SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
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FORM 8-K/A
Amendment No. 2 to
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 21, 1998
ELLIGENT CONSULTING GROUP, INC.
[Exact Name of Registrant as specified in its Charter]
Nevada 33-14576-D 87-0453842
[State or Other Jurisdiction [Commission File No.] [IRS Employer
of Incorporation] Identification No.]
152 West 57th Street, 40th Floor, New York, New York 10019
[Address of principal executive offices; ZIP Code]
Registrant's Telephone No., including Area Code: (212) 765-2915
N/A
(Former name or Former Address, if changed since last report)
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Item 7. Financial Statements
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors of
Patra Capital Ltd.
New York, New York
We have audited the accompanying balance sheet of Patra Capital Ltd.
as of July 31, 1998, and the related statements of operations, stockholders'
deficit, and cash flows for the seven months then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
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 audit provides 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 Patra Capital Ltd.
as of July 31, 1998, and the results of its operations and its cash flows for
the seven months then ended in conformity with generally accepted accounting
principles.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
November 25, 1998
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PATRA CAPITAL LTD.
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BALANCE SHEET AS OF JULY 31, 1998.
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Assets:
Current Assets:
Deferred Income Taxes $ 102,000
Due from Related Party 13,198
-----------
Total Current Assets 115,198
Equipment - Net 30,475
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Other Assets:
Deferred Costs 159,447
Security Deposit 59,689
Total Other Assets 219,136
Total Assets $ 364,809
===========
Liabilities and Stockholders' Deficit:
Current Liabilities:
Accounts Payable $ 165,034
Accrued Consulting Fees - Related Parties 98,000
Accrued Consulting Fees 25,000
Due to Related Party 229,186
-----------
Total Current Liabilities 517,220
Long-Term Liability:
Due to Stockholder 702
Total Liabilities 517,922
Commitments and Contingencies --
Stockholders' Deficit:
Common Stock, $1.00 Par Value, 1,000 Shares
Authorized, Issued and Outstanding 1,000
Accumulated Deficit (153,113)
Stock Subscription (1,000)
Total Stockholders' Deficit (153,113)
Total Liabilities and Stockholders' Deficit $ 364,809
===========
See Notes to Financial Statements.
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PATRA CAPITAL LTD.
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STATEMENT OF OPERATIONS FOR THE SEVEN MONTHS ENDED JULY 31, 1998.
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Revenue $ --
Operating Expenses - Allocated by Related Parties 255,113
-----------
Operating Loss (255,113)
Loss Before Income Taxes (255,113)
Income Taxes [Benefit] (102,000)
Net Loss $ (153,113)
===========
See Notes to Financial Statements.
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PATRA CAPITAL LTD.
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STATEMENT OF STOCKHOLDERS' DEFICIT
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<TABLE>
Total
Common Stock Accumulated Stock Stockholders'
Shares Amount Deficit Subscription Deficit
Common Stock Issued
<S> <C> <C> <C> <C> <C>
January 1998 1,000 $ 1,000 $ -- $ (1,000)$ --
Net Loss for the Seven
Months Ended July 31, 1998 -- -- (153,113) -- (153,113)
------- ---------- ----------- ------------ ----------
Balance - July 31, 1998 1,000 $ 1,000 $ (153,113)$ (1,000)$ (153,113)
======= ========== =========== ============ ==========
</TABLE>
See Notes to Financial Statements.
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PATRA CAPITAL LTD.
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STATEMENT OF CASH FLOWS FOR THE SEVEN MONTHS ENDED JULY 31, 1998.
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Operating Activities:
Net Loss $ (153,113)
-----------
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operating Activities:
Depreciation 5,219
Deferred Income Taxes (102,000)
Changes in Assets and Liabilities:
[Increase] Decrease in:
Due from Related Party (13,198)
Increase [Decrease] in:
Accounts Payable 28,034
Accrued Consulting Fees - Related Parties 98,000
Accrued Consulting Fees 25,000
Due to Related Party 111,356
Due to Stockholders 702
-----------
Total Adjustments (153,113)
Net Cash - Operating Activities --
-----------
Net Increase in Cash --
Cash - Beginning of Period --
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Cash - End of Period $ --
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Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ --
Income Taxes $ --
Supplemental Schedule of Non-Cash Investing and Financing Activities:
In January 1998, the Company issued 1,000 shares of common stock at par value
and recorded a stock subscription receivable.
During the seven months ended July 31, 1998, the Company acquired furniture
and fixtures for $35,694 and recognized deposits on operating leases of $59,689.
The Company recorded a corresponding intercompany payable for a total of $95,383
for these payments made by an affiliated company on the Company's behalf.
The Company recorded deferred costs of $159,447 for accounting and legal fees,
of which $137,000 is recorded as accounts payable and $22,447 as due to related
party.
See Notes to Financial Statements.
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PATRA CAPITAL LTD.
NOTES TO FINANCIAL STATEMENTS
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[1] Organization and Business
Patra Capital Ltd. ["Patra" or the "Company"] was incorporated on December 17,
1997, and is principally engaged in investing in companies involved in the
information technology services industry [See Note 9].
[2] Summary of Significant Accounting Policies
[A] Equipment and Depreciation - Equipment is stated at cost, less accumulated
depreciation. Depreciation is computed principally by the straight-line method
and is based on the estimated useful lives of the various assets ranging from
three to five years. When assets are sold or retired, the cost and accumulated
depreciation are removed from the accounts and any gain or loss is included in
operations.
[B] 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 and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.
Actual results could differ from those estimates.
[C] Income Taxes - Income taxes are provided based upon the provisions of
Statement of Financial Accounting Standards ["SFAS"] No. 109, "Accounting for
Income Taxes," which requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
[D] Economic Dependence - Patra does not maintain a bank account and has no cash
or investments in marketable securities. As of July 31, 1998, Patra has relied
on related parties to pay all of its obligations.
[3] Equipment and Depreciation
Equipment and accumulated depreciation as of July 31, 1998, are as follows:
Equipment $ 13,558
Furniture and Fixtures 22,136
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Total 35,694
Less: Accumulated Depreciation 5,219
Equipment - Net $ 30,475
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Depreciation expense for the seven months ended July 31, 1998, was $5,219.
[4] Deferred Costs
Deferred costs consist of legal and accounting fees incurred in relation to the
acquisition of Conversion Services International, Inc. ["CSI"] [See Note 9].
[5] Related Party Transactions
The amount due from related party of $13,198 at July 31, 1998, consists of the
monthly allocation of operating expenses between the Company and a related
company whose stockholders are the same as those of Patra. The amounts have no
stated terms of repayment and are non-interest bearing.
Accrued consulting fees - related party of $98,000 at July 31, 1998, were
incurred in the start-up of Patra and are due to a stockholder and his wife.
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PATRA CAPITAL LTD.
NOTES TO FINANCIAL STATEMENTS, Sheet #2
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[5] Related Party Transactions [Continued]
For the seven months ended July 31, 1998, Patra was allocated $5,431 of rent
expense for other office space from a related company, one of the stockholders
of which is a stockholder of the Company.
The amount due to related party of $229,186 at July 31, 1998, consists of
operating expenses allocated to the Company by a related company, whose owner is
a stockholder of Patra. The loan has no stated terms of repayment and are
non-interest bearing.
The amount due to stockholder of $702 at July 31, 1998, consists of operating
expenses paid on behalf of Patra. The loan has no stated terms of repayment and
is non-interest bearing.
All of the Company's operating expenses were allocated by related companies.
[6] Commitments and Contingencies
The Company occupies office space, which is leased by a related company, of
which one of the stockholders is a stockholder of the Company, under an
operating lease which expires in April of 2002. Approximately 73% of the cost of
the lease is allocated to the Company. The Company's rent expense for the seven
months ended July 31, 1998, amounted to $19,695.
Total minimum annual rentals under the lease are as follows:
Year Ended
July 31,
1999 $ 119,379
2000 119,379
2001 119,379
2002 89,534
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Total $ 447,671
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[7] Income Taxes
Deferred taxes and the income tax benefit consist of the following:
Deferred Taxes:
Federal $ 79,000
State 23,000
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Income Tax Benefit $ 102,000
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The tax effect of significant items comprising the Company's deferred tax asset
at July 31, 1998, are as follows:
Net Operating Loss Carryforward $ 62,800
Deductibility of Accrued Expenses 39,200
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Deferred Tax Asset $ 102,000
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The Company's has recorded a deferred tax asset of $102,000 at July 31, 1998.
The realization of the deferred tax asset is dependent on the Company generating
sufficient taxable income in future years. Although realization is not assured,
management believes it is more likely than not that all of the deferred tax
asset will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income are reduced.
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PATRA CAPITAL LTD.
NOTES TO FINANCIAL STATEMENTS, Sheet #3
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[7] Income Taxes [Continued]
The net operating loss carryforward of approximately $157,000 expires in 2013.
A reconciliation of income tax at the statutory rate to the Company's effective
rate is as follows:
Computed at the Statutory Rate 34%
State Income Tax - Net of Federal Tax Benefit 6%
Income Tax Expense - Effective Rate 40%
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[8] New Authoritative Pronouncements
The Financial Accounting Standard Board ["FASB"] has issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. SFAS No. 133 requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The accounting for changes
in the fair value of a derivative depends on the intended use of the derivative
and how it its designated, for example, gain or losses related to changes in the
fair value of a derivative not designated as a hedging instrument is recognized
in earnings in the period of the change, while certain types of hedges may be
initially reported as a component of other comprehensive income [outside
earnings] until the consummation of the underlying transaction.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. Initial application of SFAS No. 133 should be as of the
beginning of a fiscal quarter; on that date, hedging relationships must be
designated anew and documented pursuant to the provisions of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged, but
it is permitted only as of the beginning of any fiscal quarter. SFAS No. 133 is
not to be applied retroactively to financial statements of prior periods. The
Company does not currently have any derivative instruments and is not currently
engaged in any hedging activities.
[9] Subsequent Events
Patra entered into an agreement and plan of merger with Patra Acquisition, Inc.
and Elligent Consulting Group, Inc. ["Elligent"] as of August 26, 1998, whereby
all of Patra's common stock was exchanged for 12,950,000 shares of common stock
in Elligent. Upon the closing on September 3, 1998, Patra Acquisition, Inc., a
wholly-owned subsidiary of Elligent, merged into Patra.
Patra entered into a plan and agreement of merger with Conversion Services
International, Inc. ["CSI"] as of August 1, 1998, whereby all of the CSI's
common stock was sold to Patra in exchange for cash, notes payable and
restricted common stock of Elligent Consulting Group, Inc. [a publicly-held
company], the parent company of Patra. Upon the closing on September 21, 1998,
CSI merged into Patra and Patra changed its name to Conversion Services
International, Inc.
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PATRA CAPITAL LTD.
NOTES TO FINANCIAL STATEMENTS, Sheet #4
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[10] Financial Instruments
Generally accepted accounting principles require disclosing the fair value of
financial instruments to the extent practicable for financial instruments which
are recognized or unrecognized in the balance sheet. The fair value of the
financial instruments disclosed herein is not necessarily representative of the
amount that could be realized or settled, nor does the fair value amount
consider the tax consequences of realization or settlement.
For accounts payable, accrued expenses, and amounts due from/to related party,
it was assumed that the carrying amount approximated fair value because of the
short maturities of these instruments. The fair value of due to stockholder is
estimated based on rates at which the Company could borrow funds with similar
remaining maturities which approximates its carrying value.
. . . . . . . . .
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ELLIGENT CONSULTING GROUP, INC.
Dated: December 7, 1998 By: /s/ Edwin T. Brondo
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Edwin T. Brondo
Chief Financial Officer
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