10-Q/A 1 0001.txt -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 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