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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
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 June 1, 2000 TO August 31, 2000
Commission File Number: 0-17597
ELITE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
-------------------------------------------------------
76-0252296
Texas (IRS Employer Identification No.)
(State or other Jurisdiction of
incorporation or organization)
30093
5050 Oakbrook Parkway (Zip Code)
Suite 100
Norcross Georgia
(Address of principal executive offices)
770-559-4975
(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 August 31, 2000, the latest practicable date, is as follows:
42,657,720 shares of Common Stock $.0001 par value.
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ELITE TECHNOLOGIES, INC.
Index
PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements:
Consolidated Balance Sheet- August 31, 2000 and May 31, 2000. 3
Consolidated Statements of Operations-Three Month
Period ended August 31, 2000 and August 31, 1999. 4
Consolidated Statements of Cash Flows-Three Month
Period ended August 31, 2000 and August 31, 1999. 5
Notes to Consolidated Financial Statements (unaudited) 6-7
Report on Review by Independent Accountants
Item 2. Management's Discussion and Analysis of Financial Condition 8-9
And Results of Operations
PART II - OTHER INFORMATION
Item 3. Legal Proceedings 10
Item 4. Changes in Securities 10
Item 5. Defaults upon Senior Securities 10
Item 6. Submission of matters to Vote of Security Holders 10
Item 7. Other Information 10
Item 8. Exhibits and Reports on Form 8-K 10
Exhibit Index
Signature 11
KIRSCHNER & ASSOCIATES, P.C.
REPORT ON REVIEW BY INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Elite Technologies, Inc., and Subsidiaries
We have reviewed the accompanying consolidated balance sheet of Elite
Technologies, Inc. and Subsidiaries (the Company) as of August 31, 2000 and May
31, 2000 and the related consolidated statements of operations and cash flows
for the first three months ended August 31, 2000 and August 31, 1999. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review on interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters, It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the aforementioned financial statements for them to be in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed further
in the financial information, the Company has suffered recurring losses from
operations that raise substantial doubt about its ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
KIRSCHNER & ASSCOCIATES, P.C.
Marietta, Georgia
November 10, 2000, except for Note on Compliance Review as to
Which the date is February 23, 2001
2
ELITE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)
August 31, May 31,
2000 2000
Assets
Current assets:
Cash and cash equivalents $240,550 -
Accounts receivable, less allowance for doubtful
accounts of $0 at August 31, 2000 and
May 31, 2000, respectively. 1,036,924 -
Notes receivable on convertible debt obligation - 527,470
Receivable from officers 573,703 289,084
Other current assets 685,099 30,000
------------ ------------
2,536,276 846,554
Property and equipment, net 218,229 31,004
Excess of cost over net assets of businesses
acquired, less accumulated amortization 6,889,448 4,987,844
Other assets 53,789 6,789
Total Assets $9,697,742 $5,872,191
================= =================
================= =================
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
Longterm liabilities:
Notes payable 178,995 100,000
Convertible note 1,035,599 1,035,599
Total Liabilities 1,214,594 1,135,599
Stockholders' equity:
Common stock, $.0001 par value; 500,000,000
shares authorized; 42,675,720 and 34,275,720
issued and outstanding at August 31, 2000
May 31, 2000, respectively 4,267 3,427
Additional paidin capital 39,211,734 35,206,634
Retained earnings (deficit) (34,896,556) (32,512,805)
Total liabilities and equity 4,319,445 2,697,256
$9,697,742 $5,872,191
================ ==================
================ ==================
The Notes to Financial Statements are an integral part of this statement
3
ELITE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
August 31,
2000 1999
Revenues $3,630,818 $377,997
Cost of Sales 2,968,113 -
Gross Profit 662,705 377,997
Salaries, wages and benefits 328,101 385,545
Depreciation and amortization 373,958 -
Other operating expenses 493,246 266,132
Investment banking fees 1,584,031 -
Operating loss (2,116,631) (273,680)
Interest expense - -
Other expenses, net 1,713 -
Loss before income taxes (2,118,344) (273,680)
Income taxes - -
Net loss ($2,118,344) ($273,680)
============ ===========
============ ===========
Net Loss Per Share of Common Stock:
Basic and Diluted ($0.06) ($0.01)
============ ===========
============ ===========
Weighted Average Number of Common
Shares Used In Calculating
Net Loss Per Share of Common Stock:
Basic and Diluted 38,475,720 31,515,185
============ ===========
============ ===========
The Notes to Financial Statements are an integral part of this statement.
4
ELITE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flow
(Unaudited)
Three Months Ended
August 31,
2000 1999
Cash flows from operating activities:
Net loss ($2,118,344) ($273,680)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 373,958 -
Commitment to issue stock for investment banking services 1,584,253 -
Decrease (increase) in:
Accounts receivable (1,036,924) 85,981
Note receivable - debt 527,470 -
Other assets (702,099) -
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 liabilities (85,000) 1,943
--------------- --------------
Net cash provided by (used in) operating activities 509,783 187,112
--------------- --------------
Cash flows from investing activities:
Purchases of property and equipment (425,000) -
Acquisition of businesses (175,000) (67,191)
Notes receivable from officers (284,619) -
--------------- --------------
Net cash (used in) investing activities (884,619) (67,191)
--------------- --------------
Cash flows from financing activities:
Proceeds from issuance of common stock 500,000 -
Contributed capital 150,492 -
--------------- --------------
Net cash provided by financing activities 650,492 -
--------------- --------------
Net increase (decrease) in cash and cash equivalents 275,656 119,921
Cash and cash equivalents at beginning of period (35,106) -
--------------- --------------
Cash and cash equivalents at end of period $240,550 $119,921
=============== ==============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest - -
--------------- --------------
Income taxes - -
--------------- --------------
Acquisition of businesses:
Fair value of assets acquired, including goodwill 2,275,562 -
Fair value of liabilities assumed - -
Promissory note issued ($425,000) -
Fair value of common stock issued (1,675,562) -
--------------- --------------
Net cash paid for acquisitions 175,000 -
=============== ==============
The Notes to Financial Statements are an integral part of this statement.
5
Three Months Ended
August 31,
2000 1999
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest - -
Income taxes - -
Acquisition of businesses:
Fair value of assets acquired, including goodwill - -
Fair value of liabilities assumed - -
Promissory note issued $425,000 -
Fair value of common stock issued - -
Net cash paid for acquisitions $175,000 -
================ =================
================ =================
ELITE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS AUGUST 31, 2000 (UNAUDITED)
Accounting Policies
In the opinion of management the accompanying unaudited consolidated financial
statements reflect all normal adjustments, exclusive of any adjustment that may
be required as a result of going concern issues discussed further in the
financial information, necessary to present fairly the financial position of
Elite Technologies, Inc., and Subsidiaries at August 31, 2000 and 1999 and cash
flows for the three months ended August 31, 2000. The results of operations for
the three-month period ended August 31, 2000 should not necessarily be taken as
indicative of the results of operations that may be expected for the entire year
May 31, 2001.
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.
6
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.
Compliance Review
Management received a compliance review letter from the United States Securities
and Exchange Commission dated November 20, 2000. The principle provisions of the
letter involve interpretation of valuation practices of the Company's common
stock issued subsequent to May 31, 1999.
Management has responded to the Commission in detail citing both theoretical and
empirical evidence supporting the case of the August 31, 2000 financial
statements and related Form 10-Q as originally filed but has agreed to restate
the financial statements in accordance with the wishes of the SEC staff.
The following schedule summarizes the major differences between management and
the Commission as impacting the Company's financial position as of August 31,
2000, and the results of operations for the three months then ended:
Form 10-Q and Form 10-Q/A and
Financial statements Financial statements
As originally filed As amended
Depreciation and amortization $115,625 $373,958
Investment banking fees 2,465,500 1,584,031
Net loss (2,755,502) (2,118,344)
Loss per share (0.07) (0.06)
Goodwill, net of amortization 5,678,359 6,889,448
Total assets 8,472,628 9,697,742
Additional paid-in capital 14,019,401 39,211,734
Retained earnings (deficit) (10,929,218) (34,896,556)
Stockholders' equity 3,094,331 4,319,445
7
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.
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. 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 5050 Oakbrook
Parkway, Suite 100., Norcross, GA 30093 Telephone: (770)-559-4975. 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.
8
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. 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 related to (i) the internal
restructuring of the business and (ii) the subsequent acquisition of
International Electronic Technology of Georgia and AC Travel.
Salaries, Wages and Benefits. Salaries, Wages and Benefits decreased to
$328,101 due to (i) terminations of staff related to the restructuring of the
company.
Other Operating Expenses. Other Operating Expenses increased to $493,246
attributed to the restructuring of the business.
Depreciation and Amortization. Elite depreciates its assets, including goodwill,
on a straight-line basis of three to five years. Depreciation and amortization
increased to $373,958. This is attributed to the amortization of goodwill
recorded in connection with the acquisitions completed in 2000.
Stock Based Compensation. Elite recorded $1,584,031 worth of stock for
investment banking services during the first quarter, 2000.
Operating Loss. Operating losses increased to $2,118,344 from $ 273,680
representing a 674% increase in the loss due to increased operational costs and
fees associated with Investment banking.
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.
9
PART II
OTHER INFORMATION
ITEM 3. 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 4. CHANGES IN SECURITIES.
The company issued unregistered stock for investment banking services valued
at $1,584,031. The securities were Regulation D, Rule (506).
ITEM 5. DEFAULTS UPON SENIOR SECURITIES. NONE
ITEM 6. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NONE
ITEM 7. OTHER INFORMATION. NONE
ITEM 8. EXHIBITS AND REPORTS ON FORM 8-K
Addendum to IET Acquisition Agreement
10
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.
February 23, 2001
By:/s/ Scott Schuster
Name: Scott Schuster
Title: Chief Executive Officer