 GREENE STREET, NEW YORK, NEW YORK 10013
(212) 219-0815
-----------------------------------------------
(FORMER 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 JULY 28,2003
Common Stock, par 6,721,913
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 (Unaudited)
Consolidated Condensed Balance Sheets as of June 30, 2003
(Unaudited) and December 31, 2002 (Audited) 1
Consolidated Condensed Income Statements (Unaudited)for the
Three Months and Six Months Ended June 30, 2003 and 2002 3
Consolidated Condensed Statements of Cash Flows (Unaudited) for
the Three Months and Six Months Ended June 30, 2003 and 2002 4
Notes to Unaudited Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operation 6
Item 3. Controls and Procedures 7
Item 4. Subsequent Event
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 9
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
JUNE 30, DECEMBER 31,
2003 2002
(UNAUDITED) (AUDITED)
---------- ----------
CURRENT ASSETS:
Cash $ 240,003 $ 360,649
Accounts receivable, net of allowance for
doubtful accounts of $26,000 705,189 535,137
Prepaid expense 36,155 5,735
---------- ----------
TOTAL CURRENT ASSETS 981,347 901,521
Property and equipment, net 233,075 306,257
Other assets:
Security deposits 8,543 8,543
Goodwill 125,543 125,543
Intangible assets, net 648 1,598
Deferred taxes 186,877 147,300
---------- ----------
TOTAL OTHER ASSETS 321,611 282,984
---------- ----------
TOTAL ASSETS $1,536,033 $1,490,762
========== ==========
Page 1
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 669 $ 70,609
Current maturities of capital lease
obligations 14,115 13,043
Accounts payable 168,133 225,122
Accrued expenses 53,279 54,884
Income taxes payable -- 26,500
Deferred taxes 199,721 95,800
Other current liabilities -- 8,077
----------- -----------
TOTAL CURRENT LIABILITIES 435,917 494,035
Other liabilities:
Capital lease obligations, less current
maturities 8,100 15,438
----------- -----------
TOTAL LIABILITIES 444,017 509,473
Commitments
Stockholders' equity:
Preferred stock -- --
Common stock 67,219 66,275
Additional paid-in-capital 1,326,953 1,319,821
Accumulated deficit (302,156) (404,807)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,092,016 981,289
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,536,033 $ 1,490,762
=========== ===========
See accompanying notes to consolidated condensed financial statements.
Page 2
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED CONDENSED INCOME STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------------------------------
JUNE 30, JUNE 30,
2003 2002 2003 2002
--------------------------------------------------------
Revenue $ 1,118,296 $ 1,055,465 $ 2,049,131 $ 1,969,718
Cost of services 762,048 641,758 1,426,227 1,308,079
----------- ----------- ----------- -----------
Gross Profit 356,248 413,708 622,905 661,640
----------- ----------- ----------- -----------
Operating expenses:
General & administrative 229,544 249,209 451,564 484,589
----------- ----------- ----------- -----------
Operating income 126,704 164,498 171,341 177,050
Other income (expense):
Other income 620 63 2,102 68
Proceeds from September 11, 2001 grant -- 49,940 -- 49,940
Amortization expense (475) (801) (950) (7,325)
Interest expense, net (1) (723) (763) (914)
Other expense (5,709) -- (5,709) --
----------- ----------- ----------- -----------
(5,565) 48,479 (5,319) 41,769
----------- ----------- ----------- -----------
Income before income taxes 121,139 212,977 166,021 218,819
Income tax 46,472 -- 63,372 --
----------- ----------- ----------- -----------
Net income $ 74,667 $ 212,977 102,649 218,819
=========== =========== =========== ===========
Weighted average number of common
Shares outstanding 6,721,913 6,627,471 6,702,028 6,627,471
=========== =========== =========== ===========
Net income per share $ 0.01 $ 0.03 $ 0.02 $ 0.03
=========== =========== =========== ===========
See accompanying notes to consolidated condensed financial statements.
Page 3
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ -----------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2003 2002 2003 2002
------------------------------ -----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 74,667 $ 212,977 $ 102,649 $ 218,819
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 52,876 32,532 104,381 88,048
Provision for deferred income taxes 49,644 -- 64,344 --
Changes in current assets and liabilities (250,033) (131,358) (285,564) (163,879)
--------- --------- --------- ---------
Total adjustments (147,513) (98,826) (116,839) (75,831)
--------- --------- --------- ---------
Net cash (used in) provided by
operating activities (72,846) 114,151 (14,190) 142,988
Cash flows from investing activities:
Purchases of property and equipment (15,035) -- (30,249) --
--------- --------- --------- ---------
Net cash used in financing activities (15,035) -- (30,249) --
Cash flows from financing activities:
Repayments on capital lease obligations (3,194) (4,237) (6,266) (5,973)
Net repayments on lines of credit (264) (8,251) (69,941) (9,880)
--------- --------- --------- ---------
Net cash used in financing activities (3,458) (12,488) (76,207) (15,853)
--------- --------- --------- ---------
Net (decrease) increase (91,339) 101,663 (120,646) 127,135
Cash - beginning of period 331,342 66,101 360,649 40,629
--------- --------- --------- ---------
Cash - end of period $ 240,003 $ 167,764 $ 240,003 $ 167,764
========= ========= ========= =========
Supplemental disclosures:
Interest paid $ 1 $ 723 $ 763 $ 914
========= ========= ========= =========
Income taxes paid $ -- $ (191) $ 25,528 $ --
========= ========= ========= =========
Non-cash financing activities:
Issuance of common stock from other
current liabilities $ -- $ -- $ 8,077 $ --
========= ========= ========= ========
Issuance of common stock through
paid-in capital $ -- $ -- $ 273 $ --
========= ========= ========= =========
See accompanying notes to consolidated condensed financial statements
Page 4
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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.
The financial statements included herein should be read in conjunction with the
financial statements included in the Company's Form 10-KSB as of December
31,2002 and for the years ended December 31, 2002 and 2001 filed with the
Securities and Exchange Commission on March 31, 2003.
2. RECENT FINANCIAL ACCOUNTING STANDARDS
In January 2002, the EITF reached a consensus on EITF No. 01-14, INCOME
STATEMENT CHARACTERIZATION OF REIMBURSEMENTS RECEIVED FOR "OUT-OF-POCKET"
EXPENSE. EITF No. 01-14 required that reimbursements received for out-of-pocket
expenses be classified as revenue on the income statement. This change has no
material impact on the Company's historical and present financial statements.
In November 2002, the FASB issued FIN No. 45, GUARANTOR'S ACCOUNTING AND
DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF
INDEBTEDNESS OF OTHERS. FIN No. 45 requires that a liability be recorded in the
guarantor's balance sheet upon issuance of a guarantee. In addition, FIN No. 45
requires disclosures about the guarantees that an entity has issued, including a
reconciliation of changes in the entity's product warranty liabilities. The
initial recognition and initial measurement provisions of FIN No. 45 are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002, irrespective of the guarantor's fiscal year-end. The
disclosure requirements of FIN No. 45 are effective for financial statements of
interim or annual periods ending after December 15, 2002. The Company does not
guarantee the indebtedness of others, therefore, there will not be any impact on
the Company's consolidated financial statements and there was no need for the
Company to modify its disclosures herein as required.
In November 2002, the EITF reached a consensus on EITF No. 02-16, ACCOUNTING FOR
CONSIDERATION RECEIVED FROM A VENDOR BY A CUSTOMER. EITF No. 02-16 provides
guidance as to how customers should account for cash consideration received from
a vendor. EITF No. 02-16 presumes that cash received from a vendor represents a
reduction of the prices of the vendor's products or services, unless the cash
received represents a payment for assets or services provided to the vendor or a
reimbursement of costs incurred by the customer to sell the vendor's products.
The provisions of EITF No. 02-16 will apply to all agreements entered into or
modified after December 31, 2002. Management does not expect the provisions of
EITF No. 02-16 to have a material impact on the Company's consolidated financial
statements.
In November 2002, the FASB's Emerging Issues Task Force ("EITF") reached a
consensus on EITF No. 00-21, REVENUE ARRANGEMENTS WITH MULTIPLE DELIVERABLES.
EITF No. 00-21 provides guidance on how to account for arrangements that involve
the delivery or performance of multiple products, services and / or rights to
use assets. The provisions of EITF No. 00-21 will apply to revenue arrangements
entered into in fiscal periods beginning after June 15, 2003. The Company
believes that its current accounting is consistent with the provisions of EITF
00-21 and therefore does not expect that the application of the provisions of
EITF 00-21 will have a material impact on the Company's consolidated financial
statements.
Page 5
In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation ("FIN") No. 46, CONSOLIDATION OF VARIABLE INTEREST ENTITIES,
which requires variable interest entities (commonly referred to as SPEs) to be
consolidated by the primary beneficiary of the entity if certain criteria are
met. FIN No. 46 is effective immediately for all new variable interest entities
created or acquired after January 31, 2003. The adoption of this statement does
not impact the Company's historical or present financial statements, as the
Company has not created or acquired any variable interest entities, nor does it
expect to in the future.
In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. This Statement establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of those instruments were previously classified as equity.
Some of the provisions of this Statement are consistent with the current
definition of liabilities in FASB Concepts Statement No. 6, Elements of
Financial Statements. The remaining provisions of this Statement are consistent
with the FASB's proposal to revise that definition to encompass certain
obligations that a reporting entity can or must settle by issuing its own equity
shares, depending on the nature of the relationship established between the
holder and the issuer. While the FASB still plans to revise that definition
through an amendment to Concepts Statement 6, the FASB decided to defer issuing
that amendment until it has concluded its deliberations on the next phase of
this project. That next phase will deal with certain compound financial
instruments including puttable shares, convertible bonds, and dual-indexed
financial instruments. This Statement requires an issuer to classify the
following instruments as liabilities (or assets in some circumstances):
A financial instrument issued in the form of shares that is mandatorily
redeemable-that embodies an unconditional obligation requiring the issuer
to redeem it by transferring its assets at a specified or determinable date
(or dates) or upon an event that is certain to occur A financial
instrument, other than an outstanding share, that, at inception, embodies
an obligation to repurchase the issuer's equity shares, or is indexed to
such an obligation, and that requires or may require the issuer to settle
the obligation by transferring assets (for example, a forward purchase
contract or written put option on the issuer's equity shares that is to be
physically settled or net cash settled) A financial instrument that
embodies an unconditional obligation, or a financial instrument other than
an outstanding share that embodies a conditional obligation, that the
issuer must or may settle by issuing a variable number of its equity
shares, if, at inception, the monetary value of the obligation is based
solely or predominantly on any of the following: a. A fixed monetary amount
known at inception, for example, a payable settleable with a variable
number of the issuer's equity shares
b. Variations in something other than the fair value of the issuer's
equity shares, for example, a financial instrument indexed to the S&P
500 and settleable with a variable number of the issuer's equity shares
c. Variations inversely related to changes in the fair value of the
issuer's equity shares, for example, a written put option that could be
net share settled.
Management believes that the adoption of this Statement will have no material
effect on the Company's financial position or results of operations.
3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedure.
Under the supervision and with the participation of our management, including
our Chief Executive Officer, we have evaluated the effectiveness of the design
and operation of our disclosure controls and procedures within 90 days of the
filing date of this quarterly report, and based on their evaluation, our Chief
Executive Officer have concluded that these disclosure controls and procedures
are effective in timely alerting them to material information relating to the
Company required to be included in the Company's periodic SEC filings. There
were no significant changes in our internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation.
Disclosure controls and procedures are the controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports we file or submit under the Exchange Act is recorded, processed,
summarized, and reported, within the time periods specified in the Securities
and Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file under the
Exchange Act is accumulated and communicated to our management, including our
Chief Executive Officer, as appropriate, to allow timely decisions regarding
required disclosure.
(b) Changes in internal controls.
Not applicable.
Page 6
4. SUBSEQUENT EVENT
Effective August 12, 2003, the Company obtained a $400,000 line of credit with a
bank. The line of credit matures May 1, 2004 and can be renewed annually subject
to certain conditions and covenants. The line of credit bears interest at prime
plus 1% (currently 5.00% at August 12, 2003). Interest is payable monthly. The
line of credit is collateralized by substantially all of the assets of the
Company and is personally guaranteed by the majority stockholder and president
of the Company.
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 incorporated in 1996 for the purpose of providing
pre-employment/background information on candidate hires for our clients. On
August 31, 1998, Accufacts consummated a merger with a public shell, Southern
Cargo Company ("Southern"), a Florida corporation. Southern, concurrent with
this merger, changed its name to Accufacts Pre-Employment Screening Inc.("APES")
and 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, for accounting purposes,
Accufacts was the acquirer.
On October 13, 1999, Accufacts 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., a wholly-owned subsidiary
established by Accufacts. 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 excess of the purchase
price over the fair value of the net assets acquired was $141,125. At the
adoption of SFAS 142, the unamortized balance of net assets acquired was
$125,543. The fair value of the non-competition agreement was $5,313 and was
amortized using the straight-line method over the term of the agreement.
In general, Accufacts' business plan 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. We believe this ensures the fastest response and best client support
available.
Page 7
THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30,2002.
Revenues for the three months ended June 30, 2003 were $1,118,296, up $ 62,831,
or 5.9 percent, over revenues for the three months ended June 30, 2002, which
were $1,055,465. This increase was the result of ongoing business development
efforts and marketing initiatives. We closed on several new accounts after the
first of the year. Increased revenues were realized late in the first quarter
and into the second quarter.
Cost of services for the three months ended June 30, 2003 were $762,048, up $
120,290, or 18.7 percent, over cost of services for the three months ended June
30, 2003, which were $641,758. Cost of services for the three month period ended
June 30, 2002, were abnormally low due to the reconciliation of disputed billing
errors with one of our large vendors. Cost of services for the three month
period ended June 30, 2003, are consistent with management's expectations and
reflect normal operating costs.
General and administrative expenses for the three months ended June 30, 2003
were $229,544, down $19,665, or 7.9 percent, from the three months ended June
30, 2002, which were $249,209. This decrease was generally due to continuing
efficiencies realized in the administrative and financial areas of the company.
Operating income for the quarter ended June 30, 2003 was $126,704, a decrease of
$37,794 from operating income for the three months ended June 30, 2002, which
was $164,498. Income before income taxes for the period was $121,139, compared
to $212,977 for the period ended June 30, 2002. The Company intends to increase
its business through the use of operating profits and borrowings. 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 for the next 12 months.
At June 30, 2003, Accufacts had total assets of $1,536,033, compared with
$1,490,762 at December 31, 2002, representing an increase in assets of $45,271,
or 3.0 percent. For the same periods, the Company had total liabilities of $
444,017 at June 30, 2003 compared to $ 509,473 at December 31, 2002, reflecting
a decrease of $ 65,456, or 12.8 percent.
The Company has a $25,000 business checking/overdraft line of credit. As of June
30, 2003, there was $669 outstanding on the line of credit. It bears interest at
the prime rate plus six (6) percent and is secured by the assets of the Company.
Page 8
FOR THE SIX MONTHS ENDED JUNE 30,2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002
Revenues for the six months ended June 30, 2003 were $ 2,049,131,versus
$1,969,718 for the six months ended June 30, 2002. This is an increase of
$79,413, or 4.0 percent for the period. This increase is consistent with
management's expectations and reflects certain new business development efforts
and marketing initiatives.
Cost of services for the six months ended June 30, 2003 were $1,426,227, up $
118,148, or 9.0 percent from the cost of services for the six months ended June
30, 2002, which were $1,308,079. This increase, for the most part, corresponds
to the reconciliation of disputed billing errors with one of our large vendors
for the period ended June 30, 2002, as mentioned above.
General and Administrative costs for the six month period ended June 30, 2003
were $ 451,564 compared with $ 484,589 for the same period in 2002. This is a
decrease of $ 33,025, or 6.8 percent from the six month period in 2002. This
decrease was mainly due to efficiency in the financial reporting and
administrative areas of the company.
Operating income for the six months ended June 30, 2003 was $171,341, compared
to operating income of $ 177,050 for the same period in 2002. Income before
income taxes for the six months ended June 30, 2003 was $166,021, compared to $
218,819 for the same period ended June 30, 2002. As a result, the Company
realized net income per share of $0.02 compared to $0.03 for the same period in
2002. The net income for the six month period ended June 30, 2002 includes
proceeds from a one-time grant in the amount of $49,940. This grant was issued
by the City of New York to select businesses impacted by the terrorist attacks
of September 11, 2001.
Net cash used by operating activities for the six months ended June 30, 2003 was
- -$14,190, compared to net cash provided by operations of $142,988 for the six
month period ended June 30, 2002. Ending cash for the six months ended June 30,
2003 was $240,003 compared to ending cash for the same period in 2002 of
$167,764.
Management is continuing to refine operations with a focus toward increasing
revenues through aggressive marketing initiatives and generating a continuous
stream of positive earnings. We believe that the Company is poised to leverage
competitive advantages and generate continued profitable growth.
ITEM 3. Controls and Procedures.
The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or
submits under the Securities and Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing date of this
report, the executive officers of the Company concluded that the Company's
disclosure controls and procedures were adequate.
There have not been any significant changes in the Company's internal controls
or other factors that could affect these controls subsequent to the date of
evaluation.
Page 9
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 April 16, 2003, the Company, Kroll Background America, Inc., and
Accufacts Acquisition Corp. mutually agreed that it was in the best interest of
each of the parties to the Agreement and Plan of Merger dated as of November 20,
2002 and amended February 27, 2003 to terminate the Merger Agreement.
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)
2.3 Agreement and Plan of Merger dated as of November 20, 2002 by and
between Accufacts Pre-Employment Screening, Kroll Background America,
Inc., and Accufacts Acquisition Corp. (8)
2.4 Extension of Agreement and Plan of Merger dated as of February 27,
2003 by and Between Accufacts Pre-Employment Screening, Kroll
Background America, Inc., and Accufacts Acquisition Corp. (8)
2.5 Termination of Agreement and Plan of Merger dated as of April 16,
2003 by and between Accufacts Pre-Employment Screening, Kroll
Background America, Inc., and Accufacts Acquisition Corp. (9)
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)
3.4 By-laws of Maglio-Accufacts Pre-Employment Screening, Inc. (4)
3.5 Amendment to By-laws of Accufacts Pre-Employment Screening, Inc. (7)
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)
Page 10
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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.
(7) Filed as an exhibit to the Registrant's Quarterly Report on Form
10-QSB filed with the Security and Exchange Commission on May 21,
2001.
(8) Filed as an exhibit to the Registrant's Current Report on Form 8-K
dated February 28, 2003, filed with the Securities and Exchange
Commission on March 4, 2003 and is incorporated by reference herein.
(9) Filed as an exhibit to the Registrant's Current Report on Form 8-K
dated April 16, 2003, filed with the Securities and Exchange
Commission on April 22, 2003 and is incorporated by reference herein.
(b) Reports on Form 8-K
A current report on Form 8-K dated April 16, 2003 reporting that the
Company, Kroll Background America, Inc., and Accufacts Acquisition Corp.
mutually agreed that it would be in the best interest of the parties to
terminate the Agreement and Plan of Merger was filed April 22, 2003.
Page 11
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: /s/ PHILIP LUIZZO
---------------------
Philip Luizzo, Chairman,
Chief Executive Officer, and
President
Date: August 14, 2003
Page 12