SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1999
Commission file number : 2 - 85175W
ELECTRO-KINETIC SYSTEMS, INC.
(Name of small business issuer in its charter)
PENNSYLVANIA 22-1954716
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
270 Rocky Run Road, Glen Gardner, New Jersey 08826
(Address of principal executive offices) (Zip code)
Issuer's telephone number 908-537-4378
Check whether issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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
Number of shares of Class A Common Stock, no par value, outstanding as
of June 30, 1999: 30,166,069 (Common Stock issued 20,936,069 and to be issued
9,230,000)
Transitional Small Business Disclosure Format
Yes No X
INDEX
PART I. FINANCIAL STATEMENTS (UNAUDITED)
Item 1. Financial Statements (Unaudited
Pages
Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998
Assets F-1
Liabilities and Stockholders' Equity F-2
Consolidated Statements of Income for the Three Months and Six Months
Ended June 30, 1999 and 1998 F-3
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1999 and 1998 F-4
Consolidated Statements of Changes in Stockholders' Equity for
the Six Months Ended June 30, 1999 and the Year Ended December 31, 1998 F-5
Notes to Consolidated Financial Statements F-6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Signatures
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
ASSETS
6/30/99 12/31/98
Current assets:
Cash $ 186 $ 4,065
Receivable from merger 25,000 25,000
------- -------
Total current assets 25,186 29,065
------- -------
Total assets $25,186 $29,065
======= =======
F-1
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
6/30/99 12/31/98
Current liabilities:
Accounts payable $ 27,483 $ 44,333
Accrued expenses 26,327 19,793
Notes payable -- 35,828
Due to officers 60,483 76,183
----------- -----------
Total current liabilities 114,293 176,137
----------- -----------
Other liabilities
Reserve for contingencies 20,000 --
Deferred income 20,000 20,000
Liabilities being settled for stock 10,713 --
----------- -----------
Total other liabilities 50,713 20,000
----------- -----------
Total liabilities 165,006 196,137
----------- -----------
Stockholders' equity:
Class "A" common shares, no par value;
authorized - 90,000,000 shares; issued
and to be issued - 30,166,069 in 1999
and in 1998 3,441,308 3,441,308
Additional paid-in-capital 52,293 52,293
Deficit (3,633,420) (3,660,673)
----------- -----------
Total stockholders' equity (139,819) (167,072)
---------- -----------
Total liabilities and stockholders' equity $ 25,187 $ 29,065
=========== ===========
F-2
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
Three Months Ended June 30 Six Months Ended June 30
1999 1998 1999 1998
Equity in earnings of unconsolidated
affiliate $ -- $ (12,500) (25,000)
Selling, general and
administrative expenses 7,276 1,363 13,275 5,463
Amortization of excess -- 465 -- 930
------------ ------------ ------------ ------------
Net loss from continuing operations (7,276) (14,328) (13,275) (31,393)
------------ ------------ ------------ ------------
Other income (expenses)
Cancellation of indebtedness 40,528 40,528 --
Interest expense 2,100 (2,350) (4,600)
Provision for loss in affiliate -- 85,938 -- 85,938
------------ ------------ ------------ ------------
42,628 88,288 40,528 (90,538)
------------ ------------ ------------
Net income (loss) for the year 35,352 $ (102,616) $ 27,253 $ (121,931)
============ ============ ============ ============
Income (loss) per share
(basic and diluted) $ .001 (.003) $ .001 (.004)
============ ============ ============ ============
Weighted average number of
common shares outstanding 30,166,069 30,166,069 30,166,069 30,166,069
============ ============ ============ ============
F-3
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1999 1998
Cash flows from operating activities:
Net income $ 27,253 (121,931)
-------- --------
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in earnings of unconsolidated subsidiary 25,000
Depreciation and amortization 930
Provision for loss in affiliate 85,938
Change in assets and liabilities:
Increase (decrease) in:
Accounts payable (16,850) 1,211
Accrued expenses 6,534 1,400
Notes payable (35,828) 1,300
Due to officers (15,700) 5,134
Reserve for contingencies 20,000 --
-------- --------
Total adjustments 41,844 120,913
-------- --------
Net cash used in operating activities 14,591 (1,018)
-------- --------
Cash flows from financing activities:
Liabilities being settled for stock 10,712
Net increase (decrease) in cash (3,879) (1,018)
Cash - beginning of the year 4,065 1,505
-------- --------
Cash - end of the year $ 186 487
======== ========
F-4
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND THE YEAR ENDED DECEMBER 31,1998
(UNAUDITED)
Additional
Common Shares Common Share $ Paid In Capital Deficit Total
Balance at January 1, 1997 30,166,069 $3,441,308 52,293 (3,484,408) 9,193
Net loss for 1997 -- -- -- (68,505) (68,505)
---------- ------ ---------- -------- -----
Balance at December 31, 1997 30,166,069 3,441,308 52,293 (3,552,913) (59,312)
Net loss for 1998 -- -- -- (107,760) (107,760)
---------- ------ ---------- -------- -----
Balance at December 31, 1998 30,166,069 $3,441,308 52,293 (3,660,673) (167,072)
Income 6 mos. June 30, 1999 27,253 27,253
Balance June 30, 1999 30,166,069 3,441,308 52,293 3,533,420 (139,819)
========== ====== ========== ======== =====
F-5
ELECTRO-KINETIC SYSTEMS, INC.
June 30, 1999 AND 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.
Earnings per Share
Average common shares outstanding were 30,166,069, which include 9,230,000 to be
issued. In addition, there were outstanding common stock options of 1,000,000
shares at a price of $0.01 per share. The computation of earnings per share
reflecting the exercise of these options is antidilutive.
Income Taxes
No provision for taxes has been established against the income for the period
since the Company has tax-carryforward losses of approximately $3.1 million.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the financial
statements appearing elsewhere in this report.
General
Electro-Kinetic Systems, Inc. [EKS or the Company] was formed on April 24, 1972,
under the laws of the State of Pennsylvania. Its corporate office is now located
in Glen Gardner, New Jersey.
The Company ceased operations in radon testing in March 1995 and failed in its
subsequent efforts: environmental insurance (1995), magazine publishing (1996),
visual communication technology (1997), marketing of computer decision models
(1997 and 1998), and desk-top publishing and printing (1995-1998).
The Company's 50% owned unconsolidated affiliate, Printone Media Inc., ceased
operations and filed for bankruptcy in 1998. As a result of the acquisition of
Israel Investment Technologies, Inc. and two affiliates, in September 1995, the
Company acquired certain preliminary designs for developments of computer models
in the fields of medical compliance and electronic book publishing. The Company
has been unsuccessful in its efforts to exploit these developments.
Results of Operations
The consolidated financial statements include the accounts of Electro-Kinetic
Systems, Inc. and its wholly owned subsidiaries. The Company had no operating
income. The transactions with Advance Knowledge, Inc., described in full in the
Company's 10-K for the year 1998, has not been finalized.
The Company has included in income: (i) the forgiveness of all interest due to
an officer in the amount of $14,700.00 through December 31, 1998 and $1,500.00
through March 31, 1999; (ii) the estimated settlement of indebtedness below
recorded liabilities of $25,828.
Liquidity and Capital Resources
Working capital increased from ($147,072) as of December 31, 1998, to ($89,107)
as of June 30, 1999 as a result of cancellation of indebtedness. Shareholders'
equity increased from ($167,072) to ($139,819) as of the same dates.
The Company's operating losses during the past years have been funded by the
sale of its Common Stock, by loans from shareholders, by the disposal of a
subsidiary, and by settling of indebtedness below their recorded amounts. For
the Company to become a viable entity, it must raise sufficient capital to fund
its operations. The Company is making continuing efforts to negotiate the
settlement of liabilities. The Company is also seeking merger opportunities, but
there is no assurance of success in these endeavors.
PART II. Other Information
Item 1: Legal Proceedings
NONE
Item 2: Changes in Securities
There have been no instruments defining the rights of any holder of any class of
any registered security which has been materially modified.
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 of Form 8-K
NONE
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ELECTRO-KINETIC SYSTEMS, INC.
Dated: July 31, 1999 By: /s/
Richard J.L. Herson
Chief Financial Officer