UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended SEPTEMBER 30, 1999 Commission File Number 000-25257
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ELLIGENT CONSULTING GROUP, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 87-0453842
- ------------------------------- ----------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
152 WEST 57TH STREET, 40TH FLOOR
NEW YORK, N. Y. 10019
--------------------------------
(Address of principal executive offices)
Registrant's current telephone number, including area code: (212) 765 - 2915
----------------
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.
[Item - 1] Yes [X] No [ ] [Item - 2] Yes [X] No [ ]
Indicate the number of shares outstanding of each class of the Registrant's
Common Stock.
The Registrant has only one class of Common Stock outstanding. As of September
30, 1999, there were 14,879,226 shares of the Registrant's Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
ELLIGENT CONSULTING GROUP, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of September 30, 1999 (unaudited)
Consolidated Statement of Operations for the three months and nine months
ended September 30, 1999 (unaudited)
Consolidated Statement of Stockholders' Equity for the nine months ended
September 30, 1999 (unaudited)
Consolidated Statement of Cash Flows for the nine months ended September
30, 1999 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Item 6. Exhibits and Reports on Form 8-K
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INDEX TO EXHIBITS
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30,1999 [UNAUDITED]
ASSETS
CURRENT ASSETS:
Cash $ 7,746
Trade accounts receivable, net of allowance
for doubtful accounts of $150,260 3,964,105
Deferred taxes receivable 702,328
Other assets 16,427
-----------
TOTAL CURRENT ASSETS 4,690,606
-----------
PROPERTY AND EQUIPMENT, NET 375,931
-----------
GOODWILL, NET 11,312,781
-----------
OTHER ASSETS:
Customer list, net 383,333
Security deposits 117,723
Due from employees 29,726
Due from stockholders 8,550
Due from affiliates 40,000
-----------
Total other assets 579,332
-----------
TOTAL ASSETS $16,958,650
===========
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 [UNAUDITED]
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft $ 443,827
Accounts payable 1,893,247
Accrued expenses and other liabilities 126,618
Accrued expenses--stockholders 845,400
Notes & leases payable--current 2,280,034
Notes payable--stockholders 7,167,602
Taxes payable 107,831
Advances from stockholders 2,750,158
------------
TOTAL CURRENT LIABILITIES 15,614,717
------------
LONG-TERM LIABILITIES:
Notes and leases payable--long-term 89,740
------------
TOTAL LONG-TERM LIABILITIES 89,740
------------
COMMITMENT AND CONTINGENCIES --
------------
STOCKHOLDERS' EQUITY:
Common stock--$0.001 par value; 50,000,000 shares authorized
14,879,226 shares issued 14,879
Capital in excess of par value 5,024,071
Unearned compensation (189,000)
Accumulated deficit (3,229,745)
------------
Subtotal 1,620,205
------------
Treasury stock--61,002 shares at cost (366,012)
------------
TOTAL STOCKHOLDERS' EQUITY 1,254,193
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 16,958,650
============
See Accompanying Notes to Consolidated Financial Statements.
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
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<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
[UNAUDITED] [UNAUDITED]
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INCOME:
Revenue $ 6,475,640 $ 19,504,040
Cost of services 4,553,536 13,318,987
------------------- ---------------------
Gross profit 1,922,104 6,185,053
------------------- ---------------------
COSTS AND EXPENSES:
General and administrative 2,470,135 7,610,699
Depreciation 50,346 145,568
Amortization 177,804 525,508
------------------- ---------------------
Total Costs and Expenses 2,698,285 8,281,775
------------------- ---------------------
Operating loss (776,181) (2,096,722)
-------------------- ----------------------
Other expense:
Interest--other (118,675) (327,228)
Interest--stockholders (202,249) (470,359)
-------------------- ----------------------
Total Other Expense (320,924) (797,587)
-------------------- ----------------------
Loss before income taxes (1,097,105) (2,894,309)
Income tax benefit (279,395) (699,300)
-------------------- ----------------------
NET LOSS $ (817,710) $ (2,195,009)
==================== ======================
BASIC AND DILUTED LOSS PER SHARE $ (0.05) $ (0.15)
==================== ======================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 14,879,226 14,806,019
==================== ======================
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As more fully described in the Company's December 31, 1998, report on Form
10-KSB, 1998 operations are not meaningful.
See Accompanying Notes to Consolidated Financial Statements.
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 [UNAUDITED]
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<CAPTION>
COMMON STOCK CAPITAL IN TOTAL
--------------------- EXCESS OF UNEARNED TREASURY ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT PAR VALUE COMPENSATION STOCK DEFICIT EQUITY
------ ------ ---------- ------------ --------- ----------- -------------
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BALANCE - DECEMBER 31,
1998 14,544,225 $14,544 $2,992,518 $ -- $ -- $ (831,894) $2,175,168
Equity of merged entity [1] -- -- 1,000 -- -- (202,842) (201,842)
Common Stock Issued
on January 21, 1999 250,001 250 1,499,750 -- -- -- 1,500,000
Common Stock Issued
on April 15, 1999 in
payment for services 63,000 63 377,937 (378,000) -- -- --
Treasury Stock Purchased
61,002 shares on
June 30, 1999 -- -- -- -- (366,012) -- (366,012)
Stock Options Exercised
on June 30, 1999 22,000 22 1,078 -- -- -- 1,100
Imputed Interest [8] -- -- 151,788 -- -- -- 151,788
Amortization of Unearned
Compensation -- -- -- 189,000 -- -- 189,000
Net Loss for the Nine
Months Ended
September 30, 1999 -- -- -- -- -- (2,195,009) (2,195,009)
--------- ------- ---------- ------- -------- ---------- -----------
BALANCE - SEPTEMBER 30,
1999 14,879,226 $14,879 $5,024,071 $ (189,000) %(366,012) $(3,229,745) $ 1,254,193
========== ======= ========== =========== ========== =========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1999 [UNAUDITED]
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,195,009)
Adjustments to reconcile net income
to cash used by operating activities:
Depreciation 145,568
Amortization 525,508
Imputed interest 328,343
Deferred income tax benefit (699,300)
Increase in allowance for doubtful allowances 50,000
Non-cash consideration for marketing services 189,000
Change in Assets and Liabilities:
[Increase] decrease in:
Accounts receivable 11,482
Other current assets 1,446
Due from employees (14,923)
Due from affiliates (25,076)
Increase [decrease] in:
Accounts payable 5,094
Accrued expenses (62,769)
Accrued expenses-stockholders 481,849
Income taxes payable (117,669)
-----------
Total adjustments 1,096,747
-----------
NET CASH - OPERATING ACTIVITIES (1,376,456)
===========
INVESTING ACTIVITIES
Payments for Property and Equipment (116,595)
-----------
FINANCING ACTIVITIES
Increase in cash overdraft 25,166
Due to affiliates (343,941)
Advances from stockholders 2,755,970
Proceeds from Notes Payable 200,000
Payments on notes and leases payable (22,386)
Payment on notes payable - stockholders (750,000)
Acquisition of Treasury Stock (366,012)
Issuance of common stock 1,100
-----------
NET CASH - FINANCING ACTIVITIES 1,499,897
-----------
NET INCREASE IN CASH 6,846
CASH AT BEGINNING OF PERIOD 900
-----------
CASH AT END OF PERIOD $ 7,746
===========
See Accompanying Notes to Consolidated Financial Statements.
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ELLIGENT CONSULTING GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 [UNAUDITED]
As more fully described in the Company's December 31, 1998, report on Form
10-KSB, 1998 operations are not meaningful.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During March and April 1999, the Company issued 250,001 shares of common stock
valued at $1,500,000 to related parties in settlement of the January 21, 1999,
installment of notes payable related to the acquisition of CSI.
On April 15, 1999, the Company issued 63,000 shares of restricted common stock
in connection with an agreement to obtain marketing services. The value
associated with the issuance of these shares was $378,000.
See Accompanying Notes to Consolidated Financial Statements.
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]
[1] ORGANIZATION AND BUSINESS
Elligent Consulting Group, Inc., [the "Company"] was incorporated in February of
1987 under the laws of the state of Nevada as Coronado Ventures, Inc. During the
period commencing in 1990 through 1992, the Company acquired Tahoeview
Cablevision, Inc. ["Tahoe"] and Weststar Group North ["North"] and changed its
name to Weststar Group, Inc. Subsequently, Tahoe and North became subject to a
bankruptcy proceeding, which, on July 31, 1996, was concluded by an Order and
Judgment from the Court regarding the Final Distribution of Proceeds of Sale of
Assets by the Receiver. The Company was not named as a defendant in the
bankruptcy and was not involved in any manner, except that it was the sole
shareholder of Tahoe and North. The conclusion of the aforementioned proceedings
resulted in the Company emerging without any business operations and being
deemed to be a new entity for financial statement reporting purposes. As such,
the Company was considered to be a development stage company. Pursuant to the
Order and Judgment of the Court, Tahoe and North were ordered dissolved.
In July of 1997, the Company changed its name to Arena Group, Inc. and began the
process of locating a business venture with which the Registrant could enter
into a Reorganization.
On July 23, 1998, the Registrant, through its wholly owned subsidiary Patra
Acquisition, Inc., a Delaware corporation ["Patra Acquisition"], entered into a
Non-Binding Letter of Intent [the "Letter of Intent"] with Patra Capital Ltd., a
Delaware corporation ["Patra Capital"]. The Letter of Intent provided for the
execution of a definitive merger agreement [the "Merger Agreement"]. Pursuant to
the Merger Agreement, Patra Capital merged with Patra Acquisition, and Patra
Capital, the surviving corporation of the merger, became a wholly owned
subsidiary of the Registrant [the "Reorganization"]. As part of the
Reorganization, the Registrant changed its name to Elligent Consulting Group,
Inc. and Patra Capital changed its name to Conversion Services International,
Inc. On September 3, 1998, with an effective date of August 1, 1998, for
accounting purposes, the Registrant issued 12,950,000 shares of its restricted
common stock to the then current shareholders of Patra Capital in exchange for
all of the issued and outstanding common stock of Patra Capital. At that time,
the management of Patra Capital became the management of the Company. The merger
was accounted for as a Recapitalization of the Company with Patra as the
acquiror [See Note 12].
On September 21, 1998, effective August 1, 1998, for accounting purposes, the
Company through its wholly owned subsidiary, Patra Capital, purchased Conversion
Services International, Inc. ["CSI"] and Doorways, Inc. ["Doorways"]. Doorways
is a wholly-owned subsidiary of CSI. The operations of CSI and Doorways are
included in the Company's results of operations commencing on August 1, 1998.
The purchase price was $12,298,885 consisting of 1,100,000 shares of the
Company's common stock [valued at $2,640,000], cash payments of $1,500,000
delivered at the closing and notes payable of $8,500,000, less amounts due from
stockholders acquired in the
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #2 [UNAUDITED]
[1] ORGANIZATION AND BUSINESS [CONTINUED]
transaction of $582,399. The net discounted value of the consideration, net of
the acquired loan from the stockholders, was $7,561,292.
CSI is in the business of providing information technology consulting services.
CSI provides high-end project management, applications implementation, data
warehousing, consulting, Internet and information technology ["IT"] staffing
services. CSI has recently expanded its operation to accommodate additional
consultant/employees and new in-house training facilities. CSI currently has
approximately 150 employees and consultants.
On July 27, 1999, Elligent Consulting Group, Inc. [Elligent], Elligent
Consulting Services, Inc. ["ECS"], a Delaware corporation and Andreas Typaldos
["Typaldos"] signed a Stock Purchase Agreement providing for the acquisition of
all of the issued and outstanding common stock of ECS in accordance with the
Delaware General Corporation Law ["The Delaware Act"]. The Stock Purchase
Agreement provides that Typaldos will receive $1.00. Mr. Typaldos is also the
President and Chief Executive Officer of Elligent. Due to common ownership, the
acquisition was accounted for at book value in a manner similar to a pooling of
interests. In anticipation of the acquisition, options to acquire common stock
in ECS previously granted to ECS employees were converted to options to acquire
common stock in Elligent at a price of $0.05 per share of common stock.
ECS is in the business of providing information technology consulting services
directed mainly towards internet, network and e-business related applications.
ECS currently has 30 employees and consultants.
In prior years, the Company was considered a development stage company and the
operations were not meaningful.
[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[A] PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of the Company, and its wholly-owned
subsidiaries, Conversion Services International, Inc. ["CSI"], Doorways, Inc.
and Elligent Consulting Services, Inc. All significant intercompany transactions
and balances have been eliminated in the consolidation.
[B] REVENUE RECOGNITION - Revenue from consulting and professional services are
recognized at the time the services are provided. Revenue from systems
integration and software development are recognized based on the terms of the
contracts. Revenue under maintenance contracts is recognized ratably over the
life of the contract. Revenue under fixed price contracts is recognized on the
percentage of completion.
2
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #3 [UNAUDITED]
[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
[C] PROPERTY AND EQUIPMENT - Property and equipment are stated at cost less
accumulated depreciation and amortization and include equipment held under
capital lease agreements. Depreciation and amortization, which includes
amortization of leased equipment, are computed using the straight-line method
over the estimated useful lives of the respective assets. Estimated useful lives
range from three to five years. When the assets are sold or retired, the cost
and accumulated depreciation are removed from the accounts and any gain or loss
is included in operations.
[D] 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 reporting period. Actual results could differ from those estimates.
[E] INTANGIBLES - Goodwill is recognized in business combinations accounted for
under the purchase method of accounting and represents the excess of the
purchase price over the fair value of identifiable net assets acquired. Goodwill
is amortized on a straight-line basis over twenty years, which is the period
during which the Company expects to receive benefits. A customer list is
recorded at cost and amortized on a straight-line basis over its estimated
useful life of five years.
[F] CONCENTRATIONS OF CREDIT RISK - Financial instruments which potentially
subject the Company to concentrations of credit risk are cash and accounts
receivable arising from its normal business activities. The Company routinely
assesses the financial strength of its customers, based upon factors surrounding
their credit risk, establishes an allowance for uncollectible accounts, and as a
consequence, believes that its accounts receivable credit risk exposure beyond
such allowances is limited. The Company places its cash with high credit quality
financial institutions. The amount on deposit in any one institution that
exceeds federally insured limits is subject to credit risk. The Company had
$108,000 as of September 30, 1999, with financial institutions subject to credit
risk beyond the insured amount. The Company has not experienced any losses in
such accounts. The Company does not require collateral or other security to
support financial instruments subject to credit risk.
Customers accounting for 10% or more of revenue for the nine months ended
September 30, 1999, are as follows:
1999
----
Customer A $6,831,000
The above customer comprised 32% of accounts receivable at September 30, 1999.
3
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #4 [UNAUDITED]
[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
[F] CONCENTRATIONS OF CREDIT RISK -[CONTINUED]
Any decision by this major customer to cease or reduce its use of the Company's
services may have an adverse effect on the Company's operations. Further, any
delay in payment or non-payment of fees owed by the Company's large clients will
have an adverse effect on the Company's results of operations.
[G] ADVERTISING - The Company expenses advertising costs as incurred. There was
$27,400 in advertising cost during the nine months ended September 30, 1999.
[H] INCOME TAXES - Income taxes are provided based upon the provisions of
Statement of Financial Accounting Standards ["SFAS"] No. 109, "Accounting for
Income Taxes," which requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
[I] CASH AND CASH EQUIVALENTS - The Company considers certain highly liquid
investments with a maturity of nine months or less when purchased to be cash
equivalents. The Company has no cash equivalents at September 30, 1999.
[J] BASIC AND DILUTED LOSS PER COMMON SHARE - The Company adopted Statement of
Financial Accounting Standards ["SFAS"] No. 128, "Earnings Per Share." Under
"SFAS 128," loss per common share is computed by dividing net loss available to
common stockholders by the weighted-average number of common shares outstanding
during the period. In the Company's present position, diluted loss per share is
the same as basic loss per share. Securities that could potentially dilute EPS
in the future include the issuance of common stock in settlement of notes
payable and the exercise of stock options [See Notes 8 and 13].
[K] IMPAIRMENT - Certain long-term assets of the Company are reviewed
periodically as to whether their carrying value has become impaired, pursuant to
guidance established in Statement of Financial Accounting Standards ["SFAS"] No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." Management considers assets to be impaired if the
carrying value exceeds the future projected cash flows from related operations
[undiscounted and without interest charges]. If impairment is deemed to exist,
the assets will be written down to fair value or projected discounted cash flows
from related operations. Management also reevaluates the periods of amortization
to determine whether subsequent events and circumstances warrant revised
estimates of useful lives. As of September 30, 1999, management expects these
remaining assets to be fully recoverable.
4
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #5 [UNAUDITED]
[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
[L] STOCK OPTIONS AND SIMILAR EQUITY INSTRUMENTS - On August 1, 1998, the
Company adopted the disclosure requirements of Statement of Financial Accounting
Standards ["SFAS"] No. 123, "Accounting for Stock-Based Compensation," for stock
options and similar equity instruments [collectively "Options"] issued to
employees and directors; however, the Company will continue to apply the
intrinsic value based method of accounting for options issued to employees
prescribed by Accounting Principles Board ["APB"] Opinion No. 25, "Accounting
for Stock Issued to Employees" rather than the fair value based method of
accounting prescribed by SFAS No. 123. SFAS No. 123 also applies to transactions
in which an entity issues its equity instruments to acquire goods and services
from non-employees. Those transactions must be accounted for based on the fair
value of the consideration received or the fair value of the equity instruments
issued, whichever is more reliably measurable.
[3] PROPERTY AND EQUIPMENT AND DEPRECIATION AND AMORTIZATION
Property and equipment and accumulated depreciation and amortization as of
September 30, 1999, are as follows:
Computers and Equipment $322,681
Furniture and Fixtures 33,300
Leasehold Improvements 60,352
Property Held Under Capital Lease 179,489
--------
Total - At Cost 595,822
Less: Accumulated Depreciation and Amortization 219,891
--------
PROPERTY AND EQUIPMENT - NET $375,931
---------------------------- ========
Depreciation expense for the nine months ended September 30, 1999, was $145,568.
For property held under capital leases, amortization expense, which is included
in depreciation expense, for the nine months ended September 30, 1999, is
$31,610, and accumulated amortization is $64,399 at September 30, 1999.
5
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #6 [UNAUDITED]
[4] INTANGIBLE ASSETS
A breakdown of intangible assets as of September 30, 1999, is as follows:
ACCUMULATED
COST AMORTIZATION NET
---- ------------ ---
Goodwill $ 12,013,571 $ 700,790 $ 11,312,781
Customer List $ 500,000 $ 116,667 $ 383,333
The customer list is included in the caption "other assets" on the balance
sheet.
Amortization expense for the nine months ended September 30, 1999, amounted to
$525,508.
[5] DUE FROM EMPLOYEES
The amounts due from employees of $29,726 at September 30, 1999, consist of
loans and advances which are non-interest bearing and have no stated terms of
repayment.
[6] EMPLOYEE BENEFIT PLAN
The Company has adopted a pension plan pursuant to Section 401 [K] of the
Internal Revenue Code, that covers substantially all employees. Eligible
employees may contribute on a tax deferred basis a percentage of compensation up
to the maximum allowable amount. Employee contributions vest immediately. The
Company is not required to make a matching contribution. The Company's
contribution to the Plan was 25% of the first $10,000 of employee contributions
which amounted to a charge to operations of $33,941 for the nine months ended
September 30, 1999. The Company's contributions vest in 20% increments annually,
beginning with two years of service, until fully vested after six years of
service.
6
<PAGE>
ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #7 [UNAUDITED]
[7] LONG-TERM DEBT AND CAPITAL LEASES
<TABLE>
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Long-term debt at September 30, 1999, consists of the following:
Revolving line of credit (A) $ 2,050,000
Revolving line of credit (B) 100,000
Note payable - bank, due in monthly installments of $4,167, including
interest at the bank's prime rate plus 2%, due March 2001. The
note is collateralized by equipment. 75,000
Obligations under capital leases, collateralized by equipment originally
costing $147,623, payable in monthly installments including
interest at rates from 12.69% to 24.43%, through 2004. 144,774
------------
Total 2,369,774
Less: Current Portion 2,280,034
------------
TOTAL $ 89,740
----- ============
</TABLE>
The revolving line of credit (A) is due January 1, 2000, and bears interest at
the bank's prime rate plus 1.5% payable monthly. The Company may borrow the
lesser of 80% of eligible accounts receivable, as defined, or $2,050,000. At
September 30, 1999, the Company had no available credit under this line.
The revolving line of credit (B) was due January 1, 2000, and bears interest at
the bank's prime rate plus 1.5% payable monthly. At September 30, 1999, the
Company had no available credit under this line.
The prime rate at September 30, 1999, was 7.75%. For the nine months ended
September 30, 1999, the weighted average interest rate on short-term borrowings
was 9.25%.
The following schedule shows the future maturities of long-term debt exclusive
of capital leases:
TWELVE MONTHS ENDED
SEPTEMBER 30,
-------------
2000 $ 2,200,000
2001 25,000
-------------
TOTAL $ 2,225,000
----- ==============
7
<PAGE>
ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #8 [UNAUDITED]
[7] LONG-TERM DEBT AND CAPITAL LEASES - [CONTINUED]
The following schedule shows the minimum lease payments under capital lease as
of September 30, 1999:
TWELVE MONTHS ENDED
SEPTEMBER 30,
-------------
2000 $ 60,202
2001 55,837
2002 23,153
2003 5,582
---------
Total 144,774
Less: Amount Representing Interest 25,648
---------
Total 119,126
Less: Current Portion 54,386
---------
LONG-TERM PORTION $ 64,740
----------------- ==========
[8] RELATED PARTY TRANSACTIONS
The amount due from stockholder of $8,550 is non-interest bearing and has no
stated terms of repayment.
Amounts due from affiliates of $40,000 are working capital loans due from
affiliated companies controlled by a principal stockholder of the Company. The
loans are non-interest bearing and have no stated terms of repayment.
The advances from stockholders of $2,750,158 are working capital advances which
were non-interest bearing until August 1, 1999. Since July 31, 1999, the loans
bear interest at 8% and have no stated terms of repayment. Imputed interest
expense of $151,788 was recorded at 8% interest for the seven months ended July
31, 1999, and was recorded as an increase to capital in excess of par value.
Interest expense of $43,067 was recorded for the two months ended September 30,
1999.
Notes Payable - Stockholders represent amounts due to Patra Holdings and the
former Stockholders of CSI as a result of CSI's acquisition by Patra Capital.
Total notes payable as of September 30, 1999, are $7,167,602. The remaining
payments were expected to be made on August 1, 1999. Discussions are now ensuing
to determine when the notes will be paid. This will be determined through formal
arbitration.
8
<PAGE>
ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #9 [UNAUDITED]
[8] RELATED PARTY TRANSACTIONS- [CONTINUED]
The notes were discounted at 8% through July 31, 1999. The imputed interest
expense for the seven months ended July 31, 1999, was $172,171. Since July 31,
1999, the notes bear interest at 8%. Interest expense of $103,333 was recorded
for the two months ended September 30, 1999. The notes to the former
stockholders of CSI are collateralized by CSI common stock.
[9] COMMITMENTS AND CONTINGENCIES
LEASES - The Company leases office space under an operating lease, which expires
March 2003. The lease contains an option to renew for a term of five years. In
addition to minimum rentals, the Company is liable for additional rentals based
on its proportionate share of real estate taxes and operating expenses, as
defined.
The Company occupies additional office space, which is leased by a related
company, of which one of the stockholders is a stockholder of the Company, under
an operating lease which expires in April of 2002. Approximately 62% of the
cost of the lease is allocated to the Company.
Minimum annual rentals under the leases are as follows:
TWELVE MONTHS ENDED
SEPTEMBER 30,
-------------
2000 $ 462,754
2001 462,754
2002 462,754
2003 90,465
-------------
TOTAL $ 1,478,727
----- =============
Total rent expense was $289,808 for the nine months ended September 30, 1999.
LETTER OF CREDIT - The Company is committed under an outstanding letter of
credit with a bank which expires in November 1999 to secure the security deposit
on CSI office space, in the amount of $291,657. The agreement automatically
extends for additional one year periods with a final expiration date of November
2003.
EMPLOYMENT AGREEMENTS - The Company is committed under employment agreements to
the two former stockholders of CSI. The Company is obligated to pay $250,000
each per year to the former stockholders. The agreements terminate on August 1,
2001, and include automatic annual renewals at the end of each term.
9
<PAGE>
ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #10 [UNAUDITED]
[10] FAIR VALUE OF FINANCIAL INSTRUMENTS
In assessing the fair value of these financial instruments, the Company has used
a variety of methods and assumptions, which were based on estimates of market
conditions and risks existing at that time. For all financial instruments,
including cash, due from related parties, due to affiliates and stockholders,
debt maturing within one year, it was estimated that the carrying amount
approximated fair value for these financial instruments because of their short
maturities. The carrying amount of notes payable long-term approximates fair
value which is based on current rates at which the Company could borrow funds
with similar remaining maturities.
[11] INCOME TAX BENEFIT
The income tax benefit consists of the following:
Current Taxes:
Federal $ --
State --
----------
Total --
----------
Deferred Taxes:
Federal 542,000
State 157,300
----------
Total 699,300
----------
INCOME TAX BENEFIT $ 699,300
------------------ ==========
10
<PAGE>
ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #11 [UNAUDITED]
[11] INCOME TAX BENEFIT [CONTINUED
The tax effect of significant items comprising the Company's deferred tax
liability at September 30, 1999, are as follows:
DEFERRED TAX ASSETS:
Deductibility of Accrued Expenses $ 80,900
Net Operating Loss Carry Forwards 721,428
---------
DEFERRED TAX ASSET $ 702,328
------------------ =========
A reconciliation of income tax at the statutory rate to the Company's effective
rate is as follows:
Statutory Federal Income Tax Rate (34)%
Non-deductible Amortization of Intangibles 18 %
Other (2)%
State Income Tax (6)%
---------
INCOME TAX BENEFIT - EFFECTIVE RATE (24)%
----------------------------------- =========
[12] COMMON STOCK
Pursuant to a reorganization and acquisition of Patra Capital and CSI, effective
as of August 1, 1998, the Company issued 12,950,000 additional common shares.
[13] EMPLOYEE STOCK OPTIONS
An incentive stock option plan, which was adopted by the Company, in August of
1998, reserves 1,500,000 shares of the Company's common stock. Options granted
under the plan are intended to qualify as incentive stock options under existing
tax regulations.
11
<PAGE>
ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #12 [UNAUDITED]
[13] EMPLOYEE STOCK OPTIONS [CONTINUED]
Coincident with the acquisition of Elligent Consulting Services, Inc., the
Company merged Services' plan into its plan. All of the outstanding options of
Services became fully vested options in the Company's plan.
The following table summarizes the activity in common shares subject to
incentive stock options for the nine months ended September 30, 1999:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF SHARES EXERCISE PRICE
---------------- --------------
<S> <C> <C>
DECEMBER 31, 1998 - BALANCE 90,100 $ 5.00
Granted 173,400 $ 1.60
Exercised 22,000 $ 0.05
Canceled or Expired 12,350 $ 5.00
----------- ---------------
OPTIONS OUTSTANDING AT SEPTEMBER 30, 1999 229,150 $ 2.90
----------------------------------------- =========== ==============
</TABLE>
There were 100,000 options exercisable at September 30, 1999.
The following table summarizes information about stock options outstanding at
September 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------------------------------
WEIGHTED-AVERAGE
NUMBER REMAINING WEIGHTED-AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
--------------- ----------- ---------------- --------------
<S> <C> <C> <C>
$0.05 - 8.00 229,150 9.72 $ 2.90
========
</TABLE>
There was no compensation cost recognized in income for the nine months ended
September 30, 1999.
12
<PAGE>
ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #13 [UNAUDITED]
[14] SUBSEQUENT EVENT
Litigation with CSI
During July 1999, a dispute arose between the former owners of CSI and Elligent
regarding the future management of the Company. Resulting from that dispute, a
temporary restraining order (TRO) was issued by the United States District Court
for the District of New Jersey. Pursuant to the TRO, the former owners of CSI
are now running that company on behalf of Elligent. We expect to move the
dispute to arbitration pursuant to the terms of the original merger agreement
dated August 1, 1998. A possible outcome of the arbitration could result in
Elligent selling CSI back to its original owners.
13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
During July 1999, a dispute arose between the former owners of CSI and Elligent
regarding the future management of the Company. Resulting from that dispute, a
temporary restraining order (TRO) was issued by the United States District Court
for the District of New Jersey. Pursuant to the TRO, the former owners of CSI
are now running that company on behalf of Elligent. The dispute is now in
arbitration pursuant to the terms of the original merger agreement dated August
1, 1998. A possible outcome of the arbitration could result in Elligent selling
CSI back to its original owners.
The remainder of management's discussion and analysis of financial condition and
results of operations should be read in light of the preceding disclosure.
Summary Financial Information
The following table contains certain selected financial data of the
Company and is qualified by the more detailed financial statements and the notes
thereto provided in this report. The financial data for the nine months ended
September 30, 1999, has been derived from the Company's unaudited financial
statements, which statements are included elsewhere in this Report. The pro
forma (unaudited) twelve month numbers provide an historic view of our revenue
growth.
STATEMENT OF OPERATIONS DATA
- ----------------------------
<TABLE>
<CAPTION>
($ in thousands)
NINE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1 9 9 9 1 9 9 8 1 9 9 7 1 9 9 6
------- ------- ------- -------
ACTUAL PRO FORMA PRO FORMA PRO FORMA
------ --------- --------- ---------
<S> <C> <C> <C> <C>
Gross revenue $ 19,504 $ 22,149 $ 13,247 $ 9,306
</TABLE>
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
BALANCE SHEET DATA
AS AT
SEPTEMBER 30, 1999
ACTUAL
------
[in Thousands]
Current Assets $ 4,691
Total Assets 16,959
Current Liabilities 15,615
Long-Term Debt 90
Total Liabilities 15,705
Shareholders' Equity 1,254
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
As part of a Reorganization, we changed our name to Elligent Consulting
Group, Inc. on July 31, 1998. On September 3, 1998, with an effective date of
August 1, 1998, for accounting purposes, we issued 12,950,000 shares of its
restricted common stock to the then current shareholders of Patra Capital in
exchange for all of the issued and outstanding common stock of Patra Capital. At
that time, the management of Patra Capital became our management. The merger was
accounted for as a Recapitalization.
On September 21, 1998, effective August 1, 1998, for accounting
purposes, we, through our wholly owned subsidiary, Patra Capital, purchased
Conversion Services International, Inc. The operations of CSI are included in
our results of operations commencing on August 1, 1998. In connection with the
acquisition of CSI, CSI's shareholders signed three-year employment agreements
with us.
The purchase price was $12,298,885 consisting of 1,100,000 shares of
our common stock (valued at $2,640,000), cash payments of $1,500,000 delivered
at the closing and notes payable of $8,500,000, less amounts due from
stockholders acquired in the transaction of $582,399. The net discounted value
of the consideration, net of the acquired loan from the stockholders, was
$7,561,292. Interest at 8% was paid on the first two installments (November 24th
and January 21st ). The final two payments bear no interest. As of September 30,
1999, the remaining payments which have not been paid to date were due as
follows:
$3,000,000 May 1, 1999
$1,667,601 August 1, 1999
The original principal value of the May 1, 1999, installment was
$3,750,000. The Company paid $750,000 related to the installment and has
deferred the remaining $3,000,000 balance.
The May 1, 1999, and August 1, 1999, notes are interest free and have
been discounted at 8%. Beginning August 1, 1999, interest is being accrued on
the remaining principal balance at 8%. The imputed interest expense for the
seven months ended July 31, 1999, was $151,788. Interest expense for the two
months ended September 30, 1999, was $70,000. All notes to stockholders are
collateralized by CSI common stock.
We expect to continue an acquisition program to acquire other
technology consulting companies constituting a set of key consulting practice
areas to serve as a platform ("platform") for further roll-up and consolidation
through acquisition of similar companies in the future. Through these platform
companies, we plan to offer our clients an enterprise-type offering of services.
These services will include management consulting, business function
reengineering, mission critical application rollouts and package implementation,
database and datawarehousing consulting, networking and interim and permanent
staffing or support.
16
<PAGE>
We will then continue our development through continued internal growth
from the acquired platform companies and additional rollup acquisitions within
each of our service offering areas. Through this expansion and growth strategy,
we plan to develop into a leading vertically integrated IT consulting services
company.
We plan to enter a business segment that has significant competition
from other much larger companies. We expect to offer our services to large
national and multi-national companies. We own no copyrights or patents.
Our corporate headquarters are located in New York City, New York. CSI
maintains its offices in East Hanover, New Jersey. ECS is located in the same
space as our corporate headquarters.
We plan to continue an expansion strategy through (i) the acquisition
of a select number of technology consulting companies with complementary areas
of expertise and (ii) internal growth from the acquired operating subsidiaries.
While there is significant risk as a result of potential external problems, lack
of available capital, changing economic and market conditions, and significant
competition from much larger companies, through this expansion strategy, we plan
to develop into a leading information technology services company. Key to the
acquisition strategy is the retention of the acquired company's management and
staff.
For the nine-month period ended September 30, 1999, we had revenue of
$19.5 million versus $17.2 million in the year earlier period, an increase of
13%, and a net loss $2.2 million.
The major components of the nine-month loss are as follows:
$ IN THOUSANDS
--------------
Operating loss $ (157)
------------
Depreciation, Amortization and Interest 1,469
Income Tax Benefit (699)
Management and Holding Company Expenses 1,268
-----------
Subtotal Acquisition Related and Other Expenses 2,038
-----------
Net Loss $ (2,195)
===========
The management and holding company expenses represent costs related to
new acquisitions in progress and efforts to locate equity and debt financing
required to achieve our growth goals. The remaining analysis of results focuses
on the operations of our two operating subsidiary companies: CSI and Elligent
Services. The unaudited information for this transition period is not
necessarily indicative of the results for the entire year, nor should it be used
to project our operations for future dates or periods.
17
<PAGE>
The financial statements presented herein represent the financial
statements of Elligent Consulting Group, Inc. and its wholly owned subsidiaries
CSI and ECS.
CSI: The CSI acquisition was accounted for as of August 1, 1998, on the purchase
method of accounting and therefore the financial statements only reflect CSI's
operations since that date. In order to provide investors with appropriate
historical data, Management's discussion will include comparative data
reflecting the results of operations for CSI during the year preceding its
acquisition by us.
CSI has been in the business of providing information technology
consulting services for approximately nine years. CSI provides high-end project
management, applications implementation, data warehousing, consulting, internet
and information technology ("IT") staffing services. CSI has recently expanded
its operation to accommodate additional consultant/employees and new in-house
training facilities. CSI currently has approximately 150 employees and
consultants.
ECS: The Elligent Services acquisition occurred on July 27, 1999. Due to common
ownership, the acquisition was accounted for at book value in a manner similar
to a pooling of interests. As a result the acquisition was reflected in the
financial statements as if it occurred upon its inception in early 1998.
ECS began operations in March 1998 and is in the business of providing
technology consulting services mainly related to the internet, network and
e-business related applications. ECS currently has 30 employees and consultants.
CONSOLIDATED RESULTS:
For the nine months ended September 30, 1999, our operating
subsidiaries had revenues of $19.5 million reflecting a 13% increase from the
$17.2 million revenues during the corresponding period in 1998. The cost of
revenues for the nine months ended September 30, 1999, was $13.3 million
resulting in a gross margin from operations of $6.2 million or 32%.
The results of operations for the nine months ended September 30, 1999,
and 1998, are as follows:
<TABLE>
<CAPTION>
[In Thousands]
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1 9 9 9 1 9 9 8
------- -------
<S> <C> <C>
Revenue $ 19,504 $17,227
Cost of Revenue 13,319 11,534
------- -------
Gross Margin 6,185 5,693
Operating Expense [Excluding Depreciation and Amortization] 6,342 5,641
------- -------
Operating Income (loss) $ (157) $ 52
======= =======
</TABLE>
18
<PAGE>
CSI and ECS continue to show continued growth in revenues in 1999
versus the comparable period a year ago. Operating expenses for 1999 include
additional staffing costs to further develop business practice and channel
management capabilities. We expect operating expenses as a percent of revenue to
decrease during the remainder of 1999.
LIQUIDITY AND FINANCIAL POSITION
As of September 30, 1999, we had a working capital deficit of $10.9
million. Our working capital deficit reflects (i) $2.2 million due to a bank
related to the revolving lines of credit, collateralized by our accounts
receivable, and other loans, (ii) accounts payable and accrued expenses of $2.5
million, (iii) notes payable to stockholders of $7.2 million related to the
acquisition of CSI, and (iv) amounts due to related parties of $2.8 million,
relative to the acquisition of CSI, working capital advances and the funding of
costs related to future acquisitions in progress. These latter amounts are
principally due to our principal stockholder and entities owned or controlled by
him.
We believe that sufficient sources of funds exist to cover the working
capital needs of the Company. The principal sources of these funds are (i)
projected cash flow from operations, (ii) the revolving lines of credit, (iii)
the personal assets of a principal stockholder and related entities owned or
controlled by him, (iv) the issuance of the Company's common stock, and (v)
additional financing sources.
However, no assurance can be given that we will be successful in
obtaining such financing, and the failure to obtain necessary financing could
have a material adverse effect on our acquisition timetable. At the present
time, our management believes that our current sources of funding are adequate
to support our growth and that of CSI and ECS. The current sources are not
adequate to support our acquisition plans.
INFLATION
Inflation has not had a material effect upon the Company's results of
operations to date. In the event the rate of inflation should accelerate in the
future, it is expected that costs in connection with the provision by the
Company of its services and products will increase, and, to the extent such
increased costs are not offset by increased revenues, the operations of the
Company may be adversely affected.
YEAR 2000
General Description of the Year 2000 Problem. The Year 2000 problem
concerns the inability of certain computer systems to appropriately recognize
the Year 2000 when the last two digits of the year are entered in the date
field. Our date critical functions related to the Year 2000 and beyond, may be
adversely affected unless these computer systems are or become Year 2000
compliant.
19
<PAGE>
Our State of Readiness. We are a service business and do not use major
computer systems in our business. Our computer needs are satisfied through a
local area network comprised of personal computers and a server, all of which
are Year 2000 compliant.
Effect of Third Party Readiness. Our Year 2000 compliance is partially
dependent upon key third parties also being Year 2000 compliant on a timely
basis. We provide consulting services and we could be adversely affected by the
Year 2000 problem if computer systems of third parties such as banks, suppliers
and others with whom we do business fail to address the Year 2000 problem
successfully. For example, in the course of rendering our consulting services,
we may be adversely affected by, among other things, warranty and other claims
made by our suppliers related to product failures caused by the Year 2000
problem, the disruption or inaccuracy of data provided to us by non-Year 2000
compliant third parties, and the failure of our service providers to become Year
2000 compliant.
In an effort to evaluate and reduce our exposure in this area, we
intend to make an inquiry of vendors and other business partners about their
progress in identifying and addressing problems that their computer systems may
face in correctly processing date information related to the Year 2000. In
particular, we will seek to obtain statements from a substantial majority of our
vendors that they are Year 2000 compliant or are unaffected by "date sensitive"
information. We estimate that this process, including analysis of responses and
follow up interviews will be complete on or before September 30, 1999.
Our management believes that the purchasing patterns of customers and
prospective customers might be affected by Year 2000 issues. Many companies may
need to modify or upgrade their information systems to address the Year 2000
problem. The effects of this issue and of the efforts by other companies to
address it are unclear. Many companies are expending significant resources to
correct their current software systems for Year 2000 compliance. These
expenditures might result in reduced funds available to purchase services and
products such as those that we offer.
Risks. We have no reason to believe that our exposure to the risks or
lack of supplier and customer Year 2000 readiness is any greater than the
exposure to such risks that affect our competitors generally. However, if a
significant number of our key vendors, customers and other business partners
experience business disruptions as a result of their lack of Year 2000
readiness, their problems could have a material adverse effect on our financial
position and operations. In addition, if all Year 2000 issues within our
business are not properly identified there can be no assurance that the Year
2000 issue will not have a material adverse effect on our results of operations
or financial position.
Our cost estimates and time frames will be influenced by our ability to
identify Year 2000 problems, the nature of programming required to fix any
problems, and the compliance success of third parties. For those reasons, no
assurance can be given at this point that our computer system will be Year 2000
compliant in a timely manner or that we will not incur significant additional
expenses pursuing Year 2000 compliance.
20
<PAGE>
FORWARD LOOKING INFORMATION
This report contains certain forward-looking statements and
information. The cautionary statements made in this report should be read as
being applicable to all related forward-looking statements wherever they appear.
Forward-looking statements, by their very nature, include risks and
uncertainties. Accordingly, our actual results could differ materially from
those discussed herein. A wide variety of factors could cause or contribute to
such differences and could adversely impact revenues, profitability, cash flows
and capital needs. Such factors, many of which are beyond our control, include
the following: our success in obtaining new contracts; the volume and type of
work orders that are received under such contracts; levels of, and ability to,
collect accounts receivable; availability of trained personnel and utilization
of our capacity to complete work; competition and competitive pressures on
pricing; availability, cost and terms of debt or equity financing; and economic
conditions in the United States and in the regions served.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not exposed to material risk based on interest rate
fluctuation, exchange rate fluctuation, or commodity price fluctuation.
21
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
During the nine months ended September 30, 1999, the Company issued 250,001
shares of common stock with a value of $1,500,000 to related parties in
settlement of the January 21, 1999, installment of notes payable related to the
acquisition of CSI. This stock issuance represented payment in full for the
$1,500,000 installment. The liquidation of debt resulted in an addition to
Common Stock of $250, and an increase in Paid in Capital of $1,499,750.
On April 15, 1999, the Company issued 63,000 shares of restricted common stock
in connection with an agreement to obtain marketing services. The value
associated with the issuance of these shares was $378,000.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
27.1 - Financial Data Schedule
B. Reports on Form 8-K
None
INDEX TO EXHIBITS
NONE
22
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ELLIGENT CONSULTING GROUP, INC.
Dated: November 15, 1999 By: /S/ ANDREAS TYPALDOS
--------------------------------
Andreas Typaldos
Chairman of the Board
and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
SIGNATURE TITLE(S)
--------- --------
By: /S/ ANDREAS TYPALDOS Chairman of the Board and
-------------------- Chief Executive Officer
(Andreas Typaldos)
By: /S/ EDWIN T. BRONDO Chief Financial Officer
-------------------
(Edwin T. Brondo)
23
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 7,746
<SECURITIES> 0
<RECEIVABLES> 4,114,365
<ALLOWANCES> 150,260
<INVENTORY> 0
<CURRENT-ASSETS> 4,690,606
<PP&E> 375,931
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,958,650
<CURRENT-LIABILITIES> 15,614,717
<BONDS> 0
0
0
<COMMON> 14,879
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 16,958,650
<SALES> 6,475,640
<TOTAL-REVENUES> 0
<CGS> 4,553,536
<TOTAL-COSTS> 2,698,285
<OTHER-EXPENSES> (320,924)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,097,105)
<INCOME-TAX> (279,395)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (817,710)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
