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 SEPTEMBER 30,
1996 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 33-26789-NY
EFTEK CORPORATION
(Name of small business issuer in its charter)
Nevada 93-0996501
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Bloomfield Business Park
408 Bloomfield Drive
Berlin, New Jersey 08009
(Address of principal executive offices) (Zip Code)
(609)767-2300
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report)
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
preceding 12 months (or for such shorter period that the registrant
was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Applicable only to corporate issuers:
The number of shares outstanding of each of the issuer's classes of
common stock, as of November 1, 1996 was 24,054,834 shares.
Transitional small business disclosure format (check one):
Yes No X
EFTEK CORPORATION
Page(s)
-------
Consolidated Financial Statements
Consolidated Balance Sheet - September 30, 1996
(Unaudited) 2
Consolidated Statements of Operations
(Unaudited) - Nine Months Ended September 30,
1996 and 1995 3
Consolidated Statements of Cash Flows
(Unaudited) - Nine Months Ended September 30,
1996 and 1995 4
Notes to Consolidated Financial Statements
(Unaudited) 5 - 7
/TABLE
FORM 10-QSB
EFTEK CORPORATION
INDEX
Page(s)
-------
PART I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet - September 30, 1996
(Unaudited) 2
Consolidated Statements of Operations
(Unaudited) - Nine Months Ended September 30,
1996 and 1995 3
Consolidated Statements of Cash Flows
(Unaudited) - Nine Months Ended September 30,
1996 and 1995 4
Notes to Consolidated Financial Statements
(Unaudited) 5 - 7
Item 2. Management's Discussion and Analysis 8
PART II. Other Information 9
Signature Page 10
/TABLE
FORM 10-QSB PART I - FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
EFTEK CORPORATION
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(Unaudited)
Assets
------
Current Assets
- --------------
Cash $ 121,052
Accounts receivable 42,402
Due from officer 257,578
Prepaid expenses 18,361
-----------
Total Current Assets 439,393
-------------------- -----------
Property and Equipment, Net (Note 1) 1,763,406
- --------------------------- -----------
Other Assets
- ------------
Patent costs, net (Note 1) 52,559
Organization costs, net (Note 1) 34,223
Deposits 3,300
-----------
Total Other Assets 90,082
------------------ -----------
Total Assets 2,292,881
------------ ===========
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities
- -------------------
Accounts payable and accrued
liabilities 311,571
-----------
Total Liabilities 311,571
----------------- -----------
Stockholders' Equity
- --------------------
Common stock, $.001 par; authorized
25,000,000 shares; issued and
outstanding 22,452,916 shares 22,453
Additional paid in capital 3,719,300
Deficit (1,760,197)
-----------
1,981,556
Common stock held in treasury
(14,434 shares), at cost 246
-----------
Total Stockholders' Equity 1,981,310
-------------------------- -----------
Total Liabilities and Stockholders'
Equity $ 2,292,881
---------------------------------- ===========
See accompanying notes to financial statements.
FORM 10-QSB
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
----- ----- ----- -----
REVENUE (Note 1)$ 77,417 $ 20,000 $ 79,191 $ 20,000
---------- ---------- --------- ----------
COST AND EXPENSES
Cost of revenue 8,317 13,823 9,328
Selling, general and
administrative 259,565 83,744 532,691 274,696
Research and development 300 181,655
---------- ---------- ---------- ----------
TOTAL COST
AND EXPENSES 268,182 83,744 728,169 284,024
---------- ---------- ---------- ----------
LOSS FROM OPERATIONS (190,765) ( 63,744) (648,978) (264,024)
---------- ---------- ---------- ----------
OTHER INCOME
Interest and miscellaneous
income 4,230 28,641
---------- ---------- ---------- ----------
NET LOSS $ (186,535)$ ( 63,744) $ (620,337) $ (264,024)
========== ========== ========== ==========
NET LOSS PER SHARE $ ( .01)$ ( .01) $( .04) $( .02)
========== ========== ========== ==========
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 20,115,938 11,861,435 15,401,971 11,822,241
========== ========== ========== ==========
See accompanying notes to financial statements.
FORM 10-QSB
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
1996 1995
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the nine months $( 620,337) $(264,024)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVITIES
Depreciation and amortization 5,946 5,433
CHANGES IN OPERATING ASSETS
AND LIABILITIES
(Increase) decrease in accounts receivable ( 42,402) 11,066
(Increase) decrease in prepaid expenses ( 18,361) 11,232
Increase in intangible assets ( 38,490) ( 20,699)
Increase in deposits ( 400)
Increase (decrease) in accounts payable
and accrued liabilities 255,579 ( 7,105)
--------- -------
NET CASH USED IN OPERATING ACTIVITIES ( 458,065) (264,497)
--------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of property and equipment (1,747,941)
--------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments to related party ( 4,776) ( 2,500)
Payments from officer, net 760
Proceeds from issuances of common stock 2,330,683 100,000
--------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,326,667 97,500
--------- -------
NET INCREASE (DECREASE) IN CASH 120,661 (166,997)
BEGINNING CASH 391 210,645
--------- -------
ENDING CASH $ 121,052 $ 43,648
========= =======
Supplemental Disclosure (Note 2)
See accompanying notes to financial statements.
FORM 10-QSB
EFTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
EFTEK Corporation (the Company), formerly known as Exotic Bodies,
Inc. (Exotic), a development stage company, was incorporated on
December 30, 1988 in the State of Nevada. The Company was formed to
begin operations of automobile theme museums and entertainment
complexes featuring the display of exotic and European automobiles
and associated exotic car products and services. The Company's
attempt to establish and operate such exotic automobile theme
museums was unsuccessful. Operations ceased in mid-1992 and the
Company began to search for a suitable acquisition candidate.
On July 25, 1994, the Company completed the acquisition of R & D
Innovators, Inc. (R&D), a New Jersey Corporation, engaged in the
development, manufacturing and sales of equipment for the bottling
and packaging industry. For accounting purposes the transaction was
treated as an acquisition of Exotic and as a recapitalization of R &
D. The shareholders of R & D agreed to exchange all of the common
stock of R & D, their outstanding loan balances, accrued payroll and
accrued interest for 9,000,000 newly issued shares of Exotic common
stock. Prior to the execution of the acquisition, Exotic had
25,000,000 shares of authorized common stock and 17,194,400 shares
outstanding. In accordance with the agreement, Exotic effected a 17
for 1 reverse stock split which resulted in 1,011,435 shares
outstanding, post-split. Exotic's authorized common stock remained
at 25,000,000 shares post-split. Also, as part of such acquisition,
Exotic divested itself of the assets relating to the business of
exotic automobiles in consideration for the cancellation by Mr.
Bruce Selig (the former chairman of the board of the Company) of all
his outstanding loans and accrued interest due Exotic.
Simultaneously with the acquisition on July 25, 1994, prior
management was replaced by the management of R & D Innovators, Inc.
Effective August 15, 1994, Exotic amended its Certificate of
Incorporation to change its name to EFTEK Corporation.
On April 1, 1996, the Company acquired Fire Doctor, Inc., a New
Jersey Corporation engaged in the development of fire retardant
products. In addition, during 1996, the Company transferred all
assets and liabilities of its glass processing division to a newly
formed wholly owned corporation, C.F.C., Inc.
Principles of Consolidation
The consolidated financial statements include the accounts of EFTEK
Corporation and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Basis of Presentation
The financial statements for the three months and nine months ended
September 30, 1996 and 1995 have been prepared without audit and, in
the opinion of management, reflect all adjustments necessary
(consisting only of normal recurring adjustments) to present fairly
the Company's financial position at September 30, 1996 and the
results of its operations and its cash flows for the interim and
cumulative periods presented. Such financial statements do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
For further information refer to the financial statements
and footnotes thereto included in the Company's annual report on
Form 10-KSB for the year ended December 31, 1995.
Operating results for the three months and nine months ended
September 30, 1996 are not necessarily indicative of the results
for the year ending December 31, 1996.
Property and Equipment
Property and equipment are stated at cost. Depreciation is
computed using the straight line method over the estimated useful
lives of the assets. Expenditures for maintenance and repairs are
charged against income as incurred. When property and equipment
are sold or retired, the cost and accumulated depreciation are
removed from the accounts and the resulting gain or loss is
included in income. Depreciation expense for the nine months
ended September 30, 1996 was $3,648.
Property and equipment consisted of the following at September 30,
1996:
Property $ 663,000
Equipment 692,063
Furniture and fixtures 16,519
Building and leasehold improvements 401,691
----------
1,773,273
Less accumulated depreciation
and amortization 9,867
----------
Net property and equipment $ 1,763,406
==========
Patent and Organization Costs
Certain patent and organization costs have been capitalized and
are amortized over the estimated useful lives of the assets using
the straight line method. Patent costs are being amortized over a
period of 17 years. Organization costs are being amortized over a
period of 5 years.
Revenue Recognition
Revenue is recognized upon receipt of royalty fees from the
licensing of the Company's patents and technologies to other
companies. Revenue from tipping fees is recognized upon receipt
of mixed cullet.
FORM 10-QSB
EFTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITY
During the nine months ended September 30, 1996, the Company
acquired Fire Doctor, Inc., a company engaged in the development
of fire retardant products. In conjunction with the acquisition,
assets and liabilities were recorded as follows:
Assets acquired $ 57,890
Liabilities assumed 38,733
-------
Excess of Assets Acquired
Over Liabilities Assumed $ 19,157
=======
In addition, the Company transferred all assets and liabilities of
its glass processing division to a newly formed wholly owned
corporation called C.F.C., Inc.
FORM 10-QSB
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 1996 COMPARED TO THE
NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 1995.
Revenue of $79,191 and $77,417 have been realized for the nine and
three months ended September 30, 1996 respectively. Operating
expenses for the nine months ended September 30, 1996 were $714,346
as compared to $274,696 for the nine months ended September 30, 1995.
Operating expenses for the three months ended September 30, 1996 were
$259,865 as compared to $83,744 for the three months ended September
30, 1995. During the nine months ended September 30, 1996, the
Company acquired Fire Doctor, Inc. (Fire Doctor), a company engaged in
the development of a chemical that substantially retards the spread of
flame. In addition, the Company transferred all assets and
liabilities of its glass processing division to a newly formed wholly
owned corporation called C.F.C., Inc. (CFC). The Company anticipates
substantial revenue from CFC through the payment of tipping fees for
delivery and acceptance by the Company of "mixed cullet" and the sale
of "processed premium cullet" to the Fiberglass and Glass Bottling
industries. In order to "process" the cullet, the Company has made
substantial capital expenditures of $1,747,941 for machinery,
equipment and leasehold improvements during 1996.
The increase in operating expenses is primarily due to the operations
of the above subsidiaries. Fire Doctor and CFC had operating expenses
of $133,272 and $260,790 respectively, for the nine months ended
September 30, 1996 and $40,226 and $147,284 for the three months ended
September 30, 1996, respectively.
The Company anticipates that, during the next twelve months, revenue
will commence that should be sufficient to meet operating expenses.
To the extent that the Company experiences a shortfall, additional
funds will be sought through loans or issuances of the Company's debt
or equity securities.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of funds to date has been the sale of its
securities. During the nine months ended September 30, 1996,
the Company's working capital decreased by $56,108. Cash increased
by $120,661 provided by financing activities including private
placements of 10,591,481 shares of common stock for an aggregate
purchase price of $2,330,683. Investing activities included
$1,747,941 used to purchase property and equipment.
The Company's principal cash needs on both a short and long - term
basis are for the funding of its operations, and capital expenditure
requirements. The company estimates that the glass processing line
could be operational by January 1, 1997.
FORM 10-QSB
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal actions proceeding or litigation
pending or threatened to the knowledge of the Company.
Item 2. Changes in Securities
None
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 on Forms 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
FORM 10-QSB
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
EFTEK Corporation has duly caused this report to be signed on its
behalf by
the undersigned, thereunto duly authorized.
EFTEK CORPORATION
Dated: November 7, 1996 By: /s/Frank Whitmore
________________ _______________________________
FRANK WHITMORE
President, Chief Executive
Officer, and Chairman of the
Board of Directors
Dated: November 7, 1996 By: /s/Shawn Pringle
________________ _______________________________
SHAWN PRINGLE
Chief Financial Officer