10QSB/A 1 0001.txt AMENDMENT NO. 1 TO FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-QSB/A 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] 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 2 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. 3 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 Deferred Revenue 225,826 -- 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 10,349,967 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 (10,682,647) (8,372,806) Less: Treasury Stock (3,006,012) (3,006,012) Less: Subscription Receivable (250,000) ------------ ----------- TOTAL STOCKHOLDERS' EQUITY (7,824,709) (6,429,369) ------------ ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,525,258 $ 1,293,372 ============ =========== See Accompanying Notes to Consolidated Financial Statements. 4 ELLIGENT CONSULTING GROUP, INC. AND SUBSIDIARIES Consolidated Statement of Operations (Unaudited)
Three Months Ended June 30, Six Months Ended June 30, ----------------------------- ----------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ INCOME: Revenue $ 1,378,028 $ 697,027 $ 2,317,486 $ 1,193,376 Cost of services 1,057,461 568,882 1,697,010 970,027 ------------ ------------ ------------ ------------ Gross profit 320,567 128,145 620,476 223,349 ------------ ------------ ------------ ------------ 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 (1,278,403) 24,361 (2,259,841) (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 (1,328,403) 70,566 (2,309,841) (435,083) Income Tax Benefit -- 124,400 -- 283,600 Discontinued Operations -- (951,428) -- (1,363,995) ------------ ------------ ------------ ------------ Total Loss (1,328,403) (756,462) (2,309,841) (1,515,478) ============ ============ ============ ============ Loss per Share of Common Stock: Loss from Continuing Operations $ (0.08) $ (0.05) $ (0.14) $ (0.03) ============ ============ ============ ============ BASIC AND DILUTED LOSS PER SHARE $ (0.08) $ (0.05) $ (0.14) $ (0.03) ============ ============ ============ ============ WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING 17,096,149 14,858,930 16,939,335 14,765,162 ============ ============ ============ ============
See Accompanying Notes to Consolidated Financial Statements. 5 CONSULTING GROUP, INC. AND SUBSIDIARIES Consolidated Statement of Stockholder's Equity for the Period June 30, 2000
COMMON STOCK CAPITAL IN --------------------- EXCESS UNEARNED SHARES AMOUNT OF PAR VALUE COMPENSATION ------ ------ ------------ ------------ 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 - - (2,309,841) (2,309,841) ------------- ------------- ------------- ------------- Balance June 30, 2000 (3,006,012) (250,000) (10,682,647) (7,824,709) ============= ============= ============= =============
See Accompanying Notes to Consolidated Financial Statements. 6 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 $(2,309,841) $ (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 Deferred Revenue 225,826 -- Accrued expenses-stockholders 7,066 340,116 Income taxes payable -- (117,669) ----------- ----------- Total adjustments 374,285 (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. 7 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. 8 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 $ 2,317 $ 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. 9 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 $1,378,000 versus $697,000 in the year earlier period, an increase of over 98%, and a loss from continuing operations of $1,328,000, 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 $2,317,000 versus $1,193,000 in the year earlier period, an increase of over 94%, and a loss from continuing operations of $2,310,000 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. 10 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 11 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 22, 2000 By: /s/ Andreas Typaldos ------------------------------------ Andreas Typaldos Chairman of the Board and Chief Executive Officer 12