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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|X| For the Quarterly Period ended August 31, 2000
Or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________TO____________
Commission File Number: 0-17597
ELITE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
76-0252296
Texas (IRS Employer Identification
(State or other Jurisdiction of No.)
incorporation or organization)
30096
6991 Peachtree Industrial Blvd. (Zip Code)
Suite 320
Norcross Georgia
(Address of principal executive offices)
678-969-9146
(Registrant's telephone number, including area code)
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 | | No |X|
The number of issued and outstanding shares of the issuer's class of capital
stock as of May 31, 2000, the latest practicable date, is as follows: 34,275,720
shares of Common Stock $.0001 par value.
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INDEX
PART I FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheet as of August 31, 2000 (unaudited) 3
And May 31, 2000 (Audited)
Consolidated Statements of Operations for the Three Month
Period ended August 31, 2000 (unaudited)
And Period ended August 31, 1999 (unaudited) 4
Consolidated Statements of Cash Flows for the Three Month
Period ended August 31, 2000 (unaudited)
And Period ended August 31, 1999 (unaudited) 5-6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 8-10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of matters to Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Addendum to Purchase Agreement
Exhibit Index 11
Signature 12
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PART IItem I
ELITE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
August 31, 2000 and May 31, 2000
(Unaudited)
8/31/2000 5/31/2000
<S> <C> <C>
ssets
Current assets:
Cash and cash equivalents $ 226,525 $ --
Accounts receivable, less allowance for doubtful 1,036,924 --
Notes receivable on convertible debt obligation -- 527,470
Note receivable from officers 573,703 289,084
Other current assets 685,099 30,000
----------------- -----------------
----------------- -----------------
2,522,251 846,554
Property and equipment, net 218,229 31,004
Excess of cost over net assets of businesses
acquired, less accumulated amortization 5,678,359 2,609,609
Other assets 53,789 6,789
----------------- -----------------
----------------- -----------------
$ 8,472,628 $ 3,493,956
================= =================
================= =================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,490,010 $ 523,541
Cash overdrafts -- 35,106
Accrued expenses 29,292 114,292
Federal payroll taxes payable 931,888 931,888
State payroll taxes payable 321,614 321,614
Current installments of notes payable 390,899 112,895
----------------- -----------------
----------------- -----------------
4,163,703 2,039,336
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----------------- -----------------
Long-term liabilities:
Notes payable 178,995 100,000
Convertible note 1,035,599 1,035,599
----------------- -----------------
----------------- -----------------
1,214,594 1,135,599
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----------------- -----------------
Contingencies
Stockholders' equity:
Common stock, $.0001 par value; 500,000,000
shares authorized; 34,275,720 4,148 3,427
Additional paid in capital 14,019,401 8,479,400
Retained earnings (10,929,218) (8,163,806)
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3,094,331 319,021
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$ 8,472,628 $ 3,493,956
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See Accompanying notes to consolidated Financial Statements
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ELITE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended
August 31, 2000 and 1999
(Unaudited)
2000 1999
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Revenues $ 3,630,818 $ 377,997
Less: cost of goods sold 2,968,113
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-------------------- ------------------------
Gross income 662,705 377,997
Salaries, wages and benefits 328,101 385,545
Depreciation and amortization 115,625 --
Other operating expenses 507,268 266,132
-------------------- ------------------------
-------------------- ------------------------
Operating loss (288,289) (273,680)
Investment banking fees 2,465,500 --
Other expenses, net 1,713 --
-------------------- ------------------------
-------------------- ------------------------
Loss before income taxes (2,755,502) (273,680)
Income taxes -- --
-------------------- ------------------------
-------------------- ------------------------
Net loss $ (2,755,502) $ (273,680)
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==================== ========================
Weighted average shares basic 37,880,720
====================
====================
Basic loss per share $ (0.07) $
====================
====================
Adjusted weighted average shares - diluted 37,880,720
====================
====================
Diluted loss per share $ (0.07) $
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====================
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See accompanying notes to consolidated financial statements
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ELITE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended
August 31, 2000 and 1999
(Unaudited)
2000 1999
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Cash flows from operating activities:
Net loss $ (2,755,502) $ (273,680)
Adjustments to reconcile net loss to net to cash used in
operating activities:
Depreciation and amortization 68,750 --
Commitment to issue stock for investment banking services 2,465,500 --
Decrease (increase) in:
Accounts (1,036,924) 85,981
receivable
Inventory (586,848) --
Other assets (115,251) --
Increase (decrease) in:
Accounts payable 1,966,469 227,400
Federal payroll taxes payable -- 125,048
State payroll taxes payable -- 20,420
Accrued expenses and other current (60,000) 1,943
liabilities
----------------- -----------------
----------------- -----------------
Net cash used in operating (53,806) 187,112
activities
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----------------- -----------------
Cash flows from investing activities:
Acquisition of businesses (187,225) (67,191)
Notes receivable from officers (284,619) --
----------------- -----------------
----------------- -----------------
Net cash used in investing (471,844) (67,191)
activities
----------------- -----------------
----------------- -----------------
Cash flows from financing activities:
Proceeds from issuance of common stock 500,000 --
Other capital contributions 287,281 --
Increase (decrease) in cash overdrafts (35,106) --
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Net cash provided by financing activities 752,175 0
----------------- -----------------
----------------- -----------------
Net increase (decrease) in cash and cash equivalents 226,525 119,921
Cash and cash equivalents at beginning of year -- 0
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Cash and cash equivalents at end of year $ 226,525 $ 119,921
================= =================
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ELITE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended May 31, 2000, 1999 and 1998
2000
<S> <C>
Supplemental disclosures of cash flow information cash paid during the year for:
Interest $ 29,292
=================
=================
Income taxes $ --
=================
=================
Acquisition of businesses:
Fair value of assets acquired, including goodwill $ 1,266,215
Fair value of liabilities assumed (16,215)
Promissory note issued
Fair value of common stock issued (1,000,000)
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Net cash paid for acquisitions $ 250,000
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<PAGE>
ELITE TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000(UNAUDITED)
Recognition and Revenue Expense
Web site development and consulting services are generally performed on a time
and materials basis and are recognized as the services are performed. All other
revenue and expense is accrued as incurred.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
Property and Equipment
Property and equipment are carried at cost. Expenditures for maintenance and
repairs that do not significantly extend the useful lives of the assets are
expensed as incurred, while major replacements and betterments are capitalized.
Depreciation is computed principally using the straight-line method over the
estimated useful lives of the assets, generally five years for computer
equipment and furniture and fixtures, and three to five years for purchased
software.
Cost of property sold or otherwise disposed of and the related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
recognized in income currently.
Excess of Cost Over Net Assets of Business Acquired
The excess of cost over net assets of businesses acquired (goodwill) is being
amortized using the straight-line method over five years. The amortization
period is based on, among other things, the nature of the products and markets,
the competitive position of the acquired companies, and the adaptability of
changing market conditions of the acquired companies. At each balance sheet
date, the Company assesses the recoverability of this intangible asset by
determining whether the amortization of the goodwill balance over its remaining
life can be recovered through undiscounted future operating cash flows of the
acquired operation.
The amount of goodwill impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate equal to the rate
of return that would be required by the Company for a similar investment with
like risks. The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
Income Taxes
The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Payroll Taxes Payable
Payroll Taxes payable includes a liability, the assumption of which was part of
the agreement to acquire Intuitive Technology Consultants, Inc. Management
believes it can continue to reduce the liability accordingly without adversely
affecting the continuing operations of the company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the
Financial Statements and Notes thereto included elsewhere in this filing.
Certain statements made in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations are forward-looking statements.
The forward-looking statements contained herein are based on current
expectations and entail various risks and uncertainties that could cause actual
results to differ materially from those expressed in such forward-looking
statements.
This Quarterly Report may contain various forward-looking statements that are
based on management's belief as well as assumptions made by management based on
information currently available to management. In some cases, you can identify
forward-looking statements by the use of certain terminology, such as "may,"
"will," "should," "would," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," "continue," or the negative of such terms
or other comparable terminology. Any expectations based on these forward-looking
statements are subject to risks and uncertainties. These risks and uncertainties
could affect the Company's future financial and operating results and cause
actual results to differ materially from expectations based on forward-looking
statements made in this document or elsewhere by or on behalf of the Company.
Overview
ORGANIZATION
Elite Technologies, Inc. (referred to herein as "Elite" or the
"Company")is a full service technology company offering information technology
("IT")services to small, medium and large enterprises. IT services involve the
facilitation of the flow of information within a company or between a company
and external sources. These services typically involve computer hardware,
software and "integration" efforts to allow diverse systems to communicate with
one another.
Elite was founded as a Georgia corporation in 1996 under the name
Intuitive Technology Consultants, Inc. ("ITC"). In July, 1998, ITC Acquisition
Group, LLP, consisting of management of ITC, acquired a majority interest,
through a reverse merger, in CONCAP, Inc.. On April 22, 1999, the Company
changed its name to Elite Technologies, Inc. The Company's charter was revoked
on February 11, 2000 for the failure to file franchise tax returns in the State
of Texas, however the Company is presently seeking to reinstate its charter.
Although Elite, through its divisions offered a variety of services in
fiscal 2000, Elite has suspended most of its operations following the
acquisition of Ace Manufacturing Group, Ltd. ("AMG") in April 2000. Elite
intends to acquire other companies to fulfill the services of its divisions. As
part of Elite's acquisition strategy, the Company has entered into an agreement
to acquire substantially all of the capital stock of AC Travel, Inc. and
International Electronic Technologies of Georgia, Inc ("IET"). Elite does not
presently have any other definitive agreements to acquire additional companies
and there can be no assurance that it will do so.
The Company's principal executive offices are located at 6991 Peachtree
Industrial Blvd., Suite 320, Norcross, GA 30092 Telephone: (678) 969-9146. The
Company's Internet address is www.elitetech-usa.com.
RECENT DEVELOPMENTS
In June 2000, Elite signed purchase agreements with AC Travel, Inc. and
International Electronic Technologies of Georgia ("IET"). AC Travel, a wholesale
and retail travel agency, including a website catering to the international
business traveler who is traveling abroad in the U.S., The purchase price for
all the capital stock of AC Travel is 1,500,000 shares of common stock, and
$300,000. IET provides wholesale and retail sales and distribution of computer
related products. The purchase price for IET is 1,200,000 shares of common stock
and $300,000.
Elite's objective is to establish itself as a leading provider of
internet connectivity and content solutions. The company intends to utilize
acquisitions to support the growth of AMG's business, such as content and
hardware providers. The Company intends to utilize AMG's content and advertising
platform to serve as a means by which retailers and other connectivity solutions
providers can access a viewer base with quantifiable online purchasing habits.
The company was default of certain terms of the original purchase
agreements by failing to tender certain cash payments due under the said
purchase agreements. The Company has since re-negotiated the terms of the pay
out of the amounts owed under the purchase agreements, and management believes
it will be able to meet those obligations without condition.
All acquisitions have been accounted for as purchases in this filing
and are reflected as such on the Consolidated Financial Statements. This does
not take into account the year to date financial information of these
acquisitions, but only provides for results of operations since the date of
acquisition of the individual companies.
RESULTS OF OPERATIONS
QUARTER ENDED AUGUST 31, 2000 COMPARED WITH QUARTER ENDED AUGUST 31, 1999
Revenues. Revenues from operations for First Quarter 2000 increased by
860.54% from the same period, 1999. The increase in revenues is primarily
attributable to revenues in the amount of approximately $3,500,000 attributable
to the acquisition of the all the capital stock of IET in June, 2000 and AC
Travel in June, 2000.
Net Revenue. Net Revenue was $662, 705 for the three months ended
August 31, 2000, 18.2% as a percentage of revenue as compared to net revenue of
$377,997 for the three months ended August 31, 1999. The Company believes that
the increase in net revenue is primarily attributable to the acquisition of IET
and AC Travel.
Salaries, Wages and Benefits. Salaries, Wages and Benefits decreased
-14.90% from 1999. The decrease is due to (i) terminations of staff related to
the restructuring of the company.
Other Operating Expenses. Other Operating Expenses increased by 90.61% to
$507,268 attributed to the restructuring of the business and the acquisition of
AC Travel and IET.
Stock Based Compensation. The company issued approximately 1.5 million
shares of unregistered common stock in connection with investment banking
services and investor relations resulting in a stock based compensation
valuation of approximately 2.4 million dollars.
Operating Loss. Operating losses increased to $288,289 from $ 273,680
representing a 5.34% increase in the loss due to increased operational costs
attributed to the acquisition(s) completed by Elite.
Loss Before Income Taxes (Net Loss). Net Loss increased 906.83% due to the
investment banking compensation paid as stock based compensation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements have principally related to the
acquisition of businesses, working capital needs and capital expenditures for
growth. These requirements have been met through a combination of private
placements and internally generated funds. Although the Company incurred direct
costs for acquisitions, the Company completed these acquisitions primarily in
stock for stock transactions. The Company currently lacks the working capital
required to continue as a going concern and to achieve its acquisition program
and internal growth objectives. Management expects to enter into agreements for
debt or equity funding in the first or second quarter of fiscal year 2001 in
order to meet the needs of internal growth and acquisitions. Management believes
that such agreements for debt or equity funding will be sufficient to enable the
Company to continue operating as a going concern. However, there is no assurance
that agreement for such additional funding will be consummated.
The independent auditor's report on our financial statements contains
explanatory language that substantially exists about our ability to continue as
a going concern.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is, from time to time, a party to routine litigation
incidental to operating a business, including claims of discrimination, wrongful
termination, and other similar claims.
ITEM 2. CHANGES IN SECURITIES. The company issued unregistered stock for
investment banking services valued at $2,465,500. Additionally, the company
issued securities in exchange for $500,000. The securities were issued under
Regulation D, Rule (506). The remaining balance was for services rendered to the
company by investment bankers.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NONE
ITEM 5. OTHER INFORMATION. During the First Quarter, the company attempted to
appointed a CFO. However, due to disagreements, the relationship was terminated
in the same period, and no further obligation exists between the parties.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. Addendum to IET Acquisition Agreement
<PAGE>
ADDENDUM TO
STOCK PURCHASE AGREEMENT
MADE AS OF
JUNE 27, 2000,
BETWEEN
ELITE TECHNOLOGIES, INC.,
BUYER,
AND
INTERNATIONAL ELECTRONIC TECHNOLOGY OF GEORGIA, INC.,
D/B/A STARTEK COMPUTERS,
and FRANK NOORI, INDIVIDUALLY,
SELLER(S)
ADDENDUM TO STOCK PURCHASE AGREEMENT
THIS ADDENDUM TO STOCK PURCHASE AGREEMENT ["Third Addendum"], made on
this 10th day of November, 2000, by and among Elite Technologies, Inc., a Texas
corporation ["Buyer"], International Electronic Technology of Georgia, Inc.,
d/b/a Startek Computers, a Georgia corporation, and Frank Noori, individually
[individually and collectively hereinafter referred to as "Seller"],
W I T N E S S E T H:
WHEREAS, on June 27, 2000, Buyer (as "Buyer" therein) and Seller (as
"Seller" therein) entered into that certain "Stock Purchase Agreement Made as of
June 27, 2000, Between Elite Technologies, Inc., Buyer, and International
Electronic Technology of Georgia, Inc., d/b/a Startek Computers, and Frank
Noori, Individually, Seller(s)" ["the Stock Purchase Agreement"] and that
certain "Addendum to Stock Purchase Agreement Made as of June 27, 2000, Between
Elite Technologies, Inc., Buyer, and International Electronic Technology of
Georgia, Inc., d/b/a Startek Computers, and Frank Noori, Individually,
Seller(s)" ["the Addendum"];
WHEREAS, on August 10, 2000, Buyer (as "Buyer" therein) and Seller (as
"Seller" therein) entered into that certain "Addendum to Stock Purchase
Agreement Made as of June 27, 2000, Between Elite Technologies, Inc., Buyer, and
International Electronic Technology of Georgia, Inc., d/b/a Startek Computers,
and Frank Noori, Individually, Seller(s)"; and
WHEREAS, as of the time and date of execution of this Third Addendum, the
buyer has failed to deliver a cash payment of $300,000 to Seller(s):
NOW, THEREFORE, be it resolved, that the parties hereto, intending to be
legally bound, do covenant and agree as follows:
1. Definitions. For the purposes of this Addendum, all terms shall have
-----------
the same meanings ascribed thereto as in the Stock Purchase Agreement, unless a
different agreement is specifically referred to.
2. Consummation. In order to consummate the stock purchase and sale as
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contemplated in the agreements and addenda referred to above, the parties hereto
do undertake and agree to carry out the following duties and obligations:
a. Buyer shall cause the sum of Three Hundred Thousand and No/100 U.S.
Dollars (US$300,000.00), in certified funds (the "Funds"), to be paid
to Seller not later than 6:00 PM, Eastern Standard Time, on Thursday,
November 31, 2000; Said funds shall be payable in cash or in common
stock of Seller in a number of shares such that Seller shall receive
the full amount of the Funds.
3. Rescission. All parties hereto understand, covenant, and agree that,
notwithstanding anything to the contrary contained herein or in the Stock
Purchase Agreement or the Amended Stock Purchase Agreement and/or any documents
associated therewith or appurtenant thereto, Seller shall have the right, in its
sole discretion, to rescind the Amended Stock Purchase Agreement which in case
of such rescission shall be considered to be null, void, and of no further force
or effect, if the monies contemplated herein (that is, the sum of Three Hundred
Thousand and no/100 U.S. Dollars in cash or common stock of Seller) have not
been fully paid as contemplated herein by 6:00 PM, Eastern Standard Time, on
Thursday, November 31, 2000.
4. Time of the Essence. Time is be of the essence of this Addendum.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER SELLER
Scott Schuster Frank Noori
CEO, Elite Technologies, Inc. President, International Electronic
Technology of
Georgia, Inc., d/b/a Startek Computers
Date: ___________________________ Date: ____________________________________
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Frank Noori, individually
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: November 10, 2000 ELITE TECHNOLOGIES, INC.
By: /s/ Scott Schuster
Name: Scott Schuster
Title: Chief Executive Officer
