U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended:July 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 33-14576-D
ELLIGENT CONSULTING GROUP, INC.
(Name of Registrant)
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
(212) 765 - 2915
(Current Address and Telephone Number of the Registrant)
Arena Group, Inc.
5 Clancy Lane South
Rancho Mirage, California 92270
(Former Name and Address of Registrant)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: None
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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. [
Item - 1 ] Yes [ X ] No [ ] [ Item - 2 ] Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
State Registrant's revenues for its most recent fiscal year. Pro forma revenue
taking into consideration the Registrant's Reorganization (as defined herein)
and the acquisition of Conversion Services International, Inc. (as described
herein).
$17,730,000.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days:
As of September 4, 1998, the Registrant's common stock, $0.001 par value per
share (the "Common Stock") was listed on the OTC electronic bulletin board at an
average bid and asked price of $5.75 per share. Based on the 1,419,940 shares of
voting Common Stock held by non-affiliates (pro forma after the Reorganization
and the acquisition of CSI), the aggregate market value was approximately $8.16
million.
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 September
4, 1998, 14,544,225 shares of the Registrant's Common Stock were outstanding
(pro forma after the Reorganization and the acquisition of CSI).
DOCUMENTS INCORPORATED BY REFERENCE
None of the documents referred to by this Item are incorporated by reference.
Transitional Small Business Disclosure Format (check one):Yes [ ] No [ X ]
<PAGE>
PART - I
ITEM 1. DESCRIPTION OF BUSINESS
This report contains statements of a forward-looking nature relating to
future events or future financial results of the Registrant. Investors are
cautioned that such statements are only predictions and that actual events or
results may differ materially. In evaluating such statements, investors should
specifically consider the various factors identified in this Report which could
cause actual events or results to differ materially from those indicated by such
forward-looking statements.
General
The Registrant was incorporated as Coronado Ventures, Inc. under the laws
of the state of Nevada in 1987. Subsequently, the Registrant filed a Form S-18
Registration Statement (the "Offering") with the U.S. Securities and Exchange
Commission ("SEC"), which was declared effective on November 13, 1989. Pursuant
to the Offering, a total of one million units, consisting of one share of Common
Stock and three warrants, were sold. The warrants expired unexercised.
Shortly after the consummation of the Offering, the Registrant acquired
100% of the issued and outstanding shares of common stock of Tahoeview
Cablevision, Inc. ("Tahoeview") for which it issued shares of its Common Stock.
The acquisition of Tahoeview allowed the Registrant to pursue the cable
television business in northern California. At the same time, the Registrant's
name was changed to Weststar Group, Inc. In 1991, the Registrant acquired all
the assets of several cable television systems located in eastern Montana and
formed a second subsidiary, Weststar Group North ("WGN"). The Registrant issued
shares of its Common Stock and through WGN obtained a $3,000,000 revolving
credit loan (the "Revolving Credit Loan") from a financial institution of which
approximately $2,300,000 went to the sellers of the assets acquired by WGN.
Upon expiration of the Revolving Credit Loan in 1993, which the
Registrant's subsidiaries were not able to renew, suit was filed in U. S.
District Court (the "Court"), naming Tahoeview and WGN as defendants and a
permanent receiver (the "Permanent Receiver") was appointed. The Registrant was
not a party to the bankruptcy proceedings. On July 31, 1996, the Court ordered
the receivership closed and the Registrant's subsidiaries were ordered to
dissolve as corporate entities.
In July of 1997, the Registrant changed its name to Arena Group, Inc. and
two shareholders of the Registrant, Lloyd T. Rochford and Denny W. Nestripke,
were elected as directors, with the express purpose of locating a business
venture with which the Registrant could enter into a Reorganization. On July 23,
1998, the Registrant, through its wholly owned subsidiary Patra Acquisition,
Inc., a Delaware corporation ("Patra Acquisition"), entered into a Non-Binding
Letter of Intent (the "Letter of Intent") with Patra Capital Ltd., a Delaware
corporation ("Patra Capital"). The Letter of Intent provided for the execution
of a definitive merger agreement (the "Merger Agreement"). Pursuant to the
Merger Agreement, Patra Capital will merge with Patra Acquisition and Patra
Capital, as the surviving corporation of the merger, will became a wholly owned
subsidiary of the Registrant (the "Reorganization"). As part of the
Reorganization, the Registrant changed its name to Elligent Consulting Group,
Inc. on July 31, 1998.
In connection with the Reorganization, Patra Capital negotiated an
agreement to acquire Conversion Services International, Inc., a Delaware
corporation ("CSI"). CSI has been engaged for nearly nine years in providing
information technology consulting services. Pursuant to the acquisition
agreement, Patra Capital would acquire all of the outstanding shares of common
stock of CSI, and at the same time, Patra Capital would change its name to
Conversion Services International, Inc.
CSI provides high-end project management, applications implementation,
data warehousing, consulting, internet and information technology ("IT")
staffing services. CSI has recently expanded its operation to accommodate
additional consultant/employees and new in-house training facilities. CSI
currently has approximately 170 employees and consultants, and expects that
number to increase as its business grows. CSI's revenues have doubled over the
past two years, and estimated 1998 revenues are expected to be approximately $23
million.
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Prior to the Reorganization, all functions of the Registrant's operations
were conducted by its two directors. The Registrant had one employee as of July
31, 1998. The Registrant did not conduct any business operations during the past
three years and has not generated any revenue from any sources during that time
period. Pursuant to the Reorganization, the Registrant's business operations
will be significantly different in forthcoming years.
During the first quarter of fiscal 1999, the Registrant plans to close its
acquisition of CSI, its first operating subsidiary. The Registrant expects to
continue an acquisition program to acquire other operating subsidiaries
("platform companies") by early 1999. The Registrant will then continue its
development through continued internal growth from the acquired platform
companies and additional rollout acquisitions within each of its service
offering areas. Through this expansion and growth strategy, the Registrant plans
to develop into a leading global technology services company.
Through its operating subsidiaries, the Registrant plans to offer its
clients an enterprise-type offering of services. These services will include
management consulting, business function reengineering, mission critical
application rollouts and package implementation, database and datawarehousing
consulting, networking and interim and permanent staffing or support.
The Registrant plans to enter a business segment that has significant
competition from other much larger companies. The Registrant expects to offer
its services to large national and multi-national companies. There are no
copyrights or patents owned by the Registrant.
As a part of the Reorganization, the Registrant established its corporate
headquarters office in New York City, New York. CSI maintains its offices in
East Hanover, New Jersey.
The Registrant plans to continue an expansion strategy through (1) the
acquisition of a select number of technology consulting companies with
complementary areas of expertise and (2) internal growth from the acquired
operating subsidiaries. While there is significant risk as a result of potential
external problems, lack of available capital, changing economic and market
conditions, and significant competition from much larger companies, through this
expansion strategy, the Registrant's plans are to develop into a leading global
consolidator of technology services companies. Key to the acquisition strategy
is the retention of the acquired company's management and staff.
ITEM 2. DESCRIPTION OF PROPERTY
Prior to the Reorganization, the Registrant did not own or lease any real
property. After the Reorganization, the Registrant shall have two operating
locations, both of which are leased. The executive offices will be located at
152 West 57th Street, New York, New York. The offices of CSI are located at 100
Eagle Rock Avenue, East Hanover, New Jersey.
ITEM 3. LEGAL PROCEEDINGS
All legal proceedings relative to the receivership in which the
Registrant's former subsidiaries were involved prior to the Reorganization were
ordered closed by the Court on July 31, 1996. The Registrant was not a party to
the proceedings. The Registrant, its officers, directors, affiliates or owners
of more than 5% of the Registrant's Common Stock are not a party to any known or
threatened legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Pursuant to a Written Shareholder Consent (with a record date of July 25,
1998) executed in connection with the Letter of Intent and the Reorganization,
approximately 66% or 1,049,202 voting shares of Common Stock of the Registrant
approved the change in the Registrant's name to Elligent Consulting Group, Inc.
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PART - II
ITEM 5. MARKET FOR COMMON EQUITY & RELATED STOCKHOLDER MATTERS
Prior to the Reorganization, there was no public market for the
Registrant's Common Stock and any transactions occurring were principally the
result of a "work-out" market price. The Registrant's Common Stock commenced
trading on low volume following the signing of the Letter of Intent. The
quotations that commenced at that time reflected inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions.
As of September 4, 1998, and after giving effect to the Reorganization and
the acquisition of CSI, the Registrant had 14,544,225 shares of issued and
outstanding Common Stock, of which 1,419,940 shares, or 9.76%, are held by
non-affiliates. The Registrant's Common Stock is traded on the OTC Bulletin
Board under the symbol ECGR.
Stock Price RangePeriod August 25 to September 4, 1998
High $ 7 1/8
Low $ 4 7/8
The Registrant's shares of Common Stock are held by approximately 58
shareholders of record. The Registrant has not undertaken a search for
shareholders whose securities are being held in broker/dealer or clearing house
accounts; consequently, the actual number of shareholders could be substantially
larger than the shareholders of record. During the last two fiscal years the
Registrant has not declared any cash dividends on its Common Stock.
In July of 1997, the Registrant sold 214,285 shares of its Common Stock to
two individuals at a cash price of $0.07 per share pursuant to the private
offering exemption of Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"). One of these individuals was Mr. Lloyd T. Rochford, an
officer and director of the Registrant, who purchased 174,285 shares for a total
of $12,200 in cash consideration. The other individual was Mr. Robert Morley
who, after his purchase of 40,000 shares of post-split Common Stock, owned a
combined total of 82,857 shares or 8.3 % of the total common shares then
outstanding. Mr. Morley paid $2,800 in cash consideration for these shares.
In January of 1998, the Registrant sold 200,000 shares of its Common Stock
to KM Financial at a cash price of $0.07 per share pursuant to the private
offering exemption of Section 4(2) of the Securities Act. After this purchase,
KM Financial owns 200,000 shares or 12.55% of the 1,594,225 common shares
outstanding as of July 31, 1998. KM Financial paid $14,000 in cash consideration
for these shares.
In June of 1998, the Registrant sold 400,000 shares of its Common Stock to
Mr. Morley at a cash price of $0.90 per share pursuant to the private offering
exemption of Section 4(2) of the Securities Act. After his purchase, Mr. Morley
owns 482,857 shares or 30.29% of the 1,594,225 common shares outstanding as of
July 31, 1998. Mr. Morley paid $359,799 in cash consideration for these shares,
representing the purchase price of $0.90 per share less certain incidental costs
of $201.
In connection with the Reorganization, the Company intends to issue
12,950,000 shares of its Common Stock, including 1,100,000 shares in connection
with the acquisition of CSI.
ITEM 6. PLAN OF OPERATIONS.
General
The forward-looking statements herein are based on current expectations
that involve a number of risks and uncertainties. Such forward-looking
statements are based on assumptions that the Registrant will have adequate
financial resources to fund the development and operation of its business and
planned acquisitions, and that there will be no material adverse change in the
Registrant's operations or business and in the economy as a whole. The foregoing
assumptions are based on judgment with respect to,
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among other things, information available to the Registrant, future economic,
competitive and market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
the Registrant's control. Accordingly, although the Registrant's management
believe that the assumptions underlying the forward-looking statements are
reasonable, any such assumption could prove to be inaccurate and therefore there
can be no assurance that the results contemplated in forward-looking statements
will be realized. There are a number of other risks presented by the
Registrant's business and operations which could cause the Registrant's
financial performance to vary markedly from prior results or results
contemplated by the forward-looking statements. Management decisions, including
budgeting, are subjective in many respects and periodic revisions must be made
to reflect actual conditions and business developments, the impact of which may
cause the Registrant to alter its capital investment and other expenditures,
which may also adversely affect the Registrant's results of operations. In light
of significant uncertainties inherent in forward-looking information included in
this Annual Report on Form 10-KSB, the inclusion of such information should not
be regarded as a representation by the Registrant or any other person that the
Registrant's objectives or plans will be achieved.
In addition to general economic factors that could adversely affect the
economy, the several factors that could cause expectations to differ and
adversely affect the Registrant's plan of operations include, but are not
limited to, the following: (1) the Registrant may not be able to attract
acquisition candidates on favorable terms; (2) financing sources may not be
available to achieve the planned acquisitions; (3) competition for consulting
assignments remains strong and the Registrant must continue to demonstrate its
ability to meet the needs of its current and prospective clients; and (4)
changes in technology may result in the Registrant not being able to meet the
needs of its current and prospective clients due to an inability to locate a
sufficient number of qualified consultants.
The Registrant did not conduct any business operations during the past
three years and has not generated any revenue from any sources during that time
period. Pursuant to the Reorganization, the Registrant's business operations
will be significantly different in forthcoming years. The remainder of this Item
6 is a discussion of the Registrant's plans for operations during the next
twelve months and a discussion of CSI's historical results and future plans.
Elligent Consulting Group, Inc.
The Registrant's plan is to build a major technology consulting services
company that can provide a one-stop shopping entity where major corporations may
obtain the specialized technology consulting services that they need to continue
their own growth targets without adding to their fixed overhead cost structure.
The Registrant's management believes that market dynamics provide an
opportunity to grow by offering their clients enterprise services that would
replace the point solution service offerings of the past. These market dynamics
are similar to those that facilitated the growth of enterprise software
companies such as SAP, Peoplesoft, BAAN and others that replaced the point
solution software companies. The Registrant plans to meet this demand by
acquiring six to eight platform companies with complementary areas of expertise
through an acquisition program that when completed will allow the Registrant to
offer its clients an enterprise-type offering of services. These services will
include management consulting, business function reengineering, mission critical
application rollouts and package implementation, database and datawarehousing
consulting, networking and interim and permanent staffing or support.
During the first quarter of fiscal 1999, the Registrant expects to close
an acquisition of CSI, its first platform company. The Registrant expects to
continue an acquisition program to acquire other platform companies by early
1999. The Registrant will then continue its development through continued
internal growth from the acquired operating subsidiaries and additional rollout
acquisitions within each of its service offering areas. Through this expansion
and growth strategy, the Registrant plans to develop into a leading global
technology services company.
In order to achieve this expansion plan, the Registrant will need to raise
equity capital and establish lines of credit that can be used to provide capital
for acquisitions and internal growth of its platform companies.
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Conversion Services International, Inc.
CSI is a nine-year old consulting company specializing in providing
information technology consulting services. CSI provides high-end project
management, applications implementation, data warehousing, consulting, internet
and Information Technology staffing services. CSI has recently expanded its
operation to accommodate additional consultant/employees and new in-house
training facilities. CSI currently has approximately 170 employees and
consultants, and expects that number to increase as its business grows.
CSI's revenues increased from $6.3 million in 1995 to $9.3 million in 1996
and $13.2 million in 1997, representing increases of 48% and 42%, respectively.
Cost of revenue consists primarily of personnel costs for consulting and
customer support. Total services costs increased from $3.9 million in 1995 to
$4.8 million in 1996 and $8.1 million in 1997 and represented 61%, 51% and 62%
of service revenues in 1995, 1996 and 1997, respectively.
Operating expenses consist primarily of personnel related expenses,
executive compensation and other administrative costs. Total operating expenses
increased from $2.3 million in 1995 to $4.1 million in 1996 and $5.2 million in
1997, representing increases of 80% from 1995 to 1996 and 26% from 1996 to 1997.
ITEM 7. FINANCIAL STATEMENTS
See Part III, Item 13(a) for a list of financial statements filed as part
of this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
The Registrant has not had any disagreements with its accountants on
matters relating to accounting and financial disclosure.
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PART - III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The Registrant is not a small business issuer that has a class of equity
securities registered pursuant to Section 12 of the Exchange Act and therefore
is not making any disclosure relative to shareholders who would otherwise be
subject to file Forms 3, 4 and 5.
Lloyd T. Rochford and Denny W. Nestripke comprised the Registrant's board
of directors prior to the Reorganization. Mr. Nestripke resigned his position
effective August 1, 1998. In connection with the Reorganization and the
acquisition of CSI, Andreas Typaldos, Edwin T. Brondo and Scott Newman were
nominated to serve as directors and officers of the Registrant. Listed below are
the names, ages, position and offices held or nominated to be held with the
Registrant. Also provided is the business experience during the past five years
of each individual and any other directorships held in reporting companies
naming each company.
a] Lloyd T. Rochford; age 52; director and Chairman of the Board
-------------------------------------------------------------
In February of 1989, Mr. Rochford founded Magnum Hunter Resources,
Inc. ("Magnum") and served as a director and as its Chief Executive
Officer through the end of 1995. Commencing in January of 1996 through
June of 1997, Mr. Rochford served as Magnum's Chairman of the Board of
Directors. Magnum is engaged in the exploration for and the production
of oil and gas and is a company listed on the American Stock Exchange.
Since his resignation from Magnum, Mr. Rochford has pursued his own
personal business interests until being elected a director of the
Registrant in July of 1997. Mr. Rochford will serve as chairman of the
board of the Registrant until August 1, 1998.
b] Andreas Typaldos; age 52; nominated to serve as director and Chairman
---------------------------------------------------------------------
of the Board
------------
Mr. Typaldos was founder, President and CEO of Computron Software,
Inc., an international public software and consulting company until
1996. He is also founder, Chairman, and major shareholder of Enikia,
Inc., an advanced home networking and communications company. Mr.
Typaldos was nominated to serve as chairman of the board of the
Registrant effective August 1, 1998.
c] Edwin T. Brondo; age 51; nominated to serve as director, Chief
--------------------------------------------------------------
Financial Officer, Secretary and Treasurer
------------------------------------------
Mr. Brondo was Vice President of First Albany Companies, Inc. and
Senior Vice President, Chief Administrative Officer of First Albany
Corporation from May 1993 until May 1998. Mr. Brondo currently serves
as a director of Computron Software, Inc. a company listed on the
American Stock Exchange. During the last five years Mr. Brondo was a
senior consultant at Comtex Information Systems, Inc. and a senior
financial executive at Bankers Trust Company. He has also held senior
positions at Goldman Sachs & Co., Morgan Stanley & Co. and G. A.
Saxton.
d] Scott Newman; age 39; nominated to serve as director, Vice President
--------------------------------------------------------------------
Mr. Newman is co-founder and president of Conversion Services
International, Inc. and has served in that capacity since its founding
in 1989.
The term of directorship is determined by the Registrant's by-laws, which
state that a directorship shall be held for a period of one year and longer, if
no other individual is qualified and elected to serve in the capacity of a
director. The positions as executive officers of the Registrant are held at the
discretion of the Registrant's board of directors, for such period, as it deems
advisable.
ITEM 10. EXECUTIVE COMPENSATION
The fiscal year ended July 31, 1998, constitutes the first fiscal year
that the Registrant had any officers or directors who were paid in cash or
otherwise compensated since 1993. Of the directors elected in July of 1997, and
the executive officers subsequently appointed, neither of these two individuals
were paid amounts in excess of $100,000 annually. Therefore, the following
Summary Compensation
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Table provides information only with respect to the Chief Executive Officer. Any
compensation paid to any employee, officer, director or otherwise, was made only
in the form of cash payments.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
- ------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Name Annual Restricted Under- All Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonussation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- ------------------------------------------------------------------------------
Lloyd T. Rochford 1998 $12,000 $0 $0 $0 None $0 $0
CEO
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The table below reflects any person (including any "group") who is known
by the Registrant to be the beneficial owner of more than five percent of the
Registrant's 1,594,225 issued and outstanding voting Common Stock prior to the
Reorganization and acquisition of CSI.
Security ownership of certain beneficial owners
Name and Amount and
Title Address of Nature of Percent
of Beneficial Beneficial of
Class Owner Owner Class
Common Lloyd T. Rochford 174,285 10.93%
Stock 152 West 57th Street, 40th Floor
New York, NY 10019
Common Denny W. Nestripke 92,857 5.82%
Stock P.O. Box 4190
Palm Desert, CA
Common Robert Morley 482,857 30.29%
Stock 1600 Quail Ridge East Lane #65
Roseville, CA
Common KM Financial 200,000 12.55%
Stock 6350 East Thomas Road
Suite 240
Scotsdale, AZ
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Security ownership of management
The table below lists those individuals who are directors and executive
officers of the Registrant, and provides a total by such individuals as a group,
current as of the date of the change of control of the Registrant, heretofore
mentioned:
(1) (2) (3) (4)
Name and Amount and
Title Address of Nature of Percent
of Beneficial Beneficial of
Class Owner Owner Class
Common Lloyd T. Rochford 174,285 10.93%
Stock 152 West 57th Street, 40th Floor
New York, NY 10019
Common Denny W. Nestripke 92,857 5.82%
Stock P.O. Box 4190
Palm Desert, CA
Common Officers and directors 267,142 16.76%
Stock as a group, 2 persons
The Reorganization and acquisition of CSI will result in a change in
control of the Registrant. As part of the Reorganization and as part of the
consideration for the acquisition of CSI, 12,950,000 shares of Common Stock will
be issued. As a result, the security ownership of the Registrant will be
materially different after the first quarter of fiscal 1999.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NONE
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements:
Page No.
Audited Financial Statements for Elligent Consulting Group, Inc.
Report of Independent Certified Public Accountants F-1
Balance Sheet at July 31, 1998 F-2
Statement of Operations for the year ended July 31, 1998,
For the period from July 31, 1996 (date of inception)
through July 31, 1997 and cumulative from July 31, 1996
through July 31, 1998 F-3
Statement of Stockholders' Equity for the years ended
July 31, 1998 and 1997 F-4
Statements of Cash Flows for the year ended July 31, 1998,
For the period from July 31, 1996 (date of inception)
through July 31, 1997 and cumulative from July 31, 1996
through July 31, 1998 F-5
Notes to Financial Statements F-6
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last quarter of the
period being covered by this report.
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(c) Index of Exhibits as called for by this Item of the Registrant's Form 10-KSB
Report.
Index of Exhibits:
Location Exhibit Description of Exhibit
(A) 2 Order of the Court to dissolve subsidiary corporations
(B) 3(i).1 Initial Articles of Incorporation
(C) 3(i).2 Amended Articles of Incorporation dated January 5, 1990
(A) 3(i).3 Amended Articles of Incorporation filed August 5, 1997
(E) 3(i).4 Amended Articles of Incorporation filed July 25, 1998
(B) 3(ii).1 Initial by-laws
(D) 3(ii).2 by-laws dated July 2, 1991
(E) 3(ii).3 by-laws dated April 1, 1998
Legend to location of Exhibits
(A) Incorporated by reference to a Form 10-KSB Report for the year ended
July 31, 1997.
(B) Incorporated by reference to a Registration Statement filed on Form S-18
File Number 33-23314 in the Denver Regional Office of the SEC.
(C) Incorporated by reference to a Form 10-Q Report for the quarter ended
December 31, 1989.
(D) Incorporated by reference to a Form 10-K Report for the year ended
June 30, 1991
(E) An Exhibit to this Form 10-KSB Report.
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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.
ELLIGENT CONSULTING GROUP, INC.
Date: October 29, 1998 By: /s/ Lloyd T. Rochford
---------------------------------------
Lloyd T. Rochford
Chairman of the Board, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signature Title(s) Date
By: /s/ Lloyd T. Rochford Chairman of the Board, President October 29, 1998
---------------------
Lloyd T. Rochford
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ELLIGENT CONSULTING GROUP, INC.
(FORMERLY ARENA GROUP, INC.)
(A Development Stage Company)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
AND
FINANCIAL STATEMENTS
July 31, 1998
<PAGE>
ELLIGENT CONSULTING GROUP, INC.
(FORMERLY ARENA GROUP, INC.)
(A Development Stage Company)
TABLE OF CONTENTS
Page
Report of Independent Certified Public Accountants F-1
Financial Statements:
Balance Sheet - July 31, 1998 F-2
Statements of Operations for the year ended July 31, 1998,
For the period from July 31, 1996 (date of inception)
through July 31, 1997 and cumulative from July 31, 1996
through July 31, 1998 F-3
Statements of Stockholders Equity for the Years Ended
July 31, 1998 and 1997 F-4
Statements of Cash Flows for the year ended July 31, 1998,
For the period from July 31, 1996 (date of inception)
through July 31, 1997 and cumulative from July 31, 1996
through July 31, 1998 F-5
Notes to Financial Statements F-6
------------------
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HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
Member of AICPA Division of Firms Fax (801) 532-7944
Member of SECPS 345 East 300 South, Suite 200
Member of Summit International Associates Salt Lake City, Utah 84111-2693
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Elligent Consulting Group, Inc.
We have audited the balance sheet of Elligent Consulting Group, Inc., (a
development stage company) as of July 31, 1998, and the related statements of
operations, stockholders' equity, and cash flows for the year ended July 31,
1998, for the period from July 31, 1996 (date of inception) through July 31,
1997 and cumulative from July 31, 1996 through July 31, 1998. These financial
statements are the responsibility of management. Our responsibility is to
express and opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Elligent Consulting Group, Inc.
as of July 31, 1998, and the results of its operations and its cash flows for
the year ended July 31, 1998, for the period from July 31, 1996 (date of
inception) through July 31, 1997 and cumulative from July 31, 1996 through July
31, 1998, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses and has had negative cash
flows from operating activities during the periods ended July 31, 1998 and 1997
which raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding this matter are also described in Note 1.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
August 4, 1998
F-1
<PAGE>
ELLIGENT CONSULTING GROUP, INC.
(FORMERLY ARENA GROUP, INC.)
(A Development Stage Company)
BALANCE SHEET
JULY 31, 1998
ASSETS
Current Assets
Cash in bank $ 333,696
----------
Total Assets $ 333,696
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 792
----------
Total Current Liabilities 792
Stockholders' Equity
Common stock-$0.001 par value; 50,000,000
shares authorized; 1,594,225 shares issued
and outstanding 1,594
Capital in excess of par value 386,955
Deficit accumulated during the development stage (55,645)
----------
Total Stockholders' Equity 332,904
Total Liabilities and Stockholders' Equity $ 333,696
==========
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
ELLIGENT CONSULTING GROUP, INC.
(FORMERLY ARENA GROUP, INC.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
For the Period From
From July 31, July 31, 1996
1996 (Date of (Date of
For the Year Inception) Inception)
Ended July 31, Through July 31, Through
1998 1997 July 31, 1998
---------- --------------- ------------
Interest income $ 3,226 $ -- $ 3,226
----------- ---------- --------
General and administrative 57,781 1,090 58,871
----------- ---------- --------
Net Loss $ (54,555) $ (1,090) $(55,645)
=========== ========== ========
Basic and Diluted Loss Per Share $ (0.06) $ (0.01) $ (0.06)
=========== ========== =======
Weighted Average Number of Shares
Outstanding 1,064,005 891,779 926,574
=========== ========== =======
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ELLIGENT CONSULTING GROUP, INC.
(FORMERLY ARENA GROUP, INC.)
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Accumulated Total
Capital in During the Development
Common Stock Excess of Stockholders'
Shares Amount Par Value Stage Equity
Balance - July 31, 1996
(Date of Inception) 779,940 $ 780 $ (1,030) $ -- $ (250)
Stock issued for cash;
July 1997 - $0.07 per
share 214,285 214 14,786 -- 15,000
Net loss -- -- -- (1,090) (1,090)
--------- ------ -------- -------- --------
Balance - July 31, 1997 994,225 994 13,756 (1,090) 13,660
Stock issued for services;
January 1998 - $0.07
per share 200,000 200 13,800 -- 14,000
Stock issued for cash;
June 1998 - $0.90 per
share 400,000 400 359,399 -- 359,799
Net loss -- -- -- (54,555) (54,555)
--------- ------ -------- -------- ---------
Balance - July 31, 1998 1,594,225 $1,594 $386,955 $(55,645) $ 332,904
========= ====== ======== ======== =========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ELLIGENT CONSULTING GROUP, INC.
(FORMERLY ARENA GROUP, INC.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
For the Period From
From July 31, July 31, 1996
1996 (Date of (Date of
For the Year Inception) Inception)
Ended July 31, Through July 31, Through
1998 1997 July 31, 1998
---------- --------------- ------------
Cash Flows From Operating
Activities
Net loss $ (54,555) $ (1,090) $(55,645)
Stock issued for services 14,000 -- 14,000
Increase (decrease) in
accounts payable 114 428 542
--------- ----------- --------
Cash Used in Operating
Activities (40,441) (662) (41,103)
--------- ----------- --------
Cash Flows from Financing
Activities
Proceeds from issuance of
common stock 359,799 15,000 374,799
--------- ----------- --------
Cash Provided by Financing
Activities 359,799 15,000 374,799
Net Increase in Cash 319,358 14,338 333,696
Cash at Beginning of Period 14,338 -- --
----------- ----------- --------
Cash at End of Period $ 333,696 $ 14,338 $333,696
=========== =========== ========
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ELLIGENT CONSULTING GROUP, INC.
(FORMERLY ARENA GROUP, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1-ACCOUNTING POLICIES AND OTHER DISCLOSURES
Organization and Corporate History -- Elligent Consulting Group, Inc., (the
"Company") was incorporated in February of 1987 under the laws of the state
of Nevada as Coronado Ventures, Inc. During the period commencing in 1990
through 1992, the Company acquired Tahoeview Cablevision, Inc. ("Tahoe")
and Weststar Group North ("North") and changed its name to Weststar Group,
Inc. Subsequently, Tahoe and North became subject to a bankruptcy
proceeding, which, on July 31, 1996, was concluded by an Order and Judgment
from the Court regarding the Final Distribution of Proceeds of Sale of
Assets by the Receiver. The Company was not named as a defendant in the
bankruptcy and was not involved in any manner, except that it was the sole
shareholder of Tahoe and North. On July 22, 1997, the name of the Company
was changed to Arena Group, Inc., and on July 25, 1998, its name was
changed to Elligent Consulting Group, Inc.
The conclusion of the aforementioned proceedings resulted in the Company
emerging without any business operations and being deemed to be a new
entity for financial statement reporting purposes. As such, the Company is
considered to be a development stage company. Pursuant to the order and
Judgment of the Court, Tahoe and North were ordered dissolved and
therefore, only the operations of the Company since July 31, 1996 (the
"Date of Inception") are included in the accompanying financial statements.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities and equity at the date of the financial statements and the
amounts of expenses reported during the periods presented. Actual results
could differ from those estimates.
Business Condition -- The Company has incurred losses and has had negative
cash flows from operating activities during the periods ended July 31, 1998
and 1997 which raise substantial doubt about its ability to continue as a
going concern. Management plans to reorganize the Company with another
enterprise as discussed further in Note 4.
Financial Instruments -- The Company has established a policy to consider
all highly liquid debt instruments purchased with an original maturity of
three months or less to be cash equivalents.
Income Taxes -- The Company has incurred no income tax liability for the
year ended July 31, 1998 and through July 31, 1997. The Company recognizes
a deferred tax asset or liability from temporary differences between the
basis of assets and liabilities reported for financial statement purposes
and federal income tax purposes, and for the effect of net operating loss
carry forwards.
F-6
<PAGE>
ELLIGENT CONSULTING GROUP, INC.
(FORMERLY ARENA GROUP, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Basic and Diluted Loss per Common Share -- During the year ended July 31,
1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share. Under SFAS 128, loss per common share
is computed by dividing net loss available to common stockholders by the
weighted-average number of common shares outstanding during the period.
Diluted loss per share reflects the potential dilution which could occur if
all contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock. In the Company's present
position, diluted loss per share is the same as basic loss per share. The
effect of the new standard on prior years was immaterial; accordingly,
prior periods have not been restated.
New Accounting Standards -- The Financial Accounting Standard Board issued
SFAS No. 129, Disclosures of Information About Capital Structure, SFAS No.
130, Reporting Comprehensive Income and SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information in 1997. These
statements, which were effective for fiscal years beginning after December
15, 1997, had no impact on the accompanying financial statements. The
Company adopted SFAS No. 128, Earnings Per Share, during the year ended
July 31, 1998. In accordance with SFAS No. 128, both basic loss per share
and diluted loss per share have been presented in the accompanying
financial statements.
NOTE 2-COMMON STOCK
During the year ended July 31, 1997, the Company issued 214,285 shares of
its common stock to two affiliated individuals at a cash price of $0.07 per
share. Cash of $15,000 was received for the stock.
During the year ended July 31, 1998, the Company issued 400,000 shares of
its common stock for cash to an affiliated individual. The shares were
issued for cash at $0.90 per share, less certain incidental costs of $201.
Net proceeds from the issuance were $359,799.
On January 15, 1998, the Company agreed to issue 200,000 shares of common
stock to an individual for services at $0.07 per share, which was the fair
value of the stock on that date.
F-7
<PAGE>
ELLIGENT CONSULTING GROUP, INC.
(FORMERLY ARENA GROUP, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 3-INCOME TAXES
The major components of the net deferred tax asset as of July 31, 1998 and
1997 were as follows:
1998
Operating loss carryforwards $ 18,335
Valuation allowance (18,335)
-----------
Net Deferred Tax Asset $ --
===========
During the year ended December 31, 1998, the valuation allowance increased
by $17,964.
The Company had operating loss carry forwards at July 31, 1998 of $53,926,
which expire in the years 2012 through 2013, if unused. Under federal tax
law, certain potential changes in ownership of the Company may operate to
restrict future utilization of these carry forwards.
The components of the provision for income taxes were immaterial for all
periods presented. The following is a reconciliation of the income tax at
the federal statutory tax rate of 34% with the provision for income taxes
for the years ended July 31, 1998 and 1997:
1998 1997
Income tax benefit at statutory rate $ (18,279) $ (371)
Change in deferred tax asset valuation allowance 17,964 371
Nondeductible expenses 315 --
--------- --------
Provision for Income Taxes $ -- $ --
========= ========
NOTE 4-POTENTIAL ACQUISITION [UNAUDITED]
During 1998, the Company entered into a non-binding letter-of-intent with
Patra Capital, Ltd., a Delaware corporation (" Patra") whereby a
newly-formed, wholly-owned subsidiary of the Company intends to merge with
and into Patra and the Company proposes to issue 12,950,000 shares of its
restricted common stock to the current shareholders of Patra in exchange
for all of the issued and outstanding common stock of Patra. At that time,
management of Patra would become the management of the Company. The merger
will likely be accounted for as a reorganization of Patra and the
acquisition of the Company by Patra.
Prior to the merger, Patra must complete a merger agreement with Conversion
Services International, Inc. (CSI) wherein Patra plans to purchase all of
the issued and outstanding shares of stock of CSI, as follows: $1,500,000
payable at closing; $1,000,000 payable within 45 days of the closing,
$1,500,000 in cash or stock at the option of the Registrant on January 21,
1999, $3,750,000 on May 1, 1999, $2,250,000 on August 1, 1999.
Additionally, Patra is to issue 1,100,000 shares of the Company's common
stock to the current shareholders of CSI.
F-8
EXHIBIT 3(i).4 Amended Articles of Incorporation filed July 25, 1998
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
ARENA GROUP, INC..
Pursuant to the applicable provisions of the Nevada Business Corporations
Act, the undersigned Corporation adopts the following Articles of Amendment to
its Articles of Incorporation by stating the following:
FIRST: The present name of the Corporation is Arena Group, Inc.
SECOND: The following amendment to its Articles of Incorporation was
adopted by a majority vote of shareholders of the Corporation on July 25,1998 in
the manner prescribed by Nevada law.
1. Article I is amended as follows:
ARTICLE I - CORPORATE NAME
The name of the corporation (hereinafter referred to as the "Corporation")
is Elligent Consulting Group, Inc.
THIRD: The number of shares of the Corporation outstanding and entitled to
vote at the time of the adoption of said amendment was 1,594,225 shares.
FOURTH: The number of shares voted for such amendment was 1,049,202 or
65.8 percent of the shares entitled to vote and the number voted against such
amendment was none, abstaining none.
DATED this 27th day of July, 1998.
Attest: ARENA GROUP, INC.
/s/ Denny W. Nestripke /s/ Lloyd T. Rochford
- ---------------------- ---------------------
Secretary President
1
<PAGE>
VERIFICATION
The undersigned being first duly sworn deposes and says that the
undersigned is the Secretary of Arena Group, Inc. and that the undersigned has
read the Articles of Amendment and knows the contents thereof and that the same
contains a truthful statement of the amendment duly adopted by the shareholders
of the Corporation.
Dated: July 27, 1998
/s/ Denny W. Nestripke
----------------------
Secretary
2
<PAGE>
ACKNOWLEDGMENT
State of California
County of Riverside
On July 27, 1998 before me, Debbie L. Wood, Notary Public, personally
appeared Lloyd T. Rochford and Denny W. Nestripke, personally known to me to be
the persons whose names are subscribed to the within instrument and acknowledged
to me that they executed the same in their authorized capacities, and that by
their signatures on the instrument the persons or the entity upon behalf of
which the persons acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Debbie L. Wood
------------------
Signature of Notary
3
EXHIBIT 3(ii).3 by-laws dated April 1, 1998
BYLAWS OF
Arena Group, Inc.
Article I - Bylaws
The Board of Directors (the "Directors") shall have the authority to write
and/or rewrite the bylaws of Arena Group, Inc. (the "Company") and to govern the
affairs of the Company in accordance with those bylaws. Any restrictions placed
upon the Directors regarding the contents of these or any future bylaws, shall
only be available to the extent that the bylaws are not consistent with the
constitution or laws of the United States, the constitution or laws or of the
state of Nevada and in particular, Chapter 78, Title 7, of The Nevada Business
Corporation Act enacted pursuant to the Nevada Revised Statues, as amended.
Article II - Seal
The Directors have determined that the Company shall conduct its business
without making use of a "corporate seal", except to the extent that such seal
shall be required by any governmental agency or as required by administrative
action of the Directors, which requires the specific utilization of a seal. For
purposes of the Company's stock certificates, the Company shall use a facsimile
of a seal on which the words "SEAL" shall be placed, in order to conform with
the practices of most corporations who have publicly traded securities.
Article III - Capitalization of the Company
1] The Company's Articles of Incorporation ("Articles") shall be the governing
instrument to determine the number of shares which the Company is authorized to
issue and the class or series of any shares authorized for issuance. To the
extent that the Articles designate only one class of security, such class shall
represent the common stock of the Company.
2] To the extent that the Articles designate that the Company may issue more
than one class or series of security and if the shareholders do not designate as
a part of the Articles, any rights, privileges, voting powers, preferences,
limitations, restrictions or any other designations to differentiate this
additional class from the common shares, then the Directors may vote at their
sole discretion, to designate any special rights of such class or classes
(series or series' or other delineation). If any preferences are assigned to any
given security other than the common stock, and if such preferences are not
identified in the Articles, then the Directors shall file a Certificate of
Designation, with the Secretary of State of Nevada, describing the preferences
being given to such security and such description shall be conspicuously printed
on each certificate of the newly designated security which is or will be issued.
3] Unless otherwise specifically stated in the Articles, the certificates
identified and designated as
1
<PAGE>
the "common stock" of the Company, and the individuals or entities who shall own
such common stock, shall be the only class of security owners to have a right to
the net assets of the Company, upon its dissolution.
4] To the extent that the Articles do not specifically withhold such right from
the Directors and do not specifically give such rights to the shareholders, the
Directors may increase or decrease the number of authorized shares of any given
series or class of the Company's securities. Such action must correspond to an
increase or decrease in the number of shares of that particular series or class
of securities which are issued and outstanding at the time the Directors cause
such increase or decrease to occur. Consequently, the Directors, without a vote
of the Company's shareholders, may forward split or reverse split the shares of
any series or class of the Company's securities.
5] To the extent that the Articles do not specifically withhold such right from
the Directors or that the Articles do not specifically give such rights to the
shareholders, the Directors shall have the authority to change the par value of
any series or class of the Company's securities.
6] If any action authorized by either the Directors or the shareholders would
result in fractional shares being issued, then the Directors shall issue "Scrip"
rather than fractional shares. Shareholder holding Scrip shall pay to the
Company such additional dollar amounts as are required in order for a whole
share to be issued. The Scrip shall not have any rights attached thereto or any
voting privileges associated therewith until exchanged for shares of that
particular security for which the Scrip was issued. The shareholder receiving
Scrip shall have a period of thirty (30) days to exercise their rights pursuant
to the Scrip, or for the issuance of additional shares as set forth and
described on the Scrip; otherwise, the Scrip shall expire and the shareholder
holding such Scrip shall have forfeited any rights relative thereto.
7] The Directors have the authority to determine the value of any shares issued
by the Company or to determine the consideration which the Company shall receive
for the issuance of its securities. The determination of the adequacy of the
consideration shall be the exclusive right of the Directors and shall be
conclusive. The consideration being received by the Company and the value
thereof, except if such determination was made with fraudulent intent, would
include any tangible or intangible property or other benefit which the Company
might receive thereby. The property or benefit to be received by the Company
shall include, but not be limited to: a) a cash payment to the Company; b) a
promissory note, secured or unsecured, payable to the Company; c) services
performed for the benefit of the Company; d) a contract for services to be
performed; and e) the exchange of one class of the Company's securities for
another class of the Company's securities.
8] The consideration received by the Company for the securities being issued by
the Company need not be allocated equally to all parties seeking to purchase
securities. Consequently, the value of the consideration being given for the
securities being issued may vary, as determined by the Directors.
9] The Directors may provide for any kind of a right, option or warrant
(collectively referred to herein as the "Right") to any individual or entity,
which would cause that individual or entity the Right to purchase shares of the
Company's securities. This provision is limited to the extent that the Right,
when exercised, does not exceed the Company's total number of shares authorized
for issuance. The terms of purchase, the exercise price, the time period during
which the Right can be exercised and
2
<PAGE>
any other pertinent information relative to such Right, must be conspicuously
displayed on the document, certificate or other instrument evidencing such
Right.
10] The shareholders of the Company do not have any preemptive rights to
purchase or otherwise receive shares of the Company's securities, due to the
fact that such shareholders own shares of one or more of the Company's
securities.
11] The Company shall have the right to redeem one or more classes of its
outstanding securities in an amount determined by formula or other method
utilizing such data or events, and for such consideration as determined by the
Directors. The consideration which the Company would give in exchange for its
shares may be similar to that listed in paragraph 7 of Article III of these
bylaws, and under such terms and/or conditions or events, as the Directors shall
determine.
12] Inasmuch as the Nevada Business Corporation Act of the Nevada Revised
Statues, as amended, does not provide for any statutory provisions related to
reducing the Company's capital, the Company will account for its "common stock"
issued on its balance sheet by multiplying the number of shares issued and
outstanding by the par value of each common share. Any dollar amounts received
or the value of services or other consideration, which exceeds the computation
for "common stock" as described in this paragraph, shall be accounted for in an
account entitled "paid-in capital" or "capital in excess of par" or some similar
designation.
Article IV - Board Of Directors
1] The number of individuals comprising the Directors shall be at least one in
number. At either a meeting of the Directors or at a meeting of shareholders
called for the purpose of electing Directors, the number of directors of the
Company may be increased by a majority vote of the Directors or shareholders.
Nevertheless, the number of Directors shall not cumulatively total more than
thirteen (13), unless these Bylaws are amended prior to the election or
appointment of a number of directors, exceeding such number. Additionally, any
individual desiring to be qualified as a Director, regardless if such individual
is elected or appointed, shall have attained the age of eighteen (18) years or
age, or their election or appointment shall be void.
2] With respect to the long range plan of the Company's business affairs, the
Directors shall have the authority and responsibility to direct the Company and
to assign such duties and responsibilities to the Company's officers as the
Directors deem appropriate.
3] The Directors have the authority to act, without the vote of the Company's
shareholders, on any matter which the Directors deem, in their judgment, to be
in the best interest of the Company and appropriate. Such matters may be beyond
the scope of the Company's normal operations and may include the purchase and/or
sale of the securities of the Company as well as the securities of any other
entity or municipality.
4] The Directors have no obligation to hold regular meetings. Any business
requiring the affirmative vote of the majority of the Directors will require
that the Chairman of the Board of Directors or if any other Director may so
desire, give notice of a meeting to the Directors, as the giving of such notice
is set forth herein or by resolution(s) signed by all Directors without a
meeting, such action being
3
<PAGE>
considered as a resolution by consent. Consequently, a meeting of the Directors
need not occur nor is notice required to be given, if all Directors vote in
favor of a given proposition and do so in writing and a record of the
proposition and a tally of the vote thereon is retained in the Company's
records.
5] In order for the Directors to convene a meeting to transact such Company
business as may require a vote of the Directors, a majority of all of the
Directors (a "Quorum of Directors") must be present. If a Quorum of Directors is
present, a majority vote of the Directors which comprise a Quorum of Directors
is sufficient for any action requiring a vote of Directors for enactment.
6] The term of service of each Director shall be for at least one year and
thereafter until the Company's next annual meeting. The Directors shall set the
date, time and place for the annual meeting of shareholders. In the event that
an annual meeting of shareholders is not held on an annual basis, then each
Director shall continue to serve in their capacity and discharge their duties
until a successor has been elected. In the event that one or more Directors
resign, the remaining Directors, regardless of their number, may appoint one or
more individuals to serve as Directors as the remaining Directors deem
appropriate.
7] Directors shall be reimbursed for costs and expenses paid to third parties
and incurred during the performance of their assigned duties. The amount of
compensation to be paid to Directors for their services shall be determined by
resolution of the Directors at a fixed amount; which amount can be in the form
of monetary compensation, in the form of the Company's common stock or by
granting the Right to purchase shares of the Company's common stock, including
the terms and conditions pursuant to which such securities can be purchased.
Nothing herein contained shall be construed to preclude any Director from
serving the Company in any other capacity and receiving compensation therefor.
Article V - Shareholders
1] To the extent that the Company only has common stock outstanding, each
shareholder shall be entitled to one vote for each share held. To determine if a
shareholder is eligible to vote, such individual or entity must be a shareholder
on the "record date", which date shall be set by the Directors. If an entity or
individual is the owner of the Company's shares; however, the shares are being
held in the name of a nominee, a brokerage firm, a clearing house or under any
other such arrangement, the purpose of which is for the convenience of the
shareholder and not as a deceptive device to avoid disclosure of the number of
shares owned by such shareholder, then upon receipt of an omnibus proxy from the
registered owner, the actual owner of the Company's shares may vote such shares
in the manner desired.
2] If proper notice, as required by the Nevada Business Corporation Act of the
Nevada Revised Statues, as amended, has been given of such a forthcoming meeting
of the Company's shareholders and a majority of the shareholders of the Company
are present, such majority being determined by the number of shares held, then a
"quorum" is present and a meeting can be called to order and properly held
("Quorum of Shareholders"). Once that a Quorum of Shareholders is present, then
all items requiring a vote of shareholders can be acted upon and a vote of
shareholders can be taken. If a majority of the Quorum of Shareholders are
present (either in person or by proxy) then the results of a vote of those
persons or persons holding proxies shall constitute a valid and binding vote
upon
4
<PAGE>
all shareholders of the Company.
3] If a Quorum of Shareholders is not present at a shareholder meeting, the
Directors still have the authority to pledge, mortgage, secure indebtedness or
otherwise encumber all or substantially all of the Company's assets for such
purposes as the Directors deem appropriate and for reasons that are in the best
interest of the Company's shareholders. Additionally, the Directors are
authorized to sell, purchase, hold or transfer the Company's securities for the
purpose of obtaining cash or other assets or properties. All of these
activities, except where a vote of shareholders of the Company is specifically
called for by the Nevada Business Corporation Act of the Nevada Revised Statues,
as amended, the Directors can transact, by a majority vote of the Directors,
whatever actions a majority of the Directors deem to be appropriate.
4] A meeting of shareholders need not occur nor is notice required to be given,
if a Quorum of Shareholders vote in the affirmative in writing and a record of
the proceedings and the vote, is retained in the Company's records. Such a vote
requires that the entire Quorum of Shareholders vote in the affirmative.
Otherwise, a meeting of shareholders must be properly noticed and the Company
shall provide all of its shareholders with information relative to the vote that
they are being requested to give regarding one or more items.
5] If a vote of shareholders is required pursuant to a merger or exchange of
shares with another corporation, then the Company's shareholders shall have the
right to dissent and receive payment of the fair value of such shareholder's
shares in the Company. The Company's shareholders shall not be entitled to a
right to dissent if: a) the Company's shares of stock entitled to vote are
listed on a national securities exchange, listed as a part of the national
market system on the NASDAQ system, or there are at least 2,000 shareholders of
record of the Company's shares entitled to vote.
Article VI - Officers
1] The Directors shall appoint such number of officers as the Directors deem
appropriate. Notwithstanding the foregoing, the following offices of the Company
must be filled by individuals appointed by the Directors: a) president; b)
secretary; c) treasurer. To the extent that the Directors deem it advisable, the
Directors may delegate to the aforementioned officers the right to appoint such
other subordinate officers as seems advisable.
2] The officers of the Company shall be elected or appointed by a majority vote
of the Directors. Unless otherwise agreed to by contract, the officers of the
Company serve in their respective positions at the discretion of the Directors
or at the discretion of such other officers as the Directors have delegated. The
Directors are responsible to assure that the offices of president, secretary and
treasurer are at all times occupied by an individual. One individual may, at the
discretion of the Directors, serve the Company in all three capacities; namely
president, secretary and treasurer.
3] Unless determined otherwise by the Directors, the president of the Company
shall also be given the title of principal executive officer or the chief
executive officer of the Company. The Directors' shall supervise and control all
of the business and affairs of the Company, unless otherwise delegated to
others. The president shall preside, under the direction of the Directors, at
all meetings of the Company's shareholders, either annual meetings or special
meetings. The president's signature, and
5
<PAGE>
if required by the document, the signature of the secretary of the Company,
shall validate and/or bind the Company with respect to all matters, including,
but not limited to, certificates of the Company representing equity or debt
instruments, any deeds, mortgages, contracts or other documents.
4] In addition to any other duties or obligations assigned to the office of vice
president, in the absence of the president due to death, disablement, or other
inability to act, the vice president shall exercise and perform the duties of
the president, until acted upon by the Directors.
5] The secretary shall keep the minutes of any meeting of the Company's
shareholders and, if so requested, of any meeting of the Directors. The
secretary shall be responsible for giving or for supervising the giving of all
"notices" of meetings and shall perform such other duties as from time to time
may be assigned by the president or by the Directors.
6] Unless otherwise designated by the by the Directors, the treasurer of the
Company shall also be given the title of principal financial officer or chief
financial officer and the principal accounting officer of the Company. If
required by the Directors, the treasurer shall be under a bond for the faithful
discharge of the duties and responsibilities of such office. These duties would
include, but not be limited to: a) maintaining records and save keeping all of
the Company's funds and securities; b) establish such bank accounts as
instructed by the Directors; c) supervise the preparation of financial
statements and the filing of such financial statements with such regulatory
agencies as may be required.
7] Unless covered by contract, the compensation to be paid to each officer shall
be determined from time to time by the Directors and no officer shall be
prevented from receiving compensation as an officer if such officer is also a
director of the Company.
Article VII - Other Matters
1] The annual meeting of the shareholders or any special meeting of the
shareholders of the Company shall be held on such date, at such place and at
such time as determined by the Directors. The failure of the Directors to call
for an annual meeting of shareholders shall in no way effect the legality of the
Company's existence and the continuation of the Directors to conduct their
duties and obligations.
2] The Directors may, at their discretion, declare dividends in cash or in
shares of the Company's securities, or if applicable, in shares of a corporation
which is majority owned by the Company. With respect to any distributions to the
Company's shareholders, the Directors are responsible as to the extent that in
so doing, the Company does not become insolvent or that the liabilities of the
Company would exceed the Company's total assets.
3] The Company shall indemnify its directors, officers, employees and agents in
any action which is brought against them by or in the right of the Company or in
any action which is brought against them other than by or in the right of the
Company. By acceptance of a directorship, by taking any action which would be
synonymous with that of a duly appointed officer or any activities which an
employee or agent undertakes believing such to be authorized by any individual
representing the Company as an officer and/or director, the Company represents
to have entered into an agreement
6
<PAGE>
with such individual for purposes of indemnification. Such agreement provides
that the expenses, including attorneys' fees and any "out of pocket costs"
incurred or the loss of income arising from time commitments necessary to defend
a civil or criminal action, suit or proceeding must be paid by the Company as
they are incurred and in advance of the final disposition of the of the action,
suit or proceeding. The termination of the suit by judgment, settlement,
conviction or upon a plea of nolo contendere shall not, of itself, create a
presumption that the person being indemnified did not act in accordance to such
person's belief that the best interests of the Company and that of its
shareholders were not the prevailing motive. Thus, unless evidence is presented
against the person being indemnified that such person acted willfully and in a
grossly negligent manner in direct violation of existing statues, the Company
shall indemnify such individual in all possible respects.
4] The registered office of the Company in the state of Nevada is The
Corporation Trust Co. of Nev., One East 1st Street, Reno, Nevada 89501. The
Company shall provide to its registered agent located at the registered office
such information as is required by Section 78.105(1), as amended by Ch. 442,
Laws 1991.
5] Certificates representing shares of the Company's equity and debt securities
(if any) shall be in such form as shall be determined by the Directors. Such
certificates shall be signed by the president and by the secretary of the
Company. The name and address of the shareholders, the number of shares and date
of issue, shall be entered on the stock transfer books of the Company, which may
be maintained by the Secretary, the Treasurer or an agent for the Company as
designated by the Directors.
These bylaws contain provisions which replace any and all bylaws that were
previously adopted by the board of directors. These bylaws were reviewed,
approved and adopted by the Board of Directors of Arena Group, Inc. on
Wednesday, April 1, 1998, and represent the governing document with respect to
those matters described herein, until such time as these bylaws shall be amended
or otherwise revised by the board of directors.
Dated the 1st day of April, 1998.
/s/ Denny W. Nestripke
----------------------
Denny W. Nestripke, Secretary
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of operations, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> jul-31-1998
<PERIOD-END> jul-31-1998
<CASH> 333,696
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 333,696
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 333,696
<CURRENT-LIABILITIES> 792
<BONDS> 0
0
0
<COMMON> 1,594
<OTHER-SE> 331,310
<TOTAL-LIABILITY-AND-EQUITY> 333,696
<SALES> 0
<TOTAL-REVENUES> 3,226
<CGS> 0
<TOTAL-COSTS> 57,781
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (54,555)
<INCOME-TAX> 0
<INCOME-CONTINUING> (54,555)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (54,555)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
