<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 000-30522
CEREUS TECHNOLOGY PARTNERS, INC.
(Exact name of Small Business Issuer as specified in its Charter)
DELAWARE 13-3773537
(State of Incorporation) (I.R.S. Employer Identification No.)
1000 ABERNATHY ROAD, SUITE 1000, ATLANTA, GEORGIA 30328
(Address of principal executive offices) (Zip Code)
(770) 668-0900
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
------------------------------------
Check whether the issuer: (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 [ ]
As of August 8, 2000, there were 8,996,570 shares of Common Stock,
$0.01 par value outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE> 2
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
<S> <C>
ITEM 1 FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet of Cereus Technology Partners, Inc. and
Subsidiaries at June 30, 2000 and December 31, 1999......................................... 3
Condensed Consolidated Statements of Operations of Cereus Technology Partners, Inc.
and Subsidiaries for the Three Months and Six Months Ended June 30, 2000 and June 30,
1999........................................................................................ 4
Condensed Consolidated Statements of Stockholder's Equity as of June 30, 2000............... 5
Condensed Consolidated Statements of Cash Flows of Cereus Technology Partners, Inc.
and Subsidiaries for the Six Months Ended June 30, 2000 and June 30, 1999................... 6
Notes to Condensed Consolidated Financial Statements........................................ 8
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................... 12
PART II - OTHER INFORMATION
Item 1 Legal Proceedings....................................................................... 14
Item 2 Changes in Securities and Use of Proceeds............................................... 14
Item 3 Defaults Upon Senior Securities......................................................... 14
Item 4 Submission of Matters to a Vote of Security Holders..................................... 14
Item 5 Other Information....................................................................... 15
Item 6 Exhibits and Reports on Form 8-K........................................................ 15
Signatures....................................................................................... 16
</TABLE>
2
<PAGE> 3
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,631,407 $ --
Accounts receivable, net 1,581,011 814,892
Notes receivable 4,978,000 --
Prepaid expenses and other current assets 658,468 145,120
Assets of discontinued operations held for sale -- 640,000
------------ -----------
Total current assets 16,848,886 1,600,012
------------ -----------
Property and equipment, net 1,095,281 304,166
Goodwill, net 5,097,620 11,348,425
Other assets 305,976 305,976
------------ -----------
Total assets $ 23,347,763 $13,558,579
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ -- 107,702
Notes payable and short-term debt 142,817 3,351,163
Accounts payable 874,187 1,976,411
Accrued expenses and other current liabilities 2,117,194 1,776,783
Accrued stock compensation -- 638,300
------------ -----------
Total current liabilities 3,134,198 7,850,359
Long-term debt 81,375 36,463
------------ -----------
Total liabilities 3,215,573 7,886,822
------------ -----------
Stockholders' equity:
Preferred stock -- --
Common stock 89,847 40,627
Additional paid-in capital 48,587,104 15,481,923
Accumulated deficit (27,393,423) (8,835,482)
------------ -----------
Total 21,283,528 6,687,068
Less notes receivable from stockholders (1,151,338) (1,015,311)
------------ -----------
Total stockholders' equity 20,132,190 5,671,757
Commitments and contingencies -- --
------------ -----------
Total liabilities and stockholder's equity $ 23,347,763 $13,558,579
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ----------------------------
2000 1999 2000 1999
----------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Net revenues $ 1,982,829 $ -- $ 3,574,154 $ --
Less:
Cost of revenues 1,711,441 -- 3,144,621 --
Loss on contractual services -- -- 250,000 --
Sales and marketing expenses 588,451 -- 903,916 --
General and administrative expenses 1,200,681 -- 1,939,630 --
Stock compensation expense 125,928 -- 2,398,978 --
Impairment charge -- -- 5,637,401 --
Depreciation and amortization 76,676 -- 120,212 --
Goodwill amortization 306,702 -- 613,404 --
----------- ---------- ------------ ----------
Operating loss (2,027,050) -- (11,434,008) --
Interest income, net 247,307 -- 299,567 --
----------- ---------- ----------- ----------
Loss from continuing operations before
income taxes and extraordinary item (1,779,743) -- (11,134,441) --
Income taxes from continuing operations -- -- -- --
----------- ---------- ------------ ----------
Loss from continuing operations before
extraordinary item (1,779,743) -- (11,134,441) --
Discontinued operations
Loss from discontinued operations -- (88,838) -- (398,294)
Loss on disposal of discontinued operations -- -- (236,000) --
----------- ---------- ------------ ----------
-- (88,838) (236,000) (398,294)
Loss before extraordinary item (1,779,743) (88,838) (11,370,441) (398,294)
Extraordinary item:
Less from debt conversion -- -- (7,187,500) --
----------- ---------- ------------ ----------
Net loss $(1,779,743) $(88,838) $(18,557,941) $ (398,294)
=========== ========== ============ ==========
Loss per share-basic and diluted:
Loss before discontinued operations and
extraordinary items $ (0.20) $ -- $ (1.41) $ --
Discontinued operations -- (0.06) (0.03) (0.28)
----------- ---------- ------------ ----------
Loss before extraordinary items (0.20) (0.06) 1.44 (0.28)
Loss from debt conversion -- -- (0.91)
----------- ---------- ------------ ----------
Net loss $ (0.20) $ (0.06) $ (2.36) $ (0.28)
=========== ========== ============ ==========
Weighted average shares outstanding 8,960,674 1,446,135 7,876,377 $1,404,603
=========== ========== ============ ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
COMMON ADDITIONAL NOTES
------------------- PAID-IN ACCUMULATED RECEIVABLE FROM
SHARES AMOUNT CAPITAL DEFICIT STOCKHOLDERS TOTAL
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1999 4,062,604 $ 40,627 $15,481,923 $ (8,835,482) $(1,015,311) $ 5,671,757
Issuance of common stock in private
placement, including placement
agency shares 4,084,955 40,850 19,575,950 -- -- 19,616,800
Conversion of debt for common stock 751,381 7,514 9,951,987 -- -- 9,959,501
Issuance of common stock for
options exercised 68,421 684 126,486 -- -- 127,170
Employee stock compensation -- -- 3,039,084 -- -- 3,039,084
Adjustment of issuance of common stock
and note receivable to acquire common
stock in connection with acquisition (50,000) (500) 500 -- (136,027) (136,027)
Common stock issued for services 67,153 672 411,174 -- -- 411,846
Net loss -- -- -- (18,557,941) -- (18,557,941)
---------- -------- ----------- ------------ ----------- ------------
Balances at June 30, 2000 8,984,514 $ 89,847 $48,587,104 $(27,393,423) $(1,151,338) $ 20,132,190
========== ======== =========== ============ =========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------
2000 1999
------------ --------
<S> <C> <C>
Operating activities:
Continuing operations:
Loss from continuing operations $(18,321,941) --
Adjustments to reconcile net loss to net cash
provided by continuing operating activities:
Depreciation and amortization 733,616 --
Impairment charge 5,637,401 --
Noncash stock compensation 2,398,978 --
Accounts receivable allowances (277,576) --
Amortization of debt discount 73,341 --
Loss from Debt Conversion 7,187,501 --
Changes in operating assets and liabilities:
Accounts receivable (488,543) --
Prepaid expenses and other current assets 126,652 --
Accounts payable (619,599) --
Accrued expenses and other liabilities 342,213 --
------------ --------
Net cash used in continuing operating activities (3,207,957) --
------------ --------
Discontinued operations:
Loss from discontinued operations -- (398,294)
Loss on disposal of discontinued operations (236,000) --
Adjustment to reconcile loss from discontinued operations to
net cash provided by discontinued operations -- 252,352
------------ --------
Net cash used in discontinued operating activities (236,000) (145,942)
------------ --------
Net cash used in operating activities (3,443,957) (145,942)
------------ --------
Investing activities:
Continuing operations:
Net cash used in investing activities for continuing operations -
Additions to property and equipment (486,327) --
------------ --------
Discontinued operations:
Net cash used in investing activities for discontinued operations -
Increase in resource property -- (240,891)
Additions to property and equipment -- (6,761)
------------ --------
Net cash used in investing activities (486,327) (247,652)
------------ --------
Financing activities:
Continuing operations:
Decrease in bank overdraft (107,702) --
Borrowings under capital lease obligations 87,729
Proceeds from borrowings from note payable 400,000 --
Repayments of long-term debt (1,073,504) --
Issuance of notes receivable (4,978,000) --
Increase in note receivable shareholder (136,027) --
Issuance of common stock 19,369,195 --
------------ --------
Net cash provided from financing activities
for continuing operations 13,561,691 --
------------ --------
Discontinued operations:
Proceeds from debt financing -- 126,393
Payment of long-term debt -- (5,175)
------------ --------
Net cash provided by financing activities
for discontinued operations -- 121,218
------------ --------
Net cash provided by financing activities 13,561,691 121,218
------------ --------
Net increase (decrease) in cash and cash equivalents 9,631,407 (272,376)
Cash and cash equivalents at beginning of period -- --
------------ --------
Cash and cash equivalents at end of period $ 9,631,407 (272,376)
============ ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
2000 1999
-------- --------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period
for continuing operations:
Interest 41,426 90,160
Supplemental disclosures of noncash investing
and financing activities:
Issuance of debt for businesses acquired (576,000) --
Common stock granted for services 411,850 --
Exchange of non-monetary assets (425,000) --
Conversion of debt for common stock 589,150 --
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2000
(Unaudited)
(1) BUSINESS AND BASIS OF PRESENTATION
Cereus Technology Partners, Inc. and subsidiaries (the "Company" or
"Cereus"), was formerly named AIM Group, Inc. prior to December 1,
1999. Prior to July 31, 1999, the Company operated a surface
modification facility in Arkansas for industrial minerals used as
fillers and endeavored to develop a cement additive application for a
silica/kaolinite rock mined on property leased by the Company in
Arizona. On March 31, 2000, the Company entered into an agreement to
sell its mineral businesses to the Company's former Chairman of the
Board for an aggregate consideration of approximately $1.0 million
(the "Mineral Transaction"). Accordingly, the surface modification and
mining operations have been reflected as discontinued operations in
the accompanying consolidated financial statements. The Mineral
Transaction was closed in April 2000.
In 1999, the Company acquired three companies that provided
information technology services and began providing business software
implementation and consulting and Internet services. On July 30, 1999,
the Company acquired The Reddy Group, Inc. and its wholly-owned
subsidiary, Cereus Bandwidth LLC (collectively, "Cereus Bandwidth"),
an Atlanta-based Internet service provider ("ISP") which developed and
through which the Company currently markets a variety of Internet,
intranet and e-commerce services. On July 30, 1999, the Company
acquired Enterprise Solutions Group, Inc. ("ESG"), a West Palm Beach
based business software applications consulting firm. On November 15,
1999, the Company acquired Client Server Solutions, Inc. and an
affiliated company (collectively, "CSS"), an Atlanta-based business
software sales and service company. ESG and CSS are focused on
enterprise resource planning ("ERP") applications consisting of
integrated financial, administrative, payroll and human resource,
manufacturing, distribution, point-of-sale and inventory management
software. The applications are supported by software that includes
management information systems and database management of sales and
marketing information.
On June 12, 2000, Eltrax Systems, Inc. ("Eltrax") and Cereus entered
into a definitive agreement and plan of merger, which was amended and
restated as of July 27, 2000, pursuant to which Cereus will become a
wholly-owned subsidiary of Eltrax. The merger will be structured as a
tax-free reorganization and accounted for as a purchase. In the merger,
each Cereus share will be converted into 1.75 shares of the Company's
stock, but the exchange rate may be adjusted downward to 1.667 shares
of the Company's common stock for each share of the Cereus common stock
if Cereus does not before September 1, 2000, provide the Company with
the additional $5.0 million in borrowing availability under the bridge
facility noted above. If the exchange rate is adjusted to 1.667 of the
Company's common stock for each share of Cereus common stock, then the
exchange ratio may be further adjusted downward if the Company sells,
in one or more transactions, all or any part of hospitality group for
$8.0 million or more in cash in the aggregate on or before the
effective time of the merger. The transaction is subject to approval by
the shareholders of both companies and other customary conditions and
regulatory approvals. The merger is expected to close in the third
quarter of 2000.
8
<PAGE> 9
(2) DISCONTINUED OPERATIONS
Until July 31, 1999 the Company was primarily a mining and mined
products company. During 1999, the Company decided to change its
business model to become a technology services company. To accomplish
this objective, the Company acquired three technology consulting
companies, changed its name and decided to discontinue its mining
operations business.
In March 2000, the Company executed a sale agreement with the
Company's former Chairman of the Board to sell the mining business;
the transaction closed in April 2000. This agreement specified a
purchase price of approximately $640,000 for the stock of all mining
subsidiaries plus approximately $340,000 of working capital
contributions to be provided by the Company. The consideration was in
the form of an interest-bearing note, due in 180 days, unless called
earlier by the Company based upon certain rights. This note is secured
by the pledge of 84,000 shares of the Company's stock held by the
former Chairman and the stock of certain of the subsidiaries sold.
The Company retained no subsequent interests in any mining operations
or assets, no liabilities, expressed or contingent with respect to the
mining operations, and the ultimate payment of the note is not tied in
any form to the results of the mining operations.
The sales price approximates the fair market value of the assets, as
determined by an independent appraiser. Therefore, the Company wrote
down the book value of its mining operations to this fair market value
and accrued for transaction costs and severance obligations associated
with the disposition in the fourth quarter of 1999. An additional loss
on disposal of discontinued operations of approximately $236,000 was
recorded for the quarter ended March 31, 2000 reflecting an adjustment
to the write-down of the book value of the mining companies that was
recorded in the fourth quarter of 1999. In accordance with generally
accepted accounting principles the Company's prior period financial
statements have been reclassified to reflect the results of the
discontinued operations.
(3) GOODWILL AND IMPAIRMENT CHARGE
During the quarter ended March 31, 2000 the Company hired new
management, appointed a new board of directors and changed its
strategic direction from an ERP implementation and consulting business
to a web integration and application service provider business. As a
result, management evaluated its net investments in the recently
acquired companies and based upon its projections of expected future
cash flows over a five year period, discounted using a 12% interest
rate, determined that the investments in the companies previously
engaged in ERP software sales and implementation services were
impaired. Accordingly, the Company recognized an impairment charge of
approximately $5.6 million during the quarter ended March 31, 2000.
(4) STOCK-BASED COMPENSATION
During the quarter ended March 31, 2000 stock issued to certain
employees pursuant to contingent payment obligations under amended
terms of the CSS acquisition as well as purchases of stock and
warrants by members of management under terms of the private
9
<PAGE> 10
equity placement and warrants issued to consultants resulted in stock
compensation expense of approximately $2.3 million.
(5) LOSS ON COMMITMENTS AND CONTINGENCIES
Loss on contractual services of approximately $250,000 related to
commitments entered into prior to the new management team and its
repositioning of the business to focus on business to business
e-commerce was recognized in the first quarter 2000. The loss is
recognized based on management's evaluation that any future economic
benefits from these commitments are not probable given the
repositioning of the business and the amount of the loss can be
reasonably estimated.
(6) DEBT
During the quarter ended March 31, 2000, the Company retired
approximately $2 million of its notes payable outstanding as of
December 31, 1999 through a conversion of the notes into a combination
of stock and warrants. In addition another $440,000 of notes issued in
January, 2000 were converted into stock and warrants, and the Company
settled certain other amounts payable through the issuance of common
stock and warrants. Approximately $1 million of the notes were
converted pursuant to their original terms and accordingly no gain or
loss on the extinguishment of debt was recognized. The remaining notes
payable and other payables were extinguished based upon terms not
pursuant to the original obligations. Accordingly, the Company
recognized a loss on extinguishment of approximately $7.2 million
based upon the difference between the fair value of the stock and
warrants issued and the carrying value of the debt extinguished as
measured at the dates of the extinguishment.
(7) STOCK, OPTIONS AND WARRANTS
On February 8, 2000, the Company consummated the private placement
(the "Private Placement") of 4,000,000 shares of the Company's common
stock (the "Common Stock"). The placement was for 1,600 units (the
"Units"), with each Unit having a Purchase Price of $12,500 and
consisting of 2,500 shares of Common Stock and a warrant (the
"Warrant") to purchase 2,500 shares of Common Stock at an exercise
price of $10.00 per share. The Warrant expires three (3) years after
its issuance and may be redeemed by the Company if the closing bid
price for the Common Stock is equal to or greater than 100% of the
exercise price of the Warrant for twenty (20) consecutive trading
days, provided that a registration statement covering the shares of
Common Stock to be issued upon exercise of the Warrants is then
effective.
The Company received gross proceeds of $20 million from the private
placement. The Company intends to use such proceeds to make strategic
acquisitions, to meet working capital requirements and for general
corporate purposes.
In connection with the Private Placement, the Company incurred
placement agency fees consisting of approximately $760,000 in cash,
issued an aggregate of 84,955 shares of Common Stock, warrants to
purchase an aggregate of 84,955 shares of Common Stock at an exercise
price of $10.00 per share (in each case, on terms identical to the
Warrants), and warrants to purchase an aggregate of 336,750 shares of
Common Stock at an exercise price of $5.50 per share.
10
<PAGE> 11
The Units offered and sold in the Private Placement were not
registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption therefrom provided
by Section 4(2) of the Securities Act.
In addition to the 4,000,000 shares of Common Stock and warrants to
purchase 4,000,000 shares of Common Stock (exercisable at $10.00)
issued in connection with the private placement and the 84,955 stock
and warrants to purchase 421,705 shares of Common Stock issued to
placement agency firms, other significant activity during the first
quarter included: 751,381 shares of Common Stock and warrants to
purchase 929,918 shares of Common Stock (exercisable at prices between
$3.75 and $10.00) were issued for conversion of debt and settlement of
expenses, as well as 52,632 shares of common stock for contractual
services; warrants to purchase 2,630,000 shares of Common Stock were
issued to members of the new executive management and new board of
director members (at exercise prices from $3.75 to $17.75).
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained in this Quarterly Report on Form 10-QSB are
"forward-looking statements," within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective in nature. Such
forward-looking statements reflect management's beliefs and assumptions and are
based on information currently available to management. The forward-looking
statements involve known and unknown risks, uncertainties and other factors
that may cause actual results, performance or achievements of Cereus Technology
Partners, Inc. to differ materially from those expressed or implied in such
statements. There can be no assurance that such factors or other factors will
not affect the accuracy of such forward-looking statements
Results of Operations
Quarter Ended June 30, 2000 Compared to Quarter Ended June 30, 1999
Cereus Technology Partners, Inc. (the "Company" or "Cereus"), known as AIM
Group, Inc. prior to December 1, 1999, adopted a new business strategy in July
1999 to provide business application software and services through traditional
delivery methods and Web based delivery methods. To facilitate its new business
strategy during 1999 Cereus acquired Client Server Solutions, Inc. and an
affiliated company (collectively, "CSS"), Enterprise Solutions Group ("ESG")
and Reddy Group, Inc. and subsidiary, Cereus Bandwidth, LLC (collectively,
"Cereus Bandwidth" and together with CSS and ESG the "Acquired Businesses").
The results from continuing operations for the quarter ended June 30, 2000 were
derived from the operations of the Acquired Businesses. On July 30, 1999, the
Company acquired Cereus Bandwidth and ESG, and on November 15, 1999, the
Company acquired CSS. CSS and ESG provide business application software and
services to the middle market through traditional delivery methods. Cereus
Bandwidth is a provider of Internet-based technology services to small and
middle market companies.
Net revenues of approximately $1,983,000 and $3,574,000 for the quarter and six
months ended June 30, 2000, respectively, were derived principally from sales
of software, consulting and development fees and Internet service fees.
Cost of revenues of approximately $1,711,000 and $3,145,000 for the quarter and
six months ended June 30, 2000, respectively, primarily reflect the cost of
software products and consulting, development and other direct labor costs.
A loss on contractual services of approximately $250,000 was recognized in the
first quarter 2000, related to software purchase commitments entered into which
the Company does not expect to use due to the repositioning of its business to
focus on business-to-business e-commerce. The loss was recognized based on
management's evaluation that little or no future economic benefits will result
from these commitments given the repositioning of the business.
Sales and marketing costs of approximately $588,000 and $904,000 for the
quarter and six months ended June 30, 2000, respectively, relate primarily to
cost of sales, marketing and business development personnel, including
commissions as well as travel and marketing campaign expenses.
12
<PAGE> 13
General and administrative expenses of approximately $1,201,000 and $1,940,000
for the quarter and six months ended June 30, 2000, respectively, primarily
relate to personnel expenses, professional services, travel expenses and other
overhead costs.
Stock compensation of approximately $126,000 for the quarter ended June 30,
2000 represents non-cash charges related to the accelerated vesting of stock
options for terminated employees due to the proposed merger between the Company
and Eltrax. Stock compensation of approximately $2,399,000 for the six months
ended June 30, 2000 also includes non-cash charges related to the issuance of
common stock and warrants to employees and consultants during the quarter ended
March 31, 2000.
Impairment charges of approximately $5,637,000 relate to the write-down of
goodwill associated with two of the Company's acquisitions in 1999, CSS and
ESG, each of which was principally an ERP software sales and implementation
business. As a result of the new management team repositioning and
restructuring the Company's business model, management's analysis indicated
impairment in the goodwill valuation associated with these acquisitions of
approximately $5,637,000.
Goodwill amortization of approximately $307,000 and $613,000 reflects the
amortization expense for the quarter and six months ended June 30, 2000,
respectively, related to the goodwill associated with the Acquired Businesses
(as adjusted in the first quarter 2000 for the impairment valuation discussed
above).
Net interest income of approximately $247,000 and $300,000 for the quarter and
six months ended June 30, 2000, respectively, reflects interest income earned
on the proceeds of approximately $19,242,000 from the Company's February 2000
private equity placement, net of interest expense on debt outstanding and net
of approximately $73,000 of debt discount amortization expense. The discount
related to the subordinated notes issued in 1999, which were converted to
equity in the first quarter 2000.
Loss from discontinued operations of approximately $89,000 and $398,000 for the
quarter and six months ended June 30, 1999 represent the losses for the mineral
operations for those periods.
Loss on disposal of discontinued operations of approximately $236,000 for the
six months ended June 30, 2000 reflects an adjustment to the write-down of the
book value of the mining companies that was recorded in the fourth quarter of
1999. The write-down reflects the reduction in carrying value of net assets to
fair market value plus an additional accrual for severance and transaction
costs associated with its disposition of these companies.
The loss from debt conversion in the six months ended June 30, 2000 of
approximately $7,188,000 relates to the conversion of approximately $2,075,000
in debt to equity (a combination of common stock and warrants) which conversion
occurred in the first quarter, 2000.
LIQUIDITY AND SOURCES OF CAPITAL
Cereus has been funded using both equity and debt financing, and most recently,
from the proceeds of a private equity placement of common stock and warrants
completed on February 8, 2000. The net proceeds to the Company from this
private equity placement were approximately $19,242,000, and upon the exercise
in full of the warrants issued as part of such private equity placement, the
Company will receive additional proceeds of approximately $40 million. As of
June 30, 2000, the Company had working capital of approximately $13,715,000.
Cash used in continuing operating activities was approximately $3,208,000 for
the six months ended June 30, 2000. Cash used in operations, including
discontinued operations, was approximately $3,444,000 in 2000 compared with
cash used in operations of $146,000 for the six months ended June 30, 1999. The
net
13
<PAGE> 14
use of cash in six months ended June 30, 2000 was primarily a result of the
cash operating losses for the quarter and the planned reduction in accounts
payable, utilizing the proceeds from the private placement.
Cash used in investing activities was approximately $486,000 for the six months
ended June 30, 2000 compared to approximately $248,000 for the same period in
1999. The increase is attributable to purchases of property, plant and
equipment for the Acquired Businesses.
Net cash provided by financing activities was approximately $13,562,000 for the
six months ended June 30, 2000 compared with approximately $121,000 for the
same period in 1999. The financing proceeds primarily related to the net
proceeds of $19,242,000 from the private placement completed in the first
quarter of 2000. These proceeds are offset by loans made to Eltrax of
approximately $4,000,000 of the $5,000,000 agreed upon in the bridge loan
commitment entered into concurrently with execution of the merger agreement. In
addition, the Company has agreed to loan Eltrax up to an additional $5,000,000
under certain circumstances. In the first quarter of 1999, the net cash
provided by financing activities related to debt financing.
As of June 30, 2000, the Company had approximately $9,631,000 in cash. The
Company anticipates that operating and capital expenditures will be significant
as the Company continues to expand its application service provider business and
web integration strategy but the Company believes that its liquidity and capital
resources will be sufficient to satisfy its cash requirements for the next 12
months, including the additional $6,000,000 commitment to Eltrax but excluding
any acquisitions or significant hiring activities. In the event additional
capital resources are required, the Company will attempt to raise additional
equity and debt capital. There can be no assurance that the Company will be able
to raise additional such funds.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings pending, or to the Company's
knowledge, threatened against the Company or any of its subsidiaries.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
No information is required to be reported under this item.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No information is required to be reported under this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No information is required to be reported under this item.
14
<PAGE> 15
ITEM 5. OTHER INFORMATION
No information is required to be reported under this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
---------
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Second Amended and Restated Agreement and
Plan of Merger by and among Eltrax Systems,
Inc., and Solemn Acquisition Corporation
and Cereus Technology Partners, Inc. dated
as of July 27, 2000.
27 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on Form 8-K:
On June 16, 2000 the Company filed a Current Report on Form 8-K to
report under Item 5 the execution of an agreement and plan of merger with
Eltrax and Solemn Acquisition Corporation, a wholly-owned subsidiary of Eltrax.
15
<PAGE> 16
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CEREUS TECHNOLOGY PARTNERS, INC.
By: /s/Juliet M. Reising
---------------------------------------
Juliet M. Reising
Executive Vice President and Chief Financial Officer
Dated: August 14, 2000
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
2.1 Second Amended and Restated Agreement and Plan of Merger by and among
Eltrax Systems, Inc., Solemn Acquisition Corporation and Cereus
Technology Partners, Inc. dated as of July 27, 2000.
27 Financial Data Schedule (for SEC use only)
</TABLE>
17
