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
JUNE 30, 1998; 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.)
324 New Brooklyn Road, Berlin, NJ 08009
(Address of principal executive offices) (Zip Code)
(609)753-4344
(Registrant's telephone number, including area code)
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 June 30, 1998.
Common Stock, Par Value $.001 11,556,910
(Class) (Outstanding)
Transitional small business disclosure format (check one):
Yes [ ] No [X]
FORM 10-QSB
EFTEK CORPORATION
INDEX
Page(s)
-------
PART I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet - June 30, 1998
(Unaudited) 3
Consolidated Statements of Operations
(Unaudited) - Six Months and Three Months Ended
June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows
(Unaudited) - Six Months Ended June 30, 1998
and 1997 5
Notes to Consolidated Financial Statements
(Unaudited) 6&7
Item 2. Management's Discussion and Analysis 8
PART II. Other Information 9
Signature Page 10
FORM 10-QSB
PART I - FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
EFTEK CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(Unaudited)
Assets
------
Current Assets
- --------------
Cash $14,794
Receivables 129,236
Prepaid expenses 40,587
--------
Total Current Assets 184,617
-------------------- --------
Property and Equipment, Net (Note 2) 4,868,378
- --------------------------- ---------
Other Assets
Intangible assets, net (Note 2) 83,823
Deposits 3,900
---------
Total Other Assets 87,723
------------------ ---------
Total Assets 5,140,718
------------ =========
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities
- -------------------
Current portion of long term debt 215,528
Current portion of obligations under capital leases 139,561
Accounts payable and accrued liabilities 1,137,578
Income taxes payable 750
---------
Total Current Liabilities 1,493,417
-------------------------
Long Term Debt, Less Current Portion 234,797
- ------------------------------------
Obligations Under Capital Leases,
Less Current Portion 353,531
- -------------------------------- ---------
Total Liabilities 2,081,745
----------------- ---------
Stockholders' Equity
- --------------------
Common stock, $.001 par; authorized
25,000,000 shares; issued and
outstanding 11,556,910 shares 11,557
Additional paid in capital 6,946,915
Deficit (3,899,253)
----------
3,059,219
Common stock held in treasury
(14,434 shares), at cost (246)
---------
Total Stockholders' Equity 3,058,973
-------------------------- ---------
Total Liabilities and Stockholders' Equity $5,140,718
------------------------------------------ =========
See Accompanying Notes to Financial Statements.
FORM 10-QSB
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
-------------------------------------------
Revenues (Note 2) $ 443,375 $ 8,831 $ 826,378 $ 71,117
- -------- --------- --------- ----------- ---------
Costs and Expenses
- ------------------
Costs of revenues 171,622 44,158 458,231 96,971
Selling, general and
administrative 394,003 205,054 817,861 428,639
------- ------- --------- -------
Total Costs and Expenses 565,625 249,212 1,276,092 525,610
- ------------------------ ------- ------- --------- -------
Loss From Operations (122,250) (240,381) ( 449,714) (454,493)
- -------------------- ------- ------- --------- --------
Other Income (Expenses)
- ----------------------
Miscellaneous income 5,772 5,000 5,845
Interest expense ( 15,218) ( 25,709) ( 30,502) ( 26,837)
Miscellaneous expense ( 3,746) ( 3,781)
--------- -------- ---------- ---------
Total Other Income
(Expenses) ( 15,218) ( 23,683) ( 25,502) ( 24,773)
------------------ --------- --------- ---------- ---------
Net Loss $(137,468) $(264,064) $( 475,216) $(479,266)
- -------- ========= ========= ========= =========
Net Loss Per Common and Common
Equivalent Share (Note 2) $( .01) $( .03) $( .04) $( .05)
- ---------------------------- ========= ========= ========== =========
Weighted Average Common
Shares Outstanding 10,829,155 10,038,629 11,420,205 9,564,050
- ----------------------- ========== ========== ========== =========
See Accompanying Notes to Financial Statements.
FORM 10-QSB
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
1998 1997
Cash Flows From Operating Activities ---- ----
- ------------------------------------
Net loss for the period $(475,216) $( 479,266)
Adjustments to Reconcile Net Loss To
Net Cash Used In Operating Activities
- --------------------------------------
Depreciation and amortization 63,988 3,982
Changes In Operating Assets
and Liabilities
- ---------------------------
(Increase) decrease in receivables ( 63,638) 80,318
Increase in prepaid expenses ( 553) ( 5,418)
Increase in intangible assets ( 1,313) ( 2,634)
Increase in accounts
payable and accrued liabilities 373,887 70,555
Increase in income taxes payable 150
------- -------
Net Cash Used In Operating Activities (102,695) ( 334,587)
- ------------------------------------- ------- ---------
Cash Flows Used In Investing Activities
- ---------------------------------------
Purchases of equipment (100,201) (1,313,075)
------- ---------
Cash Flows From Financing Activities
- ------------------------------------
Proceeds from long term debt, net 10,000 21,129
Reduction of long term debt ( 52,180)
Proceeds from issuances of common stock 227,868 1,846,259
------- ---------
Net Cash Provided By Financing Activities 185,688 1,867,388
- ----------------------------------------- ------- ---------
Net (Decrease) Increase In Cash ( 17,208) 219,726
- ------------------------------- ---------- -----------
Beginning Cash 32,002 172,919
- -------------- --------- -----------
Ending Cash $ 14,794 $ 392,645
- ----------- --------- -----------
See Accompanying Notes to Financial Statements.
FORM 10-QSB
EFTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business
EFTEK Corporation (the Company), incorporated in the state
of Nevada, is engaged in processing mixed cullet (broken glass)
into a recycled, uncontaminated product (known as "GlassFlour")
for use in the fiberglass manufacturing industry. The Company
also develops and sells various fire retardant chemicals.
2. Summary of Significant Accounting Policies
Use of Estimates
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 at the date of the financial statements and the
reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts
of the Company 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 six
months ended June 30, 1998 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 June 30, 1998 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, 1997.
Operating results for the three months and six months ended June
30, 1998 are not necessarily indicative of the results for the year
ending December 31, 1998.
FORM 10-QSB
Property and Equipment
Property and equipment are recorded at cost. Depreciation is
provided 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 assets are sold or
retired, the cost and accumulated depreciation are removed from
the accounts and any gain or loss is included in income.
Property and equipment consisted of the following at June
30, 1998:
Land $ 338,073
Building 317,081
Building improvements 891,784
Equipment 3,503,180
Furniture and fixtures 22,648
5,072,766
Less accumulated depreciation and
amortization 204,388
Net property and equipment $4,868,378
Intangible Assets
Certain intangible assets have been capitalized and are
amortized over the estimated useful lives of the assets using the
straight-line method. Patent costs are amortized over a period
of 17 years. Organization costs are amortized over a period of 5
years.
Net Loss Per Common and Common Equivalent Share
The company uses Statement of Financial Accounting Standards
No. 128 "Earnings Per Share" (SFAS No. 128) to compute its net
loss per common and common equivalent share. SFAS No. 128
requires basic earnings per share which is computed by dividing
reported earnings available to common shareholders by the
weighted average shares outstanding and diluted earnings per
share which reflects the dilutive effect of common stock
equivalents such as stock options and warrants. The computation
of diluted net loss per common and common equivalent share was
antidilutive in each of the periods presented.
FORM 10-QSB
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information set forth and discussed below for the three months
and six months ended June 30, 1998 is derived from the consolidated
financial statements included elsewhere herein. The financial information
set forth and discussed below is unaudited but, in the opinion of management,
reflects all material adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of such information. The Company's results
of operations for a particular quarter may not be indicative of results
expected during the other quarters or for the entire year.
RESULTS OF OPERATIONS
Effective October 1, 1997. the Company's CFC, Inc. subsidiary officially
began the manufacturing of its product, GlassFlour. Accordingly, growth in
revenues and expenses for the three months and six months ended are directly
a result of the emergence of the subsidiary from its development stage and
includes various start up expenses.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Revenue for the three months ended June 30, 1998 increased $434,544
(5,021%) over the previous year's three months. This reflects the
absence of the sale of the Company's CFC, Inc. GlassFlour product
in the prior year.
Costs of revenues increased $127,464 (388.7%) over the previous
year's three months. The principal costs related to the sale of
GlassFlour are waste removal, freight and labor. Management's
efforts to control waste removal and freight costs are discussed
below.
Selling, General and Administrative costs increased $188,949
(192.1%) over the previous year's three months and are a direct
result of the CFC, Inc. operations that commenced in October of 1997.
Net loss for the three months decreased $126,596 (48.9%) over the
previous year's three months principally to the CFC, Inc. operations and
consequently, revenues that commenced in October of 1997.
Additionally, revenue for the three months ended June 30, 1998 increased
$60,372 (15.8%) over the previous three months. This reflects the
increasing customer demand for the Company's CFC, Inc. GlassFlour product
due to its customer perceived outstanding quality. Further, costs of
revenues decreased $114,987 (40.1%) over the previous three months. The
significant cost savings are a direct result of management's efforts to
control waste removal and freight costs incurred in the production of
GlassFlour. Other cost savings resulting from management's continued efforts
at effecting operational efficiencies are reflected in Selling, General and
Administrative costs which decreased $29,855 (7%) over the previous three
months. Overall, net loss for the three months decreased $200,280 (59.3%)
over the previous three months.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED JUNE
30, 1997
Revenue for the six months ended June 30, 1998 increased $755,261
(1,162%) over the six months ended June 30, 1997. The increase is
directly attributable to the Company's CFC, Inc. operations which
commenced October 1, 1997.
Costs of revenues, comprised principally of labor, freight and
waste removal, increased $361,260 (473%) compared to the six months in 1997.
The increase is directly attributable to the sale of CFC's GlassFlour
product, which began in October, 1997.
Selling, general and administrative expenses increased $389,222
(191%) compared to 1997. The increase includes the operating costs
of CFC, Inc. processing facility as well as costs relating to the
development of the Company's expansion program (see below).
Expansion Program
The Company has completed its initial due diligence relating to its proposed
expansion program. Due to customer demand (including commitments to purchase
up to 100% of a 120,000-ton capacity processing facility), northern California
has been selected as the first expansion location. Management is currently
pursuing various financing options. Preliminary interest has been strong, and
although there is no assurance, the Company believes that funding arrangements
will be secured in the near future. The funding arrangements will include a
provision for the injection of sufficient working capital into the Berlin, New
Jersey facility to ease its cash flow difficulties which have resulted from
under capitalization during its development phase.
FORM 10-QSB
EFTEK CORPORATION
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 other than those set forth in
previous filings.
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
On July 23, 1998 the Board of Directors in order to provide continuing
incentive for its officers, directors, employees and consultants, authorized
the exchange of all outstanding stock options issued under the Company's 1996
Stock Incentive Plan (approximately 850,000 options) for new options at
an exchange rate of 80% (.80 new option in exchange for each old
option). The new options' exercise prices would be 15% of the original
options' prices, with a floor of $.15 per share. Option holders have been
forwarded election agreements to indicate their interest in participating
in the program. The bid price of the Company's common stock as traded on
the OTC Bulletin Board on July 23, 1998 was $.09 per share.
Item 6. Exhibits and Reports on Forms 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
SIGNATURES
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.
EFTEK CORPORATION
Dated: August 15, 1998 By: /s/ Frank Whitmore
-----------------------
FRANK WHITMORE
President, Chief Executive
Officer, and Chairman of
the Board of Directors
Dated: August 15, 1998 By: /s/ Gerard T. Wisla
-----------------------
GERARD T. WISLA
Chief Financial Officer