1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 2000...................................
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from........................to........................
Commission File Number 2 - 85175W...............................................
ELECTRO-KINETIC SYSTEMS, INC.
......................................................
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 22-1954716
............................... ...................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
525 WASHINGTON BLVD., 36TH FLOOR
JERSEY CITY, NEW JERSEY 07310
........................................
(Address of Principal executive offices)
(Zip Code)
(201) 216-0100
...................................................
(Registrant's telephone number, including area code)
...................................................
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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.............. No .........X......
2
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS :
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes.............. No ...............
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of registrant's Common Stock outstanding as of
May 8, 2000, is 31,362,369 shares.
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INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31 2000 (Unaudited)
and December 31, 1999 F-1
Consolidated Statements of Operations for the Three Months Ended
March 31, 2000 and 1999 (Unaudited) F-2
Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
for the Three Months Ended March 31, 2000 and Year Ended December 31,
1999 F-3
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999 (Unaudited) F-4
Notes to Consolidated Financial Statements F-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PART II. OTHER INFORMATION
SIGNATURES
4
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
ASSETS 2000 1999
------------ ------------
(Unaudited)
CURRENT ASSETS:
Cash $ 14,859 $ 611
Receivable - 2,000
------------ ------------
$ 14,859 $ 2,611
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable $ 11,345 $ 22,176
Due to officers 350 -
------------ ------------
Total Current Liabilities 11,695 22,176
------------ ------------
NOTES PAYABLE 27,500 -
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Class A common shares, no par value authorized - 90,000,000 shares;
issued 31,362,369 in 2000 and 31,287,369 in 1999 3,464,452 3,452,521
Additional paid-in capital 97,043 52,293
Accumulated deficit (3,585,831) (3,524,379)
------------ ------------
Total Stockholders' Equity (Deficiency) (24,336) (19,565)
------------ ------------
$ 14,859 $ 2,611
============ ============
See accompanying notes to consolidated financial statements.
F-1
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ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
----------------------------
2000 1999
------------ ------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $ 16,507 $ 5,999
------------ ------------
NET LOSS BEFORE INTEREST EXPENSE (16,507) (5,999)
INTEREST EXPENSE 44,945 2,100
------------ ------------
NET LOSS $ (61,452) $ (8,099)
============ ============
LOSS PER SHARE - PRIMARY AND DILUTIVE (.0020) (.0003)
============ ============
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 31,324,169 30,166,069
============ ============
See accompanying notes to consolidated financial statements.
F-2
6
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
(UNAUDITED)
Class A Common Stock
-------------------------- Additional Accumulated
Shares Amount Paid-in Capital Deficit Total
---------- ---------- ----------------- -------------- -----------
Year ended December 31, 1999:
Balance, beginning of year 30,166,069 $3,441,308 $ 52,293 $(3,660,673) $ (167,072)
Debt settled for stock 1,121,300 11,213 - - 11,213
Net income - - - 136,294 136,294
---------- ---------- ----------- ----------- -----------
Balance, end of year 31,287,369 3,452,521 52,293 (3,524,379) (19,565)
Three months ended March 31, 2000:
Imputed interest on notes payable - - 44,750 - 44,750
Debt settled for stock 75,000 11,931 - - 11,931
Net loss - - - (61,452) (61,452)
---------- ---------- ----------- ----------- -----------
Balance, end of period 31,362,369 $3,464,452 $ 97,043 $(3,585,831) $ (24,336)
========== ========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
F-3
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ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
-----------------------------------
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (61,452) $ (8,099)
----------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Imputed interest on notes payable 44,750 -
Stock issued for legal fees 5,000 -
Change in assets and liabilities:
Accounts receivable 2,000 -
Accounts payable and accrued expenses (3,900) (703)
Officer's loans payable 350 600
----------- -----------
Net cash used in operating activities (13,252) (8,202)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 27,500 3,000
Accrued interest - 1,500
----------- -----------
Net cash flows from financing activities 27,500 4,500
----------- -----------
NET INCREASE (DECREASE) IN CASH 14,248 (3,702)
CASH, BEGINNING OF PERIOD 611 4,065
----------- -----------
CASH, END OF PERIOD $ 14,859 $ 363
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ - $ -
=========== ===========
Interest paid $ 195 $ 2,100
=========== ===========
Stock was issued in payment of legal fees $ 11,931 $ -
=========== ===========
See accompanying notes to consolidated financial statements.
F-4
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ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1- BASIS OF PRESENTATION:
The consolidated balance sheet at December 31, 1999 has been derived from
the audited consolidated balance sheet contained in the Company's Form 10-KSB,
which became effective on March 31, 2000 and is presented for comparative
purposes. All other financial statements are unaudited. In the opinion of
management, all adjustments which include only normal recurring adjustments
necessary to present fairly the financial position, results of operations and
cash flows for all periods presented have been made. The results of operations
for interim periods are not necessarily indicative of the operating results for
the full year.
Footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. These consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-KSB for the most recent fiscal year.
GOING CONCERN - The Company has a history of continuing operating losses
and failure in its ability to exploit various opportunities it has pursued.
While its financial position has improved marginally as a result of its recent
financing of $27,500 in the form of two-year convertible notes, the Company has
a negative net worth and no operations to provide capital. The Company continues
to pursue merger and reverse merger offers, but there is no assurance of success
in these goals. The auditors, in their annual report for the year ended December
31, 1999, expressed doubt about the Company's ability to continue as a going
concern.
F-5
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ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the selected
financial data and 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 Jersey City, New Jersey. The consolidated financial statements include the
accounts of Electro-Kinetic Systems, Inc. and its wholly-owned subsidiaries.
RESULTS OF OPERATIONS
The Company ceased its laboratory operations in March 1995 and failed in its
subsequent efforts for profit education (1996), magazine publishing (1996),
visual communication technology (1997), marketing of computer decision models
(1997 and 1998), and desk-top publishing and printing (1995-98).
The Company had no operations in 1999 and 2000. The Company's 50% owned
unconsolidated affiliate, Printone Media Inc., ceased operations 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.
The Company's loss for the first quarter increased from $8,099 in 1999 to
$61,452 in 2000, primarily as a result of increases in interest expense of
approximately $45,000. The Company borrowed $27,500 during the first quarter of
2000 under two year, 6% notes, convertible into 5,500,000 common shares. The
accounting requirement is to value the conversion factor as interest computed by
the difference between the average bid and ask price of the common stock (.0135)
and the conversion price (.005) times the number of shares (5,500,000) to which
the loan can be converted. This calculation has no effect on stockholders'
equity (deficiency) since the expense charged to earnings is offset by a
corresponding increase in paid-in capital.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from ($19,565) as of December 31, 1999 to ($3,164) as
of March 31 2000. New directors and officers were elected (with the exception of
one carryover member) in January 2000, who negotiated loans in the amount of
$27,500, due in two years with an interest rate of 6%, convertible into common
shares of the Company as detailed above.
Shareholders' equity declined from ($19,565) to ($24,336), as a result of an
operating loss of $(61,452) offset by $44,750 of imputed value of the conversion
feature and by the issuance of 75,000 shares of stock in partial payment of
indebtedness valued at $11,931. (The debt for which stock was issued and
settled.)
The Company's operating losses during the past years have been funded by the
sale of its common stock, by loans from shareholders, and by the disposal of a
subsidiary. For the Company to become a viable entity, it must continue to raise
sufficient capital to fund its plans. The Company is seeking merger
opportunities, but there can be no assurance of success in these endeavors.
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ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
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
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized:
Date: 5/8/00 ELECTRO-KINETIC SYSTEMS, INC.
---------------------- By:
By: /s/ RAYMOND L. BURKE
------------------------------
Raymond L. Burke, President
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following person(s) on behalf of the
Registrant and the capacities indicated and on the dates indicated.
SIGNATURE CAPACITY DATED
/s/ RAYMOND L. BURKE 5/8/00
- --------------------------- ------------
Raymond L. Burke President, Treasurer & CEO;
Director
/s/ RICHARD J. L. HERSON 5/8/00
- --------------------------- ------------
Richard J. L. Herson Vice-president & Assistant
Secretary; Director
(Chief Accounting Officer)