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 March 31, 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
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(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 March 31,
2000, there were 17,199,226 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 MARCH 31, 2000
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of March 31, 2000 (unaudited) 3
Consolidated Statement of Operations for the three months
ended March 31, 2000 (unaudited) and for the three months
ended March 31, 1999 (unaudited) 5
Consolidated Statement of Cash Flows for the three months
ended March 31, 2000 (unaudited) and for the three months
ended March 31, 1999 (unaudited) 6
Consolidated Statement of Stockholders' Equity for the
three months ended March 31, 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
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 [UNAUDITED]
ASSETS
CURRENT ASSETS:
Cash $ 193,911
Trade Accounts Receivable 792,001
Net Assets of Discountined Operations 726,013
Other assets 72,729
----------
TOTAL CURRENT ASSETS 1,784,653
----------
OTHER ASSETS 515,888
----------
TOTAL ASSETS $2,300,541
==========
See Accompanying Notes to Consolidated Financial Statements.
3
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 [UNAUDITED]
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 1,453,138
Accrued Expenses 893,776
Income Taxes Payable 107,831
Accrued Interest Stockholders 106,233
Notes payable - Stockholders 2,500,000
Advances from Stockholders 3,069,888
Due to Affiliates 785,962
-----------
TOTAL CURRENT LIABILITIES 8,916,847
-----------
STOCKHOLDERS' EQUITY:
Common Stock 16,979
Capital in excess of par value 6,026,971
Unearned compensation
Accumulated Deficit (8,372,806)
Current Loss (1,031,438)
Less: Treasury Stock (3,006,012)
Less: Subscription Receivable (250,000)
-----------
TOTAL STOCKHOLDERS' EQUITY (6,616,306)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,300,541
===========
See Accompanying Notes to Consolidated Financial Statements.
4
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2000 MARCH 31, 1999
[UNAUDITED] [UNAUDITED]
------------ ------------
INCOME:
Revenue $ 939,458 $ 496,349
Cost of services 639,549 401,145
------------ ------------
Gross profit 299,910 95,204
------------ ------------
COSTS AND EXPENSES:
General and administrative 1,280,974 551,728
Depreciation 373 286
Amortization 0 2,634
------------ ------------
Total Costs and Expenses 1,281,348 554,647
------------ ------------
Operating loss (981,438) (459,444)
------------ ------------
Other expense:
Interest Expense - Stockholders (50,000) (54)
Interest Expense 0 (46,151)
------------ ------------
Total Other Expense (50,000) (46,205)
------------ ------------
Loss from Continuing Operations (1,031,438) (505,649)
Income Tax Benefit (159,200)
Discontinued Operations (346,449)
------------ ------------
Total Loss (1,031,438) (759,016)
============ ============
Loss per Share of Common Stock:
Loss from Continuing Operations $ (0.06) $ (0.05)
============ ============
BASIC AND DILUTED LOSS PER SHARE $ (0.06) $ (0.05)
============ ============
WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING 16,623,670 14,684,675
============ ============
See Accompanying Notes to Consolidated Financial Statements.
5
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THREE MONTHS ENDED
MARCH 31, 2000 [UNAUDITED]
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2000 MARCH 31, 1999
(UNAUDITED) (UNAUDITED)
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(1,031,438) $ (346,449)
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and Amortization 2,002
Provision for Doubtful Accounts
Amortization of Discount 94,500
Imputed Interest
Deferred income tax benefit
Non-cash consideration for marketing services
Change in Assets and Liabilities:
[Increase] decrease in:
Accounts receivable (324,927) (185,748)
Other current assets (53,062) (201,124)
Security Deposits 4,209 64,862
Due from employees
Due from affiliates
Increase [decrease] in:
Accounts payable 288,385 463,982
Accrued expenses 140,210 105,311
Accrued expenses-stockholders (2,667) 246,366
Income taxes payable 0 (60,069)
----------- -----------
Total adjustments 146,648 435,584
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NET CASH - OPERATING ACTIVITIES (884,790) 89,136
=========== ===========
DISCONTINUED OPERATIONS:
Loss From Discontinued Business (442,794)
Depreciation and Amortization 0
Loss and Disposal of Business 0
Changes in Net Assets Liabilities 7,992,711
NET CASH - DISCONTINUED OPERATIONS 7,549,916
INVESTING ACTIVITIES
Purchases of Property and Equipment 0 (203,711)
----------- -----------
FINANCING ACTIVITIES
Increase(decrease) in cash overdraft(Continuing) (74,612)
Increase(decrease) in cash overdraft(Operating) (130,496)
Due to affiliates 570,445 (2,481,042)
Advances from stockholders 197,732 (1,870,348)
Proceeds from Notes Payable 400,000
Payments on notes and leases payable (60,809)
Payment on notes payable - stockholders (3,197,000)
Acquisition of Treasury Stock
Issuance of common stock 250,001
----------- -----------
NET CASH - FINANCING ACTIVITIES 1,018,177 (7,414,308)
----------- -----------
NET INCREASE IN CASH 133,388 21,034
CASH AT BEGINNING OF PERIOD 60,523 600
----------- -----------
CASH AT END OF PERIOD $ 193,911 $ 21,634
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
6
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ELLIGENT CONSULTING GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 [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.
7
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ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholder's Equity for the period March 31, 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 00
Equity of merged entity 1,000 00
Common Stock Issued 250,001 250 1,499,750 00
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 00
Treasury Stock sold 00
Options Exercised 122,000 122 5,978 00
Imputed Interest 151,788 00
Amortization of
Unearned Compensation 283,500
Disposal of Subsidiary 00
Net Loss for the year
ended 12/31/99 00
----------- --------- ----------- -----------
Balance - December 31, 1999 14,979,226 $ 14,979 $ 5,028,971 $ (94,500)
Common Stock Issued 2,000,000 2,000 998,000 00
Amortization of
Unearned Compensation 94,500
Net Loss 00
----------- --------- ----------- -----------
16,979,226 16,979 6,026,971 0
=========== ========= =========== ===========
TREASURY STOCK ACCUMULATED TOTAL 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 $ 0
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) $ 0 $(8,372,806) $(6,429,367)
Common Stock Issued (250,000) $ 750,000
Amortization of
Unearned Compensation $ 94,500
Net Loss (1,031,438) $(1,031,438)
----------- --------- ----------- -----------
(3,006,012) (250,000) (9,404,244) (6,616,307)
=========== ========= =========== ===========
</TABLE>
8
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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 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 in the Company's operations as of March 31, 2000
and the comparable prior quarter of March 31, 1999. However, they are shown as
profit or loss from Discontinued Operations in both of these quarters.
The operations of the Company's other operating subsidiary, Elligent Consulting
Services ("ECS"), are shown as part of the Company's operation, both in the
March 31, 2000 and March 31, 1999 quarters, 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 March 31, 2000
quarter period.
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 March 31,
2000, 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
($ in thousands)
March 31, 2000 March 31, 1999
-------------- --------------
Gross revenue $939 $496
9
<PAGE>
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.
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.
During end of year 1999 and in the first quarter 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 March 31, 2000, we had revenue of $939,458
versus $496,349 in the year earlier period, an increase of almost 90%, and a
loss from continuing operations of $1 million, versus a loss of $505,649 from
continuing operations and a loss of $412,567 for Discontinued Operations in the
comparable quarter in the prior year.
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 March 31, 2000, we had working capital deficit that reflected (i) accounts
payable and accrued expenses of $2.4 million, and (ii) amounts due to related
parties of $6.4 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.
10
<PAGE>
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.
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.
11
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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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
12
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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: June 26, 2000 By: /s/ Andreas Typaldos
---------------------------------
Andreas Typaldos
Chairman of the Board and Chief
Executive Officer
13
