SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
ANNUALQUARTERLY REPORT UNDER SECTION 13 OR 15(d)15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Sixthe Three Months Ended June 30, 1998March 31, 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) Identification No.)
270 Rocky Run Road, Glen Gardner, New Jersey 08826
(Address of principal executive offices) (Zip code)
Issuer's telephone number 908-537-4378
Securities resistered pursuant to section 12 (b) of the Act: None
Securities resistered pursuant to section 12 (g) of the Act:
Class A commonCommon Stock
(Title of class)
Check whether issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d)15(d) of the Securities Exchange Act of 1934 during the preceding
12 months ( or(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, issuedoutstanding as
of June 30, 1998:March 31, 1999: 30,166,069 (Common Stock outstanding 20,431,069issued 20,936,069 and to be issued
9,375,000)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 March 31, 1999 and December 31, 1998
Assets F-1
Liabilities and Stockholders' Equity F-2
Consolidated Statements of Income for the Three Months Ended March 31,
1999 and 1998 F-3
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1999 and 1998 F-4
Consolidated Statements of Changes in Stockholders' Equity for the Three Months
Ended March 31, 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, 1998MARCH 31, 1999 AND DECEMBER 31, 1997
(UNAUDITED)1998
ASSETS
June 30, December 31,
1998 19973/31/99 12/31/98
------------------- ------------------
Current assets:
Cash $ 487 1,505
Equipment held for sale 9,000 9,000$363 $4,065
Receivable from merger 25,000 25,000
------- ------
Total current assets 9,487 10,505
Other assets:
Excess of cost over net assets acquired,
less accumulated amortization 15,246 16,176
Investment and advances to 50% owned
affiliate 1 110,939
Organization costs 300 300
Total other assets 15,547 127,41525,363 29,065
------- ------
Total assets $25,034 137,920$25,363 $29,065
-------- -------
F-1
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998MARCH 31, 1999 AND DECEMBER 31, 1997
(UNAUDITED)1998
LIABILITIES AND STOCKHOLDER'SSTOCKHOLDERS' EQUITY
June 30, December 31,
1998 19973/31/99 12/31/98
------------------- -------------------
Current liabilities:
Accounts payable $ 64,794 63,583$41,723 $44,333
Accrued expenses 22,654 21,25421,700 19,793
Notes payable 47,914 46,61436,428 35,828
Due to officers 70,915 65,78180,683 76,183
Deferred income 20,000 20,000
------- ------
Total current liabilities 206,277 197,232200,534 196,137
-------- -------
Stockholders' equity:
Class "A" common shares, no par value;
authorized - 90,000,000 shares;
issued and to be issued - 30,166,069 in 19971999
and 28,086,098 in 19961998 3,441,308 3,441,308
Additional paid-in-capital 52,293 52,293
Deficit (3,674,844) (3,552,913)(3,668,772) (3,660,673)
----------- -----------
Total stockholders' equity (181,243) (59,312)(175,171) (167,072)
--------- ---------
Total liabilities and stockholders' equity $ 25,034 137,920$25,363 $29,065
-------- -------
F-2
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF OPERATIONSINCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,MARCH 31, 1999 AND 1998
AND 1997
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Equity in earnings of
unconsolidated affiliate $ (12,500) (12,500) (25,000) (25,000)
Selling, general and
administrative expenses 1,363 2,000 5,463 4,000
Depreciation and amortization 465 465 930 920
1,828 2,465 6,393 4,920
Operating loss (14,328) (14,965) (31,393) (29,920)
Other expenses
Interest expense 2,350 2,400 4,600 4,700
Provision for loss in affiliate 85,938 -- 85,938 --
88,288 2,400 90,538 4,700
Net loss $ (102,616) (17,365) (121,931) (34,620)
Loss per common share $ 0.003 0.001 0.004 0.001
Weighted average number of
common shares outstanding 30,166,069 29,126,069 30,166,069 29,126,069
1999 1998
------------------ -----------------
Equity in earnings of unconsolidated
affiliate $ 0 (12,500)
Selling, general and
administrative expenses 5,999 4,100
Amortization of excess of cost over
net assets acquired 0 465
-- ---
Net loss from continuing operations (5,999) (17,065)
Other expenses
Interest expense 2,100 2,250
------ -----
Net loss for the period ($8,099) (19,315)
-------- --------
Loss per share (basic and diluted) $ .0003 .0006
------- -----
Weighted average number of
common shares outstanding 30,166,069 30,166,069
----------- ----------
F-3
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIXTHREE MONTHS ENDED JUNE 30,MARCH 31, 1999 AND 1998
AND 1997
(UNAUDITED)
Six Months Ended
June 30,1999 1998
1997------ ------
Cash flows from operating activities:
Net income $(121,931) (34,620)loss ($8,099) (19,315)
-------- --------
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in earnings of unconsolidated subsidiary 25,000 25,0000 12,500
Depreciation and amortization 930 930
Provision for loss0 465
Change in affiliate 85,938 --assets and liabilities:
Increase (decrease) in liabilitiesin:
Accounts payable 1,211 2,000(2,610) 3,400
Accrued expenses 1,400 2,0011,907 1,350
Notes payable 1,300 1,733
Due to officers 5,134 2,956600 0
---- -
Total adjustments 120,913 34,620(103) 17,715
---- ------
Net cash used in operating activities (1,018) --(8,202) (1,600)
------- -------
Cash flows from financing activities:
Due to officer 3,000 1,600
Accrued interest due officer 1,500 0
------ -
Net cash provided by financing activities 4,500 1,600
------ -----
Net increase (decrease) in cash (1,018) --(3,702) 0
Cash - beginning of the period 4,065 1,505
-------- -----
Cash - end of the period $ 487 --$363 1,505
----- -----
F-4
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIXTHREE MONTHS ENDED JUNE 30,MARCH 31, 1999 AND THE YEAR ENDED DECEMBER 31, 1998
AND 1997
(UNAUDITED)
JUNE 30, 1998
Common Shares
and Paid-In
Common Shares Capital Deficit Total
Additional
Common Shares Common Shares Paid In Capital Deficit Total
Balance at January 1, 1998 30,166,069 $3,493,601 (3,552,913) (59,312)$3,441,308 $52,293 ($3,552,913) ($59,312)
Net loss for the year ended December 31, 1998 0 0 0 (107,760) (107,760)
-- -- (121,931) (121,931)-- --------- ---------
Balance at June 30,December 31, 1998 30,166,069 $3,493,601 (3,674,844) (181,243)
JUNE 30, 19973,441,308 52,293 (3,660,673) (167,072)
----------- ---------- ------- ----------- ---------
Net loss for the three months ended March 31, 1999 0 0 0 (8,099) (8,099)
-- -- -- ------- -------
Balance at January 1, 1997March 31, 1999 30,166,069 $3,498,601 (3,489,409) 9,192
Net loss -- -- (34,620) (34,620)
Balance at June 30, 1997 30,166,069 $3,498,601 (3,524,029) (25,428)$3,441,308 $52,293 ($3,668,772)($175,171)
F-5
ELECTRO-KINETIC SYSTEMS, INC.
MARCH 31, 1999 AND 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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 Glen Gardner, New Jersey.
The Company ceased operations in radon testing in March 1995 and failed
in its subsequent efforts: magazine publishing (1996), visual communication
technology (1997), marketing of computer decision models (1997 and 1998), and
desk-top publishing and printing (1998).
Results of Operations
The Company's 50% owned unconsolidated affiliate, Printone Media Inc.,
ceased operations and filed for bankruptcy. 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 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.
Liquidity and Capital Resources
Working capital decreased from ($167,072) as of December 31, 1998, to
($175,171) as of March 31, 1999. Shareholders' equity declined from ($167,072)
to ($175,171) 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, and by the disposal
of a subsidiary. 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 aggregating approximately
$100,000 for shares of its Common Stock. 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
Pursuant to the requirements of Section 13 or 15 (d)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:
ELECTRO-KINETIC SYSTEMS, INC.
Dated: __________________5/10/99 By: ___________________________________/s/
Julius Cherny, PhD.Ph.D., 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 in the capacities indicated and on the Datesdates indicated.
SIGNATURE CAPACITY DATED
Chairman of the/s/ President, Director 5/10/99
Julius Cherny
PhD. Board,/s/ Secretary, Treasurer, 5/5/99
Richard J. L. Herson Director
DATE
PART 11 - 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: See reports filed on 1/3/96
and 1/11/96.
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.
Management Report
General
Following the bankruptcy of its principal distributor in March 1995,
the Company suspended all operations related to radon testing and analysis of
environmental hazards. In 1996, the Company abandoned its efforts in the
magazing publishing field. In the fall of 1996, the officers of the Company made
available for use certain systems developed by them which the Company attempted
to market. No costs or expenses have been incurred by the Company. Such efforts
have been unsuccessful. Accordingly, the designs for these decision models have
been returned to the officers.
During the third quarter of 1998, the Company anticipates the sale of
90% of DMA Radtech, Inc., its wholly owned subsidiary at a profit of
approximately $40,000. This agreement includes the sale of certain proprietary
know-how.
Results of Operations
The only recurring item of income is the Company's equity in its 50%
owned subsidiary, Printone Media, Inc. The Company's unconsolidated affiliate
has lost money since acquisition. Accordingly, during the second quarter of
1998, the Company has established a reserve of $85,000 or about $.003 per share
against the carrying value of the investment in and advances to this affiliate.
Liquidity and Capital Resources
Working capital declined as a result of operating expenses for the six
months ended June 30, 1998 in the amount of $10,000. For the Company to become a
viable entity, it must operate profitably and raise sufficient capital to fund
its operations. Failing this, it must combine with another entity. The Company
continues its efforts in these regards, but there is no assurance of success./s/ Director 5/10/99
Daniel Herzka
/s/ Director 5/9/99
Ralph Lanciano