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
For the quarterly period ended June 30, 2000 Commission File Number 000-25257
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. 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 June 30,
2000, there were 17,119,226 shares of the Registrant's Common Stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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ELLIGENT CONSULTING GROUP, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 2000 (unaudited)
and December 31, 1999............................................... 3
Consolidated Statement of Operations for the three- and
six-month periods ended June 30, 2000 (unaudited) and for the
three- and six-month periods ended June 30, 1999 (unaudited)........ 5
Consolidated Statement of Cash Flows for the six months
ended June 30, 2000 (unaudited) and for the six months
ended June 30, 1999 (unaudited)..................................... 6
Consolidated Statement of Stockholders' Equity for the
six months ended June 30, 2000 (unaudited).......................... 8
Notes to Consolidated Financial Statements (unaudited)....................... 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................... 9
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds....................... 12
Item 6. Exhibits and Reports on Form 8-K................................ 12
SIGNATURES................................................................... 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2000
(Unaudited) December 31, 1999
----------- -----------------
ASSETS
CURRENT ASSETS:
Cash $ 50,672 $ 60,523
Trade Accounts Receivable 1,655,030 467,074
Net Assets of Discontinued Operations 226,013 726,011
Other assets 71,222 19,667
---------- ----------
TOTAL CURRENT ASSETS 2,002,937 1,273,275
---------- ----------
OTHER ASSETS 522,321 20,097
---------- ----------
TOTAL ASSETS $2,525,258 $1,293,372
========== ==========
See Accompanying Notes to Consolidated Financial Statements.
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2000
(Unaudited) December 31, 1999
----------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 1,830,999 $ 1,164,753
Accrued Expenses 1,375,948 753,566
Income Taxes Payable 107,831 107,831
Accrued Interest Stockholders 115,966 108,900
Notes payable - Stockholders 2,500,000 2,500,000
Advances from Stockholders 2,894,888 2,872,156
Due to Affiliates 1,298,509 215,535
------------ -----------
TOTAL CURRENT LIABILITIES 10,124,141 7,722,741
------------ -----------
STOCKHOLDERS' EQUITY:
Common Stock 17,119 14,979
Capital in excess of par value 6,096,831 5,028,970
Unearned compensation -- (94,500)
Accumulated Deficit (10,456,821) (8,372,806)
Less: Treasury Stock (3,006,012) (3,006,012)
Less: Subscription Receivable (250,000)
------------ -----------
TOTAL STOCKHOLDERS' EQUITY (7,598,883) (6,429,369)
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,525,258 $ 1,293,372
============ ===========
See Accompanying Notes to Consolidated Financial Statements.
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
Consolidated Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- -----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCOME:
Revenue $ 1,603,854 $ 697,027 $ 2,543,312 $ 1,193,376
Cost of services 1,057,461 568,882 1,697,010 970,027
------------ ------------ ------------ ------------
Gross profit 546,393 128,145 846,303 223,349
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
General and administrative 1,598,930 106,704 2,879,904 658,432
Depreciation 40 (286) 413 --
Amortization -- (2,634) -- --
------------ ------------ ------------ ------------
Total Costs and Expenses 1,598,970 103,784 2,880,317 658,432
------------ ------------ ------------ ------------
Operating loss (1,052,577) 24,361 (2,034,015) (435,083)
------------ ------------ ------------ ------------
OTHER EXPENSE:
Interest Expense - Stockholders (50,000) 54 (50,000) --
Interest Expense -- 46,151 -- --
------------ ------------ ------------ ------------
Total Other Expense (50,000) 46,205 (50,000) --
------------ ------------ ------------ ------------
Loss from Continuing Operations (1,102,577) 70,566 (2,084,015) (435,083)
Income Tax Benefit -- 124,400 -- 283,600
Discontinued Operations -- (951,428) -- (1,363,995)
------------ ------------ ------------ ------------
Total Loss (1,102,577) (756,462) (2,084,015) (1,515,478)
============ ============ ============ ============
Loss per Share of Common Stock:
Loss from Continuing Operations $ (0.06) $ (0.05) $ (0.12) $ (0.03)
============ ============ ============ ============
BASIC AND DILUTED LOSS PER SHARE $ (0.06) $ (0.05) $ (0.12) $ (0.03)
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING 17,096,149 14,858,930 16,939,335 14,765,162
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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CONSULTING GROUP, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholder's Equity for the
Period June 30, 2000
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
--------------------- EXCESS UNEARNED
SHARES AMOUNT OF PAR VALUE COMPENSATION
------ ------ ------------ ------------
<S> <C> <C> <C> <C>
Balance - December 31, 1998 14,544,225 $ 14,544 $ 2,992,518 $ -
Equity of merged entity - - 1,000 -
Common Stock Issued 250,001 250 1,499,750 -
Common Stock issued in lieu of Cash
Payment for Marketing Services 63,000 63 377,937 (378,000)
Treasury Stock Purchased, 66,502
shares @$6.00 - - - -
Treasury Stock sold - - - -
Options Exercised 122,000 122 5,978 -
Imputed Interest - - 151,788 -
Amortization of
Unearned Compensation - - - 283,500
Disposal of Subsidiary - - - -
Net Loss for the year ended 12/31/99 - - - -
------------- ---------- ------------- -------------
Balance - December 31, 1999 14,979,226 14,979 5,028,971 (94,500)
Common Stock Issued 2,140,000 2,140 1,067,860 -
Amortization of
Unearned Compensation - - - 94,500
Net Loss for the six month period
ending June 30, 2000 - - - -
------------- ---------- ------------- -------------
Balance June 30, 2000 17,119,226 17,119 6,096,831 -
============= ========== ============= =============
TOTAL
TREASURY STOCK ACCUMULATED STOCKHOLDER'S
STOCK SUBSCRIPTION DEFICIT EQUITY
----- ------------ ------- ------
Balance - December 31, 1998 $ - $ - $ (831,894) $ 2,175,168
Equity of merged entity - - (202,842) (201,842)
Common Stock Issued - - - 1,500,000
Common Stock issued in lieu of Cash
Payment for Marketing Services - - - -
Treasury Stock Purchased, 66,502
shares @$6.00 (399,012) - - (399,012)
Treasury Stock sold 33,000 - - 33,000
Options Exercised - - - 6,100
Imputed Interest - - - 151,788
Amortization of
Unearned Compensation - - - 283,500
Disposal of Subsidiary (2,640,000) - - (2,640,000)
Net Loss for the year ended 12/31/99 - - (7,338,070) (7,338,070)
------------- ------------- -------------- --------------
Balance - December 31, 1999 (3,006,012) - (8,372,806) (6,429,368)
Common Stock Issued - (250,000) - 820,000
Amortization of
Unearned Compensation - - - 94,500
Net Loss for the six month period
ending June 30, 2000 - - (2,084,015) (2,084,015)
------------- ------------- -------------- --------------
Balance June 30, 2000 (3,006,012) (250,000) (10,456,821) (7,598,883)
============== ============== ============== ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
June 30,
---------------------------
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,084,015) $ (151,483)
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and Amortization -- 3,780
Amortization of Discount 94,500 --
Change in Assets and Liabilities:
(Increase) decrease in:
Accounts receivable (1,187,956) (347,417)
Other current assets (51,555) (433,515)
Security Deposits (2,224) (259,170)
Increase (decrease) in:
Accounts payable 666,246 223,603
Accrued expenses 622,382 139,509
Accrued expenses-stockholders 7,066 340,116
Income taxes payable -- (117,669)
----------- -----------
Total adjustments 148,459 (450,763)
----------- -----------
NET CASH -- CONTINUING ACTIVITIES (1,935,556) (602,246)
DISCONTINUED OPERATIONS:
(Increase) decrease in Discontinued
Business Assets 499,998 (1,363,995)
Changes in Net Assets and Liabilities 8,336,593
----------- -----------
NET CASH - DISCONTINUED OPERATIONS 499,998 6,972,598
INVESTING ACTIVITIES
Purchases of Property and Equipment -- (102,822)
----------- -----------
FINANCING ACTIVITIES
Increase (decrease) in cash overdraft
(Continuing) -- (74,612)
Due to affiliates 1,082,974 115,894
Advances from stockholders 22,732 (2,085,484)
Payment on notes payable - stockholders -- (4,424,698)
Acquisition of Treasury Stock -- --
Issuance of common stock 320,001 --
----------- -----------
NET CASH - FINANCING ACTIVITIES-CONTINUING 1,425,707 (6,468,900)
----------- -----------
Financing Activities-Discontinued Operations
Increase (decrease) in cash overdraft -- (130,496)
Payments on notes and leases payable Current -- (60,809)
Proceeds from notes payable -- 400,000
Net Cash-Financing Activities-Discontinued -- 208,695
----------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (9,851) 7,325
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 60,523 600
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 50,672 $ 7,925
=========== ===========
See Accompanying Notes to Consolidated Financial Statements.
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CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED) (CONTINUED)
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.
During the three months ended June 30, 2000, the company issued 140,000
shares of common stock valued at $70,000 to Streich Lang in consideration
of payment for legal fees.
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
For further financial information, see the NOTES to the Consolidated
Financial Statements in the Company's Form 10-Q filing for December 31, 1999,
which are included by reference hereinunder.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In December 1999, the Company adopted a formal plan to dispose of its
operating subsidiary, Conversion Services International ("CSI"). The disposal
date was March 31, 2000. The results of Discontinued Operations were reflected
in the Company's operations as of December 31, 1999. Therefore, the results of
CSI's operations are not accounted for in the Company's operations for the
three-and six-month periods ended June 30, 2000. However, they are shown as a
loss from Discontinued Operations for the three-and six-month periods ended June
30, 1999.
The operations of the Company's other operating subsidiary, Elligent
Consulting Services ("ECS"), are shown as part of the Company's operation, in
the three-and six-month periods ended June 30, 2000 and 1999, because the
acquisition of this subsidiary in July 1999 is accounted for on the basis of a
pooling of interests method. Finally, the results of operations of the Company's
UK subsidiary, e-Vantage Company Ltd., are shown as part of the Company's
operation for the three-and six-month periods ended June 30, 2000.
The remainder of management's discussion and analysis of financial
condition and results of operations should be read in light of the preceding
disclosure.
BASIS OF PRESENTATION
Certain amounts for prior periods in the accompanying consolidated
financial statements, and in the discussion below have been reclassified to
conform with the current period presentations.
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 six months ended June 30,
2000 and 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 a historic view of our revenue
growth.
STATEMENT OF OPERATIONS DATA
($ in thousands)
June 30, 2000 June 30, 1999
------------- -------------
Gross revenue $ 2,543 $ 1,193
OVERVIEW. As part of the 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
our 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.
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On September 21, 1998, effective August 1, 1998, for accounting purposes,
we, through our wholly owned subsidiary, Patra Capital, purchased Conversion
Services International, Inc. Subsequently, the Company decided in December of
1999 to divest CSI and completed the divestiture on March 31, 2000 (see the
accompanying discontinued operations note to the financial statements).
In July 1999, the Company purchased the operations of ECS, which is a small
technology consulting company that provides infrastructure consulting services
to primarily New York financial services industry customers, for one dollar from
the Company's principal shareholder.
During end of year 1999 and in the first two quarters of 2000, the Company
planned and began implementation of a shift and focus on e-business and
e-architect services. It did so by discontinuation of its general technology
consulting business, through the divestiture of its operating subsidiary in that
area, CSI; by re-aligning and limiting the operations of its ECS subsidiary into
the technology infrastructure area; and most importantly by acquiring and then
investing in the growth of its international e-business and e-architect
subsidiary, the e-Vantage Company Limited, which is exclusively focused on
e-business.
For the three month period ended June 30, 2000, we had revenue of
$1,604,000 versus $697,000 in the year earlier period, an increase of over 130%,
and a loss from continuing operations of $1,103,000, versus income of $71,000
from continuing operations and a loss of $951,000 for Discontinued Operations in
the comparable quarter in the prior year.
For the six month period ended June 30, 2000, we had revenue of $2,543,000
versus $1,193,000 in the year earlier period, an increase of over 113%, and a
loss from continuing operations of $2,084,000 versus a loss of $435,000 from
continuing operations and a loss of $1,364,000 for discontinued operations in
the period ended June 30, 1999.
The operating loss from our continued operations includes holding company
management and overhead expenses, including legal and professional fees related
to the Company's operation as a public company and to acquisition related
activities and efforts to locate equity and debt financing required to achieve
our growth goals. It also includes losses due to startup expenses in the
Company's e-Vantage subsidiary in the UK.
LIQUIDITY AND FINANCIAL CONDITION
As of June 30, 2000, we had working capital deficit that reflected (i)
accounts payable and accrued expenses of $3.2 million, and (ii) amounts due to
related parties of $6.8 million, working capital advances and the funding of
costs related to startup and expansion of our European operations. These latter
amounts are principally due to our principal stockholder and entities owned or
controlled by him, who's also CEO of the Company, Mr. Andreas Typaldos.
We believe that sufficient sources of funds can be found to cover the
working capital needs of the Company. Such sources of funds are (i) from the
projected cash flow from operations (ii) from the issuance of the Company's
Common Stock, and (iii) from other public and private financing sources,
including strategic partners with whom the Company is doing or plans to do
business and existing shareholders of the Company that have an interest in
preserving their investment in the Company.
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 the Company. At the present time, our management
believes that while able to support day to day operations and reasonable
internal growth, our current sources of funding are not adequate to support our
growth plans.
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INFLATION
Inflation has not had a material effect upon our 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 our provision of services and products
will increase, and, to the extent such increased costs are not offset by
increased revenues, our operations may be adversely affected.
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 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.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended March 31, 2000, the Company issued 1,000,000
shares of common stock with a value of $500,000 to Hermann Seiler and 1,000,000
shares in consideration for the acquisition of the business e-Vantage Company
Ltd. to the shareholders of that company. In addition, the Company received into
treasury 1,100,000 shares of its Common Stock, which it had issued to Mssr.
Newman and Peipert, as a result of the disposal of its CSI subsidiary. During
the three months ended June 30, 2000, the company issued 140,000 shares of
common stock valued at $70,000 to Streich Lang in consideration of payment for
legal fees.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 -- Financial Data Schedule
(b) Reports on Form 8-K
None
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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: August 14, 2000 By: /s/ Andreas Typaldos
------------------------------------
Andreas Typaldos
Chairman of the Board and Chief
Executive Officer
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