U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Consortium Service Management Group, Inc.
(Exact name of registrant as specified in its charter)
Texas 0-27359 74-2653437
- -------------- ------------------------ -------------
(state of (Commission File Number) (IRS Employer
incorporation) I.D. Number)
500 North Shoreline Drive, Suite 701 North
Corpus Christi, TX 78471
512-887-7546
-------------------------------------------------------
(Address and telephone number of registrant's principal
executive offices and principal place of business)
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 twelve 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 (The registrant became
subject to filing requirements on November 15, 1999.)
As of September 30, 1999, there were 2,918,095 shares of the
Registrant's Common Stock, par value $0.001 per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes ___
No X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consortium Service Management Group, Inc.
Balance Sheet
September 30, 1999
<TABLE>
<CAPTION>
Unaudited Audited
09-30-99 12-31-98
--------- --------
CURRENT ASSETS
<S> <C> <C>
Cash $ (1,069) $ 50,179
Account Receivable-Alba 17,800 17,800
Notes Receivable-Current 178,000 600
-------- --------
Total Current Assets $194,731 $ 68,579
FIXED ASSETS
Furniture and Fixtures $ 8,118 $ 8,118
Equipment 50,400 50,400
Accumulated Depreciation (20,331) (20,331)
-------- --------
Total Property and Equipment $ 38,187 $ 38,187
OTHER ASSETS
UEC Founders Fund $ 73,843 $ 73,843
Account Receivable-UEC 383,613 383,613
Account Receivable-Other 2,474 -
Allowance for Doubtful Accounts (323,613) (323,613)
Investment-UEC 569,849 522,014
Employee Advances 30,565 39,533
-------- --------
Total Other Assets $736,731 $695,390
Total Assets $969,649 $802,156
</TABLE>
======== ========
2
<PAGE>
Consortium Service Management Group, Inc.
Balance Sheet (Continued)
September 30, 1999
<TABLE>
<CAPTION>
Unaudited Audited
09-30-99 12-31-98
--------- --------
CURRENT LIABILITIES
<S> <C> <C>
Accounts Payable $ 6,500 $ 33,174
Taxes Payable 12,852
Notes Payable to Stockholders 417,158 539,655
Interest Payable 22,904 15,000
Stock Subscribed 30 -
Other Current Liabilities 31,000 -
---------- ----------
Total Current Liabilities $ 490,444 $ 587,829
STOCKHOLDERS EQUITY
Preferred Stock $.001 Par Value $ 76 $ 76
10,000,000 Shares Authorized;
73,669 issued and outstanding
Common Stock $.001 Par Value 2,918 2,271
40,000,000 Shares Authorized;
2,271,233 issued and outstanding
at 12-31-98; 2,918,095 issued
and outstanding at 9-30-99
Additional Paid-In Capital 1,993,279 1,453,561
Retained Earnings, 12-31-98 (1,430,594) (1,430,594)
Current Year Earnings (86,474)
---------- ----------
Total Stockholders Equity $ 479,205 $ 25,314
---------- ---------
Total Liabilities and
Stockholders Equity $ 969,649 $ 613,143
========== ==========
</TABLE>
3
<PAGE>
Consortium Service Management Group, Inc.
Statements of Operation
For the Third Quarter Ending September 30, 1999
<TABLE>
<CAPTION>
09-30-99 09-30-98
-------- --------
<S> <C> <C>
Revenues $ 0 $ 79,542
Cost of Services Sold 5,331 79,726
-------- --------
Gross Margin (5,332) (184)
General and Administrative Expenses 28,198 82,295
-------- --------
Operating Income (33,530) (82,479)
Interest in Income from
Unconsolidated Company 15,945 39,935
Income Taxes - -
-------- ---------
Net Gain or (Loss) (17,585) (42,544)
======== ========
Net Loss per Share of Common Stock
2,918,095 shares outstanding at
9-30-99 and 2,271,233 shares
outstanding at 9-30-98 (.006) (.015)
</TABLE>
4
<PAGE>
Consortium Service Management Group, Inc.
Statements of Operation
For the Nine Months Ending September 30, 1999
<TABLE>
<CAPTION>
09-30-99 09-30-98
-------- --------
<S> <C> <C>
Revenues $ 29,624 $209,556
Interest in Income from
Unconsolidated Company 47,835 119,806
Cost of Goods Sold 39,234 172,058
-------- --------
Gross Margin 38,225 37,497
General and Administrative Expenses 124,698 180,673
-------- --------
Operating Income (86,474) (143,177)
Income Taxes - -
-------- --------
Net Gain or (Loss) (86,474) (23,370)
======== ========
Net Loss per Share of Common Stock
2,918,095 shares outstanding at
9-30-99 and 2,271,233 shares
outstanding at 9-30-98 (.029) (.008)
</TABLE>
5
<PAGE>
Consortium Service Management Group, Inc.
Statements of Cash Flow
For the Nine Months Ending September 30, 1999
<TABLE>
<CAPTION>
09-30-99 09-30-98
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
<S> <C> <C>
Net Income $ (86,474) $ (23,370)
Adjustments to reconcile net income to net
cash provided by operating activities
Accounts Receivable (2,474) 0
Employee Advances (30,565) (39,533)
Accounts Payable (9,120) 0
Payroll Taxes Payable (503) (13,997)
Notes Receivable-Current (177,400) (600)
Other Current Liabilities 31,000 0
--------- ---------
Net Cash Used in Operations $(275,536) $ (77,500)
CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------
Adjustments to reconcile net income to net
cash provided by investing activities
Investments in UEC $ (47,835) $(119,806)
Equipment 0 (24,650)
--------- ---------
Net Cash from Investing $ (47,835) $(144,456)
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Adjustments to reconcile net income to net
cash provided by financing activities
Common Stock $ 647 $ 0
Stock Subscribed 30 0
Increase in Paid-In Capital 539,717 0
Notes Payable to Stockholders (268,272) 228,750
--------- ---------
Net Cash Used in Financing $ 272,122 $ 228,750
--------- ---------
Net Increase (Decrease) in Cash $ (51,248) $ 6,794
========= =========
Cash Balance at End of Period $ (1,069) $ 17,237
Cash Balance at Beginning of Period 50,179 10,443
--------- ---------
Net Increase (Decrease) in Cash $ (51,248) $ 6,794
========= =========
</TABLE>
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with
the financial statements and the accompanying notes thereto and is
qualified in its entirety by the foregoing and by more detailed
financial information appearing elsewhere. See "Item 1. Financial
Statements."
Results of Operations - Third Quarter of Fiscal Year 2000 Compared to
------------------------------------------------------------------------
Third Quarter of Fiscal Year 1999
---------------------------------
There were no revenues received during the third fiscal quarter of 1999
as compared to revenues of $79,542 received in the third fiscal quarter of 1998.
The reason for the receipt of no revenue this most recent quarter is that there
was a delay in our receipt of payments for the tissue bonding project.
We nevertheless provided services, for which we will be unable to bill,
that cost $5,332 during Q3 1999 as compared with services that cost $79,726 in
Q3 1998 or 100.2 percent of revenue for Q3 1998. The reason we will not be able
to bill for our services during Q3 1999 is that these services, which were the
development of a strategic marketing plan for the Anaerobic Farm Waste project
and the CO2 Separator project, are not chargeable to any customers.
Our general and administrative expenses for Q3 1999 were $28,198, a
$54,097 or 65.7 percent reduction in general and administrative services of
$82,295 in Q3 1998. The reasons for the reduction were reduced officers'
salaries, reduced day-to-day operating expenses, and reduced foreign and
domestic travel expenses.
We suffered a net loss of $17,585 during Q3 1999 as compared with a net
loss of $42,544 during Q3 1998. The reason for the smaller loss, which was on no
revenue, during Q3 1999 than the loss on $79,542 in revenues during Q3 1998 was
primarily the decrease in general and administrative expenses during Q3 1999.
Results of Operations - First Three Quarters of Fiscal Year 2000
------------------------------------------------------------------------
Compared to First Three Quarters of Fiscal Year 1999
----------------------------------------------------
Our revenues dropped dramatically from $209,556 in the first nine months
of 1998 to $29,624 in the first nine months of 1999 - a decrease of $179,932 or
85.9 percent. The decrease was due to delays in the receipt of payments for the
tissue bonding project.
Our gross margin was a negative 132.4 percent during the first nine
months of 1999 compared to a gross margin of 17.9 percent during the comparable
period of 1998. The reasons we were not able to recover our costs of providing
the services for which we bill others are the delays in receiving tissue bonding
payments and the non-chargeability of our services in developing a strategic
marketing plan for the anaerobic farm waste and CO2 separator projects.
General and administrative expenses in the first nine months of 1999
were $123,175, or 415.8 percent of revenue, compared with general and
7
<PAGE>
administrative expenses of $180,674 during the first nine months of 1998, or
86.2 percent of revenues. On considerably less revenue during the first nine
months of 1999, we cut general and administrative costs by $57,499 or 31.8
percent. The reduction in general and administrative costs is due to lower
foreign and domestic travel expenses, reduced day-to-day operating expenses, and
lower officers' salaries.
We suffered a net loss of $84,950 during the first nine months of 1999,
an increase of $61,579 or 263.5 percent from the net loss of $23,371 during the
same period of 1998. The dramatic decrease in sales during the first nine months
of 1999 is the cause of the increased loss.
Outlook
-------
We manage to survive by selling stock to management and shareholders and
by borrowing working capital from our shareholders in exchange for promissory
notes. We are optimistic about the future, however, both short-term and
long-term.
Our anaerobic farm waste disposal equipment project is on track with the
Ukrainian design experts having visited the farm in Idaho and having designed a
plant to fit the needs of the farmer. We are in final negotiations with the
farmer for plant purchase. Assuming the sale goes through, we estimate the
installation will occur during the fourth quarter of 2000 and we will commence
to receive revenue from the plant during the first quarter of 2001.
We have completed a letter of intent to install one carbon dioxide
separator plant in Alabama. We will complete the contract during the first
quarter of 2000 and expect to manufacture and install the plant by the third
quarter of 2000 with revenue commencing during that quarter.
Management's Statement on Y2K
-----------------------------
Our information technology system is Y2K compliant based on
communications with our hardware and software providers and in-house testing. We
have no non-information technology systems affecting business operations. We
have no multiple computer systems.
Third parties with whom we have material relationships have confirmed
that they expect no business interruptions. We expect no cost directly relating
to fixing Y2K issues, such as modifying software and hiring Y2K solution
providers. We estimate no material lost revenues due to Y2K issues, and we are
establishing a contingency plan.
Our future results of operations and the other forward-looking
statements contained herein involve a number of risks and uncertainties. Among
the factors that could cause actual results to differ materially are the
following: inability of the Company to obtain needed additional capital and loss
of personnel - particularly president and chief executive officer Donald S.
Robbins - as a result of accident or for health reasons.
8
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Item
------- -----
27 - Financial Data Schedule.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date: February ____, 2000 Consortium Service Management Group, Inc.
By /s/ Donald S. Robbins
-------------------------------------
Donald S. Robbins, President and
Chief Executive Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> (1,069)
<SECURITIES> 0
<RECEIVABLES> 195,800
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 194,731
<PP&E> 58,518
<DEPRECIATION> 20,331
<TOTAL-ASSETS> 969,649
<CURRENT-LIABILITIES> 490,444
<BONDS> 0
0
76
<COMMON> 1,996,197
<OTHER-SE> (1,517,068)
<TOTAL-LIABILITY-AND-EQUITY> 969,649
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 5,331
<OTHER-EXPENSES> 28,198
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (17,585)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,585)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,585)
<EPS-BASIC> (0.006)
<EPS-DILUTED> (0.006)
</TABLE>
