UNITED STATES
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 SEPTEMBER 30, 2005.
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSACTION PERIOD FROM TO
COMMISSION FILE NUMBER
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
- -----------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(407) 682-5051
- --------------
(ISSUER'S TELEPHONE NUMBER)
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 |_|
The registrant had 6,721,913 shares of common stock, $0.01 par value,
outstanding as of November 11, 2005.
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 Sheets as of September 30, 2005
(Unaudited) and December 31, 2004 (Audited) 1
Consolidated Condensed Income Statements(Unaudited) for the
Three Months and Nine Months Ended September 30, 2005 and 2004 3
Consolidated Condensed Statements of Cash Flows (Unaudited) for the
Three Months and Nine Months Ended September 30, 2005 and 2004 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 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
SEPTEMBER 30, DECEMBER 31,
2005 2004
(UNAUDITED) (AUDITED)
Current assets:
Cash $ 1,561,901 $ 1,277,050
Accounts receivable, net of allowance for
doubtful accounts of $9,800 670,501 538,675
Income tax receivable 79,976 --
Prepaid expense 43,808 27,000
------------ ------------
TOTAL CURRENT ASSETS 2,356,186 1,842,725
Property and equipment, net 128,144 149,411
Other assets:
Security deposits 5,835 5,835
Goodwill 125,543 125,543
Intangible assets, net 73,565 124,283
Loan fees, net 1,600 562
------------ ------------
TOTAL OTHER ASSETS 206,543 256,223
------------ ------------
TOTAL ASSETS $ 2,690,873 $ 2,248,359
============ ============
Page 1
LIABILITIES AND STOCKHOLDERS' EQUITY
SEPTEMBER 30, DECEMBER 31,
2005 2004
(UNAUDITED) (AUDITED)
Current liabilities:
Line of credit $ -- $ 3,361
Current maturities of capital lease obligations 8,674 10,896
Accounts payable 207,876 188,935
Accrued expenses 328,156 165,411
Income taxes payable -- 76,342
Deferred taxes 251,287 125,068
------------ ------------
TOTAL CURRENT LIABILITIES 795,993 570,013
Other liabilities:
Capital lease obligations, less current maturities 7,557 14,200
Deferred taxes -- 17,187
------------ ------------
TOTAL LIABILITIES 803,550 601,400
Stockholders' equity:
Common stock 67,219 67,219
Additional paid-in-capital 1,326,953 1,326,953
Retained earnings 493,151 252,787
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,887,323 1,646,959
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,690,873 $ 2,248,359
============ ============
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 NINE MONTHS ENDED
--------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
--------------------------------------------------------
Revenue $ 1,374,282 $ 1,401,698 $ 3,970,953 $ 3,928,636
Cost of services 907,465 839,962 2,650,537 2,566,321
----------- ----------- ----------- -----------
Gross Profit 466,817 561,736 1,320,416 1,362,315
----------- ----------- ----------- -----------
Operating expenses:
General & administrative 509,993 259,775 949,162 680,083
----------- ----------- ----------- -----------
Operating (loss) income (43,176) 301,961 371,254 682,232
Other income (expense):
Other income -- -- 30 --
Amortization expense -- (112) -- (583)
Interest income, net 10,849 1,309 16,444 1,527
Other expense -- -- -- (3,571)
----------- ----------- ----------- -----------
10,849 1,197 16,474 (2,627)
----------- ----------- ----------- -----------
(Loss) income before income taxes (32,327) 303,158 387,728 679,605
Income (benefit) tax (11,754) 114,813 147,364 257,099
----------- ----------- ----------- -----------
Net (loss) income $ (20,573) $ 188,345 $ 240,364 422,506
=========== =========== =========== ===========
Weighted average number of common
shares outstanding, basic and diluted 6,721,913 6,721,913 6,721,913 6,721,913
=========== =========== =========== ===========
Net (loss) income per share, basic and diluted $ -- $ 0.03 $ 0.04 $ 0.06
=========== =========== =========== ===========
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 NINE MONTHS ENDED
---------------------------- ----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
---------------------------- ----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (20,573) $ 188,345 $ 240,364 $ 422,506
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 24,867 25,715 84,948 72,310
Provision for deferred income taxes (22,772) 43,930 109,032 124,971
Changes in current assets and liabilities 249,585 (71,909) (102,854) (110,636)
------------ ------------ ------------ ------------
Total adjustments 251,680 (2,264) 91,126 86,645
------------ ------------ ------------ ------------
Net cash provided by operating activities 231,107 186,081 331,490 509,151
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of intangible asset -- (70,780) -- (70,780)
Purchases of property and equipment (10,920) (37,332) (34,413) (68,274)
------------ ------------ ------------ ------------
Net cash used in investing activities (10,920) (108,112) (34,413) (139,054)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on capital lease obligations (1,946) (3,015) (8,865) (10,353)
Net repayments on lines of credit (2,789) -- (3,361) (403)
------------ ------------ ------------ ------------
Net cash used in financing activities (4,735) (3,015) (12,226) (10,756)
------------ ------------ ------------ ------------
Net increase in cash 215,452 74,954 284,851 359,341
Cash - beginning of period 1,346,449 1,082,454 1,277,050 798,067
------------ ------------ ------------ ------------
Cash - end of period $ 1,561,901 $ 1,157,408 $ 1,561,901 $ 1,157,408
============ ============ ============ ============
Supplemental disclosures:
Interest paid $ 56 $ -- $ 147 $ 46
============ ============ ============ ============
Income taxes paid $ 123,900 $ 72,275 $ 194,651 $ 89,151
============ ============ ============ ============
Non-cash financing activities:
Intangible asset acquired through
issuance of payable $ (21,450) $ 64,181 $ (21,450) $ 64,181
============ ============ ============ ============
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 condensed 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 for the fiscal year
ended December 31, 2004 filed with the Securities and Exchange Commission on
March 31, 2005.
2. RECENT FINANCIAL ACCOUNTING STANDARDS
In December 2004, the Financial Accounting Standards Board ("FASB") published
FASB Statement No. 123 (revised 2004), "Share-Based Payment" ("FAS 123(R)" or
the "Statement"). FAS 123(R) requires that the compensation cost relating to
share-based payment transactions, including grants of employee stock options, be
recognized in financial statements. That cost will be measured based on the fair
value of the equity or liability instruments issued. FAS 123(R) covers a wide
range of share-based compensation arrangements including stock options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. FAS 123(R) is a replacement of FASB Statement No.
123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees, and its related interpretive guidance
(APB 25).
The effect of the Statement will be to require entities to measure the cost of
employee services received in exchange for stock options based on the grant-date
fair value of the award, and to recognize the cost over the period the employee
is required to provide services for the award. FAS 123(R) permits entities to
use any option-pricing model that meets the fair value objective in the
Statement.
The Company will be required to apply FAS 123(R) as of the beginning of its
first interim period that begins after December 15, 2005, which will be the year
ending December 31, 2006.
FAS 123(R) allows two methods for determining the effects of the transition: the
modified prospective transition method and the modified retrospective method of
transition. Under the modified prospective transition method, an entity would
use the fair value based accounting method for all employee awards granted,
modified, or settled after the effective date. As of the effective date,
compensation cost related to the nonvested portion of awards outstanding as of
that date would be based on the grant-date fair value of those awards as
calculated under the original provisions of Statement No. 123; that is, an
entity would not remeasure the grant-date fair value estimate of the unvested
portion of awards granted prior to the effective date. An entity will have the
further option to either apply the Statement to only the quarters in the period
of adoption and subsequent periods, or apply the Statement to all quarters in
the fiscal year of adoption. Under the modified retrospective method of
transition, an entity would revise its previously issued financial statements to
recognize employee compensation cost for prior periods presented in accordance
with the original provisions of Statement No. 123.
The Company has not yet completed its study of the transition methods or made
any decisions about how it will adopt FAS 123(R).
Page 5
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 unaudited 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 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 provides 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 in certain circumstances 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 6
CRITICAL ACCOUNTING POLICIES
Accufacts' significant accounting policies, including the assumptions and
judgments underlying them, are more fully described in the footnotes to our
financial statements at December 31, 2004. Some of Accufacts' accounting
policies require the application of significant judgment by management in the
preparation of the financial statements, and as a result, they are subject to a
greater degree of uncertainty. In applying these policies, management uses its
judgment to determine the appropriate assumptions to be used in calculating
estimates that affect the reported amounts of assets, liabilities, revenues and
expenses.
Management bases its estimates and assumptions on historical experience and on
various other factors that are believed to be reasonable under the
circumstances. Accufacts has identified certain of its accounting policies as
the ones that are most important to the portrayal of Accufacts' financial
condition and results of operations, and which require management to make its
most difficult and subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Accufacts' critical
accounting policies include the following:
REVENUE RECOGNITION
Revenue is recognized at the time of performance of service.
ACCOUNTING FOR INTANGIBLE AND LONG-LIVED ASSETS
In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets,
"Accufacts conducts annual impairment tests of goodwill recorded on its books in
order to determine if any impairment of value may have taken place. Impairment
tests will be conducted sooner if circumstances indicate that impairment may
have occurred. At its annual evaluation of its goodwill, Accufacts determined
that such assets were not impaired.
Intangible assets with finite useful lives, which primarily consist of customer
lists and non-competition covenants, continue to be amortized on a straight-line
basis. Customer lists are amortized over three to five years. Non-competition
covenants are amortized over the lives of the respective agreements, generally
three years.
In accordance with SFAS No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets," Accufacts tests its long-lived assets, other than goodwill
and indefinite-lived intangible assets, for impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. The value of a long-lived asset is impaired if the carrying
value of the asset exceeds the sum of the undiscounted cash flows expected to
result from the use and eventual disposition of the asset. An impairment loss
will be measured as the amount by which the carrying amount of a long-lived
asset exceeds its fair value.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not maintain off-balance sheet arrangements nor does it
participate in non-exchange traded contracts requiring fair value accounting
treatment.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2004:
Revenues for the three months ended September 30, 2005 and 2004 remained
relatively stable, decreasing to $1,374,282 in 2005, only down $27,416, or 1.9%,
from $1,401,698 in 2004.
Cost of services for the three months ended September 30, 2005 were $907,465, up
$67,503, or 8.0%, from cost of services for the three months ended September 30,
2004, which were $839,962. Cost of services for the third quarter of 2004 were
unusually low due to the capitalization of approximately $77,500 of previously
expensed payments, made for an acquisition of a customer list which was acquired
on terms during the third quarter of 2004. Given this adjustment, cost of
services remained relatively stable for the three months ended September 30,
2005 as compared to the same period in 2004.
General and administrative expenses for the three months ended September 30,
2005 were $509,993, up $250,218, or 96.3%, over the three months ended September
30, 2004, which were $259,775. This increase is directly attributable to the
settlement in the amount of $298,200 paid in October 2005 to the New York State
Department of Taxation and Finance related to a sales tax audit of our Florida
subsidiary. Absent this issue, general and administrative expenses have
decreased for the quarter in comparison to the same period last year due to
efficiencies realized in the financial reporting and administrative areas of the
Company.
Operating loss for the quarter ended September 30, 2005 was $43,176, a decrease
of $345,137 from operating income for the three months ended September 30, 2004,
which was $301,961. Net loss for the period was $20,573, compared to net income
of $188,345 for the three month period ended September 30, 2004. 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.
NINE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2004:
Revenues for the nine months ended September 30, 2005 were $ 3,970,953, versus
$3,928,636 for the nine months ended September 30, 2004. This is an increase of
$42,317, or 1.1% for the period. This increase was the result of ongoing
business development efforts and marketing initiatives.
Cost of services for the nine months ended September 30, 2005 were $2,650,537,
up $84,216, or 3.3% from the cost of services for the nine months ended
September 30, 2004, which were $2,566,321. As mentioned above, this increase is
mostly due to the capitalization of previous payments made for an acquisition of
a customer list which was acquired on terms during the third quarter of 2004.
Given this adjustment, the increase is in line with the increase in revenues
realized during the first nine months of 2005.
General and Administrative costs for the nine month period ended September 30,
2005 were $ 949,162 compared with $ 680,083 for the same period in 2004. This is
an increase of $ 269,079, or 39.6% from the nine month period in 2004. As
mentioned above, this increase is directly attributable to the settlement with
the New York State Department of Taxation and Finance related to a sales tax
audit of the Florida subsidiary. Absent this issue, general and administrative
expenses have decreased for the nine month period ended September 30, 2005 in
comparison to the same period last year.
Operating income for the nine months ended September 30, 2005 was $371,254,
compared to operating income of $682,232 for the same period in 2004. Income
before income taxes for the nine months ended September 30, 2005 was $387,728,
compared to $679,605 for the same period ended September 30, 2004. As a result,
the Company realized net income per share of $0.04 compared to $0.06 for the
same period in 2004.
Net cash provided by operating activities for the nine months ended September
30, 2005 was $331,490, compared to net cash provided by operations of $509,151
for the nine month period ended September 30, 2004. Ending cash for the nine
months ended September 30, 2005 was $1,561,901 compared to ending cash for the
same period in 2004 of $1,157,408.
Page 7
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2005, Accufacts had total assets of approximately $2,700,000,
compared with $2,200,000 at December 31, 2004, representing an increase in
assets of $500,000, or 22.7%. The majority of this increase relates to the
increase in cash balances of approximately $285,000, which is directly
attributable to the continued influx of cash provided by operations. Secondly,
assets increased with the recording of an approximately $80,000 income tax
receivable related to the loss from operations realized in the third quarter.
For the same periods, the Company had total liabilities of approximately
$804,000 at September 30, 2005 compared to $601,000 at December 31, 2004,
reflecting an increase of $203,000, or 33.7%. The increase in total liabilities
is mostly due to an increase of approximately $163,000 in accrued expense
balances. The majority of the increase in accrued expense balances relates to
the increase in the sales tax payable account of approximately $238,000 related
to the accrual of the settlement and payment of a prior year sales tax liability
that was negotiated and paid in October 2005. This is offset by an approximate
$58,000 decrease associated with the pay off of the acquisition of a customer
list which was acquired on terms during the third quarter of 2004.
The Company has a $25,000 business checking/overdraft line of credit. As of
September 30, 2005, there was $0 outstanding on this line of credit. It bears
interest at the prime rate plus 6.0% and is collateralized by the assets of the
Company. Effective August 12, 2003, the Company obtained an additional $400,000
line of credit with a bank. The line of credit matures May 31, 2006 and can be
renewed annually subject to certain conditions and covenants. The line of credit
bears interest at prime plus 1.0%. 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. As of September 30, 2005, there was $0 outstanding on this line of
credit.
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.
Evaluation of the Company's Disclosure and Internal Controls
The Company evaluated the effectiveness of the design and operation of its
"disclosure controls and procedures" as of the end of the period covered by this
report. This evaluation was done with the participation of management, under the
supervision of the Chief Executive Officer ("CEO").
Limitations on the Effectiveness of Controls
A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are being met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of a simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control. The design of any system of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Over time, controls may be inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a cost
effective control system, misstatements due to error or fraud may occur and may
not be detected. The Company conducts periodic evaluations of its internal
controls to enhance, where necessary, its procedures and controls.
Conclusions
Based on our evaluation, the CEO concluded that the registrant's disclosures,
controls, and procedures are effective to ensure that information required to be
disclosed in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Security Exchange Commission rules and forms.
Page 8
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
NUMBER DESCRIPTION OF EXHIBIT
31.1 Certification of Executive Chairman, President and Chief Executive
Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes Oxley Act of 2002
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: NOVEMBER 14, 2005
Page 9